Dermata Therapeutics, Inc.

Our operations and financial results are subject to various risks and uncertainties, including those described in Part I, Item 1A, “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2025, filed with the SEC on March 26, 2026. No material changes to such risk factors have occurred during the six months ended June 30, 2026, except as described below:

We are involved in litigation with Villani, Inc. relating to our Spongilla-based products and commercialization activities, which could adversely affect our business, operations, financial condition and ability to commercialize our products.

On April 23, 2026, Villani, Inc. (“Villani”) filed a complaint against us in the U.S. District Court for the Central District of California asserting claims for false advertising under the Lanham Act, breach of contract, and conversion, and seeking injunctive relief (the “Lawsuit”). On June 5, 2026, Villani filed a Statement of Claims with the American Arbitration Association, commencing arbitration based on the same conduct alleged in the Lawsuit (“Arbitration”). Villani alleges breach of contract, breach of the duty of good faith and fair dealing, false advertising under the Lanham Act 15 USC § 1125, violation of California Business and Professions Code §§ 17200, et seq., and conversion. Villani seeks money damages in the Arbitration.

In connection with the litigation, Villani sought a temporary restraining order (“TRO”) and preliminary injunction in the Lawsuit. On May 6, 2026, the Court denied the TRO in part related to the breach of contract and conversion claims and granted the TRO in part on the false or misleading advertising statements, which imposed certain temporary restrictions on specific statements the Company could make pending further proceedings. On August 5, 2026, the Court denied Villani’s motion for a preliminary injunction and vacated the injunctive relief granted in the TRO, and the company is not currently subject to any injunctive restrictions. In denying the motion, the Court found that questions exist going to the merits of Villani’s breach of contract claim, but that Villani had not established a likelihood of immediate irreparable harm and that the balance of equities favored the Company. Villani continues to seek permanent injunctive relief in the Lawsuit and money damages in the Arbitration. We are vigorously defending ourselves against these claims; however, litigation and arbitration proceedings are inherently uncertain, costly, and time-consuming.

While we are not currently restrained from manufacturing, promoting, advertising, using, selling, offering for sale, distributing, or delivering in commerce any product or regimen containingSpongilla, if Villani were to obtain injunctive relief at a later stage of the Lawsuit, an arbitration award, or otherwise, we could be restricted or delayed in our ability to market, manufacture, distribute, advertise, sell, or commercialize certain of our current or planned products, including products containing ourSpongilla. Such restrictions could disrupt our planned product launches, impair relationships with suppliers, manufacturers, distributors, marketing partners, or customers, require us to modify our products, branding, formulations, or marketing claims, or otherwise adversely affect our commercialization strategy. In addition, defending this matter may require significant management attention and financial resources, result in substantial legal expenses, divert resources from our business operations and strategic initiatives, and expose us to reputational harm.

Our common stock is currently listed on the Nasdaq Capital Market. Continued listing of a security on Nasdaq Capital Market is conditioned upon compliance with various continued listing standards. In the past, we have received notices from Nasdaq’s Listing Qualifications Department indicating that we had not complied with certain of the Nasdaq Capital Market’s continued listing standards. While we have regained compliance for each instance, there can be no assurance that we will continue to maintain compliance with the Nasdaq listing requirements.

Upon approval of the Securities and Exchange Commission, Nasdaq amended its listing rules on July 22, 2026, to provide that where a listed company fails to meet the continued listing requirement for market value of listed securities of at least $5 million for 30 consecutive business days, such deficiency will result in immediate suspension and delisting, bypassing typical grace periods and restricting appeal rights (the “MVLS Requirement”). On July 29, 2026, the SEC’s Division of Trading and Markets confirmed that it had received notices of intention to petition the full SEC for review of the approval, which automatically stayed the order implementing the rule pending further action from the SEC. This process is pending as of the filing date of this Quarterly Report on Form 10-Q with no prescribed timeline for SEC action. As of the time of this filing, our market value of listed securities is currently below $5 million. Because we are currently below the $5 million threshold, if and when the MVLS Requirement becomes effective, we may become subject to immediate suspension and delisting, without any opportunity to cure, if our market value of listed securities remains below $5 million for 30 consecutive business days.

A delisting could substantially decrease trading in our common stock, adversely affect the market liquidity of our common stock as a result of the loss of market efficiencies associated with Nasdaq and the loss of federal preemption of state securities laws, adversely affect our ability to obtain financing on acceptable terms, if at all, and may result in the potential loss of confidence by investors, suppliers, and employees and lead to fewer business development opportunities. Additionally, the market price of our common stock may decline further, and stockholders may lose some or all of their investment.

In the event of a delisting, we anticipate that we would take actions to restore our compliance with the Nasdaq Capital Market or another national exchange’s listing requirements, but we can provide no assurance that any such action taken by us would allow our common stock to remain listed on the Nasdaq Capital Market, stabilize our market price, improve the liquidity of our common stock, or prevent future non-compliance with the Nasdaq Capital Market or another national exchange’s listing requirements.