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 87 Consolidated Balance Sheets as of December 31, 2022 and 2021 90 Consolidated Statements of Operations for the years ended December 31, 2022 and 2021 91 Consolidated Statements of Comprehensive Loss for the years ended December 31, 2022 and 2021 92 Consolidated Statements of Changes in Stockholders’ Equity for the years ended December 31, 2022 and 2021 93 Consolidated Statements of Cash Flows for the years ended December 31, 2022 and 2021 95 Notes to Consolidated Financial Statements 97 ​ ​ 86 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 sheets of Jaguar Health, Inc., and subsidiaries (the “Company”) as of December 31, 2022 and 2021, and the related consolidated statements of operations, comprehensive loss, changes in stockholders’ equity, and cash flows for each of the years in the two-year period ended December 31, 2022, 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, 2022, and 2021 and the results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2022, 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. ​ 87 Table of Contents Critical Audit Matters ​ 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) 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 6 to the financial statements ​ Critical Audit Matter Description ​ As of December 31, 2022, the Company had intangible assets, net, of $22.4 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, 2022. ​ 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 88 Table of Contents developed by the specialist considering assumptions generally used in the specialist’s field; supporting evidence provided by the specialist; existing market data; historical or recent experience and changes in conditions and events affecting the Company. ● Tested the accuracy and completeness of company-produced data used by the specialist, and evaluated the relevance and reliability of externally obtained data. For assumptions provided to the specialist by the company, evaluated whether there is a reasonable basis for using each assumption considering whether other reasonably likely outcomes could materially affect the relevant financial statement assertions. Identified and evaluated significant assumptions used by the specialist for reasonableness. ● Evaluated the Company’s estimates of future revenue projections by completing a retrospective comparison to historical revenue projections. We tested the significant assumptions discussed above, as well as the completeness and accuracy of the underlying data used in the projected cash flows and valuations. ● To reflect the uncertainty inherent in the projections, we performed our own sensitivity analyses by increasing or decreasing the significant assumptions and evaluated the potential impact on the fair value. In addition, we tested the reconciliation of the fair value of the asset group developed by management to the market capitalization of the Company as of the valuation date. ​ ​ /s/ RBSM, LLP ​ ​ We have served as the Company's auditor since 2021. Larkspur, California March 24, 2023 ​ PCAOB ID Number 587 ​ 89 Table of Contents ​ JAGUAR HEALTH, INC. CONSOLIDATED BALANCE S HEETS ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, (In thousands, except share and per share data) 2022 2021 Assets ​ ​ ​ ​ ​ Current assets: ​ ​ ​ ​ ​ ​ Cash ​ $ 5,469 ​ $ 17,051 Accounts receivable ​ ​ 1,879 ​ ​ 1,709 Other receivable ​ ​ 588 ​ ​ 435 Inventory ​ ​ 7,024 ​ ​ 4,900 Prepaid expenses and other current assets ​ ​ 7,361 ​ ​ 4,339 Total current assets ​ 22,321 ​ 28,434 Property and equipment, net ​ ​ 557 ​ ​ 650 Operating lease - right-of-use asset ​ ​ 1,140 ​ ​ 1,084 Intangible assets, net ​ ​ 22,439 ​ ​ 22,651 Other assets ​ 995 ​ 446 Total assets ​ $ 47,452 ​ $ 53,265 ​ ​ ​ ​ ​ ​ ​ Liabilities and Stockholders' equity (deficit) ​ ​ ​ ​ ​ ​ Current liabilities: ​ ​ ​ ​ ​ ​ Accounts payable ​ $ 5,808 ​ $ 4,929 Accrued liabilities ​ ​ 8,165 ​ ​ 7,117 Warrant liability ​ ​ — ​ ​ 1 Operating lease liability, current ​ ​ 483 ​ ​ 240 Notes payable, current ​ 15,883 ​ 3,184 Total current liabilities ​ 30,339 ​ 15,471 Operating lease liability, net of current portion ​ ​ 725 ​ ​ 919 Notes payable, net of discount, net of current portion (includes hybrid instrument designated at Fair Value Option amounting to $ 7.8 million as of December 31, 2022 and December 31, 2021, respectively) ​ ​ 17,744 ​ ​ 25,022 Total liabilities ​ ​ 48,808 ​ ​ 41,412 ​ ​ ​ ​ ​ ​ ​ Commitments and contingencies (See Note 5) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Stockholders' equity (deficit) ​ ​ ​ ​ ​ ​ Series B-2 convertible preferred stock: 10,165 shares authorized at December 31, 2022 and December 31, 2021; zero shares issued and outstanding at December 31, 2022 and December 31, 2021 ​ ​ — ​ ​ — Series C perpetual preferred stock: 1,011,000 shares authorized at December 31, 2022 and December 31, 2021; zero shares issued and outstanding at December 31, 2022 and December 31, 2021 ​ ​ — ​ ​ — Series E perpetual preferred stock: 4,475,074 shares authorized at December 31, 2022 and December 31, 2021; zero shares issued and outstanding at December 31, 2022 and December 31, 2021 ​ ​ — ​ ​ — Common stock - voting: $ 0.0001 par value, 298,000,000 shares authorized at December 31, 2022 and December 31, 2021; 2,182,084 and 644,700 issued and outstanding at December 31, 2022 and December 31, 2021 ​ — ​ — Common stock - non-voting: $ 0.0001 par value, 50,000,000 shares authorized at December 31, 2022 and December 31, 2021; 2,120,786 shares issued and outstanding at December 31, 2022 and December 31, 2021 ​ ​ — ​ ​ — Additional paid-in capital ​ 266,971 ​ 231,105 Noncontrolling interest ​ ​ ( 699 ) ​ ​ 242 Accumulated deficit ​ ( 266,948 ) ​ ( 219,494 ) Accumulated other comprehensive loss ​ ​ ( 680 ) ​ ​ — Total Stockholders' equity (deficit) ​ ​ ( 1,356 ) ​ ​ 11,853 Total liabilities and Stockholders' equity (deficit) ​ $ 47,452 ​ $ 53,265 ​ The accompanying notes are an integral part of these consolidated financial statements. ​ 90 Table of Contents JAGUAR HEALTH, INC. CONSOLIDATED STATEMENTS OF OPERATIONS ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended ​ ​ December 31, (In thousands, except share and per share data) 2022 2021 Product revenue ​ $ 11,956 ​ $ 4,335 Total revenue ​ ​ 11,956 ​ ​ 4,335 Operating expenses ​ ​ ​ ​ ​ ​ Cost of product revenue ​ ​ 2,019 ​ ​ 2,333 Research and development ​ 17,647 ​ 15,079 Sales and marketing ​ ​ 8,837 ​ ​ 8,894 General and administrative ​ ​ 17,868 ​ ​ 17,103 Series 3 warrants inducement expense ​ ​ — ​ ​ 1,462 ELOC warrants inducement expense ​ ​ — ​ ​ 172 Total operating expenses ​ 46,371 ​ 45,043 Loss from operations ​ ( 34,415 ) ​ ( 40,708 ) Interest expense ​ ( 12,723 ) ​ ( 8,421 ) Loss on extinguishment of debt ​ ​ ( 2,187 ) ​ ​ ( 753 ) Change in fair value of financial instruments and hybrid instrument designated at Fair Value Option ​ ​ ( 20 ) ​ ​ ( 1,953 ) Other income (expense) ​ ​ 950 ​ ​ ( 765 ) Loss before income tax ​ ​ ( 48,395 ) ​ ​ ( 52,600 ) Income tax expense ​ ​ — ​ ​ — Net loss ​ ​ ( 48,395 ) ​ ​ ( 52,600 ) Net loss attributable to noncontrolling interest ​ $ ( 941 ) ​ $ ( 5 ) Net loss attributable to common stockholders ​ $ ( 47,454 ) ​ $ ( 52,595 ) Net loss per share, basic and diluted ​ $ ( 36.18 ) ​ $ ( 88.22 ) Weighted-average common shares outstanding, basic and diluted ​ 1,311,519 ​ 596,154 ​ The accompanying notes are an integral part of these consolidated financial statements. ​ 91 Table of Contents ​ ​ JAGUAR HEALTH, INC. CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended ​ ​ December 31, (In thousands, except share and per share data) 2022 2021 Net loss ​ $ ( 48,395 ) ​ $ ( 52,600 ) Other comprehensive loss ​ ​ ​ ​ ​ ​ Translation adjustments ​ $ ( 680 ) ​ $ — Net loss and comprehensive loss ​ $ ( 49,075 ) ​ $ ( 52,600 ) ​ The accompanying notes are an integral part of these consolidated financial statements. ​ ​ ​ 92 Table of Contents JAGUAR HEALTH, INC. CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Common Stock - voting ​ Common Stock - non-voting ​ Additional ​ Noncontrolling ​ Accumulated ​ Accumulated other comprehensive ​ Total Stockholders' (In thousands, except share data) ​ Shares ​ Amount ​ Shares ​ Amount ​ paid-in capital ​ interest ​ deficit ​ loss ​ Equity Balances as of January 1, 2021 ​ 506,765 ​ $ — ​ 2,120,786 ​ $ — ​ $ 184,101 ​ $ — ​ $ ( 166,899 ) ​ $ — ​ $ 17,202 Shares issued on exercise of Series 1, Series 2, and 2019 Bridge Note Warrants ​ 18,447 ​ ​ — ​ — ​ ​ — ​ ​ 2,034 ​ ​ — ​ ​ — ​ ​ — ​ ​ 2,034 Shares issued in PIPE financing ​ 9,679 ​ ​ — ​ — ​ ​ — ​ ​ 1,751 ​ ​ — ​ ​ — ​ ​ — ​ ​ 1,751 Shares issued in At the Market offering, net of issuance and offering costs of $ 465 ​ 39,086 ​ ​ — ​ — ​ ​ — ​ ​ 8,595 ​ ​ — ​ ​ — ​ ​ — ​ ​ 8,595 Shares issued to Iliad in exchange of notes payable and accrued interest ​ 7,843 ​ ​ — ​ — ​ ​ — ​ ​ 2,982 ​ ​ — ​ ​ — ​ ​ — ​ ​ 2,982 Shares issued to third party for services ​ 75 ​ ​ — ​ — ​ ​ — ​ ​ 16 ​ ​ — ​ ​ — ​ ​ — ​ ​ 16 Shares issued in registered public offering, net of issuance and offering costs of $ 2,550 ​ 53,711 ​ ​ — ​ — ​ ​ — ​ ​ 23,232 ​ ​ — ​ ​ — ​ ​ — ​ ​ 23,232 Shares issued in extinguishment of Exchange Note 2 ​ 6,283 ​ ​ — ​ — ​ ​ — ​ ​ 2,516 ​ ​ — ​ ​ — ​ ​ — ​ ​ 2,516 Shares issued on exercise of Series 3 warrants ​ 2,759 ​ ​ — ​ — ​ ​ — ​ ​ 1,776 ​ ​ — ​ ​ — ​ ​ — ​ ​ 1,776 Shares issued upon exercise of stock options ​ 42 ​ ​ — ​ — ​ ​ — ​ ​ 4 ​ ​ — ​ ​ — ​ ​ — ​ ​ 4 Shares issued on conversion of Napo merger common shares ​ 10 ​ ​ — ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — Acquisition of a subsidiary ​ — ​ ​ — ​ — ​ ​ — ​ ​ — ​ ​ 247 ​ ​ — ​ ​ — ​ ​ 247 Fractional shares ​ — ​ ​ — ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — Warrants issued to Oasis for ELOC amendment, net of offering costs of $ 48 ​ — ​ ​ — ​ — ​ ​ — ​ ​ 124 ​ ​ — ​ ​ — ​ ​ — ​ ​ 124 Stock-based compensation ​ — ​ ​ — ​ — ​ ​ — ​ ​ 3,974 ​ ​ — ​ ​ — ​ ​ — ​ ​ 3,974 Net loss ​ — ​ ​ — ​ — ​ ​ — ​ ​ — ​ ​ ( 5 ) ​ ​ ( 52,595 ) ​ ​ — ​ ​ ( 52,600 ) Balances as of December 31, 2021 ​ 644,700 ​ $ — ​ 2,120,786 ​ $ — ​ $ 231,105 ​ $ 242 ​ $ ( 219,494 ) ​ $ — ​ $ 11,853 The accompanying notes are an integral part of these consolidated financial statements. 93 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Common Stock - voting ​ Common Stock - non-voting ​ Additional ​ Noncontrolling ​ Accumulated ​ Accumulated other comprehensive ​ Total Stockholders' (In thousands, except share data) ​ Shares ​ Amount ​ Shares ​ Amount ​ paid-in capital ​ interest ​ deficit ​ loss ​ Equity Balances as of January 1, 2022 ​ 644,700 ​ $ — ​ 2,120,786 ​ $ — ​ $ 231,105 ​ $ 242 ​ $ ( 219,494 ) ​ $ — ​ $ 11,853 Shares issued in At the Market offering, net of issuance and offering costs of $ 103 ​ 923,164 ​ ​ — ​ — ​ ​ — ​ ​ 20,462 ​ ​ — ​ ​ — ​ ​ — ​ ​ 20,462 Shares issued to Streeterville in exchange of notes payable and accrued interest ​ 310,196 ​ ​ — ​ — ​ ​ — ​ ​ 5,056 ​ ​ — ​ ​ — ​ ​ — ​ ​ 5,056 Shares issued to Iliad in exchange of notes payable and accrued interest ​ 235,461 ​ ​ — ​ — ​ ​ — ​ ​ 6,207 ​ ​ — ​ ​ — ​ ​ — ​ ​ 6,207 Shares issued to Synworld for services ​ 45,896 ​ ​ — ​ — ​ ​ — ​ ​ 800 ​ ​ — ​ ​ — ​ ​ — ​ ​ 800 Shares issued to other third party for services ​ 20,151 ​ ​ — ​ — ​ ​ — ​ ​ 23 ​ ​ — ​ ​ — ​ ​ — ​ ​ 23 Shares issued upon vesting and release of restricted stock units ​ 2,516 ​ ​ — ​ — ​ ​ — ​ ​ 100 ​ ​ — ​ ​ — ​ ​ — ​ ​ 100 Stock-based compensation ​ — ​ ​ — ​ — ​ ​ — ​ ​ 3,218 ​ ​ — ​ ​ — ​ ​ — ​ ​ 3,218 Net loss ​ — ​ ​ — ​ — ​ ​ — ​ ​ — ​ ​ ( 941 ) ​ ​ ( 47,454 ) ​ ​ — ​ ​ ( 48,395 ) Translation adjustments ​ — ​ ​ — ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ ( 680 ) ​ ​ ( 680 ) Balances as of December 31, 2022 ​ 2,182,084 ​ $ — ​ 2,120,786 ​ $ — ​ $ 266,971 ​ $ ( 699 ) ​ $ ( 266,948 ) ​ $ ( 680 ) ​ $ ( 1,356 ) ​ ​ The accompanying notes are an integral part of these consolidated financial statements 94 Table of Contents JAGUAR HEALTH, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended ​ ​ December 31, (in thousands) 2022 2021 Cash flows from operating activities ​ ​ ​ ​ Net loss and comprehensive loss ​ $ ( 49,075 ) ​ $ ( 52,600 ) Adjustments to reconcile net loss and comprehensive loss to net cash used in operating activities: ​ ​ ​ ​ ​ ​ Amortization of debt issuance costs, debt discount, and non-cash interest expense ​ ​ 11,758 ​ ​ 5,171 Stock-based compensation, vested and released restricted stock units and exercised stock options ​ ​ 3,318 ​ ​ 3,974 Loss on extinguishment of debt ​ ​ 2,187 ​ ​ 753 Depreciation and amortization expense ​ 1,981 ​ 1,719 Shares issued in exchange for services ​ ​ 823 ​ ​ 16 Amortization of operating lease - right-of-use-asset ​ ​ 311 ​ ​ 94 Change in fair value of financial instruments and hybrid instrument designated at Fair Value Option ​ ​ 21 ​ ​ 1,953 Series 3 warrants inducement expense ​ ​ — ​ ​ 1,462 ELOC warrants inducement expense ​ ​ — ​ ​ 172 Derecognition of debt discount on settlement of receivables secured borrowing ​ ​ — ​ ​ 49 Changes in assets and liabilities ​ ​ ​ ​ Accounts receivable ​ ​ ( 170 ) ​ ​ 2,823 Other receivable ​ ​ ( 251 ) ​ ​ ( 407 ) Inventory ​ ( 2,124 ) ​ ( 2,118 ) Prepaid expenses and other current assets ​ ( 1,560 ) ​ ( 796 ) Other assets ​ ​ ( 550 ) ​ ​ ( 408 ) Accounts payable ​ ​ 902 ​ ​ 158 Accrued liabilities ​ ( 360 ) ​ 3,034 Operating lease liability ​ ​ ( 315 ) ​ ​ ( 19 ) Total cash used in operating activities ​ ( 33,104 ) ​ ( 34,970 ) Cash flows from investing activity ​ ​ ​ ​ ​ ​ Purchase of equipment ​ ​ ( 77 ) ​ ​ ( 6 ) Costs incurred in software development activities ​ ​ ( 1,598 ) ​ ​ — Total cash used in investing activity ​ ( 1,675 ) ​ ( 6 ) Cash flows from financing activities ​ ​ ​ ​ Proceeds from issuance of shares in At the Market offering, net of issuance and offering costs of $ 103 and $ 465 in 2022 and 2021, respectively ​ ​ 20,462 ​ ​ 8,595 Proceeds from notes payable with Streeterville ​ ​ 3,975 ​ ​ — Payment of Tempesta Note ​ ​ ( 100 ) ​ ​ — Repayment of insurance financing ​ ​ ( 1,156 ) ​ ​ ( 943 ) 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 ​ ​ — ​ ​ 10,975 Proceeds from issuance of shares on conversion of Series 1, Series 2, and 2019 Bridge Note warrants ​ ​ — ​ ​ 2,034 Proceeds from issuance of shares in PIPE financing ​ ​ — ​ ​ 1,751 Noncontrolling interest ​ ​ ​ ​ ​ 247 Proceeds from exercise of stock options ​ ​ — ​ ​ 3 Repayment of receivables secured borrowing ​ ​ — ​ ​ ( 1,822 ) Payment of ELOC warrants offering costs ​ ​ — ​ ​ ( 35 ) Repayment of notes payable ​ ​ — ​ ​ ( 100 ) Total cash provided by financing activities ​ ​ 23,181 ​ ​ 43,937 Effects of foreign exchange rate changes on assets and liabilities ​ 16 ​ — Net (decrease) increase in cash ​ ( 11,582 ) ​ 8,961 Cash at beginning of the year ​ 17,051 ​ 8,090 Cash at end of the year ​ $ 5,469 ​ $ 17,051 ​ ​ ​ 95 Table of Contents JAGUAR HEALTH, INC. STATEMENTS OF CASH FLOWS (continued) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Supplemental schedule of cash flow information ​ ​ ​ ​ ​ ​ Cash paid for interest ​ $ 23 ​ $ 28 Supplemental schedule of non-cash financing and investing activities ​ ​ ​ ​ ​ ​ Shares issued to Iliad in exchange of notes payable and accrued interest ​ $ 10,472 ​ $ — Insurance financing ​ $ 1,056 ​ $ 1,183 Shares issued to Streeterville in exchange of notes payable and accrued interest ​ $ 792 ​ $ — Recognition of operating lease - right-of-use asset and operating lease liability ​ $ 365 ​ $ 1,087 Shares issued on exercise of Series 3 warrants ​ ​ ​ ​ ​ ​ Shares issued in exchange of partial settlement of royalty interest ​ $ — ​ $ 1,776 Lease modification ​ $ — ​ $ 91 Offering costs included in accounts payable and accrued liabilities ​ $ — ​ $ 13 ​ The accompanying notes are an integral part of these consolidated financial statements. ​ ​ 96 Table of Contents Jaguar Health, Inc. Notes to Financial Statements 1. Organization and Business Jaguar Health, Inc. (“Jaguar” or the “Company”) was founded in San Francisco, California as a Delaware corporation on June 6, 2013 (inception). 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 prescription and non-prescription products for companion animals. 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 including the ongoing development of crofelemer and commercialization of Mytesi. On March 15, 2021, Jaguar established Napo EU S.p.A (which changed its name in December 2021 to “Napo Therapeutics”) in Milan, Italy as a subsidiary of Napo. Napo Therapeutics’ core mission is to provide access to crofelemer in Europe to address significant rare/orphan disease indications, including, initially, two key orphan target indications: Short bowel syndrome (“SBS”) with intestinal failure and congenital diarrheal disorders (“CDD”). 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 18, 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). ​ On January 23, 2023, the Company effected a one-for-seventy-five reverse split of the Company’ issued and outstanding shares of common stock, par value $ 0.0001 per share. As a result of the Reverse Split every seventy-five shares of common stock issued and outstanding were automatically combined into one share of issued and outstanding common stock, without any change in the par value per share. All information related to Common Stock, stock options, restricted stock units, warrants and earnings per share have been retroactively adjusted to give effect to the Reverse Stock Split for all periods presented. ​ On February 7, 2023, the Company received a letter from the Nasdaq Office of General Counsel notifying that the minimum bid price deficiency had been cured and that the Nasdaq had determined to continue the listing of the Company’s common stock on the Nasdaq stock market. ​ 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 $ 266.9 million as of December 31, 2022. The Company expects to incur substantial losses and negative cash flows in future periods. Further, the Company’s future operations, which include the satisfaction of current obligations, are dependent on the success of the Company’s ongoing development and commercialization efforts, as well as securing of additional financing and generating positive cash flows from operations. There is no assurance that the Company will have adequate cash balances to maintain its operations. 97 Table of Contents 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, joint ventures, 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. ​ ​ 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 the consolidated 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 audited consolidated 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, restricted stock units (“RSUs”), valuation of hybrid instruments designated at fair value option (“FVO”), valuation of warrant liabilities, acquired in-process research and development (“IPR&D”), and useful lives assigned to long-lived assets; impairment assessment of non-financial 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. In March 2020, the World Health Organization declared the COVID-19 outbreak to be a pandemic. During the year ended December 31, 2022, 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. 98 Table of Contents 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, 2022 and 2021. 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 credit loss allowance was immaterial as of December 31, 2022 and 2021.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, 2022 and 2021. 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, 2022 and 2021, 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 2022 and 2021, 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, ​ ​ 2022 2021 Customer 1 ​ ​ — % 73 % Customer 2 ​ ​ 35 % 11 % Customer 3 ​ ​ 53 % 12 % ​ 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 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, ​ ​ 2022 ​ 2021 Customer 1 ​ — % ​ 16 % Customer 2 ​ 38 % ​ 37 % Customer 3 ​ 54 % ​ 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- 99 Table of Contents 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. Recent Global Events Macroeconomic conditions, including the war in Ukraine and related sanctions, exchange rate and interest rate volatility, and inflationary pressures, will continue to evolve globally. The greatest impact was a decline in Europe where the impacts of foreign currency exchange rates, the war in Ukraine, and energy inflation were the greatest. The Company’s partially owned subsidiary in Italy, Napo Therapeutics, does not generate any revenue yet for the year ended December 31, 2022. There were no significant changes in the subsidiary’s operations for the year ended December 31, 2022, because of these recent global events. Silicon Valley Bank (SVB) Failure On March 2023, SVB, has been closed by regulators after the bank’s announcement of a $ 1.8 billion securities loss following a deposit outflow and plans to raise $ 2.25 billion by selling its common and preferred stocks. As a result, venture capital firms urged companies to withdraw their cash and investments from SVB to prevent being possibly caught-up of its failure. After its close, SVB became under the receivership of FDIC. As of December 31, 2022, the Company has no cash deposits nor investments within the bank and does not expect any impact from its cash deposits from its financial institutions. 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 3 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. 100 Table of Contents 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. The Company does no t have an allowance for inventory obsolescence as of December 31, 2022 and 2021. Prelaunch Inventory The Company’s policy is to capitalize costs for prelaunch inventories within the drug development phase that evidence that the product’s reasonably likely critical attributes for success are present and feasible, and the key causes of failures are absent based on management’s assumptions. 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. Software Developed for Internal Use The Company capitalizes the costs of developing software for internal use. These costs include both purchased software and internally developed software. Costs of developing software are expensed until technological feasibility has been established. Thereafter, all costs are capitalized and are carried at the lower of unamortized cost or net realizable value. Internally developed and purchased software costs are generally amortized over five years. ​ 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, 2022 and 2021. 101 Table of Contents 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, 2022 and 2021. 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. The Company elected to include both the lease and non-lease components as a single component and account for it as a lease. 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 to customers in an amount that reflects the consideration that the Company expects to be entitled to in exchange for those goods. 102 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 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 and Agreements 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 Canalevia-CA1 and Neonorm products are primarily sold to distributors, who then sell the products to the end customers. Since 2021, the Company has entered into two distribution agreements with established distributors to distribute the Company’s animal health products in the United States. The distribution agreements and the related purchase orders 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 health products sold by the Company, the single performance obligation identified above is the Company’s promise to transfer the Company’s animal health 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 health product, Mytesi, the single performance obligation identified above is the Company’s promise to transfer Mytesi to specialty pharmacies, based on specified payment and shipping terms as outlined in the Exclusive Distribution Agreement. Transaction price For contracts with Cardinal Health and other distributors, 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 Wholesaler Acquisition Cost (“WAC”), and the transaction price of Canalevia-CA1 and Neonorm is the manufacturer’s list price, net of discounts, returns, and price adjustments. Allocate transaction price For contracts with Cardinal Health and other distributors, 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. 103 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 $ 11.7 million and $ 4.3 million for the years ended December 31, 2022 and 2021, respectively. Animal The Company recognized Canalevia-CA1 products revenues of $ 167,000 and zero for the years ended December 31, 2022 and 2021, respectively. The Company recognized Neonorm revenues of $ 48,000 and $ 62,000 for the years ended December 31, 2022 and 2021, respectively. Revenues are recognized at a point in time upon shipment, which is when title and control is transferred to the buyer. Sales of Canalevia-CA1, Neonorm Calf and Foal to distributors are made under agreements that may provide distributor price adjustments and rights of return under certain circumstances. 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 Company has entered into agreements with a total of five different specialty pharmacy chains that are authorized to provide Mytesi to patients. 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. 104 Table of Contents 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 $ 10.3 million and $ 993,000 for the years ended December 31, 2022 and 2021, respectively. 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, NP-300, 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, 2022 and 2021. 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. For the year December 31, 2022, the Company entered into another amendment on the terms of its October 2020 and March 2021 Purchase Agreements (see Note 7). 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 did not modify any equity-classified warrants in the year 2022 and 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. 105 Table of Contents The Company did not modify any equity-classified preferred stock in the year 2022 and 2021. Stock-Based Compensation The Company's Stock Incentive Plan (see Note 11) 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 resulting from the process of translating the functional currency of subsidiary financial statements into the U.S. Dollar reporting currency. These translation adjustments are 106 Table of Contents reported separately and accumulated in the consolidated balance sheets as a component of accumulated other comprehensive loss. 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 years ended December 31, 2022 and 2021, the amount of other comprehensive losses from translation adjustments were $ 680,000 and zero , respectively. 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, 2022 and 2021. Recent Accounting Pronouncements Recently Adopted Accounting Pronouncements 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 Company adopted the standard on January 1, 2022. The adoption of this standard did not have a material effect on the Company’s audited consolidated financial statements and related disclosures. 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 Company adopted the standard on January 1, 2022. The adoption of this standard did not have a material effect on the Company’s audited 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. 107 Table of Contents In October 2021, the FASB issued ASU No. 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers, to provide specific guidance to eliminate diversity in practice on how to recognize and measure acquired contract assets and contract liabilities from revenue contracts from customers in a business combination consistent with revenue contracts with customers not acquired in an acquisition. The amendments in this update provide that the acquirer should consider the terms of the acquired contracts, such as timing of payment, identify each performance obligation in the contracts, and allocate the total transaction price to each identified performance obligation on a relative standalone selling price basis as of contract inception (that is, the date the acquiree entered into the contracts) or contract modification to determine what should be recorded at the acquisition date. These amendments are effective for the Company beginning with fiscal year 2023. The impact of the adoption of the amendments in this update will depend on the magnitude of any customer contracts assumed in a business combination in 2023 and beyond. ​ ​ 3 . 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 instruments that were measured at fair value on a recurring basis as of December 31, 2022 and 2021: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2022 (in thousands) Level 1 Level 2 Level 3 Total Warrant liability ​ $ — ​ $ — ​ $ — ​ $ — Streeterville note ​ ​ — ​ ​ — ​ ​ 7,839 ​ ​ 7,839 Total fair value ​ $ — ​ $ — ​ $ 7,839 ​ $ 7,839 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 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 ​ 108 Table of Contents The change in the estimated fair value of the Level 3 liability is summarized below: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended ​ ​ December 31, 2022 (in thousands) ​ Warrant liability Streeterville note Beginning fair value of Level 3 liability $ 1 $ 7,818 Additions ​ ​ — ​ ​ — Exercises ​ ​ — ​ ​ — Change in fair value ( 1 ) ​ ​ 21 Ending fair value of Level 3 liability $ — $ 7,839 ​ Warrant Liability The warrants associated with the Level 3 warrant liability were valued at zero and $ 1,000 , respectively, in the Company’s audited consolidated balance sheet. Warrants as at December 31, 2022 and 2021 were computed using the Black-Scholes-Merton pricing model. Streeterville Note The fair value of the Streeterville Note at January 13, 2021, date of issuance and as of December 31, 2022 and 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. 109 Table of Contents 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 ​ 2022 ​ 2021 ​ to fair value Risk Adjusted Discount Rate ​ 11.53 %- 26.06 % ( 26.06 %) ​ 6.78 % - 21.31 % ( 21.31 %) ​ If discount rate is adjusted to total of additional 100 basis points (bps), fair value would have decreased by $ 364,000 . If discount rate is adjusted to total deduction of 100 bps, fair value would have increased by $ 364,000 . Sales Proceeds: Amount of comparable TDPRV ​ $ 67.5 million to $ 350 million ($ 100 million) ​ $ 67.5 million to $ 350.0 million ($ 100.0 million) ​ If expected cash flows by Management considered the lowest amount of market indications for vouchers, FV would have decreased by $ 940,000 . If expected cash flows by Management considered the highest amount of market indications for vouchers, FV would have increased by $ 7.23 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. ​ 0.39 %- 46.55 % ​ 0.35 %- 46.06 % ​ If expected cash flows by Management considered the Scenario with the least amount of indicated value, FV would have decreased by $ 692,000 . If expected cash flows by Management considered the scenario with the greatest amount of indicated value, FV would have increased by $ 1.51 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, 2022, 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 110 Table of Contents 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, 2022 ​ ​ ​ ​ ​ ​ ​ ​ ​ Hybrid Instrument: ​ ​ ​ ​ ​ ​ ​ ​ ​ Streeterville note ​ $ 7,839 ​ $ 6,221 ​ $ 1,618 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (in thousands) ​ Fair value ​ Unpaid Principal Balance ​ Fair Value Over (Under) Unpaid Principal Balance At December 31, 2021 ​ ​ ​ ​ ​ ​ ​ ​ ​ Hybrid Instrument: ​ ​ ​ ​ ​ ​ ​ ​ ​ Streeterville note ​ $ 7,818 ​ $ 6,221 ​ $ 1,597 ​ ​ 4. Related Party Transactions BOD Cash Compensation The Company makes BOD cash compensation on a quarterly basis based on the Director Compensation Program. For the years ended December 31, 2022, and 2021, the Company paid approximately $ 241,000 and $ 124,000 cash compensation to its directors. ​ 111 Table of Contents 5 . Commitments and Contingencies Commitments Leases 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 zero and $ 75,000 for the years ended December 31, 2022 and 2021, respectively. As of December 31, 2022, there were no remaining commitment 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 February 28, 2025, unless terminated earlier. The lease had 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 October 7, 2021, the Company entered into an agreement for the lease of office premises from November 1, 2021 to April 30, 2022, subject to automatic renewal for subsequent periods until terminated by either party. Base rent amounted to € 10,000 or approximately $ 10,500 . If the contract is not terminated within 12 months, the lease amount will be increased in line with the index of relevant inflation at each annual expiration of the start date of the contract. The lessor has the right to decline the renewal of the contract. Upon the happening of certain specified events, the lessor may immediately withdraw from the contract. The Company is required leave the occupied spaces immediately in the same condition in which they were found in the event of contract termination or expiry. The Company paid deposit of € 20,000 or approximately $ 21,000 to the lessor. On January 26, 2022, the lease agreement was amended whereby the term was extended by 20 months from May 1, 2022 to December 31, 2023. All other contract provisions remained the same. 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, subject to automatic renewal equal to the present term until terminated by mutual agreement. On January 26, 2022, the lease agreement was amended whereby the term was extended by 20 months from May 1, 2022 to December 31, 2023. The Company recognizes rent expense on a straight-line basis over the non-cancellable lease period. 112 Table of Contents On December 22, 2021, the Company entered into an agreement for the lease of two separate vehicles for 48 months expiring on November 30, 2025. Total monthly lease payment amounted to € 2,000 or approximately $ 2,100 payable in advance. The Company elected to include both the lease and non-lease components as a single component and account for it as a lease. The Company also paid a total deposit of € 19,000 or approximately $ 20,000 , exclusive of VAT. Early termination of the contracts requires the payment of specified amounts. 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. On January 25, 2022, the Company entered into an agreement for the lease of office premises from March 1, 2022 to December 31, 2023, subject to automatic renewal for subsequent periods until terminated by either party. Base rent amounted to € 4,000 or approximately $ 4,200 . A similar agreement was entered with the lessor for the lease of premises to be used as office space from November 1, 2022 to December 31, 2023, subject to automatic renewal for subsequent periods until terminated by either party. Base rent amounted to € 3,817 or approximately $ 4,000 . If the contracts are not terminated within 12 months, the lease amounts will be increased in line with the index of relevant inflation at each annual expiration of the start date of the contract. The lessor has the right to decline the renewal of the contracts. Upon the happening of certain specified events, the lessor may immediately withdraw from the contracts. The Company is required leave the occupied spaces immediately in the same conditions in which they were found in the event of contract termination or expiry. The Company paid a deposit of € 9,000 or approximately $ 9,500 to the Lessor. In May 2022, the Company entered into an agreement for the lease of one vehicle for 48 months expiring on April 30, 2026. Total monthly lease payment amounted to € 833 or approximately $ 880 payable in advance. The Company elected to include both the lease and non-lease components as a single component and account for it as a lease. The Company also paid a total deposit of € 21,000 or approximately $ 22,000 , exclusive of VAT. Early termination of the contracts requires the payment of specified amounts. In October 2022, the Company entered into an agreement for the lease of three vehicles for 48 months expiring on September 30, 2026. Total monthly lease payment amounted to € 2,094 or approximately $ 2,200 payable in advance. The Company elected to include both the lease and non-lease components as a single component and account for it as a lease. In November 2022, the Company entered into an agreement for the lease of two vehicles for 48 months expiring on October 31, 2026. Total monthly lease payment amounted to € 1,459 or approximately $ 1,500 payable in advance. The Company elected to include both the lease and non-lease components as a single component and account for it as a lease. 113 Table of Contents The table below provided additional details of the office space lease presented in the consolidated balance sheet: ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ 2022 ​ 2021 (in thousands) ​ ​ ​ ​ Operating lease - right-of-use asset $ 1,140 ​ $ 1,084 ​ ​ ​ ​ ​ ​ Operating lease liability, current ​ 483 ​ ​ 240 Operating lease liability, net of current portion ​ 725 ​ ​ 919 Total $ 1,208 ​ $ 1,159 ​ ​ ​ ​ ​ ​ Weighted-average remaining life (years) ​ 2.36 ​ ​ 3.21 Weighted-average discount rate ​ 17.89 % ​ ​ 21.10 % ​ Lease cost included in general and administrative expenses in the consolidated statements of operations for the years ended December 31, 2022 and 2021 was approximately $ 629,000 and $ 282,000 . ​ For the years ended December 31, 2022 and 2021, cash paid for operating lease liabilities recognized under operating cash flows amounted to $ 315,000 and $ 105,260 , respectively. Non-cash investing and financing activities for the years ended December 31, 2022 and 2021 include addition to right-of-use asset obtained from new operating liabilities amounting to $ 365,000 and $ 1.1 million, respectively, and lease modification amounting to zero and $ 91,000 respectively. The following table summarizes the undiscounted cash payment obligations for the operating lease liability: ​ ​ ​ ​ ​ December 31, ​ 2022 (in thousands) ​ 2023 ​ 642 2024 ​ 605 2025 ​ 160 2026 ​ 32 Total undiscounted operating lease payments ​ 1,439 Imputed interest expenses ​ ( 231 ) Total operating lease liability ​ 1,208 Less: Operating lease liability, current ​ 483 Operating lease liability, net of current portion $ 725 ​ Rent and lease expense included in the general and administrative expenses in the audited consolidated statements of operations for the year ended December 31, 2022 and December 31, 2021 was approximately $ 629,000 and $ 282,000 , 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 114 Table of Contents 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 500 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. As of December 31, 2022, the remaining commitment is 125 kilograms. ​ Master Services Agreement (“MSA”) 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, 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 years ended December 31, 2022 and 2021, the Company paid Integrium $ 1.9 million and $ 1.7 million, 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 years ended December 31, 2022 and 2021, the Company paid Glenmark $ 2.6 million and $ 2.0 million, 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. 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 115 Table of Contents balance sheets as of December 31, 2022, as the Company could not predict the ultimate outcome of these matters, or reasonably estimate the potential exposure. ​ 6. Balance Sheet Components Inventory Inventory at December 31, 2022 and 2021 consisted of the following: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ 2022 2021 (in thousands) ​ ​ ​ ​ ​ Raw Material ​ $ 2,101 ​ $ 1,248 Work in Process ​ ​ 3,599 ​ ​ 2,760 Finished Goods ​ ​ 1,324 ​ ​ 892 Inventory ​ $ 7,024 ​ $ 4,900 ​ Prelaunch Inventory ​ Costs capitalized for the Company’s lyophilized drug amounting to $ 2.1 million and zero as of December 31, 2022, and 2021 are included in the prepayments and other assets account. As of December 31, 2022, the Company has filed the POC for the lyophilized drug to European FDA and expects approval at the end of the first half of 2023. Upon approval, the prelaunch inventory shall be reclassed as part of the Company’s inventory. ​ Property and Equipment, net Property and equipment at December 31, 2022 and 2021 consisted of the following: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ 2022 2021 (in thousands) ​ ​ ​ ​ ​ Land ​ $ 396 ​ $ 396 Lab equipment ​ ​ 477 ​ ​ 424 Clinical equipment ​ — ​ 65 Software ​ ​ 63 ​ ​ 63 Furniture and fixtures ​ ​ 18 ​ ​ — Computers and peripherals ​ ​ 7 ​ ​ — Total property and equipment at cost ​ 961 ​ 948 Accumulated depreciation ​ ( 404 ) ​ ( 298 ) Property and equipment, net ​ $ 557 ​ $ 650 ​ Depreciation and amortization expense was $ 171,000 and $ 33,000 for the years ended December 31, 2022 and 2021, respectively . 116 Table of Contents Intangible assets, net Intangible assets, net of amortization, at December 31, 2022 and 2021 consisted of the following: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ 2022 2021 (in thousands) ​ ​ ​ ​ ​ Developed technology ​ $ 25,000 ​ $ 25,000 Accumulated developed technology amortization ​ ( 9,028 ) ​ ( 7,361 ) Developed technology, net ​ 15,972 ​ 17,639 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 ​ ( 108 ) ​ ( 88 ) Trademarks, net ​ 192 ​ 212 Internal use software costs - registry ​ ​ 1,236 ​ ​ — Accumulated internal use software costs amortization ​ ( 122 ) ​ — Internal use software costs - registry, net ​ 1,114 ​ — Patents ​ ​ 361 ​ — — Total intangible assets, net ​ $ 22,439 ​ $ 22,651 ​ Amortization expense of finite-lived intangible assets was $ 1.8 million and $ 1.7 million for the years ended December 31, 2022 and 2021. ​ The following table summarizes the Company’s estimated future amortization expense of intangible assets with finite lives as of December 31, 2022: ​ ​ ​ ​ ​ (in thousands) Amounts 2023 ​ ​ 1,952 2024 ​ ​ 1,952 2025 ​ ​ 1,952 2026 ​ ​ 1,952 Thereafter ​ ​ 9,831 ​ ​ $ 17,639 ​ 117 Table of Contents Accrued Liabilities Accrued liabilities at December 31, 2022 and 2021 consisted of the following: ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ December 31, (in thousands) 2022 2021 Accrued interest ​ $ 5,489 ​ $ 3,456 Accrued audit and tax services ​ ​ 575 ​ ​ 167 Accrued vacation ​ ​ 310 ​ ​ 281 Accrued payroll and commission ​ 263 ​ 120 Accrued legal costs ​ ​ 36 ​ ​ 414 Accrued local tax ​ ​ 9 ​ ​ 285 Accrued payroll tax ​ ​ 1 ​ ​ 58 Accrued chargebacks and discounts ​ ​ — ​ ​ 335 Accrued distributor services fees ​ ​ — ​ ​ 250 Accrued consulting ​ ​ — ​ ​ 47 Accrued other ​ ​ 1,482 ​ ​ 1,704 Total ​ $ 8,165 ​ $ 7,117 ​ Other accrued liabilities as of December 31, 2022 largely consist of other accrued interests, contract fees and scientific advisory board fees while other accrued liabilities as of December 31, 2021 significantly comprise of contract fees and scientific advisory board fees. ​ ​ ​ ​ ​ 7. Debt Notes payable at December 31, 2022 and 2021 consisted of the following: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ ​ 2022 2021 (in thousands) ​ ​ ​ ​ ​ Royalty Interest ​ $ 38,931 ​ $ 37,000 Streeterville Note ​ ​ 7,840 ​ ​ 7,818 Insurance Financing ​ ​ 234 ​ ​ 335 Tempesta Note ​ ​ 250 ​ ​ 350 ​ ​ ​ 47,255 ​ 45,503 Less: unamortized discount and debt issuance costs ​ ( 13,628 ) ( 17,297 ) Note payable, net of discount ​ $ 33,627 $ 28,206 Notes payable - non-current, net ​ $ 17,744 ​ $ 25,022 Notes payable - current, net ​ $ 15,883 ​ $ 3,184 ​ Future maturities of the notes payable as of December 31, 2022 are as follows: ​ ​ ​ ​ ​ (in thousands) ​ Amounts Years ended December 31, ​ ​ ​ 2023 ​ $ 15,882 2024 ​ ​ 23,483 2025 ​ ​ 50 2026 ​ ​ — 2027 ​ ​ — ​ ​ ​ 39,415 Less: unamortized discount and debt issuance costs ​ ​ ( 13,628 ) Total ​ $ 25,787 118 Table of Contents ​ Future maturities are based on contractual minimum payments. Timing of maturities may fluctuate based on future revenue. ​ Sale of Future Royalty Interest 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. 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 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 7,843 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, 2022, the forecasted future revenues changed which resulted to a new discount rate of 74.59 % . 119 Table of Contents On February 11, 2022, the Company entered into an exchange agreement with Iliad, pursuant to which the parties agreed to partition $ 2.4 million from the outstanding balance of the royalty interest. The parties further agreed to exchange the partitioned royalty for 23,117 shares of the Company’s common stock. The exchange consisted of Iliad surrendering the partitioned royalty in exchange for the exchange shares. On March 2, 2022, the Company entered into an exchange agreement with Iliad, pursuant to which the parties agreed to partition $ 1.1 million from the outstanding balance of the royalty interest. The parties further agreed to exchange the partitioned royalty for 32,333 shares of the Company’s common stock. The exchange consisted of Iliad surrendering the partitioned royalty in exchange for the exchange shares. On March 4, 2022, the Company entered into an exchange agreement with Iliad, pursuant to which the parties agreed to partition $ 800,000 from the outstanding balance of the royalty interest. The parties further agreed to exchange the partitioned royalty for 26,667 shares of the Company’s common stock. The exchange consisted of Iliad surrendering the partitioned royalty in exchange for the exchange shares. On March 9, 2022, the Company entered into an exchange agreement with Iliad, pursuant to which the parties agreed to partition $ 700,000 from the outstanding balance of the royalty interest. The parties further agreed to exchange the partitioned royalty for 24,667 shares of the Company’s common stock. The exchange consisted of Iliad surrendering the partitioned royalty in exchange for the exchange shares. Because the period between the first and last exchanges occurred within a 12-month period and each was individually assessed as a modification, the debt terms that existed prior to the February 13 exchange was used in the application of the 10% test on the cumulative assessment performed. The exchanges were cumulatively accounted for as an extinguishment and resulted in a loss of $ 2.2 million. On April 14, 2022, the Company entered into amendments (the “Royalty Interest Global Amendments”) to its existing royalty interests including the Royalty Interest in the original principal amount of $ 12.0 million under the October 2020 Royalty Interest. The amendment grants the Company at its sole discretion, the right to exchange from time to time, all or any portion of the Royalty Interests for shares of the Company’s common stock at a price per share equal to the Nasdaq Minimum Price (as defined in Nasdaq Listing Rule 5635(d)) as of date of the applicable exchange. Under the Royalty Interest Global Amendments, the Company’s ability to exchange the Royalty Interests for shares of the Company’s common stock is subject to certain limitations, on which the Company will not have such right and issue any common stock to investors if (a) the issuance of the Company’s common shares would cause investor’s beneficial ownership to exceed 4.99 % of Company’s issued and outstanding common stock as of such date; (b) any of the exchange conditions has not been satisfied as of the applicable exchange date; and (c) the total cumulative number of shares of the Company’s common stock issued pursuant to the Royalty Interests would exceed the requirements of The Nasdaq Capital Market (including the rules related to the aggregation of offerings under Nasdaq Listing Rule 5635(d) if applicable) (the “Exchange Cap”), unless stockholder approval is obtained to issue more than the Exchange Cap. The Exchange Cap shall be appropriately adjusted for any reorganization, recapitalization, non-cash dividend, stock split, reverse stock split or other similar transaction. On May 13, 2022, the Company entered into an exchange agreement with Iliad, pursuant to which the parties agreed to partition $ 400,000 from the outstanding balance of the royalty interest. The parties further agreed to exchange the partitioned royalty for 15,249 shares of the Company’s common stock. The exchange consisted of Iliad surrendering the partitioned royalty in exchange for the exchange shares. On July 25, 2022, the Company entered into an exchange agreement with Iliad, pursuant to which the parties agreed to partition $ 750,000 from the outstanding balance of the royalty interest. The parties further agreed to exchange the partitioned royalty for 31,546 shares of the Company’s stock. The exchange consisted of Iliad surrendering the partitioned royalty in exchange for the exchange shares. On November 18, 2022, the Company entered into another exchange agreement with Iliad, pursuant to which the parties agreed to partition $ 715,000 from the outstanding balance of the royalty interest. The parties further agreed 120 Table of Contents to exchange the partitioned royalty for 73,333 shares of the Company’s stock. The exchange consisted of Iliad surrendering the partitioned royalty in exchange for the exchange shares. Although there were exchanges that occurred within the 12-month period prior to the May 13, 2022, July 25, 2022 and November 18, 2022 exchanges, these were previously accounted for as extinguishment and, therefore, cumulative assessment was not anymore performed. The exchange agreements were accounted for as a modification. As of December 31, 2022, the forecasted future revenues changed which resulted to a new discount rate of 41.35 %. Interest expense for the years ended December 31, 2022 and 2021 was $ 3.6 million and $ 4.2 million, respectively. As of December 31, 2022 and 2021, the carrying value of the debt was $ 7.3 million and $ 6.3 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, 2022, the forecasted future revenues changed which resulted to a new discount rate of 29.55 % . ​ On April 14, 2022, under the Royalty Interest Global Amendments, the Company is granted at its sole discretion, the right to exchange from time to time, all or any of the Royalty Interest under the original principal amount of $ 12.0 million or any portion of the December 2020 Purchase Agreement for shares of the Company’s common stock at a price per share equal to the Nasdaq Minimum Price (as defined in Nasdaq Listing Rule 5635(d)) as of date of the applicable exchange, subject to certain limitations. Interest expense for the years ended December 31, 2022 and 2021 was $ 3.9 million and $ 2.9 million, respectively. As of December 31, 2022 and 2021, the carrying value of the debt was $ 10.0 million and $ 7.6 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 121 Table of Contents 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, 2022, the forecasted future revenues changed which resulted to a new discount of 19.14 %. On April 14, 2022, under the Royalty Interest Global Amendments, the Company is granted at its sole discretion, the right to exchange from time to time, all or any of the Royalty Interest under the original principal amount of $ 10.0 million of the March 2021 Purchase Agreement for shares of the Company’s common stock at a price per share equal to the Nasdaq Minimum Price (as defined in Nasdaq Listing Rule 5635(d)) as of date of the applicable exchange, subject to certain limitations. On August 17, 2022, the Company entered into an exchange agreement (the “Royalty Interest Exchange Agreement”) with Streeterville to (i) partition a new royalty interest in the royalty repayment amount of $ 3.4 million (“Partitioned Royalty”) from the royalty interest of the March 2021 Purchase Agreement and then cause the outstanding balance of the royalty interest to be reduced by an amount equal to the initial outstanding balance of the Partitioned Royalty, and (ii) exchange (“Royalty Exchange”) the Partitioned Royalty for 153,333 million shares of the Company’s common stock with a par value of $ 0.0001 in accordance with the term of the Royalty Interest Exchange Agreement. Under the terms of the Royalty Interest Exchange Agreement, the Royalty Exchange will consist of Streeterville surrendering the Partitioned Royalty in exchange for the shares, free of any restrictive securities legend, and Streeterville shall give no consideration of any kind whatsoever to the Company in connection with the Royalty Interest Exchange Agreement. On September 30, 2022, the Company entered into an exchange agreement with Streeterville, pursuant to which the parties agreed to partition $ 2.0 million from the outstanding balance of the royalty interest. The parties further agreed to exchange the partitioned royalty for 156,863 shares of the Company’s common stock. The exchange consisted of Streeterville surrendering the partitioned royalty in exchange for the exchange shares. The exchange was accounted for as a debt modification and resulted to a reduction in the outstanding balance of the royalty interest amounting to $ 2.0 million. As of December 31, 2022 the forecasted future revenues changed which resulted to a new discount of 53.85 %. 122 Table of Contents Interest expense for the years ended December 31, 2022 and 2021 was $ 1.9 million and $ 1.2 million, respectively. As of December 31, 2022 and 2021, the carrying value of the debt was $ 3.1 million and $ 5.8 million, respectively. August 2022 Purchase Agreement On August 24, 2022, the Company entered into another royalty interest purchase agreement (the “August 2022 Purchase Agreement”) with Streeterville, pursuant to which the Company sold to Streeterville (the entitling “Investor”) a royalty interest to receive $ 12.0 million of future royalties on sales of Mytesi® (crofelemer) for any indications that could cannibalize crofelemer indications or any other chronic indication and certain up-front license fees and milestone payments from licensees and/or distributors for an aggregate purchase price of $ 4.0 million (“the Royalty Financing”). The Company will use the proceeds to support the ongoing pivotal phase 3 clinical trial of crofelemer for prophylaxis of diarrhea in adults receiving targeted cancer therapy. Interest will accrue on the Royalty Repayment Amount at a rate of 5 % per annum from the closing of the Royalty Financing until the one-year anniversary of such closing and 10 % per annum thereafter, simple interest computed on the basis of a 360-day year comprised of twelve 30-day months. The Company will be obligated to make minimum royalty payments on a monthly basis beginning on January 1, 2024 in an amount equal to the greater of (A) $ 250,000 (which increases to $ 400,000 beginning 6 months following the closing of the Royalty Financing, $ 600,000 beginning 12 months following the closing of the Royalty Financing, and $ 750,000 beginning 18 months following the closing of the Royalty Financing) and (B) the royalty payments to which Investor is entitled, consisting of (1) 10 % of the Company’s net sales of crofelemer for any indications that could cannibalize crofelemer indications or any other chronic indication (including any improvements, modifications and follow-on products, collectively referred to as “Included Products”) (2) 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 (A) reimbursements of clinical trial expenses or (B) associated with the license of the of the Included Products from the Company to Napo EU S.p.A. and (3) 50 % of royalties collected from licenses of the Included Products to third parties. Pursuant to the terms of the Royalty Interest, the Company has the right to exchange from time to time at the Company’s sole discretion all or any portion of the Royalty Interest for shares of Common Stock at a price per share equal to the Nasdaq Minimum Price (as defined in Nasdaq Listing Rule 5635(d)) as of the date of the applicable exchange. At issuance, based on projected cash outflows from future revenue streams, the discount rate was 55.97 %. Interest expense for the year ended December 31, 2022 was $ 1.1 million. As of December 31, 2022, the carrying value of the debt is $ 4.8 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 drug product candidate for the indication of the symptomatic relief of diarrhea from cholera and general corporate purposes, including the Company’s product pipeline activities. The note is due after four years and bears interest at 3.25 % per annum. Interest on the note is payable annually in advance by adding the interest charge for each upcoming year to the outstanding balance on the date each such interest charge is accrued. The Company also paid $ 25,000 to cover legal fees, accounting costs, due diligence, monitoring and other transaction costs incurred in connection with the issuance of the note. The first year of prepaid interest and the transaction expenses are included in the original principal amount. At any time following the occurrence of a trial failure which refers to any of the following: (i) the Company abandons the clinical trial with NP-300 for an indication for the symptomatic relief of infectious diarrhea for cholera; (ii) the Company fails to start the Phase 1 clinical trial of NP-300 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 NP-300 for the 123 Table of Contents 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, 2022, 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, 2022, 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 NP-300 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, 2022, 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 NP-300 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 NP-300 for the cholera-related 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, 2022 and 2021, the fair value was determined to be $ 7.8 million. For the year ended December 31, 2022, the net increase in the fair value of $ 20,000 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 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, 2022 was $ 2,000 . The financing balance was zero and $ 10,000 at December 31, 2022 and 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 years ended December 31, 2022 and 2021 was $ 6,000 and $ 13,000 , respectively. The financing balance was zero and $ 326,000 at December 31, 2022 and 2021, respectively. March 2022 First Insurance Financing ​ In March 2022, the Company entered into another premium finance agreement for $ 100,000 with 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 $ 15,000 . Payment of principal and interest is due in equal monthly installments over ten months . Interest expense for the year ended December 31, 2022 was zero . The financing balance was $ 9,000 at December 31, 2022. ​ May 2022 First Insurance Financing ​ In May 2022, the Company entered into another premium finance agreement for $ 752,000 with First Insurance representing the unpaid balance of the total premiums, taxes, and fees of $ 941,000 with an annual interest rate of 4.3 %. The total finance charge was $ 15,000 . Payment of principal and interest is due in equal monthly installments over ten months . Interest expense for the year ended December 31, 2022 was $ 4,000 . The financing balance was $ 226,000 at December 31, 2022. 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 178 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 years ended December 31, 2022 and 2021 was $ 10,000 and $ 10,000 , respectively. At December 31, 2022 and 2021, the net carrying value of the Tempesta note was $ 250,000 and $ 350,000 respectively. 125 Table of Contents 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”). In December 2020, 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. In February 2021, the Company made its final required payment to Oasis under Tranche #6 Secured Note, with total payments equaling 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, 2021, the Company issued a note (“Exchange Note 2”) with a principal balance of $ 2.3 million. As of December 31, 2021, 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, 2022. 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 global amendment agreement was accounted for as modification. 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 70,622 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, 2021. As of December 31, 2022 and 2021, there were no Series D Perpetual Preferred shares outstanding. 126 Table of Contents 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 5,556 shares of the Company’s common stock to CVP on December 31, 2021. 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 6,283 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 . 8. 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, 2022 and 2021: ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ ​ 2022 ​ 2021 Warrants outstanding, beginning balance ​ 7,513 ​ 32,024 Issuances ​ — ​ 2,250 Exercises ​ — ​ ( 26,761 ) Expirations and cancelations ​ ( 8 ) ​ — Warrants outstanding, ending balance ​ 7,505 ​ 7,513 ​ As of December 31, 2022 and 2021, the Company’s outstanding warrants have an exercise price ranging from $ 1.47 to $ 157.5 per common share and generally expires prior to December 31, 2024. ​ 9. Preferred Stock At December 31, 2022 and 2021, 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 ​ ​ — ​ ​ — ​ ​ — E ​ ​ 4,475,074 ​ ​ — ​ ​ — ​ ​ — Total ​ ​ 5,496,239 ​ ​ — ​ $ — ​ ​ ​ ​ 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. ​ 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 127 Table of Contents redemption option was ultimately in the control of the Company. There were no series C Preferred Shares outstanding at December 31, 2022 and 2021. ​ Series E Preferred Stock On August 18, 2022, the Company entered into an agreement (the “Securities Purchase Agreement”) with Synworld to issue 10 Series E Preferred Stock with a par value of $ 0.0001 , amounting to $ 100 . In consideration of the Securities Purchase Agreement, the Company and Synworld agree to amend the existing definition of the term “Service Share Amount” in the License Agreement entered by both parties (See Note 2) and include a subsection for lock-up wherein Synworld agrees not to sell, transfer, loan, grant any option of the purchase of, or otherwise dispose of any shares of common stock acquired pursuant to the License Agreement until after the 90-day period following the date of acquisition. On October 4, 2022, the Company redeemed all 10 shares of Series E Preferred Stock in accordance with the terms of such securities. As a result, no shares of Series E Preferred Stock remain outstanding. ​ 10. Stockholders’ Equity As of December 31, 2022 and 2021, the Company had reserved shares of common stock, on an as-if converted basis, for issuance as follows: ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ ​ 2022 ​ 2021 Options issued and outstanding 26,533 ​ 31,221 Inducement options issued and outstanding ​ 1,546 ​ 2,065 Options available for grant under stock option plans 122,978 ​ 8,417 Restricted stock unit awards issued and outstanding 44,865 ​ 6,499 Warrants issued and outstanding 7,505 ​ 7,513 Total 203,427 55,715 ​ 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. At a special meeting of stockholders of Jaguar Health, Inc. (the “Company”) held on September 30, 2022 (the “Special Meeting”), the Company’s stockholders approved an amendment (the “Sixth Amendment”) to the Company’s Third Amended and Restated Certificate of Incorporation (the “COI”) to effect an increase in the number of authorized shares of the Company’s voting common stock, par value $ 0.0001 per share (the “Common Stock”), from 150,000,000 to 298,000,000 shares of Common Stock (the “Authorized Share Increase”) on September 30, 2022. Pursuant to such authority granted by the Company’s stockholders, the Company’s board of directors approved the Authorized Share Increase and the filing of the Sixth Amendment to effectuate the Authorized Share Increase. On September 30, 2022, the Company filed the Sixth Amendment with the Secretary of State of the State of 128 Table of Contents Delaware (the “DE Secretary of State”), and the Authorized Share Increase became effective in accordance with the terms of the Sixth Amendment immediately upon filing with the DE Secretary of State (the “Effective Time”). The Company is now authorized to issue a total number of 352,475,074 shares, of which 298,000,000 shares are common stock, 50,000,000 are non-voting common stock and 4,475,074 are preferred stock. Reverse Stock-Split On September 3, 2021, the Company filed an 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. 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. On January 20, 2023, the Company approved another amendment to the Company’s Third Amendment and Restated Certificate of Incorporation to effect a 1 -for-75 reverse stock split of the Company’s issued and outstanding shares of voting common stock, effective January 23, 2023. Upon effectivity, every seventy-five shares of the Company’s issued 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 splits reduces the number of shares of common stock issuable upon the conversion of the Company’s outstanding non-voting common stock and the exercise or vesting of its outstanding stock options and warrants in proportion to the ratio of the reverse stock split and causes a proportionate increase in the conversion and exercise prices of such non-voting common stock, stock options and warrants. In addition, the number of shares reserved for issuance under the Company’s equity compensation plans immediately prior to the effective time will be reduced proportionately. The reverse stock split did not change the total number of authorized shares of common stock or preferred stock. March 2020 ELOC (Equity Line of Credit) 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. In April 2020, the Company sold 231 common shares to Oasis for gross proceeds of $ 23,000 . As of December 31, 2022 and 2021, the Company had not exercised any further put options to require Oasis Capital to purchase common stock under the equity purchase agreement. 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. During January and February 2021, the Company issued an aggregate of 8,931 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, 2022, all shares under the October 2020 ATM Agreement have been issued. 129 Table of Contents 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. 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”). As of December 31, 2022, the Company has issued 923,164 shares under the December 2021 ATM Agreement for a total net proceeds of $ 20.5 million. 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 19,724 shares of common stock at an offering price of $ 760.50 per share for gross proceeds of approximately $ 15.0 million before deducting $ 1.6 million placement agent fee and related offering expenses. The offering closed on January 15, 2021. ​ On April 29, 2021, the Company entered into another securities purchase agreement, pursuant to which the Company agreed to issue and sell, in a registered public offering through Ladenburg as the placement agent, an aggregate of 33,987 shares of common stock at an offering price of $ 317.25 per share for gross proceeds of approximately $ 10.8 million before deducting placement agent fees and related offering expenses of $ 948,000 . The offering closed on May 3, 2022. ​ 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 € 750 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 were converted to investment at a stand-alone level 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 4,123 unregistered shares of the Company’s common stock for an aggregate purchase price of approximately $ 776,197 or $ 188.25 per share. ​ 130 Table of Contents 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. ​ For the year ended December 31, 2022, noncontrolling interest decreased by $ 941,000 due to the share in net loss on Napo Therapeutics’ financial performance. ​ ​ ​ ​ 11. 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 2 option shares outstanding at December 31, 2022 and 2021. 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. On April 13, 2022, the Board of Directors of the Company approved a Registration Statement to register an additional 2,417,660 shares of the Company’s common stock for issuance pursuant to the awards granted under the 2014 Plan. As of December 31, 2022, there were 26,533 options outstanding and 116,011 options available for grant. As of December 31, 2021, there were 31,740 options outstanding and 8,260 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 2,222 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 131 Table of Contents 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. On April 13, 2022, the Board of Directors of the Company approved an amendment to the 2020 Inducement Award Plan to reserve an additional 471,833 shares of the Company’s common stock for issuance pursuant to equity awards granted under the Inducement Award Plan, thereby increasing the number of shares of the Company’s common stock issuable thereunder from 500,000 shares to 971,833 shares. As of December 31, 2022, there were 1,546 options outstanding and 6,967 options available for grant. As of December 31, 2021, there were 1,546 options outstanding and 157 options available for grant. The Company authorized an additional 151,079 shares for the stock incentive plans. Stock Options and Restricted Stock Units (“RSUs”) The following table summarized the incentive plan activity for the year ended December 31, 2022 and 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 January 1, 2021 ​ 2,652 ​ 20,229 ​ 5 ​ $ 950.90 ​ 8.71 ​ $ 364 Additional shares authorized ​ 25,358 ​ — ​ — ​ ​ — ​ ​ ​ ​ — Options granted ​ ( 13,547 ) ​ 13,547 ​ — ​ ​ 405.45 ​ ​ ​ ​ — Options exercised ​ — ​ ( 42 ) ​ — ​ ​ 100.35 ​ ​ ​ ​ — Options canceled ​ 448 ​ ( 448 ) ​ — ​ ​ 2,285.32 ​ ​ ​ ​ — RSUs granted ​ ( 6,494 ) ​ — ​ 6,494 ​ ​ — ​ ​ ​ ​ — RSUs vested and released ​ — ​ — ​ — ​ ​ — ​ ​ ​ ​ — RSUs cancelled ​ — ​ — ​ — ​ ​ — ​ ​ ​ ​ — Outstanding at December 31, 2021 ​ 8,417 ​ 33,286 ​ 6,499 ​ $ 707.97 ​ 8.35 ​ $ 3 Additional shares authorized ​ 151,079 ​ — ​ — ​ ​ — ​ ​ ​ ​ — Options granted ​ ( 44 ) ​ 44 ​ — ​ ​ 23.46 ​ ​ ​ ​ — Options exercised ​ — ​ — ​ — ​ ​ — ​ ​ ​ ​ — Options canceled ​ 5,251 ​ ( 5,251 ) ​ — ​ ​ 418.34 ​ ​ ​ ​ — RSUs granted ​ ( 41,725 ) ​ — ​ 41,725 ​ ​ — ​ ​ ​ ​ — RSUs vested and released ​ — ​ — ​ ( 2,516 ) ​ ​ — ​ ​ ​ ​ — RSUs cancelled ​ — ​ — ​ ( 843 ) ​ ​ — ​ ​ ​ ​ — Outstanding at December 31, 2022 ​ 122,978 ​ 28,079 ​ 44,865 ​ $ 592.73 ​ 7.19 ​ $ — Exercisable at December 31, 2022 ​ ​ 26,102 ​ ​ ​ $ 614.51 7.11 ​ $ — Vested and expected to vest at December 31, 2022 ​ ​ 27,901 ​ ​ ​ $ 594.38 7.18 ​ $ — *Fair market value of Jaguar stock on December 31, 2022 was $ 6.52 per share. 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, 2022 and 2021 were zero and 42 , respectively. The weighted average grant date fair value of stock options granted was $ 22.04 and $ 379.66 per share during the years ended December 31, 2022, and 2021, respectively. 132 Table of Contents The number of options that vested in the years ended December 31, 2022, and 2021 was 7,492 and 9,280 , respectively. The grant date weighted average fair value of options that vested in the years ended December 31, 2022, and 2021 was $ 304.57 and $ 336.60 , 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, 2022 and 2021, and are included in the consolidated statements of operations as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended ​ ​ ​ December 31, ​ (in thousands) 2022 2021 ​ Research and development expense ​ $ 1,263 ​ $ 1,319 ​ Sales and marketing expense ​ 267 ​ 319 ​ General and administrative expense ​ 1,788 ​ 2,336 ​ Total ​ $ 3,318 ​ $ 3,974 ​ ​ As of December 31, 2022, the Company had $ 2.7 million of unrecognized stock-based compensation expense for options and RSU’s, which is expected to be recognized over a weighted-average period of 1.70 years. The fair value of options granted during the years ended December 31, 2022 and 2021, respectively, were calculated using the range of assumptions set forth below: ​ ​ ​ ​ ​ ​ ​ ​ Year Ended ​ ​ December 31, ​ 2022 2021 Volatility ​ 164.0 % ​ 163.8 - 164.0 % Expected term (years) ​ 5.0 5.0 Risk-free interest rate ​ 3.2 % 0.5 - 1.2 % 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, 2022. ​ ​ ​ 12. 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, 2022 and 2021: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, (In thousands, except share and per share data) ​ 2022 2021 Net loss attributable to common stockholders (basic and diluted) ​ ​ $ ( 47,454 ) ​ $ ( 52,595 ) Shares used to compute net loss per common share, basic and diluted ​ ​ ​ 1,311,519 ​ ​ 596,154 Net loss per share attributable to common stockholders, basic and diluted ​ ​ $ ( 36.18 ) ​ $ ( 88.22 ) ​ 133 Table of Contents 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, 2022 and 2021 because their inclusion would be anti-dilutive: ​ ​ ​ ​ ​ ​ ​ ​ Year Ended ​ ​ December 31, ​ 2022 ​ 2021 Options issued and outstanding ​ 26,533 ​ 31,221 Inducement options issued and outstanding ​ 1,546 ​ 2,065 Restricted stock units issued and outstanding ​ 44,865 ​ 6,499 Warrants issued and outstanding ​ 7,505 ​ 7,513 Total ​ 80,449 ​ 47,298 ​ As of March 24, 2023, there were 11,680,245 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. ​ ​ 13. Income Taxes The Company's loss before provision for income taxes during the years ended December 31, 2022 and 2021, was a domestic loss of $ 42.1 million and $ 48.0 million, and a foreign loss of $ 6.3 million and $ 4.6 million, respectively. The effective tax rate for 2022 and 2021 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, 2022 and 2021. The Company’s effective tax during the years ended December 31, 2022 and 2021, differed from the federal statutory rate as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ 2022 2021 Statutory rate ​ ( 21.0 ) % ( 21.0 ) % State taxes ​ ( 1.8 ) % — % Intercompany transactions ​ 0.2 % — % Valuation allowance ​ 18.3 % 13.4 % Nondeductible warrant expense ​ ( 0.3 ) % — % Book loss on debt extinguishment ​ 1.0 % 4.2 % Foreign rate differential ​ ( 0.7 ) % — % Other ​ 4.3 % 3.4 % Effective tax rate ​ — % — % ​ 134 Table of Contents Net deferred tax assets as of December 31, 2022 and 2021 consisted of the following: ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, (In thousands) ​ 2022 ​ 2021 Non-current deferred tax assets: ​ ​ ​ ​ ​ ​ Net operating losses ​ $ 24,773 ​ $ 21,153 Tax credits ​ ​ 241 ​ ​ 241 Stock compensation ​ ​ 3,042 ​ ​ 2,161 Other ​ ​ 1,006 ​ ​ 450 ​ ​ 29,062 ​ ​ 24,005 Valuation allowance ​ ​ ( 28,454 ) ​ ​ ( 19,865 ) Net non-current deferred tax assets ​ ​ 608 ​ ​ 4,140 Non-current deferred tax liabilities: ​ ​ ​ ​ ​ ​ Other ​ ​ ( 566 ) ​ ​ ( 678 ) Property and equipment ​ ​ ( 42 ) ​ ​ ( 3,462 ) Net non-current deferred tax liability ​ ​ ( 608 ) ​ ​ ( 4,140 ) 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, 2022 and 2021, due to the uncertainty of realizing future tax benefits from its NOL carryforwards and other deferred tax assets. The valuation allowance increased by $ 8.6 million during the year ended December 31, 2022. As of December 31, 2022, the Company had federal and California NOL carryovers of approximately $ 96.7 million and $ 29.4 million, respectively. Of the federal NOL, $ 20.7 million will begin to expire in 2034 and $ 114.4 million will carryforward indefinitely. The California NOL will begin to expire in 2033. As of December 31, 2022, 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 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, 2022 and 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, 2022 and 2021. 135 Table of Contents 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, 2022, 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, 2022 or 2021. 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) 2022 2021 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 ​ ​ 14. 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. The Company’s reportable segments sales and net income consisted of: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended ​ ​ December 31, (in thousands) 2022 2021 Revenue from external customers ​ ​ Human Health ​ $ 11,741 ​ $ 4,273 Animal Health ​ 215 ​ 62 Consolidated Totals ​ $ 11,956 ​ $ 4,335 ​ ​ ​ ​ ​ ​ ​ Segment net loss ​ ​ Human Health ​ $ ( 18,278 ) ​ $ ( 24,276 ) Animal Health ​ ( 30,117 ) ​ ( 28,324 ) Consolidated Totals ​ $ ( 48,395 ) ​ $ ( 52,600 ) ​ 136 Table of Contents The Company’s reportable segments assets consisted of the following: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, (in thousands) 2022 2021 ​ ​ ​ ​ ​ ​ Segment assets ​ ​ Human Health ​ $ 40,898 ​ $ 42,250 Animal Health ​ 128,607 ​ 115,580 Total ​ $ 169,505 ​ $ 157,830 ​ The reconciliation of segments assets to the consolidated assets is as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ December 31, (in thousands) 2022 2021 Total assets for reportable segments ​ $ 169,505 ​ $ 157,830 Less: Investment in subsidiary ​ ( 29,232 ) ​ ( 29,232 ) Less: Intercompany loan ​ ( 92,821 ) ​ ( 75,333 ) Consolidated Totals ​ $ 47,452 ​ $ 53,265 ​ ​ 15. Subsequent Events December 2021 ATM Agreement Subsequent to December 31, 2022, the Company has issued an additional 10,135,550 shares under the December 2021 ATM Agreement with a total net proceeds of $ 17.5 million. Formation of Joint Venture Magdalena Biosciences, Inc. ​ In January 2023, Jaguar and Filament Health (“Filament”), with Funding from One Small Planet, formed the U.S.-based joint venture Magdalena Biosciences, Inc. (“Magdalena”). Magdalena’s focus is on the development of novel, natural prescription medicines derived from plants for mental health indications including, initially, attention-deficit/hyperactivity disorder (“ADHD”) in adults. The goal of the collaboration is to extend the botanical drug development capabilities of Jaguar and Filament in order to develop pharmaceutical-grade, standardized drug candidates for mental health disorders, and to partner with a potential future licensee to develop and commercialize these novel plant-based drugs. This new venture aligns with Jaguar's mental health Entheogen Therapeutics Initiative (“ETI”) and Filament's corporate mission to develop novel, natural prescription medicines from plants. Magdalena will leverage Jaguar's proprietary medicinal plant library and Filament's proprietary drug development technology. Jaguar’s library of 2,300 highly characterized medicinal plants and 3,500 plant extracts, all from firsthand ethnobotanical investigation by Jaguar and members of the ETI Scientific Strategy Team, is a key asset we have generated over 30 years that bridges the knowledge of traditional healers and Western medicine. Magdalena holds an exclusive license to plants and plant extracts in Jaguar's library, not including any sources of crofelemer or NP-300, for specific indications and is in the process of identifying plant candidates in the library that may prove beneficial for addressing indications such as ADHD. ​ December 2020 Royalty Interest Exchange Agreement On February 8, 2023, the Company entered into an exchange agreement (the “December 2020 Royalty Interest Exchange Agreement”) with Irving to (i) partition a new royalty interest in the royalty repayment amount of $ 675,000 (“Partitioned Royalty”) from the royalty interest of the December 2020 Purchase Agreement and then cause the outstanding balance of the royalty interest to be reduced by an amount equal to the initial outstanding balance of the Partitioned Royalty, and (ii) exchange (“Royalty Exchange”) the Partitioned Royalty for 150,000 shares of the Company’s common stock with a par value of $ 0.0001 in accordance with term of the December 2020 Royalty Interest Exchange Agreement. Under the terms of the December 2020 Royalty Interest Exchange Agreement, the 137 Table of Contents Royalty Exchange will consist of Irving surrendering the Partitioned Royalty in exchange for the shares, free of any restrictive securities legend, and Irving shall give no consideration of any kind whatsoever to the Company in connection with the December 2020 Royalty Interest Exchange Agreement. October 2020 Royalty Interest Exchange Agreements On March 17 and 23, 2023, the Company entered into exchange agreements (the “October 2020 Royalty Interest Exchange Agreements”) with Iliad to (i) partition new royalty interests in the royalty repayment amounts of $ 992,000 and $ 227,000 , respectively (“Partitioned Royalties”) from the royalty interest of the October 2020 Purchase Agreement and then cause the outstanding balance of the royalty interest to be reduced by an amount equal to the initial outstanding balance of the Partitioned Royalties, and (ii) exchange (“Royalty Exchanges”) the Partitioned Royalties for 1,090,000 and 280,005 shares, respectively of the Company’s common stock with a par value of $ 0.0001 in accordance with term of the October 2020 Royalty Interest Exchange Agreements. Under the terms of the October 2020 Royalty Interest Exchange Agreements, the Royalty Exchanges will consist of Iliad surrendering the Partitioned Royalties in exchange for the shares, free of any restrictive securities legend, and Iliad shall give no consideration of any kind whatsoever to the Company in connection with the October 2020 Royalty Interest Exchange Agreements. Notice of Delisting or Failure to Satisfy a Continued Listing Rule or Standard On January 5, 2023, the Company received notice from the Listing Qualifications Staff (“Staff”) of Nasdaq indicating that, because the bid price for the Company’s voting common stock, par value $ 0.0001 per share had closed below $ 0.10 per share for the preceding ten consecutive trading days, in contravention of Nasdaq Listing Rule 5810(3)(A)(iii) (the “$0.10 Rule”), the Company’s securities were subject to delisting unless the Company timely requested a hearing before the Nasdaq Hearings Panel (the “Panel”) to appeal the Staff’s decision. The Company intends to timely request a hearing before the Panel, which request will stay any further delisting action by Nasdaq at least pending the Company’s hearing and the expiration of any extension that the Panel may grant to the Company following such hearing. There are no assurances that a stay will be granted or that a favorable decision will be obtained. Nasdaq previously granted the Company a 180 -calendar grace period to regain compliance with the minimum $ 1.00 bid price requirement set forth in Nasdaq Listing Rule 5550(a)(2) (the “Bid Price Rule”) through February 13, 2023. At the Special Meeting of Stockholders of the Company held on January 20, 2023, the Company received stockholder approval for the implementation of a reverse stock split of the Company’s issued and outstanding Common Stock at a ratio of not less than 1-for-3 and not greater than 1-for-75 to regain compliance with the Bid Price rule. The Company believes that, after taking into account (i) the sale of shares of common stock between January 1, 2023 and March 23, 2023 pursuant to the Company’s December 2021 agreement, (ii) the issuance of 150,000 shares of common stock on February 8, 2023 to Irving in exchange for a $ 675,000 reduction in the outstanding balance of the royalty interest held by such holder, and (iii) the issuance of 1,090,000 shares of common stock on March 17, 2023 and 280,005 shares of common stock on March 24, 2023 to Iliad in exchange for a $ 992,000 and $ 227,000 , respectively reduction in the outstanding balance of the royalty interest held by such holder, and based on interim financial data available to the Company, the Company’s stockholders’ equity as of March 24, 2023, exceeds $ 2.5 million, which is the minimum stockholders’ equity requirement for continued listing on The Nasdaq Capital Market. In addition, the Company’s cash balance as of March 24, 2023, is approximately $ 13.6 million. Termination of a Material Definitive Agreement On October 11, 2022, the Company entered into an Amended and Restated License and Services Agreement (the “License Agreement”) with SynWorld Technologies Corporation (“Licensee”), C&E Telecom, LTD (“C&E Telecom”), and Tao Wang (“Wang”), which License Agreement amended and restated in entirety the License and 138 Table of Contents Services Agreement, dated as of June 28, 2022, by and among the same parties, as amended by that certain First Amendment to the License and Services Agreement, dated as of August 18, 2022, by and between the Company and Licensee, for the grant of certain licenses by the Company to Licensee to commercialize the Product (as defined in the License Agreement) and the engagement of Licensee by the Company to obtain regulatory approval for the Product to treat all forms of diarrhea in dogs in the Licensee Territory (as defined in the License Agreement). ​ On January 31, 2023, the Company, Licensee, C&E Telecom and Wang entered into a Mutual Termination of License Agreement (the “Termination Agreement”), pursuant to which the parties agreed to mutually terminate the License Agreement, effective as of January 31, 2023. Following its termination, the License Agreement is void, and there is no liability thereunder on the part of any party thereto except as set forth in the Termination Agreement. ​ The Termination Agreement contains mutual releases by all parties thereto, for all claims known and unknown, relating and arising out of, or relating to, among other things, the License Agreement, or the transactions contemplated by the License Agreement. ​ ​ ​ 139 Table of Contents ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. ​ ​