Dermata Therapeutics, Inc. 10-K

ITEM 1. BUSINESS All references in this report to “Dermata,” the “Company,” “we,” “us,” or “our” mean Dermata Therapeutics, Inc. unless stated otherwise or the context otherwise indicates. Overview We are a scientific leader in skincare, dedicated to the development and commercialization of products that address common and underserved skin conditions. Dermata initially was founded with a focus on researching and developing prescription products subject to the FDA approval process. As part of this focus, we had one lead asset, referred to as XYNGARI, also known as DMT310, which we had been studying in clinical trials for the treatment of moderate-to-severe acne. In March 2025, we announced that we achieved statistically significant results from our Phase 3 STAR-1 clinical trial of XYNGARI, formerly our lead prescription (“Rx”) candidate incorporating our Spongilla lacustris for moderate-to-severe acne. XYNGARI demonstrated statistically significant results across all three co-primary endpoints at weeks 4, 8, and 12 when compared with placebo. Following the successful completion of the STAR-1 trial, we conducted a full assessment of the Rx acne landscape and the future Rx acne development pathway for XYNGARI. In September 2025, after an extensive review of current trends in dermatology, changing consumer preferences, additional non-clinical and clinical development costs, and go-to market costs for an Rx acne product, management, with support from our board of directors, determined that a strategic shift to developing and distributing DTC and B2B skincare products, that are backed by science, would be a better path to commercialization with potentially greater financial upside and faster time to market. We believe we can leverage our history and knowledge of Rx dermatology to create skincare products that are effective and safe, and available to consumers without the nuisance of obtaining a prescription. We believe this strategic repositioning will accelerate our path to commercialization, reduce our regulatory burden, and decrease development expenses, all while enabling us to address broad consumer segments in the skincare market. We believe the skincare market, from a cosmetic, OTC, and Rx perspective, has seen a substantial shift towards consumers first relying upon multifaceted cosmetics and OTC products that simplify routines. Consumer preferences are changing to favor natural products that do more for their skin. There appears to be a resurgence of interest in traditional remedies to treat various conditions. We have also seen an increasing trend towards the use of OTC treatments for common skin diseases such as acne vulgaris (or “acne”), psoriasis vulgaris (or “psoriasis”), and acne rosacea (or “rosacea”). The causes, symptoms, and treatments for common skin issues, like acne, have over 50 million patients in the U.S., and are well researched by consumers due to the extensive publicly available information. Thus, we believe consumers are more willing to conduct and trust their own research and treat these diseases with OTC offerings prior to seeing a dermatologist. Over 70% of patients with acne first choose to try multiple OTC products to treat their acne before seeing a dermatologist. However, many of the currently available OTC acne products are mildly effective and have many tolerability issues that result in poor patient compliance. Consumers with acne that do not get satisfactory results, either due to lack of efficacy or tolerability issues, typically wait about one year before scheduling a visit with a dermatologist to seek alternative therapies. Additionally, due to the cost-effective pricing of OTC products, as compared to Rx products, a desire for self-administration, difficulty getting appointments with dermatologists, or insurance coverage for branded Rx products, many consumers are first relying on OTC products to fill their treatment needs. We believe that if we can provide consumers with a unique topical acne treatment, we have an opportunity to capture a large segment of acne patients prior to them seeking Rx products through a physician. While this is a major shift in strategy for our company, we believe pursuing the commercial sale of both cosmetic and OTC skincare products is the best path forward to meet our mission of providing consumers with efficacious and safe skincare treatment options. We view this shift in consumer preferences as a significant benefit for our strategic repositioning. We have gained substantial clinical knowledge of various dermatology diseases and skin conditions. We plan to leverage this knowledge to create a whole product line of skincare treatments that consumers can access directly for each of their skincare needs. While our background is in clinical products, we plan to leverage the unique attributes of our hero ingredient, Spongilla lacustris , to develop both cosmetic and OTC skincare treatments. We plan to launch our first cosmetic product in the middle of 2026, with our first OTC acne product to follow shortly thereafter. In the future, we plan to offer additional products that target specific needs of consumers. For example, for consumers who want to improve the general appearance of their skin we plan to commercialize a once weekly foundational treatment for skin renewal. Consumers suffering from many common forms of acne, we plan to offer our OTC topical acne system. The foundational treatment will utilize our Bioneedle, which is 100% Spongilla lacustris powder, to provide a once weekly skin renewal routine that is simple addition to skincare routines. This kit will contain our Bioneedle which will be combined with a fluidizing agent for easy application. 4 Our Bioneedle is derived from a wildly grown freshwater sponge, Spongilla lacustris or Spongilla , which is processed into a fine, purified powder and packaged with no additives. Spongilla is a unique freshwater sponge that only grows in commercial quantities in select regions of the world, which gives our Bioneedle its distinctive organic and mechanical properties. The combination of a proprietary harvesting protocol, developed by our exclusive supplier, and the post-harvest processing procedures, produce an ingredient that we believe optimizes the mechanical components, which are silica microstructures also called spicules, as well as the organic components of Spongilla , while eliminating any harmful bacteria that could be found in many freshwater or marine sponges. Keeping our clinical roots in mind, we plan to offer an acne system that has been dermatologist tested. Our weekly Bioneedle treatment, aimed to help refine the appearance of a consumer’s skin, will be used alongside a daily salicylic acid wipe to help fight the acne lesions. We believe the unique attributes of our clearing treatment used in tandem with an OTC monograph active ingredient (salicylic acid) could produce a superior OTC product unlike anything currently on the market. We plan to develop and distribute a variety of cosmetic and OTC products that are backed by science and are easily accessible by consumers who are more comfortable treating their skin problems independently with readily available therapies. Our core values will remain unchanged during this strategic shift as we strive to provide consumers with affordable, safe, and effective treatment options, which can be obtained either through our DTC channels or through healthcare professionals, without having to get a prescription. We believe consumers are seeking greater flexibility and freedom in treating their skin and we believe we can offer them a solution. In addition to the DTC channel for our products, we believe there is a market for our technology to aid in the intradermal delivery of macromolecules for various aesthetic conditions. Typically, for facial aesthetics, botulinum toxins are injected into facial muscles to reduce forehead, lateral canthal, and glabella deep lines. However, this is limited to the use of intradermal delivery of botulinum toxin for a variety of skin diseases and conditions. Botox is currently the only approved botulinum toxin for the treatment of axillary hyperhidrosis via intradermal injections. While effective, intradermal injections, including 10-15 per axilla, of Botox can be painful for patients and very time consuming for dermatologists. Therefore, we believe developing a less painful, less time-consuming topical delivery of botulinum toxin into the dermis for various aesthetic and medical skin diseases and conditions, would provide physicians with an attractive alternative to intradermal injections of botulinum toxins. We believe our Bioneedle can increase the number of intradermal uses for botulinum toxin by leveraging the unique microstructure of our Bioneedle, to create microchannels into the dermis, enabling improved dermal penetration of botulinum toxins (i.e. Botox). Additionally, we believe our technology can allow for broader coverage of larger surface areas of the skin, which we believe will provide a better field effect of the botulinum toxin. We plan to leverage our Bioneedle platform for broad applicability across dermatologic and aesthetic skin conditions, potentially allowing dermatologists and aestheticians to increase the use of botulinum toxin. We believe this non-invasive approach could meaningfully expand the therapeutic and aesthetic utility of botulinum toxin for conditions such as axillary, palmar, and plantar hyperhidrosis, acne, acne scars, rosacea, and improved facial aesthetics (including improvements in skin luminosity and brightness, reducing pore size and number of pores, reducing fine lines, and reducing skin oiliness by decreasing sebum production). We plan to continue to explore additional uses for this platform and look forward to getting our technology in the hands of aestheticians and dermatologists so they may better serve the medical and aesthetic needs of their patients. The Tome Evolution When we made the strategic decision to switch to developing DTC products, we wanted to build a new brand that fully encompassed this new endeavor. We conducted extensive consumer interviews to learn what today’s skincare consumers think is missing in their skincare routines. We aimed to find the “white space” in the vast skincare environment by exploring what products and routines consumers currently use and what is missing. Through multiple interviews across multiple cohorts of consumers, we found that while the industry sees acne care, skincare, and beauty as distinct categories, many consumers see them all as collective acts of self-care. These consumers who are invested in their skin are not merely looking for a quick fix but a lasting effect that feels like self-care. Their skin is unique and they are searching for unique products, and we wanted to build a skincare brand that meets the needs of these consumers. We found that these consumers are highly invested in the products they put on their skin and are willing to purchase products at a premium price. 5 With these consumers in mind, we set out to build a brand that maintained our core values, of being honest, natural, and simple. In a category full of complex ingredients, we believe consumers want tried-and-true, time-tested products that include natural ingredients that are not manufactured in a lab. Recent trends in skincare include the use of beef tallow, holy basil, or kaolin clay. However, we feel many of these products lack the clinical rigor to warrant their long-term inclusion in a true skincare routine. This is why we felt it was the right time to leverage our hero ingredient, Spongilla lacustris, and its long history of helping people’s skin with the launch of our DTC skincare brand. We believe this approach will bridge the gap between the powerful, traditional ingredients and the innovation of today; to provide consumers with the science to back up the products they are using on their skin. With our newfound focus, we sought a brand name that would embody our drive to develop skincare products that turned time-honored remedies into proven skincare for our mature adopters. We wanted consumers to feel like experts in the skincare they are using by being able to learn about the ingredients in the products they are using rather than just reading a label. We believe our avid skincare users have a true fascination with their skin, and thus, are in pursuit of knowledge about the best products available. We believe we can immerse our consumers in our products and especially our hero ingredient, because it truly is one of a kind. Which is why we have branded our new skincare line Tome™. Tome in its literal meaning is a large, important, scholarly book. We wanted a name that told the right story, while being rooted in science and learning. Tome is a name that we believe will stand out from competitors and forge a deeper connection with consumers and our current and future product offerings. We intend to launch a line of skincare products with our hero ingredient, Spongilla lacustris . While some cultures have used Spongilla for various conditions like bruises, arthritis, and some cosmetic conditions, we have studied the entire sponge to learn the true mechanisms that make it such a unique ingredient. We plan to make a brand that stands for time-tested ingredients combined with next-generation science to help consumers reveal their best skin and Tome skincare products will stand as its foundation. We are currently finalizing the launch of our first commercial products, which we expect to be available in the middle of 2026. Our Strategy We plan on developing and commercializing differentiated OTC and aesthetic skincare products for the treatment of various skin diseases and conditions, which we believe have significant unmet needs in the skincare market. The key components of this strategy are as follows: ● Successfully draw awareness to our Tome skincare brand in preparation for the launch of our first commercial products. We recently announced the name of our new skincare brand, Tome, and are working on building the brand identity for our DTC skincare products, which will represent our core value of providing consumers with skincare products that come from nature but are scientifically proven to work. ● Successfully launch our first two commercial products, Tome Foundational Treatment and Tome Clearing Treatment. We are currently preparing for the launch of our first two commercial products, the first one being our Foundational Treatment powered by Bioneedle for skin renewal, expected to launch in the middle of 2026. The Foundational Treatment will be followed shortly by the Clearing Treatment targeted for the treatment of acne. We plan to first sell our products through our website, www.tomeskincare.com , which will be available as a monthly subscription or a one-month kit. We also plan to sell monthly kits to medical professionals, including aestheticians, med spas, and dermatologists, who wish to offer in-office treatments for their patients. We see the combination of these sales channels as a way to reach the greatest number of consumers suffering from acne and other skin conditions. 6 ● Expand our OTC treatment offerings incorporating our Bioneedle technology . Given the many mechanisms of actions in our technology, we believe we can create a multi-product portfolio of OTC offerings that treat a variety of skin diseases, including psoriasis and seborrheic dermatitis. We believe there is potential to incorporate the unique attributes of our Bioneedle technology in combination with other active ingredients listed on the OTC monograph to provide consumers with differentiated products that we believe may be as effective as Rx products, but without the need for a prescription. ● Expand our skincare line for the cosmetic market . With the ever-growing cosmetic marketplace, we see great potential to develop multiple skincare products by incorporating our Bioneedle technology into various serums, gels, and lotions for a variety of skin conditions. These skincare products could include skin renewal products, which address fines lines as well as the appearance of dark spots. We continue to work on developing these additional product offerings to meet all the skincare needs of our consumers. ● Build a network of certified skincare professionals to deliver in-office Tome therapy sessions. We plan to build a Tome certification program, where interested aestheticians and other skincare professionals can complete a deep dive certification program of our Tome product offerings. Such certification will allow exclusive access to discounted products, new product launches, and company events. We believe this certification program will create a community of skincare professionals who can help market our products to a broad network of consumers. ● Acquire or in-license additional skincare products that complement our current products . We continuously evaluate potential partnering opportunities that will bolster our product portfolio and provide substantial value to our organization. We intend to focus on product opportunities that are differentiated from other products on the market and can be used for a variety of skin diseases and conditions. ● Maximize the value of our portfolio by partnering with companies who can assist with commercializing our products in territories throughout the world. We plan to explore partnerships and distribution agreements with companies throughout the world who have established commercial organizations focused on skincare. ● Further strengthen our intellectual property portfolio, exclusivity, and raw material supply. We plan to continue to strengthen our intellectual property (“IP”) portfolio for all our products, maintain our exclusive supply agreement for our raw material requirements, and continue to protect our proprietary information. We believe these activities will be our primary competitive advantages if our product becomes commercially available. The dates reflected in the foregoing are estimates only, and there can be no assurances that the events included will be completed on the anticipated timeline presented, or at all. Further, there can be no assurance that we will be successful in the development or commercialization of Tome products, or any other products we may develop in the future. Dermatology Market Overview The skincare market represents a broad and diverse segment of the consumer health and beauty industry, encompassing both OTC products and cosmetic formulations intended to improve the appearance and condition of the skin. Within the skincare market, we believe there is ample white space for innovative and differentiated products to obtain valuable market share. The cosmetic and skincare industry has experienced significant growth in recent years, with global markets estimated to reach $736 billion by 2028. This growth has been driven by a variety of factors, including increasing demand for natural ingredients, changing consumer attitudes, and the rise of new distribution channels such as online retail. The broader cosmetic skincare market includes products focused on exfoliation, skin renewal, texture improvement, hydration, and overall skin appearance. This segment is driven by consumer interest in preventative care, visible results, and innovative ingredient systems, and spans mass, prestige, and professional distribution channels. As a result, differentiation is often driven by formulation innovation, novel ingredient systems, and clear, compelling product positioning. We believe skincare enthusiasts are still searching for the next best skincare product that can deliver results. 7 In recent years, the cosmetic skincare market has increasingly shifted toward products that emphasize active ingredients, science-backed formulations, and visible performance benefits, often drawing inspiration from dermatology and therapeutic skincare. In the cosmetics space, there is great interest in natural components, such as plant extracts, antioxidants, peptides, and probiotics due to their potential to enhance skin health through various mechanisms. Many of these natural components have been found to have bioactive compounds including antioxidants, anti-inflammatory, and antimicrobial properties. This trend has contributed to the growth of so-called “cosmeceutical” products, which occupy a space between traditional cosmetics and OTC therapeutics by offering enhanced functionality while remaining within cosmetic regulatory frameworks. We believe consumers have a growing interest in exfoliation, skin renewal, texture refinement, and barrier support, as well as in products that provide an in-office experience but that can be done at home. We believe these dynamics have supported demand for natural ingredients and product offerings that can be leveraged across multiple product types and use frequencies, including weekly or periodic treatments positioned as intensive or corrective steps. In addition to cosmetic uses, acne remains one of the most significant and persistent consumer skincare needs, affecting over 50 million adolescents and adults in the US, across a wide range of demographics. The OTC acne market is characterized by products containing established active ingredients from the OTC monograph, such as salicylic acid, benzoyl peroxide, and sulfur, and is largely driven by consumer demand for accessible, non-prescription solutions that can be incorporated into daily or periodic skincare routines. While the OTC acne market operates alongside the Rx acne market, prescription treatments are generally reserved for moderate to severe acne cases and may involve higher costs, potential side effects, and ongoing medical supervision, all while offering limited results. As a result, over 70% of patients with acne first choose to try OTC acne products and wait at least one year before seeing dermatologist. U.S. Google searches for “acne treatment” grew by about 19 percent to 424,000 average monthly searches in 2025 as compared with 2024. This patient sentiment towards OTC acne products can also be seen in the number of skincare brands launching new acne products in 2026. We believe this recent dynamic shift in consumer preferences creates opportunities for differentiated OTC products that deliver meaningful efficacy while offering improved tolerability, convenience, and alignment with consumers aim to amplify their skincare routine. Taken together, we believe these factors underscore the importance of differentiation and scalability in the cosmetic and OTC markets. We believe that products built around a distinctive hero ingredient, with demonstrated functional benefits, may be well positioned to address consumer demand for effective, thoughtfully formulated skincare while supporting long-term brand and portfolio development. We believe this convergence supports demand for multifunctional products and ingredient platforms that can be adapted across both OTC and cosmetic applications, providing opportunities for brand extension and long-term portfolio development. Our Hero Ingredient – Spongilla lacustris History of Sponges Freshwater sponges have an exceptionally deep evolutionary history that dates back millions of years, placing them among the earliest surviving multicellular life forms on the planet. While most sponges remained in marine environments, a smaller lineage underwent the rare and challenging transition to freshwater habitats, likely during periods of dramatic geological and climatic change. This shift required major adaptations, including tolerance to fluctuating temperatures, variable oxygen levels, and seasonal drying or freezing conditions, largely absent in stable marine settings. One of their most remarkable innovations was the development of gemmules, highly resistant reproductive structures that allow freshwater sponges to survive droughts, ice cover, and nutrient scarcity, re-emerging when conditions improve and helping them repopulate each year, making them a sustainable source. 8 The therapeutic interest in freshwater sponges emerged from both traditional medicine and modern biomedical research. In some folk practices, powdered sponge material was used topically to stimulate circulation in joints and exfoliate the skin, leveraging the microscopic silica spicules that create controlled microchannels into the skin. Modern studies, similar to the ones we have conducted in axillary hyperhidrosis and facial aesthetics, have expanded on this concept, showing that these spicules can enhance transdermal delivery of active compounds, like botulinum toxin, by temporarily increasing skin permeability. Additionally, freshwater sponges produce a range of bioactive molecules—antimicrobial, anti-inflammatory, and cytotoxic compounds—that help them defend against bacteria and predators in their natural environment. Spongilla Lacustris Overview Of the many marine and freshwater sponges available, Spongilla lacustris (“Spongilla”), as seen in Image 1 below, we believe represents the ideal intersection of nature, science, and visible results, which is why we chose it as a hero ingredient in our skincare products. This remarkable freshwater sponge has evolved highly specialized silica microstructures, that naturally exfoliate the skin, open microchannels and stimulate renewal, helping to improve the texture and tone of skin, all while reducing blemishes in a way that feels both effective and intentional. Beyond its physical properties, Spongilla also contains many organic compounds that may help improve multiple facets of various skin conditions. Spongilla also reflects our commitment to thoughtfully sourced, biologically intelligent ingredients that work in harmony with the skin’s natural processes. Its long history of topical use, combined with growing scientific backing, reinforces our belief that powerful skincare solutions can be derived from nature when guided by rigorous research and responsible innovation. Image 1: Spongilla lacustris Spongilla is a freshwater sponge from the Spongillidea family that grows in freshwater rivers and lakes in commercial quantities in select regions of the world. It goes dormant during the winter months and regrows each year through the dispersion of gemmules. These gemmules then grow into growth forms ranging from encrusting, to digitate, to branched, depending on its habitat’s growth conditions. While it grows in many parts of the northern hemisphere, there are only certain locations where it grows in the quantities and of the quality to viably support commercial products. One such location is the Volga River, where we have signed an exclusive supply agreement with one of the larger known suppliers of wild harvested Spongilla raw material for our Tome skincare line, which we believe provides us with a reliable source of our supply of Spongilla raw material for the foreseeable future. Over the last 23 years, our exclusive supplier has refined its harvesting methods and procedures and is now capable of supplying a high-quality raw material that meets our release criteria, year-over-year, for a stable and repeatable natural ingredient. Our supplier has the capacity to harvest and process large quantities of Spongilla per year, which we believe will support the quantities and of the quality of raw material necessary to support our future commercial needs. Since entering into the exclusive supply agreement, we have consistently been able to order and receive quantities of raw material to support our ongoing activities and prepare for the planned commercial launch of our once-weekly acne kit. Bioneedle™ For many years Spongilla has been believed to be effective for various ailments, but only recently have we started to learn what makes it such a unique, multifaceted organism. With our proprietary harvesting protocols and manufacturing procedures, we are able to take Spongilla lacustric raw material and leverage the combination of evolution and scientific innovation to create a unique product we like to call, Bioneedle. Bioneedle was created to unite a biological organism that has been around for millions of years with the latest cutting-edge science in skincare, that we believe will unleash new possibilities for our consumers. The unique nature of our Bioneedle creates a skincare ingredient that has both mechanical and chemical components that are naturally occurring parts of our raw material and contribute to our hero ingredient’s mechanisms of action in the improvement of skin diseases and conditions. Mechanical Components . The mechanical components of our Bioneedle technology come from the skeletal structure of the Spongilla , which is made up of millions of inorganic siliceous spicules that are bound together by organic material, as seen in Image 2 below. These spicules are smooth, rod-like shapes which come to a point on each end, and when the Spongilla is harvested under our specified protocol, the spicules can average between 200-350 micrometers in length and about 10-15 micrometers in diameter. While there are other species of freshwater and marine sponges, many of their spicules can be covered in barbs or hooks, as seen in Image 3, which we believe are not ideal for skincare products as they may end up getting stuck in the skin. Other sponges contain spicules that are blunt on each end or curved, making skin penetration difficult and thus we believe will not permit the successful delivery of various active compounds. 9 Image 2: Siliceous Spicules Present in Spongilla Image 3: Other Sponge Spicules 10 After wildly harvesting and final processing in the U.S., the form and size of our spicules make them the ideal shape to penetrate the stratum corneum, the skins barrier, and temporarily create micro-channels into the dermis without penetrating subcutaneous tissue, where the larger blood vessels are located. These newly created microchannels temporarily open the skin’s barrier to allow for the targeted delivery of large and small compounds into the dermis where they could have an effect on various skin conditions. Most topically applied products currently contain penetration enhancers that help force the active molecule through the stratum corneum and into the dermis, such as Dimethyl Sulfoxide (“DMSO”). However, DMSO is only able to help smaller molecules penetrate the stratum corneum and is usually unable to aid larger molecules, such as botulinum toxin, in topical delivery. These penetration enhancers can also cause unwanted side effects such as dry skin or garlic like taste, breath, and body odor. We believe our Bioneedle is differentiated by enabling the delivery of both small and large molecules through topical application with less irritation and side effects than other topically applied products. In addition to creating many microchannels in the skin, we believe the penetration of the spicules can open closed comedones, allowing oxygen into the anaerobic environment of the clogged pilosebaceous glands, where C . acnes and other bacteria survive. Lastly, we believe the spicules promote collagen production within the skin which accelerates the skin’s rejuvenation period, thus bringing refreshed skin to the surface at a quicker rate than the skin’s normal turnover cycle. Typically, the skin takes between three to four weeks to bring a new layer to the surface, while we believe our spicules may allow this process to complete in about one week. We believe resurfacing will aid in the time to treat inflammatory skin diseases and conditions while also enhancing the look and feel of a patient’s skin. Organic Compounds . Our Bioneedle also contains multiple organic compounds that we believe may aid in our products’ improvement of multiple dermatology skin diseases and conditions. We believe part of Spongilla’s natural defense mechanism is the creation of organic material to fight off natural enemies present in the water in which it grows. This organic material binds its spicules together to form the skeletal structure of the sponge. While we believe each of the mechanical and organic components of our Bioneedle technology may be beneficial in treating various skin conditions, the impact of each mechanism may be greatly enhanced when combined with the other. The large number spicules contained in each treatment create numerous microchannels through the stratum corneum, allowing for sufficient penetration and delivery of the organic components into the treatment area to reduce inflammation and bacteria. We plan to incorporate our Bioneedle technology into multiple OTC and cosmetic products that we can sell direct to consumers and business to business to provide differentiated foundational products for the broad skincare market. Tome Skincare Product Line Summary. Our product development strategy is centered on the scalable use of our proprietary Bioneedle as the foundation for any well-rounded skincare routine. We believe its unique mechanisms of action and its broad ability to be used alone or in combination for a variety of skin conditions and cosmetic applications, like acne, psoriasis, skin renewal, fine lines, overall skin improvement, dandruff. We plan to initially introduce our once weekly foundational treatment that we believe should be a part of any skincare routine. This will be targeted towards general skincare enthusiasts seeking an at home aesthetician product for skin renewal and general skin improvements. We also plan to offer additional products to the foundation treatment, for those consumers suffering from specific types of skin issues, like acne, psoriasis or dandruff. We believe there are many consumers that want an effective OTC product without needing to seek out a prescription from a dermatologist. We plan to first launch the foundational treatment in the middle of 2026 with the launch of the acne treatment shortly thereafter. Then, based on future consumer research and feedback, we plan to launch additional treatments for additional skincare needs. While the once weekly foundational treatment represents the first commercial demonstration of our Bioneedle technology, we believe the underlying technology has broader applicability to be used in both OTC therapeutics and cosmetic skincare categories. We believe that by leveraging a foundational ingredient, like our Bioneedle, across differentiated formulations and use cases, we can efficiently develop a cohesive portfolio of effective skincare products while reinforcing our mission to forge a new realm of skincare that is powerful, not punishing. Our team believes this platform approach provides flexibility for future innovation, supports line extensions over time, and positions us to address a wide range of consumer skin concerns beyond acne. We call this skintech at home. Foundational Treatment – powered by Bioneedle Our first commercial product to launch will be our Foundational Treatment, consisting of a once-weekly treatment, designed to renew a consumer’s skin so it feels fresh each and every week. We plan for the Foundational Treatment to be the base of any well-rounded skincare routine that blends timeless treatments with potent transformations. Through innovative science and deep research, we created a novel, foundational treatment that is based in powerful, natural ingredients. We believe the combination of these unique components in a thoughtfully designed treatment could deliver an aesthetician like experience right at home. Market Overview . The beauty industry is undergoing a dynamic change, with consumers demanding transparency and clear ingredient lists. Consumers are searching for multifunctional products to simplify their routines while valuing brand loyalty and sustainable practices. There has been a clear and significant trend for natural cosmetics, which some refer to as pure beauty. This does not mean that brands can just claim their products are natural and expect consumers to believe them. Consumers are taking an active role in determining what they consider “natural”, with one survey finding that 60% of women are willing to invest in new products that prioritize natural products. In addition to looking for products with natural ingredients, consumers also want their skincare products to be multifunctional. This new trend has been referred to as “skinminimalism,” which emphasizes the benefits of simplified skincare routines. Consumers are looking to use less products, so they want the products they do use to do more by providing multiple benefits. While this typically means products will contain 2, 3, or 4 active ingredients, we believe we can offer another option with a product that is 100% Spongilla lacustris to address multiple skincare issues. Our Solution for Skincare. Our Foundational Treatment powered by Bioneedle, will be a once weekly application to help simplify a consumer’s skincare routine while providing multiple benefits for their skin. We believe this product can be the foundation for any consumer who is looking for healthier and clearer skin. Whether they are an avid skincare user or someone that is just looking for an easy fix to their skin issues, we believe our Foundational Treatment can meet their needs. With consumers now looking for natural products that perform multiple tasks at the same time, we believe this is the ideal time to be launching our first product with our Bioneedle as the foundation. In addition to using 100% natural Spongilla powder, our Foundational Treatment will only need to be applied once per week to provide the appearance of skin renewal that consumers desire. Most other products on the market need to be applied daily, sometimes multiple times per day, or consumers must seek the help of a skincare professional for more invasive peels and laser treatments. Therefore, we see our once weekly application as an immediate differentiator to currently available product offerings. Whether it is in addition to what they already use for their skincare, or if they feel it can replace many of the products they currently use. With an easy weekly application, we believe our Foundational Treatment can become the basis for any good skincare routine. 11 The Routine The Bioneedle . The main part of this treatment is a powder containing our hero ingredient, Spongilla lacustris . As discussed above, this unique ingredient is multifaceted and we believe it has the ability to improve the quality of the skin. Our Bioneedle is wildly harvested and powdered to leverage its unique skin renewal properties. It is a combination of unique spicules and organic compounds that we believe work together to exfoliate the skin, aid in skin renewal, reduce blemishes, all while improving skin texture and quality. We believe the Bioneedle is ideal for consumers that need either deep renewal or general skin support due to the combination of precision mechanical resurfacing with organic, skin-conditioning ingredients to support a clearer complexion without relying on harsh stripping agents. The Activator . The second component of the Foundational Treatment system is an activating solution that is mixed with the Bioneedle powder to form a matrix. This activating solution contains hydrogen peroxide that helps oxidize the powder and liberate the sponge spicules so they may more freely penetrate the skin upon application. Hydrogen peroxide was first produced in 1818 and has been used in many applications at varying strengths including therapeutics, chemical application, biological function, and used as an oxidizing agent. Clearing Treatment – for acne While we believe that all consumers can eventually achieve the clear skin they always wanted with our Foundational Treatment, we know there are some whose skin needs a little extra help, which is why we plan to offer targeted systems to meet the specific needs of our skincare consumers. The first targeted OTC system we plan to offer is our Clearing Treatment, which will be focused on the treatment of many common forms of acne. Our Clearing Treatment is designed to fight acne with salicylic acid, widely recognized for the treatment for acne, and our Bioneedle, selected for its ability to enhance exfoliation and support improved delivery of actives to the skin. This combination is intended to provide a more comprehensive and efficient treatment experience than existing acne offerings, while potentially improving the look and feel of the skin. We intend to launch the Clearing Treatment shortly after the launch of our Foundational Treatment. Market Overview . Acne is one of the most common dermatologic diseases and can be a significant health burden. Acne is characterized by areas of scaly red skin, non-inflammatory blackheads and whiteheads, inflammatory lesions, papules, and pustules and occasionally cysts and scarring that occur on the face, neck, chest, back, shoulders, and upper arms. It affects approximately 50 million people in the U.S., with an estimated 32.6 million diagnosed cases in the U.S. in 2023, and about 85% of teenagers in the U.S. experiencing some form of acne. The U.S. acne treatment products reached approximately $1.7 billion in sales in 2025, which was up five percent from the previous year. Most consumers experience some form of acne during their teenage years, but there is an increased frequency reported in adults with almost 20% of adult women and 8% of adult men experiencing some form of acne. While not life-threatening, acne can cause significant trauma for those suffering from it due to social stigmas, visual manifestation, substantial risk of permanent facial scarring, lowered self-esteem and social withdrawal, all affecting a patient’s quality of life. Therefore, we believe early and aggressive treatment with an effective, once weekly, topical product may lessen the overall long-term impact of this disease and may lead to an increase in a patient’s quality of skin and life. 12 Due to acne’s negative impact on a patient’s quality of life and impact on facial aesthetic, consumers suffering from acne tend to be highly motivated to treat their acne and we believe are willing to pay more out-of-pocket for high-value-add treatments, like our Clearing Treatment. It is our belief that consumers seeking an easy to use and effective topical product will prefer our OTC acne product, rather than lower priced, less effective OTC products or having to set up an appointment with a dermatologist, only to be prescribed an inferior product. Furthermore, once commercially available, we believe that our Clearing Treatment’s unique characteristics may allow us to expand our addressable acne market to include those consumers who may have first thought to seek a prescription treatment, but now see an effective OTC product, like our Clearing Treatment, as first line therapy. The acne market can be broken into three separate classes based on the severity of the acne: ● Mild Acne: characterized by few papules or pustules; typically treated with OTC products or topical prescription therapies. ● Moderate Acne: characterized by multiple papules and pustules with moderate inflammation; typically treated with a combination of oral and topical prescription therapies. ● Severe Acne: characterized by substantial papules and pustules, with many nodules and/or cysts and significant inflammation; currently treated with oral and topical combination treatments and photodynamic therapy as a third-line treatment option. By leveraging the combination of multiple components to build our treatment, we believe we can treat all levels of acne, from mild all the way up to severe acne. Limitations of Current Standard of Care . While current treatment options may be effective for some consumers, there are many limitations and drawbacks of current OTC and Rx acne products, which cause poor patient compliance and reduced efficacy. Currently available topical therapies for the treatment of acne must be applied up to three times a day to allow an accumulation of the active ingredient within the skin to effectively treat the disease. This requirement to apply once or multiple times per day becomes very onerous and time consuming for consumers, causing many consumers to fail to comply with the strict application regimen and/or skip multiple treatments. Proper use and application schedules are particularly important for topical acne products and poor patient adherence may lead to reduced treatment effect and ultimately discontinuation of treatment by the patient due to the lack of effect. In addition to the onerous application schedule, some current acne products, such as retinoids that must be applied multiple times a day, may cause significant stinging, burning, and peeling after each application. These tolerability issues, which may start occurring after the first application, and the substantial discomfort they cause, lead many consumers to discontinue the necessary daily application schedule or the use of the product altogether. It is well known that benzoyl peroxide, or BPO, leads to drying of the skin and that retinoids result in many local skin reactions including erythema, burning, and peeling, after the first treatment. This has been observed in the combination study of adapalene/BPO, where more than 20% of the subjects reported moderate or severe erythema and stinging/burning. Lastly, most topical products have an unavoidable latency period of 6-8 weeks until consumers have a definite improvement in their acne lesions. This means they may have to endure 30 to 60 applications before observing that their acne is improving (assuming a daily or twice daily regimen), all while dealing with the burning, stinging, and peeling that may accompany these topical products. We believe today’s consumers become impatient with the lack of rapid perceived effect of available products thus leading to premature discontinuation of treatment. The lack of rapid treatment effect, side effects, and onerous application schedules all greatly contribute to patient noncompliance issues and could ultimately lead to treatment failure for current topical therapies. We believe consumers are more invested in rapid efficacy outcomes and low side effects than costs, thus we believe consumers will be more willing to pay for a high value acne treatment, like our Clearing Treatment. Our Solution for Acne. We believe our Clearing Treatment will offer consumers a differentiated treatment option than what is currently available by delivering powerful results without harmful side effects. We believe our Clearing Treatment will have an apparent rapid treatment effect, clear acne lesions, and potentially improve overall skin quality, making our system a fundamental product for any skincare routine. We are in the final stages of the development and packaging to create a paradigm shift in how consumers can treat their acne. We have designed our Clearing Treatment to remedy the multiple factors of acne while also attempting to increase patient compliance through ease of use and acceptable tolerability profile. 13 Once launched, we believe our Clearing Treatment has the potential to remedy many of the negative characteristics associated with current topical therapies for acne, including cumbersome treatment regimens, negative side effects (including burning, stinging, itching or dryness, which may occur as early as the first treatment and continue daily thereafter), and delayed time to effectiveness (which may take up to eight weeks). Our Clearing Treatment system is designed to have a faster time to treatment than currently available therapies, potentially leading to higher patient compliance. A rapid visible response may encourage consumers to continue to comply with the application schedule, leading to a continued reduction in their lesions. We will recommend a 12-week treatment cycle with our Clearing Treatment or once the patient has cleared their acne, we believe they can transition over to our Foundational Treatment for continued skin maintenance. We believe continued maintenance applications will be important and encouraged for consumers to maintain acne free skin as part of their ongoing skincare routine. Our Clearing Treatment will be sold as a 4-week supply, with the option to subscribe to a refill-based subscription at a discounted price. The Clearing Treatment will contain four weeks of daily salicylic acid wipes and four weekly Bioneedle treatments that should be applied by the patient as directed. We believe the daily wipes are a way to help quickly reduce acne lesions in between the weekly Bioneedle treatment applications. We believe this combination can be the foundation for better skin health due to its multifaceted approach of reshaping a person’s skin, with a weekly renewal of the skin and a daily acne therapy. We do not believe that consumers have to compromise on their acne treatment and see our Clearing Treatment as a way to meld ancestral wisdom with scientific innovation to create an entirely new approach to acne. The Acne Routine The Bioneedle Treatment . Once per week, consumers will complete their Bioneedle treatment, as discussed above, to help reset the appearance of their skin. The Bioneedle treatment will help jumpstart their skin’s natural healthy process, which will be followed by daily salicylic acid wipe applications for their daily fight against acne lesions. We believe this dual method will help not only treat acne but provide acne consumers with clearer, fresher looking skin. The Wipe . As the daily part of their acne treatment routine, consumers will cleanse their face with the provided wipe. This wipe is infused with 0.5% salicylic acid solution, a known active ingredient for treating acne. Salicylic acid (“SA”) is part of the U.S. Food and Drug Administration’s (“FDA”) OTC monograph for the treatment of acne and has been used topically treat various skin diseases for over 2,000 years. Its origins are traced back to ancient civilizations, where extracts from willow bark were used to treat various skin disorders through its exfoliation properties. More recently, SA’s peeling properties have been considered a complementary treatment for the management of acne, since it causes the controlled and safe removal of superficial lesions followed by regeneration of dermal tissue. In addition to its promotion of cell turnover, SA is also used for its anti-inflammatory activity, helping to relieve facial erythema associated with acne. With daily cleansing of their skin with the salicylic acid wipe, consumers will not only be removing dirt and harmful oils but also beginning the removal of their acne lesions. The upcoming launch of our Foundational Treatment and eventual launch of our Clearing Treatment is expected to solidify our presence in the skincare market while reinforcing our broader strategy of developing category-defining skincare products built around unique ingredient systems and novel usage paradigms. We plan to initially introduce the kit through targeted channels that emphasize education and regimen-based skincare, with the potential for broader distribution over time. While we cannot ensure commercial success, we believe that the differentiated formulations, simplified routine, and clear consumer messaging will support strong initial adoption and provide a foundation for future line extensions within the broader skincare market. Future Tome Skincare Products In addition to its skin renewal and acne-focused benefits, we believe the multifaceted Bioneedle technology offers a versatile platform for broader OTC and cosmetic applications by combining controlled mechanical resurfacing with enhanced topical performance either alone or in combination with other active ingredients. By creating transient microchannels and increasing surface turnover, we believe the Bioneedle can support improved skin smoothness, radiance, and texture refinement while helping optimize the delivery and amplifying the performance of well-established skincare active ingredients. Our Bioneedle technology may be leveraged across a range of formulations, including brightening and tone-correcting products, anti-aging and firming regimens, skin rejuvenation protocols, in addition to treating serious skin disease. While we are currently focused on preparing for the commercial launches of our Foundational Treatment and Clearing Treatment, we continue to research additional skincare market opportunities. We aim to find the “white space” in the various subsectors where few to no products currently reside and where our therapies can enter and quickly establish a strong market presence. 14 One near-term opportunity is a milder Bioneedle treatment to help with texture for more sensitive skin types. It would be positioned for consumers with sensitive skin seeking smoother, brighter skin without aggressive procedures. A Bioneedle “polishing” treatment could be paired with brightening and antioxidant ingredients to help improve dullness, uneven tone, and post-inflammatory discoloration while also visibly refining pores and skin texture. This concept is well suited for face and body applications, including areas prone to roughness such as the cheeks, jawline, and décolleté, and can be marketed as a weekly “reset” step in a cosmetic routine. Unlike other at-home texture products that claim to include spicules, our product will incorporate a mild version of our sponge matrix that may help retexture the user’s skin through a mild application. The intention of this product would be to fill the void of at-home scrubs and overly intense in-office procedures, like chemical peels or invasive microneedling devices, which can be painful and costly for consumers. This will be part of our skintech at home where we believe consumers will feel like they are receiving a luxury therapy, but at a reduced price. A second highly compelling opportunity is an OTC topical psoriasis care system designed to help manage the visible symptoms associated with plaque buildup, rough texture, and discomfort. While the psoriasis category has seen significant innovation in prescription biologics, there are comparatively few differentiated OTC options that focus on improving scale-related texture and supporting consistent topical performance. A Bioneedle treatment could be positioned as an adjunctive, non-prescription solution that helps lift surface buildup, promotes turnover, and enhances the feel and appearance of affected areas all while being paired with a well-recognized OTC ingredient to amplify symptomatic relief. This product could create a compelling bridge between Rx treatments and OTC symptom management, with room for a premium, technology-led offering in an underserved retail segment. A third highly strategic opportunity may be a formulate soap or shampoo for scalp and follicle-support treatment, designed to address dandruff. The OTC monograph provides for a handful of active ingredients that are approved for the treatment of dandruff and the improvement of factors that can contribute to flaking, discomfort, and poor scalp quality. The Bioneedle can help lift debris and accelerate turnover at the scalp surface while enabling better contact of soothing and balancing compounds with the skin. The microchannels of the Bioneedle may also allow the OTC active to better penetrate the scalp and target treatment to the affected area. This multi remedy approach may create a strong product story for clarifying scalp care, oily scalp management, and overall follicular health, with potential extensions into pre-shampoo treatments or leave-on scalp serums. Together, we believe these opportunities highlight how the Bioneedle can serve as the foundational ingredient to build a scalable technology platform, supporting multiple product formats (powders, gels, masks, shampoos, and cleansers), broad consumer needs, and differentiated claims around renewal, texture refinement, and optimized topical performance. Collectively, expanding into these additional OTC and cosmetic applications would reinforce our identity as a science-driven skincare innovator by showcasing a scalable technology platform that can be adapted across multiple indications, skin types, and consumer needs. By leveraging the same clinically informed principles, optimized topical performance, and skin-supportive active pairing, these products would demonstrate consistent scientific rigor while building a cohesive portfolio narrative. This approach not only strengthens credibility with dermatology-minded consumers but also positions us as a leader in advanced, mechanism-based skincare solutions that bridge the gap between cosmetic improvement and therapeutic support. Bioneedle Delivery System (“BDS”) BDS is our topical treatment regimen that utilizes our unique Bioneedle to facilitate the intradermal delivery of macromolecules, such as botulinum toxin or dermal fillers, through topical application by a professional rather than with injections. These macromolecules are highly effective and approved for the treatment of multiple aesthetic skin conditions, but must be injected by a professional, either intramuscularly or intradermally, sometimes requiring numerous injections, which can be painful. We believe that our BDS may provide professionals and consumers with a topical treatment option for skin conditions that previously were hard to treat through topical therapy. BDS works by first topically applying our proprietary sponge powder to the treatment area wherein the mechanical Bioneedles penetrate the skin, thereby creating millions of microchannels into the dermis similar to the Image 4 below. These newly created microchannels allow for the application of other molecules that benefit the skin by reaching the dermis. 15 Image 4: Bioneedle Microchannels We believe our BDS may provide advantages over other microneedling devices like a derma roller, microneedle pens, or microneedle patches. Most of these microneedling devices are manufactured, leading to certain limitations on size or array of the microneedle. Our Bioneedle is wildly harvested and based on certain environmental conditions for harvest we can obtain what we have found to be the optimal features for our Bioneedle. With our processing we are able to precisely size our sponge matrix to ensure the organic and inorganic components meet the needs for our BDS. We believe the precise size of our Bioneedles are small enough to be less painful than most derma rollers or microneedling devices, while still creating microchannels sufficient for delivery of macromolecules into the dermis. Additionally, our Bioneedles are free-floating in our matrix, rather than attached to a device, which we believe provides skincare professionals a distinct advantage to add more personalization for consumers. Skincare professionals can apply our Bioneedles to as small or as large of a surface area as they deem necessary in a uniform manner based on their desired outcome. Then, once applied, our Bioneedles stay in the skin for a short period of time, allowing the newly created microchannel to remain open rather than close up. With the open microchannel, a macromolecule, like botulinum toxin, can be applied topically to the same area to drive the macromolecule through the microchannel and into the dermis where it can have its intended effect. We also know that there are millions of spicules within our sponge matrix, allowing for the creation of a large number of microchannels as seen in Image 4 above, with each purple dot indicating the penetration of a spicule. We believe these distinct attributes will entice skincare professionals, like aestheticians and dermatologists, to use our BDS and seek out new and unique ways to deliver a variety of macromolecules. Based on published data of spicules being used to deliver botulinum toxin we believe our BDS can be used with a variety of macromolecules in many aesthetic and medical skincare applications. These might include delivering botulinum toxin to reduce pore size or for the treatment of hyperhidrosis. Additionally, BDS could help deliver dermal fillers for a more uniform field effect, which we see as difficult to achieve with intradermal injections or currently available microneedling techniques. On January 17, 2025, we entered into a Clinical Trial Collaboration Agreement (the “Collaboration Agreement”) with Revance Therapeutics, Inc. (“Revance”) where we intended to conduct a Phase 2a clinical trial to evaluate the topical application of our Bioneedle followed by the topical application of Revance’s botulinum toxin product, DAXXIFY® for the treatment of primary axillary hyperhidrosis. In light of our recent strategic shift to develop and distribute skincare products, we plan to continue to discuss future opportunities for this collaboration with Revance. At this time, the initiation of the Phase 2a clinical trial has been placed on hold. We still believe there is a potential to utilize our Bioneedle for the topical delivery of botulinum toxin, but with our strategic decision to withdraw the XYNGARI™ investigational new drug application (“IND”), we are currently evaluating the regulatory and commercial opportunities for this program. While the initiation of the Phase 2a clinical study is on hold, we continue to evaluate alternative ways to leverage our Bioneedle as a novel platform to enhance the topical delivery of large-molecules, like botulinum toxin, as a needle-free alternative to conventional intradermal injection of large molecules for medical and aesthetic skin conditions. Manufacturing We do not currently own or operate any manufacturing facilities and do not plan to own any in the near future. We rely, and will rely, on our third-party partners for the manufacture of our products for the commercial sale of our skincare products, if our products are launched. To date, we have obtained wildly harvested Spongilla raw material directly from our exclusive supplier based in Russia. In February 2020, we signed an exclusive supply agreement with this supplier of Spongilla raw material . Our supplier has over 23 years of experience collecting and processing Spongilla and has the capacity to collect and process large quantities of Spongilla each year. We believe our supplier is able to and will continue to be able to harvest sufficient quantities of raw material to fulfill our development and potential commercial needs. We have recently received a shipment of Spongilla raw material from our supplier containing quantities of Spongilla raw material. We believe this new shipment will provide us with sufficient quantities of Spongilla to launch our first commercial product, the Foundational Treatment in the middle of 2026 and the Clearing Treatment to follow. We also believe that our supplier will be able to meet our future supply needs if the sales of our commercial products exceed our forecasted numbers. Notwithstanding, we continue to explore alternative manufacturing sources of our sponge raw material in order to ensure that we have access to sufficient supply to meet potential demand for any of our products in a cost-efficient manner. While Reka-Farm is the sole supplier of our Spongilla raw materials used in our products, we have evaluated other suppliers of Spongilla from other regions of the world; however, no other supplier nor their Spongilla supply has met the quality standards required by our cGMP practices. An alternative source to supply Spongilla raw materials would be the aquaculture of Spongilla in a lab setting, which could significantly increase the cost of raw materials as well as the availability of raw materials due to the cost and time to build an aquaculture infrastructure to supply Spongilla in commercial quantities. However, due to our ability to obtain the Spongilla from Reka-Farm, we remain confident that we will not need to incur these costs for the foreseeable future. See “Business—Material Agreements— Supply Agreement between Dermata Therapeutics LLC and Reka-Farm LLC ” for more information regarding our supply of Spongilla . 16 We continue to employ strict processes to ensure the highest quality product, including internal resources to manage our contractors. The relevant manufacturers of our drug products have advised us that they are in compliance with both current Good Laboratory Practices (“cGLP”) and cGMP. We are confident that our manufacturers have the ability to scale our processes to support our first commercial launch requirements and future commercial requirements. Our suppliers and manufacturers were specifically selected based on the capabilities of their organization, their compliance to regulations, their personnel, and the type and capabilities of their equipment. Testing methods for each stage of the manufacturing process from acquisition of raw materials through production of finished product have been developed and satisfactorily qualified per the appropriate regulations. Analytical methods and operational procedures related to each stage of our production operations including product release will continue to evolve and be validated as part of our overall development plans and commercial production. Commercialization We intend to commercialize our Tome skincare products through a dual-channel marketing strategy that combines DTC advertising and B2B by targeting skincare professionals, by building a practitioner community through a Tome certification program, where interested skincare professionals can complete a deep dive certification program of our Tome product offerings. With our multidimensional hero ingredient, we believe that it should not be limited to just one commercialization strategy. With our vision to provide consumers skintech at home, we believe there is an additional set of consumers who seek the care of a skincare professional and would prefer to have treatments done in office. Therefore, we see this dual-channel strategy as a way to increase our reach to a broader consumer segment than can be done with one or the other. We believe this is only possible due to the once-weekly application routine of Foundational Treatment as most other treatments need to be applied at least daily or must be performed in-office by a professional. Additionally, this hybrid model provides us with the most flexibility in the future expansion of our Tome skincare line. Direct-to-Consumer Marketing Our DTC strategy is designed to drive consumer awareness, education, and adoption through digital-first channels. We expect to utilize a mix of performance and brand-oriented marketing tactics, including paid digital advertising, social media platforms, search engine marketing, influencer and creator partnerships, and educational content to drive consumer awareness and purchases. These efforts are intended to communicate product positioning, usage regimen, and key differentiators, while directing consumers to our owned digital properties for conversion and fulfillment. We believe by pursuing a DTC strategy we can properly educate consumers on our product offers beyond what they can read on a box. We hope that through proper education and awareness of the power of our skincare products, consumers will feel more invested in their skincare and Tome. Our primary DTC channel is our owned e-commerce platform, which enables us to control product positioning, pricing, merchandising, and customer experience. Through this channel, we can efficiently launch new products, run targeted promotions, test new claims and creative messaging, and optimize conversion through iterative improvements to site performance, content, and checkout flows. We also plan to selectively leverage third-party marketplaces and affiliate partnerships to expand reach, while maintaining brand consistency and minimizing channel conflict. Customer Acquisition Strategy. We intend to drive DTC growth through a diversified customer acquisition model that includes paid digital advertising, influencer and creator partnerships, affiliate marketing, and organic demand generation or word-of-mouth. Paid channels may include social media advertising, search engine marketing, and retargeting campaigns, optimized using performance metrics such as customer acquisition cost, conversion rate, and lifetime value. We also plan to invest in brand-building initiatives such as educational content, dermatologist-and aesthetician-aligned messaging, and community-driven social engagement to improve efficiency over time by increasing organic traffic and repeat purchase rates. 17 Retention and Lifecycle Marketing. We emphasize retention as a core driver of profitability and sustainable growth. Our lifecycle strategy includes personalized email and SMS marketing, application and replenishment reminders, loyalty and referral programs, and subscription or auto-replenishment offerings where appropriate. We aim to increase repeat purchase frequency by promoting regimen-based usage, the eventual sale of cross-selling complementary products, and delivering ongoing skincare education tailored to customer needs and skin concerns. We plan to track key retention metrics including repeat purchase rate, cohort performance, and churn to continuously improve engagement and product adoption. We believe by monitoring these metrics we can more easily identify our high value users that help build brand loyalty. Operations, Fulfillment, and Scalability . Our DTC operations will be supported by scalable fulfillment and logistics capabilities, including third-party warehousing and shipping partners. We will seek to maintain high service levels through reliable inventory planning, demand forecasting, and quality assurance processes. We continually evaluate packaging, shipping methods, and fulfillment workflows to balance cost efficiency with delivery speed and customer satisfaction. As order volume increases, we expect to realize improved efficiencies through operational scale and vendor optimization. Key Risks and Considerations. Our DTC strategy is subject to risks including rising digital advertising costs, platform algorithm changes, increased competition, evolving consumer preferences, and supply chain disruptions. Additionally, customer acquisition performance may fluctuate due to macroeconomic conditions and changes in privacy regulations that affect targeting and attribution. We seek to mitigate these risks by diversifying acquisition channels, strengthening organic demand, investing in retention, and maintaining operational flexibility. Strategic Objectives . Our DTC commercialization strategy is designed to (i) build durable customer relationships through a differentiated brand experience, (ii) improve profitability through higher margin sales and repeat purchase behavior, and (iii) create a scalable platform for new product launches and long-term growth. We believe our disciplined execution across acquisition, retention, and operational scalability positions us to expand our customer base and drive sustainable DTC revenue growth. B2B - Professional Channel Marketing In addition to a DTC channel, we also plan to pursue a B2B commercialization strategy, or professional channel marketing, focused on building trusted relationships with licensed aestheticians, dermatology practices, and other qualified skincare professionals. This channel is designed to expand awareness and adoption through professional recommendation, strengthen clinical credibility, and create a recurring, high-retention revenue stream driven by protocol-based usage and repeat replenishment. We believe professional endorsement and education can serve as a meaningful catalyst for consumer conversion, particularly for products positioned around clinically informed ingredients and outcomes, like our Foundational Treatment. Target Customers and Channel Positioning. Our primary B2B customers will likely include licensed aestheticians, dermatology practices, medical spas, and other skincare professionals who influence consumer purchasing decisions through treatment protocols and product recommendations. We plan to position our portfolio as a professional-grade skincare system supported by education, usage guidance, and regimen-based solutions. We intend to differentiate through product efficacy, ingredient transparency, and professional training designed to improve consumer outcomes and satisfaction. Providing consumers the option to have their treatment done in-office will allow the skincare professionals the flexibility to use our hero ingredient in other skincare treatments as they see fit. Professional Marketing and Demand Generation. We intend to build awareness within the professional community through a combination of targeted outreach and industry marketing initiatives. These efforts may include attendance at professional conferences and trade events, partnerships with key opinion leaders (“KOLs”), professional sampling, and educational webinars. We also plan to leverage practice-facing digital marketing, including paid search and social campaigns targeted to licensed professionals, as well as email marketing and professional community engagement to drive onboarding and repeat purchasing. 18 Certification Program and Professional Education . A core element of our B2B strategy will be a structured certification program intended to educate professionals on product science, ingredient benefits, and recommended treatment and home-care protocols. The certification program will be designed to ensure consistent product usage, enhance treatment outcomes, and support high-quality recommendations to consumers. Program components may include: ● Foundational training modules covering skin physiology, key actives, product indications, contraindications, and regimen construction. ● Protocol-based education for common skin concerns (e.g., acne, hyperpigmentation, aging, sensitive skin), including sequencing and frequency guidance. ● Assessment and credentialing , such as knowledge checks or final examinations, with certification status granted upon completion. ● Ongoing continuing education , including periodic updates on new products, clinical learnings, and evolving best practices. ● Professional resources , including downloadable treatment guides, consumer handouts, before-and-after documentation standards, and retail merchandising support. We expect the certification program to increase practitioner confidence, improve consistency of use across settings, and drive higher conversion and repeat purchasing through protocol adherence and customer satisfaction. Practice Enablement and Commercial Terms. We plan to support professional partners with tools and incentives designed to make adoption and ongoing selling efficient. This may include professional starter kits, backbar formats where applicable, retail-ready merchandising, and reordering tools integrated into our B2B platform. We may offer tiered pricing, minimum order thresholds, referral codes, and volume-based incentives to align with practice economics while maintaining premium brand positioning. Certified providers may receive access to exclusive benefits such as early product access, advanced training, co-marketing opportunities, and priority support. Sales Model and Account Development . We plan to execute this channel through a combination of inside sales, strategic field support in key markets, and digital self-serve ordering for smaller accounts. Our approach emphasizes long-term account development through training, replenishment cadence management, and practice-specific regimen customization. We plan to measure account performance using metrics such as reorder frequency, average order value, number of certified professionals per account, and sell-through performance where available. This will allow us to monitor and reward high sellers with additional incentives. Integration with DTC Strategy . We believe the professional channel can act as a complementary driver of DTC growth by increasing consumer trust and accelerating trial through professional recommendation. We may support certified professionals with referral tools, co-branded landing pages, or consumer education materials that encourage ongoing replenishment through either the professional channel or our owned e-commerce platform, depending on partner preference and channel strategy. We intend to manage pricing and messaging across channels to reduce conflict and preserve brand integrity. We also intend to list certified providers on our website so interested consumers may contact them for virtual or in-office consultations. We believe this will provide greater consumer confidence in their purchase. Key Risks and Considerations . The professional channel is subject to risks including slower onboarding cycles, variability in practitioner engagement, competitive offerings, and regulatory considerations related to product claims and professional marketing. Additionally, scaling the channel requires consistent training quality and operational support. We seek to mitigate these risks through standardized certification content, dedicated partner support, disciplined account qualification, and ongoing measurement of partner performance. Strategic Objectives . Our B2B strategy is designed to (i) establish credibility through professional adoption and recommendation, (ii) create recurring revenue through replenishment-driven purchasing behavior, (iii) expand brand awareness among high-intent consumers through trusted professional relationships, and (iv) build a scalable platform for future product launches supported by practitioner education and certification. 19 Integrated Go-to-Market Approach We believe the combination of DTC marketing and B2B professional engagement provides a complementary approach to building brand awareness and credibility. DTC marketing is intended to generate consumer demand at scale, while professional outreach is expected to support trust, validation, and longer-term brand equity within the skin-care ecosystem. We expect to scale marketing investments gradually following launch, with flexibility to adjust channel mix, spending levels, and geographic focus based on market response, operational capacity, and regulatory considerations. Our ability to execute this strategy successfully will depend on multiple factors, including competitive dynamics, consumer acceptance, marketing efficiency, and our ability to maintain compliance with applicable laws and regulations governing OTC products and advertising. REGULATION Our business is subject to various laws and regulations, particularly with respect to our product categories. As is the case with most companies in our industry, we receive inquiries from time to time from government regulatory authorities regarding the nature of our business and other issues, such as compliance with local direct selling, transfer pricing, customs, taxation, foreign exchange control, securities and other laws. Product Regulations Our OTC and cosmetic products and related promotional and marketing activities are subject to extensive government regulation by numerous federal, state, and local government agencies and authorities, including the United States Food and Drug Administration (the “FDA”), the Federal Trade Commission (the “FTC”), the Consumer Product Safety Commission, the Department of Agriculture, United States and State Attorneys General, and state regulatory agencies in the United States, and similar government agencies in all other markets in which we may operate in the future. In the United States, the FDA, in particular, regulates the formulation, manufacture and labelling of OTC drugs, cosmetics, dietary supplements, foods and medical devices such as those that we distribute. Regulation of Skincare Products in the United States. Our skincare products are subject to various laws and regulations that regulate cosmetic and personal care products and set forth regulations that, among other things, determine whether a product can be marketed as a “cosmetic” or as an OTC drug. In the United States, the regulation of cosmetic content and labeling is under the primary jurisdiction of the FDA. Cosmetics are not subject to pre-market approval by the FDA, but their ingredients and their label and labeling content are regulated by the FDA, and those who sell cosmetics have the burden to ensure that they are safe for use as directed and not adulterated or misbranded. The labeling of cosmetic products is subject to the requirements of the Federal Food, Drug, and Cosmetic Act (“FDCA”), the Fair Packaging and Labeling Act and other FDA regulations. In 2024, the FDA began implementing portions of the Modernization of Cosmetics Regulation Act of 2022 (“MoCRA”). MoCRA increases the regulation of cosmetics by, among other things, requiring cosmetic manufacturer facility registration, product listings, and reporting of serious adverse events to the FDA. Rollout of MoCRA will continue in the coming years, including the issuance of cosmetic GMPs. Failure to correctly interpret and comply with the new requirements could lead to government actions against us and the associated impairment to our business. Regulation of Cosmetics The FDCA defines cosmetics by their intended use, as “articles intended to be rubbed, poured, sprinkled, or sprayed on, introduced into, or otherwise applied to the human body . . . for cleansing, beautifying, promoting attractiveness, or altering the appearance . . . .” Among the products included in this definition are skin moisturizers, perfumes, lipsticks, fingernail polishes, eye and facial makeup preparations, shampoos, permanent waves, hair colors, toothpastes and deodorants, as well as material intended for use as a component of a cosmetic product. A product may be considered a drug if it is intended for use in the diagnosis, cure, mitigation, treatment, or prevention of disease, or is intended to affect the structure or any function of the body (“structure/function claims”). A product’s intended use can be inferred from marketing or product claims, and regulators may consider the marketing claims of our sales force. Structure/function claims are generally prohibited for cosmetic products as are disease prevention and treatment claims. The FDA prohibits certain ingredients from being included in cosmetic products. It is possible that cosmetic product ingredients now commonly in use may be restricted or prohibited in the future as more is learned about such ingredients. 20 In recent years, the FDA has issued warning letters to many cosmetic companies alleging improper structure/function claims regarding their cosmetic products, including, for example, product claims regarding gene activity, cellular rejuvenation, and rebuilding collagen. Cosmetic companies confront difficulty in determining whether a claim would be considered by the FDA to be an improper structure/function claim. Given this difficulty, and our research and product development focus on the sources of aging and the influence of certain ingredients on gene expression, there is a risk that we could receive a warning letter, be required to modify our product claims, or take other actions to satisfy the FDA if the FDA determines any of our marketing materials contain improper structure/function claims for our cosmetic products. In addition, plaintiffs’ lawyers have filed class action lawsuits against some of our competitors after our competitors received these FDA warning letters. There can be no assurance that we will not be subject to government actions or lawsuits, which could harm our business. Regulation of OTC Drugs Certain products, such as acne treatments, are classified as OTC drugs. OTC drugs are subject to many of the same regulations as prescription drugs, including compliance with general labeling requirements and cGMPs. Most OTC drug products are marketed in conformity with the requirements of an FDA-established OTC drug monograph that is applicable to that drug. An OTC drug monograph is a type of “recipe book” covering acceptable ingredients, doses, formulations, directions for use, warnings, and, in some cases, testing parameters. Products conforming to a monograph may be marketed without FDA pre-approval. OTC monographs include well-known ingredients and specific requirements for permitted indications, required warnings and precautions, allowable combinations of ingredients and dosage levels. Pharmaceutical products marketed under the OTC monograph system must conform to specific quality, formula and labeling requirements. Facilities where OTC drugs are manufactured, tested, packaged, stored or distributed must be registered with FDA and comply with cGMP regulations and/or regulations promulgated by the FDA or other competent authorities. OTC monograph products that do not comply with these standards can be deemed unapproved new drugs and can be required to be withdrawn from the market. Some OTC drug products are marketed under approved New Drug Applications (“NDA”) rather than under OTC monographs. If FDA were to find that one of our OTC drug products is not being marketed in compliance with the OTC monograph that is applicable to that drug product, we may be required to reformulate the product or cease marketing that product until it is the subject of an approved NDA or until the time, if ever, that the monograph is amended to include such product. Advertising and Product Claims. Most of our major markets also regulate advertising and product claims regarding the efficacy and quality of products and require adequate and reliable scientific substantiation of all claims. In some cases, such regulations may limit our ability to inform consumers of some of the benefits our products offer. The FTC, which exercises primary jurisdiction over the advertising of all of our products in the United States, has instituted enforcement actions against cosmetic companies for, among other things, deceptive advertising and lack of adequate scientific substantiation for claims. We also face limitations on our use of the scientific experts who have helped us develop and test some of our products. In the United States, for example, the FTC’s Guides Concerning the Use of Endorsements and Testimonials in Advertising may restrict marketing to those results obtained by a “typical” consumer and require disclosure of any material connections between an endorser and the company or products they are endorsing. This negative publicity could harm consumers’ perception of our business and our products, which could negatively impact our revenue. We cannot be sure that the FTC, or comparable foreign agencies, will not question our advertising or other operations in the future. In recent years, the FTC has initiated numerous investigations of and actions against companies that sell OTC and cosmetic products. The FTC may enforce compliance with the law in a variety of ways, both administratively and judicially, using compulsory process, cease and desist orders, and injunctions. FTC enforcement can result in consent decrees or orders requiring, among other things, injunctive provisions, corrective advertising, consumer redress, and such other relief as the agency deems necessary to protect the public. Violation of these consent decrees or orders could result in substantial financial or other penalties. The FTC also sends warning letters as it monitors companies’ activities. In addition, during 2023, the FTC sent notices of penalty offense to nearly 700 companies, including us, regarding the requirement of sufficient substantiation for product claims. Pursuant to the FTC’s “penalty offense authority,” companies that received the notice are expected to comply with the standards set in the FTC’s prior administrative cases on this topic, and they could incur significant civil penalties if they or their representatives fail to do so. No assurance can be given that the FTC will not question our advertising or other operations in the United States in the future. Any action in the future by the FTC could materially and adversely affect our ability to successfully market our products in the United States. 21 Competition The medical and aesthetic skin care markets in which we plan to sell our Tome skincare products are crowded with many small, medium, and large skin care companies. While we believe that our unique natural, once-weekly Tome Foundational Treatment and eventual Clearing Treatment will differentiate Dermata from other competitive OTC acne and skincare products, we will face significant competition from established consumer skin-care brands such as Neutrogena®, Proactiv®, Clean & Clear®, PanOxyl®, La Roche-Posay®, CeraVe®, and Differin®, many of which are owned or distributed by large multinational consumer health companies. These brands offer a range of acne products utilizing well-known active ingredients and benefit from broad retail distribution, significant brand recognition, and substantial marketing resources. Moreover, many of these competitors have substantially greater manufacturing, financial, research and development, and OTC marketing experience, with a substantially greater portfolio of OTC and skin care/cosmetic products than we do. As a result, our prospective competitors may be able to develop competing or superior products and compete more aggressively and sustain their competitive advantage over a longer period of time than us. Our products may be rendered obsolete or may lack economic viability in the face of competition. In addition, we compete with digital-first and DTC skincare companies, including brands such as Curology®, Apostrophe®, Hims & Hers®, and similar platforms, some of which offer prescription-based acne treatments alongside OTC products. While prescription products differ from OTC treatments, these companies may compete for the same consumer attention and discretionary spending. We also face indirect competition from professional-only or clinic-dispensed skin-care brands recommended or sold by dermatologists and aestheticians, as well as from generic and private-label OTC acne products offered by retailers and online marketplaces, which may compete primarily on price. While our Foundational Treatment is our first product launch, we plan to develop and launch additional products utilizing our Bioneedle and know-how. These new products, which could be future OTC products for diseases like acne, psoriasis or seborrheic dermatitis or Spongilla -based skin care/cosmetic product, will likely face competition from other OTC or prescription products, as well as other “spicule-based” cosmetic products, many of whom have established sales and brand name awareness among the consumers we will be targeting. Intellectual Property Overview Our commercial success depends in part on our ability to obtain and maintain proprietary protection for our Clearing Treatment, Bioneedle Delivery System and any of our future products, medical devices, methodologies, assays, drug development technologies, harvesting procedures, know-how; to operate without infringing on or otherwise violating the proprietary rights of others; and to prevent others from infringing or otherwise violating our proprietary rights. Our strategy is to protect our proprietary position by, among other things, filing U.S. and foreign patent applications related to our product and other proprietary technologies, inventions and improvements that are important to the development and implementation of our business. We also rely on trade secrets, trademarks, know-how, continuing technological innovations, exclusivity agreements, nondisclosure and confidentiality agreements, license agreements, assignment of inventions and potential in-licensing opportunities to develop and maintain our proprietary position. Patent Portfolio Our patent estate consists of in-licensed and solely owned patent applications. Typically, we initially file U.S. provisional patent applications and then file applications directly or under the Patent Cooperation Treaty, or PCT, which is an international patent law treaty that provides a unified procedure for filing a single initial patent application to seek patent protection for an invention simultaneously in any one of the designated member jurisdictions and states, including in the U.S. Although a PCT application does not issue as a patent, it allows the applicant to seek protection in any of the member states through national phase applications filed at a later date. We currently have multiple patents and patent applications in our patent portfolio and continue to pursue and seek additional patent coverage of all our products. 22 Clearing Treatment Our Clearing Treatment portfolio includes one family owned by us. Our family related to Clearing Treatment for acne, with a patent issuance in the U.S. by the United States Patent and Trademark Office, entitled “Compositions and methods for the treatment of skin conditions” (U.S. Patent No. 12,208,123) and a recent granted patent in Australia by the Australian Patent Office, entitled Compositions and methods for the treatment of skin conditions” (Australian Patent No. 2019419387) . We also have applications pending in Canada. This family refers to specific attributes of our Bioneedle as well as treatment related attributes for the treatment of acne based on the data received prior to its filing. Patents in this patent family, if granted, are expected to expire in 2041 in the US and in 2039 in other jurisdictions, absent any patent term adjustments or extensions. We expect our intellectual property portfolio to be protected by patents, the maintaining of our exclusive supply agreement for our raw material requirements, and our continued efforts to protect our proprietary information including trade secrets. BDS for Delivery of Botulinum Toxin Our BDS for delivery of botulinum toxin portfolio includes two families owned by Dermata. The first family consists of issued patents in Japan and Australia, a pending non-provisional U.S. patent application, and six pending foreign patent applications in Canada, China, the European Patent Office, Japan, Hong Kong, and South Korea. These patents/patent applications relate to compositions for the treatment of skin diseases using our proprietary sponge powder in combination with multiple types of botulinum toxin for both medical and aesthetic skin conditions and diseases. Patents in this patent family, if granted, are expected to expire in 2039, absent any patent term adjustments or extensions. The second family is related to certain of our clinical methods related to sponge powder and botulinum toxin. This second family consists of two pending US non-provisional applications and additional applications pending in Australia, Canada, Hong Kong, the European Patent Office, Japan, and South Korea. Patents in this patent family, if granted are expected to expire in 2041, absent any patent term adjustments or extensions. Our BDS for other large molecule portfolio includes one family owned by Dermata. The family consists of pending applications in the U.S., Australia, and Japan, covering compositions for the treatment of conditions by dermal fillers in combination with our proprietary sponge powder. Patents in this patent family, if granted, are expected to expire in 2040, absent any patent term adjustments or extensions. Although we believe our patent portfolio offers significant protection for our Clearing Treatment, BDS for delivery of Botulinum Toxin, BDS for other large molecules, and additional combination regimens, the protection offered by our patents may be, to some extent, more limited than the protection provided by patents which claim chemical structures which were previously unknown. Accordingly, other parties may compete with us, for example, by independently developing or obtaining competing topical formulations that design around our patent claims, but which may contain the same or similar active ingredients, or by seeking to invalidate our patents. The term of individual patents depends upon the laws of the countries in which they are obtained. In most countries in which we file, the patent term is 20 years from the earliest priority date of filing of a non-provisional patent application. However, the term of United States patents may be extended for delays incurred due to compliance with the FDA, requirements or by delays encountered during prosecution that are caused by the United States Patent and Trademark Office, or the USPTO. For example, the Hatch-Waxman Act permits a patent term extension for FDA-approved drugs of up to five years beyond the expiration of the patent. The length of the patent term extension is related to the length of time the drug is under regulatory review. Patent term extension cannot extend the remaining term of a patent beyond a total of 14 years from the date of product approval, and only one patent applicable to an approved drug may be extended. Similar provisions are available in Europe and other jurisdictions to extend the term of a patent that covers an approved drug. In the future, if and when our products receive FDA approval, we expect to apply for patent term extensions on patents covering those products. We intend to seek patent term extensions in any jurisdiction where these are available and where we also have a patent that may be eligible; however there is no guarantee that the applicable authorities, including the United State Patent and Trademark Office and United States FDA, will agree with our assessment of whether such extensions should be granted, and even if granted, the length of such extensions. 23 Other Intellectual Property In addition to patent protection, we also rely heavily on trade secrets, including unpatented know-how, technology innovation, technical specifications and assays and other proprietary information in attempting to develop and maintain our competitive advantage. We believe our ability to protect our unpatented know-how and trade secrets are as important if not more important than our patent portfolio due to the complex nature and lack of expiration associated with such information. We seek trademark protection in the United States and in certain other jurisdictions where available and when we deem appropriate. We currently have registrations for Dermata in the United States and multiple other jurisdictions. We also have pending applications for trademark registrations for Tome, Tome Skincare, Bioneedle, Bioneedles, Tome Bioneedles, Studied Skincare, and we intend to continue to file additional applications for trademark registrations in connection with our products in various jurisdictions, including the United States. Material Agreements Clinical Trial Collaboration Agreement between the Company and Revance Therapeutics, Inc. On January 17, 2025, the Company entered into a Clinical Trial Collaboration Agreement (Clinical Trial Agreement) with Revance Therapeutics, Inc. (Revance), pursuant to which the Company and Revance intend to conduct a multi-center clinical trial (Trial) to evaluate the topical application of XYNGARI TM , the Company’s topical Spongilla powder (formerly referred to as DMT310), with DAXXIFY® (daxibotulinumtoxinA-lanm), Revance’s botulinum toxin type A. Pursuant to the terms of the Clinical Trial Agreement, Revance has granted the Company a non-exclusive, worldwide, non-transferable, royalty-free license, with a right to sublicense (subject to limitations), to use certain Revance intellectual property, solely as necessary or useful for the Company to conduct the trial under the Clinical Trial Agreement. The Company has granted Revance a similar license to use topical Spongilla powder and other compound(s) under the Clinical Trial Agreement. The Clinical Trial Agreement will terminate upon completion of the Trial, the delivery of the data resulting from the Trial and the completion of any statistical analyses of the data resulting from the Trial. Either party may terminate the Clinical Trial Agreement upon a material breach by the other party that remains uncured following 30 days after the date of written notice of such breach. In addition, either party may terminate the Clinical Trial Agreement immediately upon written notice if such party reasonably deems it necessary in order to protect the safety, health or welfare of subjects enrolled in the Trial. The Company has agreed to sponsor, conduct, and fund the Phase 2a clinical trial, but no financial obligations or consideration is contemplated in the Clinical Trial Agreement. At this time, the initiation of the Phase 2a clinical trial has been placed on hold. We still believe there is a potential to utilize our Spongilla powder for the topical delivery of botulinum toxin and are currently evaluating the regulatory and commercial opportunities for this program. Supply Agreement between the Company and Reka-Farm LLC On February 27, 2020, we entered into an exclusive Supply Agreement (or, the Supply Agreement) with Reka-Farm, LLC (or, Reka-Farm), whereby Reka-Farm will supply us with the Spongilla raw materials necessary for use in the development of our products. The Supply Agreement has an indefinite term unless and until terminated. For the term of the Supply Agreement, Reka-Farm is prohibited from supplying Spongilla for development and sale of any other product outside of the Russian Federation, other than Cosmetic Products (as defined in the Supply Agreement). Pursuant to the Supply Agreement, we shall provide Reka-Farm with two-year rolling forecasts of our Spongilla raw material requirements, and such forecasts shall be provided to Reka-Farm on a semi-annual basis, beginning on January 1, 2021 (each, a Forecast). Pursuant to the Supply Agreement, Reka-Farm has guaranteed its ability to supply us with the required amounts of Spongilla as specified in each Forecast for the first 12 months of each Forecast. All Forecasts are non-binding on us. If Reka-Farm is unable to supply us with Spongilla raw material in accordance with a Forecast, all available quantities of Spongilla then available to Reka-Farm shall be made available to us on a first priority basis until all amounts of Spongilla set forth in the Forecast are supplied. Pursuant to the Supply Agreement, we pay a pre-negotiated price per kilogram for Spongilla supplied by Reka-Farm, and we are required to pay to Reka-Farm a royalty payment of less than one percent of the Net Sales (as defined in the Supply Agreement) of any products we develop containing Spongilla raw material supplied by Reka-Farm. 24 The Supply Agreement may be terminated (i) by either party for material breach with 90 days written notice, if such material breach is not cured within such notice period and (ii) by us for any reason or no reason upon 90 days written notice to Reka-Farm. The Supply Agreement includes customary terms relating to, among others, indemnification, intellectual property protection, confidentiality, remedies, warranties, as well as certain quality requirements. Corporate and Other Information We were formed in December 2014 as a Delaware limited liability company (“LLC”) under the name Dermata Therapeutics, LLC. On March 24, 2021, we converted from an LLC to a Delaware C-corporation and changed our name to Dermata Therapeutics, Inc. Human Capital Resources As of the date of this report, we have nine full-time employees, with four employees working in the selling, general and administrative department, two engaged in non-clinical and clinical development, two working in the chemistry, manufacturing, and controls department, and one employee working in the regulatory affairs and quality control department. We believe that our future success will depend, in part, on our continued ability to attract, hire and retain qualified personnel. In particular, we depend on the skills, experience and performance of our senior management and research personnel. We compete for qualified personnel with other medical pharmaceutical and healthcare companies, as well as universities and non-profit research institutions. We provide competitive compensation and benefits programs to help meet the needs of our employees. In addition to salaries, these programs (which vary by employment classification) include incentive compensation plans, healthcare and insurance benefits, retirement investments, paid time off, and family leave, among others. We also use targeted equity-based grants with vesting conditions to facilitate retention of personnel, particularly for our key employees. The success of our business is fundamentally connected to the well-being of our people. Accordingly, we are committed to the health and safety of our employees. 25