Dermata Therapeutics, Inc.

ITEM 1: LEGAL PROCEEDINGS

On April 23, 2026, Dermata was served with a complaint filed by Villani, Inc. (“Villani”) in the U.S. District Court for the Central District of California (“Lawsuit”). The Lawsuit alleges the Company made false or misleading advertising statements under the Lanham Act 15 USC § 1125, breach of contract, and conversion, and seeks injunctive and declaratory relief. In connection with the Lawsuit, on April 26, 2026, Villani filed a motion seeking a temporary restraining order (“TRO”), and on June 18, 2026 filed a motion seeking a preliminary injunction.

On May 6, 2026, the court denied the TRO in part as related to Villani’s breach of contract and conversion claims, and granted the TRO in part as related to certain of Villani’s false or misleading advertising claims, which imposed certain temporary restrictions on specific statements the Company could make pending further proceedings. A hearing on Villani’s motion for a preliminary injunction was held on July 16, 2026, and at that hearing the Court extended the TRO pending its decision.

On August 5, 2026, the Court denied Villani’s motion for a preliminary injunction in its entirety and vacated the injunctive relief granted in the TRO. As a result, the Company is not currently subject to any injunctive restrictions. In denying the motion, the Court found that Villani was not likely to succeed on its Lanham Act, conversion, and declaratory judgment claims and that, although questions exist going to the merits of Villani’s breach of contract claim, Villani had not established a likelihood of immediate irreparable harm and the balance of equities favored the Company. On August 18, 2026, Villani filed a motion for consideration andex parte application to shorten the timeline for hearing the motion, alleging new facts emerged that merit reconsideration of the preliminary injunction ruling. On August 20, 2026, the Court granted in part and denied in part Villani’s application and indicated that it would set a bench trial for December 2026. On September 3, 2026, Dermata filed a motion to stay all proceedings in the Lawsuit in favor of the Arbitration. The Court partially granted that motion at a September 24, 2026 hearing and converted the bench trial into an evidentiary hearing on a preliminary injunction, scheduled for December 14, 2026. Villani continues to seek preliminary and permanent injunctive relief in the Lawsuit, as well as money damages in a simultaneously pending Arbitration, as discussed further below. The Lawsuit remains pending, and Villani may continue to seek injunctive relief, including a permanent injunction, and damages as the case proceeds.

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 And also seeks injunctive relief to the extent not ordered by the Court in the Lawsuit.

At this time, the Company is unable to reasonably estimate the likelihood of an unfavorable outcome or the amount or range of potential loss, if any, that may result from this matter. Although the TRO has been vacated and Villani’s motion for a preliminary injunction was denied, Villani continues to seek injunctive relief in both Lawsuit and the Arbitration and money damages in the Arbitration. Any future injunctive relief, or an arbitration award for damages, could have an adverse impact on the Company’s operations, financial condition, and results of operations, particularly if any such restrictions were broad in scope or remained in place for an extended period.

The Company will continue to monitor developments in this matter and will adjust its disclosures as appropriate.