PROPOSAL
NO. 1-APPROVAL OF REVERSE STOCK SPLIT PROPOSAL
The
Board is asking stockholders to approve the Reverse Stock Split Proposal. The form of the Certificate of Amendment to the Certificate
of Incorporation to be filed with the Secretary of State of the State of Delaware is set forth as Appendix A to this proxy statement
(the “Amendment”). Although such filing is within the control of the Board, we expect such filing to be made shortly after
the approval by the stockholders of the Stock Split Proposal. The Amendment will become effective, at such future date as determined
by the Board, upon the filing of the Amendment with the Secretary of State of the State of Delaware (which we refer to as the “Effective
Time”), but in no event earlier than the date of the Special Meeting. Moreover, even if the Amendment is approved by the requisite
number of stockholders, the Board reserves the right, at its discretion, to abandon the Amendment prior to the proposed effective date
if it determines that abandoning the Amendment is in our best interests. No further action on the part of stockholders would be required
to either effect or abandon the Amendment.
The
text of the Amendment is subject to modification to include such changes as may be required by DGCL and as the Board deems necessary
and advisable to effect the Amendment.
A
brief description of the Stock Split Proposal is set out below.
Purpose
of the Reverse Stock Split
The
Board seeks your approval for the Reverse Stock Split as part of the Amendment with the intent of increasing the per share trading price
of our Common Stock, which is publicly traded and listed on the Nasdaq Capital Market under the symbol, “BFRI,” in order
to regain compliance with the minimum bid price requirement as set forth in Nasdaq Listing Rule 5550(a)(2) (the “Minimum Bid Requirement”),
for continued listing on the Nasdaq. Accordingly, we believe that effecting the Reverse Stock Split would be in our and our stockholders’
best interests.
On
February 24, 2023, the Company received a notice letter (the “Notice”) from the Listing Qualifications Department of The
Nasdaq Stock Market LLC (“Nasdaq”) notifying the Company that, based upon the closing bid price of the Common Stock, for
the last 30 consecutive business days, the Company is not currently in compliance with the requirement to maintain the Minimum Bid Requirement.
To
regain compliance, the closing bid price of the Common Stock must be at least $1.00 per share for ten consecutive business days at some
point during the period of 180 calendar days from the date of the Notice, or until August 23, 2023. If the Company does not regain compliance
with the minimum bid price requirement by August 23, 2023, Nasdaq may grant the Company a second period of 180 calendar days to regain
compliance. To qualify for this additional compliance period, the Company would be required to meet the continued listing requirement
for the market value of publicly held shares and all other initial listing standards for Nasdaq, other than the minimum bid price requirement.
In addition, the Company would also be required to notify Nasdaq of its intent to cure the minimum bid price deficiency. If the Company
does not regain compliance within the allotted compliance periods, including any extensions that may be granted by Nasdaq, Nasdaq will
provide notice that the Common Stock will be subject to delisting. The Company would then be entitled to appeal that determination to
a Nasdaq hearings panel.
In
addition, the Company believes that the Reverse Stock Split will make the Common Stock a more attractive and cost-effective investment
for many investors, which in turn may enhance the liquidity of the holders of the Common Stock, as it believes that the current market
price of the Common Stock may prevent certain institutional investors, professional investors, and other members of the investing public
from purchasing stock. Many brokerage houses and institutional investors have internal policies and practices that either prohibit them
from investing in low-priced stocks or tend to discourage individual brokers from recommending low-priced stocks to their customers.
Many institutional investors view stocks trading at low prices as unduly speculative in nature and, as a result, avoid investing in such
stocks. The Reverse Stock Split could also increase interest in our Common Stock for analysts and brokers who may otherwise have policies
that discourage or prohibit them in following or recommending companies with low stock prices. Moreover, because brokers’ commissions
on low-priced stocks generally represent a higher percentage of the stock price than commissions on higher-priced stocks, the current
average price per share of Common Stock can result in individual stockholders paying transaction costs representing a higher percentage
of their total share value than would be the case if the share price were higher.
Risks
of Non-Approval
Failure
to approve the Reverse Stock Split Proposal may potentially have serious, adverse effects on the Company and its stockholders. The Common
Stock could be delisted from the Nasdaq because shares of the Common Stock may continue to trade below the requisite $1.00 per share
price needed to maintain our listing in accordance with Nasdaq Listing Rule 5550(a)(2). Our shares may then trade on the OTC Bulletin
Board or other small trading markets, such as the pink sheets. In that event, the Common Stock could trade thinly as a microcap or penny
stock, adversely decrease to nominal levels of trading, and may be avoided by retail and institutional investors, resulting in the impaired
liquidity of the Common Stock.
As
of the Record Date, the Common Stock closed at $ per share on Nasdaq. Reducing the number of outstanding shares of Common Stock should,
absent other factors, generally increase the per share market price of the common stock. Although the intent of the Reverse Stock Split
is to increase the price of the Common Stock, there can be no assurance that even if the Reverse Stock Split is effected the bid price
of the Common Stock will be sufficient, over time, for the Company to regain or maintain compliance with the Minimum Bid Requirement.
Principal
Effects of the Reverse Stock Split
Depending on the ratio for the Reverse Stock Split
determined by the Board of Directors, a minimum of five and a maximum of twenty-five shares of existing common stock will be combined
into one new share of common stock. Based on [26,699,002] shares of common stock issued and outstanding as of ,
2023, immediately following the Reverse Stock Split, the Company would have approximately [5,339,801] shares of common stock issued
and outstanding (without giving effect to rounding for fractional shares) if the ratio for the Reverse Stock Split is one-for-five
(1:5), and approximately [1,067,960] shares of common stock issued and outstanding (without giving effect to rounding for
fractional shares) if the ratio for the Reverse Stock Split is one-for-twenty-five (1:25). Any other ratio selected within such range
would result in a number of shares of common stock issued and outstanding (without giving effect to rounding for fractional shares) following
the transaction between approximately [1,067,960] and [1,779,933] shares. Fractional shares will not be issued. Instead, we will issue
a full share of post-Reverse Stock Split common stock to any stockholder who would have been entitled to receive a fractional share of
common stock as a result of the Reverse Stock Split.
The
actual number of shares issued after giving effect to the Reverse Stock Split, if implemented, will depend on the reverse stock split
ratio that is ultimately determined by the Board of Directors.
The
Reverse Stock Split will affect all holders of our common stock uniformly and will not affect any stockholder’s percentage ownership
interest in us, except to the extent the Reverse Stock Split would result in fractional shares, as described above. In addition, the
Reverse Stock Split will not affect any stockholder’s proportionate voting power, except to the extent the Reverse Stock Split
would result in fractional shares, as described above.
The
Reverse Stock Split may result in some stockholders owning “odd lots” of less than 100 shares of common stock. Odd lot shares
may be more difficult to sell, and brokerage commissions and other costs of transactions in odd lots are generally somewhat higher than
the costs of transactions in “round lots” of even multiples of 100 shares.
After
the Reverse Stock Split is effective, our common stock will have new Committee on Uniform Securities Identification Procedures (CUSIP)
numbers, which are numbers used to identify our equity securities, and stock certificates with the older CUSIP numbers will need to be
exchanged for stock certificates with the new CUSIP numbers by following the procedures described below. After the Reverse Stock Split,
we will continue to be subject to the periodic reporting and other requirements of the Securities Exchange Act of 1934, as amended. Assuming
that the Company’s meets the Minimum Bid Price Requirement, we expect that our common stock will continue to be quoted on The Nasdaq
Capital Market under the symbol “BFRI.”
Beneficial
Holders of Common Stock (i.e., stockholders who hold in street name)
Upon
the implementation of the Reverse Stock Split, we intend to treat shares held by stockholders through a bank, broker, custodian or other
nominee in the same manner as registered stockholders whose shares are registered in their names. Banks, brokers, custodians or other
nominees will be instructed to effect the Reverse Stock Split for their beneficial holders holding our common stock in street name. However,
these banks, brokers, custodians or other nominees may have different procedures than registered stockholders for processing the Reverse
Stock Split. Stockholders who hold shares of our common stock with a bank, broker, custodian or other nominee and who have any questions
in this regard are encouraged to contact their banks, brokers, custodians or other nominees.
Registered
“Book-Entry” Holders of Common Stock (i.e., stockholders that are registered on the transfer agent’s books and records
but do not hold stock certificates)
Certain
of our registered holders of common stock may hold some or all of their shares electronically in book-entry form with the transfer agent.
These stockholders do not have stock certificates evidencing their ownership of the common stock. They are, however, provided with a
statement reflecting the number of shares registered in their accounts.
Stockholders
who hold shares electronically in book-entry form with the transfer agent will not need to take action (the exchange will be automatic)
to receive shares of post-Reverse Stock Split common stock.
Effect
of the Reverse Stock Split on Employee Plans, Options, Restricted Stock Awards and Units and Warrants
Based
upon the reverse stock split ratio determined by the Board of Directors, proportionate adjustments are generally required to be made
to the per share exercise price and the number of shares issuable upon the exercise or conversion of all outstanding options, warrants,
convertible or exchangeable securities entitling the holders to purchase, exchange for, or convert into, shares of common stock. This
would result in approximately the same aggregate price being required to be paid under such options, warrants, convertible or exchangeable
securities upon exercise, and approximately the same value of shares of common stock being delivered upon such exercise, exchange or
conversion, immediately following the Reverse Stock Split as was the case immediately preceding the Reverse Stock Split. The number of
shares deliverable upon settlement or vesting of restricted stock awards will be similarly adjusted. The number of shares reserved for
issuance pursuant to these securities will be proportionately based upon the reverse stock split ratio determined by the Board of Directors.
Certain
Risks and Potential Disadvantages Associated with a Reverse Stock Split
We
cannot assure stockholders that the proposed Reverse Stock Split will sufficiently increase our stock price or be completed before Nasdaq
commences delisting procedures. The effect of a Reverse Stock Split on our stock price cannot be predicted with any certainty, and the
history of reverse stock splits for other companies, including those in our industry, is varied, particularly since some investors may
view a reverse stock split negatively. It is possible that our stock price after a Reverse Stock Split will not increase in the same
proportion as the reduction in the number of shares outstanding, causing a reduction in the Company’s overall market capitalization.
Further, even if we implement the Reverse Stock Split, our stock price may decline due to various factors, including our future performance
and general industry, market and economic conditions. This percentage decline, as an absolute number and as a percentage of our overall
market capitalization, may be greater than would occur in the absence of the Reverse Stock Split. If we continue to fail to meet Nasdaq’s
listing requirements, Nasdaq may suspend trading and commence delisting proceedings.
The
proposed Reverse Stock Split may decrease the liquidity of our common stock and result in higher transaction costs. The liquidity of
our common stock may be negatively impacted by the reduced number of shares outstanding after the Reverse Stock Split, which would be
exacerbated if the stock price does not increase following the Reverse Stock Split. In addition, a Reverse Stock Split would increase
the number of stockholders owning “odd lots” of fewer than 100 shares, trading in which generally results in higher transaction
costs. Accordingly, a Reverse Stock Split may not achieve the desired results of increasing marketability and liquidity as described
above.
Stockholders
should also keep in mind that the implementation of a Reverse Stock Split does not have an effect on the actual or intrinsic value of
our business or a stockholder’s proportional ownership interest (subject to the treatment of fractional shares). However, should
the overall value of our common stock decline after a Reverse Stock Split, then the actual or intrinsic value of shares held by stockholders
will also proportionately decrease as a result of the overall decline in value.
Fractional
Shares
No
fractional shares will be issued in connection with the Reverse Stock Split. Instead, we will issue one full share of post-reverse stock
split common stock to any stockholder who would have been entitled to receive a fractional share as a result of the process. Each common
stockholder will hold the same percentage of the outstanding common stock immediately following the Reverse Stock Split as that stockholder
did immediately prior to the Reverse Stock Split, except for minor adjustment due to the additional net share fraction that will need
to be issued as a result of the treatment of fractional shares.
Authorized
Shares of Common Stock
We
are currently authorized under our Amended and Restated Certificate of Incorporation, to issue up to a total of 320,000,000 shares of
capital stock, comprised of 300,000,000 shares of common stock and 20,000,000 shares of preferred stock. Authorized shares represent
the number of shares of common stock that we are permitted to issue under our Amended and Restated Certificate of Incorporation. If the
Reverse Stock Split Proposal is implemented, the Amendment would also reduce both the number of issued and outstanding shares of common
stock and the number of authorized shares of common stock from 300,000,000 to [100,000,000].
Accounting
Matters
The
Reverse Stock Split will not affect the par value of our common stock. As a result, on the effective date of the reverse stock split,
the stated capital account on our balance sheet attributable to the common stock will be reduced by at least up to 96% of its present
amount, as the case may be, based on the ratio for the reverse stock split as determined by our Board of Directors, with the additional
paid-in capital account being credited with the amount by which the stated capital account is reduced. The per share net loss and net
book value of our common stock will be retroactively adjusted for each period because there will be fewer shares of our common stock
outstanding for all periods presented.
U.S.
Federal Income Tax Consequences of the Reverse Stock Split
The
following is a summary of certain material U.S. federal income tax consequences of the Reverse Stock Split to the holders of our common
stock. It addresses only stockholders who hold our common stock as capital assets. It does not purport to be complete, does not address
all aspects of U.S. federal income taxation that may be relevant to holders in light of their particular circumstances, does not address
U.S. federal estate or gift taxes, the alternative minimum tax or the Medicare tax on investment income, and does not address stockholders
subject to special rules, including without limitation financial institutions, tax-exempt organizations, insurance companies, dealers
in securities, foreign stockholders, stockholders who hold their pre-Reverse Stock Split shares as part of a straddle, hedge or conversion
transaction, and stockholders who acquired their pre-Reverse Stock Split shares pursuant to the exercise of employee stock options or
otherwise as compensation. In addition, this summary does not consider or discuss the tax treatment of partnerships or other pass-through
entities or persons that hold our shares through such entities.
This
summary is based on the Internal Revenue Code of 1986, as amended (the “Code”), regulations, rulings, and decisions in effect
on the date hereof, all of which are subject to change (possibly with retroactive effect) and to differing interpretations. It does not
address tax considerations under state, local, foreign and other laws. This summary is for general information purposes only, and the
tax treatment of a stockholder may vary depending upon the particular facts and circumstances of such stockholder. Each stockholder is
urged to consult with such stockholder’s own tax advisor with respect to the tax consequences of the Reverse Stock Split.
The
Reverse Stock Split is intended to constitute a “recapitalization” within the meaning of Section 368(a)(1)(E) of the Code
for U.S. federal income tax purposes. Assuming that such treatment is correct, the Reverse Stock Split generally will not result in the
recognition of gain or loss for U.S. federal income tax purposes, except potentially with respect to any additional fractions of a share
of our common stock received as a result of the rounding up of any fractional shares that otherwise would be issued, as discussed below.
Subject to the following discussion regarding a stockholder’s receipt of a whole share of our common stock in lieu of a fractional
share, the adjusted basis of the new shares of common stock will be the same as the adjusted basis of the common stock exchanged for
such new shares. The holding period of the new, post-Reverse Stock Split shares of the common stock resulting from implementation of
the Reverse Stock Split will include the stockholder’s respective holding periods for the pre-Reverse Stock Split shares. Stockholders
who acquired their shares of our common stock on different dates or at different prices should consult their tax advisors regarding the
allocation of the tax basis of such shares.
As
described above in “Fractional Shares”, no fractional shares of our common stock will be issued as a result of the Reverse
Stock Split. Instead, we will issue one (1) full share of the post-Reverse Stock Split common stock to any stockholder who would have
been entitled to receive a fractional share as a result of the process. The U.S. federal income tax consequences of the receipt of such
additional fraction of a share of our common stock are not clear. A stockholder who receives one (1) whole share of our common stock
in lieu of a fractional share may recognize income or gain in an amount not to exceed the excess of the fair market value of such share
over the fair market value of the fractional share to which such stockholder was otherwise entitled. We are not making any representation
as to whether the receipt of one (1) whole share in lieu of a fractional share will result in income or gain to any stockholder, and
stockholders are urged to consult their own tax advisors as to the possible tax consequences of receiving a whole share in lieu of a
fractional share in the Reverse Stock Split.
We
have not sought, and will not seek, any ruling from the Internal Revenue Service or an opinion of tax counsel with respect to the matters
discussed herein. The foregoing views are not binding on the Internal Revenue Service or the courts, and there can be no assurance that
the Internal Revenue Service or the courts will accept the positions expressed above. The state and local tax consequences of a reverse
stock split may vary significantly as to each holder of our common stock, depending upon the state in which such holder resides or does
business. Accordingly, each stockholder should consult with their own tax advisor with respect to all of the potential tax consequences
to him or her of the Reverse Stock Split.
Interests
of Directors and Executive Officers
Our
directors and executive officers have no substantial interests, directly or indirectly, in the matters set forth in this proposal except
to the extent of their ownership of shares of our Common Stock.
Reservation
of Right to Abandon Reverse Stock Split
We
reserve the right to not file the Certificate of Amendment and to abandon any Reverse Stock Split without further action by our stockholders
at any time before the effectiveness of the filing with the Secretary of the State of Delaware of the Certificate of Amendment, even
if the authority to effect the amendment is approved by our stockholders at the Special Meeting. By voting in favor of the Reverse Stock
Split, you are expressly also authorizing the Board to delay, not proceed with, and abandon, the Reverse Stock Split and the Certificate
of Amendment if the Board should so decide, in its sole discretion, that such actions are in the best interests of our stockholders.
Consequences
if the Reverse Stock Split is Not Approved
In
the event that the Reverse Stock Split is not approved, there is a significant likelihood that we will be delisted from the Nasdaq Capital
Market. If we are unable to achieve an increase in our stock price and our Common Stock is subsequently delisted, it could significantly
and negatively affect our ability to obtain debt or equity financing in order to support Company operations.
Required
Vote of Stockholders
The
approval of the Reverse Stock Split Proposal requires the affirmative vote of a majority of our outstanding shares of common stock entitled
to vote on the Reverse Stock Split Proposal at the Special Meeting. Broker non-votes and abstentions will be counted as votes against
the proposal.
THE
BOARD RECOMMENDS THAT YOU VOTE “FOR” PROPSAL NO. 1.
STOCKHOLDER
PROPOSALS AND NOMINATIONS FOR 2023 ANNUAL MEETING OF STOCKHOLDERS
Any
stockholder who meets the requirements of the proxy rules under the Exchange Act may submit proposals to the Board of Directors to be
presented at the 2023 annual meeting. Such proposals must comply with the requirements of Rule 14a-8 under the Exchange Act and be submitted
in writing by notice delivered or mailed by first-class United States mail, postage prepaid, to our Secretary at our principal executive
offices at the address set forth above no later than July 11, 2023, , except as may otherwise be provided in Rule 14a-8 under the Exchange
Act, to be considered for inclusion in the proxy materials to be disseminated by the Board of Directors for the 2023 annual meeting.
The
Bylaws also provide for separate notice procedures to recommend a person for nomination as a director or to propose business to be considered
by stockholders at a meeting. To be considered timely under these provisions, the stockholder’s notice must be received by our
Secretary at our principal executive offices at the address set forth above no earlier than August 14, 2023 and no later than September
13, 2023. Our Bylaws also specify requirements as to the form and content of a stockholder’s notice.
If
a stockholder wishes to solicit proxies for a stockholder nominee for election to our board at the 2023 annual meeting of stockholders
pursuant to Rule 14a-19 of the Exchange Act, notice must be submitted to our corporate secretary no later than October 13, 2023. Such
solicitation and notice must comply with the requirements of Rule 14a-19 of the Exchange Act and our by-laws.
The
chairperson of the meeting may refuse to acknowledge the introduction of any stockholder proposal if it is not made in compliance with
the applicable notice provisions.
NOTICE
REGARDING DELIVERY OF STOCKHOLDER DOCUMENTS (“HOUSEHOLDING” INFORMATION)
The
SEC has adopted rules that permit companies and intermediaries (e.g., brokers) to satisfy the delivery requirements for proxy statements
and annual reports by delivering a single copy of these materials to an address shared by two or more Biofrontera stockholders. This
process, which is commonly referred to as “householding,” potentially means extra convenience for stockholders and cost savings
for companies and intermediaries. A number of brokers and other intermediaries with account holders who are our stockholders may be householding
our stockholder materials, including this Proxy Statement. In that event, a single proxy statement, as the case may be, will be delivered
to multiple stockholders sharing an address unless contrary instructions have been received from the affected stockholders. Once you
have received notice from your broker or other intermediary that it will be householding communications to your address, householding
will continue until you are notified otherwise or until you revoke your consent, which is deemed to be given unless you inform the broker
or other intermediary otherwise when you receive or received the original notice of householding. If, at any time, you no longer wish
to participate in householding and would prefer to receive a separate proxy statement, please notify your broker or other intermediary
to discontinue householding and direct your written request to receive a separate proxy statement to us at: Biofrontera Inc., Attention:
Corporate Secretary, 120 Presidential Way, Suite 330, Woburn, Massachusetts 01801 or by calling us at (781) 486-1510. Stockholders who
currently receive multiple copies of the proxy statement at their address and would like to request householding of their communications
should contact their broker or other intermediary.
APPENDIX
A
FORM
OF REVERSE STOCK SPLIT AMENDMENT
CERTIFICATE
OF AMENDMENT
TO THE
AMENDED
AND RESTATED CERTIFICATE OF INCORPORATION OF
OF
BIOFRONTERA
INC.
Biofrontera
Inc. (the “Corporation”), a corporation organized and existing under and by virtue of the General Corporation
Law of the State of Delaware (the “DGCL”), does hereby certify:
FIRST.
The Amended and Restated Certificate of Incorporation of the Corporation is hereby amended by changing the Article FOURTH, so that, as
amended, the first paragraph of said Article FOURTH shall be amended and restated as follows:
The
total number of shares of capital stock that the Corporation has the authority to issue shall be (i) 100,000,000 shares of common stock,
par value $0.001 per share (“Common Stock”) and (ii) 20,000,000 shares of preferred stock, par value $0.001 per share
(“Preferred Stock”).
SECOND.
At [___] a.m./p.m. on [___________], 2023 (the “Split Effective Time”), every [_____][(__)] issued and outstanding
shares of the Corporation’s common stock, par value $.0001 per share, as of the date and time immediately preceding the Split Effective
Time (the “Old Shares”), shall automatically be reclassified as and converted into one (1) validly issued,
fully paid and non-assessable share of common stock of the Corporation (the “New Shares”) without any further
action by the Corporation or the holder thereof, subject to the treatment of fractional share interests as described below (the “Reverse
Stock Split”). Further, every right, option and warrant to acquire Old Shares outstanding immediately prior to the Split
Effective Time shall, as of the Split Effective Time and without any further action, automatically be reclassified into the right to
acquire one (1) New Share for every [_____][(__)] Old Shares, but otherwise upon the terms of such right, option or warrant (except that
the exercise or purchase price of such right, option or warrant shall be proportionately adjusted). No fractional shares shall be issued
in connection with the Reverse Stock Split. Stockholders who otherwise would be entitled to receive fractional shares of common stock
shall receive that number of New Shares based on the conversion ratio of their shares of Old Shares to New Shares set forth above, rounded
up to the next whole share of common stock.
THIRD.
That a resolution was duly adopted by unanimous written consent of the directors of the Corporation, pursuant to Section 242 of the DGCL,
setting forth the above mentioned amendment to the Amended and Restated Certificate of Incorporation and declaring said amendment to
be advisable.
FOURTH.
That this amendment was duly authorized by the holders of a majority of the voting stock of the Corporation entitled to vote at a duly
authorized meeting of the stockholders of the Corporation held on [____], 2023. Said amendment was duly adopted in accordance with the
provisions of the DGCL.
IN
WITNESS WHEREOF, this Certificate of Amendment of the Amended and Restated Certificate of Incorporation has been signed by the Chief
Executive Officer of the Corporation this [__] day of [__________], 2023.
| |
BIOFRONTERA INC. |
| |
|
|
| |
By: |
|
| |
|
Erica
Monaco |
| |
|
Chief
Executive Officer |