What changed in this filing

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Item 7. Management’s Discussion and Analysis

2024-04-01 compared with 2023-03-24 · 86 added, 115 removed, 164 unchanged (55% of the section changed)

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(“Jaguar” or the “Company”) is a commercial stage pharmaceuticals company focused on developing novel, plant-based, sustainably derived prescription medicines for people and animals with gastrointestinal (“GI”) distress, including chronic, debilitating diarrhea.

Jaguar Health's wholly owned subsidiary, Napo Pharmaceuticals, Inc.

Jaguar Health's wholly owned subsidiary, Napo

Pharmaceuticals, Inc.

(“Napo”), focuses on developing and commercializing proprietary plant-based human pharmaceuticals from plants harvested responsibly from rainforest areas.

Our crofelemer drug product candidate is the subject of the OnTarget study, an ongoing pivotal Phase 3 clinical trial for prophylaxis of diarrhea in adult cancer patients receiving targeted therapy.

As announced, patient enrollment in OnTarget reached approximately 75% in February 2023, and target trial enrollment of 256 patients is expected to complete in the second quarter of 2023.

Our crofelemer drug product candidate is the subject of the OnTarget study, a pivotal Phase 3 clinical trial for prophylaxis of diarrhea in adult cancer patients receiving targeted therapy.

Jaguar is the majority stockholder of Napo Therapeutics S.p.A.

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Napo Therapeutics’ core mission is to provide access to crofelemer in Europe to address significant rare/orphan disease indications, including, initially, two key rare disease target indications:

Short bowel syndrome (“SBS”) with intestinal failure and/or congenital diarrheal disorders (“CDD”).

Short bowel syndrome (“SBS”) with intestinal failure, rare disease indications of microvillus inclusion disease (“MVID”) and/or congenital diarrheal disorders (“CDD”).

Jaguar Animal Health is a tradename of Jaguar Health.

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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.

Napo’s marketed drug Mytesi (crofelemer 125 mg delayed-release tablets) is a first-in-class oral botanical drug product approved by the U.S.

Food and Drug Administration (“FDA”) for the symptomatic relief of noninfectious diarrhea in adults with HIV/AIDS on antiretroviral therapy.

Napo’s marketed drug Mytesi (crofelemer 125 mg delayed-release tablets) is a first-in-class oral botanical drug product approved by the US Food and Drug Administration (“FDA”) for the symptomatic relief of noninfectious diarrhea in adults with HIV/AIDS on antiretroviral therapy.

To date, this is the only oral plant-based botanical prescription medicine approved under the FDA’s Botanical Guidance.

The Company’s Canalevia-CA1 (crofelemer delayed-release tablets) drug is the first and only oral plant-based prescription product that is FDA conditionally approved to treat chemotherapy-induced diarrhea (“CID”) in dogs.

Crofelemer was granted ODD by the U.S.

FDA in February 2023 for microvillus inclusion disease (“MVID”), a rare CDD condition, and granted ODD for MVID by the European Medicines Agency (“EMA”) in October 2022.

Crofelemer was granted ODD by the FDA in February 2023 for MVID, an ultrarare CDD condition, and granted ODD for MVID by the European Medicines Agency (“EMA”) in October 2022.

Crofelemer was granted ODD for SBS by the EMA in December 2021 and by the FDA in August 2017.

The Company is currently supporting investigator-initiated proof-of-concept (“POC”) studies of crofelemer in patients with SBS with intestinal failure or CDD, focused on obtaining POC of reduction of requirements of parenteral support including parenteral nutrition and/or intravenous fluids, throughout 2023.

In accordance with the guidelines of specific European Union countries, publications of POC data from these trials could support early patient access to crofelemer for SBS with intestinal failure or CDD in 2023 through programs in Europe.

Early access programs are revenue generating, and reimbursable for participating patients.

Napo Therapeutics is initiating efforts to commence clinical development of crofelemer in SBS patients in support of the company’s key focus on leveraging the EMA’s accelerated conditional marketing authorization

pathway in Europe for these rare diseases.

SBS affects approximately 10,000 to 20,000 people in the U.S., according to the Crohn's & Colitis Foundation, and it is estimated that the population of SBS patients in Europe is approximately the same size.

In 2024 Jaguar expects results from 5 proof-of-concept studies of crofelemer conducted at least 8 clinical sites, including Cleveland Clinic, on three continents for the rare disease indications of MVID – an ultrarare CDD and SBS.

In accordance with the guidelines of specific European Union countries, published data from such clinical investigations could support reimbursed early patient access to crofelemer for these debilitating conditions in 2025 while the company pursues approval of crofelemer for SBS and MVID from the EMA and the FDA.

In August 2023 the FDA activated Napo’s Investigational New Drug (“IND”) application for a new crofelemer powder for oral solution formulation for the treatment of MVID.

SBS affects approximately 10,000 to 20,000 people in the US, according to the Crohn's & Colitis Foundation, and it is estimated that the population of SBS patients in Europe is approximately the same size.

Despite limited treatment options, the global SBS market exceeded $568 million in 2019 and is expected to reach $4.6 billion by 2027, according to a report by Vision Research Reports.

Most of the activities of the Company are focused on the development and/or commercialization of Mytesi, including the ongoing clinical development of crofelemer for the prophylaxis of diarrhea in adult patients receiving targeted cancer therapy, and our prioritized clinical program centered around the approved investigator-initiated POC trial of crofelemer for SBS and CDD.

Napo’s pivotal OnTarget Phase 3 clinical trial of crofelemer for prophylaxis of cancer therapy-related diarrhea (“CTD”) was initiated in October 2020 and is ongoing.

Napo’s pivotal OnTarget Phase 3 clinical trial of crofelemer for prophylaxis of cancer therapy-related diarrhea (“CTD”) was initiated in October 2020.

In the field of animal health, we are continuing limited activities related to developing and commercializing first-in-class gastrointestinal products for dogs, dairy calves and foals.

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In addition, a second-generation proprietary anti-secretory antidiarrheal drug (“NP-300”) is in development for symptomatic relief and treatment of moderate-to-severe diarrhea, with or without concomitant antimicrobial therapy, from bacterial, viral and parasitic infections including Vibrio cholerae , the bacterium that causes cholera.

In January 2023, Jaguar and Filament Health (“Filament”), with funding from One Small Planet, formed the U.S.-based joint venture Magdalena Biosciences, Inc.

In December 2021 we received conditional approval from the FDA to market Canalevia-CA1 (crofelemer delayed-release tablets), our oral plant-based prescription drug and the only available veterinary drug for the treatment of chemotherapy-induced diarrhea (“CID”) in dogs, and Canalevia-CA1 is now available to multiple leading veterinary distributors in the US Canalevia-CA1 is a tablet that is given orally and can be prescribed for home treatment of CID.

Canalevia-CA1 is conditionally approved by the FDA under application number 141-552.

Conditional approval allows for commercialization of the product while Jaguar Animal Health continues to collect the substantial evidence of effectiveness required for full approval.

We have received Minor Use in a Major Species (“MUMS”) designation from the FDA for Canalevia-CA1 to treat CID in dogs.

FDA has established a "small number" threshold for minor use in each of the seven major species covered by the MUMS act.

The small number threshold is currently 80,000 for dogs, representing the largest number of dogs that can be affected by a disease or condition over the course of a year and still have the use qualify as a minor use.

In January 2023, Jaguar and Filament Health (“Filament”), with funding from One Small Planet, formed the US-based joint venture Magdalena Biosciences, Inc.

(“Magdalena”).

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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.

Canalevia-CA1 is a tablet that is given orally and can be prescribed for home treatment of CID.

Canalevia-CA1 is conditionally approved by the FDA under application number 141-552.

Conditional approval allows for commercialization of the product while Jaguar Animal Health continues to collect the substantial evidence of effectiveness required for full approval.

We have received Minor Use in a Major Species (“MUMS”) designation from the FDA for Canalevia-CA1 to treat CID in dogs.

FDA has established a "small number"

threshold for minor use in each of the seven major species covered by the MUMS act.

The small number threshold is

currently 80,000 for dogs, representing the largest number of dogs that can be affected by a disease or condition over the course of a year and still have the use qualify as a minor use.

We believe Jaguar is poised to realize a number of synergistic, value adding benefits—an expanded pipeline of potential blockbuster human follow-on indications of crofelemer, and a second-generation anti-secretory agent—upon which to build global partnerships.

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On a consolidated basis, we have not yet generated enough revenue to date to achieve break-even or positive cash flow, and we expect to continue to incur significant research and development and other expenses.

Our net losses and comprehensive losses were $49.1 million and $52.6 million for the years ended December 31, 2022 and 2021, respectively.

As of December 31, 2022, we had total stockholders' deficit of $1.4 million, an accumulated deficit of $266.9 million, an accumulated other comprehensive loss of $680,000 and cash of $5.5 million.

Our net comprehensive losses were $41.9 million and $49.1 million for the years ended December 31, 2023 and 2022, respectively.

As of December 31, 2023, we had total stockholders' equity of $4.9 million, an accumulated deficit of $308.2 million, an accumulated other comprehensive loss of $652,000 and cash of $6.5 million.

We expect to continue to incur losses and experience increased expenditures for the foreseeable future as we expand our product development activities, seek necessary approvals for our product candidates, conduct species-specific formulation studies for our non-prescription products, establish active pharmaceutical ingredient (“API”) manufacturing capabilities and begin additional commercialization activities.

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We track outsourced development costs by prescription drug product candidate and non-prescription product but do not allocate personnel or other internal costs related to development to specific programs or development compounds.

The timing and amount of our research and development expenses will depend largely upon the outcomes of current and future trials for our prescription drug product candidates as well as the related regulatory requirements, the outcomes of current and future species-specific formulation studies for our non-prescription products, manufacturing costs and any costs associated with the advancement of our line extension programs.

costs and any costs associated with the advancement of our line extension programs.

We cannot determine with certainty the duration and completion costs of the current or future development activities.

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Interest expense consists primarily of non-cash and cash interest costs related to our borrowings.

Change in Fair Value of Financial Instruments and Hybrid Instrument Designated at Fair Value Option

Change in fair value of freestanding and hybrid financial instruments designated at Fair Value Option consists of gain or loss recognized related to fair values changes of our instruments designated at FVO.

Gain (Loss) on Debt Extinguishment

Gain (loss) on debt extinguishment consists of gain or loss incurred related to the exchanges resulting from the extinguishment of our borrowings.

Critical Accounting Policies and Significant Judgments and Estimates

The preparation of financial statements in conformity with U.S.

generally accepted accounting principles (“U.S.

GAAP”) requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities, revenues and expenses, and related disclosures in the financial statements.

The preparation of financial statements in conformity with US generally accepted accounting principles (“US GAAP”) requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities, revenues and expenses, and related disclosures in the financial statements.

Critical accounting policies are those accounting policies that may be material due to the levels of subjectivity and judgment necessary to account for highly uncertain matters or the susceptibility of such matters to change, and that have a material impact on financial condition or operating performance.

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(in thousands)

Product revenue

Product revenue, net

Operating Expenses

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General and administrative

Series 3 warrants inducement expense

ELOC warrants inducement expense

Impairment loss on intangible assets

Total operating expenses

1 unchanged sentence

Interest expense

Loss on extinguishment of debt

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

Other income (expense)

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

Gain (loss) on extinguishment of debt

Loss before income tax

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Product revenue

We transitioned from selling to the wholesalers that resell the product to retail pharmacies to the closed Specialty Pharmacy distribution networks throughout the year 2021 and we fully transitioned in the fourth quarter of the same year.

The transition caused a one-time inventory draw-down of Mytesi across our third-party logistics warehouse, wholesalers, distributors, and retail stores.

This significantly contributed to the decrease of $853,000 of Mytesi gross revenue and $1.5 million of wholesaler fees for the year 2022 compared to 2021.

Sales discounts were $1.2 million and $6.3 million for the years ended December 31, 2022, and 2021, respectively, a decrease of $5.1 million.

In line with our switch to the closed Specialty Pharmacy distribution network.

No wholesaler fees were recognized for the year ended December 31, 2022.

Medicaid and AIDS Drug Assistance Program (“ADAP”) rebates accounted for $1.8 million and $3.5 million for the years ended December 31, 2022 and 2021, respectively, a decrease of $1.6 million primarily due to the WAC

increase implemented by the Company which resulted in higher government rebates from Medicaid, ADAP, public health services programs.

Sales discounts were $1.4 million and $1.2 million for the years ended December 31, 2023, and 2022, respectively, an increase of $267,000.

Medicaid and AIDS Drug Assistance Program (“ADAP”) rebates accounted for $2.0 million and $1.8 million for the years ended December 31, 2023 and 2022, respectively, an increase of $205,000.

Due to the Company’s arrangements, including elements of variable consideration, gross product sales are reduced in order to reflect the expected consideration to arrive at net product sales.

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Sales returns

Wholesaler fee

Net product sales

Our gross product revenues were $13.6 million and $15.0 million for the years ended December 31, 2023 and 2022, respectively.

These figures reflect revenue from the sale of our human drug Mytesi, our animal products branded as Neonorm Calf and Neonorm Foal, and our new animal drug Canalevia that is designed for dogs released only this 2022 amounting to $167,000.

The majority of the decrease were contributed from the decrease of $853,000 of Mytesi gross revenue for the year 2022 compared to 2021.

Although Mytesi gross product sales decreased, net product sales increased by $7.6 million for the year 2022 compared to 2021 largely due to the transition from selling to the wholesalers to the closed Specialty Pharmacy distribution networks.

These figures reflect revenue from the sale of our human drug Mytesi, our animal products branded as Neonorm Calf and Neonorm Foal.

Our Mytesi product revenues were $13.4 million and $14.8 million for the years ended December 31, 2023 and 2022, respectively.

Our Canalevia product revenues were $130,000 and $167,000 for the years ended December 31, 2023 and 2022, respectively.

Our Neonorm product revenues were $42,000 and $48,000 for the years ended December 31, 2023 and 2022, respectively.

Sales and marketing expenses for Neonorm products are not significant during 2022 compared to 2021.

Sales and marketing expenses are not significant during 2023 and during the same period in 2022.

Cost of Product Revenue

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The change in cost of product revenue of $18,000 for the year ended December 31, 2023 compared to 2022 was primarily due to:

● Direct labor decreased $241,000 from $996,000 for the year ended December 31, 2021 to $755,000 in 2022, due to decreased resources in manufacturing.

● Distribution fees decreased $184,000 from $199,000 for the year ended December 31, 2021, to $15,000 in 2022 anticipated as cost savings in line with our transition from Title model to Specialty Pharmacy distribution network.

● Royalties increased $54,000 from a zero balance for the year ended December 31, 2021.

● Other costs increased $44,000 from $140,000 for the year ended December 31, 2021 to $184,000 in 2022 mainly consisting of $118,000 less in write-offs of non-conforming inventory, and an increase in equipment maintenance of $9,000 in 2022.

● Direct labor increased $397,000 from $755,000 for the year ended December 31, 2022 to $1.2 million in 2023, due to increased resources in testing and manufacturing.

● Material cost decreased by $126,000 from $1.0 million for the year ended December 31, 2022, to $885,000 in 2023 relative to the decrease in net sales.

● Other costs which includes royalties and APIs decreased $135,000 from $184,000 for the year ended December 31, 2022 to $49,000 in 2023 relative to the decrease in net sales.

Research and Development Expense

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Materials expense and tree planting

Travel, other expenses

The change in R&D expense of $2.6 million for the year ended December 31, 2022 compared to 2021 was primarily due to:

● Clinical and contract manufacturing expenses increased $2.1 million from $6.3 million for the year ended December 31, 2021, to $8.3 million in 2022 largely due to increased clinical trial activities related to the start-up of CTD and other indications, additional CMC manufacturing, consulting and contractors’ expenses, and cholera/NP-300 research expenses.

● Personnel and related benefits increased $1.6 million for the year ended December 31, 2022, from $4.0 million in 2021 to $5.5 million in 2022 largely from the additional headcount.

● Other expenses decreased $1.1 million from $3.1 million for the year ended December 31, 2021, to $2.1 million in 2022 mainly due to decreased consulting fees.

Travel and other expenses

The change in R&D expense of $949,000 for the year ended December 31, 2023 compared to 2022 was primarily due to:

● Clinical and contract manufacturing expenses decreased $171,000 from $8.3 million for the year ended December 31, 2022 to $8.2 million in 2023 largely due to lower clinical trial activities related to start-up of CTD and other indications, additional CMC manufacturing, consulting and contractors’ expenses, and cholera/lechlemer research expenses.

● Personnel and related benefits increased $272,000 from $5.5 million for the year ended December 31, 2022 to $5.8 million in 2023 largely due an increase in headcount.

● Stock-based compensation expense decreased $219,000 from $1.3 million for the year ended December 31, 2022 to $1.0 million in 2023 primarily due to lower options and RSUs granted during the period as compared to 2022.

● Travel, and other expenses increased by $204 ,000 from $122,000 for the year ended December 31, 2022 to $326,000 in 2023 primarily due to more travel activities associated with the clinical trials.

● Other expenses consisting of consulting, formulation and regulatory fees increased $805,000 from $2.1 million for the year ended December 31, 2022, to $2.9 million in 2023 mainly due to increased CTD activities.

Sales and Marketing Expense

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Sales and Marketing:

Direct marketing fees and expense

Personnel and related benefits

Direct marketing fees and expense

Stock-based compensation

The change in S&M expense of $57,000 for the year ended December 31, 2022 compared to 2021 was primarily due to:

● Personnel and related benefits decreased $501,000 from $3.9 million for the year ended December 31, 2021 to $3.4 million in 2022 due to reduction in resources in Commercial Operations and Sales.

● Direct marketing fees and expense increased $181,000 from $3.4 million for the year ended December 31, 2021 to $3.6 million in 2022 due to an increase in marketing programs for Mytesi related to the expanding market access through Specialty Pharmacy channels.

● Other expenses increased $315,000 from $1.2 million for the year ended December 31, 2021 to $1.6 million in 2022 largely due to additional marketing consulting costs.

The change in S&M expense of $2.4 million for the year ended December 31, 2023 compared to 2022 was primarily due to:

● Personnel and related benefits decreased $390,000 from $3.4 million for the year ended December 31, 2022 to $3.0 million in 2023 due to decreased sales commission and reduced headcount.

● Direct marketing fees and expense decreased $1.7 million from $3.6 million for the year ended December 31, 2022 to $1.9 million in 2023 due to savings associated with the utilization of a more cost-effective patient support services and other Mytesi marketing initiatives.

● Stock-based compensation benefits decreased $115,000 from $267,000 for the year ended December 31, 2022 to $152,000 in 2023 primarily due to lower options and RSUs granted during the period as compared to 2022.

● Other expenses decreased $179,000 from $1.6 million for the year ended December 31, 2022 to $1.4 million 2023 largely due to lower consulting and contractor services but slightly offset by increased travels for sales and marketing personnel.

General and Administrative Expense

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Personnel and related benefits

Legal services

Public company expense

Stock-based compensation

Legal services

Lease expense

Third-party consulting services

Audit, tax and accounting services

Rent and lease expense

Travel, other expenses

The change in G&A expenses of $765,000 for the year ended December 31, 2022 compared to 2021 was due primarily to:

● Personnel and related benefits increased $2.2 million from $3.4 million for the year ended December 31, 2021 to $5.6 million in 2022 due to increased number of hires for the year.

● Legal services decreased $1.1 million from $2.3 million for the year ended December 31, 2021 to $1.2 million in 2022 primarily due to a decrease in fees related to legal proceedings and other regulatory filings.

● Stock-based compensation expense decreased $548,000 from $2.3 million for the year ended December 31, 2021 to $1.8 million in 2022 primarily due to lower expense incurred for options granted with immediate vesting to existing employees.

● Audit, tax and accounting services fees decreased $528,000 from $982,000 for the year ended December 31, 2021 to $454,000 in 2022, mostly due to the decreased audit fees related to complex debt and equity transactions.

● Public company expenses increased $422,000 from $2.3 million for the year ended December 31, 2021 to $2.7 million in 2022 largely attributable to the investor relations and communications consulting expenses, and expenses for the annual stockholder meeting.

● Third-party consulting services decreased $352,000 from $859,000 for the year ended December 31, 2021 to $507,000 in 2022, mostly due to the decrease in outsourced legal and accounting transactions.

● Rent and lease expense increased $347,000 from $282,000 for the year ended December 31, 2021 to $629,000 in 2022 as a result of the transfer to a higher-cost facility and the occupancy of more space, including office space in Italy.

● Travel, other expenses increased $181,000 from $197,000 for the year ended December 31, 2021 to $378,000 in 2022 due to other corporate and investor relations activities.

● Other general and administrative expenses increased $129,000 from $4.5 million for the year ended December 31, 2021 to $4.6 million in 2022 largely due to increase recruitment and insurance expense in 2022.

Series 3 Warrants Inducement Expense

In January 2021, the Company issued 135,416 Series 3 Warrants to a certain investor for the exercise of 135,416 Bridge Note Warrants in accordance with the May 2020 Modification of the 2019 Bridge Note Warrants and Inducement Offer.

These Series 3 Warrants were valued at $1.5 million using the Black-Scholes-Merton option pricing model on the issuance date.

In 2022, the value of Series 3 Warrants Inducement Expense is zero.

ELOC Warrants Inducement Expense

In April 2021, in consideration for Oasis Capital’s entry into the amendment to the March 2020 Equity Line of Credit, the Company issued Oasis Capital a common stock purchase warrant exercisable for 444 shares of common stock with an exercise price per share equal to $420.75 on the date of the amendment.

These warrants were valued at $172,000 on the issuance date.

In 2022, the value of ELOC Warrants Inducement Expense is zero.

Travel and other expenses

The change in G&A expenses of $1.3 million for the year ended December 31, 2023 compared to 2022 was due primarily to:

● Personnel and related benefits decreased $447,000 from $5.6 million for the year ended December 31, 2022 to $5.1 million in 2023 due to lower headcount and no bonus in 2023.

● Legal services increased $784,000 from $1.2 million for the year ended December 31, 2022 to $2.0 million in 2023 primarily due to increased legal consultations for contracts and agreements and other regulatory filings.

● Public company expenses decreased $903,000 from $2.7 million for the year ended December 31, 2022 to $1.8 million in 2023 due to less investor relations and communications consulting expenses, and decreased expenses related to the annual shareholder meetings.

● Stock-based compensation expense decreased $872,000 from $1.8 million for the year ended December 31, 2022 to $916,000 in 2023 primarily due to lower general and administrative expense incurred for options granted with immediate vesting to existing employees.

● Lease expense increased $248,000 from $629,000 for the year ended December 31, 2022 to $877,000 in 2023, primarily due to additional lease space and increase in fees.

● Third-party consulting services increased $172,000 from $507,000 for the year ended December 31, 2022 to $679,000 in 2023, mostly due to the increase in outsourced accounting transactions.

● Audit, tax and accounting services fees increased $83,000 from $454,000 for the year ended December 31, 2022 to $537,000 in 2023, mostly due to the additional financing and complex accounting transactions for the year.

● Other general and administrative expenses decreased $402,000 from $4.6 million for the year ended December 31, 2022 to $4.2 million in 2023 largely due to lower depreciation and amortization of fixed assets and intangible assets, insurance expenses and other support services.

Impairment Loss on Intangible Asset

The Company recognized an impairment loss on intangible assets amounting to $371,000 as a result of impairment evaluation to its internal use software costs – registry triggered by experiencing lower-than-anticipated sales growth for Canalevia and Neonorm, its two primary animal health products.

Gain or Loss on Extinguishment of Debt

Gain on extinguishment of debt increased by $5.9 million from a loss of $2.2 million for the year ended December 31, 2022 to a gain of $3.7 million for the same period in 2023 due to significant modifications resulting to extinguishment recognition.

Change in Fair Value of Freestanding and Hybrid Financial Instruments Designated at FVO

Change in fair value of freestanding and hybrid financial instruments designated at FVO increased by

$5.1 million from a loss of $20,000 for the year ended December 31, 2022, to a loss of $5.1 million for the same period in 2023 primarily due to additional freestanding instruments measured at FVO.

Interest Expense, net

Interest expense increased $4.3 million from $8.4 million for the year ended December 31, 2021 to $12.7 million in 2022 primarily due to additional interest expense incurred on royalty interest agreements primarily as result of the change in the timing of payments due to exchanges and a new royalty interest purchase agreement.

Loss on Extinguishment of Debt

The loss on extinguishment of debt increased $1.4 million from $753,000 for the year ended December 31, 2021 to $2.2 million in 2022 due to the extinguishment loss from the exchange of the outstanding balance of Iliad’s royalty agreements for shares of the Company’s common stock.

Change in Fair Value of Financial Instruments and Hybrid Instrument Designated at FVO

Change in fair value of financial instruments increased $1.9 million from a loss of $2.0 million for the year ended December 31, 2021, to a loss of $21,000 in 2022 primarily due to fair value adjustments in liability classified warrants and notes payable designated at FVO.

Other income (expenses)

Other income (expenses) increased $1.7 million from $765,000 other expense for the year ended December 31, 2021 to $950,000 other income in 2022 due to write-off of extinguished liabilities as a result of legal release and reversal of long outstanding accruals with reasonable uncertainty to not be incurred.

Interest expense decreased $6.3 million from $12.7 million for the year ended December 31, 2022 to

$6.4 million in 2023 primarily due to the election of certain freestanding instruments to be valued at Fair Value Option (“FVO”) upon extinguishment.

The lower interest expense was offset by a higher loss in change in fair value of financial instruments and hybrid instrument designated at FVO.

Liquidity and Capital Resources

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We have incurred net losses since our inception.

For the years ended December 31, 2022 and 2021, we had net losses and comprehensive losses of $49.1 million and $52.6 million, respectively, and we expect to incur additional losses in the near-term future.

For the years ended December 31, 2023 and 2022, we had net losses of $41.9 million and $48.4 million, respectively, and expect to incur additional losses in the near-term future.

At December 31, 2023, we had an accumulated deficit of $308.2 million and accumulated comprehensive loss of $652,000.

To date, we have generated only limited revenue, and we may never achieve revenue sufficient to offset our expenses.

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.

We had cash of $6.5 million as of December 31, 2023 to fund our operating plan through one year from the issuance of these consolidated financial statements.

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.

We have funded our operations primarily through the issuance of debt and equity securities, in addition to sales of our commercial products.

Cash provided by financing activities for the year ended December 31, 2022 were generated from the issuance of an aggregate of 923,164 shares of common stock under the ATM Agreement for total net proceeds of $20.5 million.

The Company also raised an additional net proceeds of $17.5 million from the issuance of 10,135,550 shares of common stock under the ATM agreement between January 1, 2023 to March 23, 2023.

We expect our expenditures will continue to increase as we continue our efforts to develop our products and continue development of our pipeline in the near term.

Cash provided by financing activities for the year ended December 31, 2023, were generated from the issuance of an aggregate of 54,283,779 shares of common stock under the ATM Agreement for total net proceeds of approximately $32.1 million, issuance of an aggregate 6,850,000 warrants and 137 Series G Convertible Preferred Stock in PIPE financing for a total net proceeds of $1.8 million, and investment from non-controlling interest for a total net proceeds of $1.2 million.

We expect our expenditures will continue to increase as we continue our efforts to develop our products and continue the development of our pipeline in the near term.

We may seek additional capital due to favorable market conditions or strategic considerations even if we believe we have sufficient funds for our current or future operating plans.

We may also not be successful in entering into partnerships that include payment of upfront licensing fees for our products and product candidates for markets outside the United States, where appropriate.

We may also not be successful in entering into partnerships that include payment of upfront licensing fees for our products and product candidates for markets outside the US, where appropriate.

If we do not generate upfront fees from any anticipated arrangements, it would have a negative effect on our operating plan.

We still plan to finance our operations and capital funding needs through equity and/or debt financing as well as revenue from future product sales.

However, there can be no assurance that additional funding will be available to us on acceptable terms on a timely basis, if at all, or that we will generate sufficient cash from operations to adequately fund operating needs or ultimately achieve profitability.

However, there can be no assurance that additional funding will be available to us on acceptable terms on a

timely basis, if at all, or that we will generate sufficient cash from operations to adequately fund operating needs or ultimately achieve profitability.

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

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Effects of foreign exchange rate changes on assets and liabilities

Net (decrease) increase in cash

Net increase (decrease) in cash

Cash Used in Operating Activities

During the year ended December 31, 2022, net cash used in operating activities of $33.1 million resulted from our net loss and comprehensive loss of $49.1 million adjusted by amortization of debt issuance costs, debt discount, and non-cash interest expense of $11.8 million, stock-based compensation of $3.3 million, loss on extinguishment of debt of $2.2 million, depreciation and amortization expenses of $2.0 million, shares issued in exchange for services of $823,000, amortization of operating lease right-of-use assets of $311,000, change in fair value of financial instruments and hybrid instruments designated at FVO of $21,000, and net changes in operating assets and liabilities of $4.4 million.

During the year ended December 31, 2021, net cash used in operating activities of $35.0 million resulted from our net loss and comprehensive loss of $52.6 million adjusted by amortization of debt discounts, debt issuance costs, and non-cash interest expense of $5.2 million, stock-based compensation of $4.0 million, change in fair value of financial instruments and hybrid instruments designated at FVO of $2.0 million, depreciation and amortization expenses of $1.7 million, Series 3 and ELOC warrants inducement expense of $1.6 million, a loss on extinguishment of debt of $753,000, amortization of operating lease right-of-use assets of $94,000, derecognition of debt discount on settlement of receivables of secured borrowing of $49,000, shares issued in exchange for services of $16,000, and net changes in operating assets and liabilities of $2.3 million.

During the year ended December 31, 2023, net cash used in operating activities of $33.2 million resulted from our net comprehensive loss of $41.9 million adjusted by amortization of debt issuance costs, debt discount, and non-cash interest expense of $13.2 million, Change in fair value of freestanding and hybrid financial instruments designated at FVO of $5.1 million, stock-based compensation of $2.1 million, depreciation and amortization expenses of $2.0 million, amortization of operating lease right-of-use assets of $375,000, impairment loss on intangible asset of $371,000, shares issued in exchange for services of $171,000, share in joint venture’s loss of $51,000, gain on extinguishment of debt $3.7 million, and net changes in operating assets and liabilities of $11.1 million.

During the year ended December 31, 2022, net cash used in operating activities of $33.1 million resulted from our net comprehensive loss of $49.1 million adjusted by amortization of debt issuance costs, debt discount, and non-cash interest expense of $11.8 million, stock-based compensation of $3.3 million, loss on extinguishment of debt of $2.2 million, depreciation and amortization expenses of $2.0 million, shares issued in exchange for services of $823,000, amortization of operating lease right-of-use assets of $311,000, change in fair value of hybrid instruments designated at FVO of $21,000, and net changes in operating assets and liabilities of $4.4 million.

Cash Used in Investing Activities

There are no cash used in investing activities during the year ended December 31, 2023.

During the year ended December 31, 2022, cash used in investing activities was $1.7 million which consisted of cash used in software development activities of $1.6 million and cash used to purchase property and equipment of $77,000.

During the year ended December 31, 2021, cash used in investing activities was $6,000 which consisted of cash used to purchase property and equipment.

Cash Provided by Financing Activities

During the year ended December 31, 2023, net cash provided by financing activities of $34.2 million consisted of $32.1 million in net proceeds from shares issued in an At the Market offering, $1.2 million net proceeds from issuance of warrants in PIPE financing, investment from non-controlling interest of $1.2 million and $611,000 net proceeds from issuance of preferred shares in PIPE financing, offset by $853,000 repayment of insurance financing, and $100,000 in principal payments of Tampesta Note.

During the year ended December 31, 2022, net cash provided by financing activities of $23.2 million consisted of $20.5 million in net proceeds from shares issued in an At the Market offering, $4.0 million in net proceeds from notes payable with Streeterville, offset by $1.2 million repayment of insurance financing and $100,000 payment of Tempesta Note.

During the year ended December 31, 2021, net cash provided by financing activities of $43.9 million consisted of $23.2 million in net proceeds received from shares issued in registered public offering, $11.0 million in net proceeds received from issuance of notes payable, $8.6 million in net proceeds from shares issued in an At the Market offering, $2.0 million in net proceeds received from shares issued on conversion of Series 1, Series 2, and 2019 Bridge Note Warrants, $1.8 million in net proceeds received from shares issued in PIPE financing, $247 million noncontrolling interest, and $3,000 in net proceeds from exercise of stock options, offset by $1.8 million repayment of receivables secured borrowing, $943,000 repayment of insurance financing, $100,000 in principal payments of the notes payable and $35,000 payment of ELOC warrants offering costs.

Off-Balance Sheet Arrangements

Since inception, we have not engaged in the use of any off-balance sheet arrangements, such as structured finance entities, special purpose entities or variable interest entities.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis