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Commitments and Contingencies

9 Months Ended

Sep. 30, 2025

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

15. Commitments and Contingencies

Leases

On July 30, 2025 the Company entered into an agreement to lease new office space at 660 Main Street, Woburn, MA. The lease term is for 63 months and is scheduled to commence on December 1, 2025. Under the terms of the agreement, the Company is entitled to a rent-free period for the first three months of the lease and reduced rent payments for months four through nine. The lease has not been recognized on the balance sheet as the commencement date has not occurred. Total future rent payments not yet reflected on the balance sheet will be approximately $1.6 million over the full term.

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

The Company has also entered into a master lease agreement for its vehicles. After an initial non-cancelable twelve-month period, each vehicle is leased on a month-to-month basis. Based on historical retention experience of approximately three years, the vehicles have varying expiration dates through August 2028.

Future lease payments under non-cancellable leases as of September 30, 2025 were as follows (in thousands):

Years ending December 31,		Future lease commitments
Remainder of 2025		$	138
2026			257
2027			63
2028			14
Thereafter			-
Total future minimum lease payments		$	472
Less imputed interest			(29	)
Total lease liability		$	443

Reported as:
Operating lease liability, current		$	307
Operating lease liability, non-current			136
Total		$	443

Licensing Agreement with Optical Tools

On December 2, 2022, the Company entered into the technology transfer agreement with Optical Tools LLC (“Optical Tools”), Stephen Tobin and Paul Sowyrda (the “Agreement”). The Agreement allowed for the transfer of the assigned patents and trademarks, and upon notification by the Company to Optical Tools, the research and development of certain prototypes. The Company paid a licensing fee of $0.2 million which was expensed during the year ended December 31, 2022.

On May 28, 2023, the Company authorized Optical Tools to design, develop, manufacture, and deliver at least two portable photodynamic therapy lamp prototypes (“PDT Device”) using the technology in the assigned patents. The PDT Device provides illumination, based on different light profiles, to the external skin surface of the human body. The Company is to reimburse Optical Tools for all reasonable out-of-pocket, material and labor costs per the Agreement.

As part of the Agreement, Optical Tools will be eligible to receive regulatory and sales milestone payments totaling up to $1.0 million, and royalties of up to 3% of net revenue of certain products developed under this Agreement.

The Company did not make any milestone or royalty payments or accruals for such payments during the three and nine months ended September 30, 2025 or 2024.

Second A&R Ameluz LSA and Term Sheet Sales Commitments

The Second A&R Ameluz LSA, as amended by the Term Sheet, shall continue in full force and effect until the date of the Strategic Transaction of October 20 2025, at which time it shall be terminated.

The Second A&R Ameluz LSA, is to remain in effect for 15 years from its effective date and shall renew automatically for a period of five years, in perpetuity, so long as we have earned revenues from Ameluz product and lamps equal to or greater than $150 million over the preceding five years. If we fail to earn $150 million in revenues from Ameluz^®and the RhodoLED^® Lamps over the preceding five (5) year period prior to the Second A&R Ameluz LSA’s termination date, Biofrontera Pharma has the right to terminate the Second A&R Ameluz LSA by providing one (1) year written notice.

In addition, effective in 2025, under the Second A&R Ameluz LSA, we are to purchase the higher of (i) a minimum quantity of tubes of Ameluz^®per year as set forth in the Second A&R Ameluz LSA or (ii) 75% of the annual average of audited Ameluz^® tubes sold during the preceding four (4) full calendar years. If we fail to achieve the respective minimum for any calendar year, such failure will constitute a termination event, unless waived by the Ameluz Licensor.

As agreed to in connection with the Strategic Transaction and pursuant to the Term Sheet, until the earlier to occur of (i) the total cumulative Royalty paid to Sellers from June 1, 2025 to May 31, 2031 exceeds $50 million, or (ii) the expiration of patent protection on the Products allows for generic competition with the Products in the United States (collectively, the “Minimum Royalty Term”), we are subject to a minimum annual Ameluz sales volume of 80,000 tubes. If such minimum annual volume is not met during the Minimum Royalty Term and the Company does not otherwise pay minimum annual royalties of 12% of the net revenues of 80,000 tubes of Ameluz, the Biofrontera Group shall be entitled to minimum annual royalties of 12% of the net revenues of 80,000 tubes of Ameluz plus annual interest of 4%. Except in the case of certain limited exceptions, our failure to achieve this sales volume during this timeframe for two consecutive years will constitute a termination event, unless waived by the Ameluz Licensor.

Ameluz Minimum Research and Development Costs

The Second A&R Ameluz LSA provides that, during the years 2025 through 2030, we will be required to fund minimum R&D costs in an amount that is at least 85% of the difference between (i) the Transfer Price for product, effective February 13, 2024 and (ii) the Transfer Price for product as it would have been determined under the previous version of the license and supply agreement with the Ameluz Licensor, dated October 8, 2021. If we fail to meet the minimum requirement, the difference shall be paid to Biofrontera Pharma on February 15, 2031, in either cash or our Common Stock, at our discretion.

Milestone payments with Ferrer Internacional S.A.

Under the license and supply agreement (as amended, the “Xepi LSA”) with Ferrer Internacional S.A. (“Ferrer”), we are obligated to make payments to Ferrer upon the occurrence of certain milestones. Specifically, we must pay Ferrer (i) $2,000,000 upon the first occasion when annual net sales of Xepi^® under the Xepi LSA exceed $25,000,000, and (ii) $4,000,000 upon the first occasion annual net sales of Xepi^®under the Xepi LSA exceed $50,000,000. No payments or accruals for such payments were made during the three and nine months ended September 30, 2025 or 2024 related to Xepi^® milestones.

Legal proceedings

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

Legal Claims

On September 13, 2023, Biofrontera was served with a complaint filed by DUSA Pharmaceuticals, Inc., Sun Pharmaceutical Industries, Inc. (“Sun”), and Sun Pharmaceutical Industries LTD in which DUSA alleges i) breach of contract, ii) violation of the Lanham Act, and iii) unfair trade practices under Massachusetts law. All claims stem from allegations that Biofrontera has promoted its Ameluz^®product in a manner that is inconsistent with its approved FDA labeling. Though this complaint was originally filed in the United States District Court for the District of Massachusetts, this matter has been transferred by agreement of the parties to the United States District Court for the District of New Jersey. In March of 2024, Biofrontera Company filed a partial motion to dismiss the Lanham Act and Massachusetts statutory claims, which was denied on October 15, 2024. Biofrontera subsequently answered Sun’s complaint and filed counterclaims on October 30, 2024 alleging i) violation of the Lanham Act, ii) deceptive trade practices under Georgia law, and iii) trade libel/product disparagement, which Sun answered on December 17, 2024. On March 11, 2025, Biofrontera received an additional notice alleging breach of contract through unlawful marketing practices which makes reference to similar previous communications sent by Sun to Biofrontera on February 4, 2022 and September 9, 2022.

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

Separately, on June 26, 2024 and June 27, 2024, Sun filed two complaints against Biofrontera, Biofrontera AG, Biofrontera Pharma, and Biofrontera Bioscience with the United States District Court for the District of Massachusetts (the “Massachusetts District Court”) and the International Trade Commission (the “Commission”), both alleging that the RhodoLED-XL infringes either/both of two patents held by Sun (the “Sun Patents”). The complaint filed in the Massachusetts District Court has been held in abeyance pending the completion of the investigation before the Commission. A hearing was held in front of an administrative law judge (“ALJ”) between June 30, 2025 and July 3, 2025, and on September 30, 2025, the ALJ issued an Initial Determination (“ID”) finding the Sun Patents to be valid and that importation of Biofrontera’s RhodoLED® XL violates Section 337 of the Tariff Act of 1930. The ID may be reviewed by the Commission, following which the Commission may adopt, reverse , or remand the ID to the ALJ for further proceedings. The ID has no immediate effect and will only become effective if adopted by the Commission in its “Final Determination”. The Final Determination is currently expected by February 2, 2026, though the timing of the Commission’s decision may be impacted by the federal government shutdown that started on October 1, 2025.

The Company denies Sun’s patent claims and intends to defend them vigorously in the above-referenced matters. In addition, Biofrontera has challenged the validity of the Sun Patents by filing separate petitions for inter partes review at the United States Patent Trial and Appeal Board (“PTAB”) for each of the Sun Patents. One such petition was instituted by the PTAB on February 24, 2025, while the PTAB issued a discretionary denial of the other petition on July 2, 2025. The PTAB’s final written decision on the instituted petition is expected on or before February 24, 2026.

Based on the Company’s assessment of the facts underlying the above-referenced patent matters, as well as the uncertainty of litigation, the Company cannot estimate the possibility of a material loss, nor the potential range of loss that may result from an adverse ruling by the Commission or at the Massachusetts District Court. Money damages are not available to Sun through the case before the Commission, and an adverse ruling could result in a limited exclusion order being imposed on the allegedly infringing product. If the final resolution of the case before the Massachusetts District Court is adverse to the Company, it could have a material impact on the Company’s financial position, results of operations, or cash flows.