Biofrontera AG (Form: F-1, Received: 01/12/2018 17:12:39)

As filed with the United States Securities and Exchange Commission on January 12, 2018.

Registration No. 333-

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

Form F-1

Registration Statement

Under the Securities Act of 1933

BIOFRONTERA AG

(Exact Name of Registrant as Specified in its Charter)

Federal Republic of Germany

2834

Not Applicable

(State or Other Jurisdiction of
Incorporation or Organization)

(Primary Standard Industrial

Classification Code Number)

(I.R.S. Employer

Identification No.)

Hemmelrather Weg 201

D-51377 Leverkusen Germany

Telephone: 011 49 214 876 00

(Address, including zip code, and telephone number, including area code, of

Registrant’s principal executive offices)

Biofrontera Inc.

201 Edgewater Dr.

Wakefield, MA 01880

Telephone: 781 245 1325

(Name, address, including zip code, and telephone number, including areas code,

of agent for service)

Copies to:

Seth T. Goldsamt

Stephen E. Older

McGuireWoods LLP

1345 Avenue of the Americas

7th Floor

New York, NY 10105

Telephone: 212 548 2100

Facsimile: 212 715 6267

Ralph V. De Martino

F. Alec Orudjev

Schiff Hardin LLP

901 K Street NW

Suite 700

Washington, DC 20001
Telephone: 202 778 6400

Facsimile: 202 778 6460

Approximate date of commencement of proposed sale to the public:

As soon as practicable after the effective date of this Registration Statement.

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act, check the following box. ¨

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earliest effective registration statement for the same offering. ¨

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933. Emerging growth company þ

If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act. ¨

CALCULATION OF REGISTRATION FEE

Title of each class of
securities to be registered ⁽¹⁾

Amount to be
registered ⁽²⁾

Proposed maximum
offering price per
security ⁽³⁾

Proposed maximum aggregate
offering price ⁽³⁾

Amount of
registration
fee

Ordinary Shares with no par value; €1.00 nominal value per
share

[____]

21,600,000

2,689.20

(1)	American Depositary Shares, or ADSs, issuable upon deposit of the ordinary shares registered hereby are being registered pursuant to a separate Registration Statement on Form F-6. Each ADS represents [two] ordinary shares.

(2)	Includes ordinary shares that may be purchased pursuant to the underwriters’ over-allotment option. See “Underwriting.”

(3)	Estimated solely for the purpose of computing the registration fee pursuant to Rule 457(o) under the Securities Act of 1933, as amended.

The registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.

The information in this preliminary prospectus is not complete and may be changed. These securities may not be sold until the Registration Statement filed with the United States Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell nor does it seek an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.

(Subject to Completion) Dated [ ], 2018

American Depositary Shares Representing [ ] Ordinary Shares

BIOFRONTERA AG

This is an initial public offering of [___] American Depositary Shares, or ADSs, each representing [two] ordinary shares, nominal value €1.00 per share, of Biofrontera AG, a German stock corporation. Separate from this offering, we expect to make a concurrent preemptive rights offering of our ordinary shares pursuant to German law to our existing holders of ordinary shares. The price per share at which our shares will be offered in the German preemptive rights offering will be the same as the price per ADS at which the ADSs are being offered in the U.S. offering (adjusting for the euro/U.S. dollar exchange rate and the ratio of ordinary shares to ADSs). We have excluded shareholders’ subscription rights for a residual amount of [___] newly issued shares in accordance with German law and our articles of association. In addition, those new shares as to which subscription rights have been excluded or not exercised during the subscription period will be offered in this offering of ADSs.

We currently estimate that the initial public offering price will be between $[__] and $[__] per ADS. Prior to this offering, there has been no public market in the United States, or U.S., for our ordinary shares or ADSs. Our ordinary shares are listed on the Frankfurt Stock Exchange under the symbol “B8F”, and application has been made for the listing of the ADSs on The NASDAQ Capital Market under the symbol “BFRA”. We believe that upon the completion of the offering contemplated by this prospectus, we will meet the standards for listing on The NASDAQ Capital Market. On [___], 2018, the closing price of our ordinary shares on the Frankfurt Stock Exchange was €[___] ($[___], based upon the noon buying rate of the Federal Reserve Bank of New York for the euro on that date, which was €1.00 to $[___]) per share.

We are an “emerging growth company” as that term is defined in the Jumpstart Our Business Startups Act of 2012 and as such, will be subject to reduced public company reporting requirements for this prospectus and future filings.

Investing in our securities involves risk. See "Risk Factors" beginning on page 20 to read about factors you should consider before buying our ADSs.

None of the U.S. Securities and Exchange Commission, any U.S. state securities commission or any foreign securities commission has approved or disapproved of these securities or passed upon the accuracy or adequacy of this prospectus. Any representation to the contrary is a criminal offense.

	Per ADS	Total
Initial public offering price	$	$
Underwriting discount and commissions ¹	$	$
Proceeds, before expenses, to Biofrontera	$	$

To the extent that the underwriters sell more than [ ] ADSs, the underwriters have the option to purchase up to an additional [ ] ADSs at the same price per ADS as paid for the ADSs offered hereby, for 45 days after the date of this prospectus.

The underwriters expect to deliver the ADSs against payment in New York, New York on [ ], 2018.

Benchmark

Dawson James Securities, Inc.

Lake Street Capital Markets

Prospectus dated [ ].

¹ See "Underwriting" for additional information regarding underwriting compensation.

TABLE OF CONTENTS

	Page

Prospectus Summary	6
Risk Factors	20
Special Note Regarding Forward Looking Statements	54
Exchange Rates	55
Use of Proceeds	56
Dividend Policy and Liquidation Proceeds	57
Trading Markets	58
Capitalization	59
Dilution	61
Selected Consolidated Financial Data	63
Management's Discussion and Analysis of Financial Condition and Results of Operations	64
Business	83
Management	120
Certain Relationships and Related Party Transactions	137
Principal Shareholders	139
Description of Share Capital	141
Description of American Depositary Shares	149
Shares and ADSs Eligible for Future Sale	156
Exchange Controls and Limitations Affecting Shareholders	157
Certain Material U.S. Federal Income and German Tax Considerations	158
Underwriting (Conflicts of Interest)	167
Expenses of this Offering	170
Legal Matters	170
Experts	171
Service of Process and Enforcement of Civil Liabilities	171
Where You Can Find More Information	171
Index to Financial Statements	F-1

You should rely only on the information contained in this prospectus and any related free-writing prospectus that we authorize to be distributed to you. We and the underwriters have not authorized any person to provide you with information different from that contained in this prospectus or any related free-writing prospectus that we authorize to be distributed to you. This prospectus is not an offer to sell, nor is it seeking an offer to buy, these securities in any state or other jurisdiction where the offer or sale is not permitted. The information in this prospectus speaks only as of the date of this prospectus unless the information specifically indicates that another date applies, regardless of the time of delivery of this prospectus or of any sale of the securities offered hereby.

Unless otherwise indicated, all references in this prospectus to "Biofrontera", "we", "us", or "company" refer to Biofrontera AG and its consolidated subsidiaries, Biofrontera Pharma GmbH, Biofrontera Bioscience GmbH, Biofrontera Neuroscience GmbH, Biofrontera Development GmbH and Biofrontera Inc.

No action is being taken in any jurisdictions outside the United States to permit a public offering of the American Depositary Shares, or ADSs, or possession or distribution of this prospectus in such jurisdictions. Persons who come into possession of this prospectus in jurisdictions outside the United States are required to inform themselves about and to observe any restrictions as to this offering and the distribution of the prospectus applicable to such jurisdictions.

Until [________] (the 25 ^th day after the date of this prospectus), all dealers that effect transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to the dealers' obligation to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions.

TRADEMARKS

We own or have rights to trademarks and trade names that we use in connection with the operation of our business, including our corporate name, logos, product names and website names. Other trademarks and trade names appearing in this prospectus are the property of their respective owners. Solely for your convenience, some of the trademarks and trade names referred to in this prospectus are listed without the ^® and TM symbols, but we will assert, to the fullest extent under applicable law, our rights, or the rights of the applicable licensor, to our trademarks and trade names.

PRESENTATION OF FINANCIAL INFORMATION

Unless otherwise indicated, the consolidated financial statements and related notes included in this prospectus have been presented in euros, or €, and also comply with the International Financial Reporting Standards, or IFRS (“IFRS”), as issued by the International Accounting Standards Board, or IASB (“IASB”). None of the consolidated financial statements in this prospectus were prepared in accordance with United States generally accepted accounting principles. For any of our subsidiaries that use a functional currency that is not euros, the assets and liabilities have been translated at the closing exchange rate as of the relevant balance sheet date (six months ended June 30, 2017: 1.14227 U.S. dollars to 1 euro; June 30, 2016: 1.11038 U.S. dollars to 1 euro), while the income and expenses have been translated at the average exchange rates (six months ended June 30, 2017: 1.08200 U.S. dollars to 1 euro; June 30, 2016: 1.11603 U.S. dollars to 1 euro) applicable to the relevant period. The differences resulting from the valuation of equity at historical rates and applying the period-end exchange rates are reported as a change not affecting profit or loss and carried directly to equity within the other equity components. Transactions realized in currencies other than euros are reported using the exchange rate on the date of the transaction. Assets and liabilities are translated applying the closing exchange rate for each balance sheet date. Gains and losses arising from such currency translations are recognized in income. See “Summary of Significant Accounting Policies — Translation of Amounts in Foreign Currencies” in the notes to our consolidated financial statements included elsewhere in this prospectus for more information.

Certain information in this prospectus is expressed in U.S. dollars. The noon buying rate of the Federal Reserve Bank of New York for the euro on [_________], 2018 was €1.00 to $[___]. We make no representation that the euro or U.S. dollar amounts referred to in this prospectus could have been converted into U.S. dollars or euros, as the case may be, at any particular rate or at all. See "Risk Factors — Our international operations may pose currency risks, which may adversely affect our operating results and net income." We use the symbol "$" to refer to the U.S. dollar and use the symbol "€" to refer to the euro herein.

PROSPECTUS SUMMARY

This summary highlights selected information contained elsewhere in this prospectus and is qualified in its entirety by the more detailed information and consolidated financial statements and the related notes thereto included elsewhere in this prospectus. This summary does not contain all the information you should consider before investing in our ADSs. You should read this entire prospectus carefully, including "Risk Factors", "Management's Discussion and Analysis of Financial Condition and Results of Operations", and our consolidated financial statements and the related notes thereto included elsewhere in this prospectus, before making an investment decision.

Overview

Our Company

We are an international biopharmaceutical company specializing in the development and commercialization of a platform of pharmaceutical products for the treatment of dermatological conditions and diseases caused primarily by exposure to sunlight that results in sun damage to the skin. Our approved products focus on the treatment of actinic keratoses, which are skin lesions that can sometimes lead to skin cancer, in the U.S. and Europe, as well as the treatment of basal cell carcinoma in the EU. Actinic keratoses typically appear on sun-exposed areas, such as the face, bald scalp, arms or the back of the hands, and are often elevated, flaky, and rough in texture, and appear on the skin as hyperpigmented spots. Because of their location and appearance, actinic keratoses are often cosmetically unappealing.

Our principal product is Ameluz ^{^®} , which is a prescription drug approved for use in combination with photodynamic therapy, or PDT, which we sometimes refer to as Ameluz ^{^®} PDT. Ameluz ^{^®} PDT received centralized European approval in 2011 from the European Commission for the treatment of actinic keratosis of mild to moderate severity on the face and scalp. Since the initial centralized European approval of Ameluz ^® PDT, the European Commission granted label extensions for the use of Ameluz ^{^®} PDT for (i) the treatment of field cancerization, or larger areas of skin on the face and scalp with multiple actinic keratoses and (ii) the treatment of superficial and/or nodular basal cell carcinoma unsuitable for surgical treatment due to possible treatment-related morbidity and/or poor cosmetic outcome. A major advantage of treating actinic keratosis and basal cell carcinoma with photodynamic therapy (as opposed to other common treatments such as simple curettage and cryotherapy) is that it is a non-invasive alternative that can have better cosmetic results, i.e. , removal of tumors without leaving clearly visible scarring.

In addition, we have developed our own PDT lamp, BF-RhodoLED ^® , for use in combination with Ameluz ^® . Our BF-RhodoLED ^® lamp was approved as a medical device in the EU in November 2012 and is approved for sale in all EU countries, although the use of our BF-RhodoLED ^® lamp is not required to be used in combination with Ameluz ^® in the EU or Switzerland.

In May 2016, we received approval from the U.S. Food and Drug Administration, or the FDA, to market in the U.S. Ameluz ^{^®} in combination with photodynamic therapy using our BF-RhodoLED ^{^®} lamp for lesion-directed and field-directed treatment of actinic keratoses of mild-to-moderate severity on the face and scalp. We launched the commercialization of Ameluz ^{^®} and BF-RhodoLED ^{^®} for actinic keratosis in the U.S. in October 2016.

We currently sell Ameluz ^{^®} in the U.S., in 11 countries in Europe and in Israel.

Dermatological Conditions and Diseases that are Treated by Our Products

Ameluz ^{^®} PDT is approved for the treatment of actinic keratosis on the face and scalp in the U.S. and Europe and certain types of basal cell carcinoma in the EU. It is an alternative to more invasive treatments, such as cryotherapy or simple curettage.

Actinic keratoses are superficial, potentially pre-cancerous skin lesions caused by chronic sun exposure that may, if left untreated, develop into a form of potentially life-threatening skin cancer called squamous cell carcinoma. Actinic keratosis is more common in men than women, and much more common in people over 40 years of age. Actinic keratoses are more likely to develop in people with fair skin and a history of sunburn. They are especially prevalent in geographical areas with sunny climates.

According to The Skin Cancer Foundation (SCF), if left untreated, up to 1% of actinic keratosis lesions develop into squamous cell carcinomas every year. Squamous cell carcinoma has been the second most common form of skin cancer, but its incidence has been rapidly increasing. According to the SCF, more than one million cases of squamous cell carcinoma are diagnosed each year in the U.S., and it has been estimated that as many as 8,800 people die from the disease each year in the U.S. Incidence of the disease has increased by 200 percent in the past three decades in the U.S. and it has recently matched the incidence of basal cell carcinoma in the Medicare fee-for-service population, which had been the most common form of human cancers.

Because actinic keratosis can develop into squamous cell carcinomas, actinic keratosis is classified by The European Academy of Dermatology and Venereology and other international treatment guidelines as a tumor that requires treatment, and the international treatment guidelines list photodynamic therapy as the “gold standard” for the removal of actinic keratoses, particularly for patients with large keratotic areas.

Basal cell carcinomas are abnormal, uncontrolled growths or lesions that arise in the skin’s basal cells, which line the deepest layer of the epidermis (the outermost layer of the skin). Basal cell carcinomas often appear as open sores, red patches, pink growths, shiny bumps or scars and are typically caused by accumulated sun exposure. Basal cell carcinomas are the most common invasive tumors affecting humans, accounting for approximately 80 percent of all non-melanoma skin cancers worldwide. More than 4 million cases of basal cell carcinoma are diagnosed in the U.S. each year. Although basal cell carcinoma rarely spreads to other parts of the body and becomes life-threatening, it can be disfiguring if not treated promptly.

The Limitations of Competing Treatment Regimes

Actinic keratoses are treated using a wide range of methods. The traditional methods of treating actinic keratoses are:

cryotherapy, or the deep freezing of skin;

self-applied topical prescription products;

combination of medication with photodynamic therapy; and

simple curettage, or the surgical removal of tissue by means of scraping with a curette.

Although any of these methods can be effective, each has limitations and can result in significant side effects.

Cryotherapy is non-selective (i.e., it cannot target specific tissues, but affects all tissues in the area of application), can be painful at the site of freezing, and can cause blistering and loss of skin pigmentation, leaving temporary or permanent white spots. In addition, because there is no standardized treatment protocol, results are not uniform and can depend on the skill or technique of the doctor treating the patient.

Topical prescription products include 5-fluorouracil cream, or 5-FU, which can be irritating and requires twice-a-day application by the patient for approximately 2 to 4 weeks, resulting in inflammation, redness and erosion or rawness of the skin. Following the treatment, up to several weeks of healing may be required. Imiquimod or diclofenac, other topical prescription products, require extended applications of cream, lasting up to 3 or 4 months, during which the skin is often very red and inflamed. Treatment with ingenol mebutate is faster, requiring application for only a few days, but side effects can be long-lasting and this drug has been labeled with a black-box warning by the FDA (a warning that appears on a prescription drug’s label and is designed to call attention to serious or life-threatening risks).

Simple curettage is generally most useful for one or a few individual lesions, but not for a large number of lesions, and it leaves permanent scars.

Other approved drugs used in combination with photodynamic therapy (PDT) are Levulan ^® in the U.S. and Metvix ^® /Metvixia ^® and AlaCare ^® in the EU. Levulan and AlaCare ^® contain 5-aminolevulinic acid (5-ALA) as its active ingredient and Metvix contains methylesther as its active ingredient. Metvix is metabolized to 5-ALA in the tissue, after which the method of action is identical to Levulan. In the U.S., Levulan PDT is approved for treatment of in the U.S., Levulan is approved for the treatment of minimally to moderately thick actinic keratosis of the face and scalp in combination with PDT with a blue light source, and, in the EU, Metvix PDT is approved for treatment of actinic keratosis with a red light source. AlaCare ^® is a 2x2 cm medicated plaster, which is also approved for treatment of actinic keratosis with red light. As with Ameluz ^® , in the treatment of moderately thick actinic keratosis of the face and scalp, both Levulan and Metvix are used in a PDT treatment once, and the PDT treatment is repeated after several weeks if residual lesions remain. AlaCare ^® is approved for single use treatment of mild actinic keratosis lesions with a maximum diameter of 1.8 cm on the face and scalp (hairless area).

In the U.S., our approved treatment method involves applying Ameluz ^® gel to individual or entire fields of actinic keratosis lesions, followed three hours later with exposure to our red light BF-RhodoLED ^® lamp for approximately ten minutes. In the EU, Ameluz ^® is also indicated for field cancerization and for superficial and/or nodular basal cell carcinoma unsuitable for surgical treatment due to possible treatment-related morbidity and/or poor cosmetic outcome. In our Phase III trials, our treatment produced varying degrees of pain during light treatment, but the therapy was generally well tolerated. The resulting redness and/or inflammation resolved within 1 to 4 days in most cases; in some cases, however, it persisted for 1 to 2 weeks or even longer.

We believe Ameluz ^® PDT is a preferable treatment for actinic keratosis compared to non-PDT competing treatment regimes for a number of reasons, including: (i) Ameluz ^® PDT does not result in significant scarring (as compared to cryotherapy or simple curettage), (ii) skin appearance is typically improved for at least 12 months after treatment and (iii) a patient’s healing is typically completed within 1-2 days of treatment.

The most common treatment for basal cell carcinoma in the EU and U.S. is surgical removal. In many European countries, dermatology specialists are hospital-based and, as a result, basal cell carcinoma is most commonly treated in European countries by hospital surgery, which is rarely the case for actinic keratosis. The treatment of basal cell carcinoma by a surgical procedure can result in high cost and clearly visible scarring. But thin, non-aggressive basal cell carcinomas can also be treated with photodynamic therapy, such as Ameluz ^® PDT. The advantage of treating basal cell carcinoma with photodynamic therapy is that it is a non-invasive alternative that can have better cosmetic results, i.e. , removal of tumors without leaving clearly visible scarring. It is also available for patients who are at risk of surgery-related morbidity.

Our Strategy

Our principal objectives are to obtain regulatory approvals for the marketing of Ameluz ^® PDT for additional indications and in additional countries, and to increase the sales of our approved products. The key elements of our strategy include the following:

geographic expansion of Ameluz ^® sales worldwide, including by:

expanding our sales in the U.S. of Ameluz ^® in combination with our BF-RhodoLED ^® light device for the treatment of actinic keratosis and positioning Ameluz ^® to be a leading photodynamic therapy product in the U.S., by growing our dedicated sales and marketing infrastructure in the U.S.;

expanding our sales in the EU of Ameluz ^® by marketing it for the treatment not only of actinic keratosis, but also for the treatment of field cancerization (larger skin areas containing potentially pre-cancerous cells and multiple actinic keratosis lesions) and basal cell carcinoma, indications for which we recently obtained approval; and

expanding our sales of Ameluz ^® in other countries where it is an approved product by entering into arrangements with distribution partners;

extending the approved indications for Ameluz ^® photodynamic therapy, including by:

seeking to extend the approved label for actinic keratosis to include actinic keratosis lesions located other than on the head or scalp and increase the maximal size of the treatment field;

seeking to extend the approved indications in the U.S. for Ameluz ^® in combination with our BF-RhodoLED ^® light device for the treatment of basal cell carcinoma;

seeking to extend the approved indications in the EU for Ameluz ^® to include treatment for actinic keratosis with Ameluz ^® in combination with daylight photodynamic therapy, or exposure to sunlight, an indication for which we have recently applied in the EU and which we believe may increase the market potential of Ameluz ^® in such region (since Ameluz ^® could be used without doctor’s office procedures, which procedures can render photodynamic therapy treatment in European markets commercially unattractive due to lack of reimbursement); and

seeking to extend the approved indications in the EU and U.S. for Ameluz ^® to additional indications, such as squamous cell carcinoma in situ , actinic cheilitis, acne, warts, wound healing, and/or cutaneous leichmania; all of which would require further clinical trials, and other research and development activities.

We also plan to develop additional drug candidates and seek partnerships or other opportunities for drug development collaborations, such as our collaboration and partnership agreement with Maruho Co., Ltd., or Maruho, a major shareholder of our company, and to continue to develop and expand marketing and sales of our cosmetic skin care products.

Risk Factors

Our business is subject to numerous risks and uncertainties, including those highlighted in "Risk Factors" immediately following this prospectus summary. These risks include, but are not limited to, the following:

We have a history of operating losses and anticipate that we will continue to incur operating losses in the future and that we may never sustain profitability.

If we fail to obtain additional financing, we may be unable to complete the development and commercialization of our products and product candidates.

Our existing and any future indebtedness could adversely affect our ability to operate our business.

Certain of our important patents will expire in 2019. Although the process of developing generic topical dermatological products presents specific challenges that may deter potential generic competitors, generic versions of Ameluz ^® could enter the market after expiration of these patents. If this happens, we may need to reduce the price of Ameluz ^® significantly and may lose significant market share.

Insurance coverage and medical expense reimbursement may be limited or unavailable in certain market segments for our products or product candidates, which could make it difficult for us to sell our products.

To date, we have engaged in only limited sales of our products, primarily in Germany and Spain and, more recently, in the U.S.

We face significant competition from other pharmaceutical and medical device companies and our operating results will suffer if we fail to compete effectively. We have recently lost market share in Germany to daylight PDT products, an indication for which we have applied but for which Ameluz ^® is not currently approved.

We depend on a single unaffiliated contract manufacturer to manufacture Ameluz ^® . If we fail to maintain our relationship with this manufacturer or if that manufacturer is unable to continue to produce product for us, our business could be materially harmed.

Even if we obtain regulatory approvals for our products and product candidates, they may not gain market acceptance among hospitals, physicians, health care payors, patients and others in the medical community.

With respect to our already approved products, we may be subject to healthcare laws, regulation and enforcement. Our failure to comply with those laws could have a material adverse effect on our results of operations and financial condition.

A recall of our drug or medical device products, or the discovery of serious safety issues with our drug or medical device products, could have a significant negative impact on us.

We will need to grow the size of our organization and we may experience difficulties in managing this growth.

Our international operations may pose currency risks, which may adversely affect our operating results and net income.

Our business depends substantially on the success of our principal product Ameluz ^® . If we are unable to successfully commercialize Ameluz ^® , to obtain and maintain regulatory approvals or reimbursement for Ameluz ^® for existing and additional indications and/or in additional countries, or if we experience significant delays in realizing any of those commercialization or product development objectives, our business may be materially harmed.

Clinical drug development is expensive and involves uncertain outcomes, and results of earlier studies and trials may not be predictive of future trial results. If one or more future Phase III clinical trials for Ameluz ^® were unsuccessful, or significantly delayed, we could be required to abandon development, we may suffer reputational harm and our business will be materially harmed.

We will be subject to ongoing regulatory requirements in every market where we engage in business and we may face future development, manufacturing and regulatory difficulties.

If our efforts to protect the proprietary nature of the intellectual property related to our technologies are not adequate, we may not be able to compete effectively in our market.

We may be involved in lawsuits to defend or enforce our patents, which could be expensive, time-consuming and unsuccessful.

Corporate History and Information

Our company was formed in 1997 by Professor Hermann Lübbert, Ph.D., who currently serves as chairman of our management board and our chief executive officer, as a limited liability company ( Gesellschaft mit beschränkter Haftung or GmbH ) under German law and under the name “BioFrontera Laboratories GmbH” to provide services to the pharmaceutical industry.

In September 1997, the company was renamed “BioFrontera Pharmaceuticals GmbH” and commenced its current operations, which include the development, marketing, sales, manufacturing and distribution of drugs and medical devices, cosmetics, and other dermatology-related products. On August 24, 2000, our company was converted into a German stock corporation ( Aktiengesellschaft or AG ), and on November 27, 2003, our company was renamed “Biofrontera AG”.

Our company's principal executive offices are located at Hemmelrather Weg 201, D-51377 Leverkusen, Germany and our telephone number is 011 49 214 876 00. Our website address is www.biofrontera.com . Information contained on our website is not incorporated by reference into this prospectus, and you should not consider information contained on our website to be part of this prospectus or in deciding whether to purchase our ADSs. Our agent for service of process in the U.S. is Biofrontera Inc., 201 Edgewater Dr., Wakefield, Massachusetts 01880, U.S. Our ordinary shares have been listed on the Stock Exchange in Düsseldorf since 2006 and on the Frankfurt Stock Exchange under the ticker symbol “B8F” since 2012.

Implications of Being a Foreign Private Issuer

We will qualify as a "foreign private issuer" as defined in Section 405 of the Securities Act of 1933, as amended, or the Securities Act. As a foreign private issuer, we are exempt from certain rules under the Securities Exchange Act of 1934, as amended, or the Exchange Act, that impose disclosure requirements as well as procedural requirements for proxy solicitations under Section 14 of the Exchange Act. In addition, our officers, directors and principal shareholders are exempt from the reporting and "short-swing" profit recovery provisions of Section 16 of the Exchange Act. Moreover, we are not required to file periodic reports and financial statements with the U.S. Securities and Exchange Commission, or the SEC, as frequently or as promptly as a company that files as a domestic issuer whose securities are registered under the Exchange Act, nor are we generally required to comply with the SEC's Regulation FD, which restricts the selective disclosure of material non-public information. We intend to take advantage of these exemptions as a foreign private issuer. See "Risk Factors — As a foreign private issuer, we are exempt from a number of rules under the U.S. securities laws and are permitted to file less information with the SEC than U.S. companies. This may limit the information available to holders of ADSs.”

Implications of Being an Emerging Growth Company

We are an "emerging growth company" as that term is defined in the Jumpstart Our Business Startups Act of 2012, or the JOBS Act. An emerging growth company may take advantage of specified reduced reporting requirements that are otherwise applicable generally to public companies. These reduced reporting requirements include:

an exemption from compliance with the auditor attestation requirement on the effectiveness of our internal controls over financial reporting;

reduced disclosure about our executive compensation arrangements; and

an exemption from the requirements to obtain a non-binding advisory vote on executive compensation or stockholder approval of any golden parachute arrangements.

We have elected to take advantage of the scaled disclosure requirements and other relief described above in this prospectus and may take advantage of these exemptions for so long as we remain an emerging growth company. We will remain an emerging growth company until the earliest to occur of: (i) the last day of the fiscal year following the fifth anniversary of this offering; (ii) the last day of the fiscal year in which our annual gross revenue is $1,070,000,000 or more; (iii) the date on which we have, during the previous three-year period, issued more than $1,000,000,000 in non-convertible debt securities; or (iv) as of the end of any fiscal year in which the market value of our ordinary shares held by non-affiliates is $700,000,000 or more as of the end of the second quarter of that fiscal year. We may choose to take advantage of some, but not all, of the available benefits under the JOBS Act. Accordingly, the information contained herein may be different than the information you receive from other public companies in which you hold stock. See "Risk Factors — We are an emerging growth company, and we cannot be certain that the reduced reporting requirements applicable to emerging growth companies will not make our ADSs less attractive to investors.”

Recent Developments

Set forth below is certain limited unaudited financial information as of and for the three months and nine months ended September 30, 2017. In connection with our listing on the Frankfurt Stock Exchange, we published substantially all of this financial information in an announcement issued on November 26, 2017. This financial information has been prepared under IFRS as adopted by the EU. No material differences are believed to exist between the presented financial information in accordance with IFRS as adopted by the EU and IFRS as issued by the IASB.

Key figures

	For the Nine Months ended September 30,						For the Three Months ended September 30,
In €thousands (unless stated otherwise)	2017			2016			2017			2016
Sales revenue		7,334.0			2,881.4			2,327.6			1,172.8
Research and development costs		(3,232.9	)		(3,358.4	)		(1,047.5	)		(1,506.4	)
Sales costs		(12,586.1	)		(4,937.4	)		(4,310.8	)		(2,105.1	)
General administrative costs		(3,625.9	)		(2,080.8	)		(1,930.3	)		(708.4	)
Profit/loss for the period		(13,730.1	)		(7,163.1	)		(5,589.4	)		(3,691.5	)

Cash flows used in operational activities		(12,313.7	)		(6,885.0	)		(4,226.8	)		(4,374.3	)
Cash flows provided by financing activities		10,740.7			8,867.1			6,136.1			(0.3	)
Cash and cash equivalents		13,307.3			5,733.3			13,307.3			5,733.3

Employees (number, end of period)		125			81			125			81

Shares outstanding (number, end of period)		38,416,503			30,347,813			38,416,503			30,347,813
Share price (closing Xetra, end of period in EUR)		3.51			3.02			3.51			3.02

As compared with the nine-month period ended September 30, 2016, our sales revenue increased by 154.5% to €7.3 million, driven primarily by the successful market launch of Ameluz ® in the U.S. During the first nine months of 2017, we expanded our marketing efforts in the U.S. by expanding our U.S. team from 24 to 45 staff in the areas of field sales, medical and support and management. In August, we integrated our marketing and sales support areas into Biofrontera Inc., which we believe will enable us to offer our customers cost-efficient support at a high level. In September, we appointed Jeffrey Holm, an experienced marketing manager with a broad network in the U.S. dermatology market, to be Vice President Marketing. Our U.S. customer base currently includes over 500 dermatology practices. We expect the process of claiming reimbursement for Ameluz® will become easier once the permanent J-code for Ameluz® becomes effective in January 2018, which we expect will have a positive effect on our sales and revenue.

Results of operations

Sales revenue

We generated total sales revenue of €7.3 million in the first nine months ended September 30, 2017, representing an increase of 154.5% year-on-year. Sales revenue in Germany amounted to €1.7 million, reflecting a slight rise of €185 thousand compared with nine months ended September 30, 2017. Revenue generated outside of Germany performed well in the first nine months of 2017, driven primarily by increased sales in the U.S. amounting to €3.4 million. In Europe, sales revenue increased by 61% to €1.2 million. Development projects with Maruho generated sales revenue of €1.1 million in the nine months ended September 30, 2017 as compared with €613 thousand in the nine months ended September 30, 2016.

Operating costs

Research and development costs for the nine months ended September 30, 2017 were €3.2 million, a decrease of €125 thousand, or 4 %, as compared with nine months ended September 30, 2016.

Sales costs for the nine months ended September 30, 2017 were €12.6 million, an increase €7.7 million, or 155%, compared with the nine months ended September 30, 2016. This increase was driven primarily by increased marketing and sales expenses in the U.S.

General administrative costs for the nine months ended September 30, 2017 were €3.6 million, an increase of €1.6 million, or 74%, as compared with the nine months ended September 30, 2016. The increase reflects not only higher financing costs incurred on our EIB credit facility, but also an increase in expenses for legal advice in connection with shareholder litigation.

Other income and expenses

Other income for the nine months ended September 30, 2017 was €169 thousand, as compared with other income of €2.3 million for the nine months ended September 30, 2016. This decrease was mainly due to the non-recurring repayment in the nine months ended September 30, 2016 of our FDA submission fee in the amount of €2.1 million.

Other expenses in the nine months ended September 30, 2017 were €1 million, an increase of €1 million compared to the nine months ended September 30, 2016. This increase chiefly reflects currency differences due to the U.S. dollar’s appreciation to the euro and a significant increase in our expenses denominated in U.S. dollars, resulting from our increased marketing and sales activities in the U.S.

Consolidated net result

The total loss for the nine months ended September 30, 2017 was €(13.7 million), significantly greater than loss of €(7.2 million) for the nine months ended September 30, 2016 and predominantly reflecting the aforementioned trends in operating expenses and other income.

Financial Position

Share capital; capital measures

Our fully paid in share capital was €38.4 million as of September 30, 2017 and was divided into 38,416,503 registered shares with a nominal value of €1.00 each. Our registered share capital amounted to €37.7 million as of December 31, 2017 and was increased by €694 thousand during the nine months ended September 30, 2017 through the exercise of conversion rights from the 2016/2021 convertible bond as well as from the 2017/2022 convertible bond.

Liquidity

Cash flow from operating activities decreased year-on-year from €(6.9 million) in the nine months ended September 30, 2016 to €(12.3 million) for the nine months ended September 30, 2017.

Capital expenditure increased by €31 thousand in the nine months ended September 30, 2017, as compared with the nine months ended September 30, 2016. Given this, cash flow from investing activities decreased from €(208) thousand in the nine months ended September 30, 2016 to €(246) thousand in the nine months ended September 30, 2017, as compared with the nine months ended September 30, 2016.

Cash flow from financing activities in the nine months ended September 30, 2017 was €10.7 million, compared with €8.9 million in the nine months ended September 30, 2016. In the nine months ended September 30, 2016, we received €9.3 million in proceeds from the issuance of new shares, whereas in the nine months ended September 30, 2017 we received €5.0 million in proceeds from the issuance of our 2017/2022 convertible bond and €10 million from our drawing of the first two tranches under our EIB credit facility. Short-term financial debt reduced by €3.6 million in the nine months ended September 30, 2017 as compared to the nine months ended September 30, 2016, driven primarily by our early repayment of the 2009/2017 warrant bond in August 2017.

Cash and cash equivalents were €13.3 million as of September 30, 2017, a decrease of €1.8 million as compared with December 31, 2016.

Biofrontera AG

Condensed consolidated balance sheet

(in EUR thousands)

Assets

	September 30, 2017		December 31, 2016
Non-current assets
Tangible assets		672.3		644.7
Intangible assets		800.6		1,251.9
Total Non-current assets		1,472.9		1,896.6

Current assets
Current financial assets
Trade receivables		1,266.2		1,624.0
Other financial assets		1,009.9		1,376.9
Cash and cash equivalents		13,307.3		15,126.1
Total Current financial assets		15,583.4		18,127.0

Other current assets
Inventories
Raw materials and supplies		1,510.9		1,350.3
Unfinished products		463.5		477.1
Finished products and goods		1,972.7		1,818.9
Income tax reimbursement claims		51.7		33.0
Other assets		117.2		175.8
Total Other current assets		4,116.0		3,855.1
Total Current Assets		19,699.4		21,982.1
Total assets		21,172.3		23,878.7

Liabilities
in €’000	September 30, 2017			December 31, 2016
Equit y
Subscribed capital		38,416.4			37,722.4
Capital reserve		100,715.4			98,676.8
Capital reserve from foreign currency conversion adjustments		730.1			(154.2	)
Loss carry forward		(120,402.9	)		(109,823.7	)
Net loss of the year		(14,614.3	)		(10,579.2	)
Total equity		4,844.7			15,842.1

Long-term liabilities
Long-term financial liabilities		12,745.4			3,596.9

Current liabilities
Current financial liabilities
Trade payables		931.4			2,093.2
Short-term financial debt		131.1			274.4
Other financial liabilities		100.1			58.4
Total current liabilities		1,162.6			2,426.0

Other current liabilities
Other provisions		2,040.6			1,823.7
Other current liabilities		379.0			190.0
Total Other current liabilities		2,419.6			2,013.7
Total liabilities		3,582.2			4,439.7
Total Equity and liabilities		21,172.3			23,878.7

Condensed consolidated statement of comprehensive income

in €’000	First nine months of 2017			First nine months of 2016			Third quarter 2017			Third quarter 2016
Sales revenue		7,334.0			2,881.4			2,327.6			1,172.8
Cost of sales		(899.7	)		(1,028.8	)		(264.4	)		(265.2	)
Gross profit from sales		6,434.3			1,852.6			2,063.2			907.6

Operating expenses
Research and development costs		(3,232.9	)		(3,358.4	)		(1,047.5	)		(1,506.4	)
General administrative costs		(3,625.9	)		(2,080.8	)		(1,930.3	)		(708.4	)
thereof financing costs		(1,490.5	)		(485.0	)		(979.7	)		(112.6	)
Sales costs		(12,586.2	)		(4,937.4	)		(4,310.9	)		(2,105.0	)

Loss from operations		(13,010.7	)		(8,524.0	)		(5,225.5	)		(3,412.2	)

Interest expenses		(703.9	)		(904.0	)		(374.3	)		(309.5	)
Interest income		4.9			2.4			0.8			0.5
Other expenses		(1,074.0	)		(35.5	)		(333.1	)		(21.4	)
Other income		169.4			2,297.3			54.4			51.1
Profit/loss before income tax		(14,614.3	)		(7,163.8	)		(5,877.7	)		(3,691.5	)
Income tax		0.0			0.0			0.0			0.0
Profit or loss for the period		(14,614.3	)		(7,163.8	)		(5,877.7	)		(3,691.5	)

Expenses and income not included in profit/loss
Items which may in future be regrouped into the profit and loss statement under certain conditions		884.2			0.7			288.3			0.0
Translation differences resulting from the conversion of foreign business operations
Other income total		884.2			0.7			288.3			0.0

Total profit/loss for the period		(13,730.1	)		(7,163.1	)		(5,589.4	)		(3,691.5	)

Basic/diluted earnings per share		(0.38	)		(0.24	)		(0.15	)		(0.12	)

Condensed consolidated cash flow statement

in €’000	First nine months of 2017			First nine months of 2016			Third quarter 2017			Third quarter 2016

Cash flows from operations
Profit/loss for the period		(14.614.3	)		(7.163.8	)		(5.887.7	)		(3.691.5	)
Adjustments to reconcile profit/loss for the period to cash flow into operations
Financial result		699.0			901.7			373.6			308.9
Depreciation		674.1			606.7			230.3			202.4
(Gains)/losses from disposal of assets		0.0			4.8			0.0			0.0
Non-cash expenses and income		3.455.1			88.5			114.2			42.2
Changes in operating assets and liabilities
Trade receivables		357.9			379.5			(64.1	)		(2.7	)
Other assets and income tax assets		406.9			(990.3	)		34.5			(651.7	)
Inventories		(300.9	)		(1.049.8	)		(112.7	)		(907.5	)
Trade payables		(1.161.7	)		(306.0	)		482.9			(260.7	)
Long-term and current financial liabilities		(2.357.7	)		0.0			194.0			0.0
Provisions		297.2			659,9			231.1			576.8
Other liabilities		230.7			(16.2	)		167.1			9.5
Net cash flow into operational activities		(12.313.7	)		(6.885.0	)		(4.226.8	)		(4.374.3	)

Cash flows from investment activities
Purchase of intangible and tangible assets		(260.2	)		(229.5	)		(56.5	)		(74.9	)
Interest received		4.7			2.3			3.0			0.6
Revenue from sale of intangible and tangible assets		9.7			19.2			0.0			9.5
Net cash flow into investment activities		(245.8	)		(208.0	)		(53.5	)		(64.8	)

Cash flows from financing activities
Proceeds from the issue of shares		0.0			9.303.2			0.0			0.0
Proceeds from conversions of option bond 2011/2016		4.999.0			0.0			0.0			0.0
Interest paid		(622.2	)		(436.1	)		(227.8	)		(0.3	)
Increase/(decrease) in long-term financial debt		10.000.0			(8.280.7	)		10.000.0			(110.6	)
Increase/(decrease) in short-term financial debt		(3.636.1	)		8.280.7			(3.636.1	)		110.6
Net cash flows from financing activities		10.740.7			8.867.1			6.136.1			(0.3	)

Net increase (decrease) in cash and cash equivalents		(1.818.8	)		1.774.1			1.855.8			(4.439.4	)
Cash and cash equivalents at the beginning of the period		15.126.1			3.959.2			11.451.5			10.172.7
Cash and cash equivalents at end of the period		13.307.3			5.733.3			13.307.3			5.733.3

Composition of financial resources at the end of the period
Cash and cash equivalents		13.307.3			5.733.3			13.307.3			5.733.3

The Offering

The shares being offered by this prospectus are part of a combined offering relating to up to 6,000,000 newly issued shares of our company. The combined offering consists of (i) a rights offering to existing holders of our shares under German law and (ii) this initial public offering of ADSs in the United States. We are offering up to [____________] newly issued shares in the rights offering. We have excluded shareholders’ subscription rights for a residual amount of [____] newly issued shares in accordance with German law and our articles of association. Those new shares as to which subscription rights have been excluded or not exercised during the subscription period will be offered in the U.S. offering. The initial per share offering price to the public, which will be the same for the ADSs sold in this offering and the shares sold in the German preemptive rights offering (adjusting for the euro/U.S. dollar exchange rate and the ratio of shares to ADSs), will be determined upon completion of the bookbuilding period, which is expected to occur on [___]. The number of ADSs offered in this offering will be determined upon completion of the subscription period for the German preemptive rights offering, on or about [___].

American Depositary Shares offered by Biofrontera AG		We are offering [_____________] ADSs (or [_____________] ADSs if the underwriters exercise their over-allotment option to purchase additional ADSs in full) in the United States, which we refer to as “this offering” or the “U.S. offering”. As described below, we are making a separate preemptive rights offering under German law (the “German preemptive rights offering”) for an aggregate amount of [_____________] common shares (or the equivalent of approximately [_____________] ADSs). We have excluded shareholders’ subscription rights for a residual amount of [______] newly issued shares in accordance with German law and our articles of association. In addition, those new shares as to which subscription rights have been excluded or not exercised during the subscription period will be offered in this offering of ADSs.

German preemptive rights offering		On May 24, 2017, our shareholders authorized our management board with the approval of our supervisory board to increase the Company's capital by 6,000,000 shares, equivalent to 3,000,000 ADSs. In order to carry out the capital increase, we are required by German law and the terms of our authorized capital to make a preemptive rights offering to our existing shareholders. In the German preemptive rights offering we will be offering holders of our shares the right to subscribe for newly issued shares in proportion to their holdings of ordinary shares. The German preemptive rights offering is expected to commence on [____] and will expire on [______]. We will determine the subscription price (which will be the same as the per share offer price for the ADSs sold in the U.S. offering (adjusting for the euro/U.S. dollar exchange rate and the ratio of shares to ADSs)) at the latest by [____] p.m. Frankfurt time on [______].

American Depositary Shares to be outstanding immediately after this offering		[_____________] ADSs (or [_____________] ADSs if the underwriters exercise their over-allotment option to purchase additional ADSs in full).

Ordinary shares to be outstanding immediately after this offering		[___] shares (or [___] shares if the underwriters exercise their over-allotment option to purchase additional ADSs in full).

		Note: all descriptions of shares outstanding immediately after closing of this offering assume completion of the temporary share loan arrangement under German law in connection with closing and issuance of new shares related to this offering. See “— Share Loan” and “Related Party Transactions — Share Loan Agreement.”

Over-allotment option		As part of the offering, we have granted the underwriters a 45-day option to purchase up to an additional [_____] ADSs to cover over-allotments, if any.

Use of Proceeds		We intend to use the net proceeds from this offering to increase our marketing and sales organization in the U.S. We also intend to use the net proceeds of the offering to continue to fund clinical trials of Ameluz ^® and to make regulatory filings for marketing approval of Ameluz ^® , both for geographical expansion and the extension of the indications for Ameluz ^® . We will use the remainder of the net proceeds for general corporate purposes. See “Use of Proceeds”.

Offering price		We will determine the offer price for the shares sold in this offering (which will be equal to the subscription price per share at which our shares will be offered in the German preemptive rights offering (adjusting for the euro/U.S. dollar exchange rate and the ratio of shares to ADSs)) upon completion of the bookbuilding period, which is expected to occur on [___]. In determining the offer price, we will consider, among other things, current market conditions, the trading price and volume of trading in our ordinary shares on the XETRA electronic trading platform of the Frankfurt Stock Exchange and the results of the bookbuilding process for the shares to be offered in this offering. See “Underwriting—Pricing of the Offering” for a discussion of factors considered in determining the price to the public of the ADSs. On [_________], the closing market price for our ordinary shares on the XETRA electronic trading platform of the Frankfurt Stock Exchange was €[____] per share, equivalent to approximately $[____] per ADS based on an assumed exchange rate of €[___] to $1.00 and a ratio of [____] ordinary shares for each ADS.

The ADSs		Each ADS represents [two] ordinary shares.

		The depositary will hold the ordinary shares underlying your ADSs. You will have rights as provided in the deposit agreement. You may cancel your ADSs and withdraw the underlying ordinary shares. The depositary will charge you fees for, among other acts, any cancellation. Except in certain limited instances described in the deposit agreement, we may amend or terminate the deposit agreement without your consent. If you continue to hold your ADSs, you agree to be bound by the terms of the deposit agreement then in effect.

		To better understand the terms of the ADSs, you should carefully read “Description of American Depositary Shares” (which contains a summary of the material terms of the deposit agreement) in this prospectus. You should also read the deposit agreement, which is an exhibit to the registration statement that includes this prospectus.

Voting Rights		Holders of ADSs must follow specific procedures to exercise the voting rights of the ordinary shares underlying the ADSs and will not be able to exercise those rights unless we request the Bank of New York Mellon Corporation, as ADS depositary, to solicit voting instructions from ADS holders. We discuss these voting rights and procedures further in the sections of this prospectus entitled “Description of Share Capital — Shareholders’ Meeting and Voting Rights” and “Description of American Depositary Receipts — Voting Rights”.

Dividend Policy		We have not paid any dividends on our shares in the past and do not intend to pay dividends on our shares or ADSs for the foreseeable future.

Lock-Up Agreements		We will agree with the underwriters that, on or before [________], we will, subject to certain exceptions, (a) not directly or indirectly, offer, sell or otherwise dispose of any shares of our capital stock or any other securities which are convertible into or exchangeable for shares of our capital stock, (b) not exercise any authorization pursuant to our articles of association to increase our capital other than for the purpose of issuing ordinary shares to the beneficiaries of our existing stock option plans and convertible bonds, warrant bonds or warrants upon the exercise of options or conversion rights, and (c) not propose a capital increase to our shareholders other than a proposal for authorized capital or for contingent capital, in each case except with the prior written consent of The Benchmark Company, LLC. Certain exceptions apply for share issuances directly to strategic partners in connection with partnering or licensing transactions or in connection with an acquisition or joint venture. See “Underwriting”.

		Our chief executive officer will agree with the underwriters that, except with the prior written consent of The Benchmark Company, LLC, on or before [________] he will not, directly or indirectly, sell or otherwise dispose of any of our shares or any other securities which are convertible into or exchangeable for our shares or enter into similar transactions to this effect. See “Underwriting”.

Conflict of Interest		The Benchmark Company, LLC is acting as representative for the underwriters in connection with this offering. An affiliate and a principal of The Benchmark Company, LLC holds a position as a member of the supervisory board of our company. Therefore, The Benchmark Company, LLC is deemed to have a “conflict of interest” under Rule 5121(f)(5) of the Financial Industry Regulatory Authority, Inc. (“FINRA”). Accordingly, this offering will be conducted in accordance with the applicable provisions of Rule 5121, which requires, among other things, that a “qualified independent underwriter” participate in the preparation of, and exercise the usual standards of “due diligence” with respect to, the registration statement and this prospectus. Dawson James Securities, Inc. (“Dawson”) has agreed to act as a “qualified independent underwriter” within the meaning of Rule 5121 in connection with this offering. We have agreed to indemnify Dawson against liabilities incurred in connection with acting as qualified independent underwriter, including liabilities under the Securities Act. Dawson will undertake the legal responsibilities and liabilities of an underwriter under the Securities Act, specifically including those inherent in Section 11 thereof. Dawson will not receive any additional fees for serving as a “qualified independent underwriter” in connection with this offering.

Depositary		Bank of New York Mellon Corporation

Custodian		Bank of New York Mellon SA/NV

Share Loan

To facilitate the orderly closing of this offering of ADSs, and because of timing considerations related to the technical issuance and registration of new ordinary shares under German law, the shares underlying the ADSs immediately prior to and concurrent with the consummation of this offering and the time of delivery of the ADSs will be shares (referred to as the “Borrowed Shares”) loaned by Maruho Deutschland GmbH to Lang & Schwarz Broker GmbH, acting as a service provider for us, for deposit with the custodian for the Depositary under the ADS facility (the “Share Loan”). In order to repay and satisfy the Share Loan, we will undertake the registration of a capital increase with the commercial register of the local court of Cologne. The Borrowed Shares will be retained by the custodian for the Depositary. We will receive the full net proceeds of this offering only upon registration of the capital increase with the commercial register. If for any reason we fail to complete registration of the capital increase, then we will not retain any proceeds from this offering. See “Risk Factors — Risks Related to the Offering and Ownership of our ADSs — We will rely on a Share Loan arrangement in order to facilitate the orderly closing of this offering of ADSs. If the Share Loan arrangement is not completed (for example, if registration of the capital increase relating to this offering fails), we will not receive the proceeds of this offering, which would have a material adverse effect on our financial position, liquidity and results of operations.” and “Related Party Transactions — Share Loan Agreement”.

Listing and Quotation

Our ordinary shares are listed on the Frankfurt Stock Exchange under the Symbol B8F; International Securities Identification Number (ISIN) DE0006046113; German securities code (WKN) 604611. Application has been made for quotation of the ADSs on The NASDAQ Capital Market under the symbol “BFRA.”

RISK FACTORS

You should carefully consider the risks described below and all other information contained in this prospectus before making an investment decision. If any of the following risks actually occur, our business, financial condition and results of operations could be materially and adversely affected. In that event, the trading price of the ADSs could decline, and you may lose part or all of your investment. This prospectus also contains forward-looking information that involves risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of many factors, including the risks described below and elsewhere in this prospectus.

Risks Related to Our Financial Position and Capital Requirements

We have a history of operating losses and anticipate that we will continue to incur operating losses in the future and that we may never sustain profitability.

We have incurred losses in each year since inception. Our net loss for the fiscal years ended December 31, 2015 and December 31, 2016 was €11.2 million and €10.6 million, respectively. Our net loss for the nine months ended September 30, 2017 and September 30, 2016 was €14.6 million and €7.2 million, respectively. As of September 30, 2017, we had an accumulated deficit of €135.0 million.

Our ability to become profitable depends on our ability to further commercialize our principal product Ameluz ^® . Even if we are successful in increasing our product sales, we may never achieve or sustain profitability. We anticipate substantially increasing our sales and marketing expense as we attempt to exploit the recent regulatory approvals we have received to market Ameluz ^® in the U.S. for the photodynamic therapy treatment of actinic keratoses of mild-to-moderate severity on the face and scalp and in the EU for the treatment of field cancerization and basal cell carcinoma. There can be no assurance that our sales and marketing efforts will generate sufficient sales to allow us to become profitable. Moreover, of the numerous risks and uncertainties associated with developing and commercializing pharmaceutical products, we are unable to predict the extent of any future losses or when we will become profitable, if ever.

If we fail to obtain additional financing, we may be unable to complete the development and commercialization of our products and product candidates.

Our operations have consumed substantial amounts of cash since inception. We expect to continue to spend substantial amounts to pursue additional indications for which our products and product candidates may be commercialized, and to continue the clinical development of our product candidates, including further Phase III clinical trials. We also require significant additional funds in order to commercialize Ameluz ^® in the U.S.

We believe that our existing cash and cash equivalents, the credit facilities available to us under the EIB credit facility, the anticipated net proceeds from this offering, and revenue from product sales and future milestone or license payments will be sufficient to enable us to fund our operating expenses and to advance our commercialization strategy in the U.S. for the next 12 months. However, changing circumstances may cause us to consume capital significantly faster than we currently anticipate, and we may need to spend more money than currently expected because of circumstances beyond our control. After the next 12-month period, we may require additional capital for the further development and commercialization of our products. We may need substantial additional funds to fully develop, manufacture, market and sell our other potential products. Our future funding requirements, both near- and long-term, will depend on many factors, including, but not limited to:

the timing, costs and results of clinical trials for our product Ameluz ^® ;

the outcome, timing and cost of regulatory approvals by the FDA, the European Medicines Agency, or EMA, and comparable foreign regulatory authorities, including the potential for the FDA, EMA or comparable foreign regulatory authorities to require that we perform more studies than those that we currently expect;

the cost of filing, prosecuting, defending and enforcing any patent claims and other intellectual property rights;

the effects of competing technological and market developments;

the cost and timing of completion of commercial-scale manufacturing activities; and

the cost of establishing sales, marketing and distribution capabilities for Ameluz ^® PDT in the U.S. and in such other regions in which we are approved to market it and in which we choose to commercialize it.

We cannot be certain that additional funding will be available on acceptable terms, or at all. If we are unable to raise additional capital in sufficient amounts and on terms acceptable to us, we may have to significantly delay, scale back or discontinue the commercialization of our products or development of product candidates. We also could be required to license our rights to our products and product candidates to third parties on unfavorable terms. In addition, any equity financing would likely result in dilution to our existing holders of our shares and ADSs, and any debt financing would likely involve significant cash payment obligations and include restrictive covenants that may restrict our ability to operate our business.

Any of the above events could significantly harm our business, prospects, financial condition and/or results of operations and could cause the price of our shares or ADSs to decline.

Our existing and any future indebtedness could adversely affect our ability to operate our business.

In May 2017, we entered into a finance contract with the European Investment Bank, or EIB, under which EIB agreed to provide us with loans of up to €20 million in the aggregate. Our finance contract with EIB, which we refer to as the EIB credit facility, is unsecured, is guaranteed by certain of our subsidiaries, and is available to be drawn in tranches during a two year period. Future tranches require the achievement of certain milestones. Each tranche must be repaid five years after drawdown. The EIB credit facility contains undertakings by our company regarding the use of proceeds and limitations on debt, liens, mergers, acquisitions, asset sales, dividends and other restrictive covenants. As of the date of this prospectus, we have borrowed €10 million under the EIB credit facility. On July 6, 2022, we will be required to repay this €10 million principal amount, plus €3 million in deferred interest and an additional amount of performance participation interest determined by reference to the change in our market capitalization between disbursement and maturity of the loan. Under the EIB credit facility, we are not permitted to incur additional third-party debt in excess of €1 million without the prior consent of the EIB (subject to certain exceptions, such as for ordinary course deferred purchase arrangements and, subject to maximum amounts, various types of leases).

In addition, in November 2016 we issued convertible bonds in the aggregate initial principal amount of €5.0 million maturing on January 1, 2021 of which €4.9 million has already been converted into shares. In January 2017, we issued convertible bonds maturing on January 1, 2022 in the aggregate initial principal amount of €5.0 million of which €2.3 million has already been converted into shares. The convertible bonds provide the holders of those bonds with the right to convert them into our ordinary shares at set conversion prices, depending upon time of conversion. The convertible bonds we issued in December 2016 provide the holders with the right to convert them, at any time, in whole but not in part, into our ordinary shares, at a conversion price per share equal to: €4.00 per share from January 1, 2017 until December 31, 2018 and €5.00 per share from January 1, 2018 until maturity. The convertible bonds we issued in January 2017 provide the holders of those bonds with the right to convert them, at any time, in whole but not in part, into our ordinary shares, at a conversion price per share equal to: €4.00 per share from April 1, 2017 until December 31, 2018 and €5.00 per share from January 1, 2018 until maturity. If all of the remaining bonds were converted, we would be required to issue up to 548,960 additional ordinary shares, which would result in additional dilution to shareholders.

Our indebtedness could have significant adverse consequences, including:

requiring us to dedicate a portion of our cash to the payment of interest and principal, reducing money available for working capital, capital expenditure, product development and other general corporate purposes;

increasing our vulnerability to adverse changes in general economic, industry and market conditions;

increasing the risk of dilution to the holders of our shares or ADSs in the event any of these bonds are exercised for or converted into our ordinary shares;

limiting our flexibility in planning for, or reacting to, changes in our business and the industry in which we compete; and

placing us at a competitive disadvantage to competitors that are better capitalized than we are.

We may not have sufficient funds and may be unable to arrange for additional financing to pay the amounts due under our existing debt obligations, in particular the minimum €13 million payment that we must make on July 6, 2022. Failure to make payments or comply with other covenants under our existing debt could result in an event of default and acceleration of amounts due. If an event of default occurs and the lender or lenders accelerate the amounts due, we may not be able to make accelerated payments, and such lenders could file suit against us to collect the amounts due under such obligations or pursue other remedies. In addition, the covenants under our existing debt obligations could limit our ability to obtain additional debt financing.

Risks Related to Our Business and Strategy

The patent family that protects aminolevulinic acid hydrochloride, an active ingredient in Ameluz ^® , against copying by competitors will expire on November 12, 2019. This patent family includes U.S. Patent No. 6,559,183, which is listed in the FDA Orange Book and identified as covering aminolevulinic acid hydrochloride, the active ingredient in Ameluz ^® . Patent No. 6,559,183 serves as a significant barrier to entry into the market by generic versions of Ameluz ^® . Although the process of developing generic topical dermatological products presents specific challenges that may deter potential generic competitors, once this patent expires, generic versions of Ameluz ^® may not be prevented from entering the market and competing with Ameluz ^® . This may cause a significant price drop and, therefore, a significant drop in our profits. We may also lose significant market share for Ameluz.

Government authorities and third party payors, such as private health insurers and health maintenance organizations or, in some jurisdictions such as Germany, statutory health insurance, decide which products they will cover and the amount of reimbursement. Reimbursement by a third party payor may depend upon a number of factors, including the government or third party payor’s determination that use of a product is:

a covered benefit under its health plan;

safe, effective and medically necessary;

reasonable and appropriate for the specific patient;

cost-effective; and

neither experimental nor investigational.

Obtaining coverage and reimbursement approval for a product from a government or other third party payor is a time-consuming and costly process that could require us to provide to the payor supporting scientific, clinical and cost-effectiveness data for the use of our products. We may not be able to provide data sufficient to gain acceptance with respect to coverage and reimbursement or a particular reimbursement amount. If reimbursement of our future products or extended indications for existing products is unavailable or limited in scope or amount, or if pricing is set at unsatisfactory levels, we may be unable to achieve or sustain profitability.

The pricing of prescription pharmaceuticals is subject to governmental control in some of the countries in which we have received and/or seek to receive approval to commercialize certain of our products. We are approved to market certain of our products in the EU and the U.S., and we intend to seek approval to market our product candidates in selected other jurisdictions. If we obtain approval in one or more foreign jurisdictions for our product candidates, we will be subject to rules and regulations in those jurisdictions. In some countries, particularly those in the EU, the pricing of prescription pharmaceuticals is subject to governmental control. In these countries, pricing negotiations with governmental authorities can take considerable time after obtaining marketing approval for a product candidate. In addition, market acceptance and sales of our product candidates will depend significantly on the availability of adequate coverage and reimbursement from government or other third party payors for our product candidates and may be affected by existing and future health care reform measures. Without adequate levels of reimbursement by government health care programs and private health insurers, the market for our products will be limited. While we continue to support efforts to improve reimbursement levels to physicians and plan to work to improve coverage for our products, if our efforts are not successful, a broader adoption of our products and sales of our products could be negatively impacted.

Healthcare legislative changes may have a material adverse effect on our business and results of operations.

In the U.S. and certain other countries, there have been a number of legislative and regulatory changes to the health care system that could impact our ability to sell our products profitably. In particular, the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 revised the payment methodology for many products under Medicare in the U.S., which has resulted in lower rates of reimbursement. In 2010, the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010, or collectively, the Affordable Care Act, was enacted. On January 20, 2017, President Donald Trump signed an executive order stating that the administration intended to seek prompt repeal of the Affordable Care Act, and, pending repeal, directed by the U.S. Department of Health and Human Services and other executive departments and agencies to take all steps necessary to limit any fiscal or regulatory burdens of the Affordable Care Act. There is no guarantee whether the Affordable Care Act will remain in effect or be repealed/replaced. There is significant uncertainty about the future of the Affordable Care Act in particular and healthcare laws generally in the United States. This expansion of the government’s role in the U.S. healthcare industry may further lower rates of reimbursement for pharmaceutical products. We are unable to predict the likelihood of changes to the Affordable Care Act or other healthcare laws which may negatively impact our profitability.

The Affordable Care Act is a sweeping law intended to broaden access to health insurance, reduce or constrain the growth of healthcare spending, enhance remedies against fraud and abuse, add new transparency requirements for healthcare and the health insurance industry, impose new taxes and fees on the healthcare industry and impose additional health policy reforms. This law revises the definition of “average manufacturer price” for reporting purposes, which could increase the amount of Medicaid drug rebates to states once the provision is effective. Further, the law imposes a significant annual fee on companies that manufacture or import branded prescription drug products. Substantial new provisions affecting compliance have also been enacted, which may require us to modify our business practices with healthcare practitioners. While the U.S. Supreme Court upheld the constitutionality of most elements of the Affordable Care Act in 2012, other legal challenges are still pending final adjudication in several jurisdictions. In addition, Congress has also proposed a number of legislative initiatives, including possible repeal of the Affordable Care Act. At this time, there remains a significant amount of uncertainty related to the future of the Affordable Care Act, and whether there will be changes to certain provisions or its entirety. We can provide no assurance that the Affordable Care Act, as currently enacted or as amended in the future, will not adversely affect our business and financial results, and we cannot predict how future federal or state legislative or administrative changes relating to healthcare reform will affect our business.

Other legislative changes have been proposed and adopted in the U.S. since the Affordable Care Act was enacted. On August 2, 2011, the Budget Control Act of 2011, among other things, created measures for spending reductions by Congress. A Joint Select Committee on Deficit Reduction, tasked with recommending a targeted deficit reduction of at least $1.2 trillion for the years 2012 through 2021, was unable to reach required goals, thereby triggering the legislation’s automatic reduction to several government programs. This includes aggregate reductions of Medicare payments to providers up to 2 percent per fiscal year. The American Taxpayer Relief Act of 2012, or the ATRA, among other things, reduced Medicare payments to several providers, including hospitals, imaging centers and cancer treatment centers, and increased the statute of limitations period for the government to recover overpayments to providers from three to five years. Recently there has been increased government scrutiny regarding the manner in which manufacturers set prices for and market commercial products. If we become the subject of any government investigation with respect to our drug pricing, marketing, or other business practices, we could incur significant expense and could be distracted from operation of our business and execution of our strategy. Any such investigation could also result in reduced market acceptance and demand for our products, could harm our reputation and our ability to market our products in the future, and could have a material adverse effect on our business, financial condition, results of operations and growth prospects.

There have been, and likely will continue to be, legislative and regulatory proposals at the U.S. federal and state levels directed at broadening the availability of healthcare and containing or lowering the cost of healthcare. We cannot predict the initiatives that may be adopted in the future. Additionally, third party payors, including governmental payors, managed care organizations and private health insurers, are increasingly challenging the prices charged for medical products and services and examining their cost effectiveness. The continuing efforts of governments, insurance companies, managed care organizations and other payors of healthcare services to contain or reduce costs of healthcare and/or impose price controls may adversely affect:

the demand for our product candidates, if we obtain regulatory approvals;

our ability to set a price or obtain reimbursement that we believe is fair for our products;

our ability to generate revenues and achieve or maintain profitability; and

the level of taxes that we are required to pay.

Any denial or reduction in reimbursement from Medicare or other programs or governments may result in a similar denial or reduction in payments from private payors, which may adversely affect our future profitability.

To date, we have engaged in only limited sales of our products, primarily in Germany and Spain and, more recently, in the U.S.

We have engaged in only limited sales of our products to date. In Germany, the majority of our sales have been generated in the private dermatology offices sector. Historically, our sales partners in European countries outside of Germany have experienced difficulty in selling Ameluz ^® because that process involves selling both drug combined with a procedure, an area in which our sales partners generally have little experience. We launched the commercialization of Ameluz ^® and BF-RhodoLED ^® for actinic keratosis in the U.S. in October 2016 and have a limited history of marketing our products there. Our products may never gain significant acceptance in the European or U.S. marketplace and, therefore, may never generate substantial revenue or profits for us. We must establish a larger market for our products and build that market through marketing campaigns to increase awareness of, and confidence by doctors in, our products. If we are unable to expand our current customer base and obtain market acceptance of our products, our operations could be disrupted and our business may be materially adversely affected. Even if we achieve profitability, we may not be able to sustain or increase profitability.

Competing products and technologies based on traditional treatment methods may make our products or potential products noncompetitive or obsolete.

Well-known pharmaceutical, biotechnology and medical device companies are marketing well-established therapies for the treatment of actinic keratosis and basal cell carcinoma. Doctors may prefer to use familiar therapies, rather than trying our products.

Our industry is subject to rapid, unpredictable and significant technological change and intense competition. Our competitors may succeed in developing, acquiring, or licensing on an exclusive basis products that are safer, more effective or more desirable than ours. Many of our competitors have substantially greater financial, technical and marketing resources than we have. In addition, several of these companies have significantly greater experience than we do in developing products, conducting preclinical and clinical testing, obtaining regulatory approvals to market products for health care, and marketing healthcare products.

Mergers and acquisitions in the pharmaceutical and biotechnology industries may result in even more resources being concentrated in our competitors. Competition may increase further as a result of advances in the commercial applicability of technologies and greater availability of capital for investment in these industries.

We cannot guarantee that new drugs or future developments in drug technologies will not have a material adverse effect on our business. Increased competition could result in price reductions, lower levels of government or other third party reimbursements, failure to achieve market acceptance and loss of market share, any of which could adversely affect our business, results of operations and financial condition. Further, we cannot give any assurance that developments by our competitors or future competitors will not render our technologies obsolete or less advantageous.

We face significant competition from other pharmaceutical and medical device companies and our operating results will suffer if we fail to compete effectively. We also must compete with existing treatments, such as simple curettage and cryotherapy, which do not involve the use of a drug but have gained significant market acceptance. We have recently lost market share in Germany to daylight PDT products, an indication for which we have applied but for which Ameluz ^® is not currently approved.

The pharmaceutical and medical device industry is characterized by intense competition and rapid innovation. Our competitors may be able to develop other products that are able to achieve similar or better results for the treatment of actinic keratosis. We expect that our future competitors will include mostly established pharmaceutical companies, such as Sun Pharma and Galderma. Most of our competitors have substantially greater financial, technical and other resources, such as larger research and development staffs and experienced marketing and manufacturing organizations and well-established sales forces. Competition may increase further as a result of advances in the commercial applicability of technologies and greater availability of capital for investment in these industries.

Our competitors may succeed in developing, acquiring or licensing products that are more effective or less costly than our products and product candidates. Metvix ^® has also recently been approved in the EU for use in daylight photodynamic therapy for which it is sold by Galderma under the brand name Luxerm® in Germany and Luxera ^® in other European countries. This gives that drug a competitive advantage compared to Ameluz ^® , as Ameluz ^® is not yet approved to be used in daylight photodynamic therapy to treat actinic keratosis. In recent months, the market share of Ameluz ^® of photodynamic therapy drugs for treatment of actinic keratosis dispensed by German public pharmacies has fallen from over 75% to approximately 60%, a decline which we believe resulted primarily from the introduction to the German market of Luxerm ^® in 2016. We believe that daylight photodynamic therapy products will play an increasingly important role in Europe in the future and will begin to be prescribed as an alternative to less effective, self-applied, topical prescription product creams (which have historically been market leaders in the EU in treating actinic keratosis). We have applied to extend our indication for Ameluz ^® to daylight photodynamic therapy in the EU to better compete with Metvix ^® and Luxerm ^® , but there can be no assurance that we will receive the extended indication. If we fail to obtain this extended indication, then we may continue to lose market share to Metvix ^® and Luxerm ^® and any other products that receive approval for daylight photodynamic therapy in the EU in the future.

In addition, our products compete with other therapies, such as simple curettage and, particularly in the U.S., cryotherapy, which do not involve the use of a drug but have gained significant market acceptance.

If we are not able to compete effectively with the competitors and competing therapies discussed above, we may lose significant market share in the relevant markets, which could have a material adverse effect on our revenue, results of operations and financial condition.

If we are unable to establish effective marketing and sales capabilities or enter into agreements with third parties to market and sell our products, we may be unable to generate revenues.

In order to commercialize our products, we must further build our marketing, sales and distribution capabilities, in particular in the U.S. The establishment, development and training of our sales force and related compliance plans to market our products are expensive and time consuming and can potentially delay the commercial success of our products. In the event we are not successful in developing our marketing and sales infrastructure, we may not be able to successfully commercialize our products, which would limit our ability to generate product revenues.

We depend on a single unaffiliated contract manufacturer to manufacture Ameluz® and two unaffiliated contractors to produce 5-aminolevulinic acid, the active pharmaceutical ingredient in Ameluz®, for us. If we fail to maintain our relationship with these suppliers or if these suppliers are unable to continue to produce product for us, our business could be materially harmed.

We depend on a single unaffiliated contract manufacturer located in Switzerland to manufacture Ameluz® and two unaffiliated contractors to produce 5-aminolevulinic acid, the active pharmaceutical ingredient in Ameluz®, for us. The initial terms of our contracts with these suppliers begin to expire in June 2020, and the contracts renew automatically for one- or two-year periods, as applicable, until they are terminated. For more information on the terms of our contracts with these suppliers, see “Business—Commercial Partners and Agreements”. If we fail to maintain our relationship with these parties, we may be unable to obtain an alternative manufacturer of Ameluz® or suppliers of 5-aminolevulinic acid that could deliver the quantity of the product at the quality and cost levels that we require. Even if acceptable alternative suppliers could be found, we may experience delays in transitioning the manufacturing from our existing suppliers to our new suppliers (in particular with respect to our manufacturer of Ameluz®). Problems of this kind could cause us to experience order cancellations and loss of market share. The failure of the suppliers to supply Ameluz® or 5-aminolevulinic acid that satisfies our quality, quantity and cost requirements in a timely manner could impair our ability to deliver Ameluz® and could increase our costs, particularly if we are unable to obtain Ameluz® or 5-aminolevulinic acid from alternative sources on a timely basis or on commercially reasonable terms. In addition, our suppliers are regulated by the FDA and must comply with applicable laws and regulations, including home-country laws. If the suppliers fail to comply, this could harm our business.

If we fail to manufacture Ameluz ^® or BF-RhodoLED ^® or other marketed products and product candidates in sufficient quantities and at acceptable quality and cost levels, or to fully comply with current good manufacturing practice, or cGMP, or other applicable manufacturing regulations, we may face a bar to, or delays in, the commercialization of our products, breach obligations to our licensing partners or be unable to meet market demand, and lose potential revenues.

The manufacture of our products requires significant expertise and capital investment. Currently, all commercial supply for Ameluz ^® is manufactured by a single unaffiliated contract manufacturer. We would need to spend substantial time and expense to replace that manufacturer if it failed to deliver products in the quality and quantities we demand or failed to meet any regulatory or cGMP requirements. We take precautions to help safeguard the manufacturing facilities, including acquiring insurance, and performing on site audits. However, vandalism, terrorism or a natural or other disaster, such as a fire or flood, could damage or destroy manufacturing equipment or our inventory of raw material or finished goods, cause substantial delays in our operations, result in the loss of key information, and cause us to incur additional expenses. Our insurance may not cover our losses in any particular case. In addition, regardless of the level of insurance coverage, damage to our facilities may have a material adverse effect on our business, financial condition and operating results.

We must comply with federal, state and foreign regulations, including FDA regulations governing cGMP enforced by the FDA through its facilities inspection program and by similar regulatory authorities in other jurisdictions where we do business. These requirements include, among other things, quality control, quality assurance and the maintenance of records and documentation. For our medical device products, we are required to comply with the FDA’s Quality System Regulation, or QSR, which covers the methods and documentation of the design, testing, production, control, quality assurance, labeling, packaging, sterilization, storage and shipping of our medical device products.

Our contract facilities have been inspected by the FDA for cGMP compliance. If we do not successfully maintain cGMP compliance for these facilities, commercialization of our products could be prohibited or significantly delayed. Even after cGMP compliance has been achieved, the FDA or similar foreign regulatory authorities at any time may implement new standards, or change their interpretation and enforcement of existing standards for manufacture, packaging, testing of or other activities related to our products. For our commercialized medical device product, the FDA audits compliance with the QSR through periodic announced and unannounced inspections of manufacturing and other facilities. The FDA may conduct inspections or audits at any time. Similar audit rights exist in Europe and other foreign jurisdictions. Any failure to comply with applicable cGMP, QSR and other regulations may result in fines and civil penalties, suspension of production, product seizure or recall, imposition of a consent decree, or withdrawal of product approval, and would limit the availability of our product. Any manufacturing defect or error discovered after products have been produced and distributed also could result in significant consequences, including adverse health consequences, injury or death to patients, costly recall procedures, re-stocking costs, warning letters, Form 483 reports, civil monetary penalties, product liability, damage to our reputation and potential for product liability claims. If we are required to find a new manufacturer or supplier, the process would likely require prior FDA and/or equivalent foreign regulatory authority approval, and would be very time consuming. An inability to continue manufacturing adequate supplies of our products at any contract facilities could result in a disruption in the supply of our products. Delay or disruption in our ability to meet demand may result in the loss of potential revenue. We have licensed the commercial rights in specified foreign territories to market and sell our products. Under those licenses, we have obligations to manufacture commercial product for our commercial partners. If we are unable to fill the orders placed with us by our commercial partners in a timely manner, we may potentially lose revenue and be in breach of our licensing obligations under agreements with them.

Because of a lack of comprehensive public data regarding the market for actinic keratosis treatments in the U.S., the U.S. market size for Ameluz ^® for the treatment of actinic keratosis may be smaller than we have estimated.

Because of a lack of comprehensive public data regarding the market for actinic keratosis treatments in the U.S., some of our estimates and judgments are based on various sources which we have not independently verified and which potentially include outdated information, or information that may not be precise or correct, potentially rendering the U.S. market size for treatment of actinic keratosis with Ameluz ^® smaller than we have estimated, which may reduce our potential and ability to increase sales of Ameluz ^® and revenue in the U.S. Although we have not independently verified the data obtained from these sources, we believe that such data provide the best available information relating to the present market for actinic keratosis treatments in the U.S., and we often use such data for our business and planning purposes. We are responsible for the inclusion of such data in this prospectus .

If we face allegations of noncompliance with the law and encounter sanctions, our reputation, revenues and liquidity may suffer, and our products could be subject to restrictions or withdrawal from the market.

Any government investigation of alleged violations of the law could require us to expend significant time and resources in response and could generate negative publicity. Any failure to comply with ongoing regulatory requirements may significantly and adversely affect our ability to commercialize and generate revenues from our products. If regulatory sanctions are applied or if regulatory approval is withdrawn, the value of our company and our operating results will be adversely affected. Additionally, if we are unable to generate revenues from our product sales, our potential for achieving profitability will be diminished and the capital necessary to fund our operations will be increased.

In May 2016, we received approval from the FDA to market in the U.S. Ameluz ^® in combination with photodynamic therapy using our BF-RhodoLED ^® lamp for lesion-directed and field-directed treatment of actinic keratoses of mild-to-moderate severity on the face and scalp. We launched the commercialization of Ameluz ^® and BF-RhodoLED ^® for actinic keratosis in the U.S. in October 2016. Even after obtaining regulatory approval for our products or extending their indications, our products may not gain market acceptance among hospitals, physicians, health care payors, patients and others in the medical community. Market acceptance of any of our products and product candidates for which we receive approval depends on a number of factors, including:

the clinical indications for which they are approved, including any restrictions placed upon the product in connection with its approval, such as patient registry or labeling restriction;

the product labeling, including warnings, precautions, side effects, and contraindications that the FDA or other regulatory authorities approve;

the potential and perceived advantages of our product candidates over alternative products or therapies;

relative convenience and ease of administration;

the effectiveness and compliance of our sales and marketing efforts;

acceptance by major operators of hospitals, physicians and patients of the product candidate as a safe and effective treatment;

the prevalence and severity of any side effects;

product labeling or product insert requirements of the FDA or other regulatory authorities;

any Risk Evaluation and Mitigation Strategy that the FDA might require for our drug product candidates;

the timing of market introduction of our product candidates as well as competitive products;

the perceived advantages of our products over alternative treatments;

the cost of treatment in relation to alternative products; and

the availability of adequate reimbursement and pricing by third party payors and government authorities, including any conditions for reimbursement required by such third party payors and government authorities.

If our products and product candidates are approved, but fail to achieve market acceptance among physicians, patients, payors, or others in the medical community, we will not be able to generate significant revenues, which would have a material adverse effect on our business, prospects, financial condition and results of operations.

We may be subject to additional healthcare regulation and enforcement by the U.S. federal government and by authorities in the U.S., the EU and other jurisdictions in which we conduct our business. In certain jurisdictions outside of the U.S. where we currently commercialize certain of our products, we are already subject to such regulation and enforcement. Such U.S. laws include, without limitation, state and federal anti-kickback, federal false claims, privacy, security, financial disclosure laws, anti-trust, Physician Payment Sunshine Act reporting and fair trade regulation and advertising laws and regulations. Many states and other jurisdictions have similar laws and regulations, some of which are broader in scope. If our operations are found to be in violation of any of such laws or any other governmental regulations that apply to us, we may be subject to penalties, including, but not limited to, civil and criminal penalties, damages, fines, the curtailment or restructuring of our operations, the exclusion from participation in federal, state or other healthcare programs and imprisonment, any of which could adversely affect our ability to operate our business and our financial results.

A recall of our drug or medical device products, or the discovery of serious safety issues with our drug or medical device products, could have a significant negative impact on us.

The FDA, the EMA and other relevant regulatory agencies have the authority to require or request the recall of commercialized products in the event of material deficiencies or defects in design or manufacture or in the event that a product poses an unacceptable risk to health. Manufacturers may, under their own initiative, recall a product. A government-mandated or voluntary recall by us or one of our distributors could occur as a result of an unacceptable risk to health, component failures, manufacturing errors, design or labeling defects or other deficiencies and issues. Recalls of our products would divert managerial and financial resources and have an adverse effect on our reputation, financial condition and operating results, which could impair our ability to produce our products in a cost-effective and timely manner.

Further, under the FDA’s medical device reporting, or MDR, regulations, we are required to report to the FDA any event which reasonably suggests that our product may have caused or contributed to a death or serious injury or in which our product malfunctioned and, if the malfunction of the same or similar device marketed by us were to recur, would likely cause or contribute to death or serious injury. The FDA also requires reporting of serious, life-threatening, unexpected and other adverse drug experiences and the submission of periodic safety reports and other information. Product malfunctions or other adverse event reports may result in a voluntary or involuntary product recall and other adverse actions, which could divert managerial and financial resources, impair our ability to manufacture our products in a cost-effective and timely manner and have an adverse effect on our reputation, financial condition and operating results. Similar reporting requirements exist in Europe and other jurisdictions.

Any adverse event involving our products could result in future voluntary corrective actions, such as recalls or customer notifications, or regulatory agency action, which could include inspection, mandatory recall or other enforcement action. Any corrective action, whether voluntary or involuntary, will require the dedication of our time and capital, distract management from operating our business and may harm our reputation and financial results as well as threaten our marketing authority for such products.

Our medical device product, the BF-RhodoLED ^® lamp, is subject to extensive governmental regulation, and failure to comply with applicable requirements could cause our business to suffer.

The medical device industry is regulated extensively by governmental authorities, principally the FDA and corresponding state and European and other foreign governmental agencies. The regulations are very complex and are subject to rapid change and varying interpretations. Regulatory restrictions or changes could limit our ability to carry on or expand our operations or result in higher than anticipated costs or lower than anticipated sales. The FDA and other U.S. or European or other foreign governmental agencies regulate numerous elements of our business, including:

product design and development;

pre-clinical and clinical testing and trials;

product safety;

establishment registration and product listing;

distribution;

labeling, manufacturing and storage;

pre-market clearance or approval;

advertising and promotion;

marketing, manufacturing, sales and distribution;

relationships and communications with health care providers;

adverse event reporting;

market exclusivity;

servicing and post-market surveillance; and

recalls and field safety corrective actions.

Before we can market or sell a new regulated product or a significant modification to an existing product in the U.S., we must obtain either marketing clearance under Section 510(k) of the Federal Food, Drug and Cosmetic Act, or FDCA, or approval of a Pre-Market Approval, or PMA, application from the FDA, unless an exemption from premarket clearance and approval applies. In the 510(k) clearance process, the FDA must determine that a proposed device is “substantially equivalent” to a device legally on the market, known as a “predicate” device, with respect to intended use, technology and safety and effectiveness, in order to clear the proposed device for marketing. Clinical data are sometimes required to support a finding of substantial equivalence. The PMA pathway requires an applicant to demonstrate the safety and effectiveness of the device based on extensive clinical data. The PMA process is typically required for devices that are deemed to pose the greatest risk, such as life-sustaining, life-supporting or certain implantable devices or products that do not have an adequate predicate product. The PMA process can be lengthy, expensive, and carries uncertainty of approval. Products that are approved through a PMA application generally need FDA approval before they can be modified. Similarly, some modifications made to products cleared through a 510(k) premarket notification submission may require a new 510(k) submission, including possibly with clinical data. Before we can offer our device products to any of the 31 nations within the EU and the European Free Trade Association, we must first satisfy the requirements for CE Mark clearance, a conformity mark that signifies a product has met all criteria of the relevant EU directives, especially in the areas of safety and performance. The process of obtaining regulatory clearances or approvals to market a medical device can be costly and time-consuming, and we may not be able to obtain these clearances or approvals on a timely basis, or at all for our products or proposed products. We obtained CE Mark clearance for our BF-RhodoLED ^® lamp in November 2012 and FDA approval for it, to be used in connection with Ameluz ^® gel, in May 2016.

The FDA can delay, limit or deny clearance or approval of a device for many reasons, including:

our inability to demonstrate that our products are safe and effective for their intended uses or substantially equivalent to a predicate device;

the data from our clinical trials may not be sufficient to support clearance or approval; and

the manufacturing process or facilities we use may not meet applicable requirements.

In addition, the FDA and other regulatory authorities may change their respective clearance and approval policies, adopt additional regulations or revise existing regulations, or take other actions which may prevent or delay approval or clearance of our products under development or impact our ability to modify our currently cleared or approved products on a timely basis.

Any delay in, or failure to receive or maintain, clearance or approval for our products under development could prevent us from generating revenue from these products or achieving profitability. Additionally, the FDA and comparable foreign regulatory authorities have broad enforcement powers. Regulatory enforcement or inquiries, or other increased scrutiny of us, could dissuade some customers from using our products and adversely affect our reputation and the perceived safety and efficacy of our products.

Failure to comply with applicable regulations could jeopardize our ability to sell our products and result in enforcement actions such as fines, civil penalties, injunctions, warning letters, Form 483 reports, recalls of products, delays in the introduction of products into the market, refusal of the FDA or other regulators to grant future clearances or approvals, and the suspension or withdrawal of existing approvals by the FDA or other regulators. Any of these sanctions could result in higher than anticipated costs or lower than anticipated sales and have a material adverse effect on our reputation, business, financial condition and operating results.

Furthermore, we may evaluate international expansion opportunities in the future for our medical device products. As we expand our operations outside of the U.S. and Europe, we are, and will become, subject to various additional regulatory and legal requirements under the applicable laws and regulations of the international markets we enter. These additional regulatory requirements may involve significant costs and expenditures and, if we are not able comply with any such requirements, our international expansion and business could be significantly harmed.

Modifications to our medical device products, such as our BF-RhodoLED ^® lamp in Europe, may require reclassifications, new CE marking processes or may require us to cease marketing or recall the modified products until new CE marking is obtained.

A modification to our medical devices such as our BF-RhodoLED ^® lamp, which is approved for sale in Europe, could lead to a reclassification of the medical device and could result in further requirements (including additional clinical trials) to maintain the product’s CE marking. If we fail to comply with such further requirements we may be required to cease marketing or to recall the modified product until we obtain clearance or approval, and we may be subject to significant regulatory fines or penalties.

We are highly dependent on our key personnel, and if we are not successful in attracting and retaining highly qualified personnel, we may be unable to successfully implement our business strategy.

Our ability to compete in the highly competitive pharmaceutical industry depends upon our ability to attract and retain highly qualified managerial, scientific and medical personnel with specialized scientific and technical skills. We are highly dependent on our management, scientific, medical and operations personnel, including Prof. Hermann Lübbert, Ph.D., chairman of our management board and chief executive officer; Thomas Schaffer, member of our management board and chief financial officer and Christoph Dünwald, member of our management board and chief commercial officer. Our company does not maintain “key man” insurance for any of our officers. The loss of the services of any of our executive officers or other key employees and our inability to find suitable replacements could potentially harm our business, prospects, financial condition or results of operations.

Despite our efforts to retain valuable employees, members of our management, scientific and development teams may terminate their employment with us on short notice. Although we have employment agreements with our key employees, these employees could leave our employment at any time, with certain notice periods. We do not maintain “key man” insurance policies on the lives of these individuals or the lives of any of our other employees. Our success also depends on our ability to continue to attract, retain and motivate highly skilled junior, mid-level and senior managers as well as junior, mid-level and senior scientific and medical personnel and sales representatives.

Many of the other biotechnology and pharmaceutical companies that we compete against for qualified personnel have greater financial and other resources, different risk profiles and a longer history in the industry than we do. They may also provide more diverse opportunities and better chances for career advancement. Some of these characteristics may be more appealing to high quality candidates than what we can offer. If we are unable to continue to attract and retain high quality personnel, our ability to advance the development of our product candidates, obtain regulatory approval and commercialize our product candidates will be limited.

Our employees may engage in misconduct or other improper activities, including noncompliance with regulatory standards and requirements.

We are exposed to the risk of employee fraud or other misconduct. Misconduct by employees could include intentional failures to comply with FDA or EMA regulations, provide accurate information to the FDA or EMA, comply with manufacturing standards we have established, comply with healthcare fraud and abuse laws and regulations, report financial information or data accurately or disclose unauthorized activities to us. In particular, sales, marketing and business arrangements in the healthcare industry are subject to extensive laws and regulations intended to prevent fraud, kickbacks, self-dealing and other abusive practices in the U.S. and Europe as well as in other jurisdictions where we conduct our business. These laws and regulations may restrict or prohibit a wide range of pricing, discounting, marketing and promotion, sales commission, customer incentive programs and other business arrangements. Employee misconduct could also involve the improper use of information obtained in the course of clinical trials, which could result in regulatory sanctions, inability to obtain product approval and serious harm to our reputation. It is not always possible to identify and deter employee misconduct, and any precautions we take to detect and prevent this activity may not be effective in controlling unknown or unmanaged risks or losses or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure to be in compliance with such laws or regulations. If any such actions are instituted against us, and we are not successful in defending ourselves or asserting our rights, those actions could have a significant impact on our business, including the imposition of significant fines or other sanctions.

We will need to grow the size of our organization and we may experience difficulties in managing this growth.

As of September 30, 2017, we had 125 employees. As our development and commercialization plans and strategies develop, and as we continue operating as a public company, we expect to need additional managerial, operational, sales, marketing, financial and other personnel. Future growth would impose significant added responsibilities on members of management, including:

identifying, recruiting, integrating, maintaining and motivating additional employees;

managing our internal development efforts effectively, including the clinical and FDA and EMA review process for our product candidates, while complying with our contractual obligations to contractors and other third parties; and

improving our operational, financial and management controls, reporting systems and procedures.

Our future financial performance and our ability to commercialize our products will depend, in part, on our ability to effectively manage any future growth, and our management may also have to divert a disproportionate amount of its attention away from day-to-day activities in order to devote a substantial amount of time to managing these growth activities. To date, we have used the services of outside vendors to perform tasks including clinical trial management, statistics and analysis and regulatory affairs. Our growth strategy may also entail expanding our group of contractors or consultants to implement these tasks going forward. Because we rely on numerous consultants, effectively outsourcing many key functions of our business, we will need to be able to effectively manage these consultants to ensure that they successfully carry out their contractual obligations and meet expected deadlines. However, if we are unable to effectively manage our outsourced activities or if the quality or accuracy of the services provided by consultants is compromised for any reason, our clinical trials may be extended, delayed or terminated, and we may not be able to obtain regulatory approval for our product candidates or otherwise advance our business. There can be no assurance that we will be able to manage our existing consultants or find other competent outside contractors and consultants on economically reasonable terms, or at all. If we are not able to effectively expand our organization by hiring new employees and expanding our groups of consultants and contractors, we may not be able to successfully implement the tasks necessary to further develop and commercialize our products and product candidates that we develop and, accordingly, may not achieve our research, development and commercialization goals.

We may encounter difficulties growing our sales force.

Our initial estimate of the size of the required sales force may be materially different from the size of the sales force actually required to effectively commercialize our product candidates. As such, we may be required to hire substantially more sales representatives to adequately support the commercialization of our products and product candidates or we may incur excess costs as a result of hiring more sales representatives than necessary. With respect to certain geographical markets, we may enter into collaborations with other entities to utilize their local marketing and distribution capabilities, but we may be unable to enter into such agreements on favorable terms, if at all. If our future collaborators do not commit sufficient resources to commercialize our future products, if any, and we are unable to develop the necessary marketing capabilities on our own, we will be unable to generate sufficient product revenue to sustain our business. We may be competing with companies that currently have extensive and well-funded marketing and sales operations.

Certain of our employees and patents are subject to foreign laws.

A majority of our employees work in Germany and are subject to German employment law. Ideas, developments, discoveries and inventions made by such employees and consultants are subject to the provisions of the German Act on Employees’ Inventions, which regulates the ownership of, and compensation for, inventions made by employees. We face the risk that disputes can occur between us and our employees or former employees pertaining to alleged non-adherence to the provisions of this act that may be costly to defend and take up our management’s time and efforts whether we prevail or fail in any such dispute. There is a risk that the compensation we provided to employees who assign patents to us may be deemed to be insufficient and we may be required under German law to increase the compensation due to such employees for the use of the patents. In those cases where employees have not assigned their interests to us, we may need to pay compensation for the use of those patents. If we are required to pay additional compensation or face other disputes under the German Act on Employees’ Inventions, our results of operations could be adversely affected.

We believe that our success depends, in part, upon our ability to protect our intellectual property throughout the world. However, the laws of some foreign countries, including Germany, may not be as comprehensive as those of the U.S. and may not be sufficient to protect our proprietary rights. In addition, we generally do not pursue patent protection in all jurisdictions because of cost and confidentiality concerns. Accordingly, our international competitors could obtain foreign patent protection for, and market overseas, products and technologies for which we are seeking patent protection in the U.S.

A variety of risks associated with commercializing our products and product candidates internationally could materially adversely affect our business.

We, or our licensing partners, may seek regulatory approval for our product candidates outside of the U.S. and EU and, accordingly, we expect that we will be subject to additional risks for our products and product candidates related to operating in foreign countries if we obtain the necessary approvals, including:

differing regulatory requirements in foreign countries;

the potential for so-called parallel importing, which is what happens when a local seller, faced with high or higher local prices, opts to import goods from a foreign market (with low or lower prices) rather than buying them locally;

unexpected changes in tariffs, trade barriers, price and exchange controls and other regulatory requirements;

economic weakness, including inflation, or political instability in particular foreign economies and markets;

compliance with tax, employment, immigration and labor laws for employees living or traveling abroad;

foreign taxes, including withholding of payroll taxes;

foreign currency fluctuations, which could result in increased operating expenses and reduced revenues, and other obligations incident to doing business in another country;

difficulties staffing and managing foreign operations;

workforce uncertainty in countries where labor unrest is more common than in Germany or the U.S.;

potential liability under the Foreign Corrupt Practices Act of 1977 or comparable foreign regulations;

challenges enforcing our contractual and intellectual property rights, especially in those foreign countries that do not respect and protect intellectual property rights to the same extent as in the EU or the U.S.;

production shortages resulting from any events affecting raw material supply or manufacturing capabilities abroad; and

business interruptions resulting from geo-political actions, including war and terrorism.

These and other risks associated with our or our licensing partners’ international operations may materially adversely affect our ability to attain or maintain profitable operations.

Our business and operations would suffer in the event of system failures.

Despite the implementation of security measures, our internal computer systems and those of our current and future clinical research organizations, or CROs, and other contractors and consultants are vulnerable to damage from computer viruses, unauthorized access, natural disasters, terrorism, war and telecommunication and electrical failures. While we have not experienced any such material system failure, accident or security breach to date, if such an event were to occur and cause interruptions in our operations, it could result in a material disruption of our development programs and our business operations. For example, the loss of clinical trial data from completed or future clinical trials could result in delays in our regulatory approval efforts and significantly increase our costs to recover or reproduce the data. To the extent that any disruption or security breach were to result in a loss of, or damage to, our data or applications, or inappropriate disclosure of confidential or proprietary information, we could incur liability and the further development and commercialization of our products and product candidates could be delayed.

If product liability lawsuits are brought against us, we may incur substantial liabilities and may be required to limit commercialization of our products.

We face an inherent risk of product liability as a result of the clinical testing of our products and face an even greater risk if we commercialize our products on a larger scale. For example, we may be sued if our products allegedly cause injury or are found to be otherwise unsuitable during clinical testing, manufacturing, marketing or sale. Any such product liability claims may include allegations of defects in manufacturing; defects in design; a failure to warn of dangers inherent in the product, negligence, strict liability; and a breach of warranties. Claims could also be asserted under state consumer protection acts. In Europe, medical products and medical devices may, under certain circumstances, be subject to no-fault liability. If we cannot successfully defend ourselves against product liability claims, we may incur substantial liabilities or be required to limit commercialization of our products and product candidates. Even a successful defense would require significant financial and management resources. Regardless of the merits or eventual outcome, liability claims may result in:

costs to defend litigation and other proceedings;

a diversion of management’s time and our resources;

decreased demand for our products;

injury to our reputation;

withdrawal of clinical trial participants;

initiation of investigations by regulators;

product recalls, withdrawals or labeling, marketing or promotional restrictions;

loss of revenue;

substantial monetary awards to trial participants or patients;

exhaustion of any available insurance and our capital resources;

the inability to commercialize our products; and

a decline in our share or ADS price.

We currently maintain product liability insurance. If such insurance is not sufficient, or if we are not able to obtain such insurance at an acceptable cost in the future, potential product liability claims could prevent or inhibit the commercialization of our products and the products we develop. A successful claim could materially harm our business, financial condition or results of operations. Additionally, we cannot guarantee that continued product liability insurance coverage will be available in the future at acceptable costs.

Our international operations may pose currency risks, which may adversely affect our operating results and net income.

Our operating results may be affected by volatility in currency exchange rates and our ability to effectively manage our currency transaction risks. In general, we conduct our business, earn revenues and incur costs in the local currency of the countries in which we operate. In 2016, 80% of our revenue was generated and approximately 71% of our costs were incurred in euros (54% and 47%, respectively, for the nine months ended September 30, 2017). Although currency exchange rate fluctuations have not had an impact on our operations to date, as we execute our strategy to expand in the U.S. and internationally, our exposure to currency risks will increase. We do not manage our foreign currency exposure in a manner that would eliminate the effects of changes in foreign exchange rates. Therefore, changes in exchange rates between these foreign currencies, the dollar and the euro will affect our revenues, cost of goods sold, and operating margins, and could result in exchange losses in any given reporting period.

We incur currency transaction risks whenever we enter into either a purchase or a sale transaction using a different currency from the currency in which we report revenues. In such cases we may suffer an exchange loss because we do not currently engage in currency swaps or other currency hedging strategies to address this risk.

Given the volatility of exchange rates, we can give no assurance that we will be able to effectively manage our currency transaction risks or that any volatility in currency exchange rates will not have an adverse effect on our results of operations.

Failure to comply with the U.S. Foreign Corrupt Practices Act or other applicable anti-corruption legislation could result in fines, criminal penalties and an adverse effect on our business.

We operate in a number of countries throughout the world. We are committed to doing business in accordance with applicable anti-corruption laws. We are subject, however, to the risk that our officers, directors, employees, agents and collaborators may take action determined to be in violation of such anti-corruption laws, including the U.S. Foreign Corrupt Practices Act of 1977, the U.K. Bribery Act 2010 and the European Union Anti-Corruption Act, as well as trade sanctions administered by the U.S. Office of Foreign Assets Control and the U.S. Department of Commerce. Any such violation could result in substantial fines, sanctions, civil and/or criminal penalties or curtailment of operations in certain jurisdictions, and might adversely affect our results of operations. In addition, actual or alleged violations could damage our reputation and ability to do business.

Global economic, political and social conditions have adversely impacted our sales and operations and may continue to do so.

The uncertain direction and relative strength of the global economy, difficulties in the financial services sector and credit markets, continuing geopolitical uncertainties and other macroeconomic factors all affect spending behavior of potential end-users of our products. The prospects for economic growth in Europe, the U.S. and other countries remain uncertain and may cause end-users to further delay or reduce purchases of drugs or therapies that are not fully reimbursed by governmental or other third party payors. In particular, a substantial portion of our sales are made to customers in countries in Europe, which is experiencing a significant economic crisis. If global economic conditions remain volatile for a prolonged period or if European economies experience further disruptions, our results of operations could be adversely affected. The global financial crisis affecting the banking system and financial markets has resulted in a tightening of credit markets, lower levels of liquidity in many financial markets and extreme volatility in fixed income, credit, currency and equity markets.

Our products may become obsolete prior to the end of their anticipated useful lives, and we may be required to dispose of existing inventory or write off the value or accelerate the depreciation of those assets, each which would materially and adversely impact our results of operations.

We focus on continual product innovation and product improvement. While we believe this provides a competitive edge, it also results in the risk that our products will become obsolete prior to the end of their anticipated useful lives. If we introduce new products or next generation products prior to the end of the useful life of a prior generation, we may be required to dispose of existing inventory, or write off the value of these assets, each of which would materially and adversely impact our results of operations.

Our business involves environmental risks and we may incur significant costs complying with environmental laws and regulations.

We are subject to federal, state, local and foreign laws and regulations which govern the use, manufacture, storage handling and disposal of hazardous materials and specific waste products. We believe that we are in compliance in all material respects with currently applicable environmental laws and regulations. However, we cannot guarantee that we will not incur significant costs to comply with environmental laws and regulations in the future. We also cannot guarantee that current or future environmental laws or regulations will not materially adversely affect our operations, business or financial condition. In addition, although we believe our safety procedures for handling and disposing of these materials comply with federal, state, local and foreign laws and regulations, we cannot completely eliminate the risk of accidental contamination or injury from these materials. In the event of such an accident, we could be held liable for any resulting damages, and this liability could exceed our resources.

Risks Related to the Clinical Development and Regulatory Approval of Our Products

We have invested a significant portion of our efforts and financial resources in the development of Ameluz ^® , which has received marketing approval in the U.S. for lesion- and field-directed treatment of actinic keratosis and in the EU for actinic keratosis, field cancerization and basal cell carcinoma. Although we have received these approvals, there remains a significant risk that we will fail to generate sufficient revenue or otherwise successfully commercialize these products in the EU or the U.S. The success of our products will depend on several factors, including:

successful completion of further clinical trials;

receipt of further regulatory approvals, including for the marketing of Ameluz ^® for additional indications and/or in additional countries;

obtaining adequate reimbursement from governments and other third party payors for Ameluz ^® ;

maintaining regulatory compliance for our contract manufacturing facility and sales force;

manufacturing sufficient quantities in acceptable quality;

achieving meaningful commercial sales of our products;

sourcing sufficient quantities of raw materials used to manufacture our products;

successfully competing with other products;

continued acceptable safety and effectiveness profiles for our products following regulatory approval and marketing;

obtaining and maintaining patent and trade secret protection and regulatory exclusivity; and

protecting our intellectual property rights.

If we do not achieve one or more of these factors in a timely manner, or at all, we could experience significant delays or an inability to successfully commercialize our products, which would materially harm our business and we may not be able to earn sufficient revenue and cash flows to continue our operations.

Our ability to generate future revenues depends heavily on our success in:

maintaining and extending U.S., EU and/or other foreign regulatory approvals for our products;

manufacturing commercial quantities of our products at acceptable costs;

successfully commercializing our products, and

achieving broad market acceptance of our products and product candidates in the medical community and with the government and other third party payors and patients.

If the results of our clinical trials for our current products or product candidates or clinical trials for any future product candidates do not achieve their primary efficacy endpoints or raise unexpected safety issues, the prospects for approval of our product candidates or the extension of indications for our products will be materially adversely affected. Moreover, preclinical and clinical data are often susceptible to varying interpretations and analyses and many companies that believed their product candidates performed satisfactorily in preclinical studies and clinical trials have failed to achieve similar results in later clinical trials, or have ultimately failed to obtain regulatory approval of their product candidates. Many products that initially showed promise in clinical trials or earlier stage testing have later been found to cause undesirable or unexpected adverse effects that have prevented their further development and regulatory approval. Our ongoing trial for basal cell carcinoma may not produce the results that we expect or that are required to achieve FDA approval.

In addition, we may experience numerous unforeseen events that could cause our clinical trials to be delayed, suspended or terminated, or which could delay or prevent our ability to receive regulatory approval or commercialize our product candidates, including that:

clinical trials of our products and product candidates may produce negative, inconclusive or inconsistent results, and we may decide, or regulators may require us, to conduct additional clinical trials or implement a clinical hold;

we may elect or be required to suspend or terminate clinical trials of our products and product candidates, including based on a finding that the participants are being exposed to unacceptable health risks;

regulators or institutional review boards may not authorize us or our investigators to commence or continue a clinical trial, or may require additional data before allowing clinical trials to commence, continue or proceed from one phase to another, or conduct, or continue a clinical trial at a prospective trial site;

our third party contractors may fail to comply with regulatory requirements, such as good clinical practice requirements, fail to follow approved study protocols, or fail to meet their contractual obligations to us in a timely manner, or at all;

the cost of clinical trials for our products and product candidates may be greater than we anticipate;

changes in government regulation or administrative actions;

the supply of materials necessary to conduct clinical trials of our products and product candidates may be insufficient or inadequate; and

our products and product candidates may have undesirable adverse effects or other unexpected characteristics.

If we experience delays in the completion of, or termination of, any clinical trial of our products and product candidates, the commercial prospects of our products and product candidates will be materially harmed, and our ability to generate product revenues from any of these products and product candidates, if any, will cease or be delayed. We may have to repeat or redesign clinical trials, which could delay the regulatory approval process. In addition, any termination of, or delays in completing, our clinical trials will increase our costs, slow down our product development and approval process and jeopardize our ability to commence product sales and generate revenue. Any of these occurrences may significantly harm our business, financial condition and prospects. In addition, many of the factors that cause, or lead to a delay in the commencement or completion of or early termination of, clinical trials may also ultimately lead to the denial of regulatory approval of our products and product candidates.

We will be subject to ongoing regulatory requirements in every market where we engage in business and we may face future development, manufacturing and regulatory difficulties.

Our drug product Ameluz ^® and any other drug products we develop will be subject to ongoing regulatory requirements for labeling, packaging, storage, advertising, promotion, sampling, record-keeping, submission of safety and other post-market approval information, importation and exportation. In addition, approved products, manufacturers and manufacturers’ facilities are required to comply with extensive FDA and EMA requirements and the requirements of other similar regulatory authorities, including ensuring that quality control and manufacturing procedures conform to cGMP requirements.

Accordingly, we will be required to expend time, money and effort in all areas of regulatory compliance, including manufacturing, production and quality control. We will also be required to report certain adverse reactions and production problems, if any, to the FDA and EMA and other similar regulatory authorities and to comply with certain requirements concerning advertising and promotion for our potential products.

If a regulatory authority discovers previously unknown problems with a product, such as adverse events of unanticipated or unacceptable severity or frequency, or problems with the facility where the product is manufactured, or disagrees with the promotion, marketing or labeling of a product, it may impose restrictions on that product or us, including requiring withdrawal of the product from the market. If our products or potential products fail to comply with applicable regulatory requirements, a regulatory authority may, among other actions:

issue warning letters or Form 483 (or similar) notices requiring us to modify certain activities or correct certain deficiencies;

require product recalls or impose civil monetary fines;

mandate modifications to promotional materials or require us to provide corrective information to healthcare practitioners;

require us or our potential future collaborators to enter into a consent decree or permanent injunction;

impose other administrative or judicial civil or criminal actions, including monetary or other penalties, or pursue criminal prosecution;

withdraw regulatory approval;

refuse to approve pending applications or supplements to approved applications filed by us or by our potential future collaborators;

impose restrictions on operations, including costly new manufacturing requirements; or

seize or detain products.

Risks Related to Our Dependence on Third Parties

We rely on third parties to conduct our clinical trials. If these third parties do not successfully carry out their contractual duties or meet expected deadlines, we may not be able to obtain regulatory approval for or commercialize our product candidates and our business could be substantially harmed.

We have engaged third party CROs in connection with our Phase III clinical trials for our products and product candidates and will continue to engage such CROs in the future. We will rely heavily on these parties for proper execution of our clinical trials, and we will control only certain aspects of their activities. Nevertheless, we are responsible for ensuring that each of our studies is conducted in accordance with applicable protocol, legal and regulatory requirements, and scientific standards, and our reliance on our CROs does not relieve us of our regulatory responsibilities. We and our CROs will be required to comply with current Good Clinical Practices, or cGCP requirements, which are a collection of regulations enforced by the FDA or comparable foreign regulatory authorities for products and product candidates in clinical development in order to protect the health, safety and welfare of patients and assume the integrity of clinical data. These requirements are also intended to protect the health, safety and welfare of study subjects through requirements such as informed consent. The FDA enforces good clinical practices through periodic inspections of trial sponsors, principal investigators and trial sites. In Phase I, the initial introduction of the drug into human subjects, the drug is typically tested to assess the pharmacological actions and side effects associated with increasing doses. Phase II usually involves clinical trials in a limited patient population to determine the effectiveness of the drug for a particular indication or indications, dosage tolerance and optimum dosage and to identify common adverse effects and safety risks. If a drug demonstrates evidence of effectiveness and an acceptable safety profile in Phase II, Phase III clinical trials are undertaken to obtain additional information about clinical efficacy and safety in a larger number of patients. Throughout this process, regulatory authorities enforce these cGCPs through periodic inspections of trial sponsors, principal investigators and trial sites. If we or any of these CROs fail to comply with applicable cGCP regulations or record-keeping requirements at any point during the clinical trial process, the clinical data generated in our clinical trials may be deemed unreliable and the FDA or EMA or comparable foreign regulatory authorities may require us to perform additional clinical trials before approving our marketing applications or, in some instances, require us to suspend operations. We cannot assure you that, upon inspection, such regulatory authorities will determine that any of our clinical trials comply with the cGCP regulations. In addition, for drugs, our clinical trials must be conducted with products produced under cGMP regulations and will require a large number of test subjects. For our devices, clinical trials must use product manufactured in compliance with design controls under the QSR. Our failure or any failure by our CROs to comply with these regulations or to recruit a sufficient number of patients may require us to repeat clinical trials, which would delay the regulatory approval process. Moreover, we may be implicated if any of our CROs violate federal, state, local or foreign fraud and abuse or false claims laws and regulations, or healthcare privacy and security laws.

The CROs will not be employed directly by us and, except for remedies available to us under our agreements with such CROs, we cannot control whether they devote sufficient time and resources to our ongoing preclinical, clinical and nonclinical programs. These CROs may also have relationships with other commercial entities, including our competitors, for whom they may also be conducting clinical studies or other product development activities, which could affect their performance on our behalf. If the CROs do not successfully carry out their contractual duties or obligations or meet expected deadlines, if they need to be replaced or if the quality or accuracy of the clinical data they obtain is compromised due to the failure to adhere to our clinical protocols or regulatory requirements or for other reasons, our clinical trials may be extended, delayed or terminated and we may not be able to complete development of, obtain regulatory approval for or successfully commercialize our product candidates. As a result, our financial results and the commercial prospects for our products and product candidates would be harmed, our costs could increase and our ability to generate revenues could be delayed.

Switching or adding CROs involves substantial cost and requires extensive management time and focus. In addition, there is a natural transition period when a new CRO commences work. As a result, delays may occur, which can materially impact our ability to meet our desired clinical development timelines. Although we plan to carefully manage our relationships with our CROs, there can be no assurance that we will not encounter challenges or delays in the future or that these delays or challenges will not have a material adverse impact on our business, prospects, financial condition and results of operations.

We rely on third parties for the supply of raw materials and manufacture of our principal product.

We rely on third parties for the timely supply of raw materials and for the manufacture of Ameluz ^® . Although we actively manage these third party relationships to provide continuity and quality, some events which are beyond our control could result in the complete or partial failure of these goods and services. Any such failure could have a material adverse effect on our financial condition and operations.

We currently license the commercialization rights for some of our products outside of the U.S., Germany, Spain and the UK, which exposes us to additional risks of conducting business in international markets.

Markets outside the U.S. and Germany are an important component of existing commercialization strategy for our existing marketed products as well as part of our growth strategy for Ameluz ^® . We have entered into commercial supply agreements for Ameluz ^® and BF-RhodoLED ^® lamps pursuant to which we exclusively supply and our partners exclusively purchase the products from us in their respective territories, as described in greater detail under “Business — Commercial Partners and Agreements.” Our agreements require us to timely supply products that meet the agreed quality standards and require our customers to purchase products from us, in some cases in specified minimum quantities. If we fail to maintain these agreements and agreements with other partners or to enter into new distribution arrangements with selling parties, or if these parties are not successful, our revenue-generating growth potential will be adversely affected. Moreover, international business relationships subject us to additional risks that may materially adversely affect our ability to attain or sustain profitable operations, including:

efforts to enter into distribution or licensing arrangements with third parties in connection with our international sales, marketing and distribution efforts may increase our expenses or divert our management’s attention from the development of product candidates;

changes in a specific country’s or region’s political and cultural climate or economic condition;

differing requirements for regulatory approvals and marketing internationally;

difficulty of effective enforcement of contractual provisions in local jurisdictions;

potentially reduced protection for intellectual property rights;

potential third party patent rights in countries outside of the U.S. or the EU;

unexpected changes in tariffs, trade barriers and regulatory requirements;

economic weakness, including inflation, or political instability;

compliance with tax, employment, immigration and labor laws for employees traveling abroad;

the effects of applicable foreign tax structures and potentially adverse tax consequences;

foreign currency fluctuations, which could result in increased operating expenses and reduced revenue and other obligations incidental to doing business in another country;

workforce uncertainty in countries where labor unrest is more common than in the U.S. or Germany;

failure of our employees and contracted third parties to comply with U.S. Office of Foreign Asset Control rules and regulations and the U.S. Foreign Corrupt Practices Act or comparable foreign regulations;

production shortages resulting from any events affecting raw material supply or manufacturing capabilities abroad; and

business interruptions resulting from geo-political actions, including war and terrorism, or natural disasters, including earthquakes, volcanoes, typhoons, floods, hurricanes and fires.

These and other risks may materially adversely affect our ability to attain or sustain revenue from international markets.

We may form or seek strategic alliances in the future and we may not realize the benefits of such alliances.

We may form or seek strategic alliances, create joint ventures or collaborations or enter into licensing arrangements with third parties that we believe will complement or augment our development and commercialization efforts with respect to our products and any future products that we may develop. Any of these relationships may require us to incur non-recurring and other charges, increase our near- and long-term expenditures, issue securities that dilute our existing holders of our shares or ADSs or disrupt our management and business. In addition, we face significant competition in seeking appropriate strategic partners and the negotiation process is time-consuming and complex. Moreover, we may not be successful in our efforts to establish a strategic partnership or other alternative arrangements for our product candidates because they may be deemed to be at too early of a stage of development for collaborative effort and third parties may not view our product candidates as having the requisite potential to demonstrate safety and efficacy. If we license products or businesses, we may not be able to realize the benefit of such transactions if we are unable to successfully integrate them with our existing operations and company culture and vice versa. We cannot be certain that, following a strategic transaction or license, we will achieve the revenue or specific net income that justifies such transaction. Any delays in entering into new strategic partnership agreements related to our products or product candidates could delay the development and commercialization of our products or product candidates in certain geographies or for certain indications, which would harm our business prospects, financial condition and results of operations.

Risks Related to Our Intellectual Property

If our efforts to protect the proprietary nature of the intellectual property related to our technologies are not adequate, we may not be able to compete effectively in our market.

We rely upon a combination of patents, trade secret protection and confidentiality agreements to protect the intellectual property related to our technologies and products. Any disclosure to or misappropriation by third parties of our confidential proprietary information could enable competitors to quickly duplicate or surpass our technological achievements, thus eroding our competitive position in our market.

In addition, the patent applications that we own or that we may license may fail to result in issued patents in the U.S., the EU or in other countries or jurisdictions. Even if the patents do successfully issue, third parties may challenge the validity, enforceability or scope thereof, which may result in such patents being narrowed, invalidated or held unenforceable. Furthermore, even if they are unchallenged, our patents and patent applications may not adequately protect our intellectual property or prevent others from designing around our claims. If the breadth or strength of protection provided by the issued patents and patent applications we hold with respect to our products is threatened, it could dissuade companies from collaborating with us to develop, and threaten our ability to commercialize, our products. Further, if we encounter delays in our clinical trials, the period of time during which we could market our products under patent protection would be reduced. Since patent applications in the U.S. and most other countries are confidential for a period of time after filing, we cannot be certain that we were the first to file any patent application related to our product candidates. Furthermore, for applications in which all claims are entitled to a priority date before March 16, 2013, an interference proceeding can be provoked by a third party or instituted by the U.S. Patent and Trademark Office, or USPTO, to determine who was the first to invent any of the subject matter covered by the patent claims of our applications. For applications containing a claim not entitled to priority before March 16, 2013, there is greater level of uncertainty in the patent law with the passage of the America Invents Act (2012) which brings into effect significant changes to the U.S. patent laws that are yet untried and untested, and which introduces new procedures for challenging pending patent applications and issued patents. A primary change under this reform is creating a “first to file” system in the U.S. This will require us to be cognizant going forward of the time from invention to filing of a patent application.

In addition to the protection afforded by patents, we seek to rely on trade secret protection and confidentiality agreements to protect proprietary know-how that is not patentable, processes for which patents are difficult to enforce and any other elements of our product discovery and development processes that involve proprietary know-how, information or technology that is not covered by patents. Although we require all of our employees to assign their inventions to us to the extent permitted by law, and require all of our employees, consultants, advisors and any third parties who have access to our proprietary know-how, information or technology to enter into confidentiality agreements, we cannot be certain that our trade secrets and other confidential proprietary information will not be disclosed or that competitors will not otherwise gain access to our trade secrets or independently develop substantially equivalent information and techniques. Furthermore, the laws of some foreign countries do not protect proprietary rights to the same extent or in the same manner as the laws of the U.S. or the EU. As a result, we may encounter significant problems in protecting and defending our intellectual property both in the U.S., in the EU and in other countries. If we are unable to prevent unauthorized material disclosure of our intellectual property to third parties, we may not be able to establish or maintain a competitive advantage in our market, which could materially adversely affect our business, operating results and financial condition.

Third party claims of intellectual property infringement may prevent or delay our product discovery and development efforts.

Our commercial success depends in part on our avoiding infringement of the patents and proprietary rights of third parties. There is a substantial amount of litigation involving patents and other intellectual property rights in the biotechnology and pharmaceutical industries, as well as administrative proceedings for challenging patents, including interference and reexamination proceedings before the USPTO, or oppositions and other comparable proceedings in foreign jurisdictions. Recently, following U.S. patent reform, new procedures including inter partes review and post grant review have been implemented. This reform includes changes in law and procedures that are untried and untested and will bring uncertainty to the possibility of challenge to our patents in the future. Numerous U.S. and foreign issued patents and pending patent applications, which are owned by third parties, exist in the fields in which we are developing our product candidates. As the biotechnology and pharmaceutical industries expand and more patents are issued, the risk increases that our products may give rise to claims of infringement of the patent rights of others.

Third parties may assert that we are employing their proprietary technology without authorization. There may be third party patents of which we are currently unaware with claims to materials, formulations, devices, methods of manufacture or methods for treatment related to the use or manufacture of our products. Because patent applications can take many years to issue, there may be currently pending patent applications which may later result in issued patents that our product candidates may infringe. In addition, third parties may obtain patents in the future and claim that use of our technologies infringes upon such patents. If any third party patents were held by a court of competent jurisdiction to cover the manufacturing process of our products or product candidates, any molecules formed during the manufacturing process or any final product itself, the holders of any such patents may be able to block our ability to commercialize the product unless we obtained a license under the applicable patents, or until such patents expire or they are finally determined to be held invalid or unenforceable. Similarly, if any third party patent were held by a court of competent jurisdiction to cover aspects of our formulations, processes for manufacture or methods of use, including combination therapy or patient selection methods, the holders of any such patent may be able to block our ability to develop and commercialize the product unless we obtained a license or until such patent expires or is finally determined to be held invalid or unenforceable. In either case, such a license may not be available on commercially reasonable terms or at all. If we are unable to obtain a necessary license to a third party patent on commercially reasonable terms, or at all, our ability to commercialize our products or product candidates may be impaired or delayed, which could in turn significantly harm our business.

Parties making claims against us may seek and obtain injunctive or other equitable relief, which could effectively block our ability to further develop and commercialize our products and product candidates. Defense of these claims, regardless of their merit, would involve substantial litigation expense and would be a substantial diversion of employee resources from our business. In the event of a successful claim of infringement against us, we may have to pay substantial damages, including treble damages and attorneys’ fees for willful infringement, obtain one or more licenses from third parties, pay royalties or redesign our infringing products, which may be impossible or require substantial time and monetary expenditure. We cannot predict whether any such license would be available at all or whether it would be available on commercially reasonable terms. Furthermore, even in the absence of litigation, we may need to obtain licenses from third parties to advance our research or allow commercialization of our products or product candidates. We may fail to obtain any of these licenses at a reasonable cost or on reasonable terms, if at all. In that event, we would be unable to further develop and commercialize our products or product candidates, which could harm our business significantly.

We may be involved in lawsuits to defend or enforce our patents, which could be expensive, time-consuming and unsuccessful.

Competitors may infringe upon our patents. To counter infringement or unauthorized use, we may be required to file infringement claims, which can be expensive and time-consuming. In addition, in an infringement proceeding, a court may decide that one or more of our patents is not valid or is unenforceable, or may refuse to stop the other party from using the technology at issue on the grounds that our patents do not cover the technology in question. An adverse result in any litigation or defense proceedings could put one or more of our patents at risk of being invalidated, held unenforceable, or interpreted narrowly and could put our patent applications at risk of not issuing. Defense of these claims, regardless of their merit, would involve substantial litigation expense and would be a substantial diversion of employee resources from our business. In the event of a successful claim or counterclaim of infringement against us, we may have to pay substantial damages, including treble damages and attorneys’ fees for willful infringement, obtain one or more licenses from third parties, pay royalties or redesign our infringing products, which may be impossible or require substantial time and monetary expenditure.

Interference or derivation proceedings provoked by third parties or brought by the USPTO may be necessary to determine the priority of inventions with respect to our patents or patent applications. An unfavorable outcome could require us to cease using the related technology or to attempt to license rights to it from the prevailing party. Our business could be harmed if the prevailing party does not offer us a license on commercially reasonable terms. Litigation or interference proceedings may fail and, even if successful, may result in substantial costs and distract our management and other employees. We may not be able to prevent misappropriation of our trade secrets or confidential information, particularly in countries where the laws may not protect those rights as fully as in the U.S. or the EU.

Furthermore, because of the substantial amount of discovery that could be required in connection with intellectual property litigation, there is a risk that some of our confidential information could be compromised by disclosure during this type of litigation. In addition, there could be public announcements of the results of hearings, motions or other interim proceedings or developments. If securities analysts or investors perceive these results to be negative, it could have a substantial adverse effect on the price of our shares and ADSs.

Obtaining and maintaining our patent protection depends on compliance with various procedures, document submission requests, fee payments and other requirements imposed by governmental patent agencies, and our patent protection could be reduced or eliminated for noncompliance with these requirements.

Periodic maintenance fees on any issued patent are due to be paid to the USPTO and patent agencies in other jurisdictions in several stages over the lifetime of the patent. The USPTO and various foreign governmental patent agencies require compliance with a number of procedural, documentary, fee payment and other similar provisions during the patent application process. While an inadvertent lapse can in many cases be cured by payment of a late fee or by other means in accordance with the applicable rules, there are situations in which noncompliance can result in abandonment or lapse of the patent or patent application, resulting in partial or complete loss of patent rights in the relevant jurisdiction. Noncompliance events that could result in abandonment or lapse of a patent or patent application include, but are not limited to, failure to respond to official actions within prescribed time limits, non-payment of fees and failure to properly legalize and submit formal documents. In such an event, our competitors might be able to enter the market, which would have a material adverse effect on our business.

We may be subject to claims that our employees, consultants or independent contractors have wrongfully used or disclosed confidential information of third parties.

We have received confidential and proprietary information from third parties. In addition, we employ individuals who were previously employed at other biotechnology or pharmaceutical companies. We may be subject to claims that we or our employees, consultants or independent contractors have inadvertently or otherwise used or disclosed confidential information of these third parties or our employees’ former employers. Litigation may be necessary to defend against these claims. Even if we are successful in defending against these claims, litigation could result in substantial cost and be a distraction to our management and employees.

We may not be able to protect our intellectual property rights throughout the world.

Filing, prosecuting and defending patents on all of our products and product candidates throughout the world would be prohibitively expensive. Competitors may use our technologies in jurisdictions where we have not obtained patent protection to develop their own products and, further, may export otherwise infringing products to territories where we have patent protection, but where enforcement is not as strong as that in the U.S. and the EU. These products may compete with our products in jurisdictions where we do not have any issued patents and our patent claims or other intellectual property rights may not be effective or sufficient to prevent them from so competing.

Many companies have encountered significant problems in protecting and defending intellectual property rights in foreign jurisdictions. The legal systems of certain countries, particularly certain developing countries, do not favor the enforcement of patents and other intellectual property protection, particularly those relating to biopharmaceuticals, which could make it difficult for us to stop the infringement of our patents or marketing of competing products in violation of our proprietary rights generally. Proceedings to enforce our patent rights in foreign jurisdictions could result in substantial cost and divert our efforts and attention from other aspects of our business.

Our trade secrets are difficult to protect.

Confidentiality agreements with employees and others may not adequately prevent disclosure of our trade secrets and other proprietary information and may not adequately protect our intellectual property.

Our success depends upon the skills, knowledge and experience of our scientific and technical personnel, our consultants and advisors as well as our partners, licensors and contractors. Because we operate in a highly competitive technical field of drug development, we rely in part on trade secrets to protect our proprietary technology and processes. However, trade secrets are difficult to protect. We enter into confidentiality agreements with our corporate partners, employees, consultants, sponsored researchers and other advisors. These agreements typically require that the receiving party keep confidential and not disclose to third parties all confidential information developed by the receiving party or made known to the receiving party by us during the course of the receiving party’s relationship with us. Our agreements also provide that any inventions made based solely upon our technology are our exclusive property, and we enter into assignment agreements that are recorded in patent, trademark and copyright offices around the world to perfect our rights.

These confidentiality and assignment agreements may be breached and may not effectively assign intellectual property rights to us. Our trade secrets also could be independently discovered by competitors, in which case, we would not be able to prevent use of such trade secrets by our competitors. The enforcement of a claim alleging that a party illegally obtained and was using our trade secrets could be difficult, expensive and time consuming and the outcome would be unpredictable. In addition, courts outside the U.S. or the EU may be less willing to protect trade secrets. There exists a risk that we may not be able to detect when misappropriation of our trade secrets has occurred or where a third party is using our trade secrets without our knowledge. The failure to obtain or maintain meaningful trade secret protection could adversely affect our competitive position.

Generic manufacturers may launch products at risk of patent infringement.

If other manufacturers launch products to compete with our products or product candidates in spite of our patent position, these manufacturers would likely erode our market and negatively impact our sales revenues, liquidity and results of operations.

Risks Related to the Offering and Ownership of our ADSs

An active trading market for our ADSs may not develop or be sustained.

Prior to the offering contemplated by this prospectus, there has been no public market for our ADSs in the U.S. An active trading market for our ADSs may not develop or be sustained. If an active market for our ADSs does not develop or continue, it may be difficult for the holders to sell our ADSs without depressing the market price for our ADSs or to sell our ADSs at or above the prices at which they acquired our ADSs or to sell our ADSs at the time they would like to sell. The initial public offering price of our ADSs will be determined through negotiations between us and the underwriters. The initial public offering price may not be indicative of the market price of our ADSs after the offering. Any inactive trading market for our ADSs may also impair our ability to raise capital to continue to fund our operations by selling our ADSs and may impair our ability to acquire other companies or technologies by using our ADSs as consideration.

There has been varying trading volume for our ordinary shares.

Each ADS represents [two] ordinary shares of our company. Even though our ordinary shares have been listed on the Stock Exchange in Düsseldorf since 2006 and the Frankfurt Stock Exchange since 2012, there has been limited liquidity in the market for our ordinary shares from time to time, which could make it more difficult for holders to sell our ordinary shares. We do not intend to directly list our ordinary shares on a U.S. trading market and, therefore, do not expect that a trading market will develop for our ordinary shares.

There can be no assurance that an active trading market for our ADSs will develop or be sustained.

In addition, the stock market generally has experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of listed companies. Broad market and industry factors may negatively affect the market price of our ordinary shares or ADSs, regardless of our actual operating performance. The market price and liquidity of the market for our ordinary shares or ADSs that will prevail in the market may be higher or lower than the price you pay and may be significantly affected by numerous factors, some of which are beyond our control.

The price of our ordinary shares or ADSs may be volatile, and you could lose all or part of your investment.

The trading price of our shares or ADSs is likely to be highly volatile and could be subject to wide fluctuations in response to various factors, some of which are beyond our control, including limited trading volume. In addition to the factors discussed in this “Risk Factors” section and elsewhere in this prospectus, these factors include:

adverse results or delays in clinical trials;

our failure to commercialize our products or product candidates;

actual or anticipated variations in our operating results and our financial position;

our failure to meet the estimates and projections of the investment community or that we may otherwise provide to the public and the publication of research reports about us or our industry;

adverse regulatory decisions or changes in laws or regulations;

introduction of new products or services offered by us or our competitors;

our inability to obtain adequate product supply;

our inability to establish collaborations, if needed;

departures of key scientific or management personnel;

our ability to successfully manage our growth and enter new markets;

disputes or other developments relating to proprietary rights, including patents, litigation matters and our ability to obtain patent protection for our technologies;

significant lawsuits, including patent or shareholder litigation; and

other events or factors, many of which are beyond our control.

In addition, the stock market in general, and The NASDAQ Capital Market and pharmaceutical companies in particular, have experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of these companies. Broad market and industry factors may negatively affect the market price of our shares or ADSs, regardless of our actual operating performance. If the market price of our ADSs does not exceed your purchase price, you may not realize any return on your investment in us and may lose some or all of your investment. In the past, securities class action litigation has often been instituted against companies following periods of volatility in the market price of a company’s securities. This type of litigation, if instituted, could result in substantial costs and a diversion of management’s attention and resources, which would harm our business, operating results or financial condition.

We have broad discretion to determine how to use the funds raised in this offering and may use them in ways that may not enhance our operating results or the price of our ADSs.

Our management will have broad discretion over the use of proceeds from this offering, and we could spend the proceeds from this offering in ways the holders of our ADSs may not agree with or that do not yield a favorable return, if any. We intend to use the net proceeds of this offering for the purposes described in the “Use of Proceeds” section of this prospectus. However, our use of these proceeds may differ substantially from our current plans. You will not have the opportunity, as part of your investment decision, to assess whether proceeds are being used appropriately. You must rely on the judgment of our management regarding the application of the net proceeds of this offering. If we do not invest or apply the proceeds of this offering in ways that enhance our business, we may fail to achieve expected financial results, which could cause the price of our ADSs to decline.

We will rely on a Share Loan arrangement in order to facilitate the orderly closing of this offering of ADSs. If the Share Loan arrangement is not completed (for example, if registration of the capital increase relating to this offering fails), we will not retain the proceeds of this offering, which would have a material adverse effect on our financial position, liquidity and results of operations.

To facilitate the orderly closing of this offering of ADSs, and because of timing considerations related to the technical issuance and registration of new ordinary shares under German law, the shares underlying the ADSs immediately prior to and concurrent with the consummation of this offering and the time of delivery of the ADSs will be Borrowed Shares loaned by Maruho Deutschland GmbH to Lang & Schwarz Broker GmbH, acting as our service provider, for deposit with the custodian for the Depositary under the ADS facility. In connection with the consummation of this offering, we will initially receive proceeds equal up to the nominal value of the ordinary shares (€1.00 per ordinary share) and maximum 1/4 of this amount (€0.25 per ordinary share) underlying the ADSs sold in this offering. Upon receipt of the partial proceeds of the offering and the subscription certificate, we will initiate the registration of a capital increase for the number of shares underlying the ADSs sold in this offering with the commercial register of the local court of Cologne. Although we expect to complete the registration process within approximately one week, it is possible that registration of the capital increase may take as long as three weeks. The time required to complete registration of the capital increase is determined by the schedule of the local court. Once the capital increase has been registered, newly issued ordinary shares of our company equal to the number of shares underlying the ADSs sold in this offering will be delivered to Lang & Schwarz Broker GmbH which will return the shares to Maruho Deutschland GmbH in repayment and satisfaction in full of the Share Loan. The Borrowed Shares will be retained by the custodian for the Depositary. We will receive the full net proceeds of this offering only upon registration of the capital increase with the commercial register. If for any reason we fail to complete registration of the capital increase we will not retain any proceeds from this offering, which would have a material adverse effect on our financial position, liquidity and results of operations. If we do not retain the proceeds of this offering, it may constitute a secondary offering.

We are an emerging growth company, and the reduced reporting requirements applicable to emerging growth companies may make our ADSs less attractive to investors.

We are an emerging growth company, as defined in the JOBS Act. For as long as we continue to be an emerging growth company, we may take advantage of exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies, including not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in this prospectus and our periodic reports and exemptions from the requirements of holding nonbinding advisory votes on executive compensation and shareholder approval of any golden parachute payments not previously approved. We could be an emerging growth company until the earliest of the end of the fiscal year corresponding with the fifth anniversary of our initial public offering, the date on which we qualify as a “large accelerated filer” under U.S. securities laws, the end of the fiscal year in which our annual revenue is $1,070,000,000 or more, or the date on which we issue more than $1,000,000,000 in non-convertible debt during any prior three-year period. Our investors may find our ADSs less attractive because we may rely on these exemptions. If some investors find our ADSs less attractive as a result, there may be a less active trading market for our ADSs and our ADS price may be more volatile.

Under the JOBS Act, an emerging growth company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We currently prepare our financial statements in accordance with IFRS as issued by the IASB, which do not have separate provisions for publicly traded and private companies. However, in the event we convert to generally accepted accounting principles in the U.S., or U.S. GAAP, while we are still an emerging growth company, we may be able to take advantage of the benefits of this extended transition period.

We have no present intention to pay dividends on our ordinary shares in the foreseeable future and, consequently, your only opportunity to achieve a return on your investment during that time is if the price of our ADSs appreciates.

We have no present intention to pay dividends on our ordinary shares in the foreseeable future. Any recommendation by our supervisory and management boards to pay dividends will depend on many factors, including our financial condition, results of operations, legal requirements and other factors. In addition, under the EIB credit facility we are not permitted to pay dividends to shareholders without the prior consent of EIB. Accordingly, if the price of our ADSs declines in the foreseeable future, you will incur a loss on your investment, without the likelihood that this loss will be offset in part or at all by potential future cash dividends.

As a new investor, you will experience substantial dilution as a result of this offering.

The public offering price per ADS will be substantially higher than the as adjusted net tangible book value per ADS before giving effect to this offering. Accordingly, if you invest in the ADSs in this offering, you will incur immediate substantial dilution of approximately €[____] per ADS ($[____]) (based on the net tangible book value per share underlying the ADSs as of June 30, 2016), assuming an initial public offering price of $[____] per ADS (€[____]). Furthermore, if the underwriters exercise their over-allotment option to purchase additional ADSs or if outstanding options or convertible bonds are subsequently exercised or converted, you could experience further dilution. This dilution is due in large part to the fact that our earlier investors paid substantially less than the assumed public offering price when they purchased their ordinary shares. For further information regarding the dilution resulting from this offering, please see the section of this prospectus entitled “Dilution”.

Raising additional capital may cause additional dilution of the percentage ownership of the holders of our ADSs, restrict our operations, require us to relinquish rights to our technologies, products or product candidates and could cause our ADS price to fall.

We expect that significant additional capital may be needed in the future to continue our planned operations, including conducting clinical trials, commercialization efforts, expanded research and development activities and costs associated with operating a public company in the U.S. and Germany. To raise capital, we may sell ordinary shares, ADSs, convertible securities or other equity securities in one or more transactions at prices and in a manner we determine from time to time. If we sell ordinary shares, ADSs, convertible securities or other equity securities, investors may be materially diluted by subsequent sales. Such sales may also result in material dilution to our existing holders of ADSs, and new investors could gain rights, preferences and privileges senior to the holders of our ordinary shares or ADSs. If we raise additional funds through strategic partnerships and alliances and licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, products or product candidates, or grant licenses on terms unfavorable to us.

We have created four sets of “contingent capital” ( bedingtes Kapital ) which, under German corporate law, means ordinary shares that we have been approved to issue, in the future, upon the exercise or conversion of specified outstanding options, warrants, convertible bonds or other convertible securities, totaling up to 6,994,985 ordinary shares, of which we expect to use 542,400 ordinary shares to cover issuances of ordinary shares pursuant to our 2010 employee stock option plan and 1,814,984 ordinary shares to cover issuances of ordinary shares pursuant to our 2015 employee stock option plan. We expect up to 246,515 shares would be used to cover issuances of ordinary shares pursuant to our 2009/2017 warrant bond, which was repaid in full on August 3, 2017. The remaining 4,137,601 ordinary shares from contingent capital may be used by our company for the issuance of shares to holders of convertible bonds if the repayment price is covered by issuing shares. Our management board, with the approval of our supervisory board, can increase our capital by these amounts and issue new ordinary shares in a corresponding amount without additional shareholder approval and can, to a limited extent, exclude subscription rights of our shareholders in connection therewith (see “Description of Share Capital”). If beneficiaries exercise their options or additional ordinary shares are issued under any of our authorized capital or our contingent capital, you may experience additional dilution, which could cause our ADS price to fall.

We have also created one set of authorized capital (genehmigtes Kapital) which, under German law, enables our management board, with prior approval of the supervisory board, to issue up to 6,000,000 of our ordinary shares.

Substantial future sales of our ordinary shares or ADSs in the public market, or the perception that these sales could occur, could cause the price of the ADSs to decline.

Additional sales of our ordinary shares or ADSs in the public market after this offering, or the perception that these sales could occur, could cause the market price of the ADSs to decline. Upon completion of this offering and the German preemptive rights offering (assuming timely waiver by certain of our shareholders of its rights to purchase [_________] million newly issued shares pursuant to the German preemptive rights offering), we will have approximately [_________] ADSs outstanding representing approximately [_________] ordinary shares. All ADSs sold in this offering will be freely transferable without restriction or additional registration under the Securities Act, except for any ADSs sold to our "affiliates" (subject to the terms of the lock-up agreements referred to below, as applicable). Neither Maruho Deutschland GmbH nor any of our other major shareholders will be subject to any lock-up agreements and may sell their shares at any time. Our chief executive officer will be subject to a lock-up agreement that provides that any ordinary shares or ADSs held by him will be available for sale upon the expiration of a lock-up period, which will expire 180 days after the date of this prospectus. Any or all of these ordinary shares or ADSs may be released prior to expiration of the lock-up period with the prior written consent of The Benchmark Company, LLC. To the extent ordinary shares or ADSs are released before the expiration of the lock-up period and these ordinary shares or ADSs are sold into the market, the market price of the ADSs could decline. See “Shares and ADSs Eligible for Future Sale” for" and "Underwriting" for a more detailed description of the terms of these "lock-up" arrangements.

Unstable market and economic conditions may have serious adverse consequences on our business, financial condition and share price.

As widely reported, global credit and financial markets have experienced extreme disruptions in the past several years, including severely diminished liquidity and credit availability, declines in consumer confidence, declines in economic growth, increases in unemployment rates and uncertainty about economic stability. There can be no assurance that further deterioration in credit and financial markets and confidence in economic conditions will not occur. Our general business strategy may be adversely affected by any such economic downturn, volatile business environment or continued unpredictable and unstable market conditions. If the current equity and credit markets deteriorate, or do not improve, it may make any necessary debt or equity financing more difficult, more costly, and more dilutive. Failure to secure any necessary financing in a timely manner and on favorable terms could have a material adverse effect on our growth strategy, financial performance and ADS price and could require us to delay or abandon clinical development or commercialization plans. In addition, there is a risk that one or more of our current service providers, manufacturers and other partners may not survive these difficult economic times, which could directly affect our ability to attain our operating goals on schedule and on budget.

At September 30, 2017, we had approximately €13.3 million of cash and cash equivalents. While we are not aware of any downgrades, material losses, or other significant deterioration in the fair value of our cash equivalents since September 30, 2017, no assurance can be given that further deterioration of the global credit and financial markets would not negatively impact our current portfolio of cash equivalents or our ability to meet our financing objectives. Furthermore, our ADS price may decline due in part to the volatility of the stock market and the general economic downturn.

We could be subject to securities class action litigation.

In the past, securities class action litigation has often been brought against a company following a decline in the market price of its securities. This risk is especially relevant for us because pharmaceutical companies have experienced significant share price volatility in recent years. If we face such litigation, it could result in substantial costs and a diversion of management’s attention and resources, which could harm our business.

If securities or industry analysts cease publishing research, or publish inaccurate or unfavorable research about our business, our ADS price and trading volume could decline.

The trading market for our ADSs will depend in part on the research and reports that securities or industry analysts publish about us or our business. If one or more of the analysts who covers us downgrades our shares or ADSs or publishes inaccurate or unfavorable research about our business, our share and ADS price may decline. If one or more of these analysts ceases coverage of our company or fails to publish reports on us regularly, demand for our shares and ADSs could decrease, which might cause our share and ADS price and trading volume to decline.

As a foreign private issuer, we are exempt from a number of rules under the U.S. securities laws and are permitted to file less information with the SEC than U.S. companies. This may limit the information available to holders of ADSs.

We are a “foreign private issuer,” as defined in the rules and regulations of the U.S. Securities and Exchange Commission, or SEC, and, consequently, we are not subject to all of the disclosure requirements applicable to companies organized within the U.S. For example, we are exempt from certain rules under the U.S. Securities Exchange Act of 1934, or the Exchange Act, that regulate disclosure obligations and procedural requirements related to the solicitation of proxies, consents or authorizations applicable to a security registered under the Exchange Act. In addition, members of our supervisory board and management board and our principal shareholders are exempt from the reporting and “short-swing” profit recovery provisions of Section 16 of the Exchange Act and related rules with respect to their purchases and sales of our securities. Moreover, we are not required to file periodic reports and financial statements with the SEC as frequently or as promptly as U.S. public companies. Accordingly, there may be less publicly available information concerning our company than there is for U.S. public companies.

As a foreign private issuer, we will file an annual report on Form 20-F within four months of the close of each year ended December 31 and furnish reports on Form 6-K relating to certain material events promptly after we publicly announce these events. However, we are not required to issue quarterly financial information because of the above exemptions for foreign private issuers, and holders of our ADSs will not be afforded the same protections or information generally available to investors holding shares in public companies organized in the U.S.

As we are a “foreign private issuer” that follows, and intends to continue to follow, certain home country corporate governance practices, holders of our ADSs may not have the same protections afforded to shareholders of companies that are subject to all The NASDAQ Capital Market corporate governance requirements.

As a foreign private issuer, we have the option to follow certain German corporate governance practices rather than those of The NASDAQ Capital Market, except to the extent that such laws would be contrary to U.S. securities laws, and provided that we disclose the requirements we are not following and describe the home country practices we follow instead. We intend to rely on this “foreign private issuer exemption” with respect to The NASDAQ Capital Market’s shareholder approval requirements in respect of equity issuances and equity-based compensation plans, the requirement to have independent oversight on our director nominations process and the quorum requirement for meetings of our shareholders. In addition, we intend to rely on the “foreign private issuer exemption” in the future with respect to The NASDAQ Capital Market requirement, once effective, to have a formal charter for the compensation committee. We may in the future elect to follow home country practices in Germany with regard to other matters. As a result, holders of our ADSs may not have the same protections afforded to shareholders of companies that are subject to all The NASDAQ Capital Market corporate governance requirements. See “Management — Differences between Our Corporate Governance Practices and the Rules of The NASDAQ Capital Market.”

We may lose our foreign private issuer status in the future, which would then require us to comply with the Exchange Act’s domestic reporting regime and cause us to incur significant legal, accounting and other expenses.

We are currently a foreign private issuer and, therefore, we are not required to comply with all of the periodic disclosure and current reporting requirements of the Exchange Act applicable to U.S. domestic issuers. We would lose our foreign private issuer status if, for example, more than 50% of our assets are located in the U.S. and we continue to fail to meet additional requirements necessary to maintain our foreign private issuer status. As of September 30, 2017, a portion of our assets were located in the United States, although this may change as we expand our operations in the U.S.

A foreign private issuer must determine its status on the last business day of its most recently completed second fiscal quarter. If a foreign private issuer no longer satisfies these requirements, it will become subject to U.S. domestic reporting requirements on the first day of its fiscal year immediately succeeding such determination. If we lost this status, we would be required to comply with the Exchange Act reporting and other requirements applicable to U.S. domestic issuers, which are more detailed and extensive than the requirements for foreign private issuers. We may also be required to make changes in our corporate governance practices in accordance with various SEC and The NASDAQ Capital Market rules. The regulatory and compliance costs to us under U.S. securities laws if we are required to comply with the reporting requirements applicable to a U.S. domestic issuer may be significantly higher than the cost we would incur as a foreign private issuer. As a result, we expect that a loss of foreign private issuer status would increase our legal and financial compliance costs and would make some activities highly time consuming and costly. We also expect that if we were required to comply with the rules and regulations applicable to U.S. domestic issuers, it would make it more difficult and expensive for us to obtain director and officer liability insurance, and we may be required to accept reduced coverage or incur substantially higher costs to obtain coverage. These rules and regulations could also make it more difficult for us to attract and retain qualified members to our management board and supervisory board.

Your rights as a shareholder in a German corporation may differ from your rights as a shareholder in a U.S. corporation.

We are organized as a stock corporation ( Aktiengesellschaft or AG ) under the laws of Germany, and by participating in this offering you will become a holder of ADSs of a German stock corporation. You should be aware that the rights of shareholders of a German stock corporation under German law differ in important respects from those of shareholders of a U.S. corporation. These differences include, in particular:

Under German law, certain important resolutions, including, for example, capital decreases, measures under the German Transformation Act, such as mergers, conversions and spin-offs, the issuance of convertible bonds or bonds with warrants attached and the dissolution of the German stock corporation apart from insolvency and certain other proceedings, require the vote of a 75% majority of the capital present or represented at the relevant shareholders’ meeting ( Hauptversamlung ). Therefore, the holder or holders of a blocking minority of 25% or, depending on the attendance level at the shareholders’ meeting, the holder or holders of a smaller percentage of the shares in a German stock corporation may be able to block any such votes, possibly to our detriment or the detriment of our other shareholders.

As a general rule under German law, a shareholder has no direct recourse against the members of the management board ( Vorstand ) or supervisory board ( Aufsichtsrat ) of a German stock corporation in the event that it is alleged that they have breached their duty of loyalty or duty of care to the German stock corporation. Apart from insolvency or other special circumstances, only the German stock corporation itself has the right to claim damages from members of either board. A German stock corporation may waive or settle these damages claims only if at least three years have passed and the shareholders approve the waiver or settlement at the shareholders’ meeting with a simple majority of the votes cast, provided that a minority holding, in the aggregate, 10% or more of the German stock corporation’s share capital does not have its opposition formally noted in the minutes maintained by a German civil law notary.

By subscribing or purchasing ADSs you will not become a shareholder of the Company.

For more information, we have provided summaries of relevant German corporation law and of our articles of association under “Management” and “Description of Share Capital.”

We may qualify as a passive foreign investment company, or “PFIC,” for U.S. federal income tax purposes which could result in adverse U.S. federal income tax consequences to U.S. holders of our ADSs.

In general, we will be treated as a PFIC for any taxable year in which either (1) at least 75% of our gross income (looking through certain corporate subsidiaries) is passive income (this is known as the “income test”) or (2) at least 50% of the average value of our assets (looking through certain corporate subsidiaries) is attributable to assets that produce, or are held for the production of, passive income (this is known as the “asset test”). In the event we are treated as a PFIC, U.S. holders (as defined in "Taxation — U.S. Taxation of ADSs and Ordinary Shares") of our ADSs could be subject to adverse U.S. federal income tax consequences. These consequences include the following: (i) if our ADSs are "marketable stock" for purposes of the PFIC rules and a U.S. holder makes a mark-to-market election with respect to its ADSs, the U.S. holder will be required to include annually in its U.S. federal taxable income an amount reflecting any year-end increase in the value of its ADSs; (ii) if a U.S. holder does not make a mark-to-market election, it may incur significant additional U.S. federal income taxes on income resulting from distributions on, or any gain from the disposition of, our ADSs, as such income generally would be allocated over the U.S. holder's holding period for its ADSs and subject to tax at the highest U.S. federal income taxation rate in effect for such years, with an interest charge then imposed on the resulting taxes in respect of such income; and (iii) dividends paid by us would not be eligible for reduced individual rates of U.S. federal income tax. In addition, U.S. holders that own an interest in a PFIC are required to file additional U.S. federal tax information returns. A U.S. holder may in certain circumstances mitigate adverse tax consequences of the PFIC rules by filing an election to treat the PFIC as a qualified electing fund, or a QEF. However, in the event that we are or become a PFIC, we do not intend to comply with the reporting requirements necessary to permit U.S. holders to elect to treat us as a QEF. See “Taxation — U.S. Taxation of ADSs and Ordinary Shares - Additional U.S. Federal Income Tax Consequences — PFIC Rules.”

We expect to be treated as a publicly traded corporation for purposes of the PFIC rules with respect to the current taxable year. In such case, the value of our assets for purposes of the asset test will generally be determined by reference to the market price of our shares. Fluctuations in the market price of our shares may cause us to become a PFIC for the current taxable year or later taxable years. In addition, the composition of our income and assets will be affected by how, and how quickly, we use our liquid assets and the cash raised in this offering. If we were unable to deploy significant amounts of cash for active purposes, our risk of being classified as a PFIC would substantially increase. Because there are uncertainties in the application of the relevant rules and PFIC status is a factual determination made annually after the close of each taxable year, there can be no assurance that we will not be a PFIC for the current taxable year or any future taxable year. We urge U.S. holders to consult their own tax advisors regarding the possible application of the PFIC rules. See “Taxation — U.S. Taxation of ADSs and Ordinary Shares - Additional U.S. Federal Income Tax Consequences — PFIC Rules.”

Exchange rate fluctuations may reduce the amount of U.S. dollars you receive in respect of any dividends or other distributions we may pay in the future in connection with your ADSs.

Under German law, the determination of whether we have been sufficiently profitable to pay dividends is made on the basis of our unconsolidated annual financial statements prepared under the German Commercial Code in accordance with accounting principles generally accepted in Germany. Exchange rate fluctuations may affect the amount in U.S. dollars that our shareholders receive upon the payment of cash dividends or other distributions we declare and pay in euros, if any. Such fluctuations could adversely affect the value of our ADSs and, in turn, the U.S. dollar proceeds that holders receive from the sale of our ADSs.

As a holder of ADSs, you may not have the same voting rights as the holders of our ordinary shares and may not receive voting materials in time to be able to exercise your right to vote.

Except as described in this prospectus and the deposit agreement, holders of our ADSs will not be able to exercise voting rights attaching to the ordinary shares evidenced by our ADSs on an individual basis. Under the terms of the deposit agreement, holders of the ADSs will appoint the depositary or its nominee as their representative to exercise the voting rights attaching to the ordinary shares represented by the ADSs. Pursuant to the deposit agreement and in light of the fact that pursuant to German law and our articles of association, one whole ordinary share represents one vote, voting instructions can be given only in respect of a number of ADSs representing a whole number of ordinary shares. You may not receive voting materials in time to instruct the depositary to vote, and it is possible that you, or persons who hold their ADSs through brokers, dealers or other third parties, will not have the opportunity to exercise a right to vote.

The value of the ADSs may not track the price of our ordinary shares.

Our ordinary shares currently trade on the Frankfurt Stock Exchange under the Symbol B8F; International Securities Identification Number (ISIN) DE0006046113; German securities code (WKN) 604611. Active trading volume and pricing for our ordinary shares on the Frankfurt Stock Exchange will usually, but not necessarily, act as predictors of similar characteristics in respect of the ADSs. In addition, the terms and conditions of our agreement with our depositary may result in less liquidity or lower market value of the ADS than for our ordinary shares. Since the holders of the ADSs may surrender the ADSs to take delivery of and trade our ordinary shares (a characteristic that allows investors in ADSs to take advantage of price differentials between different markets), an illiquid market for our ordinary shares may result in an illiquid market for the ADSs. Therefore, the trading price of our ordinary shares may not be correlated with the price of the ADSs.

Your right as a holder of ADSs to participate in any future rights offerings may be limited, which may cause dilution to your holdings.

We may, from time to time, distribute rights to our shareholders, including rights to acquire our securities. However, we cannot make any such rights available to the ADS holders in the U.S. unless we register such rights and the securities to which such rights relate under the Securities Act or an exemption from the registration requirements is available. In addition, the deposit agreement provides that the depositary bank will not make rights available to you unless the distribution to ADS holders of both the rights and any related securities are either registered under the Securities Act or exempted from registration under the Securities Act. We are under no obligation to file a registration statement with respect to any such rights or securities or to endeavor to cause such a registration statement to be declared effective. Moreover, we may not be able to establish an exemption from registration under the Securities Act. Accordingly, you may be unable to participate in our rights offerings and may experience dilution in your holdings.

As a holder of ADSs, you may not receive distributions on our ordinary shares represented by the ADSs or any value for them if it is illegal or impractical to make them available to holders of ADSs.

Under the terms of the deposit agreement, the depositary for the ADSs has agreed to pay to you the cash dividends or other distributions it or the custodian receives on our ordinary shares or other deposited securities after deducting its fees and expenses. You will receive these distributions in proportion to the number of our ordinary shares your ADSs represent. However, in accordance with the limitations set forth in the deposit agreement, it may be unlawful or impractical to make a distribution available to holders of ADSs. We have no obligation to take any other action to permit the distribution of the ADSs, ordinary shares, rights or anything else to holders of the ADSs. This means that, as a holder of ADSs, you may not receive the distributions we make on our ordinary shares or any value from them if it is unlawful or impractical to make them available to you. These restrictions may have a material adverse effect on the value of your ADSs.

Exchange rate fluctuations may reduce the amount of U.S. dollars you receive in respect of any dividends or other distributions we may pay in the future in connection with your ADSs.

You may be subject to limitations on the transfer of your ADSs.

Your ADSs are transferable on the books of the depositary. However, the depositary may close its books at any time or from time to time when it deems doing so expedient in connection with the performance of its duties. The depositary may close its books from time to time for a number of reasons, including in connection with corporate events such as a rights offering, during which time the depositary needs to maintain an exact number of ADS holders on its books for a specified period. The depositary may also close its books in emergencies, and on weekends and public holidays. The depositary may refuse to deliver, transfer or register transfers of our ADSs generally when our share register or the books of the depositary are closed, or at any time if we or the depositary thinks that it is advisable to do so because of any requirement of law or of any government or governmental body, or under any provision of the deposit agreement, or for any other reason in accordance with the terms of the deposit agreement. As a result, you may be unable to transfer your ADSs when you wish.

U.S. investors may have difficulty enforcing civil liabilities against our company or members of our supervisory and management boards and the experts named in this prospectus.

Certain members of our supervisory and management boards and the experts named in this prospectus are non-residents of the U.S., and all or a substantial portion of the assets of such persons are located outside the U.S. As a result, it may not be possible, or may be very difficult, to serve process on such persons or us in the U.S. or to enforce judgments obtained in U.S. courts against them or us based on civil liability provisions of the securities laws of the U.S. In addition, awards of punitive damages in actions brought in the U.S. or elsewhere may be unenforceable in Germany. An award for monetary damages under the U.S. securities laws would be considered punitive if it does not seek to compensate the claimant for loss or damage suffered and is intended to punish the defendant. The enforceability of any judgment in Germany will depend on the particular facts of the case as well as the laws and treaties in effect at the time. Litigation in Germany is also subject to rules of procedure that differ from the U.S. rules, including with respect to the taking and admissibility of evidence, the conduct of the proceedings and the allocation of costs. Proceedings in Germany would have to be conducted in the German language, and all documents submitted to the court would, in principle, have to be translated into German. For these reasons, it may be difficult for a U.S. investor to bring an original action in a German court predicated upon the civil liability provisions of the U.S. federal securities laws against us, certain members of our supervisory and management boards and the experts named in this prospectus. The U.S. and Germany do not currently have a treaty providing for recognition and enforcement of judgments (other than arbitration awards) in civil and commercial matters, though recognition and enforcement of foreign judgments in Germany is possible in accordance with applicable German laws.

We will incur significant increased costs as a result of operating as a company whose ADSs are publicly traded in the U.S. and whose ordinary shares are publicly traded on the Frankfurt Stock Exchange, and our management will continue to be required to devote substantial time to new compliance initiatives.

As a company whose ADSs will be trading on The NASDAQ Capital Market in the U.S. and whose ordinary shares will be trading on the Frankfurt Stock Exchange in Germany, we will incur significant legal, accounting, insurance and other expenses that we did not previously incur. In addition, the Sarbanes-Oxley Act, the U.S. Dodd-Frank Wall Street Reform and Consumer Protection Act and related rules implemented by the SEC and The NASDAQ Capital Market have imposed various requirements on public companies, including requiring establishment and maintenance of effective disclosure and financial controls. These costs will increase at the time we are no longer an emerging growth company eligible to rely on exemptions under the JOBS Act from certain disclosure and governance requirements. Our management and other personnel will need to devote a substantial amount of time to these compliance initiatives. Moreover, these rules and regulations will increase our legal and financial compliance costs and will make some activities more time-consuming and costly. These laws and regulations could also make it more difficult and expensive for us to attract and retain qualified persons to serve on our supervisory board or its committees or on our management board. Furthermore, if we are unable to satisfy our obligations as a public company, we could be subject to delisting of the ADSs, fines, sanctions and other regulatory action and potentially civil litigation.

As a result of becoming a public company in the U.S., we will become subject to additional regulatory compliance requirements, including Section 404 of the Sarbanes-Oxley Act, and if we fail to maintain an effective system of internal controls, we may not be able to accurately report our financial results or prevent fraud.

As a public company listed on The NASDAQ Capital Market, the Sarbanes-Oxley Act will require, among other things that we assess the effectiveness of our internal control over financial reporting at the end of each fiscal year. We anticipate being first required to issue management's assessment of internal control over financial reporting pursuant to Section 404(a) of the Sarbanes-Oxley Act in connection with issuing our consolidated financial statements as of and for the fiscal year ending December 31, 2018.

We have started the process of designing, implementing and testing our internal control over financial reporting required to comply with Section 404(a) of the Sarbanes-Oxley Act. This process is time-consuming, costly and complicated. Our management may not be able to effectively and timely implement controls and procedures that adequately respond to the increased regulatory compliance and reporting requirements that will be applicable to us as a public company listed on The NASDAQ Capital Market. If we fail to maintain internal control over financial reporting adequate to meet the demands that will be placed upon us as a public company listed in the U.S., our business and reputation may be harmed, the accuracy and timeliness of our financial reporting may be adversely affected, and the price of our ADSs may decline.

In addition, our independent registered public accounting firm will be required to attest to the effectiveness of our internal controls over financial reporting beginning with our annual report following the date on which we are no longer an "emerging growth company," which may be up to five fiscal years following the date of this offering.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This prospectus includes forward-looking statements that involve substantial risks and uncertainties. All statements, other than statements of historical facts, included in this prospectus regarding our strategy, future operations, regulatory process, future financial position, future revenue, projected costs, prospects, plans, objectives of management and expected market growth are forward-looking statements. The words “believe”, “anticipate”, “intend”, “expect”, “target”, “goal”, “estimate”, “plan”, “assume”, “may”, “will”, “predict”, “project”, “would”, “could” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words.

The forward-looking statements in this prospectus include, but are not limited to, statements about:

our ability to achieve and sustain profitability;

our ability to compete effectively in selling our products;

our ability to expand, manage and maintain our direct sales and marketing organizations;

our actual financial results may vary significantly from forecasts and from period to period;

our estimates regarding anticipated operating losses, future revenues, capital requirements and our needs for additional financing;

our ability to market, commercialize, achieve market acceptance for and sell our products and product candidates;

market risks regarding consolidation in the healthcare industry;

the willingness of healthcare providers to purchase our products if coverage, reimbursement and pricing from third party payors for procedures using our products significantly declines;

our ability to adequately protect our intellectual property and operate our business without infringing upon the intellectual property rights of others;

the regulatory and legal risks, and certain operating risks, that our international operations subject us to;

the fact that product quality issues or product defects may harm our business;

any product liability claims; and

the progress, timing and completion of our research, development and preclinical studies and clinical trials for our products and product candidates.

We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements we make. We have included important factors in the cautionary statements included in this prospectus, particularly the factors described in the “Risk Factors” section of this prospectus, that could cause actual results or events to differ materially from the forward-looking statements that we make. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures or investments that we may make.

You should read this prospectus and the documents that we have filed as exhibits to the registration statement of which this prospectus is a part, completely and with the understanding that our actual future results may be materially different from what we expect. We have based these forward-looking statements on our current expectations and projections about future events. These forward-looking statements are subject to risks, uncertainties and assumptions about us, including those listed in the sections of this prospectus entitled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere in this prospectus.

We do not assume any obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

EXCHANGE RATES

The following table shows, for the years and dates indicated, certain information concerning the rate of exchange of euro per U.S. dollar based on the Noon Buying Rates quoted by the Federal Reserve Bank of New York for euros expressed in U.S. dollars for one Euro. No representation is made that the euro or the U.S. dollar amounts referred to herein could have been or could be converted into U.S. dollars or euros, as the case may be, at any particular rate.

	U.S. dollar for one Euro
Period	High		Low		Period Average(1)		Period End
Nine month ended September 30, 2017		1.2041		1.0416		1.1242		1.1813
Six months ended June 30, 2017		1.1420		1.0416		1.0924		1.1411
2016		1.1516		1.0375		1.1072		1.0552
2015		1.2015		1.0524		1.1096		1.0859
2014		1.3927		1.2101		1.3297		1.2101
2013		1.3816		1.2774		1.3779		1.3281
2012		1.3463		1.2062		1.2859		1.3186

(1)	The average of the Noon Buying Rates on the last business day of each full month during the relevant period.

The high and low exchange rates for the euro for each month during the previous 11 months is set forth below:

	U.S. dollar for one Euro
Month	High		Low
January 2017		1.0794		1.0416
February 2017		1.0802		1.0551
March 2017		1.0882		1.0514
April 2017		1.0941		1.0606
May 2017		1.1236		1.0869
June 2017		1.1420		1.1124
July 2017		1.1826		1.1336
August 2017		1.2025		1.1703
September 2017		1.2041		1.1747
October 2017		1.1847		1.1580
November 2017		1.1936		1.1577
December 2017		1.2022		1.1725

The Noon Buying Rate for the euro on [ ] was quoted by the Federal Reserve Bank of New York at [ ] U.S. dollars for one euro.

USE OF PROCEEDS

We estimate that the net proceeds to us from this offering will be approximately $[ ], or $[ ] million if the underwriters’ over-allotment option is exercised in full, after deducting underwriting discounts and commissions of approximately $[ ], or approximately $[ ] if the underwriters’ over-allotment option is exercised in full, and estimated offering expenses payable by us, of approximately $[ ] (based on an assumed offering price of $[ ] per ADS, which is based on the closing market price for our ordinary shares on the XETRA electronic trading platform of the Frankfurt Stock Exchange for the shares on [ ] and an assumed exchange rate of $[ ]/€1.00), and assuming, in each case, completion of the temporary share loan arrangement in connection with and issuance of new shares related to this offering as described in “Related Party Transactions — Share Loan Agreement”.

We intend to use approximately $[ ] of the net proceeds from this offering to increase our marketing and sales organization in the U.S. We also intend to use approximately $[ ] of the net proceeds of the offering to continue to fund the following clinical trials of Ameluz ^® (and to make regulatory filings for marketing approval of Ameluz ^® , both for geographic expansion and the extension of the indications for Ameluz ^® ): (i) our clinical trial comparing the efficacy of Ameluz ^® PDT with PDT using just the vehicle that is used to deliver the active ingredient in Ameluz®, in combination with photodynamic therapy when using our BF-RhodoLED ^® lamp, in the treatment of superficial basal cell carcinoma, (ii) our clinical trial investigating the field-directed treatment of actinic keratosis on the extremities and the trunk with Ameluz ^® , (iii) our clinical trial evaluating the safety and efficacy of Ameluz ^® versus placebo in the treatment of Bowen’s disease (squamous cell carcinoma in situ ) with photodynamic therapy when using our BF-RhodoLED ^® lamp and (iv) our clinical trial evaluating the safety and efficacy of Ameluz® at an application thickness of 1 mm versus application of a thin layer of Ameluz® in the treatment of mild to severe actinic keratosis on the face and/or scalp with photodynamic therapy when using our BF-RhodoLED® lamp. We expect to be able to complete all of these clinical trials and the related regulatory filings and marketing approval processes with the proceeds from this offering and our other available sources of liquidity (including the proceeds from our concurrent German preemptive rights offering). We will use the remainder of the net proceeds, if any, for general corporate purposes.

The amounts and timing of our actual expenditures will depend on numerous factors, the timing and success of any clinical trials and preclinical studies we may commence in the future, the timing of regulatory submissions, the status of our sales and marketing efforts, the amounts of proceeds actually raised in this offering and the amount of cash generated by our operations. Because we operate in a very dynamic and highly competitive industry, the actual use of proceeds may differ substantially from the ranges indicated above. Our management will have broad discretion to allocate the net proceeds from this offering.

Pending our use of the net proceeds, we intend to invest them in short-term and medium-term interest-bearing instruments.

DIVIDEND POLICY AND LIQUIDATION PROCEEDS

We have never declared or paid any dividends on our ordinary registered shares. Under German corporate law, we currently have no ability to pay dividends because of our past losses. If we were to earn annual net income, we currently plan to retain such annual net income for the foreseeable future to finance business development and internal growth. In addition and our EIB credit facility generally restrict the payment of dividends by us. We, therefore, do not anticipate paying dividends in the foreseeable future.

Under German law, Biofrontera may pay dividends only from retained earnings (Bilanzgewinn) reflected in its unconsolidated financial statements (as opposed to the consolidated financial statements for Biofrontera and its subsidiaries) prepared in accordance with the principles set forth in the German Commercial Code ( Handelsgesetzbuch ) and as adopted and approved by the management board ( Vorstand ) and the supervisory board ( Aufsichtsrat ). In determining the retained earnings that may be distributed as dividends, under our articles of association, the management board and the supervisory board may allocate to earnings reserves ( Gewinnrücklagen ) our remaining net income ( Jahresüberschuss ) for the fiscal year after deducting amounts to be allocated to legal and statutory reserves and losses carry forward in whole or in part. An amount of more than half of the remaining net income may only be allocated to earnings reserves, if the earnings reserves after allocation would exceed half of the registered capital.

Our shareholders, in their resolution on the appropriation of retained earnings, may carry forward distributable retained earnings in part or in full and may allocate additional amounts to earnings reserves. Profits carried forward will be automatically incorporated in the retained earnings of the next fiscal year. Amounts allocated to the earnings reserves are available for dividends only if and to the extent the earnings reserves have been dissolved by the management board when preparing the financial statements, thereby increasing the retained earnings.

Our shareholders may declare dividends at an ordinary general shareholders’ meeting, which must be held within the first eight months of each fiscal year. Dividends approved at an ordinary general shareholders’ meeting are payable promptly after the meeting, unless otherwise decided at the meeting. Because all of our shares are in book-entry form represented by one or more global certificates deposited with Clearstream Banking AG in Frankfurt am Main, Germany, shareholders receive dividends through Clearstream Frankfurt for credit to their deposit accounts.

Apart from liquidation as a result of insolvency proceedings, Biofrontera may be liquidated ( liquidiert ) only with a majority of three-quarters of the share capital present or represented at a shareholders’ meeting at which the vote is taken. In accordance with the German Stock Corporation Act ( Aktiengesetz ), upon a liquidation of Biofrontera, any liquidation proceeds remaining after paying off all of our liabilities would be distributed among the shareholders in proportion to the number of ordinary shares held by each shareholder.

Dividends are subject to German withholding tax. See “German Taxation of ADSs — Withholding Tax Refund for U.S. Treaty Beneficiaries”.

TRADING MARKETS

Our shares are currently traded on the Frankfurt Stock Exchange under the symbol “B8F”.

Prior to the offering, there has been no public market in the U.S. for our shares or the ADSs. We have applied for the quotation of the ADSs on The NASDAQ Capital Market under the symbol “BFRA”.

The table below sets forth for the periods indicated the high and low closing prices in euro of our shares as reported by the XETRA electronic trading platform of the Frankfurt Stock Exchange:

	High (€)		Low (€)

2012:
First quarter		4.22		2.85
Second quarter		5.16		3.45
Third quarter		4.25		2.95
Fourth quarter		4.14		3.69
2013:
First quarter		4.95		3.75
Second quarter		4.90		3.27
Third quarter		4.00		3.25
First quarter		3.65		3.29
2014:
First quarter		4.08		3.20
Second quarter		3.35		2.80
Third quarter		2.86		2.18
Fourth quarter		3.00		2.29

2015:
First quarter		2.69		1.84
Second quarter		2.70		2.04
Third quarter		2.30		2.00
Fourth quarter		2.30		1.60

2016:
First quarter		2.26		1.85
Second quarter		3.69		2.29
Third quarter		3.21		2.61
Fourth quarter		3.41		2.88

Previous six months:
June 2017		4.34		3.58
July 2017		3.88		3.65
August 2017		4.06		3.73
September 2017		3.96		3.51
October 2017		3.69		3.53
November 2017		3.94		3.16
December 2017		4.21		3.93

The average daily volume of our shares traded on the XETRA electronic trading platform of the Frankfurt Stock Exchange for the years 2016, 2015, and 2014 was 50,987, 37,960 and 17,898, respectively. In the first nine months of 2017, the average daily volume of our shares traded on XETRA was 54,888.

On [ ], 2018, the closing price of our shares on the Frankfurt Stock Exchange was €[ ].

We were also listed on the AIM Market of the London Stock Exchange from June 3, 2014 until February 18, 2015. Trading and liquidity however on that stock exchange was very limited and, as a result, we informed the London Stock Exchange of our intent to terminate such listing, which was effectuated on February 18, 2015.

CAPITALIZATION

The following table sets forth our capitalization and cash and cash equivalents, debt and total capitalization of our company as of [ ], 2018:

on an actual basis in accordance with IFRS;

on an adjusted basis, to give effect to the issuance of [____] ordinary shares in the combined offering consisting of this offering of ADSs and the German preemptive rights offering, at an assumed offering price of €[___] per share (based on the closing market price of our ordinary shares on the XETRA electronic trading platform of the Frankfurt Stock Exchange on [_____]) and $[_____] per ADS (based on an assumed exchange rate of €[___] per 1.00 U.S. dollar, which was the exchange rate of such currencies as of [____], 2018), and after deducting underwriting discounts and commissions and estimated offering expenses of approximately $[___] payable by us.

As of [ ], 2018

Actual

As adjusted ⁽¹⁾⁽³⁾

(amounts in thousands,
except per share data)

$ ⁽⁴⁾

€

$ ⁽⁴⁾

€

Cash and cash equivalents

[___]

Debt

Long-term debt, net of current portion

[___]

Capital lease obligations, net of current portion

[___]

Total debt, net of current portion

[ ]

Total debt, including current portion

[ ]

Shareholders’ Equity

Ordinary shares, with no par value (notional par value of €1 per share), ([______] shares issued and outstanding at [___], 2018; [______] shares issued and outstanding as adjusted for this offering of [______] shares)(2)

[___]

Additional paid-in capital

[___]

Subscribed shares

[___]

Accumulated other comprehensive loss

[___]

Accumulated deficit

[___]

Total equity

[___]

Total capitalization

[ ]

(1)

Each €[____] increase or decrease in the assumed public offering price of €[___] per share ($[____] per ADS), the closing market price of our ordinary shares on the XETRA electronic trading platform of the Frankfurt Stock Exchange on [____], would increase or decrease, respectively, the amount of cash and cash equivalents, total equity and total capitalization by €[____] ($[_____]), assuming the number of ADSs offered by us, as set forth on the cover page of this prospectus, remains the same, and after deducting the underwriting discounts and commissions and estimated offering expenses payable by us. We may also increase or decrease the number of ADSs we are offering. An increase or decrease of [_________] ADSs we are offering would increase or decrease, respectively, the amount of cash and cash equivalents, total equity and total capitalization by $[____] (€[____]), assuming the assumed public offering price per ADS, as set forth on the cover page of this prospectus, remains the same. The as adjusted information is illustrative only, and we will adjust this information based on the actual public offering price and other terms of this offering determined at pricing.

(2)

The actual number of ordinary shares shown as issued and outstanding excludes [_____] ordinary shares issuable upon the exercise of convertible bonds outstanding as of [____], 2018, with conversion prices ranging from €[____] to €[____].

(3)

Assumes completion of the temporary share loan arrangement in connection with the issuance of new shares related to this offering. See “Related Party Transactions — Share Loan Agreement.”

(4)

Translated solely for convenience into U.S. dollars at an assumed exchange rate of €[____] per 1.00 U.S. dollar, which was the exchange rate of such currencies as of [____], 2018.

DILUTION

If you invest in our ADSs in this offering, your interest will be immediately diluted to the extent of the difference between the initial public offering price per ADS in this offering and the net tangible book value per ADS after the combined offering consisting of this offering of ADSs and the German preemptive rights offering. Dilution results from the fact that the initial public offering price per ADS is substantially in excess of the net tangible book value per ADS. As of June 30, 2017, we had a historical net tangible book value per ADS of $[_____] (€0.49), or €0.24 per share ($[_____]). Our net tangible book value per share represents total consolidated tangible assets less total consolidated liabilities, all divided by the number of shares outstanding on June 30, 2017.

After giving effect to:

(i)

the sale of [___] ordinary shares in the combined offering consisting of this offering of ADSs and the German preemptive rights offering at an assumed offering price of €[___] per share (based on the closing market price of our ordinary shares on the XETRA electronic trading platform of the Frankfurt Stock Exchange on [_____]) and $[___] per ADS (based on an assumed exchange rate of €[___] per 1.00 U.S. dollar, which was the exchange rate of such currencies as of [___], 2018), and after deducting the underwriting discounts and commissions and estimated offering expenses, and assuming completion of the temporary share loan arrangement in connection with the issuance of new shares related to this offering as described in “Related Party Transactions — Share Loan Agreement”, and

(ii)

further assuming the underwriters have not exercised their over-allotment option,

Our as adjusted net tangible book value at June 30, 2017, would have been €[_____] per share, or $[_____] per ADS. This represents an immediate increase in as adjusted net tangible book value of €[_____] ($[_____]) per share to existing shareholders and an immediate dilution of $[_____] per ADS to new investors. The following table illustrates this dilution per ADS:

Assumed initial public offering price per ADS		$
Historical net tangible book value per ADS as of June 30, 2017 ⁽¹⁾⁽²⁾		$
Increase in pro forma net tangible book value per ADS attributable to new investors in the combined offering ⁽¹⁾⁽³⁾		$
Pro forma net tangible book value per ADS after the combined offering ⁽¹⁾⁽³⁾		$
Dilution per ADS to new investors participating in the U.S. offering ⁽³⁾		$

(1)

Translated solely for convenience into U.S. dollars at an exchange rate of € [ ] per 1.00 U.S. dollar, which was the exchange rate of such currencies as of June 30, 2017.

(2)

Based on the historic net tangible book value per share as of such date.

(3)

Assumes completion of the temporary share loan arrangement in connection with the issuance of new shares related to this offering. See “Related Party Transactions — Share Loan Agreement.”

A €[ ] increase or decrease in the assumed public offering price of €[___] per share ($[____] per ADS), the closing market price of our ordinary shares on the XETRA electronic trading platform of the Frankfurt Stock Exchange on [ ], would increase or decrease, respectively, our as adjusted net tangible book value as of June 30, 2017, after this offering by approximately €[____] per share ($[____]), or $[____] per ADS (€[___]), and would increase or decrease, respectively, dilution to investors in this offering by $[ ] per ADS (€[ ]), assuming that the number of ADSs offered by us, as set forth on the cover page of this prospectus, remains the same, after deducting the underwriting discounts and commissions and estimated offering expenses payable by us. We may also increase or decrease the number of ADSs we are offering. An increase or decrease of [__________] ADSs we are offering would increase or decrease, respectively our pro forma net tangible book value as of June 30, 2016 after this offering by €[_____] per share ($[_____]), or $[_____] per ADS (€[_____]), and would decrease or increase, respectively, dilution to investors in this offering by approximately $[_____] per ADS (€[_____]), assuming the assumed public offering price per ADS remains the same, after deducting the underwriting discounts and commissions and estimated offering expenses payable by us. The as adjusted information is illustrative only, and we will adjust this information based on the actual public offering price and other terms of this offering determined at pricing. If the underwriters fully exercise their option to purchase additional ADSs, as adjusted net tangible book value after this offering would increase to approximately $[_____] per ADS (€[_____]), and there would be an immediate dilution of approximately $[_____] per ADS (€[_____]) to new investors.

We may choose to raise additional capital due to market conditions or strategic considerations even if we believe we have sufficient funds for our current or future operating plans. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the issuance of these securities could result in further dilution to our equity holders.

The following table shows, as of June 30, 2017, on an as adjusted basis and assuming completion of the temporary share loan arrangement in connection with the issuance of new shares related to this offering as described in “Related Party Transactions — Share Loan Agreement”, the number of ADSs purchased from us, the total consideration paid to us and the average price paid per share by existing shareholders and by new investors purchasing ADSs in the U.S. offering and ordinary shares in the German preemptive rights offering:

Shares or Share
Equivalents(1)
Subscribed For/
Purchased

Total Consideration

Average
Price Per
Share
or Share

Number

Percent

Amount

Percent

Equivalents

Existing shareholders

Investors participating in the U.S. offering
and German preemptive rights offering(2)

Total

(1)

Each ADS represents [two] ordinary shares.

(2)

Assumes (i) a public offering price of €[___] per share (based on the closing market price of our ordinary shares on the XETRA electronic trading platform of the Frankfurt Stock Exchange on [____]) and $[___] per ADS (based on an assumed exchange rate of €[___] per 1.00 U.S. dollar, which was the exchange rate of such currencies as of [____], 2018), before deducting the underwriting discounts and commissions and estimated offering expenses payable by us (in thousands, except share and per share amounts and percentages).

The number of shares and ADSs to be outstanding after this offering is based on the number of shares outstanding as of June 30, 2017, and excludes up to [__________] shares that may be issued upon the conversion of outstanding convertible bonds, and assumes (i) no exercise of the underwriters’ over-allotment option to purchase up to [__________] additional ADSs, and (ii) completion of the temporary share loan arrangement in connection with the issuance of new shares related to this offering as described in “Related Party Transactions — Share Loan Agreement”.

SELECTED CONSOLIDATED FINANCIAL DATA

The following table sets forth a summary of the consolidated historical financial information of, and for the periods ended on, the dates indicated for Biofrontera AG. We prepare our consolidated financial statements in accordance with IFRS as issued by the IASB. The selected consolidated statement of operations data for the years ended December 31, 2016 and December 31, 2015, and the selected consolidated balance sheet data as of December 31, 2016 and December 31, 2015 have been derived from our audited consolidated financial statements included elsewhere in this prospectus. Our selected consolidated statement of operations data for the six months ended June 30, 2017 and June 30, 2016 and the selected consolidated balance sheet data as of June 30, 2017 have been derived from our unaudited interim condensed consolidated financial statements included elsewhere in this prospectus. The unaudited interim condensed consolidated financial statements have been prepared on the same basis as our audited consolidated financial statements and include all normal recurring adjustments that we consider necessary for a fair statement of our financial position and operating results for the periods presented.

You should read the following summary of consolidated financial information in conjunction with the section of this prospectus entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and the related notes contained elsewhere in this prospectus.

	Six Months Ended June 30,						Year Ended December 31,
	2017			2016			2016			2015
	€			€			€			€
	(amounts in thousands, except share and per share data)
Statement of operations data:
Sales Revenue		5,006			1,709			6,130			4,138
Gross Margin		87,31	%		55.30	%		73.05	%		70.14	%
Research and development costs		(2,185	)		(1,852	)		(4,640	)		(6,204	)
Sales costs		(8,275	)		(2,832	)		(8,763	)		(4,170	)
General administrative costs		(1,696	)		(1,372	)		(2,853	)		(2,759	)
Loss from operations		(7,785	)		(5,112	)		(11,779	)		(10,231	)
Loss before income tax		(8,736	)		(3,472	)		(10,579	)		(11,203	)
Per share data:
Basic and diluted loss per share		(0.23	)		(0.12	)		(0.36	)		(0.48	)
Basic and diluted operating loss per share		(0.23	)		(0.12	)		(0.38	)		(0.48	)
Shares used in computing basic and diluted loss per share		38,416,428			29,194,771			29,742,634			23,156,343

	Six Months Ended June 30,		At December 31,
	2017		2016		2015
	€		€		€
	(amounts in thousands)
Balance sheet data:
Cash and cash equivalents		11,452		15,126		3,959
Other current financial assets		2,338		3,001		1,625
Other current assets		3,912		3,855		1,639
Non-current Assets		1,647		1,897		2,275
Total assets		19,348		23,879		9,498
Long-term liabilities		2,654		3,597		11,230
Current liabilities		6,305		4,440		3,077
Total shareholders‘ equity		10,389		15,842		(4,809	)

	Six Months Ended June 30,						Year Ended December 31,
	2017			2016			2016			2015
	€			€			€			€
	(amounts in thousands)
Other financial data:
Net cash flow from operational activities		(8,087	)		(2,511	)		(10,259	)		(9,655	)
Net cash flow from (into) investment activities		(192	)		(143	)		(455	)		17
Net cash flows from financing activities		4,605			8,867			21,881			5,088

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS

You should read the following discussion of our financial condition and results of operations in conjunction with the audited consolidated financial statements and the notes to our financial statements included elsewhere in this prospectus. This discussion contains forward-looking statements that involve risks, uncertainties and assumptions. As a result of many factors, including those set forth under the section entitled “Risk Factors” and elsewhere in this prospectus, our actual results may differ materially from those anticipated in the forward-looking statements contained in the following discussion and analysis.

Overview

We were founded in 1997 by Professor Hermann Lübbert, Ph.D., who currently serves as chairman of our management board and our chief executive officer. Our ordinary shares have been listed on the Stock Exchange in Düsseldorf since 2006 and on the Frankfurt Stock Exchange since 2012 under the ticker symbol “B8F” since 2012.

Our principal product is Ameluz ^® , which is a prescription drug approved for use in combination with photodynamic therapy, or PDT, which we sometimes refer to as Ameluz ^® PDT. We are currently selling Ameluz ^® in the U.S., in 11 countries in Europe and in Israel. In Germany, Spain, the UK, and the U.S., we distribute and sell our products through our own sales force. We have agreements with partners to sell Ameluz ^® and the BF-RhodoLED ^® lamp in other European countries and in Israel. We manufacture Ameluz ^® for worldwide sales using a third party contract manufacturer in Switzerland. We manufacture our BF-RhodoLED ^® lamp at our corporate headquarters in Leverkusen, Germany.

Ameluz ^® PDT received centralized European approval in 2011 from the European Commission for the treatment of actinic keratosis of mild to moderate severity on the face and scalp. Since the initial centralized European approval of Ameluz ^® PDT, the European Commission granted label extensions for the use of Ameluz ^® PDT for (i) the treatment of field cancerization, or larger areas of skin on the face and scalp with multiple actinic keratoses and (ii) the treatment of superficial and/or nodular basal cell carcinoma unsuitable for surgical treatment due to possible treatment-related morbidity and/or poor cosmetic outcome.

We intend to further develop and seek approval to commercialize Ameluz ^® for the treatment of other medical conditions, such as basal cell carcinoma in the U.S. and squamous cell carcinoma in situ . See “Business—Recent Achievements” for a summary of recent developments in connection with out efforts to extend the approved indications for Ameluz ^® .

In our product pipeline, we are pursuing research and development of up to four branded generic dermatology drugs under a collaboration and partnership agreement with Maruho, a pharmaceutical company based in Japan specializing in dermatology that is also an affiliate of Maruho Deutschland GmbH, a major shareholder of our company. See “Business — Our Research and Development Plans — Our Development Collaboration with Maruho” for more information.

We have incurred losses in each year since inception. Our net loss for the fiscal years ended December 31, 2015 and December 31, 2016 was €11.2 million and €10.6 million, respectively. As of September 30, 2017, we had an accumulated deficit of €135.0 million. Our ability to become profitable depends on our ability to further commercialize Ameluz ^® . Even if we are successful in increasing our product sales, we may never achieve or sustain profitability. We anticipate substantially increasing our sales and marketing expense as we attempt to exploit the recent regulatory approvals we have received to market Ameluz ^® in the U.S. and the EU. There can be no assurance that our sales and marketing efforts will generate sufficient sales to allow us to become profitable. Moreover, due to the numerous risks and uncertainties associated with developing and commercializing pharmaceutical products, we are unable to predict the extent of any future losses or when we will become profitable, if ever.

Over the past five years, we have funded our operations primarily through the issuance and sale of equity securities, warrant bonds and convertible bonds. We expect to continue to fund our operations over the next several years primarily through proceeds from the EIB credit facility that we entered into in May 2017, our existing cash resources, and revenues generated from our operating business. If we achieve certain milestones, we may borrow additional amounts under the EIB credit facility and may also, subject to the covenants under our existing debt obligations, enter into other forms of debt financing. Any equity financing, if needed, would likely result in dilution to our existing shareholders and any debt financing, if available, would likely involve significant cash payment obligations and include restrictive covenants that may restrict our ability to operate our business.

Components of Our Results of Operations

Revenue

We generate revenue through the sale of our products Ameluz ^® , BF-RhodoLED ^® and Belixos ^® (our cosmetic skin care product) as well as from payments made by Maruho to us in connection with the development projects we conduct under our collaboration and partnership agreement with it.

In Germany, Spain, the UK and the U.S., we distribute and sell Ameluz ^® through our own sales force and recognize revenue upon shipment to our customers, such as wholesalers or hospitals or physicians. We have entered into license and distribution agreements with a variety of partners in other European countries and Israel. According to these agreements, we produce our products and sell them to our distribution or commercial partners at a transfer price, which is a defined percentage of the estimated final sales price in the respective country or territory. Such percentages range from 35% to 60%. Since production of Ameluz ^® is specific for most countries, we typically produce larger lots for our distribution or commercial partners and ship and invoice them. Our distribution or commercial partners hold inventory and subsequently sell stock over time in their applicable country or territory. We recognize revenue upon shipment to such partners. Upon signing of our license and supply agreements, we also typically receive one-time payments from our distribution partners.

Accordingly, the primary factors that determine our revenue derived from our products are:

•

the level of orders generated by our sales force in the U.S. and Germany;

•

the level of orders from our commercial partners

•

the level of prescriptions and institutional demand for our products; and

•

unit sales prices.

We also generate revenue from development projects entered into with Maruho. Under a collaboration and partnership agreement we entered into with Maruho, development work for the product candidates will be carried out either by our personnel or by subcontractors that we select. All costs under these projects will be borne by Maruho (subject to a cap of €2.3 million) and invoiced from us to Maruho on a monthly basis. We generated revenue of €1.2 million from this agreement in the fiscal year ended December 31, 2016.

Revenue from the sales of our BF-RhodoLED ^® photodynamic therapy lamp, which we mainly use our lamp to support sales of Ameluz ^® , and Belixos ^® , our over-the-counter line of skin care cosmetics products, are relatively insignificant compared with the revenues generated through our sales of Ameluz ^® .

Between 2015 and 2016, revenue in Germany decreased by 17% due to lower volume of sales, while revenue in other countries increased by 20%, driven primarily by prices that were on average 45% higher in 2016 (due to a higher volume of sales in countries with higher prices, in particular Spain). This average price increase was partially offset by a volume decrease of (25)%, although the decrease in volumes occurred primarily in countries where we sell to our license partners (from which we receive lower revenues as a result of the transfer price we must pay to the license partners, which on average is approximately 50% of the local average selling price in the relevant country).

For the six months ended June 30, 2017 compared to the six months ended June 30, 2016, revenue in Germany increased by 7%, based on a greater volume of sales, while revenue in other countries increased by 15% driven primarily by (i) a more favorable mix of revenue at higher price points with various license partners and revenue in Spain (where we sell Ameluz ^® directly, rather than through license partners) and (ii) an increase in volume of 7%.

The following table provides a breakdown of revenue for the past two fiscal years and for the six months ended June 30, 2017 and 2016:

	Six months ended June 30,				Year ended December 31,
	2017		2016		2016		2015
	€		€		€		€
	(amounts in thousands)
Germany		1,103		1,034		2,515		3,028
United States		2,386		0		1,153		0
Other International revenues		732		635		1,247		1,040
One time license payments		0		40		40		70
Development Projects		785		0		1,177		0
Total Revenue		5,006		1,709		6,132		4,138

Cost of Goods Sold

Our cost of goods sold is comprised of all direct manufacturing expenses for our products, including any expenses associated with manufacturing and logistics, such as packaging, freight or transportation costs. We further include any costs associated with changes or upgrades in the manufacturing processes at our third party manufacturers which had to be paid by us to fulfill certain post-approval obligations requested by the EMA. All overhead costs associated with manufacturing are also included in our costs of goods sold.

Research and Development Expenses

We incur research and development expenses related to our clinical and drug and medical device development programs. Our research and development expenses consist of expenses incurred in developing, testing and manufacturing drugs and devices for clinical trials, as well as seeking and maintaining regulatory approval of our product candidates, including:

expenses associated with regulatory submissions, clinical trials and manufacturing;

payments to third party contract research organizations, or CROs, contract laboratories and independent contractors;

payments made to regulatory consultants;

payments made to third party investigators who perform clinical research on our behalf and clinical sites where such testing is conducted;

personnel related expenses, such as salaries, benefits, travel and other related expenses;

expenses incurred to obtain and maintain regulatory approvals and licenses, patents, trademarks and other intellectual property; and

facility, maintenance, and allocated rent, utilities, and depreciation and amortization, and other related expenses.

Research and development costs totaled €4.6 million and €6.2 million for the fiscal years ended December 31, 2016 and December 31, 2015, respectively. From 2014 through 2016, our research and development costs totaled €15.4 million.

The following table summarizes the costs of significant projects and reconciling items to arrive at total research and development expenses for the periods shown (in thousands of euros):

	Six months ended June 30,				Year ended December 31,
	2017		2016		2016		2015
	€		€		€		€
	(amounts in thousands)
Clinical studies (external expenses)		750		613		1,356		1,833
FDA and EMA fees		404		85		932		2,072
Other expenses		1,031		1,154		2,352		2,299
Total Research and development expenses		2,185		1,852		4,640		6,204

As we continue our clinical trial program for Ameluz ^® , both to show effectiveness in comparison to other drugs or therapies and to try to extend the current indications of Ameluz ^® , we expect to incur similar levels of research and development expenses. In addition, any termination of, or delays in completing, our clinical trials will slow down our product development and approval process, leading to increased costs.

Sales Costs

Sales costs consist primarily of salaries, benefits and other related costs for personnel serving in our sales, marketing and business development functions in Germany, Spain and the U.S. Our sales costs also include costs related to marketing materials as well as sales congresses, industry conferences and similar events conducted to promote our products. Sales costs for the fiscal year ended December 31, 2015 also include marketing expenses in the UK incurred by our former marketing partner Spirit Healthcare, which expenses were reimbursed by us until our contract with Spirit Healthcare terminated in July 2015.

In 2016, we significantly increased our sales costs with the continued commercialization of our products, in particular, to establish and build, after obtaining FDA approval that year, a marketing and sales organization in the U.S. in connection with the launch of commercial sales in the U.S. of Ameluz ^® and our BF-RhodoLED ^® lamp in the U.S. Although our revenue increased significantly in the six months ended June 30, 2017, as compared with the six months ended June 30, 2016, our sales costs increased even more significantly. This increase in sales costs related primarily to the hiring of new sales professionals in the U.S. As our presence becomes more established in the U.S. we plan to leverage our sales professionals and will seek to generate more revenue per person so that revenues related to efforts from these salespersons exceed their cost.

We incurred sales costs of €8.8 million and €4.2 million for the fiscal years ended December 31, 2016, and December 31, 2015, respectively.

General and Administrative Expenses

General and administrative expenses consist primarily of compensation for employees in executive and operational functions, including finance, investor relations, information technology and human resources. Other significant costs in this category include facilities costs and professional fees for accounting and legal services, travel, insurance premiums and depreciation. After completion of the offering, we anticipate increases in expenses relating to insurance, legal and accounting services, investor relations and other internal resource requirements arising from additional compliance and reporting obligations imposed by The NASDAQ Capital Market and the U.S. federal securities laws.

We incurred general and administrative expenses of €2.9 million and €2.8 million for the fiscal years ended December 31, 2016, and December 31, 2015, respectively.

Stock Compensation

We grant stock options to members of our management board, senior management, and employees. We recognize compensation expense as a charge to operations over the relevant vesting period of the options, which generally is four years.

The aggregate estimated fair value for options issued during the fiscal year ended December 31, 2016 was approximately €1.5 million, which is being recognized over the vesting periods. Total compensation expense recorded related to options during the fiscal year ended December 31, 2016, was approximately €0.1 million. From inception through the fiscal year ended December 31, 2016, we have incurred cumulative compensation expense related to stock options of approximately €0.5 million.

Finance Expense

Finance expense consists of interest income and interest expense, and foreign exchange gains (losses). Interest income consists of interest earned on our cash and cash equivalents. The interest expenses were almost entirely the result of interest payments on our two series of warrant bonds outstanding during 2015 and 2016, and of the compounding of interest on those two series of warrant bonds, using the effective interest method. We incurred finance expense of €1.2 million and €1.2 million in the fiscal years ended December 31, 2016 and December 31, 2015, respectively.

Other Income and Expenses

Other income typically consists of creation and reversal of certain accruals, mainly for bonuses and accrued expenses. In 2016, we also recorded the reimbursement of the application fee we had paid to the FDA in 2015 upon submission of our New Drug Application under the U.S. Prescription Drug User Fee Act, or PDUFA fee, in other income. Payment of that fee was made in 2015 and recorded in research and development expenses.

Income Taxes

As a result of the net losses we have incurred in each fiscal year since inception, we have recorded no provision for income taxes during such periods. At December 31, 2016, we had net operating loss carry-forwards for German corporation and trade tax purposes of €120.4 million and at December 31, 2015, we had net operating loss carry-forwards for German corporation and trade tax purposes of €109.8 million. Deferred tax assets are generally determined on the basis of the existing income tax rates in Germany. As a result of the German Company Tax Reform Act 2008, the corporation tax rate is set at 15%. When a solidarity surcharge of 5.5% is included, this results in a combined tax rate of 15.8%.

In addition to the corporate tax rate, our company is also subject to a local business tax rate of 16.6%. As the business taxes are not deductible as an operating expense, the resulting tax rate is 32.4%.

Loss carry forwards have an unlimited carry forward period under current German law.

Effect of Foreign Currency Fluctuations

We publish our consolidated financial statements in euros. Historically, most of our revenues and expenses have also been denominated in euros. Therefore, we have not been subject to any major influences on our net income due to currency exchange effects. Since we have obtained FDA approval and begun to commercialize our products in the U.S., we expect to generate a significant part of our revenues and expenses in U.S. dollars. These revenues and expenses incurred in U.S. dollars will be translated into euros when they are reported in our consolidated financial statements. As a result, any substantial future appreciation or decline of the U.S. dollar against the euro could have a material effect on our revenue and profitability.

Our product, Ameluz ^® , is manufactured by a third party contract manufacturer in Switzerland. Any invoices by such manufacturer are denominated in Swiss Francs. As our sales and revenue increase, we expect to increase the manufacturing purchases from our Swiss manufacturer and could, therefore, be increasingly subject to currency exchange effects from these Swiss Franc denominated transactions with our Swiss manufacturer.

Results of Operations

Comparison of the six months ended June 30, 2017 to the six months ended June 30, 2016

Total revenue

Total Revenue
	Six months ended June 30,				Increase (decrease)
	2017		2016		Amount			Percentage
	€ thousands (except percentages)
Germany		1,103		1,034		69			7	%
United States		2,386		0		2,386			n/a
Other International Revenues		732		635		97			15	%
One Time License Payments		0		40		(40	)		(100	)%
Maruho Development Project		785		0		785			n/a
Total Revenue		5,006		1,709		3,297			193	%

Revenue for the six months ended June 30, 2017 increased by approximately 193% to €5.0 million from €1.7 million for the six months ended June 30, 2016. This increase was mainly driven by revenue in the U.S. (€2.4 million) and revenue from the Maruho development project (€0.8 million).

During the six months ended June 30, 2017, we recorded €1.1 million of revenue in Germany, which represents an increase of €69 thousand or 7% compared to the six months ended June 30, 2016.

During the six months ended June 30, 2017, we recorded revenue of €0.7 million from the sale of products in other European countries, either to our distribution partners or from our own sales in countries other than Germany. This represents an increase of €97 thousand or 15%.

During the six months ended June 30, 2017, we further recorded €2.4 million revenue in the U.S. During the six months ended June 30, 2016, we had no revenues from the sale of products in the U.S. We commenced commercialization of Ameluz ^® in the U.S. in October 2016, so the six months ended June 30, 2017 represented the full first half-year period during which we have marketed Ameluz ^® in the U.S. We expect the sales of Ameluz ^® in the U.S. to increase in the near term as we continue to develop our sales operations.

Revenue from our development projects with Maruho was €0.8 million during the six months ended June 30, 2017. During the six months ended June 30, 2016, we had no revenue from these projects.

Cost of sales

Cost of Sales
	Six months ended June 30,						Increase (decrease)
	2017			2016			Amount		Percentage
	€ thousands (except percentages)
Cost of sales		(635	)		(764	)		129		(17	)%

Cost of sales was €(0.6) million for the six months ended June 30, 2017, compared to €(0.8) million for the six months ended June 30, 2016, a decrease of €129 thousand, mainly due to a reduction in production costs at our pharmaceutical ingredient supplier.

Research and development expenses

Research and Development Expenses
	Six months ended June 30,						Increase (decrease)
	2017			2016			Amount			Percentage
	€ thousands (except percentages)
Clinical studies (external expenses)		(750	)		(613	)		137			22	%
FDA and EMA Fees		(404	)		(85	)		319			375	%
Other research and development expenses		(1,031	)		(1,154	)		(123	)		(11	)%
Total research & development expenses		(2,185	)		(1,852	)		333			18	%

Research and development expenses were €2.2 million for the six months ended June 30, 2017, compared to €1.9 million for the six months ended June 30, 2016, an increase of €333 thousand, or 18%. This increase was mainly due to higher fees paid to regulatory bodies such as the FDA and the EMA.

Sales costs

Sales Costs
	Six months ended June 30,						Increase (decrease)
	2017			2016			Amount			Percentage
	€ thousands (except percentages)
Personnel expenses		(4,958	)		(1,606	)		(3,352	)		(209	)%
Trade shows and marketing material		(469	)		(294	)		(175	)		(60	)%
Logistics and other		(2,848	)		(932	)		(1,916	)		(206	)%
Total sales costs		(8,275	)		(2,832	)		(5,443	)		(192	)%

Sales costs were €8.3 million for the six months ended June 30, 2017, compared with €2.8 million for the six months ended June 30, 2016, an increase of €5.5 million, or 192%.

During the six months ended June 30, 2017, we further invested in building a sales and marketing infrastructure in the U.S., hiring qualified personnel and incurred expenses for marketing activities in the U.S. following the approval by the FDA. The increase in sales costs was mainly due to these investments in the U.S., which we expect to continue to incur. As our presence becomes more established in the U.S. we plan to leverage our sales professionals and will seek to generate more revenue per person so that revenues related to efforts from these salespersons exceed their cost.

General and administrative expenses

General and Administrative Expenses
	Six months ended June 30,						Increase (decrease)
	2017			2016			Amount			Percentage
	€ thousands (except percentages)
General and administrative expenses		(1,696	)		(1,372	)		(324	)		24	%

General and administrative expenses increased by 24%, to €1.7 million for the six months ended June 30, 2017, compared to €1.4 million for the six months ended June 30, 2016. This increase was mainly due to higher cost of financing.

Interest income and expense

Interest Income and Expense
	Six months ended June 30,						Increase (decrease)
	2017			2016			Amount		Percentage
	€ thousands (except percentages)
Interest Expense		(330	)		(594	)		264		45	%
Interest Income		4			2			2		100	%

Interest expense decreased by €264 thousand, to €0.3 million for the six months ended June 30, 2017, compared to €(0.6) million for the six months ended June 30, 2016 due to the repayment of our warrant bond in December 2016.

Other income and (expense), net

Other Income and (Expense), Net
	Six months ended June 30,					Increase (decrease)
	2017			2016		Amount			Percentage
	€ thousands (except percentages)
Other income and (expense), net		(626	)		2,232		(2,858	)		(128	)%

Other income (expense), net was €(0.6) million for the six months ended June 30, 2017, compared to income of €2.2 million for the six months ended June 30, 2016. A significant portion of this decrease was attributable to the reimbursement of the €2.1 million PDUFA fee that had a one-time effect in March 2016. An increase of €0.7 million in other expenses was driven mainly by foreign currency exchange movements.

Comparison of Fiscal Years Ended December 31, 2016 and December 31, 2015

Total revenue

Total Revenue
	Year ended December 31,				Increase (decrease)
	2016		2015		Amount			Percentage
	€ thousands (except percentages)
Germany		2,515		3,028		(513	)		(17	)%
United States		1,153		0		1,153			n/a
Other International Revenues		1,247		1,040		207			20	%
One Time License Payments		40		70		(30	)		(43	)%
Maruho Development Project		1,177		0		1,177			n/a
Total Revenue		6,132		4,138		1,994			48	%

Revenue for the fiscal year ended December 31, 2016 increased by approximately 48%, to €6.1 million, from €4.1 million for the fiscal year ended December 31, 2015.

During the fiscal year ended December 31, 2016, we recorded €2.5 million of revenue in Germany, which represents a decrease of €513 thousand or 17% compared to the fiscal year ended December 31, 2015. This decrease was mainly due to the change of competitive landscape following the introduction in the EU of a drug identical to Metvix ^® and approved for daylight photodynamic therapy.

During the fiscal year ended December 31, 2016, we recorded revenue of €1.3 million from the sale of products in other European countries, either to our distribution partners or from our own sales in countries other than Germany. This represents an increase of €207 thousand or 20%.

During the fiscal year ended December 31, 2016, we further recorded €1.2 million revenue in the U.S. We launched commercialization of Ameluz ^® and BF-RhodoLED ^® for actinic keratosis in the U.S. in October 2016 and thus earned revenue in the U.S. for only a small part of the year. We expect annual revenue in the U.S. to increase significantly in 2017 as compared to 2016.

Revenue from the development projects with Maruho was €1.2 million during the fiscal year ended December 31, 2016. In 2015 we had no revenue from these projects.

We also recorded €40 thousand in license income during the fiscal year ended December 31, 2016. We received these license payments following the achievements of milestones as set forth in one of our license and supply agreements. We had €70 thousand in license income in the fiscal year ended December 31, 2015.

Cost of sales

Cost of Sales
	Year ended December 31,						Increase (decrease)
	2016			2015			Amount		Percentage
	€ thousands (except percentages)
Cost of sales		(1,652	)		(1,236	)		416		34	%

Cost of sales was €1.7 million for the year ended December 31, 2016, compared to €1.2 million for the year ended December 31, 2016, an increase of €416 thousand. This increase resulted primarily from a higher volume of products sold during the period.

Research and development expenses

Research and Development Expenses
	Year ended December 31,						Increase (decrease)
	2016			2015			Amount			Percentage
	€ thousands (except percentages)
Clinical studies (external expenses)		(1,356	)		(1,833	)		477			(26	)%
FDA and EMA Fees		(932	)		(2,072	)		1,140			(55	)%
Other research and development expenses		(2,352	)		(2,299	)		(53	)		2	%
Total research & development expenses		(4,640	)		(6,204	)		1,564			(25	)%

Research and development expenses were €4.6 million for the fiscal year ended December 31, 2016, compared to €6.2 million for the fiscal year ended December 31, 2015, a decrease of €1.6 million, or 25%. This decrease was mainly due to a PDUFA fee of €2.1 million that we had to pay to the FDA upon submission of our New Drug Application in 2015. This fee is usually waived for small companies for their initial submission. In consultation with the FDA, Biofrontera lodged an application for a waiver of this fee, but this could not be processed on the filing date as the FDA did not have a process for handling such applications. This fee was refunded by the FDA in March 2016 and was recorded in other income in fiscal year 2016.

Research and development expenses incurred in 2015 and 2016 were related to our clinical and drug and medical device development programs as well as expenses associated with maintaining the European approval dossier, preparing regulatory documentation and filing with regulatory authorities in other regions, in particular with the FDA in the U.S. for Ameluz ^® and our BF-RhodoLED ^® lamp. A minor part of our expenses were associated with filing and maintaining our patents and other intellectual property rights.

Sales costs

Sales Costs
	Year ended December 31,						Increase (decrease)
	2016			2015			Amount			Percentage
	€ thousands (except percentages)
Personnel expenses		(5,063	)		(1,965	)		(3,098	)		(158	)%
Trade shows and marketing material		(566	)		(670	)		104			16	%
Logistics and other		(3,134	)		(1,535	)		(1,599	)		(104	)%
Total sales costs		(8,763	)		(4,170	)		(4,593	)		(110	)%

Sales costs were €8.8 million for the fiscal year ended December 31, 2016, compared with €4.2 million for the fiscal year ended December 31, 2015, an increase of €4.6 million, or 110%.

Sales costs include salaries and other benefits for our sales and marketing teams in Germany and Spain, costs for marketing material such as flyers and promotional materials distributed to physicians, costs for marketing events such as symposia and scientific meetings, as well as marketing expenses incurred in the UK by our contract partner Spirit Healthcare and reimbursed by us until the contract with Spirit Healthcare terminated in July 2015. During the fiscal year ended December 31, 2016, we further invested in building a sales and marketing infrastructure in the U.S., hiring qualified personnel and incurred expenses for marketing activities in the U.S. following the approval by the FDA. The increase in sales costs was mainly due to these investments in the U.S., which we expect to continue to incur.

General and administrative expenses

General and Administrative Expenses
	Year ended December 31,						Increase (decrease)
	2016			2015			Amount		Percentage
	€ thousands (except percentages)
General and administrative expenses		(2,853	)		(2,759	)		94		3	%

General and administrative expenses increased by 3%, to €2.9 million for the fiscal year ended December 31, 2016, compared to €2.8 million for the fiscal year ended December 31, 2015. This increase was mainly due to higher financing expenses.

Interest income and expense

Interest Income and Expense
	Year ended December 31,						Increase (decrease)
	2016			2015			Amount			Percentage
	€ thousands (except percentages)
Interest Expense		(1,207	)		(1,169	)		(38	)		(3	)%
Interest Income		3			9			(6	)		(67	)%

Interest income was €3 thousand during the fiscal year ended December 31, 2016, compared with €9 thousand during the fiscal year ended December 31, 2015.

The interest expense in the fiscal years ended December 31, 2016 and December 31, 2015 was €1.2 million and €1.2 million, respectively. Interest expense consists primarily of interest payable for our 2009/2017 warrant bonds issued in 2009, or Warrant Bond I (€0.5 million in the fiscal year ended December 31, 2016, and €0.4 million in fiscal year ended December 31, 2015) and for our 2011/2016 warrant bonds issued in 2011, or Warrant Bond II (€0.7 million in the fiscal year ended December 31, 2016, and €0.7 million in the fiscal year ended December 31, 2015), calculated using the effective interest method. The interest payments for the 2014 calendar year for Warrant Bond I and Warrant Bond II were made in January 2015. The payment of interest on Warrant Bond I for the 2015 calendar year was made in the end of December 2015, and the payment of interest on Warrant Bond II for the 2015 calendar year was made in the beginning of January 2016.

Other income and (expense), net

Other Income and (Expense), Net
	Year ended December 31,						Increase (decrease)
	2016			2015			Amount			Percentage
	€ thousands (except percentages)
Other income and (expense), net		(2,404	)		(187	)		(2,217	)	Not meaningful

Other income (expense), net was €(2.4) million for the fiscal year ended December 31, 2016, compared with €(0.2) million for the fiscal year ended December 31, 2015. A significant portion of this increase was attributable to the reimbursement of the PDUFA fee as discussed under “Research and development expenses”.

Liquidity and Capital Resources

We devote a substantial portion of our cash resources to research and development and sales, general and administrative activities primarily related to the commercialization of our products, Ameluz ^® and BF-RhodoLED ^® . We have financed our operations primarily with the proceeds of the issuance and sale of equity securities, warrant bonds and convertible bonds and, since May 2017, with proceeds from the EIB credit facility, and supply revenue and licensing income from some of our distribution partners. To date, we have generated supply revenue from direct sales in Germany, Spain and the UK as well as from sales to distribution partners in some European countries.

We have incurred losses and generated negative cash flows from operations since inception. As of June 30, 2017, we had an accumulated deficit of €129.1 million. As of June 30, 2017, we had cash and cash equivalents of €11.5 million. In May 2017, we entered into the EIB credit facility under which EIB agreed to provide us with loans of up to €20 million in the aggregate. After June 30, 2017, we borrowed €10 million under the EIB credit facility, all of which remains outstanding as of the date of this prospectus. We cannot borrow more than €10 million in the aggregate under the EIB credit facility until we achieve revenues of €15 million on a 12-month rolling basis, and we must meet other conditions in order to borrow the full amount. See “Description of Our Principal Financing Documents — European Investment Bank Loan Commitment and Security Agreements” below.

The following table summarizes our cash flows from operating, investing and financing activities for the periods presented:

	Six months ended June 30,						Year ended December 31,
	2017			2016			2016			2015
	€ thousands
Consolidated Statement of Cash Flows Data:
Net cash provided by (used in):
Operating activities		(8,087	)		(2,511	)		(10,259	)		(9,655	)
Investing activities		(192	)		(143	)		(455	)		17
Financing activities		4,605			8,867			21,881			5,088
Net increase (decrease) in cash and cash equivalents		(3,674	)		6,213			11,167			(4,550	)

Operating Activities

For the fiscal years ended December 31, 2016 and December 31, 2015, our net cash used in operating activities was €10.3 million and €9.7 million, respectively. The increase in net cash used in operating activities in the fiscal year ended December 31, 2016 resulted primarily from an increase in operating loss for the year.

For the six months ended June 30, 2017, our net cash used in operating activities was €8.1 million, compared with €2.5 million in the six months ended June 30, 2016. This increase in net cash used in operating activities for the six months ended June 30, 2017 resulted primarily from the €2.1 million in cash received from the FDA during the six months ended June 30, 2016 for the reimbursement of the PDUFA fee that did not recur during the six months ended June 30, 2017. In addition, trade payables decreased by €1.7 million as of June 30, 2017.

Investing Activities

For the fiscal year ended December 31, 2016, our net cash used in investing activities was €0.5 million, compared to cash provided by investing activities of €17 thousand for the fiscal year ended December 31, 2015. The net cash used in investing activities in the fiscal years ended December 31, 2016 and December 31, 2015 was primarily for the purchases of tangible and intangible assets.

For the six months ended June 30, 2017 and the six months ended June 30, 2016, our cash used in investing activities was €0.2 million and €0.1 million, respectively. This increase was primarily driven by capital expenditures.

Financing Activities

Our net cash provided by financing activities was €21.9 million for the fiscal year ended December 31, 2016 compared to €5.1 million for the fiscal year ended December 31, 2015. The cash provided by financing activities for the fiscal year ended December 31, 2016 was primarily the result of the issuance of shares in our rights offering as well as the issuance of convertible bonds, providing net proceeds of €29.0 million. In the fiscal year ended December 31, 2015, we generated net proceeds of €6.3 million from the issuance of our ordinary shares.

For the six months ended June 30, 2017 and the six months ended June 30, 2016, our cash flow from financing activities was €4.6 million and €8.9 million, respectively. This decrease was primarily driven by capital increases in the six months ended June 30, 2016. The proceeds of the convertible bond issuance of €5.0 million in January 2017 were lower than the aggregate proceeds from our issuances of shares (€9.3 million) in the same period of 2016.

Future Capital Requirements

We believe that our existing cash and cash equivalents, the credit facilities available to us under the EIB credit facility, the anticipated net proceeds from this offering, and revenue from product sales and future milestone or license payments will be sufficient to enable us to fund our operating expenses and to advance our commercialization strategy in the U.S. for the next 12 months. After such period, however, we will require additional public or private equity offerings, debt financings, corporate collaboration and licensing arrangements or other financing alternatives to meet our working capital requirements and to fund the continuing commercialization of our existing products and the launch of any new products in the U.S., the EU or other jurisdictions. Our existing financing arrangements place important restrictions on our ability to raise additional debt. See “Description of Our Principal Financing Documents” below.

Our need for additional sources of liquidity and capital will depend significantly on the level and timing of regulatory approval and product sales, as well as the extent to which we choose to establish collaboration, co-promotion, distribution or other similar agreements for our products and product candidates. Moreover, changing circumstances may cause us to spend cash significantly faster than we currently anticipate, and we may need to spend more cash than currently expected because of circumstances beyond our control.

We expect to continue to incur substantial additional operating losses from significant sales, marketing and manufacturing expenses in the U.S as we seek to expand the commercialization of Ameluz ^® in the U.S. and undertake further clinical trials and other activities related to extending the approved indications for Ameluz ^® . In addition, we expect to incur additional expenses to add and improve operational, financial and information systems and personnel, including personnel to support our product commercialization efforts. We also expect to incur significant costs to continue to comply with corporate governance, internal controls and similar requirements applicable to us as a public company in the U.S and in Germany.

Our future use of operating cash and capital requirements will depend on many forward-looking factors, including the following:

the costs of our commercialization activities for Ameluz ^® , most importantly in the U.S.;

the scope, progress, results and costs of development for extending indications for Ameluz ^® ;

the costs of maintaining and extending our regulatory approvals;

the extent to which we acquire or invest in products, businesses and technologies;

the extent to which we choose to establish collaboration, co-promotion, distribution or other similar agreements for our products; and

the costs of preparing, submitting and prosecuting patent applications and maintaining, enforcing and defending intellectual property claims.

We may not have sufficient funds and may be unable to arrange for additional financing to pay the amounts due under our existing debt obligations, in particular the minimum €13 million payment that we must make on July 6, 2022. To the extent that our capital resources are insufficient to meet our future operating and capital requirements, we will need to finance our cash needs through public or private equity offerings, debt financings, corporate collaboration and licensing arrangements or other financing alternatives. We have no committed external sources of funds, other than the EIB credit facility, under which future borrowings are subject to draw conditions, including, the achievement of specified milestones. Additional equity or debt financing or corporate collaboration and licensing arrangements may not be available on acceptable terms, if at all. In addition, the covenants under our existing debt obligations could limit our ability to obtain additional debt financing. For example, under the EIB credit facility, we are not permitted to incur additional third-party debt in excess of €1 million without the prior consent of EIB (subject to certain exceptions).

If we raise additional funds by issuing equity securities, our shareholders will experience dilution. Any additional debt financing or additional equity that we raise may contain terms that are not favorable to us or our shareholders. If we raise additional funds through collaboration and licensing arrangements with third parties, it may be necessary to relinquish valuable rights to our technologies, future revenue streams or product candidates or to grant licenses on terms that may not be favorable to us.

Contractual Obligations

Set forth below is a description of our contractual obligations as of December 31, 2016:

	Payments due by period
Contractual Obligations	Total		Less than 1 year		1-3 years		3-5 years		More than 5 years
	€ thousands
Operating leases		4,719		817		1,326		956		1,620
Warrant bond 2009/2017 ⁽¹⁾		5,226		—		5,226		—		—
Interest		394		394		—		—		—
Convertible bond 2016/2021		190		—		—		190		—
Interest		55		11		22		22		—
Total ⁽²⁾⁽³⁾		10,584		1,222		6,574		1,168		1,620

⁽¹⁾ This warrant bond was repaid in full on August 3, 2017.

⁽²⁾ In January 2017, we issued convertible bonds maturing on January 1, 2022 in the aggregate initial principal amount of €5 million of which €2.3 million has already been converted into shares as of the date of this prospectus. We are obligated to pay interest on the outstanding principal amount of these bonds at a rate of 6.0% per annum.

⁽³⁾ We have borrowed €10 million under our EIB credit facility. These borrowings mature on July 6, 2022. We pay interest on these borrowings quarterly at a rate per annum equal to EURIBOR plus 4%. In addition, these borrowings accrue deferred interest, which is payable in its entirety at maturity, at a rate of 6.0% per annum. At maturity, we also must pay a performance participation interest amount. Thus, on July 6, 2022, we will be required to repay €10 million in principal, plus €3 million in deferred interest and an additional amount of performance participation interest under the EIB credit facility. See “Description of Our Principal Financing Documents—European Investment Bank Loan Commitment and Security Agreements” for more information.

Our long-term commitments under operating leases shown above consist of payments relating to our facility leases in Leverkusen, Germany, which all expire by 2025 and our facility lease in Wakefield, Massachusetts. Operating leases also include contracts for the lease of certain office equipment as well as our obligations under lease contracts for company cars.

Description of Principal Financing Documents

European Investment Bank Loan Commitment and Security Agreements

On May 19, 2017, we entered into a Finance Contract with EIB, whereby EIB has committed to lend to us up to €20 million. The loan terms specify that the amounts drawn will be used to finance up to approximately 50% of specified research and development expenses forecast to be made by us between 2017 and 2020. The key terms of the EIB credit facility are as follows:

Term and Availability . The EIB credit facility can be drawn in up to four tranches each in a minimum amount of €5 million, each of which matures 5 years from the scheduled date of disbursement for the relevant tranche. The final availability date for the EIB credit facility is May 19, 2019.

Conditions to disbursement. We have already drawn the first €10 million of the loan commitment in the form of two €5 million tranches. We may draw up to an additional €5 million (for a total aggregate draw of up to €15 million) if we provide evidence satisfactory to EIB that we have reached consolidated revenues of €15 million on a 12-month rolling basis, and we may draw up to a further €5 million (for a total aggregate draw of up to €20 million) if we provide evidence satisfactory to EIB that we have reached consolidated revenues of €35 million on a 12-month rolling basis and that we have raised at least an additional €5 million in equity financing.

Use of Proceeds and Co-Funding Requirement . We are required to use proceeds from the EIB credit facility in order to fund post-marketing level clinical trials to produce data for obtaining regulatory clearance in the EU and U.S. for Ameluz ^® in different indications and treatment modalities, referred to as the “Project”. In addition, we are required to ensure that we have available, and to expend, our own funds to finance approximately 50% of the Project budget (which is approximately €40 million in total). This means that, for any given year we may use the EIB credit facility to finance only approximately 50% of costs related to the Project.

Interest . There are three components to the interest we pay under the EIB credit facility: quarterly floating interest payments, a deferred interest payment, and a performance participation interest payment. We make floating interest payments each quarter based on a rate per annum equal to EURIBOR plus 4.00%. The deferred interest and the performance participation interest payments are payable in full when the relevant tranche matures (or on any earlier prepayment date). Deferred interest accrues daily on each €5 million tranche at a rate of 6.0% per annum. For each €5 million tranche, the performance participation interest amount is equal to the product of EIB’s disbursement date notional equity proportion in respect of such tranche multiplied by our market capitalization on the maturity date of such tranche. The disbursement date notional equity proportion in relation to the outstanding €10 million loan is 0.64%.

Restriction on Debt. We are not permitted to incur additional third-party debt in excess of €1 million without the prior consent of EIB. This restriction is subject to certain exceptions, such as for ordinary course deferred purchase arrangements and, subject to maximum amounts, various types of leases.

Events of Default . The EIB credit facility contains a number of provisions allowing EIB to accelerate the payment of all or part of amounts outstanding under the EIB credit facility, including customary acceleration provisions for failure to make payments, inaccuracy of representations and warranties, default on other loan obligations (cross-default), illegality or change of law, and events relating to bankruptcy, insolvency and administration. In addition, EIB may accelerate upon any event or change in condition which in the opinion of EIB has a material adverse effect on our business, operations, property, condition (financial or otherwise) or prospects, or on the business, operations, property, condition (financial or otherwise) or prospects of Biofrontera Bioscience GmbH, Biofrontera Pharma GmbH or Biofrontera Inc.

Other Covenants. Subject in each case to certain exceptions, the EIB credit facility contains negative covenants and restrictions, including among others: restrictions on the granting of security, on the provision of loans and guarantees, on the disposal of assets and on a change of business. Furthermore, we must retain 100% ownership of Biofrontera Bioscience GmbH, Biofrontera Pharma GmbH and Biofrontera Inc. and 51% ownership of any other subsidiary whose gross revenues, total assets or EBITDA represent 5% or more of our consolidated gross revenues, total assets or EBITDA. The EIB credit facility also contains affirmative covenants, such as the execution of the Project as described in the EIB credit facility agreement, mandatory periodic reporting of financial and other information and the notification upon the occurrence of any event of default.

Cancellation Upon Project Cost Reduction. If it is determined that the total principal amount of the loan drawn by us exceeds 50% of the total cost of the Project, EIB may cancel the undisbursed portion of the loan and demand prepayment of the loan up to the amount by which the loan, excluding accrued interest, exceeds 50% of the total cost of the Project.

Convertible Bond II

In January 2017, we issued a convertible bond with an aggregate principal amount of €4.999 million, which is divided into 49,990 non-registered pari passu ranking bonds, each with a principal amount of €100. These bonds bear interest at a rate of 6% per annum on their principal amount from and including February 1, 2017. We must pay interest on these bonds semi-annually in arrears on January 1 and July 1 of each year. We must redeem these bonds in full on January 1, 2022, by paying the outstanding principal amount, together with accrued interest on the principal amount until (but excluding) the maturity date, unless they have previously been redeemed or converted or purchased and cancelled. The bonds were offered on a preemptive basis to all existing shareholders and were fully subscribed.

The terms and conditions of these bonds provide that each bondholder is entitled to declare due and payable the entire principal amount and any other claims arising from the bonds if we fail to pay within 30 days after the relevant payment date any amounts due and payable on the bonds or we exceed the “permissible indebtedness” under the terms and conditions by incurring additional debt. We will be deemed to exceed the “permissible indebtedness” if, as a result of our incurrence of any debt, both (1) our “net financial indebtedness” exceeds €25 million, and (2) our “net indebtedness quota” exceeds 4.0. “Net financial indebtedness” is defined as (i) the sum of long-term financial liabilities and short-term financial debt, less (ii) cash and cash equivalents, and “net indebtedness quota” is defined as the quotient of (i) our “net financial indebtedness” divided by (ii) our EBITDA (as defined in the terms and conditions of the bonds). For purposes of these calculations, all relevant figures are determined based on our most recent published annual or interim quarterly financial reports at the time we incur additional debt. We will not be deemed to exceed the “permissible indebtedness” if the “net indebtedness quota” exceeds 4.0 due to a reduction of our EBITDA.

We granted each bondholder the right to convert its bonds, at any time, in whole but not in part, into our ordinary shares, at a conversion price per share equal to: €3.50 per share from the date of issuance until March 31, 2017; €4.00 per share from April 1, 2017 until December 31, 2018; and €5.00 per share from January 1, 2018 until maturity. As of the date of this prospectus, a principal amount of €2.3 million of these convertible bonds has been converted into shares.

Convertible Bond I

In December 2016, we issued a convertible bond with a maturity date of January 1, 2021 (“Convertible Bond I”). The Convertible Bond I has an aggregate principal amount of €4.999 million, which is divided into 49,990 non-registered pari passu ranking bonds, each with a principal amount of €100. These bonds bear interest at a rate of 6% per annum on their principal amount from and including January 1, 2017. The bonds were offered on a preemptive basis to all existing shareholders and were fully subscribed. As of the date of this prospectus, a principal amount of €4,916,000 of these convertible bonds have been converted into our ordinary shares.

The terms and conditions of the Convertible Bond I do not contain any financial or other covenants that would have a material impact on our ability to incur additional indebtedness. For more information on Convertible Bond I and Convertible Bond II, see Note 10 (Financial Liabilities) to our audited consolidated financial statements for the years ended December 31, 2016 and 2015.

Off-Balance Sheet Transactions

We did not have during the periods presented, and we do not currently have, any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on the company’s financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

CRITICAL ACCOUNTING POLICIES AND USE OF ESTIMATES

The consolidated financial statements of Biofrontera for the fiscal year ending December 31, 2016 have been prepared in accordance with the International Financial Reporting Standards, or IFRS, of the International Accounting Standards Board, or IASB, and the interpretations of the International Financial Reporting Standards Interpretations Committee, or IFRS IC, which are endorsed by the EU and applicable on the balance sheet date. In addition, statutory provisions pursuant to Section 315a (1) of the German Commercial Code have been complied with.

The assets and liabilities are recognized and measured in accordance with the IFRS that were required on December 31, 2016.

The preparation of the consolidated financial statements for the fiscal year ended December 31, 2016 in accordance with IFRS required the use of estimates and assumptions by the management that affect the value of assets and liabilities – as well as contingent assets and liabilities – as reported on the balance sheet date, and revenues and expenses arising during the fiscal year. The main areas in which assumptions, estimates and the exercising of a degree of discretion are appropriate relate to the determination of the useful lives of non-current assets and the formation of provisions, as well as income taxes. Estimates are based on historical experience and other assumptions that are considered appropriate in the circumstances. They are continuously reviewed but may vary from the actual values.

While our significant accounting policies are more fully discussed in Note 1 to our consolidated financial statements included in this prospectus, we believe that the following accounting policies are critical to the process of making significant judgments and estimates in the preparation of our consolidated financial statements. We have reviewed these critical accounting policies and estimates with the audit committee of our supervisory board.

Revenue Recognition

Our company recognizes revenue in accordance with IAS 18 if the risks and opportunities connected with ownership have transferred to the customer. The company realizes its revenue primarily through the sale of its products. Income from milestone and licensing agreements with third parties are recognized once the underlying contractual conditions come into effect. The receipt of revenue can always be fully and immediately recognized as revenue if the conditions of IAS 18 IE 20 are met in the form of a one-off contract start payment.

Revenue and other income are recognized if the amount can be measured reliably and payment is sufficiently probable as well as other conditions mentioned below are met. All income in connection with the sale of products and license income is recognized as revenue. Revenue is deemed to be realized when the deliveries and services owed have been provided and substantial risk and chances have been passed to the acquirer.

Most of our revenue is generated by product sales. The sale of Ameluz ^® almost exclusively occurs in Europe through pharmaceutical wholesalers or, to a lesser extent, directly to pharmacies or hospitals. Sales in the U.S. are primarily directly to physicians, hospitals or other qualified healthcare providers. Above and beyond this, in the fiscal year ended December 31, 2016, a considerable portion of sales revenue was achieved through passing costs on to Maruho as part of the collaboration and partnership agreement we have entered into with Maruho.

In the case of direct sales of our BF-RhodoLED ^® lamps, the delivered products and services on which amounts are owed are settled only after complete installation, since the installation services require specialized knowledge, are not just an ancillary service and, for legal reasons, the lamp may only be used by the customer after successful installation. In the case of lamps on loan, that is, lamps already installed for testing by buyers before a purchase, the preconditions are met through the origination of a valid purchase agreement and the generation of an outgoing invoice.

Belixos ^® is predominantly sold through local Amazon websites in the EU. Revenue is recognized after delivery and payment by the customer. Based on experience, return rights granted with the sale through Amazon are exercised by customers in very few cases.

Revenue is recognized, less revenue based trade taxes and sales deductions. Expected sales deductions, such as rebates, discounts or returns, are recognized based on estimated values at revenue recognition. Payment terms for Ameluz ^® include short-term payment terms with a possibility for sales rebates. Instalment payments over 48 months, which include a financing component, are sometimes agreed upon with the sale of our BF-RhodoLED ^® lamp.

License income as well as milestone-based payments are recognized when the contractual obligation has been fulfilled.

Share-Based Payments

Share options (equity-settled share-based payments) are valued at the fair value on the date of granting. The fair value of the obligation is capitalized as a personnel expense over the retention period. Obligations relating to cash-settled share-based payment transactions are recognized as liabilities and are measured at the fair value on the balance sheet date. In the event that we have the right to choose between payment in cash or payment using shares when a right is exercised, an increase in the capital reserve is initially performed pursuant to IFRS 2.41 and IFRS 2.43. The costs are recognized over the vesting period.

The fair market value of share options are estimated using the Monte Carlo Simulation valuation model and we use the following methods to determine its underlying assumptions: expected volatilities are based on our calculation of annualized volatilities (based on daily prices and assuming 250 trading days per year) of around 49.00%; the expected term of options granted is based on the assumption that the option holders will exercise their options evenly within the exercise window (years 5 and 6 after the grant date) and have imputed a standardized five-year holding period; the risk-free interest rate of-0.49% is based on the valuation date for a five-year term (spot rate) from the yield curve; and the expected returns are based on applying the capital asset pricing model (CAPM) using the yield curve to first calculate the standard risk-free rate for a perpetual term as applicable on the valuation date. Forfeitures are estimated at the time of grant and adjusted, if necessary, in subsequent periods if actual forfeitures differ from those estimates.

Research and Development Expenses

Pursuant to IAS 38, development costs are recognized as "intangible assets" under certain conditions. Research costs are recognized as costs as they are incurred. Development costs are capitalized if certain conditions are fulfilled depending on the possible outcome of development activities.

Estimates of such possible outcomes involve management making significant assumptions. In the management's opinion, due to uncertainties related to the development of new products, the criteria prescribed under IAS 38.57 "Intangible Assets" for capitalising development costs as assets are only fulfilled by us if the prerequisites for the expansion of the European approval and the approval in the U.S. are met, and if it is likely a future economic benefit will accrue to the company.

The research and development costs relating to Ameluz ^® , which has been approved in Europe, and to our company's other research and development projects are expensed in the period in which they are incurred, based on industry standards. Almost all research and development expenses for a drug product are incurred before clinical phase III trials are completed. Whether or not a product may receive approval or could be commercialized and generate cash flows at all can only be determined once data from such phase III trials are available, and consequently development costs cannot be capitalized.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are exposed to various risks in relation to financial instruments including credit risk, liquidity risk and currency risk. Our risk management is coordinated by our management board. We do not engage in the trading of financial assets for speculative purposes. The most significant financial risks to which we are exposed include the following discussed below. Please see Note 14 (Reporting on Financial Instruments) to our Consolidated Financial Statements for additional information.

Liquidity risk

We have been dependent on our shareholders and bondholders for the funding of our operations. As described in Note 1 of our consolidated financial statements, our ability to continue as a going concern is dependent on our ability to raise additional funds by way of debt and/or equity offerings to enable us to fund our clinical trial programs and commercialization plans. We believe that our existing cash and cash equivalents, the credit facilities available to us under the EIB credit facility, the anticipated net proceeds from this offering, and revenue from product sales and future milestone or license payments will be sufficient to enable us to fund our operating expenses and to advance our commercialization strategy in the U.S. for the next 12 months. However, changing circumstances may cause us to consume capital significantly faster than we currently anticipate, and we may need to spend more money than currently expected because of circumstances beyond our control. We will require additional capital for the further development and commercialization of our products and product candidates. We may need substantial additional funds to fully develop, manufacture, market and sell our other potential products. See “Risk Factors”.

Currency risk

We are subject to currency risk, as our income and expenditures are denominated in Euro, Swiss Francs and the U.S. dollar. As such we are exposed to exchange rate fluctuations between such foreign currencies and the Euro. We aim to match foreign currency cash inflows with foreign cash outflows where possible. We do not hedge this exposure. If we increase sales of our products in the U.S., we would expect to have significant increases in cash balances, revenues and sales and marketing costs denominated in U.S. dollars and in Swiss Francs, while we would expect the majority of our development and operating costs to remain denominated in Euro. Between January 2014 and July 2017, the exchange rate between the U.S. dollar and the euro ranged between 1.03903 dollars per euro and 1.39305 dollars per euro, and the exchange rate between the Swiss franc and the euro ranged between 0.98665 Swiss franc per euro and 1.23805 Swiss franc per euro.

BUSINESS

Overview

We are an international biopharmaceutical company specializing in the development and commercialization of a platform of pharmaceutical products for the treatment of dermatological conditions and diseases caused primarily by exposure to sunlight that results in sun damage to the skin. Our approved products focus on the treatment of actinic keratoses, which are skin lesions that can sometimes lead to skin cancer, as well as the treatment of basal cell carcinoma in the EU. We conduct our own research and development and, in several regions, including the U.S., market and sell our own products.

Our principal product is Ameluz ^® , which is a prescription drug approved for use in combination with photodynamic therapy (when used together, “Ameluz ^® PDT”) in all of the countries of the EU (including the UK), in Switzerland, in Israel and in the U.S. for the treatment of actinic keratosis of mild to moderate severity on the face and scalp. We are currently selling Ameluz ^® for this indication in the U.S., in 11 countries in Europe and in Israel.

In addition, in the EU, Ameluz ^® is currently approved by the European Commission for the photodynamic therapy treatment field cancerization (entire skin areas infiltrated by tumor cells and entailing several actinic keratoses), as well as superficial and/or nodular basal cell carcinoma unsuitable for surgical treatment due to possible treatment-related morbidity and/or poor cosmetic outcome. We are also seeking to extend the approved indications in the EU for Ameluz ^® to include treatment for actinic keratosis with Ameluz ^® in combination with daylight photodynamic therapy ( i.e. , using natural daylight to activate the drug), which we applied for in the second quarter of 2017. As further described below, we plan to seek further extensions of the approved indications for Ameluz ^® photodynamic therapy in both the EU and the U.S.

The following table summarizes the indications for which we are currently approved to market Ameluz ^® or for which we are in the process of seeking approval to market Ameluz ^® , as well as products currently in development, organized by territory ^* :

^* “CH” = Switzerland; “IL” = Israel

† Timeline for pursuing phase III trial to be determined

Recent Achievements

In 2016, we reached several milestones for our business by executing our strategies of expanding worldwide sales of our products and extending the approved indications of Ameluz ^® PDT.

In the six months ended June 30, 2017, our sales revenue increased 193% to €5.0 million compared to €1.7 million in the same period the year before, reflecting mainly our entry into the U.S. market. During the year ended December 31, 2016, our sales increased 48% to €6.1 million compared to €4.1 million for the year ended December 31, 2015.

In 2016, we also received approvals by the European Commission of label extensions for Ameluz ^® to include the treatment of field cancerization and superficial and/or nodular basal cell carcinoma unsuited for surgical treatment due to possible treatment-related morbidity and/or poor cosmetic outcome . In addition, during that year we reported positive Phase III results for Ameluz ^® in combination with daylight photodynamic therapy. We submitted to the EMA our application (which included the Phase III data) for label extension during the second quarter of 2017.

In 2016, we began to hire employees in the U.S., including a sales force. As of the date of this prospectus, we have a sales force consisting of 30 employees who cover most of the continental U.S.

In August 2017, we agreed with the FDA on the requirements necessary to obtain approval for our application of Ameluz ^® PDT for the treatment of superficial basal cell carcinoma in the U.S. Under the agreed plan with FDA, our application could be based on a single additional phase III placebo-controlled pivotal trial to be conducted in the U.S., in which Ameluz ^® PDT will be compared to placebo PDT, which can be conducted with relatively few patients minimizing both time and expense. We will be required to present a combined read-out of clinical and histological clearance. We believe our agreement with the FDA on the requirements for the potential approval of our application to extend Ameluz ^® for the treatment of superficial basal cell carcinoma in the U.S. represents a significant milestone that should allow us to reduce cost and to achieve approval more quickly than if we had been required to undertake additional or more complex clinical trials. In December 2017, we filed an investigational new drug application with the FDA for our proposed phase III study protocol to evaluate Ameluz ^® PDT for the treatment of superficial basal cell carcinoma. This investigational new drug application enables us to initiate our phase III trial to be conducted in the U.S. to compare Ameluz® PDT to placebo PDT.

In November 2017, we achieved a significant milestone in our marketing efforts in the U.S. when the U.S. Center for Medicare and Medicaid Services (CMS) assigned us a unique, product-specific billing code for Ameluz ^® . The J-code for Ameluz ^® will become effective and available for use by doctors on January 2, 2018. A permanent J-code is generally required for a drug to be eligible for reimbursement by Medicare. Before a permanent J-code is obtained, doctors making reimbursement claims must apply for reimbursement by use of a “miscellaneous” code, which can create additional administrative hurdles and delay for the doctors to receive reimbursement, especially shortly after a drug has launched and payers are not yet familiar with claims for the new drug. Once the permanent J-code for Ameluz ^® becomes effective on January 2, 2018, we expect that the process of claiming reimbursement for Ameluz ^® will become easier for doctors in the U.S., which we expect to have a positive effect on our sales and revenue.

Key Strengths

We believe we are well positioned for growth due to multiple drivers, including: our recent commercial launch of Ameluz ^® in the U.S. for treatment of minimally to moderately thick actinic keratosis of the face and scalp, our recent label extension in the EU of Ameluz ^® for treatment of field cancerization (larger areas of skin on the face and scalp with multiple actinic keratoses) and superficial and/or nodular basal cell carcinoma unsuitable for surgical treatment due to possible treatment-related morbidity and/or poor cosmetic outcome, our pending application for Ameluz ^® to be used in daylight PDT in the EU, proposed reimbursement changes for cryotherapy in U.S. In addition, we believe that there is a trend toward field therapy as opposed to single lesion therapy, which would make Ameluz ^® PDT more competitive versus treatments (such as cryotherapy) that are more suited to single lesion therapy.

Key Strengths include:

Minimal clinical risk. Our principal product – Ameluz ^® – is now approved and commercialized in the U.S. to treat minimally to moderately thick actinic keratosis of the face and scalp (which can develop into squamous cell carcinoma) using our BF-RhodoLED ^® and in the EU to treat actinic keratosis, field cancerization (i.e., larger areas of skin on the face and scalp with multiple actinic keratoses) and, in certain circumstances, basal cell carcinoma, among other approvals.

Ease of treatment. Ameluz ^® is an easy to use, non-invasive treatment that a physician applies directly to the skin, requires simple light activation and has shown no serious side effects.

Expanding presence in U.S. and EU with an experienced in-house sales force. Sales of Ameluz ^® , which was recently launched commercially in the U.S., are increasing significantly, with recent quarterly revenue growth over 160%. We are leveraging our own experienced sales force to drive this growth.

Strong pipeline. We recently submitted an application for approval of Ameluz ^® for use in daylight PDT in the EU. In addition, we are planning and/or have begun preparation for Phase III trials that will form the basis of applications we plan to submit to regulators for the treatment of basal cell carcinoma in the U.S. and squamous cell carcinoma in situ , actinic keratosis on the trunk and extremities and larger treatment areas for actinic keratosis, in each case in both the U.S. and the EU. In August 2017, we agreed with the FDA on the requirements for the potential approval of our application to extend Ameluz ^® PDT for the treatment of superficial basal cell carcinoma in the U.S., and in December 2017 we filed an investigational new drug application with the FDA for our proposed phase III study protocol to evaluate Ameluz ^® PDT for the treatment of superficial basal cell carcinoma. See “— Overview” and “— Recent Achievements” above for more information. In addition, we are pursuing research and development of up to four branded generic dermatology drugs under a collaboration and partnership agreement with Maruho, a pharmaceutical company based in Japan specializing in dermatology that is also an affiliate of Maruho Deutschland GmbH, a major shareholder of our company. See “Business — Our Research and Development Plans — Our Development Collaboration with Maruho” for more information.

Our strategy

geographic expansion of Ameluz ^® sales worldwide, including by:

expanding our sales in the U.S. of Ameluz ^® in combination with our BF-RhodoLED ^® light device for the treatment of minimally to moderately thick actinic keratosis of the face and scalp and positioning Ameluz ^® to be a leading photodynamic therapy product in the U.S., by growing our dedicated sales and marketing infrastructure in the U.S.;

expanding our sales in the EU of Ameluz ^® by marketing it for the treatment not only of minimally to moderately thick actinic keratosis of the face and scalp, but also for the treatment of field cancerization (larger skin areas containing potentially pre-cancerous cells and multiple actinic keratosis lesions) and basal cell carcinoma, indications for which we recently obtained approval; and

expanding our sales of Ameluz ^® in other countries where it is an approved product by entering into arrangements with distribution partners;

extension of the approved indications for Ameluz ^® photodynamic therapy, including by:

seeking to extend the approved label for actinic keratosis to include actinic keratosis lesions located other than on the head or scalp and increase the maximal size of the treatment field;

seeking to extend the approved indications in the U.S. for Ameluz ^® in combination with our BF-RhodoLED ^® light device for the treatment of basal cell carcinoma;

We also plan to develop additional drug candidates and seek partnerships or other opportunities for drug development collaborations, such as our collaboration and partnership agreement with Maruho Co., Ltd., or Maruho, and to continue to develop and expand marketing and sales of our cosmetic skin care products.

Our Products

Ameluz ^®

Our principal marketed product is Ameluz ^® . Ameluz ^® is used in photodynamic therapy to selectively remove tumor cells. We are currently selling Ameluz ^® in the U.S., in 11 countries in Europe and in Israel. We outsource the production of Ameluz ^® to a third party contract manufacturer in Switzerland.

In general, photodynamic therapy is a two-step process:

the first step is the application of a drug known as a “photosensitizer,” or a pre-cursor of this type of drug, which tends to collect in cancerous cells; and

the second step is activation of the photosensitizer by controlled exposure to a selective light source in the presence of oxygen.

During this process, energy from the light activates the photosensitizer. In photodynamic therapy, the activated photosensitizer transfers energy to oxygen molecules found in cells, converting the oxygen into a highly energized form known as “singlet oxygen,” which destroys or alters the sensitized cells.

The longer the wavelength of visible light, the deeper into tissue it penetrates. Different wavelengths, or colors of light, including red and blue light, may be used to activate photosensitizers. The selection of the appropriate color of light for a given indication is primarily based on two criteria:

the desired depth of penetration of the light into the target tissue; and

the efficiency of the light in activating the photosensitizer.

In the U.S., our approved treatment method involves applying Ameluz ^® gel to individual or entire fields of actinic keratosis lesions, followed three hours later with exposure to our red light BF-RhodoLED ^® lamp for approximately ten minutes. In the EU, Ameluz ^® is also indicated for field cancerization and for superficial and/or nodular basal cell carcinoma unsuitable for surgical treatment due to possible treatment-related morbidity and/or poor cosmetic outcome. See “— History of Approved Indications and Active Applications ” below.

Photodynamic therapy can be a highly selective treatment that targets specific tissues while minimizing damage to normal surrounding tissues. It also can allow for multiple courses of therapy. The most common side effect of photosensitizers that are applied topically or taken systemically is temporary skin sensitivity to bright light. Treatment is generally well tolerated but tingling discomfort or pain is common during PDT. In our Phase III trials, the resulting redness and/or inflammation resolved within 1 to 4 days in most cases; in some cases, however, it persisted for 1 to 2 weeks or even longer. Patients undergoing photodynamic therapy treatments are usually advised to avoid direct sunlight and/or to wear protective clothing and sunscreen for some days after the treatment. Patients’ indoor activities are generally unrestricted except that they are told to avoid bright lights. The degree of selectivity and period of skin photosensitivity varies among different photosensitizers and is also related to the drug dose given. Unless activated by light, photosensitizers have no direct photodynamic therapy effects.

History of Approved Indications and Active Applications

In December 2011, Ameluz ^® (“love the light”) 78 mg/g Gel (development name BF-200 ALA) received a centralized European regulatory approval by the European Commission for the treatment of actinic keratosis of mild to moderate severity on the face and scalp. In the EU, Ameluz ^® is to be used in combination with exposure to a red light source (although the approved labelling does not specify the light source). We launched the commercialization of Ameluz ^® for the treatment of actinic keratosis in Germany for this indication in February 2012 followed by other EU countries during the following two years.

In November 2015, our license partner Louis Widmer SA obtained approval to market Ameluz ^® in Switzerland for the treatment of actinic keratosis of mild to moderate severity on the face and scalp. In April 2016, our licensee Perrigo Israel Agencies Ltd. obtained approval to market Ameluz ^® in Israel for the same indication. We launched the commercialization of Ameluz ^® in Switzerland in April 2016 and in Israel in August 2017.

In September 2016, the European Commission approved Ameluz ^® for the photodynamic therapy treatment of field cancerization following a prior recommendation of the EMA. This decision was based on a field-directed Phase III trial during which the skin rejuvenating effects of Ameluz ^® were also studied. The skin rejuvenation results of this trial are included in the authorized EU product information and are summarized in the table entitled “Table 3: Skin quality parameters in the treated area during 12-month follow-up” in the section “Research and Development and Regulatory Affairs — Ameluz ^® — Trial 3” below. We launched the commercialization of Ameluz ^® for the photodynamic therapy treatment of field cancerization in the EU shortly after approval.

We initiated our efforts to extend indications for Ameluz ^® to include basal cell carcinoma in 2014. We conducted Phase III clinical testing in direct comparison with the European competitor product Metvix ^® . We completed patient recruitment in May 2015 and the last patient concluded the clinical part of the trial in November 2015. We will have a 5-year follow-up period for all patients, of which 6-month and 12-month data are currently available. We published the results of the trial in January 2016, which demonstrated clinical efficacy of Ameluz ^® for non-aggressive forms of basal cell carcinoma. In comparison with the competitor product Metvix ^® , in the clinical trials Ameluz ^® demonstrated generally higher clearance rates, especially for thicker and nodular carcinomas and significant non-inferiority of the clinical endpoint, which was total patient clearance of all basal cell carcinomas. ² These trial results demonstrated to the EMA that Ameluz ^® is a viable treatment option for superficial and nodular basal cell carcinoma unsuitable for surgical treatment due to possible treatment-related morbidity and/or poor cosmetic outcome, which resulted in approval of this indication in the EU in January 2017.

We are also seeking to extend the approved indications in the EU for Ameluz ^® to include treatment for actinic keratosis with Ameluz ^® in combination with daylight photodynamic therapy ( i.e. , using natural daylight to activate the drug), which we applied for in the second quarter of 2017. We believe that if we obtain this approval, we may increase the market potential of Ameluz ^® in the EU since Ameluz ^® could be used without doctor’s office procedures, which procedures can render photodynamic therapy treatment in European markets commercially unattractive due to lack of reimbursement.

Actinic keratoses

Actinic keratoses are superficial potentially pre-cancerous skin lesions caused by chronic sun exposure that may, if left untreated, develop into a form of potentially life-threatening skin cancer called squamous cell carcinoma. Actinic keratoses typically appear on sun-exposed areas, such as the face, bald scalp, arms or the back of the hands, and are often elevated, flaky, and rough in texture, and appear on the skin as hyperpigmented spots.

According to The Skin Cancer Foundation, actinic keratosis is becoming a widespread disease, with more than 58 million people affected in the U.S. According to The Skin Cancer Foundation, if left untreated, up to 1 percent of actinic keratosis lesions develop into squamous cell carcinomas every year. On average, this transformation into squamous cell carcinoma occurs within two years of formation of the initial actinic keratosis lesion.

Squamous cell carcinoma is an uncontrolled growth of abnormal cells arising in the squamous cells, which compose most of the skin’s upper layers (the epidermis). Squamous cell carcinoma often appear as scaly red patches, open sores, elevated growths with a central depression, or warts; and they may crust or bleed. They can become disfiguring and sometimes deadly if allowed to grow. According to The Skin Cancer Foundation, squamous cell carcinoma has been the second most common form of skin cancer, but its incidence has been rapidly increasing. According to The Skin Cancer Foundation, more than one million cases of squamous cell carcinoma are diagnosed each year in the U.S., and it has been estimated that as many as 8,800 people die from the disease each year in the U.S. Incidence of the disease has increased by 200 percent in the past three decades in the U.S. and it has recently matched the incidence of basal cell carcinoma in the Medicare fee-for-service population, which had been the most common form of human cancers.

Actinic keratosis was recognized as an occupational disease by the Federal Ministry of Labor and Social Affairs in Germany in 2013. As a result of such recognition, occupational insurance associations in Germany must cover, for the duration of the patients' lives, the treatment costs of patients who have worked predominantly outdoors for extended periods of time and who meet certain other criteria. In Germany since March 2016, photodynamic therapy has been included as an approved treatment option for occupational actinic keratosis, which means it can be reimbursed by the government.

² We demonstrated this outcome through one controlled study. Generally, two controlled studies are necessary to support comparative claims in the marketing of drugs. Therefore, the results of this clinical trial comparing Ameluz ^® and Metvix ^® are presented for informational purposes only.

Market Overview for Treatment of Actinic Keratosis

Actinic keratosis is a disease that is most frequent in the Caucasian, light-skinned population. It has been estimated that actinic keratosis affects up to 10% of the entire Caucasian population worldwide. Only a fraction of these patients are currently being treated. Actinic keratoses are treated using a wide range of methods. The traditional methods of treating actinic keratoses are:

cryotherapy, or the deep freezing of skin;

simple curettage;

self-applied topical prescription products; and

combination of medication with photodynamic therapy.

Although any of these methods can be effective, each has limitations and can result in significant side effects.

Cryotherapy is non-selective (meaning it cannot target specific tissues but affects all tissues in the area of application), can be painful at the site of freezing, and can cause blistering and loss of skin pigmentation, leaving temporary or permanent white spots. In addition, because there is no standardized treatment protocol, results are not uniform and can depend on the skill or technique of the doctor treating the patient.

Topical prescription products, such as 5-fluorouracil cream, or 5-FU, can be irritating and requires twice-a-day application by the patient for approximately 2 to 4 weeks, resulting in inflammation, redness and erosion or rawness of the skin. Following the treatment, up to several weeks of healing may be required. Imiquimod or diclofenac, other topical prescription products, require extended applications of cream, lasting up to 3 or 4 months, during which the skin is often very red and inflamed. Treatment with ingenol mebutate is faster, requiring application for only a few days, but side effects can be long-lasting and this drug has been labeled with a black-box warning by the FDA.

Simple curettage is generally most useful for one or a few individual lesions, but not for a large number of lesions, and it leaves permanent scars.

European Markets

In Europe, most actinic keratosis patients are treated with various available medications, which can be assessed through the number of prescriptions. Throughout Europe, there are more than 2 million prescriptions written per year for actinic keratosis drugs, and the number of prescriptions has been growing by about 10% annually over the past four years. In 2016 in Europe, total sales of prescription drugs to treat actinic keratosis were approximately €120 million, with PDT drugs accounting for approximately €22 million of sales. In Europe, although the total number of cryotherapy or simple curettage treatments for actinic keratosis is not available, we believe that only a small number of patients with actinic keratosis is treated by cryotherapy or simple curettage treatments. We therefore disregard treatment by cryotherapy or simple curettage treatments in the following estimates of European market share. We estimate that approximately 33% of all prescriptions for actinic keratosis drugs in Europe are written in Germany, followed by the UK (15%), France (12%), Italy (12%), Spain (10%) and Switzerland (3%), and the remaining European countries account for approximately 15% of such prescriptions.

In Europe, only a small portion of prescriptions written for drugs to treat actinic keratosis are for PDT drugs: approximately 120,000 prescriptions in 2016, representing sales of €22 million. Thus, in Europe, PDT drugs are prescribed for a relatively low percentage of treatments for actinic keratosis, notwithstanding the fact that clinical trials have demonstrated that photodynamic therapy achieves higher clearance rates compared to other drugs used to treat actinic keratosis. We believe that, in Europe, the extra time and effort required from patients and medical practitioners have historically prevented significant market penetration in the statutory health insurance sector in Europe — a photodynamic therapy treatment requires a patient to visit a medical office for the procedure and requires time from doctors or other medical practitioners to administer it. In Europe, topical prescription product creams are reimbursed by government authorities (or other third party payors) and do not require a medical office based procedure, whereas photodynamic therapy requires a procedure that, to date, is not reimbursed in all markets in Europe. We are also seeking to extend the approved indications in the EU for Ameluz ^® to include treatment for actinic keratosis with Ameluz ^® in combination with daylight photodynamic therapy ( i.e. , using natural daylight to activate the drug), which we applied for in the second quarter of 2017. Daylight PDT eliminates the need for a medical office based procedure and should allow easier reimbursement in Germany, where PDT procedures performed by physicians have not been reviewed or approved for reimbursement by the relevant governmental authorities. As a result, we see the potential for PDT to significantly grow its share of the actinic keratosis treatment market in Europe.

In Europe, sales of PDT drugs generally have been growing slightly faster, by about 15% per year, than sales of PDT drugs in the actinic keratosis market, but sales of PDT drugs in Europe still represent less than 6% of all prescriptions for actinic keratosis. This market size may, however, be an underestimation since in many countries in Europe PDT drugs may be sold directly to hospitals and, therefore, are not tracked by market research sources. Since PDT drugs generally have a higher price than the self-applied topical drugs, their percentage of revenues is higher than that of prescription numbers (18.3% vs. 5.7%, respectively).

Available PDT drugs for treatment of actinic keratosis in Europe include Ameluz ^® gel, Metvix ^® cream, Alacare ^® adhesive plaster and Luxerm ^® cream. Metvix ^® has been on the market in the EU since 2002, and is the most frequently used PDT drug for treatment of actinic keratosis throughout the EU. Metvix ^® is approved for treatment with a red light source and contains methylesther, which is metabolized to 5-ALA in the tissue, as its active ingredient. As with Ameluz ^® , in the treatment of actinic keratosis, Metvix is used in a PDT treatment once, and the PDT treatment is repeated after several weeks if residual lesions remain. In our phase III trial, we compared the efficacy of Ameluz ^® with that of Metvix ^® and demonstrated the non-inferiority of Ameluz ^® in the treatment of actinic keratosis. ³ Alacare ^® is a 2x2 cm plaster that has low market share because of its limited size of treatment area. Metvix ^® has also recently been approved in the EU for use in daylight photodynamic therapy for which it is sold by Galderma under the brand name Luxerm ^® in Germany and Luxera ^® in other European countries.

³ We demonstrated this outcome through one controlled study. Generally, two controlled studies are necessary to support comparative claims in the marketing of drugs. Therefore, the results of this clinical trial comparing Ameluz ^® and Metvix ^® are presented for informational purposes only.

Throughout Europe, Metvix ^® has 74% market share among PDT treatments of actinic keratosis, followed by Ameluz ^® with 21%, Luxerm ^® with 3% and Alacare ^® with 2%. Since commercial launch in Germany (where our sales force has been most active), the market share of Ameluz ^® in the segment of photodynamic therapy drugs for treatment of actinic keratosis dispensed by German public pharmacies had been over 75%. In recent months, however, our market share has fallen to approximately 60%. We believe this decline resulted primarily from the introduction to the market of the medication Luxerm ^® in 2016. Using our recently completed Phase III trial, we have filed for label extension in the EU for the treatment of actinic keratosis using Ameluz ^® and daylight PDT. If the approved indications for Ameluz ^® are extended to include daylight PDT, an office-based procedure would not longer be required in the EU for PDT treatment using Ameluz ^® (since the medication can be administered by the patient). We believe that we may obtain approval as early as the first half of 2018, although there is no guarantee that we will receive approval for this label extension. We believe that daylight photodynamic therapy products will play an increasingly important role in Europe in the future and will begin to be prescribed as an alternative to less effective, self-applied, topical prescription product creams (which have historically been market leaders in the EU in treating actinic keratosis).

In Spain, the market share of Ameluz ^® for photodynamic therapy treatment of actinic keratosis has been growing from less than 5% in 2014 to 12% in 2015 and 23% in 2016.

Most of the prescriptions in Europe for treatment of actinic keratosis are for self-applied topical drugs, for which the driver seems to be the minimal amount of time required by doctors and other medical practitioners. Almost half of all drug prescriptions in Europe for the treatment of actinic keratosis are for Solaraze ^® (45%), which according to a meta-analysis of clinical trials by Vector and Tolley (2014) ⁴ has a rather low efficacy. This reinforces our belief that another driver, such as time required to be spent in consultation as compared to time required for a medical office based procedure, may be more determinative of treatment selection than efficacy. In Europe, Solaraze ^® prescriptions for actinic keratosis are followed by prescriptions for Aldara ^® (18%), Picato ^® (16%) and Actikerall ^® (7%).

U.S. Market

The market for the treatment of actinic keratosis in the U.S. differs significantly from the European market. We believe this is because the U.S. reimbursement system generally has favored procedures, for which doctors in Europe may not get paid or reimbursed. In the U.S., the most common treatment for actinic keratosis is cryotherapy. In 2013, Medicare alone paid for 5.977 million actinic keratosis patients to be treated with cryotherapy. This number of patients so treated had been growing by 2-3% per year since 2008. We estimate that, if the number of patients so treated is extrapolated to 2016 with an assumed 2% growth rate, approximately 6.4 million Medicare patients with actinic keratosis were treated with cryotherapy in 2016. An analysis of “National Ambulatory Medical Care Survey” and “Medicare Current Beneficiary Survey” data with respect to the frequency and cost of actinic keratosis treatment concluded that about 60% of actinic keratosis patients were covered by Medicare, and 40% of treatments were reimbursed by private payers during the period from 1998 through 2000 (Dermatology Surgery 2006;32(8):1045-9). Thus, we assume that the above number of cryotherapies for Medicare patients represents only 60% of all cryotherapy treatments performed in the U.S. in the relevant year, so the number of cryotherapies for medicare patients should be divided by 0.6 in order to estimate the total number of cryotherapy treatments in the U.S. in that year. Simple curettage is generally not used to treat actinic keratosis in the U.S.

⁴ This research was funded by Biofrontera AG. Our personnel commented on the draft manuscript but did not have control of the methodology, conduct, results, or conclusion of this study. Additionally, this paper was not dependent on our approval for submission to the PLoS One journal.

In the U.S., Levulan ^® is approved the treatment of minimally to moderately thick actinic keratosis of the face or scalp in combination with PDT with a blue light source. Levulan ^® contains 5-aminolevulinic acid (5-ALA) as its active ingredient. As with Ameluz ^® , in the treatment of actinic keratosis, Levulan ^® is used in a PDT treatment once, and the PDT treatment is repeated after several weeks if residual lesions remain. Sun Pharma has reported annual revenue of $136 million from its sales of Levulan ^® in 2016. Assuming an approximate annual average sales price of $309 per Levulan ^® Kerastick, we estimate such sales represents approximately 343,000 prescriptions.

We estimate that there were an additional 1.65 million prescriptions for self-applied topical drugs in the U.S. for the treatment of actinic keratosis in 2016. These prescriptions are for various topical products, with the most frequently prescribed ones being drugs with the active ingredient 5-fluorouracil (44% generic plus 4% branded), followed by imiquimod drugs (31%), diclofenac drugs (16%) and ingenol mebutate drugs (5.5%).

In 2016, the cryotherapy treatments and the topical products (including PDT drugs) in the aggregate constituted an estimated 12.6 million treatments for actinic keratosis in the U.S. According to these numbers, PDT was only applied in about 3% of all actinic keratosis treatments in the U.S., and, therefore, we believe there is substantial market potential and room for growth in the U.S. Some of our estimates and judgments are based on various sources which we have not independently verified and which potentially include outdated information, or information that may not be precise or correct, potentially rendering the U.S. market size for treatment of actinic keratosis with Ameluz ^® smaller than we have estimated, which may reduce our potential and ability to increase sales of Ameluz ^® and revenue in the U.S. Although we have not independently verified the data obtained from these sources, we believe that this data provides the best available information relating to the present market for actinic keratosis treatments in the U.S., and we often use these data for our business and planning purposes. We are responsible for the inclusion of these data in this prospectus .

The chart above displays the number of drug prescriptions and treatments for actinic keratosis in the U.S during 2014-2016 by: (i) cryotherapy, reimbursed by Medicare (Source: Resource-Based Relative Value Scale (RBRVS) of the American Medical Association); (ii) cryotherapy, not reimbursed by Medicare (the remaining 40% of cryotherapies) (Source: Dermatology Surgery 2006; 32(8):1045-9); (iii) self-applied topical drugs (Source: Biofrontera’s internal market research); and (iv) Levulan ^® (Source: Sun Pharma’s annual reports). The chart below shows the relative percentages of these actinic keratosis treatments in 2016 in the U.S.

We believe our opportunities in the U.S. market for Ameluz ^® sales growth for treatment of actinic keratosis are to supercede Levulan ^® Kerastick as the leading PDT product in the current PDT market sector for actinic keratosis treatment and to expand the PDT market as a first-option therapy to treat actinic keratosis as compared to cryotherapy and self-applied topical products.

Basal Cell Carcinoma

Basal cell carcinomas are the most common invasive tumors affecting humans, accounting for approximately 80 percent of all non-melanoma skin cancers worldwide. Studies of populations in the U.S. and Switzerland have shown that approximately 20 to 30 percent of Caucasians will develop at least one basal cell carcinoma in their lifetime, and cases are increasing worldwide, which is believed to be caused by increased exposure to ultraviolet light. More than 4 million cases of basal cell carcinoma are diagnosed in the U.S. each year. Although basal cell carcinoma rarely spreads to other parts of the body and becomes life-threatening, it can be disfiguring if not treated promptly.

Market Overview for Treatment of Basal Cell Carcinoma

The most common treatment for basal cell carcinoma in the EU and U.S. is surgical removal. In many European countries, dermatology specialists are hospital-based and, as a result, basal cell carcinoma is most commonly treated by hospital surgery in such European countries, which is rarely the case for actinic keratosis. The treatment of basal cell carcinoma by a surgical procedure can result in high costs and clearly visible scarring. But thin, non-aggressive basal cell carcinomas can also be treated with photodynamic therapy. The advantage of treating basal cell carcinoma with photodynamic therapy is that it is a non-invasive alternative that can have better cosmetic results, i.e. , removal of tumors without leaving clearly visible scarring.

According to a market study published in 2014 by Technavio, the international market for actinic keratosis medication is expected to grow by approximately 8% annually, from approximately $546 million in 2013 to approximately $942 million in 2020. During this same period, the global market for basal cell carcinoma medication is expected to grow from approximately $236 million in 2013 to nearly $5 billion in 2020, because of the availability of new drugs (such as Ameluz ^® ), which would likely mean that fewer patients will undergo surgery for treatment of basal cell carcinoma.

BF-RhodoLED ^® Lamp

Our BF-RhodoLED ^® is a red light lamp specifically designed for photodynamic therapy, and uses LEDs emitting red light at a wavelength of approximately 635 nm to activate the photosensitizer. We believe light emitted at this wavelength is effective for photodynamic therapy illumination with Ameluz ^® or other medications containing ALA or methyl ALA. The red light emitted by our BF-RhodoLED ^® lamp is outside the infrared range, reducing the likelihood for discomfort from warming. Other light wavelengths, including the blue range, can also activate the photosensitizer, but penetrate less deeply into tissues as compared to red light. We manufacture our BF-RhodoLED ^® lamp at our corporate headquarters in Leverkusen, Germany.

We believe our BF-RhodoLED ^® lamp combines a controlled and consistent emission of light at the required wavelength with simplicity of design, user-friendliness and energy efficiency. Our BF-RhodoLED ^® lamp contains a fan used to blow air over the treated skin surface and power settings for the fan. In the model used in the EU, our lamp also allows adjustment of the light intensity during photodynamic therapy in order to reduce any discomfort experienced during the treatment. Our BF-RhodoLED ^® lamp has been CE-certified since November 2012 and is currently distributed throughout the EU. Our lamp is approved in the U.S. by the FDA as a combination product for use in treatment with Ameluz ^® .

We have been performing the final assembly of our BF-RhodoLED ^® lamp at our facilities in Leverkusen, Germany since July 2016 and, thus, we are considered the responsible manufacturer by the FDA.

History of Clinical Trials for Ameluz ^® and BF-RhodoLED ^® Lamp

Clinical trials relating to treatment of actinic keratosis with Ameluz ^® photodynamic therapy

The initial two Phase III trials we conducted in connection with obtaining approval for Ameluz ^® in the EU included a variety of CE marked photodynamic therapy light sources, and best results were achieved with LED lamps. The efficacy of Ameluz ^® was tested in comparison with Metvix ^® , the approved standard medication already available in the EU, that is also a topical cream used in connection with photodynamic therapy. The results of the trial demonstrated that Ameluz ^® was significantly non-inferior to Metvix ^® for the treatment of actinic keratoses with photodynamic therapy. The complete clearance rates of patients from all keratoses at the average of all lamp types were 78 percent for Ameluz ^® and 64 percent for Metvix ^® . With LED lamps only, the clearance rates increased to 85 percent for Ameluz ^® and 68 percent for Metvix ^® . The side-effect profiles were comparable for both products. In another trial, using Ameluz ^® with LED lamps completely removed all keratoses in 87 percent of the patients. For the individual lesions, 96 percent and 94 percent were completely eradicated in the two trials using LED lamps (all values cited are from the intent to treat, or ITT, population). See “Research and Development and Regulatory Affairs-Ameluz ^® Actinic Keratosis-Trial 1 and —Trial 2” .

Prior to obtaining approval in the U.S. for treatment of actinic keratoses using Ameluz ^® photodynamic therapy, the FDA requested two Phase I clinical trials for Ameluz ^® , one to determine the plasma concentration of the drug after application of an entire tube of Ameluz ^® to maximally damaged skin, the other to investigate a sensitizing effect of the product. These Phase I trials were performed with approximately 240 subjects and were completed in 2015.

A maximal use pharmacokinetics study was conducted in 12 patients bearing at least 10 mild to moderate actinic keratoses on the face or forehead. An entire tube of vehicle and Ameluz ^® followed by photodynamic therapy was applied in a fixed sequence design with a washout period of 7 days to evaluate baseline and Ameluz ^® dependent plasma concentrations of aminolevulinic acid, or ALA, and protoporphyrine IX, or PpIX. An up to 2.5-fold increase of basic ALA plasma concentrations was observed during the first three hours after Ameluz ^® application, still remaining within the normal range of previously reported and published endogenous ALA concentrations. The plasma concentrations of metabolite PpIX were generally low in all patients, and in none of the patients, was an obvious increase of PpIX plasma concentrations observed after Ameluz ^® application.

In a clinical trial designed to investigate the sensitization potential of ALA with 216 healthy subjects, 13 subjects (6 percent) developed allergic contact dermatitis after continuous exposure for 21 days with doses of ALA that were higher than doses normally used in the treatment of actinic keratosis. Allergic contact dermatitis was not observed under regular treatment conditions.

Approval of photodynamic therapy treatment of actinic keratoses in the U.S. required us to obtain a combination approval of both Ameluz ^® and the light source. As a result, we developed our own photodynamic therapy lamp, the BF-RhodoLED ^® . Our photodynamic therapy lamp is CE-certified in the EU, which required the company to be certified pursuant to the ISO 9001 and ISO 13485 standards.

In preparation for seeking FDA approval in the U.S., we conducted a Phase III trial using the combination of Ameluz ^® and our BF-RhodoLED ^® lamp. In this Phase III trial, completed in 2015, with this combination treatment, all keratoses of a patient were completely eradicated in 91 percent of patients, and 94 percent of all lesions were completely removed (99.1 percent of mild lesions and 91.7 percent of moderate lesions). Further, 63.3 percent of the patients who were initially completely asymptomatic were still asymptomatic one year later. In this Phase III trial, the drug was applied over large skin areas (field therapy) for the first time in a Phase III trial of photodynamic therapy. Field directed treatment is advisable if a patient has several actinic keratosis lesions in close proximity since multiple actinic keratoses are believed to arise from “cancerized fields,” i.e. , skin areas in which neoplastic cells are spread over a larger area, and additional subclinical (not yet visible) lesions may exist in the same field. Based on this study, the EU granted Ameluz ^® the approval for the indication “field cancerization”, and the prescribing information in the U.S. specifically approves the field directed approach. See “Research and Development and Regulatory Affairs-Actinic Keratosis-Ameluz ^® -Trial 3” .

By testing larger skin areas, we could also investigate the effect of photodynamic therapy on photo-damaged skin. Thus, in this field directed Phase III trial for Ameluz ^® , we measured the improvement of previously existing skin impairment. Based on the parameters we tested for skin impairment, the patients with the treatment showed improvements as a result of the treatment. The proportion of patients with impaired skin surface, including rough, dry and scaly skin, decreased from 85 percent to 28 percent within 12 months after treatment with Ameluz ^® . Patients with skin hyperpigmentation or hypopigmentation decreased from 59 percent to 24 percent and from 46 percent to 11 percent, respectively. The proportion of patients with mottled pigmentation, mixed hyperpigmentation and hypopigmentation, decreased from 48 percent to 18 percent. Before treatment, 26 percent of the patients had mild to moderate/severe scarring, this decreased to 7 percent of patients after treatment. Atrophic skin was diagnosed in 31 percent before but only in 4 percent of patients 12 months after treatment. See table 3 under See “Research and Development and Regulatory Affairs-Ameluz ^® -Actinic Keratosis-Trial 3” . These skin improvement results are now included in our official EU product information for Ameluz ^® .

Clinical trials relating to treatment of basal cell carcinoma with Ameluz ^® photodynamic therapy

To extend the EU approval for Ameluz ^® to the treatment of basal cell carcinoma, we conducted another Phase III trial. A total of 281 patients with 1 to 3 non-aggressive basal cell carcinomas enrolled in this Phase III trial, of which 138 were treated with Ameluz ^® PDT. We conducted the trial under the clinical supervision of Prof. Colin Morton (UK) and Prof. Markus Szeimies (Germany) at 27 clinical trial centers in the UK and Germany. The comparative trial tested Ameluz ^® side by side with its major European competitor Metvix ^® , which was already approved in the EU for the treatment of basal cell carcinoma. Patient recruitment lasted until May 2015, the last patient completed the trial in November 2015, and we obtained results of the trial in January 2016. Non-aggressive basal cell carcinomas with a thickness of up to 2 mm were included in the trial.

Photodynamic therapy treatment with Ameluz ^® completely eliminated all of a patient’s non-aggressive (superficial and nodular) basal cell carcinomas in 93.4 percent of cases, compared to 91.8 percent from photodynamic therapy treatment with Metvix ^® . Of the individual lesions, 94.6 percent were completely eliminated after Ameluz ^® treatment, 92.9 percent were completely eliminated after Metvix ^® treatment. Greater differences were observed in the case of thicker basal cell carcinomas. In photodynamic therapy treatment with Ameluz ^® , 89.3 percent of the nodular carcinomas were completely removed, compared to only 78.6 percent with Metvix ^® . Superficial basal cell carcinoma lesions were completely eradicated by photodynamic therapy treatment with Ameluz ^® in 95.8 percent of patients, compared to photodynamic therapy treatment with Metvix ^® , in which superficial basal cell carcinoma lesions were completely eradicated in 96.9 percent of the cases. After 12 months, recurrence rates were slightly higher for patients treated with Metvix ^® as compared to patients treated with Ameluz ^® . In the Ameluz ^® group, 6.7 percent of the lesions were recurrent after 12 months, and in the Metvix ^® group 8.2 percent of the lesions were recurrent after 12 months. See table 4 under “Research and Development and Regulatory Affairs-Ameluz ^® -Basal Cell Carcinoma” .

In July 2016, Biofrontera applied to the EMA for approval for the photodynamic therapy treatment of basal cell carcinoma with Ameluz ^® based on the results of this Phase III trial. The approval was granted by the European Commission in January 2017.

Clinical trials relating to treatment of actinic keratosis with daylight photodynamic therapy

Between June and September 2016, we conducted a Phase III trial to evaluate the safety and efficacy of Ameluz ^® in combination with daylight photodynamic therapy, or daylight PDT, for the treatment of mild to moderate actinic keratosis. In the trial, Ameluz ^® was compared to Metvix ^® , which had previously obtained approval for daylight photodynamic therapy in some European countries. The intra-individual, randomized, observer-blinded, multi-center study took place at 7 sites in Spain and Germany, and evaluated a total of 52 patients, each with 3 to 9 mild to moderate actinic keratosis lesions in each of two comparable treatment areas on the face and/or scalp. For an intra-patient comparison of the treatments, each patient received daylight photodynamic therapy with Ameluz ^® , on one side, and Metvix ^® , on the other side, of the face or scalp.

The Phase III trial met its primary endpoint, exhibiting after a single treatment with daylight photodynamic therapy a total lesion clearance rate (percentage of completely cleared individual lesions per patient’s side) of 79.8 percent for the areas treated with Ameluz ^® , which demonstrated non-inferiority to treatment with Metvix ^® , in which 76.5 percent of lesions were fully cleared after one daylight photodynamic therapy (p<0.0001). Histological evaluation of lesion clearance resulted in a similar outcome, with 72.5 percent versus 66.7 percent of lesions fully cleared after treatment with Ameluz ^® and Metvix ^® , respectively, in combination with daylight photodynamic therapy.

In the Phase III trial, the secondary endpoints for treatment with Ameluz ^® in combination with daylight photodynamic therapy compared favorably with Metvix ^® and showed equivalent or better clearance rates. After a single daylight photodynamic therapy with Ameluz ^® , 85 percent of lesions on the face were fully cleared, and 72 percent of the more difficult to treat lesions on the scalp were fully cleared. After a single daylight photodynamic therapy with Metvix ^® , 84 percent of the lesions on the face were fully cleared and 65 percent of the lesions on the scalp were fully cleared. The treatment of moderate actinic keratosis lesions resulted in full clearance of 76 percent of the lesions treated with Ameluz ^® in combination with daylight photodynamic therapy, compared to 73 percent cleared by treatment with Metvix ^® in combination with daylight photodynamic therapy. Mild actinic keratosis lesions had a clearance rate of 94 percent after treatment with Ameluz ^® in combination with daylight photodynamic therapy compared to 91 percent after treatment with Metvix ^® in combination with daylight photodynamic therapy. Lesions in patients with five or fewer actinic keratoses were fully cleared in 83 percent of cases after treatment with Ameluz ^® in combination with daylight photodynamic therapy and in 81 percent of cases after treatment with Metvix ^® in combination with daylight photodynamic therapy. In patients with more than 5 actinic keratoses, 75.2 percent of lesions were fully cleared after treatment with Ameluz ^® in combination with daylight photodynamic therapy, while 77.6 percent of lesions were fully cleared after treatment with Metvix ^® in combination with daylight photodynamic therapy.

In this Phase III trial, the most notable differences between Ameluz ^® and Metvix ^® clearance rates depended on the patient’s age and the weather conditions. In patients younger than 65 years of age, the lesion clearance rate was 83 percent after treatment with Ameluz ^® in combination with daylight photodynamic therapy compared to a lesion clearance rate of 74 percent after treatment with Metvix ^® in combination with daylight photodynamic therapy. For patients treated with daylight photodynamic therapy during cloudy weather, the lesion clearance rate was 75 percent after treatment with Ameluz ^® compared to a lesion clearance rate of 66 percent after treatment with Metvix ^® . For patients treated with daylight photodynamic therapy during sunny weather, lesion clearance rates improved to 85 percent after treatment with Ameluz ^® and 83 percent after treatment with Metvix ^® . See “Research and Development and Regulatory Affairs-Ameluz ^® -Actinic Keratosis with daylight photodynamic therapy” .

There were no notable differences between Ameluz ^® and Metvix ^® in side effects in this Phase III trial. Furthermore, pain during the daylight photodynamic therapy illumination was rated by the patients on a scale of 0 (no pain) to 10 (very severe pain). The mean pain scale for Ameluz ^® was 1.2 and for Metvix ^® was 1.1.

We used these results to file, in the second quarter of 2017, for label extension in the EU for the treatment of actinic keratosis using Ameluz ^® in combination with daylight photodynamic therapy.

Our Research and Development Programs

In addition to our approved products, we also have several research and development programs.

Current Clinical Trials for Ameluz ^®

Basal Cell Carcinoma

In August 2017, we agreed with the FDA on the requirements necessary to obtain approval for our application of Ameluz ^® PDT for the treatment of superficial basal cell carcinoma in the U.S. Under the agreed plan with the FDA, our application could be based on a single additional phase III placebo-controlled pivotal trial to be conducted in the U.S., in which Ameluz ^® PDT will be compared to placebo PDT, which can be conducted with relatively few patients minimizing both time and expense. We will be required to present a combined read-out of clinical and histological clearance. In December 2017, we filed an investigational new drug application with the FDA for our proposed phase III study protocol to evaluate Ameluz® PDT for the treatment of superficial basal cell carcinoma. This investigational new drug application enables us to initiate our phase III trial to be conducted in the U.S. to compare Ameluz® PDT to placebo PDT.

In connection with this application, we are planning a study with the following design. The primary objective will be to compare the efficacy of Ameluz ^® PDT with PDT using just the vehicle that is used to deliver the active ingredient in Ameluz ^® , in combination with BF-RhodoLED ^® illumination, in the treatment of superficial basal cell carcinoma. A randomized, double blind, vehicle-controlled multicenter phase III study will be performed to evaluate the safety and efficacy of Ameluz ^® in combination with BF-RhodoLED ^® . We plan to work with 10 to 11 clinical centers in the U.S., and enroll 120 patients in order to achieve an alpha level of p<0.001. Ameluz ^® and placebo will be applied at a 3:1 ratio. The primary efficacy variable is the composite clinical and histological complete clearance rate of the patient’s main target lesion, assessed at the end of the clinical observation period, 12 weeks after the start of the first or second PDT cycle. Each PDT cycle will consist of two PDTs one to two weeks apart. Secondary objectives will include the evaluation of the safety and secondary efficacy parameters (including stratification according to lesion size, location, patient age and sex) related to Ameluz ^® and BF-RhodoLED®, also including clinical clearance of additional treated lesions on the same patients. The double blind clinical observation period for each patient will be up to 6.5 months (up to two weeks screening and pre-randomization period, and three or six months double blind part of the study) followed by a 2-year follow-up period after the start of the last PDT cycle. The recruitment phase is expected to start in the second quarter of 2018 and last for six to nine months. We may revise the design of this study based on our further discussions with the FDA.

Field-Directed Treatment of Actinic Keratosis on the Extremities and the Trunk

We have initiated a double blind, placebo controlled, intra-individual phase III trial at 4 clinical centers in Germany investigating the field-directed treatment of actinic keratosis on the extremities and the trunk with Ameluz ^® . The primary clinical endpoint of this trial is total patient clearance of all actinic keratosis. Secondary endpoints include total lesion clearance, other efficacy variables and safety endpoints. All endpoints will be stratified by lesion and patient subgroups, including lesion severity, lesion location and patient sex and age. The trial will seek to enroll 52 patients. As of November 2017, 6 potential patients had been screened, and 3 had been randomized. We originally planned to complete recruitment within 6 months, but initial randomization speed is lower than we expected. As a result, recruitment may not be complete until the third quarter of 2018. We are currently considering the addition of more clinical centers to accelerate recruitment. The clinical portion of the study is scheduled to end approximately 9 months after recruitment of the last patient. The clinical part of the study will be followed by a 1-year follow up, which will be reported separately.

Preparation of Additional Clinical Trials for Ameluz ^®

We have started preparation for the following phase III trials:

(i)

Squamous cell carcinoma: We are planning a randomized, double-blind, multi-center phase III study to evaluate the safety and efficacy of Ameluz ^® versus placebo in the treatment of Bowen’s disease (squamous cell carcinoma in situ ) with photodynamic therapy when using the BF-RhodoLED® lamp. The study is expected to have an inter-individual design similar in treatment regime and patient number to our planned trial for the treatment of superficial basal cell carcinoma in the U.S., as described above under “— Current Clinical Trials for Ameluz — Basal Cell Carcinoma.” The primary clinical endpoint will be total clearance of all of a patient’s lesions. A 2-year follow-up is planned for this trial.

(ii)

Larger treatment area: We are planning a randomized, double-blind, intra-individual, multi-center phase III study to evaluate the safety and efficacy of Ameluz ^® at an application thickness of 1 mm versus application of a thin layer of Ameluz ^® in the treatment of mild to severe actinic keratosis on the face and/or scalp with photodynamic therapy when using the BF-RhodoLED® lamp. The primary clinical endpoint will be the pairwise comparison of the percentage of cleared lesions on both sides of patients. The trial is expected to enroll 52 patients and will include a 1-year follow-up.

(iii)

Acne: This phase III trial is in the early planning stages. No trial design has been defined, and we are currently collecting information of investigators with off-label experience in this indication.

These studies have been discussed with clinical centers in Germany, and study synopses have been written and agreed upon with investigators. We delayed these trials after our discussion with the FDA regarding our phase III trial to be conducted in conjunction with our application for approval of Ameluz ^® PDT to treat superficial basal cell carcinoma in the U.S. and during preparation of that trial. Once we have received the FDA’s responses to our proposed basal cell carcinoma study protocol (which we expect to receive in the first quarter of 2018), we will determine the timeline and manner for continuing the phase III trials listed above, which will also depend on availability of sufficient funds.

BF-derm1

BF-derm1 is a drug candidate we have been developing in the form of a tablet for the treatment of severe, chronic, antihistamine-resistant urticaria, or hives. In its most severe and chronic form, this illness cannot be treated adequately using currently available drugs. The BF-derm1 tablet contains an active ingredient that covalently binds to histidine decarboxylase that we believe to be a novel mechanism of action to soothe chronic urticarial (hives). The project is currently not being actively developed. Since we expect to focus on further commercializing Ameluz ^® PDT in the next several years, we intend to seek a partner for the further development and funding of the Phase III costs and regulatory approval expenses relating to developing BF-derm1.

BF-1

Our BF-1 candidate involves a patented active ingredient that is intended to be used for the prophylactic treatment of patients who frequently suffer from migraines. We have conducted preclinical investigations concerning the tissue distribution, metabolism and toxicology of the substance. We have further conducted a Phase 0 trial involving humans in which the substance was orally administered to healthy subjects, demonstrating favorable bioavailability and pharmacokinetics of the active agent. Since these trials did not yield any critical findings, we believe further tests on humans should be conducted. Because this product candidate no longer fits our dermatological product focus, we are not actively developing it, but we intend to explore licensing opportunities.

Our Development Collaboration with Maruho

In July 2016, we entered into a collaboration and partnership agreement with Maruho, a pharmaceutical company based in Japan specializing in dermatology that is also an affiliate of Maruho Deutschland GmbH, a major shareholder of our company. This agreement provides for the joint development of up to four branded generic pharmaceutical product candidates for the European market using our proprietary formulation technology. The current agreement covers the initial part of the collaboration, in which the feasibility of the product development is tested, which we expect to be completed by the end of 2017. Under this agreement, Maruho will bear all the costs connected with the development of these pharmaceutical product candidates (subject to a cap of €2.3 million).

If these product candidates progress to clinical development, the collaboration and partnership agreement provides that we will negotiate in good faith a new agreement with Maruho, without any obligation to enter into it. Maruho has not been granted any rights to our formulation technology in the first phase of the project. The collaboration and partnership agreement provides that, if the parties ultimately determine to enter into a new agreement, Biofrontera would be granted an exclusive sublicensable right to market the product in Europe. As the agreement is related to Europe only, there are currently no firm understandings with respect to other geographical regions. The collaboration and partnership agreement further specifies that all results, information and data developed during the term of such agreement will be the property of Maruho. Any intellectual property (such as trade secrets, copyrights, patents and other patent rights, trademarks and moral rights) developed during the term of such agreement will be the joint property of us and Maruho. We do not currently expect any such intellectual property to be developed during the term of the agreement. The collaboration and partnership agreement prohibits us from manufacturing, selling or otherwise dealing in any products similar to and competitive with the product candidates developed under the agreement without Maruho's consent. Maruho has the right to terminate the collaboration and partnership agreement for any or no reason. We believe that these development projects will not yield any products for commercial launch before 2020.

Our Cosmetic Skin Care Products — Belixos ^®

Our Belixos ^® line is our over-the-counter line of skin care cosmetics products developed by us to help moisturize and soothe dry, itchy and irritated or sun-damaged skin. Our Belixos ^® cosmetic products are available for sale in Germany and certain other European countries at selected pharmacies, dermatological institutes, and through local Amazon websites. These cosmetic products are not currently available for sale in the U.S.

Sales, marketing and distribution

We are currently selling Ameluz ^® in the U.S., in 11 countries in Europe and in Israel.

Sales, marketing and distribution in Europe and Israel

With its central European approval, Ameluz ^® for the photodynamic therapy treatment of actinic keratosis and basal cell carcinoma, can be sold and distributed in all EU countries as well as in Norway, Iceland, and Liechtenstein. We have marketed and sold Ameluz ^® to dermatologists in Germany and, since March 2015, also in Spain through our own field sales force. We sell Ameluz ^® in other countries within the European Union, in Switzerland and in Israel through license partners.

In many European countries, the price and the medical reimbursement status have to be defined prior to market launch, which can be a lengthy process. To date, in Europe our company or our license partners have commenced sales in Germany, Spain, Austria, the Netherlands, Luxembourg, Belgium, Denmark, Sweden, Norway, the UK and Switzerland. The medication is available in these countries at a pharmacy retail price of between approximately €150 – €270 per 2 gram tube.

In the EU, distribution to public pharmacies generally takes place via pharmaceutical wholesalers, whereas hospital pharmacies may also be supplied directly. In addition to regular visits by our field sales force to dermatologists, we have since launch presented Ameluz ^® at major dermatological conferences both in Germany and in other European countries.

We have a license and supply agreement with Desitin Arzneimittel GmbH to market and sell Ameluz ^® and the BF-RhodoLED lamp in Denmark, Sweden, and Norway; and we have a license and supply agreement with Pelpharma Handels GmbH to market and sell Ameluz ^® and the BF-RhodoLED lamp in Austria.

We terminated a marketing collaboration agreement with Spirit Healthcare Limited to market Ameluz ^® in the UK and Ireland in July 2015.

On September 13, 2017, we terminated our license and supply agreement with BiPharma B.V., effective as of October 31, 2017.

We initially marketed and sold Ameluz ^® in Spain pursuant to an agreement with Allergan SA. After termination of this agreement, since March 2015 we have marketed and sold our products in Spain through our branch, Biofrontera Pharma GmbH sucursal en España.

We have a license and supply agreement with Louis Widmer SA in which we have granted a distribution license for Ameluz ^® and the BF-RhodoLED lamp in Switzerland and Liechtenstein. We have a license and supply agreement with Perrigo Israel Agencies Ltd. in which we have granted a distribution license for Ameluz ^® and the BF-RhodoLED lamp in Israel, the West Bank and the Gaza Strip. In these regions, the licensees were required to obtain independent regulatory approvals in collaboration with Biofrontera. In Switzerland, the regulatory approvals for Ameluz ^® and reimbursement were issued in December 2015 and commercial launch commenced in the beginning of 2016. In Israel, regulatory approval for Ameluz ^® was granted by the Israeli health agency in April 2016, reimbursement for treatment with Ameluz ^® of immunosuppressed patients was subsequently granted. We commenced sales in Israel in July 2017.

In these agreements with our sales partners the sales partners purchase Ameluz ^® from us at a price that is linked to their own anticipated sales price. Our share of the sales price varies, depending on market conditions within each country or region, range from 35% to 60% of net revenue.

Sales, marketing and distribution in the U.S.

We decided to market and sell Ameluz ^® in combination with BF-RhodoLED ^® for the treatment of actinic keratosis in the U.S. with our own sales force, and launched the commercialization of Ameluz ^® and BF-RhodoLED ^® for actinic keratosis in October 2016. Prior to launch, and with the help of a consulting firm specializing in market access, we analyzed the reimbursement mechanisms for photodynamic therapy in the U.S. healthcare system. Ameluz ^® is distributed as a buy-and-bill drug that is purchased by the dermatologist, rather than distribution through pharmacies.

Sales in the U.S. are made through our wholly-owned subsidiary, Biofrontera Inc., a Delaware corporation, which we established in March 2015. Based on our experience, we concluded that we could most effectively market our products in the U.S. by using our own sales force, which we can train to sell our drug Ameluz ^® in combination with the BF-RhodoLED ^® lamp and related procedure. During 2016, we hired 26 employees for our U.S. marketing and sales efforts, and we launched the commercialization of Ameluz ^® and BF-RhodoLED ^® for actinic keratosis in the U.S. in October 2016. We have filled the key positions for our U.S. operations with qualified and experienced employees, and we expect to continue to fill positions and build our field sales force for the market. Several of our employees have joined us from competitors and, as a result, have specific experience with the photodynamic therapy market sector, including experience in selling medication as a buy-and-bill combination product. This is particularly helpful to us because, in the U.S., we sell Ameluz ^® in combination with our BF-RhodoLED ^® photodynamic therapy lamp.

Group structure

The Biofrontera group consists of a parent company, Biofrontera AG, and five wholly-owned subsidiaries, Biofrontera Bioscience GmbH, Biofrontera Pharma GmbH, Biofrontera Development GmbH, Biofrontera Neuroscience GmbH and Biofrontera Inc. All companies are based at Hemmelrather Weg 201, 51377 Leverkusen, Germany, except Biofrontera Inc., which is based at 201 Edgewater Dr., Wakefield, Massachusetts 01880, U.S.

Biofrontera AG is a holding company that leads financing activities for the group. Its subsidiary Biofrontera Bioscience GmbH has responsibility for research and development activities for the group and holds our patents and approvals for Ameluz ^® . Pursuant to a license agreement with Biofrontera Bioscience GmbH, our subsidiary Biofrontera Pharma GmbH is responsible for the manufacturing and further licensing and marketing of our approved products.

We established Biofrontera Development GmbH and Biofrontera Neuroscience GmbH in December 2012 as additional wholly owned subsidiaries of Biofrontera AG. The purpose of these subsidiaries is to pursue the further development of pipeline products that are not part of our core business. To this end, in December 2012, Biofrontera AG purchased two projects, BF-derm1 and BF-1, from Biofrontera Bioscience GmbH pursuant to purchase and transfer agreements, and then transferred the projects to the two new subsidiaries, with the contribution agreement being effective from December 31, 2012. The product candidate BF-derm1, which we intend to develop as a treatment for severe chronic urticarial (hives), is the responsibility of Biofrontera Development GmbH, while the product candidate BF-1, which we intend to develop as a prophylactic treatment for migraines, is the responsibility of Biofrontera Neuroscience GmbH. Although we are not developing these two product candidates at this time, if we chose to develop them in the future we believe this corporate structure will better allow us to finance such development.

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We established Biofrontera Inc., a Delaware corporation, as a wholly-owned subsidiary, with a headquarters in Wakefield, Massachusetts to pursue our business and commercialization efforts in the U.S. under a license from our wholly-owned subsidiary Biofrontera Pharma GmbH.

Research and Development and Regulatory Affairs

Ameluz ^®

To date, we have focused our research and development efforts on Ameluz ^® in order to try to optimize its market potential. We have advanced our Ameluz ^® development program through additional clinical trials with the goal of extending approved indications and achieving better market positioning.

We have conducted three Phase III trials for Ameluz ^® . Two of them, trials CT002 and CT003, including 12-month follow-up studies, were used to apply for the centralized European marketing approval with the EMA. The third Phase III trial, CT007, was conducted to test Ameluz ^® for use in combination with our own light source, the BF-RhodoLED ^® lamp, as well as testing for field cancerization therapy. In September 2010, we submitted the dossier for Ameluz ^® for the treatment of actinic keratosis to the EMA for centralized EU approval, and obtained marketing approval in December 2011. In July 2015, we filed an NDA with the FDA for Ameluz ^® and our BF-RhodoLED ^® . In May 2016, we received approval from the FDA to market in the U.S. Ameluz ^® in combination with photodynamic therapy using our BF-RhodoLED ^® lamp for lesion-directed and field-directed treatment of actinic keratoses of mild-to-moderate severity on the face and scalp.

The summary of clinical trials below discusses confidence intervals in relation to those trials. For clinical endpoints that are binary (i.e., the specified endpoint either is observed or not observed with respect to a patient), the result of a trial is a single number describing the percentage of patients reaching the endpoint. An example of this type of endpoint is total patient clearance, where patients are observed either to reach total clearance or not to do so. Total patient clearance is the primary endpoint in most of our trials. When the clinical endpoint is binary, there is no specific numerical result associated with individual patients, which does not give rise to a confidence interval for the results of the trial. In order to establish a confidence interval for such a trial, statisticians assume a binominal distribution, which forms the basis for the confidence interval. For a trial design where observation of the primary endpoint yields a quantifiable value for each patient, a confidence interval naturally arises from the results of the trial. For example, the primary clinical endpoint for our trial studying the safety and efficacy of Ameluz ^® in combination with daylight photodynamic therapy for the treatment of mild to moderate actinic keratosis was the pairwise comparison of the percentage of fully cleared lesions on each side of a patient’s body. See “— Actinic Keratosis with photodynamic therapy” below for more information. In such a trial, a confidence interval can be defined based on the distribution of values among all patients. The p-value is then calculated based on the difference between the average results of the two clinical groups and the size of the confidence intervals. A p-value of <0.05 is considered a significant result; however, at this level the FDA requires two independent trials to verify the result. The FDA may waive the requirement of a second trial if the first trial was excellent in all respects, including a higher p-value.

Actinic Keratosis

We evaluated the efficacy and safety of Ameluz ^® in combination with photodynamic therapy to treat mild and moderate actinic keratosis lesions on the face/forehead and/or bald scalp, using a narrow spectrum (red light lamp) light source in three pivotal, randomized, multicenter clinical Phase 3 trials (Trials 1, 2, and 3). Trial 1 was double-blind with respect to vehicle and observer-blind regarding the active comparator arm. Trials 2 and 3 were vehicle-controlled and double-blind. Each of these clinical trials included a follow-up assessment after 6 and 12 months.

In these trials, 212 patients with 4 to 8 mild to moderate actinic keratosis lesions on the face/forehead and/or bald scalp were treated with Ameluz ^® and a narrow spectrum red light source. Patients ranged from 49 to 87 years of age (with a mean of 71 years), and 92% had Fitzpatrick skin type I (always burns, never tans), Fitzpatrick skin type II (usually burns, tans minimally), or Fitzpatrick skin type III (sometimes mild burn, tans uniformly). No patients had Fitzpatrick skin type V (very rarely burns, tans very easily) or VI (never burns, always tans). Approximately 86% of the patients were male, and all of the patients were Caucasian.

All sessions were comprised of lesion preparation to roughen the surface and remove crusts, application of Ameluz ^® with occlusion for 3 hours, and removal of the residual gel. Subsequently, the entire treatment area was given photodynamic therapy; it was illuminated with a narrow spectrum red light source, a lamp of either 630 nm or 633 nm, and a light dose of approximately 37 J/cm ² . In Trial 3, illumination of the treatment area was performed with our BF-RhodoLED ^® lamp, a narrow spectrum red light source, around 635 nm, and a light dose of approximately 37 J/cm ² .

In all trials, the lesions that were not completely cleared 12 weeks after the initial treatment were treated a second time with an identical regimen. In the trials, 42% (88/212) of the patients treated with Ameluz ^® needed a second photodynamic therapy.

The primary endpoint for all trials was complete clearance of all of a patient’s lesions 12 weeks after the last photodynamic therapy.

Trial 1 was performed in Germany, Austria and Switzerland. Trials 2 and 3 were performed in Germany. The results of Trials 1, 2 and 3 as shown in the U.S. package inserts, or USPI, are presented in Table 2.

Table 2: Complete clearance 12 weeks after the last narrow spectrum photodynamic therapy in patients with actinic keratoses

	Narrow Spectrum photodynamic therapy
	Ameluz ^®	Vehicle
Trial 1	106/125 (85%)	5/39 (13%)
Trial 2	27/32 (84%) *	2/16 (13%) *
Trial 3	50/55 (91%)	7/32 (22%)

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*In the EU product information, the EMA reviewers considered one less patient as part of the ITT population, such that in the European product information the clearance rate of Trial 2 is shown as 87%. The FDA reviewers’ position was that the ITT population includes all subjects randomized to treatment, whether or not they have had any post-baseline assessments, and included one more patient in the Ameluz ^® and the vehicle groups.

Patients who achieved complete clearance at 12 weeks after the last photodynamic therapy entered a 12-month follow-up period. In the three trials, patients who received Ameluz ^® with the narrow spectrum photodynamic therapy and achieved complete clearance 12 weeks after the last photodynamic therapy, had recurrence rates of 14%, 11%, and 25% in Trials 1, 2 and 3, respectively, at 6 months, and recurrence rates of 40%, 22%, and 37% in Trials 1, 2 and 3, respectively, at 12 months. Recurrence was defined as the percentage of patients with at least one recurrent lesion during the 6-month or 12-month follow up period in patients with completely cleared lesions 12 weeks after the last photodynamic therapy.

Trial 1

In Trial 1, a randomized, observer blinded clinical trial with 571 patients and a follow-up duration of 6 months and 12 months, photodynamic therapy with Ameluz ^® was tested for non-inferiority to Metvix and superiority over placebo. The red light sources were either narrow spectrum lamps (Aktilite CL 128 or Omnilux photodynamic therapy) or lamps with a broader and continuous light spectrum (Waldmann photodynamic therapy 1200 L, or Hydrosun Photodyn 505 or 750). The primary endpoint was complete patient clearance 12 weeks after the last photodynamic therapy on average with all lamp types. Ameluz ^® (78.2%) was significantly more effective than MAL (64.2%, [97.5%- confidence interval: 5.9; ∞], P<0.05) and placebo (17.1%, [95%-confidence interval: 51.2; 71.0], P<0.05). Total lesion clearance rates were higher for Ameluz ^® (90.4%) compared to MAL (83.2%) and placebo (37.1%). Clearance rates and tolerability were dependent on the illumination source. The following table presents the efficacy and the adverse reactions transient pain and erythema occurring at the application site during photodynamic therapy with different light sources.

Table 2a: Efficacy and adverse reactions (transient pain and erythema) occurring at the application site during photodynamic therapy with different light sources for the treatment of actinic keratosis

Light	Medicinal	Total patient clearance		Application site erythema (%)						Application site pain (%)
source	product	(%)		mild		moderate		severe		mild		moderate		severe
Narrow	Ameluz ^®		85		13		43		35		12		33		46
Spectrum	MAL		68		18		43		29		12		33		48
Broad	Ameluz ^®		72		32		29		6		17		25		5
Spectrum	MAL		61		31		33		3		20		23		8

Clinical efficacy was re-assessed at follow-up visits 6 months and 12 months after the last photodynamic therapy. Recurrence rates after 12 months were slightly better for Ameluz ^® (41.6%, [95%-confidence interval: 34.4; 49.1]) as compared to MAL (44.8%, [95%-confidence interval: 36.8; 53.0]) and dependent on the light spectrum used for illumination, in favor of narrow spectrum lamps. The probability of a patient to be completely cleared 12 months after the last treatment was 53.1% or 47.2% for treatment with Ameluz ^® with narrow spectrum lamps or all lamp types, respectively, and 40.8% or 36.3% for treatment with MAL with narrow spectrum lamps or all lamp types, respectively. The probability of patients in the Ameluz ^® group to require only one treatment and remain completely cleared 12 months after the photodynamic therapy treatment was 32.3% that of patients in the MAL group 22.4% on average with all lamps.

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Trial 2

In Trial 2, Ameluz ^® was compared with placebo treatment in a randomized, double-blind clinical trial enrolling 122 patients. The red light source used was either a narrow spectrum, around 630 nm at a light dose of 37 J/cm2 (Aktilite CL 128), or a broader and continuous spectrum, in a range between 570 and 670 nm, at a light dose of 170 J/cm2 (Photodyn 750). The primary endpoint was complete patient clearance 12 weeks after the last photodynamic therapy. Photodynamic therapy with Ameluz ^® (66.3%) was significantly more effective than with placebo (12.5%, p < 0.0001). Total lesion clearance was higher for Ameluz ^® (81.1%) compared to placebo (20.9%). Clearance rates and tolerability were dependent on the illumination source, with the narrow spectrum light source being more effective. Clinical efficacy was maintained during the follow-up periods of 6 months and 12 months after the last photodynamic therapy. The probability of a patient being completely cleared 12 months after the last photodynamic therapy was 67.5% or 46.8% for treatment with Ameluz ^® with narrow spectrum lamps or all lamp types, respectively.

Table 2b: Efficacy and adverse reactions (transient pain and erythema) occurring at the application site during photodynamic therapy with different light sources for the treatment of actinic keratosis

Light	Medicinal	Total patient	Application site erythema (%)						Application site pain (%)
source	product	clearance (%)	mild		moderate		severe		mild		moderate		severe
Narrow Spectrum	Ameluz ^®	84 (87 in EU product information)*		26		67		7		30		35		16
Broad Spectrum	Ameluz ^®	53		47		19		0		35		14		0

* See footnote to Table 2 above.

Trial 3

In Trial 3, one entire tube of Ameluz ^® was used for each photodynamic therapy session on skin areas with field cancerization containing several actinic keratosis lesions. A total of 87 patients were treated with one PDT using Ameluz ^® or vehicle, which was repeated if residual lesions remained. Illumination was performed with our BF-RhodoLED ^® lamp. Complete patient clearance 12 weeks after the last photodynamic therapy was 91% in the Ameluz ^® group and 22% in the vehicle group, respectively (p < 0.0001). The clearance rate for patients with lesions on the face was 97% while the clearance rate for patients with lesions on the scalp was 82%. Lesion clearance rates were 94% 12 weeks after the last photodynamic therapy, of which 6% were recurrent at 6 months after the last photodynamic therapy, and an additional 3% (a total of 9%) were recurrent at 12 months after the last photodynamic therapy. The clearance rate for patients with mild lesions only was 99%, while the clearance rate for patients with moderate lesions was 92%.

In this Trial, by testing larger skin areas, we could also investigate the effect of photodynamic therapy on skin impairment. The proportion of patients with impaired skin surface, including rough, dry and scaly skin, decreased from 85% to 28% within 12 months after treatment with Ameluz ^® . Patients with skin hyperpigmentation or hypopigmentation decreased from 59% to 24% and from 46% to 11%, respectively. The proportion of patients with mottled pigmentation, mixed hyperpigmentation and hypopigmentation, decreased from 48% to 18%. Before treatment, 26% of the patients had mild scarring, this decreased to 7% of patients after treatment. Atrophic skin was diagnosed in 31% of patients before treatment, but only in 4% of patients 12 months after treatment.

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Table 3: Skin quality parameters in the treated area during 12- month follow-up

		Ameluz ^®						Vehicle
Type of skin impairment	Severity	Before photodynamic therapy			12 months after photodynamic therapy			Before photodynamic therapy			12 months after photodynamic therapy
Roughness/	None		15	%		72	%		11	%		58	%
dryness/	Mild		50	%		26	%		56	%		35	%
scaliness	Moderate/severe		35	%		2	%		33	%		8	%
Hyper-	None		41	%		76	%		30	%		62	%
pigmentation	Mild		52	%		24	%		59	%		35	%
	Moderate/severe		7	%		0	%		11	%		4	%
Hypo-	None		54	%		89	%		52	%		69	%
pigmentation	Mild		43	%		11	%		44	%		27	%
	Moderate/severe		4	%		0	%		4	%		4	%
Mottled or	None		52	%		82	%		48	%		73	%
irregular	Mild		44	%		17	%		41	%		15	%
pigmentation	Moderate/severe		4	%		2	%		11	%		12	%
Scarring	None		74	%		93	%		74	%		89	%
	Mild		22	%		7	%		22	%		12	%
	Moderate/severe		4	%		0	%		4	%		0	%
Atrophy	None		69	%		96	%		70	%		92	%
	Mild		30	%		4	%		30	%		8	%
	Moderate/severe		2	%		0	%		0	%		0	%

Basal Cell Carcinoma

We performed an additional Phase III clinical trial in Germany and the UK for Ameluz ^® to test the efficacy of treating basal cell carcinoma with Ameluz ^® and photodynamic therapy. After completion of the trial, patients entered a 5-year follow-up phase.

In this Phase III trial, efficacy and safety of Ameluz ^® for the treatment of non-aggressive basal cell carcinoma with a thickness of up to 2mm was evaluated in 281 patients. A total of 138 patients were treated with Ameluz ^® in combination with photodynamic therapy. After excluding drop-outs and patients with major protocol violations, the per-protocol set comprised 121 patients with 148 lesions. All patients had 1 to 3 basal cell carcinoma lesions on the face/forehead, bald scalp, extremities and/or neck/trunk. In this trial, photodynamic therapy with Ameluz ^® was tested for non-inferiority as compared to photodynamic therapy with a cream (Metvix ^® ) containing 16% methyl-aminolevulinate (MAL, methyl-[5-amino-4-oxopentanoate]). Our BF-RhodoLED ^® was used as the red light source, which provided a narrow spectrum around 635 nm at a light dose of 37 J/cm ² . The primary endpoint was complete patient clearance 12 weeks after the last photodynamic therapy.

The complete patient clearance rate for photodynamic therapy with Ameluz ^® was 93.4%, compared to 91.8% for the photodynamic therapy with MAL (Metvix ^® ). The trial demonstrated the non-inferiority of Ameluz ^® compared to MAL (Metvix ^® ) cream [97.5% -confidence interval -6.5]. Of the basal cell carcinoma lesions, 94.6% were cleared by treating with photodynamic therapy and Ameluz ^® , whereas 92.9% were cleared by treating with photodynamic therapy and MAL (Metvix ^® ). For nodular basal cell carcinoma, 89.3% of the lesions were cleared with photodynamic therapy and Ameluz ^® , whereas 78.6% of the lesions were cleared with photodynamic therapy and MAL. Adverse events and tolerability were comparable for both treatments.

Clinical efficacy was re-assessed at follow-up visits 6 months and 12 months after the last photodynamic therapy. Lesion recurrence rates 6 months and 12 months after the last photodynamic therapy were 2.9% and 6.7%, respectively, for Ameluz ^® , and 4.3% and 8.2%, respectively, for MAL (Metvix ^® ). For this Trial, patients will be assessed up to five years after the last photodynamic therapy.

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Table 4: Efficacy of photodynamic therapy for the treatment of basal cell carcinoma for all patients and selected subgroups

	Ameluz ^® Patient number number (%)			Ameluz ^® Full patient clearance number (%)			Ameluz ^® Full lesion clearance number (%)			MAL Patient number number (%)			MAL Full patient clearance number (%)			MAL Full lesion clearance number (%)
Total		121			113			140			110			101			118
					(93.4	)		(94.6	)					(91.8	)		(92.9	)
Subgroups:
Patients with more than 1 basal cell carcinoma		23			23/23			n.a.			16			14/16			n.a.
		(19.0	)		(100.0	)					(14.5	)		(87.5	)
Superficial (only)		95			90/95			114/119			83			80/83			95/98
		(78.5	)		(94.7	)		(95.8)			(75.5	)		(96.4	)		(96.9	)
Nodular (only)		21			18/21			25/28			21			16/21			22/28
		(17.4	)		(85.7	)		(89.3	)		(19.1	)		(76.2	)		(78.6	)
Others (including mixed [s/n] basal cell carcinomas)		5			5/5			1/1			6			5/6			1/1
		(4.1	)		(100.0	)		(100.0	)		(5.5	)		(83.3	)		(100.0	)
Thickness >1mm		n.a.			n.a.			8/11			n.a.			n.a.			8/12
								(72.7	)								(66.7	)
basal cell carcinoma on the head (only)		13			10/13			14/17			14			10/14			12/17
		(10.7	)		(76.9	)		(82.4	)		(12.7	)		(71.4	)		(70.6	)
basal cell carcinoma on the trunk (only)		77			75/77			95/97			73			70/73			84/87
		(63.6	)		(97.4	)		(97.9	)		(66.4	)		(95.9	)		(96.6	)

Patient distribution in the subgroups was similar for both products and represents the distribution in the general population, where more than 70% of basal cell carcinomas are located in the head/trunk region. Basal cell carcinomas located in this region mainly belong to the superficial subtype. In conclusion, even though subgroup sizes are too small to draw significant conclusions on individual groups, the distribution of the two products to the relevant subgroups is very similar. Thus, it seems not plausible that an imbalance in subgroups could negatively impact the non-inferiority claim of the primary study endpoint or the general trends observed across all subgroups.

Actinic Keratosis with daylight photodynamic therapy

Between June and September 2016, we conducted a Phase III trial in Germany and Spain to evaluate the safety and efficacy of Ameluz ^® in combination with daylight photodynamic therapy for the treatment of mild to moderate actinic keratosis. In the trial, Ameluz ^® was compared to Metvix ^® , which has marketing approval for daylight photodynamic therapy treatment of actinic keratosis in some European countries. The intra-individual, randomized, observer-blinded, multi-center study took place at 7 sites in Spain and Germany, and evaluated a total of 52 patients, each with 3 to 9 mild to moderate actinic keratosis lesions in each of two comparable treatment areas on the face and/or scalp. For an intra-patient comparison of the treatments, each patient received daylight photodynamic therapy treatment with Ameluz ^® , on one side, and Metvix ^® , on the other side, of the face or scalp.

After a single daylight photodynamic therapy with Ameluz ^® , 79% of the actinic keratosis lesions were cleared, compared to 75% with Metvix ^® (intent-to-treat population), demonstrating the non-inferiority of Ameluz ^® (p < 0.0001). Subgroup analyses shown in the table below generally showed higher clearance rates for Ameluz ^® versus Metvix ^® .

Table 5: Total lesion clearance 12 weeks after a single photodynamic therapy with Ameluz ^® or Metvix ^®

	Ameluz ^® (%)		Metvix ^® (%)

All lesions		79		75
Age < 65		83		74
Age >65 to < 84		78		75
Face		85		84
Scalp		72		65
Mild		94		91
Moderate		76		73
≤ 5 lesions per side		83		81
> 5 lesions per side		77		72
Histologically controlled clearance		73		67
Expression of the tumor marker p53		34		41

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This Phase III trial will be followed by assessments of lesion recurrence 6 months and 12 months after the treatment with daylight photodynamic therapy.

Intellectual Property

In the ordinary course of our business, we seek to protect commercially important products, product candidates and technology through a combination of patents, trademarks, processes, proprietary know-how and information, regulatory exclusivity and contractual restrictions on disclosure in the U.S., EU and/or other foreign markets, including filing of applications for German utility models. In addition, we rely upon trade secrets and contractual arrangements to protect proprietary information that may be important to the development and operation of our business and intend to file for, prosecute, maintain or license the intellectual property that we believe is relevant to the strategic needs of our business.

Trademarks

We have filed for and received trademark protection for Biofrontera ^® (as word marks), several Biofrontera ^® figurative marks, the figurative mark Natural heritage with herbal biocolloids ^® in two embodiments as well as for the Ameluz ^® , Belixos ^® , BF-RhodoLED ^® and Rhodoled ^® word marks the EU, the U.S. and/or certain other jurisdictions. The word marks BF-200 ALA ^® and Nanoxosan ^® are registered in Austria, Germany, and Switzerland. The word marks Lumixeen ^® and Dynala ^® are registered in Germany and the word mark Gefühlt mir ^® is registered in the EU and in Switzerland.

A Biofrontera ^® word mark is registered in Armenia, Australia, China, the EU, Iran, Japan, Norway, Russia, Singapore, South Korea, Switzerland, Syria, and the U.S. with an International Registration. Two national Biofrontera ^® word marks are registered in Chile, for the classes 1 and 5, respectively.

A Biofrontera ^® figurative mark is registered in Armenia, Australia, China, the EU, Germany, Iran, Japan, Norway, Russia, South Korea, Singapore, Switzerland, Syria and the U.S. with an International Registration. Another Biofrontera ^® combined mark is registered in Switzerland and a third Biofrontera ^® figurative mark is registered in the EU.

An Ameluz ^® word mark is registered in Armenia, Australia, China, the EU, Iran, Liechtenstein, Norway, Russia, Singapore, South Korea, Switzerland, Syria, and the U.S. with an International Registration. Other national Ameluz ^® word marks are registered in Germany and Israel. Another national Ameluz ^® word mark is pending in Canada.

A Belixos ^® word mark is registered in Class 3 in Algerian, Armenia, Australia, Bahrain, China, the EU, Iran, Japan, Morocco, Norway, Russia, Singapore, South Korea, Sudan, Sultan Oman, Switzerland, Syria, and the U.S. with an International Registration. Other national Belixos ^® word marks are registered in Brazil, Germany, Kuwait, Lebanon, Qatar, Saudi Arabia, Tunisia, the United Arab Emirates, and Yemen. Other Belixos ^® word marks are pending in Iraq and Libya. A Belixos ^® word mark is registered in Class 5 in Armenia, Australia, China, the EU, Iran, Japan, Norway, Russia, Singapore, South Korea, Switzerland, Syria and the U.S. with an International Registration. Other national Belixos ^® word marks are registered in Canada, Germany, and Israel.

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A BF-Rhodoled ^® word mark is registered in Armenia, Australia, China, the EU, Iran, Japan, Norway, Liechtenstein, Russia, Singapore, South Korea, Switzerland, Syria and the U.S. with an International Registration. Other national BF-Rhodoled ^® word marks are registered in Canada, Germany, and Israel.

A Rhodoled ^® word mark is registered in Armenia, Australia, China, the EU, Iran, Japan, Norway, Russia, Singapore, South Korea, Switzerland, Syria, and the U.S. with an International Registration. Other national Rhodoled ^® word marks are registered in Canada, Germany, and Israel.

Patents

We have filed for and received issued patents in various jurisdictions for our technologies relating to our nanoemulsion, nanoemulsions with 5-aminolevulinic acid, and derivatives of 4-(Thio- or Seleno-xanthene-9-ylidine)-Piperidine or Acridine and its use as a selective 5-HT2B receptor.

We have been issued composition of matter patents for our nanoemulsion technology in the EU (for France, Germany, Italy, Spain, Switzerland, and the UK), Australia, Belarus, Canada, Chile, China, Hong Kong, India, Israel, Japan, Mexico, New Zealand, Russia, South Africa, Singapore, and the Ukraine. Patent protection in these jurisdictions will expire on December 21, 2027. We have filed patent applications, which are pending, in Argentina, Brazil, Paraguay, the United Arab Emirates, Uruguay, and the U.S.

We have been issued composition of matter patents for our technology relating to nanoemulsion of 5-aminolevulinic acid in Australia, Canada, the EU (for Germany and Switzerland), Israel, and the U.S. Patent protection in these jurisdictions will expire on November 12, 2019.

We have been issued composition of matter patents for our technology relating to derivatives of 4-(Thio- or Seleno-xanthene-9-ylidine)-Piperidine or Acridine and its use as a selective 5-HT2B receptor in Australia, Canada, China, the European Union (for Denmark, France, Germany, Italy, Netherlands, Spain, Sweden, Switzerland, Turkey, and the UK), India, Japan, Russia, South Africa, South Korea, and the U.S. Patent protection in these jurisdictions will expire on October 23, 2022. These patents relate to our developmental migraine prophylaxis product candidate BF-1.

We have filed an international patent application regarding anti-migraine compounds and their use through the World Intellectual Property Organization, and national phases have commenced in the EU and the U.S. Two U.S. patents have been granted, expiring in January, 2022 and January, 2034.

We have additionally filed a German utility model for our technology relating to pharmaceutical and/or cosmetic compositions for treating skin, which provides a type of intellectual property protection for a period of eight years after filing of the application, so that it will expire on April 9, 2018.

The composition of matter patent family that protects the combination of nanoemulsions with aminolevulinic acid hydrochloride, an active ingredient in Ameluz ^® , against copying by competitors will expire on November 12, 2019. This patent family includes U.S. Patent No. 6,559,183, which is listed in the U.S. Food and Drug Administration Orange Book and identified as covering nanoemulsions combined with aminolevulinic acid hydrochloride, the active ingredient in Ameluz ^® . Upon expiration of this patent family, we will not be able to rely on the expired patents to prevent competitors from copying, making, or selling the active ingredient used in Ameluz ^® . The additional patent application on the specific nanoemulsion developed for Ameluz ^® would extend the protection until December 21, 2027. This additional patent has been granted in many countries but has not yet been (and may never be) granted in the U.S. However, we believe that the risk presented by future generic competition is mitigated by specific challenges in developing generic topical dermatological products, including regulatory hurdles, that may deter potential generic competitors. Nonetheless, if we are unable to prevent manufacture and sales of the active ingredient in Ameluz ^® in combination with our specific nanoemulsion, we may not be able to maintain a competitive advantage in our market, which could materially adversely affect our business, results of operations and financial condition.

To our knowledge, there are no contested proceedings or third party claims relating to any of our patent applications. We are not aware of any impediments to the granting of patent or other intellectual property protection for the various technologies for which we have made filings or otherwise applied for protection. However, these applications may never issue as patents, and our issued patents, and any others that may issue in the future, may be challenged, invalidated, rendered unenforceable, or circumvented by third parties.

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Trade Secrets and Proprietary Information

Trade secrets play an important role in protecting our products, product candidates and technology and provide protection beyond patents, trademarks, processes, proprietary know-how and information, regulatory exclusivity and contractual restrictions on disclosure in the U.S., EU and/or other foreign markets. The scale-up and commercial manufacture of our products involve processes and in-process and release analytical techniques that we believe are unique to us. Accordingly, we seek to protect our proprietary information by requiring our employees, consultants and other advisors to execute proprietary information and confidentiality agreements upon the commencement of their employment or engagement. These agreements generally provide that all confidential information developed or made known during the course of the relationship with us be kept confidential and not be disclosed to third parties except in specific circumstances. In the case of our employees, the agreements also typically provide that all inventions resulting from work performed for us, utilizing our property or relating to our business and conceived or completed during employment shall be our exclusive property to the extent permitted by law. Where appropriate, agreements we obtain with our consultants also typically contain similar assignment of invention obligations. Further, we require confidentiality agreements from entities that receive our confidential data or materials.

Competition

There are many pharmaceutical companies that compete with us in the field of dermatology, including in the photodynamic therapy market. The pharmaceutical and biotechnology industry is characterized by intense competition and rapid and significant innovation and change. Our competitors may be able to develop other drugs or products that are able to achieve similar or better results than our product candidates or marketed products. Several of these companies have significantly greater experience than we do in developing products, conducting preclinical and clinical testing, and obtaining regulatory approvals to commercialize products for health care. Our competitors include organizations such as major multinational pharmaceutical companies, established biotechnology companies, specialty pharmaceutical companies and generic drug companies. Many of our competitors have greater financial and other resources than we have, such as more commercial resources, larger research and development staffs, and more extensive marketing and manufacturing facilities and organizations. Our competitors may succeed in developing, acquiring or licensing on an exclusive basis technologies and products that are more effective or less costly than Ameluz ^® or any other products that we sell or are developing or that we may develop, which could render our products obsolete and noncompetitive. Our competitiveness may also be affected by our ability to manufacture and commercialize our products and by the level of reimbursement for the cost of our drug and treatment by third party payors, such as insurance companies, health maintenance organizations and government agencies.

Competition in the EU

There are a few other companies that are selling photodynamic therapy agents other than Ameluz ^® for the treatment of actinic keratoses and certain other skin conditions. Our major competitor in the EU is methyl aminolaevulinate (160mg/g) (MAL) Metvix ^® /Metvixia ^® , a drug owned and distributed by Galderma S.A., which is used in photodynamic therapy with red light. Its approved indications include: the treatment of thin or non-hyperkeratotic and non-pigmented actinic keratoses on the face and scalp when other therapies are considered less appropriate; the treatment of superficial and/or nodular basal cell carcinoma unsuitable for other available therapies due to possible treatment related morbidity and poor cosmetic outcome, such as lesions on the mid-face or ears, lesions on severely sun damaged skin, large lesions, or recurrent lesions; and the treatment of squamous cell carcinoma in situ (Bowen´s disease) when surgical excision is considered less appropriate. Metvix is indicated in adults above 18 years of age. We believe that, historically, we lost sales of Ameluz ^® in the EU to Metvix because Metvix was approved in the EU to treat both actinic keratosis and basal cell carcinoma. Since obtaining our indication extension to treat basal cell carcinoma in the EU in 2016, we expect improved sales of Ameluz ^® in the EU because of our product’s generally higher clearance rates, especially for thicker and nodular carcinomas, as demonstrated in our clinical trials.

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Metvix ^® has also recently been approved in the EU for use in daylight photodynamic therapy for which it is sold by Galderma under the brand name Luxerm ^® in Germany and Luxera ^® in other European countries. This gives that drug a competitive advantage compared to Ameluz ^® , as Ameluz ^® is not yet approved to be used in daylight photodynamic therapy to treat actinic keratosis. We have applied to extend our indication for Ameluz ^® to daylight photodynamic therapy in the EU and believe that we may receive this extension as early as the first half of 2018 to better compete with Metvix ^® and Luxerm ^® , but there can be no assurance that we will do so.

A patch containing 5-ALA (Alacare ^® ), which is owned and sold by Galderma, is approved for the treatment of mild actinic keratosis in a single treatment session in combination with red light without pretreatment of the lesion.

In addition, we also compete with a number of non-photodynamic therapy products for the treatment of actinic keratoses and certain other skin conditions, including: Efudex ^® (5-fluorouracil), sold by Valeant; Solaraze ^® (diclofenac sodium), sold by Almirall; ALDARA ^® and Zyclara ^® (imiquimod), sold by Meda Pharma; Picato ^® (Ingenolmebutat), sold by LEO Pharma; and Actikerall ^® (5-fluorouracil and salicylic acid) sold by Almirall.

The relative efficacy of different treatment options for mild to moderate actinic keratosis has been analyzed in a European meta-analysis (Vegter & Tolley 2014). The objective of this study was to compare different treatments for mild to moderate actinic keratosis on the face and scalp available in clinical practice in Europe. A network meta-analysis was performed to compare different treatment modalities by combining a network of both head to head and indirect comparative evidence. Study selection was based on the Cochrane systematic search and review for actinic keratosis treatments available in Europe. In total, 25 randomized, controlled studies (5,562 patients) with the primary outcome measure “complete patient clearance” were considered and included. For PDT, only studies with LED lamps were included. Although this study was a meta-analysis of placebo-controlled trials, rather than a head-to-head comparison of treatments, we believe this data shows significant support for Ameluz PDT as the best available treatment option for mild to moderate actinic keratosis of the face and scalp.

We believe that only a small proportion of patients in the EU who could be treated with medication in combination with photodynamic therapy are currently being so treated because dermatologists in the EU favor topical prescriptions, which require the least amount of work from medical practitioners (since no office procedure is required). In the EU, cryotherapy is not a common practice due to its limited efficacy, high recurrence rates and the lack of reimbursement. Photodynamic therapy for actinic keratosis is not reimbursed in all markets in the EU. Particularly in those countries where dermatology is mostly a hospital based discipline, dermatologists typically treat basal cell carcinoma (and not actinic keratosis). We expect sales of Ameluz ^® to increase in the EU because of the higher efficacy rate demonstrated in clinical trials, better cosmetic results compared to other treatment options, and the extension of indications to field cancerization and basal cell carcinoma in addition to actinic keratosis.

In addition, we expect to extend our indications in the EU for Ameluz ^® to include daylight photodynamic therapy in the first half of 2018 to better compete with Metvix ^® and Luxerm ^® . Approval for daylight photodynamic therapy would also allow us to more effectively compete with other topical prescription drugs, which are widely used in Europe. If the indication is not so extended, then it will be difficult for Ameluz ^® to effectively compete with Metvix ^® and other drugs in the EU.

Competition in the U.S.

In the U.S., we believe dermatologists have favored cryotherapy to treat actinic keratosis because of a favorable reimbursement regime, which may be under review by the CMS. Although the photodynamic therapy market in the U.S. for actinic keratosis treatment only represented an estimated three percent of the actinic keratosis treatments during 2016, the market has grown rapidly in recent years (as evidenced by the sales of Levulan through 2012 reported by Dusa Pharmaceuticals and Sun Pharma in their annual reports) and represented sales of over $136 million in 2016. In addition, we believe that there is treatment guideline pressure towards field-directed therapy (as opposed to single lesion therapy), which may also help support sales of photodynamic therapy treatments.

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In the U.S., our treatment of actinic keratosis with Ameluz ^® in combination with our BF-RhodoLED ^® red light device competes with Levulan ^® , an approved photodynamic therapy drug for actinic keratosis used in combination with a blue light lamp. The Ameluz ^® approval covers both lesion-directed and field-directed treatment, while the Levulan ^® approval is restricted to lesion-directed treatment. In addition, we also compete with a number of non-photodynamic therapy products for the treatment of actinic keratoses and certain other skin conditions similar to those listed above under “— Competition in the EU ”, as well as cryotherapy with liquid nitrogen.

Because our approval for Ameluz ^® in the U.S. covers not only lesion-directed treatment, but also field-directed therapy, we believe our approval provides us with the ability to provide broader treatment possibilities compared to certain competitor products.

In addition, in August 2017, we agreed with the FDA on the requirements for the potential approval of our application to extend Ameluz ^® PDT for the treatment of superficial basal cell carcinoma in the U.S. Under the agreed plan with FDA, our application could be based on a single additional phase III placebo-controlled pivotal trial to be conducted in the U.S., in which Ameluz ^® PDT will be compared to placebo PDT, which can be conducted with relatively few patients minimizing both time and cost. We will be required to present a combined read-out of clinical and histological clearance. We believe this agreed plan represents a significant milestone that should allow us to reduce cost and to achieve approval more quickly than if we had been required to undertake additional or more complex clinical trials. If the FDA approves this application, we believe this will further enhance our competitive advantage in the U.S.

Competitive Outlook

We expect that comparisons of the properties of various photosensitizing photodynamic therapy drugs will also highlight important competitive issues. We expect that our ability to compete with other photodynamic therapy companies will be based upon such factors as:

the efficacy from treatment with Ameluz ^® photodynamic therapy as compared to other treatment options;

the lower recurrence rates from treatment with Ameluz ^® photodynamic therapy as compared to other treatment options;

the ease of administration of our photodynamic therapy, including with respect to the ease of application of our formulation and the duration of illumination time;

the ability of our drug to provide both lesion- and field-directed treatment;

the ability of our drug to treat different indications;

the cost of our drug and the type and cost of our photodynamic therapy light device;

the number of required doses; and

the cosmetic outcome and improvement of skin impairment.

We expect any products that we develop and commercialize to compete on the basis of, among other things, efficacy, safety, cosmetic outcome, convenience of administration and delivery, price and the availability of reimbursement from government and other third party payers. We also expect to face competition in our efforts to identify appropriate collaborators or partners to help commercialize our product candidates in our target commercial markets. New drugs or future developments in photodynamic therapy, laser products or other drug technologies may provide therapeutic or cost advantages for competitive products. No assurance can be given that developments by other parties will not render our existing products or product candidates uncompetitive or obsolete.

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Commercial Partners and Agreements

We terminated a marketing collaboration agreement with Spirit Healthcare Limited to market and sell Ameluz ^® in the UK and Ireland in July 2015, and we are currently preparing to commence our own sales activities in the UK.

On September 13, 2017, we terminated our license and supply agreement with BiPharma B.V., effective as of October 31, 2017.

In these agreements with our sales partners, we often (but not always) receive an initial up-front payment. The sales partners purchase Ameluz ^® from us at a price that is linked to their own anticipated sales price. Our share of the sales price varies, depending on the up-front payment as well as market conditions within each country or region, ranging from 35% to 60% of net revenue.

We depend on a single unaffiliated contract manufacturer, Frike Group, located in Switzerland to manufacture Ameluz ^® for us. Pursuant to this contract, Frike Group produces, upon request by us, the volumes of Ameluz ^® that we require according to pre-agreed specifications. Our contract with Frike Group has an initial term through October 2022 and thereafter may be terminated by either party at any time upon 12 months’ prior notice.

We rely on two suppliers to obtain 5-aminolevulinic acid (5-ALA), the active pharmaceutical ingredient contained in Ameluz ^® . Hapila GmbH (“Hapila”), located in Germany, manufactures 5-ALA directly for us. Midas Pharma GmbH (“Midas”), located in Germany, relies on two sub-contractors, located in India and Italy, to manufacture the 5-ALA that it supplies to us. 5-ALA provided by Hapila is approved for use in Ameluz ^® in the EU, Switzerland and Israel. 5-ALA provided by Midas is approved for use in the U.S. and the EU. Pursuant to our contracts with Hapila and Midas, those entities supply, upon request by us, the volumes of 5-ALA that we require according to pre-agreed specifications. Our contract with Hapila has an initial term through May 2020. Thereafter, the contract with Hapila automatically renews for one-year periods, unless it is terminated by us upon 6 months’ prior notice. Our contract with Midas has an initial term through December 2021. Thereafter, the contract with Midas automatically renews for one-year periods, unless it is terminated by either party by notice to the other party given 6 months prior to the end of the initial contract term or renewal period, as applicable.

Legal Proceedings

In June 2017, one of our major shareholders, Deutsche Balaton AG, brought a lawsuit against our company in the Cologne District Court for rescission and nullity against certain resolutions passed by our shareholders at our company’s annual general meeting of shareholders on May 24, 2017 relating to our authorized capital and to the discharge of our supervisory board members under German law (a corporate formality without significant legal effect). We believe this lawsuit is without merit and we are vigorously defending our interests. On December 1, 2017, the Cologne District Court ruled that the lawsuit was dismissed; however, this decision is not yet legally binding, as German law allows for a claimant to file an appeal within one month after it has been formally served with the decision. On December 21, 2017, Deutsche Balaton AG appealed this ruling. Based on the proceedings as of the date of this prospectus and our analysis of applicable German law, we expect that this lawsuit will be resolved favorably for our company; however, even if this lawsuit proceeds and if the court ultimately issues an adverse judgment against us, we do not expect such an outcome to have a material adverse effect on our company or on our ability to complete this offering or the German preemptive rights offering.

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Facilities

Our global corporate headquarters is located in Leverkusen, Germany. We lease approximately 37,000 square feet at this facility, in which we house our corporate offices and a manufacturing facility under an operating lease expiring on June 15, 2019. This lease extends automatically on December 31 of each year thereafter for one additional year unless terminated by either party upon twelve months’ prior notice. Our U.S. headquarters is located in Wakefield, Massachusetts. We lease approximately 5,300 square feet at this facility, in which we house our U.S. corporate offices under a sub-lease agreement expiring on June 15, 2019. We have the option to extend this sublease for one additional five-year term. We believe our existing facilities are sufficient to meet our needs for the foreseeable future and that, if needed, additional space will be available to us in the near term at a reasonable cost.

Employees

As of September 30, 2017, we had 125 employees worldwide, 114 of whom were full-time, 22 of whom hold Ph.D. or M.D. degrees, 14 of whom were engaged directly or indirectly in production, two of whom were engaged in research and development activities, ten of whom were engaged in clinical and regulatory activities, 53 of whom were engaged in marketing and sales activities, and 49 of whom were engaged in management, business development or marketing, finance, human resources or administrative support. Of our 125 total employees, 70 work in Germany, 49 work in the U.S., and 6 work in Spain, as compared to 94 total employees as of December 31, 2016 and 58 total employees as of December 31, 2015 and 46 total employees as of December 31, 2014. None of our employees is subject to a collective bargaining agreement. We consider our relationship with our employees to be good.

Government Regulation

Regulation by governmental authorities in the U.S. and other countries is a significant factor in the development, manufacture and marketing of pharmaceutical products and in ongoing research and development activities. All of our products will require regulatory approval by governmental agencies prior to commercialization. In particular, pharmaceuticals are subject to rigorous preclinical testing and clinical trials and other pre-marketing approval requirements by the FDA and regulatory authorities in other countries.

Government authorities in the U.S. (at the federal, state and local level) and in other countries extensively regulate, among other things, the research, development, testing, manufacturing, quality control, approval, labeling, packaging, storage, record-keeping, promotion, advertising, distribution, post-approval monitoring and reporting, marketing and export and import of drug and medical device products such as those we are developing. Ameluz ^® and our medical device products are only marketed in certain countries and our products and product candidates must be approved or cleared by the FDA before they may be legally marketed in the U.S. and by the appropriate foreign regulatory agency before they may be legally marketed in foreign countries.

U.S. Drug Development and Review

Drug Development Process

Post-Approval Requirements for Approved Drugs

Any drug products for which we receive FDA approvals are subject to continuing regulation by the FDA, including, among other things, record-keeping requirements, reporting of adverse experiences with the product, providing the FDA with updated safety and efficacy information, product sampling and distribution requirements, and complying with FDA promotion and advertising requirements, which include, among other requirements, standards for direct-to-consumer advertising, restrictions on promoting drugs for uses or in patient populations that are not described in the drug’s approved labeling (known as “off-label use”), limitations on industry sponsored scientific and educational activities, and requirements for promotional activities involving the internet. Although physicians may prescribe legally available drugs for off-label uses, manufacturers may not market or promote such off-label uses.

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In addition, quality control and manufacturing procedures must continue to conform to applicable manufacturing requirements after approval. We are relying exclusively on our manufacturing partner’s facilities for the production of clinical and commercial quantities of our products in accordance with cGMP regulations, which has not yet been cGMP approved. cGMP regulations require among other things, quality control and quality assurance as well as the corresponding maintenance of records and documentation and the obligation to investigate and correct any deviations from cGMP. Drug manufacturers and other entities involved in the manufacture and distribution of approved drugs are required to register their establishments with the FDA and certain state agencies, and are subject to periodic unannounced inspections by the FDA and certain state agencies for compliance with cGMP and other laws. Accordingly, manufacturers must continue to expend time, money and effort in the area of production and quality control to maintain cGMP compliance. Discovery of problems with a product after approval may result in restrictions on a product, manufacturer or holder of an approved NDA, including, among other things, recall or withdrawal of the product from the market. In addition, changes to the manufacturing process are strictly regulated, and depending on the significance of the change, may require prior FDA approval before being implemented and development of and submission of data to support the change. Other types of changes to the approved product, such as adding new indications and additional labeling claims, are also subject to further FDA review and approval, as well as, possibly, the development and submission of data to support the change.

The FDA also may require post-approval, sometimes referred to as Phase 4, trials and surveillance to monitor the effects of an approved product or place conditions on an approval that could restrict the distribution or use of the product. Discovery of previously unknown problems with a product or the failure to comply with applicable FDA requirements can have negative consequences, including adverse publicity, judicial or administrative enforcement, warning letters from the FDA, mandated corrective advertising or communications with doctors, and civil or criminal penalties, among others. Newly discovered or developed safety or effectiveness data may require changes to a product’s approved labeling, including the addition of new warnings and contraindications, and also may require the implementation of other risk management measures, such as a REMS. Also, new government requirements, including those resulting from new legislation, may be established, or the FDA’s policies may change, which could delay or prevent regulatory approval of our products under development.

Pervasive and Continuing FDA Regulation for Medical Devices

After a device is placed on the market, regardless of its classification or premarket pathway, numerous regulatory requirements apply. These include, but are not limited to:

establishing establishment registration and device listings with the FDA;

Quality System Regulation, or QSR, which requires manufacturers, including third party manufacturers and certain other parties, to follow stringent design, testing, process control, documentation, CAPA, complaint handling and other quality assurance procedures, as applicable;

labeling statutes and regulations, which prohibit the promotion of products for uncleared or unapproved, or off-label, uses and impose other restrictions on labeling;

clearance or approval of product modifications that could affect (or for 510(k) devices, significantly affect) safety or effectiveness or that would constitute a change (or for 510(k) devices, a major change) in intended use;

medical device reporting regulations, which require that manufacturers report to the FDA if an event reasonably suggests that their device may have caused or contributed to a death or serious injury or malfunctioned in a way that would likely cause or contribute to a death or serious injury if the malfunction of the same or a similar device of the manufacturer were to recur;

corrections and removals reporting regulations, which require that manufacturers report to the FDA field corrections and product removals if undertaken to reduce a risk to health posed by the device or to remedy a violation of the FDCA, that may present a risk to health. In addition, FDA may order a mandatory recall if there is a reasonable probability that the device would cause serious adverse health consequences or death; and

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post-approval restrictions or conditions, including requirements to conduct post-market surveillance studies to establish additional safety or efficacy data.

The FDA has broad post-market and regulatory enforcement powers. The agency may conduct announced and unannounced inspections to determine compliance with the QSR and other regulations, and these inspections may include the manufacturing facilities of subcontractors. Failure by us or our suppliers to comply with applicable regulatory requirements can result in enforcement action by the FDA or other regulatory authorities, which may result in sanctions and related consequences including, but not limited to:

untitled letters or warning letters;

fines, injunctions, consent decrees and civil penalties;

recall, detention or seizure of our products;

operating restrictions, partial suspension or total shutdown of production;

refusal of or delay in granting our requests for 510(k) clearance or premarket approval of new products or modified products;

withdrawing 510(k) clearance or premarket approvals that are already granted;

refusal to grant export approval for our products;

criminal prosecution; and

unanticipated expenditures to address or defend such actions.

We are subject to announced and unannounced device inspections by FDA and other regulatory agencies overseeing the implementation and adherence of applicable local, state and federal statutes and regulations.

Affordable Care Act

In March 2010, the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010, or collectively, the Affordable Care Act, was enacted, which includes measures that have or will significantly change the way health care is financed by both governmental and private insurers. Among the provisions of the Affordable Care Act of greatest importance to the pharmaceutical industry are the following:

The Medicaid Drug Rebate Program requires pharmaceutical manufacturers to enter into and have in effect a national rebate agreement with the Secretary of the Department of Health and Human Services as a condition for states to receive federal matching funds for the manufacturer’s outpatient drugs furnished to Medicaid patients. Effective in 2010, the Affordable Care Act made several changes to the Medicaid Drug Rebate Program, including increasing pharmaceutical manufacturers’ rebate liability by raising the minimum basic Medicaid rebate on most branded prescription drugs and biologic agents from 15.1% of average manufacturer price (AMP) to 23.1% of AMP and adding a new rebate calculation for “line extensions” (i.e., new formulations, such as extended release formulations) of solid oral dosage forms of branded products, as well as potentially impacting their rebate liability by modifying the statutory definition of AMP. The Affordable Care Act also expanded the universe of Medicaid utilization subject to drug rebates by requiring pharmaceutical manufacturers to pay rebates on Medicaid managed care utilization as of 2010. Per a ruling by the U.S. Supreme Court in 2012, states have the option to expand their Medicaid programs which in turn expands the population eligible for Medicaid drug benefits. CMS has proposed to expand Medicaid rebate liability to the territories of the U.S. as well. In addition, the Affordable Care Act provides for the public availability of retail survey prices and certain weighted average AMPs under the Medicaid program. The implementation of this requirement by the CMS may also provide for the public availability of pharmacy acquisition of cost data, which could negatively impact our sales.

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In order for a pharmaceutical product to receive federal reimbursement under the Medicare Part B and Medicaid programs or to be sold directly to U.S. government agencies, the manufacturer must extend discounts to entities eligible to participate in the 340B drug pricing program. The required 340B discount on a given product is calculated based on the AMP and Medicaid rebate amounts reported by the manufacturer. Effective in 2010, the Affordable Care Act expanded the types of entities eligible to receive discounted 340B pricing, although, under the current state of the law, with the exception of children’s hospitals, these newly eligible entities will not be eligible to receive discounted 340B pricing on orphan drugs when used for the orphan indication. In July 2013, the Health Resources and Services Administration (HRSA) issued a final rule allowing the newly eligible entities to access discounted orphan drugs if used for non-orphan indications. While the final rule was vacated by a federal court ruling, HRSA has stated it will continue to allow discounts for orphan drugs when used for any indication other than for orphan indications. In addition, as 340B drug pricing is determined based on AMP and Medicaid rebate data, the revisions to the Medicaid rebate formula and AMP definition described above could cause the required 340B discount to increase.

Effective in 2011, the Affordable Care Act imposed a requirement on manufacturers of branded drugs and biologic agents to provide a 50% discount off the negotiated price of branded drugs dispensed to Medicare Part D patients in the coverage gap (i.e., “donut hole”).

Effective in 2011, the Affordable Care Act imposed an annual, nondeductible fee on any entity that manufactures or imports certain branded prescription drugs and biologic agents, apportioned among these entities according to their market share in certain government healthcare programs, although this fee would not apply to sales of certain products approved exclusively for orphan indications.

The Affordable Care Act required pharmaceutical manufacturers to track certain financial arrangements with physicians and teaching hospitals, including any “transfer of value” made or distributed to such entities, as well as any ownership or investment interests held by physicians and their immediate family members. Manufacturers were required to begin tracking this information in 2013 and to report this information to CMS by March 2014.

As of 2010, a new Patient-Centered Outcomes Research Institute was established pursuant to the Affordable Care Act to oversee, identify priorities in, and conduct comparative clinical effectiveness research, along with funding for such research. The research conducted by the Patient-Centered Outcomes Research Institute may affect the market for certain pharmaceutical products.

The Affordable Care Act created the Independent Payment Advisory Board, IPAB, which, beginning in 2014, will have authority to recommend certain changes to the Medicare program to reduce expenditures by the program that could result in reduced payments for prescription drugs. Under certain circumstances, these recommendations will become law unless Congress enacts legislation that will achieve the same or greater Medicare cost savings. IPAB recommendations are only required when Medicare spending exceeds a target growth rate established by the Affordable Care Act. Members of the IPAB have still not been appointed and Medicare cost growth is below the threshold that would require IPAB recommendations.

The Affordable Care Act established the Center for Medicare and Medicaid Innovation within CMS to test innovative payment and service delivery models to lower Medicare and Medicaid spending, potentially including prescription drug spending. Funding has been allocated to support the mission of the Center for Medicare and Medicaid Innovation from 2011 to 2019.

Non-U.S. Government Regulation

In addition to regulations in the U.S., we will be subject to a variety of regulations in other jurisdictions governing, among other things, clinical trials and any commercial sales, promotion and distribution of our products. Whether or not we obtain FDA approval for a product, we must obtain the requisite approvals from regulatory authorities in foreign countries prior to the commencement of clinical trials or marketing of the product in those countries. We, or our local partners, have filed marketing authorization applications for Ameluz ^® and BF-RhodoLED ^® in Israel and Switzerland and have obtained centralized European approval from the EMA in the EU.

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Non-U.S. Government Regulation Applicable to Drugs

Certain countries outside of the U.S. have a similar process that requires the submission of a clinical trial application much like an Investigational New Drug, or IND, application prior to the commencement of human clinical trials. If we fail to comply with applicable foreign regulatory requirements, we may be subject in those countries to, among other things, fines, suspension or withdrawal of regulatory approvals, product recalls, seizure of products, operating restrictions and criminal prosecution.

In the European Economic Area, or EEA (which is comprised of the 27 Member States of the European Union plus Iceland, Liechtenstein and Norway), for example, medicinal products can only be commercialized after obtaining a Marketing Authorization, or MA. There are two types of marketing authorizations:

The Community MA, which is issued by the European Commission through the Centralized Procedure, based on the opinion of the EMA Committee for Medicinal Products for Human Use (CHMP), and which is valid throughout the entire territory of the EEA. The Centralized Procedure is mandatory for certain types of products, such as biotechnology medicinal products, orphan medicinal products, and medicinal products containing a new active substance indicated for the treatment of AIDS, cancer, neurodegenerative disorders, diabetes, auto-immune and viral diseases. The Centralized Procedure is optional for products containing a new active substance not yet authorized in the EEA, or for products that constitute a significant therapeutic, scientific or technical innovation or which are in the interest of public health in the European Union. We have received Community MA for Ameluz ^® in November 2011.

National MAs, which are issued by the competent authorities of the Member States of the EEA and only cover their respective territory, are available for products not falling within the mandatory scope of the Centralized Procedure. Where a product has already been authorized for marketing in a Member State of the EEA (the Reference Member State, or RMS), this National MA can be recognized in other Member States (the Concerned Member States, or CMS) through the Mutual Recognition Procedure. If the product has not received a National MA in any Member State at the time of application, it can be approved simultaneously in various Member States through the Decentralized Procedure. Under the Decentralized Procedure, an identical dossier is submitted to the competent authorities of each of the Member States in which the MA is sought, one of which is selected by the applicant as the RMS. The competent authority of the RMS prepares a draft assessment report, a draft summary of the product characteristics, or SPC, and a draft of the labeling and package leaflet, which are sent to the CMS for their approval. If the CMS raise no objections, based on a potential serious risk to public health, to the assessment, SPC, labeling, or packaging proposed by the RMS, the product is subsequently granted a national MA in all the Member States (i.e., in the RMS and the CMS). If one or more CMS raise objections based on a potential serious risk to public health, the application is referred to the Coordination group for mutual recognition and decentralized procedure for human medicinal products (the CMDh), which is composed of representatives of the EEA Member States. If a consensus cannot be reached within the CMDh the matters is referred for arbitration to the CHMP, which can reach a final decision binding on all EEA Member States. A similar process applies to disputes between the RMS and the CMS in the Mutual Recognition Procedure.

As with FDA approval, we may not be able to secure regulatory approvals in Europe in a timely manner, if at all. Additionally, as in the U.S., post-approval regulatory requirements, such as those regarding product manufacture, marketing, or distribution, would apply to any product that is approved in Europe, and failure to comply with such obligations could have a material adverse effect on our ability to successfully commercialize any product.

With respect to the conduct of clinical trials in the European Union a clinical trial application, or CTA, must be submitted to each country’s national health authority and an independent ethics committee, much like the FDA and IRB requirements in the U.S., respectively. Once the CTA is approved in accordance with a country’s requirements, clinical trials may proceed.

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In addition to regulations in Europe and the U.S., we will be subject to a variety of foreign regulations governing clinical trials and commercial distribution of any future products. For other countries outside of the European Union, such as countries in Eastern Europe, Latin America or Asia, the requirements governing the conduct of clinical trials, product licensing, pricing and reimbursement vary from country to country. In all cases, again, the clinical trials are conducted in accordance with cGCP and the applicable regulatory requirements and the ethical principles that have their origin in the Declaration of Helsinki.

Non-U.S. Government Regulation Applicable to Medical Devices

The advertising and promotion of our products in the EEA is subject to the provisions of the Medical Devices Directive, Directive 2006/114/EC concerning misleading and comparative advertising, and Directive 2005/29/EC on unfair commercial practices, as well as other national legislation in the EEA countries governing the advertising and promotion of medical devices. The European Commission has submitted a Proposal for a Regulation of the European Parliament and the Council on medical devices, amending Directive 2001/83/EC, Regulation (EC) No 178/2002 and Regulation (EC) No 1223/2009, to replace, inter alia , Directive 93/42/EEC and to amend regulations regarding medical devices in the European Union, which could result in changes in the regulatory requirements for medical devices in Europe. In Germany, the advertising and promotion of our products can also be subject to restrictions provided by the German Act Against Unfair Competition (Gesetz gegen den unlauteren Wettbewerb) and the law on the advertising of medicines (Heilmittelwerbegesetz), criminal law, and some codices of conduct with regard to medical products and medical devices among others. These laws may limit or restrict the advertising and promotion of our products to the general public and may impose limitations on our promotional activities with healthcare professionals.

Sales of medical devices are subject to foreign government regulations, which vary substantially from country to country. In order to market our products outside the U.S., we must obtain regulatory approvals or CE Certificates of Conformity and comply with extensive safety and quality regulations. The time required to obtain approval by a foreign country or to obtain a CE Certificate of Conformity may be longer or shorter than that required for FDA clearance or approval, and the requirements may differ. In the EEA, we are required to obtain Certificates of Conformity before drawing up an EC Declaration of Conformity and affixing the CE Mark of conformity to our medical devices. Many other countries, such as Australia, India, New Zealand, Pakistan and Sri Lanka, accept CE Certificates of Conformity or FDA clearance or approval although others, such as Brazil, Canada and Japan require separate regulatory filings.

Reimbursement

Sales of our products will depend, in part, on the extent to which our products will be covered by third party payors, such as government health care programs, statutory health insurances, and commercial insurance and managed healthcare organizations. These third party payors are increasingly reducing reimbursements for medical products and services and there is no guarantee that we will be able to obtain reimbursement at all for any future products. In addition, the U.S. government, state legislatures and foreign governments have continued implementing cost-containment programs, including price controls, competitive bidding program, restrictions on reimbursement and requirements for substitution of generic products. Adoption of price controls and cost-containment measures, and adoption of more restrictive policies in jurisdictions with existing controls and measures, could further limit our net revenue and results. Decreases in third party reimbursement for our product candidates or a decision by a third party payor to not cover our product candidates could reduce physician usage of our products once approved and have a material adverse effect on our sales, results of operations and financial condition.

In the U.S., treatment of actinic keratosis with Ameluz ^® in combination with our BF-RhodoLED ^® photodynamic therapy lamp is eligible to be reimbursed by the U.S. federal government’s Medicare Program through Part B, which means that dermatologists purchase the drug to treat a patient in combination with our BF-RhodoLED ^® photodynamic therapy lamp and the doctors can be reimbursed for the cost of the drug after its use to treat a patient. This differentiates Ameluz ^® from drugs that are reimbursed through the U.S. federal government’s Medicare Program through Part D and distributed through pharmacies. As a result, “Part B” drugs tend to have lower prices than “Part D” drugs, since doctors must have the financial wherewithal to purchase the drugs before treating the patients. Problems with reimbursement can become a serious issue for doctors since they are personally liable for the cost of the drugs if they are not reimbursed.

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Fraud and Abuse Laws

We will also be subject to several healthcare regulation and enforcement by the federal government and the states and foreign governments in which we will conduct our business once our products are approved. The laws that may affect our ability to operate include:

the federal healthcare programs’ Anti-Kickback Law, which prohibits, among other things, persons from knowingly and willfully soliciting, receiving, offering or paying remuneration, directly or indirectly, in exchange for or to induce either the referral of an individual for, or the purchase, order or recommendation of, any good or service for which payment may be made under federal healthcare programs such as the Medicare and Medicaid programs;

federal false claims laws which prohibit, among other things, individuals or entities from knowingly presenting, or causing to be presented, claims for payment from Medicare, Medicaid, or other third party payors that are false or fraudulent;

federal criminal laws that prohibit executing a scheme to defraud any healthcare benefit program or making false statements relating to healthcare matters;

federal Civil Monetary Penalties Law that prohibits various forms of fraud and abuse involving the Medicare and Medicaid programs;

state law equivalents of each of the above federal laws, such as anti-kickback and false claims laws which may apply to items or services reimbursed by any third party payor, including commercial insurers;

for Europe, directive 2006/114/EC concerning misleading and comparative advertising, and Directive 2005/29/EC on unfair commercial practices, as well as other national legislation in the European Union governing the advertising and promotion of medical devices; and

in Germany the advertising and promotion of our products can be subject to restrictions provided by the German Act Against Unfair Competition protecting against commercial practices which unacceptably harass a market participants.

Healthcare Privacy and Security Laws

We may be subject to, or our marketing activities may be limited by the federal Health Insurance Portability and Accountability Act of 1996, HIPAA, and its implementing regulations, which established uniform standards for certain “covered entities” (healthcare providers, health plans and healthcare clearinghouses) governing the conduct of certain electronic healthcare transactions and protecting the security and privacy of protected health information. The American Recovery and Reinvestment Act of 2009, commonly referred to as the economic stimulus package, included sweeping expansion of HIPAA’s privacy and security standards called the Health Information Technology for Economic and Clinical Health Act, or HITECH, which became effective on February 17, 2010. Among other things, the new law makes HIPAA’s privacy and security standards directly applicable to “business associates,” independent contractors or agents of covered entities that receive or obtain protected health information in connection with providing a service on behalf of a covered entity. HITECH also increased the civil and criminal penalties that may be imposed against covered entities, business associates and possibly other persons, and gave state attorneys general new authority to file civil actions for damages or injunctions in federal courts to enforce the federal HIPAA laws and seek attorney’s fees and costs associated with pursuing federal civil actions.

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In Europe and Germany, we may be subject to strict data protection regulations, in particular with regard to health data of individuals, which are categorized as “special categories of personal data” pursuant to Section 3 subsection 9 German Federal Data Protection Act (Bundesdatenschutzgesetz). “Personal data” refers to any information relating to an identified or identifiable natural person (data subject); an identifiable person is one who can be identified, directly or indirectly, in particular by reference to an identification number or to one or more factors specific to his physical, physiological, mental, economic, cultural or social identity. The special categories of data such as health data may only be processed if the data subject consented to such processing or if (i) this is necessary in order to protect vital interests of the data subject or of a third party, in so far as the data subject is unable to provide consent for physical or legal reasons; (ii) the data concerned have evidently been made public by the data subject; (iii) this is necessary in order to assert, exercise or defend legal claims and there is no reason to assume that the data subject has an overriding legitimate interest in excluding such collection, processing or use; or (iv) this is necessary for the purposes of scientific research, where the scientific interest in carrying out the research project substantially outweighs the data subject’s interest in excluding collection, processing and use and the purpose of the research cannot be achieved in any other way or would otherwise necessitate disproportionate effort. Therefore, we may be subject to and our marketing activities may be limited by the regulations regarding the data protection of individuals (e.g., according to the Directive 95/46/EC of the European Parliament and of the Council of 24 October 1995 on the protection of individuals with regard to the processing of personal data and on the free movement of such data as well as to the German Federal Data Protection Act). These regulations could also restrict the transfer of data from Germany/Europe to the U.S. The general transfer of personal data outside of Europe is prohibited according to Section 4b subsection 2 sentence 2 German Federal Data Protection Act (implementing Art. 25 subsection 1 of the Directive 95/46/EC) if the data importer cannot guarantee an appropriate standard of data protection. A transfer of personal data to a non-EU member state (third country) is allowed only if the third country guarantees a reasonable standard of protection. Currently the U.S. is not regarded to be a country with an appropriate level of data protection meaning that further contractual arrangements have to be adopted to permit the international transfer of personal data to the U.S. European data protection law is currently under review. A newly proposed European Data Protection Regulation is currently being negotiated by the European institutions. On March 12, 2014, the European Parliament voted for a new Regulation of the European Parliament and of the Council on the protection of individuals with regard to the processing of personal data and on the free movement of such data (General Data Protection Regulation) which is expected to further strengthen the European data protection law.

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MANAGEMENT

Overview

We are a German stock corporation ( Aktiengesellschaft or AG ) and, in accordance with the German Stock Corporation Act ( Aktiengesetz ), we have two separate boards of directors, the supervisory board ( Aufsichtsrat ) and the management board ( Vorstand ). The two boards are separate, and no individual may simultaneously be a member of both boards.

The management board is responsible for the management of our business in accordance with applicable law, our articles of association ( Satzung ) and the internal rules of procedure ( Geschäftsordnung ) adopted by our supervisory board. The management board represents us in our transactions with third parties and in other proceedings with third parties.

The principal responsibility of the supervisory board is to supervise the management board. The supervisory board is also responsible for appointing and removing members of the management board and representing the company in connection with transactions between a member of the management board and our company. The supervisory board is not itself permitted to make management decisions, but in addition to its statutory responsibilities, our supervisory board has determined in the rules of procedure for the management board, that certain transactions and decisions require its prior consent. The supervisory board has organized its internal affairs and structure by adopting rules of procedure.

The members of both the supervisory board and the management board are solely responsible for and manage the duties of the relevant board (as described above); therefore, neither board may make decisions that are the responsibility of the other board under applicable law, our articles of association or the internal rules of procedure. Members of both boards owe a duty of loyalty and care to the company. In exercising their duties, the applicable standard of care is that of a diligent and prudent businessperson. Members of both boards must take into account a broad range of considerations when making decisions, including the interests of the company and its shareholders.

As a general rule under German law, a shareholder has no direct recourse against the members of the supervisory board or the management board in the event that they are believed to have breached their duty of loyalty and care. Apart from insolvency or other special circumstances, only the company has the right to claim damages from members of either board. We may waive these damages or settle these claims only if at least three years have passed and the shareholders approve the waiver or settlement at the shareholders’ meeting with a simple majority of the votes cast, provided that a minority holding, in the aggregate, ten percent or more of our share capital does not have their opposition formally noted in the minutes maintained by a German notary.

Our supervisory board has comprehensive monitoring functions. To ensure that these functions are carried out properly, our management board must, among other things, regularly report to the supervisory board with regard to current business operations and future business planning (including financial, investment and personnel planning). The supervisory board may, at any time, request special reports regarding our affairs, legal or business relations and our subsidiaries and the affairs of any of our subsidiaries to the extent that the affairs of such subsidiary may have a significant impact on us.

The following description, as far as it relates to our articles of association, is based on the articles of association which were registered in the commercial register on June 29, 2017.

Supervisory Board

Currently, our supervisory board consists of five members. Our articles of association establish that our supervisory board shall have six members; however, one of the members of our supervisory board resigned effective October 31, 2017. Under German law and our articles of association, the process of appointing a replacement member of our supervisory board requires a resolution of the shareholders’ general meeting. However, until such appointment of a new supervisory board member by the general meeting, a court may appoint, upon request of the management board, a member of the supervisory board or a shareholder, a supervisory board member. This member will have duties until the general meeting appoints a replacement member. The replacement member will have duties for the remaining election period of the member that has resigned. We expect that the competent court will appoint by the end of February 2018 a member of the supervisory board to serve until a permanent replacement is elected at our next general meeting of shareholders. Except for the foregoing, all of the members of our supervisory board are elected at the shareholders’ meeting in accordance with the provisions of the German Stock Corporation Act. Under German law, the members of a supervisory board may be elected for a term until the adjournment of the shareholders’ meeting resolving on ratification of the acts of management for the fourth fiscal year following the commencement of their respective term of office, where the fiscal year in which such term of office commences shall not be taken into account (i.e., approximately five years, depending on the dates of the annual general meeting at which the members of the supervisory board are elected), which is a standard term of office. Pursuant to our supervisory board’s rules of procedure, only persons who have not yet reached the statutory retirement age (currently: the age of 67) should be proposed as members of our supervisory board. Members of our supervisory board do not have service contracts that provide for benefits upon termination of employment.

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Any member so elected by our shareholders may be removed by the shareholders in a general meeting. In addition, any member of the supervisory board may, at any time, resign by giving one month’s prior written notice to the end of a month to the management board, or for important cause without notice. According to our articles of association and the internal rules of procedure of the supervisory board, the supervisory board has a quorum when all members were invited or requested to participate in a decision and no less than three of the members of the supervisory board participated. Unless otherwise provided by our articles of association, resolutions of the supervisory board are passed by simple majority of the votes cast. In the case of a deadlock, the chairman of the supervisory board has the deciding vote. The supervisory board meets at least twice each half-year.

The shareholders’ meeting may, at the same time as it elects the members of the supervisory board, elect one or more substitute members. The substitute members replace members who cease to be members of our supervisory board and take their place for the remainder of their respective terms of office. We have not elected any substitute members.

Our supervisory board elects a chairman and a vice chairman from its members. The vice chairman exercises the chairman’s rights and obligations whenever the chairman is unable to do so. The members of our supervisory board have elected Ulrich Granzer as chairman and Jürgen Baumann as vice chairman, each for the term of their respective membership on our supervisory board, but may at any time remove them as chairman and vice chairman, respectively, by supervisory board resolution.

The following table sets forth the names and functions of the current members of our supervisory board and their ages. The terms of all current members of the supervisory board commenced May 31, 2016 and will end on the date of the annual shareholders’ meeting relating to the accounts of the fiscal year ending December 31, 2020.

The business address of the members of our supervisory board is our principal executive office at Hemmelrather Weg 201, D-51377 Leverkusen Germany.

Name	Age	Position
Ulrich Granzer ^(1)(3)(4)	57	Chairman
Jürgen Baumann ⁽¹⁾⁽²⁾	63	Vice chairman
John Borer ⁽¹⁾⁽²⁾	60	Supervisory board member
Hansjörg Plaggemars ⁽²⁾⁽⁴⁾	47	Supervisory board member
Kevin Weber ⁽³⁾	59	Supervisory board member

(1) Member of the personnel committee.

(2) Member of the audit committee.

(3) Member of the research and development and market access committee.

(4) Member of the nomination committee.

The following is a brief summary of the business experience of the members of our supervisory board:

Ulrich Granzer, Ph.D. Dr. Granzer has been the chairman of our supervisory board since 2016. He is Managing Director of Granzer Regulatory Consulting & Services and was formerly director of regulatory affairs at GlaxoSmithKline plc, Knoll AG and Bayer AG. Dr. Granzer is a pharmacist and has been a member of the supervisory board of Biofrontera since 2006.

Jürgen Baumann. Mr. Baumann has been the vice chairman of our supervisory board since 2016 and has been a member of our supervisory board since 2007. As an economics graduate, Mr. Baumann was formerly a member of the Management Board of Schwarz Pharma AG responsible for European operations with eight national subsidiaries and four production sites. Mr. Baumann was chairman of the Supervisory Board of Biofrontera from 2007 through 2016. Up until October 2012, Mr. Jürgen Baumann was a member of the Supervisory Board of Riemser AG, Greifswald.

John Borer III, J.D. Mr. Borer has been a member of our supervisory board since 2016. He is the Senior Managing Director and Head of Investment Banking at The Benchmark Company, LLC, the lead underwriter in this offering. He was formerly the Chief Executive Officer and Head of Investment Banking at Rodman & Renshaw, and has held senior positions at Pacific Business Credit and Barclays American Business Credit. He holds a Doctor of Law degree (J.D.) from Loyola Law School in Los Angeles, California.

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Hansjörg Plaggemars. Mr. Plaggemars has been a member of our supervisory board since 2016. He is a member of the Management Board of Delphi Unternehmensberatung AG and formerly a member of the Management Board of Deutsche Balaton AG, one of our major shareholders, and was appointed at Deutsche Balaton AG’s recommendation. See “Principal Shareholders” below. He was formerly the Managing Director and Chief Financial Officer at CoCreate Software GmbH, KAMPA AG, Unister Holdings and Müller Holdings. Mr. Plaggemars is also a board member of Bolanta AG, Carus AG, Eurohaus Frankfurt AG, and Fidelitas Deutsche Industrie Holding AG, among others. He holds a degree in Business Administration from the University of Bamberg.

Kevin Weber. Mr. Weber has been a member of our supervisory board since 2016. He is a Principal at Skysis, LLC, a firm that provides commercial strategy consulting services to pharmaceutical, biotech and medical device companies. Prior to Skysis, LLC, Mr. Weber was Chief Executive Officer of Paraffin International Inc. Before Paraffin International, Mr. Weber was the Vice President of Marketing for Depomed, a specialty pharmaceutical company focused on pain medicine and neurology products. Mr. Weber is also a board member of the American Chronic Pain Association and holds a B.S. in Management and Marketing from Western Michigan University.

Supervisory Board Committees and Independence

Decisions are generally made by our supervisory board as a whole; however, decisions on certain matters may be delegated to committees of our supervisory board to the extent permitted by law. The chairman, or if he or she is prevented from doing so, the vice chairman, chairs the meetings of the supervisory board and determines the order in which the agenda items are discussed, the method and order of the voting, any adjournment of the discussion and passing of resolutions on individual agenda items after a due assessment of the circumstances.

Pursuant to Section 107(3) of the German Stock Corporation Act, the supervisory board may form committees from among its members and charge them with the performance of specific tasks. The committees’ tasks, authorizations and processes are determined by our supervisory board. Where permissible by law, important powers of the supervisory board may also be transferred to committees. The internal rules of procedure of the supervisory board explicitly provide for a personnel committee, an audit committee, and a nomination committee. Furthermore, the supervisory board has set up and appointed a research & development and market access committee.

German law does not require the majority of our supervisory board members to be independent. However, the rules of procedure for our supervisory board require that the supervisory board be composed of a sufficient number of independent members, as determined by our supervisory board. The supervisory board passed a resolution, as recommended by the German Corporate Governance Code, regarding targets for the composition of the supervisory board, and determined that at least half of the supervisory board members should be independent within the meaning of the German Corporate Governance Code. Under rule 5.4.2 of the German Corporate Governance Code, as adopted by our supervisory board’s rules of procedure, a board member is deemed to be independent if such member has no business or personal relationships with us, the management board, a controlling shareholder or an affiliate, that could constitute a material and not only temporary conflict of interest. Our supervisory board has determined that a majority of our supervisory board members are independent directors in accordance with the listing requirements of The NASDAQ Capital Market. The NASDAQ independence definition includes a series of objective tests, including that the board member is not, and has not been for at least three years, one of our employees and that neither the board member nor any of his family members has engaged in various types of business dealings with us. In addition, as required by NASDAQ rules, our supervisory board has made a subjective determination as to each independent director that no relationships exist, which, in the opinion of our supervisory board, would interfere with the exercise of independent judgment in carrying out the responsibilities of a board member. In making these determinations, our supervisory board reviewed and discussed information provided by the members of the supervisory board and us with regard to each board member’s business and personal activities and relationships as they may relate to us and our management. The wife of our chief executive officer, Prof. Hermann Lübbert, serves as a senior employee of our company responsible for regulatory affairs and manufacturing (“ Prokurist ”); however, there are no family relationships among any of the members of our supervisory board, the members of our management board or our executive officers.

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Personnel Committee

The personnel committee consists of three members: the committee chairman and two other supervisory board members, who are elected by our supervisory board from among its members. The personnel committee prepares the decisions of our supervisory board on the appointment and dismissal of management board members. The personnel committee prepares the conclusion, amendment and termination of the service contracts of the management board members, the determination of an annual bonus and other flexible remuneration elements for the decision of our supervisory board. Only persons who have not yet reached the statutory retirement age (currently: the age of 67) should be proposed as members of our management board.

The personnel committee also decides on: legal transactions with our management board members within the meaning of section 112 of the German Stock Corporation Act, consent concerning work by our management board members outside the company according to section 88 of the German Stock Corporation Act and on ancillary activities (including the assumption of supervisory board offices outside companies that are affiliated with our company within the meaning of sections 15 ff of the German Stock Corporation Act), consent concerning the granting of loans to the categories of persons referred to in sections 89, 115 of the German Stock Corporation Act, the approval of contracts with our supervisory board members pursuant to section 114 of the German Stock Corporation Act, and personnel matters for which our management board requires the approval of our supervisory board in accordance with the rules of procedure. The personnel committee is comprised of the following individuals: Dr. Ulrich Granzer, Jürgen Baumann and John Borer. Mr Baumann is the current chairman.

Audit Committee

The audit committee consists of three members, who elect one committee chairperson. Pursuant to the German Corporate Governance Code, the chairperson should not be a former member of our management board, whose appointment has ended less than two years prior, and should have special knowledge and experience in the application of accounting standards and internal control systems within the meaning of sec. 100(5) of the German Stock Corporation Act. Furthermore, pursuant to the German Corporate Governance Code and our supervisory board’s rules, the chairperson of the supervisory board should not be elected as the chairperson of the audit committee. The audit committee’s main function is to oversee our accounting and financial reporting processes and the audits of our financial statements and, insofar as legally permitted, pass resolutions with respect to these topics. The audit committee’s responsibilities explicitly include (but are not limited to) questions of:

accounting and risk management;

the necessary independence of our independent registered public accounting firm elected by our annual general meeting, and giving the audit mandate;

entering into the remuneration agreement with the auditor, and determining any focus of the audit; and

financial matters, for which the management board requires the approval of the supervisory board pursuant to the rules of procedure of the management board.

The members of our audit committee are Hansjörg Plaggemars, Jürgen Baumann and John Borer. Hansjörg Plaggemars and Jürgen Baumann whom qualify as an “independent director” as such term is defined in Rule 10A-3 under the Exchange Act; however, because John Borer is the Senior Managing Director and Head of Investment Banking of The Benchmark Company, LLC, one of the underwriters that will be compensated in connection with this offering, he does not qualify as an “independent director” under Rule 10A-3. Jürgen Baumann serves as chairman of the audit committee. Our supervisory board has determined that Hansjörg Plaggemars is a financial expert as contemplated by the rules of the SEC implementing Section 407 of the Sarbanes Oxley Act. Our audit committee focuses in particular on issues relating to accounting and risk management, the auditor's mandatory independence and the issuing of the audit mandate to the auditor, as well as the overseeing of the audit of the company's annual financial statement. In companies as defined in Section 264d of the German Commercial Code, which includes Biofrontera, the supervisory board's nomination for the election of the auditor must be based on the audit committee's recommendation. Furthermore, in companies as defined in Section 264d of the German Commercial Code, at least one member of the supervisory board must have expertise in the fields of accounting or auditing and be a member of the audit committee.

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Research & Development and Market Access Committee

The Research & Development and Market Access Committee deals with key issues related to product development as well as with any aspects related to the commercialization of our products. After discussions within this committee, it makes appropriate recommendations to our management board and supervisory board. The Research & Development and Market Access Committee does not have an explicit written charter, but was established pursuant to a supervisory board resolution. Our Research & Development and Market Access Committee is comprised of the following individuals: Dr. Ulrich Granzer, Hansjörg Plaggemars and Kevin Weber. Dr. Granzer is the current chairman.

Nomination Committee

In addition to the supervisory board chairman, the nomination committee includes two other supervisory board members, who are elected to the committee. Our nomination committee currently is comprised of Dr. Ulrich Granzer (chairman), John Borer and Hansjörg Plaggemars. Our nomination committee proposes suitable candidates for the future staffing of our supervisory board for its nominations at our annual general meeting. In so doing, our nomination committee considers the balance and variation of knowledge, skills and experience of all our supervisory board members, and creates candidate profiles. Insofar as possible, the nomination committee takes into account the targets adopted by our supervisory board for its composition, including the target for equal gender participation. In addition, our nomination committee makes recommendations to or informs our supervisory board of results from regular evaluations of the knowledge, skills and experience of individual board members and our supervisory board in its entirety. In the course of performing its duties, pursuant to the supervisory board’s rules of procedure, our nomination committee can draw on company resources deemed appropriate and also on external consultants within the necessary framework.

Management Board

Under German law and our articles of association, our management board must consist of one or more persons, and the supervisory board determines the exact number of members of the management board. Our supervisory board also appoints the chairman and the vice chairman of the management board, if any.

Currently, our management board consists of three members: Professor Hermann Lübbert, Ph.D., is appointed as chief executive officer (i.e., chairman of the management board); Thomas Schaffer is appointed as chief financial officer; and Christoph Dünwald is appointed as chief commercial officer. Members of our management board conduct the daily business of our company in accordance with applicable laws, our articles of association and the rules of procedure for the management board. The management board is generally responsible for the management of our company and for handling our daily business relations with third parties, the internal organization of our business and communications with our shareholders. In addition, the management board has the responsibility for:

the preparation of our annual financial statements;

the making of a proposal to our shareholders’ meeting on how our profits (if any) should be allocated (such proposal to be submitted simultaneously by our supervisory board); and

regular reporting to the supervisory board on our current operating and financial performance, our budgeting and planning processes and our performance under them and on future business planning (including strategic, financial, investment and personnel planning).

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Our supervisory board appoints the members of the management board for a maximum term of five years. Reappointment or extension of the term for up to five years is permissible. Our supervisory board may revoke the appointment of a management board member prior to the expiration of his or her term for good cause only, such as for gross breach of fiduciary duties or if the shareholders’ meeting passes a vote of no-confidence with respect to such member, unless the supervisory board deems the no-confidence vote to be clearly unreasonable. Our supervisory board is also responsible for entering into, amending and terminating service agreements with the management board members and, in general, for representing us in disputes with the management board, both in and out of court. Our supervisory board may assign these duties to a committee of our supervisory board, except in certain cases in which the approval of the entire supervisory board is required, such as the approval of the compensation of members of our management board and the reduction of the compensation of members of our management board upon a deterioration of our financial condition, which includes, among other things, a bankruptcy or the layoff of a significant number of employees.

According to our articles of association, either (i) two management board members or (ii) one management board member acting jointly with an authorized representative have the authority to act on our behalf. The supervisory board may grant any management board member the right to represent us alone and may release any member of the management board from the restrictions on multiple representations under Section 181, 2nd Case of the German Civil Code.

Prof. Hermann Lübbert has been granted authority to represent us alone. He and Thomas Schaffer were furthermore released from the restrictions imposed by Section 181, 2nd Case of the German Civil Code with respect to transactions conducted with some of our subsidiaries.

Our management board has the authority to determine our business areas and operating segments and resolve upon the internal allocation of responsibility for certain business areas and operating segments among the various members of the management board by setting up a business responsibility plan. Since we currently have only three members of our management board, we do not have a formal business responsibility plan in place at this time.

The following table sets forth the names and function of the current members of our management board and their ages:

Name	Age	Position
Professor Hermann Lübbert, Ph.D.	61	Chairman of the management board and chief executive officer
Thomas Schaffer	55	Member of the management board and chief financial officer
Christoph Dünwald	49	Member of the management board and chief commercial officer

The business address of the members of our management board is our principal executive office at Hemmelrather Weg 201, D-51377 Leverkusen Germany.

The following is a brief summary of the business experience of the members of our management board:

Prof. Hermann Lübbert, Ph.D. Prof. Lübbert has served as our chief executive officer since 1997. He is chairman of the management board of Biofrontera AG and a managing director of all subsidiaries of Biofrontera AG. He studied biology in his home town of Cologne and received his doctorate there in 1984. Following 3.5 years in academic research at the University of Cologne and the California Institute of Technology, he gained experience in managing a global research organization during 10 years at Sandoz, where he served as Head of Genome Research, and Novartis Pharma AG, where he served as a member of the global Neuroscience Research Management Team. Prof. Lübbert founded Biofrontera in 1997 and has been managing the company ever since. He qualified as a university lecturer at the Swiss Federal Institute of Technology (ETH) Zurich and in addition to his engagement as Executive Director, holds a professorship for animal physiology at the Ruhr-University Bochum.

Thomas Schaffer . Mr. Schaffer has served as our chief financial officer since 2013. He began his professional career with various positions in the finance and controlling division at Siemens Semiconductor. He held the position of Vice President and Chief Financial Officer in the Security & Chipcard IC business area of Siemens and the subsequently formed Infineon Technologies AG. Following this, he spent four years as Managing Director and Chief Financial Officer of Infineon Ventures GmbH and continued his career as Vice President and Chief Financial Officer of the Specialty DRAM Division of Qimonda AG, where he also took over management of Qimonda Solar GmbH, Dresden. With positions as Chief Financial Officer at Heptagon Oy, Finland/Switzerland, and Ubidyne Inc., Delaware, U.S., he expanded his extensive international experience. Mr. Schaffer has broad expertise in finance and accounting and has made significant contributions to the strategic development of the companies for which he has previously worked. Since June 2013, Mr. Schaffer has held the position of chief financial officer at Biofrontera AG and is a managing director of all subsidiaries of Biofrontera AG.

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Christoph Dünwald . Mr. Dünwald has served as our chief commercial officer since 2015. He began his professional career at Bayer, where he worked for 15 years in positions of increasing responsibility in marketing in both Spain and the U.S., as well as in strategic management positions in Germany and Asia Pacific. He then oversaw Bayer’s Healthcare Diagnostics Division in Belgium and Luxembourg as the General Manager. Following two years as International Sales and Marketing Director for Corporacion Dermoestetica SA in Spain and the UK, he became Senior Commercial Director to Allergan, the global pharmaceutical company. From 2009 until 2015, he was assigned the responsibility for Allergan’s Medical Business Unit in Spain and Portugal. Mr. Dünwald holds a significant track record of increasing sales and profit in all of his leadership roles. We believe that Mr. Dünwald’s management and marketing and sales experience qualify him to serve on our management board.

Code of Business Conduct and Ethics

We have adopted a written Code of Conduct that applies to members of our management board, officers and employees, including our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions.

No waivers have been granted to the code of business conduct and ethics since its adoption.

German Corporate Governance Code

The German Corporate Governance Code, or Corporate Governance Code, was originally published by the German Ministry of Justice in 2002 and was most recently amended on February 7, 2017 and published in the German Federal Gazette on April 24, 2017. The Corporate Governance Code contains recommendations and suggestions relating to the management and supervision of German companies that are listed on a stock exchange. It follows internationally and nationally recognized standards for good and responsible corporate governance. The purpose of the Corporate Governance Code is to make the German system of corporate governance transparent for investors. The Corporate Governance Code includes corporate governance recommendations and suggestions with respect to shareholders and shareholders’ meetings, the supervisory and management boards, transparency, accounting policies, and auditing.

There is no obligation to comply with the recommendations or suggestions of the Corporate Governance Code. The German Stock Corporation Act requires only that the supervisory board and management board of a German listed company issue an annual declaration that either (i) states that the company has complied with the recommendations of the Corporate Governance Code ( einverständniserklärung ), (ii) lists the recommendations that the company has not complied with and explains its reasons for deviating from the recommendations of the Corporate Governance Code ( qualifizierte Abweichungserklärung) (“Comply or Explain”), or (iii) states that the company has not complied with the recommendations of the Corporate Governance Code ( Abweichungserklärung ). In addition, a listed company is also required to state in this annual declaration whether it intends to comply with the recommendations or list the recommendations it does not plan to comply with in the future. These declarations must be published permanently on our website. If we change our policy on certain recommendations between such annual declarations, we must disclose this fact and explain our reasons for deviating from the recommendations. As opposed to such noncompliance with recommendations, noncompliance with mere suggestions contained in the Corporate Governance Code need not be disclosed.

As a result of the listing of our shares on the regulated market of the Frankfurt Stock Exchange, the Corporate Governance Code applies to us and we are required to issue the annual declarations described above. According to their respective rules of procedure, our supervisory board and management board are obliged to comply with the Corporate Governance Code except for such provisions which they have explicitly listed in their annual declaration and for which they have stated that they do not comply with.

In particular, we adhere to the following significant recommendations of the Corporate Governance Code: (i) the supervisory board will establish audit and nominating committees; (ii) the management board must keep the supervisory board closely informed, in particular with respect to measures which can fundamentally affect our condition; and (iii) significant management measures are subject to supervisory board approval.

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Differences between Our Corporate Governance Practices and the Rules of The NASDAQ Capital Market

The NASDAQ listing rules allow for a foreign private issuer, such as us, to follow the laws, rules, and regulations, or home country practice, of its home country in lieu of certain of NASDAQ's corporate governance standards. Specifically, NASDAQ Listing Rule 5615(a)(3)(A) permits a foreign private issuer to follow its home country practice instead of following the requirements of the NASDAQ Listing Rule 5600 series, the requirement to disclose third party director and nominee compensation set forth in NASDAQ Listing Rule 5250(b)(3), and the requirement to distribute annual and interim reports set forth in NASDAQ Listing Rule 5250(d).

In accordance with the requirements of the German Stock Corporation Act, and unlike many publicly traded companies in the U.S., we utilize a two-tier board structure, consisting of a supervisory board and a management board. This two-tier governance system provides a strict separation of supervisory and management functions, with the roles and responsibilities of each of the two boards clearly defined by German law.

Differences between the corporate governance practices that we follow and those set forth in the NASDAQ stock market rules are described below:

Distribution of Annual and Interim Reports. We expect to rely on an exemption from the requirement under NASDAQ Listing Rule 5250(d) that an annual report, containing our audited financial statements and those of our subsidiaries, be distributed to shareholders a reasonable period of time following the filing of the annual report with the SEC. Consistent with the German Stock Corporation Act, we do not distribute annual and interim reports automatically to shareholders. Instead, our annual reports are available to shareholders at our offices or on our website. Under the deposit agreement relating to our ADSs, we have agreed to provide annual reports to the depositary bank so that the depositary bank may arrange for distribution of such information to holders of our ADSs.

Independent Directors. NASDAQ Stock Market Rule 5605(b)(1) requires listed companies to have a majority of independent directors. There is no requirement under German law that the majority of members of a supervisory board be independent. The rules of procedure of our supervisory board provide that the supervisory board should have a sufficient number of independent members within the meaning of the German Corporate Governance Code, and the supervisory board has resolved that a number of at least one-half of the board members should be sufficient, though this is not a mandatory requirement. The supervisory board has determined that a majority of the current members of our supervisory board are independent.

In addition, under our two-tier board system, our methods for determining and ensuring the independence of our supervisory board generally differ from those set forth in NASDAQ rule 5605, which contemplates a U.S.-style, one-tier system. For instance, while NASDAQ rules require the board to affirmatively determine the independence of individual directors via specific tests of independence, German law does not require the supervisory board to make such affirmative findings on an individual basis. At the same time, the rules of procedure of our supervisory board contain provisions to help ensure the independence of the supervisory board’s advice and supervision. Furthermore, the members of our supervisory and management boards are independent from one another. A member of one board is legally prohibited from being concurrently active on the other. Supervisory board members have independent decision making authority and are legally prohibited from following the direction or instruction of any affiliated party. Moreover, supervisory board members may not enter into advisory, service or certain other contracts with us, unless approved by our supervisory board.

Executive Sessions. We expect to rely on an exemption from the requirement under NASDAQ Listing Rule 5605(b)(2) that independent directors have regularly scheduled meetings during which only independent directors are present. German law does not require executive sessions of independent directors. However, German law provides that the supervisory board holds meetings at least twice in each half-year period. Additionally, where supervisory board members are subject to conflicts of interest, they generally have to refrain from taking part in deliberations and voting.

Audit Committee Charter. We expect to rely on an exemption from the requirement under NASDAQ Listing Rule 5605(c)(1) that we adopt a formal written audit committee charter specifying certain audit committee responsibilities. German law does not require a separate charter for an audit committee. Instead, the responsibilities and authority of our audit committee are set forth in the rules of procedure of our supervisory board and in the applicable German laws. Pursuant to the German Stock Corporation Act, independent auditors are elected at the shareholders' meeting, instead of being appointed by the audit committee. Also pursuant to the German Stock Corporation Act and applicable German law, our entire supervisory board, together with our management board, and in some cases, our shareholders, are responsible for the final approval of the audited financial statements and our supervisory board as a whole is responsible for many of the same functions that Nasdaq requires of an audit committee under its rules.

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Compensation Committee Charter. We expect to rely on an exemption from the requirement under NASDAQ Listing Rule 5605(d)(1) that we certify we have adopted a formal written compensation committee charter and that the compensation committee will review and reassess the adequacy of the formal written charter on an annual basis. German law does not require a separate charter for a compensation committee. Instead, the responsibilities and authority of our personnel committee (which is responsible for nominating members of the management board and questions of compensation of the management board) are set forth in the rules of procedure of our supervisory board and in applicable German law. Pursuant to the German Stock Corporation Act and applicable German law, our entire supervisory board is responsible for the appointment and final approval of remuneration of the management board.

Compensation Committee Responsibilities and Authority. We expect to rely on an exemption from the requirements under NASDAQ Listing Rule 5605(d)(3) identifying specific compensation committee responsibilities and authority. The responsibilities and authority of our personnel committee are set forth in the rules of procedure of our supervisory board and in applicable German law. The personnel committee does not have independent authority to retain legal and professional advice; rather, the supervisory board as a whole can generally retain such advice.

Nominations Committee Charter. We expect to rely on an exemption from the requirement under NASDAQ Listing Rule 5605(e)(2) that we certify we have adopted a formal written charter or board resolution, as applicable, addressing the nominations process and related matters as required under federal securities laws. German law does not require a separate charter or board resolution addressing nominations. Instead, the responsibilities and authority of our personnel committee (responsible for nominating members of the management board) and the nomination committee (responsible for nominating members of the supervisory board) are set forth in the rules of procedure of our supervisory board and in applicable German law.

Solicitation of Proxies. We expect to rely on an exemption from the requirement under NASDAQ Listing Rule 5620(b) that we solicit proxies and provide proxy statements for all meetings of shareholders and provide copies of such proxy solicitation to NASDAQ. Consistent with German law, we offer to our shareholders the right to exercise their voting rights in the general meeting through proxies appointed by our company and keep the declarations of such proxies available for inspection for a period of three years. The proxies appointed by us are obligated to vote only in accordance with the instructions of the represented shareholder. Under the deposit agreement pertaining to our ADSs, our depositary bank mails to holders of ADSs a notice stating, among other things, that each holder of ADSs is entitled to instruct the depositary bank as to the exercise of the voting rights. Each holder of ADSs who desires to exercise or to give instructions for the exercise of voting rights must execute and return a document provided by the depositary bank that instructs the depositary bank as to how the number of the shares represented by such holders’ ADSs are to be voted. See “Description of American Depositary Shares — Voting Rights“ for more information.

Quorum. We expect to rely on an exemption from the requirement under NASDAQ Listing Rule 5620(c) that our by-laws provide for a quorum that is not less than 33 1/3 % of the outstanding shares of our ordinary voting shares. Consistent with German law, our articles of association do not provide for a quorum for shareholders’ meetings.

Shareholder Approval . We expect to rely on an exemption from the requirement under NASDAQ Listing Rule 5635(c) requiring companies to obtain shareholder approval of all equity compensation plans (including share option plans) and any material revisions to them. Consistent with the German Stock Corporation Act, the adoption of our stock option plans and any material revisions thereto must be approved by our shareholders insofar as the issuance of shares and/or share options under authorized or contingent capital authorizations requires shareholder approval. For the avoidance of doubt, this only applies insofar as actual shares are to be delivered under the plan. Phantom stock or other remuneration programs linked to share value, but not requiring delivery of physical shares, do not require shareholder approval.

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Compensation of Management Board and Supervisory Board Members

Compensation of Supervisory Board Members

2016 Supervisory Board Member Compensation Table

The following table sets forth information for the fiscal year ended December 31, 2016 regarding the compensation awarded to, earned by or paid to our supervisory board members who served on our supervisory board during 2016.

Name	Fees Earned or Paid in Cash (€)		Option or other Equity Awards (€)		All Other Compensation (€)		Total (€)
Jürgen Baumann*		25,625		**		—		25,625
Prof. Bernd Wetzel, Ph.D.		9,375		**		—		9,375
Andreas Fritsch		6,250		**		—		6,250
Ulrich Granzer, Ph.D.*		23,750		**		—		23,750
Ulrike Kluge		6,250		**		—		6,250
Alfred Neimke		6,250		**		—		6,250
John Borer*		8,750		**		—		8,750
Hansjörg Plaggemars*		8,750		**		—		8,750
Mark Reeth†		8,750		**		—		8,750
Kevin Weber*		8,750		**		—		8,750

Current member of our supervisory board.

No option or other equity awards were made to any of our supervisory board members as compensation in 2016.

†

Member of our supervisory board until October 31, 2017.

Under German law, the compensation of the supervisory board of a German stock corporation can only be determined by the shareholders’ meeting.

The following remuneration system for our supervisory board has been approved by our shareholders.

Each member of our supervisory board receives a fixed annual fee of €15,000 (fixed fee component). If our consolidated results per share in the fiscal year for which the fixed fee is paid (salary year), and in the salary year of the previous fiscal year, improve by 25% or more compared with each respective previous fiscal year, each member of our supervisory board will be awarded an annual performance-related fee of €10,000 over and above the fixed fee component for the salary year (performance-related pay). If our consolidated results per share improve by 50% or more, the performance-related pay will increase to €20,000. The basis for calculating whether or not the required improvement is achieved in the relevant successive fiscal years (period under consideration) is the consolidated results per share in the fiscal year 2006 and in subsequent years; for example, if the required improvement in terms of consolidated results per share is achieved in 2007 compared with 2006, and subsequently in 2008 compared with 2007, the performance-related pay for the fiscal year 2008 will have been earned.

Our chairman receives twice and our vice chairman receives one-and-a-half times the fee.

Our company has obtained an indemnity insurance policy, for the benefit of the members of our supervisory board, which covers statutory liability arising from the activities of our supervisory board.

We do not pay fees for attendance at supervisory board meetings.

The members of our supervisory board are entitled to reimbursement of their reasonable, documented expenses (including, but not limited to, travel, board and lodging and telecommunication expenses).

Compensation of Management Board Members

2016 Management Board Member Compensation Table

The following table sets forth information concerning the compensation of our named executive officers during the fiscal year ended December 31, 2016.

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Name and Principal Position	Salary		Bonus		Option Awards		All Other Compensation		Total
Prof. Hermann Lübbert, Ph.D. Chief Executive Officer	€	363,387	€	72,000	€	199,200		—	€	634,587
Thomas Schaffer Chief Financial Officer	€	213,139	€	63,000	€	124,500		—	€	400,639
Christoph Dünwald Chief Commercial Officer	€	237,000	€	5,625	€	124,500		—	€	367,125

In the fiscal year ended December 31, 2016, Prof. Lübbert received total compensation of €634,587, which included base salary, bonus, option awards and other benefits, Mr. Schaffer received total compensation of €400,639, which included base salary, bonus, option awards and other benefits, and Mr. Dünwald received total compensation of €367,125, which included base salary, bonus, option awards and other benefits.

Employment Agreement with Prof. Hermann Lübbert

We entered into an employment agreement with Prof. Hermann Lübbert that provides that Prof. Lübbert will serve as our chief executive officer and as the chairman of our management board and under which he is entitled to receive an initial annual base salary of €350,000. Prof. Lübbert is further eligible to receive an annual target performance bonus of €80,000, based on certain annual corporate goals and individual performance goals established annually by our supervisory board. Prof. Lübbert’s total annual target bonus increases proportionately to up to 150% of the annual target performance bonus if the corporate and individual goals are exceeded, as determined by our supervisory board. No bonus will be paid if our supervisory board determines that the target achievement of the respective year was below 70%. Prof. Lübbert’s annual base salary shall be increased to €400,000 upon the achievement of profitability.

The employment agreement further provides that Prof. Lübbert shall be granted options to purchase ordinary shares from our employee stock option plan. Prof. Lübbert must hold personally at least one ordinary share of Biofrontera for each option he has been granted.

The employment agreement also provides that if we terminate Prof. Lübbert’s employment for reasons other than cause, he is entitled to continue to receive his base salary and annual bonus for a period of two years after the termination in consideration for a non-compete obligations agreed by Prof. Lübbert. These obligations include a non-solicitation covenant and a covenant not-to-compete with us worldwide during his employment with us and for a period of two years thereafter.

Further, the employment agreement includes a “change of control” provision pursuant to which Prof. Lübbert may terminate his employment agreement in the event that one party or a group of parties acting in concert acquires 50% or more of the voting rights of our company. Upon termination of his employment in the event of a “change of control,” Prof. Lübbert shall be entitled to a payment of 300% of his annual salary, including the base salary and 100% of his annual bonus.

The term of the employment agreement with Prof. Lübbert is until October 31, 2020.

Employment Agreement with Thomas Schaffer

We entered into an employment agreement with Thomas Schaffer that provides that Mr. Schaffer will serve as our chief financial officer and a member of our management board and under which he is entitled to receive an initial annual base salary of €230,000. Mr. Schaffer is further eligible to receive an annual target performance bonus of €70,000, based on certain annual corporate goals and individual performance goals established annually by our supervisory board. Mr. Schaffer’s total annual target bonus increases proportionately to up to 150% of the annual target performance bonus if the corporate and individual goals are exceeded, as determined by our supervisory board. No bonus will be paid if our supervisory board determines that the target achievement of the respective year was below 70%. Mr. Schaffer’s annual base salary shall be increased to €250,000 upon the achievement of profitability.

The employment agreement further provides that Mr. Schaffer shall be granted options to purchase ordinary shares from our employee stock option plan. Mr. Schaffer must hold personally at least one ordinary share of Biofrontera for each option he has been granted, up to an aggregate amount of €15,000 per annum.

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Further, the employment agreement includes a “change of control” provision pursuant to which Mr. Schaffer may terminate his employment agreement in the event that one party or a group of parties acting in concert acquires 50% or more of the voting rights of Biofrontera AG. Upon termination of his employment in the event of a “change of control,” Mr. Schaffer shall be entitled to a payment of 300% of his annual salary, including the base salary and 100% of his annual bonus.

The term of the employment agreement with Mr. Schaffer is until November 30, 2020.

Employment Agreement with Christoph Dünwald

We entered into an employment agreement with Christoph Dünwald that provides that Mr. Dünwald will serve as our chief commercial officer and a member of our management board and under which he is entitled to receive an initial annual base salary of €225,000. Mr. Dünwald is further eligible to receive an annual target performance bonus of €50,000, based on certain annual corporate goals and individual performance goals established annually by our supervisory board. Mr. Dünwald’s total annual target bonus increases proportionately to up to 200% of the annual target performance bonus if the corporate and individual goals are exceeded, as determined by our supervisory board. No bonus will be paid if our supervisory board determines that the target achievement of the respective year was below 70%. Mr. Dünwald’s annual base salary shall be increased to €300,000 upon the achievement of profitability.

The employment agreement further provides that Mr. Dünwald shall be granted options to purchase ordinary shares from our employee stock option plan. Mr. Dünwald must hold personally at least one ordinary share of Biofrontera for each option he has been granted, up to an aggregate amount of €15,000 per annum.

Further, the employment agreement includes a “change of control” provision pursuant to which Mr. Dünwald may terminate his employment agreement in the event that one party or a group of parties acting in concert acquires 50% or more of the voting rights of our company. Upon termination of his employment in the event of a “change of control,” Mr. Dünwald shall be entitled to a payment of 300% of his annual salary, including the base salary and 100% of his annual bonus.

The term of the employment agreement with Mr. Dünwald is until November 30, 2020.

Equity Incentive Plans

2010 Employee Stock Option Plan

At our annual general meeting of shareholders held on July 2, 2010, our management board and supervisory board proposed a share option program for employees to the annual general meeting, which approved the initiative. In accordance with this plan, our management board, or the supervisory board if the beneficiaries are management board members, is entitled to issue up to 839,500 share options, the exercise of which is linked to specific targets.

The plan has a total nominal value of €839,500 and a term ending upon the expiration of the option rights issued pursuant to the plan. The plan provides that option rights may be exercised until six years following the date of issuance of the options in question and only after the expiration of the vesting period of the options, which is four years after the date of issuance. To this end, contingent capital of €839,500 was enacted as a result of the issuing of up to 839,500 registered ordinary shares without par value, with a stake in the share capital of €1.00 per share pursuant to Section 192 paragraph 1 No. 3 of the German Stock Corporation Act. The contingent capital was registered on July 30, 2010 in the commercial register of Cologne District Court as HRB 49717. Eligibility for the 2010 share option plan was granted to members of our management board and employees of our company as well as to executive officers and employees of affiliates of Biofrontera AG.

The date of issue of the options was November 24, 2010 and the option grants were made without any payment being provided in return. On November 24, 2010, 106,400 options (first tranche) were issued, with an exercise price per share of €1.91. On September 30, 2011 and on October 7, 2011 (second tranche), an additional 96,400 options were issued, with an exercise price per share of €2.48. On March 23, 2012 and May 11, 2012 (third tranche), 65,000 options were issued, with an exercise price per share of €3.30 and 51,500 options were issued with an exercise price per share of €4.09. On September 2, 2013, 179,500 options were issued (fourth tranche), with an exercise price per share of €3.373. On April 2, 2014, 159,350 options were issued, with an exercise price per share of €3.43. A total of 137,250 options have been forfeited by employees who have terminated employment with our company and an additional total of 106,400 options (from the first tranche) expired because the exercise conditions were not met. The authorization to issue options under our 2010 stock option plan ended on July 1, 2015. By resolution of our annual general meeting on August 28, 2015, the contingent capital authorized to service options under this plan was reduced to €542,400.

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In accordance with the associated conditions, each subscription right that is granted under the plan entitles the beneficiary to acquire one new registered ordinary share, without par value, of our company. The exercise price is equal to the arithmetical average (unweighted) of the closing prices ascertained on the Frankfurt Stock Exchange via floor and XETRA trading for our shares on the ten trading days prior to the issuance of the share. However, the minimum exercise price amounts to the proportionate share of our company’s share capital allocated to each individual no-par value share, pursuant to Section 9, paragraph 1 of the German Stock Corporation Act.

The options granted may only be exercised after expiration of a vesting period. The vesting period is four years from the respective date of issue. A prerequisite for the whole or partial exercise of the options is that the following performance target is achieved:

Exercise of the options from a tranche is possible if at the beginning of the respective exercise period, the price (hereinafter referred to as the "reference price") of a share of Biofrontera exceeds the exercise price by at least 20%, and a minimum reference price of at least €5.00 is achieved (hereinafter referred to as the "minimum reference price"). The reference price is equal to the arithmetical average (unweighted) of the closing prices ascertained on the Frankfurt Stock Exchange via floor and XETRA trading for our shares between the 15th and the 5th trading day (inclusive in each case) prior to the respective exercise window.

The minimum reference price is adjusted in the following cases in order to bring the stated performance target into line with changed circumstances:

In the event of a capital increase from company funds as a result of the issuance of shares, the minimum reference price is reduced by the same proportion as new shares issued compared to existing shares. If the capital increase is carried out from company funds without the issuing of new shares (Section 207 paragraph 2 clause 2 of the German Stock Corporation Act), the minimum reference price remains unchanged.

In the event of a capital reduction taking place, no adjustment is made to the minimum reference price, provided that the total number of shares is not affected by the reduction of capital, or if the capital reduction is associated with a return of capital or an acquisition of our own shares in return for payment. In the event of a capital reduction achieved by consolidation of shares without repayment of capital or in the event of an increase in the number of shares without a change in capital (a share split), then the minimum reference price is increased in proportion to the reduction of capital or to the share split.

There are no other cases in which adjustments are made to the minimum reference price.

The exercise of options under this plan is limited to the following time periods, or exercise windows:

the period commencing on the 6th and continuing over the following 14 banking days after the date of the annual general meeting (exclusive);

the period commencing on the 6th and continuing over the following 14 banking days after the date of issue of a half-yearly or quarterly report or an interim announcement by our company (exclusive); and

the period between the 15th and 5th banking day before the expiration of the option rights of the expiry date in question.

Any options not exercised before the date of expiration of the options are forfeited without compensation. We assume an average holding period of five years in assessing the employee options.

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Any claim by the beneficiary to receive a cash settlement in the event of non-exercise of the options is invalid, notwithstanding the existence of the above exercise prerequisites. An option right may only be exercised if the holder has a current service or employment contract with our company or another company affiliated with our company or if the holder is a member of our management board or the management team of another company affiliated with our company.

In the event of the exercise of a subscription right, our company is generally and in specific cases permitted to choose between granting the registered share in exchange for payment of the exercise price, or fulfilling its obligation by paying a cash settlement to the holder of the subscription right. The cash settlement per subscription right is equal to the difference between the exercise price per share and the share price on the exercise date, minus due taxes and fees.

2015 Employee Stock Option Plan

At our annual general meeting of shareholders held on August 28, 2015, our management board and supervisory board proposed a share option program for employees to the annual general meeting, which approved the initiative. In accordance with this plan, our management board, or the supervisory board if the beneficiaries are management board members, is entitled to issue up to 1,814,984 share options, the exercising of which is linked to specific targets.

The program has a total nominal value of €1,814,984 and the right to exercise options issued pursuant to this plan ends six years following the issue date of the respective option. To this end, contingent capital of €1,814,984 was enacted as a result of the issuing of up to 1,814,984 registered ordinary shares, without par value, and with a stake in the share capital of €1.00 per share pursuant to Section 192 paragraph 1 No. 3 of the German Stock Corporation Act. The contingent capital was registered on September 18, 2015 in the commercial register of Cologne District Court as HRB 49717. Eligibility for the 2015 share option plan was granted to members of the management board and employees of our company as well as to members of management bodies and employees of affiliates of Biofrontera AG.

The date of issue of the options was April 7, 2016 and the options grants were made without any payment being provided in return. On April 18, 2016, 425,500 options (first tranche) were issued, with an exercise price per share of €2.49. On December 1, 2016, 130,500 options (second tranche) were issued, with an exercise price per share of €3.28. On April 28, 2017, 329,000 options (third tranche) were issued, with an exercise price per share of €4.02. A total of 38,500 options have been forfeited by employees who have terminated employment with our company.

In accordance with the associated conditions, each subscription right that is granted entitles the beneficiary to acquire one new registered share, without par value, in our company. The exercise price is equal to the arithmetical average (unweighted) of the closing prices ascertained on the Frankfurt Stock Exchange via floor and XETRA trading for our shares on the ten trading days prior to the issuing of the share. However, the minimum exercise price amounts to the proportionate share of our company’s share capital allocated to each individual no-par value share, pursuant to Section 9, paragraph 1 of the German Stock Corporation Act.

The options granted may only be exercised after expiry of a vesting period. The vesting period is four years from the respective date of issue. A prerequisite for the whole or partial exercise of the options is that the following performance targets are achieved.

Options under this plan may only be exercised if the following performance targets are met:

Exercise of the options from a tranche is possible if, at the beginning of the respective exercise window, the price of a share of our company exceeds the exercise price by at least 20% (the reference price); and

if in comparison with the exercise price of the option, the reference price has performed as well as or better in percentage terms than the MSCI World Health Care Index TR or a comparable successor index (the reference index), during the period from the last trading day before the issue date until the 5th trading day before the beginning of the respective exercise window (the reference period). As the reference index is a total return index, the gross amount of dividends distributed by our company during the reference period and other distributions to shareholders are taken into account as a value-enhancing factor when determining the performance of our company’s shares.

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The reference price corresponds to the non-weighted average price of our company’s shares in the Xetra closing auction on the Frankfurt Stock Exchange or in an equivalent successor system between the 15th and 5th trading days (inclusive in each case) before the beginning of the respective exercise window.

The plan provides the following option right adjustments and anti-dilution provisions:

If during the term of the options, our company grants a direct or an indirect subscription right to our shareholders, our company increases its share capital by issuing new shares or debt instruments or profit participation rights with conversion or option rights, and the conversion or option price per share determined in this process is lower than the exercise price of the options, our management board and, in the event that members of our management board are affected, our supervisory board, is authorized to put the beneficiary of the options on an equal financial footing as far as is necessary to ensure that the value of the options to which an eligible person is entitled remains unchanged before and after implementation of a capital measure using recognized methods in financial mathematics. At the option of our company this adjustment can be made by reducing the exercise price or adjusting the number of options or a combination of both. If no subscription rights trade takes place, in the event of an adjustment by our company, the value of the subscription right will be calculated as follows with binding effect:

SR = (Po - Pn) / (SRa + 1)

where:

SR = subscription right
Po = market price of the old shares
Pn = issue price of the new shares
SRa = subscription ratio

The market price of the old shares, “Po”, is determined as follows: arithmetic average (non-weighted) of the closing price of our shares determined in trading on the XETRA electronic trading platform of the Frankfurt Stock Exchange during the subscription period.

In the event of a capital increase from company funds through the issuing of shares, the contingent capital pursuant to Section 218 of the German Stock Corporation Act will be increased by the same ratio as the share capital. The beneficiary’s right to subscribe to new shares through exercise of the subscription right will increase by the same ratio; the exercise price per share will be reduced by the same ratio. In the event of a capital increase from company funds without the issue of new shares (Section 207 (2) second sentence of the German Stock Corporation Act), the subscription right under the options and the exercise price will remain unchanged.

In the event of a capital reduction, the exercise price and option ratio will not be adjusted, provided that the capital reduction does not change the total number of shares or the capital reduction is linked to a capital repayment or an acquisition of treasury shares against payment. In the event of a capital reduction through the consolidation of shares without a capital repayment and in the event of an increase in the number of shares without a change in capital (share split), the number of shares that can be acquired for each option at the exercise price will be reduced or increased in proportion to the capital reduction or share split; the exercise price per share will be changed by the same ratio.

If an adjustment is made in accordance with the foregoing paragraphs, fractions of shares will not be issued when the subscription right is exercised. There will be no cash settlement.

In the event that our company merges with another company, changes its legal form or undertakes similar transactions that impair the rights of the beneficiary due to the loss of or changes to our shares, the option rights will be replaced by the right to acquire, at the exercise price, a number of shares, shares in a business or other rights replacing our shares to invest in our company or our legal successor that corresponds in value to the market value of one of our shares at the time such transaction occurs (full entry of its execution in the commercial register).

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In the event of an integration, the conclusion of profit transfer or domination agreements, a squeeze-out of minority shareholders or an asset transfer within the meaning of Section 174 et seq. of the German Act Regulating Transformation of Companies, our company will, as far as is legally and practicably possible, place the eligible person in the position when exercising his options in which he would have been had he already exercised his option rights at the time of the contract coming into effect or such transaction being implemented. If trading in our company’s shares is suspended as a result of such a transaction and for this reason it is no longer possible to determine if performance targets have been met, the extent to which targets have been met will be determined by means of an assessment by a public auditor/public audit firm commissioned by our company at its expense calculating the capitalized earnings value of our shares on December 31 of each year in each case.

In the event of other measures having an effect comparable to that of an adjustment as described in the foregoing cases, our company may adjust the exercise price in accordance with Section 315 of the German Commercial Code.

The exercise of options under this plan is limited to the following time periods (hereinafter "exercise windows"), i.e. , only declarations of the exercise of rights submitted to our company within an exercise window will be considered:

the period commencing on the 6th banking day and continuing over the following 20 banking days after our annual general meeting;

the period commencing on the 6th banking day and continuing over the following 20 banking days after presentation of the half-yearly or quarterly report or of an interim announcement or interim financial report of our company; and

the period between the 20th and 5th banking days before the option rights lapse.

The right to exercise the options expires no later than six years after the first day of issue. Any options not exercised by that date are forfeited without compensation. We assume an average holding period of five years in assessing the employee options.

Any claim by the beneficiary to receive a cash settlement in the event of non-exercise of the options is invalid, notwithstanding the existence of the above exercise prerequisites. An option right may only be exercised if the holder has a current service or employment contract with our company or another company affiliated with our company or if the holder is a member of the management board or the management team of another company affiliated with our company.

Share Ownership by Members of our Supervisory Board and Management Board

Supervisory Board

The following table provides information with respect to ownership of our ordinary shares, options and convertible bonds for each of the members of our supervisory board as of [ ], 2018, based on an aggregate of [ ] shares outstanding as of such date.

Name	Shares		% of Outstanding Shares			Convertible Bonds
Jürgen Baumann		30,000		—			—
John Borer		—					—
Ulrich Granzer		—					—
Hansjörg Plaggemars		—					—
Mark Reeth†		—					—
Kevin Weber		—		—			—

Total		30,000			*		—

Less than one percent of class.

†

Member of our supervisory board until October 31, 2017.

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Management Board

The following table provides information with respect to ownership of our ordinary shares and options for each of the members of our management board as of [___], 2018, based on an aggregate of 38,416,828 shares outstanding as of such date.

Name

% of
Outstanding
Shares

Options

Exercise
Price (€)

Expiration
Date

Prof. Hermann Lübbert, Ph.D.

724,678

1.89

35,000 options

1.91

11/23/2016

30,000 options

2.48

10/06/2017

40,000 options

3.30

03/30/2018

30,000 options

3.373

09/01/2019

16,850 options

3.43

04/01/2020

80,000 options

2.49

04/17/2022

70,000 options

4.02

04/27/2023

Thomas Schaffer

44,265

15,000 options

3.373

09/01/2019

20,000 options

3.43

04/01/2020

50,000 options

2.49

04/17/2022

40,000 options

4.02

04/27/2023

Christoph Dünwald

107,500

50,000 options

2.49

04/17/2022

40,000 options

4.02

04/27/2023

Total

876,443

2.28

516,850 options

* Less than one percent of class.

As of [___], 2018, the members of our management board held an aggregate of 876,433 of our ordinary shares, while the members of our supervisory board held an aggregate of 30,000 of our ordinary shares. As of [___], 2018, the aggregate number of our shares owned by current management board and supervisory board members amounts to approximately [___]% of our outstanding shares as of such date.

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CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

Employment Agreements and Options Grants

We have entered into employment agreements with, and granted options to, the members of our management board. See “Management — Compensation of Management Board and Supervisory Board Members — Compensation of Management Board Members” for more information.

Arrangements with The Benchmark Company, LLC

The Benchmark Company, LLC is acting as representative for the underwriters in connection with this offering. John Borer is the Senior Managing Director and Head of Investment Banking of the representative. Mr. Borer is also a supervisory board member of our company for which he is compensated by our company pursuant to our company’s supervisory board member compensation policies and practices described above under “Management — Compensation of Management Board and Supervisory Board Members”. Therefore, Mr. Borer may be deemed a related person of our company, and the representative may be deemed to be a related person of our company as well by virtue of Mr. Borer’s positions at our company and the representative. In addition, the representative may be deemed to have a conflict of interest under applicable FINRA rules as a result of Mr. Borer’s relationships with our company and the representative. Refer to “Underwriting — Conflict of Interest” for additional disclosures relating this matter, including the amount of compensation to be paid to The Benchmark Company, LLC.

Development Agreement with Maruho

In July 2016, we entered into a collaboration and partnership agreement with Maruho Co. Ltd., one of our major shareholders. See “Business — Our Research and Development Plans — Our Development Collaboration with Maruho” for more information.

Consulting Arrangement with Dr. Ulrich Granzer

During 2016, our company availed itself of additional advisory services from supervisory board member Dr. Ulrich Granzer and his consulting company Granzer Regulatory Consulting & Services, which is owned and controlled by Dr. Granzer. These services went beyond the scope of normal supervisory board activities. Dr. Granzer assisted our company with key issues relating to the preparation of the applications for approval submitted to the supervisory authorities in Europe and the U.S. During the fiscal year ending December 31, 2016, advisory services amounting to €10 thousand (previous year: €62 thousand) were provided by Granzer Regulatory Consulting & Services. Accounts payable to Granzer Regulatory Consulting & Services amounted to €7 thousand on December 31, 2016 (December 31, 2015: €0). For the nine months ended September 30, 2017, we paid €34 thousand to Granzer Regulatory Consulting & Services for advisory services. The amounts stated here do not include statutory value added tax at the current rate of 19%.

Share Loan Agreement

To facilitate the orderly closing of this offering of ADSs and because of timing considerations related to the technical issuance and registration of new ordinary shares under German law, under the terms of a Share Loan Agreement dated [__________], 2018, by and between Lang & Schwarz Broker GmbH (acting as service provider for Biofrontera AG pursuant to a separate Mandate Agreement) and Maruho Deutschland GmbH, Maruho Deutschland GmbH agreed to temporarily lend to Lang & Schwarz Broker GmbH (acting as our service provider) [____] ordinary shares (the “Borrowed Shares”) in connection with the initial deposit of ordinary shares into our ADS program immediately prior to and concurrent with the consummation of this offering.

We have agreed to cause to be conveyed (pursuant to the Share Loan Agreement) to the custodian, whose role is more fully described in the section entitled “Description of American Depositary Shares”, and the custodian has agreed to deposit into the ADS program, [ ] ordinary shares, concurrently with or immediately after the consummation of this offering. In connection with the consummation of this offering, we will initially receive proceeds equal to one quarter of the nominal value of the ordinary shares underlying the ADSs sold in this offering (i.e., €0.25 per ordinary share), and Lang & Schwarz Broker GmbH will provide a subscription certificate to us. Upon receipt of the partial proceeds of the offering and the subscription certificate, we will initiate the registration of a capital increase for the number of shares underlying the ADSs sold in this offering with the commercial register of the local court of Cologne. Although we expect to complete the registration process within approximately one week, it is possible that registration of the capital increase may take as long as three weeks. The time required to complete registration of the capital increase is determined by the schedule of the local court. Once the capital increase has been registered, newly issued ordinary shares of our company equal to the number of shares underlying the ADSs sold in this offering will be delivered to Lang & Schwarz Broker GmbH, which will return the shares to Maruho Deutschland GmbH in repayment and satisfaction in full of the Share Loan. We will receive the full net proceeds of this offering only upon registration of the capital increase with the commercial register. If for any reason we fail to complete registration of the capital increase, then we will not retain any proceeds from this offering, which would have a material adverse effect on our financial position, liquidity and results of operations.

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If the underwriters exercise their over-allotment option then the over-allotment option will be settled with shares conveyed to the custodian pursuant to the Share Loan Agreement.

Transactions with Family Members

Montserrat Foguet Roca, the wife of our chief executive officer, Prof. Hermann Lübbert, serves as a senior employee of our company responsible for regulatory affairs and manufacturing (“ Prokurist ”).

Dr. Matthias Lübbert, the son of our chief executive officer, Prof. Hermann Lübbert, serves as an employee of our Company, with the title “Clinical Trial Manager USA.”

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PRINCIPAL SHAREHOLDERS

The following table sets forth information relating to the beneficial ownership of our shares as of [ ], 2018 by:

each person, or group of affiliated persons, known by us to beneficially own more than 5% of our outstanding shares;

each of the members of our supervisory board; and

each of the members of our management board.

The number of shares beneficially owned by each entity, person, member of our supervisory board, member of our management board is determined in accordance with the rules of the SEC, and the information is not necessarily indicative of beneficial ownership for any other purpose. Under such rules, beneficial ownership includes any shares over which the individual has sole or shared voting power or investment power as well as any shares that the individual has the right to subscribe for within 60 days of [ ], 2018 through the exercise of any warrants or other rights. Except as otherwise indicated, and subject to applicable community property laws, the persons named in the table have sole voting and investment power with respect to all shares owned by that person.

The percentage of shares beneficially owned is computed on the basis of [___]shares outstanding as of [ ], 2018. Shares for which a person has the right to subscribe within 60 days of [ ], 2018 are deemed outstanding for purposes of computing the percentage ownership of the person holding such rights, but are not deemed outstanding for purposes of computing the percentage ownership of any other person. There were [_______] shares for which a person has the right to subscribe within 60 days of [ ], 2018. Additionally, a person is considered to have the right to subscribe for shares which are subject to outstanding options and vested within 60 days of [ ], 2018, although such options may only be exercised in [___] annual exercise periods. See also “Description of Share Capital — Notification and Disclosure Obligations”.

Name and address

of beneficial owner

Beneficial ownership

prior to this offering

Beneficial ownership

after this offering

Number
of shares
beneficially
owned

Number
of options
exercisable
within 60
days

Fully diluted
number of
shares
beneficially
owned

Fully diluted
percentage of
beneficial
ownership

Number
of shares
beneficially
owned

Percentage of
beneficial
ownership ⁽¹⁾

5% and greater shareholders

Maruho Deutschland Co. Ltd., Osaka Japan ⁽²⁾

7,631,586

—

7,631,586

Universal Investment Gesellschaft mbH Frankfurt, Germany ⁽³⁾

799,463

—

799,463

Wilhelm Konrad Thomas Zours ⁽⁴⁾

3,400,907

—

3,400,907

Includes the following shares held directly by Deutsche Balaton AG ⁽⁵⁾

2,512,799

—

2,512,799

Supervisory board members and management board members ⁽⁵⁾

Ulrich Granzer

Jürgen Baumann

John Borer

Hansjörg Plaggemars

Kevin Weber

Prof. Hermann Lübbert, Ph.D.

Thomas Schaffer

Christoph Dünwald

All supervisory board members and management board members as a group (9 persons)

906,443

Indicates beneficial ownership of less than 1% of the total shares outstanding.

(1)

Assuming that the underwriters exercise their option to purchase [ ] additional shares in full for the purpose of covering over-allotments. See “Underwriting”.

(2)

Based on public filings by Maruho Co., Ltd, Osaka which is deemed to be the owner of shares held by its controlled subsidiary, Maruho Deutschland GmbH, Düsseldorf. Maruho Deutschland GmbH’s address is c/o Biofrontera AG, Hemmelrather Weg 201, 51377 Leverkusen, Germany.

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(3)

Based on public filings by Universal-Investment GmbH, which is deemed to be the owner of shares held through its controlled subsidiary through the company FEHO Vemögensverwaltungsgesellschaft. Universal-Investment-GmbH’s address is Theodor-Heuss-Allee 70, 60486 Frankfurt am Main, Germany.

(4)

Based on public filings in Germany on May 27, 2016 by Mr. Wilhelm Konrad Thomas Zours, who is deemed to be the owner of shares held by the following entities he controls: DELPHI Unternehmensberatung AG, VV Beteiligungen AG, Deutsche Balaton AG (which directly held 2,512,799, or approximately 8.28%, of our shares as of that date), ABC Beteiligungen AG and Heidelberger Beteiligungsholding AG.

(5)

Based on public filings in Germany on May 27, 2016 by Deutsche Balaton AG. Based on public filings in Germany, Deutsche Balaton AG is controlled by Mr. Wilhelm Konrad Thomas Zours, who is deemed to be the owner of shares held by Deutsche Balaton AG.

(6)

The address of the members of our supervisory board and management board is c/o Biofrontera AG at Hemmelrather Weg 201, D-51377 Leverkusen, Germany.

As of [___], 2018, there were 5,446 holders of record entered in our share register, of which two were U.S. residents, holding less than 0.1% of our outstanding shares. The number of individual holders of record is based exclusively upon our share register and does not address whether a share or shares may be held by the holder of record on behalf of more than one person or institution who may be deemed to be the beneficial owner of a share or shares in our company.

To our knowledge, no other shareholder beneficially owns more than 5% of our shares. Under German law, shareholders of a public company are required to notify the company and the German Federal Financial Supervisory Authority of the number of shares they own when their percentage ownership reaches, exceeds or falls below certain threshold levels. German law does not require a shareholder to update this information unless it again reaches, exceeds or falls below a notification threshold. As a result, we cannot be certain whether the number of shares owned by the shareholders (other than the shareholders who are members of our supervisory board and management board) listed above is accurate. See “Description of Share Capital — Notification and Disclosure Obligations.”

Our company is not owned or controlled directly or indirectly by any government or by any corporation or by any other natural or legal person severally or jointly. Our major shareholders do not have any special voting rights.

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DESCRIPTION OF SHARE CAPITAL

The following description is a summary of certain information relating to our share capital, as well as certain provisions of our articles of association and the German Stock Corporation Act. Unless stated otherwise, the description insofar as it relates to our articles of association is based on the amended version of our articles of association which was registered with the commercial register in Köln, Germany, on 29 June 2017. This summary does not purport to be complete and speaks as of the date of this prospectus. Copies of our articles of association are publicly available from the commercial register of the local court in Köln, Germany, electronically at www.unternehmensregister.de and as an exhibit to the Registration Statement of which this prospectus forms a part.

Incorporation of the company

Our company was formed in 1997 as a limited liability company ( Gesellschaft mit beschränkter Haftung or GmbH ) under German law and under the name “BioFrontera Laboratories GmbH” to provide services to the pharmaceutical industry. In September 1997, the company was renamed “BioFrontera Pharmaceuticals GmbH” and commenced its current operations, which include the development, marketing, sales, manufacturing and distribution of drugs and medical devices, cosmetics, and other dermatology-related products. On August 24, 2000, our company was converted into a German stock corporation ( Aktiengesellschaft or AG ), and on November 27, 2003, our company was renamed “Biofrontera AG”.

Share Capital

As of the date of this prospectus, our registered share capital amounts to €38,416,828, divided into 38,416,828 no par-value ordinary registered shares with a notional value of €1.00 per share. The shares were created according to German law.

Form, Certification and Transferability of the Shares

Our shares are in registered form ( Namensaktien ). The form and contents of our share certificates, any dividend certificates, renewal certificates and interest coupons are determined by our management board with the approval of our supervisory board. A shareholder’s right to certificated shares is excluded, to the extent permitted by law and to the extent certification is not required by the stock exchange on which the shares are admitted to trading. We are permitted to issue share certificates that represent one or more shares.

Our share capital is represented by one or more global share certificates deposited with Clearstream Banking AG. All our outstanding shares are no par-value ordinary registered shares. Under German law, if a resolution regarding a capital increase does not specify whether such increase will be in bearer or registered form, the new shares resulting from such capital increase will be no par-value ordinary registered shares by default. Any resolution regarding a capital increase may determine the profit participation of the new shares resulting from such capital increase.

Our shares are freely transferable under German law, with the transfer of ownership governed by applicable laws and the rules of the relevant clearing system.

General Information on Capital Measures

Pursuant to our articles of association, an increase of our share capital generally requires a resolution passed at our shareholders’ meeting with both a simple majority of the share capital represented at the relevant shareholders’ meeting and a simple majority of the votes cast. See also “— Subscription Rights“ below.

The shareholders at such meeting may authorize our management board to increase our share capital with the consent of our supervisory board within a period of five years by issuing shares for a certain total amount as “authorized capital” ( genehmigtes Kapital ), which is a concept under German law that enables us to issue shares without going through the process of obtaining a shareholders’ resolution.

Furthermore, our shareholders may resolve to amend or create “contingent capital” ( bedingtes Kapital ); however, they may do so only to issue conversion or subscription rights to holders of convertible bonds, in preparation for a merger with another company or to issue subscription rights to employees and members of the management of our company or of an affiliated company by way of a consent or authorization resolution.

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According to German law, any resolution pertaining to the creation of authorized or contingent capital requires the vote of at least three-quarters of the share capital represented at the relevant shareholders’ meeting and a simple majority of the votes cast. The shareholders may also resolve to increase the share capital from company resources by converting capital reserve and profit reserves into share capital.

Pursuant to our articles of association, any resolution pertaining to an increase in share capital from company resources (“ Kapitalerhöhung aus Gesellschaftsmitteln ”) requires the vote of a simple majority of the share capital represented at the relevant shareholders’ meeting and a simple majority of the votes cast.

According to German law, the aggregate nominal amount of the authorized capital created by the shareholders may not exceed 50% of the share capital existing at the time of registration of the authorized capital with the commercial register.

According to German law, the aggregate nominal amount of the contingent capital created at any shareholders’ meeting may not exceed one-half of the share capital existing at the time of the shareholders’ meeting adopting such resolution. The aggregate nominal amount of the contingent capital created for the purpose of granting subscription rights to employees and members of the management of our company or of an affiliated company may not exceed 10% of the share capital existing at the time of the shareholders’ meeting adopting such resolution.

Any resolution relating to a reduction of our share capital (“ Kapitalherabsetzung ”) requires the vote of at least three-quarters of the share capital represented at the relevant shareholders’ meeting as well as a simple majority of the votes cast according to German law.

Changes in Our Share Capital during the Last Three Fiscal Years

On January 28, 2014, our share capital was increased from authorized capital by €4,438,292 to €22,191,460 pursuant a capital increase against cash contribution by issuing 4,438,292 new registered no-par ordinary shares, with an amount of the share capital attributable to each share of €1.00. All existing shareholders were offered the right to subscribe for shares in the issuance and make offers for additional subscriptions. The price per share was €3.50 each, and we received net proceeds from this share issuance of approximately €15.3 million.

On March 13, 2014, an increase of our share capital by €5,110 to €22,196,570 was registered, pursuant to the exercise of option rights from our warrant bond issued in 2009, resulting in a subscription of 5,110 new shares. The shares were created from contingent capital. On May 28, 2015, our share capital was increased from authorized capital by €1,377,272 to €23,573,842 pursuant to a capital increase against cash contribution by issuing 1,377,272 new registered no-par ordinary shares, with an amount of the share capital attributable to each share of €1.00. All existing shareholders were offered the right to subscribe for shares in the issuance and make offers for additional subscriptions. The subscription price per share was €2.30 each, and we received net proceeds from this share issuance of approximately €3.1 million.

On September 18, 2015, based on the resolution of our general meeting dated August 28, 2015, we restructured our share capital, creating an Authorized Capital I in an amount of €11,786,921, a Contingent Capital I in an amount of €6,434,646, a Contingent Capital III in an amount of €542,400, and a Contingent Capital V in an amount of €1,814,984.

On November 25, 2015, our share capital was increased from Authorized Capital I by €1,916,588 to €25,490,430 pursuant to a capital increase against cash contribution by issuing 1,916,588 new registered no-par ordinary shares, with an amount of the share capital attributable to each share of €1.00, reducing the Authorized Capital I proportionally. All existing shareholders were offered the right to subscribe for shares in the issuance and make offers for additional subscriptions. The subscription price per share was €1.90 each, and we received net proceeds from this share issuance of approximately €3.5 million.

On February 18, 2016, our share capital was increased from Authorized Capital I by €2,357,384 to €27,847,814 pursuant to a capital increase against cash contribution by issuing 2,357,384 new registered no-par ordinary shares, with an amount of the share capital attributable to each share of €1.00, reducing the Authorized Capital I proportionally. The shareholders’ subscription right was excluded in this issuance and the shares were offered to selected institutional investors. The subscription price per share was €1.90 each, and we received net proceeds from this share issuance of approximately €4.4 million.

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On April 20, 2016, our share capital was increased from Authorized Capital I by €2,499,999 to €30,347,813 pursuant to a capital increase against cash contribution by issuing 2,499,999 new registered no-par ordinary shares, with an amount of the share capital attributable to each share of €1.00, reducing the Authorized Capital I proportionally. Our shareholders were granted the statutory subscription right to participate in the issuance. The subscription price per share was €2.00, and we received net proceeds from this share issuance of approximately €4.9 million.

On November 17, 2016, our share capital was increased from Authorized Capital I by €5,012,950 to €35,360,763 pursuant to a capital increase against cash contribution by issuing 5,012,950 new registered no-par ordinary shares, with an amount of the share capital attributable to each share of €1.00, using up the Authorized Capital I completely. Our shareholders were granted the statutory subscription right to participate in the issuance. The subscription price per share was €3.00, and we received net proceeds from this share issuance of approximately €14.7 million.

In December 2016 and January 2017, we issued convertible bonds which could be converted into shares. Insofar as shares are to be delivered as a consequence of conversion of the bonds, we can issue these shares from Contingent Capital I.

In January 2017, an increase of our share capital by €2,354,510 to €37,715,273 was registered pursuant to the conversion of our warrant bonds into 1,603,050 of our ordinary shares, and the exercise of options from our convertible bond issued in 2009 (which was fully repaid upon maturity on December 31, 2016) into 751,460 shares. The 1,603,050 shares from the conversion of convertible bonds were issued from Contingent Capital I, reducing the available Contingent Capital I proportionally. The 751,460 shares from the exercise of option rights were issued from Contingent Capital IV, reducing the available Contingent Capital IV proportionally.

In February 2017, an increase of our share capital by €7,160 to €37,722,433 was registered pursuant to the exercise of options from the warrant bond issued in 2009 into 7,160 of our ordinary shares. The 7,160 shares from the exercise of option rights were issued from Contingent Capital IV, reducing the available Contingent Capital IV proportionally.

On June 29, 2017, our share capital was increased by €693,995 to €38,416,428 pursuant to the conversion of our convertible bonds into 693,995 of our ordinary shares. The 693,995 shares from the conversion of convertible bonds were issued from Contingent Capital I, reducing the available Contingent Capital I proportionally.

In August 2017, our share capital was increased by €75 to €38,416,503 pursuant to the conversion of convertible bonds into 75 of our ordinary shares. The 75 shares resulting from the conversion of convertible bonds were issued from our Contingent Capital I, reducing the available Contingent Capital I proportionately.

In December 2017, our share capital was increased by €325 to €38,416,828 pursuant to the conversion of convertible bonds into 325 of our shares. The 325 shares resulting from the conversion of convertible bonds were issued from our Contingent Capital I, reducing the available Contingent Capital I proportionately.

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Authorized Capital ( genehmigtes Kapital )

At our annual general meeting on May 24, 2017, our shareholders resolved to create two sets of authorized capital. The authorized capital was entered into our articles of association on May 25, 2017. However, one shareholder, Deutsche Balaton AG, has contested one of the resolutions of the annual general meeting creating authorized capital by filing a lawsuit in the Cologne District Court in June 2017. Due to the pending lawsuit, only one set of authorized capital approved by our shareholders at such meeting has been entered into the commercial register, which entry is a requirement for the authorized capital to become effective.

As a result of such meeting, pursuant to the first set of authorized capital, our management board is authorized to increase our share capital until May 23, 2022, with the approval of our supervisory board, by up to €6,000,000 by issuing up to 6,000,000 new ordinary registered shares, against contribution in cash (which we sometimes refer to in this prospectus as “Authorized Capital I”). Our management board is authorized, with the approval of our supervisory board, to determine the rights associated with the shares as well as their terms of issuance. If any such new shares were to be issued therefrom, they must be first offered to our shareholders for subscription. Our management board is authorized, with the approval of our supervisory board, to exclude subscription rights of our shareholders in cases of fractional shares.

Pursuant to the second set of authorized capital approved by the shareholders at such meeting (but which has not been entered into the commercial register and is therefore currently not effective), our management board would be authorized to increase our share capital until May 23, 2022, with the approval of our supervisory board, by up to €4,000,000 by issuing up to 4,000,000 new ordinary registered shares, against contribution in cash (which we sometimes refer to in this prospectus as “Authorized Capital II”). Our management board would be authorized, with the approval of our supervisory board, to determine the rights associated with the shares as well as their terms of issuance. If this set of authorized capital is registered, if any such new shares were to be issued therefrom, they must be first offered to our shareholders for subscription; however, our management board would be authorized, with the approval of our supervisory board, to exclude subscription rights of our shareholders in the following cases:

cases of fractional shares;

in cases of cash contributions up to an amount not exceeding 10% of the share capital at the time of this authorization becoming effective or – if this amount should be lower – when this authorization is utilized, if the issue price of the shares is not significantly lower than the exchange price of shares already being traded on the stock market at the time of the final determination of the issue price. (Shares that are sold or issued during the term of this authorization on the basis of other authorizations, by direct or analogous application of sec. 186(3)(4) of the German Stock Corporation Act under exclusion of subscription rights, are taken into account in the above-mentioned 10% limit. The issue of purchase or conversion rights or obligations arising from bonds and/or profit participation rights regarding shares is treated as the issue of shares for this purpose, if these were issued by analogous application of sec. 186(3)(4) of the German Stock Corporation Act under exclusion of subscription rights).

The authorization to exclude the subscription rights may not be exercised (with the exception of the subscription right exclusion for fractional shares) if and insofar during the term of this authorization, together with other authorizations to exclude subscription rights, subscription rights have been excluded for a total of more than 20% of the share capital existing at the time of the use of such exclusion. This does not include subscription rights exclusions for fractional shares and for shares issued in the context of certain employee participation programs. However, the limit includes purchase or conversion rights or obligations arising from bonds and/or profit participation rights regarding shares, if these were issued under exclusion of subscription rights.

Upon resolution of the shareholder lawsuit contesting this second set of authorized capital, we may be able to enter it into the commercial register, at which time it would become effective.

Contingent Capital ( bedingtes Kapital )

According to our articles of association we have established four sets of contingent capital as follows:

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Our company’s share capital is conditionally increased by up to €4,137,201 (reduced from original amount of €4,831,596 as a result of warrants we have issued), through the issue of 4,137,201 new registered ordinary shares, which constitute a proportion of the share capital of €1.00 each (Contingent Capital I). At this time, €548,960 of the Contingent Capital I is required to secure conversion rights from our convertible bonds issued in December 2016 and January 2017.

The contingent capital increase serves (i) to secure granting of option rights and agreeing on option obligations pursuant to the terms of a respective bond, or (ii) to secure fulfillment of conversion rights and fulfillment of conversion obligations pursuant to the terms of a respective bond, each issued, agreed upon or guaranteed based on the authorization of the general meeting of August 28, 2015, by us or our affiliates.

The contingent capital increase will be implemented only if and insofar as (i) financial instruments based on the authorization of the general meeting of August 28, 2015, are issued, and (ii) the holders or creditors of financial instruments, exercise their option or conversion rights, or fulfill an option or conversion obligation, as the case may be. The new shares issued on the basis of the previous sentence entitle their holders to dividends of company profits from the beginning of the fiscal year in which they are issued.

Our management board is authorized (subject to the approval of our supervisory board) to make further stipulations regarding the implementation of the contingent capital increase.

Our company’s share capital is conditionally increased by up to €500,000, through the issue of up to 500,000 new registered ordinary shares, which constitute a proportion of the share capital of €1.00 each (Contingent Capital II).

The contingent capital increase serves to redeem option rights, according to the option terms, to the benefit of the holders of share options from warrant bonds issued pursuant to the authorization resolution by our general meeting of shareholders held on March 17, 2009. The new shares are issued at the option price to be set in accordance with such authorization resolutions (issue price in the sense of Section 193 Para. 2 No. 3 of the German Stock Corporation Act.

The contingent capital increase must be carried out only in the event of the issuance of warrant bonds, and only if the holders of share options from warrant bonds exercise their option rights, and if our company does not draw the necessary shares from other sources or replace them with cash payments. The new shares issued on the basis of the exercise of option rights entitle their holders to dividends from company profits from the beginning of the fiscal year in which they are issued.

Our management board is authorized, subject to the approval of the Federal Financial Supervisory Authority of Germany, to make further stipulations regarding the implementation of the contingent capital increase.

Our company’s share capital is conditionally increased by €542,400, through the issuance of up to 542,400 no-par-value registered ordinary shares (Contingent Capital III). The contingent capital increase serves exclusively to fulfill options granted until July 1, 2015 pursuant to the authorization by resolution of our general meeting of shareholders held on July 2, 2010. The contingent capital increase will be implemented only if the holders of the options issued exercise their right to purchase shares of our company, and if our company does not grant our own shares or pay a cash settlement in order to fulfill the options. The new shares entitle their holders to dividends from company profits from the beginning of the fiscal year in which they are issued.

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Our company’s share capital is conditionally increased by up to €1,814,984, through the issue of up to 1,814,984 new no-par-value registered ordinary shares (Contingent Capital V). The contingent capital increase serves to ensure that option rights are fulfilled which were granted on the basis of the authorization of our general meeting of shareholders held on August 28, 2015, in the period up to August 27, 2020. The capital increase must be implemented only insofar as the holders of the share options exercise their options and we do not fulfill the option rights by delivering our own shares or paying a cash compensation. The new shares entitle their holders to dividends of company profits from the beginning of the fiscal year in which they are issued.

Subscription Rights

According to the German Stock Corporation Act, every shareholder is generally entitled to subscription rights (commonly known as preemptive rights) to any new shares issued in connection with a capital increase, including convertible bonds, bonds with warrants, profit-sharing rights or income bonds, in proportion to the number of shares such shareholder holds in the corporation’s existing share capital. Under German law, these rights do not apply to shares issued out of contingent capital. A minimum subscription period of two weeks must be provided for the exercise of such subscription rights. Subscription rights are freely transferable and may be traded on German Stock exchanges within a specified period prior to the expiration date of the subscription period. In the past, we have refrained from arranging tradability of subscription rights on stock markets, since the issue price of our new shares had generally been close to market price, meaning that the subscription rights did not have inherent value.

Under German law, the shareholders’ meeting may pass a resolution excluding subscription rights if at least a simple majority of votes and three-quarters of the share capital represented adopts the resolution. In addition to approval by the general shareholders’ meeting, the exclusion of subscription rights requires a justification. The justification must be based on the principle that our interest in excluding subscription rights outweighs the shareholders’ interest in their subscription rights and may be subject to judicial review. Under German law, the exclusion of subscription rights upon the issuance of new shares is permitted, however, if we increase the share capital against cash contributions and the amount of the capital increase does not exceed 10% of our existing share capital and the issue price of the new shares is not significantly lower than the market price of our shares. The management board must also make a report available to the shareholders justifying the exclusion and demonstrating that the company’s interest in excluding the subscription rights outweighs the shareholders’ interest in having them. If subscription rights to authorized capital are excluded, such report must be presented at the general meeting resolving on the creation of the authorized capital.

Shareholders’ Meetings and Voting Rights

Pursuant to our articles of association, the annual general shareholders’ meeting takes place at the discretion of the corporate body convening such meeting at the corporate seat of the company, the seat of a German stock exchange, or in a German city with more than 100,000 inhabitants. Each share entitles its holder to one vote at the general shareholders’ meeting. Shareholders can vote their shares by proxy. Unless otherwise stipulated by the German Stock Corporation Act or our articles of association, resolutions of the general shareholders’ meeting are adopted by a simple majority of the votes cast or, if a capital majority is required, by a simple majority of the registered share capital represented at the meeting.

Pursuant to the German Stock Corporation Act, resolutions of fundamental importance require both a majority of votes cast and a mandatory majority of at least 75% of the registered share capital represented at the vote on the resolution. Resolutions of fundamental importance generally include:

changes to the articles of association regarding our business purpose;

capital increases if shareholders’ subscription rights are excluded;

capital decreases;

the creation of authorized or contingent capital;

reorganizations pursuant to the German Reorganization Act ( Umwandlungsgesetz ), including mergers ( Verschmelzungen ), spin-offs (“ Abspaltungen ”), transfers of assets (“ Ausgliederungen ”) and changes in legal form (“ Formwechsel ”);

an agreement to transfer all of the company’s assets pursuant to Section 179a of the German Stock Corporation Act;

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the conclusion of enterprise agreements (“ Unternehmensverträge ”), such as domination and profit and loss transfer agreements (“ Beherrschungs-und Gewinnabführungsvertrag ”); and

the dissolution of the company.

Our management board and our supervisory board may call a shareholders’ meeting. Shareholders holding an aggregate of 5% or more of our registered share capital may request the management board to call a general meeting, and, if the management board refrains from doing so, may be authorized by a court to call the meeting themselves. Our supervisory board must call a shareholders’ meeting whenever the interests of our company so require. Our company must hold our annual general shareholders’ meeting during the first eight months of each fiscal year. The current version of our articles of association require us to publish notices of shareholders’ meetings in the Federal Gazette at least 36 days before such meeting. The registration deadline for attending the meeting is published concurrently with the notice of meeting. Neither German law nor our articles of association restrict the right of foreign shareholders or shareholders not domiciled in Germany to hold or vote our shares.

Other than as set forth above, neither German law nor our articles of association provide for a minimum participation for a quorum for our shareholders’ meetings.

For a description of the voting rights for ADS holders, please see “Description of American Depositary Shares — Voting Rights.”

Dividend Rights

Under the German Stock Corporation Act, distributions of dividends on shares for a given fiscal year are generally determined by a process in which our supervisory board and management board submit a proposal to our annual general shareholders’ meeting held in the subsequent fiscal year and such annual general shareholders’ meeting adopts a resolution. The German Stock Corporation Act provides that a resolution concerning dividends and distribution thereof may be adopted only if the company’s unconsolidated financial statements under the applicable law show net retained profits (“ Bilanzgewinn ”). In determining the profit available for distribution, the result for the relevant fiscal year must be adjusted for profits and losses brought forward from the previous year and for withdrawals from or transfers to reserves. Certain reserves are required by law and must be deducted when calculating the profits available for distribution.

Shareholders participate in profit distributions in proportion to the number of shares they hold. Dividends on shares approved by the general shareholders’ meeting are paid annually, shortly after the general shareholders’ meeting, in compliance with the rules of the respective clearing system. Dividend payment claims are subject to a three-year statute of limitation in the company’s favor.

We do not anticipate declaring or paying dividends for the foreseeable future. For information about the tax considerations relating to dividend payments, please see “Taxation — German Taxation of ADSs.”

Liquidation Rights

Apart from a liquidation as a result of insolvency proceedings, our company may be liquidated only with a simple majority of votes and a majority of 75% or more of our share capital represented at the general shareholders’ meeting at which such vote is taken. Pursuant to the German Stock Corporation Act, in the event of our company’s liquidation, any assets remaining after all of our company’s liabilities have been settled will be distributed pro rata among our shareholders. The German Stock Corporation Act provides certain protections for creditors which must be observed in the event of liquidation.

Merger and Division

Any merger into or with another company, split-off and split-ups, or the transfer of all or substantially all of our assets requires a resolution of the shareholder’s meeting and a majority of at least 75% of our share capital present or represented at the time of adoption of the resolution.

Repurchase of our Own Shares

Our articles of association do not allow us to repurchase our own shares. German law, however, permits the purchase of a company’s own shares in certain limited cases. In particular, the general meeting may authorize the purchase of shares of up to ten percent of the registered capital, if the company has sufficient free reserves. We do not have such an authorization in place at this time.

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Squeeze-Out of Minority Shareholders

Under German law, the shareholders’ meeting of a stock corporation may resolve upon request of a shareholder that holds at least 95% of the share capital that the shares held by any remaining minority shareholders be transferred to this shareholder against payment of “adequate cash compensation”. This amount must take into account the full value of the company at the time of the resolution, which is generally determined using the future earnings value method.

A squeeze-out in the context of a merger (“ umwandlungsrechtlicher Squeeze-Out ”) only requires a majority shareholder to hold at least 90% of the share capital. A squeeze-out in the context of a public take-over (“ übernahmerechtlicher Squeeze-Out ”) requires a majority shareholder to hold at least 95% of the share capital, but has a simplified process.

Objects and Purposes of our Company

Our business purpose, as described in paragraph 3 of our articles of association, is to research, develop and sell pharmaceuticals, and to assume the status of a holding company, i.e. , to acquire and manage companies or stakes in companies. We may engage in all business activities which serve, directly or indirectly, our business purpose. Furthermore, we may establish branch offices and may acquire participations in enterprises of the same or similar kind.

Registration of our Company with Commercial Register

We are a German stock corporation that is organized under the laws of Germany. Our company is registered in the commercial register of Köln, Germany under the number HRB 49717.

Listing

Our ordinary shares are listed on the Frankfurt Stock Exchange under the symbol “B8F”. Prior to this offering, no public market existed in the U.S. for our ordinary shares or the ADSs. Application has been made for the quotation of the ADSs on The NASDAQ Capital Market under the symbol “BFRA”.

Notification and Disclosure Obligations

The German Securities Trading Act requires every shareholder whose equity participation in a company with a registered seat in Germany, and that is listed for trading on an organized market in a member state of the European Union or a country that is a party to the Treaty on the European Economic Area, reaches, exceeds, or falls below thresholds of 3%, 5%, 10%, 25%, 30%, 50%, or 75% of the voting rights of such company to inform the company and the German Federal Financial Supervisory Authority ( Bundesanstalt für Finanzdienstleistungsaufsicht or BaFin) without undue delay and, in any case, no later than four trading days after reaching, exceeding or falling below these thresholds, using a standardized form. In the context of this requirement, the German Securities Trading Act and other regulations contains various rules that are meant to ensure that share ownership is attributed to the person that actually controls the voting rights pertaining to such shares. As long as the shareholder fails to make such notification, he may generally not exercise any rights pertaining to these shares (including voting rights and dividend rights). Upon receipt of any such shareholder notification, the German company is required to immediately publish the notification by a so-called European media bundle.

In addition, the European Market Abuse Regulation requires, inter alia , the members of the management board and the supervisory board, their spouses and close relatives, who purchase or sell shares, or other types of securities representing the right to acquire shares, including convertible bonds and bonds with warrants attached, issued by a company whose shares have been admitted to trading on a German stock exchange in excess of a de minimis number, to immediately notify the issuer and the BaFin of such purchases or sales. Upon receipt of such notice, the issuer is required to publish this notification by, among other things, posting it on its website.

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DESCRIPTION OF AMERICAN DEPOSITARY SHARES

The Bank of New York Mellon, as depositary, will register and deliver ADSs. Each ADS will represent [____] shares (or a right to receive [____] shares) deposited with The Bank of New York Mellon SA/NV, as custodian for the depositary in Frankfurt (but see “Related Party Transactions — Share Loan Agreement” for a description of the mechanics of closing and the timing of share issuances). Each ADS will also represent any other securities, cash or other property which may be held by the depositary. The depositary’s office at which the ADSs will be administered is located at 101 Barclay Street, New York, New York 10286. The Bank of New York Mellon’s principal executive office is located at 225 Liberty Street, New York, New York 10286.

You may hold ADSs either (A) directly (i) by having an American Depositary Receipt, also referred to as an ADR, which is a certificate evidencing a specific number of ADSs, registered in your name, or (ii) by having uncertificated ADSs registered in your name, or (B) indirectly by holding a security entitlement in ADSs through your broker or other financial institution that is a direct or indirect participant in The Depository Trust Company, also called DTC. If you hold ADSs directly, you are a registered ADS holder, also referred to as an ADS holder. This description assumes you are an ADS holder. If you hold the ADSs indirectly, you must rely on the procedures of your broker or other financial institution to assert the rights of ADS holders described in this section. You should consult with your broker or financial institution to find out what those procedures are.

Registered holders of uncertificated ADSs will receive statements from the depositary confirming their holdings.

As an ADS holder, we will not treat you as one of our shareholders and you will not have shareholder rights. German law governs shareholder rights. The depositary will be the holder of the shares underlying your ADSs. As a registered holder of ADSs, you will have ADS holder rights. A deposit agreement among us, the depositary, ADS holders and all other persons indirectly or beneficially holding ADSs sets out ADS holder rights as well as the rights and obligations of the depositary. New York law governs the deposit agreement and the ADSs.

The following is a summary of the material provisions of the deposit agreement. For more complete information, you should read the entire deposit agreement and the form of ADR. Directions on how to obtain copies of those documents are provided on page [____].

Dividends and Other Distributions

How will you receive dividends and other distributions on the shares?

The depositary has agreed to pay or distribute to ADS holders the cash dividends or other distributions it or the custodian receives on shares or other deposited securities, upon payment or deduction of its fees and expenses. You will receive these distributions in proportion to the number of shares your ADSs represent.

*Cash*		The depositary will convert any cash dividend or other cash distribution we pay on the shares into U.S. dollars, if it can do so on a reasonable basis and can transfer the U.S. dollars to the U.S. If that is not possible or if any government approval is needed and cannot be obtained, the deposit agreement allows the depositary to distribute the foreign currency only to those ADS holders to whom it is possible to do so. It will hold the foreign currency it cannot convert for the account of the ADS holders who have not been paid. It will not invest the foreign currency and it will not be liable for any interest.

		Before making a distribution, any withholding taxes or other governmental charges that must be paid will be deducted. See “Certain Material U.S. Federal Income and German Tax Considerations”. It will distribute only whole U.S. dollars and cents and will round fractional cents to the nearest whole cent. If the exchange rates fluctuate during a time when the depositary cannot convert the foreign currency, you may lose some of the value of the distribution.

*Shares*		The depositary may distribute additional ADSs representing any shares we distribute as a dividend or free distribution. The depositary will only distribute whole ADSs. It will sell shares which would require it to deliver a fraction of an ADS (or ADSs representing those shares) and distribute the net proceeds in the same way as it does with cash. If the depositary does not distribute additional ADSs, the outstanding ADSs will also represent the new shares. The depositary may sell a portion of the distributed shares (or ADSs representing those shares) sufficient to pay its fees and expenses in connection with that distribution.

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*Rights to purchase additional shares*		If we offer holders of our securities any rights to subscribe for additional shares or any other rights, the depositary may (i) exercise those rights on behalf of ADS holders, (ii) distribute those rights to ADS holders or (iii) sell those rights and distribute the net proceeds to ADS holders, in each case after deduction or upon payment of its fees and expenses. To the extent the depositary does not do any of those things, it will allow the rights to lapse. In that case, you will receive no value for them. The depositary will exercise or distribute rights only if we ask it to and provide satisfactory assurances to the depositary that it is legal to do so. If the depositary will exercise rights, it will purchase the securities to which the rights relate and distribute those securities or, in the case of shares, new ADSs representing the new shares, to subscribing ADS holders, but only if ADS holders have paid the exercise price to the depositary. U.S. securities laws may restrict the ability of the depositary to distribute rights or ADSs or other securities issued on exercise of rights to all or certain ADS holders, and the securities distributed may be subject to restrictions on transfer.

*Other Distributions*		The depositary will send to ADS holders anything we distribute on deposited securities by any means it thinks is legal, fair and practical. If it cannot make the distribution in that way, the depositary has a choice. It may decide to sell what we distributed and distribute the net proceeds, in the same way as it does with cash. Or, it may decide to hold what we distributed, in which case ADSs will also represent the newly distributed property. However, the depositary is not required to distribute any securities (other than ADSs) to ADS holders unless it receives satisfactory evidence from us that it is legal to make that distribution. The depositary may sell a portion of the distributed securities or property sufficient to pay its fees and expenses in connection with that distribution. U.S. securities laws may restrict the ability of the depositary to distribute securities to all or certain ADS holders, and the securities distributed may be subject to restrictions on transfer.

The depositary is not responsible if it decides that it is unlawful or impractical to make a distribution available to any ADS holders. We have no obligation to register ADSs, shares, rights or other securities under the Securities Act. We also have no obligation to take any other action to permit the distribution of ADSs, shares, rights or anything else to ADS holders. This means that you may not receive the distributions we make on our shares or any value for them if it is illegal or impractical for us to make them available to you .

Deposit, Withdrawal and Cancellation

How are ADSs issued?

The depositary will deliver ADSs if you or your broker deposits shares or evidence of rights to receive shares with the custodian. Upon payment of its fees and expenses and of any taxes or charges, such as stamp taxes or stock transfer taxes or fees, the depositary will register the appropriate number of ADSs in the names you request and will deliver the ADSs to or upon the order of the person or persons that made the deposit.

How can ADS holders withdraw the deposited securities?

You may surrender your ADSs for the purpose of withdrawal at the depositary’s office. Upon payment of its fees and expenses and of any taxes or charges, such as stamp taxes or stock transfer taxes or fees, the depositary will deliver the shares and any other deposited securities underlying the ADSs to the ADS holder or a person the ADS holder designates at the office of the custodian. Or, at your request, risk and expense, the depositary will deliver the deposited securities at its office, if feasible. The depositary may charge you a fee and its expenses for instructing the custodian regarding delivery of deposited securities.

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How do ADS holders interchange between certificated ADSs and uncertificated ADSs?

You may surrender your ADR to the depositary for the purpose of exchanging your ADR for uncertificated ADSs. The depositary will cancel that ADR and will send to the ADS holder a statement confirming that the ADS holder is the registered holder of uncertificated ADSs. Upon receipt by the depositary of a proper instruction from a registered holder of uncertificated ADSs requesting the exchange of uncertificated ADSs for certificated ADSs, the depositary will execute and deliver to the ADS holder an ADR evidencing those ADSs.

Voting Rights

How do you vote?

ADS holders may instruct the depositary how to vote the number of deposited shares their ADSs represent. If we request the depositary to solicit your voting instructions (and we are not required to do so), the depositary will notify you of a shareholders’ meeting and send or make voting materials available to you. Those materials will describe the matters to be voted on and explain how ADS holders may instruct the depositary how to vote. For instructions to be valid, they much reach the depositary by a date set by the depositary. The depositary will try, as far as practicable, subject to the laws of Germany and the provisions of our articles of association or similar documents, to vote or to have its agents vote the shares or other deposited securities as instructed by ADS holders. If we do not request the depositary to solicit your voting instructions, you can still send voting instructions and, in that case, the depositary may try to vote as you instruct, but it is not required to do so.

Except by instructing the depositary as described above, you won’t be able to exercise voting rights unless you surrender your ADSs and withdraw the shares. However, you may not know about the meeting enough in advance to withdraw the shares. In any event, the depositary will not exercise any discretion in voting deposited securities and it will only vote or attempt to vote as instructed.

We cannot assure you that you will receive the voting materials in time to ensure that you can instruct the depositary to vote your shares. In addition, the depositary and its agents are not responsible for failing to carry out voting instructions or for the manner of carrying out voting instructions. This means that you may not be able to exercise voting rights and there may be nothing you can do if your shares are not voted as you requested.

In order to give you a reasonable opportunity to instruct the depositary as to the exercise of voting rights relating to deposited securities, if we request the depositary to act, we agree to give the depositary notice of any such meeting and details concerning the matters to be voted upon at least 45 days in advance of the meeting date.

Fees and Expenses

Persons depositing or withdrawing shares or ADS holders must pay :		For :
$5.00 (or less) per 100 ADSs (or portion of 100 ADSs)		Issuance of ADSs, including issuances resulting from a distribution of shares or rights or other property Cancellation of ADSs for the purpose of withdrawal, including if the deposit agreement terminates

$.05 (or less) per ADS		Any cash distribution to ADS holders

A fee equivalent to the fee that would be payable if securities distributed to you had been shares and the shares had been deposited for issuance of ADSs		Distribution of securities distributed to holders of deposited securities (including rights) that are distributed by the depositary to ADS holders

$.05 (or less) per ADS per calendar year		Depositary services

Registration or transfer fees		Transfer and registration of shares on our share register to or from the name of the depositary or its agent when you deposit or withdraw shares

Expenses of the depositary		Cable, telex and facsimile transmissions (when expressly provided in the deposit agreement) Converting foreign currency to U.S. dollars

Taxes and other governmental charges the depositary or the custodian has to pay on any ADSs or shares underlying ADSs, such as stock transfer taxes, stamp duty or withholding taxes		As necessary

Any charges incurred by the depositary or its agents for servicing the deposited securities		As necessary

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The depositary collects its fees for delivery and surrender of ADSs directly from investors depositing shares or surrendering ADSs for the purpose of withdrawal or from intermediaries acting for them. The depositary collects fees for making distributions to investors by deducting those fees from the amounts distributed or by selling a portion of distributable property to pay the fees. The depositary may collect its annual fee for depositary services by deduction from cash distributions or by directly billing investors or by charging the book-entry system accounts of participants acting for them. The depositary may collect any of its fees by deduction from any cash distribution payable (or by selling a portion of securities or other property distributable) to ADS holders that are obligated to pay those fees. The depositary may generally refuse to provide fee-attracting services until its fees for those services are paid.

From time to time, the depositary may make payments to us to reimburse us for costs and expenses generally arising out of establishment and maintenance of the ADS program, waive fees and expenses for services provided to us by the depositary, or share revenue from the fees collected from ADS holders. In performing its duties under the deposit agreement, the depositary may use brokers, dealers, foreign currency dealers or other service providers that are owned by or affiliated with the depositary and that may earn or share fees, spreads or commissions.

The depositary may convert currency itself or through any of its affiliates and, in those cases, acts as principal for its own account and not as agent, advisor, broker or fiduciary on behalf of any other person and earns revenue, including, without limitation, transaction spreads, that it will retain for its own account. The revenue is based on, among other things, the difference between the exchange rate assigned to the currency conversion made under the deposit agreement and the rate that the depositary or its affiliate receives when buying or selling foreign currency for its own account. The depositary makes no representation that the exchange rate used or obtained in any currency conversion under the deposit agreement will be the most favorable rate that could be obtained at the time or that the method by which that rate will be determined will be the most favorable to ADS holders, subject to the depositary’s obligations under the deposit agreement. The methodology used to determine exchange rates used in currency conversions is available upon request.

Payment of Taxes

You will be responsible for any taxes or other governmental charges payable on your ADSs or on the deposited securities represented by any of your ADSs. The depositary may refuse to register any transfer of your ADSs or allow you to withdraw the deposited securities represented by your ADSs until those taxes or other charges are paid. It may apply payments owed to you or sell deposited securities represented by your ADSs to pay any taxes owed and you will remain liable for any deficiency. If the depositary sells deposited securities, it will, if appropriate, reduce the number of ADSs to reflect the sale and pay to ADS holders any proceeds, or send to ADS holders any property, remaining after it has paid the taxes.

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Tender and Exchange Offers; Redemption, Replacement or Cancellation of Deposited Securities

The depositary will not tender deposited securities in any voluntary tender or exchange offer unless instructed to do by an ADS holder surrendering ADSs and subject to any conditions or procedures the depositary may establish.

If deposited securities are redeemed for cash in a transaction that is mandatory for the depositary as a holder of deposited securities, the depositary will call for surrender of a corresponding number of ADSs and distribute the net redemption money to the holders of called ADSs upon surrender of those ADSs.

If there is any change in the deposited securities such as a sub-division, combination or other reclassification, or any merger, consolidation, recapitalization or reorganization affecting the issuer of deposited securities in which the depositary receives new securities in exchange for or in lieu of the old deposited securities, the depositary will hold those replacement securities as deposited securities under the deposit agreement. However, if the depositary decides it would not be lawful to hold the replacement securities because those securities could not be distributed to ADS holders or for any other reason, the depositary may instead sell the replacement securities and distribute the net proceeds upon surrender of the ADSs.

If there is a replacement of the deposited securities and the depositary will continue to hold the replacement securities, the depositary may distribute new ADSs representing the new deposited securities or ask you to surrender your outstanding ADRs in exchange for new ADRs identifying the new deposited securities.

If there are no deposited securities underlying ADSs, including if the deposited securities are cancelled, or if the deposited securities underlying ADSs have become apparently worthless, the depositary may call for surrender or of those ADSs or cancel those ADSs upon notice to the ADS holders.

Amendment and Termination

How may the deposit agreement be amended?

We may agree with the depositary to amend the deposit agreement and the ADRs without your consent for any reason. If an amendment adds or increases fees or charges, except for taxes and other governmental charges or expenses of the depositary for registration fees, facsimile costs, delivery charges or similar items, or prejudices a substantial right of ADS holders, it will not become effective for outstanding ADSs until 30 days after the depositary notifies ADS holders of the amendment. At the time an amendment becomes effective, you are considered, by continuing to hold your ADSs, to agree to the amendment and to be bound by the ADRs and the deposit agreement as amended .

How may the deposit agreement be terminated?

The depositary will initiate termination of the deposit agreement if we instruct it to do so. The depositary may initiate termination of the deposit agreement if:

60 days have passed since the depositary told us it wants to resign, but a successor depositary has not been appointed and accepted its appointment;

we delist our shares from an exchange on which they were listed and do not list the shares on another exchange;

we appear to be insolvent or enter insolvency proceedings;

all or substantially all the value of the deposited securities has been distributed either in cash or in the form of securities;

there are no deposited securities underlying the ADSs or the underlying deposited securities have become apparently worthless; or

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there has been a replacement of deposited securities.

If the deposit agreement will terminate, the depositary will notify ADS holders at least 90 days before the termination date. At any time after the termination date, the depositary may sell the deposited securities. After that, the depositary will hold the money it received on the sale, as well as any other cash it is holding under the deposit agreement, unsegregated and without liability for interest, for the pro rata benefit of the ADS holders that have not surrendered their ADSs. Normally, the depositary will sell as soon as practicable after the termination date.

After the termination date and before the depositary sells, ADS holders can still surrender their ADSs and receive delivery of deposited securities, except that the depositary may refuse to accept a surrender for the purpose of withdrawing deposited securities if it would interfere with the selling process. The depositary may refuse to accept a surrender for the purpose of withdrawing sale proceeds until all the deposited securities have been sold. The depositary will continue to collect distributions on deposited securities, but , after the termination date, the depositary is not required to register any transfer of ADSs or distribute any dividends or other distributions on deposited securities to the ADSs holders (until they surrender their ADSs) or give any notices or perform any other duties under the deposit agreement except as described in this paragraph.

Limitations on Obligations and Liability

Limits on our Obligations and the Obligations of the Depositary; Limits on Liability to Holders of ADSs

The deposit agreement expressly limits our obligations and the obligations of the depositary. It also limits our liability and the liability of the depositary. We and the depositary:

are only obligated to take the actions specifically set forth in the deposit agreement without negligence or bad faith;

are not liable if we are or it is prevented or delayed by law or circumstances beyond our or its control from performing our or its obligations under the deposit agreement;

are not liable if we or it exercises discretion permitted under the deposit agreement;

are not liable for the inability of any holder of ADSs to benefit from any distribution on deposited securities that is not made available to holders of ADSs under the terms of the deposit agreement, or for any special, consequential or punitive damages for any breach of the terms of the deposit agreement;

have no obligation to become involved in a lawsuit or other proceeding related to the ADSs or the deposit agreement on your behalf or on behalf of any other person;

are not liable for the acts or omissions of any securities depository, clearing agency or settlement system; and

may rely upon any documents we believe or it believes in good faith to be genuine and to have been signed or presented by the proper person.

In the deposit agreement, we and the depositary agree to indemnify each other under certain circumstances.

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Requirements for Depositary Actions

Before the depositary will deliver ADSs or register a transfer of ADSs, make a distribution on ADSs, or permit withdrawal of shares, the depositary may require:

payment of stock transfer or other taxes or other governmental charges and transfer or registration fees charged by third parties for the transfer of any shares or other deposited securities;

satisfactory proof of the identity and genuineness of any signature or other information it deems necessary; and

compliance with regulations it may establish, from time to time, consistent with the deposit agreement, including presentation of transfer documents.

The depositary may refuse to deliver ADSs or register transfers of ADSs when the transfer books of the depositary or our transfer books are closed or at any time if the depositary or we think it advisable to do so.

Your Right to Receive the Shares Underlying your ADSs

ADS holders have the right to cancel their ADSs and withdraw the underlying shares at any time except:

when temporary delays arise because: (i) the depositary has closed its transfer books or we have closed our transfer books; (ii) the transfer of shares is blocked to permit voting at a shareholders' meeting; or (iii) we are paying a dividend on our shares;

when you owe money to pay fees, taxes and similar charges; or

when it is necessary to prohibit withdrawals in order to comply with any laws or governmental regulations that apply to ADSs or to the withdrawal of shares or other deposited securities.

This right of withdrawal may not be limited by any other provision of the deposit agreement.

Pre-release of ADSs

The deposit agreement permits the depositary to deliver ADSs before deposit of the underlying shares. This is called a pre-release of the ADSs. The depositary may also deliver shares upon cancellation of pre-released ADSs (even if the ADSs are canceled before the pre-release transaction has been closed out). A pre-release is closed out as soon as the underlying shares are delivered to the depositary. The depositary may receive ADSs instead of shares to close out a pre-release. The depositary may pre-release ADSs only under the following conditions: (1) before or at the time of the pre-release, the person to whom the pre-release is being made represents to the depositary in writing that it or its customer owns the shares or ADSs to be deposited; (2) the pre-release is fully collateralized with cash or other collateral that the depositary considers appropriate; and (3) the depositary must be able to close out the pre-release on not more than five business days' notice. In addition, the depositary will limit the number of ADSs that may be outstanding at any time as a result of pre-release, although the depositary may disregard the limit from time to time if it thinks it is appropriate to do so.

Direct Registration System

In the deposit agreement, all parties to the deposit agreement acknowledge that the Direct Registration System, also referred to as DRS, and Profile Modification System, also referred to as Profile, will apply to the ADSs. DRS is a system administered by DTC that facilitates interchange between registered holding of uncertificated ADSs and holding of security entitlements in ADSs through DTC and a DTC participant. Profile is a feature of DRSs that allows a DTC participant, claiming to act on behalf of a registered holder of uncertificated ADSs, to direct the depositary to register a transfer of those ADSs to DTC or its nominee and to deliver those ADSs to the DTC account of that DTC participant without receipt by the depositary of prior authorization from the ADS holder to register that transfer.

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In connection with and in accordance with the arrangements and procedures relating to DRS/Profile, the parties to the deposit agreement understand that the depositary will not determine whether the DTC participant that is claiming to be acting on behalf of an ADS holder in requesting registration of transfer and delivery as described in the paragraph above has the actual authority to act on behalf of the ADS holder (notwithstanding any requirements under the Uniform Commercial Code). In the deposit agreement, the parties agree that the depositary’s reliance on and compliance with instructions received by the depositary through the DRS/Profile system and in accordance with the deposit agreement will not constitute negligence or bad faith on the part of the depositary.

Shareholder Communications; Inspection of Register of Holders of ADSs

The depositary will make available for your inspection at its office all communications that it receives from us as a holder of deposited securities that we make generally available to holders of deposited securities. The depositary will send you copies of those communications or otherwise make those communications available to you if we ask it to. You have a right to inspect the register of holders of ADSs, but not for the purpose of contacting those holders about a matter unrelated to our business or the ADSs.

SHARES AND ADSs ELIGIBLE FOR FUTURE SALE

Our ordinary shares are listed and are currently traded on the Frankfurt Stock Exchange under the symbol “B8F”. Prior to this offering, no public market existed in the U.S. for our ordinary shares or the ADSs. Future sales of ordinary shares or ADSs in the public market after this offering, and the availability of ordinary shares or ADSs for future sale, could adversely affect the market price of the ADSs prevailing from time to time. As described below, most of our currently outstanding ordinary shares will be available for sale immediately after this offering, and the remainder will be available for sale 180 days after the expiration of contractual restrictions on transfers of ordinary shares and ADSs. Accordingly, sales of substantial amounts of ordinary shares or ADSs, or the perception that these sales could occur, could adversely affect prevailing market prices for ordinary shares and the ADSs and could impair our future ability to raise equity capital.

Based on the number of shares outstanding as of [__________], and assuming (1) timely waiver by certain of our shareholders of their rights to purchase [___________] million newly issued shares pursuant to the German preemptive rights offering, (2) that the German preemptive rights offering is otherwise fully subscribed, (3) no exercise of the underwriters' over-allotment option to purchase additional ADSs and (4) no exercise or conversion of any of our outstanding convertible bonds, upon completion of this offering (see “Related Party Transactions — Share Loan Agreement”) we will have outstanding an aggregate of [__________] ordinary shares (including ordinary shares represented by the ADSs). All of the ADSs sold in this offering will be freely transferable without restriction or further registration under the Securities Act, except for any ADSs sold to our "affiliates" (subject to the terms of the lock-up agreements referred to below, as applicable) . In addition, all of our ordinary shares outstanding before this offering will be freely transferable and may be resold without restriction or further registration under the Securities Act (subject to the terms of the lock-up agreements referred to below, as applicable). Under Rule 144 under the Securities Act, an "affiliate" of a company is a person that directly or indirectly controls, is controlled by or is under common control with that company. Affiliates may sell only the volume of shares described below and their sales are subject to additional restrictions described below.

Lock-Up Agreements

We and our chief executive officer has agreed that, without the prior consent of The Benchmark Company, LLC, we and he will not, subject to limited exceptions, during the period ending 180 days after the date of this prospectus, directly or indirectly, offer, pledge, sell, contract to sell, pledge or otherwise dispose of any ordinary shares or other shares of our capital stock or any securities convertible into, exercisable or exchangeable for, such capital stock (including our ADSs). See "Underwriting" for additional information.

The Benchmark Company, LLC, on behalf of the underwriters, will have discretion in determining if, and when, to release any ordinary shares or ADSs subject to any lock-up agreements.

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Rule 144

Rule 144 provides an exemption from the registration requirements of the Securities Act for restricted securities and securities held by certain affiliates of an issuer being sold in the U.S., to U.S. persons or through U.S. securities markets. In general, under Rule 144, as currently in effect, once we have been subject to the public company reporting requirements of the Exchange Act for at least 90 days, a person (or persons whose securities are required to be aggregated) who is not deemed to have been one of our "affiliates" for purposes of Rule 144 at any time during the three months preceding a sale, and who has beneficially owned restricted securities within the meaning of Rule 144 for at least six months, including the holding period of any prior owner other than one of our "affiliates," is entitled to sell such securities in the U.S. public market (subject to any lock-up agreement referred to above, if applicable) without complying with the manner of sale, volume limitations or notice provisions of Rule 144, but subject to compliance with the public information requirements of Rule 144. If such a person has beneficially owned the securities proposed to be sold for at least one year, including the holding period of any prior owner other than "affiliates," then such person is entitled to sell such securities in the public market without complying with any of the requirements of Rule 144 (subject to any lock-up agreement referred to above, if applicable).

In general, under Rule 144, as currently in effect, once we have been subject to the public company reporting requirements of the Exchange Act for at least 90 days, our "affiliates," as defined in Rule 144, who have beneficially owned the securities proposed to be sold for at least six months are entitled to sell in the public market, upon expiration of any applicable lock-up agreements and within any three-month period, a number of those securities that does not exceed the greater of:

1% of the number of ADSs then outstanding, which will equal approximately [_________] immediately after this offering; or

the average weekly trading volume of our ADSs on The NASDAQ Capital Market during the four calendar weeks preceding the filing of a notice on Form 144 with respect to such sale.

Such sales under Rule 144 by our "affiliates" or persons selling ADSs on behalf of our "affiliates" are also subject to certain manner of sale provisions, notice requirements and to the availability of current public information about us.

Regulation S

Regulation S under the Securities Act provides that shares owned by any person may be sold without registration in the U.S., provided that the sale is effected in an offshore transaction and no directed selling efforts are made in the U.S. (as these terms are defined in Regulation S), subject to certain other conditions. In general, this means that our shares may be sold in offshore transactions in compliance with Regulation S.

EXCHANGE CONTROLS AND LIMITATIONS AFFECTING SHAREHOLDERS

There are currently no legal restrictions in Germany on international capital movements and foreign-exchange transactions, except in limited embargo circumstances relating to certain areas, entities or persons as a result of applicable resolutions adopted by the United Nations and the European Union. Restrictions currently exist with respect to, among others, Afghanistan, Belarus, Burma/Myanmar, Central African Republic, Congo, Egypt, Eritrea, Guinea, Guinea-Bissau, Iran, Iraq, Ivory Coast, Lebanon, Liberia, Libya, North Korea, Russia, Somalia, South Sudan, Sudan, Syria, Tunisia, Ukraine, Yemen and Zimbabwe.

For statistical purposes, there are, however, limited notification requirements regarding transactions involving cross-border monetary transfers. With some exceptions, every corporation or individual residing in Germany must report to the German Central Bank (Deutsche Bundesbank) (i) any payment received from, or made to, a non-resident corporation or individual that exceeds €12,500 (or the equivalent in a foreign currency) and (ii) any claim against, or liability payable to, a non-resident or corporation in excess of €5 million (or the equivalent in a foreign currency) at the end of any calendar month. Payments include cash payments made by means of direct debit, checks and bills, remittances denominated in euros and other currencies made through financial institutions, as well as netting and clearing arrangements.

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CERTAIN MATERIAL U.S. FEDERAL INCOME AND GERMAN TAX CONSIDERATIONS

German Taxation of ADSs

Scope of Discussion

The following is a general summary of the material German tax consequences for U.S. holders (as defined below) of the ADSs. It does not purport to be a complete analysis of all German tax considerations relating to the ADSs. It is based upon the laws in force and their interpretation at the time of preparation of this prospectus and is subject to any change in law or interpretation after such date, potentially having retrospective or retroactive effect. It does not address the German tax consequences for holders of the ADSs who are not U.S. holders (as defined below). Furthermore, it does not address the German tax consequences resulting from the ADSs being attributable to (1) a permanent establishment outside of the U.S., or (2) a permanent representative outside of the U.S.

A U.S. holder in terms of this section on the German taxation of the ADSs is:

a resident of the U.S. in terms of the Agreement between the United States of America and the Federal Republic of Germany for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income and Capital and to certain other Taxes as of June 4, 2008 (Abkommen zwischen der Bundesrepublik Deutschland und den Vereinigten Staaten von Amerika zur Vermeidung der Doppelbesteuerung und zur Verhinderung der Steuerverkürzung auf dem Gebiet der Steuern vom Einkommen und vom Vermögen und einiger anderer Steuern in der Fassung vom 4. Juni 2008, “Treaty”);

who is not subject to German unlimited tax liability by way of a German residence or habitual abode or, as the case may be, a German registered seat or place of management;

who is the beneficial owner of the ADSs and any payments such as dividends under the ADSs; and

who is not subject to the limitation of benefits clause of the Treaty.

In particular because it is not possible to take into account the personal circumstances of prospective U.S. holders, they should consult their tax advisors as to the consequences under the tax laws of Germany resulting from acquiring, holding and disposing of ADSs and receiving payments under the ADSs such as dividends.

German Taxation of Dividends and Capital Gains

At the time of preparation of this prospectus, no decisions of German tax courts have been published that comprehensively outline the treatment of ADRs or ADSs under German tax law. However, the German Federal Ministry of Finance has issued a circular dated May 24, 2013 (reference number BMF IV C 1 — S 2204/12/10003, “ADR Circular”) on the treatment of ADRs under German tax law. According to the ADR Circular, holders of ADRs are in general treated like the beneficial owners of the respective shares for German tax purposes. It has to be noted, however, that the ADR Circular does not address ADSs and it is therefore not clear whether or not the ADSs fall within the scope of the ADR Circular. If the ADS fall within the scope of the ADR Circular, U.S. holders of the ADSs would be treated as if they held the respective amount of ordinary shares and if they received dividends under the ordinary shares for German tax purposes. Furthermore, U.S. holders of the ADSs should note that the ADR Circular is not binding on German tax courts and it is unclear whether a German tax court would follow the ADR Circular with respect to the German tax treatment of ADRs or ADSs. For the purposes of this section on the German taxation of the ADSs it is assumed that the ADSs fall within the scope of the ADR Circular.

German Taxation of Capital Gains of the U.S. Treaty Beneficiaries of the ADSs

The company maintains its registered seat in Germany. As a consequence, capital gains resulting from the disposition of ADSs realized by a U.S. holder are treated as German source income and are subject to German limited tax liability ( beschränkte Steuerpflicht ) if such U.S. holder at any time within five years prior to the disposition directly or indirectly held ADSs, shares and/or other rights representing together 1% or more of the company’s shares. If such holder had acquired the ADSs without consideration, the previous owner’s holding period and percentage of the holding would also be taken into account. However, U.S. holders may invoke the Treaty and, as a result, are not subject to German taxation on capital gains resulting from the disposition of ADSs.

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Under German law, disbursing agents are required to levy withholding tax on capital gains from the sale of shares or other securities held in a custodial account. Disbursing agent in this context means a German bank, a financial services institution, a securities trading enterprise or a securities trading bank (each as defined in the German Banking Act ( Kreditwesengesetz ) and, in each case, including a German branch of a foreign enterprise, but excluding a foreign branch of a German enterprise) that holds the ADSs in custody or administers the ADSs for the U.S. holder or conducts sales or other dispositions and disburses or credits the income from the ADSs to the U.S. holder of the ADSs. Under German law, the obligation to withhold taxes on capital gains does not explicitly depend on the capital gains being subject to German limited or unlimited taxation or on an applicable double taxation treaty permitting Germany to tax such capital gains.

However, the German Federal Ministry of Finance has issued a circular dated October 9, 2012 (reference number BMF IVC1 — S 2252/10/10013, “Capital Income Circular”) due to which taxes need not be withheld when the capital gains are not subject to German taxation. The Capital Income Circular further states that there is no obligation to withhold such tax on capital gains even if a U.S. holder owns 1% or more of the shares. While the Capital income Circular is only binding on the tax authorities but not on the tax courts, in practice, the disbursing agents nevertheless typically rely on the guidance contained in such circular. Therefore, a disbursing agent would only withhold tax at 26.375% on capital gains derived by a U.S. holder from the sale of ADSs held in a custodial account in Germany in the unlikely event that the disbursing agent did not follow this guidance. In this case, the U.S. holder should be entitled to claim a refund of the withholding tax from the German tax authorities under the Treaty.

Taxation of Dividends

Dividends distributed by the company to a U.S. holder under the ADS are subject to a German withholding tax of 25% plus 5.5% solidarity surcharge thereon, resulting in an overall withholding tax rate of 26.375%.

However, U.S. holders may invoke the Treaty. Therefore, the German withholding tax may in general not exceed 15% of the dividends received by U.S. holders. A further reduction of the permitted withholding tax rate under the Treaty may apply depending on further requirements. The excess of the total amount withheld over the maximum rate of withholding tax permitted under the Treaty is refunded to U.S. holders upon application (as described below under “Withholding Tax Refund for U.S. Treaty Beneficiaries”).

Withholding Tax Refund for U.S. Treaty Beneficiaries

As described above, U.S. holders are entitled to claim a refund of the portion of the generally applicable 26.375% German withholding tax on dividends that exceeds the permitted withholding tax rate under the Treaty. However, U.S. holders should note that it is unclear how the German authorities will apply the refund process to dividends paid under ADSs and ADRs. In general, any potential refund claim becomes time-barred after four years following the calendar year in which the dividend is received.

Additionally, such refund is subject to the German anti treaty shopping provision. In general, this rule requires that the U.S. holder (in case it is corporation, “U.S. corporate holder”) maintains its own administrative substance and conducts its own business activities. In particular, a U.S. corporate holder has no right to a full or partial refund to the extent persons holding ownership interests in the U.S. corporate holder would not be entitled to the refund had they received the income directly and the gross income realized by the U.S. corporate holder is not caused by the business activities of the U.S. corporate holder, and there are either no economic or other valid reasons for the interposition of the U.S. corporate holder, or the U.S. corporate holder does not participate in general commerce by means of a business organization with resources appropriate to its business purpose. However, this shall not apply if the U.S. corporate holder’s principal class of stock is regularly traded in substantial volume on a recognized stock exchange, or if the U.S. corporate holder is subject to the provisions of the German Investment Tax Act ( lnvestmentsteuergesetz ).

U.S. holders claiming a refund of German withholding tax should in any case consult their tax advisors with respect to the refund procedure as there is only limited guidance of the German tax authorities on the practical application of the refund procedure with respect to the ADS.

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German Inheritance and Gift Tax (Erbschaft-und Schenkungsteuer)

As the ADR Circular does not refer to the German Inheritance and Gift Tax Act, it is unclear whether or not the German inheritance or gift tax applies to the transfer of the ADSs. However, if German inheritance or gift tax is applicable to ADSs, under German domestic law, the transfer of the ordinary shares in the company and, as a consequence, the transfer of the ADSs would be subject to German gift or inheritance tax if:

the decedent or donor or heir, beneficiary or other transferee (1) maintained his or her residence or a habitual abode in Germany or had its place of management or registered seat in Germany at the time of the transfer, or (2) is a German citizen who has spent no more than five consecutive years outside of Germany without maintaining a residence in Germany or (3) is a German citizen who serves for a German entity established under public law and is remunerated for his or her service from German public funds (including family members who form part of such person’s household, if they are German citizens) and is only subject to estate or inheritance tax in his or her country of residence or habitual abode with respect to assets located in such country (special rules apply to certain former German citizens who neither maintain a residence nor have their habitual abode in Germany);

at the time of the transfer, the ADSs are held by the decedent or donor as business assets forming part of a permanent establishment in Germany or for which a permanent representative in Germany has been appointed; or

the ADSs subject to such transfer form part of a portfolio that represents at the time of the transfer 10% or more of the registered share capital of the company and that has been held directly or indirectly by the decedent or donor, either alone or together with related persons.

Under the Agreement between the Federal Republic of Germany and the United States of America for the avoidance of double taxation with respect to taxes on inheritances and gifts ( Abkommen zwischen der Bundesrepublik Deutschland und den Vereinigten Staaten von Amerika zur Vermeidung der Doppelbesteuerung auf dem Gebiet der Nachlass-, Erbschaft-und Schenkungsteuern in der Fassung vom 21. December 2000 , “Inheritance and Gift Tax Treaty”), a transfer of ADSs by gift or upon death is not subject to German inheritance or gift tax if the donor or the transferor is domiciled in the U.S. in terms of the Inheritance and Gift Tax Treaty, and is neither a citizen of Germany nor a former citizen of Germany and, at the time of the transfer, the ADSs are not held by the decedent or donor as business assets forming part of a permanent establishment in Germany or for which a permanent representative in Germany has been appointed.

Notwithstanding the foregoing, in case the heir, transferee or other beneficiary (i) has, at the time of the transfer, his or her residence or habitual abode in Germany, or (ii) is a German citizen who has spent no more than five (or, in certain circumstances, ten) consecutive years outside Germany without maintaining a residence in Germany or (iii) is a German citizen who serves for a German entity established under public law and is remunerated for his or her service from German public funds (including family members who form part of such person’s household, if they are German citizens) and is only subject to estate or inheritance tax in his or her country of residence or habitual abode with respect to assets located in such country (or special rules apply to certain former German citizens who neither maintain a residence nor have their habitual abode in Germany), the transferred ADSs are subject to German inheritance or gift tax.

If, in this case, Germany levies inheritance or gift tax on the ADSs with reference to the heir’s, transferee’s or other beneficiary’s residence in Germany or his or her German citizenship, and the U.S. also levies federal estate tax or federal gift tax with reference to the decedent’s or donor’s residence (but not with reference to the decedent’s or donor’s citizenship), the amount of the U.S. federal estate tax or the U.S. federal gift tax, respectively, paid in the U.S. with respect to the transferred ADSs is credited against the German inheritance or gift tax liability, provided the U.S. federal estate tax or the U.S. federal gift tax, as the case may be, does not exceed the part of the German inheritance or gift tax, as computed before the credit is given, which is attributable to the transferred ADSs. A claim for credit of the U.S. federal estate tax or the U.S. federal gift tax, as the case may be, may be made within one year of the final determination and payment of the U.S. federal estate tax or the U.S. federal gift tax, as the case may be, provided that the determination and payment are made within ten years of the date of death of the decedent or of the date of the gift by the donor. Similarly, U.S. state-level estate or gift taxes are also creditable against the German inheritance or gift tax liability to the extent that U.S. federal estate or gift tax is creditable.

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U.S. Taxation of ADSs and Ordinary Shares

The following discussion describes the material U.S. federal income tax consequences of the acquisition, ownership and disposition of the ADSs and ordinary shares by a U.S. holder (as defined below). The information provided below is based on the Internal Revenue Code of 1986, as amended (“Code”), Internal Revenue Service (“IRS”) rulings and pronouncements, and judicial decisions all as now in effect and all of which are subject to change or differing interpretations, possibly with retroactive effect. This summary addresses only U.S. federal income tax considerations of U.S. holders that will hold ADSs or ordinary shares as capital assets. It does not provide a complete analysis of all potential tax considerations. In particular, this summary does not address all the tax considerations applicable to a particular holder of ADSs or ordinary shares in light of the holder’s circumstances, for example:

financial institutions;

insurance companies;

dealers or traders in securities;

persons that will hold ADSs or ordinary shares as part of a hedging or conversion transaction or as a position in a straddle or other integrated transaction for U.S. federal income tax purposes;

persons that have a functional currency other than the U.S. dollar;

persons that own (or are deemed to own) ADSs or ordinary shares representing 10% or more of our voting shares;

regulated investment companies, real estate investment trusts;

tax-exempt entities;

tax-deferred or other retirement accounts;

persons who hold ADSs or ordinary shares through partnerships or other pass-through entities;

certain former citizens or residents of the U.S.;

persons deemed to sell ADSs or ordinary shares under constructive sale provisions of the Code; or

persons holding ADSs or ordinary shares in connection with a trade or business conducted outside of the U.S.

Finally, the summary does not describe the effect of the U.S. federal alternative minimum, estate and gift tax laws on U.S. holders or the effects of any applicable state, local, or non-U.S. laws.

For purposes of this summary, a “U.S. holder” is a beneficial owner of ADSs or ordinary shares that for U.S. federal income tax purposes, is (1) an individual who is a citizen or resident of the U.S.; (2) a corporation, or other entity treated as a corporation for U.S. federal income tax purposes, created or organized in or under the laws of the U.S., any state thereof or the District of Columbia; (3) an estate, the income of which is subject to U.S. federal income taxation regardless of its source; or (4) a trust, if it (i) is subject to the primary supervision of a U.S. court and the control of one or more U.S. persons or (ii) has a valid election in effect under applicable U.S. Treasury Regulations to be treated as a U.S. person. A “non-U.S. holder” is a beneficial owner of the ADSs or ordinary shares (other than an entity or arrangement treated as a partnership for U.S. federal income tax purposes) that is not a U.S. holder.

If a partnership (including an entity or arrangement, U.S. or non-U.S., treated as a partnership for U.S. federal income tax purposes) holds ADSs or ordinary shares, the tax treatment of a partner in the partnership will depend upon the status of the partner and the activities of the partnership. A holder of ADSs or ordinary shares that is a partnership, and partners in such partnership, should consult their own tax advisors about the U.S. federal income tax consequences of acquiring, owning and disposing of the ADSs or ordinary shares.

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Each prospective holder of ADSs or ordinary shares should consult its own tax advisors regarding the U.S. federal, state and local or other tax consequences of acquiring, owning and disposing of our ADSs or ordinary shares in light of their particular circumstances. U.S. holders should also review the discussion under “— German Taxation of ADSs” for the German tax consequences to a U.S. holder of the ownership of the ADSs.

General

In general and taking into account the earlier assumptions, a U.S. holder of ADSs is treated as the owner of the ordinary shares represented by such ADSs. Exchanges of ordinary shares for ADSs, and ADSs for ordinary shares, respectively, generally will not be subject to U.S. federal income tax.

Distributions

Under the U.S. federal income tax laws, and subject to the passive foreign investment company (“PFIC”) rules discussed below, the gross amount of any distribution that is actually or constructively received by a U.S. holder with respect to its ordinary shares (including shares deposited in respect of ADSs) will be a dividend includible in gross income of a U.S. holder as ordinary income to the extent the amount of such distribution is paid out of our current or accumulated earnings and profits, as determined for U.S. federal income tax purposes. To the extent that the amount of such distribution exceeds our current and accumulated earnings and profits as so computed, it will be treated first as a non-taxable return of capital to the extent of such U.S. holder’s adjusted tax basis in its ADSs or ordinary shares, and to the extent the amount of such distribution exceeds such adjusted tax basis, will be treated as gain from the sale of the ADSs or ordinary shares. If you are a non-corporate U.S. holder, dividends paid to you that constitute qualified dividend income will be taxable to you at a reduced maximum U.S. federal income rate of taxation, the maximum of which is currently 20% (rather than the higher rates of tax generally applicable to items of ordinary income, the maximum of which is currently 37%) provided that you hold our ADSs or ordinary shares for more than 60 days during the 121-day period beginning 60 days before the ex-dividend date and meet other holding period requirements. If we are a PFIC (as discussed below under “Additional U.S. Federal Income Tax Consequences — PFIC Rules”), distributions paid by us with respect to ADSs or ordinary shares will not be eligible for the preferential income tax rate. Prospective investors should consult their own tax advisors regarding the taxation of distributions under these rules.

You must include any German tax withheld from the dividend payment in this gross amount even though you do not in fact receive it. The gross amount of the dividend is taxable to you when you receive the dividend, actually or constructively. Dividends paid on ADSs or ordinary shares generally will constitute income from sources outside the U.S. and will generally not be eligible for the dividends-received deduction generally available to corporate U.S. holders. The gross amount of any dividend paid in non-U.S. currency will be included in the gross income of a U.S. holder in an amount equal to the U.S. dollar value of the non-U.S. currency calculated by reference to the exchange rate in effect on the date the dividend distribution is includable in the U.S. holder’s income, regardless of whether the payment is in fact converted into U.S. dollars. If the non-U.S. currency is converted into U.S. dollars on the date of receipt by the depositary, in the case of ADSs, or the U.S. holder in the case of ordinary shares, a U.S. holder generally should not be required to recognize non-U.S. currency gain or loss in respect of the dividend. If the non-U.S. currency received is not converted into U.S. dollars on the date of receipt, a U.S. holder will have a basis in the non-U.S. currency equal to its U.S. dollar value on the date of receipt. Any gain or loss on a subsequent conversion or other disposition of the non-U.S. currency will be treated as ordinary income or loss, and will generally be income or loss from sources within the U.S. for foreign tax credit limitation purposes. The amount of any distribution of property other than cash will be the fair market value of the property on the date of the distribution, less the sum of any encumbrance assumed by the U.S. holder.

Subject to applicable limitations that may vary depending upon a U.S. holder’s circumstances, a U.S. holder will be entitled to a credit against its U.S. federal income tax liability for any German withholding taxes withheld in respect of our dividend distributions not in excess of the applicable rate under the treaty. The limitation on foreign taxes eligible for credit is calculated separately with respect to specific classes of income, such as “passive” or “general” income. In addition, the amount of the qualified dividend income, if any, paid to a U.S. holder that is subject to the reduced dividend income tax rate and that is taken into account for purposes of calculating the U.S. holder’s U.S. foreign tax credit limitation must be reduced by the rate differential portion of the dividend. The rules governing foreign tax credits are complex. Prospective investors should consult their own tax advisors regarding the availability and implications of foreign tax credits in light of their particular situation. In lieu of claiming a foreign tax credit, U.S. holders may elect to deduct all non-U.S. taxes paid or accrued in a taxable year in computing their taxable income, subject to generally applicable limitations under U.S. federal income tax law. Prospective investors should consult their own tax advisors regarding the availability and deductibility of non-U.S. taxes in light of their particular situation.

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U.S. Taxation of Sale or Other Disposition

Subject to the discussion below under “Additional U.S. Federal Income Tax Consequences — PFIC Rules,” a U.S. holder will generally recognize gain or loss for U.S. federal income tax purposes upon the sale or other disposition of ADSs or ordinary shares in an amount equal to the difference between the U.S. dollar value of the amount realized from such sale or other disposition and the U.S. holder’s tax basis in such ADSs or ordinary shares. Such gain or loss generally will be capital gain or loss. Capital gain of a non-corporate U.S. holder recognized on the sale or other disposition of ADSs or ordinary shares held for more than one year is generally eligible for a reduced maximum U.S. federal income tax rate of taxation, the maximum of which is currently 20%. The gain or loss will generally be income or loss from sources within the U.S. for foreign tax credit limitation purposes. The deductibility of capital losses is subject to limitations.

A U.S. holder that receives non-U.S. currency on the sale or other disposition of ADSs or ordinary shares will realize an amount equal to the U.S. dollar value of the non-U.S. currency on the date of sale (or, in the case of cash basis and electing accrual basis taxpayers, the U.S. dollar value of the non-U.S. currency on the settlement date) provided that the ADSs or ordinary shares, as the case may be, are treated as being “traded on an established securities market.” If a U.S. holder receives non-U.S. currency upon a sale or exchange of ADSs or ordinary shares, gain or loss, if any, recognized on the subsequent sale, conversion or disposition of such non-U.S. currency will be ordinary income or loss, and will generally be income or loss from sources within the U.S. for foreign tax credit limitation purposes. However, if such non-U.S. currency is converted into U.S. dollars on the date received by the U.S. holder, a cash basis or electing accrual U.S. holder should not recognize any gain or loss on such conversion.

Redemption

Depending on the particular U.S. holder, a redemption of ADSs or ordinary shares by us will be treated as a sale of the redeemed ADSs or ordinary shares by the U.S. holder or as a distribution to the U.S. holder (which is taxable as described above under “— Distributions”).

Additional U.S. Federal Income Tax Consequences

Controlled Foreign Corporation Rules. Generally, a non-U.S. corporation, such as us, will be classified as a controlled foreign corporation (“CFC”) if more than 50% (by vote or value) of the shares of the corporation are held directly, indirectly, or constructively, by “U.S. Shareholders.” For this purpose, a U.S. Shareholder is generally any U.S. holder that possess, directly, indirectly or constructively, 10% or more of the combined voting power or value of all classes of shares of the corporation. Based on our current and anticipated ownership structure, we do not expect to be classified as a CFC. However, we can offer no assurances in this regard.

If we were classified as a CFC, however, any of our U.S. Shareholders generally would be required to include in gross income (as ordinary income) such U.S. shareholder’s global intangible low-taxed income and, at the end of each of our taxable years, and may be increased by certain deserved earnings an amount equal to the U.S. Shareholder’s pro rata share of our “subpart F income.” Subpart F income generally includes dividends, interest, rents and royalties, gains from the sale of securities, and income from certain transactions with related parties. If we are classified as both a CFC and a PFIC, we generally will not be treated as a PFIC with respect to those U.S. holders that meet the definition of a U.S. Shareholder.

PFIC Rules. Special adverse U.S. federal income tax rules apply to U.S. holders owning shares of a PFIC. In general, if you are a U.S. holder, we will be a PFIC with respect to you if for any taxable year in which you held our ADSs or ordinary shares: (i) at least 75% of our gross income for the taxable year is passive income or (ii) at least 50% of the value, determined on the basis of a quarterly average, of our assets is attributable to assets that produce or are held for the production of passive income. The determination of whether we are a PFIC will be made annually. Accordingly, it is possible that we may become a PFIC in the current or any future taxable year due to changes in our asset or income composition. Assuming we are a publicly traded corporation for purposes of the PFIC rules, the value of our assets would generally be determined by reference to the market price of our shares. Fluctuations in the market price of our shares may cause us to become a PFIC for the current taxable year or later taxable years. In addition, the composition of our income and assets will be affected by how, and how quickly, we use our liquid assets and the cash raised in this offering. If we were unable to deploy significant amounts of cash for active purposes, our risk of being classified as a PFIC would substantially increase. Because there are uncertainties in the application of the relevant rules and PFIC status is a factual determination made annually after the close of each taxable year, there can be no assurance that we will not be a PFIC for the current taxable year or any future taxable year.

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Passive income generally includes dividends, interest, royalties, rents (other than certain rents and royalties derived in the active conduct of a trade or business), annuities and gains from the disposition of assets that produce passive income. Any cash we hold, including the cash raised in this offering, generally will be treated as held for the production of passive income for the purpose of the PFIC test, and any income generated from cash or other liquid assets generally will be treated as passive income for such purpose. If a non-U.S. corporation owns at least 25% by value of the shares of another corporation, the non-U.S. corporation is treated for purposes of the PFIC tests as owning its proportionate share of the assets of the other corporation, and as receiving directly its proportionate share of the other corporation’s income. Although we do not believe that we are currently a PFIC, the determination of PFIC status is highly factual, determined annually, and based on technical rules that are difficult to apply. Accordingly, there can be no assurances that we will not be a PFIC for the current year or any future taxable year.

If we were to be treated as a PFIC, except as otherwise provided by election regimes described below, a U.S. holder would be subject to special adverse tax rules with respect to (i) “excess distributions” received on our ADSs or ordinary shares and (ii) any gain recognized upon a sale or other disposition (including a pledge) of our ADSs or ordinary shares. A U.S. holder would be treated as if it had realized such gain and certain “excess distributions” ratably over its holding period for our ADSs or ordinary shares. The amounts allocated to the then current taxable year and to any taxable year in the holding period prior to the first taxable year in which we were a PFIC would be taxed as ordinary income. The amounts allocated to any other taxable year would be taxed at the highest tax rate in effect for each such year to which the gain was allocated, together with an interest charge in respect of the tax attributable to each such year. Special rules apply for calculating the amount of the foreign tax credit with respect to “excess distributions” by a PFIC.

With certain exceptions, a U.S. holder’s ADSs or ordinary shares will be treated as stock in a PFIC if we were a PFIC at any time during the U.S. holder’s holding period for its ordinary shares or ADSs, even if we are not currently a PFIC.

Dividends that a U.S. holder receives from us will not be eligible for the special tax rates applicable to qualified dividend income if we are treated as a PFIC either in the taxable year of the distribution or the preceding taxable year, but instead will be taxable at rates applicable to ordinary income, or if an excess distribution treated as discussed above.

If a U.S. holder owns ordinary shares in a PFIC that are treated as “marketable stock,” the U.S. holder may make a mark-to-market election. If a U.S. holder makes this election, the U.S. holder will not be subject to all of the PFIC rules described above. Instead, in general, the U.S. holder will include as ordinary income the excess, if any, of the fair market value of its ADSs or ordinary shares at the end of the taxable year over the U.S. holder’s adjusted basis in its ADSs or ordinary shares. Similarly, any gain realized on the sale, exchange or other disposition of the ADSs or ordinary shares will be treated as ordinary income, and will not be eligible for the favorable tax rates applicable to qualified dividend income or long-term capital gains. The U.S. holder will also be allowed to take an ordinary loss in respect of the excess, if any, of the adjusted basis of its ADSs or ordinary shares over the fair market value at the end of the taxable year (but only to the extent of the net amount of previously included income as a result of the mark-to-market election). A U.S. holder’s basis in the ADSs or ordinary shares will be adjusted to reflect any such income or loss amount.

A U.S. holder may in certain circumstances also mitigate adverse tax consequences of the PFIC rules by filing an election to treat the PFIC as a qualified electing fund (“QEF”), if the PFIC complies with certain reporting requirements. However, in the event that we are or become a PFIC, we do not intend to comply with such reporting requirements necessary to permit U.S. holders to elect to treat us as a QEF.

U.S. holders should consult their own tax advisors regarding the application of the PFIC rules to their investment in our ADSs or ordinary shares and the elections discussed above.

Tax on Net Investment Income. Certain U.S. holders who are individuals, estate and trusts will be required to pay an additional 3.8% tax on some or all of their “net investment income,” which generally includes their dividend income (including qualified dividend income) and net gains from the disposition of our ADSs or ordinary shares. U.S. holders should consult their own tax advisors regarding the applicability of this additional tax on their particular situation.

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Information with Respect to Foreign Financial Assets . Owners of "specified foreign financial assets" with an aggregate value in excess of $50,000 (and in some circumstances, a higher threshold) may be required to file an information report with respect to such assets on their tax returns. "Specified foreign financial assets" may include financial accounts maintained by foreign financial institutions, as well as the following, but only if they are not held in accounts maintained by financial institutions: (i) stocks and securities issued by non-U.S. persons; (ii) financial instruments and contracts held for investment that have non-U.S. issuers or counterparties; and (iii) interests in foreign entities. U.S. holders are urged to consult their tax advisors regarding the application of this legislation to their ownership of the ADSs and ordinary shares.

Information with Respect to Interests in Passive Foreign Investment Companies (PFICs) . If we were to be treated as a PFIC, owners of our ADSs or ordinary shares (including, potentially, indirect owners) would be required to file an information report with respect to such interest on their tax returns, subject to certain exceptions. U.S. holders are urged to consult their tax advisors regarding the application of these rules to their ownership of the ADSs and ordinary shares.

Backup Withholding and Information Reporting. Backup withholding and information reporting requirements will generally apply to certain payments to U.S. holders of dividends on ADSs or ordinary shares. We, our agent, a broker or any paying agent, may be required to withhold tax from any payment that is subject to backup withholding unless the U.S. holder (1) is an exempt payee, or (2) provides the U.S. holder’s correct taxpayer identification number and complies with applicable certification requirements. Payments made to U.S. holders by a broker upon a sale of our ADSs or ordinary shares will generally be subject to backup withholding and information reporting. If the sale is made through a non-U.S. office of a non-U.S. broker, however, the sale will generally not be subject to either backup withholding or information reporting. This exception may not apply if the non-U.S. broker is owned or controlled by U.S. persons, or is engaged in a U.S. trade or business.

Backup withholding is not an additional tax. Any amounts withheld from a payment to a U.S. holder of ADSs or ordinary shares under the backup withholding rules can be credited against any U.S. federal income tax liability of the U.S. holder, provided the required information is timely furnished to the IRS. A U.S. holder generally may obtain a refund of any amounts withheld under the backup withholding rules that exceeds the U.S. holder’s income tax liability by filing a refund claim with the IRS. Prospective investors should consult their own tax advisors as to their qualification and procedure for exemption from backup withholding.

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THE COMBINED OFFERING

The shares being offered by this prospectus are part of a combined offering relating to up to 6,000,000 newly issued shares of our company. The combined offering consists of (i) a preemptive rights offering to our existing shareholders, pursuant to German law and (ii) this initial public offering of ADSs in the United States.

On May 24, 2017, our shareholders authorized our management board with the approval of our supervisory board to increase our company’s capital by 6,000,000 shares, equivalent to 3,000,000 ADSs. In order to carry out the capital increase, we are required by German law and the terms of our authorized capital to make a preemptive rights offering to our existing shareholders. In the German preemptive rights offering, we will issue to holders of our shares the right to subscribe for up to [ ____ ] newly issued shares. We have excluded shareholders’ subscription rights for a residual amount of [___] newly issued shares in accordance with German law and our articles of association.

The shares underlying the ADSs offered in the U.S. offering will relate to those new shares as to which subscription rights (i) have been excluded as described above or (ii) have not been exercised during the subscription period (assuming completion of the temporary share loan arrangement in connection with and issuance of new shares related to this offering as described in “Related Party Transactions — Share Loan Agreement”). The initial per share offering price to the public, which will be the same for the ADSs sold in the U.S. offering and the shares sold in the German preemptive rights offering (adjusting for the euro/U.S. dollar exchange rate and the ratio of shares to ADSs), will be determined upon completion of the bookbuilding period, which is expected to occur on [____]. In determining the offer price, we will consider, among other things, current market conditions, the trading price and volume of trading in our ordinary shares on the XETRA electronic trading platform of the Frankfurt Stock Exchange and the results of the bookbuilding process for the shares to be offered in this offering. See “Underwriting—Pricing of the Offering” for a discussion of factors considered in determining the price to the public of the ADSs. The final number of ADSs offered in this offering will be determined upon completion of the subscription period for the German preemptive rights offering, on or about [____].

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UNDERWRITING

Under the terms and subject to the conditions contained in an underwriting agreement dated the date of this prospectus, the underwriters named below, for whom The Benchmark Company, LLC is acting as representative, have severally agreed to purchase, and we have agreed to sell to them, severally, the number of ADSs indicated below:

Name	Number of ADSs

The Benchmark Company, LLC		[ ]
Dawson James Securities, Inc.		[ ]
Lake Street Capital Markets LLC		[ ]
Total:		[ ]

The underwriters and the representative are collectively referred to as the “underwriters” and the “representative,” respectively. The underwriters are offering the ADSs subject to their acceptance of the ADSs from us and subject to prior sale. The underwriting agreement provides that the obligations of the several underwriters to pay for and accept delivery of the ADSs offered by this prospectus are subject to the approval of certain legal matters by their counsel and to certain other conditions, including the absence of any material adverse change in our business and the receipt of certain certificates, opinions and letters from us, our counsel and the independent registered public accounting firm. The underwriters are obligated, severally and not jointly, to take and pay for all of the ADSs offered by this prospectus if any such ADSs are taken. The underwriters are not required, however, to take or pay for the ADSs covered by the underwriters’ over-allotment option to purchase additional ADSs described below. Any offers or sales of the ADSs in the U.S. will be conducted by registered broker-dealers in the U.S.

The underwriters have advised us that they propose to offer the ADSs to the public at $[ ] per ADS. The underwriters propose to offer the ADSs to certain dealers at the same price less a concession of not more than $[ ] per ADS. The underwriters may allow and the dealers may reallow a concession of not more than $[ ] per ADS on sales to certain other brokers and dealers. After the offering, these figures may be changed by the underwriters.

Over-Allotment Option

Additionally, after the waiver by certain of our shareholders of their preemptive rights with respect to [ ] million of our shares subject to the German preemptive rights offering, of which [ ] million are being offered in the form of ADSs in the U.S. offering, we have granted to the underwriters an option, exercisable for 45 days from the date of this prospectus, to purchase up to an aggregate of [ ] additional ADSs at the public offering price listed on the cover page of this prospectus less underwriting discounts and commissions. The underwriters may exercise this option for the purpose of covering over-allotments, if any, made in connection with the offering of the ADSs offered by this prospectus. To the extent the option is exercised, each underwriter will become obligated, subject to certain conditions, to purchase about the same percentage of the additional ADSs as the number listed next to the underwriter’s name in the preceding table bears to the total number of ADSs listed in the preceding table. If the underwriters’ option is exercised in full, the total price to the public would be $[ ], the total underwriters’ discounts and commissions would be $[ ] and the total proceeds to us (before expenses) would be $[ ].

Discounts, Commissions and Expenses

The table below shows the per ADS and total underwriting discounts and commissions that we will pay to the underwriters. The underwriting discounts and commissions are determined by negotiations among us and the underwriters and are a percentage of the offering price to the public. Among the factors considered in determining the discounts and commissions are the size of the offering, the nature of the security to be offered and the discounts and commissions charged in comparable transactions. These amounts are shown assuming both no exercise and full exercise of the underwriters’ option to purchase up to an additional [ ] ADSs.

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Underwriting Discounts and Commissions	No Exercise			Full Exercise

Public offering price per ADS	$	[ ]	(1)	$	[ ]	(1)
Underwriting discounts	$	[ ]	(1)	$	[ ]	(1)
Proceeds to us, before expenses	$	[ ]	(1)	$	[ ]	(1)

(1) Assumes the maximum underwriting discount and commission of 8.0% per ADS.

We have agreed to pay a non-accountable expense allowance to The Benchmark Company, LLC equal to 1.0% of the gross proceeds received in this offering (excluding any amounts we receive from any sale of ADSs pursuant to the exercise of the underwriters’ over-allotment option). In addition to the non-accountable expense allowance, we have also agreed to pay or reimburse the underwriters for certain of their out-of-pocket expenses in an amount not to exceed $125,000 (including reasonable “blue sky” fees and expenses of $25,000). Furthermore, pursuant to the underwriting agreement, the underwriters’ obligations are subject to customary conditions, representations and warranties contained in the underwriting agreement, such as receipt by the underwriters of officers’ certificates and legal opinions.

We estimate expenses payable by us in connection with this offering, other than the discounts and commissions referred to above, will be approximately $[ ]. This estimate includes due diligence fees and legal expenses of the representatives, fees and expenses relating to background checks of our officers and directors, printing costs, book building software costs and costs related to the road show.

Future Financings

We also have agreed to pay to The Benchmark Company, LLC an underwriting commission (or equivalent fee or other compensation permitted in accordance with applicable law) of 8.0% and non-accountable expense allowance of 1.0% of the gross proceeds received by us from any public or private offering or other financing or capital-raising transaction, but only to the extent such financing is provided to us by U.S.-based investors that The Benchmark Company, LLC introduced to us during the 12-month engagement period contemplated under our engagement agreement with The Benchmark Company, LLC (including any U.S.-based investors that purchase ADSs in the offering contemplated by this prospectus),, if any such financing is consummated during such engagement period or within 6 months following the earlier one to occur of (x) the expiration or termination of our engagement agreement with The Benchmark Company, LLC or (y) the completion of the offering contemplated by this prospectus.

Lock-Up Arrangements

Our chief executive officer has agreed or is otherwise contractually restricted for a period of 180 days after the date of this prospectus, without the prior written consent of the representative, not to directly or indirectly, sell, offer, contract or grant any option to sell, pledge, transfer, or otherwise dispose of or enter into any transaction which may result in the disposition of any ordinary shares or ADSs, or securities convertible into, exchangeable or exercisable for any ordinary shares or ADSs. There are no existing agreements between the representative and any person who will execute a lock-up agreement in connection with this offering providing consent to the sale of ordinary shares or ADSs prior to the expiration of the lock-up period. The lock up is subject to exceptions relating to open market transaction, estate planning transfer, transfers in satisfaction of the exercise price of or to pay taxes associated with options, transfers in the context of a bona fide third-party takeover, and similar limited exceptions, and does not apply to the exercise, exchange or conversion of any securities exercisable or exchangeable for or convertible into ordinary shares or ADSs upon the exercise of rights to acquire ordinary shares or ADSs pursuant to any existing option for ordinary shares or ADSs, so long as the shares or ADSs acquired on such exercise, exchange or conversion during the lock-up period are not transferred by the chief executive officer, unless otherwise permitted by the lock-up agreement and does not prohibit the chief executive officer from entering into or modifying any so-called “10b5-1” plan at any time (other than the entry into or modification of such a plan in such a manner as to cause the sale of securities within the lock-up period).

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Indemnification and Contribution

The underwriting agreement provides for indemnification between us and the underwriters against specified liabilities, including liabilities under the Securities Act, advancement of costs and for contribution by us and the underwriters to payments that may be required to be made with respect to those liabilities. We have been advised that, in the opinion of the Securities and Exchange Commission, indemnification of liabilities under the Securities Act is against public policy as expressed in the Securities Act, and is therefore, unenforceable.

Stabilizing Transactions and Penalty Bids

To facilitate this offering of ADSs, the underwriters may engage in transactions that stabilize, maintain or otherwise affect the price of the ADSs. Specifically, the underwriters may sell more ADSs than they are obligated to purchase under the underwriting agreement, creating a short position. A short sale is covered if the short position is no greater than the number of ADSs available for purchase by the underwriters under their over-allotment option. The underwriters can close out a covered short sale by exercising their over-allotment option or purchasing ADSs in the open market. In determining the source of ADSs to close out a covered short sale, the underwriters will consider, among other things, the open market price of ADSs compared to the price available under the over-allotment option. The underwriters may also sell ADSs in excess of the over-allotment option, creating a naked short position. The underwriters must close out any naked short position by purchasing ADSs in the open market. A naked short position is more likely to be created if the underwriters are concerned that there may be downward pressure on the price of the ADSs in the open market after pricing that could adversely affect investors who purchase ADSs in this offering. In addition, to stabilize the price of the ADSs, the underwriters may bid for, and purchase, ADSs in the open market. Finally, the underwriting syndicate may reclaim selling concessions allowed to an underwriter or a dealer for distributing the ADSs in this offering, if the syndicate repurchases previously distributed ADSs to cover syndicate short positions or to stabilize the price of the ADSs. Any of these activities may raise or maintain the market price of the ADSs above independent market levels or prevent or retard a decline in the market price of the ADSs. The underwriters are not required to engage in these activities, and may end any of these activities at any time.

Electronic Offer, Sale and Distribution of ADSs

A prospectus in electronic format may be made available on websites maintained by one or more underwriters, or selling group members, if any, participating in this offering. The representatives may agree to allocate a number of ADSs to underwriters for sale to their online brokerage account holders. Internet distributions will be allocated by the representatives to underwriters that may make Internet distributions on the same basis as other allocations. In addition, ADSs may be sold by the underwriters to securities dealers who resell ADSs to online brokerage account holders. Other than the prospectus in electronic format, the information on any underwriter’s or selling group member’s website and any information contained in any other website maintained by any underwriter or selling group member is not part of the prospectus or the registration statement of which this prospectus forms a part, has not been approved and/or endorsed by us or any underwriter or selling group member in its capacity as underwriter or selling group member and should not be relied upon by investors.

Pricing of the Offering

Our ordinary shares are listed on the Frankfurt Stock Exchange under the symbol “B8F” (International Securities Identification Number (ISIN) DE0006046113; German securities code (WKN) 604611), and application has been made for the listing of the ADSs on The NASDAQ Capital Market under the symbol “BFRA”. On [ ], 2018, the closing price of our ordinary shares on the Frankfurt Stock Exchange was €[_] ($[_], based upon the noon buying rate of the Federal Reserve Bank of New York for the euro on that date, which was €1.00 to $[_]) per share.

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Prior to this offering, there has been no public market in the U.S. for our ordinary shares or ADSs. The initial public offering price is determined by negotiations between us and Dawson, as qualified independent underwriter. Among the factors considered in determining the initial public offering price are the trading price and volume of trading in the ordinary shares on the Frankfurt Stock Exchange, our future prospects and those of our industry in general, our sales, earnings, certain other financial and operating information in recent periods, the price-earnings ratios and market prices of our securities and securities of companies engaged in activities similar to ours, the general condition of the securities markets at the time of this offering, and other factors deemed relevant by the representative and us. Neither we nor the underwriters can assure investors that an active trading market will develop for the ADSs or our ordinary shares represented by the ADSs, or that the ADSs will trade in the public market at or above the initial public offering price.

Selling Restrictions

No action may be taken in any jurisdiction other than the U.S. that would permit a public offering of the ADSs or the possession, circulation or distribution of this prospectus in any jurisdiction where action for that purpose is required. Accordingly, the ADSs may not be offered or sold, directly or indirectly, and neither this prospectus nor any other offering material or advertisements in connection with the offering of ADSs, may be distributed or published in or from any country or jurisdiction except under circumstances that will result in compliance with any applicable laws, rules and regulations of any such country or jurisdiction.

Conflicts of Interest

The Benchmark Company, LLC is acting as representative for the underwriters in connection with this offering. An affiliate and a principal of The Benchmark Company, LLC holds a position as a member of the supervisory board of our company. Therefore, The Benchmark Company, LLC is deemed to have a “conflict of interest” under Rule 5121(f)(5) of FINRA. Accordingly, this offering will be conducted in accordance with the applicable provisions of Rule 5121, which requires, among other things, that a “qualified independent underwriter” participate in the preparation of, and exercise the usual standards of “due diligence” with respect to, the registration statement and this prospectus. Dawson has agreed to act as a “qualified independent underwriter” within the meaning of Rule 5121 in connection with this offering. We have agreed to indemnify Dawson against liabilities incurred in connection with acting as qualified independent underwriter, including liabilities under the Securities Act. Dawson will undertake the legal responsibilities and liabilities of an underwriter under the Securities Act, specifically including those inherent in Section 11 thereof. Dawson will not receive any additional fees for serving as a “qualified independent underwriter” in connection with this offering.

EXPENSES OF THIS OFFERING

Set forth below is an itemization of the total expenses, excluding underwriting discounts and commissions, which are expected to be incurred in connection with our sale of ADSs in this offering. With the exception of the registration fee payable to the SEC and the filing fee payable to FINRA, all amounts are estimates.

Itemized expenses**	Amount
SEC registration fee	$	[______]
FINRA filing fee
NASDAQ listing fee	$	[______]
Printing expenses			*
ADS Depositary expenses
Legal fees and expenses			*
Accounting fees and expenses			*
Miscellaneous fees and expenses			*
Total			*

* To be completed by amendment

** Estimated

LEGAL MATTERS

The validity of the shares underlying the ADSs offered in this prospectus and certain other matters of German law will be passed upon for us by LLR Legerlotz Laschet und Partner Rechtsanwälte Partnerschaft mbB, Köln, Germany. Certain matters of U.S. law will be passed upon for us by McGuireWoods LLP, New York, New York. Certain legal matters in connection with this offering will be passed upon for the underwriters by Schiff Hardin, LLP, Washington, DC, counsel for the underwriters with respect to U.S. law, and Luther Rechtsanwaltsgesellschaft mbH, Frankfurt, Germany, counsel for the underwriters with respect to German law. VRT Revisionsgesellschaft mbH, Bonn, Germany will pass on certain German tax matters for us.

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EXPERTS

The audited consolidated financial statements included in this prospectus and elsewhere in this registration statement have been so included in reliance upon the report of Warth & Klein Grant Thornton AG Wirtschaftsprüfungsgesellschaft, independent registered public accountants, upon the authority of said firm as experts in accounting and auditing.

SERVICE OF PROCESS AND ENFORCEMENT OF CIVIL LIABILITIES

Biofrontera AG is a German stock corporation and its registered offices and a substantial portion of its assets are located outside of the U.S. In addition, certain members of our management board, our supervisory board, our senior management and the experts named in the prospectus are residents of Germany and jurisdictions other than the U.S., and all or a substantial portion of the assets of such persons are located outside the U.S. As a result, it may not be possible, or may be very difficult, for you to effect service of process within the U.S. upon Biofrontera AG or these individuals or to enforce judgments obtained in U.S. courts based on the civil liability provisions of the U.S. securities laws against Biofrontera AG or these individuals in the U.S. Awards of punitive damages in actions brought in the U.S. or elsewhere may be unenforceable in Germany. In addition, actions brought in a German court against Biofrontera AG or the members of its supervisory board and management board, its senior management and the experts named herein to enforce liabilities based on U.S. federal securities laws may be subject to certain restrictions; in particular, German courts generally do not award punitive damages. An award for monetary damages under the U.S. securities laws would be considered punitive if it does not seek to compensate the claimant for loss or damage suffered and is intended to punish the defendant. The enforceability of any judgment in Germany will depend on the particular facts of the case as well as the laws and treaties in effect at the time.

Litigation in Germany is also subject to rules of procedure that differ from the U.S. rules, including with respect to the taking and admissibility of evidence, the conduct of the proceedings and the allocation of costs. Proceedings in Germany would have to be conducted in the German language, and all documents submitted to the court would, in principle, have to be translated into German. For these reasons, it may be difficult for a U.S. investor to bring an original action in a German court predicated upon the civil liability provisions of the U.S. federal securities laws against us, certain members of our management and supervisory boards and senior management and the experts named in this prospectus. The U.S. and Germany do not currently have a treaty providing for recognition and enforcement of judgments (other than arbitration awards) in civil and commercial matters, though recognition and enforcement of foreign judgments in Germany is possible in accordance with applicable German laws. Even if a judgment against our company, the non-U.S. members of our management board, supervisory board, senior management or the experts named in this prospectus based on the civil liability provisions of the U.S. federal securities laws is obtained, a U.S. investor may not be able to enforce it in U.S. or German courts.

WHERE YOU CAN FIND MORE INFORMATION

We have filed with the SEC a registration statement on Form F-1 under the Securities Act, including amendments and relevant exhibits and schedules, covering the underlying ordinary shares represented by the ADSs to be sold in this offering. We have also filed with the SEC a related registration statement on Form F-6 to register our ADSs. This prospectus, which constitutes a part of the registration statement, summarizes material provisions of contracts and other documents that we refer to in the prospectus. Since this prospectus does not contain all of the information contained in the registration statement and the exhibits and schedules to the registration statement, you should read the registration statement and its exhibits and schedules for further information with respect to us and our shares and ADSs. If a document has been filed as an exhibit to the registration statement, we refer you to the copy of the document that has been filed. Each statement in this prospectus relating to a document filed as an exhibit is qualified in all respects by the filed exhibit.

You may review a copy the registration statement, including exhibits and any schedules filed therewith, and reports and other information we file, and obtain copies of such materials, at the SEC’s public reference room at 100 F Street, N.E., Washington, D.C. 20549. You may also request copies of these documents upon payment of a duplicating fee by writing to the SEC. For further information on the public reference facility, please call the SEC at 1-800-SEC-0330. In addition, the SEC maintains an Internet website that contains reports and other information about issuers, like us, that file electronically with the SEC. The address of that website is www.sec.gov .

Upon completion of this offering, we will become subject to the informational requirements of the Exchange Act as applicable to foreign private issuers. Accordingly, we will be required to file reports and other information with the SEC, including annual reports on Form 20-F and reports on Form 6-K. Those reports may be inspected without charge at the locations described above.

171

As a foreign private issuer, we are exempt under the Exchange Act from, among other things, the rules prescribing the furnishing and content of proxy statements, and our executive officers, directors and principal shareholders are exempt from the reporting and short-swing profit recovery provisions contained in Section 16 of the Exchange Act. In addition, we will not be required under the Exchange Act to file periodic reports and financial statements with the SEC as frequently or as promptly as U.S. companies whose securities are registered under the Exchange Act, although we intend to report our results of operations voluntarily on a quarterly basis. In addition, as a foreign private issuer, we intend to avail ourselves of exemptions from certain corporate governance requirements under the NASDAQ Marketplace Rules, as discussed in detail above under “Management — Differences between Our Corporate Governance Practices and the Rules of The NASDAQ Capital Market”. Our annual consolidated financial statements will be prepared in accordance with International Financial Reporting Standards, as issued by the International Accounting Standards Board, and certified by an independent public accounting firm.

As a foreign private issuer, we are also exempt from the requirements of Regulation FD (Fair Disclosure) which, generally, are meant to ensure that select groups of investors are not privy to specific information about an issuer before other investors. We are, however, still subject to the anti-fraud and anti-manipulation rules of the SEC, such as Rule 10b-5. Since many of the disclosure obligations required of us as a foreign private issuer are different than those required by other U.S. domestic reporting companies, our shareholders, potential shareholders and the investing public in general should not expect to receive information about us in the same amount and at the same time as information is received from, or provided by, other U.S. domestic reporting companies. We are liable for violations of the rules and regulations of the SEC which do apply to us as a foreign private issuer.

We maintain a corporate website at www.biofrontera.com . Information contained on, or that can be accessed through, our website does not constitute a part of this prospectus. We have included our website address in this prospectus solely as an inactive textual reference.

172

BIOFRONTERA AG

INDEX TO FINANCIAL STATEMENTS

Audited Financial Statements of Biofrontera AG
Report of Independent Registered Public Accounting Firm	F-2
Consolidated Balance Sheet as of December 31, 2016	F-3
Consolidated Statement of Comprehensive Income for the years ended December 31, 2016 and 2015	F-5
Statement of Changes in Equity for the year ended December 31, 2016	F-6
Consolidated Cash Flow Statement for the year ended December 31, 2016	F-7

Unaudited Financial Statements of Biofrontera AG
Consolidated Balance Sheet as of June 30, 2017	F-40
Consolidated Statement of Comprehensive Income for the six months ended June 30, 2017 and 2016	F-41
Consolidated Cash Flow Statement for the six months ended June 30, 2017 and 2016	F-42
Statement of Changes in Equity for the six months ended June 30, 2017	F-43

F- 1

Report of Independent Registered Public Accounting Firm

Supervisory Board

Biofrontera AG

We have audited the accompanying consolidated balance sheets of Biofrontera AG and subsidiaries (the “Company”) as of December 31, 2016 and 2015, and the related consolidated statements of comprehensive income, changes in equity, and cash flows for each of the years ended December 31, 2016 and 2015. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Company’s internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Biofrontera AG and subsidiaries as of December 31, 2016 and 2015, and the results of their operations and their cash flows for each of the years ended December 31, 2016 and 2015 in conformity with International Financial Reporting Standards as issued by the International Accounting Standards Board.

/s/ WARTH & KLEIN GRANT THORNTON AG

Düsseldorf, Germany

October 4, 2017

F- 2

Biofrontera AG
Consolidated Balance Sheet as of

Assets

(in EUR thousands)

		31 December 2016		31 December 2015
Non-current assets
Tangible assets	(1)		645		373
Intangible assets	(1)		1,252		1,902
Total Non-current assets			1,897		2,275

Current assets
Current financial assets
Trade receivables	(3)		1,624		895
Other financial assets	(4)		1,377		730
Cash and cash equivalents	(7)		15,126		3,959
Total Current financial assets			18,127		5,584

Other current assets
Inventories	(2)
Raw materials and supplies			1,350		590
Unfinished products			477		43
Finished products and goods			1,819		901
Income tax reimbursement claims	(5)		33		32
Other assets	(4)		176		73
Total Other current assets			3,855		1,639
Total Current assets			21,982		7,223
Total Assets			23,879		9,498

The accompanying notes are an integral part of these consolidated financial statements.

F- 3

Biofrontera AG
Liabilities

(in EUR thousands)

		31 December 2016			31 December 2015
Equity	(9)
Subscribed capital			37,722			25,490
Capital reserve			98,677			79,526
Capital reserve from foreign currency conversion adjustments			(154	)		(1	)
Loss carry forward			(109,824	)		(98,621	)
Net loss of the year			(10,579	)		(11,203	)
Total Equity			15,842			(4,809	)

Long-term liabilities
Long-term financial liabilities	(10)		3,597			11,230

Current liabilities
Current financial liabilities
Trade payables	(11)		2,093			1,043
Short-term financial debt	(9)		274			830
Other financial liabilities	(13)		59			38
Total Current financial liabilities			2,426			1,911

Other current liabilities
Income tax provision	(8)		—			—
Other provisions	(12)		1,824			1,042
Other current liabilities	(13)		190			124
Total Other current liabilities			2,014			1,166
Total Current Liabilities			4,440			3,077
Total Equity and liabilities			23,879			9,498

The accompanying notes are an integral part of these consolidated financial statements.

F- 4

Biofrontera AG

Consolidated Statement of Comprehensive Income

(in EUR thousands)

	Note	01.01.-31.12.2016			01.01.-31.12.2015
Sales revenue	(15)		6,130			4,138
Cost of sales	(16)		(1,652	)		(1,236	)
Gross profit from sales			4,478			2,902

Operating expenses
Research and development costs	(17)		(4,640	)		(6,204	)
General administrative costs	(19)		(2,853	)		(2,759	)
thereof financing costs			(826	)		(265	)
Sales costs	(18)		(8,764	)		(4,170	)
Total Operating Expenses			(16,257	)		(13,133	)
Loss from operations			(11,779	)		(10,231	)

Interest expenses	(20)		(1,207	)		(1,168	)
Interest income	(20)		3			9
Other expenses	(21)		(47	)		(32	)
Other income	(21)		2,451			219
Total interest and other (expenses)/income			1,200			(972	)

Profit/loss before income tax	(23)		(10,579	)		(11,203	)
Income tax			—			—
Profit or loss for the period	(23)		(10,579	)		(11,203	)

Expenses and income not included in profit/loss
Items which may in future be regrouped into the profit and loss statement under certain conditions Translation differences resulting from the conversion of foreign business operations			(153	)		(2	)
Other income total			(153	)		(2	)

Total profit/loss for the period			(10,732	)		(11,205	)

Basic/diluted earnings per share	(22)		(0.36	)		(0.48	)

The accompanying notes are an integral part of these consolidated financial statements.

F- 5

Biofrontera AG

Statement of Changes in Equity

(in EUR thousands except for share information)

	Ordinary shares		Subscribed capital		Capital reserve			Capital reserve from foreign currency conversion adjustments			Accumulated loss			Total
	number		EUR		EUR			EUR			EUR			EUR
Balance as at 01 January 2015		22,196,570		22.196		76.403			1			(98.621	)		(21	)
Capital increase		3,293,860		3.294		3.515			—			—			6,809
Costs of equity procurement		—		—		(496	)		—			—			(496	)
Foreign currency conversion adjustment		—		—		—			(2	)		—			(2	)
Increase in capital reserve from the stock option programme		—		—		104			—			—			104
Net loss of the year		—		—		—			—			(11.203	)		(11.203	)
Balance as at 31 December 2015		25,490,430		25.490		79.526			(1	)		(109.824	)		(4.809	)
Capital increase		9,870,333		9.870		14.648			—			—			24.518
Conversion from convertible bond 2016/2021		1,603,050		1.603		3.231			—			—			4.834
Exercise of detachable warrant rights from option bond 2011/2016		758,620		759		1.487			—			—			2.246
Foreign currency conversion adjustment		—		—		—			(153	)		—			(153	)
Costs of equity procurement		—		—		(321	)		—			—			(321	)
Changes in capital reserves pursuant to the issuance of the convertible bond 2016/2021		—		—		(4	)		—			—			(4	)
Increase in capital reserve from the stock option programme		—		—		110			—			—			110
Net loss of the year		—		—		—			—			(10.579	)		(10.579	)
Balance as at 31 December 2016		37,722,433		37.722		98.677			(154	)		(120.403	)		15.842

The accompanying notes are an integral part of these consolidated financial statements.

F- 6

Biofrontera AG

Consolidated Cash Flow Statement

(in EUR thousands)

	01.01.-31.12.16			01.01.-31.12.15
Cash flows from operations
Loss for the period		(10,579	)		(11,203	)
Adjustments to reconcile profit/loss for the period to cash flow into operations
Financial result		1,204			1,159
Depreciation		831			812
Losses from disposal of assets		5			0
Non-cash expenses and income		(51	)		40
Changes in operating assets and liabilities
Trade receivables		(729	)		(586	)
Other assets and income tax assets		(750	)		(11	)
Inventories		(2,112	)		(140	)
Trade payables		1,050			76
Provisions		782			150
Other liabilities		90			48
Net cash flow from used in operating activities		(10,259	)		(9,655	)

Cash flows from investment activities
Purchase of intangible and tangible assets		(484	)		(180	)
Interest received		3			184
Revenue from sale of intangible and tangible assets		26			13
Net cash flow (used in) provided by investment activities		(455	)		17

Cash flows from financing activities
Proceeds from the issue of shares		24,518			6,313
Costs of equity procurement		(321	)		—
Proceeds from issuance of convertible bonds 2016/2021		4,995			—
The exercise of detachable warrant rights from the proceeds from issuance of option bond 2011/2016		2,246			—
Interest paid		(842	)		(1,225	)
Repayment of convertible bonds 2011/2016		(8,715	)		—
Net cash flows provided by financing activities		21,881			5,088

Net increase (decrease) in cash and cash equivalents		11,167			(4,550	)
Cash and cash equivalents at the beginning of the period		3,959			8,509
Cash and cash equivalents at the end of the period		15,126			3,959

Composition of financial resources at the end of the period
Cash and cash equivalents		15,126			3,959

The accompanying notes are an integral part of these consolidated financial statements.

F- 7

Biofrontera AG

As of and for the period ending December 31, 2016 and 2015

Information about the company

Biofrontera AG (www.biofrontera.com), registered in the commercial register of Cologne District Court, Department B under No. 49717, and its wholly-owned subsidiaries Biofrontera Bioscience GmbH, Biofrontera Pharma GmbH, Biofrontera Development GmbH, Biofrontera Neuroscience GmbH, all with head office at Hemmelrather Weg 201, 51377 Leverkusen, Germany, and Biofrontera Inc., based in Wakefield, Massachussetts and with its registered office in Wilmington, Delaware, U.S. research, develop and market dermatological products. Biofrontera AG is an international biopharmaceutical company specializing in the development and commercialization of a platform of pharmaceutical products for the treatment of dermatological conditions and diseases caused primarily by exposure to sunlight that results in sun damage to the skin. Its approved products focus on the treatment of actinic keratoses, which are skin lesions that can sometimes lead to skin cancer, in the U.S. and Europe, as well as the treatment of basal cell carcinoma in the EU. Biofrontera AG (hereinafter also the "company" or "Biofrontera") pursues this goal along with its subsidiaries. All the companies together form the "Biofrontera Group".

The Biofrontera Group’s principal product is Ameluz ^® , which is a prescription drug approved for use in combination with photodynamic therapy, or PDT, referred to as Ameluz ^® PDT. Ameluz ^® PDT received centralized European approval in 2011 from the European Commission for the treatment of actinic keratosis of mild to moderate severity on the face and scalp. Since the initial centralized European approval of Ameluz ^® PDT, the European Commission granted label extensions for the use of Ameluz ^® PDT for (i) the treatment of field cancerization, or larger areas of skin on the face and scalp with multiple actinic keratoses and (ii) the treatment of superficial and/or nodular basal cell carcinoma unsuitable for surgical treatment due to possible treatment-related morbidity and/or poor cosmetic outcome.

In addition, the Biofrontera Group has developed its own PDT lamp, BF-RhodoLED ^® , for use in combination with Ameluz ^® . The BF-RhodoLED ^® lamp was approved as a medical device in the EU in November 2012 and is approved for sale in all EU countries, although the use of our BF-RhodoLED ^® lamp is not required to be used in combination with Ameluz ^® in the EU or Switzerland.

In May 2016, Biofrontera received approval from the U.S. Food and Drug Administration, or the FDA, to market in the U.S. Ameluz ^® in combination with photodynamic therapy using its BF-RhodoLED ^® lamp for lesion-directed and field-directed treatment of actinic keratoses of mild-to-moderate severity on the face and scalp. Biofrontera Inc. launched the commercialization of Ameluz ^® and BF-RhodoLED ^® for actinic keratosis in the U.S. in October 2016.

The Biofrontera Group currently sells Ameluz ^® in the U.S., in 11 countries in Europe and in Israel.

The Biofrontera Group also sells Belixos ^® , an over-the-counter line of skin care cosmetics products. Belixos ^® cosmetic products are available for sale in Germany and certain other European countries at selected pharmacies, dermatological institutes, and through local Amazon websites.

In July 2016, the company agreed a research partnership with Maruho Co., Ltd. ("Maruho"), a Japanese company specializing in dermatology, in which possibilities to jointly develop pharmaceutical products based on Biofrontera's proprietary nanoemulsion technology are to be researched. This corresponds to the same strategy with which Ameluz ^® was also developed. The nanoemulsion technology stabilized the active substance and improved skin penetration, leading to greater clinical efficacy. This principle is also to be applied to other substances as part of the partnership with Maruho. According to the agreement, Maruho will bear all costs connected with the exploratory research for four new product candidates (subject to a cap of €2.3 million). It is planned that Biofrontera will receive an exclusive license to market the new products in Europe.

The BF-derm1 project was tested in a three-part Phase II trial for the treatment of chronic, antihistamine-resistant urticaria. The trial demonstrated the drug's efficacy, which reduced the intensity of urticaria rashes and itching and reduced the amount of drowsiness-inducing antihistamines required by patients.

The BF-1 project is to develop a substance that is intended to be used for migraine prophylaxis. The substance was administered to healthy subjects for the first time towards the end of 2006, by intravenous injection and in tablet form. The company received the results of this trial in early 2007. They show that the substance is almost completely absorbed in the intestine, and that it takes around two days for 50% of the substance to be broken down or excreted.

At present, the Biofrontera Group is not actively pursuing the BF-derm1 project or the BF-1 project.

F- 8

Biofrontera AG

As of and for the period ending December 31, 2016 and 2015

Summary of significant accounting policies

Basis for preparation of the consolidated financial statements

The consolidated financial statements for Biofrontera AG have been prepared in accordance with the International Financial Reporting Standards (IFRS) of the International Accounting Standards Board (IASB) and the interpretations of the International Financial Reporting Standards Interpretations Committee (IFRS IC) and applicable on the balance sheet date.

The assets and liabilities are recognized and measured in accordance with the IFRS that were mandatory on 31 December 2016.

Standards, amendments to standards and interpretations applied for the first time in the consolidated financial statements for 31 December 2016:

Standards and interpretations requiring first-time mandatory application

Standard/Interpretation		First-time mandatory application as per IASB
Amendments to IAS 19 "Employee benefits”		1 July 2014
Annual Improvements Project		1 July 2014
Amendments to IAS 1 "Presentation of financial statements”		1 January 2016
IFRS 14 “Regulatory Deferral Accounts”		1 January 2016
Amendments to IAS 16 "Property, Plant and Equipment"		1 January 2016
Amendments to IAS 16 "Property, Plant and Equipment"		1 January 2016
Amendments to IAS 27 "Separate Financial Statements"		1 January 2016
Amendments to IFRS 10 "Consolidated Financial Statements", IFRS 12 "Disclosure of Interests in Other Entities" and IAS 28 "Interests in Associates and Joint Ventures": Investment Entities: Applying the Consolidation Exception		1 January 2016
Amendments to IFRS 11 "Joint Arrangements": Acquisitions of Interests in Joint Operations		1 January 2016
Annual Improvements Project Cycle 2012 – 2014		1 January 2016

With the exception of minor changes due to IAS 1, no changes have arisen for the consolidated financial statements of Biofrontera AG.

Recent Standards and Interpretations not yet applied

F- 9

Biofrontera AG

As of and for the period ending December 31, 2016 and 2015

Standard / Interpretation		First-time mandatory application as per IASB
IFRS 15 "Revenue from Contracts with Customers" (including supplements)		1 January 2018
IFRS 9 "Financial Instruments"		1 January 2018
Amendments to IAS 7 "Statements of Cash Flows": Disclosure Initiative		1 January 2017
Amendments to IAS 12 "Income Taxes": Recognition of Deferred Tax Assets for unrealized losses unrealized Losses		1 January 2017
Amendments to IAS 28 "Interest in Associates and Joint Ventures" and IFRS 10 "Consolidated Financial Statements": Sale or Contribution of Assets between an Investor and its Associate or Joint Venture		Postponed for an indefinite period
Amendments to IAS 40 "Investment Property": Transfers of Investment Property		1 January 2018
Amendments IFRS 2 "Share-based Payment": Classification and Measurement of share-based payment transactions		1 January 2018
Amendments to IFRS 4 "Insurance Contracts": Applying IFRS 9 Financial Instruments together with IFRS 4 Insurance Contracts		1 January 2018
IFRS 16 "Leases"		1 January 2019
IFRIC 22 "Foreign Currency Transactions and Advance Consideration"		1 January 2018
Annual Improvements Project Cycle 2014 – 2016		01.01.2017/01.01.2018
Clarification of IFRS 15 "Revenue from Contracts with Customers"		01 January 2018

It is expected that unless details of their effects are given below, the listed standards and interpretations that are not yet applied will have no effect on the Biofrontera Group, in the absence of relevant facts and circumstances.

As part of its disclosure initiative, the IASB has published amendments to IAS 7 — Statements of Cash Flows. The core changes are requirements for additional disclosures in the notes, which should enable the readers of financial statements to assess the changes in liabilities arising from the company's financing activities. The amendments are to be applied the first time in the first reporting period of a financial year beginning on or after 1 January 2017. Earlier application is also permitted. When first applied, there is no comparative information from the same period in the previous year to report. Apart from the requirement for additional notes, the Group expects no effects on its consolidated financial statements.

In May 2014, the IASB issued the new standard IFRS 15. The aim of this new standard concerning revenue recognition is to amalgamate the various rules previously contained in different standards and interpretations. At the same time, uniform principles are defined that are applicable for all sectors and for all types of revenue transactions. The questions regarding what amount, at what time and for which time period revenue is to be realized are to be answered with the help of the 5-stage model. In addition, the standard includes a number of other regulations covering detailed issues and an expansion of the disclosures required. The new standard is to be applied to annual periods beginning on or after 1 January 2018. The first application must in principle be carried out retrospectively, but various simplification options are available; earlier application is permitted.

The Group pursues instalment sales over several years which include a financing element. Furthermore, the adoption of the new standard IFRS 15 may lead in individual cases to a different approach in revenue recognition of licenses. The evaluation of individual license agreements is not yet completed. Requirements to make expanded disclosures will also arise.

F- 10

Biofrontera AG

As of and for the period ending December 31, 2016 and 2015

In January 2016, the IASB issued the new standard IFRS 16 — Leases. IFRS 16 establishes principles for the recognition, measurement, presentation and disclosure of leases, and notes regarding leases, with the aim of ensuring that lessees and lessors provide relevant information regarding the impact of leases. At the same time, the previous accounting model applied in accordance with IAS 17, involving the classification into operating and finance leases, is abandoned in favour of a uniform accounting model for leasing agreements with a mandatory control concept. For the lessee, the standard provides a single accounting model. This model leads in the case of the lessee to all the assets and liabilities from leases being recognized on the balance sheet, provided that their term does not exceed 12 months or if they are minor assets (option). The lessor continues to differentiate, for accounting purposes, between finance and operating leases. The mandatory first-time application date of IFRS 16 — Leases is for financial years beginning on or after 1 January 2019. Early application is permitted, in principle, if IFRS 15 — Revenue from Contracts with Customers is already applied (early) in full. The lessee either has to fully apply IFRS 16 retrospectively, with the inclusion of prior reporting periods, or has to recognize the cumulative adjustment effect at the point in time of initial application as an entry in equity at the beginning of the financial year of initial application. The Group is currently evaluating the possible impact of the initial application of IFRS 16 on its consolidated financial statements, and will define an adoption date and transitional method.

In July 2014, the IASB approved the final version of IFRS 9 "Financial Instruments". The new standard includes revised regulations for the classification and measurement of financial assets, including impairment regulations, and supplements the new hedge accounting regulations published in 2013. Furthermore, more extensive disclosure obligations pursuant to IFRS 9 are to be complied with. The Group anticipates effects on the classification of financial instruments as well as expanded disclosures in the notes to the financial statements. The company has evaluated the potential effects of IFRS 9, and has determined that it will not have a material impact on the financial statements.

The accounting policies applied are consistent with those applied on 31 December 2015, with the exception of the new and revised standards and interpretations described above that were applied from the 2016 financial year for the first time.

The consolidated financial statements are presented in euros (EUR) or thousands of euros.

The Biofrontera Group presents current and non-current assets and current and non-current liabilities as separate categories in the balance sheet, in accordance with IAS 1.60, with these categories also being subdivided to some extent according to their respective terms in the notes to the consolidated financial statement for 31 December 2016. The income statement is prepared applying the cost of sales method. In this reporting format, the net sales revenue is set against the expenses incurred in achieving it, subdivided into cost of sales, research and development costs, sales costs and general administration costs.

The consolidated financial statements for 31 December 2016 contain no separate segment-based reporting, as the activities of the Biofrontera Group are limited to a single business segment in terms of the definition in IFRS 8. All business operations focus on the product Ameluz ^{^®} , including the supplementary products BF-RhodoLED ^{^®} (PDT lamp) and Belixos ^{^®} , and are internally monitored and managed accordingly.

On 4 October 2017 the Management Board approved the consolidated financial statements for the financial year ending 31 December 2016 for filing and forwarding to the Supervisory Board.

F- 11

Biofrontera AG

As of and for the period ending December 31, 2016 and 2015

Basis of consolidation

The consolidated financial statements for the financial year ending 31 December 2016 include the financial statements of the parent company, Biofrontera AG, and the subsidiary companies in which the parent has a direct majority of the voting rights or another means of exercising control. The following companies have been included in the consolidated financial statements:

Biofrontera Bioscience GmbH, Leverkusen, Germany, with a direct interest of 100%

Biofrontera Pharma GmbH, Leverkusen, Germany, with a direct interest of 100%

Biofrontera Development GmbH, Leverkusen, Germany, with a direct interest of 100%

Biofrontera Neuroscience GmbH, Leverkusen, Germany, with a direct interest of 100%.

Biofrontera Inc., Wilmington, Delaware, U.S. with a direct interest of 100% since March 2015.

The basis for the consolidation of the companies included in the consolidated financial statements are the financial information of these companies prepared for 31 December 2016 pursuant to uniform principles. The consolidated financial statements for 31 December 2016 have been prepared on the basis of uniform accounting policies (IFRS).

The subsidiaries have been fully consolidated from the date of acquisition. The date of acquisition is the date when the parent company obtained control of these subsidiaries. The subsidiaries are included in the consolidated financial statements until control over these companies no longer exists.

All inter-company balances and income and expenses have been eliminated on consolidation. Results of intra-group transactions have been eliminated.

Immaterial Error Correction to Previously Issued Financial Statements

The company has made an immaterial error correction to the consolidated financial statements as of and for the years ended 31 December 2016 and 2015.

Management determined that it had incorrectly disclosed operating and financing cash flows related to non-cash components of its convertible warrant bonds. This resulted in a gross-up of operating and financing activities in the net amount of €481,000 and €62,000 as of 31 December 2016 and 2015, respectively. The error had no impact on revenues or the results of operations for either period presented.

Translation of amounts in foreign currencies

The consolidated financial statements for 31 December 2016 have been prepared in EUR (or thousands of EUR), which is the functional currency of all the German companies included in the consolidated financial statements, and of the Group, and is the Group's reporting currency.

For subsidiaries with a functional currency that is the local currency of the country in which they have their registered office, the assets and liabilities that are recognized in the foreign currency on the balance sheets of the foreign, economically independent subsidiaries, are converted to euros applying the relevant period-end exchange rate (2016: 1,052 USD/EUR, previous year: 1,091 USD/EUR). Income and expense items are translated applying the average exchange rates (2016: 1,107 USD/EUR, previous year: 1,102 USD/EUR) applicable to the relevant period. The differences resulting from the valuation of equity at historical rates and applying the period-end exchange rates are reported as a change not affecting profit or loss and carried directly to equity within the other equity components.

Transactions realized in currencies other than EUR are reported using the exchange rate on the date of the transaction. Assets and liabilities are translated applying the closing exchange rate for each balance sheet date. Gains and losses arising from such currency translations are recognized in income.

Application of estimates

The preparation of the consolidated financial statements in accordance with IFRS required the use of estimates and assumptions by management that affect the value of assets and liabilities — as well as contingent assets and liabilities — as reported on the balance sheet date, and revenues and expenses arising during the financial year. The main areas in which assumptions, estimates and the exercising of a degree of discretion are appropriate relate to the determination of the useful lives of non-current assets and the formation of provisions, as well as income taxes. Estimates are based on historical experience and other assumptions that are considered appropriate in the circumstances. They are continuously reviewed but may vary from the actual values.

F- 12

Biofrontera AG

As of and for the period ending December 31, 2016 and 2015

The carrying amounts of items affected by estimates are presented in the respective explanatory remarks concerning the items in the notes to the consolidated financial statements.

Transactions with related parties

With regard to transactions with shareholders, particularly in connection with capital increases and the issue of Biofrontera AG bonds, please see our comments in the appendix note "Equity".

With respect to the issue of share options to employees of the Biofrontera Group, please see our comments on the "Share Option Plan" in the appendix note "Equity".

With regard to the remuneration of Management Board members, please see our comments in the appendix note "Members of the Management Board".

With regard to the remuneration of Supervisory Board members, please see our comments in the appendix note "Members of the Supervisory Board".

Fixtures and equipment

Pursuant to IAS 16, the value of fixtures and equipment is recognized on the balance sheet at historical acquisition and production cost less scheduled depreciation.

Depreciation of fixtures and equipment is generally applied straight-line over the estimated useful life of assets (generally three to thirteen years). The main useful lives are unchanged:

¨	IT equipment	3 years, straight-line

¨	Fixtures and equipment	4 years, straight-line

¨	Office and laboratory facilities	10 years, straight-line

¨	Laboratory devices	13 years, straight-line

Since 1 January 2008, low value assets with purchase costs of between EUR 150 and EUR 1,000 have been booked to the year of acquisition as a single item for the relevant year, and are fully depreciated over five years.

Intangible assets

Purchased software is recognized at cost less amortization applied straight-line over a three-year useful life.

Purchased intangible assets consist of licenses and other rights. They are recognized at cost less accumulated amortization. Only intangible assets purchased from third parties are capitalized as assets, as the requirements for the recognition of internally generated intangible assets are not met. These intangible assets are capitalized as assets and generally amortized straight-line over an estimated useful life of between 4 and 20 years.

No intangible assets exist with indefinite useful lives.

Borrowing costs are not recognized as part of the purchase cost of the acquired assets but are instead expensed in the period in which they are incurred, because the Group has no qualifying assets in the meaning of IAS 23.5.

Impairment of assets

The company tests assets for impairment when indications exist that the carrying amount of an asset exceeds its recoverable amount. A possible impairment requirement of assets held for use is evaluated by comparing the carrying amount of an asset with the cash flows that the asset is expected to generate in the future. When such an asset is considered to be impaired, the impairment loss is measured at the amount by which the carrying amount of the asset exceeds its recoverable amount. Assets that are to be sold are reported at the lower of the carrying amount or fair value less costs to sell.

F- 13

Biofrontera AG

As of and for the period ending December 31, 2016 and 2015

Financial instruments

The financial instruments held by the Biofrontera Group on the balance sheet date primarily consist of cash and cash equivalents, current (short-term) investments, trade payables and receivables as well as financial debt. Biofrontera does not currently deploy derivative financial instruments. Due to the short terms of the current financial investments, trade payables and trade receivables, the carrying amounts of these items correspond to their fair values. The current financial investments are assigned to the "financial investments held to maturity" category, and other receivables and liabilities are assigned to the "loans and receivables" category. The financial liabilities are measured applying the effective interest method.

The Biofrontera Group was not exposed to significant foreign currency risk on the balance sheet date. Financial investments have been transacted in euros. Trade payables denominated in foreign currency are of minor importance. Trade receivables are regularly reviewed with respect to potential default risk.

Various safeguarding criteria are applied when selecting of current capital investments (for example, ratings, capital guarantee, safeguarding by the deposit protection fund). Based on the selection criteria and the ongoing monitoring of capital investments, Biofrontera does not consider any default risks to exist in this area that have not been taken into account. The amounts reported in the balance sheet generally represent the maximum default risk.

The monitoring and management of liquidity is based on short-term and long-term corporate planning. Liquidity risks are identified at an early stage, using simulations of various scenarios. Current liquidity is reported and monitored on a daily basis.

To date, Biofrontera has provided the necessary financing for its business operations through injections of equity and the issuance of warrant bonds and convertible bonds. See discussion of recent entry into a credit facility with European Investment Bank in Note 32.

As of 31 December 2016, Biofrontera held no financial positions that were exposed to interest rate risks.

Financial investments held to maturity

The company classifies the securities held as current financial investments as "financial investments held to maturity", in accordance with IAS 39.9. As of the 31 December 2016 reporting date, Biofrontera had in its portfolio holdings of its own Warrant Bond I 2009/2017 with a nominal value of EUR 1.5 million. In 2016, the company identified an error related to the financial instruments held to maturity made in 2014 and 2015. The warrant bonds were incorrectly impaired based on then existing market conditions in the amount of EUR 100,000 and EUR 167,000, respectively. Management concluded that an adjustment would be immaterial to the current and prior years both individually and in the aggregate. In order to correct the error, an out of period adjustment to reverse the cumulative impairment of EUR 267,000 was recorded in the period ended December 31, 2016. In accordance with IAS 32, the bonds are reported on a net basis with the corresponding bond debt.

Inventories

Raw materials and supplies, as well as finished and unfinished goods, are recognized at the lower of cost or net realisable value. Borrowing costs are not capitalized. Cost is calculated applying the first-in-first-out method (FIFO). A value adjustment is made to the inventories on the balance sheet date if the net realizable value is lower than the carrying amount.

Trade receivables

Trade receivables are reported at their nominal value. Any value adjustments are booked directly against the relevant receivable. Receivables denominated in foreign currencies have been translated into euros applying the exchange rates on the balance sheet date, with any translation differences being recognized in profit or loss.

F- 14

Biofrontera AG

As of and for the period ending December 31, 2016 and 2015

Cash and cash equivalents

Cash and cash equivalents include cash in hand, cheques and bank deposits with a term of up to three months at the time of acquisition, as well as current financial assets. These are measured at amortized cost.

Trade payables, overdrafts

Trade payables, as well as liabilities from current accounts and other liabilities are recognized at their redemption amount. Due to their short-term nature, the reported carrying amount reflects the fair value. Foreign currency liabilities are translated applying the period-end exchange rate. Exchange rate losses and gains are reported in the income statement.

Provisions

Provisions are formed if an obligation to third parties resulting from a past event exists, and is likely to result in an outflow of assets in the future, and if the effect on assets can be reliably estimated.

Share options

Share options (equity-settled share-based payments) are valued at the fair value on the date of granting. The fair value of the obligation is capitalized as a personnel expense over the vesting period. Obligations relating to cash-settled share-based payment transactions are recognized as liabilities and are measured at the fair value on the balance sheet date. In the event that Biofrontera AG has the right to choose between payment in cash or payment using shares when a right is exercised, the award is recognized as equity over the vesting period in accordance with IFRS 2.41 and IFRS 2.43, with the cost being recognized as compensation expense. The fair value of both cash-settled and equity-settled share-based payment transactions is generally determined using a Monte Carlo valuation model.

Warrant bonds

In accordance with IAS 32, warrant bonds are classified as compound financial instruments that represent a debt security with an embedded conversion or subscription option. The issuer of such a financial instrument, which contains both a liability and an equity component, is required to present the liability component and the equity component separately from the financial instrument originally reported on the balance sheet. At the issue date, the fair value of the financial liability component is determined by discounting at the market interest rate for comparable financial instruments without conversion rights. The financial liability is subsequently measured at amortized cost until conversion or maturity of the instrument. In accordance with IAS 32, the difference between the contract value and the fair value of the financial liability is the equity component, which is reported within capital reserves with no subsequent adjustment.

If the warrant bonds are redeemed before maturity through early redemption or early repurchase, with the original conversion rights remaining unchanged, the fee paid and all transactions relating to the repurchase or redemption are allocated to the liability and equity components of the instrument at the time of the transaction. The method for the allocation of the fees and transaction costs to the two components is identical to that utilised in the original allocation applied to the proceeds received when issuing the bond.

F- 15

Biofrontera AG

As of and for the period ending December 31, 2016 and 2015

Income tax

In accordance with IAS 12, Biofrontera recognizes deferred taxes for valuation differences between IFRS valuation and tax law valuation. Deferred tax liabilities are generally recognized for all taxable temporary differences — claims from deferred taxes are only recognized to the extent that it is probable that taxable profits will be available to utilise the claims. The carrying amount of deferred income tax assets is reviewed on each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available against which the deferred tax claim can be at least partially utilised. Previously unrecognized deferred income tax assets are reassessed on each balance sheet date and are recognized to the extent that it is probable from a current perspective that sufficient future taxable profit will be available to realise the deferred tax asset.

Deferred tax liabilities and deferred tax assets are offset if a right to offset exists, and if they are levied by the same tax authority.

Current taxes are calculated on the basis of the company's taxable earnings for the period. The tax rates applicable to the respective companies on the balance sheet date are used for this purpose.

Earnings per share

Earnings per share are calculated by dividing net consolidated income by the weighted average number of outstanding shares during the year in accordance with IAS 33 ("Earnings per Share").

Leasing

The leases that have been agreed are classified as either finance leases or operating leases. If the lessor has passed all significant opportunities and risks onto the Group as a lessee, the Group is assigned beneficial ownership. The companies included in the consolidated financial statements have usually concluded contracts that are classified as operating leases. In this case, ongoing lease payments are expensed as they are incurred. Agreed leases that are classified as finance leases are recognized as assets at the lower of the present value of the minimum lease payments or the fair value of the leased asset at the beginning of the lease, and depreciated over the shorter of the lease duration or useful life, if the transfer of ownership to the lessee at the end of the contract term is insufficiently certain.

Revenue recognition

The company recognizes revenue in accordance with IAS 18 if the risks and opportunities connected with ownership have transferred to the customer. The company realises its revenue primarily through the sale of its products. Income from milestone and licensing agreements with third parties are recognized once the underlying contractual conditions come into force. From time to time, the company may receive a cash payment at the inception of a distribution agreement. These payments are not refundable and are recognized as revenue upon receipt in accordance with IAS 18 IE 20.These payments were immaterial for the years ended December 31, 2016 and 2015.

Most of the revenues are generated by product sales. The sale of Ameluz ^{^®} almost exclusively occurs in Europe through pharmaceutical wholesalers or, to a lesser extent, directly to pharmacies, hospitals. Sales in the U.S. are primarily directly to physicians, hospitals or other qualified healthcare providers. Under a collaboration and partnership agreement entered into with Maruho, development work for certain product candidates is invoiced on a monthly basis after cost and/or time has been incurred. Revenue is recognized upon invoicing.

In the case of direct sales of the BF-RhodoLED ^{^®} lamps, the delivered products and services on which amounts are owed are settled only after complete installation, since the installation services requires specialised knowledge, is not just an ancillary service and, for legal reasons, the lamp may only be used by the customer after successful installation. In the case of lamps on loan, in other words, in the case of lamps already installed for testing by buyers before a purchase, the preconditions are met through the origination of a valid purchase agreement and the generation of an outgoing invoice.

F- 16

Biofrontera AG

As of and for the period ending December 31, 2016 and 2015

Belixos ^{^®} is predominantly sold through Amazon in Germany. Revenue is recognized after delivery and payment by the customer. Based on experience, return rights granted with the sale through Amazon are exercised by customers only in very few cases.

Revenues are recognized less revenue based trade taxes and sales deductions. Expected sales deductions, for instance rebates, discounts or returns, are recognized based on estimated values at revenue recognition. Payment terms for Ameluz ^{^®} include short-term payment terms with a possibility for sales rebates. Instalment payments over 48 months, which include a financing component, are sometimes agreed upon with the sale of BF-RhodoLED ^{^®} .

License income as well as milestone-based payments are recognized when the contractual obligation has been fulfilled.

Research and development expenses

Estimates of such possible outcomes involve management making significant assumptions. In the management's opinion, due to uncertainties related to the development of new products, the criteria prescribed under IAS 38.57 "Intangible Assets" for capitalising development costs as assets are only fulfilled by the Biofrontera Group if the prerequisites for the expansion of the European approval and the approval in the U.S. are met, and if it is likely a future economic benefit will accrue to the company.

The research and development costs relating to the medication Ameluz ^{^®} , which has been approved in Europe and the U.S., and to the company's other research and development projects, are consequently expensed in the period in which they are incurred.

F- 17

Biofrontera AG

As of and for the period ending December 31, 2016 and 2015

Notes to the consolidated balance sheet

Intangible assets and property, plant and equipment

Changes in non-current assets in the 2016 financial year, as well as accumulated depreciation, amortization and impairment losses, are presented in the statement of changes in non-current assets. Property, plant and equipment consist mainly of office and business equipment and laboratory and production facilities.

The additions to intangible assets and to property, plant and equipment in the reporting period arise mainly from the purchase of software to compare important documents (EUR 20 thousand; previous year: EUR 0), right-of-use assets connected with the prototype of the PDT lamp (EUR 36 thousand; previous year: EUR 26 thousand), as well as further laboratory devices (EUR 290 thousand; previous year: EUR 35 thousand) and other fixtures and equipment (EUR 117 thousand; previous year: EUR 42 thousand). The asset disposals with costs totalling EUR 66 thousand (previous year: EUR 20 thousand) resulted primarily from sales of the rental lamps in an amount of EUR 52 thousand (previous year: EUR 20 thousand).

The right-of-use assets reported with a net carrying amount totaling EUR 1.1 million relate mainly to rights to use technology developed by the company ASAT Applied Science and Technology AG, Zug, Switzerland, in terms of the active ingredient ALA (aminolevulinic acid), including all related patents and know how. The right-of-use assets that are acquired are amortized over their estimated remaining useful life, from their date of acquisition, due to their direct usability. This useful life is derived from the term of the patents issued and acquired by Biofrontera AG and is reviewed annually pursuant to IAS 38.104. The remaining amortization period amounts to 2 years (previous year: 3 years). No indications of impairment exist.

F- 18

Biofrontera AG

As of and for the period ending December 31, 2016 and 2015

Consolidated Statement of Changes in Non-Current Assets

(in EUR thousands)

			Cost										Accumulated depreciation, amortization and impairment losses								Carrying amounts
			1 Jan. 16		Currency		Additions		Disposals		31 Dec. 16		1 Jan. 16		Currency		Additions		Disposals		31 Dec. 16		31 Dec. 16		31 Dec. 15
			EUR		translation		EUR		EUR		EUR		EUR		translation		EUR		EUR		EUR		EUR		EUR
I.	Property, plant and equipment
		Operating and business equipment		3,477		2		420		65		3,834		3,104		—		120		35		3,189		645	373
II.	Intangible assets
	1.	Software and license		419		—		25		—		444		295		—		9		—		304		140	124
	2.	Right-of-use assets		6,053		—		36		—		6,089		4,275		—		702		—		4,977		1,112	1,778
		Total Intangible assets		6,472		—		61		—		6,533		4,570		—		711		—		5,281		1,252	1,902

		Total Non-Current Assets		9,949		2		481		65		10,367		7,674		—		831		35		8,470		1,897	2,275

Consolidated Statement of Changes in Non-Current Assets

(in EUR thousands)

			Cost										Accumulated depreciation, amortization and impairment losses										Carrying amounts
			1 Jan. 15		Currency		Additions		Disposals		31 Dec. 15		1 Jan. 15		Currency		Additions		Disposals		31 Dec. 15		31 Dec. 15		31 Dec. 14
			EUR		translation		EUR		EUR		EUR		EUR		translation		EUR		EUR		EUR		EUR		EUR
I.	Property, plant and equipment
		Operating and business equipment		3,343		—		154		20		3,477		3,003		—		108		7		3,104		373	340
II.	Intangible assets
	1.	Software and license		419		—		—		—		419		282		—		13		—		295		124	137
	2.	Right-of-use assets		6,027		—		26		—		6,053		3,584		—		691		—		4,275		1,778	2,443
		Total Intangible assets		6,446		—		26		—		6,472		3,866		—		704		—		4,570		1,902	2,580

		Total Non-Current Assets		9,789		—		180		20		9,949		6,869		—		812		7		7,674		2,275	2,920

F- 19

Biofrontera AG

Notes to the Consolidated Financial Statements

Inventories

Inventories comprise finished products, work in progress, and raw materials and supplies at the sales companies.

Inventories amount to EUR 3.6 million (previous year: EUR 1.5 million). In assessing the consumption of inventories, the sequence of consumption is assumed to be based on the first-in-first-out (FIFO) method.

Trade receivables

The trade receivables are mainly attributable to the sale of Ameluz ^{^®} , the BF-RhodoLED ^{^®} PDT lamp and the cosmetic product Belixos ^{^®} , as well as receivables due from Maruho arising from revenues from development projects. It is expected that all trade receivables will be settled within twelve months of the balance sheet date. Value adjustments for doubtful receivables have not been applied since no receivables existed that were over due as of December 31, 2016. For December 31, 2015 a receivable allowance for EUR 20 thousand was recognized.

Other financial and other assets

The other assets comprise mainly prepayments (EUR 707 thousand; previous year: EUR 116 thousand), prepayments rendered for studies (EUR 570 thousand; previous year: EUR 585 thousand) and VAT reimbursement claims (EUR 174 thousand; previous year: EUR 57 thousand). No individual value adjustments were applied during the reporting year (previous year: EUR 0 thousand).

Income tax reimbursement claims

These consist of claims for tax refunds relating to withheld capital gains tax, plus the Solidarity Surcharge (EUR 33 thousand; previous year: EUR 32 thousand). These amounts were refunded as we were at a net loss position and no tax obligations existed for the periods presented.

Securities

The valuation of securities classified as financial investments held to maturity is based on amortized costs. On 31 December 2016, the company's holdings in its own Warrant Bond I 2009/2017 had a nominal value of EUR 1.5 million (previous year: EUR 1.5 million). The warrant bonds held by Biofrontera were written up in fiscal year 2016 by EUR 267 thousand (previous year: write-down of EUR 100 thousand), to EUR 1.5 million (previous year: EUR 1.2 million) due to an increase in the market price. In accordance with IAS 32, the bonds are offset against the bond debt.

Cash and cash equivalents

Cash and cash equivalents relate to cash in hand, cheques, bank deposits and money deposits with a term of up to three months at the time of acquisition amounting to EUR 15.1 million (previous year: EUR 4.0 million). The carrying amounts of the cash and cash equivalents correspond to their fair value, due to the short-term nature of these investments.

Deferred income tax

The Biofrontera Group reported a net loss before tax on 31 December 2016 and on 31 December 2015. Deferred tax assets are generally determined on the basis of the existing income tax rates in Germany. The corporate tax rate is 15% as a result of the 2008 German Corporation Tax Reform Act (UStRG 2008). Including the 5.5% Solidarity Surcharge, this results in a combined tax rate of 15.8% (previous year: 15.8%). Due to the basic federal rate of 3.5% on businesses and the fact that it is no longer possible to deduct business tax as an operating expense, the resulting tax rate, taking into account the local business tax rate, is 16.6% (previous year: 16.6%).

F- 20

Biofrontera AG

Notes to the Consolidated Financial Statements

The following table shows changes in the Group's existing deferred tax assets deriving, as a matter of principle, from tax loss carryforwards (the previous year's figures have been adjusted to the amounts determined for tax purposes):

	31 December 2016				31 December 2015
	Loss carried forward		Deferred tax assets		Loss carryforward		Deferred tax assets
	€ thousands
Corporation tax including Solidarity Surcharge		111,742		17,683		104,757		16,583
Business tax		100,716		16,744		94,915		15,784
Total				34,427				32,367

These loss carryforwards have an unlimited carryforward period under current German law.

Due to the lack of predictability regarding future taxable profits, the existing deferred tax claims deriving, as a matter of principle, from loss carryforwards (EUR 34.4 million; previous year: EUR 32.4 million) and tax deductible differences of EUR 3 thousand (previous year: EUR 33 thousand) were not recognized on the balance sheet, in accordance with IAS 12.34.

The following provides a reconciliation between expected and actual reported income tax expense, with the output value being based on the rounded income tax rate of 32.5% currently applicable to the Biofrontera Group:

	31.12.2016			31.12.2015
	€ thousands
Consolidated earnings before tax		(10,579	)		(11,203	)
Expected income tax reimbursement at the tax rate of the parent company		3,433			3,635
Differences arising from different tax rates		(14	)		0
Tax reductions due to changes in permanent differences		0			161
Tax increases due to non-deductible expenses		(222	)		(187	)
Changes in unrecognized deferred tax assets
– from active temporary differences		3			33
– from loss carryforwards		(2,060	)		(3,602	)
Other effects		(1,140	)		(40	)
Income taxes as per statement of comprehensive income		0			0

Equity

The fully paid in share capital of the parent company, Biofrontera AG, amounted to EUR 37.7 million on 31 December 2016. It was divided into 37,722,433 registered shares with a nominal value of EUR 1.00 each. On 31 December 2015, the share capital amounted to EUR 25.5 million and was increased by a total of EUR 9.9 million, divided into 9,870,333 registered shares, during the course of the 2016 financial year as a result of three capital increases.

As part of the capital increase implemented in February 2016, the company's share capital was increased against cash capital contributions by EUR 2.4 million through issuing 2,357,384 new ordinary registered shares from approved capital. Shareholders' subscription rights were excluded for this capital increase. The new shares were offered to selected institutional investors at an issue price of EUR 1.90 per new share, consequently for a total issue amount of EUR 4.5 million. These shares were fully placed and the implementation of the capital increase was entered in the commercial register on 26 February 2016. The net proceeds amounted to EUR 4.4 million.

F- 21

Biofrontera AG

Notes to the Consolidated Financial Statements

As part of the capital increase implemented in April 2016, the company's share capital was increased against cash capital contributions by EUR 2.5 million through issuing 2,499,999 new ordinary registered shares from approved capital. Statutory subscription rights were granted to the shareholders. An "additional subscription" was also offered. In other words, shareholders exercising subscription rights could apply to subscribe for unsubscribed shares at the subscription price. The subscription price per share amounted to EUR 2.00. The capital increase was fully placed. The implementation of the capital increase was entered in the commercial register on 26 April 2016. The net issue proceeds amounted to EUR 4.9 million.

As part of the capital increase implemented in November 2016, the company's share capital was increased against cash capital contributions by EUR 5.0 million through issuing 5,012,950 new ordinary registered shares from approved capital. The implementation of the capital increase was entered in the commercial register on 21 November 2016. Statutory subscription rights were granted to the shareholders in a 6:1 ratio. The subscription price per share amounted to EUR 3.00. The net issue proceeds amounted to EUR 14.7 million.

Also in November 2016, 49,990 subordinated convertible 2016/2021 bonds were issued in a total nominal amount of EUR 4,999,000 ("convertible bond"). The bonds were offered at a subscription price of 100% of the nominal value per bond in a denomination of EUR 100.00 per bond, and were fully placed. Shareholders were granted indirect subscription rights to the bonds. The conversion price amounted initially to EUR 3.00 per share, EUR 4.00 per share from 1 January 2017 and EUR 5.00 per share from 1 January 2018. Shareholders were granted statutory subscription rights in a 607:1 ratio at an issue price of EUR 100.00 per bond. The total issue volume amounted to EUR 5.0 million.

The exercising of 751,460 warrant rights from the 2011/2016 warrant bond generated issue proceeds of EUR 2.2 million in the 2016 financial year.

The Biofrontera AG shares were listed on the Regulated Market of the Düsseldorf Stock Exchange in 2006. In August 2012, the company's shares were also admitted to trading on the Regulated Market of the Frankfurt Stock Exchange in response to an application by the company. The company's shares are also traded on the Xetra computer trading system and all other German stock exchanges. On 3 June 2014, the share was admitted to the Prime Standard of the Frankfurt Stock Exchange and the AIM Market of the London Stock Exchange. The listing on the AIM Market was discontinued as of 18 February 2016.

The numbers of shares held by the shareholders on 31 December 2016, based on the most recent compulsory disclosures of the shareholders, are as follows:

	31.12.2016		31.12.2015
Maruho Deutschland Co., Ltd., Osaka Japan		7,631,586		4,467,143
The total share of voting rights is assigned to Maruho Co., Ltd, Osaka, through the company Maruho Deutschland GmbH, Düsseldorf, which is controlled by the former.
Wilhelm Konrad Thomas Zours
The voting rights through the chain of subsidiaries listed below are attributed to Mr. Zours:
· DELPHI Unternehmensberatung AG		3,400,907		1,053,154
· VV Beteiligungen AG
· Deutsche Balaton AG
· ABC Beteiligungen AG
· Heidelberger Beteiligungsholding AG

Universal-Investment-Gesellschaft mbH, Frankfurt am Main, Germany		799,463		799,463
The share of voting rights is attributed to Universal-Investment GmbH through the company FEHO Vemögensverwaltungsgesellschaft.
Free float		25,890,477		19,170,670
Total		37,722,433		25,490,430

F- 22

Biofrontera AG

Notes to the Consolidated Financial Statements

Consolidated equity determined in accordance with IFRS is managed as capital. The company's capital management body regularly reviews the equity facilities available to the Group. The management's objective is to ensure an appropriate equity base, within the framework of the expectations of the capital market, and creditworthiness with respect to national and international business partners. The company's Management Board ensures that all Group companies have sufficient capital at their disposal in the form of equity and debt funding. Financing measures occurred in February 2016, April 2016 and November 2016.

The statement of changes in equity provides further information about the development of equity.

The following items are reported as of 31 December 2016 in connection with the 2009/2017 bond with warrants that was issued, the 2011/2016 bond with warrants that was issued in July 2011 (Tranche 1) and December 2011 (Tranche 2), and the 2016/2021 convertible bond:

€ thousands	31.12.2016 EUR		31.12.2015 EUR
Non-current financial liabilities (measured at amortized cost)		3,597		11,230
Current financial debt (accrued interest from nominal interest rate)		273		830
Capital reserve (equity component: 2009/2017 warrant bond)		1,485		1,485
Capital reserve (equity component: 2011/2016 warrant bond)		1,227		1,227
Capital reserve (equity component: 2016/2021 convertible bond)		323		—

The interest effects of the warrant bonds on the non-current borrowings were initially calculated applying an effective annual interest rate of 14.35% per annum for the 2009/2017 warrant bond, 9.8% per annum for the first tranche of the 2011/2016 warrant bond and 5.8% per annum for the second tranche of the 2011/2016 warrant bond as well as 7.9% per annum for the convertible bond 2016/2021.

In accordance with IAS 32.37, equity procurement costs less any related income tax benefits are to be deducted from equity. In the 2016 financial year, costs of raising equity totaling EUR 0.3 million (previous year: EUR 0.5 million) were recognized in connection with the capital increases that were implemented.

In the event of the company achieving an annual surplus, the Management and Supervisory boards are authorized to transfer all or part of the annual surplus that remains, after deduction of the sums to be placed in the legal reserves and of a loss carried forward, to retained earnings. It is not permissible to transfer more than half of the annual surplus to retained earnings if, after such a transfer, the other retained earnings would exceed half of the share capital. The shareholders' dividends are calculated based on the size of their holding of the share capital.

2010 share option program

At the Annual General Meeting on 2 July 2010, the Management and Supervisory boards proposed a share option program for employees to the Annual General Meeting, which approved the initiative. Accordingly, the Management Board, or the Supervisory Board if the beneficiaries are Management Board members, are entitled to issue up to 839,500 share options, the exercising of which is linked to specific targets.

The program has a total nominal volume of EUR 0.8 million and a term of six years from the issue date, in other words, until 24 November 2016. For this, contingent capital amounting to EUR 0.8 million was approved by means of the issuing of up to 839,500 registered no par value unit shares with a proportional amount of the share capital of EUR 1.00 per share, in accordance with Section 192 (1) No. 3 of the German Stock Corporation Act (AktG). The contingent capital was registered on 30 July 2010 in the commercial register of the Cologne District Court, under commercial register sheet number 49717. Eligibility for the 2010 share option program was granted to members of the Management Board and employees of the company as well as to members of management bodies and employees of affiliates of Biofrontera AG.

F- 23

Biofrontera AG

Notes to the Consolidated Financial Statements

The issue date was 24 November 2010. The granting of options is made without any consideration being rendered in return. On 24 November 2010, 106,400 options (first tranche) were issued with an exercise price per share of EUR 1.91. On 30 September and 7 October 2011 (second tranche) a further 96,400 options were issued with an exercise price of EUR 2.48 each. On 23 March 2012 and 11 May 2012 (third tranche), 65,000 options were issued with an exercise price of EUR 3.30 each, and 51,500 options were issued with an exercise price of EUR 4.09 each. On 2 September 2013, 179,500 options were issued (fourth tranche) with an exercise price of EUR 3.373 each. On 2 April 2014, 159,350 options were issued with an exercise price of EUR 3.43 each (fifth tranche).

In accordance with the associated conditions, each subscription right that is granted entitles the beneficiary to acquire one new registered no par value unit share in the company. The exercise price is equal to the arithmetical average (unweighted) of the closing prices on the Frankfurt Stock Exchange in floor trading and in Xetra trading for the company's shares on the ten trading days prior to the issuing of the share. However, the minimum exercise price amounts to the proportionate share of the company's share capital allocated to each individual no par value unit share, pursuant to Section 9 (1) of the German Stock Corporation Act (AktG).

The options granted can only be exercised after expiry of a vesting period. The vesting period is four years from the respective date of issue. A prerequisite for the whole or partial exercising of the options is that the following performance target is achieved:

Exercising the options from a tranche is possible if at the beginning of the respective exercise period, the price (hereinafter referred to as the "reference price") of a share in Biofrontera Aktiengesellschaft exceeds the exercise price by at least 20%, and a minimum reference price of at least EUR 5.00 is reached (hereinafter referred to as the "minimum reference price"). The reference price is equal to the arithmetical average (unweighted) of the closing prices on the Frankfurt Stock Exchange in floor trading and Xetra trading for the company's shares between the 15th and the 5th stock market day (in each case inclusive) before the start of the respective exercise window. The minimum reference price is adjusted in the following cases to align the specified performance target with changed circumstances:

In the event of a capital increase from company funds being implemented by issuing shares, the minimum reference price is reduced by the same ratio as new shares issued compared to existing shares. If the capital increase is implemented from company funds without issuing new shares (Section 207 (2) Clause 2 of the German Stock Corporation Act [AktG]), the minimum reference price is not changed.

In the case of a capital reduction, no adjustment of the minimum reference price is implemented, provided that the total number of shares is not changed by the capital reduction, or if the capital reduction is connected to a capital repayment or purchase of treasury shares. In the case of a capital reduction performed by consolidating shares without capital repayment and in the case of increasing the number of shares with no associated change in capital (share split), the minimum reference rate increases proportionally with the capital reduction or share split.

Other adjustments to the minimum reference price are not implemented.

The exercising of options is limited to the following time periods (hereinafter "exercise windows"), in other words, only declarations of exercising of rights submitted to the company within an exercise window will be considered:

on the 6th and subsequent 14 banking days after the date of the Annual General Meeting (exclusive),

on the 6th and subsequent 14 banking days after the date of submission of the semi-annual or quarterly report or an interim statement by Biofrontera AG (exclusive)

in the period between the 15th and the 5th banking day before expiration of the options for each respective expiry date (exclusive).

After expiry of the relevant vesting period, the options can be exercised up until the expiry of six years from the date of issue (exclusive).

F- 24

Biofrontera AG

Notes to the Consolidated Financial Statements

The right to exercise the options ends at the latest six years after the first day of issue. The right to exercise the first options that were issued thus ended on 24 November 2016. If the options have not been exercised by this time, they expire without provision of compensation. In the valuation of the employee share options, we have assumed an average holding period of 5 years.

Any claim by the beneficiaries to receive a cash settlement in the event of non-exercise of the options is invalid even in the event of the existence of the above exercise prerequisites. An option may only be exercised if the holder has a current service or employment contract with the company or another company affiliated with the company or if the holder is a member of the Management Board or the management team of another company affiliated with the company.

In the event of the exercising of a subscription right, the company is generally and in specific cases permitted to choose between granting the registered share in exchange for payment of the exercise price, or fulfilling its debt by paying a cash settlement to the holder of the subscription right. The cash settlement per subscription right is equal to the difference between the exercise price per share and the share price on the exercise date, minus due taxes and fees.

As this share option program entails share-based payment transactions in which the terms of the arrangement provide the company with a choice of settlement, the company has determined, that the most likely form of settlement would be in the form of shares. Therefore, in accordance with IFRS 2.41 and IFRS 2.43, the transactions have been recognized pursuant to the provisions for equity-settled share-based payments (IFRS 2.10-29). For this reason, the fair value of a share from this share option program with a grant date of 24 November 2010 was determined, on the basis of a binomial model, to have a fair value of EUR 0.57 / share option. For the share options issued on 31 December 2010, this resulted in a total value of options of EUR 0.1 million. For the additional share options granted in 2011, a fair value of EUR 0.1 million was calculated. For the two tranches of options granted in 2012, fair values of EUR 0.1 million and EUR 0.1 million were calculated, respectively. For the share options granted in 2013, a fair value of EUR 0.2 million was calculated. For the share options granted in 2014, a fair value of EUR 0.1 million was determined. The pro rata amounts are recognized in instalments over the vesting period until the end of the vesting period as personnel expenses and as an increase in the capital reserve. Share price volatilities of 45.78% and 51.3% were applied in calculating the fair value of the options granted in 2010 and 2011, volatilities of 53.5% and 65% were applied for the options granted in 2012, volatility of 39.2% was applied for the options granted in 2013, and volatility of 32.3% for the options granted in 2014 (based on the reporting date volatility). A dividend yield of 0% was applied in all cases, as well as risk-free rates of respectively 1.75% and 1.21%, and 0.9% and 0.82% in 2012 as well as 0.71% in 2013 and 0.68% in 2014, and a standard 20% annual beneficiary turnover rate. No share options were issued in financial year 2015. The authorization to issue options under the 2010 share option program ended on 1 July 2015.

The vesting period for the first tranche ran until 30 November 2014, and the vesting period for the second tranche ran until 30 September 2015. The option rights from the first tranche expired on 24 November 2016, as the exercise conditions were not met. No options from the second tranche had been exercised as of the reporting date.

The vesting period for the third tranche ran until 30 March 2016, and the vesting period for the fourth tranche ended on 11 May 2016. No options had been exercised from these tranches up to the reporting date.

No options from the fifth tranche could be exercised due to the vesting period.

A total of 137,250 options were forfeited by employees leaving the company.

By resolution of the Annual General Meeting on 28 August 2015, the Contingent Capital III planned for the servicing of options under this program was reduced to EUR 0.5 million.

The cost expensed in the reporting period amounted to EUR 62 thousand (previous year: EUR 103 thousand).

F- 25

Biofrontera AG

Notes to the Consolidated Financial Statements

2015 share option program

At the Annual General Meeting on 28 August 2015, the Management Board and Supervisory Board proposed a new share option program for employees to the Annual General Meeting, which approved the initiative. Accordingly, the Management Board or, to the extent that the beneficiaries are Management Board members, the Supervisory Board, are entitled until 27 August 2020 to issue up to 1,814,984 subscription rights to up to EUR 1.8 million of the company's ordinary registered shares, whose exercise is tied to certain targets.

The program has a total nominal volume of EUR 1.8 million and a term of five years from the issue date, in other words, until 27 August 2020. For this, contingent capital amounting to EUR 1.8 million was approved by means of the issuing of up to 1,814,984 registered no par value unit shares with a proportional amount of the share capital of EUR 1.00 per share, in accordance with Section 192 (1) No. 3 of the German Stock Corporation Act (AktG). The contingent capital was registered on 18 September 2015 in the commercial register of the Cologne District Court, under commercial register sheet number 49717. Eligibility for the 2015 share option program was granted to members of the Management Board and employees of the company as well as to members of management bodies and employees of affiliates of Biofrontera AG. The granting of options is made without any payment being provided in return.

The conditions of the 2015 share option program are to a large extent identical to those of the 2010 share option program, therefore, with respect to the 2015 share option program, we refer to the explanations of the conditions of the share option program 2010 provided above, however 20 banking days are being used instead of 14 banking days.

The inclusion of a “comparison with a reference index” as performance target instead of “achievement of a minimum reference price of EUR 5.00” as performance target is deemed to be a major difference in the conditions of the 2015 share option program compared to the 2010 share option program. The fair value of each option of this share option program was calculated on the grant date of the first tranche on 18 April 2016 based on a Monte Carlo risk simulation at a fair value of EUR 1.00/option. The fair value of each option of this share option program was calculated on the grant date 01 December 2016 based on a Monte Carlo risk simulation at a fair value of EUR 1.30/option. A volatility of the share price of approximately 50.6% was used to calculate the fair value of the options granted in the first tranche and a volatility of approximately 49.0% for the second tranche (based on daily rates, annualised assuming 250 trading days per annum), an earning yield of 2.31% for the first tranche (based on daily rates, annualised assuming 250 trading days per annum) and 7.00% for the second tranche respectively (based on a Capital Asset Pricing Model (CAPM)) and a total risk adjusted interest rate of 5.92% for the first tranche and 13.26% for the second tranche respectively as well as a standard annual beneficiary turnover rate of 12% for both tranches.

On 18 April 2016, 425,000 options (first tranche) were issued with an exercise price per share of EUR 2.49. On 1 December 2016 (second tranche) a further 130,500 options were issued with an exercise price of EUR 3.28 each.

A total of 7,500 options were forfeited by employees leaving the company.

The total option value for options issued as at 31 December 2016 was therefore EUR 1.5 million. The pro rata amounts are recognized in instalments over the vesting period until the end of the vesting period as personnel expenses and as an increase in the capital reserve. The expenditure recognized in the reporting period was EUR 49 thousand (previous year: EUR 0).

Share Option Program 2010	December 31, 2015		December 31, 2016		June 30, 2017
Outstanding at the beginning of the period		549,400		534,400		439,500
granted during the period		0		0		0
forfeited during the period		15,000		13,500		5,000
exercised during the period		0		0		0
expired during the period		0		81,400		0
outstanding at the end of the period		534,400		439,500		434,500
exercisable at the end of the period		0		0		0
range of exercise prices for options outstanding		€1.91 – €4.09		€2.44 – €4.05		€2.44 – €4.05
weighted average remaining contractual life		35 months		27 months		20 months

Share Option Program 2015	December 31, 2015	December 31, 2016		June 30, 2017
Outstanding at the beginning of the period			0		548,000
granted during the period			555,500		329,000
forfeited during the period			7,500		31,000
exercised during the period			0		0
expired during the period			0		0
outstanding at the end of the period			548,000		846,000
exercisable at the end of the period			0		0
range of exercise prices for options outstanding			€2.49 – €3.28		€2.49 – €4.02
weighted average remaining contractual life			59 months		63 months

10.

Financial liabilities

On 26 June 2009, Biofrontera announced the placement of a warrant bond with a term ending on 1 January 2018. As part of this financing measure on the part of the company, a warrant bond was placed in 2009 ("Warrant Bond I"). The warrant bond has a total nominal value of EUR 10,000,000.00, divided into up to 100,000 bonds with a nominal value of EUR 100.00. The redemption at the end of the term is at 106% of par. The warrant bonds bear interest on the following scale:

- from 01.09.2009 to 30.12.2010 at an annual rate of 4%;

- from 31.12.2010 to 30.12.2011 at an annual rate of 6%;

- from 31.12.2011 to 31.12.2017 at an annual rate of 8%.

F- 26

Biofrontera AG

Notes to the Consolidated Financial Statements

The accrual of interest on each warrant bond ends on the day before it is due for redemption. The interest payment is made on the last business day of the calendar year, but not until 31 December 2010, in other words, the interest for 2009 does not become due until then. An ordinary call on the bond by the bondholders is not permitted. Biofrontera has the right, upon issuing of written notice to the bondholders of Warrant Bond I, to repay 106% of the nominal amount (plus any accrued interest) at any time. Each holder of a partial bond is, in accordance with the bond and option terms, entitled to five detachable option rights per bond, with each of these providing the irrevocable right to acquire a registered voting-entitled no par value ordinary share in Biofrontera AG with a notional proportion of the share capital of EUR 1.00, at a warrant price of EUR 5.00 each. The warrant right expires on 30 December 2017. The share resulting from the exercising of a warrant right is dividend-entitled from the beginning of the financial year in which it originated from the exercising of the option right and payment of the capital contribution. To provide financing for the warrant rights, contingent capital of the company amounting to up to EUR 0.5 million was approved at the Extraordinary General Meeting held on 17 March 2009.

Of these warrant bonds, partial bonds were issued with a total nominal value of EUR 4,930,300.

The liability from this warrant bond was measured at its present value of EUR 3.2 million on the issue date, and the carrying amount of the non-current financial liability amounts to a total of EUR 3.4 million applying the effective interest method as of 31 December 2016 (31 December 2015: EUR 2.8 million ). The current (due within one year) portion of this financial liability amounts to EUR 0.3 million (31 December 2015: EUR 0.4 million).

On 7 June 2011, the Management Board resolved, with Supervisory Board approval and based on the authorization granted by the Annual General Meeting, to issue a warrant bond 2011/2016 (hereinafter "Warrant Bond II").

Warrant Bond II has a total nominal value of up to EUR 25 million and is divided into up to 250,000 individual warrant bonds with a nominal value of EUR 100.00 each. Each individual warrant bond is connected with ten detachable warrants issued by the company; each warrant entitles the holder to buy one registered voting-entitled no par value ordinary share in the company with an interest in the share capital of EUR 1.00 each at an option price of EUR 3.00. If all the warrant rights were to be issued and exercised, this would result in a calculated total exercise price of EUR 7.5 million. The issue price of each warrant bond is EUR 100.

The term of the warrant bonds begins on 20 July 2011 and ends on 31 December 2016. To provide financing for the option rights, contingent capital of up to EUR 2.5 million was approved at the company's General Meeting on 10 May 2011 and entered in the commercial register on 18 May 2011. Warrant Bond II carries a coupon of 5% per annum. The accrual of interest on each warrant bond ended on 31 December 2016. Interest was paid annually on 1 January for the previous year, commencing on 1 January 2012 with a payment of EUR 0.2 million for the period 20 July 2011 until 31 December 2011. A nominal total of EUR 8.7 million of individual warrant bonds of Warrant Bond II was issued as a result of two transactions that exchanged the convertible bonds for Warrant Bond II in July and December 2011 and the direct subscription from the initial issue.

The term of the 2016/2021 convertible bond begins on the date of its initial issue ("issue date") and ends on 31 December 2020.

The individual bonds carry 6% annual interest on their par value from 1 January 2017 (inclusive). The interest payments are payable annually subsequently on 1 January of each year, commencing on 1 January 2018.

The bonds can be converted into the company's ordinary no par value registered shares, each of which has a nominal share of EUR 1.00 in the share capital. The shares are dividend-entitled from the year when the conversion right is exercised.

F- 27

Biofrontera AG

Notes to the Consolidated Financial Statements

During the term, the holders of the bonds are entitled to convert all bonds into the company's shares. The initial conversion price is staggered. From the start of the term until 31 December 2016, the initial conversion price amounts to EUR 3.00 per share. From 1 January 2017 until 31 December 2017, the conversion price amounts to EUR 4.00 per share. From 1 January 2018, the conversion price amounts to EUR 5.00 per share.

At the end of the term of the convertible bond, the company is entitled to deliver shares instead of repaying the bonds. Moreover, the company is entitled to convert the bonds into shares at any time if the average price of the company shares exceeds EUR 5.00 on one occasion. In both cases, the initial conversion price amounts to EUR 5.00.

The contractual interest and repayment obligations relating to warrant bonds are broken down on the balance sheet date as follows:

€ thousands	31.12.2016
	2017		2018		2019		2020		2021		Total
Warrant bond 2009/2017:
Principal repayment				5,226								5,226
Interest payment		394										394
Warrant bond 2011/2016:
Principal repayment		0										0
Interest payment												0
Convertible bond 2016/2021:
Principal repayment										190		190
Interest payment		11		11		11		11		11		55

F- 28

Biofrontera AG

Notes to the Consolidated Financial Statements

The position was as follows in the previous year:

€ thousands	31.12.2015
	2016		2017		2018		2019	2020	Total
Warrant bond 2009/2017:
Principal repayment						5,226				5,226
Interest payment		394		394						788
Warrant bond 2011/2016:
Principal repayment				8,715						8,715
Interest payment		436		436						872

11.

Trade payables

The trade payables (EUR 2.1 million; previous year: EUR 1.0 million) increased by EUR 1.1 million from the previous year primarily due to the increase in inventory.

12.

Other provisions

Other provisions report the following changes:

Biofrontera Group
€ thousands	01.01.2016		Utilised		Released		Added		31.12.2016
Bonuses for employees		143		143		—		506		506
Outstanding vacation		82		82		—		198		198
Outstanding invoices		660		399		6		681		936
Costs for financial statements and auditing		109		109		—		154		154
Miscellaneous other provisions		48		22		2		6		30
Total provisions		1,042		755		8		1,545		1,824

Other provisions concern various individually identifiable risks and contingent liabilities. Provisions classified as current are expected to be utilised prospectively within the subsequent financial year.

13.

Other financial and other current liabilities

€ thousands	31 December 2016		31 December 2015
Payroll tax		114		97
Financial leasing		4		12
Credit card payments		28		16
Wages and salaries		57		10
Other		45		26
		248		161

14.

Reporting on financial instruments

During the course of its operating activities, the Group is exposed to market price and credit risk, as well as liquidity risk, which could have an effect on its financial position and performance.

Market price risk: Interest-rate risk is deemed minor as existing interest-rate modalities for the Biofrontera Group's relevant financing facilities can generally be adapted to market conditions short-term to medium-term. Due to the fixing of interest, no disadvantageous changes can occur to the interest payments. As the liabilities are not recognized at fair value but instead at amortized cost, there is also no fair value risk.

F- 29

Biofrontera AG

Notes to the Consolidated Financial Statements

Credit risk: A credit risk arises for the Group if transaction partners cannot meet their obligations within the normal payment deadlines. On the balance sheet, the maximum non-payment risk is represented by the carrying amount of the relevant financial asset. The situation regarding receivables is monitored so that any possible non-payment risks can be identified at an early stage and appropriate steps taken. In the reporting year, no individual value adjustments were made for other financial assets (previous year: EUR 0 thousand); in addition, no individual value adjustments were applied to trade receivables in the reporting year (previous year: EUR 0).

Based on the input factors used at the valuation methods fair values are divided into different steps of the fair value hierarchy:

Level 1: Fair value valuations using prices listed on active markets (not adjusted) for identical assets or liabilities.

Level 2: Fair value valuations using inputs for the asset or liability that are either directly observable (as prices) or indirectly observable (derived from prices), but which do not constitute listed prices pursuant to Level 1.

Level 3: Fair value valuations using inputs for the asset or liability that are not based on observable market data (unobservable input data).

Biofrontera only has financial instruments at levels 1 and 2. No reclassifications between level 1 and level 2 were performed during the 2016 financial year. With regard to financial liabilities, the full amount of non-current and current financial liabilities (EUR 3.9 million; previous year: EUR 12.1 million) is allocated to Level 1. This involves financial debt arising from the two warrant bonds.

Biofrontera reports under other operating expenses value adjustments to trade receivables and miscellaneous financial obligations allocable to the "loans and receivables" category. The currency translation losses arise mainly from trade payables. The net gains and losses generally include specific value adjustments and currency conversion effects.

The financial assets and liabilities can be subdivided into measurement categories with the following carrying amounts, and net gains and losses:

F- 30

Biofrontera AG

Notes to the Consolidated Financial Statements

			Carrying amounts
Financial assets on 31.12.2016 € thousands	Fair value		Loans and receivables		Financial instruments recognized at fair value in profit or loss (excluding "held-for- trading")		Financial assets available-for-sale		TOTAL CARRYING AMOUNTS		Net gains (+) or losses (-)
Financial assets										0		0
Liquid assets		15,126		15,126						15,126		0
Trade receivables		1,624		1,624						1,624		0
Other current financial receivables and assets		1,377		1,377						1,377		0
TOTAL		18,127		18,127		0		0		18,127		0

			Carrying amounts
Financial liabilities on 31.12.2016 € thousands	Fair value		Other liabilities		Financial instruments recognized at fair value in profit or loss (excluding "held-for- trading")		TOTAL CARRYING AMOUNTS		Net gains (+) or losses (-)
Financial liabilities current		274		274				274		0
Trade payables		2,093		2,093				2,093		(72	)
Other financial liabilities current		59		58				58		0
Other financial liabilities non-current		3,660		3,597				3,597		0
TOTAL		6,086		6,022		0		6,022		(72	)

F- 31

Biofrontera AG

Notes to the Consolidated Financial Statements

			Carrying amounts
Financial assets on 31.12.2015 € thousands	Fair value		Loans and receivables		Financial instruments recognized at fair value in profit or loss (excluding "held-for- trading")		Financial assets available- for-sale		TOTAL CARRYING AMOUNTS		Net gains (+) or losses (-)
Financial assets										0		0
Liquid assets		3,959		3,959						3,959		0
Trade accounts receivable		895		895						895		0
Miscellaneous current financial receivables and assets		730		730						730		0
TOTAL		5,584		5,584		0		0		5,584		0

			Carrying amounts
Financial liabilities on 31.12.2015 € thousands	Fair value		Other liabilities		Financial instruments recognized at fair value in profit or loss (excluding "held-for- trading")		TOTAL CARRYING AMOUNTS		Net gains (+) or losses (-)
Financial liabilities current		830		830				830		0
Trade accounts payable		1,043		1,043				1,043		(22	)
Other financial liabilities current		38		38				38		0
Other financial liabilities non-current		9,689		11,230				11,230		0
TOTAL		11,600		13,141		0		13,141		(22	)

Liquidity risk: The refinancing of the Biofrontera Group companies is generally performed centrally by Biofrontera AG. A risk exists in this regard that the liquidity reserves may be insufficient to fulfil the financial obligations on the due date. In order to cover the liquidity requirements at 31 December 2016, cash and cash equivalents totalling EUR 15.1 million (31 December 2015: EUR 4.0 million) are available. See the relevant balance sheet notes on (undiscounted) payments from financial debt due in the next years.

F- 32

Biofrontera AG

Notes to the Consolidated Financial Statements

Notes to the consolidated statement of comprehensive income as of 31 December 2016

15.

Sales revenue

The Biofrontera Group recognized sales of EUR 6.1 million in the 2016 financial year (previous year: EUR 4.1 million), representing an increase of 48% compared with the previous year. This includes down payments of EUR 40 thousand (previous year: EUR 70 thousand). Revenues from selling products in Germany reduced by 17% to EUR 2.5 million (previous year: EUR 3.0 million), while revenues generated in European countries outside Germany grew by 20% to EUR 1.3 million (previous year: EUR 1.0 million). For the first time, revenues were also generated from the sale of products in the U.S. in an amount of EUR 1.2 million. Revenues in the U.S. were achieved using a title model with one wholesaler. Revenues of EUR 1.2 million were generated in the financial year from the development partnership with Maruho.

16.

Cost of sales, gross profit

The gross profit on sales improved from EUR 2.9 million to EUR 4.5 million. The gross margin increased to 73%, compared to 70% in the same period in the previous year.

The cost of sales amounted to EUR 1.7 million, equivalent to 27% of sales revenue (previous year: EUR 1.2 million, or 30%).

17.

Development costs

Research and development costs amounted to EUR 4.6 million in the 2016 financial year, a reduction of EUR 1.6 million, or 25%, year-on-year. The decrease mainly reflects the EUR 2.1 million submission fee (PDUFA fee) paid at submission of the application for approval to the FDA during the first half of 2015. The PDUFA fee is usually waived for small companies for their initial submission. Biofrontera lodged an application for a waiver of this fee, but this could not be processed on the filing date as the FDA did not have a process for handling such applications. This fee was refunded by the FDA in March 2016 and was recorded in other income in fiscal year 2016.

18.

Sales and marketing costs

Sales and marketing costs of EUR 8.8 million reflect an approximately 110% increase compared with the previous year's period (EUR 4.2 million). The sales and marketing costs include the costs of our own field sales team in Germany, Spain and in the U.S., as well as marketing expenses. The increase is mainly attributable to expenses for the start-up of sales activities and to establish sales structures in the U.S..

19.

Administrative costs

Administrative costs increased by EUR 94 thousand year-on-year to EUR 2.9 million in the 2016 financial year (previous year: EUR 2.8 million). Financing costs shown under administrative costs include primarily consultancy and placement fees in connection with support for the search of investors.

20.

Financial result

The financial result consists primarily of the interest payable for the 2009/2017 warrant bond (EUR 0.5 million, previous year: EUR 0.4 million) and for the 2011/2016 warrant bond placed in 2011 (EUR 0.7 million, previous year: EUR 0.7 million), calculated using the effective interest method. The aforementioned interest expenses on the warrant bond 2009/2017 of EUR 0.5 million (previous year: EUR 0.4 million) include the opposite effect of EUR 0.2 million (previous year: EUR 0.2 million) from the repurchase of part of the warrant bond on 28 February 2014. The interest on Warrant Bond I for the 2015 financial year was paid at the end of December 2015, and the interest on Warrant Bond II was paid at the beginning of January 2016. The interest for the 2016 financial year for Warrant Bond I was paid at the start of January 2017. In December 2016, Warrant Bond II was repaid early with a principal repayment of EUR 8.7 million, plus accrued interest of EUR 0.4 million. See note 6 for details of the warrant bonds held by Biofrontera.

F- 33

Biofrontera AG

Notes to the Consolidated Financial Statements

21.

Other income (expenses), net

The submission fee paid to the FDA in 2015 (PDUFA fee) was reimbursed in an amount of EUR 2.0 million in March 2016 after a "small business waiver" was granted. This fee was reported under research and development costs in the income statement for 2015. The reimbursement is reported under other income. The difference to the amount originally paid results from currency translation differences.

22.

Earnings per share (EPS)

Earnings per share are calculated on the basis of the net loss for the year of the Biofrontera Group and the average ordinary shares in circulation in the financial year, in accordance with IAS 33.

	31.12.2016			31.12.2015
Number of weighted ordinary shares in circulation (on average)		29,742,634			23,156,343
Net loss for the year in EUR (in thousands)		(10,579	)		(11,203	)
Basic/Diluted earnings per share in EUR		(0.36	)		(0.48	)

When calculating diluted earnings per share for the 2015 and 2016 financial years, the warrant bond issued in 2009 (2009/2017), with a total nominal value of EUR 4.9 million and giving bondholders the right to acquire 246,515 shares at a price of EUR 5.00 each, as well as the warrant bond issued in 2011 (2011/2016), with a total nominal value of EUR 8.7 million and giving bondholders the right to acquire 871,500 shares at a price of EUR 3.00 each, have been taken into account as a matter of principle. As the Group achieved negative results for the year in the 2015 and 2016 financial years, no diluted earnings per share were reported, as the conversion or subscription rights for the periods shown counteracted any dilution.

23.

Additional information about the consolidated statement of comprehensive income

The other income only includes conversion adjustments from the conversion of the foreign business entity into the Group’s currency.

Cost of materials

The cost of materials included in the cost of sales amounted to EUR 1.3 million for the 2016 financial year (previous year: EUR 1.0 million).

Depreciation, amortization and impairment losses

Depreciation and amortization on tangible and intangible assets of EUR 0.8 million in the 2016 financial year and of EUR 0.8 million in the previous year is included in the following items in the statement of comprehensive income:

€ thousands	31.12.2016		31.12.2015
Research and development costs		689		691
General administrative costs		127		113
Cost of sales		9		8
Sales		6		0
Depreciation, amortization and impairment losses		831		812

F- 34

Biofrontera AG

Notes to the Consolidated Financial Statements

Personnel costs

€ thousands	31.12.2016		31.12.2015
Wages and salaries		5,753		3,557
Social security charges		908		482
Costs for pension schemes		33		34
Total		6,694		4,073

24.

Staff

On average, the Biofrontera Group employed 64 people in the 2016 financial year (previous year: 46 employees).

25.

Other information

Operating and finance leases

The Group companies lease administrative and research facilities, as well as vehicles and equipment, under operating lease contracts. The future minimum commitments from leases are as follows:

€ thousands	2016		2015		2016		2015		2016		2015
	≤ 1 year				1 year to 5 years				> 5 years
Operating leases
Leases for business premises		520		424		1,870		2,156		1,620		1,620
Leases for cars		274		145		375		178		0		0
Operating and business equipment		23		18		37		35		0		0

Lease-related expenses for the reporting period amounted to EUR 0.2 million (previous year: EUR 0.2 million).

On the balance sheet date, a finance lease existed for a server leased by Biofrontera AG with a carrying amount of EUR 4 thousand (previous year: EUR 12 thousand). The contract has a minimum term of 60 months to 31 July 2017. Biofrontera AG is obliged to purchase the leased asset from the lessor for a fixed residual value of EUR 2 thousand if the lessor exercises its option to sell. In the reporting year, minimum lease payments of EUR 11 thousand were expensed (previous year: EUR 11 thousand).

On the balance sheet date of 31 December 2016, the present value of the sum of future minimum lease payments is reconciled to their present values as follows:

All amounts in € thousands	Minimum lease payments		Discounting		Present value
Up to 1 year:		7		2		4
Between 2 and 5 years:		0		0		0
More than 5 years:		0		0		0

26.

Notes to the cash flow statement

The cash flow statement is presented in accordance IAS 7. The net loss for the year is adjusted for effects of non-cash transactions, deferrals or accruals of past or future operational deposits or disbursements, and income and expense items attributable to investment or financing activities.

In the consolidated cash flow statement, cash and cash equivalents include cash in hand, cheques, bank deposits and money deposits with a maturity of up to three months. Current account liabilities are incorporated into the cash fund where applicable.

F- 35

Biofrontera AG

Notes to the Consolidated Financial Statements

Interest paid out amounted to EUR 0.8 million (previous year: EUR 1.2 million). The change resulted from the two interest payments for Warrant Bond I made in the 2015 financial year: firstly, on 1 January 2015 for the 2014 financial year, and, secondly, on 31 December 2015 interest for the 2015 financial year. Interest received amounted to EUR 3 thousand (previous year: EUR 0.2 million), consisting of interest received for deposits. In the previous year, the interest received from Warrant Bond I held by the company itself already accrued to the company as of 30 December 2015.

27.

Members of the Management Board

Prof. Hermann Lübbert was the Management Board Chairman (Chief Executive Officer/CEO) in the reporting period. The CEO also holds a professorial chair at Bochum University in Germany. Prof. Lübbert was appointed to the Management Board from 27 March 2015 until 31 October 2020 by way of Supervisory Board resolution.

Mr. Thomas Schaffer is the Chief Financial Officer. Mr. Schaffer was appointed to the Management Board from 9 April 2015 until 30 November 2020 by way of Supervisory Board resolution.

Mr. Christoph Dünwald is the Management Board member responsible for the Sales and Marketing areas. With a Supervisory Board resolution of 9 July 2015, Mr. Dünwald was appointed to the Management Board until 15 November 2017.

The remuneration of the Management Board members consists of a fixed salary that is paid in twelve equal monthly instalments. In addition, an annual, performance-based bonus exists for the Management board members, as well as a long-term remuneration component consisting of participation in the company's share option program. Company cars are also available to the directors for business and private use.

The remuneration for members of the Management Board in the 1 January until 31 December 2016 period consisted of a salary and a bonus as well as share options. The total remuneration for Management Board members in the reporting period, including the value of share options at the time they were granted, amounted to EUR 1.4 million (previous year: EUR 0.9 million). This was allocated as follows

Prof. Dr. Hermann Lübbert	Non-performance based salary component: Performance based salary component: stock options:	EUR 0.3 million (31 December 2015: EUR 0.4 million) EUR 0.1 million (31 December 2015: EUR 35 thousand) 231,850 (fair value when granted: EUR 0.4 million) (previous year: 151,850, fair value when granted: EUR 0.2 million); of which granted in 2016: 80,000 (2015: 0)

Thomas Schaffer	Non-performance based salary component: Performance based salary component: stock options:	EUR 0.2 million (31 December 2015: EUR 0.2 million) EUR 0.1 million (31 December 2015: EUR 28 thousand) 85,000 (fair value when granted: EUR 0.2 million) (previous year: 35,000, fair value when granted: EUR 32,650); of which granted in 2016: 50,000 (2015: 0).

Christoph Dünwald	Non-performance based salary component: Performance based salary component: stock options:	EUR 0.2 million (31 December 2015: EUR 29 thousand) EUR 6 thousand (31 December 2015: EUR 0 thousand) 50,000 (fair value when granted: EUR 0.1 million) (previous year: 0, fair value when granted: EUR 0); of which granted in 2016: 50,000 (2015: 0).

All salaries/bonuses are classified as short-term employee benefits as defined in IAS 24.17 (a).

F- 36

Biofrontera AG

Notes to the Consolidated Financial Statements

28.

Members of the Supervisory Board

As a result of the resolution passed by the Annual General Meeting held on 31 May 2016, the Supervisory Board has consisted of the following members since 31 May 2016:

Dr. Ulrich Granzer	Chairman of the Supervisory Board, Owner and Managing Director of Ulrich Granzer Regulatory Consulting & Services, resident in Munich, Germany
Jürgen Baumann	Deputy Chairman of the Supervisory Board, management consultant, resident in Monheim
John Borer	Head of Investment Banking at The Benchmark Company LLC, New York, U.S., resident in Jersey City, NJ, U.S.
Hansjörg Plaggemars	Management Board member of Deutsche Balaton Aktiengesellschaft, Heidelberg, resident in Stuttgart
Mark Reeth	Attorney, resident in Frederick, MD, U.S.
Kevin Weber	Principal of Skysis, LLC., Scottsdale, AZ, U.S., resident in Scottsdale, AZ, U.S.

The Supervisory Board members held the following other supervisory board positions and positions on comparable domestic and foreign boards during the reporting period:

Hansjörg Plaggemars	OOC CTV Verwaltungs GmbH, Managing Director
	Stellar Diamonds plc, Non-Executive Board Member
	Carus Grundstücksgesellschaft am Taubenfeld AG, Supervisory Board Chairman
	Eurohaus Frankfurt AG, Supervisory Board Chairman
	Youbisheng Greenpaper AG i.I., Supervisory Board Chairman
	Ming Le Sports AG, Supervisory Board Chairman
	Nordic SSW 1000 Verwaltungs AG, Supervisory Board Chairman
	Balaton Agro Invest AG, Deputy Supervisory Board Chairman
	Carus AG, Deputy Supervisory Board Chairman
	Deutsche Balaton Immobilien I AG, Supervisory Board member
	Ultrasonic AG i.I., Supervisory Board member

In the 2016 financial year, compensation paid to Supervisory Board members amounted to EUR 113 thousand (previous year: EUR 0.1 million). The compensation transactions are classified as short-term employee benefits as per IAS 24.17(a).

During the reporting period, the company availed itself of additional advisory services from Supervisory Board member Dr. Ulrich Granzer. These services went beyond the scope of normal Supervisory Board activities. Dr. Granzer assisted the company with key issues relating to the preparation of the applications for approval submitted to the supervisory authorities in Europe and the U.S.. During the course of the 2016 financial year, advisory services amounting to EUR 10 thousand (previous year: EUR 0.1 million) were provided by Granzer Regulatory Consulting & Services. Accounts payable to Granzer Regulatory Consulting & Services amounted to EUR 7 thousand on 31 December 2016 (31 December 2015: EUR 0 thousand). The amounts stated here do not include statutory VAT at the current rate of 19%. The underlying consultancy contract was approved in consideration of the statutory provisions.

29.

Related party disclosures

In July 2016, Biofrontera AG entered into a collaboration and partnership agreement with Maruho Co., Ltd., a pharmaceutical company based in Japan specializing in dermatology that is also an affiliate of Maruho Deutschland GmbH, a major shareholder of Biofrontera AG. This agreement provides for the joint development of up to four branded generic pharmaceutical product candidates for the European market using Biofrontera AG’s proprietary formulation technology. The current agreement covers the initial part of the collaboration, in which the feasibility of the product development is tested, which Biofrontera AG expects to be completed by the end of 2017. Under this agreement, Maruho will bear all the costs connected with the development of these pharmaceutical product candidates (subject to a cap of €2.3 million).

F- 37

Biofrontera AG

Notes to the Consolidated Financial Statements

If these product candidates progress to clinical development, the collaboration and partnership agreement provides that Biofrontera AG will negotiate in good faith a new agreement with Maruho, without any obligation to enter into it. Maruho has not been granted any rights to Biofrontera AG’s formulation technology in the first phase of the project. The collaboration and partnership agreement provides that, if the parties ultimately determine to enter into a new agreement, Biofrontera AG would be granted an exclusive sublicensable right to market the product in Europe. As the agreement is related to Europe only, there are currently no firm understandings with respect to other geographical regions. The collaboration and partnership agreement further specifies that all results, information and data developed during the term of such agreement will be the property of Maruho. Any intellectual property (such as trade secrets, copyrights, patents and other patent rights, trademarks and moral rights) developed during the term of such agreement will be the joint property of Biofrontera AG and Maruho. We do not currently expect any such intellectual property to be developed during the term of the agreement. The collaboration and partnership agreement prohibits Biofrontera AG from manufacturing, selling or otherwise dealing in any products similar to and competitive with the product candidates developed under the agreement without Maruho's consent. Maruho has the right to terminate the collaboration and partnership agreement for any or no reason.

This development partnership generated revenue of EUR 1.2 million in the financial year under review (previous year: EUR 0 thousand). Receivables due from Maruho amounted to EUR 0.5 million as of 31 December 2016 (31 December 2015: 0).

In the 2016 financial year, no further reportable transactions or relationships with related parties existed beyond the aforementioned facts and circumstances stated in subsections 27 and 28. The Group of related persons and entities is limited to those referred to therein.

In the context of the underlying holding structure, Biofrontera AG is responsible for the administrative and management tasks. Biofrontera AG is also responsible for the financing of the currently still loss-making business areas, as it is a listed company and consequently enjoys access to the public capital market.

F- 38

Biofrontera AG

Notes to the Consolidated Financial Statements

30.

Auditor's fees and services

The total fee invoiced by the auditor Warth & Klein Grant Thornton AG for the 2016 financial year consists of the following:

€ thousands	2016			2015
Auditing services		184			122
[of which for the previous year]		[50	]		[16	]
Other certification services		55			43
		239			165

31.

Events after the reporting date

On 24 January 2017, the company announced that the issue of up to 49,990 subordinated convertible bonds that had been approved in December 2016 had been placed in full in a total nominal amount of up to EUR 4,999,000 ("convertible bond").

On 30 January 2017, the European Commission followed the positive vote by the Committee for Medicinal Products for Human Use (CHMP) of the European Medicines Agency (EMA) and issued the expansion of the approval of Ameluz ^{^®} to treat basal cell carcinoma. The extended approval comprises the treatment of superficial and/or nodular basal cell carcinoma in adults where surgical removal is ruled out due to potential morbidity or due to an undesirable cosmetic result.

On 6 February 2017, the company announced positive preliminary results for the primary endpoint of the clinical Phase III trial to investigate the efficacy and safety of the prescription medication Ameluz ^{^®} in combination with daylight photodynamic therapy (PDT). The trial reached its primary regulatory endpoint and proved the non-inferiority (p<0.001) of Ameluz ^{^®} in daylight-PDT in relation to the comparator product Metvix ^{^®} in treating mild or moderate actinic keratosis, a superficial skin cancer. After just one PDT, the trial reached its primary endpoint at 78.7% complete lesion clearance in a half side comparison per patient in treatment with Ameluz ^{^®} and daylight-PDT, in comparison with 75.0% lesion clearance in treatment with Metvix ^{^®} and daylight-PDT. The company published detailed results of this trial on 13 March 2017. Ameluz ^{^®} has also reported higher results in all relevant secondary endpoints than the competitor product, with the greatest differences between Ameluz ^{^®} and the competitor product arising for patients under 65 years of age and for patients treated under cloudy weather.

On 9 March 2017, the lawsuit of a shareholder of June 30, 2016 was withdrawn by the plaintiff. The lawsuit brought charges for nullity, alternatively rescission, of some of the resolutions passed at the company's Ordinary Annual Shareholder Meeting on 31 May 2016. In particular, the election of Mr. John Borer, Mr. Jürgen Baumann and Mr. Kevin Weber to the company's Supervisory Board was contested.

No further events subject to mandatory reporting occurred after the balance sheet date.

F- 39

Biofrontera AG

Condensed Consolidated Balance Sheet as at

Assets

(in EUR thousands)

	June 30, 2017		December 31, 2016
Non-current assets
Tangible assets		662		645
Intangible assets		984		1,252
Total Non-current assets		1,646		1,897

Current assets
Current financial assets
Trade receivables		1,202		1,624
Other financial assets		1,136		1,377
Cash and cash equivalents		11,452		15,126
Total Current financial assets		13,790		18,127

Other current assets
Inventories
Raw materials and supplies		1,573		1,350
Unfinished products		428		477
Finished products and goods		1,834		1,819
Income tax reimbursement claims		33		33
Other assets		44		177
Total Other current assets		3,912		3,855
Total Current assets		17,702		21,982
Total Assets		19,348		23,879

Liabilities

(in EUR thousands)

	June 30, 2017			December 31, 2016
Equity
Subscribed capital		38,417			37,722
Capital reserve		100,670			98,677
Capital reserve from foreign currency conversion adjustments		442			(154	)
Loss carry forward		(120,403	)		(109,824	)
Net loss of the year		(8,737	)		(10,579	)
Total Equity		10,389			15,842

Long-term liabilities
Long-term financial liabilities		2,654			3,597

Current liabilities
Current financial liabilities
Trade payables		448			2,093
Short-term financial debt		3,666			274
Other financial liabilities		47			59
Total Current financial liabilities		4,161			2,426

Other current liabilities
Other provisions		1,880			1,824
Other Current liabilities		264			190
Total Other current liabilities		2,144			2,014
Total Current liabilities		6,305			4,440
Total Equity and liabilities		19,348			23,879

The accompanying notes are an integral part of these consolidated financial statements.

F- 40

Biofrontera AG

Condensed Consolidated Statement of Comprehensive Income for the six months ended

(in EUR thousands)

	June 30, 2017			June 30, 2016
Sales revenue		5,006			1,709
Cost of sales		(635	)		(764	)
Gross profit from sales		4,371			945

Operating expenses
Research and development costs		(2,185	)		(1,852	)
General administrative costs		(1,696	)		(1,373	)
thereof financing costs		(511	)		(372	)
Sales costs		(8,275	)		(2,832	)

Loss from operations		(7,785	)		(5,112	)

Interest expenses		(330	)		(594	)
Interest income		4			2
Other expenses		(741	)		(14	)
Other income		115			2,246


Profit/loss before income tax		(8,737	)		(3,472	)
Income tax		0.0			0.0
Profit or loss for the period		(8,737	)		(3,472	)

Expenses and income not included in profit/loss
Items which may in future be regrouped into the profit and loss statement under certain conditions		596			0
Translation differences resulting from the conversion of foreign business operations
Other income total		596			0

Total profit/loss for the period		(8,141	)		(3,472	)

Basic/diluted earnings per share		(0.23	)		(0.12	)

The accompanying notes are an integral part of these consolidated financial statements.

F- 41

Biofrontera AG

Condensed Consolidated Cash Flow Statement for the six months ended

(in EUR thousands)

	June 30, 2017			June 30, 2016
Cash flows from operations
Loss for the period		(8,737	)		(3,472	)
Adjustments to reconcile profit/loss for the period to cash flow into operations
Financial result		326			593
Depreciation		444			404
Losses from disposal of assets		0.0			5
Non-cash expenses and income		789			46
Changes in operating assets and liabilities
Trade receivables		422			382
Other assets and income tax assets		372			(339	)
Inventories		(188	)		(142	)
Trade payables		(1,644	)		(45	)
Provisions		66			83
Other liabilities		63			(26	)
Net cash flow into operational activities		(8,087	)		(2,511	)

Cash flows from investment activities
Purchase of intangible and tangible assets		(204	)		(155	)
Interest received		2			2
Revenue from sale of intangible and tangible assets		10			10
Net cash flow into investment activities		(192	)		(143	)

Cash flows from financing activities
Proceeds from the issue of shares		0.0			9,303
Proceeds from conversions of convertible bonds 2017/2022		4,999			0.0
Interest paid		(394	)		(436	)
Net cash flows from financing activities		4,605			8,867

Net (decrease)/increase in cash and cash equivalents		(3,674	)		6,213
Cash and cash equivalents at the beginning of the period		15,126			3,959
Cash and cash equivalents at the end of the period		11,452			10,172

Composition of financial resources at the end of the period
Cash and cash equivalents		11,452			10.172

The accompanying notes are an integral part of these consolidated financial statements.

F- 42

Biofrontera AG

Condensed Statement of Changes in Equity

(in EUR thousands, except per share amounts)

	Ordinary shares number		Subscribed capital		Capital reserve			Capital reserve from foreign currency conversion adjustments			Accumulated loss			Total

Balance as at 01 January 2016		25,490,430		25,490		79,526			(1	)		(109,824	)		(4,809	)
Capital increase		4,857,383		4,857		4,622			—			—			9,479
Costs of equity procurement		—		—		(176	)		—			—			(176	)
Foreign currency conversion adjustment		—		—		—			—			—			—
Increase in capital reserve from the stock option program		—		—		53			—			—			53
Net loss of the year		—		—		—			—			(3,472	)		(3,472	)
Balance as at June 30, 2016		30,347,813		30,347		84,025			(1	)		(113,296	)		1,075
Capital increase		5,012,950		5,013		10,026			—			—			15,039
Conversion from convertible bond 2016/2021		1,603,050		1,603		3,231			—			—			4,834
Exercise of detachable warrant rights from the option bond 2011/2016		758,620		759		1,487			—			—			2,246
Foreign currency conversion adjustment		—		—		—			(153	)		—			(153	)
Costs of equity procurement		—		—		(145	)		—			—			(145	)
Changes in capital reserves pursuant to the issuance of the convertible bond 2016/2021		—		—		(4	)		—			—			(4	)
Increase in capital reserve from the stock option programme		—		—		57			—			—			57
Net loss of the year		—		—		—			—			(7,107	)		(7,107	)
Balance as at 31 December 2016		37,722,433		37,722		98,677			(154	)		(120,403	)		15,842

Conversion from convertible bond 2016/2021		26,700		27		74			—			—			101
Conversion from convertible bond 2017/2022		667,295		668		1,836			—			—			2,504
Foreign currency conversion adjustment		—		—		—			596.0			—			596
Increase in capital reserve from the stock option programme		—		—		83			—			—			83
Net loss of the year		—		—		—			—			(8,737	)		(8,737	)
Balance as at June 30, 2017		38,416,428		38,417		100,670			442			(129,140	)		10,389

The accompanying notes are an integral part of these consolidated financial statements.

F- 43

Biofrontera AG

Notes to the Condensed Consolidated Financial Statements

As of and for the six months ending June 30, 2017

Information about the company

Biofrontera AG (www.biofrontera.com), registered in the commercial register of Cologne District Court, Department B under No. 49717, and its wholly-owned subsidiaries Biofrontera Bioscience GmbH, Biofrontera Pharma GmbH, Biofrontera Development GmbH, Biofrontera Neuroscience GmbH, all with head office at Hemmelrather Weg 201, 51377 Leverkusen, Germany, and Biofrontera AG, based in Wakefield, Massachusetts, U.S. and with its registered office in Wilmington, Delaware, U.S., research, develop and market dermatological products. Biofrontera AG is an international biopharmaceutical company specializing in the development and commercialization of a platform of pharmaceutical products for the treatment of dermatological conditions and diseases caused primarily by exposure to sunlight that results in sun damage to the skin. Its approved products focus on the treatment of actinic keratoses, which are skin lesions that can sometimes lead to skin cancer, in the U.S. and Europe, as well as the treatment of basal cell carcinoma in the EU. Biofrontera Inc. (hereinafter also the “company” or “Biofrontera”) pursues this goal along with its subsidiaries. All the companies together form the “Biofrontera Group”.

The Biofrontera Group currently sells Ameluz ^® in the U.S., in 11 countries in Europe and in Israel.

In July 2016, the company agreed a research partnership with Maruho Co., Ltd. (“Maruho”), a Japanese company specializing in dermatology, in which possibilities to jointly develop pharmaceutical products for the European market based on Biofrontera's proprietary nanoemulsion technology are to be researched. This corresponds to the same strategy with which Ameluz ^® was also developed. The nanoemulsion technology stabilized the active substance and improved skin penetration, leading to greater clinical efficacy. This principle is also to be applied to other substances as part of the partnership with Maruho. According to the agreement, Maruho will bear all costs connected with the exploratory research for four new product candidates (subject to a cap of €2.3 million). It is planned that Maruho will be the owner of the results, but that all new inventions are to belong to both companies jointly. As part of the agreement, Biofrontera does not issue to Maruho any license for the utilisation of the nanoemulsion or other existing intellectual property. The license to market the new products in Europe shall be allocated to Biofrontera. The agreement does not cover other markets.

F- 44

Biofrontera AG

Notes to the Condensed Consolidated Financial Statements

As of and for the six months ending June 30, 2017

At present, the Biofrontera Group is not actively pursuing the BF-derm1 project or the BF-1 project.

Accounting policies

Pursuant to the regulations of Section 37y of the German Securities Trading Act (WpHG), in combination with Section 37w WpHG, this half-year financial report as of June 30, 2017 comprises condensed interim consolidated financial statements, an interim Group management report and a responsibility statement pursuant to the regulations of Section 297 (2) Clause 4, Section 315 (1) Clause 6 of the German Commercial Code (HGB).

The condensed interim consolidated financial statements of Biofrontera AG were prepared in accordance with the International Financial Reporting Standards (IFRS) of the International Accounting Standards Board (IASB) as well as the interpretations of the International Financial Reporting Standards Interpretations Committee (IFRS IC) for “Interim Financial Reporting” in accordance with IAS 34. As a consequence, they do not include all information and disclosures required for consolidated financial statements, and for this reason should be read in connection with the consolidated financial statements for the financial year ending 31 December 2016.

As part of preparing the interim consolidated financial statements, the Management Board must make assumptions that affect the application of accounting policies within the Group, and the reporting of assets and liabilities as well as income and expenses. Actual amounts can differ from such estimates. The results achieved during the first half of the 2017 financial year do not allow any predictions to be made about trends during the further course of business.

The accounting policies applied to prepare the consolidated financial statements as of 31 December 2016 continued to be applied on an unmodified basis for the preparation of the condensed interim consolidated financial statements. In this connection, please also refer to the notes to the consolidated financial statements as of 31 December 2016.

This half-year financial report of Biofrontera AG was approved for publication by a Management Board resolution on October 4, 2017.

Rounding differences can arise in the tables due to commercial rounding.

F- 45

Biofrontera AG

Notes to the Condensed Consolidated Financial Statements

As of and for the six months ending June 30, 2017

Convertible bond 2017/2022

The company's Management Board passed a resolution to issue a further convertible bond on 23 December 2016. This EUR 5.0 million bond was fully placed in January 2017. The initial conversion price for the bond amounts to EUR 3.50, to EUR 4.00 from 1 April 2017 and to EUR 5.00 from 1 January 2018. The bonds carry 6 % annual interest on their par value from 1 February 2017. The bond will be redeemed in cash on 1 January 2022 unless it is converted previously. The conversion right was recorded upon issuance as the difference between the contract value and the fair value of the financial liability in the amount of €296,000 in accordance with IAS 32 and is included in the condensed statement of changes in equity in the “conversion from convertible bond 2017/2022” line item. As of 30 June 2017, bonds with a nominal amount of EUR 2.3 million had been converted into the company's shares.

Loan agreement with the European Investment Bank

In May 2017, a loan agreement for up to EUR 20.0 million was arranged with the European Investment Bank (EIB). The loan is unsecured and guaranteed by our main subsidiaries. It is available in tranches over a two-year period. In July 2017, the company drew down a first tranche of EUR 10.0 million. Two further tranches of EUR 5.0 million each can be drawn down after certain milestones have been achieved. Each tranche must be repaid five years after it was made available. The loan incurs interest in three components, whereby some of the interest payments must be paid in cash quarterly, some of the interest payments are initially deferred and are to be paid at the end of the term, and a further portion of the interest payments are also to be paid at the end of the term depending on the company's market capitalisation.

Employee stock option program 2015

After the end of the 2010 employee share option program, the company's Annual General Meeting on 28 August 2015 authorized the Management and Supervisory boards until 27 August 2020 to issue to Management Board members and employees up to 1,814,984 subscription rights to up to EUR 1,814,984 million of the company's ordinary registered shares according to the more detailed specifics of the authorization resolutions.

On April 18, 2016, a total of 425,000 options were issued for the first time from the potential 1,814,914 share options (exercise price: EUR 2.49 per option). On 1 December 2016, a further 130,500 options (second tranche) were issued with an exercise price of EUR 3.28 each. On April 28, 2017, a further 329,000 options (third tranche) were issued at an exercise price of EUR 4.02 each. A total of 38,500 options were forfeited by employees leaving the company during the six months ended June 30, 2017. Due to the vesting period, no options have yet been exercised or forfeited. As a consequence, 891,983 options are still outstanding on June 30, 2017. The cost expensed in the reporting period amounted to EUR 56 thousand (prior-year period: EUR 16 thousand).

Shares/Earnings per share

Earnings per share are calculated by dividing net consolidated income by the weighted average number of outstanding shares during the year in accordance with IAS 33 (“Earnings per Share”).

	June 30, 2017			June 30, 2016
Number of weighted ordinary shares in circulation (on average)		37,730,066			29,194,771
Net loss for the year in € thousands		(8,737	)		(3,472	)
Earnings per share in EUR based on the net loss for the year		(0.23	)		(0.12	)

Reporting on financial instruments

In the course of its operating activities, the Group is exposed to market price and credit risk, as well as liquidity risk, which could have an effect on its financial position and performance.

F- 46

Biofrontera AG

Notes to the Condensed Consolidated Financial Statements

As of and for the six months ending June 30, 2017

Market price risk : Interest-rate risk is deemed minor as existing interest-rate modalities for the Biofrontera Group's relevant financing facilities can generally be adapted to market conditions short-term to medium-term. Due to the fixing of interest, no disadvantageous changes can occur to the interest payments. As the liabilities are not recognized at fair value but instead at amortized cost, there is also no fair value risk.

Credit risk : A credit risk arises for the Group if transaction partners cannot meet their obligations within the normal payment deadlines. On the balance sheet, the maximum non-payment risk is represented by the carrying amount of the relevant financial asset. The situation regarding receivables is monitored so that any possible non-payment risks can be identified at an early stage and appropriate steps taken. In the first half of 2017, no individual value adjustments were made to other financial assets (prior-year period: EUR 0); in addition, no individual value adjustments were applied to trade receivables in the first half of 2017 (prior-year period: EUR 0).

Based on the input factors used at the valuation methods fair values are divided into different steps of the fair value hierarchy:

Level 1 : Fair value valuations using prices listed on active markets (not adjusted) for identical assets or liabilities.

Level 2 : Fair value valuations using inputs for the asset or liability that are either directly observable (as prices) or indirectly observable (derived from prices), but which do not constitute listed prices pursuant to Level 1.

Level 3 : Fair value valuations using inputs for the asset or liability that are not based on observable market data (unobservable input data).

Biofrontera only has financial instruments at levels 1 and 2. During the first half of 2017, no reclassifications between the individual levels of the fair value hierarchy were implemented. With regard to financial liabilities, the full amount of non-current and current financial liabilities (EUR 6.3 million; 31 December 2016: EUR 3.9 million) are classified as level 1, except for the residual value of warrant bond 2016 (EUR 81 thousand). This involves financial debt arising from warrant and convertible bonds.

F- 47

Biofrontera AG

Notes to the Condensed Consolidated Financial Statements

As of and for the six months ending June 30, 2017

The financial assets and liabilities can be subdivided into measurement categories with the following carrying amounts, and net gains and losses:

			Carrying amounts
Financial assets on 30.06.2017 € thousands	Fair value		Loans and receivables		Financial instruments recognized at fair value in profit or loss (excluding “held-for- trading”)		Financial assets available- for-sale		TOTAL CARRYING AMOUNTS
Financial assets
Liquid assets		11,452		11,452						11,452
Trade receivables		1,202		1,202						1,202
Other current financial receivables and assets		1,136		1,136						1,136
TOTAL		13,790		13,790		—		—		13,790

F- 48

Biofrontera AG

Notes to the Condensed Consolidated Financial Statements

As of and for the six months ending June 30, 2017

			Carrying amounts
Financial liabilities on 30.06.2017 € thousands	Fair value		Other liabilities		Financial instruments recognized at fair value in profit or loss (excluding “held- for- trading”)		TOTAL CARRYING AMOUNTS
Financial liabilities current		3,593		3,665				3,665
Trade payables		448		448				448
Other financial liabilities current		48		48				48
Other financial liabilities non-current		2,928		2,654				2,654
TOTAL		7,017		6,815		—		6,815

F- 49

Biofrontera AG

Notes to the Condensed Consolidated Financial Statements

As of and for the six months ending June 30, 2017

			Carrying amounts
Financial assets on 31.12.2016 € thousands	Fair value		Loans and receivables		Financial instruments recognized at fair value in profit or loss (excluding “held-for- trading”)		Financial assets available- for-sale		TOTAL CARRYING AMOUNTS
Financial assets
Liquid assets		15,126		15,126						15,126
Trade accounts receivable		1,624		1,624						1,624
Miscellaneous current financial receivables and assets		1,377		1,377						1,377
TOTAL		18,127		18,127		—		—		18,127

			Carrying amounts
Financial liabilities on 31.12.2016 € thousands	Fair value		Other liabilities		Financial instruments recognized at fair value in profit or loss (excluding “held- for- trading”)		TOTAL CARRYING AMOUNTS
Financial liabilities current		274		274				274
Trade accounts payable		2,093		2,093				2,093
Other financial liabilities current		59		59				59
Other financial liabilities non-current		3,660		3,597				3,597
TOTAL		6,086		6,023		—		6,023

Members of the Supervisory Board

F- 50

Biofrontera AG

Notes to the Condensed Consolidated Financial Statements

As of and for the six months ending June 30, 2017

One change relating to the following Supervisory Board member occurred during the first half of 2017:

Hansjörg Plaggemars is a Supervisory Board member of Biofrontera AG and to date has been employed as a member of the Management Board of Deutsche Balaton Aktiengesellschaft, Heidelberg, resident in Stuttgart, and is now a member of the Management Board of Delphi Unternehmensberatung AG, Heidelberg, resident in Stuttgart.

Related party disclosures

In July 2016, Biofrontera AG entered into a collaboration and partnership agreement with Maruho Co., Ltd., a pharmaceutical company based in Japan specializing in dermatology that is also an affiliate of Maruho Deutschland GmbH, a major shareholder of Biofrontera AG. This agreement provides for the joint development of up to four branded generic pharmaceutical product candidates for the European market using Biofrontera AG’s proprietary formulation technology. The current agreement covers the initial part of the collaboration, in which the feasibility of the product development is tested, which Biofrontera AG expects to be completed by the end of 2017. Under this agreement, Maruho will bear all costs connected with the development of these pharmaceutical product candidates (subject to a cap of €2.3 million).

This development partnership generated revenue of EUR 785 thousand in the first half of 2017 (prior-year period: EUR 0 thousand). Receivables due from Maruho amounted to EUR 0.2 million as of June 30, 2017 (31 December 2016: EUR 0.5 million).

During the reporting period, the company availed itself of additional advisory services from Supervisory Board member Dr. Ulrich Granzer. Dr. Granzer assisted the company with key issues relating to the preparation of the applications for approval submitted to the supervisory authorities in Europe and the U.S. During the first half of 2017, advisory services amounting to EUR 33 thousand (previous-year period: EUR 2 thousand) were provided by Granzer Regulatory Consulting & Services. Accounts payable to Granzer Regulatory Consulting & Services amounted to EUR 0 thousand on June 30, 2017 (December 31, 2016: EUR 7 thousand). The amounts stated here do not include statutory VAT at the current rate of 19 %. The underlying consultancy contract was approved in consideration of the statutory provisions.

F- 51

Biofrontera AG

Notes to the Condensed Consolidated Financial Statements

As of and for the six months ending June 30, 2017

In the first half of 2017, no further significant reportable transactions or relationships with related parties existed beyond the aforementioned facts and circumstances.

Significant events after the interim reporting date

Management evaluated events after the interim reporting date of June 30, 2017 through October 4, 2017 and noted the following events that occurred during that period:

In July 2017, the Cologne District Court served a lawsuit on the company dated 23 June 2017 and brought by Deutsche Balaton AG for the rescission and nullity of two resolutions passed at the AGM on 24 May 2017.

In August 2017, the company received the written opinion of the American drugs regulator, the FDA, on the terms for the approval of Ameluz ^{^®} for basal cell carcinoma in the U.S., on which the company had reached agreement with the FDA at a formal meeting in July. According to the agreed development plan, the approval expansion for superficial basal cell carcinoma can be applied for based on a single supplementary Phase III trial conducted in the U.S., comparing Ameluz ^{^®} with a placebo. The FDA expects from Biofrontera a combined evaluation of the clinical and histological healing rates. The clinical investigation of patients with different ethnic backgrounds or children is not required. As far as safety information and long-term data are concerned, the FDA has accepted the existing European trial for review.

In July 2017, a first tranche of EUR 10.0 million from the loan from the European Investment Bank was drawn down.

In July 2017 a further patent for the development project BF-1 was granted by the United States Patent and Trademark Office.

Following a resolution by our supervisory board on 19 July 2017 the service contract with Christoph Dünwald and his appointment to the management board have been extended until 30 November 2020.

The 2009/2017 bond with warrants with stepped interest rates and with final maturity on 31 December 2017 was fully repaid early on 3 August 2017 with a total payment of €5.5 million including principal amount and accumulated interest.

On 2 August 2017, the company announced the market launch of Ameluz ^{^®} and BF-RhodoLED ^{^®} in Israel by its partner Perrigo Israel Ltd.

Marketing activities in Slovenia were discontinued as of 31 August 2017 due to low market volume.

Management evaluated events after October 4, 2017 through January 12, 2018 and noted the following events that occurred during that period;

On 13 September 2017, we terminated our license and supply agreement with BiPharma B.V., effective as of 31 October 2017.

In a ruling dated December 1, 2017, the Court of Cologne dismissed the lawsuit filed by Deutsche Balaton AG in June 2017.

On December 21, 2017 Deutsche Balaton AG appealed this ruling.

No further events subject to mandatory reporting occurred after the interim balance sheet date.

F- 52

PART II — INFORMATION NOT REQUIRED IN PROSPECTUS

Item 6. Indemnification of Board Members and Officers.

Under German law, we may not, as a general matter, indemnify members of our supervisory board and management board. Certain limited exceptions may apply if the indemnification is in the legitimate interest of our company. We will indemnify our supervisory board and management board members, to the extent permissible under German law, from and against any liabilities arising out of or in connection with their services.

We have provided directors’ and officers’ liability insurance for the members of our supervisory and management boards against civil liabilities, which they may incur in connection with their activities on behalf of our company. We intend to expand their insurance coverage against such liabilities, including by providing for coverage against liabilities under the Securities Act.

In the underwriting agreement, the form of which is filed as Exhibit 1.1 to this Registration Statement, the underwriters will agree to indemnify, under certain conditions, us, the members of our management board and persons who control our company within the meaning of the Securities Act, against certain liabilities, but only to the extent that such liabilities are caused by information relating to the underwriters furnished to us in writing expressly for use in this Registration Statement and certain other disclosure documents.

Item 7. Recent Sales of Unregistered Securities.

Set forth below are the sales of all securities by the Company in the past three years. We believe that each of such issuances was exempt from registration under the Securities Act in reliance on Section 4(2) of the Securities Act and/or Regulation S under the Securities Act. We did not employ an underwriter in connection with the issuance of the securities described below.

The descriptions of share issuances contained in the section entitled “Description of Share Capital—Changes in Our Share Capital During the Last Three Fiscal Years” and descriptions of convertible bond issuances contained in the section entitled “Management’s Discussion and Analysis – Description of Principal Financial Documents”, in each case contained in the Prospectus forming part of this Registration Statement are incorporated herein by reference.

Item 8. Exhibits and Financial Statement Schedules.

Exhibit Number		Description of Exhibit
1.1*		Form of Underwriting Agreement
3.1 **		Articles of Association of Biofrontera AG
3.2**		Rules of Procedure of the Supervisory Board of Biofrontera AG
3.3**		Rules of Procedure of the Management Board of Biofrontera AG
4.1*		Form of specimen of ordinary registered share certificate and English translation thereof
4.2*		Form of Deposit Agreement
4.3*		Form of American Depositary Receipt (included in Exhibit 4.2)
5.1*		Opinion of LLR Legerlotz Laschet und Partner Rechtsanwälte Partnerschaft mbB, Köln, Germany
8.1*		Opinion of VRT Revisionsgesellschaft mbH, Bonn, Germany as to German tax matters
10.1**		License and Manufacturing Agreement dated as of October 4, 2017 between Biofrontera Pharma GmbH and Frike Group†
10.2**		Manufacturing and Supply Agreement dated as of June 1, 2015, between Biofrontera Pharma GmbH and Hapila GmbH†
10.3**		Supply Agreement dated as of January 1, 2017, between Biofrontera Pharma GmbH and Midas Pharma GmbH†
10.4**		Finance Contract dated May 19, 2017 between the European Investment Bank and Biofrontera AG
10.5 **		Terms and Conditions of Convertible Bond I
10.6 **		Terms and Conditions of Convertible Bond II
10.7 **		Leverkusen Lease (English translation)
10.8 **		Wakefield Lease
10.9 **		2010 Employee Stock Option Plan
10.10 **		2015 Employee Stock Option Plan
10.11*		Employment Agreement – Hermann Lübbert (English Translation)
10.12*		Employment Agreement – Thomas Schaffer (English Translation)
10.13*		Employment Agreement – Christoph Dünwald (English Translation)
10.14*		Form of Share Loan Agreement
21.1 **		List of Subsidiaries
23.1**		Consent Warth & Klein Grant Thornton AG Wirtschaftsprüfungsgesellschaft, independent registered public accounting firm
23.2*		Consent of VRT Revisionsgesellschaft mbH, Bonn, Germany (included in Exhibit 8.1)
24.1**		Powers of Attorney (included on signature page)

* To be filed by amendment.

† Confidential treatment has been requested with respect to certain portions of this exhibit. Omitted portions have been submitted separately to the Securities and Exchange Commission.

** Filed herewith.

II- 1

(b) Financial Statement Schedules . Schedules not listed above have been omitted because the information required to be set forth therein is not applicable or is shown in the financial statements or notes thereto.

Item 9. Undertakings.

The undersigned registrant hereby undertakes to provide to the underwriters, at the closing specified in the underwriting agreement, certificates in such denominations and registered in such names as required by the underwriters to permit prompt delivery to each purchaser.

Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the U.S. Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.

The undersigned hereby undertakes that:

For purposes of determining any liability under the Securities Act of 1933, the information omitted from the form of prospectus filed as a part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective; and

For the purpose of determining any liability under the Securities Act of 1933, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and this offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

II- 2

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form F-1 and has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in Leverkusen, Germany, on January 12, 2018.

	BIOFRONTERA AG

	By:	/s/ Hermann Lübbert
	Name:	Hermann Lübbert
	Title:	Chief Executive Officer

	By:	/s/ Thomas Schaffer
	Name:	Thomas Schaffer
	Title:	Chief Executive Officer

POWER OF ATTORNEY

We, the undersigned members of the supervisory board and the management board of the Registrant, hereby severally constitute and appoint Thomas Schaffer, his true and lawful attorney-in-fact and agent, with full power of substitution and re-substitution for him and in his name, place and stead, in any and all capacities, to sign any and all amendments (including post-effective amendments) to this Registration Statement, and any subsequent registration statements pursuant to Rule 462 of the United States Securities Act of 1933 and to file the same, with all exhibits thereto, and other documents in connection therewith, with the U.S. Securities and Exchange Commission, granting unto said attorney-in-fact and agent full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorney-in-fact or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities held on the dates indicated.

Signature	Title	Date

/s/ Hermann Lübbert	Chief Executive Officer and Chairman of
Hermann Lübbert	management board (Principal executive officer)	January 12, 2018

	Chief Financial Officer and
/s/ Thomas Schaffer	member of management board
Thomas Schaffer	(Principal financial and accounting officer)	January 12, 2018

/s/ Ulrich Granzer	Chairman of supervisory board	January 12, 2018
Ulrich Granzer

/s/ Jürgen Baumann	Vice chairman of supervisory board	January 12, 2018
Jürgen Baumann

/s/ John Borer	Member of supervisory board	January 12, 2018
John Borer

/s/ Hansjörg Plaggemars	Member of supervisory board	January 12, 2018
Hansjörg Plaggemars

/s/ Kevin Weber	Member of supervisory board	January 12, 2018
Kevin Weber

II- 3

SIGNATURE OF AUTHORIZED REPRESENTATIVE IN THE UNITED STATES

Pursuant to the requirements of the United States Securities Act of 1933, as amended, the undersigned, the registrant’s duly authorized representative in the U.S., has signed this Registration Statement on this 12 ^th day of January, 2018.

	BIOFRONTERA Inc.

	By:	/s/ Hermann Lübbert
	Name:	Hermann Lübbert
	Title:	President & Chief Executive Officer

	By:	/s/ Thomas Schaffer
	Name:	Thomas Schaffer
	Title:	Chief Financial Officer

II- 4

Exhibit 3.1

Certificate

Pursuant to § 181 Para. 1 Sentence 2 of the German Stock Corporation Act (AktG)

I hereby certify that the wording presented below of the Articles of Association of

Biofrontera AG

with its Head Office in Leverkusen

contains the provisions of the Articles of Association amended by resolution of the Shareholder Meeting of 24 May 2017, and that the provisions of the Articles of Association not amended by resolution of the Shareholder Meeting of 24 May 2017 match the complete wording of these provisions of the Articles of Association most recently submitted to the Commercial Register.

By viewing the Register files, I have satisfactorily ascertained the complete wording of the Articles of Association most recently submitted to the Commercial Register.

Leverkusen, 18 July 2017

		Dr Thilo Weimer

		Notary

ARTICLES OF ASSOCIATION

Biofrontera AG

General Provisions

§ 1

Company Name

The Company’s name is:

Biofrontera AG

§ 2

Head Office

The Company’s Head Office is located in Leverkusen.

§ 3

Purpose of the Company

(1)

The Company’s purpose is to research, develop and sell pharmaceuticals, and to assume the status of a holding company, i.e. to acquire and manage companies or stakes in companies.

(2)

The Company can perform all transactions suitable for promoting the Company’s purpose, either directly or indirectly.

(3)

The Company can establish branches and hold stakes in companies of the same or a similar kind, both domestically and abroad. It can unite companies in which it holds stakes under its single management, or it can restrict itself to managing its own stakes. It can outsource or transfer some or all of its operations to associated companies.

§ 4

Financial Year

The financial year is the calendar year.

§ 5

Duration of the Company

The company is established for an indefinite period.

§ 6

Announcements and Information

(1)

The Company’s announcements are published in the German Electronic Federal Gazette, unless otherwise required by law .

(2)

Information can also be sent electronically to the holders of approved Company securities. In this context, approved securities are those that are approved domestically for trading on an organised market, within the meaning of § 2 Para. 5 of the German Securities Trading Act.

II.

Share Capital and Shares

§ 7

Share Capital

(1)

The Company’s share capital amounts to EUR 38,416,428.00 (in words: thirty-eight million four hundred and sixteen thousand four hundred and twenty-eight euros) and is divided into 38,416,428 individual shares (share capital).

(2)

The share capital is conditionally increased by up to EUR 4,137,601.00, through the issue of 4,137,601 new registered no-par-value ordinary shares (individual shares) (Conditional Capital I). The conditional capital increase serves (i) to ensure that, in accordance with the bond conditions, option rights are granted and option obligations are agreed and/or (ii) to ensure that, in accordance with the bond conditions, conversion rights and obligations are fulfilled, where these are in each case issued, agreed or guaranteed by the Company or via its direct or indirect majority holdings (associated companies) on the basis of the authorisation of the General Meeting of Shareholders of 28th August 2015, in the period up to 27th August 2020.

The conditional capital increase must be implemented only in the event of the issue of financial instruments on the basis of the authorisation of the General Meeting of Shareholders of 28 ^th August 2015 and only if the holders and/or creditors of the financial instruments issued by the Company make use of their option or conversion rights or fulfil their option or conversion obligations. The new shares entitle their holders to dividends of Company profits from the beginning of the financial year in which they are issued.

The Management Board is authorised, subject to the approval of the Supervisory Board, to make further stipulations regarding the implementation of the conditional capital increase. The Supervisory Board is authorised to amend § 7 of the Articles of Association according to each use of conditional capital and after all option or conversion periods have expired.

(3)

The Management Board is authorised, up until 23rd May 2022, subject to the approval of the Supervisory Board, to increase the share capital of the Company by up to EUR 6,000,000.00, by issuing up to 6,000,000 no-par-value registered shares, in one or several issues, in exchangefor cash contributions (Authorised Capital I). The Management Board is authorised, subject to the approval of the Supervisory Board, to specify further details of share rights and set the conditions for issuing shares. The new shares must be offered for purchase to theshareholders. Shareholders can also be granted purchase rights indirectly, pursuant to § 186 Para. 5 AktG (German Stock Corporation Act). However, the Management Board is authorised, subject to the approval of the Supervisory Board, to exclude the shareholders’ purchaserights in case of fractional amounts. The Supervisory Board is authorised to amend the wording of § 7 of the Articles of Association after the complete or partial use of Authorised Capital I, and – if Authorised Capital I has not been used, or not used in full, by 23rd May 2022– after the term of authorisation has expired.

(4)

In the event of a capital increase, the way in which the profit dividends of the new shares are regulated may deviate from § 60 of the German Stock Corporation Act.

(5)

The share capital is conditionally increased by up to EUR 500,000.00, through the issue of up to 500,000 new ordinary registered shares (individual shares), which constitute a proportion of the share capital of EUR 1.00 each (Conditional Capital II).

The conditional capital increase serves to redeem option rights, according to the option terms, to the benefit of the holders of share options from option bonds issued pursuant to the authorisation resolution passed by the General Meeting of Shareholders of 17th March 2009. The new shares are issued at the option price to be set in accordance with the above-mentioned authorisation resolutions (issue price in the sense of § 193 Para. 2 No. 3 AktG (German Stock Corporation Act).

The conditional capital increase must be carried out only in the event of the issue of option bonds, and only if the holders of options exercise their option rights, and if the Company does not draw the necessary shares [from] other sources or replace them with cash payments. The new shares issued on the basis of the exercise of option rights entitle their holders to dividends from Company profits from the beginning of the financial year in which they are issued.

The Management Board is authorised, subject to the approval of the Supervisory Board, to make further stipulations regarding the implementation of the conditional capital increase.

(6)

The Company’s share capital is conditionally increased by EUR 542,400, through the issue of up to 542,400 no-par-value registered shares (individual shares) (Conditional Capital III). The conditional capital increase serves exclusively to fulfil options granted until 1 ^st July 2015 pursuant to the authorisation by resolution of the General Meeting of Shareholders of 2 ^nd July 2010. The conditional capital increase will be implemented only if the holders of the options issued exercise their right to purchase shares in the Company, and if the Company does not grant its own shares or pay a cash settlement in order to fulfil the options. The new shares entitle their holders to dividends from Company profits from the beginning of the financial year in which they are created as a result of the exercise of options.

(7)

[cancelled]

(8)

The Company’s share capital is conditionally increased by [up to] EUR 1,814,984.00, through the issue of up to 1,814,984 no-par-value registered shares (individual shares) (Conditional Capital V). The conditional capital increase serves exclusively to fulfil option rights granted until 27 ^th August 2020 on the basis of the authorisation of the General Meeting of Shareholders of 28 ^th August 2015. The conditional capital increase will be implemented only if the holders of the options issued exercise their right to purchase shares in the Company, and if the Company does not grant its own shares or pay a cash settlement in order to fulfil the options. The new shares entitle their holders to dividends from Company profits from the beginning of the financial year in which they are created as a result of the exercise of options. The Supervisory Board is authorised to amend § 7 of the Articles of Association according to each use of the conditional capital and after all option or conversion periods have expired.

§ 8

Shares

(1)

The shares are registered shares.

(2)

Any right for shareholders to securitise their stakes or individual shares is excluded. The form and content of the share certificates is specified by the Management Board, subject to the approval of the Supervisory Board. The Company can securitise multiple individual shares in the same share certificates (global shares, global certificates). The same applies to dividend warrants and renewal certificates, as well as bonds, interest coupons and renewal certificates .

(3)

If a capital increase resolution does not contain any provision as to whether or not the new shares are bearer shares or registered shares, they are registered shares.

III.

Management Board

§ 9

Composition of the Management Board, and General Management

(1)

The Management Board consists of one or several individuals. The number of members of the Management Board is determined by the Supervisory Board.

(2)

The members of the Management Board are appointed and dismissed by the Supervisory Board. The Supervisory Board can appoint a member of the Management Board as the Chairperson or Speaker of the Management Board and another member as the Deputy Chairperson.

(3)

The Management Board establishes its own Rules of Procedure, unless the Supervisory Board issues Rules of Procedure for the Management Board.

§ 10

Representation

If several members of the Management Board are appointed, the Company can be represented jointly by two members of the Management Board, or by one member of the Management Board in conjunction with a proxy. If only one member of the Management Board is appointed, s/he represents the Company alone. The Supervisory Board can authorise one, several or all members of the Management Board to represent the Company alone. The Supervisory Board can exempt members of the Management Board, either generally or in individual cases, from the prohibition on multiple representation pursuant to § 181 2nd Alt. BGB (Second Alternative German Civil Code); § 112 AktG (German Stock Corporation Act) is not affected.

§ 11

General Management

The Management Board carries out the Company’s business in accordance with the law, the Articles of Association and the Rules of Procedure.

IV.

Supervisory Board

§ 12

Composition and Term of Office of the Supervisory Board

(1)

The Supervisory Board consists of six members.

(2)

The members of the Supervisory Board are elected by the General Meeting of Shareholders. The members of the Supervisory Board are elected for a term lasting until the end of the General Meeting of Shareholders which resolves on whether or not to discharge them for the fourth financial year after the beginning of their term of office, provided that the General Meeting of Shareholders does not stipulate a shorter term of office at the time of the election. The financial year in which their term of office begins is not included. It is permissible for members to be re-elected several times.

(3)

At the same time as electing members of the Supervisory Board, the General Meeting of Shareholders can also elect substitute members who will become members of the Supervisory Board – in a way to be determined at the time of the election – in the event that existing members of the Supervisory Board leave their posts before the end of their term of office.

(4)

If a member elected by the General Meeting of Shareholders quits the Supervisory Board before the end of his/her term of office, a new election must be held for the vacant post at the next General Meeting of Shareholders, unless a substitute member has already been promoted to this post. The term of office of the newly-elected member or the promoted substitute member is the same as the remaining term of office of the departed member of the Supervisory Board.

§ 13

Resignation/Dismissal from the Supervisory Board

Each member of the Supervisory Board can resign from his/her post by addressing a written notification to this effect to the Management Board, subject to one month’s notice to the end of the month. The right to resign from his/her post for good cause is not affected. The dismissal of a member of the Supervisory Board elected by the shareholders must have the approval of a majority of at least three quarters of votes cast.

§ 14

Chairperson and Rules of Procedure of the Supervisory Board

(1)

From among its members, the Supervisory Board elects a Chairperson and a Deputy Chairperson. The election follows each General Meeting of Shareholders in which members of the Supervisory Board to be elected by the General Meeting of Shareholders have been elected by the shareholders , in a meeting that is held without being specially convened. A member requires only a simple majority in order to be elected. In the event of a tie, the outcome is decided by the drawing of lots.

(2)

If the Chairperson or Deputy Chairperson of the Supervisory Board quits his/her post before the end of his/her term of office, the Supervisory Board will elect a successor at its next meeting. If the Chairperson of the Supervisory Board quits prematurely, the Deputy Chairperson will convene the Supervisory Board.

(3)

The Supervisory Board establishes its own Rules of Procedure.

§ 15

Convening the Supervisory Board

(1)

The Supervisory Board must hold two meetings each calendar year. It also holds additional meetings if required by law or advisable on commercial grounds.

(2)

The meetings of the Supervisory Board are convened in writing with at least 14 days’ notice by the Chairperson or, if s/he is prevented from doing so, by his/her Deputy. The date on which the invitation is sent and that of the meeting itself are not included in the notice period. In an emergency, the notice period can be reduced as appropriate, and the meeting can be convened verbally or by telephone. The meetings of the Supervisory Board take place at the Company’s Head Office or at another location agreed by all the members of the Supervisory Board. The items on the agenda must be included with the invitation.

§ 16

Resolutions of the Supervisory Board

(1)

Resolutions of the Supervisory Board are generally passed in meetings. They can also be passed without convening a meeting, and votes can also be cast verbally, in writing, by telephone, by fax, electronically or by video conference, if the Chairperson of the Supervisory Board prescribes this procedure, and fewer than three members of the Supervisory Board immediately object to it.

(2)

Resolutions of the Supervisory Board require a majority of votes cast, unless otherwise required by law. In the event of a tie, there will be a second vote on the same proposed resolution, and if this second vote results in a tie, the Chairperson will have two votes.

(3)

Minutes must be kept of the resolutions of the Supervisory Board. The minutes must be signed by the Chairperson of the Supervisory Board. The minutes must include the place and date of the meeting, its participants, the items on the agenda, the resolutions of the Supervisory Board (including the Chairperson’s statement concerning the result of the resolution) and the significant contents of the negotiations. The minutes must be forwarded immediately to all members of the Supervisory Board.

(4)

Declarations of intent by the Supervisory Board are issued by the Chairperson in the name of the Supervisory Board. The Chairperson, but not every member, is authorised to accept declarations for the Supervisory Board.

(5)

The Supervisory Board is able to pass resolutions provided that at least three members of the Supervisory Board participate in passing the resolution. A member is deemed to have participated in passing the resolution even if s/he abstains from voting. Absent members of the Supervisory Board can also participate in passing the resolution if they arrange for other members of the Supervisory Board to submit written votes on their behalf.

(6)

The Supervisory Board can resolve to make amendments to the Articles of Association that affect only the wording.

§ 17

Committees of the Supervisory Board

The Supervisory Board can invite experts and other providers of information to its meetings. It can transfer individual responsibilities within its remit to committees or individuals from among its members, provided that this does not contravene any legal provisions.

§ 18

Remuneration of the Supervisory Board

(1)

In addition to reimbursement of expenses, each member of the Supervisory Board receives a fixed annual salary component of € 15,000.00 (fixed salary component). If the consolidated result per share in the financial year for which the fixed salary pursuant to Sentence 1 is paid (salary year), and in the salary year of the previous financial year, improves by 25% or more compared with each respective previous financial year, each member of the Supervisory Board will be awarded annual performance-related pay of € 10,000.00 over and above the fixed salary component for the salary year (performance-related pay). If the consolidated result per share improves by 50% or more, the annual performance-related pay will amount to € 20,000.00. The basis for calculating whether or not the required improvement is achieved in the relevant successive financial years (period under consideration) is the consolidated result per share in the financial year 2006 and in subsequent years; for example, if the required improvement in terms of consolidated result per share is achieved in 2007 compared with 2006, and subsequently in 2008 compared with 2007, the performance-related pay for the financial year 2008 will have been earned.

(2)

The Chairperson receives twice, and his/her Deputy receives one-and-a-half times, the remuneration to be paid pursuant to Paragraph 1.

(3)

Members of the Supervisory Board who have been part of the Supervisory Board only for part of the financial year will receive proportionately reduced remuneration for the time during which they have been members. If a member of the Supervisory Board quits his/her post before the end of a salary year for which performance-related pay is paid pursuant to Paragraph 1 Sentences 2-4, s/he will receive proportionate remuneration for the time during which s/he was still a member, provided that s/he was a member of the Supervisory Board in the period under consideration on which the pay calculation is based; this applies correspondingly if a member of the Supervisory Board is part of the latter in a salary year for which performance-related pay is paid pursuant to Paragraph 1 Sentence 2, but was not a member of the Supervisory Board for the whole duration of the period under consideration.

(4)

The Company reimburses members of the Supervisory Board for expenses incurred by the latter while exercising their duties, including any sales tax (VAT) on their remuneration and reimbursement for expenses.

(5)

The Company can take out an indemnity insurance policy, to the benefit of the members of the Supervisory Board, which covers statutory liability arising from the activities of the Supervisory Board.

(6)

One quarter of the fixed remuneration of the members of the Supervisory Board for a given financial year, to be calculated pursuant to Paragraphs 1 to 3 above, is due after the end of each quarter of the calendar year.

General Meeting of Shareholders

§ 19

Venue of the General Meeting of Shareholders

The General Meeting of Shareholders takes place at the Company’s Head Office, a German town or city with more than 100,000 inhabitants, or a German stock exchange.

§ 20

Convening the General Meeting of Shareholders, and Participation Entitlement

(1)

The General Meeting of Shareholders is convened by the Management Board, provided that no other persons are authorised to do so by law. Unless the law permits a shorter notice period, the General Meeting of Shareholders must be convened at least 30 days before it is to be held. The date of the convocation and the date of the General Meeting of Shareholders are not included in the notice period. The notice period for convening the General Meeting of Shareholders is extended by the number of days in the registration period (§ 20 Paragraph 2).

(2)

The only shareholders entitled to participate in the General Meeting of Shareholders and exercise their voting rights are those recorded in the Share Register who registered in good time. The registration must reach the Company, at the address designated for this purpose in the convocation, at least six days before the Meeting; but, in derogation from this, the convocation may stipulate a shorter period, to be measured in days, of up to three days (registration period). The date of receipt and the date of the General Meeting of Shareholders are not included. The Management Board may make stipulations regarding the form of registration in the convocation – in particular, as to whether registration must be submitted in writing, by fax, in text form or in an (electronic) way to be specified by the Company.

(3)

The General Meeting of Shareholders, which must decide whether or not to discharge the Management Board and the Supervisory Board, decide upon the appropriation of earnings, and – if necessary – decide whether or not to approve the annual financial statements, takes place within the first eight months of each financial year.

§ 21

Procedure of the General Meeting of Shareholders

(1)

The Chairperson of the Supervisory Board, his/her Deputy (if s/he is prevented from doing so), or another member appointed by the Supervisory Board chairs the General Meeting of Shareholders. In the event that no member of the Supervisory Board chairs the General Meeting of Shareholders, the latter will elect its own chairperson.

(2)

The chairperson of the General Meeting of Shareholders can decide that the items on the agenda will be discussed in a different order from that indicated in the agenda. S/he also specifies the type and form of voting.

(3)

The chairperson of the General Meeting of Shareholders is entitled to set reasonable time limits for the shareholders’ rights to speak and ask questions; in particular, s/he can set a reasonable timetable for the meeting as a whole, for discussions of individual items on the agenda, and for individual speeches and questions.

(4)

The members of the Management Board and of the Supervisory Board should be present in person at the General Meeting of Shareholders. Members of the Supervisory Board who are prevented from attending in person for compelling reasons can also participate via video or audio link .

(5)

The chairperson of the General Meeting of Shareholders is authorised to permit the video and audio transmission of all or part of the General Meeting of Shareholders in a way to be determined by him/her.

§ 22

Passing Resolutions

(1)

Each share grants its holder one vote in the General Meeting of Shareholders.

(2)

Resolutions of the General Meeting of Shareholders require a simple majority of votes cast in order to be passed, provided that nothing to the contrary is required by the Articles of Association or by law. If, in addition to the simple majority of votes cast, the law prescribes a majority of the share capital represented when the resolution is passed, a simple majority of the share capital represented is sufficient, insofar as this is permitted by law; this applies, in particular, to resolutions pursuant to § 103 AktG (German Stock Corporation Act) (dismissal of members of the Supervisory Board), § 179 AktG (changes to the Articles of Association), § 182 AktG (share capital increase in return for contributions), § 207 AktG (share capital increase using Company resources) and § 221 AktG (in particular, the issue of convertible bonds and income bonds).

§ 23

Exercise of Voting Rights by Representatives

A shareholder’s voting rights may be exercised by representative proxy. For a proxy to exercise voting rights, a corresponding proxy authorisation must be issued. This proxy authorisation may be issued at any time in writing or by fax; any other forms provided by law for issuing a proxy authorisation, revoking the latter or proving to the Company that authorisation has been granted, in particular, facilitation measures that are compulsory under the law, are not restricted by the Articles of Association. Legal provisions apply to the issue of proxy authorisations to credit institutions, shareholder associations or other persons equated with the latter pursuant to § 135 AktG (German Stock Corporation Act).

VI.

Financial Reporting and Use of the Annual Surplus

§ 24

Financial Reporting

The Management Board must compile the annual financial statements (balance sheet, profit and loss account and notes to the financial statements) and the management report, as well as the consolidated financial statements and group management report, and submit them to the Supervisory Board and the auditor within the statutory deadlines. Likewise, the Management Board must submit a proposal for the use of the retained profit to the Supervisory Board. §§ 298 Para. 3 and 315 Para. 3 of the German Commercial Code (HGB) are not affected.

§ 25

Use of the Annual Surplus

(1)

When the annual financial statements are approved, the Management Board and the Supervisory Board are authorised to place in other reserves either some or all of the annual surplus that remains after deduction of the sums to be placed in the statutory reserve and of losses carried forward. The placement of more than half the annual surplus is not permitted if the other reserves would exceed half the share capital after this placement.

(2)

Shareholders’ dividends are calculated in proportion to the size of their share of the share capital.

VII.

Concluding Provisions

§ 26

Expenses relating to foundation and change of form

(1)

The Company is the result of the change of legal form of Biofrontera Pharmaceuticals GmbH, which had its Head Office in Leverkusen.

(2)

The Company bears the expenses incurred by its change of legal form into a public limited company (Aktiengesellschaft), and by its foundation, up to the sum of EUR 15,000.00.

Exhibit 3.2

Rules of Procedure

of the Supervisory Board

Biofrontera AG

as of 01 June 2016

Rules of Procedure of the Supervisory Board of

Biofrontera AG

as amended by the Supervisory Board resolution of
01.06.2016

Introduction

1.1

The work of the Supervisory Board and its members is governed by the statutory provisions, the Articles of Association and these Rules of Procedure as well as the recommendations and suggestions of the German Corporate Governance Code in accordance with the Company’s declaration of conformity. Its members have the same rights and obligations and are not bound by any instructions.

1.2

It is the task of the Supervisory Board is to regularly advise and monitor the Management Board in its management activities. It must be involved in decisions of fundamental importance to the Company. The Supervisory and Management Boards work closely together for the benefit of the Company.

1.3

The Supervisory Board checks whether it has a, in its opinion, sufficient number of independent members. Each Supervisory Board member will ensure that he/she has sufficient time to perform his/her mandates. Supervisory Board members who are management board members of a listed company at the same time should not hold a total of more than three positions on supervisory boards in non-group listed companies or on supervisory bodies of companies with comparable requirements.

1.4

Only persons who have not yet reached the statutory retirement age (currently: the age of 67) should be proposed for election as a Supervisory Board member.

1.5

The Supervisory Board will continuously review the efficiency of its work.

1.6

The Supervisory Board shall specify certain measures and business transactions as requiring approval in the rules of procedure for the Management Board. The list of business transactions requiring approval can be extended or restricted at any time by resolution of the Supervisory Board. Limiting the catalogue of business transactions requiring approval requires a unanimous Supervisory Board resolution.

Election of the chairman and his/her deputy

2.1

The Supervisory Board elects a chairman and a deputy chairman from among its members. The election takes place at a meeting held without being specially convened directly following the general meeting of shareholders at which the members of the Supervisory Board to be elected are elected. A simple majority of the votes cast is sufficient for election. In the event of a tied vote, the decision is made by lot.

2.2

Until the election is completed, the previous chairman or his/her deputy or, if both are absent, the oldest Supervisory Board member in terms of age shall chair the electoral session in question.

2.3

If the Supervisory Board chairman or his/her deputy withdraws from the Supervisory Board before their term of office expires, the Supervisory Board elects a successor at its next meeting.

Tasks and powers of the chairman and deputy

3.1

The chairman represents the Supervisory Board in respect of the Management Board and externally. The chairman coordinates the work of the Supervisory Board and chairs its meetings.

3.2

The chairman ensures that the Management Board meets its statutory and disclosure and reporting obligations and any additional obligations imposed by the Supervisory Board. The chairman maintains regular contact with the Management Board, especially with the Management Board chairman, and consults with it on the strategy, planning, business development and risk management of the company. The chairman shall be informed immediately by the chairman of the management board of important events that are of material significance for the assessment of the situation and the development and management of the company. The chairman then informs the Supervisory Board, if the briefing cannot wait until the following ordinary Supervisory Board meeting, and if necessary convenes an extraordinary meeting of the Supervisory Board.

3.3

The chairman is authorized to issue on behalf of the Supervisory Board the statements of intent necessary for the execution of the resolutions of the Supervisory Board and to accept statements for the Supervisory Board.

3.4

In the event that the chairman is unavailable, the deputy chairman exercises the rights and obligations of the chairman. The deputy chairman is not, however, entitled to the right to the casting vote regulated in point 5.4.

Meetings

4.1

The Supervisory Board should be convened to meetings at least once every calendar quarter and must be convened at least twice every calendar half-year. The meetings are held at the Company’s registered office or at another location on which all Supervisory Board members have agreed.

4.2

The chairman convenes the Supervisory Board meetings in written or electronic form with a notice period of 14 days. When calculating the notice period for convening a meeting, the day on which the invitation is sent and the day of the meeting itself are not included. The invitation must specify the place and time of the meeting and the individual items on the agenda. The chairman may entrust the Management Board with the technicalities involved in convening the meeting.

4.3

The Chairman has to convene a meeting immediately whenever this is required by a Supervisory Board member or by the Management Board with an indication of the purpose and reasons for the meeting. The meeting must be held within two weeks of it being convened. If the chairman fails to comply with the request, the Supervisory Board member or the Management Board can convene the Supervisory Board themselves by giving notification of the facts and setting out an agenda.

4.4

The chairman also has to convene a meeting immediately whenever the good of the Company or of one of its direct or indirect equity interests requires this.

4.5

In urgent cases, the invitation period may be appropriately shortened and the meeting may be convened verbally or by telephone; however, there must be at least three days between the invitation and the meeting date in such cases. Point 4.2 sentence 2 applies accordingly.

4.6

The chairman determines the order in which the items on the agenda are dealt with and the manner in which the voting is conducted.

4.7

A new meeting must be convened if neither the chairman nor the deputy chairman are present at a meeting. In urgent cases, however, the Supervisory Board may resolve that the oldest Supervisory Board member in terms of age shall chair the meeting.

4.8

The Management Board members attend the Supervisory Board meetings unless the Supervisory Board in individual cases or the chairman in urgent cases makes other arrangements. Experts or other knowledgeable persons may be called in on the request of individual Supervisory Board members or the Management Board to give advice on individual items.

4.9

Minutes are to be kept on the progress of each meeting and signed by the chair of the meeting in question. The chairman may delegate the keeping of minutes to the Management Board or to minute-taker. The minutes must state the place and date of the meeting, the participants, the items on the agenda, the main content of the discussions and the resolutions of the Supervisory Board (with the chairman’s statement on the result of the resolutions). A copy of the signed minutes of the meeting is to be forwarded to each Supervisory Board member without delay. The minutes of the meeting are deemed to be approved unless a member of the Supervisory Board who took part in the meeting files an objection with the chairman in writing within one month of the minutes being sent.

Adoption of resolutions

5.1

Resolutions of the Supervisory Board are in principle adopted in meetings. Supervisory Board members who cannot participate in the meetings may have a written vote submitted by another Supervisory Board member. The retrospective casting of a vote by absent members is only permissible if this is approved by all members who are present.

5.2

Resolutions may also be adopted outside of meetings, and the vote may also take place verbally, in writing, by telephone, by fax, using electronic means of communication (e.g. e-mail) or by video conference if the Chairman orders this and this procedure is not objected to immediately by more than three members of the Supervisory Board.

5.3

The chairman records resolutions passed outside meetings in minutes and forwards a copy of them to all Supervisory Board members without delay after the resolution has been adopted. Point 4.9 applies accordingly.

5.4

Resolutions are adopted by a simple majority of the votes cast unless mandatorily stipulated otherwise by law or by the articles of association. Abstentions are not counted. If the vote results in a tie, the vote is to be repeated, where the chairman shall have two votes should this new vote also result in a tie.

5.5

The Supervisory Board is quorate when at least three members participate in the resolution. A Supervisory Board member who abstains from casting a vote is also deemed to be participating in the resolution in this case.

5.6

Resolutions on items that are not on the agenda or that have not been duly notified to the members may only be adopted if no member present at the meeting objects and absent members are given the opportunity to submit their votes in writing retrospectively within a reasonable deadline to be set by the chairman.

6.1

The Supervisory Board may set up committees and also entrust these with the adoption of resolutions on certain matters, provided that the entire Supervisory Board is not responsible for these under mandatory law. The Supervisory Board has a personnel committee (section 7) and an audit committee (section 8) as well as a nomination committee (section 10) in any event.

The Supervisory Board appoints a Supervisory Board member as the committee chairman in each case. The Supervisory Board chairman or his/her deputy should at the same time be the chairman of the committees that deal with the contracts of the Management Board and prepare the Supervisory Board meetings. The committee chairmen report regularly to the Supervisory Board on the work of the committees.

6.2

Supervisory Board members who do not belong to a committee can participate in committee meetings unless the chairman or the committee specifies otherwise. Management Board members participate in committee meetings only following a prior decision of the competent committee.

6.3

The committee Chairmen convene the committees. Meetings are convened as often as seems necessary. The notice period for convening the meeting should generally not exceed three days. Publication of the agenda and the delivery of special documents on the agenda prior to the meeting can be waived.

6.4

Committees are quorate if at least three members including the committee chairman, participate in the adoption of a resolution.

6.5

In all other respects, the regulations for the Supervisory Board governing meetings and the adoption of resolutions apply accordingly.

7.1

The personnel committee consists of three members: the chairman and two other Supervisory Board members, who are elected by the Supervisory Board from among its members. The personnel committee prepares the decisions of the Supervisory Board on the appointment and dismissal of Management Board members.

7.2

The personnel committee prepares the conclusion, amendment and termination of the employment contracts of the Management Board members, the determination of an annual bonus and other flexible remuneration elements for the decision of the Supervisory Board. Only persons who have not yet reached the statutory retirement age (currently: the age of 67) should be proposed as members of the Management Board.

7.3

The personnel committee decides on

7.3.1

legal transactions with Management Board members within the meaning of section 112 of the Aktiengesetz (AktG - German Stock Corporation Act),

7.3.2

consent concerning work by Management Board members outside the company according to section 88 AktG and on ancillary activities (including the assumption of supervisory board offices outside companies that are affiliated with the Company within the meaning of sections 15 ff. AktG,

7.3.3

consent concerning the granting of loans to the categories of persons referred to in sections 89, 115 AktG,

7.3.4

the approval of contracts with Supervisory Board members pursuant to section 114 AktG, and

7.3.5

personnel matters for which the Management Board requires the approval of the Supervisory Board in accordance with the Rules of Procedure.

Audit committee

8.1

The Supervisory Board forms an audit committee that consists of three members. The members of the audit committee elect a committee chairman from among its members. The chairman of the Supervisory Board should not be the chairman of the audit committee. The chairman of the audit committee should have specialist knowledge and experience in the use of accounting principles and internal control procedures. He/she should be independent and no former Management Board member whose appointment ended less than two years prior.

8.2

The audit committee deals in particular with issues concerning:

8.2.1

accounting and risk management,

8.2.2

the necessary independence of the auditor and the issuing of the audit mandate to the auditor,

8.2.3

the conclusion of the fee agreement with the auditor and the definition of focal points of the audit, as well as

8.2.4

financial matters for which the Management Board requires the approval of the Supervisory Board in accordance with the rules of procedure,

and adopts the related resolutions in s far as this is legally permissible.

9.1

Each Supervisory Board member is obliged to act in the Company’s best interests. When making their decisions, they may not pursue personal interests or make use of business opportunities to which the Company is entitled for themselves without a resolution of the Supervisory Board.

9.2

Each Supervisory Board member must disclose conflicts of interest to the Supervisory Board. This applies in particular to conflicts of interest that may arise from performing advisory or executive functions for customers, suppliers, lenders or other business partners.

9.3

The Supervisory Board is expected to disclose any conflicts of interest that have occurred and how they were dealt with in its report to the annual general meeting of shareholders. Material conflicts of interest in the person of a Supervisory Board member that are not merely temporary should result in the termination of their mandate.

9.4

Advisory and other service agreements and contracts for work between a member of the Supervisory Board and the Company require the approval of the Supervisory Board.

10.1

The members of the Supervisory Board should as a whole have the knowledge, skills and professional experience necessary to carry out their tasks properly. The company-specific situation, the company’s international activities, potential conflicts of interest, the age limit for Supervisory Board members and diversity, including the participation of women, must be considered here. The members must be familiar with the sector in which the Company does business.

10.2

The Supervisory Board forms a nomination committee that is composed exclusively of representatives of the shareholders. It includes two other Supervisory Board members to be elected in addition to the chairman.

10.3

The nomination committee proposes suitable candidates to the Supervisory Board for it to propose at the annual general meeting of Shareholders. In so doing, the nomination committee considers the balance and diversity of the knowledge, skills and experience of all Supervisory Board members, and draws up candidate profiles.

10.4

In addition, the nomination committee makes recommendations to and informs the Supervisory Board about results of regular assessments of the knowledge, skills and experience of the individual members and of the Supervisory Board as a whole.

10.5

In the course of performing its duties, the nomination committee can draw on Company resources that it deems appropriate and also involve external consultants within the necessary framework.

11.1

The Supervisory Board members must maintain complete confidentiality with regard to third parties concerning facts that have come to their knowledge in the performance of their duties as a Supervisory Board member and the disclosure of which could adversely affect the interests of the Company or of one of its affiliated companies. This obligation also remains in force after their term of office has ended. The casting of votes, the course of discussions, the comments and personal statements of the individual Supervisory Board members are subject in particular to the dictates of non-disclosure. Each Supervisory Board member shall ensure that the employees that they call in comply with the obligation to maintain secrecy in the same manner.

11.2

If a Supervisory Board member intends to pass information on to third parties, the communication of which is obviously not permitted, the chairman must be informed of this beforehand. If the chairman does not agree to the disclosure, he/she must notify the other Supervisory Board members of this immediately and obtain an immediate statement from the Supervisory Board. The Supervisory Board member in question is obliged to maintain confidentiality concerning the facts he/she has gained knowledge of through his/her office until this statement is obtained.

11.3

11.4

Upon resigning from office, the Supervisory Board members are obliged to hand over to the Company immediately all documents such as papers, correspondence, records and similar that relate to Company matters and are in their possession. This obligation includes duplicates and photocopies. The Supervisory Board members have no right of retention in such documents.

11.5

Written reports of the Management Board to the Supervisory Board are handed over to the Supervisory Board members unless otherwise decided by the Supervisory Board in each individual case. In all other respect, section 170(3) AktG applies.

Exhibit 3.3

RULES OF PROCEDURE

FOR THE MANAGEMENT BOARD

Biofrontera AG

dated September 29, 2017

Rules of Procedure for the Management Board

Biofrontera AG

as adopted in the Supervisory Board resolution dated February 22, 2011

General

1.1

The Management Board members comprise the Management Board. By way of resolution, the Supervisory Board can appoint one of them the chairman and one of them the deputy chairman.

1.2

The Management Board is solely responsible for managing the company. It is bound by the company's interests and increasing long-term corporate value. It develops the enterprise's strategy, coordinates it with the Supervisory Board and ensures its implementation.

1.3

The members of the Management Board conduct the company's business in compliance with the laws, the articles of association, these rules of procedure, the rules of procedure of the Supervisory Board, the recommendations and suggestions of the German Corporate Governance Code, pursuant to the company's Declaration of Compliance, and their employment contracts. It cooperates with the other executive bodies of the company on the basis of mutual trust.

Delegation of business

2.1

The Management Board members conduct the company's business together. The Management Board members are obliged to keep each other informed of all important business matters - even if they are not under their direct responsibility - and to be aware of incoming and outgoing correspondence to the extent necessary and inform each other of any deficiencies or desired improvements.

2.2

The tasks and responsibilities of each Management Board member will be governed by a business delegation plan, to be prepared by them and unanimously agreed upon. This plan requires the consent of the Supervisory Board. The business delegation plan will also define the representation of any Management Board member who is indisposed.

Business management

3.1

Each Management Board member, subject to the limitations by law, articles of association, rules of procedure or employment contract, is solely entitled and obliged to manage the business within his/her area of responsibility.

3.2

If the intended business management will affect other, or all, Management Board members, these persons must be involved in preparing for and making decisions. If no agreement is reached by the Management Board members involved, the entire Management Board will decide by way of resolution.

3.3

A resolution from the entire Management Board is required for the following legal transactions and activities:

3.3.1

Processes for which the law or the articles of association require a decision from the Management Board, in particular:

The preparation of the annual financial statements and the management report, plus any consolidated financial statements or group management report,

The notice of annual shareholders' meeting and the proposed resolutions for the annual shareholders' meeting,

The request to bring about a resolution at the annual shareholders' meeting under Section 119 (2) AktG (Stock Corporation Act),

The submission of a Declaration of Compliance with the Corporate Governance Code under Section 161 AktG;

3.3.2

Measures that can be taken only upon agreement of the Supervisory Board;

3.3.3

Processes that affect the work of all Management Board members;

3.3.4

Other processes that a Management Board member feels are relevant in general;

3.3.5

Reports to the Supervisory Board under Section 90 AktG;

3.3.6

Processes that can be resolved only upon unanimous agreement of the Management Board members.

3.4

Decisions under Section 3.2 or Section 3.3 can be made by a member of the Management Board in his/her own division without the prior consent of the other affected Management Board members, or without the prior consent of the entire Management Board, if and to the extent that this is necessary under his/her required discretion to avoid immediate, potentially severe disadvantages to the company, the group, or the relevant division. If a Management Board member makes a decision under Sentence 1, he or she must inform the Management Board immediately, c/o the chairman.

Chairman of the Management Board

4.1

The chairman of the Management Board is in charge of coordination of all the Management Board activities, in particular the organization and management of Management Board meetings. He or she is also in charge of monitoring each business unit within the Management Board. He or she must particularly ensure that management of the business units is uniformly aligned to the goals and plans set forth in the Management Board's resolutions. The members of the Management Board will report regularly to the chairman about all material matters, particularly the state of business, within their business areas. The chairman can request information from the Management Board members at any time about individual matters from their business areas and can ask to be informed in advance about certain types of business.

4.2

The chairman of the Management Board represents the company to the public, in particular to the media, official agencies, associations and business organizations unless another Management Board member is charged with this.

Meetings, resolutions

5.1

Resolutions of the Management Board are adopted in meetings. Meetings of the Management Board should be held at least once a month. Every Management Board member can request a notice of special meeting, or an addition to the agenda of a meeting, if he/she gives a reason.

5.2

The chairman of the Management Board sends notices of Management Board meetings along with the agenda. The chairman of the Management Board leads the meetings. He/she determines the order in which the agenda items are handled and the method of voting. The chairman of the Management Board can order that persons who do not belong to the Management Board be consulted for some items on the agenda. If the chairman of the Management Board is indisposed, the other Management Board members will elect a representative who handles the tasks of the chairman.

5.3

The agenda items will be handled based on written documents where possible; these documents will be provided to the Management Board members in good time before the respective meeting.

5.4

The Management Board is quorate if all members were invited and at least half of the members participate in voting on the resolution; abstentions are considered participation. Absent Management Board members can vote in advance or subsequently by a deadline to be set by the chairman; this can be done in writing, by fax, verbally, by phone, or using electronic methods of communication (e.g. e-mail). If the Management Board has two members, it is quorate only if both members participate in voting on the resolution. If a member is absent, matters from his or her division can be negotiated and resolved only with his or her consent, unless the matter is urgent.

5.5

Resolutions of the Management Board require a simple majority unless another majority is stipulated by law, the articles of association, or rules of procedure. If the Management Board has more than two members, and the vote is tied, the chairman shall cast the deciding vote.

5.6

By order of the chairman of the Management Board, resolutions can also be voted on outside meetings by way of written, fax, or electronic means (e.g. e-mail) if no Management Board member objects to this procedure.

5.7

Minutes must be kept of the Management Board meetings. These must include the location and date of the meeting, the participants, the agenda, and the wording of the resolutions. The chairman of the Management Board or - if he/she is indisposed - the meeting chair will appoint the secretary of the meeting. The minutes will be signed by the chairman of the Management Board or - if he or she is indisposed - the respective meeting chair, and a copy will be sent to all Management Board members and the chairman of the Supervisory Board. The minutes will be considered approved if no Management Board member objects in the next meeting held after the minutes were received. Management Board resolutions adopted outside meetings will be recorded in minutes by the chairman of the Management Board. A copy of these minutes must be sent immediately to the other Management Board members and the chairman of the Supervisory Board.

5.8

The implementation of resolutions is handled by the responsible Management Board member under the business delegation plan, or by the chairman of the Management Board.

Transactions requiring consent I conflicts of interest

6.1

Without prejudice to the rights of the Supervisory Board otherwise reserved by law, articles of association, or rules of procedure, the Management Board requires prior consent of the Supervisory Board for the following legal transactions and activities:

6.1.1

Approval or major changes to the annual budget, and definition of the principles of business policy, including the strategic corporate planning along with financial and investment planning,

6.1.2

Conclusion, major changes or termination of lease or rental agreements (except for real estate), which, during their term, have total expenses in excess of EUR 250,000 or a term of more than five years,

6.1.3

Conclusion, major changes or termination of loan agreements in excess of

EUR 250,000 in a single case or with a term of more than five years, if this deviates from the approved budget,

6.1.4

Assumption of guarantees, exemptions, co-liability suretyships , or other security for third parties outside normal business operations, if a liability amount of EUR 50,000 is exceeded in a single case,

6.1.5

Investments and disinvestments in property, plant and equipment and in intangible assets, especially patents and licenses, with a transaction volume in excess of EUR 500,000 in a single case,

6.1.6

Forward transactions for currencies, securities and goods or rights traded on the stock exchange, if they are not part of normal business operations,

6.1.7

Purchase and sale of property or property-equivalent rights, and conclusion of rental agreements for property with an annual rent in excess of EUR 250,000, Purchase and sale of shareholdings in companies if the stake accounts for 10% or more of the company's capital, or the purchase or sale price exceeds EUR 500,000,

6.1.8

Incorporation or disposal of subsidiaries or international branches ,

6.1.9

Acceptance of side employment by Management Board employees, in particular Supervisory Board mandates outside the group,

6.1.10

Conclusion or major changes to employment agreements with executive body members in subsidiaries, employees or agents, if the gross annual compensation exceeds or would exceed EUR 150,000, and the confirmation of benefits for such persons,

6.1.11

Appointment of general representatives and persons with Prokura (power of attorney)

6.1.12

Transactions that would exceed the company's normal business operations and/or decisions that affect the existence of the company

6.1.13

Transactions outside the ordinary course of business, which are not included in the approved budget and exceed EUR 350,000

and

6.1.14

Any transaction or contract with affiliated parties as defined in sec. 15 of the German Fiscal Code (Abgabenordnung), other than inter-company transactions or contracts

6.2

The Management Board also requires prior consent from the Supervisory Board or responsible committee if it cooperates in the business or activities of affiliated companies as defined under Section 6.1 by way of instruction, consent, voting, or other means.

6.3

The Management Board is entitled to conduct business as defined under this Section 6 without the prior consent of the Supervisory Board if failing to conduct said business would result in damage or disadvantages to the company and the consent of the Supervisory Board could not be obtained in time. In these cases, the Supervisory Board must be notified immediately about the aforementioned business and asked for retroactive consent.

6.4

The Supervisory Board is entitled by way of resolution to define other types of business that require its prior consent.

6.5

All Management Board members must immediately disclose conflicts of interest to the Supervisory Board and inform the other Management Board members that there is a conflict of interest (and what the subject matter is) and that the conflict of interest has been disclosed to the Supervisory Board. All transactions conducted between the company or another company that is dependent on this company, on the one hand, and the Management Board members and closely associated persons, on the other hand, must comply with the standard for transactions with external parties. Transactions with Management Board members and persons closely associated with them require - if the cooperation of the Supervisory Board is not already required under Section 112 AktG - consent of the Supervisory Board if the value of the transaction in a single case, or the value of all transactions in a calendar year, exceeds an amount of €5,000. Transactions of each Management Board member and his/her closely associated persons will be added up. Persons "closely associated with" the Management Board member are defined by Section 138 lnsO ¹ .

¹ §138 lnsO (Insolvency Statute)

(date: last amended by Art. 3 G dated December 9, 2010 11885)

(1)

If the debtor is a natural person, closely associated persons are:

The debtor's spouse, even if the marriage was contracted only after the transaction or was dissolved during the last year prior to the transaction;

1a.

The debtor's civil partner, even if the civil partnership was contracted only after the transaction or was dissolved during the last year prior to the transaction;

The relatives of the debtor or of the spouse designated in no. 1, or the civil partner designated in no. 1a, the debtor's full and half siblings, or the spouse designated in no. 1, or the civil partner designated in no. 1a, and the spouses of such persons;

Information to the Supervisory Board and the Audit Committee

7.1

The Management Board must report regularly to the Supervisory Board about the state of the business, particularly revenues and earnings of the company. The Management Board must give a target vs. actual comparison, including the prior year's figures, and show deviations from the prior period and the budget.

7.2

The Management Board must inform the Supervisory Board as soon as possible about transactions that could be very significant for the profitability or liquidity of the company, so that the Supervisory Board has time to respond to this before the transaction is performed. The same applies to other special events and risks.

7.3

At least once a year - unless there are changes to the business situation or new questions require ad hoc reports - the Management Board must report to the Supervisory Board about the intended business policy or other general questions about future business development; it must include deviations between actual developments and previously reported goals, along with the reasons. Additionally, the Management Board must report to the Supervisory Board in a meeting or in written form about situations with a significant public impact.

7.4

Reports by the Management Board must include subsidiaries and joint ventures. The reports are, as a rule, to be submitted in writing.

7.5

The chairman of the Supervisory Board must be immediately informed about all other significant events, particularly important situations that are relevant to evaluating the status and development of the company and managing the company. "Significant events" can also include a business transaction with an affiliated company that the Management Board learns of and that can have a major influence on the company's situation.

7.6

The management board shall provide regular reports to the audit committee regarding the acceptance and handling of complaints. The management submits to the chairman of the audit committee without undue delay any received complaints concerning (i) accounting, (ii) internal audit procedures regarding accounting, (iii) auditing of financial statements and (iv) other matters relating to the financial statements. 7.4 applies mutatis mutandis. The management board ensures in the code of conduct, that employees may communicate confidential and anonymous information on matters of concern relating to accounting, financial statements and auditing directly to the chairman of the audit committee

Persons living in the debtor's household or having lived in the debtor's household during the last year prior to the transaction, as well as persons who can provide information on the debtor's financial circumstances on the grounds of a relationship based on a contract of employment or service with the debtor;

A legal person or a company without legal personality if the debtor or one of the persons referred to in nos. 1 to 3 is a member of the body representing or supervising the debtor, a general partner or persons holding more than one quarter of the debtor's capital, or is able, on the basis of a comparable relationship under company law or a contract of employment or service, of providing information regarding the debtor's financial circumstances.

(2)

If the debtor is a natural person, or a company without a legal personality, closely associated persons are:

The members of the body representing or supervising the debtor, as well as his general partners and persons holding more than one quarter of the debtor's capital;

A person or a company having on the basis of a comparable association with the debtor under company law or under a service contract the opportunity to become aware of the debtor's financial circumstances;

A person having a personal relationship detailed at subsection (1) with a person named in no. 1 or 2; this shall not apply if the persons named in no. 1 or 2 are legally bound to secrecy regarding the debtor's affairs.

Exhibit 10.1

Master Agreement relating to Contract Manufacturing, Supply and Confidentiality

between

	Manufacturer
FRIKE GROUP, Auenstrasse 11, 8617 Mönchaltorf Glaropharm AG in Sändli, CH- 8756 Mitlödi

and

Biofrontera Pharma GmbH, Hemmelrather Weg 201, D-51377 Leverkusen
	Customer

Preamble and purpose

1.1.

FRIKE and its affiliated operations hold regulatory approvals to manufacture pharmaceutical, cosmetic and chemical-technical contract products, and are subject to supervision by the relevant authorities.

1.2.

The Customer is the holder of the ownership rights and utilisation rights to preparations, formulations, requisite manufacturing methods, and inspection methods for the manufacturing of all contract products, including the rights to such contract products' brands. It distributes the contract products. The Customer is also the authorisation holder and authorisation holders' representative in relation to FRIKE.

Confidential treatment has been requested with respect to the information contained within the [***] marking. Such portions have been omitted from this filing and have been filed separately with the Securities and Exchange Commission.

Agreement on contract manufacturing, supply and confidentiality

1.3.

This Master Agreement including its annexes shall regulate the responsibilities, obligations and conditions between FRIKE and the Customer for the issuing of orders to manufacture contract products on a contract manufacturing basis by FRIKE and their delivery to the Customer or third Parties nominated by the Customer. All quality-relevant matters for pharmaceutical contract products, including compliance with the guidelines of Good Manufacturing Practice (GMP) and Good Distribution Practice (GDP), shall be regulated in a separate agreement (QAA / Quality Assurance Agreement).

Definitions

The terms utilised in this Master Agreement shall have the following meaning:

2.1.

" Contract products " shall refer to the products described in the separate supplements pursuant to Annex 1.

2.2.

"Pharmaceutical contract products" shall refer to such as listed by trademark, generic name, galenic formulation, dosing and packaging size in Annex 1 to this Master Agreement.

2.3.

"Cosmetic products" shall include preparations and formulations of cosmetic nature.

2.4.

"Preparation and formulation" shall comprise the quantitative and qualitative composition of the ingredients contained in the individual contract products.

2.5.

The "manufacturing – manufacture" term applied in this Agreement shall refer to the manufacturing process and all working steps (such as purchasing, entry inspection and approval, bulk manufacturing including in-process controls, filling, packing, inspecting bulk wares and finished products, warehousing and delivery), where FRIKE produces the contract products on the basis of technical data provided by the Customer, and where the Customer provides to FRIKE the ingredients (APIs), raw materials and packaging materials (Annex 4), or FRIKE purchases the ingredients (APIs), raw materials and packaging materials from suppliers approved by the Customer in accordance with the QAA requirements.

2.6.

"Technical specifications" shall refer to those documents, information, data, and manufacturer instructions issued by the Customer to FRIKE for the manufacturing of the contract products. These should generally include information about production methods, instructions for in-process controls, inspection regulations, quality controls and data relating to security, environmental protection, occupational hygiene, and warehousing and transportation regulations.

2.7.

The term "in writing" shall include letter, fax and email.

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Responsibilities

3.1.

FRIKE and the Customer shall confirm that they possess the requisite official authorisations, whose scope shall fully cover the respective activity.

In terms of pharmaceuticals, FRIKE shall fulfil the national provisions of the German Pharmaceuticals Act (HMG) as well as related directives, especially the German Pharmaceutical Approval Act (AMBV), and in relation to cosmetics, the German Food Manufacturing Act and its specific directives.

FRIKE shall also satisfy all requisite provisions for the manufacturing of pharmaceuticals for the EU and the USA, as described in the QAA.

Without being asked, the Contractual Partners shall inform each other immediately about modifications to approval statuses.

3.2.

The Customer shall be obligated to provide FRIKE – wherever available – with all requisite documents such as preparations and formulations, technical specifications, the manufacturing process and quality control methods.

3.3.

FRIKE shall obligate itself to produce the contract products in accordance with the requirements agreed with the Customer, especially the requirements of the QAA, and in compliance with the respective valid Good Manufacturing Practice (GMP / cGMP).

3.4.

Otherwise, reference is made to the binding regulation of responsibilities in the QAA.

Subject of the agreement

4.1.

This agreement shall regulate the overall conditions for the case-by-case issuing of orders to FRIKE for the manufacturing, assembly, packaging and delivery of the contract products. The underlying specifications (product, product volume etc) for this purpose shall be regulated in the individual agreement. The provisions of this Master Agreement shall be valid on a supplementary basis.

4.2.

The provisions of this Agreement shall have precedence in any instance before any general terms and conditions of business of the contractual Partners. General terms and conditions of business shall apply on a supplementary basis only after the express consent of the contractual partner.

4.3.

FRIKE shall manufacture the contract products exclusively for the Customer or companies it licenses.

4.4.

The manufacturing of the contract product shall occur at the operating location of FRIKE as agreed with the Customer. Following previous coordination, the Customer shall have the right to conduct audits.

4.5.

FRIKE shall obligate itself to supply to the Customer the entire demanded amount of contract products during the contract term.

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Ownership of and transfer of preparations and formulations as well as further development and manufacturing know-how

5.1.

The preparations and formulations attached to the contract products (Annex 1), including the manufacturing and inspection know-how required to manufacture the contract products, shall be the Customer's property. In particular, this shall include the know-how conveyed by the Customer to FRIKE before the conclusion of the contract for this purpose.

New developments, further developments and/or improvements to contract products, or of the manufacturing process, as well as analysis methods, including resultant property rights that the Customer orders from FRIKE and pays for, shall be the Customer's property.

5.2.

Any development costs shall be budgeted in advance and invoiced separately. These shall be based on expense actually occurred by FRIKE (briefing, raw materials costs, development expense, documentation, scale-up).

5.3.

Unless it has already occurred, the entire know-how shall be transferred to FRIKE after the signing of this Agreement or respective individual order by the Customer's specialist personnel. The Customer shall provide free training and support to FRIKE in setting up the manufacturing of the contract products.

5.4.

The commencement of series production shall occur according to a separate arrangement.

Manufacturing of the contract products, controlling and modifications

6.1.

The manufacturing of the pharmaceutical shall be regulated by the QAA. FRIKE must conduct the manufacturing and inspection of the remaining contract products (pursuant to Annex 1) according to the preparations and technical specifications prescribed by the Customer, and according to the applicable statutory provisions and relevant GMP regulations.

6.2.

The Customer shall be entitled to conduct audits at the Contractor's locations following prior announcement (at least 10 working days in advance) and during normal business hours. Further audits can be arranged by mutual agreement. All of the Customer's audit teams shall be accompanied and supported by FRIKE staff during the audits.

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Agreement on contract manufacturing, supply and confidentiality

6.3.

FRIKE shall inform the Customer immediately about regulatory inspections that may affect the contract product, and shall prepare for the Customer a summary and special findings in connection with the effects or potential effects on the contract product.

6.4.

Modifications to the preparation and/or technical specification affecting the contract of products shall be communicated mutually. Any resultant costs shall be subject to written approval by the Customer.

6.5.

FRIKE shall inform the Customer immediately if problems occur in the manufacturing of the contract products that could entail, in particular, qualitative, volume-related or deadline-related consequences.

Procurement of ingredients (APIs), raw materials and packaging materials

7.1.

The procurement of ingredients (APIs), raw materials and packaging materials for the manufacturing of pharmaceuticals shall be regulated in the QAA. The following shall apply for all other contract products: The Customer shall provide FRIKE with raw materials and packaging materials for the manufacturing of the contract products (Annex 4), or FRIKE shall procure after consultation with the Customer – in its own name and for its own account – the requisite raw materials and packaging materials for the manufacturing of the contract product on the basis of the suppliers/manufacturers approved by the Customer and according to the specifications determined by the Customer.

7.2.

A change of supplier/manufacturer or modifications to the quality of the ingredients (APIs), raw materials or packaging materials shall require statutory approval in the case of pharmaceuticals, and in the case of cosmetics conformity with relevant legislation, including stating the reasons for the written approval by the Customer. External costs arising from such procedures (e.g. analysis methods) shall be invoiced after consultation with, and approval by, the Customer.

7.3.

If the Customer plans a modification to the packaging or if a type is withdrawn from the product range or is replaced by another, the Customer and FRIKE shall process the orders that have already occurred as part of a targeted expiry management so that as few as possible remaining stocks of ingredients (APIs), raw materials and packaging materials remain for acceptance by the Customer.

7.4.

The volumes of ordering and warehousing volumes of raw materials and packaging materials to be procured by FRIKE shall secure the requirements as defined on a binding basis in the production forecast. -> Section 10.1

Quality assurance

The Contractual Parties shall agree a separate quality agreement pursuant to Annex 2 (QAA) for the manufacturing of pharmaceuticals. The quality standards agreed in this Agreement shall apply for the other contract products.

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Warehousing

9.1.

FRIKE shall warehouse the finished contract products, packaging materials, ingredients (APIs) and raw materials pursuant to the instructions of the GMP guidelines (EU and USA), and according to the Customer's instructions.

9.2.

FRIKE shall insure merchandise and contract products provided by the Customer (until the transfer of risk) against losses.

10.

Demand planning, order processing

10.1.

The Customer shall convey to FRIKE at the latest [ *** ] working days before the start of a quarter a rolling, non-binding preview of its requirements for the various contract products over the next [ *** ] quarters, of which the [ *** ] quarters within a range of [ *** ] shall serve as a binding procurement basis for raw materials and packaging materials as well as production planning.

10.2.

As a rule, binding manufacturing orders shall be placed as part of written individual orders.

10.3.

Individual orders shall include the manufacturing order as well as delivery volume, delivery date and place of delivery, among other items. FRIKE shall confirm the orders. The individual orders by the Customer shall be placed at least [ *** ] weeks before the delivery date.

10.4.

Minimum order volumes per contract product are regulated in Annex 3.

11.

Packaging and delivery

11.1.

The packaging and labelling of the contract products shall occur according to the target regions' statutory directives and the Customer's specifications.

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11.2.

Deliveries shall be made FCA to the FRIKE operating location, subject to other arrangements. FRIKE shall prepare the requisite freight papers and shall organise the transportation according to the Customer's instructions.

11.3.

The contract products shall be delivered either to the sales centres or warehouses designated by the Customer, or directly to wholesalers or retailers according to the Customer's order.

11.4.

The order volumes may not be delivered [ *** ]% more or [ *** ]% less than as ordered. In the case of under-delivery by more than [ *** ]% of the order volume, the Customer can demand the corresponding subsequent delivery without incurring additional cost. FRIKE shall not be entitled to take into account over-deliveries of more than [ *** ]% of the order volume when invoicing.

12.

Delivery deadlines, delivery delays

12.1.

Unless agreed differently in individual cases, the delivery period shall amount to [ *** ] after the respective order and packaging materials approval by the Customer.

12.2.

If the agreed delivery deadline is exceeded, FRIKE shall be deemed to be in delay in performance of the order, including without a warning being issued by the Customer.

13.

Prices

13.1.

The prices and terms for the contract products are set out in Annex 3.

13.2.

FRIKE shall endeavour as part of a continuous improvement process to reduce manufacturing costs and the prices of the contract products' materials, and to examine measures suggested by the Customer to enhance efficiency and cut costs.

13.3.

Based on cost-cutting and the Customer's proposed modifications, FRIKE shall pass on such cost reductions in full. A total of [ *** ]% of cost reductions based on a modification proposed by FRIKE shall be passed on to the Customer.

14.

Invoicing, payment terms

14.1.

For each order/contract, FRIKE shall submit an invoice with the order number and article number to the Customer.

14.2.

The Customer shall obligate itself to transfer the invoice amount at the latest [ *** ] days net, after receiving the invoice and delivery.

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15.

Warranty for the contract products

15.1.

FRIKE shall warranty that the contract products shall not exhibit any defects diminishing their value or suitability for their intended utilisation in terms of specification, durability and characterisation.

15.2.

The Contractual Partners shall inform each other immediately if they become aware of defective functions or quality defects or other risks relating to third-party products comparable with the contract products, which can lead, or have led, to fatalities or serious health damage for consumers or users, and which are recalled from the market for such reasons.

15.3.

Legal warranty claims shall otherwise be valid.

16.

Notification of defects

16.1.

Immediately after the goods have been received at the agreed delivery location, the Customer shall investigate them for evident defects, quality complaints (e.g. internal differences to the manufacturing regulation, values not in conformity with specifications when analysing the end-product), identity, deficient volumes as well as transportation damage.

16.2.

To avoid a plea of late notification of defects, the Customer shall notify FRIKE at the latest within [ *** ] working days after discovering defects.

16.3.

If defects arise during the warranty period, FRIKE shall be obligated, following mutual coordination, to immediately remedy, or have remedied, the defects at its cost, or to provide the Customer with defect-free replacements free of charge. All additional costs incurred as the result of subsequent improvement or replacement delivery, in other words, costs for the provision, transportation and taxation of the defective goods, or replacement delivery, shall be borne by FRIKE.

16.4.

If FRIKE continues to fail to remedy defects following two written warnings, the Customer shall be entitled to remedy the defect itself at the cost and risk of FRIKE, or have them remedied by a third party.

17.

Liability

17.1.

FRIKE shall be liable for all personal injuries and property damage which are caused by defects and faults of the contract product that it produces and for which it is responsible, up to a maximum of CHF [ *** ] per loss.

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18.

Confidentiality obligation and restitution

18.1.

FRIKE shall utilise all information relating to preparations and formulations as well as concerning technical specifications and all know-how of which it becomes aware in connection with this Agreement and collaboration with the Customer only for the purposes of manufacturing the contract products.

18.2.

FRIKE shall also impose this confidentiality obligation on its employees and on the subcontractors and suppliers it mandates.

18.3.

Information that can be proved to have been known to FRIKE as of the date when this collaboration started, information that becomes generally known without infringing this Agreement, or information that is made accessible to FRIKE by third parties entitled to do so, shall be exempted from this obligation.

18.4.

When this Agreement ends, all of the Customer's related documents shall be returned, to the extent that they are not still required to process open orders or to meet statutory obligations. The manufacturing and inspection documentation prepared as part of quality assurance shall be excluded from this obligation to return.

18.5.

This confidentiality and non-utilisation obligation shall be valid for the contractual duration as well as for a 10-year period after the agreement ends.

18.6.

Documents forming the object of this Agreement must be disclosed to authorities on demand.

19.

Force majeure

19.1.

Instances of force majeure shall wholly or partly release both Contractual Partners from the obligation to fulfil this Agreement until the discontinuation of the force majeure. The contractual partner at which the force measure occurs must immediately inform the other contractual partner of the event.

19.2.

The unavailability of sufficient supplies of ingredients (APIs), raw materials, packaging materials or the procurement of means of transportation as well as occurrence of strikes and lockouts, for which none of the Contractual Parties is responsible, shall be considered equivalent to force majeure.

19.3.

Once the force measure has ended, subsequent delivery shall immediately be realised of supplies that have not occurred during this period. The aforementioned shall be subject to other arrangements between the two Contractual Parties.

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20.

Contractual duration and termination

20.1.

This agreement shall come into force when it has been signed by the Contractual Parties. It can be terminated on a regular basis with a 12-month notice period, for the first time at the earliest with effect as of the end of the fifth year of the contract term.

20.2.

The quality assurance agreement (Annex 2) shall remain valid as long as FRIKE renders services, or up to one year after the expiry date of the last batch of the contract product.

20.3.

Early termination, without notice, shall be reserved for good cause, namely:

a) if an insolvency petition has been brought against the other party, a debt restructuring moratorium has been applied for, or if its insolvency is established without doubt in another manner;

b) if a party grossly infringes the Agreement, and the condition in conformity with the Agreement is not restored within at most 30 days after a written warning has been issued;

c) if the Customer discontinues distribution of the contract products; if, however, the Customer outsources distribution of the contract products to a company, be it a third party company or one of its own companies, and discontinues distribution for this reason, the rights and obligations of this Agreement shall transfer to this company.

d) if the agreement can no longer be fulfilled during a period of more than eight weeks due to force majeure.

21.

Legal consequences of ending the Agreement

21.1.

The ending of this Master Agreement shall leave unaffected the Parties' obligations to fulfil orders that are still open as of the respective date.

21.2.

FRIKE shall remain obligated to execute the Customer's orders on the last agreed terms during a maximum period of 12 months after the agreement is ended, if this is required to ensure supplies of the contract products until another contractor assumes production or production is assumed by the Customer itself.

21.3.

Within a month after the agreement is ended (irrespective for which reason) or after the delivery of the last order, FRIKE shall return to the Customer all documents it has received, including updates to them. This should apply particularly for preparations and formulations, technical specifications, working and inspection instructions, batch records filled out as examples, procurement sources for ingredients (APIs), raw materials and packaging materials.

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21.4.

After one of the Parties terminates the Agreement, the Customer shall also be entitled to designate one or two individuals to acquire at FRIKE during a period of at least three months all know-how required for the manufacturing and assembly of the contract products in return for payment (cost rate: see Section 21.5). FRIKE shall obligate itself to disclose to these individuals all information, without exception, connected with the manufacturing of the contract products.

21.5.

In the period between the termination and three months after the contract end, FRIKE shall be available on an advisory basis to the Customer on request for the establishment of any new production of the contract products at the Customer or a third party. The compensation per hour per individual shall amount to CHF [***] plus value added tax and inflation in accordance with the Swiss wage index (basis = date when this Master Agreement is signed), plus travel expenses.

21.6.

The Customer shall obligate itself to purchase at the end of the Agreement or given the termination of individual contract products, remaining stocks of approved planning quantities (plus any surplus volumes up to a maximum of 20%) of ingredients (APIs), raw materials and packaging materials ordered by FRIKE at cost prices including additional logistics costs plus 10% handling fees. This shall also apply in the case of relaunches or modifications to preparations required by the Customer during the contract term.

22.

Final provisions

22.1.

This Agreement shall contain the entire contractual will of the Parties in relation to the manufacturing of the contract products and shall replace, subject to a written agreement worded otherwise, all previous related agreements and statements by the Parties. Ancillary agreements shall not exist.

22.2.

In the case of mergers or similar transactions, the transfer of this Agreement, or the transfer of resultant rights or obligations to third Parties, shall require the Contractual Parties' written consent.

22.3.

Amendments or supplements to this Agreement as well as amendments to the annexes shall require written form to be legally valid. The text of the agreement in the German version shall prevail.

22.4.

Terminations or other declarations by the Parties relating to this Agreement shall require written form to be valid.

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23.

Place of performance, applicable law and place of jurisdiction

23.1.

The corresponding FRIKE operating location shall be the place of performance.

23.2.

This agreement and all related legal relationships shall be exclusively subject to substantive Swiss law under exclusion of Conflict-of-Law Rules and the United Nations Convention on Contracts for the International Sale of Goods (CISG).

23.3.

The Parties shall endeavour to settle amicably any differences of opinion arising from this Agreement, or in connection with it.

23.4.

The exclusive place of jurisdiction shall be Mönchaltorf (Uster District / Canton of Zürich, Switzerland). FRIKE shall also be entitled, however, to submit a claim to the Customer at the Customer's general place of jurisdiction.

24.

Severability clause and waiver clause

24.1.

Should one or several of the provisions of this Agreement, or of a document issued in connection with this Agreement, be found by a relevant court or relevant authority according to an applicable law, including competition law, to be in any aspect ineffective, illegal or unenforceable, the efficacy, legality and enforceability of the remaining provisions of this Agreement document shall under no circumstances be thereby affected or diminished. In this instance, the Contractual Parties shall obligate themselves to undertake all economically feasible efforts to satisfy the objective of the ineffective provision by a new and legally valid provision that effects the same (or a mainly similar) economic benefit or the same (or mainly similar) economic burden. Corresponding shall apply for the interpretation of questions or general contractual loopholes.

24.2.

If one party at any time refrains from the implementation of provisions arising from this Agreement, whether wholly or in part, this shall have no effect on this party's right to demand implementation subsequently. Any waiver of the enforcement of an infringement against this Agreement must occur in writing and be signed by the waiving party.

25.

Annexes

The following annexes shall form part of this Agreement. In the case of contradictions between the Master Agreement and its annexes, the text of the respective annex shall prevail.

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Annex 1 Product list and specifications

Annex 2 Quality agreement

Annex 3 Prices, bases, payment target and PQR costs

Annex 4 Materials to be provided free of charge by Biofrontera

(Place, date)

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Annex 1

Master Agreement

BIOFRONTERA

and

GLAROPHARM AG

Product list and specifications

Product description: pharmaceutical products

Ameluz Gel 2 gr DEU (Hapila)

Ameluz Gel 2 gr NLD ([ *** ])

Ameluz Gel 2 gr BEL (Hapila)

Ameluz Gel 2 gr ESP Reimbursement (Hapila) Ameluz

Gel 2 gr UK ([ *** ])

Ameluz Gel 2 gr ESP Non Reimbursement (Hapila)

Ameluz Gel 2 gr DEU Muster (Hapila)

Ameluz Gel 2 gr ESP Muster (Hapila)

Ameluz Gel 2 gr NLD Muster ([ *** ])

Ameluz Gel 2 gr UK Muster ([ *** ])

Ameluz Gel 2 gr ISR (Hapila)

Ameluz Gel 2 gr BEL Muster (Hapila)

Ameluz Gel 2 gr DEU ([ *** ])

Ameluz Gel 2 gr ESP Reimbursement ([ *** ])

Ameluz Gel 2 gr DEU Muster ([ *** ])

Ameluz Gel 2 gr USA commercial ([ *** ])


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Agreement on contract manufacturing, supply and confidentiality

Ameluz Gel 2 gr CHE (Hapila)

Ameluz Gel 2 gr UK Muster (Hapila)

Ameluz Gel 2 gr USA drug sample ([ *** ])

Ameluz Gel 2 gr UK (Hapila)

Ameluz Gel 2 gr DNK-NOR-SWE ([ *** ])

Placebo Gel

Product description: cosmetic products

Belixos Creme 5 ml DEU Belixos Creme 30 ml DEU Belixos Creme 30 ml Export

The specifications are listed in the registered dossiers.

	For the FRIKE Group (Glaropharm AG):

	(legally valid signature)

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Annex 2

Master Agreement

BIOFRONTERA

and

GLAROPHARM AG

Quality agreement

New version valid from October 2017

(Place, date)


Visum FRIKE		AG Visum

Agreement on contract manufacturing, supply and confidentiality

Annex 3

Master Agreement

BIOFRONTERA

and

GLAROPHARM AG

Prices, bases, payment target and PQR costs

	[ ***** ] batch per tube in CHF**	[ ***** ] batch per tube in CHF**
Article description

Ameluz Gel 2 gr DEU (Hapila)	[ ******* ]	[ ******* ]

Ameluz Gel 2 gr NLD ([ ******* ])	[ ******* ]	[ ******* ]

Ameluz Gel 2 gr BEL (Hapila)	[ ******* ]	[ ******* ]

Ameluz Gel 2 gr ESP Reimbursement (Hapila)	[ ******* ]	[ ******* ]

Ameluz Gel 2 gr UK ([ ******* ])	[ ******* ]	[ ******* ]

Ameluz Gel 2 gr ESP Non Reimbursement (Hapila)	[ ******* ]	[ ******* ]

Ameluz Gel 2 gr DEU Muster (Hapila)	[ ******* ]	[ ******* ]

Ameluz Gel 2 gr ESP Muster (Hapila)	[ ******* ]	[ ******* ]

Ameluz Gel 2 gr NLD Muster ([ ******* ])	[ ******* ]	[ ******* ]

Ameluz Gel 2 gr UK Muster ([ ******* ])	[ ******* ]	[ ******* ]

Ameluz Gel 2 gr ISR (Hapila)	[ ******* ]	[ ******* ]

Ameluz Gel 2 gr BEL Muster (Hapila)	[ ******* ]	[ ******* ]

Ameluz Gel 2 gr DEU ([ ******* ])	[ ******* ]	[ ******* ]

Ameluz Gel 2 gr ESP Reimbursement ([ ******* ])	[ ******* ]	[ ******* ]

Ameluz Gel 2 gr DEU Muster ([ ******* ])	[ ******* ]	[ ******* ]

Ameluz Gel 2 gr USA commercial ([ ******* ])	[ ******* ]	[ ******* ]

Ameluz Gel 2 gr CHE (Hapila)	[ ******* ]	[ ******* ]

Ameluz Gel 2 gr UK Muster (Hapila)	[ ******* ]	[ ******* ]

Ameluz Gel 2 gr USA drug sample ([ ******* ])	[ ******* ]	[ ******* ]

Ameluz Gel 2 gr UK (Hapila)	[ ******* ]	[ ******* ]

Ameluz Gel 2 gr DNK-NOR-SWE ([ ******* ])	[ ******* ]	[ ******* ]

Ameluz Gel 2 gr mit Hapila API ohne FS und Gl	[ ******* ]	[ ******* ]

Ameluz Gel 2 gr mit Parabolic API ohne FS und Gl	[ ******* ]	[ ******* ]

Ameluz Gel 2 gr Placebo ohne API ohne FS und Gl	[ ******* ]	[ ******* ]


Visum FRIKE		AG Visum

Agreement on contract manufacturing, supply and confidentiality

Bases:

In the case of small batches of [ *** ], at least [ *** ] batches shall be produced in a campaign.

Batch splits shall be charged at CHF [ *** ] per split due to additional expense.

Stability studies, validation work and development contracts shall be offered and invoiced separately.

If the following occurs during the course of the year:

•

Biofrontera approves a new laboratory for analysis work,

•

Biofrontera delivers larger Hapila API batches

•

forthcoming modifications to prices of raw materials and packaging materials of > +/- 5 %

the new costs shall be taken into account in price structuring.

Bonus regulation for sales goods and market samples (forecast: [***] units for 2018)

If more than [ *** ] tubes are sold per calendar year, Glaropharm shall pay a

•

a) Bonus from [ *** ] units of: CHF [ *** ]/unit

(->max. CHF [ *** ] if [ *** ] units are reached)

•

b) Bonus from [ *** ] units of: CHF [ *** ]/unit

(example: given [ *** ] units -> [ *** ] x [ *** ] = CHF [ *** ] + CHF [ *** ] from a) = total CHF [ *** ])

Payment shall be made in [ *** ] of the new year

	2 \| 3
Visum FRIKE		AG Visum

Agreement on contract manufacturing, supply and confidentiality

Payment target:

[ *** ] days net, from invoicing date

Delivery:

FCA Mitlödi (Incoterms 2015)

The contract products must be transported pursuant to the currently valid GDP guidelines on a temperature-controlled basis and in vehicles qualified for such purpose. The warehousing and transportation temperature must lie between 2° and 8°C.

PQR costs:

Batch 1-5: CHF [ *** ]/PQR

Batch 6-10: + CHF [ *** ] per batch


(Place, date)	(Place, date)

For the Customer:	For the FRIKE Group (Glaropharm AG) :

(legally valid signature)	(legally valid signature)

	3 \| 3
Visum FRIKE		AG Visum

Agreement on contract manufacturing, supply and confidentiality

Annex 4

Master Agreement

BIOFRONTERA

and

GLAROPHARM AG

Materials provided free of charge by Biofrontera

Material		Manufacturer
Aminolevulinic acid HCl		[ ******* ]
Aminolevulinic acid HCl		Hapila
Phospholipon 90 G		Phospholipid GmbH Deutschland

(Place, date)

For the FRIKE Group (Glaropharm):

(legally valid signature)


Visum FRIKE		AG Visum

Exhibit 10.2

Manufacturing and Supply Agreement
(Projekt H 2000)

This Manufacturing and Supply Agreement (together with its Attachments, which are incorporated herein by reference, the "Agreement") is made on June 1st, 2015 (the "Effective Date") by and between Hapila GmbH, Otto-Schott-Straße 9, 07552 Gera, Germany ("Hapila") and Biofrontera Pharma GmbH, HemmelratherWeg 201, D-51377 Leverkusen, Germany ("Biofrontera"). Hapila and Biofrontera are hereinafter also referred to individually as "Party" or collectively as "Parties".

WHEREAS:

Hapila has substantial experience and expertise in the development and manufacturing of active pharmaceutical ingredients (APls);

Biofrontera is active in the registration and commercialization of pharmaceutical products, in particular for dermatology. Biofrontera obtained in 2011 an approval in the European Union for the drug product Ameluz® Ameluz ® is used for photodynamic therapy and contains the active substance 5-aminolevulinic acid hydrochloride.

Biofrontera contracted Hapila in 2012 with the development of a synthesis process and the required analytical methods and necessary stability tests to manufacture 5- aminolevulinic acid hydrochloride (“API") according to GMP. Biofrontera has financed the process and analytical development, stability studies, establishment and validation of the analysis methods and the process validation.

With Hapila's support Biofrontera has written an Active Substance Master File (ASMF) for the API. Biofrontera holds the ASMF (ASMF holder) while Hapila acts as Active Substance Manufacturer (ASM). The ASMF was submitted by Biofrontera in the EU and third countries in support of the regulatory dossier for the drug product Ameluz in order to use the API manufactured by Hapila for the manufacturing of Ameluz.

All rights related to Ameluz, the ASMF for the API and all processes and methods developed with financing provided by Biofrontera are the exclusive property of Biofrontera.

Biofrontera wishes to have the API manufactured and supplied (as defined below) by Hapila according to the terms set out in this Agreement;

The parties have agreed to enter into this Agreement detailing the terms upon which the API will be supplied;

Hapila and Biofrontera intend to implement this Agreement in connection with a separate Quality Agreement, dated September, 12 ^th 2014, and any amendment thereto (all together the "Quality Agreement", as defined below in section 5.3) will be subject to and incorporating by reference the terms of this Agreement.

NOW, THEREFORE, the Parties hereby agree as follows:

Definitions

In this Agreement the following expressions shall have the following meaning unless the context requires otherwise:

"Active Pharmaceutical Ingredient, API" shall mean active pharmaceutical ingredient 5- aminolevulinic acid hydrochloride.

"Affiliate" shall mean any corporation, company, partnership, joint venture and/or firm that controls, is controlled by, or is under common control with a Person. For purposes of this definition, "control" means (a) in the case of corporate entities, direct or indirect ownership of at least fifty percent (50%) of the stock or shares having the right to vote for the election of directors, and (b) in the case of non-corporate entities, direct or indirect ownership of at least fifty percent (50%) of the equity interest with the power to direct the management and policies of such non-corporate entities.

"Agreement" shall have the meaning as defined in the recitals.

"Applicable Laws" shall mean all current laws, regulations, directives, guidelines and other requirements of competent authorities, including without limitation all European Good Manufacturing Practice standards, as amended from time to time, which are applicable to the activities under this Agreement.

"Batch Size" shall mean appr. [ *** ] (in words: [ *** ], range from [ *** ]) of Product or such other size as the Parties may agree from time to time. If the Parties agree to change the Batch Size, then the Parties shall at the same time agree about a corresponding change of the Purchase Price.

"GMP" shall mean Good Manufacturing Practice as defined by Council Directive 2003/94/EC and/or any other applicable regulatory authority.

"Change" shall mean a variation to the Product, the Specification and/or to this Agreement.

"Confidential Information" shall mean any and all information and materials (whether or not patentable) disclosed in writing, electronically, orally or otherwise by or on behalf of Biofrontera or any of its Affiliates to Hapila or any of its Affiliates, or on behalf of Hapila or any of its Affiliates to Biofrontera or any of its Affiliates.

"Delivery Date" shall mean the date of delivery for Product as specified by HAPILAin its confirmation to the respective Purchase Order.

"Delivery Destination" shall mean the delivery destination for the Product, which shall be Biofrontera GmbH, Hemmelrather Weg 201, D-51377 Leverkusen, Germany unless otherwise specified by Biofrontera in the respective Purchase Order and agreed to by Hapila.

" ASMF " or "DMF" shall mean the "Active Substance Master File" or the "Drug Master File" written by Biofrontera with support byHapila.

"Effective Date" shall have the meaning as defined in the preamble.

"End-Product" shall mean a pharmaceutical formulation as finished dosage form containing the Product as sole active pharmaceutical ingredient for human use

“Facility" shall mean Hapila's facility situated at Otto-Schot-tStra e 9, D-07552, Gera, Germany.

“ Force Majeure ” shall have the meaning as defined in sec. 13.2.

“Initial Term " shall mean a time period of five (5) years from the Effective Date.

"Manufacture" and “ Manufacturing ” shall mean all activities related to the manufacture, testing, release, storage and/or shipment of Product.

"Minimum Shelf Life" shall mean, with respect to Product, a remaining shelf life of at least [ *** ] of the total shelf life for Product as approved by the regulatory authorities in the respective countries in the Territory.

"Process" shall mean the manufacturing process developed by Hapila on behalf of Biofrontera according to the Project Plans "Projektvorschlag H 2000" (drafts 1 to 3) and the corresponding offers 2011-0048, 2012-0003, 2012-0032 and 2013-0005 as accepted by Biofrontera.

"Product Warranties" shall have the meaning as defined in Section 5.5.

"Purchase Order" shall have the meaning as defined in Section 3.3.

"Purchase Price" shall mean the price payable by Biofrontera or its Affiliates to Hapila under this Agreement for Product, as specified in Attachment 1.

Quality Assurance Agreement" shall have the meaning as defined in Section 5.3.

"Specifications" shall mean the specifications for Product as approved in the marketing authorization(s) for End-Product, as may be amended from time to time by Biofrontera.

“Territory" shall mean European Union (EU) and third-countries which accept EU Guidelines for GMP (e.g. Israel and Switzerland).

"Third Party" shall mean any person or entity other than Hapila and Biofrontera and Affiliates of Biofrontera.

Supply of Products

Supply and Purchase, Exclusivity

2.1 Supply and Purchase. Hapila shall Manufacture and deliver Product to Biofrontera, and Biofrontera shall purchase Product from Hapila pursuant to and in accordance with the terms and conditions of this Agreement.

2.2 Purchase Obligation. Biofrontera is not obliged to purchase API exclusivel y from Hapila. However, Biofrontera will be obliged to purchase enough API from Hapila per year to produce at least [ *** ] of the drug product Ameluz to be marketed in Territory, provided that Hapila fulfills its quality and delivery obligations. [ *** ] before expiry of the Initial Term, the Parties shall negotiate in good faith a possible extension of the aforementioned percentage of Biofrontera's supply, provided that any said extension is compliant with the then applicable antitrust and competition laws in the Territory. For the avoidance of doubt, upon expiry of the Initial Term in circumstances where the Parties do not mutually agree on a prolongation of the above percentage, Biofrontera's obligation to purchase at least API for [ *** ] of the Ameluz sold in the Territory shall expire. The purchase of Product from Hapila shall, however, remain possible during the remainder of the term of the Agreement.

2.3 Exclusivity Sale Obligation: Hapila shall exclusively sell API (5-aminolevulinic acid hydrochloride) to Biofrontera. Hapila will not provide API or its salt forms to other customers or any third party without the prior approval by Biofrontera. Biofrontera will be the exclusive ASMF holder unless otherwise decided and communicated in writing by Biofrontera to Hapila.

Forecasts, Orders and Delivery

3.1 Forecasts. Biofrontera shall use reasonable efforts to assist Hapila with its production planning by providing Hapila with non-binding [ *** ] rolling written forecasts of its Product requirements for the next [ *** ] . Forecasts will be updated by Biofrontera on a [ *** ] basis. Hapila acknowledges and agrees that any forecast or any other estimate given by Biofrontera shall be non-binding, and shall not constitute any obligation whatsoever to place any Purchase Orders or otherwise to purchase or pay for any Product.

3.2 Amounts. The annual requirement of API is about [ *** ] in the year 2015, and is expected to increase in the following years according to the written forecasts provided by Biofrontera.

3.3 Purchase Orders. Hapila shall Manufacture and supply Product according to purchase orders placed by Biofrontera and/or its Affiliates pursuant to the terms hereof (each a "Purchase Order"). Purchase Orders shall be made in writing at least [ *** ] calendar days prior to the Delivery Date for the first order and [ *** ] calendar days prior to the Delivery Date for any subsequent order, and shall determine quantity of Product ordered, stated as multiples of the Batch Size, and the Delivery Date for the ordered Product. Hapila shall confirm each Purchase Order placed by Biofrontera under this Agreement in writing within [ *** ] business days of it being placed, provided however that Hapila shall fulfill any Purchase Order placed by Biofrontera in accordance with this Agreement regardless of whether or not such Purchase Order has been confirmed as long as the purchase order does not exceed the according forecast by more or less than [ *** ] .

3.4 Delivery Terms. Hapila shall deliver Products on the Delivery Date confirmed and to the Delivery Destination (as specified in the respective Purchase Order). Delivery shall be made [ *** ] . The transport will be organized by and within the responsibility of Hapila but the costs will be passed through to Biofrontera. Hapila shall inform Biofrontera of the concrete Delivery Date at least [ *** ] calendar days before such delivery takes place.

Purchase Price

4.1 Purchase Price. In consideration for Product delivered by Hapila to Biofrontera in accordance with this Agreement, Biofrontera shall pay to Hapila the Purchase Price. Any payments under this Agreement shall be paid in Euro in full without any deduction or withholding of taxes, except to the extent required by Applicable Laws. If any taxes are required to be deducted or withheld by Biofrontera pursuant to Applicable Laws, Biofrontera will (i) pay the taxes to the taxing authority, (ii) send proof of such payment to Hapila, and (iii) use reasonable efforts to assist Hapila in its efforts to obtain a credit for such tax payment. Each Party agrees to use reasonable efforts to assist the other Party in claiming any legal exemptions from the respective obligation to deduct or withhold tax under double taxation treaties available under applicable double tax treaties or other Applicable Laws.

4.2 Purchase Price. During the Initial Term the Purchase Price will be according to Attachment 1.

4.3 Invoice, Payment. Hapila shall invoice Biofrontera for each shipment of Product. Payment of the Purchase Price for any Product delivered in accordance with the terms of this Agreement shall become due [ *** ] after receipt of the invoice and delivery of the Product to which the invoice corresponds.

Manufacture, Quality Assurance and Pharmacovigilance

5.1 Permits and Licenses. At all times during the term of this Agreement, Hapila shall hold and maintain in good standing all required and advisable authorizations and permits needed for the Manufacture and supply of the Product for the manufacturing of API in the Territory. Hapila shall promptly inform Biofrontera in writing in the event any such authorization or permit is not obtained in a timely manner or is withdrawn or is threatened to be withdrawn.

5.2 Subcontractors. Hapila shall be entitled to have the API manufactured by Hapila with the involvement of Third Parties provided that such Third Parties are registered as manufacturers or contract testing laboratories in the ASMF for the API and the marketing authorizations for Ameluz. Hapila shall in any event be fully responsible and liable for the fulfillment of Hapila's obligations under this Agreement by its subcontractors, including without limitation to Manufacture and deliver Product in accordance with the terms and conditions of this Agreement. Hapila shall not be entitled to change any manufacturer, subcontractor and/or the Process and/or the API or its Third Party supplier thereof without prior written consent of Biofrontera.

5.3 Quality Assurance Agreement. Further responsibilities and obligations of the Parties with respect to the quality of the Product and related responsibilities of the Parties are defined in a separate written quality assurance agreement, signed between the Parties with effective date September 12th, 2014, and any amendment thereto (all together the "Quality Assurance Agreement"). The Quality Assurance Agreement and, after signing, any amendment thereto shall become part of this Agreement. If there is any conflict between the terms of this Agreement and the Quality Assurance Agreement, commercial terms shall prevail of this Agreement, and terms covering regulatory or legal requirements shall prevail of the Quality Assurance Agreement.

5.4 Changes. Any changes relating to the Process, Manufacture, storage and supply of Product are subject to the change management and change approval provisions as set forth the Quality Assurance Agreement. Actual and direct costs incurred by a Party as a result of changes will be allocated as follows:

5.4.1 Costs Borne by Hapila. Hapila shall solely bear all actual and related costs resulting from changes requested by Hapila (irrespective of any approval of such changes by Biofrontera) and costs related to the establishment and maintenance of GMP or changes required by modifications of applicable laws and GMP requirements inherent to manufacturing of any active substance or to findings from inspections by the local Competent Authorities.

5.4.2 Costs Borne by Biofrontera. Biofrontera shall solely bear all actual and related costs resulting from (i) changes requested by Biofrontera, or (ii) changes requested or required by regulatory authorities relating to the marketing of Ameluz (other than changes listed under Section 5.4.1(ii) above), or (iii) changes in the materials and/or suppliers of any starting materials or other materials used for the Manufacture of Product (including the Active Substance) mandated by a regulatory authority in relation to the marketing of Ameluz or required by Biofrontera.

5.5 Product Warranties. Hapila warrants that any Product shall, at the time of delivery (i) fully meet the Specifications, (ii) have been Manufactured and supplied in compilance with all Applicable Laws, the Process and the requirements set out in the Quality Assurance Agreement, (iii) be free from defects, (iv) have a remaining shelf life of at least the Minimum Shelf Life, and (v) be free from any liens, encumbrances or other Third Party rights (the "Product Warranties").

5.6 Pharmacovigilance. As between the Parties Biofrontera shall be responsible for fulfilling the pharmacovigilance obligations under Applicable Laws related to the final drug product.

Inspection and Defects

6.1 Visual Inspection. After delivery of a shipment of the API, Biofrontera or a Third Party on behalf of Biofrontera will perform incoming visual inspection of the Product delivered and the associated batch documentation. For the purposes of this Agreement, "visual inspection" shall mean:

(i) comparing the applicable Purchase Order against the documentation accompanying the shipment to verify that the identity, quantity and exterior shipment packaging and labeling comply with the Purchase Order ;

(ii) verifying that the certificate(s) of analysis and other batch documentation for the shipment shows that the Product conforms in all material respects to the Product Specifications; and

(iii) visually inspecting the exterior of the packaging of Product to verify that the shipment appears to be in good condition.

If any shipment of Product is incomplete, damaged or fails to comply with the Product Specifications as evident from the accompanying certificate of analysis, Biofrontera shall inform Hapila thereof no later than [ *** ] days after receipt of the shipment. In the absence of such notice given by or on behalf of Biofrontera within the aforesaid period, Biofrontera shall be deemed to have accepted such delivery of Product subject only to the provisions of the following section 6.2.

6.2 Notwithstanding the foregoing, Hapila shall remain liable to Biofrontera for any latent defect in compliance with the Product Warranties that subsequently is discovered,by e.g. further laboratory testing as defined in the Quality Assurance Agreement, in a shipment of Product provided that Biofrontera informs Hapila by notice in writing of such latent defect not later than [ *** ] days from the date of discovery of such latent defect stating in reasonable detail the basis for the assertion of a latent defect.

6.3 Remedies for Defective Product. If the Product delivered by Hapila has a defect and if Biofrontera has fulfilled its duties of inspection according to sec. 6.1, Biofrontera shall have the right to reject such defective Products and to demand replacement whereas other legal remedies are excluded. If Hapila refuses to replace the Product or Hapila's attempts to replace the defective Products with Products as defined in this Agreement have failed [ *** ] , then Biofrontera shall have the right to either terminate the concrete Purchase Order or to terminate the concrete Purchase Order and this Supply Agreement. Other legal remedies shall be excluded.

6.4 Independent Testing. In the event the Parties disagree as to whether the Product delivered conforms to the Product Warranties, the rejected Product along with all associated batch documentation shall be submitted to a mutually acceptable Third Party testing laboratory, which will determine whether such Product conforms to the Product Warranties, provided however that Hapila's obligations under Section6.3, including without limitation its obligations to replace Product, shall not be suspended or otherwise affected. The Parties agree that such testing laboratory's determination shall be final and binding on the Parties. The Party against whom the testing laboratory rules will bear the reasonable costs of the testing laboratory. If the testing laboratory rules that the Product meets the Product Warranties, Biofrontera will purchase the Product at the Purchase Price, irrespective of whether Hapila has already replaced such Product. If the testing laboratory rules that the Product does not meet the Product Warranties and the Product was not previously replaced, Hapila shall at Biofrontera's option refund the Purchase Price for the affected Batch(es) of Product to Biofrontera.

Inspections and Audits

7.1 Inspections by Regulatory Authorities. For any competent authority's audit and/or inspection of Hapila's facilities involved in the manufacture, supply or shipment of the Product the relevant provisions in the Quality Agreement shall apply.

7.2 Audits. Upon Hapila's receipt of at least [ *** ] notice from Biofrontera, Hapila will give employees or authorized representatives of Biofrontera, its Affiliates or License Partners for third countries access to any facilities and records related to the Manufacture of Product, including any facility and records of Hapila's subcontractors for the Product or Active Substance, in order to audit Hapila's compliance with the terms of this Agreement. The scope and manner of each audit shall be determined by Biofrontera in consultation with Hapila, provided that each audit shall have a duration of [ *** ] unless determined otherwise by Biofrontera. If any Third Party's facilities are involved in the Manufacture and shipment of Product, Hapila shall ensure that such Third Party also adheres to the obligations under this Section 7.2.

Warranties, Indemnifications, Limitation of Liability

Warranties

Each Party represents and warrants that to the best of its knowledge, neither the execution and delivery of this Agreement by it nor its performance hereunder conflicts with or will result in any violation or breach of, or constitute (with or without due notice or lapse of time or both) a default under any of the terms or conditions of any license, agreement or other instrument or obligation to which it is a party or by which it or any of its properties or assets may be bound, or violates any statute, law, rule, regulation, writ, injunction, judgment, order or decree of any court, administrative agency or governmental authority binding on it or any of its properties or assets.

Indemnification

9.1 Indemnification by Hapila.

Hapila's liability with respect to any claim under this agreement shall be limited to the extent of coverage of the liability insurance of Hapila with respect to such claim, but in each occurrence not more than a maximum amount of [ *** ].

9.2 Indemnification by Biofrontera. Subject to any limitation of liability explicitly set out in this Agreement, Biofrontera shall indemnify and hold Hapila, its Affiliates and their respective officers, employees and agents harmless from and against all Losses resulting from all claims, demands, actions and other proceedings by any Third Party to the extent arisingfrom (i) the willful and/or gross negligent breach of any representation, warranty or any other obligation under this Agreement, and/or (ii) non-compliance of Biofrontera' actions or omissions as distributor of any End-Product with Applicable Laws, except to the extent that any such Loss is resulting from willful or negligent act or omission of Hapila.

9.3 Procedure. Upon the filing of any such claim or suit, the Party seeking indemnification hereunder (the "Indemnified Party") shall immediately notify the other Party (the "Indemnifying Party") thereof, shall give full information and reasonable assistance in the defense or settlement of such claim or suit and shall permit such Indemnifying Party at its cost, to handle and control such claim or suit; provided, however, that the Indemnified Party may, at its own expense, retain such additional attorneys as it may deem necessary. The Indemnified Party's attorneys will be permitted by the Indemnifying Party and its attorneys to reasonably observe and/or participate in all aspects of the defense of such claims or suits. The Indemnifying Party shall have the right, after consultation with the Indemnified Party, to resolve and settle any such claims or suits, provided, that in no event may the Indemnifying Party compromise or settle any such claim in a manner which admits fault or negligence on the part of the Indemnified Party or includes injunctive relief or includes the payment of money or other property by the Indemnified Party without the prior written consent of the Indemnified Party.

10.

Limitation of Liabilities, No Other Warranties

10.1 Limitation of Liability. Except as expressly set forth in this Agreement, neither Party shall be liable for any special, indirect, consequential or incidental damages, except to the extent such damages were caused by intentional misconduct or gross negligence.

10.2 Personal Injury and Death. Neither Party seeks to exclude or limit liability for death or personal injury caused by its negligence or for fraud or fraudulent misrepresentation or for any liability that cannot legally be excluded or limited under any applicable law.

10.3 No Other Warranties. EXCEPT AS OTHERWISE EXPRESSLY SET FORTH IN THIS AGREEMENT, EACH PARTY EXPRESSLY DISCLAIMS, WAIVES, RELEASES AND RENOUNCES ANY WARRANTY, EXPRESS OR IMPLIED, INCLUDING, WITHOUT LIMITATION, ANY WARRANTY OF TITLE, NON-INFRINGEMENT, MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE.

Term and Termination

11.

Term and Termination

11.1 Term. This Agreement shall become effective on the Effective Date and shall, unless terminated earlier according to the provisions of this Agreement, continue in force and effect for the Initial Term. Thereafter, the term of this Agreement shall be automatically extended by subsequent one (1) year periods, unless terminated by Biofrontera in its sole discretion by giving Hapila written notice, such notice to be given no later than six (6) months prior to expiry of the then current term.

11.2 Termination by Biofrontera upon Delivery Failures, Force Majeure or due to critical failures.

11.2.1 Biofrontera shall have the right to terminate the purchase agreement in Section 2.2, and Biofrontera shall be free to Manufacture Product and/or to obtain Product from any other source, if Hapila has not met its obligations to timely fill a binding Purchase Order in full and/or with Product that meets the Product Warranties, and such failure (i) occurs more often than [ *** ] , or (ii) with respect to one or more Purchase Orders, continues for a period of time of [ *** ] ;

11.2.2 Biofrontera shall be entitled to terminate this Agreement with immediate effect by giving written notice to Hapila in the event that a Force Majeure situation with respect to any obligations of Hapila continues for more than [ *** ] ;

11.3 Termination by Either Party. Either Party may terminate this Agreement in its entirety with immediate effect by giving written notice to the other Party in any event that constitutes a good cause under German Civil Law (K0ndigung aus wichtigem Grund). An event of good cause shall be the following events:

11.3.1 in the event of a material breach by the other Party of, or default with, its obligations under this Agreement or the Quality Agreement which breach or default has not been cured by the other Party within [ *** ] after receiving written notice from the terminating Party requiring it to cure such breach; or

11.3.2 if the other Party refuses to perform or to continue to perform its obligations under this Agreement, or

11.3.3 in the event that any third party deviant from, and without being controlled by, the other Party's ultimate parent as of the date hereof is entitled to directly or indirectly control the other Party, whether by the majority of the voting rights, on a contractual basis or otherwise; or

11.3.4 in the event that the other Party files for insolvency or bankruptcy, shall be adjudicated insolvent or bankrupt, shall file a petition under insolvency laws, shall be dissolved or shall have a receiver appointed for substantially all of its property.

12.

Consequences of Termination

12.1 General Consequences of Termination. Except as explicitly set out otherwise in this Agreement, the expiry or termination of this Agreement shall have the following consequences:

12.1.1 Each Party shall return the other Party's Confidential Information disclosed under this Agreement within fourteen (14) days after expiry or termination of this Agreement and receipt of a respective request from the Disclosing Party, subject to retention of one archival copy which shall be kept confidential and may be used solely for the purpose of monitoring compliance with the confidentiality and non-use provisions of this Agreement.

Miscellaneous

13.

Miscellaneous

13.1 Publicity. Each Party agrees not to issue any press release or other public statement, whether oral or in writing, disclosing the existence of this Agreement, the terms hereof or the Parties' relationship under this Agreement without the prior written consent of the other party, such consent not to be unreasonably withheld, conditioned or delayed, provided, however, that neither Party will be prevented from complying with any duty of disclosure it may have pursuant to law or governmental regulation or pursuant to the rules of a recognized stock exchange. However, in the latter case, the Parties shall, to the extent reasonably practicable, consult with each other and coordinate the wordings of any such announcements.

13.2 Force Majeure. Neither Party shall be liable to the other for any delay or nonperformance of its obligations under this Agreement to the extent it arises from national emergency, act of God, fire, floods, earth-quakes, strikes, riots or any other cause beyond the reasonable control of a Party ("Force Majeure"). The affected Party shall promptly notify the other Party in writing of the cause and the likely duration of the delay or nonperformance and provided that the affected Party shall use reasonable endeavors to limit the effect of such event on the other Party; the performance of the affected Party's obligations, to the extent affected by the cause, shall be suspended during the period that the cause persists.

13.3 Notifications. Any notice required or permitted to be given under this Agreement shall be in writing and in English, and shall be sufficiently given if delivered by prepaid courier or sent by facsimile to the Party to whom such correspondence is required or permitted to be given. All correspondence shall be addressed as follows, provided that either Party may, by giving notice as provided in this Article, change its address for receiving such notice:

If addressed to Hapila:

Hapila GmbH

Otto-Schott-StraBe 9

07552 Gera

If addressed to Biofrontera:

Biofrontera Pharma GmbH

HemmelratherWeg 201

D-51377 Leverkusen, Germany

13.4 Assignment. Unless explicitly agreed upon in this Agreement, this Agreement is not assignable or transferable by either Party without the prior written consent of the other Party.

13.5 Waiver. No omission or delay on the part of any Party hereto to enforce at any time any of the provisions of this Agreement shall be deemed or construed to be a waiver by the omitting Party of any such provision or of its rights hereunder nor shall any single or partial exercise of any right or remedy preclude any further or other exercise of such right or remedy.

13.6 Entire Understanding, Amendments, Conflicts. This Agreement constitutes and incorporates the complete and exclusive understanding of the terms of the agreement between the Parties hereto with respect to the subject matter hereof. No modifications, amendments or supplements to this Agreement shall be effective for any purpose unless in writing signed by each Party.

13.7 Severability. If any provision of this Agreement is found by any court or administrative body of competent jurisdiction to be invalid or unenforceable, the invalidity or unenforceability of such provision shall not affect the other provisions of this Agreement, and all provisions not affected by such invalidity or unenforceability shall remain in full force and effect. The Parties agree to attempt to substitute for any invalid or unenforceable provision a valid or enforceable provision which achieves to the greatest extent possible the economic objectives of the invalid or unenforceable provision.

13.8 Governing Law and jurisdiction. This Agreement shall be governed by and construed in accordance with the laws of Germany with the exception of its conflict of law rules. Any dispute arising out of or in connection with this Agreement will be finally settled by the District Court at Berlin without limiting any right of appeal.

13.9 Counterparts. This Agreement may be executed in counterparts and all of such counterparts taken together shall be deemed to constitute one and the same instrument.

IN WITNESS WHEREOF, the Parties have executed this Agreement effective as of the Effective Date:

Hapila GmbH			Biofrontera Pharma GmbH

Date:			Date:

By:/s/ [ ******* ]			By:/s/ [ ******* ]
Name: [ ******* ]			Name: [ ******* ]

Date:			Date:

By:			By:/s/ [ ******* ]
Name:			Name: [ ******* ]

Attachment 1 - Purchase Price

I. Purchase Price: The Purchase Price according to 1. is based on the concept of an annual amount up to [ *** ] . This quantity of API can be produced in Hapila's qualified [ *** ] . If Biofrontera's Forecast announces annual quantities of more than [***], the parties will discuss transferring the process to a [ *** ] . The transfer will only take place with Biofrontera's approval. For Products produced in this [ *** ] the Purchase Price defined in 2. shall apply.

Price/kg for Product produced in the existing [ *** ] :

The Purchase price shall be [ *** ] .

Price/kg for Product produced after upscaling to a [ *** ] :

The Purchase price shall be [ *** ] .

Exhibit 10.3

SUPPLY AGREEMENT

This Supply Agreement ("Agreement") has been made on the 1st day of January 2017 ("Effective Date") by and between

Biofrontera Pharma GmbH, a company with its head office at Hemmelrather Weg 201, D-51377 Leverkusen, Germany (hereinafter called "BIOFRONTERA") and

Midas Pharma GmbH, a company with its head office at Rheinstr. 49, D-55218 lngelheim, Germany (hereinafter called "MIDAS")

PREAMBLE

WHEREAS , MIDAS has developed and holds a European Active Substance Master File (ASMF) and a US Drug Master File (DMF) for the active pharmaceutical ingredient 5-Aminolevulinic acid Hydrochloride that is currently manufactured on behalf and order of MIDAS at a third party contract manufacturing organization; and

WHEREAS , BIOFRONTERA is in possession of a registration dossier for a finished pharmaceutical form with the active substance 5-Aminolevulinic acid Hydrochloride that refers, among others, to the ASMF and DMF of MIDAS; and

WHEREAS , BIOFRONTERA is willing to purchase the active pharmaceutical ingredient from MIDAS and

WHEREAS , MIDAS is willing to supply the active pharmaceutical ingredient to BIOFRONTERA or, upon request of BIOFRONTERA, directly to its contract manufacturers; and

WHEREAS , BIOFRONTERA and MIDAS signed a binding Letter or Intent (LoI) on 29 December 2012, that sets forth several rights and obligations of MIDAS and BIOFRONTERA, respectively, to be incorporated into this Agreement.

NOW THEREFORE _, in consideration of the foregoing recitals, which are expressly incorporated into the body of this Agreement, the Parties mutually agree as follows:

DEFINITIONS

1.1

" Active Substance Master File " or " ASMF " shall mean the drug master file formerly known as European Drug Master File (EDMF) as specified in the European Medicines Agency's Guideline on Active Substance Master File Procedure, and in Annex I to Directive 2001/83/EC as amended Part I, 3.2 Basic principles and requirements, (8) Active Substance Master File (for Human medicinal products).

1.2

“ Agreement ” shall mean this Supply Agreement between BIOFRONTERA and MIDAS.

1.3

" Affiliate(s) " shall mean with respect to either Party, any person, partnership, corporation, organization or entity that directly or indirectly controls or is directly or indirectly controlled by or is under common control with such Party. A person or entity shall be regarded as controlling entity, if (i) it owns more than fifty percent of the voting stock or other ownership interest of such other entity; or (ii) it directly or indirectly possesses sufficient authority to direct the adoption and I or execution of the policies, management or operations of such entity by any means whatsoever.

1.4

" Annual Minimum Amount " shall mean at least [***] of the annual purchasing requirements of the AP! by BIOFRONTERA.

1.5

" API " shall mean the active pharmaceutical ingredient 5-Aminolevulinic acid Hydrochloride as manufactured by the MANUFACTURER and supplied by MIDAS.

1.6

" APPROVED COMPETITOR " shall mean a competitor comparable to the MANUFACTURER, that manufactures in compliance with GMP and is accepted by the competent Health Authorities in the EU or US.

1.7

" Confidential Information " shall mean all written information provided by MIDAS to BIOFRONTERA or by BIOFRONTERA to MIDAS and with regard to the API or the PRODUCT. The term "Confidential information" as used herein shall also include all terms and conditions of this Agreement.

1.8

" Drug Master File " or " DMF " shall mean the drug master file used for active pharmaceutical ingredients in the United States of America as specified by the U.S: Food & Drug Administration (FDA) of the U.S. Department of Health and Human Services,

1.9

" Effective Date " shall mean the date first written above.

1.10

" Health Authorities " shall mean any health authority in a given country, responsible for the evaluation of the registration dossier and the grant of the Marketing Authorisation for the PRODUCT.

1.11

" Initial Contractual Period " shall have the meaning given to it in Section 14.1.

1.12

" MANUFACTURER(S) " shall mean the manufacturer of the API as contracted by MIDAS and named in the ASMF or DMF, being [ *** ].

1.13

" Marketing Authorisation " shall mean any authorisation, which is legally required under applicable laws, regulations or administrative decisions, to launch the PRODUCT in a given country.

1.14

" Material Breach " shall mean any breach of this Agreement by one Party which, considering the nature and purpose of the Agreement, makes the continuation of this contractual relationship unreasonable for the non-breaching Party.

1.15

" Minimum Quantity " shall have the meaning given to it in Section 5.2 and Annex B.

1.16

" Party " shall mean each of the contracting parties, BIOFRONTERA and MIDAS separately, whereas "Parties" shall mean all of the contracting parties together.

1.17

" PRODUCT " shall mean a semisolid formulation for topical use with the API as one/as the main active ingredient as developed by BIOFRONTERA.

1.18

" Quality Agreement " shall mean a separate agreement between MIDAS governing, without limitation, cGMP and quality issues involved in the manufacture and control of the API and testing and release of the API for sale. The Parties agree to sign and execute the Quality Agreement prior to the first commercial supply of the API to BIOFRONTERA.

1.19

" SPECIFICATION " shall mean the specification of the API according to the current Certificate of Suitability (CEP) and/or Marketing Authorisation of the PRODUCT as stipulated in detail in the corresponding Quality Agreement.

1.20

" Third Party " shall mean any person or entity not being MIDAS or one of its Affiliates or BIOFRONTERA or one of its Affiliates.

1.21

" Working Day " shall mean each Day from Monday to Friday, except for national public holidays in Germany, Italy and India.

1.22

Headings are for convenience only and do not affect interpretation. The following rules apply unless the context requires otherwise.

The singular includes the plural and conversely.

A gender includes all genders.

A reference to a person, corporation, trust, partnership, unincorporated body or other entity includes any of them.

A reference to an agreement or document (including, without limitation, a reference to this Agreement) is to the agreement or document as amended, varied, supplemented or replaced, except to the extent prohibited by this Agreement or that other agreement or document.

SUBJECT OF THIS AGREEMENT

2.1

BIOFRONTERA contracts MIDAS with the supply of the API in accordance with the terms and conditions of this Agreement.

2.2

MIDAS accepts such appointment.

2.3

Both Parties agree to perform their respective obligations under this Agreement in accordance with the terms and conditions set forth herein and in accordance with all applicable national and European laws, regulations or directives.

EXCLUSIVITY OF SUPPLY

3.1

For the entire term of the Initial Contractual Period, Midas shall refrain from selling API to any Third Party within [***] . MIDAS will ensure that the commercial contract between MIDAS and MANUFACTURERs contains an exclusivity clause in accordance with this contract. Notwithstanding the provisions of this Section 3.1 above, MIDAS shall be entitled to (i) sell the API to Third Parties for use in the finished pharmaceutical product with the brand name [***] or for use in a generic version of [***] , and (ii) to use and sell the API for an own development and the commercialization of a generic version of [***] ,

3.2

As consideration for the exclusive supply of API to BIOFRONTERA for use in the Field of Use, BIOFRONTERA shall pay to MIDAS a [***] . Each lump sum payment shall be due [***] .

3.3

Provided that BIOFRONTERA purchases within a calendar year of the Initial Contractual Period more quantities of API than the Minimum Quantity then the lump sum payable by the 15th of December for the same year will be reduced by [***] .

For sake of clarity; if BIOFRONTERA purchases [***] (or more) in one calendar year in addition to the Minimum Quantity then the lump sum in this (same) calendar year as stipulated in Clause

3.2 above will be reduced to zero. Any quantity between [***] will reduce the lump sum partly.

3.4

After the Initial Contractual Period, the marketing restriction clause according to Clause 3.1 and the lump sum payment according to 3.2 will cease, if not otherwise agreed between the Parties prior to the expiry of the Initial Contractual Period.

OBLIGATIONS AND RIGHTS OF MIDAS

4.1

MIDAS' obligation shall be the supply of the API, as manufactured by the MANUFACTURER [ *** ], free of defects, in the agreed upon time and quantity and in accordance with the SPECIFICATION and the ASMF and DMF. Supply of API from any different MANUFACTURER than [ *** ] shall only be conducted upon prior mutual consent between the Parties. At the time of delivery of the API to the first carrier in accordance with incoterms 201O CPT, the API remaining re-test period for the API shall not be less than two years and shall be extended by another year upon availability of 48 months stability data from the ongoing ICH stability program.

4.2

Without assuming any liability towards BIOFRONTERA for a successful qualification, MIDAS develops [ *** ] as alternative qualified manufacturing site. Within the year 2016 at least three (3) validation batches of approximately [***] are planned for production and a stability programme is planned to be initiated with the aim to have the documentation including stability data relevant for the registration of [ *** ] as manufacturing site with EMA and US-FDA available by beginning of 2017. MIDAS will as soon as possible provide BIOFRONTERA with quantities of [***] from three different validation batches for the manufacture of PRODUCT in order to generate appropriate stability data for the submission of the change/variation in order to qualify [ *** ] as API MANUFACTURER for PRODUCT. Upon successful validation and registration of the new MANUFACTURER [ *** ] with the competent authorities, the validation batches (part of the Minimum Quantity and not exceeding the Minimum Quantity per annum) will be sold by MIDAS as commercial batches of API to BIOFRONTERA in 2017.

4.3

Unless already provided by MIDAS at the Effective Date, MIDAS shall provide BIOFRONTERA with all data and documentation necessary to enable BIOFRONTERA to add [ *** ] Italy, as MANUFACTURER to BIOFRONTERA's Dossier for the Product. Any such documentation shall be provided by MIDAS as soon as it is available at MIDAS without delay.

4.4

Upon request of BIOFRONTERA, MIDAS shall submit reasonable quantities of working standards and reference impurities of the API to BIOFRONTERA at its own cost, if such standards or reference materials are not elsewhere commercially available.

4.5

MIDAS shall file and maintain the ASMF and DMF and comply with all obligations as ASMF- and DMF holder according to relevant laws. After termination of this contract, MIDAS shall maintain the ASMF and DMF active as long as BIOFRONTERA has PRODUCT manufactured with MIDAS API on the market and the associated change/variation is approved.

4.6

MIDAS shall provide the Applicant's Part of the ASMF or a copy of the CEP for the API to BIOFRONTERA. MIDAS shall file the Restricted Part with the Health Authorities or fill in the declaration of access box of the CEP and issue the requested Letters of Access and Letters of Commitment, if necessary. Furthermore, MIDAS shall submit the US-DMF for the API to FDA in USA and provide BIOFRONTERA with a Letter of Authorisation.

4.7

MIDAS agrees to commit MANUFACTURER to not make any change in the manufacturing and/or testing processes for the API set out in the ASMF and/or US-DMF which is referred to in the registration dossiers and/or the Marketing Authorisations for the PRODUCT, without the prior written consent of BIOFRONTERA, which may not be unreasonably withheld. MIDAS shall notify BIOFRONTERA in writing of any changes that MANUFACTURER proposes to make to the SPECIFICATION, or the manufacturing procedures, for the APL MIDAS shall deliver with the notice required adequate documentation to enable BIOFRONTERA to determine whether such change requires regulatory notification or approval. As soon as reasonably practicable BIOFRONTERA shall notify MIDAS if the proposed change would require regulatory notification or Approval by the Health Authorities. In the event that any such proposed change would require regulatory notification or approval by the Health Authorities, BIOFRONTERA agrees that it will take the necessary steps to notify the Health Authorities or to obtain regulatory approval as soon as reasonably practicable. Unless and until BIOFRONTERA has obtained regulatory approval for such proposed changes, MIDAS shall commit MANUFACTURER to continue to manufacture the API supplied by MIDAS to BIOFRONTERA in accordance with the provisions of this Agreement, and such API shall conform with the SPECIFICATION and manufacturing processes previously approved.

O BLIGATIONS AND RIGHTS OF BIOFRONTERA

5.1

BIOFRONTERA undertakes to purchase and take at least the Annual Minimum Amount of the API from MIDAS for the Initial Contractual Period.

5.2

Notwithstanding the provision of Section 5.1, BIOFRONTERA at no time shall purchase less than a minimum yearly quantity of API per calendar year as set forth in Annex B to this Agreement ("Minimum Quantity") for the Initial Contractual Period.

5.3

Notwithstanding the foregoing provisions regarding the Annual Minimum Amount and the Minimum Quantity, BIOFRONTERA is only obligated to purchase the Minimum Quantity or Annual Minimum Amount if the MANUFACTURER [ *** ] is registered in the ASMF and DMF by MIDAS and accepted by the European Authorities (EMA) and by US-FDA.

5.4

BIOFRONTERA will order from MIDAS [***] of the validation batches manufactured by [ *** ] for MIDAS as soon as these batches are available. These quantities are part of the Minimum Quantity for 2017. The [***] price shall be [***] .

5.5

In the event that BIOFRONTERA omits to purchase from MIDAS (a) its Annual Minimum Amount or (b) the Minimum Quantity, whatever is the larger amount, MIDAS shall be entitled to invoice to BIOFRONTERA the value of the quantities of API not purchased by BIOFRONTERA and falling short of the Annual Minimum Amount or the Minimum Quantity, whatever is the larger amount ("Shortfall Quantity"). The exact value of the Shortfall Quantity shall be calculated by multiplying the Shortfall Quantity with the price of the API that was applicable during the period in which the Shortfall Quantity should have been purchased by BIOFRONTERA.

5.6

For the avoidance of doubt, BIOFRONTERA wishes to be supplied by the MANUFACTURER [ *** ] for the Initial Contractual Period and shall not be obligated to buy API from MIDAS that has been produced by MANUFACTURER and/or any other Third Party contract manufacturer of MIDAS that is not already known to BIOFRONTERA, registered in the ASMF and/or DMF and accepted by the relevant Health Authority. However, the acceptance and confirmation of any such newly selected manufacturer will not be unreasonably withheld by BIOFRONTERA.

PRICE AND PAYMENT TERMS

6.1

The prices for the API are listed in Annex A to this Agreement and will be fixed in Euro (EUR). The prices are to be understood CPT Switzerland or Germany (INCOTERMS 2010), excluding any fees charged by authorities for or related to the PRODUCT, the API, the ASMF, the DMF and the MANUFACTURER. Should BIOFRONTERA in future require a different delivery destination the Parties will discuss and agree on the respective terms and conditions for such supply. Any fees that are charged by any authority to MIDAS and/or MANUFACTURER and that are related to the use of API by BIOFRONTERA for manufacture, marketing or use of a finished pharmaceutical form within the USA shall be borne by BIOFRONTERA, or in case the respective fee is payable by MIDAS or MANUFACTURER, shall be reimbursed to MIDAS.

However, if charges are due to quality issues or non-compliance issues caused by MIDAS or its MANUFACTURERS then BIOFRONTERA shall not be obliged to absorb such cost.

6.2

BIOFRONTERA shall pay the agreed upon price for the API as invoiced by MIDAS within [***] from date of invoice of MIDAS.

6.3

Should the cost- and/or market situation change considerably to the disadvantage of one of the Parties, the Parties shall solve such a problem in a friendly way, balancing the interests of the Parties.

6.4

As regards the Annual Minimum Amount, BIOFRONTERA undertakes to accept during the Initial Contractual Period a price [***] . Should BIOFRONTERA receive a written quotation for an identical ASMF- or CEP-supported quality of the API offered by an APPROVED COMPETITOR which is more than [***] below the price of MIDAS, BIOFRONTERA shall provide written notice thereof to an independent Third Party, mutually agreed upon and appointed by the Parties hereto, for the purposes of verification and validation of said APPROVED COMPETITOR's offer as bona fide, in particular with regard to the APPROVED COMPETITOR's price and identical quality of the API. If the offer is bona fide, MIDAS shall have the right to match said Third Party price.

In case MIDAS cannot offer a price which is at [***] higher than the price of the APPROVED COMPETITOR, then BIOFRONTERA is free to purchase the quantities of the API which are offered at such lower price from the APPROVED COMPETITOR. After such quantities are called off from the APPROVED COMPETITOR, BIOFRONTERA shall purchase again the entire demand from MIDAS provided that MIDAS is offering a price which is at maximum five (5) % higher than the price of the APPROVED COMPETITOR.

Solely for avoidance of doubt, in case BIOFRONTERA decides in accordance with the above provision to purchase the API from the APPROVED COMPETITOR and not from MIDAS, MIDAS' obligations under this Agreement, including the obligations mentioned in Clause 4.4 and 4.6, which are considered as accessory obligations in relation to the supply of API, shall not apply during such period.

ORDERS AND DELIVERY

7.1

BIOFRONTERA will provide MIDAS with a [***] rolling forecast starting from the Effective Date whereas the quantities given for the first [***] of such forecast are considered to be firm and binding orders. The forecast has to be updated by BIOFRONTERA every [***] . All delivery schedules are to be mutually agreed upon between the Parties.

7.2

If not previously provided, at the beginning of each new [***] period, according to Clause 7.1, but not later than [***] of such period, BIOFRONTERA shall send to MIDAS written purchase orders covering all quantities of the API of the binding forecast.

7.3

MIDAS shall accept such orders within [***] from receipt of such orders. In case MIDAS does not comment on the received orders within such period, MIDAS shall be deemed to have accepted the orders.

7.4

MIDAS shall deliver the API on orders accepted by MIDAS to BIOFRONTERA or its contract manufacturers according to the SPECIFICATION and in containers suitable for storage and transportation of APls. Delivery shall take place CPT Germany or Switzerland {INCOTERMS 2010), as indicated by BIOFRONTERA.

7.5

The standard delivery time from stock is [***] after receipt of the BIOFRONTERA's written order by MIDAS. Production campaign planning will be done based on forecast provided by BIOFRONTERA according to Clause 7.1 Should MIDAS expect delays in delivery times or have general delivery problems, MIDAS will immediately inform BIOFRONTERA thereof.

7.6

Should MIDAS not be in a position to supply the quantities ordered by BIOFRONTERA at the right time or in the agreed upon quality BIOFRONTERA will be free to buy from another source to prevent an out of stock situation, until MIDAS has remedied its deficiencies. In this case, both Annual Minimum Amount and Minimum Quantity will be reduced accordingly.

7.7

The risk of loss of the API will pass pursuant to the agreed upon delivery terms according to INCOTERMS 2010.

7.8

Notwithstanding the delivery and the passing of risk in the API or any other provision of these conditions, the property in the APls shall not pass to BIOFRONTERA until MIDAS has received payment in full for the price of the respective delivery of the API. BIOFRONTERA is entitled to resell the delivered goods in the regular course of business. However, BIOFRONTERA shall, at the time of conclusion of such contract, transfer to MIDAS any and all outstanding claims up to the amount of MIDAS's outstanding payment claims, independent of whether the goods delivered by MIDAS are sold without or after being further processed. BIOFRONTERA remains authorized to collect the debts from its respective debtors even after transfer of such claims to MIDAS. Notwithstanding the above, MIDAS shall also be entitled to collect such debts itself. MIDAS undertakes not to collect such debt as long as BIOFRONTERA complies with its payment obligations towards MIDAS. In case of breach of payment obligations by BIOFRONTERA, MIDAS shall be entitled to demand from BIOFRONTERA to reveal to MIDAS the transferred claims and the corresponding debtor and all necessary information and documentation. In addition BIOFRONTERA shall notify the debtors of the assignment of its claims to MIDAS.

DEFECTS

8.1

Any complaint regarding obvious qualitative defaults, detectable by a visual inspection, including the taking and analysing of random samples, and/or quantitative shortcomings of the API shall be made in writing by BIOFRONTERA to MIDAS immediately after their discovery, at the latest within [***] Days after receipt of the API. BIOFRONTERA shall simultaneously send samples of the faulty API to MIDAS. If BIOFRONTERA fails to notify MIDAS within such period, BIOFRONTERA shall be deemed to have given his unqualified acceptance regarding the consignment.

8.2

In case of any hidden defects, complaints shall be raised by BIOFRONTERA immediately, but not later than [***] after their discovery in writing.

8.3

Claims pursuant to Section 8.2 are time-barred after [***] , counted from the delivery of the API to BIOFRONTERA. If BIOFRONTERA fails to notify MIDAS of any hidden defects within the period pursuant to Section 8.2, BIOFRONTERA shall be deemed to have given his unqualified acceptance regarding the consignment.

8.4

In case of timely and justified claims, MIDAS shall have the following options and BIOFRONTERA's rights against MIDAS shall be restricted to the following:

In case of short delivery MIDAS shall use all commercially reasonable efforts to deliver the missing quantities within the shortest reasonable period of time.

In all other cases MIDAS shall (i) replace those quantities of the API which are found to be defective, as long as the performance of such replacement is not impossible, or (ii) in case the performance of such replacement is impossible or only possible at disproportionate costs, MIDAS shall, at its own option, take back the API which is not in accordance with the SPECIFICATION and refund the purchase price to BIOFRONTERA.

8.5

It is hereby agreed that in the case that MIDAS does not acknowledge the defect of the API, which BIOFRONTERA has found to be defective; the Parties shall endeavour to settle such disagreement amicably and constructively between themselves. In the event that they fail to agree within [***] after receipt of the notice of defects, the Parties agree to nominate an independent, reputable laboratory, acceptable to all Parties, which shall examine representative samples taken from such consignment, using the methods of analysis indicated in the specification, and the result shall be binding for all Parties. The charges for such examination shall be borne by the Party found to be at fault. Substitute deliveries on the basis of complaints subsequently recognised as not justified will be invoiced to BIOFRONTERA by MIDAS.

LIABILITY

9.1

Unless otherwise provided for in this Agreement, the Parties' liability towards each other in case of simple negligence (/eichte Fahrlassigkeit) shall be excluded. The Parties' liability to each other in case of damages and losses resulting from gross negligence (grobe Fahrlassigkeit) shall be limited to direct losses, excluding in particular any indirect, punitive or consequential damages or loss of profits, whether based on contract or tort, or arising under applicable law or otherwise.

9.2

The limitation of liability set forth in this Section 9 shall not apply to the injury to life, limb or health; or to the intentionalviolation of the obligations of this Agreement by a Party.

9.3

All defect and liability claims arising from this contract are subject, to the extent legally possible, to a limitation period of [***] from statutory commencement of the limitation period. The running of the limitation period shall not be suspended or interrupted due to the Parties' negotiation of the claim or the claim's circumstances, unless otherwise agreed in writing.

10.

FORCE MAJEURE

Any delay in the performance of any of the duties or obligations of either Party caused by an event outside the affected Party's reasonable control including those events affecting suppliers of such Party, shall not be considered a breach of this Agreement and the time required for the performance shall be extended for a period equal to the period of such delay. The Party so affected shall give prompt notice to the other Party of such cause, and shall take whatever reasonable steps are appropriate in that Party's discretion to relieve the effect of such cause as rapidly as possible. Should one of the Parties be prevented from fulfilling its contractual obligations for more than [***] due to Force Majeure, the other Party shall be entitled to terminate this Agreement irrespective of the general provisions providing for termination in Section 14.

11.

CONFIDENTIALITY

11.1

Neither Party shall disclose any Confidential Information to third parties without the prior written consent of the respective disclosing party of such Confidential Information. However, BIOFRONTERA may disclose Confidential Information received from MIDAS to the appropriate regulatory authorities and to its licensees, provided a corresponding confidentiality agreement has been concluded between MIDAS and/or BIOFRONTERA and the respective licensees beforehand. In addition, MIDAS shall be entitled to disclose Confidential Information received from BIOFRONTERA to MANUFACTURER, provided a corresponding confidentiality agreement has been concluded between MIDAS and MANUFACTURER beforehand.

11.2

The above mentioned obligation shall not apply or shall cease to apply to any information which:

is in the public domain at the time of disclosure;

is published or otherwise becomes part of the public domain through no fault of the receiving party;

is known to the receiving party before receipt thereof under this Agreement, as shown by prior written records;

becomes available from a Third Party which is not known by receiving party to be prohibited from disclosing such information by contractual or legal obligation to the disclosing Party; or

has to be revealed according to a court decision or an administrative order.

11.3

This confidentiality obligation will continue for a period of [***] after the termination date of this Agreement. None of the Parties shall be required to disclose to any of the other Parties any information known to be property of, or obtained under obligations of secrecy from a Third Party.

12.

INDEMNIFICATION

12.1

MIDAS shall defend, indemnify and hold BIOFRONTERA harmless from any Third Party claim or suit resulting from the use or application of the PRODUCTS, (i) if such loss or damage is due to a breach of warranties of MIDAS under this Agreement, (ii) is solely due to the API supplied by MIDAS not being in conformity with the Specifications, or (iii) is due to any grossly negligent or intentionally wrongful breach, error or omission of contractual obligations of MIDAS under this Agreement.

12.2

BIOFRONTERA shall defend, indemnify and hold MIDAS harmless from any third Party claim or suit on for loss or damages, (i) resulting from a breach of warranties of BIOFRONTERA under this Agreement, (ii) resulting from the manufacture, marketing, use or application of the PRODUCT, (iii) resulting from any grossly negligent or intentionally wrongful breach, error or omission of BIOFRONTERA in performing its contractual obligations under this Agreement, or (iv) resulting from any alleged or proven infringements of Third Party intellectual property rights by the marketing, use or application of PRODUCTS, unless such damages result solely from the breach of this Agreement by MIDAS or are otherwise covered by the indemnity clause of Section 12.1above.

12.3

Any Party seeking to be indemnified by virtue of this Agreement shall notify the Party from which indemnification is sought promptly in writing of any and all respective claims, actions and proceedings made or instituted against it.

12.4

Each Party (the Indemnified Party) shall conduct its own defence against Third Party claims for which it seeks indemnification from the other Party {the Indemnifying Party) under this Agreement, but shall make sure that the Indemnifying Party obtains access to all documentation related to the case, and is allowed to participate in defending the case. The Indemnifying Party shall be entitled, but under no obligations, to assist the Indemnified Party's defence in the respective case to the extend as it may deem the Indemnifying Party appropriate under the circumstances. The Indemnified Party will not agree to any settlement without the Indemnifying Party's prior written consent.

13.

INSURANCE

Both Parties undertake to obtain and to maintain during the term of this Agreement and [***] after its termination or expiry in full force and effect a valid commercial general liability insurance with a reasonable coverage. Upon request of the other Party, each Party shall forward the other Party a copy of the respective insurance policy.

14.

TERM AND TERMINATION

14.1

This Agreement shall be initially valid for a period commencing on the Effective Date and ending on 31 December 2021 ("Initial Contractual Period").

14.2

After the Initial Contractual Period this Agreement shall be automatically renewed for further periods of two (2) years each, unless either Party gives the other a six (6) month notice of termination prior to the end of the Initial Contractual Period or any prolongation period.

14.3

Without prejudice to Section 14.2, this Agreement may be terminated by either Party for an important reason without observing a period of notice.

An important reason would be in particular:

debt settlement proceedings (in particular insolvency) are instituted against the assets of the other Party or an application is filed in this respect and, despite specific request, the other Party cannot prove within a reasonable period of time that such application is obviously without foundation;

the other Party commits a Material Breach notwithstanding a warning letter admitting the Party in breach a [***] period to cure such Material Breach.

14.4

All notices of termination have to be made in writing, shall be delivered by prepaid registered Airmail or personal courier. A termination notice issued by the terminating Party shall become effective on the date of receipt by the other Party.

15.

ASSIGNMENT

15.1

Subject to the other terms of this Agreement, neither Party shall have the right or the power to assign any of its rights, or delegate or subcontract the performance of any of its obligations under this Agreement, without the prior written authorization of the other Party, such written authorization not to be unreasonably withheld or delayed.

15.2

The prior written authorization of the other Party shall not be required for a Party to assign its rights and delegate its obligations hereunder, in whole or in part, to an Affiliate.

15.3

In case of an assignment to an Affiliate the assigning Party shall notify the other Party in writing of the extent of the assignment of contractual rights and obligations to the Affiliate, and whether the Affiliate shall be entitled to directly invoice any contractual services to the other Party due to the assignment.

16.

LEGAL SUCCESSOR

This Agreement shall be binding on and shall inure to the benefit of the Parties and their legal successors. Each Party shall commit its respective successor to enter into and therefore become a new Party to this Agreement.

17.

DISPUTE RESOLUTION

17.1

This Agreement shall be governed and construed in accordance with the laws of Germany without giving effect to the choice of laws principles thereof which would result in the application of the laws of another jurisdiction. The Convention on Contracts for the International Sales of Goods (CISG 1980) shall not apply.

17.2

Any disputes arising between the Parties out of or in connection with this Agreement (including, without limitation, any questions regarding its existence, validity or termination) which cannot be solved by the Parties using their best efforts shall be subject to the courts having jurisdiction over Cologne, Germany.

18.

NOTICES

Unless otherwise provided for herein, any notice required to be given under this shall be in writing and shall be given by facsimile, personal delivery or by prepaid registered mail addressed as follows:

Biofrontera Pharma GmbH
Hemmelrather Weg 201
D-51377 Leverkusen
Germany
[***]
Tel.: [***]
Fax.: [***]
Email: [***]

Midas Pharma GmbH
Rheinstraße 49
D-55218 lngelheim
Germany
[***]
Tel.: [***]
Fax.: [***]
Email: [***]
or at such other address as such Party has advised the other Parties of in writing.

19.

MISCELLANEOUS

19.1

If, at any time, any provision of this Agreement is or becomes unenforceable in any respect under the laws of the applicable jurisdiction, the remaining provisions of this Agreement shall remain unaffected thereby. The Parties shall negotiate in good faith and replace the invalid or unenforceable provision by a valid and enforceable provision, which comes closest to the original intention of the Parties.

19.2

This Agreement, including the Annex(es) referred to in this Agreement, shall constitute the entire agreement between the Parties with respect to the subject matter of this Agreement and shall supersede all previous negotiations, agreements, and commitments, whether written or unwritten, with respect to such subject matter.

19.3

No failure of any Party to exercise any power given it under this Agreement, or to insist upon strict compliance with any provision of this Agreement, and no custom or practice of the Parties at variance with the terms of this Agreement shall constitute a waiver of any Party's right to demand strict compliance with the terms of this Agreement.

19.4

All clauses and articles herein were negotiable and negotiated between the Parties without any restriction or limitation. They were left to the free and unrestricted negotiations of the Parties and reflect the result of such negotiations.

19.5

Modifications to the provisions set forth in this Agreement must be confirmed and accepted in writing by duly authorised officers of all Parties. Any oral modification of this section shall be void.

19.6

Headings contained herein are for convenience and reference only and shall not control the interpretation of any term or provision of this Agreement.

19.7

The Parties agree to inform their respective Affiliates of the existence of this Agreement and to commit those Affiliates to respect this Agreement and not to circumvent it by entering into other agreements contradicting the content of this Agreement.

19.8

If not otherwise provided for herein, the Sections 9 (Liability), 11 (Confidentiality), 12 (Indemnification) and 17 (Dispute Resolution) shall survive the termination of this Agreement.

IN WITNESS WHEREOF _, the Parties have caused this Agreement to be executed by their representatives.

	Biofrontera Pharma GmbH	Midas Pharma GmbH

Date:	20.12.2016	22.12.2016
Name:	[]*	[]*
Title:	Chief Executive Officer	Managing Director

Signature:	/s/ []*	/s/ []*

Date:	20.12.2016	22.12.2016
Name:	[]*	[]*
Title:	Vice President Controlling	Head of Marketing & Sales NCE – Ims

Signature:	/s/ []*	/s/ []*

Annex A

to the SUPPLY AGREEMENT

by and between BIOFRONTERA and MIDAS

Price according to Section 6.1 of this Agreement shall be:

[]*	[]* per annum	at	[]*
[]*	[]* per annum	at	[]*
[]*	[]* per annum	at	[]*

	Biofrontera Pharma GmbH	Midas Pharma GmbH

Date:	20.12.2016	22.12.2016
Name:	Prof. Dr. Hermann Lübbert	Dr. Marcus Stumpf
Title:	Chief Executive Officer	Managing Director

Signature:	/s/ []*	/s/ []*

Date:	20.12.2016	22.12.2016
Name:	Hans-Dieter Stock	Florian Tetzner
Title:	Vice President Controlling	Head of Marketing & Sales NCE – Ims

Signature:	/s/ []*	/s/ []*

Annex B

to the SUPPLY AGREEMENT

by and between BIOFRONTERA and MIDAS

Minimum Quantities according to Section 5.2 of this Agreement are:
For 2017: [***]
For 2018 and for each following calendar year: [***]

	Biofrontera Pharma GmbH	Midas Pharma GmbH

Date:	20.12.2016	22.12.2016
Name:	[]*	[]*
Title:	Chief Executive Officer	Managing Director

Signature:	/s/ []*	/s/ []*

Date:	20.12.2016	22.12.2016
Name:	[]*	[]*
Title:	Vice President Controlling	Head of Marketing & Sales NCE – Ims

Signature:	/s/ []*	/s/ []*

Exhibit 10.4

FI No: 87906/87907

Serapis: 2016-0719

Biofrontera (EGFF)

Finance Contract

between the

European Investment Bank

and

Biofrontera AG

Luxembourg, 19 May 2017

Table of Contents

		Page

ARTICLE 1	Credit and Disbursements	16

ARTICLE 2	The Loan	22

ARTICLE 3	Interest	22

ARTICLE 4	Repayment	25

ARTICLE 5	Payments	30

ARTICLE 6	Borrower undertakings and representations	31

ARTICLE 7	Security	42

ARTICLE 8	Information and Visits	45

ARTICLE 9	Charges and expenses	51

ARTICLE 10	Events of Default	52

ARTICLE 11	Law and jurisdiction, miscellaneous	56

ARTICLE 12	Final clauses	58

Schedule A		60

Project Specification and Reporting		60

Schedule B		63

Definitions of EURIBOR		63

Schedule C		65

Form of Disbursement Offer/Acceptance (Articles 1.02B and 1.02C)		65

Schedule D		67

Form of Certificate from Borrower (Article 1.04(B))		67

Schedule E		68

Form of Compliance Certificate		68

Schedule F		69

Performance Participation Interest Examples		69

Schedule G		70

THIS CONTRACT IS MADE BETWEEN:

The European Investment Bank having its seat at 100 boulevard Konrad Adenauer, L-2950 Luxembourg, represented by Adrian Kamenitzer Director and Stefan Becker, Senior Counsel	(the “ Bank ”),

of the first part, and

Biofrontera AG, a public listed company incorporated under the laws of Germany, registered with the commercial register of the local court ( Amtsgericht ) of Leverkusen under the registration number 49717, and having its registered address at Hemmelrather Weg 201.D-51377 Leverkusen, represented by Prof. Dr. Hermann Lübbert, CEO ( Vorstandsvorsitzender ), and Thomas Schaffer, CFO ( Vorstand )	(the “ Borrower ”).

of the second part.

WHEREAS

(1)

The Borrower has stated that it is undertaking various research and development programmes as more particularly described in the technical description (the “ Technical Description ”) set out in Part Al of Schedule A (the “ Project ”).

(2)

The total cost of the Project, as estimated by the Bank, is EUR 40,500,000 (forty million five hundred thousand euros) and the Borrower has stated that it intends to finance the Project as follows:

Source	Amount (EUR)

Own funds		20,500,000

Credit from the Bank		20,000,000

TOTAL		40,500,000

(3)

In order to fulfil the financing plan set out in Recital (2), the Borrower has requested from the Bank a credit up to EUR 20,000,000 (twenty million euros).

(4)

The Bank considering that the financing of the Project falls within the scope of its functions, and having regard to the statements and facts cited in these Recitals, has decided to give effect to the Borrower’s request providing to it a credit in an amount up to EUR 20,000,000 (twenty million euros) under this Finance Contract (the “ Contract ”); provided that the amount of the Bank loan shall not, in any case, exceed 50% (fifty per cent) of the total cost of the Project set out in Recital (2).

(5)

The board of directors of the Borrower has authorised the borrowing of the sum of EUR 20,000,000 (twenty million euros) represented by this credit on the terms and conditions set out in this Contract.

(6)

The financial obligations of the Borrower under this Contract are to be guaranteed by the Material Subsidiaries which as at the date of this Contract are Biofrontera Bioscience AG, Biofrontera Pharma GmbH and Biofrontera Inc. (the “ Guarantors ”) under a guarantee and indemnity (the “ Guarantee ”) by execution of a guarantee and indemnity agreement in form and substance satisfactory to the Bank (the “ Guarantee Agreement ”).

(7)

This operation benefits from a guarantee from the European Union under the European Fund for Strategic Investments (“ EFSI ”).

(8)

The statute of the Bank provides that the Bank shall ensure that its funds are used as rationally as possible in the interests of the European Union and, accordingly, the terms and conditions of the Bank’s loan operations must be consistent with relevant policies of the European Union.

(9)

The Bank considers that access to information plays an essential role in the reduction of environmental and social risks, including human rights violations, linked to the projects it finances and has therefore established its Transparency policy, the purpose of which is to enhance the accountability of the EIB Group towards its stakeholders and the citizens of the European Union in general.

(10)

The processing of personal data shall be carried out by the Bank in accordance with applicable European Union legislation on the protection of individuals with regard to the processing of personal data by the European Union institutions and bodies and on the free movement of such data.

NOW THEREFORE it is hereby agreed as follows:

INTERPRETATION AND DEFINITIONS

(a)

Interpretation

In this Contract:

(i)

References to Articles, Recitals and Schedules are, save if explicitly stipulated otherwise, references respectively to articles, recitals and schedules to this Contract.

(ii)

References to a provision of law are references to that provision as amended or re-enacted.

(iii)

References to any other agreement or instrument are references to that other agreement or instrument as amended, novated, supplemented, extended or restated.

(iv)

This Contract is drafted in the English language. For the avoidance of doubt, the English language version of this Contract shall prevail over any translation of this Contract. However, where a German translation of a word or phrase appears in the text of this Contract, the German translation of such word or phrase shall prevail with respect to any Obligor incorporated in Germany.

(a)

Definitions

In this Contract:

“ Acceptance Deadline ” for a notice means:

(a)

16h00 Luxembourg time on the day of delivery, if the notice is delivered by 14h00 Luxembourg time on a Business Day; or

(b)

11h00 Luxembourg time on the next following day which is a Business Day, if the notice is delivered after 14h00 Luxembourg time on any such day or is delivered on a day which is not a Business Day;

“ Accepted Tranche ” means a Tranche in respect of a Disbursement Offer which has been duly accepted by the Borrower in accordance with its terms on or before the Disbursement Acceptance Deadline:

“ Accounting Reference Date ” has the meaning given to it in Article 6.21(s);

“ Affiliates ” means in relation to a person, a Subsidiary of that person, or a Holding Company of that person or any other Subsidiary of that Holding Company;

“ Application Form ” means the Borrowers application form for financing dated 18 July 2016:

“ Authorisation ” means an authorisation, permit, consent, approval, resolution, licence, exemption, filing, notarisation or registration;

“ Bankruptcy Code ” means Title 11 of the United States Code entitled “Bankruptcy,” as now or hereafter in effect, or any successor statute;

“ Business Day ” means a day (other than a Saturday or Sunday) on which the Bank and commercial banks are open for general business in Luxembourg;

“ Cash Pay Margin ” means 400 bps;

“ Change-of-Control Event ” has the meaning given to it in Article 4.03A(3);

“ Change-of-Law Event ” has the meaning given to it in Article 4.03A(4);

“ Compliance Certificate ” means a certificate substantially in the form of Schedule E;

“ Contract ” has the meaning given to it in Recital (4);

“ Credit ” has the meaning given to it in Article 1.01:

“ Default ” means an Event of Default or any event or circumstance specified in Article 10.01A which would (with the expiry of a grace period, the giving of notice, the making of any determination under this Contract or any combination of the foregoing) be an Event of Default;

“ Deferred interest ” has the meaning given to it in Article 3.02;

“ Deferred Interest Rate ” has the meaning given to it in Article 3.02;

“ Disbursement Acceptance ” means a copy of the Disbursement Offer duly countersigned by the Borrower;

“ Disbursement Acceptance Deadline ” means the date and time of expiry of a Disbursement Offer as specified therein;

“ Disbursement Date ” means the date on which actual disbursement of a Tranche is made by the Bank;

“ Disbursement Date Market Capitalisation ” has the meaning given to it under Article 3.03;

“ Disbursement Date Notional Equity Proportion ” has the meaning given to it under Article 3.03;

“ Disbursement Offer ” means a letter substantially in the form set out in Schedule C;

“ Disruption Event ” means either or both of

(a)

a material disruption to those payment or communications systems or to those financial markets which are, in each case, required to operate in order for payments to be made in connection with this Contract; or

(b)

the occurrence of any other event which results in a disruption (of a technical or systems-related nature) to the treasury or payments operations of either the Bank or the Borrower, preventing that party:

(i)

from performing its payment obligations under this Contract; or

(ii)

from communicating with other parties in accordance with the terms of this Contract,

and which disruption (in either such case as per (a) or (b) above) is not caused by, and is beyond the control of, the party whose operations are disrupted;

“ EBITDA ” means, in respect of any Relevant Period, the consolidated operating profit of the Group before taxation (excluding the results from discontinued operations):

(a)

before deducting any interest, commission, fees, discounts, prepayment fees, premiums or charges and other finance payments whether paid, payable or capitalised by any member of the Group (calculated on a consolidated basis) in respect of that Relevant Period;

(b)

not including any accrued interest owing to any member of the Group;

(c)

after adding back any amount attributable to the amortisation or depreciation of assets of members of the Group;

(d)

before taking into account any Exceptional Items;

(e)

after deducting the amount of any profit (or adding back the amount of any loss) of any member of the Group which is attributable to minority interests;

(f)

plus or minus the Group’s share of the profits or tosses (after finance costs and tax) of Non-Group Entities:

(g)

before taking into account any unrealised gains or losses on any financial instrument (other than any derivative instrument which is accounted for on a hedge accounting basis); and

(h)

before taking into account any gain arising from an upward revaluation of any other asset,

in each case, to the extent added, deducted or taken into account, as the case may be, for the purposes of determining operating profits of the Group before taxation;

“ EFSI ” has the meaning given in Recital (7);

“ EFSI Regulation ” means the Regulation 2015/1017 of the European Parliament and of the Council of 25 June 2015 on the European Fund for Strategic Investments,

“ Environment ” means the following, in so far as they affect human health and social well-being:

(a)

fauna and flora;

(b)

soil, water, air, climate and the landscape; and

(c)

cultural heritage and the built environment,

and includes, without limitation, occupational and community health and safety;

“ Environmental Approval ” means any Authorisation required by Environmental Law;

“ Environmental Claim ” means any claim, proceeding, formal notice or investigation by any person in respect of any Environmental Law;

“ Environmental Law ” means:

(a)

European Union law, including principles and standards;

(b)

German laws and regulations; and

(c)

applicable international treaties,

of which a principal objective is the preservation, protection or improvement of the Environment;

“ EURIBOR ” has the meaning given to it in Schedule B;

“ EUR ” or “ euro ” means the lawful currency of the Member States of the European Union which adopt or have adopted it as their currency in accordance with the relevant provisions of the Treaty on European Union and the Treaty on the Functioning of the European Union or their succeeding treaties;

“ Event of Default ” means any of the circumstances, events or occurrences specified in Article 10.01;

“ Exceptional Items ” means any material items of an unusual or non-recurring nature which represent gains or losses including those arising on:

(a)

the restructuring of the activities of an entity and reversals of any provisions for the cost of restructuring;

(b)

disposals, revaluations, write downs or impairment of non-current assets or any reversal of any write down or impairment;

(c)

disposals of assets associated with discontinued operations; and

(d)

any other examples of “exceptional items” (as such term has the meaning attributed to it in IFRS);

“ Final Availability Date ” means the date falling 2 (two) years from and (including) the date of this Contract;

“ Financial Quarter ” means the period commencing on the day after one Quarter Date and ending on the next Quarter Date;

“ Financial Year ” means the annual accounting period of the Group ending on the Accounting Reference Date;

“ Floating Rate ” means a fixed-spread floating interest rate, that is to say an annual interest rate determined by the Bank for each successive Floating Rate Reference Period equal to EURIBOR plus the Cash Pay Margin;

“ Floating Rate Reference Period ” means each period from one Payment Date to the next relevant Payment Date; the first Floating Rate Reference Period shall commence on the date of disbursement of the Tranche;

“ GAAP ” means generally accepted accounting principles in Germany ( Grundsätze ordnungsgemäßer Buchführong ) under the German Commercial Code ( Handelsgesetzbuch ) including, where permitted by the German Commercial Code (Handelsgesetzbuch) or other applicable law (and with respect to any US Guarantor means the generally accepted accounting principles and rules used in the US), including IFRS;

“ Good Industry Practice ” means the exercise of that degree of skill, diligence, prudence and foresight which would reasonably and ordinarily be expected from a skilled and experienced person acting in good faith and carrying out the same type of activity under the same or equivalent circumstances and conditions and acting generally in accordance with applicable law;

“ Group ” means the Borrower and its Affiliates from time to time;

“ Guarantee ” means a guarantee and indemnity to the Bank guaranteeing the performance by the Borrower of all of its obligations under this Contract;

“ Guarantee Agreement ” means each guarantee and indemnity agreement executed by a Guarantor, in form and substance satisfactory to the Bank;

“ Guarantor ” means:

(a)

as at the date of this Contract, Biofrontera Bioscience GmbH, Biofrontera Pharma GmbH and Biofrontera Inc.; and

(b)

and any other company which becomes a Guarantor in accordance with Article 7.01.

“ Holding Company ” means, in relation to a person, any other person in respect of which it is a Subsidiary;

“ IFRS ” means international accounting standards within the meaning of IAS Regulation 1606/2002 to the extent applicable to the relevant financial statements;

“ Illegal Activities ” means any of the following illegal activities or activities carried out for illegal purposes: tax evasion, tax fraud, fraud, corruption, coercion, collusion, obstruction, money laundering, financing of terrorism, organised crime or any illegal activity that may affect the financial interests of the EU according to applicable law:

“ Indebtedness ” means any:

(a)

obligations for borrowed money;

(b)

indebtedness under any acceptance credit;

(c)

indebtedness under any bond, debenture, note or similar instrument;

(d)

instrument under any bill of exchange:

(e)

indebtedness in respect of any interest rate or currency swap or forward currency sale or purchase or other form of interest or currency hedging transaction (including without limit caps, collars and floors);

(f)

indebtedness under any finance lease;

(g)

indebtedness (actual or contingent) under any guarantee, bond security, indemnity or other agreement;

(h)

indebtedness (actual or contingent) under any instrument entered into for the purpose of raising finance;

(i)

indebtedness in respect of a liability to reimburse a purchaser of any receivables sold or discounted in the event that any amount of those receivables is not paid:

(j)

indebtedness arising under a securitisation: or

(k)

other transaction which has the commercial effect of borrowing;

“ Indemnifiable Prepayment Event ” means a Prepayment Event other than those specified in Article 4.03A(2) or Article 4.03A(5);

“ Intellectual Property Rights ” means, including without limitation, intellectual property of every designation (including patents, utility patents, copyrights, design rights, trademarks, service marks and know how) whether capable of registration or not;

“ Joint Venture ” means any joint venture entity, whether a company, unincorporated firm undertaking, association, joint venture or partnership or any other entity;

“ Lead Organisation ” means the European Union, the United Nations, the International Monetary Fund, the Financial Stability Board, the Financial Action Task Force and the Organisation for Economic Cooperation and Development;

“ Loan ” means the aggregate amount of Tranches disbursed from time to time by the Bank under this Contract;

“ Margin Stock ” has the meaning assigned to that term in Regulation U issued by the Board of Governors of the Federal Reserve System as in effect from time to time;

“ Market Abuse Regulation ” means Regulation (EU) No 596/2014 of the European Parliament and of the Council of 16 April 2014 on market abuse (market abuse regulation) and repealing Directive 2003/6/EC of the European Parliament and of the Council and Commission Directives 2003/124/EC, 2003/125/EC and 2004/72/EC;

“ Material Adverse Change ” means, any event or change of condition, which, in the opinion of the Bank has a material adverse effect on:

(a)

the ability of the Borrower or any Guarantor to perform its obligations under this Contract or any Guarantee (as applicable);

(b)

the business, operations, property, condition (financial or otherwise) or prospects of the Borrower, any Guarantor or the Group as a whole; or

(c)

the validity or enforceability of, or the rights or remedies of the Bank under this Contract or any Guarantee;

“ Material Subsidiary ” means any Subsidiary of the Borrower from time to time, whose gross revenues, total assets or EBITDA represents not less than 5% (five per cent) of (i) the consolidated gross revenues of the Group taken as a whole and attributable to the shareholders of the Borrower or, (ii) the consolidated total assets of the Borrower and its Subsidiaries taken as a whole or, (iii) as the case may be, the consolidated EBITDA of the Group, as calculated based on the then latest consolidated audited accounts of the Group;

“ Maturity Date ” means the sole repayment date of a Tranche specified pursuant to Article 4.01;

“ Non-Group Entity ” means any investment or entity (which is not itself a member of the Group (including associates and Joint Ventures)) in which any member of the Group has an ownership interest;

“ Obligor ” means a Borrower or a Guarantor;

“ Payment Date ” means the quarterly dates specified in the Disbursement Offer until the Maturity Date, save that, in case any such date is not a Relevant Business Day, it means, the next day, if any, of that calendar month that is a Relevant Business Day or, failing that, the nearest preceding day that is a Relevant Business Day, in all cases with corresponding adjustment to the interest due under Article 3.01;

“ Permitted Acquisition ” means an acquisition:

(a)

by a member of the Group of an asset sold, leased, transferred or otherwise disposed of by another member of the Group in circumstances permitted by Article 6.06;

(b)

by the Borrower or any other member of the Group of shares or other ownership interests by way of acquisition of a wholly owned shelf company, provided that such company is incorporated in a country that is a member of either or both of the European Union or the Organisation of Economic Co-Operation and Development;

(c)

of shares or other ownership interests in a Target Entity, which do not exceed an aggregate amount of EUR 2,000,000 (two million euros) during the term of the Credit.

but, in relation to paragraphs (b), and (c) above, only if:

(ii)

no Event of Default is continuing on the date the relevant acquisition agreement is entered into or would occur as a result of the acquisition;

(ii)

the acquired Target Entity, business or undertaking is engaged in a business similar or complementary to the business carded on by the Group as at the date of this Contract,

(iii)

the acquired Target Entity, business or undertaking is not incorporated or located in a jurisdiction that is blacklisted by any Lead Organisation in connection with activities such as money laundering, financing of terrorism, tax fraud and tax evasion or harmful tax practices as such blacklist may be amended from time to time;

(iv)

legal and financial due diligence reports (including customary reliance letters) and a business plan (in the form of the most recent budget supplemented to account for the effects of the acquisition) in respect of the 3 (three) next following financial years and any other due diligence reports received in connection with the acquisition (if any) are provided to the Bank; and

(v)

the Borrower demonstrates that the acquisition has been approved by the Borrower’s board of directors;

“ Permitted Disposal ” means any act effecting a sale, transfer, lease or other disposal:

(a)

related to the sale of finished products and/or services made on arm’s length terms in the ordinary course of business of the Borrower or other member of the Group;

(b)

by one Obligor to another Obligor;

(c)

for cash in an amount reflecting or exceeding the fair market value of such assets, which is reinvested in assets of comparable or superior type, value and quality;

(d)

(other than shares, businesses or Intellectual Property Rights) made in exchange for other assets comparable or superior as to type, value and quality;

(e)

constituted by a licence of Intellectual Property Rights in the ordinary course of business;

(f)

made in relation to non-material assets which have depreciated to less than 25% (twenty five per cent) of their initial value or which are obsolete: or

(g)

excluding any disposal permitted under (a) to (f) above, disposals where the higher of the market value or consideration receivable for such disposals does not exceed EUR 1,000,000 (one million euros) during the term of the Credit,

“ Permitted Guarantees ” means guarantees issued in the ordinary course of trade by any member of the Group:

(a)

under or in connection with any Guarantee Agreement;

(b)

under or in connection with any negotiable instruments;

(c)

under or in connection with any performance bond;

(d)

in connection with any Permitted Indebtedness;

(e)

to another member of the Group; or

(f)

in the ordinary course of business,

provided that at any point in time the guarantees issued pursuant to (a) to (f) above do not guarantee an aggregate amount of EUR 1,000,000 (one million euros) or greater;

“ Permitted Indebtedness ” means Indebtedness of the Borrower and/or members of the Group incurred under

(a)

this Contract,

(b)

existing Indebtedness as at the date of this Contract listed in Schedule G (Existing Indebtedness);

(c)

any deferred purchase arrangements for assets or services acquired in the ordinary course of its business which is:

(i)

on terms that require the indebtedness to be repaid within 60 days of delivery of the goods or performance of the services, as the case may be, and

(ii)

not more than 30 days overdue;

(d)

leasing costs, incurred in the ordinary course of its business, for non-specific company assets, provided that the capital value of the assets does not exceed EUR 2,500,000 in aggregate at any one time;

(e)

any finance or capital leases of equipment if the aggregate liability in respect of the equipment leased does not at any time exceed EUR 250,000 (two hundred and fifty thousand euros) (or its equivalent in another currency or currencies);

(f)

the leasing agreement of the Borrower’s business premises;

(g)

a Permitted Guarantee;

(h)

any intercompany loan made by one Obligor to another Obligor, provided such intercompany loan is on arms’ length terms;

(i)

excluding Indebtedness permitted under (a) to (f) above, Indebtedness which does not exceed EUR 1,000,000 (one million euros); or

(j)

any other Indebtedness incurred with the prior written consent of the Bank;

“ Permitted Merger ” means any amalgamation, demerger, merger or corporate reconstruction which, in the reasonable opinion of the Bank, does not result in a Material Adverse Change and which is on a solvent basis, and where:

(a)

only members of the Group are involved;

(b)

the resulting entity will not be incorporated or located in a country which is in a jurisdiction that is blacklisted by any Lead Organisation in connection with activities such as money laundering, financing of terrorism, tax fraud and tax evasion or harmful tax practices as such blacklist may be amended from time to time; and

(c)

where the Borrower is involved, (i) the rights and obligations of the Borrower under this Contract will remain with the Borrower, (ii) the surviving entity will be the Borrower and the statutory seat of the Borrower would not as a result of such merger be transferred to a different jurisdiction, (iii) the merger will not have an effect on the validity, legality or enforceability of the Borrowers obligations under this Contract; and (iv) all of the business and assets of the Borrower are retained by it,

“ Permitted Payments ” means:

(a)

shares purchased from former employees, managers or directors, provided that such shares were awarded under a share programme of the Borrower;

(b)

any payments required to be made under any intercompany loan or intercompany service agreement made by one Obligor to another Obligor, provided such intercompany loan or intercompany service agreement is on arms’ length terms; and

(c)

any other payments made with the prior written consent of the Bank, in each case without double counting:

“ Permitted Security ” means any security permitted under Article 7.02(b);

“ Prepayment Amount ” means the amount of a Tranche to be prepaid by the Borrower in accordance with Article 4.02A;

“ Prepayment Date ” means the date, which shall be a Payment Date, on which the Borrower proposes to effect prepayment of a Prepayment Amount;

“ Prepayment Event ” means any of the events described in Article 4.03A;

“ Prepayment Fee ” means the prepayment fee payable in accordance with Article 4.02B;

“ Prepayment Notice ” means a written notice from the Bank to the Borrower in accordance with Article 4.02C;

“ Prepayment Request ” means a written request from the Borrower to the Bank to prepay all or part of the Loan, in accordance with Article 4.02A;

“ Project ” has the meaning given to it in Recital (1);

“ Quarter Date ” means each of 31 March, 30 June, 30 September and 31 December from the date of this Contract until the Maturity Date;

“ Regulations T, U, X ” means, respectively, Regulations T, U and X of the Board of Governors of the Federal Reserve System of the United States (or any successor);

“ Relevant Business Day ” means a day on which the Trans-European Automated Real-time Gross Settlement Express Transfer payment system which utilises a single shared platform and which was launched on 19 November 2007 (TARGET2) is open for the settlement of payments in EUR;

“ Relevant Period ” means each period of twelve months ending on or about the last day of the Financial Year and each period of twelve months ending on or about the last day of the second Financial Quarter of a Financial Year;

“ Restricted Party ” means a person that is:

(a)

listed on, or owned or controlled by a person listed on, a Sanctions List, or a person acting on behalf of such a person;

(b)

located in or organised under the laws of a country or territory that is the subject of country- or territory-wide Sanctions, or a person who is owned or controlled by, or acting on behalf of such a person; or

(c)

otherwise a subject of Sanctions;

“ Sanctions ” means any trade, economic or financial sanctions laws, regulations, embargoes or restrictive measures administered, enacted or enforced by a Sanctions Authority;

“ Sanctions Authority ” means;

(a)

the Security Council of the United Nations;

(b)

the US;

(c)

the European Union:

(d)

the UK; and

(e)

the governments and official institutions or agencies of any of paragraphs (a) to (d) above, including OFAC, the US Department of State and Her Majesty’s Treasury:

“ Sanctions List ” means the Specially Designated Nationals and Blocked Persons list maintained by OFAC, the Consolidated List of Financial Sanctions Targets and the Investment Ban List maintained by Her Majesty’s Treasury, or any similar list maintained by, or public announcement of a Sanctions designation made by, a Sanctions Authority, each as amended, supplemented or substituted from time to time;

“ Scheduled Disbursement Date ” means the dale on which a Tranche is scheduled to be disbursed in accordance with Article 1.02B;

“ Security ” means any mortgage, pledge, lien, charge, assignment, hypothecation, or other security interest securing any obligation of any person or any other agreement or arrangement having a similar effect;

“ Subsidiary ” means:

(a)

a subsidiary ( Tochterunternehmen ) within the meaning of section 17 German Stock Corporation Act (Aktiengesetz) or section 290 German Commercial Code ( Handelsgesetzbuch ) in relation to the Borrower; and

(b)

any other entity of which the Borrower has direct or indirect control or owns beneficially directly or indirectly more than 50% of the voting capital or similar right of ownership and “control” for this purpose means the power to control the composition of or direct the management ( Geschäftsleitung ) and the policies ( Geschäftspolitik ) of the entity, whether through the ownership of voting capital, by contract or otherwise;

“ Target Entity ” means any limited liability company, corporation, limited liability partnership or any equivalent;

“ Tax ” means any tax, levy, impost, duty or other charge or withholding of a similar nature (including any penalty or interest payable in connection with any failure to pay or any delay in paying any of the same);

“ Technical Description ” has the meaning given to it in Recital (1);

“ Total Assets ” means the total consolidated assets of the Group, as shown in the Borrowers latest consolidated financial statements;

“ Tranche ” means each disbursement made or to be made under this Contract. In case no Disbursement Acceptance has been received, Tranche shall mean a Tranche as offered under Article 1.02B;

“ US ” means the United States of America; and

“ US Guarantor ” means any Guarantor organised under the laws of the US, any state thereof or the District of Columbia.

ARTICLE 1

Credit and Disbursements

1.01

Amount of Credit

By this Contract the Bank establishes in favour of the Borrower, and the Borrower accepts, a credit in an amount of up to EUR 20,000,000 (twenty million euros) for the financing of the Project (the “ Credit ”).

1.02

Disbursement procedure

1.02A

Tranches

The Bank shall disburse the Credit in up to four Tranches. The amount of each Tranche, if not being the undrawn balance of the Credit, shall be in a minimum amount of EUR 5,000,000 (five million euros).

1.02B

Disbursement Offer

Subject to Article 1.04 and upon request by the Borrower the Bank shall send to the Borrower a Disbursement Offer for the disbursement of a Tranche. The latest time for receipt by the Borrower of a Disbursement Offer is 10 (ten) days before the Final Availability Date. The Disbursement Offer shall specify:

(a)

the amount and currency of the Tranche;

(b)

the Scheduled Disbursement Date, which shall be a Relevant Business Day falling at least 10 (ten) days after the date of the Disbursement Offer and on or before the Final Availability Date;

(c)

the Cash Pay Margin applicable until the Maturity Date;

(d)

the Disbursement Date Market Capitalisation;

(e)

the Disbursement Date Notional Equity Proportion;

(f)

the Deferred Interest Rate;

(g)

the payment dates and interest payment periodicity for the Tranche, in accordance with the provisions of Article 3.01;

(h)

the first Payment Date for the Tranche;

(i)

the Maturity Date; and

(j)

the Disbursement Acceptance Deadline.

1.02C

Disbursement Acceptance

The Borrower may accept a Disbursement Offer by delivering a Disbursement Acceptance to the Bank no later than the Disbursement Acceptance Deadline. The Disbursement Acceptance shall be accompanied:

(a)

by the IBAN code (or appropriate format in line with local banking practice) and SWIFT BIC of the bank account to which disbursement of the Tranche should be made in accordance with Article 1.02D; and

(b)

by evidence of the authority of the person or persons authorised to sign the Disbursement Acceptance and the specimen signature of such person or persons or a declaration by the Borrower that no change has occurred in relation to the authority of the person or persons authorised to sign Disbursement Acceptances under this Contract.

If a Disbursement Offer is duly accepted by the Borrower in accordance with its terms on or before the Disbursement Acceptance Deadline, and provided that the conditions under Article 1.04 are met, the Bank shall make the Accepted Tranche available to the Borrower in accordance with the relevant Disbursement Offer and subject to the terms and conditions of this Contract.

The Borrower shall be deemed to have refused any Disbursement Offer which has not been duly accepted in accordance with its terms on or before the Disbursement Acceptance Deadline.

1.02D

Disbursement Account

Disbursement shall be made to such account of the Borrower as the Borrower shall notify in writing to the Bank in the Disbursement Acceptance.

Only one account may be specified for each Tranche.

1.03

Currency of disbursement

The Bank shall disburse each Tranche in EUR.

1.04

Conditions of disbursement

1.04A

First Tranche

The disbursement of the first Tranche under Article 1.02 is conditional upon receipt by the Bank, in form and substance satisfactory to it, before the date falling 5 Business Days before the Disbursement Offer, of the following documents or evidence:

(a)

a certified copy of the resolution of the competent body (management board ( Vorstand )) of the Borrower duly authorising the execution of this Contract and duly authorising the person or persons signing this Contract on behalf of the Borrower together with the specimen signature of each such person or persons;

(b)

a certified copy of the resolution of the competent body (management board ( Geschäftsführung ) and CEO, respectively and with respect to a Guarantor that is a US Guarantor, its board of directors or other management body)) of each Guarantor duly authorising the execution of the Guarantee Agreement and duly authorising the person or persons signing the Guarantee Agreement on behalf of each Guarantor together with the specimen signature of each such person or persons;

(c)

evidence that the Borrower has obtained all necessary Authorisations required in connection with this Contract and the Project:

(d)

evidence that this Contract has been executed by the Borrower,

(e)

the duly executed Guarantee Agreement in a form and substance satisfactory to the Bank;

(f)

a legal opinion of Ashurst LLP, addressed to the Bank, in form and substance satisfactory to the Bank, on the legality, validity and enforceability of this Contract and distributed to the Bank prior to the signing of this Contract;

(g)

a legal opinion of LLR Legerlotz Laschet und Partner Rechtsanwälte Partnerschaft mbB, Mevissenstraße 15, 50668 Cologne, Germany, legal adviser to the Borrower, addressed to the Bank in form and substance satisfactory to the Bank, on the valid existence of the Borrower, the authority and capacity of the Borrower to enter into this Contract and on the due execution and choice of law of this Contract;

(h)

a legal opinion of LLR Legerlotz Laschet und Partner Rechtsanwälte Partnerschaft mbB, Mevissenstraße 15, 50668 Cologne, Germany, legal adviser to each Guarantor, addressed to the Bank in form and substance satisfactory to the Bank, on the valid existence of each Guarantor incorporated in Germany, the authority and capacity of each Guarantor incorporated in Germany to enter into the Guarantee Agreement and on the due execution and choice of law of the Guarantee Agreement;

(i)

legal opinion of Foley Hoag LLP, legal adviser to the US Guarantor, addressed to the Bank in form and substance satisfactory to the Bank, on the valid existence of the US Guarantor, the authority and capacity of the US Guarantor to enter into the Guarantee Agreement and on the due execution and choice of law of the Guarantee Agreement;

(j)

evidence of the latest audited financial statements of the Borrower and each Guarantor;

(k)

an up-to date pdf copy from the German commercial register ( Handelsregister ) with regard to the Borrower and each Guarantor incorporated in Germany;

(l)

a pdf copy of the list of shareholders ( Geselischafterliste ) of each Guarantor, if applicable;

(m)

a pdf copy of the articles of association ( Setzung ) of the Borrower and each Guarantor (and with respect to a US Guarantor. its certificate of incorporation or other organizational document) and the rules of procedure of the management board ( Geschäftsordnung ), supervisory board ( Aufsichtsrat ) and/or advisory board ( Beirat ), and with respect to a US Guarantor, its by-laws or other operating document, if any;

(n)

the Group structure chart showing the Group as of the date of this Contract;

(o)

a certificate of an authorised signatory of the Borrower and each Guarantor certifying that each copy document relating to it specified in this Article 1.04A is correct, complete and in full force and effect as at a date no earlier than the date of this Contract,

(p)

evidence that insurances in accordance with the requirements of Article 6.05(c) are in place;

(q)

evidence of appointment of the Borrowers and each Guarantors’ agent of service;

(r)

evidence of payment of all the fees and expenses as required under this Contract and the Guarantee Agreement;

(s)

in the case of each Guarantor that is a US Guarantor, a certificate as to the existence and good standing of such Guarantor from the appropriate governmental authorities in such Guarantor’s jurisdiction of organisation;

(t)

a solvency certificate signed by the chief financial officer, chief accounting officer or other similar officer of each Guarantor that is a US Guarantor in form and substance reasonably satisfactory to the Bank; and

(u)

a copy of any other document, authorisation, opinion or assurance which the Bank considers to be necessary (if it has notified the Borrower and each Guarantor accordingly) in connection with the entry into and performance of this Contract.

1.04B

Further Conditions Precedent for all Trenches

The disbursement of each Tranche under Article 1.02, including the first, is subject to the following conditions:

(a)

that the Bank has received, in form and substance satisfactory to it, before the date falling 5 Business Days before the Disbursement Offer for the proposed Tranche, the following documents or evidence:

(i) a certificate from the Borrower in the form of Schedule D, signed by an authorised representative of the Borrower and dated no earlier than the date falling 10 (ten) days before the Scheduled Disbursement Date;

(ii) evidence of each Guarantors consent to the Borrower’s acceptance of the Disbursement Offer;

(iii) evidence of the authority of the person or persons authorised to sign each Guarantor’s consent under paragraph (ii) above and the specimen signature of such person or persons; and

(iv) a copy of any other authorisation or other document, opinion or assurance which the Bank has notified the Borrower is necessary in connection with the entry into and performance of, and the transactions contemplated by, this Contract or the validity and enforceability of the same;

(b)

that on the Disbursement Date for the proposed Tranche:

(i) the representations and warranties which are repeated pursuant to Article 6.21 are correct in all respects;

(ii) no Default has occurred and is continuing or would result from the disbursement of the proposed Tranche; and

(iii) no event or circumstance has occurred and is continuing which constitutes or would with the expiry of a grace period and/or the giving of notice under this Contract constitute a Prepayment Event (other than pursuant to Article 4.03A(1) (Project Cost Reduction) or Article 4.03A(2) (Pari Passu to Non-EIB Financing)), or would result from the disbursement of the proposed Tranche;

(c)

if the amount of the proposed Tranche, when aggregated with the Loans outstanding under all Tranches is more than EUR 10,000,000, the Bank has received before the Disbursement Offer for the proposed Tranche, (in form and substance satisfactory to it) evidence of Group consolidated revenues of over EUR 15 million on a 12-month rolling basis: and

(d)

if the amount of the proposed Tranche, when aggregated with the Loans outstanding under all Tranches is more than EUR 15,000,000, the Bank has received before the Disbursement Offer for the proposed Tranche, the following documents or evidence (in form and substance satisfactory to it):

(i) evidence of Group consolidated revenues of over EUR 35 million on a 12-month rolling basis, and

(ii) evidence of an equity raise of at least EUR 5 million.

1.05

Cancellation

1.05A

Borrower’s right to cancel

The Borrower may at any time by notice in writing to the Bank cancel, in whole or in part and with immediate effect, the undisbursed portion of the Credit. However, the notice shall have no effect in respect of an Accepted Tranche which has a Scheduled Disbursement Date falling within 5 (five) Business Days of the date of the notice.

1.05B

Bank’s right to cancel

The Bank may, by notice in writing to the Borrower, cancel the undisbursed portion of the Credit in whole or in part at any time and with immediate effect:

(a)

upon the occurrence of a Prepayment Event other than pursuant to Articles 4.03A(1) or 4.03A(2), a Default or an event or circumstance which would with the passage of time or giving of notice under this Contract constitute a Prepayment Event other than pursuant to Articles 4.03A(1) or 4.03A(2); or

(b)

by an amount equal to the amount by which it is entitled to cancel the Credit pursuant to Articles 4.03A(1) or 4.03A(2).

1.05C

Indemnity for cancellation of a Tranche

If an Accepted Tranche is not disbursed on the Scheduled Disbursement Date because the conditions precedent set out in Article 1.04 are not satisfied on such date, such Tranche shall be cancelled and, the Borrower shall indemnify the Bank under Article 4.02B.

If pursuant to Article 1.05A, the Borrower cancels any part of the Credit it shall indemnify the Bank under Article 4.02B.

if the Bank cancels:

(a)

an Accepted Tranche upon an Indemnifiable Prepayment Event, the Borrower shall indemnify the Bank as per Article 4.02B; or

(b)

an Accepted Tranche upon an Event of Default, the Borrower shall indemnify the Bank under Article 10.03.

Save in these cases, no indemnity is payable upon cancellation of a Tranche by the Bank.

1.06

Cancellation after expiry of the Credit

On the day following the Final Availability Date, and unless otherwise specifically agreed to in writing by the Bank, the part of the Credit in respect of which no Disbursement Acceptance has been made in accordance with Article 1.02C shall be automatically cancelled, without any notice being served by the Bank to the Borrower and without liability arising on the part of either party.

1.07

Sums due under Article 1

Sums due under Article 1 shall be payable in EUR. They shall be payable within 15 (fifteen) days of the Borrower’s receipt of the Bank’s demand or within any longer period specified in the Bank’s demand.

ARTICLE 2

The Loan

2.01

Amount of Loan

The Loan shall comprise the aggregate amount of Tranches disbursed by the Bank under the Credit.

2.02

Currency of repayment, interest and other charges

Interest, repayments and other charges payable in respect of each Tranche shall be made by the Borrower in the currency in which the Tranche is disbursed.

Any other payment shall be made in the currency specified by the Bank having regard to the currency of the expenditure to be reimbursed by means of that payment.

ARTICLE 3

Interest

3.01

Payment of cash interest

(a)

Subject to Article 3.02 and Article 3.03, the Borrower shall pay interest on the outstanding balance of each Tranche at the Floating Rate quarterly in arrears on the relevant Payment Dates, as specified in the Disbursement Offer commencing on the first such Payment Date following the Disbursement Date of the Tranche. If the period from the Disbursement Date to the first Payment Date is 15 days or less then the payment of interest accrued during such period shall be postponed to the following Payment Date.

(b)

The Bank shall notify the Floating Rate to the Borrower within 10 (ten) days following the commencement of each Floating Rate Reference Period

(c)

Interest shall be calculated in respect of each Floating Rate Reference Period on the basis of Article 5.01. If the Floating Rate for any Floating Rate Reference Period is below zero, it will be set at zero.

3.02

Payment of deferred interest

In addition to the interest referred to in Article 3.01 and 3.03, the Borrower shall pay, on the Maturity Date of the relevant Tranche (and as specified in the relevant Disbursement Offer) interest at the Deferred Interest Rate which accrues on a daily basis on the outstanding amount of each Tranche during the period starting on the Disbursement Date of such Tranche and ending on the Maturity Date of the relevant Tranche (or on any date earlier than that Maturity Date in the event of a prepayment or an acceleration of all or part of that Tranche) (the “ Deferred Interest ”).

For the purposes of this Contract “ Deferred Interest Rate ” means a fixed interest rate of 6% per annum.

3.03

Payment of performance participation interest

(a)

In addition to the interest referred to in Article 3.01 and Article 3.02, the Borrower shall pay, on the Maturity Date of the relevant Tranche (or on any date earlier than that Maturity Date in the event of a prepayment or an acceleration of all or part of that Tranche) an amount equal to the Performance Participation Interest in respect of that Tranche.

(b)

The Borrower and the Bank hereby agree that the calculations illustrated as examples of the Performance Participation Interest under Schedule F, fairly represent the intention of the Parties.

For the purposes of this Contract:

“ Auditor ” means any firm of accountants with sufficient skill and expertise and appropriate geographical reach or any other firm approved in advance by the Bank (such approval not to be unreasonably withheld or delayed);

“ Disbursement Date Notional Equity Proportion ” means the Bank’s notional equity share in the Borrower’s issued share capital calculated as at the Disbursement Offer of a relevant Tranche as follows:

Disbursement Date Notional Equity Proportion = the amount expressed as a per centage of (Amount of the Tranche) x (Participation Interest Notional Rate) x (Term of the Tranche) / (Disbursement Date Market Capitalisation);

“ Disbursement Date Market Capitalisation ” means the Market Capitalisation of the Borrower’s entire issued share capital as notified by the Bank in the Disbursement Offer;

“ Market Capitalisation ” means:

(a)

for so long as the Borrower is listed for trading on the Frankfurt Stock Exchange, the market value of the issued share capital of the Borrower shall be calculated on the basis of a non-weighted average closing price of the shares in the Xetra trading system over a period equal to 90 Trading Days prior to the Disbursement Date or the Maturity Date of the relevant Tranche (as applicable); and

(b)

if at any time the Borrower is de-listed from trading on the Frankfurt Stock Exchange, the market value of the issued share capital of the Borrower on the Disbursement Date or the Maturity Date (or on any date earlier than that Maturity Date in the event of a prepayment or an acceleration of all or part of that Tranche) shall be determined by an Auditor (at the cost of the Borrower) and such Auditor shall attribute a value to the appropriated financial collateral in a commercially reasonable manner;

“ Maturity Date Market Capitalisation ” means the Market Capitalisation of the Borrower’s entire issued share capital in relation to the Maturity Date (or on any date earlier than that Maturity Date in the event of a prepayment or an acceleration of all or part of that Tranche);

“ Participation Interest Notional Rate ” means a fixed interest rate of 2% per annum;

“ Performance Participation Interest ” means the amount expressed in Euros notified by the Bank to the Borrower representing the value of the Bank’s notional equity return in the Borrower’s issued share capital based on (i) the Bank’s Disbursement Date Notional Equity Proportion and (ii) the Maturity Date Market Capitalisation, calculated as follows:

Performance Participation Interest = (Disbursement Date Notional Equity Proportion) x (Maturity Date Market Capitalisation).

provided that, other than in the case of a voluntary prepayment, the maximum Performance Participation Interest payable in respect of a Tranche shall not exceed an amount equal to 4% per annum; and

“ Trading Day ” means a day (other than a Saturday or Sunday) on which the Frankfurt Stock Exchange is open for trading.

3.04

Interest on overdue sums

Without prejudice to Article 10 and by way of exception to Article 3.01, if the Borrower fails to pay any amount payable by it under this Contract on its due date, interest shall accrue (subject to mandatory provisions of the applicable laws) on any overdue amount payable under the terms of this Contract from the due date to the date of actual payment at an annual rate equal to:

(a)

for overdue sums related to Trenches, the applicable Floating Rate plus 2% (200 basis points); or

(b)

for overdue sums other than under (i) above, EURIBOR plus 2% (200 basis points),

and shall be payable in accordance with the demand of the Bank. For the purpose of determining the EURIBOR in relation to this Article 3.04, the relevant periods within the meaning of Schedule B shall be successive periods of one month commencing on the due date.

If the overdue sum is in a currency other than the currency of the Loan, the following rate per annum shall apply, namely the relevant interbank rate that is generally retained by the Bank far transactions in that currency plus 2% (200 basis points), calculated in accordance with the market practice for such rate.

ARTICLE 4

Repayment

4.01

Repayment

The Borrower shall repay each Tranche, together with all other outstanding amounts under this Contract in relation to the Tranche, in a single instalment on the Maturity Date specified in the Disbursement Offer relating to that Tranche being a Payment Date falling 5 years from the Scheduled Disbursement Date of that Tranche.

4.02

Voluntary prepayment

4.02A

Prepayment option

Subject to Articles 4.02B, 4.02C and 4.04, the Borrower may at any time after the first anniversary of the relevant Disbursement Date prepay all or part of any Tranche, together with accrued interest (including Deferred Interest and Performance Participation Interest) and indemnities if any, upon giving a Prepayment Request with at least 1 (one) month’s prior notice specifying (i) the Prepayment Amount, (ii) the Prepayment Date, (iii) if applicable, the choice of application method of the Prepayment amount in line with Article 5.05(c)(i); and (iv) the contract number (“ Fl nr ”) mentioned on the cover page of this Contract.

Subject to Article 4.02C the Prepayment Request shall be binding and irrevocable.

4.02B

Prepayment Fee

Upon prepayment of all or part of any Tranche under Article 4.02 or cancellation under Article 1.05C, the Borrower shall pay a fee, for each Tranche, as follows:

(a)

a fee of 6% of the Prepayment Amount if the Prepayment Date is on or after the first anniversary of the relevant Disbursement Date but before the second anniversary of such Disbursement Date; or

(b)

a fee of 3% of the Prepayment Amount if the Prepayment Date is on or after the second anniversary of the relevant Disbursement Date but before the third anniversary of such Disbursement Date; or

(c)

a fee of 1.5% of the Prepayment Amount if the Prepayment Date is on or after the third anniversary of the relevant Disbursement Date but before the fourth anniversary of such Disbursement Date,

with each fee being payable on the applicable Prepayment Date.

For the avoidance of doubt, no such fee shall be payable if the Prepayment Date is on or after the fourth anniversary of the relevant Disbursement Date.

4.02C

Prepayment mechanics

Upon presentation by the Borrower to the Bank of a Prepayment Request, the Bank shall issue a Prepayment Notice to the Borrower, not later than 15 (fifteen) days prior to the Prepayment Date. The Prepayment Notice shalt specify the Prepayment Amount, the accrued interest due thereon (including any Deferred Interest and Performance Participation Interest), the Prepayment Fee payable under Article 4.02B or, as the case may be, that no fee is due, the method of application of the Prepayment Amount and the Acceptance Deadline.

If the Borrower accepts the Prepayment Notice no later than by the Acceptance Deadline, it shall effect the prepayment. In any other case, the Borrower may not effect the prepayment.

The Borrower shall accompany the prepayment by the payment of accrued interest (including Deferred Interest and Performance Participation Interest) and fee, if any, due on the Prepayment Amount, as specified in the Prepayment Notice.

4.03

Compulsory prepayment

4.03A

Prepayment Events

4.03A(1) PROJECT COST REDUCTION

If the total cost of the Project falls below the figure stated in Recital (2) so that the amount of the Credit exceeds 50% (fifty per cent) of such total cost, the Bank may forthwith, by notice to the Borrower, cancel the undisbursed portion of the Credit and/or demand prepayment of the Loan up to the amount by which the Credit exceeds 50% (fifty per cent) of the total cost of the Project. The Borrower shall effect payment of the amount demanded on the date specified by the Bank, such date being a date falling not less than 30 (thirty) days from the date of the demand.

4.03A(2) PARI PASSU TO NON-EIB FINANCING

If the Borrower (or any other member of the Group) or a Guarantor voluntarily prepays (for the avoidance of doubt, prepayment shall include a repurchase, redemption or cancellation where applicable) a part or the whole of any Non-EIB Financing and:

(a)

such prepayment is not made within a revolving credit facility (save for the cancellation of the revolving credit facility); or

(b)

such prepayment is not made out of the proceeds of a loan or other indebtedness having a term at least equal to the unexpired term of the Non-EIB Financing prepaid;

the Bank may, by notice to the Borrower, cancel the undisbursed portion of the Credit and demand prepayment of the Loan. The proportion of the Loan that the Bank may require to be prepaid shall be the same as the proportion that the prepaid amount of the Non-EIB Financing bears to the aggregate outstanding amount of all Non-EIB Financing.

The Borrower shall effect payment of the amount demanded on the date specified by the Bank, such date being a date falling not less than 30 (thirty) days from the date of the demand.

This Article 4.03(A)(2) shall not apply to a voluntary prepayment by the Borrower of the following:

(a)

a prepayment of an outstanding option bond due 1 January 2018 (as set out under Schedule G (Existing Indebtedness));

(b)

a prepayment of a convertible bond due 1 January 2021 (as set out under Schedule G (Existing Indebtedness)) in accordance with the terms of the “Early Redemption for reasons of minimal outstanding Principal Amount” provision listed under the relevant part of the column entitled “De-minimis repayment provisions” of Schedule G (Existing Indebtedness)); and

(c)

a prepayment of a convertible bond due 1 January 2022 (as set out under Schedule G (Existing Indebtedness)) in accordance with the terms of the “Early Redemption for reasons of minimal outstanding Principal Amount” provision listed under the relevant part of the column entitled “De-minimis repayment provisions” of Schedule G (Existing Indebtedness)).

For the purposes of this Article, “ Non-EIB Financing ” includes any loan (save for the Loan and any other direct loans from the Bank to the Borrower (or any other member of the Group)) or a Guarantor, credit bond or other form of financial indebtedness or any obligation for the payment or repayment of money originally granted to the Borrower (or any other member of the Group) or a Guarantor for a term of more than 3 (three) years.

4.03A(3) CHANGE OF CONTROL

The Borrower shall promptly inform the Bank if a Change-of-Control Event has occurred or is likely to occur in respect of itself or any Guarantor. At any time after the occurrence of a Change-of-Control Event, the Bank may, try notice to the Borrower, cancel the undisbursed portion of the Credit and demand prepayment of the Loan, together with accrued interest and all other amounts accrued or outstanding under this Contract.

In addition, if the Borrower has informed the Bank that a Change-of-Control Event is about to occur, or if the Bank has reasonable cause to believe that a Change-of-Control Event is about to occur, the Bank may request that the Borrower consult with it. Such consultation shall take place within 30 (thirty) days from the date of the Bank’s request. After the earlier of (a) the lapse of 30 (thirty) days from the date of such request for consultation, or (b) at any time thereafter, upon the occurrence of the anticipated Change-of-Control Event the Bank may, by notice to the Borrower, cancel the undisbursed portion of the Credit and demand prepayment of the Loan, together with accrued interest and all other amounts accrued or outstanding under this Contract.

The Borrower shall effect payment of the amount demanded on the date specified by the Bank, such date being a date failing not less than 30 (thirty) days from the date of the demand.

For the purposes of this Article

(a)

a “ Change-of-Control Event ” occurs if any person or group of persons acting in concert gains control of the Borrower or of the entity directly or ultimately controlling the Borrower;

(b)

“ acting in concert ” means acting together pursuant to an agreement or understanding (whether formal or informal): and

(c)

“ control ” means the power to direct the management and policies of an entity, whether through the ownership of voting capital, by contract or otherwise.

4.03A(4) CHANGE OF LAW

The Borrower shall promptly inform the Bank if a Change-of-Law Event has occurred or is likely to occur. In such case, or if the Bank has reasonable cause to believe that a Change-of-Law Event has occurred or is about to occur, the Bank may request that the Borrower consult with it. Such consultation shall take place within 30 (thirty) days from the date of the Bank’s request. If, after the lapse of 30 (thirty) days from the date of such request for consultation the Bank is of the opinion that the effects of the Change-of-Law Event cannot be mitigated to its satisfaction, the Bank may by notice to the Borrower, cancel the undisbursed portion of the Credit and demand prepayment of the Loan, together with accrued interest and all other amounts accrued or outstanding under this Contract.

The Borrower shall effect payment of the amount demanded on the date specified by the Bank, such date being a date falling not less than 30 (thirty) days from the date of the demand.

For the purposes of this Article “ Change-of-Law Event ” means the enactment, promulgation, execution or ratification of or any change in or amendment to any law, rule or regulation (or in the application or official interpretation of any law, rule or regulation) that occurs after the date of this Contract and which, in the opinion of the Bank, would materially impair the Borrower’s or Guarantor’s ability to perform its obligations under this Contract or any guarantee provided in respect of this Contract.

4.03A(5) ILLEGALITY

If it becomes unlawful in any applicable jurisdiction for the Bank to perform any of its obligations as contemplated in this Contract or to fund or maintain the Loan, the Bank shall promptly notify the Borrower and may immediately (i) suspend or cancel the undisbursed portion of the Credit and/or (ii) demand prepayment of the Loan, together with accrued interest and all other amounts accrued or outstanding under this Contract on the date indicated by the Bank in its notice to the Borrower.

4.03B

Prepayment mechanics

Any sum demanded by the Bank pursuant to Article 4.03A together with any interest or other amounts accrued or outstanding under this Contract including, without limitation, any fee or indemnity due under Article 4.03C and Article 4.04, shall be paid on the date indicated by the Bank in its notice of demand.

4.03C

Prepayment fee

In the case of an indemnifiable Prepayment Event, the fee, if any, shall be determined in accordance with Article 4.02B.

4.04

General

A repaid or prepaid amount may not be reborrowed. This Article 4 shall not prejudice Article 10.

If the Borrower prepays a Tranche on a date other than a relevant Payment Date, the Borrower shall indemnify the Bank in such amount as the Bank shall certify is required to compensate it for receipt of funds otherwise than on a relevant Payment Date.

ARTICLE 5

Payments

5.01

Day count convention

Any amount due by way of interest, indemnity or fee from the Borrower under this Contract, and calculated in respect of a fraction of a year, shall be determined on the following respective conventions in respect of interest and indemnities due under a Tranche, a year of 360 (three hundred and sixty) days and the number of days elapsed.

5.02

Time and place of payment

Unless otherwise specified in this Contract or in the Bank’s demand, all sums other than sums of interest, indemnity and principal are payable within 15 (fifteen) days of the Borrower’s receipt of the Bank’s demand.

Each sum payable by the Borrower under this Contract shall be paid to the relevant account notified by the Bank to the Borrower. The Bank shall notify the account not less than 15 (fifteen) days before the due date for the first payment by the Borrower and shall notify any change of account not less than 15 (fifteen) days before the date of the first payment to which the change applies. This period of notice does not apply in the case of payment under Article 10.

The Borrower shall indicate in each payment made hereunder the contract number (“Fl nr”) found on the cover page of this Contract.

A sum due from the Borrower shall be deemed paid when the Bank receives it.

Any disbursements by and payments to the Bank under this Contract shall be made using account(s) acceptable to the Bank. For the avoidance of doubt, any account in the name of the Borrower held with a duly authorised financial institution in the jurisdiction where the Borrower is incorporated or where the Project is undertaken is deemed acceptable to the Bank.

5.03

No set-off by the Borrower

All payments to be made by the Borrower under this Contract shall be calculated and be made without (and free and clear of any deduction for) set-off or counterclaim.

5.04

Disruption to Payment Systems

If either the Bank determines (in its discretion) that a Disruption Event has occurred or the Bank is notified by the Borrower that a Disruption Event has occurred:

(a)

the Bank may, and shall if requested to do so by the Borrower, consult with the Borrower with a view to agreeing with the Borrower such changes to the operation or administration of this Contract as the Bank may deem necessary in the circumstances;

(b)

the Bank shall not be obliged to consult with the Borrower in relation to any changes mentioned in paragraph (a) if, in its opinion, it is not practicable to do so in the circumstances and, in any event, shall have no obligation to agree to such changes; and

(c)

the Bank shall not be liable for any damages, costs or losses whatsoever arising as a result of a Disruption Event or for taking or not taking any action pursuant to or in connection with this Article 5.04.

5.05

Application of sums received

(a)

General

Sums received from the Borrower shall only discharge its payment obligations if received in accordance with the terms of this Contract.

(b)

Partial payments

If the Bank receives a payment that is insufficient to discharge all the amounts then due and payable by the Borrower under this Contract, the Bank shall apply that payment in or towards payment of

(i) first, any unpaid fees, costs, indemnities and expenses due under this Contract;

(ii) secondly, any accrued interest due but unpaid under this Contract,

(iii) thirdly, any principal due but unpaid under this Contract; and

(iv) fourthly, any other sum due but unpaid under this Contract.

(c)

Allocation of sums related to Tranches

(i) The Bank may apply sums received between Tranches at its discretion

(ii) In case of receipt of sums which cannot be identified as applicable to a specific Tranche, and on which there is no agreement between the Bank and the Borrower on their application, the Bank may apply these between Tranches at its discretion.

ARTICLE 6

Borrower undertakings and representations

The undertakings in this Article 6 remain in force from the date of this Contract for so long as any amount is outstanding under this Contract or the Credit is in force.

Project undertakings

6.01

Use of Loan and availability of other funds

The Borrower shall use all amounts borrowed by it under the Loan for the execution of the Project.

The Borrower shall ensure that it has available to it the other funds listed in Recital (2) and that such funds are expended, to the extent required, on the financing of the Project.

6.02

Completion of Project

The Borrower shall or shall procure that the Project is carried out in accordance with the Technical Description as may be modified from time to time with the approval of the Bank, and complete it by the final date specified therein.

6.03

Increased cost of Project

If the total cost of the Project exceeds the estimated figure set out in Recital (2), the Borrower shall obtain the finance to fund the excess cost without recourse to the Bank, so as to enable the Project to be completed in accordance with the Technical Description. The plans for funding the excess cost shall be communicated to the Bank without delay.

6.04

Procurement procedure

The Borrower shall purchase equipment, secure services and order works for the Project (a) in so far as they apply to it or to the Project, in accordance with European Union law in general and in particular with the relevant European Union Directives and (b) in so far as European Union Directives do not apply, by procurement procedures which, to the satisfaction of the Bank, respect the criteria of economy and efficiency and, in case of public contracts, the principles of transparency, equal treatment and non-discrimination on the basis of nationality.

6.05

Continuing Project undertakings

The Borrower shall:

(a)

Maintenance : maintain, repair, overhaul and renew all project assets as required to keep such assets in good working order;

(b)

Project assets : unless the Bank shall have given its prior consent in writing retain title to and possession of all or substantially all the project assets or, as appropriate, replace and renew such assets and maintain the Project in substantially continuous operation in accordance with its original purpose; provided that the Bank may withhold its consent only where the proposed action would prejudice the Bank’s interests as lender to the Borrower or would render the Project ineligible for financing by the Bank under its statute or under Article 309 of the Treaty on the Functioning of the European Union;

(c)

Insurance : insure all works and property forming part of the Project with first class insurance companies in accordance with Good Industry Practice;

(d)

Rights and Permits : maintain in force all rights of way or use and all Authorisations necessary for the execution and operation of the Project; and

(e)

Environment :

(i) implement and operate the Project in compliance with Environmental Law;

(ii) obtain and maintain requisite Environmental Approvals for the Project; and

(iii) comply with any such Environmental Approvals;

On becoming aware of any breach of this Article 6.05(e).

the Borrower shall promptly notify the Bank;

the Borrower and the Bank will consult for 15 Business Days from the date of notification (the consultation period) with a view to agreeing the manner in which the breach should be rectified; and

the Borrower will use its best endeavours to comply with the provisions set out in paragraphs (i) to (iii) (inclusive) above and shall in any event remedy the breach within 30 Business Days of the end of the consultation period.

(f)

Integrity : take, within a reasonable timeframe, appropriate measures in respect of any member of its management bodies who has been convicted by a final and irrevocable court ruling of an Illegal Activity perpetrated in the course of the exercise of his/her professional duties, in order to ensure that such member is excluded from any Borrowers activity in relation to the Loan or the Project;

(g)

Integrity Audit Rights : ensure that all contracts under the Project to be procured after the date of signature of this Contract in accordance with European Union Directives on procurement provide for;

(i) the requirement that the relevant contractor promptly informs the Bank of a genuine allegation, complaint or information with regard to Illegal Activities related to the Project;

(ii) the requirement that the relevant contractor keeps books and records of all financial transactions and expenditures in connection with the Project; and

(iii) the Bank’s right, in relation to an alleged Illegal Activity, to review the books and records of the relevant contractor in relation to the Project and to take copies of documents to the extent permitted by law.

B. General undertakings

6.06

Disposal of assets

The Borrower shall not, and shall procure that no other member of the Group will, either in a single transaction or in a series of transactions whether related or not and whether voluntarily or involuntarily dispose of all or any part of the Borrowers or ether Group member’s business, undertaking or assets, including any Intellectual Property Rights or any shares or securities of any entity or business undertaking, unless such disposal is a Permitted Disposal.

For the purposes of this Article, “dispose” and “disposal” includes any act effecting sale, transfer, lease or other disposal.

6.07

Compliance with laws, Hedging, US regulations, Sanctions and Anti-Money Laundering

6.07A

Compliance with laws

The Borrower shall, and shall procure that each other member of the Group (including the Guarantors) shall, comply in all respects with all laws and regulations to which it or the Project is subject.

6.07B

Hedging

The Borrower shall not, and shalt procure that each other member of the Group shall not enter into any derivative transaction other than non-speculative currency hedging transactions on market standard terms in connection with Group’s business in the US.

6.07C

US Governmental Regulation

(a)

The Borrower shall not, and shall procure that each member of the Group and any of their respective Subsidiaries shall not, be subject at any time to regulation under the US Federal Power Act or the US Interstate Commerce Act or under any other US federal or state statute or regulation which may limit its ability to incur or guarantee indebtedness or which may otherwise render all or any portion of their respective obligations under the Contract or any Guarantee Agreement unenforceable.

(b)

The Borrower shall not at any time, and shall procure that each member of the Group and any of their respective Subsidiaries shall not any time, be an “investment company” or a company “controlled” by an “investment company’ as defined in, or subject to regulation under, the US Investment Company Act of 1940, as amended.

6.07D

US Securities Activities and Margin Regulations

(a)

The Borrower shall not at any time, and shall procure that each member of the Group and any of their respective Subsidiaries shall not at any time, engage principally, or as one of its important activities, in the business of purchasing or carrying Margin Stock or extending credit for the purpose of purchasing or carrying any Margin Stock.

(b)

No part of the proceeds of any of the Loans will be used for any purpose which violates the provisions of Regulations T, U or X issued by the Board of Governors of the Federal Reserve System.

6.07E

Sanctions

The Borrower shall not, and shall procure that each member of the Group and any of their respective Subsidiaries shall not, nor any of their respective Subsidiaries, any directors, officers, employees, agents, Affiliates of each of the foregoing:

(a)

be a Restricted Party or engage in or be engaged in any transaction or conduct that could result in it becoming a Restricted Party;

(b)

be subject to any claim, proceeding, formal notice or investigation with respect to Sanctions;

(c)

engage in or be engaged in any transaction that evades or avoids, or has the purpose of evading or avoiding, or breaches or attempts to breach, directly or indirectly, any Sanctions applicable to it or

(d)

engage or be engaged, directly or indirectly, in any trade, business or other activities with or for the benefit of any Restricted Party.

6.07F

Anti-Money Laundering

The Borrower shall at all times, and shall procure that each member of the Group and any of their respective Subsidiaries shall at all times be in compliance with the (a) Trading with the Enemy Act, as amended, and each of the foreign assets control regulations of the United States Treasury Department (31 CFR, Subtitle B, Chapter V, as amended) and any other enabling legislation or executive order relating thereto, and (b) the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (Title III of Pub. L. 107-56 (signed into law October 26, 2001)), as amended. No part of the proceeds of any Loan will be used, directly or indirectly, for any payments to any governmental official or employee, political party, official of a political party, candidate for political office, or anyone else acting in an official capacity, in order to obtain, retain or direct business or obtain any improper advantage, in violation of the United States Foreign Corrupt Practices Act of 1977, as amended.

6.08

Change in business

The Borrower shall procure that no substantial change is made to the general nature business of the Borrower or the Group as a whole from that carried on at the date of this Contract.

6.09

Merger

The Borrower shall not, and shall ensure that no other member of the Group shall, enter into any amalgamation, demerger, merger or corporate reconstruction unless:

(a)

with the prior written consent of the Bank; or

(b)

such amalgamation, demerger, merger or corporate reconstruction is a Permitted Merger.

6.10

Ownership

(a)

The Borrower shall maintain not less than 51% (fifty one per cent) of the share capital, directly or indirectly, of each of its Material Subsidiaries, unless a prior written consent of the Bank is received by the Borrower.

(b)

The Borrower shall in aggregate maintain not less than 100% (one hundred per cent) of the share capital, directly or indirectly, of each Guarantor, unless prior written consent of the Bank is received by the Borrower.

(c)

The Borrower shall immediately notify the Bank in the event of a new entity becoming a majority owned subsidiary (meaning ownership of 50.1% (fifty point one per cent) or more) through any means, including but not limited to acquisition, creation and spin-off.

(d)

The undertakings in paragraphs (a) and (h) above shall be calculated in accordance with GARP as applied by the Borrower on the date of this Contract and as GAAP is amended from time to time and tested annually.

6.11

Books and records

The Borrower shalt ensure that it has kept and will continue to keep proper books and records of account, in which full and correct entries shall be made of all financial transactions and the assets and business of the Borrower, including expenditures in connection with the Project, in accordance with GAAP as in effect from time to time.

6.12

Visibility

The Borrower agrees to cooperate with the Bank to ensure that any press releases or publications made by the Borrower regarding the financing and the Project include an appropriate acknowledgment of the financial support provided by the Bank with the backing of the European Union through EFSI.

6.13

Acquisitions

The Borrower shall not, and shall ensure that no other member of the Group shall invest in or acquire any entity or a business going concern or an undertaking (whether whole or substantially the whole of the assets or business), or any division or operating unit thereof, or any shares or securities of any entity or a business or undertaking (or in each case, any interest in any of them) (or agree to any of the foregoing), unless:

(a)

with the prior written consent of the Bank; or

(b)

such acquisition is a Permitted Acquisition.

6.14

Indebtedness

The Borrower shall not, and shalt ensure that no other member of the Group shall incur any Indebtedness, unless:

(a)

with the prior written consent of the Bank; or

(b)

such Indebtedness is Permitted Indebtedness.

6.15

Guarantees

The Borrower shall not, and shall procure that no other member of the Group will issue or allow to remain outstanding any guarantees in respect of any liability or obligation of any person unless:

(a)

with the prior written consent of the Bank; or

(b)

such guarantees are Permitted Guarantees.

6.16

Permitted Payments

The Borrower shall not, and shall procure that no other member of the Group shall declare or distribute dividends, or make any payment in respect of any intercompany loan, or return or purchase shares unless:

(a)

with the prior written consent of the Bank;

(b)

such payments are Permitted Payments;

(c)

such distribution of dividends is made from one Obligor to another Obligor; or

(d)

it relates to the solvent liquidation or reorganisation of any member of the Group which is not an Obligor so long as any payments or assets distributed as a result of such liquidation or reorganisation are distributed to other members of the Group.

6.17

Intellectual Property Rights

The Borrower shall, and shall procure that each other member of the Group shall, (i) safeguard and maintain its rights with respect to the Intellectual Property Rights required for the implementation of the Project in accordance with this Contract, including complying with all material contractual provisions and that the implementation of the Project in accordance with this Contract will not result in the infringement of the rights of any person with regard to the Intellectual Property Rights and (ii) ensure that any Intellectual Property Rights required for the implementation of the Project will be owned by or licensed to the Borrower, and where such Intellectual Property Rights which are owned by a member of the Group are capable of registration, are registered to that Obligor.

6.18

Maintenance of Status

The Borrower shall, and shall procure that each other member of the Group shall, remain duly incorporated and/or organised and validly existing as a corporate or other legal entity (as applicable) with limited liability under the jurisdiction in which it is incorporated or organised (and with respect to any US Guarantor, is in good standing under its jurisdiction of incorporation or organisation or formation) that it will have no centre of main interests, permanent establishment or place of business outside the jurisdiction in which it is incorporated, and that it will continue to have the power to carry on its business as it is now being conducted and continue to own its property and other assets.

6.19

Eligibility Prerequisites

The Borrower shall, and shall procure that each other member of the Group shall, satisfy the eligibility prerequisites, as amended from time to time, that are required to be satisfied in order to obtain finance under the joint initiative between the Bank and the European Commission as set out in Recital (8).

6.20

Illicit origin

The Borrower shall, and shall procure that each other member of the Group shall, promptly inform the Bank if at any time it becomes aware of any funds that are invested in the Project by the Borrower or by any other member of the Group that are of illicit origin, including products of money laundering or linked to the financing of terrorism.

6.21

General Representations and Warranties

The Borrower represents and warrants to the Bank that:

(a)

it is duly incorporated and validly existing as a public listed company under the laws of Germany and it has power to carry on its business as it is now being conducted and to own its property and other assets;

(b)

it has the power to execute, deliver and perform its obligations under this Contract and all necessary corporate, shareholder and other action has been taken to authorise the execution, delivery and performance of the same by it;

(c)

this Contract constitutes its legally valid, binding and enforceable obligations;

(d)

the execution and delivery of, the performance of its obligations under and compliance with the provisions of this Contract do not and will not

(i) contravene or conflict with any applicable law, statute, rule or regulation, or any judgement, decree or permit to which it is subject;

(ii) contravene or conflict with any agreement or other instrument binding upon it which might reasonably be expected to have a material adverse effect on its ability to perform its obligations under this Contract; and

(iii) contravene or conflict with any provision of its articles of association ( Satzung ) or the rules of procedure of the management board ( Geschäftsordnung ), supervisory board ( Aufsichtsrat ) and/or advisory board ( Beirat ), if any;

(e)

the latest available consolidated audited accounts of the Borrower and if applicable each Guarantor have been prepared on a basis consistent with previous years and have been approved by its auditors as representing a true and fair view of the results of its operations for that year and accurately disclose or reserve against all the liabilities (actual or contingent) of the Borrower;

(f)

there has been no Material Adverse Change since 9 November 2016;

(g)

no event or circumstance which constitutes an Event of Default has occurred and is continuing unremedied or unwaived;

(h)

no litigation, arbitration, administrative proceedings or investigation is current or to its knowledge is threatened or pending before any court, arbitral body or agency which has resulted, or if adversely determined is reasonably likely to result in, a Material Adverse Change, nor is there subsisting against it or any of its subsidiaries any unsatisfied judgement or award;

(i)

it has obtained all necessary Authorisations in connection with this Contract and in order to lawfully comply with its obligations hereunder, and the Project and all such Authorisations are in full force and effect and admissible in evidence;

(j)

its payment obligations under this Contract rank not less than pari passu in right of payment with all other present and future unsecured and unsubordinated obligations under any of its debt instruments except for obligations mandatorily preferred by law applying to companies generally;

(k)

it is in compliance with Article 6.05(e) and to the best of its knowledge and belief (having made due and careful enquiry) no Environmental Claim has been commenced or is threatened against it;

(l)

no financial covenants have been concluded with any other creditor of the Borrower other than the covenants disclosed to the Bank under Schedule G (Existing Indebtedness);

(m)

the Group structure chart delivered in accordance with Article 1 .04A(m) is true, complete and accurate in all material respects and represents the complete corporate structure of the Group as at the date of this Contract;

(n)

it is not required to make any deduction for or on account of any Tax from any payment it may make under this Contract;

(o)

to the best of its knowledge, no funds invested in the Project by the Borrower or by its controlling entities or by another member of the Group are of illicit origin, including products of money laundering or linked to the financing of terrorism. The Borrower shall promptly inform the Bank if at any time it becomes aware of the illicit origin of any such funds;

(p)

all Tax returns required to have been filed by it or on its behalf under any applicable law have been filed when due and contain the information required by applicable law to be contained in them;

(q)

it has paid when due all Taxes payable by it under applicable law except to the extent that it is contesting payment in good faith and by appropriate means;

(r)

with respect to Taxes which have not fallen due or which it is contesting, it is maintaining reserves adequate for their payment and in accordance, where applicable, with GAAP;

(s)

the accounting reference date of the Borrower is 31 December (the “Accounting Reference Date);

(t)

under the laws of Germany it is not necessary that this Contract be filed, recorded or enrolled with any court or other authority in Germany or that any stamp, registration or similar tax be paid on or in relation to this Contract, or the transactions contemplated by this Contract;

(u)

any factual information provided by the Borrower and any member of the Group for the purposes of entering into this Contract and any related documentation was true and accurate in all material respects as at the date it was provided or as at the date (if any) at which it is stated;

(v)

the Borrower has no Indebtedness outstanding other than the Permitted Indebtedness;

(w)

neither it, nor any of its assets, is entitled to immunity from suit, execution, attachment or other legal process;

(x)

it has done, or will have done by the appropriate time for the Project to be implemented in accordance with this Contract, all that is reasonably required to obtain, safeguard and maintain its rights with respect to the Intellectual Property Rights required for the implementation of the Project in accordance with this Contract including complying with all contractual provisions;

(y)

to the best of its knowledge and belief, having made reasonable enquiry the implementation of the Project in accordance with this Contract, will not result in the infringement of the rights of any person with regard to the Intellectual Property Rights;

(z)

the pension schemes for the time being operated by the Borrower (if any) are funded in accordance with their rules and to the extent required by law or otherwise comply with the requirements of any law applicable in the jurisdiction in which the relevant pension scheme is maintained;

(aa)

it is in compliance with all applicable European Union and German legislation, including any applicable anti-corruption legislation;

(bb)

other than as set out in the Group structure chart, the Borrower owns no other equity and/or shares in any other business entity;

(cc)

it has acquainted itself with this Contract and determined that it is in its best commercial interest and consistent with its purpose of operations to enter into this Contract;

(dd)

no member of the Group is dormant (other than Biofrontera Neuroscience GmbH and Biofrontera Development GmbH);

(ee)

as on the date of this Contract, (i) information provided by the Borrower under the Application Form is complete, accurate and true in all respects; and (ii) the Borrower (and the Group as a whole where relevant) complies with the eligibility and exclusion criteria to be the beneficiary of the Credit as such criteria are listed in the Application Form;

(ff)

it is in compliance with all undertakings under this Contract;

(gg)

it is not engaged in any Illegal Activities and to the best of its knowledge no Illegal Activities have occurred in connection with the Project;

(hh)

the choice of the laws of England and Wales as the governing law of this Contract will be recognised and enforced in its jurisdiction of incorporation and any judgement obtained in England and Wales in relation to this Contract will be recognised and enforced in its jurisdiction of incorporation;

(ii)

it has not disclosed any information (whether confidential or otherwise) to the Bank, prior to the date of this Contract and at any time from the date of this Contract, which constitutes inside information within the meaning of Article 7 of the Market Abuse Regulation;

(jj)

it, the Guarantors and any other member of the Group have not issued or do not have in issue “financial instruments” which fall within the scope of Article 2 of the Market Abuse Regulations (Regulation 596/2014) save for the following:

(A)

its shares under ISINs DE0006046113 and DE000A2E41E4; and

(B)

the bonds referred to under Schedule G (Existing Indebtedness); and

(kk)

it is not, nor to its knowledge any other member of the Group or any of their respective Subsidiaries and any of directors, officers, employees, agents of any of the foregoing is not:

(A)

a Restricted Party or engaging in or engaged in any transaction or conduct that could result in it becoming a Restricted Party;

(B)

or never has been subject to any claim, proceeding, formal notice or investigation with respect to Sanctions;

(C)

engaging or engaged in any transaction that evades or avoids, or has the purpose of evading or avoiding, or breaches or attempts to breach, directly or indirectly, any Sanctions applicable to it, or

(D)

engaged or engaging, directly or indirectly, in any trade, business or other activities with or for the benefit of any Restricted Party.

The representations and warranties set out above shall survive the execution of this Contract and are, with the exception of the representations set out in paragraph (f), (m), (n), (t), (ee), (gg) and (kk) above, deemed repeated on each Disbursement Acceptance, Disbursement Date and on each Payment Date by reference to the facts and circumstances then existing.

ARTICLE 7

Security

The undertakings in this Article 7 remain in force from the date of this Contract for so long as any amount is outstanding under this Contract or the Credit is in force.

7.01

Guarantee

(a)

The obligations of the Bank under this Contract are conditional upon the prior execution and delivery to the Bank of the Guarantee Agreement in form and substance satisfactory to it. The Borrower hereby acknowledges and consents to the terms of the Guarantee Agreement.

(b)

The Borrower shall procure that as soon as any other member of the Group becomes a Material Subsidiary (other than in the case of a Material Subsidiary incorporated in France), the Borrower shall promptly inform the Bank and procure that such member of the Group shalt (to the extent this is permitted under applicable mandatory corporate law, assuming that all relevant corporate approvals have been obtained) shall:

(i) enter into a Guarantee Agreement duly executed by it;

(ii) provide the Bank with a certified copy of its resolution of the competent body (board of directors or general meeting of shareholders or other management body) duly authorising the execution of the Guarantee Agreement and duly authorising the person or persons signing the Guarantee Agreement on its behalf, together with the specimen signature of each such person or persons.

(iii) provide the Bank with evidence that the Material Subsidiary has obtained all necessary Authorisations required in connection with the Guarantee Agreement;

(iv) provide the Bank with a legal opinion of a reputable law firm in the jurisdiction of incorporation of such Material Subsidiary, addressed to the Bank in form and substance satisfactory to the Bank, on the valid existence of the Guarantor, the authority and capacity of the Guarantor to enter into the Guarantee Agreement and on the due execution and choice of law of the Guarantee Agreement;

(v) evidence of the constitutional documents of the Guarantor;

(vi) a certificate of an authorised signatory of the Guarantor certifying that each copy document relating to it specified in this Article 7.01 is correct, complete and in full force and effect as at a date no earlier than the date of the Guarantee Agreement;

(vii) evidence of appointment of the Guarantor’s agent of service;

(viii) in the case of a Guarantor that is a US Guarantor, a certificate as to the existence and good standing of such Guarantor from the appropriate governmental authorities in such Guarantors jurisdiction of organisation; and

(ix) a solvency certificate signed by the chief financial officer, chief accounting officer or other similar officer of a Guarantor that is a US Guarantor, each in form and substance satisfactory to the Bank.

7.02

Negative pledqe

(a)

The Borrower shall not (and the Borrower shall ensure that no other member of the Group will) create or permit to subsist any Security over any of its assets.

For the purposes of this Article 7.02, the term Security shall also include any arrangement or transaction on assets or receivables or money (such as the sale, transfer or other disposal of assets on terms whereby they are or may be leased to or re-acquired by the Borrower or any other member of the Group, the sale, transfer or otherwise dispose of any receivables on recourse terms or any arrangement under which money or the benefit of a bank account or other account may be applied or set off or any preferential arrangement having a similar effect) in circumstances where the arrangement or transaction is entered into primarily as a method of raising credit or of financing the acquisition of an asset.

(b)

Paragraph (a) above does not apply to any Security, listed below:

(i) any netting or set-off arrangement entered into by any member of the Group in the ordinary course of its banking arrangements for the purpose of netting debit and credit balances;

(ii) any lien arising by operation of law and in the ordinary course of trading;

(iii) any Security over or affecting any asset acquired by a member of the Group after the date of this Contract if:

the Security was not created in contemplation of the acquisition of that asset by a member of the Group;

the principal amount secured has not been increased in contemplation of or since the acquisition of that asset by a member of the Group; and

the Security is removed or discharged within 3 (three) months of the date of acquisition of such asset;

(iv) any Security over or affecting any asset of any company which becomes a member of the Group after the date of this Contract, where the Security is created prior to the date on which that company becomes a member of the Group, if:

the Security was not created in contemplation of the acquisition of that company;

the principal amount secured has not increased in contemplation of or since the acquisition of that company; and

the Security is removed or discharged within 3 (three) months of that company becoming a member of the Group;

(v) any Security arising under any retention of title, hire purchase or conditional sale arrangement or arrangements having similar effect in respect of goods supplied to a member of the Group in the ordinary course of trading and on the suppliers standard or usual terms and not arising as a result of any default or omission by any member of the Group; or

(vi) any Security securing indebtedness the principal amount of which (when aggregated with the principal amount of any other indebtedness which has the benefit of Security given by any member of the Group other than any permitted under paragraphs (i) to (v) above) does not exceed EUR 500,000 (five hundred thousand euros) (or its equivalent in another currency or currencies).

7.03

Pari passu ranking

The Borrower shall ensure that its payment obligations under this Contract rank, and will rank not less than pari passu in right of payment with ail other present and future unsecured and unsubordinated obligations under any of its debt instruments except for obligations mandatorily preferred by law applying to companies generally.

7.04

Clauses by inclusion

If the Borrower or any other member of the Group concludes with any other financial creditor a financing agreement that includes a loss-of-rating clause or a covenant or other provision regarding its financial ratios, if applicable, that is not provided for in this Contract or is more favourable to the relevant financial creditor than any equivalent provision of this Contract is to the Bank, the Borrower shall promptly inform the Bank and shall provide a copy of the more favourable provision to the Bank. The Bank may request that the Borrower promptly executes an agreement to amend this Contract so as to provide for an equivalent provision in favour of the Bank.

7.05

Bond de-minimis repayment provisions

The Borrower may only voluntarily prepay the convertible bond due 1 January 2021 (as set out under Schedule G (Permitted Indebtedness)) and the convertible bond due 1 January 2022 (as set out under Schedule G (Permitted Indebtedness)) in accordance with the terms of the “Early Redemption for reasons of minimal outstanding Principal Amount” provision listed under the relevant part of the column entitled “De-minimis repayment provisions” of Schedule G (Existing Indebtedness)). The Borrower may not amend the “Early Redemption for reasons of minimal outstanding Principal Amount” provision of such bonds (or any other provisions of such bonds which may affect the de-minimis repayment terms of such bonds), without the prior written consent of the Bank.

ARTICLE 8

Information and Visits

8.01

Information concerning the Project

The Borrower shall:

(a)

deliver to the Bank:

(i) the information in content and in form, and at the times, specified in Part A2 of Schedule A or otherwise as agreed from time to time by the parties to this Contract;

(ii) any such information or further document concerning the Project as the Bank may reasonably require to comply with its obligations under the EFSI Regulation, and

(iii) any such information or further document concerning the financing, procurement, implementation, operation and environmental matters of or for the Project as the Bank may reasonably require within a reasonable time,

provided always that if such information or document is not delivered to the Bank on time, and the Borrower does not rectify the omission within a reasonable time set by the Bank in writing, the Bank may remedy the deficiency, to the extent feasible, by employing its own staff or a consultant or any other third party, at the Borrowers expense and the Borrower shall provide such persons with all assistance necessary for the purpose;

(b)

submit for the approval of the Bank without delay any material change to the Project, also taking into account the disclosures made to the Bank in connection with the Project prior to the signing of this Contract, in respect of, inter alia, the price, design, plans, timetable or to the expenditure programme or financing plan for the Project;

(c)

promptly inform the Bank of:

(i) any action or protest initiated or any objection raised by any third party or any genuine complaint received by the Borrower or any material Environmental Claim that is to its knowledge commenced, pending or threatened against it with regard to environmental or other matters affecting the Project: and

(ii) any fact or event known to the Borrower, which may substantially prejudice or affect the conditions of execution or operation of the Project;

(iii) a genuine allegation, complaint or information with regard to Illegal Activities related to the Loan and/or the Project:

(iv) any non-compliance by it with any applicable Environmental Law and

(v) any suspension, revocation or modification of any Environmental Approval,

and set out the action to be taken with respect to such matters; and

(d)

provide to the Bank, if so requested a certificate of its insurers showing fulfilment of the requirements of Article 6.05(c);

8.02

Information concerning the Borrower

The Borrower shall:

(a)

deliver to the Bank:

(i) as soon as they become available, but in any event within 180 days after the end of each of its financial, its audited consolidated and unconsolidated annual report, balance sheet, profit and loss account and auditors report for that financial year, provided that if Article 8.05 (Confidential Information) applies, such information shall be provided to the Bank as soon as it becomes publicly available;

(ii) as soon as they become available, but in any event within 120 days after the end of each of the relevant accounting periods for its interim consolidated and unconsolidated semi-annual report, balance sheet and profit and loss account for the first half-year of each of its financial years, provided that if Article 8.05 (Confidential Information) applies, such information shall be provided to the Bank as soon as it becomes publicly available;

(iii) on the earlier of

(A)

the date on which its financial, its audited consolidated and unconsolidated annual report, balance sheet, profit and loss account and auditors report for that financial year are delivered to the Bank under paragraph (i) above; and

(B)

the date which is within 180 days after the end of each of its financial years,

a Compliance Certificate as set out in Schedule E signed by two directors of the Borrower (provided that if at the relevant time the Borrower only has one appointed director, the Compliance Certificate shall be signed by such director);

(iv) on the earlier of:

(A)

the date on which its interim consolidated and unconsolidated semi-annual report, balance sheet and profit and loss account for the first half-year of each of its financial years are delivered to the Bank under paragraph (ii) above; and

(B)

the date which is within 120 days after the end of each of the accounting periods for its interim consolidated and unconsolidated semi-annual report,

(v) subject to the provisions of Article 8.05 (Confidential information), as soon as they become available but in any event within 30 days after the end of each of its financial half years:

the budgets which were delivered to and approved by the board of directors;

an update on the financial performance of the Borrower against the agreed budgets;

a succinct notification on the significant clinical and regulatory development milestones or achievements of the Borrower’s product portfolio; and

a succinct notification on the significant changes in the development, licensing and distribution contracts portfolio related to the Borrower’s product portfolio;

(vi) from time to time, such further information on its general financial situation as the Bank may reasonably require or such certificates of compliance with the undertakings of Article 6 as the Bank may deem necessary;

(vii) any such information or further document concerning customer due diligence matters of or for the Borrower as the Bank may reasonably require within a reasonable time; and

(viii) notify the Bank at least 5 Business Days prior to any prepayment of any bond listed under Schedule G (Permitted Indebtedness) and where the prepayment relates to a convertible bond such notification shalt be accompanied with a confirmation from the Borrower that the prepayment is in accordance with the terms of the “Early Redemption for reasons of minimal outstanding Principal Amount’ provision listed under the relevant part of the column entitled “De-minimis repayment provisions” of Schedule G (Existing indebtedness));

and

(b)

inform the Bank immediately in writing of:

(i) any material alteration to its articles of association or shareholding structure and of any change of ownership of 5% or more of its shares after the date of this Contract;

(ii) any fact which obliges it to prepay any financial indebtedness or any European Union funding;

(iii) any event or decision that constitutes or may result in a Prepayment Event;

(iv) any intention on its part to grant any security over any of its assets in favour of a third party;

(v) any intention on its part to relinquish ownership of any material component of the Project;

(vi) any fact or event that is reasonably likely to prevent the substantial fulfilment of any obligation of the Borrower under this Contract;

(vii) any event listed in Article 10.01 having occurred or being threatened or anticipated;

(viii) any investigations concerning the integrity of the members of the Borrower’s Board of Directors, supervisory board or managers;

(ix) to the extent permitted by law, any material litigation, arbitration, administrative proceedings or investigation carried out by a court, administration or similar public authority, which, to the best of its knowledge and belief, is current, imminent or pending against the Borrower or its controlling entities or members of the Borrowers management bodies in connection with Illegal Activities related to the Loan or the Project;

(x) any measure taken by the Borrower pursuant to Article 6.05 6.05(f) of this Contract; and

(xi) any litigation, arbitration or administrative proceedings or investigation which is current, threatened or pending and which might, if adversely determined, reasonably likely result in a Material Adverse Change.

8.03

Visits by the Bank

The Borrower shall allow the Bank and, when either required by the relevant mandatory provisions of EU law or pursuant to the EFSI Regulation, the competent EU institutions Including the European Court of Auditors, the Commission, the European Anti-Fraud Office, as well as person designated by the foregoing.

(a)

to visit the sites, installations and works comprising the Project;

(b)

to interview representatives of the Borrower, and not obstruct contacts with any other person involved in or affected by the Project; and

(c)

to conduct such on the spot audits and checks as they may wish and review the Borrower’s books and records in relation to the execution of the Project and to be able to take copies of related documents to the extent permitted by the law.

The Borrower shall provide the Bank, or ensure that the Bank is provided, with all necessary assistance for the purposes described in this Article.

In the case of a genuine allegation, complaint or information with regard to Illegal Activities related to the Loan and/or the Project, the Borrower shall consult with the Bank in good faith regarding appropriate actions. In particular, if it is proven that a third party committed Illegal Activities in connection with the Loan and/or the Prefect with the result that the Loan or the EFSI financing were misapplied, the Bank may, without prejudice to the other provisions of this Contract, inform the Borrower if, in its view, the Borrower should take appropriate recovery measures against such third party. In any such case, the Borrower shall in good faith consider the Bank’s views and keep the Bank informed.

The Borrower acknowledges that the Bank may be obliged to communicate information relating to the Borrower and the Project to any competent institution or body of the European Union in accordance with the relevant mandatory provisions of European Union law.

8.04

Disclosure and publication

The Borrower acknowledges and agrees that:

(a)

the Bank may be obliged to communicate information relating to the Borrower and the Project to any competent institution or body of the European Union in accordance with the relevant mandatory provisions of European Union law or pursuant to the EFSI Regulation; and

(b)

the Bank may publish on its website or produce press releases containing information related to the financing provided pursuant to this Contract, with support of the EFSI including the name, address of the Borrower, the purpose of the financing and the type of financial support received under this Contract.

(c)

The Borrower hereby releases the Bank from any bank secrecy. Accordingly, the Bank may disclose all confidential information concerning this Contract, the Guarantee or any related document and the transactions envisaged thereunder that has been provided to the Bank by the Borrower or, on their behalf, third parties (including, but without limitation, the fact that the Bank and the Obligors entered into the business relationship established under this Contract, the Guarantee or any related document, the amount and the conditions of the Loans, the interest rate, provided security interests, the presence of a Default, any financial information on any of the Obligors) to such persons as permitted under this Article 8,04.

(d)

To the extent legally permissible, the above release in respect of any bank secrecy is irrevocable.

8.05

Confidential information

Where the Borrower provides information to the Bank in connection with this Contract, it shall clearly indicate whether or not such information is already public, and if it is confidential the Borrower shall ensure the public publication of such information at the same time, or immediately after, it is shared with the Bank. The Borrower will not share any inside information with the Bank before it is published to the market

ARTICLE 9

Charges and expenses

9.01

Taxes, uties and fees

The Borrower shall pay all Taxes, duties, fees and other impositions of whatsoever nature, including stamp duty and registration fees, arising out of the execution or implementation of this Contract or any related document and in the creation, perfection, registration or enforcement of any security for the Loan to the extent applicable.

The Borrower shall pay all principal, interest, indemnities and other amounts due under this Contract gross without deduction of any national or local impositions whatsoever; provided that, if the Borrower is obliged to make any such deduction, it will gross up the payment to the Bank so that after deduction, the net amount received by the Bank is equivalent to the sum due.

9.02

Other charges

The Borrower shall bear all charges and expenses, including professional, banking or exchange charges incurred in connection with the preparation, execution, implementation, enforcement and termination of this Contract and/or any Guarantee or any related document, any amendment, supplement or waiver in respect of this Contract and/or any Guarantee or any related document, and in the amendment, creation, management, enforcement and realisation of any Guarantee.

9.03

Increased costs, indemnity and set-off

(a)

The Borrower shall pay to the Bank any sums or expenses incurred or suffered by the Bank as a consequence of the introduction of or any change in (or in the interpretation, administration or application of) any law or regulation or compliance with any law or regulation made after the date of signature of this Contract the Guarantee and/or any other related document, in accordance with or as a result of which (i) the Bank is obliged to incur additional costs in order to fund or perform its obligations under this Contract, the Guarantee and/or any other related document or (ii) any amount owed to the Bank under this Contract, the Guarantee and/or any other related document or the financial income resulting from the granting of the Credit or the Loan by the Bank to the Borrower is reduced or eliminated.

(b)

Without prejudice to any other rights of the Bank under this Contract or under any applicable law, the Borrower shall indemnify and hold the Bank harmless from and against any loss incurred as a result of any payment or partial discharge that takes place in a manner other than as expressly set out in this Contract.

(c)

The Bank may set off any matured obligation due from the Borrower under this Contract (to the extent beneficially owned by the Bank) against any obligation (whether or not matured) owed by the Bank to the Borrower regardless of the place of payment, backing branch or currency of either obligation. If the obligations are in different currencies, the Bank may convert either obligation at a market rate of exchange in its usual course of business for the purpose of the set-off. If either obligation is unliquidated or unascertained, the Bank may set off in an amount estimated by it in good faith to be the amount of that obligation.

ARTICLE 10

Events of Default

10.01

Right to demand repayment

Upon written demand being made by the Bank in accordance with the following provisions the Borrower shall repay all or part of the Loan (as requested by the Bank) forthwith, together with accrued interest and all other accrued or outstanding amounts under this Contract provided that, if an Event of Default under Article 10.01A(m) below shall occur, then without notice, demand or any other act by the Bank or any other person, the obligation of the Bank to make any Loan and the Credit shall automatically terminate, all of the Loans, together with accrued interest, and all other amounts accrued or outstanding under this Contract or any Guarantee Agreement shall become immediately due and payable without presentment, demand, protest or notice of any kind, all of which are expressly waived.

For the avoidance of doubt, the Bank’s right to cancel the Credit pursuant to Article 1.05B shall not be restricted.

10.01A

Immediate demand

The Bank may make such demand immediately:

(a)

if the Borrower does not pay on the due date any amount payable pursuant to this Contract at the place and in the currency in which it is expressed to be payable, unless (i) its failure to pay is caused by an administrative or technical error or a Disruption Event and (ii) payment is made within 3 Business Days of its due date;

(b)

if any information or document given to the Bank by or on behalf of the Borrower or any Guarantor or any representation, warranty or statement made or deemed to be made by the Borrower or any Guarantor in or pursuant to this Contract or any Guarantee (as applicable) is or proves to have been incorrect, incomplete or misleading in any material respect;

(c)

if, following any default of the Borrower, any Guarantor or any other member of the Group in relation to any loan, or any obligation arising out of any financial transaction other than the Loan:

(i) the Borrower, any Guarantor or any other member of the Group is required or is capable of being required or will, following expiry of any applicable contractual grace period, be required or be capable of being required to prepay, discharge, close out or terminate ahead of maturity such other loan or obligation; or

(ii) any financial commitment for such other loan or obligation is cancelled or suspended;

(d)

if the Borrower, any Guarantor or any other member of the Group incorporated in Germany:

(i) is unable to pay its debts as they fall due ( zahlungsunfähig ) or is declared or is deemed to be unable to pay its debts as they fall due (drohend zahlungsunfähig ) within the meaning of sections 17 and 18 of the German Insolvency Code ( Insolvenzordnung ), suspends making payments on all or a material part of its debts or announces an intention to do so;

(ii) is over-indebted within the meaning of section 19 of the German Insolvency Code ( Insolvenzordnung ) or, with respect to any other member of the Group, the value of the assets of any member of the Group is less than its liabilities (taking into account contingent and prospective liabilities);

(iii) commences negotiations with any one or more of its creditors with a view to the general readjustment or rescheduling of its indebtedness;

(iv) files for insolvency ( Antrag auf Eröffnung eines Insolvenzverfahrens ); or

(v) preliminary insolvency administrator has been appointed or any other action has been taken within the meaning of section 21 of the German Insolvency Code ( Insolvenzordnung ) or the opening of insolvency proceedings is rejected due to insufficiency of funds ( Abweisung mangels Masse ):

(e)

if the Borrower, any Guarantor or any other member of the Group incorporated in any jurisdiction other than Germany is unable to pay its debts as they fall due, or suspends its debts, or makes or seeks to make a composition with its creditors including a moratorium, or commences negotiations with one or more of its creditors with a view to rescheduling any of its financial indebtedness;

(f)

if any corporate action, legal proceedings or other procedure or step is taken in relation to the suspension of payments, a moratorium of any indebtedness, dissolution, administration or reorganisation (by way of voluntary arrangement, scheme of arrangement or otherwise or an order is made or an effective resolution is passed for the winding up of the Borrower, any Guarantor or any member of the Group, or if the Borrower, any Guarantor or any member of the Group takes steps towards a substantial reduction in its capital, is declared insolvent or ceases or resolves to cease to carry on the whole or any substantial part of its business or activities;

(g)

if an encumbrancer takes possession of, or a receiver, liquidator, administrator, administrative receiver or similar officer is appointed, whether by a court of competent jurisdiction or by any competent administrative authority or by any person, of or over, any part of the business or assets of the Borrower, any Guarantor or any member of the Group or any property forming part of the Project;

(h)

if the Borrower, any Guarantor or any member of the Group defaults in the performance of any obligation in respect of any other loan granted by the Bank or financial instrument entered into with the Bank,

(i)

if the Borrower, any Guarantor or any member of the Group defaults in the performance of any obligation in respect of any other loan made to it from the resources of the Bank or the European Union;

(j)

if any distress, execution, sequestration or other process is levied or enforced upon the property of the Borrower or any property forming part of the Project and is not discharged or stayed within 14 (fourteen) days;

(k)

if a Material Adverse Change occurs, as compared with the Borrower’s or any Guarantor’s condition at the date of this Contract;

(l)

if it is or becomes unlawful for the Borrower or any Guarantor to perform any of its obligations under this Contract or any Guarantee or this Contract or any Guarantee is not effective in accordance with its terms or is alleged by the Borrower or any Guarantor to be ineffective in accordance with its terms; or

(m)

without limiting any of the other clauses of this Article 10.01A:

(i) a court of the US or any state thereof (a “US Federal or State Court”) having jurisdiction in the premises shall enter a decree or order for relief in respect of any other member of the Group or for all or any material part of its property in an involuntary case under the Bankruptcy Code or under any other applicable bankruptcy, insolvency or similar law of the US or any state thereof now or hereafter in effect, which decree or order is not stayed or dismissed within seven days of it being entered; or any other similar relief shall be granted under any applicable US federal or state law;

(ii) an involuntary case shall be commenced against the Borrower, any Guarantor or any other member of the Group or for all or any material part of its property under the Bankruptcy Code or under any other applicable bankruptcy, insolvency or similar law of the US or any state thereof now or hereafter in effect; or a decree or order of a US Federal or State court having jurisdiction in the premises for the appointment of a receiver, liquidator, sequestrator, trustee, custodian or other officer having similar powers over the Borrower, any Guarantor or any other member of the Group, or over all or a material part of its property, shall have been entered; and in any such event described in this paragraph (ii) shall continue for 60 days unless dismissed or discharged; or

(iii) the Borrower, any Guarantor or any other member of the Group shall have an order for relief entered with respect to it (or for all or any material part of its property) in a voluntary case or commence a voluntary case under the Bankruptcy Code or under any other applicable bankruptcy, insolvency or similar law of the US or any state thereof now or hereafter in effect, or shall consent to the entry of an order for relieve in an involuntary case, or to the conversion of an involuntary case to a voluntary case, under any such law.

10.01B Demand after notice to remedy

The Bank may also make such demand:

(i)

if the Borrower fails to comply with any obligation under this Contract not being an obligation mentioned in Article 10.01A or any Guarantor fails to comply with any obligation under any Guarantee or Guarantee Agreement: or

(ii) if any fact related to the Borrower or the Project stated in the Recitals materially alters and is not materially restored and if the alteration either prejudices the interests of the Bank as lender to the Borrower or adversely affects the implementation or operation of the Project, unless the non-compliance or circumstance giving rise to the non-compliance is capable of remedy and is remedied within 20 Business Days from a notice served by the Bank on the Borrower or any Guarantor.

10.02

Other rights at law

Article 10.01 shall not restrict any other right of the Bank at law to require prepayment of the Loan.

10.03

Indemnity

10.03(A) Trenches

In case of demand under Article 10.01 in respect of any Tranche, the Borrower shall pay to the Bank the amount demanded together with the Prepayment Fee on any amount of principal due to be prepaid. Such Prepayment Fee payable as a result of cancellation and/or repayment of the Loan pursuant to Article 10.01 in respect of any Tranche shall be calculated in accordance with Article 4.02E but on the basis that:

(a)

the “Prepayment Date” shall be deemed to be the date specified in the written demand from the Bank, and

(b)

the “Prepayment Amount” shall be deemed to be the relevant amount demanded by the Bank pursuant to this Article 10.01.

10.03(B) General

Amounts due by the Borrower pursuant to this Article 10.03 shall be payable on the date of prepayment specified in the Bank’s demand.

10.04

Non-Waiver

No failure or delay or single or partial exercise by the Bank in exercising any of its rights or remedies under this Contract shall be construed as a waiver of such right or remedy. The rights and remedies provided in this Contract are cumulative and not exclusive of any rights or remedies provided by law.

ARTICLE 11

Law and jurisdiction, miscellaneous

11.01

Governing Law

This Contract and any non-contractual obligations arising out of or in connection with it shall be governed by the laws of England and Wales.

11.02

Jurisdiction

(a)

The courts of England have exclusive jurisdiction to settle any dispute (a “ Dispute ”) arising out of or in connection with this Contract (including a dispute regarding the existence, validity or termination of this Contract or the consequences of its nullity) or any non-contractual obligation arising out of or in connection with this Contract.

(b)

The parties agree that the courts of England are the most appropriate and convenient courts to settle Disputes between them and, accordingly, that they will not argue to the contrary.

(c)

This Article 11.02 is for the benefit of the Bank only. As a result and notwithstanding Article 11.02(a), it does not prevent the Bank from taking proceedings relating to a dispute (including a dispute relating to the existence, validity or termination hereof or any non-contractual obligation arising out of or in connection with this Contract) in any other courts with jurisdiction. To the extent allowed by law, the Bank may take concurrent proceedings in any number of jurisdictions.

11.03

Agent of Service

Without prejudice to any other mode of service allowed under any relevant law, the Borrower hereby irrevocably appoints Elemental Process Agent Limited (company number 01745936), 27 Old Gloucester Street, London WC1N 3AX as its agent of service for the purposes of accepting service on its behalf of any writ, notice, order, judgement or other legal process. The Borrower agrees that failure by a process agent to notify it of the process will not invalidate the proceedings concerned. The Borrower unconditionally releases the agent of service from the restrictions of section 181 of the German Civil Code ( Bürgeriiches Gesetzbuch ), to the extent legally permissible.

The Bank hereby appoints The Securities Management Trust Limited of 8 Lothbury, London EC2 7HH to be its agent for the purpose of accepting service of legal process.

11.04

Place of performance

Unless otherwise specifically agreed by the Bank in writing, the place of performance under this Contract, shall be the seat of the Bank.

11.05

Evidence of sums due

In any legal action arising out of this Contract the certificate of the Bank as to any amount or rate due to the Bank under this Contract shall, in the absence of manifest error, be prima facie evidence of such amount or rate.

11.06

Third party rights

A person who is not a party has no right under the Contracts (Rights of Third Parties) Act 1999 to enforce or to enjoy the benefit of any term of this Contract.

11.07

Entire Agreement

This Contract constitutes the entire agreement between the Bank and the Borrower in relation to the provision of the Credit hereunder, and supersedes any previous agreement, whether express or implied, on the same matter.

11.08

Invalidity

If at any time any term of this Contract is or becomes illegal, invalid or unenforceable in any respect, or this Contract is or becomes ineffective in any respect, under the laws of any jurisdiction, such illegality, invalidity, unenforceability or ineffectiveness shall not affect:

(a)

the legality, validity or enforceability in that jurisdiction of any other term of this Contract or the effectiveness in any other respect of this Contract in that jurisdiction; or

(b)

the legality, validity or enforceability in other jurisdictions of that or any other term of this Contract or the effectiveness of this Contract under the laws of such other jurisdictions.

11.09

Amendments

Any amendment to this Contract shall be made in writing and shall be signed by the parties hereto.

11.10

Counterparts

This Contract may be executed in any number of counterparts, all of which taken together shall constitute one and the same instrument. Each counterpart is an original, but all counterparts shall together constitute one and the same instrument.

ARTICLE 12

Final clauses

12.01

Notices to either party

Notices and other communications given under this Contract addressed to either party to this Contract shall be made to the address, email address or facsimile number as set out below, or to such other address, email address or facsimile number as a party previously notifies to the other in writing:

For the Bank	Attention Ops
	100 boulevard Konrad Adenauer
	L-2950 Luxembourg

	Facsimile no: +352 43 79 67397

	Email address:	ops-enpst3-shared©eib.org
		y.zhang@eib.org

For the Borrower	Attention: Chief Financial Officer

	Hemmelrather Weg 201, 51377 Leverkusen, Germany
	Facsimile no.:	+49 (214) 876 3290
	Email address:	press@biofrontera.com

12.02

Form of notice

Any notice or other communication given under this Contract must be in writing.

Notices and other communications, for which fixed periods are laid down in this Contract or which themselves fix periods binding on the addressee, may be made by hand delivery, registered letter, facsimile or e-mail. Such notices and communications shall be deemed to have been received by the other party on the date of delivery in relation to a hand-delivered or registered letter, on receipt of transmission in relation to a facsimile, or on the date when the e-mail is sent in relation to an e-mail message from the Bank to the Borrower or when confirmed by return e-mail by an authorised officer of the Bank to have been received in readable form, in the case of an e-mail sent by the Borrower to the Bank.

Other notices and communications may be made by hand delivery, registered letter, facsimile or e mail.

Without affecting the validity of any notice delivered by e-mail or facsimile according to the paragraphs above, a copy of each notice delivered by e-mail or facsimile shall also be sent by letter to the relevant party on the next following Business Day at the latest.

Notices issued by the Borrower pursuant to any provision of this Contract shall, where required by the Bank, be delivered to the Bank together with satisfactory evidence of the authority of the person or persons authorised to sign such notice on behalf of the Borrower and the authenticated specimen signature of such person or persons.

12.03

Recitals and Schedules

The Recitals and the following Schedules form part of this Contract:

Schedule A	Project Specification and Reporting

Schedule B	Definition of EURIBOR

Schedule C	Forms for Borrower

Schedule D	Form of Certificate from Borrower

Schedule E	Compliance Certificate

Schedule F	Performance Participation Interest Examples

Schedule G	Existing Indebtedness

IN WITNESS WHEREOF the parties hereto have caused this Contract to be executed on the date referred to below:

At Luxembourg, this _____ May 2017

Signed for and on behalf of				Signed for and on behalf of

EUROPEAN INVESTMENT BANK				BIOFRONTERA AG

Name:	Adrian Kamenitzer	Name:	Stefan Becker	Name:	Prof. Dr. Hermann Lübbert	Name:	Thomas Schaffer
Title:	Director	Title:	Senior Counsel	Title:	CEO ( Vorstadsvorsitzender )	Title:	CFO ( Vorstand )

Signature:		Signature:		Signature:		Signature:

Schedule A

Project Specification and Reporting

Part A1 Technical Description (Article 6.02)

Purpose, Location

The Project concerns the Borrowers research and development activity on the expansion of indications for its lead product, Ameluz. These indications include the treatment of non-melanoma skin cancers, such as Basal Cell Carcinoma. The Borrower, established in 1997, is headquartered in Leverkusen, Germany and currently employs over 60 people.

Description

The Project comprises of running post-marketing level clinical trials to produce data for obtaining regulatory clearances, both in the European Union and the US, for their lead product in different indications and treatment modalities. In addition, such data is to be used for gaining reimbursement in all main markets. More specifically, it includes four sub-projects:

(i)

Producing supportive clinical and preclinical data to gain marketing authorization for Ameluz in various new indications in the European Union;

(ii)

Generating an Active Substance Masterfile (ASMF) for 5-aminolevulic acid to be used in regulatory filings outside the US;

(iii)

Activities related to filing in the US of a New Drug Application (NDA) for Ameluz to be used in conjunction with Rhodoled; and

(iv)

Collecting clinical data to support a label claim of using Ameluz in daylight phatodynamic therapy (PDT).

Calendar

The Project will be implemented over the period 2016-2020.

Part A2 - Information Duties under Article 8.01(a)

Dispatch of information: designation of the person responsible

The information below has to be sent to the Bank under the responsibility of:

	Contact
Company	Biofrontera AG
Contact person	Hermann Lübbert
Title	CEO
Address	Hemmelrather Weg 20, D-51377 Leverkusen
Phone	+49 214 876 32 0
Fax	+49 214 876 32 90
Email	h.luebbert@biofrontera.com

The above-mentioned contact person(s) is (are) the responsible contact(s) for the time being. The Borrower shall inform the Bank immediately in case of any change.

Information on specific subjects

The Borrower shall deliver to the Bank the following information at the latest by the deadline indicated below.

Document / information		Deadline
N/A

Information on the project’s implementation

The Borrower shall deliver to the Bank the following information on project progress during implementation at the latest by the deadline indicated below.

Document / information		Deadline	Frequency of Reporting
Project Progress Report		30 April 2016	Annually

-	A brief update on the Technical Description, explaining the reasons for significant changes vs. initial scope;	30 April 2019
-	Update on the date of completion of each of the main
-	Project’s components, explaining reasons for any possible delay;
-	Update on the cost of the Project, explaining reasons for any possible cost variations vs. initial budgeted cost;

Document / information		Deadline	Frequency of Reporting
-	A description of any major issue with impact on the environment;
-	Update on the Project’s demand or usage and comments;
-	Any significant issue that has occurred and any significant risk that may affect the Project’s operation;
-	Any legal action concerning the Project that may be on-going;
-	Non-confidential project-related pictures, if available.

Table 1. Initial Project Cost Breakdown (monitoring reference):

EUR 000	2016		2017		2018		2019		2020		Total
Personnel		1.5		1.9		2.1		2.2		2.3		10.0
Consumables		0.8		0.3		0.4		0.5		0.6		2.6
CROs		10		2.9		2.6		2.9		2.9		12.2
Regulatory approval		1.6		1.0		1.0		1.1		1.1		5.9
Services		0.6		0.6		1,8		1.4		1.4		5.8
Other		0.8		0.8		0.8		0.8		0.9		4.1
Total costs		6.2		7.4		8.7		9.0		9.2		40.5

Information on the end of works and first year of operation

The Borrower shall deliver to the Bank the following information on project completion and initial operation at the latest by the deadline indicated below.

Document / information		Date of delivery to the Bank
Project Completion Report, including		30 June 2020
-	A final Technical Description of the Project as completed, explaining the reasons for any significant change compared to the Technical Description in A.1.;
-	The date of completion of each of the main project’s components, explaining reasons for any possible delay;
-	The date of completion of each of the main project’s components, explaining reasons for any possible delay;
-	The final cost of the Project, explaining reasons for any possible cost variations vs. initial budgeted cost;
-	Employment effects of the project: person-days required during implementation as well as permanent new jobs created;
-	A description of any major issue with impact on the environment or social impacts;
-	Update on procurement procedures and explanation of deviations from the procurement plan;
-	Update on the Project’s demand or usage and comments;
-	Any significant issue that has occurred and any significant risk that may affect the Project’s operation;
-	Any legal action concerning the Project that may be on-going;
-	An update on the following Monitoring Indicators:

Language of reports

English

Schedule B

Definitions of EURIBOR

EURIBOR

“EURIBOR” means:

(a)

in respect of a relevant period of less than one month, the Screen Rate (as defined below) for a term of one month;

(b)

in respect of a relevant period of one or more months for which a Screen Rate is available, the applicable Screen Rate for a term for the corresponding number of months; and

(c)

in respect of a relevant period of more than one month for which a Screen Rate is not available, the rate resulting from a linear interpolation by reference to two Screen Rates, one of which is applicable for a period next shorter and the other for a period next longer than the length of the relevant period,

(the period for which the rate is taken or from which the rates are interpolated being the “ Representative Period ”).

For the purposes of paragraphs (b) and (c) above, “available” means the rates, for given maturities, that are calculated and published by Global Rate Set Systems Ltd (GRSS), or such other service provider selected by the European Money Markets Institute (EMMI), under the sponsorship of EMMI and EURIBOR AC I, or any successor to that function of EMMI and EURIBOR ACI as determined by the Bank.

“ Screen Rate ” means the rate of interest for deposits in EUR far the relevant period as published at 11h00, Brussels time, or at a later time acceptable to the Sank on the day (the “Reset Date”) which falls 2 (two) Relevant Business Days prior to the first day of the relevant period, on Reuters page EURIBOR 01 or its successor page or, failing which, by any other means of publication chosen for this purpose by the Bank.

If such Screen Rate is not so published, the Bank shall request the principal euro-zone offices of four major banks in the euro-zone, selected by the Bank. to quote the rate at which EUR deposits in a comparable amount are offered by each of them as at approximately 111100, Brussels time, on the Reset Date to prime banks in the euro-zone interbank market for a period equal to the Representative Period. If at least 2 (two) quotations are provided, the rate for that Reset Date will be the arithmetic mean of the quotations.

If fewer than 2 (two) quotations are provided as requested, the rate for that. Reset Date will be the arithmetic mean of the rates quoted by major banks in the euro-zone, selected by the Bank, at approximately 11h00, Brussels time, on the day which falls 2 (two) Relevant Business Days after the Reset Date, for loans in EUR in a comparable amount to leading European Banks for a period equal to the Representative Period.

If no rate is available as provided above, EURIBOR shall be the rate (expressed as a percentage rate per annum) which is determined by the Bank to be the all-inclusive cost to the Bank for the funding of the relevant Tranche based upon the then applicable internally generated Bank reference rate or an alternative rate determination method reasonably determined by the Bank.

GENERAL

For the purposes of the foregoing definitions

(a)

All percentages resulting from any calculations referred to in this Schedule will be rounded, if necessary, to the nearest one hundred-thousandth of a percentage point, with halves being rounded up.

(b)

The Bank shall inform the Borrower without delay of the quotations received by the Bank.

(c)

If any of the foregoing provisions becomes inconsistent with provisions adopted under the aegis of EMMI and EURIBOR ACI (or any successor to that function of EMMI and EURIBOR ACI as determined by the Bank), the Bank may by notice to the Borrower amend the provision to bring it into line with such other provisions.

Schedule C

Form of Disbursement Offer/Acceptance (Articles 1.02B and 1.02C)

To:

Biofrontera AG

From:

European Investment Bank

Date:

Subject:	Disbursement Offer/Acceptance for the Finance Contract between European Investment Bank and Biofrontera AG dated [•] (the “Finance Contract”)

	Fl number ________	Serapis number ________

Dear Sirs.

We refer to the Finance Contract. Terms defined in the Finance Contract have the same meaning when used in this letter.

Following your request for a Disbursement Offer from the Bank, in accordance with Article 1.02B of the Finance Contract, we hereby offer to make available to you the following Tranche:

(a)

the amount and currency to be disbursed:

(b)

Scheduled Disbursement Date.

(c)

the Cash Pay Margin applicable until the Maturity Date:

(d)

the Disbursement Date Market Capitalisation:

(e)

the Disbursement Date Notional Equity Proportion:

(f)

the Deferred Interest Rate:

(g)

the Interest payment periodicity;

(h)

the Payment Dates:

(i)

the Maturity Date:

To make the Tranche available subject to the terms and conditions of the Finance Contract, the Bank must receive a Disbursement Acceptance in the form of a copy of this Disbursement Offer duly signed on your behalf, to the following fax number [___] no later than the Disbursement Acceptance Deadline of Time), Luxembourg time, on [date].

The Disbursement Acceptance must be accompanied (if it has not been previously supplied) by:

(a)

the indication of the bank account (with IBAN code in case of disbursements in FUR or the appropriate format for the relevant currency) where disbursement of the Tranche should be made; and

(b)

evidence of the authority of the person or persons authorised to sign it on behalf of the Borrower and the specimen signature of such person or persons.

If not accepted by the above stated time, the offer contained in this document shall be deemed to have been refused and shall automatically lapse,

If you do accept the Tranche as described in this Disbursement Offer, all the related terms and conditions of the Finance Contract shall apply, in particular, the provisions of Article 1.04.

Yours faithfully,

EUROPEAN INVESTMENT BANK

We hereby accept the above Disbursement Offer:



For and behalf of Biofrontera AG

Date:

Schedule D

Form of Certificate from Borrower (Article 1.04(B))

To:

European Investment Bank

From:

Biofrontera AG

Date:

Subject:	Finance Contract between European Investment Bank and Biofrontera AG dated [•] (the “Finance Contract”)

	Fl number ________	Serapis number ________

Dear Sirs,

Terms defined in the Finance Contract have the same meaning when used in this letter. For the purposes of Article 1.04 of the Finance Contract we hereby certify to you as follows:

(a)

no Prepayment Event has occurred and is continuing unremedied;

(b)

no security of the type prohibited under Article 7.02 has been created or is in existence;

(c)

there has been no material change to any aspect of the Project or in respect of which we are obliged to report under Article 8.01, save as previously communicated by us;

(d)

no Default has occurred and is continuing unremedied or unwaived;

(e)

no litigation, arbitration administrative proceedings or investigation is current or to our knowledge is threatened or pending before any court, arbitral body or agency which has resulted or if adversely determined is reasonably likely to result in a Material Adverse Change, nor is there subsisting against us or any of our subsidiaries any unsatisfied judgement or award;

(f)

the representations and warranties to be made or repeated by us under Article 6.21 are true in all respects; and

(g)

no Material Adverse Change has occurred, as compared with the situation at the date of the Finance Contract.

Yours faithfully,


For and on behalf of Biofrontera AG
Date:

Schedule E

Form of Compliance Certificate

European Investment Bank

From:

Biofrontera AG

Date:

Subject:	Finance Contract between European Investment Bank and Biofrontera AG dated [6] (the “Finance Contract”)

	Fl number ________	Serapis number ________

Dear Sirs,

We refer to the Finance Contract. This is a Compliance Certificate. Terms defined in the Finance Contract have the same meaning when used in this Compliance Certificate.

We hereby confirm:

(i) no security of the type prohibited under Article 7.02 has been created or is in existence;

(ii) no event or circumstance which constitutes or would with the passage of time or giving of notice under the Finance Contract constitute an Event of Default has occurred and is continuing unremedied or unwaived. [If this statement cannot be made, this certificate should identify any potential event of default that is continuing and the steps, if any, being taken to remedy it]; and

(iii) it has no other Material Subsidiaries other than the Material Subsidiaries identified in Recital 6 of the Finance Contract. [If this statement cannot be made, this certificate should identify the relevant subsidiary and the steps under Article 7.01 will have to occur].

Yours faithfully,

For and on behalf of Biofrontera AG

[director]	[director]

Schedule F

Performance Participation Interest Examples

The following examples have been provided as a worked example to illustrate the calculation of the Performance Participation Interest. These examples have been provided for illustration purposes only

Disbursement Date in respect of the relevant Tranche (Year 1)

•

Disbursement of Tranche = EUR 10,000,000

•

Disbursement Date Market Capitalisation = EUR 160,000,000

•

Disbursement Date Notional Equity Proportion = (EUR 10,000,000) x (2%) x (5 years) / (EUR 160,000,000) = 0.00625 (or 0.625%)

Maturity Date in respect of the relevant Tranche (Year 5)

(a)

Upside Scenario

•

Maturity Date Market Capitalisation (in relation to the Maturity Date or on any date earlier than the Maturity Date in the event of a prepayment or an acceleration of all or part of that Tranche) = EUR 200,000,000

•

Performance Participation Interest = 0.00625 x EUR 200,000,000 = EUR 1,250,000

(b)

Downside Scenario

•

Maturity Date Market Capitalisation (in relation to the Maturity Date or on any date earlier than the Maturity Date in the event of a prepayment or an acceleration of ail or part of that Tranche) = EUR 100,000,000.

•

Performance Participation Interest = 0.00625 x EUR 100,000,000 = FUR 625,000

Schedule G

Existing Indebtedness

Source	Outstanding amount	De-minimis repayment provision

8% option bond due 1 January 2018	EUR 4,930,000 (of which EUR 1,500,000 are held by Borrower)	N/A

6% subordinated convertible bond due 1 January 2021	EUR 83,000	Paragraph 4(4) of the terms of the bond states:

		“ Early Redemption for reasons of minimal outstanding Principal Amount. The Issuer may at any time redeem all, but not part of the Bonds at their Principal Amount, together with interest accrued thereon until (but excluding) the date of redemption if at any time the Principal Amount of the Bonds outstanding is below 15% of the initially issued amount of Bonds. Notice of early redemption shall be given not less than 30 nor more than 60 days before the day fixed in the notice on which any Bonds become due for early redemption. The Provisions of the preceding paragraph shall apply accordingly.”

		The provisions of the preceding paragraph state that such notice will be irrevocable and must state the date of the early redemption and the last day on which Conversion Rights may be exercised by Bondholders.

		The initially issued amount of the Bonds was 49,990 bonds in a total nominal amount of EUR 4,999,000, so the de minimis threshold is reached when EUR 749,850 or less are outstanding (which is already the case as at the date of this Contract).

		Defined terms used above have the meaning given to them under the terms and conditions of the 6% subordinated convertible bond due 1 January 2021.

6% subordinated convertible bond due 1 January 2022 ¹	EUR 2,663,400	Paragraph 4(3) of the terms of the bond states:

		“ Early Redemption for reasons of minimal outstanding Principal Amount. The Issuer may at any time redeem all, but not part of the Bonds at their Principal Amount, together with interest accrued thereon until (but excluding) the date of redemption if at any time the Principal Amount of the Bonds outstanding is below 15% of the initially issued amount of Bonds, Notice of early redemption shall be given not less than 30 nor more than 60 days before the day fixed in the notice on which any Bonds become due for early redemption. The provisions of the preceding paragraph shall apply accordingly.”

		The provisions of the preceding paragraph state that such notice will be irrevocable and must state the date of the early redemption and the last day on which Conversion Rights may be exercised by Bondholders.

		The initially issued amount of the Bonds is EUR 4,999,000. Therefore, the Borrower may repay the convertible bond under the above de-minimis clause once the outstanding amount reaches EUR 749,850 or falls below that amount.

		Defined terms used above have the meaning given to them under the terms and conditions of the 6% subordinated convertible bond due 1 January 2022.

¹ ( 1) includes the following covenant :

“Each Bondholder is entitled to declare due and payable by submitting a notice of termination (Termination Notice”) its entire claims arising from the Bonds and demand payment of their Principal Amount, plus interest accrued on the Principal Amount until (but excluding) the day of actual redemption, if

the Issuer, for any reason whatsoever, fails within 30 days after the relevant payment date to pay any amounts due and payable on the Bonds; or

the Issuer Exceeds the Permissible Indebtedness by debt borrowing.

The issuer ‘Exceeds the Permissible Indebtedness’ if by debt borrowing both (i) the Net Financial Indebtedness of the Issuer exceeds EUR 25 million, and (ii) the Net Indebtedness Quota of the Issuer exceeds 4.0. Exempt are any debt borrowings for the purpose of financing the claims of Bondholders arising out of these Bonds.

“Net Financial Indebtedness’ means the sum of long-term financial liabilities and short-term financial debt, less cash and cash equivalents.

“Net Indebtedness Quota” means the quotient of Net Financial Indebtedness divided by EBITDA.

“EBITDA” means the profit or loss for the period, adjusted for depreciation and amortization, tax, interest expenses and interest income.

The calculation of Net Financial Indebtedness, Net Indebtedness Quota and EBITDA shall be based on the respective most recent published annual group or interim quarterly financial reports at the time of the debt borrowing. Insofar as the audited financial report shows Net Financial Indebtedness, Net Indebtedness Quota and/or EBITDA, the respective calculation shall be binding both for the Issuer and the Bondholders.

The Issuer shall not be considered to Exceed the Permissible Indebtedness if the Net Indebtedness Quota exceeds 4.0 due to a reduction of the EBITDA.”

Exhibit 10.5

Biofrontera Aktiengesellschaft

Leverkusen

Anleihebedingungen	Terms and Conditions of Convertible Bonds (non binding convenience translation)
§ 1 Allgemeines	§ 1 General
(1) Nennbetrag und Einteilung . Die von der Biofrontera AG mit Sitz in Leverkusen („ Emittentin ”) begebenen Wandelschuldverschreibungen im Gesamtnennbetrag von EUR 4.999.000 sind eingeteilt in 49.990 untereinander gleichberechtigte, auf den Inhaber lautende Teilschuldverschreibungen („ Schuldverschreibungen ”) im Nennbetrag von jeweils EUR 100 („ Nennbetrag “).	(1) Principal Amount and Denomination . The convertible bond issued by Biofrontera AG with a statutory seat in Leverkusen, (“ Issuer ”), in an aggregate principal amount of EUR 4,999,000 is divided into 49,990 non-registered pari passu ranking bonds (“ Bonds ”), each with a principal amount of EUR 100 (“ Principal Amount ”).
(2) Globalverbriefung und Verwahrung . Die Schuldverschreibungen werden durch eine auf den Inhaber lautende Dauerglobalurkunde („ Globalurkunde ”) ohne Zinsscheine verbrieft. Die Globalurkunde wird bei der Clearstream Banking AG mit Sitz in Frankfurt am Main („ Clearstream Frankfurt “) eingeliefert und verwahrt, bis alle Verpflichtungen der Emittentin aus den Schuldverschreibungen erfüllt sind. Die Globalurkunde trägt die Unterschrift des Vorstands der Emittentin in vertretungsberechtigter Zahl. Die Ausgabe effektiver Schuldverschreibungen und Zinsscheine ist ausgeschlossen.	(2) Global Certificate and Custody. The Bonds are securitized in a non-registered permanent global certificate (“ Global Certificate ”) without interest coupons. The Global Certificate will be deposited with Clearstream Banking AG with seat in Frankfurt am Main (“ Clearstream Frankfurt ”) and will be kept in custody with Clearstream until all obligations of the Issuer under the Bonds have been satisfied. The Global Certificate bears the signatures of members of the Issuer’s management board authorized to represent the Issuer. No physical certificates representing Bonds and interest coupons will be issued.

§ 2 Zinsen	§ 2 Interest
(1) Zinssatz und Zinszahlungstage . Die Schuldverschreibungen werden ab dem 01. Januar 2017 (einschließlich) („ Zinsbeginn ”) an mit jährlich 6 % auf ihren Nennbetrag verzinst. Die Zinsen sind jährlich nachträglich am 01. Januar eines jeden Jahres („ Zinszahlungstag ”), erstmals am 01. Januar 2018, zahlbar. Der Zinslauf der Schuldverschreibungen endet mit Ablauf des Tages, der dem Tag, an dem sie zur Rückzahlung fällig werden, unmittelbar vorausgeht, oder, falls das Wandlungsrecht ausgeübt wurde, mit Ablauf des Tages, der dem letzten Zinszahlungstag vor dem Ausübungstag unmittelbar vorausgeht oder, falls kein Zinszahlungstag vorausging, dem der dem Zinsbeginn vorausging.	(1) Interest Rate and Interest Payment Dates . The Bonds shall bear interest at a rate of 6 % p.a. on their Principal Amount from and including 1 January 2017 (“ Interest Commencement ”). Interest shall be payable annually in arrears on 1 January of each year (“ Interest Payment Date ”), commencing on 1 January 2018. Interest shall cease to accrue with the expiration of the day which immediately precedes the day on which the Bonds become due for redemption, or, if the Conversion Right has been exercised, with the expiration of the day which immediately precedes the last Interest Payment Date prior to the Conversion Date or, if there was no Interest Payment Date, the Interest Commencement.
(2) Verzugszinsen. Sofern die Emittentin die Schuldverschreibungen nicht bei Fälligkeit zurückzahlt, wird der Nennbetrag bis zum Tag der tatsächlichen Rückzahlung der Schuldverschreibungen (ausschließlich) mit einem jährlichen Zinssatz von 6 % weiter verzinst. Die Geltendmachung eines weiteren Schadens ist nicht ausgeschlossen.	(2) Default Interest . Insofar as the Issuer fails to redeem the Bonds on the day on which they become due for redemption, interest shall continue to accrue on the Principal Amount at the rate of 6 % per annum until (but excluding) the date of actual redemption of the Bonds. Claims for further damages shall not be excluded.
(3) Zinsperiode, Zinstagequotient . „ Zinsperiode “ bezeichnet den Zeitraum ab dem Zinsbeginn (einschließlich) bis zu dem ersten Zinszahlungstag (ausschließlich) und danach ab dem jeweiligen Zinszahlungstag (einschließlich) bis zu dem nächstfolgenden Zinszahlungstag (ausschließlich). Sind Zinsen für einen Zeitraum zu berechnen, der kürzer als eine volle Zinsperiode ist oder einer Zinsperiode entspricht, werden die Zinsen gemäß Rule 251 ICMA (ACT/ACT) berechnet.	(3) Interest Period, Interest Day Count Fraction . “ Interest Period ” shall mean the period from and including the Interest Commencement until but excluding the first Interest Payment Date and thereafter from and including each relevant Interest Payment Date until but excluding the next following Interest Payment Date. Where interest is to be calculated in respect of a period which is shorter than or equal to a full Interest Period, interest will be calculated on the basis of Rule 251 ICMA (ACT/ACT)

§ 3 Zahlungen	§ 3 Payments
(1) Währung . Sämtliche Zahlungen auf die Schuldverschreibungen werden von der Emittentin in Euro geleistet.	(1) Currency . All payments on the Bonds shall be made by the Issuer in Euro.
(2) Zahlungen . Zahlungen von Kapital, Zinsen und aller sonstigen auf die Schuldverschreibungen zahlbaren Barbeträge werden von der Emittentin am jeweiligen Zahlungstag an eine Zahlstelle zur Weiterleitung an Clearstream zur Gutschrift auf die Konten der jeweiligen Kontoinhaber bei Clearstream geleistet. Alle Zahlungen an Clearstream oder zu deren Order befreien die Emittentin in Höhe der geleisteten Zahlungen von ihren Verbindlichkeiten aus den Schuldverschreibungen.	(2) Payments . Payments of principal, interest and all other cash payments payable on the Bonds shall be made by the Issuer on the relevant payment date to a Paying Agent for on-payment to Clearstream for credit to the accounts of the respective accountholders in Clearstream. All payments made to Clearstream or to its order shall discharge the issuer from its liability under the Bonds to the extent of the amounts so paid.
(3) Zahlungstag/Fälligkeitstag/Geschäftstag . Im Rahmen dieser Anleihebedingungen bedeutet „ Zahlungstag “ der Tag, an dem die Zahlung tatsächlich erfolgen muss, und „ Fälligkeitstag “ bezeichnet den hierin vorgesehenen Zahlungstag ohne Berücksichtigung einer solchen Verschiebung. Ein „ Geschäftstag ” ist jeder Tag, an dem Banken in Frankfurt am Main für den Geschäftsverkehr geöffnet sind und Zahlungen in Euro über das TARGET 2 System abgewickelt werden können. Ist ein Fälligkeitstag kein Geschäftstag, so wird die betreffende Zahlung erst am nächstfolgenden Geschäftstag als Zahlungstag geleistet, ohne dass wegen dieses Zahlungsaufschubes Zinsen oder sonstige Entschädigungen zu zahlen sind.	(3) Payment Date/Due Date/Business Day . For the purposes of these Terms and Conditions, “ payment date ” means the day on which the payment is actually to be made, and “ due date ” means the payment date provided for herein, without taking account of such adjustment. A “ Business Day ” shall be any day on which banking institutions are open for business in Frankfurt am Main and payments in Euro may be settled via the TARGET 2 system. If any due date is not a Business Day, such payment will not be made until the immediately following payment date, and no interest or other reimbursements shall be paid in respect of the delay in such payment.

§ 4 Fälligkeit; Rückerwerb; Vorzeitige Rückzahlung	§ 4 Maturity; Repurchase; Early Redemption
(1) Fälligkeit . Die Schuldverschreibungen werden am 01. Januar 2021 („ Rückzahlungstag ”) zu ihrem Nennbetrag zuzüglich auf den Nennbetrag bis zum Rückzahlungstag (ausschließlich) aufgelaufener Zinsen zurückgezahlt, sofern sie nicht vorher zurückgezahlt, gewandelt oder zurückgekauft und entwertet worden sind.	(1) Maturity . The Bonds will be redeemed with their Principal Amount on 1 January 2021 (“ Maturity Date ”), together with accrued interest on the Principal Amount until (but excluding) the Maturity Date, unless they have previously been redeemed or converted or purchased and cancelled.
(2) Rückerwerb . Die Emittentin und/oder ein mit ihr verbundenes Unternehmen ist berechtigt, jederzeit Schuldverschreibungen im Markt oder auf andere Weise zu erwerben. Die zurückerworbenen Schuldverschreibungen können gehalten, entwertet oder wieder verkauft werden.	(2) Repurchases . The Issuer and/or any of its affiliates shall be entitled at any time to purchase Bonds in the market or otherwise. Bonds repurchased may be held, cancelled or resold.
(3) Vorzeitige Rückzahlung ab dem 31. Dezember 2017 . Die Emittentin ist berechtigt, die Schuldverschreibungen am oder nach dem 31. Dezember 2017 insgesamt, nicht jedoch teilweise, jederzeit zu deren Nennbetrag zuzüglich der darauf bis zum Tag der Rückzahlung (ausschließlich) aufgelaufenen Zinsen zurückzuzahlen. Die vorzeitige Rückzahlung muss mindestens 30 und höchstens 60 Tage vor demjenigen Tag bekannt gemacht werden, der in der Bekanntmachung als Tag angegeben wurde, an dem die Schuldverschreibungen zur Rückzahlung fällig werden. Diese Bekanntmachung ist unwiderruflich und muss den Tag der vorzeitigen Rückzahlung sowie den letzten Tag benennen, an dem Wandlungsrechte ausgeübt werden dürfen.	(3) Early Redemption from 31 December 2017 . On or after 31 December 2017, the Issuer may at any time redeem all, but not part of the Bonds at their Principal Amount, together with interest accrued thereon until (but excluding) the date of redemption. Notice of early redemption shall be given not less than 30 and not more than 60 days before the day fixed in the notice on which any Bonds become due for early redemption. Such notice will be irrevocable and must state the date of the early redemption and the last day on which Conversion Rights may be exercised by Bondholders.

(4) Vorzeitige Rückzahlung aufgrund Geringfügigkeit . Die Emittentin ist berechtigt, die noch ausstehenden Schuldverschreibungen insgesamt, nicht jedoch teilweise, jederzeit zu deren Nennbetrag zuzüglich der darauf bis zum Tag der Rückzahlung (ausschließlich) aufgelaufenen Zinsen zurückzuzahlen, wenn der Gesamtnennbetrag der ausstehenden Schuldverschreibungen zu irgendeinem Zeitpunkt unter 15% der ursprünglich begebenen Schuldverschreibungen fällt. Die vorzeitige Rückzahlung muss mindestens 30 und höchstens 60 Tage vor demjenigen Tag bekannt gemacht werden, der in der Bekanntmachung als Tag angegeben wurde, an dem die Schuldverschreibungen zur Rückzahlung fällig werden. Die Regelungen des vorstehenden Absatzes gelten entsprechend.	(4) Early Redemption for reasons of minimal outstanding Principal Amount . The Issuer may at any time redeem all, but not part of the Bonds at their Principal Amount, together with interest accrued thereon until (but excluding) the date of redemption if at any time the Principal Amount of the Bonds outstanding is below 15% of the initially issued amount of Bonds. Notice of early redemption shall be given not less than 30 nor more than 60 days before the day fixed in the notice on which any Bonds become due for early redemption. The provisions of the preceding paragraph shall apply accordingly.
§ 5 Steuern	§ 5 Taxes
Alle Zahlungen der Emittentin auf die Schuldverschreibungen werden ohne Abzug oder Einbehalt gegenwärtiger oder zukünftiger Steuern, Abgaben oder amtlicher Gebühren gleich welcher Art geleistet, die von einer in der Bundesrepublik Deutschland ansässigen Behörde oder für deren Rechnung oder von oder für Rechnung einer dort zur Steuererhebung ermächtigten Gebietskörperschaft oder Behörde durch Abzug oder Einbehalt an der Quelle auferlegt, erhoben oder eingezogen werden, es sei denn, ein solcher Abzug oder Einbehalt ist rechtlich vorgeschrieben. Die Emittentin ist im Hinblick auf einen solchen Abzug oder Einbehalt nicht zu zusätzlichen Zahlungen an die Anleihegläubiger verpflichtet.	All payments by the Issuer on the Bonds will be made without deduction or withholding of any present or future taxes, duties or governmental charges of any nature whatsoever imposed, levied or collected by way of deduction or withholding at source by, in or on behalf of the Federal Republic of Germany or by or on behalf of any political subdivision or authority thereof or therein having power to tax, unless such deduction or withholding is required by law. The Issuer shall not be required to make any additional payments to the Bondholders in respect of such deduction or withholding.

§ 6
Wandlungsrecht

§ 6
Conversion Right

(1) Die Emittentin gewährt jedem Anleihegläubiger das Recht (“ Wandlungsrecht ”), gemäß den Bestimmungen dieses § 6 jederzeit während des Ausübungszeitraums (§ 6(3)) jede Schuldverschreibung ganz, nicht jedoch teilweise, in nennbetragslose auf den Namen lautende Stammaktien der Emittentin („ Aktien “) zu wandeln. Der Wandlungspreis je Aktie („ Wandlungspreis “) beträgt, vorbehaltlich einer Anpassung gemäß § 12, bis zum 31. Dezember 2016 (einschließlich) je Aktie EUR 3,00, vom 01. Januar 2017 bis zum 31. Dezember 2017 (einschließlich) je Aktie EUR 4,00 und ab dem 01. Januar 2018 je Aktie EUR 5,00.

(1) Conversion Right . The Issuer grants each Bondholder the right (“ Conversion Right ”) to convert in accordance with this § 6 at any time during the Conversion Period (§ 6(3)) each Bond in whole, but not in part, into no-par ordinary registered shares of the Issuer (“ Shares ”). Subject to adjustments pursuant to § 12, the conversion price per Share (“ Conversion Price ”) amounts to, until 31 December 2016 (inclusive) EUR 3.00 per Share, from 01 January 2017 until 31 December 2018 (inclusive) EUR 4.00 per Share and from 01 January 2018 EUR 5.00 per Share.

(2) Das Wandlungsverhältnis (das „ Wandlungsverhältnis “) errechnet sich durch Division des Nennbetrags einer Schuldverschreibung durch den am Ausübungstag geltenden Wandlungspreis, das anfängliche Wandelverhältnis beträgt gerundet 1:33. Die Lieferung der Aktien erfolgt gemäß § 9.	(2) The conversion ratio (“ Conversion Ratio ”) shall be calculated by dividing the Principal Amount of a Bond by the Conversion Price applicable on the Conversion Date; the initial Conversion Ratio is (rounded) 1:33. Delivery of Shares shall be made in accordance with § 9.
(3) Ausübungszeitraum . Das Wandlungsrecht kann durch einen Anleihegläubiger nach Maßgabe dieser Anleihebedingungen jederzeit bis zum zehnten Geschäftstag vor dem Rückzahlungstag (beide Tage einschließlich) („ Ausübungszeitraum ”) ausgeübt werden, allerdings vorbehaltlich § 6(4) und § 6(5). Ist der letzte Tag des Ausübungszeitraums kein Geschäftstag, so endet der Ausübungszeitraum an dem Geschäftstag, der diesem Tag unmittelbar vorangeht. Fällt der letzte Tag des Ausübungszeitraums in einen Nichtausübungszeitraum, so endet der Ausübungszeitraum am letzten Geschäftstag vor dem Beginn des betreffenden Nichtausübungszeitraums.	(3) Conversion Period . The Conversion Right may be exercised by a Bondholder at any time pursuant to these conditions ending on the tenth Business Day prior to the Maturity Date (both dates inclusive) (“ Conversion Period ”), however subject to the provisions of § 6(4) und § 6(5). If the last day of the Conversion Period falls on a day which is not a Business Day, the Conversion Period shall terminate on the Business Day immediately preceding such day. If the last day of the Conversion Period falls within an Exclusion Period, the Conversion Period shall terminate on the last Business Day prior to the commencement of such Exclusion Period.
(4) Vorzeitige Rückzahlung der Schuldverschreibungen . Für den Fall, dass die Schuldverschreibungen durch die Emittentin gemäß § 4(3) gekündigt werden, darf (vorbehaltlich der Regelungen des § 6(3)), das Wandlungsrecht bis zum Ablauf des zehnten Geschäftstages ausgeübt werden, der dem für die vorzeitige Rückzahlung bestimmten Tag vorausgeht; danach erlischt das Wandlungsrecht. Fällt der so ermittelte letzte Tag des Ausübungszeitraums in einen Nichtausübungszeitraum, so endet der Ausübungszeitraum am letzten Geschäftstag vor dem Beginn des betreffenden Nichtausübungszeitraums. Wenn Schuldverschreibungen durch Anleihegläubiger gekündigt werden, darf das Wandlungsrecht im Hinblick auf die gekündigten Schuldverschreibungen von solchen Anleihegläubigern nicht mehr ausgeübt werden.	(4) Early Redemption of the Bonds . In the event the Bonds are called for early redemption by the Issuer pursuant to § 4(3), the Conversion Right may, subject to the provisions of § 6(3)), be exercised until the end of the tenth Business Day prior to the date fixed for early redemption; thereafter, the Conversion Right expires. If the last day of the Conversion Period so determined falls within an Exclusion Period, the Conversion Period ends on the last Business Day before such Exclusion Period. If Bonds are declared due for early redemption by Bondholders, the Conversion Right with respect to the Bonds so declared due may no longer be exercised by such Bondholders.

(5) Nichtausübungszeitraum . Die Ausübung des Wandlungsrechts ist während der nachfolgenden Zeiträume („ Nichtausübungszeitraum ”) ausgeschlossen:

· anlässlich von Hauptversammlungen der Emittentin während eines Zeitraums ab der Einberufung der Hauptversammlung bis zum Tag der Hauptversammlung (jeweils einschließlich) endet;

· während eines Zeitraums von fünf Geschäftstagen vor dem Ende des Geschäftsjahres der Emittentin;

· während des Zeitraums beginnend mit dem Tag, an dem ein Bezugsangebot der Emittentin an ihre Aktionäre zum Bezug von Aktien, Schuldverschreibungen mit Options- oder Wandlungsrechten oder –pflichten, Gewinnschuldverschreibungen oder Genussscheinen im Bundesanzeiger veröffentlicht wird, bis zum letzten Tag der für die Ausübung des Bezugsrechts bestimmten Frist (jeweils einschließlich); und

· während des Zeitraums beginnend mit dem Tag, an dem ein Bezugsangebot der Emittentin an ihre Aktionäre zum Bezug von Aktien, Schuldverschreibungen mit Options- oder Wandlungsrechten oder –pflichten, Gewinnschuldverschreibungen oder Genussscheinen im Wege einer Ad-hoc-Mitteilung oder ähnlichen Mitteilung (mit konkreten Angaben über das bevorstehende Bezugsangebot), bis zum letzten Tag der für die Ausübung des Bezugsrechts bestimmten Frist (jeweils einschließlich).

(5) Exclusion Period . The exercise of the Conversion Right shall be excluded during any of the following periods (“ Exclusion Period ”):

· in connection with any shareholder assemblies of the Issuer, a period commencing on the convocation of the shareholder assembly and ending the day of such shareholder assembly (each inclusive);

· a period of five business days prior to the end of the fiscal year of the Issuer;

· a period commencing on the date on which an offer by the Issuer to its shareholders by way of a rights offering to subscribe to shares, debt securities with warrants or bonds with option or conversion rights or conversion obligations, profit-linked bonds or profit participation certificates is published in the German Federal Gazette (Bundesanzeiger), and ending on the last day of the subscription period (both dates inclusive); and

· a period commencing on the date on which an offer by the Issuer to its shareholders by way of a rights offering to subscribe to shares, debt securities with warrants or bonds with option or conversion rights or conversion obligations, profit-linked bonds or profit participation certificates is published by way of an ad-hoc-release or a similar communication (with specific details regarding the imminent subscription offer), and ending on the last day of the subscription period (both dates inclusive).

§ 7
Ausübung des Wandlungsrechts

§ 7
Exercise of Conversion Right

(1) Ausübungserklärung . Zur Ausübung des Wandlungsrechts muss der Anleihegläubiger während des Ausübungszeitraums auf eigene Kosten während der üblichen Geschäftszeiten an einem Geschäftstag bei einer Wandlungsstelle (§ 15) eine ordnungsgemäß ausgefüllte und unterzeichnete Erklärung (die „ Ausübungserklärung ”) unter Verwendung eines dann gültigen Vordrucks, der bei der Wandlungsstelle erhältlich ist, einreichen. Ausübungserklärungen sind unwiderruflich. Die Ausübungserklärung hat mindestens die folgenden Angaben zu enthalten:

· Name und Anschrift der ausübenden Person;

· die Zahl der Schuldverschreibungen, für die das Wandlungsrecht ausgeübt werden soll;

· die Bezeichnung des Wertpapierdepots des Anleihegläubigers , in das die Aktien über Clearstream geliefert werden sollen;

· gegebenenfalls die Bezeichnung eines auf Euro lautenden Kontos des Anleihegläubigers oder seiner Depotbank, auf das auf die Schuldverschreibungen zahlbare Beträge über Clearstream geleistet werden sollen; und

· in dem Vordruck der Ausübungserklärung geforderte Bestätigungen und Verpflichtungserklärungen im Hinblick auf bestimmte Beschränkungen der Inhaberschaft der Schuldverschreibungen und/oder der Aktien.

(1) Conversion Notice . To exercise the Conversion Right, the Bondholder must deliver to a Conversion Agent (§ 15) at its own expense during normal business hours on a Business Day during the Conversion Period a duly completed and signed notice (the “ Conversion Notice ”) using a form (as amended from time to time) available from the Conversion Agent. Conversion Notices shall be irrevocable. The Conversion Notice shall at least include:

· name and address of the exercising person;

· the number of Bonds with respect to which the Conversion Right shall be exercised;

· the deposit account of the Bondholder to which the Shares are to be delivered via Clearstream;

· if applicable, a Euro-account of the Bondholder or its depository bank to which any payments on the Bonds are to be made via Clearstream; and

· the certifications and undertakings set out in the form of the Conversion Notice relating to certain restrictions of the ownership of the Bonds and/or the Shares.

(2) Weitere Voraussetzungen für die Ausübung des Wandlungsrechts . Die Ausübung des Wandlungsrechts setzt außerdem voraus, dass die Schuldverschreibungen, für die das Wandlungsrecht ausgeübt werden soll, an die jeweilige Wandlungsstelle geliefert werden, und zwar durch Lieferung (Umbuchung) der Schuldverschreibungen auf das Konto der Wandlungsstelle bei Clearstream. Die Wandlungsstellen sind ermächtigt, die Bezugserklärung gemäß § 198 Abs. 1 AktG für den Anleihegläubiger abzugeben. Die Wandlungsstellen sind von den Beschränkungen des § 181 BGB befreit.

(2) Further Requirements for Exercise of Conversion Right . The exercise of the Conversion Right further requires that the Bonds to be converted be delivered to the respective Conversion Agent by transferring (book-entry transfer) the Bonds to the Clearstream account of the Conversion Agent. The Conversion Agents shall be authorized to deliver the subscription certificate pursuant to sec. 198 para. 1 of the German Stock Corporation Act (Aktiengesetz, AktG) on behalf of the Bondholder. The Conversion Agents are exempt from the restrictions of sec. 181 of the German Civil Code (Bürgerliches Gesetzbuch, BGB).

(3) Prüfung der Ausübungserklärung . Nach Erfüllung sämtlicher in § 7(1) und § 7(2) genannten Voraussetzungen für die Ausübung des Wandlungsrechts prüft die jeweilige Wandlungsstelle, ob die Zahl der an die Wandlungsstelle gelieferten Schuldverschreibungen der in der Ausübungserklärung angegebenen Zahl von Schuldverschreibungen entspricht. Soweit die in der Ausübungserklärung angegebene Zahl von Schuldverschreibungen die Zahl der tatsächlich gelieferten Schuldverschreibungen über- oder unterschreitet, wird die Wandlungsstelle, je nachdem, welche Zahl niedriger ist, entweder (i) diejenige Gesamtzahl von Aktien, die der in der Ausübungserklärung angegebenen Zahl von Schuldverschreibungen entspricht, oder (ii) diejenige Gesamtzahl von Aktien, die der Zahl der tatsächlich gelieferten Schuldverschreibungen entspricht, von der Emittentin beziehen und an den Anleihegläubiger liefern. Verbleibende Schuldverschreibungen werden an den Anleihegläubiger auf dessen eigene Kosten zurückgeliefert.

(3) Review of Conversion Notice . Upon fulfilment of all requirements specified in § 7(1) and § 7(2) for the exercise of the Conversion Right, the respective Conversion Agent will verify whether the number of Bonds delivered to the Conversion Agent is identical to the number of Bonds specified in the Conversion Notice. In the event of any excess or shortfall, the Conversion Agent shall subscribe from the Issuer and deliver to the Bondholder the lower of (i) such total number of Shares which corresponds to the number of Bonds set forth in the Conversion Notice, or (ii) such total number of Shares which corresponds to the number of Bonds in fact delivered. Any remaining Bonds will be redelivered to the Bondholder at its own expense.

(4) Ausübungstag . Das Wandlungsrecht ist an dem Geschäftstag wirksam ausgeübt, an dem sämtliche in § 7(1) und § 7(2) genannten Voraussetzungen für die Ausübung des Wandlungsrechts erfüllt sind und die Emittentin die Bezugserklärung erhalten hat (der „ Ausübungstag ”). Für den Fall, dass die in § 7(1) und § 7(2) genannten Voraussetzungen an einem Tag erfüllt worden sind, der in einen Nichtausübungszeitraum fällt, ist der Ausübungstag der erste Geschäftstag nach dem Ende dieses Nichtausübungszeitraums, sofern auch dieser Tag noch in den Ausübungszeitraum fällt; andernfalls ist das Wandlungsrecht nicht wirksam ausgeübt.

(4) Conversion Date . The Conversion Right shall be validly exercised on the Business Day on which all of the conditions precedent specified in § 7(1) and § 7(2) for the exercise of the Conversion Right have been fulfilled and the Issuer has received the subscription certificate (the “ Conversion Date ”). In the event that the conditions precedent specified in § § 7(1) and § 7(2) are fulfilled on a day which falls within an Exclusion Period, then the Conversion Date shall be the first Business Day after the end of such Exclusion Period provided that such day still falls within the Conversion Period; otherwise, the Conversion Right shall not have been validly exercised.

(5) Kosten der Ausübung . Sämtliche Kosten, die durch die Ausübung des Wandlungsrechts und/oder durch die Lieferung der Aktien an den betreffenden Anleihegläubiger oder die in der Ausübungserklärung bezeichnete Person durch oder für Rechnung der Emittentin anfallen, werden von der Emittentin getragen. Seine Bankspesen und sonstige ihm entstehende Kosten trägt der Anleihegläubiger.

(5) Conversion Costs . All costs arising on exercise of the Conversion Right and/or delivery of Shares by, or on behalf of, the Issuer to the relevant Bondholder or the person designated in the Conversion Notice shall be borne by the Issuer. All banking and other fees shall be borne by the bond holder..

§ 8 Wandlung durch die Emittentin	§ 8 Conversion by the Issuer
(1) Wandlung bei Fälligkeit . Die Emittentin ist berechtigt, aber nicht verpflichtet, den Nominalbetrag einiger oder aller Schuldverschreibungen bei Fälligkeit nicht zurückzuzahlen, sondern stattdessen Aktien zu liefern („ Pflichtwandlung “). Die Lieferung von Aktien anstelle der Rückzahlung ist mit einer Frist von mindestens 30 und höchstens 60 Tagen vor Rückzahlungstag anzukündigen.	(1) Conversion upon Maturity . The Issuer has the right, but not the obligation, not to repay the principal of several or all Bonds upon maturity, but to deliver Shares instead (“ Mandatory Conversion ”). The delivery of Shares in lieu of a repayment shall be announced at least 30 days but no more than 60 days before the day of the repayment.
(2) Weiteres Wandlungsrecht. Die Emittentin ist ferner zeitlich unbefristet zur Pflichtwandlung berechtigt, nachdem der Kurs der Aktie der Emittentin EUR 5,00 einmalig überschreitet („ Pflichtwandlungsauslösungspreis “). Maßgeblich ist der volumengewichtete arithmetische Mittelwert der an der Frankfurter Wertpapierbörse im Parkett- und XETRA-Handel festgestellten Schlusskurse der Aktie der Gesellschaft während eines zusammenhängenden Zeitraums von fünf Handelstagen. Der Pflichtwandlungsauslösungspreis ist entsprechend § 12 anzupassen. Die Pflichtwandlung ist in diesem Fall mit einer Frist von mindestens 30 und höchstens 60 Kalendertagen zu erklären.	(2) Additional Conversion Right. The Issuer further has the right, for a non-limited period of time, to Mandatory Conversion, any time after the stock price of the Issuer’s shares exceeds EUR 5.00 at least once (“ Mandatory Conversion Trigger Price ”). The initial Conversion Price amounts in this case to EUR 5.00 per Share. The relevant stock price shall be the volume weighted arithmetic average of the closing price determined on the floor and XETRA trade of the Frankfurt Stock Exchange within a continuous period of five trading days. The Mandatory Conversion Trigger Price shall be subject to the adjustments pursuant to § 12. In this case, the Mandatory Conversion shall be prior announced at least 30 days but no more than 60 days.

(3) Anfänglicher Wandlungspreis. Der anfängliche Wandlungspreis beträgt in den Fällen dieses § 8 EUR 5,00 je Aktie.

(3) Initial Conversion Price . The Initial Conversion Price shall amount to EUR 5.00 per share in the cases of this § 8.

(4) Durchführung. Zur Durchführung der Pflichtwandlung müssen die Schuldverschreibungen, für die die Pflichtwandlung durchgeführt wird, der Wandlungsstelle durch die Anleihegläubiger übergeben werden. Die Schuldverschreibungen werden an die Wandlungsstelle zur Verwahrung für Rechnung des Anleihegläubigers und Weiterleitung an die Emittentin übergeben.

Jeder Anleihegläubiger beauftragt und bevollmächtigt die Wandlungsstelle, die Pflichtwandlung der übergebenen Schuldverschreibungen in Aktien nach Maßgabe und in Übereinstimmung mit der durch diesen Anleihegläubiger abgegebenen Wandlungserklärung durchzuführen. Der Anleihegläubiger ermächtigt die Wandlungsstelle insbesondere, die Bezugserklärung gemäß § 198 Abs. 1 AktG zu unterzeichnen. Diese Ermächtigung ist unbedingt und unwiderruflich und wirkt gegenüber jeden Anleihegläubiger.

Die Aktien werden von der Emittentin der Wandlungsstelle zur Übergabe und Übereignung an den Anleihegläubiger oder eine von dem Anleihegläubiger zuvor schriftlich bestimmte Person übergeben.

(4) Execution . For the purpose of the Mandatory Conversion, the Bonds to be mandatorily converted must be transferred to the Conversion Agent by the Bondholders. The Bonds shall be transferred to the Conversion Agent to be held for the account of the Bondholder for transfer to the Issuer.

Each Bondholder instructs and authorizes the Conversion Agent to mandatorily convert the delivered Bonds into Shares pursuant to and in conformity with the conversion notice issued by the respective Bondholder. In particular, each Bondholder authorizes the Conversion Agent to sign the exercise notice pursuant to sec. 198 para. 1 on behalf of the Bondholder. This authorization is unconditional and irrevocable and is binding on each Bondholder.

The Shares will be transferred by the Issuer to the Conversion Agent for delivery and transfer to the Bondholder or a person designated in writing by the Bondholder.

(5) Weitere Regelungen. Auf die Wandlung durch die Emittentin finden die Regelung über die Wandung durch den Anleihegläubiger mit Ausnahme der Regelungen über den Ausübungszeitraum entsprechend Anwendung.	(5) Further Provisions. The provisions regarding the conversion by the Bondholders shall apply mutatis mutandis to the conversion by the Issuer, with the exception of the provisions regarding the Conversion Period.
(6) Zahlungsansprüche. Nach Erklärung der Pflichtwandlung durch die Emittentin kann der Anleihegläubiger nur noch die Lieferung von Aktien verlangen. Insbesondere kann er von der Emittentin keine Barzahlung gem. § 10 sowie keine Zinszahlungen für einen über den Zeitpunkt der Erklärung der Pflichtwandlung hinausgehenden Zeitraum verlangen, wenn er seinen Verpflichtungen nach diesem § 8 nicht nachgekommen ist und die Emittentin in der Folge gehindert ist, Aktien aus bedingtem Kapital an den Anleihegläubiger auszugeben. Im Übrigen gilt § 10 entsprechend.	(6) Claims for Payment. After announcement of the Mandatory Conversion by the Issuer, the rights of the Bondholders are limited to delivery of shares. In particular, the Bondholder may neither request cash payment in lieu of shares pursuant to § 10, nor any interest payment for any period after the point in time of the announcement of the Mandatory Conversion, if the Bondholder has not complied with the obligations under this § 8 and the Issuer was consequently precluded to issue Shares from conditional capital to the Bondholders. Subject to the foregoing, § 10 applies accordingly.
§ 9 Lieferung der Aktien; Ausgleich von Bruchteilen von Aktien	§ 9 Delivery of Shares; Compensation for Fractions of Shares
(1) Lieferung der Aktien; Bruchteile von Aktien . Nach Ausübung des Wandlungsrechts werden ausschließlich ganze Aktien geliefert. Ein Anspruch auf Lieferung von Bruchteilen von Aktien besteht nicht. Soweit die jeweilige Wandlungsstelle festgestellt hat (ohne dazu verpflichtet zu sein), dass für denselben Anleihegläubiger mehrere Schuldverschreibungen zur gleichen Zeit gewandelt wurden, und soweit sich für eine oder mehrere Schuldverschreibungen bei der Durchführung der Wandlung Bruchteile von Aktien ergeben, werden alle sich aus der Wandlung dieser Schuldverschreibungen ergebenden Bruchteile von Aktien addiert und die sich infolge der Addition der Bruchteile etwa ergebenden ganzen Aktien an den betreffenden Anleihegläubiger geliefert. Die zu liefernden Aktien werden so bald wie möglich nach dem Ausübungstag auf das von dem betreffenden Anleihegläubiger in der Ausübungserklärung angegebene Wertpapierdepot übertragen. Bis zur Übertragung der Aktien bestehen keine Ansprüche aus den Aktien.	(1) Delivery of Shares; Fractions of Shares . Upon any exercise of the Conversion Right, only full Shares shall be delivered. Fractions of Shares may not be claimed. To the extent that the respective Conversion Agent has ascertained (without any obligation to do so) that several Bonds have been converted at the same time for the same Bondholder and to the extent that any conversion of one or several Bonds results in fractions of Shares, the fractions of Shares resulting from the conversion of such Bonds shall be aggregated and any full Shares resulting from such aggregation of fractions of Shares shall be delivered to the respective Bondholder. The Shares to be delivered shall be transferred as soon as practicable after the Conversion Date to the securities deposit account of the Bondholder designated in the Conversion Notice. Until delivery of the Shares, no rights may be exercised from the Shares.

(2) Verbleibende Bruchteile von Aktien . Verbleibende Bruchteile von Aktien werden nicht geliefert. Ein Ausgleich in Geld findet nicht statt.	(2) Remaining Fractions of Shares . Remaining fractions of Shares shall not be delivered and shall not be compensated in cash. .
(3) Steuern . Die Lieferung von Aktien gemäß § 9(1) erfolgt nur, sofern der Anleihegläubiger etwaige Steuern, Abgaben oder amtliche Gebühren zahlt, die im Zusammenhang mit der Ausübung des Wandlungsrechts oder der Lieferung der Aktien gemäß § 9(1) anfallen.	(3) Taxes . Delivery of Shares pursuant to § 9(1) is subject to payment by a Bondholder of any taxes, duties or governmental charges which may be imposed in connection with the exercise of the Conversion Right or the delivery of the Shares pursuant to § 9(1).

§ 10 Barzahlung statt Lieferung der Aktien in bestimmten Fällen	§ 10 Cash Payment in Lieu of Delivery of Shares in Certain Circumstances
(1) Barzahlung statt Lieferung der Aktien . Falls die Emittentin rechtlich gehindert ist, Aktien aus bedingtem Kapital bei Ausübung des Wandlungsrechts durch einen Anleihegläubiger zu begeben, ist sie verpflichtet, an den Anleihegläubiger an Stelle der Lieferung der Aktien, auf die der Anleihegläubiger ansonsten gemäß § 6(1) einen Anspruch hätte, aber an deren Ausgabe die Emittentin gehindert ist, einen Barbetrag in Euro („ Barzahlung “) zu zahlen. Die Barzahlung für eine Aktie errechnet sich aus dem Betrag des volumengewichteten arithmetischen Mittels der XETRA Kurse innerhalb eines Zeitraums von fünf aufeinanderfolgenden Handelstagen beginnend an dem zweiten auf den Benachrichtigungstag (§ 10(2)) folgenden Handelstag („ Berechnungszeitraum “), gerundet auf den nächsten vollen Cent, wobei EUR 0,005 abgerundet werden. Ein Anspruch des Anleihegläubigers auf Lieferung bzw. Ausgleich von Bruchteilen von Aktien besteht nicht. Die Barzahlung wird spätestens am dritten Geschäftstag nach dem letzten Tag des Berechnungszeitraums durch die Emittentin geleistet. Auf diesen Betrag werden keine Zinsen geschuldet. § 1(1) findet entsprechende Anwendung. Steuern, Abgaben und amtliche Gebühren können von einer etwaigen Zahlung abgezogen werden, sofern der Anleihegläubiger solche Steuern, Abgaben oder amtlichen Gebühren nicht zuvor gezahlt hat.	(1) Cash Payment in Lieu of Delivery of Shares . If due to legal reasons the Issuer is unable to issue Shares from conditional capital upon the exercise of a Conversion Right by a Bondholder, the Issuer shall be obligated to pay to the Bondholder a cash amount in Euro (the “ Cash Payment ”) in lieu of the delivery of the Shares to which the Bondholder is otherwise entitled pursuant to § 6(1), but which the Issuer is unable to issue. The Cash Payment relating to one Share shall be calculated as an amount equal to the volume-weighted arithmetic mean value of the XETRA-Quotations on the five consecutive Trading Days beginning on the second Trading Day following the Notification Day (§ 10(2)) (the “ Calculation Period ”), rounded to the nearest full cent with EUR 0.005 being rounded downwards. Fractions of Shares or compensation therefore shall be excluded. The Cash Payment shall be effected by the Issuer not later than on the third Business Day following the last day of the Calculation Period. No interest shall be payable with respect to the Cash Payment. § 1(1) and § 9(3) shall apply accordingly. Taxes, duties and governmental charges may be deducted from a payment obligation, unless the Bondholder has already paid such taxes, duties or governmental charges.
(2) Benachrichtigung . Die Emittentin wird den Anleihegläubiger, der eine Wandlungserklärung abgegeben hat, nicht später als am siebten Geschäftstag nach dem Wandlungstag (schriftlich, per Telefax, oder auf andere Art und Weise unter Benutzung der in der Wandlungserklärung angegebenen Anschrift) benachrichtigen, ob die Emittentin eine Barzahlung zu leisten hat (der Tag, an dem die Emittentin eine solche Nachricht abschickt, wird als „ Benachrichtigungstag “ bezeichnet).	(2) Notification . The Issuer shall notify the Bondholder who has delivered a Conversion Notice no later than on the seventh Business Day after the Conversion Date (in writing, by telefax, or otherwise using the address stated in the Conversion Notice) whether the Issuer has to effect a Cash Payment (the day on which such notification is dispatched by the Issuer being the “ Notification Day ”).

§ 11 Bereitstellung von Aktien; Lieferung alter Aktien; Dividenden	§ 11 Procurement of Shares; Delivery of Existing Shares, Dividends
(1) Bedingtes Kapital . Die Aktien werden nach Durchführung der Wandlung aus einem bedingten Kapital der Emittentin stammen. Unbeschadet § 10 ist die Emittentin berechtigt, nach freiem Ermessen an Anleihegläubiger statt Aktien aus dem bedingten Kapital bestehende Aktien zu liefern (oder liefern zu lassen), vorausgesetzt, solche Aktien gehören derselben Gattung an wie die andernfalls zu liefernden Aktien aus bedingtem Kapital (ausgenommen die Dividendenberechtigung, die jedoch nicht geringer sein darf als die Dividendenberechtigung der jungen Aktien, die anderenfalls an den betreffenden Anleihegläubiger zu liefern gewesen wären), und vorausgesetzt, die Lieferung solcher Aktien kann rechtmäßig erfolgen und beeinträchtigt nicht die Rechte des betreffenden Anleihegläubigers (im Vergleich zur Lieferung von Aktien aus bedingtem Kapital).	(1) Conditional Capital . Upon execution of the conversion, new Shares will be issued out of a conditional capital of the Issuer. The Issuer shall, notwithstanding § 10, at its sole discretion be entitled to deliver (or cause to be delivered) at the Conversion Price Shares to any Bondholder instead of the delivery of new Shares out of conditional capital, provided that in case of (i) and (ii) such Shares shall be of the same class as the Shares otherwise to be delivered from conditional capital except for a different dividend entitlement (which shall be no less than the dividend entitlement of the new Shares that would have otherwise been delivered to the relevant Bondholder) and that such delivery of such Shares can be legally effected and does not impair the rights of the relevant Bondholders (in comparison to a delivery of new Shares).
(2) Dividenden . Aktien, die aufgrund der Wandlung aus bedingtem Kapital (§ 11(1)) ausgegeben werden, sind ab Beginn des Geschäftsjahres der Emittentin, in dem die Aktien ausgegeben werden, für dieses und alle folgenden Geschäftsjahre der Emittentin dividendenberechtigt, und können zunächst als „junge“ Aktien eine eigene Wertpapierkennung haben.	(2) Dividends . Shares issued upon conversion out of conditional capital (§ 11(1)) are entitled to dividends (if any) for the then current and all following business years as from the beginning of the business year of the Issuer in which such Shares are issued, and may initially have a separate securities code.

§ 12
Verwässerungsschutz

§ 12
Anti-Dilution Protection

(1) Bezugsrecht für Aktionäre

Wenn die Emittentin bis zur letzten Möglichkeit der Ausübung des Wandlungsrechts unter Gewährung von Bezugsrechten an ihre Aktionäre gemäß § 186 AktG (i) ihr Grundkapital durch Ausgabe neuer Aktien gegen Einlagen erhöht, oder (ii) weitere Schuldverschreibungen mit Options- oder Wandlungsrechten oder -pflichten, Gewinnschuldverschreibungen oder Genussscheine begibt oder garantiert oder eigene Aktien veräußert, ist jedem Anleihegläubiger, der zu Beginn des entsprechenden Nichtausübungszeitraums sein Wandlungsrecht noch nicht wirksam ausgeübt hat, vorbehaltlich der weiteren Bestimmungen des § 12(1), ein Bezugsrecht in dem Umfang einzuräumen, wie es ihm zustünde, wenn eine Ausübung des Wandlungsrechts an dem Geschäftstag unmittelbar vor dem Ex-Tag erfolgt wäre.

(1) Preemptive Rights for Shareholders.

If the Issuer until the last date on which the Conversion Rights may be executed subject to preemptive rights of its shareholders pursuant to sec. 186 of the German Stock Corporation Act (Aktiengesetz), (i) increases its share capital by issuing new shares against capital contributions; or (ii) issues or guarantees further debt securities with warrants or bonds with option or conversion rights or conversion obligations, profit-linked bonds or profit participation certificates or sells own shares, each Bondholder, who at the beginning of the relevant Excluded Period has not yet exercised its Conversion Right, shall, subject to the further provisions of § 12(1), be granted a pre-emptive right equal to the right it would have been entitled to had the Conversion Right been exercised on the Business Day immediately preceding the Ex-Date.

„ Ex-Tag ” ist der erste Handelstag, an dem die Aktien „ex Bezugsrecht”, „ex Dividende“ oder ex eines anderen Rechts gehandelt werden.

“ Ex-Date ” shall mean the first Trading Day on which the Shares are traded “ex subscription right”, “ex dividend” or ex any other right giving rise to an adjustment of the quoted price in the XETRA-System.

Anstelle der Einräumung eines Bezugsrechts kann die Emittentin eine Anpassung des Wandlungspreises vornehmen:

Der Wandlungspreis wird um den Betrag ermäßigt, der dem volumengewichteten arithmetischen Mittel der Kurse des einer Aktie gewährten Bezugsrechts an allen Börsenhandelstagen an der Frankfurter Wertpapierbörse entspricht.

Findet kein Bezugsrechtshandel an der Frankfurter Wertpapierbörse statt, wird der Wert des Bezugsrechts wie folgt verbindlich ermittelt:

BR = (Ka - Kn) / (BV + 1)

BR: Bezugsrecht

Ka: Börsenkurs der alten Aktien

Kn: Ausgabekurs der neuen Aktien

BV: Bezugsverhältnis

Der Börsenkurs „Ka“ der alten Aktien wird wie folgt ermittelt: Volumengewichteter arithmetischer Mittelwert der an der Frankfurter Wertpapierbörse im Parkett- und XETRA-Handel festgestellten Schlusskurse der Aktie der Emittentin während der Bezugsfrist.

Instead of granting a preemptive right, the Issuer may elect to adjust the Conversion Price:

The Conversion Price shall be reduced by the amount equal to the volume-weighted arithmetic average of the stock prices of a subscription right granted by one share on all trading days of the Frankfurt Stock Exchange.

If subscription rights are not traded at the Frankfurt Stock Exchange, the value of the subscription right shall be determined with binding effect as follows:

BR = (Ka - Kn) / (BV + 1)

BR: Subscription RightKa: Stock price of old shares

Kn: Issue price of New Shares

BV: Subscription ratio

The stock price “Ka” of the old shares shall be determined as follows: volume-weighted arithmetic mean of the closing prices of the Issuer’s shares determined in the floor and XETRA trade of the Frankfurt Stock Exchange during the subscription period.

(2) Kapitalerhöhung aus Gesellschaftsmitteln . Im Falle einer Kapitalerhöhung der Emittentin aus Gesellschaftsmitteln gemäß § 207 AktG (d.h. durch Umwandlung von Kapitalrücklagen oder Gewinnrücklagen) unter Ausgabe neuer Aktien vor Ablauf des Ausübungszeitraums oder einem früheren Rückzahlungstag wird der Wandlungspreis mit dem nach der nachstehenden Formel errechneten Wert multipliziert:

Dabei ist

N ₀ : die die Anzahl der ausgegebenen Aktien vor der Kapitalerhöhung aus Gesellschaftsmitteln, und

N _n : die Anzahl der ausgegebenen Aktien nach der Kapitalerhöhung aus Gesellschaftsmitteln.

(2) Capital Increase from Company Reserves . In the event of a capital increase of the Issuer from company reserves (i.e., capital reserves (Kapitalrücklagen) or retained earnings (Gewinnrücklagen)) pursuant to sec. 207 AktG (Kapitalerhöhung aus Gesellschaftsmitteln) by issuing new shares prior to the expiration of the Conversion Period or an earlier date of redemption, the Conversion Price shall be multiplied by the number determined by the following formula:

Whereas

N ₀ : the number of issued Shares before the increase of share capital from company reserves, and

N _n : the number of issued Shares after the increase of share capital from company reserves.

(3) Änderung der Zahl der Aktien ohne Änderung des Grundkapitals; Kapitalherabsetzung . Sofern bis zur letzten Möglichkeit der Ausübung des Wandlungsrechts (i) die Zahl der ausstehenden Aktien ohne Änderung des Grundkapitals der Emittentin geändert wird (z.B. in Folge eines Aktiensplits oder einer Zusammenlegung von Aktien (umgekehrter Aktiensplit)), oder (ii) das Grundkapital der Emittentin durch Zusammenlegung von Aktien herabgesetzt wird, gilt § 12(2) entsprechend.

Im Falle einer Herabsetzung des Grundkapitals der Emittentin allein durch Herabsetzung des auf die einzelne Aktie entfallenden anteiligen Betrages des Grundkapitals bleibt das Wandlungsverhältnis unverändert, jedoch mit der Maßgabe, dass nach einem solchen Ereignis zu liefernde Aktien mit ihrem jeweiligen neuen, auf die einzelne Aktie entfallenden anteiligen Betrag des Grundkapitals geliefert werden.

Ist die Kapitalherabsetzung mit einer Kapitalrückzahlung oder einem entgeltlichen Erwerb eigener Aktien verbunden, bleibt der Wandlungspreis und damit das Wandlungsverhältnis unverändert.

(3) Changes in the Number of Shares without Change in the Share Capital; Capital Decrease. If until the last date on which the Conversion Rights may be executed (i) the number of outstanding Shares is being changed without a change in the aggregate amount of the Issuer’s share capital (e.g. by means of splitting or combining shares (reverse split)) or (ii) the Issuer decreases its share capital by combining shares, § 12(2) shall apply mutatis mutandis.

In the event of a decrease of the Issuer’s share capital which is solely the result of a reduction of the amount in the share capital represented by each Share, the Conversion Price shall remain unchanged provided that Shares to be delivered after the occurrence of such an event shall be delivered with their respective new portion of the share capital allotted to them.

If the capital decrease is connected with a capital repayment or a share repurchasing, the Conversion Price and therefore the Conversion Ratio remain unaffected.

(4) Ausschüttungen . Falls die Emittentin bis zur letzten Möglichkeit der Ausübung des Wandlungsrechts an ihre Aktionäre Vermögenswerte, insbesondere Dividenden, gewährt, mindert sich der Wandlungspreis um den Betrag der Brutto-Ausschüttung je Aktie, soweit diese 4 % des anteiligen Betrags der Aktie am Grundkapital p.a. übersteigt.	(4) Distributions . If the Issuer until the last date on which the Conversion Rights may be executed distributes, allots or grants to its shareholders (i) assets, in particular dividends, the Conversion Price will be reduced by the amount of the gross distribution per Share, insofar as this exceeds 4% of the pro rata participation of the share in the registered capital p.a
(5) Andere Ereignisse . Bei einer Maßnahme nach dem Umwandlungsgesetz oder bei dem Eintritt eines anderen Ereignisses, das die Aktien, das Wandlungsverhältnis oder den Wandlungspreis berühren könnte, bleibt das Wandlungsverhältnis unverändert. Es wer-den insbesondere keine Anpassungen vorgenommen im Hinblick auf (i) die Ausgabe von Aktienoptionen an Mitglieder des Vorstands, des Aufsichtsrats oder Mitarbeiter der Emittentin oder ihrer Tochtergesellschaften im Rahmen von Aktienoptions-Programmen der Emittentin oder (ii) die Ausgabe von Aktien aus am Emissionstag bereits existierenden bedingtem oder genehmigten Kapital.	(5) Other events. In the event of a measure pursuant to the German Transformation Act (Umwandlungsgesetz, UmwG) or in any other event which may affect the Shares, the Conversion Ratio or the Conversion Price, the Conversion Ratio shall remain unaffected. In particular, no adjustments shall be made in relation to (i) the issuance of stock options for members of the management board or supervisory board or employees of the Issuer or its subsidiaries under stock option programs of the Issuer or (ii) the issuance of Shares out of conditional or authorized capital existing on the Issue Date.
(6) Wirksamkeit; Ausschluss. Anpassungen nach Maßgabe dieses § 12 werden mit Wirkung zum Beginn des Ex-Tages wirksam. Anpassungen nach Maßgabe dieses § 12 werden nicht vorgenommen, sofern der Ex-Tag im Falle von Schuldverschreibungen, für die das Wandlungsrecht ausgeübt wurde, nach dem Tag liegt, an dem die Aktien dem Depotkonto des betreffenden Anleihegläubigers gemäß § 9(1) gutgeschrieben wurden, oder, im Falle von nicht gewandelten Schuldverschreibungen, nach dem letzten Tag des Wandlungszeitraums bzw. nach dem früheren für die Rückzahlung festgelegten Tag.	(6) Effectiveness; Preclusion . Adjustments pursuant to this § 12 shall become effective with the Ex-Date. Adjustments pursuant to this § 12 will not be made if the Ex-Date is, in the case of Bonds in respect of which the Conversion Right has been exercised, the date on which the Shares have been delivered pursuant to § 9(1) to the securities deposit account of the Bondholder or, in the case of Bonds not converted, later than the last day of the Conversion Period or the earlier date fixed for redemption, as the case may be.

(7) Auf- bzw. Abrundung und Lieferung . Der Wandlungspreis, der sich aufgrund einer Anpassung gemäß § 12 ergibt, wird auf vier Nachkommastellen aufgerundet; das Wandlungsverhältnis, das sich aufgrund des so angepassten und gerundeten Wandlungspreises errechnet, wird (vor einer etwaigen Addition von Aktien) auf vier Nachkommastellen abgerundet. Die sich daraus ergebende Zahl von Aktien wird gemäß § 9(1) geliefert. Bruchteile von Aktien werden gemäß § 9(1) zusammengefasst. Verbleibende Bruchteile von Aktien werden nicht ausgeglichen.

(7) Rounding up or down and Delivery . The Conversion Price determined by an adjustment pursuant to § 12 shall be rounded upwards to four decimal points; the Conversion Ratio, calculated on the basis of the Conversion Price so adjusted and rounded, shall be rounded downwards to four decimal points (before any aggregation of Shares). The number of Shares resulting therefrom shall be delivered pursuant to § 9(1). Fractions of Shares shall be aggregated in accordance with § 9(1). Remaining fractions of Shares shall not be compensated.

(8) Zuständigkeit; Bekanntmachung . Anpassungen gemäß diesem § 12 werden durch die Wandlungsstelle oder, nach Wahl der Anleiheschuldnerin, einen von der Anleiheschuldnerin auf ihre Kosten zu bestellenden geeigneten Dritten vorgenommen und sind (sofern nicht ein offensichtlicher Fehler vorliegt) für alle Beteiligten bindend.

Jedwede Anpassung des Wandlungsverhältnisses gemäß diesem § 12 darf nicht zu einem Wandlungspreis führen, der niedriger ist als der auf die einzelne Aktie entfallende anteilige Betrag am Grundkapital der Emittentin.

(8) Responsibility; Notice . Adjustments pursuant to this § 12 shall be made by the Conversion Agent or, at the option of the Issuer, an appropriate third party appointed by the Issuer at the expense of the Issuer and will be binding on all parties involved, absent an obvious mistake.

Any adjustment to the Conversion Price pursuant to this § 12 shall not cause the Conversion Price to fall below the nominal participation in the registered capital represented by each Share.

(9) Bekanntmachung von Anpassungen. Die Emittentin wird eine Anpassung des Wandlungsverhältnisses, des Wandlungspreises und/oder jede andere Anpassung der Bedingungen des Wandlungsrechts in Übereinstimmung mit § 16 bekannt machen.	(9) Disclosure of adjustments. The Issuer shall disclose any adjustments to the Conversion Ratio, the Conversion Price and/or any other adjustments to the terms and conditions of the conversion right pursuant to § 16.
§ 13 Rang	§ 13 Status
Rang . Die Anleihegläubiger treten mit ihrem Anspruch auf Rückzahlung des Nominalbetrages und ihrem Anspruch auf fällige Zinszahlungen dergestalt im Rang hinter die Forderungen aller bestehenden und künftigen Gläubiger der Emittentin zurück, dass sie erst nach Befriedigung sämtlicher übrigen nicht nachrangigen Gläubiger (und, soweit ein Liquidationsüberschuss oder ein die sonstigen Verbindlichkeiten übersteigendes Vermögen der Emittentin hierfür zur Verfügung steht, nur zugleich mit, im Rang jedoch vor den Einlagerückgewähransprüchen der Gesellschafter der Emittentin) Erfüllung ihrer Ansprüche, also Zahlung verlangen können. Der Rangrücktritt gilt dabei, solange und soweit durch eine teilweise oder vollständige Befriedigung der im Rang zurückgetretenen Ansprüche der Anleihegläubiger eine Überschuldung oder aber eine Zahlungsunfähigkeit der Emittentin im insolvenzrechtlichen Sinne entsteht oder zu entstehen droht; die im Rang zurückgetretenen Ansprüche der Anleihegläubiger gelten für diesen Fall als zinslos gestundet. Der Nachrang gilt auch im Insolvenzverfahren..	(1) Status. The rights of the Bondholders regarding repayment of the principal and interest are subordinated to the rights of all current and future third party creditors of the Issuer, and their claims, i.e. payments, will only be satisfied after all other non-subordinate creditors are satisfied (and, insofar as liquidation proceeds or assets of the Issuer which exceed the remaining liabilities are available for this purpose, will be satisfied only together with, but ranking above, the claims of the Issuer’s shareholders regarding the repayment of the shares). The subordination shall apply as long as and insofar as a partial or full satisfaction of the subordinated claims of the Bondholders would cause or threaten an over-indebtedness or illiquidity of the Issuer pursuant to applicable insolvency law; the subordinated claims of the Bondholders shall be considered as deferred without interest. The subordination shall also apply in insolvency proceedings.

§ 14 Kündigung durch Anleihegläubiger	§ 14 Termination by Bondholders
(1) Kündigungsrecht . Jeder Anleihegläubiger ist berechtigt, seine sämtlichen Ansprüche aus den Schuldverschreibungen durch Abgabe einer Kündigungserklärung („ Kündigungserklärung ”) gegenüber einer Zahlstelle zu kündigen und fällig zu stellen und Rückzahlung des Nennbetrags zuzüglich der darauf bis zum Tag der tatsächlichen Rückzahlung (ausschließlich) aufgelaufenen Zinsen zu verlangen, wenn	(1) Right to Terminate . Each Bondholder is entitled to declare due and payable by submitting a notice of termination (“ Termination Notice ”) to a Paying Agent its entire claims arising from the Bonds and demand payment of their Principal Amount, plus interest accrued on the Principal Amount until (but excluding) the day of actual redemption, if
die Emittentin, gleichgültig aus welchen Gründen, innerhalb von 30 Tagen nach dem betreffenden Zahlungstrag irgendwelche Beträge, die fällig und auf die Schuldverschreibungen zahlbar sind, nicht zahlt.	the Issuer, for any reason whatsoever, fails within310 days after the relevant payment date to pay any amounts due and payable on the Bonds; or
(2) Erlöschen des Kündigungsrechts . Das Kündigungsrecht der Anleihegläubiger erlischt, falls der Kündigungsgrund vor Ausübung des Kündigungsrechts geheilt wurde.	(2) Cessation of Termination Right . The Bondholders’ right to declare the Bonds due and payable will cease in the event that the event of default has been remedied prior to the exercise of the termination right.
(3) Kündigungserklärung . Eine Kündigungserklärung hat in der Weise zu erfolgen, dass der Anleihegläubiger einer Zahlstelle eine schriftliche Erklärung übergibt oder durch eingeschriebenen Brief übersendet und dabei durch eine Bescheinigung seiner Depotbank nachweist, dass er die betreffenden Schuldverschreibungen zum Zeitpunkt der Erklärung hält.	(3) Termination Notice . Any Termination Notice shall be made by means of a written notice to be delivered by hand or registered mail to a Paying Agent together with evidence by means of a certificate of the Bondholder’s depository bank that such Bondholder at the time of such written notice is a holder of the relevant Bonds.

§ 15 Zahlstellen, Wandlungsstellen	§ 15 Paying Agents; Conversion Agents
(1) Zahlstellen . Die Emittentin hat die Bankhaus Gebr. Martin AG, Schlossplatz 7, D-73033 Göppingen, zur Hauptzahlstelle („ Hauptzahlstelle ” und zusammen mit etwaigen anderen von der Emittentin gemäß § 15(3) bestellten Zahlstellen, „ Zahlstellen “) bestellt. Die Zahlstellen sind von den Beschränkungen des § 181 des Bürgerlichen Gesetzbuchs befreit. Adressänderungen werden gemäß § 16 bekannt gemacht.	(1) Paying Agents . The Issuer has appointed Bankhaus Gebr. Martin AG, Schlossplatz 7, D-73033 Göppingen, to act as principal paying agent (“ Principal Paying Agent ” and, together with any other paying agent appointed by the Issuer in accordance with § 15(3), “ Paying Agents ”). The Paying Agents are exempt from the restrictions of sec. 181 of the German Civil Code (Bürgerliches Gesetzbuch). Changes of address shall be published in accordance with § 16.
(2) Wandlungsstelle . Die Emittentin hat die Bankhaus Gebr. Martin AG, Schlossplatz 7, D-73033 Göppingen, zur Hauptwandlungsstelle („ Hauptwandlungsstelle ” und zusammen mit etwaigen anderen von der Emittentin gemäß § 15(3) bestellten Wandlungsstellen, die „ Wandlungsstellen “) bestellt. Die Wandlungsstellen sind von den Beschränkungen des § 181 BGB befreit. Adressänderungen werden gemäß § 16 bekannt gemacht.	(2) Conversion Agent . The Issuer has appointed Bankhaus Gebr. Martin AG, Schlossplatz 7, D-73033 Göppingen, to act as principal conversion agent (“ Principal Conversion Agent ” and, together with any other conversion agent appointed by the Issuer in accordance with § 15(3), the “ Conversion Agents ”). The Conversion Agents are exempt from the restrictions of sec. 181 of the German Civil Code (Bürgerliches Gesetzbuch). Changes of address shall be published in accordance with § 16.
(3) Ersetzung . Die Emittentin kann jederzeit durch Bekanntmachung gemäß § 16 mit einer Frist von mindestens 30 Tagen eine andere Bank zur Zahlstelle oder Wandlungsstelle bestellen. Die Zahlstellen und die Wandlungsstellen können jederzeit von ihrem jeweiligen Amt zurücktreten. Der Rücktritt wird jedoch nur wirksam mit der Bestellung einer anderen Bank zur neuen Zahlstelle bzw. Wandlungsstelle durch die Emittentin unter Bekanntmachung dieser Bestellung gemäß § 16 mit einer Frist von mindestens 30 Tagen.	(3) Substitution . The Issuer may at any time, by giving not less than 30 days’ notice by publication in accordance with § 16, appoint another bank as Paying Agent or Conversion Agent. Each of the Paying Agents or the Conversion Agents may at any time resign from their respective offices. Such resignation shall become effective only upon the appointment by the Issuer of a bank as the new Paying Agent and/or Conversion Agent and the giving of not less than 30 days’ notice of any such appointment by publication in accordance with § 16.

§ 16 Bekanntmachungen	§ 16 Notices
Die Emittentin wird Bekanntmachungen im Bundesanzeiger vornehmen. Der Tag der Veröffentlichung ist maßgeblich, soweit für Zwecke von Fristberechnungen nach diesen Anleihebedingungen auf den Tag der Bekanntmachung Bezug genommen wird.	(1) The Issuer will publish notices in the German Federal Gazette. The day of publication is relevant insofar as these terms and conditions refer to publication days for the purpose of calculation of periods.
§ 17 Änderung der Anleihebedingungen durch Beschluss der Anleihegläubiger; Gemeinsamer Vertreter	§ 17 Amendments to the Terms and Conditions by resolution of the Bondholders; Joint Representative
(1) Änderung der Anleihebedingungen . Die Anleihebedingungen können durch die Emittentin mit Zustimmung der Anleihegläubiger aufgrund Mehrheitsbeschlusses nach Maßgabe der §§ 5 ff. SchVG in seiner jeweiligen gültigen Fassung geändert werden. Die Anleihegläubiger können insbesondere einer Änderung wesentlicher Inhalte der Anleihebedingungen, einschließlich der in § 5 Abs. 3 SchVG vorgesehenen Maßnahmen, zustimmen und einen gemeinsamen Vertreter bestellen. Ein ordnungsgemäß gefasster Mehrheitsbeschluss ist für alle Anleihegläubiger verbindlich.	(1) Amendments to the Terms and Conditions . The Issuer may amend the Terms and Conditions with consent by a majority resolution of the Bondholders pursuant to sec. 5 et seq. of the German Act on Issues of Debt Securities (Gesetz über Schuldverschreibungen aus Gesamtemissionen, SchVG), as amended from time to time. In particular, the Bondholders may consent to amendments which materially change the substance of the Terms and Conditions, including such measures as provided for under sec. 5 para. 3 of the SchVG, and appoint a joint representative. A duly passed majority resolution shall be binding upon all Bondholders.

(2) Nachweise . Anleihegläubiger haben die Berechtigung zur Teilnahme an der Abstimmung zum Zeitpunkt der Stimmabgabe durch besonderen Nachweis der Depotbank und die Vorlage eines Sperrvermerks der Depotbank zugunsten der Zahlstelle als Hinterlegungsstelle für den Abstimmungszeitraum nachzuweisen.	(2) Proof of Eligibility . Bondholders must demonstrate their eligibility to participate in the vote at the time of voting by means of a special confirmation of the Depositary Bank hereof and by submission of a blocking instruction by the Depositary Bank for the benefit of the Paying Agent as depository (Hinterlegungsstelle) for the voting period.
§ 18 Verschiedenes	§ 18 Miscellaneous
(1) Anwendbares Recht . Form und Inhalt der Schuldverschreibungen sowie sämtliche sich aus diesen Anleihebedingungen ergebenden Rechte und Pflichten der Anleihegläubiger und der Emittentin bestimmen sich in jeder Hinsicht nach dem Recht der Bundesrepublik Deutschland.	(1) Governing Law . The Bonds, with regard to both form and content, as well as all rights and obligations arising from these Terms and Conditions for the Bondholders and the Issuer shall in all respects be governed by German law.
(2) Erfüllungsort . Erfüllungsort ist Frankfurt am Main, Bundesrepublik Deutschland.	(2) Place of Performance . Place of performance shall be Frankfurt am Main, Federal Republic of Germany.
(3) Gerichtsstand . Gerichtsstand für alle Rechtsstreitigkeiten aus den in diesen Anleihebedingungen geregelten Angelegenheiten ist, soweit rechtlich zulässig, und vorbehaltlich dem nachstehenden Absatz, Frankfurt am Main, Deutschland.	(3) Place of Jurisdiction . The place of jurisdiction for all proceedings arising from matters provided for in these Terms and Conditions shall, to the extent legally permitted and subject to the following paragraph, be Frankfurt am Main, Germany.
(4) Für Entscheidungen gemäß § 9 Abs. 2, § 13 Abs. 3 und § 18 Abs. 2 SchVG ist gemäß § 9 Abs. 3 SchVG das Amtsgericht zuständig, in dessen Bezirk die Emittentin ihren Sitz hat. Für Entscheidungen über die Anfechtung von Beschlüssen der Anleihegläubiger ist gemäß § 20 Abs. 3 SchVG das Landgericht ausschließlich zuständig, in dessen Bezirk die Emittentin ihren Sitz hat.	(4) The local court (Amtsgericht) in the district where the Issuer has its registered office will have jurisdiction for all judgments pursuant to sec. 9 para. 2, sec. 13 para. 3 and sec. 18 para. 2 SchVG in accordance with sec. 9 para. 3 SchVG. The regional court (Landgericht) in the district where the Issuer has its registered office will have exclusive jurisdiction for all judgments over contested resolutions by Bondholders in accordance with sec. 20 para. 3 SchVG.

(5) Vorlegungsfrist . Die in § 801 Abs. 1 S. 1 BGB bestimmte Vorlegungsfrist wird für die Schuldverschreibungen in Bezug auf Kapital auf zehn Jahre verkürzt. Die Vorlegungsfrist für die Schuldverschreibungen in Bezug auf Zinsen beträgt vier Jahre und beginnt mit dem Datum, an dem die jeweilige Zinszahlung erstmals fällig und zahlbar wird.	(5) Term for Presentation . The term for presentation of the Bonds with respect to principal as set forth in sec. 801 para. 1 sentence 1 of the German Civil Code (Bürgerliches Gesetzbuch, BGB) shall be reduced to ten years. The term for presentation of the Bonds with respect to interest shall be four years after the date on which payment thereof first becomes due and payable.
(6) Sollten einzelne Bestimmungen dieser Anleihebedingungen ganz oder teilweise unwirksam oder nicht durchsetzbar sein oder unwirksam oder nicht durchsetzbar werden, so wird hierdurch die Wirksamkeit oder die Durchsetzbarkeit der übrigen Bestimmungen nicht berührt. Anstelle der unwirksamen bzw. nicht durchsetzbaren Bestimmung soll, soweit rechtlich möglich, eine dem Sinn und wirtschaftlichen Zweck dieser Anleihebedingungen zum Zeitpunkt der Begebung der Schuldverschreibungen entsprechende Regelung gelten. Unter Umständen, unter denen sich diese Anleihebedingungen als unvollständig erweisen, soll eine ergänzende Auslegung, die dem Sinn und Zweck dieser Anleihebedingungen entspricht, unter angemessener Berücksichtigung der berechtigten Interessen der beteiligten Parteien erfolgen.	(6) Should any of the provisions of these Terms and Conditions be or become invalid or unenforceable in whole or in part, the validity or the enforceability of the remaining provisions shall not in any way be affected or impaired thereby. In this case the invalid or unenforceable provision shall be replaced by a provision which, to the extent legally possible, provides for an interpretation in keeping with the meaning and the economic purposes of the Terms and Conditions at the time of the issue of the Bonds. Under circumstances in which these Terms and Conditions prove to be incomplete, a supplementary interpretation in accordance with the meaning and the purposes of these Terms and Conditions under due considerations of the legitimate interest of the parties involved shall be applied.
(7) Der deutsche Wortlaut dieser Anleihebedingungen ist allein rechtsverbindlich. Die englische Übersetzung dient nur der Information.	(7) The German text of these Terms and Conditions is the only legally binding one. This English translation is for convenience purposes only.

Exhibit 10.6

Biofrontera Aktiengesellschaft

Leverkusen

6% Wandelschuldverschreibung 2017/2022	6 % Convertible Bond 2017/2022
Anleihebedingungen	Terms and Conditions of Bonds (non binding convenience translation)
§ 1 Allgemeines	§ 1 General
(1) Nennbetrag und Einteilung . Die von der Biofrontera AG mit Sitz in Leverkusen („ Emittentin ”) begebene Wandelschuldverschreibung im Gesamtnennbetrag von bis zu EUR 4.999.000 ist eingeteilt in bis zu 49.990 untereinander gleichberechtigte, auf den Inhaber lautende Teilschuldverschreibungen („ Schuldverschreibungen ”) im Nennbetrag von jeweils EUR 100 („ Nennbetrag “).	(1) Principal Amount and Denomination . The convertible bond issued by Biofrontera AG with a statutory seat in Leverkusen, (“ Issuer ”), in an aggregate principal amount of up to EUR 4,999,000 is divided into up to 49,990 non-registered pari passu bonds (“ Bonds ”), each with a principal amount of EUR 100 (“ Principal Amount ”).
(2) Globalverbriefung und Verwahrung . Die Schuldverschreibungen werden durch eine auf den Inhaber lautende Dauerglobalurkunde („ Globalurkunde ”) ohne Zinsscheine verbrieft. Die Globalurkunde wird bei der Clearstream Banking AG mit Sitz in Frankfurt am Main („ Clearstream Frankfurt “) eingeliefert und verwahrt, bis alle Verpflichtungen der Emittentin aus den Schuldverschreibungen erfüllt sind. Die Globalurkunde trägt die Unterschrift des Vorstands der Emittentin in vertretungsberechtigter Zahl. Die Ausgabe effektiver Schuldverschreibungen und Zinsscheine ist ausgeschlossen.	(2) Global Certificate and Custody. The Bonds are securitized in a non-registered permanent global certificate (“ Global Certificate ”) without interest coupons. The Global Certificate will be deposited with Clearstream Banking AG with seat in Frankfurt am Main (“ Clearstream Frankfurt ”) and will be kept in custody with Clearstream until all obligations of the Issuer under the Bonds have been satisfied. The Global Certificate bears the signatures of members of the Issuer’s management board authorized to represent the Issuer. No physical certificates representing Bonds and interest coupons will be issued.

§ 2 Zinsen	§ 2 Interest
(1) Zinssatz und Zinszahlungstage . Die Schuldverschreibungen werden ab dem 01. Februar 2017 (einschließlich) („ Zinsbeginn ”) an mit jährlich 6 % auf ihren Nennbetrag verzinst. Die Zinsen sind halbjährlich nachträglich am 01. Januar und 1. Juli eines jeden Jahres („ Zinszahlungstag ”), erstmals am 01. Juli 2017, zahlbar. Der Zinslauf der Schuldverschreibungen endet mit Ablauf des Tages, der dem Tag, an dem sie zur Rückzahlung fällig werden, unmittelbar vorausgeht, oder, falls das Wandlungsrecht ausgeübt wurde, mit Ablauf des Tages, der dem letzten Zinszahlungstag vor dem Ausübungstag unmittelbar vorausgeht oder, falls kein Zinszahlungstag vorausging, dem der dem Zinsbeginn vorausging.	(1) Interest Rate and Interest Payment Dates . The Bonds shall bear interest at a rate of 6 % p.a. on their Principal Amount from and including 1 February 2017 (“ Interest Commencement ”). Interest shall be payable half-yearly in arrears on 1 January and 1 July of each year (“ Interest Payment Date ”), commencing on 1 July 2017. Interest shall cease to accrue with the expiration of the day which immediately precedes the day on which the Bonds become due for redemption, or, if the Conversion Right has been exercised, with the expiration of the day which immediately precedes the last Interest Payment Date prior to the Conversion Date or, if there was no Interest Payment Date, the Interest Commencement.
(2) Verzugszinsen. Sofern die Emittentin die Schuldverschreibungen nicht bei Fälligkeit zurückzahlt, wird der Nennbetrag bis zum Tag der tatsächlichen Rückzahlung der Schuldverschreibungen (ausschließlich) mit einem jährlichen Zinssatz von 6 % weiter verzinst. Die Geltendmachung eines weiteren Schadens ist nicht ausgeschlossen.	(2) Default Interest . Insofar as the Issuer fails to redeem the Bonds on the day on which they become due for redemption, interest shall continue to accrue on the Principal Amount at the rate of 6 % per annum until (but excluding) the date of actual redemption of the Bonds. Claims for further damages shall not be excluded.

(3) Zinsperiode, Zinstagequotient . „ Zinsperiode “ bezeichnet den Zeitraum ab dem Zinsbeginn (einschließlich) bis zu dem ersten Zinszahlungstag (ausschließlich) und danach ab dem jeweiligen Zinszahlungstag (einschließlich) bis zu dem nächstfolgenden Zinszahlungstag (ausschließlich). Sind Zinsen für einen Zeitraum zu berechnen, der kürzer als eine volle Zinsperiode ist oder einer Zinsperiode entspricht, werden die Zinsen gemäß Rule 251 ICMA (ACT/ACT) berechnet.	(3) Interest Period, Interest Day Count Fraction . “ Interest Period ” shall mean the period from and including the Interest Commencement until but excluding the first Interest Payment Date and thereafter from and including each relevant Interest Payment Date until but excluding the next following Interest Payment Date. Where interest is to be calculated in respect of a period which is shorter than or equal to a full Interest Period, interest will be calculated on the basis of Rule 251 ICMA (ACT/ACT)
§ 3 Zahlungen	§ 3 Payments
(1) Währung . Sämtliche Zahlungen auf die Schuldverschreibungen werden von der Emittentin in Euro geleistet.	(1) Currency . All payments on the Bonds shall be made by the Issuer in Euro.
(2) Zahlungen . Zahlungen von Kapital, Zinsen und aller sonstigen auf die Schuldverschreibungen zahlbaren Barbeträge werden von der Emittentin am jeweiligen Zahlungstag an eine Zahlstelle zur Weiterleitung an Clearstream zur Gutschrift auf die Konten der jeweiligen Kontoinhaber bei Clearstream geleistet. Alle Zahlungen an Clearstream oder zu deren Order befreien die Emittentin in Höhe der geleisteten Zahlungen von ihren Verbindlichkeiten aus den Schuldverschreibungen.	(2) Payments . Payments of principal, interest and all other cash payments payable on the Bonds shall be made by the Issuer on the relevant payment date to a Paying Agent for on-payment to Clearstream for credit to the accounts of the respective accountholders in Clearstream. All payments made to Clearstream or to its order shall discharge the issuer from its liability under the Bonds to the extent of the amounts so paid.

(3) Zahlungstag/Fälligkeitstag/Geschäftstag . Im Rahmen dieser Anleihebedingungen bedeutet „ Zahlungstag “ der Tag, an dem die Zahlung tatsächlich erfolgen muss, und „ Fälligkeitstag “ bezeichnet den hierin vorgesehenen Zahlungstag ohne Berücksichtigung einer solchen Verschiebung. Ein „ Geschäftstag ” ist jeder Tag, an dem Banken in Frankfurt am Main für den Geschäftsverkehr geöffnet sind und Zahlungen in Euro über das TARGET 2 System abgewickelt werden können. Ist ein Fälligkeitstag kein Geschäftstag, so wird die betreffende Zahlung erst am nächstfolgenden Geschäftstag als Zahlungstag geleistet, ohne dass wegen dieses Zahlungsaufschubes Zinsen oder sonstige Entschädigungen zu zahlen sind.	(3) Payment Date/Due Date/Business Day . For the purposes of these Terms and Conditions, “ payment date ” means the day on which the payment is actually to be made, and “ due date ” means the payment date provided for herein, without taking account of such adjustment. A “ Business Day ” shall be any day on which banking institutions are open for business in Frankfurt am Main and payments in Euro may be settled via the TARGET 2 system. If any due date is not a Business Day, such payment will not be made until the immediately following payment date, and no interest or other reimbursements shall be paid in respect of the delay in such payment.
§ 4 Laufzeit, Fälligkeit; Rückerwerb; Vorzeitige Rückzahlung	§ 4 Maturity; Repurchase; Early Redemption
(1) Laufzeit, Fälligkeit . Die Laufzeit der Schuldverschreibungen beginnt am 01. Februar 2017. Die Schuldverschreibungen werden am 01. Januar 2022 („ Rückzahlungstag ”) zu ihrem Nennbetrag zuzüglich auf den Nennbetrag bis zum Rückzahlungstag (ausschließlich) aufgelaufener Zinsen zurückgezahlt, sofern sie nicht vorher zurückgezahlt, gewandelt oder zurückgekauft und entwertet worden sind.	(1) Term, Maturity . The term of the bonds commences on 1 February 2017. The Bonds will be redeemed with their Principal Amount on 1 January 2022 (“ Maturity Date ”), together with accrued interest on the Principal Amount until (but excluding) the Maturity Date, unless they have previously been redeemed or converted or purchased and cancelled.
(2) Rückerwerb . Die Emittentin und/oder ein mit ihr verbundenes Unternehmen ist berechtigt, jederzeit Schuldverschreibungen im Markt oder auf andere Weise zu erwerben. Die zurückerworbenen Schuldverschreibungen können gehalten, entwertet oder wieder verkauft werden.	(2) Repurchases . The Issuer and/or any of its affiliates shall be entitled at any time to purchase Bonds in the market or otherwise. Bonds repurchased may be held, cancelled or resold.

(3) Vorzeitige Rückzahlung aufgrund Geringfügigkeit . Die Emittentin ist berechtigt, die noch ausstehenden Schuldverschreibungen insgesamt, nicht jedoch teilweise, jederzeit zu deren Nennbetrag zuzüglich der darauf bis zum Tag der Rückzahlung (ausschließlich) aufgelaufenen Zinsen zurückzuzahlen, wenn der Gesamtnennbetrag der ausstehenden Schuldverschreibungen zu irgendeinem Zeitpunkt unter 15% der ursprünglich begebenen Schuldverschreibungen fällt. Die vorzeitige Rückzahlung muss mindestens 30 und höchstens 60 Tage vor demjenigen Tag bekannt gemacht werden, der in der Bekanntmachung als Tag angegeben wurde, an dem die Schuldverschreibungen zur Rückzahlung fällig werden. Die Regelungen des vorstehenden Absatzes gelten entsprechend.	(3) Early Redemption for reasons of minimal outstanding Principal Amount . The Issuer may at any time redeem all, but not part of the Bonds at their Principal Amount, together with interest accrued thereon until (but excluding) the date of redemption if at any time the Principal Amount of the Bonds outstanding is below 15% of the initially issued amount of Bonds. Notice of early redemption shall be given not less than 30 nor more than 60 days before the day fixed in the notice on which any Bonds become due for early redemption. The provisions of the preceding paragraph shall apply accordingly.
§ 5 Steuern	§ 5 Taxes
Alle Zahlungen der Emittentin auf die Schuldverschreibungen werden ohne Abzug oder Einbehalt gegenwärtiger oder zukünftiger Steuern, Abgaben oder amtlicher Gebühren gleich welcher Art geleistet, die von einer in der Bundesrepublik Deutschland ansässigen Behörde oder für deren Rechnung oder von oder für Rechnung einer dort zur Steuererhebung ermächtigten Gebietskörperschaft oder Behörde durch Abzug oder Einbehalt an der Quelle auferlegt, erhoben oder eingezogen werden, es sei denn, ein solcher Abzug oder Einbehalt ist rechtlich vorgeschrieben. Die Emittentin ist im Hinblick auf einen solchen Abzug oder Einbehalt nicht zu zusätzlichen Zahlungen an die Anleihegläubiger verpflichtet.	All payments by the Issuer on the Bonds will be made without deduction or withholding of any present or future taxes, duties or governmental charges of any nature whatsoever imposed, levied or collected by way of deduction or withholding at source by, in or on behalf of the Federal Republic of Germany or by or on behalf of any political subdivision or authority thereof or therein having power to tax, unless such deduction or withholding is required by law. The Issuer shall not be required to make any additional payments to the Bondholders in respect of such deduction or withholding.

§ 6 Wandlungsrecht	§ 6 Conversion Right
(1) Die Emittentin gewährt jedem Anleihegläubiger das Recht (“ Wandlungsrecht ”), gemäß den Bestimmungen dieses § 6 jederzeit während des Ausübungszeitraums (§ 6(3)) jede Schuldverschreibung ganz, nicht jedoch teilweise, in nennbetragslose auf den Namen lautende Stammaktien der Emittentin mit einem rechnerischen Anteil von je EUR 1,00 am Grundkapital („ Aktien “) zu wandeln. Der Wandlungspreis je Aktie („ Wandlungspreis “) beträgt, vorbehaltlich einer Anpassung gemäß § 11, bis zum 31. März 2017 (einschließlich) je Aktie EUR 3,50, vom 01. April 2017 bis zum 31. Dezember 2017 (einschließlich) je Aktie EUR 4,00 und ab dem 01. Januar 2018 je Aktie EUR 5,00.	(1) Conversion Right . The Issuer grants each Bondholder the right (“ Conversion Right ”) to convert in accordance with this § 6 at any time during the Conversion Period (§ 6(3)) each Bond in whole, but not in part, into no-par ordinary registered shares of the Issuer with a notional participation in registered capital of EUR 1.00 each (“ Shares ”). Subject to adjustments pursuant to § 11, the conversion price per Share (“ Conversion Price ”) amounts to, until 31 March 2017 (inclusive) EUR 3.50 per Share, from 01 April 2017 until 31 December 2018 (inclusive) EUR 4.00 per Share and from 01 January 2018 EUR 5.00 per Share.
(2) Das Wandlungsverhältnis (das „ Wandlungsverhältnis “) errechnet sich durch Division des Nennbetrags einer Schuldverschreibung durch den am Ausübungstag geltenden Wandlungspreis, das anfängliche Wandelverhältnis beträgt abgerundet 1:28. Die Lieferung der Aktien erfolgt gemäß § 8.	(2) The conversion ratio (“ Conversion Ratio ”) shall be calculated by dividing the Principal Amount of a Bond by the Conversion Price applicable on the Conversion Date; the initial Conversion Ratio is (rounded down) 1:28. Delivery of Shares shall be made in accordance with § 8.

(3) Ausübungszeitraum . Das Wandlungsrecht kann durch einen Anleihegläubiger nach Maßgabe dieser Anleihebedingungen jederzeit bis zum zehnten Geschäftstag vor dem Rückzahlungstag (beide Tage einschließlich) („ Ausübungszeitraum ”) ausgeübt werden, allerdings vorbehaltlich § 6(4) und § 6(5). Ist der letzte Tag des Ausübungszeitraums kein Geschäftstag, so endet der Ausübungszeitraum an dem Geschäftstag, der diesem Tag unmittelbar vorangeht. Fällt der letzte Tag des Ausübungszeitraums in einen Nichtausübungszeitraum, so endet der Ausübungszeitraum am letzten Geschäftstag vor dem Beginn des betreffenden Nichtausübungszeitraums.

(3) Conversion Period . The Conversion Right may be exercised by a Bondholder at any time pursuant to these conditions ending on the tenth Business Day prior to the Maturity Date (both dates inclusive) (“ Conversion Period ”), however subject to the provisions of § 6(4) and § 6(5). If the last day of the Conversion Period falls on a day which is not a Business Day, the Conversion Period shall terminate on the Business Day immediately preceding such day. If the last day of the Conversion Period falls within an Exclusion Period, the Conversion Period shall terminate on the last Business Day prior to the commencement of such Exclusion Period.

(4) Vorzeitige Rückzahlung der Schuldverschreibungen . Für den Fall, dass die Schuldverschreibungen durch die Emittentin gemäß § 4(3) vorzeitig zurückgezahlt werden, darf (vorbehaltlich der Regelungen des § 6(3)) das Wandlungsrecht bis zum Ablauf des zehnten Geschäftstages ausgeübt werden, der dem für die vorzeitige Rückzahlung bestimmten Tag vorausgeht; danach erlischt das Wandlungsrecht. Fällt der so ermittelte letzte Tag des Ausübungszeitraums in einen Nichtausübungszeitraum, so endet der Ausübungszeitraum am letzten Geschäftstag vor dem Beginn des betreffenden Nichtausübungszeitraums. Wenn Schuldverschreibungen durch Anleihegläubiger gekündigt werden, darf das Wandlungsrecht im Hinblick auf die gekündigten Schuldverschreibungen von solchen Anleihegläubigern nicht mehr ausgeübt werden.

(4) Early Redemption of the Bonds . In the event the Bonds are called for early redemption by the Issuer pursuant to § 4(3), the Conversion Right may, subject to the provisions of § 6(3)), be exercised until the end of the tenth Business Day prior to the date fixed for early redemption; thereafter, the Conversion Right expires. If the last day of the Conversion Period so determined falls within an Exclusion Period, the Conversion Period ends on the last Business Day before such Exclusion Period. If Bonds are declared due for early redemption by Bondholders, the Conversion Right with respect to the Bonds so declared due may no longer be exercised by such Bondholders.

(5) Nichtausübungszeitraum . Die Ausübung des Wandlungsrechts ist während der nachfolgenden Zeiträume („ Nichtausübungszeitraum ”) ausgeschlossen:

· anlässlich von Hauptversammlungen der Emittentin während eines Zeitraums ab der Einberufung der Hauptversammlung bis zum Tag der Hauptversammlung (jeweils einschließlich);

· während eines Zeitraums von fünf Geschäftstagen vor dem Ende des Geschäftsjahres der Emittentin;

· während des Zeitraums beginnend mit dem Tag, an dem ein Bezugsangebot der Emittentin an ihre Aktionäre zum Bezug von Aktien, Schuldverschreibungen mit Options- oder Wandlungsrechten oder –pflichten, Gewinnschuldverschreibungen oder Genussscheinen im Wege einer Ad-hoc-Mitteilung oder ähnlichen Mitteilung (mit konkreten Angaben über das bevorstehende Bezugsangebot) veröffentlicht wird, bis zum letzten Tag der für die Ausübung des Bezugsrechts bestimmten Frist (jeweils einschließlich).

(5) Exclusion Period . The exercise of the Conversion Right shall be excluded during any of the following periods (“ Exclusion Period ”):

· in connection with any shareholder assemblies of the Issuer, a period commencing on the convocation of the shareholder assembly and ending the day of such shareholder assembly (each inclusive);

· a period of five business days prior to the end of the fiscal year of the Issuer;

· a period commencing on the date on which an offer by the Issuer to its shareholders by way of a rights offering to subscribe to shares, debt securities with warrants or bonds with option or conversion rights or conversion obligations, profit-linked bonds or profit participation certificates is published by way of an ad-hoc-release or a similar communication (with specific details regarding the imminent subscription offer), and ending on the last day of the subscription period (both dates inclusive).

§ 7
Ausübung des Wandlungsrechts

§ 7
Exercise of Conversion Right

(1) Ausübungserklärung . Zur Ausübung des Wandlungsrechts muss der Anleihegläubiger während des Ausübungszeitraums auf eigene Kosten während der üblichen Geschäftszeiten an einem Geschäftstag bei einer Wandlungsstelle (§ 14) eine ordnungsgemäß ausgefüllte und unterzeichnete Erklärung (die „ Ausübungserklärung ”) unter Verwendung eines dann gültigen Vordrucks, der bei der Wandlungsstelle erhältlich ist, einreichen. Ausübungserklärungen sind unwiderruflich. Die Ausübungserklärung hat mindestens die folgenden Angaben zu enthalten:

· Name und Anschrift der ausübenden Person;

· die Zahl der Schuldverschreibungen, für die das Wandlungsrecht ausgeübt werden soll;

· die Bezeichnung des Wertpapierdepots des Anleihegläubigers, in das die Aktien über Clearstream geliefert werden sollen;

(1) Conversion Notice . To exercise the Conversion Right, the Bondholder must deliver to a Conversion Agent (§ 14) at its own expense during normal business hours on a Business Day during the Conversion Period a duly completed and signed notice (the “ Conversion Notice ”) using a form (as amended from time to time) available from the Conversion Agent. Conversion Notices shall be irrevocable. The Conversion Notice shall at least include:

· name and address of the exercising person;

· the number of Bonds with respect to which the Conversion Right shall be exercised;

· the deposit account of the Bondholder to which the Shares are to be delivered via Clearstream;

· if applicable, a Euro-account of the Bondholder or its depository bank to which any payments on the Bonds are to be made via Clearstream; and

· the certifications and undertakings set out in the form of the Conversion Notice relating to certain restrictions of the ownership of the Bonds and/or the Shares.

§ 8
Lieferung der Aktien; Ausgleich von Bruchteilen von Aktien

§ 8
Delivery of Shares; Compensation for Fractions of Shares

(1) Lieferung der Aktien; Bruchteile von Aktien . Nach Ausübung des Wandlungsrechts werden ausschließlich ganze Aktien geliefert. Ein Anspruch auf Lieferung von Bruchteilen von Aktien besteht nicht. Soweit die jeweilige Wandlungsstelle festgestellt hat (ohne dazu verpflichtet zu sein), dass für denselben Anleihegläubiger mehrere Schuldverschreibungen zur gleichen Zeit gewandelt wurden, und soweit sich für eine oder mehrere Schuldverschreibungen bei der Durchführung der Wandlung Bruchteile von Aktien ergeben, werden alle sich aus der Wandlung dieser Schuldverschreibungen ergebenden Bruchteile von Aktien addiert und die sich infolge der Addition der Bruchteile etwa ergebenden ganzen Aktien an den betreffenden Anleihegläubiger geliefert. Die zu liefernden Aktien werden so bald wie möglich nach dem Ausübungstag auf das von dem betreffenden Anleihegläubiger in der Ausübungserklärung angegebene Wertpapierdepot übertragen. Bis zur Übertragung der Aktien bestehen keine Ansprüche aus den Aktien.

(1) Delivery of Shares; Fractions of Shares . Upon any exercise of the Conversion Right, only full Shares shall be delivered. Fractions of Shares may not be claimed. To the extent that the respective Conversion Agent has ascertained (without any obligation to do so) that several Bonds have been converted at the same time for the same Bondholder and to the extent that any conversion of one or several Bonds results in fractions of Shares, the fractions of Shares resulting from the conversion of such Bonds shall be aggregated and any full Shares resulting from such aggregation of fractions of Shares shall be delivered to the respective Bondholder. The Shares to be delivered shall be transferred as soon as practicable after the Conversion Date to the securities deposit account of the Bondholder designated in the Conversion Notice. Until delivery of the Shares, no rights may be exercised from the Shares.

(2) Verbleibende Bruchteile von Aktien . Verbleibende Bruchteile von Aktien werden nicht geliefert. Ein Ausgleich in Geld findet nicht statt.	(2) Remaining Fractions of Shares . Remaining fractions of Shares shall not be delivered and shall not be compensated in cash. .
(3) Steuern . Die Lieferung von Aktien gemäß § 8(1) erfolgt nur, sofern der Anleihegläubiger etwaige Steuern, Abgaben oder amtliche Gebühren zahlt, die im Zusammenhang mit der Ausübung des Wandlungsrechts oder der Lieferung der Aktien gemäß § 8(1) anfallen.	(3) Taxes . Delivery of Shares pursuant to § 8(1) is subject to payment by a Bondholder of any taxes, duties or governmental charges which may be imposed in connection with the exercise of the Conversion Right or the delivery of the Shares pursuant to § 8(1).

§ 9 Barzahlung statt Lieferung der Aktien in bestimmten Fällen	§ 9 Cash Payment in Lieu of Delivery of Shares in Certain Circumstances
(1) Barzahlung statt Lieferung der Aktien . Falls die Emittentin rechtlich gehindert ist, Aktien aus bedingtem Kapital bei Ausübung des Wandlungsrechts durch einen Anleihegläubiger zu begeben, ist sie verpflichtet, an den Anleihegläubiger an Stelle der Lieferung der Aktien, auf die der Anleihegläubiger ansonsten gemäß § 6(1) einen Anspruch hätte, aber an deren Ausgabe die Emittentin gehindert ist, einen Barbetrag in Euro („ Barzahlung “) zu zahlen. Die Barzahlung für eine Aktie errechnet sich aus dem Betrag des volumengewichteten arithmetischen Mittels der XETRA Kurse innerhalb eines Zeitraums von fünf aufeinanderfolgenden Handelstagen beginnend an dem zweiten auf den Benachrichtigungstag (§ 9(2)) folgenden Handelstag („ Berechnungszeitraum “), gerundet auf den nächsten vollen Cent, wobei EUR 0,005 abgerundet werden. Ein Anspruch des Anleihegläubigers auf Lieferung bzw. Ausgleich von Bruchteilen von Aktien besteht nicht. Die Barzahlung wird spätestens am dritten Geschäftstag nach dem letzten Tag des Berechnungszeitraums durch die Emittentin geleistet. Auf diesen Betrag werden keine Zinsen geschuldet. § 9(3) findet entsprechende Anwendung. Steuern, Abgaben und amtliche Gebühren können von einer etwaigen Zahlung abgezogen werden, sofern der Anleihegläubiger solche Steuern, Abgaben oder amtlichen Gebühren nicht zuvor gezahlt hat.	(1) Cash Payment in Lieu of Delivery of Shares . If due to legal reasons the Issuer is unable to issue Shares from conditional capital upon the exercise of a Conversion Right by a Bondholder, the Issuer shall be obligated to pay to the Bondholder a cash amount in Euro (the “ Cash Payment ”) in lieu of the delivery of the Shares to which the Bondholder is otherwise entitled pursuant to § 6(1), but which the Issuer is unable to issue. The Cash Payment relating to one Share shall be calculated as an amount equal to the volume-weighted arithmetic mean value of the XETRA-Quotations on the five consecutive Trading Days beginning on the second Trading Day following the Notification Day (§ 9(2)) (the “ Calculation Period ”), rounded to the nearest full cent with EUR 0.005 being rounded downwards. Fractions of Shares or compensation therefore shall be excluded. The Cash Payment shall be effected by the Issuer not later than on the third Business Day following the last day of the Calculation Period. No interest shall be payable with respect to the Cash Payment. § 8(3) shall apply accordingly. Taxes, duties and governmental charges may be deducted from a payment obligation, unless the Bondholder has already paid such taxes, duties or governmental charges.

(2) Benachrichtigung . Die Emittentin wird den Anleihegläubiger, der eine Wandlungserklärung abgegeben hat, nicht später als am siebten Geschäftstag nach dem Wandlungstag (schriftlich, per Telefax, oder auf andere Art und Weise unter Benutzung der in der Wandlungserklärung angegebenen Anschrift) benachrichtigen, ob die Emittentin eine Barzahlung zu leisten hat (der Tag, an dem die Emittentin eine solche Nachricht abschickt, wird als „ Benachrichtigungstag “ bezeichnet).	(2) Notification . The Issuer shall notify the Bondholder who has delivered a Conversion Notice no later than on the seventh Business Day after the Conversion Date (in writing, by telefax, or otherwise using the address stated in the Conversion Notice) whether the Issuer has to effect a Cash Payment (the day on which such notification is dispatched by the Issuer being the “ Notification Day ”).
§ 10 Bereitstellung von Aktien; Dividenden	§ 10 Procurement of Shares; Dividends
(1) Bedingtes Kapital . Die Aktien werden nach Durchführung der Wandlung aus einem bedingten Kapital der Emittentin stammen.	(1) Conditional Capital . Upon execution of the conversion, new Shares will be issued out of a conditional capital of the Issuer.

(2) Dividenden . Aktien, die aufgrund der Wandlung aus bedingtem Kapital (§ 10(1)) ausgegeben werden, sind ab Beginn des Geschäftsjahres der Emittentin, in dem die Aktien ausgegeben werden, für dieses und alle folgenden Geschäftsjahre der Emittentin dividendenberechtigt, und können zunächst als „junge“ Aktien eine eigene Wertpapierkennung haben.

(2) Dividends . Shares issued upon conversion out of conditional capital (§ 10(1)) are entitled to dividends (if any) for the then current and all following business years as from the beginning of the business year of the Issuer in which such Shares are issued, and may initially have a separate securities code.

§ 11
Verwässerungsschutz

§ 11
Anti-Dilution Protection

(1) Bezugsrecht für Aktionäre

Wenn die Emittentin bis zur letzten Möglichkeit der Ausübung des Wandlungsrechts unter Gewährung von Bezugsrechten an ihre Aktionäre gemäß § 186 AktG (i) ihr Grundkapital durch Ausgabe neuer Aktien gegen Einlagen erhöht, oder (ii) weitere Schuldverschreibungen mit Options- oder Wandlungsrechten oder -pflichten, Gewinnschuldverschreibungen oder Genussscheine begibt oder garantiert oder eigene Aktien veräußert, ist jedem Anleihegläubiger, der zu Beginn des entsprechenden Nichtausübungszeitraums sein Wandlungsrecht noch nicht wirksam ausgeübt hat, vorbehaltlich der weiteren Bestimmungen des § 11(1), ein Bezugsrecht in dem Umfang einzuräumen, wie es ihm zustünde, wenn eine Ausübung des Wandlungsrechts an dem Geschäftstag unmittelbar vor dem Ex-Tag erfolgt wäre.

(1) Preemptive Rights for Shareholders.

If the Issuer until the last date on which the Conversion Rights may be executed subject to preemptive rights of its shareholders pursuant to sec. 186 of the German Stock Corporation Act (Aktiengesetz), (i) increases its share capital by issuing new shares against capital contributions; or (ii) issues or guarantees further debt securities with warrants or bonds with option or conversion rights or conversion obligations, profit-linked bonds or profit participation certificates or sells own shares, each Bondholder, who at the beginning of the relevant Excluded Period has not yet exercised its Conversion Right, shall, subject to the further provisions of § 11(1), be granted a pre-emptive right equal to the right it would have been entitled to had the Conversion Right been exercised on the Business Day immediately preceding the Ex-Date.

„ Ex-Tag ” ist der erste Handelstag, an dem die Aktien „ex Bezugsrecht”, „ex Dividende“ oder ex eines anderen Rechts gehandelt werden.

Anstelle der Einräumung eines Bezugsrechts kann die Emittentin eine Anpassung des Wandlungspreises vornehmen:

Findet kein Bezugsrechtshandel an der Frankfurter Wertpapierbörse statt, wird der Wert des Bezugsrechts wie folgt verbindlich ermittelt:

BR = (Ka - Kn) / (BV + 1)

BR: Bezugsrecht

Ka: Börsenkurs der alten Aktien

Kn: Ausgabekurs der neuen Aktien

BV: Bezugsverhältnis

Instead of granting a preemptive right, the Issuer may elect to adjust the Conversion Price:

If subscription rights are not traded at the Frankfurt Stock Exchange, the value of the subscription right shall be determined with binding effect as follows:

BR = (Ka - Kn) / (BV + 1)

BR: Subscription Right

Ka: Stock price of old shares

Kn: Issue price of New Shares

BV: Subscription ratio

Dabei ist

N ₀ : die Anzahl der ausgegebenen Aktien vor der Kapitalerhöhung aus Gesellschaftsmitteln, und

N _n : die Anzahl der ausgegebenen Aktien nach der Kapitalerhöhung aus Gesellschaftsmitteln.

Whereas

N ₀ : the number of issued Shares before the increase of share capital from company reserves, and

N _n : the number of issued Shares after the increase of share capital from company reserves.

Ist die Kapitalherabsetzung mit einer Kapitalrückzahlung oder einem entgeltlichen Erwerb eigener Aktien verbunden, bleibt der Wandlungspreis und damit das Wandlungsverhältnis unverändert.

If the capital decrease is connected with a capital repayment or a share repurchasing, the Conversion Price and therefore the Conversion Ratio remain unaffected.

(4) Ausschüttungen . Falls die Emittentin bis zur letzten Möglichkeit der Ausübung des Wandlungsrechts an ihre Aktionäre Vermögenswerte, insbesondere Dividenden, gewährt, mindert sich der Wandlungspreis um den Betrag der Brutto-Ausschüttung je Aktie, soweit diese 4 % des anteiligen Betrags der Aktie am Grundkapital p.a. übersteigt.

(4) Distributions . If the Issuer until the last date on which the Conversion Rights may be executed distributes, allots or grants to its shareholders (i) assets, in particular dividends, the Conversion Price will be reduced by the amount of the gross distribution per Share, insofar as this exceeds 4% of the pro rata participation of the share in the registered capital p.a

(5) Andere Ereignisse . Bei einer Maßnahme nach dem Umwandlungsgesetz oder bei dem Eintritt eines anderen Ereignisses, das die Aktien, das Wandlungsverhältnis oder den Wandlungspreis berühren könnte, bleibt das Wandlungsverhältnis unverändert. Es wer-den insbesondere keine Anpassungen vorgenommen im Hinblick auf (i) die Ausgabe von Aktienoptionen an Mitglieder des Vorstands, des Aufsichtsrats oder Mitarbeiter der Emittentin oder ihrer Tochtergesellschaften im Rahmen von Aktienoptions-Programmen der Emittentin oder (ii) die Ausgabe von Aktien aus am Emissionstag bereits existierenden bedingtem oder genehmigten Kapital.

(5) Other events. In the event of a measure pursuant to the German Transformation Act (Umwandlungsgesetz, UmwG) or in any other event which may affect the Shares, the Conversion Ratio or the Conversion Price, the Conversion Ratio shall remain unaffected. In particular, no adjustments shall be made in relation to (i) the issuance of stock options for members of the management board or supervisory board or employees of the Issuer or its subsidiaries under stock option programs of the Issuer or (ii) the issuance of Shares out of conditional or authorized capital existing on the Issue Date.

(6) Wirksamkeit; Ausschluss. Anpassungen nach Maßgabe dieses § 11 werden mit Wirkung zum Beginn des Ex-Tages wirksam. Anpassungen nach Maßgabe dieses § 11 werden nicht vorgenommen, sofern der Ex-Tag im Falle von Schuldverschreibungen, für die das Wandlungsrecht ausgeübt wurde, nach dem Tag liegt, an dem die Aktien dem Depotkonto des betreffenden Anleihegläubigers gemäß § 8(1) gutgeschrieben wurden, oder, im Falle von nicht gewandelten Schuldverschreibungen, nach dem letzten Tag des Wandlungszeitraums bzw. nach dem früheren für die Rückzahlung festgelegten Tag.

(6) Effectiveness; Preclusion . Adjustments pursuant to this § 11 shall become effective with the Ex-Date. Adjustments pursuant to this § 11 will not be made if the Ex-Date is, in the case of Bonds in respect of which the Conversion Right has been exercised, the date on which the Shares have been delivered pursuant to § 8(1) to the securities deposit account of the Bondholder or, in the case of Bonds not converted, later than the last day of the Conversion Period or the earlier date fixed for redemption, as the case may be.

(7) Auf- bzw. Abrundung und Lieferung . Der Wandlungspreis, der sich aufgrund einer Anpassung gemäß § 11 ergibt, wird auf vier Nachkommastellen aufgerundet; das Wandlungsverhältnis, das sich aufgrund des so angepassten und gerundeten Wandlungspreises errechnet, wird (vor einer etwaigen Addition von Aktien) auf vier Nachkommastellen abgerundet. Die sich daraus ergebende Zahl von Aktien wird gemäß § 8(1) geliefert. Bruchteile von Aktien werden gemäß § 8(1) zusammengefasst. Verbleibende Bruchteile von Aktien werden nicht ausgeglichen.

(7) Rounding up or down and Delivery . The Conversion Price determined by an adjustment pursuant to § 11 shall be rounded upwards to four decimal points; the Conversion Ratio, calculated on the basis of the Conversion Price so adjusted and rounded, shall be rounded downwards to four decimal points (before any aggregation of Shares). The number of Shares resulting therefrom shall be delivered pursuant to § 8(1). Fractions of Shares shall be aggregated in accordance with § 8(1). Remaining fractions of Shares shall not be compensated.

(8) Zuständigkeit; Bekanntmachung . Anpassungen gemäß diesem § 11 werden durch die Wandlungsstelle oder, nach Wahl der Anleiheschuldnerin, einen von der Anleiheschuldnerin auf ihre Kosten zu bestellenden geeigneten Dritten vorgenommen und sind (sofern nicht ein offensichtlicher Fehler vorliegt) für alle Beteiligten bindend. Jedwede Anpassung des Wandlungsverhältnisses gemäß diesem § 11 darf nicht zu einem Wandlungspreis führen, der niedriger ist als der auf die einzelne Aktie entfallende anteilige Betrag am Grundkapital der Emittentin.	(8) Responsibility; Notice . Adjustments pursuant to this § 11 shall be made by the Conversion Agent or, at the option of the Issuer, an appropriate third party appointed by the Issuer at the expense of the Issuer and will be binding on all parties involved, absent an obvious mistake. Any adjustment to the Conversion Price pursuant to this § 11 shall not cause the Conversion Price to fall below the nominal participation in the registered capital represented by each Share.
(9) Bekanntmachung von Anpassungen. Die Emittentin wird eine Anpassung des Wandlungsverhältnisses, des Wandlungspreises und/oder jede andere Anpassung der Bedingungen des Wandlungsrechts in Übereinstimmung mit § 15 bekannt machen.	(9) Disclosure of adjustments. The Issuer shall disclose any adjustments to the Conversion Ratio, the Conversion Price and/or any other adjustments to the terms and conditions of the conversion right pursuant to § 15.
§ 12 Rang	§ 12 Status
Rang . Die Anleihegläubiger treten mit ihrem Anspruch auf Rückzahlung des Nominalbetrages und ihrem Anspruch auf fällige Zinszahlungen dergestalt im Rang hinter die Forderungen aller bestehenden und künftigen Finanzgläubiger der Emittentin zurück, dass sie erst nach Befriedigung sämtlicher übrigen nicht nachrangigen Finanzgläubiger (und, soweit ein Liquidationsüberschuss oder ein die sonstigen Verbindlichkeiten übersteigendes Vermögen der Emittentin hierfür zur Verfügung steht, nur zugleich mit, im Rang jedoch vor den Einlagerückgewähransprüchen der Gesellschafter der Emittentin) Erfüllung ihrer Ansprüche, also Zahlung verlangen können. „ Finanzgläubiger “ sind Inhaber von Finanzierungsforderungen gegen die Emittentin, sowohl verbrieft (z.B. Schuldverschreibungen, Schuldscheindarlehen oder Genussscheine) als auch unverbrieft (z.B. Darlehen oder Stille Beteiligungen von Kreditinstituten oder Zuschüsse aus Subventionen). Der Rangrücktritt gilt, solange und soweit durch eine teilweise oder vollständige Befriedigung der im Rang zurückgetretenen Ansprüche der Anleihegläubiger eine Überschuldung oder aber eine Zahlungsunfähigkeit der Emittentin im insolvenzrechtlichen Sinne entsteht oder zu entstehen droht; die im Rang zurückgetretenen Ansprüche der Anleihegläubiger gelten für diesen Fall als zinslos gestundet. Der Nachrang gilt auch im Insolvenzverfahren.	Status . The rights of the Bondholders regarding repayment of the principal and interest are subordinated to the rights of all current and future third party Financial Creditors of the Issuer, and their claims, i.e. payments, will only be satisfied after all other non-subordinate Financial Creditors are satisfied (and, insofar as liquidation proceeds or assets of the Issuer which exceed the remaining liabilities are available for this purpose, will be satisfied only together with, but ranking above, the claims of the Issuer’s shareholders regarding the repayment of the shares). „ Financial Creditors “ are holders of financial claims against the Issuer, both securitized (e.g. bonds, certified loans, or mezzanine) and unsecuritized (e.g. loans or silent participation by financial institutions or repayable grants from subsidies). The subordination shall apply as long as and insofar as a partial or full satisfaction of the subordinated claims of the Bondholders would cause or threaten an over-indebtedness or illiquidity of the Issuer pursuant to applicable insolvency law; the subordinated claims of the Bondholders shall be considered as deferred without interest. The subordination shall also apply in insolvency proceedings.

§ 13 Kündigung durch Anleihegläubiger	§ 13 Termination by Bondholders
(1) Kündigungsrecht . Jeder Anleihegläubiger ist berechtigt, seine sämtlichen Ansprüche aus den Schuldverschreibungen durch Abgabe einer Kündigungserklärung („ Kündigungserklärung ”) zu kündigen und fällig zu stellen und Rückzahlung des Nennbetrags zuzüglich der darauf bis zum Tag der tatsächlichen Rückzahlung (ausschließlich) aufgelaufenen Zinsen zu verlangen, wenn	(1) Right to Terminate . Each Bondholder is entitled to declare due and payable by submitting a notice of termination (“ Termination Notice ”) its entire claims arising from the Bonds and demand payment of their Principal Amount, plus interest accrued on the Principal Amount until (but excluding) the day of actual redemption, if

die Emittentin, gleichgültig aus welchen Gründen, innerhalb von 30 Tagen nach dem betreffenden Zahlungstag irgendwelche Beträge, die fällig und auf die Schuldverschreibungen zahlbar sind, nicht zahlt; oder	the Issuer, for any reason whatsoever, fails within 30 days after the relevant payment date to pay any amounts due and payable on the Bonds; or
die Emittentin durch Aufnahme von Fremdkapital eine Überschreitung der Zulässigen Verschuldung versursacht.	the Issuer Exceeds the Permissible Indebtedness by debt borrowing.
Eine „ Überschreitung der Zulässigen Verschuldung “ liegt vor, wenn durch Aufnahme von Fremdkapital sowohl (i) die Netto-Finanzverschuldung der Emittentin EUR 25 Mio. übersteigt als auch (ii) der Netto-Verschuldungsgrad der Emittentin 4,0 übersteigt. Davon ausgenommen ist die Aufnahme von Fremdkapital zur Finanzierung der Ansprüche der Anleihegläubiger aus diesen Schuldverschreibungen.	The Issuer “ Exceeds the Permissible Indebtedness ” if by debt borrowing both (i) the Net Financial Indebtedness of the Issuer exceeds EUR 25 million, and (ii) the Net Indebtedness Quota of the Issuer exceeds 4.0. Exempt are any debt borrowings for the purpose of financing the claims of Bondholders arising out of these Bonds.
Die „ Netto-Finanzverschuldung “ ist die Summe aus langfristigen finanziellen Verbindlichkeiten und kurzfristigen Finanzschulden, abzüglich Zahlungsmittel und Zahlungsmitteläquivalente.	“ Net Financial Indebtedness ” means the sum of long-term financial liabilities and short-term financial debt, less cash and cash equivalents.
Der „ Netto-Verschuldungsgrad “ ist der Quotient aus der Netto-Finanzverschuldung geteilt durch das EBITDA.	“ Net Indebtedness Quota ” means the quotient of Net Financial Indebtedness divided by EBITDA.
Das „ EBITDA “ ist das Periodenergebnis des Geschäftsjahrs, bereinigt um Abschreibungen, Steuern, Zinsaufwendungen und Zinserträge.	“ EBITDA ” means the profit or loss for the period, adjusted for depreciation and amortization, tax, interest expenses and interest income.

Maßgeblich für die Berechnung von Netto-Finanzverschuldung, Netto-Verschuldungsgrad und EBITDA ist der jeweils aktuellste veröffentlichte Konzernabschluss oder Quartalszwischenabschluss zum Zeitpunkt der Fremdkapitalaufnahme. Soweit im testierten Konzernabschluss Netto-Finanzverschuldung, Netto-Verschuldungsgrad und/oder EBITDA ausgewiesen werden, ist deren Berechnung für die Emittentin und die Anleihegläubiger bindend.	The calculation of Net Financial Indebtedness, Net Indebtedness Quota and EBITDA shall be based on the respective most recent published annual group or interim quarterly financial reports at the time of the debt borrowing. Insofar as the audited financial report shows Net Financial Indebtedness, Net Indebtedness Quota and/or EBITDA, the respective calculation shall be binding both for the Issuer and the Bondholders.
Ein Überschreiten eines Netto-Verschuldungsgrads von 4,0 durch Absinken des EBITDA stellt keine Überschreitung der Zulässigen Verschuldung dar.	The Issuer shall not be considered to Exceed the Permissible Indebtedness if the Net Indebtedness Quota exceeds 4.0 due to a reduction of the EBITDA.
(2) Erlöschen des Kündigungsrechts . Das Kündigungsrecht der Anleihegläubiger erlischt, falls der Kündigungsgrund vor Ausübung des Kündigungsrechts geheilt wurde.	(2) Cessation of Termination Right . The Bondholders’ right to declare the Bonds due and payable will cease in the event that the event of default has been remedied prior to the exercise of the termination right.
(3) Kündigungserklärung . Eine Kündigungserklärung hat in der Weise zu erfolgen, dass der Anleihegläubiger der Emittentin eine schriftliche Erklärung übergibt oder durch eingeschriebenen Brief übersendet und dabei durch eine Bescheinigung seiner Depotbank nachweist, dass er die betreffenden Schuldverschreibungen zum Zeitpunkt der Erklärung hält.	(3) Termination Notice . Any Termination Notice shall be made by means of a written notice to be delivered by hand or registered mail to the Issuer together with evidence by means of a certificate of the Bondholder’s depository bank that such Bondholder at the time of such written notice is a holder of the relevant Bonds.

§ 14 Zahlstellen, Wandlungsstellen	§ 14 Paying Agents; Conversion Agents
(1) Zahlstellen . Die Emittentin hat die Bankhaus Gebr. Martin AG, Schlossplatz 7, D-73033 Göppingen, zur Hauptzahlstelle („ Hauptzahlstelle ” und zusammen mit etwaigen anderen von der Emittentin gemäß § 14(3) bestellten Zahlstellen, „ Zahlstellen “) bestellt. Die Zahlstellen sind von den Beschränkungen des § 181 des Bürgerlichen Gesetzbuchs befreit. Adressänderungen werden gemäß § 15 bekannt gemacht.	(1) Paying Agents . The Issuer has appointed Bankhaus Gebr. Martin AG, Schlossplatz 7, D-73033 Göppingen, to act as principal paying agent (“ Principal Paying Agent ” and, together with any other paying agent appointed by the Issuer in accordance with § 14(3), “ Paying Agents ”). The Paying Agents are exempt from the restrictions of sec. 181 of the German Civil Code (Bürgerliches Gesetzbuch). Changes of address shall be published in accordance with § 15.
(2) Wandlungsstelle . Die Emittentin hat die Bankhaus Gebr. Martin AG, Schlossplatz 7, D-73033 Göppingen, zur Hauptwandlungsstelle („ Hauptwandlungsstelle ” und zusammen mit etwaigen anderen von der Emittentin gemäß § 14(3) bestellten Wandlungsstellen, die „ Wandlungsstellen “) bestellt. Die Wandlungsstellen sind von den Beschränkungen des § 181 BGB befreit. Adressänderungen werden gemäß § 15 bekannt gemacht.	(2) Conversion Agent . The Issuer has appointed Bankhaus Gebr. Martin AG, Schlossplatz 7, D-73033 Göppingen, to act as principal conversion agent (“ Principal Conversion Agent ” and, together with any other conversion agent appointed by the Issuer in accordance with § 14(3), the “ Conversion Agents ”). The Conversion Agents are exempt from the restrictions of sec. 181 of the German Civil Code (Bürgerliches Gesetzbuch). Changes of address shall be published in accordance with § 15.
(3) Ersetzung . Die Emittentin kann jederzeit durch Bekanntmachung gemäß § 15 mit einer Frist von mindestens 30 Tagen eine andere Bank zur Zahlstelle oder Wandlungsstelle bestellen. Die Zahlstellen und die Wandlungsstellen können jederzeit von ihrem jeweiligen Amt zurücktreten. Der Rücktritt wird jedoch nur wirksam mit der Bestellung einer anderen Bank zur neuen Zahlstelle bzw. Wandlungsstelle durch die Emittentin unter Bekanntmachung dieser Bestellung gemäß § 15 mit einer Frist von mindestens 30 Tagen.	(3) Substitution . The Issuer may at any time, by giving not less than 30 days’ notice by publication in accordance with § 15, appoint another bank as Paying Agent or Conversion Agent. Each of the Paying Agents or the Conversion Agents may at any time resign from their respective offices. Such resignation shall become effective only upon the appointment by the Issuer of a bank as the new Paying Agent and/or Conversion Agent and the giving of not less than 30 days’ notice of any such appointment by publication in accordance with § 15.

§ 15 Bekanntmachungen	§ 15 Notices
Die Emittentin wird Bekanntmachungen im Bundesanzeiger vornehmen. Der Tag der Veröffentlichung ist maßgeblich, soweit für Zwecke von Fristberechnungen nach diesen Anleihebedingungen auf den Tag der Bekanntmachung Bezug genommen wird.	(1) The Issuer will publish notices in the German Federal Gazette. The day of publication is relevant insofar as these terms and conditions refer to publication days for the purpose of calculation of periods.
§ 16 Änderung der Anleihebedingungen durch Beschluss der Anleihegläubiger; Gemeinsamer Vertreter	§ 16 Amendments to the Terms and Conditions by resolution of the Bondholders; Joint Representative
(1) Änderung der Anleihebedingungen . Die Anleihebedingungen können durch die Emittentin mit Zustimmung der Anleihegläubiger aufgrund Mehrheitsbeschlusses nach Maßgabe der §§ 5 ff. SchVG in seiner jeweiligen gültigen Fassung geändert werden. Die Anleihegläubiger können insbesondere einer Änderung wesentlicher Inhalte der Anleihebedingungen, einschließlich der in § 5 Abs. 3 SchVG vorgesehenen Maßnahmen, zustimmen und einen gemeinsamen Vertreter bestellen. Ein ordnungsgemäß gefasster Mehrheitsbeschluss ist für alle Anleihegläubiger verbindlich.	(1) Amendments to the Terms and Conditions . The Issuer may amend the Terms and Conditions with consent by a majority resolution of the Bondholders pursuant to sec. 5 et seq. of the German Act on Issues of Debt Securities (Gesetz über Schuldverschreibungen aus Gesamtemissionen, SchVG), as amended from time to time. In particular, the Bondholders may consent to amendments which materially change the substance of the Terms and Conditions, including such measures as provided for under sec. 5 para. 3 of the SchVG, and appoint a joint representative. A duly passed majority resolution shall be binding upon all Bondholders.
(2) Nachweise . Anleihegläubiger haben die Berechtigung zur Teilnahme an der Abstimmung zum Zeitpunkt der Stimmabgabe durch besonderen Nachweis der Depotbank und die Vorlage eines Sperrvermerks der Depotbank zugunsten der Zahlstelle als Hinterlegungsstelle für den Abstimmungszeitraum nachzuweisen.	(2) Proof of Eligibility . Bondholders must demonstrate their eligibility to participate in the vote at the time of voting by means of a special confirmation of the Depositary Bank hereof and by submission of a blocking instruction by the Depositary Bank for the benefit of the Paying Agent as depository (Hinterlegungsstelle) for the voting period.

§ 17 Verschiedenes	§ 17 Miscellaneous
(1) Anwendbares Recht . Form und Inhalt der Schuldverschreibungen sowie sämtliche sich aus diesen Anleihebedingungen ergebenden Rechte und Pflichten der Anleihegläubiger und der Emittentin bestimmen sich in jeder Hinsicht nach dem Recht der Bundesrepublik Deutschland.	(1) Governing Law . The Bonds, with regard to both form and content, as well as all rights and obligations arising from these Terms and Conditions for the Bondholders and the Issuer shall in all respects be governed by German law.
(2) Erfüllungsort . Erfüllungsort ist Frankfurt am Main, Bundesrepublik Deutschland.	(2) Place of Performance . Place of performance shall be Frankfurt am Main, Federal Republic of Germany.
(3) Gerichtsstand . Gerichtsstand für alle Rechtsstreitigkeiten aus den in diesen Anleihebedingungen geregelten Angelegenheiten ist, soweit rechtlich zulässig, und vorbehaltlich dem nachstehenden Absatz, Frankfurt am Main, Deutschland.	(3) Place of Jurisdiction . The place of jurisdiction for all proceedings arising from matters provided for in these Terms and Conditions shall, to the extent legally permitted and subject to the following paragraph, be Frankfurt am Main, Germany.
(4) Zuständigkeit . Für Entscheidungen gemäß § 9 Abs. 2, § 13 Abs. 3 und § 18 Abs. 2 SchVG ist gemäß § 9 Abs. 3 SchVG das Amtsgericht zuständig, in dessen Bezirk die Emittentin ihren Sitz hat. Für Entscheidungen über die Anfechtung von Beschlüssen der Anleihegläubiger ist gemäß § 20 Abs. 3 SchVG das Landgericht ausschließlich zuständig, in dessen Bezirk die Emittentin ihren Sitz hat.	(4) Competence . The local court (Amtsgericht) in the district where the Issuer has its registered office will have jurisdiction for all judgments pursuant to sec. 9 para. 2, sec. 13 para. 3 and sec. 18 para. 2 SchVG in accordance with sec. 9 para. 3 SchVG. The regional court (Landgericht) in the district where the Issuer has its registered office will have exclusive jurisdiction for all judgments over contested resolutions by Bondholders in accordance with sec. 20 para. 3 SchVG.

(5) Vorlegungsfrist . Die in § 801 Abs. 1 S. 1 BGB bestimmte Vorlegungsfrist wird für die Schuldverschreibungen in Bezug auf Kapital auf zehn Jahre verkürzt. Die Vorlegungsfrist für die Schuldverschreibungen in Bezug auf Zinsen beträgt vier Jahre und beginnt mit dem Datum, an dem die jeweilige Zinszahlung erstmals fällig und zahlbar wird.	(5) Term for Presentation . The term for presentation of the Bonds with respect to principal as set forth in sec. 801 para. 1 sentence 1 of the German Civil Code (Bürgerliches Gesetzbuch, BGB) shall be reduced to ten years. The term for presentation of the Bonds with respect to interest shall be four years after the date on which payment thereof first becomes due and payable.
(6) Keine Gesamtnichtigkeit . Sollten einzelne Bestimmungen dieser Anleihebedingungen ganz oder teilweise unwirksam oder nicht durchsetzbar sein oder unwirksam oder nicht durchsetzbar werden, so wird hierdurch die Wirksamkeit oder die Durchsetzbarkeit der übrigen Bestimmungen nicht berührt. Anstelle der unwirksamen bzw. nicht durchsetzbaren Bestimmung soll, soweit rechtlich möglich, eine dem Sinn und wirtschaftlichen Zweck dieser Anleihebedingungen zum Zeitpunkt der Begebung der Schuldverschreibungen entsprechende Regelung gelten. Unter Umständen, unter denen sich diese Anleihebedingungen als unvollständig erweisen, soll eine ergänzende Auslegung, die dem Sinn und Zweck dieser Anleihebedingungen entspricht, unter angemessener Berücksichtigung der berechtigten Interessen der beteiligten Parteien erfolgen.	(6) Severability . Should any of the provisions of these Terms and Conditions be or become invalid or unenforceable in whole or in part, the validity or the enforceability of the remaining provisions shall not in any way be affected or impaired thereby. In this case the invalid or unenforceable provision shall be replaced by a provision which, to the extent legally possible, provides for an interpretation in keeping with the meaning and the economic purposes of the Terms and Conditions at the time of the issue of the Bonds. Under circumstances in which these Terms and Conditions prove to be incomplete, a supplementary interpretation in accordance with the meaning and the purposes of these Terms and Conditions under due considerations of the legitimate interest of the parties involved shall be applied.
(7) Sprache . Der deutsche Wortlaut dieser Anleihebedingungen ist allein rechtsverbindlich. Die englische Übersetzung dient nur der Information.	(7) Language . The German text of these Terms and Conditions is the only legally binding one. This English translation is for convenience purposes only.

Leverkusen, im Januar 2017

Der Vorstand

Exhibit 10.7

Rental contract number 28390041

Rental contract

between

YAL Immobilien GmbH Ernst-Reuter-Strasse 119 95030 Hof/Saale

represented by the Managing Director entitled to collective representation

- hereinafter referred to as the "Landlord" – and

Biofrontera Bioscience GmbH Hemmelrather Weg 201 51377 Leverkusen represented by the Managing Directors entitled to collective representation, Prof. Dr. Hermann Lübbert and Dr. Reinhold Gahlmann

- hereinafter referred to as the "Tenant"

LIST OF CONTENTS

Preamble

Part A – Special contractual conditions

§ A.1 Cancellation of the existing rental agreement

§ A.2 Rental object

§ A.3 Rental period

§ A.4 Rent, VAT

§ A.5 Incidental costs

§ A.6 Deposit

§ A.7 Further regulations

§ A.8 Commitment period for the first signing contractual party

§ A.9 Contractual elements

Part B – General contractual terms and conditions

§ B.1 Utilisation of the rental object

§ B.2 Transfer of the rental object

§ B.3 Payment of rent, offsetting, retention

§ B.4 Incidental cost invoicing/adaptation of prepayments

§ B.5 Termination for an important reason

§ B.6 Construction modifications by the Tenant

§ B.7 Liability for the condition of the rental object

§ B.8 Ending of the rental agreement

§ B.9 Access to the rental premises

§ B.10 Building modifications by the Landlord

§ B.11 Design of advertising, nameplates and company signs

§ B.12 Subletting

§ B.13 Keys

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§ B.14 Sale of the rental object § B.15 Insurance

§ B.16 Several individuals as Tenant

§ B. 17 Authorisation of the Tenant to take receipt in relation to declarations of intent and constitutive declarations

§ B.18 No competitive protection

§ B.19 House rules

§ B.20 Time limits

§ B.21 Written form clause

§ B.22 Partial inefficacy

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Preamble

A rental agreement dated 18 June 2007 exists between the parties concerning the property Hemmelrather Weg 201 in 51377 Leverkusen. The parties now intend to re-establish the rental relationship on a new basis. To this end, the rental agreement dated 18 June 2007 is to be cancelled and replaced by this rental agreement. As a consequence, the parties shall agree as follows:

Part A – Special contractual conditions

§ A.1

Cancellation of the existing rental agreement

The parties shall cancel the rental agreement dated 18 June 2007 with effect as of the rental start pursuant to A.3.1.

§ A.2

Rental object

A.2.1

The Landlord is the owner of the property Hemmelrather Weg 201 in 51377 Leverkusen.

A.2.2

The aforementioned plot of land is developed with an office and business park, hereinafter also referred to as the "rental object".

A.2.3

In the rental object, the Landlord shall rent to the Tenant,

A.2.3.1

Building II, the premises marked in colour in this agreement as Annex 1 on the first floor, and

A.2.3.2

Building III, the premises marked in colour in this agreement as Annex 2 on the ground floor, and

A.2.3.3

Building II, the premises marked in colour in this agreement as Annex 3 in the basement, and

A.2.3.4

A total of 20 car parking spaces whose location is marked in colour in the plan as Annex 4 .

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The spaces designated above in § A.2.3 are referred to hereinafter in their entirety as the "rental object". The entire space is determined as amounting to 1,330 m². The parties are aware that a precise measurement has not been made, with this space being regarded as binding nevertheless.

A.2.4

The Tenant shall rent the rental object for the purposes of utilising it as an office. It already utilises the rental object on the basis of the rental agreement dated 18 June 2007. It shall recognise the rental object contractually as it stands.

§ A.3

Rental period

A.3.1

The rental agreement shall commence on 1 July 2009. ⁴

A.3.2

The rental contract shall end on 30 June 2019.

A.3.3

is dispensed with.

A.3.4

is dispensed with.

A.3.5

The rental agreement shall renew in each case by one year unless one of the parties gives notice of termination at least 12 months before the expiry of the rental duration.

§ A.4

Rent, VAT

A.4.1

The monthly rent for	EUR	8,279.17
the rental spaces pursuant to § A.2.3. shall amount to (basic rent	EUR	3,000.00
excluding incidental costs)	EUR	11,279.17
plus monthly prepayment of incidental costs pursuant to § A.5.5	EUR	2,143.04
Total monthly amount, net	EUR	13,422.21
plus VAT to the respective statutory level, currently 19% of the gross
monthly total amount

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A.4.2

Graduated rent

The basic rent of currently EUR 8,279.17 shall increase as follows:

as of 01/07/2011 to EUR 8,527.54,

as of 01/07/2013 to EUR 8,783.37,

as of 01/07/2015 to EUR 9,046.87, and

as of 01/07/2017 to EUR 9,318.28.

A.4.3.1

For the rental of the rental object, the Landlord has waived the VAT option pursuant to Section 9 of the German Value Added Tax Act (UStG). In light of this, the Tenant shall obligate itself to utilise the rental object exclusively for sales turnover that does not exclude input tax deduction (VAT) pursuant to Section 9 (2) UStG. Moreover, the Tenant shall obligate itself to always immediately make available to the Landlord upon demand those documents that enable the Landlord to fulfil its duty of proof to the tax authorities pursuant to Section 9 (2) UStG.

A.4.3.2

In the instance of subletting, the Tenant shall be obligated for its part to opt for VAT and to impose on the subtenant the obligations arising from § A.4.3.1 and § A.4.3.2 of this agreement. The Tenant shall guarantee to the Landlord that the subtenant shall fulfil such obligations. This regulation is not connected with a permission to conduct subletting.

A.4.3.3

If the Tenant infringes the obligations pursuant to § A.4.3.1 and § A.4.3.2, it should be obligated to compensate the Landlord for any losses arising as a consequence. The Landlord draws attention to the fact that extraordinarily high losses can arise.

§ A.5

Incidental costs

A.5.1

In addition to payment of the rent, the Tenant shall bear on a proportional basis incidental costs pursuant to § A.5.3.

A.5.2

Incidental costs in the meaning of this agreement shall comprise:

A.5.2.1

all operating costs in the meaning of the German Operating Costs Regulation (BetrKV) dated 25 November 2003 which is attached to this agreement as Annex 5 , over and above this the following incidental costs:

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A.5.2.2

costs for commercial and technical property management including house management on a lump-sum basis of 3% of the annual basic rent excluding incidental costs;

A.5.2.3

costs for cleaning exterior glass surfaces and facade cleaning including costs for the cleaning of external shutters;

A.5.2.4

costs for operation and maintenance of garage doors and technical access restrictions (e.g. code card systems);

A.5.2.5

costs for the operation and maintenance of the air-conditioning and ventilation systems;

A.5.2.6

costs for the operation and maintenance of all other technical systems and equipment of the building and land plot not referred to above or in the BetrKV, such as especially fire extinguishing systems, emergency electricity systems, emergency electric lighting, door bell and intercom systems;

A.5.2.7

costs for caretaker services and for other personnel required for the operation and supervision of the building and land;

A.5.2.8

costs for insurance as referred to in § B. 15.1;

A.5.2.9

costs for the aesthetic repair, maintenance and repair of common areas and common facilities, as well as the costs of maintaining and repairing all common technical systems and facilities mentioned above or referred to in the BetrKV or otherwise existing, and including the replacement of defective door and window panes and coverings in rooms not serving the Tenant's exclusive use;

A.5.2.10

all fees, taxes and levies based on the law, regulations or bylaws, which might be introduced in the future for the plot of land for the building or its use;

A.5.2.11

The Tenant shall also bear ancillary costs that might be included in a new version of the BetrKV that is valid in the future.

A.5.2.12

The costs pursuant to § A.5.2.3 to A.5.2.9 shall be limited to a maximum of 10% of the annual basic rent excluding incidental costs.

A.5.3

All incidental costs in the meaning of § A.5.2 shall be passed on to the Tenant on the basis of the ratio of rental space, unless they are settled directly by the Tenant or are calculated on the basis of consumption.

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The Landlord at its discretion shall decide which ancillary costs shall be passed on according to consumption, unless related statutory regulations exist.

The Landlord shall also be entitled to decide at its discretion whether and which ancillary costs are to be distributed among user groups by type and extent of utilisation or consumption

A.5.4

VAT at the respective statutory level, to the extent that it is incurred, shall be added to all ancillary costs: ancillary costs shall be increased by the respective VAT amounts that are non-deductible for the Landlord on the basis of VAT-free rental.

A.5.5

An initial monthly prepayment of EUR 2.26 per m ² plus VAT shall be levied on the ancillary costs, which shall fall due together with the monthly rental payment.

§ A.6

Deposit

A.6.1

The Tenant shall be entitled to transfer to this agreement the deposit of EUR 3,000.00 provided on the basis of the rental agreement dated 18 June 2007.

§ A.7

Further regulations

7.1

The Landlord at its cost shall replace all external windows on the first floor of Building II with new external windows with double glazing in accordance with the cost estimate/attached offer attached as Annex 6 .

7.2

The Landlord, also at its cost, shall install a new entrance door on the first floor of Building II ( Annex 8 ) in accordance with the cost estimate/attached offer attached as Annex 7 .

7.3

The aforementioned modernisation measures are to be completed by autumn 2009 at the latest. However, the Landlord shall not be liable for delays in execution for which neither it nor the specialist firms it commissions are responsible.

7.4

The Tenant is aware that restrictions can occur to the use of the rental object as a consequence of the works. The Tenant will endeavour to minimise as far as possible the restrictions to the Tenant's ongoing business operations and to give prompt notification of respective works except where such notification would create a risk of delay.

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7.5

The Tenant shall state that it is prepared to tolerate the execution of the modernisation measures. The Tenant shall obligate itself not to hinder the works on the rental object and to grant the executing specialist firms access to the rental object where required by the modernisation works. The Tenant shall only be entitled to rent reductions, loss compensation and reclamation claims against the Landlord on the basis of the building measures being conducted on the rental object, especially also due to noise, dirt and odour nuisances occurring during the day, to the extent that they wholly or partly prevent utilisation of the rental object.

7.6

The modernisation works on the rental object do not comprise a defect in the rental property, as the mutual interests are sufficiently taken into account in this rental agreement.

7.7

The Tenant is aware that no air conditioning system is installed. This represents the contractually preconditioned condition of the rental object and has been taken into account when assessing the rent. If high room temperatures arise during the warm periods of the year, the Tenant shall not be entitled to a reduction of the rent nor to a remedying of this condition.

§ A.8

Commitment period for the first signing contractual party

The commitment period for the first signing contractual party shall amount to four weeks from the receipt of the rental contract signed by the first party at the other party.

§ A.9

Contractual elements

This rental agreement shall consist of the following components:

Part I, Special contractual terms & conditions

Part II, General contractual terms & conditions

Annex 1, floor plan Building II, first floor

Annex 2, floor plan Building III, ground floor

Annex 3, floor plan Building II, basement

Annex 4, parking place plan

Annex 5, German Operating Costs Regulation (BetrKV)

Annex 6, cost estimate/offer (external windows)

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Annex 7, cost estimate/offer (entrance door)

Annex 8, site plan, entrance door

Annex 9, Inspection report

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Part B – General contractual terms and conditions

§ B.1

Utilisation of the rental object

B.1.1

The Tenant may only use the rental object for the purpose agreed in this rental contract. An amendment to the utilisation purposes deriving from § A.2.4 is permissible only with prior approval by the Landlord. Such approval shall require written form.

B.1.1.1

Any statements of approval on the part of the Landlord in relation to a modification of utilisation shall always be issued subject – even if not stated expressly in the statement of approval – to any requisite regulatory approval of the modification of utilisation, whose procurement shall be at the Tenant's expense.

B.1.1.2

Before implementing the approved modification of utilisation, the Tenant must prove to the Landlord that either the official approval that is required for this purpose is legally valid, or that official approval is not required.

B.1.2

The Tenant shall obligate itself to satisfy at its expense all regulations and requirements connected with its person and/or its business, and to procure the approvals required for this purpose. This shall not apply to rendering the rental object suitable in construction terms for the contractual purpose pursuant to § A.2.4.

B.1.3

The Tenant shall ensure that the permitted burdening of storey ceilings, about which the Tenant shall inform itself before installing heavy fixtures, is not exceeded.

B.1.4

Gas and electric equipment and water supplies may only be connected to the existing network to the extent that the envisaged burdening, about which the Tenant must provide advance information, is not exceeded.

B.1.5

When it was constructed, the rental object complied with technical construction requirements prevailing at that time. The rental object shall be made available to the Tenant in its contractual condition pursuant to these requirements prevailing at that time, subject to its general ageing. The Tenant shall not be entitled to have the rental object comply with any more stringent and improved technical construction requirements that have been introduced in the meantime or are introduced during the rental period. The latter shall apply particularly for the area of sound and heat insulation.

This regulation shall only be valid insofar as the contractual utilisation is not thereby restricted considerably.

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§ B.2

Transfer of the rental object

The Tenant is already in possession of the rental object, and no renewed transfer is to occur. Nevertheless, to record the condition of the rental object before signing this agreement / at the start of the rental period, an inspection of the rental object shall be conducted and an inspection report shall be prepared. This report shall become a component of this agreement as Annex 9 .

§ B.3

Payment of rent, offsetting, retention

B.3.1

The rent should be paid monthly in advance to the Landlord as of the third working day of a given month to an account to be specified by the Landlord. The crediting of the money shall be relevant for the rather than the time of its dispatch.

B.3.2

At the Landlord's request, the Tenant shall be obligated to issue a direct debit authorisation.

B.3.3

The Tenant can only offset in relation to the rental payment and the ancillary costs, or exercise a right of retention, with such claims that are either determined to be legally valid or not contested by the Landlord. A right of retention can only be exercised on the basis of claims arising from this agreement.

B.3.4

Payments by the Tenant that are insufficient to repay all of the Tenant's open receivables shall first be offset with any interest due, then with the ancillary costs and finally with the rent, whereby, where several identical receivables exist, offsetting shall initially occur with the older receivables in accordance with Section 366 of the German Civil Code (BGB). This shall also apply if the Tenant determines another repayment sequence when making the payment.

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§ B.4

Incidental cost invoicing/adaptation of prepayments

B.4.1

Invoicing of ancillary costs shall occur annually. The calendar year shall be the invoicing period. The Tenant shall be entitled to view the documents underlying the invoice of the ancillary costs within a six-week period from the receipt of the invoice. After the expiry of three months after receipt of the invoice, objections to their correctness shall be excluded.

B.4.2

Any differences arising from the annual invoicing to the benefit of the Landlord or Tenant are to be settled within one month after receipt of the invoice.

B.4.3

The Landlord shall implement an adjustment to the monthly prepayments for ancillary costs to reflect modified circumstances pursuant to Section 315 of the German Civil Code (BGB). In this case, the modified prepayment is to be rendered from the month following the receipt of the amendment notification.

B.4.4

If the rental relationship ends during an invoicing period, the invoice shall not be prepared on an interim basis, but instead only as part of general invoicing.

§ B.5

Termination for an important reason

B.5.1

Statutory provisions shall apply for the termination of the rental contract for an important reason. § 17 of this agreement shall apply for the receipt of declarations of termination.

B.5.2

The Landlord shall also be entitled to terminate this rental contract without complying with a notice period,

B.5.2.1

to the extent that, before transferring the rental object, an application has been made to open insolvency proceedings in relation to the Tenant's assets;

B.5.2.2

if an insolvency application concerning the Tenant's assets is not withdrawn within three weeks, or if the opening of insolvency proceedings is declined due to a lack of insolvency estate assets.

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§ B.6

Construction modifications by the Tenant

B.6.1

Construction modifications within the rental object and the installation of additional facilities potentially required for the Tenant's operations shall be permissible only with the Landlord's prior consent, to which the Tenant shall submit suitable related plans in advance. Such approval shall require written form. The costs of such measures shall be charged to the Tenant. § B. 1.1.1 and 1.1.2 shall apply correspondingly.

B.6.2

When the rental contract ends, the Tenant shall restore the condition in which the rental object was at the start of the rental duration on 1 July 2009, unless the Landlord states its agreement with the transfer of any modifications implemented by the Tenant, or facilities installed in the rental object, whereby such modifications and facilities are to be offered to the Landlord in advance.

If the Landlord is in agreement with transferring such modifications of facilities, the Landlord shall compensate for their agreed value. If no value is agreed, the Landlord shall compensate for the market value. If agreement cannot be reached concerning the market value, such market value is to be calculated by an expert as arbitrator. The expert is to be nominated at the application of one of the parties by submission to the chamber of industry and commerce of relevance to the rental property.

§ B.7

Liability for the condition of the rental object

B.7.1

The rental object is to be maintained in a functioning condition by the Tenant, unless specified differently in accordance with the following: .

B.7.2

The Tenant shall be responsible for ongoing aesthetic repairs and the maintenance and repair of the rental object, including technical equipment utilised exclusively by the Tenant. To the extent that repairs relate to damages that are not allocable to the rental utilisation of the Tenant or to its sphere of risk, the costs of such repair within a given calendar year shall be charged to the Tenant, albeit only up to the level of 10% of the annual net rent.

B.7.3

In those rooms of the rental object that serve the joint utilisation by several or all Tenants, the Landlord shall implement the ongoing aesthetic repairs as well as maintenance and repair, and shall charge on such costs according to the regulations in § A.5.2.

B.7.4

The Tenant shall have loss compensation claims due to defects of the rental object only if the Landlord is responsible for the defect by way of intent or gross negligence, and the Tenant has unsuccessfully set a deadline for the Landlord to remedy the defect. This shall apply only for the lack of pledged characteristics as well as for the infringement of significant contractual obligations, damage to life, body or health, as well as for losses encompassed under risk covered by the Landlord's building insurance.

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B.7.5

The Tenant can reduce the rent only due to undisputed or legally determined defects to the rental object. A reduction is only possible if the Tenant has notified the Landlord of the defect one month previously in writing, while giving a deadline for the remedying of the defect.

B.7.6

Excluded shall be a reduction of rent or loss compensation claims on the part of the Tenant due to pollution or disruptions to the entrances to the building for which the Landlord is not responsible, or building measures of third parties outside the building. The Landlord shall nevertheless endeavour to eliminate any pollution or disruptions of which it is made aware.

B.7.7

The Tenant shall replace defective windowpanes and window fittings in the rooms exclusively serving the Tenant's use, unless the Landlord is responsible for the defect.

B.7.8

The Tenant shall be responsible for any damage it is responsible for causing within the rental object, including if the damage is caused by its dependents, employees, subtenants, visitors, suppliers or agents.

The Tenant shall inform the Landlord and eliminate immediately without request any damages or contamination to land and buildings outside the rental object that the Tenant, its dependents, employees, subtenants or agents cause and are responsible for.

§ B.8

Ending of the rental agreement

B.8.1

On the date of the ending of the rental period, the Tenant shall transfer the rental object in its contractual condition and with all keys to the Landlord. The rental object shall be in contractual condition if all rooms have been vacated and cleaned, damages have been eliminated and due aesthetic repairs have been performed, and any restoration obligation has been satisfied.

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B.8.2

A tacit renewal of the rental contract pursuant to § 545 of the German Civil Code (BGB) shall be excluded. An objection to renewal is not required. To the extent that the Tenant continues to utilise the rental object after the end of the rental period, it shall be obligated to pay utilisation compensation equivalent to 1.5 times the previous rent. Payments shall also be counted as utilisation compensation if they are described as rental payments in the correspondence or on the transfer form. Moreover, the Tenant shall compensate any loss that arises from the Landlord as the result of not returning the rental object on the due date.

§ B.9

Access to the rental premises

Following prior notification, the Landlord or its agent and authorised officer shall be entitled to view the rental object during the Tenant's business hours. The Landlord is to be granted access at any time in emergencies.

§ B.10

Building modifications by the Landlord

B.10.1

The Landlord may make improvements and construction modifications required to preserve or maintain the building or rental object, or to avert potential hazards, or to eliminate damages, including without the Tenant's approval. The same shall apply for works and construction measures that although not necessary are nevertheless useful and serve to modernise or improve or better utilise or expand the building (including adding storeys and extensions). The Tenant shall ensure that the relevant rooms remain accessible and may not hinder or delay the carrying out of works. The Landlord shall notify the Tenant in advance of the measures, unless where such advance notification brings the risk of delay.

B.10.2

The Tenant is required to tolerate all reasonable modernisation and improvement measures within the rental object.

B.10.3

Due to measures pursuant to §§ B.10.1 and 10.2 the Tenant shall be entitled to reduction claims, if the measures are connected with a considerable restriction of the Tenant's operations, or wholly or partially exclude utilisation of the rental object. Damage compensation claims on the part of the Tenant shall exist only in the case of intentional or grossly negligent activity on the part of the Landlord or its vicarious agents. The Tenant's right of termination in the case of maintenance and modernisation measures pursuant to Sections 55 4 (3) in combination with 578 (2) of the German Civil Code (BGB) shall be excluded.

§ B.11

Design of advertising, nameplates and company signs

B.11.1

Nameplates and company signs shall be designed and fitted on a standard basis. The right of determination shall lie with the Landlord, which, to the extent that uniform design permits, shall take Tenants' wishes into account.

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The Tenant shall bear the costs of nameplates and company signs, and their installation.

B.11.2

To the extent that advertising spaces are rented, their design, which is also to be implemented on a standard basis, shall require the Landlord's prior consent. Other tenants and third parties can neither be disrupted nor negatively affected by advertising facilities.

§ B. 1.1.1 and § B.1.1.2 shall also apply correspondingly for advertising facilities. The Tenant loan shall bear the costs for procuring, assembling, maintaining and disassembling advertising facilities.

§B.12

Subletting

B.12.1

Subletting shall be permissible only with the Landlord's prior written consent. A consent that has been granted can be revoked if grounds exist in the subtenant's person or behaviour that entitle the Landlord to terminate the rental contract without notice, if such grounds were to exist in the Tenant's person or behaviour.

B.12.2

The special right of termination of the Tenant pursuant to Section 540 (1) Clause 2 of the German Civil Code (BGB) shall not apply if the Landlord refuses consent for subletting due to an important reason consisting in the subtenant's person or another reason of importance to the Landlord.

An important reason can consist especially in the insufficient creditworthiness of the subtenant, as well as in characteristics, activities or reputation of the subtenant, to the extent that these are suited to exerting a negative effect on the image of the Landlord or the rental object.

- 17 -

B3.12.3

In the case of unauthorised subletting, the Landlord can demand that the Tenant terminate the subletting arrangement as soon as possible, albeit at the latest within one month. If this does not occur, the Landlord can terminate the main rental agreement without notice.

B.12.4

The Landlord is entitled to make its consent to subletting dependent on agreeing a subletting surcharge of up to 10% of the annual net rent. Alternatively, the Landlord can demand that 50% of the subletting rent exceeding the rental payment owed pursuant to this agreement be transferred to it.

B.12.5

In the instance of subletting, the Tenant shall be liable for all actions or omissions on the part of the subtenant, without taking into account whether the Tenant itself was responsible for such actions or omissions.

B.12.6

In the case of subletting, the Tenant shall already cede its claims from subletting up to the level of the Landlord's receivables due from the Tenant to secure all claims from this rental contract.

B.12.7

Subletting shall also be deemed to be any other not only temporary transfer of utilisation and the inclusion of a partner in the Tenant's business/company, a change of owner of the Tenant's business/company and the modification of the Tenant's legal form.

Keys

for the entrance door to the building

§ B.13

At the start of the rental period, the Tenant shall be in possession of the requisite keys. There type and number shall be specified in the joint inspection report.

B.13.1

These keys and any duplicate keys prepared by the Tenant are to be returned at the end of the rental contract.

If this does not occur, despite warning and the setting of a deadline, the Landlord shall be entitled to exchange the corresponding locks at the Tenant's expense.

Any loss of a key is to be reported immediately to the Landlord.

B.13.2

Given the loss of a key for a locking system, the Landlord can instigate the complete exchange of the entire locking system at the Tenant's expense, unless it can be assumed that misuse of the lost key is excluded.

- 18 -

B.13.3

The locking system in the Tenant's premises was purchased by the Tenant and belongs to the Tenant.

§ B.14

Sale of the rental object

B.14.1

In the instance that the rental object is sold, the rental contract shall transfer to the new owner (Sections 566 (1), 578 of the German Civil Code [BGB]). In this instance, the seller shall not be liable as a guarantor to the Tenant. The regulation pursuant to Sections 566 (2) 578 BGB shall not be applicable.

B.14.2

If, by way of exception, the rental contract does not transfer in a sale of the rental object to the new owner pursuant to Sections 566 et seq. BGB, the Tenant shall already consent to a transfer of the rental contract with all rights and obligations to the new owner with effect from the transfer of ownership. The Tenant shall expressly repeat its statement of consent to the renewal of the Landlord or of the purchaser.

§ B.15

Insurance

B.15.1

The Landlord shall be entitled to insure the building against fire, storm and water damage as well as rental loss and to charge the expense to the incidental costs pursuant to § A.5,2.8, and to arrange land and building insurance including fire liability insurance as well as glass insurance. The insurance of the aforementioned risks can also occur as part of so-called "all risk insurance".

B.15.2

The Tenant shall be obligated to immediately notify the Landlord of any value-enhancing fixtures as well as any change to risks in the meaning of insurance law. The Tenant loan shall bear any related premium increases.

B.15.3

The Tenant shall be obligated to ensure its equipment, installations and inventory at new value and under exclusion of the possibility of regress against the Landlord, as well as to arrange commercial liability insurance and exclusion of damages to rented buildings, and to provide proof of such insurance to the Landlord.

B.15.4

The Tenant shall also be obligated to arrange business interruption insurance and to provide proof of it to the Landlord.

- 19 -

§ B.16

Several individuals as Tenant

Several individuals as Tenant shall mutually authorise themselves to receive all statements relating to the rental contract. This authorisation shall be revocable only for an important reason.

§ B. 17

Authorisation of the Tenant to take receipt in relation to declarations of intent and constitutive declarations

Exclusively the Landlord shall be entitled to receive declarations of intent and constitutive declarations, such as declarations of termination or the exercising of options in relation to the respective rental contract. Irrespective of how it presents itself to the Tenant, the Property Management function is not authorised to receive declarations of intent and constitutive declarations of the Tenant in relation to the rental contract. If changes arising this context, exclusively the Landlord itself shall communicate such to the Tenant.

§ B.18

No competitive protection

Competitive protection shall not be granted.

§ B.19

House rules

The Landlord should be entitled to approve the set of house rules and to determine its contents at its discretion.

§ B.20

Time limits

For compliance with all time limits specified in this contract, the receipt of the declaration by the recipient shall be decisive.

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B 21.1

No side agreements have been arranged.

B2l.2

The parties to the rental contract are aware of the special statutory written form requirements of Sections 550, 126 of the German Civil Code (BGB). They hereby obligate themselves to implement all actions at the request of a party at any time and to issue declarations required to comply with the statutory written form requirement, and not to terminate the rental contract early by appeal to non-compliance with the statutory written form. This shall not only apply for the arrangement of the original/main contract, but also for all and any subsequent, amending and supplementary contracts.

§ B.22

Partial inefficacy

Should a part of this contract be void or disputable, the validity of the contract shall be thereby unaffected. Should this contract contain a loophole, that which best approximates in a legally permissible manner that which the parties concluding the agreement would have agreed if they had been aware of the loophole shall be deemed to be agreed.

- 21 -

Addendum 1 to the
RENTAL AGREEMENT
No. 28390041

dated 18 September 2009
between

Biofrontera Bioscience GmbH
Hemmelrather Weg 201, 53177 Leverkusen
represented by Thomas Schaffer (Managing

Director)
and Andrea Piotraschke (Company Officer)

- hereinafter referred to as the “Tenant” -
and

YAL Immobilien GmbH Ernst-Reuter-Strasse 119

119.95030 Hof/Saale

- hereinafter referred to as the “Previous

Landlord” -
and

Marie-Curie-Campus GmbH
Hemmelrather Weg 201, 53177 Leverkusen
represented by Peter Kohlrautz (Managing

Director)

- hereinafter referred to as the “Landlord” -
Tax number: 230 5712 2734

Addendum 1 to contract Biofrontera - VAL v. 19.09.2009 . Page 1 of

Preamble

As a result of transfer of the rental agreement from the “Previous Landlord” to the “Tenant”, the rental agreement dated 18 September 2009 exists in relation to rental spaces in House 3 on the property Hemmelrather Weg 201 in 51377 Leverkusen.

The spaces rented pursuant to this rental agreement shall be supplemented to include a space of approximately 301 m². The supplementary rental space is highlighted green and has blue edges in the attached plan (Annex “Preamble”) . The plan shall form part of the contract.

The Tenant shall be responsible for procuring any type of approval as well as the licensing of the space for the Tenant’s utilisation and all related requirements.

On this basis, the parties shall agree the following:

(1)

The rental agreement shall be amended to the extent that from now

Marie-Curie-Campus GmbH, Hemmelrather Weg 201, 53177 Leverkusen, represented by its Managing Director entitled to sole representation, Mr Peter Kohlrautz, shall be the “Landlord”.

(2)

§ A.2.3.2 of the rental agreement shall be amended as follows:

The Annex 2 specified in the agreement shall be exchanged for the “Preamble” Annex attached to this addendum.

(3)

§ A.4.1 shall be reformulated as follows:

“The monthly rent for the rental spaces pursuant to § A.2.3. shall amount to	EUR	903.00
plus monthly prepayment of incidental costs pursuant to § A.5	EUR	903.00
Total monthly amount, net	EUR	1,806.00
plus VAT in each case at the statutory level, currently 19%	EUR	343.14
Total monthly amount, gross	EUR	2,149.14

(4)

The parties shall agree that the modification of the rental space and rent as of 1 August 2014 shall become effective. To the extent that the Tenant takes possession of the rental space before this date for the purpose of building modifications or installations, it shall be liable for the related operating costs from this date.

(5)

The rental agreement dated 18 September 2009 shall be otherwise unaffected by this Addendum Number 1, and to this extent shall continue to exist unchanged.

Otherwise it shall be agreed:

Amendments or supplements to the rental contract and to this Addendum 1 shall require written form.

The same shall also apply for deviating from the written form requirement. Verbal side agreements shall not exist.

Addendum 1 to contract Biofrontera - VAL v. 19.09.2009 . Page 2 of

The parties shall assume that the written form of Section 550 of the German Civil Code (BGB) has been complied with as a result of this addendum. If it should arise that the parties’ shared notion of compliance with the written form is incorrect, the parties shall obligate themselves to cooperate to ensure that this agreement together with Addendum 1 is re-concluded at the demand of one of the rental contract parties in such way as to include identical contents and so that the written form is complied with.

In light of the precedence of the German Federal Supreme Court (BGH) (BGH ruling of 26 February 1992, XII ZR 129/90) and the written form requirement for the rental contract pursuant to § 550 BGB, the contractual parties shall declare that they shall waive an attachment of today’s addendum to the original agreement in light of the clear applicability of today’s addendum to the original agreement in the opinion of the parties.

By way of precaution for the instance that the statutory written form requirement of the past should be impaired in whatever manner, they also declare by way of appeal to the BGH ruling of 29 April 2009 (BGH ruling XII ZR 142/07) that with today’s addendum the parties also wish to remedy any such lack of written form.

The parties shall irrevocably waive the cancellation of the agreement or any subsequent agreements, or to attack them in any other manner, by way of appeal to a lack of written form.

Should one or several provisions of this addendum be or become ineffective for whatever reason, the validity of the rental contract plus Addendum 1 shall otherwise be unaffected. In such an instance, the parties shall be required to immediately arrange an effective agreement that best approximates the economic purpose of the ineffective provisions.

The addendum was prepared in three copies, one for each party and one for the manager.

The place of fulfilment shall be Cologne.

The applicant shall grant a deadline of 31 August 2014 for the acceptance of the offer relating to the agreement of the addendum. The receipt of the countersigned contract by the applicant shall be relevant for the compliance with the deadline.

Annexes

“Preamble” annex - Ground floor plan for House number III, 2nd floor

Rental contract copy dated 18 September 2009

Addendum 1 to contract Biofrontera - VAL v. 19.09.2009 . Page 3 of

Addendum 2 to the
RENTAL AGREEMENT
No. 28390041

dated 18 September 2009
between

Biofrontera Bioscience GmbH Hemmelrather Weg 201,53177 Leverkusen

represented by Thomas Schaffer and Prof. Dr. Hermann Lübbert (both Managing Directors)

- hereinafter referred to as the “Tenant” -
and

YAL Immobilien GmbH Ernst-Reuter-Strasse 119 119.95030 Hof/Saale

- hereinafter referred to as the “Previous Landlord” -
and

Marie-Curie-Campus GmbH
Hemmelrather Weg 201, 53177 Leverkusen
represented by Peter Kohlrautz (Managing Director)

- hereinafter referred to as the “Landlord” -
Tax number: 230 5712 2734

Version 26.05.2015 ms05

Addendum 1 to contract Biofrontera - YAL v. 19.09.2009 . Seitei von 4

Preamble

As a result of transfer of the rental agreement from the “Previous Landlord” to the “Tenant”, the rental agreement dated 18 September 2009 exists in relation to rental spaces in House 2 and House 3 on the property Hemmelrather Weg 201 in 51377 Leverkusen.

On 14 July 2014, the tenant and the landlord concluded an Addendum 1 to this agreement, with which the original rental space was expanded to include an additional rental space of approximately 301 m².

With this addendum, the current rental space is to be expanded again by approximately 1,238 m² in the upper storeys 2 and 5 of House 2. The supplementary spaces are highlighted in yellow, green and beige and edged in blue in the two attached plans ( Annex “Preamble 2” and “Preamble 3” ). The plans shall form part of the agreement.

The tenant shall be responsible for procuring any type of approval as well as the licensing of the space for the tenant’s utilisation and all related requirements.

On this basis, the parties shall agree the following:

(1)

§ A.2.3.2 of the rental agreement shall be amended as follows:

Annex 1 in the original agreement shall be supplemented by the Annexes “Preamble 2” and “Preamble 3” attached to this addendum.

(2)

§ A.2.3.1 shall be reformulated as follows:

Building II, the first-floor rooms highlighted in colour in this agreement in the attached Annex 1, and the rooms on the second and fifth floors marked in yellow, green and beige and outlined in blue in the attached annexes “ Preamble 2 ” and “ Preamble 3 ”

(3)

§ A.2.3.2 shall be reformulated as follows:

Building something, the ground-floor rooms highlighted in colour (blue and yellow) in this agreement in the attached “Preamble” Annex (previously Annex 2)

(4)

§ A.2.3 shall be reformulated as follows in relation to the last paragraph:

The spaces designated above in Section A.2.3 are referred to hereinafter in their entirety as the “rental object”. The entire space is determined as amounting to 1,330 m² (original rental contract)

+ 301 m ² (1st Addendum)

+ 1,238 m ² (2nd Addendum)

+ 2,869 m ² .

The parties are aware that precise measurement has not been made, with this space being regarded as binding nevertheless.

(5)

§ A.4.1 shall be reformulated as follows:

Pursuant to § A.2.3, the monthly rent for the rental spaces shall amount to (basic rent excluding incidental costs)

Addendum 1 to contract Biofrontera - YAL v. 19.09.2009 . Page 2 of 4

+ for rental spaces from original agreement dated 18 September 2009	EUR	9,046.87
+ for the rental spaces from the 1st Addendum dated 14 July 2015	EUR	903.00
+ for the rental spaces from this 2nd Addendum	EUR	8,421.07
= together:	EUR	18,370.94
plus monthly prepayment of incidental costs purs. § A.5 (plus €3.5/m²)	EUR	10,041.50
Total monthly amount, net	EUR	28,412.44
plus VAT in each case at the statutory level, currently 19%	EUR	5,398.36
Total monthly amount, gross	EUR	33,810.81

(6)

§ A.4.2 shall be reformulated as follows:

The basic rent excluding incidental costs of currently EUR … shall be increased as follows:

As of 1 July 2017 to EUR 18,894.99.

(7)

The parties shall agree that the modification of the rental space and rent as of 1 July 2014 shall become effective. To the extent that the tenant takes possession of the rental space before this date for the purpose of building modifications or installations, it shall be liable for the related operating costs from this date.

The rental agreement dated 18 September 2009 in combination with Addendum 1 shall be otherwise unaffected by this Addendum Number 2, and to this extent shall continue to exist unchanged.

Otherwise it shall be agreed:

Amendments or supplements to the rental contract dated 18 September 2009 in combination with Addendum 1 and this Addendum 2 shall require written form. The same shall also apply for deviating from the written form requirement. Verbal side agreements shall not exist.

The parties shall assume that the written form of Section 550 of the German Civil Code (BGB) has been complied with as a result of this addendum. If it should arise that the parties’ shared notion of compliance with the written form is incorrect, the parties shall obligate themselves to cooperate to ensure that this agreement together with Addendum 1 and Addendum 2 is re-concluded at the demand of one of the rental contract parties in such way as to include identical contents and so that the written form is complied with.

The parties shall irrevocably waive the cancellation of the agreement or any subsequent agreements, or to attack them in any other manner, by way of appeal to a lack of written form.

The addendum was prepared in three copies, one for each party and one for the manager.

The place of fulfilment shall be Cologne.

The applicant shall grant a deadline of 15 June 2015 for the acceptance of the offer relating to the agreement of the addendum. The receipt of the countersigned contract by the applicant shall be relevant for the compliance with the deadline.

Addendum 3 to the
RENTAL AGREEMENT
No. 28390041

dated 18 September 2009
between

Biofrontera Bioscience GmbH Hemmelrather Weg 201,53177 Leverkusen

represented by Thomas Schaffer and Prof. Dr. Hermann Lübbert (both Managing Directors)

- hereinafter referred to as the “Tenant” -
and

YAL Immobilien GmbH Ernst-Reuter-Strasse 119 119.95030 Hof/Saale

- hereinafter referred to as the “Previous Landlord” -
and

Marie-Curie-Campus GmbH
Hemmelrather Weg 201, 53177 Leverkusen
represented by Peter Kohlrautz (Managing Director)

- hereinafter referred to as the “Landlord” -
Tax number: 230 5712 2734

Version 12.08.2015 msOl

Addendum 3 to contract Biofrontera - YAL v. 19.09.2009 . Page 1 of

Preamble

As a result of transfer of the rental agreement from the “Previous Landlord” to the “Tenant”, the rental agreement dated 18 September 2009 exists in relation to rental spaces in House 2 and House 3 on the property Hemmelrather Weg 201 in 51377 Leverkusen.

On 28/05/2015, the tenant and the landlord concluded an Addendum 2 to this agreement, with which the rental space was expanded to include an additional rental space of approximately 1,238 m².

With this addendum, the current rental space is to be expanded again by approximately 868 m² on the ground floor of House 3. The supplementary rental space is highlighted yellow, green and beige and has blue edges in the attached plan (Annex “Preamble 4”) . The plan shall form part of the contract.

The tenant shall be responsible for procuring any type of approval as well as the licensing of the space for the tenant’s utilisation and all related requirements.

On this basis, the parties shall agree the following:

(1)

§ A.2.3.2 of the rental agreement shall be amended as follows:

Annex 1 in the original agreement and annexes “Preamble 2” and “Preamble 3” from the addenda shall be supplemented to include the annex “Preamble 4” attached with this addendum.

(2)

§ A.2.3.2 shall be reformulated as follows:

Building III , the ground-floor rooms marked in colour (blue and yellow) in this agreement in the attached Annex “ Preamble ” (previously Annex 2), and the ground-floor rooms highlighted in yellow, green and beige and edged in blue in the attached Annex “ Preamble 4 ”

(3)

§ A.2.3 shall be reformulated as follows in relation to the last paragraph:

+ 301 m ² (1st Addendum)

+ 1,238 m ² (2nd Addendum)

+ 868 m ² (2nd Addendum)

= 3,737 m ² .

The parties are aware that precise measurement has not been made, with this space being regarded as binding nevertheless.

(4)

§ A.4.1 shall be reformulated as follows:

Pursuant to § A.2.3, the monthly rent for the rental spaces shall amount to (basic rent excluding incidental costs)

+ for the rental spaces from the original agreement dated 18 September 2009

+ for the rental spaces from the 1st Addendum of 14 July 2015 EUR 903.00

Addendum 3 to contract Biofrontera - YAL v. 19.09.2009 . Page 2 of

+ for the rental spaces from the 2nd Addendum dated 28 May 2015	EUR	8,421.07
+ for the rental spaces from this 3rd Addendum	EUR	3,906.00
= together:	EUR	22,276.94
plus monthly prepayment of incidental costs purs. to § A.5 (plus €3.5/m²)	EUR	13,079.50
Total monthly amount, net	EUR	35,356.44
plus VAT in each case at the statutory level, currently 19%	EUR	6,717.72
Total monthly amount, gross	EUR	42,074.17

(5)

§ A.4.2 shall be reformulated as follows:

The basic rent excluding incidental costs of currently EUR … shall be increased as follows:

as of 1 July 2017 to EUR 22,918.17.

(6)

The parties shall agree that the modification of the rental space and rent as of 1 September 2015 shall become effective. To the extent that the tenant takes possession of the rental space before this date for the purpose of building modifications or installations, it shall be liable for the related operating costs from this date.

(7)

The rental agreement dated 18 September 2009 in combination with Addendum 1 and Addendum 2 shall be otherwise unaffected by this Addendum Number 3, and to this extent shall continue to exist unchanged.

Otherwise it shall be agreed:

Amendments or supplements to the rental contract dated 18 September 2009 in combination with Addendum 1 and Addendum 2 and this Addendum 3 shall require written form. The same shall also apply for deviating from the written form requirement. Verbal side agreements shall not exist.

The parties shall assume that the written form of Section 550 of the German Civil Code (BGB) has been complied with as a result of this addendum. If it should arise that the parties’ shared notion of compliance with the written form is incorrect, the parties shall obligate themselves to cooperate to ensure that this agreement together with Addendum 1 and Addendum 2 is re-concluded at the demand of one of the rental contract parties in such way as to include identical contents and so that the written form is complied with.

The parties shall irrevocably waive the cancellation of the agreement or any subsequent agreements, or to attack them in any other manner, by way of appeal to a lack of written form.

Should one or several provisions of this addendum be or become ineffective for whatever reason, the validity of the rental contract plus addenda 1, 2 and 3 shall otherwise be unaffected. In such an instance, the parties shall be required to immediately arrange an effective agreement that best approximates the economic purpose of the ineffective provisions.

Addendum 3 to contract Biofrontera - VAL v. 19.09.2009 . Page 3 of

The addendum was prepared in three copies, one for each party and one for the manager. The place of fulfilment shall be Cologne.

The applicant shall grant a deadline of 20 August 2015 for the acceptance of the offer relating to the agreement of the addendum. The receipt of the countersigned contract by the applicant shall be relevant for the compliance with the deadline.

Annexes

“Preamble 4” annex - Ground floor plan for House number III, ground floor

Rental contract copy dated 18 September 2009

1st Addendum copy dated 14/07/2014

2nd Addendum copy dated 28/05/2015

(Place, date, name, function and signature of the Landlord)

(Place, date, name, function and signature of the Tenant)

Addendum 3 to contract Biofrontera - VAL v. 19.09.2009 . Page 4 of

Addendum 4 to the
RENTAL AGREEMENT
No. 28390041

dated 18 September 2009
between

Biofrontera Bioscience GmbH Hemmelrather Weg 201,53177 Leverkusen

represented by Thomas Schaffer and Prof. Dr. Hermann Lübbert (both Managing Directors)

- hereinafter referred to as the “Tenant” -
and

YAL Immobilien GmbH Ernst-Reuter-Strasse 119 119.95030 Hof/Saale

- hereinafter referred to as the “Previous Landlord” -
and

Marie-Curie-Campus GmbH
Hemmelrather Weg 201, 53177 Leverkusen
represented by Peter Kohlrautz (Managing Director)

- hereinafter referred to as the “Landlord” -
Tax number: 230 5712 2734

Version 16.09.2015 msOlb

Addendum 4 to contract Biofrontera - YAL v. 18.09.2009 . Page 1 of

Preamble

As a result of transfer of the rental agreement from the “Previous Landlord” to the “Tenant”, the rental agreement dated 18 September 2009 exists in relation to rental spaces in House 2 and House 3 on the property Hemmelrather Weg 201 in 51377 Leverkusen.

On 28 May 2015, the tenant and the landlord concluded an Addendum 2 to this agreement, with which the rental space was expanded to include an additional rental space of approximately 1,238 m².

On 17 August 2015, the tenant and the landlord concluded an Addendum 3 to this agreement, with which the rental space was expanded to include an additional rental space of approximately 868 m².

With this addendum, the rental duration for the currently rented property including all of the spaces added by the three addenda is to be extended until 30 September 2025.

On this basis, the parties shall agree the following:

(1)

§ A.3.2 of the rental agreement shall be amended as follows:

The rental contract shall end on 30 September 2025, including for all spaces rented with addenda.

(2)

The parties shall agree that the amendment to the rental duration shall become effective with the signing of this Addendum 4.

(3)

The rental agreement dated 18 September 2009 in combination with Addendum 1 and Addendum 2 and Addendum 3 shall be otherwise unaffected by this Addendum Number 4, and to this extent shall continue to exist unchanged.

Otherwise it shall be agreed:

Amendments or supplements to the rental contract dated 18 September 2009 in combination with Addendum 1 and Addendum 2 and Addendum 3 and this Addendum 4 shall require written form. The same shall also apply for deviating from the written form requirement. Verbal side agreements shall not exist.

The parties shall assume that the written form of Section 550 of the German Civil Code (BGB) has been complied with as a result of this addendum. If it should arise that the parties’ shared notion of compliance with the written form is incorrect, the parties shall obligate themselves to cooperate to ensure that this agreement together with Addendum 1 and Addendum 2 is re-concluded at the demand of one of the rental contract parties in such way as to include identical contents and so that the written form is complied with.

Addendum 4 to contract Biofrontera - YAL v. 18.09.2009 . Page 2 of

The parties shall irrevocably waive the cancellation of the agreement or any subsequent agreements, or to attack them in any other manner, by way of appeal to a lack of written form.

Should one or several provisions of this addendum be or become ineffective for whatever reason, the validity of the rental contract plus addenda 1, 2, 3 and 4 shall otherwise be unaffected. In such an instance, the parties shall be required to immediately arrange an effective agreement that best approximates the economic purpose of the ineffective provisions.

The addendum was prepared in three copies, one for each party and one for the manager. The place of fulfilment shall be Cologne.

The applicant shall grant a deadline of 30 September 2015 for the acceptance of the offer relating to the agreement of the addendum. The receipt of the countersigned contract by the applicant shall be relevant for the compliance with the deadline.

Annexes

Rental contract copy dated 18 September 2009

1st Addendum copy dated 14/07/2014

2nd Addendum copy dated 28/05/2015

3rd Addendum copy dated 17/08/2015

(Place, date, name, function and signature of the Tenant)

Addendum 4 to contract Biofrontera - YAL v. 18.09.2009 . Page 3 of

Exhibit 10.8

CONSENT TO SUBLEASE
EDGEWATER OFFICE PARK

THIS CONSENT TO SUBLEASE (“ Consent ”) dated as of ____________________, 2016, is made with reference to that certain Sublease Agreement (the “Sublease”) dated 2016 and attached hereto as Exhibit A, by and between SDL XyEnterprise LLC, a Delaware limited liability company, formerly known as XyEnterprise Inc., with an address at 201 Edgewater Drive, Suite 225, Wakefield, Massachusetts 01880 (“ Tenant ”) and Biofrontera AG, a Delaware corporation with an address at 201 Edgewater Drive, Wakefield, Massachusetts 01880 (“ Subtenant ”), and is entered into by and among Tenant, Subtenant, and 101 Edgewater LLC, a Delaware limited liability company (together with its successors and assigns, “ Landlord ”), with addresses in care of Hobbs Brook Management, LLC, 225 Wyman Street Waltham, Massachusetts 02451-1209, Attention: Real Estate Manager, with reference to the following facts:

(A) Landlord and Tenant, or their respective predecessors in interest, are the parties to that certain Office Lease dated as of April 30, 2012, as amended by First Amendment to Lease dated March 17, 2014 (as heretofore or hereafter amended from time to time, the “ Master Lease ”) with respect to the Premises (as defined in the Master Lease) located in the building known as 201 Edgewater Drive, Wakefield, Massachusetts (the “ Building ”);

(B) Tenant and Subtenant wish to enter into the Sublease, with respect to a portion of the Premises, as described in the Sublease and being known as the Additional Premises in the Master Lease, containing approximately 5,362 square feet of Rentable Floor Area located on the first floor of the Building (the “ Sublease Premises ”);

(C) The Master Lease provides, inter alia, that Tenant may not enter into the Sublease without Landlord’s prior written consent; and

(D) Tenant and Subtenant have presented the fully executed Sublease to Landlord in connection with Tenant’s request for such consent, upon all of the terms and conditions hereinafter set forth.

NOW, THEREFORE, for good and valuable consideration, the parties agree as follows:

1. Tenant and Subtenant represent and warrant to Landlord that the copy of the Sublease attached hereto as Exhibit A is a true and complete copy of the Sublease and that the same represents the entire agreement between Tenant and Subtenant with respect to the sublease of the Sublease Premises. Landlord hereby consents to Tenant entering into the Sublease upon the terms and conditions set forth below.

2. This Consent shall not release Tenant from any existing or future duty, obligation or liability to Landlord pursuant to the Master Lease, nor shall this Consent change, modify or amend the Master Lease in any manner, notwithstanding anything to the contrary in the_ Sublease. Without limiting the generality of the foregoing and notwithstanding anything to the contrary in the Sublease, (a) Tenant shall obtain Landlord’s prior written approval of any other subleases, assignments or other dispositions of Tenant’s interest in the Master Lease or the Premises or any portion thereof (except as may be expressly set forth in the Master Lease) or of Subtenant’s interest in the Sublease or the demised premises thereunder or any portion thereof, (b) this Consent shall not constitute Landlord’s consent to any alteration of the Sublease Premises or the Premises, and (c) any provision of the Sublease that, directly or indirectly, purports to expand the uses permitted under the Master Lease beyond those set forth in the Master Lease, to grant to Subtenant rights that are greater than those granted to Tenant under the Master Lease or in conflict with any provision of the Master Lease or this Consent, or otherwise to change, modify or amend the Master Lease in any manner shall be deemed void and without force or effect.

3. (a) In the event of a Master Lease Termination (as hereinafter defined), at the written request and sole option of Landlord, Subtenant agrees to attorn to Landlord and to recognize Landlord as Subtenant’s landlord under the Sublease, upon the terms and conditions and at the rental rate specified in the Sublease, and for the then remaining term of the Sublease, except that Landlord shall not be bound by any provision of the Sublease that in any way increases Landlord’s duties, obligations or liabilities to Subtenant beyond those owed to Tenant under the Master Lease or by any provision that grants or attempts to grant Subtenant any rights, privileges or benefits greater than those possessed by Tenant under the Master Lease. Subtenant hereby waives any provisions of applicable law that may permit Subtenant (i) to terminate the Sublease other than pursuant to its terms or (ii) to surrender possession of the Sublease Premises in the event of a Master Lease Termination; and Subtenant hereby agrees that the Sublease shall not be affected in any way whatsoever by a Master Lease Termination in the event Landlord requests Subtenant’s attornment to and recognition of Landlord except as set forth herein. In the event of a Master Lease Termination as to which Landlord does not so request Subtenant’s attornment to and recognition of Landlord as set forth above, the Sublease shall terminate.

In no event shall Landlord ever (i) be liable to Subtenant for any act, omission or breach of the Sublease by Tenant, (ii) be subject to any offsets or defense that Subtenant might have against Tenant, (iii) be bound by any rent or additional rent that Subtenant might have paid in advance to Tenant, or (iv) be bound to honor any rights of Subtenant in any security deposit placed by Subtenant except to the extent Tenant has specifically assigned and turned over such security deposit to Landlord as set forth below.

Tenant hereby agrees that in the event of a Master Lease Termination, Tenant shall immediately pay or transfer to Landlord any security deposits, rent, or other sums then held by Tenant in connection with the subleasing of the Sublease Premises, unless at that time the Sublease shall also be terminated, with the Subtenant having vacated the Sublease Premises, and there is no outstanding rent or other sums due to Landlord by either Tenant or Subtenant. Subtenant hereby agrees that under no circumstances whatsoever shall Landlord be held in any way responsible or accountable for any security deposit or any sums paid by Subtenant to Tenant except to the extent that Landlord has actually received such sums from Tenant and has acknowledged their source, and Subtenant shall have no claim to any security or other deposit made by Tenant under the Master Lease.

(b) “ Master Lease Termination ” means any event that, by voluntary or involuntary act or by operation of law, might cause or permit the Master Lease (or Tenant’s right to possess the Premises under the Master Lease) to be terminated, expire, be canceled, be foreclosed against, or otherwise come to an end, including but not limited to (1) a default by Tenant under the Master Lease or any of the terms and provisions hereof, in each case beyond any applicable notice and cure period; (2) foreclosure proceedings brought by the holder of any mortgage or deed of trust to which the Master Lease is subject, unless otherwise expressly agreed to by Tenant and any such holder pursuant to any non-disturbance and/or recognition agreement or otherwise; (3) the termination of Tenant’s leasehold estate by dispossession proceeding or otherwise; or (4) the expiration or termination of the Master Lease in accordance with its terms.

4. Subtenant shall be liable to Landlord, jointly and severally with Tenant, to the extent of the obligations undertaken by or attributable to Subtenant under the Sublease, for the performance of Tenant’s agreements under the Master Lease. Landlord may elect to receive directly from Subtenant all sums due or payable to Tenant by Subtenant pursuant to the Sublease, and upon receipt of Landlord’s notice, following a Master Lease Termination (and not otherwise), Subtenant shall thereafter pay to Landlord any and all sums becoming due or payable under the Sublease and Tenant shall receive from Landlord a corresponding credit for such sums actually received by Landlord against any and all payments then owing from Tenant under the Master Lease. Neither the service of such written notice nor the receipt of such direct payments shall cause Landlord to assume any of Tenant’s duties, obligations and/or liabilities under the Sublease, nor shall such event impose upon Landlord the duty or obligation to honor the Sublease in the event of a Master Lease Termination, nor subsequently to accept any purported attornment by Subtenant not elected by Landlord pursuant to Section 3(a) hereof.

5. Subtenant hereby acknowledges that it is familiar with all of the terms and provisions of the Master Lease and agrees not to do or omit to do anything that would cause Tenant to be in breach of the Master Lease. Any such act or omission shall also constitute a breach of the Master Lease and this Consent and shall entitle Landlord to recover any damage, loss, cost, or expense that it thereby suffers from Tenant and Subtenant, jointly and severally. Without limiting the generality of the foregoing, Subtenant shall comply with and be subject to the provisions of the Master Lease regarding Tenant’s insurance (to the extent the same relate to the Sublease Premises) and waivers of subrogation and, upon Landlord’s request from time to time, shall provide Landlord with such evidence of such compliance. To the extent that any provision of the Sublease is inconsistent with the provisions of the Master Lease, Subtenant agrees that it shall be bound by any stricter provision set forth in the Master Lease.

6. Tenant and Subtenant, jointly and severally, shall be liable to reimburse Landlord for any expenses, including reasonable attorneys’ fees, incurred in enforcing any of the terms or provisions of this Consent.

7. No expansion, extension, or termination of the Sublease that is not expressly set forth in the Sublease, and no modification of the Sublease, will be binding upon Landlord without Landlord’s prior written consent thereto. If the Master Lease has been guaranteed, then Tenant shall deliver to Landlord a written approval of the Sublease and this Consent by each such guarantor as evidenced by the Joinder to this Consent.

8. The agreements contained herein constitute the entire understanding between the parties with respect to Landlord’s consent to the Sublease, and shall supersede any prior agreements, written or oral with respect to such consent. Tenant and Subtenant warrant and agree that neither Landlord nor any of its agents or other representatives have made any representations concerning the Premises, their condition, the Sublease, or the Master Lease.

9. Any notice, approval, consent and other like communication hereunder shall be effective only if given in writing and shall be deemed duly served (i) if and when hand delivered, (ii) the third day following such mailing if and when mailed prepaid certified or registered mail, or (iii) the next business day if sent by national recognized overnight courier which provides evidence of delivery (in any case, whether or not accepted for delivery), in each case addressed to the parties at the addresses set forth in this Consent (or to the extent any such address(es) are not so listed, then to the Landlord at the Landlord’s notice address applicable under the Master Lease, or to Tenant or Subtenant at the address of the Premises or of the Sublease Premises, respectively). Any party may change its address for notice by giving notice in the manner hereinabove provided.

10. Notwithstanding anything to the contrary in the Sublease, (a) neither the Master Lease, the Sublease nor this Consent shall be deemed, nor are they intended, to grant to Subtenant any rights whatsoever against Landlord, (b) Subtenant hereby acknowledges and agrees that its sole remedy for any alleged or actual breach of its rights in connection with the Sublease shall be solely against Tenant, that it is not a third party beneficiary under the Master Lease, and that it is not entitled to assert, against Landlord, any of Tenant’s rights under the Master Lease or any claims arising under the Sublease, whether in its own right, on behalf of Tenant, by a purported assignment of Tenant’s rights under the Master Lease to Subtenant, or otherwise, and (c) Tenant and Subtenant shall be jointly and severally liable to Landlord for all charges for services from time to time rendered by Landlord or its agents to the Sublease Premises or to Subtenant in connection with the Sublease Premises, whether the same are for ordinary services (such as electricity), separately reimbursable services (such as after-hours HVAC or other special or extra services), or otherwise, whether the same are requested by Tenant or Subtenant or their respective representatives, and whether or not the same are permitted or prohibited by, or referenced in, the Master Lease or the Sublease, and Tenant and Subtenant shall be responsible, as between themselves, for allocating responsibility for such charges. Landlord may in its sole discretion disregard, refuse, or decline to respond to any requests from time to time made by Subtenant directly to Landlord for any such services, approvals, or otherwise.

11. Tenant and Subtenant agree: (a) jointly and severally, to indemnify and hold Landlord harmless from and against any loss, cost, expense, damage, or liability, including reasonable attorneys’ fees, incurred as a result of a claim by any person or entity (i) that it is entitled to a commission, finder’s fee or like payment in connection with the Sublease or (ii) relating to or arising out of the Sublease or any related agreements or dealings; and (b) that Section 14 of the Sublease shall govern their respective obligations to one another regarding any such brokers.

12. Tenant shall promptly pay Landlord’s expenses incurred in connection with Tenant’s request for consent of this Sublease, as and to the extent provided in the Master Lease.

13. Subtenant hereby warrants, represents and certifies to Landlord that (a) Subtenant is duly organized, validly existing and in good standing under the laws of the jurisdiction in which such entity was organized; (b) Subtenant has the authority to own its property and to carry on its business as contemplated under the Sublease; (c) Subtenant is in compliance with all laws and orders of public authorities applicable to Subtenant, (d) Subtenant is not acting, directly or indirectly, for or on behalf of any person, group, entity, or nation named by any Executive Order or the United States Treasury Department as a terrorist, “Specially Designated National and Blocked Person”, or other banned or blocked person, group, entity, nation, or transaction pursuant to any law, order, rule, or regulation that is enforced or administered by the Office of Foreign Assets Control or other governmental agency and that it is not engaged in this transaction, directly or indirectly, on behalf of, or instigating or facilitating this transaction, directly or indirectly, on behalf of any such person, group, entity, or nation; (e) Subtenant has duly executed and delivered this Consent; (f) the execution, delivery and performance by Subtenant of this Consent (i) are within the powers of Subtenant, (ii) have been duly authorized by all requisite action, (iii) will not violate any provision of law or any order of any court or agency of government, or any agreement or other instrument to which Subtenant is a party or by which it or any of its property is bound, and (iv) will not result in the imposition of any lien or charge on any of Subtenant’s property, except by the provisions of this Consent; and (g) the Consent is a valid and binding obligation of Subtenant in accordance with its terms. Subtenant hereby agrees to defend, indemnify, and hold harmless Landlord from and against any and all claims, damages, losses, risks, liabilities, and expenses (including attorneys’ fees and costs) arising from or related to any breach of the foregoing warranty, representation, and certification. The provisions of this Section 13 shall survive the expiration or earlier termination of the term of the Sublease.

14. Landlord shall not be considered to have consented to the Sublease unless and until this Consent is executed and delivered by Landlord, Tenant, and Subtenant and approved by the holder of any mortgage on the Building having a right to approve the Sublease (Landlord hereby representing and warranting to Tenant and Subtenant that no such holder exists as of the date of this Consent). The submission of this Consent to Tenant or Subtenant for review or for execution, or any course of negotiations or communications with respect to the proposed Sublease, shall not constitute or be deemed to constitute Landlord’s consent to the Sublease, an undertaking to provide such consent, a waiver of any right of Landlord to request and review financial information, references, and other information regarding the Subtenant, its business and principals, and proposed activities in the Subleased Premises, or to recapture or terminate the Lease as to the Sublease Premises, or other undertaking to provide such consent or waiver. Any liability of Landlord to Tenant under or in connection with this Consent, and any liability of Landlord to Subtenant, including without limitation liability under or in connection with the Sublease or arising in any way from Subtenant’s use or occupancy of the Sublease Premises, shall be limited to the same extent as Landlord’s liability to Tenant is limited under the Master Lease.

15. This Consent shall be binding upon and shall inure to the benefit of Landlord, Tenant, and Subtenant and their respective successors and permitted assigns.

16. This Consent may be executed in multiple counterparts, each of which shall be deemed an original and all of which together shall constitute a single agreement, and shall be governed by the laws of The Commonwealth of Massachusetts.

[SIGNATURES ON FOLLOWING PAGE]

EXECUTED under seal as of the date first written above.

	LANDLORD:

	101 EDGEWATER LLC, a Delaware limited liability company

	By:
	Name:
	Title: Manager

	TENANT:

	SDL XYENTERPRISE LLC, a Delaware limited liability company

	By:
	Name:
	Title:
	Duly authorized

	SUBTENANT:

	BIOFRONTERA AG, a Delaware corporation

	By:
	Name:
	Title:
	Duly authorized

JOINDER

The undersigned, SDL, plc (the “Guarantor”), the guarantor of Tenant’s obligations under the Master Lease pursuant to the terms and provisions of the Guaranty dated April 30, 2012, hereby acknowledges its consent to the Sublease and this Consent pursuant to the terms and provisions of Section 7 of this Consent.

SDL, plc

	By:
		Name:
		Title:

EXHIBIT A

Copy of Executed Sublease

[See Attached]

SUBLEASE AGREEMENT

This SUBLEASE AGREEMENT (as the same may be amended, modified, supplemented or restated from time to time, this “ Sublease ”) is made as of __________________, 2016, by and between SDL XYENTERPRISE LLC, a Delaware limited liability c6mpany (f/k/a XyEnterprise Inc.) (the “ Sublandlord ”), having an address at 201 Edgewater Drive, Wakefield, Massachusetts 01880, and BIOFRONTERA, AG, a Delaware corporation (the “ Subtenant ”), having an address at #253, 450B Paradise Road, Swampscott, Massachusetts 01907.

WITNESSETH

WHEREAS, by that certain Office Lease dated as of April 30, 2012, by and between 101 Edgewater LLC, a Delaware limited liability company (“ Landlord ”), and Sublandlord, as tenant, as amended by that First Amendment to Lease dated as of March 17, 2014 (as amended, the “ Underlying Lease ”), a copy of which is annexed hereto, made a part hereof and marked Exhibit A , Landlord did lease to Sublandlord the space described in the Underlying Lease (the “ Premises ”) in the Complex (as defined therein), all as more particularly described in the Underlying Lease;

WHEREAS, all capitalized terms used herein without definition shall have the same meaning as set forth in the Underlying Lease; and

WHEREAS, Sublandlord desires to sublease to Subtenant the approximately 5,362 rentable square foot portion of the Premises referred to in the First Amendment to Lease as the “Additional Premises” and shown on the plan attached hereto as Exhibit A-1 (the “S ubleased Premises ”), and Subtenant is willing to sublet the Subleased Premises from Sublandlord on the terms and conditions hereinafter set forth.

NOW, THEREFORE, in consideration of the mutual covenants and agreements hereinafter set forth, it is hereby agreed by and between the parties hereto as follows:

1. PREMISES.

1.1 Sublease . Sublandlord hereby subleases unto Subtenant, and Subtenant hereby takes and hires from Sublandlord, the Subleased Premises, subject to the terms, conditions and provisions hereof. Subtenant shall have all the rights, privileges and benefits of the “Tenant” of such Underlying Lease pertaining to the Subleased Premises except as herein specifically limited or denied, and the same are hereby granted and conveyed to Subtenant from Sublandlord for the full Term hereof.

1.2 Condition of Premises . Subject to Sublandlord’s obligation to deliver the Subleased Premises to Subtenant in so-called “broom clean” condition and free of all occupants, Subtenant accepts the Subleased Premises and the Personal Property (as defined below) therein in “as-is” condition on the Sublease Commencement Date (as defined below). Subtenant acknowledges and agrees that Sublandlord has no obligation and has made no promises to alter, remodel, improve, renovate, repair or decorate the Subleased Premises, or any part thereof, or to provide any allowance for such purposes, and that no representations respecting the condition of the Subleased Premises have been made by Sublandlord to Subtenant.

2. TERM.

The term of this Sublease shall commence upon the full execution and delivery of this Sublease by the Sublandlord and Subtenant and receipt of the Landlord’s consent referred to in Section 12 (the “ Sublease Commencement Date ”) and end on June 15, 2019 (the “ Term ”), unless the Term may be sooner terminated as set forth herein. Subtenant shall have the right to occupy the premises beginning on the Sublease Commencement Date.

3. BASE RENT AND ADDITIONAL RENT.

Subtenant covenants and agrees to pay rent to Sublandlord to the address noted in Section 3.2, at the following rates and time periods:

3.1 Rent . Subtenant shall pay to Sublandlord fixed rent for the Premises (“ Base Rent ”), in advance, on the first day of each and every calendar month during the Term hereof and pro-rated for the fraction of any month, without offset, deduction, notice or demand, in the following amounts:

Period	Monthly Base Rent
Sublease Commencement Date to May 31, 2017	$	7,372.75
June 1, 2017 to May 31, 2018	$	7,819.58
June 1, 2018 to June 15, 2019	$	8,266.42

3.2 Additional Rent . Subtenant covenants and agrees to pay to Sublandlord, as additional rent, the following amounts (collectively, “ Additional Rent ”) when billed by Sublandlord in the manner provided in Section 2.6 of the Underlying Lease:

(a) Operating Expenses . 5.44% of Landlord’s Operating Expenses in each calendar year or portion thereof in the Term in excess of Landlord’s Operating Expenses for Calendar Year 2016, which percentage is based on the ratio of the (i) rentable square footage of the Subleased Premises (i.e., approximately 5,362 rentable square feet) to (ii) Rentable Floor Area of Building (as defined in the Underlying Lease) (i.e., 98,583 square feet);

(b) Taxes . 5.44% of Landlord’s Taxes in each tax fiscal year or portion thereof in the Term in excess of Landlord’s Taxes for the tax fiscal year ending June 30, 2017, which percentage is based on the ratio of the (i) rentable square footage of the Subleased Premises (i.e., approximately 5,362 rentable square feet) to (ii) Rentable Floor Area of Building (i.e., 98,583 square feet); and

(c) Electric . 22.23% of the electricity billed to the Premises, provided that if Subtenant’s use of electricity shall exceed normal office use as reasonably designated by Sublandlord, Subtenant shall pay an additional amount therefor, as reasonably estimated and billed by Sublandlord, which percentage is based on the ratio of the (i) rentable square footage of the Subleased Premises (i.e., approximately 5,362 rentable square feet) to (ii) rentable square footage of the Premises (i.e., approximately 24,125 square feet).

3.3 Address for Payment . All Rent and Additional Rent shall be paid to Sublandlord at the address set forth in the Notice section or such other address as Sublandlord may designate in writing.

3.4 Security Deposit . Subtenant shall deposit with Sublandlord a security deposit in the amount of $14,745.50 (the “ Security Deposit ”), which sum Sublandlord shall retain as security for the performance by Subtenant of each of its obligations hereunder. If at any time Subtenant fails to perform any of its obligations under this Sublease, including the payment of Rent or other payment obligations, Sublandlord may, at its option, apply the Security Deposit (or any portion thereof) to cure Subtenant’s default or to pay for damages caused by Subtenant’s default, and Subtenant shall immediately pay to Landlord the amount so applied to replenish the Security Deposit. If this Sublease has been terminated, then Sublandlord may apply the Security Deposit (or any portion thereof) against the damages incurred as a consequence of Subtenant’s breach. The application of the Security Deposit shall not limit Sublandlord’s remedies for default under the terms of this Sublease. Unless Sublandlord uses the Security Deposit to cure a default of Subtenant, to pay damages for Tenants’ breach of the Sublease or to restore the Premises to the condition to which Subtenant is required to leave the Premises upon expiration or any termination of the Sublease, then Sublandlord shall, within thirty (30) days after the termination of this Sublease, refund to Subtenant any funds remaining in the Security Deposit.

4. USE.

Subtenant shall have the right to use the Premises for the Permitted Uses set forth in the Underlying Lease, and for no other purpose.

5. UTILITIES.

Except as provided in Section 3.2 above, Subtenant shall be responsible for all charges for any utility, if any, separately metered or submetered to the Subleased Premises and consumed by Subtenant in or upon the Subleased Premises during the Term of this Sublease.

6. ASSIGNMENT AND SUBLEASING.

Subtenant shall not have the right to assign Subtenant’s interest in this Sublease or sublease all or any portion of the Subleased Premises during the Term, by operation of law or otherwise, without the prior written consent of Landlord and Sublandlord.

7. SUBORDINATION OF SUBLEASE.

7.1 Subordination of Sublease . It is understood that Sublandlord is not the fee owner of the Premises, but has acquired its interest therein solely through the Underlying Lease. This Sublease is subject to the provisions of the Underlying Lease and subordinate thereto. In the event that the Underlying Lease shall be cancelled or terminated by Landlord, the Term of this Sublease shall automatically terminate as of the date of such cancellation or termination of the Underlying Lease by Landlord, and Sublandlord shall not be liable in any way or to any extent to Subtenant for such termination or cancellation or for any damages or losses incurred or claimed to be incurred by Subtenant as a result thereof.

7.2 Attornment . Notwithstanding anything to the contrary contained herein, in the event of a termination of the Underlying Lease, and re-entry and dispossession of Sublandlord by Landlord, Landlord may, at its option, take over all right, title and interest of Sublandlord under this Sublease and Subtenant shall, at Landlord’s option, attorn to Landlord, pursuant to the terms of this Sublease, except that Landlord shall not:

(a) be liable for any previous act or omission of Sublandlord under this Sublease;

(b) be subject to any offset, not expressly provided in this Sublease, which theretofore accrued to Subtenant against Sublandlord;

(c) be bound by any modification of this Sublease made subsequent to the date hereof or by any previous prepayment of more than one month’s rent unless previously approved by Landlord;

(d) be hound by any covenant to undertake or complete any construction of the Subleased Premises or any portion thereof demised by this Sublease; or

(e) be bound by any obligation to make any payment to or on behalf of Subtenant.

8. INCORPORATION OF UNDERLYING LEASE.

8.1 Sublease Subject to Underlying Lease . Except as otherwise herein provided, this Sublease is subject to all of the terms, covenants and conditions of the Underlying Lease and such terms, covenants and conditions are incorporated herein by reference and made a part of this Sublease as if fully set forth herein except as otherwise stated in Section 8.2 below and except that the following provisions shall not apply to this Sublease:

(a) Section 1.1 — Any provision thereof which is inconsistent with this Sublease

(b) Section 2.1.1 — Right of First Offer

(d) Section 2.6.5 — Audit Rights

(e) Section 2.7, First Paragraph — Electricity

(f) Article III — Construction

(g) Section 5.8 — Assignment, Subletting

(h) Section 8.6 — Brokerage

(i) Section 8.21 - Guaranty

(j) Article X — Subordination and Non-disturbance

(k) Article XI — Roof Space

(l) Article XII — Moving Allowance

(m) Exhibit B — Landlord’s Initial Construction

(n) First Amendment, Sections 1(a) (Annual Fixed Rent), 1(b) (Additional Rent) and 1(c) (As-Is)

(o) First Amendment — Section 2 — Right of First Offer

(p) First Amendment — Section 4 — Brokerage

(q) First Amendment — Section 7 - Signage

The words “Landlord” and “Tenant” as utilized in the provisions of the Underlying Lease incorporated herein shall be deemed for the purposes of this Sublease to refer to Sublandlord and Subtenant respectively, it being understood and agreed that, subject to the provisions of Section 8.3 below, Sublandlord will not be acting as, or assuming any of the responsibilities of, Landlord, and all references in the Underlying Lease to Landlord-provided services or Landlord insurance requirements, and any other references which by their nature relate to the owner or operator of the building, rather than to a tenant of the building subleasing space to a subtenant, shall continue to be references to Landlord and not to Sublandlord. The words, “this Lease” as utilized in the provisions of the Underlying Lease incorporated herein shall be deemed for the purposes of this Sublease to refer to this Sublease. In all provisions of the Underlying Lease requiring the approval or consent of the “Landlord,” Subtenant shall be required to obtain the approval or consent of Sublandlord (which may be conditioned on Sublandlord’s ability to obtain the approval or consent of Landlord pursuant to the Underlying Lease).

8.2 Conflict with Underlying Lease . If any of the provisions of this Sublease are at variance or in conflict with the provisions of the Underlying Lease due to an express deletion, modification or alteration of such provisions herein, the provisions of this Sublease shall govern and control, as between Sublandlord and Subtenant only, and Landlord shall not be bound thereby.

8.3 Sublandlord’s Obligations . Notwithstanding anything to the contrary in this Sublease or the Underlying Lease, Sublandlord shall have no obligation to perform any of the terms, covenants and conditions contained in the Underlying Lease to be performed by Landlord. Without limiting the foregoing, Sublandlord shall have no obligation to provide any or all of the services, utilities, work, alterations, repairs or maintenance to be provided by Landlord under the Underlying Lease, and Sublandlord shall in no way be liable to Subtenant for any failure of Landlord to provide such services, utilities, work, alterations, repairs or maintenance. Notwithstanding the foregoing, Sublandlord shall use reasonable efforts to promptly enforce, at Subtenant’s sole cost and expense, all of its rights under the Underlying Lease upon notice from Subtenant of Landlord’s failure to perform its obligations under the Underlying Lease.

8.4 Subtenant’s Obligations . Subtenant hereby agrees to perform all of the obligations applicable to the Subleased Premises imposed on Sublandlord as Tenant under the Underlying Lease except for the payment of rent and other charges to Landlord and except as expressly provided for herein.

Subtenant agrees to indemnify and hold Sublandlord harmless from and against any and all claims, suits, damages, liabilities and expenses, including reasonable attorneys’ fees, arising out of Subtenant’s use and occupancy of the Subleased Premises.

8.5 Violation of Underlying Lease . Subtenant covenants that it will not commit, or suffer to be committed, any act or act of omission in violation of the terms and provisions of the Underlying Lease so as to render Sublandlord in default in any of the terms, covenants and conditions of the Underlying Lease.

8.6 Cabling . Notwithstanding Section 5.10 of the Underlying Lease to the contrary, Subtenant shall be obligated to remove, at Subtenant’s sole cost and expense, any wiring, cabling and/or other tel/data systems installed by Subtenant within or to otherwise serve the Subleased Premises pursuant to the terms and provisions of this Sublease, but shall not be obligated to remove any wiring, cabling and/or other tel/data systems existing within or otherwise serving the Subleased Premises prior to Subtenant’s occupancy thereof.

8.7 Default by Landlord . In the event of any default by Landlord of the Underlying Lease under the terms thereof, Subtenant shall give Sublandlord and Landlord written notice thereof, and Sublandlord shall use commercially reasonable efforts to compel Landlord to cure any such default pursuant to the terms of the Underlying Lease.

9. DEFAULT.

9.1 Default Under Sublease . The occurrence of any of the following shall constitute an “Event of Default”: (a) failure by Subtenant to pay Base Rent, Additional Rent or any other amounts payable under this Sublease, when due and such failure continues for more than three (3) business days following written notice from Sublandlord; and (b) failure by Subtenant to observe or perform any other provision of this Sublease to be observed or performed by Subtenant and such failure continues for more than ten (10) days following written notice from Sublandlord (provided, however, if such failure is of such a nature that Subtenant cannot reasonably remedy the same within such ten (10) day period, then Subtenant shall have an additional period, not to exceed thirty (30) days after the notice described in this subsection (b) to remedy the same, so long as Subtenant promptly commences (and in any event within such ten (10) day period) and prosecutes such remedy to completion with diligence and continuity). At any time after the occurrence of an Event of Default, Sublandlord shall have the right to terminate this Sublease by providing written notice to Subtenant and the effective date of such termination shall be five (5) business days after Subtenant’s receipt of such notice.

9.2 Underlying Lease Controls . Except in the Event of Default, which shall be governed by the provisions of Section 9.1 of this Sublease, (a) whenever a time period is specified in the Underlying Lease within which the Sublandlord, as tenant therein, must give notice or make a demand following an event, or within which Sublandlord must respond to any notice, request or demand previously given or made by the Landlord, or comply with any obligation thereunder on such Sublandlord’s part, such time period is hereby changed (for purposes of this Sublease only) by subtracting five (5) days therefrom, and (b) whenever a time period is specified in the Underlying Lease within which the Landlord must give notice or make a demand following an event or within which the Landlord must respond to any notice, request or demand previously given or made by the Sublandlord thereunder, or comply with any obligation thereunder on Landlord’s part, such time period is hereby changed (for purposes of this Sublease only) by adding five (5) days thereto. It is the intent of this Section to provide Sublandlord with time within which to transmit to the Landlord any notices or demands received by Sublandlord from Subtenant, and to transmit to Subtenant any notices or demands received by Sublandlord from the Landlord.

9.3 Remedies . Sublandlord shall have, in addition and not in limitation of any other remedy permitted by law or by this Sublease, all the rights and remedies of Landlord under Article VII of the Underlying Lease in the event of a default by Subtenant hereunder.

10. GENERAL PROVISIONS.

10.1 Insurance . Any insurance required to be carried by Subtenant pursuant to the provisions of the Underlying Lease (including, but not limited to, Section 5.5.2 of the Underlying Lease) shall name Landlord as well as Sublandlord as additional insured parties.

Except to the extent that the following is prohibited by the terms of any insurance policy carried by either party with respect to the Subleased Premises or occurrences thereon, each party, on behalf of themselves and their insurers, hereby waives any rights of recovery against the other (and, in the case of Subtenant, also against Landlord) for loss or injury against which such party is protected by insurance to the extent of the coverage provided by such insurance.

10.2 Holding Over . If Subtenant occupies (or claims the right to occupy) the Subleased Premises or any portion of the Subleased Premises after the expiration or earlier termination of this Sublease without having entered into a new sublease of the Subleased Premises with Sublandlord, Subtenant shall be a tenant-at-sufferance only, shall be subject to all of the terms and provisions of this Sublease, and shall pay, as use and occupation each month, an amount equal to one hundred fifty percent (150%) of the monthly Base Rent payments and one hundred percent (100%) of the Additional Rent payments in effect for the last full calendar month preceding the date of expiration or earlier termination of this Sublease. Such a holding over, even if with the consent of Sublandlord, shall not constitute a tenancy at will or an extension or renewal of this Sublease, and shall not diminish or affect Sublandlord’s right to recover possession of the Subleased Premises by self help, re-entry by summary proceedings or otherwise, the provisions of this Sublease, judicial process or otherwise. Subtenant shall save Sublandlord harmless and will exonerate, defend, indemnify and hold harmless Sublandlord from and against any and all damages and expenses that Sublandlord suffers on account of Subtenant’s holding over in the Subleased Premises after the expiration or sooner termination of the term of this Sublease.

10.3 Alterations . Subtenant shall make no decorations, alterations, additions or improvements to the Subleased Premises without the consent of both the Landlord and Sublandlord, which consent Sublandlord and Landlord may withhold in their sole discretion. Any and all alterations, improvements or additions by Subtenant shall be made in compliance with all applicable statutes, laws, ordinances and the like and shall become the property of Landlord, except to the extent such alterations or improvements constitute trade fixtures of Subtenant. Subtenant shall indemnify and hold harmless the Landlord and Sublandlord from and against all losses, damages, expenses (including reasonable attorneys’ fees) and all statutory liens or claims or liens of any contractor, subcontractor, materialman, laborer or any other party which may arise in connection with any alteration, addition, additional improvement or building to the Subleased Premises made by Subtenant or Subtenant’s contractors. In the event Subtenant shall make any improvements or alterations in the Subleased Premises and Landlord shall require the removal thereof, Subtenant shall remove the same and repair all damage caused thereby prior to the expiration of the term of this Sublease.

10.4 Furniture, Fixtures and Equipment . Subtenant shall have the right to use and maintain all of the furniture, furniture systems and fixtures located in the Subleased Premises during the Term of the Sublease set forth on Exhibit B attached hereto (collectively, the “Personal Property”). Subtenant shall not have the right to convey, barter or dispose of any of the Personal Property and shall maintain the same in good condition and repair throughout the Term, reasonable wear and tear and damage by casualty or condemnation excepted.

10.5 Signage . Any and all signage shall comply with the Underlying Lease. All costs and expenses associated with removing Subtenant’s signage, installing new signage for Subtenant or removing signage of Subtenant at the end of the Term shall be paid by the Subtenant.

11. NOTICES.

All notices to be given hereunder shall be deemed to be properly given as of the date of receipt of delivery (which shall be deemed one (1) day after the date mailed if sent by overnight courier) or refusal of delivery if in writing and sent by certified mail, overnight carrier or messenger (personal delivery) addressed as follows:

If to Sublandlord:

SDL XyEnterprise LLC

201 Edgewater Drive

Wakefield, MA 01880

Attn: Kevin Keating, Divisional Finance Controller

If to Subtenant:

Biofrontera, AG

201 Edgewater Drive

Wakefield, MA 01880

Attn: Monica Tamborini, CEO of US Operations

or at such other address as either party from time to time may specify in writing to the other. It is further agreed that each party hereto will promptly furnish to the other party a copy of any notice it may receive from any third person which may affect the rights of any party hereunder.

12. LANDLORD’S CONSENT.

This Sublease is conditioned upon Sublandlord and Subtenant obtaining the written consent of the Landlord to this Sublease and the consent of any mortgagee of Landlord that may be required.

13. LIMITATION ON RIGHT OF RECOVERY.

13.1 Sublandlord’s Liability . Notwithstanding anything to the contrary contained herein, there shall be absolutely no personal liability on Sublandlord’s officers, directors, partners, agents, employees, affiliates or any heir, administrator, executor, successor, legal representative or assign of any of them with respect to any of the terms, covenants, conditions and provisions of this Sublease in the event of a default by Sublandlord hereunder or in the event of any other claim in connection with the Subleased Premises. Such exculpation is absolute and without any exception whatsoever and all such liability of any kind hereunder is expressly waived by Subtenant and every person now or hereafter claiming any right hereunder or by, through or under Subtenant.

13.2 Subtenant’s Liability . Notwithstanding anything to the contrary contained herein, there shall be absolutely no personal liability on Subtenant’s officers, directors, partners, agents, employees, affiliates or any heir, administrator, executor, successor, legal representative or assign of any of them with respect to any of the terms, covenants, conditions and provisions of this Sublease in the event of a default by Subtenant hereunder or in the event of any other claim in connection with the Subleased Premises. Such exculpation is absolute and without any exception whatsoever and all such liability of any kind hereunder is expressly waived by Sublandlord and every person now or hereafter claiming any right hereunder or by, through or under Sublandlord.

14. BROKERS.

Each party represents and warrants to the other that it has not dealt with any real estate broker, salesperson or finder, in connection with this Sublease other than Cushman & Wakefield of Massachusetts, Inc. Any brokerage commission due to it shall be paid by Sublandlord. Both parties agree to hold the other harmless from all losses, damages, claims and expenses (including reasonably attorney’s fees) arising out of any claims for commission or finders fees or otherwise asserted by any person or firm either party has employed as its broker in connection with this Sublease.

15. MERGERS, DISCLAIMERS.

All understandings and agreements heretofore had between the parties hereto are merged in this Sublease, which alone fully and completely express this Sublease. Subtenant has not relied upon or been induced by any statements or representations, other than those expressly set forth in this Sublease, of any person in respect of the title to or the physical condition of the Subleased Premises, or any other matter affecting the Subleased Premises or this transaction which might be pertinent in considering the execution of this Sublease. Subtenant expressly acknowledges that no such representation not embodied herein have been made.

16. ENTIRE AGREEMENT AND BENEFIT.

This agreement contains the entire understanding between parties. No waiver, change, modification or discharge of any of the provisions of this Sublease shall be valid unless effected by an agreement in writing signed by both parties hereto. The waiver of any of the provisions of this Sublease shall not be deemed to be a waiver of any subsequent breach or default of the provisions hereof. This Sublease shall be binding upon and inure to the benefit of Sublandlord and Subtenant and their respective successors and assigns.

17. SEVERABILITY.

The illegality or invalidity of any provision of this Sublease, by reason of any rule of law or public policy, shall not affect this Sublease or any other provision hereof, but this Sublease shall, nevertheless, remain in full force and effect and shall be construed in all respects as if such invalid provision were omitted.

18. CONSTRUCTION.

This Sublease and the performance thereof shall be construed, regulated and governed by the laws of the Commonwealth of Massachusetts. The section headings have been inserted for convenience only and shall not enter in the interpretation or construction of this Sublease.

[Remainder of page intentionally left blank]

IN WITNESS WHEREOF, the parties have hereunto set their hands and seals as of the date first above written.

	SUBLANDLORD :

	SDL XYENTERPRISE LLC, a Delaware limited liability company

	By:
	Name:
	Title:

	SUBTENANT :

	BIOFRONTERA AG, a Delaware corporation

	By:
	Name:
	Title:

Exhibit A

Underlying Lease

[See Attached]

HOBBS BROOK OFFICE PARK
WAKEFIELD, MASSACHUSETTS

FIRST AMENDMENT TO LEASE
XYENTERPRISE INC.

First Amendment to Lease (“ First Amendment ”) dated as of March 17, 2014 between 101 EDGEWATER LLC, a Delaware limited liability company (“ Landlord ”), and XYENTERPRISE INC., a Delaware corporation (“ Tenant ”).

Background

Reference is made to a lease dated April 30, 2012 (the “ Lease ”) between Landlord and Tenant for certain premises containing 18,763 square feet of Rentable Floor Area (the “ Existing Premises ”) in the building known as 201 Edgewater Drive, Wakefield, Massachusetts (the “ Building ”). Capitalized terms used and not otherwise defined in this First Amendment shall have the meanings ascribed to them in the Lease.

Landlord and Tenant desire to enter into this First Amendment to add certain expansion space to the Existing Premises on the terms more particularly set forth in this First Amendment.

Agreement

FOR VALUE RECEIVED, Landlord and Tenant agree as follows:

1. Expansion . Effective as of the Expansion Commencement Date (defined below), Landlord hereby agrees to lease to Tenant and Tenant hereby agrees to lease from Landlord 5,362 square feet of Rentable Floor Area (the “ Additional Premises ” the Existing Promises and the Additional Premises are collectively, referred to as the “ Premises ” or the “ Expanded Premises ”) as shown on the floor plan attached hereto as Exhibit A . Tenant’s lease of the Additional Premises shall be on all of the same terms and conditions as the Existing Premises, except as otherwise specified herein. Effective as of the Expansion Commencement Date, the Additional Premises shall be made a part of the Premises under the Lease and Tenant shall be leasing a total of 24,125 square feet of Rentable Floor Area in the Building. Landlord may elect to send Tenant documentation setting forth the Expansion Commencement Date and other matters in the form attached as Exhibit D (a “ Confirmation of Expansion Commencement ”), which shall be binding subject to Tenant’s right to deliver to Landlord a written notice specifying Tenant’s objections within ten (10) days of Tenant’s receipt of the Confirmation of Expansion Commencement. The foregoing shall not relieve Landlord of the obligation to complete punch list items of Landlord’s Initial Construction. Landlord and Tenant acknowledge that the Initial Term applicable to the Expanded Premises is scheduled to expire on June 30, 2019 (subject to extension pursuant to the Lease, the “ Term Expiration Date ”).

(a) Annual Fixed Rent for the Additional Premises . Subject to the abatement of monthly installments of Annual Fixed Rent for the Additional Premises described below, commencing on (x) the earlier of (i) the date Tenant enters into possession of all or any portion of the Additional Premises for the conduct of its business (which shall not be deemed to occur by virtue of the installation or testing of computers or other equipment or the installation of other property of Tenant in the Additional Premises) or (ii) the Substantial Completion Date, as such term is defined in the attached Exhibit B (the earlier of such dates being referred to herein as the “ Expansion Commencement Date ”) and continuing through (y) the last day of the Term, Tenant shall pay Annual Fixed Rent for the Additional Premises in the amount per rentable square foot in accordance with the following schedule:

Expansion Lease Year	Rent Per Rentable Square Foot		Annual Fixed Rent		Monthly Installments Annual Fixed Rent
1-3	$	22,00	$	117,964.00	$	9,830,33
4 - Term Expiration Date	$	24.00	$	128,688.00	$	10,724.00

An “ Expansion Lease Year ” shall consist of twelve (12) calendar months beginning with the Expansion Commencement Date (as defined above), except that if the Expansion Commencement Date is not the first day of a calendar month, then Expansion Lease Year I shall include the partial month that includes the Expansion Commencement Date in addition to the following twelve (I2) calendar months, and the Annual Fixed Rent for Expansion Lease Year 1 shall be proportionately increased, Notwithstanding anything to the contrary contained in the Lease or this First Amendment, provided that no uncured default exists at the time of the abatement, Tenant shall be entitled to an abatement of monthly installments of Annual Fixed Rent for the Additional Premises for the two (2) month period beginning on the Expansion Commencement Date (in an amount not to exceed $19,660.66).

(b) Additional Rent . Commencing on the Expansion Commencement Date and continuing through the Term Expiration Date, payments of Additional Rent for Landlord’s Operating Expenses and Taxes with respect to the Additional Premises shall be determined and paid at the times and in the manner set forth in Sections 2.5 and 2.6 of the Lease, except that (i) the Base Operating Expenses Per Square Foot of Rentable Floor Area figure for the Additional Premises shall be equal to actual Operating Expenses for calendar year 2014 adjusted to 95% occupancy and (ii) the Base Taxes Per Square Foot of Rentable Floor Area figure for the Additional Premises shall be equal to actual Taxes for calendar year 2014. From and after the Expansion Commencement Date, Tenant shall pay for all electricity consumed in the Additional Premises as set forth in Section 2.7 of the Lease and any other additional charges incurred under the Lease for the Additional Premises other than Additional Rent for Landlord’s Operating Expenses and Taxes.

(c) As-Is . The Additional Premises are being leased in their “as-is” condition without representation or warranty by Landlord, and Landlord shall not be required to perform any work in connection with Tenant’s occupancy of the Additional Premises during the Term. Notwithstanding the foregoing, Landlord, at Tenant’s cost, subject to the Improvement Allowance set forth in Exhibit B attached to this First Amendment, shall perform the construction of the initial improvements to the Additional Premises for Tenant’s occupancy shown on Landlord’s Plans attached hereto as Exhibit B-1, in accordance with the provisions of Exhibit B to this First Amendment, using Building standard materials and finishes. Any additional improvement to the Additional Premises not shown on Landlord’s Plans that is requested by Tenant and approved by Landlord shall be constructed at Tenant’s sole cost and expense, subject to all terms and provisions of the Lease.

2. Right of First Offer . Prior to Landlord’s leasing any available space in the Building (the “ First Offer Space ”), to any third party, Landlord shall offer to lease such space (the “ Offered Space ”) to Tenant at the Expansion Market Rent (defined below) and except as otherwise specified herein on the same terms and conditions as the Lease, provided however, that (a) if there are less than three (3) Lease Years left in the Term at the time Landlord is offering to lease the Offered Space, Tenant may lease the Offered Space only if Tenant has, and irrevocably exercises, an Extension Option set forth in Section 2.4.1 of the Lease for the entire Premises (as expanded by this First Amendment) so that the Offered Space shall be leased by Tenant for not less than a three (3) year term, (b) the Offered Space shall be leased by Tenant in its “as is” condition, and (c) the figures for Base Operating Expenses and Base Taxes applicable to the Offered Space shall be the actual amounts for the calendar year and fiscal year, respectively, in which the Offered Space is to be delivered to Tenant, Any tenant or occupant of the Offered Space from time to time, any affiliate thereof, or any party having a right (including right of first offer) to lease such space as of the date hereof shall not be considered a “third-party” for purposes of this Section 2 , and Landlord shall be free to lease the Offered Space to any of the foregoing without offering the same to Tenant.

Any offer by Landlord under this Section 2 may be accepted by Tenant by written notice given within ten (10) days of delivery of Landlord’s offer. If Tenant does not timely accept Landlord’s offer, then Tenant’s rights under this Section 2 shall be deemed conclusively waived by Tenant with respect to the next lease of the Offered Space, and Landlord shall have no further obligation to offer the Offered Space to Tenant before next leasing the same to a third party, but this Section 2 shall apply to any other lease of First Offer Space. In the event that Tenant accepts any offer by Landlord under this section, the leasing of such Offered Space and the rent therefor shall be documented by an Amendment to the Lease. Tenant’s rights under this Section 2 shall be rendered void, at Landlord’s election, if Tenant is in default (subject to any applicable notice and cure periods set forth in the Lease) at the time Landlord offers any space to a third party or at the time Tenant’s lease of any Offered Space under this Section 2 , would otherwise commence.

“ Expansion Market Rent ” shall mean the then prevailing market rate for a five (5) year lease of office space in the greater Boston, Massachusetts “Metro-North” area, comparable to the Offered Space in terms of location within a building, finish, age, building quality and amenities for a tenant of equal size and financial strength as Tenant, under terms and conditions substantially the same as those on which Tenant shall have the right to lease the Offered Space and taking into account market tenant concessions in such comparable leases such as tenant improvement allowances and free rent, if any. If Landlord and Tenant have not agreed, in writing, on the Expansion Market Rent for the Offered Space within fourteen (14) days after Tenant accepts Landlord’s offer, then at the request of either party Expansion Market Rent for the Offered Space shall be determined in accordance with the arbitration procedure set forth in Section 2.4.1 of the Lease for the determination of Fair Market Rent.

If Tenant exercises its rights under this Section 2 , Landlord shall use reasonable efforts to deliver the Offered Space as set forth in Landlord’s offer. Landlord’s failure to deliver, or delay in delivering, all or any part of the Offered Space by reason of Force Majeure, as such term is defined in the Lease, and including continued occupancy of any such Offered Space by any occupant thereof shall not give rise to any liability of Landlord, shall not alter Tenant’s obligation to accept such Offered Space, when delivered, shall not constitute a default of Landlord, and shall not affect the validity of the Lease; provided that if delivery of the Offered Space does not occur within ninety (90) days after the delivery date set forth in Landlord’s Offer, Tenant may elect to withdraw its exercise of its rights under this Section 2 by notice given within five (5) Business Days after the expiration of such ninety (90) day period. If Tenant so notifies Landlord, Tenant’s Right of First Offer under this Section 2 shall not apply to the next lease of the Offered Space in question (but shall apply to subsequent leases thereafter).

This Section 2 shall not be construed to grant to Tenant any rights or interest in any space in the Building and any claims by Tenant alleging a failure of Landlord to comply herewith shall be limited to claims for monetary damages and Tenant may not assert any rights in any space nor file any lis pendens or similar notice with respect thereto.

Tenant’s rights under this Section 2 are personal to Tenant and shall not apply to any Transferee of Tenant (other than a Transferee under a Permitted Transfer). If at any time during the Term Tenant has Transferred all or any portion of the Premises (not including Permitted Transfers), then Tenant’s rights under this Section 2 shall be null and void and of no further force or effect.

3. Termination of Options . Except (a) as specifically set forth in this First Amendment and (b) for the Extension Option set forth in Section 2.4.1 of the Lease, all other Options set forth in the Lease are hereby terminated. For purposes hereof, “Options” shall mean (a) all rights or options of Tenant to (i) extend or renew the Lease Term, (ii) expand or contract the Premises or (iii) relocate within the Building or the Edgewater Office Park; and (b) rights of first refusal or first offer or notice (or similar rights) with respect to the lease of other space in the Building or the Edgewater Office Park or the purchase of any portion of the Building or the Edgewater Office Park.

4. Brokerage . Each of Landlord and Tenant represents and warrants to the other that it has had no dealings with any broker or agent in connection with this First Amendment, except Cassidy Turley and Wyman Street Advisors, Each; of Landlord and Tenant covenants to the other to defend (by counsel of reasonably acceptable to the other party), pay, hold harmless and indemnify the other from and against any and all costs, expense or liability for any compensation, commissions, and charges claimed by any broker or agent, with respect to this First Amendment or the negotiation thereof arising from a breach of the foregoing warranty. Landlord shall pay all commissions due to Cassidy Turley and Wyman Street Advisors in connection with this First Amendment pursuant to separate written agreements between Landlord and Cassidy Turley and Wyman Street Advisors.

5. Ratification . Except as set forth herein, the terms of the Lease are hereby ratified and confirmed. Each party hereby warrants and represents that, to the best of its knowledge (i) as of the date hereof the parties have complied with all of the terms and conditions of the Lease, (ii) Tenant has no rights to any credit, claim, cause of action, offset or similar charge against Landlord or the Annual Fixed Rent existing as of the date hereof, except as specifically set forth in this First Amendment and (iii) without Landlord’s prior written consent there have been no assignees, sublessees or transferees of the Lease, or any person or firm occupying or having the right in the future to occupy the Premises, or any part thereof, except Tenant.

6. Miscellaneous . Except as modified herein, the Lease and all of the terms and provisions thereof shall remain unmodified and in full force and effect as originally written including, without limitation, Sections 5.2 and 5.3. In the event of any conflict or inconsistency between the provisions of the Lease and the provisions of this First Amendment, the provisions of this First Amendment shall control. All terms used herein but not defined herein which are defined in the Lease shall have the same meaning for purposes hereof as they do for purposes of the Lease. The recitals set forth above in this First Amendment are hereby incorporated by this reference. This First Amendment shall be binding upon and shall inure to the benefit of the parties hereto and their respective beneficiaries, successors and assigns. This First Amendment shall be deemed to have been executed and delivered within The Commonwealth of Massachusetts, and the rights and obligations of Landlord and Tenant shall be construed and enforced in accordance with, and governed by, the laws of The Commonwealth of Massachusetts. Each party has cooperated in the drafting and preparation of this First Amendment and, therefore, in any construction to be made of this First Amendment, the same shall not be construed against either party, This First Amendment may be executed in counterparts, and when both Landlord and Tenant have signed and delivered at least one such counterpart, each counterpart shall be deemed an original, and, when taken together with other signed counterparts, shall constitute one First Amendment, which shall be binding upon and effective as to Landlord and Tenant. In case any one or more of the provisions contained in this First Amendment shall for any reason be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality, or unenforceability shall not affect any other provision of this First Amendment, and this First Amendment shall be construed as if such invalid, illegal or unenforceable provision had never been contained herein.

7. Signage . Landlord shall install Building standard signage at the entrance to the Expanded Premises and in the lobby directory at Landlord’s sole cost and expense in accordance with Section 5.12 of the Lease.

EXECUTED as a sealed Massachusetts instrument as of the date first written above.

	LANDLORD:

	101 Edgewater LLC

	By:
		Manager

	TENANT:

	XyEnterprise, Inc.

	By:
		Name:
		Title:

	By:
		Name:
		Title:

REAFFIRMATION OF GUARANTY

The undersigned, as guarantor of Tenant’s obligations under the Lease pursuant to that certain Guaranty dated April 30, 2012 (the “ Guaranty ”) and as of the date of the First Amendment, hereby (a) consents to the First Amendment; (b) ratifies the Guaranty; (c) confirms that the Guaranty remains in full force and effect; and (d) agrees that the Guaranty includes, without limitation, all of Tenant’s obligations under the Lease as amended by the First Amendment.

SDL, plc, a corporation registered In England and
Wales

	By:
		Name:
		Title: President / Vice President

	By:
		Name:
		Title: Treasurer / Assistant Treasurer

EXHIBIT B

Landlord’s Work

Plans and Specifications .

(a) Preparation of Plans . Landlord has prepared plans (“ Landlord’s Plans ”) for the construction of certain improvements in the Additional Premises attached hereto as Exhibit B-1, which Tenant hereby unconditionally approves. Landlord shall perform Landlord’s Work consistent with Landlord’s Plans using Building standard materials and finishes. Tenant acknowledges that Landlord’s Work does not include the installation of telecommunications cabling and equipment.

(b) Change Orders . Landlord’s Plans shall not be changed or modified except as set forth herein. If Tenant requests a change in Landlord’s Plans, Landlord shall not unreasonably withhold its consent to said change provided that it shall not be deemed unreasonable for Landlord to withhold consent to any change in Landlord’s Plans that in Landlord’s sole opinion (i) will cause any delay in the completion of Landlord’s Work (as hereinafter defined), (ii) cause any additional cost or expense to Landlord, (iii) in any manner affect any structural component of the Building (including, without limitation, exterior walls, exterior windows, core walls, roofs, or floor slabs), (iv) in any respect be incompatible with the electrical, mechanical, or plumbing components or systems of the Building, (v) affect in any respect other space in the Building other than the Additional Premises, including the exterior of the Building, (vi) diminish the value of the Premises for any general purpose office use, or (vii) require any unusual expense to readapt the Premises for any general purpose office use. With respect to clauses (i) and (ii) above, Landlord may, but shall not be obligated to, grant its consent provided Tenant agrees to pay for any and all costs associated therewith.

Completion of Landlord’s Work .

(a) Construction of Additional Premises . Landlord shall exercise reasonable efforts to substantially complete the work specified in Landlord’s Plans (“ Landlord’s Work ”) necessary to prepare the Additional Premises for Tenant’s occupancy on or before May 1, 2014 (the “ Estimated Expansion Commencement Date ”), subject to Tenant’s Delays (as hereinafter defined) and Force Majeure, as such term is defined In Section 4.2 of the Lease.

(b) Substantial Completion . The Additional Premises shall be deemed ready for occupancy on that day (the “ Substantial Completion Date ”) on which Landlord’s Work is “ Substantially Complete, ” defined to mean that Landlord’s Work has been completed except for minor items of construction, mechanical and electrical adjustment or other work which Landlord is able to complete after Tenant has occupied the Additional Premises without unreasonably interfering with Tenant’s use thereof, as evidenced by an architect’s written certification and the issuance of a valid certificate of occupancy (which may be temporary or permanent) from the City of Wakefield for the Premises or such other permit or approval entitling Tenant to occupy the Additional Premises for the Permitted Uses.

Improvement Allowance .

Landlord shall provide Tenant with an allowance for the costs of preparing the Additional Premises for Tenant’s initial occupancy (including the costs of Landlord’s Work and architectural and engineering fees) in an amount not to exceed $67,025.00 (the “ Improvement Allowance ”), Landlord shall notify Tenant of the total fixed-price construction cost of Landlord’s Work shown on Landlord’s Plans (the “ Base Price ”), including mark-ups as determined hereunder, The Base Price shall hereafter be subject to adjustment for Change Orders (if any). Costs of Building services or facilities (such as electricity, HVAC, and cleaning) and other additional costs (such as permit fees, infiltration and inflow charges, and inspection costs) actually required to implement Landlord’s Work and other variable costs to the extent required to be paid by Tenant under the Lease (such as for review, inspection, and testing) shall thereafter be added to the Base Price (as adjusted for Change Orders). All costs referred to in this paragraph shall be subject to reimbursement from the Improvement Allowance. In the event that the total fixed price of Landlord’s Work (as determined hereunder), together with any related costs reasonably estimated by Landlord, exceeds the Improvement Allowance, Landlord may from time to time require Tenant to pay such excess to Landlord before performing the remaining Landlord’s Work. Except as set forth below, Tenant shall have no right to, and Landlord shall have no obligation to fund, any Improvement Allowance not properly requisitioned by Tenant on or before December 31, 2014. Notwithstanding the foregoing sentence, if Tenant requests by written notice to Landlord any Improvement Allowance unused after the full and final payment of Landlord’s Work, then such amount(s) may be used to reimburse Tenant for its actual, documented third party costs of furniture, cabling and other approved Tenant fixtures in the Additional Premises or toward Tenant’s monthly installments of Annual Fixed Rent beginning on January 1, 2015,

Excess Work .

All Landlord’s Work (including, without limitation, any Change Orders requested by Tenant, the cost of which exceeds the Improvement Allowance shall be “ Excess Work. ” Tenant may seek to reduce the cost of Landlord’s Work by Change Order under Section 1(b) , above). All Excess Work shall be performed by Landlord at the sole expense of Tenant.

Tenant’s Delay .

(a) Any delay that shall occur in the Substantial Completion Date as the result of the following shall be a Tenant’s Delay: any request by Tenant that Landlord delay in the commencement or completion of Landlord’s Work for any reason;

(i) any change made or requested by Tenant in any of Landlord’s Plans

(ii) any special requirements of Tenant not in conformity with Landlord’s Plans;

(iii) any other act or omission of Tenant or its members, managers, officers, directors, agents, servants, contractors, architects, engineers, or employees; or

(iv) any reasonably necessary rescheduling of the sequence of any of Landlord’s Work due to any of the causes for delay referred to In clauses (i), (ii), (iii), and (iv) of this paragraph (a) of Section 5 .

(b) If any delay in the Substantial Completion Date is the result of Force Majeure and such delay would not have occurred but for any of Tenant’s Delays described in paragraph (a) of this Section 5 , such delay shall be deemed added to Tenant’s Delays described in that paragraph.

(c) In addition to Landlord’s other rights and remedies under prevailing circumstances, the Expansion Commencement Date shall automatically be extended for the period of any delays caused by Tenant’s Delay(s) or Force Majeure but the number of days of rent abatement for the Additional Premises to which Tenant is entitled under Section 1(a) of this First Amendment shall be reduced by the number of days the Expansion Commencement Date is delayed as a result of a Tenant’s Delay or Force Majeure and Tenant shall be obligated to commence the payment of Rent on the date Tenant would have commenced payment of Rent but for the Tenant Delay(s) or Force Majeure.

(d) If, as a result of Tenant’s Delay(s), the Substantial Completion Date is delayed in the aggregate for more than sixty (60) days, Landlord may (but shall not be required to) at any time thereafter terminate the First Amendment by giving written notice of such termination to Tenant, and thereupon the First Amendment shall forthwith terminate without further liability or obligation on the part of either party, except that Tenant shall pay to Landlord the damages suffered by Landlord by reason of such Lease termination including, without limitation, the cost theretofore incurred by Landlord in performing and, if applicable, demolishing Landlord’s Work, plus an amount equal to Landlord’s out-of-pocket expenses incurred in connection with the First Amendment, including, without limitation, brokerage and legal fees, together with any amount required to be paid pursuant to paragraph (a) of this Section 5 , through the effective termination date.

Conclusiveness of Landlord’s Performance .

Tenant shall have no claim that Landlord has failed to perform any of Landlord’s Work, unless Tenant shall have given Landlord notice, not later than sixty (60) days following the Substantial Completion Date, or, in the case of latent defects, not later than the earlier of (a) eleven (11) months following the Substantial Completion Date and (b) the date Tenant knew or should have known about such latent defect, of respects in which Landlord has not performed Landlord’s Work, Except for Landlord’s Work, the Additional Premises are being leased in their condition “as is” without representation or warranty by Landlord.

Entry Prior to the Expansion Commencement Date .

If and as long as Tenant does not interfere in any, way with the construction process (by causing disharmony, scheduling or coordination difficulties, etc.), Tenant may, pursuant to the provisions of Section 3.2 of the Lease and at Tenant’s sole risk and expense, enter the Additional Premises up to thirty (30) days prior to the Substantial Completion Date for the purpose of installing Tenant’s decorations, movable furnishings, cabling, wiring and business fixtures and equipment. The determination of any such interference by Landlord shall be conclusive. Prior to Tenant’s occupancy of the Additional Premises, and after Tenant’s written request to Landlord, Tenant may conduct a walk-through of the Additional Premises accompanied by a representative of Landlord.

Prior to the Expansion Commencement Date Tenant shall comply with and perform, and shall cause its employees, agents, contractors, subcontractors, material suppliers and laborers to comply with and perform, all Tenant’s obligations under the Lease except the obligations to pay Annual Fixed Rent and Additional Rent and other obligations, the performance of which would be clearly incompatible with the installation of decorations, movable furnishings, cabling, wiring and business fixtures and equipment pursuant hereto.

Tenant Contractors.

Any independent contractor of Tenant (or any employee or agent of Tenant) performing any work in the Premises or the Additional Premises prior to the Expansion Commencement Date if and to the extent permitted by Landlord pursuant to the provisions of Section 3.2 of the Lease shall be a “ Tenant Contractor ” and shall be subject to all of the terms, conditions and requirements contained in the Lease. Neither Tenant nor any Tenant Contractor shall interfere in any way with construction of, nor damage, Landlord’s Work, and shall do all things reasonably requested by Landlord to expedite construction of Landlord’s Work, Without limitation, Tenant shall require each Tenant Contractor to adjust and coordinate any work or installation in or to the Premises to meet the schedule or requirements of other work being performed by or for Landlord throughout the Building, which shall in all cases have precedence. If Tenant or any Tenant Contractor fails so to adjust to the schedule or requirements of Landlord, then Landlord may immediately by notice to Tenant terminate permission previously granted to Tenant to enter the Additional Premises prior to the Expansion Commencement Date. Neither Tenant nor any Tenant Contractor shall cause any labor disharmony, and Tenant shall be responsible for all costs required to produce labor harmony in connection with an entry under this Section. In all events, Tenant shall indemnify the Indemnitees in the manner provided in Section 5.5.1 of the Lease against any claim, loss or cost arising out of any interference with, or damage to, Landlord’s Work or any other work in the Building, or any delay thereto, or any increase in the cost thereof on account in whole or in part of any act, omission, neglect or default by Tenant or any Tenant Contractor. Without limiting the generality of the foregoing, to the extent that the commencement or performance of Landlord’s Work is delayed on account in whole or in part of any act, omission, neglect, or default by Tenant or any Tenant Contractor, then such delay shall constitute a Tenant Delay as provided herein.

Any requirements of any such Tenant Contractor for services from Landlord or Landlord’s contractor, such as hoisting, electrical or mechanical needs, shall be paid for in advance by Tenant and arranged between such Tenant Contractor and Landlord or Landlord’s contractor, Should the work of any Tenant Contractor depend on the installed field conditions of any item of Landlord’s Work, such Tenant Contractor shall ascertain such field conditions after installation of such item of Landlord’s Work. Neither Landlord nor Landlord’s contractor shall ever be required or obliged to alter the method, time or manner for performing Landlord’s Work or work elsewhere in the Building, on account of the work of any such Tenant Contractor. Should Landlord’s contractor, including subcontractors working under such contractor, damage or delay the work of any Tenant Contractor, then such Tenant Contractor, by entering on the Premises and/or the Additional Premises, shall be deemed to have agreed not to prosecute any claim against Landlord, but shall look solely to Landlord’s contractor (or such contractor’s subcontractors) that allegedly caused the damage or delay. If any such Tenant Contractor ever makes a claim against any Indemnitee (as such term is defined in Section 5.5.1 of the Lease) directly, then Tenant shall indemnify such Indemnitee in the manner provided in the Lease against such claim so long as such Tenant Contractor’s loss was not caused solely and directly by the gross negligence or willful and wrongful act of such Indemnitee. Tenant shall cause each Tenant Contractor performing work on the Premises or the Additional Premises to clean up regularly and remove its debris from the Premises, the Additional Premises and Building. If any Tenant Contractor fails so to clean up, then Landlord may cause its contractor to clean up and remove debris, and Tenant shall pay all costs (including administrative costs) of such cleanup and removal.

Exhibit D

Confirmation of Expansion Commencement

Reference is made to the Lease dated __________ between _________, as Landlord and __________________, as Tenant (the “ Lease ”). The terms listed below are used as defined in the Lease.

The following are hereby confirmed:

Expansion Commencement

Date:

Initial Rent Abatement

Period under Section 1(a) of

the First Amendment

Executed this ___ day of ___________, 20___.

LANDLORD:

	By:
		Name:
		Title:

EDGEWATER OFFICE PARK

Wakefield, Massachusetts

OFFICE LEASE

XyEnterprise Inc., as Tenant

Table of Contents

		Page

ARTICLE I	REFERENCE DATA	1

1.1	SUBJECTS REFERRED TO	1

1.2	EXHIBITS	3

ARTICLE II	PREMISES; TERM; RENT	3

2.1	PREMISES AND EXCLUSIONS	3

2.2	APPURTENANT RIGHTS	5

2.3	RESERVATIONS	6

2.4	TERM	6

2.5	ANNUAL FIXED RENT	8

2.6	ADDITIONAL RENT - OPERATING EXPENSES AND TAXES	9

2.7	ELECTRICITY	12

ARTICLE III	CONSTRUCTION	12

3.1	LANDLORD WORK	12

3.2	ENTRY BY TENANT PRIOR TO TERM COMMENCEMENT DATE	13

ARTICLE IV	LANDLORD’S COVENANTS	13

4.1	LANDLORD’S COVENANTS	13

4.2	INTERRUPTION	15

4.3	INSURANCE	15

ARTICLE V	TENANT’S ADDITIONAL COVENANTS	16

5.1	MAINTENANCE AND REPAIR	16

5.2	USE, WASTE AND NUISANCE	16

5.3	COMPLIANCE WITH LAW	17

5.4	RULES AND REGULATIONS	17

5.5	INDEMNIFICATION AND INSURANCE	18

5.6	TENANT’S PROPERTY	19

5.7	ENTRY FOR REPAIRS ANT) INSPECTIONS	19

5.8	ASSIGNMENT	20

5.9	ALTERATIONS	21

5.10	SURRENDER	21

5.11	PERSONAL PROPERTY TAXES	22

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Table of Contents

(continued)

		Page

5.12	SIGNS	22

ARTICLE VI	CASUALTY AND TAKING	22

6.1	DAMAGE BY FIRE OR CASUALTY	22

6.2	CONDEMNATION - EMINENT DOMAIN	24

6.3	EMINENT DOMAIN AWARD	24

ARTICLE VII	DEFAULT	25

7.1	TERMINATION FOR DEFAULT OR INSOLVENCY	25

7.2	REIMBURSEMENT OF LANDLORD’S EXPENSES	26

7.3	DAMAGES	26

7.4	MITIGATION	27

7.5	CLAIMS IN BANKRUPTCY	27

7.6	INTEREST ON UNPAID AMOUNTS	27

7.7	LATE FEE	27

7.8	INTENTIONALLY OMITTED	28

7.9	INTENTIONALLY OMITTED	28

ARTICLE VIII	MISCELLANEOUS	28

8.1	HOLDOVER	28

8.2	ESTOPPEL CERTIFICATES	28

8.3	NOTICE	29

8.4	LANDLORD’S RIGHT TO CURE	29

8.5	SUCCESSORS AND ASSIGNS	29

8.6	BROKERAGE	29

8.7	WAIVER	30

8.8	ACCORD AND SATISFACTION	30

8.9	REMEDIES CUMULATIVE	30

8.10	PARTIAL INVALIDITY	30

8.11	WAIVERS OF SUBROGATION	31

8.12	ENTIRE AGREEMENT	31

8.13	NO AGREEMENT UNTIL SIGNED	31

8.14	TENANT’S AUTHORIZED REPRESENTATIVE	31

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Table of Contents

(continued)

		Page

8.15	NOTICE OF LEASE	31

8.16	TENANT AS BUSINESS ENTITY	32

8.17	INTENTIONALLY OMITTED	32

8.18	FINANCIAL STATEMENTS	32

8.19	INTENTIONALLY OMITTED	33

8.20	MISCELLANEOUS PROVISIONS	33

8.21	GUARANTY	33

ARTICLE IX	LANDLORD’S LIABILITY AND ASSIGNMENT FOR FINANCING	34

9.1	LANDLORD’S LIABILITY	34

9.2	ASSIGNMENT OF RENTS	34

ARTICLE X	SUBORDINATION AND NON-DISTURBANCE	35

ARTICLE XI	ROOF SPACE	36

11.1	ANTENNA	36

ARTICLE XII	MOVING ALLOWANCE	38

12.1	MOVING ALLOWANCE	38

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EDGEWATER OFFICE PARK

Wakefield, Massachusetts

LEASE dated April 30, 2012

ARTICLE I

REFERENCE DATA

1.1 SUBJECTS REFERRED TO

Each reference in this Lease to any of the following subjects shall be construed to incorporate the data stated for that subject in this Article I.

LANDLORD:		101 Edgewater LLC, a Delaware limited liability company

LANDLORD’S ADDRESS:		c/o 225 Wyman Street Waltham, Massachusetts 02451-1209 Attention: Real Estate Manager

TENANT:		XyEnterprise Inc., a Delaware corporation

TENANT’S ORIGINAL ADDRESS:		Suite 210 101 Edgewater Drive Wakefield, MA 01880

PREMISES ADDRESS:		Suite 225 201 Edgewater Drive Wakefield, MA 01880

ESTIMATED TERM COMMENCEMENT DATE:		June 1, 2012

TERM COMMENCEMENT DATE:		As defined in Section 2.4 .

TERM EXPIRATION DATE:		The last day of the 7th Lease Year, subject to extension as set forth in Section 2.4.1

LEASE YEAR:		Each Lease Year shall consist of twelve (12) calendar months beginning with the Term Commencement Date, except that if the Term Commencement Date is not the first day of a calendar month, then Lease Year 1 shall include the partial month at the beginning of the Term in addition to the following twelve (12) calendar months, and the Annual Rent for Lease Year 1 shall be proportionately increased.

ANNUAL FIXED RENT:

Lease Year	Annual Fixed Rent			Monthly Fixed Rent		Rent Per Square Foot of Premises Rentable Floor Area
1-4	$	431,549.00	*	$	35,962.42	$	23.00
5	$	459,693.50		$	38,307.79	$	24.50
6-7	$	469,075.00		$	39,089.58	$	25.00

*Notwithstanding anything to the contrary contained in this Lease, provided that no uncured default under this Lease beyond any applicable notice and cure period exists at the time of the abatement, Tenant shall be entitled to an abatement of monthly installments of Annual Fixed Rent for the eight (8) month period beginning on the Term Commencement Date. For avoidance of doubt, the rent abatement period shall be for eight (8) full calendar months (or two-hundred and forty (240) days).

BASE OPERATING EXPENSES PER SQUARE FOOT OF RENTABLE FLOOR AREA:		Annual Operating Expenses per square foot of Rentable Floor Area for the calendar year 2012, adjusted to reflect 95% occupancy.

BASE TAXES PER SQUARE FOOT OF RENTABLE FLOOR AREA:		Landlord’s Taxes per square foot of Rentable Floor Area for the calendar year 2013.

MOVING ALLOWANCE:		$12.80 per square foot of Rentable Floor Area of the Premises ($240,166.40).

LAND:		The land upon which the Building is situated including parking areas, garages, drives, walks, landscaped areas and other common areas serving the Building.

COMPLEX:		A three-building project comprised of the Building, the building known as 101 Edgewater Drive, Wakefield, Massachusetts and the building known as 500 Edgewater Drive, Wakefield, Massachusetts and all other buildings owned by Landlord or its affiliates from time to time on the Edgewater Office Park, including without limitation the buildings known as 301 and 401 Edgewater Place and 601 and 701 Edgewater Drive.

BUILDING:		The entire building known and numbered as 201 Edgewater Drive, Wakefield, Massachusetts and all other improvements on the Land.

RENTABLE FLOOR AREA OF BUILDING:		Conclusively agreed to be 98,583 square feet.

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PREMISES:		The space delineated on Exhibit A-I.

RENTABLE FLOOR AREA OF PREMISES:		Conclusively agreed to be 18,763 square feet located on the first (1st) floor of the Building.

PERMITTED USES:		General Office Uses

GUARANTOR:		SDL, plc

COMMERCIAL GENERAL LIABILITY INSURANCE:		$4,000,000.00

TENANT’S BROKER:		Cassidy Turley FHO

LANDLORD’S BROKER:		Wyman Street Advisors

TENANT’S AUTHORIZED REPRESENTATIVE		David Leers, CFO

1.2 EXHIBITS

The following is a list of Exhibits attached to this Lease.

Exhibit A:		Plan of Premises

Exhibit A-1:		Plan of First Offer Space

Exhibit B:		Landlord’s Initial Construction

Exhibit B-1:		Landlord’s Plans

Exhibit C:		Landlord’s Cleaning Specifications

Exhibit D:		Confirmation of Lease Commencement

Exhibit E:		Guaranty

ARTICLE II

PREMISES; TERM; RENT

2.1 PREMISES AND EXCLUSIONS

Landlord hereby leases to Tenant and Tenant hereby leases from Landlord the Premises. The Premises exclude parking areas, common areas and facilities of the Building, including without limitation exterior faces of exterior walls, the common stairways and stairwells, entranceways and any lobby and courtyard areas, elevators and elevator wells, fan rooms, electric and telephone closets, janitor closets, freight elevator vestibules, and pipes, ducts, conduits, wires and appurtenant fixtures serving other parts of the Building (exclusively or in common) and other common areas and facilities. If the Premises include less than the entire rentable area of any floor, then the Premises also exclude the common corridors, elevator lobby and toilets located on such floor.

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This Lease is subject to all easements, restrictions, agreements, and encumbrances of record to the extent in force and applicable. Landlord represents that such title matters shall not affect any of Tenant’s rights under this Lease in any material and adverse respect.

2.1.1 RIGHT OF FIRST OFFER FOR CONTIGUOUS SPACE

Prior to leasing certain premises, of approximately 5,300 square feet of Rentable Floor Area, as shown on Exhibit A-1 (the “ First Offer Space ”), to any third party, Landlord shall offer to lease such space (the “Offered Space”) to Tenant at the Expansion Market Rent (defined below) and except as otherwise specified herein on the same terms and conditions as this Lease, provided however, that (a) if there are less than three (3) Lease Years left in the Term at the time Landlord is offering to lease the Offered Space, Tenant may lease the Offered Space only if Tenant has, and irrevocably exercises, an Extension Option set forth in Section 2.4.1 for the Premises so that the Offered Space shall be leased by Tenant for more than a three (3) year term, (b) the Offered Space shall be leased by Tenant in its “as is” condition, and (c) the figures for Base Operating Expenses and Base Taxes applicable to the Offered Space shall be the actual amounts for the calendar year in which the Offered Space is to be delivered to Tenant. Any tenant or occupant of the Offered Space from time to time, any affiliate thereof (but not if Landlord would enter into a new lease with such affiliate for such space), or any party having a right (including right of first offer) to lease such space as of the date hereof shall not be considered a “third-party” for purposes of this Section 2.1.1 , and Landlord shall be free to lease the Offered Space to any of the foregoing without offering the same to Tenant.

Any offer by Landlord under this Section 2.1.1 may be accepted by Tenant by written notice given within ten (10) days of delivery of Landlord’s offer. If Tenant does not timely accept Landlord’s offer, then Tenant’s rights under this Section 2.1.1 shall be deemed conclusively waived by Tenant with respect to the next lease of the Offered Space, and Landlord shall have no further obligation to offer the Offered Space to Tenant before next leasing the same to a third party, but this Section 2.1.1 shall apply to any other lease of First Offer Space. In the event that Tenant accepts any offer by Landlord under this section, the leasing of such Offered Space and the rent therefor shall be documented by an Amendment to this Lease. Tenant’s rights under this Section 2.1.1 shall be rendered void, at Landlord’s election, if Tenant is in default (subject to any applicable notice and cure periods set forth in this Lease) at the time Landlord offers any space to a third party or at the time Tenant’s lease of any Offered Space under this Section 2.1.1 would otherwise commence. For the avoidance of doubt, Tenant’s default will only render the right of first offer void for such specific offer of Offered Space and not for the remainder of the Term, provided that Landlord has accepted Tenant’s cure of such default.

“ Expansion Market Rent ” shall mean the then prevailing market rate for a five (5) year lease of office space in the greater Boston, Massachusetts “Metro-North” area comparable to the Offered Space in terms of location within a building, finish, age, building quality and amenities for a tenant of equal size and financial strength as Tenant, under terms and conditions substantially the same as those on which Tenant shall have the right to lease the Offered Space and considering all relevant factors (the parties intending and agreeing that uncommon or unusual features of other leases in the marketplace will not be considered). If Landlord and Tenant have not agreed, in writing, on the Expansion Market Rent for the Offered Space within fourteen (14) days after Tenant accepts Landlord’s offer, then at the request of either party Expansion Market Rent for the Offered Space shall be determined in accordance with the arbitration procedure set forth in Section 2.4.1 for the determination of Fair Market Rent.

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If Tenant exercises its rights under this Section 2.1.1 , Landlord shall use reasonable efforts to deliver the Offered Space as set forth in Landlord’s offer. Landlord’s failure to deliver, or delay in delivering, all or any part of the Offered Space by reason of Force Majeure, as such term is defined in Section 4.2 , and including continued occupancy of any such Offered Space by any occupant thereof shall not give rise to any liability of Landlord, shall not alter Tenant’s obligation to accept such Offered Space when delivered, shall not constitute a default of Landlord, and shall not affect the validity of the Lease; provided that if delivery of the Offered Space does not occur within ninety (90) days after the delivery date set forth in Landlord’s Offer, Tenant may elect to withdraw its exercise of its rights under this Section 2.1.1 by notice given within five (5) Business Days after the expiration of such ninety (90) day period. If Tenant so notifies Landlord, Tenant’s Right of First Offer under this Section 2.1.1 shall not apply to the next lease of the Offered Space in question (but shall apply to subsequent leases thereafter).

This Section 2.1.1 shall not be construed to grant to Tenant any rights or interest in any space in the Building and any claims by Tenant alleging a failure of Landlord to comply herewith shall be limited to claims for monetary damages and Tenant may not assert any rights in any space nor file any lis pendens or similar notice with respect thereto.

Tenant’s rights under this Section 2.1.1 are personal to Tenant and shall not apply to any Transferee of Tenant (other than a Transferee under a Permitted Transfer). If at any time during the Term Tenant has Transferred all or any portion of the Premises (not including Permitted Transfers), then Tenant’s rights under this Section 2.1.1 shall be null and void and of no further force or effect.

2.2 APPURTENANT RIGHTS

Tenant shall have, as appurtenant to the Premises, rights to use in common (subject to reasonable rules of general applicability to tenants and other users of the Building from time to time made by Landlord of which Tenant is given written notice): (a) the common lobbies, corridors, stairways, elevators and loading platform, and the pipes, ducts, conduits, wires and appurtenant meters and equipment serving the Premises in common with others; (b) common driveways and walkways necessary for access to the Building; (c) if the Premises include less than the entire rentable floor area of any floor, the common toilets, corridors and elevator lobby on such floor and serving the Premises; (d) the roof of the Building for telecommunications antennae in accordance with Article XI ; and (e) the parking areas and facilities serving the Building from time to time intended for general use by Tenant, other Building tenants, and visitors, subject to reasonable rules from time to time made by Landlord of which Tenant is given notice which shall at all times permit unreserved parking for Tenant (at no additional cost to Tenant) at a ratio of 3.36 spaces per 1,000 square feet of Rentable Floor Area in the Premises. Nothing contained in the Lease shall prohibit or otherwise restrict Landlord from changing, from time to time, without notice to Tenant, the location, layout or type of the forgoing common areas and facilities, provided that Landlord shall not substantially reduce the number of parking spaces available for use of tenants of the Building.

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2.3 RESERVATIONS

Landlord reserves the right from time to time, with telephonic notice and without unreasonable (except in emergency) interruption of Tenant’s use: (a) to install, use, maintain, repair, replace and relocate for service to the Premises and other parts of the Building, or either, pipes, ducts, conduits, wires and appurtenant fixtures, wherever located in the Premises or the Building and (b) to alter or relocate any other common facility, including without limitation any lobby and courtyard areas. Installations, replacements and relocations referred to in clause (a) above shall be located as far as practicable in the central core area of the Building, above ceiling surfaces, below floor surfaces or within perimeter walls of the Premises. Landlord shall provide Tenant with reasonable prior notice of any such installation, replacement or relocation and shall use reasonable efforts to schedule the making thereof so as to minimize, to the extent practicable, the interference with Tenant’s business operations.

2.4 TERM

(a) If the Term Commencement Date is a date certain agreed upon by the parties at the time of execution of this Lease, the Term Commencement Date shall be as set forth in Section 1.1 and the Term shall begin at 12:01 a.m. on such date and shall end at 12:00 midnight on the Term Expiration Date set forth in Section 1.1 or on such earlier date pursuant to the provisions of this Lease; otherwise, the following provisions shall govern.

(b) If the Term Commencement Date is not a date certain, the Term shall begin at 12:01 a.m. on the earlier to occur of the following (i) or (ii), which date shall be the “Term Commencement Date,” and shall end at 12:00 midnight on the Term Expiration Date set forth in Section 1.1 or on such earlier date pursuant to the provisions of this Lease.

(i) The date Tenant enters into possession of all or any portion of the Premises for the conduct of its business. (The event described in the prior sentence shall not be deemed to occur by virtue of the installation or testing of computers or other equipment or the installation of other property of Tenant in the Premises.)

(ii) The Substantial Completion Date, as such term is defined in the attached Exhibit B. Landlord shall provide Tenant with at least fifteen (15) Business Days prior oral or written notice of Landlord’s estimate of the Substantial Completion Date.

Upon request by Landlord, Tenant shall execute documentation setting forth the Term Commencement Date and other matters in the form attached as Exhibit D, which shall be binding upon Landlord and Tenant when executed by both parties.

(c) Subject to delay caused by Force Majeure, as such term in defined in Section 4.2 , or caused by action or inaction of Tenant, Landlord shall endeavor, in good faith, to have the Premises ready for Tenant’s occupancy on the Estimated Term Commencement Date. Landlord’s failure to have the Premises ready for Tenant’s occupancy on the Estimated Term Commencement Date, for any reason, shall not give rise to any liability of Landlord hereunder, shall not constitute a Landlord’s default, shall not affect the validity of this Lease, and shall have no effect on the beginning or end of the Term as otherwise determined hereunder or on Tenant’s obligations associated therewith.

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2.4.2 EXTENSION OPTION . Tenant shall have the option to extend the Term for one (1) additional five (5) year extension term (the “ Extension Term ”) by notice given to Landlord at least nine (9) months before the Term Expiration Date. Tenant’s election shall be exercised, and Annual Fixed Rent for the Extension Term determined, as set forth below. If Tenant fails timely to exercise its option for the Extension Term, Tenant shall have no further extension rights hereunder.

Tenant’s option so to extend the Term shall be void, at Landlord’s election, if Tenant is in default (subject to any applicable notice and cure periods set forth in this Lease) at the time Tenant elects to extend the Term or at the time the Term would expire but for such extension. The extension of the Term shall be applicable to the entire Premises and Tenant shall have no right to extend the Term for only a portion of the Premises. During the Extension Term, if any, all provisions of this Lease shall apply except that Tenant shall have no further option to extend the Term after the Extension Term.

During the Extension Term, Tenant shall pay Annual Fixed Rent equal to ninety-five percent (95%) of the then prevailing market rate for a five (5) year lease of office space in the greater Boston, Massachusetts “Metro-North” area comparable to the Premises in terms of location within a building, finish, age, building quality and amenities for a tenant of equal size and financial strength as Tenant, under terms and conditions substantially the same as those of this Lease as though then available for single occupancy for the Permitted Uses (or any higher and better use then being made by Tenant) in “as-is” condition or such better condition in which Tenant is required to maintain the Premises and considering all relevant factors (the parties intending and agreeing that uncommon or unusual features of other leases in the marketplace will not be considered) (the “ Fair Market Rent ”).

Landlord shall notify Tenant of its estimate of the Fair Market Rent within ten (10) days after Tenant exercises the extension option. Tenant shall have the option to reject by written notice Landlord’s estimate, or to withdraw its exercise of the extension option, in any case within fourteen (14) days following delivery of Landlord’s estimate. Failure to respond within such period shall be deemed to constitute acceptance of Landlord’s estimate. In the event Tenant rejects Landlord’s estimate then the Fair Market Rent shall be arbitrated in accordance with the following procedure. In the event Landlord fails to notify Tenant of its estimate as provided above, the parties shall determine Fair Market Rent by arbitration as set forth below.

Each of Landlord and Tenant, within twenty (20) days after notice by Tenant disputing Landlord’s estimate of the Fair Market Rent, shall (i) submit to the other in a sealed envelope its final estimate of the Fair Market Rent (“Estimates”) and (ii) appoint an MAI appraiser with at least ten (10) years experience as an appraiser of office buildings in the Greater Boston “Metro North” area, including first class suburban office buildings, and shall give notice of such appointment to the other party. If either Landlord or Tenant shall fail timely to appoint an appraiser, then the appraiser appointed by the other party shall be the sole appraiser for the purposes hereof. The two appraisers shall, within five (5) Business Days after appointment of the second appraiser, appoint a third appraiser who shall be similarly qualified. If the two appraisers are unable to agree timely on the selection of the third appraiser, then either appraiser on behalf of both may request such appointment from the President of the local chapter of the Appraisal Institute (or its successor organization, or if no successor exists, the most similar organization reasonably selected by Landlord). The appraisers shall be charged to reach a majority written decision in accordance with the standards for the Fair Market Rent as provided in this Section 2.4.1 , within twenty (20) days after the third appraiser is appointed, by selecting either of the final Estimates of the Fair Market Rent provided by Landlord and Tenant at the commencement of the hearing. The appraisers shall have no authority or jurisdiction to make any other determination of such amount. The cost of the third appraiser shall be borne equally by the parties and otherwise the parties shall bear their own costs.

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If Landlord should delay in giving the notice which begins the valuation procedures of this Section 2.4.1 , or if the process should otherwise be delayed for any reason, then such procedures shall nevertheless remain in effect and be applicable when and as invoked with respect to Annual Fixed Rent payable during the Extension Term; but until such procedures are completed, Tenant shall pay on account of Annual Fixed Rent at the rate established for Annual Fixed Rent for the last twelve (12) months of the Term (and upon Fair Market Rent being established, Tenant shall pay the same within ten (10) days of such determination, retroactively to the beginning of the Extension Term). The parties shall adjust for over or under payments within twenty (20) days after the decision of the appraisers is announced.

Promptly after the Annual Fixed Rent is determined for the Extension Term, Landlord and Tenant shall enter into an amendment of this Lease confirming the extension of the Term and the new rate for Annual Fixed Rent.

Tenant’s rights under this Section 2.4.1 are personal to Tenant and shall not apply to any Transferee of Tenant (other than a Transferee under a Permitted Transfer). If at any time during the Term Tenant has Transferred more than 4,000 rentable square feet of the Premises (not including Permitted Transfers), then Tenant’s rights under this Section 2.4.1 shall be null and void and of no further force or effect.

2.5 ANNUAL FIXED RENT

Tenant covenants and agrees to pay the Annual Fixed Rent in Section 1.1 to Landlord in advance in equal monthly installments commencing on the Term Commencement Date (if not the first day of a month) and thereafter on the first day of each calendar month during the Term. All payments shall be due without billing or demand and without deduction, setoff or counterclaim, except as expressly set forth in this Lease. Tenant shall make payment for any portion of a month at the beginning or end of the Term. All payments shall be payable to Landlord at Landlord’s address, as specified in Section 1.1 , or to such other entities at such other places as Landlord may from time to time designate.

Without limiting the foregoing, except as expressly set forth in this Lease, Tenant’s obligation so to pay Rent (as hereinafter defined) shall not be discharged or otherwise affected by any law or regulation now or hereafter applicable to the Premises, or any other restriction on Tenant’s use, or any casualty or taking, or any failure by Landlord to perform any covenant contained herein, or any other occurrence; and, except as expressly set forth in this Lease, Tenant waives all rights now or hereafter existing to terminate or cancel this Lease or quit or surrender the Premises or any part thereof, or to assert any defense in the nature of constructive eviction to any action seeking to recover Rent.

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The foregoing notwithstanding, if Landlord fails for any reason within Landlord’s control to provide any service to be supplied by Landlord under the Lease which is necessary for Tenant’s reasonable use of the Premises (such as HVAC, elevator service, electricity, water, or structural repairs), and Tenant is unable to use the Premises on account of such failure, Tenant shall be entitled to a proportional abatement of Annual Fixed Rent and Additional Charges for Operating Expenses and Taxes based on the portion of the Premises which cannot be used by Tenant. This abatement shall begin on the fourth (4th) consecutive Business Day from Tenant’s written notice to Landlord of the failure. The abatement shall end when the services are restored sufficiently to permit use of the Premises.

2.6 ADDITIONAL RENT - OPERATING EXPENSES AND TAXES

2.6.1 ADDITIONAL RENT - GENERAL COVENANT . Tenant covenants and agrees to pay to Landlord, as “ Additional Rent ”, (i) an amount equal to the product of (a) the Rentable Floor Area of the Premises and (b) the excess (if any) of Landlord’s Operating Expenses per square foot of Rentable Floor Area of the Building over Base Operating Expenses per Square Foot of Rentable Floor Area of the Building, (ii) an amount equal to the product of (a) the Rentable Floor Area of the Premises and (b) the excess (if any) of Landlord’s Taxes per square foot of Rentable Floor Area of the Building over Base Taxes Per Square Foot of Rentable Floor Area of the Building provided that if less than the Total Rentable Floor Area of the Building is occupied at any time during such period, Landlord may extrapolate components of Landlord’s Operating Expenses and Landlord’s Taxes as though the Total Rentable Floor Area of the Building had been ninety-five percent (95%) occupied at all times during such period, and (iii) any other charges payable by Tenant to Landlord under this Lease. The term “Rent” as used in this Lease shall mean Annual Fixed Rent and Additional Rent as set forth in this Lease. Appropriate adjustments shall be made for any portion of a year at the beginning or end of the Term.

2.6.2 PAYMENT . Additional Rent for Operating Expenses and Taxes under this Section 2.6 shall be paid for any portion of a month at the beginning of the Term and thereafter in monthly installments on the first day of each calendar month in amounts reasonably estimated by Landlord for the then current calendar year, all without deduction, setoff or counterclaim. Landlord may from time to time, but not more than once per calendar year and upon thirty (30) days prior notice to Tenant, revise such estimates based on available information relating to Landlord’s Operating Expenses and Taxes or otherwise affecting the calculation hereunder. Landlord will provide Tenant with an accounting statement of Landlord’s Operating Expenses and Taxes and other data necessary to calculate Additional Rent hereunder for such calendar year prepared in reasonable “line item” detail, and consistently maintained from year to year in accordance with generally accepted accounting principles. Landlord shall use reasonable efforts to provide such statement within ninety (90) days after the end of each calendar year. Any such statement shall be binding upon Tenant unless disputed in accordance with Section 2.6.5 . Upon issuance thereof, there shall be an adjustment between Landlord and Tenant for the calendar year covered by such accounting to the end that Landlord shall have received the exact amount of Additional Rent due hereunder. In no event shall Additional Rent for Operating Expenses and Taxes be less than zero. Any overpayments by Tenant hereunder shall be credited against the next payments of Additional Rent due under this Section 2.6 or upon Tenant’s written request refunded within ten (10) business days (or if such overpayment applies to the last year of the Term, then such overpayment shall be paid by Landlord to Tenant within thirty (30) days following the date such overpayment is determined), provided there are no outstanding amounts due Landlord under this Lease at such time. Any underpayments by Tenant shall be due and payable within thirty (30) days of delivery of Landlord’s statement. With respect to the calendar year in which the Term ends, the adjustment shall be pro rated for the portion of the year included in the Term, but shall take place nevertheless at the times provided in the preceding sentences.

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2.6.3 “LANDLORD’S OPERATING EXPENSES” - DEFINITION . “ Landlord’s Operating Expenses ” means all customary costs of Landlord in owning, servicing, operating, managing, maintaining, and repairing the Building, Land, and all improvements thereon and providing services to tenants including, without limitation, the costs of the following: (i) supplies, materials and equipment purchased or rented, total wage and salary costs paid to, and all contract payments made on account of, all persons (excluding executives and senior management above the level of facilities general manager) engaged in the operation, maintenance, security, cleaning and repair of the Building and Land, including Social Security, old age and unemployment taxes and so-called “fringe benefits”; (ii) building services furnished to tenants of the Building at Landlord’s expense (including the types of services provided to Tenant pursuant to Section 4.1 hereof) and maintenance and repair of and services provided to or on behalf of the Building performed by Landlord’s employees or by other persons under contract with Landlord; (iii) utilities consumed and expenses incurred in the operation, maintenance and repair of the Building including, without limitation, oil, gas, electricity (other than electricity to tenants in their premises if Tenant is directly responsible for payment under this Lease on account of electricity consumed by Tenant), water, sewer and snow removal; (iv) casualty, liability and other insurance, and unreimbursed costs incurred by Landlord which are subject to an insurance deductible; (v) costs of operating any cafeteria, other food service facility, or physical fitness facility for use of tenants generally to the extent such costs exceed the net rent paid by providers of such services, if any, or if Landlord or an affiliate is the provider of such services, then to the extent such costs exceed the income from such services; (vi) management fees not to exceed four percent (4%) of gross revenue; and (vii) any such costs of Landlord incurred with respect to the Complex that are reasonably allocated to the Building. If Landlord, in its reasonable discretion, installs a new or replacement capital item for the purpose of reducing (or avoiding increases in) Landlord’s Operating Expenses, complying with any building code or other law, regulation or legal requirement not in effect or enforced or applicable prior to the Term Commencement Date, complying with the requirements of any insurer not in effect or enforced or applicable to the Building prior to the Term Commencement Date or for the purpose of complying with any energy efficiency standards imposed by law or governmental body, the cost of such item amortized on a straight-line basis over its useful life with interest at the then “Prime Rate” as published by the Wall Street Journal or comparable financial publication reasonably selected by Landlord plus Two Percent (2%) shall be included in Landlord’s Operating Expenses. Landlord’s Operating Expenses shall not include (i) any costs or expenses incurred by Landlord in the construction and development of the Building including construction for tenants for which Landlord is entitled to reimbursement; (ii) payments of principal interest or other charges on mortgages; (iii) costs for categories of services provided to other tenants but not to Tenant; (iv) salaries of executives or principals of Landlord (except as the same may be reflected in the management fee for the Building or attributable to actual Building operations); (v) costs incurred in connection with the making of repairs or replacements which are the obligation of another tenant or occupant of the Building; (vi) advertising, marketing, promotional, public relations or brokerage fees, commissions or expenditures; (vii) interest or penalties for any failed payments by Landlord under any contract or agreement; (viii) costs (including, within limitation, attorneys’ fees and disbursements) in excess of reasonable insurance deductible amounts incurred in connection with any judgment, settlement or arbitration award resulting from any gross negligence or willful misconduct of Landlord or its agents; (ix) costs of electricity or utilities furnished directly to any premises of other tenants of the Building where such utility is separately metered to such premises or such tenant pays a separate charge therefor; (x) costs incurred in connection with Landlord’s preparation, negotiation, dispute resolution and/or enforcement of leases, including court costs and attorneys’ fees and disbursements in connection with any summary proceeding to dispossess any other tenant, or incurred in connection with disputes with prospective tenants, leasing agents, purchasers or mortgagees; (xi) costs of repairs, restoration or replacements occasioned by fire or other casualty in excess of reasonable insurance deductible amounts, or caused by the exercise of the right of eminent domain; legal and other professional fees relating to matters which are excluded from Operating Expenses for the Building; (xii) the cost to make improvements, alterations and additions to the Building which are required in order to render the same in compliance with laws, rules, orders, regulations and/or directives as in effect and generally enforced as of the date of this Lease; (xiii) depreciation; (xiv) amounts other than the management fee specified above paid to subsidiaries or affiliates of Landlord for services rendered to the Building to the extent such amounts exceed the competitive costs for delivery of such services were they not provided by such related parties; (xv) expenditures for new or replacement capital items other than those which are permitted above; (xvi) rental on ground leases or other underlying leases and the costs of providing the same; (xvii) the cost of environmental monitoring, compliance, testing and remediation performed in, on, about and around the Building or the Land except in the ordinary course of building operations; (xviii) expenses incurred by Landlord to the extent the same are fully reimbursed by other tenants or third parties; (xix) any rent and operating expenses for office space occupied by Landlord’s property management personnel as an on or off-site management office for the Building, except to the extent included in the management fee permitted hereby; (xx) except as set forth above, the cost of installing, operating and maintaining any specialty service, such as an observatory, broadcasting facilities, child or daycare; (xxi) cost of correcting defects in the design, construction or equipment of, or latent defects in, the Building; (xxii) except as permitted above, cost of any work or services performed for any facility other than the Building; (xxiii) lease payments for rental equipment (other than equipment for which depreciation is properly charged as an expense) that would constitute a capital expenditure not permitted to be included in Landlord’s Operating Expenses under the second sentence of this Section 2.6.3 if the equipment were purchased; (xxiv) cost of acquiring, securing, cleaning or maintaining sculptures, fine art paintings and other works of fine art; (xxv) costs of mitigation or impact fees or subsidies (however characterized), imposed or incurred prior to the date of this Lease or imposed or incurred solely as a result of another tenant’s or tenants’ use of the Land or their respective premises; and (xxvi) if a parking structure on the Land requires a separate charge to be paid by persons in order to park, then the costs of operating, repairing or maintaining any such parking structure associated with the Building unless the fees, if any, charged to users of such parking structure are deducted therefrom.

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2.6.4 “LANDLORD’S TAXES” - DEFINITION . “ Landlord’s Taxes ” means all taxes, assessments and similar charges assessed or imposed on the Land for the then current fiscal year by any governmental authority attributable to the Building and any associated parking structure (including personal property associated therewith). The amount of any special taxes, special assessments and agreed or governmentally imposed “in lieu of tax” or similar charges shall be included in Landlord’s Taxes for any year but shall be limited to the amount of the installment (plus any interest, other than penalty interest, payable thereon) of such special tax, special assessment or such charge required to be paid during or with respect to the year in question. Landlord’s Taxes include expenses, including fees of attorneys, appraisers and other consultants, incurred in connection with any efforts to obtain abatements or reduction or to assure maintenance of Landlord’s Taxes for any year wholly or partially included in the Term, whether or not successful and whether or not such efforts involved filing of actual abatement applications or initiation of formal proceedings. Landlord’s Taxes exclude income taxes of general application and all estate, succession, inheritance and transfer taxes. If at any time during the Term there shall be assessed on Landlord, in addition to or lieu of the whole or any part of the ad valorem tax on real or personal property, a capital levy or other tax on the gross rents or other measures of building operations, or a governmental income, franchise, excise or similar tax, assessment, levy, charge or fee measured by or based, in whole or in part, upon building valuation, gross rents or other measures of building operations or benefits of governmental services furnished to the Building, then any and all of such taxes, assessments, levies, charges and fees, to the extent so measured or based, shall be included within the term Landlord’s Taxes, but only to the extent that the same would be payable if the Building and Land were the only property of Landlord.

2.6.5 AUDIT RIGHTS . At the request of Tenant at any time within ninety (90) days after Landlord delivers Landlord’s statement of Landlord’s Operating Expenses and Taxes to Tenant, Tenant (at Tenant’s expense) shall have the right to examine Landlord’s books and records applicable to Landlord’s Operating Expenses and Taxes. Such right to examine the records shall be exercisable: (a) upon reasonable advance notice to Landlord and at reasonable times during Landlord’s business hours; (b) only during the 90-day period following Tenant’s receipt of Landlord’s statement of the actual amount of Landlord’s Operating Expenses and Taxes for the applicable calendar year; and (c) not more than once each calendar year. Notwithstanding anything herein to the contrary, Tenant shall have no right to examine Landlord’s books and records and audit Landlord’s Operating Expenses and Taxes if Tenant shall have withheld or otherwise failed to pay any Additional Rent when due. Landlord’s statement of Operating Expenses and Taxes shall be binding upon Tenant except as to items specifically disputed in writing by notice from Tenant to Landlord given within 105 days after Landlord delivers the statement to Tenant. Tenant shall pay all costs of the audit unless Tenant is found to have overpaid Additional Rent for Operating Expenses and Taxes by more than 5% for the year in question. In any event any audit of Landlord’s Operating Expenses and Taxes shall be conducted by an independent certified public accountant retained by Tenant or an auditing firm approved by Landlord for such purpose (each, an “examiner”). In no event shall Tenant propose, nor shall Landlord ever be required to approve, any examiner of Tenant who is being paid on a contingent fee basis or is representing other tenants in the Building.

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As a condition precedent to performing any such examination of Landlord’s books and records, Tenant and its examiners shall be required to execute and deliver to Landlord an agreement in form acceptable to Landlord agreeing to keep confidential any information that they discover about Landlord or the Building in connection with such examination. Without limiting the foregoing, such examiners shall also be required to agree that they will not represent any other tenant in the Building in connection with examinations of Landlord’s books and records for the Building unless said tenant(s) have retained said examiners prior to the date of the first examination of Landlord’s books and records conducted by Tenant pursuant to this Section 2.6 .5 and have been continuously represented by such examiners since that time. Notwithstanding any prior approval of any examiners by Landlord, Landlord shall have the right to rescind such approval at any time if in Landlord’s reasonable judgment the examiners have breached any confidentiality undertaking to Landlord or any other landlord or cannot provide acceptable assurances and procedures to maintain confidentiality.

2.7 ELECTRICITY

Tenant acknowledges and agrees that there is an electric meter presently located in the Premises which shall be used for the purpose of measuring Tenant’s use and consumption of electricity in the Premises, and Tenant shall make direct payment to the applicable utility for any costs, expenses and charges for electricity relating to the Premises as Additional Rent, Tenant shall have the right to contract with alternate electric service providers and Landlord shall not receive any compensation whatsoever for allowing such access, provided that Landlord shall not be required to incur any material cost or expense in connection with such service, there shall be no interference with the operation of the Building or the operations of other tenants, and all work to provide such service shall comply with the applicable provisions of this Lease.

Tenant covenants and agrees that Landlord shall in no event be liable or responsible to Tenant for any loss, damage or expense which Tenant may sustain or incur if either the quality or character of electrical service is changed or is no longer suitable for Tenant’s requirements. Tenant covenants and agrees that at all times its use of electric current shall never exceed the capacity of existing feeders to the Building or the risers or wiring or installation of the Building. Landlord shall be responsible for the maintenance, repair and replacement of the electric meter unless the need for such maintenance, repair or replacement is the result of misuse or the negligence or wrongful acts or omissions of Tenant.

ARTICLE III

CONSTRUCTION

3.1 LANDLORD WORK

3.1.1 GENERAL . Except for Landlord’s Initial Construction as set forth in Exhibit B , the Premises are being leased in their broom-clean, “as-is” condition without representation or warranty by Landlord except as expressly set forth in this Lease, and Landlord shall not be required to perform any work in connection with Tenant’s occupancy of the Premises.

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3.1.2 LANDLORD’S INITIAL CONSTRUCTION . Landlord, at Landlord’s cost, shall perform the construction of the initial improvements to the Premises for Tenant’s occupancy in accordance with the provisions of Exhibit B using Building standard materials and finishes; provided, however, that the cost of Landlord’s Initial Construction for the computer room in the Premises shall be at Tenant’s sole cost and expense. Landlord’s Initial Construction shall be performed in strict accordance with Landlord’s Plans as attached as Exhibit B-1 . Any additional improvement to the Premises not shown on Landlord’s Plans that are requested by Tenant and approved by Landlord shall be constructed at Tenant’s sole cost and expense, subject to all terms and provisions of this Lease. Landlord agrees to apply the Moving Allowance toward the cost of Landlord’s Initial Construction for the computer room (in which case, Tenant shall not be entitled to request the Moving Allowance under Article XII , until completion of Landlord’s Initial Construction for the computer room, after which Tenant shall be entitled to request any remaining Moving Allowance pursuant to the terms of Article XII ). Tenant shall pay to Landlord on or prior to the date of this Lease the amount, if any, by which the cost of Landlord’s Initial Construction for the computer room will exceed the Moving Allowance, as estimated by Landlord. Landlord and Tenant shall adjust for any overpayment or underpayment under the preceding sentence within sixty (60) days following the Substantial Completion Date.

3.2 ENTRY BY TENANT PRIOR TO TERM COMMENCEMENT DATE

With Landlord’s prior written consent, which shall not be unreasonably withheld, conditioned or delayed, Tenant or any agent, employee or independent contractor of Tenant shall have the right to enter the Premises prior to the Term Commencement Date to perform such work or decoration as is to be performed by, or under the direction or control of, Tenant. Such right of entry shall be deemed a license from Landlord to Tenant, and entry thereunder shall be at the sole risk of Tenant and subject to all the terms of this Lease, including but not limited to Section 5.5 , except for the obligation to pay Annual Fixed Rent or Additional Rent for Landlord’s Operating Expenses or Landlord’s Taxes.

ARTICLE IV

LANDLORD’S COVENANTS

4.1 LANDLORD’S COVENANTS

4.1.1 BUILDING SERVICES . Landlord shall furnish services, utilities, facilities and supplies set forth in this Section 4.1.1 and in Exhibit C . Exhibit C is intended to add detail to the provisions of the main body of the Lease, and in case of conflict, the provisions of the main body of the Lease shall control. Tenant may obtain additional services, utilities, facilities and supplies from time to time upon reasonable advance request or Landlord may furnish the same without request if Landlord determines that Tenant’s use or occupancy of the Premises necessitates the same (for example where the condition of the Premises necessitates additional cleaning services), and, in either case, the cost of the same at reasonable rates from time to time established by Landlord shall constitute Additional Rent, payable upon demand. For all purposes in this Lease, the phrase “ Hours of Operation ” shall mean Mondays through Fridays excepting legal holidays in the state in which the Building is located from 8:00 a.m. to 6:00 p.m. and on Saturdays from 9:00 a.m. to 1:00 p.m. Notwithstanding the foregoing, Tenant shall have access to the Premises 24 hours a day, 7 days a week, 365 days a year, subject to the terms and conditions of this Lease.

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(a) WATER CHARGES . Landlord shall furnish hot and cold water for ordinary office cleaning, toilet, lavatory and drinking purposes. If Tenant requires, uses or consumes water for any other purpose, Landlord may assess Tenant reasonable charges for additional water.

(b) CLEANING . Landlord shall cause the common areas and the office areas of the Premises to be kept reasonably clean provided the same are maintained and kept in good order by Tenant. Cleaning standards shall be in accordance with Exhibit C.

(c) HEAT AND AIR-CONDITIONING . Landlord shall, through the Building heating and air-conditioning system, furnish to and distribute in the Premises heat during the Hours of Operation of the normal heating season and air conditioning during the Hours of Operation of the normal cooling season when air conditioning may reasonably be required for the comfortable occupancy of the Premises by Tenant. Landlord shall not be required to furnish heat and air-conditioning in the Premises in excess of the capacity of the equipment installed in the Building. If Tenant requests Landlord to provide heat or air conditioning beyond the Hours of Operation, Tenant shall pay Landlord therefor at rates reasonably established by Landlord from time to time, to reflect Landlord’s actual cost without mark-up to Tenant. If Tenant requires additional air-conditioning outside of normal Hours of Operation for business machines, meeting rooms or other purposes, or because of occupancy or unusual electrical loads, any additional air-conditioning units, chillers, condensers, compressors, ducts, piping and other equipment and facilities will be installed and maintained by Landlord at Tenant’s sole cost, but only to the extent that the same are compatible with the Building and its mechanical systems. During the Term, Tenant may use the existing supplemental HVAC unit in the Premises (the “ HVAC Unit ”). Tenant acknowledges and agrees that, (i) Landlord shall have no obligation or liability with respect to any such HVAC Unit, (ii) the presence or absence of such HVAC Unit will not cause any delay in the Term Commencement Date, (iii) Landlord makes no representations or warranties as to the condition or suitability of such HVAC Unit for Tenant’s use, and (iv) Tenant shall be solely responsible for such HVAC Unit (including, without limitation, for insurance, safety and maintenance).

4.1.2 REPAIRS . Except as otherwise provided in this Lease, and except for repairs to items referred to below necessitated by Tenant’s act or neglect (which shall be Tenant’s repair obligation under Section 5.1 ), Landlord shall make such repairs to the roofs, exterior walls, exterior windows of the Premises (except if such damage or repair is necessitated by the Tenant’s negligence or willful misconduct), floor slabs, core walls, and common areas and facilities in the Building as may be necessary to keep them in good condition.

4.1.3 QUIET ENJOYMENT . Landlord covenants that Tenant, on paying the Rent and performing the tenant obligations in this Lease, shall peacefully and quietly have, hold and enjoy the Premises, free from any claim by Landlord or persons claiming under Landlord, but subject to all of the terms and provisions hereof, provisions of law and rights of record to which this Lease is or may become subordinate. This covenant is in lieu of any other so-called quiet enjoyment covenant, either express or implied.

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4.2 INTERRUPTION

Except as expressly set forth in this Lease, Landlord shall not be liable to Tenant for any compensation or reduction of Rent by reason of inconvenience or annoyance or for loss of business arising from Landlord or its agents entering the Premises for any of the purposes authorized in this Lease or from repairs by Landlord of any portion of the Building. In case Landlord is prevented or delayed from diligent construction of improvements, making any repairs, alterations or improvements, or furnishing any services or performing any other covenant or duty to be performed on Landlord’s part, by reason of strike or other labor trouble, fire or other casualty, or inability to obtain supplies, or labor despite reasonable efforts, or unusually adverse weather conditions, or unforeseen subsurface conditions, or acts of God, war, terrorism or other public emergency, or delays due to government regulation or delays in obtaining insurance proceeds, or any other cause whether similar or dissimilar beyond Landlord’s reasonable control collectively and individually (“ Force Majeure ”), Landlord shall not be liable to Tenant therefor, nor, except as otherwise provided in this Lease, shall Tenant be entitled to any abatement or reduction of Rent by reason thereof, nor shall the same give rise to a claim in Tenant’s favor that such failure constitutes actual or constructive, total or partial, eviction from the Premises. In no event shall Landlord be liable for indirect or consequential damages arising out of any default by Landlord.

Landlord reserves the right to stop any service or utility system, when necessary by reason of accident or emergency, or until necessary repairs have been completed; provided, however, that in each instance of stoppage, Landlord shall exercise reasonable diligence to eliminate the cause thereof. Except in case of emergency repairs, Landlord will give Tenant reasonable advance notice of any contemplated stoppage and will use reasonable efforts to avoid unnecessary interruption of Tenant’s use of the Premises by reason thereof.

4.3 INSURANCE

4.3.1 PROPERTY INSURANCE . Landlord agrees to maintain throughout the Term, with companies licensed and approved to write insurance in the state in which the Building is located, property insurance against direct physical loss or damage to the Building on an “all risks,” agreed amount basis in an amount equal to the physical replacement cost of the Building. Landlord shall not be required to carry insurance with respect to any property that Tenant is required to insure pursuant to Section 5.5 .

4.3.2 LIABILITY INSURANCE . Throughout the Term, Landlord agrees to maintain in a responsible company or companies liability insurance against claims, demands or actions for injury, death, and property damage in amounts not less than Five Million Dollars ($5,000,000) in the aggregate.

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ARTICLE V

TENANT’S ADDITIONAL COVENANTS

5.1 MAINTENANCE AND REPAIR

Except for damage by fire or casualty and reasonable wear and tear, Tenant shall at all times keep the Premises clean, neat and in as good repair, order and condition as the same are at the beginning of the Term or may be put in thereafter. The foregoing shall include without limitation Tenant’s obligation to maintain floors and floor coverings, to paint and repair walls and doors, to replace and repair ceiling tiles, interior glass (and exterior glass if such damage or repair is necessitated by the Tenant’s negligence or willful misconduct), lights and light fixtures, drains and the like, and clean the Premises to the extent such cleaning is not to be performed by Landlord pursuant to Exhibit C .

5.2 USE , WASTE AND NUISANCE

Throughout the Term, Tenant shall use the Premises for the Permitted Uses only, and shall not use the Premises for any other purpose. Tenant shall not injure, overload, deface or commit waste in the Premises or any part of the improvement on the Land, nor permit the emission therefrom of any objectionable noise, light or odor, nor use or permit any use of the Premises which is improper, offensive, contrary to law or ordinance or which is liable to invalidate or increase the premium for any insurance on the Building or its contents or which is liable to render necessary any alterations or additions in the Building, nor obstruct in any manner any portion of the Building. If Tenant’s use of the Premises results in an increase in the premium for any insurance on the Building or the contents thereof (or would result in such an increase if the Landlord were not self-insuring), Landlord shall notify Tenant of such increase and Tenant shall pay same as Additional Rent.

Tenant shall not without Landlord’s prior written consent keep, store, or use any substances or materials designated as, or containing components now or hereafter designated as, hazardous, dangerous, toxic or harmful and/or subject to regulation under any federal, state or local law, regulation or ordinance (“ Hazardous Substances ”) in, on, under or about the Premises or Building or Complex except for ordinary cleaning and office supplies used and stored in accordance with applicable law. With respect to any Hazardous Substance kept, stored or used with Landlord’s consent, Tenant shall: (i) not permit any such Hazardous Substance to escape, be released, or be disposed of in, or about the Premises, Building, Complex, or Land, (ii) promptly, timely and completely comply with all federal, state or local governmental requirements concerning such Hazardous Substances, including without limitation, use, sale, transportation, generation, treatment, disposal, reporting and record keeping, and (iii) within five (5) Business Days of Landlord’s request, provide evidence satisfactory to Landlord of Tenant’s compliance with all applicable federal, state or local laws, regulations or ordinances. Without limitation, Hazardous Substances shall include those described in the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, 42 U.S.C. §9601 et seq., the Resource Conservation and Recovery Act, as amended, 42 U.S.C. §6901 et seq., the Massachusetts Hazardous Waste Management Act, as amended, M.G.L. Chapter 21C, and the Massachusetts Oil and Hazardous Material Release Prevention Act, as amended, M.G.L. Chapter 21E, and the regulations adopted under these acts. In addition, Tenant shall execute affidavits, representations and the like from time to time at Landlord’s request concerning Tenant’s best knowledge and belief regarding the presence of Hazardous Substances on the Premises.

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If any governmental agency shall ever require testing to ascertain whether or not there has been any release of Hazardous Substances, then the reasonable costs thereof shall be reimbursed by Tenant to Landlord upon demand as Additional Rent if such requirement is the result of Tenant’s use or occupancy of the Premises. Any and all costs incurred by Landlord in connection with Landlord’s monitoring of Tenant’s compliance with this Section 5.2 , including Landlord’s attorneys’ fees and costs, shall be Additional Rent and shall be due and payable to Landlord within ten (10) days of Landlord’s demand. Tenant shall be fully and completely liable to Landlord (either with or without negligence) for any and all cleanup costs and expenses and any and all other charges, expenses, fees, fines, penalties (both civil and criminal) and costs imposed with respect to Tenant’s use, disposal, transportation, generation and/or sale of, or Tenant’s causing or permitting the escape, disposal or release, of any biologically or chemically active or other Hazardous Substance. In all events, Tenant shall indemnify Landlord as provided in Section 5.5 from any release of Hazardous Substances in the Premises occurring while Tenant is in possession, or elsewhere if caused by Tenant or persons acting under Tenant. The provisions of this Section 5.2 shall survive the expiration or earlier termination of this Lease.

5.3 COMPLIANCE WITH LAW

Tenant shall use the Premises only as permitted under federal, state, and local laws, regulations and orders applicable from time to time, including without limitation municipal by-laws, land use and zoning laws, environmental laws and regulations (as set forth in Section 5.2 above) and occupational health and safety laws, and shall procure all approvals, licenses and permits necessary therefor, in each case giving Landlord true and complete copies of the same and all applications therefor. Tenant shall promptly comply with all present and future laws applicable to Tenant’s particular use of the Premises or Tenant’s signs thereon, foreseen or unforeseen, and whether or not the same necessitate structural or other changes or improvements to the Premises or interfere with its particular use and enjoyment of the Premises, and shall comply with all requirements reasonable in light of the use Tenant is making of the Premises of insurance inspection or rating bureaus having jurisdiction. If Tenant’s use of the Premises results in any increase in the premium for any insurance carried by Landlord, then upon Landlord’s notice to Tenant of such increase Tenant shall pay the same to Landlord within sixty (60) days after demand as Additional Rent. Tenant shall bear the sole risk of all present or future laws affecting the Premises or appurtenances thereto, and Landlord shall not be liable for (nor suffer any reduction in any rent on account of) any interruption, impairment or prohibition affecting the Premises or Tenant’s use thereof resulting from the enforcement of laws.

5.4 RULES AND REGULATIONS

Tenant shall conform to all reasonable non-discriminatory rules and regulations now or hereafter promulgated from time to time by Landlord for the care and use of the Premises and the Building and the parking areas and facilities serving the Building, including but not limited to rules and regulations relating to the conservation of energy and the initial Rules and Regulations set forth at www.hobbsbrook.com. In no event may Landlord’s rules and regulations derogate from Tenant’s rights under this Lease (such rights to be interpreted consistently with standards for a first-class suburban office building in Greater Boston, Massachusetts).

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5.5 INDEMNIFICATION AND INSURANCE

5.5.1 INDEMNIFICATION . Tenant shall save Landlord, its mortgagees and its direct and indirect owners, and the managers, directors, officers, trustees, agents, employees, property management companies, attorneys, and independent contractors of any of the foregoing (collectively, the “ Indemnitees ”) harmless and indemnified (and shall defend the Indemnitees with counsel reasonably approved by the Indemnitees) against any claim, loss or cost, whether in law or equity, and/or arising in whole or in part out of any injury, loss, theft or damage to any person or property while on, in or about the Premises, or out of any condition within the Premises, to the extent not due to the negligence or willful misconduct of the Indemnitees, and to any person or property anywhere occasioned by any act, omission, neglect or default of Tenant or of employees, agents, managers, officers, directors, members, trustees, independent contractors or invitees of Tenant or any person acting under Tenant. In addition to the foregoing, if any person not a party to this Lease shall institute any other types of action against Tenant in which Indemnitees involuntarily and/or without cause, shall be made a party defendant(s), then Tenant shall indemnify, hold harmless and defend indemnitees (with counsel reasonably approved by Indemnitees) from all liabilities by reason thereof. This indemnity shall not require payment as a condition precedent to recovery. Tenant shall pay all costs and expenses including reasonable attorneys’ fees associated with enforcement of the provisions of this Section 5.5.1 . Except as may be provided in Section 4.2 and 5.6 and subject to the limitations elsewhere set forth in this Lease, Landlord will cause Tenant to be indemnified and held harmless from and against third party claims against Tenant for damage to property or injuries to persons while on or in the common areas of the Building to the extent due to Landlord’s negligence or willful misconduct. The provisions of this Section 5.5.1 shall survive the expiration or earlier termination of this Lease.

5.5.2 INSURANCE . Throughout the Term (and such further time as Tenant or any person claiming through Tenant occupies any part of the Premises) Tenant shall maintain in a responsible company or companies licensed in the state in which the Building is located and having a Best’s Insurance Rating of not less than A-VIII (or equivalent), Commercial General Liability Insurance for Bodily Injury, Personal Injury and Property Damage and insurance that includes Products and Completed Operations, Personal and Advertising Injury, Automobile Liability, and Contractual Liability, written on an occurrence basis, insuring the Indemnitees and other parties as designated by Landlord or as may be so designated from time to time, and Tenant, as their respective interests may appear, against all claims, demands or actions for injury, death, and property damage in amounts not less than those specified in Section 1.1 (as such amounts may, from time to time, be reasonably increased by Landlord) and worker’s compensation insurance as required by applicable law. Landlord and the other Indemnitees shall be named as additional insureds under such liability insurance policies (excluding any worker’s compensation policy). Such Commercial General Liability insurance coverage shall be primary and any other insurance procured for the benefit of such additional insureds will be excess and non-contributory. All insurance to be maintained by Tenant under this Section 5.5.2 shall provide that it will not be subject to cancellation, termination, or change except after at least thirty (30) days’ prior written notice to the Indemnitees and other parties designated by Landlord. The policy or policies or a duly executed Evidence of Insurance (ACORD Form 25) for the same (together with satisfactory evidence of the payment of the premium thereon if requested by Landlord) shall be deposited with Landlord and other parties designated by Landlord at the beginning of the Term and, upon renewals of such policies, not less than two (2) Business Days prior to the expiration of the term of such coverage. If Tenant fails to comply with any of the foregoing requirements, Landlord may obtain such insurance on behalf of Tenant and may keep the same in effect, and Tenant shall pay Landlord, as Additional Rent, the premium cost thereof upon demand. The provisions of this Section 5.5.2 shall survive the expiration of the Term or earlier termination of this Lease.

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5.6 TENANT’S PROPERTY

All furnishings, fixtures, equipment, effects and property of Tenant and of all persons claiming through Tenant which from time to time may be on the Premises or elsewhere in the Building or in transit thereto or therefrom shall be at the sole risk of Tenant and shall be kept insured by Tenant throughout the term at Tenant’s expense and in prudent amounts, and if the whole or any part thereof shall be destroyed or damaged by fire, explosion, water leakage, rupture of water pipes or other Building equipment or facilities, or resulting from dampness, or by theft or from any other cause whatsoever in the Building, no part of said loss or damage is to be charged to or be borne by Landlord. The parties acknowledge that damage or destruction may result from acts of cleaning personnel and employees of other independent contractors of Landlord working in and around the Premises and that Tenant shall bear the risk and cost thereof unless Landlord has been grossly negligent in the selection of such persons.

5.7 ENTRY FOR REPAIRS ANT) INSPECTIONS

Tenant shall permit Landlord and its agents to enter and examine the Premises at reasonable times, upon reasonable prior oral or written notice (except in the case of an emergency, in which event no notice shall be required), and, if Landlord shall so elect, to make any repairs or replacements Landlord may deem necessary or desirable, to remove at Tenant’s expense any alterations, additions, signs or the like not consented to in writing, and to show the Premises to prospective tenants during the twelve (12) months preceding the expiration of the Term and to prospective purchasers and mortgagees at all times. In case of an emergency in the Premises or in the Building, Landlord or its representative may enter the Premises (forcibly, if necessary) at any time to take such measures as may be needed to deal with such emergency.

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5.8 ASSIGNMENT . SUBLETTING

Tenant, voluntarily or involuntarily, shall not assign this Lease, or sublet, license, mortgage or otherwise encumber or convey the Premises or any portion thereof, or permit the occupancy of all or any portion of the Premises other than by the Tenant (all or any of the foregoing actions are referred to as “ Transfers ”, and all or any of assignees, transferees, licensees, and other such parties are referred to as “ Transferees ”) without obtaining, on each occasion, the prior written consent of the Landlord, which consent shall not be unreasonably withheld, conditioned or delayed. Any Transfer without such consent shall be null and void and of no effect whatsoever. Notwithstanding the provisions of this Section 5.8 , this Lease may be assigned, or the Premises may be sublet, in whole or in part, after prior notice to Landlord but without consent of the Landlord and without any termination right of the Landlord being applicable thereto, (i) to any corporation or other entity into or with which Tenant may be merged or consolidated or to any corporation or entity to which all or substantially all of the Tenant’s assets will be transferred, or (ii) to any corporation or other entity which is an affiliate, subsidiary, parent or successor of Tenant, provided in all such cases the surviving corporation or entity shall provide reasonable evidence that it has a creditworthiness at least equal to the greater of the net worth of Tenant (i) as of the date of such corporate transaction, and (ii) as of the date of this Lease and shall agree in writing with the Landlord to be bound by all of the terms and conditions of this Lease (all of the foregoing being referred to as a (“ Permitted Transfer ”). Unless Landlord’s consent specifically provides otherwise with respect to a particular proposed Transferee, Tenant shall not offer to make or enter into negotiations with respect to a Transfer to any of the following: (i) a tenant in the Building or any other building owned, managed or controlled by Landlord; (ii) any party with whom Landlord or any affiliate of Landlord is then negotiating with respect to space in the Building or any other building owned, managed or controlled by Landlord or an affiliate of Landlord; or (iii) any party which would be of such type, character or condition as to be inappropriate, in Landlord’s reasonable judgment, as a tenant for a first class office building. Tenant’s request for consent to a Transfer shall include a copy of the proposed Transfer instrument together with a statement of the proposed Transfer in detail satisfactory to Landlord, together with reasonably detailed financial, business and other information about the proposed Transferee.

Tenant shall pay to Landlord, as Additional Rent, Landlord’s reasonable legal fees and other expenses incurred in connection with any proposed Transfer (except a Permitted Transfer), including fees for review of documents and investigations of proposed Transferees. Notwithstanding any such Transfer, the original Tenant named herein shall remain directly and primarily obligated under this Lease.

If Tenant enters into any Transfer including a Permitted Transfer with respect to the Premises (or any part thereof), such Transferee shall be liable, jointly and severally, with Tenant, to the extent of the obligation undertaken by or attributable to such Transferee, for the performance of Tenant’s agreements under this Lease (including payment of Rent under the Transfer), and every Transfer shall so provide, without relieving or modifying Tenant’s liability hereunder. The foregoing provision shall be self-operative, but in confirmation thereof, such Transferee shall execute and deliver such instruments as may be reasonably required by Landlord to acknowledge such liability. Landlord may collect Rent from the Transferee and apply the net amount collected to the Rent and other charges hereunder, but no such assignment or collection shall be deemed a waiver of the provisions of this Section 5.8 , or the acceptance of the Transferee as a tenant, or a release of Tenant from direct and primary liability for the further performance of Tenant’s covenants hereunder. The consent by Landlord to a particular Transfer shall not relieve Tenant from the requirement of obtaining the consent of Landlord to any further Transfer.

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5.9 ALTERATIONS

Tenant shall make no alterations, additions or improvements to the Premises (any of the foregoing being “ Tenant Work ”) without the prior written consent of Landlord and only in accordance with the requirements of this Lease and Landlord’s rules and regulations under Section 5.4 . Notwithstanding the foregoing, after notice to Landlord but without any requirement for Landlord’s consent, Tenant may perform (i) cosmetic or decorative alterations in the Premises (including repainting and installing carpet) and (ii) other alterations which do not affect the Building’s structure or base building systems and which cost no more than $20,000 in the aggregate for a single project, provided that all such alterations are made in accordance with the requirements of this Lease, including without limitation this Section 5.9 and Exhibit B . Prior to commencing work, Tenant’s contractors shall provide certificates of insurance to Landlord evidencing that such contractors have sufficient insurance to complete the portion of the Tenant Work for which they are responsible, in such form and amounts as may be approved by Landlord in advance. Any alterations, additions and improvements to the Premises, except movable furniture and trade fixtures, shall belong to Landlord. All alterations, additions and improvements to the Premises shall be at Tenant’s sole cost. Tenant shall pay, when due, the entire cost of all Tenant Work so that the Premises shall always be free of liens for labor or materials or professional services by design professionals. If any mechanic’s lien (which term shall include all similar liens relating to the furnishing of labor and materials and professional services by design professionals) is filed against the Building which is claimed to be attributable to Tenant, its agents, employees, contractors, or persons working under Tenant’s direction or control, then Tenant shall give Landlord immediate notice of such lien and shall discharge the same by payment or filing any necessary bond within ten (10) days after Tenant has notice (from any source) of such lien. Landlord may, as a condition of its approval of any Tenant Work, require Tenant to deposit with Landlord a bond, letter of credit or other similar security in the amount of Landlord’s reasonable estimate of the value of such Tenant Work securing Tenant’s obligations to make payments for such Tenant Work. Landlord’s approval of the construction documents shall signify Landlord’s consent to the work shown thereon only and Tenant shall be solely responsible for any errors or omissions contained therein. Landlord’s approvals under this Section 5.9 shall not be unreasonably withheld, conditioned or delayed.

5.10 SURRENDER

At the expiration of the Term or earlier termination of this Lease, without the requirement of any notice, Tenant shall peaceably surrender the Premises including all alterations and additions thereto and all replacements thereof, including carpeting, any water or electricity meters, and all fixtures and partitions, in any way bolted or otherwise attached to the Premises (which shall become the property of Landlord) except for such alterations and additions as Landlord has directed Tenant to remove when Tenant requested Landlord’s approval for such alterations and additions (other than cabling, which Tenant shall always be required to remove), and Tenant shall leave the Premises and improvements in the condition in which the same are required to be maintained under Section 5.1 , subject to reasonable wear and tear and damage by casualty subject to the provisions of Section 6.1 . Tenant shall, at the time of termination, remove the goods, effects and fixtures which Tenant is directed or permitted to remove in accordance with the provisions of this Section 5.10 , making any repairs to the Premises and other areas necessitated by such removal and leaving the Premises in the condition otherwise required by this Section 5.10 . Should Tenant fail to remove any of such goods, effects, and fixtures within ten (10) days after notice by Landlord, the same shall be deemed abandoned by Tenant and may be disposed of by Landlord at Tenant’s expense. In the event that Landlord terminates this Lease pursuant to Section 7.1 and re-enters and possesses the Premises in accordance with the terms of this Lease then Landlord may, without notice, store Tenant’s personal property (and those of any person claiming under Tenant) at the expense and risk of Tenant or, if Landlord so elects, Landlord may sell such personal property in accordance with the previous sentence and apply the net proceeds to the earliest of installments of Rent or other charges owing Landlord.

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5.11 PERSONAL PROPERTY TAXES

Tenant shall pay promptly when due all taxes (and charges in lieu thereof) imposed upon Tenant’s personal property in the Premises, (including, without limitation, fixtures and equipment), no matter to whom assessed. If the Tenant Work to the Premises, whether installed and/or paid for by Landlord or Tenant and whether or not affixed to the real property so as to become a part thereof, are assessed for real property tax purposes at a valuation higher than the valuation at which improvements in other space in the Building are assessed, then the real property taxes and assessment levied against Landlord by reason of such excess assessed valuation shall be deemed to be taxes levied against personal property of Tenant and shall be paid promptly when due. If the records of the tax assessor are available and sufficiently detailed to serve as a basis for determining whether said Tenant Work are assessed at a higher valuation, such records shall be binding on both Landlord and Tenant; otherwise the actual cost of construction shall be the basis for such determination.

5.12 SIGNS

No sign, name, placard, advertisement or notice visible from the exterior of the Premises shall be inscribed, painted or affixed by Tenant on any part of the Building without the prior written approval of Landlord. All signs or letterings on doors, or otherwise, approved by Landlord, shall be inscribed, painted or affixed by a person reasonably approved by Landlord and at the sole cost and expense of Tenant. Landlord, at Landlord’s expense, shall provide and install Building standard signage at the entry doors to the Premises and in the Building lobby to identify Tenant’s official name and Building address, all such letters and numerals to be in the Building standard graphics.

ARTICLE VI

CASUALTY AND TAKING

6.1 DAMAGE BY FIRE OR CASUALTY

If the Premises or any part thereof shall be damaged by fire or other insured casualty, then, subject to the last paragraph of this Section 6.1 , Landlord shall proceed with diligence, subject to then applicable statutes, building codes, zoning ordinances and regulations of any governmental authority, and at the expense of Landlord (but only to the extent of insurance proceeds made available to Landlord by any mortgagee of the Building) to repair or cause to be repaired all damage to the Premises (except for damage to leasehold improvements installed by Tenant without notice to and, if required by this Lease, approval by Landlord). All such repairs made necessary by the negligence or willful misconduct of Tenant shall be made at the Tenant’s expense to the extent that the cost of such repairs does not exceed the deductible amount in Landlord’s insurance policy. All repairs to and replacements of property which Tenant is entitled to remove shall be made by and at the expense of Tenant. If the Premises or any part thereof shall have been rendered unfit for use and occupation hereunder by reason of such damage the Annual Fixed Rent and Additional Rent for Operating Expenses or a just and proportionate part thereof, according to the nature and extent to which the Premises shall have been so rendered unfit, shall be abated until the Premises (except as to the property which is to be repaired by or at the expense of Tenant) shall have been restored as nearly as practicable to the condition in which they were immediately prior to such fire or other casualty. Landlord shall not be liable for delays in the making of any such repairs which are due to Force Majeure, nor shall Landlord be liable for any inconvenience or annoyance to Tenant or injury to the business of Tenant resulting from delays in repairing such damage.

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Between thirty (30) and sixty (60) days after any casualty, Tenant may inquire of Landlord as to Landlord’s estimate of the time period necessary to complete repair of the Premises. Within thirty (30) days after such inquiry, Landlord shall provide Tenant with Landlord’s architect’s good faith estimate of the time to complete such repairs and if such estimate (which shall be non-binding) shall be more than one hundred eighty (180) days from the date of the casualty, then Tenant may terminate this Lease by notice given to Landlord within thirty (30) days after Tenant’s delivery of Landlord’s architect’s estimate.

If Landlord fails to commence repairs as soon as is reasonably practicable after such damage, and such failure is not due to Force Majeure, and in any event if Landlord does not commence repairs within sixty (60) days of the casualty, Tenant may elect to terminate this Lease by notice to Landlord. If Landlord, having commenced such repair, has not completed the repair of such damage by the later of (i) one hundred eighty (180) days from the occurrence of such damage, or (ii) the date given in any Landlord’s architect’s repair period estimate under the prior paragraph (the later of such dates is referred to below as the “ Outside Restoration Date ”), Tenant may elect to terminate this Lease by notice to Landlord within twenty (20) days of the Outside Restoration Date, the termination to be effective not less than thirty (30) days after the date on which such termination notice is received by Landlord. The Outside Restoration Date shall be extended for up to ninety (90) days on account of delays caused by Force Majeure. Landlord shall not be liable for any inconvenience or annoyance to Tenant or injury to the business of Tenant resulting from delays in repairing the damage, however if the delays continue more than ninety (90) days beyond the initial Outside Restoration Date, Tenant may elect to terminate this Lease in the manner provided above.

If (i) the Premises are so damaged by fire or other casualty (whether or not insured) at any time during the last thirty (30) months of the Term that the cost to repair such damage is reasonably estimated to exceed one-third of the total Annual Fixed Rent payable hereunder for the period from the estimated completion date of repair until the end of the Term, (ii) at any time the Building (or any portion thereof, whether or not including any portion of the Premises) is so damaged by fire or other casualty (whether or not insured) that substantial alteration or reconstruction or demolition of the Building (or a portion thereof) shall in Landlord’s judgment be required, or (iii) at any time damage to the Building occurs by fire or other insured casualty and any mortgagee shall refuse to permit insurance proceeds to be utilized for the repair or replacement of such property and Landlord determines not to repair such damage, then and in any of such events, this Lease and the Term hereof may be terminated at the election of Landlord by a notice from Landlord to Tenant within sixty (60) days, or such longer period as is required to complete arrangements with any mortgagee regarding such situation, following such fire or other casualty; the effective termination date pursuant to such notice shall be not less than thirty (30) days after the day on which such termination notice is delivered to Tenant. In the event of any termination, the Term shall expire as though such effective termination date were the date originally stipulated in Section 1.1 for the end of the Term and the Annual Fixed Rent and Additional Rent for Operating Expenses and Taxes shall be apportioned as of such date.

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6.2 CONDEMNATION - EMINENT DOMAIN

In case during the Term all or any substantial part of the Premises or the Building are taken by eminent domain or Landlord receives compensable damage by reason of anything lawfully done in pursuance of public or other authority, this Lease shall terminate at Landlord’s election, which may be made (notwithstanding that Landlord’s entire interest may have been divested) by notice given to Tenant within ninety (90) days after the election to terminate arises, specifying the effective date of termination. The effective date of termination specified by Landlord shall not be less than fifteen (15) nor more than thirty (30) days after the date of notice of such termination. Unless terminated pursuant to the foregoing provisions, this Lease shall remain in full force and effect following any such taking, subject, however, to the following provisions. If in any such case the Premises are rendered unfit for use and occupation and this Lease is not terminated, Landlord shall use reasonable diligence (following the expiration of the period in which Landlord may terminate this Lease pursuant to the foregoing provisions of this Section 6.2 ) to put the Premises, or what may remain thereof (excluding any items installed or paid for by Tenant which Tenant may be required to remove pursuant to Section 5.10 ), into proper condition for use and occupation and a just proportion of the Annual Fixed Rent and Additional Rent for Operating Expenses according to the nature and extent of the injury shall be abated until the Premises or such remainder shall have been put by Landlord in such condition; and in case of a taking which permanently reduces the area of the Premises, a just proportion of the Annual Fixed Rent and Additional Rent for Operating Expenses and Taxes shall be abated for the remainder of the Term.

If the taking of a part of the Premises substantially and adversely interferes with Tenant’s ability to continue its business operations then Tenant may terminate this Lease on written notice to Landlord given not more than thirty (30) days after such taking and effective on the earlier of: (i) the date when title vests; (ii) the date Tenant is dispossessed by the condemning authority; or (iii) sixty (60) days following notice to Tenant of the date when vesting or dispossession is to occur.

6.3 EMINENT DOMAIN AWARD

Except for Tenant’s relocation expenses (specifically so designated by the court or authority having jurisdiction over the matter) Landlord reserves to itself any and all rights to receive awards made for damages to the Premises, the Building or the leasehold hereby created, or any one or more of them, accruing by reason of exercise of eminent domain or by reason of anything lawfully done in pursuance of public or other authority. Tenant hereby releases and assigns to Landlord all Tenant’s rights to such awards, and covenants to deliver such further assignments and assurances thereof as Landlord may from time to time request, hereby irrevocably designating and appointing Landlord as its attorney-in-fact to execute and deliver in Tenant’s name and behalf all such further assignments thereof.

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ARTICLE VII

DEFAULT

7.1 TERMINATION FOR DEFAULT OR INSOLVENCY

This Lease is upon the condition that:

(a) if Tenant shall fail to perform or observe any of Tenant’s covenants, and if such failure shall continue, (i) in the case of Rent or any sum due Landlord hereunder, for more than three (3) Business Days after written notice, or (ii) in any other case, after written notice, for more than thirty (30) days (provided that if correction of any such matter reasonably requires longer than thirty (30) days and Tenant so notifies Landlord within twenty (20) days after Landlord’s notice is given together with an estimate of time required for such cure, Tenant shall be allowed such longer period, but only if cure is begun and diligently pursued within such thirty (30) day period and such delay does not cause increased risk of damage to person or property), or

(b) if more than two (2) notices under clause (a) hereof are given in any twelve month period (failure to pay Rent or any other sum for more than three (3) Business Days after the particular due date shall have the same effect under this clause (b) as such a notice), or

(c) if the leasehold hereby created shall be taken on execution, or by other process of law, or if any assignment shall be made of Tenant’s property or the property of any guarantor of Tenant’s obligations hereunder (“ Guarantor ”) for the benefit of creditors, or

(d) if a receiver, guardian, conservator, trustee in bankruptcy or similar officer shall be appointed by a court of competent jurisdiction to take charge of all or any part of Tenant’s or the Guarantor’s property and such appointment is not discharged within sixty (60) days thereafter or if a petition including, without limitation, a petition for reorganization or arrangement is filed by Tenant or the Guarantor under any bankruptcy law or is filed against Tenant or the Guarantor and, in the case of a filing against Tenant only, the same shall not be dismissed within sixty (60) days from the date upon which it is filed,

then, and in any of said cases (a) - (d), Landlord may, immediately or at any time thereafter, elect to terminate this Lease by notice of termination, by entry, or by any other means available under law and may recover possession of the Premises as provided herein.

Upon termination by notice, by entry, or by any other means available under law, Landlord shall be entitled immediately, in the case of termination by notice or entry, and otherwise in accordance with the provisions of law to recover possession of the Premises from Tenant and those claiming through or under the Tenant. Such termination of this Lease and repossession of the Premises shall be without prejudice to any remedies which Landlord might otherwise have for arrears of Rent or for a prior breach, violation or default of the provisions of this Lease.

Tenant waives any statutory notice to quit and equitable rights in the nature of further cure or redemption, and Tenant agrees that upon Landlord’s termination of this’ Lease Landlord shall be entitled to re-entry and possession in accordance with the terms hereof. Tenant further agrees that it shall not interpose any counterclaim in any summary proceeding or in any action based in whole or in part on non-payment of Rent unless the counterclaim is a compulsory counterclaim that must be alleged in the same proceeding.

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7.2 REIMBURSEMENT OF LANDLORD’S EXPENSES

In the case of termination of this Lease pursuant to Section 7.1 , Tenant shall reimburse Landlord for all reasonable expenses arising out of such termination, including without limitation, all reasonable costs incurred in collecting amounts due from Tenant under this Lease (including attorneys’ fees, costs of litigation and the like); all expenses incurred by Landlord in attempting to relet the Premises or parts thereof (including advertisements, brokerage commissions, Tenant’s allowances, costs of preparing space, maintaining or preserving the Premises after Tenant default, and the like); all of Landlord’s then unamortized costs of special inducements provided to Tenant (including without limitation Rent holidays, Rent waivers, above building standard leasehold improvements and the like) and all Landlord’s other reasonable expenditures necessitated by the termination. The reimbursement from Tenant shall be due and payable immediately from time to time upon notice from Landlord that an expense has been incurred, without regard to whether the expense was incurred before or after the termination. The provisions of this Section 7.2 shall survive the expiration or earlier termination of this Lease.

7.3 DAMAGES

In the event of the termination of this Lease by Landlord pursuant to Section 7.1 , Landlord may elect by written notice to Tenant at any time following such termination to be indemnified for loss of Rent by a lump sum payment representing the then present value of the amount of Rent which would have been paid in accordance with this Lease for the remainder of the Term minus the then present value of the aggregate fair market rent and Additional Rent payable for the Premises for the remainder of the Term following such election (if less than the Rent payable hereunder), estimated as of the date of Landlord’s election, and taking into account reasonable projections of vacancy and time required to re-lease the Premises. (For the purposes of calculating the Rent which would have been paid hereunder for the lump sum payment calculation described herein (x) the last full year’s Additional Rent under Section 2.6 is to be deemed constant for each year thereafter, (y) the Federal Reserve discount rate (or equivalent) shall be used in calculating present values and (z) in the event that Landlord enters into a third party lease for the Premises after the termination of this Lease, then the annual fixed rent under such third party lease shall be conclusively deemed to be the fair market rent for purposes of this Section 7.3 .) Should the parties be unable to agree on a fair market rent, the matter shall be submitted, upon the demand of either party, to the Boston, Massachusetts office of the American Arbitration Association, with a request for arbitration in accordance with the rules of the Association by a single arbitrator who shall be an MAI appraiser with at least ten years experience as an appraiser of major office buildings in the Greater Boston area. The parties agree that a decision of the arbitrator shall be conclusive and binding upon them. Until such time, if any, when Landlord makes the election provided for in this Section 7.3 , Tenant shall indemnify Landlord for the loss of Rent by a payment at the end of each month which would have been included in the Term, representing the difference between the Rent which would have been paid in accordance with this Lease (Annual Fixed Rent under Section 2.5 , and Additional Rent which would have been payable under Section 2.6 to be ascertained monthly) and the Rent actually derived from the Premises by Landlord for such month (the amount of Rent deemed derived shall be the actual amount less any portion thereof attributable to Landlord’s reletting expenses described in Section 7.2 which have not been reimbursed by Tenant thereunder).

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All rights and remedies of Landlord under this Section 7.3 and elsewhere in this Lease shall be distinct, separate and cumulative, and none shall exclude any other right or remedy of Landlord set forth in this Lease or allowed by law or in equity. Tenant’s obligations under this Section 7.3 shall survive the expiration or earlier termination of the Term.

7.4 MITIGATION

In the event the Lease is terminated pursuant to Section 7.1 and Tenant vacates the Premises, Landlord shall, subject to the provisions of this Section 7.4 , use reasonable efforts to relet the Premises and collect the sums due to Landlord as a result of such reletting; provided, however, that any obligation imposed by law upon Landlord to relet the Premises shall be subject to the right of Landlord and its affiliates to lease other available space prior to reletting the Premises and to lease the Building in a harmonious manner with an appropriate mix of uses, tenants, floor areas and terms of tenancies, and the like.

7.5 CLAIMS IN BANKRUPTCY

Nothing herein shall limit or prejudice the right of Landlord to prove and obtain in a proceeding for bankruptcy, insolvency, arrangement or reorganization, by reason of the termination, an amount equal to the maximum allowed by a statute or law in effect at the time when, and governing the proceedings in which, the damages are to be proved, whether or not the amount is greater to, equal to, or less than the amount of the loss or damage which Landlord has suffered.

7.6 INTEREST ON UNPAID AMOUNTS

If any payment of Annual Fixed Rent, Additional Rent, or other payment due from Tenant to Landlord is not paid when due, then without notice and in addition to all other remedies hereunder, Tenant shall pay to Landlord interest on such unpaid amount at the rate of eighteen percent (18%) per annum; provided, however, in no event shall such interest exceed the maximum amount permitted to be charged by applicable law.

7.7 LATE FEE

If any payment of Annual Fixed Rent, Additional Rent, or other payment due from Tenant to Landlord is not paid within five (5) days of such date when due, then upon the third (3rd) such instance Landlord may, at its option, in addition to all other remedies hereunder, impose a late charge on Tenant equal to five percent (5%) of the amount in question, which late charge will be due within ten (10) days after notice as Additional Rent.

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7.8 INTENTIONALLY OMITTED

7.9 INTENTIONALLY OMITTED

ARTICLE VIII

MISCELLANEOUS

8.1 HOLDOVER

If Tenant remains in the Premises after the termination or expiration of the Term, such holding over shall be as a tenant at sufferance at a rent equal to the greater of one and one half (1.5) times (i) the Annual Fixed Rent due hereunder for the last month of the Term and (ii) the fair market rent for the Premises, and otherwise subject to all the covenants and conditions (including obligations to pay Additional Rent under Section 2.6 ) of this Lease. Notwithstanding the foregoing, if Landlord desires to regain possession of the Premises after the termination or expiration hereof, Landlord may, at its option, re-enter and take possession of the Premises or any part thereof at any time thereafter or by any legal process in force in the state in which the Premises are located.

Notwithstanding the establishment of any tenancy at sufferance following the expiration or earlier termination of the Term, if Tenant fails to vacate the Premises at the expiration or earlier termination of the Term, Tenant shall save Landlord harmless, indemnify and defend Landlord against any claim, loss, cost or expense (including reasonable attorneys’ fees by counsel of Landlord’s choice) arising out of Tenant’s failure promptly to vacate the Premises (or any portion thereof), including without limitation due to the loss of any opportunity to enter into any advantageous lease or other occupancy agreement.

8.2 ESTOPPEL CERTIFICATES

At Landlord’s request, from time to time, Tenant agrees to execute and deliver to Landlord, within ten (10) days after delivery of such request, a certificate which acknowledges the dates on which the Term begins and ends, tenancy and possession of the Premises and recites such other facts concerning any provision of the Lease or payments made under the Lease which Landlord or a mortgagee or lender or a purchaser or prospective purchaser of the Building or any interest therein or any other party may from time to time reasonably request. Tenant acknowledges that the execution and delivery of such certificates in connection with a financing or sale in a prompt manner constitute requirements of Landlord’s financing and/or property dispositions. Without limitation of the foregoing, Tenant agrees to execute instruments reasonably requested by lenders to acknowledge such tenancy in recordable form, within ten (10) days after Landlord’s request, correcting as appropriate any representations which are not then correct.

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8.3 NOTICE

Any notice, approval, consent and other like communication hereunder from Landlord to Tenant or from Tenant to Landlord shall be effective only if given in writing and shall be deemed duly delivered if (i) hand delivered, (ii) mailed by prepaid certified or registered mail, return receipt requested, or (iii) delivered by a national overnight delivery service, receipt confirmed. If requested, Tenant shall send copies of all such notices in like manner to Landlord’s mortgagees and any other persons having an interest in the Premises and designated by Landlord. Any notice so addressed shall be deemed duly delivered on the third Business Day following the day of mailing if so mailed by registered or certified mail, return receipt requested, whether or not accepted, or on the date of delivery if hand delivered or sent by overnight delivery service. Communications to Tenant shall be addressed to Tenant’s Authorized Representative at the Original Address of Tenant set forth in Section 1.1 prior to the Term Commencement Date and thereafter at the Premises, with a copy to Tenant’s Legal Department at the same addresses. Communications to Landlord shall be addressed to the Landlord’s Address, and a copy of all notices shall be sent to Landlord’s attorneys, Chief Legal Officer, Hobbs Brook Management LLC, 225 Wyman Street, Waltham, Massachusetts 02451-1209 and Richard D. Rudman, Esq., DLA Piper LLP (US), 33 Arch Street, 26th Floor, Boston, Massachusetts 02110. Either party may from time to time designate other addresses within the continental United States by notice to the other.

8.4 LANDLORD’S RIGHT TO CURE

Subject to prior notice to Tenant and the expiration of any applicable cure period (except in the case of emergency or Landlord’s reasonable determination of the existence of danger to health or property, in which case no notice or cure period shall be required), Landlord may, but need not, cure any failure by Tenant to perform its obligations under this Lease. Whenever Landlord chooses to do so, Tenant shall pay all costs and expenses incurred by Landlord in curing any such failure, including, without limitation, reasonable attorneys’ fees together with an administrative charge equal to five percent (5%) of such costs and expenses (or such higher percentage as may then be customary with respect to first class office buildings in the metropolitan area in which the Premises are located) and interest as provided in Section 7.6 .

8.5 SUCCESSORS AND ASSIGNS

This Lease and the covenants and conditions herein contained shall inure to the benefit of and be binding upon Landlord, its successors and assigns, and shall be binding upon Tenant, its successors and assigns, and shall inure to the benefit of Tenant and only such Transferees of Tenant as are permitted hereunder. The term “ Landlord ” means the original Landlord named herein, its successors and assigns. The term “ Tenant ” means the original Tenant named herein and its permitted successors and assigns.

8.6 BROKERAGE

Tenant warrants that it has had no dealings with any broker or agent in connection with this Lease or any other space in the Building or office park of which the Building is a part, except for any broker designated in Section 1.1 . Tenant covenants to pay, hold harmless, indemnify and defend Landlord from and against any and all claims, costs, expense or liability (including reasonable attorneys’ fees by counsel of Landlord’s choice) for any compensation, commissions and charges claimed by any broker or agent other than any such broker designated in Section 1.1 with respect to this Lease or the negotiation thereof arising from a breach of the foregoing warranty. Landlord warrants that it has had no dealings with any broker or agent in connection with this Lease except for any broker designated in Section 1.1 . Landlord covenants to pay, hold harmless, indemnify and defend Tenant from and against any and all claims, costs, expense or liability (including reasonable attorneys’ fees by counsel of Tenant’s choice) for any compensation, commissions and charges claimed by any broker or agent other than any such broker designated in Section 1.1 with respect to this Lease or the negotiation thereof arising from a breach of the foregoing warranty. Landlord shall be responsible for payment of any brokerage commission to any broker designated in Section 1.1 pursuant to a separate written agreement.

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8.7 WAIVER

The failure of Landlord or of Tenant to seek redress for violation of, or to insist upon strict performance of, any covenant or condition of this Lease, or, with respect to such failure of Landlord, any of the Rules and Regulations referred to in Section 5.4 , whether heretofore or hereafter adopted by Landlord, shall not be deemed a waiver of such violation nor prevent a subsequent act, which would have originally constituted a violation, from having all the effect of an original violation, nor shall the failure of Landlord to enforce any of said Rules and Regulations against any other tenant of the Building be deemed a waiver of any such Rules or Regulations. The receipt by Landlord of Annual Fixed Rent or Additional Rent with knowledge of the breach of any covenant of this Lease shall not be deemed waiver of such breach. No provision of this Lease shall be deemed to have been waived by Landlord, or by Tenant, unless such waiver be in writing signed by the party to be charged. No consent or waiver, express or implied, by Landlord or Tenant to or of any breach of any agreement or duty shall be construed as a waiver or consent to or of any other breach of the same or any other agreement or duty.

8.8 ACCORD AND SATISFACTION

No acceptance by Landlord of a lesser sum than the Annual Fixed Rent and Additional Rent then due shall be deemed to be other than on account of the earliest installment of such Rent due, nor shall any endorsement or statement on any check or any letter accompanying any check or payment as Rent be deemed an accord and satisfaction, and Landlord may accept such check or payment without prejudice to Landlord’s right to recover the balance of such installment or pursue any other remedy provided in this Lease. The delivery of keys to Landlord shall not operate as a termination of this Lease or a surrender of the Premises.

8.9 REMEDIES CUMULATIVE

The specific remedies to which Landlord may resort under the terms of this Lease are cumulative and are not intended to be exclusive of any other remedies to which it may be lawfully entitled in case of any breach or threatened breach by Tenant of any provisions of this Lease. In addition to the other remedies provided in this Lease, Landlord shall be entitled to the restraint by injunction of the violation or attempted or threatened violation of any of the covenants or conditions of this Lease or to a decree compelling specific performance of any such covenants or conditions.

8.10 PARTIAL INVALIDITY

If any term of this Lease, or the application thereof to any person or circumstance, shall to any extent be invalid or unenforceable, the remainder of this Lease, or the application of such term to persons or circumstances other than those as to which it is invalid or unenforceable, shall not be affected thereby, and each term of this Lease shall be valid and enforceable to the fullest extent permitted by law.

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8.11 WAIVERS OF SUBROGATION

Any insurance carried by Landlord or Tenant with respect to the Premises or property therein or occurrences thereon shall include a clause or endorsement denying to the insurer rights of subrogation and/or recovery against the other party for any injury or loss due to hazards which are actually insured by such party or are required to be insured under the Lease. Landlord and Tenant, notwithstanding any provisions of this Lease to the contrary, hereby waive any rights of recovery against the other party for injury or loss due to hazards which are the subject of insurance under the Lease. For the purposes of this Section 8.11 , “Landlord” shall include its mortgagees, agents, employees, managers and/or management companies, officers, directors, attorneys, trustees, independent contractors, and invitees.

8.12 ENTIRE AGREEMENT

This Lease contains all of the agreements between Landlord and Tenant with respect to the Premises and supersedes all prior writings and dealings between them with respect thereto.

8.13 NO AGREEMENT UNTIL SIGNED

The submission of this Lease or a summary of some or all of its provisions for examination does not constitute a reservation of or option for the Premises or an offer to lease and no legal obligations shall arise with respect to the Premises or other matters herein until this Lease is executed and delivered by Landlord and Tenant.

8.14 TENANT’S AUTHORIZED REPRESENTATIVE

Tenant designates the person named from time to time as Tenant’s Authorized Representative to take all acts of Tenant hereunder. Landlord may rely on the acts of such Authorized Representative without further inquiry or evidence of authority. Tenant’s Authorized Representative shall be the person so designated in Section 1.1 and such successors as may be named from time to time by the then current Tenant’s Authorized Representative or by Tenant’s president.

8.15 NOTICE OF LEASE

Landlord and Tenant agree not to record this Lease. If appropriate, both parties will, at • the request of either, execute, acknowledge and deliver a Notice of Lease and a Notice of Termination of Lease Term, each in recordable form. Such notices shall contain only the information required by law for recording. Tenant hereby irrevocably appoints Landlord as Tenant’s attorney-in-fact (which appointment shall survive the expiration of the Term or earlier termination of the Term) with full power of substitution to execute, acknowledge and deliver a notice of termination of lease on Tenant’s name if Tenant fails to do so within ten (10) days after request therefor.

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8.16 TENANT AS BUSINESS ENTITY

Tenant warrants and represents that (a) Tenant is duly organized, validly existing and in good standing under the laws of the jurisdiction in which such entity was organized; (b) Tenant has the authority to own its property and to carry on its business as contemplated under this Lease; (c) Tenant is in compliance with all laws and orders of public authorities applicable to Tenant; (d) Tenant has duly executed and delivered this Lease; (e) the execution, delivery and performance by Tenant of this Lease (i) are within the powers of Tenant, (ii) have been duly authorized by all requisite action, (iii) will not violate any provision of law or any order of any court or agency of government, or any agreement or other instrument to which Tenant is a party or by which it or any of its property is bound, and (iv) will not result in the imposition of any lien or charge on any of Tenant’s property, except by the provisions of this Lease; (f) the Lease is a valid and binding obligation of Tenant in accordance with its terms; and (g) Tenant’s Federal Taxpayer Identification Number is 45-2766487. Tenant agrees that breach of the foregoing warranty and representation shall at Landlord’s election be a default under this Lease for which there shall be no cure. This warranty and representation shall survive the expiration or earlier termination of the Term.

8.17 INTENTIONALLY OMITTED

8.18 FINANCIAL STATEMENTS

Within fifteen (15) days of Landlord’s request therefor (which request shall not be made more than once per calendar year, unless (i) Tenant is in default under this Lease past any applicable notice and cure period, or (ii) in connection with the sale or financing of the Building) shall furnish to Landlord an accurate, up-to-date, audited if available, financial statement of Tenant and Guarantor showing Tenant’s, and each Guarantor’s, financial condition. If no audited financial statement is prepared, such statement will be certified by the CFO or Treasurer of Tenant or Guarantor, as applicable. Unless public by other means, Landlord will maintain confidential such statement, except as required by as applicable law or court order; however Landlord may provide such statements to Landlord’s prospective and actual lenders and purchasers, and its and their accountants, attorneys and partners, as long as Landlord advises the recipients of the existence of Landlord’s confidentiality obligation. So long as Tenant or Guarantor is a publicly-traded company that makes public reports as required by the Securities and Exchange Commission, those publicly-available reports shall satisfy all obligations of Tenant under this Section 8.18 with respect to Tenant or Guarantor, as applicable. Notwithstanding anything herein to the contrary, in the event that Guarantor is no longer a publicly-traded company, then Guarantor shall not be required to provide Landlord with financial statements, provided that Tenant furnishes Landlord with financial statements of Tenant in accordance with this Section 8.18 to the extent Tenant or Guarantor prepares financial statements of Tenant in the ordinary course. If Tenant or Guarantor does not prepare such statements in the ordinary course, then Tenant shall provide to Landlord such information and documentation reasonably requested by Landlord to enable Landlord to evaluate Tenant’s finances.

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8.19 INTENTIONALLY OMITTED

8.20 MISCELLANEOUS PROVISIONS

This Lease may be executed in counterparts and shall constitute the agreement of Landlord and Tenant whether or not their signatures appear in a single copy hereof. This Lease shall be construed as a sealed instrument and shall be governed exclusively by the provisions hereof and by the laws of The Commonwealth of Massachusetts as the same may from time to time exist. The titles are for convenience only and shall not be considered a part of the Lease. Where the phrases “persons acting under Tenant” or “persons claiming under Tenant” or similar phrases are used, the persons included shall be all employees, agents, independent contractors and invitees of Tenant or of any Transferee of Tenant. The enumeration of specific examples of or inclusions in a general provision shall not be construed as a limitation of the general provision. If Tenant is granted any extension option, expansion option or other right or option, the exercise of such right or option (and notice thereof) must be unconditional to be effective, time always being of the essence to the exercise of such right or option; and if Tenant purports to condition the exercise of any option or to vary its terms in any manner, then the option granted shall be void and the purported exercise shall be ineffective. Unless otherwise stated herein, any consent or approval required hereunder may be given or withheld in the sole absolute discretion of the party whose consent or approval is required. Nothing herein shall be construed as creating the relationship between Landlord and Tenant of principal and agent, or of partners or joint venturers or any relationship other than landlord and tenant. This Lease and all consents, notices, approvals and all other documents relating hereto may be reproduced by any party by photographic, microfilm, microfiche or other reproduction process and the originals thereof may be destroyed; and each party agrees that any reproductions shall be admissible in evidence as the original itself in any judicial or administrative proceeding (whether or not the original is in existence and whether or not reproduction was made in the regular course of business) and that any further reproduction of such reproduction shall likewise be admissible in evidence. This Lease may be amended only by a writing signed by all of the parties hereto. Any reference in this Lease to the time for the performance of obligations or elapsed time shall mean consecutive calendar days, months, or years as applicable. “ Business Day ” shall mean any day of the week other than Saturday, Sunday, or a day on which banking institutions in Boston, Massachusetts are obligated or authorized by law or executive action to be closed to the transaction of normal banking business. In the event the time for performance of any obligation hereunder expires on any day other than a Business Day the time for performance shall be extended to the next Business Day.

8.21 GUARANTY

All of Tenant’s obligations under this Lease shall be guaranteed jointly and severally by SDL plc (“ Guarantor ”), in accordance with the Guaranty attached as Exhibit E .

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ARTICLE IX

LANDLORD’S LIABILITY AND ASSIGNMENT FOR FINANCING

9.1 LANDLORD’S LIABILITY

Tenant agrees to look only to Landlord’s interest in the Land and Building and the proceeds therefrom for satisfaction of any claim against Landlord hereunder or under any other instrument related to the Lease (including any separate agreements among the parties and any notices or certificates delivered by Landlord) and not to any other property or assets of Landlord. If Landlord from time to time transfers its interest in the Land and Building (or part thereof which includes the Premises), then from and after each such transfer Tenant shall look solely to the interests in the Land and Building of each of Landlord’s transferees for the satisfaction of any claim relating to non-performance of all of the obligations of Landlord hereunder (or under any related instrument). The obligations of Landlord shall not be binding on any partners, mortgagees, members, managers, directors, officers, trustees, or beneficiaries of Landlord or of any successor, individually, but only upon Landlord’s or such successor’s interest described above.

Except for the negligence or willful misconduct of Landlord or any of the Indemnitees (as such term is defined in Section 5.5.1 ), Landlord shall not be liable to Tenant and Tenant hereby waives all claims against Landlord for any injury or damage to any person or property whatsoever. In no event shall Landlord ever be liable for any indirect or consequential damages. It is expressly agreed by Landlord and Tenant that business interruption costs and expenses are indirect and consequential damages under the terms of this Lease and no other property assets of Landlord shall be subject to levy, execution or other enforcement procedures for satisfaction of any judgment or decree in favor of Tenant. Notwithstanding anything to the contrary in this Lease, Tenant shall not be liable to Landlord under this Lease for indirect or consequential damages except under Section 5.2 and provided further that the parties acknowledge that damages set forth in Article VII shall be deemed direct damages and shall not be construed to be consequential damages.

9.2 ASSIGNMENT OF RENTS

If, at any time and from time to time, Landlord assigns this Lease or the Rents payable hereunder to the holder of any mortgage on the Building, or to any other party for the purpose of securing financing (the holder of any such mortgage and any other such financing party are referred to herein as the “ Financing Party ”), whether such assignment is conditional in nature or otherwise, the following provisions shall apply:

(a) Such assignment to the Financing Party shall not be deemed an assumption by the Financing Party of any obligations of Landlord hereunder unless such Financing Party shall, by written notice to Tenant, specifically otherwise elect;

(b) Except as provided in Section 9.2(a) above and Section 9.2(c) below, the Financing Party shall be treated as having assumed Landlord’s obligations hereunder (subject to Section 9.1) only upon foreclosure of its mortgage (or voluntary conveyance by deed in lieu thereof) and the taking of possession of the Premises from and after foreclosure and, with respect to obligations regarding return of the Security Deposit, only upon receipt of the funds constituting such Security Deposit;

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(c) Subject to Section 9.1 , the Financing Party shall be responsible for only such breaches under the Lease by Landlord which occur during the period of ownership by the Financing Party after such foreclosure (or voluntary conveyance by deed in lieu thereof) and taking of possession, as aforesaid; and

(d) In the event Tenant alleges that Landlord is in default under any of Landlord’s obligations under this Lease, Tenant agrees to give any Financing Party, by registered mail, a copy of any notice of default which is served upon the Landlord, provided that prior to such notice, Tenant has been notified, in writing, (whether by way of notice of an assignment of lease, request to execute an estoppel letter, or otherwise) of the address of such Financing Party. Tenant further agrees that if Landlord shall have failed to cure such default within the time provided by law or such additional time as may be provided in such notice to Landlord, such Financing Party shall have sixty (60) days after the last date on which Landlord could have cured such default within which such Financing Party will be permitted to cure such default. If such default cannot be cured within such sixty (60) day period, then such Financing Party shall have such additional time as may be necessary to cure such default, if within such sixty (60) day period such Financing Party has commenced and is diligently pursuing the remedies necessary to effect such cure (including, but not limited to, commencement of foreclosure proceedings, if necessary, to effect such cure), in which event Tenant shall have no right with respect to such default while such remedies are being diligently pursued by such Financing Party.

In all events, any liability of a Financing Party shall be limited to the interest of such Financing Party in the Land and Building, and in no event shall a Financing Party ever be liable for any indirect or consequential damages.

Tenant hereby agrees to enter into such reasonable agreements or instruments as may be requested from time to time in confirmation of the foregoing.

ARTICLE X

SUBORDINATION AND NON-DISTURBANCE

This Lease shall be subject and subordinate to any first mortgage and to any junior mortgage that has been approved by the first mortgagee that may now or hereafter be placed upon the Building and/or the Land and to any and all advances to be made under such mortgages and to the interest thereon, and all renewals, extensions and consolidations thereof. Any mortgagee may elect to give this Lease priority to its mortgage, except that the Lease shall not have priority to (i) the prior right, claim and lien of such mortgagees in, to and upon any insurance proceeds and the disposition thereof under the mortgage; (ii) the prior right, claim and lien of such mortgagees in, to and upon any award or compensation heretofore or hereafter to be made for any taking by eminent domain of any part of the Premises, and to the right of disposition thereof under the mortgage; and (iii) any lien, right, power or interest, if any, which may have arisen or intervened in the period between the recording of the mortgages and the execution of this Lease, or any lien or judgment which may arise any time under the terms of this Lease. In the event of such election and upon notification by such mortgagee, this Lease shall be deemed prior in lien to the said mortgage. This Article X shall be self-operative, but in confirmation thereof, Tenant shall execute and deliver whatever instruments as may be reasonably required by the first mortgagee or junior mortgagee to acknowledge such subordination or priority in a recordable form.

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Landlord will deliver .1 subordination and non-disturbance agreement to Tenant on the lenders standard form, if and when a mortgage is placed on the property.

ARTICLE XI

ROOF SPACE

11.1 ANTENNA .

(a) From the Term Commencement Date until the expiration or earlier termination of this Lease, Tenant shall have a license to use a portion of the roof of the Building and enjoy 24-hour access thereto (the “ Rooftop License ”) at a technologically sufficient location to be proposed by Tenant and approved by Landlord (the “ Rooftop Installation Area ”). The Rooftop Installation Area is to be used by Tenant solely for the installation, operation, maintenance, repair and replacement during the Term of this Lease of an antenna thirty inches (36”) in diameter and other related communications equipment, including one two-inch (2”) conduit connecting the antenna to the Premises, to be located in a vertical chase mutually designated by Landlord and Tenant (collectively, the “ Antenna ”). Tenant’s installation and operation of the Antenna and its obligations with respect thereto shall be all in accordance with the terms, provisions, conditions and agreements contained in this Lease.

(b) Tenant shall install the Antenna in the Rooftop Installation Area at its sole cost and expense, at such times and in such manner as Landlord may reasonably designate and in accordance with all of the applicable provisions of this Lease, including, without limitation, Section 5.9 ). Landlord shall not be obligated to perform any work or incur any expense to prepare the Rooftop Installation Area for Tenant’s use thereof.

(c) Tenant shall not install or operate the Antenna until it receives prior written approval from Landlord, which Landlord agrees shall not be unreasonably withheld, conditioned or delayed, provided and on the condition that Tenant complies with all of the requirements of this Lease including without limitation Section 5.9 and this Article XI . Prior to commencing installation of the Antenna, Tenant shall provide Landlord with (i) copies of all required permits, licenses and authorizations which Tenant will obtain at its own expense and which Tenant will maintain at all times during the operation of the Antenna; and (ii) a certificate of insurance evidencing insurance coverage as required by this Lease and any other insurance reasonably required by Landlord for the installation and operation of the Antenna. Tenant agrees to reimburse Landlord for reasonable expenses incurred in connection with the review and approval of Tenant’s plans showing the proposed installation of the Antenna.

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(d) Tenant shall pay to Landlord as Additional Rent (the “ Antenna Rent ”), all applicable taxes or governmental charges, fees, or impositions imposed upon Landlord and arising out of Tenant’s use of the Rooftop Installation Area, and the amount, if any, by which Landlord’s insurance premiums increase as a result of the installation of the Antenna.

(e) Tenant covenants that Tenant shall repair any damage to the roof and the Building caused by the installation or operation of the Antenna.

(f) Tenant covenants and agrees that the installation, operation and removal of the Antenna and appurtenant equipment and cabling will be at its sole risk. Tenant agrees to indemnify and defend Landlord and all other Indemnitees (as defined in Section 5.5.1 ) against all claims, actions, damages, liabilities and expenses including reasonable attorneys’ fees by counsel of Landlord’s choice in connection with the loss of life, personal injury, damage to property or business or any other loss or injury or as a result of any litigation arising out of the installation, use, operation or removal of the Antenna and appurtenant equipment and cabling, except to the extent the foregoing is caused by the gross negligence or willful misconduct of Landlord or the Indemnitees.

(g) Landlord, at its sole option upon not less than sixty (60) days’ prior written notice, shall have the right to revoke the Rooftop License at any time prior to the expiration of the Term of this Lease, and require Tenant to terminate the operation of the Antenna if (1) the Antenna is causing physical damage to the structural integrity of the Building, or (2) the Antenna is interfering with any telecommunications, mechanical or other systems either located or servicing the Building (whether belonging to or utilized by Landlord or any other tenant or occupant of the Building) or located at or servicing any building, premises or location in the vicinity of the Building, or (3) the installation, existence, maintenance and operation of the Antenna (i) constitutes a violation of any applicable laws, ordinances, rules, order, regulations, etc. of any federal, state, county and municipal authorities having jurisdiction thereover or (ii) does not conform to industry technical specifications. Notwithstanding the foregoing however, if Tenant can correct the damage or disturbance caused by the Antenna to Landlord’s reasonable satisfaction, Tenant may restore the operation. If the Antenna is not corrected and restored to operation within sixty (60) days, Landlord, at its sole option, may require that Tenant remove the Antenna and appurtenant equipment and cabling at its own expense.

(h) The sole use and purpose of this Rooftop License shall be to serve the communication needs of Tenant within the Building. Tenant is expressly forbidden to serve other tenants or occupants of the Building, to serve any locations outside the Building, or to resell any communications services without the prior written consent of Landlord, which consent may be granted or withheld at Landlord’s sole discretion. In the event Tenant shall attempt to resell, license, lease or otherwise provide use of the Antenna to any person or entity, except in connection with a Permitted Transfer, without Landlord’s prior written consent, then the Rooftop License shall immediately terminate and Landlord shall have the right to disconnect the Antenna and appurtenant equipment and cabling and, in accordance with the provisions of subsection (h) hereof, require Tenant to remove the Antenna and appurtenant equipment and cabling and to restore the Building to the condition as existed prior to the installation thereof, all at Tenant’s sole cost and expense.

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(i) Within fifteen (15) days following the expiration or earlier termination of the Lease or the permanent termination of the operation of the Antenna by Tenant, Tenant shall, at its sole cost and expense, (i) remove the Antenna from the Rooftop Installation Area and the Building in accordance with the terms hereof, (ii) leave the Rooftop Installation Area in good order and repair, reasonable wear and tear excepted and (iii) pay all amounts due and owing with respect to the Rooftop License up to the date of the termination thereof. If Tenant does not remove the Antenna when so required, the Antenna shall become Landlord’s property and, at Landlord’s election, Landlord may remove and dispose of the Antenna and charge Tenant for all costs and expenses incurred as Additional Rent. Notwithstanding that Tenant’s use of the Rooftop Installation Area shall be subject at all times to and shall be in accordance with the terms, covenants, conditions and agreements contained in this Lease, the Rooftop Installation Area shall not be deemed part of the Premises. All Tenant obligations under this Section 11.1 shall survive the expiration of the Term or the earlier termination of this Lease.

ARTICLE XII

MOVING ALLOWANCE

12.1 MOVING ALLOWANCE

Landlord shall provide Tenant with a Moving Allowance in the amount set forth in Section 1.1 for Tenant’s use toward offsetting costs associated with the installation and procurement of telecommunications and data infrastructure, and equipment and furniture systems. The payment or rent credit shall be made by Landlord to Tenant within thirty (30) days following Tenant’s written request delivered to Landlord after the Term Commencement Date but no later than December 31, 2012. Tenant shall receive the full economic benefit of the Moving Allowance amount as rent credit to the extent that it has not been fully expended and reimbursed in connection with the move.

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Executed to take effect as a sealed instrument.

	LANDLORD:

	101 EDGEWATER LLC

	By:
		Manager

	TENANT:

	XYENTERPRISE INC.

	By:
		Name:
		Title: President/Vice-President

	By:
		Name:
		Title: Treasurer/Assistant Treasurer

Exhibit A - Plan of Premises

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Exhibit A-1

Plan of First Offer Space

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Exhibit B

Landlord’s Initial Construction

Plans and Specifications .

(a) Preparation of Plans . Landlord has prepared a plan (“Landlord’s Plans”) attached hereto as Exhibit B-1, which Tenant hereby unconditionally approves. Landlord shall perform Landlord’s Initial Construction consistent with Landlord’s Plans using building standard materials and finishes

(b) Change Orders . Landlord’s Plans shall not be changed or modified except as set forth herein. If Tenant requests a change in Landlord’s Plans, Landlord shall not unreasonably withhold its consent to said change provided that it shall not be deemed unreasonable for Landlord to withhold consent to any change in Landlord’s Plans that in Landlord’s sole opinion (i) will cause any delay in the completion of Landlord’s Initial Construction (as hereinafter defined), (ii) cause any additional cost or expense to Landlord, (iii) in any manner affect any structural component of the Building (including, without limitation, exterior walls, exterior windows, core walls, roofs, or floor slabs), (iv) in any respect be incompatible with the electrical, mechanical, or plumbing components or systems of the Building, (v) affect in any respect other space in the Building other than the Premises, including the exterior of the Building, (vi) diminish the value of the Premises for any general purpose office use, or (vii) require any unusual expense to readapt the Premises for any general purpose office use. With respect to clauses (i) and (ii) above, Landlord may, but shall not be obligated to, grant its consent provided Tenant agrees to pay for any and all costs associated therewith.

2. Completion of Landlord’s Initial Construction.

(a) Construction of Premises . Landlord shall exercise reasonable efforts to substantially complete the work specified in Landlord’s Plans (“ Landlord’s Initial Construction ”) necessary to prepare the Premises for Tenant’s occupancy on or before the Estimated Term Commencement Date specified in Section 1.1 of this Lease, subject to Tenant’s Delays (as hereinafter defined) and Force Majeure, as such term is defined in Section 4.2 of this Lease.

(b) Substantial Completion . The Premises shall be deemed ready for occupancy on that day (the “Substantial Completion Date”) on which Landlord’s Initial Construction is “Substantially Complete,” defined to mean that Landlord’s Initial Construction has been completed except for minor items of construction, mechanical and electrical adjustment or other work which Landlord is able to complete after Tenant has occupied the Premises without unreasonably interfering with Tenant’s use thereof, as evidenced by an architect’s written certification and the issuance of a valid certificate of occupancy (which may be temporary or permanent) from the City of Wakefield for the Premises or such other permit or approval entitling Tenant to occupy the Premises for the Permitted Uses.

3. Intentionally Omitted

Excess Work .

All Landlord’s Initial Construction performed under any Change Order, the cost of which exceeds the cost to perform Landlord’s Initial Construction in accordance with Landlord’s Plans shall be “ Excess Work .” Tenant may seek to reduce the cost of Landlord’s Initial Construction by Change Order under Section 1(b) above. All Excess Work shall be performed by Landlord at the sole expense of Tenant.

Tenant’s Delay.

(a) Any delay that shall occur in the Substantial Completion Date as the result of the following shall be a Tenant’s Delay:

(i)

any request by Tenant that Landlord delay in the commencement or completion of Landlord’s Initial Construction for any reason;

(ii)

any change made or requested by Tenant in any of Landlord’s Plans

(iii)

any special requirements of Tenant not in conformity with Landlord’s Plans;

(iv)

any other act or omission of Tenant or its members, managers, officers, directors, agents, servants, contractors, architects, engineers, or employees; or

(v)

any reasonably necessary rescheduling of the sequence of any of Landlord’s Initial Construction due to any of the causes for delay referred to in clauses (i), (ii), (iii), and (iv) of this paragraph (a) of Section 5.

(c) In addition to Landlord’s other rights and remedies under prevailing circumstances, the Term Commencement Date shall automatically be extended for the period of any delays caused by Tenant’s Delay(s) or Force Majeure, but the number of days of initial rent abatement to which Tenant is entitled under Section 1.1 shall be reduced by the number of days the Term Commencement Date is delayed as a result of a Tenant Delay.

(d) If, as a result of Tenant’s Delay(s), the Substantial Completion Date is delayed in the aggregate for more than sixty (60) days, Landlord may (but shall not be required to) at any time thereafter terminate this Lease by giving written notice of such termination to Tenant, and thereupon this Lease shall forthwith terminate without further liability or obligation on the part of either party, except that Tenant shall pay to Landlord the damages suffered by Landlord by reason of such Lease termination including, without limitation, the cost theretofore incurred by Landlord in performing and, if applicable, demolishing Landlord’s Initial Construction, plus an amount equal to Landlord’s out-of-pocket expenses incurred in connection with this Lease, including, without limitation, brokerage and legal fees, together with any amount required to be paid pursuant to paragraph (a) of this Section 5, through the effective termination date.

Conclusiveness of Landlord’s Performance.

Tenant shall have no claim that Landlord has failed to perform any of Landlord’s Initial Construction, unless Tenant shall have given Landlord notice, not later than sixty (60) days following the Substantial Completion Date, or, in the case of latent defects, not later than the earlier of (a) eleven (11) months following the Substantial Completion Date and (b) the date Tenant knew or should have known about such latent defect, of respects in which Landlord has not performed Landlord’s Initial Construction. Except for Landlord’s Initial Construction, the Premises are being leased in their condition “as is” without representation or warranty by Landlord.

Entry Prior to Commencement.

If and as long as Tenant does not interfere in any way with the construction process (by causing disharmony, scheduling or coordination difficulties, etc.), Tenant may, pursuant to the provisions of Section 3.2 of this Lease and at Tenant’s sole risk and expense, enter the Premises up to thirty (30) days prior to the Substantial Completion Date for the purpose of installing Tenant’s decorations, movable furnishings, cabling, wiring and business fixtures and equipment. The determination of any such interference by Landlord shall be conclusive. Prior to the Substantial Completion Date, upon Tenant’s written request, Tenant may conduct a walk-through of the Premises accompanied by a representative of Landlord.

Prior to the Term Commencement Date Tenant shall comply with and perform, and shall cause its employees, agents, contractors, subcontractors, material suppliers and laborers to comply with and perform, all Tenant’s obligations under this Lease except the obligations to pay Annual Fixed Rent and Additional Rent and other obligations, the performance of which would be clearly incompatible with the installation of decorations, movable furnishings, cabling, wiring and business fixtures and equipment pursuant hereto.

Tenant Contractors.

Any independent contractor of Tenant (or any employee or agent of Tenant) performing any work in the Premises prior to the Term Commencement Date if and to the extent permitted by Landlord pursuant to the provisions of Section 3.2 of this Lease shall be a “ Tenant Contractor ” and shall be subject to all of the terms, conditions and requirements contained in the Lease. Neither Tenant nor any Tenant Contractor shall interfere in any way with construction of, nor damage, Landlord’s Initial Construction, and shall do all things reasonably requested by Landlord to expedite construction of Landlord’s Initial Construction. Without limitation, Tenant shall require each Tenant Contractor to adjust and coordinate any work or installation in or to the Premises to meet the schedule or requirements of other work being performed by or for Landlord throughout the Building, which shall in all cases have precedence. If Tenant or any Tenant Contractor fails so to adjust to the schedule or requirements of Landlord, then Landlord may immediately by notice to Tenant terminate permission previously granted to Tenant to enter the Premises prior to the Term Commencement Date. Neither Tenant nor any Tenant Contractor shall cause any labor disharmony, and Tenant shall be responsible for all costs required to produce labor harmony in connection with an entry under this Section. In all events, Tenant shall indemnify the Indemnitees in the manner provided in Section 5.5.1 of this Lease against any claim, loss or cost arising out of any interference with, or damage to, Landlord’s Initial Construction or any other work in the Building, or any delay thereto, or any increase in the cost thereof on account in whole or in part of any act, omission, neglect or default by Tenant or any Tenant Contractor. Without limiting the generality of the foregoing, to the extent that the commencement or performance of Landlord’s Initial Construction is delayed on account in whole or in part of any act, omission, neglect, or default by Tenant or any Tenant Contractor, then such delay shall constitute a Tenant Delay as provided herein.

Any requirements of any such Tenant Contractor for services from Landlord or Landlord’s contractor, such as hoisting, electrical or mechanical needs, shall be paid for in advance by Tenant and arranged between such Tenant Contractor and Landlord or Landlord’s contractor. Should the work of any Tenant Contractor depend on the installed field conditions of any item of Landlord’s Initial Construction, such Tenant Contractor shall ascertain such field conditions after installation of such item of Landlord’s Initial Construction. Neither Landlord nor Landlord’s contractor shall ever be required or obliged to alter the method, time or manner for performing Landlord’s Initial Construction or work elsewhere in the Building, on account of the work of any such Tenant Contractor. Should Landlord’s contractor, including subcontractors working under such contractor, damage or delay the work of any Tenant Contractor, then such Tenant Contractor, by entering on the Premises, shall be deemed to have agreed not to prosecute any claim against Landlord, but shall look solely to Landlord’s contractor (or such contractor’s subcontractors) that allegedly caused the damage or delay. If any such Tenant Contractor ever makes a claim against any Indemnitee (as such term is defined in Section 5.5.1 of this Lease) directly, then Tenant shall indemnify such Indemnitee in the manner provided in the Lease against such claim so long as such Tenant Contractor’s loss was not caused solely and directly by the gross negligence or willful and wrongful act of such Indemnitee. Tenant shall cause each Tenant Contractor performing work on the Premises to clean up regularly and remove its debris from the Premises and Building. If any Tenant Contractor fails so to clean up, then Landlord may cause its contractor to clean up and remove debris, and Tenant shall pay all costs (including administrative costs) of such cleanup and removal.

Exhibit B-1: Landlord’s

- i -

- ii -

Memorandum Revision 01

SDL — 201 EDGEWATER DRIVE 1ST FLOOR			12.042.01

To:	Patricia Holland	Hobbs Brook Management LLC

From:	Shane Mulroney	DBA-W, Architects

cc:

Date:	April 30, 2012

Personnel whose names appear in bold type, please diStribute.es required within your office.

Scope of work: DBA-W Architects is pleased to provide a proposal to perform architectural and M.E.P. engineering services for SDL In approximately 18,763 Rentable Square Feet (RSF) based upon fit plan option 07 dated 03¬29-2012. This is a multitenant floor and includes general office space and a training room. We are utilizing existing Walls where possible and reusing all doer and frames throughout the space.

Below is a list of the building standards that will be followed to construct the new space for SDL. Anything Bold and underlined is a specific item not included in the building standards that will be provided within the scope of work per fit plan option 07.

ALL SERVER ROOM AND SECURE LAB EQUIPMENT AND RACK LAYOUT IS THE RESPONSIBILITY_OF THE TENANT. TENANT TO PROVIDE DBA-W AND C3 WITH THIS LAYOUT IN_CAD FORMAT FOR COORDINATION WITH BUILDING SYSTEMS AND SERVER ROOM REQUIREMENTS. SDL HAS PROVIDED A SERVER ROOM LAYOUT FOR CONSTRCTION DOCUMENTS AND IS ATTACHED TO THIS DOCUMENT IN PDF FORMAT LABELED “09801.07 SDL SERVER ROOM LAYOUT-07 4-30-2012.PDF”

Walls

Standard Wall - 2 ½” metal studs with 5/8” GWB each side; taped, speckled and sanded

Tenant Suite Demising Walls — 1 hour rated, full height to underside of deck with insulation

Private Offices and all interior Suite Walls —wall height to be 6” above finished ceiling

Conference Rooms — Full height to underside of deck with sound batt wall insulation on all sides

Server Rooms — Full height to underside of deck with sound batt wall insulation on all sides

Electric Rooms - 1 hour rated, full height to underside of deck with insulation

All walls must penetrate the ceiling a minimum of 6”. Interior partition studs must extend to the underside of the slab above and braced to underside of deck as necessary. All demising partitions and corridor walls must extend completely and be sound insulated and fire taped; drywall and studs most extend to the underside of the slab.

Building Finishes : (See Finishes Memo for all specifications)

Floors

Office Interiors and Reception — Carpet

ii.

Storage, Pantries, Break Areas, Copy Rooms, Server Rooms, Electric Rooms —VCT tile

Base

4” Rubber/Vinyl base

Paint

(1) coat primer, (2) coats finish latex, eggshell finish at all gypsum walls

Millwork

Plastic laminated base and upper cabinets as indicated on Tenant Space plans in pantry area and work areas.

ii.

Exclusions: Reception desks.

Doors & Sidelights

Entryway Doors - All tenant entry doors on the pubic corridors of multi-tenant floors are to be building standard glass door with glass sidelight

Any Deviation from building standard must be approved in writing by the Office of the Building.

Secondary Suite Doors

All tenant entry doors on the public corridors of multi-tenant floors and Interior doors are to match doors of other tenants on the respective floors. All doors to be Solid Core Wood Door to match existing. Refinish any corridor doors within scope of work to match standard color to repair any damage or wear

All interior tenant doors are to be solid core wood doors with P-Lam Finish as follows: Doors to be salvaged and reused first prior to purchasing new.

201 3’0” x 8’10” solid core Golden Oak Wood P-lam finish
Wilsonart#7888-60

Interior Sidelights - Drywall cased 24” frameless sidelight spaced 1’-0” from outside of door frame

Sliding stacking door at training room shall be provided at training room as noted on fit plan option 07

Hardware and Locks

All door hardware must conform to the building standard specification below. All Locks, including interior locks, must be building standard US 26D(626) Satin Chrome Lever passage/lockset.

Glass Entry Door Hardware :

Building Standard glass door with glass sidelight

Glass door hardware:

Pivot hinges (top and bottom)

Door pulls (both sides) per elevation

Top and bottom rails

Concealed closer (2 for pair of doors); closer to be installed at floor, below floor final finish

Electromagnetic lock Schlage electronics M490 - fail safe, connected to fire alarm (M492 for double doors)

Power requirement — RBH Access Technologies, IRC-2000 with ENCL1-PS and ASP-MT-1-MINITIMER

(2) DT 12VCD batteries

Motion sensor - Bosch DS160 PIR exit Sensor with sounder and door monitoring fail safe Push to exit button – H100-US28-PE red rex push plate engraved ‘‘push to exit” pneumatic time delay micro switch (NFPA 201) manual door release and over ride switch in one (2) Key switch device - Schlage electronics LN-653-04 and LN-653-05 Cylinders/IC products - (2) 16CR27-001-26D mort IC housing 11/4 std cam 26D mortise housing interchangeable core, standard satin chrome

All mag locks must be tied into the Building’s Fire Alarm System, if door leads to a fire exit. All mag locks must fall safe on fire alarm.

ii.

Secondary Suite Door Hardware:

Lever set —Schlage AL Series Jupiter US260(626) Satin Chrome

Butt Hinges —Quantity of (3) US26D

(1) Floor Stop (Rif Dome) US26D

Silencers (Gray color)

Private Offices — lever passage set, butt hinges, floor stop, silencers, coat hook

Conference Rooms, Server Rooms — lever passage set, butt hinges, floor stop, silencers

Electric Rooms —lever lock set, butt hinges, floor stop, silencers, surface-mounted door closer

Windows/Solar Screens

All window blinds, which can be seen from the exterior of the building, must conform to Building Standards

iii

201 Edgewater Drive : Vertex Vertical Binds: 3 5” solid, straight, Ivory louvered with bronze tracking vertical blinds

Ceilings .

Edging or 9’-o” ceiling height

All new ceilings are to be installed using Armstrong Ultima #1911 24”x24” Beveled Tegular Tile

All new Ceiling Grids must use Armstrong Prelude 07300 15/16”

Lighting .

If new fixtures are being Installed they must be 2’ x or 2’ x 4’ recessed direct/indirect;

2’x2’ recessed direct/indirect basket fixtures:

Cooper Lighting Metalux Ovation T5 2RD1-224T5RP-UNV-EL-EBT1

ii.

2’x4’ recessed direct/indirect basket fixture:

Cooper Lighting Metalux Ovation T5 2RDI-328T5-RP-UNV-EL-EBT2

illumination levels as required by State Building Code.

Standard switching motion sensors to comply with energy codes.

Exit Signs: Emergi Lite Prestige Series x40 LED series premium Edgelit sign, brushed aluminum, self powered with red lettering on mirror. Arrows as required by location.

All new light switches to be stainless plate and white device.

If existing parabolic fixtures are to remain, they must be T-8.

Electrical (scone for design-build protects)

Privates Offices — (2) duplex outlet receptacles

Open Office Areas —Convenience duplex outlet receptacles as required.

Server Room — (1) quad outlet receptacle, (1) duplex outlet receptacle, 4-by wall-mounted plywood

All new electrical receptacles to be stainless plate and white device.

Voice and Data (all tel/data wiring by tenant; shown on drawings for location only)j

Private offices - (1) Junction box w/pull string

Open Office Area -Junction box w/pull string as required by Tenant’s layout

D Mark — Closet bar location as available)

Tenant is responsible for all Voice and Data distribution

10.

HVAC

Thermostat locations as required by zone

Air distribution shall be through low-velocity ductwork

Return Air through plenum

Tenant is responsible for installation, repairs, maintenance and replacement of all supplemental HVAC units dedicated to their Premises.

11.

Plumbing

According to plan. Including distribution, insulation, electrical water heater, vents and drains.

All water heaters shall have an automatic leak detector and water shutoff included as part of install.

All hot water heaters shall have drain pans.

Check life of existing water heater in premises and replace as required.

Tenant is responsible for all repairs and replacement of water heaters that are dedicated to their premises.

12.

Fire Protection

aa.

Interior hydraulically calculated fire protection sprinkler system per State of Massachusetts Building Code.

bb.

Fully sprinklered

cc.

Sprinkler heads are to be concealed type, centered in ceiling tile.

13.

Fire Alarm

dd.

As required by State of Massachusetts Building Code.

14.

Security

ee.

Tenant is responsible for installing any and all security systems, alarms, controls and distribution dedicated to their Premises. Security system must be approved by Landlord PRIOR to Installation .

15.

Fireproofing

in the event that any structural steel is exposed as a result of construction, thorough fireproofing shall be required as part of contractor’s scope of work.

Subcontractors engaged to replace fireproofing materials must be licensed by the manufacturer and have prior experience in at least two projects of spinier size and scope.

All Structural Elements (columns, beams, etc.): must have an application to afford three hours of fire resistance. Floors and Decking: to be two hour rated.

Application of fireproofing must adhere to the following guidelines:

Mask and protect adjacent work which could be damaged by over spray or fallout

ii.

Clean substrates of all substances that might be incompatible or inhibit bonding:

iii.

Verify that surface members to receive sprayed fireproofing are compatible with fireproofing materials and bonding requirements.

iv.

Power dean unpainted members that will receive sprayed fireproofing to remove Incompatible materials to could affect bond when scraping, bruising, or washing will not remove materials

Assure that installation of clips, hangers, supports, sleeves, shaft wall runners and other items required to penetrate the sprayed fireproofing work is complete.

vi.

Verify that ducts, piping equipment and other hems would interfere with application of fireproofing are not-positioned until sprayed fireproofing work is completed.

Attachments: None

Exhibit C

Landlord’s Cleaning Specifications

Office Area

Daily/Nightly Monday through Friday, excluding holidays.

•

Empty all waste receptacles and return to proper locations.

•

Sweep and dust mop all uncarpeted areas.

•

Vacuum all rugs and carpeted areas.

•

Dust horizontal surfaces of furniture and equipment within normal reach.

•

Clean and sanitize all drinking fountains and water coolers.

•

Remove finger marks from glass sidelights

•

Wipe clean all brass and other metal surfaces within normal reach. Clean Tenant kitchen space, (sink, surfaces, and floors with germicide)

Monthly:

Remove all finger marks from doors, door jambs, and light switches Spot clean tile floor areas where needed

Quarterly:

Wash interior partition glass surfaces.

Dust picture frames, chart boards and similar wall hangings

RESTROOMS- Daily

•

Sweep and mop floors

•

Clean and sanitize all floors, toilet seats, bowls, urinals and fixtures

•

Clean all mirrors and shelves

•

Refill towel dispensers, tissue holders, materials to be furnished by Landlord.

•

Empty paper towel receptacles

•

Dust all partitions

MONTHLY:

Machine scrub restroom floors Wash all partitions, dispensers and splash areas Dust all light fixtures and ventilating grills.

QUARTERLY:

Wash all tile walls and partitions.

Tenant requiring services in excess of those above shall request through Landlord at Tenant’s expense.

Exhibit D

Confirmation of Lease Commencement

Reference is made to the Lease dated _________ between __________, as Landlord and _______________, as Tenant (the “ Lease ”). The terms listed below are used as defined in the Lease.

Landlord and Tenant confirm the following:

Term Commencement Date: _______________________________

Initial Rent Abatement Period under Section 1.1:

Executed as a Massachusetts instrument under seal as of _______________.

		LANDLORD:

		By:
			Name:
			Title:

		TENANT:

		By:
			Name:
			Title:

		By:
			Name:
			Title:

COMMONWEALTH OF MASSACHUSETTS

___________ County, ss.

On this _____________ day of ____________, 20___, before me, the undersigned notary public, personally appeared ________________, proved to me through satisfactory evidence of identification, which was ______________, to be the person whose name is signed on the preceding or attached document, and acknowledged to me that (he) (she) signed it voluntarily, for its stated purpose, as ____________________________ of _______________________, a ____________________.


	(official signature and seal of notary

	My commission expires

COMMONWEALTH OF MASSACHUSETTS

___________ County, ss.


	(official signature and seal of notary

	My commission expires

COMMONWEALTH OF MASSACHUSETTS

___________ County, ss.


	(official signature and seal of notary

	My commission expires

Exhibit E

Guaranty

201 Edgewater Drive

WAKEFIELD, MASSACHUSETTS

Guaranty dated as of April 30, 2012, by the undersigned SDL, plc, a corporation registered in England and Wales (“ Guarantor ” hereunder), having offices at Globe House, Clivemont Road Maidenhead, SL6 7DY, United Kingdom, on behalf of itself its subsidiaries and affiliated entities.

BACKGROUND

101 Edgewater LLC, a Delaware limited liability company, (“ Landlord ”) and XyEnterprise, Inc., a Delaware corporation (“ Tenant ”), entered into a lease dated as of April 30, 2012 for space at 201 Edgewater Drive, Wakefield, Massachusetts (as the same may be amended hereafter from time to time, the “ Lease ”).

It is intended that Guarantor shall guarantee all of Tenant’s obligations under the Lease pursuant to this Guaranty. Capitalized terms used and not defined in this Guaranty shall have the same meanings as in the Lease.

AGREEMENT

1. Guarantor hereby unconditionally guarantees to Landlord, its successors and assigns, the full performance and observance of all the covenants, conditions and agreements in the Lease provided to be performed and observed by Tenant, its successors and assigns, for the entire Term, as the same may be extended or renewed and to any holdover term thereafter, for the entire Premises, as the same may be expanded, contracted, relocated, sublet, licensed and/or assigned (voluntarily or otherwise), and whether or not Landlord has consented to same. Guarantor expressly agrees that the validity of this Guaranty and the obligations of Guarantor under this Guaranty shall not be terminated or in any way affected or impaired by reason of any amendment to the Lease, but shall continue in full force and effect with respect to the Lease as the Lease may be amended from time to time. Guarantor further expressly agrees that the validity of this Guaranty and the obligations of Guarantor under this Guaranty shall not be terminated or in any way affected or impaired by reason of the assertion by Landlord against Tenant of any of the rights or remedies reserved to Landlord pursuant to the provisions of the Lease, or by reason of the delay, waiver or failure by Landlord to enforce any of the terms, covenants or conditions of the Lease, this Guaranty, or any other guaranty of the Lease (if any), or by reason of the granting of any indulgence or extension to Tenant, or Guarantor, or to any other guarantor (if any), all of which may be given or done by Landlord from time to time without notice to Guarantor. Guarantor waives notice of non-payment of rent, additional charges, or any other amounts to be paid by Tenant under the Lease, and waives notice of default or non-performance of any of Tenant’s other covenants, conditions and agreements contained in the Lease. Guarantor further waives, to the fullest extent permitted by law, any and all legal, equitable and/or surety defenses whatsoever to which Guarantor might otherwise be entitled other than: (1) that Guarantor has fully performed all of its obligations under this Guaranty, and (2) that Tenant has fully performed all of its obligations under the Lease (determined without regard to any relief of Tenant from its obligations by operation of law or otherwise).

2. Guarantor agrees that its liability under this Guaranty shall be primary and joint and several with Tenant, any other guarantor (if any), and any other party liable for Tenant’s obligations under the Lease, and that in any right of action that shall accrue to Landlord under the Lease, Landlord may, at its option, proceed against Guarantor, without having commenced any action or having obtained any judgment against Tenant, any other guarantor, or any other party liable for Tenant’s obligations under the Lease.

3. Guarantor represents and warrants to Landlord that Guarantor has a material financial interest in the Tenant. If Guarantor is a corporation or other entity, Guarantor represents and warrants to Landlord that the individual or individuals executing this Guaranty on behalf of Guarantor is or are duly authorized to execute and deliver this Guaranty on behalf of Guarantor, that this Guaranty is a valid and binding obligation of Guarantor enforceable in accordance with its terms, and that this Guaranty violates no law, rule, regulation, agreement or contract applicable to or binding on Guarantor. In any proceeding, the books and records of Landlord shall be prima facie evidence of the obligation of Guarantor.

4. Guarantor further agrees as follows:

a. Any and all claims of any nature that Guarantor may now or hereafter have against Tenant are hereby subordinated to the full and final cash payment to Landlord of all obligations under the Lease and under this Guaranty. Without limiting the generality of the foregoing, prior to the full and final cash payment to Landlord of all obligations under the Lease and under this Guaranty, Guarantor agrees that it shall not: (i) make any claim of liability of Tenant to any Guarantor or assert any set-off or counterclaim against Tenant whether by reason of paying any sum due or recoverable under this Guaranty (whether or not demanded by Landlord) or under the Lease, or by any other means or on any other ground; or (ii) attempt to prove in competition with Landlord any claim regarding any payment made under this Guaranty or under the Lease; or (iii) have the benefit of any counterclaim or proof of claim or dividend or payment by or on behalf of Tenant or the benefit of any other security for any obligation. Guarantor waives any rights of subrogation, any rights to enforce any right or remedy of Landlord against Tenant, and any right to participate in any collateral held or payment received by Landlord.

b. In order to carry out the terms and intent of this Guaranty more effectively, Guarantor agrees to do all acts necessary or convenient to preserve for Landlord the benefits of the foregoing subordination provisions and promptly will execute all agreements and instruments that Landlord may from time to time reasonably request for that purpose, and Guarantor hereby assigns, transfers and sets over to Landlord all claims against the Tenant that Guarantor now has or Guarantor hereafter may have (“ Guarantor’s Claims ”) and, without imposing upon the Landlord any duty with respect to preservation, protection or enforcement of any Guarantor’s Claims, constitutes and appoints Landlord the true and lawful attorney of Guarantor for the purposes of collecting and/or proving Guarantor’s Claims, of accepting or rejecting, to the extent to which Guarantor otherwise would be entitled to accept or reject any plan of reorganization or arrangement in any proceedings affecting Tenant, and in general of doing any act in connection with any proceedings affecting Tenant which Guarantor might otherwise do. Landlord shall account to Guarantor for any dividends or payments received in excess of the amount necessary fully and finally to satisfy in cash all claims arising out of the Lease and the Guaranty including, without limitation, all interest and expenses of collection.

c. In the event of avoidance, disgorgement, reduction, reconveyance or recovery of any payment from Tenant to Landlord as a preference under any laws relating to the bankruptcy, reorganization or liquidation of debtors, or as a so-called fraudulent conveyance, or under any other applicable law, Landlord shall be entitled to recover on demand the amount of such payment from Guarantor as if such payment had never been made by Tenant.

5. Guarantor shall furnish to Landlord copies of its financial statements as set forth in Section 8.18 of the Lease. So long as Guarantor is a publicly-traded company that makes public reports as required by the Listing Rules of the London Stock Exchange, those publicly-available reports shall satisfy all obligations of Guarantor under this Section 5.

6. No assignment or transfer of the Lease shall operate to extinguish or diminish the liability of Guarantor under the Guaranty. Guarantor further agrees to pay to Landlord, upon demand, all costs and expenses, including without limitation reasonable attorneys’ fees and expert fees and costs, of preparing to enforce or of enforcing any obligations under this Guaranty.

7. Guarantor’s liability hereunder shall be ascertained as though the Guarantor was itself the tenant under the Lease, jointly and severally with Tenant, and the Guarantor’s obligations hereunder shall not be affected or impaired by any relief of Tenant from Tenant’s obligations under the Lease by operation of law or otherwise including, without limitation, in connection with proceedings under the bankruptcy laws now or hereafter enacted, or similar laws for the relief of debtors.

8. Guarantor hereby irrevocably and unconditionally submits to personal jurisdiction in the Commonwealth of Massachusetts over any suit, action or proceeding arising out of this Guaranty or out of the Lease, and Guarantor hereby waives any right to object to personal jurisdiction within the Commonwealth of Massachusetts. The initiation of any suit, action or proceeding by Landlord against any Guarantor or any property of Guarantor in any other jurisdiction shall not constitute a waiver of the agreements contained herein that the law of the Commonwealth of Massachusetts shall govern the rights of Landlord and the rights and obligations of Guarantor under this Guaranty, and that Guarantor submits to personal jurisdiction within the Commonwealth of Massachusetts. Guarantor hereby waives any right to a trial by jury for any claim arising under this Guaranty.

9. If any term of this Guaranty, or the application thereof to any person or circumstance, shall to any extent be invalid or unenforceable, the remainder of this Guaranty, or the application of such term to persons or circumstances other than those as to which it is invalid or unenforceable, shall not be affected thereby, and each term of this Guaranty shall be valid and enforceable to the fullest extent permitted by law.

iii

10. This Guaranty is governed by, and all disputes arising under or in connection with this Guaranty shall be resolved in accordance with, the laws of Massachusetts (to the exclusion of its conflict of laws rules), except that this arbitration clause and any arbitration hereunder shall be governed by the Federal Arbitration Act, Chapters 1 and 2. Any controversy or claim arising out of or relating to this Guaranty, or the breach thereof, shall be settled by arbitration administered by the American Arbitration Association in accordance with its International Arbitration Rules. There shall be one (1) arbitrator. The language of the arbitration shall be English. The place of the arbitration shall be (and the hearings shall be conducted in) Boston, Massachusetts. The arbitrator is authorized to include in his or her award an allocation to any party of such costs and expenses, including attorneys’ fees, as the arbitrator shall deem reasonable. Judgment on the award(s) rendered by the arbitrator may be entered into any court having jurisdiction thereof. The parties hereby waive all objection which it may have at any time to the laying of venue of any proceedings brought in such courts, waives any claim that such proceedings have been brought in an inconvenient forum and further waives the right to object with respect to such proceedings that any such court does not have jurisdiction over such party.

[the remainder of this page is left intentionally blank]

Executed as a sealed Massachusetts instrument.

	GUARANTOR:

	SDL plc

By:
	Name:	John Hunter
	Title:	Chief Executive Officer
		Hereunto duly authorized

By:
	Name:	Matthew Knight
	Title:	Chief Financial Officer
		Hereunto duly authorized

INDEX OF CERTAIN DEFINED TERMS

A

AAA	Section 2.4.1
Additional Rent	Section 2.6.1
Annual Fixed Rent	Section 1.1
Antenna	Section 11.1
Antenna Rent	Section 11.1

E

Estimated Term Commencement Date	Section 1.1
Extension Term	Section 2.4.1

F

Fair Market Rent	Section 2.4.1
Financing Party	Section 9.2
Force Majeure	Section 4.2

G

Guarantor	Section 7.1

H

Hazardous Substances	Section 5.2
Hours of Operation	Section 4.1
Improvement Allowance	Section 1.1
Indemnitees	Section 5.5.1
Insolvency Laws	Section 8.19

L

Land	Section 1.1
Landlord	Sections 1.1 and 8.5
Landlord’s Operating Expenses	Section 2.6.3
Landlord’s Taxes	Section 2.6.4
Landlord’s Address	Section 1.1
Lease Assignment	Section 9.2
Lease Year	Section 1.1
Letter of Credit Security Deposit	Section 8.19
Letter of Credit Terms and Conditions	Section 8.19

O
Offered Space	Section 2.1.1

P

Permitted Transfer	Section 5.8
Permitted Uses	Section 1.1
persons acting under Tenant	Section 8.20
persons claiming under Tenant	Section 8.20
Plan of First Offer Space	Section 2.1.1
Premises	Section 1.1
Premises Address	Section 1.1
Public Liability Insurance	Section 1.1

R

Rent	Section 2.6.1
Rentable Floor Area of Building	Section 1.1
Rentable Floor Area of Premises	Section 1.1
Rooftop Installation Area	Section 11.1
Rooftop License	Section 11.1

S

Security Deposit	Section 1.1
Subordination Agreement	Article X
Substantial Completion Date	Section 2.4
Substantially Complete	Section 2.4

T

Tenant	Sections 1.1 and 8.5
Tenant Work	Section 5.9
Tenant’s Pro Rata Share of Landlord’s	Section 2.6.5
Complex Operating Expenses
Tenant’s Authorized Representative	Section 1.1
Tenant’s Original Address	Section 1.1
Term Commencement Date	Sections 1.1 and 2.4
Term Expiration Date	Section 1.1
Transferees	Section 5.8
Transfers	Section 5.8

Exhibit A-1

Subleased Premises

A- 1

Exhibit B

List of Furniture, Furniture Systems and Fixtures

•

Front Conference Room:

•

6 hard black chairs

•

18 Cubicles with Chairs

•

2 Offices: Single Desk + Chair

•

Back Conference Room:

•

Conference Table

•

8 Chairs

•

1 Desk

Exhibit 10.9

Biofrontera Aktiengesellschaft

2010 Stock Option Programme

Terms and conditions of the stock option as amended on

16.11.2010

Page 1 of 30

Preamble:

Biofrontera Aktiengesellschaft (hereinafter referred to as the “ Company ”) finds itself in increasing competition to attract outstanding managers and employees. In order to survive in this competitive environment, the Company should have the abillity to offer stock options. The holding by employees of equity interests in the Company’s capital and thus their participation in the its economic risk and success are an important component of conventional remuneration schemes. The Management and Supervisory Boards are therefore convinced that the implementation of this stock option plan (hereinafter referred to as the “ AOP ”) is required in order for the Company to remain attractive to managers and employees. This applies in particular to highly qualified individuals who continue to be enticed internationally and across all sectors with attractive remuneration schemes. A stock option plan additionally allows the Company and the Group also to grant stock options to the existing Management Board members, management bodies of affiliated companies and the existing employees of the Company and its affiliates as a way to create an appropriate long-term incentive and preemptively counter any headhunting attempts by competitors. Biofrontera AG is committed to the principles of good corporate governance. Accordingly, the AOP is to be designed in such a way that incentives are created for sustainable enterprise development and action with a long-term orientation for the benefit of the Company.

With the approval of the Supervisory Board, the Management Board has therefore decided to introduce the AOP. For this purpose, the Management and Supervisory Boards adopted the following option terms and conditions for the structure of the AOP on 16 November 2010. The Supervisory Board alone has taken these decisions for the Management Board.

Page 2 of 30

According to the resolution of 02 July 2010, the Company’s Annual General Meeting of Shareholders adopted the introduction of the AOP (hereinafter referred to as the “ stock option programme 2010 ”) and the creation of conditional capital of EUR 839,500 through the issue of up to 839,500 registered shares without a par value (no-par shares) and with a proportional stake in the share capital of EUR 1.00 per no par share pursuant to section 192(1) no. 3 of the Aktiengesetz (AktG – German Stock Corporation Act). The conditional capital was registered in the Commercial Register of Cologne District Court under HRB 49717 on 30 July 2010.

A copy of the corresponding resolution of the General Meeting of Shareholder, the content of which is an integral part of the AOP, is attached as

annexe AOP 1,

to these option terms and conditions.

The Management Board members and the employees of the Company and the executive officers and employees of affiliated companies (hereinafter referred to as the “ beneficiaries ”) have been defined in the resolution of the General Meeting of Shareholders as potentially entitled to subscription rights in respect of the shares.

Page 3 of 30

§ 1
Content and granting of the option rights

(1)

Each subscription right that is granted (hereinafter also referred to as “ option ”, “ option right ” or “ stock option ”) entitles the beneficiary under these option terms and conditions to acquire one (1) new registered share without par value (no-par share) of the Company at the exercise price defined in the following paragraph (5), this being subject to any adjustments pursuant to § 11. The option rights are granted without consideration.

(2)

The new shares participate in the profits from the beginning of the financial year in which they arise as a result of the exercise of options. Until the option rights are exercised, the beneficiary is not entitled to any rights to dividends or other distributions from the ordinary shares that are subject to the option rights.

(3)

Subscription rights may be issued to the beneficiaries

in the ten stock exchange trading days that follow the date of announcement of the annual or semi-annual results (exclusive),

in the ten stock exchange trading days that follow the Annual General Meeting of Shareholders (exclusive)

in the ten stock exchange trading days that follow the publication of a quarterly or interim report (exclusive).

The options are granted once per calendar year in annual tranches, none of which may exceed 50% of the total volume of the stock option plan 2010.

Page 4 of 30

(4)

The options are issued by concluding a written contract on the assumption of options (hereinafter referred to as “ option agreement ”) between the beneficiary and the Company. The Company will submit an option agreement to the beneficiary for this purpose. The issue date is the date on which the declaration on the acquisition of stock options submitted to the beneficiary and initially signed by this beneficiary is countersigned by the Company (hereinafter referred to as “ issue date ”). The option agreement comes into effect when it is countersigned by the Company. The date of countersignature by the Company and therefore the issue date are determined by the Management Board and the Supervisory Board, or in matters concerning the Management Board by the Supervisory Board alone.

(5)

The price to be paid when the respective option for a share is exercised (hereinafter referred to as the “ exercise price ”) is equal to the arithmetical average (not weighted) of the closing prices for the Company’s shares ascertained in floor and Xetra trading on the Frankfurt Stock Exchange on the ten trading days before the issue date. However, the minimum exercise price is the proportionate share of the Company’s share capital allocated to each individual no-par share (section 9(1)AktG).

(6)

The Company will invite the beneficiary to sign the agreement in duplicate within a period specified by the Company for this purpose and will subsequently countersign the option agreement within the relevant acquisition period within the meaning of annexe AOP 1 . The company will determine the exercise price upon the conclusion of the option agreement in accordance with § 1 (5) and communicate this to the beneficiary when handing over the option agreement signed by the company.

Page 5 of 30

(7)

In the event that a subscription right is exercised, the Company is entitled generally and in specific cases at its discretion – instead of delivering a no par share in exchange for payment of the exercise price – to pay a cash settlement to the beneficiary with the effect of discharging its debt (hereinafter referred to as “ cash settlement ”). The cash settlement per subscription right corresponds to the difference between the exercise price per share and the share price on the exercise date, less taxes and levies incurred. The relevant share price on the exercise date (hereinafter referred to as “ exercise price ”) is to be determined as follows: arithmetical average (not weighted) of the closing prices of the Company’s shares determined in floor and Xetra trading on the Frankfurt Stock Exchange on the ten trading days before the date on which the exercise notice (cf. REF _Ref273707335 \w \h \* MERGEFORMAT § 3 ) of the beneficiary is sent to the Company(exclusive) (hereinafter referred to as “ exercise date ”). In this case, the obligation to pay the exercise price no longer applies for the beneficiary.

(8)

The Company is entitled generally and in specific cases to transfer old no par shares of the Company instead of new shares to the beneficiaries when options are exercised, also such with profit-sharing rightsthat deviate from § 1 (2).

(9)

The beneficiary has no claim against the company for the performance of the measures stated in § 1 (7) and § 1 (8).

§ 2
Prerequisites for exercising options

(1)

Option rights can be exercised only after expiry of a vesting period (hereinafter referred to as “ vesting period ”). The vesting period is four years from the respective issue date (exclusive).

Page 6 of 30

(2)

A prerequisite for the whole or partial exercising of the option rights is that the following performance target is achieved:

Performance target :

It is possible to exercise the option rights from a tranche if

(i)

at the beginning of the respective exercise window, the price (hereinafter referred to as “ reference price ”) of the share of Biofrontera Aktiengesellschaft exceeds the exercise price by no less than 20%, whereb, however

(ii)

a minimum reference price of 5.00 Euro has to be reached (hereinafter referred to as “ minimum reference price ”).

The reference price corresponds to the arithmetical average (not weighted) of the closing prices of the company’s shares determined in floor and Xetra trading on the Frankfurt Stock Exchange, between the 15th and the 5th stock exchange trading days (inclusive in both cases) before the beginning of the respective exercise window. (cf. § 2 (3)); the attainment of the minimum reference price is determined accordingly.

The minimum reference price is adjusted in the following cases in order to bring the performance target under (ii) into line with changed circumstances:

In the event of a capital increase from Company funds through the issue of shares, the minimum reference price is reduced by the same proportion as the new shares that have been issued to existing shares. In the event of a capital increase from Company funds without new shares being issued (section 207(2) clause 2 AktG), the minimum reference price remains unchanged.

Page 7 of 30

In the event of a capital reduction taking place, no adjustment is made to the minimum reference price, provided that the total number of shares is not affected by the reduction of capital or the capital reduction is associated with a repayment of capital or an acquisition of own shares in return for payment. In the event of a capital reduction achieved by consolidation of shares without repayment of capital or in the event of an increase in the number of shares without a change in capital (share split), the minimum reference price is increased in proportion to the reduction of capital or to the share split.

There are no other cases in which adjustments are made to the minimum reference price.

(3)

The exercising of the options is limited to the following time periods (hereinafter “ exercise window ”), i.e. only exercise notices pursuant to § 3 submitted to the company within an exercise window will be considered:

on the 6th and the next 14 banking days after the date of the Annual General Meeting of Shareholders (exclusive),

on the 6th and the next 14 banking days after the date that the half-yearly or quarterly report or an interim announcement of Biofrontera Aktiengesellschaft is presented (exclusive),

in the period between the 15th and the 5th banking day before expiry of the option rights of the expiry date in question (exclusive).

(4)

After the relevant vesting period has expired, the option rights can be exercised up until the expiry of six years from the issue date in question (exclusive).

Page 8 of 30

(5)

The right to exercise the options expires no later than six years after the issue date (exclusive). Any options not exercised by that date are forfeited without compensation.

(6)

Any claim of the beneficiary to receive a cash settlement in the event of the non-exercise of the option rights is excluded, notwithstanding the existence of the above prerequisites for exercise.

§ 3
Exercise notice

(1)

The option rights are exercised by giving written notice pursuant to section 198(1) AktG in duplicate to the Company or – if the beneficiary is a member of the Management Board of the Company – to the chairman of the Company’s Supervisory Board, addressed in each case to the Company’s head office.

(2)

The beneficiary is to use the form provided by the Company for the exercise notice. The beneficiary is also required to perform all actions and make statements necessary for the exercise and processing.

(3)

The exercise notice shall specify for how many shares the option right is being exercised.

(4)

The option exercise in the permissible scope specified in the declaration becomes effective upon receipt of the exercise notice by the Company or, if it is to be submitted to the Company’s Supervisory Board, upon receipt by the chairman of the Supervisory Board, provided that the other prerequisites for exercise are met.

Page 9 of 30

§ 4
Transfer of the shares/cash settlement

(1)

Upon effective exercise, the Company is obliged to issue or deliver to the beneficiary a number of shares corresponding to the number of option rights exercised subject to the adjustments pursuant to § 11 or to pay the cash settlement pursuant to § 1 (7).

(2)

Within six weeks of receipt of the subscription notice and payment of the subscription price, the Company will transfer to the beneficiary the number of shares corresponding to the number of option rights exercised or pay the cash settlement according to § 1 (7) (in this case, the payment of the exercise price is not necessary).

(3)

The Company may specify that any taxes and levies to be paid, in particular within the meaning of the following § 10, are paid by the beneficiary in full or in part on account together with the corresponding exercise price.

§ 5
Exercise and sale restrictions

(1)

The beneficiary is entitled to resell the shares acquired through the exercise of option rights immediately. In the context of such a sale, he/she has, however, to show consideration for the Company’s legitimate interests in a reasonable stabilisation of its share price.

Page 10 of 30

(2)

The beneficiary is aware that he/she belongs to the category of persons who can obtain knowledge of insider information concerning the Company. In addition, he/she is aware that the acquisition and the sale of the Company’s shares with knowledge of insider information is in particular punishable under the Wertpapierhandelsgesetz (WpHG –German Securities Trading Act). The beneficiary therefore undertakes not to sell the shares acquired through the exercise of option rights in the event that he/she has knowledge of insider information.

(3)

The beneficiary is also aware that the acquisition of shares in the Companymay also trigger statutory reporting obligations, in particular under section 15 a WpHG (Directors’ dealings) and section 21 ff. WpHG (notifications concerning voting rights).

(4)

The beneficiary will independently fulfil all legal and contractual obligations to be observed by him/her in connection with the stock option programme 2010 and its execution.

§ 6
Possible limits in the event of extraordinary developments

(1)

In the event that extraordinary developments arise, the vesting of options is limited, irrespective of the other provisions of these option terms and conditions, pursuant to this § 6.

(2)

Offers within the meaning of the Wertpapiererwerbs- und Übernahmegesetzes (WpÜG – German Securities Acquisition and Takeover Act) are considered to be extraordinary developments.

(3)

Restrictions on the exercise of options in a tranche may arise in the following period:

Page 11 of 30

Between the publication (i) of the bidder’s decision to submit a bid or (ii) of the acquisition of control (section 10(1) sentence 1 WpÜG, if necessary in conjunction with section 34 WpÜG or section 35(1) sentence 1 WpÜG) (hereinafter referred to as “ announcement ”) until the expiry of the follow-up acquisition period within the meaning of section 31(5) sentence 1 WpÜG.

The restriction on the vesting of the options ends with the bidder’s refusal to publish a bid or the expiry of this notice period laid down by law for this purpose without the expected result.

(4)

In the event of a bid within the meaning of the WpÜG, the beneficiary should be placed in such a position as he would have been in if he had exercised the options before the announcement, however with the proviso that the beneficiary may realise a premium of up to 25% on the Company’s stock market share price existing prior to the announcement.

(5)

The key factor for determining to what extent a limitation on the exercise exists is initially the arithmetical average (not weighted) of the closing prices of the Company’s shares determined in floor and Xetra trading on the Frankfurt Stock Exchange on the ten trading days before the bidder’s announcement (exclusive) plus a premium of 25 % on this value (hereinafter referred to as the “ pre-bid share price ”).

In the proportion in which the consideration offered by the bidder (hereinafter referred to as “ consideration ”) exceeds the pre-bid share price, the options are subject to an exercise blocking period.

Page 12 of 30

Example :

The pre-bid share price is 10 Euro (8 Euro calculated average closing price plus a premium of 25 %, i.e. 2 Euro). The person entitled to exercise the option has 100 options. The consideration is 15 Euro.

The number of options in a tranche that are still present at the time of the announcement and are subject in part to a limitation on exercise (“ x ” in %) is calculated as follows:

x % = 100 – ([100/consideration] * pre-bid share price)

In this example, 33.3 % of the options are thus subject to a block on exercise.

Used as consideration is (i) the bidder’s last publicly announced bid price, in particular any such (intended) bid price that the bidder communicates in the announcement. If no bid price is named in the announcement, (ii) the arithmetical average (not weighted) of the closing prices of the Company’s shares determined in floor and Xetra trading on the Frankfurt Stock Exchange on the last three trading days subsequent to the announcement (exclusive) is to be taken as the basis for the consideration until a public announcement of the bid price by the bidder.

If the consideration is increased, the number of options in a tranche that are still present at the time of the announcement and are subject in part to an limitation on exercise must be calculated again. Options already exercised after the announcement are to be offset against the amount of the newly calculated options that can be exercised in so far as this is possible.

Page 13 of 30

Example :

The beneficiary has 100 options at the time of the announcement. The pre-bid share price is 10 Euro. The consideration is 15 Euro.

Thus 33.3% of the options are subject to a block on exercise. After 45 options are exercised, the consideration is increased to 20 Euro. Thus 50% of the options are subject to a block on exercise, such that another 5 options could be exercised. The consideration is subsequently increased to 25 Euro. Thus 60% of the options are subject to a block on exercise. No further options can therefore be exercised. This has no impact on the 50 options already exercised.

(6)

After the follow-up acquisition period within the meaning of section 31(5) sentence 1 WpÜG has expired, options subject to a block on exercise according to this § 6 can be exercised in accordance with this AOP.

§ 7
Transferability and inheritability

(1)

The option rights granted to the beneficiary are not transferable. In addition, any other disposal of the option rights, the granting of a sub-participation or the establishment of a trust in them is not allowed. The beneficiary is also not permitted to enter into short positions or comparable offsetting transactions, which are equivalent in economic terms to a sale of the option rights.

(2)

Violations of § 7 (1) lead to the forfeiture of the option rights without compensation.

Page 14 of 30

(3)

Option rights are generally not inheritable, unless all prerequisites for their exercise are already met at the time the inheritance takes place. In this case, the heirs/legatees of the beneficiary are entitled to exercise, instead of the beneficiary, the option rights once in the three subscription windows following the time they become aware of the inheritance on the same conditions, but at the latest within a period of 12 months following the inheritance. Upon the expiry of the anniversary of the inheritance, option rights that have not been or cannot be exercised are forfeited without replacement or compensation. The Company is entitled to demand reasonable proof of the inheritance and legal succession.

§ 8
Termination of employment/
termination of an executive position

(1)

An option right may be exercised only if its holder has a service or employment contract that is not under notice of termination (hereinafter referred to as “ employment relationship ”) with the Company or another company affiliated with the Company or is a member of the Management Board of the Company or the management of another company affiliated with the Company (hereinafter referred to as “ executive position ”).

(2)

Upon termination of the employment/executive position – for whatever reason –– the option rights are forfeited without compensation in so far asthey cannot yet be exercised pursuant to § 2 (1), § 2 (2) and § 6 at the time the employment and/or the executive position is legally ended (hereinafter referred to as “ date of termination ”) and unless otherwise stipulated in these option terms and conditions (cf. § 8 (5)). Forfeiture does not occur when only an executive position is terminated, but an employment relationship continues.

Page 15 of 30

(3)

Option rights that are vested at the date of termination pursuant to § 2 (1), § 2 (2) and § 6 can be exercised by the beneficiary only in the first exercise window following the date of termination, unless he/she has caused the termination of employment and/or executive position as a result of good cause within the meaning of section 626 of the Bürgerliches Gesetzbuch (BGB – German Civil Code- ) triggered by him/her. In this case the options are forfeited without compensation without prejudice to the Company’s rights regarding revocation pursuant to § 9 (2).

(4)

If beneficiaries have a fixed-term employment contract with the Company, these contracts are valid for the entire duration of employment as employment relationships not under notice of termination for the purposes of this provision if they are extended or renewed without interruption and are not under notice of termination.

(5)

If the employment relationship and/or executive position has/have existed without interruption for no less than four years at the date of termination, the following applies for options that were granted at least 18 months before the date of termination but are not yet vested pursuant to § 2 (1), § 2 (2) and § 6:

The intrinsic value of the unvested options is determined on the date of termination. The intrinsic value per option corresponds to the difference between the exercise price (cf. § 1 (4)) and the share price on the date of termination. The relevant share price on the date of termination is to be determined as follows: the arithmetical average (not weighted) of the closing prices of the Company’s shares determined in floor and Xetra trading on the Frankfurt Stock Exchange on the 30 trading days before the termination date. The intrinsic value determined in this way is multiplied by the number of options that have been granted at least 18 months before the date of termination (hereinafter referred to as the “ starting amount ”).

Page 16 of 30

In the first exercise window following the date of termination, the beneficiary may then exercise a number of options that corresponds to the starting amount divided by the exercise price (cf. § 1 (7)) (fractions must be rounded down), to a maximum amount, however, of the options actually granted but not yet exercised, if they are vested at this time pursuant to § 2 (1), § 2 (2) and § 6.

In addition, it is a prerequisite for the exercise of the options in these cases that the performance target pursuant to § 2 (2) was reached at least once in mathematical terms in the period between the issue of the options and the date of termination.

In addition, the beneficiary has to provide information with the exercise notice of a security deposit account to which the shares can be delivered and furnish proof

(i)

that it is a blocked security deposit account (hereinafter referred to as “ blocked security deposit ”) and

(ii)

that sales of the shares granted on the options are only possible from this blocked security deposit no earlier than after nine months have elapsed (hereinafter referred to as the “ holding period ”) and

Page 17 of 30

(iii)

that the bank has undertaken to the Company to comply accordingly with the holding period or will not allow any sale within the holding period without the Company’s consent. The holding period begins on the first day after the first exercise window following the date of termination in which the options are exercised has expired.

The Company is entitled to deliver 75% of the shares to be granted to the blocked security deposit account.

The provisions of this § 8 (5) do not apply if the termination of the employment relationship/executive position

(i)

is to be attributed to good cause within the meaning of section 626 BGB triggered by the beneficiary, or

(ii)

is to be attributed to the expiry of a time limit and if the beneficiary has not accepted an offer of the Company to continue his/her corresponding duties at the end of the time limit for at least two more years on economic conditions that are not worse than the economic conditions already agreed (agreement on salary, working hours, holidays and non-cash benefits). An appropriate written offer is to be forwarded to the beneficiary no later than 6 months before expiry of the time limit and furnished with a commitment period for the Company of at least three weeks, such that the offer obtains the local foreclosing effect in the event that it is not accepted by the beneficiary.

Page 18 of 30

Insofar as the Company is liable in connection with the exercise of the options for the tax liabilities or other levies of the beneficiary incurred as a result of this, it may demand that the beneficiary furnishes adequate security or proof that the tax and levy debt has been paid. The collateral security per share is 65% of the exercise price (cf. § 1 (7)). The collateral security or proof must be furnished within 10 working days following a corresponding request from the Company. Otherwise the claim arising from the exercised options is forfeited.

(6)

If an operation or an operating unit of the Company in which the beneficiary has an employment relationship and/or holds an executive position leaves the Company and the Company’s group or if an affiliated company at which the beneficiary is employed and/or works on an executive body leaves the corporate group of the Company, the following applies:

The options that may be vested at the key departure date pursuant to § 2 (1), § 2 (2) and § 6 may be exercised against the Company by the beneficiaries who belong to the company or operating unit leaving the Company only in the first two exercise windows following the key departure date, provided that all the other prerequisites for exercise are met. The option rights not yet exercised are subsequently forfeited.

The Company is entitled to settle vested option rights in derogation from the above provisions § 8 (6) a) at any time, also contrary to the beneficiary’s wishes. In this case an amount that is calculated in accordance with the cash settlement pursuant to § 1 (7) is to be paid to the beneficiary as a settlement amount for the vested options. The date of departure is used to calculate the settlement in place of the exercise day. The date on which the change of employer takes place pursuant to section 613 a BGB or the date on which the dependency ends pursuant to section 17 AktG is regarded as the key departure date. A legal claim for such settlement does not exist.

Page 19 of 30

Options not yet vested are forfeited on the key departure date pursuant to § 2 (1), § 2 (2) and § 6 , where the beneficiary is granted a settlement, for the calculation of which § 12 (4) applies accordingly. The date on which the change of employer takes place pursuant to section 613 aBGB or the date on which the dependency ends pursuant to section 17AktG is regarded as the key date for the calculation of the settlement. The settlement calculated in this way is to be paid to the beneficiary within 12 weeks of the aforementioned date.

The provisions of this § 8 (6) also apply if the beneficiary makes use of any rights of objection against the transfer of the employment relationship without objective reasons that may otherwise exist.

§ 9
Term and revocation

(1)

This AOP is valid up until the expiry of the term of the option rights issued on the basis of this plan. If the beneficiary fails to exercise the option rights by this date, the option rights are forfeited without compensation.

(2)

The Company may revoke the option rights allocated to a beneficiary with immediate effect if

insolvency proceedings concerning the beneficiary’s assets are opened or the opening of insolvency proceedings has been rejected for lack of assets,

Page 20 of 30

a creditor of the beneficiary proceeds to levy execution in his/her rights under this option agreement,

the beneficiary breaches material duties under law, the Company’s articles of association, his/her employment contract or this AOP.

(3)

Upon receipt of the declaration of revocation,all option rights granted under this AOP and not yet exercised expire without compensation. The beneficiary has no claim against the company for setoff of any financial prejudice.

§ 10
Taxes and other levies

(1)

The beneficiary is aware that the granting of options to the beneficiary and their exercise may result in taxable non-cash benefits for the beneficiary.

(2)

The Company will pay the income tax incurred as a result, including church tax and the solidarity surcharge, to the tax office as well as any social security contributions incurred as a result in accordance with statutory requirements. The beneficiary is obligated to reimburse these payments to the company (cf. § 4 (3)). The Company is therefore entitled to withhold corresponding amounts from the beneficiary’s salary.

(3)

At the request of the beneficiary, the parties will reach a reasonable agreement on a deferment or other financing of the income tax reimbursement obligation of the beneficiary if he/she credibly shows that he/she is unable to pay the reimbursement amount by way of a single payment to the Company.

(4)

In so far as the beneficiary is an executive or employee of a company affiliated with the Company, the preceding paragraphs (1) to (3) apply accordingly, however with the proviso that the affiliated company takes the place of the Company.

Page 21 of 30

§ 11
Option right adjustments and protection against dilution

(1)

If the Company increases the share capital by issuing new shares while granting subscription rights to shareholders or issues partial bonds with subscription or conversion rights on shares and the share price or conversion or option price per share fixed for this lies below the option price, the option price will be reduced by the amount equal to the arithmetical average of the cash prices of a subscription right granted to an ordinary share on all trading days on the Frankfurt Stock Exchange. A reduction in the option price will not apply if the option holders are granted a subscription right that puts them in such a position as if they had already exercised the option right. For this, it is sufficient that the beneficiary is given the opportunity to subscribe for and acquire at the subscription price an appropriate number of shares from the capital increase that are not subscribed for by the shareholders. For this purpose it is sufficient if the Company also grants an additional subscription to the subscription right holders in addition to the subscription right, such that the beneficiaries would have been able to subscribe for a corresponding number of shares from the subscription surplus, if they were also shareholders with a subscription right, as this would have been possible for shareholders as beneficiaries after previously exercising the option rights. Moreover, a reduction in the option price will not occur if the reduction would lead to the option price for an ordinary share falling below the notional amount of the ordinary share in the share capital of the issuer. If no subscription rights trading takes place, the Company’s subscription right value is calculated with binding effect as follows:

Page 22 of 30

BR = (Ka - Kn) / (BV + 1)

BR: subscription right

Ka: stock exchange price of the old shares

Kn: issue price of the new shares

BV: subscription ratio

The stock exchange price “Ka” of the old shares is determined as follows: arithmetical average (not weighted) of the closing prices of the Company’s shares determined in floor and Xetra trading on the Frankfurt Stock Exchange during the subscription period.

(2)

In the event of a capital increase from Company funds through the issue of shares, the conditional capital will be increased in accordance with section 218 AktG in the same proportion as the share capital. The claim of the beneficiary to acquire new shares by exercising the subscription right is increased in the same proportion. The exercise price per share is reduced by the same proportion. If the capital is increased from Company funds without new shares being issued (section 207(2) sentence 2 AktG), the subscription right from the options and the exercise price remain unchanged. Fractions of shares arising from a capital increase from Company funds are not provided when the option right is exercised.

Page 23 of 30

(3)

In the event of a capital reduction, no adjustment is made to the option price or the option relationship, provided that the total number of shares is not affected by the reduction of capital or the capital reduction is associated with a repayment of capital or an acquisition of own shares in return for payment. In the event of a capital reduction achieved by consolidating shares without repayment of capital or in the event of an increase in the number of shares without a change in capital (share split), the number of shares that can be acquired for each option at the exercise price is decreased or increased in proportion to the reduction of capital or to the share split. The option price for a share is changed in the same proportion.

(4)

If an adjustment is made pursuant to the above paragraphs, fractions of shares are not granted when the subscription right is exercised. A cash settlement does not take place.

(5)

In the event of a merger one of the Company into another company, a transformation or similar measure that hasa negative impact on the beneficiary’s rights as a result of the company’s shares expiring or their value being adjusted under the terms of this AOP, the right to acquire the company’s shares pursuant to § 1 (1) of the AOP is replaced by the right to acquire at the option price such a number of shares, capital shares or other ownership rights replacing the Company’s ordinary shares in the Company or its legal successor , the value of which corresponds to the market value of one of the Company’s ordinary shares at the time such measure is exercised (full entry of the execution in the commercial register).

Page 24 of 30

(6)

In cases of integration, of the conclusion of profit and loss transfer and control agreements, of an exclusion of minority shareholders and of an asset transfer within the meaning of sections 174 ff. of the Umwandlungsgesetz (UmwG – German Transformation Act), the Company will, within the framework of what is legally and actually possible, place the beneficiaries in such a position in the exercise of the options as they would have been if they had already exercised their option rights at the time the contract came into effect or the such a measure was implemented. If trading in the Company’s shares is suspended as a consequence of such a measure and if it cannot be determined for this reason whether the share-based performance target pursuant to § 2 (2) is achieved, the achievement of targets is to be determined by determining the capitalised value of the Company’s shares on 31.12. of each year respectively on the basis of an assessment carried out by an auditor/auditing company to be commissioned by the Company at its own expense.

(7)

In the case of other procedures that have comparable effects to the aforementioned cases of adjustment, the Company’s exercise price may be adjusted pursuant to section 315 BGB.

(8)

The Company will announce adjustments and the due date from which the adjustment applies to the beneficiaries without delay.

§ 12
Settlement of the options

(1)

In the event of a Change of Control, the Company may settle the options granted to a beneficiary also contrary to the beneficiary’s wishes (hereinafter referred to as the “ desire to settle ”). The beneficiaries are to be paid a settlement (hereinafter referred to as the “ settlement amount ”).

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(2)

A “ Change of Control ” takes place when a natural or legal person acquires the majority of the voting rights in the Company after the option agreement has been concluded. A Change of Control is, however, not present if a Company within the Group acquires the majority of the voting rights in the company.

(3)

The desire to settle is to be announced to the beneficiary within a period of four months following the implemented Change of Control. Within eight weeks of the notification of the desire to settle, the Company must disburse the settlement amount to the beneficiaries pursuant to § 12 (4). The due date for determining the settlement amount is the occurrence of the Change of Control.

(4)

The settlement amount corresponds to the full value (hereinafter referred to as the “ fair value ”) of the options granted to the beneficiary less any applicable taxes and levies. The settlement amount is to be determined using recognised actuarial methods and after an appraisal of the Company’s economic situation and the option terms and conditions. The intrinsic value and the fair value of the options should be assessed in particular in the process. For the calculation of the settlement amount, the Company can, at its own discretion and expense, use an auditor/auditing company or a prestigious credit or financial services institution to determine the value of the options using recognised actuarial methods with binding effect for the Company and the beneficiaries

(5)

The provisions in § 12 (1) to § 12 (4) will apply mutatis mutandis in the cases mentioned in § 11 (5), unless otherwise provided for by mandatory legal provisions. The calculation of the notice periods of § 12 (3) is to be based on the time that the contract came into effect or such a measure was implemented.

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(6)

The provisions in § 12 (1) to § 12 (4) will furthermore apply mutatis mutandis in the cases mentioned in § 11 (6). The calculation of the notice periods of § 12 (3) is to be based on the time the contract came into effect or such a measure was implemented.

(7)

A beneficiary has no legal claim to settlement.

§ 13
Limitations of liability

(1)

The liability of the Company, its legal representatives and their vicarious agents for slight negligence and consequential damages and loss of profits is excluded.

(2)

The Company assumes no responsibility whatsoever for general market developments and the price performance of the Company’s shares.

(3)

Option rights are accepted and exercised solely at the risk of the respective beneficiary.

§ 14
Prohibition of insider trading

(1)

Pursuant to the German Securities Trading Act, a large number of beneficiaries are regarded as insiders as a result of their work or duties because of their function as a member of the Management Board of the Company or because of the knowledge required for the intended use of facts that are not public knowledge.

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(2)

Insiders are prohibited, among other things, from acquiring or selling company shares while taking advantage of their knowledge of facts that are not public knowledge and that are likely to significantly affect the Company’s share price in the event that they became public knowledge (insider information). The prohibition on insider trading also includes the sale of the Company’s shares.

(3)

Each beneficiary is personally responsible for ensuring that he does not sell the Company’s shares that he/she acquires by exercising option rights in violation of insider trading prohibitions. The establishment of trading windows pursuant to § 2 (3) does not constitute a guarantee that the sale of the Company’s shares during the exercise window is not problematic in each individual case.

(4)

Each beneficiary is obliged to obtain information for himself/herself about the respective legal situation concerning the insider trading prohibitions before exercising option rights or selling shares.

§ 15
Absence of company practice

The option rights are granted as a voluntary benefit on the part of the Company. No claims whatsoever to the renewed granting of option rights or to similar or equivalent benefits are therefore created even when option rights are repeatedly granted.

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§ 16
Applicable law

The form and content of the option rights or this AOP and all resulting rights and obligations of the beneficiary or of the Company’s are determined in every respect exclusively by the laws of the Federal Republic of Germany and — in so far as this is permitted by law — excluding international private law.

§ 17
Place of performance, venue

Place of performance and venue for all disputes arising from or in connection with this AOP is the registered office of the company, provided the beneficiary has no general venue in Germany.

§ 18
Miscellaneous

(1)

Stock exchange trading days in this contract are all trading days on the Frankfurt Stock Exchange.

(2)

Amendments and supplements to this AOP must be made in writing, unless notarisation is required. This also applies to amendments to this requirement for written form.

(3)

The Company is entitled to modify or annul the AOP at any time in accordance with mandatory legal requirements, without any obligation to compensate the beneficiaries arising therefrom.

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(4)

If any provision of this AOP is or becomes invalid or unenforceable, the validity or unenforceability of the remaining provisions will remain unaffected. A gap or omission or any other gaps or omissions resulting from the invalidity or unenforceability of a provision are to be filled mutatis mutandis by means of supplementary interpretation of the contract while taking into account the interests of the parties. This also applies if the measure of a performance or time (notice period, deadline) is affected. In such cases, a legally permissible measure of performance or time (notice period, deadline) that most closely approximates the intended purpose will replace the provision initially agreed upon. Provisions that are not consistent with the resolution on conditional capital of 02 July 2010, are considered to be unenforceable within the meaning of this regulation.

(5)

Headings serve as orientation only and are not to be drawn on in any interpretation.

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Exhibit 10.10

Biofrontera Aktiengesellschaft

Option Terms

of the Share Option Programme 2015

as resolved by the Annual General Meeting,

version dated

7 April 2016

Page 1 of 22

Preamble

The Annual General Meeting of Biofrontera AG (hereinafter “Company” ) held on 28 August 2015 granted an authorization (hereinafter “Authorization Resolution” ) valid until 27 August 2020 to issue up to 1,814,984 subscription rights to up to EUR 1,814,984 in no-par value registered shares in the Company (hereinafter “Options” or “Share Options” ) in accordance with the more detailed provisions of the Authorization Resolution (hereinafter “Share Option Scheme 2015” ).

On 7 April 2016, the Management Board and the Supervisory Board resolved to make use of the authorization granted in the Share Option Scheme 2015. The Management Board and the Supervisory Board have adopted these option terms (hereinafter “Option Terms”) in order to regulate further details with respect to granting Share Options and further exercising conditions.

Page 2 of 22

§ 1
Granting Options

(1)

The Company grants Options ( “Options” or “Option Rights” ) to up to EUR 1,814,984 in no-par value registered shares in the Company. The content of the Options and the associated rights and obligations comply with the Share Option Scheme 2015 and with these Option Terms.

(2)

Options may be issued to members of the Management Board of the Company, members of the management of affiliated companies and employees of the Company and of affiliated companies (hereinafter collectively referred to as “Beneficiaries” or “Eligible Persons” ).

(3)

The precise group of Beneficiaries and the respective number of Options to be granted to them are determined by the Management Board of the Company. Where members of the Management Board are to receive Options, the Supervisory Board is solely responsible for determining this and deciding on the issuing of Options.

§ 2
Content and granting of Options

(1)

In accordance with these Option Terms, each Option granted entitles the Beneficiary to subscribe to one (1) new registered share with no nominal value (no-par value share) in the Company at the exercise price defined in paragraph (7) below (subject to adjustments of the exercise price pursuant to section 13). The Beneficiary does not have to pay for the granting of Options.

(2)

Up until the Option Rights are exercised, the Eligible Person does not accrue any rights from the shares to which they may subscribe under the Options.

(3)

New shares that are issued after Options are exercised participate in profits from the beginning of the financial year in which they are created through the exercising of Options.

(4)

Unless mandatory legal provisions (particularly insider trading provisions) stipulate otherwise in individual cases, Options may be issued:

Page 3 of 22

in the ten trading days following the date on which annual financial reports or half-yearly financial reports are made publicly available,

in the ten trading days following the date of the Annual General Meeting,

in the ten trading days following the date of publication of a quarterly report or interim announcement.

Options are granted up to twice per calendar year in tranches; the total of the tranches in a calendar year may not exceed 50% of the total volume of the Share Option Scheme 2015 (hereinafter “Tranches” ).

(5)

The Options are issued through the conclusion of a written contract between the Beneficiary and the Company (hereinafter “Option Agreement” ).

(6)

The issue date is the date on which the Option Agreement is signed by the Company (hereinafter “Issue Date” ). The Issue Date must be determined by the Management Board and the Supervisory Board, or by the Supervisory Board alone if the Management Board is affected, in connection with the decision regarding the respective Tranche issue. A sample Option Agreement is attached as

Annex section 2 (5).

(7)

The price to be paid for a share upon exercise of an Option corresponds to the non-weighted average price of the Company’s shares in the Xetra closing auction on the Frankfurt Stock Exchange (XETRA) or in an equivalent successor system on the ten trading days before the Issue Date (hereinafter “Exercise Price” ). However, the minimum Exercise Price is the proportionate amount of the Company’s share capital attributable to the individual no-par value share (share) (section 9 (1) of the German Stock Corporation Act (AktG)). The Eligible Person will be notified of the Exercise Price upon submission of the Option Agreement.

Page 4 of 22

§ 3
Blocking period for first-time exercise and exercise window

(1)

Option Rights may be exercised for the first time after expiry of a blocking period. The blocking period is four years after the respective Issue Date (hereinafter “Blocking Period” ).

(2)

After expiry of the respective Blocking Period, the Option Rights may be exercised until the expiry of six years after the respective Issue Date with the proviso that in each case an exercise is only possible within the following periods (hereinafter “Exercise Windows” ) unless mandatory legal provisions stipulate otherwise in individual cases (particularly insider trading provisions):

on the 6th banking day and following 20 banking days after the Annual General Meeting,

on the 6th banking day and following 20 banking days after presentation of the half-yearly or quarterly report or of an interim announcement or interim financial report of the Company,

in the period between the 20th and 5th banking day before the Option Rights lapse.

However, this excludes the period from the announcement that the shareholders are to be granted a subscription right to shares or other securities to be issued by the Company until the beginning of the first day of the subscription period.

(3)

The right to exercise the Options will end no later than six years after the Issue Date (exclusive). If the Options have not been exercised by this time they will lapse without compensation.

(4)

Any entitlement of the Eligible Person to payment of a cash settlement in the event that Option Rights are not exercised in spite of the above exercise requirements being met is precluded.

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§ 4
Performance targets

Options may only be exercised if the following performance targets are met:

It is possible to exercise Options from a Tranche if the price of the share in the Company at the beginning of the respective Exercise Window exceeds the Exercise Price by at least 20% (hereinafter “Reference Price” ) and

additionally if, as compared with the Exercise Price, the Reference Price has performed as well as or better in percentage terms than the “MSCI World Health Care Index TR” or a comparable successor index (hereinafter “Reference Index” ) in the period from the last trading day before the Issue Date until the 5th trading day (in each case the last index calculation of the day based on USA Eastern Standard Time (EST)) before the beginning of the respective Exercise Window (hereinafter “Reference Period” ). As the Reference Index is a total return index, the gross amount of dividends distributed by the Company during the Reference Period and other distributions to shareholders are taken into account as a value-enhancing factor when determining the performance of the Company’s shares.

The Reference Price corresponds to the non-weighted average price of the Company’s shares in the Xetra closing auction on the Frankfurt Stock Exchange or in an equivalent successor system between the 15th and 5th trading day (inclusive in each case) before the beginning of the respective Exercise Window.

§ 5
Exercise notice

(1)

Option Rights are exercised by way of written notice in duplicate from the Eligible Person in accordance with section 198 (1) AktG (hereinafter “Exercise Notice” ) to the Company or – if the Beneficiary is a member of the Management Board of the Company – to the Chairman of the Supervisory Board of the Company, addressed in each case to the headquarters of the Company.

Page 6 of 22

(2)

The Exercise Notice must be submitted using the form available from the Company. The Beneficiary is also required to undertake all the actions required for exercising and processing and to submit statements.

(3)

The Exercise Notice must state the number of shares for which the Option Right is to be exercised.

(4)

The Option exercise will take effect to the permitted extent stated in the notice upon receipt of the Exercise Notice by the Company or, if it is to be submitted to the Supervisory Board of the Company, upon receipt by the Chairman of the Supervisory Board, provided that the other exercise requirements have been met.

(5)

The Company may require the Beneficiary to engage a third party specified by the Company to submit the Exercise Notice for them as a subscription agent, either in their own name or in the name of a third party. The Company shall bear the costs of the subscription agent.

(6)

The date on which the Company or the subscription agent receives the Exercise Notice is the exercise date (hereinafter “Exercise Date” ).

§ 6
Transfer of shares/cash settlement

(1)

Upon the effective exercise of Options the Company is required, subject to the adjustments under section 13, to issue to the Beneficiary a number of shares in the Company corresponding to the number of Option Rights exercised. In lieu of issuing shares in the Company from contingent capital, treasury shares in the Company may also be transferred against payment of the issue amount.

(2)

The Company will transfer the number of shares corresponding to the number of Options exercised to the Eligible Person within six weeks of receipt of the subscription notice and payment of the subscription price.

Page 7 of 22

(3)

The Company may – in lieu of providing shares against payment of the Exercise Price – pay a cash settlement to the Beneficiary in discharge of its obligations. The cash settlement may be paid for all or part of the Options exercised. The cash settlement per Option will correspond to the difference between the Exercise Price per share and the price of the share on the Exercise Date. The relevant price of the shares on the Exercise Date will be determined as follows: non-weighted average price of the Company’s shares in the Xetra closing auction on the Frankfurt Stock Exchange or in an equivalent successor system on the ten trading days before the Exercise Date.

(4)

The Company may require the Eligible Person to pay any taxes and levies due, particularly those under section 12 below, in full together with the relevant Exercise Price.

§ 7
Restrictions on exercise and disposal

(1)

The Beneficiary is entitled to sell on the shares acquired by exercising the Options immediately. However, in the context of such a sale they must have regard for the legitimate interests of the Company in appropriate price management.

(2)

The Eligible Person is aware that they are among a group of persons who can obtain knowledge of insider information concerning the Company. They are also aware that, in particular, acquiring and disposing of shares in the Company while having knowledge of insider information is a criminal offence.

(3)

The Eligible Person is also aware that acquiring shares in the Company can trigger statutory notification duties and, in particular, directors’ dealings and/or voting rights notifications.

(4)

The Eligible person will comply with all the legal and contractual obligations they are required to observe in connection with the Share Option Scheme 2015 and the processing thereof on their own responsibility.

Page 8 of 22

§ 8
Limitation in the event of extraordinary developments

(1)

The exercisability of the Options is restricted in the event of extraordinary developments notwithstanding the other provisions of these Option Terms under this section 8.

(2)

Offers within the meaning of the German Securities Acquisition and Takeover Act (WpÜG) are deemed to be extraordinary developments.

(3)

The exercising of Options in a Tranche may be restricted within the following period:

Between the publication (i) of the decision of the bidder to submit an offer or (ii) of the assumption of control (hereinafter “Announcement” ) until expiry of the follow-up acquisition period within the meaning of section 31 (5) first sentence WpÜG.

The restriction of the exercisability of the Options will end if the bidder declines to publish an offer or the period prescribed for this by law expires without result.

(4)

In the event of an offer within the meaning of WpÜG, the Eligible Person is to be placed in the position in which they would have been had they exercised the Options before the Announcement; however, this is with the proviso that the Eligible Person may realize a premium of no more than 50% on the market price of the Company’s shares that was in effect before the Announcement.

(5)

The decisive factor in determining the extent of any exercising restriction is firstly the arithmetic average (non-weighted) of the closing price of the Company’s shares determined in Xetra trading on the Frankfurt Stock Exchange on the ten trading days before the date of the Announcement by the bidder (exclusive) plus a premium of 50% on this amount (hereinafter “Share Price before the Offer” ).

The Options are subject to an exercising ban in the proportion by which the consideration offered by the bidder (hereinafter “Consideration” ) exceeds the Share Price before the Offer.

Page 9 of 22

Example :

The Share Price before the Offer is EUR 15 (EUR 10 calculated average closing price plus a premium of 50%, i.e. EUR 5). The Eligible Person has 100 Options. The Consideration is EUR 20.

The number of Options from a Tranche still existing at the time of the Announcement and partially subject to an exercising restriction ( “x” in %) is calculated as follows:

x% = 100 – ([100/Consideration] * Share Price before the Offer)

Therefore, in the example case 25.00% of the Options are subject to an exercising ban.

In each case, the (i) last offer price publicly disclosed by the bidder will be referenced as the Consideration, in particular also an (intended) offer price such as is disclosed by the bidder in Announcement. If the Announcement does not specify an offer price, (ii) until the bidder publicly announces the offer price the Consideration will be based on the arithmetic average (non-weighted) of the closing price of the Company’s shares determined in Xetra trading on the Frankfurt Stock Exchange on the last three trading days following the Announcement (exclusive).

If the Consideration is increased, the number of Options from a Tranche still existing at the time of the Announcement and partially subject to an exercising restriction will be recalculated in each case. As far as possible, any Options already exercised after the Announcement will be set off against the amount of the newly calculated exercisable Options.

Example :

At the time of the Announcement the Eligible Person has 100 Options. The Share Price before the Offer is EUR 15. The Consideration is EUR 20.

Therefore, 25.00% of the Options are subject to an exercising ban. After 45 Options have been exercised, the Compensation is increased to EUR 30. Thus 50% of the Options are subject to an exercising ban, leaving 5 more Options that could be exercised, which are then exercised. The Compensation is subsequently increased to EUR 35. Around 57% of the Options are thus subject to an exercising ban. Therefore, no further Options can be exercised but the 50 Options already exercised are not affected.

Page 10 of 22

(6)

Options that were subject to an exercising ban under this section 8 may be exercised after expiry of the follow-up acquisition period within the meaning of section 31 (5) first sentence WpÜG.

§ 9
Transferability and heritability

(1)

The Options granted to the Eligible Person are not transferable. Any other disposal over the Options, granting of a sub-participation or establishment of a trust is also not permitted. The Eligible Person is also not allowed to enter into short positions or comparable closing out transactions that in financial terms rank equal to selling the Options.

(2)

Violations against section 9 (1) will cause the Options to lapse without compensation.

(3)

The Options cannot be inherited unless the Blocking Period has expired at the time of occurrence. In such event, the heirs/legatees of the Eligible Person are entitled on one occasion to exercise the Options in their place under the same terms in the three exercise periods after acquiring knowledge of the accrual of the inheritance, but at the latest within a period of 12 months after the accrual of the inheritance. Upon expiry of the anniversary date of the accrual of the inheritance, any unexercised or exercisable Options will lapse without replacement or compensation. The Company is entitled to request sufficient evidence of the accrual of the inheritance and legal succession.

Page 11 of 22

§ 10
Termination of the employment relationship/executive position

(1)

Options may only be exercised if their holder has an unterminated service or employment relationship (hereinafter “Employment Relationship” ) with the Company or a company affiliated with the Company or is a member of the Management Board of the Company or of the management of a company affiliated with the Company (hereinafter “Executive Position” ).

(2)

Upon termination – for whatever reason – of the Employment Relationship and/or Executive Position, the Options will lapse without compensation if the Blocking Period has expired at the time the Employment Relationship and/or Executive Position is legally terminated (hereinafter “Time of Termination” ) and these Option Terms do not stipulate otherwise (see section 10 (5)). They will not lapse if only the Executive Position is terminated but an Employment Relationship continues to exist.

(3)

The Eligible Person may still exercise Option Rights whose Blocking Period has expired at the Time of Termination in the first Exercise Window following the Time of Termination if the other requirements have been met unless they brought about termination of the Employment Relationship and/or Executive Position for cause within the meaning of section 626 of the German Commercial Code (BGB) due to a reason for which they were responsible. In such case, the Option Rights will lapse without compensation notwithstanding the Company’s rights of revocation under section 11 (2).

(4)

For the purposes of this regulation, if Beneficiaries have a temporary Employment Relationship with the Company these contracts will be deemed to be unterminated Employment Relationships for the entire term of employment, provided that they are extended or renewed without interruption and are not terminated.

(5)

If the Employment Relationship and/or Executive Position has existed without interruption for at least four years at the Time of Termination, the following will apply to Options that were granted at least 18 months before the Time of Termination but whose Blocking Period has yet to expire:

Page 12 of 22

The intrinsic value of the Options will be determined at the Time of Termination. The intrinsic value of each Option will correspond to the difference between the Exercise Price and the price of the share at the Time of Termination. The price of the share at the Time of Termination is to be determined as follows: arithmetic average (non-weighted) of the closing price of the Company’s shares determined in Xetra trading on the Frankfurt Stock Exchange on the ten trading days before the Time of Termination.

The intrinsic value determined in this manner will be multiplied by the number of Options that were granted at least 18 months before the Time of Termination (hereinafter “Initial Amount” ).

In the first Exercise Window following the Time of Termination after expiry of the Blocking Period, the Eligible Person may then – provided that the other requirements have been met – exercise a number of Options corresponding to the Initial Amount divided by the Exercise Price (fractions are to be rounded down) up to a maximum of the Options actually granted and not yet exercised.

A further requirement for the exercising of the Options in such cases is that the performance targets have been arithmetically achieved at least once in the period between the Options being issued and the Time of Termination.

The provisions of this section 10 (5) will not apply if the termination of the Employment Relationship and/or Executive Position is attributable to

(i)

good cause within the meaning of section 626 BGB due to a reason for which the Eligible Person was responsible or

(ii)

the expiry of a fixed term and if the Eligible Person did not accept an offer from the Company to continue their respective activity after expiry of the fixed term for at least two further years on financial terms that were not less favorable than the previously agreed financial terms (agreement on salary, working hours, leave and non-cash ancillary benefits). A relevant offer must be submitted to the Eligible Person in writing no later than six months before expiry of the fixed term and have a commitment period for the Company of at least three weeks in order that the offer acquires the local preclusive effect in the event that it is not accepted by the Eligible Person.

Page 13 of 22

If the Company is liable for taxes or other levies on the Eligible Person that arise in connection with the exercising of Options, it may require the Eligible Person to furnish appropriate security for this or to provide evidence of the settlement of tax and levy liabilities. The security or evidence must be submitted within ten working days of a corresponding request by the Company. The entitlement to exercise Options will otherwise be canceled.

(6)

The following will apply if the business or part of the business division of the Company with which the Eligible Person has an Employment Relationship and/or holds an Executive Position separates from the Company or from the Company’s Group or if an affiliated company in which the Eligible Person is employed and/or acts in an executive capacity separates from the Company’s Group:

Options whose Blocking Period has expired on the date of separation may only be exercised vis-à-vis the Company by Eligible Persons belonging to the separating company, business or business division in the first two Exercise Windows following the date of separation, provided that the other exercise requirements have also been met. Thereafter, any Option Rights not yet exercised will lapse without compensation.

In derogation of section 10 (6) a) above, the Company is entitled to settle Options at any time, including against the will of the Eligible Person. In such case, the Eligible Person must be paid a settlement amount for the exercisable Options that will be calculated analogously to the cash settlement under section 6 (3). The time of separation will be used instead of the Exercise Date for the purpose of calculating the settlement. The decisive point in time for determining the time of separation is the date on which the change of employer pursuant to section 613 a BGB takes place or dependency pursuant to section 17 AktG ends. There is no legal entitlement to such a settlement.

Page 14 of 22

Options whose Blocking Period has yet to expire on the date of separation will lapse and the Eligible Person will be granted a settlement; section 14 (4) will apply analogously for the purpose of determining such settlement. The decisive point in time for determining the settlement will be the date on which the change of employer pursuant to section 613 a BGB takes place or dependency pursuant to section 17 AktG ends. The settlement determined in this manner must be paid to the Eligible Person within 12 weeks after the aforementioned point in time.

The provisions of this section 10 (6) will also apply if the Eligible Person makes use of any rights to object to the transfer of the Employment Relationship in the absence of other objective grounds.

§ 11
Term and revocation

(1)

These Option Terms will remain in effect until the term of the Options issued on its basis expires. If the Eligible Person has not exercised the Options by this point in time, the Options will lapse without compensation.

(2)

The Company may revoke the Options allocated to an Eligible Person with immediate effect if

insolvency proceedings are opened in respect of the assets of the Eligible Person or the opening of such proceedings is refused for lack of assets;

a creditor of the Eligible Person levies execution on the Options;

the Beneficiary has breached material duties under the law, the Company’s articles of association, their employment contract or these Option Terms.

(3)

Upon receipt of the revocation notice all Options granted under these Option Terms and not yet exercised will lapse without compensation. The Beneficiary cannot assert claims against the Company for compensation of any financial disadvantages.

Page 15 of 22

§ 12
Taxes and other levies

(1)

The Beneficiary is aware that the granting of Options and exercising of such Options can lead to non-cash benefits that are taxable.

(2)

The Company will pay the wage tax due thereon to the tax office, including church tax and the solidarity surcharge, as well as any social security contributions due thereon in accordance with statutory requirements. The Beneficiary is required to reimburse the Company for this (see section 6 (4)). The Company is also entitled to withhold corresponding amounts from the Beneficiary’s salary for this purpose.

(3)

The provisions above will apply analogously if the Eligible Person is an executive or employee at a company affiliated with the Company.

§ 13
Option Right adjustments and anti-dilutive provisions

(1)

If during the term of the Options and having granted a direct or an indirect subscription right to its shareholders the Company increases its share capital by issuing new shares or debt instruments or profit participation rights with conversion or option rights and the conversion or option price per share determined in this process is lower than the Exercise Price of the Options, the Management Board and, in the event that members of the Management Board are affected, the Supervisory Board are authorized to put the Beneficiary of the Options on an equal financial footing as far as is necessary to ensure that the total value of the Options to which an Eligible Person is entitled remains unchanged before and after implementation of a capital measure using recognized methods in financial mathematics. At the option of the Company this adjustment can be made by reducing the Exercise Price or adjusting the number of Options or a combination of both. If no subscription rights trade takes place, in the event of an adjustment by the Company the value of the subscription right will be calculated as follows with binding effect:

Page 16 of 22

SR = (Po - Pn) / (SRa + 1)

SR: subscription right
Po: market price of the old shares
Pn: issue price of the new shares
SRa: subscription ratio

The market price of the old shares, “Po”, is determined as follows: arithmetic average (non-weighted) of the closing price of the Company’s shares determined in Xetra trading on the Frankfurt Stock Exchange during the subscription period.

(2)

In the event of a capital increase from company funds through the issuing of shares, the contingent capital pursuant to section 218 AktG will be increased by the same ratio as the share capital. The Beneficiary’s right to subscribe to new shares through exercising the subscription right will increase by the same ratio; the Exercise Price per share will be reduced by the same ratio. In the event of a capital increase from company funds without the issue of new shares (section 207 (2) second sentence AktG), the subscription right under the Options and the Exercise Price will remain unchanged.

(3)

In the event of a capital reduction, the Exercise Price and Option ratio will not be adjusted, provided that the capital reduction does not change the total number of shares or the capital reduction is linked to a capital repayment or an acquisition of treasury shares against payment. In the event of a capital reduction through the consolidation of shares without a capital repayment and in the event of an increase in the number of shares without a change in capital (share split), the number of shares that can be acquired for each Option at the Exercise Price will be reduced or increased in proportion to the capital reduction or share split; the Exercise Price per share will be changed by the same ratio.

(4)

If an adjustment is made in accordance with the paragraphs above, fractions of shares will not be issued when the subscription right is exercised. There will be no cash settlement.

Page 17 of 22

(5)

In the event that the Company merges with another company, changes its legal form or undertakes comparable measures that impair the rights of the Beneficiary due to the loss of or changes to the Company’s shares, the right under section 2 (1) of these Option Terms will be replaced by the right to acquire at the Exercise Price a number of shares, shares in a business or other rights replacing shares in the Company to invest in the Company or its legal successor that corresponds in value to the market value of a share in the Company at the time such a measure is carried out (full entry of its execution in the commercial register).

(6)

In the event of an integration, the conclusion of profit transfer or domination agreements, a squeeze-out of minority shareholders or an asset transfer within the meaning of section 174 et seq. of the German Act Regulating Transformation of Companies (UmwG), the Company will, as far as is legally and practicably possible, place the Eligible Person in the position when exercising their Options in which they would have been had they already exercised their Option Rights at the time of the contract coming into effect or such measure being implemented. If trading in the Company’s shares is suspended as a result of such a measure and for this reason it is no longer possible to determine if performance targets have been met, the extent to which targets have been met will be determined by means of an assessment by a public auditor/public audit firm commissioned by the Company at its expense calculating the capitalized earnings value of the Company’s shares on 31 December of each year in each case.

(7)

In the event of other measures having an effect comparable to that of an adjustment as described in the cases above, the Company may adjust the Exercise Price in accordance with section 315 BGB.

(8)

The Company will notify the Eligible Person without delay of any adjustment and the date from which the adjustment will apply.

Page 18 of 22

§ 14
Settlement of Options

(1)

In the event of a change of control, the Company may settle the Options granted to an Eligible Person, including against the will of the Eligible Person (hereinafter “Settlement Requirement” ). A settlement must be paid to the Eligible Person (hereinafter “Settlement Amount” ).

(2)

A “Change of Control” will be deemed to occur if there is an assumption of control within the meaning of section 35 WpÜG.

(3)

The Beneficiary must be informed of the Settlement Requirement within a period of four months after the Change of Control has occurred. The Company must pay the Settlement Amount under section 14 (4) to the Beneficiary (less any taxes and levies) within eight weeks of the notice of the Settlement Requirement being given. The Settlement Amount will be determined based on the date on which the Change of Control occurred.

(4)

The Settlement Amount will correspond to the full value (hereinafter “Fair Value” ) of the Options granted to the Beneficiary. The Settlement Amount must be determined using recognized methods in financial mathematics along with an appraisal of the financial position of the Company and the Option Terms; in particular, this appraisal must assess the intrinsic value and time value of the Options. For the purpose of calculating the Settlement Amount, the Company may at its option and expense have the value of the Options determined by a public auditor/public audit firm or recognized financial institution using recognized methods in financial mathematics with binding effect on the Company and the Eligible Person.

(5)

The provisions in sections 14 (1) to 14 (4) apply analogously in the cases specified in section 13 (5) unless mandatory legal provisions stipulate otherwise. The point at which such a measure came into effect or was implemented is relevant for the purpose of calculating the periods under section 14 (3).

(6)

The provisions in sections 14 (1) to 14 (4) also apply analogously in the cases specified in section 13 (6). The point at which the contract came into effect or such a measure was implemented is relevant for the purpose of calculating the periods under section 14 (3).

Page 19 of 22

§ 15
Limitations of liability

(1)

The Company, its legal representatives and their vicarious agents shall not be liable for slight negligence or for consequential damage or lost profit.

(2)

The Company assumes no liability for the overall performance of the market or the performance of the Company’s shares.

(3)

The respective Eligible Person accepts and exercises Options solely at their own risk.

§ 16
Prohibition on insider trading

(1)

Each Eligible Person is personally responsible for ensuring they do not sell shares in the Company they have acquired through exercising Options in violation of prohibitions on insider trading. The establishment of Exercise Windows under section 3 does not constitute a guarantee that selling shares in the Company within the Exercise Window is unproblematic in individual cases.

(2)

Each Eligible Person is required to find out about the respective legal situation as regards prohibitions on insider trading before exercising Options or selling shares and to act accordingly. The Company does not issue any advice on this matter and assumes no responsibility for the legality of actions in this regard.

Page 20 of 22

§ 17
No establishment of a company practice

The Company grants Option Rights as a voluntary measure. Therefore, even if Option Rights are granted repeatedly this does not give rise to any entitlement to the renewed granting of Option Rights or to similar or equivalent benefits.

§ 18
Priority of the Annual General Meeting resolution of 28 August 2015 over the Share Option Scheme 2015

A copy of the Annual General Meeting resolution of 28 August 2015 is attached to these Option Terms as

Annex section 18.

The content of the Annual General Meeting resolution on the Share Option Scheme 2015 forms part of these Option Terms. In the event of any inconsistencies between these Option Terms and the content of the Annual General Meeting resolution, the content of the Annual General Meeting resolution will take precedence over the provisions of these Option Terms.

§ 19
Applicable law

The form and content of the Options and of these Option Terms as well as all rights and obligations of the Beneficiary or Company arising thereunder will be governed in every respect by the law of the Federal Republic of Germany and – to the extent permitted by law – to the exclusion of the provisions of private international law.

§ 20
Place of performance, place of jurisdiction

The place of performance and place of jurisdiction for any and all legal disputes arising from or in connection with these Option Terms is the registered office of the Company.

Page 21 of 22

§ 21
Other provisions

(1)

Trading days for the purposes of this contract are all trading days at the Frankfurt Stock Exchange.

(2)

Any amendments or additions to the Option Agreement must be made in writing unless notarization is required. This also applies to any amendment of this requirement of written form.

(3)

The Company is entitled to modify or cancel the Option Terms at any time in accordance with mandatory legal requirements without giving rise to any obligation to compensate the Eligible Person.

(4)

If one of the provisions of these Option Terms should be or become invalid or impracticable, this shall not affect the validity or practicability of the remaining provisions. Any gap in the provisions arising as a result of an invalid or impracticable provision and any other gaps in the provisions shall be filled analogously by way of supplementary interpretation of the contract, taking into account the interests of the parties. This shall also apply where a measure of performance or time (time periods, dates) is concerned. In such cases, a legally permissible measure of performance or time (time periods, dates) coming as close as possible to the intention of the parties shall replace that initially agreed.

(5)

Headings are used for guidance only and are not to be used in the interpretation of the contract.

Page 22 of 22

Exhibit 21.1

Subsidiaries of Biofrontera AG
Subsidiary		Jurisdiction
Biofrontera Bioscience GmbH		Germany
Biofrontera Pharma GmbH		Germany
Biofrontera Development GmbH		Germany
Biofrontera Neuroscience GmbH		Germany
Biofrontera Inc.		U.S.A.

Exhibit 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We have issued our report dated October 4, 2017, with respect to the consolidated financial statements of Biofrontera AG contained in the Registration Statement and Prospectus. We consent to the use of the aforementioned report in the Registration Statement and Prospectus, and to the use of our name as it appears under the caption "Experts."

/s/ WARTH & KLEIN GRANT THORNTON AG

Düsseldorf, Germany
January 12, 2018