Dermata Therapeutics(DRMA) - 2025 Q2 - Quarterly Report

Part I Financial Information Item 1: Financial Statements (unaudited) This section presents the unaudited interim financial statements for Dermata Therapeutics, Inc., including the Balance Sheets, Statements of Operations, Statements of Stockholders' Equity, Statements of Cash Flows, and accompanying Notes to Financial Statements, providing a snapshot of the company's financial position and performance for the periods ended June 30, 2025 Balance Sheets Balance Sheets Summary | Metric | June 30, 2025 | December 31, 2024 | | :----------------------------- | :-------------- | :------------------ | | Cash and cash equivalents | $6,480,930 | $3,161,570 | | Total assets | $6,640,516 | $3,533,888 | | Total liabilities | $1,026,265 | $1,972,794 | | Total stockholders' equity | $5,614,251 | $1,561,094 | Statements of Operations Statements of Operations Summary | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :----------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Research and development | $617,835 | $2,009,102 | $1,898,976 | $3,609,843 | | General and administrative | $1,154,896 | $874,640 | $2,213,559 | $2,477,459 | | Total operating expenses | $1,772,731 | $2,883,742 | $4,112,535 | $6,087,302 | | Net loss | $(1,701,093) | $(2,829,106) | $(4,004,680) | $(5,963,368) | | Net loss per share, basic and diluted | $(1.66) | $(41.82) | $(5.18) | $(106.44) | Statements of Stockholders' Equity - Total stockholders' equity increased significantly from $1,561,094 at December 31, 2024, to $5,614,251 at June 30, 2025, primarily driven by the issuance of common stock and warrants from the January 2025 PIPE and March 2025 Warrant Inducement, which generated net proceeds of $2,254,721 and $5,750,828 respectively, despite a net loss of $(4,004,680) for the six months ended June 30, 2025[16][19][14] Statements of Cash Flows Statements of Cash Flows Summary (Six Months Ended June 30) | Cash Flow Activity | 2025 | 2024 | | :----------------- | :------------ | :------------ | | Operating activities | $(4,624,547) | $(4,830,407) | | Financing activities | $7,943,907 | $2,339,372 | | Net increase (decrease) in cash and cash equivalents | $3,319,360 | $(2,491,035) | | Cash and cash equivalents at end of period | $6,480,930 | $4,947,100 | Notes to Financial Statements The notes provide detailed information on the company's organization, significant accounting policies, financial instruments, equity activities, commitments, and contingencies, highlighting key events such as reverse stock splits, capital raises, and clinical trial progress, along with the ongoing going concern uncertainty 1. Organization and Basis of Presentation - Dermata Therapeutics, Inc. is a clinical-stage biotechnology company focused on skin conditions, which converted to a Delaware C-corporation in March 2021[25] - The company effected a 1-for-10 reverse stock split on August 1, 2025, and a 1-for-15 reverse stock split on May 16, 2024, retroactively adjusting all share and per share amounts[26][27] - As of June 30, 2025, the company had $6.5 million in cash and an accumulated deficit of $69.7 million, with cash expected to fund operations into Q2 2026, raising substantial doubt about its ability to continue as a going concern[28][31] 2. Summary of Significant Accounting Policies - The company operates as a single segment focused on developing and commercializing pharmaceutical candidates for skin conditions[34] - Research and development costs, including license fees and milestone payments without commercial value, are expensed as incurred[40] - All warrants issued and modified are equity-classified, recorded as a component of additional paid-in capital[46] Potentially Dilutive Securities (as of June 30) | Security Type | 2025 | 2024 | | :-------------- | :---------- | :-------- | | Common Stock options | 20,477 | 2,727 | | Common Stock warrants | 1,238,949 | 110,924 | | Total | 1,259,426 | 113,651 | 3. Balance Sheet Details Prepaid Expenses and Other Current Assets | Category | June 30, 2025 | December 31, 2024 | | :-------------------------------- | :-------------- | :------------------ | | Prepaid insurance | $68,061 | $349,824 | | Prepaid research and development costs | $7,993 | $12,600 | | Prepaid other and other current assets | $83,532 | $9,894 | | Total | $159,586 | $372,318 | Accrued and Other Current Liabilities | Category | June 30, 2025 | December 31, 2024 | | :-------------------------------- | :-------------- | :------------------ | | Accrued research and development costs | $28,197 | $295,392 | | Accrued compensation and benefits | $490,703 | $731,632 | | Accrued other | $93,678 | $137,759 | | Total | $612,578 | $1,164,783 | 4. Equity Securities Equity Securities Summary (as of June 30, 2025) | Description | Authorized | Issued | Abeyance | Reserved | Outstanding | | :-------------------------- | :------------ | :-------- | :-------- | :------- | :---------- | | Common Stock | 250,000,000 | 637,757 | 388,700 | - | 637,757 | | Preferred Stock | 10,000,000 | - | - | - | - | | Warrants | - | 1,238,949 | - | - | 1,238,949 | | 2021 Omnibus Equity Incentive Plan | - | 20,568 | - | 13 | 20,477 | | Total | 260,000,000 | 1,897,274 | 388,700 | 13 | 1,897,183 | - In March 2025, the company received approximately $5.7 million in net proceeds from a warrant inducement, where a holder exercised 483,447 existing warrants at a reduced price in exchange for new Series A and B warrants[55][66] - In January 2025, the company closed a private placement (PIPE) generating approximately $2.2 million in net cash proceeds from the sale of 193,539 shares of Common Stock, pre-funded warrants, and 200,785 PIPE warrants[56] - As of June 30, 2025, 1,238,949 warrants were outstanding, with an aggregate intrinsic value of zero, based on a closing trading price of $5.85 per share[63][64][65] 5. Equity Incentive Plan - The 2021 Omnibus Equity Incentive Plan was amended to increase authorized shares to 7,993 and the evergreen provision to 5% of outstanding common stock, adding 12,588 shares as of January 1, 2025[68] Stock-Based Compensation Expense | Category | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Research and development | $8,100 | $4,623 | $15,720 | $241,960 | | General and administrative | $31,134 | $14,985 | $60,702 | $364,882 | | Total | $39,234 | $19,608 | $76,422 | $606,842 | - As of June 30, 2025, 20,477 stock options were outstanding with a weighted-average exercise price of $25.27, and total unrecognized compensation cost was approximately $0.3 million, expected to be recognized over 2.7 years[75][78] 6. Commitments and Contingencies - The XYNGARI™ Phase 3 STAR-1 clinical trial is completed, with $0.7 million in R&D expense recognized for the six months ended June 30, 2025[79] - The company relies on an exclusive supply agreement with a Russian entity for Spongilla raw material, with sufficient quantities on hand to initiate and complete two Phase 3 studies for XYNGARI™ in acne, but future supply could be impacted by sanctions[80] - A license agreement with Villani, Inc. requires future milestone payments up to $40.5 million and single-digit royalties, but no accrual was required as of June 30, 2025, as the likelihood of achievement was not yet probable[81] - A Clinical Trial Collaboration Agreement with Revance Therapeutics, Inc. was entered into in January 2025 to conduct a Phase 2a clinical trial evaluating XYNGARI™ with Daxxify for primary axillary hyperhidrosis, with no expenses incurred as of June 30, 2025[83] 7. Segment Information - The company operates as a single operating segment focused on identifying, developing, and commercializing pharmaceutical products for skin conditions, with the CEO acting as the chief operating decision maker[87][88] Segment Expenses (Six Months Ended June 30) | Expense Category | 2025 | 2024 | | :----------------- | :------------ | :------------ | | Clinical R&D | $705,645 | $2,439,727 | | Nonclinical R&D | $311,179 | $212,034 | | Personnel related R&D | $882,152 | $958,082 | | Total R&D | $1,898,976 | $3,609,843 | | General and administrative | $2,213,559 | $2,477,459 | | Net loss | $(4,004,680) | $(5,963,368) | 8. Related Party Transaction - Company insiders, including the CEO, CFO, and board members, participated in the January 2025 PIPE financing, purchasing an aggregate of 122,047 Common Stock and warrants for approximately $1.55 million, at the same price as other investors[90] 9. Subsequent Events - Subsequent to June 30, 2025, 43,800 abeyance shares related to the March 2025 Warrant Inducement were delivered, leaving 344,900 shares still in abeyance[91] - The company received a Nasdaq delisting notice for not meeting the $1.00 minimum bid price requirement but was granted an exception until August 14, 2025, to regain compliance[92][94] - Stockholders approved a reverse stock split, and the board set a 1-for-10 ratio, effective August 1, 2025, which retrospectively adjusted all share and per share amounts in the financial statements[95][96] Item 2: Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on the company's financial condition, operational results, and liquidity for the reported periods, including an overview of its business, recent developments, critical accounting policies, and future funding requirements, emphasizing the ongoing need for capital and the associated going concern uncertainty Cautionary Note Regarding Forward-Looking Statements - The report contains forward-looking statements subject to known and unknown risks and uncertainties, which may cause actual results to differ materially from expectations[99] - Key risk factors include lack of operating history, significant expected operating losses, need for additional capital, dependence on product candidates in clinical development, ability to acquire raw materials, manufacturing capabilities, regulatory approvals, and intellectual property protection[100][101] Overview - Dermata Therapeutics is a late-stage medical dermatology company developing XYNGARI™ and DMT410, both utilizing proprietary Spongilla technology for various skin conditions[103][105] - XYNGARI™ Phase 3 STAR-1 trial for acne met all co-primary endpoints, showing statistically significant reductions in inflammatory and noninflammatory lesions and improvement in IGA at week 12[108] - DMT410, designed for topical delivery of botulinum toxin, demonstrated 80% reduction in gravimetric sweat production in a Phase 1 hyperhidrosis trial, and a Phase 2a clinical trial with Revance for primary axillary hyperhidrosis is anticipated[110][111] - The company has a limited operating history, no product revenue, and incurred net losses of $4.0 million for the six months ended June 30, 2025, with an accumulated deficit of $69.7 million[112][113] Recent Developments - In January 2025, the company completed a private placement (PIPE) raising approximately $2.3 million in net cash proceeds from the sale of common stock and warrants[116] - In March 2025, the company announced positive topline results for its XYNGARI™ Phase 3 STAR-1 trial, meeting all co-primary endpoints for acne treatment[117] - A March 2025 warrant inducement generated approximately $5.7 million in net proceeds from the exercise of existing warrants at a reduced price in exchange for new warrants[119] - As of June 30, 2025, the company has no remaining capacity under its At The Market (ATM) Offering Agreement[120] Critical Accounting Policies and Use of Estimates - The preparation of financial statements requires management to make estimates and judgments, particularly concerning accrued research and development expenses and the classification of equity instruments like warrants[121][123][124] - Warrants are assessed upon issuance for proper classification, and all current warrants are equity-classified, recorded as additional paid-in capital[124][125] Fluctuations in Operating Results - Operating results have fluctuated significantly in the past and are expected to continue doing so, primarily due to the timing and expenditures related to product candidate development, making period-to-period comparisons unreliable indicators of future performance[126] Results of Operations Operating Results (Three Months Ended June 30) | Metric | 2025 | 2024 | Difference | | :-------------------------- | :------------ | :------------ | :------------ | | Research and development | $617,835 | $2,009,102 | $(1,391,267) | | General and administrative | $1,154,896 | $874,640 | $280,256 | | Total operating expenses | $1,772,731 | $2,883,742 | $(1,111,011) | | Net loss | $(1,701,093) | $(2,829,106) | $1,128,013 | - Research and development expenses decreased by $1.4 million for the three months ended June 30, 2025, primarily due to decreased clinical expenses from the completed XYNGARI™ STAR-1 acne study[128] Operating Results (Six Months Ended June 30) | Metric | 2025 | 2024 | Difference | | :-------------------------- | :------------ | :------------ | :------------ | | Research and development | $1,898,976 | $3,609,843 | $(1,710,867) | | General and administrative | $2,213,559 | $2,477,459 | $(263,900) | | Total operating expenses | $4,112,535 | $6,087,302 | $(1,974,767) | | Net loss | $(4,004,680) | $(5,963,368) | $1,958,688 | - General and administrative expenses decreased by $0.3 million for the six months ended June 30, 2025, mainly due to decreased stock-based compensation from the cancellation of out-of-the-money stock options in Q1 2024[133] Cash Flows Cash Flow Summary (Six Months Ended June 30) | Activity | 2025 | 2024 | | :-------------------------------- | :------------ | :------------ | | Net cash used in operating activities | $(4,624,547) | $(4,830,407) | | Net cash provided by financing activities | $7,943,907 | $2,339,372 | | Net increase (decrease) in cash and cash equivalents | $3,319,360 | $(2,491,035) | | Cash and cash equivalents at end of period | $6,480,930 | $4,947,100 | - Cash provided by financing activities significantly increased to $7.9 million in 2025 from $2.3 million in 2024, primarily driven by the January 2025 PIPE financing ($2.2 million net proceeds) and the March 2025 Inducement financing ($5.7 million net proceeds)[138][139] Liquidity and Capital Resources - As of June 30, 2025, the company had $6.5 million in cash and cash equivalents and an accumulated deficit of $69.7 million, with existing cash expected to fund operations into the second quarter of 2026[140] - The company anticipates continued net losses and will require additional capital to complete Phase 3 studies for XYNGARI™, continue development of other candidates, and pursue new acquisitions or licenses, raising substantial doubt about its ability to continue as a going concern[140][142][145] - Future funding requirements are highly dependent on the scope and success of drug candidate development, regulatory approvals, manufacturing costs, and the ability to establish strategic collaborations[147][149] Item 3: Quantitative and Qualitative Disclosures about Market Risk This section states that there are no quantitative and qualitative disclosures about market risk applicable to the company for the reported period Item 4: Controls and Procedures Management concluded the company's disclosure controls and procedures were effective as of June 30, 2025, with no material changes in internal control over financial reporting during the period - The company's disclosure controls and procedures were evaluated as effective at the reasonable assurance level as of June 30, 2025[154] - There were no material changes in internal control over financial reporting during the period[155] Part II Other Information Item 1: Legal Proceedings The company is not a party to any legal proceedings, nor is it aware of any threatened legal proceedings, that are expected to have a material adverse effect on its financial condition, results of operations, or liquidity Item 1A: Risk Factors This section refers to the risk factors detailed in the company's Annual Report on Form 10-K for the year ended December 31, 2024, and states that no material changes to these risk factors have occurred during the six months ended June 30, 2025 Item 2: Unregistered Sales of Equity Securities and Use of Proceeds The company reports no unregistered sales of equity securities or use of proceeds during the period Item 3: Defaults Upon Senior Securities The company reports no defaults upon senior securities during the period Item 4: Mine Safety Disclosures This item is not applicable to the company Item 5: Other Information The company reported that no director or officer adopted or terminated any Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement during the fiscal quarter ended June 30, 2025 Item 6: Exhibits This section lists the exhibits filed as part of the Form 10-Q, including the Certificate of Amendment to the Amended and Restated Certificate of Incorporation, officer certifications, and XBRL documents Signatures The report is duly signed on behalf of Dermata Therapeutics, Inc. by Gerald T. Proehl, President and Chief Executive Officer, and Kyri K. Van Hoose, Senior Vice President, Chief Financial Officer