Dermata Therapeutics, Inc. 10-Q

ITEM 1A: RISK FACTORS Our operations and financial results are subject to various risks and uncertainties, including those described in Part I, Item 1A, “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2025, filed with the SEC on March 26, 2026. No material changes to such risk factors have occurred during the three months ended March 31, 2026, except as described below: We are involved in litigation with Villani, Inc. relating to our Spongilla-based products and commercialization activities, which could adversely affect our business, operations, financial condition and ability to commercialize our products. On April 23, 2026, Villani, Inc. (“Villani”) filed a complaint against us in the U.S. District Court for the Central District of California asserting claims for false advertising under the Lanham Act, breach of contract, and conversion, and seeking injunctive relief. Villani has also stated that it intends to initiate an arbitration proceeding against us seeking monetary damages. Although no arbitration demand has been served to date, we may become subject to additional claims, damages, costs, or other remedies in connection with any such proceeding. In connection with the litigation, Villani sought a temporary restraining order (“TRO”) and preliminary injunction against us. On May 6, 2026, the Court denied the TRO in part related to a breach of contract and conversion claims and granted the TRO in part on the false or misleading advertising statements, which imposes certain temporary restrictions on specific statements the Company can make pending further proceedings. Villani has also requested a preliminary injunction, which, if granted, could extend or grant new restrictions imposed by the Court during the pendency of any arbitration proceeding or related litigation. We intend to vigorously defend ourselves against these claims; however, litigation and arbitration proceedings are inherently uncertain, costly, and time-consuming. While we are not currently restrained from manufacturing, promoting, advertising, using, selling, offering for sale, distributing, or delivering in commerce any product or regimen containing Spongilla, if Villani were to obtain a preliminary injunction, arbitration award, or otherwise, we could be restricted or delayed in our ability to market, manufacture, distribute, advertise, sell, or commercialize certain of our current or planned products, including products containing our Spongilla . Such restrictions could disrupt our planned product launches, impair relationships with suppliers, manufacturers, distributors, marketing partners, or customers, require us to modify our products, branding, formulations, or marketing claims, or otherwise adversely affect our commercialization strategy. In addition, defending this matter may require significant management attention and financial resources, result in substantial legal expenses, divert resources from our business operations and strategic initiatives, and expose us to reputational harm. ITEM 2: UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS None. ITEM 3: DEFAULTS UPON SENIOR SECURITIES None. ITEM 4: MINE SAFETY DISCLOSURES Not applicable.