Jaguar Health, Inc. 10-K

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Jaguar Health, Inc. Index to Financial Statements ​ Page Financial Statements ​ Reports of Independent Registered Public Accounting Firms 88 Consolidated Balance Sheets as of December 31, 2021 and 2020 92 Consolidated Statements of Operations for the years ended December 31, 2021 and 2020 93 Consolidated Statements of Changes in Stockholders’ Equity for the years ended December 31, 2021 and 2020 94 Consolidated Statements of Cash Flows for the years ended December 31, 2021 and 2020 96 Notes to Consolidated Financial Statements 98 ​ 87 Table of Contents Report of Independent Registered Public Accounting Firm ​ ​ ​ 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: (1) 88 Table of Contents 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. 89 Table of Contents ● 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 ​ 90 Table of Contents 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 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 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 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 served as the Company's auditor since 2019, which ended in 2021. San Diego, California 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 ​ ​ ​ 91 Table of Contents JAGUAR HEALTH, INC. CONSOLIDATED BALANCE S HEETS ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ December 31, (In thousands, except share and per share data) 2021 2020 Assets ​ ​ ​ ​ ​ Current assets: ​ ​ ​ ​ ​ ​ Cash ​ $ 17,051 ​ $ 8,090 Accounts receivable ​ ​ 1,709 ​ ​ 2,098 Accounts receivable - pledged ​ — ​ 2,434 Other receivable ​ ​ 435 ​ ​ 28 Inventory ​ ​ 4,900 ​ ​ 2,782 Prepaid expenses and other current assets ​ ​ 4,339 ​ ​ 2,360 Total current assets ​ 28,434 ​ 17,792 Property and equipment, net ​ ​ 650 ​ ​ 677 Operating lease - right-of-use asset ​ ​ 1,084 ​ ​ — Intangible assets, net ​ ​ 22,651 ​ ​ 24,337 Other assets ​ 446 ​ 37 Total assets ​ $ 53,265 ​ $ 42,843 ​ ​ ​ ​ ​ ​ ​ Liabilities and stockholders' equity ​ ​ ​ ​ ​ ​ Current liabilities: ​ ​ ​ ​ ​ ​ Accounts payable ​ $ 4,929 ​ $ 4,759 Accrued liabilities ​ ​ 7,117 ​ ​ 4,493 Warrant liability ​ ​ 1 ​ ​ 179 Operating lease liability, current ​ ​ 240 ​ ​ — Notes payable, current ​ 3,184 ​ 3,789 Series D perpetual preferred stock: $ 0.0001 par value; 977,300 shares authorized at December 31, 2021 and 2020; zero shares issued and outstanding at December 31, 2021 and 2020 ​ ​ — ​ ​ — Total current liabilities ​ 15,471 ​ 13,220 Operating lease liability, net of current portion ​ ​ 919 ​ ​ — 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) ​ ​ 25,022 ​ ​ 12,421 Total liabilities ​ ​ 41,412 ​ ​ 25,641 ​ ​ ​ ​ ​ ​ ​ Commitments and contingencies (See Note 6) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Stockholders' equity ​ ​ ​ ​ ​ ​ Series B-2 convertible preferred stock: $ 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 shares authorized at December 31, 2021 and 2020; zero shares issued and outstanding at December 31, 2021 and 2020 ​ ​ — ​ ​ — Common stock - voting: $ 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 ​ 5 ​ 4 Common stock - non-voting: $ 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 ​ 231,100 ​ 184,097 Noncontrolling interest ​ ​ 242 ​ ​ — Accumulated deficit ​ ( 219,494 ) ​ ( 166,899 ) Total stockholders' equity ​ ​ 11,853 ​ ​ 17,202 Total liabilities and stockholders' equity ​ $ 53,265 ​ $ 42,843 ​ The accompanying notes are an integral part of these consolidated financial statements. ​ 92 Table of Contents JAGUAR HEALTH, INC. CONSOLIDATED STATEMENTS OF OPERATIONS ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended ​ ​ December 31, (In thousands, except share and per share data) 2021 2020 Product revenue ​ $ 4,335 ​ $ 9,385 Operating expenses ​ ​ ​ ​ ​ ​ Cost of product revenue ​ ​ 2,333 ​ ​ 3,280 Research and development ​ 15,079 ​ 6,413 Sales and marketing ​ ​ 8,894 ​ ​ 6,609 General and administrative ​ ​ 17,103 ​ ​ 14,387 Series 3 warrants inducement expense ​ ​ 1,462 ​ ​ 3,696 ELOC warrants inducement expense ​ ​ 172 ​ ​ — Series B convertible preferred stock inducement expense ​ ​ — ​ ​ 1,647 Total operating expenses ​ 45,043 ​ 36,032 Loss from operations ​ ( 40,708 ) ​ ( 26,647 ) Interest expense ​ ( 8,421 ) ​ ( 2,792 ) Loss on extinguishment of debt and exchange of Series D perpetual preferred stock ​ ​ ( 753 ) ​ ​ ( 1,864 ) Change in fair value of financial instruments and hybrid instrument designated at Fair Value Option ​ ​ ( 1,953 ) ​ ​ ( 2,696 ) Other income (expense), net ​ ​ ( 765 ) ​ ​ 190 Loss before income tax ​ ​ ( 52,600 ) ​ ​ ( 33,809 ) Income tax expense ​ ​ — ​ ​ — Net loss and comprehensive loss ​ ​ ( 52,600 ) ​ ​ ( 33,809 ) Deemed dividend attributable to Series C perpetual preferred stock ​ ​ — ​ ​ ( 2,521 ) Deemed dividend attributable to accretion of Series A redeemable convertible preferred stock ​ ​ — ​ ​ ( 1,332 ) Deemed dividend attributable to Series 1, Series 2 and Bridge warrant holders ​ ​ — ​ ​ ( 856 ) Stock dividend attributable to Series C perpetual preferred stock ​ ​ — ​ ​ ( 130 ) Adjusted net loss and comprehensive loss ​ $ ( 52,600 ) ​ $ ( 38,648 ) Net loss attributable to noncontrolling interest ​ $ ( 5 ) ​ $ — Net loss attributable to common shareholders ​ $ ( 52,595 ) ​ $ ( 38,648 ) Net loss per share, basic and diluted ​ $ ( 1.18 ) ​ $ ( 3.00 ) Weighted-average common shares outstanding, basic and diluted ​ 44,711,588 ​ 12,880,868 ​ The accompanying notes are an integral part of these consolidated financial statements. ​ ​ 93 Table of Contents JAGUAR HEALTH, INC. CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Series A ​ ​ Series B ​ Series B-2 ​ Series C ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Convertible Preferred Stock ​ ​ Convertible Preferred Stock ​ Convertible Preferred Stock ​ Perpetual Preferred Stock ​ Common Stock - voting ​ Common Stock - non-voting ​ Additional ​ Noncontrolling ​ Accumulated ​ Total Stockholders' (In thousands, except share data) Shares Amount Shares ​ Amount ​ Shares Amount ​ Shares Amount ​ Shares ​ Amount ​ Shares ​ Amount ​ paid-in capital ​ interest ​ deficit ​ Equity Balances as of January 1, 2020 ​ 5,524,926 ​ $ 9,895 ​ ​ 1,971 ​ $ 476 ​ 10,165 ​ $ 1,236 ​ — ​ $ — ​ 4,757,683 ​ $ 1 ​ 40,301,237 ​ $ 4 ​ $ 142,046 ​ $ — ​ $ ( 133,090 ) ​ $ 10,673 Shares issued on exercise of Series 1, Series 2, and 2019 Bridge Note warrants ​ — ​ ​ — ​ ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ​ 182,986 ​ ​ — ​ — ​ ​ — ​ ​ 392 ​ ​ — ​ ​ — ​ ​ 392 Shares issued on exercise of Series 2 warrants and inducement offer conversion of Series B-1 convertible preferred stock ​ — ​ ​ — ​ ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ​ 416,666 ​ ​ — ​ — ​ ​ — ​ ​ 2,341 ​ ​ — ​ ​ — ​ ​ 2,341 Shares issued on exercise of Series 1, Series 2, and 2019 Bridge Note warrants, net of issuance costs of $ 461 ; May 2020 ​ — ​ ​ — ​ ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ​ 2,890,283 ​ ​ — ​ — ​ ​ — ​ ​ 3,788 ​ ​ — ​ ​ — ​ ​ 3,788 Shares issued on conversion of Series 1, Series 2, and 2019 Bridge Note warrants; June 2020 ​ — ​ ​ — ​ ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ​ 244,104 ​ ​ — ​ — ​ ​ — ​ ​ 359 ​ ​ — ​ ​ — ​ ​ 359 Modification of Series 1, Series 2 and Bridge warrants ​ — ​ ​ — ​ ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ​ ​ 856 ​ ​ — ​ ​ — ​ ​ 856 Deemed dividend attributable to Series 1, Series 2 and Bridge warrant holders ​ — ​ ​ — ​ ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ​ ​ ( 856 ) ​ ​ — ​ ​ — ​ ​ ( 856 ) Shares issued on exercise of Series 3 warrants ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ ​ ​ ​ ​ — ​ ​ — ​ 2,818,779 ​ ​ — ​ — ​ ​ — ​ ​ 6,057 ​ ​ — ​ ​ — ​ ​ 6,057 Shares issued on exercise of Series 1 and Series 2 warrants ​ — ​ ​ — ​ ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ​ 426,416 ​ ​ — ​ — ​ ​ — ​ ​ 626 ​ ​ — ​ ​ — ​ ​ 626 Shares issued to Atlas Sciences for settlement of Trial Delay Fee ​ — ​ ​ — ​ ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ​ 666,666 ​ ​ — ​ — ​ ​ — ​ ​ 612 ​ ​ — ​ ​ — ​ ​ 612 Warrants issued and converted to common shares to Atlas Sciences for settlement of Trial Delay Fee ​ — ​ ​ — ​ ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ​ 2,072,984 ​ ​ — ​ — ​ ​ — ​ ​ 1,904 ​ ​ — ​ ​ — ​ ​ 1,904 Issuance of common stock in PIPE financing, net of issuance costs of $ 51 ​ — ​ ​ — ​ ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ​ 571,427 ​ ​ — ​ — ​ ​ — ​ ​ 668 ​ ​ — ​ ​ — ​ ​ 668 Shares issued in Underwriter settlement agreement ​ — ​ ​ — ​ ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ​ 33,333 ​ ​ — ​ — ​ ​ — ​ ​ 45 ​ ​ — ​ ​ — ​ ​ 45 Warrants issued in Underwriter settlement agreement ​ — ​ ​ — ​ ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ​ ​ 31 ​ ​ — ​ ​ — ​ ​ 31 Underwriter settlement offering cost ​ — ​ ​ — ​ ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ​ ​ ( 185 ) ​ ​ — ​ ​ — ​ ​ ( 185 ) Conversion of Series B-2 convertible preferred stock into common stock ​ — ​ ​ — ​ ​ — ​ ​ — ​ ( 10,165 ) ​ ​ ( 1,236 ) ​ — ​ ​ — ​ 748,761 ​ ​ — ​ — ​ ​ — ​ ​ 1,236 ​ ​ — ​ ​ — ​ ​ — Conversion of Series B convertible preferred stock into common stock ​ — ​ ​ — ​ ​ ( 1,971 ) ​ ​ ( 476 ) ​ — ​ ​ — ​ — ​ ​ — ​ 1,474,416 ​ ​ — ​ — ​ ​ — ​ ​ 476 ​ ​ — ​ ​ — ​ ​ — Shares issued to Oasis as consideration under the March 2020 equity purchase agreement ​ — ​ ​ — ​ ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ​ 22,935 ​ ​ — ​ — ​ ​ — ​ ​ 33 ​ ​ — ​ ​ — ​ ​ 33 Shares issued to Oasis under the March 2020 equity purchase agreement, put option exercise, net of issuance costs of $ 13 ​ — ​ ​ — ​ ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ​ 17,333 ​ ​ — ​ — ​ ​ — ​ ​ 10 ​ ​ — ​ ​ — ​ ​ 10 Series A convertible preferred stock redeemed and Series C perpetual preferred issued under the exchange transaction ​ ( 5,524,926 ) ​ ​ ( 11,227 ) ​ ​ — ​ ​ — ​ — ​ ​ — ​ 842,500 ​ ​ 4,717 ​ — ​ ​ — ​ — ​ ​ — ​ ​ 150 ​ ​ — ​ ​ — ​ ​ 4,867 Stock dividend attributable to Series C perpetual preferred stock of $ 8 per share ​ — ​ ​ — ​ ​ — ​ ​ — ​ — ​ ​ — ​ 16,310 ​ ​ 130 ​ — ​ ​ — ​ — ​ ​ — ​ ​ ( 130 ) ​ ​ — ​ ​ — ​ ​ — Extinguishment of Series C perpetual preferred stock ​ — ​ ​ — ​ ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ ( 2,521 ) ​ — ​ ​ — ​ — ​ ​ — ​ ​ 2,521 ​ ​ — ​ ​ — ​ ​ — Deemed dividend attributable to Series C perpetual preferred stock ​ — ​ ​ — ​ ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ 2,521 ​ — ​ ​ — ​ — ​ ​ — ​ ​ ( 2,521 ) ​ ​ — ​ ​ — ​ ​ — Shares issued to third party for services ​ — ​ ​ — ​ ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ​ 91,666 ​ ​ — ​ — ​ ​ — ​ ​ 105 ​ ​ — ​ ​ — ​ ​ 105 Shares issued to Sagard Capital in exchange of services ​ — ​ ​ — ​ ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ​ 763,158 ​ ​ — ​ — ​ ​ — ​ ​ 879 ​ ​ — ​ ​ ​ ​ ​ 879 Shares issued in exchange of CVP Exchange Notes ​ — ​ ​ — ​ ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ​ 7,157,239 ​ ​ 1 ​ — ​ ​ — ​ ​ 6,512 ​ ​ — ​ ​ — ​ ​ 6,513 Warrants issued and converted to common shares to Pacific Capital Management in exchange of promissory note ​ — ​ ​ — ​ ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ​ 16,666 ​ ​ — ​ — ​ ​ — ​ ​ 24 ​ ​ — ​ ​ — ​ ​ 24 Shares issued to PoC Capital in Payment of Contracted Research Fees ​ — ​ ​ — ​ ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ​ 444,444 ​ ​ — ​ — ​ ​ — ​ ​ 437 ​ ​ — ​ ​ — ​ ​ 437 Shares issued to Iliad in exchange of Royalty Interest ​ — ​ ​ — ​ ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ​ 438,324 ​ ​ — ​ — ​ ​ — ​ ​ 256 ​ ​ — ​ ​ — ​ ​ 256 Shares issued on conversion of Series C perpetual preferred stock ​ — ​ ​ — ​ ​ — ​ ​ — ​ — ​ ​ — ​ ( 858,810 ) ​ ​ ( 4,847 ) ​ 2,817,959 ​ ​ — ​ — ​ ​ — ​ ​ 4,847 ​ ​ — ​ ​ — ​ ​ — Warrants issued and converted to common stock in exchange for Series C Preferred Stock ​ — ​ ​ — ​ ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ​ 2,352,563 ​ ​ 1 ​ — ​ ​ — ​ ​ ( 1 ) ​ ​ — ​ ​ — ​ ​ — Shares issued on conversion of Series D convertible preferred stock ​ — ​ ​ — ​ ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ​ 5,296,623 ​ ​ 1 ​ — ​ ​ — ​ ​ 7,876 ​ ​ — ​ ​ — ​ ​ 7,877 Conversion of non-voting common stock to voting common stock ​ — ​ ​ — ​ ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ​ 12,120 ​ ​ — ​ ( 38,180,451 ) ​ ​ ( 4 ) ​ ​ 4 ​ ​ — ​ ​ — ​ ​ — Shares issued in Registered Direct Offering Priced Above-the-Market, net of $ 78 offering costs ​ — ​ ​ — ​ ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ​ 1,271,639 ​ ​ — ​ — ​ ​ — ​ ​ 1,207 ​ ​ — ​ ​ — ​ ​ 1,207 Accretion to redemption value of redeemable preferred stock ​ — ​ ​ 1,332 ​ ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ​ ​ ( 1,332 ) ​ ​ — ​ ​ — ​ ​ ( 1,332 ) Fractional shares ​ — ​ ​ — ​ ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ​ 62 ​ ​ — ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — Shares issued upon exercise of stock options ​ — ​ ​ — ​ ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ​ 185 ​ ​ — ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — Stock-based compensation ​ — ​ ​ — ​ ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ​ ​ 2,824 ​ ​ — ​ ​ — ​ ​ 2,824 Net loss ​ — ​ ​ — ​ ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ ( 33,809 ) ​ ​ ( 33,809 ) Balances as of December 31, 2020 ​ — ​ $ — ​ ​ — ​ $ — ​ — ​ $ — ​ — ​ $ — ​ 38,007,420 ​ $ 4 ​ 2,120,786 ​ $ — ​ $ 184,097 ​ $ — ​ $ ( 166,899 ) ​ $ 17,202 The accompanying notes are an integral part of these consolidated financial statements. 94 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Series A ​ ​ Series B ​ Series B-2 ​ Series C ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Convertible Preferred Stock ​ ​ Convertible Preferred Stock ​ Convertible Preferred Stock ​ Perpetual Preferred Stock ​ Common Stock - voting ​ Common Stock - non-voting ​ Additional ​ Noncontrolling ​ Accumulated ​ Total Stockholders' (In thousands, except share data) Shares ​ Amount Shares ​ Amount ​ Shares ​ Amount ​ Shares ​ Amount ​ Shares ​ Amount ​ Shares ​ Amount ​ paid-in capital ​ interest ​ deficit ​ Equity Balances as of January 1, 2021 ​ — ​ $ — ​ ​ — ​ $ — ​ — ​ $ — ​ — ​ $ — ​ 38,007,420 ​ $ 4 ​ 2,120,786 ​ $ — ​ $ 184,097 ​ $ — ​ $ ( 166,899 ) ​ $ 17,202 Shares issued on exercise of Series 1, Series 2, and 2019 Bridge Note Warrants ​ — ​ ​ — ​ ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ​ 1,383,524 ​ ​ — ​ — ​ ​ — ​ ​ 2,034 ​ ​ — ​ ​ — ​ ​ 2,034 Shares issued in PIPE financing ​ — ​ ​ — ​ ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ​ 725,906 ​ ​ — ​ — ​ ​ — ​ ​ 1,751 ​ ​ — ​ ​ — ​ ​ 1,751 Shares issued in At the Market offering, net of issuance and offering costs of $ 465 ​ — ​ ​ — ​ ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ​ 2,931,446 ​ ​ — ​ — ​ ​ — ​ ​ 8,595 ​ ​ — ​ ​ — ​ ​ 8,595 Shares issued in registered public offering, net of issuance and offering costs of $ 2,550 ​ — ​ ​ — ​ ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ​ 4,028,290 ​ ​ 1 ​ — ​ ​ — ​ ​ 23,231 ​ ​ — ​ ​ — ​ ​ 23,232 Shares issued in extinguishment of Exchange Note 2 ​ — ​ ​ — ​ ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ​ 471,202 ​ ​ — ​ — ​ ​ — ​ ​ 2,516 ​ ​ — ​ ​ — ​ ​ 2,516 Shares issued on exercise of Series 3 warrants ​ — ​ ​ — ​ ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ​ 206,915 ​ ​ — ​ — ​ ​ — ​ ​ 1,776 ​ ​ — ​ ​ — ​ ​ 1,776 Shares issued to Iliad in exchange of notes payable and accrued interest ​ — ​ ​ — ​ ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ​ 588,235 ​ ​ — ​ — ​ ​ — ​ ​ 2,982 ​ ​ — ​ ​ — ​ ​ 2,982 Warrants issued to Oasis for ELOC amendment, net of offering costs of $ 48 ​ — ​ ​ — ​ ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ​ ​ 124 ​ ​ — ​ ​ — ​ ​ 124 Shares issued on conversion of Napo merger common shares ​ — ​ ​ — ​ ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ​ 726 ​ ​ — ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — Shares issued upon exercise of stock options ​ — ​ ​ — ​ ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ​ 3,147 ​ ​ — ​ — ​ ​ — ​ ​ 4 ​ ​ — ​ ​ — ​ ​ 4 Shares issued to third party for services ​ — ​ ​ — ​ ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ​ 5,666 ​ ​ — ​ — ​ ​ — ​ ​ 16 ​ ​ — ​ ​ — ​ ​ 16 Fractional shares ​ — ​ ​ — ​ ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ​ 50 ​ ​ — ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — Merger of subsidiary ​ — ​ ​ — ​ ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ​ ​ — ​ ​ 247 ​ ​ ​ ​ ​ 247 Stock-based compensation ​ — ​ ​ — ​ ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ​ ​ 3,974 ​ ​ — ​ ​ — ​ ​ 3,974 Net loss ​ — ​ ​ — ​ ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ​ ​ — ​ ​ ( 5 ) ​ ​ ( 52,595 ) ​ ​ ( 52,600 ) Balances as of December 31, 2021 ​ — ​ $ — ​ ​ — ​ $ — ​ — ​ $ — ​ — ​ $ — ​ 48,352,527 ​ $ 5 ​ 2,120,786 ​ $ — ​ $ 231,100 ​ $ 242 ​ $ ( 219,494 ) ​ $ 11,853 ​ ​ The accompanying notes are an integral part of these consolidated financial statements 95 Table of Contents JAGUAR HEALTH, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended ​ ​ December 31, ​ December 31, (in thousands) 2021 2020 Cash flows from operating activities ​ ​ ​ ​ Net loss ​ $ ( 52,600 ) ​ $ ( 33,809 ) Adjustments to reconcile net loss to net cash used in operating activities: ​ ​ ​ ​ ​ ​ Amortization of debt issuance costs, debt discount, and non-cash interest expense ​ ​ 5,171 ​ ​ 2,670 Stock-based compensation ​ 3,974 ​ 2,824 Change in fair value of financial instruments and hybrid instrument designated at Fair Value Option ​ ​ 1,953 ​ ​ 2,696 Depreciation and amortization expense ​ 1,719 ​ 1,727 Series 3 warrants inducement expense ​ ​ 1,462 ​ ​ 3,696 Loss on extinguishment of debt and conversion of Series D perpetual preferred stock ​ ​ 753 ​ ​ 1,864 ELOC warrants inducement expense ​ ​ 172 ​ ​ — Amortization of operating lease - right-of-use-asset ​ ​ 94 ​ ​ 553 Derecognition of debt discount on settlement of receivables secured borrowing ​ ​ 49 ​ ​ — Shares issued in exchange for services ​ ​ 16 ​ ​ 984 Series B convertible preferred stock inducement expense ​ ​ — ​ ​ 1,647 Expense on modification of warrants ​ ​ — ​ ​ 86 Shares and warrants issued in Underwriter settlement agreement ​ ​ — ​ ​ 76 Shares issued as consideration paid under the Oasis Capital Equity Purchase Agreement ​ ​ — ​ ​ 33 Loss on recourse obligation on secured borrowing ​ ​ — ​ ​ 15 Interest paid on the conversion of debt to equity ​ ​ — ​ ​ 611 Shares issued to Atlas for settlement of Trial Delay Fee ​ ​ — ​ ​ 612 Shares issued on conversion of warrants of Atlas for settlement of Trial Delay Fee ​ ​ — ​ ​ 1,904 Changes in assets and liabilities ​ ​ ​ ​ Accounts receivable ​ ​ 2,823 ​ ​ ( 2,840 ) Other receivable ​ ​ ( 407 ) ​ ​ ( 26 ) Inventory ​ ( 2,118 ) ​ ( 653 ) Prepaid expenses and other current assets ​ ( 796 ) ​ ( 955 ) Other assets ​ ​ ( 408 ) ​ ​ 893 Accounts payable ​ ​ 158 ​ ​ ( 743 ) Accrued liabilities ​ 3,034 ​ 1,194 Operating lease liability ​ ​ ( 19 ) ​ ​ ( 337 ) Total cash used in operating activities ​ ( 34,970 ) ​ ( 15,278 ) Cash flows from investing activities ​ ​ ​ ​ ​ ​ Purchase of equipment ​ ​ ( 6 ) ​ ​ ( 7 ) Total cash used in investing activity ​ ( 6 ) ​ ( 7 ) Cash flows from financing activities ​ ​ ​ ​ Proceeds from issuance of shares in registered public offering, net of issuance and offering costs of $ 2,550 ​ ​ 23,232 ​ ​ — Proceeds from issuance of notes payable, net of issuance costs of $ 50 in 2021 and 2020 ​ ​ 10,975 ​ ​ 12,300 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 ​ ​ 8,595 ​ ​ 1,281 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 ​ ​ 2,034 ​ ​ 5,797 Repayment of receivables secured borrowing ​ ​ ( 1,822 ) ​ ​ ( 6,207 ) Proceeds from issuance of shares in PIPE financing ​ ​ 1,751 ​ ​ 668 Repayment of insurance financing ​ ​ ( 943 ) ​ ​ ( 681 ) Noncontrolling interest ​ ​ 247 ​ ​ — Repayment of notes payable ​ ​ ( 100 ) ​ ​ ( 406 ) Payment of ELOC warrants offering costs ​ ​ ( 35 ) ​ ​ — Proceeds from exercise of stock options ​ ​ 3 ​ ​ — Proceeds from sale of receivables, net of debt discount and issuance costs of $ 640 ​ ​ — ​ ​ 7,057 Issuance costs from shares issued on Underwriter settlement agreement ​ ​ — ​ ​ ( 185 ) Payments of deferred offering costs ​ ​ — ​ ​ ( 142 ) Proceeds from issuance of common stock on conversion of Oasis Capital an Equity Purchase Agreement put options, net of issuance costs of $ 13 ​ ​ — ​ ​ 10 Total cash provided by financing activities ​ ​ 43,937 ​ ​ 19,492 Net increase in cash ​ 8,961 ​ 4,207 Cash at beginning of period ​ ​ 8,090 ​ ​ 3,883 Cash at end of period ​ $ 17,051 ​ $ 8,090 ​ ​ ​ 96 Table of Contents JAGUAR HEALTH, INC. STATEMENTS OF CASH FLOWS (continued) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended ​ ​ December 31, ​ December 31, ​ ​ 2021 ​ 2020 Supplemental schedule of cash flow information ​ ​ ​ ​ ​ ​ Cash paid for interest ​ $ 28 ​ $ 757 Supplemental schedule of non-cash financing and investing activities ​ ​ ​ ​ ​ ​ Shares issued in exchange of partial settlement of royalty interest ​ $ 2,982 ​ $ — Shares issued on exercise of Series 3 warrants ​ $ 1,776 ​ $ 6,057 Insurance financing ​ $ 1,183 ​ $ 776 Recognition of operating lease - right-of-use asset and operating lease liability ​ $ 1,087 ​ $ — Lease modification ​ $ 91 ​ $ — Offering costs included in accounts payable and accrued liabilities ​ $ 13 ​ $ — Extinguishment of Series A redeemable convertible preferred stock ​ $ — ​ $ 11,227 Common stock issued as redemption of Series D perpetual preferred stock ​ $ — ​ $ 6,575 Issuance of Series D perpetual preferred stock ​ $ — ​ $ 6,404 Common stock issued as redemption of notes payable and related interest ​ $ — ​ $ 6,165 Issuance of Series C perpetual preferred stock ​ $ — ​ $ 4,717 Deemed dividend attributable to Series C perpetual preferred stock ​ $ — ​ $ 2,521 Accretion to redemption value of Series A contingently redeemable convertible preferred stock ​ $ — ​ $ 1,332 Conversion of Series B-2 convertible preferred stock into common stock ​ $ — ​ $ 1,236 Deemed dividend attributable to Series 1, Series 2 and Bridge warrant holders ​ $ — ​ $ 856 Shares issued on exercise of Series B convertible preferred shares ​ $ — ​ $ 476 Shares issued to PoC Capital in payment of contracted research fees ​ $ — ​ $ 437 Stock dividend attributable to Series C perpetual preferred stock ​ $ — ​ $ 130 ​ The accompanying notes are an integral part of these consolidated financial statements. ​ ​ 97 Table of Contents Jaguar Health, Inc. Notes to Financial Statements 1. Organization and Business Jaguar Health, Inc. (“Jaguar” or the “Company”), formerly known as Jaguar Animal Health, Inc., was incorporated on June 6, 2013 (inception) in Delaware. The Company was a majority-owned subsidiary of Napo until the close of the Company's initial public offering on May 18, 2015. The Company was formed to develop and commercialize first-in-class gastrointestinal products for companion and production animals and horses. The Company's first commercial product, Neonorm Calf, was launched in 2014 and Neonorm Foal was launched in the first quarter of 2016. The Company's activities are subject to significant risks and uncertainties, including failing to secure additional funding in order to timely complete the development and commercialization of products. On July 31, 2017, Jaguar completed a merger with Napo pursuant to the Agreement and Plan of Merger dated March 31, 2017 by and among Jaguar, Napo, Napo Acquisition Corporation (“Merger Sub”), and Napo's representative (the “Merger Agreement”). In accordance with the terms of the Merger Agreement, upon the completion of the merger, Merger Sub merged with and into Napo, with Napo surviving as the wholly-owned subsidiary (the “Merger” or “Napo Merger”). Immediately following the Merger, Jaguar changed its name from “Jaguar Animal Health, Inc.” to “Jaguar Health, Inc.” Napo now operates as a wholly-owned subsidiary of Jaguar focused on human health and the ongoing commercialization of Mytesi, a Napo drug product approved by the U.S. 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. Nasdaq Communication and Compliance Minimum Stockholders’ Equity Requirement 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 98 Table of Contents 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. ​ 2. Summary of Significant Accounting Policies ​ Basis of Presentation The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP"). 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 subsidiaries. All inter-company transactions and balances have been eliminated in consolidation. The reporting currency of the Company is the U.S. dollar. Use of Estimates The preparation of financial statements in conformity with U.S. 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. 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. 99 Table of Contents In March 2020, the World Health Organization declared the COVID-19 outbreak to be a pandemic. During the year ended December 31, 2021, the Company’s financial results were not significantly affected by the COVID-19 outbreak. The Company has considered all information available as of the date of issuance of these financial statements and the Company is not aware of any specific events or circumstances that would require an update to its estimates or judgments, or a revision to the carrying value of its assets or liabilities. These estimates may change as new events occur and additional information becomes available. 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. 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.” Cash 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 Accounts receivable is recorded net of allowances for discounts for prompt payment and credit losses. The Company estimates an allowance for credit losses by considering factors such as historical experience, credit quality, the age of the accounts receivable balances, and current economic conditions that may affect a customer’s ability to pay. The corresponding expense for the credit loss allowance is reflected in general and administrative expenses. The credit loss allowance was immaterial as of December 31, 2021 and 2020. Concentrations 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 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: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended ​ ​ ​ December 31, ​ ​ 2021 2020 Customer 1 ​ ​ 73 % 97 % Customer 2 ​ ​ 11 % — % Customer 3 ​ ​ 12 % — % ​ ​ 100 Table of Contents 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. Accounts receivable balance of the significant customers as a percentage of total accounts receivable is as follows: ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ ​ 2021 ​ 2020 Customer 1 ​ 16 % 95 % Customer 2 ​ 37 % — % Customer 3 ​ 37 % — % ​ The Company is subject to concentration risk from its suppliers. 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. Fair Value 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. Other financial liabilities are initially recorded at fair value, and subsequently measured at either fair value or amortized cost using the effective interest method. 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 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 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. Inventory write-downs are measured as the difference between the cost of inventory and net realizable value. 101 Table of Contents Property and Equipment Land is stated at cost, reflecting fair value of the property at July 31, 2017, the date of the Napo merger. Equipment is stated at cost, net of accumulated depreciation. Equipment begins to be depreciated when it is placed into service. Depreciation is calculated using the straight-line method over estimated useful lives ranging between 3 to 10 years . Expenditures for repairs and maintenance of assets are charged to expense as incurred. Costs of major additions and betterments are capitalized and depreciated on a straight-line basis over their estimated useful lives. Upon retirement or sale, the cost and related accumulated depreciation of assets disposed of are removed from the accounts and any resulting gain or loss is included in the consolidated statements of operations. Long-Lived Assets 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. 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 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. During the development period, these assets will not be amortized as charges to earnings; instead, these assets will be tested for impairment on an annual basis or more frequently if impairment indicators are identified. 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 for the years ended December 31, 2021 and 2020. Leases 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. Operating lease liabilities and their corresponding right-of-use assets are recorded based on the present value of lease payments over the expected lease term. Because the interest rate implicit in lease contracts is typically not readily determinable, the Company utilizes its incremental borrowing rate, which is the rate incurred to borrow on a collateralized basis over a similar term, an amount equal to the lease payments in a similar economic environment. Certain adjustments to the right-of-use asset may be required for items such as initial direct costs paid or incentives received. ​ Operating Lease 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 102 Table of Contents 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 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. The Company elected not to apply the recognition requirements to short-term leases, and instead recognize the lease payments in profit or loss on a straight-line basis over the lease term. 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 Research and development expense consists of expenses incurred in performing research and development activities including related salaries, clinical trial and related drug and non-drug product costs, contract services and other outside service expenses. 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 The Company recognizes revenue in accordance with ASC Topic 606, Revenue from Contracts with Customers (“ASC 606”). The Company’s policy typically permits returns if the product is damaged, defective, or otherwise cannot be used when received by the customer if the product has expired. Returns are accepted for product that will expire within six months or that have expired up to one year after their expiration dates. Estimates for expected returns of expired products are based primarily on an ongoing analysis of our historical return patterns. The Company recognizes revenue in accordance with the core principle of ASC 606 or when there is a transfer of control of promised goods or services to customers in an amount that reflects the consideration that the Company expects to be entitled to in exchange for those goods or services. 103 Table of Contents The Company recognizes the incremental costs of obtaining a contract as an expense when incurred if the amortization period of the asset that the Company otherwise would have recognized is one year or less. The Company does not adjust the amount of consideration for the effects of a significant financing component if, at contract inception, the expected period between the transfer of promised goods or services and customer payment is one year or less. The Company has elected to treat shipping and handling activities as fulfillment costs. Additionally, the Company elected to record revenue net of sales and other similar taxes. Contracts – Cardinal Health 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. Since 2014, the Company has entered into several distribution agreements with established distributors such as Animart, Vedco, VPI, RJ Matthews, Covetrus, and Stockmen Supply to distribute the Company's products in the United States, Japan, and China. The distribution agreements and the related purchase order together meet the contract existence criteria under ASC 606-10-25-1. The Company sells directly to its customers without the use of an agent. Performance obligations 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, 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, 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, the entire transaction price is allocated to the single performance obligation contained in each contract. Revenue recognition For contracts with Cardinal Health, for the Company, a single performance obligation is satisfied at a point in time, upon the FOB terms of each contract when control, including title and all risks, has transferred to the customer. 104 Table of Contents Disaggregation of Product Revenue Human 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. Animal 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 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. 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. 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. 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 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. The Company does not anticipate future revenue contract with Atlas. 105 Table of Contents ● The trial delay fee is a penalty in its economic term, subject to accounting for contingencies and provisions under relevant authoritative guidance. In October 2020, the Company entered into a fee settlement agreement with Atlas pursuant to which the Company agreed to issue 2,000,000 shares of common stock and pre-funded warrants to purchase 6,218,954 shares of common stock as complete settlement and satisfaction of the trial delay fee of $ 2.5 million that the Company incurred pursuant to its license agreement with Atlas dated April 15, 2020. 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 . The settlement resulted in a loss of $ 1.0 million. 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. 106 Table of Contents Collaboration Revenue Revenue recognition for collaboration agreements requires significant judgment. The Company’s assessments and estimates are based on contractual terms, historical experience and general industry practice. Revisions in these values or estimations have the effect of increasing or decreasing collaboration revenue in the period of revision. On September 24, 2018, the Company entered into a Distribution, License and Supply Agreement (“License Agreement”) with Knight Therapeutics ("Knight"). The License Agreement has a term of 15 years (with automatic renewals) and provides Knight with an exclusive right to commercialize current and future Jaguar human health products (including crofelemer, Lechlemer, and any product containing a proanthocyanidin or with an anti-secretory mechanism) in Canada and Israel. Knight forfeited its right of first negotiation for expansion to Latin America. Under the License Agreement, Knight is responsible for applying for and obtaining necessary regulatory approvals in the territory of Canada and Israel, as well as marketing, sales and distribution of the licensed products. 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, 2021 and 2020. Modifications to Liability-classified Instruments 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 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. Pursuant to that guidance, the incremental fair value from the modification is recognized as an expense in the statements of operations to the extent the modified instrument has a higher fair value; 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. 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. 107 Table of Contents 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 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. The Company issues stock awards with only service-based vesting conditions, and records compensation expense for these awards using the straight-line method. 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. Income Taxes The Company uses the asset and liability method of accounting for income taxes. Under this method, deferred tax assets and liabilities are determined based on the differences between the financial reporting and the tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. 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. 108 Table of Contents Comprehensive Loss 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 Basic net loss per common share is computed by dividing net loss attributable to common stockholders for the year by the weighted-average number of common shares outstanding during the year. Diluted net loss per share is computed by dividing the net loss attributable to common stockholders for the year by the weighted-average number of common shares, including potential dilutive shares of common stock assuming the dilutive effect of potential dilutive securities. For years in which the Company reports a net loss, diluted net loss per common share is the same as basic net loss per common share, because their impact would be anti-dilutive to the calculation of net loss per common share. Diluted net loss per common share is the same as basic net loss per common share for the years ended December 31, 2021 and 2020. 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): Measurement of Credit Losses on Financial Instruments . The main objective of the standard is to provide financial statement users with more decision-useful information about the expected credit losses on financial instruments and other commitments to extend credit held by a reporting entity at each reporting date. To achieve this objective, the amendments in this standard replace the incurred loss impairment methodology in current GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. The update is effective for the Company beginning January 1, 2023 with early adoption permitted. The Company is still evaluating the impact of the adoption of this standard. 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 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. 109 Table of Contents 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 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. ​ 3. 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. ​ 4 . Fair Value Measurements ASC 820 "Fair Value Measurements," defines fair value, establishes a framework for measuring fair value under U.S. GAAP and enhances disclosures about fair value measurements. Fair value is defined under ASC 820 as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value under ASC 820 must maximize the use of observable inputs and minimize the use of unobservable inputs. The standard describes a fair value hierarchy based on three levels of inputs, of which the first two are considered observable and the last unobservable, that may be used to measure fair value which are the following: ● Level 1 – Observable inputs such as quoted prices (unadjusted) for identical instruments in active markets. ● Level 2 – Observable inputs such as quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, or model ‑ derived valuations whose significant inputs are observable. ● Level 3 – Unobservable inputs that reflect the reporting entity’s own assumptions. The following tables set forth the fair value of the Company’s consolidated financial instrument that was measured at fair value on a recurring basis as of December 31, 2021 and 2020: ​ 110 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2021 (in thousands) Level 1 Level 2 Level 3 Total Warrant liability ​ $ — ​ $ — ​ $ 1 ​ $ 1 Streeterville note ​ ​ — ​ ​ — ​ ​ 7,818 ​ ​ 7,818 Total fair value ​ $ — ​ $ — ​ $ 7,819 ​ $ 7,819 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2020 (in thousands) Level 1 Level 2 Level 3 Total Warrant liability ​ $ — ​ $ — ​ $ 179 ​ $ 179 Total fair value ​ $ — ​ $ — ​ $ 179 ​ $ 179 ​ The change in the estimated fair value of the Level 3 liability is summarized below: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended ​ ​ December 31, 2021 (in thousands) ​ Warrant liability Streeterville note Beginning fair value of Level 3 liability $ 179 $ — Additions ​ ​ 1,462 ​ ​ 6,000 Exercises ​ ​ ( 1,775 ) ​ ​ — Change in fair value 135 ​ ​ 1,818 Ending fair value of Level 3 liability $ 1 $ 7,818 ​ Warrant Liability 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 The Series A warrant valuation of zero at December 31, 2021 was computed using the Black-Scholes-Merton pricing model using a stock price of $ 1.04 , a strike price of $ 2,363 per share, an expected term of 0.41 years, volatility of 89 % and a risk-free discount rate of 0.19 % . 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 was zero for the year ended December 31, 2021. The October 2018 Underwriter Warrants The October 2018 Underwriter Warrants valuation of $ 1,000 at December 31, 2021 was computed using the Black-Scholes-Merton pricing model using a stock price of $ 1.04 , a strike price of $ 158 per share, an expected term of 1.75 years, volatility of 180 % and a risk-free discount rate of 0.65 % . 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 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. 111 Table of Contents 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 % . 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 ​ 2021 ​ 2020 ​ to fair value Risk Adjusted Discount Rate ​ 6.78 % - 21.31 % ( 21.31 %) ​ N/A ​ 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) ​ N/A ​ If expected cash flows by management considered the lowest amount of market indications for vouchers, FV would have decreased by $ 1.2 million. ​ 112 Table of Contents 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 % ​ N/A ​ 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) ​ Fair value ​ Unpaid Principal Balance ​ Fair Value Over (Under) Unpaid Principal Balance At December 31, 2021 ​ ​ ​ ​ ​ ​ ​ ​ ​ Hybrid Instrument: ​ ​ ​ ​ ​ ​ ​ ​ ​ Streeterville note ​ $ 7,818 ​ $ 6,000 ​ $ 1,818 ​ ​ 113 Table of Contents ​ 5. Related Party Transactions Management Services Agreement In March 2018, concurrent with the issuance of the Company’s Series A Convertible Preferred Stock to Sagard Capital Partners, L.P. (“Sagard Capital”), the Company entered into a Management Services Agreement with Sagard Capital. Under the agreement, Sagard Capital was to provide consulting and management advisory service to the Company from March 2018 through March 2021. These services include assistance with strategic planning regarding the Company’s commercial strategy, research and due diligence regarding human resource activities, and strategic advice in financial matters. In consideration for such services, the Company paid Sagard Capital an annual fee of $ 450,000 , with total fees over the term of the agreement not to exceed $ 1.4 million. On September 1, 2020, in concurrence with other transactions by and between the Company, Chicago Venture Partners, L.P. (“CVP” or “Chicago Venture Partners”) and its affiliates, and Sagard Capital, the Company and Iliad Research and Trading, L.P. (“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, 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 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 (“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. Conte pursuant to the expiration and termination of the office lease agreement between the Company and CA-Mission Street Partnership on September 30, 2020. In October 2020, the Company paid Dr. Conte a prorated amount due through the effective date of the release of the letter of credit of $ 7,000 . As of December 31, 2021 and 2020, the Company had a balance of zero due to Dr. Conte. ​ 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. ​ 6 . Commitments and Contingencies Commitments Leases On August 28, 2018, the Company entered into an office lease extension agreement for approximately 6,311 square feet of office space in San Francisco, CA. The term of the lease began on September 1, 2018 and expired on September 30, 2020. 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. 114 Table of Contents 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 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-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: ​ ​ ​ ​ ​ ​ ​ ​ December 31, (in thousands) 2021 ​ 2020 Operating lease - right-of-use asset $ 1,084 ​ $ — ​ ​ ​ ​ ​ ​ Operating lease liability, current ​ 240 ​ ​ — Operating lease liability, net of current portion ​ 919 ​ ​ — Total $ 1,159 ​ $ — ​ ​ ​ ​ ​ ​ Weighted-average remaining life (years) ​ 3.21 ​ ​ — Weighted-average discount rate ​ 21.10 % ​ ​ — ​ 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 115 Table of Contents 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: ​ ​ ​ ​ ​ ​ ​ ​ December 31, (in thousands) 2021 ​ 2020 2021 $ — ​ $ — 2022 ​ 463 ​ ​ — 2023 ​ 518 ​ ​ — 2024 ​ 534 ​ ​ — 2025 ​ 89 ​ ​ — Total undiscounted operating lease payments ​ 1,604 ​ ​ — Imputed interest expenses ​ ( 445 ) ​ ​ — Total operating lease liability ​ 1,159 ​ ​ — Less: Operating lease liability, current ​ 240 ​ ​ — Operating lease liability, net of current portion $ 919 ​ $ — ​ 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 ​ On September 3, 2020, the Company entered into a manufacturing and supply agreement (the “Agreement”) with Glenmark Life Sciences Limited (“Glenmark”), pursuant to which Glenmark will continue to serve as the Company’s manufacturer of crofelemer for use in Mytesi, the Company’s human prescription drug product approved by the U.S. Food and Drug Administration, and for other crofelemer-based products manufactured by the Company or its affiliates for human or animal use. The term of the Agreement is approximately 2.5 years (i.e., until March 31, 2023) and may be extended for successive two-year renewal terms upon mutual agreement between the parties thereto. Pursuant to the terms of the Agreement, Glenmark will supply crofelemer to the Company. The Agreement contains provisions regarding the rights and responsibilities of the parties with respect to manufacturing specifications, forecasting and ordering, delivery arrangements, payment terms, confidentiality and indemnification, as well as other customary provisions. The Agreement includes a commitment for the purchase from Glenmark of a minimum quantity of 300 kilograms of crofelemer per year, pro-rated for partial years, where the Company may be obligated to pay any shortfall. Either party may terminate the Agreement for any reason with 12 months prior written notice to the other party. In addition, either party may terminate the Agreement upon written notice as a result of a material breach of the Agreement that remains uncured for a period of 90 days . If the Company terminates the Agreement as a result of a material breach caused by Glenmark, the Company will not be obligated to pay for any minimum quantity shortfall. ​ Master Services Agreement (“MSA”) On June 24, 2019, the Company entered into an MSA for clinical research organization services (the “2019 MSA”) and a service order under such 2019 MSA with Integrium, LLC (“Integrium”). The service order supports the Company’s study to evaluate the effect of Mytesi on gastrointestinal microbiome in people living with HIV. The 2019 MSA will terminate upon the satisfactory performance of all services to be provided thereunder unless earlier terminated by the parties. On October 5, 2020, the Company entered into another MSA for clinical research organization services (the “2020 MSA”) and a service order under such 2020 MSA with Integrium. The service order covers the Company’s planned upcoming pivotal Phase 3 clinical trial for cancer-therapy related diarrhea. As consideration for its services, 116 Table of Contents 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. 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. As a result of the agreement, Napo now controls commercial rights for Mytesi for all indications, territories and patient populations globally, and also holds commercial rights to the existing regulatory approvals for crofelemer in Brazil, Ecuador, Zimbabwe and Botswana. 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. For the year ended December 31, 2021 and 2020, the Company paid Glenmark $ 2.0 million and zero , respectively. Revenue Sharing Commitment Update On December 14, 2017, the Company announced its entry into a collaboration agreement with Seed Mena Businessmen Services LLC (“SEED”) for Equilevia™, the Company's non-prescription, personalized, premium product for total gut health in equine athletes. According to the terms of the Agreement, the Company will pay SEED 15 % of total revenue generated from any clients or partners introduced to the Company by SEED in the form of fees, commissions, payments or revenue received by the Company or its business associates or partners, and the agreed-upon revenue percentage increases to 20 % after the first million dollars of revenue. In return, SEED will provide the Company access to its existing United Arab Emirates (“UAE”) network and contacts and assist the Company with any legal or financial requirements. The agreement became effective on December 13, 2017 and will continue indefinitely until terminated by either party pursuant to the terms of the Agreement. No payments have been made to date. Legal Proceedings 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”). 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. 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 . As of December 31, 2021 and 2020, the Company concluded not to record any loss contingency and insurance recovery. Settlement of Underwriter Fee In August 2018, the Company entered into an agreement with an underwriter pursuant to which the underwriter would aid the Company in identifying certain financing transactions, in exchange for a percentage fee of any such financing and warrants. 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 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 117 Table of Contents 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. The Company classified the cash payments, warrant and commons stock issuance payments as issuance costs in the consolidated statements of stockholders’ equity. Severance Agreements In June 2020, the Company entered into certain agreements relating to the payment of severance and other benefits to executive officers of the Company, the severance agreements provide for compensation and benefits if the executive officer is subject to (a) a termination of employment by the Company without cause or (b) a good reason termination, within three months following a change in control. ​ Contingencies 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. ​ 7. Balance Sheet Components Inventory Inventory at December 31, 2021 and 2020 consisted of the following: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, (in thousands) 2021 2020 Raw Material ​ $ 1,248 ​ $ 1,321 Work in Process ​ ​ 2,760 ​ ​ 1,026 Finished Goods ​ ​ 892 ​ ​ 435 Inventory ​ $ 4,900 ​ $ 2,782 ​ Property and Equipment, net Property and equipment at December 31, 2021 and 2020 consisted of the following: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, (in thousands) 2021 2020 Land ​ $ 396 ​ $ 396 Lab equipment ​ ​ 424 ​ ​ 418 Clinical equipment ​ 65 ​ 65 Software ​ ​ 63 ​ ​ 63 Total property and equipment at cost ​ 948 ​ 942 Accumulated depreciation ​ ( 298 ) ​ ( 265 ) Property and equipment, net ​ $ 650 ​ $ 677 ​ 118 Table of Contents Depreciation and amortization expense was $ 33,000 and $ 40,000 for the years ended December 31, 2021 and 2020, respectively . Intangible assets, net Intangible assets, net of amortization, at December 31, 2021 and 2020 consisted of the following: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, (in thousands) 2021 2020 Developed technology ​ $ 25,000 ​ $ 25,000 Accumulated developed technology amortization ​ ( 7,361 ) ​ ( 5,694 ) Developed technology, net ​ 17,639 ​ 19,306 In-process research and development ​ ​ 4,800 ​ ​ 4,800 In process research and development, net ​ 4,800 ​ 4,800 Trademarks ​ 300 ​ 300 Accumulated trademark amortization ​ ( 88 ) ​ ( 69 ) Trademarks, net ​ 212 ​ 231 Total intangible assets, net ​ $ 22,651 ​ $ 24,337 ​ 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: ​ ​ ​ ​ ​ (in thousands) Amounts 2022 ​ $ 1,687 2023 ​ ​ 1,687 2024 ​ ​ 1,687 2025 ​ ​ 1,687 2026 ​ ​ 1,687 Thereafter ​ ​ 9,416 ​ ​ $ 17,851 ​ Accrued Liabilities Accrued liabilities at December 31, 2021 and 2020 consisted of the following: ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, (in thousands) 2021 ​ 2020 Accrued interest ​ $ 3,456 ​ $ 696 Accrued legal costs ​ ​ 414 ​ ​ 291 Accrued chargebacks and discounts ​ ​ 335 ​ ​ 736 Accrued local tax ​ ​ 285 ​ ​ — Accrued vacation ​ ​ 281 ​ ​ 277 Accrued distributor services fees ​ ​ 250 ​ ​ 1,314 Accrued audit and tax services ​ ​ 167 ​ ​ 70 Accrued payroll and commission ​ 120 ​ 43 Accrued payroll tax ​ ​ 58 ​ ​ 57 Accrued consulting ​ ​ 47 ​ ​ 31 Accrued other ​ ​ 1,704 ​ ​ 978 Total ​ $ 7,117 ​ $ 4,493 ​ 119 Table of Contents 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. ​ ​ ​ ​ ​ 8. Debt Notes payable at December 31, 2021 and 2020 consisted of the following: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, (in thousands) ​ 2021 ​ 2020 Royalty Interest ​ $ 37,000 ​ $ 30,000 Streeterville Note ​ ​ 7,818 ​ ​ — Insurance Financing ​ ​ 335 ​ ​ 95 Tempesta Note ​ ​ 350 ​ ​ 450 Oasis Secured Borrowing ​ ​ — ​ ​ 1,822 Exchange Note 2 ​ ​ — ​ ​ 1,525 ​ ​ ​ 45,503 ​ 33,892 Less: unamortized discount and debt issuance costs ​ ( 17,297 ) ( 17,682 ) Note payable, net of discount ​ $ 28,206 $ 16,210 Notes payable - non-current, net ​ $ 25,022 ​ $ 12,421 Notes payable - current, net ​ $ 3,184 ​ $ 3,789 ​ Future maturities of the notes payable as of December 31, 2021 are as follows: ​ ​ ​ ​ ​ (in thousands) ​ Amounts Years ended December 31, ​ ​ ​ 2022 ​ $ 3,183 2023 ​ ​ 13,493 2024 ​ ​ 10,959 2025 ​ ​ 6,187 2026 ​ ​ 3,863 ​ ​ ​ 37,685 Less: unamortized discount and debt issuance costs ​ ​ ( 17,297 ) Total ​ $ 20,388 ​ Future maturities are based on contractual minimum payments. Timing of maturities may fluctuate based on future revenue. ​ Sale of Future Royalty Interest March 2020 Purchase Agreement In March 2020, the Company entered into a royalty interest purchase agreement (the “March 2020 Purchase Agreement”) with Iliad, pursuant to which the Company sold to Iliad a royalty interest entitling Iliad to receive $ 500,000 of future royalties on sales of Mytesi and certain up-front license fees and milestone payments from licensees and/or distributors (the “Royalty Repayment Amount”) for an aggregate purchase price of $ 350,000 . 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 120 Table of Contents 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. The Royalty Interest amount of $ 500,000 is classified as debt, net of a $ 150,000 discount. Under ASC 470-10-35-3, royalty payments to Iliad 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 105 %. On July 10, 2020, the Company and Iliad entered into an amendment to the March 2020 Purchase Agreement to which the parties agreed that no royalty payments or other payment will be due prior to December 10, 2020. The Royalty Payments shall resume as of December 10, 2020, which Royalty Payment will cover Net Sales on Included Products and licensing fees and milestone payments for the month of November. In consideration of the amendment, the balance of the Royalty Repayment Amount as of July 10, 2020 was increased by 10 %. All other terms remain unchanged. This amendment resulted in the Company accounting for the transaction as a TDR, under which the carrying amount of the debt remained unchanged but interest expense is computed using a new effective rate that equates the present value of future cash payments specified by the new terms with the carrying amount of the debt. Subsequent to March 2020, the Company had paid $ 283,000 of the $ 500,000 Royalty Interest Amount. In November 2020, the Company and Iliad entered into an exchange agreement pursuant to which the Company issued 1,314,974 shares of common stock in exchange for the outstanding balance of the debt as of November 16, 2020. The exchange agreement was accounted for as a TDR. As of December 31, 2020, the carrying amount of the debt was zero . October 2020 Purchase Agreement On October 8, 2020, the Company entered into another royalty interest purchase agreement (the “October 2020 Purchase Agreement”) with Iliad, pursuant to which the Company sold to Iliad a royalty interest entitling Iliad to receive $ 12.0 million of future royalties on sales of Mytesi and certain up-front license fees and milestone payments from licensees and/or distributors (the “Royalty Repayment Amount”) for an aggregate purchase price of $ 6.0 million. Until such time as the Royalty Repayment Amount has been paid in full, the Company will pay Iliad 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, 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 delivery of the October 2020 Purchase Agreement to the Company (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) $ 250,000 , 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 18-month anniversary of the Purchase Price Date, the monthly Royalty Payment shall be the greater of (a) $ 400,000 and (b) the actual Royalty Payment amount Iliad is entitled to for such month. 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. 121 Table of Contents The Royalty Interest amount of $ 12.0 million is classified as debt, net of a $ 6.0 million discount. Under ASC 470-10-35-3, royalty payments to Iliad 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 34.51 % . Pursuant to the October 2020 Purchase Agreement, if the weekly volume weighted average price (“VWAP”) of the Company’s common stock is not equal or greater than the minimum VWAP of $ 0.9105 at least twice during each calendar month during the six-month period beginning on November 1, 2020, then the Royalty Repayment Amount will be automatically be increased by $ 6.0 million at the end of such six-month period. During the observation period starting November 1, 2020, the Company’s weekly VWAP failed to reach the minimum VWAP of $ 0.9105 and on November 13, 2020, the Company concluded that the contingent clause has been met, warranting an additional $ 6.0 million Royalty Repayment Amount, to be added to the outstanding balance commencing on May 10, 2021 for the purpose of cash interest calculation. The change in the Royalty Repayment Amount was accounted for as a debt modification and resulted in a new discount rate of 45.42 % . 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 On December 22, 2020, the Company entered into a royalty interest purchase agreement (the “December 2020 Purchase Agreement”) with Irving Park Capital, LLC (“Irving”), pursuant to which the Company sold to Irving a royalty interest entitling Irving to receive $ 12.0 million of future royalties on sales of Mytesi and certain up-front license fees and milestone payments from licensees and/or distributors (the “Royalty Repayment Amount”) for an aggregate purchase price of $ 6.0 million. Until such time as the Royalty Repayment Amount has been paid in full, the Company will pay Irving 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, but specifically excluding licensing fees and/or milestone payments that are reimbursements of clinical trial expenses (the “Royalty Payments”). Beginning on the payment start date and continuing until the 12-month anniversary of the Purchase Price Date, the monthly Royalty Payment shall be the greater of (a) $ 750,000 , and (b) the actual Royalty Payment amount Irving 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. Under ASC 470-10-35-3, royalty payments to Irving 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 23.70 % . As of December 31, 2021, the forecasted future revenues changed which resulted to a new discount rate of 23.28 % . 122 Table of Contents 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. 123 Table of Contents 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. 124 Table of Contents 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 The Purchase Agreement In May 2020, the Company, entered into a one-year Accounts Receivable Purchase Agreement (the “Purchase Agreement”) with Oasis Capital (“Oasis”), pursuant to which Oasis may from time to time at its discretion purchase accounts receivable of the Company on a recourse basis, at a purchase price equal to 37.5 % of the face amount of the first purchase, and at a purchase price equal to 42.5 % for subsequent purchased accounts (“Purchase Price”). 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 125 Table of Contents 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. Notwithstanding the foregoing, either Oasis or the Company may terminate the Purchase Agreement on 60 days prior written notice. Under the Purchase Agreement, Oasis is entitled to a transaction fee of $ 25,000 and may be entitled to additional transaction fees to the extent Oasis acquires additional accounts receivable under the Purchase Agreement, which fees will not exceed $ 5,000 per transaction. Per the Purchase Agreement, the Company will service and administer the purchased accounts receivable for Oasis. Oasis appointed the Company to be its agent and servicer for monitoring and collecting the accounts receivable subject to the terms of the Purchase Agreement. The Company will perform its duties in a commercially reasonable manner and agrees that Company will not commence any legal action with respect to such servicing and collection efforts and shall not terminate, discharge, discount or write off any accounts receivable without Oasis's prior written consent. 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.” 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. The purchase was effectuated pursuant to an amended Assignment Agreement, effective December 3, 2020, between the Company and Oasis. The Maturity Date, by which date Oasis must collect the $ 1.8 million Threshold Price, was February 10, 2021. The Company recorded the sale to Oasis as a short-term secured borrowing with a principal amount of $ 1.6 million, or $ 1.8 million net of a $ 213,000 discount. Though there was no stated interest rate, the effective interest rate at issuance was 128.4 % . The Tranche #6 Secured Note had a maturity date of February 10, 2021, 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 #6 Secured Note, the effective interest rate is variable, dependent on the amount of any principal payment and payment dates. 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 126 Table of Contents 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. 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 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. 127 Table of Contents 9. Warrants 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: ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ ​ 2021 ​ 2020 Warrants outstanding, beginning balance ​ 2,401,818 ​ 6,473,964 Issuances ​ 168,750 ​ 7,349,426 Exercises ​ ( 2,007,117 ) ​ ( 11,421,464 ) Expirations and cancelations ​ — ​ ( 108 ) Warrants outstanding, ending balance ​ 563,451 ​ 2,401,818 ​ 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 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; or (ii) a cashless exercise feature wherein, regardless if there is an effective registration agreement, following the requisite Stockholder Approval, each such Series 3 Warrant will be exercisable into one share of common stock for no consideration (the “Alternate Cashless Exercise”). The Series 3 Warrants were initially valued at $ 3.7 million using the Black-Scholes-Merton option pricing model as follows: probability-weighted exercise price of $ 0.15 per share, stock price of $ 1.32 per share, expected life of 5.50 years, volatility of 141 % , and a risk-free rate of 0.34 % . The Series 3 Warrants were classified as liabilities on the Company’s consolidated balance sheets. A Special Meeting of Stockholders was held on July 21, 2020, whereupon a proposal to approve the “Alternate Cashless Exercise” settlement method for the Series 3 Warrants was approved. In 2020, certain holders of the Series 3 Warrants agreed to exercise a total of 2,818,784 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 $ 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 In October 2018, in consideration of services provided leading up to the Company’s October 2018 public offering, the Company issued warrants to various service providers to purchase an aggregate of 5,713 shares 128 Table of Contents of common stock at an exercise price of $ 157.50 per common share. The warrants were classified as liabilities pursuant to ASC 815-40 as there was potential cash settlement. 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. The warrants were valued at $ 32,000 using the Black-Scholes-Merton option pricing model as follows: exercise price of $ 7.50 per share, stock price of $ 1.35 per share, expected life of 4.25 years, volatility of 141 % , and a risk-free rate of 0.29 % . The warrants were equity classified in the consolidated statements of stockholders’ equity. March 2019 Ladenburg Warrants In March 2019, in consideration of services provided in the Company’s March 2019 public offering of 6,339 common shares, the Company issued to Ladenburg Thalmann & Co. warrants to purchase an aggregate of 253 shares of common stock at an exercise price of $ 52.50 per common share. The warrants were valued at $ 13,000 using the Black-Scholes-Merton option pricing model as follows: exercise price of $ 52.50 per share, stock price of $ 56.70 per share, expected life of 5 years , volatility of 146 % , and a risk-free rate of 2.21 % . The warrants were equity classified in the consolidated statements of stockholders’ equity. March 2019 LOC Warrant In March 2019, in consideration of a letter of credit cancellation related to the Company’s office lease, the Company issued a warrant to purchase warrant shares equal to a fixed principal amount divided by a variable exercise price. The warrants were initially classified as liabilities pursuant to ASC 480-10 due to their debt-like nature. 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 Between March 18, 2019 and June 26, 2019, concurrent to the Company entering into Promissory Notes of $ 5.1 million, the Company issued twenty-one warrants to purchase warrant shares equal to a fixed principal amount divided by a variable exercise price. The warrants for all twenty-one Bridge Notes were initially liability classified pursuant to ASC 480-10 due to their debt-like nature. On July 23, 2019, upon the exercise price of the warrants becoming fixed, the warrants became exercisable into 927,083 shares of the Company’s common stock and were reclassified to additional paid-in-capital with a fair value of $ 4.3 million, calculated using the Black-Scholes-Merton pricing model using a stock price of $ 5.19 , a strike price of $ 6.00 per share, an average expected term of 4.80 years, volatility of 146 % and a risk-free discount rate of 1.76 % . February 2020 Modification of Certain 2019 Bridge Note Warrants In February 2020, the Company entered into a warrant exercise agreement with a holder of its Bridge warrants, pursuant to which the holder agreed to exercise 83,333 Bridge warrants in consideration of the Company lowering the exercise price of the 83,333 warrants from $ 6.00 to $ 2.08 . Upon exercise of the warrants, the Company received cash proceeds of $ 173,000 and, in turn, issued 83,333 common shares. It is the Company’s policy to determine the impact of modifications to equity-classified warrants by analogy to the 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 Bridge warrants, the incremental increase of $ 9,000 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. 129 Table of Contents May 2020 Modification of the 2019 Bridge Note Warrants and Inducement Offer In May 2020, the Company reduced the exercise price of all outstanding 2019 Bridge Note Warrants from $ 6.00 per share to $ 1.47 per share. The Company determined the impact of this modification to be an increase in the fair value of the warrants of $ 166,000 . Because the modification applied to the entire class of Bridge Note Warrant holders, the increase in fair value represented a deemed dividend to the entire class of Bridge Note Warrant holders. The modification did not result in the reclassification of the equity-classified Bridge Note Warrants from additional paid-in-capital to liability classification. 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. 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 In July 2019, the Company entered into an underwriting agreement, relating to a public offering, which was comprised of (1) 962,166 Class A Units, priced at $ 6.00 per unit, with each unit consisting of (i) one share of the Company’s common stock, (ii) one Series 1 warrant to purchase one share of common stock, and (iii) one Series 2 warrant to purchase one share of common stock, and (2) 10,787 Class B Units, priced at a price of $ 1,000 per unit, with each unit consisting of (i) one share of Series B Convertible Preferred Stock, convertible into 166 shares of common stock, (ii) 166 Series 1 Warrants and (iii) 166 Series 2 Warrants. The Series 1 Warrants had an exercise price of $ 6.00 and expire on the earlier of (a) 5 years from the date of issuance and (b) 30 calendar days following the public announcement of Positive Interim Results related to the diarrhea results from the HALT-D investigator-initiated trial, if and only if certain trading benchmarks are achieved during such 30 calendar day period. In the offering, the Company sold (i) 962,166 Class A Units, which included Series 1 warrants to purchase 962,166 shares of the Company’s common stock and (ii) 10,787 Class B Units, which included Series 1 warrants to purchase 1,797,833 shares of the Company’s common stock. In total, 2,760,000 Series 1 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 % . Upon issuance, the Series 1 warrants were classified in additional paid-in-capital. September 2019 Modification of the July 2019 Series 1 Warrants In September 2019, the Company reduced the exercise price of all 2,760,000 Series 1 Warrants from $ 6.00 to $ 4.20 . The Company determined the impact of this modification to be an increase in the fair value of the warrants of $ 522,000 . Because the modification applied to the entire class of Series 1 Warrant holders, the increase in fair value represented a deemed dividend to the entire class of Series 1 Warrant holders. The modification did not result in the reclassification of the equity-classified Series 1 warrants from additional paid-in-capital to liability classification. 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 1 130 Table of Contents 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. May 2020 Modification of the July 2019 Series 1 Warrants and Inducement Offer In May 2020, the Company reduced the exercise price of all outstanding Series 1 Warrants from $ 4.20 per share to $ 1.47 per share. The Company determined the impact of this modification to be an increase in the fair value of the warrants of $ 284,000 . Because the modification applied to the entire class of Series 1 Warrant holders, the increase in fair value represented a deemed dividend to the entire class of Series 1 Warrant holders. The modification did not result in the reclassification of the equity-classified Series 1 Warrants from additional paid-in-capital to liability classification. 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. 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 The Series 2 Warrants had an exercise price of $ 6.00 and expire on the first date on the earlier of (a) 5 years from the date of issuance and (b) 30 calendar days following the public announcement by the Company that a pivotal phase 3 clinical trial using crofelemer (Mytesi, or the same or similar product with a different name) for the treatment of cancer therapy-related diarrhea in humans has met its primary endpoint in accordance with the protocol, if and only if certain trading benchmarks are achieved during such 30 calendar day period. 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) 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 % . Upon issuance, the Series 2 Warrants were classified in additional paid-in-capital. March 5, 2020 Modification of the July 2019 Series 2 Warrants On March 5, 2020, the Company entered into a warrant exercise agreement with a holder of its Series 2 Warrants, pursuant to which the holder agreed to exercise 30,313 Series 2 Warrants in consideration of the Company lowering the exercise price of the 30,313 warrants from $ 6.00 to $ 1.82 . 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 131 Table of Contents 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. March 23, 2020 Modification of the July 2019 Series 2 Warrants On March 23, 2020, the Company entered into a Warrant Exercise and Preferred Stock Amendment Agreement (see Note 10) with 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 Series 2 Warrant exercise price from $ 6.00 to $ 1.57 per share, for gross proceeds to the Company of approximately $ 653,000 , or $ 628,000 net of $ 25,000 of issuance costs. The Company determined the impact of this modification to be an increase in the fair value of the warrants of $ 65,000 . 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 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 In May 2020, the Company reduced the exercise price of all outstanding Series 2 Warrants from $ 6.00 per share to $ 1.47 per share. The Company determined the impact of this modification to be an increase in the fair value of the warrants of $ 406,000 . Because the modification applied to the entire class of Series 2 Warrant holders, the increase in fair value represented a deemed dividend to the entire class of Series 2 Warrant holders. The modification did not result in the reclassification of the equity-classified Series 2 Warrants from additional paid-in-capital to liability classification. 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. 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 In December 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 833,333 unregistered shares of the Company’s common stock, and (ii) Warrants to purchase up to an aggregate of 416,664 shares of common stock, for an aggregate purchase price of $ 1.5 million (see Note 11). The warrants have an exercise price of $ 2.34 per share and become exercisable on June 24, 2020 ( 6 months after their issuance date) and have a five-year term. The warrants were valued at $ 686,000 using the Black-Scholes-Merton option pricing model as follows: 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 132 Table of Contents 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. ​ 10. Preferred Stock At December 31, 2021 and 2020, preferred stock consisted of the following: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Liquidation ( in thousands, except share and per share data) ​ Shares Issued and Carrying ​ Preference Series ​ Authorized ​ Outstanding ​ Value ​ per Share B-2 ​ ​ 10,165 ​ ​ — ​ $ — ​ $ — C ​ ​ 1,011,000 ​ ​ — ​ ​ — ​ ​ 8.00 Total ​ ​ 1,021,165 ​ ​ — ​ $ — ​ ​ ​ ​ Series A Convertible Preferred Stock In March 2018, the Company entered into a stock purchase agreement with Sagard Capital pursuant to which the Company, in a private placement, agreed to issue and sell to Sagard Capital 5,524,926 shares of the Company's Series A Convertible Preferred Stock, $ 0.0001 par value per share, for gross proceeds of $ 9.2 million, or $ 9.0 million net of issuance costs. The preferred stock was convertible into approximately 157,855 shares of common stock at the option of the holder at an effective conversion price of $ 582.75 per share. Subject to certain limited exceptions, the shares of preferred stock could not be offered, pledged or sold by Sagard Capital for one year from the date of issuance. The conversion price was subject to certain adjustments in the event of any stock dividend, stock split, reverse stock split, combination or other similar recapitalization. Holders of the Series A Convertible Preferred shares were entitled to participate equally and ratably with the holders of shares of common stock in all dividends paid and distributions made to the holders of the common stock as if, immediately prior to each record date of the common stock, the shares of Series A Convertible Preferred Stock then outstanding were converted into shares of common stock. In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Company or deemed liquidation event, the holders of Series A Convertible Preferred shares then outstanding were 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 A Convertible Preferred Stock 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 A Convertible Preferred Stock equal to one times the Series A Convertible Preferred Stock original issue price. 133 Table of Contents The Series A Convertible Preferred shares were redeemable by Sagard Capital upon a Redemption Event that is not solely within the control of the Company. Were a Redemption Event to occur as of the Measurement Date (the later of April 30, 2021 and the date on which the Company files its Form 10-Q for the three months ending March 31, 2021, but in no event later than September 30, 2021), the holders of at least a majority of the shares of Series A Convertible Preferred Stock then outstanding may require the Company to redeem all Series A shares for cash at a per share purchase price equal to $ 2.3057 . Any one of the following conditions can result in a Redemption Event: (i) revenue attributable to the Mytesi product for the six-month period ended March 31, 2021 is less than $ 22.0 million; (ii) the daily VWAP of the Company's common stock on Nasdaq for the 30 days prior to a Measurement Date is less than $ 315.00 ; (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. The preferred stock was classified outside of stockholders' equity in accordance with authoritative guidance for the classification and measurement of potentially redeemable securities. 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 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. As of the exchange date, the related extinguishment required recording derecognition of the Series A accreted value and recording Series C and Series D at fair value. 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. As of December 31, 2020, there were no Series A Convertible Preferred shares authorized or outstanding. Series B Convertible Preferred Stock In July 2019, the Company entered into an underwriting agreement relating to the public offering comprised of (1) 962,166 Class A Units, priced at a public offering price of $ 6.00 per unit, with each unit consisting of (i) one share of the Company’s voting common stock, (ii) one Series 1 warrant to purchase one share of common stock and (2) 10,787 Class B Units, priced at a public offering price of $ 1,000 per unit, with each Class B unit consisting of (i) one share of Series B Convertible Preferred Stock with a stated value of $ 1,000 and convertible into 166 shares of common stock, (ii) 166 Series 1 Warrants and (iii) 166 Series 2 Warrants, at a public offering price of $ 1,000 per Class B Unit. The Company sold 10,787 Class B Units, comprised of 10,787 shares of Series B Convertible Preferred Stock, Series 1 warrants to purchase 1,797,833 shares of common stock and Series 2 warrants to purchase 1,797,833 shares of common stock. The total gross proceeds to the Company from the offering of the Class B Units were $ 10.8 million of which $ 4.2 million was allocated to the Series B Convertible Preferred Stock, $ 3.3 million to the Series 1 Warrants and $ 3.3 million to the Series 2 Warrants. Issuance costs of $ 1.6 million were allocated to the Class B Units. Holders of the Series B shares are entitled to participate equally and ratably with the holders of shares of common stock in all dividends paid and distributions made to the holders of the common stock as if, immediately prior to each record date of the common stock, the shares of Series B then outstanding were converted into shares of common stock. With certain exceptions, the shares of Series B Convertible Preferred Stock have no voting rights. 134 Table of Contents However, as long as any shares of Series B Convertible 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 Convertible Preferred Stock, (a) alter or change adversely the powers, preferences or rights given to the Series B Convertible Preferred Stock or alter or amend the Series B Certificate of Designation or (b) enter into any agreement with respect to any of the foregoing. 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. 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). As a further inducement to enter into the Amendment Agreement, the Company agreed to reduce the conversion price of the Company’s Series B Convertible Preferred Stock from $ 6.00 to $ 1.34 , resulting in the application of accounting for modification of preferred stock instruments under ASC 260-10-S99-2 where the difference between the fair value of the consideration transferred and the net carrying amount of the convertible preferred stock is treated as a dividend and must be deducted from net income in arriving at income available to common stockholders. Because the reduction to the conversion price was an inducement, the Company applied the guidance in ASC 470-20, resulting in the recording of an inducement charge of $ 1.6 million in the consolidated statement of operations for the year ended December 31, 2020. In September 2020, the Company filed a certificate with the Secretary of State of Delaware effecting the retirement and cancellation of the Series B Convertible Preferred Stock. As of December 31, 2020, there were no Series B Convertible Preferred shares authorized or outstanding. 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. No other dividends shall be paid on shares of the Series B-2 Convertible Preferred Stock. The shares of Series B-2 Convertible Preferred Stock have no voting rights. However, as long as any shares of Series B-2 Convertible 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-2 Convertible Preferred Stock, (a) alter or change adversely the powers, preferences or rights given to the Series B-2 Convertible Preferred Stock or alter or amend the Series B-2 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-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 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 135 Table of Contents 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. In January 2020, a holder of the Series B-2 Convertible Preferred Stock converted 2,631 preferred shares into 166,630 shares of common stock. In October 2020, the Company entered into an exchange agreement with Oasis Capital pursuant to which the Company agreed to issue 166,728 shares of common stock in exchange for 975 shares of the Series B-2 Convertible Preferred Stock. The exchange agreement was accounted for as a modification. In December 2020, an investor converted the remaining 6,559 Series B-2 Convertible Preferred Stock into a total of 415,403 shares of the Company’s common stock. As of December 31, 2020, there were no Series B-2 Convertible Preferred shares outstanding. Series C Perpetual Preferred Stock ​ In September 2020, the Company entered into an exchange agreement with Iliad to issue 842,500 shares of the Company's Series C Perpetual Preferred Stock at $ 0.0001 par value per share, for a non-cash exchange of equity instruments. The exchange agreement was contemporaneously entered with the issuance of Series D Perpetual Preferred shares, in exchange of remaining Series A Convertible Preferred shares totaling 5,524,926 shares, and accreted value of $ 11.2 million as of the exchange date. An amendment agreement of the Exchange Note 2 was also entered into, with issuance value of $ 2.3 million and carrying value of $ 2.6 million as of the exchange date, to extend maturity from December 31, 2020 to December 31, 2021, in consideration of 5 % increase in the outstanding balance. ​ Holders of the Series C Perpetual Preferred Stock were not entitled to voting rights. 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. ​ The Series C Perpetual Preferred shares were entitled to receive 10 % cumulative stock dividends, to be payable in arrears on a monthly basis for 24 consecutive months. Dividends payable on the Series C Perpetual Preferred shares shall be payable through the Company’s issuance of Series C Perpetual Preferred share by delivering to each record holder the calculated number of PIK dividend shares. ​ The Series C Perpetual Preferred shares were initially measured at fair value using the income approach, which considered the weighted probability of discounted cash flows at various scenarios of redemption by the Company or liquidation event and perpetual holding of the shares. As of the date of exchange, total fair value of the Series C Perpetual Preferred shares amounted to $ 4.7 million. Subsequently, the carrying amount of Series C Perpetual Preferred shares increased as the PIK dividend shares were recognized. ​ The preferred stock has been classified as permanent stockholders' equity in accordance with authoritative guidance for the classification and measurement of perpetual shares without mandatory redemption period because the redemption option was ultimately in the control of the Company. ​ 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 136 Table of Contents exercised in full. The nominal exercise price of each pre-funded warrant was $ 0.0001 . In December 2020, the Company also entered into a series of exchange agreements with Iliad pursuant to which the Company agreed to issue a total of 2,734,626 shares of common stock in exchange for 573,810 shares of Series C Perpetual Preferred Stock. The series of exchanges were viewed as singular transaction, hence combined for purposes of accounting for the subsequent amendments. The series of exchanges was accounted for as an extinguishment which resulted in a $ 2.5 million deemed dividend, recorded against additional paid-in capital, for the difference between the fair value of the shares of common stock and pre-funded warrants transferred and the carrying amount of the Series C Perpetual Preferred Stock. As of December 31, 2020, Iliad had exercised all pre-funded warrants for $ 1,000 . ​ As of December 31, 2020, there were no Series C Perpetual Preferred shares outstanding. ​ 11. Stockholders’ Equity As of December 31, 2021 and 2020, the Company had reserved shares of common stock, on an as-if converted basis, for issuance as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ ​ 2021 ​ 2020 Options issued and outstanding 2,348,199 1,485,518 Inducement options issued and outstanding ​ 154,893 ​ 38,289 Options available for grant under stock option plans 631,270 198,866 Restricted stock unit awards issued and outstanding 487,456 1,871 Warrants issued and outstanding 563,451 2,401,818 Total 4,185,269 4,126,362 ​ Common Stock The holders of common stock are entitled to one vote for each share of common stock held. The common stockholders are also entitled to receive dividends whenever funds and assets are legally available and when declared by the Board of Directors. 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. 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-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. 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 137 Table of Contents 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) In March 2020, the Company entered into an equity purchase agreement (the “March 2020 ELOC”) with Oasis Capital, which provides that Oasis Capital is committed to purchase up to an aggregate of $ 2.0 million shares of the Company’s common stock over the 36 -month term of the March 2020 ELOC. Pursuant to the terms and conditions of the March 2020 ELOC, on any trading day selected by the Company (such date the “Put Date”), after the SEC has declared effective the registration statement registering the sale of the shares of common stock that may be issued to Oasis Capital under the March 2020 ELOC, the Company has the right, in its sole discretion, to present to Oasis Capital with a purchase notice (each a “Put Notice”), directing Oasis Capital to purchase up to the lesser of (i) 66,666 shares of common stock or (ii) 20 % of the average trading volume of common stock in the 10 trading days immediately preceding the date of such Put Notice, at a per share price equal to $ 1.31 (each an “Option 1 Put”), provided that the aggregate of all Option 1 Puts and Option 2 Puts (described below) does not exceed $ 2.0 million. In addition, on any date on which Oasis Capital receives shares of common stock in connection with a Put Notice (the “Clearing Date”), the Company also has the right, in its sole discretion, to present to Oasis Capital with a Put Notice (each an “Option 2 Put”) directing Oasis Capital to purchase an amount of common stock equal to the lesser of (i) such amount that equals 10 % of the daily trading volume of the common stock on the date of such Put Notice and (ii) $ 200,000 , provided that the aggregate amount of the Option 1 Put and Option 2 Put on any Put Date or Clearing Date does not exceed $ 500,000 and the aggregate amount of all Option 1 Puts and Option 2 Puts does not exceed $ 2.0 million. The purchase price per share pursuant to such Option 2 Put is equal to $ 1.31 . 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. The Company will control the timing and amount of sales of common stock to Oasis Capital. Oasis Capital has no right to require any sales by the Company but is obligated to make purchases from the Company as directed by the Company in accordance with the March 2020 ELOC. In connection with the equity line, the Company agreed to pay Oasis Capital a commitment fee and in April 2020, in settlement of the commitment fee, the Company issued to Oasis Capital 22,935 shares of common stock. At issuance, the 22,935 shares of common stock had a fair value of $ 33,000 and were expensed as an issuance cost in the Company’s consolidated statements of operations. 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 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 138 Table of Contents 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 In March 2020, Company entered into a securities purchase agreement (the “PIPE Purchase Agreement”) with certain investors, pursuant to which the Company agreed to issue and sell to the Investors in a private placement an aggregate of 571,427 shares of the Company’s common stock, for an aggregate purchase price of approximately $ 720,000 , or $ 668,000 net of $ 52,000 of issuance costs. At The Market Offering (“ATM”) 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 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. ​ 139 Table of Contents 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. ​ ​ ​ ​ 12. Stock-Based Compensation 2013 Equity Incentive Plan In November 2013, the Company's board of directors and sole stockholder adopted the Jaguar Health, Inc. 2013 Equity Incentive Plan (the “2013 Plan”). The 2013 Plan allows the Company's board of directors to grant stock options, restricted stock awards and restricted stock unit awards to employees, officers, directors and consultants of the Company. Following the effective date of the IPO and after effectiveness of any grants under the 2013 Plan that were contingent on the IPO, no additional stock awards will be granted under the 2013 Plan. 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 123 option shares outstanding at December 31, 2021 and 2020. 140 Table of Contents 2014 Stock Incentive Plan Effective May 12, 2015, the Company adopted the Jaguar Health, Inc. 2014 Stock Incentive Plan (“2014 Plan”). The 2014 Plan provides for the grant of options, restricted stock and restricted stock units to eligible employees, directors and consultants to purchase the Company's common stock. 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 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, cancelled or expired. As of December 31, 2021, there were 2,348,076 options outstanding and 619,480 options available for grant. As of December 31, 2020, there were 1,485,395 options outstanding and 70,472 options available for grant. 2020 New Employee Inducement Award Plan Effective June 16, 2020, the Company adopted the Jaguar Health, Inc. New Employee Inducement Award Plan (“2020 Inducement Award Plan”) and, subject to the adjustment provisions of the Inducement Award Plan, reserved 166,666 shares of the Company’s common stock for issuance pursuant to equity awards granted under the Inducement Award Plan. 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 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. The terms and conditions of the 2020 Inducement Award Plan are substantially similar to the Company’s 2014 Stock Incentive Plan, but with such other terms and conditions intended to comply with the Nasdaq inducement award rules. In accordance with Rule 5635(c)(4) of the Nasdaq Listing Rules, the only persons eligible to receive grants of equity awards under the Inducement Award Plan are individuals who were not previously an employee or director of the Company, or following a bona fide period of non-employment, as an inducement material to such persons entering into employment with the Company. 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”) The following table summarized the incentive plan activity for the year ended December 31, 2021: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted ​ Weighted Average ​ ​ ​ ​ ​ Shares ​ Stock ​ ​ ​ Average ​ Remaining ​ Aggregate ​ ​ Available ​ Options ​ RSUs ​ Stock Option ​ Contractual Life ​ Intrinsic (in thousands, except share and per share data) for Grant Outstanding Outstanding Exercise Price (Years) Value* Outstanding at December 31, 2020 ​ 198,866 ​ 1,523,790 ​ 1,871 ​ $ 12.68 ​ 8.71 ​ $ 364 Additional shares authorized ​ 1,900,421 ​ — ​ — ​ ​ — ​ ​ ​ ​ — Options granted ​ ( 1,016,044 ) ​ 1,016,044 ​ — ​ ​ 5.41 ​ ​ ​ ​ — Options exercised ​ — ​ ( 3,147 ) ​ — ​ ​ 1.34 ​ ​ ​ ​ — Options canceled ​ 33,612 ​ ( 33,612 ) ​ — ​ ​ 30.47 ​ ​ ​ ​ — RSUs granted ​ ( 485,585 ) ​ — ​ 485,585 ​ ​ — ​ ​ ​ ​ — Outstanding at December 31, 2021 ​ 631,270 ​ 2,503,075 ​ 487,456 ​ $ 9.44 ​ 8.35 ​ $ 3 Exercisable at December 31, 2021 ​ ​ 1,431,658 ​ ​ ​ $ 12.92 7.84 ​ $ 2 Vested and expected to vest at December 31, 2021 ​ ​ 2,362,310 ​ ​ ​ $ 9.70 8.30 ​ $ 3 *Fair market value of Jaguar stock on December 31, 2021 was $ 1.04 per share. 141 Table of Contents 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. 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. The number of options that vested in the years ended December 31, 2021 and 2020 was 695,995 and 483,021 , respectively. The grant date weighted average fair value of options that vested in the years ended December 31, 2021 and 2020 was $ 4.49 and $ 5.97 , respectively. Stock-Based Compensation The following table summarizes stock-based compensation expense related to stock options, inducement stock options and RSUs for the years ended December 31, 2021 and 2020, and are included in the consolidated statements of operations as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended ​ ​ ​ December 31, ​ (in thousands) 2021 2020 ​ Research and development expense ​ $ 1,319 ​ $ 749 ​ Sales and marketing expense ​ 319 ​ 220 ​ General and administrative expense ​ 2,336 ​ 1,855 ​ Total ​ $ 3,974 ​ $ 2,824 ​ ​ As of December 31, 2021, the Company had $ 3.9 million of unrecognized stock-based compensation expense for options and RSU’s, which is expected to be recognized over a weighted-average period of 1.87 years. The fair value of options granted during the years ended December 31, 2021 and 2020, respectively, were calculated using the range of assumptions set forth below: ​ ​ ​ ​ ​ ​ ​ ​ Year Ended ​ ​ December 31, ​ 2021 2020 Volatility ​ 163.8 - 164.0 % ​ 150.1 - 167.9 % Expected term (years) ​ 5.0 5.0 Risk-free interest rate ​ 0.5 - 1.2 % 0.3 - 0.5 % Expected dividend yield ​ — ​ — ​ 401(k) Plan The Company sponsors a 401(k) defined contribution plan covering all employees. There were no employer contributions to the plan from plan inception through December 31, 2021. ​ ​ ​ 142 Table of Contents 13. Net Loss Per Share Attributable to Common Stockholders The following table presents the calculation of basic and diluted net loss per common share for the years ended December 31, 2021 and 2020: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, (In thousands, except share and per share data) 2021 2020 ​ ​ ​ Net loss attributable to common shareholders (basic and diluted) ​ $ ( 52,595 ) ​ $ ( 38,648 ) Shares used to compute net loss per common share, basic and diluted ​ ​ 44,711,588 ​ ​ 12,880,868 Net loss per share attributable to common shareholders, basic and diluted ​ $ ( 1.18 ) ​ $ ( 3.00 ) ​ Basic net loss per share is calculated by dividing net loss by the weighted-average number of common shares outstanding during the period. Diluted net loss per share is computed by dividing net loss by the weighted-average number of common shares and common share equivalents outstanding for the period. Common stock equivalents are only included when their effect is dilutive. The Company's potentially dilutive securities which include stock options, convertible preferred stock, RSUs and common stock warrants have been excluded from the computation of diluted net loss per share as they would be anti-dilutive. For all periods presented, there is no difference in the number of shares used to compute basic and diluted shares outstanding due to the Company's net loss position. The following outstanding common stock equivalents have been excluded from diluted net loss per common share for the years ended December 31, 2021 and 2020 because their inclusion would be anti-dilutive: ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ 2021 ​ 2020 Options issued and outstanding ​ 2,348,199 ​ 1,485,518 Inducement options issued and outstanding ​ 154,893 ​ 38,289 Restricted stock units issued and outstanding ​ 487,456 ​ 1,871 Warrants issued and outstanding ​ 563,451 ​ 2,401,818 Total ​ 3,553,999 ​ 3,927,496 ​ 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. ​ ​ 14. Income Taxes 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. 143 Table of Contents The Company’s effective tax during the years ended December 31, 2021 and 2020, differed from the federal statutory rate as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ 2021 2020 Statutory rate ​ ( 21.0 ) % ( 21.0 ) % Intercompany transactions ​ 15.5 % — % Valuation allowance ​ 3.0 % 13.4 % Nondeductible warrant expense ​ 0.7 % — % Book loss on debt extinguishment ​ 0.3 % 4.2 % Foreign rate differential ​ ( 0.3 ) % — % Other ​ 1.8 % 3.4 % Effective tax rate ​ ( 0.0 ) % — % ​ Net deferred tax assets as of December 31, 2021 and 2020 consisted of the following: ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, (In thousands) ​ 2021 ​ 2020 Non-current deferred tax assets: ​ ​ ​ ​ ​ ​ Net operating losses ​ $ 21,153 ​ $ 19,863 Tax credits ​ ​ 241 ​ ​ 241 Stock compensation ​ ​ 2,161 ​ ​ 1,711 Other ​ ​ 450 ​ ​ 156 ​ ​ 24,005 ​ ​ 21,971 Valuation allowance ​ ​ ( 19,865 ) ​ ​ ( 18,437 ) Net non-current deferred tax assets ​ ​ 4,140 ​ ​ 3,534 Non-current deferred tax liabilities: ​ ​ ​ ​ ​ ​ Other ​ ​ ( 678 ) ​ ​ — Property and equipment ​ ​ ( 3,462 ) ​ ​ ( 3,534 ) Net non-current deferred tax liability ​ ​ ( 4,140 ) ​ ​ ( 3,534 ) Net non-current deferred tax asset (liability) ​ $ — ​ $ — ​ ​ ​ ​ ​ ​ ​ ​ 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, 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. As of December 31, 2021, the Company had federal and California NOL carryovers of approximately $ 88.3 million and $ 23.8 million, respectively. Of the federal NOL, $ 20.7 million will begin to expire in 2034 and $ 106.3 million will carryforward indefinitely. The California NOL will begin to expire in 2033. As of December 31, 2021, the Company had California research credit carryovers of approximately $ 382,000 . The California research credits carry forward indefinitely. The Company had no Federal research credit carryovers. Utilization of the domestic NOL and tax credit forwards may be subject to a substantial annual limitation due to ownership change limitations that may have occurred or that could occur in the future, as required by the Internal Revenue Code Section 382, as well as similar state provisions. In general, an "ownership change," 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 144 Table of Contents 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. The CARES Act does not have a material impact on the Company’s financial results for the year ended December 31, 2021. The Consolidated Appropriations Act, 2021 (the "Act") was enacted in the United States on December 27, 2020. The Act enhances and expands certain provisions of the CARES Act. The Act does not have a material impact on the Company’s financial results for the year ended December 31, 2021. Uncertain Tax Positions 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. 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. The Company's policy is to include interest and penalties related to unrecognized tax benefits within its provision for income taxes. Due to the Company's net operating loss position, the Company has not recorded an accrual for interest or penalties related to uncertain tax positions for the years ended December 31, 2021 or 2020. The following is a reconciliation of the beginning and ending amount of the Company’s total gross unrecognized tax benefit liabilities: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, (In thousands) 2021 2020 Gross Unrecognized Tax Benefit--Beginning Balance ​ $ 77 ​ $ 77 Increases Related to Tax Positions from Prior Years ​ ​ — ​ ​ — Increases Related to Tax Positions Taken During the Current Year ​ ​ — ​ ​ — Gross Unrecognized Tax Benefit--Ending Balance ​ $ 77 ​ $ 77 ​ ​ 15. Segment Data The Company has two reportable segments-human health and animal health. The animal health segment is focused on developing and commercializing prescription and non-prescription products for companion and production animals. The human health segment is focused on developing and commercializing of human products and the ongoing commercialization of Mytesi, which is approved by the U.S. FDA for the symptomatic relief of non-infectious diarrhea in adults with HIV/AIDS on antiretroviral therapy. 145 Table of Contents The Company’s reportable segments sales and net income consisted of: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended ​ ​ December 31, (in thousands) 2021 2020 Revenue from external customers ​ ​ Human Health ​ $ 4,273 ​ $ 9,309 Animal Health ​ 62 ​ 76 Consolidated Totals ​ $ 4,335 ​ $ 9,385 ​ ​ ​ ​ ​ ​ ​ Segment net loss ​ ​ Human Health ​ $ ( 24,276 ) ​ $ ( 9,779 ) Animal Health ​ ( 28,324 ) ​ ( 24,030 ) Consolidated Totals ​ $ ( 52,600 ) ​ $ ( 33,809 ) ​ The Company’s reportable segments assets consisted of the following: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, (in thousands) 2021 2020 Segment assets ​ ​ Human Health ​ $ 42,250 ​ $ 34,201 Animal Health ​ 115,580 ​ 79,760 Total ​ $ 157,830 ​ $ 113,961 ​ The reconciliation of segments assets to the consolidated assets is as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, (in thousands) 2021 2020 Total assets for reportable segments ​ $ 157,830 ​ $ 113,961 Less: Investment in subsidiary ​ ( 29,232 ) ​ ( 29,241 ) Less: Intercompany loan ​ ( 75,333 ) ​ ( 41,877 ) Consolidated Totals ​ $ 53,265 ​ $ 42,843 ​ ​ 16. Subsequent Events 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 146 Table of Contents 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. ​ ​ ​ ​ ​ 147 Table of Contents ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. ​ ​