10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

xQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2016

OR

oTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from             to            

Commission file number 001-36714

JAGUAR ANIMAL HEALTH, INC.

(Exact name of registrant as specified in its charter)

Delaware	46-2956775
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)

201 Mission Street, Suite 2375

San Francisco, California 94105

(Address of principal executive offices, zip code)

(415) 371-8300

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x     No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x     No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o	Accelerated filer o
Non-accelerated filer o	Smaller reporting company x
(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o    No x

As of August 15, 2016, there were 11,121,408 shares of common stock, par value $0.0001 per share, outstanding.

	Page No.
PART I. — FINANCIAL INFORMATION (Unaudited)
Item 1. Condensed Unaudited Financial Statements
Condensed Balance Sheets as of June 30, 2016 and December 31, 2015	2
Condensed Statements of Operations and Comprehensive Loss for the Three and Six Month Periods Ended June 30, 2016 and 2015	3
Condensed Statement of Changes in Common Stock, Convertible Preferred Stock and Stockholders’ Equity (Deficit) for the period from December 31, 2014 through June 30, 2016	4
Condensed Statements of Cash Flows for the Six Months Ended June 30, 2016 and 2015	5
Notes to the Condensed Financial Statements	6
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	24
Item 3. Quantitative and Qualitative Disclosures About Market Risk	42
Item 4. Controls and Procedures	42
PART II. — OTHER INFORMATION	43
Item 1. Legal Proceedings	43
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	43
Item 6. Exhibits	43
SIGNATURE	44

1

PART I. — FINANCIAL INFORMATION

Item 1. Condensed Financial Statements

JAGUAR ANIMAL HEALTH, INC.

CONDENSED BALANCE SHEETS

	June 30,			December 31,
	2016			2015
	(Unaudited)			(1)
Assets
Current assets:
Cash and cash equivalents	$	3,875,044		$	7,697,531
Accounts receivable	19,112			55,867
Due from former parent	—			3,199
Inventory	276,624			229,871
Deferred offering costs	—			143,231
Prepaid expenses	850,230			324,083
Total current assets	5,021,010			8,453,782
Property and equipment, net	916,007			829,232
Restricted cash	1,144,297			3,000,000
Other assets	122,163			122,163
Total assets	$	7,203,477		$	12,405,177
Liabilities, Convertible Preferred Stock and Stockholders’ Equity
Current liabilities:
Accounts payable	$	413,816		$	574,462
License fee payable to former parent	—			425,000
Deferred revenue	262,666			251,936
Convertible notes payable	150,000			150,000
Accrued expenses	653,744			798,434
Current portion of long-term debt	1,465,713			1,707,899
Total current liabilities	2,945,939			3,907,731
Long-term debt, net of discount	2,685,580			4,095,028
Deferred rent	6,642			3,321
Total liabilities	$	5,638,161		$	8,006,080
Commitments and Contingencies (See note 6)
Stockholders’ Equity:
Preferred stock: $0.0001 par value, 10,000,000 shares authorized at June 30, 2016 and December 31, 2015; no shares issued and outstanding at June 30, 2016 and December 31, 2015.	—			—
Common stock: $0.0001 par value, 50,000,000 shares authorized at June 30, 2016 and December 31, 2015; 10,821,408 and 8,124,923 shares issued and outstanding at June 30, 2016 and December 31, 2015, respectively.	1,082			812
Additional paid-in capital	34,908,241			30,100,613
Accumulated deficit	(33,344,007		)	(25,702,328		)
Total stockholders’ equity	1,565,316			4,399,097
Total liabilities, convertible preferred stock and stockholders’ equity	$	7,203,477		$	12,405,177

(1) The condensed balance sheet at December 31, 2015 is derived from the audited financial statements at that date included in the Company’s Form 10-K filed with the Securities and Exchange Commission on March 29, 2016.

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

2

JAGUAR ANIMAL HEALTH, INC.

CONDENSED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(Unaudited)

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2016			2015			2016			2015
Revenue	$	24,143		$	63,142		$	62,289		$	125,529
Operating Expenses
Cost of revenue	8,641			16,957			27,009			51,255
Research and development expense	1,953,647			1,751,288			3,705,388			3,174,331
Sales and marketing expense	54,050			163,227			218,463			353,530
General and administrative expense	1,416,159			1,300,156			3,204,544			2,393,843
Total operating expenses	3,432,497			3,231,628			7,155,404			5,972,959
Loss from operations	(3,408,354		)	(3,168,486		)	(7,093,115		)	(5,847,430		)
Interest expense, net	(254,758		)	(1,936,611		)	(538,994		)	(2,869,643		)
Other income/(expense)	5,637			15,523			(9,570		)	18,632
Change in fair value of warrants	—			(173,101		)	—			(501,617		)
Net loss and comprehensive loss	(3,657,475		)	(5,262,675		)	(7,641,679		)	(9,200,058		)
Accretion of redeemable convertible preferred stock	—			(159,288		)	—			(346,374		)
Net loss attributable to common stockholders	$	(3,657,475	)	$	(5,421,963	)	$	(7,641,679	)	$	(9,546,432	)
Net loss per share atributable to common stockholders, basic and diluted	$	(0.35	)	$	(1.00	)	$	(0.78	)	$	(2.30	)
Weighted-average common shares outstanding, basic and diluted	10,314,106			5,410,661			9,810,730			4,149,502

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

3

JAGUAR ANIMAL HEALTH, INC.

CONDENSED STATEMENT OF CHANGES IN COMMON STOCK, CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY (DEFICIT)

(Unaudited)

Jaguar Animal Health, Inc.

Statement of Changes in Common Stock, Convertible Preferred Stock and Stocholders’ Equity (Deficit)

(Unaudited)

	Series A Convertible
	Preferred Stock					Common Stock
															Total
									Additional paid-in			Accumulated			Stockholders’
	Shares		Amount			Shares	Amount		capital			deficit			Equity (Deficit)
Balances - December 31, 2014	3,015,902		$	7,304,914		2,874,330	$	288	$	1,175,242		$	(9,410,778	)	$	(8,235,248	)
Issuance of common stock in initial public offering, net of discounts and commissions of $1,209,802, offering costs of $2,897,825 and offering costs in the form of common stock warrants of $400,400	—		—			2,860,000	286		15,511,974			—			15,512,260
Warrant, issued in conjunction with the initial public offering	—		—			—	—		400,400			—			400,400
Conversion of preferred stock into common stock upon initial public offering	(3,015,902	)	(7,651,288		)	2,010,596	201		7,651,087			—			7,651,288
Conversion of preferred stock warrant liability into additional paid-in capital upon initial public offering	—		—			—	—		1,150,985			—			1,150,985
Conversion of convertible notes into common stock upon initial public offering	—		—			374,997	37		2,099,963			—			2,100,000
Stock-based compensation	—		—			—	—		992,165			—			992,165
Beneficial conversion feature on notes payable	—		—			—	—		1,202,521			—			1,202,521
Deemed dividends on Series A	—		263,060			—	—		(263,060		)	—			(263,060		)
Accretion of issuance costs	—		83,314			—	—		(83,314		)	—			(83,314		)
Napo license fee abatement	—		—			—	—		250,000			—			250,000
Issuance of common stock upon exercise of stock options	—		—			5,000	—		12,650			—			12,650
Net and comprehensive loss	—		—			—	—		—			(16,291,550		)	(16,291,550		)
Balances - December 31, 2015	—		$	0		8,124,923	$	812	$	30,100,613		$	(25,702,328	)	$	4,399,097
Issuance of common stock in a secondary public offering ,net of discounts and commissions of $373,011 and offering costs of $496,887.	—		—			2,000,000	200		4,129,902						4,130,102
Issuance of common stock in a private investment in public entities offering, net of offering costs of $51,268.						678,889	68		448,664						448,732
Issuance of common stock in exchange for vested restricted stock units	—		—			17,596	2		(2		)				—
Stock-based compensation	—		—			—	—		229,064						229,064
Net and comprehensive loss	—		—			—	—		—			(7,641,679		)	(7,641,679		)
Balances - June  30, 2016	—		$	0		10,821,408	$	1,082	$	34,908,241		$	(33,344,007	)	$	1,565,316

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

4

JAGUAR ANIMAL HEALTH, INC.

CONDENSED STATEMENTS OF CASH FLOWS

(Unaudited)

	Six Months Ended
	June 30,
	2016			2015
Cash Flows from Operating Activities
Net loss	$	(7,641,679	)	$	(9,200,058	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation expense	17,432			—
Materials cost in connection with license activity	—			6,287
Stock-based compensation	229,064			627,847
Amortization of debt issuance costs and debt discount	269,019			2,506,498
Change in fair value of warrants	—			501,617
Changes in assets and liabilities
Accounts receivable - trade	36,755			(29,387		)
Inventory	(46,753		)	(108,695		)
Prepaid expenses	(526,147		)	(124,944		)
Other long-term assets	—			(122,163		)
Due from parent	3,199			(21,815		)
Deferred revenue	10,730			349,791
Deferred rent	3,321			—
License fee payable	(425,000		)	(175,000		)
Accounts payable	(115,306		)	(370,984		)
Accrued expenses	(117,690		)	(869,580		)
Total cash used in operations	(8,303,055		)	(7,030,586		)
Cash Flows from Investing Activities
Purchase of equipment	(98,266		)	—
Change in restricted cash	1,855,703			—
Total cash provided by investing activities	1,757,437			—
Cash Flows from Financing Activities
Repayment of long-term debt	(1,855,703		)	—
Proceeds from issuance of redeemable convertible notes payable, net	—			1,250,000
Repayment of convertible notes payable	—			(100,000		)
Repayment of notes payable	—			(1,000,000		)
Proceeds from issuance of common stock in initial public offering, net of commissions and discounts	—			18,810,484
Deferred offering costs	—			(396,012		)
Proceeds from issuance of common stock in a follow-on secondary offering, net of commissions and discounts	4,130,102			—
Proceeds from issuance of common stock in a private investment in public entities, net of offering costs	448,732			—
Total cash provided by financing activities	2,723,131			18,564,472
Net increase (decrease) in cash and cash equivalents	(3,822,487		)	11,533,886
Cash and cash equivalents, beginning of period	7,697,531			845,192
Cash and cash equivalents, end of period	$	3,875,044		$	12,379,078
Supplemental Schedule of Non-Cash Financing and Investing Activities
Interest paid on long-term debt	$	277,959		$	—
Offering costs not paid during the six months	$	—		$	1,401,253
Warrants issued in connection with convertible notes payable	$	—		$	47,479
Accretion of redeemable convertible preferred stock	$	—		$	346,374
Abatement of license fee payable to Napo	$	—		$	250,000
Conversion of convertible preferred stock to common stock	$	—		$	7,651,288
Conversion of preferred stock warrant liability to common stock warrants	$	—		$	1,150,985
Conversion of convertible notes to common stock	$	—		$	2,100,000
Fixed assets in accounts payable	$	5,941		$	—
Offering costs in accounts payable	$	(116,231	)	$	—
Offering costs in accrued liabilities	$	(27,000	)	$	—

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

5

JAGUAR ANIMAL HEALTH, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

1. Organization and Business

Jaguar Animal Health, Inc. (“Jaguar” or the “Company”) was incorporated on June 6, 2013 (inception) in Delaware. The Company was a majority-owned subsidiary of Napo Pharmaceuticals, Inc. (“Napo” or the “Former Parent”) until the close of the Company’s initial public offering on May 18, 2015. The Company was formed to develop and commercialize first-in-class gastrointestinal products for companion and production animals and horses. The Company’s first commercial product, Neonorm Calf, was launched in 2014. The Company launched a second commercial product, Neonorm Foal, in the first quarter of 2016. The Company’s activities are subject to significant risks and uncertainties, including failing to secure additional funding in order to timely compete the development and commercialization of products. The Company operates in one segment and is headquartered in San Francisco, California.

On June 11, 2013, Jaguar issued 2,666,666 shares of common stock to Napo in exchange for cash and services. On July 1, 2013, Jaguar entered into an employee leasing and overhead agreement (the “Service Agreement”) with Napo, under which Napo agreed to provide the Company with the services of certain Napo employees for research and development and the general administrative functions of the Company. On January 27, 2014, Jaguar executed an intellectual property license agreement with Napo pursuant to which Napo transferred fixed assets and development materials, and licensed intellectual property and technology to Jaguar. On February 28, 2014, the Service Agreement terminated and the associated employees became employees of Jaguar effective March 1, 2014. See Note 9 for additional information regarding the capital contributions and Note 4 for the Service Agreement and license agreement details.

Reverse Stock Split

In October 2014, the Board of Directors and stockholders approved a 1-for-1.5 reverse stock split (the “Reverse Split”) of the Company’s outstanding shares of common stock and increased the number of authorized shares of common stock from 10,000,000 shares to 15,000,000 shares. The Company effected the Reverse Split on October 27, 2014. Under the terms of the Reverse Split, each share of common stock, issued and outstanding as of such effective date, was automatically reclassified and changed into two-thirds of one share of common stock, without any action by the stockholder. Fractional shares were rounded down to the nearest whole share. All share and per share amounts have been restated to reflect the Reverse Split.

Initial Public Offering

On May 18, 2015, the Company completed an initial public offering (“IPO”) of its common stock. In connection with its IPO, the Company issued and sold 2,860,000 shares of common stock at a price to the public of $7.00 per share. As a result of the IPO, the Company received $15.9 million in net proceeds, after deducting underwriting discounts and commissions of $1.2 million and offering expenses of $2.9 million ($3.3 million including non-cash offering expenses) payable by the Company. In connection with the IPO, the Company’s outstanding shares of convertible preferred stock were automatically converted into 2,010,596 shares of common stock and the Company’s outstanding warrants to purchase convertible preferred stock were all converted to warrants to purchase common stock.

Secondary Public Offering

On February 8, 2016, the Company completed a secondary public offering of its common stock. In connection with its secondary public offering, the Company issued and sold 2,000,000 shares of common stock at a price to the public of $2.50 per share. As a result of the secondary public offering, the Company received $4.1 million in net proceeds, after deducting underwriting discounts and commissions of $373,011 and offering expenses of $496,887.

Liquidity

The accompanying financial statements have been prepared assuming the Company will continue as a going concern. The Company has incurred recurring operating losses since inception and has an accumulated deficit of $33,344,007 as of June 30, 2016. The Company expects to incur substantial losses in future periods. Further, the Company’s future operations are dependent on the success of the Company’s ongoing development and commercialization efforts. There is no assurance that profitable operations, if ever achieved, could be sustained on a continuing basis.

6

The Company plans to finance its 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 the Company on acceptable terms on a timely basis, if at all, or that the Company will generate sufficient cash from operations to adequately fund operating needs or ultimately achieve profitability. If the Company is unable to obtain an adequate level of financing needed for the long-term development and commercialization of its products, the Company will need to curtail planned activities and reduce costs. Doing so will likely have an adverse effect on the Company’s ability to execute on its business plan. These matters raise substantial doubt about the ability of the Company to continue in existence as a going concern. The accompanying financial statements do not include any adjustments that might result from the outcome of these uncertainties.

In June 2016, the Company entered into a common stock purchase agreement with a private investor (the “Common Stock Purchase Agreement”), which provides that, upon the terms and subject to the conditions and limitations set forth therein, the investor is committed to purchase up to an aggregate of $15.0 million of the Company’s common stock over the approximately 30-month term of the agreement.  Upon execution of the Common Stock Purchase Agreement, the Company sold 222,222 shares of its common stock to the investor at $2.25 per share for net proceeds of $448,732, reflecting gross proceeds of $500,000  and offering expenses of $51,268.   In consideration for entering into the Common Stock Purchase Agreement, the Company issued 456,667 shares of its common stock to the investor.  Concurrently with entering into the Common Stock Purchase Agreement, the Company also entered into a registration rights agreement with the investor (the “Registration Agreement”), in which the Company agreed to file one or more registration statements, as permissible and necessary to register under the Securities Act of 1933, as amended, the sale of the shares of the Company’s common stock that have been and may be issued to the investor under the Common Stock Purchase Agreement.  On June 22, 2016, the Company filed a registration statement on Form S-1 (File No. 333-212173) pursuant to the terms of the Registration Agreement, which registration statement was declared effective on July 8, 2016.

2. Summary of Significant Accounting Policies

Basis of Presentation

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

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires the Company’s management to make judgments, assumptions and estimates that affect the amounts reported in its financial statements and the accompanying notes. The accounting policies that reflect the Company’s more significant estimates and judgments and that the Company believes are the most critical to aid in fully understanding and evaluating its reported financial results are valuation of stock options; valuation of warrant liabilities; impairment of long lived assets; useful lives for depreciation; valuation adjustments for excess and obsolete inventory; deferred taxes and valuation allowances on deferred tax assets; and evaluation and measurement of contingencies. Those estimates could change, and as a result, actual results could differ materially from those estimates.

Concentration of Credit Risk and Cash and Cash Equivalents

The financial instrument that potentially subjects the Company to a concentration of credit risk is that is held at a financial institution of high credit standing. Cash is generally in excess of Federal Deposit Insurance Corporation (“FDIC”) insurance limits. Therefore, the Company is exposed to credit risk in the event that the balances exceed FDIC insurance limits. The carrying value of cash approximates fair value at June 30, 2016 and December 31, 2015.

Fair Values

The Company’s financial instruments include, cash and cash equivalents, accounts payable, accrued expenses, amounts due to Napo, the former parent, warrant liabilities, and debt. Cash is reported at fair value. The recorded carrying amount of accounts payable, accrued expenses and amounts due to Napo approximates their fair value due to their short-term nature. The carrying value of the interest-bearing debt approximates fair value based upon the borrowing rates currently available to the Company for bank loans with similar terms and maturities. See Note 3 for the fair value measurements, and Note 7 for the fair value of the Company’s warrant liabilities.

7

Restricted Cash

On August 18, 2015, the Company entered into a long-term loan and security agreement with a lender for up to $8.0 million, which provided for an initial loan commitment of $6.0 million. The loan agreement required the Company to maintain a base minimum cash balance of $4.5 million until the Company met certain milestones and/or when the Company begins making principal payments. On December 22, 2015, the Company achieved certain milestones and the base minimum cash balance was reduced to $3.0 million.  On March 1, 2016, the restricted cash balance was further reduced by a $178,740 principal loan payment, resulting in a restricted cash balance of $2,821,260 at March 31, 2016.  On April 1, 2016, the restricted cash balance was further reduced by a $176,963 principal loan payment.  On April 21, 2016, the loan and security agreement was amended upon which the Company repaid $1.5 million of the debt out of restricted cash resulting in a restricted cash balance of $1,144,297 at June 30, 2016. The amendment modified the repayment amortization schedule providing a four-month period of interest-only payments for the period from May through August 2016.

Inventories

Inventories are stated at the lower of cost or market. The Company calculates inventory valuation adjustments when conditions indicate that the 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 estimated net realizable value. There have been no write-downs to date.

Property and Equipment

Equipment is stated at cost, less accumulated depreciation. Equipment begins to be depreciated when it is placed into service. Depreciation is calculated using the straight-line method over the estimated useful lives of 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 income (loss) from operations.

Long-Lived Assets

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

Should an impairment exist, the impairment loss would be measured based on the excess of the carrying amount over the asset’s fair value. The Company has not recognized any impairment losses through June 30, 2016.

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.

Revenue Recognition

Sales to distributors are made under agreements that may provide distributor price adjustments and rights of return under certain circumstances. Until the Company develops sufficient sales history and pipeline visibility, revenue and costs of distributor sales will be deferred until products are sold by the distributor to the distributor’s customers. Revenue recognition depends on notification either directly from the distributor that product has been sold to the distributor’s customer, when the Company has access to the data. Deferred revenue on shipments to distributors reflect the estimated effects of distributor price adjustments, if any, and the estimated amount of gross margin expected to be realized when the distributor sells through product purchased from the Company. Accounts receivable from distributors are recognized and included in deferred revenue when shipped to the distributor. Inventory is relieved and revenue recognized upon shipment by the distributor to their customer. The Company had revenues of $24,143 and $62,289 for the three and six months ended June 30, 2016, and $63,142 and $125,529 for the three and six months ended June 30, 2015.

8

Stock-Based Compensation

The Company’s 2013 Equity Incentive Plan and 2014 Stock Incentive Plan (see Note 10) provides for the grant of stock options, restricted stock and restricted stock unit awards.

The Company measures stock awards granted to employees and directors at fair value on the date of grant and recognizes the corresponding compensation expense of the awards, net of estimated forfeitures, over the requisite service periods, which correspond to the vesting periods of the awards. The Company issues stock awards with only service-based vesting conditions, and records compensation expense for these awards using the straight-line method.

The fair value of stock awards is based on the quoted price of our common stock on the grant date.

Classification of Securities

The Company applies the principles of ASC 480-10 “Distinguishing Liabilities from Equity” and ASC 815-40 “Derivatives and Hedging—Contracts in Entity’s Own Equity” to determine whether financial instruments such as warrants, contingently issuable shares and shares subject to repurchase should be classified as liabilities or equity and whether beneficial conversion features exist.

Income Taxes

The Company accounts for income taxes using the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in the financial statements or in the Company’s tax returns. Deferred taxes are determined based on the difference between the financial statement and tax basis of assets and liabilities using enacted tax rates in effect in the years in which the differences are expected to reverse. Changes in deferred tax assets and liabilities are recorded in the provision for income taxes. The Company assesses the likelihood that its deferred tax assets will be recovered from future taxable income and, to the extent it believes, based upon the weight of available evidence, that it is more likely than not that all or a portion of deferred tax assets will not be realized, a valuation allowance is established through a charge to income tax expense. Potential for recovery of deferred tax assets is evaluated by estimating the future taxable profits expected and considering prudent and feasible tax planning strategies.

The Company accounts for uncertainty in income taxes recognized in the financial statements by applying a two-step process to determine the amount of tax benefit to be recognized. First, the tax position must be evaluated to determine the likelihood that it will be sustained upon external examination by the taxing authorities. If the tax position is deemed more-likely-than-not to be sustained, the tax position is then assessed to determine the amount of benefit to recognize in the financial statements. The amount of the benefit that may be recognized is the largest amount that has a greater than 50% likelihood of being realized upon ultimate settlement. The provision for income taxes includes the effects of any resulting tax reserves, or unrecognized tax benefits, that are considered appropriate, as well as the related net interest and penalties.

Comprehensive Loss

Comprehensive loss is defined as changes in stockholders’ equity (deficit) exclusive of transactions with owners (such as capital contributions and distributions). For the three and six months ended June 30, 2016 and 2015 there was no difference between net loss and comprehensive loss.

Segment Data

The Company manages its operations as a single segment for the purposes of assessing performance and making operating decisions. The Company is an animal health company focused on developing and commercializing prescription and non-prescription products for companion and production animals.

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 period by the weighted-average number of common shares outstanding during the period. Diluted net loss per share is computed by dividing the net loss attributable to common stockholders for the period by the weighted-average number of common shares, including potential dilutive shares of common stock assuming the dilutive effect of potential dilutive securities. For periods 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 three and six months ended June 30, 2016 and 2015.

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Recent Accounting Pronouncements

In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-02, Leases (Topic 842), which provides guidance for accounting for leases. Under ASU 2016-02, the Company will be required to recognize the assets and liabilities for the rights and obligations created by leased assets. ASU 2016-02 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. We are currently evaluating the impact of the adoption of ASU 2016-02 on our consolidated financial statements.

In November 2015, the FASB issued ASU No. 2015-17, Balance Sheet Classification of Deferred Taxes (Topic 740), which simplifies the presentation of deferred income taxes. Under ASU 2015-17, deferred tax assets and liabilities are required to be classified as noncurrent, eliminating the prior requirement to separate deferred tax assets and liabilities into current and noncurrent. The new guidance is effective for the Company beginning on January 1, 2017, with early adoption permitted. The standard may be adopted prospectively or retrospectively to all periods presented. The Company is currently assessing the timing of adoption of the new guidance, but does not expect it will have a material impact on the Company’s Consolidated Financial Statements.

In April 2015, the FASB issued ASU No. 2015-03, Interest—Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs, to simplify the presentation of debt issuance costs by requiring debt issuance costs to be presented as a deduction from the corresponding debt liability. ASU 2015-03 will be effective for the Company beginning in its first quarter of 2016, however early adoption is permitted for financial statements that have not been previously issued. The guidance is to be applied retrospectively to all periods presented. We adopted ASU 2015-03 on December 31, 2015.

In August 2014, the FASB issued ASU No. 2014-15, “Presentation of Financial Statements—Going Concern (Subtopic 205-40)—Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern”, which provides guidance regarding management’s responsibility to assess whether substantial doubt exists regarding the ability to continue as a going concern and to provide related footnote disclosures. In connection with preparing financial statements for each annual and interim reporting period, management should evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date that the financial statements are issued (or within one year after the date that the financial statements are available to be issued when applicable). This ASU is effective for the annual period ending after December 15, 2016, and for annual periods and interim periods thereafter. The Company is currently evaluating the new guidance and has not determined the impact this standard may have on its financial statements.

In June 2014, the FASB issued ASU No. 2014-12, “Compensation—Stock Compensation (Topic 718)”, which requires that a performance target that affects vesting and that could be achieved after the requisite service period be treated as a performance condition. The performance target should not be reflected in estimating the grant-date fair value of the award. Compensation cost should be recognized in the period in which it becomes probable that the performance target will be achieved and should represent the compensation cost attributable to the period(s) for which the requisite service has already been rendered. If the performance target becomes probable of being achieved before the end of the requisite service period, the remaining unrecognized compensation cost should be recognized prospectively over the remaining requisite service period. The total amount of compensation cost recognized during and after the requisite service period should reflect the number of awards that are expected to vest and should be adjusted to reflect those awards that ultimately vest. The requisite service period ends when the employee can cease rendering service and still be eligible to vest in the award if the performance target is achieved. This guidance will be effective for annual periods (and interim periods within those annual periods) beginning after December 15, 2015. The Company implemented this guidance for all interim and annual periods beginning after December 15, 2015. The adoption of this guidance did not have an impact on the Company’s financial condition, results of operations or cash flows.

In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers.” The objective of ASU 2014-19 is to establish a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and will supersede most of the existing revenue recognition guidance, including industry-specific guidance. The core principle of the new standard is that revenue should be recognized to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The standard is effective for annual reporting periods beginning after December 15, 2016 and allows for prospective or retrospective application. The Company is evaluating the new guidance and has not determined the impact this pronouncement will have on its financial statements.

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3. Fair Value Measurements

ASC 820 “Fair Value Measurements,” defines fair value, establishes a framework for measuring fair value under generally accepted accounting principles 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—Quoted prices in active markets for identical assets or liabilities;

·Level 2—Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data; and

·Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities, including pricing models, discounted cash flow methodologies and similar techniques.

The following table presents information about the Company’s liability that is measured at fair value on a recurring basis as of June 30, 2016 and 2015 and indicates the fair value hierarchy of the valuation:

	Level 1		Level 2		Level 3		Total
As of June 30, 2016 Warrant Liability	$	—	$	—	$	—	$	—

	Level 1		Level 2		Level 3		Total
As of June 30, 2015 Warrant Liability	$	—	$	—	$	—	$	—

The change in the estimated fair value of the warrant liability is summarized below:

	Beginning Value of Warrant Liability		Issuance of Common Stock Warrants		Change in Fair Value of Level 3 Liability		Conversion into Additional Paid-in Capital		Ending Fair Value of Level 3 Liability
For the six months ended June 30, 2016	—		—		—		—		—
For the six months ended June 30, 2015	$	601,889	$	47,479	$	501,617	(1,150,985	)	$	—

The change in the fair value of the level 3 warrant liability is reflected in the statement of operations and comprehensive loss for the six months ended June 30, 2015.

There were no assets or liabilities measured at fair value on a recurring basis at June 30, 2016.

4. License Agreement

On July 11, 2013, Jaguar entered into an option to license Napo’s intellectual property and technology (the “Option Agreement”). Under the Option Agreement, upon the payment of $100,000 in July 2013, the Company obtained an option for a period of two years to execute an exclusive worldwide license to Napo’s intellectual property and technology to use for the Company’s animal health business. The option price was creditable against future license fees to be paid to Napo under the License Agreement (as defined below).

In January 2014, the Company exercised its option and entered into a license agreement (the “License Agreement”) with Napo for an exclusive worldwide license to Napo’s intellectual property and technology to permit the Company to develop, formulate, manufacture, market, use, offer for sale, sell, import, export, commercialize and distribute products for veterinary treatment uses and indications for all species of animals. The Company was originally obligated to pay a one-time non-refundable license fee of $2,000,000, less the option fee of $100,000. At the Company’s option, the license fee could have been paid in common stock. Milestone payments aggregating $3,150,000 may also be due to Napo based on regulatory approvals of various veterinary products. In addition to the milestone payments, the Company will owe Napo an 8% royalty on annual net sales of products derived from the Croton lechleri tree, up to $30,000,000 and then, a royalty of 10% on annual net sales of $30,000,000 or more. Additionally, if any other products are developed, the Company will owe Napo a 2% royalty on annual net sales of pharmaceutical prescription products that are not derived from Croton lechleri and a 1% royalty on annual net sales of nonprescription products that are not derived from Croton lechleri. The royalty term expires at the longer of 10 years from the first sale of each individual product or when there is no longer a valid patent claim covering any of the products and a competitive product has entered the market. However, because an IPO of at least $10,000,000 was consummated prior to December 31, 2015, the royalty was reduced to 2% of annual net sales of its prescription products derived from Croton lechleri and 1% of net sales of its nonprescription products derived from Croton lechleri and no milestone payment will be due and no royalties will be owed on any additional products developed. The Company incurred $191 and $844 in royalties for the three and six months ended June 30, 2016 and $36,163 and $38,746 for the three and six months ended June 30, 2015, which is included in sales and marketing expense in the Company’s statement of operations and comprehensive loss. The Company’s unpaid royalties total $0 and $2,810 at June 30, 2016 and December 31, 2015, respectively, which is included in accrued liabilities in the Company’s balance sheet.

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In addition to receiving a License Agreement to Napo’s intellectual property and technology, the License also transferred to the Company certain materials and equipment. Materials transferred from Napo have been included in research and development expense on the statements of operations and comprehensive loss during the year ended December 31, 2014. Equipment of $811,087 related to the License is included in property and equipment on the Company’s balance sheet at June 30, 2016 and December 31, 2015 at the cost paid by Napo, which approximates fair value. Some of the equipment was placed into service in November of 2015, and the Company has booked $6,568 and $13,136 in depreciation expense for the three and six months ended June 30, 2016, which is included in research and development expense in the Company’s statement of operations and comprehensive loss.

The Company has agreed under the License Agreement to defend, indemnify and hold Napo, its affiliates, and the officers, directors, employees, consultants and contractors of Napo harmless from and against any losses, costs, damages, liabilities, fees and expenses arising out of any third-party claim related to the Company’s gross negligence, breach of covenants or the manufacture, sale or use of the product or products.

In January 2015, the License Agreement was amended to decrease the one-time non-refundable license fee payable from $2,000,000 to $1,750,000 in exchange for acceleration of the payment of the fee. In 2015, payments totalling $1.2 million were made, and the balance of $425,000 was paid in March of 2016.  The License Fee Payable of $0 and $425,000 is included in the Company’s balance sheet at June 30, 2016 and December 31, 2015, respectively. Additionally, the terms of the License Agreement were amended to require the mutual agreement of the parties for payment of the license fee to be remitted in the form of the Company’s common stock. The Company may also, at its sole discretion, elect to remit any milestone payments and/or royalties in the form of the Company’s common stock. Given that Napo is a significant shareholder of the Company, the abatement of the license fee amount has been recorded as a capital contribution in the accompanying condensed financial statements.

5. Balance Sheet Components

Property and Equipment

Property and equipment at June 30, 2016 and December 31, 2015 consisted of the following:

	June 30,		December 31,
	2016		2015
Lab equipment	811,087		811,087
Clinical equipment	64,870		23,300
Software	5,223		—
Work in-process	57,414		—
Total property and equipment at cost	938,594		834,387
Accumulated depreciation	(22,587	)	(5,155	)
Property and equipment, net	916,007		829,232

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Depreciation expense for the three and six month periods ended June 30, 2016 and 2015 was as follows:

	Three months ended		Six months ended
	June 30,		June30,
	2016	2015	2016	2015
Depreciation - Lab Equipment - research and developoment expense	6,568	—	13,136	—
Depreciation - Clinical Equipment - research and development expense	2,551	—	3,716	—
Depreciation - Software - general and administrative expense	435	—	580	—
Total Depreciation Expense	9,554	—	17,432	—

Accrued Expenses

Accrued expenses at June 30, 2016 and December 31, 2015 consist of the following:

	June 30,	December 31,
	2016	2015
Accrued compensation and related:
Accrued vacation	200,878	187,734
Accrued payroll	—	80,692
Accrued payroll tax	15,367	43,702
	216,245	312,128
Accrued interest	119,165	127,149
Accrued contract manufacturing costs	165,480	110,141
Accrued clinical	133,375	166,750
Accrued other	19,479	82,266
Total	653,744	798,434

6. Commitments and Contingencies

Operating Leases

Effective July 1, 2015, the Company leases its San Francisco, California headquarters under a non-cancelable sub-lease agreement that expires August 31, 2018. The Company provided cash deposits of $122,163, consisting of a security deposit of $29,539 and prepayment of the last three months of the lease of $92,623, which is identified as other assets on the Company’s balance sheet.

Future minimum lease payments under non-cancelable operating leases as of June 30, 2016 are as follows:

Years ending December 31,	Amount
2016 - July through December	180,242
2017	363,486
2018	245,327
Total minimum lease payments	789,055

The Company recognizes rent expense on a straight-line basis over the non-cancelable lease period. Rent expense under the non-cancelable operating lease was $90,278 and $180,556 for the three and six months ended June 30, 2016, which was included in general and administrative expense in the Company’s statement of operations and comprehensive loss.

Since March 1, 2014, the date the Service Agreement terminated (Note 4), the Company paid Napo $33,897 for rent related to the office space utilized by the Company for the months of March, April and May of 2014. Effective June 1, 2014, the Company assumed the existing sublease from Napo. The term of the assumed sublease was from June 1, 2014 through June 30, 2015. Rent expense under the sub-lease was $34,799 and $69,598 for the three and six months ended June 30, 2015, which was included in general and administrative expense in the Company’s statement of operations and comprehensive loss.

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Contract Manufacturing Commitment

Effective June 26, 2014 the Company entered into a technology transfer and commercial manufacturing agreement (the “Transfer Agreement”) with a contract manufacturer in Italy (the “Manufacturer”), whereby the Company and the Manufacturer will cooperate to develop and refine the manufacturing process for the Company’s prescription and non-prescription products. Pursuant to the Transfer Agreement, the Company was to make prepayments to the Manufacturer as follows: (1) a start-up fee of €500,000, €250,000 of which was to be paid at the earlier to occur of September 15, 2014 or the closing date of an initial public offering and €250,000 of which was to be paid at the time of installation and qualification of the Company’s equipment at their facility, (2) related to the technology transfer, €620,000, €310,000 of which was paid subsequent to the signature of the Transfer Agreement and €310,000 of which was to be paid after the delivery of a final study report, (3) for design of a portion of the Manufacturer’s facility, €100,000 was to be paid within five days of the signature of the Transfer Agreement, and (4) a €300,000 bonus fee payable in two equal installments, the first of which is due by the end of March 2015, with the remainder paid by the end of December 2015. The first €150,000 of the bonus fee payable was paid in May 2015. Additionally, the Transfer Agreement stipulated that the Company was to pay the Manufacturer an aggregate of €500,000 upon the delivery of agreed-upon levels of satisfactory product. Further, the Company issued the Manufacturer warrants to purchase 16,666 shares of common stock with an exercise price of 90% of the initial public offering price, amended to $6.30 in March 2015. (Note 7)

Effective February 12, 2015, March 25, 2015 and July 15, 2015 the Company entered into amendments delaying payments to the Manufacturer as follows: i) the €500,000 start-up fee was due by the end of April 2015 and has been paid during the year ended December 31, 2015, (ii) related to the technology transfer, of the remaining €310,000, €215,000 was due April 2015 and €95,000 was due June 30, 2015, both of which were paid during the year ended December 31, 2015, (iii) related to the design of a portion of the Manufacturer’s facility, the payment has increased to €170,000, €150,000 of which was due at the end of April 2015 and €20,000 was due on June 30, 2015, both of which have been paid during the year ended December 31, 2015 (iv) the fees linked to the deliverables are now due €250,000 on December 31, 2015 and €250,000 on March 31, 2016, 2015, (v) the bonus fee payable of €300,000, €150,000 was due at the end of April 2015 and has been paid during the year ended December 31, 2015 and €150,000 due at December 31, 2015. In May 2015, the Company entered into a Memorandum of Understanding (“MOU”) with the contract manufacturer and paid the start-up fee of €500,000 and the technology transfer fee of €215,000. In accordance with the terms of the Memorandum of Understanding, the Manufacturer will supply 400Kg of the Company’s API at no cost in anticipation of the future deduction by December 2015.  The final €250,000 was paid on March 29, 2016.

In December 2015, we entered into an amendment to our technology transfer and commercial manufacturing agreement with our contract manufacturer in Italy delaying a €150,000 bonus fee payment which was originally due on December 31, 2015 to March 31, 2016. On April 4, 2016, the Company further amended the payment date to June 30, 2016.  The Company paid the final €150,000 bonus fee on July 15, 2016.  The liability at June 30, 2016 of US$165,480 is included in accrued liabilities on the Company’s balance sheet.

The Company expenses the total cost of the contract ratably over the estimated life of the contract, or the total amount paid if greater. As of June 30, 2016 and December 31, 2015, the amortized costs exceeded amounts paid by $170,850 and $110,141, respectively, which are included in accrued manufacturing costs in accrued liabilities in the Company’s balance sheet.

Debt Obligations

See Note 7—Debt and Warrants.

Contingencies

From time to time, the Company may be involved in legal proceedings arising in the ordinary course of business. The Company believes there is no litigation pending that could have, individually or in the aggregate, a material adverse effect on the financial position, results of operations or cash flows.

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7. Debt and Warrants

Convertible Notes and Warrants

2013 Convertible Notes

From July through September 2013, the Company issued four convertible promissory notes (collectively the “Notes”) for gross aggregate proceeds of $525,000 to various third-party lenders. The Notes bore interest at 8% per annum. The Notes automatically matured and the entire outstanding principal amount, together with accrued interest, was due and payable in cash at the earlier of July 8, 2015 (the “Maturity Date”) or ten business days after the date of consummation of the initial closing of a first equity round of financing. The Company consummated a first equity round of financing prior to the Maturity Date with a pre-money valuation of greater than $3.0 million, and, accordingly, principal and accrued interest was converted into shares of common stock at 75% of the purchase price paid by such equity investors. These notes were all converted to common stock in February 2014 upon the issuance of the convertible preferred stock. In February 2014, in connection with the first equity round of financing and issuance of the Series A convertible preferred stock, the noteholders exercised their option to convert their Notes into 207,664 shares of common stock and accrued interest was paid in cash to the noteholders. The accreted interest expense related to the discount on the Notes was $1,443 for the period from January 1, 2014 to the conversion date of the Notes. Upon conversion, the entire remaining debt discount of $4,071 was recorded as interest expense.

In connection with the Notes, the Company issued to the noteholders warrants, which became exercisable to purchase an aggregate of 207,664 shares of common stock as of the issuance of the first equity round of financing (the “Warrants”). The Warrants have a $2.53 exercise price, are fully exercisable from the initial date of the first equity round of financing, and have a five-year term subsequent to that date.

2014 Convertible Notes

On June 2, 2014, pursuant to a convertible note purchase agreement, the Company issued convertible promissory notes in the aggregate principal amount of $300,000 to two accredited investors, including a convertible promissory note for $200,000 to a board member to which Series A preferred stock was sold. These notes accrued interest at 3% per annum and automatically were to mature on June 1, 2015. Accrued interest was to be paid in cash upon maturity. Upon the closing of the IPO, the outstanding principal amount automatically converted into 53,571 shares common stock at $5.60, as amended in March 2015. Upon issuance, the Company analyzed the beneficial nature of the conversion terms and determined that a beneficial conversion feature (“BCF”) existed because the effective conversion price on issuance of the notes was less than the fair value at the time of the issuance. The Company calculated the value of the BCF using the intrinsic method and recorded a BCF of $75,000 as a discount to the notes payable and to additional paid-in capital. For the three and six months ended June 30, 2015, the Company amortized $12,530 and $30,713, respectively, of the discount, which has also been recorded as interest expense.

On July 16, 2014, pursuant to a convertible note purchase agreement, the Company issued a convertible promissory note in the principal amount of $150,000 to an accredited investor. This note accrued interest at 3% per annum and automatically was to mature on June 1, 2015. Accrued interest was to be paid in cash upon maturity. Upon the closing of the IPO, the outstanding principal amount automatically converted into 26,785 shares of common stock at $5.60, as amended in March 2015. Upon issuance, the Company analyzed the beneficial nature of the conversion terms and determined that a BCF existed because the effective conversion price was less than the fair value at the time of the issuance. The Company calculated the value of the BCF using the intrinsic method and recorded a BCF of $37,500 as a discount to the notes payable and to additional paid-in capital. For the three and six months ended June 30, 2015, the Company amortized $7,243 and $17,757 of the discount, which has also been recorded as interest expense.

In connection with the Transfer Agreement (Note 7) the Company issued fully vested and immediately exercisable warrants to the Manufacturer to purchase 16,666 shares of common stock at 90% of the IPO price, amended to $6.30 in March 2015, for a period of five years. The fair value of the warrants, $37,840, was recorded as research and development expense and additional paid-in capital in June 2014. The warrants were originally valued using the Black-Scholes model with the following assumptions: stock price of $4.83, exercise price of $4.35, term of five years, volatility of 49%, dividend yield of 0%, and risk-free interest rate of 1.64%.

On December 23, 2014, pursuant to a convertible note purchase agreement, the Company issued convertible promissory notes in the aggregate principal amount of $650,000 to three accredited investors, including a convertible promissory note for $250,000 to the same board member to which the June 2, 2014 $200,000 convertible promissory note was issued and to which Series A preferred stock was sold. These notes accrued interest at 12% per annum and became payable within thirty days following the IPO. Upon consummation of the Company’s IPO, the noteholders converted the notes into 116,070 shares of common stock at a conversion price equal to 80% of the IPO price, amended to $5.60 in March 2015. In connection with these notes, the Company also issued the lenders a fully vested warrant to purchase shares of the Company’s common stock at an exercise price equal to 80% of the IPO price, amended to $5.60 in March 2015. These warrants entitle the noteholders to purchase 58,035 shares of common stock. The fair value of the warrants, $147,943, was recorded as a debt discount and liability at December 23, 2014. The Company amortized $61,201 and $121,729 of this discount during the three and six months ended June 30, 2015. The warrants were originally valued using the Black-Scholes model with the following assumptions: stock price of $4.59, exercise price of $4.15, term of three years, volatility of 49%, dividend yield of 0%, and risk-free interest rate of 1.10%. Based on the circumstances, the value derived using the Black-Scholes model approximated that which would be obtained using a lattice model. The debt discount was to be recorded as interest expense over the one hundred ninety days from issuance of the notes through their first maturity date of July 31, 2015, beginning in January 2015. The Company analyzed the beneficial nature of the conversion terms and determined that a BCF existed because the effective conversion price was less than the fair value at the time of the issuance. The Company calculated the value of the BCF using the intrinsic method. A BCF of $502,057 has been recorded as a discount to the notes payable and to additional paid-in capital. For the three and six months ended June 30, 2015, the Company amortized $207,690 and $413,098 of the BCF which has also been recorded as interest expense.

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2015 Convertible Notes

In February 2015, the Company issued convertible promissory notes to two accredited investors in the aggregate principal amount of $250,000. These notes were issued pursuant to the convertible note purchase agreement dated December 23, 2014. Principal and interest of $103,912 was paid in May 2015 for $100,000 of these notes.

The Company’s remaining outstanding note of $150,000 is payable to Serious Change II LP at an effective simple interest rate of 12% per annum, and is due in full on July 31, 2016 (the “Serious Change II Note”). The note is included in notes payable in the Company’s balance sheet. The Company has accrued interest of $24,855, which is included in accrued liabilities in the Company’s balance sheet. The note remains outstanding as Serious Change II LP elected not to convert the note as per the terms of the agreement.  On July 28, 2016, the Company entered into an amendment to delay the repayment of the principal and related interest under the Serious Change II Note from July 31, 2016 to October 31, 2016.

In March 2015, the Company entered into a non-binding letter of intent with Dechra Pharmaceuticals PLC (“Dechra”). In connection therewith, Dechra paid the Company $1.0 million. At March 31, 2015, the Company had recorded this amount as a loan advance on the balance sheet. In April 2015, Dechra purchased $1.0 million of convertible promissory notes from the Company, the terms of which provided that such notes were to be converted into shares of the Company’s common stock upon the closing of an IPO at a conversion price of $5.60 per share. In connection with the purchase of the notes, the Company issued Dechra a warrant to purchase 89,285 shares at $5.60 per share, which expires December 31, 2017. The notes accrued simple interest of 12% per annum and, upon consummation of the Company’s IPO in May 2015, converted into 178,571 shares of the Company’s common stock. The Company analyzed the beneficial nature of the conversion terms and determined that a BCF existed because the effective conversion price was less than the fair value at the time of the issuance. The Company calculated the value of the BCF using the intrinsic method. A BCF of for the full face value was recorded as a discount to the notes payable and to additional paid-in capital. The Company amortized the entire BCF of $1.0 million by the end of May 2015 and recorded the amortized amounts as interest expense through that period.

As of June 30, 2016 and December 31, 2015, the convertible notes payable obligations were as follows:

	June 30,		December 31,
	2016		2015
Notes payable	$	150,000	$	150,000
Unamortized note discount	—		—
Net debt obligation	$	150,000	$	150,000

Interest expense on the convertible notes payable was as follows:

	June 30,		June 30,
	2016		2015
Nominal interest	$	8,975	$	61,545
Amortization of debt discount	—		1,898,540
Repayment premium	—		100,800
	$	8,975	$	2,060,885

At June 30, 2016 and December 31, 2015, interest payable on convertible notes payable was $84,974 and $75,999, respectively.

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Notes Payable—Bridge Loans

On October 30, 2014, the Company entered into a standby bridge financing agreement with two lenders, which was amended and restated on December 3, 2014, which provided a loan commitment in the aggregate principal amount of $1.0 million (the “Bridge”). Proceeds to the Company were net of a $100,000 debt discount under the terms of the Bridge and net of $104,000 of debt issuance costs. This debt discount and debt issuance costs were recorded as interest expense using the effective interest method, over the six month term of the Bridge. The Bridge became payable upon the IPO. The Bridge was repaid in May 2015, including interest thereon in an amount of $1,321,600. In connection with the Bridge, the lenders were granted warrants to purchase that number of shares of the Company’s common stock determined by dividing $1.0 million by the exercise price of 80% of the IPO price, amended to $5.60 in March 2015. The fair value of the warrants, $505,348, was originally recorded as a debt discount and liability at December 3, 2014. The warrants were originally valued using the Black-Scholes model with the following assumptions: stock price of $5.01, exercise price of $5.23, term of five years, volatility of 63%, dividend yield of 0%, and risk-free interest rate of 1.61%. Based on the circumstances, the value derived using the Black-Scholes model approximated that which would be obtained using a lattice model. The debt discount was recorded as interest expense over the six month term of the Bridge. Of the aggregate debt discount of $605,348 (warrants and original $100,000 discount), $521,291 was recorded as interest expense during the year ended December 31, 2015. Additional financing costs of $104,000 were incurred related to the Bridge and deferred on closing. These were recognized as interest expense over the six-month term of the Bridge using the effective interest method.  The Company amortized the remaining $86,667 of these deferred financing charges by the end of May 2015 was recorded the amortized amounts as interest expense.

The Company fully extinguished the debt in May of 2015.

Interest expense on the notes payable-bridge loans was as follows:

	June 30,		June 30,
	2016		2015
Nominal interest	$	—	$	100,000
Amortization of debt discount	—		521,291
Repayment premium	—		86,667
Debt issuance costs	—		100,800
	$	—	$	808,758

Standby Line of Credit

In August 2014, the Company entered into a standby line of credit with an accredited investor for up to $1.0 million pursuant to a Line of Credit and Loan Agreement dated August 26, 2014. In connection with the entry into the standby line of credit, the Company issued the lender a fully vested warrant to purchase 33,333 shares of common stock at an exercise price equal to 80% of the IPO price, amended to $5.60 in March 2015, which expires in August 2016. The fair value of the warrants, $114,300, was recorded as interest expense and additional paid-in capital in August 2014. The warrants were originally valued using the Black-Scholes model with the following assumptions: stock price of $8.00, exercise price of $6.40, term of two years, volatility of 52%, dividend yield of 0%, and risk-free interest rate of 0.52%. The line of credit expired on March 31, 2015 and there have been no drawdowns under the facility.

Long-term Debt

In August 2015, the Company entered into a loan and security agreement with a lender for up to $8.0 million, which provided for an initial loan commitment of $6.0 million. The loan agreement requires the Company to maintain $4.5 million of the proceeds in cash, which may be reduced or eliminated on the achievement of certain milestones. An additional $2.0 million is available contingent on the achievement of certain further milestones. The agreement has a term of three years, with interest only payments through February 29, 2016. Thereafter, principal and interest payments will be made with an interest rate of 9.9%. Additionally, there will be a balloon payment of $560,000 on August 1, 2018. This amount is being recognized over the term of the loan agreement and the effective interest rate, considering the balloon payment, is 15.0%. Proceeds to the Company were net of a $134,433 debt discount under the terms of the loan agreement. This debt discount is being recorded as interest expense, using the interest method, over the term of the loan agreement. Under the agreement, the Company is entitled to prepay principal and accrued interest upon five days prior notice to the lender. In the event of prepayment, the Company is obligated to pay a prepayment charge. If such prepayment is made during any of the first twelve months of the loan agreement, the prepayment charge will be (a) during such time as the Company is required to maintain a minimum cash balance, 2% of the minimum cash balance amount plus 3% of the difference between the amount being prepaid and the minimum cash balance, and (b) after such time as the Company is no longer required to maintain a minimum cash balance, 3% of the amount being prepaid. If such prepayment is made during any time after the first twelve months of the loan agreement, 1% of the amount being prepaid.

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On April 21, 2016, the loan and security was amended upon which the Company repaid $1.5 million of the debt out of restricted cash. The amendment modified the repayment amortization schedule providing a four month period of interest only payments for the period from May through August 2016.

As of June 30, 2016 and December 31, 2015, the net long-term debt obligation was as follows:

	June 30,			December 31,
	2016			2015
Debt and unpaid accrued end-of-term payment	$	4,406,121		$	6,115,797
Unamortized note discount	(71,584		)	(106,635		)
Unamortized debt issuance costs	(183,244		)	(206,235		)
Net debt obligation	$	4,151,293		$	5,802,927
Current portion of long-term debt	$	1,465,713		$	1,707,899
Long-term debt, net of discount	2,685,580			$	4,095,028
Total	$	4,151,293		$	5,802,927

Future principal payments under the long-term debt as of June 30, 2016 are as follows:

Years ending December 31 (except 2016 which is the six months ending December 31)	Amount
2016 July through December	$	633,003
2017	2,032,048
2018	1,479,246
Total future principal payments	$	4,144,297
2018 end-of-term payment	$	560,000
	$	4,704,297
Less: unaccreted end-of-term payment at June 30, 2016	$	(298,176	)
Debt and unpaid accrued end-of-term payment	$	4,406,121

The obligation at June 30, 2016 and December 31, 2015 includes an end-of-term payment of $560,000, which accretes over the life of the loan as interest expense. As a result of the debt discount and the end-of-term payment, the effective interest rate for the loan differs from the contractual rate.

Interest expense on the long-term debt was as follows:

	Three months ended				Six months ended
	June 30,				June 30,
	2016		2015		2016		2015
Nominal interest	$	112,374	$	—	$	261,000	$	—
Amortization of debt discount	16,640		—		35,051		—
Accretion of end-of-term payment	69,331		—		146,027		—
Debt issuance costs	51,924		—		87,940		—
	$	250,269	$	—	$	530,018	$	—

At June 30, 2016 and December 31, 2015, interest payable on long-term debt was $34,190 and $51,150, respectively.

At the IPO, the Company’s outstanding warrants to purchase convertible preferred stock were all converted to warrants to purchase common stock.

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The Company’s warrant activity is summarized as follows:

	June 30,	June 30,
	2016	2015
Warrants outstanding January 1	748,872	494,267
Warrants issued	—	254,605
Warrants outstanding June 30	748,872	748,872

8.  Redeemable Convertible Preferred Stock

In February, April and May of 2014, the Company issued 3,015,902 shares of convertible preferred stock in exchange for $6,777,338. The redemption value of the convertible preferred stock was $9.0 million. The differences between the respective redemption values/liquidation preference and carrying values are being accreted over the period from the date of issuance to the earliest possible redemption date, February 2017. The Company has recorded accretion of $85,763 and $263,060 for the three and six months ended June 30, 2015.

Costs incurred in connection with the issuance of Series A redeemable convertible preferred stock during the year ended December 31, 2014 were $119,097 which have been recorded as a reduction to the carrying amounts of convertible preferred stock and are being accreted to the carrying value of the applicable preferred stock to the redemption date. The Company has recorded accretion of $73,525 and $83,334 for the three and six months ended June 30, 2015.

On May 18, 2015, the Company completed its IPO. In connection with the IPO, the Company’s 3,015,902 outstanding shares of convertible preferred stock were automatically converted into 2,010,596 shares of common stock.

The Convertible Preferred Stock was classified outside of stockholders’ (deficit) in accordance with authoritative guidance for the classification and measurement of potentially redeemable securities.

9. Stockholders’ Equity

Common Stock

The Company’s second amended and restated certificate of incorporation authorizes the Company to issue 50,000,000 shares of common stock $0.0001 par value. The holders of common stock are entitled to one vote for each share of common stock held at all meetings of stockholders. The number of authorized shares of common stock may be increased or decreased by the affirmative vote of the holders of shares of capital stock of the Company representing a majority of the votes represented by all shares (including Preferred Stock) entitled to vote.

As of June 30, 2016 and December 31, 2015, the Company had reserved shares of common stock for issuance as follows:

	June 30,	December 31,
	2016	2015
Options issued and outstanding	1,464,265	919,506
Options available for grant	1,146,943	106,833
RSUs issued and outstanding	20,789	55,536
Warrants issued and outstanding	748,872	748,872
Convertible notes	26,785	26,785
Total	3,407,654	1,857,532

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Preferred Stock

The Company’s second amended and restated certificate of incorporation authorizes the Company to issue 10,000,000 shares of preferred stock $0.0001 par value. No shares of preferred stock were issued or outstanding at June 30, 2016 or December 31, 2015.

10. Stock Incentive Plans

2013 Equity Incentive Plan

Effective November 1, 2013, the Company’s board of directors and sole stockholder adopted the Jaguar Animal 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. As of December 31, 2013, the Company had reserved 300,000 shares of its common stock for issuance under the 2013 Plan. In April 2014, the board of directors amended the 2013 Plan to increase the shares reserved for issuance to 847,533 shares. 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.

2014 Stock Incentive Plan

Effective May 12, 2015, the Company adopted the Jaguar Animal 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 Company reserved 333,333 shares of common stock for issuance pursuant to the 2014 Plan. The Company added 162,498 shares to the plan in accordance with the Plan that 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 replaces the 2013 Plan except that all outstanding options under the 2013 Plan remain outstanding until exercised, cancelled or until they expire.

In July 2015, the Company amended the 2014 Plan reserving an additional 550,000 shares under the plan contingent upon approval by the Company’s stockholders at the June 2016 annual stockholders meeting.  In June 2016, the Company amended the 2014 Plan once again, modifying the increase from 550,000 shares to 1,550,000 shares, which was approved at the annual stockholders meeting.

Stock Options and Restricted Stock Units (“RSUs”)

The following table summarizes incentive plan activity for the six months ended June 30, 2016:

							Weighted		Weighted Average
	Shares						Average		Remaining	Aggregate
	Available		Stock Options		RSUs		Stock Option		Contractual Life	Intrinsic
	for Grant		Outstanding		Outstanding		Exercise Price		(Years)	Value
Combined Incentive Plan Balance—December 31, 2015	106,833		919,506		55,536		$	3.87	8.81	$	—
Q1 2016 2013 Equity Incentive Plan Activity:
Options Cancelled			(24,740	)			$	7.00
RSUs vested and released					(27,768	)
RSUs Cancelled					(6,979	)
Q2 2016 2013 Equity Incentive Plan Activity:
Options Cancelled			(102,889	)			$	3.52
Q1 2016 2014 Stock Incentive Plan Activity:
Additional shares authorized	162,498
Q2 2016 2014 Stock Incentive Plan Activity:
Additional shares authorized	1,550,000
Options granted	(692,388	)	692,388				$	3.30
Options cancelled	20,000		(20,000	)			$	1.58
Combined Incentive Plan Balance—June 30, 2016	1,146,943		1,464,265		20,789		$	3.61	8.81
Options vested and exercisable—June 30, 2016			574,690				$	4.05	6.49	$	—
Options vested and expected to vest—June 30, 2016			1,164,273				$	3.63	8.79	$	—

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The weighted average fair value of options granted to purchase common stock $1.04 and $3.65 for the six months ended June 30, 2016 and 2015, respectively.

The number of options that vested in the six months ended June 30, 2016 and 2015 was 242,239 and 291,786, respectively.  The grant date fair value of options vested was $283,219 and $160,736 for the six months ended June 30, 2016 and 2015, respectively.

No options were exercised in the six months ended June 30, 2016 and 2015.

The intrinsic value is calculated as the difference between the market value as of December 31, 2015 and the weighted average exercise price of shares exercised.

The Company granted RSUs in 2014 and 2015 under the 2013 Equity Incentive Plan. The units granted vest upon the occurrence of both a liquidity event and satisfaction of the service-based requirement. The time-based vesting provides that 50% of the RSU will vest on January 1, 2016 and the remaining 50% vest on July 1, 2017. The Company began recording stock-based compensation expense relating to the RSU grants effective May 18, 2015, the date of the Company’s initial public offering, and the date the liquidity condition was met. The stock-based compensation expense is based on the grant date fair value which is the equivalent to the fair market value on the date of grant, and is amortized over the vesting period using the straight-line method, net of estimated forfeitures.  On January 1, 2016, the Company issued 17,546 shares of its common stock in exchange for 27,768 vested and released RSUs, net of 10,172 RSU shares used to pay withholding taxes.

Stock-Based Compensation

The following table summarizes stock-based compensation expense related to stock options and RSUs for the three months ended June 30, 2016 and 2015, and are included in the statements of operations and comprehensive loss as follows:

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2016		2015		2016		2015
Research and development expense	$	37,284	$	328,555	$	62,617	$	346,219
Sales and marketing expense	—		34,829		8,681		34,829
General and administrative expense	88,238		211,846		157,766		246,799
Total	$	125,522	$	575,230	$	229,064	$	627,847

As of June 30, 2016, the Company had $852,837 of unrecognized stock-based compensation expense for options outstanding, which is expected to be recognized over a weighted-average period of 2.05 years. As of June 30, 2016, the Company had $61,592 of unrecognized stock-based compensation expense for outstanding RSUs which is expected to be recognized over a weighted-average period of one year.

The estimated grant-date fair value of employee stock options was calculated using the Black-Scholes option-pricing model based on the following assumptions:

	Three months ended		Six Months Ended
	June 30,		June 30,
	2016	2015	2016	2016
Weighted-average volatility	66.25-69.14%	55.43-59.05%	66.25-69.14%	55.43-59.05%
Weighted-average expected term (years)	5.67-5.82	5.15-5.77	5.67-5.82	5.15-5.77
Risk-free interest rate	1.36-1.49%	1.60-1.76%	1.36-1.49%	1.60-1.76%
Expected dividend yield	—	—	—	—

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The estimated grant-date fair value of non-employee stock options was calculated using the Black-Scholes option-pricing model.  The options granted on September 8, 2015 were revalued using the following assumptions:

	Three months ended		Six Months Ended
	June 30,		June 30,
	2016	2015	2016	2016
Weighted-average volatility	78.30-80.04%	—	78.30-80.04%	—
Weighted-average expected term (years)	9.19-9.25	—	9.19-9.44	—
Risk-free interest rate	1.44-1.66%	—	1.44-1.74%	—
Expected dividend yield	—	—	—	—

11. Related Party Transactions

The Company was a majority-owned subsidiary of Napo. Additionally, Lisa A. Conte, Chief Executive Officer of the Company, is also the interim Chief Executive Officer of Napo Pharmaceuticals, Inc. The Company has total outstanding liabilities to Napo at June 30, 2016 and December 31, 2015 as follows:

	June 30,		December 31,
	2016		2015
Due to/(from) Napo	$	—	$	(6,008	)
Royalty payable to Napo	—		2,809
License fee payable to Napo	—		425,000
Total	$	—	$	421,801

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 three and six months ended June 30, 2016 and 2015:

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2016			2015			2016			2015
Net loss attributable to common shareholders	$	(3,657,475	)	$	(5,421,963	)	$	(7,641,679	)	$	(9,546,432	)
Shares used to compute net loss per common share, basic and diluted	10,314,106			5,410,661			9,810,730			4,149,502
Net loss per share attributable to common shareholders, basic and diluted	$	(0.35	)	$	(1.00	)	$	(0.78	)	$	(2.30	)

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 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 three and six months ended June 30, 2016 and 2015 because their inclusion would be anti-dilutive:

	June 30,	June 30,
	2016	2015
Options	1,464,265	815,284
Warrants to purchase common stock	748,872	748,872
Restricted stock units	20,789	55,536
Total	2,233,926	1,619,692

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13. 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 June 30, 2016.

14. Subsequent Events

The Company completed an evaluation of the impact of subsequent events through August 15, 2016, the date these financial statements were issued.

Common Stock Purchase Agreement

On July 14, 2016, pursuant to the Common Stock Purchase Agreement, the Company sold an additional 100,000 shares of the Company’s common stock in exchange for $183,670 of cash proceeds.

On July 25, 2016, pursuant to the Common Stock Purchase Agreement, the Company sold an additional 100,000 shares of the Company’s common stock in exchange for $177,000 of cash proceeds.

On August 9, 2016, pursuant to the Common Stock Purchase Agreement, the Company sold an additional 100,000 shares of the Company’s common stock in exchange for $146,690 of cash proceeds.

Convertible Notes Payable

In conjunction with the $150,000 2015 convertible note payable to Serious Change II LP, the Company entered into an amendment to delay the repayment of the debt and related interest originally due on July 31, 2016 to October 31, 2016.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of financial condition and results of operations should be read together with the condensed consolidated financial statements and the related notes included in Item 1 of Part I of this Quarterly Report on Form 10-Q, and with our audited financial statements and the related notes included in our Annual Report on Form 10-K for the year ended December 31, 2015.

The discussion and analysis below includes certain forward-looking statements related to our research and development and commercialization of our products in the U.S., our future financial condition and results of operations and potential for profitability, the sufficiency of our cash resources, our ability to obtain additional equity or debt financing, if needed, possible partnering or other strategic opportunities for the development of our products, as well as other statements related to the progress and timing of product development, present or future licensing, collaborative or financing arrangements or that otherwise relate to future periods, which are all forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995. These statements represent, among other things, the expectations, beliefs, plans and objectives of management and/or assumptions underlying or judgments concerning the future financial performance and other matters discussed in this document. The words “may,” “will,” “should,” “plan,” “believe,” “estimate,” “intend,” “anticipate,” “project,” and “expect” and similar expressions are intended to connote forward-looking statements. All forward-looking statements involve certain risks, uncertainties and other factors described in our Annual Report on Form 10-K, that could cause our actual commercialization efforts, financial condition and results of operations, and business prospects and opportunities to differ materially from these expressed in, or implied by, those forward-looking statements. We caution investors not to place significant reliance on the forward-looking statements contained in this report. These statements, like all statements in this report, speak only as of the date of this report (unless another date is indicated), and we undertake no obligation to update or revise forward-looking statements.

Overview

We are an animal health company focused on developing and commercializing first-in-class gastrointestinal products for companion and production animals, foals, and high value horses. Canalevia is our lead prescription drug product candidate, intended for the treatment of various forms of diarrhea in dogs. We achieved statistically significant results in a canine proof-of-concept study completed in February 2015, supporting the conclusion that Canalevia treatment is superior to placebo, with 91% of the Canalevia-treated dogs achieving a formed stool during the study versus 50% of the placebo-treated dogs. As we announced in December 2015, the pivotal clinical field study to evaluate the safety and effectiveness of Canalevia for acute diarrhea in dogs is underway. Jaguar has received Minor Use in a Minor Species (MUMS) designation for Canalevia for Chemotherapy-Induced Diarrhea (CID) in dogs. Canalevia is a canine-specific formulation of crofelemer, an active pharmaceutical ingredient isolated and purified from the Croton lechleri tree, which is sustainably harvested. A human-specific formulation of crofelemer, Fulyzaq, was approved by the FDA in 2012 for the symptomatic relief of noninfectious diarrhea in adults with HIV/AIDS on antiretroviral therapy. Members of our management team developed crofelemer while at Napo Pharmaceuticals, Inc. (Napo), which was Jaguar’s parent company until May 13, 2015. Neonorm Calf and Neonorm Foal are our lead non-prescription products. The reception among users of Neonorm Foal, an anti-diarrheal product we launched for newborn horses early this year, as well as in calves, has been quite positive. The clinically-proven performance of Neonorm Foal, in combination with our heightened understanding of market needs within the global equine space, is driving our increased focus on equine product development. SB-300 is Jaguar’s prescription drug product candidate for the treatment of gastrointestinal ulcers in horses. SB-300 is a pharmaceutical formulation of a standardized botanical extract. Neonorm is a standardized botanical extract derived from the Croton lechleri tree. We launched Neonorm Calf in the United States at the end of 2014 for preweaned dairy calves, and as of March 1, 2016, we have shipped $638,000 of the product to distributors. Canalevia and Neonorm are distinct products that are formulated to address specific species and market channels. We have filed nine investigational new animal drug applications, or INADs, with the FDA and intend to develop species-specific formulations of Neonorm in six additional target species, and Canalevia for both cats and dogs. We recently released data from two studies conducted by a Chinese investigator showing remarkable resolution of diarrhea and cure of piglets afflicted with diarrhea and treated with Neonorm powder administered in water.  We have entered into a term sheet with a potential business partner in China for exclusive distribution of Neonorm powder for dairy calves and pigs in China.

Since inception, we have been primarily focused on designing and conducting studies of Canalevia to treat diarrhea in dogs and for Neonorm to improve gut health and normalize stool formation in preweaned dairy calves and foals. We are also focused on developing a full suite of equine products to support and improve gastrointestinal health in foals and adult horses. Gastrointestinal conditions such as acute diarrhea, ulcers and diarrhea associated with acute colitis can be extremely debilitating for horses, and present a significant economic and emotional burden for veterinarians and owners around the world. A portion of our activities has also been focused on other efforts associated with being a recently formed company, including securing necessary intellectual property, recruiting management and key employees and financing activities.

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In December 2015, we met benchmarks which reduced our restricted cash balance by $1.5 million from $4.5 million to $3.0 million as required by Hercules Technology Growth Capital, Inc., (“Hercules Technology”), pursuant to the Loan and Security Agreement dated August 18, 2015, between us, certain of our subsidiaries, the several banks and other financial institutions or entities from time to time party thereto as lenders and Hercules Technology.  Beginning March 2016, the restricted cash balance began to be reduced by amounts equal to principal payments on the debt.

On February 8, 2016, we completed a secondary public offering of its common stock. In connection with this secondary public offering, we issued and sold 2,000,000 shares of common stock at a price to the public of $2.50 per share. As a result of the secondary public offering, the Company received $4.1 million in net proceeds, after deducting underwriting discounts and commissions of $373,000 and offering expenses of $497,000.

In April 2016, the Loan and Security Agreement dated August 18, 2015, between us, certain of our subsidiaries, the several banks and other financial institutions or entities from time to time party thereto as lenders and Hercules Technology Growth Capital, Inc., (“Hercules Technology”) was amended upon which the Company repaid $1.5 million of the debt out of restricted cash. The amendment modified the repayment amortization schedule providing a four month period of interest only payments for the period from May through August 2016.

In June 2016, we entered into a common stock purchase agreement with a private investor (the “Common Stock Purchase Agreement”), which provides that, upon the terms and subject to the conditions and limitations set forth therein, the investor is committed to purchase up to an aggregate of $15.0 million in our common stock over the approximately 30-month term of the agreement.  Upon execution of the Common Stock Purchase Agreement, we sold 222,222 shares of our common stock to the investor at $2.25 per share for net proceeds of $448,732, reflecting gross proceeds of $500,000  and offering expenses of $51,268.   In consideration for entering into the Common Stock Purchase Agreement, we issued 456,667 shares of our common stock to the investor.  Concurrently with entering into the Common Stock Purchase Agreement, we also entered into a registration rights agreement with the investor (the “Registration Rights Agreement”), in which we agreed to file one or more registration statements, as permissible and necessary to register under the Securities Act of 1933, as amended, the sale of the shares of our common stock that have been and may be issued to the investor under the Common Stock Purchase Agreement.  On June 22, 2016, we filed a registration statement on Form S-1 (File No. 333-212173) pursuant to the terms of the Registration Agreement, which registration statement was declared effective on July 8, 2016.

Financial Operations Overview

We were incorporated in June 2013 in Delaware. Napo formed our company to develop and commercialize animal health products. Prior to our incorporation, the only activities of Napo related to animal health were limited to the retention of consultants to evaluate potential strategic alternatives. We were previously a majority-owned subsidiary of Napo. However, following the closing of our May 2015 initial public offering, we are no longer majority-owned by Napo.

We have not generated any material revenue to date and expect to continue to incur significant research and development and other expenses. Our net loss attributable to common stockholders was $7.6 million in the six months ended June 30, 2016 and 2015, and $16.6 million and $9.3 million for the years ended December 31, 2015 and 2014. As of June 30, 2016, we had total stockholders’ equity of $1.6 million and cash and cash equivalents of $3.9 million. We expect to continue to incur losses 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 API manufacturing capabilities and begin commercialization activities. As a result, we expect to experience increased expenditures for 2016.

Revenue

We sell our primary commercial product Neonorm to distributors under agreements that may provide distributor price adjustments and rights of return under certain circumstances. Until we have sufficient sales history and pipeline visibility, we will defer revenue and costs of distributor sales until products are sold by the distributor to the distributor’s customers. Revenue recognition depends on notification either directly from the distributor that product has been sold to the distributor’s customer, when we have access to the data. Deferred revenue on shipments to distributors will reflect the estimated effects of distributor price adjustments, if any, and the estimated amount of gross margin expected to be realized when the distributor sells through product purchased from the Company. Accounts receivable from distributors will be recognized and included in deferred revenue when we ship product to the distributor. We relieve inventory and recognize revenue typically upon shipment by the distributor to their customer. While we did not have revenue in the year ended December 31, 2014, we did recognize $258,381 in revenue for the year ended December 31, 2015, and $62,289 in the six months ended June 30, 2016.

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Cost of Revenue

Cost of revenue expenses consist of costs to manufacture, package and distribute Neonorm that distributors have sold through to their customers.

Research and Development Expense

Research and development expenses consist primarily of clinical and contract manufacturing expense, personnel and related benefit expense, stock-based compensation expense, employee travel expense, reforestation expenses and expenses attributable to services received from Napo under the Service Agreement. Clinical and contract manufacturing expense consists primarily of costs to conduct stability, safety and efficacy studies, and manufacturing startup expenses at an outsourced API provider in Italy.

We typically use our employee and infrastructure resources across multiple development programs. 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. We cannot determine with certainty the duration and completion costs of the current or future development activities.

The duration, costs and timing of trials, formulation studies and development of our prescription drug and non-prescription products will depend on a variety of factors, including:

·the scope, rate of progress, and expense of our ongoing, as well as any additional clinical trials, formulation studies and other research and development activities;

·future clinical trial and formulation study results;

·potential changes in government regulations; and

·the timing and receipt of any regulatory approvals.

A change in the outcome of any of these variables with respect to the development of a prescription drug product candidate or non-prescription product could mean a significant change in the costs and timing associated with our development activities.

We expect research and development expense to increase significantly as we add personnel, commence additional clinical studies and other activities to develop our prescription drug product candidates and non-prescription products.

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Sales and Marketing Expense

Sales and marketing expenses consist of personnel and related benefit expense, direct sales and marketing expense, employee travel expense, and management consulting expense. We currently incur sales and marketing expenses to promote Neonorm sales.

We expect sales and marketing expense to increase significantly as we develop and commercialize new products and grow our existing Neonorm market. We will need to add sales and marketing headcount to promote the sales of existing and new products.

General and Administrative Expense

General and administrative expenses consist of personnel and related benefit expense, stock-based compensation expense, employee travel expense, legal and accounting fees, rent and facilities expense, and management consulting expense.

We expect general and administrative expense to increase in order to enable us to effectively manage the overall growth of the business. This will include adding headcount, enhancing information systems and potentially expanding corporate facilities.

Interest Expense

Interest expense consists primarily of interest on convertible promissory notes, the standby bridge financing commitment and the loan and security agreement (long-term debt arrangement). It also includes interest expense and the amortization of a beneficial conversion feature related to convertible promissory notes issued in June and December 2014.

Results of Operations

Comparison of the six months ended June 30, 2016 and 2015

The following table summarizes the Company’s results of operations with respect to the items set forth in such table for the six months ended June 30, 2016 and 2015 together with the change in such items in dollars and as a percentage:

	Six months Ended
	June 30,						Variance
	2016			2015			$			%
	(In thousands of $)
Revenue	$	62		$	125		$	(63	)	(50.4)%
Operating Expenses
Cost of revenue	27			51			(24		)	(47.1)%
Research and development expense	3,705			3,174			531			16.7%
Sales and marketing expense	218			354			(136		)	(38.4)%
General and administrative expense	3,205			2,394			811			33.9%
Total operating expenses	7,155			5,973			1,182			19.8%
Loss from operations	(7,093		)	(5,848		)	(1,245		)	21.3%
Interest expense, net	(539		)	(2,870		)	2,331			(81.2)%
Other income	(10		)	19			(29		)	(152.6)%
Change in fair value of warrants	—			(501		)	501			(100.0)%
Net loss and comprehensive loss	$	(7,642	)	$	(9,200	)	$	1,558		(16.9)%

Revenue and Cost of Revenue

Revenue and related cost of revenue for the six months ended June 30, 2016 reflects sell-through of our Neonorm Calf and Neonorm Foal products to our distributors. We defer revenue and cost of revenue until products are sold by the distributor to the distributor’s end customers and recognition will depend on notification from the distributor that product has been sold to the distributor’s end customer.  We experienced a reduction in unit sales in the six months ended June 30, 2016 compared to the same period in 2015 resulting in the decrease in revenue.  The decrease in cost of revenue was consistent with the decrease in revenue.  We are increasing our efforts to promote sales growth.

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Research and Development Expense

The following table presents the components of research and development expense for the six months ended June 30, 2016 and 2015 together with the change in such components in dollars and as a percentage:

	Six months Ended
	June 30,				Variance
	2016		2015		$			%
	(In thousands of $)
Personnel and related benefits	$	1,426	$	835	$	591		70.8%
Materials expense and tree planting	46		—		46			0.0%
Travel, other expenses	223		114		109			95.6%
Clinical and contract manufacturing	1,323		1,670		(347		)	(20.8)%
Stock-based compensation	63		346		(283		)	(81.8)%
Other	624		209		415			198.6%
Total	$	3,705	$	3,174	$	531		16.7%

We plan to increase our research and development expense as we continue developing our drug candidates.

We increased Research and development expense $531,000 from $3.2 million in the six months ended June 30, 2015 to $3.7 million for the same period in 2016. We added headcount to enable us to make significant progress in the development of certain drug candidates that resulted in the increase of $591,000 in personnel and related benefit expenses, while carefully controlling spend in clinical trails and contract manufacturing.  Stock-based compensation decreased $283,000 from $346,000 in the six months ended June 30, 2015 to $63,000 in the same period in 2016 primarily due to the reduction in the fair market value of our common stock.  Other expenses increased $415,000 from $209,000 in the six months ended June 30, 2015 to $624,000 in the same period in 2016 primarily due to a $376,000 increase in consulting expenses from $11,000 in the six months ended June 30, 2015 to $387,000 in the same period in 2016. We are using outside consultants primarily in clinical development.

We also continued our reforestation efforts, resulting in increased expense of $46,000 in the six months ended June 30, 2016.  We value and take to heart the responsibility to replenish trees consumed in order to extract the raw material to manufacture our primary commercial product and the drug product for use in clinical trials.

Sales and Marketing Expense

Sales and marketing expense decreased $136,000 from $354,000 in the six months ended June 30, 2015 to $218,000 in the same period in 2016 primarily due to a decrease in headcount.  Sales and marketing expenses consist of personnel costs, direct marketing, travel and consulting expenses.  We plan to expand sales and marketing spend to promote our Neonorm products.

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General and Administrative Expense

The following table presents the components of general and administrative expense for the six months ended June 30, 2016 and 2015 together with the change in such components in dollars and as a percentage:

	Six months Ended
	June 30,				Variance
	2016		2015		$			%
	(In thousands of $)
Personnel and related benefits	$	1,269	$	995	$	274		27.5%
Accounting fees	169		267		(98		)	(36.7)%
Third-party consulting fees and Napo service fees	154		71		83			116.9%
Legal fees	383		307		76			24.8%
Travel	181		186		(5		)	(2.7)%
Stock-based compensation	158		247		(89		)	(36.0)%
Rent and lease expense	213		—		213			0.0%
Public company expenses	186		—		186			0.0%
Other	492		321		171			53.3%
Total	$	3,205	$	2,394	$	811		33.9%

We expect to incur additional general and administrative expense as a result of operating as a public company, including expenses related to compliance with the rules and regulations of the SEC, additional insurance expenses, investor relations activities and other administrative and professional services.

Our general and administrative expenses increased $811,000 from $2.4 million in the six months ended June 30, 2015 to $3.1 million for the same period in 2016. In 2015, we became a public company and added headcount that has resulted in increases of $274,000 in personnel expense. Stock-based compensation decreased $89,000 from $247,000 in the six months ended June 30, 2015 to $158,000 in the same period in 2016 primarily due to the reduction in the fair market value of our common stock.  We incurred direct public company expenses of $186,000 in the six months ended June 30, 2016 primarily for public and investor relations expense, NASDAQ fees, printer fees for SEC filings, and board of directors expenses.  We controlled our professional services expenses, reducing our audit fees by $98,000, while limiting increases to legal fees and consulting services to $76,000 and $83,000, respectively.  Rent expense increased $139,000 to $213,000 as a result of our moving into new facilities to accommodate the added headcount (rent for office space in the three months ended June 30, 2015 was $74,000 and is included in the “other” category). Other expenses all other expenses, including insurance costs also increased as a result of becoming a public company in 2015.

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Comparison of the three months ended June 30, 2016 and 2015

The following table summarizes the Company’s results of operations with respect to the items set forth in such table for the three months ended June 30, 2016 and 2015 together with the change in such items in dollars and as a percentage:

	Three Months Ended
	June 30,						Variance
	2016			2015			$			%
	(In thousands of $)
Revenue	$	24		$	63		$	(39	)	(62)%
Operating Expenses
Cost of revenue	9			17			(8		)	(47.1)%
Research and development expense	1,953			1,751			202			11.5%
Sales and marketing expense	53			164			(111		)	(67.7)%
General and administrative expense	1,417			1,300			117			9.0%
Total operating expenses	3,432			3,232			200			6.2%
Loss from operations	(3,408		)	(3,169		)	(239		)	7.5%
Interest expense, net	(255		)	(1,937		)	1,682			(86.8)%
Other income	5			16			(11		)	(68.8)%
Change in fair value of warrants	—			(172		)	172			(100.0)%
Net loss and comprehensive loss	$	(3,658	)	$	(5,262	)	$	1,604		(30.5)%

Revenue and Cost of Revenue

Revenue and related cost of revenue for the three months ended June 30, 2016 reflects sell-through of our Neonorm Calf and Neonorm Foal products to our distributors. We defer revenue and cost of revenue until products are sold by the distributor to the distributor’s end customers and recognition will depend on notification from the distributor that product has been sold to the distributor’s end customer.  We experienced a reduction in unit sales in the three months ended June 30, 2016 compared to the same period in 2015 resulting in the decrease in revenue.  The decrease in cost of revenue was consistent with the decrease in revenue.  We are increasing our efforts to promote sales growth.

Research and Development Expense

The following table presents the components of research and development expense for the three months ended June 30, 2016 and 2015 together with the change in such components in dollars and as a percentage:

	Three Months Ended
	June 30,				Variance
	2016		2015		$			%
	(In thousands of $)
Personnel and related benefits	$	764	$	432	$	332		76.9%
Materials expense and tree planting	14		—		14			0.0%
Travel, other expenses	115		57		58			101.8%
Clinical and contract manufacturing	620		847		(227		)	(26.8)%
Stock-based compensation	37		328		(291		)	(88.7)%
Other	403		87		316			363.2%
Total	$	1,953	$	1,751	$	202		11.5%

We plan to increase our research and development expense as we continue developing our drug candidates.

We increased Research and development expense $202,000 from $1.8 million in the three months ended June 30, 2015 to $2.0 million for the same period in 2016. We added headcount to enable us to make significant progress in the development of certain drug candidates that resulted in the increase of $332,000 in personnel and related benefit expenses, while carefully controlling spend in clinical trails and contract manufacturing.  Stock-based compensation decreased $291,000 from $328,000 in the three months ended June 30, 2015 to $37,000 in the same period in 2016 primarily due to the reduction in the fair market value of our common stock.  Other expenses increased $316,000 from $87,000 in the three months ended June 30, 2015 to $403,000 in the same period in 2016 primarily due to a $210,000 increase in consulting expenses from $4,000 in the three months ended June 30, 2015 to $214,000 in the same period in 2016, and a $133,000 increase in product formulation expense from $0 in the three months ended June 30, 2015 to $133,000 in the same period in 2016.  We are using outside consultants primarily in clinical development.

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We also continued our reforestation efforts, resulting in increased expense of $14,000 in the three months ended June 30, 2016.  We value and take to heart the responsibility to replenish trees consumed in order to extract the raw material to manufacture our primary commercial product and the drug product for use in clinical trials.

Sales and Marketing Expense

Sales and marketing expense decreased $111,000 from $164,000 in the three months ended June 30, 2015 to $53,000 in the same period in 2016 primarily due to the elimination of headcount in the second quarter of 2016.  Sales and marketing expenses consist of personnel costs, direct marketing, travel and consulting expenses.  We plan to expand sales and marketing spend to promote our Neonorm products.

General and Administrative Expense

The following table presents the components of general and administrative expense for the three months ended June 30, 2016 and 2015 together with the change in such components in dollars and as a percentage:

	Three Months Ended
	June 30,				Variance
	2016		2015		$			%
	(In thousands of $)
Personnel and related benefits	$	584	$	529	$	55		10.4%
Accounting fees	47		65		(18		)	(27.7)%
Third-party consulting fees and Napo service fees	33		21		12			57.1%
Legal fees	196		163		33			20.2%
Travel	76		108		(32		)	(29.6)%
Stock-based compensation	88		212		(124		)	(58.5)%
Rent and lease expense	112		—		112			0.0%
Public company expenses	89		—		89			0.0%
Other	192		202		(10		)	(5.0)%
Total	$	1,417	$	1,300	$	117		9.0%

We expect to incur additional general and administrative expense as a result of operating as a public company, including expenses related to compliance with the rules and regulations of the SEC, additional insurance expenses, investor relations activities and other administrative and professional services.

Our general and administrative expenses increased $117,000 from $1.3 million in the three months ended June 30, 2015 to $1.4 million for the same period in 2016. In 2015, we became a public company and added headcount that has resulted in increases of $274,000 in personnel expense. Stock-based compensation decreased $124,000 from $212,000 in the three months ended June 30, 2015 to $88,000 in the same period in 2016 primarily due to the reduction in the fair market value of our common stock. We incurred direct public company expenses of $89,000 in the three months ended June 30, 2016 primarily for public and investor relations expense, NASDAQ fees, printer fees for SEC filings, and board of directors expenses.  We controlled our professional services expenses, reducing our audit fees by $18,000, while limiting increases to legal fees and consulting services to $33,000 and $12,000, respectively.  Rent expense increased $77,000 to $112,000 as a result of our moving into new facilities to accommodate the added headcount (rent for office space in the three months ended June 30, 2015 was $35,000 and is included in the “other” category). Other expenses all other expenses, including insurance costs also increased as a result of becoming a public company in 2015.

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Liquidity and Capital Resources

Sources of Liquidity

We have an accumulated deficit of $33.3 million as a result of incurring net losses since our inception as we have not generated significant revenue through the current fiscal quarter. Our net loss and comprehensive loss was $801,000 for the period from inception to December 31, 2013, $8.6 million for the year ended December 31, 2014, $16.3 million for the year ended December 31, 2015, and $7.6 million for the six months ended June 30, 2016. We expect to continue to incur additional losses through the end of fiscal year 2016 and in future years due to expected significant expenses for toxicology, safety and efficacy clinical trials of our products and product candidates, for establishing contract manufacturing capabilities, and for the commercialization of one or more of our product candidates, if approved.

We had cash and cash equivalents of $3.9 million as of June 30, 2016 compared to $7.7 million as of December 31, 2015. We do not believe our existing cash and cash equivalents will be sufficient to meet our anticipated cash requirements for the next 12 months. Our independent registered public accounting firm has included an explanatory paragraph in its audit report included in our Form 10-K regarding our assessment of substantial doubt about our ability to continue as a going concern. Our financial statements do not include any adjustments that may result from the outcome of this uncertainty.

To date, we have funded our operations primarily through the issuance of equity securities, short-term convertible promissory notes, and long-term debt, in addition to sales of Neonorm, our commercial product:

·In 2013, we received $400 from the issuance of 2,666,666 shares of common stock to our parent Napo Pharmaceuticals, Inc. We also received $519,000 of net cash from the issuance of convertible promissory notes in an aggregate principal amount of $525,000. These notes were all converted to common stock in 2014.

·In 2014, we received $6.7 million in proceeds from the issuance of convertible preferred stock. Effective as of the closing of our initial public offering, the 3,015,902 shares of outstanding convertible preferred stock were automatically converted into 2,010,596 shares of common stock. Following our initial public offering, there were no shares of preferred stock outstanding.

·In 2014, we received $1.1 million from the issuance of convertible promissory notes in an aggregate principal amount of $1.1 million. These notes were converted to common stock upon the effectiveness of the initial public offering in May of 2015. In August 2014, we entered into a standby line of credit with an individual, who is an accredited investor, for up to $1.0 million. To date, we had not made any drawdowns under this facility. Also, in October of 2014, as amended and restated in December 2014, we entered into a $1.0 million standby bridge loan which was repaid in 2015.

·In 2015, we received $1.25 million in exchange for $1.25 million of convertible promissory notes, of which $1.0 million was converted to common stock in 2015, and $100,000 was repaid in 2015. The remaining $150,000 remains outstanding.

·In May 2015, we received net proceeds of $15.9 million upon the closing of our initial public offering, gross proceeds of $20.0 million (2,860,000 shares at $7.00 per share) net of $1.2 million of underwriting discounts and commissions and $3.3 million of offering expenses, including $0.4 million of non-cash expense. These shares began trading on The NASDAQ Capital Market on May 13, 2015.

·In 2015, we received net proceeds of $5.9 million from the issuance of long-term debt. We entered into a loan and security agreement with a lender for up to $8.0 million, which provided for an initial loan commitment of $6.0 million. Under the loan agreement we are required to maintain $4.5 million of the proceeds in cash, which amount may be reduced or eliminated on the achievement of certain milestones. An additional $2.0 million is available contingent on the achievement of certain further milestones. The agreement has a term of three years, with interest only payments through February 29, 2016. Thereafter, principal and interest payments will be made with an interest rate of 9.9%. Additionally, there will be a balloon interest payment of $560,000 on August 1, 2018. This amount is being recognized over the term of the loan agreement and the effective interest rate, considering the balloon payment, is 15.0%. Our proceeds are net of a $134,433 debt discount under the terms of such agreement.

·In 2014 and 2015, we received $24,000 and $531,000, respectively, in cash from sales of Neonorm to distributors.

·In 2015, we received approximately $13,000 in proceeds from the exercise of stock options.

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·In 2016, we received net proceeds of $4.1 million upon the closing of our follow-on public offering, reflecting gross proceeds of $5.0 million (2.0 million shares at $2.50 per share) net of $373,011 of underwriting discounts and commissions and $496,887 of offering expenses.

·In 2016, we entered into the Common Stock Purchase Agreement with a private investor.  Under the terms of the agreement, we may sell up to $15.0 million in common stock to the investor during the approximately 30-month term of the agreement.    Upon execution of the Common Stock Purchase Agreement, we sold 222,222 shares of our common stock to the investor at $2.25 per share for net proceeds of $448,732, reflecting gross proceeds of $500,000 and offering expenses of $51,268.   In consideration for entering into the Common Stock Purchase Agreement, we issued 456,667 shares of our common stock to the investor.  On July 14, 2016, we sold an additional 100,000 shares of common stock under the Common Stock Purchase Agreement in exchange for $183,670 of cash proceeds.  On July 25, 2016, we sold an additional 100,000 shares of common stock under the Common Stock Purchase Agreement in exchange for $177,000 of cash proceeds. And on August 9, 2016, we sold 100,000 shares of common stock under the Common Stock Purchase Agreement in exchange for $146,690 of cash proceeds.

We expect our expenditures will continue to increase as we continue our efforts to develop animal health products, expand our commercially available Neonorm product and continue development of Canalevia in the near term. We have agreed to pay Indena S.p.A. fees of approximately €2.1 million under a memorandum of understanding relating to the establishment of our commercial API manufacturing arrangement in Italy. As of June 30, 2016, we remitted €1.95 million of the €2.1 million.  We paid the final €150,000 on July 14, 2016.

We do not believe our current capital is sufficient to fund our operating plan through June 2017. We will need to seek additional funds sooner than planned, through public or private equity or debt financings or other sources, such as strategic collaborations. Such financing may result in dilution to stockholders, imposition of debt covenants and repayment obligations or other restrictions that may affect our business. In addition, 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. If we do not generate upfront fees from any anticipated arrangements, it would have a negative effect on our operating plan.

Cash Flows for the six months ended June 30, 2016 compared to the six months ended June 30, 2015

The following table shows a summary of cash flows for the six months ended June 30, 2016 and 2015:

	Six Months Ended
	June 30,
	2016			2015
	(in thousands of $)
Total cash used in operations	$	(8,303	)	$	(7,031	)
Cash flows from financing activities	1,757			—
Total cash provided by financing activities	2,723			18,564
	$	(3,823	)	$	11,534

Cash Used in Operating Activities

During the six months ended June 30, 2016, cash used in operating activities resulted from our net loss of $7.6 million, offset by non-cash accretion of debt discounts and debt issuance costs of $269,000, stock-based compensation of $229,000, depreciation expense of $17,000, net of changes in operating assets and liabilities of $1.2 million.

During the six months ended June 30, 2015 cash used in operating activities was the result of our net loss of $9.2 million, offset by non-cash accretion of debt discounts of $2.5 million, non-cash revaluation of warrant liability of $502,000 and stock-based compensation of $628,000, net of changes in operating assets and liabilities of $1.5 million.

Cash Provided by Investing Activities

During the six months ended June 30, 2016, cash provided by investing activities primarily consisted of $1.9 million of a release  of restricted cash that resulted from principal payments on our long-term debt, net of $98,000 in purchases of property and equipment.

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Cash Provided by Financing Activities

During the six months ended June 30, 2016, cash provided by financing activities primarily consisted $4.1 million in net cash received in our secondary public offering, net of commissions and certain offering expenses, and $448,732 in net cash received in the initial sale under the Common Stock Purchase Agreement, net of fees and certain offering expenses, offset by $1.9 million in principal payments on our long-term debt.

During the six months ended June 30, 2015, cash provided by financing activities primarily consisted of $18.4 million in net proceeds from the issuance of common stock in our initial public offering and $1.2 million in gross proceeds from the issuance of convertible promissory notes; net of $1.1 million in payments on convertible promissory notes and notes payable.

Description of Indebtedness

Standby Lines of Credit, Convertible Notes and Warrant Issuances

Convertible Notes and Warrants

2013 Convertible Notes

From July through September 2013, we issued four convertible promissory notes (collectively the “Notes”) for gross aggregate proceeds of $525,000 to various third-party lenders. The Notes bore interest at 8% per annum. The Notes automatically matured and the entire outstanding principal amount, together with accrued interest, was due and payable in cash at the earlier of July 8, 2015 (the “Maturity Date”) or ten business days after the date of consummation of the initial closing of a first equity round of financing. We consummated a first equity round of financing prior to the Maturity Date with a pre-money valuation of greater than $3.0 million, and, accordingly, principal and accrued interest was converted into shares of common stock at 75% of the purchase price paid by such equity investors. These notes were all converted to common stock in February 2014 upon the issuance of the convertible preferred stock. In February 2014, in connection with the first equity round of financing and issuance of the Series A convertible preferred stock, the noteholders exercised their option to convert their Notes into 207,664 shares of common stock and accrued interest was paid in cash to the noteholders. The accreted interest expense related to the discount on the Notes was $1,443 for the period from January 1, 2014 to the conversion date of the Notes. Upon conversion, the entire remaining debt discount of $4,071 was recorded as interest expense.

In connection with the Notes, we issued to the noteholders warrants, which became exercisable to purchase an aggregate of 207,664 shares of common stock as of the issuance of the first equity round of financing (the “Warrants”). The Warrants have a $2.53 exercise price, are fully exercisable from the initial date of the first equity round of financing, and have a five-year term subsequent to that date.

2014 Convertible Notes

On June 2, 2014, pursuant to a convertible note purchase agreement, we issued convertible promissory notes in the aggregate principal amount of $300,000 to two accredited investors, including a convertible promissory note for $200,000 to a board member to which Series A preferred stock was sold. These notes accrued interest at 3% per annum and automatically were to mature on June 1, 2015. Accrued interest was to be paid in cash upon maturity. Upon the closing of the IPO, the outstanding principal amount automatically converted into 53,571 shares common stock at $5.60, as amended in March 2015. Upon issuance, we analyzed the beneficial nature of the conversion terms and determined that a beneficial conversion feature (“BCF”) existed because the effective conversion price on issuance of the notes was less than the fair value at the time of the issuance. We calculated the value of the BCF using the intrinsic method and recorded a BCF of $75,000 as a discount to the notes payable and to additional paid-in capital. For the three and six months ended June 30, 2015, we amortized $12,530 and $30,713, respectively, of the discount, which has also been recorded as interest expense.

On July 16, 2014, pursuant to a convertible note purchase agreement, we issued a convertible promissory note in the principal amount of $150,000 to an accredited investor. This note accrued interest at 3% per annum and automatically was to mature on June 1, 2015. Accrued interest was to be paid in cash upon maturity. Upon the closing of the IPO, the outstanding principal amount automatically converted into 26,785 shares of common stock at $5.60, as amended in March 2015. Upon issuance, we analyzed the beneficial nature of the conversion terms and determined that a BCF existed because the effective conversion price was less than the fair value at the time of the issuance. We calculated the value of the BCF using the intrinsic method and recorded a BCF of $37,500 as a discount to the notes payable and to additional paid-in capital. For the three and six months ended June 30, 2015, we amortized $7,243 and $17,757 of the discount, respectively, which has also been recorded as interest expense.

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In connection with the Transfer Agreement (Note 7) we issued fully vested and immediately exercisable warrants to the Manufacturer to purchase 16,666 shares of common stock at 90% of the IPO price, amended to $6.30 in March 2015, for a period of five years. The fair value of the warrants, $37,840, was recorded as research and development expense and additional paid-in capital in June 2014. The warrants were originally valued using the Black-Scholes model with the following assumptions: stock price of $4.83, exercise price of $4.35, term of five years, volatility of 49%, dividend yield of 0%, and risk-free interest rate of 1.64%.

On December 23, 2014, pursuant to a convertible note purchase agreement, we issued convertible promissory notes in the aggregate principal amount of $650,000 to three accredited investors, including a convertible promissory note for $250,000 to the same board member to which the June 2, 2014 $200,000 convertible promissory note was issued and to which Series A preferred stock was sold. These notes accrued interest at 12% per annum and became payable within thirty days following the IPO. Upon consummation of our’s IPO, the noteholders converted the notes into 116,070 shares of common stock at a conversion price equal to 80% of the IPO price, amended to $5.60 in March 2015. In connection with these notes, we also issued to the lenders a fully vested warrant to purchase shares of our’s common stock at an exercise price equal to 80% of the IPO price, amended to $5.60 in March 2015. These warrants entitle the noteholders to purchase 58,035 shares of common stock. The fair value of the warrants, $147,943, was recorded as a debt discount and liability at December 23, 2014. We amortized $61,201 and $121,729 of this discount during the three and six months ended June 30, 2015. The warrants were originally valued using the Black-Scholes model with the following assumptions: stock price of $4.59, exercise price of $4.15, term of three years, volatility of 49%, dividend yield of 0%, and risk-free interest rate of 1.10%. Based on the circumstances, the value derived using the Black-Scholes model approximated that which would be obtained using a lattice model. The debt discount was be recorded as interest expense over the one hundred ninety days from issuance of the notes through their first maturity date of July 31, 2015, beginning in January 2015. We analyzed the beneficial nature of the conversion terms and determined that a BCF existed because the effective conversion price was less than the fair value at the time of the issuance. We calculated the value of the BCF using the intrinsic method. A BCF of $502,057 has been recorded as a discount to the notes payable and to additional paid-in capital. For the three and six months ended June 30, 2015, we amortized $207,690 and $413,098 of the BCF, respectively, which has also been recorded as interest expense.

2015 Convertible Notes

In February 2015, we issued convertible promissory notes to two accredited investors in the aggregate principal amount of $250,000. These notes were issued pursuant to the convertible note purchase agreement dated December 23, 2014. Principal and interest of $103,912 was paid in May 2015 for $100,000 of these notes.

Our remaining outstanding note of $150,000 is payable to Serious Change II LP at an effective simple interest rate of 12% per annum, and is due in full on July 31, 2016. The note is included in notes payable in we’s balance sheet.  We have accrued interest of $24,855, which is included in accrued liabilities in the Company’s balance sheet. The note remains outstanding as Serious Change II LP elected not to convert the note as per the terms of the agreement.  On July 28, 2016, we entered into an amendment to delay the repayment of the principal and related interest originally due on July 31, 2016 to October 31, 2016.

In March 2015, we entered into a non-binding letter of intent with Dechra Pharmaceuticals PLC (“Dechra”). In connection therewith, Dechra paid to us $1.0 million. At March 31, 2015, we had recorded this amount as a loan advance on the balance sheet. In April 2015, Dechra purchased $1.0 million of convertible promissory notes from us, the terms of which provided that such notes were to be converted into shares of our common stock upon the closing of an IPO at a conversion price of $5.60 per share. In connection with the purchase of the notes, we issued Dechra a warrant to purchase 89,285 shares at $5.60 per share, which expires December 31, 2017. The notes accrued simple interest of 12% per annum and, upon consummation of our IPO in May 2015, converted into 178,571 shares of our common stock. We analyzed the beneficial nature of the conversion terms and determined that a BCF existed because the effective conversion price was less than the fair value at the time of the issuance. We calculated the value of the BCF using the intrinsic method. A BCF of for the full face value was recorded as a discount to the notes payable and to additional paid-in capital. We amortized the entire BCF of $1.0 million by the end of May 2015 and recorded the amortized amounts as interest expense through that period.

As of June 30, 2016 and December 31, 2015, the convertible notes payable obligations were as follows:

	June 30,		December 31,
	2016		2015
Notes payable	$	150,000	$	150,000
Unamortized note discount	—		—
Net debt obligation	$	150,000	$	150,000

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Interest expense on the convertible notes payable was as follows:

	June 30,		June 30,
	2016		2015
Nominal interest	$	8,975	$	61,545
Amortization of debt discount	—		1,898,540
Repayment premium	—		100,800
	$	8,975	$	2,060,885

At June 30, 2016 and December 31, 2015, interest payable on convertible notes payable was $84,974 and $75,999, respectively.

Notes Payable—Bridge Loans

On October 30, 2014, we entered into a standby bridge financing agreement with two lenders, which was amended and restated on December 3, 2014, which provided a loan commitment in the aggregate principal amount of $1.0 million (the “Bridge”). Proceeds to us were net of a $100,000 debt discount under the terms of the Bridge and net of $104,000 of debt issuance costs. This debt discount and debt issuance costs were recorded as interest expense using the effective interest method, over the six month term of the Bridge. The Bridge became payable upon the IPO. The Bridge was repaid in May 2015, including interest thereon in an amount of $1,321,600. In connection with the Bridge, the lenders were granted warrants to purchase that number of shares of our common stock determined by dividing $1.0 million by the exercise price of 80% of the IPO price, amended to $5.60 in March 2015. The fair value of the warrants, $505,348, was originally recorded as a debt discount and liability at December 3, 2014. The warrants were originally valued using the Black-Scholes model with the following assumptions: stock price of $5.01, exercise price of $5.23, term of five years, volatility of 63%, dividend yield of 0%, and risk-free interest rate of 1.61%. Based on the circumstances, the value derived using the Black-Scholes model approximated that which would be obtained using a lattice model. The debt discount was recorded as interest expense over the six month term of the Bridge. Of the aggregate debt discount of $605,348 (warrants and original $100,000 discount), $521,291 was recorded as interest expense during the year ended December 31, 2015. Additional financing costs of $104,000 were incurred related to the Bridge and deferred on closing. These were recognized as interest expense over the six-month term of the Bridge using the effective interest method.  We amortized the remaining $86,667 of these deferred financing charges by the end of May 2015 was recorded the amortized amounts as interest expense.

The Company fully extinguished the debt in May of 2015.

Interest expense on the notes payable-bridge loans was as follows:

	June 30,		June 30,
	2016		2015
Nominal interest	$	—	$	100,000
Amortization of debt discount	—		521,291
Repayment premium	—		86,667
Debt issuance costs	—		100,800
	$	—	$	808,758

Standby Line of Credit

In August 2014, we entered into a standby line of credit with an accredited investor for up to $1.0 million pursuant to a Line of Credit and Loan Agreement dated August 26, 2014. In connection with the entry into the standby line of credit, we issued the lender a fully vested warrant to purchase 33,333 shares of common stock at an exercise price equal to 80% of the IPO price, amended to $5.60 in March 2015, which expires in August 2016. The fair value of the warrants, $114,300, was recorded as interest expense and additional paid-in capital in August 2014. The warrants were originally valued using the Black-Scholes model with the following assumptions: stock price of $8.00, exercise price of $6.40, term of two years, volatility of 52%, dividend yield of 0%, and risk-free interest rate of 0.52%. The line of credit expired on March 31, 2015 and there have been no drawdowns under the facility.

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Long-term Debt

In August 2015, we entered into a loan and security agreement with a lender for up to $8.0 million, which provided for an initial loan commitment of $6.0 million. The loan agreement requires us to maintain $4.5 million of the proceeds in cash, which may be reduced or eliminated on the achievement of certain milestones. An additional $2.0 million is available contingent on the achievement of certain further milestones. The agreement has a term of three years, with interest only payments through February 29, 2016. Thereafter, principal and interest payments will be made with an interest rate of 9.9%. Additionally, there will be a balloon payment of $560,000 on August 1, 2018. This amount is being recognized over the term of the loan agreement and the effective interest rate, considering the balloon payment, is 15.0%. Proceeds to us were net of a $134,433 debt discount under the terms of the loan agreement. This debt discount is being recorded as interest expense, using the interest method, over the term of the loan agreement. Under the agreement, we are entitled to prepay principal and accrued interest upon five days prior notice to the lender. In the event of prepayment, we are obligated to pay a prepayment charge. If such prepayment is made during any of the first twelve months of the loan agreement, the prepayment charge will be (a) during such time as we are required to maintain a minimum cash balance, 2% of the minimum cash balance amount plus 3% of the difference between the amount being prepaid and the minimum cash balance, and (b) after such time as we are no longer required to maintain a minimum cash balance, 3% of the amount being prepaid. If such prepayment is made during any time after the first twelve months of the loan agreement, 1% of the amount being prepaid.

On April 21, 2016, the loan and security was amended upon which we repaid $1.5 million of the debt out of restricted cash. The amendment modified the repayment amortization schedule providing a four month period of interest only payments for the period from May through August 2016.

As of June 30, 2016 and December 31, 2015, the net long-term debt obligation was as follows:

	June 30,			December 31,
	2016			2015
Debt and unpaid accrued end-of-term payment	$	4,406,121		$	6,115,797
Unamortized note discount	(71,584		)	(106,635		)
Unamortized debt issuance costs	(183,244		)	(206,235		)
Net debt obligation	$	4,151,293		$	5,802,927
Current portion of long-term debt	$	1,465,713		$	1,707,899
Long-term debt, net of discount	2,685,580			$	4,095,028
Total	$	4,151,293		$	5,802,927

Future principal payments under the long-term debt as of June 30, 2016 are as follows:

Years ending December 31 (except 2016 which is the six months ending December 31)	Amount
2016 July through December	$	633,003
2017	2,032,048
2018	1,479,246
Total future principal payments	$	4,144,297
2018 end-of-term payment	$	560,000
	$	4,704,297
Less: unaccreted end-of-term payment at June 30, 2016	$	(298,176	)
Debt and unpaid accrued end-of-term payment	$	4,406,121

The obligation at June 30, 2016 and December 31, 2015 includes an end-of-term payment of $560,000, which accretes over the life of the loan as interest expense. As a result of the debt discount and the end-of-term payment, the effective interest rate for the loan differs from the contractual rate.

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Interest expense on the long-term debt was as follows:

	Three months ended				Six months ended
	June 30,				June 30,
	2016		2015		2016		2015
Nominal Interest	$	112,374	$	—	$	261,000	$	—
Amortization of debt discount	16,640		—		35,051		—
Accretion of end-of-term payment	69,331		—		146,027		—
Debt issuance costs	51,924		—		87,940		—
	$	250,269	$	—	$	530,018	$	—

At June 30, 2016 and December 31, 2015, interest payable on long-term debt was $34,190 and $51,150, respectively.

At the IPO, our outstanding warrants to purchase convertible preferred stock were all converted to warrants to purchase common stock.

Warrant activity is summarized as follows:

	June 30,	June 30,
	2016	2015
Warrants outstanding January 1	748,872	494,267
Warrants issued	—	254,605
Warrants outstanding June 30	748,872	748,872

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.

Critical Accounting Policies and Significant Judgments and Estimates

The preparation of financial statements in conformity with U.S. generally accepted accounting principles, or 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. 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. While we base our estimates and judgments on our experience and on various other factors that we believe to be reasonable under the circumstances, actual results may differ from these estimates under different assumptions or conditions. We believe the following critical accounting policies used in the preparation of our financial statements require significant judgments and estimates. For additional information relating to these and other accounting policies, see Note 2 to our audited financial statements, appearing elsewhere in this report.

Accrued Research and Development Expenses

As part of the process of preparing our financial statements, we are required to estimate accrued research and development expenses. Estimated accrued expenses include fees paid to vendors and clinical sites in connection with our clinical trials and studies. We review new and open contracts and communicate with applicable internal and vendor personnel to identify services that have been performed on our behalf and estimate the level of service performed and the associated costs incurred for the service when we have not yet been invoiced or otherwise notified of the actual cost for accrued expenses. The majority of our service providers invoice us monthly in arrears for services performed or as milestones are achieved in relation to our contract manufacturers. We make estimates of our accrued expenses as of each reporting date.

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We base our accrued expenses related to clinical trials and studies on our estimates of the services received and efforts expended pursuant to contracts with vendors, our internal resources, and payments to clinical sites based on enrollment projections. The financial terms of the vendor agreements are subject to negotiation, vary from contract to contract and may result in uneven payment flows. Payments under some of these contracts depend on factors such as the successful enrollment of animals and the completion of development milestones. We estimate the time period over which services will be performed and the level of effort to be expended in each period. If the actual timing of the performance of services or the level of effort varies from our estimate, we adjust the related expense accrual accordingly on a prospective basis. If we do not identify costs that have been incurred or if we underestimate or overestimate the level of services performed or the costs of these services, our actual expenses could differ from our estimates. To date, we have not made any material adjustments to our estimates of accrued research and development expenses or the level of services performed in any reporting period presented.

The Company expenses the total cost of a certain long-term manufacturing development contract ratably over the estimated life of the contract, or the total amount paid if greater.

Accounting for Stock-Based Compensation

During 2013, we did not issue any stock awards to employees, directors or consultants and did not incur any stock based compensation expense. Beginning in the second quarter of 2014, we awarded options and restricted stock units. We measure stock-based awards granted to employees and directors at fair value on the date of grant and recognize 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.

Key Assumptions.  Our Black-Scholes-Merton option-pricing model requires the input of highly subjective assumptions, including the fair value of the underlying common stock, the expected volatility of the price of our common stock, the expected term of the option, risk-free interest rates and the expected dividend yield of our common stock. These estimates involve inherent uncertainties and the application of management’s judgment. If factors change and different assumptions are used, our stock-based compensation expense could be materially different in the future. These assumptions are estimated as follows:

·Fair value of our common stock—Our common stock is valued by reference to the publicly-traded price of our common stock.

·Expected volatility—As we do not have any trading history for our common stock, the expected stock price volatility for our common stock was estimated by taking the average historic price volatility for industry peers based on daily price observations for common stock values over a period equivalent to the expected term of our stock option grants. We did not rely on implied volatilities of traded options in our industry peers’ common stock because the volume of activity was relatively low. We intend to continue to consistently apply this process using the same or similar public companies until a sufficient amount of historical information regarding the volatility of our own common stock share price becomes available.

·Expected term—The expected term represents the period that our stock-based awards are expected to be outstanding. It is based on the “simplified method” for developing the estimate of the expected life of a “plain vanilla” stock option. Under this approach, the expected term is presumed to be the midpoint between the average vesting date and the end of the contractual term for each vesting tranche. We intend to continue to apply this process until a sufficient amount of historical exercise activity is available to be able to reliably estimate the expected term.

·Risk-free interest rate—The risk-free interest rate is based on the yields of U.S. Treasury securities with maturities similar to the expected term of the options for each option group.

·Dividend yield—We have never declared or paid any cash dividends and do not presently plan to pay cash dividends in the foreseeable future. Consequently, we used an expected dividend yield of zero.

·Forfeitures—We estimate forfeitures at the time of grant and revise those estimates periodically in subsequent periods. We use historical data to estimate pre-vesting option forfeitures and record stock-based compensation expense only for those awards that are expected to vest.

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Common Stock Valuations.  Prior to our IPO, the fair value of the common stock underlying our stock options was determined by our board of directors, which intended all options granted to be exercisable at a price per share not less than the per share fair value of our common stock underlying those options on the date of grant. The valuations of our common stock were determined in accordance with the guidelines outlined in the American Institute of Certified Public Accountants Practice Aid, Valuation of Privately-Held-Company Equity Securities Issued as Compensation. The assumptions we used in the valuation model are highly complex and subjective. We base our assumptions on future expectations combined with management judgment. In the absence of a public trading market, our board of directors, with input from management, exercised significant judgment and considered numerous objective and subjective factors to determine the fair value of our common stock as of the date of each option grant and stock award. These judgments and factors will not be necessary to determine the fair value of new awards once the underlying shares begin trading. For now we included the following factors:

·the prices, rights, preferences and privileges of our Series A preferred stock relative to those of our common stock;

·lack of marketability of our common stock;

·our actual operating and financial performance;

·current business conditions and projections;

·hiring of key personnel and the experience of our management;

·our stage of development;

·illiquidity of share-based awards involving securities in a private company;

·the U.S. capital market conditions; and

·the likelihood of achieving a liquidity event, such as an offering or a merger or acquisition of our company given prevailing market conditions.

The fair value per share of our common stock for purposes of determining stock-based compensation is now the closing price of our common stock as reported on The NASDAQ Stock Market on the applicable grant date.

Classification of Securities

We apply the principles of ASC 480-10 “Distinguishing Liabilities From Equity” and ASC 815-40 “Derivatives and Hedging—Contracts in Entity’s Own Equity” to determine whether financial instruments such as warrants, contingently issuable shares and shares subject to repurchase should be classified as liabilities or equity and whether beneficial conversion features exist.

Income Taxes

As of December 31, 2015, we had net operating loss carryforwards for federal and state income tax purposes of $19.1 million and $10.6 million, respectively, which will begin to expire in 2033, subject to limitations. Our management has evaluated the factors bearing upon the realizability of our deferred tax assets, which are comprised principally of net operating loss carryforwards. Our management concluded that, due to the uncertainty of realizing any tax benefits as of December 31, 2015, a valuation allowance was necessary to fully offset our deferred tax assets. We have evaluated our uncertain tax positions and determined that we have no liabilities from unrecognized tax benefits and therefore we have not incurred any penalties or interest. The Tax Reform Act of 1986, as amended, limits the use of net operating loss and tax credit carryforward in certain situations where changes occur in the stock ownership of a company. In the event we have a change in ownership in the future, as defined by the tax law, utilization of the carryforwards could be limited.

Recently Issued Accounting Pronouncements

Recent Accounting Pronouncements

In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-02, Leases (Topic 842), which provides guidance for accounting for leases. Under ASU 2016-02, we will be required to recognize the assets and liabilities for the rights and obligations created by leased assets. ASU 2016-02 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. We are currently evaluating the impact of the adoption of ASU 2016-02 on our financial statements.

In November 2015, the FASB issued ASU No. 2015-17, Balance Sheet Classification of Deferred Taxes (Topic 740), which simplifies the presentation of deferred income taxes. Under ASU 2015-17, deferred tax assets and liabilities are required to be classified as noncurrent, eliminating the prior requirement to separate deferred tax assets and liabilities into current and noncurrent. The new guidance is effective for us beginning on January 1, 2017, with early adoption permitted. The standard may be adopted prospectively or retrospectively to all periods presented. We are currently assessing the timing of adoption of the new guidance, but does not expect it will have a material impact on our Financial Statements.

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In April 2015, the FASB issued ASU No. 2015-03, Interest—Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs, to simplify the presentation of debt issuance costs by requiring debt issuance costs to be presented as a deduction from the corresponding debt liability. ASU 2015-03 will be effective for us beginning in its first quarter of 2016, however early adoption is permitted for financial statements that have not been previously issued. The guidance is to be applied retrospectively to all periods presented. We adopted ASU 2015-03 on December 31, 2015.

In August 2014, the FASB issued ASU No. 2014-15, “Presentation of Financial Statements—Going Concern (Subtopic 205-40)—Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern,” which provides guidance regarding management’s responsibility to assess whether substantial doubt exists regarding the ability to continue as a going concern and to provide related footnote disclosures. In connection with preparing financial statements for each annual and interim reporting period, management should evaluate whether there are condition or events, considered in the aggregate, that raise substantial doubt about the company’s ability to continue as a going concern within one year after the date that the financial statements are issued (or within one year after the date that the financial statements are available to be issued when applicable). This ASU is effective for the annual period ending after December 15, 2016, and for annual periods and interim periods thereafter. We are evaluating the new guidance and have not determined the impact this standard may have on our financial statements.

In June 2014, the FASB issued ASU No. 2014-12, “Compensation—Stock Compensation (Topic 718)”, which requires that a performance target that affects vesting and that could be achieved after the requisite service period be treated as a performance condition. The performance target should not be reflected in estimating the grant-date fair value of the awarded. Compensation cost should be recognized in the period in which it becomes probable that the performance target will be achieved and should represent the compensation cost attributable to the period(s) for which the requisite service has already been rendered. If the performance target becomes probable of being achieved before the end of the requisite service period, the remaining unrecognized compensation cost should be recognized prospectively over the remaining requisite service period. The total amount of compensation cost recognized during and after the requisite service period should reflect the number of awards that are expected to vest and should be adjusted to reflect those awards that ultimately vest. The requisite service period ends when the employee can cease rendering service and still be eligible to vest in the award if the performance target is achieved. This guidance will be effective for annual periods (and interim periods within those annual periods) beginning after December 15, 2015. We implemented this guidance for all interim and annual periods beginning after December 15, 2015. The adoption of this guidance did not have an impact on our financial condition, results of operations or cash flows.

In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers.” The objective of ASU2014-19 is to establish a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and will supersede most of the existing revenue recognition guidance, including industry-specific guidance. The core principle of the new standard is that revenue should be recognized to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The standard is effective for annual reporting periods beginning after December 15, 2017 and allows for prospective or retrospective application. We are evaluating this pronouncement and have not yet determined the impact it will have on our financial statements.

JOBS Act

In April 2012 the JOBS Act was enacted. Section 107 of the JOBS Act provides that an emerging growth company can take advantage of an extended transition period for complying with new or revised accounting standards. Thus, an emerging growth company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have irrevocably elected not to avail ourselves of this extended transition period, and, as a result, we will adopt new or revised accounting standards on the relevant dates on which adoption of such standards is required for other public companies.

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Item 3. Quantitative and Qualitative Disclosures About Market Risk

Not applicable.

Item 4.         Controls and Procedures

Evaluation of disclosure controls and procedures.

We maintain “disclosure controls and procedures,” as such term is defined in Rule 13a-15(e) under the Exchange Act that are designed to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in Securities and Exchange Commission rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating our disclosure controls and procedures, management recognized that disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the disclosure controls and procedures are met. Our disclosure controls and procedures have been designed to meet reasonable assurance standards. Additionally, in designing disclosure controls and procedures, our management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible disclosure controls and procedures. The design of any disclosure controls and procedures also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.

Based on their evaluation as of the end of the period covered by this Quarterly Report on Form 10-Q, our Chief Executive Officer and Chief Financial Officer have concluded that, as of such date, our disclosure controls and procedures were effective at the reasonable assurance level.

Changes in internal control over financial reporting.

There was no change in our internal control over financial reporting as defined in Rule 13a-15(f) under the Exchange Act that occurred during the period covered by this Quarterly Report on Form 10-Q that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PART II. — OTHER INFORMATION

Item 1. Legal Proceedings.

We are not currently involved in any material legal proceedings. However, from time to time, we may become subject to legal proceedings, claims, and litigation arising in the ordinary course of business.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

Other than the shares of our common stock sold pursuant to the Common Stock Purchase Agreement, as disclosed on our Form 8-K filed with the SEC on June 9, 2016, there were no unregistered sales of equity securities during the period.

Item 6. Exhibits

Exhibit Number	Description
4.1	Registration Rights Agreement, dated June 8, 2016, between Jaguar Animal Health, Inc. and Aspire Capital Fund, LLC (incorporated herein by reference to Exhibit 4.1 to the registrant’s current report on Form 8-K, filed June 9, 2016)
10.1	Separation Agreement, dated as of April 28, 2016, by and between Jaguar Animal Health, Inc. and John Kallassy (incorporated herein by reference to Exhibit 10.1 to the registrant’s current report on Form 8-K, filed May 3, 2016)
10.2	Common Stock Purchase Agreement, dated June 8, 2016, between Jaguar Animal Health, Inc. and Aspire Capital Fund, LLC (incorporated herein by reference to Exhibit 10.1 to the registrant’s current report on Form 8-K, filed June 9, 2016)
10.3	Jaguar Animal Health, Inc. Amended and Restated 2014 Stock Incentive Plan (incorporated herein by reference to Exhibit 10.1 to the registrant’s current report on Form 8-K, filed June 20, 2016)
31.1	Principal Executive Officer’s Certification Pursuant to Section 302 of the Sarbanes- Oxley Act of 2002
31.2	Principal Financial Officer’s Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1*	Certification Pursuant to 18 U.S.C. § 1350 (Section 906 of Sarbanes-Oxley Act of 2002)
32.2*	Certification Pursuant to 18 U.S.C. § 1350 (Section 906 of Sarbanes-Oxley Act of 2002)
101.INS	XBRL Instance Document
101.SCH	XBRL Taxonomy Extension Schema Document
101.CAL	XBRL Taxonomy Extension Calculation Document
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB	XBRL Taxonomy Extension Label Linkbase Document
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document

*In accordance with Item 601(b)(32)(ii) of Regulation S-K and SEC Release No. 34-47986, the certifications furnished in Exhibits 32.1 and 32.2 hereto are deemed to accompany this Form 10-Q and will not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 (the “Exchange Act”) or deemed to be incorporated by reference into any filing under the Exchange Act or the Securities Act of 1933 except to the extent that the registrant specifically incorporates it by reference.

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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Date: August 15, 2016
	JAGUAR ANIMAL HEALTH, INC.
	By:	/s/ Karen S. Wright
		Karen S. Wright
		Chief Financial Officer
		Principal Financial and Accounting Officer

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EX-31.1

Exhibit 31.1

PRINCIPAL EXECUTIVE OFFICER’S CERTIFICATION PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Lisa A. Conte, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Jaguar Animal Health, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Not applicable;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 15, 2016
	/s/ Lisa A. Conte
	Lisa A. Conte
	President and Chief Executive Officer
	(Principal Executive Officer)

EX-31.2

Exhibit 31.2

PRINCIPAL FINANCIAL OFFICER’S CERTIFICATION PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Karen S. Wright, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Jaguar Animal Health, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Not applicable;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 15, 2016
	/s/ Karen S. Wright
	Karen S. Wright
	Chief Financial Officer
	(Principal Financial and Accounting Officer)

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Jaguar Animal Health, Inc.  (the “Company”) on Form 10-Q for the six months ended June 30, 2016, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned officer of the Company certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to such officer’s knowledge:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: August 15, 2016
	/s/ Lisa A. Conte
	Lisa A. Conte
	President and Chief Executive Officer
	(Principal Executive Officer)

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Jaguar Animal Health, Inc. (the “Company”) on Form 10-Q for the six months ended June 30, 2016, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned officer of the Company certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to such officer’s knowledge:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: August 15, 2016
	/s/ Karen S. Wright
	Karen S. Wright
	Chief Financial Officer
	(Principal Financial and Accounting Officer)

XML

Document and Entity Information - shares	6 Months Ended
	Jun. 30, 2016	Aug. 15, 2016
Document and Entity Information
Entity Registrant Name	Jaguar Animal Health, Inc.
Entity Central Index Key	0001585608
Document Type	10-Q
Document Period End Date	Jun. 30, 2016
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Entity Current Reporting Status	Yes
Entity Filer Category	Smaller Reporting Company
Entity Common Stock, Shares Outstanding		11,121,408
Document Fiscal Year Focus	2016
Document Fiscal Period Focus	Q2

XML

CONDENSED BALANCE SHEETS - USD ($)	Jun. 30, 2016	Dec. 31, 2015
Current assets:
Cash and cash equivalents	$ 3,875,044	$ 7,697,531
Accounts receivable	19,112	55,867
Due from former parent		3,199
Inventory	276,624	229,871
Deferred offering costs		143,231
Prepaid expenses	850,230	324,083
Total current assets	5,021,010	8,453,782
Property and equipment, net	916,007	829,232
Restricted cash	1,144,297	3,000,000
Other assets	122,163	122,163
Total assets	7,203,477	12,405,177
Current liabilities:
Accounts payable	413,816	574,462
License fee payable to former parent		425,000
Deferred revenue	262,666	251,936
Convertible notes payable	150,000	150,000
Accrued expenses	653,744	798,434
Current portion of long-term debt	1,465,713	1,707,899
Total current liabilities	2,945,939	3,907,731
Long-term debt, net of discount	2,685,580	4,095,028
Deferred rent	6,642	3,321
Total liabilities	5,638,161	8,006,080
Commitments and Contingencies (See note 6)
Stockholders' Equity
Common stock: $0.0001 par value, 50,000,000 shares authorized at June 30, 2016 and December 31, 2015; 10,821,408 and 8,124,923 shares issued and outstanding at June 30, 2016 and December 31, 2015, respectively.	1,082	812
Additional paid-in capital	34,908,241	30,100,613
Accumulated deficit	(33,344,007)	(25,702,328)
Total stockholders' equity	1,565,316	4,399,097
Total liabilities, convertible preferred stock and stockholders' equity	$ 7,203,477	$ 12,405,177

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CONDENSED BALANCE SHEETS (Parenthetical) - USD ($)	Jun. 30, 2016	Dec. 31, 2015
Preferred stock, par value (in dollars per share)	$ 0.0001	$ 0.0001
Preferred stock, shares authorized	10,000,000	10,000,000
Preferred stock, shares issued	0	0
Preferred stock, shares outstanding	0	0
Common stock, par value (in dollars per share)	$ 0.0001	$ 0.0001
Common stock, shares authorized	50,000,000	50,000,000
Common stock, shares issued	10,821,408	8,124,923
Common stock, shares outstanding	10,821,408	8,124,923

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CONDENSED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Revenue
Revenue	$ 24,143	$ 63,142	$ 62,289	$ 125,529
Operating Expenses
Cost of revenue	8,641	16,957	27,009	51,255
Research and development expense	1,953,647	1,751,288	3,705,388	3,174,331
Sales and marketing expense	54,050	163,227	218,463	353,530
General and administrative expense	1,416,159	1,300,156	3,204,544	2,393,843
Total operating expenses	3,432,497	3,231,628	7,155,404	5,972,959
Loss from operations	(3,408,354)	(3,168,486)	(7,093,115)	(5,847,430)
Interest expense, net	(254,758)	(1,936,611)	(538,994)	(2,869,643)
Other income/(expense)	5,637	15,523	(9,570)	18,632
Change in fair value of warrants		(173,101)		(501,617)
Net loss and comprehensive loss	(3,657,475)	(5,262,675)	(7,641,679)	(9,200,058)
Accretion of redeemable convertible preferred stock		(159,288)		(346,374)
Net loss attributable to common stockholders	$ (3,657,475)	$ (5,421,963)	$ (7,641,679)	$ (9,546,432)
Net loss per share attributable to common stockholders, basic and diluted (in dollars per share)	$ (0.35)	$ (1.00)	$ (0.78)	$ (2.30)
Weighted-average common shares outstanding, basic and diluted (in shares)	10,314,106	5,410,661	9,810,730	4,149,502

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CONDENSED STATEMENT OF CHANGES IN COMMON STOCK, CONVERTIBLE PREFERRED STOCK (Series A Redeemable Convertible Preferred Stock) - USD ($)	3 Months Ended	6 Months Ended	12 Months Ended
	Jun. 30, 2015	Jun. 30, 2015	Dec. 31, 2015
Increase (decrease) in temporary equity
Conversion of preferred stock into common stock upon initial public offering		$ 7,651,288	$ 7,651,288
Deemed dividends on Series A	$ 85,763	263,060
Series A redeemable convertible preferred stock
Increase (decrease) in temporary equity
Beginning Balance		$ 7,304,914	$ 7,304,914
Beginning Balance (in shares)		3,015,902	3,015,902
Conversion of preferred stock into common stock upon initial public offering			$ (7,651,288)
Conversion of preferred stock into common stock upon initial public offering (in shares)			(3,015,902)
Deemed dividends on Series A			$ 263,060
Accretion of issuance costs	$ 73,525	$ 83,334	$ 83,314

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CONDENSED STATEMENT OF CHANGES IN COMMON STOCK, CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS' EQUITY (DEFICIT) - USD ($)	Common Stock	Additional paid-in capital	Accumulated deficit	Total
Balance at Dec. 31, 2014	$ 288	$ 1,175,242	$ (9,410,778)	$ (8,235,248)
Balance (in shares) at Dec. 31, 2014	2,874,330
Increase (decrease) in Stockholders' Equity (Deficit)
2015: Issuance of common stock in initial public offering, net of discounts and commissions of $1,209,802, offering costs of $2,897,825 and offering costs in the form of common stock warrants of $400,400. 2016: Issuance of common stock in a secondary public offering net of discounts and commissions of $373,011 and offering costs of $496,887.	$ 286	15,511,974		15,512,260
Shares issued (in shares)	2,860,000
Warrant, issued in conjunction with the initial public offering		400,400		400,400
Conversion of preferred stock into common stock upon initial public offering	$ 201	7,651,087		7,651,288
Conversion of preferred stock into common stock upon initial public offering (in shares)	2,010,596
Conversion of preferred stock warrant liability into additional paid-in capital		1,150,985		1,150,985
Conversion of convertible notes payable	$ 37	2,099,963		2,100,000
Conversion of convertible notes payable (in shares)	374,997
Beneficial conversion feature on notes payable		1,202,521		1,202,521
Deemed dividends on Series A		(263,060)		(263,060)
Accretion of issuance costs		(83,314)		(83,314)
Napo license fee abatement		250,000		250,000
Issuance of common stock upon exercise of stock options		12,650		12,650
Issuance of common stock upon exercise of stock options (in shares)	5,000
Stock-based compensation		992,165		992,165
Net and comprehensive loss			(16,291,550)	(16,291,550)
Balance at Dec. 31, 2015	$ 812	30,100,613	(25,702,328)	4,399,097
Balance (in shares) at Dec. 31, 2015	8,124,923
Increase (decrease) in Stockholders' Equity (Deficit)
2015: Issuance of common stock in initial public offering, net of discounts and commissions of $1,209,802, offering costs of $2,897,825 and offering costs in the form of common stock warrants of $400,400. 2016: Issuance of common stock in a secondary public offering net of discounts and commissions of $373,011 and offering costs of $496,887.	$ 200	4,129,902		4,130,102
Shares issued (in shares)	2,000,000
Issuance of common stock in a private investment in public entities offering, net of offering costs of $51,268.	$ 68	448,664		448,732
Shares issued (in shares)	678,889
Issuance of common stock in exchange for vested restricted stock units	$ 2	(2)
Issuance of common stock in exchange for vested restricted stock units (in shares)	17,596
Stock-based compensation		229,064		229,064
Net and comprehensive loss			(7,641,679)	(7,641,679)
Balance at Jun. 30, 2016	$ 1,082	$ 34,908,241	$ (33,344,007)	$ 1,565,316
Balance (in shares) at Jun. 30, 2016	10,821,408

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CONDENSED STATEMENT OF CHANGES IN COMMON STOCK, CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS' EQUITY (DEFICIT) (Parenthetical) - USD ($)			1 Months Ended	6 Months Ended	12 Months Ended
	Feb. 08, 2016	May 18, 2015	Jun. 30, 2016	Jun. 30, 2016	Dec. 31, 2015
Stock Transactions, Parenthetical Disclosures
Net proceeds from issuance of common stock				$ 4,130,102
Warrant, issued in conjunction with the initial public offering					$ 400,400
Common Stock
Stock Transactions, Parenthetical Disclosures
Shares issued (in shares)				2,000,000	2,860,000
Common Stock | Underwriters' over-allotment option | Warrants to purchase common stock
Stock Transactions, Parenthetical Disclosures
Warrant, issued in conjunction with the initial public offering					$ 400,400
Common Stock | IPO
Stock Transactions, Parenthetical Disclosures
Shares issued (in shares)		2,860,000
Underwriting discounts and commissions		$ 1,200,000			1,209,802
Offering costs		$ 2,900,000			$ 2,897,825
Common Stock | Secondary public offering
Stock Transactions, Parenthetical Disclosures
Net proceeds from issuance of common stock	$ 4,100,000
Shares issued (in shares)	2,000,000
Underwriting discounts and commissions	$ 373,011			$ 373,011
Offering costs	$ 496,887			$ 496,887
Common Stock | Private investment
Stock Transactions, Parenthetical Disclosures
Net proceeds from issuance of common stock			$ 448,732
Shares issued (in shares)			222,222
Secondary Public Offering (in dollars per share)			$ 2.25	$ 2.25
Underwriting discounts and commissions				$ 51,268
Offering costs			$ 51,268

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CONDENSED STATEMENTS OF CASH FLOWS - USD ($)	6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015
Cash Flows from Operating Activities
Net loss	$ (7,641,679)	$ (9,200,058)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation expense	17,432
Materials cost in connection with license activity		6,287
Stock-based compensation	229,064	627,847
Amortization of debt issuance costs and debt discount	269,019	2,506,498
Change in fair value of warrants		501,617
Changes in assets and liabilities
Accounts receivable - trade	36,755	(29,387)
Inventory	(46,753)	(108,695)
Prepaid expenses	(526,147)	(124,944)
Other long-term assets		(122,163)
Due from parent	3,199	(21,815)
Deferred revenue	10,730	349,791
Deferred rent	3,321
License fee payable	(425,000)	(175,000)
Accounts payable	(115,306)	(370,984)
Accrued expenses	(117,690)	(869,580)
Total cash used in operations	(8,303,055)	(7,030,586)
Cash Flows from Investing Activities
Purchase of equipment	(98,266)
Change in restricted cash	1,855,703
Total cash provided by investing activities	1,757,437
Cash Flows from Financing Activities
Repayment of long-term debt	(1,855,703)
Proceeds from issuance of redeemable convertible notes payable, net		1,250,000
Repayment of convertible notes payable		(100,000)
Repayment of notes payable		(1,000,000)
Proceeds from issuance of common stock in initial public offering, net of commissions and discounts		18,810,484
Deferred offering costs		(396,012)
Proceeds from issuance of common stock in a follow-on secondary offering, net of commissions and discounts	4,130,102
Proceeds from issuance of common stock in a private investment in public entities, net of offering costs	448,732
Total cash provided by financing activities	2,723,131	18,564,472
Net increase (decrease) in cash and cash equivalents	(3,822,487)	11,533,886
Cash and cash equivalents, beginning of period	7,697,531	845,192
Cash and cash equivalents, end of period	3,875,044	12,379,078
Supplemental Schedule of Non-Cash Financing and Investing Activities
Interest paid on long-term debt	277,959
Offering costs not paid during the period		1,401,253
Warrants issued in connection with convertible notes payable		47,479
Accretion of redeemable convertible preferred stock		346,374
Abatement of license fee payable to Napo		250,000
Conversion of convertible preferred stock to common stock		7,651,288
Conversion of preferred stock warrant liability to common stock warrants		1,150,985
Conversion of convertible notes to common stock		$ 2,100,000
Fixed assets in accounts payable	5,941
Offering costs in accounts payable	(116,231)
Offering costs in accrued liabilities	$ (27,000)

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Organization and Business

6 Months Ended

Jun. 30, 2016

Organization and Business

Organization and Business

1. Organization and Business

Jaguar Animal Health, Inc. (“Jaguar” or the “Company”) was incorporated on June 6, 2013 (inception) in Delaware. The Company was a majority-owned subsidiary of Napo Pharmaceuticals, Inc. (“Napo” or the “Former Parent”) until the close of the Company’s initial public offering on May 18, 2015. The Company was formed to develop and commercialize first-in-class gastrointestinal products for companion and production animals and horses. The Company’s first commercial product, Neonorm Calf, was launched in 2014. The Company launched a second commercial product, Neonorm Foal, in the first quarter of 2016. The Company’s activities are subject to significant risks and uncertainties, including failing to secure additional funding in order to timely compete the development and commercialization of products. The Company operates in one segment and is headquartered in San Francisco, California.

On June 11, 2013, Jaguar issued 2,666,666 shares of common stock to Napo in exchange for cash and services. On July 1, 2013, Jaguar entered into an employee leasing and overhead agreement (the “Service Agreement”) with Napo, under which Napo agreed to provide the Company with the services of certain Napo employees for research and development and the general administrative functions of the Company. On January 27, 2014, Jaguar executed an intellectual property license agreement with Napo pursuant to which Napo transferred fixed assets and development materials, and licensed intellectual property and technology to Jaguar. On February 28, 2014, the Service Agreement terminated and the associated employees became employees of Jaguar effective March 1, 2014. See Note 9 for additional information regarding the capital contributions and Note 4 for the Service Agreement and license agreement details.

Reverse Stock Split

In October 2014, the Board of Directors and stockholders approved a 1-for-1.5 reverse stock split (the “Reverse Split”) of the Company’s outstanding shares of common stock and increased the number of authorized shares of common stock from 10,000,000 shares to 15,000,000 shares. The Company effected the Reverse Split on October 27, 2014. Under the terms of the Reverse Split, each share of common stock, issued and outstanding as of such effective date, was automatically reclassified and changed into two-thirds of one share of common stock, without any action by the stockholder. Fractional shares were rounded down to the nearest whole share. All share and per share amounts have been restated to reflect the Reverse Split.

Initial Public Offering

On May 18, 2015, the Company completed an initial public offering (“IPO”) of its common stock. In connection with its IPO, the Company issued and sold 2,860,000 shares of common stock at a price to the public of $7.00 per share. As a result of the IPO, the Company received $15.9 million in net proceeds, after deducting underwriting discounts and commissions of $1.2 million and offering expenses of $2.9 million ($3.3 million including non-cash offering expenses) payable by the Company. In connection with the IPO, the Company’s outstanding shares of convertible preferred stock were automatically converted into 2,010,596 shares of common stock and the Company’s outstanding warrants to purchase convertible preferred stock were all converted to warrants to purchase common stock.

Secondary Public Offering

On February 8, 2016, the Company completed a secondary public offering of its common stock. In connection with its secondary public offering, the Company issued and sold 2,000,000 shares of common stock at a price to the public of $2.50 per share. As a result of the secondary public offering, the Company received $4.1 million in net proceeds, after deducting underwriting discounts and commissions of $373,011 and offering expenses of $496,887.

Liquidity

The accompanying financial statements have been prepared assuming the Company will continue as a going concern. The Company has incurred recurring operating losses since inception and has an accumulated deficit of $33,344,007 as of June 30, 2016. The Company expects to incur substantial losses in future periods. Further, the Company’s future operations are dependent on the success of the Company’s ongoing development and commercialization efforts. There is no assurance that profitable operations, if ever achieved, could be sustained on a continuing basis.

The Company plans to finance its 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 the Company on acceptable terms on a timely basis, if at all, or that the Company will generate sufficient cash from operations to adequately fund operating needs or ultimately achieve profitability. If the Company is unable to obtain an adequate level of financing needed for the long-term development and commercialization of its products, the Company will need to curtail planned activities and reduce costs. Doing so will likely have an adverse effect on the Company’s ability to execute on its business plan. These matters raise substantial doubt about the ability of the Company to continue in existence as a going concern. The accompanying financial statements do not include any adjustments that might result from the outcome of these uncertainties.

In June 2016, the Company entered into a common stock purchase agreement with a private investor (the “Common Stock Purchase Agreement”), which provides that, upon the terms and subject to the conditions and limitations set forth therein, the investor is committed to purchase up to an aggregate of $15.0 million of the Company’s common stock over the approximately 30-month term of the agreement.  Upon execution of the Common Stock Purchase Agreement, the Company sold 222,222 shares of its common stock to the investor at $2.25 per share for net proceeds of $448,732, reflecting gross proceeds of $500,000  and offering expenses of $51,268.   In consideration for entering into the Common Stock Purchase Agreement, the Company issued 456,667 shares of its common stock to the investor.  Concurrently with entering into the Common Stock Purchase Agreement, the Company also entered into a registration rights agreement with the investor (the “Registration Agreement”), in which the Company agreed to file one or more registration statements, as permissible and necessary to register under the Securities Act of 1933, as amended, the sale of the shares of the Company’s common stock that have been and may be issued to the investor under the Common Stock Purchase Agreement.  On June 22, 2016, the Company filed a registration statement on Form S-1 (File No. 333-212173) pursuant to the terms of the Registration Agreement, which registration statement was declared effective on July 8, 2016.

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Summary of Significant Accounting Policies

6 Months Ended

Jun. 30, 2016

Summary of Significant Accounting Policies

Summary of Significant Accounting Policies

2. Summary of Significant Accounting Policies

Basis of Presentation

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

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires the Company’s management to make judgments, assumptions and estimates that affect the amounts reported in its financial statements and the accompanying notes. The accounting policies that reflect the Company’s more significant estimates and judgments and that the Company believes are the most critical to aid in fully understanding and evaluating its reported financial results are valuation of stock options; valuation of warrant liabilities; impairment of long lived assets; useful lives for depreciation; valuation adjustments for excess and obsolete inventory; deferred taxes and valuation allowances on deferred tax assets; and evaluation and measurement of contingencies. Those estimates could change, and as a result, actual results could differ materially from those estimates.

Concentration of Credit Risk and Cash and Cash Equivalents

The financial instrument that potentially subjects the Company to a concentration of credit risk is that is held at a financial institution of high credit standing. Cash is generally in excess of Federal Deposit Insurance Corporation (“FDIC”) insurance limits. Therefore, the Company is exposed to credit risk in the event that the balances exceed FDIC insurance limits. The carrying value of cash approximates fair value at June 30, 2016 and December 31, 2015.

Fair Values

The Company’s financial instruments include, cash and cash equivalents, accounts payable, accrued expenses, amounts due to Napo, the former parent, warrant liabilities, and debt. Cash is reported at fair value. The recorded carrying amount of accounts payable, accrued expenses and amounts due to Napo approximates their fair value due to their short-term nature. The carrying value of the interest-bearing debt approximates fair value based upon the borrowing rates currently available to the Company for bank loans with similar terms and maturities. See Note 3 for the fair value measurements, and Note 7 for the fair value of the Company’s warrant liabilities.

Restricted Cash

On August 18, 2015, the Company entered into a long-term loan and security agreement with a lender for up to $8.0 million, which provided for an initial loan commitment of $6.0 million. The loan agreement required the Company to maintain a base minimum cash balance of $4.5 million until the Company met certain milestones and/or when the Company begins making principal payments. On December 22, 2015, the Company achieved certain milestones and the base minimum cash balance was reduced to $3.0 million.  On March 1, 2016, the restricted cash balance was further reduced by a $178,740 principal loan payment, resulting in a restricted cash balance of $2,821,260 at March 31, 2016.  On April 1, 2016, the restricted cash balance was further reduced by a $176,963 principal loan payment.  On April 21, 2016, the loan and security agreement was amended upon which the Company repaid $1.5 million of the debt out of restricted cash resulting in a restricted cash balance of $1,144,297 at June 30, 2016. The amendment modified the repayment amortization schedule providing a four-month period of interest-only payments for the period from May through August 2016.

Inventories

Inventories are stated at the lower of cost or market. The Company calculates inventory valuation adjustments when conditions indicate that the 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 estimated net realizable value. There have been no write-downs to date.

Property and Equipment

Equipment is stated at cost, less accumulated depreciation. Equipment begins to be depreciated when it is placed into service. Depreciation is calculated using the straight-line method over the estimated useful lives of 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 income (loss) from operations.

Long-Lived Assets

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

Should an impairment exist, the impairment loss would be measured based on the excess of the carrying amount over the asset’s fair value. The Company has not recognized any impairment losses through June 30, 2016.

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.

Revenue Recognition

Sales to distributors are made under agreements that may provide distributor price adjustments and rights of return under certain circumstances. Until the Company develops sufficient sales history and pipeline visibility, revenue and costs of distributor sales will be deferred until products are sold by the distributor to the distributor’s customers. Revenue recognition depends on notification either directly from the distributor that product has been sold to the distributor’s customer, when the Company has access to the data. Deferred revenue on shipments to distributors reflect the estimated effects of distributor price adjustments, if any, and the estimated amount of gross margin expected to be realized when the distributor sells through product purchased from the Company. Accounts receivable from distributors are recognized and included in deferred revenue when shipped to the distributor. Inventory is relieved and revenue recognized upon shipment by the distributor to their customer. The Company had revenues of $24,143 and $62,289 for the three and six months ended June 30, 2016, and $63,142 and $125,529 for the three and six months ended June 30, 2015.

Stock-Based Compensation

The Company’s 2013 Equity Incentive Plan and 2014 Stock Incentive Plan (see Note 10) provides for the grant of stock options, restricted stock and restricted stock unit awards.

The Company measures stock awards granted to employees and directors at fair value on the date of grant and recognizes the corresponding compensation expense of the awards, net of estimated forfeitures, over the requisite service periods, which correspond to the vesting periods of the awards. The Company issues stock awards with only service-based vesting conditions, and records compensation expense for these awards using the straight-line method.

The fair value of stock awards is based on the quoted price of our common stock on the grant date.

Classification of Securities

The Company applies the principles of ASC 480-10 “Distinguishing Liabilities from Equity” and ASC 815-40 “Derivatives and Hedging—Contracts in Entity’s Own Equity” to determine whether financial instruments such as warrants, contingently issuable shares and shares subject to repurchase should be classified as liabilities or equity and whether beneficial conversion features exist.

Income Taxes

The Company accounts for income taxes using the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in the financial statements or in the Company’s tax returns. Deferred taxes are determined based on the difference between the financial statement and tax basis of assets and liabilities using enacted tax rates in effect in the years in which the differences are expected to reverse. Changes in deferred tax assets and liabilities are recorded in the provision for income taxes. The Company assesses the likelihood that its deferred tax assets will be recovered from future taxable income and, to the extent it believes, based upon the weight of available evidence, that it is more likely than not that all or a portion of deferred tax assets will not be realized, a valuation allowance is established through a charge to income tax expense. Potential for recovery of deferred tax assets is evaluated by estimating the future taxable profits expected and considering prudent and feasible tax planning strategies.

The Company accounts for uncertainty in income taxes recognized in the financial statements by applying a two-step process to determine the amount of tax benefit to be recognized. First, the tax position must be evaluated to determine the likelihood that it will be sustained upon external examination by the taxing authorities. If the tax position is deemed more-likely-than-not to be sustained, the tax position is then assessed to determine the amount of benefit to recognize in the financial statements. The amount of the benefit that may be recognized is the largest amount that has a greater than 50% likelihood of being realized upon ultimate settlement. The provision for income taxes includes the effects of any resulting tax reserves, or unrecognized tax benefits, that are considered appropriate, as well as the related net interest and penalties.

Comprehensive Loss

Comprehensive loss is defined as changes in stockholders’ equity (deficit) exclusive of transactions with owners (such as capital contributions and distributions). For the three and six months ended June 30, 2016 and 2015 there was no difference between net loss and comprehensive loss.

Segment Data

The Company manages its operations as a single segment for the purposes of assessing performance and making operating decisions. The Company is an animal health company focused on developing and commercializing prescription and non-prescription products for companion and production animals.

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 period by the weighted-average number of common shares outstanding during the period. Diluted net loss per share is computed by dividing the net loss attributable to common stockholders for the period by the weighted-average number of common shares, including potential dilutive shares of common stock assuming the dilutive effect of potential dilutive securities. For periods 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 three and six months ended June 30, 2016 and 2015.

Recent Accounting Pronouncements

In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-02, Leases (Topic 842), which provides guidance for accounting for leases. Under ASU 2016-02, the Company will be required to recognize the assets and liabilities for the rights and obligations created by leased assets. ASU 2016-02 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. We are currently evaluating the impact of the adoption of ASU 2016-02 on our consolidated financial statements.

In November 2015, the FASB issued ASU No. 2015-17, Balance Sheet Classification of Deferred Taxes (Topic 740), which simplifies the presentation of deferred income taxes. Under ASU 2015-17, deferred tax assets and liabilities are required to be classified as noncurrent, eliminating the prior requirement to separate deferred tax assets and liabilities into current and noncurrent. The new guidance is effective for the Company beginning on January 1, 2017, with early adoption permitted. The standard may be adopted prospectively or retrospectively to all periods presented. The Company is currently assessing the timing of adoption of the new guidance, but does not expect it will have a material impact on the Company’s Consolidated Financial Statements.

In April 2015, the FASB issued ASU No. 2015-03, Interest—Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs, to simplify the presentation of debt issuance costs by requiring debt issuance costs to be presented as a deduction from the corresponding debt liability. ASU 2015-03 will be effective for the Company beginning in its first quarter of 2016, however early adoption is permitted for financial statements that have not been previously issued. The guidance is to be applied retrospectively to all periods presented. We adopted ASU 2015-03 on December 31, 2015.

In August 2014, the FASB issued ASU No. 2014-15, “Presentation of Financial Statements—Going Concern (Subtopic 205-40)—Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern”, which provides guidance regarding management’s responsibility to assess whether substantial doubt exists regarding the ability to continue as a going concern and to provide related footnote disclosures. In connection with preparing financial statements for each annual and interim reporting period, management should evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date that the financial statements are issued (or within one year after the date that the financial statements are available to be issued when applicable). This ASU is effective for the annual period ending after December 15, 2016, and for annual periods and interim periods thereafter. The Company is currently evaluating the new guidance and has not determined the impact this standard may have on its financial statements.

In June 2014, the FASB issued ASU No. 2014-12, “Compensation—Stock Compensation (Topic 718)”, which requires that a performance target that affects vesting and that could be achieved after the requisite service period be treated as a performance condition. The performance target should not be reflected in estimating the grant-date fair value of the award. Compensation cost should be recognized in the period in which it becomes probable that the performance target will be achieved and should represent the compensation cost attributable to the period(s) for which the requisite service has already been rendered. If the performance target becomes probable of being achieved before the end of the requisite service period, the remaining unrecognized compensation cost should be recognized prospectively over the remaining requisite service period. The total amount of compensation cost recognized during and after the requisite service period should reflect the number of awards that are expected to vest and should be adjusted to reflect those awards that ultimately vest. The requisite service period ends when the employee can cease rendering service and still be eligible to vest in the award if the performance target is achieved. This guidance will be effective for annual periods (and interim periods within those annual periods) beginning after December 15, 2015. The Company implemented this guidance for all interim and annual periods beginning after December 15, 2015. The adoption of this guidance did not have an impact on the Company’s financial condition, results of operations or cash flows.

In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers.” The objective of ASU 2014-19 is to establish a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and will supersede most of the existing revenue recognition guidance, including industry-specific guidance. The core principle of the new standard is that revenue should be recognized to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The standard is effective for annual reporting periods beginning after December 15, 2016 and allows for prospective or retrospective application. The Company is evaluating the new guidance and has not determined the impact this pronouncement will have on its financial statements.

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Fair Value Measurements

6 Months Ended

Jun. 30, 2016

Fair Value Measurements

Fair Value Measurements

3. Fair Value Measurements

ASC 820 “Fair Value Measurements,” defines fair value, establishes a framework for measuring fair value under generally accepted accounting principles 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—Quoted prices in active markets for identical assets or liabilities;

· Level 2—Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data; and

· Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities, including pricing models, discounted cash flow methodologies and similar techniques.

The following table presents information about the Company’s liability that is measured at fair value on a recurring basis as of June 30, 2016 and 2015 and indicates the fair value hierarchy of the valuation:

	Level 1		Level 2		Level 3		Total
As of June 30, 2016 Warrant Liability	$	—	$	—	$	—	$	—

	Level 1		Level 2		Level 3		Total
As of June 30, 2015 Warrant Liability	$	—	$	—	$	—	$	—

The change in the estimated fair value of the warrant liability is summarized below:

	Beginning Value of Warrant Liability		Issuance of Common Stock Warrants		Change in Fair Value of Level 3 Liability		Conversion into Additional Paid-in Capital		Ending Fair Value of Level 3 Liability
For the six months ended June 30, 2016	—		—		—		—		—
For the six months ended June 30, 2015	$	601,889	$	47,479	$	501,617	(1,150,985	)	$	—

The change in the fair value of the level 3 warrant liability is reflected in the statement of operations and comprehensive loss for the six months ended June 30, 2015.

There were no assets or liabilities measured at fair value on a recurring basis at June 30, 2016.

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License Agreement

6 Months Ended

Jun. 30, 2016

License Agreement

License Agreement

4. License Agreement

On July 11, 2013, Jaguar entered into an option to license Napo’s intellectual property and technology (the “Option Agreement”). Under the Option Agreement, upon the payment of $100,000 in July 2013, the Company obtained an option for a period of two years to execute an exclusive worldwide license to Napo’s intellectual property and technology to use for the Company’s animal health business. The option price was creditable against future license fees to be paid to Napo under the License Agreement (as defined below).

In January 2014, the Company exercised its option and entered into a license agreement (the “License Agreement”) with Napo for an exclusive worldwide license to Napo’s intellectual property and technology to permit the Company to develop, formulate, manufacture, market, use, offer for sale, sell, import, export, commercialize and distribute products for veterinary treatment uses and indications for all species of animals. The Company was originally obligated to pay a one-time non-refundable license fee of $2,000,000, less the option fee of $100,000. At the Company’s option, the license fee could have been paid in common stock. Milestone payments aggregating $3,150,000 may also be due to Napo based on regulatory approvals of various veterinary products. In addition to the milestone payments, the Company will owe Napo an 8% royalty on annual net sales of products derived from the Croton lechleri tree, up to $30,000,000 and then, a royalty of 10% on annual net sales of $30,000,000 or more. Additionally, if any other products are developed, the Company will owe Napo a 2% royalty on annual net sales of pharmaceutical prescription products that are not derived from Croton lechleri and a 1% royalty on annual net sales of nonprescription products that are not derived from Croton lechleri. The royalty term expires at the longer of 10 years from the first sale of each individual product or when there is no longer a valid patent claim covering any of the products and a competitive product has entered the market. However, because an IPO of at least $10,000,000 was consummated prior to December 31, 2015, the royalty was reduced to 2% of annual net sales of its prescription products derived from Croton lechleri and 1% of net sales of its nonprescription products derived from Croton lechleri and no milestone payment will be due and no royalties will be owed on any additional products developed. The Company incurred $191 and $844 in royalties for the three and six months ended June 30, 2016 and $36,163 and $38,746 for the three and six months ended June 30, 2015, which is included in sales and marketing expense in the Company’s statement of operations and comprehensive loss. The Company’s unpaid royalties total $0 and $2,810 at June 30, 2016 and December 31, 2015, respectively, which is included in accrued liabilities in the Company’s balance sheet.

In addition to receiving a License Agreement to Napo’s intellectual property and technology, the License also transferred to the Company certain materials and equipment. Materials transferred from Napo have been included in research and development expense on the statements of operations and comprehensive loss during the year ended December 31, 2014. Equipment of $811,087 related to the License is included in property and equipment on the Company’s balance sheet at June 30, 2016 and December 31, 2015 at the cost paid by Napo, which approximates fair value. Some of the equipment was placed into service in November of 2015, and the Company has booked $6,568 and $13,136 in depreciation expense for the three and six months ended June 30, 2016, which is included in research and development expense in the Company’s statement of operations and comprehensive loss.

The Company has agreed under the License Agreement to defend, indemnify and hold Napo, its affiliates, and the officers, directors, employees, consultants and contractors of Napo harmless from and against any losses, costs, damages, liabilities, fees and expenses arising out of any third-party claim related to the Company’s gross negligence, breach of covenants or the manufacture, sale or use of the product or products.

In January 2015, the License Agreement was amended to decrease the one-time non-refundable license fee payable from $2,000,000 to $1,750,000 in exchange for acceleration of the payment of the fee. In 2015, payments totalling $1.2 million were made, and the balance of $425,000 was paid in March of 2016.  The License Fee Payable of $0 and $425,000 is included in the Company’s balance sheet at June 30, 2016 and December 31, 2015, respectively. Additionally, the terms of the License Agreement were amended to require the mutual agreement of the parties for payment of the license fee to be remitted in the form of the Company’s common stock. The Company may also, at its sole discretion, elect to remit any milestone payments and/or royalties in the form of the Company’s common stock. Given that Napo is a significant shareholder of the Company, the abatement of the license fee amount has been recorded as a capital contribution in the accompanying condensed financial statements.

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Balance Sheet Components

6 Months Ended

Jun. 30, 2016

Balance Sheet Components

Balance Sheet Components

5. Balance Sheet Components

Property and Equipment

Property and equipment at June 30, 2016 and December 31, 2015 consisted of the following:

	June 30,		December 31,
	2016		2015
Lab equipment	811,087		811,087
Clinical equipment	64,870		23,300
Software	5,223		—
Work in-process	57,414		—
Total property and equipment at cost	938,594		834,387
Accumulated depreciation	(22,587	)	(5,155	)
Property and equipment, net	916,007		829,232

Depreciation expense for the three and six month periods ended June 30, 2016 and 2015 was as follows:

	Three months ended		Six months ended
	June 30,		June30,
	2016	2015	2016	2015
Depreciation - Lab Equipment - research and developoment expense	6,568	—	13,136	—
Depreciation - Clinical Equipment - research and development expense	2,551	—	3,716	—
Depreciation - Software - general and administrative expense	435	—	580	—
Total Depreciation Expense	9,554	—	17,432	—

Accrued Expenses

Accrued expenses at June 30, 2016 and December 31, 2015 consist of the following:

	June 30,	December 31,
	2016	2015
Accrued compensation and related:
Accrued vacation	200,878	187,734
Accrued payroll	—	80,692
Accrued payroll tax	15,367	43,702
	216,245	312,128
Accrued interest	119,165	127,149
Accrued contract manufacturing costs	165,480	110,141
Accrued clinical	133,375	166,750
Accrued other	19,479	82,266
Total	653,744	798,434

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Commitments and Contingencies

6 Months Ended

Jun. 30, 2016

Commitments and Contingencies

Commitments and Contingencies

6. Commitments and Contingencies

Operating Leases

Effective July 1, 2015, the Company leases its San Francisco, California headquarters under a non-cancelable sub-lease agreement that expires August 31, 2018. The Company provided cash deposits of $122,163, consisting of a security deposit of $29,539 and prepayment of the last three months of the lease of $92,623, which is identified as other assets on the Company’s balance sheet.

Future minimum lease payments under non-cancelable operating leases as of June 30, 2016 are as follows:

Years ending December 31,	Amount
2016 - July through December	180,242
2017	363,486
2018	245,327
Total minimum lease payments	789,055

The Company recognizes rent expense on a straight-line basis over the non-cancelable lease period. Rent expense under the non-cancelable operating lease was $90,278 and $180,556 for the three and six months ended June 30, 2016, which was included in general and administrative expense in the Company’s statement of operations and comprehensive loss.

Since March 1, 2014, the date the Service Agreement terminated (Note 4), the Company paid Napo $33,897 for rent related to the office space utilized by the Company for the months of March, April and May of 2014. Effective June 1, 2014, the Company assumed the existing sublease from Napo. The term of the assumed sublease was from June 1, 2014 through June 30, 2015. Rent expense under the sub-lease was $34,799 and $69,598 for the three and six months ended June 30, 2015, which was included in general and administrative expense in the Company’s statement of operations and comprehensive loss.

Contract Manufacturing Commitment

Effective June 26, 2014 the Company entered into a technology transfer and commercial manufacturing agreement (the “Transfer Agreement”) with a contract manufacturer in Italy (the “Manufacturer”), whereby the Company and the Manufacturer will cooperate to develop and refine the manufacturing process for the Company’s prescription and non-prescription products. Pursuant to the Transfer Agreement, the Company was to make prepayments to the Manufacturer as follows: (1) a start-up fee of €500,000, €250,000 of which was to be paid at the earlier to occur of September 15, 2014 or the closing date of an initial public offering and €250,000 of which was to be paid at the time of installation and qualification of the Company’s equipment at their facility, (2) related to the technology transfer, €620,000, €310,000 of which was paid subsequent to the signature of the Transfer Agreement and €310,000 of which was to be paid after the delivery of a final study report, (3) for design of a portion of the Manufacturer’s facility, €100,000 was to be paid within five days of the signature of the Transfer Agreement, and (4) a €300,000 bonus fee payable in two equal installments, the first of which is due by the end of March 2015, with the remainder paid by the end of December 2015. The first €150,000 of the bonus fee payable was paid in May 2015. Additionally, the Transfer Agreement stipulated that the Company was to pay the Manufacturer an aggregate of €500,000 upon the delivery of agreed-upon levels of satisfactory product. Further, the Company issued the Manufacturer warrants to purchase 16,666 shares of common stock with an exercise price of 90% of the initial public offering price, amended to $6.30 in March 2015. (Note 7)

Effective February 12, 2015, March 25, 2015 and July 15, 2015 the Company entered into amendments delaying payments to the Manufacturer as follows: i) the €500,000 start-up fee was due by the end of April 2015 and has been paid during the year ended December 31, 2015, (ii) related to the technology transfer, of the remaining €310,000, €215,000 was due April 2015 and €95,000 was due June 30, 2015, both of which were paid during the year ended December 31, 2015, (iii) related to the design of a portion of the Manufacturer’s facility, the payment has increased to €170,000, €150,000 of which was due at the end of April 2015 and €20,000 was due on June 30, 2015, both of which have been paid during the year ended December 31, 2015 (iv) the fees linked to the deliverables are now due €250,000 on December 31, 2015 and €250,000 on March 31, 2016, 2015, (v) the bonus fee payable of €300,000, €150,000 was due at the end of April 2015 and has been paid during the year ended December 31, 2015 and €150,000 due at December 31, 2015. In May 2015, the Company entered into a Memorandum of Understanding (“MOU”) with the contract manufacturer and paid the start-up fee of €500,000 and the technology transfer fee of €215,000. In accordance with the terms of the Memorandum of Understanding, the Manufacturer will supply 400Kg of the Company’s API at no cost in anticipation of the future deduction by December 2015.  The final €250,000 was paid on March 29, 2016.

In December 2015, we entered into an amendment to our technology transfer and commercial manufacturing agreement with our contract manufacturer in Italy delaying a €150,000 bonus fee payment which was originally due on December 31, 2015 to March 31, 2016. On April 4, 2016, the Company further amended the payment date to June 30, 2016.  The Company paid the final €150,000 bonus fee on July 15, 2016.  The liability at June 30, 2016 of US$165,480 is included in accrued liabilities on the Company’s balance sheet.

The Company expenses the total cost of the contract ratably over the estimated life of the contract, or the total amount paid if greater. As of June 30, 2016 and December 31, 2015, the amortized costs exceeded amounts paid by $170,850 and $110,141, respectively, which are included in accrued manufacturing costs in accrued liabilities in the Company’s balance sheet.

Debt Obligations

See Note 7—Debt and Warrants.

Contingencies

From time to time, the Company may be involved in legal proceedings arising in the ordinary course of business. The Company believes there is no litigation pending that could have, individually or in the aggregate, a material adverse effect on the financial position, results of operations or cash flows.

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Debt and Warrants

6 Months Ended

Jun. 30, 2016

Debt and warrants

Debt and Warrants

7. Debt and Warrants

Convertible Notes and Warrants

2013 Convertible Notes

From July through September 2013, the Company issued four convertible promissory notes (collectively the “Notes”) for gross aggregate proceeds of $525,000 to various third-party lenders. The Notes bore interest at 8% per annum. The Notes automatically matured and the entire outstanding principal amount, together with accrued interest, was due and payable in cash at the earlier of July 8, 2015 (the “Maturity Date”) or ten business days after the date of consummation of the initial closing of a first equity round of financing. The Company consummated a first equity round of financing prior to the Maturity Date with a pre-money valuation of greater than $3.0 million, and, accordingly, principal and accrued interest was converted into shares of common stock at 75% of the purchase price paid by such equity investors. These notes were all converted to common stock in February 2014 upon the issuance of the convertible preferred stock. In February 2014, in connection with the first equity round of financing and issuance of the Series A convertible preferred stock, the noteholders exercised their option to convert their Notes into 207,664 shares of common stock and accrued interest was paid in cash to the noteholders. The accreted interest expense related to the discount on the Notes was $1,443 for the period from January 1, 2014 to the conversion date of the Notes. Upon conversion, the entire remaining debt discount of $4,071 was recorded as interest expense.

In connection with the Notes, the Company issued to the noteholders warrants, which became exercisable to purchase an aggregate of 207,664 shares of common stock as of the issuance of the first equity round of financing (the “Warrants”). The Warrants have a $2.53 exercise price, are fully exercisable from the initial date of the first equity round of financing, and have a five-year term subsequent to that date.

2014 Convertible Notes

On June 2, 2014, pursuant to a convertible note purchase agreement, the Company issued convertible promissory notes in the aggregate principal amount of $300,000 to two accredited investors, including a convertible promissory note for $200,000 to a board member to which Series A preferred stock was sold. These notes accrued interest at 3% per annum and automatically were to mature on June 1, 2015. Accrued interest was to be paid in cash upon maturity. Upon the closing of the IPO, the outstanding principal amount automatically converted into 53,571 shares common stock at $5.60, as amended in March 2015. Upon issuance, the Company analyzed the beneficial nature of the conversion terms and determined that a beneficial conversion feature (“BCF”) existed because the effective conversion price on issuance of the notes was less than the fair value at the time of the issuance. The Company calculated the value of the BCF using the intrinsic method and recorded a BCF of $75,000 as a discount to the notes payable and to additional paid-in capital. For the three and six months ended June 30, 2015, the Company amortized $12,530 and $30,713, respectively, of the discount, which has also been recorded as interest expense.

On July 16, 2014, pursuant to a convertible note purchase agreement, the Company issued a convertible promissory note in the principal amount of $150,000 to an accredited investor. This note accrued interest at 3% per annum and automatically was to mature on June 1, 2015. Accrued interest was to be paid in cash upon maturity. Upon the closing of the IPO, the outstanding principal amount automatically converted into 26,785 shares of common stock at $5.60, as amended in March 2015. Upon issuance, the Company analyzed the beneficial nature of the conversion terms and determined that a BCF existed because the effective conversion price was less than the fair value at the time of the issuance. The Company calculated the value of the BCF using the intrinsic method and recorded a BCF of $37,500 as a discount to the notes payable and to additional paid-in capital. For the three and six months ended June 30, 2015, the Company amortized $7,243 and $17,757 of the discount, which has also been recorded as interest expense.

In connection with the Transfer Agreement (Note 7) the Company issued fully vested and immediately exercisable warrants to the Manufacturer to purchase 16,666 shares of common stock at 90% of the IPO price, amended to $6.30 in March 2015, for a period of five years. The fair value of the warrants, $37,840, was recorded as research and development expense and additional paid-in capital in June 2014. The warrants were originally valued using the Black-Scholes model with the following assumptions: stock price of $4.83, exercise price of $4.35, term of five years, volatility of 49%, dividend yield of 0%, and risk-free interest rate of 1.64%.

On December 23, 2014, pursuant to a convertible note purchase agreement, the Company issued convertible promissory notes in the aggregate principal amount of $650,000 to three accredited investors, including a convertible promissory note for $250,000 to the same board member to which the June 2, 2014 $200,000 convertible promissory note was issued and to which Series A preferred stock was sold. These notes accrued interest at 12% per annum and became payable within thirty days following the IPO. Upon consummation of the Company’s IPO, the noteholders converted the notes into 116,070 shares of common stock at a conversion price equal to 80% of the IPO price, amended to $5.60 in March 2015. In connection with these notes, the Company also issued the lenders a fully vested warrant to purchase shares of the Company’s common stock at an exercise price equal to 80% of the IPO price, amended to $5.60 in March 2015. These warrants entitle the noteholders to purchase 58,035 shares of common stock. The fair value of the warrants, $147,943, was recorded as a debt discount and liability at December 23, 2014. The Company amortized $61,201 and $121,729 of this discount during the three and six months ended June 30, 2015. The warrants were originally valued using the Black-Scholes model with the following assumptions: stock price of $4.59, exercise price of $4.15, term of three years, volatility of 49%, dividend yield of 0%, and risk-free interest rate of 1.10%. Based on the circumstances, the value derived using the Black-Scholes model approximated that which would be obtained using a lattice model. The debt discount was to be recorded as interest expense over the one hundred ninety days from issuance of the notes through their first maturity date of July 31, 2015, beginning in January 2015. The Company analyzed the beneficial nature of the conversion terms and determined that a BCF existed because the effective conversion price was less than the fair value at the time of the issuance. The Company calculated the value of the BCF using the intrinsic method. A BCF of $502,057 has been recorded as a discount to the notes payable and to additional paid-in capital. For the three and six months ended June 30, 2015, the Company amortized $207,690 and $413,098 of the BCF which has also been recorded as interest expense.

2015 Convertible Notes

In February 2015, the Company issued convertible promissory notes to two accredited investors in the aggregate principal amount of $250,000. These notes were issued pursuant to the convertible note purchase agreement dated December 23, 2014. Principal and interest of $103,912 was paid in May 2015 for $100,000 of these notes.

The Company’s remaining outstanding note of $150,000 is payable to Serious Change II LP at an effective simple interest rate of 12% per annum, and is due in full on July 31, 2016 (the “Serious Change II Note”). The note is included in notes payable in the Company’s balance sheet. The Company has accrued interest of $24,855, which is included in accrued liabilities in the Company’s balance sheet. The note remains outstanding as Serious Change II LP elected not to convert the note as per the terms of the agreement.  On July 28, 2016, the Company entered into an amendment to delay the repayment of the principal and related interest under the Serious Change II Note from July 31, 2016 to October 31, 2016.

In March 2015, the Company entered into a non-binding letter of intent with Dechra Pharmaceuticals PLC (“Dechra”). In connection therewith, Dechra paid the Company $1.0 million. At March 31, 2015, the Company had recorded this amount as a loan advance on the balance sheet. In April 2015, Dechra purchased $1.0 million of convertible promissory notes from the Company, the terms of which provided that such notes were to be converted into shares of the Company’s common stock upon the closing of an IPO at a conversion price of $5.60 per share. In connection with the purchase of the notes, the Company issued Dechra a warrant to purchase 89,285 shares at $5.60 per share, which expires December 31, 2017. The notes accrued simple interest of 12% per annum and, upon consummation of the Company’s IPO in May 2015, converted into 178,571 shares of the Company’s common stock. The Company analyzed the beneficial nature of the conversion terms and determined that a BCF existed because the effective conversion price was less than the fair value at the time of the issuance. The Company calculated the value of the BCF using the intrinsic method. A BCF of for the full face value was recorded as a discount to the notes payable and to additional paid-in capital. The Company amortized the entire BCF of $1.0 million by the end of May 2015 and recorded the amortized amounts as interest expense through that period.

As of June 30, 2016 and December 31, 2015, the convertible notes payable obligations were as follows:

	June 30,		December 31,
	2016		2015
Notes payable	$	150,000	$	150,000
Unamortized note discount	—		—
Net debt obligation	$	150,000	$	150,000

Interest expense on the convertible notes payable was as follows:

	June 30,		June 30,
	2016		2015
Nominal interest	$	8,975	$	61,545
Amortization of debt discount	—		1,898,540
Repayment premium	—		100,800
	$	8,975	$	2,060,885

At June 30, 2016 and December 31, 2015, interest payable on convertible notes payable was $84,974 and $75,999, respectively.

Notes Payable—Bridge Loans

On October 30, 2014, the Company entered into a standby bridge financing agreement with two lenders, which was amended and restated on December 3, 2014, which provided a loan commitment in the aggregate principal amount of $1.0 million (the “Bridge”). Proceeds to the Company were net of a $100,000 debt discount under the terms of the Bridge and net of $104,000 of debt issuance costs. This debt discount and debt issuance costs were recorded as interest expense using the effective interest method, over the six month term of the Bridge. The Bridge became payable upon the IPO. The Bridge was repaid in May 2015, including interest thereon in an amount of $1,321,600. In connection with the Bridge, the lenders were granted warrants to purchase that number of shares of the Company’s common stock determined by dividing $1.0 million by the exercise price of 80% of the IPO price, amended to $5.60 in March 2015. The fair value of the warrants, $505,348, was originally recorded as a debt discount and liability at December 3, 2014. The warrants were originally valued using the Black-Scholes model with the following assumptions: stock price of $5.01, exercise price of $5.23, term of five years, volatility of 63%, dividend yield of 0%, and risk-free interest rate of 1.61%. Based on the circumstances, the value derived using the Black-Scholes model approximated that which would be obtained using a lattice model. The debt discount was recorded as interest expense over the six month term of the Bridge. Of the aggregate debt discount of $605,348 (warrants and original $100,000 discount), $521,291 was recorded as interest expense during the year ended December 31, 2015. Additional financing costs of $104,000 were incurred related to the Bridge and deferred on closing. These were recognized as interest expense over the six-month term of the Bridge using the effective interest method.  The Company amortized the remaining $86,667 of these deferred financing charges by the end of May 2015 was recorded the amortized amounts as interest expense.

The Company fully extinguished the debt in May of 2015.

Interest expense on the notes payable-bridge loans was as follows:

	June 30,		June 30,
	2016		2015
Nominal interest	$	—	$	100,000
Amortization of debt discount	—		521,291
Repayment premium	—		86,667
Debt issuance costs	—		100,800
	$	—	$	808,758

Standby Line of Credit

In August 2014, the Company entered into a standby line of credit with an accredited investor for up to $1.0 million pursuant to a Line of Credit and Loan Agreement dated August 26, 2014. In connection with the entry into the standby line of credit, the Company issued the lender a fully vested warrant to purchase 33,333 shares of common stock at an exercise price equal to 80% of the IPO price, amended to $5.60 in March 2015, which expires in August 2016. The fair value of the warrants, $114,300, was recorded as interest expense and additional paid-in capital in August 2014. The warrants were originally valued using the Black-Scholes model with the following assumptions: stock price of $8.00, exercise price of $6.40, term of two years, volatility of 52%, dividend yield of 0%, and risk-free interest rate of 0.52%. The line of credit expired on March 31, 2015 and there have been no drawdowns under the facility.

Long-term Debt

In August 2015, the Company entered into a loan and security agreement with a lender for up to $8.0 million, which provided for an initial loan commitment of $6.0 million. The loan agreement requires the Company to maintain $4.5 million of the proceeds in cash, which may be reduced or eliminated on the achievement of certain milestones. An additional $2.0 million is available contingent on the achievement of certain further milestones. The agreement has a term of three years, with interest only payments through February 29, 2016. Thereafter, principal and interest payments will be made with an interest rate of 9.9%. Additionally, there will be a balloon payment of $560,000 on August 1, 2018. This amount is being recognized over the term of the loan agreement and the effective interest rate, considering the balloon payment, is 15.0%. Proceeds to the Company were net of a $134,433 debt discount under the terms of the loan agreement. This debt discount is being recorded as interest expense, using the interest method, over the term of the loan agreement. Under the agreement, the Company is entitled to prepay principal and accrued interest upon five days prior notice to the lender. In the event of prepayment, the Company is obligated to pay a prepayment charge. If such prepayment is made during any of the first twelve months of the loan agreement, the prepayment charge will be (a) during such time as the Company is required to maintain a minimum cash balance, 2% of the minimum cash balance amount plus 3% of the difference between the amount being prepaid and the minimum cash balance, and (b) after such time as the Company is no longer required to maintain a minimum cash balance, 3% of the amount being prepaid. If such prepayment is made during any time after the first twelve months of the loan agreement, 1% of the amount being prepaid.

On April 21, 2016, the loan and security was amended upon which the Company repaid $1.5 million of the debt out of restricted cash. The amendment modified the repayment amortization schedule providing a four month period of interest only payments for the period from May through August 2016.

As of June 30, 2016 and December 31, 2015, the net long-term debt obligation was as follows:

	June 30,			December 31,
	2016			2015
Debt and unpaid accrued end-of-term payment	$	4,406,121		$	6,115,797
Unamortized note discount	(71,584		)	(106,635		)
Unamortized debt issuance costs	(183,244		)	(206,235		)
Net debt obligation	$	4,151,293		$	5,802,927
Current portion of long-term debt	$	1,465,713		$	1,707,899
Long-term debt, net of discount	2,685,580			$	4,095,028
Total	$	4,151,293		$	5,802,927

Future principal payments under the long-term debt as of June 30, 2016 are as follows:

Years ending December 31 (except 2016 which is the six months ending December 31)	Amount
2016 July through December	$	633,003
2017	2,032,048
2018	1,479,246
Total future principal payments	$	4,144,297
2018 end-of-term payment	$	560,000
	$	4,704,297
Less: unaccreted end-of-term payment at June 30, 2016	$	(298,176	)
Debt and unpaid accrued end-of-term payment	$	4,406,121

The obligation at June 30, 2016 and December 31, 2015 includes an end-of-term payment of $560,000, which accretes over the life of the loan as interest expense. As a result of the debt discount and the end-of-term payment, the effective interest rate for the loan differs from the contractual rate.

Interest expense on the long-term debt was as follows:

	Three months ended				Six months ended
	June 30,				June 30,
	2016		2015		2016		2015
Nominal interest	$	112,374	$	—	$	261,000	$	—
Amortization of debt discount	16,640		—		35,051		—
Accretion of end-of-term payment	69,331		—		146,027		—
Debt issuance costs	51,924		—		87,940		—
	$	250,269	$	—	$	530,018	$	—

At June 30, 2016 and December 31, 2015, interest payable on long-term debt was $34,190 and $51,150, respectively.

At the IPO, the Company’s outstanding warrants to purchase convertible preferred stock were all converted to warrants to purchase common stock.

The Company’s warrant activity is summarized as follows:

	June 30,	June 30,
	2016	2015
Warrants outstanding January 1	748,872	494,267
Warrants issued	—	254,605
Warrants outstanding June 30	748,872	748,872

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Redeemable Convertible Preferred Stock

6 Months Ended

Jun. 30, 2016

Redeemable Convertible Preferred Stock

Redeemable Convertible Preferred Stock

8.  Redeemable Convertible Preferred Stock

In February, April and May of 2014, the Company issued 3,015,902 shares of convertible preferred stock in exchange for $6,777,338. The redemption value of the convertible preferred stock was $9.0 million. The differences between the respective redemption values/liquidation preference and carrying values are being accreted over the period from the date of issuance to the earliest possible redemption date, February 2017. The Company has recorded accretion of $85,763 and $263,060 for the three and six months ended June 30, 2015.

Costs incurred in connection with the issuance of Series A redeemable convertible preferred stock during the year ended December 31, 2014 were $119,097 which have been recorded as a reduction to the carrying amounts of convertible preferred stock and are being accreted to the carrying value of the applicable preferred stock to the redemption date. The Company has recorded accretion of $73,525 and $83,334 for the three and six months ended June 30, 2015.

On May 18, 2015, the Company completed its IPO. In connection with the IPO, the Company’s 3,015,902 outstanding shares of convertible preferred stock were automatically converted into 2,010,596 shares of common stock.

The Convertible Preferred Stock was classified outside of stockholders’ (deficit) in accordance with authoritative guidance for the classification and measurement of potentially redeemable securities.

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Stockholders' Equity

6 Months Ended

Jun. 30, 2016

Stockholders' Equity

Stockholders' Equity

9. Stockholders’ Equity

Common Stock

The Company’s second amended and restated certificate of incorporation authorizes the Company to issue 50,000,000 shares of common stock $0.0001 par value. The holders of common stock are entitled to one vote for each share of common stock held at all meetings of stockholders. The number of authorized shares of common stock may be increased or decreased by the affirmative vote of the holders of shares of capital stock of the Company representing a majority of the votes represented by all shares (including Preferred Stock) entitled to vote.

As of June 30, 2016 and December 31, 2015, the Company had reserved shares of common stock for issuance as follows:

	June 30,	December 31,
	2016	2015
Options issued and outstanding	1,464,265	919,506
Options available for grant	1,146,943	106,833
RSUs issued and outstanding	20,789	55,536
Warrants issued and outstanding	748,872	748,872
Convertible notes	26,785	26,785
Total	3,407,654	1,857,532

Preferred Stock

The Company’s second amended and restated certificate of incorporation authorizes the Company to issue 10,000,000 shares of preferred stock $0.0001 par value. No shares of preferred stock were issued or outstanding at June 30, 2016 or December 31, 2015.

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Stock Incentive Plans

6 Months Ended

Jun. 30, 2016

Stock Incentive Plans

Stock Incentive Plans

10. Stock Incentive Plans

2013 Equity Incentive Plan

Effective November 1, 2013, the Company’s board of directors and sole stockholder adopted the Jaguar Animal 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. As of December 31, 2013, the Company had reserved 300,000 shares of its common stock for issuance under the 2013 Plan. In April 2014, the board of directors amended the 2013 Plan to increase the shares reserved for issuance to 847,533 shares. 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.

2014 Stock Incentive Plan

Effective May 12, 2015, the Company adopted the Jaguar Animal 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 Company reserved 333,333 shares of common stock for issuance pursuant to the 2014 Plan. The Company added 162,498 shares to the plan in accordance with the Plan that 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 replaces the 2013 Plan except that all outstanding options under the 2013 Plan remain outstanding until exercised, cancelled or until they expire.

In July 2015, the Company amended the 2014 Plan reserving an additional 550,000 shares under the plan contingent upon approval by the Company’s stockholders at the June 2016 annual stockholders meeting.  In June 2016, the Company amended the 2014 Plan once again, modifying the increase from 550,000 shares to 1,550,000 shares, which was approved at the annual stockholders meeting.

Stock Options and Restricted Stock Units (“RSUs”)

The following table summarizes incentive plan activity for the six months ended June 30, 2016:

							Weighted		Weighted Average
	Shares						Average		Remaining	Aggregate
	Available		Stock Options		RSUs		Stock Option		Contractual Life	Intrinsic
	for Grant		Outstanding		Outstanding		Exercise Price		(Years)	Value
Combined Incentive Plan Balance—December 31, 2015	106,833		919,506		55,536		$	3.87	8.81	$	—
Q1 2016 2013 Equity Incentive Plan Activity:
Options Cancelled			(24,740	)			$	7.00
RSUs vested and released					(27,768	)
RSUs Cancelled					(6,979	)
Q2 2016 2013 Equity Incentive Plan Activity:
Options Cancelled			(102,889	)			$	3.52
Q1 2016 2014 Stock Incentive Plan Activity:
Additional shares authorized	162,498
Q2 2016 2014 Stock Incentive Plan Activity:
Additional shares authorized	1,550,000
Options granted	(692,388	)	692,388				$	3.30
Options cancelled	20,000		(20,000	)			$	1.58
Combined Incentive Plan Balance—June 30, 2016	1,146,943		1,464,265		20,789		$	3.61	8.81
Options vested and exercisable—June 30, 2016			574,690				$	4.05	6.49	$	—
Options vested and expected to vest—June 30, 2016			1,164,273				$	3.63	8.79	$	—

The weighted average fair value of options granted to purchase common stock $1.04 and $3.65 for the six months ended June 30, 2016 and 2015, respectively.

The number of options that vested in the six months ended June 30, 2016 and 2015 was 242,239 and 291,786, respectively.  The grant date fair value of options vested was $283,219 and $160,736 for the six months ended June 30, 2016 and 2015, respectively.

No options were exercised in the six months ended June 30, 2016 and 2015.

The intrinsic value is calculated as the difference between the market value as of December 31, 2015 and the weighted average exercise price of shares exercised.

The Company granted RSUs in 2014 and 2015 under the 2013 Equity Incentive Plan. The units granted vest upon the occurrence of both a liquidity event and satisfaction of the service-based requirement. The time-based vesting provides that 50% of the RSU will vest on January 1, 2016 and the remaining 50% vest on July 1, 2017. The Company began recording stock-based compensation expense relating to the RSU grants effective May 18, 2015, the date of the Company’s initial public offering, and the date the liquidity condition was met. The stock-based compensation expense is based on the grant date fair value which is the equivalent to the fair market value on the date of grant, and is amortized over the vesting period using the straight-line method, net of estimated forfeitures.  On January 1, 2016, the Company issued 17,546 shares of its common stock in exchange for 27,768 vested and released RSUs, net of 10,172 RSU shares used to pay withholding taxes.

Stock-Based Compensation

The following table summarizes stock-based compensation expense related to stock options and RSUs for the three months ended June 30, 2016 and 2015, and are included in the statements of operations and comprehensive loss as follows:

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2016		2015		2016		2015
Research and development expense	$	37,284	$	328,555	$	62,617	$	346,219
Sales and marketing expense	—		34,829		8,681		34,829
General and administrative expense	88,238		211,846		157,766		246,799
Total	$	125,522	$	575,230	$	229,064	$	627,847

As of June 30, 2016, the Company had $852,837 of unrecognized stock-based compensation expense for options outstanding, which is expected to be recognized over a weighted-average period of 2.05 years. As of June 30, 2016, the Company had $61,592 of unrecognized stock-based compensation expense for outstanding RSUs which is expected to be recognized over a weighted-average period of one year.

The estimated grant-date fair value of employee stock options was calculated using the Black-Scholes option-pricing model based on the following assumptions:

	Three months ended		Six Months Ended
	June 30,		June 30,
	2016	2015	2016	2016
Weighted-average volatility	66.25-69.14%	55.43-59.05%	66.25-69.14%	55.43-59.05%
Weighted-average expected term (years)	5.67-5.82	5.15-5.77	5.67-5.82	5.15-5.77
Risk-free interest rate	1.36-1.49%	1.60-1.76%	1.36-1.49%	1.60-1.76%
Expected dividend yield	—	—	—	—

The estimated grant-date fair value of non-employee stock options was calculated using the Black-Scholes option-pricing model.  The options granted on September 8, 2015 were revalued using the following assumptions:

	Three months ended		Six Months Ended
	June 30,		June 30,
	2016	2015	2016	2016
Weighted-average volatility	78.30-80.04%	—	78.30-80.04%	—
Weighted-average expected term (years)	9.19-9.25	—	9.19-9.44	—
Risk-free interest rate	1.44-1.66%	—	1.44-1.74%	—
Expected dividend yield	—	—	—	—

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Related Party Transactions

6 Months Ended

Jun. 30, 2016

Related Party Transactions

Related Party Transactions

11. Related Party Transactions

The Company was a majority-owned subsidiary of Napo. Additionally, Lisa A. Conte, Chief Executive Officer of the Company, is also the interim Chief Executive Officer of Napo Pharmaceuticals, Inc. The Company has total outstanding liabilities to Napo at June 30, 2016 and December 31, 2015 as follows:

	June 30,		December 31,
	2016		2015
Due to/(from) Napo	$	—	$	(6,008	)
Royalty payable to Napo	—		2,809
License fee payable to Napo	—		425,000
Total	$	—	$	421,801

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Net Loss Per Share Attributable to Common Stockholders

6 Months Ended

Jun. 30, 2016

Net Loss Per Share Attributable to Common Stockholders

Net Loss Per Share Attributable to Common Stockholders

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 three and six months ended June 30, 2016 and 2015:

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2016			2015			2016			2015
Net loss attributable to common shareholders	$	(3,657,475	)	$	(5,421,963	)	$	(7,641,679	)	$	(9,546,432	)
Shares used to compute net loss per common share, basic and diluted	10,314,106			5,410,661			9,810,730			4,149,502
Net loss per share attributable to common shareholders, basic and diluted	$	(0.35	)	$	(1.00	)	$	(0.78	)	$	(2.30	)

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 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 three and six months ended June 30, 2016 and 2015 because their inclusion would be anti-dilutive:

	June 30,	June 30,
	2016	2015
Options	1,464,265	815,284
Warrants to purchase common stock	748,872	748,872
Restricted stock units	20,789	55,536
Total	2,233,926	1,619,692

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401(k) Plan

6 Months Ended

Jun. 30, 2016

401(k) Plan

401(k) Plan

13. 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 June 30, 2016.

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Subsequent Events

6 Months Ended

Jun. 30, 2016

Subsequent Events

Subsequent Events

14. Subsequent Events

The Company completed an evaluation of the impact of subsequent events through August 15, 2016, the date these financial statements were issued.

Common Stock Purchase Agreement

On July 14, 2016, pursuant to the Common Stock Purchase Agreement, the Company sold an additional 100,000 shares of the Company’s common stock in exchange for $183,670 of cash proceeds.

On July 25, 2016, pursuant to the Common Stock Purchase Agreement, the Company sold an additional 100,000 shares of the Company’s common stock in exchange for $177,000 of cash proceeds.

On August 9, 2016, pursuant to the Common Stock Purchase Agreement, the Company sold an additional 100,000 shares of the Company’s common stock in exchange for $146,690 of cash proceeds.

Convertible Notes Payable

In conjunction with the $150,000 2015 convertible note payable to Serious Change II LP, the Company entered into an amendment to delay the repayment of the debt and related interest originally due on July 31, 2016 to October 31, 2016.

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Summary of Significant Accounting Policies (Policies)

6 Months Ended

Jun. 30, 2016

Summary of Significant Accounting Policies

Basis of Presentation

Basis of Presentation

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

Use of Estimates

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires the Company’s management to make judgments, assumptions and estimates that affect the amounts reported in its financial statements and the accompanying notes. The accounting policies that reflect the Company’s more significant estimates and judgments and that the Company believes are the most critical to aid in fully understanding and evaluating its reported financial results are valuation of stock options; valuation of warrant liabilities; impairment of long lived assets; useful lives for depreciation; valuation adjustments for excess and obsolete inventory; deferred taxes and valuation allowances on deferred tax assets; and evaluation and measurement of contingencies. Those estimates could change, and as a result, actual results could differ materially from those estimates.

Concentration of Credit Risk and Cash and Cash Equivalents

Concentration of Credit Risk and Cash and Cash Equivalents

The financial instrument that potentially subjects the Company to a concentration of credit risk is that is held at a financial institution of high credit standing. Cash is generally in excess of Federal Deposit Insurance Corporation (“FDIC”) insurance limits. Therefore, the Company is exposed to credit risk in the event that the balances exceed FDIC insurance limits. The carrying value of cash approximates fair value at June 30, 2016 and December 31, 2015.

Fair Values

Fair Values

The Company’s financial instruments include, cash and cash equivalents, accounts payable, accrued expenses, amounts due to Napo, the former parent, warrant liabilities, and debt. Cash is reported at fair value. The recorded carrying amount of accounts payable, accrued expenses and amounts due to Napo approximates their fair value due to their short-term nature. The carrying value of the interest-bearing debt approximates fair value based upon the borrowing rates currently available to the Company for bank loans with similar terms and maturities. See Note 3 for the fair value measurements, and Note 7 for the fair value of the Company’s warrant liabilities.

Restricted Cash

Restricted Cash

On August 18, 2015, the Company entered into a long-term loan and security agreement with a lender for up to $8.0 million, which provided for an initial loan commitment of $6.0 million. The loan agreement required the Company to maintain a base minimum cash balance of $4.5 million until the Company met certain milestones and/or when the Company begins making principal payments. On December 22, 2015, the Company achieved certain milestones and the base minimum cash balance was reduced to $3.0 million.  On March 1, 2016, the restricted cash balance was further reduced by a $178,740 principal loan payment, resulting in a restricted cash balance of $2,821,260 at March 31, 2016.  On April 1, 2016, the restricted cash balance was further reduced by a $176,963 principal loan payment.  On April 21, 2016, the loan and security agreement was amended upon which the Company repaid $1.5 million of the debt out of restricted cash resulting in a restricted cash balance of $1,144,297 at June 30, 2016. The amendment modified the repayment amortization schedule providing a four-month period of interest-only payments for the period from May through August 2016.

Inventories

Inventories

Inventories are stated at the lower of cost or market. The Company calculates inventory valuation adjustments when conditions indicate that the 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 estimated net realizable value. There have been no write-downs to date.

Property and Equipment

Property and Equipment

Equipment is stated at cost, less accumulated depreciation. Equipment begins to be depreciated when it is placed into service. Depreciation is calculated using the straight-line method over the estimated useful lives of 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 income (loss) from operations.

Long-Lived Assets

Long-Lived Assets

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

Should an impairment exist, the impairment loss would be measured based on the excess of the carrying amount over the asset’s fair value. The Company has not recognized any impairment losses through June 30, 2016.

Research and Development Expense

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.

Revenue Recognition

Revenue Recognition

Sales to distributors are made under agreements that may provide distributor price adjustments and rights of return under certain circumstances. Until the Company develops sufficient sales history and pipeline visibility, revenue and costs of distributor sales will be deferred until products are sold by the distributor to the distributor’s customers. Revenue recognition depends on notification either directly from the distributor that product has been sold to the distributor’s customer, when the Company has access to the data. Deferred revenue on shipments to distributors reflect the estimated effects of distributor price adjustments, if any, and the estimated amount of gross margin expected to be realized when the distributor sells through product purchased from the Company. Accounts receivable from distributors are recognized and included in deferred revenue when shipped to the distributor. Inventory is relieved and revenue recognized upon shipment by the distributor to their customer. The Company had revenues of $24,143 and $62,289 for the three and six months ended June 30, 2016, and $63,142 and $125,529 for the three and six months ended June 30, 2015.

Stock-Based Compensation

Stock-Based Compensation

The Company’s 2013 Equity Incentive Plan and 2014 Stock Incentive Plan (see Note 10) provides for the grant of stock options, restricted stock and restricted stock unit awards.

The Company measures stock awards granted to employees and directors at fair value on the date of grant and recognizes the corresponding compensation expense of the awards, net of estimated forfeitures, over the requisite service periods, which correspond to the vesting periods of the awards. The Company issues stock awards with only service-based vesting conditions, and records compensation expense for these awards using the straight-line method.

The fair value of stock awards is based on the quoted price of our common stock on the grant date.

Classification of Securities

Classification of Securities

The Company applies the principles of ASC 480-10 “Distinguishing Liabilities from Equity” and ASC 815-40 “Derivatives and Hedging—Contracts in Entity’s Own Equity” to determine whether financial instruments such as warrants, contingently issuable shares and shares subject to repurchase should be classified as liabilities or equity and whether beneficial conversion features exist.

Income Taxes

Income Taxes

The Company accounts for income taxes using the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in the financial statements or in the Company’s tax returns. Deferred taxes are determined based on the difference between the financial statement and tax basis of assets and liabilities using enacted tax rates in effect in the years in which the differences are expected to reverse. Changes in deferred tax assets and liabilities are recorded in the provision for income taxes. The Company assesses the likelihood that its deferred tax assets will be recovered from future taxable income and, to the extent it believes, based upon the weight of available evidence, that it is more likely than not that all or a portion of deferred tax assets will not be realized, a valuation allowance is established through a charge to income tax expense. Potential for recovery of deferred tax assets is evaluated by estimating the future taxable profits expected and considering prudent and feasible tax planning strategies.

The Company accounts for uncertainty in income taxes recognized in the financial statements by applying a two-step process to determine the amount of tax benefit to be recognized. First, the tax position must be evaluated to determine the likelihood that it will be sustained upon external examination by the taxing authorities. If the tax position is deemed more-likely-than-not to be sustained, the tax position is then assessed to determine the amount of benefit to recognize in the financial statements. The amount of the benefit that may be recognized is the largest amount that has a greater than 50% likelihood of being realized upon ultimate settlement. The provision for income taxes includes the effects of any resulting tax reserves, or unrecognized tax benefits, that are considered appropriate, as well as the related net interest and penalties.

Comprehensive Loss

Comprehensive Loss

Comprehensive loss is defined as changes in stockholders’ equity (deficit) exclusive of transactions with owners (such as capital contributions and distributions). For the three and six months ended June 30, 2016 and 2015 there was no difference between net loss and comprehensive loss.

Segment Data

Segment Data

The Company manages its operations as a single segment for the purposes of assessing performance and making operating decisions. The Company is an animal health company focused on developing and commercializing prescription and non-prescription products for companion and production animals.

Basic and Diluted Net Loss Per Common Share

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 period by the weighted-average number of common shares outstanding during the period. Diluted net loss per share is computed by dividing the net loss attributable to common stockholders for the period by the weighted-average number of common shares, including potential dilutive shares of common stock assuming the dilutive effect of potential dilutive securities. For periods 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 three and six months ended June 30, 2016 and 2015.

Recent Accounting Pronouncements

Recent Accounting Pronouncements

In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-02, Leases (Topic 842), which provides guidance for accounting for leases. Under ASU 2016-02, the Company will be required to recognize the assets and liabilities for the rights and obligations created by leased assets. ASU 2016-02 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. We are currently evaluating the impact of the adoption of ASU 2016-02 on our consolidated financial statements.

In November 2015, the FASB issued ASU No. 2015-17, Balance Sheet Classification of Deferred Taxes (Topic 740), which simplifies the presentation of deferred income taxes. Under ASU 2015-17, deferred tax assets and liabilities are required to be classified as noncurrent, eliminating the prior requirement to separate deferred tax assets and liabilities into current and noncurrent. The new guidance is effective for the Company beginning on January 1, 2017, with early adoption permitted. The standard may be adopted prospectively or retrospectively to all periods presented. The Company is currently assessing the timing of adoption of the new guidance, but does not expect it will have a material impact on the Company’s Consolidated Financial Statements.

In April 2015, the FASB issued ASU No. 2015-03, Interest—Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs, to simplify the presentation of debt issuance costs by requiring debt issuance costs to be presented as a deduction from the corresponding debt liability. ASU 2015-03 will be effective for the Company beginning in its first quarter of 2016, however early adoption is permitted for financial statements that have not been previously issued. The guidance is to be applied retrospectively to all periods presented. We adopted ASU 2015-03 on December 31, 2015.

In August 2014, the FASB issued ASU No. 2014-15, “Presentation of Financial Statements—Going Concern (Subtopic 205-40)—Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern”, which provides guidance regarding management’s responsibility to assess whether substantial doubt exists regarding the ability to continue as a going concern and to provide related footnote disclosures. In connection with preparing financial statements for each annual and interim reporting period, management should evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date that the financial statements are issued (or within one year after the date that the financial statements are available to be issued when applicable). This ASU is effective for the annual period ending after December 15, 2016, and for annual periods and interim periods thereafter. The Company is currently evaluating the new guidance and has not determined the impact this standard may have on its financial statements.

In June 2014, the FASB issued ASU No. 2014-12, “Compensation—Stock Compensation (Topic 718)”, which requires that a performance target that affects vesting and that could be achieved after the requisite service period be treated as a performance condition. The performance target should not be reflected in estimating the grant-date fair value of the award. Compensation cost should be recognized in the period in which it becomes probable that the performance target will be achieved and should represent the compensation cost attributable to the period(s) for which the requisite service has already been rendered. If the performance target becomes probable of being achieved before the end of the requisite service period, the remaining unrecognized compensation cost should be recognized prospectively over the remaining requisite service period. The total amount of compensation cost recognized during and after the requisite service period should reflect the number of awards that are expected to vest and should be adjusted to reflect those awards that ultimately vest. The requisite service period ends when the employee can cease rendering service and still be eligible to vest in the award if the performance target is achieved. This guidance will be effective for annual periods (and interim periods within those annual periods) beginning after December 15, 2015. The Company implemented this guidance for all interim and annual periods beginning after December 15, 2015. The adoption of this guidance did not have an impact on the Company’s financial condition, results of operations or cash flows.

In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers.” The objective of ASU 2014-19 is to establish a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and will supersede most of the existing revenue recognition guidance, including industry-specific guidance. The core principle of the new standard is that revenue should be recognized to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The standard is effective for annual reporting periods beginning after December 15, 2016 and allows for prospective or retrospective application. The Company is evaluating the new guidance and has not determined the impact this pronouncement will have on its financial statements.

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Fair Value Measurements (Tables)

6 Months Ended

Jun. 30, 2016

Fair Value Measurements

Summary of information about the warrant liability that is measured at fair value on a recurring basis

	Level 1		Level 2		Level 3		Total
As of June 30, 2016 Warrant Liability	$	—	$	—	$	—	$	—

	Level 1		Level 2		Level 3		Total
As of June 30, 2015 Warrant Liability	$	—	$	—	$	—	$	—

Summary of change in the estimated fair value of the warrant liability

	Beginning Value of Warrant Liability		Issuance of Common Stock Warrants		Change in Fair Value of Level 3 Liability		Conversion into Additional Paid-in Capital		Ending Fair Value of Level 3 Liability
For the six months ended June 30, 2016	—		—		—		—		—
For the six months ended June 30, 2015	$	601,889	$	47,479	$	501,617	(1,150,985	)	$	—

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Balance Sheet Components (Tables)

6 Months Ended

Jun. 30, 2016

Balance Sheet Components

Schedule of property and equipment

	June 30,		December 31,
	2016		2015
Lab equipment	811,087		811,087
Clinical equipment	64,870		23,300
Software	5,223		—
Work in-process	57,414		—
Total property and equipment at cost	938,594		834,387
Accumulated depreciation	(22,587	)	(5,155	)
Property and equipment, net	916,007		829,232

Schedule of depreciation expense

	Three months ended		Six months ended
	June 30,		June30,
	2016	2015	2016	2015
Depreciation - Lab Equipment - research and developoment expense	6,568	—	13,136	—
Depreciation - Clinical Equipment - research and development expense	2,551	—	3,716	—
Depreciation - Software - general and administrative expense	435	—	580	—
Total Depreciation Expense	9,554	—	17,432	—

Schedule of accrued expenses

	June 30,	December 31,
	2016	2015
Accrued compensation and related:
Accrued vacation	200,878	187,734
Accrued payroll	—	80,692
Accrued payroll tax	15,367	43,702
	216,245	312,128
Accrued interest	119,165	127,149
Accrued contract manufacturing costs	165,480	110,141
Accrued clinical	133,375	166,750
Accrued other	19,479	82,266
Total	653,744	798,434

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Commitments and Contingencies (Tables)

6 Months Ended

Jun. 30, 2016

Leases, Operating

Schedule of future minimum payments for operating leases

Years ending December 31,	Amount
2016 - July through December	180,242
2017	363,486
2018	245,327
Total minimum lease payments	789,055

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Debt and Warrants (Tables)

6 Months Ended

Jun. 30, 2016

Schedule of net long-term debt obligation

	June 30,			December 31,
	2016			2015
Debt and unpaid accrued end-of-term payment	$	4,406,121		$	6,115,797
Unamortized note discount	(71,584		)	(106,635		)
Unamortized debt issuance costs	(183,244		)	(206,235		)
Net debt obligation	$	4,151,293		$	5,802,927
Current portion of long-term debt	$	1,465,713		$	1,707,899
Long-term debt, net of discount	2,685,580			$	4,095,028
Total	$	4,151,293		$	5,802,927

Schedule of future annual principal payments under long-term debt

Years ending December 31 (except 2016 which is the six months ending December 31)	Amount
2016 July through December	$	633,003
2017	2,032,048
2018	1,479,246
Total future principal payments	$	4,144,297
2018 end-of-term payment	$	560,000
	$	4,704,297
Less: unaccreted end-of-term payment at June 30, 2016	$	(298,176	)
Debt and unpaid accrued end-of-term payment	$	4,406,121

Schedule of interest expense on long-term debt

	Three months ended				Six months ended
	June 30,				June 30,
	2016		2015		2016		2015
Nominal interest	$	112,374	$	—	$	261,000	$	—
Amortization of debt discount	16,640		—		35,051		—
Accretion of end-of-term payment	69,331		—		146,027		—
Debt issuance costs	51,924		—		87,940		—
	$	250,269	$	—	$	530,018	$	—

Summary of warrant activity

	June 30,	June 30,
	2016	2015
Warrants outstanding January 1	748,872	494,267
Warrants issued	—	254,605
Warrants outstanding June 30	748,872	748,872

Convertible notes payable

Schedule of short-term debt obligations

	June 30,		December 31,
	2016		2015
Notes payable	$	150,000	$	150,000
Unamortized note discount	—		—
Net debt obligation	$	150,000	$	150,000

Schedule of interest expense on short-term debt

	June 30,		June 30,
	2016		2015
Nominal interest	$	8,975	$	61,545
Amortization of debt discount	—		1,898,540
Repayment premium	—		100,800
	$	8,975	$	2,060,885

Standby bridge financing agreement

Schedule of interest expense on short-term debt

	June 30,		June 30,
	2016		2015
Nominal interest	$	—	$	100,000
Amortization of debt discount	—		521,291
Repayment premium	—		86,667
Debt issuance costs	—		100,800
	$	—	$	808,758

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Stockholders' Equity (Tables)

6 Months Ended

Jun. 30, 2016

Stockholders' Equity

Schedule Of Common Stock Reserved For Future Issuance

	June 30,	December 31,
	2016	2015
Options issued and outstanding	1,464,265	919,506
Options available for grant	1,146,943	106,833
RSUs issued and outstanding	20,789	55,536
Warrants issued and outstanding	748,872	748,872
Convertible notes	26,785	26,785
Total	3,407,654	1,857,532

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Stock Incentive Plans (Tables)

6 Months Ended

Jun. 30, 2016

Summary of incentive plan activity

							Weighted		Weighted Average
	Shares						Average		Remaining	Aggregate
	Available		Stock Options		RSUs		Stock Option		Contractual Life	Intrinsic
	for Grant		Outstanding		Outstanding		Exercise Price		(Years)	Value
Combined Incentive Plan Balance—December 31, 2015	106,833		919,506		55,536		$	3.87	8.81	$	—
Q1 2016 2013 Equity Incentive Plan Activity:
Options Cancelled			(24,740	)			$	7.00
RSUs vested and released					(27,768	)
RSUs Cancelled					(6,979	)
Q2 2016 2013 Equity Incentive Plan Activity:
Options Cancelled			(102,889	)			$	3.52
Q1 2016 2014 Stock Incentive Plan Activity:
Additional shares authorized	162,498
Q2 2016 2014 Stock Incentive Plan Activity:
Additional shares authorized	1,550,000
Options granted	(692,388	)	692,388				$	3.30
Options cancelled	20,000		(20,000	)			$	1.58
Combined Incentive Plan Balance—June 30, 2016	1,146,943		1,464,265		20,789		$	3.61	8.81
Options vested and exercisable—June 30, 2016			574,690				$	4.05	6.49	$	—
Options vested and expected to vest—June 30, 2016			1,164,273				$	3.63	8.79	$	—

Summary of stock-based compensation expense

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2016		2015		2016		2015
Research and development expense	$	37,284	$	328,555	$	62,617	$	346,219
Sales and marketing expense	—		34,829		8,681		34,829
General and administrative expense	88,238		211,846		157,766		246,799
Total	$	125,522	$	575,230	$	229,064	$	627,847

Employee stock options

Schedule of estimated grant-date fair value of stock options calculated using the Black-Scholes option-pricing model

	Three months ended		Six Months Ended
	June 30,		June 30,
	2016	2015	2016	2016
Weighted-average volatility	66.25-69.14%	55.43-59.05%	66.25-69.14%	55.43-59.05%
Weighted-average expected term (years)	5.67-5.82	5.15-5.77	5.67-5.82	5.15-5.77
Risk-free interest rate	1.36-1.49%	1.60-1.76%	1.36-1.49%	1.60-1.76%
Expected dividend yield	—	—	—	—

Non-employee stock options

Schedule of estimated grant-date fair value of stock options calculated using the Black-Scholes option-pricing model

	Three months ended		Six Months Ended
	June 30,		June 30,
	2016	2015	2016	2016
Weighted-average volatility	78.30-80.04%	—	78.30-80.04%	—
Weighted-average expected term (years)	9.19-9.25	—	9.19-9.44	—
Risk-free interest rate	1.44-1.66%	—	1.44-1.74%	—
Expected dividend yield	—	—	—	—

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Related Party Transactions (Tables)

6 Months Ended

Jun. 30, 2016

Related Party Transactions

Schedule of total outstanding liabilities to Napo

	June 30,		December 31,
	2016		2015
Due to/(from) Napo	$	—	$	(6,008	)
Royalty payable to Napo	—		2,809
License fee payable to Napo	—		425,000
Total	$	—	$	421,801

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Net Loss Per Share Attributable to Common Stockholders (Tables)

6 Months Ended

Jun. 30, 2016

Net Loss Per Share Attributable to Common Stockholders

Schedule of calculation of basic and diluted net loss per common share

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2016			2015			2016			2015
Net loss attributable to common shareholders	$	(3,657,475	)	$	(5,421,963	)	$	(7,641,679	)	$	(9,546,432	)
Shares used to compute net loss per common share, basic and diluted	10,314,106			5,410,661			9,810,730			4,149,502
Net loss per share attributable to common shareholders, basic and diluted	$	(0.35	)	$	(1.00	)	$	(0.78	)	$	(2.30	)

Schedule of common stock equivalents excluded from the calculation of diluted net loss per common share

	June 30,	June 30,
	2016	2015
Options	1,464,265	815,284
Warrants to purchase common stock	748,872	748,872
Restricted stock units	20,789	55,536
Total	2,233,926	1,619,692

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Organization and Business (Details)					1 Months Ended		6 Months Ended		12 Months Ended
	Feb. 08, 2016 USD ($) $ / shares shares	May 18, 2015 USD ($) $ / shares shares	Oct. 27, 2014 shares	Jun. 11, 2013 shares	Jun. 30, 2016 USD ($) $ / shares shares	Oct. 31, 2014	Jun. 30, 2016 USD ($) segment $ / shares shares	Jun. 30, 2015 USD ($)	Dec. 31, 2015 USD ($) shares	Oct. 26, 2014 shares
Number of segments | segment							1
Reverse Stock Split
Common stock, shares authorized | shares					50,000,000		50,000,000		50,000,000
Initial Public Offering and Secondary Public Offering
Net proceeds from initial public offering								$ 18,810,484
Net proceeds from issuance of common stock							$ 4,130,102
Liquidity
Accumulated deficit					$ (33,344,007)		$ (33,344,007)		$ (25,702,328)
Common Stock
Reverse Stock Split
Reverse stock split ratio			0.667			0.667
Common stock, shares authorized | shares			15,000,000							10,000,000
Initial Public Offering and Secondary Public Offering
Shares issued (in shares) | shares							2,000,000		2,860,000
Issuance of common stock upon conversion (in shares) | shares		2,010,596
Common Stock | IPO
Initial Public Offering and Secondary Public Offering
Shares issued (in shares) | shares		2,860,000
Shares issued (price per share) | $ / shares		$ 7.00
Net proceeds from initial public offering		$ 15,900,000
Underwriting discounts and commissions		1,200,000							$ 1,209,802
Offering expenses		2,900,000							$ 2,897,825
Non-cash offering expenses		$ 3,300,000
Issuance of common stock upon conversion (in shares) | shares		2,010,596
Common Stock | Secondary public offering
Initial Public Offering and Secondary Public Offering
Shares issued (in shares) | shares	2,000,000
Shares issued (price per share) | $ / shares	$ 2.50
Net proceeds from issuance of common stock	$ 4,100,000
Underwriting discounts and commissions	373,011						$ 373,011
Offering expenses	$ 496,887						496,887
Common Stock | Private investment
Initial Public Offering and Secondary Public Offering
Shares issued (in shares) | shares					222,222
Net proceeds from issuance of common stock					$ 448,732
Underwriting discounts and commissions							$ 51,268
Offering expenses					$ 51,268
Liquidity
Term of Stock Purchase Agreement					30 months
Gross proceeds from the issuance of common stock					$ 500,000
Private Offering Price (in dollars per share) | $ / shares					$ 2.25		$ 2.25
Shares issued to a private investor in payment of underwriting discounts and commissions | shares					456,667		456,667
Common Stock | Private investment | Maximum
Liquidity
Value of common stock that may be sold to a private investor.					$ 15,000,000
Service Agreement | Napo
Number of shares issued in exchange for cash and services | shares				2,666,666

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Summary of Significant Accounting Policies - Restricted Cash and Inventories (Details) - USD ($)					4 Months Ended	6 Months Ended
	Apr. 21, 2016	Apr. 01, 2016	Mar. 01, 2016	Aug. 18, 2015	Aug. 31, 2016	Jun. 30, 2016	Mar. 31, 2016	Dec. 31, 2015	Dec. 22, 2015
Restricted Cash
Maximum borrowing capacity				$ 8,000,000
Initial loan commitment				6,000,000
Base minimum cash balance				$ 4,500,000		$ 1,144,297	$ 2,821,260	$ 3,000,000	$ 3,000,000
Repayment of loan from restricted cash	$ 1,500,000	$ 176,963	$ 178,740
Interest-only payments, term					4 months
Inventories
Inventory write-downs						$ 0

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Summary of Significant Accounting Policies - Property and Equipment (Details) - Equipment	6 Months Ended
	Jun. 30, 2016
Minimum
Property and Equipment
Property, Plant and Equipment, Useful Life	3 years
Maximum
Property and Equipment
Property, Plant and Equipment, Useful Life	10 years

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Summary of Significant Accounting Policies - Revenue Recognition (Details) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Revenue Recognition
Revenues	$ 24,143	$ 63,142	$ 62,289	$ 125,529

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Fair Value Measurements - Fair Value of Liabilities Measured on a Recurring Basis (Details)	Dec. 31, 2014 USD ($)
Recurring | Level 3
Fair value of liabilities measured on a recurring basis
Warrant liability	$ 601,889

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Fair Value Measurements - Estimated Fair Value of Warrant Liability (Details) - USD ($)	3 Months Ended	6 Months Ended	12 Months Ended
	Jun. 30, 2015	Jun. 30, 2015	Dec. 31, 2015	Jun. 30, 2016
Change in the estimated fair value of the warrant liability
Issuance of Common Warrants		$ 47,479
Change in Fair Value of Level 3 Liability	$ 173,101	501,617
Conversion into Additional Paid-in Capital			$ 1,202,521
Assets measured at fair value on a recurring basis				$ 0
Liabilities measured at fair value on a recurring basis				$ 0
Level 3 | Recurring
Change in the estimated fair value of the warrant liability
Beginning value of warrant liability		601,889	$ 601,889
Issuance of Common Warrants		47,479
Change in Fair Value of Level 3 Liability		501,617
Conversion into Additional Paid-in Capital		$ (1,150,985)

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License Agreement (Details) - USD ($)		1 Months Ended			3 Months Ended		6 Months Ended		12 Months Ended
	Mar. 31, 2016	Jan. 31, 2015	Jan. 31, 2014	Jul. 31, 2013	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015	Dec. 31, 2015
License agreement
Property and equipment, net					$ 916,007		$ 916,007		$ 829,232
License Fee Payable									425,000
Option Agreement | Napo
License agreement
License fees paid				$ 100,000
Term of agreement				2 years
License Agreement | Napo
License agreement
License fees paid	$ 425,000								1,200,000
Payment obligation of one-time non-refundable license fee		$ 1,750,000	$ 2,000,000
Option fee			100,000
Milestone payments due			$ 3,150,000
Royalty expiration term from the first sale of each individual product			10 years
Minimum proceeds from IPO prior to December 31, 2015, required for royalty reduction			$ 10,000,000
Milestone payments due in the event of minimum proceeds from IPO			0
License Fee Payable					0		0		$ 425,000
License Agreement | Napo | Products derived from Croton Lechleri
License agreement
Royalty rate for net sales below revenue base (as a percent)									8.00%
Net product sales upon which royalty rate increases			$ 30,000,000
Royalty rate for net sales above revenue base (as a percent)			10.00%
Royalties payments due in the event of minimum proceeds from IPO			$ 0
License Agreement | Napo | Prescription products derived from Croton Lechleri
License agreement
Royalty rate in the event of an IPO in excess of a specified amount			2.00%
License Agreement | Napo | Nonprescription products derived from Croton Lechleri
License agreement
Royalty rate in the event of an IPO in excess of a specified amount			1.00%
License Agreement | Napo | Pharmaceutical prescription products not derived from Croton Lechleri
License agreement
Royalty on annual net sales of products (as a percent)			2.00%
License Agreement | Napo | Nonprescription products not derived from Croton Lechleri
License agreement
Royalty on annual net sales of products (as a percent)			1.00%
License Agreement | Napo | Accrued Liabilities
License agreement
Unpaid royalties					0		0		$ 2,810
License Agreement | Napo | Property and equipment
License agreement
Property and equipment, net					811,087		811,087		$ 811,087
License Agreement | Napo | General and administrative expense
License agreement
Royalties incurred					191	$ 36,163	844	$ 38,746
License Agreement | Napo | Research and development expense
License agreement
Depreciation expense					$ 6,568		$ 13,136

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Balance Sheet Components - Property and Equipment (Details) - USD ($)	3 Months Ended	6 Months Ended
	Jun. 30, 2016	Jun. 30, 2016	Dec. 31, 2015
Property and Equipment
Property, Plant and Equipment, Gross	$ 938,594	$ 938,594	$ 834,387
Accumulated depreciation	(22,587)	(22,587)	(5,155)
Property and equipment, net	916,007	916,007	829,232
Depreciation and amortization expense	9,554	17,432
Lab Equipment
Property and Equipment
Property, Plant and Equipment, Gross	811,087	811,087	811,087
Lab Equipment | Research and development expense
Property and Equipment
Depreciation and amortization expense	6,568	13,136
Clinical Equipment
Property and Equipment
Property, Plant and Equipment, Gross	64,870	64,870	$ 23,300
Clinical Equipment | Research and development expense
Property and Equipment
Depreciation and amortization expense	2,551	3,716
Software
Property and Equipment
Property, Plant and Equipment, Gross	5,223	5,223
Software | General and administrative expense
Property and Equipment
Depreciation and amortization expense	435	580
Work in-process
Property and Equipment
Property, Plant and Equipment, Gross	$ 57,414	$ 57,414

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Balance Sheet Components - Accrued Expenses (Details) - USD ($)	Jun. 30, 2016	Dec. 31, 2015
Accrued compensation and related:
Accrued vacation	$ 200,878	$ 187,734
Accrued payroll		80,692
Accrued payroll tax	15,367	43,702
Total of accrued compensation and related	216,245	312,128
Accrued interest	119,165	127,149
Accrued contract manufacturing costs	165,480	110,141
Accrued clinical	133,375	166,750
Accrued other	19,479	82,266
Total	$ 653,744	$ 798,434

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Commitments and Contingencies - Operating Leases (Details) - USD ($)		3 Months Ended			6 Months Ended
	Jul. 01, 2015	Jun. 30, 2016	Jun. 30, 2015	May 31, 2014	Jun. 30, 2016	Jun. 30, 2015
Commitments and Contingencies
Cash deposits under non-cancelable sub-lease agreement	$ 122,163
Security deposit under non-cancelable sub-lease agreement	29,539
Future minimum lease payments under non-cancellable operating leases
2016 - July through December		$ 180,242			$ 180,242
2017		363,486			363,486
2018		245,327			245,327
Total minimum lease payments		789,055			789,055
Other assets
Commitments and Contingencies
Prepayment of last three months lease payments	$ 92,623
Napo
Commitments and Contingencies
Rent related to the office space				$ 33,897
General and administrative expense
Commitments and Contingencies
Rent expense under non-cancelable operating lease		$ 90,278			$ 180,556
General and administrative expense | Napo
Commitments and Contingencies
Rent expense under non-cancelable operating lease			$ 34,799			$ 69,598

XML

Commitments and Contingencies - Contract Manufacturing Commitment (Details)				1 Months Ended			6 Months Ended	12 Months Ended
	Jul. 15, 2016 USD ($)	Jun. 30, 2015 USD ($)	Jun. 26, 2014 EUR (€) item shares	Jun. 30, 2015 EUR (€)	May 31, 2015 EUR (€)	Apr. 30, 2015 EUR (€)	Jun. 30, 2016 USD ($)	Dec. 31, 2015 EUR (€) shares item	Dec. 31, 2015 USD ($) item	Jun. 30, 2016 EUR (€) shares	Mar. 29, 2016 EUR (€)	Mar. 31, 2015 $ / shares	Mar. 25, 2015 EUR (€)	Oct. 30, 2014
Commitments and Contingencies
Prepayment of start-up fee											€ 250,000
Number of warrants issued to purchase shares of common stock (in shares) | shares								26,785		26,785
Exercise price as a percentage of initial public offering price														80.00%
Accrued Liabilities
Commitments and Contingencies
Contract amortization costs included in accrued liabilities | $							$ 170,850		$ 110,141
Transfer Agreement
Commitments and Contingencies
Bonus fee paid | $	$ 150,000
Transfer Agreement | Accrued Liabilities
Commitments and Contingencies
Bonus fee paid | $		$ 165,480
Transfer Agreement | Manufacturer
Commitments and Contingencies
Prepayment of start-up fee			€ 500,000		€ 500,000			€ 500,000
Prepayment of start-up fee which is to be paid at the earlier to occur of September 15, 2014 or the closing date of an initial public offering			250,000
Prepayment of start-up fee which is to be paid at the time of installation and qualification of the Company's equipment			250,000
Prepayment related to technology transfer			620,000		215,000
Prepayment related to technology transfer which is to be paid within five days of the signature of the Transfer Agreement			310,000
Prepayment related to technology transfer which is to be paid after the delivery of a final study report			310,000
Prepayment for design of a portion of the Manufacturer's facility which is to be paid within five days of the signature of the Transfer Agreement			€ 100,000
Period within which prepayment for design of a portion of the Manufacturer's facility is payable from signature of the Transfer Agreement			5 days
Bonus fee payable			€ 300,000							€ 150,000
Number of installments | item			2
Bonus fee paid					€ 150,000	€ 150,000		150,000
Aggregate amount payable to Manufacturer upon the delivery of agreed-upon levels of satisfactory product pursuant to the agreement			€ 500,000					€ 250,000		€ 250,000
Number of warrants issued to purchase shares of common stock (in shares) | shares			16,666
Exercise price as a percentage of initial public offering price			90.00%
Exercise price (in dollars per share) | $ / shares												$ 6.30
Remaining balance due related to prepayment of technology transfer													€ 310,000
Increase in prepayment for design of portion of manufacturer facility payable within specified days of signature of agreement													170,000
Transfer Agreement | API
Commitments and Contingencies
Amount of product supplied at no cost (in Kg) | item								400	400
Amendment to Transfer Agreement first portion due | Manufacturer
Commitments and Contingencies
Prepayment related to technology transfer													€ 215,000
Payments related to design of a portion of manufacturing facility						€ 150,000
Amendment to Transfer Agreement second portion due | Manufacturer
Commitments and Contingencies
Prepayment related to technology transfer				€ 95,000
Payments related to design of a portion of manufacturing facility				€ 20,000

XML

Debt and Warrants (Details)																1 Months Ended							2 Months Ended	3 Months Ended			4 Months Ended	5 Months Ended	6 Months Ended		12 Months Ended
	Aug. 01, 2018 USD ($)	Apr. 21, 2016 USD ($)	Apr. 01, 2016 USD ($)	Mar. 01, 2016 USD ($)	Aug. 18, 2015 USD ($)	Aug. 15, 2015 USD ($)	Jun. 02, 2015 shares	Dec. 23, 2014 USD ($) item $ / shares shares	Dec. 03, 2014 USD ($) $ / shares	Oct. 31, 2014	Oct. 30, 2014 USD ($) item	Jul. 16, 2014 USD ($) $ / shares shares	Jun. 26, 2014 USD ($) $ / shares shares	Jun. 26, 2014 USD ($) $ / shares shares	Jun. 02, 2014 USD ($) item $ / shares	Aug. 31, 2015 USD ($)	May 31, 2015 USD ($) shares	Apr. 30, 2015 $ / shares shares	Mar. 31, 2015 USD ($) $ / shares	Feb. 28, 2015 USD ($) item	Aug. 31, 2014 USD ($) $ / shares shares	Feb. 28, 2014 USD ($) shares	Feb. 28, 2014 USD ($)	Jun. 30, 2016 USD ($) shares	Jun. 30, 2015 USD ($) shares	Sep. 30, 2013 USD ($) item $ / shares shares	Aug. 31, 2016	May 31, 2015 USD ($) shares	Jun. 30, 2016 USD ($) shares	Jun. 30, 2015 USD ($) shares	Dec. 31, 2015 USD ($) shares	Mar. 31, 2016 USD ($)	Dec. 22, 2015 USD ($)
Debt, Convertible Promissory Notes and Common Stock Warrants
Gross aggregate proceeds																														$ 1,250,000
Number of shares issued for notes converted | shares																	178,571
Number of warrants issued to purchase shares of common stock (in shares) | shares																								26,785					26,785		26,785
Exercise price as a percentage of initial public offering price											80.00%
Fair value of warrants																					$ 114,300
Interest Paid																													$ 277,959
Stand-by line of credit					$ 8,000,000
Initial loan commitment					6,000,000
Proceeds required to be maintained in cash					$ 4,500,000																			$ 1,144,297					1,144,297		$ 3,000,000	$ 2,821,260	$ 3,000,000
Repayment of loan from restricted cash		$ 1,500,000	$ 176,963	$ 178,740
Interest-only payments, term																											4 months
Short-term debt
Net debt obligation																								150,000					150,000		150,000
Interest payable on convertible notes payable																								119,165					119,165		127,149
Future principal payments of debt
2016 July through December																								633,003					633,003
2017																								2,032,048					2,032,048
2018																								1,479,246					1,479,246
Total																								4,144,297					4,144,297
Long-term debt
Current portion of long-term debt																								1,465,713					1,465,713		1,707,899
Long-term debt, net of discount																								$ 2,685,580					2,685,580		$ 4,095,028
End-of-term payment																													560,000
Total including end-of-term payment																													4,704,297
Less: unaccreted end-of-term payment																													(298,176)
Debt and unpaid accrued end-of-term payment																													$ 4,406,121
Warrant Activity
Warrants outstanding at beginning of period | shares																												494,267	748,872	494,267	494,267
Warrants issued | shares																														254,605
Warrants outstanding at end of period | shares																								748,872	748,872				748,872	748,872	748,872
Transfer Agreement | Manufacturer
Debt, Convertible Promissory Notes and Common Stock Warrants
Number of warrants issued to purchase shares of common stock (in shares) | shares													16,666	16,666
Exercise price (in dollars per share) | $ / shares																			$ 6.30
Exercise price as a percentage of initial public offering price													90.00%	90.00%
Warrants to purchase common stock | Transfer Agreement | Manufacturer
Debt, Convertible Promissory Notes and Common Stock Warrants
Exercise price (in dollars per share) | $ / shares																			$ 6.30
Term														5 years
Warrants to purchase common stock | Common Stock | Transfer Agreement | Manufacturer
Debt, Convertible Promissory Notes and Common Stock Warrants
Number of warrants issued to purchase shares of common stock (in shares) | shares													16,666	16,666
Exercise price (in dollars per share) | $ / shares													$ 4.35	$ 4.35
Exercise price as a percentage of initial public offering price													90.00%	90.00%
Term													5 years
Fair value of warrants													$ 37,840	$ 37,840
Strike price (in dollars per share) | $ / shares													$ 4.83	$ 4.83
Volatility (as a percent)														49.00%
Dividend yield (as a percent)														0.00%
Risk-free interest rate (as a percent)														1.64%
Standby bridge financing agreement
Debt, Convertible Promissory Notes and Common Stock Warrants
Amortization of debt discount																														$ 521,291
Exercise price (in dollars per share) | $ / shares									$ 5.23
Term									5 years
Fair value of warrants									$ 505,348
Strike price (in dollars per share) | $ / shares									$ 5.01
Volatility (as a percent)									63.00%
Dividend yield (as a percent)									0.00%
Risk-free interest rate (as a percent)									1.61%
Unamortized note discount											$ 605,348
Number of lenders | item											2
Aggregate principal amount of bridge financing									$ 1,000,000
Interest Paid																	$ 1,321,600
Value to be divided by IPO exercise price to determine number of warrants granted																			$ 1,000,000
Short-term debt
Unamortized note discount											$ (605,348)
Nominal interest																														100,000
Amortization of debt discount																														521,291
Repayment premium																														86,667
Debt issuance costs																														100,800
Total																														808,758
Long-term debt
Unamortized note discount											$ (605,348)
Nominal interest																														100,000
Amortization of debt discount																														521,291
Debt Issuance Cost																														100,800
Total																														808,758
Standby bridge financing agreement | IPO
Debt, Convertible Promissory Notes and Common Stock Warrants
Exercise price (in dollars per share) | $ / shares																			$ 5.60
Standby bridge financing agreement | Interest Expense.
Debt, Convertible Promissory Notes and Common Stock Warrants
Amortization of debt discount																															$ 521,291
Term										6 months	6 months
Unamortized note discount											$ 100,000
Additional financing costs											104,000																				86,667
Short-term debt
Unamortized note discount											(100,000)
Amortization of debt discount																															521,291
Debt issuance costs											104,000
Long-term debt
Unamortized note discount											(100,000)
Amortization of debt discount																															521,291
Debt Issuance Cost											$ 104,000
Convertible notes payable
Debt, Convertible Promissory Notes and Common Stock Warrants
Amortization of debt discount																														1,898,540
Notes payable																								$ 150,000					$ 150,000		150,000
Short-term debt
Notes payable																								150,000					150,000		150,000
Net debt obligation																								150,000					150,000		150,000
Nominal interest																													8,975	61,545
Amortization of debt discount																														1,898,540
Repayment premium																														100,800
Total																													8,975	2,060,885
Interest payable on convertible notes payable																								84,974					84,974		75,999
Long-term debt
Nominal interest																													8,975	61,545
Amortization of debt discount																														1,898,540
Total																													8,975	2,060,885
Convertible promissory notes
Debt, Convertible Promissory Notes and Common Stock Warrants
Number of convertible promissory notes issued | item																				2						4
Gross aggregate proceeds																										$ 525,000
Interest rate (as a percent)																										8.00%
Number of business days after the date of consummation of the initial closing of a first equity round of financing, when the debt instrument is due																										10 days
Pre-money valuation threshold amount																										$ 3,000,000
Number of shares issued for notes converted | shares																						207,664
Amortization of debt discount																						$ 4,071	$ 1,443
Notes payable																				$ 250,000
Principal and interest paid on debt																	103,912
Retirement of convertible promissory notes																	$ 100,000											$ 100,000
Short-term debt
Notes payable																				250,000
Amortization of debt discount																						4,071	1,443
Long-term debt
Amortization of debt discount																						$ 4,071	$ 1,443
Convertible promissory notes | Interest Expense.
Debt, Convertible Promissory Notes and Common Stock Warrants
Amortization of debt discount																												1,000,000
Short-term debt
Amortization of debt discount																												1,000,000
Long-term debt
Amortization of debt discount																												$ 1,000,000
Convertible promissory notes | Dechra Pharmaceuticals PLC
Debt, Convertible Promissory Notes and Common Stock Warrants
Interest rate (as a percent)																		12.00%
Number of warrants issued to purchase shares of common stock (in shares) | shares																		89,285
Exercise price (in dollars per share) | $ / shares																		$ 5.60
Notes payable																			$ 1,000,000
Investment Warrants Expiration Date																		Dec. 31, 2017
Short-term debt
Notes payable																			$ 1,000,000
Convertible promissory notes | Warrants to purchase common stock | Common Stock
Debt, Convertible Promissory Notes and Common Stock Warrants
Exercise price as a percentage of purchase price paid by equity investors when pre-money valuation threshold amount is achieved																										75.00%
Number of warrants issued to purchase shares of common stock (in shares) | shares																										207,664
Exercise price (in dollars per share) | $ / shares																										$ 2.53
Warrant term																										5 years
Convertible promissory notes issued June 2, 2014
Debt, Convertible Promissory Notes and Common Stock Warrants
Interest rate (as a percent)															3.00%
Number of shares issued for notes converted | shares							53,571
Exercise price (in dollars per share) | $ / shares															$ 5.60
Notes payable															$ 300,000
Number of Accredited Investors | item															2
Aggregate principal amount issued to board member to which Series A preferred stock was sold															$ 200,000
Beneficial conversion feature															75,000
Short-term debt
Notes payable															300,000
Convertible promissory notes issued June 2, 2014 | Interest Expense.
Debt, Convertible Promissory Notes and Common Stock Warrants
Amortization of debt discount																									$ 12,530					30,713
Short-term debt
Amortization of debt discount																									12,530					30,713
Long-term debt
Amortization of debt discount																									12,530					30,713
Convertible promissory note issued July 16, 2014
Debt, Convertible Promissory Notes and Common Stock Warrants
Interest rate (as a percent)												3.00%
Number of shares issued for notes converted | shares												26,785
Exercise price (in dollars per share) | $ / shares												$ 5.60
Notes payable												$ 150,000
Beneficial conversion feature												37,500
Short-term debt
Notes payable												$ 150,000
Convertible promissory note issued July 16, 2014 | Interest Expense.
Debt, Convertible Promissory Notes and Common Stock Warrants
Amortization of debt discount																									7,243					17,757
Short-term debt
Amortization of debt discount																									7,243					17,757
Long-term debt
Amortization of debt discount																									7,243					17,757
Convertible note purchase agreement
Debt, Convertible Promissory Notes and Common Stock Warrants
Gross aggregate proceeds								$ 650,000
Interest rate (as a percent)								12.00%
Amortization of debt discount																									61,201					121,729
Number of warrants issued to purchase shares of common stock (in shares) | shares								58,035
Exercise price (in dollars per share) | $ / shares								$ 4.15											$ 5.60
Number of Accredited Investors | item								3
Aggregate principal amount issued to board member to which Series A preferred stock was sold								$ 250,000							$ 200,000
Beneficial conversion feature								$ 502,057																						413,098
Term								3 years
Fair value of warrants								$ 147,943
Strike price (in dollars per share) | $ / shares								$ 4.59
Volatility (as a percent)								49.00%
Dividend yield (as a percent)								0.00%
Risk-free interest rate (as a percent)								1.10%
Short-term debt
Amortization of debt discount																									61,201					121,729
Long-term debt
Amortization of debt discount																									61,201					$ 121,729
Convertible note purchase agreement | IPO
Debt, Convertible Promissory Notes and Common Stock Warrants
Number of shares issued for notes converted | shares								116,070
Exercise price as a percentage of initial public offering price								80.00%				5.60%
Strike price (in dollars per share) | $ / shares																		$ 5.60
Convertible note purchase agreement | Interest Expense.
Debt, Convertible Promissory Notes and Common Stock Warrants
Beneficial conversion feature																									$ 207,690
Line of credit and loan agreement
Debt, Convertible Promissory Notes and Common Stock Warrants
Number of warrants issued to purchase shares of common stock (in shares) | shares																					33,333
Exercise price (in dollars per share) | $ / shares																			$ 5.60		$ 6.40
Exercise price as a percentage of initial public offering price																					80.00%
Term																					2 years
Strike price (in dollars per share) | $ / shares																					$ 8.00
Volatility (as a percent)																					52.00%
Dividend yield (as a percent)																					0.00%
Risk-free interest rate (as a percent)																					0.52%
Drawdown amount																			$ 0
Line of credit and loan agreement | Maximum
Debt, Convertible Promissory Notes and Common Stock Warrants
Stand-by line of credit																					$ 1,000,000
Loan and security agreement
Debt, Convertible Promissory Notes and Common Stock Warrants
Interest rate (as a percent)				9.90%
Amortization of debt discount																								16,640					35,051
Interest payable on long-term debt																								34,190					34,190		51,150
Unamortized note discount																$ 134,433								71,584					71,584		106,635
Stand-by line of credit																8,000,000
Initial loan commitment																6,000,000
Proceeds required to be maintained in cash																$ 4,500,000
Additional borrowing capacity contingent on achievement of milestones						$ 2,000,000
Term of agreement																3 years
Balloon amount payable on August 1, 2018	$ 560,000
Effective interest rate																15.00%
Prior notification period required for pre-payment of principal and accrued interest (in days)																5 days
Short-term debt
Unamortized note discount																$ (134,433)								(71,584)					(71,584)		(106,635)
Nominal interest																								112,374					261,000
Amortization of debt discount																								16,640					35,051
Debt issuance costs																								51,924					87,940
Total																								250,269					530,018
Long-term debt
Debt and unpaid accrued end-of-term payment																								4,406,121					4,406,121		6,115,797
Unamortized note discount																$ (134,433)								(71,584)					(71,584)		(106,635)
Unamortized debt issuance costs																								(183,244)					(183,244)		(206,235)
Total																								4,151,293					4,151,293		5,802,927
Current portion of long-term debt																								1,465,713					1,465,713		1,707,899
Long-term debt, net of discount																								2,685,580					2,685,580		4,095,028
End-of-term payment																													560,000		$ 560,000
Nominal interest																								112,374					261,000
Amortization of debt discount																								16,640					35,051
Accretion of end-of-term payment																								69,331					146,027
Debt Issuance Cost																								51,924					87,940
Total																								250,269					530,018
Loan and security agreement | Prepayment during the first twelve months member
Debt, Convertible Promissory Notes and Common Stock Warrants
Prepayment charge during first twelve months of loan when a minimum cash balance is required as a percent of minimum cash balance																2.00%
Prepayment charge during first twelve months of loan when a minimum cash balance is required as a percent of difference between amount being prepaid and minimum cash balance																3.00%
Prepayment charge during first twelve months of loan when no minimum cash balance is required as a percent of amount being prepaid																3.00%
Loan and security agreement | Prepayment after the first twelve months member
Debt, Convertible Promissory Notes and Common Stock Warrants
Prepayment charge as a percent of amount being prepaid																1.00%
Convertible promissory note issued to Serious Change II LP
Debt, Convertible Promissory Notes and Common Stock Warrants
Gross aggregate proceeds																				$ 150,000
Interest rate (as a percent)																				12.00%
Convertible promissory note issued to Serious Change II LP | Accrued liabilities
Short-term debt
Interest payable on convertible notes payable																								$ 24,855					$ 24,855

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Redeemable Convertible Preferred Stock (Details) - USD ($)		6 Months Ended	12 Months Ended
	May 18, 2015	Jun. 30, 2015	Dec. 31, 2014	May 31, 2014	Apr. 30, 2014	Feb. 28, 2014
Redeemable Convertible Preferred Stock
Preferred shares issued				3,015,902	3,015,902	3,015,902
Liquidation preference				$ 6,777,338
Redemption value				$ 9,000,000
Issuance costs incurred		$ 396,012
Common Stock
Redeemable Convertible Preferred Stock
Issuance of common stock upon conversion (in shares)	2,010,596
Common Stock | IPO
Redeemable Convertible Preferred Stock
Issuance of common stock upon conversion (in shares)	2,010,596
Series A redeemable convertible preferred stock
Redeemable Convertible Preferred Stock
Preferred shares issued			3,015,902
Issuance costs incurred			$ 119,097
Preferred shares outstanding	3,015,902

XML

Stockholders' Equity (Details)	6 Months Ended
	Jun. 30, 2016 item $ / shares shares	Dec. 31, 2015 $ / shares shares
Stockholders' Equity
Common stock, shares authorized	50,000,000	50,000,000
Common stock par value (in dollars per share) | $ / shares	$ 0.0001	$ 0.0001
Number of voting rights entitled for each share of common stock held | item	1
Preferred stock, shares authorized	10,000,000	10,000,000
Preferred stock, par value (in dollars per share) | $ / shares	$ 0.0001	$ 0.0001
Preferred stock, shares issued	0	0
Preferred stock, shares outstanding	0	0
Shares of common stock reserved for issuance
Options issued and outstanding	1,464,265	919,506
Options available for grant	1,146,943	106,833
RSUs issued and outstanding	20,789	55,536
Warrants issued and outstanding	748,872	748,872
Convertible notes	26,785	26,785
Total	3,407,654	1,857,532

XML

Stock Incentive Plans - Summary of Stock Incentive Plans (Details) - USD ($)			1 Months Ended		3 Months Ended		6 Months Ended		12 Months Ended
	May 18, 2015	May 12, 2015	Jul. 31, 2016	Jul. 31, 2015	Jun. 30, 2016	Mar. 31, 2016	Jun. 30, 2016	Jun. 30, 2015	Dec. 31, 2015	Jan. 01, 2016	Apr. 30, 2014	Dec. 31, 2013
Shares Available for Grant
Beginning balance (in shares)			1,146,943			106,833	106,833
Ending balance (in shares)					1,146,943		1,146,943		106,833
Stock Options Outstanding
Beginning balance (in shares)			1,464,265			919,506	919,506
Ending balance (in shares)					1,464,265		1,464,265		919,506
RSUs Outstanding
Beginning balance (in shares)			20,789			55,536	55,536
Ending balance (in shares)					20,789		20,789		55,536
Weighted Average Stock Option Exercise Price
Beginning balance (in dollars per share)			$ 3.61			$ 3.87	$ 3.87
Options Cancelled (in dollars per share)					$ 1.58
Ending balance (in dollars per share)					$ 3.61		$ 3.61		$ 3.87
Weighted Average Remaining Contractual Life (Years)
Weighted Average Remaining Contractual Life (Years)							8 years 9 months 22 days		8 years 9 months 22 days
Options vested, exercisable and expected to vest
Options vested and exercisable (in shares)					574,690		574,690
Options vested and exercisable (in dollars per share)					$ 4.05		$ 4.05
Options vested and exercisable (in years)							6 years 5 months 27 days
Options vested and expected to vest (in shares)					1,164,273		1,164,273
Options vested and expected to vest (in dollars per share)					$ 3.63		$ 3.63
Options vested and expected to vest (in years)							8 years 9 months 15 days
Fair market value of options exercised (in dollars per share)							$ 3.65	$ 1.04
Stock options
Stock Options Outstanding
Options Exercised (in shares)							0	0
Options vested, exercisable and expected to vest
Number of options vested (in shares)							242,239	291,786
Fair value of options vested on grant date							$ 283,219	$ 160,736
2013 Plan
Stock Options Outstanding
Options Cancelled (in shares)					(102,889)	(24,740)
RSUs Outstanding
RSUs Granted (in shares)						(27,768)
RSUs Cancelled (in shares)						(6,979)
Weighted Average Stock Option Exercise Price
Options Cancelled (in dollars per share)					$ 3.52	$ 7.00
2013 Plan | Stock options
Stock Incentive Plans
Number of shares reserved for issuance											847,533	300,000
Shares Available for Grant
Shares Authorized (in shares)											847,533	300,000
Stock Options Outstanding
Options Granted (in shares)	0
2014 Plan
Stock Incentive Plans
Number of shares reserved for issuance					1,550,000	162,498	1,550,000
Shares Available for Grant
Shares Authorized (in shares)					1,550,000	162,498	1,550,000
Stock Options Outstanding
Options Granted (in shares)					692,388
Options Cancelled (in shares)					(20,000)
Weighted Average Stock Option Exercise Price
Options Granted (in dollars per share)					$ 3.30
2014 Plan | Stock options
Stock Incentive Plans
Number of shares reserved for issuance		333,333
Increase in shares reserve based on outstanding number of shares										162,498
Increase in share reserve based on outstanding number of shares (as a percent)		2.00%
Additional shares under plan contingent upon approval by stockholders at next stockholders meeting			1,550,000	550,000
Shares Available for Grant
Shares Authorized (in shares)		333,333

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Stock Incentive Plans - Restricted Units (Details) - USD ($)	Jan. 01, 2017	Jan. 01, 2016	Jun. 30, 2016
Stock Incentive Plans
Issuance of common stock in exchange for vested restricted stock units (in shares)		17,546
Restricted stock units
Stock Incentive Plans
RSUs, vested and released, gross (in shares)		27,768
RSU shares used to pay withholding taxes (in shares0		10,172
Unrecognized stock-based compensation expense			$ 61,592
2013 Plan | Restricted stock units
Stock Incentive Plans
Vesting (as a percent)		50.00%
2013 Plan | Restricted stock units | Forecast
Stock Incentive Plans
Vesting (as a percent)	50.00%

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Stock Incentive Plans - Stock-Based Compensation (Details) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Stock Incentive Plans
Total stock-based compensation expense	$ 125,522	$ 575,230	$ 229,064	$ 627,847
Research and development expense
Stock Incentive Plans
Total stock-based compensation expense	37,284	328,555	62,617	346,219
Selling and marketing expense
Stock Incentive Plans
Total stock-based compensation expense		34,829	8,681	34,829
General and administrative expense
Stock Incentive Plans
Total stock-based compensation expense	88,238	$ 211,846	157,766	$ 246,799
Stock options
Stock Incentive Plans
Unrecognized stock-based compensation expense	852,837		$ 852,837
Estimated grant-date fair value of stock options calculated using the Black-Scholes option-pricing model
Weighted-average expected term (in years)			2 years 18 days
Restricted stock units
Stock Incentive Plans
Unrecognized stock-based compensation expense	$ 61,592		$ 61,592
Estimated grant-date fair value of stock options calculated using the Black-Scholes option-pricing model
Weighted-average expected term (in years)			1 year
Minimum | Employee stock options
Estimated grant-date fair value of stock options calculated using the Black-Scholes option-pricing model
Weighted-average volatility (as a percent)	66.25%	55.43%	66.25%	55.43%
Weighted-average expected term (in years)	5 years 8 months 1 day	5 years 1 month 24 days	5 years 8 months 1 day	5 years 1 month 24 days
Risk-free interest rate (as a percent)	1.36%	1.60%	1.36%	1.60%
Minimum | Non-employee stock options
Estimated grant-date fair value of stock options calculated using the Black-Scholes option-pricing model
Weighted-average volatility (as a percent)	78.30%		78.30%
Weighted-average expected term (in years)	9 years 2 months 9 days		9 years 2 months 9 days
Risk-free interest rate (as a percent)	1.44%		1.44%
Maximum | Employee stock options
Estimated grant-date fair value of stock options calculated using the Black-Scholes option-pricing model
Weighted-average volatility (as a percent)	69.14%	59.05%	69.14%	59.05%
Weighted-average expected term (in years)	5 years 9 months 26 days	5 years 9 months 7 days	5 years 9 months 26 days	5 years 9 months 7 days
Risk-free interest rate (as a percent)	1.49%	1.76%	1.49%	1.76%
Maximum | Non-employee stock options
Estimated grant-date fair value of stock options calculated using the Black-Scholes option-pricing model
Weighted-average volatility (as a percent)	80.04%		80.04%
Weighted-average expected term (in years)	9 years 3 months		9 years 5 months 9 days
Risk-free interest rate (as a percent)	1.66%		1.74%

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Related Party Transactions (Details) - Napo	Dec. 31, 2015 USD ($)
Outstanding liabilities
Due to/(from) Napo	$ (6,008)
Royalty payable to Napo	2,809
License fee payable to Napo	425,000
Total	$ 421,801

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Net Loss Per Share Attributable to Common Stockholders- Calculation (Details) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Calculation of basic and diluted net loss per common share
Net loss attributable to common stockholders	$ (3,657,475)	$ (5,421,963)	$ (7,641,679)	$ (9,546,432)
Shares used to compute net loss per common share, basic and diluted (in shares)	10,314,106	5,410,661	9,810,730	4,149,502
Net loss per share attributable to common shareholders, basic and diluted	$ (0.35)	$ (1.00)	$ (0.78)	$ (2.30)

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Net Loss Per Share Attributable to Common Stockholders- Excluded From Calculation (Details) - shares	6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015
Outstanding common stock equivalents have been excluded from diluted net loss per common share
Outstanding common stock equivalents have been excluded from diluted net loss per common share (in shares)	2,233,926	1,619,692
Options
Outstanding common stock equivalents have been excluded from diluted net loss per common share
Outstanding common stock equivalents have been excluded from diluted net loss per common share (in shares)	1,464,265	815,284
Warrants to purchase common stock
Outstanding common stock equivalents have been excluded from diluted net loss per common share
Outstanding common stock equivalents have been excluded from diluted net loss per common share (in shares)	748,872	748,872
Restricted stock units
Outstanding common stock equivalents have been excluded from diluted net loss per common share
Outstanding common stock equivalents have been excluded from diluted net loss per common share (in shares)	20,789	55,536

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401(k) Plan (Details)	6 Months Ended
	Jun. 30, 2016 USD ($)
401(k) Plan
Employer contributions to the plan	$ 0

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Subsequent Events (Details) - USD ($)				6 Months Ended
	Aug. 09, 2016	Jul. 25, 2016	Jul. 14, 2016	Jun. 30, 2016	Oct. 31, 2016
Subsequent Event
Net proceeds from issuance of common stock				$ 4,130,102
Subsequent event
Subsequent Event
Shares issued (in shares)	100,000	100,000	100,000
Net proceeds from issuance of common stock	$ 146,690	$ 177,000	$ 183,670
Subsequent event | Convertible promissory note issued to Serious Change II LP
Subsequent Event
Convertible notes payable					$ 150,000