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Biofrontera Inc. - Quarter Report: 2022 September (Form 10-Q)

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

 

 

FORM 10-Q

 

 

 

(Mark One)

 

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

 

For the quarterly period ended September 30, 2022

 

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

 

 

 

Biofrontera Inc.

(Exact name of registrant as specified in its charter)

 

 

 

Delaware   47-3765675

(State or other jurisdiction of

incorporation or organization)

 

(IRS Employer

Identification No.)

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

 

(781) 245-1325

(Registrant’s telephone number, including area code)

 

Not Applicable

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

 

 

 

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

 

Title of each class   Trading Symbol(s)   Name of each exchange on which registered
Common stock, par value $0.001 per share   BFRI   The Nasdaq Stock Market LLC

Preferred Stock Purchase Rights

     

The Nasdaq Stock Market LLC

Warrants, each warrant exercisable for one share of common stock, each at an exercise price of $5.00 per share   BFRIW   The Nasdaq Stock Market LLC

 

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

 

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

 

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

 

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

 

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

 

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

 

As of November 10, 2022, there were 26,699,002 shares outstanding of the registrant’s common stock, par value $0.001 per share.

 

 

 

 

 

 

TABLE OF CONTENTS

 

  PART 1. FINANCIAL INFORMATION  
     
ITEM 1. Financial Statements  
  Consolidated Balance Sheets as of September 30, 2022 (unaudited) and December 31, 2021 3
  Consolidated Statements of Operations for the three and nine months ended September 30, 2022 (unaudited) and 2021 (unaudited) 4
  Consolidated Statements of Stockholders’ Equity for the three and nine months ended September 30, 2022 (unaudited) and 2021 (unaudited) 5
  Consolidated Statements of Cash Flows for the nine months ended September 30, 2022 (unaudited) and 2021 (unaudited) 6
  Notes to Consolidated Financial Statements 7
ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 20
ITEM 3. Quantitative and Qualitative Disclosures About Market Risk 32
ITEM 4. Controls and Procedures 32
     
  PART II. OTHER INFORMATION  
     
ITEM 1. Legal Proceedings 33
ITEM 1A. Risk Factors 33
ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds 33
ITEM 3. Defaults Upon Senior Securities 33
ITEM 4. Mine Safety Disclosures 33
ITEM 5. Other Information 33
ITEM 6. Exhibits 34
Signatures 35

 

2
 

 

PART I. FINANCIAL INFORMATION

 

Item 1. Financial Statements

 

BIOFRONTERA INC.

CONSOLIDATED BALANCE SHEETS

(In thousands, except par value and share amounts)

 

   September 30, 2022   December 31, 2021 
   (Unaudited)     
         
ASSETS          
Current assets:          
Cash and cash equivalents  $27,518   $24,545 
Accounts receivable, net   1,562    3,784 
Other receivables, related party   3,503    8,647 
Inventories   12,087    4,458 
Prepaid expenses and other current assets   3,823    4,987 
           
Total current assets   48,493    46,421 
           
Other receivables long term, related party   2,813    2,813 
Property and equipment, net   224    267 
Intangible asset, net   3,136    3,450 
Other assets   393    268 
           
Total assets  $55,059   $53,219 
           
LIABILITIES AND STOCKHOLDERS’ EQUITY          
Current liabilities:          
Accounts payable  $253   $658 
Accounts payable, related parties   4,206    282 
Acquisition contract liabilities, net   3,242    3,242 
Accrued expenses and other current liabilities   9,442    9,654 
           
Total current liabilities   17,143    13,836 
           
Long-term liabilities:          
Acquisition contract liabilities, net   5,711    9,542 
Warrant liability   3,964    12,854 
Other liabilities   5,646    5,649 
           
Total liabilities  $32,464   $41,881 
           
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 September 30, 2022 and December 31, 2021  $-   $- 
Common Stock, $0.001 par value, 300,000,000 shares authorized; 23,550,960 and 17,104,749 shares issued and outstanding as of September 30, 2022 and December 31, 2021   23    17 
Additional paid-in capital   99,306    90,200 
Accumulated deficit   (76,734)   (78,879)
           
Total stockholders’ equity   22,595    11,338 
           
Total liabilities and stockholders’ equity  $55,059   $53,219 

 

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

 

3
 

 

BIOFRONTERA INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

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

(Unaudited)

 

                     
  

Three months ended

September 30,

  

Nine months ended

September 30,

 
   2022   2021   2022   2021 
                 
Products revenues, net  $4,290   $4,319   $18,467   $14,890 
Revenues, related party   32    15    63    42 
                     
Total revenues, net   4,322    4,334    18,530    14,932 
                     
Operating expenses                    
Cost of revenues, related party   2,127    2,249    9,504    7,630 
Cost of revenues, other   98    41    425    339 
Selling, general and administrative   7,765    17,090    25,050    27,412 
Selling, general and administrative, related party   171    160    612    520 
Restructuring costs   -    199    -    654 
Change in fair value of contingent consideration   (2,200)   700    (4,100)   1,698 
                     
Total operating expenses   7,961    20,439    31,491    38,253 
                     
Loss from operations   (3,639)   (16,105)   (12,961)   (23,321)
                     
Other income (expense)                    
Change in fair value of warrants   1,185    -    15,267    - 
Interest expense, net   (89)   (86)   (160)   (255)
Other income (expense), net   (22)   185    30    419 
                     
Total other income (expense)   1,074    99    15,137    164 
                     
Income (loss) before income taxes   (2,565)   (16,006)   2,176    (23,157)
Income tax expense   1    6    31    51 
                     
Net income (loss)  $(2,566)  $(16,012)  $2,145   $(23,208)
                     
Income (loss) per common share:                    
Basic  $(0.11)  $(2.00)  $0.11   $(2.90)
Diluted  $(0.11)  $(2.00)  $0.11   $(2.90)
                     
Weighted-average common shares outstanding:                    
Basic   22,725,821    8,000,000    19,560,351    8,000,000 
Diluted   22,725,821    8,000,000    19,605,014    8,000,000 

 

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

 

4
 

 

BIOFRONTERA INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In thousands, except number of shares)

(Unaudited)

 

Three and Nine Months Ended September 30, 2022

 

   Shares   Amount   In Capital   Deficit   Total 
   Common Stock   Additional Paid-   Accumulated     
   Shares   Amount   In Capital   Deficit     Total 
Balance June 30, 2022   19,011,438   $19   $91,382   $(74,168)  $17,233 
Exercise of pre-funded warrants   1,569,000    1    2,840         2,841 
Exercise of PIPE warrants   2,857,143    3    4,683    -    4,686 
Issuance of shares for vested restricted stock units   113,379    -    -    -    - 
Stock based compensation   -    -    401    -    401 
Net loss   -    -    -    (2,566)   (2,566)
Balance, September 30, 2022   23,550,960   $23   $99,306   $(76,734)  $22,595 
                          
Balance, December 31, 2021   17,104,749   $17   $90,200   $(78,879)  $11,338 
Issuance of common stock and warrants under private placement, net of issuance costs   1,850,000    2    114    -    116 
Exercise of pre-funded warrants   1,569,000    1    2,840         2,841 
Exercise of PIPE warrants   2,857,143    3    4,683    -    4,686 
Issuance of shares for vested restricted stock units   170,068    -    -    -    - 
Stock based compensation   -    -    1,469    -    1,469 
Net income   -    -    -    2,145    2,145 
Balance, September 30, 2022   23,550,960   $    23   $99,306   $(76,734)  $22,595 

 

Three and Nine Months Ended September 30, 2021

 

   Common Stock   Additional Paid-   Accumulated     
   Shares   Amount   In Capital   Deficit   Total 
Balance June 30, 2021   8,000,000   $8   $46,986   $(48,362)  $(1,368)
Net loss   -    -    -    (16,012)   (16,012)
Balance, September 30, 2021   8,000,000   $8   $46,986   $(64,374)  $(17,380)
                          
Balance, December 31, 2020   8,000,000   $8   $46,986   $(41,166)  $5,828 
Net loss   -    -    -    (23,208)   (23,208)
Balance, September 30, 2021   8,000,000   $      8   $46,986   $(64,374)  $(17,380)

 

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

 

5
 

 

BIOFRONTERA INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In Thousands)

(Unaudited)

 

   2022   2021 
  

Nine Months Ended

September 30,

 
   2022   2021 
Cash flows from operating activities:          
           
Net income (loss)  $2,145   $(23,208)
           
Adjustments to reconcile net income (loss) to cash flows used in operations          
           
Depreciation   80    95 
Amortization of acquired intangible assets   314    314 
Change in fair value of contingent consideration   (4,100)   1,698 
Change in fair value of warrant liabilities   (15,267)   - 
Stock-based compensation   1,469    - 
Provision for inventory obsolescence   100    31 
Provision for doubtful accounts   111    36 
Non-cash interest expense   268    268 
           
Changes in operating assets and liabilities:          
Accounts receivable   2,111    1,210 
Other receivables, related party   5,145    - 
Prepaid expenses and other assets   4,121    234 
Inventories   (7,728)   1,613 
Accounts payable and related party payables   3,519    308 
Accrued expenses and other liabilities   (216)   11,676 
           
Cash flows used in operating activities   (7,928)   (5,725)
           
Cash flows from investing activities          
Disbursement for loan receivable   (3,033)   - 
Purchases of property and equipment   (37)   (2)
           
Cash flows used in investing activities   (3,070)   (2)
           
Cash flows from financing activities:          
Payment of deferred offering costs   -    (638)
Proceeds from issuance of common stock and warrants in private placement, net of issuance costs   9,391    - 
Proceeds from exercise of warrants   4,630    - 
           
Cash flows provided by (used) in financing activities   14,021    (638)
           
Net increase (decrease) in cash and cash equivalents   3,023    (6,365)
Cash, cash equivalents and restricted cash, at the beginning of the period   24,742    8,278 
           
Cash, cash equivalents and restricted cash, at the end of the period  $27,765   $1,913 
           
Supplemental disclosure of cash flow information          
Interest paid  $10   $- 
Income taxes paid, net  $30   $9 
           
Supplemental non-cash investing and financing activities          
Deferred offering costs included in accrued expenses and other liabilities  $-   $460 
Non-cash purchase of fixed assets included in accounts payable and related party payable  $-   $13 
Conversion of warrant liability to equity  $

6,840

   $- 

 

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

 

6
 

 

Biofrontera Inc.

Notes to Consolidated Financial Statements

(Unaudited)

 

1. Business Overview

 

Biofrontera Inc. (the “Company”) includes its wholly owned subsidiary Bio-FRI GmbH (“Bio-FRI” or “subsidiary”).

 

Biofrontera Inc. is a U.S.-based biopharmaceutical company specializing in the commercialization of pharmaceutical products for the treatment of dermatological conditions, in particular, diseases caused primarily by exposure to sunlight that result in sun damage to the skin. Our principal licensed products focus on the treatment of actinic keratoses, which are skin lesions that can sometimes lead to skin cancer. We also market a licensed topical antibiotic for treatment of impetigo, a bacterial skin infection.

 

Our principal product is Ameluz®, which is a prescription drug approved for use in combination with our licensor’s FDA-approved medical devices, the BF-RhodoLED® lamp series, consisting of the BF-RhodoLED® and the RhodoLED® XL lamps, for photodynamic therapy (“PDT”) (when used together, “Ameluz® PDT”) in the U.S. for the lesion-directed and field-directed treatment of actinic keratosis 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”), by and among us and Biofrontera Pharma GmbH and Biofrontera Bioscience GmbH (collectively, the (“Ameluz Licensor”) originally dated as of October 1, 2016, and as subsequently amended on October 8, 2021. Refer to Note 16, Related Party Transactions, for further details.

 

Our second prescription drug 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 due to staphylococcus aureus or streptococcus pyogenes. The approved indication is impetigo, a common skin infection. It is approved for use in adults and children 2 months and older. We are currently selling Xepi® for this indication in the U.S. under an exclusive license and supply agreement (“Xepi LSA”) with Ferrer Internacional S.A. (“Ferrer”) that was acquired by Biofrontera Inc. on March 25, 2019 through our acquisition of Cutanea Life Sciences, Inc. Refer to Note 16, Related Party Transactions, for further details.

 

Our subsidiary, Bio-FRI was formed on February 9, 2022, as a German presence to facilitate our relationship with the Ameluz Licensor.

 

Liquidity and Going Concern

 

The Company’s primary sources of liquidity are its existing cash balances and cash flows from equity financing transactions. In July of 2022, we received proceeds of $4.6 million from the exercise of common stock warrants (See Note 18 Stockholders’ Equity). As of September 30, 2022, we had cash and cash equivalents of $27.5 million, compared to $24.5 million as of December 31, 2021.

 

Since we commenced operations in 2015, we have generated significant losses. For the nine months ended September 30, 2022 and 2021, we incurred losses from operations of $13.0 million and $23.3 million, respectively. We incurred net cash outflows from operations of $7.9 million and $5.7 million for the same periods, respectively. We had an accumulated deficit as of September 30, 2022 of $76.7 million.

 

The Company’s short-term material cash requirements include working capital needs and satisfaction of contractual commitments including auto leases (see Note 23, Commitments and Contingencies), Maruho start-up payments of $7.3 million (see Note 3. Acquisition Contract Liabilities), and legal settlement expenses after reimbursement from Biofrontera AG (“Biofrontera AG”), a significant shareholder and our former parent company, of $5.6 million (see Note 13. Accrued Expenses and Other Current Liabilities). Long-term material cash requirements include potential milestone payments to Ferrer Internacional S.A (see Note 23. Commitments and Contingencies) and contingent consideration payments to Maruho (see Note 3. Acquisition Contract Liabilities). 

 

Additionally, we expect to continue to incur operating losses due to significant discretionary sales and marketing efforts as we seek to expand the commercialization of our licensed products in the United States. We also expect to incur additional expenses to add and improve operational, financial and information systems and personnel, including personnel to support our product commercialization efforts. In addition, we expect to incur significant costs to continue to comply with corporate governance, regulatory reporting and other requirements applicable to us as a public company in the U.S. We also intend to be opportunistic in our business plans which may include acquiring additional shares of Biofrontera AG as a strategic measure.

 

Our future growth is dependent on our ability to obtain additional equity financing. Based on current operating plans and financial forecasts, we expect that our current cash and cash equivalents will be sufficient to fund our operations for at least the next twelve months from the date of issuance of our financial statements. However, if our current operating plans or financial forecasts change, or we are unable to obtain additional financing, we may need to reduce the discretionary spend on promotional expenses, branding, marketing consulting and defer some hiring. While we expect to continue being flexible in our spending over the next twelve months, we do not consider there to be a need to significantly revise our operations currently.

 

7
 

 

2. Summary of Significant Accounting Policies

 

Basis for Preparation of the Financial Statements

 

The accompanying unaudited interim consolidated financial statements of the Company have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) for interim financial reporting. Certain information and footnote disclosures normally included in the annual financial statements prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) have been condensed or omitted pursuant to such rules and regulations. In the Company’s opinion, the unaudited consolidated financial statements include all material adjustments, all of which are of a normal and recurring nature, necessary to present fairly the Company’s financial position as of September 30, 2022, the Company’s operating results for the three and nine months ended September 30, 2022 and 2021, and the Company’s cash flows for the nine months ended September 30, 2022 and 2021. The accompanying financial information as of December 31, 2021 is derived from audited financial statements. Interim results are not necessarily indicative of results for a full year. The information included in this Quarterly Report on Form 10-Q should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2021, filed with the SEC on April 11, 2022.

 

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.

 

The Company’s significant accounting policies are discussed in Note 2—Summary of Significant Accounting Policies within the notes to financial statements for the year ended December 31, 2021, included in the Company’s Annual Report on Form 10-K. There have been no significant changes to these policies during the nine months ended September 30, 2022 other than the following.

 

Consolidation

 

The accompanying consolidated financial statements have been prepared in conformity 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.

 

Use of Estimates

 

The preparation of the 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, valuation allowances for receivables and inventory, valuation of contingent consideration and warrant liabilities, realization of intangible and other long-lived assets, product sales allowances and reserves, share-based payments and income taxes including deferred tax assets and liabilities. Estimates are based on historical experience and other assumptions that are considered appropriate in the circumstances. They are continuously reviewed but may vary from the actual values.

 

Recently Issued Accounting Pronouncements   

 

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which requires organizations that lease assets to recognize on the balance sheet the assets and liabilities for the rights and obligations created by those leases. The new guidance requires that a lessee recognize assets and liabilities for leases with lease terms of more than twelve months and recognition, presentation and measurement in the financial statements will depend on the lease classification as a finance or operating lease. In addition, the new guidance will require disclosures to help investors and other financial statement users better understand the amount, timing and uncertainty of cash flows arising from leases. The JOBS ACT provides that an emerging growth company can take advantage of an extended transition period for complying with new or revised accounting standards. This allows us to delay the adoption of this new standard until it would otherwise apply to private companies. The new standard will be effective for us for fiscal years beginning after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2022. The Company is currently evaluating the impact of adopting this guidance. Upon adoption of Topic 842, the Company expects to recognize a right-of-use asset and lease liability for all financing and operating leases with terms greater than twelve months.

 

In September 2016, the FASB issued 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 will be effective for us on January 1, 2023. The Company is currently evaluating the impact of adopting this guidance.

 

3. Acquisition Contract Liabilities

 

On March 25, 2019, we entered into an agreement (as amended, the “Share Purchase Agreement”) 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 Co, Ltd. owned approximately 29.9% of Biofrontera AG through its fully owned subsidiary Maruho Deutschland GmbH. Biofrontera AG is our former parent, and currently a significant shareholder.

 

8
 

 

Pursuant 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 are 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 will be shared equally between Maruho and Biofrontera until 2030 (“contingent consideration”).

 

In connection with this acquisition in 2019, we recorded the $7.3 million in start-up cost financing, a $1.7 million contract asset related to the benefit associated with the non-interest-bearing start-up cost financing and $6.5 million of contingent consideration related to the estimated profits from the sale of Cutanea products to be shared equally with Maruho.

 

The contract asset related to the start-up cost financing is amortized on a straight-line basis using a 6.0% interest rate over the 57-month term of the financing arrangement, which ends on December 31, 2023. The contract asset is shown net of the related start-up cost financing within acquisition contract liabilities, net.

 

The contingent consideration was recorded at acquisition-date fair value using a Monte Carlo simulation with an assumed discount rate of approximately 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-measures contingent consideration and re-assesses the underlying assumptions and estimates at each reporting period utilizing a scenario-based method.

 

Acquisition contract liabilities, net consist of the following:

 

(in thousands)  September 30, 2022   December 31, 2021 
Short-term acquisition contract liabilities:          
Contingent consideration  $-   $- 
Start-up cost financing   3,600    3,600 
Contract asset   (358)   (358)
Acquisition contract liabilities, net  $3,242   $3,242 
           
Long-term acquisition contract liabilities:          
Contingent consideration  $2,100   $6,200 
Start-up cost financing   3,700    3,700 
Contract asset   (89)   (358)
Acquisition contract liabilities, net  $5,711   $9,542 
           
Total acquisition contract liabilities:          
Contingent consideration  $2,100   $6,200 
Start-up cost financing   7,300    7,300 
Contract asset   (447)   (716)
Total acquisition contract liabilities, net  $8,953   $12,784 

 

4. Fair Value Measurements

 

The following table presents information about the Company’s assets that are measured at fair value on a recurring basis at September 30, 2022 and December 31, 2021 and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value:

 

(in thousands)  Level   September 30, 2022   December 31, 2021 
             
Liabilities:               
Contingent Consideration   3   $2,100   $6,200 
Warrant liability – 2021 Purchase Warrants   3   $-   $12,854 
Warrant liability - 2022 Purchase Warrants   3   $1,607   $- 
Warrant liability – 2022 Inducement Warrants   3   $2,357   $- 

 

9
 

 

Contingent Consideration

 

Contingent consideration, which relates to the estimated profits from the sale of Cutanea products to be shared equally with Maruho, 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.

 

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

 

(in thousands)     
Balance at December 31, 2020  $7,602 
Change in fair value of contingent consideration   1,698 
Balance at September 30, 2021  $9,300 
      
Balance at December 31, 2021  $6,200 
Change in fair value of contingent consideration   (4,100)
Balance at September 30, 2022  $2,100 

 

Warrant Liability

 

Exercise of 2021 Purchase Warrant and Issuance of July 2022 Inducement Warrant. On July 26, 2022, the Company entered into an Inducement Letter with the holder of the Company’s 2021 Purchase Warrants (the “Investor”). The 2021 Purchase Warrants were originally issued on December 1, 2021 to purchase up to 2,857,143 shares of common stock, par value $0.001 per share. The Investor agreed to exercise for cash, the 2021 Purchase Warrants, in exchange for the Company’s agreement to (i) lower the exercise price of the 2021 Purchase Warrants from $5.25 to $1.62 per share and (ii) issue a new warrant (the “Inducement Warrant”) to purchase up to 4,285,715 shares of common stock. The Company received proceeds of $4.6 million from the exercise of the 2021 Purchase Warrants and expensed $0.3 million of related financial advisory fees.

 

This price modification triggered the requirement for modification accounting of these warrants.  Based on the applicable guidance for liability classified warrants, the warrants issued during the three months ended September 2022 in connection with the modification and exercise of the 2021 Purchase Warrants were considered inducement warrants and their fair value of $3.9 million at issuance was considered part of the modification transaction and included in the change in fair value and recognized in the consolidated statement of operations. The fair value was determined using a Black-Scholes option pricing model with the following assumptions: fair value of the underlying common stock of $1.64, expected volatility of 70%, risk free rate of 2.84%, remaining contractual term of 4.34 years and a dividend yield of 0%. The expected life of the warrants is assumed to be equivalent to their remaining contractual term.

 

The Inducement Warrant is exercisable on or after January 27, 2023 at a price per share of $1.66 and expires on December 1, 2026.

 

May 2022 Pre-Funded and Purchase Stock Warrants. Warrants issued on May 16, 2022 in conjunction with the private placement to an institutional shareholder were accounted for as liabilities in accordance with ASC 815-40. Pre-funded common stock purchase warrants to purchase up to 1,569,000 shares of our common stock at a nominal exercise price of $0.001 per share (the “2022 Pre-funded Warrants”) and common stock purchase warrants to purchase up to 3,419,000 shares of our common stock at an exercise price of $2.77 per share (the “2022 Purchase Warrants”) are presented within warrant liability in the accompanying consolidated balance sheets. The warrant liability is measured at fair value at inception and on a recurring basis, with changes in fair value presented within the consolidated statements of operations. On July 14, 2022, the 2022 Pre-funded Warrants were exercised resulting in net proceeds of $2,000. The estimated fair value of the May 2022 Purchase Warrant at September 30, 2022 was determined using the Black-Scholes Option Pricing Model with the following assumptions: fair value of the underlying common stock of $1.05, expected volatility of 75%, risk free rate of 4.01%, remaining contractual term of 5.13 years and a dividend yield of 0%. The expected life of the warrants is assumed to be equivalent to their remaining contractual term.

 

The Company utilized a Black-Scholes option pricing model to estimate the fair value of the Inducement Warrant at September 30, 2022 with the following assumptions: fair value of the underlying common stock of $1.05, expected volatility of 80%, risk free rate of 4.10%, remaining contractual term of 4.17 years and a dividend yield of 0%. The expected life of the warrants is assumed to be equivalent to their remaining contractual term. 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 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 statements of operations.

 

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

 

(in thousands)     
Fair value at December 31, 2021  $12,854 
Issuance of new warrants   13,217 
Exercise of warrants   (6,840)
Change in fair value of warrant liability   (15,267)
Fair value at September 30, 2022  $3,964 

 

10
 

 

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 GmbH (“Bioscience”) for BF-RhodoLED® leasing and installation service. Refer to Note 16, Related Party Transactions.

 

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

 

(in thousands):  Returns   Co-pay assistance program   Prompt pay discounts   Government and payor rebates   Total 
Balance at December 31, 2020  $217   $52   $15   $43   $327 
Provision related to current period sales   2    211    6    119    338 
Credit or payments made during the period   (142)   (263)   (5)   (113)   (523)
Balance at September 30, 2021  $77   $-   $16   $49   $142 
                          
Balance at December 31, 2021  $43   $101   $48   $54   $246 
Provision related to current period sales   8    503    16    164    691 
Credit or payments made during the period   (5)   (400)   (23)   (149)   (577)
Balance at September 30, 2022  $46   $204   $41   $69   $360 

 

6. Accounts Receivable, net

 

Accounts receivables are mainly attributable to the sale of Ameluz®, the BF-RhodoLED® and Xepi®. It is expected that all trade receivables will be settled within twelve months of the balance sheet date.

 

The allowance for doubtful accounts was $0.1 million and negligible as of September 30, 2022 and December 31, 2021, respectively.

 

7. Other Receivables, Related Party

 

As of September 30, 2022, the Company has a receivable of $6.3 million ($3.5 short term and $2.8 long-term) due from Biofrontera AG of which $6.1 million is due from Biofrontera AG for its 50% share of the balance of a legal settlement for which both parties are jointly and severally liable. The Company has a contractual right to repayment of its share of the settlement payment, plus other miscellaneous settlement costs, from Biofrontera AG under the Settlement Allocation Agreement entered into on December 9, 2021 and as amended on March 31, 2022, which provided that the settlement payments would first be made by the Company and then reimbursed by Biofrontera AG for its share. The March 31, 2022 Amended Settlement Allocation Agreement 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®). As such, no reserve for the receivable has been recorded as of September 30, 2022 or December 31, 2021.

 

11
 

 

The remaining $0.2 million of other receivables, related party pertains to service agreements and chargebacks. See Note 16- Related Party Transactions.

 

8. Inventories

 

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

 

In assessing the consumption of inventories, the sequence of consumption is assumed to be based on the first-in-first-out (FIFO) method. We recorded a provision of $0.1 million related to BF-RhodoLED® devices for the nine months ended September 30, 2022. The provision for Xepi® inventory obsolescence was negligible, for the three months ended September 30, 2022 and for the three and nine months ended September 30, 2021.

 

9. Prepaid Expenses and Other Current Assets

 

Prepaid expenses and other current assets consist of the following:

 

(in thousands)  September 30, 2022   December 31, 2021 
Loan receivable, short term  $3,017   $- 
Receivable for common stock warrants proceeds  $-   $3,258 
Prepaid expenses   460   $824 
Security deposits   85    149 
Other   261    756 
Total  $3,823   $4,987 

 

On September 23, 2022. the Company entered into a loan agreement with Quirin PrivatBank AG in the amount of 3.1 million Euros. The loan receivable bears interest at 1.0% from date of disbursement, is due on December 6, 2022 and is repayable at the option of the holder, in cash or in shares of Biofrontera AG acquired with the funds disbursed from the loan.

 

10. Property and Equipment, Net

 

Property and equipment, net consists of the following:

 

(in thousands)  September 30, 2022   December 31, 2021 
Computer equipment  $88   $85 
Computer software   27    27 
Furniture & fixtures   81    81 
Leasehold improvement   368    368 
Machinery & equipment   145    112 
Property and equipment, gross   709    673 
Less: Accumulated depreciation   (485)   (406)
Property and equipment, net  $224   $267 

 

Depreciation expense was $0.1, for the nine months ended September 30, 2022 and 2021. which was included in selling, general and administrative expense in the consolidated statements of operations. Depreciation expense for the three months ended September 30, 2022 and 2021 was negligible.

 

11. Intangible Asset, Net

 

Intangible asset, net consists of the following:

 

(in thousands)  September 30, 2022   December 31, 2021 
Xepi® license  $4,600   $4,600 
Less: Accumulated amortization   (1,464)   (1,150)
Intangible asset, net  $3,136   $3,450 

 

12
 

 

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 $0.1 million and $0.3 million, for the three and nine months ended September 30, 2022, respectively, and $0.1 million and $0.3 million for the three and nine months ended September 30, 2021, respectively.

 

We review the Xepi® license intangible asset for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be fully 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, we deemed it necessary to assess the recoverability of our Xepi® asset group. Future cash flows were estimated over the expected remaining useful life of the asset group, and we determined that, on an undiscounted basis, expected cash flows exceeded the carrying amount of the asset group.

 

The Company did not recognize any impairment charges during the three or nine months ended September 30, 2022 or 2021.

 

12. Statement of Cash Flows Reconciliation

 

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

 

(in thousands)  September 30, 2022   December 31, 2021 
Cash and cash equivalents  $27,518   $24,545 
Short-term restricted cash   47    47 
Long-term restricted cash   200    150 
Total cash, cash equivalent, and restricted cash shown on the consolidated statements of cash flows  $27,765   $24,742 

 

13. Accrued Expenses and Other Current Liabilities

 

Accrued expenses and other current liabilities consist of the following:

 

(in thousands)  September 30, 2022   December 31, 2021 
Legal settlement (See note 23)  $5,625   $5,625 
Employee compensation and benefits   2,243    2,384 
Professional fees   676    570 
Product revenue allowances and reserves   360    246 
Other   538    829 
Total  $9,442   $9,654 

 

14. Other Long-Term Liabilities

 

Other long-term liabilities consist of the following:

 

(in thousands)  September 30, 2022   December 31, 2021 
Legal settlement – noncurrent (See note 23)  $5,625   $5,625 
Other   21    24 
Total  $5,646   $5,649 

 

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 three- or nine-month periods ended September 30, 2022 and 2021. Income tax expense incurred for the three and nine months ended September 30, 2022 and 2021 relates to state income taxes. At September 30, 2022 and December 31, 2021, the Company had no unrecognized tax benefits.

 

The Company continues to be in a cumulative loss position and as such, is maintaining a full valuation allowance.

 

Interest and penalty charges, if any, related to unrecognized tax benefits would be classified as income tax expense in the accompanying consolidated statements of operations. As of September 30, 2022, and December 31, 2021, the Company has no accrued interest related to uncertain tax positions. Since the Company is in a loss carryforward position, it is generally subject to examination by the U.S. federal, state, and local income tax authorities for all tax years in which a loss carryforward is available.

 

13
 

 

16. Related Party Transactions

 

License and Supply Agreement

 

On October 1, 2016, the Company executed an exclusive license and supply agreement with Biofrontera Pharma GmbH (“Pharma”), which was amended in July 2019 to increase the Ameluz® transfer price per unit from 35.0% to 50.0% of the anticipated net selling price per unit as defined in the agreement. It was further amended on October 8, 2021 so that the price we pay per unit will be based upon our sales history, although the minimum number of units to purchase per year remains unchanged. As a result of this amendment, the purchase price we pay Biofrontera Pharma for Ameluz® will range from 30% to 50% of the anticipated net price per unit based on our level of annual revenue. Refer to Item I. Business - Commercial Partners and Agreements in our Annual Report on Form 10-K for the year ended December 31, 2021 for further details. Under the agreement, the Company obtained an exclusive, non-transferable license to use the Pharma’s technology to market and sell the licensed products, Ameluz® and BF-RhodoLED® and must purchase the licensed products exclusively from Pharma. There was no consideration paid for the transfer of the license.

 

Purchases of the licensed products during the three and nine months ended September 30, 2022 were $5.2 million and $16.6 million, respectively, and $1.0 million and $5.7 million for the three and nine months ended September 30, 2021. These purchases are 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 September 30, 2022 and December 31, 2021 were $4.2 million and $0.3 million, respectively, which were recorded in accounts payable, related parties in the consolidated balance sheets.

 

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 that will replace the applicable provisions of our previous intercompany services agreement dated January 1, 2016, or 2016 Services Agreement, by and among us, Biofrontera AG, Biofrontera Pharma and Biofrontera Bioscience, enabling us to continue to use the IT resources of Biofrontera AG and its wholly owned subsidiaries (the “Biofrontera Group”) as well as providing access to the Biofrontera Group’s resources with respect to quality management, regulatory affairs and medical affairs. We currently have statements of work in place regarding IT, 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. Expenses related to the service agreement were $0.2   million and $0.6 million for the three and nine months ended September 30, 2022, respectively and $0.2 million and $0.5 million for the three and nine months ended September 30, 2021. These expenses were recorded in selling, general and administrative, related party. Amounts due to Biofrontera AG related to the service agreement as of September 30, 2022 and December 31, 2021 were $0.2 million and $0.2 million, respectively, which were offset against other receivables, related party in the consolidated balance sheet.

 

Clinical Lamp Lease Agreement

 

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

 

Total revenue related to the clinical lamp lease agreement was minimal for the three and nine months ended September 30, 2022, and for the three and nine months ended September 30, 2021, and was recorded as revenues, related party. Amounts due from Bioscience for clinical lamp and other reimbursements were approximately $0.2 million and $0.1 as of September 30, 2022 and December 31, 2021, respectively, which were recorded as other receivables, related party in the consolidated balance sheets.

 

14
 

 

Reimbursements from Maruho Related to Cutanea Acquisition

 

Pursuant to the Cutanea acquisition share purchase agreement, we received start-up cost financing and reimbursements for certain costs. These restructuring costs Maruho agreed to pay are referred to as “SPA costs” under the arrangement and are to be accounted for as other income. Refer to Note 3, Acquisition Contract Liabilities.

 

There were no amounts reimbursed relating to SPA costs for the three and nine months ended September 30, 2022. For the three and nine months ended September 30, 2021, the amounts reimbursed relating to SPA costs were $0.2 million and $0.5 million and were recorded as other income in the consolidated statements of operations as the related expenses were incurred. As of September 30, 2022 and December 31, 2021 amounts due from Maruho, primarily relating to SPA cost reimbursements, were $0.1 for each of the periods and were recorded in other receivables, related parties in the consolidated balance sheets.

 

Others

 

The Company has recorded a receivable of $6.1 million and $11.3 million as of September 30, 2022 and December 31, 2021 due from Biofrontera AG for its 50% share of the balance of a legal settlement for which both parties are jointly and severally liable. Refer to Note 7, Other Receivables, Related Party. The Company has recognized $0.1 million of interest income for the nine months ended September 30, 2022 in connection with this receivable.

 

17. Restructuring costs

 

We restructured the business of Cutanea and incurred restructuring costs which were subsequently reimbursed by Maruho. Restructuring costs primarily relate to the winding down of Cutanea’s operations. There were no restructuring costs for the three and nine months ended September 30, 2022. For the three and nine months ended September 30, 2021, restructuring costs were incurred in the amount of $0.2 and $0.7 million, respectively.

 

18. Stockholders’ Equity

 

Under the Company’s amended and restated certificate of incorporation, dated December 21, 2020, the Company is authorized to issue 300,000,000 shares of common stock, par value $0.001 per share and 20,000,000 shares of preferred stock, par value $0.001 per share.

 

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.

 

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) 1,850,000 shares of the common stock, (ii) a warrant to purchase up to 3,419,000 shares of the common stock (“2022 Purchase Warrant”) and (iii) a warrant to purchase up to 1,569,000 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 $2.75. The 2022 Purchase Warrant will be exercisable nine months after the issue date, expires five and one-half years after the issue date and has an exercise price of: $2.77 per share. The Pre-Funded Warrant is exercisable immediately and has a term of exercise equal to five (5) years with a nominal exercise price of $0.001 per share.

 

Because the warrants are accounted for as liabilities, the May 2022 PIPE proceeds were allocated between the fair value of the warrants with the remaining proceeds allocated to common stock and additional paid in capital.

 

Exercise of 2022 Pre-Funded Warrant - On July 14, 2022, an investor exercised the 2022 Pre-Funded Warrant and purchased a total of 1,569,000 shares of common stock at an exercise price of $.001 per share, resulting in negligible net proceeds,

 

Exercise of 2021 Purchase Warrant and Issuance of July 2022 Inducement Warrant - On July 26, 2022, the Company entered into the Inducement Letter with the holder of the Company’s 2021 Purchase Warrants (the “Investor”). The 2021 Purchase Warrants were originally issued on December 1, 2021 to purchase up to 2,857,143 shares of common stock, par value $0.001 per share. The Investor agreed to exercise for cash, the 2021 Purchase Warrants, in exchange for the Company’s agreement to (i) lower the exercise price of the 2021 Purchase Warrants from $5.25 to $1.62 per share and (ii) issue a new warrant (the “Inducement Warrant”) to purchase up to 4,285,715 shares of common stock. The Company received proceeds of $4.6 million, from the exercise of the 2021 Purchase Warrants and expensed the related issuance costs of $0.3 million.

 

The Inducement Warrant is exercisable on or after January 27, 2023 at a price per share of $1.66 and expires on December 1, 2026.

 

15
 

 

19. Equity Incentive Plans and Share-Based Payments

 

2021 Omnibus Incentive Plan

 

In 2021, our Board of Directors adopted, and our shareholders approved the 2021 Omnibus Incentive Plan (“2021 Plan). Under the 2021 Plan, 2,750,000 shares are authorized for awards and the maximum contractual term is 10 years for stock options granted. A total of 2,579,932 shares remain eligible for issuance as of September 30, 2022 under the 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.

 

Share-based compensation expense of approximately $0.3 million and $0.6 million was recorded in selling, general and administrative expenses on the accompanying consolidated statement of operations for the three and nine months ended September 30, 2022. There was no stock based compensation for the three and nine months ended September 30, 2021.

 

Options outstanding and exercisable under the employee share option plan as of September 30, 2022 and a summary of option activity during the nine months then ended is presented below.

 

   Shares  

Weighted

Average

Exercise

Price

  

Weighted

Average

Remaining

Contractual

Term

  

Aggregate

Intrinsic

Value (1)

 
Outstanding at December 31, 2021   613,614   $4.77           
Granted   1,290,489   $2.41           
Exercised   -   $-           
Canceled or forfeited   (63,946)  $4.77           
Outstanding at September 30, 2022   1,840,157   $3.11    9.52   $6 
Exercisable at September 30, 2022   29,332   $2.61    9.63   $- 

 

(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 September 30, 2022.

 

As of September 30, 2022, there was $2.6 million of unrecognized compensation cost related to unvested stock options, which is expected to be recognized over a weighted-average period of approximately 2.5 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 of $0.1 million and $0.9 million for the RSUs was recorded in selling, general and administrative expenses in the accompanying consolidated statement of operations for the three and nine months ended September 30, 2022. There was no share-based compensation for the three and nine months ended September 30, 2021.

 

16
 

 

As of September 30, 2022, there was $0.7 million of unrecognized compensation cost related to unvested RSUs, which is expected to be recognized over a weighted-average period of approximately 1.6 years.

   Shares   Weighted Average Remaining Contractual Term  

Aggregate Intrinsic

Value

   Weighted Average Grant Date Fair Value 
Outstanding at December 31, 2021   170,068        $    $4.77 
Awarded   343,512        $    $2.61 
Vested   (170,068)       $    $4.77 
Canceled or forfeited   -        $    $- 
Outstanding at September 30, 2022   343,512    1.13   $361   $2.61 
Expected to vest at September 30, 2022   343,512    1.13   $361   $2.61 

 

20. Interest Expense, net

 

Interest expense, net consists of the following:

 

(in thousands)  2022   2021   2022   2021 
   For three months ended
September 30,
   For nine months ended
September 30,
 
(in thousands)  2022   2021   2022   2021 
                 
Interest expense  $(3)  $-   $(10)  $- 
Contract asset interest expense   (89)   (90)   (268)   (268)
Interest income – related party   1    -    110    - 
Interest income – other   2    4    8    13 
Interest expense, net  $(89)  $(86)  $(160)  $(255)

 

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 is amortized on a straight-line basis using a 6% interest rate over the financing arrangement contract term, which ends on December 31, 2023.

 

21. Other Income (Expense), net

 

Other income (expense), net consists of the following:

 

(in thousands)  2022   2021   2022   2021 
  

For three months ended

September 30,

  

For nine months ended

September 30,

 
(in thousands)  2022   2021   2022   2021 
                 
Reimbursed SPA costs  $-   $188   $-   $472 
Other, net   (22)   (3)   30    (53)
Other income (expense), net  $(22)  $185   $30   $419 

 

Other, net, primarily includes gain (loss) on foreign currency transactions and gain on termination of operating leases.

 

22. Net Earnings per Share

 

Basic net earnings per common share are calculated by dividing net income by the weighted average number of common shares outstanding during the period. Diluted net earnings per common share are calculated by dividing net income 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.

 

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

 

   2022   2021   2022   2021 
   Three Months Ended   Nine Months Ended 
   September 30,   September 30, 
   2022   2021   2022   2021 
Net income (loss)  $(2,566)  $(16,012)  $2,145   $(23,208)
                     
Shares:                    
Basic weighted average common shares outstanding   22,725,821    8,000,000    19,560,351    8,000,000 
Add: Effect of dilutive securities                    
Stock options and restricted stock units   -    -    44,663    - 
Diluted weighted average common shares outstanding   22,725,821    8,000,000    19,605,014    8,000,000 
                     
Net earnings (loss) per share:                    
Basic  $(0.11)  $(2.00)  $0.11   $(2.90)
Diluted  $(0.11)  $(2.00)  $0.11   $(2.90)

 

17
 

 

The following table sets forth the potential common shares that were not included in the diluted per share calculations for the three and nine months ended September 30, 2022 because they would be anti-dilutive:

 

Nine Months Ended September 30,   Three Months Ended
September 30, 2002
   Nine Months Ended September 30, 2022 
Common stock warrants     9,197,109     9,197,109 
Common stock options and RSUs     2,073,337     1,112,395 
Unit Purchase Options     403,628     403,628 

 

23. Commitments and Contingencies

 

Facility Leases

 

The Company leases its corporate headquarters under an operating lease that expires in November 2025. 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.

 

Rent expense is recorded on a straight-line basis through the end of the lease term. The Company incurred rent expense, in the amount of $0.1 million and $0.4 million for the three and nine months ended September 30, 2022 which was included in selling, general, and administrative expenses. The rent expense, net of sublease income for the three and nine months ended September 30, 2021 was $0.2 million and $0.6 million.

 

Auto Leases

 

The Company also leases autos for its field sales force with a lease payment term of 40 months. The Company incurred auto lease expense of $0.1 million and $0.3 million for the three and nine months ended September 30, 2022 and $0.1 million and $0.4 million for the three and nine months ended September 30, 2021.

 

The minimum aggregate payments of all future lease commitments as of September 30, 2022, are as follows:

 

(in thousands)

 

Years ending December 31,   Future lease commitments  
Remainder of 2022   $ 164  
2023     565  
2024     541  
2025     389  
Thereafter     -  
Total   $ 1,659  

 

Cutanea payments

 

We are obligated to repay to Maruho $3.6 million on December 31, 2022 and $3.7 million on December 31, 2023 in start-up cost financing paid to us in connection with the Cutanea acquisition.     

 

We are also obligated to share product profits with Maruho equally from January 1, 2020 through October 30, 2030. Refer to Note 3, Acquisition Contract Liabilities.

 

18
 

 

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 when annual net sales of Xepi® under the Xepi LSA exceed $50,000,000. No payments were made for the three and nine months ended September 30, 2022 or 2021 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 costs related to such legal proceedings. We are not presently a party to any pending legal proceedings.

 

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 to settle the claims in the litigation. The Company will be responsible for $11.3 million of the aggregate settlement amount, plus interest accrued at a rate equal to the weekly average one-year constant maturity Treasury yield and agreed to pay in three annual installments. The first installment of $11.3 million (of which $5.6 million was Biofrontera AG’s portion) was paid in December 2021 by the Company.

 

While Biofrontera AG has agreed to pay a portion of the settlement, both parties remain jointly and severally liable for the full settlement amount, meaning that in the event Biofrontera AG does not pay all or a portion of the amount it owes under the agreement, the claimant could compel the Company to pay Biofrontera AG’s share. If either the Company or Biofrontera AG violates the terms of the settlement agreement, this could nullify the settlement and the Company may lose the benefits of the settlement and be liable for a greater amount. As of September 30, 2022 we have reflected a legal settlement liability in the amount of $11.3 million for the remaining payments due and a related receivable from related party of $5.6 million, in accordance with 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.

 

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.

 

For the three and nine months ended September 30, 2022, matching contribution costs paid by the Company were $0.1 million and $0.2 million, respectively. For the three and nine months ended September 30, 2021, matching contribution costs paid by the Company were $0.1 million and $0.2 million.

 

25. Subsequent Events  

 

We have completed an evaluation of subsequent events after the balance sheet date of September 30, 2022 through the date this Quarterly Report on Form 10-Q was submitted to the SEC.

 

Adoption of a stockholder rights plan. On October 13, 2022 the 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 (“Rights Agreement”), dated October 13, 2022, between the Company and Computershare Trust Company, N.A, as rights agent.

 

While the stockholder rights plan described above (the “Rights Plan”) is 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 Company’s Board of Directors. The Rights Plan will expire on October 13, 2023.

 

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.

 

Full details about the Rights Agreement are contained in a Form 8-K filed by the Company with the U.S. Securities and Exchange Commission on October 14, 2022.

 

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.

 

Acquisition of Biofrontera AG Shares. 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 (the “AG Options”), of Biofrontera AG, pursuant to which the parties agreed to a negotiated private exchange of 3,148,042 shares of the Company’s common stock in exchange for the AG Options. The AG Options represent the right to acquire 2,623,365 ordinary shares of Biofrontera AG held by the shareholders, representing an exchange ratio of approximately 1 AG share to 1.2 shares of the Company’s common stock. There was no additional cost to exercise the AG Options. As of November 8, 2022, the Company exercised the AG options in full to acquire 2,623,365 shares of Biofrontera AG.

 

Also, on November 8, 2022, the Company entered into an amendment to the Loan Agreement with Convertible Repayment Obligation dated September 23,2022. In the Amendment, Quirin PrivatBank AG assigned the acquired 1,601,318 shares of AG, including all associated rights, to the Company with shares to be delivered promptly thereafter. The parties agreed to terminate the loan in part in exchange for noted shares.

 

As a result of these transactions, the Company now owns a total of 4,224,683 shares, which is 7.45% of Biofrontera AG’s outstanding ordinary shares as of November 8, 2022. These shares were acquired in accordance with the loan receivable agreement (as amended on November 8, 2022) disclosed in Note 9- Prepaid Expenses and Other Current Assets and the Private Exchange Agreement entered into October 25, 2022 as detailed above.

 

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

Forward-Looking Statements

 

The Private Securities Litigation Reform Act of 1995 provides a “safe harbor” for forward-looking statements. Certain statements in this Form 10-Q constitute “forward-looking statements”. Such statements include estimates of our expenses, future revenue, capital requirements, our need for additional financing, statements regarding the efficacy and intended use of our technologies under development, the timelines and strategy for bringing licensed products to market, the timeline for regulatory review and approval of our licensed products, and other statements that are not historical facts, 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 guaranties 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.

 

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

 

  our reliance on sales of products we license from other companies as our sole source of revenue;
     
  the success of our competitors in developing generic topical dermatological products that successfully compete with our licensed products;
     
  the success of our principal licensed product Ameluz®;
     
  the ability of Biofrontera Pharma, Biofrontera Bioscience and Ferrer Internacional S.A. (“Ferrer”), referred to collectively as our (“licensors”) to establish and maintain relationships with contract manufacturers that are able to supply us with enough of the licensed products to meet our demand;
     
  the ability of our licensors or our licensors’ manufacturing partners, as applicable, to supply Ameluz®, BF-RhodoLED® lamps, Xepi® or other licensed products that we market in sufficient quantities and at acceptable quality and cost levels, and to fully comply with current good manufacturing practice or other applicable manufacturing regulations;
     
  the ability of our licensors to successfully defend or enforce patents related to our licensed products;
     
  the effect of the COVID-19 global pandemic, including mitigation efforts and economic effects;
     
  the availability of insurance coverage and medical expense reimbursement for our licensed products;
     
  the impact of legislative and regulatory changes;
     
  competition from other pharmaceutical and medical device companies and existing treatments, such as simple curettage and cryotherapy;
     
  our success in achieving profitability;
     
  our ability to obtain additional financing as needed to implement our growth strategy;
     
  our success in remediating material weaknesses in our internal control over financial reporting and in establishing adequate internal controls over financial reporting;
     
  our ability to retain and recruit key personnel;
     
  our success in making the transition to operate as a public company;
     
  such other risks identified in Item 1A. Risk Factors in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021 and any other filings with the SEC.

 

20
 

 

More detailed information about us and the risk factors that may affect the realization of forward-looking statements, including the forward-looking statements in this Quarterly Report on Form 10-Q, is set forth in our filings with the SEC, including our Annual Report on Form 10-K for the fiscal year ended December 31, 2021. We urge investors and security holders to read those documents free of charge at the SEC’s web site at www.sec.gov. We do not undertake to publicly update or revise our forward-looking statements as a result of new information, future events or otherwise, except as required by law.

 

Overview

 

Biofrontera Inc. (the “Company”) 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 our Ameluz Licensor.

 

We are a U.S.-based   biopharmaceutical company specializing in the commercialization of pharmaceutical products for the treatment of dermatological conditions, in particular, diseases caused primarily by exposure to sunlight that result in sun damage to the skin. Our principal licensed product focuses on the treatment of actinic keratoses, which are skin lesions that can sometimes lead to skin cancer. We also market a topical antibiotic for treatment of impetigo, a bacterial skin infection.

 

Our principal licensed product is Ameluz®, which is a prescription drug approved for use in combination with our licensor’s FDA-approved medical devices, the BF-RhodoLED® lamp series consisting of the BF-RhodoLED® and the RhodoLED® XL lamps, for photodynamic therapy in the United States 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”), by and among us and Biofrontera Pharma GmbH and Biofrontera Bioscience GmbH (collectively, the “Ameluz Licensor”) originally dated as of October 1, 2016, and as subsequently amended on October 8, 2021. Under the Ameluz LSA, we hold the exclusive license to sell Ameluz® and the BF-RhodoLED® lamp in the United States for all indications currently approved by the FDA as well as all future FDA-approved indications that the Ameluz Licensor may pursue. We are obliged to purchase Ameluz® and the RhodoLED® devices exclusively from the Licensor. Under the Ameluz LSA, the Licensor is obliged to manufacture, perform regulatory work and sponsor certain clinical trials on its own expense. In consideration, we are obligated to pay a transfer price of 30-50% of our net sales of Ameluz®. We have the authority under the Ameluz LSA in certain circumstances to i) take over clinical development with respect to the indications the Ameluz Licensor is currently pursuing with the FDA (as well as certain other clinical studies identified in the Ameluz LSA), ii) take over the regulatory and manufacturing responsibilities from the Ameluz Licensor, and iii) to offset the costs of such operations by adjusting the transfer price for Ameluz® or to reduce the transfer price at a fixed ratio. The Ameluz Licensor does not have any obligation under the Ameluz LSA, as amended, to perform or finance clinical trials to promote new indications beyond those they are currently pursuing with the FDA (as well as certain other clinical studies identified in the Ameluz LSA). Under the Ameluz LSA, further extensions of the approved indications for Ameluz® photodynamic therapy in the United States are anticipated.

 

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 adults and children 2 months and older. We are currently selling Xepi® for this indication in the U.S. under an exclusive license and supply agreement (“Xepi LSA”) with Ferrer that was acquired by Biofrontera on March 25, 2019 through our acquisition of Cutanea Life Sciences, Inc. (“Cutanea”). 

 

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 series for the treatment of minimally to moderately thick actinic keratoses of the face and scalp and positioning Ameluz® to be a leading photodynamic therapy product, by growing our dedicated sales and marketing infrastructure in the United States;
   
expanding our sales of Xepi® for treatment of impetigo by improving the market positioning of the licensed product; and 
   
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.

 

21
 

 

Our strategic objectives also include further expansion of our product and business portfolio through various methods to pursue selective strategic investment and acquisition opportunities to expand and support our business growth, including but not limited to:

 

in-licensing further products or product opportunities and developing them for the U.S. market;
   
procuring products through asset acquisition from other healthcare companies; and
   
procuring products through share acquisition of some or all shares of other healthcare companies, including the possible acquisition of shares of our former parent company and significant stockholder, Biofrontera AG .

 

We devote a substantial portion of our cash resources to the commercialization of our licensed products, Ameluz®, the RhodoLED® lamp series. We have financed our operating and capital expenditures through cash proceeds generated from our product sales 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 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.

 

Seasonality

 

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

 

COVID-19

 

Since the beginning of 2020, COVID-19 has become a global pandemic. As a result of the measures implemented by governments around the world, our business operations have been directly affected. In particular, we experienced a significant decline in demand for our licensed products as a result of different priorities for medical treatments emerging, thereby causing a delay of actinic keratosis treatment for most patients. Our revenue was directly affected by the global COVID-19 pandemic starting in mid-March of 2020. From that point on, rising infection rates and the resulting American Academy of Dermatology’s official recommendation to care for patients through remote diagnosis and treatment (telehealth) led to significantly declining patient numbers and widespread, albeit temporary, physician practice closures. As COVID-19 vaccines started to roll-out to the general public in March 2021, we experienced an increase in patients willing to undergo treatment for actinic keratosis. In the fourth quarter of 2021 continuing through the first quarter of 2022, we again saw a seasonally strong increase in sales, indicating a revenue recovery from the global COVID-19 pandemic. However, due to the speed and fluidity with which the COVID-19 pandemic continues to evolve, and the emergence of highly contagious variants, we do not yet know the full extent of the impact of COVID-19 on our business operations. The ultimate extent of the impact of any epidemic, pandemic, outbreak, or other public health crisis on our business, financial condition and results of operations will depend on future developments, which are highly uncertain and cannot be predicted, including new information that may emerge concerning the severity of such epidemic, pandemic, outbreak, or other public health crisis and actions taken to contain or prevent the further spread, including the effectiveness of vaccination and booster vaccination campaigns, among others. Accordingly, we cannot predict the extent to which our business, financial condition and results of operations will be affected. We remain focused on maintaining a strong balance sheet, liquidity and financial flexibility and continue to monitor developments as we deal with the disruptions and uncertainties from a business and financial perspective relating to COVID-19 and variants thereof.

 

22
 

 

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. In December 2021, we were notified by Ferrer of third-party manufacturing delays for the Xepi® product and of their manufacturer’s (Teligent, Inc.) Chapter 11 bankruptcy filing on October 14, 2021 and, in February 2022, Teligent Inc. filed a motion to convert the proceedings into a Chapter 7 liquidation. As Teligent, Inc, is no longer a viable manufacturing option, Ferrer has selected a new contract manufacturer for Xepi®, but the process will require significant time, 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. Due to the uncertainty of supply chain, we expect a delay in shipments of Xepi® for the next 15 months from the new contract manufacturer. Despite these delays, our total revenues will not be significantly impacted since the majority of our revenues are from sales of Ameluz®. 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 RhodoLED®.

 

Components of Our Results of Operations

 

Product Revenue, net

 

We generate product revenues through the third-party sales of our licensed products Ameluz®, RhodoLED® lamps and Xepi®. 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 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 to provide RhodoLED® lamps and associated services for the clinical trials performed by Biofrontera Bioscience.

 

Cost of Revenues, Related Party

 

Cost of revenues, related party, is comprised of purchase costs of our licensed products, Ameluz® and RhodoLED® lamps from Biofrontera Pharma GmbH.

 

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, inventory adjustment due to expiring Xepi® products, as well as sales-based Xepi® royalties.

 

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Selling, General and Administrative Expense

 

Selling, general and administrative expenses consist principally of costs associated with our sales force, commercial support personnel, personnel in executive and other administrative functions, 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, accounting services and the amortization of our intangible asset.

 

Selling, General and Administrative Expenses, Related Party

 

Selling, general and administrative expenses, related party, primarily relate to the services provided by our significant stockholder, Biofrontera AG, for accounting consolidation, IT support, and pharmacovigilance. These expenses were previously charged to us based on costs incurred plus 6% in accordance with the 2016 Services Agreement. As of December 31, 2021, we entered into the Services Agreement which provides for the execution of statements of work that supersedes the applicable provisions of the 2016 Services Agreement. The Services Agreement enables us to continue relying on Biofrontera AG and its subsidiaries for various services it has historically provided to us, including IT and pharmacovigilance support. We currently have statements of work in place regarding IT, 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.

 

Restructuring Costs

 

We restructured the business of Cutanea and incurred restructuring costs, which were subsequently reimbursed by Maruho. Restructuring costs primarily relate to Aktipak® discontinuation, personnel costs related to the termination of all Cutanea employees, and the winding down of Cutanea’s operations.

 

Change 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 is re-measured at each reporting date, with changes in fair value presented within the consolidated statements of operations, until the contingency is resolved.

 

Change in Fair Value of Warrant Liabilities

 

Common stock warrants issued in conjunction with private placement financing transactions are accounted for as liabilities in accordance with ASC 815-40.

 

The warrant liability is measured at fair value at inception and on a recurring basis, with changes in fair value presented within the consolidated statements of operations.

 

Interest Expense, net

 

Interest expense, net, primarily consists of amortization of the contract asset related to the start-up cost financing from Maruho Co. Ltd’s. (“Maruho”) agreement (“Share Purchase Agreement”) to acquire 100% of the Shares of Cutanea Life Sciences, Inc. (“Cutanea”), 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 RhodoLED® lamps.

 

24
 

 

Other Income, net

 

Other income, net primarily includes (i) reimbursed Share Purchase Agreement costs, and (ii) gain (loss) on foreign currency transactions.

 

Income Taxes

 

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

 

Results of Operations

 

Comparison of the Three Months ended September 30, 2022 and 2021

 

The following table summarizes our results of operations for the three months ended September 30, 2022 and 2021:

 

(in thousands)  2022   2021   Change 
             
Product revenues, net  $4,290   $4,319   $(29)
Related party revenues   32    15    17 
Revenues, net   4,322   $4,334    (12)
                
Operating expenses:               
Cost of revenues, related party   2,127    2,249    (122)
Cost of revenues, other   98    41    57 
Selling, general and administrative   7,765    17,090    (9,325)
Selling, general and administrative, related party   171    160    11 
Restructuring costs   -    199    (199)
Change in fair value of contingent consideration   (2,200)   700    (2,900)
Total operating expenses   7,961    20,439    (12,478)
Loss from operations   (3,639)   (16,105)   12,466 
Change in fair value of warrant liabilities   1,185    -    1,185 
Interest expense, net   (89)   (86)   (3)
Other income, net   (22)   185    (207)
Loss before income taxes   (2,565)   (16,006)   13,441 
Income tax expenses   1    6    (5)
Net loss  $(2,566)  $(16,012)  $13,446 

 

25
 

 

Operating Expenses

 

Selling, General and Administrative Expenses

 

Selling, general and administrative expenses were $7.8 million and $17.1 million for the three months ended September 30, 2022 and 2021, respectively, a decrease of $9.3 million, or 54.6%.

 

The decrease was primarily driven by legal settlement expense incurred in 2021 of $11.3 million. This decrease was partially offset by an increase in headcount costs of $0.8 million as a result of resumed hiring in 2022 plus additional business insurance of $0.5 million, general consulting expense of $0.4 million and stock compensation expense of $0.4 million.

 

Restructuring Costs

 

There were no restructuring costs for the three months ended September 30, 2022. Restructuring costs were $0.2 million for three months ended September 30, 2021, which were related to facility exit costs.

 

Change in Fair Value of Contingent Consideration

 

The change in fair value of contingent consideration was a decrease of $2.2 million and an increase of $0.7 million for the three months ended September 30, 2022 and 2021, respectively. The change in fair value of contingent consideration is driven by the estimated profit share the Company is required to pay under the Share Purchase Agreement.

 

Change in Fair Value of Warrant Liabilities

 

The change in fair value of warrant liabilities was a decrease of $1.2 million for three months ended September 30, 2022. The change in fair value of warrant liabilities was driven by changes in the underlying value of the common stock, as well as the modification of the 2021 Purchase Warrant. There were no warrant liabilities as of September 30, 2021.

 

26
 

 

Comparison of the Nine Months ended September 30, 2022 and 2021

 

The following table summarizes our results of operations for the nine months ended September 30, 2022 and 2021:

 

(in thousands)  2022   2021   Change 
             
Product revenues, net  $18,467   $14,890   $3,577 
Related party revenues   63    42    21 
Revenues, net   18,530   $14,932    3,598 
                
Operating expenses:               
Cost of revenues, related party   9,504    7,630    1,874 
Cost of revenues, other   425    339    86 
Selling, general and administrative   25,050    27,412    (2,362)
Selling, general and administrative, related party   612    520    92 
Restructuring costs   -    654    (654)
Change in fair value of contingent consideration   (4,100)   1,698    (5,798)
Total operating expenses   31,491    38,253    (6,762)
Loss from operations   (12,961)   (23,321)   10,360 
                 
Change in fair value of warrant liabilities   15,267    -    15,267 
Interest expense, net   (160)   (255)   95 
Other income, net   30    419    (389)
Income (loss) before income taxes   2,176    (23,157)   25,353 
Income tax expenses   31    51    (20)
Net income (loss)  $2,145   $(23,208)  $25,353 

 

Product Revenue, net

 

Net product revenue was $18.5 million and $14.9 million for the nine months ended September 30, 2022 and 2021, respectively, an increase of $3.6 million, or 24.0%. The increase was primarily driven by (i) higher volume of Ameluz® orders, which resulted in an increase in Ameluz® revenue of $3.2 million, and (ii) an Ameluz® price increase which further increased Ameluz® revenue by $0.2 million.

 

27
 

 

Operating Expenses

 

Cost of Revenues, Related Party

 

Cost of revenues, related party was $9.5 million and $7.6 million for the nine months ended September 30, 2022 and 2021, respectively, an increase of $1.9 million, or 24.6% which was driven by the increase in Ameluz® product revenue. Cost of revenues, related party is directly correlated to the selling price under the Ameluz LSA.

 

Selling, General and Administrative Expenses

 

Selling, general and administrative expenses were $25.1 million and $27.4 million for the nine months ended September 30, 2022 and 2021, respectively, a decrease of $2.4 million, or 8.6%.

 

The decrease was primarily driven by legal settlement expense incurred in 2021 of $11.3 million. This decrease was partially offset by legal expenses of $1.4 million, issuance costs related to a private placement financing of $1.0 million and business insurance of $1.5 million. Headcount costs also increased $2.0 million as a result of resumed hiring in 2022. The increase was further driven by stock compensation expense of $1.5 million, consulting expenses of $1.1 million and resumed travel of $0.5 million.

 

Restructuring Costs

 

There were no restructuring costs for the nine months ended September 30, 2022. Restructuring costs were $0.7 million for the nine months ended September 30, 2021, which was related to facility exit costs.

 

Change in Fair Value of Contingent Consideration

 

The change in fair value of contingent consideration was a decrease of $4.1 million and an increase of $1.7 million for the nine months ended September 30, 2022 and 2021, respectively. The change in fair value of contingent consideration is driven by the estimated profit share the Company is required to pay under the Share Purchase Agreement.

 

Change in Fair Value of Warrant Liabilities

 

The change in fair value of warrant liabilities was a decrease of $15.3 million for the nine months ended September 30, 2022. The change in fair value of warrant liabilities was driven by changes in the underlying value of the common stock, as well as the modification of the 2021 Purchase Warrant. There were no warrant liabilities as of September 30, 2021.

 

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Net Income (Loss) to Adjusted EBITDA Reconciliation for the Nine Months Ended September 30, 2022 and 2021

 

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 consolidated 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.

 

Change in fair value of contingent consideration: Pursuant to the Share Purchase Agreement, the profits from the sale of Cutanea products will 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 is re-measured at each reporting date. We exclude the impact of the change in fair value of contingent consideration as this is non-cash.

 

Change in fair value of warrant liabilities: The warrants issued in conjunction with private placement equity financings were accounted for as liabilities in accordance with ASC 815-40. The warrant liabilities were measured at fair value at inception and are remeasured at each reporting date, 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.

 

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 typically 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 related 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 income (loss) to Adjusted EBITDA for the three and nine months ended September 30, 2022 and 2021:

 

  

Three months ended

September 30,

  

Nine months ended

September 30,

 
   2022   2021   2022   2021 
Net income (loss)  $(2,566)  $(16,012)  $2,145   $(23,208)
Interest expense, net   89    86    160    255 
Income tax expense   1    6    31    51 
Depreciation and amortization   130    134    394    409 
EBITDA   (2,346)   (15,786)   2,730    (22,493)
Change in fair value of contingent consideration   (2,200)   700    (4,100)   1,698 
Change in fair value of warrant liabilities   (1,185)   -    (15,267)   - 
Legal settlement expenses   -    11,250    -    11,250 
Stock-based compensation   400    -    1,469    - 
Expensed issuance costs   320    -    1,045    - 
Adjusted EBITDA  $(5,011)  $(3,836)  $(14,123)  $(9,545)
Adjusted EBITDA margin   -115.9%   -88.5%   -76.2%   -63.9%

 

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Adjusted EBITDA

 

Adjusted EBITDA decreased from ($3.8) million during the three months ended September 30, 2021 to ($5.00) million for the three months ended September 30, 2022. Our adjusted EBITDA margin decreased from (88.5%) to (115.9%) during the same periods.

 

Adjusted EBITDA decreased from ($9.5) million during the nine months ended September 30, 2021 to ($14.11) million for the nine months ended September 30, 2022. Our adjusted EBITDA margin decreased from (63.9%) to (76.2%) during the same periods.

 

Liquidity and Capital Resources

 

The Company’s primary sources of liquidity are its existing cash balances and cash flows from equity financing transactions. In July of 2022, we received proceeds of $4.6 million from the exercise of common stock warrants (See Note 18 Stockholders’ Equity). As of September 30, 2022, we had cash and cash equivalents of $27.5 million, compared to $24.5 million as of December 31, 2021.

 

Since we commenced operations in 2015, we have generated significant losses. For the nine months ended September 30, 2022 and 2021, we incurred losses from operations of $13.0 million and $23.3 million, respectively. We incurred net cash out-flow from operation of $7.9 million and $5.7 million for the nine months ended September 30, 222 and September 30, 2021. We had an accumulated deficit as of September 30, 2022 of $76.7 million.

 

The Company’s short-term material cash requirements include working capital needs and satisfaction of contractual commitments including auto leases (see Note 23, Commitments and Contingencies), Maruho start-up payments of $7.3 million (see Note 3. Acquisition Contract Liabilities), and legal settlement expenses after reimbursement from Biofrontera AG, a significant shareholder and our former parent company, of $5.6 million (see Note 13. Accrued Expenses and Other Current Liabilities). Long-term material cash requirements include potential milestone payments to Ferrer Internacional S.A (see Note 23. Commitments and Contingencies) and contingent consideration payments to Maruho (see Note 3. Acquisition Contract Liabilities).

 

Additionally, we expect to continue to incur operating losses due to significant discretionary sales and marketing efforts as we seek to expand the commercialization of our licensed products in the United States. We also expect to incur additional expenses to add and improve operational, financial and information systems and personnel, including personnel to support our product commercialization efforts. In addition, we expect to incur significant costs to continue to comply with corporate governance, regulatory reporting and other requirements applicable to us as a public company in the U.S. We also intend to be opportunistic in our business plans which may include acquiring additional shares of Biofrontera AG as a strategic measure.

 

Our future growth is dependent on our ability to obtain additional equity. Based on current operating plans and financial forecasts, we expect that our current cash and cash equivalents, will be sufficient to fund our operations for at least the next twelve months from the date of issuance of our financial statements. However, if our current operating plans or financial forecasts change, or we are unable to obtain additional financing, we may need to reduce the discretionary spend on promotional expenses, branding, marketing consulting and defer some hiring. While we expect to continue being flexible in our spending over the next twelve months, we do not consider there to be a need to significantly revise our operations currently.

 

The adequacy of our available funds to meet our future operating and capital requirements will depend on many factors, including the amounts of future revenues generated by our licensed products. Due to numerous factors described in more detail under the caption Part I, Item 1A, “Risk Factors” of the Form 10-K and our contractual obligations and commitments, we may require significant additional funds earlier than we currently expect in order to continue to commercialize Ameluz®, BF-RhodoLED® lamp series, and to support the operating, investing, and financing activities of the Company beyond the next twelve months.

 

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Our future use of operating cash and capital requirements will depend on many forward-looking factors, including the following:

 

the costs of our commercialization activities for Ameluz®;
   
the extent to which we acquire or invest in licensed products, businesses and technologies;
   
the extent to which we choose to establish collaboration, co-promotion, distribution or other similar agreements for our licensed products;
   
the cost to fulfill our contractual obligations for various operating leases on vehicles and office space;
   
the requirement to pay back $7.3 million of start-up cost financing to Maruho and make any contingent profit- sharing payments to Maruho in connection with the Cutanea acquisition; and 
   
the ability to collect a receivable of $5.6 million from Biofrontera AG (in accordance with the Settlement Allocation Agreement) for reimbursement of legal settlement payments to be made on their behalf for which both parties are jointly and severally liable.

 

We will continue to assess our operating costs and expenses and our cash and cash equivalents and, if circumstances warrant, we will make appropriate adjustments to our operating plan.

 

Cash Flows

 

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

 

   Nine Months Ended September 30, 
(in thousands)  2022   2021 
Net cash used in operating activities  $(7,928)  $(5,725)
Net cash used in investing activities   (3,070)   (2)
Net cash provided by (used) in financing activities   14,021    (638)
Net increase (decrease) in cash and restricted cash  $3,023   $(6,365)

 

Operating Activities

 

During the nine months ended September 30, 2022, operating activities used $7.9 million of cash, primarily resulting from our net income of $1.1 million, decreased by the non-cash change in fair value of warrant liabilities of $15.3 million and the change in fair value of contingent consideration of $3.4 million and offset by the non-cash expense of stock-based compensation of $1.5 million, $0.4 million depreciation and amortization, $0.3 million interest expense as well as $7.3 million of working capital changes.

 

During the nine months ended September 30, 2021, operating activities used $5.7 million of cash, primarily resulting from our net loss of $23.2 million, adjusted for non-cash expense of $1.5 million as an offset and net cash provided by changes in our operating assets and liabilities of $1.2 million.

 

Investing Activities

 

During the nine months ended September 30, 2022 investing activities used $3.1 million, primarily resulting from the distribution of a short-term loan of $3.1 million, which is repayable at the option of the holder, Quirin PrivatbankAG, in cash or in shares of Biofrontera AG acquired with the funds from the loan.

 

During the nine months ended September 30, 2021, investing activities used $2,000, resulting from the purchase of computer equipment.

 

Financing Activities

 

During the nine months ended September 30, 2022, net cash from financing activities was $14 million driven entirely by proceeds from the sale of common stock and warrants in a private placement (See Note 18 Stockholders’ Equity) as well as the exercise of warrants.

 

During the nine months ended September 30, 2021, cash used in financing activities was $0.65 million related to payments of deferred offering costs.

 

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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 consolidated financial statements, which have been prepared in accordance with U.S. GAAP. The preparation of the financial statements in accordance with U.S. GAAP requires the use of estimates and assumptions by management that affect the value of assets and liabilities, as well as contingent assets and liabilities, as reported on the balance sheet date, and revenues and expenses arising during the reporting period. The main areas in which assumptions, estimates and the exercising of a degree of judgment are appropriate relate to fair value measurements of contingent consideration and warrant liabilities 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 financial statements included in our Annual Report on Form 10-K.

 

Critical Accounting Estimates

 

A summary of our critical accounting estimates is included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021. There were no material changes to our critical accounting estimates for the nine months ended September 30, 2022.

 

Off-balance Sheet Arrangements

 

Besides the contractual obligations and commitments as discussed in the section titled 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 3. Quantitative and Qualitative Disclosures About Market Risk

 

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

 

Item 4. Controls and Procedures

 

Evaluation of Disclosure Controls and Procedures

 

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated, as of the end of the period covered by this Form 10-Q, the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act). Based on that evaluation, and as a result of the material weakness described below, our Chief Executive Officer and Chief Financial Officer concluded that, as of September 30, 2022, our disclosure controls and procedures were not effective at the reasonable assurance level.

 

Material Weaknesses in Internal Control Over Financial Reporting

 

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 audits of our financial statements as of and for the years ended December 31, 2021 and December 31, 2020, we identified a material weakness in our internal control over financial reporting. The previously identified material weakness pertains to our oversight of work being performed for the Company by third-party service providers; as the Company’s management review control over information produced by third-party service providers was not sufficiently precise to identify errors. Specifically, as part of the valuation of an intangible asset in connection with the acquisition of Cutanea, 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 consultant in connection with an impairment assessment.

 

Relating to the previously identified deficiency pertaining to management’s review of work performed by specialists, management has implemented measures designed to improve our internal control over financial reporting including formalized reviews of transactions handled by the specialist. However, in light of the prior year control deficiency, the remediation is still considered to be in process. We will monitor the effectiveness of our remediation plan and will continue to make changes we determine to be appropriate. As a result, management has concluded that the material weakness was not fully remediated as of September 30, 2022.

 

Management will continue its remediation work by adding steps to the engagement of third-party specialists for assistance with complex or judgmental accounting areas, including checks and balances over the proper flow of information to the specialist to allow for an adequate understanding of the transaction.

 

As previously noted, we are still in process of remediating this material weakness as of September 30, 2022. If we are unable to remediate this material weakness, or if we identify additional material weaknesses in the future or otherwise fail to maintain an effective system of internal control, 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.

 

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 September 30, 2022 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).

 

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PART II. OTHER INFORMATION

 

Item 1. Legal Proceedings

 

For information regarding legal proceedings in which we are involved, see Note 23 - Commitments and Contingencies under the subsection titled “Legal Proceedings” in our Notes to Consolidated Financial Statements in Part I, Item 1 of this Quarterly Report on Form 10-Q.

 

Item 1A. Risk Factors

 

As a smaller reporting company, we are not required to provide disclosure pursuant to this item in this Form 10-Q. However, you should carefully consider the “Risk Factors” included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021, for a discussion of important factors that could materially affect our business, financial condition and/or operating results.

 

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

 

Use of Proceeds from our Initial Public Offering

 

On October 28, 2021, our registration statement on Form S-1 (File No. 333-257722) relating to the initial public offering (“IPO”) of our common stock became effective.

 

As of September 30, 2022, we have used all of the proceeds received from our IPO for working capital and general corporate purposes. There was no material change in the planned use of proceeds from the IPO of our common stock from that described in the Prospectus filed with SEC pursuant to rule 424b(4) under the Securities Act on November 1, 2021.

 

Item 3. Defaults Upon Senior Securities

 

None.

 

Item 4. Mine Safety Disclosures

 

Not Applicable.

 

Item 5. Other Information

 

None

 

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Item 6. Exhibits

 

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

 

Exhibit No.    
4.1   Form of Inducement Letter (incorporated by reference to Exhibit 4.1 to the Company’s Form 8-K filed with the SEC on July 28, 2022).
     
10.1  

Form of Inducement Warrant (incorporated by reference to Exhibit 4.2 to the Company’s Form 8-K filed with the SEC on July 28, 2022).

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

31.2*

  Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes Oxley Act of 2002
     
32.1*   Certification of Principal Executive Officer pursuant to Section 906 of the Sarbanes Oxley Act of 2002
     
32.2*   Certification of Principal Financial Officer pursuant to Section 906 of the Sarbanes Oxley Act of 2002
     
101.INS*   Inline XBRL Instance Document
     
101.SCH*   Inline XBRL Taxonomy Extension Schema Document
     
101.CAL*   Inline XBRL Taxonomy Extension Calculation Linkbase Document
     
101.DEF*   Inline XBRL Taxonomy Extension Definition Linkbase Document
     
101.LAB*   Inline XBRL Taxonomy Extension Label Linkbase Document
     
101.PRE*   Inline XBRL Taxonomy Extension Presentation Linkbase Document
     
104   Cover Page Interactive Data File (embedded within the Inline XBRL document and included in Exhibit 101)

 

* Filed herewith.
Indicates a management contract or compensatory plan or arrangement.
# The schedules (and similar attachments) to this exhibit have been omitted from this filing pursuant to Item 601(b)(10) of Regulation S-K. The registrant agrees to furnish a supplemental copy of any omitted schedule (or similar attachment) to the SEC upon request.

 

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SIGNATURES

 

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

 

  BIOFRONTERA INC.
     
Date: November 14, 2022 By: /s/ Erica Monaco
  Name: Erica Monaco
  Title:

Chief Executive Officer

(Principal Executive Officer)

     
Date: November 14, 2022 By: /s/ Fred Leffler
  Name: Fred Leffler
  Title:

Chief Financial Officer

(Principal Financial Officer)

 

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