Fair Value Measurements

3 Months Ended

Mar. 31, 2026

3. Fair Value Measurements

The following table presents information about the Company’s assets that are measured at fair value on a recurring basis at March 31, 2026 and December 31, 2025 and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value:

(in thousands)	Level		March 31, 2026		December 31, 2025
Assets:
Investment, related party		1	$	9	$	9
Liabilities:
Warrant liability – 2023 Purchase Warrants		3	$	470	$	289
Warrant liability - 2022 Purchase Warrants		3	$	44	$	28
Warrant liability – 2022 Inducement Warrants		3	$	56	$	34
Total Liabilities			$	570	$	351

Investment, related party

As of March 31, 2026 and December 31, 2025, the Company owned 3,019 common shares of Biofrontera AG. The fair value of this investment was determined with Level 1 inputs through references to quoted market prices.

Warrant Liabilities

The warrant liabilities are comprised of (i) outstanding warrants to purchase 170,950 shares of the common stock, originally issued in a private placement on May 16, 2022, as amended on November 2, 2023 to extend the expiration date until November 2, 2028 and revise the exercise price to $3.55 per share (the “2022 Purchase Warrants”); (ii) warrants to purchase 214,286 shares of common stock issued on July 26, 2022, as amended on November 2, 2023 to extend the expiration date until November 2, 2028 and revise the exercise price to $3.55 per share (the “2022 Inducement Warrants”) and (iii) warrants to purchase 1,807,500 shares of common stock issued on November 2, 2023 expiring five years following the date of issuance and with an exercise price of $3.55 per share (the “2023 Purchase Warrants”). See Note 13. Stockholders’ Equity for additional details.

The 2023 Purchase Warrants, the 2022 Inducement Warrants and the 2022 Purchase Warrants were accounted for as liabilities as these warrants provide for a redemption right in the case of a fundamental transaction which fails the requirement of the indexation guidance under ASC 815-40. The resulting warrant liabilities are re-measured at each balance sheet date until their exercise or expiration, and any change in fair value is recognized in the Company’s condensed consolidated statement of operations. The warrant liabilities are measured at fair value at inception and on a recurring basis, with changes in fair value presented within the condensed consolidated statement of operations.

The Company utilizes a Black-Scholes-Merton (“BSM”) model to estimate the fair value of the warrant liabilities which is considered a Level 3 fair value measurement. Certain inputs utilized in our BSM model may fluctuate in future periods based upon factors which are outside of the Company’s control. A significant change in one or more of these inputs used in the calculation of the fair value may cause a significant change to the fair value of our warrant liabilities which could also result in material non-cash gain or loss being reported in our condensed consolidated statement of operations.

The fair value for the Level 3 warrants at March 31, 2026 was estimated using a BSM model based on the following assumptions at each measurement date:

	March 31, 2026			December 31, 2025
Stock price	$	0.81		$	0.57
Expiration term (in years)		2.59			2.84
Volatility		105.0	%		105	%
Risk-free Rate		3.77	%		3.51	%
Dividend yield		0.0	%		0.0	%

The following table presents the changes in the Level 3 warrant liabilities measured at fair value (in thousands):

	2026		2025
	Three Months Ended March 31,
	2026		2025
Fair value at beginning of period	$	351	$	1,250
Change in fair value of warrant liabilities		219		(548	)
Fair value at end of period	$	570	$	702

Biofrontera Inc. 10-Q