What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2022-03-11 compared with 2021-03-31 · 755 added, 765 removed, 851 unchanged (64% of the section changed)

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Financial Statements

Report of Independent Registered Public Accounting Firm

Reports of Independent Registered Public Accounting Firms

Consolidated Balance Sheets as of December 31, 2021 and 2020

Consolidated Statements of Operations for the years ended December 31, 2021 and 2020

Consolidated Statements of Changes in Convertible Preferred Stock and Stockholders’ Equity for the years ended December 31, 2020 and 2019

Consolidated Statements of Changes in Stockholders’ Equity for the years ended December 31, 2021 and 2020

Consolidated Statements of Cash Flows for the years ended December 31, 2021 and 2020

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To the Board of Directors and

Shareholders of Jaguar Health, Inc.:

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheet of Jaguar Health, Inc., (the “Company”) as of December 31, 2021, and the related consolidated statements of operations, changes in stockholders’ equity, and cash flows for the year ended December 31, 2021, and the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021, and the results of its operations and its cash flows for the year ended December 31, 2021, in conformity with accounting principles generally accepted in the United States of America.

The Company’s Ability to Continue as a Going Concern

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern.

As discussed in Note 1 to the consolidated financial statements, the Company has an accumulated deficit, recurring losses, and expects continuing future losses.

These conditions raise substantial doubt about the Company’s ability to continue as a going concern.

Management’s evaluation of the events and conditions and management’s plans regarding these matters are also described in Note 1.

The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company’s financial statements based on our audit.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

As part of our audit, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.

Accordingly, we express no such opinion.

Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that our audit provides a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that:

relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Impairment of Intangible Assets, Net—Refer to Note 2 and Note 7 to the financial statements

Critical Audit Matter Description

As of December 31, 2021, the Company had intangible assets, net, of $22.7 million.

Intangible assets are evaluated based on the asset group based on product as well as being evaluated between definite-lived and indefinite-lived intangible assets for the purpose of the impairment assessment.

The Company assesses potential impairments whenever events or circumstances indicate that the asset may be impaired.

For finite-lived intangibles assets the impairment is based on recoverability.

Recoverability of an asset group is measured by a comparison of the carrying amount of an asset group to its forecasted cash flows expected to be generated by the asset group.

If the carrying amount of the asset group exceeds its estimated forecasted cash flows, an impairment charge is recognized as the amount by which the carrying amount of the asset group exceeds the fair value of the asset group.

An indefinite-lived intangible asset is considered impaired if the carrying amount exceeds the fair value of the asset group.

The fair value of the asset group was determined using the income approach.

The Company did not recognize an impairment loss in the financial statements for the year ended December 31, 2021.

We identified the evaluation of intangible asset impairment as a critical audit matter because the determination of the forecasted individual asset group’s cash flows, including revenue, expenses, and other items, requires a high degree of auditor judgment and increased extent of effort.

How the Critical Audit Matter Was Addressed in the Audit

The principal considerations for our determination that performing procedures relating to the valuation of intangible assets as a critical audit matter are (1) there was a high degree of auditor judgment and subjectivity in applying procedures relating to the fair value of intangible assets acquired due to the significant judgment by management when developing the estimates and (2) significant audit effort was required in evaluating the significant assumptions relating to the estimates, including the income projections and discount rates.

In addition, the audit effort involved the use of professionals with specialized skill and knowledge to assist in performing these procedures and evaluating the audit evidence obtained.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements.

These procedures included the following:

● Inquiry of management regarding the development of the assumptions used in the valuation of the intangible assets.

● Testing management’s process included evaluating the appropriateness of the valuation models, testing the completeness, accuracy, and relevance of underlying data used in the models, and testing the reasonableness of significant assumptions, including the income projections and discount rates.

● Professionals with specialized skill and knowledge were used to assist in evaluating the reasonableness of significant assumptions.

● Evaluated the experience, qualifications and objectivity of the Company’s specialist, a third-party valuation firm.

● Obtained an understanding of the nature of the work the Company’s specialist performed, including the objectives and scope of the specialist’s work;

the methods or assumptions used;

and a comparison of the methods or assumptions used with those used in the preceding period.

Identified and evaluated assumptions developed by the specialist considering assumptions generally used in the specialist’s field;

supporting evidence provided by the specialist;

existing market data;

historical or recent experience and changes in conditions and events affecting the Company.

● Tested the accuracy and completeness of company-produced data used by the specialist, and evaluated the relevance and reliability of externally obtained data.

For assumptions provided to the specialist by the company, evaluated whether there is a reasonable basis for using each assumption considering whether other reasonably likely outcomes could materially affect the relevant financial statement assertions.

Identified and evaluated significant assumptions used by the specialist for reasonableness.

● Evaluated the Company’s estimates of future revenue projections by completing a retrospective comparison to historical revenue projections.

We tested the significant assumptions discussed above, as well as the completeness and accuracy of the underlying data used in the projected cash flows and valuations.

● To reflect the uncertainty inherent in the projections, we performed our own sensitivity analyses by increasing or decreasing the significant assumptions and evaluated the potential impact on the fair value.

In addition, we tested the reconciliation of the fair value of the asset group developed by management to the market capitalization of the Company as of the valuation date.

/s/ RBSM, LLP

We have served as the Company's auditor since 2021.

Larkspur, California

March 11, 2022

PCAOB ID Number 587

Report of Independent Registered Public Accounting Firm

To the Board of Directors and

Stockholders of Jaguar Health, Inc.:

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Jaguar Health, Inc.

(“Company”) as of December 31, 2020 and 2019, and the related consolidated statements of operations, changes in convertible preferred stock and stockholders’ equity, and cash flows for each of the two years in the period ended December 31, 2020, and the related notes (collectively referred to as the “financial statements”).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2020, in conformity with accounting principles generally accepted in the United States of America.

We have audited the accompanying consolidated balance sheet of Jaguar Health, Inc.

(“Company”) as of December 31, 2020, and the related consolidated statements of operations, changes in stockholders’ equity, and cash flows for the year ended December 31, 2020, and the related notes (collectively referred to as the “financial statements”).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020, and the results of its operations and its cash flows for the year ended December 31, 2020, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company’s financial statements based on our audits.

Our responsibility is to express an opinion on the Company’s financial statements based on our audit.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.

As part of our audit, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.

Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that our audits provide a reasonable basis for our opinion.

Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that our audit provides a reasonable basis for our opinion.

/s/ Mayer Hoffman McCann P.C.

We have served as the Company's auditor since 2019.

We served as the Company's auditor since 2019, which ended in 2021.

San Diego, California

March 31, 2021

March 31, 2021 (except for the effects of the reverse stock split described in Note 1, as to which the date is March 11, 2022)

PCAOB ID Number 199

JAGUAR HEALTH, INC.

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Current assets:

Restricted cash

Accounts receivable

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Other receivable

Operating lease - right-of-use asset

Prepaid expenses and other current assets

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Property and equipment, net

Operating lease - right-of-use asset

Intangible assets, net

Liabilities, convertible preferred stock and stockholders' equity

Liabilities and stockholders' equity

Current liabilities:

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Warrant liability

Operating lease liability

Notes payable, net of discount, current

Operating lease liability, current

Notes payable, current

Series D perpetual preferred stock:

$ 0.0001 par value;

977,300 and zero shares authorized at

December 31, 2020 and December 31, 2019, respectively;

zero shares issued and outstanding at

December 31, 2020 and December 31, 2019

977,300 shares authorized at December 31, 2021 and 2020;

zero shares issued and outstanding at December 31, 2021 and 2020

Total current liabilities

Notes payable, net of current portion

Operating lease liability, net of current portion

Notes payable, net of discount, net of current portion (includes hybrid instrument designated at Fair Value Option amounting to $ 7.8 million and zero as of December 31, 2021 and 2020, respectively)

Total liabilities

Commitments and contingencies (See Note 6)

Series A redeemable convertible preferred stock:

$0.0001 par value, zero and 5,524,926 shares authorized at December 31, 2020 and December 31, 2019, respectively;

zero and 5,524,926 shares issued and outstanding at December 31, 2020 and December 31, 2019, respectively;

(redemption amount of zero and $12,739 at December 31, 2020 and December 31, 2019, respectively;

liquidation preference of zero and $9,199 at December 31, 2020 and December 31, 2019, respectively)

Stockholders' equity

Series B-2 convertible preferred stock:

$0.0001 par value, zero and 11,000 shares authorized at

December 31, 2020 and December 31, 2019, respectively;

zero and 1,971 shares issued and outstanding at December 31, 2020 and December 31, 2019, respectively

Series B-2 convertible preferred stock:

$0.0001 par value, 10,165 shares authorized at December 31, 2020 and December 31, 2019;

zero and 10,165 shares issued and outstanding at

December 31, 2020 and December 31, 2019, respectively

$ 0.0001 par value, 10,165 shares authorized at December 31, 2021 and 2020;

zero shares issued and outstanding at December 31, 2021 and 2020

Series C perpetual preferred stock:

1,011,000 and zero shares authorized at December 31, 2020 and December 31, 2019, respectively;

1,011,000 shares authorized at December 31, 2021 and 2020;

zero shares issued and outstanding at December 31, 2021 and 2020

December 31, 2019

Common stock - voting:

$0.0001 par value, 150,000,000 shares authorized at

December 31, 2020 and December 31, 2019;

114,022,368 and 14,273,061 shares issued and outstanding at December 31, 2020 and December 31, 2019, respectively

$ 0.0001 par value, 150,000,000 shares authorized at December 31, 2021 and 2020;

48,352,527 and 38,007,420 shares issued and outstanding at December 31, 2021 and 2020, respectively

Common stock - non-voting:

$0.0001 par value, 50,000,000 shares authorized at

December 31, 2020 and December 31, 2019;

2,120,786 and 40,301,237 shares issued and outstanding at December 31, 2020 and December 31, 2019, respectively

$ 0.0001 par value, 50,000,000 shares authorized at December 31, 2021 and 2020;

2,120,786 shares issued and outstanding at December 31, 2021 and 2020

Additional paid-in capital

Noncontrolling interest

Accumulated deficit

Total stockholders' equity

Total liabilities, convertible preferred stock and stockholders' equity

Total liabilities and stockholders' equity

The accompanying notes are an integral part of these consolidated financial statements.

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Product revenue

Total revenue

Operating expenses

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General and administrative

Settlement of Tempesta Royalty License Agreement

Impairment of indefinite-lived intangible assets

Series B convertible preferred stock inducement expense

Series 3 warrants inducement expense

ELOC warrants inducement expense

Series B convertible preferred stock inducement expense

Total operating expenses

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Interest expense

Other income, net

Change in fair value of financial instruments

Loss on extinguishment of debt and exchange of Series D perpetual preferred stock

Change in fair value of financial instruments and hybrid instrument designated at Fair Value Option

Other income (expense), net

Loss before income tax

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Net loss and comprehensive loss

Deemed dividend attributable to accretion of Series A redeemable convertible preferred stock

Deemed dividend attributable to Series B convertible preferred stock

Deemed dividend attributable to Series B-1 convertible preferred stock

Deemed dividend attributable to Series C perpetual preferred stock

Stock dividend attributable to Series C perpetual preferred stock

Deemed dividend attributable to the Series 1 warrant modification

Deemed dividend attributable to accretion of Series A redeemable convertible preferred stock

Deemed dividend attributable to Series 1, Series 2 and Bridge warrant holders

Stock dividend attributable to Series C perpetual preferred stock

Adjusted net loss and comprehensive loss

Net loss attributable to noncontrolling interest

Net loss attributable to common shareholders

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JAGUAR HEALTH, INC.

CONSOLIDATED STATEMENTS OF CHANGES

IN CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY

Preferred Stock

Stock - voting

Stock - non-voting

Stockholders'

(In thousands, except share data)

paid-in capital

Balances as of January 1, 2019

Issuance of common stock, net of offering costs, put exercise

Issuance of common stock, net of offering costs, March 2019 registered offering

Issuance of common stock in exchange of notes payable and accrued interest

Issuance of common stock in exchange of accrued interest, January 2019

Issuance of common stock in exchange of CVP Exchange Notes

Issuance of Series B convertible preferred stock, net of offering costs of $875

Beneficial conversion feature of the Series B convertible preferred stock

Deemed dividend on the Series B convertible preferred stock

Issuance of common stock in Class A Units, net

Issuance of Series 1 warrants in Class A and B Units

Issuance of Series 2 warrants in Class A and B Units

Modification of Series 1 warrants

Deemed dividend attributable to Series 1 warrant modification

Bridge warrant reclassification from liability to equity

LOC warrant reclassification from liability to equity

Issuance of common stock upon conversion of Series B convertible preferred stock

Fractional shares

Issuance of common stock for Tempesta settlement, October 2019

Issuance of common stock upon exercise of Series 1 warrants, October 2019

Issuance of preferred stock to Ionic Ventures, October 2019

Beneficial conversion feature of the Series B-1 convertible preferred stock, October 2019

Deemed dividend on the Series B-1 convertible preferred stock, October 2019

Issuance of common stock upon exercise of Series 1 warrants, October 2019

Issuance costs from issuance of Series B-1 preferred stock, October 2019

Issuance of common stock in exchange for services, October 2019

Issuance of prepaid equity forward contracts, November 2019, net of offering

Issuance of common stock upon settlement of prepaid equity forward contracts, November 2019

Conversion of Series B convertible preferred stock into common stock, December 2019

Issuance of Series B-2 preferred stock in exchange for prepaid equity forward

contracts and Jaguar Health common stock, December 2019

Issuance of common stock in PIPE Financing, December 2019

Issuance of warrants in PIPE Financing, December 2019

Accretion to redemption value of contingently redeemable preferred stock

Stock-based compensation

Balances as of December 31, 2019

The accompanying notes are an integral part of these consolidated financial statements.

Preferred Stock

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

Preferred Stock

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Stock - non-voting

Noncontrolling

Stockholders'

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Balances as of January 1, 2020

Shares issued on conversion of Series 1, Series 2, and 2019 Bridge Note warrants

Shares issued on exercise of Series 1, Series 2, and 2019 Bridge Note warrants

Shares issued on exercise of Series 2 warrants and inducement offer conversion of Series B-1 convertible preferred stock

Shares issued on conversion of Series 1, Series 2, and 2019 Bridge Note warrants, net of issuance costs of $461;

Shares issued on exercise of Series 1, Series 2, and 2019 Bridge Note warrants, net of issuance costs of $ 461 ;

Shares issued on conversion of Series 1, Series 2, and 2019 Bridge Note warrants;

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Deemed dividend attributable to Series 1, Series 2 and Bridge warrant holders

Shares issued on conversion of Series 3 warrants

Shares issued on conversion of Series 1 and Series 2 warrants

Shares issued on exercise of Series 3 warrants

Shares issued on exercise of Series 1 and Series 2 warrants

Shares issued to Atlas Sciences for settlement of Trial Delay Fee

Shares issued on conversion of warrants of Atlas for settlement of Trial Delay Fee

Shares issued in PIPE financing, net of issuance costs of $51

Warrants issued and converted to common shares to Atlas Sciences for settlement of Trial Delay Fee

Issuance of common stock in PIPE financing, net of issuance costs of $ 51

Shares issued in Underwriter settlement agreement

Warrants issued in Underwriter settlement agreement

Underwriter settlement agreement offering cost

Underwriter settlement offering cost

Conversion of Series B-2 convertible preferred stock into common stock

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Series A convertible preferred stock redeemed and Series C perpetual preferred issued under the exchange transaction

( 5,524,926 )

Stock dividend attributable to Series C perpetual preferred stock of $ 8 per share

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Shares issued in exchange of CVP Exchange Notes

Shares issued on conversion of warrants to Pacific Capital Management in exchange of promissory note

Warrants issued and converted to common shares to Pacific Capital Management in exchange of promissory note

Shares issued to PoC Capital in Payment of Contracted Research Fees

Shares issued to Iliad in exchange of Royalty Interest

Shares issued on exchange of Series C perpetual preferred stock

Shares issued on conversion of Series C perpetual preferred stock

Warrants issued and converted to common stock in exchange for Series C Preferred Stock

Shares issue on exchange of Series D convertible preferred stock

Preferred Stock

Shares issued on conversion of Series D convertible preferred stock

Conversion of non-voting common stock to voting common stock

( 38,180,451 )

Shares issued in Registered Direct Offering Priced Above-the-Market, net of $ 78 offering costs

Accretion to redemption value of redeemable preferred stock

Fractional shares

Shares issued upon exercise of stock options

Stock-based compensation

Balances as of December 31, 2020

The accompanying notes are an integral part of these consolidated financial statements.

Preferred Stock

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Stock - non-voting

Noncontrolling

Stockholders'

1 unchanged sentence

paid-in capital

Conversion of non-voting common stock to voting common stock

Shares issued in At The Market offering, net of offering costs of $78

Accretion to redemption value of redeemable preferred stock

Fractional shares

Balances as of January 1, 2021

Shares issued on exercise of Series 1, Series 2, and 2019 Bridge Note Warrants

Shares issued in PIPE financing

Shares issued in At the Market offering, net of issuance and offering costs of $ 465

Shares issued in registered public offering, net of issuance and offering costs of $ 2,550

Shares issued in extinguishment of Exchange Note 2

Shares issued on exercise of Series 3 warrants

Shares issued to Iliad in exchange of notes payable and accrued interest

Warrants issued to Oasis for ELOC amendment, net of offering costs of $ 48

Shares issued on conversion of Napo merger common shares

Shares issued upon exercise of stock options

Shares issued to third party for services

Fractional shares

Merger of subsidiary

Stock-based compensation

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Adjustments to reconcile net loss to net cash used in operating activities:

Amortization of debt issuance costs, debt discount, and non-cash interest expense

Stock-based compensation

Change in fair value of financial instruments and hybrid instrument designated at Fair Value Option

Depreciation and amortization expense

Impairment of indefinite-lived intangible assets

Interest paid on the conversion of debt to equity

Loss on recourse obligation on secured borrowing

Series 3 warrants inducement expense

Loss on extinguishment of debt and conversion of Series D perpetual preferred stock

Amortization of operating lease right-of-use-assets

Expense on modification of warrants

ELOC warrants inducement expense

Amortization of operating lease - right-of-use-asset

Derecognition of debt discount on settlement of receivables secured borrowing

Shares issued in exchange for services

Series B convertible preferred stock inducement expense

Series 3 warrants issued as an inducement to exercise equity-classified Series 1, Series 2 and Bridge warrants

Stock-based compensation

Issuance of common stock in exchange for services

Issuance of common stock in Tempesta settlement agreement

Issuance of warrants and common stock in underwriter settlement agreement

Issuance of common stock as consideration paid under the Oasis Capital Equity Purchase Agreement

Tempesta settlement note expense

Amortization of debt issuance costs and debt discount and non-cash interest expense

Expense on modification of warrants

Shares and warrants issued in Underwriter settlement agreement

Shares issued as consideration paid under the Oasis Capital Equity Purchase Agreement

Loss on recourse obligation on secured borrowing

Interest paid on the conversion of debt to equity

Shares issued to Atlas for settlement of Trial Delay Fee

Shares issued on conversion of warrants of Atlas for settlement of Trial Delay Fee

Change in fair value of financial instruments

Changes in assets and liabilities

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Prepaid expenses and other current assets

Other non-current assets

Operating lease liabilities

Deferred rent

Accounts payable

Accrued expenses

Accrued liabilities

Operating lease liability

Total cash used in operating activities

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Cash flows from financing activities

Proceeds from issuance of notes payable, net of issuance costs of $50 and debt discount

Proceeds from receivables secured borrowing, net of debt discount and issuance costs of $640

Proceeds from issuance of short-term notes payable

Repayment of short-term notes payable

Repayment of notes payable

Repayment of insurance premium financing

Proceeds from issuance of shares in registered public offering, net of issuance and offering costs of $ 2,550

Proceeds from issuance of notes payable, net of issuance costs of $ 50 in 2021 and 2020

Proceeds from issuance of shares in At the Market offering, net of issuance and offering costs of $ 465 in 2021 and offering costs of $ 78 in 2020

Proceeds from issuance of shares on conversion of Series 1, Series 2, and 2019 Bridge Note warrants, net of issuance and offering costs of $ 486 in 2020

Repayment of receivables secured borrowing

Proceeds from issuance of common stock

Proceeds from issuance of common stock in Class A Units, net of issuance costs, July 2019

Payment of underwriting discounts, commissions and other associated offering costs for Class A Units

Proceeds from issuance of Series 1 Warrants in Class A and B Units, July 2019

Proceeds from issuance of Series 2 Warrants in Class A and B Units, July 2019

Proceeds from issuance of Series B convertible preferred stock, net of issuance costs, July 2019

Payment of underwriting discounts, commissions and other associated offering costs for Class B Units

Proceeds from issuance of common stock in PIPE financing, net of issuance costs

Proceeds from issuance of common stock in At The Market Offering, net of $78 offering costs

Proceeds from issuance of Series B-2 convertible preferred for pre-funded warrants, November 2019

Proceeds from issuance of Series 1 warrants via put option, October 2019

Proceeds from issuance of common stock on conversion of Series 1, Series 2, and 2019 Bridge Note warrants, net of issuance costs of $486

Proceeds from issuance of common stock on conversion of Oasis Capital an Equity Purchase Agreement put options, net of issuance costs of $13

Issuance costs, pre-funded warrants, November 2019

Proceeds from issuance of shares in PIPE financing

Repayment of insurance financing

Noncontrolling interest

Repayment of notes payable

Payment of ELOC warrants offering costs

Proceeds from exercise of stock options

Proceeds from sale of receivables, net of debt discount and issuance costs of $ 640

Issuance costs from shares issued on Underwriter settlement agreement

Payments of deferred offering costs

Proceeds from issuance of common stock on conversion of Oasis Capital an Equity Purchase Agreement put options, net of issuance costs of $ 13

Total cash provided by financing activities

Net increase in cash and restricted cash

Cash and restricted cash at beginning of period

Cash and restricted cash at end of period

Net increase in cash

Cash at beginning of period

Cash at end of period

JAGUAR HEALTH, INC.

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Supplemental schedule of non-cash financing and investing activities

Shares issued in exchange of partial settlement of royalty interest

Shares issued on exercise of Series 3 warrants

Insurance financing

Recognition of operating lease - right-of-use asset and operating lease liability

Lease modification

Offering costs included in accounts payable and accrued liabilities

Extinguishment of Series A redeemable convertible preferred stock

Common stock issued as redemption of Series D perpetual preferred stock

Issuance of Series D perpetual preferred stock

Common stock issued as redemption of notes payable and related interest

Insurance premium financing

Deemed dividend attributable to modification of Series 1 warrants

Deemed dividend attributable to Series B convertible preferred stock

Issuance of Series C perpetual preferred stock

Deemed dividend attributable to Series C perpetual preferred stock

Common stock issued upon conversion of Series B convertible preferred stock

Issuance of warrants with Notes Payable

Reclassification of Bridge Note warrants from liability to equity

Issuance of March 2019 letter of credit warrant

Reclassification of March 2019 LOC warrants from liability to equity

Accretion to redemption value of Series A contingently redeemable convertible preferred stock

Conversion of Series B-2 convertible preferred stock into common stock

Deemed dividend attributable to Series 1, Series 2 and Bridge warrant holders

Shares issued on exercise of Series B convertible preferred shares

Extinguishment of Series A redeemable convertible preferred stock

Issuance of Series C perpetual preferred stock

Issuance of Series D perpetual preferred stock

Common stock issued as redemption of Series D perpetual preferred stock

Shares issued on exercise of Series 3 warrants

Stock dividend attributable to Series C perpetual preferred stock

Shares issued to PoC Capital in payment of contracted research fees

Deemed dividend attributable to Series 1, Series 2 and Bridge warrant holders

Cash and Restricted Cash:

Restricted cash

Total cash and restricted cash

Stock dividend attributable to Series C perpetual preferred stock

The accompanying notes are an integral part of these consolidated financial statements.

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FDA for the symptomatic relief of noninfectious diarrhea in adults with HIV/AIDS on antiretroviral therapy.

On March 15, 2021, the Company established Napo EU in Italy as a subsidiary of Napo.

Napo EU’s mission is to develop and commercialize novel, plant-based, sustainably derived prescription medicines in Europe (excluding Russia) for people with gastrointestinal distress to provide relief and treatment from various gut disorders, their symptoms, and interventions.

The initial focus of Napo EU is on pursuing the accelerated conditional marketing authorization pathway from the European Medicines Agency for crofelemer for an important orphan-designated disease:

Intestinal failure with short bowel syndrome (“SBS-IF”).

On November 3, 2021, Napo EU and Dragon SPAC S.p.A (“Dragon SPAC”) merged.

Dragon SPAC is private company limited by shares with registered office in Italy.

Upon close, Dragon SPAC became a controlled subsidiary of the Company and will be a consolidated entity.

Further, Napo EU was incorporated into Dragon SPAC with Dragon SPAC as the surviving entity which took over by operation of law all the assets, rights, reasons and actions as well as liabilities, obligations and commitments of NAPO EU.

The merged entity was named as Napo Therapeutics S.p.A (“Napo Therapeutics”).

The Company manages its operations through two segments – human health and animal health and is headquartered in San Francisco, California.

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Minimum Stockholders’ Equity Requirement

On August 17, 2020, the Company received a letter from the Staff of the Listing Qualifications Department (the “Staff”) of The Nasdaq Stock Market LLC (“Nasdaq”) notifying the Company that it no longer complies with Nasdaq Listing Rule 5550(b)(1) due to the Company’s failure to maintain a minimum of $2.5 million in stockholders’ equity (or meet the alternatives of market value of listed securities of $35 million or net income from continuing operations).

On September 9, 2020, the Company received a letter from Nasdaq stating that, based on the Company’s Current Report on Form 8-K filed on September 2, 2020, the Staff has determined that the Company complied with Nasdaq Listing Rule 5550(b)(1).

However, if the Company failed to evidence compliance with Nasdaq Listing Rule 5550(b)(1) upon filing its next periodic report, the Company may be subject to delisting.

Minimum Bid Price Requirement

On September 11, 2020, the Company received written notice from Nasdaq indicating that, based upon the Company’s continued non-compliance with the minimum $1.00 bid price requirement for continued listing on The Nasdaq Capital Market (the “Rule”), as set forth in Nasdaq Listing Rule 5550(a)(2), as of September 11, 2020, and notwithstanding the Company’s compliance with the quantitative criteria necessary to obtain a second 180-day period within which to evidence compliance with the Rule, as set forth in Nasdaq Listing Rule 5810(c)(3)(A), Nasdaq determined to delist the Company’s securities from Nasdaq unless the Company timely requested a hearing before the Nasdaq Hearings Panel (the “Hearings Panel”).

On October 22, 2020, the hearing was held with the Hearings Panel.

On October 28, 2020, the Company received formal notice that the Hearings Panel granted the Company an extension through December 23, 2020 to evidence compliance with the Rule.

In order to comply with the Rule, the Company must have a closing bid price of at least $1.00 per share for a minimum of ten consecutive business days by December 23, 2020.

As the Company consistently reached a closing bid price of above $1.00 in 2021, on January 21, 2021, the Company received a letter from the Nasdaq Office of General Counsel that the Company has regained compliance with the bid price and warrant concerns, as required by the Hearings Panel decision dated October 28, 2020.

Accordingly, the Hearings Panel has determined to continue the listing of the Company’s securities on The Nasdaq Stock Market and is closing this matter.

On February 17, 2022, the Company received a letter from the Staff of Nasdaq indicating that the bid price of the Company’s common stock for the last 30 consecutive business days had again closed below the minimum $ 1.00 per share required for the continued listing under Nasdaq Listing Rule 5550(a)(2) (see Note 16).

Liquidity and Going Concern

The Company, since its inception, has incurred recurring operating losses and negative cash flows from operations and has an accumulated deficit of $ 219.5 million as of December 31, 2021.

The Company expects to incur substantial losses and negative cash flows in future periods.

Further, the Company’s future operations, which include the satisfaction of current obligations, are dependent on the success of the Company’s ongoing development and commercialization efforts, as well as securing of additional financing and generating positive cash flows from operations.

In January 2021, the Company was able to reduce the outstanding balance of a secured promissory note by $1.8 million through common stock exchange and raised $20.5 million from a registered public offering and an at-the-market agreement.

As of the issuance date of the consolidated financial statements, the Company has cash of $33.8 million.

Based on the Company’s current operating plan and forecasted operations, management believes that existing cash will be sufficient to fund the Company’s obligations for at least 12 months after these consolidated financial statements are issued.

Further, the Company’s future operations, which include the satisfaction of current obligations, are dependent on the success of the Company’s ongoing development and

commercialization efforts, as well as securing of additional financing and generating positive cash flows from operations.

There is no assurance that the Company will have adequate cash balances to maintain its operations.

Although the Company plans to finance its operations and cash flow needs through equity and/or debt financing, collaboration arrangements with other entities, license royalty agreements, as well as revenue from future product sales, the Company does not believe its current cash balances are sufficient to funds its operating plan through one year from the issuance of these consolidated financial statements.

The Company has an immediate need to raise cash.

There can be no assurance that additional funding will be available to the Company on acceptable terms, or on a timely basis, if at all, or that the Company will generate sufficient cash from operations to adequately fund operating needs.

If the Company is unable to obtain an adequate level of financing needed for the long-term development and commercialization of our products, the Company will need to curtail planned activities and reduce costs.

Doing so will likely have an adverse effect on our ability to execute our business plan;

accordingly, there is substantial doubt about the ability of the Company to continue in existence as a going concern.

The accompanying consolidated financial statements do not include any adjustments that might result from the outcome of these uncertainties.

Reverse Stock Split

On September 3, 2021, the Company filed the Certificate of Fifth Amendment to its Third Amended and Restated Certificate of Incorporation with the Secretary of State of Delaware to effect a 1 -for-3 reverse stock split of the Company’s issued and outstanding shares of voting common stock, effective September 8, 2021.

The reverse split has been retrospectively reflected in all voting common stock, warrants, and common stock option shares disclosed in these consolidated financial statements.

The non-voting common stock and the convertible preferred stock were excluded from the reverse split.

Summary of Significant Accounting Policies

Basis of Presentation

The financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("U.S.

The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("U.S.

Principles of Consolidation

The consolidated financial statements have been prepared in accordance with U.S.

GAAP and applicable rules and regulations of the Securities and Exchange Commission (“SEC”) and include the accounts of the Company and its wholly-owned subsidiaries.

GAAP and applicable rules and regulations of the Securities and Exchange Commission (“SEC”) and include the accounts of the Company and its subsidiaries.

All inter-company transactions and balances have been eliminated in consolidation.

The reporting currency of the Company is the U.S.

Use of Estimates

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GAAP requires the Company’s management to make judgments, assumptions and estimates that affect the amounts reported in its financial statements and the accompanying notes.

valuation adjustments for excess and obsolete inventory;

allowance for doubtful accounts;

deferred taxes and valuation allowances on deferred tax assets;

evaluation and measurement of contingencies;

and recognition of

revenue, including estimates for product returns.

The accounting policies that reflect the Company’s more significant estimates and judgments and that the Company believes are the most critical to aid in fully understanding and evaluating its reported financial results are the valuation of stock options, valuation of Series C Perpetual Preferred Stock and Series D Perpetual Stock, valuation of hybrid instruments designated at fair value option (“FVO”), valuation of warrant liability, acquired in-process research and development (“IPR&D”), useful lives assigned to long-lived assets, impairment assessment of intangible assets, valuation adjustments for excess and obsolete inventory, allowance for doubtful accounts, deferred taxes and valuation allowances on deferred tax assets, evaluation and measurement of contingencies, and recognition of revenue, including estimates for product returns.

Those estimates could change, and as a result, actual results could differ materially from those estimates.

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The extent to which the COVID-19 outbreak affects the Company’s future financial results and operations will depend on future developments which are highly uncertain and cannot be predicted, including new information which may emerge concerning the severity of the outbreak, and current or future domestic and international actions to contain and treat it.

Cash and Restricted Cash

Our cash on deposit may exceed United States federally insured limits at certain times during the year.

We maintain cash accounts with certain major financial institutions in the United States.

Restricted cash represents cash not available to us for immediate and general use.

Amounts included in restricted cash primarily relate to security deposits and a letter of credit with a financial institution, both in connection with office space lease agreements.

For a discussion of risks of COVID-19 relating to the Company’s business, see “Item 1A.

- Risk Factors- Risks Related to Our Business- The novel coronavirus global pandemic could adversely impact our business, including our supply chain, clinical trials and commercialization of Mytesi and Canalevia.”

The Company’s cash on deposit may exceed United States federally insured limits at certain times during the year.

The Company maintains cash accounts with certain major financial institutions in the United States.

The Company does not have cash equivalents as of December 31, 2021 and 2020.

Accounts Receivable

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Concentrations

Cash is the financial instrument that potentially subjects the Company to a concentration of credit risk as cash is deposited with a bank and cash balances are generally in excess of Federal Deposit Insurance Corporation (“FDIC”) insurance limits.

Cash is the financial instrument that potentially subjects the Company to a concentration of credit risk as cash is deposited with banks and cash balances are generally in excess of Federal Deposit Insurance Corporation (“FDIC”) insurance limits.

For the years ended December 31, 2021 and 2020, substantially all of the Company’s revenue was derived from the sale of Mytesi.

In looking at sales by the Company to distributors whose net revenue percentage of total net revenue was equal to or greater than 10%, for fiscal year 2020 and 2019 the Company earned Mytesi revenue primarily from one major pharmaceutical distributor located in the United States.

For the years ended December 31, 2020 and 2019, one customer comprised 97% and 91%, respectively of total net revenues.

In looking at sales by the Company to distributors whose net revenue percentage of total net revenue was equal to or greater than 10 %, for fiscal years 2021 and 2020, the Company earned Mytesi revenue primarily from three and one major pharmaceutical distributor(s) located in the United States, respectively.

Revenue earned from each major customer as a percentage of total revenue is as follows:

The Company is subject to credit risk from its accounts receivable related to its sales.

The Company generally does not perform evaluations of customers' financial condition and generally does not require collateral.

For the years ended December 31, 2020 and 2019, one customer comprised 95% and 99%, respectively of total accounts receivable.

Accounts receivable balance of the significant customers as a percentage of total accounts receivable is as follows:

The Company is subject to concentration risk from its suppliers.

The Company sources raw material used to produce the active pharmaceutical ingredient in Mytesi from two suppliers and is dependent on a single third-party contract manufacturer, both for the supply of the active pharmaceutical ingredient in Mytesi, as well as for the supply of finished products for commercialization.

The Company’s financial instruments include accounts receivable, accounts payable, accrued liabilities, warrant liabilities, equity-linked financial instruments and debt.

The Company sources raw material used to produce the active pharmaceutical ingredient (“API”) in Mytesi from two suppliers and is dependent on a single third-party contract manufacturer for the supply of API in Mytesi and a single third-party contract manufacturer as well for the supply of finished products for commercialization.

Other Risks and Uncertainties

The Company’s future results of operations involve a number of risks and uncertainties.

Factors that could affect the Company’s future operating results and cause actual results to vary materially from expectations include, but are not limited to, rapid technological change, obtaining second source suppliers, regulatory approval from the FDA or other regulatory authorities, the results of clinical trials and the achievement of milestones, market acceptance of the Company’s product candidates, competition from other products and larger companies, protection of proprietary technology, strategic relationships and dependence on key individuals.

The Company’s financial instruments include accounts receivable, accounts payable, accrued liabilities, warrant liability, operating lease liability, equity-linked financial instruments, and debt.

The recorded carrying amount of accounts receivable, accounts payable and accrued liabilities reflect their fair value due to their short-term nature.

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See Note 4 for the fair value measurements.

Fair Value Option

ASC 825-10, Financial Instruments , provides FVO election that allows companies an irrevocable election to use fair value as the initial and subsequent accounting measurement attribute for certain financial assets and liabilities.

ASC 825-10 permits entities to elect to measure eligible financial assets and liabilities at fair value on an ongoing basis.

Unrealized gains and losses on items for which the FVO has been elected are reported in earnings.

The decision to elect the FVO is determined on an instrument-by-instrument basis, must be applied to an entire instrument and is irrevocable once elected.

Assets and liabilities measured at fair value pursuant to ASC 825-10 are required to be reported separately from those instruments measured using another accounting method.

In accordance with the options presented in ASC 825-10, the Company elected to present the aggregate of fair value and non-fair-value amounts in the same line item in the consolidated balance sheets and parenthetically disclose the amount measured at fair value in the aggregate amount.

Inventory is stated at the lower of cost or net realizable value.

Cost is determined using the first-in, first-out method.

Cost is initially recorded at the invoiced amount of raw materials or active pharmaceutical ingredient, including the sum of qualified expenditures and charges in bringing the inventory to its existing condition and location.

Cost is initially recorded at the invoiced amount of raw materials or API, including the sum of qualified expenditures and charges in bringing the inventory to its existing condition and location.

The Company calculates inventory valuation adjustments when conditions indicate that net realizable value is less than cost due to physical deterioration, usage, obsolescence, reductions in estimated future demand or reduction in selling price.

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Long-Lived Assets

The Company regularly reviews the carrying value and estimated lives of all of its long-lived assets, including property and equipment, to determine whether indicators of impairment may exist that warrant adjustments to carrying values or estimated useful lives.

The Company regularly reviews the carrying value and estimated lives of all of its long-lived assets, including property and equipment and definite-lived intangible assets, to determine whether indicators of impairment exist that warrant adjustments to carrying values or estimated useful lives.

The determinants used for this evaluation include management’s estimate of the asset’s ability to generate positive income from operations and positive cash flow in future periods as well as the strategic significance of the assets to the Company’s business objectives.

Definite-lived intangible assets are amortized on a straight-line basis over the estimated periods benefited, and are reviewed when impairment indicators are identified.

If the Company determines that an impairment trigger has been met, the Company evaluates the realizability of its long-lived assets (asset group) based on a comparison of projected undiscounted cash flows from use and eventual disposition with the carrying value of the related asset.

Any write-downs (which are measured based on the difference between the fair value and the carrying value of the asset) are treated as permanent reductions in the carrying amount of the assets (asset group).

Based on this evaluation, the Company believes that, as of each of the balance sheet dates presented, none of the Company’s long-lived assets were impaired.

The Company’s had no impairment of long-lived assets for the years ended December 31, 2021 and 2020.

Indefinite-lived Intangible Assets

Acquired in-process research and development (“IPR&D”) are intangible assets acquired in the July 2017 Napo merger.

Acquired IPR&D are intangible assets acquired in the July 2017 Napo merger.

Under ASC 805, IPR&D are initially recognized at fair value and classified as indefinite-lived assets until the successful completion or abandonment of the associated research and development efforts.

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An impairment loss is measured based on the excess of the carrying amount over the asset’s fair value.

The Company recorded an impairment of zero and $4.0 million in the years ended December 31, 2020 and 2019, respectively.

ASC 842, ‘ Leases ,” requires lessees to recognize right-of-use assets and lease liabilities for all leases with a term greater than 12 months regardless of their classification on the balance sheet and to provide expanded disclosures about leasing arrangements.

The Company adopted ASC 842 on January 1, 2019, using the optional transition method with no restatements of comparative periods.

There was no effect on the Company’s accumulated deficit upon adoption.

The Company recorded an impairment of zero for the years ended December 31, 2021 and 2020.

The Company accounts for its leases in accordance with ASC 842, Leases .

At the inception of an arrangement, the Company determines whether the arrangement is or contains a lease based on the unique facts and circumstances present.

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The Company had a non-cancelable operating lease with CA-Mission Street Limited Partnership for its offices in San Francisco, California, through September 30, 2020.

The lease agreement called for monthly base rents between $38,000 and $41,000 over the term of the lease.

The lease agreement called for monthly base rents

between $ 38,000 and $ 41,000 over the term of the lease.

The lease agreement was not renewed during the year ended December 31, 2020.

The Company entered into a sublease agreement with Peacock Construction, Inc., a California corporation, for office space located in San Francisco, California.

The term of the sublease began on August 31, 2020 and will expire on May 31, 2021, unless earlier terminated in accordance with the contract.

The rent under the sublease is $15,000 per month beginning October 1, 2020, which includes operating expenses and taxes.

The term of the sublease began on August 31, 2020 and expired on May 31, 2021.

The rent under the sublease was $ 15,000 per month beginning October 1, 2020, which includes operating expenses and taxes.

On October 1, 2020, the Company transitioned its operations from its existing premises to the sublease premises, which the Company expects will serve as its principal administrative headquarters.

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As a result, there was no right-of-use asset and lease liability recognized related to the sublease.

In April 2021, the Company entered into an office lease agreement with M & E, LLC, a California Limited Liability Company, to lease approximately 10,526 square feet of office space located in San Francisco, California, inclusive of office space currently covered under the sublease agreement with Peacock.

The term of the lease began on September 1, 2021 and will expire on August 31, 2024, unless earlier terminated.

The base rent under the lease will be $ 42,000 monthly for the first 12 months, $ 43,000 monthly for the next 12 months and $ 45,000 for the last twelve months.

In December 2021, the Company entered into the first amendment to the lease with M & E, LLC whereby the commencement date of one of the leased premises was modified to March 1, 2022.

Accordingly, the expiration of the lease was extended to February 28, 2025.

The base rent under the original agreement remained the same but will be due starting March 1, 2022.

In addition, the rent for one of the leased premises being occupied by the Company will continue to be $ 21,000 until the new commencement date.

Research and Development Expense

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Research and development expense is charged to operating expense in the period incurred.

Clinical Trial Accruals

Clinical trial costs are a component of research and development expenses.

The Company accrues and expenses clinical trial activities performed by third parties based upon actual work completed in accordance with agreements established with clinical research organizations and clinical sites.

The Company determines the costs to be recorded based upon validation with the external service providers as to the progress or stage of completion of trials or services and the agreed-upon fee to be paid for such services.

Revenue Recognition

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Contracts – Cardinal Health

Effective January 16, 2019, Napo engaged Cardinal Health as its exclusive third-party logistics distribution agent for commercial sales for the Company’s Mytesi product and to perform certain other services which include, without limitation, storage, distribution, returns, customer support, financial support, EDI and system access support (the “Exclusive Distribution Agreement”).

In addition to the terms and conditions of the Exclusive Distribution Agreement, Cardinal Health’s purchase of products, and assumption of title therein, is set forth in the Title Model Addendum.

The Title Model Addendum states that upon receipt of product at the 3PL Facility (Cardinal Health in La Vergne, Tennessee) from the Company, title and risk of loss for the Mytesi product purchased by Cardinal Health (excluding consigned inventory) shall pass to Cardinal Health, and title and risk of loss for consigned inventory shall remain with the Company until purchased by Cardinal Health in accordance with the Title Model Addendum.

Napo considers Cardinal Health the Company’s exclusive customer for Mytesi products per the Exclusive Distribution Agreement.

Effective January 16, 2019, Napo engaged Cardinal Health SPS as its exclusive third-party logistics distribution agent for commercial sales for the Company’s Mytesi product and to perform certain other services which include, without limitation, storage, distribution, returns, customer support, financial support, Electronic Data Interchange and system access support (the “Exclusive Distribution Agreement”).

On September 3, 2021, the Company ended its engagement with Cardinal Health as its exclusive title model customer for commercial sales and fully implemented its limited distribution Specialty Pharmacy model.

Cardinal Health continues to provide third-party logistics services for Mytesi.

The Company's Neonorm and botanical extract products are primarily sold to distributors, who then sell the products to the end customers.

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Performance obligations

For animal products sold by the Company, the single performance obligation identified above is the Company’s promise to transfer the Company’s animal products to distributors based on specified payment and shipping terms in the arrangement.

For animal products sold by the Company, the single performance obligation identified is the Company’s promise to transfer the Company’s animal products to distributors based on specified payment and shipping terms in the arrangement.

Product warranties are assurance-type warranties that do not represent a performance obligation.

For the Company’s human product, Mytesi, which is sold by Napo, the single performance obligation identified above is the Company’s promise to transfer Mytesi to Cardinal Health, the Company’s exclusive distributor for the product, based on specified payment and shipping terms as outlined in the Exclusive Distribution Agreement.

For the Company’s human product, Mytesi, the single performance obligation identified above is the Company’s promise to transfer Mytesi to Cardinal Health, based on specified payment and shipping terms as outlined in the Exclusive Distribution Agreement.

Transaction price

For contracts with Cardinal Health, for the Company, the transaction price is the amount of consideration to which the Company expects to collect in exchange for transferring promised goods or services.

For contracts with Cardinal Health, the transaction price is the amount of consideration to which the Company expects to collect in exchange for transferring promised goods or services.

The transaction price of Mytesi and Neonorm is the Wholesaler Acquisition Cost (“WAC”), net of discounts, returns, and price adjustments.

Allocate transaction price

For contracts with Cardinal Health, for the Company, the entire transaction price is allocated to the single performance obligation contained in each contract.

For contracts with Cardinal Health, the entire transaction price is allocated to the single performance obligation contained in each contract.

Revenue recognition

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Disaggregation of Product Revenue

Sales of Mytesi are recognized as revenue when the products are delivered to the wholesaler.

Sales of Mytesi are recognized as revenue at a point in time when the products are delivered to the wholesaler.

Net revenues from the sale of Mytesi were $ 3.3 million and $ 9.3 million for the years ended December 31, 2021 and 2020, respectively.

The Company recognized Neonorm revenues of $76,000 and $102,000 for the years ended

December 31, 2020 and 2019, respectively.

Revenues are recognized upon shipment, which is when title and control is transferred to the buyer.

The Company recognized Neonorm revenues of $ 62,000 and $ 76,000 for the years ended December 31, 2021 and 2020, respectively.

Revenues are recognized at a point in time upon shipment, which is when title and control is transferred to the buyer.

Sales of Neonorm Calf and Foal to distributors are made under agreements that may provide distributor price adjustments and rights of return under certain circumstances.

Contracts – Atlas Sciences, LLC

NP-500 drug product candidate (the “Patent Rights”) for an upfront cash payment of $1.5 million.

Effective April 15, 2020, the Company entered into a patent purchase agreement with Atlas Sciences, LLC (“Atlas”), pursuant to which Atlas agreed to purchase certain patents and patent applications relating to Napo’s NP-500 drug product candidate (the “Patent Rights”) for an upfront cash payment of $ 1.5 million.

Concurrent with the Patent Rights sale, the Company entered into a license agreement with Atlas (the “License Agreement”), pursuant to which Atlas granted the Company an exclusive 10 -year license to use the Patent Rights and improvements thereon to develop and commercialize NP-500 in all territories worldwide except Greater China (i.e., China, Hong Kong, Taiwan and Macau), inclusive of the right to sublicense NP-500 development and commercialization rights (“The License”).

Included in the arrangement with Atlas, the Company was obligated to initiate a proof of concept Phase 2 study of NP-500 under an investigational new drug (“IND”) application with the U.S.

Food and Drug Administration or an IND-equivalent dossier under appropriate regulatory authorities (the “Phase 2 study”) within nine months of

April 15, 2020.

Food and Drug Administration or an IND-equivalent dossier under appropriate regulatory authorities (the “Phase 2 study”) within nine months of April 15, 2020.

The Company would incur a trial delay fee if the Company failed to initiate the Phase 2 study by this date, for any reason, including the timely receipt of adequate funding to initiate the Phase 2 study.

Atlas had the right to terminate the License in the event that the Company (i) failed to complete the Phase 2 study within five years of

April 15, 2020 or (ii) had not timely initiated the Phase 2 study and thereafter failed to make three or more consecutive trial delay payments.

Performance obligations

The Patent Rights sale to Atlas and the Phase 2 study to be performed by the Company, identified above, represent a single transaction with two separate performance obligations;

with the sale of the Patent Rights, the Company transferred control of the internally generated Patent Rights to Atlas at the date of sale.

Transaction price

For the contract with Atlas, the upfront payment of $1.5 million from Atlas as consideration for the Patent Rights sale and the Phase 2 study, is variable consideration that is fully constrained due to the potential incurrence of a Trial Delay Fee of $2.5 million if the Phase 2 study had not been initiated by January 15, 2021.

The Company’s method for estimating the variable consideration was to use the most likely amount method.

The Company fully constrained the value of the variable consideration based on inherent uncertainty of timing of clinical trials.

Accordingly, at inception, the total transaction price of $1.5 million is deferred and the transaction price is zero.

Allocate transaction price

For the contract with Atlas, the transaction price of $1.5 million is allocated as follows:

(i) $1.0 million was allocated to the Phase 2 study using the cost-plus margin approach based on the price quoted by a third-party contract research organization, and (ii) $529,000 was allocated to the Patent sale using the Residual method.

Revenue recognition

For the contract with Atlas, control of the Patent Rights transferred to Atlas on the date of sale (at a point-in-time);

and with the Phase 2 study, the services were to be transferred to Atlas over the estimated 13.2 months of the study, which was set to run between October 2020 and November 2021.

In September 2020, the Company made the decision not to initiate the Phase 2 study and intended to negotiate the payment of the trial delay fee of $2.5 million and terminate this obligation in the contract.

In September 2020, the Company made the decision not to initiate the Phase 2 study and negotiated the payment of the trial delay fee of $ 2.5 million and terminated this obligation in the contract.

Because of this decision, the allocated transaction price for that performance obligation will not be recognized as revenue.

Likewise, the allocated transaction price for the Patent sale will not be recognized as revenue, as its recognition was dependent on initiating the Phase 2 study on or before January 15, 2021.

The Company derecognized $1.5 million in deferred revenue and the excess of the trial delay fee was recognized in "General and Administrative Expenses"

in the consolidated statements of operations.

The Company derecognized $ 1.5 million in deferred revenue and the excess of the trial delay fee was recognized in general and administrative expenses in the consolidated statements of operations.

The payment was deemed not in exchange for a distinct good or service.

The Company evaluated the nature of the consideration payable to the customer and the rights and obligations in the related contract and concluded that the excess payment or loss should be presented as part of the "General and Administrative Expenses"

due to the following factors:

● No revenue has been recognized from the transaction as performance obligations were not satisfied.

● No revenue has been recognized from the transaction as the performance obligation was not satisfied.

● The Company settled the trial delay fee in full in October 2020, which constitutes termination of the customer relationship considering that Atlas cannot compel the Company or has no recourse to force the Company to initiate the Phase 2 Study.

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As of December 31, 2020, the shares of common stock have all been issued and the pre-funded warrants have all been exercised.

Contracts – Specialty Pharmacies

Effective October 1, 2020, the Company engaged a private company as its third-party logistics distribution agent for commercial sales of the Company’s Mytesi product.

Under the Specialty Product Distribution Agreement, the Company shall supply the products to the private company’s specialty pharmacies, through a designated wholesaler, in such amounts as may be ordered.

There is no minimum purchase or inventory requirement.

The specialty pharmacies were authorized distributors of record for all National Drug Codes (“NDCs”) of Mytesi.

Effective April 20, 2021, the Company engaged another private company as an authorized specialty pharmacy provider of Mytesi.

Under the Specialty Pharmacy Distribution and Services Agreement, the private company shall sell and dispense the Mytesi directly ordered from the Company at the agreed price to patients within the territories identified in the agreement.

The two contracts with the two specialty pharmacies were combined into one portfolio of contract as they share similar characteristics.

Performance obligations

The single performance obligation is the Company’s promise to transfer Mytesi to specialty pharmacies, based on specified payment and shipping terms outlined in the agreements.

Transaction price

The transaction price is the amount of consideration to which the Company expects to collect in exchange for transferring the promised goods or services.

The transaction price of Mytesi is the WAC, net of estimated discounts, returns, and price adjustments.

Allocate transaction price

The entire transaction price is allocated to the single performance obligation contained in each contract.

Revenue recognition

The single performance obligation is satisfied at a point in time, upon the free on board (“FOB”) terms of each contract, when control, including title and all risks, has transferred to the customer.

Product Revenue

Sales of Mytesi are recognized as revenue at a point in time when the products are delivered to the specialty pharmacies.

Net revenues from the sale of Mytesi to the specialty pharmacies were $ 993,000 and zero for the years ended December 31, 2021 and 2020, respectively.

Collaboration Revenue

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Knight will pay a transfer price for all licensed products, and upon achievement of certain regulatory and sales milestones, the Company may receive payments from Knight in an aggregate amount of up to approximately $ 18 million payable throughout the initial 15 -year term of the agreement.

The Company did not have any license revenues for the years ended

December 31, 2020 and 2019.

The Company did not have any license revenues for the years ended December 31, 2021 and 2020.

Modifications to Liability-classified Instruments

For the years ended December 31, 2020 and 2019, the Company modified certain debt instruments and Series D Perpetual Preferred Stock which is a liability-classified preferred stock (see Note 7).

In accounting for debt modifications and exchange transactions, it is the Company’s policy to first determine whether it qualifies as a Troubled Debt Restructuring pursuant to the guidance provided in ASC 470-60.

A debt modification or exchange transaction that is not within the scope of the ASC 470-60 is accounted for under ASC 470-50 to determine if the transation is a mere modification or an extinguishment.

In accounting for debt modifications and exchange transactions, it is the Company’s policy to first determine whether it qualifies as a Troubled Debt Restructuring (“TDR”) pursuant to the guidance provided in ASC 470-60.

A debt modification or exchange transaction that is not within the scope of the ASC 470-60 is accounted for under ASC 470-50 to determine if the transaction is a mere modification or an extinguishment.

The Company amended the terms of its October 2020 Purchase Agreement and Exchange Note 2 in the year 2021 (see Note 8).

The Company also amended the terms of its Exchange Note 1, Exchange Note 2, March 2020 Purchase Agreement, and Series D Perpetual Preferred Stock in the year 2020 (see Note 8).

Modifications to Equity-classified Instruments

For the years ended December 31, 2020 and 2019, the Company modified certain equity-classified warrants (see Note 8).

It is the Company’s policy to determine the impact of modifications to equity-classified warrants by analogy to the share-based compensation guidance of ASC 718, Compensation - Stock Compensation (“ASC 718”).

In accounting for modifications of equity-classified warrants, it is the Company’s policy to determine the impact by analogy to the share-based compensation guidance of ASC 718, Compensation - Stock Compensation (“ASC 718”).

The model for a modified share-based payment award that is classified as equity and remains classified in equity after the modification is addressed in ASC 718-20-35-3.

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however, in certain circumstances, such as when an entire class of warrants are modified, the measured increase in fair value may be more appropriately recorded as a deemed dividend, depending upon the nature of the warrant modification.

For the years ended December 31, 2020 and 2019, the Company modified the terms of its Series B Convertible Preferred Stock and Series 1, 2 and Bridge Note Warrants in one transaction (see Note 8) and Series C Perpetual Preferred Stock (see Note 9).

For amendments to preferred stock, it is the Company’s policy to measure the impact by analogy to ASC 470-50 in determining if such an amendment is an extinguishment or a modification.

The Company modified certain equity-classified warrants in the year 2020 (see Note 9).

The Company did not modify any equity-classified warrants in the year 2021.

In accounting for amendments to equity-classified preferred stock, it is the Company’s policy to measure the impact by analogy to ASC 470-50 in determining if such an amendment is an extinguishment or a modification.

If the amendment results in an extinguishment, the Company follows the SEC staff guidance in ASC 260-10-S99-2 and ASC 470-20.

If the amendment results in a modification, the Company follows the model in either ASC 718 or ASC 470-50, depending on the nature of the amendment.

The Company modified the terms of its Series B Convertible Preferred Stock and Series C Perpetual Preferred Stock in the year 2020 (see Note 10).

The Company did not modify any equity-classified preferred stock in the year 2021.

Stock-Based Compensation

The Company's Stock Incentive Plan (see Note 12) provides for the grant of stock options, restricted stock and restricted stock unit awards.

The Company measures stock awards granted to employees, non-employees and directors at fair value on the date of grant and recognizes the corresponding compensation expense of the awards, net of estimated forfeitures, over

the requisite service periods, which correspond to the vesting periods of the awards.

The Company measures stock awards granted to employees, non-employees and directors at estimated fair value on the date of grant and recognizes the corresponding compensation expense of the awards, net of estimated forfeitures, over the requisite service periods, which correspond to the vesting periods of the awards.

Forfeitures are estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates.

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The Company uses the grant date fair market value of its common stock to determine the grant date fair value of options granted to employees, non-employees and directors.

The Company measures and recognizes compensation expense for all stock options and restricted stock units (“RSUs”) granted to its employees and directors based on the estimated fair value of the award on the grant date.

The Company uses the Black-Scholes valuation model to estimate the fair value of stock option awards.

The fair value is recognized as expense, net of estimated forfeitures, over the requisite service period, which is generally the vesting period of the respective award, on a straight-line basis.

The Company believes that the fair value of stock options granted to non-employees is more reliably measured than the fair value of the services received.

The determination of the grant date fair value of options using an option pricing model is affected by the Company’s estimated Common Stock fair value and requires management to make a number of assumptions including the expected life of the option, the volatility of the underlying stock, the risk-free interest rate and expected dividends.

The Company estimates the fair value of stock options using the Black-Scholes option valuation model.

The fair value of employee stock options is being amortized on a straight-line basis over the requisite service period of the awards.

The fair market value of common stock is based on the closing price of the Company’s common stock as reported on the date of the grant.

The Company uses the asset and liability method of accounting for income taxes.

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A valuation allowance is provided when it is more likely than not that some portion or all of a deferred tax asset will not be realized.

The Company has adopted the provisions of ASC 740, Income Taxes Related to Uncertain Tax Positions .

Under these principals, tax positions are evaluated in a two-step process.

The Company first determines whether it is more-likely-than-not that a tax position will be sustained upon examination.

If a tax position meets the more-likely-than-not recognition threshold, it is then measured to determine the amount of benefit to be recognized in the financial statements.

The tax position is measured as the largest amount of benefit that has a greater than 50 percent likelihood of being realized upon ultimate settlement.

Foreign Currency Remeasurement and Translation

The functional currency of Napo Therapeutics is Euro.

The Company follows ASC 830, Foreign Currency Matters (“ASC 830”).

ASC 830 requires the assets, liabilities, and results of operations of a foreign operation to be measured using the functional currency of that foreign operation.

Exchange gains or losses from remeasuring transactions and monetary accounts in a currency other than the functional currency are included in current earnings.

For certain subsidiaries, translation adjustments result from the process of translating the functional currency of subsidiary financial statements into the U.S.

Dollar reporting currency.

These translation adjustments are reported separately and accumulated in the consolidated balance sheets as a component of accumulated other comprehensive loss.

Comprehensive Loss

For all periods presented, the comprehensive loss was equal to the net loss;

therefore, a separate statement of comprehensive loss is not included in the accompanying consolidated financial statements.

The Company follows ASC 220, Comprehensive Income , which establishes standards for reporting and displaying comprehensive income and its components (revenue, expenses, gains and losses) in a full set of general-purpose financial statements.

For the year ended December 31, 2020, the comprehensive loss was equal to the net loss;

therefore, a separate statement of comprehensive loss was not included in the accompanying consolidated financial statements.

For the year ended December 31, 2021, the amount of other comprehensive loss was only de minimis;

hence, a separate statement of comprehensive loss was not also included in the accompanying consolidated financial statements.

Basic and Diluted Net Loss Per Common Share

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Recent Accounting Pronouncements

Recently Adopted Accounting Pronouncements

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740):

Simplifying the Accounting for Income Taxes, which is intended to simplify various aspects related to accounting for income taxes.

The standard also removes certain exceptions to the general principles in Topic 740 and clarifies and amends existing guidance to improve consistent application.

The Company adopted the standard on January 1, 2021.

The adoption of this standard did not have a material effect on the Company’s consolidated financial statements and related disclosures.

Recently Issued Accounting Pronouncements Not Yet Adopted

In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326):

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The Company is still evaluating the impact of the adoption of this standard.

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820):

Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement.

The primary focus of the standard is to improve the effectiveness of the disclosure requirements for fair value measurements.

The changes affect all companies that are required to include fair value measurement disclosures.

The standard requires the use of the prospective method of transition for disclosures related to changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop fair value measurements categorized within Level 3 of the fair value hierarchy, and narrative description of measurement uncertainty.

All other amendments in the standard are required to be adopted retrospectively.

We adopted the standard on January 1, 2020.

The adoption of this standard did not have a material effect on the Company’s consolidated financial statements and related disclosures.

In November 2018, the FASB issued ASU 2018-18, Collaborative Arrangements (Topic 808):

Clarifying the Interaction Between Topic 808 and Topic 606.

ASU 2018-18 provides guidance on how to assess whether certain transactions between collaborative arrangement participants should be accounted for within the revenue recognition standard.

The standard also provides more comparability in the presentation of revenue for certain transactions between collaborative arrangement participants.

The standard is to be applied retrospectively to the date of the initial application of Topic 606 which also requires recognition of the cumulative effect of applying the amendments as an adjustment to the opening balance of retained earnings of the later or the earliest annual period presented and the annual period inclusive of the initial application of Topic 606.

We adopted the standard on January 1, 2020.

The adoption of this standard did not have a material effect on the Company’s consolidated financial statements and related disclosures.

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740):

Simplifying the Accounting for Income Taxes, which is intended to simplify various aspects related to accounting for income taxes.

The standard also removes certain exceptions to the general principles in Topic 740 and clarifies and amends existing guidance to improve consistent application.

The pronouncement was effective for the Company beginning January 1, 2021 with early adoption permitted.

The adoption of this standard will not have a material effect on the Company’s consolidated financial statements and related disclosures.

In August 2020, the FASB issued ASU 2020-06, Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40):

Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity , which simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts on an entity’s own equity.

The standard is effective for the Company beginning January 1, 2022 with early adoption permitted.

The pronouncement is effective for the Company beginning January 1, 2022 with early adoption permitted.

The Company is still evaluating the impact of the adoption of this standard.

In May 2021, the FASB issued ASU 2021-04, Issuer’s Accounting for Certain Modification or Exchanges of Freestanding Equity-Classified Written Call Options – a consensus of the FASB Emerging Issues Task Force.

The ASU provides a principles-based framework to determine whether an issue should recognize the modification or exchange as an adjustment to equity or an expense.

The amendments in the update are effective for all entities for fiscal years beginning January 1, 2022, including interim periods within those fiscal years with early adoption permitted.

The Company is still evaluating the impact of the adoption of this standard.

Reclassification of Prior Year Presentation

Certain prior year amounts in the Consolidated Statements of Changes in Convertible Preferred Stock and Stockholders’ Equity have been reclassified to be consistent with the current year presentation.

Certain prior period amounts of cash flows from financing activities in the consolidated statements of cash flows have been reclassified within the same category of cash flow activity to be consistent with the current period presentation.

There were no reclassifications to other categories of cash flow activity and the reclassification did not impact the profit or loss during the prior period.

Napo Therapeutics Subsidiary

As discussed in Note 1 – Organization and Business, Napo EU completed a merger with Dragon SPAC on November 3, 2021, with Dragon SPAC as the surviving entity.

Dragon SPAC took over by operation of law all the assets, rights, reasons, and actions as well as liabilities, obligations, and commitments of Napo EU.

The merged entity was named Napo Therapeutics.

Napo Therapeutics now operates as a subsidiary of Napo, with Napo owning 99 % of Napo Therapeutics’ equity.

This transaction was accounted for as a formation of a new subsidiary of the Company.

Fair Value Measurements

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Warrant liability

Streeterville note

Total fair value

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Warrant liability

Streeterville note

Beginning fair value of Level 3 liability

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Warrant Liability

The warrants associated with the Level 3 warrant liability were the November 2016 Series A Warrants, the October 2018 Underwriter Warrants and the May 2020 Series 3 Warrants, which, at December 31, 2020, were valued at zero, $4,000 and $175,000 respectively, in the Company’s consolidated balance sheet.

The warrants associated with the Level 3 warrant liability activity for the year ended December 31, 2019 were the November 2016 Series A Warrants, the October 2018 Underwriter Warrants, the March 2019 LOC Warrants and the Bridge Warrants, which at December 31, 2019 were valued at zero, $3,000, zero and zero, respectively in the Company’s consolidated balance sheet.

The warrants associated with the Level 3 warrant liability were the November 2016 Series A Warrants and the October 2018 Underwriter Warrants, which, at December 31, 2021, were valued at zero and $ 1,000 , respectively, in the Company’s consolidated balance sheet.

The warrants associated with the Level 3 warrant liability activity for the year ended December 31, 2020 were the November 2016 Series A Warrants, the October 2018 Underwriter Warrants, and the May 2020 Series 3 Warrants, which at December 31, 2020 were valued at zero , $ 4,000 , and $ 175,000 , respectively in the Company’s consolidated balance sheet.

The November 2016 Series A Warrants

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The Series A warrant valuation of zero at December 31, 2020 was computed using the Black-Scholes-Merton pricing model using a stock price of $ 2.45 , a strike price of $ 2,363 per share, an expected term of 1.41 years, volatility of 148 % and a risk-free discount rate of 0.13 % .

The net change in the fair value of the warrants is zero for the year ended December 31, 2020.

The net change in the fair value of the warrants was zero for the year ended December 31, 2021.

The October 2018 Underwriter Warrants

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The October 2018 Underwriter Warrants valuation of $ 4,000 at December 31, 2020 was computed using the Black-Scholes-Merton pricing model using a stock price of $ 2.45 , a strike price of $ 158 per share, an expected term of 2.76 years, volatility of 156 % and a risk-free discount rate of 0.17 % .

The net increase in the fair value of the warrants of $1,000 for the year ended December 31, 2020, was recorded as a loss in the change in fair value of financial instruments in the consolidated statement of operations.

The net decrease in the fair value of the warrants of $ 3,000 for the year ended December 31, 2021 was recorded as a gain in the change in fair value of financial instruments and hybrid instrument designated at FVO in the consolidated statements of operations.

The May 2020 Series 3 Warrants

There were no outstanding May 2020 Series 3 Warrants as of December 31, 2021.

The May 2020 Series 3 Warrants valuation of $ 175,000 at December 31, 2020 was computed using the Black-Scholes-Merton pricing model using a stock price of $ 2.45 , a strike price of $ 0.00 per share, an expected term of 4.89 years, volatility of 142 % and a risk-free discount rate of 0.36 % .

The May 2020 Series 3 Warrants valuation of $3.7 million at issuance on May 22, 2020 was computed using the Black-Scholes-Merton pricing model using a stock price of $0.44, a strike price of $0.05 per share, an expected term of 5.50 years, volatility of 142% and a risk-free discount rate of 0.34%.

As of December 31, 2020, certain holders of the Series 3 Warrants agreed to exercise 8,456,352 shares for a 1-for-1 exchange of common shares in an Alternate Cashless Exercise.

The net increase in the fair value of the warrants of $2.5 million for the year ended December 31, 2020 was recorded as a loss in the change in fair value of financial instruments in the consolidated statement of operations.

In January 2021, an investor received 135,416 Series 3 Warrants for the exercise of 135,416 2019 Bridge Note Warrants in accordance with the May 2020 Modification of the 2019 Bridge Note Warrants and Inducement Offer.

The fair value of these Series 3 Warrants was $ 1.5 million on the issuance date.

For the year ended December 31, 2021, certain holders of the Series 3 Warrants agreed to exercise total of 206,915 shares for a 1-for-1 exchange of common shares in an Alternate Cashless Exercise.

The aggregate fair value of the common stock issued upon the exercise of the Series 3 Warrants as of the exercise date was $ 1.8 million.

The net increase in the fair value of the warrants of $ 138,000 for the year ended December 31, 2021 was recorded as a loss in the change in fair value of financial instruments and hybrid instrument designated at FVO in the consolidated statements of operations.

Streeterville Note

The fair value of the Streeterville Note at January 13, 2021, date of issuance and as of December 31, 2021 amounting to $ 6.0 million and $ 7.8 million, respectively, were based on the weighted average discounted expected future cash flows representing the terms of the note, discounting them to their present value equivalents.

This was classified as Level 3 fair values in the fair value hierarchy due to the use of unobservable inputs, including the Company’s own credit risk.

The Company determined and performed the valuations of the Streeterville Note with the assistance of an independent valuation service provider.

On a quarterly basis, the Company considers the main Level 3 inputs used as follows:

● Discount rate for the Streeterville note was determined using a comparison of various effective yields on bonds as of the valuation date.

● Market indications for vouchers, which affect the Return Bonus from the sale of Tropical Disease Priority Review Voucher (“TDPRV”)

● Weighted probability of cash outflows was estimated based on the entity's knowledge of the business and how the current economic environment is likely to impact the timing of the cash outflows, attributed to the different repayment features of the note.

The following table summarizes the quantitative information about the significant unobservable inputs used in Level 3 fair value measurement:

Range of Inputs

(probability-weighted average)

Relationship of unobservable inputs

Unobservable Inputs

to fair value

Risk Adjusted Discount Rate

6.78 % - 21.31 %

If discount rate is adjusted to total of additional 100 basis points (bps), fair value would have decreased by $ 367,000 .

If discount rate is adjusted to total deduction of 100 bps, fair value would have increased by $ 367,000 .

Sales Proceeds:

Amount of comparable TDPRV

$ 67.5 million to $ 350.0 million ($ 100.0 million)

If expected cash flows by management considered the lowest amount of market indications for vouchers, FV would have decreased by $ 1.2 million.

If expected cash flows by management considered the highest amount of market indications for vouchers, FV would have increased by $ 9.5 million.

Range of Probability for Timing of Cash Flows:

Variations of the terms and conditions of the timing of cash flows, including settlement of the note principal, interest, penalties, and acceleration clause.

0.35 % - 46.06 %

If expected cash flows by management considered the scenario with the least amount of indicated value, FV would have decreased by $ 236,000 .

If expected cash flows by management considered the scenario with the greatest amount of indicated value, FV would have increased by $ 2.3 million.

Fair Value Option

Beginning January 1, 2021, the Company elected to apply the FVO accounting to selected financial instruments to align the measurement attributes of those instruments under U.S.

GAAP and to simplify the accounting model applied to those financial instruments.

The Company elected to apply FVO accounting to the entire class of hybrid instruments, including structured notes, of which there are assessed embedded derivatives that would be eligible for bifurcation.

Changes in the fair value of FVO assets and liabilities as well as the mark-to-market adjustment on the entire class of hybrid instruments, including derivatives and the net realized gains or losses on these instruments are reported in the change in fair value of financial instruments and hybrid instrument designated at FVO in the consolidated statements of operations.

For the year ended December 31, 2021, the Company did not note any fair value movement on FVO liabilities attributable to any instrument-specific credit risk, which should be recorded in other comprehensive income (loss).

Hybrid Instruments

The Company elected to apply FVO accounting to all of the hybrid instruments issued, including structured notes.

The valuation of the hybrid instruments is predominantly driven by the derivative features embedded within the instruments.

The Company determined and performed the valuations of the hybrid instruments with the assistance of an independent valuation service provider.

The valuation methodology utilized is consistent with the income approach for estimating the fair value of the interest-bearing portion of the instrument and the related derivatives.

Cash flows of the hybrid instruments in their entirety, including the embedded derivatives, are discounted at an appropriate rate for the applicable duration of the instrument.

Interest on the interest-bearing portion of the instrument that is held to maturity is aggregated as gain (loss) on instruments designated at fair value and related derivatives in the change in fair value of financial instruments and hybrid instruments designated at FVO in the consolidated statements of operations.

The following table summarizes the fair value and unpaid principal balance for items the Company accounts under FVO:

(in thousands)

Unpaid Principal Balance

Fair Value Over (Under) Unpaid Principal Balance

At December 31, 2021

Hybrid Instrument:

Streeterville note

Related Party Transactions

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(“Iliad”), a Utah limited partnership affiliated with CVP, agreed to issue 2,289,474 shares of the Company’s Common Stock to Sagard Capital pursuant to the Stock Plan Agreement for termination of the Management Services Agreement in lieu of payment of $ 1.1 million in accrued consulting and management fees.

For the years ended December 31, 2020 and 2019, total fees incurred were $338,000 and $439,000, respectively.

December 31, 2020 and 2019, the Company had a balance of zero and $788,000 due to Sagard Capital, respectively.

Consent and Waiver Fee

In May 2019, the Company paid Sagard Capital a consent and waiver fee of $250,000 to receive permission grant security interest in substantially all of the Company’s assets for the Company’s obligations under the restructured Napo December 2016 and Napo July 2017 Notes (see Note 7).

For the years ended December 31, 2021 and 2020, total fees incurred were zero and $ 338,000 , respectively.

As of December 31, 2021 and 2020, the Company had a balance of zero due to Sagard Capital.

Letter of Credit

In August 2018, to satisfy a letter of credit requirement in the Company’s office lease agreement (see Note 5), Pacific Capital Management, LLC, one of the Company’s existing shareholders, caused its financial institution to issue a letter of credit in the amount of $475,000 on behalf of the Company.

In consideration of the letter of credit, in August 2018, the Company issued to Pacific Capital Management, LLC a warrant to purchase 9,580 shares of the Company’s common stock.

As additional consideration, a payment of $45,000 was made to Pacific Capital Management, LLC in November 2019.

On March 24, 2020, the Company entered into a letter of credit agreement with Dr.

Charles Conte, the brother of Lisa Conte, the Company’s President, CEO and member of the Company’s board of directors, pursuant to which the Company will, subject to CA-Mission Street Partnership’s consent, replace the existing letter of credit in the amount of $475,000 entered into on August 28, 2018 by the Company with CA-Mission Street Partnership to satisfy the letter of credit requirement in the Company’s office lease agreement with a new letter of credit in the amount of $475,000.

In consideration of the new letter of credit, the Company would pay Dr.

Conte an amount equal to $10,000 per month and reimburse up to $7,500 for reasonable out-of-pocket expenses incurred.

For the year ended December

31, 2020, total fees incurred were $65,000.

Charles Conte, the brother of Lisa Conte, the Company’s President, CEO and member of the Company’s board of directors (“BOD”), pursuant to which the Company replaced then existing letter of credit in the amount of $ 475,000 entered into on August 28, 2018 by the Company with CA-Mission Street Partnership to satisfy the letter of credit requirement in the Company’s office lease agreement with a new letter of credit in the amount of $ 475,000 .

In consideration of the new letter of credit, the Company paid Dr.

Conte an amount equal to $ 10,000 per month and agreed to reimburse up to $ 7,500 for reasonable out-of-pocket expenses incurred.

For the years ended December 31, 2021 and 2020, total fees incurred were zero and $ 65,000 , respectively.

In October 2020, CA Mission Street Partnership released the letter of credit agreement with Dr.

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Conte a prorated amount due through the effective date of the release of the letter of credit of $ 7,000 .

As of December 31, 2020, the Company had zero balance due to Dr.

2019 Bridge Notes

Between March 18, 2019 and June 26, 2019, three members of the Board of Directors of the Company entered into short-term Promissory Note Purchase Agreements with the Company:

(i) Lisa Conte, the Company’s CEO & President, purchased a short-term Promissory Note of $100,000 which the Company settled in July 2019.

In consideration for the short-term financing, the Company issued Ms.

Conte a warrant that became exercisable into 37,500 shares of the Company’s common stock;

(ii) James Bochnowski, purchased a short-term Promissory Note of $350,000 which the Company settled in July 2019.

In consideration for the short-term financing, the Company issued Mr.

Bochnowski a warrant that became exercisable into 218,750 shares of the Company’s common stock at an exercise price of $0.49 per share;

and (iii) Jonathan Siegel DBA JBS Healthcare Ventures, purchased a short-term Promissory Note of $75,000 which the Company settled in July 2019.

In consideration for the short-term financing, the Company issued Mr.

Siegel a warrant that became exercisable into 34,375 shares of the Company’s common stock at an exercise price of $0.49 per share.

In addition, Sagard Capital purchased a short-term Promissory Note of $500,000, which the Company settled in July 2019.

In consideration for the short-term financing, the Company issued Sagard Capital a warrant that became exercisable into 187,500 shares of the Company’s common stock at an exercise price of $0.49 per share;

and Jonathan Glaser, an existing shareholder, purchased short-term Promissory Notes of $500,000 which the Company settled in July 2019.

In consideration for the short-term financing, the Company issued Mr.

Glaser warrants that became exercisable into 250,000 shares of the Company’s common stock at an exercise price of $0.49 per share.

As of December 31, 2021 and 2020, the Company had a balance of zero due to Dr.

BOD Cash Compensation

Effective May 2021, the Company will pay the BOD cash compensation on a quarterly basis based on the Director Compensation Program for 2021.

For the year ended December 31, 2021, the Company paid approximately $ 124,000 cash compensation to its directors.

Commitments and Contingencies

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The term of the lease began on September 1, 2018 and expired on September 30, 2020.

The monthly base rent under the lease was as follows:

$38,000 for the first twelve months, $40,000 for the subsequent twelve months, and $41,000 for the final month.

The Company also paid an additional monthly amount for the Company’s proportionate share of the building’s operating charges.

An existing shareholder provided a standby letter of credit in the amount of $ 475,000 to the lessor as collateral for the full performance by the Company of all of its obligations under the lease.

In consideration of the Letter of Credit, the Company issued the shareholder a five-year warrant (see Note 9) to purchase 9,580 shares of the Company’s voting common stock.

The $494,000 fair value of the Warrant was classified in stockholders’ equity with an offset to deferred rent.

With the Company’s adoption of ASC 842 on January 1, 2019, the offset to the deferred balance was classified as a right-of-use asset.

In December 2018, the Company did not meet a covenant per the terms of the $475,000 Letter of Credit, the result of which required the Company to issue a Letter of Credit of $122,000 to the shareholder who issued the original $475,000 letter of credit.

In March 2019, the Company canceled the $122,000 letter of credit in lieu of issuing the shareholder a promissory note for that amount in April 2019, as well as issuing the shareholder a warrant (see Note 8).

On August 31, 2020, the Company entered into an office sublease of approximately 5,263 square feet of office space in San Francisco.

The term of the sublease will expire on May 31, 2021.

The term of the sublease expired on May 31, 2021.

The rent sublease is $ 15,000 per month beginning on October 1, 2020, which includes operating expenses and taxes.

The Company recognizes rent expense on a straight-line basis over the non-cancelable lease period.

Rent expense was $633,000 and $745,000 for the years ended December 31, 2020 and 2019, respectively.

Rent expense is included in general and administrative expenses in the consolidated statements of operations.

The Company recognizes rent expense on a straight-line basis over the non-cancellable lease period.

Rent expense, included in general and administrative expenses in the consolidated statements of operations, was $ 75,000 and $ 45,000 for the year ended December 31, 2021 and 2020, respectively.

As of December 31, 2021, there were no remaining commitments under the lease.

On April 6, 2021, the Company entered into an office lease agreement of approximately 10,526 square feet of office space in San Francisco, inclusive of office space covered under the previous sublease agreement.

The term of the lease began on September 1, 2021 and will expire on August 31, 2024, unless terminated earlier.

The lease has an early occupancy provision which entitled the Company to use a portion of the leased premises on June 1, 2021, free of rent obligation.

In addition, the Company has the option to extend the lease for one three-year period after the expiration date.

This option was not included as part of the lease term as the Company was not reasonably certain to exercise it, hence the lease term only includes the noncancellable period of three years plus the period of early occupancy.

The base rent under the lease were $ 42,000 monthly for the first 12 months, $ 43,000 monthly for the next 12 months and $ 45,000 for the last twelve months.

The lease agreement only contained one lease component, that is, the lease of the office space.

Non-lease components such as payment of building operating costs and share in real property taxes were accounted for separately and were not considered as part of the total lease payments.

The lease was classified as an operating lease.

On December 24, 2021, the Company entered into the first amendment of the lease of office space in San Francisco.

The expiration of the lease was extended to February 28, 2025 due to the change in the commencement date of one of the leased premises to March 1, 2022.

The base rent under the lease amendment remained the same but will only be due starting March 1, 2022.

The rent in one of the leased premises currently being occupied by the Company was and will still be $ 21,000 until the new commencement date.

The lease amendment constituted a lease modification where the Company remeasured the original lease liability using a discount rate determined at the effective date of the modification and the amount of remeasurement of the lease liability was recognized as an adjustment to the corresponding right-of-use asset without affecting profit or loss.

The table below provided additional details of the office space lease presented in the consolidated balance sheet:

(in thousands)

Operating lease - right-of-use asset

Operating lease liability, current

Operating lease liability, net of current portion

Weighted-average remaining life (years)

Weighted-average discount rate

Lease cost included in general and administrative expenses in the consolidated statements of operations for the year ended December 31, 2021 was approximately $ 144,000 .

For the year ended December 31, 2021 and 2020, cash paid for operating lease liabilities recognized under operating cash flows amounted to $ 105,260 and $ 357,079 , respectively.

Non-cash investing and financing activities for the year ended December 31, 2021 and 2020 include addition to right-of-use asset obtained from new operating

liabilities amounting to $ 1.1 million and zero , respectively, and lease modification amounting to $ 91,243 and zero , respectively.

The following table summarizes the undiscounted cash payment obligations for the operating lease liability:

(in thousands)

Total undiscounted operating lease payments

Imputed interest expenses

Total operating lease liability

Operating lease liability, current

Operating lease liability, net of current portion

On October 10, 2021, the Company also entered into a short-term office lease in Milan, Italy.

The term of the lease began on November 1, 2021 and will expire on April 30, 2022, subject to automatic renewal equal to the present term until terminated by mutual agreement.

The Company recognizes rent expense on a straight-line basis over the non-cancellable lease period.

Rent expense, included in general and administrative expenses in the consolidated statements of operations, was $ 23,000 and zero for the years ended December 31, 2021 and 2020, respectively.

Purchase Commitment

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The service order covers the Company’s planned upcoming pivotal Phase 3 clinical trial for cancer-therapy related diarrhea.

As consideration for its services, the Company will pay Integrium a total amount of up to approximately $12.4 million that will be paid over the term of the engagement and based on the achievement of certain milestones.

As consideration for its services,

the Company will pay Integrium a total amount of up to approximately $ 12.4 million that will be paid over the term of the engagement and based on the achievement of certain milestones.

The 2020 MSA will terminate upon the satisfactory performance of all services to be provided thereunder unless earlier terminated by the parties.

Angel Pond Agreement

In October 2019, the Company engaged Angel Pond Capital LLC to explore potential licensing agreements and collaborations for Mytesi in China.

In consideration of these services, the Company compensated Angel Pond Capital LLC with $140,000, paid via the issuance of 166,667 shares of the Company’s common stock, for the initial four-month term of the agreement.

The Company had the option to extend the agreement term for two months for $30,000 payable in shares of the Company’s common stock.

As of December 31, 2020, no qualifying amounts were raised in China and no amounts are owed to Angel Pond as compensation.

The Company did not extend the agreement with Angel Pond Capital LLC and it has expired.

Asset Transfer and Transition Commitment Update

For the year ended December 31, 2021 and 2020, the Company paid Integrium $ 1.7 million and $ 529,000 , respectively.

Asset Transfer and Transition Commitment

On September 25, 2017, Napo entered into the Termination, Asset Transfer and Transition Agreement dated September 22, 2017 with Glenmark.

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In exchange, Napo agrees to pay Glenmark 25 % of any payment it receives from a third party to whom Napo grants a license or sublicense or with whom Napo partners in respect of, or sells or otherwise transfers any of the transferred assets, subject to certain exclusions, until Glenmark has received a total of $ 7.0 million.

No payments have been made to date.

For the year ended December 31, 2021 and 2020, the Company paid Glenmark $ 2.0 million and zero , respectively.

Revenue Sharing Commitment Update

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On July 20, 2017, a putative class action complaint was filed in the United States District Court, Northern District of California, Civil Action No.

3:17-cv-04102, by Tony Plant (the “Plaintiff”) on behalf of shareholders of the Company who held shares on April 12, 2017 and were entitled to vote at the 2017 Special Shareholders Meeting, against the Company and certain individuals who were directors as of the date of the vote (collectively, the

“Defendants”), in a matter captioned Tony Plant v.

Jaguar Animal Health, Inc., et al.

(Jaguar Health, Inc.

was formerly known as Jaguar Animal Health, Inc.), making claims arising under Section 14(a) and Section 20(a) of the Exchange Act and Rule 14a-9, 17 C.F.R.

§ 240.14a-9, promulgated thereunder by the SEC.

The claims alleged false and misleading information provided to investors in the Joint Proxy Statement/Prospectus on Form S-4 (File No.

333-217364) declared effective by the Commission on July 6, 2017 related to the solicitation of votes from shareholders to approve the merger and certain transactions related thereto.

The Company accepted service of the complaint and summons on behalf of itself and the United States-based director Defendants on November 1, 2017.

The Company has not accepted service on behalf of, and Plaintiff has not yet served, the non-U.S.-based director Defendants.

By order dated September 20, 2018, the court dismissed the lawsuit for failure to state a claim.

Plaintiff was entitled to amend that complaint within 20 days from the date of dismissal.

On October 10, 2018, Plaintiff filed a second amended complaint to focus on the Company’s commercial strategy in support of Equilevia and the related disclosure statements in the Form S-4 described above.

On November 6, 2018, the Defendants moved to dismiss the second amended complaint.

The court denied the Defendants’ motion to dismiss on June 28, 2019.

The Company answered the second amended complaint on August 2, 2019;

3:17-cv-04102, by Tony Plant (the “Plaintiff”).

The Company answered the complaint on August 2, 2019;

the answer denied the material allegations of the second amended complaint.

Following the completion of document discovery, the parties engaged in a mediation that resulted in an agreement in principle to settle the litigation on a class-wide basis for $2.6 million, subject to court approval.

Plaintiff filed a motion for preliminary approval of the proposed settlement on December 30, 2020.

The court preliminarily approved the proposed settlement, and authorized Plaintiff to provide settlement class members with notice of the proposed settlement, in an order dated February 2, 2021.

The final settlement approval hearing is currently scheduled for May 27, 2021.

Assuming that the court gives final approval to the proposed settlement following the final settlement approval hearing, the entire settlement consideration will be provided by the Company’s director and officer liability insurance carrier.

Following the completion of document discovery, the parties engaged in a mediation that resulted in an agreement in principle to settle the litigation on a class-wide basis for $ 2.6 million.

On May 27, 2021, the court gave the final approval to the proposed settlement and the entire settlement consideration will be provided by the Company’s director and officer liability insurance carrier.

Under the loss recovery model in ASC 450 and in reference to ASC 410, the ultimate net income effect of the recognized loss and the insurance proceeds directly related to the recognized loss is zero .

December 31, 2020, the Company concluded not to record any loss contingency and insurance recovery.

As of December 31, 2021 and 2020, the Company concluded not to record any loss contingency and insurance recovery.

Settlement of Underwriter Fee

1 unchanged sentence

In the first quarter of 2020, the Company and the underwriter agreed on a final settlement for the underwriter services comprised of a cash payment, warrants and common stock.

The cash payment amount totaled $387,000, of which $202,000 had been paid in 2019, and $185,000 was paid in 2020.

The total warrant issuance payment consisted of the Company issuing 1,096 equity-classified warrants to the underwriter in 2018 and, in 2020, issuing an additional 100,780 equity-classified warrants (see Note 8) to the underwriter to purchase shares of common stock at an exercise price of $2.50 per share.

The cash payment amount totalled $ 387,000 , of which $ 202,000 had been paid in 2019, and $ 185,000 was paid in 2020.

The total warrant issuance payment consisted of the Company issuing 365 equity-classified warrants to the underwriter in 2018

and, in 2020, issuing an additional 33,593 equity-classified warrants (see Note 9) to the underwriter to purchase shares of common stock at an exercise price of $ 7.50 per share.

The common stock issuance payment consisted of the Company issuing 33,333 shares of the Company’s common stock to the underwriter with a value of $ 45,000 in 2020.

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Contingencies

From time to time, the Company may be involved in legal proceedings (other than those noted above) arising in the ordinary course of business.

The Company believes there is no litigation pending that could have, individually or in the aggregate, a material adverse effect on the financial position, results of operations or cash flows.

From time to time, the Company maybe a party to various legal actions, both inside and outside the U.S., arising in the ordinary course of its business or otherwise.

The Company accrues amounts, to the extent they can be reasonably estimated, that the Company believes will result in a probable loss (including, among other things, probable settlement value), to adequately address any liabilities related to legal proceedings and other loss contingencies.

A loss or a range of loss is disclosed when it is reasonably possible that a material loss will incur and can be estimated, or when it is reasonably possible that the amount of a loss, when material, will exceed the recorded provision.

The Company did not have any material accruals for any currently active legal action in its consolidated balance sheets as of December 31, 2021, as the Company could not predict the ultimate outcome of these matters, or reasonably estimate the potential exposure.

Balance Sheet Components

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Total intangible assets, net

In June 2019, the Company determined that in-process research and development was impaired and recorded an impairment loss of $4.0 million in the consolidated statement of operations for the year ended December 31, 2019.

Amortization expense of finite-lived intangibles was $1.7 million for the years ended December 31, 2020 and 2019.

Amortization expense of finite-lived intangible assets was $ 1.7 million for the years ended December 31, 2021 and 2020.

The following table summarizes the Company’s estimated future amortization expense of intangible assets with finite lives as of December 31, 2021:

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(in thousands)

Accrued interest

Accrued legal costs

Accrued chargebacks and discounts

Accrued local tax

Accrued vacation

Accrued distributor services fees

Accrued audit and tax services

Accrued payroll and commission

Accrued payroll tax

Accrued interest

Accrued consulting

Accrued distributor services fees

Accrued legal costs

Accrued audit and tax services

Accrued chargebacks and discounts

Accrued other

Convertible Debt

June 2017 Convertible Debt

On June 29, 2017, the Company issued a secured convertible promissory note to CVP, in the aggregate principal amount of $2.2 million less an original issue discount of $425,000 and less $30,000 to cover the lender's legal fees for net cash proceeds of $1.7 million (the “June 2017 Note”).

Interest on the outstanding balance will be paid 8% per annum from the purchase price date until the balance is paid in full.

On August 2, 2018, the Company and CVP agreed to an amendment extending the maturity date to

August 26, 2019, and limiting the aggregate amount that CVP is permitted to redeem on a monthly basis to $500,000, which is the maximum aggregate redemption amount for all notes outstanding with CVP.

This amendment resulted in the Company accounting for the transaction as a TDR.

Between October 2018 and December 2018, the Company and CVP renegotiated the terms of the June 2017 Note agreement such that CVP agreed not to make any redemptions of the June 2017 Note until March 2019.

The restructurings in whole represented four separate restructurings of the June 2017 Note agreement, resulting in two TDRs accounted for under ASC 470-60 and two modifications accounted for under ASC 470-50.

In May 2019, the Company and CVP amended the June 2017 Note agreement such that the Company made three separate exchanges of principal and related accrued interest for shares of the Company’s common stock.

The first two exchanges of principal and accrued interest for common stock were not considered a substantial change to the June 2017 Note and therefore resulted in modification accounting and the determination of a new effective interest rate;

the third exchange on May 29, 2019 resulted in the extinguishment of the entire June 2017 Note with a corresponding extinguishment loss of $8,000.

At December 31, 2019, the June 2017 Note had been fully extinguished.

Napo Convertible Notes

December 2016 Convertible Debt

In December 2016, Napo entered into a note purchase agreement which provided for the sale of up to $12.5 million face amount of notes and issued convertible promissory notes (the “Napo December 2016 Notes”) in the aggregate face amount of $2.5 million to three lenders and received proceeds of $2.0 million which resulted in $500,000 of original issue discount.

In July 2017, Napo issued convertible promissory notes (the “Napo July 2017 Notes”) in the aggregate face amount of $7.5 million to four lenders and received proceeds of $6.0 million which resulted in $1.5 million of original issue discount.

The Napo December 2016 Notes and the Napo July 2017 Notes mature on December 30, 2019 and bear interest at 10% with interest due each six-month period after December 30, 2016.

On June 30, 2017, the accrued interest of $125,000 was added to principal of the Napo December Notes, and the new principal balance became $2.6 million.

Interest may be paid in cash or in the stock of Jaguar per terms of the note purchase agreement.

In each one year period beginning December 30, 2016, up to one-third of the principal and accrued interest on the notes may be converted into the common stock of the merged entity at a conversion price of $64.75 per share.

The Company assumed these convertible notes at fair value of $11.2 million as part of the Napo Merger.

The $1.0 million difference between the fair value of the notes and the principal balance was being amortized over the twenty-nine (29) month period from July 31, 2017 to December 31, 2019.

Interest expense is paid every nine months through the issuance of common stock.

On March 16, 2018, $535,000 of interest accrued through

January 31, 2018 and $170,000 of certain legal expenses were paid through the issuance of 4,081 shares of the Company's common stock.

In August 2018, the Company paid $480,000 of accrued interest through July 31, 2018 with the issuance of 4,582 shares of the Company’s common stock.

In January 2019, $447,000 of accrued interest was paid through the issuance of 19,751 shares of the Company's common stock.

Extinguishment and Exchange of the Napo Convertible Notes

In May 2019, in a restructuring of the Notes, CVP acquired the Napo December 2016 and Napo July 2017 Notes, as well as all rights thereof, and immediately extinguished the two Notes;

in their place, the Company issued to CVP a new note (“Exchange Note 1”).

At December 31, 2019, the balances of the Napo December 2016 and Napo July 2017 Notes were zero.

Concurrent with the restructuring, CVP also entered into security agreements with Jaguar (the “Jaguar Security Agreement”) and Napo (the “Napo Security Agreement”, and together with the Jaguar Security Agreement, the “Security Agreements”), pursuant to which CVP will receive (i) a security interest in substantially all of the Company’s assets as security for the Company’s obligations under Exchange Note 2 and (ii) a security interest in substantially all of Napo’s assets as security for Napo’s obligations under Exchange Note 1 and Exchange Note 2.

Notwithstanding the foregoing, (a) the amount owing under Exchange Note 2 will not be considered part of the obligations secured by the Napo Security Agreement and (b) the security interest granted under the Jaguar Security Agreement will be automatically terminated and released upon Jaguar’s receipt of a waiver from such third party.

Notes Payable

Notes Payable at December 31, 2020 and December 31, 2019 consisted of the following:

Other accrued liabilities as of December 31, 2021 largely consist of other accrued interests, contract fees and scientific advisory board fees while other accrued liabilities as of December 31, 2020 significantly comprise of contract fees and scientific advisory board fees.

Notes payable at December 31, 2021 and 2020 consisted of the following:

(in thousands)

Exchange Note 1

Exchange Note 2

Insurance Premium Financing

Tempesta Note Payable

Royalty Interest

Streeterville Note

Insurance Financing

Tempesta Note

Oasis Secured Borrowing

Exchange Note 2

unamortized discount and debt issuance costs

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Years ended December 31,

debt discount

unamortized discount and debt issuance costs

Future maturities are based on contractual minimum payments.

Timing of maturities may fluctuate based on

future revenue.

December 2017 Note

On December 8, 2017, the Company entered into a securities purchase agreement with CVP pursuant to which the Company issued a promissory note (the “December 2017 Note”) in the aggregate principal amount of $1.6 million for an aggregate purchase price of $1.1 million.

The December 2017 Note carried an original issue discount of $463,000, and the initial principal balance also included $25,000 to cover CVP’s transaction expenses.

The Company used the proceeds for general corporate purposes.

The December 2017 Note bore interest at the rate of 8% per annum and had an original maturity date of September 8, 2018.

On August 2, 2018, the Company and CVP amended the December 2017 Note agreement, extending the maturity date from September 8, 2018 to August 26, 2019, and limiting the aggregate amount that CVP is permitted to redeem on a monthly basis to $500,000, which amount was the maximum aggregate amount for the Notes collectively.

This amendment resulted in the Company accounting for the transaction as a TDR.

Between October 2018 and December 2018, the Company and CVP renegotiated the terms of the December 2017 Note agreement such that CVP agreed not to make any redemptions of the December 2017 Note until March 2019.

The modifications in whole represented four separate restructurings of the December 2017 Note agreement, resulting in two TDR accounted for under ASC 470-60 and two modifications accounted for under ASC 470-50.

In March 2019, the Company and CVP amended the December 2017 Note agreement such that the Company prepaid principal and accrued interest of $811,000 and $179,000, respectively, in shares of the Company’s common stock.

The exchange of debt for common stock was considered a substantial change to the December 2017 Note and therefore, the exchange resulted in extinguishment accounting and a corresponding extinguishment loss of $243,000.

For the year ended December 31, 2019, the Company recorded a loss on extinguishment of $363,061 for the December 2017 Note.

In April 2019, the Company and CVP amended the December 2017 Note agreement such that the Company made two separate exchanges of principal and related accrued interest for shares of the Company’s common stock.

The first exchange resulted in changes to cash flows that were considered substantial, resulting in extinguishment accounting with an extinguishment loss of $100,000;

the second exchange on April 17, 2019 resulted in the extinguishment of the entire December 2017 Note with a corresponding extinguishment loss of $19,000.

December 31, 2019, the December 2017 Note had been fully extinguished.

February 2018 Note

On February 26, 2018, the Company entered into a securities purchase agreement with CVP, pursuant to which the Company issued to CVP a promissory note (the “February 2018 Note”) in the aggregate principal amount of $2.2 million for an aggregate purchase price of $1.6 million.

The February 2018 Note carried an original issue discount of $656,000, and the initial principal balance also included $25,000 to cover CVP's transaction expenses.

The Company used the proceeds for general corporate purposes and working capital.

The February 2018 Note bore interest at the rate of 8% per annum and had an original maturity date of August 26, 2019.

Between October 2018 and December 2018, the Company and CVP renegotiated the terms of the February 2018 Note agreement such that CVP agreed not to make any redemptions of the February 2018 Note until March 2019.

The modifications in whole represented four separate restructurings of the February 2018 Note agreement, resulting in a debt extinguishment accounted for under ASC 470-50, two TDR accounted for under ASC 470-60 and a debt modification accounted for under ASC 470-50.

In March 2019, the Company and CVP amended the February 2018 Note agreement such that the Company prepaid principal and accrued interest of $2.0 million and $204,000, respectively, in shares of the Company’s common stock.

The exchange of debt for common stock was considered a substantial change to the February 2018 Note and therefore, the exchange resulted in extinguishment accounting and a corresponding extinguishment loss of $488,000.

In April 2019, the Company and CVP amended the February 2018 Note agreement such that the Company made a single exchange of principal and related accrued interest for shares of the Company’s common stock.

The first exchange on April 16, 2019 resulted in the extinguishment of the entire February 2018 Note with a corresponding extinguishment loss of $38,000.

At December 31, 2019, the February 2018 Note had been fully extinguished.

March 2018 Note

On March 21, 2018, the Company entered into a securities purchase agreement with CVP, pursuant to which the Company issued to CVP a promissory note (the “March 2018 Note”) in the aggregate principal amount of $1.1 million for an aggregate purchase price of $750,000.

The March 2018 Note carried an original issue discount of $315,000, and the initial principal balance also included $25,000 to cover CVP's transaction expenses.

The Company used the proceeds to fully repay certain prior secured and unsecured indebtedness.

The March 2018 Note bore interest at the rate of 8% per annum and had an original maturity date of September 21, 2019.

Between October 2018 and December 2018, the Company and CVP renegotiated the terms of the March 2018 Note agreement such that CVP agreed not to make any redemptions of the March 2018 Note until March 2019.

The modifications in whole represented four separate restructurings of the March 2018 Note agreement, resulting in a debt extinguishment accounted for under ASC 470-50, two TDR accounted for under ASC 470-60, and a debt modification accounted for under ASC 470-50.

Between January 2019 and March 2019, the Company and CVP amended the March 2018 Note agreement such that the Company prepaid principal and accrued interest of $1.1 million and $86,000, respectively, in shares of the Company’s common stock.

These exchanges in whole represented four separate prepayments of principal and accrued interest, resulting in three debt extinguishments and one debt modification.

For the debt extinguishments, the Company recorded an aggregate extinguishment loss of $1.2 million.

For the modification, a new effective rate was determined at the date of modification that equated the revised cash flows to the carrying amount of the March 2018 Note.

At December 31, 2019, the March 2018 Note had been fully extinguished.

2019 Bridge Notes

Between March 18, 2019 and June 26, 2019, the Company entered into Promissory Note Purchase Agreements with certain accredited investors under which the Company issued (i) fourteen promissory notes with a principal balance of $3.6 million and warrant coverage at 125% of principal, and (ii) seven promissory notes with a principal balance of $1.5 million and warrant coverage at 75% of principal.

Collectively, cash proceeds from the twenty-one promissory notes (collectively, the “2019 Bridge Notes”) was $5.0 million.

The 2019 Bridge Notes were not convertible and bore interest at 12% with a maturity date of July 18, 2019, at which date all principal and accrued interest were due.

The exercise price of the warrants was either (i) the price the Company issued common shares in its next public offering subject to a registration statement or (ii) if no such offering was consummated by the four-month maturity date of the 2019 Bridge Notes, then the exercise price would be equal to the closing price of the Company’s common stock on the 2019 Bridge Notes’ four-month maturity date.

The warrants were valued using the Black-Scholes-Merton option pricing model as follows:

range of stock prices between $4.84 and $32.90, a range of strike prices between $4.84 and $32.90 per share, an expected term of 5.0 years, a range of volatilities between 145.60% and 145.72%, and a range of risk-free discount rates between 1.76% and 2.23%.

The warrants for all twenty-one Bridge Notes had an issuance date fair value of $5.0 million which was recorded as a discount to the 2019 Bridge Notes and amortized to interest expense.

Between May and early July 2019, the Company and the 2019 Bridge Note investors extended the maturity date of the 2019 Bridge Notes from July 18, 2019 to July 31, 2019, or an addition of thirteen days;

this amendment to

the terms of the Promissory Note Purchase Agreements was accounted for as modification resulting to a new effective interest rate.

On July 23, 2019, the Company paid-off all twenty-one 2019 Bridge Notes prior to maturity.

The Company paid cash of $5.2 million, or $5.0 million of principal and $143,000 of accrued interest.

The extinguishment of the 2019 Bridge Notes resulted in an extinguishment loss of $336,000.

Exchange Notes

In May 2019, the Company and CVP entered into an Exchange Agreement whereby CVP purchased the two outstanding Napo convertible notes and all rights thereof from the current debt holders.

Subject to the terms of the Exchange Agreement, CVP and the Company agreed to exchange the two Napo convertible notes for Exchange Note 1.

At the exchange date, the principal balance of the two Napo convertible notes was $10.1 million, or $10.5 million inclusive of accrued but unpaid interest of $411,000.

The beginning principal balance of Exchange Note 1 was $10.5 million, or equal to the principal balance of the two Napo convertible notes and accrued interest thereon.

The maturity date of Exchange Note 1 was December 31, 2020, with an interest rate of 10%.

Per the terms of the Exchange Agreement, CVP agreed to extend the maturity date of Exchange Note 1 from December 31, 2019 (the same maturity date carried over from the two Napo convertible notes) to December 31, 2020;

in consideration of this extension, the Company issued Exchange Note 2 with a principal balance of $2.3 million.

The maturity date of Exchange Note 2 is December 31, 2020, with an interest rate of 10%.

The exchange of the two outstanding Napo convertible notes for Exchange Note 1 and Exchange Note 2 resulted in a loss on extinguishment of $2.0 million.

Between May 2019 and July 2019, the Company and CVP entered into note exchange agreements pursuant to which the Company made prepayments of principal and related accrued interest of $6.2 million and $90,000, respectively, in lieu of making cash payments to CVP on Exchange Note 1, by issuing 1,119,440 shares of the Company’s common stock to CVP.

For the year ended December 31, 2019, the Company recorded a loss on the extinguishment of $429,000 for Exchange Note 1.

Between September 2020 and November 2020, the Company and CVP entered into a series of note exchange agreements pursuant to which the Company made prepayments of principal and related accrued interest of an aggregate amount of $5.0 million, in lieu of making cash payments to CVP on Exchange Note 1, by issuing a total of 20,221,724 shares of the Company’s common stock to CVP.

The series of exchanges was accounted for as an extinguishment which resulted in a loss of $560,000.

As of December 31, 2020 and 2019, the carrying value of Exchange Note 1 is $0 and $4.4 million, respectively.

In September 2020, the Company and CVP also entered into a global amendment agreement, pursuant to which the maturity date of Exchange Note 2 is extended to December 31, 2021.

In consideration of CVP’s grant of extension, together with the related fees and other accommodation set forth, principal debt was increased by 5% of the outstanding balance of Exchange Note 2, which was $2.6 million as of the global amendment date.

The global amendment requires redemption of Series D Perpetual Preferred Stock prior to payment of principal of Exchange Note 2.

The Company determined the incremental value of cash flows amounting to $228,000 with the assistance of an independent valuation service provider, based on weighted probability assumptions of various settlement conditions and penalties stipulated in the contract therein.

The global amendment agreement was accounted for as a modification;

hence a new effective rate was determined at the date of modification that equated the revised cash flows to the carrying amount of the note.

Pursuant to the global amendment agreement, the Company issued 842,500 shares of Series D Perpetual Preferred Stock.

The Series D Perpetual Preferred shares are redeemable upon the option or discretion of the Company.

The Series D Perpetual Preferred stockholders are entitled to receive 8% cumulative stock dividends, to be payable in arrears on a monthly basis for 24 consecutive months.

Dividends payable on the Series D perpetual preferred shares shall be payable through the Company’s issuance of Series D Perpetual Preferred share by delivering to each record holder the calculated number of payment-in-kind (“PIK”) dividend shares.

The Series D Perpetual Preferred shares were classified as liability and were measured at fair value using the income approach, which considered the weighted probability of discounted cash flows at various scenarios of redemption and perpetual holding

of the shares.

The Company determined the fair value of $6.4 million at contract inception date with the assistance of an independent valuation service provider to be based on discounted cash flows representing the settlement value of the shares and cumulative dividends issued using an effective borrowing rate of 12% to 15% adjusted for counterparty and a maturity date of September 30, 2021.

In consideration of the global amendment agreement, no principal payment shall be made to the Exchange Note 2 until the redemption of Series D Perpetual Preferred shares.

Due to the restrictive nature of the timing of cash outflows in response to the settlement of the Exchange Note 2, Series D Perpetual Preferred shares are implicitly deemed to be mandatorily redeemable upon the ultimate settlement of the outstanding balance of Exchange Note 2.

The shares are redeemable at $8.00 per share on or before December 31, 2024, the date in which contractual cash outflows of the Exchange Note 2 require the entire settlement or redemption of the Series D Perpetual Preferred shares.

In December 2020, the Company entered into a series of exchange agreements with a stockholder pursuant to which the Company agreed to issue a total of 15,889,871 shares of common stock in exchange for redeeming 859,348 shares of Series D Perpetual Preferred Stock.

The series of exchanges was accounted for as an extinguishment which resulted to a loss amounting to $1.3 million.

This is included in loss on extinguishment of debt and conversion of Series D Perpetual Preferred Stock on the statement of operations as of December 31, 2020.

As of December 31, 2020, there were no Series D Perpetual Preferred shares outstanding.

In December 2020, the Company and CVP entered into a note exchange agreement to which the Company made a prepayment of principal amounting to $1.0 million, in lieu of making cash payments to CVP on Exchange Note 2, by issuing 1,250,000 shares of the Company’s common stock to CVP on December 31, 2020.

The exchange agreement was accounted for as a modification.

As of December 31, 2020 and 2019, the carrying value of Exchange Note 2, net of discount, was $1.4 million and $2.3 million, respectively.

Insurance Premium Financing

In May 2020, the Company entered into a financing agreement for $873,000 for a portion of the Company’s annual insurance premiums.

The balance is due in monthly installments over 9 months with an annual interest rate of 4.15%.

The financing balance was $95,000 as of December 31, 2020.

2019 Tempesta Note

In October 2019, the Company entered into a License Termination and Settlement Agreement with Dr.

Michael Tempesta, pursuant to which certain royalty payment disputes between Napo and Tempesta were settled.

Per the terms of the Agreement, Tempesta received $50,000 in cash, an unsecured promissory note issued by the Company in the aggregate principal amount of $550,000 and 40,000 shares of the Company’s common stock in exchange for the cessation of all royalty payments by Napo to Dr.

Tempesta under the License Agreements.

The $550,000 promissory note bears interest at the rate of 2.5% per annum and matures on March 1, 2025.

The promissory note provides for the Company to make semiannual payments equal to $50,000 plus accrued interest beginning on March 1, 2020 until the Note is paid in full.

At December 31, 2020 and 2019, the net carrying value of the Tempesta note was $450,000 and $550,000 respectively.

Timing of maturities may fluctuate based on future revenue.

Sale of Future Royalty Interest

2 unchanged sentences

Until such time as the Royalty Repayment Amount has been paid in full, the Company will pay Iliad ten percent ( 10 %) of the Company’s Net Sales on Included Products and ten percent ( 10 %) of worldwide revenues related to upfront licensing fees and milestone payments from licensees and/or distributors, but specifically excluding licensing fees and/or milestone payments that are reimbursements of clinical trial expenses (the “Royalty Payments”).

Beginning on the six-month anniversary of the Purchase Price Date and continuing until the 12-month anniversary of the Purchase Price Date, the monthly Royalty Payment shall be the greater of (a) $25,000, and (b) the actual Royalty Payment amount Iliad is entitled to for such month.

Beginning on the six-month anniversary of the Purchase Price Date and continuing until the 12-month anniversary of

the Purchase Price Date, the monthly Royalty Payment shall be the greater of (a) $ 25,000 , and (b) the actual Royalty Payment amount Iliad is entitled to for such month.

Beginning on the 12-month anniversary of the Purchase Price Date and continuing until the Revenue Repayment Amount has been paid in full, the monthly Royalty Payment shall be the greater of (a) $ 44,000 and (b) the actual Royalty Payment amount Iliad is entitled to for such month.

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The exchange agreement was accounted for as a TDR.

As of December 31, 2020, the carrying amount of the debt is zero.

As of December 31, 2020, the carrying amount of the debt was zero .

October 2020 Purchase Agreement

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Beginning on the 18-month anniversary of the Purchase Price Date and continuing until 24-month anniversary of the Purchase Price Date, the monthly Royalty Payment shall be the greater of (a) $ 600,000 and (b) the actual Royalty Payment amount Iliad is entitled to for such month.

Beginning on the 24-month

anniversary of the Purchase Price Date and continuing until the Royalty Repayment Amount has been paid in full, the monthly Royalty Payment shall be the greater of (a) $750,000, and (b) the actual Royalty Payment amount Iliad is entitled to for such month.

Beginning on the 24-month anniversary of the Purchase Price Date and continuing until the Royalty Repayment Amount has been paid in full, the monthly Royalty Payment shall be the greater of (a) $ 750,000 , and (b) the actual Royalty Payment amount Iliad is entitled to for such month.

The Royalty Interest amount of $ 12.0 million is classified as debt, net of a $ 6.0 million discount.

7 unchanged sentences

The change in the Royalty Repayment Amount was accounted for as a debt modification and resulted in a new discount rate of 45.42 % .

As of December 31, 2020, royalty payments did not start yet, hence the discount rate remained at 45.42%.

As of December 31, 2020, the carrying value of the debt is $6.3 million.

On April 13, 2021, the Company entered into an exchange agreement with Iliad, pursuant to which the parties agreed to partition $ 3.0 million from the original outstanding balance of the royalty interest.

The parties further agreed to exchange the partitioned royalty for 588,235 shares of the Company’s common stock.

The exchange consisted of Iliad surrendering the partitioned royalty in exchange for the exchange shares.

The exchange agreement was accounted for as a modification and resulted in a new discount rate of 77.09 % .

As of December 31, 2021, the forecasted future revenues changed which resulted to a new discount rate of 74.59 % .

Interest expense for the years ended December 31, 2021 and 2020 was $ 4.2 million and $ 543,000 , respectively.

As of December 31, 2021 and 2020, the carrying value of the debt was $ 6.3 million and $ 6.6 million, respectively.

December 2020 Purchase Agreement

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At issuance, based on projected cash outflows from future revenue streams, the discount rate was 23.70 % .

As of December 31, 2020, royalty payments did not start yet, hence the discount rate remained at 23.70%.

As of December 31, 2020, the carrying value of the debt is $6.0 million.

As of December 31, 2021, the forecasted future revenues changed which resulted to a new discount rate of 23.28 % .

Interest expense for the years ended December 31, 2021 and 2020 was $ 2.9 million and $ 14,000 , respectively.

As of December 31, 2021 and 2020, the carrying value of the debt was $ 7.6 million and $ 6.0 million, respectively.

March 2021 Purchase Agreement

On March 8, 2021, the Company entered into a purchase agreement (the “March 2021 Purchase Agreement”) with Streeterville Capital, LLC (“Streeterville”), a company affiliated with CVP, pursuant to which the Company sold a royalty interest entitling Streeterville to $ 10.0 million and any interest, fees, and charges as royalty repayment amount for an aggregate purchase price of $ 5.0 million.

Interest will accrue on the royalty repayment amount at a rate of 5 % per annum, compounding quarterly, and will increase to 10 % per annum, compounding quarterly on the 12-month anniversary of the closing date.

The Company will be obligated to make minimum royalty payments on a monthly basis beginning at the earlier of (a) 36 months following the closing date or (b) 30 days following the satisfaction of all existing royalties to Streeterville, and its affiliates namely Iliad and Irving, but not earlier than 18 months following the closing date in an amount equal to the greater of (i) $ 250,000 beginning on the royalty payment start date and continuing until either the royalty repayment amount has been paid in full or the 6-month anniversary of the royalty payment start date, $ 400,000 beginning on the 6-month anniversary of the royalty payment start date and continuing until either the royalty repayment amount has been paid in full or the 12-month anniversary of the royalty payment start date, $ 600,000 beginning on the 12-month anniversary of the royalty payment start date and continuing until either the royalty repayment amount has been paid in full or the 18-month anniversary of the royalty payment start date, $ 750,000 beginning on the 18-month anniversary of the royalty payment start date and continuing until the royalty repayment amount has been paid in full, and (ii) 10 % of the Company’s net sales on included products, 10 % of worldwide revenues related to upfront licensing fees and milestone payments from licensees and/or distributors but specifically excluding licensing fees and/or milestone payments that are reimbursements of clinical trial expenses or associated with the license of Included Products from the Company to Napo Therapeutics, including but not limited to the upfront fee payable by Napo Therapeutics to Napo for included products and Crofelemer for other indications;

and 50 % of royalties collected from licenses of the included products to third parties.

The Royalty Interest amount of $ 10.0 million is classified as debt, net of a $ 5.0 million discount, at initial recognition.

Under ASC 470-10-35-3, royalty payments to Streeterville will be amortized under the interest method per ASC 835-30.

Because there is no set interest rate, and because the royalty payments are variable, the discount rate is variable.

After each royalty payment, the Company will use a prospective method to determine a new discount rate based on the revised estimate of remaining cash flows.

The new rate is the discount rate that equates the present value of the revised estimate of remaining cash flows with the carrying amount of the debt, and it will be used to recognize interest expense for the remaining periods.

At issuance, based on projected cash outflows from future revenue streams, the discount rate was 19.36 %.

As of December 31, 2021, the forecasted future revenues changed which resulted to a new discount of 19.14 %.

Interest expense for the year ended December 31, 2021 was $ 1.2 million.

As of December 31, 2021, the carrying value of the debt was $ 5.8 million.

Streeterville Note

On January 13, 2021, the Company issued a secured promissory note to Streeterville in the original principal amount of $ 6.2 million for an aggregate purchase price of $ 6.0 million.

The Company will use the proceeds to fund development of the Company’s NP-300 (lechlemer) drug product candidate for the indication of the symptomatic relief of diarrhea from cholera and general corporate purposes, including the Company’s product pipeline activities.

The note is due after four years and bears interest at 3.25 % per annum.

Interest on the note is payable annually in advance by adding the interest charge for each upcoming year to the outstanding balance on the date each such interest charge is accrued.

The Company also paid $ 25,000 to cover legal fees, accounting costs, due diligence, monitoring and other transaction costs incurred in connection with the issuance of the note.

The first year of prepaid interest and the transaction expenses are included in the original principal amount.

At any time following the occurrence of a trial failure which refers to any of the following:

(i) the Company abandons the clinical trial with lechlemer for an indication for the symptomatic relief of infectious diarrhea for cholera;

(ii) the Company fails to start the Phase 1 clinical trial of lechlemer for the symptomatic relief of infectious diarrhea for cholera by July 1, 2022;

or (iii) the Company fails to meet all primary endpoints in the pivotal trials of Lechlemer for the symptomatic relief if infectious diarrhea for cholera with statistical significance, Streeterville may elect to increase the outstanding balance as of the date of the trial failure by 25 % without acceleration (the “Trial Failure Effect”).

If Streeterville elects to apply the Trial Failure Effect, it reserves the right to declare the outstanding balance immediately due and payable at any time.

As of December 31, 2021, no trial failure occurred.

Streeterville is entitled to a maximum of 18 % and a minimum of 1 % of the gross proceeds received by the Company from the sale of TDPRV (the “Return Bonus”).

The Return Bonus percentage is reduced pro rata based on the percentage of the original principal balance of the note that has been repaid as of the date of the sale of the TDPRV.

Even if the note has been paid in full at the time of the sale of the TDPRV, the Company is still obliged to pay Streeterville a Return Bonus of 1 %.

If Streeterville applies the Trial Failure Effect, the Return Bonus will automatically be reduced to 1 %.

If the TDPRV has not been sold as of the day immediately preceding the maturity date of the note, the Return Bonus percentage will be fixed as of such date.

As of December 31, 2021, the Company has not sold any TDPRV.

Beginning on the earlier of (a) 6 months after January 2021, and (b) initiation of human trials with lechlemer for symptomatic relief of infectious diarrhea for cholera, the Company may pay all or any portion of the outstanding balance earlier than it is due.

In the event the Company elects to prepay all or any portion of the outstanding balance, it shall pay to Streeterville 112.5 % of the portion of the outstanding balance the Company elects to prepay.

The Company may not prepay the note without the Streeterville’s consent on the date the last patient is enrolled in a pivotal trial.

After Streeterville becomes aware of the occurrence of any default, Streeterville may accelerate the note, with the outstanding balance becoming immediately due and payable in cash at the Mandatory Default Amount (i.e., the outstanding balance following the application of the Default Effect).

Streeterville reserves the right to declare the outstanding balance immediately due and payable at any time following the default.

Default Effect means multiplying the outstanding balance as of the date of default by 5 % or 15 % for each occurrence of default, capped at an aggregate of 25 %, and then adding the resulting product to the outstanding balance.

The percentage to be used depends on whether the default is viewed as minor or major as defined in the agreement.

Furthermore, interest accrues on the outstanding balance beginning on the date of default at an interest rate equal to the lesser of 18 % per annum or the maximum rate permitted under applicable law.

As of December 31, 2021, no default has occurred.

In connection with the note issuance, the Company has entered into a security agreement with Streeterville, pursuant to which Streeterville will receive a first priority security interest in all existing and future lechlemer technology, and any TDPRV and the sale proceeds therefrom that may be granted to the Company by the FDA in connection with the development of lechlemer for the cholera indication.

The Company also agreed, with certain exceptions, not to grant any lien on any of the collateral securing the note and not to grant any license under any of the intellectual property relating to such collateral.

The grant of security interest has become effective upon the receipt of the Salix Waiver on April 6, 2021 in observance to the requirement of the settlement agreement previously entered by the Company with Salix Pharmaceuticals, Inc.

The Company irrevocably elected to initially and subsequently apply the FVO accounting to the entire note.

The fair value at transaction date was equal to the cash proceeds received of $ 6.0 million.

The transaction expense of $ 25,000 was recognized in profit and loss as incurred.

The Company used the valuation report from an independent valuation service provided to measure the reporting date fair value of the note.

At December 31, 2021, the fair value was determined to be $ 7.8 million.

For the year ended December 31, 2021, the net increase in the fair value of $ 1.8 million was recorded as loss included in the change in fair value of financial instruments and hybrid instrument designated at FVO in the consolidated statements of operations.

Insurance Financing

Insurance Premium Financing

In May 2020, the Company entered into a financing agreement for $ 873,000 for a portion of the Company’s annual insurance premiums.

The balance is due in monthly installments over nine months with an annual interest rate of 4.15 %.

The financing balance was zero and $ 95,000 as of December 31, 2021 and 2020, respectively.

March 2021 First Insurance Financing

In March 2021, the Company entered into a premium finance agreement for $ 98,000 with First Insurance Funding (“First Insurance”) representing the unpaid balance of the total premiums, taxes, and fees of $ 115,000 with an annual interest rate of 4.6 %.

The total finance charge was $ 2,000 .

Payment of principal and interest is due in equal monthly installments over ten months .

The Company granted and assigned First Insurance a first priority lien on and security interest in the financed policies and any additional premium required under the financed policies.

Interest expense for the year ended December 31, 2021 was $ 2,000 .

The financing balance was $ 10,000 at December 31, 2021.

May 2021 First Insurance Financing

In May 2021, the Company entered into another premium finance agreement for $ 1.1 million with First Insurance representing the unpaid balance of the total premiums, taxes, and fees of $ 1.4 million with an annual interest rate of 4.15 %.

The total finance charge was $ 21,000 .

Payment of principal and interest is due in equal monthly installments over ten months .

Interest expense for the year ended December 31, 2021 was $ 13,000 .

The financing balance was $ 326,000 at December 31, 2021.

2019 Tempesta Note

In October 2019, the Company entered into a License Termination and Settlement Agreement with Dr.

Michael Tempesta, pursuant to which certain royalty payment disputes between Napo and Tempesta were settled.

Per the terms of the Agreement, Tempesta received $ 50,000 in cash, an unsecured promissory note issued by the Company in the aggregate principal amount of $ 550,000 and 13,333 shares of the Company’s common stock in exchange for the cessation of all royalty payments by Napo to Dr.

Tempesta under the License Agreements.

The $ 550,000 promissory note bears interest at the rate of 2.5 % per annum and matures on March 1, 2025.

The promissory note provides for the Company to make semiannual payments equal to $ 50,000 plus accrued interest beginning on March 1, 2020 until the Note is paid in full.

Interest expense for the year ended December 31, 2021 was $ 10,000 .

At December 31, 2021 and 2020, the net carrying value of the Tempesta note was $ 350,000 and $ 450,000 respectively.

Oasis Secured Borrowing

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With respect to purchased accounts, in the event that Oasis receives more than an amount equal to the sum of (i) the face amount of such purchased account multiplied by 0.0545 and (ii) the Purchase Price (such amount, the “Threshold Price”) from collection on such purchased accounts, then Oasis will return any such excess overage amount (the “Overage”) to the Company, as applicable, within five days after Oasis’s receipt thereof.

In the event Oasis does not receive at least the Threshold Price for a purchased account on or before such account becomes due and payable, the Company will, at Oasis’s election, be obligated to either (i) pay the difference between the Threshold Price and the amount received by Oasis for such account (the “Shortfall”) within 30 days thereof, or (ii) assign or transfer to Oasis additional accounts receivable with a Purchase Price equal to (A) the Shortfall plus (B) an amount equal to 25% of the Shortfall (the “Additional Amount”).

between the Threshold Price and the amount received by Oasis for such account (the “Shortfall”) within 30 days thereof, or (ii) assign or transfer to Oasis additional accounts receivable with a Purchase Price equal to (A) the Shortfall plus (B) an amount equal to 25 % of the Shortfall (the “Additional Amount”).

The initial term of the Purchase Agreement is one year , which will automatically renew for successive one-year periods unless notice of non-renewal is provided by the Company at least 30 days prior to the expiration of a term.

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The Company, having determined that it did not meet the criteria per ASC 860-10-40-5 to account for the transactions under the Purchase Agreement as sales, accounts for such transactions as secured borrowings in accordance with ASC 860-30, “Transfers – Secured Borrowings and Collateral.”

May 2020 Oasis Secured Note - Tranche #1

In May 2020, for the first sale under the terms of the Purchase Agreement, the Company received cash proceeds of $1.0 million from Oasis less a $25,000 transaction fee (the “Tranche #1 Secured Note”).

Oasis purchased accounts receivable with a carrying value of $1.7 million, or gross accounts receivable of $2.8 million net of chargebacks and discounts of $1.1 million.

The purchase was effectuated pursuant to an Assignment Agreement, dated May 12, 2020, between the Company and Oasis.

The Maturity Date, by which date Oasis must collect the $1.2 million Threshold Price, is on or before July 10, 2020.

The Company recorded the sale as a short-term secured borrowing with a principal amount of $1.0 million, or $1.2 million net of a $175,000 discount.

Though there was no stated interest rate, the effective interest rate was 147.9%.

The Tranche #1 Secured Note had a maturity date of July 10, 2020, or earlier if the Threshold amount was received by Oasis prior to that date (payment of the Threshold amount was the maturity date).

Accordingly, during the term of the Tranche #1 Secured Note, the effective interest rate was variable, dependent on the amount of any principal payment and payment dates.

On June 30, 2020, the Company made its final required payment to Oasis under the Tranche #1 Secured Note, with total payments equaling the $1.2 million Threshold amount, and the Tranche #1 Secured Note was extinguished.

June 2020 Oasis Secured Note - Tranche #2

In June 2020, for its second sale under the terms of the Purchase Agreement, the Company received cash proceeds of $1.2 million from Oasis (the “Tranche #2 Secured Note”).

Oasis purchased accounts receivable with a carrying value of $1.7 million, or gross accounts receivable of $2.8 million net of chargebacks and discounts of $1.1 million.

The purchase was effectuated pursuant to an amended Assignment Agreement, effective June 26, 2020, between the Company and Oasis.

The Maturity Date, by which date Oasis must collect the $1.4 million Threshold Price plus the transaction fee of $10,000, was September 2, 2020.

The Company recorded the sale to Oasis as a short-term secured borrowing with a principal amount of $1.2 million, or $1.4 million net of a $156,000 discount.

Though there was no stated interest rate, the effective interest rate at issuance was 77.7%.

The Tranche #2 Secured Note had a maturity date of September 2, 2020, or earlier if the Threshold amount was received by Oasis prior to that date (payment of the Threshold amount is the maturity date).

Accordingly, during the term of the Tranche #2 Secured Note, the effective interest rate is variable, dependent on the amount of any principal payment and payment dates.

In September 2020, the Company made its final required payment to Oasis under the Tranche #2 Secured Note, with total payments equaling the $1.4 million Threshold amount plus the transaction fee, and the Tranche #2 Secured Note was extinguished.

August 2020 Oasis Secured Note - Tranche #3

In August 2020, for its third sale under the terms of the Purchase Agreement, the Company received cash proceeds of $1.3 million from Oasis (the “Tranche #3 Secured Note”).

Oasis purchased accounts receivable with a carrying value of $1.9 million, or gross accounts receivable of $3.1 million net of chargebacks and discounts of $1.2 million.

The purchase was effectuated pursuant to an amended Assignment Agreement, effective August 13, 2020, between the Company and Oasis.

The Maturity Date, by which date Oasis must collect the $1.5 million Threshold Price, was October 13, 2020.

The Company recorded the sale to Oasis as a short-term secured borrowing with a principal amount of $1.3 million, or $1.5 million net of a $177,000 discount.

Though there was no stated interest rate, the effective interest rate at issuance was 125.6%.

The Tranche #3 Secured Note had a maturity date of October 13, 2020, or earlier if the Threshold amount was received by Oasis prior to that date (payment of the Threshold amount is the maturity date).

Accordingly, during the term of the Tranche #3 Secured Note, the effective interest rate is variable, dependent on the amount of any principal payment and payment dates.

In October 2020, the Company made its final required payment to Oasis under the Tranche #3 Secured Note, with total payments equaling the $1.5 million Threshold amount plus the transaction fee, and the Tranche #3 Secured Note was extinguished.

September 2020 Oasis Secured Note - Tranche #4

In September 2020, for its fourth sale under the terms of the Purchase Agreement, the Company received cash proceeds of $985,000 from Oasis (the “Tranche #4 Secured Note”).

Oasis purchased accounts receivable with a carrying value of $1.4 million, or gross accounts receivable of $2.3 million net of chargebacks and discounts of $920,000.

The purchase was effectuated pursuant to an amended Assignment Agreement, effective September 9, 2020, between the Company and Oasis.

The Maturity Date, by which date Oasis must collect the $1.1 million Threshold Price, was November 12, 2020.

The Company recorded the sale to Oasis as a short-term secured borrowing with a principal amount of $985,000, or $1.1 million net of a $132,000 discount.

Though there was no stated interest rate, the effective interest rate at issuance was 98.4%.

The Tranche #4 Secured Note had a maturity date of November 12, 2020, or earlier if the Threshold amount was received by Oasis prior to that date (payment of the Threshold amount is the maturity date).

Accordingly, during the term of the Tranche #4 Secured Note, the effective interest rate is variable, dependent on the amount of any principal payment and payment dates.

In November 2020, the Company made its final required payment to Oasis under the Tranche #4 Secured Note, with total payments equaling the $1.1 million Threshold amount plus the transaction fee, and the Tranche #4 Secured Note was extinguished.

October 2020 Oasis Secured Note – Tranche #5

In October 2020, for its fifth sale under the terms of the Purchase Agreement, the Company received cash proceeds of $895,000 from Oasis (the “Tranche #5 Secured Note”).

Oasis purchased accounts receivable with a carrying value of $1.2 million, or gross accounts receivable of $2.1 million net of chargebacks and discounts of $955,000.

The purchase was effectuated pursuant to an amended Assignment Agreement, effective October 9, 2020, between the Company and Oasis.

The Maturity Date, by which date Oasis must collect the $1.0 million Threshold Price, was December 16, 2020.

The Company recorded the sale to Oasis as a short-term secured borrowing with a principal amount of $895,000, or $1.0 million net of a $120,000 discount.

Though there was no stated interest rate, the effective interest rate at issuance was 90.2%.

The Tranche #5 Secured Note had a maturity date of December 16, 2020, or earlier if the Threshold amount was received by Oasis prior to that date (payment of the Threshold amount is the maturity date).

Accordingly, during the term of the Tranche #5 Secured Note, the effective interest rate is variable, dependent on the amount of any principal payment and payment dates.

In December 2020, the Company made its final required payment to Oasis under the Tranche #5 Secured Note, with total payments equaling the $1.0 million Threshold amount plus the transaction fee, and the Tranche #5 Secured Note was extinguished.

December 2020 Oasis Secured Note – Tranche #6

In December 2020, for its sixth sale under the terms of the Purchase Agreement, the Company received cash proceeds of $1.6 million from Oasis (the “Tranche #6 Secured Note”).

During 2020, the Company made the required payments to Oasis for the first five purchases with total payments equalling to $ 8.0 million and the related notes payable were extinguished.

In December 2020, for its sixth purchase under the terms of the Purchase Agreement, the Company received cash proceeds of $ 1.6 million from Oasis (the “Tranche #6 Secured Note”).

Oasis purchased accounts receivable with a carrying value of $ 2.2 million, or gross accounts receivable of $ 3.8 million net of chargebacks and discounts of $ 1.6 million.

6 unchanged sentences

The secured borrowing gross balance remaining to be paid is $ 1.8 million as of December 31, 2020.

In February 2021, the Company made its final required payment to Oasis under Tranche #6 Secured Note, with total payments equalling the $ 1.8 million Threshold amount plus the transaction fee, and the Tranche #6 Secured Note was extinguished.

Exchange Note 2

In May 2019, CVP and the Company agreed to exchange two Napo convertible notes for a single CVP Note (“Exchange Note 1”).

Per agreement, in consideration of the extension of the maturity date of Exchange Note 1 from December 31, 2019 to December 31, 2020, the Company issued a note (“Exchange Note 2”) with a principal balance of $ 2.3 million.

The maturity date of Exchange Note 2 is December 31, 2020, with an interest rate of 10 %.

Between September 2020 and November 2020, the Company and CVP entered into a series of note exchange agreements pursuant to which the Company made prepayments of principal and related accrued interest of an aggregate amount of $ 5.0 million, in lieu of making cash payments to CVP on Exchange Note 1, by issuing a total of 6,740,573 shares of

the Company’s common stock to CVP.

The series of exchanges was accounted for as an extinguishment which resulted in a loss of $ 560,000 .

As of December 31, 2020, the carrying value of Exchange Note 1 was zero .

In September 2020, the Company and CVP also entered into a global amendment agreement, pursuant to which the maturity date of Exchange Note 2 is extended to December 31, 2021.

In consideration of CVP’s grant of extension, together with the related fees and other accommodation set forth, principal debt was increased by 5 % of the outstanding balance of Exchange Note 2, which was $ 2.6 million as of the global amendment date.

The global amendment requires redemption of Series D Perpetual Preferred Stock prior to payment of principal of Exchange Note 2.

The Company determined the incremental value of cash flows amounting to $ 228,000 with the assistance of an independent valuation service provider, based on weighted probability assumptions of various settlement conditions and penalties stipulated in the contract therein.

The global amendment agreement was accounted for as a modification;

hence a new effective rate was determined at the date of modification that equated the revised cash flows to the carrying amount of the note.

Pursuant to the global amendment agreement, the Company issued 842,500 shares of Series D Perpetual Preferred Stock.

The Series D Perpetual Preferred shares were redeemable upon the option or discretion of the Company.

The Series D Perpetual Preferred stockholders were entitled to receive 8 % cumulative stock dividends, to be payable in arrears on a monthly basis for 24 consecutive months.

The Company determined the fair value of $ 6.4 million at contract inception date with the assistance of an independent valuation service provider to be based on discounted cash flows representing the settlement value of the shares and cumulative dividends issued using an effective borrowing rate of 12 % to 15 % adjusted for counterparty and a maturity date of September 30, 2021.

In consideration of the global amendment agreement, no principal payment shall be made to the Exchange Note 2 until the redemption of Series D Perpetual Preferred shares.

Due to the restrictive nature of the timing of cash outflows in response to the settlement of the Exchange Note 2, Series D Perpetual Preferred shares were implicitly deemed to be mandatorily redeemable upon the ultimate settlement of the outstanding balance of Exchange Note 2.

The shares were redeemable at $ 8.00 per share on or before December 31, 2024, the date in which contractual cash outflows of the Exchange Note 2 require the entire settlement or redemption of the Series D Perpetual Preferred shares.

In December 2020, the Company entered into a series of exchange agreements with a stockholder pursuant to which the Company agreed to issue a total of 5,296,623 shares of common stock in exchange for redeeming 859,348 shares of Series D Perpetual Preferred Stock.

The series of exchanges was accounted for as an extinguishment which resulted to a loss amounting to $ 1.3 million.

This is included in loss on extinguishment of debt and conversion of Series D Perpetual Preferred Stock on the statement of operations as of December 31, 2020.

As of December 31, 2021 and 2020, there were no Series D Perpetual Preferred shares outstanding.

In December 2020, the Company and CVP entered into a note exchange agreement to which the Company made a prepayment of principal amounting to $ 1.0 million, in lieu of making cash payments to CVP on Exchange Note 2, by issuing 416,666 shares of the Company’s common stock to CVP on December 31, 2020.

The exchange agreement was accounted for as a modification.

In January 2021, the Company and CVP entered into another note exchange agreement to which the Company made a prepayment of the remaining outstanding balance of Exchange Note 2 amounting to $ 1.8 million, in lieu of making cash payments to CVP by issuing 471,202 shares of the Company’s common stock to CVP on January 4, 2021.

The exchange was accounted for as debt extinguishment which resulted in a loss of $ 753,000 .

As of December 31, 2021 and 2020, the carrying value of Exchange Note 2, net of discount, was zero and $ 1.4 million, respectively.

The following table summarizes information about warrants outstanding and exercisable into shares of the Company’s common stock for the years ended December 31, 2021 and 2020:

Warrants outstanding, beginning balance

( 2,007,117 )

( 11,421,464 )

Expirations and cancelations

1 unchanged sentence

May 2020 Series 3 Warrants

In May 2020, concurrent with the May 2020 modification of the exercise price of the Series 1, Series 2 and Bridge Warrants and inducement offer, the Company issued unregistered Series 3 Warrants to purchase 8,670,852 shares of common stock.

The Series 3 Warrants have an exercise price of $0.53 per share and are exercisable beginning the earlier of (i) six months from their May 22, 2020 issuance date and (ii) receipt of the requisite Stockholder Approval (defined below), and expire five years thereafter.

In addition to the fixed settlement method at $0.53 per warrant share, the Series 3 Warrants have two contingent settlement methods:

In May 2020, concurrent with the May 2020 modification of the exercise price of the Series 1, Series 2 and Bridge Note Warrants and inducement offer, the Company issued unregistered Series 3 Warrants to purchase 2,890,284 shares of common stock.

The Series 3 Warrants had an exercise price of $ 1.59 per share and are exercisable beginning the earlier of (i) six months from their May 22, 2020 issuance date and (ii) receipt of the requisite Stockholder Approval (defined below), and expire five years thereafter.

In addition to the fixed settlement method at $ 1.59 per warrant share, the Series 3 Warrants had two contingent settlement methods:

(i) if at the time of exercise there is no effective registration statement, then the holders of the 2,890,284 warrants may exercise the warrants in a “cashless exercise,” under which the holders will receive the aggregate warrants less the number of warrants equal to the exercise price;

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The aggregate fair value of the common stock issued upon the exercise of the Series 3 Warrants as of the exercise date was $ 6.1 million.

On January 8, 2021, in accordance with the May 2020 Modification of the 2019 Bridge Note Warrants and Inducement Offer, an investor received 135,416 Series 3 Warrants for the exercise of 135,416 2019 Bridge Note Warrants on the same date.

During the year ended December 31, 2021, certain holders of the Series 3 Warrants agreed to exercise a total of 206,915 shares for a 1-for-1 exchange of common shares in an Alternate Cashless Exercise.

The aggregate fair value of the common stock issued upon the exercise of the Series 3 Warrants as of the exercise date was $ 1.8 million.

A total of zero and 71,500 Series 3 Warrants were outstanding as of December 31, 2021 and 2020, respectively.

October 2018 Underwriter Warrants

2 unchanged sentences

The warrants were classified as liabilities pursuant to ASC 815-40 as there was potential cash settlement.

The April 2020 Underwriter Warrants

April 2020 Underwriter Warrants

In April 2020, in consideration of the settlement of a dispute regarding underwriting fees (see Note 6), the Company issued warrants to purchase 33,592 shares of common stock at an exercise price of $ 7.50 per common share.

11 unchanged sentences

The warrants were initially classified as liabilities pursuant to ASC 480-10 due to their debt-like nature.

July 23, 2019, upon the exercise price of the warrants becoming fixed, the warrants became exercisable into 45,750 shares of the Company’s common stock and were reclassified to additional paid-in-capital with a fair value of $71,000.

On July 23, 2019, upon the exercise price of the warrants becoming fixed, the warrants became exercisable into 15,250 shares of the Company’s common stock and were reclassified to additional paid-in-capital with a fair value of $ 71,000 .

2019 Bridge Note Warrants

13 unchanged sentences

In May 2020, concurrent with the reduction of the exercise price of the Bridge Note Warrants, the Company entered into a warrant exercise inducement offer with certain holders of the Bridge Note Warrants, pursuant to which such holders agreed to exercise for cash Bridge Note Warrants to purchase 31,250 shares of common stock, in exchange for the Company’s issuing to the exercising holders new unregistered Series 3 Warrants to purchase 31,250 shares of common stock.

As of December 31, 2020, a total of 1,903,125 of 2019 Bridge Note Warrants are outstanding.

During the year ended December 31, 2021, an aggregate of 443,748 shares of common stock were issued upon the exercise of the Bridge Note Warrants for total proceeds of $ 652,000 .

A total of 190,622 and 634,370 Bridge Notes Warrants were outstanding as of December 31, 2021 and 2020, respectively.

July 2019 Series 1 Warrants

10 unchanged sentences

February 2020 Modification of the July 2019 Series 1 Warrants

In February 2020, the Company entered into a warrant exercise agreement with a holder of its Series 1 Warrants, pursuant to which the holder agreed to exercise 208,022 Series 1 Warrants in consideration of the Company lowering the exercise price of the 208,022 warrants from $2.00 to $0.6920.

In February 2020, the Company entered into a warrant exercise agreement with a holder of its Series 1

Warrants, pursuant to which the holder agreed to exercise 69,340 Series 1 Warrants in consideration of the Company lowering the exercise price of the 69,340 warrants from $ 6.00 to $ 2.08 .

Upon exercise of the warrants, the Company received cash proceeds of $ 144,000 and, in turn, issued 69,340 common shares.

It is the Company’s policy to determine the impact of modifications to equity-classified warrants by analogy to share-based compensation guidance per ASC 718, Compensation – Stock Compensation.

Pursuant to that guidance, and due to the modification being applicable only to a single holder of the Series 1 Warrants, the incremental increase of $6,000 in fair value of

the modified warrants was recorded as an expense in the consolidated statement of operations for the year ended December 31, 2020.

Pursuant to that guidance, and due to the modification being applicable only to a single holder of the Series 1 Warrants, the incremental increase of $ 6,000 in fair value of the modified warrants was recorded as an expense in the consolidated statement of operations for the year ended December 31, 2020.

May 2020 Modification of the July 2019 Series 1 Warrants and Inducement Offer

4 unchanged sentences

In May 2020, concurrent with the reduction of the exercise price of the Series 1 Warrants, the Company entered into a warrant exercise inducement offer with certain holders of the Series 1 Warrants, pursuant to which such holders agreed to exercise for cash Series 1 Warrants to purchase 1,524,013 shares of common stock, in exchange for the Company’s issuing to the exercising holders new unregistered Series 3 Warrants to purchase 1,524,013 shares of common stock.

As of December 31, 2020, a total of 1,078,365 Series 1 Warrants were outstanding.

During the year ended December 31, 2021, an aggregate of 464,058 shares of common stock were issued upon the exercise of the Series 1 Warrants for total proceeds of $ 682,000 .

A total of 145,396 and 609,450 Series 1 Warrants were outstanding as of December 30, 2021 and 2020, respectively.

July 2019 Series 2 Warrants

1 unchanged sentence

In addition, each Series 2 Warrant has an embedded call option that allows the Company to redeem any unexercised warrants if certain contingencies are met.

In the July 2019 offering, the Company sold (i) 2,886,500 Class A Units, which included Series 2 warrants to purchase 2,886,500 shares of the Company’s common stock and (ii) 10,787 Class B Units, which included Series 2 warrants to purchase 5,393,500 shares (10,787 Class B Units multiplied by 500 warrants per Class B Unit equals 5,393,500) of the Company’s common stock.

In the July 2019 offering, the Company sold (i) 962,166 Class A Units, which included Series 2 warrants to purchase 962,166 shares of the Company’s common stock and (ii) 10,787 Class B Units, which included Series 2 warrants to purchase 1,797,833 .

In total, 2,760,000 Series 2 warrants were issued, with an initial valuation of $ 5.0 million computed using the Black-Scholes-Merton pricing model using a stock price of $ 5.19 , a strike price of $ 6.00 , an expected term of 5.0 years, volatility of 109 % and a risk-free discount rate of 1.83 % .

3 unchanged sentences

Upon exercise of the warrants, the Company received cash proceeds of $ 55,000 and, in turn, issued 30,313 common shares.

It is the Company’s policy to determine the impact of modifications to equity-classified warrants by analogy to share-based compensation guidance per ASC 718, Compensation – Stock Compensation.

It is the Company’s policy to determine

the impact of modifications to equity-classified warrants by analogy to share-based compensation guidance per ASC 718, Compensation – Stock Compensation.

Pursuant to that guidance, and due to the modification being applicable only to a single holder of the Series 2 Warrants, the incremental increase of $ 6,000 in fair value of the modified warrants was recorded as an expense in the consolidated statement of operations for the year ended December 31, 2020.

3 unchanged sentences

Because the modification applied to a sole holder of Series 2 Warrants, the $ 65,000 increase in fair value was recorded as an expense in the consolidated statement of operations for the year ended December 31, 2020.

The modification did not result in the reclassification of the equity-classified Series 2 Warrants.

The modification did not result in the reclassification of the equity-classified Series 2 Warrants from additional paid-in-capital to liability classification, and as of December 31, 2020, all 2,760,000 Series 2 Warrants have been exercised.

May 2020 Modification of the July 2019 Series 2 Warrants and Inducement Offer

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In May 2020, concurrent with the reduction of the exercise price of the Series 2 Warrants, the Company entered into a warrant exercise inducement offer with certain holders of the Series 2 Warrants, pursuant to which such holders agreed to exercise for cash Series 2 Warrants to purchase 1,344,520 shares of common stock, in exchange for the Company’s issuing to the exercising holders new unregistered Series 3 Warrants to purchase 1,335,020 shares of common stock.

As of December 31, 2020, a total of 878,365 Series 2 Warrants were outstanding.

During the year ended December 31, 2021, an aggregate of 475,725 shares of common stock were issued upon the exercise of the Series 2 Warrants for total proceeds of $ 700,000 .

A total of 133,730 and 609,450 Series 2 Warrants were outstanding as of December 31, 2021 and 2020, respectively.

December 2019 PIPE Financing Warrants

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exercise price of $ 2.34 per share, stock price of $ 1.86 per share, expected life of five years, volatility of 143 % , and a risk-free rate of 2.42 % .

As the common stock and warrants were issued in a unit structure, the aggregate proceeds of $1.5 million were allocated to the two securities using the relative fair value method, resulting with the common stock and warrants being allocated $1.0 million and $465,000, respectively.

As the common stock and warrants were issued in a unit structure, the aggregate proceeds of $ 1.5 million were allocated to the two securities using the relative fair value method, resulting with the common stock

and warrants being allocated $ 1.0 million and $ 465,000 , respectively.

The warrants were classified in stockholders’ equity

During January 2021, an aggregate of 416,664 shares of common stock was issued upon the exercise of the December 2019 PIPE Financing Warrants for total proceeds of $ 975,000 .

As of December 31, 2021, all December 2019 PIPE Financing Warrants have been exercised.

April 2021 ELOC Warrants

On April 7, 2021, in consideration for Oasis Capital’s entry into the March 2020 ELOC amendment, the Company issued Oasis Capital a common stock purchase warrant (“ELOC Warrants”) exercisable for 33,333 shares of common stock with an exercise price per share equal to $ 5.61 on the date of the amendment.

The warrants were valued at $ 172,000 using the Black-Scholes option pricing model as follows:

exercise price of $ 5.61 per share, stock price of $ 5.61 per share, expected life of five years , volatility of 156 % , and a risk-free rate of 0.87 % .

The warrants were classified in additional paid-in-capital.

Preferred Stock

At December 31, 2020, preferred stock consisted of the following:

( in thousands, except share and per share data)

At December 31, 2019, preferred stock consisted of the following:

At December 31, 2021 and 2020, preferred stock consisted of the following:

( in thousands, except share and per share data)

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(iii) the Company fails to file with the Securities and Exchange Commission (“SEC”) on or before June 30, 2021, its Form 10-Q for the three months ending March 31, 2021.

In March 2019, the Company and Sagard Capital amended certain terms of the agreement, such that the effective conversion price was adjusted to $19.425 per share.

The preferred stock was classified outside of stockholders' equity in accordance with authoritative guidance for the classification and measurement of potentially redeemable securities.

In 2019, the Company determined that a Redemption Event was probable as of July 1, 2019.

The Company accreted the carrying value to the redemption amount of $12.7 million which was accounted for as a deemed dividend.

The deemed dividend was a non-cash transaction and is reflected below net loss available to common stockholders on the Company’s consolidated statement of operation for the year ended December 31, 2019.

In September 2020, the Company and Sagard Capital entered into an exchange agreement, by which the remaining Series A Convertible Preferred shares were exchanged for (i) 842,500 shares of the Company’s Series C Perpetual Preferred shares, and (ii) 842,500 shares of the Company’s Series D Perpetual Preferred shares, all issued to Iliad.

The exchange agreement was entered into to effect a share-for-share exchange transaction.

The Series A Convertible Preferred shares were canceled upon surrender, and the Company issued Iliad the Series C and Series D Perpetual Preferred shares.

The Series A Convertible Preferred shares were cancelled upon surrender, and the Company issued Iliad the Series C and Series D Perpetual Preferred shares.

The exchange agreement was treated as an extinguishment of the Series A Convertible Preferred shares.

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The related excess of the carrying value over the fair value of the new instruments of $ 150,000 was recorded to additional paid-in-capital and increased earnings available to common stockholders.

During the year ended December 31, 2020, the Company determined that a Redemption Event was probable.

The Company recorded a deemed dividend charge of $ 1.3 million for the accretion of the redemption amount and carrying value of the Series A Convertible Preferred Stock.

In September 2020, the Company filed a certificate with the Secretary of State of Delaware effecting the retirement and cancellation of the Series A Convertible Preferred Stock.

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Each share of Series B Convertible Preferred Stock is convertible at any time at the holder’s option into 500 shares of Common Stock, which conversion ratio will be subject to adjustment for stock splits, stock dividends, distributions, subdivisions and combinations and other similar transactions.

On the July 23, 2019 issuance date, the effective conversion price per share was less than the fair value of the underlying common stock.

As a result, the Company determined that there was a Beneficial Conversion Feature of $4.2 million.

Because the Company's Series B Convertible Preferred Stock does not have a stated conversion date and

was immediately convertible at the issuance date, the Company recorded a deemed dividend charge of $4.2 million for the accretion of the discount on the Series B Convertible Preferred Stock.

The deemed dividend was a non-cash transaction and is reflected below net loss to arrive at net loss available to common stockholders on the Company's consolidated statement of operations for the year ended December 31, 2019.

During 2019, certain investors converted 8,816 Series B Convertible Preferred shares into 4,408,000 shares of the Company’s common shares at the stated conversion ratio.

The preferred stock has been classified in stockholders' equity in accordance with authoritative guidance.

In March 2020, the Company entered into a Warrant Exercise and Preferred Stock Amendment Agreement (“Amendment Agreement”) with a Ionic Ventures of its Series 2 Warrants, pursuant to which the holder agreed to exercise in cash its Series 2 Warrants to purchase an aggregate of 416,666 shares of common stock, in consideration of the Company reducing the warrant exercise price from $ 6.00 to $ 1.57 per share, for gross proceeds to the Company of approximately $ 653,000 (see Note 9).

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Series B-2 Convertible Preferred Stock

In October 2019, the Company entered into a Warrant Exercise Agreement with the sole remaining holder of the Series B Convertible Preferred Stock (the Exercising Holder), who owned Series 1 warrants exercisable for 1,250,000 shares of common stock.

Pursuant to the terms of the Warrant Exercise Agreement, the Company had the right (a purchased put option) to require the Exercising Holder to exercise all or a portion of its Series 1 warrants in accordance with the existing terms of the Series 1 warrants, in exchange for the Company’s agreement to issue to the Exercising Holder a number of shares of the Company’s Series B-1 Convertible Preferred Stock, with a stated value of $12,201, in an amount equal to one Series B-1 Preferred Share for every 19,841 Series 1 Warrant Shares issued by the Company to the Exercising Holder.

The purpose of the Company entering into the agreement was to enable the Company to monetize the remaining Series 1 warrants.

To the extent that all Series 1 warrants held by the Exercising Holder were exercised at their $1.40 exercise price, the Company would receive aggregate gross proceeds of approximately $1.8 million and, in turn, have issued 63 shares of Series B-1 Preferred Stock to the Exercising Holder.

In October 2019, in two separate transactions, the Company exercised its purchased put option to require the Exercising Holder to exercise all of its 1,250,000 Series 1 warrants (see Note 8), upon which the Company issued 1,250,000 common shares to the Exercising Holder in return for aggregate gross proceeds of $1,750,001.

In consideration (the strike price) of the exercising the warrants, the Company issued 63 shares of Series B-1 Convertible Preferred Stock to the Exercising Holder.

Holders of the Series B-1 Convertible Preferred Stock were entitled to receive dividends on shares of Series B-1 Preferred Stock equal (on an as-if-converted-to-Common-Stock basis) to and in the same form as dividends actually paid on shares of the Common Stock when, as and if such dividends are paid on shares of the common stock.

No other dividends shall be paid on shares of the Series B-1 Preferred Stock.

The shares of Series B-1 Convertible Preferred Stock had no voting rights.

However, as long as any shares of Series B-1 Preferred Stock remain outstanding, the Company shall not, without the affirmative vote of holders of a majority of the then outstanding shares of Series B-1 Convertible Preferred Stock, (a) alter or change adversely the powers, preferences or rights given to the Series B-1 Convertible Preferred Stock or alter or amend the Series B-1 Certificate of Designation or (b) enter into any agreement with respect to any of the foregoing.

Upon any liquidation, dissolution or winding-up of the Company, whether voluntary or involuntary, the Holders of the Series B-1 Convertible Preferred Stock were entitled to receive out of the assets, whether capital or surplus, of the Company the same amount that a holder of common stock would receive if the Series B-1 Preferred Stock were fully converted to Common Stock which amounts shall be paid pari passu with all holders of common stock.

Each share of Series B-1 Convertible Preferred Stock was convertible at any time at the holder’s option into 10,001 shares of Common Stock, as determined by dividing the $12,201 stated value of each Series B-1 Convertible Preferred Share by the $1.22 conversion price ($12,201 divided by 1.22 = 10,001 conversion ratio), and which conversion ratio is subject to adjustment for stock splits, stock dividends, distributions, subdivisions and combinations and other similar transactions as specified in the Series B-1 Certificate of Designation.

On the October 3, 2019 issuance date, the effective conversion price was less than the fair value of the underlying common stock.

As a result, the Company determined that there was a Beneficial Conversion Feature of $145,000.

Because the Company's Series B-1 Convertible Preferred Stock does not have a stated conversion date and was immediately convertible at the issuance date, the Company recorded a deemed dividend charge of $145,000 for the accretion of the discount on the Series B-1 Convertible Preferred Stock.

On the October 9, 2019 issuance date, the effective conversion price was less than the fair value of the underlying common stock.

As a result, the Company determined that there was a Beneficial Conversion Feature of $385,000.

Because the Company's Series B-1 Convertible Preferred Stock does not have a stated conversion date and was immediately convertible at the issuance date, the Company recorded a deemed dividend charge of $385,000 for the accretion of the discount on the Series B-1 Convertible Preferred Stock.

The deemed dividend was a non-cash transaction and is reflected below net loss to arrive at net loss available to common stockholders on the Company's consolidated statements of operations for the fiscal year ended December 31, 2019.

The Series B-1 Convertible Preferred Stock was classified in stockholders' equity in accordance with authoritative guidance.

In December 2019, the sole investor in the Series B-1 Convertible Preferred Stock converted its entire holding of 63 shares of the Series B-1 Preferred Stock into 630,063 shares of the Company’s common shares at the stated conversion ratio.

As of December 31, 2019, there were no shares of the Series B-1 Convertible Preferred Stock outstanding.

In September 2020, the Company filed a certificate with the Secretary of State of Delaware effecting the retirement and cancellation of the Series B-1 Convertible Preferred Stock.

Series B-2 Convertible Preferred Stock

In December 2019, the Company entered into an exchange agreement with Oasis Capital, pursuant to which Oasis Capital gave up (i) its remaining unexercised Prepaid Forward contracts (see Note 10) exercisable for 1,236,223 shares of the Company’s common stock and (ii) 695,127 common shares held as an investment by Oasis Capital, in exchange for 10,165 shares of the Company’s newly authorized Series B-2 Convertible Preferred Stock.

In December 2019, the Company entered into an exchange agreement with Oasis Capital, pursuant to which Oasis Capital gave up (i) its remaining unexercised Prepaid Forward contracts exercisable for 412,074 shares of the Company’s common stock and (ii) 231,709 common shares held as an investment by Oasis Capital, in exchange for 10,165 shares of the Company’s newly authorized Series B-2 Convertible Preferred Stock.

Holders of the Series B-2 Convertible Preferred Stock are entitled to receive dividends on shares of Series B-2 Convertible Preferred Stock equal (on an as-if-converted-to-common-stock basis) to and in the same form as dividends actually paid on shares of the common stock when, as and if such dividends are paid on shares of the common stock.

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Upon any liquidation, dissolution or winding-up of the Company, whether voluntary or involuntary, the Holders of the Series B-2 Convertible Preferred Stock are entitled to receive out of the assets, whether capital or surplus, of the Company the same amount that a holder of common stock would receive if the Series B-2 Convertible Preferred Stock were fully converted to common stock which amounts shall be paid pari passu with all holders of common stock.

Each share of Series B-2 Convertible Preferred Stock is convertible at any time at the holder’s option into 190 shares of Common Stock, as determined by dividing the $153.90 stated value of each Series B-2 Convertible Preferred Share by the $0.81 conversion price ($153.90 divided by 0.81 = 190 conversion ratio), and which conversion ratio is subject to adjustment for stock splits, stock dividends, distributions, subdivisions and combinations and other similar transactions as specified in the Series B-2 Certificate of Designation.

Each share of Series B-2 Convertible Preferred Stock is convertible at any time at the holder’s option into 63 shares of common stock, as determined by dividing the $ 153.90 stated value of each Series B-2 Convertible Preferred Share by the $ 2.43 conversion price ( $ 153.90 divided by $ 2.43 = 63 conversion ratio), and which conversion ratio is subject to adjustment for stock splits, stock dividends, distributions, subdivisions and combinations and other similar

transactions as specified in the Series B-2 Certificate of Designation.

The Series B-2 Convertible Preferred Stock was classified in stockholders' equity in accordance with authoritative guidance.

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However, as long as any Series C Perpetual Preferred share is outstanding, the Company is restricted to alter, change, or enter into an agreement to alter or change adversely the powers, preferences, or rights given to the shareholders.

In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Company or deemed liquidation event, the holders of Series C Perpetual Preferred shares then outstanding would be entitled to be paid in cash out of the assets of the Company before any payment shall be made to the holders of common stock or shares of any series or class of preferred or other capital stock then outstanding that by its terms is junior to the Series C Perpetual Preferred shares in respect of the preferences as to distributions and payments upon such liquidation event

by reason of their ownership, an amount per share of Series C equal to one times the Series C original issue price.

The Series C Perpetual Preferred shares were redeemable upon the option or discretion of the Company.

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In October 2020, the Company entered into an exchange agreement with Iliad pursuant to which the Company agreed to issue a total of 83,333 shares of common stock and pre-funded warrants to purchase 2,352,563 shares of common stock in exchange for 285,000 shares of Series C Perpetual Preferred Stock.

The pre-funded warrants were exercisable immediately and could be exercised at any time until all of the pre-funded warrants were exercised in full.

The pre-funded warrants were exercisable immediately and could be exercised at any time until all of the pre-funded warrants were

exercised in full.

The nominal exercise price of each pre-funded warrant was $ 0.0001 .

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Warrants issued and outstanding

Series A convertible preferred stock

Series B convertible preferred stock

Series B-2 convertible preferred stock

The holders of common stock are entitled to one vote for each share of common stock held.

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The holders of non-voting common stock are not entitled to vote, except on an as converted basis with respect to any change of control of the Company that is submitted to the stockholders of the Company for approval.

Shares of the Company's non-voting common stock have the same rights to dividends and other distributions and are convertible into shares of the Company's common stock on a one-for-one basis upon transfers to non-affiliates of Nantucket ("former creditor of Napo"), upon the release from escrow of certain non-voting shares held by the former creditors of Napo to the legacy stockholders of Napo under specified conditions and at any time on or after

April 1, 2018 at the option of the respective holders thereof.

Shares of the Company's non-voting common stock have the same rights to dividends and other distributions and are convertible into shares of the Company's common stock on a one -for-one basis.

The Company is authorized to issue a total number of 204,475,074 shares, of which 150,000,000 shares are common stock, 50,000,000 are non-voting common stock and 4,475,074 are preferred stock.

Reverse stock-splits

On June 3, 2019, the Company filed the Certificate of Fifth Amendment to its Third Amended and Restated

Certificate of Incorporation with the Secretary of State of the State of Delaware to effect a 1-for-70 reverse stock split of the Company’s issued and outstanding shares of voting common stock, effective June 7, 2019.

The reverse split has been retroactively reflected in all voting common stock, warrants, and common stock option shares disclosed in the consolidated financial statements.

The non-voting common stock and the convertible preferred stock were

excluded from the reverse split.

Reverse Stock-Split

On December 22, 2020, the Company obtained approval through a special shareholders meeting held on December 9, 2020 to effect a reverse split of the Company’s issued and outstanding voting common stock at a ratio not less than 1 -for-2 and not greater than 1 -for-20.

As of December 31, 2020, the reverse stock split has not yet been effectuated.

Transactions with Oasis Capital

January 2019 SPA

On January 7, 2019, the Company entered into a common stock purchase agreement with Oasis Capital, relating to an offering of an aggregate of up to 76,190 shares of common stock via an equity line of credit.

Under the terms of the purchase agreement, the Company has the right to "put,"

or sell, up to 76,190 shares of common stock to Oasis Capital for an amount equal to the product of (i) the number of shares set forth on the applicable put notice (minus the deposit and clearing fees associated with such purchase) and (ii) a fixed price of $52.50 per share or such other price agreed upon between the Company and Oasis Capital.

The Company had the option to increase the equity line of credit by an additional 114,286 shares of common stock by notifying Oasis Capital at any time after the effective date of the purchase agreement.

In March 2019, the Company exercised this option.

December 31, 2019, the Company had sold all of the 76,190 shares of common stock of the equity line and all 114,286 shares of common stock from the option to Oasis Capital, or a total of 190,476 shares.

March 2019 SPA

In March 2019, the Company entered into a securities purchase agreement with Oasis Capital pursuant to which the Company agreed to issue and sell, in a registered public offering by the Company directly to Oasis, an aggregate of 19,019 shares of common stock at an offering price of $14.00 for gross proceeds of approximately $266,000.

November 2019 SPA

In November 2019, the Company entered into a securities purchase agreement with Oasis Capital, pursuant to which the Company, in a registered public offering, sold directly to Oasis pre-funded warrants to purchase 2,222,223 shares of the Company’s common stock.

The Pre-Funded Warrants were exercisable immediately and could be exercised at any time until all of the pre-funded warrants were exercised in full.

The purchase price paid by Oasis was nonrefundable in the event that the pre-funded warrants were never exercised.

The purchase price of each pre-funded warrant was $0.81, or the $0.80 price per share in the offering, plus an additional $0.01 exercise price upon subsequent exercise.

Gross proceeds to the Company from the offer and sale was $1.8 million, or $1.7 million net of issuance costs.

In November 2019, subsequent to the initial sale, Oasis Capital exercised 986,000 of the 2,222,223 pre-funded warrants, with the Company receiving gross proceeds of $10,000.

The pre-funded warrants represented prepaid equity forward contracts that were equity classified, as they were not subject to ASC 480-10 and did not meet the definition of a derivative pursuant to ASC 815-10 due to their requiring a substantial upfront payment.

On September 3, 2021, the reverse stock split became effective.

Upon effectivity, every three shares of the Company’s issued and outstanding common stock immediately prior to the effective time shall automatically be reclassified into one share of common stock without any change in the par value.

The reverse stock split reduces the number of shares of common stock issuable upon the conversion of the Company’s outstanding non-voting common stock and the exercise or vesting of its outstanding stock options and warrants in proportion to the ratio of the reverse stock split and causes a proportionate increase in the conversion and exercise prices of such non-voting common

stock, stock options and warrants.

In addition, the number of shares reserved for issuance under the Company’s equity compensation plans immediately prior to the effective time will be reduced proportionately.

The reverse stock split did not change the total number of authorized shares of common stock or preferred stock.

March 2020 ELOC (Equity Line of Credit)

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The purchase price per share pursuant to such Option 2 Put is equal to $ 1.31 .

The Threshold Price (defined later) and the Purchase Price will be adjusted for any reorganization, recapitalization, non-cash dividend, stock split, reverse stock split or other similar transaction occurring during the period used to compute the Threshold Price or the Purchase Price.

The threshold price and the purchase price will be adjusted for any reorganization, recapitalization, non-cash dividend, stock split, reverse stock split or other similar transaction occurring during the period used to compute the threshold price or the purchase price.

On April 15, 2020, the SEC declared effective the registration statement registering the sale of the shares of common stock issued to Oasis Capital under the March 2020 ELOC.

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Per the terms of the equity purchase agreement, the Option Put 1 and Option Put 2 may be exercised only at a price that is always above the trading price of the underlying common stock at the exercise date, thereby rendering any exercise by the Company being out-of-the-money.

At inception of the equity line on March 24, 2020, the Put

Options were classified as derivative assets with a fair value of zero, and upon an effective registration statement on April 15, 2020, were reclassified to stockholders’ equity with a fair value of zero.

In April 2020, the Company exercised a single Put Option Put 1 under which the Company sold 52,000 common shares to Oasis for gross proceeds of $22,627.

As of December 31, 2020, the Company had not exercised any further put options to require Oasis Capital to purchase common stock under the equity purchase agreement.

At inception of the equity line on March 24, 2020, the Put Options were classified as derivative assets with a fair value of zero , and upon an effective registration statement on April 15, 2020, were reclassified to stockholders’ equity with a fair value of zero .

In April 2020, the Company sold 17,333 common shares to Oasis for gross proceeds of $ 23,000 .

As of December 31, 2021 and 2020, the Company had not exercised any further put options to require Oasis Capital to purchase common stock under the equity purchase agreement.

On April 7, 2021, the Company entered into an amendment to the March 2020 ELOC with Oasis Capital, pursuant to which the parties agreed to increase (i) the purchase price from $ 1.31 to $ 9.00 and (ii) the threshold price

from $ 1.50 to $ 10.35 .

In consideration for Oasis Capital’s entry into the amendment, the Company issued Oasis Capital a common stock purchase warrant (“ELOC Warrants”) exercisable for 33,333 shares of common stock with an exercise price per share equal to $ 5.61 on the date of the amendment.

March 2020 PIPE Financing

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At The Market Offering (“ATM”)

On October 5, 2020, the Company entered into an ATM Agreement with Ladenburg, pursuant to which the Company may offer and sell, from time to time through Ladenburg, shares of common stock, subject to the terms and conditions of the ATM Agreement.

The ATM Agreement will terminate upon the earlier of (i) October 5, 2022 and (ii) termination of the ATM Agreement as permitted therein.

As of December 31, 2020, the Company sold 3,814,925 shares of common stock under the ATM Agreement resulting in net proceeds of approximately $1.3 million after commissions and expenses of approximately $40,000.

October 2020 ATM Agreement

On October 5, 2020, the Company entered into an ATM Agreement (“October 2020 ATM Agreement”) with Ladenburg, pursuant to which the Company may offer and sell, from time to time through Ladenburg, shares of common stock, subject to the terms and conditions of the October 2020 ATM Agreement.

The October 2020 ATM Agreement will terminate upon the earlier of (i) October 5, 2022 and (ii) termination of the October 2020 ATM Agreement as permitted therein.

In 2020, the Company sold 1,271,639 shares of common stock under the October 2020 ATM Agreement resulting in net proceeds of approximately $ 1.3 million after commissions and expenses of approximately $ 40,000 .

During January and February 2021, the Company issued an aggregate of 669,850 shares under the October 2020 ATM Agreement for total net proceeds of $ 5.4 million after commissions and expenses of approximately $ 311,000 .

As of December 31, 2021, all shares under the October 2020 ATM Agreement have been issued.

December 2021 ATM Agreement

On December 10, 2021, the Company entered into another ATM Agreement (“December 2021 ATM Agreement”) with Ladenburg, pursuant to which the Company may offer and sell, from time to time through Ladenburg, shares of common stock having an aggregate offering price of up to $ 15.0 million, subject to the terms and conditions of the December 2021 ATM Agreement.

The offering will terminate upon the earlier of (i) December 10, 2024 and (ii) termination of the December 2021 ATM Agreement as permitted therein.

As of December 31, 2021, the Company has issued 2,261,596 shares under the December 2021 ATM Agreement for a total net proceeds of $ 3.2 million.

PoC Capital Registered Direct Offering

On October 6, 2020, the Company entered into a Stock Plan Agreement for payment of contracted research fees (the “SPA”) with PoC Capital, LLC (“PoC”), pursuant to which the Company issued to PoC an aggregate of 1,333,333 shares of the Company’s common stock, par value $0.0001 per share, as consideration for PoC’s assumption of $400,000 in payment obligations of Napo under the service order with Integrium for Napo’s planned upcoming pivotal Phase 3 clinical trial for cancer-therapy related diarrhea, for an effective offering price of $0.30 per share.

October 2019 Angel Pond Agreement

In October 2019, the Company engaged Angel Pond Capital LLC to explore potential licensing

agreements and collaborations for Mytesi in China.

In consideration of these services, the Company issued 166,667

shares of the Company’s common stock.

December 2019 PIPE Financing

In 2019, the Company entered into a securities purchase agreement with certain investors pursuant to which the Company, in a Private Placement, sold (i) an aggregate of 2,500,000 unregistered shares of the Company’s common stock, and (ii) warrants to purchase 1,250,000 shares of common stock, for an aggregate purchase price of

$1.5 million .

As the common stock and warrants were issued in a unit structure, the aggregate proceeds of $1.5 million were allocated to the two securities using the relative fair value method, resulting in the common stock and warrants being allocated $1.0 million and $500,000, respectively.

On October 6, 2020, the Company entered into a Stock Plan Agreement for payment of contracted research fees (the “SPA”) with PoC Capital, LLC (“PoC”), pursuant to which the Company issued to PoC an aggregate of 444,444 shares of the Company’s common stock as consideration for PoC’s assumption of $ 400,000 in payment obligations of Napo under the service order with Integrium for Napo’s planned upcoming pivotal Phase 3 clinical trial for cancer-therapy related diarrhea, for an effective offering price of $ 0.90 per share.

Securities Purchase Agreement

On January 13, 2021, the Company entered into a securities purchase agreement, pursuant to which the Company agreed to issue and sell, in a registered public offering an aggregate of 1,479,290 shares of common stock at an offering price of $ 10.14 per share for gross proceeds of approximately $ 15.0 million before deducting $ 1.6 million placement agent fee and related offering expenses.

The offering closed on January 15, 2021.

On April 29, 2021, the Company entered into another securities purchase agreement, pursuant to which the Company agreed to issue and sell, in a registered public offering through Ladenburg as the placement agent, an aggregate of 2,549,000 shares of common stock at an offering price of $ 4.23 per share for gross proceeds of approximately $ 10.8 million before deducting placement agent fees and related offering expenses of $ 948,000 .

Subscription Agreement

On June 1, 2021, the Company entered into a subscription agreement with the SPAC and its sponsor, pursuant to which Dragon SPAC agreed to issue and sell, in a private placement by Dragon SPAC directly to the Company, units of Dragon SPAC, with each unit consisting of one ordinary share of Dragon SPAC and a warrant to purchase a share, for gross proceeds of approximately € 8.8 million (corresponding, as at June 1, 2021, to $ 10.8 million).

Dragon SPAC is an Italy special purpose acquisition company formed for the purpose of entering into a business combination with Napo Therapeutics, with the aim of developing the pharmaceutical activities of Dragon SPAC/Napo Therapeutics combined entity in Europe.

Each warrant will entitle the holder thereof to purchase one share at an exercise price of € 10 per share at any time prior to the earlier of (i) the 10-year anniversary of the consummation of the business combination and (ii) the five-year anniversary of the listing of the combined entity on a public exchange.

On November 3, 2021, Dragon SPAC issued 883,000 ordinary shares, each reserved to the exercise of warrants pursuant to the warrant agreement approved by Dragon SPAC.

As a result, Dragon SPAC became a substantially owned subsidiary, at the same time, the related advances will be converted to investment at a stand-alone level, and will be eliminated at the consolidated level.

September 2021 PIPE Financing

On September 13, 2021, the Company entered into a securities purchase agreement (the “September 2021 PIPE Financing”) with certain investors, pursuant to which the Company agreed to issue and sell to the investors in a private placement an aggregate of 309,242 unregistered shares of the Company’s common stock for an aggregate purchase price of approximately $ 776,197 or $ 2.51 per share.

Noncontrolling Interest

As a result of the merger last November 3, 2021 between Napo EU and Dragon SPAC, the Company assumed a non-controlling interest amounting to $ 242,000 as of December 31, 2021 which represents minority interest held by an investor in Napo Therapeutics.

Stock-Based Compensation

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Outstanding grants continue to be exercisable, however, any unissued shares under the plan and any forfeitures of outstanding options do not rollover to the 2014 Stock Incentive Plan.

There were 384 and 395 option shares outstanding at

December 31, 2020 and 2019, respectively.

There were 123 option shares outstanding at December 31, 2021 and 2020.

2014 Stock Incentive Plan

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The 2014 Plan provides for automatic share increases on the first day of each fiscal year in the amount of 2 % of the outstanding number of shares of the Company's common stock on last day of the preceding calendar year.

The 2014 Plan replaced the 2013 Plan except that all outstanding options under the 2013 Plan remain outstanding until exercised, canceled or expired.

The 2014 Plan replaced the 2013 Plan except that all outstanding options under the 2013 Plan remain outstanding until exercised, cancelled or expired.

As of December 31, 2021, there were 2,348,076 options outstanding and 619,480 options available for grant.

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The term of an incentive stock option may not exceed 10 years , except that with respect to any participant who owns more than 10% of the voting power of all classes or our outstanding stock, the term must not exceed 5 years .

The 2020 Inducement Award Plan provides for the grant of nonstatutory stock options, restricted stock units, restricted stock, and performance shares.

The 2020 Inducement Award Plan provides for the grant of non-statutory stock options, restricted stock units, restricted stock, and performance shares.

The 2020 Inducement Award Plan was adopted without stockholder approval pursuant to Rule 5635(c)(4) of the Nasdaq Listing Rules.

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As of December 31, 2021, there were 154,876 options outstanding and 11,790 options available for grant.

As of December 31, 2020, there were 38,272 options outstanding and 128,394 options available for grant.

Stock Options and Restricted Stock Units (“RSUs”)

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Options granted

( 1,016,044 )

Options exercised

Options canceled

Options canceled not rolled back into the 2013 Plan

Outstanding at December 31, 2021

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The intrinsic value is calculated as the difference between the exercise price of the underlying options and the fair market value of the Company's common stock for options that were in-the-money.

555 options were exercised for the year ended December 31, 2020.

No options were exercised in 2019.

The number of options exercised during the year ended December 31, 2021 and 2020 were 3,147 and 185 , respectively.

The weighted average grant date fair value of stock options granted was $ 5.06 and $ 1.20 per share during the years ended December 31, 2021 and 2020, respectively.

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The following table presents the calculation of basic and diluted net loss per common share for the years ended December 31, 2021 and 2020:

Years Ended December 31,

Year Ended December 31,

(In thousands, except share and per share data)

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Warrants issued and outstanding

Series A convertible preferred stock

Series B convertible preferred stock

Series B-2 convertible preferred stock

As of March 10, 2022 there were 28,701,463 shares of common stock issued after the balance sheet date.

Including these shares will have a material effect on the diluted net loss per common share in future periods.

The Company's loss before provision for income taxes during the years ended December 31, 2020 and 2019, was a domestic loss of $33.8 million and $38.5 million, respectively.

The Company's loss before provision for income taxes during the years ended December 31, 2021 and 2020, was a domestic loss of $ 48.0 million and $ 33.8 million, and a foreign loss of $ 4.6 million and zero , respectively.

The effective tax rate for 2021 and 2020 was 0 %.

As a result of the Company's history of net operating losses (“NOL”) and a full valuation allowance against its deferred tax assets, there was minimal current income tax and no deferred income tax provision for the years ended December 31, 2021 and 2020.

The components of the provision for income taxes during the years ended December 31, 2020 and 2019 is as follows:

(In thousands)

Total current

Total deferred

Total provision for income taxes

The Company’s effective tax during the years ended December 31, 2021 and 2020, differed from the federal statutory rate as follows:

Statutory rate

Book loss on debt extinguishment

Intercompany transactions

Valuation allowance

Nondeductible warrant expense

Book loss on debt extinguishment

Foreign rate differential

Effective tax rate

Net deferred tax assets as of December 31, 2020 and 2019 consist of the following:

Net deferred tax assets as of December 31, 2021 and 2020 consisted of the following:

(In thousands)

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A valuation allowance is provided when it is more likely than not that the deferred tax assets will not be realized.

The Company has established a valuation allowance to offset net deferred tax assets as of

December 31, 2020 and 2019, due to the uncertainty of realizing future tax benefits from its NOL carryforwards and other deferred tax assets.

The Company has established a valuation allowance to offset net deferred tax assets as of December 31, 2021 and 2020, due to the uncertainty of realizing future tax benefits from its NOL carryforwards and other deferred tax assets.

The valuation allowance increased by $ 1.4 million during the year ended December 31, 2021.

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as defined by the code, results from a transaction or series of transactions over a three-year period resulting in an ownership change of more than 50 percentage points of the outstanding stock of a company by certain stockholders or public groups.

Any limitation may result in expiration of all or a portion of the NOL or tax credit carryforwards before utilization.

The Company also reduced its federal and California R&D credit carryforwards by $1.4 million and $697,000, respectively.

limitation may result in expiration of all or a portion of the NOL or tax credit carryforwards before utilization.

The Company has previously reduced its federal and California R&D credit carryforwards by $ 1.4 million and $ 697,000 , respectively.

Enacted on March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (“the CARES Act”) authorizes more than $2.0 trillion to battle COVID-19 and its economic effects, including immediate cash relief for individual citizens, loan programs for small business, support for hospitals and other medical providers, and various types of economic relief for impacted businesses and industries.

8 unchanged sentences

The tax position is measured as the largest amount of benefit that has a greater than 50 percent likelihood of being realized upon ultimate settlement.

As of December 31, 2020, all unrecognized tax benefits are offset against deferred tax assets which are subject to a full valuation allowance, and if recognized, will not affect the Company's tax rate.

As of December 31, 2021, all unrecognized tax benefits were offset against deferred tax assets which are subject to a full valuation allowance, and if recognized, will not affect the Company's tax rate.

The Company does not anticipate that the total amounts of unrecognized tax benefits will significantly increase or decrease in the next 12 months.

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Subsequent Events

December 2019 PIPE Financing Warrants

During January 2021, an aggregate of 1,250,000 shares of common stock were issued upon the exercise of the December 2019 PIPE Financing Warrants for total proceeds of $975,000.

Exchange Note 2 3(a)(9) Exchange

On January 4, 2021, the Company issued 1,413,606 shares of common stock to CVP in exchange for a $1.8 million reduction in the outstanding balance of the secured promissory note, Exchange Note 2, held by CVP.

January 2021 Series 1 and Series Common Stock Purchase Warrants

During January 2021, an aggregate of 2,475,044 shares of common stock were issued upon the exercise of Series 1 and Series 2 Warrants for total proceeds of $1.2 million.

Series 3 Common Stock Purchase Warrant

On January 8, 2021, in accordance with the May 2020 Modification of the 2019 Bridge Note Warrants and Inducement Offer, an investor received 406,250 Series 3 Warrants for the exercise of 406,250 2019 Bridge Note Warrants on the same date ( see Note 8).

On January 27, 2021, 406,250 Series 3 Warrants were exercised into 406,250 shares of common stock.

Securities Purchase Agreement

On January 13, 2021, the Company entered into a securities purchase agreement, pursuant to which the Company agreed to issue and sell, in a registered public offering an aggregate of 4,437,870 shares of common stock, par value $0.0001 per share, at an offering price of $3.38 per share for gross proceeds of approximately $15.0 million before deducting $1.4 million placement agent fee and related offering expenses.

The offering closed on

January 15, 2021.

Note Purchase and Security Agreements

On January 19, 2021, the Company entered into a note purchase agreement with Streeterville Capital, LLC

(“Streeterville”), pursuant to which the Company issued a secured promissory note in the aggregate principal amount of $6.2 million for an aggregate purchase price of $6.0 million.

The initial principal balance of the note includes $196,000 representing prepaid interest for the first twelve months and $25,000 to cover Investor’s transaction expenses.

The note bears interest at 3.25% per annum and matures on January 20, 2025.

Interest will be prepaid each 12 months at the beginning of the period.

The Company also entered in a security agreement with Streeterville, pursuant to which Streeterville will receive a first priority security interest in all existing and future lechlemer technology, and the Company will agree, with certain exceptions, not to grant any lien on any of the collateral securing the note and not to grant any license under any of the intellectual property relating to such collateral.

The grant of security interest under the security agreement will not be effective until such time the Company receives a required consent from a third party.

In the event the Company sells a Tropical Disease Priority Review Voucher (“TDPRV”) Streeterville will be entitled to a maximum of 18% and a minimum of 1% of the gross proceeds received by the Company from the sale of the TDPRV.

At any time following the occurrence of a Trial Failure, Streeterville, at its option, elect to increase the outstanding balance by multiplying the outstanding balance as of the date of the Trial Failure by 25% via written notice to the Company without accelerating the outstanding balance, in which event the outstanding balance shall be increased as of the date of the occurrence of the Trial Failure, but the outstanding balance shall not be immediately due and payable unless so declared by Streerville.

“Trial Failure” means (a) the Company abandons the clinical trial with Lechlemer for an indication for the symptomatic relief of infectious diarrhea for cholera;

(b) the Company fails to start the Phase 1 clinical trial of Lechlemer for the symptomatic relief of infectious diarrhea for cholera by July 1, 2022;

or (c) the Company fails to meet all primary endpoints in the pivotal trials of Lechlemer for the symptomatic relief of infectious diarrhea for cholera with statistical significance.

Pursuant to the Settlement, Termination, Asset Transfer and Transition Agreement, dated March 4, 2016, and amended May 10, 2016 (the “Settlement Agreement”), between the Company and Salix Pharmaceuticals, Inc.

(“Salix”), the Company is required to enter into an intercreditor agreement with Salix for purposes of protecting the relative priority of Salix’s rights to payment and collection of amounts payable to Salix under the Settlement Agreement prior to the Company incurring any secured indebtedness (the “Intercreditor Obligation”).

In connection with the Company’s issuance of a secured promissory note to a third party lender in January 2021, the Company requested that Salix waive its rights with respect to the Intercreditor Obligation.

ATM Agreement

During January and February 2021, the Company issued an aggregate of 2,009,554 shares under the ATM Agreement for total net proceeds of $5.5 million.

As of February 18, 2021, all shares under the ATM Agreement have been issued.

Royalty Purchase Agreement

On March 8, 2021, the Company entered into a Purchase Agreement with Streeterville, pursuant to which the Company sold a royalty interest entitling Streeterville to $10.0 million and any interest, fees, and charges as royalty repayment amount for an aggregate purchase price of $5.0 million.

Interest will accrue on the royalty repayment amount at a rate of 5% per annum, compounding quarterly, and will increase to 10% per annum, compounding quarterly on the 12-month anniversary of the closing date.

following the closing date in an amount equal to the greater of (i) $250,000 beginning on the royalty payment start date and continuing until either the royalty repayment amount has been paid in full or the 6-month anniversary of the royalty payment start date, $400,000 beginning on the 6-month anniversary of the royalty payment start date and continuing until either the royalty repayment amount has been paid in full or the 12-month anniversary of the royalty payment start date, $600,000 beginning on the 12-month anniversary of the royalty payment start date and continuing until either the royalty repayment amount has been paid in full or the 18-month anniversary of the royalty payment start date, $750,000 beginning on the 18-month anniversary of the royalty payment start date and continuing until the royalty repayment amount has been paid in full, and (ii) 10% of the Company’s net sales on included products and 10% of worldwide revenues related to upfront licensing fees and milestone payments from licensees and/or distributors.

Issuances under the December 2021 ATM Agreement

During January to March 2022, the Company issued an aggregate of 20,046,463 shares under the December 2021 ATM Agreement for total net proceeds of $ 9.2 million.

Amendment to December 2021 ATM Agreement

On February 2, 2022, the Company entered into an amendment to the December 2021 ATM Agreement, pursuant to which, the aggregate offering amount of the shares of the Company’s common stock which the Company may sell and issue through Ladenburg, as the sales agent, was increased from $ 15.0 million to $ 75.0 million (the “ATM Upsize”).

3a9 Exchange Agreements

On February 11, 2022, the Company entered into a privately-negotiated exchange agreement with Iliad, pursuant to which, the Company issued 2,375,000 shares (“Exchange Shares”) of common stock in exchange for a $ 1.7 million reduction (“Partitioned Royalty”) in the outstanding balance of the royalty interest held by Iliad in relation to the October 2020 Purchase Agreement.

The exchange will consist of Iliad surrendering the Partitioned

Royalty in exchange for the Exchange Shares, which will be free of any restrictive securities legend.

Other than the surrender of the Partitioned Royalty, no consideration of any kind whatsoever will be given by Iliad to the Company in connection with the exchange agreement.

On March 2, 2022, the Company entered into another exchange agreement with Iliad, pursuant to which, the Company issued 2,425,000 shares of common stock in exchange for a $ 1.1 million reduction in the outstanding balance of the royalty interest held by Iliad in relation to the October 2020 Purchase Agreement.

The exchange will consist of Iliad surrendering the Partitioned Royalty in exchange for the Exchange Shares, which will be free of any restrictive securities legend.

Other than the surrender of the Partitioned Royalty, no consideration of any kind whatsoever will be given by Iliad to the Company in connection with the exchange agreement.

On March 4, 2022, the Company entered into another exchange agreement with Iliad, pursuant to which, the Company issued 2,000,000 shares of common stock in exchange for a $ 828,000 reduction in the outstanding balance of the royalty interest held by Iliad in relation to the October 2020 Purchase Agreement.

The exchange will consist of Iliad surrendering the Partitioned Royalty in exchange for the Exchange Shares, which will be free of any restrictive securities legend.

Other than the surrender of the Partitioned Royalty, no consideration of any kind whatsoever will be given by Iliad to the Company in connection with the exchange agreement.

On March 9, 2022, the Company entered into another exchange agreement with Iliad, pursuant to which, the Company issued 1,850,000 shares of common stock in exchange for a $ 747,000 reduction in the outstanding balance of the royalty interest held by Iliad in relation to the October 2020 Purchase Agreement.

The exchange will consist of Iliad surrendering the Partitioned Royalty in exchange for the Exchange Shares, which will be free of any restrictive securities legend.

Other than the surrender of the Partitioned Royalty, no consideration of any kind whatsoever will be given by Iliad to the Company in connection with the exchange agreement.

No tice of Delisting

On February 17, 2022, the Company received a letter from the Staff of Nasdaq indicating that the bid price of the Company’s common stock for the last 30 consecutive business days had closed below the minimum $ 1.00 per share required for the continued listing under Nasdaq Listing Rule 5550(a)(2).

Under Nasdaq Listing Rule 5810(c)(3)(A), the Company has been granted a 180 calendar day grace period, or until August 16, 2022, to regain compliance with the minimum bid price requirement.

The continued listing standard will be met if the Company evidences a closing bid price of at least $ 1.00 per share for a minimum of 10 consecutive business days during the 180 calendar day grace period.

In order for Nasdaq to consider granting the Company additional time beyond August 16, 2022, the Company would be required, among other things, to meet the continued listing requirement for market value of publicly held shares as well as all other standards for initial listing on Nasdaq, with the exception of the minimum bid price requirement.

If measured today, the Company would qualify for Nasdaq’s consideration of an extension because the Company currently has stockholders’ equity of at least $ 5.0 million.

In the event the Company does not regain compliance with the $ 1.00 bid price requirement by August 16, 2022, eligibility for Nasdaq’s consideration of a second 180 day grace period would be determined on the Company’s compliance with the above referenced criteria on August 16, 2022.

The Company is diligently working to evidence compliance with the minimum bid price requirement for continued listing on Nasdaq;

however, there can be no assurance that the Company will be able to regain compliance or that Nasdaq will grant the Company a further extension of time to regain compliance, if necessary.

If the Company fails to regain compliance with the Nasdaq continued listing standards, its common stock will be subject to delisting from Nasdaq.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data