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, 2023

☐	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 Presidential 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 to purchase common stock	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 8, 2023 there were 1,517,628 shares outstanding of the registrant’s common stock, par value $0.001 per share.

TABLE OF CONTENTS

	PART I. FINANCIAL INFORMATION

ITEM 1.	Financial Statements
	Condensed Consolidated Balance Sheets as of September 30, 2023 (unaudited) and December 31, 2022	3
	Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2023 (unaudited) and 2022 (unaudited)	4
	Condensed Consolidated Statements of Stockholders’ Equity for the three and nine months ended September 30, 2023 (unaudited) and 2022 (unaudited)	5
	Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2023 (unaudited) and 2022 (unaudited)	6
	Notes to Condensed 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	30
ITEM 4.	Controls and Procedures	30

	PART II. OTHER INFORMATION

ITEM 1.	Legal Proceedings	31
ITEM 1A.	Risk Factors	31
ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	31
ITEM 3.	Defaults Upon Senior Securities	31
ITEM 4.	Mine Safety Disclosures	31
ITEM 5.	Other Information	31
ITEM 6.	Exhibits	32
Signatures		33

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

BIOFRONTERA INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except par value and share amounts)

	September 30, 2023			December 31, 2022
	(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	3,422		$	17,208
Investment, related party		3,341			10,548
Accounts receivable, net		3,793			3,748
Other receivables, related party		2,713			3,658
Inventories, net		16,068			7,168
Prepaid expenses and other current assets		274			810

Total current assets		29,611			43,140

Other receivables long term, related party		-			2,813
Property and equipment, net		154			204
Operating lease right-of-use assets		1,129			1,375
Intangible asset, net		2,718			3,032
Other assets		492			320

Total assets	$	34,104		$	50,884

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable		1,634			1,278
Accounts payable, related parties		6,988			1,312
Accounts payable		6,988			1,312
Acquisition contract liabilities, net		7,211			6,942
Operating lease liabilities		555			498
Accrued expenses and other current liabilities		11,039			10,864
Line of credit		1,697			-

Total current liabilities		29,124			20,894

Long-term liabilities:
Acquisition contract liabilities, net		2,500			2,400
Warrant liabilities		842			2,843
Operating lease liabilities, non-current		562			848
Other liabilities		38			21

Total liabilities		33,066			27,006

Commitments and contingencies (Note 18)		-			-

Stockholders’ equity:
Preferred Stock, $0.001 par value, 20,000,000 shares authorized, zero shares issued and outstanding as of September 30, 2023 and December 31, 2022		-			-
Common Stock, $0.001 par value, 15,000,000 shares authorized; 1,367,628 and 1,334,950 shares issued and outstanding as of September 30, 2023 and December 31, 2022		1			1
Additional paid-in capital		104,213			103,396
Accumulated deficit		(103,176	)		(79,519	)

Total stockholders’ equity		1,038			23,878

Total liabilities and stockholders’ equity	$	34,104		$	50,884

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

BIOFRONTERA INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

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

(Unaudited)

	2023			2022			2023			2022
	Three months ended September 30,						Nine months ended September 30,
	2023			2022			2023			2022

Product revenues, net	$	8,879		$	4,290		$	23,423		$	18,467
Revenues, related party		17			32			52			63

Total revenues, net		8,896			4,322			23,475			18,530

Operating expenses
Cost of revenues, related party		4,495			2,127			11,814			9,504
Cost of revenues, other		95			98			262			425
Selling, general and administrative		8,619			7,765			29,874			25,050
Selling, general and administrative, related party		74			171			193			612
Research and development		33			-			44			-
Change in fair value of contingent consideration		200			(2,200	)		100			(4,100	)

Total operating expenses		13,516			7,961			42,287			31,491

Loss from operations		(4,620	)		(3,639	)		(18,812	)		(12,961	)

Other income (expense)
Change in fair value of warrant liabilities		598			3,814			2,001			17,896
Warrant inducement expense		-			(2,629	)		-			(2,629	)
Realized/Unrealized losses in investment, related party		(2,212	)		-			(6,635	)		-
Interest expense, net		(142	)		(89	)		(256	)		(160	)
Other income, net		35			(22	)		65			30

Total other income (expense)		(1,721	)		1,074			(4,825	)		15,137

Income (loss) before income taxes		(6,341	)		(2,565	)		(23,637	)		2,176
Income tax expense		1			1			20			31

Net income (loss)	$	(6,342	)	$	(2,566	)	$	(23,657	)	$	2,145

Income (loss) per common share:
Basic	$	(4.64	)	$	(2.26	)	$	(17.57	)	$	2.19
Diluted	$	(4.64	)	$	(2.26	)	$	(17.57	)	$	2.19

Weighted-average common shares outstanding:
Basic		1,366,842			1,136,291			1,346,264			978,018
Diluted		1,366,842			1,136,291			1,346,264			980,251

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

BIOFRONTERA INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In thousands, except number of shares)

(Unaudited)

Three and Nine Months Ended September 30, 2023

	Shares		Amount		In Capital		Deficit			Total
	Common Stock				Additional Paid-		Accumulated
	Shares		Amount		In Capital		Deficit			Total
Balance, June 30, 2023		1,343,538	$	1	$	104,006	$	(96,834	)	$	7,173
Issuance of shares in reverse stock split (for fractional shares)		24,090		0		-		-			-
Stock based compensation		-		-		207		-			207
Net loss		-		-		-		(6,342	)		(6,342	)
Balance, September 30, 2023		1,367,628	$	1	$	104,213	$	(103,176	)	$	1,038

Balance, December 31, 2022		1,334,950	$	1	$	103,396	$	(79,519	)	$	23,878
Issuance of shares for vested restricted stock units		8,588		0		-		-			-
Issuance of shares in reverse stock split (for fractional shares)		24,090		0		-		-			-
Stock based compensation		-		-		817		-			817
Net loss		-		-		-		(23,657	)		(23,657	)

Balance, September 30, 2023		1,367,628	$	1	$	104,213	$	(103,176	)	$	1,038

Three and Nine Months Ended September 30, 2022

	Common Stock				Additional Paid-		Accumulated
	Shares		Amount		In Capital		Deficit			Total
Balance, June 30, 2022		950,573	$	1	$	91,400	$	(74,168	)	$	17,233
Exercise of pre-funded warrants		78,450		0		2,841					2,841
Exercise of PIPE warrants		142,857		0		4,686		-			4,686
Issuance of shares for vested restricted stock units		5,668		0		-		-			-
Stock based compensation		-		-		401		-			401
Net loss		-		-		-		(2,566	)		(2,566	)
Balance, September 30, 2022		1,177,548	$	1	$	99,328	$	(76,734	)	$	22,595

Balance, December 31, 2021		855,237	$	1	$	90,216	$	(78,879	)	$	11,338
Issuance of common stock and warrants under private placement, net of issuance costs		92,500		0		116		-			116
Exercise of pre-funded warrants		78,450		0		2,841					2,841
Exercise of PIPE warrants		142,857		0		4,686		-			4,686
Issuance of shares for vested restricted stock units		8,504		0		-		-			-
Stock based compensation		-		-		1,469		-			1,469
Net income		-		-		-		2,145			2,145
Net income (loss)		-		-		-		2,145			2,145
Balance, September 30, 2022		1,177,548	$	1	$	99,328	$	(76,734	)	$	22,595

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

BIOFRONTERA INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In Thousands)

(Unaudited)

	2023			2022
	Nine Months Ended September 30,
	2023			2022
Cash flows from operating activities:

Net income (loss)	$	(23,657	)	$	2,145

Adjustments to reconcile net income (loss) to cash flows used in operations:

Depreciation		65			80
Amortization of right-of-use assets		390			-
Amortization of acquired intangible assets		314			314
Realized/Unrealized losses in investment, related party		6,635			-
Change in fair value of contingent consideration		100			(4,100	)
Change in fair value of warrant liabilities		(2,001	)		(17,896	)
Warrant inducement expense		-			2,629
Stock-based compensation		817			1,469
Provision for inventory obsolescence		-			100
Provision for doubtful accounts		158			111
Non-cash interest expense		296			268

Changes in operating assets and liabilities:
Accounts receivable		(204	)		2,111
Other receivables, related party		3,652			5,145
Prepaid expenses and other assets		347			4,121
Inventories		(8,900	)		(7,728	)
Accounts payable and related party payables		6,137			3,519
Operating lease liabilities		(375	)		-
Accrued expenses and other liabilities		197			(216	)

Cash flows used in operating activities		(16,029	)		(7,928	)

Cash flows from investing activities
Disbursement for loan receivable		-			(3,033	)
Sales of equity investment, related party		560			-
Purchases of property and equipment		(14	)		(37	)

Cash flows provided by (used) in investing activities		546			(3,070	)

Cash flows from financing activities
Proceeds from line of credit		13,546			-
Proceeds from issuance of common stock and warrants in private placement, net of issuance costs		-			9,391
Proceeds from exercise of warrants		-			4,630
Repayment of line of credit		(11,849	)		-

Cash flows provided by financing activities		1,697			14,021

Net increase (decrease) in cash and cash equivalents		(13,786	)		3,023
Cash, cash equivalents and restricted cash, at the beginning of the period		17,408			24,742

Cash, cash equivalents and restricted cash, at the end of the period	$	3,622		$	27,765

Supplemental disclosure of cash flow information
Interest paid	$	31		$	10
Interest paid, related party	$	22			-
Income taxes paid, net	$	21		$	30

Supplemental non-cash investing and financing activities
Conversion of warrant liability to equity	$	-		$	6,840
Addition of right-of-use assets in exchange for operating lease liabilities	$	147		$	-

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

Biofrontera Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

1. Business Overview

Biofrontera Inc. (the “Company” or “Biofrontera”) is a U.S.-based biopharmaceutical company commercializing a portfolio of pharmaceutical products for the treatment of dermatological conditions with a focus on photodynamic therapy (“PDT”) and topical antibiotics. The Company’s licensed products are used for the treatment of actinic keratoses, which are pre-cancerous skin lesions as well as impetigo, a bacterial skin infection. In May 2023, the Company began research and development (“R&D”) activities to support PDT growth and will continue to opportunistically invest in these activities going forward. Our research and development program currently aims to improve the capabilities of our BF-RhodoLED^®lamps to better fulfill the needs of dermatologists and improve the effectiveness of our commercial team by letting sales representatives carry approved devices with them allowing for easier product demonstrations and evaluations.

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

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

Our second prescription drug licensed product is Xepi® (ozenoxacin cream, 1%), a topical non-fluorinated quinolone that inhibits bacterial growth. It is approved for use in the United States in adults and children 2 months and older. We are currently selling Xepi® for this indication in the United States under an exclusive license and supply agreement, as amended (“Xepi LSA”) with Ferrer Internacional S.A. (“Ferrer”) that was assumed by Biofrontera on March 25, 2019 through our acquisition of Cutanea Life Sciences, Inc.(“Cutanea”). There has been limited revenue during the current reporting periods and recent developments with the third-party manufacturer that was providing our supply of Xepi® have resulted in further delays of our commercialization of the product. However, Ferrer is qualifying a new Contract manufacturer, Cambrex, which is expected to begin production in 2024.

Reverse Stock Split

On June 28, 2023, the Company, filed a Certificate of Amendment to its Amended and Restated Certificate of Incorporation (the “Amendment”) with the Secretary of State of the State of Delaware to (i) effect a 1-for-20 reverse stock split (the “Reverse Stock Split”) of the Company’s common stock, par value $0.001 per share (the “Common Stock”), and (ii) effect a related proportional reduction in the number of the Company’s authorized shares of Common Stock from 300,000,000 to 15,000,000 (the “Authorized Share Reduction”).

Pursuant to the Amendment, the Reverse Stock Split and Authorized Share Reduction was effective at 11:59 p.m. on July 3, 2023 (the “Split Effective Time”), and the Common Stock began trading on the Nasdaq Capital Market on a post-split basis on July 5, 2023. The par value and other terms of the Common Stock were not affected.

Following the Split Effective Time, every 20 shares of Biofrontera Common Stock issued and outstanding were automatically combined and reclassified into one share of Common Stock. Outstanding equity-based awards, warrants and other equity rights were proportionately adjusted pursuant to their terms and the number of shares authorized and reserved for issuance upon vesting of restricted stock units or exercise of stock options and warrants were reduced proportionately. No fractional shares were issued as a result of the Reverse Stock Split. Stockholders who would otherwise hold a fractional share as a result of the Reverse Stock Split received an additional share of Common Stock.

Under the terms of the applicable warrant agreement, the number of shares of Common Stock issuable on exercise of each warrant will be proportionately decreased. Specifically, following effectiveness of the Reverse Stock Split, every 20 shares of Common Stock that may be purchased pursuant to the exercise of public warrants now represents one share of Common Stock that may be purchased pursuant to such warrants. Accordingly, for the Company’s warrants trading under the symbol “BFRIW”, every 20 warrants will be exercisable for one share of Common Stock at an exercise price of $100.00 per share of Common Stock.

The Reverse Stock Split affected all stockholders uniformly and did not alter any stockholder’s percentage interest in the Company’s equity (other than as a result of the rounding up of fractional shares). All information included in these consolidated financial statements has been adjusted, on a retrospective basis, to reflect the Reverse Stock Split as if it had been effective from the beginning of the earliest period presented, unless otherwise stated. All outstanding securities entitling their holders to purchase shares of Common Stock or acquire shares of Common Stock, including stock options, restricted stock units, and warrants, were adjusted as a result of the Reverse Stock Split.

Liquidity and Going Concern

The Company’s primary sources of liquidity are its existing cash balances, cash collected from the sales of its products, proceeds from the sale of our investment, related party, and cash flows from a revolving line of credit. As of September 30, 2023, we had cash and cash equivalents of $3.4 million and investment, related party of $3.3 million, compared to $17.2 million and $10.5 million as of December 31, 2022, respectively.

Since we commenced operations in 2015, we have generated significant losses. For the nine months ended September 30, 2023 and 2022, we incurred loss from operations of $18.8 million and $13.0 million, respectively. We incurred net cash outflows from operations of $16.0 million and $7.9 million, for the same periods, respectively. We had an accumulated deficit as of September 30, 2023 of $103.2 million. Additionally, we expect to continue to incur operating losses due to significant discretionary sales and marketing, medical affairs, and dermatology community outreach efforts as we seek to expand the commercialization of our licensed products in the United States.

In connection with our assessment of going concern considerations under applicable accounting standards, the Company’s management has determined that substantial doubt exists about our ability to continue as a going concern for at least one year from the date the unaudited condensed consolidated financial statements were issued.

The future viability of the Company is dependent on its ability to continue to execute its growth plan and raise additional capital or find alternative methods of financing to fund its operations during the first half of 2024, and until cash flow from operations is sufficient, if ever. We have implemented plans to improve our working capital position, particularly around inventory levels, and do not expect to need a delivery until sometime in Q3 2024, depending on actual sales until then. Management believes that the anticipated implementation of such plans, together with the recent net capital raise of $4.1 million (See Note 21, Subsequent Events) will provide the opportunity for the Company to continue as a going concern. However, no assurance can be given that the Company will be successful in these efforts.

The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the ordinary course of business. The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might result from the outcome of the uncertainties described above. There could be a material adverse effect on the Company and its financial statements if management’s plans are not achieved on a timely basis.

2. Summary of Significant Accounting Policies

Basis for Preparation of the Financial Statements

The accompanying unaudited interim condensed 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 condensed 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, 2023, the Company’s operating results for the three and nine months ended September 30, 2023 and 2022, and the Company’s cash flows for the nine months ended September 30, 2023 and 2022. The accompanying financial information as of December 31, 2022 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 reaudited consolidated financial statements for the fiscal years ended December 31, 2022 and 2021 (“reaudited Consolidated Financial Statements”), and the revised Management’s Discussion and Analysis of Financial Condition and Results of Operations for the fiscal years ended December 31, 2022 and December 31, 2021 (“revised MD&A”), filed in a Current Report on From 8-K with the SEC on October 3, 2023.

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.

With the exception of the accounting policies below, there have been no new or material changes to the significant accounting policies discussed in the Company’s reaudited Consolidated Financial Statements.:

Reverse Stock Split

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

Research and Development Costs

Research and development costs are expensed as incurred. Research and development costs include external costs of outside vendors engaged to conduct research and development activities, and other operational costs related to the Company’s research and development activities.

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 Adopted Accounting Pronouncements

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 was effective for us on January 1, 2023, and did not have a material effect on our consolidated financial statements.

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 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.

Pursuant to the Share Purchase Agreement, Maruho provided $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”).

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. The contingent consideration liability was valued at $2.5 million with payments coming due May of 2028 through May 2031.

Acquisition contract liabilities, net consist of the following:

(in thousands)	September 30, 2023			December 31, 2022
Short-term acquisition contract liabilities:

Contingent consideration	$	2,500		$	2,400
Start-up cost financing		7,300			7,300
Contract asset		(89	)		(358	)
Acquisition contract liabilities, net	$	7,211		$	6,942

Long-term acquisition contract liabilities:
Contingent consideration	$	2,500		$	2,400

Total acquisition contract liabilities:
Contingent consideration	$	2,500		$	2,400
Start-up cost financing		7,300			7,300
Contract asset		(89	)		(358	)
Total acquisition contract liabilities, net	$	9,711		$	9,342

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, 2023 and December 31, 2022 and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value:

(in thousands)	Level		September 30, 2023		December 31, 2022
Assets:
Investment, related party		1	$	3,341	$	10,548
Liabilities:
Contingent Consideration		3	$	2,500	$	2,400
Warrant liability – 2022 Purchase Warrants		3	$	366	$	1,129
Warrant liability - 2022 Inducement Warrants		3	$	476	$	1,714
Warrant liability		3	$	476	$	1,714

Investment, related party

As of September 30, 2023 and December 31, 2022, the Company has an investment in 5,745,678 and 6,446,946, respectively of common shares of Biofrontera AG, a company traded on the Frankfurt Stock Exchange and a significant shareholder of Biofrontera. The fair value of this investment was determined with Level 1 inputs through references to quoted market prices. See Note 6. Investment Related Party and Note 13. Related Party Transactions.

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. 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, 2022	$	2,400
Change in fair value of contingent consideration		100
Balance at September 30, 2023	$	2,500

Balance at December

SEC Form 10-Q filed by Biofrontera Inc.