Dermata Therapeutics, Inc. 10-K

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market Information Our common stock and Warrants trade on The Nasdaq Capital Market under the symbols “DRMA” and “DRMAW”, respectively, since August 12, 2021. Prior to that date, there was no public market for our common stock or Warrants. Holders As of December 31, 2021, there were approximately 92 stockholders of record of our Common Stock. This number does not include beneficial owners whose shares were held in street name. The actual number of holders of our Common Stock is greater than this number of record holders and includes stockholders who are beneficial owners, but whose shares are held in street name by brokers or held by other nominees. Dividends We have never declared or paid cash dividends on our Common Stock. We do not intend to declare or pay cash dividends on our common stock for the foreseeable future, but currently intend to retain any future earnings to fund the development and growth of our business. The payment of cash dividends if any, on the common stock will rest solely within the discretion of our board of directors and will depend, among other things, upon our earnings, capital requirements, financial condition, and other relevant factors. Use of Proceeds from Registered Securities On August 12, 2021, our registration statement on Form S-1 (Registration No. 333-256997) was declared effective by the SEC for our initial public offering pursuant to which we sold an aggregate of 2,571,428 units consisting of 2,571,428 shares of common stock and Warrants to purchase up to 2,571,428 shares of common stock at a price to the public of $7.00 per unit, for an aggregate offering of approximately $18.0 million. Maxim Group LLC acted as the sole book-running manager for the offering. On August 17, 2021, we closed the sale of the units, resulting in net proceeds to us of approximately $15.4 million after deducting underwriting discounts and commissions and other offering expenses. No payments were made by us to directors, officers or persons owning ten percent or more of our common stock or to their associates, or to our affiliates. There has been no material change in the planned use of proceeds from our initial public offering as described in our final prospectus filed with the SEC on August 16, 2021 pursuant to Rule 424(b). Recent Sales of Unregistered Securities During the period covered by this Form 10-K, or such period as described below, we made sales of the following unregistered securities: Original Issuances of Stock On March 24, 2021, we converted from a limited liability company to a Delaware corporation and we changed our name to Dermata Therapeutics, Inc., resulting in a new capital structure consisting of common stock and preferred stock, each having a par value of $0.0001. This conversion resulted in conversion of the prior Dermata members’ interests into an aggregate of 65,823,015 shares of our preferred stock (which converted into 3,813,973 shares of common stock upon the closing of our initial public offering), and 1,911,009 shares of our common stock. In connection with our conversion to a Delaware corporation, we also issued warrants exercisable for 1,419,228 shares of our preferred stock (or the Preferred Stock Warrants), and warrants exercisable for 65,303 shares of our common stock (or the Common Stock Warrants). The Preferred Stock Warrants have an exercise price of $1.00 per share and the Common Stock Warrants have a weighted average exercise price of $5.82 per share. 84 Table of Contents Convertible Promissory Note Offering In July 2020, we held the first closing of the Notes for an aggregate principal amount of $2,330,000, including $500,000 from Proehl Investment Ventures, LLC. In October 2020, we held the second closing of the Notes for an aggregate principal amount of $670,000, including $420,000 from Proehl Investment Ventures, LLC. In February 2021, we held the third closing of the Notes for an aggregate principle amount of $1,556,000, including $825,000 from Proehl Investment Ventures, LLC, $100,000 from the Sean Michael Proehl Irrevocable Trusts Dated December 18, 2020, and $250,000 from Hale Biopharma Ventures, LLC. On March 15, 2021, we completed the conversion of$4,391,000 of Notes into 5,379,247 Series 1d Preferred Units. At that time Proehl Investment Ventures, LLC, Sean Michael Proehl Irrevocable Trusts Dated December 18, 2020 and Hale Biopharma Ventures, LLC held an aggregate principal amount of $1,745,000, $100,000 and $250,000 of Notes, respectively. Mr. Proehl, our President and Chief Executive Officer and a member of the board of directors, is the managing member of Proehl Investment Ventures, LLC and the trustee of Sean Michael Proehl Irrevocable Trusts Dated December 18, 2020. Mr. Hale, a member of the board of directors, is the managing member of Hale Biopharma Ventures, LLC. In addition, Wendell Wierenga, a member of our board of directors, held $45,000 principal amount of the Notes. Each of Messrs. Proehl, Hale and Wierenga converted their aggregate principal amounts of Notes into Series 1d Preferred Units on March 15, 2021, which units were subsequently converted into shares of our Series 1d Preferred Stock in connection with our conversion to a Delaware corporation. The shares of Series 1d Preferred Stock held by Mr. Proehl, Hale and Wierenga automatically converted into 291,831, 39,180 and 7,142 shares of common stock, respectively, upon the completion of our initial public offering, at a conversion price equal to $5.60 (80% of the initial offering price). The Notes had an interest rate of 4.0% per annum, were unsecured, had a maturity date of December 31, 2021 and provided for conversion into our common stock upon the earlier of (i) qualified Series A Financing (as defined in the Notes) which resulted in aggregate gross proceeds to the Company of at least Ten Million Dollars ($10,000,000), or (ii) the closing of our initial public offering. At the closing of our initial public offering the aggregate principal amount and all accrued but unpaid interest on the Notes automatically converted into an aggregate of 32,219 shares of our common stock at a conversion price of $5.60 per share (which was 80% of the initial offering price). Stock Options On March 24, 2021, in connection with our conversion from a limited liability company to a Delaware corporation, we issued common stock options exercisable for an aggregate of 398,199 shares of our common stock. These options have an exercise price of $5.74 per share. Underwriter Warrants Upon the closing of our initial public offering, we issued to the underwriters warrants exercisable for a period of five years from the closing of the initial public offering which entitle the underwriters to purchase 128,571 of shares of common stock, at an exercise price equal to 115% of the public offering price, or $8.05 per share. The warrants will not be exercisable until February 12, 2022. Securities Act Exemptions We deemed the offers, sales and issuances of the securities described above under “Original Issuances of Stock,” “Convertible Promissory Note Offering” and “Underwriter Warrants” to be exempt from registration under the Securities Act in reliance on Section 4(2) of the Securities Act, including Regulation D and Rule 506 promulgated thereunder, relative to transactions by an issuer not involving a public offering. All purchasers of securities in transactions exempt from registration pursuant to Regulation D represented to us that they were accredited investors and were acquiring the shares for investment purposes only and not with a view to, or for sale in connection with, any distribution thereof and that they could bear the risks of the investment and could hold the securities for an indefinite period of time. The purchasers received written disclosures that the securities had not been registered under the Securities Act and that any resale must be made pursuant to a registration statement or an available exemption from such registration. We deemed the grants of stock options and issuances of common stock upon exercise of such options described above under “Stock Options” to be exempt from registration under the Securities Act in reliance on Rule 701 of the Securities Act as offers and sales of securities under compensatory benefit plans and contracts relating to compensation in compliance with Rule 701. Each of the recipients of securities in any transaction exempt from registration either received or had adequate access, through employment, business or other relationships, to information about us. ITEM 6. RESERVED 85 Table of Contents