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 2024-03-04

 UNITED
STATES

 SECURITIES
AND EXCHANGE COMMISSION

 WASHINGTON,
D.C. 20549

 FORM

 (Mark
One)

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

 FOR
THE FISCAL YEAR ENDED DECEMBER 31, 2023

 OR

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

 FOR
THE TRANSITION PERIOD FROM _________TO__________

 COMMISSION
FILE NUMBER 001-40943

INC.

 (Exact
name of registrant as specified in its charter)

 Delaware

 47-3765675

 (State
 or other jurisdiction of

 incorporation
 or organization)

 (I.R.S.
 Employer

 Identification
 No.)

 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:

 Title
 of Each Class:

 Trading
 symbol(s)

 Name
 of Each Exchange on Which Registered:

 Common
 Stock, par value $0.001 per share

 BFRI

 The
 Nasdaq Stock Market LLC

 Preferred
 Stock Purchase Rights

 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

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

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

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

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

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.

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.

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).

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, 2023, 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 $ 14.2 million, based on the closing price of the registrant's
common stock.

 As
of March 11, 2024, there were 5,089,413
shares outstanding of the registrant's common stock, par value $0.001 per 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, 2023 are incorporated
by reference into Part III of this Form 10-K.

 TABLE
OF CONTENTS

 PART
 I.

 Item
 1.

 Business

 Item
 1A.

 Risk
 Factors

 Item
 1B.

 Unresolved
 Staff Comments

 4 6

 Item
 1C

 Cybersecurity

 Item
 2.

 Properties

 Item
 3.

 Legal
 Proceedings

 Item
 4.

 Mine
 Safety Disclosures

 PART
 II.

 Item
 5.

 Market
 for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

 Item
 6.

 Reserved

 Item
 7.

 Management's
 Discussion and Analysis of Financial Conditions and Results of Operations

 Item
 7A.

 Quantitative
 and Qualitative Disclosures About Market Risk

 Item
 8.

 Statements and Supplementary Data

 Item
 9.

 Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

 Item
 9A.

 Controls and Procedures

 Item
 9B.

 Other Information

 Item
 9C.

 Disclosure Regarding Foreign Jurisdictions that Prevent Inspections

 PART III.

 Item
 10.

 Directors, Executive Officers and Corporate Governance

 Item
 11.

 Executive Compensation

 Item
 12.

 Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

 Item
 13.

 Certain Relationships and Related Transaction, and Director Independence

 Item
 14.

 Principal Accountant Fees and Services

 PART IV.

 Item
 15.

 Exhibit and Financial Statement Schedules

 Item
 16.

 Form 10-K Summary

 SIGNATURES

 BASIS
OF PRESENTATION

 As
used in this Annual Report on Form 10-K for the fiscal year ended December 31, 2023 (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 Bio-Fri
GmbH ("Bio-FRI"). 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.
References in this Form 10-K to " Maruho " refer to Maruho Co., Ltd. References in this Form 10-K to
" Cutanea " refer to Cutanea Life Sciences, Inc. As of December 31, 2023, Biofrontera AG owned 26.4% of our Common Stock. Accordingly, the entities in the Biofrontera
Group are related parties to us.

 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;

 our
 ability to expand, manage and maintain our direct sales and marketing organizations, including our ability to obtain the financing
 to develop our marketing strategy, if needed;

 our
 actual financial results may vary significantly from forecasts and from period to period;

 our
 estimates regarding anticipated operating losses, future revenues, capital requirements and our needs for additional financing;

 market
 risks regarding consolidation in the healthcare industry;

 the
 willingness of healthcare providers to purchase our licensed products if coverage, reimbursement and pricing from third-party payors
 for our products or procedures using our products significantly declines;

 our
 Licensors' ability to adequately protect their intellectual property and operate their business without infringing upon the
 intellectual property rights of others;

 our
 ability to market, commercialize, achieve market acceptance for and sell our licensed products;

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

 any
 product liability claims;

 our
 ability to regain compliance with The Nasdaq Stock Market, LLC ("Nasdaq") continued listing
 standards;

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

 the
 progress, timing and completion of our Licensors' research, development and preclinical studies and clinical trials for our
 licensed products and our Licensors' ability to obtain the regulatory approvals necessary for the marketing of our licensed
 products in the United States;

 any
 impact of extraordinary events, including those resulting from the sunsetting of the COVID-19 Public Health Emergency ("PHE")
 on May 11, 2023; and

 those
 risks listed in the sections of this Form 10-K entitled " Risk Factors " and elsewhere in this Form 10-K.

 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 U.S.-based biopharmaceutical company commercializing a portfolio of pharmaceutical products for the treatment of dermatological
conditions with a focus on photodynamic therapy ("PDT") and topical antibiotics with PDT contribution to the largest amount
of our business. The Company's licensed products are used for the treatment of actinic keratoses, which are pre-cancerous skin
lesions, as well as impetigo, a bacterial skin infection.

 In May 2023, we began research and development ("R&D")
activities to support PDT growth and will continue to opportunistically invest in these activities going forward. Our R&D
program currently aims to improve the capabilities of our BF-RhodoLED lamps to better fulfill the needs of dermatologists. Our goal
is to improve the effectiveness of our commercial team by allowing sales representatives to carry approved devices with them allowing
for easier product demonstrations and evaluations.

 Effective June 1, 2024, we will take control of
all clinical trials relating to Ameluz in the US, allowing for more effective cost management and direct oversight
of trial efficiency.

 Biofrontera
Inc. includes its wholly owned subsidiary Bio-FRI GmbH, a limited liability company organized under the laws of Germany. Our subsidiary,
Bio-FRI was formed on February 9, 2022, as a German presence to facilitate our relationship with the Ameluz Licensor.

 Company
Overview

 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. On November 2, 2021, we consummated our initial public offering and subsequently we ceased to be
deemed a company controlled by Biofrontera AG. As of December 31, 2023, Biofrontera AG held 26.4% of the outstanding shares of our common
stock. With our national commercial team, we generate revenue by selling our licensed products directly to dermatology offices and groups.

 Employees

 As
of December 31, 2023, the company had 85 employees, of which 83 were full-time employees and two were part-time employees. Approximately
57% are focused on marketing and sales activities. 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, 2023, no customer represented
more than 10% of the net accounts receivable balance. For the year ended December 31, 2023, no customer represented more than 10% of
net revenues.

 Our
Strategy

 Our
principal objective is to improve patient outcomes by increasing the sales of our licensed products. The key elements of our strategy
include the following:

 expand
 our sales in the United States of Ameluz in combination with the BF-RhodoLED lamp series for the
 treatment of minimally to moderately thick actinic keratoses of the face and scalp and positioning Ameluz to be standard
 of care in the United States by focusing on acquisition of new customers and growth of the therapy in our current customer base;

 expand
 sales of Xepi for treatment of impetigo by improving the market positioning of the licensed product;

 leverage
 the potential for future approvals and label extensions of our licensed portfolio products that are in the pipeline for the U.S.
 market through our license and supply agreements with the Licensors; and

 opportunistically
 add complementary products or services to our portfolio by acquiring or licensing IP to further leverage our commercial infrastructure
 and customer relationships.

 By
executing these four strategic objectives, we will fuel company growth, deepen our trusted relationships in the dermatology community,
and above all, help patients live healthier, more fulfilling lives.

 and RhodoLED Lamp Series

 Our
principal licensed product is Ameluz, which is a prescription drug approved for use in combination with the
RhodoLED lamp series, for PDT (when used together, "Ameluz PDT"). In the United States,
the PDT treatment is used for the lesion-directed and field-directed treatment of actinic keratoses ("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 U.S. under an exclusive license and supply agreement (as amended
the "Ameluz LSA") between Biofrontera, Inc. and the Ameluz Licensors.

 AKs
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,
which is the number one indication for those 45 years of age and older.

 In
general, PDT is a two-step process:

 the
 first step is the application of a drug known as a "photosensitizer," or a pre-cursor of this type of drug, which tends
 to accumulate in cancerous cells; and

 the
 second step is activation of the photosensitizer by controlled exposure to a selective light source in the presence of oxygen.

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, 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 treatments 3 with limited or no scarring. The therapy also may provide protection from potentially fatal
progress of mild or invisible AKs. 4

 Market
and competitive landscape

 AK
currently affects approximately 58 million Americans which lead to roughly 13 million treatments annually. 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 share and focus on converting cryotherapy treatments of more than 14 lesions
as a field therapy such as Ameluz 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.

 Fuchs & Marmur, Dermatol Surg. 2007 Sep; 33(9):1099-101

 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

 For full prescribing information for Ameluz, please see

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

 www.skincancer.org/skin-cancer-information/actinic-keratosis

 Market data accessible from CMS and IQVIA, 2020

 Sales,
marketing and distribution

 We
are currently selling our portfolio of 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 $273.00 per light treatment and has to be performed by a qualified healthcare
professional. Public information regarding CPT reimbursement is available at

 Our
licensors' R&D programs

 We
are a sales organization with focus on commercializing our portfolio of licensed products that are already FDA-approved. R&D efforts for label extensions in order to optimize the market positioning of the products are the responsibility of the respective
licensor and are governed by the respective LSAs.

 Under
the Ameluz LSA, we hold the exclusive license to sell Ameluz and the RhodoLED lamp series comprising
the RhodoLED and the new, more advanced RhodoLED XL (available in the second quarter of 2024) in the United States for all
indications currently approved by the FDA as well as all future FDA-approved indications identified under the Ameluz LSA.

 On February 19, 2024, the Ameluz LSA was amended with
the Second Amended and Restated License and Supply Agreement (the "Second A&R Ameluz LSA"), effective February 13. The Second A&R Ameluz LSA amends and restates the Ameluz LSA, originally dated as of October 1, 2016, between
the Company and Amulez Licensor, which was subsequently amended on July 1, 2019, June 16, 2021, October 8, 2021, December 5, 2023, and
January 26, 2024. Among other things, the Second A&R Ameluz LSA reduces 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. 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 will take control of all clinical trials relating to
Ameluz in the US, allowing for more effective cost management and direct oversight of trial efficiency. The reduced
Ameluz LSA transfer price will allow the Company to finance such R&D activities and continue our commercial growth
trajectory.

 A
summary of our understanding of the Licensor's clinical trials is below:

 Clinical
 Phase

 Product

 Indication

 Pre-clinical

 I

 II

 III

 Status

 Superficial
 basal cell carcinoma

 Last-patient-in
 treatment phase in August 2023; Last-patient-out of treatment phase expected in March 2024; Clinical Study Report (CSR) expected
 Q4 – 2024

 Actinic
 keratosis

 Phase
 I safety study applying 3 tubes of Ameluz to an expanded treatment area of 60 cm; completed and submitted to FDA

 Moderate
 to severe acne

 Phase
 II is recruiting; CSR expected in Q3 2025

 Actinic
 keratosis

 Trunk
 & extremities applying 1-3 tubes of Ameluz; First patient dosed in Jan 2023; CSR expected in Q1-2026

 Actinic
 keratosis

 Combination
 daylight and conventional PDT, plan to start enrollment in 2025

 Squamous
 cell carcinoma in situ

 Plan
 to start enrollment in 2026

 In
late October 2021, the new, larger RhodoLED XL was approved by the FDA 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. 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
U.S. market. 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, the FDA recently approved a new formulation of Ameluz that lacks propylene glycol and reduces the
accumulation of certain contaminants over time. The new formulation will be implemented in all US productions of
Ameluz starting in 2024. A corresponding patent application has been filed with the U.S. 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 lamp series is our Licensor, Biofrontera Pharma. Biofrontera Pharma
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 has recently signed an agreement with 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.

 We
intend to continue our development of our sales and marketing infrastructure to effectively target the broad range of dermatologic prescribers.
To further our development, we plan to expand our headcount, increase our investment in market research and brand development, further
develop our distribution capabilities and explore broader payer relationships and coverage.

 Xepi

 Our
second prescription drug licensed product in our portfolio is Xepi (ozenoxacin cream, 1%), a topical non-fluorinated
quinolone that inhibits bacterial growth. Currently, no antibiotic resistance against Xepi is known and it has been specifically
approved by the FDA for the treatment of impetigo, a common skin infection, due to Staphylococcus aureus or Streptococcus pyogenes. It
is approved for use in the United States in adults and children 2 months and older. We are currently selling Xepi for
this indication in the United States under an exclusive license and supply agreement, as amended ("Xepi LSA"), with Ferrer
that was assumed by Biofrontera on March 25, 2019 through our acquisition of Cutanea (the "Cutanea Acquisition").

 Impetigo
is a common and highly contagious bacterial skin infection caused by bacteria. The bacteria that can cause impetigo include Group A beta-hemolytic
streptococcus and Staphylococcus aureus. It occurs most frequently in children 2 to 5 years old, but people of any age can be affected
and even more than once. Impetigo causes red sores that most often appear on the face, neck, arms, and legs. These sores can turn into
blisters that open and form a yellowish crust. Transmission of the disease is by direct contact and poor hygiene can increase the spread.
Although impetigo is a year-round disease, it occurs most often during the warm weather months. 7

 Possible
complications of impetigo 8 can include:

 Worsening
 or spreading of the infection

 Scarring,
 which is more common with ecthyma

 Impetigo
 caused by beta-hemolytic strep bacteria can cause:

 Kidney
 damage (poststreptococcal glomerulonephritis)

 Fever,
 joint, and other problems (rheumatic fever)

 Although
impetigo rarely leads to serious complications, effective treatment with drugs like Xepi can shorten how long impetigo
lasts.

 Market
and competitive landscape

 There
are more than 3 million cases of impetigo in the United States every year. 5 The market for topical antibiotics is driven by
generics with mupirocin being the top choice of topical antibiotics across all specialties. In 2021, over 13 million prescriptions were
written for mupirocin for a range of conditions. According to prescription data from IQVIA, dermatologists account for approximately
12% of the annual topical antibiotic prescriptions written or about 1.4 million prescriptions. Xepi is a prescription
product that is filled by specialty pharmacies nationwide and orders to these specialty pharmacies are fulfilled by our 3PL, Cardinal
Health. Sales to the specialty pharmacies are recognized net of sales deductions, which include expected returns, discounts and incentives
such as payments made under patient assistance programs.

 Our
licensors' R&D programs

 Currently,
there are no clinical trials being conducted for Xepi, and we are unaware of any immediate or near-term plans of Ferrer
for a U.S.-market focused development pipeline.

 Sales,
marketing and distribution

 We
are currently selling our portfolio of 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.

 There
has been limited revenue during the current reporting periods and issues with the third-party manufacturer that was providing our
supply of Xepi impacting the timing of sales expansion and improved market positioning. However, Ferrer is in
the process of qualifying a new third-party manufacturer in North America. The expectation is that this process will be completed in
the second half of 2024. Once the new third-party manufacturer is qualified, we expect the supply of Xepi will enable us to market and increase demand. Xepi is distributed through specialty pharmacies and generally covered by most commercial payers
without pre-approval or similar requirements. Our contracts with third-party payers/pharmacy benefit managers ("PBMs")
generally require us to provide rebates based on utilization by the patients they cover. We believe that Xepi has
the potential to be another innovative product with a large market potential.

 How to Treat Impetigo and Control This Common Skin Infection | FDA

 From CLS link to Johns Hopkins Impetigo | Johns Hopkins Medicine

 Intellectual
Property

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

 and the RhodoLED lamp series 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 BF-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 2023, if granted, extends protection to 2043.

 Xepi
 is protected by four patents in the United States held by Ferrer. The primary patent protecting the active ingredient in Xepi
 expired in November 2023. However, there are treatment specific patents for the treatment of impetigo due to Staphylococcus aureus
or Streptococcus pyogenes and a method of treating nasopharynx infections in asymptomatic nasal carriers expiring in 2032 and 2029, respectively.

 Commercial
Partners and Agreements

 and RhodoLED Lamp Series License Service Agreement

 Under
the terms of the Ameluz LSA, we are granted an exclusive, non-transferable license to use Biofrontera Pharma and Biofrontera
Bioscience technology to use, import, export, distribute, market, offer for sale and sell Ameluz and the
RhodoLED lamp series for its approved indications within the United States and certain of its territories. The price we pay per unit will be based upon our sales history. The Ameluz
LSA will remain in effect for fifteen years and automatically renew for a period of five years, in perpetuity as long as certain minimum
revenues are achieved. See Note 23. Commitments and Contingencies.

 In
addition, under the Ameluz LSA, the Ameluz Licensor agrees to sell us the RhodoLED lamp series 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 LSA also provides that we will indemnify the Ameluz Licensor, subject to certain conditions, for any claims related to a breach
of our representations and covenants under the agreement or any other gross negligent, willful or intentionally wrongful act, error or
omission on our part. Under the terms of the agreement, the Ameluz Licensor will indemnify us, subject to certain conditions, against
claims related to the licensed products.

 Under
the Ameluz LSA, 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 lamp series and/or
for Biofrontera to sell Ameluz and/or the RhodoLED lamp series 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). Furthermore, the Ameluz Licensor will, in agreement with Biofrontera, perform and finance
clinical trials to promote the Ameluz market positioning in the U.S. market for indications that are identified in the
amendment signed on October 8, 2021, including the clinical studies. With respect to the indications currently pursued by the Ameluz
Licensor, we have the authority under the Ameluz LSA, in certain circumstances, to take over clinical development from the Ameluz Licensor,
if they are unable or unwilling to perform these functions appropriately and subtract the cost from the transfer price of future shipments.
The pursuit of any additional indications would need to be separately negotiated between us and the Ameluz Licensor.

 Conversely,
under the Ameluz LSA, Biofrontera is responsible for obtaining all state licenses or any other similar approvals required to market Ameluz
 and/or the RhodoLED lamp 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 by the Ameluz LSA to use commercially reasonable efforts and resources to exploit the license
and market Ameluz and the RhodoLED lamp in the United States ("commercially reasonable efforts"
being defined in terms of comparison against industry standards and practices for a company of comparable size and capability and active
in the same business area).

 Under
the Ameluz LSA, if product or lamps are not delivered in conformance with certain specifications of this Agreement and the Quality Assurance
Agreement, 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, the 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.

 On February 19, 2024, we entered into the Second
A&R Ameluz LSA, which is discussed above in the section entitled " Ameluz and RhodoLED Lamp
Series - Our licensors' R&D programs.

 Effective June 1, 2024, the Company will take
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.

 Ferrer
Internacional S.A.

 On
March 25, 2019, we assumed the rights, duties and obligations of Cutanea under the Xepi LSA as part of the acquisition of Cutanea. Under
the terms of the Xepi LSA, we have been granted an exclusive, royalty-bearing license in the United States and certain of its territories,
including the right to sublicense under certain conditions, to develop, make, have made, use, register, market, promote, sell, have sold,
offer for sale and import Xepi.

 Under
the Xepi LSA, we are obligated to make payments to Ferrer upon the occurrence of certain milestones. Specifically, we must pay Ferrer
(i) $2,000,000 upon the first occasion when annual net sales of Xepi under the Xepi LSA exceed $25,000,000, and (ii)
$4,000,000 upon the first occasion annual net sales of Xepi under the Xepi LSA exceed $50,000,000. The maximum potential
milestone payments remaining under this agreement total $6,000,000. These are both sales-based milestones. There are no development milestones
within the agreement.

 The
terms of the Xepi LSA also provide for us to purchase Xepi from Ferrer and pay royalties at a high single digit percentage
based on net sales. Royalties are paid quarterly when the related sales occur. There are no other performance obligations required for
royalties to be incurred. Furthermore, while Ferrer is approval holder for Xepi, the administration of the NDA is managed
by Biofrontera Bioscience, a related party. We are fully dependent on our collaboration with Ferrer for our supply of Xepi from their
sole supplier.

 The
Xepi LSA will continue for the longer of (a) 12 years following the first commercial sale of Xepi or (b) 12 years from
the date of latest product to launch under the Xepi LSA, concluding in 2030. However, the Xepi LSA will automatically terminate concurrently
with the termination of Ferrer's license with Toyama Chemical Co., Ltd., also in 2030. Ferrer covenants under the agreement to
make commercially reasonable efforts to extend its license agreement with Toyama. Although recent developments with respect to the third-party
manufacturer that was providing our supply of Xepi have impacted the timing of sales expansion and improved market positioning,
we believe that Xepi has the potential to be another innovative product with a large market potential in our portfolio.
See " Management's Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Estimates
—Intangible Assets and Impairment Assessment " in this Form 10-K.

 Under
the Xepi LSA, Biofrontera is required to obtain and maintain all "Marketing Authorizations and Regulatory Approvals" in Ferrer's
name, as well as to obtain and maintain all other licenses and certificates required for the wholesale and/or retail sale of Xepi
 in the United States. Biofrontera must also participate in a "Joint Steering Committee," which is intended, in part,
to ensure (among other things) that Biofrontera uses commercially reasonable efforts to market and sell Xepi in the United
States. This joint steering committee is required to meet at least once per year, unless agreed otherwise by the 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.

 U.S.
Drug Development and Review

 Drug
Development Process

 General
Information about the Drug Approval Process and Post-Marketing Requirements

 The
U.S. 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 undertaken by our Licensors.

 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 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. 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.

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 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. 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 licensors
control, including:

 delays
 obtaining regulatory approval to commence a trial;

 delays
 in reaching agreement on acceptable terms with contract research organizations ("CROs") and clinical trial sites;

 delays
 in obtaining institutional review board ("IRB"), approval at each site;

 slower
 than anticipated patient enrollment or an inability to recruit and enroll patients to participate in clinical trials for various
 reasons;

 inability
 to retain patients who have initiated a clinical trial;

 lack
 of funding to start or continue the clinical trial, including as a result of unforeseen costs due to enrollment delays, requirements
 to conduct additional trials and studies;

 negative
 or inconclusive results;

 deficiencies
 in the conduct of the clinical trial, including failure to conduct the clinical trial in accordance with regulatory requirements,
 good clinical practice, or clinical protocols;

 deficiencies
 in the clinical trial operations or trial sites resulting in the imposition of a clinical hold; or

 adverse
 medical events or side effects experienced by patients during the clinical trials as a result of or resulting from the clinical trial
 treatments;

 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

 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. 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;

 Quality
 System Regulation, or QSR, which requires manufacturers, including third party manufacturers and certain other parties, to follow
 stringent design, testing, process control, documentation, corrective action/preventive action, complaint handling and other quality
 assurance procedures, as applicable;

 labeling
 statutes and regulations, which prohibit the promotion of products for uncleared or unapproved, or off-label uses and impose other
 restrictions on labeling;

 clearance
 or approval of product modifications that could affect (or for 510(k) devices, significantly affect) safety or effectiveness or that
 would constitute a change (or for 510(k) devices, a major change) in intended use;

 medical
 device reporting regulations, which require that manufacturers report to the FDA if an event reasonably suggests that their device
 may have caused or contributed to a death or serious injury or malfunctioned in a way that would likely cause or contribute to a
 death or serious injury if the malfunction of the same or a similar device of the manufacturer were to recur;

 corrections
 and removals reporting regulations, which require that manufacturers report to the FDA field corrections and product removals if
 undertaken to reduce a risk to health posed by the device or to remedy a violation of the FDCA, that may present a risk to health.
 In addition, the FDA may order a mandatory recall if there is a reasonable probability that the device would cause serious adverse
 health consequences or death; and

 post-approval
 restrictions or conditions, including requirements to conduct post-market surveillance studies to establish additional safety or
 efficacy data.

 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;

 refusal
 of or delay in granting our requests for 510(k) clearance or premarket approval of new products or modified products;

 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.

 Fraud
and Abuse Laws

 We
are subject to healthcare anti-fraud and abuse regulations that are enforced by the U.S. federal government and the states in which we
conduct our business. The laws that may affect our ability to operate include:

 the
 federal healthcare programs' Anti-Kickback Law;

 federal
 false claims laws;

 federal
 criminal laws that prohibit executing a scheme to defraud any healthcare benefit program or making false statements relating to healthcare
 matters;

 the
 federal Civil Monetary Penalties Law, which imposes penalties against any person or entity that, among other things, is determined
 to have presented or caused to be presented a claim to a federal health program that the person knows or should know is for an item
 or service that was not provided as claimed or is false or fraudulent; and

 state
 law equivalents of each of the above federal laws, such as anti-kickback and false claims laws which may apply to items or services
 reimbursed by any third-party payor, including commercial insurers.

 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, 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.

 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, which became effective on February 17, 2010. Among other things, the new
law 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

 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

 We
also maintain a website at  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.

 Item
1A. Risk Factors

 Investing in
our common stock involves a high degree of risk. You should carefully consider the risks described below, as well as the other
information in this Form 10-K, including our financial statements and the related notes and the section "Management's
Discussion and Analysis of Financial Condition and Results of Operations," before deciding whether to invest in our common
stock. The occurrence of any of the events or developments described below could materially and adversely affect our business,
financial condition, results of operations and growth prospects. In such an event, the market price of our common stock could
decline, and you may lose all or part of your investment. Additional risks and uncertainties not presently known to us or that we
currently deem immaterial may also impair our business operations.

 Summary
of Material 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 (in order of importance or probability of occurrence) the most significant risk factors 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. You should read this summary together with the more detailed description of each risk
factor contained below. Some of these material risks include:

 Risks
Related to the License and Supply Agreements and our Licensed Products

 Currently, our sole source of revenue is from sales of products we license from other companies, including a related party. If we fail to comply with our obligations in the agreements under which we license rights from such parties, or if the license agreements are terminated for other reasons, we could lose license rights that are important to our business.

 Certain important patents for our licensed product Ameluz expired in 2019. Although the process of developing generic topical dermatological products for the first time presents specific challenges that may deter potential generic competitors, generic versions of Ameluz may enter the market following the recent expiration of these patents. If this happens, we may need to reduce the price of Ameluz significantly and may lose significant market share.

 Our business depends substantially on the success of our principal licensed product Ameluz. If the Ameluz Licensor is unable to successfully obtain and maintain regulatory approvals or reimbursement for Ameluz for existing and additional indications, our business may be materially harmed.

 The Ameluz Licensor currently depends on a single unaffiliated contract manufacturer to manufacture Ameluz and has contracted with a second unaffiliated contract manufacturer to begin producing Ameluz. If the Ameluz Licensor fails to maintain its relationships with these manufacturers or if both of these manufacturers are unable to produce product for the Ameluz Licensor, our business could be materially harmed.

 If our Licensors or our Licensors' manufacturing partners, as applicable, fail to manufacture Ameluz, RhodoLED lamps, Xepi or other marketed products in sufficient quantities and at acceptable quality and cost levels, or to fully comply with current good manufacturing practice, or cGMP, or other applicable manufacturing regulations, we may face a bar to, or delays in, the commercialization of the products under license to us or we will be unable to meet market demand, and lose potential revenues.

 If our Licensors' efforts to protect the proprietary nature of their intellectual property related to our licensed products are not adequate, we may not be able to compete effectively in our market.

 Third party claims of intellectual property infringement may affect our ability to sell our licensed products and may also prevent or delay our Licensors' product discovery and development efforts

 The Biofrontera Group has been involved in lawsuits to defend or enforce patents related to our licensed products and they or another licensor may become involved in similar suits in the future, which could be expensive, time-consuming and unsuccessful.

 The trade secrets of our Licensors are difficult to protect.

 Our subsidiary and certain third-party employees and our licensed patents are subject to foreign laws.

 Our international dealings with our Licensors may pose currency risks, which may adversely affect our operating results and net income.

 Risks
Related to Our Business and Strategy

 We are fully dependent on our collaboration with the Ameluz Licensor for our supply of Ameluz and RhodoLED lamps and future development of the Ameluz product line, on our collaboration with Ferrer for our supply of Xepi and future development of Xepi and may depend on the Ameluz Licensor, Ferrer or additional third parties for the supply, development and commercialization of future licensed products or product candidates. Although we have the authority under the Ameluz LSA with respect to the indications that the Ameluz Licensor is currently pursuing with the FDA (as well as certain other clinical studies identified in the Ameluz LSA) in certain circumstances to take over clinical development, regulatory work and manufacturing from the Ameluz Licensor if they are unable or unwilling to perform these functions appropriately, the sourcing and manufacture of our licensed products as well as the regulatory approvals and clinical trials related to our licensed products are currently controlled, and will likely continue to be controlled for the foreseeable future, by our existing and future collaborators. Our lack of control over some of these functions could adversely affect our ability to implement our strategy for the commercialization of our licensed products.

 Insurance coverage and medical expense reimbursement may be limited or unavailable in certain market segments for our licensed products, which could make it difficult for us to sell our licensed products.

 Healthcare legislative changes may have a material adverse effect on our business and results of operations.

 To date, we have a relatively short history of sales of our licensed products in the United States.

 Competing products and future emerging products may erode sales of our licensed products.

 We face significant competition from other pharmaceutical and medical device companies and our operating results will suffer if we fail to compete effectively. We also must compete with existing treatments, such as simple curettage and cryotherapy, which do not involve the use of a drug but have gained significant market acceptance.

 If we are unable to maintain effective marketing and sales capabilities or enter into agreements with third parties to market and sell our licensed products, we may be unable to generate revenue growth.

 The U.S. market size for Ameluz for the treatment of actinic keratosis may be smaller than we have estimated.

 If our Licensors face allegations of noncompliance with the law and encounter sanctions, their reputation, revenues and liquidity may suffer, and our licensed products could be subject to restrictions or withdrawal from the market.

 Even if our Licensors obtain regulatory approvals for our licensed products and product candidates, or approvals extending their indications, they may not gain market acceptance among hospitals, physicians, health care payors, patients and others in the medical community.

 With respect to our licensed products, we may be subject to healthcare laws, regulation and enforcement. Our failure to comply with those laws could have a material adverse effect on our results of operations and financial condition.

 A recall of our licensed drug or medical device products, or the discovery of serious safety issues with our licensed drug or medical device products, could have a significant negative impact on us.

 Our licensed medical device product, the RhodoLED lamp, is subject to extensive governmental regulation, and failure to comply with applicable requirements could cause our business to suffer.

 As a result of our current IT infrastructure and German-based subsidiary, we are subject to governmental regulation and other legal obligations in the EU and European Economic Area, or EEA, related to privacy, data protection and data security and, as a result of our sales in California, the California Consumer Privacy Act (CCPA). Our actual or perceived failure to comply with such obligations could harm our business.

 We are highly dependent on our key personnel, and if we are not successful in attracting and retaining highly qualified personnel, we may be unable to successfully implement our business strategy.

 Our employees may engage in misconduct or other improper activities, including noncompliance with regulatory standards and requirements.

 We will need to grow the size of our organization and we may experience difficulties in managing this growth.

 Our business and operations would suffer in the event of system failures or, cyber-attacks.

 If product liability lawsuits are brought against us, we may incur substantial liabilities and may be required to limit commercialization of our licensed products.

 Failure to comply with the U.S. Foreign Corrupt Practices Act or other applicable anti-corruption legislation could result in fines, criminal penalties and an adverse effect on our business.

 Our licensed products will be subject to ongoing regulatory requirements and we may face future development, manufacturing and regulatory difficulties.

 Generic manufacturers may launch products at risk of patent infringement.

 The results of our R&D efforts are uncertain and there can be no assurance they will enhance the commercial success of our products.

 Risks
Related to Our Financial Position and Capital Requirements

 There is substantial doubt about our ability to continue as a "going concern."

 Failure to achieve the conditions relating to the additional $7.2 million of proceeds to be provided under the equity financing agreement
entered into on February 19, 2024 could adversely affect our financial condition and liquidity over the next twelve months

 We
 have a history of operating losses and anticipate that we will continue to incur operating losses in the future and may never sustain
 profitability.

 If
 we fail to obtain additional financing, we may be unable to pursue our plans for strategic growth, including completing the commercialization
 of Xepi and other products we may license.

 Our
 existing and any future indebtedness could adversely affect our ability to operate our business.

 Risks
Related to Corporate Governance, Including Being a Public Company

 We
 previously identified a material weakness in our internal control over financial reporting, resulting from control deficiencies related
 to management's review of work performed by specialists. If we identify additional material weaknesses in the future or otherwise
 fail to maintain an effective system of internal controls, we may not be able to accurately or timely report our financial condition
 or results of operations, which may adversely affect our business and stock price.

 We
 have incurred, and will continue to incur, increased costs as a result of operating as a public company, and our management is required
 to devote substantial time to compliance with our public company responsibilities and corporate governance practices.

 As
 a result of becoming a public company, we are obligated to develop and maintain proper and effective internal controls over financial
 reporting and any failure to maintain the adequacy of these internal controls may adversely affect investor confidence in our company
 and, as a result, the value of our common stock.

 We
 are an emerging growth company and smaller reporting company we cannot be certain if the reduced disclosure requirements applicable
 to emerging growth companies or smaller reporting companies will make our common stock less attractive to investors.

 Risks
Related to Our Securities and the Ownership of Our Common Stock

 Provisions of our outstanding warrants could discourage an acquisition
of us by a third party.

 Our share price may be volatile, and you may be unable to sell your shares and/or warrants at or above the offering price.

 If we fail to regain compliance with applicable listing standards, our common stock and/or our publicly-traded warrants could be
delisted from Nasdaq.

 Future sales of our common stock in the public market could cause our share price to fall.

 If the Preferred Warrants are not exercised, we will not
 receive up to $8 million in aggregate gross proceeds from the exercise of the Warrants which
 could have a material adverse effect on our financial condition.

 Warrants are exercisable for our common stock, which would increase the number of shares eligible for future resale in the public
market and result in dilution to our stockholders.

 If securities or industry analysts do not publish research or publish unfavorable research about our business, our stock price
and trading volume could decline.

 Our quarterly operating results may fluctuate significantly.

 Future
 sales and issuances of our common stock or rights to purchase our common stock, including pursuant to our equity incentive plans,
 could result in additional dilution of the percentage ownership of our stockholders and could cause the stock price of our common
 stock to decline.

 We have never paid dividends on our common stock and we do not intend to
pay dividends for the foreseeable future. Consequently, any gains from an investment in our common stock will likely depend on whether
the price

 Our
 stockholder rights plan, or "poison pill," includes terms and conditions which could discourage a takeover or other transaction
 that stockholders may consider favorable.

 Our
 charter documents and Delaware law could prevent a takeover that stockholders consider favorable and could also reduce the market
 price of our stock.

 Our
 amended and restated certificate of incorporation provides that the Court of Chancery of the State of Delaware will be the exclusive
 forum for substantially all disputes between us and our stockholders, which could limit our stockholders' ability to obtain
 a favorable judicial forum for disputes with us or our directors, officers or employees.

 Claims for indemnification by our directors and officers may reduce our available funds to satisfy successful third-party claims
against us and may reduce the amount of money available to us for our common stock increases.

 Many of the warrants to purchase shares of our common stock are accounted for as a warrant liability and recorded at fair value
with changes in fair value each period reported in earnings, which may have an adverse effect on the market price of our common stock

 Risks
Related to the License and Supply Agreements and Our Licensed Products

 Currently,
our sole source of revenue is from sales of products we license from other companies. If we fail to comply with our obligations in the
agreements under which we license rights from such third parties, or if the license agreements are terminated for other reasons, we could
lose license rights that are important to our business.

 We
are a party to license agreements with Biofrontera Pharma, GmbH and Biofrontera Bioscience, GmbH (for Ameluz and the
RhodoLED lamp series) and with Ferrer (for Xepi) and expect to enter into additional licenses in the
future. Our existing license agreements impose, and we expect that future license agreements will impose, on us various development,
regulatory diligence obligations, payment of milestones or royalties and other obligations. If we fail to comply with our obligations
under our license agreements, the licensor may have the right to terminate the license. In the event that any of our existing or future
important licenses were to be terminated by the licensor, we would likely need to cease further commercialization of the related licensed
product or be required to spend significant time and resources to modify the licensed product to not use the rights under the terminated
license. In the case of marketed products that depend upon a license agreement, we could be required to cease our commercialization activities,
including sale of the affected product. For a summary of the terms of the license agreements, see " Business—Commercial
Partners and Agreements ".

 Disputes
may arise between us and any of our Licensors regarding intellectual property subject to such agreements, including:

 the
 scope of rights granted under the agreement and other interpretation-related issues;

 whether
 and the extent to which our technology and processes infringe on intellectual property of the licensor that is not subject to the
 agreement;

 our
 right to sublicense patent and other rights to third parties;

 our
 diligence obligations with respect to the use of the licensed intellectual property, and what activities satisfy those diligence
 obligations;

 the
 ownership of inventions and know-how resulting from the joint creation or use of intellectual property by our Licensors and us, should
 any such joint creation occur;

 our
 right to transfer or assign the license; and

 the
 effects of termination.

 These,
or other disputes over intellectual property that we have licensed may prevent or impair our ability to maintain our current arrangements
on acceptable terms or may impair the value of the arrangement to us. Any such dispute, or termination of a necessary license, could
have a material adverse effect on our business, financial condition and results of operations.

 Certain
important patents for our licensed product Ameluz expired in 2019. Although the process of developing generic topical
dermatological products for the first time presents specific challenges that may deter potential generic competitors, generic versions
of Ameluz may enter the market following the recent expiration of these patents. If this happens, we may need to reduce
the price of Ameluz significantly and may lose significant market share.

 The
patent family that protected the technology relating to nanoemulsion of 5-aminolevulinic acid, the active ingredient in Ameluz,
against copying by competitors expired on November 12, 2019. This patent family included U.S. Patent No. 6,559,183, which, prior to its
expiration, served as a material, significant and possibly the only barrier to entry into the U.S. market by generic versions of Ameluz.
Although the process of developing generic topical dermatological products presents specific challenges that may deter potential generic
competitors, Patent No. 6,559,183 no longer prevents generic versions of Ameluz from entering the U.S. market and competing
with Ameluz. If generic competitors do enter the market, this may cause a significant drop in the price of Ameluz
 and, therefore, a significant drop in our profits. We may also lose significant U.S. market share for Ameluz.

 The
Ameluz Licensor holds another patent family protecting the technology relating to nanoemulsions for which they have been issued patents
in various jurisdictions and which expire in December 2027. A corresponding U.S. patent application has been filed by the Ameluz Licensor
but is still pending. We cannot guarantee that this U.S. patent will be issued or, if issued, will adequately protect us against copying
by competitors.

 Our
business depends substantially on the success of our principal licensed product Ameluz. If the Ameluz Licensor is unable
to successfully obtain and maintain regulatory approvals or reimbursement for Ameluz for existing and additional indications,
our business may be materially harmed.

 Although
the Ameluz Licensor has received marketing approval in the United States for Ameluz for lesion- and field-directed treatment
of actinic keratosis in combination with PDT using the BF-RhodoLED lamp series, 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 our product will depend on several factors, including:

 successful
 completion of further clinical trials by the Ameluz Licensor;

 receipt
 by the Ameluz Licensor of further regulatory approvals, including for the marketing of Ameluz for additional indications;

 the
 contract manufacturing facility maintaining regulatory compliance;

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

 the
 contract manufacturing facility manufacturing sufficient quantities in acceptable quality;

 the
 Ameluz Licensor sourcing sufficient quantities of raw materials used to manufacture our licensed products;

 continued
 acceptable safety and effectiveness profiles for our licensed products;

 the
 Ameluz Licensor obtaining and maintaining patent and trade secret protection and regulatory exclusivity; and

 the
 Ameluz Licensor protecting its intellectual property rights.

 If
the Ameluz Licensor does 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 licensed 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
the Ameluz Licensor received approval from the FDA to market in the United States Ameluz in combination with PDT using the BF-RhodoLED lamp, any new lamp we may license would require new approval from the FDA. We cannot assure
you that the Biofrontera Group 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.

 The
Ameluz Licensor currently depends on a single unaffiliated contract manufacturer to manufacture Ameluz and has contracted
with a second unaffiliated contract manufacturer to begin producing Ameluz. If the Ameluz Licensor fails
to maintain its relationships with these manufacturers or if both of these manufacturers are unable to produce product for the Ameluz
Licensor, our business could be materially harmed.

to the Ameluz LSA, the Ameluz Licensor supplies us with Ameluz. The Ameluz Licensor currently depends on a single unaffiliated
contract manufacturer located in Switzerland to manufacture Ameluz, Glaropharm AG, and has signed an agreement with a
second unaffiliated contract manufacturer located in Germany, Pharbil Waltrop GmbH, to begin to supply it with Ameluz
 to ensure stability of the supply chain. If the Ameluz Licensor fails to maintain its relationships with both of these manufacturers
or if the Ameluz Licensor fails to maintain its relationship with its current manufacturer and the second manufacturer has not yet completed
the necessary steps to begin manufacturing Ameluz, the Ameluz Licensor may be unable to obtain an alternative manufacturer
of Ameluz that could deliver the quantity of the product at the quality and cost levels that we require. Even if an acceptable
alternative manufacturer could be found, we would expect long delays in transitioning the manufacturing from the existing manufacturer
to a new manufacturer. Problems of this kind could cause us to experience order cancellations and loss of market share. The failure of
either manufacturer to supply the Ameluz Licensor with Ameluz that satisfies quality, quantity and cost requirements
in a timely manner could impair our ability to deliver Ameluz to the U.S. market and could increase costs, particularly
if the Ameluz Licensor is unable to obtain Ameluz from alternative sources on a timely basis or on commercially reasonable
terms. In addition, each manufacturer is regulated by the country in which it is located and by the FDA and must comply with applicable
laws and regulations. Finding a suitable replacement of these particular partners would therefore be extremely difficult for the Ameluz
Licensor. If the Ameluz Licensor lost these manufacturers, this could have a material adverse effect on our business, prospects, financial
condition and/or results of operations. If the suppliers fail to comply, this could harm our business.

 If
our Licensor or our Licensors' manufacturing partners, as applicable, fail to manufacture Ameluz, RhodoLED
 lamps, Xepi or other marketed products in sufficient quantities and at acceptable quality and cost levels, or to
fully comply with current good manufacturing practice, or cGMP, or other applicable manufacturing regulations, we may face a bar to,
or delays in, the commercialization of the products under license to us or we will be unable to meet market demand, and lose potential
revenues.

to the applicable LSA, our Licensors supply us with the licensed product that we sell in the U.S. market. The manufacture of the products
we license requires significant expertise and capital investment. Currently, all commercial supply for each of our commercial licensed
products are manufactured by single unaffiliated contract manufacturers. Our Licensors would each need to spend substantial time and
expense to replace their respective contract manufacturer if such contract manufacturer failed to deliver products in the quality and
quantities we demand or failed to meet any regulatory or cGMP requirements. Our Licensors take precautions to help safeguard their respective
manufacturing facilities, including acquiring insurance and performing on site audits. However, vandalism, terrorism or a natural or
other disaster, such as a fire or flood, could damage or destroy manufacturing equipment or the inventory of raw material or finished
goods, cause substantial delays in operations, result in the loss of key information, and cause additional expenses. Our Licensors'
insurance may not cover losses related to our licensed products in any particular case. In addition, regardless of the level of insurance
coverage, damage to our Licensors' facilities may have a material adverse effect on our business, financial condition and operating
results.

 Furthermore,
while our Licensors take reasonable precautions to ensure the successful production of our commercially licensed products, their contract
manufacturers may experience a myriad of business difficulties (i.e., workforce instability, supply chain issues, erosion of customer
base, etc.) that could impact their financial solvency. Ferrer's manufacturer of Xepi (Teligent, Inc.) filed for
Chapter 11 bankruptcy on October 14, 2021, and on February 23, 2022 Teligent, Inc. filed a motion to convert their bankruptcy into a
Chapter 7 liquidation. Ferrer is in the process of qualifying a new third-party manufacturer in North America. The process will require
significant time and expense, including the time it will take the new contract manufacturer to reach a level of production to meet our
commercial needs. Although we have inventory of Xepi on hand, we do not expect it will be enough to complete the commercialization
of Xepi in accordance with the originally planned timeline. If there are any significant delays to, or changes in, our
plans for the completion of the commercialization of Xepi, this could have a material adverse effect on our business,
prospects, financial condition and/or results of operations. See " Management's Discussion and Analysis of Financial Condition
and Results of Operations—Key factors affecting our performance —Supply Chain " in this Form 10-K.

 Our
efforts to commercialize a new lamp (the "RhodoLED XL") that was approved by the FDA on October 21, 2021
have been delayed due to supply chain matters. We have currently placed an order and issued a PO for 300 units and manufacturing
has commenced on the units. While we anticipate that we will be able to commercialize the
RhodoLED XL in or around the second quarter of 2024, slower than anticipated shipments or other delays are possible.

 Our
Licensors' manufacturing partners must comply with federal, state and foreign regulations, including FDA regulations governing
cGMP enforced by the FDA through its facilities inspection program and by similar regulatory authorities in other jurisdictions where
we do business. These requirements include, among other things, quality control, quality assurance and the maintenance of records and
documentation. For the medical device products we license, our Licensors are required to comply with the FDA's Quality System Regulation,
or QSR, which covers the methods and documentation of the design, testing, production, control, quality assurance, labeling, packaging,
sterilization, storage and shipping of our medical device products.

 Our
Licensors' facilities or our Licensors' contract facilities, as applicable, have been inspected by the FDA for cGMP compliance.
If our Licensors' or our Licensors' contract manufacturers, as applicable, do not successfully maintain cGMP compliance for
these facilities, commercialization of our licensed products could be prohibited or significantly delayed. Even after cGMP compliance
has been achieved, the FDA or similar foreign regulatory authorities at any time may implement new standards or change their interpretation
and enforcement of existing standards for manufacture, packaging, testing of or other activities related to our licensed products. For
our licensed commercialized medical device product, the FDA audits compliance with the through periodic announced and unannounced inspections
of manufacturing and other facilities. The FDA may conduct inspections or audits at any time. Similar audit rights exist in Europe and
other foreign jurisdictions. Any failure to comply with applicable cGMP, QSR and other regulations may result in fines and civil penalties,
suspension of production, product seizure or recall, imposition of a consent decree, or withdrawal of product approval, and would limit
the availability of our product. Any manufacturing defect or error discovered after products have been produced and distributed also
could result in significant consequences, including adverse health consequences, injury or death to patients, costly recall procedures,
re-stocking costs, warning letters, Form 483 reports, civil monetary penalties, product liability, damage to our reputation and potential
for product liability claims. If our Licensors are required to find a new manufacturer or supplier, the process would likely require
prior FDA and/or equivalent foreign regulatory authority approval and would be very time consuming. An inability to continue manufacturing
adequate supplies of our licensed products at any contract facilities could result in a disruption in the supply of our licensed products.
Delay or disruption in our ability to meet demand may result in the loss of potential revenue.

 In
addition, we are subject to regulations in various jurisdictions, including the Federal Drug Quality and Security Act and the Drug Supply
Chain Security Act in the United States, which require us to develop electronic systems to serialize, track, trace and authenticate units
of our licensed products through the supply chain and distribution system. Compliance with these regulations may result in increased
expenses for our company or impose greater administrative burdens on our organization, and failure to meet these requirements could result
in fines or other penalties.

 Failure
to comply with all applicable regulatory requirements may subject our company to operating restrictions and criminal prosecution, monetary
penalties and other disciplinary actions, including, sanctions, warning letters, product seizures, recalls, fines, injunctions, suspension,
shutdown of production, revocation of approvals or the inability to obtain future approvals, or exclusion from future participation in
government healthcare programs. Any of these events could disrupt our company's business and, consequently, have a material adverse
effect on our revenue, profitability and financial condition.

 If
our Licensors' efforts to protect the proprietary nature of their intellectual property related to our licensed products are not
adequate, we may not be able to compete effectively in our market.

 Our
Licensors rely upon a combination of patents, trade secret protection and confidentiality agreements to protect the intellectual property
related to the products we license from them. Any disclosure to or misappropriation by third parties of their confidential proprietary
information could enable competitors to quickly duplicate or surpass their technological achievements, thus eroding our competitive position
in our market.

 In
addition, the patent applications that they own may fail to result in issued patents in the United States. Even if the patents do successfully
issue, third parties may challenge the validity, enforceability or scope thereof, which may result in such patents being narrowed, invalidated
or held unenforceable. Furthermore, even if they are unchallenged, their patents and patent applications may not adequately protect their
intellectual property or prevent others from designing around their claims. If the breadth or strength of protection provided by the
issued patents and patent applications our Licensors hold with respect to our licensed products is threatened, it could threaten our
ability to commercialize our licensed products. Further, if our Licensors encounter delays in their clinical trials, the period of time
during which we could market our licensed products under patent protection would be reduced. Since patent applications in the United
States are confidential for a period of time after filing, we cannot be certain that our Licensors were the first to file any patent
application related to the products we license. Furthermore, for applications in which all claims are entitled to a priority date before
March 16, 2013, an interference proceeding can be provoked by a third party or instituted by the U.S. Patent and Trademark Office, or
USPTO, to determine who was the first to invent any of the subject matter covered by the patent claims of our applications. For applications
containing a claim not entitled to priority before March 16, 2013, there is greater level of uncertainty in the patent law with the passage
of the America Invents Act (2012) which brings into effect significant changes to the U.S. patent laws that are yet untried and untested,
and which introduces new procedures for challenging pending patent applications and issued patents. A primary change under this reform
is creating a "first to file" system in the United States. This will require us to be cognizant going forward of the time
from invention to filing of a patent application.

 In
addition to the protection afforded by patents, our Licensors may rely on trade secret protection and confidentiality agreements to protect
proprietary know-how that is not patentable, processes for which patents are difficult to enforce and any other elements of our product
discovery and development processes that involve proprietary know-how, information or technology that is not covered by patents. Although
our Licensors may require their employees to assign their inventions to us to the extent permitted by law, and may require our employees,
consultants, advisors and any third parties who have access to our proprietary know-how, information or technology to enter into confidentiality
agreements, we cannot be certain that our trade secrets and other confidential proprietary information will not be disclosed or that
competitors will not otherwise gain access to our trade secrets or independently develop substantially equivalent information and techniques.
Furthermore, the laws of some foreign countries do not protect proprietary rights to the same extent or in the same manner as the laws
of the United States or the EU. As a result, our Licensors may encounter significant problems in protecting and defending their intellectual
property in the United States, in the EU and in other countries. If they are unable to prevent unauthorized material disclosure of their
intellectual property to third parties, we may not be able to establish or maintain a competitive advantage in our market, which could
materially adversely affect our business, operating results and financial condition.

 Third
party claims of intellectual property infringement may affect our ability to sell our licensed products and may also prevent or delay
our Licensors' product discovery and development efforts.

 Our
commercial success depends in part on our Licensors avoiding infringement of the patents and proprietary rights of third parties. There
is a substantial amount of litigation involving patents and other intellectual property rights in the biotechnology and pharmaceutical
industries, as well as administrative proceedings for challenging patents, including interference and reexamination proceedings before
the USPTO, or oppositions and other comparable proceedings in foreign jurisdictions. Recently, following U.S. patent reform, new procedures
including inter partes review and post grant review have been implemented. This reform includes changes in law and procedures
that are untried and untested and will bring uncertainty to the possibility of challenge to our patents in the future. Numerous U.S.
and foreign issued patents and pending patent applications, which are owned by third parties, exist in the fields in which our Licensors
are developing product candidates. As the biotechnology and pharmaceutical industries expand and more patents are issued, the risk increases
that our licensed products may give rise to claims of infringement of the patent rights of others.

 Third
parties may assert that we or our Licensors are employing their proprietary technology without authorization. There may be third party
patents of which we or our Licensors are currently unaware with claims to materials, formulations, devices, methods of manufacture or
methods for treatment related to the use or manufacture of the products we license. Because patent applications can take many years to
issue, there may be currently pending patent applications which may later result in issued patents that our licensed products or product
candidates may infringe. In addition, third parties may obtain patents in the future and claim that use of our licensed technologies
infringes upon such patents. If any third-party patents were held by a court of competent jurisdiction to cover the manufacturing process
of our licensed products, any molecules formed during the manufacturing process or any final product itself, the holders of any such
patents may be able to block our ability to commercialize the product unless we obtained a license under the applicable patents, or until
such patents expire or they are finally determined to be held invalid or unenforceable. Similarly, if any third-party patent were held
by a court of competent jurisdiction to cover aspects of the formulations, processes for manufacture or methods of use, including combination
therapy or patient selection methods, the holders of any such patent may be able to block our ability to commercialize the product unless
we obtained a license or until such patent expires or is finally determined to be held invalid or unenforceable. In either case, such
a license may not be available on commercially reasonable terms or at all. If we or our Licensors are unable to obtain a necessary license
to a third-party patent on commercially reasonable terms, or at all, our ability to commercialize our licensed products may be impaired
or delayed, which could in turn significantly harm our business.

 Parties
making claims against us or our Licensors may seek and obtain injunctive or other equitable relief, which could effectively block our
ability to sell our licensed products and to further commercialize our licensed products. Defense of these claims, regardless of their
merit, would involve substantial litigation expense and would be a substantial diversion of employee resources from our business. In
the event of a successful claim of infringement against us, we may have to pay substantial damages, including treble damages and attorneys'
fees for willful infringement, obtain one or more licenses from third parties, pay royalties or redesign our infringing products, which
may be impossible or require substantial time and monetary expenditure. We cannot predict whether any such license would be available
at all or whether it would be available on commercially reasonable terms. Furthermore, even in the absence of litigation, we or our Licensors
may need to obtain licenses from third parties to advance their research or allow commercialization of the products we license. We or
our licensors may fail to obtain any of these licenses at a reasonable cost or on reasonable terms, if at all. In that event, we would
be unable to further commercialize our licensed products, which could harm our business significantly.

 On
November 29, 2021, the Company entered into a settlement and release agreement with respect to a lawsuit filed March 23, 2018 in the
United States District Court for the District of Massachusetts in which we were alleged to have infringed on certain patents and misappropriated
certain trade secrets. In the settlement, the Company and Biofrontera AG together agreed to make an aggregate payment of $22.5 million
and engage a forensic expert to destroy data at issue in the litigation to settle the claims in the litigation.

 If
either we or Biofrontera AG violates the terms of the settlement agreement, this could nullify certain aspects of the settlement and
we may lose certain benefits of the settlement and be liable for a greater amount. If we become liable for more than our agreed
share of the aggregate settlement amount, either of these events could have a material adverse effect on our business, prospects,
financial condition and/or results of operations. As of December 31, 2023, we have recorded a legal settlement liability in the
amount of $0.4 million for the remaining payments due under the settlement agreement for the cost of the forensic expert and a related receivable from related party of $2.8 million for the remaining legal settlement costs to be reimbursed in accordance with the Settlement Allocation Agreement, which provided that the settlement payments, including the cost of the forensic expert, would first be made by the Company and then reimbursed by Biofrontera AG for its share. The $2.8 million receivable is presented net of accounts payable, related party on the balance sheet.

 On
September 13, 2023, Biofrontera was served with a complaint filed in United Stated District Court for the District of Massachusetts by
DUSA, Sun Pharmaceutical Industries, Inc., and Sun Pharmaceutical Industries LTD in which DUSA alleges breach of contract, violation
of the Lanham Act, and unfair trade practices. All claims stem from allegations that Biofrontera has promoted its Ameluz product in a
manner that is inconsistent with its approved FDA labeling. Though this complaint was originally filed in the U.S. District Court for
the District of Massachusetts, this matter has been transferred by agreement of the parties to the U.S. District Court for the District
of New Jersey.

 The
Company denies the Plaintiffs' claims and intends to defend these matters vigorously. Based on the Company's assessment of
the facts underlying the above claims, the uncertainty of litigation and the preliminary stage of the case, the Company cannot estimate
the possibility of a material loss, nor the potential range of loss that may result from this action. If the final resolution of the
matter is adverse to the Company, it could have a material impact on the Company's financial position, results of operations, or
cash flows.

 The
Biofrontera Group has been involved in lawsuits to defend or enforce patents related to our licensed products and they or another licensor
may become involved in similar suits in the future, which could be expensive, time-consuming and unsuccessful.

 Competitors
may infringe upon the patents for our licensed products. To counter infringement or unauthorized use, we or our Licensors may be required
to file infringement claims, which can be expensive and time-consuming. In addition, in an infringement proceeding, a court may decide
that one or more of our Licensors' patents is not valid or is unenforceable, or may refuse to stop the other party from using the
technology at issue on the grounds that our patents do not cover the technology in question. An adverse result in any litigation or defense
proceedings, could put one or more of our patents at risk of being invalidated, held unenforceable, or interpreted narrowly and could
put our patent applications at risk of not issuing. Defense of these claims, regardless of their merit, would involve substantial litigation
expense and would be a substantial diversion of employee resources from our business. In the event of a successful claim or counterclaim
of infringement against us, we may have to pay substantial damages, including treble damages and attorneys' fees for willful infringement,
obtain one or more licenses from third parties, pay royalties or redesign our infringing products, which may be impossible or require
substantial time and monetary expenditure.

 Interference
or derivation proceedings provoked by third parties or brought by the USPTO may be necessary to determine the priority of inventions
with respect to our patents or patent applications. An unfavorable outcome in any patent related litigation could require us to cease
using the related technology or to attempt to license rights to it from the prevailing party. Our business could be harmed if the prevailing
party does not offer us a license on commercially reasonable terms. Litigation or interference proceedings may fail and, even if successful,
may result in substantial costs and distract our management and other employees. We may not be able to prevent misappropriation of our
trade secrets or confidential information, particularly in countries where the laws may not protect those rights as fully as in the United
States or the EU.

 Furthermore,
because of the substantial amount of discovery that could be required in connection with intellectual property litigation, there is a
risk that some of our confidential information could be compromised by disclosure during this type of litigation. In addition, there
could be public announcements of the results of hearings, motions or other interim proceedings or developments. If securities analysts
or investors perceive these results to be negative, it could have a substantial adverse effect on the price of our securities.

 The
trade secrets of our Licensors are difficult to protect.

 Confidentiality
agreements with employees and others may not adequately prevent disclosure of our Licensors' trade secrets and other proprietary
information and may not adequately protect their intellectual property.

 Our
success depends upon the skills, knowledge and experience of our Licensors' scientific and technical personnel, consultants and
advisors as well as our partners, Licensors and contractors. Because drug development is a highly competitive technical field, our Licensors
may rely in part on trade secrets to protect their proprietary technology and processes. However, trade secrets are difficult to protect.
We enter into confidentiality agreements with our Licensors, corporate partners, employees, consultants and other advisors. These agreements
typically require that the receiving party keep confidential and not disclose to third parties all confidential information developed
by the receiving party or made known to the receiving party during the course of the receiving party's relationship.

 Our
Licensors' trade secrets also could be independently discovered by their competitors, in which case, they would not be able to
prevent use of such trade secrets by their competitors. The enforcement of a claim alleging that a party illegally obtained and was using
our trade secrets could be difficult, expensive and time consuming and the outcome would be unpredictable. There exists a risk that we
or our Licensors may not be able to detect when misappropriation of trade secrets has occurred or where a third party is using such trade
secrets without our or their knowledge. The failure to obtain or maintain meaningful trade secret protection could adversely affect the
competitive position of our licensed products.

 Our
subsidiary and certain third-party employees and our licensed patents are subject to foreign laws.

 All
employees of our wholly owned subsidiary, Bio-FRI GmbH, and a majority of the employees of Biofrontera AG, the parent company of the
Ameluz Licensor, work in Germany and are subject to German employment law. Ideas, developments, discoveries and inventions made by such
employees and consultants are subject to the provisions of the German Act on Employees' Inventions, which regulates the ownership
of, and compensation for, inventions made by employees. We face the risk that disputes can occur between Biofrontera AG and its employees
or former employees pertaining to alleged non-adherence to the provisions of this act that may impact our license depending on whether
Biofrontera AG prevails or fails in any such dispute. There is a risk that the compensation Biofrontera AG provided to employees who
assign patents to them may be deemed to be insufficient and Biofrontera AG may be required under German law to increase the compensation
due to such employees for the use of the patents. In those cases where employees have not assigned their interests to Biofrontera AG,
Biofrontera AG may need to pay compensation for the use of those patents. If Biofrontera AG is required to pay additional compensation
or face other disputes under the German Act on Employees' Inventions, the impact on our license could adversely affect our results
of operations.

 Our
international dealings with our Licensors may pose currency risks, which may adversely affect our operating results and net income.

 Our
operating results may be affected by volatility in currency exchange rates and our ability to effectively manage our currency transaction
risks. In general, we conduct our business with our Licensors and any third-party vendors in the local currency of the country in which
such licensor or vendor operates. We do not manage our foreign currency exposure in a manner that would eliminate the effects of changes
in foreign exchange rates. Therefore, changes in exchange rates between these foreign currencies, the dollar and the euro will affect
our selling, general and administrative, related party, and the recorded levels of assets and liabilities held in a foreign currency
and could result in exchange losses in any given reporting period.

 Given
the volatility of exchange rates, we can give no assurance that we will be able to effectively manage our currency transaction risks
or that any volatility in currency exchange rates will not have an adverse effect on our results of operations.

 Risks
Related to Our Business and Strategy

 We
are fully dependent on our collaboration with the Ameluz Licensor for our supply of Ameluz and RhodoLED lamps
and future development of the Ameluz product line, on our collaboration with Ferrer for our supply of Xepi
 and future development of Xepi and may depend on the Ameluz Licensor, Ferrer or additional third parties for the
supply, development and commercialization of future licensed products or product candidates. Although we have the authority under the
Ameluz LSA with respect to the indications that the Ameluz Licensor is currently pursuing with the FDA (as well as certain other clinical
studies identified in the Ameluz LSA) in certain circumstances to take over clinical development, regulatory work and manufacturing from
the Ameluz Licensor if they are unable or unwilling to perform these functions appropriately, the sourcing and manufacture of our licensed
products as well as the regulatory approvals and clinical trials related to our licensed products are currently controlled, and will
likely continue to be controlled for the foreseeable future, by our existing and future collaborators. Our lack of control over some
of these functions could adversely affect our ability to implement our strategy for the commercialization of our licensed products.

 We
do not own or operate manufacturing facilities for clinical or commercial manufacture of any of our licensed products. We outsource all
manufacturing and packaging of our licensed products to our Licensors, who may in turn contract with third parties to provide these services.
We have no direct control over the manufacturing process of our licensed products. This lack of control may increase quality or reliability
risks and could limit our ability to quickly increase or decrease production rates. See "—If our Licensors' manufacturing
partners fail to manufacture Ameluz, RhodoLED lamps, Xepi or other marketed products
in sufficient quantities and at acceptable quality and cost levels, or to fully comply with current good manufacturing practice, or cGMP,
or other applicable manufacturing regulations, we may face a bar to, or delays in, the commercialization of the products under license
to us or we will be unable to meet market demand, and lose potential revenues" for more information on the risks related to
the manufacture of our licensed products. Although under the Ameluz LSA we are entitled to enter into a direct agreement with the Ameluz
Licensor's supplier under certain circumstances, this is only with respect to the indications that the Ameluz Licensor is currently
seeking from the FDA (as well as certain other clinical studies identified in the Ameluz LSA) and there is no guarantee that we will
be able to do so under terms similar to the Ameluz Licensor's existing agreement or without delays or difficulties, each of which
could have an adverse impact on our business or results of operations.

 We
currently do not have the ability to conduct any clinical trials. Under the Ameluz LSA and the Xepi LSA, our Licensors' control
clinical development as well as the regulatory approval process for our licensed products. Our lack of control over the clinical development
and regulatory approval process for our licensed products could result in delays or difficulties in the commercialization of our licensed
products and/or affect the development of future indications for our licensed products. Although under the Ameluz LSA we are entitled
to take over clinical trial and regulatory work under certain circumstances with respect to the indications that the Ameluz Licensor
is currently seeking from the FDA (as well as certain other clinical studies identified in the Ameluz LSA) and subtract the cost of the
trials from the transfer price of Ameluz, there is no guarantee that we will be able to do so without delays or difficulties
that could have an adverse impact on our business or results of operations and we do not have that right with respect to indications
for Ameluz that we may desire the Ameluz Licensor to pursue in the future.

 In
addition, under the Ameluz LSA and the Xepi LSA, we are not obligated or tasked with the duty to defend the intellectual property related
to our licensed products and rely on our Licensors to defend the relevant intellectual property. This lack of control may increase the
litigation risks and could limit our ability to utilize the relevant intellectual property. See "—If our Licensors'
efforts to protect the proprietary nature of their intellectual property related to our licensed products are not adequate, we may not
be able to compete effectively in our market" for more information on the risks related to the defense of the intellectual
property related to our licensed products.

 Biofrontera
AG is a significant stockholder of the Company and, as a result of its control of the manufacture, clinical development and regulatory
approval of Ameluz may exert greater influence on the Company relative to the percentage of its ownership of the Company's
outstanding common stock. See "—Risks Related to Our Securities and Ownership of Our Common Stock— As of December
31, 2023, Biofrontera AG beneficially owns 26.4% of our stock after the completion of the initial public offering and will be able to
exert significant control over matters subject to stockholder approval, and its interests may conflict with ours or other stockholders'
in the future" for more information on the risks related to Biofrontera AG's beneficial ownership of the Company's
common stock.

 Insurance
coverage and medical expense reimbursement may be limited or unavailable in certain market segments for our licensed products, which
could make it difficult for us to sell our licensed products.

 Government
authorities and third-party payors, such as private health insurers and health maintenance organizations, decide which products they
will cover and the amount of reimbursement. Reimbursement by a third-party payor may depend upon a number of factors, including the government
or third-party payor's determination that use of a product is:

 a
 covered benefit under its health plan;

 safe,
 effective and medically necessary;

 reasonable
 and appropriate for the specific patient;

 cost-effective;
 and

 neither
 experimental nor investigational.

 Obtaining
coverage and reimbursement approval for a product from a government or other third-party payor is a time consuming and costly process
that could require our Licensors to provide to the payor supporting scientific, clinical and cost-effectiveness data for the use of our
licensed products. Our Licensors may not be able to provide data sufficient to gain acceptance with respect to coverage and reimbursement
or a particular reimbursement amount. If reimbursement of future products or extended indications for existing licensed products is unavailable
or limited in scope or amount, or if pricing is set at unsatisfactory levels, we may be unable to achieve or sustain profitability.

 Healthcare
legislative changes may have a material adverse effect on our business and results of operations.

 In
the United States and certain other countries, there have been a number of legislative and regulatory changes to the health care system
that could impact our ability to sell our licensed products profitably. In particular, the Medicare Prescription Drug, Improvement, and
Modernization Act of 2003 revised the payment methodology for many products under Medicare in the United States, which has resulted in
lower rates of reimbursement. In March 2010, the Patient Protection and Affordable Care Act, as amended by the Health Care and Education
Reconciliation Act of 2010 the ("PPACA" or collectively, the "ACA"), was signed into law, which substantially
changed the way healthcare is financed by both governmental and private insurers in the United States.

 Since
its enactment, there have been executive, judicial and Congressional challenges to certain aspects of the ACA, and we expect there will
be additional challenges and amendments to the ACA in the future. On January 20, 2017, President Donald Trump signed an executive order
stating that the administration intended to seek prompt repeal of the Affordable Care Act, and, pending repeal, directed by the U.S.
Department of Health and Human Services and other executive departments and agencies to take all steps necessary to limit any fiscal
or regulatory burdens of the Affordable Care Act. On January 28, 2021, President Joseph R. Biden, Jr. signed the Executive Order on Strengthening
Medicaid and stated his administration's intentions to reverse the actions of his predecessor and strengthen the Affordable Care
Act. As part of this Executive Order, the Department of Health and Human Services, United States Treasury, and the Department of Labor
are to review all existing regulations, orders, guidance documents, policies, and agency actions to consider if they are consistent with
ensuring both coverage under the Affordable Care Act and if they make high-quality healthcare affordable and accessible to Americans.
On March 11, 2021, President Joseph R. Biden Jr. signed into law the American Rescue Plan Act of 2021 to further strengthen Medicaid
and the ACA and on April 5, 2022, President Joseph R. Biden Jr. signed the Executive Order on Continuing to Strengthen Americans'
Access to Affordable, Quality Health Coverage in which he celebrated the significant progress across the U.S. in making healthcare more
affordable and accessible. In this Executive Order, President Joseph R. Biden Jr. directed agencies "with responsibilities related
to Americans' access to health coverage" to "review agency actions to identify ways to continue to expand the availability
of affordable health coverage." The continued expansion of the government's role in the U.S. healthcare industry may further
lower rates of reimbursement for pharmaceutical products. While we are unable to predict the likelihood of changes to the Affordable
Care Act or other healthcare laws which may negatively impact our profitability, we continue to closely monitor all changes.

 President
Biden intends, as his predecessor did, to take action against drug prices which are considered "high." The most likely
time to address this would be in the reauthorization of the Prescription Drug User Fee Act ("PDUFA") in 2022 as part of
a package bill. Drug pricing continues to be a subject of debate at the executive and legislative levels of U.S. government. The
American Rescue Plan Act of 2021 signed into law by President Biden on March 14, 2021 includes a provision that will eliminate the
statutory cap on rebates drug manufacturers pay to Medicaid beginning in January 2024. With the elimination of the cap,
manufacturers may be required to compensate states in an amount greater than what the state Medicaid programs pay for the drug.
Additionally, the Inflation Reduction Act of 2022 contains substantial drug pricing reforms, including the establishment of a drug
price negotiation program within the U.S. Department of Health and Human Services that would require manufacturers to charge a
negotiated "maximum fair price" for certain selected drugs or pay an excise tax for noncompliance, the establishment of
rebate payment requirements on manufacturers of certain drugs payable under Medicare Parts B and D to penalize price increases that
outpace inflation, and requires manufacturers to provide discounts on Part D drugs. Substantial penalties can be assessed for
noncompliance with the drug pricing provisions in the Inflation Reduction Act of 2022. The Inflation Reduction Act of 2022 could
have the effect of reducing the prices we can charge and reimbursement we receive for our products, if approved, thereby reducing
our profitability, and could have a material adverse effect on our financial condition, results of operations and growth prospects.
The effect of the Inflation Reduction Act of 2022 on our business and the pharmaceutical industry in general is not yet
known.

 Following
the passage of the Inflation Reduction Act of 2022, President Biden signed The Executive Order on Lowering Prescription Drug Costs for
Americans, effective October 14, 2022. This Executive Order is intended to drive down prescription drug costs and attempts to make use
of HHS's Center for Medicare and Medicaid Innovation ("Innovation Center"). The Innovation Center tests health care
payment and delivery models with the goal of improving health care quality and ensuring the efficiency of health care delivery. This
Executive Order further requires that HHS consider utilizing the Innovation Center's testing to identify payment and delivery models
that would "lower drug costs and promote access to innovative drug therapies for beneficiaries enrolled in Medicare and Medicaid
programs, including models that may lead to lower cost-sharing for commonly used drugs and support value-based payment that promotes
high-quality care."

 At
the state level, legislatures have increasingly passed legislation and implemented regulations designed to control pharmaceutical product
pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure
and transparency measures, and, in some cases, designed to encourage importation from other countries and bulk purchasing.

 We
expect that additional federal, state and foreign healthcare reform measures will be adopted in the future, any of which could limit
the amounts that federal and state governments will pay for healthcare products and services, which could result in limited coverage
and reimbursement and reduced demand for our products, once approved, or additional pricing pressures. Additionally, third-party payors,
including governmental payors, managed care organizations and private health insurers, are increasingly challenging the prices charged
for medical products and services and examining their cost effectiveness. The continuing efforts of governments, insurance companies,
managed care organizations and other payors of healthcare services to contain or reduce costs of healthcare and/or impose price controls
may adversely affect:

 the
 demand for our licensed products,

 if
 our Licensors obtain regulatory approvals;

 our
 ability to set a price or obtain reimbursement that we believe is fair for our licensed products;

 our
 ability to generate revenues and achieve or maintain profitability; and

 the
 level of taxes that we are required to pay.

 Any
denial or reduction in reimbursement from Medicare or other programs or governments may result in a similar denial or reduction in payments
from private payors, which may adversely affect our future profitability.

 To
date, we have a relatively short history of sales of our licensed products in the United States.

 We
have limited relatively short history of sales of our licensed products to date. The Biofrontera Group, including Biofrontera as a wholly
owned subsidiary of Biofrontera AG at the time, launched the commercialization of Ameluz and the RhodoLED lamp
for actinic keratosis in the United States in October 2016 and we have a limited history of marketing our licensed products in the United
States. In addition, we began marketing the drug Xepi in the United States following our acquisition of Cutanea in March
2019 and have a limited history of marketing Xepi in the United States. While our licensed products have gained acceptance
in the markets we serve, our licensed products may never generate substantial revenue or profits for us. We must establish a larger market
for our licensed products and build that market through marketing campaigns to increase awareness of, and confidence by doctors in, our
licensed products. If we are unable to expand our current customer base and obtain market acceptance of our licensed products, our operations
could be disrupted and our business may be materially adversely affected. Even if we achieve profitability, we may not be able to sustain
or increase profitability.

 Competing
products and future emerging products may erode sales of our licensed products.

 Reimbursement
issues affect the economic competitiveness of our licensed products as compared to other therapies. See "— Insurance coverage
and medical expense reimbursement may be limited or unavailable in certain market segments for our licensed products, which could make
it difficult for us to sell our licensed products."

 Our
industry is subject to rapid, unpredictable and significant technological change and intense competition. Our competitors may succeed
in developing, acquiring, or licensing on an exclusive basis, products that are safer, more effective or more desirable than our licensed
products. Many of our competitors have substantially greater financial, technical and marketing resources than we have. In addition,
several of these companies have significantly greater experience than we or our Licensors do in developing products, conducting preclinical
and clinical testing, obtaining regulatory approvals to market products for health care, and marketing healthcare products.

 Mergers
and acquisitions in the pharmaceutical and biotechnology industries may result in even more resources being concentrated in our competitors.
Competition may increase further as a result of advances in the commercial applicability of technologies and greater availability of
capital for investment in these industries.

 We
cannot guarantee that new drugs or future developments in drug technologies will not have a material adverse effect on our business.
Increased competition could result in price reductions, lower levels of government or other third-party reimbursements, failure to achieve
market acceptance and loss of market share, any of which could adversely affect our business, results of operations and financial condition.
Further, we cannot give any assurance that developments by our competitors or future competitors will not render our technologies obsolete
or less advantageous.

 We
face significant competition from other pharmaceutical and medical device companies and our operating results will suffer if we fail
to compete effectively. We also must compete with existing treatments, such as simple curettage and cryotherapy, which do not involve
the use of a drug but have gained significant market acceptance.

 The
pharmaceutical and medical device industry is characterized by intense competition and rapid innovation. Our competitors may be able
to develop other products that are able to achieve similar or better results for the treatment of actinic keratosis. We expect that our
future competitors will include mostly established pharmaceutical companies, such as Sun Pharma (DUSA) and Galderma. Most of our competitors
have substantially greater financial, technical and other resources, such as larger R&D staffs and experienced marketing
and manufacturing organizations and well-established sales forces. Competition may increase further as a result of advances in the commercial
applicability of technologies and greater availability of capital for investment in these industries.

 Our
competitors may succeed in developing, acquiring or licensing products that are more effective or less costly than our licensed products
and product candidates. In addition, our licensed products compete with other therapies, such as simple curettage and, particularly in
the United States, cryotherapy, which do not involve the use of a drug but have gained significant market acceptance.

 If
we are not able to compete effectively with the competitors and competing therapies, we may lose significant market share in the relevant
markets, which could have a material adverse effect on our revenue, results of operations and financial condition.

 If
we are unable to maintain effective marketing and sales capabilities or enter into agreements with third parties to market and sell our
licensed products, we may be unable to generate revenue growth.

 In
order to grow the market for our licensed products, especially a newer licensed product like Xepi, we must continue to
build our marketing, sales and distribution capabilities in the United States. The development and training of our sales force and related
compliance plans to market our licensed products are expensive and time consuming and can potentially delay the growth of sales of our
licensed products. In the event we are not successful in maintaining our marketing and sales infrastructure, we may not be able to successfully
grow the market of our licensed products, which would limit our revenue growth.

 The
U.S. market size for Ameluz for the treatment of actinic keratosis may be smaller than we have estimated.

 The
public data regarding the market for actinic keratosis treatments in the United States may be incomplete. Therefore, some of our estimates
and judgments are based on various sources which we have not independently verified and which potentially include outdated information,
or information that may not be precise or correct, potentially rendering the U.S. market size for treatment of actinic keratosis with
Ameluz smaller than we have estimated, which may reduce our potential and ability to increase sales of Ameluz
 and revenue in the United States. Although we have not independently verified the data obtained from these sources, we believe
that such data provide the best available information relating to the present market for actinic keratosis treatments in the United States,
and we often use such data for our business and planning purposes.

 If
our Licensors face allegations of noncompliance with the law and encounter sanctions, their reputation, revenues and liquidity may suffer,
and our licensed products could be subject to restrictions or withdrawal from the market.

 Any
government investigation of alleged violations of the law could require our Licensors to expend significant time and resources in response
and could generate negative publicity. Any failure to comply with ongoing regulatory requirements may significantly and adversely affect
our ability to commercialize and generate revenues from our licensed products. If regulatory sanctions are applied or if regulatory approval
is withdrawn, the value of our company and our operating results will be adversely affected. Additionally, if we are unable to generate
revenues from our product sales, our potential for achieving profitability will be diminished and the capital necessary to fund our operations
will be increased.

 Even
if our Licensors obtain regulatory approvals for our licensed products, or approvals extending their indications, they may not gain market
acceptance or become widely accepted among hospitals, physicians, health care payors, patients and others in the medical community.

 In
May 2016, Biofrontera Bioscience received approval from the FDA to market in the United States. Ameluz in combination
with PDT using the BF-RhodoLED lamp for lesion-directed and field-directed treatment of actinic keratoses
of mild-to-moderate severity on the face and scalp. We launched the commercialization of Ameluz and the BF-RhodoLED
 lamp for actinic keratosis in the United States in October 2016. Even with regulatory approval, Ameluz may not
receive wide acceptance among hospitals, physicians, health care payors, patients and others in the medical community. In addition, Xepi
 received approval from the FDA in 2017 and may not gain market acceptance over time. Market acceptance of any of our licensed products
depends on a number of factors, including:

 the
 clinical indications for which they are approved, including any restrictions placed upon the product in connection with its approval,
 such as patient registry or labeling restriction;

 the
 product labeling, including warnings, precautions, side effects, and contraindications that the FDA or other regulatory authorities
 approve;

 the
 potential and perceived advantages of our product candidates over alternative products or therapies;

 relative
 convenience and ease of administration;

 the
 effectiveness and compliance of our sales and marketing efforts;

 acceptance
 by major operators of hospitals, physicians and patients of our licensed products or candidates as a safe and effective treatment;

 the
 prevalence and severity of any side effects;

 product
 labeling or product insert requirements of the FDA or other regulatory authorities;

 any
 Risk Evaluation and Mitigation Strategy that the FDA might require for our drug product candidates;

 the
 timing of market introduction of our licensed product or product candidates as well as competitive products;

 the
 perceived advantages of our licensed products over alternative treatments;

 the
 cost of treatment in relation to alternative products; and

 the
 availability of adequate reimbursement and pricing by third party payors and government authorities, including any conditions for
 reimbursement required by such third-party payors and government authorities.

 If
our licensed products and product candidates are approved, and/or receive label extensions, but fail to achieve market acceptance among
physicians, patients, payors, or others in the medical community in the United States, we will not be able to generate significant revenues,
which would have a material adverse effect on our business, prospects, financial condition and results of operations.

 With
respect to our licensed products, we may be subject to healthcare laws, regulation and enforcement. Our failure to comply with those
laws could have a material adverse effect on our results of operations and financial condition.

 We
may be subject to additional healthcare regulation and enforcement by the U.S. federal government and by authorities in the United States.
Such U.S. laws include, without limitation, state and federal anti-kickback, federal false claims, privacy, security, financial disclosure
laws, anti-trust, Physician Payment Sunshine Act reporting, fair trade regulation and advertising laws and regulations. Many states and
other jurisdictions have similar laws and regulations, some of which are broader in scope. If our operations are found to be in violation
of any of such laws or any other governmental regulations that apply to us, we may be subject to penalties, including, but not limited
to, civil and criminal penalties, damages, fines, the curtailment or restructuring of our operations, the exclusion from participation
in federal, state or other healthcare programs and imprisonment, any of which could adversely affect our ability to operate our business
and our financial results.

 Increased
Health and Human Services, Office of Inspector General (OIG), scrutiny on the sale of products through specialty pharmacies or through
physician practices by means of direct investigation or by issuance of unfavorable Opinion Letters which may curtail or hinder the sales
of our licensed products based on risk of enforcement upon ourselves or our buyers. The OIG continues to make modifications to existing
Anti-Kickback Statute, or AKS, safe harbors which may increase liability and risk for our company as well as adversely impact sales relationships.
On November 20, 2020, OIG issued the final rule for Safe Harbors under the Federal AKS. This new final rule creates additional safe harbors
including ones pertaining to patient incentives. OIG is able to modify safe harbors as well as regulatory compliance requirements which
could impact out business adversely.

 The
majority of states also have statutes or regulations similar to these federal laws, which apply to items and services reimbursed under
Medicaid and other state programs, or, in several states, apply regardless of the payer. In addition, some states have laws that require
pharmaceutical companies to adopt comprehensive compliance programs. Certain states also mandate the tracking and require reporting of
gifts, compensation, and other remuneration paid by us to physicians and other health care providers.

 In
September 2010, OIG issued a Special Advisory Bulletin to notify drug manufacturers that OIG intended to pursue enforcement actions against
drug manufacturers that failed to submit timely average manufacturer price, or AMP, and average sales price, or ASP, information. The
Medicaid Drug Rebate Program requires manufacturers to enter into and have in effect a national rebate agreement with the Secretary of
Health and Human Services in order for Medicaid payments to be available for the manufacturer's covered outpatient drugs. Companies
with such rebate agreements are required to submit certain drug pricing information to CMS, including quarterly and monthly pricing data.
There has been an increased level of federal enforcement against drug manufacturers that have failed to provide timely and accurate pricing
information to the government. Since September 2010, OIG has settled 13 cases against drug manufacturers relating to drug price reporting
issues, totaling approximately $18.5 million. We expect continued enforcement directed at companies that fail to make accurate and timely
price reports. If we were found to make the required pricing disclosures, we could incur significant expense and delay.

 A
recall of our licensed drug or medical device products, or the discovery of serious safety issues with our licensed drug or medical device
products, could have a significant negative impact on us.

 The
FDA and other relevant regulatory agencies have the authority to require or request the recall of commercialized products in the event
of material deficiencies or defects in design or manufacture or in the event that a product poses an unacceptable risk to health. Manufacturers
may, under their own initiative, recall a product. A government-mandated or voluntary recall by us or one of our distributors could occur
as a result of an unacceptable risk to health, component failures, manufacturing errors, design or labeling defects or other deficiencies
and issues. Recalls of our licensed products would divert managerial and financial resources and have an adverse effect on our and our
Licensors' reputation, financial condition and operating results, which could impair our or our Licensors' ability to market,
sell or produce our licensed products in a cost-effective and timely manner. In February 2024, our Ameluz Licensor initiated a voluntary
recall of a limited number of lots of Ameluz due to a manufacturing defect in the impacted product's packaging, which is provided
by an unaffiliated supplier. The Ameluz Licensor confirmed that the recalled product is not likely to cause adverse health consequences.
We promptly notified all impacted physician customers of this recall and arranged for the prompt replacement of the recalled products.
Refer to Note 25. Subsequent Events - Voluntary Product Recall of Limited Lots of Ameluz for more information.

 Further,
under the FDA's medical device reporting, or MDR, regulations, our Licensors are required to report to the FDA any event which
reasonably suggests that our licensed product may have caused or contributed to a death or serious injury or in which our licensed product
malfunctioned and, if the malfunction of the same or similar device marketed by us were to recur, would likely cause or contribute to
death or serious injury. The FDA also requires reporting of serious, life-threatening, unexpected and other adverse drug experiences
and the submission of periodic safety reports and other information. Product malfunctions or other adverse event reports may result in
a voluntary or involuntary product recall and other adverse actions, which could divert managerial and financial resources, impair our
and our Licensors' ability to market, sell or manufacture our licensed products in a cost-effective and timely manner and have
an adverse effect on our reputation, financial condition and operating results.

 Any
adverse event involving our licensed products could result in future voluntary corrective actions, such as recalls or customer notifications,
or regulatory agency action, which could include inspection, mandatory recall or other enforcement action. Any corrective action, whether
voluntary or involuntary, will require the dedication of our Licensors' time and capital, distract our Licensors' management
from operating their business and may harm our and our Licensors' reputation and financial results as well as threaten our marketing
authority for such products.

 Our
licensed medical device product, the RhodoLED lamp, is subject to extensive governmental regulation, and failure to comply
with applicable requirements could cause our business to suffer.

 The
medical device industry in the United States is regulated extensively by governmental authorities, principally the FDA and corresponding
state agencies. The regulations are very complex and are subject to rapid change and varying interpretations. Regulatory restrictions
or changes could limit our ability to carry on or expand our operations or result in higher than anticipated costs or lower than anticipated
sales. The FDA and other U.S. governmental agencies regulate numerous elements of our and our Licensors' business, including:

 product
 design and development;

 pre-clinical
 and clinical testing and trials;

 product
 safety;

 establishment
 registration and product listing;

 distribution;

 labeling,
 manufacturing and storage;

 pre-market
 clearance or approval;

 advertising
 and promotion;

 marketing,
 manufacturing, sales and distribution;

 relationships
 and communications with health care providers;

 adverse
 event reporting;

 market
 exclusivity;

 servicing
 and post-market surveillance; and

 recalls
 and field safety corrective actions.

 We
are working to commercialize a new lamp, the "RhodoLED XL," which was approved by the FDA on
October 21, 2021 and allows use of Ameluz on more distant Actinic Keratosis lesions. Management believes that this new
lamp, could provide new business growth opportunities for our company. In the United States, according to FDA guidance, products for
PDT, such as Ameluz gel and its corresponding lamp(s), must be approved as combination products that cover both the drug
and the lamp. In May 2016, the Biofrontera Group (which included Biofrontera prior to our initial public offering) received approval
from the FDA to market in the United States Ameluz in combination with PDT using the BF-RhodoLED
 lamp for lesion-directed and field-directed treatment of actinic keratoses of mild-to-moderate severity on the face and scalp.
The applicable office of the FDA has determined that if the Ameluz Licensor develops a new lamp to be used with Ameluz,
beyond the existing approved RhodoLED lamp series, the Ameluz Licensor must seek a new approval utilizing the "New
Drug Application" procedure. As part of a drug/device combination, the lamp is by definition classified as a class III medical
device and as such requires a premarket approval, or PMA, by the FDA. A new lamp will also require changes in the "Prescribing
Information" of the drug. If the Ameluz Licensor develops this new lamp, once the Ameluz Licensor's PMA application is submitted
to the FDA as part of this approval process, it may take more than six months, plus, if needed, time required to answer questions or
provide additional data. Prior to submission, the Ameluz Licensor will need to perform final tests on the lamp prototype, including technical
tests by a certified laboratory and a usability study. During the process, there is a risk that the FDA might ask for additional tests
or even clinical trials, and there is no assurance that the Ameluz Licensor will be able to satisfy the FDA's requests for additional
tests or trials in a timely manner, or at all, and there is no assurance that the Ameluz Licensor will be able to develop this new lamp,
or obtain approval to use it in the United States for PDT treatment of actinic keratosis in combination with Ameluz.

 The
FDA can delay, limit or deny clearance or approval of a device for many reasons, including:

 the
 Biofrontera Group's inability to demonstrate that its products are safe and effective for their intended uses or substantially
 equivalent to a predicate device;

 the
 data from the Biofrontera Group's clinical trials may not be sufficient to support clearance or approval; and

 the
 manufacturing process or facilities we use may not meet applicable requirements.

 In
addition, the FDA and other regulatory authorities may change their respective clearance and approval policies, adopt additional regulations
or revise existing regulations, or take other actions which may prevent or delay approval or clearance of our licensed products under
development or impact our ability to modify our currently cleared or approved products on a timely basis.

 Any
delay in, or failure to receive or maintain, clearance or approval for such products under development that we expect to license could
prevent us from generating revenue from these products or achieving profitability. Additionally, the FDA and comparable foreign regulatory
authorities have broad enforcement powers. Regulatory enforcement or inquiries, or other increased scrutiny of us, could dissuade some
customers from using our licensed products and adversely affect our reputation and the perceived safety and efficacy of our licensed
products.

 Failure
to comply with applicable regulations could jeopardize our ability to sell our licensed products and result in enforcement actions against
our Licensors such as fines, civil penalties, injunctions, warning letters, Form 483 reports, recalls of products, delays in the introduction
of products into the market, refusal of the FDA or other regulators to grant future clearances or approvals, and the suspension or withdrawal
of existing approvals by the FDA or other regulators. Any of these sanctions could result in higher than anticipated costs or lower than
anticipated sales and have a material adverse effect on our reputation, business, financial condition and operating results.

 As
a result of our current IT infrastructure and German-based subsidiary, we are subject to governmental regulation and other legal obligations
in the EU and European Economic Area, or EEA, related to privacy, data protection and data security and, as a result of our sales in
California, the California Consumer Privacy Act (CCPA). Our actual or perceived failure to comply with such obligations could harm our
business.

 We
are subject to diverse laws and regulations relating to data privacy and security in the EU and eventually in the EEA, including Regulation
2016/679, known as the GDPR. The GDPR applies extraterritorially and implements stringent operational requirements for controllers and
processors of personal data. New global privacy rules are being enacted and existing ones are being updated and strengthened. We are
likely to be required to expend capital and other resources to ensure ongoing compliance with these laws and regulations.

 Complying
with these numerous, complex and often changing regulations is expensive and difficult. Failure by us, any partners, our service providers,
or our employees or contractors to comply with the GDPR could result in regulatory investigations, enforcement notices and/or fines of
up to the higher of 20 million or up to 4% of our total worldwide annual revenue. In addition to the foregoing, a breach of privacy
laws or data security laws, particularly those resulting in a significant security incident or breach involving the misappropriation,
loss or other unauthorized use or disclosure of sensitive or confidential patient or consumer information, could have a material adverse
effect on our business, reputation and financial condition.

 As
a data controller, we are accountable for any third-party service providers we engage to process personal data on our behalf. We attempt
to mitigate the associated risks by performing security assessments and due diligence of our vendors and requiring all such third-party
providers with data access to sign agreements and obligating them to only process data according to our instructions and to take sufficient
security measures to protect such data. There is no assurance that these contractual measures and our own privacy and security-related
safeguards will protect us from the risks associated with the third-party processing, storage and transmission of such information. Any
violation of data or security laws by our third-party processors could have a material adverse effect on our business and result in the
fines and penalties outlined above.

 Where
we transfer personal data of EU citizens or anyone residing in the EU out of the EU and EEA, we do so in compliance with the relevant
data export requirements from time to time. There is currently ongoing litigation challenging the commonly used transfer mechanism, the
EU Commission approved model clauses. On July 16, 2020, the Court of Justice of the European Union, or CJEU, issued a judgment which
annulled, without granting a grace or transition period, the European Commission's Decision (EU) 2016/1250 of July 12, 2016 on
the adequacy of the protection provided by the U.S. Privacy Shield (a mechanism for complying with data protection requirements when
transferring personal data from the EU to the United States). Accordingly, such framework is not a valid mechanism to comply with EU
data protection requirements when transferring personal data from the European Union to the United States. To the extent that we were
to rely on the EU-U.S. Privacy Shield Framework, we will not be able to do so in the future, which could increase our costs and limit
our ability to process personal data from the EU. The same decision also cast doubt on the viability of one of the primary alternatives
to the U.S. Privacy Shield, namely, the European Commission's Standard Contractual Clauses, as a vehicle for such transfers in
all circumstances. Use of the standard contractual clauses must now be assessed on a case-by-case basis taking into account the legal
regime applicable in the destination country, in particular applicable surveillance laws and rights of individuals and additional measures
and/or contractual provisions may need to be put in place, however, the nature of these additional measures is currently uncertain. The
CJEU went on to state that if a competent supervisory authority believes that the Standard Contractual Clauses cannot be complied with
in the destination country and the required level of protection cannot be secured by other means, such supervisory authority is under
an obligation to suspend or prohibit that transfer. At present, there are few, if any, viable alternatives to the Standard Contractual
Clauses, and the law in this area remains dynamic. These changes may require us to find alternative bases for the compliant transfer
of personal data outside the EEA and we are monitoring developments in this area.

 The
GDPR is directly applicable in each EU Member State, however, it provides that EU Member States may introduce further conditions, including
limitations which could limit our ability to collect, use and share personal data (including health and medical information), or could
cause our compliance costs to increase, ultimately having an adverse impact on our business. The GDPR imposes onerous accountability
obligations requiring data controllers and processors to maintain a record of their data processing and implement policies as part of
its mandated privacy governance framework. It also requires data controllers to be transparent and disclose to data subjects (in a concise,
intelligible and easily accessible form) how their personal information is to be used, imposes limitations on retention of personal data;
defines for the first time pseudonymized ( i.e., key-coded) data; introduces mandatory data breach notification requirements; and
sets higher standards for data controllers to demonstrate that they have obtained valid consent for certain data processing activities.
In addition to the foregoing, a breach of the GDPR could result in regulatory investigations, reputational damage, orders to cease/change
our use of data, enforcement notices, as well potential civil claims including class action type litigation where individuals suffer
harm.

 On
January 1, 2020, California enacted the California Consumer Privacy Act, or CCPA, which, among other things, requires new disclosures
to California consumers and affords such consumers new abilities to opt out of certain sales of personal information. This Act also applies
to any information of certain patients that a drug company may possess. It remains unclear what, if any, modifications will be made to
this legislation or how it will be interpreted in the years to come. The effects of the CCPA potentially are significant, however, and
may require us to modify our data processing practices and policies and to incur substantial costs and expenses in an effort to comply.
As a general matter, compliance with laws, regulations, and any applicable rules or guidance from self-regulatory organizations relating
to privacy, data protection, information security and consumer protection, may result in substantial costs and may necessitate changes
to our business practices, which may compromise our growth strategy, adversely affect our ability to acquire customers, and otherwise
adversely affect our business, financial condition and operating results. Noncompliance with CCPA could result in regulatory investigations,
reputational damage, orders to cease/change our use of data, enforcement notices, as well potential civil claims including class action
type litigation where individuals suffer harm. Since its enactment, four (4) additional states – Colorado, Connecticut, Utah, and
Virginia – have enacted comprehensive consumer data privacy laws similar to the CCPA, indicating a potential trend that may continue
to spread across the U.S.

 We
are highly dependent on our key personnel, and if we are not successful in attracting and retaining highly qualified personnel, we may
be unable to successfully implement our business strategy.

 Our
ability to compete in the highly competitive pharmaceutical industry depends upon our ability to attract and retain highly qualified
managerial, scientific and medical personnel with specialized scientific and technical skills. We are highly dependent on our management,
scientific, medical and operations personnel, including Prof. Dr. Hermann L bbert, our Chief Executive Officer and Chairman and
Fred

 Leffler, our Chief Financial Officer. The loss of the services of any of our executive officers or other key employees and our inability
to find suitable replacements could potentially harm our business, prospects, financial condition or results of operations.

 Despite
our efforts to retain valuable employees, members of our management team may terminate their employment with us on short notice. Although
we have, or are in the process of negotiating, employment agreements with our key employees, these employees could leave our employment
at any time, with certain notice periods. We do not maintain "key man" insurance policies on the lives of these individuals
or the lives of any of our other employees. Our success also depends on our ability to continue to attract, retain and motivate highly
skilled junior, mid-level and senior managers as well as junior, mid-level and senior scientific and medical personnel and sales representatives.

 Many
of the other biotechnology and pharmaceutical companies that we compete against for qualified personnel have greater financial and other
resources, different risk profiles and a longer history in the industry than we do. They may also provide more diverse opportunities
and better chances for career advancement. Some of these characteristics may be more appealing to high quality candidates than what we
can offer. If we are unable to continue to attract and retain high quality personnel, our ability to commercialize our licensed products
will be limited.

 Our
employees may engage in misconduct or other improper activities, including noncompliance with regulatory standards and requirements.

 We
are exposed to the risk of employee fraud or other misconduct. Misconduct by employees could include intentional failures to comply with
FDA regulations, provide accurate information to the FDA, comply with manufacturing standards we have established, comply with healthcare
fraud and abuse laws and regulations, report financial information or data accurately or disclose unauthorized activities to us. In particular,
sales, marketing and business arrangements in the healthcare industry are subject to extensive laws and regulations intended to prevent
fraud, kickbacks, self-dealing and other abusive practices in the United States as well as in any other jurisdictions where we conduct
our business. These laws and regulations may restrict or prohibit a wide range of pricing, discounting, marketing and promotion, sales
commission, customer incentive programs and other business arrangements. Employee misconduct could also involve the improper use of information
obtained in the course of clinical trials, which could result in regulatory sanctions, inability to obtain product approval and serious
harm to our reputation. It is not always possible to identify and deter employee misconduct, and any precautions we take to detect and
prevent this activity may not be effective in controlling unknown or unmanaged risks or losses or in protecting us from governmental
investigations or other actions or lawsuits stemming from a failure to be in compliance with such laws or regulations. If any such actions
are instituted against us, and we are not successful in defending ourselves or asserting our rights, those actions could have a significant
impact on our business, including the imposition of significant fines or other sanctions.

 We
will need to grow the size of our organization and we may experience difficulties in managing this growth.

 As
of December 31, 2023, we had 85 employees. In the longer term, as our development and commercialization plans and strategies develop,
and as we continue operating as a public company, we expect to need additional managerial, operational, sales, marketing, financial and
other personnel. Future growth would impose significant added responsibilities on members of management, including:

 identifying,
 recruiting, integrating, maintaining and motivating existing or additional employees; and

 improving
 our operational, financial and management controls, reporting systems and procedures.

 Our
future financial performance and our ability to commercialize and market our licensed products will depend, in part, on our ability to
effectively manage any future growth, and our management may also have to divert a disproportionate amount of its attention away from
day-to-day activities in order to devote a substantial amount of time to managing these growth activities. If we are not able to effectively
expand our organization by hiring new employees and expanding our groups of consultants and contractors, we may not be able to successfully
implement the tasks necessary to commercialize our licensed products and, accordingly, may not achieve our commercialization goals.

 Due
to our ongoing assessment of the size of the required sales force, we may be required to hire substantially more sales representatives
to adequately support the commercialization and marketing of our licensed products or we may incur excess costs as a result of hiring
more sales representatives than necessary. We may be competing with companies that currently have extensive and well-funded marketing
and sales operations.

 Our
business and operations would suffer in the event of system failures or cyber-attacks.

 Despite
the implementation of security measures, our internal computer systems and those of our current and future contract and research
organizations, or CROs, licensors, and other contractors and consultants are vulnerable to damage from breaches of information
systems, attempts to access information, including customer and company information, malicious code, theft, misuse, loss, release,
or destruction of data (including confidential customer information), account takeovers, unavailability of service, computer
viruses, unauthorized access, natural disasters, terrorism, war and telecommunication and electrical failures. The risk of a
security breach or disruption, particularly through cyber-attacks or cyber-intrusion, including by computer hackers, foreign
governments, and cyber terrorists, has generally increased as the number, intensity and sophistication of attempted attacks and
intrusions from around the world have increased. While we have not experienced any such material system failure or cyber-related
incident, if such an event were to occur and cause interruptions in our operations, it could (i) materially disrupt our development
programs. The proper functioning of our networks and systems and therefore our business operations and those of our customers; (ii)
result in the unauthorized access to, and destruction, loss, theft, misappropriation, or release of confidential, sensitive, or
otherwise valuable information of ours or our customers; (iii) result in a violation of applicable privacy, data protection, and
other laws, subjecting us to additional regulatory scrutiny and exposing us to civil litigation, enforcement actions, governmental
fines, and possible financial liability; (iv) require significant management attention and resources to remedy the damages that
result; or (v) harm our reputation or cause a decrease in the number of customers that choose to do business with us. The occurrence
of any of the foregoing could have a material adverse effect on our business, financial condition, and results of operations.
Furthermore, in the event of a cyber-related incident, we may be delayed in identifying or responding to the incident, which could
increase the negative impact of the incident on our business, financial condition, and results of operations. To the extent that any
disruption or cyberrelated incident were to result in a loss of, or damage to, our data or applications, or inappropriate disclosure
of confidential or proprietary information, we could incur liability and the further development and commercialization of our
licensed products and product candidates could be delayed.

 If
product liability lawsuits are brought against us, we may incur substantial liabilities and may be required to limit commercialization
of our licensed products.

 We
face an inherent risk of product liability as a result of the clinical testing of our licensed products and face an even greater risk
if we commercialize our licensed products on a larger scale. For example, we may be sued if our licensed products allegedly cause injury
or are found to be otherwise unsuitable during clinical testing, manufacturing, marketing or sale. Any such product liability claims
may include allegations of defects in manufacturing; defects in design; a failure to warn of dangers inherent in the product, negligence,
strict liability; and a breach of warranties. Claims could also be asserted under state consumer protection acts. If we cannot successfully
defend ourselves against product liability claims, we may incur substantial liabilities or be required to limit commercialization of
our licensed products and product candidates. Even a successful defense would require significant financial and management resources.
Regardless of the merits or eventual outcome, liability claims may result in:

 costs
 to defend litigation and other proceedings;

 a
 diversion of management's time and our resources;

 decreased
 demand for our licensed products;

 injury
 to our reputation;

 withdrawal
 of clinical trial participants;

 initiation
 of investigations by regulators;

 product
 recalls, withdrawals or labeling, marketing or promotional restrictions;

 loss
 of revenue;

 substantial
 monetary awards to trial participants or patients;

 exhaustion
 of any available insurance and our capital resources;

 the
 inability to commercialize our licensed products; and

 a
 decline in our share price.

 We
currently maintain product liability insurance. If such insurance is not sufficient, or if we are not able to obtain such insurance at
an acceptable cost in the future, potential product liability claims could prevent or inhibit the commercialization of our licensed products
and the products we license in the future. A successful claim could materially harm our business, financial condition or results of operations.
Additionally, we cannot guarantee that continued product liability insurance coverage will be available in the future at acceptable costs.

 Failure
to comply with the U.S. Foreign Corrupt Practices Act or other applicable anti-corruption legislation could result in fines, criminal
penalties and an adverse effect on our business.

 We
do business with Licensors in a number of countries throughout the world. We are committed to doing business in accordance with applicable
anti-corruption laws. We are subject, however, to the risk that our officers, directors, employees, agents and collaborators may take
action determined to be in violation of such anti-corruption laws, including the U.S. Foreign Corrupt Practices Act of 1977, the U.K.
Bribery Act 2010 and the European Union Anti-Corruption Act, as well as trade sanctions administered by the U.S. Office of Foreign Assets
Control and the U.S. Department of Commerce. Any such violation could result in substantial fines, sanctions, civil and/or criminal penalties
or curtailment of operations in certain jurisdictions and might adversely affect our results of operations. In addition, actual or alleged
violations could damage our reputation and ability to do business.

 Our
licensed products will be subject to ongoing regulatory requirements and we may face future development, manufacturing and regulatory
difficulties.

 Our
licensed drug products Ameluz and Xepi and any other drug products we license or acquire will be subject
to ongoing regulatory requirements for labeling, packaging, storage, advertising, promotion, sampling, record-keeping, submission of
safety and other post-market approval information, importation and exportation. In addition, approved products, manufacturers and manufacturers'
facilities are required to comply with extensive FDA requirements and the requirements of other similar regulatory authorities, including
ensuring that quality control and manufacturing procedures conform to cGMP requirements.

 Accordingly,
we rely on our Licensors to expend time, money and effort in all areas of regulatory compliance, including manufacturing, production
and quality control. Our Licensors will also be required to report certain adverse reactions and production problems, if any, to the
FDA and other similar regulatory authorities and to comply with certain requirements concerning advertising and promotion for our licensed
products and potential products.

 If
a regulatory authority discovers previously unknown problems with a product, such as adverse events of unanticipated or unacceptable
severity or frequency, or problems with the facility where the product is manufactured, or disagrees with the promotion, marketing or
labeling of a product, it may impose restrictions on that product, including requiring withdrawal of the product from the market. If
our licensed products or potential products fail to comply with applicable regulatory requirements, a regulatory authority may, among
other actions against our Licensors or applicable third parties:

 issue
 warning letters or Form 483 (or similar) notices requiring our Licensors or applicable third parties to modify certain activities
 or correct certain deficiencies;

 require
 product recalls or impose civil monetary fines;

 mandate
 modifications to promotional materials or require our Licensors to provide corrective information to healthcare practitioners;

 require
 our Licensors or applicable third parties to enter into a consent decree or permanent injunction;

 impose
 other administrative or judicial civil or criminal actions, including monetary or other penalties, or pursue criminal prosecution;

 withdraw
 regulatory approval;

 refuse
 to approve pending applications or supplements to approved applications filed by our Licensors;

 impose
 restrictions on operations, including costly new manufacturing requirements; or

 seize
 or detain products.

 To
the extent that such adverse actions impact our rights under our license and supply agreements or otherwise restrict our ability to market
our licensed products, they could adversely impact our business and results of operation.

 Generic
manufacturers may launch products at risk of patent infringement.

 If
other manufacturers launch products to compete with our licensed products or product candidates in spite of our Licensors' patent
position, these manufacturers would likely erode our market and negatively impact our sales revenues, liquidity and results of operations.

 The results of our R&D efforts are uncertain and there can be no assurance they will enhance the commercial success of our products.

 We believe that we will need
to incur additional R&D expenditures to improve the capabilities of our BF-RhodoLED lamps to better fulfill
the needs of dermatologists and may also incur R&D expenditures to develop new products. The products we are developing
and may develop in the future may not be technologically successful. At this time, we have limited internal R&D personnel,
which makes us dependent on consulting relationships.

 In addition, the length of our product development cycle may be greater than we originally expected, and we may experience
delays in product development. If our resulting products are not technologically successful, they may not achieve market acceptance or
compete effectively with our competitors' products and services.

 Risks
Related to Our Financial Position and Capital Requirements

 There
is substantial doubt about our ability to continue as a "going concern", which has been alleviated through managements plans to mitigate these conditions and obtain additional liquidit y.

 In
connection with our assessment of going concern considerations under applicable accounting standards, the Company's management
has determined that substantial doubt exists about our ability to continue as a going concern for at least one year from the date the
unaudited condensed consolidated financial statements were issued, which management believes has been alleviated
through its plans to mitigate these conditions and obtain additional liquidity. The future viability of the Company is dependent on its ability to
continue to execute its growth plan and raise additional capital or find alternative methods of financing to fund its operations during
the first half of 2024, and until cash flow from operations is sufficient, if ever. As of March 11, 2024 our unaudited cash was approximately
$4.1 million. There can be no guarantee that the Company will be successful in raising additional capital or finding alternative methods of
financing. If the Company is not successful in these endeavors, it would likely have a material adverse effect on the Company's
business, results of operations and financial condition. See Note 1. Organization and Business Overview - Liquidity and Going Concern for additional information.

 We
have a history of operating losses and anticipate that we will continue to incur operating losses in the future and may never sustain
profitability.

 We
have incurred losses in each year since inception. Our net loss for the fiscal years ended December 31, 2023 and December 31, 2022 was
$20.1 million and $0.6 million, respectively. As of December 31, 2023, we had an accumulated deficit of $99.7 million.

 Our
ability to become profitable depends on our ability to further commercialize our principal licensed product Ameluz and to further commercialize and obtain a larger market share for Xepi.
Even if we are successful in increasing our licensed product sales, we may never achieve or sustain profitability. In the long term,
we anticipate increasing our sales and marketing expense as we attempt to exploit the regulatory approvals to market
Ameluz in the United States for the PDT treatment of actinic keratoses of mild-to-moderate severity
on the face and scalp. There can be no assurance that our sales and marketing efforts will generate sufficient sales to allow us to
become profitable. Moreover, because of the numerous risks and uncertainties associated with commercializing pharmaceutical
products, we are unable to predict the extent of any future losses or when we will become profitable, if ever.

 We
will likely engage in additional equity or debt financing in the future, which could dilute the voting rights of stockholders and the
value of their shares. If we are unable to achieve profitability over time or to obtain additional equity or debt financing in such a
scenario, this would have a material adverse effect on our financial condition.

 If
we fail to obtain additional financing, we may be unable to pursue our plans for strategic growth, including completing the commercialization
of Xepi and other products we may license.

 Our
operations have consumed substantial amounts of cash since inception. Going forward, we expect that we will require significant funds
in order to pursue our plans for strategic growth, including completing the commercialization of the drug Xepi, the rights
to which we acquired in March 2019 through our purchase of Cutanea, and the subsequent merger of Biofrontera and Cutanea.

the year ended December 31, 2023, we received an aggregate of $4.1 million, net of issuance costs, from a registered public
offering. On February 19, 2024, we entered into an equity financing agreement which provided net proceeds of $7.2 million with an
additional $7.2 million to be provided upon the satisfaction of certain conditions. For additional details, see Note 25. Subsequent Events - Securities
Purchase Agreement for Series B Convertible Preferred. We believe that the funds available from these
transactions and under our working capital line of credit, we will have sufficient funds to support the operating,
investing, and financing activities of the Company through at least twelve months from the date of this Form 10-K.
However, changing circumstances may cause us to consume capital significantly faster than currently anticipated, and we may need to
spend more money than currently expected because of circumstances beyond our control. In addition, if we choose to take significant
steps towards the realization during the current fiscal year of longer-term goals for our strategic growth, we may need to raise
additional capital through debt or equity financing in order to complete those steps during the current fiscal year. Our future
funding requirements, both near- and long-term, will depend on many factors, including, but not limited to:

 the
 effects of competing technological and market developments;

 the
 cost and timing of completion of commercial-scale manufacturing activities;

 the
 cost of establishing or maintaining sales, marketing and distribution capabilities for Ameluz PDT
 or other licensed products or potential products in the United States; and

 the
 impact of COVID-19 on our licensor's clinical trials, the timing of regulatory approvals obtained by our Licensors, demand
 for our licensed products, our ability to market and sell our licensed products and other matters.

 We
cannot be certain that additional funding for any purpose will be available to us on acceptable terms, or at all. If we are unable to
raise additional capital in sufficient amounts and on terms acceptable to us, we may have to significantly delay, scale back or discontinue
the commercialization of our licensed products or other plans for strategic growth. We also could be required to license our rights to
our licensed products and product candidates to third parties on unfavorable terms. In addition, any equity financing would likely result
in dilution to holders of our securities, and any debt financing would likely involve significant cash payment obligations and include
restrictive covenants that may restrict our ability to operate our business.

 Any
of the above events could prevent us from realizing business opportunities or prevent us from growing our business or responding to competitive
pressures, which could have a material adverse effect on our business, prospects, financial condition and/or results of operations and
could cause the price of our shares to decline.

 Our
existing and any future indebtedness could adversely affect our ability to operate our business.

 On December 21, 2023, we entered into credit facilities with two different
lenders, each pursuant to a Business Loan and Security Agreement for a term loan in the principal amount of $2,000,000 evidenced by a
Secured Promissory Note, effective as of December 21, 2023 (collectively, the "Loan Agreements").

 Each loan under the Loan Agreements (the "Loans") requires the
Company to make weekly payments of principal and interest in the amount of approximately $102,857 through July 5, 2024, the maturity date.
Each Loan is secured by a security interest in substantially all of the Company's assets (the "Collateral"). The default
interest rate for each of the Loans is 5.0%.

 Each
Loan Agreement includes limitations on the Company's ability to sell, lease, transfer, or otherwise dispose of its assets outside
the ordinary course of its business; or to create, incur, allow or suffer to exist any lien on any of its assets other than liens in
favor of the applicable lender and certain other permitted liens. Each Loan Agreement also contains customary representations and warranties
and customary events of default, upon the occurrence of which, after any applicable grace period, the applicable lender would have the
ability to accelerate its loan and exercise remedies with respect to the Collateral.

 Our
indebtedness could have significant adverse consequences, including:

 requiring
 us to dedicate a portion of our cash to the payment of interest and principal, reducing money available for working capital, capital
 expenditure, product development and other general corporate purposes;

 increasing
 our vulnerability to adverse changes in general economic, industry and market conditions;

 increasing
 the risk of dilution to the holders of our shares in the event any of these bonds are exercised for or converted into our ordinary
 shares;

 limiting
 our flexibility in planning for, or reacting to, changes in our business and the industry in which we compete, including changes
 arising as a result of the COVID-19 pandemic; and

 placing
 us at a competitive disadvantage to competitors that are better capitalized than we are.

 We
may also engage in debt financing in the future. Failure to make payments or comply with covenants under such debt could result in an
event of default and acceleration of amounts due. If an event of default occurs and the lender or lenders accelerate the amounts due,
we may not be able to make accelerated payments, and such lenders could file suit against us to collect the amounts due under such obligations
or pursue other remedies. In addition, the covenants under such debt obligations could limit our ability to obtain additional debt financing.
If we are unable to satisfy such debt obligations it could have material adverse effect on our business, prospects, financial condition
and/or results of operations.

 Risks
Related to Corporate Governance, Including Being a Public Company

 We
previously identified a material weakness in our internal control over financial reporting, resulting from control deficiencies related
to management's review of work performed by specialists. If we identify additional material weaknesses in the future or otherwise
fail to maintain an effective system of internal controls, we may not be able to accurately or timely report our financial condition
or results of operations, which may adversely affect our business and stock price.

 A
material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is
a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected
on a timely basis.

 In
connection with the audit of our financial statements as of and for the year ended December 31, 2021, we identified a material weakness
in our internal control over financial reporting. The material weakness we identified pertains to management's review of work performed
by specialists; as the Company's management review control over information provided to and produced by a third-party specialist
was not sufficiently precise to identify errors in the valuation of an intangible asset. Specifically, as part of the initial valuation
of an intangible asset in connection with the Cutanea acquisition we failed to identify a computational error within the valuation model
for the Xepi intangible asset. In addition, in 2021 an error in the valuation of the same intangible asset was identified
relating to insufficient information being provided to the third-party specialist in connection with an impairment assessment.

 We
have taken steps to enhance our internal control environment and continue to address the underlying cause of the material weakness with
the implementation of additional controls including those designed to strengthen our review and validation of the work product from third-party
service providers. As of December 31, 2022, the steps we have taken to date were determined to be sufficient to remediate this material
weakness. As a result, management has concluded that the material weakness was fully remediated as of December 31, 2022.

 If
we identify additional material weaknesses in the future or otherwise fail to maintain an effective system of internal controls, we may
not be able to accurately or timely report our financial condition or results of operations, which may adversely affect investor confidence
in us and, as a result, our stock price.

 We
have incurred, and will continue to incur, increased costs as a result of operating as a public company, and our management is required
to devote substantial time to compliance with our public company responsibilities and corporate governance practices.

 As
a public company, and particularly after we are no longer an "emerging growth company," we have incurred and will continue
to incur significant legal, accounting and other expenses that we did not incur as a private company. The Sarbanes-Oxley Act of 2002,
or the Sarbanes Oxley Act, the Dodd-Frank Wall Street Reform and Consumer Protection Act, the listing requirements of Nasdaq, and other
applicable securities rules and regulations impose various requirements on public companies. Our management and other personnel will
need to devote a substantial amount of time to compliance with these requirements. Moreover, these rules and regulations will increase
our legal and financial compliance costs and will make some activities more time-consuming and costly. If, notwithstanding our efforts
to comply with new or changing laws, regulations and standards, we fail to comply, regulatory authorities may initiate legal proceedings
against us, and our business may be harmed. Further, failure to comply with these laws, regulations and standards may make it more difficult
and more expensive for us to obtain directors' and officers' liability insurance, which could make it more difficult for
us to attract and retain qualified members to serve on our board of directors or committees or as members of senior management. We cannot
predict or estimate the amount of additional costs we will incur as a public company or the timing of such costs.

 As
a result of becoming a public company, we are obligated to develop and maintain proper and effective internal control over financial
reporting and any failure to maintain the adequacy of these internal controls may adversely affect investor confidence in our company
and, as a result, the value of our common stock.

 We
will be required, pursuant to Section 404 of the Sarbanes Oxley Act, or Section 404, to furnish a report by management on, among other
things, the effectiveness of our internal controls over financial reporting for the fiscal year ended December 31, 2023. This assessment
will need to include disclosure of any material weaknesses identified by our management in our internal controls over financial reporting.
Our independent registered public accounting firm will not be required to attest to the effectiveness of our internal controls over financial
reporting until our first annual report required to be filed with the SEC following the date we are no longer an emerging growth company,
as defined in the JOBS Act. At such time as we are required to obtain auditor attestation, if we then have a material weakness, we would
receive an adverse opinion regarding our internal control over financial reporting from our independent registered public accounting
firm. We will be required to disclose significant changes made in our internal control procedures on a quarterly basis.

 We
have already begun the process of compiling the system and processing documentation necessary to perform the evaluation needed to comply
with Section 404 and anticipate we will be able to complete our evaluation, testing and any required remediation in a timely fashion.
Our compliance with Section 404 will require that we incur additional legal, accounting and other compliance expense and expend significant
management efforts. We currently do not have an internal audit group, and although we have accounting and finance staff with appropriate
public company experience and technical accounting knowledge, we may need to hire additional consultants or staff to perform the evaluation
needed to comply with Section 404.

the evaluation and testing process of our internal controls, if we identify one or more material weaknesses in our internal control over
financial reporting, we will be unable to assert that our internal control over financial reporting is effective. For example, in connection
with the audits of our financial statements as of and for the years ended December 31, 2021 and 2020, we identified a material weakness
in our internal control over financial reporting. See "— We previously identified a material weakness in our internal control
over financial reporting, resulting from control deficiencies related to management's review of work performed by specialists.
If we identify additional material weaknesses in the future or otherwise fail to maintain an effective system of internal controls, we
may not be able to accurately or timely report our financial condition or results of operations, which may adversely affect our business
and stock price. "

 We
cannot assure you that the measures we have taken to date, and are continuing to implement, will be sufficient to avoid additional material
weaknesses or significant deficiencies in our internal controls over financial reporting in the future. Any failure to maintain effective
internal controls over financial reporting could severely inhibit our ability to accurately report our financial condition or results
of operations. If we are unable to conclude that our internal control over financial reporting is effective, or if our independent registered
public accounting firm determines we have a material weakness or significant deficiency in our internal control over financial reporting,
we could lose investor confidence in the accuracy and completeness of our financial reports, the market price of shares of our common
stock could decline, and we could be subject to sanctions or investigations by Nasdaq, the SEC or other regulatory authorities. Failure
to remedy any material weakness in our internal control over financial reporting, or to implement or maintain other effective control
systems required of public companies, could also negatively impact our ability to access to the capital markets.

 In
addition, effective disclosure controls and procedures enable us to make timely and accurate disclosure of financial and non-financial
information that we are required to disclose. As a public company, if our disclosure controls and procedures are ineffective, we may
be unable to report our financial results or make other disclosures accurately on a timely basis, which could cause our reported financial
results or other disclosures to be materially misstated and result in the loss of investor confidence and cause the market price of our
securities.

 We
are an emerging growth company and a smaller reporting company and we cannot be certain if the reduced disclosure requirements applicable
to emerging growth companies or smaller reporting companies will make our common stock less attractive to investors.

 We
are an "emerging growth company" as defined in the JOBS Act. Under the JOBS Act, emerging growth companies can delay adopting
new or revised accounting standards until such time as those standards apply to private companies. We have elected to use this exemption
from new or revised accounting standards and, therefore, we will not be subject to the same new or revised accounting standards as other
public companies that have not made this election.

 For
as long as we continue to be an emerging growth company, we also intend to take advantage of certain other exemptions from various reporting
requirements that are applicable to other public companies including, but not limited to, reduced disclosure obligations regarding executive
compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a non-binding advisory vote
on executive compensation and stockholder approval of any golden parachute payments not previously approved. We cannot predict if investors
will find our common stock less attractive because we will rely on these exemptions. If some investors find our common stock less attractive
as a result, there may be a less active trading market for our common stock and our stock price may be more volatile.

 We
will remain an emerging growth company until the earliest of (i) the last day of the fiscal year in which we have total annual gross
revenue of $1.235 billion or more; (ii) the last day of the fiscal year following the fifth anniversary of the date of the closing of
our initial public offering; (iii) the date on which we have issued more than $1.0 billion in nonconvertible debt during the previous
three fiscal years; or (iv) the date on which we are deemed to be a "large accelerated filer" under the rules of the SEC.

 Additionally,
we are a "smaller reporting company" as defined in Item 10(f)(1) of Regulation S-K. Even after we no longer qualify as
an emerging growth company, we may still qualify as a "smaller reporting company," which would allow us to continue to
take advantage of many of the same exemptions from disclosure requirements, including presenting only the two most recent fiscal
years of audited financial statements and reduced disclosure obligations regarding executive compensation in this Form 10-K and our
periodic reports and proxy statements. We will remain a smaller reporting company until the last day of the fiscal year in which (1)
the market value of our shares of common stock held by non-affiliates exceeds $250 million as of the prior the end of our second
fiscal quarter ending December 31 st of each year, or (2) our annual revenues exceeded $100 million during such completed
fiscal year and the market value of our ordinary shares held by non-affiliates exceeds $700 million as of the prior to the end of
our second fiscal quarter ending December 31 st of each year. To the extent we take advantage of such reduced disclosure
obligations, it may also make the comparison of our financial statements with other public companies difficult or
impossible.

 Risks
Related to Our Securities and Ownership of Our Common Stock

 Provisions
of our outstanding warrants could discourage an acquisition of us by a third party.

 In
addition to the discussion of the provisions of our certificate of incorporation and our bylaws, certain provisions of our outstanding
warrants could make it more difficult or expensive for a third party to acquire us. The warrants prohibit us from engaging in certain
transactions constituting "fundamental transactions" unless, among other things, the surviving entity assumes our obligations
under the warrants. These and other provisions of our outstanding warrants could prevent or deter a third party from acquiring us even
where the acquisition could be beneficial to you.

 Our
share price may be volatile, and you may be unable to sell your shares and/or warrants at or above the offering price.

 The
market price of our common stock is likely to be volatile and could be subject to wide fluctuations in response to many risk factors
listed in this section, and others beyond our control, including:

 the
 success of existing or new competitive products or technologies;

 regulatory
 actions with respect to Ameluz, the BF-RhodoLED lamp (and its successors) or Xepi or
 our competitors' products;

 actual
 or anticipated fluctuations in our financial condition and operating results, including fluctuations in our quarterly and annual
 results;

 announcements
 of innovations by us, our Licensors or our competitors;

 overall
 conditions in our industry and the markets in which we operate;

 market
 conditions or trends in the biotechnology industry or in the economy as a whole;

 addition
 or loss of significant healthcare providers or other developments with respect to significant healthcare providers;

 changes
 in laws or regulations applicable to Ameluz, the BF-RhodoLED lamp (and its successors) or Xepi;

 actual
 or anticipated changes in our growth rate relative to our competitors;

 announcements
 by us, our Licensors or our competitors of significant acquisitions, strategic partnerships, joint ventures or capital commitments;

 additions
 or departures of key personnel;

 issuance
 of new or updated research or reports by securities analysts;

 fluctuations
 in the valuation of companies perceived by investors to be comparable to us;

 disputes
 or other developments related to the patents covering our licensed products, and our Licensors' ability to obtain intellectual
 property protection for our licensed products;

 security
 breaches;

 litigation
 matters;

 announcement
 or expectation of additional financing efforts;

 sales
 of our common stock by us or our stockholders;

 share
 price and volume fluctuations attributable to inconsistent trading volume levels of our shares;

 the
 expiration of contractual lock-up agreements with our executive officers, directors and stockholders; and

 general
 economic and market conditions.

 Furthermore,
the stock markets have experienced price and volume fluctuations that have affected and continue to affect the market prices of equity
securities of many companies. These fluctuations often have been unrelated or disproportionate to the operating performance of those
companies. These broad market and industry fluctuations, as well as general economic, political and market conditions such as recessions,
interest rate changes or international currency fluctuations, may negatively affect the market price of our common stock. In the past,
companies that have experienced volatility in the market price of their stock have been subject to securities litigation. This risk is
especially relevant for biopharmaceutical companies, which have experienced significant stock price volatility in recent years. We may
be the target of this type of litigation in the future. Securities litigation against us could result in substantial costs and divert
our management's attention from other business concerns, which could seriously harm our business.

 If
we fail to regain compliance with applicable listing standards, our common stock and publicly-traded warrants could be delisted from
Nasdaq.

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

 the
 liquidity and marketability of our common stock and/or publicly-traded warrants;

 the
 market price of our common stock;

 our
 ability to obtain financing for the continuation of our operations;

 the
 number of institutional and general investors that will consider investing in our common stock;

 the
 number of market makers in our common stock;

 the
 availability of information concerning the trading prices and volume of our common stock; and

 the
 number of broker-dealers willing to execute trades in shares of our common stock.

 On
November 22, 2023, we received a letter (the "Notice") from the Listing Qualifications staff of Nasdaq notifying the Company that, because the Company's stockholders' equity as reported in its Quarterly Report on Form 10-Q for
the period ended September 30, 2023 was $1,038,000, the Company is no longer in compliance with the continued listing requirement under
Nasdaq Listing Rule 5550(b)(1), which requires that a listed company's stockholders' equity be at least $2,500,000. Additionally,
as of the date of the Notice, the Company did not meet either of the alternative requirements of maintaining a market value of listed
securities of $35 million or achieving a net income from continuing operations of $500,000 in the most recently completed fiscal year
or in two of the last three most recently completed fiscal years. As a result, as of the date of this Report, the Company does not satisfy
Nasdaq Marketplace Rule 5550(b).

We submitted a compliance plan to Nasdaq on January 8, 2024. The compliance plan was accepted and we were granted 180 calendar days from
November 22, 2023 to evidence compliance.

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

 Future
sales of our common stock in the public market could cause our share price to fall.

 Sales
of a substantial number of shares of our common stock in the public market or the perception that these sales might occur, could
depress the market price of our common stock and could impair our ability to raise capital through the sale of additional equity
securities. We had 5,089,413 shares of common stock outstanding as of March 11, 2024, of which 2,172,628 shares are freely tradable
without restrictions or further registration required under the Securities Act. 2,516,785 shares were issued in a private placement
that closed on February 22, 2024 (the "Offering") and are currently unregistered, but are subject to registration
rights. We have filed a registration statement to register the resale of the shares issued in the Offering and once it is declared
effective by the SEC (which we expect to occur soon after the date of this Annual Report on Form 10-K) those 2,516,785 shares will
be freely tradable without restriction. The remaining 400,000 shares are currently unregistered and held by Biofrontera
AG.

 In addition, we have issued warrants to purchase our common stock that, if such warrants are exercised, could be
sold in the public market. See "We have issued several warrants that are exercisable for our common stock and issued Series B
Convertible Preferred Stock, which, if exercised or converted, could substantially increase the number of shares eligible for future resale
in the public market and result in dilution to our stockholders" for
more information regarding the potential impact of such warrants.

 If the Preferred Warrants are not exercised,
we will not receive up to $8 million in aggregate gross proceeds from the exercise of the Warrants which could have a material adverse effect on our financial condition.

 We issued warrants (the "Preferred Warrants") to purchase up to 8,000 shares of Series B-3 Convertible
Preferred Stock (the "Series B-3 Preferred Stock") at an exercise price of $1,000 per share of Series B-3 Preferred Stock.
If the Preferred Warrants are exercised, we will receive up to $8.0 million in gross proceeds as a result of such exercise.

 The Preferred Warrants will expire within 5 days of meeting certain milestones, which we expect to occur in the
second quarter of 2024. Although we anticipate that the holders of the Preferred Warrants will exercise the Preferred Warrants prior to
their expiration, the holders of the Preferred Warrants are not required to do so. In addition, if those milestones are not met the Preferred
Warrants will not expire until February 22, 2027 and the Preferred Warrants, if they are exercised at all, will not be exercised within
the currently anticipated timeframe.

 In addition, while the Company has reserved sufficient shares of Common Stock to cover the
number of shares issuable upon conversion of the remaining shares of Series B-1 Convertible Preferred Stock, the Company does not currently
have enough authorized shares of Common Stock to cover the shares of Common Stock that would be issuable upon conversion of the Series
B-3 Preferred Stock if the investors exercised all of their Warrants. Based on the current conversion price of $0.7074 per share, an
additional 11,309,019 shares of Common Stock would need to be reserved and, unless the stockholders approve an amendment to our Amended
and Restated Certificate of Incorporation to increase the number of authorized shares of common stock, we only have 7, 354,059
 shares of common stock available to reserve for the issuance of common stock upon conversion of the Series B-3 Preferred Stock.
If we are unable to obtain the stockholder approval necessary to reserve sufficient shares to cover the conversion of the Series B-3
Preferred Stock, then the investors will not be able to exercise any of their Warrants. If the Preferred Warrants are not exercised or
are not exercised within the currently anticipated timeline for any of the reasons described above or if the Preferred Warrants are not
exercised in full, we would not receive the anticipated proceeds from the exercise of the Preferred Warrants which could have a material
adverse effect on our financial condition since our current plans for ensuring sufficient liquidity to continue as a going concern depend
on receiving the anticipated proceeds. Even if there were alternate sources of financing available to us, there is no guarantee that
they would be sufficient to offset the loss of such proceeds.

 We
have issued several warrants, which are exercisable for our common stock, and issued Series B Convertible Preferred Stock,
which, if exercised or converted, as applicable, could substantially increase the number of shares eligible for future resale in the
public market and result in dilution to our stockholders.

 As
of March 10, 2024, we have a total of 2,269,356 outstanding warrants which may each be exercised for one share of our common stock.
All of the shares issuable upon exercise of these warrants have been registered on effective registration statements and therefore, when
issued, will be freely tradable without restriction or further registration required under the Securities Act. Any shares of our common
stock issued upon exercise of outstanding warrants will result in dilution to the then existing holders of our common stock and increase
the number of shares eligible for resale in the public market. In addition, in the Offering we issued shares of Series B-1 Convertible Preferred Stock ("Series B-1 Preferred
Stock"). Each share of Series B-1 Preferred Stock may be converted into approximately 1,413 shares of our common stock (based on
the conversion price of $0.7074 per share and a liquidation preference of $1,000 per share of Series B-1 Preferred Stock). At the time
of issuance, the holders of the Series B-1 Preferred Stock converted some of their shares resulting in the issuance of 2,516,785 shares
of common stock. However, 4,806 shares of Series B-1 Preferred Stock remain outstanding, which could be converted into up to 6,793,893
shares of common stock.

 We
also issued in the Offering, the Preferred Warrants, which if exercised, would result in the issuance of Series B-3 Preferred Stock.
Each share of Series B-3 Preferred Stock may convert into approximately 1,413 shares of our common stock (based on the conversion price
of $0.7074 per share and a liquidation preference of $1,000 per share of Series B-3 Stock). While it is not certain that any of the Preferred
Warrants will be exercised, if they are exercised in full, the Series B-3 Preferred Stock issued could be converted into up to 11,309,019
shares of common stock.

 Although
the Series B-1 Preferred Stock and Series B-3 Preferred Stock each have a beneficial ownership limitation that prevents the holder
from converting if it would result in the holder's beneficial ownership exceeding 9.99% of the then outstanding common stock
and although the initial conversion into 2,516,785 shares is close to the beneficial ownership limitation for all current holders of
the Series B-1 Stock and the Preferred Warrants, the remaining Series B-1 Preferred Stock and any Series B-3 Preferred Stock issued
upon exercise of the Preferred Warrants could be converted into common stock at a future date if the total number of outstanding
shares of our common stock increases, if the beneficial ownership limitation is removed or if the holders of the Series B-1
Preferred Stock and Series B-3 Preferred Stock sell any of the common stock they currently hold. Under the terms of the Certificate
of Designation for the Series B Convertible Preferred Stock, if our stockholders approve an amendment to our Amended and Restated
Certificate of Incorporation to increase the number of authorized shares, the Series B-1 Preferred Stock will automatically be
converted into common stock (to the extent such conversion does not exceed the beneficial ownership limitation described above) or
Series B-2 Convertible Preferred Stock with the same terms as the Series B-3 Preferred Stock. Sales of substantial numbers of any
such shares described above in the public market could adversely affect the market price of our common stock.

 If
securities or industry analysts do not publish research or publish unfavorable research about our business, our stock price and trading
volume could decline.

 The
trading market for our common stock will be influenced by the research and reports that industry or securities analysts publish about
us or our business. If one or more of these analysts ceases coverage of our company or fails to publish reports on us regularly, we could
lose visibility in the financial markets, which in turn could cause our stock price or trading volume to decline. Moreover, if our operating
results do not meet the expectations of the investor community, one or more of the analysts who cover our company may change their recommendations
regarding our company, and our stock price could decline.

 Our
quarterly operating results may fluctuate significantly.

 We
expect our operating results to be subject to quarterly fluctuations. Our net loss and other operating results will be affected by numerous
factors, including:

 variations
 in the level of expenses related to our marketing efforts;

 any
 litigation, including intellectual property infringement lawsuits related to our licensed products, in which we may become involved;

 regulatory
 developments affecting Ameluz, the BF-RhodoLED lamp (and its successors) or Xepi;

 our
 execution of any licensing or similar arrangements, and the timing of payments we may make or receive under these arrangements;

 the
 timing of milestone payments under our existing license agreements; and

 the
 level of underlying demand for Ameluz and Xepi and customers' buying patterns.

 If
our quarterly operating results fall below the expectations of investors or securities analysts, the price of our common stock could
decline substantially. Furthermore, any quarterly fluctuations in our operating results may, in turn, cause the price of our stock to
fluctuate substantially.

 Future
sales and issuances of our common stock or rights to purchase our common stock, including pursuant to our equity incentive plans, could
result in additional dilution of the percentage ownership of our stockholders and could cause the stock price of our common stock to
decline.

 In
the future, we may sell common stock, convertible securities or other equity securities in one or more transactions at prices and in
a manner we determine from time to time. We also expect to issue common stock to employees, consultants and directors pursuant to our
equity incentive plans. If we sell common stock, convertible securities or other equity securities in subsequent transactions, or common
stock is issued pursuant to equity incentive plans or the Unit Purchase Option, investors may be materially diluted. New investors in
such subsequent transactions could gain rights, preferences and privileges senior to those of holders of our common stock.

 We
have never paid dividends on our common stock and we do not intend to pay dividends for the foreseeable future. Consequently, any gains
from an investment in our common stock will likely depend on whether the price of our common stock increases.

 We
have never declared or paid any dividends on our common stock and do not intend to pay any dividends in the foreseeable future. We anticipate
that we will retain all of our future earnings for use in the operation of our business and for general corporate purposes. Any determination
to pay dividends in the future will be at the discretion of our board of directors. Accordingly, investors must rely on sales of their
common stock after price appreciation, which may never occur, as the only way to realize any future gains on their investments. For more
information, see the section of this Form 10-K captioned " Management's Discussion and Analysis of Financial Condition
and Results of Operations—Liquidity and Capital Resources."

 Our
stockholder rights plan, or "poison pill," includes terms and conditions which could discourage a takeover or other transaction
that stockholders may consider favorable.

 On
October 24, 2022, stockholders of record at the close of business on that date received a dividend of one right (a "Right")
for each outstanding share of common stock. Each Right entitles the registered holder to purchase one one-thousandth of a share of Series
A Junior Participating Cumulative Preferred Stock of the Company (the "Preferred Stock"), at a price of $5.00 per one thousandth
of a share of Preferred Stock, subject to adjustment (the "Exercise Price"). The Rights are not exercisable until the Distribution
Date (as defined below). The description and terms of the Rights are set forth in the Stockholder Rights Agreement between the Company
and Computershare Trust Company, N.A., as rights agent, dated as of October 13, 2022, as amended by Amendment No.1 to the Stockholder
Rights Agreement, dated as of April 26, 2023.

 The
Rights Agreement imposes a significant penalty upon any person or group that acquires 20% or more (but less than 50%) of our then-outstanding
common stock without the prior approval of our board of directors. A person or group that acquires shares of our common stock in excess
of the applicable threshold, subject to certain limited exceptions, is called an "Acquiring Person." Any rights held by an
Acquiring Person are void and may not be exercised. A person or group who beneficially owned 20% or more of our outstanding Common Stock
prior to the first public announcement of the adoption of the Rights Agreement will not trigger the Rights Agreement so long as they
do not acquire beneficial ownership of any additional shares of Common Stock at a time when they still beneficially own 20% or more of
such Common Stock.

 The
Rights will not be exercisable until the earlier of ten days after a public announcement by us that a person or group has become an Acquiring
Person and ten business days (or a later date determined by our board of directors) after a person or group begins a tender or an exchange
offer that, if completed, would result in that person or group becoming an Acquiring Person (the earlier of such dates being herein referred
to as the "Distribution Date"). At any time after a person becomes an Acquiring Person, the Board of Directors may, at its
option, exchange all or any part of the then outstanding and exercisable Rights for shares of Common Stock at an exchange ratio of one
share of Common Stock for each Right, subject to adjustment as specified in the Rights Agreement. Notwithstanding the foregoing, the
Board of Directors generally will not be empowered to effect such exchange at any time after any person becomes the beneficial owner
of 50% or more of the Common Stock of the Company.

 The
Rights will expire at the earlier of (a) June 30, 2026 or (b) the first day after the Company's 2025 annual meeting, if stockholder
approval has not been obtained prior to such date, the Rights will expire at such time, in each case, unless previously redeemed or exchanged
by the Company.

 The
Rights have certain anti-takeover effects, including potentially discouraging a takeover that stockholders may consider favorable. The
Rights will cause substantial dilution to a person or group that attempts to acquire us on terms not approved by the board of directors.

 Our
charter documents and Delaware law could prevent a takeover that stockholders consider favorable and could also reduce the market price
of our stock.

 Our
amended and restated certificate of incorporation and our amended and restated bylaws contain provisions that could delay or prevent
a change in control of our company. These provisions could also make it more difficult for stockholders to elect directors and take other
corporate actions.

 These
provisions may frustrate or prevent any attempts by our stockholders to replace or remove our current management by making it more difficult
for stockholders to replace members of our board of directors, which is responsible for appointing the members of our management.

 In
addition, we are subject to the anti-takeover provisions contained in Section 203 of the Delaware General Corporation Law, or the DGCL.
Under Section 203 of the DGCL, a corporation may not, in general, engage in a business combination with any holder of 15% or more of
its capital stock unless the holder has held the stock for three years or, among other exceptions, the board of directors has approved
the transaction.

 These
and other provisions in our amended and restated certificate of incorporation and our amended and restated bylaws and under Delaware
law could discourage potential takeover attempts, reduce the price investors might be willing to pay in the future for shares of our
common stock and result in the market price of our common stock being lower than it would be without these provisions.

 Our
amended and restated certificate of incorporation provides that the Court of Chancery of the State of Delaware will be the exclusive
forum for substantially all disputes between us and our stockholders, which could limit our stockholders' ability to obtain a favorable
judicial forum for disputes with us or our directors, officers or employees.

 Our
amended and restated certificate of incorporation provides that the Court of Chancery of the State of Delaware is, to the fullest extent
permitted by applicable law, the exclusive forum for:

 any
 derivative action or proceeding brought on our behalf;

 any
 action asserting a claim of breach of a fiduciary duty owed by, or other wrongdoing by, any of our current or former directors, officers,
 employees or our stockholders;

 any
 action asserting a claim against us arising under the DGCL, our amended and restated certificate of incorporation, or our amended
 and restated bylaws (as either may be amended from time to time) or as to which the DGCL confers jurisdiction on the Court of Chancery
 of the State of Delaware; and

 any
 action asserting a claim against us that is governed by the internal-affairs doctrine.

 However,
Section 27 of the Exchange Act creates exclusive federal jurisdiction over all claims brought to enforce any duty or liability created
by the Exchange Act or the rules and regulations thereunder. Consequently, the exclusive forum provisions will not apply to suits brought
to enforce any liability or duty created by the Exchange Act or to any claim for which the federal courts have exclusive jurisdiction.

 Moreover,
Section 22 of the Securities Act creates concurrent jurisdiction for federal and state courts over all claims brought to enforce any
duty or liability created by the Securities Act or the rules and regulations thereunder. We note that investors cannot waive compliance
with the federal securities laws and the rules and regulations thereunder. Our amended and restated certificate of incorporation will
further provide that, unless we consent in writing to the selection of an alternative forum, the federal district courts are the sole
and exclusive forum for the resolution of any complaint asserting a right under the Securities Act. The Supreme Court of the State of
Delaware has held that such provisions are facially valid under Delaware law. While there can be no assurance that federal or state courts
will follow the holding of the Delaware Supreme Court or determine that the provision should be enforced in a particular case, application
of the provision means that suits brought by our stockholders to enforce any duty or liability created by the Securities Act must be
brought in federal court and cannot be brought in state court.

 By
becoming a stockholder in our Company, you will be deemed to have notice of and have consented to the provisions of our amended and restated
certificate of incorporation related to choice of forum. This exclusive forum provision may limit a stockholder's ability to bring
a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers, or other employees, which may discourage
lawsuits against us and our directors, officers and other employees and result in increased costs for investors to bring a claim. If
a court were to find the exclusive forum provision in our amended and restated certificate of incorporation to be inapplicable or unenforceable
in an action, we may incur additional costs associated with resolving the dispute in other jurisdictions, which could seriously harm
our business.

 Claims
for indemnification by our directors and officers may reduce our available funds to satisfy successful third-party claims against us
and may reduce the amount of money available to us.

 Our
amended and restated certificate of incorporation and amended and restated bylaws provide that we will indemnify our directors and officers,
in each case to the fullest extent permitted by Delaware law.

 In
addition, as permitted by Section 145 of the DGCL, our amended and restated bylaws and our indemnification agreements that we have entered
into with our directors and officers provide that:

 we
 will indemnify our directors and officers for serving us in those capacities or for serving other business enterprises at our request,
 to the fullest extent permitted by Delaware law. Delaware law provides that a corporation may indemnify such person if such person
 acted in good faith and in a manner such person reasonably believed to be in or not opposed to the best interests of the registrant
 and, with respect to any criminal proceeding, had no reasonable cause to believe such person's conduct was unlawful;

 we
 may, in our discretion, indemnify employees and agents in those circumstances where indemnification is permitted by applicable law;

 we
 are required to advance expenses, as incurred, to our directors and officers in connection with defending a proceeding, except that
 such directors or officers shall undertake to repay such advances if it is ultimately determined that such person is not entitled
 to indemnification;

 we
 will not be obligated pursuant to our amended and restated bylaws to indemnify a person with respect to proceedings initiated by
 that person against us or our other indemnitees, except with respect to proceedings authorized by our board of directors or brought
 to enforce a right to indemnification;

 the
 rights conferred in our amended and restated bylaws are not exclusive, and we are authorized to enter into indemnification agreements
 with our directors, officers, employees and agents and to obtain insurance to indemnify such persons; and

 we
 may not retroactively amend our amended and restated bylaw provisions to reduce our indemnification obligations to directors, officers,
 employees and agents.

 Many
of the warrants to purchase shares of our common stock are accounted for as a warrant liability and recorded at fair value with changes
in fair value each period reported in earnings, which may have an adverse effect on the market price of our common stock.

 Under
U.S. GAAP, we are required to evaluate the outstanding warrants to purchase our common stock to determine whether they should be accounted
for as a warrant liability or as equity. At each reporting period (1) the accounting treatment of the warrants will be reevaluated for
proper accounting treatment as a liability or equity and (2) the fair value of the liability of the warrants will be re-measured and
the change in the fair value of the liability will be recorded as other income (expense) in our consolidated statement of operations.
Such accounting treatment may adversely affect the market price of our securities. In addition, changes in the inputs and assumptions
for the valuation model we use to determine the fair value of such liability may have a material impact on the estimated fair value of
the warrant liability. As a result, our financial statements and results of operations will fluctuate quarterly, based on various factors,
such as the share price of our common stock, many of which are outside of our control. If our share price is volatile, we expect that
we will recognize non-cash gains or losses on our warrants or any other similar derivative instruments in each reporting period and that
the amount of such gains or losses could be material. The impact of changes in fair value on earnings may have an adverse effect on the
market price of our common stock.

 The warrants issued in connection with the private placement offerings (completed
on December 1, 2021, May 16, 2022, July 26, 2022, and November 2, 2023) (collectively, the "PIPE Warrants") were accounted
for as liabilities as these warrants provide for a redemption right in the case of a fundamental transaction which fails the requirement
of the indexation guidance under ASC 815-40. The resulting warrant liabilities are re-measured at each balance sheet date until their
exercise or expiration, and any change in fair value is recognized in the Company's consolidated statement of operations. Refer
to Note 4. Fair Value Measurements.

 As
of the date of this Form 10-K, 2,192,736 liability classified Warrants remain outstanding. See Note 18. Stockholders' Equity in
our audited financial statements for the fiscal year ended December 31, 2023 and 2022 included in this Form 10-K for more
information on the Warrants.

 Item
1B. Unresolved Staff Comments

 Not
applicable.

 Item
1C. Cybersecurity

 Risk
Management and Strategy

 We
have developed and implemented a cybersecurity risk management program intended to protect the confidentiality, integrity, and availability
of our critical systems and information. Our cybersecurity program is based on the National Institute of Standards and Technology Cybersecurity
Framework (NIST CSF). This does not imply that we meet any particular technical standards, specifications, or requirements, but rather
that we use the NIST CSF as a guide to help us identify, assess, and manage cybersecurity risks relevant to our business.

 Key
elements of our cybersecurity risk management program include:

 risk
 assessments designed to help identify material cybersecurity risks to our critical systems,
 information, and our broader enterprise information technology environment;

 leveraging
 our external service providers, where appropriate, to assess, test, monitor or otherwise
 assist with aspects of our security controls;

 training
 and awareness programs for employees to drive adoption and awareness of cybersecurity processes
 and controls;

 a
 cybersecurity incident response plan that includes procedures for responding to cybersecurity
 incidents.

 In
the last two fiscal years, the Company has not experienced any material cybersecurity incidents, and expenses incurred from cybersecurity
incidents were immaterial. For a discussion of whether and how any risks from cybersecurity threats are reasonably likely to materially
affect us, including our business, results of operations or financial condition, refer to Item 1A. Risk Factors - "Our business
and operations would suffer in the event of system failures or, cyber-attacks or a deficiency in our cyber-security," which is
incorporated by reference into this Item 1C.

 Governance
(Role of Management/Role of the Board)

 Our cybersecurity
program and function is overseen by the Director of Information Technology ("Director of IT"), who has over 15 years of experience
leading information technology divisions in various industries. The Director of IT collaborates with all business units to identify and
assess cybersecurity risks and compliance with company policy. The Director of IT stays aware of emerging threats and trends in cybersecurity
through attendance at cyber security conferences, subscription to the CISA.gov mailing list, various tech focused news outlets, and other
sources.

 The Audit Committee is responsible for the
oversight of risks associated with cybersecurity threats. The Audit Committee charter provides that the Committee is
responsible for considering the effectiveness of the Company's internal control system, including information technology
security and control. The Director of IT reports significant cybersecurity events to our Vice President of Administration or Chief
Financial Officer, who then reports such events to our Audit Committee.

 Item
2. Properties

 Our
headquarters is located in Woburn, Massachusetts, where we lease approximately 16,128 square feet under a lease agreement that has an
initial term expiring in September 2025.

 Item
3. Legal Proceedings

 From
time to time, we may be involved in legal proceedings arising in the ordinary course of our business. Information regarding our material
legal proceedings is included in Note 23, Commitments and Contingencies, to the consolidated financial statements in Item 8 of
this Form 10-K, which is incorporated herein by reference. Given the inherent uncertainties of litigation, the ultimate outcome of any
such matters cannot be predicted at this time, nor can the amount of possible loss or range of loss, if any, be reasonably estimated,
except in circumstances where an aggregate litigation accrual has been recorded for probable and reasonably estimable loss contingencies.

 Item
4. Mine Safety Disclosures

 Not
applicable.

 Item
5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

 Market

 Our
common stock is traded on the NASDAQ Capital Market, under the symbol " BFRI," and our warrants are traded on the NASDAQ
Capital Market, under the symbol " BFRIW."

 Holders

 As
of December 31, 2023, there were two holders of record of our common stock. Holders of record are defined as those stockholders
whose shares are registered in their names in our stock records and do not include beneficial owners of common stock whose shares
are held in the names of brokers, dealers or clearing agencies.

 Dividend
Policy

 We
have never declared or paid any cash dividends on our common stock. We currently anticipate that we will retain all future earnings for
the operation of our business, and we do not currently intend to pay any cash dividends on our common stock in the foreseeable future.

 Recent
Sales of Unregistered Securities

 We
do not have any sales of unregistered securities to report that have not been previously included in a Quarterly Report on Form 10-Q
or in a Current Report on Form 8-K.

 Issuer
Purchases of Equity Securities

 There
were no repurchases made by us, or on our behalf, of shares of our common stock during the year ended December 31, 2023.

 Item
6. [Reserved]

 Item
7. Management's Discussion and Analysis of Financial Condition and Results of Operations

 The
following section contains statements that are not statements of historical fact and are forward-looking statements within the meaning
of the federal securities laws. These statements involve known and unknown risks, uncertainties, and other factors that may cause our
actual results, performance, or achievement to differ materially from anticipated results, performance, or achievement, expressed or
implied in such forward-looking statements. These statements reflect our current views with respect to future events, are based on assumptions,
and are subject to risks and uncertainties. We discuss many of these risks and uncertainties at the beginning of this Form 10-K and under
the sections captioned "Business" and "Risk Factors." The following discussion should also be read in conjunction
with the financial statements and the Notes thereto appearing elsewhere in this Form 10-K.

 Forward-Looking
Statements

 The
Private Securities Litigation Reform Act of 1995 provides a "safe harbor" for forward-looking statements. Certain
statements in this Form 10-K constitute "forward-looking statements". Such statements include statements regarding the
timeline for regulatory review and approval of our products, the availability of funding sources for continued development of such
products, and other statements that are not historical facts, including statements which may be preceded by the words
"intends," "may," "will," "plans," "expects," "anticipates,"
"projects," "predicts," "estimates," "aims," "believes,"
"hopes," "potential" or similar words. Forward-looking statements are not guarantees of future performance,
are based on certain assumptions and are subject to various known and unknown risks and uncertainties, many of which are beyond our
control. Actual results may differ materially from the expectations contained in the forward-looking statements.

 See
Part I, Item 1A, "Risk Factors" of this Form 10-K for a discussion of the factors that could cause such
differences. However, other factors besides those listed in Part I, Item 1A, "Risk Factors" or otherwise discussed in this Annual Report also could adversely affect our results, and you should not consider any such list of factors to be a complete set of all potential risks or uncertainties.

 Any
forward-looking statements made by us or on our behalf speak only as of the date they are made. We do not undertake to publicly
update or revise our forward-looking statements as a result of new information, future events or otherwise, except as required by
law.

 Overview

 Biofrontera
Inc. (the "Company" or "Biofrontera") includes its wholly owned subsidiary Bio-FRI GmbH ("Bio-FRI"
or "subsidiary"). Our subsidiary, Bio-FRI was formed on February 9, 2022, as a German presence to facilitate our relationship
with Biofrontera Pharma GmbH and Biofrontera Bioscience GmbH, our Ameluz Licensor and related parties.

 We
are a U.S.-based biopharmaceutical company commercializing a portfolio of pharmaceutical products for the treatment of dermatological
conditions with a focus on photodynamic therapy ("PDT") and topical antibiotics. The Company's licensed products are used for the
treatment of actinic keratoses, which are pre-cancerous skin lesions, as well as impetigo, a bacterial skin infection.

 In May 2023, we began research and development
("R&D") activities to support PDT growth and will continue to opportunistically invest in these activities going
forward. Our R&D program currently aims to improve the capabilities of our BF-RhodoLED lamps to better fulfill the needs of
dermatologists. Our goal is to improve the effectiveness of our commercial team by allowing sales representatives to carry approved
devices with them allowing for easier product demonstrations and evaluations.

 On February 19, 2024, we entered into the Second Amended
and Restated License and Supply Agreement with the Ameluz Licensor under which, with immediate effect, the transfer price of Ameluz
 will be reduced 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. 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, we will take control of all clinical trials
relating to Ameluz in the US, allowing for more effective cost management and direct oversight of trial efficiency.
The reduced LSA transfer price will allow the Company to finance such R&D activities and continue our commercial growth
trajectory.

 Our
principal licensed product is Ameluz, which is a prescription drug approved for use in combination with the BF-RhodoLED
 lamp series, for PDT, or PDT (when used together, "Ameluz PDT"). In the United States,
the PDT treatment is used for the lesion-directed and field-directed treatment of actinic keratoses ("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. International treatment guidelines list PDT as the "gold standard" for treating
AK, especially multiple AKs and the surrounding photodamaged skin. 1 We are currently selling Ameluz for this
indication in the U.S. under the Ameluz LSA.

 Our
second prescription drug licensed product in our portfolio is Xepi (ozenoxacin cream, 1%), a topical non-fluorinated
quinolone that inhibits bacterial growth. Currently, no antibiotic resistance against Xepi is known and it has been
specifically approved by the FDA for the treatment of impetigo, a common skin infection, due to Staphylococcus aureus or
Streptococcus pyogenes. It is approved for use in the United States in adults and children 2 months and older. Our exclusive license
and supply agreement, as amended ("Xepi LSA"), with Ferrer Internacional S.A. ("Ferrer") that was assumed by
Biofrontera on March 25, 2019 through our acquisition of Cutanea Life Sciences, Inc. ("Cutanea") enables us to market and sell this product in the United Sates.

 Our
principal objective is to increase the sales of our licensed products in the United States. The key elements of our strategy include
the following:

 expanding
 our sales in the United States of Ameluz in combination with the BF-RhodoLED lamp for the treatment
 of minimally to moderately thick actinic keratoses of the face and scalp and positioning Ameluz to be the standard
 of care in the United States by growing our dedicated sales and marketing infrastructure in the United States;

 leveraging
 the potential for future approvals and label extensions of our portfolio products that are in the pipeline for the U.S. market through
 the LSAs with our Licensors; and

 opportunistically
 adding complementary products or services to our portfolio by acquiring or licensing IP to further leverage our commercial infrastructure
 and customer relationships.

 We
devote a substantial portion of our cash resources to the commercialization of our licensed products, Ameluz and the
BF-RhodoLED lamp series. We have financed our operating and capital expenditures through cash proceeds generated from
our product sales, our line of credit, short term debt and proceeds received in equity financings.

 We
believe that important measures of our results of operations include product revenue, operating income (loss) and adjusted EBITDA
(a non-GAAP measure as defined below). Our sole source of product revenue is sales of products that we license from certain related and
unrelated companies. Our long-term financial objectives include consistent revenue growth and expanding operating margins. Accordingly,
we are focused on licensed product sales expansion to drive revenue growth and improve operating efficiencies, including effective resource
utilization, information technology leverage, and overhead cost management.

 Key
factors affecting our performance

 As
a result of a number of factors, our historical results of operations may not be comparable to our results of operations in future periods,
and our results of operations may not be directly comparable from period to period. Set forth below is a brief discussion of the key
factors impacting our results of operations.

 1 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.

 Seasonality

 Because
traditional PDT treatments using a lamp are performed more frequently during the winter, our revenue is subject to some
seasonality and has historically been higher during the first and fourth quarters than during the second and third quarters.

 Supply
Chain

 While our Licensors take reasonable precautions to ensure the successful
production of our commercially licensed products, their contract manufacturers may experience a myriad of business difficulties (i.e.,
workforce instability, supply chain issues, erosion of customer base, etc.) that could impact their financial solvency. As previously
disclosed in 2021, the Xepi product has experienced manufacturing delays at Ferrer's third-party manufacturer, which have not yet
been resolved. We expect a delay in further shipments for an additional five to eight months. We are expecting to launch the RhodoLED
XL in the second quarter 2024 and have begun production activities. However, there have been historical delays due to supply chain issues, and there is
a possibility that there are additional supply chain challenges, or our orders are fulfilled at a slower rate than expected. Despite these
historic and possible future delays, we expect total revenues will not be significantly impacted (i.e., we experience less growth than
expected vs. declining sales) since the majority of our revenues are from sales of Ameluz and we have RhodeLED lamps on
hand and on order. We continue to monitor the impacts of the supply chain on our business and are focused on ensuring the stability of
the supply chains for Ameluz and BF-RhodoLED lamp series.

 Components
of Our Results of Operations

 Product
Revenue, net

 We
generate product revenues through the third-party sales of our licensed products Ameluz, BF-RhodoLED
lamps and to a much lesser extent Xepi covered by our exclusive LSAs with our Licensors. Revenues from
product sales are recorded net of discounts, rebates and other incentives, including trade discounts and allowances, product
returns, government rebates, and other incentives such as patient co-pay assistance. Revenue from the sales of our
BF-RhodoLED lamp and Xepi are relatively insignificant compared with revenues generated through our
sales of Ameluz.

 The
primary factors that determine our revenue derived from our licensed products are:

 the
 level of orders generated by our sales force;

 the
 level of prescriptions and institutional demand for our licensed products; and

 unit
 sales prices.

 Related
Party Revenues

 We
also generate insignificant related party revenue in connection with an agreement with Biofrontera Bioscience GmbH to provide
BF-RhodoLED lamps and associated services for the clinical trials performed by Biofrontera Bioscience GmbH.

 Cost
of Revenues, Related Party

 Cost
of revenues, related party, is comprised of purchase costs of our licensed products, Ameluz and BF-RhodoLED
 lamps from Biofrontera Pharma GmbH and insignificant inventory adjustments due to scrapped, expiring and excess products.

 Under the Ameluz LSA
the price we pay per unit will be based upon our sales history. The purchase price we pay the Ameluz Licensor for Ameluz
will be determined in the following manner:

 fifty
 percent of the anticipated net price per unit until we generate $30 million in revenue from sales of the products we license from
 the Ameluz Licensor during a given Commercial Year (as defined in the Ameluz LSA);

 forty
 percent of the anticipated net price per unit for all revenues we generate between $30 million and $50 million from sales of the
 products we license from the Ameluz Licensor; and

 thirty
 percent of the anticipated net price per unit for all revenues we generate above $50 million from sales of the products we license
 from the Ameluz Licensor.

 On February 19, 2024, we entered into the Second
Amended and Restated License and Supply Agreement (the "Second A&R Ameluz LSA"), effective as of February 13, 2024,
by and among the Company, Pharma, and Bioscience.

 Among other things, the Second A&R Ameluz
LSA has been amended to (i) change the Transfer Price to 25% through 2025 and then increasing over time pursuant to the schedule set
forth in the Second A&R Ameluz LSA to a maximum of 35% starting in 2032, subject to a minimum dollar amount per unit, from the previous
Transfer Price of 50% of annual revenue up to $30 million, and then decreasing on further sales until reaching 30% of annual revenue
at and above $50 million, (ii) provide for the transfer of responsibilities for Ongoing Trials (as defined in the Second A&R Ameluz LSA)
on or before June 1, 2024, including the Company assuming related contracts and transferring key personnel from Pharma and
Bioscience to the Company, and (iii) make the failure to achieve the applicable Annual Minimum Sales (as defined in the Second A&R Ameluz LSA) a termination event in certain circumstances, unless waived by Pharma and Bioscience.

 In connection with the Second A&R Ameluz
LSA, we entered into a Release of Claims dated as of
February 13, 2024, by and among the Company, Biofrontera Pharma and Biofrontera Bioscience, pursuant to which the Company agreed to
release Biofrontera Pharma and Biofrontera Bioscience from all claims and liabilities arising out of or relating to any failure by
Biofrontera Pharma and Biofrontera Bioscience to perform certain obligations under the Second A&R Ameluz LSA with respect to clinical
trials that the Company will assume responsibility for under the Second A&R Ameluz LSA.

 Cost
of Revenues, Other

 Cost
of revenues, other, is comprised of purchase costs of our licensed product, Xepi, third-party logistics and distribution
costs including packaging, freight, transportation, shipping and handling costs, and inventory adjustment due to expiring Xepi
 products.

General and Administrative Expense

general and administrative expenses consist principally of costs associated with our sales force, commercial support personnel, personnel
in executive and other administrative functions, as well as medical affairs professionals. Other selling, general and administrative
expenses include marketing, trade, and other commercial costs necessary to support the commercial operation of our licensed products
and professional fees for legal, consulting and accounting services. Selling, general and administrative expenses also include the amortization
of our intangible asset and our legal settlement expenses.

General and Administrative Expenses, Related Party

general and administrative expenses, related party, relate to the services provided by our significant stockholder, Biofrontera AG,
primarily for regulatory support and pharmacovigilance. These expenses are charged to us based on costs incurred plus 6% in
accordance with the Amended and Restated Master Contact Services Agreement, (the "2021 Services Agreement"), entered
into in December 2021. The 2021 Services Agreement enables us to continue relying on Biofrontera AG and its subsidiaries for various
services it has historically provided to us, including regulatory and pharmacovigilance support for as long as we deem necessary. We
currently have statements of work in place regarding information technology, regulatory affairs, medical affairs, pharmacovigilance,
and investor relations services, and are continuously assessing the other services historically provided to us by Biofrontera AG to
determine 1) if they will be needed, and 2) whether they can or should be obtained from other third-party providers. As of December
31, 2023, we have migrated most of our significant information technology services from Biofrontera AG to third-party
providers.

 Research
and Development

 Our
current R&D programs aim to improve the capabilities of our BF-RhodoLED lamps to better fulfill
the needs of dermatologists and improve the effectiveness of our commercial team by letting sales representatives carry approved devices with them allowing for easier product demonstrations and evaluations.

in Fair Value of Contingent Consideration

 In
connection with the Cutanea acquisition, we recorded contingent consideration related to the estimated profits from the sale of Cutanea
products to be shared equally with Maruho. The fair value of such contingent consideration was determined to be $6.5 million on the acquisition
date of March 25, 2019 and was re-measured at each reporting date until the contingency was resolved. Under the Release, our obligation relating to contingent consideration was relieved as of December 31, 2023.

in Fair Value of Warrant Liabilities

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

Inducement Expense

 In
connection with the Securities Purchase Agreement ("Purchase Agreement"), dated as of October 30, 2023, entered into with an
institutional investor, the Company entered into the Amendment to Common Stock Purchase Warrants, dated as of October 30, 2023 to amend the common stock purchase
warrant dated May 16, 2022 and the common stock purchase warrant dated July 26, 2022 ("Existing Warrants") to (i) revise
the exercise price to $3.55 and (ii) extend the date until which the warrants can be exercised until November 2, 2028. As a
result of the amendment to the existing warrants, the Company recognized inducement expense which was determined using the
Black-Scholes option pricing model before and after the warrant amendment (see Note 18 Stockholders' Equity within our consolidated
financial statements for details).

 The
2022 warrant inducement expense represents the accounting fair value of consideration issued to induce conversion of the common
stock purchase warrant dated December 1, 2021 ("2021 Purchase Warrant"). On July 26, 2022, the Company entered into a
warrant exercise inducement offer letter (the "Inducement Letter"), in which the Company agreed to lower the exercise
price of the 2021 Purchase Warrant and issue a new warrant (the "2022 Inducement Warrant") to purchase up to 4,285,715
shares of common stock in exchange for $4.6 million in proceeds (see Note 18 Stockholders' Equity within our
consolidated financial statements for details).

 The
warrant inducement expense was determined using the Black-Scholes option pricing model and was calculated as the difference between
the fair value of the 2021 Purchase Warrant prior to, and immediately after, the reduction in the exercise price on the date of repricing
in addition to the fair value of the 2022 Inducement Warrant issued.

 Excess
of Warrant Fair Value Over Offering Proceeds

 On
November 2, 2023, the Company issued common shares and warrants for common shares for net proceeds of $4.1 million (see Note 18 Stockholders'
Equity within our consolidated financial statements for details). The excess of the fair value of the warrants at the issuance date
over the proceeds received was recognized as a loss on the statement of operations.

in Fair Value of Investment, Related Party

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

 Under
the Release, the Company agreed to transfer 5,451,016 shares of Biofrontera AG to Maruho in exchange for the release of our
obligations relating to the Cutanea acquisition.

 Gain on Legal Settlement

 Under a Confidential Settlement Agreement and Mutual Release (the "Release") dated as of December 27,
2023, entered into with Maruho, the Company was released from its obligations to 1) repay $7.3 million in start-up cost financing to Maruho
for Cutanea's redesigned business activities ("start-up cost financing"), and 2) make certain profit-sharing payments
pursuant to the Share Purchase and Transfer Agreement dated March 25, 2019 entered into with Maruho (as amended, the "Share Purchase
Agreement" or "SPA"). In exchange, the Company agreed to transfer 5,451,016 shares of Biofrontera AG to Maruho. The
exchange of the shares of Biofrontera AG for the release of the obligations mentioned above, resulted in a gain.

Expense, net

expense, net, primarily consists of amortization of the contract asset related to the start-up cost financing from Maruho under the
Share Purchase Agreement, as well as interest on our debt instruments, offset by interest income of 6% per annum for each day that
any reimbursement is past due related to the Amended Settlement Allocation Agreement with Biofrontera AG, and immaterial amounts of
interest income earned on our financing of customer purchases of BF-RhodoLED lamps.

 Other
Income, net

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

 Income
Taxes

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

 Results
of Operations

 Comparison
of the Years Ended December 31, 2023 and December 31, 2022

 The
following table summarizes our results of operations for the years ended December 31, 2023 and December 31, 2022:

 For the Year Ended December 31,

 ( in thousands)

 2023

 2022

 % Change

 Product revenues, net

 $
 34,005

 $
 28,541

 $
 5,464

 19.1
 %

 Related party revenues

 (67
)

 -50.4
 %

 Revenues, net

 34,071

 28,674

 5,397

 18.8
 %

 Operating expenses:

 Cost of revenues, related party

 16,789

 14,618

 2,171

 14.9
 %

 Cost of revenues, other

 15.5
 %

 Selling, general and administrative

 38,975

 35,137

 3,838

 10.9
 %

 Selling, general and administrative, related party

 (581
)

 -79.3
 %

 Research and development

 -

 N/A

 (3,800
)

 3,900

 -102.6
 %

 Total operating expenses

 56,748

 47,255

 9,493

 20.1
 %

 Loss from operations

 (22,677
)

 (18,581
)

 (4,096
)

 22.0
 %

 6,456

 19,017

 (12,561
)

 -66.1
 %

 Warrant inducement expense

 (1,045
)

 (2,629
)

 1,584

 -60.3
 %

 Excess of warrant fair value over offering proceeds

 (2,272
)

 -

 (2,272
)

 N/A

 Change in fair value of investment, related party

 (7,421
)

 1,747

 (9,168
)

 -524.8
 %

 7,385

 -

 7,385

 N/A

 (468
)

 (195
)

 (273
)

 -140.0
 %

 Other income, net

 (75
)

 (108
)

 -327.3
 %

 Loss before income taxes

 (20,117
)

 (608
)

 (19,509
)

 -3208.7
 %

 Income tax expenses

 (18
)

 -56.3
 %

 $
 (20,131
)

 $
 (640
)

 $
 (19,491
)

 -3045.5
 %

 Revenues,
net

 Net
product revenue for 2023 increased $5.5 million, or 19.1% compared to 2022. The increase was primarily driven by the expansion of our
salesforce in 2023, which resulted in a higher volume of Ameluz orders and, therefore, an increase in Ameluz
 revenue of $5.2 million. The remaining increase was attributed to an increase in the price of Ameluz.

 Operating
Expenses

 Cost
of Revenues, Related Party

 Cost
of revenues, related party increased $2.2 million, or 14.9% compared to 2022. The increase was primarily driven by the increase in
Ameluz product revenue. For the revenues in 2023 exceeding $30 million, the related cost of revenues decreased from
50% to 40% of net selling price tier pursuant to the Ameluz LSA, which offset the increase of cost due to the increase of sales
volume.

General and Administrative Expenses

general and administrative expenses for 2023 increased $3.8 million, or 10.9% compared to 2022. This increase was primarily driven
by an increase in personnel-related expenses of $2.4 million, reflecting a realignment of our workforce strategy to reduce general
and administrative costs and deploy some of these costs to revenue generating related functions. The increase was further driven by
sales-related travel of $0.3 million, auto lease expense of $0.2 million, clinical grant expenses of $0.5 million, franchise fee and
sales tax of $0.2 million and external legal
expenses related to a legal settlement of $1.2 million and other legal costs of $0.8 million related to a variety of non-routine
matters including legal claims as disclosed in Note 23. Commitments
and Contingencies – Legal Proceedings. These increases are partially offset by a decrease in issuance costs of $0.6 million related to liability classified equity financings, a decrease of $0.5 million in business insurance, and a decrease in stock compensation
of $0.8 million in 2023 due to a decline in the Company's award of executive's restricted stock units.

 Gain
on Legal Settlement

 Under the Release, the Company was released from its obligations to repay $7.3 million in start-up cost financing
to Maruho for Cutanea's redesigned business activities and released from having to make certain profit-sharing payments pursuant
to the SPA. In exchange, the Company agreed to transfer 5,451,016 shares of Biofrontera AG to Maruho. The
exchange pursuant to the Release resulted in a gain of $7.4 million, recorded in December 2023.

in Fair Value of Contingent Consideration

 The
change in fair value of contingent consideration was an increase of $0.1 million and a decrease of $3.8 million for 2023 and 2022,
respectively. The change in contingent consideration was driven by the estimated profit share the Company is required to pay under
the Share Purchase Agreement. There weren't any material changes in 2023. However, during 2022, the estimated profit share was
reduced by approximately $3.8 million after receiving
notification of third-party manufacturing delays that impacted the timing of sales expansion and improved market positioning of the
Xepi product.

in Fair Value of Warrant Liabilities

 The
change in fair value of warrant liabilities was a decrease of $12.6 million from 2022, driven primarily by changes in the underlying
value of the Company's common stock.

Inducement Expense

 The
warrant inducement expense was $1.0 million and $2.6 million for the years ended December 31, 2023 and 2022, respectively. The 2023
inducement expense was driven by a lower exercise price and extended term to exercise for the 2022 Purchase Warrant and 2022
Inducement Warrant, pursuant to the Amendment to Common Stock Purchase Warrants entered into on October 30, 2023. The 2022 inducement expense was driven by changes in fair value due to the repricing of the 2021 Purchase Warrant,
pursuant to the Inducement Letter.

 Excess
of Warrant Fair Value Over Offering Proceeds

 The
excess of the fair value of the November 2023 warrants at the issuance date over the proceeds received was recognized as a loss on the
statement of operations.

in Fair Value of Investment, Related Party

 The
change in fair value of investment, related party was a decrease of $7.4million and an increase of $1.7 million for the years ended
December31, 2023 and 2022, driven by changes in the quoted market price of the common stock of Biofrontera AG and losses on securities we sold during the period.

 Net
Income to Adjusted EBITDA Reconciliation for years ended December 31, 2023 and 2022

 We
define adjusted EBITDA as net income or loss before interest income and expense, income taxes, depreciation and amortization, and other
non-operating items from our statements of operations as well as certain other items considered outside the normal course of our operations
specifically described below. Adjusted EBITDA is not a presentation made in accordance with GAAP. Our definition of adjusted EBITDA may
vary from the use of similarly-titled measures by others in our industry due to the potential inconsistencies in the method of calculation
and differences due to items subject to interpretation. Adjusted EBITDA should not be considered as an alternative to net income or loss,
operating income/(loss), cash flows from operating activities or any other performance measures derived in accordance with GAAP as measures
of operating performance or liquidity. Adjusted EBITDA has limitations as an analytical tool and should not be considered in isolation
or as a substitute for analysis of our results as reported under GAAP.

in fair value of contingent consideration: Pursuant to the Share Purchase Agreement, the profits from the sale of Cutanea products
were to be shared equally between Maruho and Biofrontera until 2030. The fair value of the contingent consideration was determined to
be $6.5 million on the acquisition date and was re-measured at each reporting date. We exclude the impact of the change in fair value
of contingent consideration as this is non-cash. Further, we were relieved of our obligations relating to the contingent consideration
under the Release. As such, our future results of operations will not be impacted by the change in fair value.

 Gain
on legal settlement: Under the Release, we were relieved of our obligations relating to the start-up cost financing and profit
sharing under the Share Purchase Agreement in exchange for 5,451,016 shares of Biofrontera AG. The exchange of the shares of Biofrontera AG for the release of the liabilities mentioned above, both of which were recorded at their
respective fair values at the exchange date, resulted in a gain. We exclude the impact of the gain on legal
settlement as this is non-cash and non-recurring.

in fair value of warrant liabilities: The Warrants issued in conjunction with our private placement offerings and registered
public offering were accounted for as liabilities in accordance with ASC 815-40. The warrant liabilities are measured at fair value
at inception and on a recurring basis, with changes in fair value presented within the consolidated statement of operations. We
exclude the impact of the change in fair value of warrant liabilities as this is non-cash.

inducement expense: The warrant inducement expense was determined using the Black-Scholes option pricing model and was calculated
as the difference between the fair value of the applicable warrants prior to, and immediately after, the reduction in the exercise price
on the date of repricing and is presented within the statement of operations. We exclude the impact of the change in fair value of the
warrant inducement expense as this is non-cash.

 Excess
of warrant fair value over offering proceeds: The excess of warrant fair value over offering proceeds was determined by the difference
between the fair value of the warrants upon issuance on November 2, 2023 and the proceeds received. We exclude the impact of the variance
between the warrant fair value and the proceeds as this is non-cash.

in fair value of investment, related party: The Company accounts for its investment, related party in accordance with ASC 321, Investments
— Equity Securities ("ASC 321"). Equity securities, which are comprised of investments in common stock, are initially
recorded at cost, plus transaction costs, and subsequently measured at fair value, based on quoted market prices, with the gains and
losses reported in the Company's consolidated statement of operations. For the investments held in foreign currencies, the change
in fair value attributable to changes in foreign exchange rates is included in gains and losses in the consolidated statement of operations.
We exclude the impact of the realized and unrealized change in fair value of investments as this is non-cash.

 Legal
settlement expenses: To measure operating performance, we exclude legal settlement expenses. We do not expect to incur
these types of legal expenses on a recurring basis and believe the exclusion of such amounts allows management and the users of the financial
statements to better understand our financial results.

 Stock
Based Compensation: To measure operating performance, we exclude the impact of costs relating to share-based compensation. Due to
the subjective assumptions and a variety of award types, we believe that the exclusion of share-based compensation expense, which is non-cash, allows for more meaningful comparisons of our operating results to peer companies. Share-based compensation expense
can vary significantly based on the timing, size and nature of awards granted.

 Expensed
issuance costs: To measure operating performance, we exclude the portion of issuance costs allocated to our warrant liabilities.
We do not expect to incur this type of expense on a recurring basis and believe the exclusion of these costs allows management and the
users of the financial statements to better understand our financial results.

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

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

 The
below table presents a reconciliation from net loss to Adjusted EBITDA for the years ended December 31, 2023 and 2022:

 Years ended December 31,

 2023

 2022

 $
 (20,131
)

 $
 (640
)

 Income tax expenses

 Depreciation and amortization

 EBITDA

 (19,145
)

 (7,385
)

 -

 (3,800
)

 (6,456
)

 (19,017
)

 Warrant inducement expense

 1,045

 2,629

 Excess of warrant fair value over offering proceeds

 2,272

 -

 Change in fair value of investment, related party

 7,421

 (1,747
)

 Legal settlement expenses

 1,225

 Stock based compensation

 1,045

 1,852

 Expensed issuance costs

 1,045

 Adjusted EBITDA

 $
 (19,456
)

 $
 (18,062
)

 Adjusted EBITDA margin

 -57.1
 %

 -63.0
 %

 Adjusted
EBITDA

 Adjusted
EBITDA decreased from ($18.1) million for the year ended December 31, 2022 to ($19.5) million for the year ended December 31, 2023.
The decrease was primarily driven by an increase in selling, general, and administrative expenses (excluding legal settlement
expenses) ("SG&A expenses") due to increased headcount. Our Adjusted EBITDA margin increased from (63.0%) for the
year ended December 31, 2022 to (57.1%) for the year ended December 31, 2023, as the increase in revenue outpaced the decline in our
Adjusted EBITDA.

 Liquidity
and Capital Resources

 Since
we commenced operations in 2015, we have generated significant losses and have incurred net cash outflows from operations of $24.9
million and $16.2 million for the years ended December 31, 2023 and 2022, respectively. The Company had an accumulated deficit as of
December 31, 2023 of $99.7 million. The Company's primary sources of liquidity are its cash collected from the sales of its
products, and cash flows from financing transactions. During the year ended December 31, 2023, we received proceeds of $4.1 million
from the issuance of common stock and warrants, net of issuance costs (See Note 18. Stockholders' Equity). As of
December 31, 2023, we had cash and cash equivalents of $1.3 million, compared to $17.2 million as of December 31, 2022. These
conditions raise substantial doubt about our ability to continue as a going concern for at least twelve months from the issuance
date of this report, which management believes has been alleviated through its plans to mitigate these conditions and obtain
additional liquidity.

 Pursuant to the requirements of the Financial Accounting
Standards Board's Accounting Standards Codification ("ASC") Topic 205-40, Disclosure of Uncertainties about an Entity's
Ability to Continue as a Going Concern, management must evaluate whether there are conditions or events, considered in the aggregate,
that raise substantial doubt about the Company's ability to continue as a going concern for one year from the date the consolidated
financial statements included in this Annual Report on Form 10-K are issued. This evaluation does not take into consideration the potential
mitigating effect of management's plans that have not been fully implemented or are not within control of the Company as of the
date the financial statements are issued. When substantial doubt exists under this methodology, management evaluates whether the mitigating
effect of its plans sufficiently alleviates substantial doubt about the Company's ability to continue as a going concern. The mitigating
effect of management's plans, however, is only considered if both (1) it is probable that the plans will be effectively implemented
within one year after the date that the financial statements are issued, and (2) it is probable that the plans, when implemented, will
mitigate the relevant conditions or events that raise substantial doubt about the entity's ability to continue as a going concern
within one year after the date that the consolidated financial statements are issued.

 In an effort to alleviate these conditions, management
plans include execution on the 2024 budget approved by the Board, which includes significant discretionary sales and marketing, medical
affairs, and dermatology community outreach efforts as we seek to expand the commercialization of Ameluz in the United States, however,
discretionary expenses are about $5.5 million less than what was spent in 2023. We have reduced spending at both the commercial and general
and administrative level but do not expect these reductions to impact our ability to grow and achieve our revenue targets. We also expect
to incur additional expenses in support of our product commercialization efforts. In addition, we expect to continue to incur significant
costs to comply with corporate governance, internal controls and similar requirements applicable to us as a public company in the U.S.

 Also, on February 20, 2024, the Company entered into
the 2024 LSA with Biofrontera AG which will significantly reduce our cost of inventory in the future. The Company will begin to see gross
margins of its primary product, Ameluz, of approximately 75% as opposed to the prior 50% beginning with inventory purchases after
the execution date. This will reduce our cash needs for inventory which will be partially offset by R&D costs, resulting in expected
net savings of $0.7 million by March 2025 and continuing in subsequent years.

 In addition, on February 19, 2024, the Company
entered into a securities and purchase agreement with healthcare-focused institutional investors resulting in net proceeds of $7.2
million, which were received on February 22, 2024. Under the agreement, we also issued warrants to purchase 8,000 shares of Series
B-3 Convertible Preferred Stock at an exercise price of $1,000 per share. If these warrants are exercised in full, we will receive
additional net proceeds of $7.2 million. To encourage the investors to exercise the warrants, they will expire within 21 days upon
the satisfaction of certain conditions (but if such conditions are not met, they will expire three years after issuance). Even
though we anticipate that we will satisfy the conditions to trigger the expiration of the warrants and receive additional financing
as a result of the exercise of the warrants, there can be no assurance that such conditions will be met or that the investors will choose to exercise the warrants prior to expiration. See Note 25. Subsequent Events- Securities Purchase
Agreement for Series B Convertible Preferred.

 The Company
believes that, as a result of these plans, it has sufficient liquidity and probable financing to meet its funding requirements for
at least one year from the date the financial statements are issued. However, the Company's plans will depend on many factors,
including executing on our sales plan over one year from issuance, reaching at least 5% in year to date revenue growth over 2023 by
June 2024, receiving shareholder approval to increase the number of authorized shares to enable the warrant exercise, controlling
our selling, general and administrative costs, and the
investors electing to exercise their warrants within the anticipated timeframe, among other possible challenges and unforeseen
circumstances. A lack of execution or unforeseen circumstances may require the Company to raise additional capital or debt which may
not be available on acceptable terms, or at all which could result in a material adverse effect on the Company and its financial
statements.

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

 Cash
Flows

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

 For the Year Ended

 2023

 2022

 Net cash used in operating activities

 $
 (24,895
)

 $
 (16,199
)

 Net cash provided by (used in) investing activities

 (5,156
)

 Net cash provided by financing activities

 8,411

 14,021

 Net increase (decrease) in cash and restricted cash

 $
 (15,865
)

 $
 (7,334
)

 Operating
Activities

the year ended December 31, 2023, operating activities used $24.9 million of cash, primarily resulting from our net loss of $20.1
million, adjusted for the add back of non-cash income of $0.4 million and offset by net cash used by changes in our operating
assets and liabilities of $4.4 million. Non-cash income includes a gain on legal settlement of $7.4 million and a change in fair
value of warrant liabilities of $6.5 million offset by a change in fair value of equity securities of $7.4 million, loss on warrant
fair value over offering proceeds of $2.3 million, warrant inducement expense of $1.1 million, stock-based compensation of $1.1
million, non-cash interest expense of $0.4 million, change in fair value of contingent consideration of $0.1 million, provision for
doubtful accounts of $0.1 million and depreciation and amortization in the aggregate of $1.1 million.

the year ended December 31, 2022, operating activities used $16.2 million of cash, primarily resulting from our net loss of $0.6 million,
adjusted for the add back of non-cash income of $18.3 million and offset by net cash provided by changes in our operating assets and
liabilities of $2.7 million. Non-cash items include stock-based compensation of $1.9 million, non-cash interest expense of $0.4 million,
and depreciation and amortization in the aggregate of $1.2 million, netted against a change in fair value of investment of warrant liabilities
of $19.0 million, change in fair value of contingent consideration of $3.8 million, and change in fair value of equity securities of
$1.7 million.

 Investing
Activities

the year ended December 31, 2023, investing activities provided $0.6 million, primarily resulting from the sale of shares of Biofrontera
AG.

the year ended December 31, 2022, investing activities used $5.2 million, primarily resulting from the purchase of shares of Biofrontera
AG (See Note 4. Fair Value Measurements and Note 6. Investment, related party within our consolidated financial statements)

 Financing
Activities

the year ended December 31, 2023, net cash provided by financing activities was $8.4 million which consisted of net proceeds
received from our loan and line of credit of $3.9 million and net proceeds of $4.5 million from the issuance of common stock and
warrants in a public offering.

the year ended December 31, 2022, net cash provided by financing activities was $14.0 million which consisted of proceeds of $9.4
million from the issuance of common stock and warrants in private placement, net of issuance costs, and $4.6 million from the
exercise of common stock warrants.

 Accounting
Policies and Significant Judgments and Estimates

 Our
management's discussion and analysis of our financial condition and results of operations are based on our financial statements,
which have been prepared in accordance with generally accepted accounting principles of the United States, or GAAP. The preparation of
the financial statements in accordance with GAAP requires the use of estimates and assumptions by management that affect the value of
assets and liabilities, as well as contingent assets and liabilities, as reported on the balance sheet date, and revenues and expenses
arising during the reporting period. The main areas in which assumptions, estimates and the exercising of a degree of judgment are appropriate
relate to contingent consideration, fair value measurements, valuation of intangible assets and impairment assessment, and stock compensation.
Estimates are based on historical experience and other assumptions that are considered appropriate in the circumstances. They are continuously
reviewed but may vary from the actual values.

 Our
significant accounting policies are described in more detail in Note 2 – Summary of Significant Accounting Policies, to
our consolidated financial statements.

 Critical
Accounting Estimates

 We
believe that the following are the most critical estimates which required significant judgments in the
preparation of our financial statements.

Consideration

 We
record contingent consideration resulting from a business combination at its fair value on the acquisition date. Each reporting period
thereafter and until settlement, we revalue the remaining obligations and record increases or decreases in their fair value as an adjustment
to operating expense in our statements of operations. We considered a number of factors, including information provided by an outside
valuation advisor in performing the valuation. Contingent consideration is reported at the estimated fair values based on the probability-adjusted
present value of the consideration expected to be paid, using significant inputs and estimates. Changes in the fair value of our contingent
consideration obligations can result from changes to one or multiple inputs, including forecasted product profit amounts, metric risk
premium and discount rates consistent with the level of risk of achievement as further discussed in Note 4, Fair Value Measurements
 to the audited financial statements as of and for the years ended December 31, 2023 and 2022 as included in this Form 10-K. These
fair value measurements represent Level 3 measurements as they are based on significant inputs not observable in the market.

 Significant
judgment is employed in determining the appropriateness of these assumptions as of the acquisition date and for each subsequent period.
Accordingly, changes in assumptions described above, could have a material impact on the amount of contingent consideration expense we
record in any given period.

 Intangible
Assets and Impairment Assessment

 The
Company regularly reviews the carrying amount of its long-lived assets to determine whether indicators of impairment may exist,
which warrant adjustments to carrying values or estimated useful lives. In connection with this review, assets are grouped at the
lowest level at which identifiable cash flows are largely independent of other asset groupings. If indications of impairment exist,
projected future undiscounted cash flows associated with the asset grouping are compared to the carrying amount to determine whether
the asset's value is recoverable. An impairment loss would be recognized when estimated undiscounted future cash flows
expected to result from the use of an asset group are less than its carrying amount and if the carrying value is also determined to be greater than its fair value. The impairment loss would be based on the
excess of the carrying value of the impaired asset group over its fair value, determined based on discounted cash flows.

 In
determining future cash flows, we take various factors into account, including the remaining useful life of each asset group, forecasted
growth rates, pricing, working capital, capital expenditures, and other cash needs specific to the asset group. Additional considerations
when assessing impairment include changes in our strategic operational and financial decisions, economic conditions, demand for our product
and other corporate initiatives which may eliminate or significantly decrease the realization of future benefits from our long-lived
assets. Since the determination of future cash flows is an estimate of future performance, future impairments may arise in the event
that future cash flows do not meet expectations.

 We
perform an impairment assessment in accordance with FASB ASC Topic 360-10-S99, Impairment or Disposal of Long-Lived Assets.
Management's review for the presence of indicators of impairment include events or changes in circumstances that indicate the
carrying amount of an asset may not be recoverable. In October 2022, upon receiving notification of further third-party
manufacturing delays that impacted the timing of sales expansion and improved market positioning of the Xepi
product, and again in December 2023, when we implemented a marketing hold in response to continued manufacturing delays experienced
by our Licensor and also entered the Release, relieving us of obligations that had previously reduced the carrying value of the
asset group, we deemed it necessary to assess the recoverability of our Xepi asset group. As of the date of
notification in 2022 and the Release in 2023, future undiscounted cash flows were estimated over the expected remaining useful life
using revenue and operating expense growth rates. The expected cash flows were based on the assumption that sales levels would grow
considerably after resolution of the manufacturing delays as a result of expanding the sales force and marketing efforts related to
relaunching the asset group. Further, in 2023, due to the uncertainty relating to the timing of resolution of the previously
identified supply chain issues, the Company used a probability-weighted approach to estimate the future cash flows under several
scenarios. While we believe these assumptions were reasonable, the level of future sales may vary significantly from the levels
assumed. Also, the timeframe over which activity levels grow is highly uncertain. Potential events that could affect our assumptions
are affected by factors such as those described in " Risks Related to Our Business and Strategy ". After the
assessment we performed in 2023, we determined that, on an undiscounted basis, expected cash flows did not exceed the carrying
amount of the asset group, which had increased significantly as a result of the relief of obligations under the Release agreement.
As such, we determined that the carrying value was not recoverable as of December 29, 2023 and proceeded to determine whether the
carrying value exceeded the asset group's fair value, indicating an impairment loss. The valuation of the asset group required
that management use valuation techniques such as the income approach. The income approach includes the use of a discounted cash flow
model, which includes discounted cash flow scenarios and requires significant estimates such as future expected revenue,
expenses and other costs, and discount rates. The fair value calculated was in excess of the carrying value, indicating that
no impairment loss had been incurred. For additional information on our impairment assessment, refer Note 12, "Intangible
Assets, Net ", to our financial statements included in this Form 10-K.

 Fair
Value – Warrant Liability

 The
Warrants issued in conjunction with our private placement offerings including warrants issued to induce conversion were accounted
for as liabilities in accordance with ASC 815-40 and are presented within warrant liabilities in the accompanying consolidated
balance sheet. The warrant liabilities are measured at fair value at inception and on a recurring basis, with changes in fair value
presented within the consolidated statement of operations.

 The
Company utilizes a Black-Scholes option pricing model to estimate the fair value of the Warrants which is considered a Level 3 fair
value measurement. The Black-Scholes option-pricing model considers several variables and assumptions in estimating the fair value
of financial instruments, including the per-share fair value of the underlying common stock, exercise price, expected term,
risk-free interest rate, expected stock price volatility over the expected term, and expected annual dividend yield. Certain inputs
utilized in our Black-Scholes pricing model may fluctuate in future periods based upon factors which are outside of the
Company's control. Due to the relatively limited period during which our stock has been publicly traded, volatility is
based on a weighted average of our historical volatility and of a selected peer group of publicly traded companies within a similar
industry. A significant change in one or more of these inputs used in the calculation of the fair value may cause a significant
change to the fair value of our warrant liability which could also result in material non-cash gain or loss being reported in our
consolidated statement of operations.

 Contingencies and Litigation

 In the ordinary course of our business, we are subject to various legal proceedings, claims and other regulatory
matters, the outcomes of which are subject to significant uncertainty. In determining whether a loss should be accrued, we evaluate, among
other factors, the probability of an unfavorable outcome and the ability to make a reasonable estimate of the amount of loss. As additional
information becomes available, we reassess the potential liability related to our pending litigation and other contingencies and revise
our estimates as applicable. Revisions of our estimates of the potential liability could materially impact our results of operations.
Additionally, if the final outcome of such litigation and contingencies differs adversely from that currently expected, it would result
in a charge to operating results when determined.

 Going Concern Estimates

 We assume that the Company will continue as a
going concern, which contemplates continuity of operations, realization of assets, and liquidation of liabilities in the normal
course of business. This estimate requires us to consider various factors such as historical performance, expected performance, liquidity, debt
obligations, and potential sources of additional funding. A different outcome in any of these assumptions could adversely affect our
financial condition and liquidity over the next twelve months.

 Recently
issued accounting pronouncements

 A
description of recently issued accounting pronouncements that may potentially impact our financial position and results of operations
is disclosed in Note 2, Summary of Significant Accounting Policies—Recently Issued Accounting Pronouncements.

 Off-balance
Sheet Arrangements

 Besides
the contractual obligations and commitments as discussed in the Liquidity and Capital Resources, we did not have during the periods
presented, and we do not currently have, any other off-balance sheet arrangements, as defined in the rules and regulations of the SEC.

 Emerging
Growth Company Status

 The
Jumpstart Our Business Startups Act of 2012 permits an "emerging growth company" such as us to take advantage of an extended
transition period to comply with new or revised accounting standards applicable to public companies until those standards would otherwise
apply to private companies. We have elected to take advantage of such extended transition period, which means that when an accounting
standard is issued or revised and it has different application dates for public or private companies, we will adopt the new or revised
standard at the time private companies adopt the new or revised standard and will do so until such time that we either (i) irrevocably
elect to "opt out" of such extended transition period or (ii) no longer qualify as an emerging growth company.

 Item
7A. Quantitative and Qualitative Disclosures About Market Risk

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

 Item
8. Financial Statements and Supplementary Data

TO FINANCIAL STATEMENTS

 Page

 Financial Statements as of and for the Years Ended December 31, 2023 and 2022

 Report of Independent Registered Public Accounting Firm (PCAOB ID No. 688)

 Consolidated Balance Sheets as of December 31, 2023 and 2022

 Consolidated Statements of Operations for the years ended December 31, 2023 and 2022

 Consolidated Statements of Stockholders' Equity for the years ended December 31, 2023 and 2022

 Consolidated Statements of Cash Flows for the years ended December 31, 2023 and 2022

 Notes to the Consolidated Financial Statements

 F- 1

 REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 To
the Shareholders and Board of Directors of Biofrontera, Inc.

 Opinion
on the Financial Statements

 We
have audited the accompanying consolidated balance sheets of Biofrontera, Inc. (the "Company") as of December 31, 2023 and 2022, the related consolidated statements of operations, stockholders' equity and cash flows for each of the two years
in the period ended December 31, 2023, and the related notes (collectively referred to as the "financial statements"). In
our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December
31, 2023 and 2022, and the results of its operations and its cash flows for each of the two years in the period ended December
31, 2023, in conformity with accounting principles generally accepted in the United States of America.

 Basis
for Opinion

 These
financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's
financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board
(United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal
securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

 We
conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company
is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits
we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion
on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.

 Our
audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error
or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding
the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant
estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits
provide a reasonable basis for our opinion.

 /s/
 Marcum llp

 Marcum
LLP

 We
have served as the Company's auditor since 2023.

 East
Hanover, New Jersey

 March 15, 2024

 F- 2

Consolidated Financial Statements as of and for the Years Ended December 31, 2023 and 2022

INC.

 CONSOLIDATED
BALANCE SHEETS

 ( In
thousands, except par value and share amounts)

 2023

 2022

 ASSETS

 Current assets:

 Cash and cash equivalents

 $
 1,343

 $
 17,208

 Investment, related party

 10,548

 Accounts receivable, net

 5,162

 3,748

 Other receivables, related party

 -

 3,658

 Inventories, net

 10,908

 7,168

 Prepaid expenses and other current assets

 Other assets, related party

 5,159

 -

 Total current assets

 23,075

 43,140

 Other receivables long term, related party

 -

 2,813

 Property and equipment, net

 Operating lease right-of-use assets

 1,612

 1,375

 Intangible asset, net

 2,629

 3,032

 Other assets

 Total assets

 $
 27,932

 $
 50,884

 LIABILITIES AND STOCKHOLDERS' EQUITY

 Current liabilities:

 Accounts payable

 3,308

 1,278

 Accounts payable, related parties, net

 5,698

 1,312

 Accounts payable

 5,698

 1,312

 Acquisition contract liabilities, net

 -

 6,942

 Operating lease liabilities

 Accrued expenses and other current liabilities

 4,487

 10,864

 Short term debt

 3,904

 -

 Total current liabilities

 18,088

 20,894

 Long-term liabilities:

 Acquisition contract liabilities, net

 -

 2,400

 Warrant liabilities

 4,210

 2,843

 Operating lease liabilities, non-current

 Other liabilities

 Total liabilities

 23,139

 27,006

 Commitments and contingencies (see Note 23)

 -

 -

 Stockholders' equity:

 Preferred Stock, $ 0.001 par value, 20,000,000 shares authorized, zero shares issued and outstanding as of December 31, 2023 and 2022

 -

 -

 Common Stock, $ 0.001 par value, 15,000,000 shares authorized; 1,517,628 and 1,334,950 shares issued and outstanding as of December 31, 2023 and 2022

 Additional paid-in capital

 104,441

 103,396

 Accumulated deficit

 ( 99,650
)

 ( 79,519
)

 Total stockholders' equity

 4,793

 23,878

 Total liabilities and stockholders' equity

 $
 27,932

 $
 50,884

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

 F- 3

Consolidated Financial Statements as of and for the Years Ended December 31, 2023 and 2022

INC.

 CONSOLIDATED
STATEMENTS OF OPERATIONS

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

 2023

 2022

 Products revenues, net

 $
 34,005

 $
 28,541

 Revenues, related party

 Total revenues, net

 34,071

 28,674

 Operating expenses

 Cost of revenues, related party

 16,789

 14,618

 Cost of revenues, other

 Selling, general and administrative

 38,975

 35,137

 Selling, general and administrative, related party

 Research and development

 -

 ( 3,800
)

 Total operating expenses

 56,748

 47,255

 Loss from operations

 ( 22,677
)

 ( 18,581
)

 Other income (expense)

 6,456

 19,017

 Warrant inducement expense

 ( 1,045
)

 ( 2,629
)

 Excess of warrant fair value over offering proceeds

 ( 2,272
)

 -

 Change in fair value of investment, related party

 ( 7,421
)

 1,747

 7,385

 -

 ( 468
)

 ( 195
)

 Other income (expense), net

 ( 75
)

 Total other income (expense)

 2,560

 17,973

 Loss before income taxes

 ( 20,117
)

 ( 608
)

 Income tax expense

 $
)

 $
 ( 640
)

 Loss per common share:

 Basic and diluted

 $
 ( 13.02
)

 $
 ( 0.61
)

 Weighted-average common shares outstanding:

 Basic and diluted

 1,546,297

 1,056,988

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

 F- 4

Consolidated Financial Statements as of and for the Years Ended December 31, 2023 and 2022

INC.

 CONSOLIDATED
STATEMENTS OF STOCKHOLDERS' EQUITY

 (In
thousands, except number of shares)

 Common Stock

 Additional

 Paid-In

 Accumulated

 Shares

 Amount

 Capital

 Deficit

 Total

 Balance at December 31, 2021

 855,237

 $

 $
 90,216

 $
 ( 78,879
)

 $
 11,338

 Issuance of common stock in exchange for investment, related party

 157,402

 3,683

 -

 3,683

 Issuance of common stock and warrants under private placement, net of negligible issuance costs

 92,500

 -

 Exercise of pre-funded warrants

 78,450

 2,842

 2,842

 Exercise of PIPE warrants

 142,857

 4,686

 -

 4,686

 Issuance of shares for vested restricted stock units

 8,504

 -

 -

 -

 -

 Stock-based compensation

 -

 -

 1,852

 -

 1,852

 -

 -

 -

 ( 640
)

 ( 640
)

 Balance at December 31, 2022

 1,334,950

 $

 $
 103,396

 $
 ( 79,519
)

 $
 23,878

 Beginning balance

 1,334,950

 $

 $
 103,396

 $
 ( 79,519
)

 $
 23,878

 Issuance of shares for vested restricted stock units

 8,588

 -

 -

 Issuance of shares in reverse stock split (for fractional shares)

 24,090

 -

 -

 Issuance of common stock and warrants, under registered public offering

 150,000

 -

 -

 Stock based compensation

 -

 -

 1,045

 1,045

 -

 -

 -

)

)

 Balance at December 31, 2023

 1,517,628

 $

 $
 104,441

 $
 ( 99,650
)

 $
 4,793

 Ending balance

 1,517,628

 $

 $
 104,441

 $
 ( 99,650
)

 $
 4,793

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

 F- 5

Consolidated Financial Statements as of and for the Years Ended December 31, 2023 and 2022

INC.

 CONSOLIDATED
STATEMENTS OF CASH FLOWS

 (In
Thousands)

 Years ended December 31,

 2023

 2022

 Cash Flows From Operating Activities:

 $
)

 $
 ( 640
)

 Adjustments to reconcile net loss to cash flows used in operations

 ( 7,385
)

 -

 Depreciation

 Amortization of right-of-use assets

 Amortization of acquired intangible assets

 Change in fair value of investment, related party

 7,421

 ( 1,747
)

 ( 3,800
)

 ( 6,456
)

 ( 19,017
)

 Warrant inducement expense

 1,045

 2,629

 Excess of warrant fair value over offering proceeds

 2,272

 -

 Stock-based compensation

 1,045

 1,852

 Provision for inventory obsolescence

 -

 Provision for doubtful accounts

 Non-cash interest expense

 Changes in operating assets and liabilities:

 Accounts receivable

 ( 1,536
)

 ( 70
)

 Other receivables, related party

 6,470

 4,990

 Prepaid expenses and other assets

 4,154

 Other assets, related party

 ( 5,159

)

 -

 Inventories

 ( 3,750
)

 ( 2,810
)

 Accounts payable and related party payables

 6,415

 Operating lease liabilities

 ( 657
)

 ( 781
)

 Accrued expenses and other liabilities

 ( 6,351
)

 ( 3,607
)

 Cash flows used in operating activities

 ( 24,895
)

 ( 16,199
)

 Cash flows from investing activities

 Purchases of investment, related party

 -

 ( 5,118
)

 Sales of investment, related party

 -

 Purchases of property and equipment

 ( 5
)

 ( 38
)

 Cash flows provided by (used in) investing activities

 ( 5,156
)

 Cash flows from financing activities

 Proceeds from line of credit

 21,448

 -

 Proceeds from short term debt

 3,800

 -

 Principal payments short term debt, net

 ( 21,344
)

 Proceeds from issuance of common stock and warrants

 4,507

 9,391

 Proceeds from exercise of warrants

 -

 4,630

 Cash flows provided by financing activities

 8,411

 14,021

 Net decrease in cash and cash equivalents

 ( 15,865
)

 ( 7,334
)

 Cash, cash equivalents and restricted cash, at the beginning of the year

 17,408

 24,742

 Cash, cash equivalents and restricted cash, at the end of the year

 $
 1,543

 $
 17,408

 Supplemental disclosure of cash flow information

 Interest paid

 $

 $

 Interest paid, related party

 $

 $
 -

 Income tax paid, net

 $

 $

 Supplemental non-cash investing and financing activities

 Release of start-up cost financing obligation as part of legal settlement

 $
 ( 7,300
)

 $
 -

 Release of contingent consideration obligation as part of legal settlement

 $
 ( 2,500
)

 $
 -

 Transfer of investment as part of legal settlement

 $
 2,415

 $
 -

 Addition of right-of-use assets in exchange for operating lease liabilities

 $

 $

 Conversion of warrant liability to equity in connection with exercise of warrants

 $
 -

 $
 6,840

 Issuance of common shares in exchange for investment, related party

 $
 -

 $
 3,683

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

 F- 6

 Notes
to the Audited Consolidated Financial Statements as of and for the Years Ended December 31, 2023 and 2022

 1.
 Organization and Business Overview

 Biofrontera
Inc., a Delaware Corporation, (the "Company" or "Biofrontera") is a U.S.-based biopharmaceutical company commercializing
a portfolio of pharmaceutical products for the treatment of dermatological conditions with a focus on photodynamic therapy ("PDT")
and topical antibiotics. The Company's licensed products are used for the treatment of actinic keratoses, which are pre-cancerous
skin lesions as well as impetigo, a bacterial skin infection.

 The Company includes
its wholly owned subsidiary Bio-FRI GmbH ("Bio-FRI"), a limited liability company organized under the laws of Germany, formed
on February 9, 2022, as a German presence to facilitate our relationship with the Ameluz Licensor.

 Our
principal licensed product is Ameluz, which is a prescription drug approved for use in combination with the
RhodoLED lamp series, for PDT (when used together, "Ameluz PDT"). In the United States,
the PDT treatment is used for the lesion-directed and field-directed treatment of actinic keratoses of mild-to-moderate severity on
the face and scalp. We are currently selling Ameluz for this indication in the U.S. under an exclusive license and
supply agreement ("Ameluz LSA") with Biofrontera Pharma ("Pharma") GmbH and Biofrontera Bioscience GmbH
("Biofrontera Bioscience," and, together with Pharma, the "Ameluz Licensor"), both of which are related parties.

 Our
second prescription drug licensed product is Xepi (ozenoxacin cream, 1%), a topical non-fluorinated quinolone that inhibits
bacterial growth. Currently, no antibiotic resistance against Xepi is known and it has been specifically approved by the FDA
for the treatment of impetigo, a common skin infection, due to Staphylococcus aureus or Streptococcus pyogenes. It is approved for
use in the United States in adults and children 2 months and older. Our exclusive license and supply agreement, as amended
("Xepi LSA") with Ferrer Internacional S.A. ("Ferrer") and assumed by the Company on March 25, 2019 through
our acquisition of Cutanea Life Sciences, Inc. ("Cutanea") enables the Company to market and sell this product in the
United States. The Company has generated limited revenue from sales of Xepi during the current reporting periods and recent
developments with the third-party manufacturer that was providing our supply of Xepi have resulted in further delays of our
commercialization of the product. However, Ferrer is qualifying a new contract manufacturer, Cambrex, which is expected to begin
production in the second half of 2024. Once the new third-party manufacturer is qualified, we expect the supply of Xepi will
meet our future market demand.

 Liquidity
and Going Concern

 Since
we commenced operations in 2015, we have generated significant losses and have incurred net cash outflows from operations of $ 24.9 million
and $ 16.2 million
for the years ended December 31, 2023 and 2022, respectively. The Company had an accumulated deficit as of December 31, 2023 of $ 99.7 million.
The Company's primary sources of liquidity are its cash collected from the sales of its products, and cash flows from
financing transactions. During the year ended December 31, 2023, we received proceeds of $ 4.1 million
from the issuance of common stock and warrants, net of issuance costs (See Note 18. Stockholders' Equity). As of
December 31, 2023, we had cash and cash equivalents of $ 1.3 million,
compared to $ 17.2 million
as of December 31, 2022. These conditions raise substantial doubt about our ability to continue as a going concern for at least
twelve months from the issuance date of this report, which management believes has been alleviated through its plans to mitigate
these conditions and obtain additional liquidity.

 Pursuant to the requirements of the Financial Accounting
Standards Board's Accounting Standards Codification ("ASC") Topic 205-40, Disclosure of Uncertainties about an Entity's
Ability to Continue as a Going Concern, management must evaluate whether there are conditions or events, considered in the aggregate,
that raise substantial doubt about the Company's ability to continue as a going concern for one year from the date the consolidated
financial statements included in this Annual Report on Form 10-K are issued. This evaluation does not take into consideration the potential
mitigating effect of management's plans that have not been fully implemented or are not within control of the Company as of the
date the financial statements are issued. When substantial doubt exists under this methodology, management evaluates whether the mitigating
effect of its plans sufficiently alleviates substantial doubt about the Company's ability to continue as a going concern. The mitigating
effect of management's plans, however, is only considered if both (1) it is probable that the plans will be effectively implemented
within one year after the date that the financial statements are issued, and (2) it is probable that the plans, when implemented, will
mitigate the relevant conditions or events that raise substantial doubt about the entity's ability to continue as a going concern
within one year after the date that the consolidated financial statements are issued.

 In an effort to alleviate these conditions, management plans include execution
on the 2024 budget approved by the Board, which includes significant discretionary sales and marketing, medical affairs, and dermatology
community outreach efforts as we seek to expand the commercialization of Ameluz in the United States, however, discretionary expenses
are about $ 5.5 million less than what was spent in 2023. We have reduced spending at both the commercial and general and administrative
level but do not expect these reductions to impact our ability to grow and achieve our revenue targets. We also expect to incur additional
expenses in support of our product commercialization efforts. In addition, we expect to continue to incur significant costs to comply
with corporate governance, internal controls and similar requirements applicable to us as a public company in the U.S.

 Also, on
February 20, 2024, the Company entered into the 2024 LSA with Biofrontera AG which will significantly reduce our cost of inventory
in the future. The Company will begin to see gross margins of its primary product, Ameluz, of approximately 75% as opposed to the
prior 50% beginning with inventory purchases after the execution date. This will reduce our cash needs for inventory which will be
partially offset by R&D costs, resulting in expected net savings of $ 0.7
million by March 2025 and continuing in subsequent years.

 In addition, on February 19, 2024, the Company
entered into a securities and purchase agreement with healthcare-focused institutional investors resulting in net proceeds of $ 7.2
 million, which were received on February 22, 2024. Under the agreement, we also issued warrants to purchase 8,000 shares of Series
B-3 Convertible Preferred Stock at an exercise price of $ 1,000 per share. If these warrants are exercised in full, we will receive additional
net proceeds of $ 7.2 million. To encourage the investors to
exercise the warrants, they will expire within 21 days upon the satisfaction of certain conditions (but if such conditions are not met,
they will expire three years after issuance). Even though we anticipate that we will satisfy the conditions to trigger the expiration
of the warrants and receive additional financing as a result of the exercise of the warrants, there can be no assurance that such conditions
will be met or that the investors will choose to exercise the warrants prior to expiration. See Note 25. Subsequent Events-
Securities Purchase Agreement for Series B Convertible Preferred.

 The Company
believes that, as a result of these plans, it has sufficient liquidity and probable financing to meet its funding requirements for
at least one year from the date the financial statements are issued. However, the Company's plans will depend on many factors,
including executing on our sales plan over one year from issuance, reaching at least 5% in year to date revenue growth over 2023 by
June 2024, receiving shareholder approval to increase the number of authorized shares to enable the warrant exercise, controlling
our selling, general and administrative costs, and the investors electing to exercise their warrants within the anticipated
timeframe, among other possible challenges and unforeseen circumstances. A lack of execution or unforeseen circumstances may require
the Company to raise additional capital or debt which may not be available on acceptable terms, or at all which could result in a
material adverse effect on the Company and its financial statements.

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

 F- 7

 2.
 Summary of Significant Accounting Policies

 Basis
for Preparation of the Consolidated Financial Statements

 The
accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the
United States of America ("GAAP"). These consolidated financial statements include the accounts of our wholly owned subsidiary.
All intercompany balances and transactions have been eliminated in consolidation. The information presented reflects the application
of significant accounting policies described below.

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

 Segment
Reporting

 Operating
segments are defined as components of an enterprise about which separate discrete information is available for evaluation by the chief
operating decision-makers in deciding how to allocate resources and assess performance. The Company's chief operating decision
makers (determined to be the Chief Executive Officer and the Chief Financial Officer) do not manage any part of the Company
separately, and the allocation of resources and assessment of performance are based on the Company's operating results.

 We
operate in a single reporting segment, the commercialization of pharmaceutical products for the treatment of dermatological conditions
and diseases within the U.S. All business operations focus on the products Ameluz, including the complementary product
BF-RhodoLED, and Xepi. We monitor and manage our business operations across these products collectively
as one reporting segment.

 Reverse
Stock Split

 On
July 3, 2023, the Company effected a 1-for-20 reverse stock split (the "Reverse Stock Split") of the issued and outstanding
shares of the Company's common stock, $ 0.001 par value (the "Common Stock"). The Common Stock began trading on the
Nasdaq Capital Market on a post-split basis on July 5, 2023.

 All
information included in these consolidated financial statements has been adjusted, on a retrospective basis, to reflect the Reverse Stock
Split as if it had been effective from the beginning of the earliest period presented, unless otherwise stated. All outstanding securities
entitling their holders to purchase shares of Common Stock or acquire shares of Common Stock, including stock options, restricted stock
units, and warrants, were adjusted as a result of the Reverse Stock Split, as required by the terms of those securities.

 Use
of Estimates

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

 F- 8

 Cash
and Cash Equivalents

 The
Company considers all highly liquid investments purchased with an original maturity of three months or less at the time of purchase to
be cash equivalents.

 The
Company maintains its cash balances at financial institutions that are insured by the Federal Deposit Insurance Corporation
("FDIC"). At December 31, 2023, approximately $ 1.0 million
of the Company's cash balances were in excess of FDIC limits. The Company has not experienced any losses on these accounts and
management does not believe that the Company is exposed to any significant risks with respect to these accounts.

 Restricted
Cash

 Restricted
cash consists primarily of deposits of cash collateral held in accordance with the terms of our corporate credit cards (see Note
13. Cash Balances and Statement of Cash Flows Reconciliation). Long-term restricted cash was recorded in other assets in the
consolidated balance sheet.

 Investment,
Related Party

 The
Company accounts for its investment, related party in accordance with ASC 321, Investments — Equity Securities ("ASC
321"). Equity securities, which are comprised of investments in common stock with a readily determinable fair value, are initially
recorded at cost, plus transaction costs, and subsequently measured at fair value, based on quoted market prices, with the gains and
losses reported in the Company's consolidated statement of operations. As the fair value of the Company's investments is
reported in a foreign currency, the change in fair value attributable to changes in foreign exchange rates is included in other income,
net in the consolidated statement of operations.

 Accounts
Receivable

 Accounts
receivable are reported at their net realizable value. Any value adjustments are booked directly against the relevant receivable. We
have standard payment terms that generally require payment within approximately 30 to 90 days. Management performs ongoing credit evaluations
of its customers. The allowance for estimated credit losses represents management's best
estimate of probable credit losses. The allowance is based upon a number of factors, including the length of time accounts receivable
are past due, the Company's previous loss history, the specific customer's ability to pay its obligation and any other forward-looking
data regarding customers' ability to pay which may be available. In addition, management considered other qualitative factors, particularly
in relation to the greater actinic keratosis and dermatological market. Receivables are written off against the allowance when management
believes that the amount receivable will not be recovered.
Provisions for the allowance for doubtful accounts are recorded in selling, general and administrative expenses in the accompanying statements
of operations.

 Concentration
of Credit Risk and Off-Balance Sheet Risk

instruments that potentially expose the Company to concentrations of credit risk consist primarily of cash, cash equivalents, accounts
receivable and other receivables, related party. The Company maintains all of its cash and cash equivalents at a single accredited financial
institution, in amounts that exceed federally insured limits. The Company has no significant off-balance sheet risk such as foreign exchange
contracts, option contracts, or other foreign hedging arrangements.

 Concentrations
of credit risk with respect to receivables, which are typically unsecured, are somewhat mitigated due to the wide variety of customers
using our products. We monitor the financial performance and creditworthiness of our customers so that we can properly assess and respond
to changes in their credit profile. We continue to monitor these conditions and assess their possible impact on our business.

 The Company has a receivable due from Biofrontera AG for its 50% share of a legal settlement and related costs
for which they are jointly and severally liable for the total settlement amount. The Company has a contractual right to repayment of
its share of the settlement payment from Biofrontera AG under the Settlement Allocation Agreement entered into on December 9, 2021, which
provided that the settlement payments would first be made by the Company and then reimbursed by Biofrontera AG for its share. Although
this receivable has credit risk, it is mitigated by the Settlement Allocation Agreement as amended on March 31, 2022, which
provides certain remedies to the Company, if Biofrontera AG fails to make timely reimbursements, which the Company may implement in its
sole discretion, including the ability to charge interest at a rate of 6.0% per annum for each day that any reimbursement is past due
and the ability to offset any overdue reimbursement amounts against payments owed to Biofrontera AG by the Company (including amounts
owed under the Company's license and supply agreement for Ameluz). The Addendum to Amended and Restated License
and Supply Agreement, effective December 5, 2023, and as amended on January 29, 2024, allows for the Company to set off the amounts due to Biofrontera
AG and Ameluz Licensor, with the amounts due from Biofrontera AG and Ameluz Licensor. As such, in accordance with ASC 210-20-45-1
the other receivables, related party have been offset against accounts payable, related parties for the year ended December 31, 2023.

 We
are dependent on two licensors, Biofrontera Pharma and Ferrer, to supply drug products, including all underlying
components, for our commercial efforts. These efforts could be adversely affected by a significant interruption in the supply of our
finished products. These licensors may have risks associated with limited source suppliers and contract manufacturers. If our licensors
fail to maintain relationships with these suppliers and manufacturers or they are unable to produce product, our business could be materially
harmed.

 Inventories

 Finished
goods consist of pharmaceutical products purchased for resale and are stated at the lower of cost or net realizable value. Cost is calculated
by applying the first-in-first-out method (FIFO). Inventory costs include the purchase price of finished goods and freight-in costs.
The Company regularly reviews inventory quantities on hand and writes down to its net realizable value any inventory that it believes
to be impaired. Management considers forecast demand in relation to the inventory on hand, competitiveness of product offerings, market
conditions and product life cycles when determining excess and obsolescence and net realizable value adjustments. Once inventory is written
down and a new cost basis is established, it is not written back up if demand increases.

 F- 9

 Property
and Equipment

 Property
and equipment are recorded at cost less accumulated depreciation. Depreciation is generally applied straight-line over the estimated
useful life of assets. Leasehold improvements are amortized over the shorter of the asset's estimated useful life or the lease
term. The estimated useful lives of property and equipment are:

of Estimated Useful Lives of Property, Plant and Equipment

 Estimated Useful Life in Years

 Computer equipment

 3 years

 Computer software

 3 years

 Furniture and fixtures

 3 - 5 years

 Leasehold improvements

 Shorter of estimated useful lives or the term of the lease

 Machinery & equipment

 3 - 4 years

 The
cost and accumulated depreciation of assets retired or sold are removed from the respective asset category, and any gain or loss is recognized
in our statements of operations.

 Intangible
Assets

 Intangible
assets with finite lives are amortized over their estimated useful lives. Intangible assets with indefinite lives are not amortized.

 Leases

 In
February 2016, the Financial Accounting Standards Board (" FASB") issued ASU
No. 2016-02, Leases (Topic 842), to enhance the transparency and comparability of financial reporting related to leasing arrangements.
The Company adopted the standard effective January 1, 2022. The adoption of the new lease standard resulted in the addition of an operating lease
right-of-use asset and an operating lease liability in the amount of $ 1.8 million to the consolidated balance sheet as of January 1,
2022.

 At
the inception of an arrangement, the Company determines whether the arrangement is or contains a lease based on the unique facts and
circumstances present. Operating lease liabilities and their corresponding right-of-use assets are recorded based on the present
value of lease payments over the expected lease term. The interest rate implicit in lease contracts is typically not readily
determinable. As such, the Company utilizes its incremental borrowing rate ("IBR"), which is the rate incurred to borrow
on a collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment. The IBR for
the twelve months ended December 31, 2023 was 9.5%. Given the absence of an outstanding debt agreement for the twelve months ended December 31, 2022, a synthetic credit rating
analysis was used in estimating the Company's IBR. Based
on a synthetic credit rating of Ba3 and a term of 3.33 to six years, the IBR was determined to be 6% for lease liabilities at
inception and 8.5% for 2022 lease liabilities. No adjustments to the right-of-use asset were required for items such as
initial direct costs paid or incentives received.

 The
Company has elected to adopt the practical expedient provided in ASC 842 and not reassess leases that existed prior to the commencement
date, 1). Whether any expired or existing contracts are or contain leases, 2). Lease classification, or 3). Initial indirect costs for
any existing leases. The Company has elected to combine lease and non-lease components as a single component for certain asset classes,
when applicable. Operating leases are recognized on the balance sheet as operating lease right-of-use assets, operating lease liabilities
current and operating lease liabilities non-current. The Company also elected to utilize the short-term lease recognition exemption and
for those leases that qualified, the Company did not recognize right-of-use assets or lease liabilities. These leases are recognized
on a straight-line basis over the expected term.

 Impairment
of Long-Lived Assets

 The
Company considers whether events or changes in facts and circumstances, both internally and externally, may indicate that an impairment
of long-lived assets held for use, including right-of-use assets, are present. To the extent indicators of impairment exist, the determination
of recoverability is based on an estimate of undiscounted future cash flows resulting from the use of the asset and its eventual disposition.
In the event that such cash flows are not expected to be sufficient to recover the carrying amount of the asset, the assets are written
down to their estimated fair values and the loss is recognized in the statements of operations. Refer to Note 12. Intangible Asset,
Net.

Consideration

consideration in a business combination is included as part of the acquisition cost and is recognized at fair value as of the acquisition
date. For contingent consideration, management is responsible for determining the appropriate valuation model and estimated fair value,
and in doing so, considers a number of factors, including information provided by an outside valuation advisor. Contingent consideration
liabilities are reported at their estimated fair values based on probability-adjusted present values of the consideration expected to
be paid, using significant inputs and estimates. Key assumptions used in these estimates include probability assessments with respect
to the likelihood of achieving certain milestones and discount rates consistent with the level of risk of achievement. The fair value
of contingent consideration liabilities is remeasured each reporting period, with changes in the fair value included in current operations.
The remeasured liability amount could be significantly different from the amount at the acquisition date, resulting in material charges
or credits in subsequent reporting periods.

 F- 10

 Contingencies

 Loss
contingency provisions are recorded if the potential loss from any claim, asserted or unasserted, or legal proceeding is considered probable,
and the amount can be reasonably estimated or a range of loss can be determined. These accruals represent management's best estimate
of probable loss. Disclosure is also provided when it is reasonably possible that a loss will be incurred or when it is reasonably possible
that the amount of a loss will exceed the recorded provision. On a quarterly basis, we review the status of each significant matter and
assess its potential financial exposure. Significant judgment is required in both the determination of probability and as to whether
an exposure is reasonably estimable. Because of uncertainties related to these matters, accruals are based only on the best information
available at the time. As additional information becomes available, we reassess the potential liability related to pending claims and
litigation and may change our estimates. Legal costs associated with legal proceedings are expensed when incurred.

 Derivative
Instruments

 The
Company accounts for common stock warrants as either equity-classified or liability-classified instruments based on an assessment of
the specific terms of the warrants and applicable authoritative guidance in FASB Accounting Standards Codification ("ASC")
480, Distinguishing Liabilities from Equity ("ASC 480") and Derivatives and Hedging ("ASC 815"). Warrants
classified as equity are recorded at fair value as of the date of issuance on the Company's consolidated balance sheets and no
further adjustments to their valuation are made. Warrants classified as derivative liabilities that require separate accounting as liabilities
are recorded on the Company's consolidated balance sheets at their fair value on the date of issuance and are revalued on each
subsequent balance sheet date until such instruments are exercised or expire, with any changes in the fair value between reporting periods
recorded as other income or expense. Management estimates the fair value of these liabilities using the Black-Scholes-Merton model and assumptions that are based on the individual characteristics of the warrants or instruments on the valuation date, as well
as assumptions for future financings, expected volatility, expected life, yield, and risk-free interest rate.

 At
their issuance date on November 2, 2023, the Pre-Funded Warrants ("2023 Pre-Funded Warrants") (see Note 18.
Stockholders' Equity) were accounted for as equity as these instruments met all of the requirements for equity classification
under ASC 815-40.

 Fair
Value Measurements

 The
Company is required to disclose information on all assets and liabilities reported at fair value that enables an assessment of the inputs
used in determining the reported fair values. ASC 820, Fair Value Measurements and Disclosures, or ASC 820, establishes a hierarchy
of inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring
that the observable inputs be used when available. Observable inputs are those that market participants would use in pricing the asset
or liability based on market data obtained from sources independent of the Company. Unobservable inputs reflect the Company's assumptions
about the inputs that market participants would use in pricing the asset or liability and are developed based on the best information
available in the circumstances. The three levels of the fair value hierarchy are described below:

 Level
1 – Quoted prices in active markets for identical assets or liabilities.

 Level
2 – Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or
indirectly.

 Level
3 – Unobservable inputs using estimates or assumptions developed by the Company, which reflect those that a market participant
would use in pricing the asset or liability.

 To
the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair
value requires more judgment. Accordingly, the degree of judgment exercised by the Company in determining fair value is greatest for
instruments categorized in Level 3. A financial instrument's level within the fair value hierarchy is based on the lowest level
of any input that is significant to the fair value measurement.

 Fair
Value of Financial Instruments

 The
carrying amounts reflected in the consolidated balance sheets for, accounts receivable, other receivables,
accounts payable and start-up cost financing included in acquisition contract liabilities approximate their fair values, due to their
short-term nature.

 F- 11

 Revenue
Recognition

 The
Company accounts for revenue in accordance with ASC Topic 606, Revenue from Contracts with Customers. Under ASC Topic 606, revenue
is recognized when a customer obtains control of promised goods or services in an amount that reflects the consideration to which the
Company expects to be entitled in exchange for those goods or services. We recognize revenue when the customer obtains control of our
product, which occurs at a point in time, typically upon delivery to the customer.

 To
determine revenue recognition, we perform the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance
obligations in the contract; (iii) determine the transaction price, including variable consideration, if any; (iv) allocate the transaction
price to the performance obligations in the contract; and (v) recognize revenue when (or as) we satisfy a performance obligation. We
only apply the five-step model to contracts when collectability of the consideration to which we are entitled in exchange for the goods
or services we transfer to the customer is determined to be probable.

 The
Company realizes its revenue primarily through the sale of its Ameluz product, which are made directly to physicians,
hospitals or other qualified healthcare providers. Sales are recognized, net of sales deductions, when ownership and control are transferred
to the customer, which is generally upon delivery. Sales deductions include expected trade discounts and allowances, product returns,
and government rebates. These discounts and allowances are estimated at the time of sale based on the amounts incurred or expected to
be received for the related sales.

 Xepi
 is sold directly to specialty pharmacies. Sales are recognized net of sales deductions when ownership and control are transferred
to the customer, which is generally upon delivery. Sales deductions include expected returns, discounts and incentives such as payments
made under patient assistance programs. These rebates are estimated at the time of sale based on the amounts incurred or expected to
be received for the related sales.

 The
payment terms for sales of our pharmaceutical products are generally short-term payment terms with the possibility of volume-based discounts,
co-pay assistance discounts, or other rebates.

 BF
RhodoLED is also sold directly to physicians, hospitals or other qualified healthcare providers through (i) direct sales,
(ii) rental agreements, or (iii) an evaluation period up to six-month for a fee, after which a customer can decide to purchase or return
the lamp. For direct sales, revenue is recognized only after complete installation has taken place. As directed by the instruction manual,
the lamp may only be used by the customer once it has been professionally installed. A final decision to purchase the lamps that are
within the evaluation period does not need to be made until the end of the evaluation period. Lamps that are not returned at the end
of the evaluation period are converted into sales in accordance with the contract terms. The Company generates immaterial revenues from
the monthly fees during the evaluation or rental period and from the sale of lamps at the end of the evaluation period.

 Variable
Consideration

 Revenues
from product sales are recorded at the net sales price (transaction price), which includes estimates of variable consideration for which
sales reserves are established and which result from discounts, rebates and other incentives that are offered within contracts between
the Company and its customers. Components of variable consideration include trade discounts and allowances, product returns, government
rebates, and other incentives such as patient co-pay assistance. Variable consideration is recorded on the balance sheet as either a
reduction of accounts receivable, if expected to be claimed by a customer, or as a current liability, if expected to be payable to a
third party other than a customer. Where appropriate, these estimates take into consideration relevant factors such as the Company's
historical experience, current contractual and statutory requirements, specific known market events and trends, industry data and forecasted
customer buying and payment patterns. These reserves reflect the Company's best estimates of the amount of consideration to which
it is entitled based on the terms of the contract. Actual amounts of consideration ultimately received may differ from the Company's
estimates. If actual results in the future vary from the Company's estimates, the Company will adjust these estimates, and record
any necessary adjustments in the period such variances become known.

 F- 12

 Trade
Discounts and Allowances – The Company provides customers with trade discounts, rebates, allowances and/or other incentives.
The Company records estimates for these items as a reduction of revenue in the same period the revenue is recognized.

 Government
and Payor Rebates – The Company contracts with, or is subject to arrangements with, certain third-party payors, including pharmacy
benefit managers and government agencies, for the payment of rebates with respect to utilization of its commercial products. The Company
is also subject to discount and rebate obligations under state and federal Medicaid programs and Medicare. The Company records estimates
for these discounts and rebates as a reduction of revenue in the same period the revenue is recognized.

 Other
Incentives – The Company has historically maintained a co-pay assistance program, which is intended to provide financial assistance
to qualified patients with the cost of purchasing Xepi. The Company estimates and records accruals for these incentives
as a reduction of revenue in the period the revenue is recognized. The Company estimates amounts for co-pay assistance based upon the
number of claims and the cost per claim that the Company expects to receive associated with products sold to customers but remaining
in the distribution channel at the end of each reporting period. During 2023, due to the continued delays with the supply of Xepi,
the co-pay assistance program was discontinued.

 Royalties

 For
arrangements that include sales-based royalties, the Company recognizes royalty expense at the later of (i) when the related sales occur,
or (ii) when the performance obligation to which some or all of the royalty has been allocated has been satisfied (or partially satisfied).

 Product Warranty

 The
Company generally provides a 36-month warranty for sales of BF-RhodoLED for which estimated contractual warranty obligations
are recorded as an expense at the time of installation. Customers do not have the option to purchase the warranty separately and the
warranty does not provide the customer with a service beyond the assurance that BF-RhodoLED complies with agreed-upon
specifications. Therefore, the warranty is not considered to be a performance obligation. The lamps are subject to regulatory and quality
standards. Future warranty costs are estimated based on historical product performance rates and related costs to repair given products.
The accounting estimate related to product warranty expense involves judgment in determining future estimated warranty costs. Should
actual performance rates or repair costs differ from estimates, revisions to the estimated warranty liability would be required. Warranty
expenses were $ 0.1 million and negligible for the years ended December 31, 2023 and 2022, respectively, and are recognized as selling, general and administrative
expenses.

 Contract
Costs

 Incremental
costs of obtaining a contract with a customer may be recorded as an asset if the costs are expected to be recovered. As a practical expedient,
we recognize the incremental costs of obtaining a contract as an expense when incurred if the amortization period of the asset that we
otherwise would have recognized is one year or less. Sales commissions earned by the Company's sales force are considered incremental
costs of obtaining a contract. To date, we have expensed sales commissions as these costs are generally attributed to periods shorter
than one year. Sales commissions are included in selling, general and administrative expenses.

 Cost
of Revenues

 Cost
of revenues is comprised of purchase costs of our products, third party logistics and distribution costs including packaging, freight,
transportation, shipping and handling costs, and inventory adjustment due to expiring products, as well as sales-based royalties. Logistics
and distribution costs totaled $ 0.5 million for each of the years ended December 31, 2023 and 2022, respectively.

 F- 13

 Share-Based
Compensation

 The
Company measures and recognizes share-based compensation expense for equity awards based on fair value at the grant date. The Company
uses the Black-Scholes-Merton option pricing model to calculate the fair value of its stock option grants. The compensation
cost for restricted stock awards is based on the closing price of the Company's common stock on the date of grant. Share-based
compensation expense recognized in the statements of operations is based on the period the services are performed and recognized as compensation
expense on a straight-line basis over the requisite service period. The Company accounts for forfeitures as they occur.

 The
Black-Scholes-Merton option pricing model requires the input of subjective assumptions, including the risk-free interest rate, the expected volatility
of the value of the Company's common stock, and the expected term of the option. These estimates involve inherent uncertainties
and the application of management's judgment. If factors change and different assumptions are used, the share-based compensation
expense could be materially different in the future. These assumptions are estimated as follows:

 Risk-Free
Interest Rate. The risk-free rate is based on the interest rate payable on United States Treasury securities in effect at the time of
grant for a period that is commensurate with the assumed expected term.

 Expected
Volatility. The Company based the volatility assumption on a weighted average of the peer group re-levered equity volatility, the warrant
implied volatility and the historical equity volatility of the Company. The peer group was developed based on companies in the biopharma
industry whose shares are publicly traded. Due to our limited historical data and the long-term nature of the awards, the peer group
volatility was more heavily weighted.

 Expected
Term. The expected term represents the period of time that options are expected to be outstanding. Due to the lack of historical exercise
data and given the plain vanilla nature of the options granted by the Company, the expected term is determined using the "simplified"
method, as prescribed in SEC Staff Accounting Bulletin ("SAB") No. 107 ("SAB 107"), whereby the expected life
equals the average of the vesting term and the original contractual term.

 Dividend
Yield. The dividend yield is 0 % as the Company has never declared or paid, and for the foreseeable future does not expect to declare
or pay, a dividend on its common stock.

 Foreign
Currency Transactions

 Transactions
realized in currencies other than USD are reported using the exchange rate on the date of the transaction.

General and Administrative Expense

general and administrative expenses are primarily comprised of compensation and benefits associated with our sales force, commercial
support personnel, personnel in executive and other administrative functions, as well as medical affairs professionals. Other selling,
general and administrative expenses include marketing, advertising, and other commercial costs to support the commercial operation of
our product and professional fees for legal, consulting, and other general and administrative costs.

 Advertising
costs are expensed as incurred. For the years ended December 31, 2023 and 2022, advertising costs totaled $ 0.2 million and $ 0.1 million,
respectively.

 R&D Costs

 R&D costs are expensed as incurred. R&D costs include external costs of outside vendors engaged to conduct
R&D activities, and other operational costs related to the Company's R&D activities.

 Income
Taxes

 The
Company accounts for income taxes using the asset and liability method in accordance with ASC 740, Income Taxes, which requires
the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in
the financial statements or in the Company's tax returns. Deferred taxes are determined based on the difference between the financial
reporting and tax basis of assets and liabilities using enacted tax rates in effect in the years in which the differences are expected
to reverse. Changes in deferred tax assets and liabilities are recorded in the provision for income taxes. The Company assesses the likelihood
that its deferred tax assets will be recovered from future taxable income and, to the extent it believes, based upon the weight of available
evidence, that it is more likely than not that all or a portion of deferred tax assets will not be realized, a valuation allowance is
established through a charge to income tax expense. Potential for recovery of deferred tax assets is evaluated by estimating the future
taxable profits expected and considering prudent and feasible tax planning strategies.

 The
Company accounts for uncertainty in income taxes recognized in the financial statements by applying a two-step process to determine the
amount of tax benefit to be recognized. First, the tax position must be evaluated to determine the likelihood that it will be sustained
upon external examination by the taxing authorities. If the tax position is deemed more likely-than-not to be sustained, the tax position
is then assessed to determine the amount of benefit to recognize in the financial statements. The amount of the benefit that may be recognized
is the largest amount that has a greater than 50% likelihood of being realized upon ultimate settlement. The provision for income taxes
includes the effects of any resulting tax reserves, or unrecognized tax benefits, that are considered appropriate as well as the related
net interest and penalties.

 F- 14

 Net
Loss per Share

 Basic
and diluted net loss per common share is computed by dividing net loss attributable to common stockholders by the weighted average number
of common shares outstanding. When the effects are not anti-dilutive, diluted earnings per share is computed by dividing the Company's
net income attributable to common stockholders by the weighted average number of common shares outstanding and the impact of all dilutive
potential common shares outstanding during the period, including stock options, restricted stock units, and warrants, using the treasury
stock method.

 Recently
Issued Accounting Pronouncements

 In
September 2016, the FASB issued Accounting Standards Update ("ASU ") 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial
Instruments, which requires entities to record expected credit losses for certain financial instruments, including trade receivables,
as an allowance that reflects the entity's current estimate of credit losses expected to be incurred. The new standard was effective
for us on January 1, 2023, and did not have a material effect on our consolidated financial statements.

 In November 2023, FASB issued ASU 2023-07, Segment
Reporting (Topic 280), Improvements to Reportable Segment Disclosures to improve reportable segment disclosure requirements
through enhanced disclosures about significant segment expenses on an interim and annual basis. All disclosure requirements of ASU 2023-07
are required for entities with a single reportable segment. ASU 2023-07 is effective for fiscal years beginning after December 15, 2023,
and interim periods for the fiscal years beginning after December 15, 2024, and should be applied on a retrospective basis to all periods
presented. Early adoption is permitted. We are currently evaluating the effect of adopting the ASU on our disclosures.

 In December 2023, the FASB issued ASU 2023-09, Income
Taxes (Topic 740) – Improvements to Income Tax Disclosures. The ASU requires that an entity disclose specific categories
in the effective tax rate reconciliation as well as provide additional information for reconciling items that meet a quantitative threshold.
Further, the ASU requires certain disclosures of state versus federal income tax expense and taxes paid. The amendments in this ASU are
required to be adopted for fiscal years beginning after December 15, 2024. Early adoption is permitted and the amendments should be applied
on a prospective basis. We are currently evaluating the effect of adopting the ASU on our disclosures.

 3.
 Acquisition Contract Liabilities

 On
March 25, 2019, we entered into an agreement (as amended, the "Share Purchase Agreement" or "SPA")
with Maruho Co, Ltd. ("Maruho") to acquire 100 %
of the shares of Cutanea Life Sciences, Inc. ("Cutanea"). As of the date of the acquisition, Maruho owned approximately 29.9 %
of Biofrontera AG through its wholly-owned subsidiary, Maruho Deutschland GmbH. Biofrontera AG is our former parent, and currently a
significant shareholder.

to the Share Purchase Agreement, Maruho agreed to provide $ 7.3 million in start-up cost financing for Cutanea's redesigned business
activities ("start-up costs"). These start-up costs were to be paid back to Maruho by the end of 2023 in accordance
with contractual obligations related to an earn-out arrangement. In addition, as part of the earn-out arrangement with Maruho, the product
profit amount from the sale of Cutanea products as defined in the share purchase agreement was be shared equally between Maruho and Biofrontera
until 2030 ("contingent consideration").

 The
contingent consideration was recorded at acquisition-date fair value using a Monte Carlo simulation with an assumed discount rate of
 6.0 % over the applicable term. The contingent consideration is recorded within acquisition contract liabilities, net. The amount of contingent
consideration that could be payable is not subject to a cap under the agreement. The Company re-measured contingent consideration and
re-assessed the underlying assumptions and estimates at each reporting period utilizing a scenario-based method.

 On
December 29, 2023, we entered into a Confidential Settlement Agreement and Mutual Release (the "Release"), with Maruho, and
a Share Transfer Agreement (together with the Release, the "Settlement Agreement").
The Settlement Agreement resolves the arbitration proceeding initiated by the Company against Maruho in the
International Chamber of Commerce (the "Arbitration") in which the Company alleged certain claims against Maruho concerning
the Share Purchase Agreement. In the Arbitration, the Company sought, in part, a declaration that it is not obligated to repay $ 7.3 million
of "start-up costs" to Maruho.

 The
Settlement Agreement contains a mutual release whereby each of the Company and Maruho agreed to release and discharge the other party
from any and all claims, actions, causes of action, suits, debts, dues, sums of money, accounts, reckonings, bonds, bills, specialties,
covenants, contracts, controversies, agreements, promises, variances, trespasses, damages, judgments, extents, executions, claims, and
demands whatsoever, in law, admiralty, equity, arbitration or otherwise, which against the other arising from or in connection with or
in any manner relating to the Share Purchase Agreement, including but not limited to any claims that were or could have been asserted
in the Arbitration.

 Under
the Settlement Agreement, the obligations of the Company to repay the $ 7.3
million of start-up costs to Maruho, and to make the contingent consideration payments, were released. In exchange the Company agreed to transfer to Maruho 5,451,016
shares of Biofrontera AG. The exchange of the shares of Biofrontera AG for the release of the liabilities mentioned above, both of
which were recorded at their respective fair values at the exchange date, resulted in a gain.

 The
following table provides a summary of the transaction under the settlement Agreement:

 Schedule of Acquisition Contract Liabilities

 Release of contingent consideration

 $
 ( 2,500
)

 Release of start-up cost financing

 ( 7,300
)

 Transfer of Investment in Biofrontera AG

 $
 2,415

 Gain on settlement

 $
 ( 7,385
)

 F- 15

 4.
 Fair Value Measurements

 The
following table presents information about the Company's assets that are measured at fair value on a recurring basis and indicates
the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value:

 Schedule of Fair Value Hierarchy Valuation Inputs

 Level

 2023

 2022

 Assets:

 Investment, related party

 $

 $
 10,548

 Liabilities:

 Contingent Consideration

 $
 -

 $
 2,400

 Warrant liability – 2023 Purchase Warrants

 $
 3,470

 $
 -

 Warrant liability – 2022 Purchase Warrants

 $

 $
 1,129

 Warrant liability – Purchase Warrants

 $

 $
 1,129

 Warrant liability – 2022 Inducement Warrants

 $

 $
 1,714

 Warrant liability

 $

 $
 1,714

 Investment,
related party

 A s
of December 31, 2023 and 2022, the Company has an investment in 177,465 and 6,466,946, respectively, of common shares of Biofrontera
AG, a company traded on the Frankfurt Stock Exchange and a significant shareholder of Biofrontera. The fair value of this investment
was determined with Level 1 inputs through references to quoted market prices. See Note 6. Investment Related Party and
 Note 17. Related Party Transactions.

Consideration

consideration, which relates to the estimated profits from the sale of Cutanea products to be shared equally with Maruho under the Share
Purchase Agreement, is reflected at fair value within acquisition contract liabilities, net on the consolidated balance sheets. The fair
value is based on significant inputs not observable in the market, which represent a Level 3 measurement within the fair value hierarchy.
The valuation of the contingent consideration utilizes a scenario-based method under which a set of payoffs are calculated using the
term of the earnout, projections, and an appropriate metric risk premium. These payoffs are then discounted back from the payment date
to the valuation date using a payment discount rate. Finally, the discounted payments are summed together to arrive at the value of the
contingent consideration. The scenario-based method incorporates the following key assumptions: (i) the forecasted product profit amounts,
(ii) the remaining contractual term, (iii) a metric risk premium, and (iv) a payment discount rate. The Company re-measures contingent
consideration and re-assesses the underlying assumptions and estimates at each reporting period.

 F- 16

 Under
the Settlement Agreement (see Note 3), the obligations of the Company to make the profit-sharing payments related
to the products acquired by the Company pursuant to the Share Purchase Agreement were released.

 The
following table provides a roll forward of the fair value of the contingent consideration:

 Schedule of Fair Value of Contingent Consideration

 Balance at December 31, 2021

 $
 6,200

 ( 3,800
)

 Balance at December 31, 2022

 $
 2,400

 Release of contingent consideration

 ( 2,500
)

 Balance at December 31, 2023

 $
 -

 The
increase/(decrease) in fair value of the contingent consideration in the amount of $ 0.1 million and $ ( 3.8) million during the years ended
December 31, 2023 and 2022 was recorded in operating expenses in the statements of operations.

Liabilities

 The
warrant liabilities are comprised of (i) outstanding warrants to purchase 170,950 shares of Common Stock originally issued in a private placement on May 16, 2022, as amended on
November 2, 2023 to extend the expiration date until November 2, 2028 and revise the exercise price to $ 3.55 per share (the "2022
Purchase Warrants") (ii) warrants to purchase 214,286 shares of Common Stock issued
on July 26, 2022, as amended on November 2, 2023 to extend the expiration date until November 2, 2028 and revise the exercise price to
$ 3.55 per share (the "2022 Inducement Warrants") and (iii) warrants to purchase 1,807,500 shares of Common Stock issued on
November 2, 2023 expiring five years following the date of issuance and with an exercise price of $ 3.55 per share ( the "2023 Purchase
Warrants"). See Note 18. Stockholders' Equity - Registered Public Offering and Warrant Amendment for additional
details.

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

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

 The
fair value at issuance for the Level 3 warrants was estimated using a Black-Scholes pricing model based on the following assumptions
at May 16, 2022 for the 2022 Purchase Warrants, July 26, 2022 for the 2022 Inducement Warrants, and November 2, 2023 for the 2023
Purchase Warrants:

 Schedule of Fair Value Warrant by Using Black-Scholes Pricing Model Assumptions

 2023 Purchase

 2022
 Purchase

 2022
 Inducement

 $
 4.90

 $
 52.40

 $
 32.80

 5.00

 5.50

 4.34

 %

 65.0
 %

 70.0
 %

 4.6
 %

 2.83
 %

 2.84
 %

 0.0
 %

 0.0
 %

 0.0
 %

 The
fair value for the Level 3 warrants at December 31, 2023 was estimated using Black-Scholes pricing model based on the following assumptions:

 2023 Purchase

 2022 Purchase

 2022 Inducement

 $
 2.77

 4.84

 %

 3.82
 %

 0.0
 %

 The
fair value for the Level 3 warrants at December 31, 2022 was estimated using Black-Scholes pricing model based on the following assumptions:

 2022
 Purchase

 2022
 Inducement

 $
 18.40

 $
 18.40

 4.88

 3.92

 %

 %

 3.96
 %

 4.07
 %

 0.0
 %

 0.0
 %

 F- 17

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

of Changes in Fair Value Warrant Liabilities

 2023

 2022

 Fair value at beginning of year

 $
 2,843

 $
 12,854

 Issuance of new warrants

 6,778

 13,217

 Exercise of warrants

 -

 ( 6,840
)

 Change in fair value of warrant liability

 ( 6,456
)

 ( 19,017
)

 Warrant inducement expense (See Note 18. Stockholders' Equity -
Exercise of 2021 Purchase Warrant and Issuance of 2022 Inducement Warrant)

 1,045

 2,629

 Fair value at end of year

 $
 4,210

 2,843

 5.
 Revenue

 We
generate revenue primarily through the sales of our licensed products Ameluz, BF-RhodoLED lamps and Xepi.
Revenue from the sales of our BF-RhodoLED lamp and Xepi are relatively insignificant compared with the
revenues generated through our sales of Ameluz.

 Related
party revenue relates to an agreement with Biofrontera Bioscience for BF-RhodoLED leasing and installation service. Refer
to Note 17. Related Party Transactions.

 An
analysis of the changes in product revenue allowances and reserves is summarized as follows:

of Revenue Allowance and Accrual Activities

 Co-pay

 Prompt

 Government

 assistance

 pay

 and payor

 (in thousands):

 Returns

 program

 discounts

 rebates

 Total

 Balance at December 31, 2021

 $

 $

 $

 $

 $

 Provision related to current period sales

 Credit or payments made during the period

 ( 5
)

 ( 666
)

 ( 62
)

 ( 244
)

 ( 977
)

 Balance at December 31, 2022

 $

 $

 $

 $

 $

 Beginning balance

 $

 $

 $

 $

 $

 Provision related to current period sales

 Credit or payments made during the period

 -

 ( 165
)

 ( 2
)

 ( 310
)

 ( 477
)

 Balance at December 31, 2023

 $

 -

 Ending balance

 $

 -

 6.
 Investment, Related Party

 As
of December 31, 2023 and December 31, 2022, our investment in equity securities consisted solely of 177,465
and 6,466,946,
respectively of common shares of Biofrontera AG, a significant shareholder. (See Note 17. Related Party Transactions). Equity
securities gains and losses include unrealized gains and losses from changes in fair values during the period on equity securities
we still own, as well as gains and losses on securities we sold or transferred during
the period. As reflected in the consolidated statements of cash flows, we received proceeds from sales of equity securities of
approximately $ 0.6
million during the twelve months ended December 31, 2023. There were no
proceeds from sales of equity securities during the twelve months ended December 31, 2022.

of Related Party Investments in Equity Securities

 (in thousands):

 2023

 2022

 Net losses recognized during the period on equity securities

 $
 ( 7,421
)

 $
 ( 1,747
)

 Less: Net realized losses on equity securities sold or transferred

 7,219

 -

 Unrealized losses recognized during the reporting period on equity securities still held at the reporting date

 ( 202
)

 ( 1,747
)

 7.
 Accounts Receivable, net

 Accounts
receivable are mainly attributable to the sale of Ameluz. products. It is expected that all trade receivables will
be settled within twelve months of the balance sheet date. Trade accounts receivable are stated at their net realizable value. The
allowance for credit losses reflects our best estimate of expected credit losses of the receivables determined on the basis of
historical experience and current information. In developing the estimate for expected credit losses, trade accounts receivable are
segmented into pools of assets depending primarily on delinquency status, and fixed reserve percentages are established for each
pool of trade accounts receivable.

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

 The
allowance for doubtful accounts was $ 0.2 million and $ 0.1 million as of December 31, 2023 and 2022, respectively.

 F- 18

 8.
 Other Receivables, Related Party

 As
of December 31, 2023 and 2022 the Company had a receivable, related party of $ 2.8 million
(presented net in accounts payable, related party) and $ 6.5 million ($ 3.7 million
short term and $ 2.8 million long term), respectively, primarily due from Biofrontera AG for its 50 %
share of the balance of a legal settlement (See Note 23. Commitments and Contingencies – Legal proceedings) for which
both parties are jointly and severally liable. The Company has a contractual right to repayment of its share of the settlement
payments, plus interest and other miscellaneous settlement costs, from Biofrontera AG under the Settlement Allocation Agreement
("Allocation Agreement") entered into on December 9, 2021 and as amended on March 31, 2022, which provides that the
settlement payments would first be made by the Company and then reimbursed by Biofrontera AG for its share. The Allocation
Agreement, as amended, provides certain remedies to the Company if Biofrontera AG fails to make timely reimbursements, which the
Company may implement in its sole discretion, including the ability to charge interest at a rate of 6.0 %
per annum for each day that any reimbursement is past due and the ability to offset any overdue reimbursement amounts against
payments owed to Biofrontera AG by the Company (including amounts owed under the Company's license and supply agreement for
Ameluz). See Note 17. Related Party.

 The Addendum to Amended
and Restated License and Supply Agreement, effective December 5, 2023, and as amended on January 29, 2024, allows for us to set off
the amounts due to Biofrontera AG and the Ameluz Licensor, with the amounts due from Biofrontera AG, and the Ameluz Licensor. As
such, in accordance with ASC 210-20-45-1 the other receivables, related party have been offset against accounts payable, related
parties for the year ended December 31, 2023. No reserve
for the receivable was deemed necessary as of December 31, 2023 or December 31, 2022.

 9.
 Inventories

 Inventories
are comprised of Ameluz, Xepi and the BF-RhodoLED finished products.

 The
provision related to BF-RhodoLED devices was negligible and $ 0.1 million
for the years ended December 31, 2023 and 2022, respectively. The provision for Xepi inventory obsolescence was
$ 0.1 million
and negligible for the years ended December 31, 2022 and 2023, respectively. There was no provision
relating to Ameluz at December 31, 2022. As of December 31, 2023, in connection with the voluntary recall by the
Ameluz Licensor, we recorded an inventory write-off of $ 5.2 million
with a corresponding asset for the anticipated replacement from the licensor to other assets, related party, as the recalled lots of
Ameluz products will be replaced by the Ameluz Licensor at no additional cost in accordance with the Ameluz LSA. See Note 25.
Subsequent Events, Voluntary Product Recall of Limited Lots of Ameluz for further discussion of the voluntary
recall.

 10.
 Prepaid Expenses and Other Current Assets

 Prepaid
expenses and other current assets consist of the following:

 Schedule of Prepaid Expenses and Other Current Assets

 2023

 2022

 $

 Prepaid expenses

 $

 $

 Security deposits

 -

 Other

 Total

 $

 $

 11.
 Property and Equipment, Net

 Property
and equipment, net consists of the following:

 Schedule of Property and Equipment

 2023

 2022

 Computer equipment

 $

 $

 Computer software

 Furniture & fixtures

 Leasehold improvement

 Machinery & equipment

 Property and equipment, gross

 Less: Accumulated depreciation

 ( 557
)

 ( 507
)

 Property and equipment, net

 $

 $

 Depreciation
expense was $ 0.1 million for each of the years ended December 31, 2023 and 2022, respectively, which was included in selling, general
and administrative expense on the consolidated statements of operations.

 F- 19

 12.
 Intangible Asset, Net

 Intangible
asset, net consists of the following:

 Schedule of Intangible Asset Net

 2023

 2022

 Capitalized software costs

 $

 $
 -

 Xepi license

 4,600

 $
 4,600

 Less: Accumulated amortization

 ( 1,986
)

 ( 1,568
)

 Intangible asset, net

 $
 2,629

 $
 3,032

 The
Xepi license intangible asset was recorded at acquisition-date fair value of $ 4.6 million and is amortized on a straight-line
basis over the useful life of 11 years. Amortization expense was $ 0.4 million for each of the years ended December 31, 2023 and 2022.

 We
review the Xepi license intangible asset for impairment whenever events or changes in circumstances indicate that
the carrying amount of the asset group may not be fully recoverable. The Company has generated limited revenue from the sales of
Xepi during the current reporting periods and recent developments with the third-party manufacturer that was
providing our supply of Xepi have resulted in further constraints on the commercialization of the product. However, Ferrer is
qualifying a new Contract manufacturer, Cambrex, which is expected to begin production in the second half of 2024.

 The
Company performed an impairment analysis because of this situation, coupled with the relief from the start-up cost and contingent consideration payment obligations under the Release, which significantly increased the carrying value of the asset group, and determined no impairment charges were deemed necessary during
the twelve months ended December 31, 2023.

 Capitalized
Software Costs. The Company capitalizes the application development phase costs of internal use software in accordance with ASC 350-40, " Intangibles-Goodwill and Other-Internal Use Software". Capitalized
costs will be amortized on a straight-line basis over the estimated useful life of the asset upon completion. There was no amortization
expense as of December 31, 2023.

 13.
 Cash Balances and Statement of Cash Flows Reconciliation

 The
Company maintains its cash balances at financial institutions that are insured by the Federal Deposit Insurance Corporation ("FDIC").
At December 31, 2023, approximately $ 1.0 million
of the Company's cash balances were in excess of FDIC limits. The Company has not experienced any losses on these accounts and
management does not believe that the Company is exposed to any significant risks with respect to these accounts.

 Restricted
cash consists primarily of deposits of cash collateral held in accordance with the terms of our corporate credit cards. Long-term restricted
cash was recorded in other assets in the consolidated balance sheet.

 The
following table provides a reconciliation of cash, cash equivalents, and restricted cash that sum to the total shown in the statements
of cash flows:

 Schedule of Reconciliation of Cash, Cash Equivalents, and Restricted Cash

 2023

 2022

 Cash and cash equivalents

 $
 1,343

 $
 17,208

 Long-term restricted cash

 Total cash and cash equivalent, and restricted cash shown on the statements of cash flows

 $
 1,543

 $
 17,408

 Long-term
restricted cash was recorded in other assets in the consolidated balance sheet.

 14.
 Accrued Expenses and Other Current Liabilities

 Accrued
expenses and other current liabilities consist of the following:

 Schedule of Accrued Expenses and Other Current Liabilities

 2023

 2022

 Legal settlement (See Note 24)

 $

 $
 6,207

 Employee compensation and benefits

 2,185

 2,850

 Professional fees

 1,064

 1,353

 Distribution and Storage

 Product revenue allowances and reserves

 Other

 Total

 $
 4,487

 $
 10,864

 F- 20

 15.
 Income Taxes

 As
a result of the net losses, we have incurred in each fiscal year since inception, we have recorded no provision for federal income taxes
for the years ended December 31, 2023 and December 31, 2022. Income tax expense incurred in 2023 and 2022 relates to state income taxes.
At December 31, 2023 and December 31, 2022, the Company had no unrecognized tax benefits.

 A
reconciliation of the expected income tax (benefit) computed using the federal statutory income tax rate to the Company's effective
income tax rate is as follows:

 Schedule of Effective Income Tax Rate Reconciliation

 2023

 2022

 Year ended December 31,

 2023

 2022

 Income tax computed at federal statutory tax rate

 21.00

 %

 21.00
 %

 State taxes

 5.21

 %

 ( 5.85
)%

 Permanent differences – non-deductible expenses

 ( 0.48

)%

 ( 37.93
)%

 ( 0.10

)%

 133.62
 %

 3.27

 %

 576.27
 %

 2.61
 %

 -

 True-ups

 ( 0.08

)%

 ( 7.42
)%

 Federal R&D Credits

 0.04

 %

 -

 Change in valuation allowance

 ( 31.61

)%

 ( 685.54
)%

 Effective income tax rate

 ( 0.14

)%

 ( 5.85
)%

 The
principal components of the Company's deferred tax assets and liabilities consist of the following at December 31, 2023 and 2022:

of Deferred Tax Assets and Liabilities

 2023

 2022

 Deferred tax assets (liabilities):

 Net operating loss carryforwards

 $
 36,964

 $
 30,450

 Credit Carryforward

 -

 Intangible assets

 4,270

 4,824

 Acquisition contract liabilities

 -

 ( 96
)

 Property and equipment

 Accrued expenses and reserves

 Stock based compensation

 Lease liability

 Other

 -

 ROU asset

 ( 422

)

 ( 369
)

 Investment revaluation

 ( 469
)

 Total deferred tax assets

 42,527

 36,163

 Less valuation allowance

 ( 42,527

)

 ( 36,163
)

 Net deferred taxes

 $
 -

 $
 -

 The
Company has had no federal income tax expense due to operating losses incurred since inception. The Company has evaluated the positive
and negative evidence bearing upon the realizability of its deferred tax assets. Based on this, the Company has provided a valuation
allowance for the full amount of the net deferred tax assets as the realization of the deferred tax assets is not determined to be more
likely than not. During 2023, the valuation allowance increased by $ 6.4 million, primarily due to the increase in the Company's
net operating loss carryforwards during the period.

 As
of December 31, 2023, the Company had approximately $ 148.6 million and $ 111.5 million of Federal and state net operating loss carryforwards,
respectively. $ 139.0 million of the federal NOLs are not subject to expiration and the remaining NOLs begin to expire in 2036. These
loss carryforwards are available to reduce future federal taxable income, if any. These loss carryforwards are subject to review and
possible adjustment by the appropriate taxing authorities. The amount of loss carryforwards that may be utilized in any future period
may be limited based upon changes in the ownership of the Company's shareholders.

 F- 21

 The
Company follows the provisions of ASC 740-10, "Accounting for Uncertainty in Income Taxes," which specifies how tax benefits
for uncertain tax positions are to be recognized, measured, and recorded in financial statements; requires certain disclosures of uncertain
tax matters; specifies how reserves for uncertain tax positions should be classified on the balance sheet; and provides transition and
interim period guidance, among other provisions. As of December 31, 2023, the Company has not recorded any amounts for uncertain tax
positions. The Company's policy is to recognize interest and penalties accrued on any uncertain tax positions as a component of
income tax expense, if any, in its statements of operations. As of December 31, 2023 the Company had no reserves for uncertain tax positions.
For the year ended December 31, 2023 no estimated interest or penalties were recognized on uncertain tax positions.

 The
Company's tax returns for 2019 through 2023 remain open and subject to examination by the Internal Revenue Service and state
taxing authorities. Under the provisions of the Internal Revenue Code, the net operating loss and tax credit carryforwards are
subject to review and possible adjustment by the Internal Revenue Service and state tax authorities. Net operating loss and tax
credit carryforwards may become subject to an annual limitation in the event of certain cumulative changes in the ownership interest
of significant shareholders over a three-year period in excess of 50 percentage points, as defined under Sections 382 and 383 of the
Internal Revenue Code, respectively, as well as similar state provisions. This could limit the amount of tax attributes that can be
utilized annually to offset future tax liabilities. The amount of the annual limitation is determined based on the value of the
Company immediately prior to an ownership change. Subsequent ownership changes may further affect the limitation in future years.
The Company has completed numerous financings since its inception, which may have resulted in a change in control as defined by
Sections 382 and 383 of the Internal Revenue Code. As of December 31, 2023, we have not completed a formal Internal Revenue Code
Section 382 analysis of our equity changes.

 16.
 Debt

 Line
of Credit

 On
May 8, 2023, the Company entered into a Loan and Security Agreement (the "Loan Agreement") with MidCap Business Credit LLC,
providing us with a revolving line of credit in the aggregate principal amount of up to $ 6.5 million, subject to a borrowing base and
an availability block, with a maturity date of May 8, 2026. The Loan Agreement is secured by a lien on substantially all of the assets
of the Company, subject to customary exceptions.

 Advances
under the Loan Agreement bear interest at the 30-Day Adjusted Term Secured Overnight Financing Rate ("SOFR"), set monthly
on the first day of the month based on 30-Day Term SOFR plus a spread adjustment of 15 basis points and subject to a floor of 2.25%,
plus 4.00% calculated and charged monthly in arrears. In the event of a called event of default, a default interest rate of 3.00% percent
shall be added to the aforementioned rate. Under the
terms of the Loan Agreement, amounts available for advances would be subject to a borrowing base, which is a formula based on certain
eligible receivables and inventory, and a block on such availability in the amount of $ 650,000.
Our borrowing capacity is based on our eligible receivables with an additional $ 1.0
 million borrowing capacity based on inventory.
 The
borrowing base is up to 85% of accounts receivable, plus the least of (a) $1.0 million for inventory and (b) 85% of accounts receivable,
less borrowing base reserve, if any, as defined in the Loan Agreement. The Loan Agreement also
includes an Unused Line Fee Rate of 0.375% of the credit limit less all outstanding advances, which shall be paid on a monthly basis.

 The
interest rate as of December 31, 2023 was 5.5 % and interest expense for the twelve months ended December 31, 2023 was $ 0.1 million.
The Company recorded approximately $ 0.2 million of costs related to the line of credit as an asset to be amortized on a straight-line
basis over the term of the line of credit. The Company recognized minimal amortization expense in connection with this line of credit
for the twelve months ended December 31, 2023, which is recorded as interest expense on the accompanying consolidated statement of operations.
The line of credit balance as of December 31, 2023 was $ 0.2 million.

 Effective as
of January 4, 2024, we voluntarily terminated the Loan Agreement and paid the outstanding principal balance on the revolving
line of credit of approximately $ 194,000. We also paid a termination fee of $ 150,000 in connection with the early termination of the revolving
line of credit.

 Loan
Facilities

 On
December 21, 2023, we entered into credit facilities with two different lenders, each pursuant to a Business Loan and Security Agreement
for a term loan in the principal amount of $ 2,000,000,
evidenced by a Secured Promissory Note, effective as of December 21, 2023.

 F- 22

 Each
of the Loans requires the Company to make weekly payments of principal and interest in the amount of approximately $ 102,857 through July
5, 2024, the maturity date. Each of the Loans is secured by a security interest in substantially all of the Company's assets (the
"Collateral"). The default interest rate for each of the Loans is 5.0 %.

 Each
of the Business Loan and Security Agreements includes limitations on the Company's ability to sell, lease, transfer, or otherwise
dispose of its assets outside the ordinary course of its business; or to create, incur, allow or suffer to exist any lien on any of its
assets other than liens in favor of either lender and certain other permitted liens. Each of the Business Loan and Security Agreements
also contains customary representations and warranties and customary events of default, upon the occurrence of which, after any applicable
grace period, the applicable lender would have the ability to accelerate its loan and exercise remedies with respect to the Collateral.

 The interest rate as of December 31, 2023 was 44 % and interest expense for the twelve months ended December 31, 2023 was negligible.
The loan balance as of December 31, 2023 was $ 3.7 million.

 17.
 Related Party Transactions

 License
and Supply Agreement

 On
October 8, 2021, we entered into an amendment to the Ameluz LSA under which the price we pay per unit is based upon our sales history.
 Under the Ameluz LSA, the Company obtained an exclusive, non-transferable license to use Pharma's
technology to market and sell the licensed products Ameluz and BF-RhodoLED and must purchase the such products exclusively
from Pharma. As a result of this amendment, the purchase price we pay the Ameluz Licensor for Ameluz will be determined
in the following manner:

 fifty
 percent of the anticipated net price per unit until we generate $ 30 million in revenue from sales of the products we license from
 the Ameluz Licensor during a given Commercial Year (as defined in the Ameluz LSA);

 forty
 percent of the anticipated net price per unit for all revenues we generate between $ 30 million and $ 50 million from sales of the
 products we license from the Ameluz Licensor; and

 thirty
 percent of the anticipated net price per unit for all revenues we generate above $ 50 million from sales of the products we license
 from the Ameluz Licensor.

 Purchases
of the licensed products from Pharma, inclusive of estimated and actual purchase price adjustments during the years ended December 31, 2023 and 2022 were $ 23.4
million and $ 17.9
million, respectively, and recorded in inventories in the consolidated balance sheets, and, when sold, in cost of revenues, related
party in the consolidated statements of operations. Amounts due and payable to Pharma as of December 31, 2023 and 2022 were $ 8.5
million and $ 1.3
million, respectively, which were recorded in accounts payable, related parties in the consolidated balance sheets.

 On
December 12, 2023, we entered into an addendum (the "Addendum "), effective as of
December 5, 2023, to the Ameluz LSA. The Addendum provides, among other things, for a schedule of payments in relation to
various financial obligations among the Company, Biofrontera Pharma, Biofrontera
Bioscience, and Biofrontera AG, including updated terms relating to payments by the Company to Pharma for purchases of Licensed
Products (as that term is defined in the Amulez LSA) under the Amulez LSA through the
end of 2024. As of December 31, 2023 any receivable amounts from related parties were offset against accounts payable, related
parties in accordance with the Addendum.

 On
February 19, 2024, we entered into the Second Amended and Restated License and Supply Agreement (the "Second A&R Amezuz LSA"), effective as of February 13, 2024, by and among the Company, Biofrontera
Pharma, and Biofrontera Bioscience. See
Note 24. Subsequent Events - Ameluz LSA Amendment, for new terms effective February 13, 2024.

 F- 23

 Service
Agreements

 In
December 2021, we entered into an Amended and Restated Master Contract Services Agreement, or "Services Agreement",
which provides for the execution of statements of work, by and among the Company, Biofrontera AG, Biofrontera Pharma and Biofrontera
Bioscience, primarily for regulatory support and pharmacovigilance. The
Services Agreement enables us to continue relying on Biofrontera AG and its subsidiaries for various services it has historically
provided to us for as long as we deem necessary. We currently have statements of work in place
regarding pharmacovigilance, regulatory affairs, medical affairs, information technology, and investor relations services and are
continuously assessing the other services historically provided to us by Biofrontera AG to determine 1) if they will be needed, and
2) whether they can or should be obtained from other third-party providers.

 As
of December 31, 2023, we have migrated away from Biofrontera AG to third party providers for most of our significant information
technology services. Expenses related to the Services Agreement were $ 0.2
million and $ 0.7
million for the years ended December 31, 2023 and 2022, which were recorded in selling, general and administrative, related party.
Amounts due to Biofrontera AG related to the Services Agreement were $ 0.1
million and $ 0.2 million as of December 31, 2023 and 2022, respectively which were
recorded in accounts payable, related parties in the consolidated balance sheets.

 As
of December 31, 2023, any receivable amounts from related parties were offset against accounts payable, related parties in accordance
with the Addendum.

 Clinical
Lamp Lease Agreement

 On
August 1, 2018, the Company executed a clinical lamp lease agreement with Biofrontera Bioscience to provide lamps and associated services.

 Total
revenue related to the clinical lamp lease agreement was approximately $ 0.1
 million for each of the years ended December
31, 2023 and 2022 and recorded as revenues, related party. Amounts due from Biofrontera Bioscience for clinical lamp and other reimbursements
were approximately $ 0.2
 million for each of the years ended December
31, 2023 and 2022, which were offset against accounts payable, related parties in accordance with
the Addendum.

 Others

 The
Company has recorded a receivable of $ 2.8 million and $ 6.4 million as of December 31, 2023 and December 31, 2022, respectively, due from
Biofrontera AG for its 50 % share of the balance of a legal settlement for which both parties are jointly and severally liable. See Note
8. Other Receivables, Related Party. The Company recognized $ 0 and $ 0.1 million of interest income in connection with this
receivable for the years ended December 31, 2023 and 2022, respectively.

 As
of December 31, 2023 and December 31, 2022, our investment, related party consisted solely of 177,465
 and 6,466,946,
respectively, of common shares of Biofrontera AG. In accordance with a Share Purchase and Transfer Agreement dated, November 3, 2022,
the Company had purchased approximately 1,674,996 shares (of the total 6,466,946 shares) for $ 1.7 million from Maruho. The total investment
was valued at $ 0.1
 million and $ 10.5
 million, as of December
31, 2023 and 2022, respectively. See Note 6. Investment, Related Party. In 2023, under the Release, the Company transferred 5,451,016
 shares of our shares
in Biofrontera AG to Maruho in exchange for the extinguishment of the total acquisition costs due to Maruho.

 As
of December 31, 2023, any receivable amounts for related party transactions among
the Company, Pharma, Bioscience and Biofrontera AG were offset against accounts payable, related parties in accordance
with the Addendum.

 F- 24

 18.
 Stockholders' Equity

 Under
the Company's Certificate of Amendment to the Amended and Restated Certificate of Incorporation, effective July 3, 2023, the Company
is authorized to issue 15,000,000 shares of common stock, par value $ 0.001 per share and 20,000,000 shares of preferred stock, par value
$ 0.001 per share. See Note 2. Summary of Significant Accounting Policies for information relating to the Reverse Stock Split.

 The
holders of common stock are entitled to one vote for each share held. Common stockholders are not entitled to receive dividends, unless
declared by the Board of Directors. The Company has not declared dividends since inception. In the event of liquidation of the Company,
dissolution or winding up, the holders of common stock are entitled to share ratably in all assets remaining after payment of liabilities.
The common stock has no preemptive or conversion rights or other subscription rights. There are no redemption or sinking fund provisions
applicable to the common stock. The outstanding shares of common stock are fully paid and non-assessable.

 Registered
Public Offering - On October 30, 2023, the Company entered into a securities purchase agreement ("2023 Purchase
Agreement") with an institutional investor for the purchase and sale, in a registered public offering (the "Public
Offering") by the Company of: (i) 150,000 shares
of Common Stock at a combined offering price of $ 3.74,
(ii) 1,055,000 pre-funded
warrants to purchase up to 1,055,000 shares
of Common Stock (the "Pre-Funded Warrants") at a combined offering price of $ 3.7399 and
(iii) 1,205,000 warrants
to purchase up to 1,807,500 shares
of Common Stock (the "Common Warrants"), resulting in gross proceeds of approximately $ 4.5 million.
The Public Offering closed on November 2, 2023.

 The
Common Warrants are exercisable upon issuance, will expire five years following the date of issuance and have an exercise price of $ 3.55
per share. The Pre-Funded Warrants are exercisable upon issuance, will expire five years following the date of issuance and have an exercise
price of $ 0.0001 per share.

Amendment

 On
October 30, 2023, in connection with the 2023 Purchase Agreement, the Company entered into an amendment to amend the 2022 Purchase Warrant
and the 2022 Inducement Warrant (the "Existing Warrants Amendment") pursuant to which the Company agreed, effective November
2, 2023, to (i) revise the exercise price of the Existing Warrants to $ 3.55 and (ii) extend the date until which the Existing Warrants
can be exercised until November 2, 2028. No other terms of the Existing Warrants were revised or changed.

 As
a result of this amendment to the Existing Warrants, the Company recorded an inducement expense on modification of common stock warrants
in the amount of $ 1.0 million. The loss represents the increase in fair value of the Existing Warrants, as amended. The increase in fair
value was calculated as the difference in value immediately before and after modification using the Black-Scholes option pricing model.
The fair value of the Existing Warrants was determined to be $ 0.4 million immediately prior to the modification in accordance with the
following key assumptions:

of Fair Value Warrant by Using Black-Scholes Pricing Model Assumptions Prior to Modification

 2022 Purchase

 2022 Inducement

 $
 4.90

 $
 4.90

 4.04

 3.08

 90.0
 %

 90.0
 %

 4.66
 %

 4.72
 %

 0.0
 %

 0.0
 %

 The
fair value of the Existing Warrants was determined to be $ 1.4 million immediately after the modification in accordance with the following
key assumptions:

 2022 Purchase

 2022 Inducement

 $
 4.90

 $
 4.90

 5.00

 5.00

 90.0
 %

 90.0
 %

 4.60
 %

 4.60
 %

 0.0
 %

 0.0
 %

 Warrants
 – The details of all outstanding warrants as of December 31, 2023 were as follows:

of Outstanding Warrants

 Warrant Shares

 Weighted Average

 Exercise Price

 Balance, December 31, 2021

 219,477

 $
 99.69

 Issued

 463,686

 35.77

 Exercised

 ( 221,307
)

 20.92

 Balance, December 31, 2022

 461,856

 52.29

 Issued

 2,862,500

 2.24

 Exercised

 -

 Balance, December 31, 2023

 3,324,356

 $
 2.46

 F- 25

 Reverse
Stock Split - On July 3, 2023 Biofrontera Inc. effected a 1-for-20 reverse stock split (the "Reverse Stock Split") of
the issued and outstanding shares of the Company's common stock, $ 0.001 par value (the "Common Stock"). The Common
Stock began trading on the Nasdaq Capital Market on a post-split basis on July 5, 2023.

 All
information included in these consolidated financial statements has been adjusted, on a retrospective basis, to reflect the Reverse Stock
Split as if it had been effective from the beginning of the earliest period presented, unless otherwise stated. All outstanding securities
entitling their holders to purchase shares of Common Stock or acquire shares of Common Stock, including stock options, restricted stock
units, and warrants, were adjusted as a result of the Reverse Stock Split, as required by the terms of those securities.

 Exercise
of 2021 Purchase Warrant and Issuance of 2022 Inducement Warrant – On July 26, 2022, the Company entered into the Reprice and
Reload Offer of Common Stock Purchase Warrants (the "Inducement Letter") with the holder of the Company's 2021 Purchase
Warrant (the "Investor"). The Investor agreed to exercise for cash, the 2021 Purchase Warrant, in exchange
for the Company's agreement to (i) lower the exercise price of the 2021 Purchase Warrant from $ 105.00
 to $ 32.40
 per share and (ii) issue the 2022 Inducement
Warrant to purchase up to 214,286
 shares of common stock. The Company received
proceeds of $ 4.6 million,
from the exercise of the 2021 Purchase Warrant and expensed the related issuance costs of $ 0.3
 million. The 2021 Purchase Warrant modification
along with the fair value of the 2022 Inducement Warrant of $ 2.6
 million was expensed as warrant modification
expense in the accompanying consolidated statement of operations for the year ended December 31, 2022.

 Private
Placement – On May 16, 2022, the Company entered into a Securities Purchase Agreement ("May 2022 PIPE"). In
the May 2022 PIPE, the Company issued for the gross cash receipts of $ 9.4 million
(i) 92,500 shares
of the common stock, (ii) a warrant to purchase up to 170,950 shares
of the common stock ("2022 Purchase Warrant") and (iii) a warrant to purchase up to 78,450 shares
of the common stock ("2022 Pre-Funded Warrant"). The purchase price for one share of common stock (or common stock
equivalent) and a warrant to purchase one share of common stock was $ 55.00. In connection with the 2023 Purchase Agreement,
the Company entered into the Amendment to Common Stock Purchase Warrants effective November 2, 2023, to (i) revise the exercise price
from $ 55.40 to $ 3.55 and (ii) extend the date which the warrant can be exercised from November 18, 2027 until November 2, 2028 for the
2022 Purchase Warrant. Because the warrants are accounted for as liabilities, the May 2022 PIPE proceeds were allocated the first to the
warrants based on their fair value with the remaining proceeds allocated to common stock and additional paid in capital.

 The 2022 Pre-Funded Warrant had a
term of exercise equal to five ( 5) years with a nominal exercise price of $ 0.02 per share and was exercised on July 14, 2022, for
a total of 78,450 shares of common stock, resulting in negligible net proceeds. As of December 31,
2023, there were no 2022 Pre-Funded Warrants outstanding.

 Adoption
of a stockholder rights plan. On October 13, 2022 the Company's Board of Directors ("Board") authorized and
declared a dividend distribution of one Preferred Stock Purchase Right (a "Right") for each outstanding share of common
stock to stockholders of record as of the close of business on October 24, 2022. In addition, one Right will automatically attach to
each share of Common Stock issued between the record date of the distribution and the earlier of the distribution date and the
expiration date of the Rights. Each Right entitles the registered holder to purchase from the Company a unit consisting of one
ten-thousandth of a share (a "Unit") of Series A Junior Participating Cumulative Preferred Stock, par value $ 0.001
per share, of the Company at a cash exercise price of $ 5.00
per Unit, subject to adjustment, under certain conditions. The complete terms of the Rights are set forth in the Stockholder Rights
Agreement, dated October 13, 2022, as amended by Amendment No. 1 to the Stockholder Rights Agreement, dated as of April 26, 2023,
between the Company and Computershare Trust Company, N.A, as Rights agent.

 While
the stockholder rights plan described above (the "Rights Plan") became effective immediately, the Rights would become exercisable
only if a person or group, or anyone acting in concert with such a person or group, acquires beneficial ownership, as defined in the
Rights Agreement, of 20% or more of the Company's issued and outstanding common stock in a transaction not approved by the Board.
The Rights Plan will expire on June 30, 2026.

 Under
the Rights Plan, a person or group who beneficially owned 20% or more of the Company's outstanding Common Stock prior to the first
public announcement of the Rights Plan on October 14, 2022 will not trigger the Rights so long as they do not acquire beneficial ownership
of any additional shares of Common Stock at a time when they still beneficially own 20% or more of such Common Stock.

 F- 26

 Series
A Junior Participating Cumulative Preferred Stock. In connection with the adoption of the Rights Plan, the Board approved a Certificate
of Designations of Series A Junior Participating Cumulative Preferred Stock which designates the rights, preferences and privileges of
 5,000 shares of Preferred Stock. The Certificate of Designations was filed with the Secretary of State of Delaware and became effective
on October 13, 2022.

 Exchange
Agreement – On October 25, 2022, the Company entered into private exchange agreements with certain holders of options to
acquire ordinary shares, nominal value 1.00
per share, of Biofrontera AG pursuant to which the parties agreed to a negotiated private exchange, and closed on a series of
private exchanges of 3,148,042
shares of the Company's common stock in exchange for the AG Options.

 19.
 Equity Incentive Plans and Share-Based Payments

 2021
Omnibus Incentive Plan

 In
2021, the Board adopted, and our shareholders approved, the 2021 Omnibus Incentive Plan ("2021 Plan). On December
12, 2022, the 2021 Plan was amended by our stockholders and the number of shares reserved and authorized for awards under the 2021 Plan
was increased from 137,500 shares to 266,990 shares. The maximum contractual term for stock options issued under the 2021 Plan is ten
years. As of December 31, 2023, there were 141,824 shares available for future awards under the amended 2021 Plan.

 Non-qualified
stock options

 We
maintain the 2021 Plan for the benefit of our officers, directors and employees. Employee stock options granted under the 2021 Plan generally
vest in equal annual installments over three years and are exercisable for a period of up to ten years from the grant date. Non-employee
director options vest in equal monthly installments following the date of grant and will be fully vested on the one-year anniversary
of the date of grant. All stock options are exercisable at a price equal to the market value of
the common shares underlying the option on the grant date.

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

 The
fair value of each option was estimated on the date of the grant using the Black-Scholes option pricing model with the following
assumptions:

 Schedule of Stock Options Assumptions

 2023

 2022

 Expected volatility

 70 %
 - 95
 %

 55 %
 - 70
 %

 Expected term
 (in years)

 6.0

 5.24
 - 6.0

 Risk-free interest rate

 3.54 %-
 4.66
 %

 1.34 %
 - 4.10
 %

 Expected dividend yield

 0.0
 %

 0.0
 %

 F- 27

 The weighted average grant-date fair value of options
granted during the years ended December 31, 2023 and 2022 was $ 6.40 and $ 29.28, respectively.

 Share-based
compensation expense related to stock options of approximately $ 0.7
million and $ 0.8
million was recorded in selling, general and administrative expenses on the accompanying consolidated statement of operations for
the years ended December 31, 2023 and 2022, respectively.

 Options
outstanding and exercisable under the employee share option plan as of December 31, 2023 and 2022, and a summary of option activity during
the year then ended is presented below.

 Schedule of Stock Option Activity

 Shares

 Weighted Average Exercise Price

 Weighted Average Remaining Contractual Term

 Aggregate Intrinsic Value (1)

 Outstanding at December 31, 2021

 30,737

 $
 95.40

 9.94

 $
 1,691

 Granted

 64,572

 $
 48.20

 Exercised

 -

 $
 -

 Canceled or forfeited

 ( 8,358
)

 $
 76.11

 Outstanding at December 31, 2022

 86,951

 $
 62.16

 9.27

 $

 Granted

 49,730

 $
 9.35

 Exercised

 -

 $
 -

 Canceled or forfeited

 37,195

 $
 52.55

 Outstanding at December 31, 2023

 99,486

 $
 39.36

 8.79

 $
 -

 Exercisable at December 31, 2023

 27,815

 $
 67.54

 8.14

 $
 -

 (1)
 The aggregate intrinsic
value is calculated as the difference between the exercise price of the underlying options and the fair value of the common stock for
the options that were in the money at December 31, 2023 and December 31, 2022.

 As
of December 31, 2023, there was $ 0.9 million of unrecognized compensation cost related to unvested stock options held by employees and
directors, which is expected to be recognized over a weighted-average period of approximately 2.0 years.

 Share-Based
Compensation (RSUs)

 Restricted
Stock Units ("RSUs") will vest annually over two years, subject to the recipient's continued service with the Company
through the applicable vesting dates. The fair value of each RSU is estimated based on the closing market price of the Company's
common stock on the grant date.

 Share-based
compensation expense related to RSUs of $ 0.3
million and $ 1.0
million for the RSUs was recorded in selling, general and administrative expenses in the accompanying consolidated statement of
operations for the years ended December 31, 2023 and 2022.

 As
of December 31, 2023, there was $ 0.1 million of unrecognized compensation cost related to unvested RSUs, which is expected to be recognized
over a weighted-average period of approximately 0.4 years.

 The
following table summarizes the activity for RSUs during the year ended December 31, 2022 and December 31, 2021:

of Restricted Stock Units

 Shares

 Weighted Average Grant Date Fair Value

 Outstanding balance at December 31, 2021

 8,504

 $
 95.40

 Granted

 17,176

 52.20

 Issued

 ( 8,504
)

 95.40

 Forfeited

 -

 -

 Outstanding balance at December 31, 2022

 17,176

 $
 52.20

 Awarded

 -

 -

 Issued

 ( 8,588
)

 52.20

 Forfeited

 ( 3,817
)

 52.20

 Outstanding balance at December 31, 2023

 4,771

 $
 52.20

 F- 28

 20.
 Interest Expense, net

expense, net consists of the following:

 Schedule of Interest Expense

 For years ended December 31,

 2023

 2022

 Interest expense

 ( 220
)

 ( 12
)

 Interest expense, related party

 ( 22
)

 -

 Contract asset interest expense

 ( 358
)

 ( 358
)

 Interest income- related party

 -

 Interest income – other

 $
 ( 468
)

 $
 ( 195
)

expense is comprised primarily of interest on our Loan and Security Agreements.

 Interest expense, related
party relates to interest incurred on late payments to the Biofrontera Group.

 Contract
asset interest expense relates to the $ 1.7 million contract asset in connection with the $ 7.3 million start-up cost financing received
from Maruho under the Cutanea acquisition Share Purchase Agreement. The contract asset was amortized on a straight-line basis using a
 6 % interest rate over the financing arrangement contract term, which ended on December 31, 2023.

income - related party, relates to default interest on the recorded receivable of $ 6.1 million as of September 30, 2022 from Biofrontera
AG for its 50 % share of the balance of a legal settlement.

income – other, relates primarily to interest earned on funds deposited in our bank accounts.

 21.
 Other Income, net

 Other
income, net consists of the following:

 Schedule of Other Income, Net

 For years ended December 31,

 2023

 2022

 Gain/Loss on termination of operating leases

 Foreign currency transactions

 ( 114
)

 ( 28
)

 Bank service charges

 ( 92
)

 ( 8
)

 Other, net

 ( 3
)

 ( 24
)

 $
 ( 75
)

 $

 22.
 Net Loss per Share

 Basic
net earnings (loss) per common share are calculated by dividing net income by the weighted average number of common shares
outstanding during the period. As noted in ASC 260-10-45-13, shares issuable for little to no
consideration should be included in the number of outstanding shares used for basic EPS. As such, the 2022 Pre-Funded Warrants are
included in the outstanding shares for EPS purposes. Diluted net earnings per common share are calculated by dividing net
income (loss) by the diluted weighted average number of common shares outstanding during the period. The diluted shares include the
dilutive effect of stock-based awards based on the treasury stock method. In periods where a net loss is recorded, no effect is
given to potentially dilutive securities, since the effect would be anti-dilutive.

 The
following table sets forth the computation of the Company's basic and diluted net earnings (loss) per share attributable to common
stockholders (in thousands, except share and per share data):

 Schedule of Basic and Diluted Net Loss per Share Attributable to Common Stockholders

 2023

 2022

 For years ended December 31,

 2023

 2022

 $
)

 $
 ( 640
)

 Weighted average common shares outstanding, basic and diluted

 1,546,297

 1,056,988

 Net loss per share, basic and diluted

 $
 ( 13.02
)

 $
 ( 0.61
)

 The
following table sets forth securities that were anti-dilutive for diluted EPS for the periods presented but which could potentially dilute
EPS in the future:

 Schedule of Anti-dilutive Securities Excluded from Computation of Earnings per Share

 2023

 2022

 Common stock warrants

 2,269,356

 459,856

 Common stock options and RSUs

 104,257

 104,127

 Unit Purchase Options

 20,182

 20,182

 Total

 2,393,795

 584,165

 Anti-dilutive securities excluded from computation of earnings per share

 2,393,795

 584,165

 23.
 Commitments and Contingencies

 Facility
Leases

 The
Company leases its corporate headquarters under an operating lease that expires in August 2025. The Company has the option to extend
the term of the lease for one five (5) year period upon written notice to the landlord. The extension period has not been included in
the determination of the ROU asset or the lease liability as the Company concluded that it is not reasonably certain that it would exercise
this option. The Company provided the landlord with a security deposit in the amount of $ 0.1 million, which was recorded as other assets
in the consolidated balance sheets.

 F- 29

 The
Company has also entered into a master lease agreement for its vehicles. After an initial non-cancelable twelve-month period, each vehicle
is leased on a month-to-month basis. Based on historical retention experience of approximately three years, the vehicles have varying
expiration dates through March 2027.

 The
components of lease expense for the year ended December 31, 2023 were as follows (in thousands except lease term and discount rate):

 Schedule of Components of Lease Expense and Other Information

 Operating Lease expense

 December 31, 2023

 December 31, 2022

 Amortization of ROU assets (operating lease cost)

 $

 $

 Interest on lease liabilities

 Total lease expense

 $

 $

 Other Information

 Operational cash flow used for operating leases

 $

 $

 ROU assets obtained in exchange for lease liabilities

 Weighted -average remaining lease term (in years)

 2.22

 2.54

 Weighted -average discount rate

 7.76
 %

 6.31
 %

 Future
lease payments under non-cancelable leases as of December 31, 2023 were as follows (in thousands):

 Schedule of Future Commitments and Sublease Income

 Years ending December 31,

 Future lease commitments

 2024

 2025

 2026

 2027

 Thereafter

 -

 Total future minimum lease payments

 $
 1,635

 Less imputed interest

 $
 ( 140
)

 Total lease liability

 $
 1,495

of Operating Lease Liability

 Reported as:

 December 31, 2023

 Operating lease liability, current

 $

 Operating lease liability, non-current

 Total

 1,495

 Ameluz LSA Sales Commitment

 If we fail to earn
$ 150
 million in revenues from Ameluz
 and t he RhodoLED lamp
series over the preceding five (5) year period leading to the Ameluz LSA's termination
date (either fifteen (15) years from the date of the Amended and Restated License and Supply Agreement, dated June 16, 2021 or any later
termination date following the automatic renewal of this Agreement), Biofrontera Pharma has the right to terminate the Ameluz LSA by
providing one (1) year written notice. See Note 25, Subsequent Events, Amendments to the Ameluz LSA.

 Milestone
payments with Ferrer Internacional S.A.

 Under
the Xepi LSA, we are obligated to make payments to Ferrer upon the occurrence of certain milestones. Specifically, we must pay
Ferrer i) $ 2,000,000
upon the first occasion when annual net sales of Xepi under the Xepi LSA exceed $ 25,000,000,
and ii) $ 4,000,000
upon the first occasion annual net sales of Xepi under the Xepi LSA exceed $ 50,000,000.
No payments were made in 2023 or 2022 related to Xepi milestones.

 Legal
proceedings

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

 F- 30

 Settlement
Agreement with DUSA Pharmaceuticals Inc.

 On
November 29, 2021, the Company entered into a settlement and release agreement with respect to a lawsuit filed March 23, 2018 in the
United States District Court for the District of Massachusetts in which we were alleged to have infringed on certain patents and
misappropriated certain trade secrets. In the settlement, the Company and Biofrontera AG together agreed to make an aggregate
payment of $ 22.5
million and engage a forensic expert to destroy data at issue in the litigation to settle the claims in the litigation. On September
13, 2023, we were served with a new complaint filed by DUSA Pharmaceuticals Inc. See DUSA – 2023 Legal Claim section below for
details.

 As
of December 31, 2023, we have reflected a legal settlement liability in the amount of $ 0.4
 million for the remaining payments due under the settlement for the estimated remaining cost of the forensic expert and a
related receivable from related party of $ 2.8
million (presented net in accounts payable, related party) for the remaining legal settlement costs to be reimbursed in accordance
with the Settlement Allocation Agreement, which provided that the settlement payments, including the cost of the forensic expert,
would first be made by the Company and then reimbursed by Biofrontera AG for its share.

 Settlement
Agreement with Biofrontera AG

to the terms of that certain Settlement Agreement, dated as of April 11, 2023, among the Company, Biofrontera AG and certain current
and former directors of the Company (the "AG Settlement Agreement"), the Company has taken or committed, among other
things, to take the following actions:

 On July 7, 2023, in connection with the AG Settlement
Agreement, Board appointed Heikki Lanckriet to the Board. Mr. Lanckriet will serve as a Class I Director
to hold office for a term expiring at the annual meeting of the Company's stockholders for fiscal year 2025. Mr. Lanckriet's
term as director began upon his appointment at the July 7, 2023 meeting.

 The Company will begin a
 search, pursuant to the conditions set forth in the AG Settlement Agreement including a strike right granted to the aforementioned
 director nominated by Biofrontera AG, for an additional director candidate, who is fully independent from Biofrontera AG, Deutsche
 Balaton Aktiengesellschaft and any of their respective affiliates, to be nominated for election as a Class II
 Director at the Company's 2024 annual meeting of stockholders.

 The Board will increase its size to seven members, including
the two directors appointed and elected pursuant to the AG Settlement Agreement as noted above.

 In
addition, the AG Settlement Agreement contains provisions to maintain Biofrontera AG's representation on the Board as long as
it holds at least 20% of the Company's outstanding common stock and to limit further increases in the size of the Board or
changes to the Company's stockholder rights plan. Under the AG Settlement Agreement, Biofrontera AG also agrees, subject to
certain conditions, to vote in support of the directors nominated by, and the proposals recommended by, the Board. With the closing
of the Securities Purchase Agreement, dated February 19, 2024 (see Note 25. Subsequent Events), Biofrontera AG ceased to own
at least 20 % of our common stock outstanding. Accordingly, if Biofrontera AG does not acquire sufficient shares of our common stock
to own at least 20% within 30 days from the date of notice, February 26, 2024, the Board representation provisions, and the
standstill/voting provisions noted above shall terminate. Our Related Party Transaction Committee has elected to waive the
requirement that AG must cause its sitting non-independent director, Heikki Lanckriet, to resign from his position of
director.

 DUSA – 2023 Legal
Claim

 On
September 13, 2023, Biofrontera was served with a complaint filed in United Stated District Court for the District of Massachusetts by
DUSA Pharmaceuticals, Inc., Sun Pharmaceutical Industries, Inc., and Sun Pharmaceutical Industries LTD (collectively "DUSA"
or "Plaintiffs") in which DUSA alleges breach of contract, violation of the Lanham Act, and unfair trade practices. All claims
stem from allegations that Biofrontera has promoted its Ameluz product in a manner that is inconsistent with its approved FDA labeling.
Though this complaint was originally filed in the U.S. District Court for the District of Massachusetts, this matter has been transferred
by agreement of the parties to the U.S. District Court for the District of New Jersey.

 The
Company denies the Plaintiffs' claims and intends to defend these matters vigorously. Based on the Company's assessment of
the facts underlying the above claims, the uncertainty of litigation and the preliminary stage of the case, the Company cannot estimate
the possibility of a material loss, nor the potential range of loss that may result from this action. If the final resolution of the
matter is adverse to the Company, it could have a material impact on the Company's financial position, results of operations, or
cash flows.

 24.
 Retirement Plan

 The
Company has a defined-contribution plan under Section 401(k) of Internal Revenue Code (the "401(k) Plan"). The 401(k) Plan
covers all employees who meet defined minimum age and service requirements and allows participants to defer a portion of their annual
compensation on a pre-tax basis. The Company matches 50% of employee contributions up to a maximum of 6% of employees' salary.

 Matching
contribution costs paid by the Company were $ 0.3 million and $ 0.2 million for the years ended December 31, 2023 and 2022, respectively.

 25.
 Subsequent Events

 We
have completed an evaluation of subsequent events after the balance sheet date of December 31, 2023 through the date this Annual Report
on Form 10- K was filed with the SEC.

 Termination
of Loan Agreement

 Effective
as of January 4, 2024, we voluntarily terminated the Loan Agreement (See Note 16. Debt).
We repaid the outstanding principal balance on the revolving line of credit of approximately $ 194,000
 and paid a termination fee of $ 150,000
 in connection with the early termination of the revolving line of credit.

 Exercise of 2023 Pre-Funded Warrants

 On January 8, 2024 and February 2, 2024, an investor exercised 167,000 and 888,000 the 2023 Pre-Funded Warrants,
respectively and purchased a total of 1,055,000 shares of common stock at an exercise price of $.0001 per share, resulting in
negligible net proceeds,

 Notice
from Nasdaq

 On
November 22, 2023, we received a letter (the "Notice") from the Listing Qualifications Staff of Nasdaq notifying
us that, because our stockholders' equity as reported in our Quarterly Report on Form 10-Q for the period ended September 30, 2023
was $1,038,000, we are no longer in compliance with the continued listing requirement under Nasdaq Listing Rule 5550(b)(1), which requires
that a listed company's stockholders' equity be at least $2,500,000. Additionally, as of the date of the Notice, the Company
did not meet either of the alternative requirements of maintaining a market value of listed securities of $35 million or achieving a
net income from continuing operations of $500,000 in the most recently completed fiscal year or in two of the last three most recently
completed fiscal years. As a result, as of the date of this Form 10-K, we do not satisfy Nasdaq Marketplace Rule 5550(b).

 We
submitted a compliance plan to Nasdaq on January 8, 2024. The compliance plan was accepted and we were granted 180 calendar days from
November 22, 2023 to evidence compliance.

 Amendments
to the Ameluz LSA

 On
January 29, 2024, we entered into an amendment and restatement (the "Amendment"), effective January 26, 2024, of the
Ameluz LSA. The Amendment modifies a schedule of payments in relation to various financial obligations among the Company, Biofrontera
Pharma, Biofrontera Bioscience, and Biofrontera AG, including terms relating to payments by the Company to Biofrontera Pharma for purchases
of Licensed Products (as that term is defined in the Ameluz LSA) under the Ameluz LSA. Among other things, the Addendum provides that
payment that was due from the Company on January 31, 2024 be deferred to February 29, 2024.

 F- 31

 On
February 19, 2024, we entered into the Second A&R Ameluz LSA,
effective as of February 13, 2024, by and among the Company, Biofrontera Pharma, and Biofrontera Bioscience. The Second A&R Ameluz LSA amends
and restates the Ameluz LSA, originally dated as of October 1, 2016 which was previously amended on July 1, 2019, June 16, 2021, October
8, 2021, December 5, 2023 and January 26, 2024.

 Among
other things, the Second A&R Ameluz LSA has been amended to (i)
change the Transfer Price (as defined in the Second A&R Ameluz LSA) to 25% through 2025 and then increasing over time pursuant
to the schedule set forth in the Second A&R Ameluz LSA to a maximum of 35% starting in 2032, subject to a minimum dollar amount
per unit, from the previous Transfer Price of 50% of annual revenue up to $30 million, and then decreasing on further sales until
reaching 30% of annual revenue at and above $50 million, (ii) provide for the transfer of responsibilities for Ongoing Trials (as
defined in the Second A&R Ameluz LSA) on or before June 1, 2024, including the Company assuming related contracts and
transferring key personnel from Pharma and Bioscience to the Company, and (iii) make the failure to achieve the applicable Annual
Minimum Sales (as defined in the Second A&R Ameluz LSA) a termination event in certain circumstances, unless waived by
Biofrontera Pharma and Biofrontera Bioscience. The Second A&R Ameluz LSA also includes an Addendum to the Second A&R Ameluz
LSA which modifies a schedule of payments in relation to various financial obligations among the Company, Biofrontera Pharma,
Biofrontera Bioscience, and Biofrontera AG, including terms relating to payments by the Company to Biofrontera Pharma for purchases
of Licensed Products (as that term is defined in the Second A&R Ameluz LSA) under the Second A&R Ameluz
LSA. Based on the most current budget projections, we expect to order Ameluz
to be delivered in Q4 2024, and therefore, the positive effects of the Second A&R Ameluz LSA amendment will not be realized until
then.

 In
connection with the Second A&R Ameluz LSA, the Company entered into a Release of Claims, dated February 13, 2024, by and among
the Company, Biofrontera Pharma and Biofrontera Bioscience, pursuant to which the Company agreed to release Biofrontera Pharma and
Biofrontera Bioscience from all claims and liabilities arising out of or relating to any failure by Biofrontera Pharma and
Biofrontera Bioscience to perform certain obligations under the Second A&R Ameluz LSA with respect to clinical trials that the Company
will assume responsibility for under the Second A&R Ameluz LSA.

 Voluntary
Product Recall of Limited Lots of Ameluz

 On
February 9, 2024, we were notified that our Ameluz Licensor, had initiated a voluntary recall of a limited number of lots of Ameluz
due to a manufacturing defect in the impacted product's packaging, which is provided by an unaffiliated supplier. In its communication,
the Ameluz Licensor confirmed that the recalled product is not likely to cause adverse health consequences. We have notified all impacted
physician customers of this recall and have arranged for the prompt replacement of the recalled products. There were no sales of recalled
product for the year ended December 31, 2023. See Note 9. Inventories for impact to inventory as of December 31, 2023.

to the Ameluz LSA, the Company will not bear any financial responsibility for the costs associated with this recall. As such, the Company
does not anticipate a material financial impact on its business as a result of the recall.

 Securities Purchase Agreement
for Series B Convertible Preferred

 On February 19, 2024, we entered
into a securities purchase agreement (the "Preferred Purchase Agreement") with certain accredited investors (the " Preferred
Investors "), pursuant to which the Company agreed to issue and sell, in a private placement (the " Offering "),
(i) 6,586
 shares of Series B-1 Convertible Preferred Stock, par value $ 0.001
 per share (the " Series B-1 Preferred Stock "), and (ii) warrants (the " Preferred Warrants ")
to purchase shares of Series B-3 Convertible Preferred Stock, par value $ 0.001
 per share (the " Series B-3 Preferred Stock ") for an aggregate offering price of $ 8.0
 million. Each share of Series B-1 Preferred Stock was sold for $ 1,000
 per share and the consideration for each Preferred Warrant was $ 0.125
 per share of common stock that each share of Series B-3 Preferred Stock may be converted into. The net proceeds of the Offering were approximately $ 7.2 million, after deducting fees paid to the placement agent
and other estimated offering expenses payable by the Company. The Company intends to use the net proceeds from the Offering for working
capital purposes and other general corporate purposes and ongoing activities related to expediting the development and approval of additional
indications for Ameluz.

 The aggregate exercise price of the Preferred
Warrants is approximately $ 8.0
million, exercisable for an aggregate of 8,000
shares of Series B-3 Preferred Stock commencing on the Exercisability Date (as defined in the Form of Preferred Warrant) until the
earlier of (i) 5 days following the date of completion of (A) the Company's public
announcement of (I) at least 95% of the Company's territory managers, medical science liaisons, and reimbursement
employees are using the Company's customer relationship management system routinely or on a performance improvement plan and
(II) the Company's revenue for the period starting on January 1, 2024 and ending no earlier than April 30, 2024 excluding
revenue from related parties (including Biofrontera AG) is at least 5% higher than the Company's revenue excluding revenue
from related parties (including Biofrontera AG) for the corresponding period of the same length, starting on January 1,
2023, which announcement shall be made promptly after certification by the
Company's board of directors that such targets have been completed, and (B) the Stockholder Approval (as defined below) and
(C) the effectiveness of a registration statement with the U.S. Securities and Exchange Commission covering the resale of the Common
Stock underlying all shares of Series B-3 Preferred Stock (as defined below) and (ii) February 22, 2027.

 Subject to the terms and limitations contained in the Certificate of Designation,
the shares of the Series B-1 Preferred Stock issued in the Offering are immediately convertible and the Series B-3 Preferred Stock issuable
upon exercise of the Warrants issued in the Offering will not become convertible until the Company's stockholders approve (i) the
issuance of all Common Stock issuable upon conversion of the Issued Preferred Stock and the Series B-3 Preferred Stock or the Series B-3
Preferred Stock upon exercise of the Preferred Warrants to the extent required under the Nasdaq listing rules, (iii) an increase to the
Company's authorized share capital (collectively, the "Stockholder Approval").

 Pursuant to the Preferred Purchase Agreement and as
soon as practicable following the date of the Stockholder Approval, the Company shall appoint two independent directors to the Company's
Board who are designated by Rosalind Advisors, Inc.

 On February 22, 2024, concurrent with the
closing of the Offering, each purchaser delivered a notice of initial conversion requesting that the Company convert the Series B-1
Preferred Stock they had acquired in the Offering up to the Cap (as defined in the Certificate of Designation) for each purchaser.
As a result of this conversion, the Company issued 2,516,785 shares of the Company's common stock to the purchasers, and as of
February 22, 2024, the total number of the Company's outstanding shares of common stock is 5,089,413 and the total number of
the Company's outstanding shares of Series B-1 Convertible Preferred Stock is 4,806, with 6,793,893 shares of common stock
issuable upon conversion of the Series B-1 Preferred. Upon obtaining the Stockholder Approval, there will be 11,309,019 shares of common stock issuable upon conversion
of all of the Series B-3 Convertible Preferred Stock, that may be acquired upon exercise of the Warrants.

 Amendment to Articles
of Incorporation - Series B Preferred Stock

 Pursuant to the terms of the Preferred Purchase
Agreement, on February 20, 2024, the Company filed the Certificate of Designation with the Delaware Secretary of State designating 6,586
shares of its authorized and unissued preferred stock as Series B-1 Preferred Stock, 6,586
shares as Series B-2 Preferred Stock and 8,000
shares as Series B-3 Convertible Preferred Stock, each with a stated value of $ 1,000
per share. The Certificate of Designation sets forth the rights, preferences and limitations of the shares of Series B Preferred
Stock. The company will need to increase the number of authorized shares from the current 15,000,000 in order to have enough
common shares available to allow for the conversion of the B-2 and B-3 Preferred Stock. The Board of Directors has approved an increase
of authorized shares up to 35,000,000 on March 4, 2024, subject to shareholder approval.

 F- 32

 The
following is a summary of the terms of the Series B Preferred Stock:

 Voting
Rights. Subject to certain limitations described in the Certificate of Designation, the Series B Preferred Stock is voting
stock. Holders of the Series B Preferred Stock are entitled to vote together with the Common Stock on an as-if-converted-to-Common-Stock
basis. Holders of Common Stock are entitled to one vote for each share of Common Stock held on all matters submitted to a vote of stockholders.
Accordingly, holders of Series B Preferred Stock will be entitled to one vote for each whole share of Common Stock into which their Series
B Preferred Stock is then-convertible on all matters submitted to a vote of stockholders.

 Unless
and until the Company has obtained the Stockholder Approval, the number of shares of Common Stock that shall be deemed issued upon conversion
of the Series B Preferred Stock (for purposes of calculating the number of aggregate votes that the holders of Series B Preferred Stock
are entitled to on an as-converted basis) will be equal to that number of shares equal to 9.9 % of the Company's outstanding Common
Stock as of the Signing Date (excluding for purposes of the calculation, any securities issued on the Signing Date) (the " Cap "),
which each such holder being able to vote the number of shares of Series B Preferred Stock held by it relative to the total number of
shares of Series B Preferred Stock then outstanding multiplied by the Cap. Notwithstanding the foregoing, the holders of the Series B
Preferred Stock are not entitled to vote together with the Common Stock on an as-if-converted-to-Common-Stock-basis with regard to the
approval of the issuance of units upon conversion of the Series B-1 Preferred Stock and the issuance of all Common Stock upon conversion
of the Series B Preferred Stock.

 Conversion. Prior
to the Stockholder Approval, the Series B Preferred Stock is not convertible in excess of the Cap. Following the Stockholder Approval,
each share of Series B-1 Preferred Stock will automatically convert into either Common Stock or, to the extent the conversion would cause
a holder to exceed their beneficial ownership limitation, shares of Series B-2 Preferred Stock.

 Liquidation.
Prior to the Stockholder Approval, in the event of any voluntary or involuntary liquidation, dissolution or winding up of the Company,
including a change of control transaction, or Deemed Liquidation Event (any such event, a " Liquidation ") the holders
of shares of Series B Preferred Stock then outstanding shall be entitled to be paid out of the assets of the Company available for distribution
to its stockholders, and in the event of a Deemed Liquidation Event, the holders of shares of Series B Preferred Stock then outstanding
shall be entitled to be paid out of the consideration payable to stockholders in such Deemed Liquidation Event or the other proceeds
available for distribution to stockholders, before any payment shall be made to the holders of any other shares of capital stock of the
Company by reason of their ownership thereof, an amount per share equal to the greater of (i) three times the Original Per Share Price,
together with any dividends accrued but unpaid thereon (the " Liquidation Preference ") or (ii) such amount per share
as would have been payable had all shares of Series B Preferred Stock been converted into Common Stock (without regard to any limitations
on conversion set forth in the Certificate of Designation or otherwise) immediately prior to such Liquidation (the amount payable pursuant
to this sentence is hereinafter referred to as the " Series B Liquidation Amount "). If upon any such Liquidation, the
assets of the Company available for distribution to its stockholders shall be insufficient to pay the holders of shares of Series B Preferred
Stock the full Liquidation Preference, the holders of shares of Series B Preferred Stock shall share ratably in any distribution of the
assets available for distribution in proportion to the respective amounts which would otherwise be payable in respect of the shares held
by them upon such distribution if all amounts payable on or with respect to such shares were paid in full. After the payment in full
of all Series B Liquidation Amount, the remaining assets of the Company available for distribution to its stockholders or, in the case
of a Deemed Liquidation Event, the consideration not payable to the holders of shares of Series B Preferred Stock pursuant to the Certificate
of Designation shall be distributed among the holders of shares of Common Stock, pro rata based on the number of shares held by each
such holder.

 Following
the Stockholder Approval, upon any Liquidation, the assets of the Company available for distribution to its stockholders shall be distributed
among the holders of the shares of Series B Preferred Stock and Common Stock, pro rata based on the number of shares held by each such
holder, treating for this purpose all shares of Series B Preferred Stock as if they had been converted to Common Stock pursuant to the
terms of the Certificate of Designation immediately prior to such Liquidation, without regard to any limitations on conversion set forth
in the Certificate of Designation or otherwise.

 Redemption.
 Unless prohibited by Delaware law governing distributions to stockholders, in the event the Stockholder Approval is not obtained within
one year following the Issuance Date, shares of Series B-1 Preferred Stock shall be redeemed by the Company at a price equal to the then
Liquidation Preference at any time for up to three years following the Issuance Date commencing not more than 60 days after receipt by
the Company at any time on or after the one year anniversary of the Issuance Date of written notice from the holders of a majority of
the then outstanding shares of Series B-1 Preferred Stock, voting together as a single class (the " Redemption Request ")
requesting redemption of all shares of Series B-1 Preferred Stock (such date, the " Redemption Date "). Upon receipt
of a Redemption Request, the Company shall apply all of its assets to any such redemption, and to no other corporate purpose, except
to the extent prohibited by Delaware law governing distributions to stockholders. On the Redemption Date, the Company shall redeem, on
a pro rata basis in accordance with the number of shares of Series B-1 Preferred Stock owned by each holder, the total number of shares
of Series B-1 Preferred Stock outstanding immediately prior to the Redemption Date; provided, however, that Excluded Shares (as defined
in the Certificate of Designation) shall not be redeemed and shall be excluded from the calculations set forth in this sentence. If,
on the Redemption Date, Delaware law governing distributions to stockholders prevents the Company from redeeming all shares of Series
B-1 Preferred Stock to be redeemed, the Company shall ratably redeem the maximum number of shares that it may redeem consistent with
such law, and shall redeem the remaining shares as soon as it may lawfully do so under such law.

 Participation
Right. For a period of one year following closing of the transactions, the purchasers will have the right to participate
as an investor in any securities offering consummated by the Company.

 F- 33

 Item
9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosures

 None.

 Item
9A. Controls and Procedures

 Evaluation
of Disclosure Controls and Procedures

 Our
management, including our Chief Executive Officer and Chief Financial Officer, evaluated, as of the end of the period covered by
this Form 10-K, the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the
Exchange Act). Based on that evaluation, our management, including our Chief Executive Officer and Chief Financial Officer, concluded
that, as of December 31, 2023, our disclosure controls and procedures were effective at the reasonable assurance level.

 Management's
Annual Report on Internal Control Over Financial Reporting

 Our
management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rules
13a-15(f) and 15d-15(f) of the Exchange Act. Our management, under the supervision and with the participation of our Chief Executive
Officer and Chief Financial Officer, conducted an evaluation of the effectiveness of our internal control over financial reporting
as of December 31, 2023 based on the framework in Internal Control-Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (2013 Framework). Based on the results of its evaluation, our management, including our Chief Executive Officer and Chief Financial Officer, concluded that our
internal control over financial reporting was effective as of December 31, 2023.

 Attestation
Report of the Registered Public Accounting Firm

 As
a smaller reporting company as defined in the Exchange Act, we are exempt from the auditor attestation requirements of Section 404 of
the Sarbanes-Oxley Act of 2002. As a result, our independent registered public accounting firm has not audited or issued an attestation
report with respect to the effectiveness of our internal control over financial reporting as of December 31, 2023.

 Changes
in Internal Control Over Financial Reporting

 There
were no changes in our internal control over financial reporting during the most recent fiscal quarter ended December 31, 2023 that materially
affected, or is reasonably likely to materially affect, our internal control over financial reporting (as defined in Rule 13a-15(f) under
the Exchange Act).

 Item
9B. Other Information

 None

 Item
9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections

 Not
applicable.

 PART
III

 Item
10. Directors, Executive Officers and Corporate Governance

Annual Meeting of Stockholders for the fiscal year ended December 31, 2023, which will be filed with the Securities and Exchange Commission,
pursuant to Regulation 14A, no later than 120 days after the end of the 2023 fiscal year covered by this Form 10-K,or alternatively,
by amendment to this Form 10-K under cover of Form 10-K/A no later than the end of such 120 day period.

 Item
11. Executive Compensation

Annual Meeting of Stockholders for the fiscal year ended December 31, 2023, which will be filed with the Securities and Exchange Commission,
pursuant to Regulation 14A, no later than 120 days after the end of the 2023 fiscal year covered by this Form 10-K,or alternatively,
by amendment to this Form 10-K under cover of Form 10-K/A no later than the end of such 120 day period.

 Item
12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

Annual Meeting of Stockholders for the fiscal year ended December 31, 2023, which will be filed with the Securities and Exchange Commission,
pursuant to Regulation 14A, no later than 120 days after the end of the 2023 fiscal year covered by this Form 10-K,or alternatively,
by amendment to this Form 10-K under cover of Form 10-K/A no later than the end of such 120 day period.

 Item
13. Certain Relationships and Related Transactions, and Director Independence

Annual Meeting of Stockholders for the fiscal year ended December 31, 2023, which will be filed with the Securities and Exchange Commission,
pursuant to Regulation 14A, no later than 120 days after the end of the 2023 fiscal year covered by this Form 10-K,or alternatively,
by amendment to this Form 10-K under cover of Form 10-K/A no later than the end of such 120 day period.

 Item
14. Principal Accountant Fees and Services

Annual Meeting of Stockholders for the fiscal year ended December 31, 2023, which will be filed with the Securities and Exchange Commission,
pursuant to Regulation 14A, no later than 120 days after the end of the 2023 fiscal year covered by this Form 10-K,or alternatively,
by amendment to this Form 10-K under cover of Form 10-K/A no later than the end of such 120 day period.

 PART
IV

 Item
15. Exhibit and Financial Statements

 The
following documents are filed as part of this report:

 (1)

 Statements, included in Part II, " Item 8. Financial Statements and Supplementary Data ":

 Report of Independent Registered Public Accounting Firm

 Consolidated Balance Sheets as of December 31, 2023 and 2022

 Consolidated Statements of Operations for the years ended December 31, 2023 and 2022

 Consolidated Statements of Stockholders' Equity for the years ended December 31, 2023 and 2022

 Consolidated Statements of Cash Flows for the years ended December 31, 2023 and 2022

 Notes to Consolidated Financial Statements

 (2)

 Statement Schedules:

statement schedules have been omitted because either they are not applicable or the required information is included in the financial
statements or the notes thereto.

 (3)

 List
 of Exhibits:

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

 Exhibit
 No.

 2.1#

 Share and Purchase Agreement dated March 25, 2019 between Biofrontera Newderm LLC, Biofrontera AG, Maruho Co. Ltd. And Cutanea Life Sciences, Inc. (incorporated by reference to Exhibit 4.13 to Biofrontera AG's Form 20-F filed with the SEC on April 29, 2019).

 3.1

 Amended and Restated Certificate of Incorporation of the Company (incorporated by reference to Exhibit 3.1 to the Company's Form 8-K filed with the SEC on November 3, 2021).

 3.2

 Certificate of Designations of Series A Junior Participating Cumulative Preferred Stock of Biofrontera Inc. (incorporated by reference to Exhibit 3.1 to the Company's Registration Statement on Form 8-A filed with the SEC on October 14, 2022)

 3.3

 Amended and Restated Bylaws of the Company (incorporated by reference to Exhibit 3.2 to the Company's Current Report on Form 8-K filed with the SEC on November 3, 2021).

 3.4

 Certificate of Amendment to the Amended and Restated Certificate of Incorporation of Biofrontera Inc. (incorporated by reference to Exhibit 3.1 of the Company's Current Report on Form 8-K filed with the Securities and Exchange Commission on July 3, 2023

 3.5

 Certificate of Designation of Preferences, Rights and Limitations of the Series B Convertible Preferred Stock (incorporated by reference to Exhibit 3.1 to the Company's Current Report on Form 8-K filed with the SEC on February 23, 2024).

 4.1*

 Description of Securities

 4.2

 Form of IPO Unit Purchase Option (incorporated by reference to Exhibit 4.1 to the Company's Current Report on Form 8-K filed with the SEC on November 3, 2021)

 4.3

 Warrant Agent Agreement (incorporated by reference to Exhibit 4.2 to the Company's Current Report on Form 8-K filed with the SEC on November 3, 2021)

 4.4

 Form of Purchaser Warrant (incorporated by reference to Exhibit 4.1 to the Company's Form 8-K filed with the SEC on December 3, 2021).

 4.5

 Form of Pre-Funded Warrant (incorporated by reference to Exhibit 4.2 to the Company's Form 8-K filed with the SEC on December 3, 2021).

 4.6

 Form of Unit Purchase Option (incorporated by reference to Exhibit 4.3 to the Company's Form 8-K filed with the SEC on December 3, 2021)

 4.7

 Form of 2022 Purchaser Warrant (incorporated by reference to Exhibit 4.1 to the Company's Current Report on Form 8-K filed with the SEC on May 20, 2022)

 4.8

 Form of 2022 Pre-funded Warrant (incorporated by reference to Exhibit 4.2 to the Company's Current Report on Form 8-K filed with the SEC on May 20, 2022)

 4.9

 Form of Inducement Warrant (incorporated by reference to Exhibit 4.1 to the Company's Form 8-K filed with the SEC on July 28, 2022).

 4.10

 Stockholder Rights Agreement, dated as of October 13, 2022, between Biofrontera Inc. and Computershare Trust Company, N.A., as Rights Agent (incorporated by reference to Exhibit 4.1 to the Company's Registration Statement on Form 8-A filed with the SEC on October 14, 2022)

 4.11

 Amendment No. 1 to the Stockholder Rights Agreement, dated as of April 26, 2023, between Biofrontera Inc. and Computershare Trust Company, N.A., as Rights Agent (incorporated by reference to Exhibit 4.1 of the Company's Current Report on Form 8-K, filed on April 28, 2023).

 4.12

 Form of Common Warrant (incorporated by reference to Exhibit 4.1 to the Company's Current Report on Form 8-K filed with the SEC on November 2, 2023)

 4.13

 Form of Pre-Funded Warrant (incorporated by reference to Exhibit 4.2 to the Company's Current Report on Form 8-K filed with the SEC on November 2, 2023)

 4.14

 Form of Series B-3 Convertible Preferred Stock Warrant (incorporated by reference to Exhibit 4.1 to the Company's Current Report on Form 8-K filed with the SEC on February 23, 2024)

 10.1#

 Amended and Restated License and Supply Agreement dated June 16, 2021 by and among Biofrontera Pharma GmbH, Biofrontera Bioscience GmbH and Biofrontera Inc. (incorporated by reference to Exhibit 10.1 to Company's Form S-1 filed with the SEC on July 6, 2021).

 10.2#

 License and Supply Agreement dated March 10, 2014 by and between Ferrer Internacional, S.A. and Medimetriks Pharmaceuticals, Inc., as amended by Amendment No. 1 and Consent and Acknowledgment Agreement with respect thereto (incorporated by reference to Exhibit 4.14 to Biofrontera AG's Form 20-F filed with the SEC on April 29, 2019).

 10.3#

 Amendment No. 1 to License and Supply Agreement dated March 5, 2018 by and between Medimetriks Pharmaceuticals, Inc. and Ferrer Internacional, S.A. (incorporated by reference to Exhibit 4.15 to Biofrontera AG's Form 20-F filed with the SEC on April 29, 2019).

 10.4

 Consent and Acknowledgement Agreement dated March 5, 2018 by and between Medimetriks Pharmaceuticals, Inc. and Ferrer Internacional, S.A. (incorporated by reference to Exhibit 4.16 to Biofrontera AG's Form 20-F filed with the SEC on April 29, 2019).

 10.5#

 Supply Agreement dated March ___, 2018 by and between Ferrer Internacional, S.A. and Cutanea Life Sciences, Inc. (incorporated by reference to Exhibit 4.17 to Biofrontera AG's Form 20-F filed with the SEC on April 29, 2019).

 10.6

 Employment Agreement – Erica Monaco (incorporated by reference to Exhibit 10.6 to Amendment No. 2 to the Company's Form S-1 filed with the SEC on August 12, 2021).

 10.7

 Second Intercompany Revolving Loan Agreement dated March 31, 2021 by and between the Company and Biofrontera AG (incorporated by reference to Exhibit 10.7 to the Company's Form S-1 filed with the SEC on July 6, 2021).

 10.8

 Amended and Restated Master Contract Services Agreement, by and among the Company, Biofrontera AG, Biofrontera Pharma GmbH and Biofrontera Bioscience GmbH (incorporated by reference to Exhibit 10.8 to the Company's Form S-1 filed with the SEC on July 6, 2021).

 10.9

 Quality Agreement dated November 1, 2016, between the Company and Biofrontera Pharma GmbH (incorporated by reference to Exhibit 10.9 to Amendment No. 1 to the Company's Form S-1 filed with the SEC on July 26, 2021).

 10.10

 Intercompany Services Agreement dated January 1, 2016, between the Company, Biofrontera AG, Biofrontera Pharma GmbH and Biofrontera Bioscience GmbH (incorporated by reference to Exhibit 10.10 to Amendment No. 4 to the Company's Form S-1 filed with the SEC on September 16, 2021

 10.11

 Amended Employment Agreement dated October 1, 2021 – Hermann L bbert (incorporated by reference to Exhibit 10.11 to Amendment No. 5 to the Company's Form S-1 filed with the SEC on October 1, 2021).

 10.12

 2021 Omnibus Incentive Plan (as amended and restated on December 12, 2022) (incorporated by reference to Exhibit 10.1 to the Company's Form 8-K filed with the SEC on December 16, 2022).

 10.13

 Form of Restricted Stock Unit Executive Award Agreement under 2021 Omnibus Incentive Plan (incorporated by reference to Exhibit 10.13 to Amendment No. 6 to the Company's Form S-1 filed with the SEC on October 12, 2021).

 10.14

 Form of Nonqualified Stock Option Executive Award Agreement under 2021 Omnibus Incentive Plan (incorporated by reference to Exhibit 10.14 to Amendment No. 6 to the Company's Form S-1 filed with the SEC on October 12, 2021).

 10.15

 Form of Nonqualified Stock Option Award Agreement under 2021 Omnibus Incentive Plan (incorporated by reference to Exhibit 10.15 to Amendment No. 6 to the Company's Form S-1 filed with the SEC on October 12, 2021).

 10.16

 Employee Stock Purchase Plan (incorporated by reference to Exhibit 10.16 filed with the SEC on October 12, 2021).

 10.17#

 Corrected Amendment to Amended and Restated License and Supply Agreement dated October 8, 2021 by and among Biofrontera Pharma GmbH, Biofrontera Bioscience GmbH and Biofrontera Inc. (incorporated by reference to Exhibit 10.17 to Amendment No. 7 to the Company's Form S-1 filed with the SEC on October 13, 2021).

 10.18

 Form of Securities Purchase Agreement (incorporated by reference to Exhibit 10.1 to the Company's Form 8-K filed with the SEC on December 3, 2021).

 10.19

 Form of Registration Rights Agreement (incorporated by reference to Exhibit 10.2 to the Company's Form 8-K filed with the SEC on December 3, 2021).

 10.20

 Amendment to Amended Employment Agreement effective as December 15, 2021 and dated March 2, 2022 — Herman L bbert (incorporated by reference to Exhibit 10.1 to the Company's Form 8-K filed with the SEC on March 8, 2022).

 10.21

 Amended Settlement Allocation Agreement dated March 31,2022 between the Company and Biofrontera Bioscience GmbH, Biofrontera Pharma GmbH, Biofrontera Development GmbH, Biofrontera Neuroscience GmbH, (incorporated by reference to Exhibit 10.1 to the Company's Form 8-K filed with the SEC on April 5, 2022).

 10.22

 Amendment to Employment Agreement effective as April 1, 2022 — Erica Monaco (incorporated by reference to Exhibit 10.2 to the Company's Form 8-K filed with the SEC on April 5, 2022).

 10.23

 Form of Securities Purchase Agreement for 2022 Private Placement (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed with the SEC on May 20, 2022)

 10.24

 Form of Registration Rights Agreement for 2022 Private Placement (incorporated by reference to Exhibit 10.2 to the Company's Current Report on Form 8-K filed with the SEC on May 20, 2022)

 10.25

 Form of Inducement Letter (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed with the SEC on July 27, 2022)

 10.26

 Employment Agreement —Fred Leffler (incorporated by reference to Exhibit 10.1 to the Company's Form 8-K filed with the SEC on October 24, 2022)

 10.27

 Form of Exchange Agreement (incorporated by reference to Exhibit 10.1 to the Company's Form 8-K filed with the SEC on October 31, 2022)

 10.28#

 Settlement Agreement dated April 11, 2023 between Biofrontera Inc., Hermann Luebbert, John J. Borer, Loretta M. Wedge, Beth J. Hoffman, Kevin D. Weber and Biofrontera AG (incorporated by reference to Exhibit 10.1 to the Company's Form 10-Q filed with the SEC on May 12, 2023)

 10.29

 Securities Purchase Agreement, dated October 30, 2023, by and between Biofrontera Inc. and an institutional investor (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed with the SEC on November 2, 2023)

 10.30

 Placement Agency Agreement, dated October 30, 2023, by and between Biofrontera Inc. and Roth Capital Partner, LLC (incorporated by reference to Exhibit 10.2 to the Company's Form 8-K filed with the SEC on November 2, 2023)

 10.31

 Amendment to Common Stock Purchase Warrants, dated October 30, 2023, by and between Biofrontera Inc. and institutional investor (incorporated by reference to Exhibit 10.3 to the Company's Form 8-K filed with the SEC on November 2, 2023)

 10.32

 Amendment No. 1 to Settlement Agreement dated as of October 12, 2023, between Biofrontera Inc., Hermann Luebbert, John J. Borer, Loretta M. Wedge, Beth J. Hoffman, Kevin D. Weber and Biofrontera AG (incorporated by reference to Exhibit 10.1 of the Company's Current Report on Form 8-K filed with the SEC on October 13, 2023)

 10.33

 Addendum to Amended and Restated License and Supply Agreement, dated as of December 12, 2023 (incorporated by reference to Exhibit 10.1 of the Company's Current Report on Form 8-K filed with the SEC on December 15, 2023)

 10.34*

 Amended and Restated Business Loan and Security Agreement between Biofrontera Inc. and Agile Capital Funding, LLC and Agile Lending, LLC, dated as of December 21, 2023

 10.35*

 Business Loan and Security Agreement between Biofrontera Inc. and Cedar Advance, LLC, dated as of December 21, 2023

 10.36

 Confidential Settlement Agreement and Mutual Release, dated as of December 27, 2023 and effective as of December 22, 2023, by and between the Company and Maruho (incorporated by reference to Exhibit 10.1 of the Company's Current Report on Form 8-K filed with the SEC on January 3, 2024)

 10.37

 Amended and Restated Addendum to Amended and Restated License and Supply Agreement, dated January 29, 2024 (incorporated by reference to Exhibit 10.1 of the Company's Current Report on Form 8-K filed with the SEC on February 2, 2024)

 10.38

 Second Amended and Restated License and Supply Agreement, dated February 19, 2024, between the Company, Pharma and Bioscience. (incorporated by reference to Exhibit 10.1 of the Company's Current Report on Form 8-K filed with the SEC on February 20, 2024)

 10.39

 Release of Claims, dated February 13, 2024, between the Company, Pharma and Bioscience. (incorporated by reference to Exhibit 10.2 of the Company's Current Report on Form 8-K filed with the SEC on February 20, 2024)

 10.40

 Form of Securities Purchase Agreement, dated February 19, 2024, by and amount Biofrontera Inc. and the purchasers named therein (incorporated by reference to Exhibit 10.1 of the Company's Current Report on Form 8-K filed with the SEC on February 23, 2024)

 10.41

 Placement Agency Agreement, dated February 19, 2024, by and between Biofrontera Inc. and Roth Capital Partners, LLC (incorporated by reference to Exhibit 10.2 of the Company's Current Report on Form 8-K filed with the SEC on February 23, 2024)

 21.1*

 List of Subsidiaries of the Company

 23.1*

 Consent of Marcum LLP, independent registered public accounting firm

 31.1*

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

 31.2*

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

 32.1*

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

 32.2*

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

 97*

 Compensation Clawback Policy, as approved by the Board of Directors on November 29, 2023

 101.INS*

 101.SCH*

 101.CAL*

 101.DEF*

 101.LAB*

 101.PRE*

 Cover

 *

 Filed
 herewith.

 Indicates
 a management contract or compensatory plan or arrangement.

 #

 Certain
 confidential portions of this Exhibit were omitted by means of marking such portions with brackets ("[***]") because
 the identified confidential portions (i) are not material and (ii) would be competitively harmful if publicly disclosed.

 Item
16. Form 10-K Summary

 Not
applicable.

 SIGNATURES

to the requirements of the Securities Act of 1933, as amended, the registrant has duly caused this registration statement to be signed
on its behalf by the undersigned, thereunto duly authorized in the City of Woburn, Commonwealth of Massachusetts, on March 15, 2024.

 INC.

 By:

 /s/
 Hermann L bbert

 Name:

 Hermann
 L bbert

 Title:

 Chief
 Executive Officer and Chairman

 Signature

 Title

 Date

 /s/
 Hermann L bbert

 Chief
 Executive Officer and Chairman

 March

 Hermann
 L bbert

 ( Principal
 Executive Officer)

 /s/
 E. Fred Leffler

 Chief
 Financial Officer

 March

 E.
 Fred Leffler

 ( Principal
 Financial Officer)

 (Principal
 Accounting Officer)

 /s/
 John J. Borer

 Director

 March

 John
 J. Borer

 /s/
 Beth J. Hoffman

 Director

 March

 Beth
 J. Hoffman

 /s/
 Heikki Lanckriet

 Director

 March

 Heikki
 Lanckriet

 /s/
 Kevin D. Weber

 Director

 March

 Kevin
 D. Weber