Stockholders’ Equity |
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| Stockholders’ Equity | 17. Stockholders’ Equity
Under the Company’s Certificate of Third Amendment to the Amended and Restated Certificate of Incorporation (“Certificate”), filed June 16, 2025, the Company is authorized to issue shares of common stock, and shares of preferred stock, par value $
Common Stock
The holders of common stock are entitled to one vote for each share held. Holders of common stock are not entitled to receive dividends, unless declared by the Company’s board of directors (“Board”). 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.
During the years ended December 31, 2025 and 2024, the Company issued shares of common stock upon the exercise of our liability classified warrants, conversions of preferred stock, and vesting of equity awards. The related changes in shares outstanding are reflected in the Consolidated Statement of Stockholder’s Equity.
On October 30, 2023, the Company entered into a securities purchase agreement (“2023 Purchase Agreement”) with an institutional investor for the purchase and sale, in a registered public offering (the “Public Offering”) by the Company of: (i) 150,000 shares of Common Stock at a combined offering price of $3.74, (ii) 1,055,000 pre-funded warrants to purchase up to 1,055,000 shares of Common Stock (the “Pre-Funded Warrants”) at a combined offering price of $3.7399 and (iii) 1,205,000 warrants to purchase up to 1,807,500 shares of Common Stock (the “Common Warrants”), resulting in gross proceeds of approximately $4.5 million. The Public Offering closed on November 2, 2023. The Common Warrants are exercisable upon issuance, will expire five years following the date of issuance and have an exercise price of $3.55 per share. The Pre-Funded Warrants are exercisable upon issuance, will expire five years following the date of issuance and have an exercise price of $0.0001 per share.
On January 8, 2024 and February 2, 2024, an investor exercised and , respectively, of the Pre-Funded Warrants, purchasing a total of shares of Common Stock at an exercise price of $ per share, resulting in negligible net proceeds.
During the year ended December 31, 2025, the Company issued shares of common stock upon conversion of Series B-2 Preferred Stock, shares of common stock upon conversion of Series B-3 Preferred Stock, shares of common stock upon conversion of Series C Preferred Stock and shares of common stock for restricted stock units.
For each of the years ended December 31, 2025 and 2024, we had outstanding warrants to purchase an aggregate of 2,269,356 shares of common stock with an exercise price range of $3.55 to $100.00 per share. These warrants have expiration dates ranging from November 2026 to November 2028. A summary of the warrants outstanding as of December 31, 2025 is presented below.
Series B Convertible Preferred Stock
On February 19, 2024, the Company entered into a securities purchase agreement (the “Preferred Purchase Agreement”), with certain accredited investors, pursuant to which the Company agreed to issue and sell, in a private placement (the ‘Offering”) (i) shares of Series B-1 Convertible Preferred Stock, par value $ per share (the “Series B-1 Preferred Stock”), and (ii) 2024 Preferred Warrants to purchase 8,000 shares of Series B-3 Convertible Preferred Stock, par value $ per share (the “Series B-3 Preferred Stock”), for an aggregate price of $8.0 million. The conversion price of Series B-1 Preferred Stock and Series B-3 Preferred Stock is $0.7074 per share of common stock, such that each Series B share is convertible into shares of the common stock or, to the extent the conversion would cause a holder to exceed its beneficial ownership limitation, shares of Series B-2 Preferred Stock. Pursuant to the Preferred Purchase Agreement, the Company may be compelled to appoint two independent directors designated by Rosalind Advisors, Inc. to the Company’s Board. No such appointment has been made as of December 31, 2025.
On February 20, 2024, the Company filed the Certificate of Designation with the Delaware Secretary of State designating shares of its authorized and unissued preferred stock as Series B-1 Preferred Stock, shares as Series B-2 Preferred Stock and shares as Series B-3 Convertible Preferred Stock, with a par value of $ per share (collectively the “Series B Preferred Stock”).
On February 22, 2024, concurrent with the closing of the Offering, in exchange for the conversion of shares of Series B-1 Preferred Stock, the Company issued shares of Common Stock. Pursuant to the Certificate, upon the Company’s stockholders’ May 2024 approval of an increase in the authorized shares of Common Stock (“Stockholder Approval”), the remaining shares of Series B-1 Preferred Stock automatically converted into Series B-2 Preferred Stock (as a conversion to common stock would have caused the holders to exceed their respective beneficial ownership limitations). During the third quarter of 2024, an additional shares of Series B Preferred Stock were converted into common stock.
On May 13 and 14, 2024, of the 2024 Preferred Warrants were exercised to purchase 7,998 shares of Series B-3 Convertible Preferred stock, par value $0.001 per share for net proceeds of $7.4 million, net of fees paid to the placement agent, while two warrants expired due to non-issuance of fractional shares. As of the exercise date, $12.8 million was applied to additional paid-in-capital, comprised of the $7.4 million of net proceeds and $5.4 million of warrant liability fair value. As of December 31, 2024, the 2024 Preferred Warrants issued in the Offering had been exercised or expired.
During the year ended December 31, 2025, holders of the Company’s Series B-2 Preferred Stock converted of these shares into shares of common stock and holders of the Company’s Series B-3 Preferred Stock converted of these shares into shares of common stock, in accordance with the applicable conversion provisions of those instruments.
As of December 31, 2025, there were no shares of Series B-1 Preferred Stock issued and outstanding, shares of Series B-2 Convertible Preferred Stock, par value $ per share (the “Series B-2 Preferred Stock”) and shares of the Series B-3 Preferred Stock (collectively the “Series B Preferred Stock”) issued and outstanding with the following terms, pursuant to the Certificate of Designation of Preferences, Rights and Limitations of Series B Convertible Preferred with the Delaware Secretary of State:
Voting Rights. Subject to certain limitations described in the Certificate of Designation with the Delaware Secretary of State, the Series B Preferred Stock is voting stock. Holders of the Series B Preferred Stock are entitled to vote together with the common stock on an as-if-converted-to-Common-Stock basis. Holders of common stock are entitled to one vote for each share of common stock held on all matters submitted to a vote of stockholders. Accordingly, holders of Series B Preferred Stock will be entitled to one vote for each whole share of common stock into which their Series B Preferred Stock is then convertible on all matters submitted to a vote of stockholders.
Conversion. Subject to certain beneficial ownership limitations, at the option of the holder, each share of Series B Preferred Stock is convertible into shares of common stock at the applicable conversion price, rounded down to the nearest whole share. The conversion price for the Series B Preferred Stock is $0.7074 per share of common stock, subject to adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization. In May 2024, upon the Company’s stockholders’ approval of an increase in the authorized shares of common stock (the “Stockholder Approval”), each share of Series B-1 Preferred Stock was automatically converted into either common stock or, to the extent the conversion would cause a holder to exceed its beneficial ownership limitation, shares of Series B-2 Preferred Stock.
Liquidation. Following the Stockholder Approval, in the event of any voluntary or involuntary liquidation, dissolution or winding up of the Company, including a change of control transaction, or Deemed Liquidation Event, as defined in the Certificate of Designation (any such event, a “Liquidation”), the assets of the Company available for distribution to its stockholders shall be distributed among the holders of the shares of Series B Preferred Stock and common stock, pro rata based on the number of shares held by each such holder, treating for this purpose all shares of Series B Preferred Stock as if they had been converted to common stock pursuant to the terms of the Certificate of Designation immediately prior to such Liquidation, without regard to any limitations on conversion set forth in the Certificate of Designation or otherwise.
Participation Right. For a period of one year following the closing of the Offering, the purchasers will have the right to participate as an investor in any securities offering consummated by the Company.
Following the Stockholder Approval, upon any liquidation, the assets of the Corporation available for distribution to its stockholders will be distributed among the holders of the shares of Series B Preferred Stock and common stock, pro rata based on the number of shares held by each such holder, treating for this purpose all shares of Series B Preferred Stock as if they had been converted to common stock pursuant to the terms of the Certificate of Designation filed on February 20, 2024. Accordingly, the Series B Preferred Stock is classified as permanent equity on our consolidated balance sheets and consolidated statements of changes in stockholders’ as of December 31, 2025 and 2024, due to the limited exception under ASC 480-10-S99-3A(3)(f).
Series C Convertible Preferred Stock
As a condition precedent to the Strategic Transaction, the Company entered into a securities purchase agreement with certain accredited investors on June 27, 2025, pursuant to which the Company agreed to issue and sell, in a private placement, up to shares of Series C Convertible Preferred Stock, par value $ per share at a price of $ per Series C Preferred Share for an aggregate offering price of $11.0 million. The offering consisted of two tranches, of which the first tranche of Series C Preferred Shares closed on July 1, 2025 and the second tranche of Series C Preferred Shares closed on October 24, 2025.
On June 30, 2025, the Company filed a Certificate of Designation of Preferences, Rights and Limitations of Series C Convertible Preferred with the Delaware Secretary of State (the “Series C Certificate of Designation”) designating shares of its authorized and unissued preferred stock as Series C Preferred Stock each with a stated value of $ per share.
During the year ended December 31, 2025, holders of the Company’s Series C Preferred Stock converted of these shares into shares of common stock in accordance with the applicable conversion provisions of those instruments.
As of December 31, 2025, there were shares of Series C Preferred Stock issued and outstanding with the following terms, pursuant to the Certificate of Designation of Preferences, Rights and Limitations of Series C Convertible Preferred with the Delaware Secretary of State:
Voting Rights. Holders of Series C Preferred Stock will be entitled to one vote for each whole share of common stock into which their Series C Preferred Stock is then-convertible on all matters submitted to a vote of stockholders, subject to certain limitations.
Conversion. Each share of Series C Preferred Stock is, subject to certain limitations, immediately convertible at the option of the holder thereof into the number of shares of the Company’s common stock equal to the original share price of $1,000 divided by $, rounded down to the nearest whole share.
Liquidation. Upon any liquidation, the assets of the Company available for distribution to its stockholders shall be distributed among the holders of the shares of Series C Preferred Stock, Series D Preferred Stock, any other classes of capital stock with liquidation rights and common stock, pro rata based on the number of shares of common stock held by each such holder, treating for this purpose all shares of Series C Preferred Stock as if they had been converted to common stock immediately prior to such liquidation, without regard to any limitations on conversion or otherwise.
Series D Convertible Preferred Stock
On July 2, 2025, the Company issued shares of Series D Convertible Preferred Stock, par value $ per share (the “Series D Preferred Stock”), each at a price of $ per Series D Preferred Stock, in connection with the Term Sheet, as a precursor to the Strategic Transaction. Under the Term Sheet, for a period of twelve months following the date of issuance of the Series D Preferred Stock, the Company shall not issue any additional equity securities or any debt convertible into equity.
In connection with the Strategic Transaction, on June 30, 2025, the Company filed the Certificate of Designation of Preferences, Rights and Limitations of Series D Convertible Preferred Stock with the Delaware Secretary of State (the “Series D Certificate of Designation”) designating shares of its authorized and unissued preferred stock as Series D Preferred Stock each with a stated value of $ per share.
As of December 31, 2025, there were
Voting Rights. Holders of Series D Preferred Stock will be entitled to one vote for each whole share of common stock into which their Series D Preferred Stock is then-convertible on all matters submitted to a vote of stockholders, subject to certain limitations.
Conversion. Each share of Series D Preferred Stock, subject to certain limitations, is immediately convertible at the option of the holder thereof into the number of shares of the Company’s common stock equal to the original share price of $1,000 divided by, rounded down to the nearest whole share.
Liquidation. Upon any liquidation, the assets of the Company available for distribution to its stockholders shall be distributed among the holders of the shares of Series D Preferred Stock, Series C Preferred Stock, any other classes of capital stock with liquidation rights and common stock, pro rata based on the number of shares of common stock held by each such holder, treating for this purpose all shares of Series D Preferred Stock as if they had been converted to common stock immediately prior to such liquidation, without regard to any limitations on conversion or otherwise.
Effective as of the date of the Strategic Transaction and for the following three years, as long as Biofrontera AG holds any shares of Series D Preferred Stock (or shares of common stock that were converted from Series D Preferred Stock), Biofrontera AG shall have the right to appoint (i) one individual to the Company’s board of directors if the board consists of seven or fewer members; or (ii) two individuals to the Company’s board of directors if the board consists of eight or more directors. No appointments have been made through the filing date.
Redeemable Preferred Stock
At issuance, the Series C Preferred and Series D Preferred Stock were redeemable in the event of a change in control that was not solely within the control of the Company. ASC 480-10-S99-3A(2) of the SEC’s Accounting Series Release No. 268 requires preferred securities that are redeemable for cash or other assets to be classified outside of permanent equity if they are redeemable (i) at a fixed or determinable price on a fixed or determinable date, (ii) at the option of the holder, or (iii) upon the occurrence of an event that is not solely within the control of the issuer. The Series C Preferred and Series D Preferred Stock had preference in liquidation over common stock upon deemed liquidation events that were not solely within the issuer’s control. As such the limited scope exception for permanent equity did not apply and the Series C Preferred and Series D Preferred Stock were classified as mezzanine equity at issuance.
Following the Company’s Special Shareholder Meeting on September 16, 2025, the holders of Series C Preferred Stock and Series D Preferred Stock are entitled to receive the same form of consideration upon a liquidation event. Accordingly, the Series C Preferred Stock and Series D Preferred Stock were classified as permanent equity on our consolidated balance sheets and consolidated statements of change in stockholders’ equity and are presented as such as of December 31, 2025, due to the limited exception under ASC 480-10-S99-3A(3)(f).
Convertible Debt
On November 22, 2024, the Company issued $4.2 million in an aggregate principal amount of the Notes. The Notes allow for up to shares of common stock to be issued upon conversion for principal plus additional shares for PIK interest. See Note 14. Debt - Convertible Notes Payable, for additional details.
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