20. Commitments and Contingencies

Leases

The lease for our office space at 120 Presidential Way, Woburn, MA expired in November 2025. The Company elected to not renew the lease and has no remaining commitments under this agreement. Lease expense was recognized through the expiration date, and the ROU asset and related lease liability were derecognized.

On July 30, 2025, the Company entered into an agreement to lease office space for its corporate headquarters at 660 Main Street, Woburn, MA. The lease commenced on December 1, 2025, with an original term of 63 months, terminating on February 28, 2031, unless extended. 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, followed by periodic escalated payments thereafter. The Company provided the landlord with a security deposit in the amount of $0.2 million, which was recorded as other assets in the consolidated balance sheets.

The Company has a master lease agreement for its vehicles, pursuant to which each vehicle is leased for an initial non-cancelable twelve-month period, and thereafter on a month-to-month basis. Based on historical retention experience of approximately three years, the vehicles have varying expiration dates through January 2029.

The components of lease expense for the years ended December 31, 2025 and 2024 were as follows (in thousands except lease term and discount rate):

 Schedule of Components of Lease Expense and Other Information

Future lease payments under non-cancelable leases as of December 31, 2025 were as follows (in thousands):

 Schedule of Future Commitments and Sublease Income

 Schedule of Operating Lease Liability

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 years ended December 31, 2025 or 2024.

Second A&R Ameluz LSA Sales Commitment and Minimum Research and Development Costs

The Second A&R Ameluz LSA, as amended by the Term Sheet, remained in full force and effect until the date of the Strategic Transaction of October 20 2025, at which time it was terminated. The Company was not required to make any payments under the Second A&R Ameluz LSA for the years ended December 31, 2025 and 2024.

Minimum Sales or Minimum Order

Until the earlier to occur of (i) the Company manufactures orders meeting one million tubes of Ameluz during the period from June 1, 2025 through May 31, 2031, or (ii) the expiration of patent protection, which is expected to occur in December 2043 (the “Asset Reversion Term”), starting January 1, 2026 and continuing until the end of the Asset Reversion Term, the Company shall be required to manufacture or order from suppliers at least 80,000 tubes of Ameluz per year (the “Minimum Order Amount”).

Supply Agreement

On December 12, 2025, Discovery entered into a Supply Agreement (“Supply Agreement”) with Midas Pharma GmbH (“Midas”). Among other things, the Supply Agreement provides that Midas will supply to Discovery or its contract manufacturers, in the aggregate, 100kg of the active pharmaceutical ingredient 5-Aminolevulinic acid Hydrochloride through the second quarter of 2028. Under the terms of the Supply Agreement, Discovery will provide Midas with a twenty-four (24) months non-binding rolling forecast, which shall 1) indicate the anticipated quantity of API required by the company and 2) be updated every twelve (12) months during the term of the agreement.

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., and Sun Pharmaceutical Industries LTD (collectively, “SUN”) in which SUN 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. SUN has since amended its complaint to include the allegations contained therein with its existing claims.

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 and the uncertainty of litigation, 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 United States District Court for the District of Massachusetts 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 Commission’s Final Determination is expected by April 30, 2026.

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 discretionarily denied by the PTAB on July 2, 2025 on administrative reasons. However, after instituting the other such petition in February of 2025, the PTAB issued final written decision on February 23, 2026 finding all of the claims in the SUN Patent challenged by Biofrontera to be unpatentable.

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 either action. Money damages are not available to Sun through the case before the Commission, and an adverse ruling could result in an 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.