3. Asset Acquisition

On October 20, 2025, the Company completed an asset acquisition with Biofrontera Group, pursuant to which the Company acquired certain intangible assets, including intellectual property, inventory (offset by assumed liabilities) and fixed assets in exchange for shares of the Company’s preferred stock, and an earnout arrangement. The transaction was accounted for as an asset acquisition because the acquired set of assets did not meet the definition of a business.

The preferred stock issued was measured at its fair value of $4.8 million on the acquisition date and included in the cost of the acquired assets, comprised of $2.1 million in fixed assets, $2.7 million of intangible assets and $2.6 million of inventory, offset by $2.6 million of assumed liabilities.

At the acquisition date, the Company evaluated the terms of the earnout arrangement and concluded that the amount of contingent consideration was not reasonably estimable due to the significant uncertainty associated with the timing and magnitude of future net sales. Accordingly, no amount related to the earnout was included in the initial measurement of the cost of the acquired assets. The Company has elected to account for contingent consideration in an asset acquisition as the contingency is resolved (earned and payable). No contingent consideration liability is recognized for amounts not yet earned. 

The earnout consideration is calculated and payable on a monthly basis, based on sales performance. See Note 16. Related Party Transactions for details. Earnout payments of $2.2 million were recognized during the period and included in cost of revenues on the consolidated statement of operations, of which $0.8 million was reflected in accrued expenses and an additional $0.7 million in accounts payable, related party as of December 31, 2025.

If the Company does not achieve the Minimum Order Amount as defined in Note 20. Commitments and Contingencies for two consecutive calendar years starting in January 1, 2026, then the Biofrontera Group will have the right to terminate the Agreements and recover all assets transferred to the Company.