Biofrontera Inc. Debt Disclosure

14. Debt

 

Line of Credit

 

Effective as of January 4, 2024, we voluntarily terminated the Loan and Security Agreement with Midcap Business Credit LLC (the “Loan Agreement”), paying a total of approximately $0.4 million, consisting of (1) the outstanding principal of and interest balance due under the Loan Agreement, aggregating approximately $0.2 million, and (2) early termination fees of approximately $0.2 million.

 

 

As a result of the termination of the Loan Agreement, the Company recognized a $0.3 million loss related to prepayment fees and the write-off of deferred financing costs in the accompanying consolidated statement of operations for the year ended December 31, 2024.

 

Loan Facilities

 

On December 21, 2023, we entered into credit facilities with two different lenders (the “Loans”), each pursuant to a Business Loan and Security Agreement providing for a term loan in the principal amount of $2,000,000. Each of the Loans was evidenced by a Secured Promissory Note, effective as of December 21, 2023, and required the Company to make weekly payments of principal and interest in the amount of approximately $102,857 through July 5, 2024, the maturity date. Interest expense was recognized using the effective interest method, such that a constant effective interest rate was applied to the carrying amount of the debt at the beginning of each period until maturity. There were approximately $0.3 million of related issuance costs, recognized as a debt discount (contra liability against the debt balance), that were amortized as interest expense over the life of the loan using the effective interest method. The Company recognized discount amortization and interest expense of $0.3 million for the year ended December 31, 2024. As of December 31, 2024, the Company had repaid both Loans.

 

Convertible Notes Payable

 

On November 22, 2024, the Company issued $4.2 million in an aggregate principal amount of the Company’s Senior Secured Convertible Notes (the “Notes”) pursuant to a securities purchase agreement entered into on November 21, 2024 with its principal stockholders.

 

The Notes bear interest at 10.0% per annum, payable in-kind (“PIK interest”) through the issuance of additional principal on a quarterly basis. In the Event of Default (as defined in the Notes), the interest will increase to 15% per annum from the date of written notice from the holder. The Notes may be converted at any time into shares of the Company’s common stock at a conversion price of $0.78 per share subject to customary adjustments for stock splits, stock dividends and recapitalizations, as described in the Notes.

 

The Notes mature on November 22, 2027, unless earlier converted or repurchased. The Company may not redeem the Notes at its option prior to maturity. Upon maturity, the Company will pay to the holders of the Notes an amount in cash representing all of the outstanding aggregate principal amount of the Notes, together with any accrued and unpaid interest. Alternatively, the entire amount of the note will be automatically converted to shares of common stock if the 10-day volume weighted average price of a share of the Company’s common stock on Nasdaq is greater than 250% of the conversion price, and certain other conditions are met.

 

The Notes provide for customary events of default and contain conversion limitations, providing that no conversion may be made if the aggregate number of shares of common stock beneficially owned by the holder would exceed 9.99% immediately after conversion. There were no events of default at December 31, 2025.

 

The Notes are secured by substantially all property of the Company, including but not limited to the Company’s assets, inventory, intellectual property and accounts.

 

The Notes were accounted for as a liability under ASC 470 and the embedded conversion option has been assessed under ASC 815. Based on the Company’s evaluation, there were no embedded features that required bifurcation as a derivative liability.

 

In connection with the issuance of the note, the Company incurred $0.2 million of debt issuance costs, consisting of legal fees.

 

During the year ended December 31, 2025, the Company recognized interest expense of $0.4 million and amortization of issuance costs of $0.1 million. As of December 31, 2025 and December 31, 2024, the outstanding balance of the Notes was $4.6 million and $4.1 million, respectively, which is shown net of the remaining unamortized issuance cost of $0.1 million.