10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q 

(Mark One)

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

For the quarterly period ended September 30, 2019

OR

☐TRANSITION 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 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 ☒  No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files). Yes ☒  No ☐

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

Large accelerated filer ☐	Accelerated filer ☐	Non-accelerated filer ☒	Smaller reporting company ☒
			Emerging growth company ☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☒

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

Securities registered pursuant to Section 12(b) of the Act:

Title of each class:	Trading Symbol(s)	Name of each exchange on which registered:
Common Stock, Par Value $0.0001 Per Share	JAGX	The NASDAQ Capital Market

As of November 8, 2019 there were 10,852,125 shares of voting common stock, par value $0.0001 per share, outstanding, 40,301,237 shares of non-voting common stock, par value $0.0001 per share, outstanding (convertible into 38,382 shares of voting common stock),  5,524,926 shares of Series A convertible preferred stock, par value $0.0001 per share, outstanding (convertible into 473,565 shares of voting common stock, subject to certain voting restrictions as provided in the Certificate of Designation for the convertible preferred stock), 1,971 shares of Series B convertible preferred stock, par value $0.0001 per share, outstanding (convertible into 985,500 shares of voting common stock, subject to certain voting restrictions as provided in the Certificate of Designation for the convertible preferred stock), and 63 shares of Series B-1 convertible preferred stock, par value $0.0001 per share, outstanding (convertible into 630,063 shares of voting common stock, subject to certain restrictions as provided in the Certificate of Designation for the convertible preferred stock).

	Page No.
PART I. — FINANCIAL INFORMATION	1
Item 1. Unaudited Condensed Consolidated Financial Statements	1
Condensed Consolidated Balance Sheets	1
Condensed Consolidated Statements of Operations	2
Condensed Consolidated Statements of Changes in Convertible Preferred Stock and Stockholders’ Equity/(Deficit)	3
Condensed Consolidated Statements of Cash Flows	6
Notes to the Condensed Consolidated Financial Statements	8
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations	39
Item 3. Quantitative and Qualitative Disclosures About Market Risk	58
Item 4. Controls and Procedures	58
PART II. — OTHER INFORMATION	60
Item 1. Legal Proceedings	60
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	60
Item 5. Other Information	60
Item 6. Exhibits	61
SIGNATURE	62

PART I. — FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements

JAGUAR HEALTH, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

	September 30,		December 31,
	2019		2018
Assets		(Unaudited)
Current assets:
Cash	$	2,069,534	$	2,568,191
Accounts receivable		1,593,531		995,683
Other receivable		—		6,118
Inventory		2,322,137		3,342,177
Prepaid expenses and other current assets		1,563,458		1,237,772
Total current assets		7,548,660		8,149,941
Property and equipment, net		720,345		760,617
Operating lease - right-of-use asset		730,840		—
Intangible assets, net		26,445,555		31,710,556
Other assets		181,144		420,831
Total assets	$	35,626,544	$	41,041,945
Liabilities, convertible preferred stock and stockholders' equity
Current liabilities:
Accounts payable	$	4,752,097	$	5,414,260
Accrued liabilities		3,364,021		4,939,441
Warrant liability		10,029		220,376
Convertible debt, net of discount		—		11,239,170
Operating lease liability		442,017		—
Notes payable, net of discount		—		4,845,575
Total current liabilities		8,568,164		26,658,822
Notes payable long term, net of discount		6,678,461		—
Total liabilities	$	15,246,625	$	26,658,822
Commitments and contingencies (See Note 6)
Series A convertible preferred stock: $0.0001 par value, 10,000,000 shares authorized at September 30, 2019 and December 31, 2018; 5,524,926 shares issued and outstanding at September 30, 2019 and December 31, 2018; (redemption value and liquidation preference of $12,738,822 and $9,199,002 at September 30, 2019 and December 31, 2018, respectively)	$	9,000,002	$	9,000,002
Stockholders' equity:
Series B convertible preferred stock: $0.0001 par value, 11,000 and zero shares authorized at September 30, 2019 and December 31, 2018, respectively; 1,971 and zero shares issued and outstanding at September 30, 2019 and December 31, 2018, respectively		409,401		—
Common stock - voting: $0.0001 par value, 150,000,000 shares authorized at September 30, 2019 and December 31, 2018, respectively; 9,395,458 and 351,472 shares issued and outstanding at September 30, 2019 and December 31, 2018, respectively		940		35
Common stock - non-voting: $0.0001 par value, 50,000,000 shares authorized at September 30, 2019 and December 31, 2018; 40,301,237 shares issued and outstanding at September 30, 2019 and December 31, 2018		4,030		4,030
Additional paid-in capital		138,096,378		99,929,835
Accumulated deficit		(127,130,832)		(94,550,779)
Total stockholders' equity	$	11,379,917	$	5,383,121
Total liabilities, convertible preferred stock and stockholders' equity	$	35,626,544	$	41,041,945

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

1

JAGUAR HEALTH, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2019		2018		2019		2018
Product revenue	$	972,779	$	1,132,067	$	4,268,206	$	2,642,880
Collaboration revenue		—		—		—		177,389
Total revenue		972,779		1,132,067		4,268,206		2,820,269
Operating expenses
Cost of product revenue		947,495		736,733		3,072,800		1,808,918
Research and development		1,307,296		1,481,166		4,426,308		3,843,918
Sales and marketing		1,698,440		2,716,752		5,436,635		7,119,204
General and administrative		3,106,633		2,703,628		9,816,909		8,761,776
Settlement of Tempesta Royalty License Agreement		640,000		—		640,000		—
Impairment of indefinite-lived intangible assets		—		—		4,000,000		—
Total operating expenses		7,699,864		7,638,279		27,392,652		21,533,816
Loss from operations		(6,727,085)		(6,506,212)		(23,124,446)		(18,713,547)
Interest expense		(1,352,845)		(872,044)		(5,556,953)		(2,185,868)
Other income (expense)		28,784		9,540		49,392		322,244
Change in fair value of warrants, derivative liability and conversion option liability		841,834		26,231		1,002,865		(119,134)
Gain on Valeant settlement		—		1,204,133		—		1,204,133
Loss on extinguishment of debt		(335,753)		—		(4,940,911)		—
Loss before income tax		(7,545,065)		(6,138,352)		(32,570,053)		(19,492,172)
Income tax expense		(10,000)		—		(10,000)		—
Net loss and comprehensive loss		(7,555,065)		(6,138,352)		(32,580,053)		(19,492,172)
Deemed dividend attributable to Series A preferred stock		—		—		—		(995,000)
Deemed dividend attributable to Series B preferred stock		(3,875,778)		—		(3,875,778)		—
Deemed dividend attributable to the Series 1 warrant modification		(252,106)		—		(252,106)		—
Net loss attributable to common shareholders	$	(11,682,949)	$	(6,138,352)	$	(36,707,937)	$	(20,487,172)
Net loss per share, basic and diluted	$	(2.00)	$	(37.77)	$	(13.37)	$	(143.25)
Weighted-average common shares outstanding, basic and diluted		5,841,790		162,506		2,746,523		143,012

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

2

JAGUAR HEALTH, INC.

CONDENSED CONSOLIDATED STATEMENT OF CHANGES

IN CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY/(DEFICIT)

(Unaudited)

	Series A			Series B			Common			Common							Total
	Preferred Stock			Preferred Stock			stock - voting			stock - non-voting			Additional		Accumulated		Stockholders'
	Shares	Amount		Shares	Amount		Shares	Amount		Shares	Amount		paid-in capital		deficit		Equity
Beginning Balance June 30, 2018	5,524,926	$	9,000,002	—	$	—	124,808	$	12	40,301,237	$	4,030	$	89,772,794	$	(75,758,542)	$	14,018,294
Issuance of common stock in exchange for payment of interest expense (Kingdon)	—		—	—		—	4,580		—	—		—		479,808		—		479,808
Issuance of common stock July 2018	—		—	—		—	6,725		1	—		—		624,896		—		624,897
Issuance of common stock in debt financing September 2018	—		—	—		—	1,071		—	—		—		48,000		—		48,000
Issuance of warrants in debt financing September 2018	—		—	—		—	—		—	—		—		118,149		—		118,149
Issuance of warrants for September 2018 office lease	—		—	—		—	—		—	—		—		493,688		—		493,688
Stock-based compensation	—		—	—		—	—		—	—		—		680,094		—		680,094
Net loss	—		—	—		—	—		—	—		—		—		(6,138,352)		(6,138,352)
Three Months Ended  September 30, 2018	5,524,926	$	9,000,002	—	$	—	137,184	$	13	40,301,237	$	4,030	$	92,217,429	$	(81,896,894)	$	10,324,578

	Series A			Series B			Common			Common							Total
	Preferred Stock			Preferred Stock			stock - voting			stock - non-voting			Additional		Accumulated		Stockholders'
	Shares	Amount		Shares	Amount		Shares	Amount		Shares	Amount		paid-in capital		deficit		Equity
Beginning Balance June 30, 2019	5,524,926	$	9,000,002	—	$	—	1,799,381	$	180	40,301,237	$	4,030	$	117,927,532	$	(119,575,767)	$	(1,644,025)
Issuance of Series B convertible preferred stock, net	—		—	10,787		2,240,594	—		—	—		—		—		—		2,240,594
Beneficial conversion feature of the Series B convertible preferred stock	—		—	—		(3,875,778)	—		—	—		—		3,875,778		—		—
Deemed dividend on the Series B convertible preferred stock	—		—	—		3,875,778	—		—	—		—		(3,875,778)		—		—
Issuance of common stock in Class A Units, net	—		—	—		—	2,886,500		289	—		—		1,198,833		—		1,199,122
Issuance of Series 1 warrants in Class A and B Units	—		—	—		—	—		—	—		—		5,304,989		—		5,304,989
Issuance of Series 2 warrants in Class A and B Units	—		—	—		—	—		—	—		—		5,304,989		—		5,304,989
Modification of Series 1 warrants	—		—	—		—	—		—	—		—		252,106				252,106
Deemed dividend attributable to Series 1 warrant modification	—		—	—		—	—		—	—		—		(252,106)				(252,106)
Bridge warrant reclassification from liability to equity	—		—	—		—	—		—	—		—		4,259,327		—		4,259,327
LOC warrant reclassification from liability to equity	—		—	—		—	—		—	—		—		71,079		—		71,079
Issuance of common stock upon conversion of Series B convertible preferred stock	—		—	(8,816)		(1,831,193)	4,408,000		441	—		—		1,830,752		—		—
Issuance of common stock in exchange of CVP Exchange Notes	—		—	—		—	301,577		30	—		—		1,088,768		—		1,088,798
Stock-based compensation	—		—	—		—	—		—	—		—		1,110,109		—		1,110,109
Net loss	—		—	—		—	—		—	—		—		—		(7,555,065)		(7,555,065)
Three Months Ended September 30, 2019	5,524,926	$	9,000,002	1,971	$	409,401	9,395,458	$	940	40,301,237	$	4,030	$	138,096,378	$	(127,130,832)	$	11,379,917

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

3

JAGUAR HEALTH, INC.

CONDENSED CONSOLIDATED STATEMENT OF CHANGES

IN CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY/(DEFICIT)

(Unaudited)

	Series A			Series B			Common			Common							Total
	Preferred Stock			Preferred Stock			Stock - voting			Stock - non-voting			Additional		Accumulated		Stockholders'
	Shares	Amount		Shares	Amount		Shares	Amount		Shares	Amount		paid-in capital		deficit		Equity
Beginning Balance January 1, 2018	—	$	—	—	$	—	59,721	$	6	42,617,893	$	4,262	$	79,661,456	$	(62,404,722)	$	17,261,002
Issuance of preferred stock and common stock in a private placement	5,524,926		9,000,002	—		—	28,011		3	—		—		4,999,997		—		5,000,000
Beneficial conversion feature of the series A convertible preferred stock	—		(995,000)	—		—	—		—	—		—		995,000		—		995,000
Deemed dividend on the series A convertible preferred stock	—		995,000	—		—	—		—	—		—		(995,000)		—		(995,000)
Issuance of common stock	—		—	—		—	17,075		2	—		—		2,055,872		—		2,055,874
Issuance of common stock in exchange for redemption of convertible debt	—		—	—		—	13,665		1	—		—		1,607,420		—		1,607,421
Issuance of common stock in exchange for services	—		—	—		—	47		—	—		—		6,425		—		6,425
Issuance of common stock in exchange for payment of interest expense	—		—	—		—	4,081		—	—		—		704,725		—		704,725
Conversion of non-voting common stock to voting common stock	—		—	—		—	2,206		—	(2,316,656)		(232)		232		—		-
Issuance of common stock in exchange for payment of interest expense (Kingdon)	—		—	—		—	4,582		—	—		—		479,808		—		479,808
Issuance of common stock July 2018	—		—	—		—	6,725		1	—		—		624,896		—		624,897
Issuance of common stock in debt financing September 2018	—		—	—		—	1,071		—	—		—		48,000		—		48,000
Issuance of warrants in debt financing September 2018	—		—	—		—	—		—	—		—		118,149		—		118,149
Issuance of warrants for September 2018 office lease	—		—	—		—	—		—	—		—		493,688		—		493,688
Fractional common stock shares repurchased	—		—	—		—	—		—	—		—		(30)		—		(30)
Stock-based compensation	—		—	—		—	—		—	—		—		1,416,791		—		1,416,791
Net loss	—		—	—		—	—		—	—		—		—		(19,492,172)		(19,492,172)
Nine Months Ended September 30, 2018	5,524,926	$	9,000,002	—	$	—	137,184	$	13	40,301,237	$	4,030	$	92,217,429	$	(81,896,894)	$	10,324,578

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

4

	Series A			Series B			Common			Common							Total
	Preferred Stock			Preferred Stock			stock - voting			stock - non-voting			Additional		Accumulated		Stockholders'
	Shares	Amount		Shares	Amount		Shares	Amount		Shares	Amount		paid-in capital		deficit		Equity
Beginning Balance - January 1, 2019	5,524,926	$	9,000,002	—	$	—	351,472	$	35	40,301,237	$	4,030	$	99,929,835	$	(94,550,779)	$	5,383,121
Issuance of common stock to Oasis, put exercise	—		—	—		—	195,319		20	—		—		2,602,876		—		2,602,896
Issuance of common stock to Oasis, registered offering	—		—	—		—	19,019		1	—		—		266,265		—		266,266
Issuance of common stock in exchange of CVP Notes	—		—	—		—	395,970		40	—		—		8,224,883		—		8,224,923
Issuance of common stock in exchange for payment of interest expense (Kingdon)	—		—	—		—	19,752		2	—		—		446,727		—		446,729
Issuance of common stock in exchange of CVP Exchange Notes	—		—	—		—	1,119,440		112	—		—		6,672,838		—		6,672,950
Issuance of Series B convertible preferred stock, net	—		—	10,787		2,240,594	—		—	—		—		—		—		2,240,594
Beneficial conversion feature of the Series B convertible preferred stock	—		—	—		(3,875,778)	—		—	—		—		3,875,778		—		—
Deemed dividend on the Series B convertible preferred stock	—		—	—		3,875,778	—		—	—		—		(3,875,778)		—		—
Issuance of common stock in Class A Units, net	—		—	—		—	2,886,500		289	—		—		1,198,833		—		1,199,122
Issuance of Series 1 warrants in Class A and B Units	—		—	—		—	—		—	—		—		5,304,989		—		5,304,989
Issuance of Series 2 warrants in Class A and B Units	—		—	—		—	—		—	—		—		5,304,989		—		5,304,989
Modification of Series 1 warrants	—		—	—		—	—		—	—		—		252,106				252,106
Deemed dividend attributable to Series 1 warrant modification	—		—	—		—	—		—	—		—		(252,106)				(252,106)
Bridge warrant reclassification from liability to equity	—		—	—		—	—		—	—		—		4,259,327		—		4,259,327
LOC warrant reclassification from liability to equity	—		—	—		—	—		—	—		—		71,079		—		71,079
Issuance of common stock upon conversion of Series B convertible preferred stock	—		—	(8,816)		(1,831,193)	4,408,000		441	—		—		1,830,752		—		—
Fractional common stock shares repurchased	—		—	—		—	(14)		—	—		—		—		—		—
Stock-based compensation	—		—	—		—	—		—	—		—		1,982,985		—		1,982,985
Net loss	—		—	—		—	—		—	—		—		—		(32,580,053)		(32,580,053)
Nine Months Ended September 30, 2019	5,524,926	$	9,000,002	1,971	$	409,401	9,395,458	$	940	40,301,237	$	4,030	$	138,096,378	$	(127,130,832)	$	11,379,917

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

5

JAGUAR HEALTH, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited) 

	Nine Months Ended
	September 30,		September 30,
	2019		2018
Cash flows from operating activities
Net loss	$	(32,580,053)	$	(19,492,172)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization expense		1,304,946		989,116
Impairment of indefinite-lived intangible assets		4,000,000		—
Interest paid on the conversion of debt to equity		—		21,275
Common stock issued in exchange for services rendered		—		6,425
Loss on extinguishment of debt		4,940,911		—
Amortization of operating lease right-of-use-assets		554,017		—
Stock-based compensation		1,982,985		1,416,791
Amortization of debt issuance costs and debt discount		5,032,214		1,461,133
Change in fair value of warrants, conversion option and derivative liability		(1,002,865)		(178,461)
Changes in assets and liabilities
Accounts receivable		(597,848)		(561,012)
Other receivable		6,118		(175,009)
Inventory		1,020,040		(477,217)
Prepaid expenses and other current assets		(465,610)		(635,622)
Deferred offering costs		—		(1,255,554)
Other non-current assets		—		(289,828)
Deferred collaboration revenue		—		(177,389)
Operating lease liabilities		(346,679)		52,665
Accounts payable		(662,163)		(904,577)
Accrued expenses		(503,526)		2,370,682
Total cash used in operating activities		(17,317,513)		(17,828,754)
Cash flows from investing activities
Purchase of equipment		—		(6,527)
Total cash used in investing activities		—		(6,527)
Cash flows from financing activities
Proceeds from issuance of long-term debt		—		2,310,000
Repayment of notes payable		(100,000)		(1,689,200)
Proceeds from issuance of convertible debt		—		500,000
Proceeds from issuance of common stock through a stock purchase agreement with a private investor		—		1,305,774
Proceeds from the issuance of common stock in a private investment in public entities with existing investors		—		750,100
Proceeds from the issuance of common stock, March 2018		—		5,000,000
Proceeds from the issuance of convertible preferred stock, March 2018		—		9,000,002
Proceeds from issuance of common stock July 2018		—		624,897
Fractional common shares repurchased		—		(30)
Proceeds from issuance of short-term notes payable		5,050,000		—
Repayment of short-term notes payable		(5,050,000)		—
Proceeds from the issuance of common stock, January to April 2019		2,602,896		—
Proceeds from the issuance of common stock, March 2019		266,266		—
Proceeds from the issuance of common stock in Class A Units, net of issuance costs, July 2019		2,074,244		—
Payment of underwriting discounts, commissions and other associated offering costs for Class A Units		(875,122)		—
Proceeds from the issuance of Series 1 Warrants in Class A and B Units, July 2019		5,304,989		—
Proceeds from the issuance of Series 2 Warrants in Class A and B Units, July 2019		5,304,989		—
Proceeds from the Issuance of Series B convertible preferred stock, net of issuance costs, July 2019		3,875,778		—
Payment of underwriting discounts, commissions and other associated offering costs for Class B Units		(1,635,184)		—
Total cash provided by financing activities		16,818,856		17,801,543
Net increase (decrease) in cash		(498,657)		(33,738)
Cash at beginning of period		2,568,191		759,867
Cash at end of period	$	2,069,534	$	726,129

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

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JAGUAR HEALTH, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)

(Unaudited) 

	Nine Months Ended
	September 30,		September 30,
	2019		2018
Supplemental disclosure of cash flow information
Interest paid on long-term debt	$	-	$	19,344
Supplemental schedule of non-cash financing and investing activities
Common stock issued as redemption of notes payable and related interest	$	-	$	1,153,408
Common stock issued as redemption of notes payable and related interest	$	-	$	1,638,546
Common stock issued with September 2018 Promissory Notes	$	-	$	48,000
Warrants issued with the September 2018 Promissory Notes	$	-	$	118,148
Deemed dividend attributable to Series A preferred stock	$	-	$	995,000
Deemed dividend attributable to modification of Series 1 warrants	$	252,106	$	-
Deemed dividend attributable to Series B convertible preferred stock	$	3,875,778	$	-
Common stock issued in exchange for CVP Exchange Note 1 principal and related interest	$	6,672,950	$	-
Common stock issued in payment of accrued interest on Kingdon notes payable	$	446,729	$	-
Common stock issued in payment of CVP Note Payable principal and related interest	$	8,224,923	$	-
Common stock issued upon conversion of Series B convertible preferred stock	$	1,831,193	$	-
Issuance of Bridge Notes warrants	$	5,005,739	$	-
Reclassification of Bridge Note warrants from liability to equity	$	4,259,327	$	-
Issuance of March 2019 LOC warrant	$	116,297	$	-
Reclassification of March 2019 LOC warrants from liability to equity	$	71,079	$	-

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

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JAGUAR HEALTH, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. Organization and Business

Jaguar Health, Inc. (“Jaguar”, “we” or the “Company”), formerly known as Jaguar Animal Health, Inc., was incorporated on June 6, 2013 (inception) in Delaware. The Company was a majority-owned subsidiary of Napo 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 and Neonorm Foal was launched in the first quarter of 2016. The Company's activities are subject to significant risks and uncertainties, including failing to secure additional funding in order to timely complete the development and commercialization of products.

On July 31, 2017, Jaguar completed a merger with Napo pursuant to the Agreement and Plan of Merger dated March 31, 2017 by and among Jaguar, Napo, Napo Acquisition Corporation (“Merger Sub”), and Napo's representative (the “Merger Agreement”). In accordance with the terms of the Merger Agreement, upon the completion of the merger, Merger Sub merged with and into Napo, with Napo surviving as our wholly-owned subsidiary (the “Merger” or “Napo Merger”). Immediately following the Merger, Jaguar changed its name from “Jaguar Animal Health, Inc.” to “Jaguar Health, Inc.” Napo now operates as a wholly-owned subsidiary of Jaguar focused on human health and the ongoing commercialization of Mytesi, a Napo drug product approved by the U.S. Food and Drug Administration (“FDA”) for the symptomatic relief of noninfectious diarrhea in adults with HIV/AIDS on antiretroviral therapy.

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

Reverse stock-splits

On May 29, 2018, the Company filed the Certificate of Second Amendment to its Third Amended and Restated Certificate of Incorporation with the Secretary of State of the State of Delaware to effect a 1-for-15 reverse stock split of the Company’s issued and outstanding shares of voting common stock, effective June 1, 2018. The reverse split has been retrospectively reflected in all voting common stock, warrants, and common stock option shares disclosed in these condensed consolidated financial statements. The non-voting common stock and the convertible preferred stock were excluded from the reverse split.

On June 3, 2019, the Company filed the Certificate of Fifth Amendment to its Third Amended and Restated Certificate of Incorporation with the Secretary of State of the State of Delaware to effect a 1-for-70 reverse stock split of the Company’s issued and outstanding shares of voting common stock, effective June 7, 2019. The reverse split has been retrospectively reflected in all voting common stock, warrants, and common stock option shares disclosed in these condensed consolidated financial statements. The non-voting common stock and the convertible preferred stock were excluded from the reverse split.

Liquidity and Going Concern

The accompanying condensed consolidated 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 $127.1 million as of September 30, 2019. The net loss for the nine months ended September 30, 2019 was $32.6 million. 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, as well as securing additional financing. There is no assurance that profitable operations, if ever achieved, could be sustained on a continuing basis.

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The Company plans to finance its operations and capital funding needs through equity and/or debt financing, collaboration arrangements with other entities, license royalty agreements, as well as revenue from future product sales. We do not believe our current capital is sufficient to fund our operating plan through one year from the issuance of these unaudited condensed consolidated financial statements. 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 within one year after the issuance date of the condensed consolidated financial statements. The accompanying condensed consolidated financial statements do not include any adjustments that might result from the outcome of these uncertainties.

July 2019 Underwritten Public Offering

In July 2019, the Company entered into an underwriting agreement, relating to a public offering, which was comprised of (1) 2,886,500 Class A Units, priced at $2.00 per unit, with each unit consisting of (i) one share of the Company’s voting common stock, (ii) one Series 1 warrant to purchase one share of Common Stock, and (iii) one Series 2 warrant to purchase one share of Common Stock, and (2) 10,787 Class B Units, priced at a price of $1,000 per unit, with each unit consisting of (i) one share of Series B convertible preferred stock, convertible into 500 shares of Common Stock, (ii) 500 Series 1 Warrants and (iii) 500 Series 2 Warrants.

In total, the Company sold 2,886,500 shares of common stock (see Note 10), 10,787 shares of Series B convertible preferred stock (see Note 9), Series 1 warrants to purchase 8,280,000 shares of common stock and Series 2 warrants to purchase 8,280,000 shares of common stock (see Note 8), including the full exercise of the over-allotment option. The total gross proceeds to the Company from the offering was $16,560,000, or $14,049,697 net of issuance and other costs of $2,510,303.

2. Summary of Significant Accounting Policies

Basis of Presentation

The condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and on a basis consistent with the annual consolidated financial statements, and in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary for a fair presentation of the periods presented. These interim financial results are not necessarily indicative of the results to be expected for the year ending December 31, 2019, or for any other future annual or interim period. These unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto contained in our Annual Report on Form 10-K for the year ended December 31, 2018.

There has been a material change to the Company's significant accounting policies during the three months and nine months ended September 30, 2019, as compared to the significant accounting policies described in Note 2 of the “Notes to Condensed Consolidated Financial Statements” in the Company's Annual Report on Form 10-K for the year ended  December 31, 2018. The Company adopted ASC (“Accounting Standards Codification”) 842 “Leases” and implemented a new policy to account for modifications of preferred stock using the model in ASC 470-50. 

Principals of Consolidation

The condensed consolidated financial statements have been prepared in accordance with U.S. GAAP and applicable rules and regulations of the Securities and Exchange Commission (“SEC”) and include the accounts of the Company and its wholly-owned subsidiary. All inter-company transactions and balances have been eliminated in consolidation.

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Use of Estimates

The preparation of consolidated financial statements in conformity with U.S. GAAP requires the Company’s management to make judgments, assumptions and estimates that affect the amounts reported in its consolidated financial statements and the accompanying notes. The accounting policies that reflect the Company’s more significant estimates and judgments and that the Company believes are the most critical to aid in fully understanding and evaluating its reported financial results are valuation of stock options; valuation of warrant liabilities; valuation of derivative liability, impairment testing of goodwill, acquired in-process research and development (“IPR&D"), and long lived assets; useful lives for depreciation and amortization; valuation adjustments for excess and obsolete inventory; allowance for doubtful accounts; deferred taxes and valuation allowances on deferred tax assets; evaluation and measurement of contingencies; and recognition of revenue, including estimates for product returns. Those estimates could change, and as a result, actual results could differ materially from those estimates.

Concentrations

Cash is the financial instrument that potentially subjects the Company to a concentration of credit risk as cash is deposited with a bank and cash balances are generally in excess of Federal Deposit Insurance Corporation insurance limits. The carrying value of cash approximates fair value at September 30, 2019 and December 31, 2018.

For the three and nine months ended September 30, 2019 and 2018, substantially all of the Company’s revenue has been derived from the sale of Mytesi.  For the three months and nine months ended September 30, 2019, the Company earned Mytesi revenue primarily from one pharmaceutical distributor in the United States. For the three and nine months ended September 30, 2018, the Company earned Mytesi revenue primarily from three pharmaceutical distributors in the United States, each of whom amounted to a percentage of total net revenue of at least 10%. Revenue earned from each as a percentage of total net revenue is as follows:

Consolidated (percentage of total net sales)	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2019		2018		2019		2018
Customer 1	100	%	34	%	90	%	28	%
Customer 2	—	%	28	%	—	%	28	%
Customer 3	—	%	25	%	—	%	25	%

The Company is subject to credit risk from its accounts receivable related to its sales. The Company generally does not perform evaluations of customers' financial condition and generally does not require collateral. The Company's significant pharmaceutical distributors and their related accounts receivable balance as a percentage of total accounts receivable were as follows:

	As of		As of
	September 30,		September 30,
	2019		2018
Customer 1	99.6	%	35.0	%
Customer 2	—	%	29.0	%
Customer 3	—	%	26.0	%

No other customer represented more than 10% of the Company's accounts receivable balances as of those dates.

The Company is subject to credit risk from its inventory suppliers. The Company sources drug substance from a single supplier and drug product from a single supplier.

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Fair Value

The Company’s financial instruments include, cash, accounts receivable, accounts payable, warrant liabilities, derivative liability, debt conversion option liability, and debt. The recorded carrying amount of accounts receivable, accounts payable and accrued expenses reflect 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.

Inventories

Inventories are stated at the lower of cost or net realizable value. The Company calculates inventory valuation adjustments when conditions indicate that net realizable value is less than cost due to physical deterioration, usage, obsolescence, reductions in estimated future demand or reduction in selling price. Inventory write-downs are measured as the difference between the cost of inventory and net realizable value.

Land, Property and Equipment

Land is stated at cost, reflecting fair value of the property at July 31, 2017, the date of the Napo merger. Equipment is stated at cost, 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 the statements of operations and comprehensive loss.

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.

Definite-lived intangible assets are amortized on a straight-line basis over the estimated periods benefited and are reviewed when appropriate for possible impairment.

Goodwill and Indefinite-lived Intangible Assets

Goodwill is tested for impairment on an annual basis and in between annual tests if events or circumstances indicate that an impairment loss may have occurred. The test is based on a comparison of the reporting unit's book value to its estimated fair value. The Company performs the annual impairment test during the fourth quarter of each fiscal year using the opening consolidated balance sheet as of the first day of the fourth quarter, with any resulting impairment recorded in the fourth quarter of the fiscal year. The Company did not record an impairment of goodwill during the three and nine months ended September 30, 2019 and 2018.

Acquired in-process research and development (“IPR&D”) are intangible assets acquired in the July 2017 Napo merger. Under ASC 805, IPR&D are initially recognized at fair value and classified as indefinite-lived assets until the successful completion or abandonment of the associated research and development efforts. During the development period, these assets will not be amortized as charges to earnings; instead these assets will be tested for impairment on an annual basis or more frequently if impairment indicators are identified. The Company recorded an impairment of zero and $4,000,000 in the three and nine months ended September 30, 2019, respectively. There were no impairment charges recorded in the three and nine months ended September 30, 2018. The impairment loss is measured based on the excess

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of the carrying amount over the asset’s fair value. Definite-lived intangible assets are amortized on a straight-line basis over the estimated periods benefited and are reviewed when appropriate for possible impairment.

Leases

ASC 842, Leases, requires lessees to recognize right-of-use assets and lease liabilities for all leases with a term of greater than 12 months regardless of their classification on the balance sheet and to provide expanded disclosures about leasing arrangements. The Company adopted ASC 842 on January 1, 2019 using the optional transition method with no restatements of comparative periods. There was no effect on accumulated deficit at adoption.

The Company elected to adopt the package of practical expedients to (i) not reassess whether expired or existing contracts are or contain leases, (ii) not reassess the lease classification for any expired or existing leases and (iii) not reassess the accounting for initial direct costs.

The adoption of the new leases standard resulted in the following adjustments to the consolidated balance sheet as of January 1, 2019:

	December 31, 2018		Adoption Impact		January 1, 2019
			(unaudited)
Operating lease right-of-use assets	$	—	$	1,111,214	$	1,111,214
Operating leases liabilities, current portion		—		336,647		336,647
Operating leases liabilities, long term		—		394,703		394,703
Deferred rent		379,864		(379,864)		—

At the inception of an arrangement, the Company determines whether the arrangement is or contains a lease based on the unique facts and circumstances present. Operating lease liabilities and their corresponding right-of-use assets are recorded based on the present value of lease payments over the expected lease term. Because the interest rate implicit in lease contracts is typically not readily determinable, the Company utilizes its incremental borrowing rate, which is the rate incurred to borrow on a collateralized basis over a similar term, an amount equal to the lease payments in a similar economic environment. Certain adjustments to the right-of-use asset may be required for items such as initial direct costs paid or incentives received.

Operating Lease

The Company has a non-cancelable operating lease with CA-Mission Street Limited Partnership for its offices in San Francisco, California through September 1, 2020. The lease agreement calls for monthly base rents between $38,391 and $40,730 over the term of the lease.

Prior to the Company’s adoption of ASC 842 on January 1, 2019, the Company recorded lease expense for its operating leases in accordance with ASC 840.

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

The Company recognizes revenue in accordance with ASC Topic 606, Revenue from Contracts with Customers (“ASC 606”), which was adopted on January 1, 2018, using the modified retrospective method, which was elected to apply to all active contracts as of the adoption date. Application of the modified retrospective method did not impact amounts previously reported by the Company, nor did it require a cumulative effect adjustment upon adoption, as the Company's method of recognizing revenue under ASC 606 yielded similar results to the method utilized immediately

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prior to adoption. Accordingly, there was no effect to each financial statement line item as a result of applying the new revenue standard.

Practical Expedients, Elections, and Exemptions

The Company recognizes revenue in accordance with the core principle of ASC 606 or when there is a transfer of control of promised goods or services to customers in an amount that reflects the consideration that the Company expects to be entitled to in exchange for those goods or services.

The Company elected a practical expedient available under ASC 606‑10‑65‑1(f)4 that permits it to consider the aggregate effect of all contract modifications that occurred before the beginning of the earliest period presented when identifying satisfied and unsatisfied performance obligations, transaction price, and allocating the transaction price to the satisfied and unsatisfied performance obligations.

The Company also elected a practical expedient available under ASC 606‑10‑32‑18 that permits it to not adjust the amount of consideration for the effects of a significant financing component if, at contract inception, the expected period between the transfer of promised goods or services and customer payment is one year or less.

The Company has elected to treat shipping and handling activities as fulfillment costs.

Additionally, the Company elected to record revenue net of sales and other similar taxes.

Contracts

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

In addition to the terms and conditions of the Exclusive Distribution Agreement, Cardinal Health’s purchase of products, and assumption of title therein, is set forth in the Title Model Addendum. The Title Model Addendum states that upon receipt of product at the 3PL Facility (Cardinal Health in La Vergne, Tennessee) from the Company, title and risk of loss for the Mytesi product purchased by Cardinal Health (excluding consigned inventory) shall pass to Cardinal Health, and title and risk of loss for consigned inventory shall remain with the Company until purchased by Cardinal Health in accordance with the Title Model Addendum. Napo Pharmaceuticals, Inc. considers Cardinal Health the Company’s exclusive customer for Mytesi products per the Exclusive Distribution Agreement.  

Jaguar's Neonorm and botanical extract products are primarily sold to distributors, who then sell the products to the end customers. Since 2014, the Company has entered into several distribution agreements with established distributors such as Animart, Vedco, VPI, RJ Matthews, Henry Schein, and Stockmen Supply to distribute the Company's products in the United States, Japan, and China. The distribution agreements and the related purchase order together meet the contract existence criteria under ASC 606‑10‑25‑1. Jaguar sells directly to its customers without the use of an agent.

Performance obligations

For animal products sold by Jaguar Health, the single performance obligation identified above is the Company’s promise to transfer the Company’s animal products to distributors based on specified payment and shipping terms in the arrangement. Product warranties are assurance type warranties that do not represent a performance obligation. For the Company’s human product, Mytesi, which is sold by Napo Pharmaceuticals Inc., the single performance obligation identified above is the Company’s promise to transfer Mytesi to Cardinal Health, the Company’s exclusive distributor for the product, based on specified payment and shipping terms as outlined in the Exclusive Distribution Agreement.  The product warranties are assurance type warranties that do not represent a performance obligation.

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Transaction price

For both Jaguar and Napo, the transaction price is the amount of consideration to which the Company expects to collect in exchange for transferring promised goods or services to a customer. The transaction price of Mytesi and Neonorm is the Wholesaler Acquisition Cost (“WAC”), net of discounts, returns, and price adjustments.

Allocate transaction price

For both Napo and Jaguar, the entire transaction price is allocated to the single performance obligation contained in each contract.

Point in time recognition

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

Disaggregation of Product Revenue

Human

Sales of Mytesi are recognized as revenue when the products are delivered to the wholesaler. Revenues from the sale of Mytesi were $957,059 and $1,107,682 for the three months ended September 30, 2019 and 2018, respectively. Revenues from the sale of Mytesi were $4,184,912 and $2,545,121 for the nine months ended September 30, 2019 and 2018, respectively. The increase in sales of Mytesi is due to the more streamlined distribution channel and increased sales presence.

Out of period adjustment - During the period ended September 30, 2019, the Company identified a prior period product donation incorrectly recorded as revenue.   The adjustment, totaling $336,934 related to revenue and accounts receivable, was corrected within the current quarter. The impact of the adjustment was an increase to net loss of $336,934. This adjustment does not affect Mytesi revenue associated with sales in the nine months ended September 30, 2019.  Management has determined that this out of period correcting adjustment is not material to any prior period consolidated financial statements impacted by the adjustment and has therefore recorded it in the three months ended September 30, 2019.

Animal

The Company recognized Neonorm revenues of $15,720 and $24,385 for the three months ended September 30, 2019 and 2018, respectively. Revenues from the sale of Neonorm were $83,294 and $97,759 for the nine months ended September 30, 2019 and 2018, respectively. Revenues are recognized upon shipment which is when title and control is transferred to the buyer. Sales of Neonorm Calf and Foal to distributors are made under agreements that may provide distributor price adjustments and rights of return under certain circumstances.

Collaboration Revenue

On January 27, 2017, the Company entered into a licensing, development, co-promotion and commercialization agreement with Elanco US Inc. (“Elanco”) to license, develop and commercialize Canalevia, the Company's drug product candidate under investigation for treatment of acute and chemotherapy-induced diarrhea in dogs, and other drug product formulations of crofelemer for treatment of gastrointestinal diseases, conditions and symptoms in cats and other companion animals. On November 1, 2017, the Company received a letter from Elanco serving as formal notice of their decision to terminate the agreement by giving the Company 90 days written notice. According to the agreement, termination became effective on January 30, 2018. Under the terms of the agreement, the Company received revenue of $0 and $177,389 in the nine months ended September 30, 2019 and 2018, respectively. There was no revenue recognized in the three months ended September 30, 2019 and 2018.

14

On September 24, 2018, the Company entered into a Distribution, License and Supply Agreement ("License Agreement") with Knight Therapeutics, Inc. ("Knight"). The License Agreement has a term of 15 years (with automatic renewals) and provides Knight with an exclusive right to commercialize current and future Jaguar human health products (including Crofelemer, Lechlemer, and any product containing a proanthocyanidin or with an anti-secretory mechanism) in Canada and Israel. In addition, Knight was granted a right of first negotiation for expansion to Latin America. Under the License Agreement, Knight is responsible for applying for and obtaining necessary regulatory approvals in the territory of Canada and Israel, as well as marketing, sales and distribution of the licensed products. Knight will pay a transfer price for all licensed products, and upon achievement of certain regulatory and sales milestones, Jaguar may receive payments from Knight in an aggregate amount of up to approximately $18 million payable throughout the initial 15-year term of the agreement. The Company did not have any license revenues in the three months and nine months ended September 30, 2019 and 2018.

Modifications to equity-classified instruments

In September 2019, the Company modified its equity-classified Series 1 Warrants (see Note 7). It is the Company’s policy to determine the impact of such equity-classified modifications by analogy to the share-based compensation guidance of ASC 718, Compensation - Stock Compensation. The model for a modified share-based payment award that is classified as equity and remains classified in equity after the modification is addressed in ASC 718-20-35-3. Pursuant to that guidance, the incremental fair value from the modification is recognized as an expense in the income statement to the extent the modified instrument has a higher fair value. The Company uses a similar model for measuring the effects of a modification to equity-classified warrants, however, in contrast to the 718 model, the measured increase in fair value may be more appropriately recorded as a deemed dividend, depending upon the nature of the modification.

Comprehensive Income (Loss)

For all periods presented, the comprehensive income (loss) was equal to the net income (loss); therefore, a separate statement of comprehensive income (loss) is not included in the accompanying condensed consolidated financial statements.

Recent Accounting Pronouncements

Except as described in Note 2 – Basis of Presentation, there have been no other new accounting pronouncements adopted by the Company besides the adoption of ASC 842 “Leases” and implementation of a new policy to account for modifications of preferred stock using the model in ASC 470-50 during the three months and nine months ended September 30, 2019, that the Company believes are of significance or potential significance to the Company.

In June 2018, the Financial Accounting Standards Board (“FASB”) issued ASU 2018-07, Compensation - Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting. This update expands the scope of Topic 718 to include share-based payment transactions for acquiring goods and services from nonemployees. The amendments specify that Topic 718 applies to all share-based payment transactions in which a grantor acquires goods or services to be used or consumed in a grantor’s own operations by issuing share-based payment awards. The amendments also clarify that Topic 718 does not apply to share-based payments used to effectively provide (1) financing to the issuer or (2) awards granted in conjunction with selling goods or services to customers as part of a contract accounted for under ASC 606. The amendments in ASU 2018-07 are effective for public business entities for fiscal years beginning after December 15, 2018, including interim periods within that fiscal year. Early adoption is permitted. The Company adopted this standard on January 1, 2019, and this standard did not have a material impact on the Company’s financial position, results of operations or disclosures.

In August 2018, the FASB issued ASU 2018-15, Intangible - Goodwill and Other - Internal-Use Software (Subtopic 350-40), which aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or

15

obtain internal-use software. ASU 2018-15 is effective for the Company in the first quarter of 2020. Early adoption is permitted. ASU 2018-15 permits either a prospective or retrospective transition approach. The Company is currently evaluating ASU 2018-15 to determine the impact to its condensed consolidated financial statements and related disclosures. The Company is evaluating the impact of the adoption of ASU 2016-13 on its Condensed Consolidated Financial Statements.

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820). The new guidance modifies the disclosure requirements on fair value measurements. ASU 2018-13 is effective for the Company beginning in the first quarter of 2020 and must be adopted on a modified retrospective basis, with certain exceptions. Early adoption is permitted. The Company does not expect ASU 2018-13 to have a significant impact to its condensed consolidated financial statements and related disclosures.

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— Observable inputs such as quoted prices (unadjusted) for identical instruments in active markets.

· Level 2— Observable inputs such as quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, or model derived valuations whose significant inputs are observable.

· Level 3— Unobservable inputs that reflect the reporting entity’s own assumptions.

The following tables set forth the fair value of the Company’s financial instruments that were measured at fair value on a recurring basis as of September 30, 2019 and December 31, 2018.

		September 30, 2019
	(unaudited)
		Level 1		Level 2		Level 3		Total
Warrant liability		$	—	$	—	$	10,029	$	10,029
Total fair value		$	—	$	—	$	10,029	$	10,029

	December 31, 2018
	Level 1		Level 2		Level 3		Total
Warrant liability	$	—	$	—	$	220,376	$	220,376
Total fair value	$	—	$	—	$	220,376	$	220,376

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The change in the estimated fair value of Level 3 liabilities is summarized below:

	Nine Months Ended
	September 30, 2019
	Warrant
	Liability
	(unaudited)
Beginning fair value of Level 3 liability	$	220,376
Additions		5,122,039
Reclassification to equity		(4,329,521)
Change in fair value		(1,002,865)
Ending fair value of Level 3 liability	$	10,029

Warrant Liability

The warrants associated with the Level 3 warrant liability activity for the nine months ended September 30, 2019 were the November 2016 Series A warrants, the October 2018 Underwriter warrants, the March 2019 LOC warrants and the Bridge warrants, which at September 30, 2019 were valued at $49 and $9,980,  zero and zero, respectively in the Company’s condensed consolidated balance sheet. At December 31, 2018, the warrants associated with the Level 3 warrant liability were the November 2016 Series A Warrants and the October 2018 Underwriter Warrants, which were valued at $7,388 and $212,988, respectively in the Company’s consolidated balance sheet.

The Series A Warrants

The Series A warrant valuation of $7,388 at December 31, 2018 was computed using the Black-Scholes-Merton pricing model using a stock price of $16.10, a strike price of $787.50 per share, an expected term of 3.41 years, volatility of 135.63% and a risk-free discount rate of 2.46%. The Series A warrant valuation of $49 at September 30, 2019 was computed using the Black-Scholes-Merton pricing model using a stock price of $1.31, a strike price of $787.50, an expected term of 2.66 years, volatility of 144.31% and a risk-free discount rate of 1.56%. For the three and nine months ended September 30, 2019, the net change in the fair value of the warrants of $1,004 and $7,339, respectively, was recorded as a gain in the change in fair value of warrants, derivative liability and conversion option liability in the condensed statements of operations.

The October 2018 Underwriter Warrants

The October 2018 Underwriter Warrants valuation of $212,988 at December 31, 2018 was computed using the Black-Scholes-Merton pricing model using a stock price of $16.10, a strike price of $52.50, an expected term of 4.76 years, volatility of 135.63% and a risk-free discount rate of 2.51%. The October 2018 Underwriter Warrants valuation of $9,980 at September 30, 2019 was computed using the Black-Scholes-Merton pricing model using a stock price of $1.31, a strike price of $52.50 per share, an expected term of 4.01 years, volatility of 144.31% and a risk-free discount rate of 1.55%. For the three and nine months ended September 30, 2019, the net change in the fair value of the warrants of $42,285 and $203,008, respectively, was recorded as a gain in the change in fair value of warrants, derivative liability and conversion option liability in the condensed statements of operations

March 2019 LOC Warrants

The March 2019 LOC Warrants were issued on March 29, 2019 with a valuation at issuance and at March 31, 2019 of $116,297, computed using the Black-Scholes-Merton pricing model using a stock price of $19.60, a strike price of $17.50 per share, an expected term of 5.0 years, volatility of 145.72% and a risk-free discount rate of 2.23%. On July 23, 2019, at which date the exercise price of the March 2019 LOC warrants became fixed, the March 2019 LOC warrants were reclassified from liability classification to equity classification. Immediately prior to reclassification to equity, the March 2019 LOC Warrant liability was valued at $71,079 using the Black-Scholes-Merton pricing model, calculated using a stock price of $1.73, a strike price of $2.00, an expected term of 5.00 years, volatility of 147.43% and a risk-free discount rate of 1.83%. For the three and nine months ended September 30, 2019, there was a gain in the fair

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value of the warrants of $79,891 and $45,218, respectively, which was recorded as a gain in the change in fair value of warrants, derivative liability and conversion option liability in the consolidated statements of operations. 

2019 Bridge Warrants

The 2019 Bridge Warrants were issued between March and June 2019, concurrent to the Company entering into short-term Promissory Notes of $5,050,000 (see Note 7). The Company issued (i) fourteen Notes with a principal balance of $3,550,000 and warrant coverage at 125% of principal, and (ii) seven Notes with a principal balance of $1,500,000 and warrant coverage at 75% of principal. At issuance, the exercise price of the warrants was either (i) the price the Company issued common shares in its next public offering subject to a registration statement or (ii) if no such offering were consummated by the four-month maturity date of the Promissory Notes, then the exercise price would be equal to the closing price of the Company’s common stock on the Notes four-month maturity date. The warrants for all twenty-one  Bridge Notes had a collective issuance date fair value of $5,005,739, computed using the Black-Scholes-Merton pricing model using a range of stock prices between $4.84 and $32.90, a range of strike prices between $4.84 and $32.90 per share, an expected term of 5.0 years, a range of volatilities between 145.60% and 145.72%, and a range of risk-free discount rates between 1.76% and 2.23%. At issuance, all twenty-one warrants were liability classified. On July 23, 2019, upon the Company’s filing of a registration statement, the exercise price for all twenty-one warrants became fixed at $2.00, at which point the Bridge warrants were reclassified from liability classification to equity classification. Immediately prior to reclassification, the liability for all twenty-one Bridge Warrants had a collective fair value of $4,259,327, calculated using the Black-Scholes-Merton pricing model using a stock price of $1.73, a strike price of $2.00 per share, an average expected term of 4.80 years, volatility of 145.84% and a risk-free discount rate of 1.76%. For the three and nine months ended September 30, 2019, the net change in the fair value of the warrants of $718,654 and $747,300, respectively, was recorded as a gain in the change in fair value of warrants, derivative liability and conversion option liability in the consolidated statements of operations.

4. Balance Sheet Components

Goodwill 

The change in the carrying amount of goodwill at September 30, 2019 and December 31, 2018 was as follows:

	September 30,
	2019		December 31,
	(unaudited)		2018
Beginning balance	$	—	$	5,210,821
Impairment		—		(5,210,821)
Ending balance	$	—	$	—

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Intangible Assets

Intangible assets at September 30, 2019 and December 31, 2018 consisted of the following:

	September 30,
	2019		December 31,
	(unaudited)		2018
Developed technology	$	25,000,000	$	25,000,000
Accumulated developed technology amortization		(3,611,112)		(2,361,111)
Developed technology, net		21,388,888		22,638,889
In-process research and development		8,800,000		8,800,000
Impairment		(4,000,000)		—
In process research and development, net		4,800,000		8,800,000
Trademarks		300,000		300,000
Accumulated trademark amortization		(43,333)		(28,333)
Trademarks, net		256,667		271,667
Total intangible assets, net	$	26,445,555	$	31,710,556

In June 2019 the Company determined that in-process research and development was impaired and recorded an impairment loss of $4.0 million in the statements of operations. Amortization expense was $421,667 and $1,265,001 for the three and nine months ended September 30, 2019, respectively, and $421,667 and $1,265,001 for the three and nine months ended September 30, 2018, respectively.

The following table summarizes the Company’s estimated future amortization expense of intangible assets with finite lives as of September 30, 2019:

	Amounts
2019 (remaining)	$	421,667
2020		1,686,667
2021		1,686,667
2022		1,686,667
2023		1,686,667
2024		1,686,667
Thereafter		12,790,553
	$	21,645,555

5. Related Party Transactions

Management Services Agreement

In March 2018, concurrent with the issuance of the Company’s Series A convertible participating preferred stock to Sagard Capital Partners, the Company entered into a Management Services Agreement with Sagard Capital Partners. Under the agreement, Sagard Partners will provide consulting and management advisory service to the Company from March 2018 through March 2021. These services include assistance with strategic planning regarding the Company’s commercial strategy, research and due diligence regarding human resource activities, and strategic advice in financial matters. In consideration for such services, the Company will pay Sagard Capital Partners an annual fee of $450,000, with total fees over the term of the agreement not to exceed $1,350,000. As of September 30, 2019, with respect to this agreement, the Company had paid Sagard Capital Partners aggregate fees of $250,000 and has a balance due of $425,000.  

Letter of Credit

To satisfy the letter of credit requirement in the Company’s new office lease agreement, Pacific Capital Management, LLC, one of the Company’s existing shareholders, caused its financial institution to issue a letter of credit

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in the amount of $475,000 on behalf of the Company, dated August 28, 2018. In consideration of the letter of credit, in August 2018 the Company issued to Capital Management, LLC a warrant to purchase 9,580 shares of the Company’s voting common stock. The warrant is exercisable on or after March 28, 2019 at an exercise price of $49.00 and has a five-year term. The $493,688 fair value of the Warrant was classified in stockholders’ equity (see Note 6). Additionally, a payment of $45,000 is due to Capital Management, LLC by November 28, 2019.

2019 Bridge Notes

Between March 18, 2019 and June 26, 2019, three members of the Board of Directors of the Company had entered into short-term Promissory Note Purchase Agreements (see Note 7, the “2019 Bridge Notes”) with the Company: (i) Lisa Conte, the Company’s CEO & President, purchased a short-term Promissory Note of $100,000 which the Company settled in July 2019. In consideration for the short-term financing, the Company issued Ms. Conte a warrant that became exercisable into 37,500 shares of the Company’s common stock;(ii) James Bochnowski, purchased a short-term Promissory Note of $350,000 which the Company settled in July 2019. In consideration for the short-term financing, the Company issued Mr. Bochnowski a warrant that became exercisable into 218,750 shares of the Company’s common stock; and (iii) Jonathan Siegel DBA JBS Healthcare Ventures, purchased a short-term Promissory Note of $75,000 which the Company settled in July 2019. In consideration for the short-term financing, the Company issued Mr. Siegal a warrant that became exercisable into 34,375 shares of the Company’s common stock.

In addition, Sagard Capital Partners purchased a short-term Promissory Note of $500,000 which the Company settled in July 2019. In consideration for the short-term financing, the Company issued Sagard Capital Partners a warrant that became exercisable into 187,500 shares of the Company’s common stock; and Jonathan Glaser, an existing shareholder, purchased short-term Promissory Notes of $500,000 which the Company settled in July 2019. In consideration for the short-term financing, the Company issued Mr. Glaser warrants that became exercisable into 250,000 shares of the Company’s common stock.

6. Commitments and Contingencies

Commitments

On August 28, 2018, the Company entered into an office lease extension agreement for approximately 6,311 square feet of office space in San Francisco, CA.   The term of the Lease began on September 1, 2018 and will expire on September 30, 2020, unless earlier terminated in accordance therewith.  The monthly base rent under the Lease is as follows: $38,392 for the first twelve months, $39,544 for the subsequent twelve months, and $40,730 for the final month.  The Company will also pay an additional monthly amount for the Company’s proportionate share of the building’s operating charges. An existing shareholder provided a standby letter of credit in the amount of $475,000 to the Lessor as collateral for the full performance by the Company of all of its obligations under the Lease.  In consideration of the Letter of Credit, the Company issued the existing shareholder a five-year warrant to purchase 9,580 shares of the Company’s voting common stock (see Note 5).  The Warrant is exercisable on or after March 28, 2019 at an exercise price of $49.00 per share.  The fair value of the warrant was determined to be $493,688 using the Black-Scholes-Merton model with the following criteria:  stock price of $58.80 per share, expected life of 5 years, volatility of 132%, risk-free rate of 2.77% and dividend rate of 0%.  The $493,688 fair value of the Warrant was classified in stockholders’ equity with an offset to Operating lease – right-of-use asset.  Each month, $19,748 of this rent will be recognized as non-cash lease expense.

In December 2018, the Company did not meet a covenant per the terms of the $475,000 Letter of Credit, the result of which required the Company to issue a Letter of Credit of $122,000 to the shareholder who issued the original $475,000 letter of credit. In March 2019, the Company canceled the $122,000 letter of credit in lieu of issuing the shareholder a promissory note for that amount in April 2019, as well as issuing the shareholder a warrant (see Note 7).

The Company recognizes lease expense on a straight-line basis over the non-cancelable lease period. Lease expense was $152,741 and $554,017 for the three and nine months ended September 30, 2019, and $117,435 and $297,993 for the three and nine months ended September 30, 2018. Lease expense is included in general and administrative expense in the statements of operations.

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Asset transfer and transition commitment update

On September 25, 2017, Napo entered into the Termination, Asset Transfer and Transition Agreement dated September 22, 2017 with Glenmark Pharmaceuticals Ltd. (“Glenmark”). As a result of the agreement, Napo now controls commercial rights for Mytesi® for all indications, territories and patient populations globally, and also holds commercial rights to the existing regulatory approvals for crofelemer in Brazil, Ecuador, Zimbabwe and Botswana. In exchange, Napo agrees to pay Glenmark 25% of any payment it receives from a third party to whom Napo grants a license or sublicense or with whom Napo partners in respect of, or sells or otherwise transfers any of the transferred assets, subject to certain exclusions, until Glenmark has received a total of $7.0 million. No payments have been made to date.

Revenue sharing commitment update

On December 14, 2017, the Company announced its entry into a collaboration agreement with Seed Mena Businessmen Services LLC (“SEED”) for Equilevia™, the Company's non-prescription, personalized, premium product for total gut health in equine athletes. According to the terms of the Agreement, the Company will pay SEED 15% of total revenue generated from any clients or partners introduced to the Company by SEED in the form of fees, commissions, payments or revenue received by the Company or its business associates or partners, and the agreed-upon revenue percentage increases to 20% after the first million dollars of revenue. In return, SEED will provide the Company access to its existing United Arab Emirates (“UAE”) network and contacts and assist the Company with any legal or financial requirements. The agreement became effective on December 13, 2017 and will continue indefinitely until terminated by either party pursuant to the terms of the Agreement. Upon termination for any reason, the Company remained obligated to make Revenue Sharing Payments to SEED until the end of 2018. No payments have been made to date.

Legal Proceedings

On July 20, 2017, a putative class action complaint was filed in the United States District Court, Northern District of California, Civil Action No. 3:17‑cv‑04102, by Tony Plant (the “Plaintiff”) on behalf of shareholders of the Company who held shares on April 12, 2017 and were entitled to vote at the 2017 Special Shareholders Meeting, against the Company and certain individuals who were directors as of the date of the vote (collectively, the “Defendants”), in a matter captioned Tony Plant v. Jaguar Animal Health, Inc., et al., making claims arising under Section 14(a) and Section 20(a) of the Exchange Act and Rule 14a‑9, 17 C.F.R. § 240.14a‑9, promulgated thereunder by the SEC. The claims alleged false and misleading information provided to investors in the Joint Proxy Statement/Prospectus on Form S‑4 (File No. 333‑217364) declared effective by the Commission on July 6, 2017 related to the solicitation of votes from shareholders to approve the merger and certain transactions related thereto. The Company accepted service of the complaint and summons on behalf of itself and the United States-based director Defendants on November 1, 2017. The Company has not accepted service on behalf of, and Plaintiff has not yet served, the non-U.S.-based director Defendants.

On October 3, 2017, Plaintiff filed a motion seeking appointment as lead plaintiff and appointment of Monteverde & Associates PC as lead counsel. That motion was granted. Plaintiff filed an amended complaint against the Company and the United States-based director Defendants on January 10, 2018.  The Defendants filed a motion to dismiss on March 12, 2018, for which oral arguments were held on June 14, 2018.  The court dismissed the amended complaint on September 20, 2018 but gave Plaintiff leave to amend the complaint within 20 days from the date of dismissal.  On October 10, 2018, Plaintiff amended the complaint to focus on the Company’s commercial strategy in support of Equilevia and the related disclosure statements in the Form S-4 described above.  On November 6, 2018, the Defendants moved to dismiss the second amended complaint. The Defendants argued in their motion that the second amended complaint fails to state a claim upon which relief can be granted because the omissions and misrepresentations alleged in the complaint are immaterial as a matter of law. The court denied the Defendants’ motion to dismiss on June 28, 2019. The defendants answered the second amended complaint on August 2, 2019. Discovery will now proceed. If the Plaintiff were able to prove his allegations in this matter and to establish the damages he asserts, then an adverse ruling could have a material impact on the Company.

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Other than as described above, there are currently no claims or actions pending against us, the ultimate disposition of which could have a material adverse effect on our results of operations, financial condition or cash flows.

Contingencies

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

Settlement of Tempesta Royalty dispute

As of September 30, 2019, the Company was in negotiations with Dr. Michael Tempesta regarding disputes of royalty payments owed by Napo to Tempesta under a license agreement, dated February 8, 1990, between Tempesta and Shaman Pharmaceuticals, a predecessor-in-interest to Napo (the “1990 License”), and a modified license agreement, dated October 16, 2002, between Tempesta and Napo (the “2002 License” and together with the 1990 License, the “License Agreements”) with respect to SP-303, a component of Mytesi, the Company’s FDA-approved drug for the symptomatic relief of noninfectious diarrhea in adult patients with HIV/AIDS on antiretroviral therapy. The Company had ceased payment of royalties to Tempesta in October 2018.

At September 30, 2019, the Company determined that it was probable that a liability in the amount of $640,000 would be paid to Tempesta in the settlement of the royalty dispute. Accordingly, at September 30, 2019 and pursuant to ASC 450, the Company accrued a loss contingency of $640,000 that was charged to operating expenses in the condensed statements of operations.

In October 2019, the Company and Tempesta settled the dispute, pursuant to which Tempesta received $50,000 in cash, an unsecured promissory note issued by the Company in the aggregate principal amount of $550,000 and 40,000 shares of the Company’s common stock in exchange for the cessation of all royalty payments by Napo to Dr. Tempesta under the License Agreements (see Note 14).

7. Debt

Convertible Notes

Convertible notes at September 30, 2019 and December 31, 2018 consist of the following:

	September 30,
	2019		December 31,
	(unaudited)		2018
June 2017 convertible debt	$	—	$	740,882
Napo convertible debt		—		10,553,888
		—		11,294,770
Less: unamortized debt discount and debt issuance costs		—		(55,600)
Net convertible debt obligation	$	—	$	11,239,170
Convertible debt - non-current, net of discount		—		—
Convertible debt - current, net of discount	$	—	$	11,239,170

February 2015 Convertible Note

In February 2015, the Company issued a convertible promissory note to an accredited investor in the aggregate principal amount of $150,000. This note was issued pursuant to the convertible note purchase agreement dated December 23, 2014. In March of 2018, the debtor agreed to accept 1,937 shares of the Company’s common stock as payment for all outstanding principal and interest in the amount of $203,408.

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June 2017 Convertible Note

On June 29, 2017, the Company issued a secured convertible promissory note to CVP in the aggregate principal amount of $2,155,000 less an original issue discount of $425,000 and less $30,000 to cover the lender's legal fees for net cash proceeds of $1,700,000 (the “June 2017 Note”). Interest on the outstanding balance will be paid 8% per annum from the purchase price date until the balance is paid in full.

The Note provides for two separate features that result in a derivative liability:

1. Repayment of mandatory default amount upon an event of default—upon the occurrence of any event of default, the lender may accelerate the Note resulting in the outstanding balance becoming immediately due and payable in cash; and

2. Automatic increase in the interest rate on and during an event of default—during an event of default, the interest rate will increase to the lesser of 17% per annum or the maximum rate permitted under applicable law.

The Company computed fair values at the date of issuance of $15,000 and $5,000 for the repayment and the interest rate increase feature, respectively, using the Binomial Lattice Model, which was based on the generalized binomial option pricing formula. The $20,000 combined fair value was carved out and was included as a derivative liability on the Balance Sheet. At September 30, 2018, the derivatives were determined to have a de-minimis fair value and were written-off.

On August 2, 2018, the Company and CVP agreed to an amendment extending the maturity date to August 26, 2019, and limiting the aggregate amount that CVP is permitted to redeem on a monthly basis to $500,000, which is the maximum aggregate redemption amount for all notes outstanding with CVP. This amendment resulted in the Company accounting for the transaction as a troubled debt restructuring, under which the carrying amount of the note payable remained unchanged but interest expense is computed using a new effective rate that equates the present value of the future cash payments specified by the new terms with the carrying amount of the note.

Between October 2018 and December 2018, the Company and CVP renegotiated the terms of the June 2017 Note agreement such that CVP agreed not to make any redemptions of the June 2017 Note until March 2019. In consideration of this standstill arrangement, the Company paid CVP a total standstill fee of $499,403 for all four CVP Notes. The standstill fee allocated to the June 2017 Note was $63,296, of which $37,296 increased the principal balance and $26,000 was paid in cash. These restructurings in whole represented four separate restructurings of the June 2017 ConvertibleNote agreement, resulting in two troubled debt restructurings accounted for under ASC 470-60 and two modificationsaccounted for under ASC 470-50. For the two modifications resulting in troubled debt restructurings, the changes wereaccounted for prospectively and a new effective interest rate was determined that equated the present value of the futurecash payments specified by the new terms with the carrying amount of the June 2017 Note. For the two modifications that resultedin modification accounting, a new effective rate was determined at the date of modification that equated the revisedcash flows to the carrying amount of the Note.

In May 2019, the Company and CVP amended the June 2017 Note agreement such that the Company made three separate exchanges of principal and related accrued interest for shares of the Company’s common stock. The first two exchanges of principal and accrued interest for common stock were not considered a substantial change to the June 2017 Note and therefore resulted in modification accounting and the determination of a new effective interest rate; the third exchange on May 29, 2019 resulted in the extinguishment of the entire June 2017 Note with a corresponding extinguishment loss of $27,176 for the three months ended June 30, 2019. At September 30, 2019 and December 31, 2018, the net carrying value of the June 2017 Note was zero and $685,282, respectively.

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Napo Convertible Notes

March 2017 Convertible Notes

In March 2017, Napo entered into an exchangeable Note Purchase Agreement with two lenders for the funding of face amount of $1,312,500 in two $525,000 tranches of face amount $656,250. The notes bore interest at 3% and mature on December 1, 2017. The Company assumed the notes at fair value of $1,312,500 as part of the Napo Merger.

First Amendment to Note Purchase Agreement and Notes

In December 2017, Napo amended the exchangeable note purchase agreement to extend the maturity of the first tranche and second tranche of notes to February 15, 2018 and April 1, 2018, respectively, increase the principal amount by 12%, and reduce the conversion price from $39.20 per share to $14.00 per share. The Company also issued 35,601 shares of common stock to the lenders in connection with this amendment to partially redeem $299,050 from the first tranche of the notes. The amended face value of the notes was $1,170,950. This amendment resulted in the Company treating the notes as having been extinguished and replaced with new notes for accounting purposes due to meeting the 10% cash flow test. The conversion option in the notes was bifurcated and accounted for as a conversion option liability at fair value.

Second Amendment to Note Purchase Agreement and Notes

On February 16, 2018, Napo amended the exchangeable note purchase agreement to extend the maturity date of the Second Tranche Notes from April 1, 2018 to May 1, 2018. In addition, the Company also issued 54,049 shares of common stock to the Purchasers as repayment of the remaining $435,950 aggregate principal amount and $18,063 in accrued and unpaid interest thereon. On March 23, 2018, the Company paid off the remaining $735,000 of principal and $20,699 in interest due on the second tranche debt in cash with proceeds from the March 23, 2018 equity financing. The fair value of the conversion option liability was again revalued at March 23, 2018 using the Black-Scholes-Merton model using the following criteria: stock price of $14.70 per share, expected life of 0.11 years, volatility of 288.16%, risk free rate of 1.69% and dividend rate of 0%, resulting in an increase of $174,754 to the fair value of the conversion option liability and included in the change in fair value of warrants and conversion option liability in the statements of operations. The underlying debt was paid off in March of 2018 and the $286,595 conversion option liability was written off to other income in the statements of operations.

December 2016 Convertible Notes

In December 2016, Napo entered into a note purchase agreement which provided for the sale of up to $12,500,000 face amount of notes and issued convertible promissory notes (the Napo December 2016 Notes) in the aggregate face amount of $2,500,000 to three lenders and received proceeds of $2,000,000 which resulted in $500,000 of original issue discount. In July 2017, Napo issued convertible promissory notes (the Napo July 2017 Notes) in the aggregate face amount of $7,500,000 to four lenders and received proceeds of $6,000,000 which resulted in $1,500,000 of original issue discount. The Napo December 2016 Notes and the Napo July 2017 Notes mature on December 30, 2019 and bear interest at 10% with interest due each six-month period after December 30, 2016. On June 30, 2017, the accrued interest of $125,338 was added to principal of the Napo December Notes, and the new principal balance became $2,625,338. Interest may be paid in cash or in the stock of Jaguar per terms of the note purchase agreement. In each one year period beginning December 30, 2016, up to one-third of the principal and accrued interest on the notes may be converted into the common stock of the merged entity at a conversion price of $64.75 per share. The Company assumed these convertible notes at fair value of $11,161,000 as part of the Napo Merger. The $1,035,661 difference between the fair value of the notes and the principal balance was being amortized over the twenty-nine (29) month period from July 31, 2017 to December 31, 2019. Interest expense is paid every nine months through the issuance of common stock. On March 16, 2018, $534,775 of interest accrued through January 31, 2018 and $169,950 of certain legal expenses were paid through the issuance of 4,081 shares of the Company's common stock. In August 2018, the Company paid $479,808 of accrued interest through July 31, 2018 with the issuance of 4,582 shares of the Company’s common stock. In January 2019, $446,729 of accrued interest was paid through the issuance of 19,751 shares of the Company's common stock.

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Extinguishment and Exchange of the Napo Convertible Notes

In May 2019, in a restructuring of the Notes, Chicago Venture Partners (“CVP”) acquired the Napo December 2016 and Napo July 2017 Notes, as well as all rights thereof, and immediately extinguished the two Notes; in their place, the Company issued to CVP a new note (“Exchange Note 1”). The collective carrying amount of the Napo December 2016 and Napo July 2017 Note immediately before the exchange was $10,375,326, or principal of $10,125,339 and unamortized premium of $249,987. The new Exchange Note 1 had an opening principal balance of $10,535,900, consisting of the $10,125,339 principal balance of the extinguished notes plus $410,562 in accrued but unpaid interest from the Napo December 2016 and Napo July 2017 Notes. At September 30, 2019 and December 31, 2018, the balance of the Napo December 2016 and Napo July 2017 Notes was zero and $10,553,888, respectively.

Concurrent with the restructuring, CVP also entered into security agreements with Jaguar (the “Jaguar Security Agreement”) and Napo (the “Napo Security Agreement”, and together with the Jaguar Security Agreement, the “Security Agreements”), pursuant to which CVP will receive (i) a security interest in substantially all of the Company’s assets as security for the Company’s obligations under Exchange Note 2 and (ii) a security interest in substantially all of Napo’s assets as security for Napo’s obligations under Exchange Note 1 and Exchange Note 2. Notwithstanding the foregoing, (a) the amount owing under Exchange Note 2 will not be considered part of the obligations secured by the Napo Security Agreement until such time as Jaguar receives permission from a third party and (b) the security interest granted under the Jaguar Security Agreement will be automatically terminated and released upon Jaguar’s receipt of a waiver from such third party.

Notes Payable

Notes payable at September 30, 2019 and December 31, 2018 consist of the following:

	September 30,
	2019		December 31,
	(unaudited)		2018
December 2017 note payable	$	—	$	1,673,237
February 2018 note payable		—		2,359,750
March 2018 note payable		—		1,147,870
2019 Exchange Note 1		4,381,535		—
2019 Exchange Note 2		2,296,926		—
		6,678,461		5,180,857
Less: unamortized discount and debt issuance costs		—		(335,282)
Note payable, net	$	6,678,461	$	4,845,575
Notes payable - non-current, net	$	6,678,461	$	—
Notes payable - current, net	$	—	$	4,845,575

December 2017 Note

On December 8, 2017, the Company entered into a securities purchase agreement with CVP pursuant to which the Company issued a promissory note (the “December 2017 Note”) in the aggregate principal amount of $1,587,500 for an aggregate purchase price of $1,100,000. The December 2017 Note carries an original issue discount of $462,500, and the initial principal balance also includes $25,000 to cover CVP’s transaction expenses. The December 2017 Note bears interest at the rate of 8% per annum and matures on August 26, 2019.

On August 2, 2018, the Company and CVP amended the December 2017 Note agreement, extending the maturity date from September 8, 2018 to August 26, 2019, and limiting the aggregate amount that CVP is permitted to redeem on a monthly basis to $500,000, which amount is the maximum aggregate amount for the CVP Notes collectively. This amendment resulted in the Company accounting for the transaction as a troubled debt restructuring, under which the carrying amount of the note payable remained unchanged but interest expense is computed using a new effective rate that equates the present value of the future cash payments specified by the new terms with the carrying

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amount of the note. The principal balance of the December 2017 Note is included in notes payable in the current liabilities section of the condensed consolidated balance sheet.

Between October 2018 and December 2018, the Company and CVP renegotiated the terms of the December 2017 Note agreement such that CVP agreed not to make any redemptions of the December 2017 Note until March 2019. In consideration of this standstill arrangement, the Company paid CVP a total standstill fee of $499,403 for all four CVP Notes. The standstill fee allocated to the December 2017 Note was $141,737, of which $85,737 increased the principal balance and $56,000 was paid in cash. These modifications in whole represented four separate restructurings of the December 2017 Note agreement, resulting in two troubled debt restructurings accounted for under ASC 470-60 and two modifications accounted for under ASC 470-50. For the two restructurings resulting in troubled debt restructurings, the changes were accounted for prospectively and a new effective interest rate was determined that equated the present value of the future cash payments specified by the new terms with the carrying amount of the December 2017 Note. For the two modifications that resulted in modification accounting, a new effective rate was determined at the date of modification that equated the revised cash flows to the carrying amount of the December 2017 Note.

In March 2019, the Company and CVP amended the December 2017 Note agreement such that the Company prepaid principal and accrued interest of $811,065 and $178,755, respectively, in 57,857 shares of the Company’s common stock. The exchange of debt for common stock was considered a substantial change to the December 2017 Note and therefore the exchange resulted in extinguishment accounting and a corresponding extinguishment loss of $243,419.  

In April 2019, the Company and CVP amended the December 2017 Note agreement such that the Company made two separate exchanges of principal and related accrued interest for shares of the Company’s common stock. The first exchange resulted in changes to cash flows that were considered substantial, resulting in extinguishment accounting with an extinguishment loss of $100,148; the second exchange on April 17, 2019 resulted in the extinguishment of the entire December 2017 Note with a corresponding extinguishment loss of $19,494. At September 30, 2019 and December 31, 2018, the net carrying value of the December 2017 Note was zero and $1,548,829, respectively.

February 2018 Note

On February 26, 2018, the Company entered into a securities purchase agreement with CVP, pursuant to which the Company issued to CVP a promissory note in the aggregate principal amount of $2,240,909 for an aggregate purchase price of $1,560,000 (the “February 2018 Note”). The February 2018 Note carries an original issue discount of $655,909, and the initial principal balance also includes $25,000 to cover CVP's transaction expenses. The February 2018 Note bears interest at the rate of 8% per annum and matures on August 26, 2019.

Between October 2018 and December 2018, the Company and CVP renegotiated the terms of the February 2018 Note agreement such that CVP agreed not to make any redemptions of the February 2018 Note until March 2019. In consideration of this standstill arrangement, the Company paid CVP a total standstill fee of $499,403 for all four CVP Notes. The standstill fee allocated to the February 2018 Note was $198,841, of which $118,841 increased the principal balance and $80,000 was paid in cash. These modifications in whole represented four separate restructurings of the February 2018 Note agreement, resulting in a debt extinguishment accounted for under ASC 470-50, two troubled debt restructurings accounted for under ASC 470-60 and a debt modification accounted for under ASC 470-50. For the debt extinguishment, the Company recorded an extinguishment loss of $102,296. For the two troubled debt restructurings, the changes were accounted for prospectively and a new effective interest rate was determined that equated the present value of the future cash payments specified by the new terms with the carrying amount of the February 2018 Note. For the modification that resulted in modification accounting, a new effective rate was determined at the date of modification that equated the revised cash flows to the carrying amount of the February 2018 Note.

In March 2019, the Company and CVP amended the February 2018 Note agreement such that the Company prepaid principal and accrued interest of $2,044,627 and $203,866, respectively, in 114,802 shares of the Company’s common stock. The exchange of debt for common stock was considered a substantial change to the February 2018 Note and therefore the exchange resulted in extinguishment accounting and a corresponding extinguishment loss of $487,865.  

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In April 2019, the Company and CVP amended the February 2018 Note agreement such that the Company made a single exchange of principal and related accrued interest for 20,345 shares of the Company’s common stock. The first exchange on April 16, 2019 resulted in the extinguishment of the entire February 2018 Note with a corresponding extinguishment loss of $37,740. At September 30, 2019 and December 31, 2018, the net carrying value of the February 2018 Note was zero and $2,290,865, respectively.

March 2018 Note

On March 21, 2018, the Company entered into a securities purchase agreement with CVP, pursuant to which the Company issued to CVP a promissory note in the aggregate principal amount of $1,090,341 for an aggregate purchase price of $750,000 (the “March 2018 Note” and together with the June 2017 Note, the December 2017 Note and the February 2018 Note, the “CVP Notes”). The March 2018 Note carries an original issue discount of $315,341, and the initial principal balance also includes $25,000 to cover CVP's transaction expenses. The March 2018 Note bears interest at the rate of 8% per annum and matures on September 21, 2019.

Between October 2018 and December 2018, the Company and CVP renegotiated the terms of the March 2018 Note agreement such that CVP agreed not to make any redemptions of the March 2018 Note until March 2019. In consideration of this standstill arrangement, the Company paid CVP a total standstill fee of $499,403 for all four CVP Notes. The standstill fee allocated to the March 2018 Note was $95,529, of which $57,529 increased the principal balance and $38,000 was paid in cash. These modifications in whole represented four separate restructurings of the March 2018 Note agreement, resulting in a debt extinguishment accounted for under ASC 470-50, two troubled debt restructurings accounted for under ASC 470-60, and a debt modification accounted for under ASC 470-50. For the debt extinguishment, the Company recorded an extinguishment loss of $223,824. For the two troubled debt restructurings, the changes were accounted for prospectively and a new effective interest rate was determined that equated the present value of the future cash payments specified by the new terms with the carrying amount of the March 2018 Note. For the modification that resulted in modification accounting, a new effective rate was determined at the date of modification that equated the revised cash flows to the carrying amount of the March 2018 Note.

Between January 2019 and March 2019, the Company and CVP amended the March 2018 Note agreement such that the Company prepaid principal and accrued interest of $1,050,114 and $85,681, respectively, in 95,407 shares of the Company’s common stock. These exchanges in whole represented four separate prepayments of principal and accrued interest, resulting in three debt extinguishments and one debt modification accounted. For the debt extinguishments, the Company recorded an aggregate extinguishment loss of $1,210,676. For the modification, a new effective rate was determined at the date of modification that equated the revised cash flows to the carrying amount of the March 2018 Note. The March 2018 Note was fully extinguished in March 2019. At September 30, 2019 and December 31, 2018, the net carrying value of the March 2018 Note was zero and $1,005,880, respectively.

2019 Bridge Notes

Between March 18, 2019 and June 26, 2019 the Company entered into Promissory Note Purchase Agreements with certain accredited investors under which the Company issued (i) fourteen promissory notes with a principal balance of $3,550,000 and warrant coverage at 125% of principal, and (ii) seven promissory notes with a principal balance of $1,500,000 and warrant coverage at 75% of principal. Collectively, cash proceeds from the twenty-one promissory notes (collectively, the “Bridge Notes”) was $5,050,000. The Bridge Notes were not convertible and bore interest at 12% with a maturity date of July 18, 2019, at which date all principal and accrued interest were due. The exercise price of the warrants was either (i) the price the Company issued common shares in its next public offering subject to a registration statement or (ii) if no such offering is consummated by the four-month maturity date of the Notes, then the exercise price would be equal to the closing price of the Company’s common stock on the Notes four-month maturity date. The warrants for all twenty-one Bridge Notes had an issuance date fair value of $5,005,739 (see Note 3).

Between May and early July 2019, the Company and the Bridge Note investors extended the maturity date of the Bridge Notes from July 18, 2019 to July 31, 2019, or an addition of thirteen days; this amendment to the terms of the  Promissory Note Purchase Agreements did not represent a troubled debt restructuring per Subtopic 470-60, nor was it considered a substantial change requiring extinguishment accounting per Subtopic 470-50. Rather, it represented a

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modification under Subtopic 470-50 requiring the determination of a new effective interest rate at the modification date that equated the revised cash flows to the carrying amounts of the Bridge Notes.

On July 23, 2019, the Company paid-off all twenty-one Bridge Notes prior to maturity. The Company paid cash of $5,192,923, or $5,050,000 of principal and $142,923 of accrued interest. The extinguishment of the Bridge Notes resulted in an extinguishment loss of $335,753.  

2019 Exchange Notes

In May 2019, the Company and CVP entered into an Exchange Agreement whereby CVP purchased the two outstanding Napo convertible notes and all rights thereof from the current debt holders. Subject to the terms of the Exchange Agreement, CVP and the Company agreed to exchange the two Napo convertible notes for a single CVP Note (“CVP Exchange Note 1”). At the Exchange date, the principal balance of the two Napo convertible notes was $10,125,339, or $10,535,900 inclusive of accrued but unpaid interest of $410,562. The beginning principal balance of CVP Exchange Note 1 was $10,535,900, or equal to the principal balance of the two Napo convertible notes and accrued interest thereon. The maturity date of CVP Exchange Note 1 was December 31, 2020, with an interest rate of 10%. Per the terms of the Exchange Agreement, CVP agreed to extend the maturity date of CVP Exchange Note 1 from December 31, 2019 (the same maturity date carried over from the two Napo convertible notes ) to December 31, 2020; in consideration of this extension, the Company issued CVP Exchange Note 2 with a principal balance of $2,296,926. The maturity date of CVP Exchange Note 2 is December 31, 2020, with an interest rate of 10%. The exchange of the two outstanding Napo convertible notes for Exchange Note 1 and Exchange Note 2 resulted in the recording of a $2,046,939 loss on extinguishment of debt for the three months ended June 30, 2019.

Between May 2019 and June 2019, the Company and CVP entered into note exchange agreements pursuant to which the Company, in lieu of making a cash payment to CVP on Exchange Note 1, made a prepayment of principal and related accrued interest of $5,144,175 by issuing 817,863 shares of the Company’s common stock to CVP. These exchanges of principal and related accrued interest resulted in a debt extinguishment accounted for under ASC 470-50, with the accompanying recording of a loss on extinguishment of $439,978.  

In July 2019, the Company and CVP entered into note exchange agreements pursuant to which the Company, in lieu of making a cash payment to CVP on Exchange Note 1, made a prepayment of principal and related accrued interest of $1,100,000 by issuing 301,577 shares of the Company’s common stock to CVP. These exchanges of principal and related accrued interest resulted in a debt extinguishment accounted for under ASC 470-50, with the accompanying recording of a loss on extinguishment of $11,202.  

At September 30, 2019, the net carrying value of Exchange Note 1 and Exchange Note 2 was $4,381,535 and $2,296,926, respectively, or an aggregate principal balance of $6,678,461.

8. Warrants

The following table summarizes information about warrants outstanding and exercisable into shares of the Company’s common stock as of September 30, 2019 and 2018:

	Nine Months Ended		Nine Months Ended
	September 30,		September 30,
	2019		2018
	(unaudited)
Warrants outstanding, beginning balance		34,682		4,590
Issuances		19,387,761		12,713
Expirations and cancellations		(551)		(722)
Warrants outstanding, ending balance		19,421,892		16,581

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For the nine months ended September 30, 2019, the Company issued 19,387,761 warrants, as follows:

March 2019 Ladenburg Warrants

In March 2019, in consideration of services provided in the Company’s March 2019 public offering of 19,019 common shares, the Company issued to Ladenburg Thalmann & Co. warrants to purchase an aggregate of 761 shares of common stock at an exercise price of $17.50 per common share. The warrants were valued at $13,028 using the Black-Scholes option pricing model as follows: exercise price of $17.50 per share, stock price of $18.90 per share, expected life of five years, volatility of 146%, and a risk-free rate of 2.21%. The warrants were classified in stockholders’ equity.

March 2019 LOC Warrant

In March 2019, in consideration of a letter of credit cancellation related to the Company’s office lease, the Company issued a warrant to purchase warrant shares equal to a fixed principal amount divided by a variable exercise price (see Note 3). The warrants were initially classified as liabilities pursuant to ASC 480-10 due to their debt-like nature. On July 23, 2019, upon the exercise price of the warrants becoming fixed, the warrants became exercisable into 45,750 shares of the Company’s common stock and were reclassified to additional paid-in-capital with a fair value of $71,079 (see Note 3).

2019 Bridge Note Warrants

Between March 18, 2019 and June 26, 2019, concurrent to the Company entering into Promissory Notes of $5,050,000, the Company issued twenty-one warrants to purchase warrant shares equal to a fixed principal amount divided by a variable exercise price (see Note 3). The warrants for all twenty-one Bridge Notes were initially liability classified pursuant to ASC 480-10 due to their debt-like nature. On July 23, 2019, upon the exercise price of the warrants becoming fixed, the warrants became exercisable into 2,781,250 shares of the Company’s common stock and were reclassified to additional paid-in-capital with a fair value of $4,259,327 (see Note 3).

Series 1 Warrants

In July 2019, the Company entered into an underwriting agreement (see Note 1), relating to a public offering, which was comprised of (1) 2,886,500 Class A Units, priced at $2.00 per unit, with each unit consisting of (i) one share of the Company’s voting common stock, (ii) one Series 1 warrant to purchase one share of Common Stock, and (iii) one Series 2 warrant to purchase one share of Common Stock, and (2) 10,787 Class B Units, priced at a price of $1,000 per unit, with each unit consisting of (i) one share of Series B convertible preferred stock, convertible into 500 shares of Common Stock, (ii) 500 Series 1 Warrants and (iii) 500 Series 2 Warrants.

The Series 1 Warrants have an exercise price of $2.00 and expire on the earlier of (a) 5 years from the date of issuance and (b) 30 calendar days following the public announcement of Positive Interim Results related to the diarrhea results from the HALT-D investigator initiated trial, if and only if certain trading benchmarks are achieved during such 30 calendar day period.

In the offering, the Company sold (i) 2,886,500 Class A Units, which included Series 1 warrants to purchase 2,886,500 shares of the Company’s common stock and (ii) 10,787 Class B Units, which included Series 1 warrants to purchase 5,393,500 shares of the Company’s common stock. In total, 8,280,000 Series 1 warrants were issued, with an initial valuation of $5,304,989 computed using the Black-Scholes-Merton pricing model using a stock price of $1.73, a strike price of $2.00, an expected term of 5.0 years, volatility of 144.76% and a risk-free discount rate of 1.83%. Upon issuance, the Series 1 warrants were classified in additional paid-in-capital.

Modification of the Series 1 Warrants

In September 2019, the Company reduced the exercise price all 8,280,000 Series 1 Warrants from $2.00 to $1.40. The Company determined the impact of this modification to be an increase in the fair value of the warrants of

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$252,106. Because the modification applied to the entire class of Series 1 Warrant holders, the increase in fair value represented a deemed dividend to the entire class of Series 1 Warrant holders. The modification did not result in the reclassification of the equity-classified Series 1 warrants from additional paid-in-capital to liability classification.

Series 2 Warrants

The Series 2 Warrants have an exercise price of $2.00 and expire on the first date on the earlier of (a) 5 years from the date of issuance and (b) 30 calendar days following the public announcement by the Company that a pivotal phase 3 clinical trial using crofelemer (Mytesi®, or the same or similar product with a different name) for the treatment of cancer therapy-related diarrhea in humans has met its primary endpoint in accordance with the protocol, if and only if certain trading benchmarks are achieved during such 30 calendar day period. In addition, each Series 2 Warrant has an embedded call option that allows the Company to redeem any unexercised warrants if certain contingencies are met. 

In the offering, the Company sold (i) 2,886,500 Class A Units, which included Series 2 warrants to purchase 2,886,500 shares of the Company’s common stock and (ii) 10,787 Class B Units, which included Series 1 warrants to purchase 5,393,500 shares of the Company’s common stock. In total, 8,280,000 Series 2 warrants were issued, with an initial valuation of $5,304,989 computed using the Black-Scholes-Merton pricing model using a stock price of $1.73, a strike price of $2.00, an expected term of 5.0 years, volatility of 144.76% and a risk-free discount rate of 1.83%. Upon issuance, the Series 2 Warrants were classified in additional paid-in-capital.

For the nine months ended September 30, 2018, the Company issued 12,713 warrants, as follows:

August 2018 LOC Warrant

In August 2018, in consideration of the Letter of Credit associated with the Company’s office lease, the Company issued to an existing shareholder a five-year warrant to purchase 9,580 shares of the Company’s common stock. The Warrant is exercisable on or after March 28, 2019 at an exercise price of $49.08. The warrants had an issuance-date fair value of $493,688 and classified in additional paid-in-capital with an offset to deferred rent.

September 2018 L2 Warrants

Concurrent to entering into the Note Purchase Agreement with L2 Capital in September 2018, the Company issued to L2 Capital a 5-year warrant to purchase 2,649 shares of the Company’s common stock. The warrants had an issuance-date fair value of $100,330 at an exercise price of $63.00 per share. The warrants were recorded in additional paid-in-capital and treated as a discount to the L2 Capital Promissory note balance.

September 2018 Conte Warrants

Concurrent to entering into the Note Purchase Agreement with an accredited investor in September 2018, the Company issued to the accredited investor a 5-year warrant to purchase 484 shares of the Company’s common stock. The warrants had an issuance-date fair value of $17,818 at an exercise price of $86.10 per share. The warrants were recorded in additional paid-in-capital and treated as a discount to the Conte Promissory note balance.

9. Convertible Preferred Stock

Series A Convertible Preferred Stock

In March 2018, the Company entered into a stock purchase agreement with Sagard Capital Partners, L.P. pursuant to which the Company, in a private placement, agreed to issue and sell to Sagard 5,524,926 shares of the Company's Series A convertible participating preferred stock, $0.0001 par value per share, for gross proceeds of $9,199,002, or $9,000,002 net of issuance costs. The preferred stock is convertible into approximately 473,565 shares of common stock at the option of the holder at an effective conversion price of $19.425 per share, provided that, at any time prior to the time the Company obtains stockholder approval, as required pursuant to Nasdaq Rule 5635(b) any conversion of Preferred Stock by a holder into shares of the common stock would be prohibited if, as a result of such

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conversion, the holder, together with such holder's attribution parties, would beneficially own more than 19.99% of the total number of shares of the common stock issued and outstanding after giving effect to such conversion. Subject to certain limited exceptions, the shares of Preferred Stock cannot be offered, pledged or sold by Sagard for one year from the date of issuance. The conversion price is subject to certain adjustments in the event of any stock dividend, stock split, reverse stock split, combination or other similar recapitalization.

Holders of the Series A shares are entitled to participate equally and ratably with the holders of common stock shares in all dividends paid and distributions made to the holders of the common stock as if, immediately prior to each record date of the common stock, the shares of Series A then outstanding were converted into shares of common stock.

In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Company or deemed liquidation event, the holders of Series A shares then outstanding shall be entitled to be paid in cash out of the assets of the Company before any payment shall be made to the holders of common stock or shares of any series or class of preferred or other capital stock then outstanding that by its terms is junior to the Series A in respect of the preferences as to distributions and payments upon such liquidation event by reason of their ownership, an amount per share of Series A equal to one times the Series A original issue price.

The redemption and liquidation value of the Series A preferred stock is $12,738,822 and $9,199,002, respectively, as of September 30, 2019 and December 31, 2018. If a Redemption Event occurs as of the Measurement Date (the later of April 30, 2021 and the date on which the Company files its Form 10‑Q for the three months ending March 31, 2021, but in no event later than September 30, 2021), the holders of at least a majority of the shares of Series A preferred stock then outstanding may require the Company to redeem all Series A shares at a per share purchase price equal to $2.3057; any one of the following conditions can result in a Redemption Event that is not solely within the Company's control: Revenues attributable to the Mytesi product for the six-month period ended March 31, 2021 are less than $22.0 million or the daily volume weighted average price (“VWAP”) of the Company's common stock on Nasdaq for the 30 days prior to a Measurement Date is less than $105.00.

On the March 23, 2018 issuance date, the effective conversion price per share was less than the fair value of the underlying common stock. As a result, the Company determined that there was a Beneficial Conversion Feature (“BCF”) of approximately $995,000.  Because the Company's Series A Preferred Stock does not have a stated conversion date and was immediately convertible at the issuance date, the Company recorded a deemed dividend charge of $995,000 for the accretion of the discount on the Series A Preferred Stock. The deemed dividend was a non-cash transaction and is reflected below net loss to arrive at net loss available to common stockholders on the Company's condensed consolidated statements of operations for the nine months ended September 30, 2018.

In March 2019, the Company and Sagard Capital Partners, L.P. amended certain terms of the agreement, such that the effective conversion price was adjusted to $19.425 per share. 

The preferred stock has been classified outside of stockholders' equity/(deficit) in accordance with authoritative guidance for the classification and measurement of potentially redeemable securities.

Series B Convertible Preferred Stock

In July 2019, the Company entered into an underwriting agreement relating to the public offering comprised of (1) 2,886,500 Class A Units, priced at a public offering price of $2.00 per unit, with each unit consisting of (i) one share of the Company’s voting common stock, (ii) one Series 1 warrant to purchase one share of Common Stock and (2) 10,787 Class B Units, priced at a public offering price of $1,000 per unit, with each Class B unit consisting of (i) one share of Series B convertible preferred stock with a stated value of $1,000 and convertible into 500 shares of Common Stock, (ii) 500 Series 1 Warrants and (iii) 500 Series 2 Warrants, at a public offering price of $1,000 per Class B Unit.

The Company sold 10,787 Class B Units, comprised of 10,787 shares of Series B convertible preferred stock, Series 1 warrants to purchase 5,393,500 shares of common stock and Series 2 warrants to purchase 5,393,500 shares of common stock. The total gross proceeds to the Company from the offering of the Class B Units was $10,787,000, of

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which $3,875,778 was allocated to the Series B convertible preferred stock, $3,455,611 to the Series 1 Warrants and $3,455,611 to the Series 2 Warrants. Issuance costs of $1,635,184 were allocated to the Class B Units.

Holders of the Series B shares are entitled to participate equally and ratably with the holders of common stock shares in all dividends paid and distributions made to the holders of the common stock as if, immediately prior to each record date of the common stock, the shares of Series A then outstanding were converted into shares of common stock. With certain exceptions, the shares of Series B Preferred Stock have no voting rights. However, as long as any shares of Series B Preferred Stock remain outstanding, the Company shall not, without the affirmative vote of holders of a majority of the then outstanding shares of Series B Preferred Stock, (a) alter or change adversely the powers, preferences or rights given to the Series B Preferred Stock or alter or amend the Series B Certificate of Designation or (b) enter into any agreement with respect to any of the foregoing.Each share of Series B Preferred Stock is convertible at any time at the holder’s option into 500 shares of Common Stock, which conversion ratio will be subject to adjustment for stock splits, stock dividends, distributions, subdivisions and combinations and other similar transactions.

On the July 23, 2019 issuance date, the effective conversion price per share was less than the fair value of the underlying common stock. As a result, the Company determined that there was a Beneficial Conversion Feature of $3,875,778.  Because the Company's Series B Preferred Stock does not have a stated conversion date and was immediately convertible at the issuance date, the Company recorded a deemed dividend charge of $3,875,778 for the accretion of the discount on the Series B Preferred Stock. The deemed dividend was a non-cash transaction and is reflected below net loss to arrive at net loss available to common stockholders on the Company's condensed consolidated statements of operations for the three and nine months ended September 30, 2019.

During July and August 2019, certain investors converted 8,816 Series B preferred shares into 4,408,000 shares of the Company’s common shares at the stated conversion ratio. As of September 30, 2019, there remained 1,971 Series B preferred shares outstanding.

The preferred stock has been classified in stockholders' equity/(deficit) in accordance with authoritative guidance.

10. Stockholders' Equity

Common Stock

As of September 30, 2019, and December 31, 2018, the Company had reserved shares of common stock for issuance as follows:

	September 30,	December 31,
	2019	2018
	(unaudited)
Options issued and outstanding	3,821,690	42,979
Inducement options issued and outstanding	—	2,985
Options available for grant under stock option plans	554,016	2,327
RSU awards issued and outstanding	5,613	5,613
Warrants issued and outstanding	19,421,892	34,682
Convertible notes	—	10,849
Convertible preferred stock-Series A	473,565	47,357
Convertible preferred stock-Series B	985,500	—
Total	25,262,276	146,792

Transactions with Oasis Capital

On January 7, 2019, Jaguar entered into a common stock purchase agreement with Oasis Capital, relating to an offering of an aggregate of up to 76,190 shares of common stock via an equity line of credit. Under the terms of the

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purchase agreement, the Company has the right to "put," or sell, up to 76,190 shares of common stock to Oasis Capital for an amount equal to the product of (i) the number of shares set forth on the applicable put notice (minus the deposit and clearing fees associated with such purchase) and (ii) a fixed price of $52.50 per share or such other price agreed upon between the Company and Oasis Capital. Jaguar had the option to increase the equity line of credit by an additional 114,286 shares of common stock by notifying Oasis Capital at any time after the effective date of the purchase agreement. In March 2019, Jaguar exercised this option. As of March 31, 2019, the Company had sold all of the 76,190 shares of common stock of the equity line and all 114,286 shares of common stock from the option to Oasis Capital, or a total of 190,476 shares.

In March 2019, Jaguar entered into a securities purchase agreement with Oasis Capital pursuant to which Jaguar agreed to issue and sell, in a registered public offering by Jaguar directly to Oasis, an aggregate of 19,019 shares of common stock at an offering price of $14.00 for gross proceeds of approximately $266,266.  

On April 1, 2019, the Company entered into another common stock purchase agreement (the “April CSPA”) with Oasis Capital relating to an offering (the “April Equity Line Offering”) of an aggregate of up to 285,714 shares (the “April Purchase Shares”) of the Company’s common stock, all of which are being offered in a primary offering consisting of an equity line of credit. Under the terms of the April CSPA, the Company has the right to “put,” or sell, the April Purchase Shares to Oasis Capital for an amount equal to the product of (i) the number of April Purchase Shares set forth in the applicable put notice (minus the deposit and clearing fees associated with such purchase) and (ii) a fixed price of $19.60 per share or such other price agreed upon between the Company and Oasis Capital. The Company had

the option to increase the equity line of credit by an additional 285,714 shares of Common Stock by notifying Oasis Capital at any time after the effective date of the April CSPA.

Effective June 14, 2019, we halted all future offers and sales of our voting common stock, par value $0.0001 per share under the April CSPA and terminated the April CSPA. Between April 1, 2019, the date of the April CSPA, and June 14, 2019, we sold an aggregate of 4,843 shares of Common Stock pursuant to the CSPA for aggregate gross proceeds of approximately $100,000.

Issuance of Class A Units in July 2019 Underwritten Public Offering

In July 2019, the Company entered into an underwriting agreement relating to the public offering comprised of (1) 2,886,500 Class A Units, priced at a public offering price of $2.00 per unit, with each unit consisting of (i) one share of the Company’s voting common stock, (ii) one Series 1 warrant to purchase one share of Common Stock and (2) 10,787 Class B Units, priced at a public offering price of $1,000 per unit, with each Class B unit consisting of (i) one share of Series B convertible preferred stock with a stated value of $1,000 and convertible into 500 shares of Common Stock, (ii) 500 Series 1 Warrants and (iii) 500 Series 2 Warrants, at a public offering price of $1,000 per Class B Unit.

The Company sold 2,886,500 Class A Units, comprised of 2,886,500 shares of voting common stock, Series 1 warrants to purchase 5,393,500 shares of common stock and Series 2 warrants to purchase 5,393,500 shares of common stock. The total gross proceeds to the Company from the offering of the Class A Units was $5,773,000, of which $2,074,244 was allocated to the voting common stock, $1,849,378 to the Series 1 Warrants and $1,849,378 to the Series 2 Warrants. Issuance costs of $875,184 were allocated to the Class A Units.

11. Stock Incentive Plans

2013 Equity Incentive Plan

Effective November 1, 2013, the Company's board of directors and sole stockholder adopted the Jaguar Health, Inc. 2013 Equity Incentive Plan (the “2013 Plan”). The 2013 Plan allows the Company's board of directors to grant stock options, restricted stock awards and restricted stock unit awards to employees, officers, directors and consultants of the Company. Following the effective date of the IPO and after effectiveness of any grants under the 2013 Plan that were contingent on the IPO, no additional stock awards will be granted under the 2013 Plan. Outstanding grants continue to be exercisable; however, any unissued shares under the plan and any forfeitures of outstanding options do not rollover to the 2014 Stock Incentive Plan. As of September 30, 2019, there were 368 options outstanding.

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2014 Stock Incentive Plan

In May 2015, the Company adopted the Jaguar Health, Inc. 2014 Stock Incentive Plan (“2014 Plan”). The 2014 Plan provides for the grant of options, restricted stock and restricted stock units to eligible employees, directors and consultants to purchase the Company's common stock. The 2014 Plan provides for automatic share increases on the first day of each fiscal year in the amount of 2% of the outstanding number of shares of the Company's common stock on the last day of the preceding calendar year. The final 2% increase under the terms of the 2014 Plan was on January 1, 2019, at which time 7,797 additional available shares were added to the 2014 Plan. In February 2019, the Company shareholders approved a 5-year extension of the annual 2% automatic increase from January 1, 2020 through January 1, 2024. The 2014 Plan replaced the 2013 Plan except that all outstanding options under the 2013 Plan remain outstanding until exercised, cancelled or expiration.

In July 2019, the Company adopted an amendment to the 2014 Plan to increase the number of shares of the Company’s common stock authorized for issuance such that the aggregate authorized but unissued shares available for issuance would be equal to 12.5% of the issued and outstanding shares of Common Stock on a fully diluted basis including for purposes of this calculation as if such shares available under the 2014 Plan were included in the denominator (and assuming conversion or exercise, as applicable, of all outstanding convertible securities, including but not limited to conversion of the Company’s Series A Convertible Participating Preferred Stock and Series B Convertible Preferred Stock  into shares of Common Stock, all issued and outstanding warrants, RSUs and stock options (whether issued under or outside the 2014 Plan and the like)), calculated as of the earlier of (i) the day immediately after the consummation of the Company’s next underwritten public equity offering with gross proceeds of $5 million or more or (ii) July 31, 2019 (collectively, the “Calculation Date”). The Calculation Date occurred on July 24, 2019 and the total number of shares of Common Stock approved for issuance under the 2014 Plan increased 4,330,400 shares.

As of September 30, 2019, there were 3,821,690 options outstanding and 554,016 options available for grant.

Stock Options and Restricted Stock Units (“RSUs”)

The following table summarizes incentive plan activity for the nine months ended September 30, 2019 (unaudited):

				Weighted		Weighted Average
	Shares	Stock		Average		Remaining	Aggregate
	Available	Options	RSUs	Stock Option		Contractual Life	Intrinsic
	for Grant	Outstanding	Outstanding	Exercise Price		(Years)	Value*
Outstanding at December 31, 2018	2,327	42,979	5,613	$	406.36	9.24	$	—
Additional shares authorized	4,330,400	—	—		—	—
Options granted	(4,306,832)	4,306,832	—		1.71	—		—
Options cancelled	528,121	(528,121)	—		4.45	—		—
Outstanding at September 30, 2019	554,016	3,821,690	5,613	$	5.72	9.81	$	—
Exercisable at September 30, 2019		503,943		$	24.61	9.76	$	—
Vested and expected to vest at September 30, 2019		3,197,953		$	6.82	9.81	$	—

*Fair market value of JAGX common stock on September 30, 2019 was $1.31 per share.

The intrinsic value is calculated as the difference between the exercise price of the underlying options and the fair market value of the Company's common stock for options that were in-the-money.

No options were exercised in the nine months ended September 30, 2019 and 2018.

The weighted average grant date fair value of stock options granted was $1.57 and $128.80 per share during the nine months ended September 30, 2019 and 2018, respectively.

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The number of options that vested in the nine months ended September 30, 2019 and 2018 was 496,467 and 6,053, respectively. The grant date weighted average fair value of options that vested in the nine months ended September 30, 2019 and 2018 was $2,668,737 and $475,123, respectively.

The Company granted 2,993 inducement options in fiscal year 2018 to new employees. The weighted average grant-date fair value of the options was $93.80 per share.

Stock-Based Compensation

The following table summarizes stock-based compensation expense related to stock options, inducement stock options and RSUs for the three and nine months ended September 30, 2019 and 2018, and are included in the condensed consolidated statements of operations as follows:

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2019		2018		2019		2018
	(unaudited)				(unaudited)
Research and development expense	$	332,636	$	175,772	$	548,524	$	400,521
Sales and marketing expense		41,122		39,210		87,215		59,762
General and administrative expense		736,351		465,112		1,347,246		956,508
Total	$	1,110,109	$	680,094	$	1,982,985	$	1,416,791

As of September 30, 2019, the Company had $5,555,383 of unrecognized stock-based compensation expense for options, inducement options and restricted stock units outstanding, which is expected to be recognized over a weighted-average period of 2.31 years.

The estimated grant-date fair value of stock option grants for the nine months ended September 30, 2019 and 2018 was calculated using the Black-Scholes - Merton option-pricing model using the following weighted-average assumptions:

	Nine Months Ended
	September 30,
	2019		2018
	(unaudited)
Weighted-average volatility	142.9 -  145.9	%	95.6 - 95.9	%
Weighted-average expected term (years)	5.6 - 5.8		5.8
Risk-free interest rate	1.5 - 1.9	%	2.8 - 3.1	%
Expected dividend yield	—		—

401(k) Plan

The Company sponsors a 401(k) defined contribution plan covering all employees. There were no employer contributions to the plan from plan inception through September 30, 2019.

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12. Net Loss Per Share

The following table presents the calculation of basic and diluted net loss per share of common stock for the periods indicated:

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2019		2018		2019		2018
	(unaudited)					(unaudited)
Net loss attributable to common shareholders (basic and diluted)	$	(11,682,949)	$	(6,138,352)	$	(36,707,937)	$	(20,487,172)
Shares used to compute net loss per common share, basic and diluted		5,841,790		162,506		2,746,523		143,012
Net loss per share attributable to common shareholders, basic and diluted	$	(2.00)	$	(37.77)	$	(13.37)	$	(143.25)

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 nine months ended September 30, 2019 and 2018 because their inclusion would be anti-dilutive.

	September 30,	September 30,
	2019	2018
	(unaudited)
Options issued and outstanding	3,821,690	42,979
Inducement options issued and outstanding	—	2,994
Options available for grant under stock options plans	554,016	3,402
Restricted stock unit awards issued and outstanding	5,613	5,613
Warrants issued and outstanding	19,421,892	16,582
Convertible notes	—	23,469
Series A convertible preferred stock	473,565	—
Series B convertible preferred stock	985,500	—
Total	25,262,276	95,039

13. Segment Information

Prior to the merger with Napo, the Company managed its operations as a single segment for the purposes of assessing performance and making operating decisions. The Company reorganized its segments to reflect the change in the organizational structure resulting from the merger with Napo. Post-merger, the Company manages its operations through two reportable segments—human health and animal health. The human health segment is focused on developing and commercializing human products and the ongoing commercialization of Mytesi™, which is approved by the U.S. FDA for the symptomatic relief of noninfectious diarrhea in adults with HIV/AIDS on antiretroviral therapy. The animal health segment is focused on developing and commercializing prescription and non-prescription products for companion and production animals.

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The Company's reportable segments net revenues and net loss for the three and nine months ended September 30, 2019 and 2018 consisted of:

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2019		2018		2019		2018
	(unaudited)				(unaudited)
Revenue from external customers
Human Health	$	957,059	$	1,107,682	$	4,184,912	$	2,545,121
Animal Health		15,720		24,385		83,294		275,148
Consolidated Totals	$	972,779	$	1,132,067	$	4,268,206	$	2,820,269
Segment profit (loss)
Human Health	$	(3,955,115)	$	(3,145,782)	$	(16,585,956)	$	(10,519,413)
Animal Health		(3,599,950)		(2,992,570)		(15,994,097)		(8,972,759)
Consolidated Totals	$	(7,555,065)	$	(6,138,352)	$	(32,580,053)	$	(19,492,172)

The Company's reportable segments assets consisted of the following:

		September 30,		December 31,
	2019		2018
Segment assets
Human Health	$	33,571,477	$	37,985,935
Animal Health		64,797,329		54,893,593
Total	$	98,368,806	$	92,879,528
The reconciliation of segments assets to the consolidated assets is as follows:
		September 30,		December 31,
	2019		2018
Total assets for reportable segments		98,368,806		92,879,528
Less: Investment in subsidiary		(29,240,965)		(29,240,965)
Less: Intercompany loan		(33,501,296)		(22,596,618)
Consolidated Totals	$	35,626,544	$	41,041,945

14. Subsequent Events

Series 1 Warrant Exercise Agreement

In October 2019, the Company entered into a Warrant Exercise Agreement with the sole remaining holder of the Series B Preferred Stock (the “Exercising Holder”), which Exercising Holder owns Series 1 warrants exercisable for 1,250,000 shares of Common Stock (the “Series 1 Warrant Shares”). Pursuant to the Warrant Exercise Agreement, the Company had the right, with 2 trading days’ prior notice, to require the Exercising Holder to exercise all or a portion of its Series 1 warrants in accordance with the existing terms of the Series 1 warrants, in exchange for the Company’s agreement to issue to the Exercising Holder a number of Series B-1 Convertible Preferred Stock, with a stated value of $12,201, in an amount equal to one Series B-1 Convertible Preferred Share for every 19,841 Series 1 Warrant Shares issued by the Company to the Exercising Holder. 

In October 2019, the Exercising Holder exercised its 1,250,000 Series 1 warrants for common stock, with the Company receiving aggregate gross proceeds of approximately $1,750,000. In consideration of the exercise, and in accordance with the terms of the Warrant Exercise Agreement, the Company in turn issued to the Exercising Holder 63 shares of Series Convertible B-1 Preferred Stock. 

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Designation of Series B-1 Convertible Preferred Stock

In October 2019, the Company created a new series of authorized preferred stock, designated as the “Series B-1 Convertible Preferred Stock.”  The Series B-1 Certificate of Designation became effective with the Secretary of State of the State of Delaware upon filing. The shares of Series B-1 Preferred Stock rank on par with the shares of the Common Stock, in each case, as to dividend rights and distributions of assets upon liquidation, dissolution or winding up of the Company.

With certain exceptions, as described in the Series B-1 Certificate of Designation, the shares of Series B-1 Convertible Preferred Stock have no voting rights. However, as long as any shares of Series B-1 Convertible Preferred Stock remain outstanding, the Series B-1 Certificate of Designation provides that the Company shall not, without the affirmative vote of holders of a majority of the then outstanding shares of Series B-1 Convertible Preferred Stock, (a) alter or change adversely the powers, preferences or rights given to the Series B-1 Convertible Preferred Stock or alter or amend the Series B-1 Certificate of Designation or (b) enter into any agreement with respect to any of the foregoing.

Each share of Series B-1 Convertible Preferred Stock is convertible at any time at the holder’s option into 10,001 shares of Common Stock, which conversion ratio will be subject to adjustment for stock splits, stock dividends, distributions, subdivisions and combinations and other similar transactions as specified in the Series B-1 Certificate of Designation. Notwithstanding the foregoing, the Series B-1 Certificate of Designation further provides that the Company shall not effect any conversion of the shares of Series B-1 Convertible Preferred Stock, with certain exceptions, to the extent that, after giving effect to an attempted conversion, the holder of shares of Series B-1 Preferred Stock (together with such holder’s affiliates and any persons acting as a group together with such holder or any of such holder’s affiliates) would beneficially own a number of shares of Common Stock in excess of 4.99% (or 9.99% at the election of the holder prior to the date of issuance of Series B-1 Convertible Preferred Stock) of the shares of Common Stock then outstanding. At the holder’s option, upon notice to the Company, the holder may increase or decrease this beneficial ownership limitation not to exceed 9.99% of the shares of Common Stock then outstanding, with any such increase becoming effective upon 61 days’ prior notice to the Company.

Issuance of Series B-1 Convertible Preferred Stock

In October 2019, per the terms of a Warrant Exercise Agreement, the Company issued 63 shares of Series B-1 Convertible Preferred Stock in consideration of an existing Series 1 Warrant holder exercising 1,250,000 Series 1 warrants for the Company’s common stock. The Company received aggregate gross proceeds of approximately $1,750,000 from the exercise of the Series 1 Warrants. 

Termination of Tempesta Royalty License Agreement

In October 2019, the Company entered into a License Termination and Settlement Agreement with Dr. Michael Tempesta, pursuant to which certain disputes between Napo and Tempesta were settled. The disputes related to royalty payments owed by Napo to Tempesta under a license agreement, dated February 8, 1990, between Tempesta and Shaman Pharmaceuticals, a predecessor-in-interest to Napo (the “1990 License”), and a modified license agreement, dated October 16, 2002, between Tempesta and Napo (the “2002 License” and together with the 1990 License, the “License Agreements”) with respect to SP-303, a component of Mytesi, the Company’s FDA-approved drug for the symptomatic relief of noninfectious diarrhea in adult patients with HIV/AIDS on antiretroviral therapy. At September 30, 2019, the Company had recorded a loss contingency of $640,000 in regard to the probable settlement of the royalty dispute (see Note 6).

Pursuant to the terms of the Agreement, Tempesta received $50,000 in cash, an unsecured promissory note issued by the Company in the aggregate principal amount of $550,000 and 40,000 shares of the Company’s common stock in exchange for the cessation of all royalty payments by Napo to Dr. Tempesta under the License Agreements. The promissory note bears interest at the rate of 2.5% per annum and matures on March 1, 2025. The promissory note provides for the Company to make semi-annual payments equal to $50,000 plus accrued interest beginning on March 1,

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2020 until the Note is paid in full. The 40,000 shares are subject to lock-up restrictions and are not tradeable by Tempesta until October 1, 2020.

Angel Pond Agreement

In October 2019, the Company engaged Angel Pond Capital LLC to explore potential licensing agreements and collaborations for Mytesi® in China. In consideration of these services, the Company compensated Angel Pond Capital LLC with $140,000 in the Company’s common stock for the initial four-month term of the agreement. The Company has the option to extend the agreement term for two months for $30,000 payable in the Company’s common stock.

If a definitive commercial agreement is executed by the Company with an entity that does all or substantially all of its business in China and one with whom Angel Pond Capital LLC has had substantial contact on the Company’s behalf prior to the expiration or termination of this Agreement,  Angel Pond Capital LLC will be paid compensation equal to 6%  (6.5% for certain engaged entities) of the amounts actually received by the Company from such engaged entity in the form of upfront licensing fees and regulatory milestone payments pursuant to such Definitive Commercial Agreement. 

The Company will pay to Angel Pond Capital LLC sales milestone payments equal to $300,000 after the first $50,000,000 of “Net Sales” (as defined in a Definitive Commercial Agreement) has been achieved in China by an engaged entity, and $300,000 after each and every additional $50,000,000 in cumulative net sales in China by such engaged entity; provided, however, such milestone payments will be capped at 6% of the cumulative sales royalty payments received by the Company from such engaged entity.

If Angel Pond Capital LLC is able to raise equity capital for the Company from an engaged entity prior to the expiration or termination of the Agreement, Angel Pond Capital LLC will receive compensation equal to 6% of the total dollar amount raised.

If Angel Pond Capital LLC is instrumental in arranging for the sale of the Company to an engaged entity prior to the expiration or termination of the Agreement, then Angel Pond Capital LLC will be compensated determinant upon any such sale price.

Securities Purchase Agreement

On November 13, 2019, Jaguar Health, Inc. (“Jaguar” or the “Company”) entered into a securities purchase agreement (the “Purchase Agreement”) with the purchasers named therein (each, an “Investor” and collectively, the “Investors”), pursuant to which the Company agreed to issue and sell, in a registered public offering by the Company directly to the Investors (the “Offering”), pre-funded warrants to purchase up to an aggregate of 2,222,223 shares of the Company’s common stock (“Common Stock”) at an offering price of $0.80 per share (the “Pre-Funded Warrants”), which when added together with the exercise price of $0.01 per share, equals the Minimum Price as defined under Nasdaq Listing Rule 5635(d).  The gross proceeds from the Offering were approximately $1.8 million before deducting offering expenses.

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 consolidated financial statements and the related notes included in our Annual Report on Form 10‑K for the year ended December 31, 2018.

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

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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 a commercial stage pharmaceuticals company focused on developing novel, sustainably derived gastrointestinal products on a global basis. Our wholly-owned subsidiary, Napo Pharmaceuticals, Inc. (“Napo”), focuses on developing and commercializing proprietary human gastrointestinal pharmaceuticals for the global marketplace from plants used traditionally in rainforest areas. Our Mytesi (crofelemer) product is approved by the U.S. Food and Drug Administration (“FDA”) for the symptomatic relief of noninfectious diarrhea in adults with HIV/AIDS on antiretroviral therapy.

Jaguar was founded in San Francisco, California as a Delaware corporation on June 6, 2013. Napo formed Jaguar to develop and commercialize animal health products. Effective as of December 31, 2013, Jaguar was a wholly-owned subsidiary of Napo, and Jaguar was a majority-owned subsidiary of Napo until the close of the Company's initial public offering on May 18, 2015. On July 31, 2017, the merger of Jaguar Animal Health, Inc. and Napo became effective, at which point Jaguar Animal Health's name changed to Jaguar Health, Inc. and Napo began operating as a wholly-owned subsidiary of Jaguar focused on human health and the ongoing commercialization of, and development of follow-on indications for, Mytesi. Most of the activities of the Company are now focused on the commercialization of Mytesi and development of follow-on indications for crofelemer and a second-generation anti-secretory product, lechlemer. In the field of animal health, we have limited activities which are focused on developing and commercializing first-in-class gastrointestinal products for dogs, dairy calves, foals, and high value horses.

We believe Jaguar is poised to realize a number of synergistic, value adding benefits—an expanded pipeline of potential blockbuster human follow-on indications, a second-generation anti-secretory agent, as well as a pipeline of important animal indications for crofelemer —upon which to build global partnerships. As previously announced, Jaguar, through Napo, now holds extensive global rights for Mytesi, and crofelemer manufacturing is being conducted at a multimillion-dollar commercial manufacturing facility that has been FDA-inspected and approved. Additionally, several of the drug product candidates in Jaguar's Mytesi pipeline are backed by strong Phase 2 and proof of concept evidence from completed human clinical trials.

Mytesi is a novel, first-in-class anti-secretory agent which has a basic normalizing effect locally on the gut, and this mechanism of action has the potential to benefit multiple disorders. Mytesi is in development for multiple possible follow-on indications, including cancer therapy-related diarrhea; orphan-drug indications for infants and children with congenital diarrheal disorders and short bowel syndrome (SBS); supportive care for inflammatory bowel disease (IBD); irritable bowel syndrome (IBS); and for idiopathic/functional diarrhea. In addition, a second-generation anti-secretory agent, lechlemer, in development for cholera. Mytesi previously received orphan-drug designation for SBS.

Financial Operations Overview

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

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$32.6 million and $19.5 million for the nine months ended September 30, 2019 and 2018, respectively. Our net loss was $7.6 million and $6.1 million for the three months ended September 30, 2019 and 2018, respectively. As of September 30, 2019, we had a total stockholders' equity of $11.4 million, an accumulated deficit of $127.1 million, and cash of $2.1 million. We expect to continue to incur losses and experience increased expenditures for the foreseeable future as we expand our product development activities, seek necessary approvals for our product candidates, conduct species-specific formulation studies for our non-prescription products, establish API manufacturing capabilities and begin additional commercialization activities.

Revenues

Our product and collaboration revenue consist of the following:

· Revenues from the sale of our human drug Mytesi, which is sold through distributors and wholesalers.

· Revenues from the sale of our animal products branded as Neonorm Calf and Neonorm Foal. Our Neonorm and botanical extract products are primarily sold to distributors, who then sell the products to the end customers.

· Revenues from our collaborative agreement with Elanco to license, develop and commercialize Canalevia. This agreement was terminated in January 2018.

See “Results of Operations” below for more detailed discussion on revenues

Cost of Revenue

Cost of revenue consists of direct drug substance and drug product materials expense, direct labor, distribution fees, royalties and other related expenses associated with the sale of our products.

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, and reforestation expenses. Clinical and contract manufacturing expense consists primarily of costs to conduct stability, safety and efficacy studies, and manufacturing startup at an outsourced API provider in Italy. It also includes expenses with a third-party provider for the transfer of the Mytesi manufacturing process, and the related feasibility and validation activities.

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 and we track 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;

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· 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.

Sales and Marketing Expense

Sales and marketing expenses consist of personnel and related benefit expense, stock-based compensation expense, direct sales and marketing expense, employee travel expense, and management consulting expense. We currently incur sales and marketing expenses to promote Mytesi. We do not currently have any marketing or promotional expenses related to Neonorm Calf or Neonorm Foal in the three and nine months ended September 30, 2019.

We expect sales and marketing expense to decrease going forward as we consolidate Mytesi sales territories for HIV promotion, focus on commercial partnerships for the development of follow-on indications of Mytesi and Crofelemer.  

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.

In the near term, we  expect general and administrative expense to remain the same as we consolidate sales territories and simultaneously focus on our pipeline development. This will include growing the business without adding headcount or increasing facilities.

Interest Expense

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

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Critical Accounting Policies and Significant Judgments and Estimates

The preparation of consolidated 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 consolidated 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 consolidated financial statements require significant judgments and estimates. For additional information relating to these and other accounting policies, see Note 2 to our audited consolidated financial statements and the related notes included in our Annual Report on Form 10‑K for the year ended December 31, 2018.

Revenue Recognition

The Company recognizes revenue in accordance with ASC Topic 606, Revenue from Contracts with Customers (“ASC 606”), which was adopted on January 1, 2018, using the modified retrospective method, which was elected to apply to all active contracts as of the adoption date. Application of the modified retrospective method did not impact amounts previously reported by the Company, nor did it require a cumulative effect adjustment upon adoption, as the Company's method of recognizing revenue under ASC 606 yielded similar results to the method utilized immediately prior to adoption. Accordingly, there was no effect to each financial statement line item as a result of applying the new revenue standard.

Practical Expedients, Elections, and Exemptions

We recognize revenue in accordance with the core principle of ASC 606 or when there is a transfer of control of promised goods or services to customers in an amount that reflects the consideration that we expect to be entitled to in exchange for those goods or services.

We used a practical expedient available under ASC 606‑10‑65‑1(f)4 that permits us to consider the aggregate effect of all contract modifications that occurred before the beginning of the earliest period presented when identifying satisfied and unsatisfied performance obligations, transaction price, and allocating the transaction price to the satisfied and unsatisfied performance obligations.

We also used a practical expedient available under ASC 606‑10‑32‑18 that permits us not to adjust the amount of consideration for the effects of a significant financing component if, at contract inception, the expected period between the transfer of promised goods or services and customer payment is one year or less.

We have elected to treat shipping and handling activities as fulfillment costs.

Additionally, we have elected to record revenue net of sales and other similar taxes.

Contracts

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

In addition to the terms and conditions of the Agreement, Cardinal Health’s purchase of products, and assumption of title therein, is set forth in the Title Model Addendum. The Title Model Addendum states that upon receipt of product at the 3PL Facility (Cardinal Health in La Vergne, Tennessee) from the Company,  title and risk of loss for the Mytesi product purchased by Cardinal Health (excluding consigned inventory) shall pass to Cardinal Health,

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and title and risk of loss for consigned inventory shall remain with Client until purchased by Cardinal Health in accordance with this Addendum. Napo Pharmaceuticals, Inc. considers Cardinal Health the Company’s exclusive customer for Mytesi products per the Cardinal Health Exclusive Distribution agreement.  

Our Neonorm and botanical extract products are primarily sold to distributors, who then sell the products to the end customers. Since 2014, we entered into several distribution agreements with established distributors such as Animart, Vedco, VPI, RJ Matthews, Henry Schein, and Stockmen Supply to distribute the Company's products in the United States, Japan, and China. The distribution agreements and the related purchase order together meet the contract existence criteria under ASC 606‑10‑25‑1. Jaguar sells directly to its customers without the use of an agent.

Performance obligations

For the products sold by each of Napo and Jaguar, the single performance obligation identified above is our promise to transfer our Mytesi product to Distributors based on specified payment and shipping terms in the arrangement. Product warranties are assurance type warranties that does not represent a performance obligation.

Transaction price

For both Jaguar and our Napo subsidiary, the transaction price is the amount of consideration to which we expect to collect in exchange for transferring promised goods or services to a customer. The transaction price of Mytesi and Neonorm is the Wholesaler Acquisition Cost (“WAC”), net of discounts, returns, and price adjustments.

Allocate transaction price

For both Jaguar and our Napo subsidiary, the entire transaction price is allocated to the single performance obligation contained in each contract.

Point in time recognition

For both Jaguar and our Napo subsidiary, a single performance obligation is satisfied at a point in time, upon the FOB terms of each contract when control, including title and all risks, has transferred to the customer.

Disaggregation of Product Revenue

Human

Sales of Mytesi are recognized as revenue when the products are delivered to the wholesaler. Revenues from the sale of Mytesi were $957,059 and $1,107,682 for the three months ended September 30, 2019 and 2018, respectively. Revenues from the sale of Mytesi were $4,184,912 and $2,545,121 for the nine months ended September 30, 2019 and 2018, respectively. The increase in sales of Mytesi is due to the more streamlined distribution and increased sales presence. Deductions from revenue are derived from reserves for estimated product returns based on historical returns experience. If actual returns differed from our historical experience, changes to the reserved could be required in future periods. Additional deductions are wholesaler fees which are based on our agreement with Cardinal Health, sales discounts, and Medicare rebates which are derived from data collected by Cardinal Health through various  sources.

Animal

The Company recognized Neonorm revenues of $15,720 and $24,385 for the three months ended September 30, 2019 and 2018, respectively. Revenues from the sale of Neonorm were $83,294 and $97,759 for the nine months ended September 30, 2019 and 2018, respectively. Revenues are recognized upon shipment which is when title and control is transferred to the buyer.  Sales of Neonorm Calf and Foal to distributors are made under agreements that may provide distributor price adjustments and rights of return under certain circumstances.

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Goodwill and Indefinite-lived Intangible Assets

Goodwill

Goodwill is tested for impairment on an annual basis and in-between annual tests if events or circumstances indicate that an impairment loss may have occurred. The test is based on a comparison of the reporting unit's book value to its estimated fair market value. We perform the annual impairment test during the fourth quarter of each fiscal year using the opening condensed consolidated balance sheet as of the first day of the fourth quarter, with any resulting impairment recorded in the fourth quarter of the fiscal year.If the carrying value of a reporting unit's net assets exceeds its fair value, the goodwill would be considered impaired and would be reduced to its fair value.

Indefinite-lived Intangible Assets

Acquired in-process research and development (IPR&D) are intangible assets initially recognized at fair value and classified as indefinite-lived assets until the successful completion or abandonment of the associated research and development efforts. During the development period, these assets will not be amortized as charges to earnings; instead these assets will be tested for impairment on an annual basis or more frequently if impairment indicators are identified. In connection with each annual impairment assessment and any interim impairment assessment in which indicators of impairment have been identified, we compare the fair value of the asset as of the date of the assessment with the carrying value of the asset on the condensed consolidated balance sheet. If impairment is indicated by this test, the intangible asset is written down by the amount by which the discounted cash flows expected from the intangible asset exceeds its carrying value. Fair value determinations require considerable judgement and are sensitive to changes in underlying assumptions, estimates regarding our future plans, as well as industry and economic conditions. These assumptions and estimates include projected revenues and income growth rates, terminal growth rates, competitive and consumer trends, market-based discount rates, and other factors. If current expectations of growth rates are not met or market factors outside of our control, such as discount rates, change significantly, this may lead to a further impairment in the future. Acquired in-process research and development (“IPR&D”) are intangible assets initially recognized at fair value and classified as indefinite-lived assets until the successful completion or abandonment of the associated research and development efforts. During the development period, these assets will not be amortized as charges to earnings; instead these assets will be tested for impairment on an annual basis or more frequently if impairment indicators are identified. We recorded an impairment of zero and $4,000,000 in the three and nine months ended September 30, 2019, respectively. There were no impairment charges recorded in the three and nine months ended September 30, 2018. The impairment loss is measured based on the excess of the carrying amount over the asset’s fair value. Definite-lived intangible assets are amortized on a straight-line basis over the estimated periods benefited and are reviewed when appropriate for possible impairment.

Accrued Research and Development Expenses

As part of the process of preparing our condensed consolidated 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. Clinical and contract manufacturing expense consists primarily of costs to conduct stability, safety and efficacy studies, and manufacturing startup at an outsourced API provider in Italy. It also includes expenses with a third-party provider for the transfer of the Mytesi manufacturing process, and the related feasibility and validation activities.

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.

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

45

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.

Results of Operations

Comparison of the Nine Months Ended September 30, 2019 and 2018

The following table summarizes the Company’s results of operations with respect to the items set forth in such table for the nine months ended September 30, 2019 and 2018 together with the change in such items in dollars and as a percentage.

	Nine Months Ended
	September 30,
	2019		2018		Variance		Variance %
Product revenue, net	$	4,268,206	$	2,642,880	$	1,625,326	61.5	%
Collaboration revenue		—		177,389		(177,389)	(100.0)	%
Total revenue		4,268,206		2,820,269		1,447,937	51.3	%
Operating Expenses
Cost of product revenue		3,072,800		1,808,918		1,263,882	69.9	%
Research and development		4,426,308		3,843,918		582,390	15.2	%
Sales and marketing		5,436,635		7,119,204		(1,682,569)	(23.6)	%
General and administrative		9,816,909		8,761,776		1,055,133	12.0	%
Settlement of Tempesta Royalty License Agreement		640,000		—		640,000	100	%
Impairment of indefinite-lived intangible assets		4,000,000		—		4,000,000	100	%
Total operating expenses		27,392,652		21,533,816		5,858,836	27.2	%
Loss from operations		(23,124,446)		(18,713,547)		(4,410,899)	23.6	%
Interest expense		(5,556,953)		(2,185,868)		(3,371,085)	154.2	%
Other income (expense), net		49,392		322,244		(272,852)	(84.7)	%
Change in fair value of warrant, derivative liability and conversion option liability		1,002,865		(119,134)		1,121,999	(941.8)	%
Gain on Valeant settlement		—		1,204,133		(1,204,133)	(100.0)	%
Loss on extinguishment of debt		(4,940,911)		—		(4,940,911)	(100.0)	%
Loss before income tax		(32,570,053)		(19,492,172)		(13,077,881)	67.1	%
Income tax expense		(10,000)		—		(10,000)	100	%
Net loss and comprehensive loss		(32,580,053)		(19,492,172)		(13,087,881)	67.1	%
Deemed dividend attributable to Series A preferred stock		—		(995,000)		995,000	100	%
Deemed dividend attributable to Series B preferred stock		(3,875,778)		—		(3,875,778)	100	%
Deemed dividend attributable to the Series 1 warrant modification		(252,106)		—		(252,106)	100	%
Net loss attributable to common stockholders	$	(36,707,937)	$	(20,487,172)	$	(16,220,765)	79.2	%

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Revenue

Sales and Allowances

Due to the Company’s arrangements, including elements of variable consideration, gross product sales are reduced in order to reflect the expected consideration to arrive at net product sales. Deductions to reduce gross product sales to net product sales in the nine months ended September 30, 2019 and 2018 were as follows:

	Nine Months Ended
	September 30,
	2019		2018		Variance		Variance %
Gross product sales
Mytesi	$	6,054,053	$	3,550,994	$	2,503,059	70.5	%
Neonorm		83,273		98,738		(15,465)	(15.7)	%
Total gross product sales		6,137,326		3,649,732		2,487,594	68.2	%
Medicare rebates		(368,038)		(80,192)		(287,846)	358.9	%
Sales discounts - Mytesi		(1,055,244)		(582,017)		(473,227)	81.3	%
Sales returns - Mytesi		(88,934)		(88,052)		(882)	1.0	%
Wholesaler fee - Mytesi		(356,904)		(256,591)		(100,313)	39.1	%
Net product sales	$	4,268,206	$	2,642,880	$	1,625,326	61.5	%

Product Revenue

Our gross product revenues were $6,137,326 and $3,649,732 for the nine months ended September 30, 2019 and 2018, respectively. These periods reflect revenue from the sale of our human drug Mytesi and our animal products branded as Neonorm Calf and Neonorm Foal.

Human

Sales of Mytesi are recognized as revenue when the products are delivered to the wholesalers. Our gross revenues from the sale of Mytesi were $6,054,053 and $3,550,994 in the nine months ended September 30, 2019 and 2018, respectively. The increase in sales of Mytesi is due to the more streamlined distribution and increased sales presence.

Sales discounts were $1,055,244 and $582,017 for the nine months ended September 30, 2019 and 2018, respectively, an increase of $473,227. Sales discounts include discounts for prompt payments from customers and an estimated allowance for chargebacks on sales. Of the total sales discounts, allowances for chargebacks were $935,694 and $386,631 for the nine months ended September 30, 2019 and 2018, respectively. These allowances for chargebacks were approximately 15%  and 11% on Mytesi gross product sales for the nine months ended September 30, 2019 and 2018, respectively. The increase in allowance is mostly due to the transition in distributors during 2019.

Animal

Our Neonorm product revenues were $83,273 and $98,738 for the nine months ended September 30, 2019 and 2018, respectively. Focus on sales and marketing for Neonorm products had decreased during 2019.

Collaboration Revenue 

Collaboration revenue was derived from our January 2017 licensing, development, co-promotion and commercialization agreement with Elanco US Inc. to license, develop and commercialize Canalevia. Elanco terminated the arrangement in January 2018 and all remaining deferred revenue was recognized at that time. We recognized collaboration revenues of $0 and $177,389 for the nine months ended September 30, 2019 and 2018, respectively.

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Cost of Product Revenue

Comparison of the Nine Months Ended September 30, 2019 and 2018  

	Nine Months Ended
	September 30,
	2019		2018		Variance		Variance %
Cost of Product Revenue
Material cost	$	1,624,970	$	847,264	$	777,706	91.8	%
Direct labor		435,305		407,525		27,780	6.8	%
Distribution fees		406,857		291,300		115,557	39.7	%
Royalties		(10,807)		81,342		(92,149)	(113.3)	%
Other		616,475		181,487		434,988	239.7	%
Total	$	3,072,800	$	1,808,918	$	1,263,882	69.9	%

Cost of product revenue increased $1,263,882 from $1,808,918 in the nine months ended September 30, 2018 to $3,072,800 for the same period in 2019. The increase in cost of product revenue year over year was due to increased sales of Mytesi, including non-recurring charges for a campaign batch cancellation fee of $161,000, fees of $227,000 from the Company’s former distributor, and the write-off of non-conforming inventory, offset by the reversal of $189,000 of accrued royalties related to the termination of a royalty agreement.

Research and Development

Comparison of the Nine Months Ended September 30, 2019 and 2018

The following table presents the components of research and development expense for the nine months ended September 30, 2019 and 2018 together with the change in such components in dollars and as a percentage:

	Nine Months Ended
	September 30,
	2019		2018		Variance		Variance %
Research and Development:
Personnel and related benefits	$	1,382,646	$	1,708,116	$	(325,470)	(19.1)	%
Materials expense and tree planting		95,297		153,595		(58,298)	(38.0)	%
Travel, other expenses		137,909		108,078		29,831	27.6	%
Clinical and contract manufacturing		1,105,459		829,312		276,147	33.3	%
Stock-based compensation		548,524		400,521		148,003	37.0	%
Other		1,156,473		644,296		512,177	79.5	%
Total	$	4,426,308	$	3,843,918	$	582,390	15.2	%

Research and development expense increased $582,390 from $3,843,918 in the nine months ended September 30, 2018 to $4,426,308 for the nine months ended September 30, 2019 due primarily to:

· Clinical and contract manufacturing expense increased $276,147 from $829,312 in the nine months ended September 30, 2018 to $1,105,459 in the same period in 2019 primarily due to an increase in contract manufacturing costs for enhanced manufacturing process improvements the Company is developing to reduce the cost of revenue.

· Personnel and related benefits decreased $325,470 from $1,708,116 in the nine months ended September 30, 2018 to $1,382,646 in the same period in 2019 due to changes in headcount and related salaries.

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· Other expenses, consisting primarily of consulting, formulation and regulatory fees, increased $512,177 from $644,296 in the nine months ended September 30, 2018 to $1,156,473 in the same period in 2019. Consulting expenses increased by $131,066 due to an increase in clinical trial consultants consistent with the temporary termination of clinical trials and an increase in R&D testing consultant work, net of an increase in Napo consulting expense. Direct R&D testing costs increased $314,000 due to an increase in R&D work. Formulation expenses were relatively constant in the comparative periods. Regulatory expenses decreased by $176,038 due to the Company receiving a waiver of fee payment from the FDA. Formulation expenses were relatively constant in the comparative periods.

Sales and Marketing

Comparison of the Nine Months Ended September 30, 2019 and 2018  

	Nine Months Ended
	September 30,
	2019		2018		Variance		Variance %
Sales and Marketing:
Personnel and related benefits	$	3,513,935	$	2,996,262	$	517,673	17.3	%
Stock-based compensation		87,215		59,762		27,453	45.9	%
Direct Marketing Fees		1,460,089		3,088,532		(1,628,443)	(52.7)	%
Other		375,396		974,648		(599,252)	(61.5)	%
Total	$	5,436,635	$	7,119,204	$	(1,682,569)	(23.6)	%

Sales and marketing expense decreased $1,682,569 from $7,119,204 in the nine months ended September 30, 2018 to $5,436,635 in the same period in 2019 due primarily to:

· Direct marketing and sales expense decreased $1,628,443 from $3,088,532 in the nine months ended September 30, 2018 to $1,460,089 for the same period in 2019 due to a decrease in marketing programs for Mytesi.

· Personnel and related benefits increased $517,673 from $2,996,262 in the nine months ended September 30, 2018 to $3,513,935 in the same period in 2019 due to severance expenses of $125,865 from the sales force reduction and increased sales incentive bonuses of $332,334 from increased sales.

· Other expenses decreased $599,252 from $974,648 in the nine months ended September 30, 2018 to $375,396 in the same period in 2019 largely due to reduction in advertising costs of $716,574.

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General and Administrative

Comparison of the Nine Months Ended September 30, 2019 and 2018  

	Nine Months Ended
	September 30,
	2019		2018		Variance		Variance %
General and Administrative:
Personnel and related benefits	$	1,371,634	$	1,321,627	$	50,007	3.8	%
Accounting fees		542,395		423,468		118,927	28.1	%
Third-party consulting fees		1,717,665		1,246,792		470,873	37.8	%
Legal fees		1,295,480		1,692,451		(396,971)	(23.5)	%
Travel		174,965		212,707		(37,742)	(17.7)	%
Stock-based compensation		1,347,246		956,508		390,738	40.9	%
Rent and lease expense		554,017		324,693		229,324	70.6	%
Public company expenses		649,965		508,934		141,031	27.7	%
Other		2,163,542		2,074,596		88,946	4.3	%
Total	$	9,816,909	$	8,761,776	$	1,055,133	12.0	%

General and administrative expenses increased $1,055,133 from $8,761,776 in the nine months ended September 30, 2018 to $9,816,909 for the same period in 2019 primarily due to increases in accounting fees, third-party consulting, stock-based compensation, rent and lease expenses, and public company expenses:

· Accounting fees increased $118,927 from  $423,468 in the nine months ended September 30, 2018 to $542,395 in the same period in 2019, mostly due to change in the timing fees billings.  

· Consulting fees increased $470,873 from $1,246,792 in the nine months ended September 30, 2018 to $1,717,665 in the same period in 2019. This was to supplement the technical accounting and Finance Planning and Analysis needs of the current staff. Human Resource and Information Technology consulting services have also been in place in lieu of regular fulltime employees.

· Legal fees decreased $396,971 from $1,692,451 in the nine months ended September 30, 2018 to $1,295,480 in the same period in 2019 mostly due to a decrease in patent legal fees.

· Stock-based compensation expense increased $390,738 from $956,508 in the nine months ended September 30, 2018 to $1,347,246 in the same period in 2019 due to an increase in the volume of option grants to new and existing employees.

· Rent and lease expense increased $229,324 from $324,693 in the nine months ended September 30, 2018 to $554,017 in the same period in 2019 primarily due to contractual increases in rent on the Company’s office facilities and the additional increase in rent expense beginning in March 2019 due to the cost of the LOC warrant.

· Public company expenses increased $141,031 from $508,934 in the nine months ended September 30, 2018 to $649,965 in the same period in 2019 primarily due to increased D&O liability insurance.  

· Other general and administrative expenses increased $88,946 from $2,074,596 in nine months ended September 30, 2018 to $2,163,542 in the same period in 2019 largely due to personnel recruiting fees.

In the near term, we  expect general and administrative expense to remain the same as we focus on other areas of operations. This will include growing the business without adding headcount or increasing facilities.

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Impairment of Indefinite-lived Intangible Assets

Acquired in-process research and development (“IPR&D”) are intangible assets initially recognized at fair value and classified as indefinite-lived assets until the successful completion or abandonment of the associated research and development efforts. During the development period, these assets will not be amortized as charges to earnings; instead these assets will be tested for impairment on an annual basis or more frequently if impairment indicators are identified. We recorded an impairment of $4,000,000 in the nine months ended September 30, 2019. There were no impairment charges recorded in the nine months ended September 30, 2018. The impairment loss is measured based on the excess of the carrying amount over the asset’s fair value.

Comparison of the Three Months Ended September 30, 2019 and 2018

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 September 30, 2019 and 2018 together with the change in such items in dollars and as a percentage:

	Three Months Ended
	September 30,
	2019		2018		Variance		Variance %
Product revenue	$	972,779	$	1,132,067	$	(159,288)	(14.1)	%
Collaboration revenue		—		—		—	—	%
Total revenue		972,779		1,132,067		(159,288)	(14.1)	%
Operating Expenses
Cost of product revenue		947,495		736,733		210,762	28.6	%
Research and development		1,307,296		1,481,166		(173,870)	(11.7)	%
Sales and marketing		1,698,440		2,716,752		(1,018,312)	(37.5)	%
General and administrative		3,106,633		2,703,628		403,005	14.9	%
Settlement of Tempesta Royalty License Agreement		640,000		—		640,000	100.0
Total operating expenses		7,699,864		7,638,279		61,585	0.8	%
Loss from operations		(6,727,085)		(6,506,212)		(220,873)	3.4	%
Interest expense, net		(1,352,845)		(872,044)		(480,801)	55.1	%
Other income (expense), net		28,784		9,540		19,244	201.7
Change in fair value of warrants, derivative liability and conversion option liability		841,834		26,231		815,603	3,109.3	%
Gain on Valeant settlement		—		1,204,133		(1,204,133)	(100.0)	%
Loss on extinguishment of debt		(335,753)		—		(335,753)	(100.0)
Loss before income tax		(7,545,065)		(6,138,352)		(1,406,713)	22.9	%
Income tax expense		(10,000)		—		(10,000)	100	%
Net loss and comprehensive loss		(7,555,065)		(6,138,352)		(1,416,713)	23.1	%
Deemed dividend attributable to Series B preferred stock		(3,875,778)		—		(3,875,778)	100	%
Deemed dividend attributable to the Series 1 warrant modification		(252,106)		—		(252,106)	100	%
Net loss attributable to common shareholders	$	(11,682,949)	$	(6,138,352)		(5,544,597)	90.3	%

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Revenue

Sales and Allowances

Due to the Company’s arrangements, including elements of variable consideration, gross product sales are reduced in order to reflect the expected consideration to arrive at net product sales. Deductions to reduce gross product sales to net product sales in the three months ended September 30, 2019 and 2018 were as follows:

	Three Months Ended
	September 30,
	2019		2018		Variance		Variance %
Gross product sales
Mytesi	$	1,897,417	$	1,592,801	$	304,616	19.1	%
Neonorm		15,699		24,630		(8,931)	(36.3)	%
Total gross product sales		1,913,116		1,617,431		295,685	18.3	%
Adjustment for product donations		(336,934)		—		(336,934)	100.0	%
Medicare rebates		(98,912)		(80,192)		(18,720)	23.3	%
Sales discounts - Mytesi		(318,394)		(262,927)		(55,467)	21.1	%
Sales returns - Mytesi		(30,999)		(42,403)		11,404	(26.9)	%
Wholesaler fee - Mytesi		(155,098)		(99,842)		(55,256)	55.3	%
Net product sales	$	972,779	$	1,132,067	$	(159,288)	(14.1)	%

Product Revenue

Our gross product revenues were $1,913,116 and $1,617,431 for the three months ended September 30, 2019 and 2018, respectively. These periods reflect revenue from the sale of our human drug Mytesi and our animal products branded as Neonorm Calf and Neonorm Foal.

Human

Gross sales of Mytesi are recognized as revenue when the products are delivered to the wholesalers. Our gross revenues from the sale of Mytesi were $1,897,417 and $1,592,801 in the three months ended September 30, 2019 and 2018, respectively. The increase in sales of Mytesi is due to the more streamlined distribution and increased sales presence. 

Out of period adjustment - During the period ended September 30, 2019, the Company identified a prior period product donation incorrectly recorded as revenue.   The adjustment, totaling $336,934 related to revenue and accounts receivable, was corrected within the current quarter. The impact of the adjustment was a reduction to net income of $336,934. This adjustment does not affect Mytesi revenue associated with sales in the three months ended September 30, 2019.  Management has determined that this out of period correcting adjustment is not material to the prior period consolidated financial statements and has therefore recorded it in the three months ended September 30, 2019.

Sales discounts were $318,394 and $262,927 for the three months ended September 30, 2019 and 2018, respectively, an increase of $55,467. Sales discounts include discounts for prompt payments from customers and an estimated allowance for chargebacks on sales. Of the total amount of sales discounts, allowances for chargebacks were $323,867 and $176,010 for the three months ended September 30, 2019 and 2018, respectively. These allowances for chargebacks were approximately 21%  and 11% of Mytesi gross product sales for the three months ended September 30, 2019 and 2018, respectively. The increase in allowance is mostly due to the transition in distributors during 2019.

Animal

We recognized Neonorm gross revenues of $15,699 and $24,630 for the three months ended September 30, 2019 and 2018, respectively. Focus on sales and marketing for Neonorm products had decreased during 2019.

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Cost of Product Revenue

Comparison of the Three Months Ended September 30, 2019 and 2018

	Three Months Ended
	September 30,
	2019		2018		Variance		Variance %
Cost of Product Revenue
Material cost	$	575,752	$	371,108	$	204,644	55.1	%
Direct labor		138,851		141,822		(2,971)	(2.1)	%
Distribution fees		251,507		128,182		123,325	96.2	%
Royalties		(114,564)		38,119		(152,683)	(400.5)	%
Other		95,949		57,502		38,447	66.9	%
Total	$	947,495	$	736,733	$	210,762	28.6	%

Cost of product revenue increased $210,762 from $736,733 in the three months ended September 30, 2018 to $947,495 for the same period in 2019. The increase in cost of product revenue quarter over quarter was due to increased sales of Mytesi, including a campaign batch cancellation fee of $161,000, fees of $227,000 from the Company’s former distributor, and offset by the reversal of $189,000 of accrued royalties related to the termination of a royalty agreement.

Research and Development

Comparison of the Three Months Ended September 30, 2019 and 2018  

	Three Months Ended
	September 30,
	2019		2018		Variance		Variance %
Research and Development:
Personnel and related benefits	$	411,542	$	562,643	$	(151,101)	(26.9)	%
Materials expense and tree planting		29,782		47,271		(17,489)	(37.0)	%
Travel, other expenses		48,397		60,982		(12,585)	(20.6)	%
Clinical and contract manufacturing		273,188		209,886		63,302	30.2	%
Stock-based compensation		332,636		175,772		156,864	89.2	%
Other		211,751		424,612		(212,861)	(50.1)	%
Total	$	1,307,296	$	1,481,166	$	(173,870)	(11.7)	%

Research and development expense decreased $173,870 from $1,481,166 in the three months ended September 30, 2019 to $1,307,296 for the same period in 2019 largely due to:

· Clinical and contract manufacturing expense increased $63,302 from $209,886 in the three months ended September 30, 2018 to $273,188 in the same period in 2019 primarily due to an increase in contract manufacturing costs for enhanced manufacturing process improvements the Company is developing to reduce the cost of revenue.

· Personnel and related benefits decreased $151,101 from $562,643 in the three months ended September 30, 2018 to $411,542 in the same period in 2019 due to changes in headcount and related salaries.

· Stock-based compensation increased $156,864 from $175,772 in the three months ended September 30, 2018 to $332,636 in the same period in 2019 due to an increase in the volume of option grants to new and existing employees.

· Other expenses, consisting primarily of consulting, formulation and regulatory fees, decreased $212,861 from $424,612 in the three months ended September 30, 2018 to $211,751 in the same period in 2019. Consulting expenses increased by $28,715 due to an increase in clinical trial consultants consistent with the

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temporary termination of clinical trials and an increase in R&D testing consultant work, net of an increase in Napo consulting expense. Direct R&D testing costs decreased $328,930. Formulation expenses were relatively constant in the comparative periods. Regulatory expenses decreased by $13,960 due to the Company receiving a waiver of fee payment from the FDA. Formulation expenses were relatively constant in the comparative periods.

Sales and Marketing

Comparison of the Three Months Ended September 30, 2019 and 2018  

	Three Months Ended
	September 30,
	2019		2018		Variance		Variance %
Sales and Marketing:
Personnel and related benefits	$	1,002,044	$	1,312,164	$	(310,120)	(23.6)	%
Stock-based compensation		41,122		39,210		1,912	4.9	%
Direct marketing fees and expense		466,908		887,481		(420,573)	(47.4)	%
Other		188,366		477,897		(289,531)	(60.6)	%
Total	$	1,698,440	$	2,716,752	$	(1,018,312)	(37.5)	%

Sales and marketing expense decreased $1,018,312 from $2,716,752 in the three months ended September 30, 2018 to $1,698,440 in the same period in 2019 largely due to a decrease in marketing programs and advertising costs for Mytesi.

· Direct marketing and sales expense decreased $420,573 from $887,481 in the three months ended September 30, 2018 to $466,908 for the same period in 2019 due to a decrease in marketing programs for Mytesi.

· Personnel and related benefits decreased $310,120 from $1,312,164 in the three months ended September 30, 2018 to $1,002,044 in the same period in 2019 due to the reduction of our sales headcount in support of Mytesi. 

· Other expenses decreased $289,531 from $477,897 in the three months ended September 30, 2018 to $188,366 in the same period in 2019 largely due to a decrease of $216,495 in marketing consulting.

General and Administrative

Comparison of the Three Months Ended September 30, 2019 and 2018  

	Three Months Ended
	September 30,
	2019		2018		Variance		Variance %
General and Administrative:
Personnel and related benefits	$	473,645	$	442,870	$	30,775	6.9	%
Accounting fees		181,012		68,082		112,930	165.9	%
Third-party consulting fees		413,988		409,678		4,310	1.1	%
Legal fees		181,295		306,259		(124,964)	(40.8)	%
Travel		75,484		59,575		15,909	26.7	%
Stock-based compensation		736,351		465,112		271,239	58.3	%
Rent and lease expense		152,741		125,936		26,805	21.3	%
Public company expenses		248,185		122,503		125,682	102.6	%
Other		643,932		703,613		(59,681)	(8.5)	%
Total	$	3,106,633	$	2,703,628	$	403,005	14.9	%

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General and administrative expenses increased $403,005 from $2,703,628 in the three months ended September 30, 2018 to $3,106,633 for the same period in 2019,

· Accounting fees increased $112,930 from $68,082 in the three months ended September 30, 2018 to $181,012 in the same period in 2019 mostly due to the change in the timing of fees billings. 

· Legal fees decreased $124,964 from $306,259 in the three months ended September 30, 2018 to $181,295 in the same period in 2019 mostly due to a decrease in patent legal fees.

· Stock-based compensation expense increased $271,239 from $465,112 in the three months ended September 30, 2018 to $736,351 in the same period in 2019 due to an increase in the volume of option grants to new and existing employees.

· Public company expenses increased $125,682 from $122,503 in the three months ended September 30, 2018 to $248,185 in the same period in 2019 mostly due to $157,445 increase in D&O liability insurance.

· Other general and administrative expenses decreased $59,681 from $703,613 in three months ended September 30, 2018 to $643,932 in the same period in 2019 largely due to personnel recruiting fees.

In the near term, we expect general and administrative expense to remain the same as we consolidate sales territories and simultaneously focus on our pipeline development. This will include growing the business without adding headcount or increasing facilities.

Settlement of Tempesta Royalty License Agreement

Comparison of the Three Months Ended September 30, 2019 and 2018  

	Three Months Ended
	September 30,
	2019		2018		Variance		Variance %
Settlement of Tempesta Royalty License Agreement		640,000		—		640,000	100	%
Total	$	640,000	$	—	$	640,000	100	%

A royalty license agreement settlement liability increased $640,000 from zero in the three months ended September 30, 2018 to $640,000 in the same period in 2019. In October 2019, the Company and Tempesta settled the dispute, pursuant to which Tempesta received $50,000 in cash, an unsecured promissory note issued by the Company in the aggregate principal amount of $550,000 and 40,000 shares of the Company’s common stock in exchange for the cessation of all royalty payments by Napo to Dr. Tempesta under the License Agreements (see Note 14).

Deemed Dividends

Comparison of the Three Months Ended September 30, 2019 and 2018  

	Three Months Ended
	September 30,
	2019		2018		Variance		Variance %
Deemed dividend attributable to Series B preferred stock	$	(3,875,778)	$	—	$	(3,875,778)	100	%
Deemed dividend attributable to the Series 1 warrant modification		(252,106)		—		(252,106)	100	%
Total	$	(4,127,884)	$	—	$	(4,127,884)	100	%

Deemed dividends increased  $4,127,884 from zero in the three months ended September 30, 2018 to $4,127,884 in the same period in 2019 due to the deemed dividend charge of $3,875,778 for the accretion of the discount

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on the Series B Preferred Stock issued on July 23, 2019, and the deemed dividend charge of $252,106 that resulted from the modification of the Series 1 Warrants in September 2019.

Liquidity and Capital Resources

Sources of Liquidity

We have incurred net losses since our inception. For the three months ended September 30, 2019 and 2018, we had net losses of $7.6 million and $6.1 million, respectively, and for the nine months ended September 30, 2019 and 2018, we had net losses of $32.6 million and $19.5 million, respectively. We expect to incur additional losses in the near-term future. At September 30, 2019 we had an accumulated deficit of $127.1 million. To date, we have generated only limited revenue, and we may never achieve revenue sufficient to offset our expenses.

We had cash of $2.1 million as of September 30, 2019.  We do not believe our current capital is sufficient to fund our operating plan through one year from the issuance of these unaudited condensed consolidated financial statements.  Our independent registered public accounting firm has included an explanatory paragraph in its audit report included in our Annual Report on Form 10‑K for the year ended December 31, 2018 regarding our assessment of substantial doubt about our ability to continue as a going concern. Our condensed consolidated financial statements do not include any adjustments that may result from the outcome of this uncertainty.

We have funded our operations primarily through the issuance of equity and debt financing, in addition to sales of our commercial products. Our funding activities in the nine months ended September 30, 2019 were as follows:

· Between January and April 2019, we issued 76,190 and 4,843 shares of our common stock via equity lines of credit with Oasis Capital. A further 114,286 shares of common stock were issued to Oasis Capital via an option to increase this equity line of credit.  In all, 195,319 common shares were issued for total proceeds were $2.6 million.

· Between January and June 2019, we entered into exchange agreements with Chicago Venture Partners L.P., pursuant to which we issued to CVP 395,970 shares of common stock, with a fair value of $8.2 million, in exchange for a reduction of approximately $5.8 million in the principal amount of the CVP Promissory Notes and $2.4 million in accrued interest thereon.  

· Between March and June 2019, we entered into securities purchase agreement with selected investors, pursuant to which we issued $5.1 million in short-term promissory notes (the Bridge Notes). We settled these short-term promissory notes and interest accrued thereon in July 2019.

· In March 2019, we entered into a securities purchase agreement with Oasis Capital, whereby we issued in a registered direct public offering 19,019 shares to Oasis Capital for gross proceeds of approximately $0.3 million.

· In March 2019, we issued 19,752 shares of our common stock in lieu of a cash payment of $0.4 million in interest expense on the Napo convertible notes payable.

· Between May and July 2019, we entered into exchange agreements with Chicago Venture Partners L.P., pursuant to which we issued to CVP 1,119,440 shares of common stock with a fair value of $6.7 million, in exchange for a reduction of approximately $6.2 million in the principal amount of CVP Exchange Note 1 and $0.1 million in accrued interest thereon.  

· In July 2019, we entered into an underwriting agreement, relating to a public offering, in which we sold 2,886,500 shares of common stock, 10,787 shares of Series B convertible preferred stock, Series 1 warrants to purchase 8,280,000 shares of common stock and Series 2 warrants to purchase 8,280,000

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shares of common stock. We received total gross proceeds from the offering was $16.6 million, or $14.0 million net of issuance and other costs of $2.6 million.

We expect our expenditures will continue to increase as we continue our efforts to develop our products and continue development of our pipeline in the near term. We do not believe our current capital is sufficient to fund our operating plan through one year from the issuance of these unaudited condensed consolidated financial statements. We will need to seek additional funds 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. We plan to finance our operations and capital funding needs through equity and/or debt financing as well as revenue from future product sales. However, there can be no assurance that additional funding will be available to us on acceptable terms on a timely basis, if at all, or that we will generate sufficient cash from operations to adequately fund operating needs or ultimately achieve profitability. If we are unable to obtain an adequate level of financing needed for the long-term development and commercialization of our products, we will need to curtail planned activities and reduce costs. Doing so will likely have an adverse effect on our ability to execute on our business plan. These matters raise substantial doubt about the ability of the Company to continue in existence as a going concern within one year after issuance date of the condensed consolidated financial statements.

Cash Flows for the Nine Months Ended September 30, 2019 Compared to the Nine Months Ended September 30, 2018

The following table shows a summary of cash flows for the nine months ended September 30, 2019 and 2018:

	September 30,
	2019		2018
Total cash used in operating activities	$	(17,317,513)	$	(17,828,754)
Total cash used in investing activities		—		(6,527)
Total cash provided by financing activities		16,818,856		17,801,543
Net increase (decrease) in cash	$	(498,657)	$	(33,738)

Cash Used in Operating Activities

During the nine months ended September 30, 2019,  net cash used in operating activities of $17,317,513 resulted from our net loss of $32,580,053 adjusted for an impairment charge of $4,000,000 associated with our indefinite-lived intangible assets, reduction in the fair value of warrants, conversion option and derivative liability of $1,002,865, amortization of debt discounts and debt issuance costs of $5,032,214, stock-based compensation of $1,982,985, depreciation and amortization expenses of $1,304,946,  amortization of operating lease right-of-use assets of $554,017, loss on the extinguishment of debt of $4,940,911 and of changes in operating assets and liabilities of $1,549,668. 

During the nine months ended September 30, 2018, cash used in operating activities of $17,828,754 resulted from our net loss of $19,492,172, adjusted by non-cash accretion of end of term payment, debt discounts and debt issuance costs of $1,461,133, stock-based compensation of $1,416,791, reduction in the fair value of warrants, conversion option and derivative liability of $178,461, common stock issued in exchange for services rendered of $6,425, depreciation and amortization expenses of $989,116, interest paid on the conversion of debt to equity of $21,275, net of changes in operating assets and liabilities of $2,052,861.

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Cash Used in Investing Activities

During the nine months ended September 30, 2019 no cash was used in investing activities. During the nine months ended September 30, 2018, cash used in investing activities was $6,527 and consisted of cash used to purchase property and equipment.

Cash Provided by Financing Activities

During the nine months ended September 30, 2019,  net cash provided by financing activities of $16,818,856 consisted of $2,602,896 in net proceeds received from 195,319 shares of common stock issued to Oasis Capital via an option to increase the equity line of credit, $266,266 in net proceeds received from 19,019 shares issued in a registered direct public offering to Oasis Capital, $14,049,694 in net proceeds received from the July 2019 public offering, offset by $100,000 in repayments of notes payable.

During the nine months ended September 30, 2018, cash provided by financing activities of $17,801,543 primarily consisted of  $1,305,774 and $750,100 received in separate PIPE (“Private Investment in Public Entity”) financings, $14,000,002 million in net proceeds from the Sagard financing, including $5,624,867 in net proceeds received from the issuance of common stock and $9,000,002 in net proceeds received from the issuance of convertible preferred stock, $2,310,000 received in the issuance of non-convertible debt, and $500,000 received in the issuance of convertible debt, offset by $1,689,200 in principal payments of our long-term debt.

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.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Not applicable.

Item 4. Controls and Procedures

Disclosure Controls and Procedures

Our management, Chief Executive Officer and Principal Financial and Accounting Officer, evaluated the effectiveness of our disclosure controls and procedures as of September 30, 2019. The term "disclosure controls and procedures," as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms.

Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and Principal Financial and Accounting Officer, as appropriate, to allow timely decisions regarding required disclosure. Based on this evaluation, our Chief Executive Officer and Principal Financial and Accounting Officer concluded that our disclosure controls and procedures were not effective at the reasonable assurance level as of September 30, 2019. This conclusion was based on the material weakness in our internal control over financial reporting further described below.

Material Weakness

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim consolidated

58

financial statements will not be prevented or detected and corrected on a timely basis. In connection with our preparation of our annual financial statements for the year ended December 31, 2018, we identified a material weakness in our internal control over financial reporting related to staff turnover in our accounting department. We did not maintain a sufficient complement of internal personnel with appropriate knowledge, experience and/or training commensurate with our financial reporting requirements. We relied on outside consulting technical experts and did not maintain adequate internal qualified personnel to properly supervise and review the information provided by the outside consulting technical experts to ensure certain significant complex transactions and technical matters were properly accounted for, specifically with respect to accurately reflecting all potential accrued services on the balance sheet at December 31, 2018.  In addition, we identified inadequate internal technical staffing levels and expertise to properly supervise and review the information of the outside consulting technical experts to properly apply ASC 815-40 for liability classification of certain warrants and ASC 470-50 and ASC 470-60 to properly reflect the accounting impact to multiple modifications of the Company’s debt instruments. We have concluded that we must implement new or improved controls in our financial statement close process and policies in reviewing information received from our outside consulting technical experts.

Remediation Efforts to Address Material Weakness

We have prepared a preliminary remediation plan to address the underlying causes of the material weakness described above. The preliminary remediation plan includes:

· Reassessing the design and operation of internal controls over financial reporting, including interim and annual accruals cutoff procedures and review procedures related to information received from our outside consulting technical experts;

· We hired two senior level permanent accounting personnel and trained to further educate the existing staff on the accounting of significant complex transactions and technical accounting matters;

· Continue to reassess the staffing level and implement process improvements to ensure that our remediation plan is successful.

We cannot assure you that the measures we may take in response to this material weakness will be sufficient to remediate such material weakness or to avoid potential future material weaknesses.

Internal Control over Financial Reporting

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 Principal Financial and Accounting Officer have concluded that, as of such date, our disclosure controls and procedures were not effective due to the existence of a material weakness in the design of our internal controls over financial reporting relating to staff turnover in our accounting department.

A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our annual or interim consolidated financial statements will not be prevented or detected in a timely basis. We plan to enhance existing controls and design and implement new controls applicable to staff, to ensure that our staff is accurately trained to properly understand and review financial transactions. We plan to devote significant time and attention to remediate the above material weakness as soon as reasonably possible. As we continue to evaluate our controls, we will make the necessary changes to improve the overall design and operation of our controls. We believe these actions will be sufficient to remediate the identified material weakness and strengthen our internal control over financial reporting; however, there can be no guarantee that such remediation will be sufficient. We will continue to monitor the effectiveness of our controls and will make any further changes management determines appropriate.

Changes in Internal Control over Financial Reporting

There was no change in our internal control over financial reporting 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.

On July 20, 2017, a putative class action complaint was filed in the United States District Court, Northern District of California, Civil Action No. 3:17‑cv‑04102, by Tony Plant (the “Plaintiff”) on behalf of shareholders of the Company who held shares on April 12, 2017 and were entitled to vote at the 2017 Special Shareholders Meeting, against the Company and certain individuals who were directors as of the date of the vote (collectively, the “Defendants”), in a matter captioned Tony Plant v. Jaguar Animal Health, Inc., et al., making claims arising under Section 14(a) and Section 20(a) of the Exchange Act and Rule 14a‑9, 17 C.F.R. § 240.14a‑9, promulgated thereunder by the SEC. The claims alleged false and misleading information provided to investors in the Joint Proxy Statement/Prospectus on Form S‑4 (File No. 333‑217364) declared effective by the Commission on July 6, 2017 related to the solicitation of votes from shareholders to approve the merger and certain transactions related thereto. The Company accepted service of the complaint and summons on behalf of itself and the United States-based director Defendants on November 1, 2017. The Company has not accepted service on behalf of, and Plaintiff has not yet served, the non-U.S.-based director Defendants.

On October 3, 2017, Plaintiff filed a motion seeking appointment as lead plaintiff and appointment of Monteverde & Associates PC as lead counsel. That motion was granted. Plaintiff filed an amended complaint against the Company and the United States-based director Defendants on January 10, 2018.  The Defendants filed a motion to dismiss on March 12, 2018, for which oral arguments were held on June 14, 2018.  The court dismissed the amended complaint on September 20, 2018 but gave Plaintiff leave to amend the complaint within 20 days from the date of dismissal.  On October 10, 2018, Plaintiff amended the complaint to focus on the Company’s commercial strategy in support of Equilevia and the related disclosure statements in the Form S-4 described above.  On November 6, 2018, the Defendants moved to dismiss the second amended complaint. The Defendants argued in their motion that the second amended complaint fails to state a claim upon which relief can be granted because the omissions and misrepresentations alleged in the complaint are immaterial as a matter of law. The court denied the Defendants’ motion to dismiss on June 28, 2019. The Defendants answered the second amended complaint on August 2, 2019. Discovery will now proceed. If the Plaintiff were able to prove his allegations in this matter and to establish the damages he asserts, then an adverse ruling could have a material impact on the Company.

The Company believes that it is not probable that an asset has been impaired or a liability has been incurred as of the date of the financial statements and the amount of any potential loss is not reasonably estimable.

Other than as described above, there are currently no claims or actions pending against us, the ultimate disposition of which could have a material adverse effect on our results of operations, financial condition or cash flows.

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

Other than equity securities issued in transactions disclosed on our Current Report on Form 8-K/A filed with the SEC on July 12, 2019, there were no unregistered sales of equity securities during the period.

Item 5.  Other Information

Departure of Directors or Certain Officers

On August 9, 2019, Karen Wright resigned her position as Chief Financial Officer and Treasurer of the Company. On August 13, 2019, the board of directors of the Company appointed Carol R. Lizak to serve as the Company’s principal financial and accounting officer.

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Item 6. Exhibits

Exhibit No.	Description
3.1	Third Amended and Restated Certificate of Incorporation of Jaguar Health, Inc. (f/k/a Jaguar Animal Health, Inc.) (incorporated by reference to Exhibit 3.1 to the Current Report on Form 8‑K (No. 001‑36714) filed on August 1, 2017).
3.2	Certificate of Second Amendment of the Third Amended and Restated Certificate of Incorporation (incorporated by reference to Exhibit 3.1 to the Form 8‑K of Jaguar Health, Inc. filed June 1, 2018, File No. 001‑36714).
3.3	Certificate of Third Amendment of the Third Amended and Restated Certificate of Incorporation (incorporated by reference to Exhibit 3.2 to the Form 8‑K of Jaguar Health, Inc. filed June 1, 2018, File No. 001‑36714).
3.4	Certificate of Designation of Series B Preferred Stock (incorporated by reference to Exhibit 3.1 to the Form 8-K of Jaguar Health, Inc. filed July 23, 2019, File No. 001-36714).
4.1	Specimen Common Stock Certificate of Jaguar Health, Inc. (incorporated by reference to Exhibit 4.1 to the Form 8‑K of Jaguar Health, Inc. filed June 1, 2018, File No. 001‑36714).
4.2	Secured Promissory Note, dated May 28, 2019, by and among Jaguar Health, Inc., Napo Pharmaceuticals, Inc. and Chicago Venture Partners, L.P. (incorporated by reference to Exhibit 4.1 to the Form 8‑K of Jaguar Health, Inc. filed June 3, 2019, File No. 001‑36714).
4.3	Secured Promissory Note, dated May 28, 2019, by and among Jaguar Health, Inc., Napo Pharmaceuticals, Inc. and Chicago Venture Partners, L.P. (incorporated by reference to Exhibit 4.2 to the Form 8‑K of Jaguar Health, Inc. filed June 3, 2019, File No. 001‑36714).
4.4	Form of Series 1 Warrant (incorporated by reference to Exhibit 4.1 to the Form 8‑K of Jaguar Health, Inc. filed July 23, 2019, File No. 001‑36714).
4.5	Form of Series 2 Warrant (incorporated by reference to Exhibit 4.2 to the Form 8‑K/A of Jaguar Health, Inc. filed July 23, 2019, File No. 001‑36714).
10.1#	Promotion Letter, dated September 6, 2019 (incorporated by reference to Exhibit 10.1 to the Form 8-K of Jaguar Health, Inc. filed September 9, 2019, File No. 001-36714).
10.2	First Amendment to Landlord Letter of Credit & Warrant Issuance Agreement, dated September 16, 2019, by and between Jaguar Health, Inc. and Pacific Capital Management, LLC (incorporated by reference to Exhibit 10.1 to the Form 8-K of Jaguar Health, Inc. filed September 20, 2019, File No. 001-36714).
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

*     Filed herewith.

**   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.

#Management contract or compensatory plan or arrangement.

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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: November 14, 2019
	JAGUAR HEALTH, INC.
	By:	/s/ Carol R. Lizak
		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 Health, Inc. for the quarter ended September 30, 2019;

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)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) 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) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

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: November 14, 2019
	/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, Carol Lizak, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Jaguar Health, Inc. for the quarter ended September 30, 2019;

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)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) 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) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

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: November 14, 2019
	/s/ Carol Lizak
	Carol Lizak
	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 Health, Inc.  (the “Company”) on Form 10-Q for the quarter ended September 30, 2019, 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: November 14, 2019
	/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 Health, Inc. (the “Company”) on Form 10-Q for the quarter ended September 30, 2019, 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: November 14, 2019
	/s/ Carol Lizak
	Carol Lizak
	Principal Financial and Accounting Officer

XML

Fair Value Measurements (Tables)

9 Months Ended

Sep. 30, 2019

Fair Value Measurements

Summary of information about the derivative, conversion option and warrant liabilities that were measured at fair value on a recurring basis

		September 30, 2019
	(unaudited)
		Level 1		Level 2		Level 3		Total
Warrant liability		$	—	$	—	$	10,029	$	10,029
Total fair value		$	—	$	—	$	10,029	$	10,029

	December 31, 2018
	Level 1		Level 2		Level 3		Total
Warrant liability	$	—	$	—	$	220,376	$	220,376
Total fair value	$	—	$	—	$	220,376	$	220,376

Summary of change in the estimated fair value of level 3 liabilities

	Nine Months Ended
	September 30, 2019
	Warrant
	Liability
	(unaudited)
Beginning fair value of Level 3 liability	$	220,376
Additions		5,122,039
Reclassification to equity		(4,329,521)
Change in fair value		(1,002,865)
Ending fair value of Level 3 liability	$	10,029

XML

Stockholders' Equity (Tables)

9 Months Ended

Sep. 30, 2019

Stockholders' Equity

Schedule of common reserved shares of common stock for issuance

	September 30,	December 31,
	2019	2018
	(unaudited)
Options issued and outstanding	3,821,690	42,979
Inducement options issued and outstanding	—	2,985
Options available for grant under stock option plans	554,016	2,327
RSU awards issued and outstanding	5,613	5,613
Warrants issued and outstanding	19,421,892	34,682
Convertible notes	—	10,849
Convertible preferred stock-Series A	473,565	47,357
Convertible preferred stock-Series B	985,500	—
Total	25,262,276	146,792

XML

Related Party Transactions - Management Services Agreement (Details) - USD ($)	1 Months Ended	3 Months Ended
	Mar. 31, 2018	Sep. 30, 2019
Related Party Transaction [Line Items]
Consulting and management advisory services fees	$ 450,000
Maximum aggregate payments for consulting and management advisory services received	$ 1,350,000
Sagard Capital Partners, L.P.
Related Party Transaction [Line Items]
Payment of fees		$ 250,000
Payable amount		$ 425,000

XML

Fair Value Measurements - Estimated Fair Value of Warrant Liability (Details)		1 Months Ended	2 Months Ended	3 Months Ended		4 Months Ended	9 Months Ended
	Mar. 31, 2019 USD ($) item	Jun. 26, 2019 USD ($) item	May 31, 2019 item	Sep. 30, 2019 USD ($) Y item $ / shares	Jun. 26, 2019 USD ($) item	Jun. 30, 2019 USD ($) item	Sep. 30, 2019 USD ($) Y item $ / shares	Jul. 31, 2019 USD ($)	Jul. 23, 2019 USD ($) $ / shares	Dec. 31, 2018 USD ($)	Feb. 28, 2015 USD ($)
Fair Value Assumptions and Methodology for Assets and Liabilities
Fair value of warrant				$ 493,688			$ 493,688
Principal amount											$ 150,000
Exercise price (in dollars per share) | $ / shares				$ 49.00			$ 49.00
Strike price
Fair Value Assumptions and Methodology for Assets and Liabilities
Warrant liability | $ / shares				58.80			58.80
Expected life
Fair Value Assumptions and Methodology for Assets and Liabilities
Warrant liability | Y				5			5
Volatility
Fair Value Assumptions and Methodology for Assets and Liabilities
Warrant liability				132			132
Risk free rate
Fair Value Assumptions and Methodology for Assets and Liabilities
Warrant liability				2.77			2.77
Dividend rate
Fair Value Assumptions and Methodology for Assets and Liabilities
Warrant liability				0			0
Series A Warrants | Stock price
Fair Value Assumptions and Methodology for Assets and Liabilities
Warrant liability				0.0131			0.0131			0.1610
Series A Warrants | Strike price
Fair Value Assumptions and Methodology for Assets and Liabilities
Warrant liability				7.8750			7.8750			7.8750
Series A Warrants | Expected life
Fair Value Assumptions and Methodology for Assets and Liabilities
Weighted-average expected term (years)				2 years 7 months 28 days			2 years 7 months 28 days			3 years 4 months 28 days
Series A Warrants | Volatility
Fair Value Assumptions and Methodology for Assets and Liabilities
Warrant liability				1.4431			1.4431			1.3563
Series A Warrants | Risk free rate
Fair Value Assumptions and Methodology for Assets and Liabilities
Warrant liability				0.0156			0.0156			0.0246
Underwriter Warrants | Stock price
Fair Value Assumptions and Methodology for Assets and Liabilities
Warrant liability				0.0131			0.0131			0.1610
Underwriter Warrants | Strike price
Fair Value Assumptions and Methodology for Assets and Liabilities
Warrant liability				0.5250			0.5250			0.5250
Underwriter Warrants | Expected life
Fair Value Assumptions and Methodology for Assets and Liabilities
Weighted-average expected term (years)				4 years 4 days			4 years 4 days			4 years 9 months 4 days
Underwriter Warrants | Volatility
Fair Value Assumptions and Methodology for Assets and Liabilities
Warrant liability				1.4431			1.4431			1.3563
Underwriter Warrants | Risk free rate
Fair Value Assumptions and Methodology for Assets and Liabilities
Warrant liability				0.0155			0.0155			0.0251
LOC Warrants
Fair Value Assumptions and Methodology for Assets and Liabilities
Change in fair value of liability				$ 79,891			$ 45,218
LOC Warrants | Stock price
Fair Value Assumptions and Methodology for Assets and Liabilities
Warrant liability | item	0.1960			0.0173			0.0173
LOC Warrants | Strike price
Fair Value Assumptions and Methodology for Assets and Liabilities
Warrant liability | item	0.1750			0.0200			0.0200
LOC Warrants | Expected life
Fair Value Assumptions and Methodology for Assets and Liabilities
Weighted-average expected term (years)	5 years			5 years			5 years
LOC Warrants | Volatility
Fair Value Assumptions and Methodology for Assets and Liabilities
Warrant liability	1.4572			1.4743			1.4743
LOC Warrants | Risk free rate
Fair Value Assumptions and Methodology for Assets and Liabilities
Warrant liability	0.0223			0.0183			0.0183
2019 Bridge Note Warrants
Fair Value Assumptions and Methodology for Assets and Liabilities
Fair value of warrant						$ 4,259,327		$ 5,005,739	$ 4,259,327
Change in fair value of liability				$ 718,654			$ 747,300
Principal amount		$ 5,050,000			$ 5,050,000
Number of promissory notes issued | item	21	21	21
Term of promissory notes						4 months
2019 Bridge Note Warrants | Stock price
Fair Value Assumptions and Methodology for Assets and Liabilities
Warrant liability				0.0173			0.0173
2019 Bridge Note Warrants | Stock price | Minimum
Fair Value Assumptions and Methodology for Assets and Liabilities
Warrant liability								0.0484
2019 Bridge Note Warrants | Stock price | Maximum
Fair Value Assumptions and Methodology for Assets and Liabilities
Warrant liability								0.3290
2019 Bridge Note Warrants | Strike price
Fair Value Assumptions and Methodology for Assets and Liabilities
Warrant liability				0.0200			0.0200
2019 Bridge Note Warrants | Strike price | Minimum
Fair Value Assumptions and Methodology for Assets and Liabilities
Warrant liability								0.0484
2019 Bridge Note Warrants | Strike price | Maximum
Fair Value Assumptions and Methodology for Assets and Liabilities
Warrant liability								0.3290
2019 Bridge Note Warrants | Expected life
Fair Value Assumptions and Methodology for Assets and Liabilities
Weighted-average expected term (years)				4 years 9 months 18 days			4 years 9 months 18 days	5 years
2019 Bridge Note Warrants | Volatility
Fair Value Assumptions and Methodology for Assets and Liabilities
Warrant liability				1.4584			1.4584
2019 Bridge Note Warrants | Volatility | Minimum
Fair Value Assumptions and Methodology for Assets and Liabilities
Warrant liability								1.4560
2019 Bridge Note Warrants | Volatility | Maximum
Fair Value Assumptions and Methodology for Assets and Liabilities
Warrant liability								1.4572
2019 Bridge Note Warrants | Risk free rate
Fair Value Assumptions and Methodology for Assets and Liabilities
Warrant liability				0.0176			0.0176
2019 Bridge Note Warrants | Risk free rate | Minimum
Fair Value Assumptions and Methodology for Assets and Liabilities
Warrant liability								0.0176
2019 Bridge Note Warrants | Risk free rate | Maximum
Fair Value Assumptions and Methodology for Assets and Liabilities
Warrant liability								0.0223
Warrant liability | Recurring | Level 3
Fair Value Assumptions and Methodology for Assets and Liabilities
Fair value of warrant				$ 10,029			$ 10,029			$ 220,376
Change in fair value of liability							(1,002,865)
Warrant liability | Series A Warrants
Fair Value Assumptions and Methodology for Assets and Liabilities
Fair value of warrant				49			49			7,388
Change in fair value of liability				1,004			7,339
Warrant liability | Series A Warrants | Recurring | Level 3
Fair Value Assumptions and Methodology for Assets and Liabilities
Fair value of warrant				49			49			7,388
Warrant liability | Underwriter Warrants
Fair Value Assumptions and Methodology for Assets and Liabilities
Fair value of warrant				9,980			9,980			212,988
Warrant liability | Underwriter Warrants | Recurring | Level 3
Fair Value Assumptions and Methodology for Assets and Liabilities
Fair value of warrant				9,980			9,980			$ 212,988
Change in fair value of liability				42,285			203,008
Warrant liability | LOC Warrants
Fair Value Assumptions and Methodology for Assets and Liabilities
Fair value of warrant	$ 116,297
Warrant liability | LOC Warrants | Level 3
Fair Value Assumptions and Methodology for Assets and Liabilities
Fair value of warrant				71,079			71,079
Warrant liability | LOC Warrants | Recurring | Level 3
Fair Value Assumptions and Methodology for Assets and Liabilities
Fair value of warrant				0			0
Warrant liability | 2019 Bridge Note Warrants | Recurring
Fair Value Assumptions and Methodology for Assets and Liabilities
Fair value of warrant				$ 0			$ 0
2019 Bridge Notes
Fair Value Assumptions and Methodology for Assets and Liabilities
Fair value of warrant		$ 5,005,739			$ 5,005,739
Principal amount						$ 5,050,000
Number of promissory notes issued | item					21	21
Fourteen Promissory Notes [Member]
Fair Value Assumptions and Methodology for Assets and Liabilities
Principal amount		3,550,000			$ 3,550,000	$ 3,550,000
Number of promissory notes issued | item					14	14
Warrant coverage percentage					125.00%	125.00%
Seven Promissory Notes [Member]
Fair Value Assumptions and Methodology for Assets and Liabilities
Principal amount		$ 1,500,000			$ 1,500,000	$ 1,500,000
Number of promissory notes issued | item					7	7
Warrant coverage percentage					75.00%	75.00%
Twenty One Promissory Notes [Member]
Fair Value Assumptions and Methodology for Assets and Liabilities
Number of promissory notes issued | item						21
Twenty One Promissory Notes [Member] | 2019 Bridge Note Warrants
Fair Value Assumptions and Methodology for Assets and Liabilities
Exercise price (in dollars per share) | $ / shares									$ 2.00

XML

Warrants - Warrant activity (Details) - shares	9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018
Warrant Activity
Warrants outstanding, beginning balance	34,682	4,590
Issuances	19,387,761	12,713
Expirations and cancellations	(551)	(722)
Warrants outstanding, ending balance	19,421,892	16,581

XML

Stockholders' Equity (Details)	Jun. 03, 2019	May 29, 2019	Sep. 30, 2019 shares	Dec. 31, 2018 shares
Stockholders’ Equity
Reverse stock split ratio	0.015	0.0667
Shares of common stock reserved for issuance
Options issued and outstanding			3,821,690	42,979
Options available for grant under stock option plans			554,016	2,327
RSUs awards issued and outstanding			5,613	5,613
Warrants issued and outstanding			19,421,892	34,682
Convertible warrants			9,580
Total			25,262,276	146,792
Convertible notes
Shares of common stock reserved for issuance
Convertible warrants				10,849
Inducement options issued and outstanding
Shares of common stock reserved for issuance
Options issued and outstanding				2,985
Series A convertible preferred stock
Shares of common stock reserved for issuance
Convertible warrants			473,565	47,357
Series B convertible preferred stock
Shares of common stock reserved for issuance
Convertible warrants			985,500
Common Stock | Common stock - voting
Stockholders’ Equity
Common stock, shares authorized			150,000,000	150,000,000
Common Stock | Common stock - non-voting
Stockholders’ Equity
Common stock, shares authorized			50,000,000	50,000,000

XML

Stock Incentive Plans - 401(k) Plan (Details)	9 Months Ended
	Sep. 30, 2019 USD ($)
401(k) Plan
Employer contributions to the plan	$ 0

XML

Debt - June 2017 Convertible debt (Details)			3 Months Ended	9 Months Ended		12 Months Ended
	Aug. 02, 2018 USD ($)	Jun. 29, 2017 USD ($)	Dec. 31, 2018 USD ($) item	Sep. 30, 2019 USD ($) item	Sep. 30, 2018 USD ($)	Dec. 31, 2018 USD ($) item	May 28, 2019 USD ($)	Jun. 30, 2017 USD ($)	Feb. 28, 2015 USD ($)
Debt and Warrants
Notes payable									$ 150,000
Proceeds from issuance of convertible debt					$ 500,000
Number of notes for which standstill fee paid | item			4
Convertible debt			$ 11,239,170			$ 11,239,170
Face value			11,294,770			11,294,770
Chicago Venture Partners, L.P.
Debt and Warrants
Total standstill fee			$ 499,403	$ 499,403		$ 499,403
Number of notes for which standstill fee paid | item			4	4		4
Convertible debt			$ 499,403			$ 499,403
June 2017 Convertible debt
Debt and Warrants
Notes payable		$ 2,155,000
Original issue discount		425,000
Debt legal fee		30,000
Proceeds from issuance of convertible debt		$ 1,700,000
Interest rate (as a percent)		8.00%
Automatic increase in interest rate at the event of default		17.00%
Maximum aggregate redemption amount	$ 500,000
Standstill fee			63,296
Increase in principal balance of notes payable			37,296
Standstill fee paid in cash			26,000
Face value			740,882			740,882
Discounts			$ 55,600			$ 55,600
June 2017 Convertible debt | Current liabilities
Debt and Warrants
Fair value of derivative liability due to repayment of mandatory default					15,000
Fair value of derivative liability due to interest rate increase feature					$ 5,000
Derivative liability								$ 20,000
Existing Notes 1 | Chicago Venture Partners, L.P.
Debt and Warrants
Notes payable							$ 10,535,900

XML

Debt - Notes Payable (Details) - USD ($)	May 28, 2018	Sep. 30, 2019	Jun. 30, 2019	Jun. 26, 2019	Dec. 31, 2018	Feb. 28, 2015
Notes payable
Convertible debt, Gross					$ 11,294,770
Notes payable, net of discount					4,845,575
Notes payable - current, net		$ 6,678,461
Notes payable						$ 150,000
Notes payable
Notes payable
Convertible debt, Gross		6,678,461			5,180,857
Less: unamortized debt discount and net issuance costs					(335,282)
Note payable, net		6,678,461			4,845,575
Notes payable, net of discount		6,678,461
Notes payable - current, net					4,845,575
December 2017 note payable | Notes payable
Notes payable
Convertible debt, Gross					1,673,237
February 2018 note payable | Notes payable
Notes payable
Convertible debt, Gross					2,359,750
March 2018 note payable | Notes payable
Notes payable
Convertible debt, Gross					$ 1,147,870
2019 Exchange Note 1
Notes payable
Accrued interest on notes payable	$ 410,562
Notes payable	$ 10,125,339
Interest rate (as a percent)	10.00%
2019 Exchange Note 1 | Notes payable
Notes payable
Convertible debt, Gross		4,381,535
2019 Exchange Note 2
Notes payable
Notes payable	$ 2,296,926
Interest rate (as a percent)	10.00%
2019 Exchange Note 2 | Notes payable
Notes payable
Convertible debt, Gross		$ 2,296,926
2019 Bridge Notes
Notes payable
Notes payable			$ 5,050,000
Interest rate (as a percent)				12.00%

XML

Document and Entity Information - shares	9 Months Ended
	Sep. 30, 2019	Nov. 08, 2019
Document Type	10-Q
Document Period End Date	Sep. 30, 2019
Entity Registrant Name	JAGUAR HEALTH, INC.
Entity Current Reporting Status	Yes
Entity Filer Category	Non-accelerated Filer
Entity Small Business	true
Entity Emerging Growth Company	true
Entity Shell Company	false
Current Fiscal Year End Date	--12-31
Document Fiscal Year Focus	2019
Document Fiscal Period Focus	Q3
Entity Central Index Key	0001585608
Amendment Flag	false
Entity Ex Transition Period	true
Common stock - voting
Entity Common Stock, Shares Outstanding		10,852,125
Common stock - non-voting
Entity Common Stock, Shares Outstanding		40,301,237
Series A convertible preferred stock
Entity Common Stock, Shares Outstanding		5,524,926

XML

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS' EQUITY/(DEFICIT) - USD ($)	Series 1 warrants Additional paid-in capital	Series 1 warrants	Series 2 warrants Additional paid-in capital	Series 2 warrants	Bridge Note Warrants Additional paid-in capital	Bridge Note Warrants	March 2019 LOC warrants Additional paid-in capital	March 2019 LOC warrants	Private Investment in Public Entities March 2018 Common Stock Common stock - voting	Private Investment in Public Entities March 2018 Additional paid-in capital	Private Investment in Public Entities March 2018 Series A convertible preferred stock	Private Investment in Public Entities March 2018	Private Investment in Public Entities July 2018 Common Stock Common stock - voting	Private Investment in Public Entities July 2018 Additional paid-in capital	Private Investment in Public Entities July 2018	CVP Notes Common Stock Common stock - voting	CVP Notes Additional paid-in capital	CVP Notes	CVP Exchange Notes Common Stock Common stock - voting	CVP Exchange Notes Additional paid-in capital	CVP Exchange Notes	September 2018 L2 convertible note payable Common Stock Common stock - voting	September 2018 L2 convertible note payable Additional paid-in capital	September 2018 L2 convertible note payable	Common Stock Series B convertible preferred stock	Common Stock Common stock - voting	Common Stock Common stock - non-voting	Additional paid-in capital Series B convertible preferred stock	Additional paid-in capital Common stock - voting	Additional paid-in capital Office lease extension agreement	Additional paid-in capital	Accumulated deficit	Series A convertible preferred stock	Series B convertible preferred stock	Common stock - voting	Office lease extension agreement	Total
Ending Balance at Sep. 30, 2018																																	$ 9,000,002
Balance (in shares) at Sep. 30, 2018																																	5,524,926
Balance at Dec. 31, 2017																										$ 6	$ 4,262				$ 79,661,456	$ (62,404,722)					$ 17,261,002
Balance (in shares) at Dec. 31, 2017																										59,721	42,617,893
Increase (decrease) in Stockholders' Equity (Deficit)
Issuance of preferred stock and common stock in a private placement									$ 3	$ 4,999,997	$ 9,000,002	$ 5,000,000
Issuance of preferred stock and common stock in a private placement (in shares)									28,011		5,524,926
Beneficial conversion feature of the series A and series B convertible preferred stock																															995,000		$ (995,000)				995,000
Deemed dividend on the series A and series B convertible preferred stock																															(995,000)		995,000				(995,000)
Issuance of common stock																										$ 2					2,055,872						2,055,874
Issuance of common stock (In shares)																										17,075
Issuance of common stock in exchange for services																															6,425						6,425
Issuance of common stock in exchange for services (in shares)																										47
Issuance of common stock in exchange for payment of interest expense																															704,725						704,725
Issuance of common stock in exchange for payment of interest expense (in shares)																										4,081
Issuance of common stock in conversion of debt																										$ 1					1,607,420						1,607,421
Issuance of common stock in conversion of debt (in shares)																										13,665
Issuance of common stock in exchange for payment of interest expense (Kingdon)																															479,808						479,808
Issuance of common stock in exchange for payment of interest expense (Kingdon) (in shares)																										4,582
Conversion of non-voting common stock to voting common stock																											$ (232)				232
Conversion of non-voting common stock to voting common stock (in shares)																										2,206	(2,316,656)
Issuance of common stock July 2018													$ 1	$ 624,896	$ 624,897
Issuance of common stock July 2018 (in shares)													6,725
Issuance of common stock in debt financing September 2018																							$ 48,000	$ 48,000
Issuance of common stock in debt financing September 2018 (in shares)																						1,071
Issuance of warrants in debt financing September 2018																							$ 118,149	$ 118,149						$ 493,688						$ 493,688
Fractional common stock shares repurchased																															(30)						(30)
Stock-based compensation																															1,416,791						1,416,791
Net loss																																(19,492,172)					(19,492,172)
Balance at Sep. 30, 2018																										$ 13	$ 4,030				92,217,429	(81,896,894)					10,324,578
Balance (in shares) at Sep. 30, 2018																										137,184	40,301,237
Beginning Balance at Jun. 30, 2018																																	$ 9,000,002
Balance (in shares) at Jun. 30, 2018																																	5,524,926
Ending Balance at Sep. 30, 2018																																	$ 9,000,002
Balance (in shares) at Sep. 30, 2018																																	5,524,926
Balance at Jun. 30, 2018																										$ 12	$ 4,030				89,772,794	(75,758,542)					14,018,294
Balance (in shares) at Jun. 30, 2018																										124,808	40,301,237
Increase (decrease) in Stockholders' Equity (Deficit)
Issuance of common stock (In shares)																										6,725
Issuance of common stock in exchange for payment of interest expense (Kingdon)																										$ 4,580					479,808						479,808
Issuance of common stock July 2018																										$ 1					624,896						624,897
Issuance of common stock in debt financing September 2018																															48,000						48,000
Issuance of common stock in debt financing September 2018 (in shares)																										1,071
Issuance of warrants in debt financing September 2018																														$ 493,688	118,149					$ 493,688	118,149
Stock-based compensation																															680,094						680,094
Net loss																																(6,138,352)					(6,138,352)
Balance at Sep. 30, 2018																										$ 13	$ 4,030				92,217,429	(81,896,894)					10,324,578
Balance (in shares) at Sep. 30, 2018																										137,184	40,301,237
Beginning Balance at Dec. 31, 2018																																	$ 9,000,002				$ 9,000,002
Balance (in shares) at Dec. 31, 2018																																	5,524,926	0			5,524,926
Ending Balance at Sep. 30, 2019																																	$ 9,000,002				$ 9,000,002
Balance (in shares) at Sep. 30, 2019																																	5,524,926	1,971			5,524,926
Balance at Dec. 31, 2018																										$ 35	$ 4,030				99,929,835	(94,550,779)					$ 5,383,121
Balance (in shares) at Dec. 31, 2018																										351,472	40,301,237
Increase (decrease) in Stockholders' Equity (Deficit)
Beneficial conversion feature of the series A and series B convertible preferred stock																												$ 3,875,778						$ (3,875,778)
Deemed dividend on the series A and series B convertible preferred stock																												(3,875,778)						3,875,778
Issuance of common stock																										$ 289					1,198,833						1,199,122
Issuance of common stock (In shares)																										2,886,500
Issuance of common stock to Oasis, put exercise																										$ 20					2,602,876						2,602,896
Issuance of common stock to Oasis, put exercise (in shares)																										195,319
Issuance of common stock, registered offering																										$ 1					266,265						266,266
Issuance of common stock, registered offering (in shares)																										19,019
Issuance of common stock in conversion of debt																$ 40	$ 8,224,883	$ 8,224,923	$ 112	$ 6,672,838	$ 6,672,950
Issuance of common stock in conversion of debt (in shares)																395,970			1,119,440
Issuance of common stock in exchange for payment of interest expense (Kingdon)																										$ 2					446,727						446,729
Issuance of common stock in exchange for payment of interest expense (Kingdon) (in shares)																										19,752
Issuance of Series B convertible preferred stock or common stock in Class A Units, net																																		$ 2,240,594
Issuance of Series B convertible preferred stock or common stock in Class A Units, net (in shares)																																		10,787
Issuance of warrants in Class A and B Units	$ 5,304,989	$ 5,304,989	$ 5,304,989	$ 5,304,989
Modification of Series 1 warrants	252,106	252,106
Deemed dividend attributable to Series 1 warrant modification	(252,106)	(252,106)
Warrant reclassification from liability to equity						$ 4,259,327	$ 71,079	$ 71,079																							4,259,327						4,259,327
Common stock issued upon conversion of Series B convertible preferred stock																									$ 441			1,830,752						$ (1,831,193)
Issuance of common stock upon conversion of Series B convertible preferred stock (in shares)																									4,408,000									(8,816)
Issuance of warrants in debt financing September 2018																																					493,688
Fractional common stock shares repurchased																										$ (14)
Stock-based compensation																															1,982,985						1,982,985
Net loss																																(32,580,053)					(32,580,053)
Balance at Sep. 30, 2019																										$ 940	$ 4,030				138,096,378	(127,130,832)		$ 409,401			11,379,917
Balance (in shares) at Sep. 30, 2019																										9,395,458	40,301,237							1,971
Beginning Balance at Jun. 30, 2019																																	$ 9,000,002
Balance (in shares) at Jun. 30, 2019																																	5,524,926
Ending Balance at Sep. 30, 2019																																	$ 9,000,002				$ 9,000,002
Balance (in shares) at Sep. 30, 2019																																	5,524,926	1,971			5,524,926
Balance at Jun. 30, 2019																										$ 180	$ 4,030				117,927,532	(119,575,767)					$ (1,644,025)
Balance (in shares) at Jun. 30, 2019																										1,799,381	40,301,237
Increase (decrease) in Stockholders' Equity (Deficit)
Beneficial conversion feature of the series A and series B convertible preferred stock																															3,875,778			$ (3,875,778)
Deemed dividend on the series A and series B convertible preferred stock																															(3,875,778)			3,875,778
Issuance of common stock in conversion of debt																			$ 30	$ 1,088,768	$ 1,088,798				$ 441			$ 1,830,752
Issuance of common stock in conversion of debt (in shares)																			301,577						4,408,000
Issuance of Series B convertible preferred stock or common stock in Class A Units, net																										$ 289			$ 1,198,833					$ 2,240,594	$ 1,199,122
Issuance of Series B convertible preferred stock or common stock in Class A Units, net (in shares)																										2,886,500								10,787
Issuance of warrants in Class A and B Units	5,304,989	5,304,989	$ 5,304,989	$ 5,304,989
Modification of Series 1 warrants	252,106	252,106
Deemed dividend attributable to Series 1 warrant modification	$ (252,106)	$ (252,106)
Warrant reclassification from liability to equity					$ 4,259,327	$ 4,259,327	$ 71,079	$ 71,079
Common stock issued upon conversion of Series B convertible preferred stock																																		$ (1,831,193)
Issuance of common stock upon conversion of Series B convertible preferred stock (in shares)																																		(8,816)
Stock-based compensation																															1,110,109						1,110,109
Net loss																																(7,555,065)					(7,555,065)
Balance at Sep. 30, 2019																										$ 940	$ 4,030				$ 138,096,378	$ (127,130,832)		$ 409,401			$ 11,379,917
Balance (in shares) at Sep. 30, 2019																										9,395,458	40,301,237							1,971

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Subsequent Events - Termination of Tempesta Royalty License Agreement (Details) - USD ($)	1 Months Ended
	Oct. 31, 2019	Sep. 30, 2019	Feb. 28, 2015
Subsequent Events.
Principal amount			$ 150,000
Termination of Tempesta Royalty License Agreement | Tempesta
Subsequent Events.
Estimate possible loss		$ 640,000
Termination of Tempesta Royalty License Agreement | Subsequent event | Tempesta
Subsequent Events.
Estimate possible loss	$ 640,000
Cash paid	50,000
Principal amount	$ 550,000
Number roof shares issued in exchange of cessation of royalty payments	40,000
Interest rate	2.50%
Periodic payment	$ 50,000

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Fair Value Measurements

9 Months Ended

Sep. 30, 2019

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— Observable inputs such as quoted prices (unadjusted) for identical instruments in active markets.

· Level 2— Observable inputs such as quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, or model derived valuations whose significant inputs are observable.

· Level 3— Unobservable inputs that reflect the reporting entity’s own assumptions.

The following tables set forth the fair value of the Company’s financial instruments that were measured at fair value on a recurring basis as of September 30, 2019 and December 31, 2018.

		September 30, 2019
	(unaudited)
		Level 1		Level 2		Level 3		Total
Warrant liability		$	—	$	—	$	10,029	$	10,029
Total fair value		$	—	$	—	$	10,029	$	10,029

	December 31, 2018
	Level 1		Level 2		Level 3		Total
Warrant liability	$	—	$	—	$	220,376	$	220,376
Total fair value	$	—	$	—	$	220,376	$	220,376

The change in the estimated fair value of Level 3 liabilities is summarized below:

	Nine Months Ended
	September 30, 2019
	Warrant
	Liability
	(unaudited)
Beginning fair value of Level 3 liability	$	220,376
Additions		5,122,039
Reclassification to equity		(4,329,521)
Change in fair value		(1,002,865)
Ending fair value of Level 3 liability	$	10,029

Warrant Liability

The warrants associated with the Level 3 warrant liability activity for the nine months ended September 30, 2019 were the November 2016 Series A warrants, the October 2018 Underwriter warrants, the March 2019 LOC warrants and the Bridge warrants, which at September 30, 2019 were valued at $49 and $9,980,  zero and zero, respectively in the Company’s condensed consolidated balance sheet. At December 31, 2018, the warrants associated with the Level 3 warrant liability were the November 2016 Series A Warrants and the October 2018 Underwriter Warrants, which were valued at $7,388 and $212,988, respectively in the Company’s consolidated balance sheet.

The Series A Warrants

The Series A warrant valuation of $7,388 at December 31, 2018 was computed using the Black-Scholes-Merton pricing model using a stock price of $16.10, a strike price of $787.50 per share, an expected term of 3.41 years, volatility of 135.63% and a risk-free discount rate of 2.46%. The Series A warrant valuation of $49 at September 30, 2019 was computed using the Black-Scholes-Merton pricing model using a stock price of $1.31, a strike price of $787.50, an expected term of 2.66 years, volatility of 144.31% and a risk-free discount rate of 1.56%. For the three and nine months ended September 30, 2019, the net change in the fair value of the warrants of $1,004 and $7,339, respectively, was recorded as a gain in the change in fair value of warrants, derivative liability and conversion option liability in the condensed statements of operations.

The October 2018 Underwriter Warrants

The October 2018 Underwriter Warrants valuation of $212,988 at December 31, 2018 was computed using the Black-Scholes-Merton pricing model using a stock price of $16.10, a strike price of $52.50, an expected term of 4.76 years, volatility of 135.63% and a risk-free discount rate of 2.51%. The October 2018 Underwriter Warrants valuation of $9,980 at September 30, 2019 was computed using the Black-Scholes-Merton pricing model using a stock price of $1.31, a strike price of $52.50 per share, an expected term of 4.01 years, volatility of 144.31% and a risk-free discount rate of 1.55%. For the three and nine months ended September 30, 2019, the net change in the fair value of the warrants of $42,285 and $203,008, respectively, was recorded as a gain in the change in fair value of warrants, derivative liability and conversion option liability in the condensed statements of operations

March 2019 LOC Warrants

The March 2019 LOC Warrants were issued on March 29, 2019 with a valuation at issuance and at March 31, 2019 of $116,297, computed using the Black-Scholes-Merton pricing model using a stock price of $19.60, a strike price of $17.50 per share, an expected term of 5.0 years, volatility of 145.72% and a risk-free discount rate of 2.23%. On July 23, 2019, at which date the exercise price of the March 2019 LOC warrants became fixed, the March 2019 LOC warrants were reclassified from liability classification to equity classification. Immediately prior to reclassification to equity, the March 2019 LOC Warrant liability was valued at $71,079 using the Black-Scholes-Merton pricing model, calculated using a stock price of $1.73, a strike price of $2.00, an expected term of 5.00 years, volatility of 147.43% and a risk-free discount rate of 1.83%.  For the three and nine months ended September 30, 2019, there was a gain in the fair value of the warrants of $79,891 and $45,218, respectively, which was recorded as a gain in the change in fair value of warrants, derivative liability and conversion option liability in the consolidated statements of operations. 

2019 Bridge Warrants

The 2019 Bridge Warrants were issued between March and June 2019, concurrent to the Company entering into short-term Promissory Notes of $5,050,000 (see Note 7). The Company issued (i) fourteen Notes with a principal balance of $3,550,000 and warrant coverage at 125% of principal, and (ii) seven Notes with a principal balance of $1,500,000 and warrant coverage at 75% of principal. At issuance, the exercise price of the warrants was either (i) the price the Company issued common shares in its next public offering subject to a registration statement or (ii) if no such offering were consummated by the four-month maturity date of the Promissory Notes, then the exercise price would be equal to the closing price of the Company’s common stock on the Notes four-month maturity date. The warrants for all twenty-one  Bridge Notes had a collective issuance date fair value of $5,005,739, computed using the Black-Scholes-Merton pricing model using a range of stock prices between $4.84 and $32.90, a range of strike prices between $4.84 and $32.90 per share, an expected term of 5.0 years, a range of volatilities between 145.60% and 145.72%, and a range of risk-free discount rates between 1.76% and 2.23%. At issuance, all twenty-one warrants were liability classified. On July 23, 2019, upon the Company’s filing of a registration statement, the exercise price for all twenty-one warrants became fixed at $2.00, at which point the Bridge warrants were reclassified from liability classification to equity classification. Immediately prior to reclassification, the liability for all twenty-one Bridge Warrants had a collective fair value of $4,259,327, calculated using the Black-Scholes-Merton pricing model using a stock price of $1.73, a strike price of $2.00 per share, an average expected term of 4.80 years, volatility of 145.84% and a risk-free discount rate of 1.76%. For the three and nine months ended September 30, 2019, the net change in the fair value of the warrants of $718,654 and $747,300, respectively, was recorded as a gain in the change in fair value of warrants, derivative liability and conversion option liability in the consolidated statements of operations.

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Net Loss Per Share Attributable to Common Stockholders (Details) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Calculation of basic and diluted net loss per common share
Net loss attributable to common shareholders (basic and diluted)	$ (11,682,949)	$ (6,138,352)	$ (36,707,937)	$ (20,487,172)
Shares used to compute net loss per common share, basic and diluted	5,841,790	162,506	2,746,523	143,012
Net loss per share attributable to common stockholders, basic and diluted	$ (2.00)	$ (37.77)	$ (13.37)	$ (143.25)

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Related Party Transactions

9 Months Ended

Sep. 30, 2019

Related Party Transactions

Related Party Transactions

5. Related Party Transactions

Management Services Agreement

In March 2018, concurrent with the issuance of the Company’s Series A convertible participating preferred stock to Sagard Capital Partners, the Company entered into a Management Services Agreement with Sagard Capital Partners. Under the agreement, Sagard Partners will provide consulting and management advisory service to the Company from March 2018 through March 2021. These services include assistance with strategic planning regarding the Company’s commercial strategy, research and due diligence regarding human resource activities, and strategic advice in financial matters. In consideration for such services, the Company will pay Sagard Capital Partners an annual fee of $450,000, with total fees over the term of the agreement not to exceed $1,350,000. As of September 30, 2019, with respect to this agreement, the Company had paid Sagard Capital Partners aggregate fees of $250,000 and has a balance due of $425,000.  

Letter of Credit

To satisfy the letter of credit requirement in the Company’s new office lease agreement, Pacific Capital Management, LLC, one of the Company’s existing shareholders, caused its financial institution to issue a letter of credit in the amount of $475,000 on behalf of the Company, dated August 28, 2018. In consideration of the letter of credit, in August 2018 the Company issued to Capital Management, LLC a warrant to purchase 9,580 shares of the Company’s voting common stock. The warrant is exercisable on or after March 28, 2019 at an exercise price of $49.00 and has a five-year term. The $493,688 fair value of the Warrant was classified in stockholders’ equity (see Note 6). Additionally, a payment of $45,000 is due to Capital Management, LLC by November 28, 2019.

2019 Bridge Notes

Between March 18, 2019 and June 26, 2019, three members of the Board of Directors of the Company had entered into short-term Promissory Note Purchase Agreements (see Note 7, the “2019 Bridge Notes”) with the Company: (i) Lisa Conte, the Company’s CEO & President, purchased a short-term Promissory Note of $100,000 which the Company settled in July 2019. In consideration for the short-term financing, the Company issued Ms. Conte a warrant that became exercisable into 37,500 shares of the Company’s common stock;(ii) James Bochnowski, purchased a short-term Promissory Note of $350,000 which the Company settled in July 2019. In consideration for the short-term financing, the Company issued Mr. Bochnowski a warrant that became exercisable into 218,750 shares of the Company’s common stock; and (iii) Jonathan Siegel DBA JBS Healthcare Ventures, purchased a short-term Promissory Note of $75,000 which the Company settled in July 2019. In consideration for the short-term financing, the Company issued Mr. Siegal a warrant that became exercisable into 34,375 shares of the Company’s common stock.

In addition, Sagard Capital Partners purchased a short-term Promissory Note of $500,000 which the Company settled in July 2019. In consideration for the short-term financing, the Company issued Sagard Capital Partners a warrant that became exercisable into 187,500 shares of the Company’s common stock; and Jonathan Glaser, an existing shareholder, purchased short-term Promissory Notes of $500,000 which the Company settled in July 2019. In consideration for the short-term financing, the Company issued Mr. Glaser warrants that became exercisable into 250,000 shares of the Company’s common stock.

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Convertible Preferred Stock

9 Months Ended

Sep. 30, 2019

Convertible Preferred Stock

Convertible Preferred Stock

9. Convertible Preferred Stock

Series A Convertible Preferred Stock

In March 2018, the Company entered into a stock purchase agreement with Sagard Capital Partners, L.P. pursuant to which the Company, in a private placement, agreed to issue and sell to Sagard 5,524,926 shares of the Company's Series A convertible participating preferred stock, $0.0001 par value per share, for gross proceeds of $9,199,002, or $9,000,002 net of issuance costs. The preferred stock is convertible into approximately 473,565 shares of common stock at the option of the holder at an effective conversion price of $19.425 per share, provided that, at any time prior to the time the Company obtains stockholder approval, as required pursuant to Nasdaq Rule 5635(b) any conversion of Preferred Stock by a holder into shares of the common stock would be prohibited if, as a result of such conversion, the holder, together with such holder's attribution parties, would beneficially own more than 19.99% of the total number of shares of the common stock issued and outstanding after giving effect to such conversion. Subject to certain limited exceptions, the shares of Preferred Stock cannot be offered, pledged or sold by Sagard for one year from the date of issuance. The conversion price is subject to certain adjustments in the event of any stock dividend, stock split, reverse stock split, combination or other similar recapitalization.

Holders of the Series A shares are entitled to participate equally and ratably with the holders of common stock shares in all dividends paid and distributions made to the holders of the common stock as if, immediately prior to each record date of the common stock, the shares of Series A then outstanding were converted into shares of common stock.

In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Company or deemed liquidation event, the holders of Series A shares then outstanding shall be entitled to be paid in cash out of the assets of the Company before any payment shall be made to the holders of common stock or shares of any series or class of preferred or other capital stock then outstanding that by its terms is junior to the Series A in respect of the preferences as to distributions and payments upon such liquidation event by reason of their ownership, an amount per share of Series A equal to one times the Series A original issue price.

The redemption and liquidation value of the Series A preferred stock is $12,738,822 and $9,199,002, respectively, as of September 30, 2019 and December 31, 2018. If a Redemption Event occurs as of the Measurement Date (the later of April 30, 2021 and the date on which the Company files its Form 10‑Q for the three months ending March 31, 2021, but in no event later than September 30, 2021), the holders of at least a majority of the shares of Series A preferred stock then outstanding may require the Company to redeem all Series A shares at a per share purchase price equal to $2.3057; any one of the following conditions can result in a Redemption Event that is not solely within the Company's control: Revenues attributable to the Mytesi product for the six-month period ended March 31, 2021 are less than $22.0 million or the daily volume weighted average price (“VWAP”) of the Company's common stock on Nasdaq for the 30 days prior to a Measurement Date is less than $105.00.

On the March 23, 2018 issuance date, the effective conversion price per share was less than the fair value of the underlying common stock. As a result, the Company determined that there was a Beneficial Conversion Feature (“BCF”) of approximately $995,000.  Because the Company's Series A Preferred Stock does not have a stated conversion date and was immediately convertible at the issuance date, the Company recorded a deemed dividend charge of $995,000 for the accretion of the discount on the Series A Preferred Stock. The deemed dividend was a non-cash transaction and is reflected below net loss to arrive at net loss available to common stockholders on the Company's condensed consolidated statements of operations for the nine months ended September 30, 2018.

In March 2019, the Company and Sagard Capital Partners, L.P. amended certain terms of the agreement, such that the effective conversion price was adjusted to $19.425 per share. 

The preferred stock has been classified outside of stockholders' equity/(deficit) in accordance with authoritative guidance for the classification and measurement of potentially redeemable securities.

Series B Convertible Preferred Stock

In July 2019, the Company entered into an underwriting agreement relating to the public offering comprised of (1) 2,886,500 Class A Units, priced at a public offering price of $2.00 per unit, with each unit consisting of (i) one share of the Company’s voting common stock, (ii) one Series 1 warrant to purchase one share of Common Stock and (2) 10,787 Class B Units, priced at a public offering price of $1,000 per unit, with each Class B unit consisting of (i) one share of Series B convertible preferred stock with a stated value of $1,000 and convertible into 500 shares of Common Stock, (ii) 500 Series 1 Warrants and (iii) 500 Series 2 Warrants, at a public offering price of $1,000 per Class B Unit.

The Company sold 10,787 Class B Units, comprised of 10,787 shares of Series B convertible preferred stock, Series 1 warrants to purchase 5,393,500 shares of common stock and Series 2 warrants to purchase 5,393,500 shares of common stock. The total gross proceeds to the Company from the offering of the Class B Units was $10,787,000, of which $3,875,778 was allocated to the Series B convertible preferred stock, $3,455,611 to the Series 1 Warrants and $3,455,611 to the Series 2 Warrants. Issuance costs of $1,635,184 were allocated to the Class B Units.

Holders of the Series B shares are entitled to participate equally and ratably with the holders of common stock shares in all dividends paid and distributions made to the holders of the common stock as if, immediately prior to each record date of the common stock, the shares of Series A then outstanding were converted into shares of common stock. With certain exceptions, the shares of Series B Preferred Stock have no voting rights. However, as long as any shares of Series B Preferred Stock remain outstanding, the Company shall not, without the affirmative vote of holders of a majority of the then outstanding shares of Series B Preferred Stock, (a) alter or change adversely the powers, preferences or rights given to the Series B Preferred Stock or alter or amend the Series B Certificate of Designation or (b) enter into any agreement with respect to any of the foregoing.Each share of Series B Preferred Stock is convertible at any time at the holder’s option into 500 shares of Common Stock, which conversion ratio will be subject to adjustment for stock splits, stock dividends, distributions, subdivisions and combinations and other similar transactions.

On the July 23, 2019 issuance date, the effective conversion price per share was less than the fair value of the underlying common stock. As a result, the Company determined that there was a Beneficial Conversion Feature of $3,875,778.  Because the Company's Series B Preferred Stock does not have a stated conversion date and was immediately convertible at the issuance date, the Company recorded a deemed dividend charge of $3,875,778 for the accretion of the discount on the Series B Preferred Stock. The deemed dividend was a non-cash transaction and is reflected below net loss to arrive at net loss available to common stockholders on the Company's condensed consolidated statements of operations for the three and nine months ended September 30, 2019.

During July and August 2019, certain investors converted 8,816 Series B preferred shares into 4,408,000 shares of the Company’s common shares at the stated conversion ratio. As of September 30, 2019, there remained 1,971 Series B preferred shares outstanding.

The preferred stock has been classified in stockholders' equity/(deficit) in accordance with authoritative guidance.

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Segment Information

9 Months Ended

Sep. 30, 2019

Segment Information

Segment Information

13. Segment Information

Prior to the merger with Napo, the Company managed its operations as a single segment for the purposes of assessing performance and making operating decisions. The Company reorganized its segments to reflect the change in the organizational structure resulting from the merger with Napo. Post-merger, the Company manages its operations through two reportable segments—human health and animal health. The human health segment is focused on developing and commercializing human products and the ongoing commercialization of Mytesi™, which is approved by the U.S. FDA for the symptomatic relief of noninfectious diarrhea in adults with HIV/AIDS on antiretroviral therapy. The animal health segment is focused on developing and commercializing prescription and non-prescription products for companion and production animals.

The Company's reportable segments net revenues and net loss for the three and nine months ended September 30, 2019 and 2018 consisted of:

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2019		2018		2019		2018
	(unaudited)				(unaudited)
Revenue from external customers
Human Health	$	957,059	$	1,107,682	$	4,184,912	$	2,545,121
Animal Health		15,720		24,385		83,294		275,148
Consolidated Totals	$	972,779	$	1,132,067	$	4,268,206	$	2,820,269
Segment profit (loss)
Human Health	$	(3,955,115)	$	(3,145,782)	$	(16,585,956)	$	(10,519,413)
Animal Health		(3,599,950)		(2,992,570)		(15,994,097)		(8,972,759)
Consolidated Totals	$	(7,555,065)	$	(6,138,352)	$	(32,580,053)	$	(19,492,172)

The Company's reportable segments assets consisted of the following:

		September 30,		December 31,
	2019		2018
Segment assets
Human Health	$	33,571,477	$	37,985,935
Animal Health		64,797,329		54,893,593
Total	$	98,368,806	$	92,879,528
The reconciliation of segments assets to the consolidated assets is as follows:
		September 30,		December 31,
	2019		2018
Total assets for reportable segments		98,368,806		92,879,528
Less: Investment in subsidiary		(29,240,965)		(29,240,965)
Less: Intercompany loan		(33,501,296)		(22,596,618)
Consolidated Totals	$	35,626,544	$	41,041,945

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Summary of Significant Accounting Policies - Goodwill and Indefinite-lived Intangible Assets (Details) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Goodwill impairment charges
Impairment of indefinite-lived intangible assets	$ 0	$ 0	$ 4,000,000	$ 0
Equipment | Minimum
Goodwill
Estimated useful lives			3 years
Equipment | Maximum
Goodwill
Estimated useful lives			10 years

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Organization and Business - Reverse stock-split and Liquidity (Details)	Jun. 03, 2019	May 29, 2019
Organization and Business
Reverse stock split ratio	0.015	0.0667

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Debt - February 2015 Convertible debt (Details) - USD ($)	1 Months Ended
	Mar. 31, 2018	Feb. 28, 2015
Debt and Warrants
Principal amount		$ 150,000
February 2015 Convertible debt
Debt and Warrants
Repayments of Debt	$ 203,408
Convertible promissory note issued to Serious Change II LP
Debt and Warrants
Share issued for principal and interest payment	1,937

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Debt - December 2016 Convertible debt (Details)		1 Months Ended				12 Months Ended
	Mar. 16, 2018 USD ($) shares	Jan. 31, 2019 USD ($) shares	Aug. 31, 2018 USD ($) shares	Jul. 31, 2017 USD ($) Lender	Dec. 31, 2016 USD ($) $ / shares Lender	Dec. 31, 2018 USD ($) item	Sep. 30, 2019 USD ($)	May 31, 2019 USD ($)	May 28, 2018 USD ($)	Jun. 30, 2017 USD ($)	Feb. 28, 2015 USD ($)
Debt and Warrants
Aggregate principal amount											$ 150,000
Convertible promissory notes, December 2016
Debt and Warrants
Aggregate principal amount					$ 2,500,000
Number of lenders | Lender					3
Proceeds from issuance of convertible debt					$ 2,000,000
Unamortized note discount					$ 500,000
Conversion price (in dollars per share) | $ / shares					$ 64.75
Revised principal value of debt										$ 2,625,338
Annual percentage of conversion					33.00%
Fair value of notes					$ 11,161,000
Difference between the fair value of the notes and the principal balance					$ 1,035,661
Amortization period of such difference amount					29 months
Interest Payable	$ 534,775		$ 479,808
Debt legal fee	$ 169,950
Repayment of accrued interest		$ 446,729
Shares issued (in shares) | shares	4,081	19,751	4,582
Convertible promissory notes, December 2016 | Convertible Long-term Debt
Debt and Warrants
Number of debt instrument extinguished | item						2
Unamortized balance of notes payable						$ 10,553,888	$ 0
Convertible note purchase agreement
Debt and Warrants
Aggregate principal amount					$ 12,500,000
Interest rate (as a percent)				10.00%
Debt instrument, frequency of periodic payment				six-month
Accrued interest capitalized to principal of debt										$ 125,338
Convertible promissory notes, July 2017
Debt and Warrants
Aggregate principal amount				$ 7,500,000
Number of lenders | Lender				4
Proceeds from issuance of convertible debt				$ 6,000,000
Unamortized note discount				$ 1,500,000
2019 Exchange Note 1
Debt and Warrants
Aggregate principal amount									$ 10,125,339
Interest rate (as a percent)									10.00%
2019 Exchange Note 2
Debt and Warrants
Aggregate principal amount									$ 2,296,926
Interest rate (as a percent)									10.00%
Napo | Napo December 2016 and Napo July 2017 Notes
Debt and Warrants
Aggregate principal amount								$ 10,125,339
Unamortized premium								249,987
Carrying amount of Notes issued								10,375,326
Napo | 2019 Exchange Note 1
Debt and Warrants
Aggregate principal amount								10,535,900
Accrued interest capitalized to principal of debt								$ 410,562

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Subsequent Events - Angel Pond Agreement (Details) - USD ($)	1 Months Ended	9 Months Ended
	Oct. 31, 2019	Sep. 30, 2018
Subsequent Events.
Compensation		$ 6,425
Angel Pond Capital LLC | Subsequent event | Angel Pond Agreement
Subsequent Events.
Compensation	$ 140,000
Initial term of contract	4 months
Extension term of contract	2 months
Additional compensation payable	$ 30,000
Percentage of compensation received	6.00%
Percentage of compensation received for some engaged entities	6.50%
Sale milestone to be payable up on achieving of net sales of $50,000,000	$ 300,000
Net sales threshold	50,000,000
Additional sale milestone to be payable up on achieving every additional $50,000,000 in cumulative net sales	$ 300,000
Maximum milestone payment percent	6.00%
Percentage of compensation paid on capital raised	6.00%

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Summary of Significant Accounting Policies

9 Months Ended

Sep. 30, 2019

Summary of Significant Accounting Policies

Summary of Significant Accounting Policies

2. Summary of Significant Accounting Policies

Basis of Presentation

The condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and on a basis consistent with the annual consolidated financial statements, and in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary for a fair presentation of the periods presented. These interim financial results are not necessarily indicative of the results to be expected for the year ending December 31, 2019, or for any other future annual or interim period. These unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto contained in our Annual Report on Form 10-K for the year ended December 31, 2018.

There has been a material change to the Company's significant accounting policies during the three months and nine months ended September 30, 2019, as compared to the significant accounting policies described in Note 2 of the “Notes to Condensed Consolidated Financial Statements” in the Company's Annual Report on Form 10-K for the year ended  December 31, 2018. The Company adopted ASC (“Accounting Standards Codification”) 842 “Leases” and implemented a new policy to account for modifications of preferred stock using the model in ASC 470-50. 

Principals of Consolidation

The condensed consolidated financial statements have been prepared in accordance with U.S. GAAP and applicable rules and regulations of the Securities and Exchange Commission (“SEC”) and include the accounts of the Company and its wholly-owned subsidiary. All inter-company transactions and balances have been eliminated in consolidation.

Use of Estimates

The preparation of consolidated financial statements in conformity with U.S. GAAP requires the Company’s management to make judgments, assumptions and estimates that affect the amounts reported in its consolidated financial statements and the accompanying notes. The accounting policies that reflect the Company’s more significant estimates and judgments and that the Company believes are the most critical to aid in fully understanding and evaluating its reported financial results are valuation of stock options; valuation of warrant liabilities; valuation of derivative liability, impairment testing of goodwill, acquired in-process research and development (“IPR&D"), and long lived assets; useful lives for depreciation and amortization; valuation adjustments for excess and obsolete inventory; allowance for doubtful accounts; deferred taxes and valuation allowances on deferred tax assets; evaluation and measurement of contingencies; and recognition of revenue, including estimates for product returns. Those estimates could change, and as a result, actual results could differ materially from those estimates.

Concentrations

Cash is the financial instrument that potentially subjects the Company to a concentration of credit risk as cash is deposited with a bank and cash balances are generally in excess of Federal Deposit Insurance Corporation insurance limits. The carrying value of cash approximates fair value at September 30, 2019 and December 31, 2018.

For the three and nine months ended September 30, 2019 and 2018, substantially all of the Company’s revenue has been derived from the sale of Mytesi.  For the three months and nine months ended September 30, 2019, the Company earned Mytesi revenue primarily from one pharmaceutical distributor in the United States. For the three and nine months ended September 30, 2018, the Company earned Mytesi revenue primarily from three pharmaceutical distributors in the United States, each of whom amounted to a percentage of total net revenue of at least 10%. Revenue earned from each as a percentage of total net revenue is as follows:

Consolidated (percentage of total net sales)	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2019		2018		2019		2018
Customer 1	100	%	34	%	90	%	28	%
Customer 2	—	%	28	%	—	%	28	%
Customer 3	—	%	25	%	—	%	25	%

The Company is subject to credit risk from its accounts receivable related to its sales. The Company generally does not perform evaluations of customers' financial condition and generally does not require collateral. The Company's significant pharmaceutical distributors and their related accounts receivable balance as a percentage of total accounts receivable were as follows:

	As of		As of
	September 30,		September 30,
	2019		2018
Customer 1	99.6	%	35.0	%
Customer 2	—	%	29.0	%
Customer 3	—	%	26.0	%

No other customer represented more than 10% of the Company's accounts receivable balances as of those dates.

The Company is subject to credit risk from its inventory suppliers. The Company sources drug substance from a single supplier and drug product from a single supplier.

Fair Value

The Company’s financial instruments include, cash, accounts receivable, accounts payable, warrant liabilities, derivative liability, debt conversion option liability, and debt. The recorded carrying amount of accounts receivable, accounts payable and accrued expenses reflect 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.

Inventories

Inventories are stated at the lower of cost or net realizable value. The Company calculates inventory valuation adjustments when conditions indicate that net realizable value is less than cost due to physical deterioration, usage, obsolescence, reductions in estimated future demand or reduction in selling price. Inventory write-downs are measured as the difference between the cost of inventory and net realizable value.

Land, Property and Equipment

Land is stated at cost, reflecting fair value of the property at July 31, 2017, the date of the Napo merger. Equipment is stated at cost, 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 the statements of operations and comprehensive loss.

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.

Definite-lived intangible assets are amortized on a straight-line basis over the estimated periods benefited and are reviewed when appropriate for possible impairment.

Goodwill and Indefinite-lived Intangible Assets

Goodwill is tested for impairment on an annual basis and in between annual tests if events or circumstances indicate that an impairment loss may have occurred. The test is based on a comparison of the reporting unit's book value to its estimated fair value. The Company performs the annual impairment test during the fourth quarter of each fiscal year using the opening consolidated balance sheet as of the first day of the fourth quarter, with any resulting impairment recorded in the fourth quarter of the fiscal year. The Company did not record an impairment of goodwill during the three and nine months ended September 30, 2019 and 2018.

Acquired in-process research and development (“IPR&D”) are intangible assets acquired in the July 2017 Napo merger. Under ASC 805, IPR&D are initially recognized at fair value and classified as indefinite-lived assets until the successful completion or abandonment of the associated research and development efforts. During the development period, these assets will not be amortized as charges to earnings; instead these assets will be tested for impairment on an annual basis or more frequently if impairment indicators are identified. The Company recorded an impairment of zero and $4,000,000 in the three and nine months ended September 30, 2019, respectively. There were no impairment charges recorded in the three and nine months ended September 30, 2018. The impairment loss is measured based on the excess of the carrying amount over the asset’s fair value. Definite-lived intangible assets are amortized on a straight-line basis over the estimated periods benefited and are reviewed when appropriate for possible impairment.

Leases

ASC 842, Leases, requires lessees to recognize right-of-use assets and lease liabilities for all leases with a term of greater than 12 months regardless of their classification on the balance sheet and to provide expanded disclosures about leasing arrangements. The Company adopted ASC 842 on January 1, 2019 using the optional transition method with no restatements of comparative periods. There was no effect on accumulated deficit at adoption.

The Company elected to adopt the package of practical expedients to (i) not reassess whether expired or existing contracts are or contain leases, (ii) not reassess the lease classification for any expired or existing leases and (iii) not reassess the accounting for initial direct costs.

The adoption of the new leases standard resulted in the following adjustments to the consolidated balance sheet as of January 1, 2019:

	December 31, 2018		Adoption Impact		January 1, 2019
			(unaudited)
Operating lease right-of-use assets	$	—	$	1,111,214	$	1,111,214
Operating leases liabilities, current portion		—		336,647		336,647
Operating leases liabilities, long term		—		394,703		394,703
Deferred rent		379,864		(379,864)		—

At the inception of an arrangement, the Company determines whether the arrangement is or contains a lease based on the unique facts and circumstances present. Operating lease liabilities and their corresponding right-of-use assets are recorded based on the present value of lease payments over the expected lease term. Because the interest rate implicit in lease contracts is typically not readily determinable, the Company utilizes its incremental borrowing rate, which is the rate incurred to borrow on a collateralized basis over a similar term, an amount equal to the lease payments in a similar economic environment. Certain adjustments to the right-of-use asset may be required for items such as initial direct costs paid or incentives received.

Operating Lease

The Company has a non-cancelable operating lease with CA-Mission Street Limited Partnership for its offices in San Francisco, California through September 1, 2020. The lease agreement calls for monthly base rents between $38,391 and $40,730 over the term of the lease.

Prior to the Company’s adoption of ASC 842 on January 1, 2019, the Company recorded lease expense for its operating leases in accordance with ASC 840.

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

The Company recognizes revenue in accordance with ASC Topic 606, Revenue from Contracts with Customers (“ASC 606”), which was adopted on January 1, 2018, using the modified retrospective method, which was elected to apply to all active contracts as of the adoption date. Application of the modified retrospective method did not impact amounts previously reported by the Company, nor did it require a cumulative effect adjustment upon adoption, as the Company's method of recognizing revenue under ASC 606 yielded similar results to the method utilized immediately prior to adoption. Accordingly, there was no effect to each financial statement line item as a result of applying the new revenue standard.

Practical Expedients, Elections, and Exemptions

The Company recognizes revenue in accordance with the core principle of ASC 606 or when there is a transfer of control of promised goods or services to customers in an amount that reflects the consideration that the Company expects to be entitled to in exchange for those goods or services.

The Company elected a practical expedient available under ASC 606‑10‑65‑1(f)4 that permits it to consider the aggregate effect of all contract modifications that occurred before the beginning of the earliest period presented when identifying satisfied and unsatisfied performance obligations, transaction price, and allocating the transaction price to the satisfied and unsatisfied performance obligations.

The Company also elected a practical expedient available under ASC 606‑10‑32‑18 that permits it to not adjust the amount of consideration for the effects of a significant financing component if, at contract inception, the expected period between the transfer of promised goods or services and customer payment is one year or less.

The Company has elected to treat shipping and handling activities as fulfillment costs.

Additionally, the Company elected to record revenue net of sales and other similar taxes.

Contracts

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

In addition to the terms and conditions of the Exclusive Distribution Agreement, Cardinal Health’s purchase of products, and assumption of title therein, is set forth in the Title Model Addendum. The Title Model Addendum states that upon receipt of product at the 3PL Facility (Cardinal Health in La Vergne, Tennessee) from the Company, title and risk of loss for the Mytesi product purchased by Cardinal Health (excluding consigned inventory) shall pass to Cardinal Health, and title and risk of loss for consigned inventory shall remain with the Company until purchased by Cardinal Health in accordance with the Title Model Addendum. Napo Pharmaceuticals, Inc. considers Cardinal Health the Company’s exclusive customer for Mytesi products per the Exclusive Distribution Agreement.  

Jaguar's Neonorm and botanical extract products are primarily sold to distributors, who then sell the products to the end customers. Since 2014, the Company has entered into several distribution agreements with established distributors such as Animart, Vedco, VPI, RJ Matthews, Henry Schein, and Stockmen Supply to distribute the Company's products in the United States, Japan, and China. The distribution agreements and the related purchase order together meet the contract existence criteria under ASC 606‑10‑25‑1. Jaguar sells directly to its customers without the use of an agent.

Performance obligations

For animal products sold by Jaguar Health, the single performance obligation identified above is the Company’s promise to transfer the Company’s animal products to distributors based on specified payment and shipping terms in the arrangement. Product warranties are assurance type warranties that do not represent a performance obligation. For the Company’s human product, Mytesi, which is sold by Napo Pharmaceuticals Inc., the single performance obligation identified above is the Company’s promise to transfer Mytesi to Cardinal Health, the Company’s exclusive distributor for the product, based on specified payment and shipping terms as outlined in the Exclusive Distribution Agreement.  The product warranties are assurance type warranties that do not represent a performance obligation.

Transaction price

For both Jaguar and Napo, the transaction price is the amount of consideration to which the Company expects to collect in exchange for transferring promised goods or services to a customer. The transaction price of Mytesi and Neonorm is the Wholesaler Acquisition Cost (“WAC”), net of discounts, returns, and price adjustments.

Allocate transaction price

For both Napo and Jaguar, the entire transaction price is allocated to the single performance obligation contained in each contract.

Point in time recognition

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

Disaggregation of Product Revenue

Human

Sales of Mytesi are recognized as revenue when the products are delivered to the wholesaler. Revenues from the sale of Mytesi were $957,059 and $1,107,682 for the three months ended September 30, 2019 and 2018, respectively. Revenues from the sale of Mytesi were $4,184,912 and $2,545,121 for the nine months ended September 30, 2019 and 2018, respectively. The increase in sales of Mytesi is due to the more streamlined distribution channel and increased sales presence.

Out of period adjustment - During the period ended September 30, 2019, the Company identified a prior period product donation incorrectly recorded as revenue.   The adjustment, totaling $336,934 related to revenue and accounts receivable, was corrected within the current quarter. The impact of the adjustment was an increase to net loss of $336,934. This adjustment does not affect Mytesi revenue associated with sales in the nine months ended September 30, 2019.  Management has determined that this out of period correcting adjustment is not material to any prior period consolidated financial statements impacted by the adjustment and has therefore recorded it in the three months ended September 30, 2019.

Animal

The Company recognized Neonorm revenues of $15,720 and $24,385 for the three months ended September 30, 2019 and 2018, respectively. Revenues from the sale of Neonorm were $83,294 and $97,759 for the nine months ended September 30, 2019 and 2018, respectively. Revenues are recognized upon shipment which is when title and control is transferred to the buyer. Sales of Neonorm Calf and Foal to distributors are made under agreements that may provide distributor price adjustments and rights of return under certain circumstances.

Collaboration Revenue

On January 27, 2017, the Company entered into a licensing, development, co-promotion and commercialization agreement with Elanco US Inc. (“Elanco”) to license, develop and commercialize Canalevia, the Company's drug product candidate under investigation for treatment of acute and chemotherapy-induced diarrhea in dogs, and other drug product formulations of crofelemer for treatment of gastrointestinal diseases, conditions and symptoms in cats and other companion animals. On November 1, 2017, the Company received a letter from Elanco serving as formal notice of their decision to terminate the agreement by giving the Company 90 days written notice. According to the agreement, termination became effective on January 30, 2018. Under the terms of the agreement, the Company received revenue of $0 and $177,389 in the nine months ended September 30, 2019 and 2018, respectively. There was no revenue recognized in the three months ended September 30, 2019 and 2018.

On September 24, 2018, the Company entered into a Distribution, License and Supply Agreement ("License Agreement") with Knight Therapeutics, Inc. ("Knight"). The License Agreement has a term of 15 years (with automatic renewals) and provides Knight with an exclusive right to commercialize current and future Jaguar human health products (including Crofelemer, Lechlemer, and any product containing a proanthocyanidin or with an anti-secretory mechanism) in Canada and Israel. In addition, Knight was granted a right of first negotiation for expansion to Latin America. Under the License Agreement, Knight is responsible for applying for and obtaining necessary regulatory approvals in the territory of Canada and Israel, as well as marketing, sales and distribution of the licensed products. Knight will pay a transfer price for all licensed products, and upon achievement of certain regulatory and sales milestones, Jaguar may receive payments from Knight in an aggregate amount of up to approximately $18 million payable throughout the initial 15-year term of the agreement. The Company did not have any license revenues in the three months and nine months ended September 30, 2019 and 2018.

Modifications to equity-classified instruments

In September 2019, the Company modified its equity-classified Series 1 Warrants (see Note 7). It is the Company’s policy to determine the impact of such equity-classified modifications by analogy to the share-based compensation guidance of ASC 718, Compensation - Stock Compensation. The model for a modified share-based payment award that is classified as equity and remains classified in equity after the modification is addressed in ASC 718-20-35-3. Pursuant to that guidance, the incremental fair value from the modification is recognized as an expense in the income statement to the extent the modified instrument has a higher fair value. The Company uses a similar model for measuring the effects of a modification to equity-classified warrants, however, in contrast to the 718 model, the measured increase in fair value may be more appropriately recorded as a deemed dividend, depending upon the nature of the modification.

Comprehensive Income (Loss)

For all periods presented, the comprehensive income (loss) was equal to the net income (loss); therefore, a separate statement of comprehensive income (loss) is not included in the accompanying condensed consolidated financial statements.

Recent Accounting Pronouncements

Except as described in Note 2 – Basis of Presentation, there have been no other new accounting pronouncements adopted by the Company besides the adoption of ASC 842 “Leases” and implementation of a new policy to account for modifications of preferred stock using the model in ASC 470-50 during the three months and nine months ended September 30, 2019, that the Company believes are of significance or potential significance to the Company.

In June 2018, the Financial Accounting Standards Board (“FASB”) issued ASU 2018-07, Compensation - Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting. This update expands the scope of Topic 718 to include share-based payment transactions for acquiring goods and services from nonemployees. The amendments specify that Topic 718 applies to all share-based payment transactions in which a grantor acquires goods or services to be used or consumed in a grantor’s own operations by issuing share-based payment awards. The amendments also clarify that Topic 718 does not apply to share-based payments used to effectively provide (1) financing to the issuer or (2) awards granted in conjunction with selling goods or services to customers as part of a contract accounted for under ASC 606. The amendments in ASU 2018-07 are effective for public business entities for fiscal years beginning after December 15, 2018, including interim periods within that fiscal year. Early adoption is permitted. The Company adopted this standard on January 1, 2019, and this standard did not have a material impact on the Company’s financial position, results of operations or disclosures.

In August 2018, the FASB issued ASU 2018-15, Intangible - Goodwill and Other - Internal-Use Software (Subtopic 350-40), which aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. ASU 2018-15 is effective for the Company in the first quarter of 2020. Early adoption is permitted. ASU 2018-15 permits either a prospective or retrospective transition approach. The Company is currently evaluating ASU 2018-15 to determine the impact to its condensed consolidated financial statements and related disclosures. The Company is evaluating the impact of the adoption of ASU 2016-13 on its Condensed Consolidated Financial Statements.

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820). The new guidance modifies the disclosure requirements on fair value measurements. ASU 2018-13 is effective for the Company beginning in the first quarter of 2020 and must be adopted on a modified retrospective basis, with certain exceptions. Early adoption is permitted. The Company does not expect ASU 2018-13 to have a significant impact to its condensed consolidated financial statements and related disclosures.

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Net Loss Per Share Attributable to Common Stockholders- Excluded From Calculation (Details) - shares	9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018
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)	25,262,276	95,039
Options issued and outstanding
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)	3,821,690	42,979
Inducement options issued and outstanding
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)		2,994
Options available for grant under stock options plans
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)	554,016	3,402
Restricted stock unit awards issued and outstanding
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)	5,613	5,613
Warrants issued and outstanding
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)	19,421,892	16,582
Convertible notes
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)		23,469
Series A convertible preferred 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)	473,565
Series B convertible preferred 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)	985,500

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CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Revenue
Total revenue	$ 972,779	$ 1,132,067	$ 4,268,206	$ 2,820,269
Operating expenses
Cost of product revenue	947,495	736,733	3,072,800	1,808,918
Research and development	1,307,296	1,481,166	4,426,308	3,843,918
Sales and marketing	1,698,440	2,716,752	5,436,635	7,119,204
General and administrative	3,106,633	2,703,628	9,816,909	8,761,776
Settlement of Tempesta Royalty License Agreement	640,000		640,000
Impairment of indefinite-lived intangible assets	0	0	4,000,000	0
Total operating expenses	7,699,864	7,638,279	27,392,652	21,533,816
Loss from operations	(6,727,085)	(6,506,212)	(23,124,446)	(18,713,547)
Interest expense	(1,352,845)	(872,044)	(5,556,953)	(2,185,868)
Other income (expense)	28,784	9,540	49,392	322,244
Change in fair value of warrants, derivative liability and conversion option liability	841,834	26,231	1,002,865	(119,134)
Gain on Valeant settlement		1,204,133		1,204,133
Loss on extinguishment of debt	(335,753)		(4,940,911)
Loss before income tax	(7,545,065)	(6,138,352)	(32,570,053)	(19,492,172)
Income tax expense	(10,000)		(10,000)
Net loss and comprehensive loss	(7,555,065)	(6,138,352)	(32,580,053)	(19,492,172)
Net loss attributable to common shareholders	$ (11,682,949)	$ (6,138,352)	$ (36,707,937)	$ (20,487,172)
Net loss per share, basic and diluted (in dollars per share)	$ (2.00)	$ (37.77)	$ (13.37)	$ (143.25)
Weighted-average common shares outstanding, basic and diluted (in shares)	5,841,790	162,506	2,746,523	143,012
Series A convertible preferred stock
Operating expenses
Deemed dividend				$ (995,000)
Series B convertible preferred stock
Operating expenses
Deemed dividend	$ (3,875,778)		$ (3,875,778)
Series 1 warrants
Operating expenses
Deemed dividend	(252,106)		(252,106)
Product revenue, net
Revenue
Total revenue	$ 972,779	$ 1,132,067	$ 4,268,206	2,642,880
Collaboration revenue
Revenue
Total revenue				$ 177,389

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Net Loss Per Share

9 Months Ended

Sep. 30, 2019

Net Loss Per Share Attributable to Common Stockholders

Net Loss Per Share Attributable to Common Stockholders

12. Net Loss Per Share

The following table presents the calculation of basic and diluted net loss per share of common stock for the periods indicated:

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2019		2018		2019		2018
	(unaudited)					(unaudited)
Net loss attributable to common shareholders (basic and diluted)	$	(11,682,949)	$	(6,138,352)	$	(36,707,937)	$	(20,487,172)
Shares used to compute net loss per common share, basic and diluted		5,841,790		162,506		2,746,523		143,012
Net loss per share attributable to common shareholders, basic and diluted	$	(2.00)	$	(37.77)	$	(13.37)	$	(143.25)

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 nine months ended September 30, 2019 and 2018 because their inclusion would be anti-dilutive.

	September 30,	September 30,
	2019	2018
	(unaudited)
Options issued and outstanding	3,821,690	42,979
Inducement options issued and outstanding	—	2,994
Options available for grant under stock options plans	554,016	3,402
Restricted stock unit awards issued and outstanding	5,613	5,613
Warrants issued and outstanding	19,421,892	16,582
Convertible notes	—	23,469
Series A convertible preferred stock	473,565	—
Series B convertible preferred stock	985,500	—
Total	25,262,276	95,039

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Balance Sheet Components

9 Months Ended

Sep. 30, 2019

Balance Sheet Components

Balance Sheet Components

4. Balance Sheet Components

Goodwill 

The change in the carrying amount of goodwill at September 30, 2019 and December 31, 2018 was as follows:

	September 30,
	2019		December 31,
	(unaudited)		2018
Beginning balance	$	—	$	5,210,821
Impairment		—		(5,210,821)
Ending balance	$	—	$	—

Intangible Assets

Intangible assets at September 30, 2019 and December 31, 2018 consisted of the following:

	September 30,
	2019		December 31,
	(unaudited)		2018
Developed technology	$	25,000,000	$	25,000,000
Accumulated developed technology amortization		(3,611,112)		(2,361,111)
Developed technology, net		21,388,888		22,638,889
In-process research and development		8,800,000		8,800,000
Impairment		(4,000,000)		—
In process research and development, net		4,800,000		8,800,000
Trademarks		300,000		300,000
Accumulated trademark amortization		(43,333)		(28,333)
Trademarks, net		256,667		271,667
Total intangible assets, net	$	26,445,555	$	31,710,556

In June 2019 the Company determined that in-process research and development was impaired and recorded an impairment loss of $4.0 million in the statements of operations. Amortization expense was $421,667 and $1,265,001 for the three and nine months ended September 30, 2019, respectively, and $421,667 and $1,265,001 for the three and nine months ended September 30, 2018, respectively.

The following table summarizes the Company’s estimated future amortization expense of intangible assets with finite lives as of September 30, 2019:

	Amounts
2019 (remaining)	$	421,667
2020		1,686,667
2021		1,686,667
2022		1,686,667
2023		1,686,667
2024		1,686,667
Thereafter		12,790,553
	$	21,645,555

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Warrants

9 Months Ended

Sep. 30, 2019

Warrant Activity

Warrants

8. Warrants

The following table summarizes information about warrants outstanding and exercisable into shares of the Company’s common stock as of September 30, 2019 and 2018:

	Nine Months Ended		Nine Months Ended
	September 30,		September 30,
	2019		2018
	(unaudited)
Warrants outstanding, beginning balance		34,682		4,590
Issuances		19,387,761		12,713
Expirations and cancellations		(551)		(722)
Warrants outstanding, ending balance		19,421,892		16,581

For the nine months ended September 30, 2019, the Company issued 19,387,761 warrants, as follows:

March 2019 Ladenburg Warrants

In March 2019, in consideration of services provided in the Company’s March 2019 public offering of 19,019 common shares, the Company issued to Ladenburg Thalmann & Co. warrants to purchase an aggregate of 761 shares of common stock at an exercise price of $17.50 per common share. The warrants were valued at $13,028 using the Black-Scholes option pricing model as follows: exercise price of $17.50 per share, stock price of $18.90 per share, expected life of five years, volatility of 146%, and a risk-free rate of 2.21%. The warrants were classified in stockholders’ equity.

March 2019 LOC Warrant

In March 2019, in consideration of a letter of credit cancellation related to the Company’s office lease, the Company issued a warrant to purchase warrant shares equal to a fixed principal amount divided by a variable exercise price (see Note 3). The warrants were initially classified as liabilities pursuant to ASC 480-10 due to their debt-like nature. On July 23, 2019, upon the exercise price of the warrants becoming fixed, the warrants became exercisable into 45,750 shares of the Company’s common stock and were reclassified to additional paid-in-capital with a fair value of $71,079 (see Note 3).

2019 Bridge Note Warrants

Between March 18, 2019 and June 26, 2019, concurrent to the Company entering into Promissory Notes of $5,050,000, the Company issued twenty-one warrants to purchase warrant shares equal to a fixed principal amount divided by a variable exercise price (see Note 3). The warrants for all twenty-one Bridge Notes were initially liability classified pursuant to ASC 480-10 due to their debt-like nature. On July 23, 2019, upon the exercise price of the warrants becoming fixed, the warrants became exercisable into 2,781,250 shares of the Company’s common stock and were reclassified to additional paid-in-capital with a fair value of $4,259,327 (see Note 3).

Series 1 Warrants

In July 2019, the Company entered into an underwriting agreement (see Note 1), relating to a public offering, which was comprised of (1) 2,886,500 Class A Units, priced at $2.00 per unit, with each unit consisting of (i) one share of the Company’s voting common stock, (ii) one Series 1 warrant to purchase one share of Common Stock, and (iii) one Series 2 warrant to purchase one share of Common Stock, and (2) 10,787 Class B Units, priced at a price of $1,000 per unit, with each unit consisting of (i) one share of Series B convertible preferred stock, convertible into 500 shares of Common Stock, (ii) 500 Series 1 Warrants and (iii) 500 Series 2 Warrants.

The Series 1 Warrants have an exercise price of $2.00 and expire on the earlier of (a) 5 years from the date of issuance and (b) 30 calendar days following the public announcement of Positive Interim Results related to the diarrhea results from the HALT-D investigator initiated trial, if and only if certain trading benchmarks are achieved during such 30 calendar day period.

In the offering, the Company sold (i) 2,886,500 Class A Units, which included Series 1 warrants to purchase 2,886,500 shares of the Company’s common stock and (ii) 10,787 Class B Units, which included Series 1 warrants to purchase 5,393,500 shares of the Company’s common stock. In total, 8,280,000 Series 1 warrants were issued, with an initial valuation of $5,304,989 computed using the Black-Scholes-Merton pricing model using a stock price of $1.73, a strike price of $2.00, an expected term of 5.0 years, volatility of 144.76% and a risk-free discount rate of 1.83%. Upon issuance, the Series 1 warrants were classified in additional paid-in-capital.

Modification of the Series 1 Warrants

In September 2019, the Company reduced the exercise price all 8,280,000 Series 1 Warrants from $2.00 to $1.40. The Company determined the impact of this modification to be an increase in the fair value of the warrants of $252,106. Because the modification applied to the entire class of Series 1 Warrant holders, the increase in fair value represented a deemed dividend to the entire class of Series 1 Warrant holders. The modification did not result in the reclassification of the equity-classified Series 1 warrants from additional paid-in-capital to liability classification.

Series 2 Warrants

The Series 2 Warrants have an exercise price of $2.00 and expire on the first date on the earlier of (a) 5 years from the date of issuance and (b) 30 calendar days following the public announcement by the Company that a pivotal phase 3 clinical trial using crofelemer (Mytesi®, or the same or similar product with a different name) for the treatment of cancer therapy-related diarrhea in humans has met its primary endpoint in accordance with the protocol, if and only if certain trading benchmarks are achieved during such 30 calendar day period. In addition, each Series 2 Warrant has an embedded call option that allows the Company to redeem any unexercised warrants if certain contingencies are met. 

In the offering, the Company sold (i) 2,886,500 Class A Units, which included Series 2 warrants to purchase 2,886,500 shares of the Company’s common stock and (ii) 10,787 Class B Units, which included Series 1 warrants to purchase 5,393,500 shares of the Company’s common stock. In total, 8,280,000 Series 2 warrants were issued, with an initial valuation of $5,304,989 computed using the Black-Scholes-Merton pricing model using a stock price of $1.73, a strike price of $2.00, an expected term of 5.0 years, volatility of 144.76% and a risk-free discount rate of 1.83%. Upon issuance, the Series 2 Warrants were classified in additional paid-in-capital.

For the nine months ended September 30, 2018, the Company issued 12,713 warrants, as follows:

August 2018 LOC Warrant

In August 2018, in consideration of the Letter of Credit associated with the Company’s office lease, the Company issued to an existing shareholder a five-year warrant to purchase 9,580 shares of the Company’s common stock. The Warrant is exercisable on or after March 28, 2019 at an exercise price of $49.08. The warrants had an issuance-date fair value of $493,688 and classified in additional paid-in-capital with an offset to deferred rent.

September 2018 L2 Warrants

Concurrent to entering into the Note Purchase Agreement with L2 Capital in September 2018, the Company issued to L2 Capital a 5-year warrant to purchase 2,649 shares of the Company’s common stock. The warrants had an issuance-date fair value of $100,330 at an exercise price of $63.00 per share. The warrants were recorded in additional paid-in-capital and treated as a discount to the L2 Capital Promissory note balance.

September 2018 Conte Warrants

Concurrent to entering into the Note Purchase Agreement with an accredited investor in September 2018, the Company issued to the accredited investor a 5-year warrant to purchase 484 shares of the Company’s common stock. The warrants had an issuance-date fair value of $17,818 at an exercise price of $86.10 per share. The warrants were recorded in additional paid-in-capital and treated as a discount to the Conte Promissory note balance.

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Summary of Significant Accounting Policies - Leases (Details) - USD ($)	9 Months Ended
	Sep. 30, 2019	Jan. 01, 2019	Dec. 31, 2018
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Operating lease - right-of-use asset	$ 730,840
Operating leases liabilities, current portion	442,017
Minimum
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Monthly base rents	38,391
Maximum
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Monthly base rents	$ 40,730
ASU 2016-02
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Operating lease - right-of-use asset		$ 1,111,214
Operating leases liabilities, current portion		336,647
Operating leases liabilities, long term		394,703
Deferred rent			$ 379,864
Adoption Impact | ASU 2016-02
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Operating lease - right-of-use asset		1,111,214
Operating leases liabilities, current portion		336,647
Operating leases liabilities, long term		394,703
Deferred rent		$ (379,864)

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Organization and Business - Liquidity and Going Concern (Details) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018	Dec. 31, 2018
Organization and Business
Accumulated deficit	$ (127,130,832)		$ (127,130,832)		$ (94,550,779)
Net Income (Loss) Attributable to Parent	$ (7,555,065)	$ (6,138,352)	$ (32,580,053)	$ (19,492,172)

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Summary of Significant Accounting Policies (Tables)

9 Months Ended

Sep. 30, 2019

Schedule of adoption of the new leases standard

	December 31, 2018		Adoption Impact		January 1, 2019
			(unaudited)
Operating lease right-of-use assets	$	—	$	1,111,214	$	1,111,214
Operating leases liabilities, current portion		—		336,647		336,647
Operating leases liabilities, long term		—		394,703		394,703
Deferred rent		379,864		(379,864)		—

Customer risk | Total net revenue

Schedule of concentration risk

Consolidated (percentage of total net sales)	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2019		2018		2019		2018
Customer 1	100	%	34	%	90	%	28	%
Customer 2	—	%	28	%	—	%	28	%
Customer 3	—	%	25	%	—	%	25	%

Credit risk | Total accounts receivable

Schedule of concentration risk

	As of		As of
	September 30,		September 30,
	2019		2018
Customer 1	99.6	%	35.0	%
Customer 2	—	%	29.0	%
Customer 3	—	%	26.0	%

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Warrants (Tables)

9 Months Ended

Sep. 30, 2019

Warrant Activity

Summary of warrant activity

	Nine Months Ended		Nine Months Ended
	September 30,		September 30,
	2019		2018
	(unaudited)
Warrants outstanding, beginning balance		34,682		4,590
Issuances		19,387,761		12,713
Expirations and cancellations		(551)		(722)
Warrants outstanding, ending balance		19,421,892		16,581

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Related Party Transactions - Letter of Credit (Details) - USD ($)		1 Months Ended	3 Months Ended	9 Months Ended
	Aug. 28, 2018	Aug. 31, 2018	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Related party Transactions
Standby letter of credit received as collateral				$ 475,000
Warrants to purchase (in shares)				9,580
Exercise price (in dollars per share)				$ 49.00
Term				5 years
Fair value of warrants included in stockholders equity			$ 118,149	$ 493,688
Pacific Capital Management LLC
Related party Transactions
Exercise price (in dollars per share)		$ 49.00
Term		5 years
Fair value of warrants included in stockholders equity				493,688
Payable amount				$ 45,000
Office lease extension agreement
Related party Transactions
Fair value of warrants included in stockholders equity			$ 493,688		$ 493,688
Office lease extension agreement | Pacific Capital Management LLC
Related party Transactions
Standby letter of credit received as collateral	$ 475,000
Warrants to purchase (in shares)		9,580

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Balance Sheet Components - Goodwill (Details)	12 Months Ended
	Dec. 31, 2018 USD ($)
Goodwill
Beginning balance	$ 5,210,821
Impairment	$ (5,210,821)

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Stock Incentive Plans - Stock-Based Compensation (Details) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Stock Based Compensation
Total stock-based compensation expense	$ 1,110,109	$ 680,094	$ 1,982,985	$ 1,416,791
Research and development expense
Stock Based Compensation
Total stock-based compensation expense	332,636	175,772	548,524	400,521
Sales and marketing expense
Stock Based Compensation
Total stock-based compensation expense	41,122	39,210	87,215	59,762
General and administrative expense
Stock Based Compensation
Total stock-based compensation expense	736,351	$ 465,112	1,347,246	$ 956,508
Stock options and RSUs
Stock Based Compensation
Unrecognized stock-based compensation expense	$ 5,555,383		$ 5,555,383
Expected weighted average period to be recognized			2 years 3 months 22 days
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)			142.90%	95.60%
Weighted-average expected term (years)			5 years 7 months 6 days	5 years 9 months 18 days
Risk-free interest rate (as a percent)			1.50%	2.80%
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)			145.90%	95.90%
Weighted-average expected term (years)			5 years 9 months 18 days
Risk-free interest rate (as a percent)			1.90%	3.10%

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Debt - 2019 Exchange Notes (Details)		1 Months Ended	2 Months Ended	3 Months Ended	9 Months Ended
	May 28, 2018 USD ($) item	Jul. 31, 2019 USD ($)	Jun. 30, 2019 USD ($)	Sep. 30, 2019 USD ($)	Sep. 30, 2019 USD ($)	Dec. 31, 2018 USD ($)	Feb. 28, 2015 USD ($)
Convertible Promissory Notes and Common Stock Warrants [Line Items]
Debt Instrument, Face Amount							$ 150,000
Principal amount and accrued interest		$ 1,100,000	$ 5,144,175
Debt conversion amount		301,577	817,863
Gains (Losses) on Extinguishment of Debt				$ (335,753)	$ (4,940,911)
Convertible Notes Payable						$ 11,239,170
Exchange Notes
Convertible Promissory Notes and Common Stock Warrants [Line Items]
Number of Napo convertible notes | item	2
Number of Napo convertible notes exchanged for CVP note | item	2
Gains (Losses) on Extinguishment of Debt		$ 11,202	$ 439,978
Convertible Notes Payable				6,678,461	6,678,461
2019 Exchange Note 1
Convertible Promissory Notes and Common Stock Warrants [Line Items]
Debt Instrument, Face Amount	$ 10,125,339
Principal amount and accrued interest	10,535,900
Convertible Notes Payable, Accrued Interest	$ 410,562
Debt Instrument, Interest Rate, Stated Percentage	10.00%
Convertible Notes Payable				4,381,535	4,381,535
2019 Exchange Note 2
Convertible Promissory Notes and Common Stock Warrants [Line Items]
Number of Napo convertible notes exchanged for CVP note | item	2
Debt Instrument, Face Amount	$ 2,296,926
Debt Instrument, Interest Rate, Stated Percentage	10.00%
Gains (Losses) on Extinguishment of Debt	$ 2,046,939
Convertible Notes Payable				$ 2,296,926	$ 2,296,926

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Convertible Preferred Stock (Details) - USD ($)	1 Months Ended			2 Months Ended	3 Months Ended		6 Months Ended	9 Months Ended
	Jul. 31, 2019	Jul. 23, 2019	Mar. 31, 2018	Aug. 31, 2019	Sep. 30, 2019	Mar. 31, 2018	Mar. 31, 2021	Sep. 30, 2019	Sep. 30, 2018	Dec. 31, 2018
Amount of shares issued								$ 1,199,122	$ 2,055,874
Liquidation value					$ 12,738,822			$ 12,738,822		$ 9,199,002
Convertible preferred stock, shares outstanding					5,524,926			5,524,926		5,524,926
Outstanding preferred shares					5,524,926			5,524,926		5,524,926
Series 1 warrants
Deemed dividend								$ 252,106
Gross proceeds	$ 3,455,611
Series 2 warrants
Gross proceeds	3,455,611
Class A units
Stock issuance and other costs								$ 875,122
Class A units | Series 1 warrants
Units issued		2,886,500
Common stock issued and issuable		2,886,500
Class A units | Series 2 warrants
Units issued		2,886,500
Common stock issued and issuable		2,886,500
Class B units
Units issued		10,787
Public offering price		$ 1,000
Gross proceeds	10,787,000
Stock issuance and other costs	1,635,184
Class B units | Series 1 warrants
Units issued		10,787
Number of shares in exchange for each unit		500
Common stock issued and issuable		5,393,500
Class B units | Series 2 warrants
Units issued		10,787
Public offering price		$ 1,000
Number of shares in exchange for each unit		500
Common stock issued and issuable		5,393,500
Forecast | Maximum
Product revenue							$ 22,000,000
Average VWAP of common stock for the 30 days prior to Measurement Date							$ 105.00
Underwritten Public Offering
Gross proceeds from the issuance of common stock	$ 16,560,000
Common stock issued and issuable	2,886,500
Stock issuance and other costs	$ 2,510,303
Underwritten Public Offering | Series 1 warrants
Number of shares in exchange for each unit	500
Common stock issued and issuable	5,393,500
Underwritten Public Offering | Series 2 warrants
Number of shares in exchange for each unit	500
Common stock issued and issuable	5,393,500
Underwritten Public Offering | Class A units
Units issued	2,886,500	2,886,500
Public offering price	$ 2.00	$ 2.00
Number of shares in exchange for each unit	1	1
Stock issuance and other costs	$ 875,184
Underwritten Public Offering | Class A units | Series 1 warrants
Units issued		2,886,500
Public offering price		$ 2.00
Number of shares in exchange for each unit	1	1
Number of warrants are converted for each share		1
Underwritten Public Offering | Class A units | Series 2 warrants
Number of shares in exchange for each unit	1	1
Number of warrants are converted for each share		1
Underwritten Public Offering | Class B units
Units issued	10,787
Public offering price	$ 1,000
Underwritten Public Offering | Class B units | Series 1 warrants
Number of shares issued for each convertible preferred stock	500
Units issued		10,787
Public offering price		$ 1,000
Number of shares in exchange for each unit		500
Underwritten Public Offering | Class B units | Series 2 warrants
Number of shares issued for each convertible preferred stock	500
Number of shares in exchange for each unit		500
Series B convertible preferred stock
Number of shares issued for each convertible preferred stock		500
Convertible preferred stock, shares outstanding					1,971			1,971		0
Deemed dividend					$ 3,875,778			$ 3,875,778
Units issued	10,787				10,787			10,787
Stated or par value	$ 1,000
Number of warrants are converted for each share	1
Gross proceeds	$ 3,875,778
Shares converted				8,816	(8,816)			(8,816)
Outstanding preferred shares					1,971			1,971		0
Series B convertible preferred stock | Class B units
Number of shares issued for each convertible preferred stock		500
Number of shares in exchange for each unit		1
Series B convertible preferred stock | Underwritten Public Offering
Number of shares issued for each convertible preferred stock	10,787
Series B convertible preferred stock | Underwritten Public Offering | Class B units
Number of shares issued for each convertible preferred stock	500
Number of shares in exchange for each unit	1
Series B convertible preferred stock | Underwritten Public Offering | Class B units | Series 1 warrants
Number of shares issued for each convertible preferred stock		500
Number of shares in exchange for each unit		1
Series A convertible participating preferred stock
Redemption value					$ 12,738,822			$ 12,738,822		$ 12,738,822
Liquidation value					$ 9,199,002			$ 9,199,002		$ 9,199,002
Redemption price per share					$ 2.3057			$ 2.3057
Beneficial Conversion Feature						$ 995,000
Deemed dividend								$ 995,000
Series B Convertible Participating Preferred Stock
Beneficial Conversion Feature		$ 3,875,778
Deemed dividend		$ 3,875,778
Common Stock
Stock price (in dollars per share)					$ 1.31			$ 1.31
Issuance of common stock upon conversion (in shares)				4,408,000
Common Stock | Series B convertible preferred stock
Issuance of common stock in exchange for redemption of convertible preferred stock (in shares)					4,408,000
Shares converted								4,408,000
Sagard Capital Partners, L.P. | Series A convertible participating preferred stock
Number of shares issued for each convertible preferred stock			473,565			473,565
Effective conversion price			$ 19.425					$ 19.4250
Minimum holding percent of the shares after conversion			19.99%
Maximum period from date of issuance			1 year
Second Amendment to Note Purchase Agreement and Notes | Sagard Capital Partners, L.P. | Series A convertible participating preferred stock | Private placement
Shares issued (in shares)			5,524,926
Preferred stock, par value (in dollars per share)			$ 0.0001			$ 0.0001
Amount of shares issued						$ 9,000,002
Gross proceeds from the issuance of common stock						$ 9,199,002

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Subsequent Events - Designation of Series B-1 Convertible Preferred Stock (Details) - USD ($)	1 Months Ended
	Oct. 31, 2019	Sep. 30, 2019
Subsequent Events.
Number of securities issued on conversion		9,580
Series 1 warrants | Subsequent event
Subsequent Events.
Warrant exercise agreement	1,250,000
Notice period for exercise of warrants	2 days
Preferred stock, par value (in dollars per share)	$ 12,201
Number of warrants are converted for each share	19,841
Warrants exercised	1,250,000
Gross proceeds	$ 1,750,000
Series B-1 Convertible Preferred Stock | Subsequent event
Subsequent Events.
Number of shares issued for each convertible preferred stock	10,001
Minimum percentage of beneficial ownership after conversion	4.99%
Beneficial ownership percentage prior to increase	9.99%
Prior notice period for increase in beneficial ownership percentage	61 days
Number of securities issued on conversion	63

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CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($)	Sep. 30, 2019	Dec. 31, 2018
Current assets:
Cash	$ 2,069,534	$ 2,568,191
Accounts receivable	1,593,531	995,683
Other receivable		6,118
Inventory	2,322,137	3,342,177
Prepaid expenses and other current assets	1,563,458	1,237,772
Total current assets	7,548,660	8,149,941
Property and equipment, net	720,345	760,617
Operating lease - right-of-use asset	730,840
Intangible assets, net	26,445,555	31,710,556
Other assets	181,144	420,831
Total assets	35,626,544	41,041,945
Current liabilities:
Accounts payable	4,752,097	5,414,260
Accrued liabilities	3,364,021	4,939,441
Warrant liability	10,029	220,376
Convertible debt, net of discount		11,239,170
Operating lease liability	442,017
Notes payable, net of discount		4,845,575
Total current liabilities	8,568,164	26,658,822
Notes payable long term, net of discount	6,678,461
Total liabilities	15,246,625	26,658,822
Commitments and contingencies (See Note 6)
Series A convertible preferred stock: $0.0001 par value, 10,000,000 shares authorized at September 30, 2019 and December 31, 2018; 5,524,926 shares issued and outstanding at September 30, 2019 and December 31, 2018; (redemption value and liquidation preference of $12,738,822 and $9,199,002 at September 30, 2019 and December 31, 2018, respectively)	9,000,002	9,000,002
Stockholders' equity/(deficit):
Series B convertible preferred stock: $0.0001 par value, 11,000 and zero shares authorized at September 30, 2019 and December 31, 2018, respectively; 1,971 and zero shares issued and outstanding at September 30, 2019 and December 31, 2018, respectively	409,401
Additional paid-in capital	138,096,378	99,929,835
Accumulated deficit	(127,130,832)	(94,550,779)
Total stockholders' equity	11,379,917	5,383,121
Total liabilities, convertible preferred stock and stockholders' equity	35,626,544	41,041,945
Common stock - voting
Stockholders' equity/(deficit):
Common stock value	940	35
Common stock - non-voting
Stockholders' equity/(deficit):
Common stock value	$ 4,030	$ 4,030

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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($)	3 Months Ended			9 Months Ended		12 Months Ended
	Sep. 30, 2019	Dec. 31, 2018	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018	Dec. 31, 2018
Cash flows from operating activities
Net loss	$ (7,555,065)		$ (6,138,352)	$ (32,580,053)	$ (19,492,172)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization expense				1,304,946	989,116
Impairment of indefinite-lived intangible assets	0		0	4,000,000	0
Interest paid on the conversion of debt to equity					21,275
Common stock issued in exchange for services rendered					6,425
Loss on extinguishment of debt	335,753			4,940,911
Amortization of operating lease right-of-use-assets				554,017
Stock-based compensation				1,982,985	1,416,791
Amortization of debt issuance costs and debt discount				5,032,214	1,461,133
Change in fair value of warrants, conversion option and derivative liability				(1,002,865)	(178,461)
Changes in assets and liabilities.
Accounts receivable				(597,848)	(561,012)
Other receivable				6,118	(175,009)
Inventory				1,020,040	(477,217)
Prepaid expenses and other current assets				(465,610)	(635,622)
Deferred offering costs					(1,255,554)
Other non-current assets					(289,828)
Deferred collaboration revenue					(177,389)
Operating lease liabilities				(346,679)	52,665
Accounts payable				(662,163)	(904,577)
Accrued expenses				(503,526)	2,370,682
Total cash used in operating activities				(17,317,513)	(17,828,754)
Cash flows from investing activities
Purchase of equipment					(6,527)
Total cash used in investing activities					(6,527)
Cash flows from financing activities
Proceeds from issuance of long-term debt					2,310,000
Repayment of notes payable				(100,000)	(1,689,200)
Proceeds from issuance of convertible debt					500,000
Proceeds from issuance of common stock through a stock purchase agreement with a private investor					1,305,774
Proceeds from the issuance of common stock in a private investment in public entities with existing investors					750,100
Fractional common shares repurchased					(30)
Proceeds from issuance of short-term notes payable				5,050,000
Repayment of short-term notes payable				(5,050,000)
Proceeds from the issuance of common stock, March 2019				266,266
Total cash provided by financing activities				16,818,856	17,801,543
Net increase (decrease) in cash				(498,657)	(33,738)
Cash at beginning of period		$ 726,129		2,568,191	759,867	$ 759,867
Cash at end of period	2,069,534	$ 2,568,191	$ 726,129	2,069,534	726,129	$ 2,568,191
Supplemental disclosure of cash flow information
Interest paid on long-term debt					$ 19,344
Supplemental schedule of non-cash financing and investing activities
Common stock issued in exchange for CVP Exchange Note 1 principal and related interest				6,672,950
Common stock issued in payment of accrued interest on Kingdon notes payable				446,729
Common stock issued in payment of CVP Note Payable principal and related interest				8,224,923
Common stock issued upon conversion of Series B convertible preferred stock				1,831,193
Reclassification of warrants from liability to equity				4,259,327
September 2018 L2 convertible note payable
Supplemental schedule of non-cash financing and investing activities
Issuance of warrants with short-term Notes Payable					118,148
Issuance of common stock					$ 48,000
Private Investment in Public Entities July 2019
Cash flows from financing activities
Proceeds from issuance of convertible preferred stock				3,875,778
Private Investment in Public Entities March 2018
Cash flows from financing activities
Proceeds from the issuance of common stock					5,000,000
Proceeds from the issuance of convertible preferred stock, March 2018					9,000,002
Proceeds from issuance of common stock, January to April 2019
Cash flows from financing activities
Proceeds from the issuance of common stock				2,602,896
Private Investment in Public Entities July 2018
Cash flows from financing activities
Proceeds from the issuance of common stock					624,897
Jaguar Notes Payable
Supplemental schedule of non-cash financing and investing activities
Common stock issued as redemption of notes payable and related interest					1,153,408
Napo convertible debt
Supplemental schedule of non-cash financing and investing activities
Common stock issued as redemption of notes payable and related interest					1,638,546
Series 1 warrants
Supplemental schedule of non-cash financing and investing activities
Deemed dividend				252,106
Series 1 warrants | Private Investment in Public Entities July 2019
Cash flows from financing activities
Proceeds from the issuance of Warrants in Class A and B Units, July 2019				5,304,989
Series 2 warrants | Private Investment in Public Entities July 2019
Cash flows from financing activities
Proceeds from the issuance of Warrants in Class A and B Units, July 2019				5,304,989
Bridge Note Warrants
Supplemental schedule of non-cash financing and investing activities
Issuance of warrants				5,005,739
Reclassification of warrants from liability to equity	4,259,327			4,259,327
March 2019 LOC warrants
Supplemental schedule of non-cash financing and investing activities
Issuance of warrants				116,297
Reclassification of warrants from liability to equity	71,079			71,079
Series A convertible preferred stock
Supplemental schedule of non-cash financing and investing activities
Deemed dividend					$ 995,000
Series B convertible preferred stock
Supplemental schedule of non-cash financing and investing activities
Deemed dividend	$ 3,875,778			3,875,778
Class A units
Cash flows from financing activities
Payment of underwriting discounts, commissions and other associated offering costs				(875,122)
Class A units | Private Investment in Public Entities July 2019
Cash flows from financing activities
Proceeds from the issuance of common stock				2,074,244
Class B units | Private Investment in Public Entities July 2019
Cash flows from financing activities
Payment of underwriting discounts, commissions and other associated offering costs				$ (1,635,184)

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Commitments and Contingencies - Contingencies (Details) - USD ($)	1 Months Ended	3 Months Ended	9 Months Ended
	Oct. 31, 2019	Sep. 30, 2019	Sep. 30, 2019	Feb. 28, 2015
Commitments and Contingencies
Loss contingency		$ 640,000	$ 640,000
Principal amount				$ 150,000
Tempesta | Termination of Tempesta Royalty License Agreement
Commitments and Contingencies
Estimate possible loss		$ 640,000	640,000
Loss contingency			$ 640,000
Tempesta | Subsequent event | Termination of Tempesta Royalty License Agreement
Commitments and Contingencies
Estimate possible loss	$ 640,000
Cash paid	50,000
Principal amount	$ 550,000
Number roof shares issued in exchange of cessation of royalty payments	40,000

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Debt - March 2017 Convertible debt (Details)	Mar. 31, 2017 USD ($) tranche Lender	Feb. 28, 2015 USD ($)
Debt and Warrants
Principal amount		$ 150,000
Exchangeable note purchase agreement | Napo
Debt and Warrants
Number of lenders, agreement | Lender	2
Principal amount	$ 1,312,500
Number of tranches | tranche	2
Value of each tranche	$ 525,000
Face amount of each tranche	$ 656,250
Interest rate (as a percent)	3.00%
Fair value of notes	$ 1,312,500

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Debt - Securities Purchase Agreement (Details)							1 Months Ended			3 Months Ended					9 Months Ended		12 Months Ended
	Apr. 17, 2019 USD ($)	Apr. 16, 2019 USD ($)	Aug. 02, 2018 USD ($)	Mar. 21, 2018 USD ($)	Feb. 26, 2018 USD ($)	Dec. 08, 2017 USD ($)	May 31, 2019 USD ($)	Apr. 30, 2019 USD ($) shares	Mar. 31, 2019 USD ($)	Sep. 30, 2019 USD ($)	Jun. 26, 2019 USD ($)	Mar. 31, 2019 USD ($) shares	Dec. 31, 2018 USD ($) item	Sep. 30, 2018 USD ($)	Sep. 30, 2019 USD ($) item	Sep. 30, 2018 USD ($)	Dec. 31, 2018 USD ($) item	Jun. 30, 2019 USD ($)	Feb. 28, 2015 USD ($)
Debt and Warrants
Principal amount																			$ 150,000
Proceeds from issuance of short-term notes payable															$ 5,050,000
Convertible debt													$ 11,239,170				$ 11,239,170
Convertible Notes Payable Gross													$ 11,294,770				11,294,770
Number of notes for which standstill fee paid | item													4
Convertible debt – current, net of discount													$ 11,239,170				11,239,170
Principal less discount													11,294,770				11,294,770
Loss on extinguishment of debt										$ (335,753)					(4,940,911)
Change in warrant liability										(841,834)				$ (26,231)	(1,002,865)	$ 119,134
Chicago Venture Partners, L.P.
Debt and Warrants
Convertible debt													499,403				499,403
Total standstill fee													$ 499,403		$ 499,403		$ 499,403
Number of notes for which standstill fee paid | item													4		4		4
March 2018 note payable
Debt and Warrants
Carrying value of notes										0			$ 1,005,880		$ 0		$ 1,005,880
2019 Bridge Notes
Debt and Warrants
Principal amount																		$ 5,050,000
Proceeds from issuance of short-term notes payable											$ 5,050,000
Interest rate (as a percent)											12.00%
Securities purchase agreement | Chicago Venture Partners, L.P.
Debt and Warrants
Principal amount				$ 1,090,341
Securities purchase agreement | Promissory Note, December 08, 2017 | Chicago Venture Partners, L.P.
Debt and Warrants
Principal amount						$ 1,587,500
Aggregate purchase price						1,100,000
Original issue discount						462,500
Transaction expenses						$ 25,000
Interest rate (as a percent)						8.00%
Convertible debt										$ 0			685,282		0		685,282
Maximum aggregate redemption amount			$ 500,000
Standstill fee													141,737
Increase in principal balance of notes payable													85,737
Standstill fee paid in cash													56,000
Repayments of notes payable, principal									$ 811,065
Repayments of notes payable, interest									178,755
Common stock issued in exchange of debt | shares												57,857
Loss on extinguishment of debt	$ 19,494						$ 27,176	$ 100,148	(243,419)						0		1,548,829
Securities purchase agreement | February 2018 note payable | Chicago Venture Partners, L.P.
Debt and Warrants
Principal amount					$ 2,240,909
Proceeds from issuance of short-term notes payable					1,560,000
Original issue discount					655,909
Transaction expenses					$ 25,000
Interest rate (as a percent)					8.00%
Standstill fee													198,841
Increase in principal balance of notes payable													118,841
Standstill fee paid in cash													80,000
Repayments of notes payable, principal									2,044,627
Repayments of notes payable, interest									203,866
Common stock issued in exchange of debt | shares								20,345				114,802
Loss on extinguishment of debt		$ 37,740							$ (487,865)				102,296		$ 0		$ 2,290,865
Securities purchase agreement | March 2018 note payable | Chicago Venture Partners, L.P.
Debt and Warrants
Proceeds from issuance of short-term notes payable				750,000
Original issue discount				315,341
Transaction expenses				$ 25,000
Interest rate (as a percent)				8.00%
Standstill fee													95,529
Increase in principal balance of notes payable													57,529
Standstill fee paid in cash													38,000
Repayments of notes payable, principal												$ 1,050,114
Repayments of notes payable, interest												$ 85,681
Common stock issued in exchange of debt | shares												95,407
Loss on extinguishment of debt												$ (1,210,676)	$ 223,824

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Summary of Significant Accounting Policies - Revenue Recognition - Collaboration Revenue (Details) - USD ($)			3 Months Ended		9 Months Ended
	Sep. 24, 2018	Nov. 01, 2017	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Collaboration Revenue
Written notice period (in days)		90 days
Revenues			$ 972,779	$ 1,132,067	$ 4,268,206	$ 2,820,269
Elanco
Collaboration Revenue
Collaboration revenue			0	0	0	177,389
Knight
Collaboration Revenue
License agreement term (in years)	15 years
Transfer price receivable upon achievement of certain regulatory and sales milestones	$ 18,000,000
Revenues			$ 0	$ 0	$ 0	$ 0

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Summary of Significant Accounting Policies - Concentrations (Details) - item	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Total net revenue | Customer 1
Concentrations
Concentration risk (as a percentage)	100.00%	34.00%	90.00%	28.00%
Total net revenue | Customer 2
Concentrations
Concentration risk (as a percentage)		28.00%		28.00%
Total net revenue | Customer 3
Concentrations
Concentration risk (as a percentage)		25.00%		25.00%
Total net revenue | Customer risk | One major pharmaceutical distributors
Concentrations
Number of major distributors	1		1
Total net revenue | Customer risk | Three major pharmaceutical distributors
Concentrations
Number of major distributors		3		3
Total net revenue | Customer risk | Three major pharmaceutical distributors | Minimum
Concentrations
Concentration risk (as a percentage)			10.00%
Total accounts receivable | Customer 1
Concentrations
Concentration risk (as a percentage)			99.60%	35.00%
Total accounts receivable | Customer 2
Concentrations
Concentration risk (as a percentage)				29.00%
Total accounts receivable | Customer 3
Concentrations
Concentration risk (as a percentage)				26.00%

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Organization and Business - (Details)	9 Months Ended
	Sep. 30, 2019 segment
Organization and Business
Number of operations segments	2

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Commitments and Contingencies

9 Months Ended

Sep. 30, 2019

Commitments and Contingencies

Commitments and Contingencies

6. Commitments and Contingencies

Commitments

On August 28, 2018, the Company entered into an office lease extension agreement for approximately 6,311 square feet of office space in San Francisco, CA.   The term of the Lease began on September 1, 2018 and will expire on September 30, 2020, unless earlier terminated in accordance therewith.  The monthly base rent under the Lease is as follows: $38,392 for the first twelve months, $39,544 for the subsequent twelve months, and $40,730 for the final month.  The Company will also pay an additional monthly amount for the Company’s proportionate share of the building’s operating charges. An existing shareholder provided a standby letter of credit in the amount of $475,000 to the Lessor as collateral for the full performance by the Company of all of its obligations under the Lease.  In consideration of the Letter of Credit, the Company issued the existing shareholder a five-year warrant to purchase 9,580 shares of the Company’s voting common stock (see Note 5).  The Warrant is exercisable on or after March 28, 2019 at an exercise price of $49.00 per share.  The fair value of the warrant was determined to be $493,688 using the Black-Scholes-Merton model with the following criteria:  stock price of $58.80 per share, expected life of 5 years, volatility of 132%, risk-free rate of 2.77% and dividend rate of 0%.  The $493,688 fair value of the Warrant was classified in stockholders’ equity with an offset to Operating lease – right-of-use asset.  Each month, $19,748 of this rent will be recognized as non-cash lease expense.

In December 2018, the Company did not meet a covenant per the terms of the $475,000 Letter of Credit, the result of which required the Company to issue a Letter of Credit of $122,000 to the shareholder who issued the original $475,000 letter of credit. In March 2019, the Company canceled the $122,000 letter of credit in lieu of issuing the shareholder a promissory note for that amount in April 2019, as well as issuing the shareholder a warrant (see Note 7).

The Company recognizes lease expense on a straight-line basis over the non-cancelable lease period. Lease expense was $152,741 and $554,017 for the three and nine months ended September 30, 2019, and $117,435 and $297,993 for the three and nine months ended September 30, 2018. Lease expense is included in general and administrative expense in the statements of operations.

Asset transfer and transition commitment update

On September 25, 2017, Napo entered into the Termination, Asset Transfer and Transition Agreement dated September 22, 2017 with Glenmark Pharmaceuticals Ltd. (“Glenmark”). As a result of the agreement, Napo now controls commercial rights for Mytesi® for all indications, territories and patient populations globally, and also holds commercial rights to the existing regulatory approvals for crofelemer in Brazil, Ecuador, Zimbabwe and Botswana. In exchange, Napo agrees to pay Glenmark 25% of any payment it receives from a third party to whom Napo grants a license or sublicense or with whom Napo partners in respect of, or sells or otherwise transfers any of the transferred assets, subject to certain exclusions, until Glenmark has received a total of $7.0 million. No payments have been made to date.

Revenue sharing commitment update

On December 14, 2017, the Company announced its entry into a collaboration agreement with Seed Mena Businessmen Services LLC (“SEED”) for Equilevia™, the Company's non-prescription, personalized, premium product for total gut health in equine athletes. According to the terms of the Agreement, the Company will pay SEED 15% of total revenue generated from any clients or partners introduced to the Company by SEED in the form of fees, commissions, payments or revenue received by the Company or its business associates or partners, and the agreed-upon revenue percentage increases to 20% after the first million dollars of revenue. In return, SEED will provide the Company access to its existing United Arab Emirates (“UAE”) network and contacts and assist the Company with any legal or financial requirements. The agreement became effective on December 13, 2017 and will continue indefinitely until terminated by either party pursuant to the terms of the Agreement. Upon termination for any reason, the Company remained obligated to make Revenue Sharing Payments to SEED until the end of 2018. No payments have been made to date.

Legal Proceedings

On July 20, 2017, a putative class action complaint was filed in the United States District Court, Northern District of California, Civil Action No. 3:17‑cv‑04102, by Tony Plant (the “Plaintiff”) on behalf of shareholders of the Company who held shares on April 12, 2017 and were entitled to vote at the 2017 Special Shareholders Meeting, against the Company and certain individuals who were directors as of the date of the vote (collectively, the “Defendants”), in a matter captioned Tony Plant v. Jaguar Animal Health, Inc., et al., making claims arising under Section 14(a) and Section 20(a) of the Exchange Act and Rule 14a‑9, 17 C.F.R. § 240.14a‑9, promulgated thereunder by the SEC. The claims alleged false and misleading information provided to investors in the Joint Proxy Statement/Prospectus on Form S‑4 (File No. 333‑217364) declared effective by the Commission on July 6, 2017 related to the solicitation of votes from shareholders to approve the merger and certain transactions related thereto. The Company accepted service of the complaint and summons on behalf of itself and the United States-based director Defendants on November 1, 2017. The Company has not accepted service on behalf of, and Plaintiff has not yet served, the non-U.S.-based director Defendants.

On October 3, 2017, Plaintiff filed a motion seeking appointment as lead plaintiff and appointment of Monteverde & Associates PC as lead counsel. That motion was granted. Plaintiff filed an amended complaint against the Company and the United States-based director Defendants on January 10, 2018.  The Defendants filed a motion to dismiss on March 12, 2018, for which oral arguments were held on June 14, 2018.  The court dismissed the amended complaint on September 20, 2018 but gave Plaintiff leave to amend the complaint within 20 days from the date of dismissal.  On October 10, 2018, Plaintiff amended the complaint to focus on the Company’s commercial strategy in support of Equilevia and the related disclosure statements in the Form S-4 described above.  On November 6, 2018, the Defendants moved to dismiss the second amended complaint. The Defendants argued in their motion that the second amended complaint fails to state a claim upon which relief can be granted because the omissions and misrepresentations alleged in the complaint are immaterial as a matter of law. The court denied the Defendants’ motion to dismiss on June 28, 2019. The defendants answered the second amended complaint on August 2, 2019. Discovery will now proceed. If the Plaintiff were able to prove his allegations in this matter and to establish the damages he asserts, then an adverse ruling could have a material impact on the Company.

Other than as described above, there are currently no claims or actions pending against us, the ultimate disposition of which could have a material adverse effect on our results of operations, financial condition or cash flows.

Contingencies

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

Settlement of Tempesta Royalty dispute

As of September 30, 2019, the Company was in negotiations with Dr. Michael Tempesta regarding disputes of royalty payments owed by Napo to Tempesta under a license agreement, dated February 8, 1990, between Tempesta and Shaman Pharmaceuticals, a predecessor-in-interest to Napo (the “1990 License”), and a modified license agreement, dated October 16, 2002, between Tempesta and Napo (the “2002 License” and together with the 1990 License, the “License Agreements”) with respect to SP-303, a component of Mytesi, the Company’s FDA-approved drug for the symptomatic relief of noninfectious diarrhea in adult patients with HIV/AIDS on antiretroviral therapy. The Company had ceased payment of royalties to Tempesta in October 2018.

At September 30, 2019, the Company determined that it was probable that a liability in the amount of $640,000 would be paid to Tempesta in the settlement of the royalty dispute. Accordingly, at September 30, 2019 and pursuant to ASC 450, the Company accrued a loss contingency of $640,000 that was charged to operating expenses in the condensed statements of operations.

In October 2019, the Company and Tempesta settled the dispute, pursuant to which Tempesta received $50,000 in cash, an unsecured promissory note issued by the Company in the aggregate principal amount of $550,000 and 40,000 shares of the Company’s common stock in exchange for the cessation of all royalty payments by Napo to Dr. Tempesta under the License Agreements (see Note 14).

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Stockholders' Equity

9 Months Ended

Sep. 30, 2019

Stockholders' Equity

Stockholders' Equity

10. Stockholders' Equity

Common Stock

As of September 30, 2019, and December 31, 2018, the Company had reserved shares of common stock for issuance as follows:

	September 30,	December 31,
	2019	2018
	(unaudited)
Options issued and outstanding	3,821,690	42,979
Inducement options issued and outstanding	—	2,985
Options available for grant under stock option plans	554,016	2,327
RSU awards issued and outstanding	5,613	5,613
Warrants issued and outstanding	19,421,892	34,682
Convertible notes	—	10,849
Convertible preferred stock-Series A	473,565	47,357
Convertible preferred stock-Series B	985,500	—
Total	25,262,276	146,792

Transactions with Oasis Capital

On January 7, 2019, Jaguar entered into a common stock purchase agreement with Oasis Capital, relating to an offering of an aggregate of up to 76,190 shares of common stock via an equity line of credit. Under the terms of the purchase agreement, the Company has the right to "put," or sell, up to 76,190 shares of common stock to Oasis Capital for an amount equal to the product of (i) the number of shares set forth on the applicable put notice (minus the deposit and clearing fees associated with such purchase) and (ii) a fixed price of $52.50 per share or such other price agreed upon between the Company and Oasis Capital. Jaguar had the option to increase the equity line of credit by an additional 114,286 shares of common stock by notifying Oasis Capital at any time after the effective date of the purchase agreement. In March 2019, Jaguar exercised this option. As of March 31, 2019, the Company had sold all of the 76,190 shares of common stock of the equity line and all 114,286 shares of common stock from the option to Oasis Capital, or a total of 190,476 shares.

In March 2019, Jaguar entered into a securities purchase agreement with Oasis Capital pursuant to which Jaguar agreed to issue and sell, in a registered public offering by Jaguar directly to Oasis, an aggregate of 19,019 shares of common stock at an offering price of $14.00 for gross proceeds of approximately $266,266.  

On April 1, 2019, the Company entered into another common stock purchase agreement (the “April CSPA”) with Oasis Capital relating to an offering (the “April Equity Line Offering”) of an aggregate of up to 285,714 shares (the “April Purchase Shares”) of the Company’s common stock, all of which are being offered in a primary offering consisting of an equity line of credit. Under the terms of the April CSPA, the Company has the right to “put,” or sell, the April Purchase Shares to Oasis Capital for an amount equal to the product of (i) the number of April Purchase Shares set forth in the applicable put notice (minus the deposit and clearing fees associated with such purchase) and (ii) a fixed price of $19.60 per share or such other price agreed upon between the Company and Oasis Capital. The Company had

the option to increase the equity line of credit by an additional 285,714 shares of Common Stock by notifying Oasis Capital at any time after the effective date of the April CSPA.

Effective June 14, 2019, we halted all future offers and sales of our voting common stock, par value $0.0001 per share under the April CSPA and terminated the April CSPA. Between April 1, 2019, the date of the April CSPA, and June 14, 2019, we sold an aggregate of 4,843 shares of Common Stock pursuant to the CSPA for aggregate gross proceeds of approximately $100,000.

Issuance of Class A Units in July 2019 Underwritten Public Offering

In July 2019, the Company entered into an underwriting agreement relating to the public offering comprised of (1) 2,886,500 Class A Units, priced at a public offering price of $2.00 per unit, with each unit consisting of (i) one share of the Company’s voting common stock, (ii) one Series 1 warrant to purchase one share of Common Stock and (2) 10,787 Class B Units, priced at a public offering price of $1,000 per unit, with each Class B unit consisting of (i) one share of Series B convertible preferred stock with a stated value of $1,000 and convertible into 500 shares of Common Stock, (ii) 500 Series 1 Warrants and (iii) 500 Series 2 Warrants, at a public offering price of $1,000 per Class B Unit.

The Company sold 2,886,500 Class A Units, comprised of 2,886,500 shares of voting common stock, Series 1 warrants to purchase 5,393,500 shares of common stock and Series 2 warrants to purchase 5,393,500 shares of common stock. The total gross proceeds to the Company from the offering of the Class A Units was $5,773,000, of which $2,074,244 was allocated to the voting common stock, $1,849,378 to the Series 1 Warrants and $1,849,378 to the Series 2 Warrants. Issuance costs of $875,184 were allocated to the Class A Units.

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Subsequent Events

9 Months Ended

Sep. 30, 2019

Subsequent Events

Subsequent Events

14. Subsequent Events

Series 1 Warrant Exercise Agreement

In October 2019, the Company entered into a Warrant Exercise Agreement with the sole remaining holder of the Series B Preferred Stock (the “Exercising Holder”), which Exercising Holder owns Series 1 warrants exercisable for 1,250,000 shares of Common Stock (the “Series 1 Warrant Shares”). Pursuant to the Warrant Exercise Agreement, the Company had the right, with 2 trading days’ prior notice, to require the Exercising Holder to exercise all or a portion of its Series 1 warrants in accordance with the existing terms of the Series 1 warrants, in exchange for the Company’s agreement to issue to the Exercising Holder a number of Series B-1 Convertible Preferred Stock, with a stated value of $12,201, in an amount equal to one Series B-1 Convertible Preferred Share for every 19,841 Series 1 Warrant Shares issued by the Company to the Exercising Holder. 

In October 2019, the Exercising Holder exercised its 1,250,000 Series 1 warrants for common stock, with the Company receiving aggregate gross proceeds of approximately $1,750,000. In consideration of the exercise, and in accordance with the terms of the Warrant Exercise Agreement, the Company in turn issued to the Exercising Holder 63 shares of Series Convertible B-1 Preferred Stock. 

Designation of Series B-1 Convertible Preferred Stock

In October 2019, the Company created a new series of authorized preferred stock, designated as the “Series B-1 Convertible Preferred Stock.”  The Series B-1 Certificate of Designation became effective with the Secretary of State of the State of Delaware upon filing. The shares of Series B-1 Preferred Stock rank on par with the shares of the Common Stock, in each case, as to dividend rights and distributions of assets upon liquidation, dissolution or winding up of the Company.

With certain exceptions, as described in the Series B-1 Certificate of Designation, the shares of Series B-1 Convertible Preferred Stock have no voting rights. However, as long as any shares of Series B-1 Convertible Preferred Stock remain outstanding, the Series B-1 Certificate of Designation provides that the Company shall not, without the affirmative vote of holders of a majority of the then outstanding shares of Series B-1 Convertible Preferred Stock, (a) alter or change adversely the powers, preferences or rights given to the Series B-1 Convertible Preferred Stock or alter or amend the Series B-1 Certificate of Designation or (b) enter into any agreement with respect to any of the foregoing.

Each share of Series B-1 Convertible Preferred Stock is convertible at any time at the holder’s option into 10,001 shares of Common Stock, which conversion ratio will be subject to adjustment for stock splits, stock dividends, distributions, subdivisions and combinations and other similar transactions as specified in the Series B-1 Certificate of Designation. Notwithstanding the foregoing, the Series B-1 Certificate of Designation further provides that the Company shall not effect any conversion of the shares of Series B-1 Convertible Preferred Stock, with certain exceptions, to the extent that, after giving effect to an attempted conversion, the holder of shares of Series B-1 Preferred Stock (together with such holder’s affiliates and any persons acting as a group together with such holder or any of such holder’s affiliates) would beneficially own a number of shares of Common Stock in excess of 4.99% (or 9.99% at the election of the holder prior to the date of issuance of Series B-1 Convertible Preferred Stock) of the shares of Common Stock then outstanding. At the holder’s option, upon notice to the Company, the holder may increase or decrease this beneficial ownership limitation not to exceed 9.99% of the shares of Common Stock then outstanding, with any such increase becoming effective upon 61 days’ prior notice to the Company.

Issuance of Series B-1 Convertible Preferred Stock

In October 2019, per the terms of a Warrant Exercise Agreement, the Company issued 63 shares of Series B-1 Convertible Preferred Stock in consideration of an existing Series 1 Warrant holder exercising 1,250,000 Series 1 warrants for the Company’s common stock. The Company received aggregate gross proceeds of approximately $1,750,000 from the exercise of the Series 1 Warrants. 

Termination of Tempesta Royalty License Agreement

In October 2019, the Company entered into a License Termination and Settlement Agreement with Dr. Michael Tempesta, pursuant to which certain disputes between Napo and Tempesta were settled. The disputes related to royalty payments owed by Napo to Tempesta under a license agreement, dated February 8, 1990, between Tempesta and Shaman Pharmaceuticals, a predecessor-in-interest to Napo (the “1990 License”), and a modified license agreement, dated October 16, 2002, between Tempesta and Napo (the “2002 License” and together with the 1990 License, the “License Agreements”) with respect to SP-303, a component of Mytesi, the Company’s FDA-approved drug for the symptomatic relief of noninfectious diarrhea in adult patients with HIV/AIDS on antiretroviral therapy. At September 30, 2019, the Company had recorded a loss contingency of $640,000 in regard to the probable settlement of the royalty dispute (see Note 6).

Pursuant to the terms of the Agreement, Tempesta received $50,000 in cash, an unsecured promissory note issued by the Company in the aggregate principal amount of $550,000 and 40,000 shares of the Company’s common stock in exchange for the cessation of all royalty payments by Napo to Dr. Tempesta under the License Agreements. The promissory note bears interest at the rate of 2.5% per annum and matures on March 1, 2025. The promissory note provides for the Company to make semi-annual payments equal to $50,000 plus accrued interest beginning on March 1, 2020 until the Note is paid in full. The 40,000 shares are subject to lock-up restrictions and are not tradeable by Tempesta until October 1, 2020.

Angel Pond Agreement

In October 2019, the Company engaged Angel Pond Capital LLC to explore potential licensing agreements and collaborations for Mytesi® in China. In consideration of these services, the Company compensated Angel Pond Capital LLC with $140,000 in the Company’s common stock for the initial four-month term of the agreement. The Company has the option to extend the agreement term for two months for $30,000 payable in the Company’s common stock.

If a definitive commercial agreement is executed by the Company with an entity that does all or substantially all of its business in China and one with whom Angel Pond Capital LLC has had substantial contact on the Company’s behalf prior to the expiration or termination of this Agreement,  Angel Pond Capital LLC will be paid compensation equal to 6%  (6.5% for certain engaged entities) of the amounts actually received by the Company from such engaged entity in the form of upfront licensing fees and regulatory milestone payments pursuant to such Definitive Commercial Agreement. 

The Company will pay to Angel Pond Capital LLC sales milestone payments equal to $300,000 after the first $50,000,000 of “Net Sales” (as defined in a Definitive Commercial Agreement) has been achieved in China by an engaged entity, and $300,000 after each and every additional $50,000,000 in cumulative net sales in China by such engaged entity; provided, however, such milestone payments will be capped at 6% of the cumulative sales royalty payments received by the Company from such engaged entity.

If Angel Pond Capital LLC is able to raise equity capital for the Company from an engaged entity prior to the expiration or termination of the Agreement, Angel Pond Capital LLC will receive compensation equal to 6% of the total dollar amount raised.

If Angel Pond Capital LLC is instrumental in arranging for the sale of the Company to an engaged entity prior to the expiration or termination of the Agreement, then Angel Pond Capital LLC will be compensated determinant upon any such sale price.

Securities Purchase Agreement

On November 13, 2019, Jaguar Health, Inc. (“Jaguar” or the “Company”) entered into a securities purchase agreement (the “Purchase Agreement”) with the purchasers named therein (each, an “Investor” and collectively, the “Investors”), pursuant to which the Company agreed to issue and sell, in a registered public offering by the Company directly to the Investors (the “Offering”), pre-funded warrants to purchase up to an aggregate of 2,222,223 shares of the Company’s common stock (“Common Stock”) at an offering price of $0.80 per share (the “Pre-Funded Warrants”), which when added together with the exercise price of $0.01 per share, equals the Minimum Price as defined under Nasdaq Listing Rule 5635(d).  The gross proceeds from the Offering were approximately $1.8 million before deducting offering expenses.

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Balance Sheet Components (Tables)

9 Months Ended

Sep. 30, 2019

Balance Sheet Components

Schedule of change in the carrying amount of goodwill

	September 30,
	2019		December 31,
	(unaudited)		2018
Beginning balance	$	—	$	5,210,821
Impairment		—		(5,210,821)
Ending balance	$	—	$	—

Schedule of intangible assets

	September 30,
	2019		December 31,
	(unaudited)		2018
Developed technology	$	25,000,000	$	25,000,000
Accumulated developed technology amortization		(3,611,112)		(2,361,111)
Developed technology, net		21,388,888		22,638,889
In-process research and development		8,800,000		8,800,000
Impairment		(4,000,000)		—
In process research and development, net		4,800,000		8,800,000
Trademarks		300,000		300,000
Accumulated trademark amortization		(43,333)		(28,333)
Trademarks, net		256,667		271,667
Total intangible assets, net	$	26,445,555	$	31,710,556

Schedule of estimated future amortization expense of intangible assets with finite lives

	Amounts
2019 (remaining)	$	421,667
2020		1,686,667
2021		1,686,667
2022		1,686,667
2023		1,686,667
2024		1,686,667
Thereafter		12,790,553
	$	21,645,555

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Stock Incentive Plans (Tables)

9 Months Ended

Sep. 30, 2019

Stock Based Compensation

Summary of incentive plan activity

				Weighted		Weighted Average
	Shares	Stock		Average		Remaining	Aggregate
	Available	Options	RSUs	Stock Option		Contractual Life	Intrinsic
	for Grant	Outstanding	Outstanding	Exercise Price		(Years)	Value*
Outstanding at December 31, 2018	2,327	42,979	5,613	$	406.36	9.24	$	—
Additional shares authorized	4,330,400	—	—		—	—
Options granted	(4,306,832)	4,306,832	—		1.71	—		—
Options cancelled	528,121	(528,121)	—		4.45	—		—
Outstanding at September 30, 2019	554,016	3,821,690	5,613	$	5.72	9.81	$	—
Exercisable at September 30, 2019		503,943		$	24.61	9.76	$	—
Vested and expected to vest at September 30, 2019		3,197,953		$	6.82	9.81	$	—

*Fair market value of JAGX common stock on September 30, 2019 was $1.31 per share.

Summary of stock-based compensation expense

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2019		2018		2019		2018
	(unaudited)				(unaudited)
Research and development expense	$	332,636	$	175,772	$	548,524	$	400,521
Sales and marketing expense		41,122		39,210		87,215		59,762
General and administrative expense		736,351		465,112		1,347,246		956,508
Total	$	1,110,109	$	680,094	$	1,982,985	$	1,416,791

Employee stock options

Stock Based Compensation

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

	Nine Months Ended
	September 30,
	2019		2018
	(unaudited)
Weighted-average volatility	142.9 -  145.9	%	95.6 - 95.9	%
Weighted-average expected term (years)	5.6 - 5.8		5.8
Risk-free interest rate	1.5 - 1.9	%	2.8 - 3.1	%
Expected dividend yield	—		—

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Warrants - Warrants (Details)	1 Months Ended				3 Months Ended		9 Months Ended
	Jul. 23, 2019 USD ($) shares	Mar. 31, 2019 USD ($) Y $ / shares shares	Sep. 30, 2018 USD ($) $ / shares shares	Aug. 31, 2018 USD ($) $ / shares shares	Sep. 30, 2019 USD ($) Y $ / shares shares	Sep. 30, 2018 USD ($) $ / shares shares	Sep. 30, 2019 USD ($) Y $ / shares shares	Sep. 30, 2018 USD ($) $ / shares shares	Dec. 31, 2018 USD ($)
Convertible Promissory Notes and Common Stock Warrants [Line Items]
Amount of shares issued							$ 1,199,122	$ 2,055,874
Warrant Activity
Warrants to purchase (in shares) | shares					9,580		9,580
Exercise price (in dollars per share) | $ / shares					$ 49.00		$ 49.00
Term							5 years
Fair value of warrant					$ 493,688		$ 493,688
Warrant liability					10,029		10,029		$ 220,376
Change in warrant liability					$ (841,834)	$ (26,231)	$ (1,002,865)	$ 119,134
Strike price
Warrant Activity
Warrants - Measurement input | $ / shares					58.80		58.80
Expected life
Warrant Activity
Warrants - Measurement input | Y					5		5
Volatility
Warrant Activity
Warrants - Measurement input					132		132
Risk free rate
Warrant Activity
Warrants - Measurement input					2.77		2.77
Series A Warrants | Stock price
Warrant Activity
Warrants - Measurement input					0.0131		0.0131		0.1610
Series A Warrants | Strike price
Warrant Activity
Warrants - Measurement input					7.8750		7.8750		7.8750
Series A Warrants | Volatility
Warrant Activity
Warrants - Measurement input					1.4431		1.4431		1.3563
Series A Warrants | Risk free rate
Warrant Activity
Warrants - Measurement input					0.0156		0.0156		0.0246
Underwriter Warrants | Stock price
Warrant Activity
Warrants - Measurement input					0.0131		0.0131		0.1610
Underwriter Warrants | Strike price
Warrant Activity
Warrants - Measurement input					0.5250		0.5250		0.5250
Underwriter Warrants | Volatility
Warrant Activity
Warrants - Measurement input					1.4431		1.4431		1.3563
Underwriter Warrants | Risk free rate
Warrant Activity
Warrants - Measurement input					0.0155		0.0155		0.0251
March 2019 LOC Warrants
Warrant Activity
Warrants exercisable | shares	45,750
Fair value of warrant	$ 71,079
August 2018 LOC Warrant
Warrant Activity
Warrants to purchase (in shares) | shares				9,580
Exercise price (in dollars per share) | $ / shares				$ 49.08
Term				5 years
Fair value of warrant				$ 493,688
September 2018 L2 Warrants
Warrant Activity
Warrants to purchase (in shares) | shares			2,649			2,649		2,649
Exercise price (in dollars per share) | $ / shares			$ 63.00			$ 63.00		$ 63.00
Term			5 years
Fair value of warrant			$ 100,330			$ 100,330		$ 100,330
September 2018 Conte Warrants
Warrant Activity
Warrants to purchase (in shares) | shares			484			484		484
Exercise price (in dollars per share) | $ / shares			$ 86.10			$ 86.10		$ 86.10
Term			5 years
Fair value of warrant			$ 17,818			$ 17,818		$ 17,818
Common Stock
Convertible Promissory Notes and Common Stock Warrants [Line Items]
Share issue price (in dollars per share) | $ / shares					$ 1.31		$ 1.31
Securities purchase agreement | March 2019 Ladenburg Warrants
Convertible Promissory Notes and Common Stock Warrants [Line Items]
Shares issued (in shares) | shares		19,019
Warrant Activity
Warrants to purchase (in shares) | shares		761
Exercise price (in dollars per share) | $ / shares		$ 17.50
Warrant liability		$ 13,028
Securities purchase agreement | March 2019 Ladenburg Warrants | Stock price
Warrant Activity
Warrants - Measurement input		18.90
Securities purchase agreement | March 2019 Ladenburg Warrants | Strike price
Warrant Activity
Warrants - Measurement input		17.50
Securities purchase agreement | March 2019 Ladenburg Warrants | Expected life
Warrant Activity
Warrants - Measurement input | Y		5
Securities purchase agreement | March 2019 Ladenburg Warrants | Volatility
Warrant Activity
Warrants - Measurement input		146
Securities purchase agreement | March 2019 Ladenburg Warrants | Risk free rate
Warrant Activity
Warrants - Measurement input		2.21

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Stockholders' Equity - Transactions with Oasis Capital and Underwritten Public Offering (Details) - USD ($)			1 Months Ended		2 Months Ended	3 Months Ended		9 Months Ended
	Apr. 01, 2019	Jan. 07, 2019	Jul. 31, 2019	Jul. 23, 2019	Jun. 14, 2019	Sep. 30, 2019	Mar. 31, 2019	Sep. 30, 2019	Sep. 30, 2018	Dec. 31, 2018
Warrants issued								12,713
Amount of shares issued								$ 1,199,122	$ 2,055,874
Convertible debt										$ 11,239,170
Issuance of common stock in conversion of debt									$ 1,607,421
Underwritten Public Offering
Gross proceeds from issuance			$ 14,049,697
Stock issuance and other costs			$ 2,510,303
Series B convertible preferred stock
Units issued			10,787			10,787		10,787
Number of warrants are converted for each share			1
Number of shares issued for preferred stock converted				500
Series B convertible preferred stock | Underwritten Public Offering
Number of shares issued for preferred stock converted			10,787
Series 1 warrants
Warrants issued				8,280,000
Term of warrant				5 years
Series 1 warrants | Underwritten Public Offering
Warrants issued			8,280,000
Number of shares in exchange for each unit			500
Series 1 warrants | Class A units | Underwritten Public Offering
Warrants issued			5,393,500
Series 2 warrants
Warrants issued				8,280,000
Term of warrant				5 years
Series 2 warrants | Underwritten Public Offering
Warrants issued			8,280,000
Number of shares in exchange for each unit			500
Series 2 warrants | Class A units | Underwritten Public Offering
Warrants issued			5,393,500
Class A units
Stock issuance and other costs								$ 875,122
Class A units | Underwritten Public Offering
Units issued			2,886,500	2,886,500
Public offering price			$ 2.00	$ 2.00
Number of shares in exchange for each unit			1	1
Gross proceeds from issuance			$ 5,773,000
Stock issuance and other costs			875,184
Class A units | Common stock - voting | Underwritten Public Offering
Gross proceeds from issuance			$ 2,074,244
Issuance of common stock (In shares)			2,886,500
Class A units | Series 1 warrants
Units issued				2,886,500
Class A units | Series 1 warrants | Underwritten Public Offering
Units issued				2,886,500
Public offering price				$ 2.00
Number of shares in exchange for each unit			1	1
Number of warrants are converted for each share				1
Gross proceeds from issuance			$ 1,849,378
Class A units | Series 2 warrants
Units issued				2,886,500
Class A units | Series 2 warrants | Underwritten Public Offering
Number of shares in exchange for each unit			1	1
Number of warrants are converted for each share				1
Gross proceeds from issuance			$ 1,849,378
Class B units
Units issued				10,787
Public offering price				$ 1,000
Stock issuance and other costs			$ 1,635,184
Class B units | Underwritten Public Offering
Units issued			10,787
Public offering price			$ 1,000
Class B units | Series B convertible preferred stock
Number of shares in exchange for each unit				1
Number of shares issued for preferred stock converted				500
Class B units | Series B convertible preferred stock | Underwritten Public Offering
Number of shares in exchange for each unit			1
Number of shares issued for preferred stock converted			500
Class B units | Series 1 warrants
Units issued				10,787
Number of shares in exchange for each unit				500
Class B units | Series 1 warrants | Underwritten Public Offering
Units issued				10,787
Public offering price				$ 1,000
Number of shares in exchange for each unit				500
Number of shares issued for preferred stock converted			500
Class B units | Series 1 warrants | Series B convertible preferred stock | Underwritten Public Offering
Number of shares in exchange for each unit				1
Number of shares issued for preferred stock converted				500
Class B units | Series 2 warrants
Units issued				10,787
Public offering price				$ 1,000
Number of shares in exchange for each unit				500
Class B units | Series 2 warrants | Underwritten Public Offering
Number of shares in exchange for each unit				500
Number of shares issued for preferred stock converted			500
Securities purchase agreement
Price per share	$ 19.60	$ 52.50
Issuance of common stock (In shares)					4,843
Amount of shares issued					$ 100,000
Par value (per share)					$ 0.0001
Common stock, shares issued							190,476
Securities purchase agreement | Registered Direct Offering
Price per share							$ 14.00
Gross proceeds from issuance							$ 266,266
Issuance of common stock (In shares)							19,019
Securities purchase agreement | Original Equity Line Offering
Common Stock, Shares Authorized	285,714	76,190
Number of shares offered		76,190
Number of additional shares authorized	285,714	114,286
Common stock, shares issued							76,190
Securities purchase agreement | Option
Common stock, shares issued							114,286

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Commitments and Contingencies - Commitments (Details)					3 Months Ended		9 Months Ended
	Jun. 03, 2019	May 29, 2019	Dec. 14, 2017	Sep. 25, 2017 USD ($)	Sep. 30, 2019 USD ($) Y $ / shares shares	Sep. 30, 2018 USD ($)	Sep. 30, 2019 USD ($) Y $ / shares shares	Sep. 30, 2018 USD ($)	Dec. 31, 2018 USD ($)	Aug. 28, 2018 ft²
Commitments and Contingencies
Monthly base rent for first twelve months							$ 38,392
Monthly base rent for subsequent twelve months							39,544
Monthly base rent for final months							40,730
Standby letter of credit received as collateral							$ 475,000
Term							5 years
Warrants to purchase (in shares) | shares					9,580		9,580
Exercise price (in dollars per share) | $ / shares					$ 49.00		$ 49.00
Fair value of warrant					$ 493,688		$ 493,688
Fair value of warrants included in stockholders equity						$ 118,149	493,688
Non-cash rent expense per month							19,748
Percentage of amount received to be paid to Glenmark				25.00%
Maximum amount to be received by Glenmark				$ 7,000,000
Payments made to date to Glenmark				$ 0
Payments made to date to SEED							0
Reverse stock split ratio	0.015	0.0667
Minimum
Commitments and Contingencies
Lease expense under non-cancelable operating lease							38,391
Maximum
Commitments and Contingencies
Lease expense under non-cancelable operating lease							40,730
Letter of credit
Commitments and Contingencies
Letter of Credit									$ 475,000
Letter of credit | Shareholder
Commitments and Contingencies
Letter of Credit									122,000
Letter of credit cancelled									$ 122,000
SEED
Commitments and Contingencies
Percentage of revenue sharing commitment			15.00%
Percentage of revenue sharing commitment after first million dollars of revenue			20.00%
General and administrative expense
Commitments and Contingencies
Lease expense under non-cancelable operating lease					$ 152,741	117,435	$ 554,017	$ 297,993
Strike price
Commitments and Contingencies
Warrants - Measurement input | $ / shares					58.80		58.80
Expected life
Commitments and Contingencies
Warrants - Measurement input | Y					5		5
Volatility
Commitments and Contingencies
Warrants - Measurement input					132		132
Risk free rate
Commitments and Contingencies
Warrants - Measurement input					2.77		2.77
Dividend rate
Commitments and Contingencies
Warrants - Measurement input					0		0
Office lease extension agreement
Commitments and Contingencies
Area (in square feet) | ft²										6,311
Fair value of warrants included in stockholders equity						$ 493,688		$ 493,688

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Balance Sheet Components - Estimated Future Amortization Expense (Details) - USD ($)	Sep. 30, 2019	Dec. 31, 2018
Finite-Lived Intangible Assets [Line Items]
Total	$ 26,445,555	$ 31,710,556
Trademarks and Developed technology rights
Finite-Lived Intangible Assets [Line Items]
2019 (remaining)	421,667
2020	1,686,667
2021	1,686,667
2022	1,686,667
2023	1,686,667
2024	1,686,667
Thereafter	12,790,553
Total	$ 21,645,555

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Fair Value Measurements - Estimated fair value of Level 3 (Details)	9 Months Ended
	Sep. 30, 2019 USD ($)
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward]
Ending fair value of level 3 liability	$ 493,688
Level 3 | Recurring | Warrant liability
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward]
Beginning value of Level 3 liability	220,376
Additions	5,122,039
Reclassification to equity	(4,329,521)
Change in fair value of liability	(1,002,865)
Ending fair value of level 3 liability	$ 10,029

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Net Loss Per Share (Tables)

9 Months Ended

Sep. 30, 2019

Net Loss Per Share Attributable to Common Stockholders

Schedule of calculation of basic and diluted net income (loss) per common share

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2019		2018		2019		2018
	(unaudited)					(unaudited)
Net loss attributable to common shareholders (basic and diluted)	$	(11,682,949)	$	(6,138,352)	$	(36,707,937)	$	(20,487,172)
Shares used to compute net loss per common share, basic and diluted		5,841,790		162,506		2,746,523		143,012
Net loss per share attributable to common shareholders, basic and diluted	$	(2.00)	$	(37.77)	$	(13.37)	$	(143.25)

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

	September 30,	September 30,
	2019	2018
	(unaudited)
Options issued and outstanding	3,821,690	42,979
Inducement options issued and outstanding	—	2,994
Options available for grant under stock options plans	554,016	3,402
Restricted stock unit awards issued and outstanding	5,613	5,613
Warrants issued and outstanding	19,421,892	16,582
Convertible notes	—	23,469
Series A convertible preferred stock	473,565	—
Series B convertible preferred stock	985,500	—
Total	25,262,276	95,039

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Summary of Significant Accounting Policies (Policies)

9 Months Ended

Sep. 30, 2019

Summary of Significant Accounting Policies

Basis of Presentation

Basis of Presentation

The condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and on a basis consistent with the annual consolidated financial statements, and in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary for a fair presentation of the periods presented. These interim financial results are not necessarily indicative of the results to be expected for the year ending December 31, 2019, or for any other future annual or interim period. These unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto contained in our Annual Report on Form 10-K for the year ended December 31, 2018.

There has been a material change to the Company's significant accounting policies during the three months and nine months ended September 30, 2019, as compared to the significant accounting policies described in Note 2 of the “Notes to Condensed Consolidated Financial Statements” in the Company's Annual Report on Form 10-K for the year ended  December 31, 2018. The Company adopted ASC (“Accounting Standards Codification”) 842 “Leases” and implemented a new policy to account for modifications of preferred stock using the model in ASC 470-50. 

Principals of Consolidation

Principals of Consolidation

The condensed consolidated financial statements have been prepared in accordance with U.S. GAAP and applicable rules and regulations of the Securities and Exchange Commission (“SEC”) and include the accounts of the Company and its wholly-owned subsidiary. All inter-company transactions and balances have been eliminated in consolidation.

Use of Estimates

Use of Estimates

The preparation of consolidated financial statements in conformity with U.S. GAAP requires the Company’s management to make judgments, assumptions and estimates that affect the amounts reported in its consolidated financial statements and the accompanying notes. The accounting policies that reflect the Company’s more significant estimates and judgments and that the Company believes are the most critical to aid in fully understanding and evaluating its reported financial results are valuation of stock options; valuation of warrant liabilities; valuation of derivative liability, impairment testing of goodwill, acquired in-process research and development (“IPR&D"), and long lived assets; useful lives for depreciation and amortization; valuation adjustments for excess and obsolete inventory; allowance for doubtful accounts; deferred taxes and valuation allowances on deferred tax assets; evaluation and measurement of contingencies; and recognition of revenue, including estimates for product returns. Those estimates could change, and as a result, actual results could differ materially from those estimates.

Concentrations

Concentrations

Cash is the financial instrument that potentially subjects the Company to a concentration of credit risk as cash is deposited with a bank and cash balances are generally in excess of Federal Deposit Insurance Corporation insurance limits. The carrying value of cash approximates fair value at September 30, 2019 and December 31, 2018.

For the three and nine months ended September 30, 2019 and 2018, substantially all of the Company’s revenue has been derived from the sale of Mytesi.  For the three months and nine months ended September 30, 2019, the Company earned Mytesi revenue primarily from one pharmaceutical distributor in the United States. For the three and nine months ended September 30, 2018, the Company earned Mytesi revenue primarily from three pharmaceutical distributors in the United States, each of whom amounted to a percentage of total net revenue of at least 10%. Revenue earned from each as a percentage of total net revenue is as follows:

Consolidated (percentage of total net sales)	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2019		2018		2019		2018
Customer 1	100	%	34	%	90	%	28	%
Customer 2	—	%	28	%	—	%	28	%
Customer 3	—	%	25	%	—	%	25	%

The Company is subject to credit risk from its accounts receivable related to its sales. The Company generally does not perform evaluations of customers' financial condition and generally does not require collateral. The Company's significant pharmaceutical distributors and their related accounts receivable balance as a percentage of total accounts receivable were as follows:

	As of		As of
	September 30,		September 30,
	2019		2018
Customer 1	99.6	%	35.0	%
Customer 2	—	%	29.0	%
Customer 3	—	%	26.0	%

No other customer represented more than 10% of the Company's accounts receivable balances as of those dates.

The Company is subject to credit risk from its inventory suppliers. The Company sources drug substance from a single supplier and drug product from a single supplier.

Fair Value

Fair Value

The Company’s financial instruments include, cash, accounts receivable, accounts payable, warrant liabilities, derivative liability, debt conversion option liability, and debt. The recorded carrying amount of accounts receivable, accounts payable and accrued expenses reflect 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.

Inventories

Inventories

Inventories are stated at the lower of cost or net realizable value. The Company calculates inventory valuation adjustments when conditions indicate that net realizable value is less than cost due to physical deterioration, usage, obsolescence, reductions in estimated future demand or reduction in selling price. Inventory write-downs are measured as the difference between the cost of inventory and net realizable value.

Land, Property and Equipment

Land, Property and Equipment

Land is stated at cost, reflecting fair value of the property at July 31, 2017, the date of the Napo merger. Equipment is stated at cost, 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 the statements of operations and comprehensive loss.

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.

Definite-lived intangible assets are amortized on a straight-line basis over the estimated periods benefited and are reviewed when appropriate for possible impairment.

Goodwill and Indefinite-lived Intangible Assets

Goodwill and Indefinite-lived Intangible Assets

Goodwill is tested for impairment on an annual basis and in between annual tests if events or circumstances indicate that an impairment loss may have occurred. The test is based on a comparison of the reporting unit's book value to its estimated fair value. The Company performs the annual impairment test during the fourth quarter of each fiscal year using the opening consolidated balance sheet as of the first day of the fourth quarter, with any resulting impairment recorded in the fourth quarter of the fiscal year. The Company did not record an impairment of goodwill during the three and nine months ended September 30, 2019 and 2018.

Acquired in-process research and development (“IPR&D”) are intangible assets acquired in the July 2017 Napo merger. Under ASC 805, IPR&D are initially recognized at fair value and classified as indefinite-lived assets until the successful completion or abandonment of the associated research and development efforts. During the development period, these assets will not be amortized as charges to earnings; instead these assets will be tested for impairment on an annual basis or more frequently if impairment indicators are identified. The Company recorded an impairment of zero and $4,000,000 in the three and nine months ended September 30, 2019, respectively. There were no impairment charges recorded in the three and nine months ended September 30, 2018. The impairment loss is measured based on the excess of the carrying amount over the asset’s fair value. Definite-lived intangible assets are amortized on a straight-line basis over the estimated periods benefited and are reviewed when appropriate for possible impairment.

Leases

Leases

ASC 842, Leases, requires lessees to recognize right-of-use assets and lease liabilities for all leases with a term of greater than 12 months regardless of their classification on the balance sheet and to provide expanded disclosures about leasing arrangements. The Company adopted ASC 842 on January 1, 2019 using the optional transition method with no restatements of comparative periods. There was no effect on accumulated deficit at adoption.

The Company elected to adopt the package of practical expedients to (i) not reassess whether expired or existing contracts are or contain leases, (ii) not reassess the lease classification for any expired or existing leases and (iii) not reassess the accounting for initial direct costs.

The adoption of the new leases standard resulted in the following adjustments to the consolidated balance sheet as of January 1, 2019:

	December 31, 2018		Adoption Impact		January 1, 2019
			(unaudited)
Operating lease right-of-use assets	$	—	$	1,111,214	$	1,111,214
Operating leases liabilities, current portion		—		336,647		336,647
Operating leases liabilities, long term		—		394,703		394,703
Deferred rent		379,864		(379,864)		—

At the inception of an arrangement, the Company determines whether the arrangement is or contains a lease based on the unique facts and circumstances present. Operating lease liabilities and their corresponding right-of-use assets are recorded based on the present value of lease payments over the expected lease term. Because the interest rate implicit in lease contracts is typically not readily determinable, the Company utilizes its incremental borrowing rate, which is the rate incurred to borrow on a collateralized basis over a similar term, an amount equal to the lease payments in a similar economic environment. Certain adjustments to the right-of-use asset may be required for items such as initial direct costs paid or incentives received.

Operating Lease

The Company has a non-cancelable operating lease with CA-Mission Street Limited Partnership for its offices in San Francisco, California through September 1, 2020. The lease agreement calls for monthly base rents between $38,391 and $40,730 over the term of the lease.

Prior to the Company’s adoption of ASC 842 on January 1, 2019, the Company recorded lease expense for its operating leases in accordance with ASC 840.

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

The Company recognizes revenue in accordance with ASC Topic 606, Revenue from Contracts with Customers (“ASC 606”), which was adopted on January 1, 2018, using the modified retrospective method, which was elected to apply to all active contracts as of the adoption date. Application of the modified retrospective method did not impact amounts previously reported by the Company, nor did it require a cumulative effect adjustment upon adoption, as the Company's method of recognizing revenue under ASC 606 yielded similar results to the method utilized immediately prior to adoption. Accordingly, there was no effect to each financial statement line item as a result of applying the new revenue standard.

Practical Expedients, Elections, and Exemptions

The Company recognizes revenue in accordance with the core principle of ASC 606 or when there is a transfer of control of promised goods or services to customers in an amount that reflects the consideration that the Company expects to be entitled to in exchange for those goods or services.

The Company elected a practical expedient available under ASC 606‑10‑65‑1(f)4 that permits it to consider the aggregate effect of all contract modifications that occurred before the beginning of the earliest period presented when identifying satisfied and unsatisfied performance obligations, transaction price, and allocating the transaction price to the satisfied and unsatisfied performance obligations.

The Company also elected a practical expedient available under ASC 606‑10‑32‑18 that permits it to not adjust the amount of consideration for the effects of a significant financing component if, at contract inception, the expected period between the transfer of promised goods or services and customer payment is one year or less.

The Company has elected to treat shipping and handling activities as fulfillment costs.

Additionally, the Company elected to record revenue net of sales and other similar taxes.

Contracts

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

In addition to the terms and conditions of the Exclusive Distribution Agreement, Cardinal Health’s purchase of products, and assumption of title therein, is set forth in the Title Model Addendum. The Title Model Addendum states that upon receipt of product at the 3PL Facility (Cardinal Health in La Vergne, Tennessee) from the Company, title and risk of loss for the Mytesi product purchased by Cardinal Health (excluding consigned inventory) shall pass to Cardinal Health, and title and risk of loss for consigned inventory shall remain with the Company until purchased by Cardinal Health in accordance with the Title Model Addendum. Napo Pharmaceuticals, Inc. considers Cardinal Health the Company’s exclusive customer for Mytesi products per the Exclusive Distribution Agreement.  

Jaguar's Neonorm and botanical extract products are primarily sold to distributors, who then sell the products to the end customers. Since 2014, the Company has entered into several distribution agreements with established distributors such as Animart, Vedco, VPI, RJ Matthews, Henry Schein, and Stockmen Supply to distribute the Company's products in the United States, Japan, and China. The distribution agreements and the related purchase order together meet the contract existence criteria under ASC 606‑10‑25‑1. Jaguar sells directly to its customers without the use of an agent.

Performance obligations

For animal products sold by Jaguar Health, the single performance obligation identified above is the Company’s promise to transfer the Company’s animal products to distributors based on specified payment and shipping terms in the arrangement. Product warranties are assurance type warranties that do not represent a performance obligation. For the Company’s human product, Mytesi, which is sold by Napo Pharmaceuticals Inc., the single performance obligation identified above is the Company’s promise to transfer Mytesi to Cardinal Health, the Company’s exclusive distributor for the product, based on specified payment and shipping terms as outlined in the Exclusive Distribution Agreement.  The product warranties are assurance type warranties that do not represent a performance obligation.

Transaction price

For both Jaguar and Napo, the transaction price is the amount of consideration to which the Company expects to collect in exchange for transferring promised goods or services to a customer. The transaction price of Mytesi and Neonorm is the Wholesaler Acquisition Cost (“WAC”), net of discounts, returns, and price adjustments.

Allocate transaction price

For both Napo and Jaguar, the entire transaction price is allocated to the single performance obligation contained in each contract.

Point in time recognition

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

Disaggregation of Product Revenue

Human

Sales of Mytesi are recognized as revenue when the products are delivered to the wholesaler. Revenues from the sale of Mytesi were $957,059 and $1,107,682 for the three months ended September 30, 2019 and 2018, respectively. Revenues from the sale of Mytesi were $4,184,912 and $2,545,121 for the nine months ended September 30, 2019 and 2018, respectively. The increase in sales of Mytesi is due to the more streamlined distribution channel and increased sales presence.

Out of period adjustment - During the period ended September 30, 2019, the Company identified a prior period product donation incorrectly recorded as revenue.   The adjustment, totaling $336,934 related to revenue and accounts receivable, was corrected within the current quarter. The impact of the adjustment was an increase to net loss of $336,934. This adjustment does not affect Mytesi revenue associated with sales in the nine months ended September 30, 2019.  Management has determined that this out of period correcting adjustment is not material to any prior period consolidated financial statements impacted by the adjustment and has therefore recorded it in the three months ended September 30, 2019.

Animal

The Company recognized Neonorm revenues of $15,720 and $24,385 for the three months ended September 30, 2019 and 2018, respectively. Revenues from the sale of Neonorm were $83,294 and $97,759 for the nine months ended September 30, 2019 and 2018, respectively. Revenues are recognized upon shipment which is when title and control is transferred to the buyer. Sales of Neonorm Calf and Foal to distributors are made under agreements that may provide distributor price adjustments and rights of return under certain circumstances.

Collaboration Revenue

Collaboration Revenue

On January 27, 2017, the Company entered into a licensing, development, co-promotion and commercialization agreement with Elanco US Inc. (“Elanco”) to license, develop and commercialize Canalevia, the Company's drug product candidate under investigation for treatment of acute and chemotherapy-induced diarrhea in dogs, and other drug product formulations of crofelemer for treatment of gastrointestinal diseases, conditions and symptoms in cats and other companion animals. On November 1, 2017, the Company received a letter from Elanco serving as formal notice of their decision to terminate the agreement by giving the Company 90 days written notice. According to the agreement, termination became effective on January 30, 2018. Under the terms of the agreement, the Company received revenue of $0 and $177,389 in the nine months ended September 30, 2019 and 2018, respectively. There was no revenue recognized in the three months ended September 30, 2019 and 2018.

On September 24, 2018, the Company entered into a Distribution, License and Supply Agreement ("License Agreement") with Knight Therapeutics, Inc. ("Knight"). The License Agreement has a term of 15 years (with automatic renewals) and provides Knight with an exclusive right to commercialize current and future Jaguar human health products (including Crofelemer, Lechlemer, and any product containing a proanthocyanidin or with an anti-secretory mechanism) in Canada and Israel. In addition, Knight was granted a right of first negotiation for expansion to Latin America. Under the License Agreement, Knight is responsible for applying for and obtaining necessary regulatory approvals in the territory of Canada and Israel, as well as marketing, sales and distribution of the licensed products. Knight will pay a transfer price for all licensed products, and upon achievement of certain regulatory and sales milestones, Jaguar may receive payments from Knight in an aggregate amount of up to approximately $18 million payable throughout the initial 15-year term of the agreement. The Company did not have any license revenues in the three months and nine months ended September 30, 2019 and 2018.

Modifications to equity-classified instruments.

Modifications to equity-classified instruments

In September 2019, the Company modified its equity-classified Series 1 Warrants (see Note 7). It is the Company’s policy to determine the impact of such equity-classified modifications by analogy to the share-based compensation guidance of ASC 718, Compensation - Stock Compensation. The model for a modified share-based payment award that is classified as equity and remains classified in equity after the modification is addressed in ASC 718-20-35-3. Pursuant to that guidance, the incremental fair value from the modification is recognized as an expense in the income statement to the extent the modified instrument has a higher fair value. The Company uses a similar model for measuring the effects of a modification to equity-classified warrants, however, in contrast to the 718 model, the measured increase in fair value may be more appropriately recorded as a deemed dividend, depending upon the nature of the modification.

Comprehensive Income (Loss)

Comprehensive Income (Loss)

For all periods presented, the comprehensive income (loss) was equal to the net income (loss); therefore, a separate statement of comprehensive income (loss) is not included in the accompanying condensed consolidated financial statements.

Recent Accounting Pronouncements

Recent Accounting Pronouncements

Except as described in Note 2 – Basis of Presentation, there have been no other new accounting pronouncements adopted by the Company besides the adoption of ASC 842 “Leases” and implementation of a new policy to account for modifications of preferred stock using the model in ASC 470-50 during the three months and nine months ended September 30, 2019, that the Company believes are of significance or potential significance to the Company.

In June 2018, the Financial Accounting Standards Board (“FASB”) issued ASU 2018-07, Compensation - Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting. This update expands the scope of Topic 718 to include share-based payment transactions for acquiring goods and services from nonemployees. The amendments specify that Topic 718 applies to all share-based payment transactions in which a grantor acquires goods or services to be used or consumed in a grantor’s own operations by issuing share-based payment awards. The amendments also clarify that Topic 718 does not apply to share-based payments used to effectively provide (1) financing to the issuer or (2) awards granted in conjunction with selling goods or services to customers as part of a contract accounted for under ASC 606. The amendments in ASU 2018-07 are effective for public business entities for fiscal years beginning after December 15, 2018, including interim periods within that fiscal year. Early adoption is permitted. The Company adopted this standard on January 1, 2019, and this standard did not have a material impact on the Company’s financial position, results of operations or disclosures.

In August 2018, the FASB issued ASU 2018-15, Intangible - Goodwill and Other - Internal-Use Software (Subtopic 350-40), which aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. ASU 2018-15 is effective for the Company in the first quarter of 2020. Early adoption is permitted. ASU 2018-15 permits either a prospective or retrospective transition approach. The Company is currently evaluating ASU 2018-15 to determine the impact to its condensed consolidated financial statements and related disclosures. The Company is evaluating the impact of the adoption of ASU 2016-13 on its Condensed Consolidated Financial Statements.

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820). The new guidance modifies the disclosure requirements on fair value measurements. ASU 2018-13 is effective for the Company beginning in the first quarter of 2020 and must be adopted on a modified retrospective basis, with certain exceptions. Early adoption is permitted. The Company does not expect ASU 2018-13 to have a significant impact to its condensed consolidated financial statements and related disclosures.

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Debt (Tables)

9 Months Ended

Sep. 30, 2019

Debt and Warrants

Schedule of aggregate convertible debt

	September 30,
	2019		December 31,
	(unaudited)		2018
June 2017 convertible debt	$	—	$	740,882
Napo convertible debt		—		10,553,888
		—		11,294,770
Less: unamortized debt discount and debt issuance costs		—		(55,600)
Net convertible debt obligation	$	—	$	11,239,170
Convertible debt - non-current, net of discount		—		—
Convertible debt - current, net of discount	$	—	$	11,239,170

Schedule of notes payable

	September 30,
	2019		December 31,
	(unaudited)		2018
December 2017 note payable	$	—	$	1,673,237
February 2018 note payable		—		2,359,750
March 2018 note payable		—		1,147,870
2019 Exchange Note 1		4,381,535		—
2019 Exchange Note 2		2,296,926		—
		6,678,461		5,180,857
Less: unamortized discount and debt issuance costs		—		(335,282)
Note payable, net	$	6,678,461	$	4,845,575
Notes payable - non-current, net	$	6,678,461	$	—
Notes payable - current, net	$	—	$	4,845,575

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Warrants - 2019 Bridge Note Warrants (Details)			1 Months Ended			2 Months Ended	3 Months Ended		4 Months Ended	9 Months Ended
	Mar. 31, 2019 item	May 28, 2018 USD ($)	Jul. 31, 2019 USD ($) $ / shares shares	Jul. 23, 2019 USD ($) $ / shares shares	Jun. 26, 2019 USD ($) item	May 31, 2019 item	Sep. 30, 2019 USD ($) Y $ / shares shares	Jun. 26, 2019 USD ($) item	Jun. 30, 2019 USD ($) item	Sep. 30, 2019 USD ($) Y $ / shares shares	Feb. 28, 2015 USD ($)
Debt and Warrants
Debt Instrument, Face Amount | $											$ 150,000
Fair value of warrant | $							$ 493,688			$ 493,688
Gains (Losses) on Extinguishment of Debt | $							$ (335,753)			$ (4,940,911)
Warrants issued										12,713
Exercise price (in dollars per share) | $ / shares							$ 49.00			$ 49.00
Strike price
Debt and Warrants
Warrant liability | $ / shares							58.80			58.80
Expected life
Debt and Warrants
Warrant liability | Y							5			5
Volatility
Debt and Warrants
Warrant liability							132			132
Risk free rate
Debt and Warrants
Warrant liability							2.77			2.77
Series B convertible preferred stock
Debt and Warrants
Units issued			10,787				10,787			10,787
Number of shares issued for preferred stock converted				500
Number of warrants are converted for each share			1
Underwritten Public Offering
Debt and Warrants
Common stock issued and issuable			2,886,500
Underwritten Public Offering | Series B convertible preferred stock
Debt and Warrants
Number of shares issued for preferred stock converted			10,787
Class A units | Underwritten Public Offering
Debt and Warrants
Public offering price | $ / shares			$ 2.00	$ 2.00
Units issued			2,886,500	2,886,500
Unit Price | $ / shares			$ 2.00	$ 2.00
Number of shares in exchange for each unit			1	1
Class B units
Debt and Warrants
Public offering price | $ / shares				$ 1,000
Units issued				10,787
Unit Price | $ / shares				$ 1,000
Class B units | Series B convertible preferred stock
Debt and Warrants
Number of shares in exchange for each unit				1
Number of shares issued for preferred stock converted				500
Class B units | Underwritten Public Offering
Debt and Warrants
Public offering price | $ / shares			$ 1,000
Units issued			10,787
Unit Price | $ / shares			$ 1,000
Class B units | Underwritten Public Offering | Series B convertible preferred stock
Debt and Warrants
Number of shares in exchange for each unit			1
Number of shares issued for preferred stock converted			500
2019 Bridge Note Warrants
Debt and Warrants
Debt Instrument, Face Amount | $					$ 5,050,000			$ 5,050,000
Number Of Promissory Notes Issued | item	21				21	21
Fair value of warrant | $			$ 5,005,739	$ 4,259,327					$ 4,259,327
Warrants exercisable				2,781,250
2019 Bridge Note Warrants | Stock price
Debt and Warrants
Warrant liability							0.0173			0.0173
2019 Bridge Note Warrants | Strike price
Debt and Warrants
Warrant liability							0.0200			0.0200
2019 Bridge Note Warrants | Expected life
Debt and Warrants
Term of warrant			5 years				4 years 9 months 18 days			4 years 9 months 18 days
2019 Bridge Note Warrants | Volatility
Debt and Warrants
Warrant liability							1.4584			1.4584
2019 Bridge Note Warrants | Risk free rate
Debt and Warrants
Warrant liability							0.0176			0.0176
Series 1 warrants
Debt and Warrants
Warrants issued				8,280,000
Initial valuation | $				$ 5,304,989			$ 5,304,989			$ 5,304,989
Impact of modification | $							$ 252,106			$ 252,106
Term of warrant				5 years
Exercise price (in dollars per share) | $ / shares			$ 2.00	$ 2.00			$ 1.40			$ 1.40
Series 1 warrants | Stock price
Debt and Warrants
Warrant liability				1.73
Series 1 warrants | Strike price
Debt and Warrants
Warrant liability				2.00
Series 1 warrants | Expected life
Debt and Warrants
Term of warrant				5 years
Series 1 warrants | Volatility
Debt and Warrants
Warrant liability				144.76
Series 1 warrants | Risk free rate
Debt and Warrants
Warrant liability				1.83
Series 1 warrants | Underwritten Public Offering
Debt and Warrants
Common stock issued and issuable			5,393,500
Warrants issued			8,280,000
Number of shares in exchange for each unit			500
Series 1 warrants | Class A units
Debt and Warrants
Units issued				2,886,500
Common stock issued and issuable				2,886,500
Series 1 warrants | Class A units | Underwritten Public Offering
Debt and Warrants
Public offering price | $ / shares				$ 2.00
Units issued				2,886,500
Unit Price | $ / shares				$ 2.00
Number of shares in exchange for each unit			1	1
Number of warrants are converted for each share				1
Series 1 warrants | Class B units
Debt and Warrants
Units issued				10,787
Common stock issued and issuable				5,393,500
Number of shares in exchange for each unit				500
Series 1 warrants | Class B units | Underwritten Public Offering
Debt and Warrants
Public offering price | $ / shares				$ 1,000
Units issued				10,787
Unit Price | $ / shares				$ 1,000
Number of shares in exchange for each unit				500
Number of shares issued for preferred stock converted			500
Series 1 warrants | Class B units | Underwritten Public Offering | Series B convertible preferred stock
Debt and Warrants
Number of shares in exchange for each unit				1
Number of shares issued for preferred stock converted				500
Series 2 warrants
Debt and Warrants
Warrants issued				8,280,000
Initial valuation | $				$ 5,304,989			$ 5,304,989			$ 5,304,989
Term of warrant				5 years
Exercise price (in dollars per share) | $ / shares				$ 2.00
Series 2 warrants | Stock price
Debt and Warrants
Warrant liability				1.73
Series 2 warrants | Strike price
Debt and Warrants
Warrant liability				2.00
Series 2 warrants | Expected life
Debt and Warrants
Term of warrant				5 years
Series 2 warrants | Volatility
Debt and Warrants
Warrant liability				144.76
Series 2 warrants | Risk free rate
Debt and Warrants
Warrant liability				1.83
Series 2 warrants | Underwritten Public Offering
Debt and Warrants
Common stock issued and issuable			5,393,500
Warrants issued			8,280,000
Number of shares in exchange for each unit			500
Series 2 warrants | Class A units
Debt and Warrants
Units issued				2,886,500
Common stock issued and issuable				2,886,500
Series 2 warrants | Class A units | Underwritten Public Offering
Debt and Warrants
Number of shares in exchange for each unit			1	1
Number of warrants are converted for each share				1
Series 2 warrants | Class B units
Debt and Warrants
Public offering price | $ / shares				$ 1,000
Units issued				10,787
Unit Price | $ / shares				$ 1,000
Common stock issued and issuable				5,393,500
Number of shares in exchange for each unit				500
Series 2 warrants | Class B units | Underwritten Public Offering
Debt and Warrants
Number of shares in exchange for each unit				500
Number of shares issued for preferred stock converted			500
2019 Exchange Note 2
Debt and Warrants
Debt Instrument, Face Amount | $		$ 2,296,926
Gains (Losses) on Extinguishment of Debt | $		$ 2,046,939
Fourteen Promissory Notes [Member]
Debt and Warrants
Debt Instrument, Face Amount | $					$ 3,550,000			$ 3,550,000	$ 3,550,000
Number Of Promissory Notes Issued | item								14	14
Warrant Coverage Percentage								125.00%	125.00%
Seven Promissory Notes [Member]
Debt and Warrants
Debt Instrument, Face Amount | $					$ 1,500,000			$ 1,500,000	$ 1,500,000
Number Of Promissory Notes Issued | item								7	7
Warrant Coverage Percentage								75.00%	75.00%

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Stock Incentive Plans - Summary of Stock Incentive Plans (Details) - USD ($)			1 Months Ended		9 Months Ended		12 Months Ended
	Jan. 01, 2019	May 12, 2015	Jul. 31, 2019	Feb. 28, 2019	Sep. 30, 2019	Sep. 30, 2018	Dec. 31, 2018
Shares Available for Grant
Beginning balance (in shares)	2,327				2,327
Ending balance (in shares)					554,016		2,327
Stock Options Outstanding
Beginning balance (in shares)	42,979				42,979
Ending balance (in shares)					3,821,690		42,979
RSUs Outstanding
Beginning balance (in shares)	5,613				5,613
Ending balance (in shares)					5,613		5,613
Options vested, exercisable and expected to vest
Weighted average grant date fair value of stock options granted (in dollars per share)					$ 1.57	$ 128.80
Number of options vested (in shares)					496,467	6,053
Weighted average fair value of options vested on grant date					$ 2,668,737	$ 475,123
Inducement options issued and outstanding
Stock Options Outstanding
Beginning balance (in shares)	2,985				2,985
Options granted (in shares)							2,993
Ending balance (in shares)							2,985
Options vested, exercisable and expected to vest
Weighted average grant date fair value of stock options granted (in dollars per share)							$ 93.80
Common Stock
Options vested, exercisable and expected to vest
Share Price					$ 1.31
2013 Plan | Stock options
Stock Options Outstanding
Options granted (in shares)					0
2014 Plan
Stock Based Compensation
Percentage of unissued shares			12.50%
Gross proceeds from issuance			$ 5,000,000
Number of shares reserved for issuance			4,330,400
Shares Available for Grant
Beginning balance (in shares)	2,327				2,327
Additional shares authorized (in shares)					4,330,400
Options granted (in shares)					(4,306,832)
Options cancelled (in shares)					528,121
Ending balance (in shares)					554,016		2,327
Stock Options Outstanding
Beginning balance (in shares)	42,979				42,979
Options granted (in shares)					4,306,832
Options cancelled (in shares)					(528,121)
Ending balance (in shares)					3,821,690		42,979
RSUs Outstanding
Beginning balance (in shares)	5,613				5,613
Ending balance (in shares)					5,613		5,613
Weighted Average Stock Option Exercise Price
Beginning balance (in dollars per share)	$ 406.36				$ 406.36
Options granted (in dollars per share)					1.71
Options cancelled (in dollars per share)					4.45
Ending balance (in dollars per share)					$ 5.72		$ 406.36
Weighted Average Remaining Contractual Life (Years)
Weighted Average Remaining Contractual Life (Years)					9 years 9 months 22 days		9 years 2 months 27 days
Options vested, exercisable and expected to vest
Options vested and exercisable (in shares)					503,943
Options vested and exercisable (in dollars per share)					$ 24.61
Options vested and exercisable (in years)					9 years 9 months 4 days
Options vested and expected to vest (in shares)					3,197,953
Options vested and expected to vest (in dollars per share)					$ 6.82
Options vested and expected to vest (in years)					9 years 9 months 22 days
Options exercised (in shares)					0	0
2014 Plan | Stock options
Stock Based Compensation
Increase in share reserve based on outstanding number of shares (as a percent)		2.00%
Shares Available for Grant
Additional shares authorized (in shares)	7,797
Options vested, exercisable and expected to vest
Extension period				5 years

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Balance Sheet Components - Intangible assets (Details) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018	Dec. 31, 2018
Intangible assets
Impairment	$ 0	$ 0	$ (4,000,000)	$ 0
Finite-lived intangible assets, net	26,445,555		26,445,555		$ 31,710,556
Total intangible assets, net	26,445,555		26,445,555		31,710,556
Amortization expense	421,667	$ 421,667	1,265,001	$ 1,265,001
Developed technology
Intangible assets
Total intangible assets	25,000,000		25,000,000		25,000,000
Accumulated amortization	(3,611,112)		(3,611,112)		(2,361,111)
Finite-lived intangible assets, net	21,388,888		21,388,888		22,638,889
In process research and development
Intangible assets
Total intangible assets	8,800,000		8,800,000		8,800,000
Impairment			(4,000,000)
Finite-lived intangible assets, net	4,800,000		4,800,000		8,800,000
Trademarks
Intangible assets
Total intangible assets	300,000		300,000		300,000
Accumulated amortization	(43,333)		(43,333)		(28,333)
Finite-lived intangible assets, net	$ 256,667		$ 256,667		$ 271,667

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Fair Value Measurements - Fair Value of Liabilities Measured on a Recurring Basis (Details) - Recurring - USD ($)	Sep. 30, 2019	Dec. 31, 2017
Fair value of liabilities measured on a recurring basis
Warrant liability	$ 10,029	$ 220,376
Total fair value	10,029	220,376
Level 3
Fair value of liabilities measured on a recurring basis
Warrant liability	10,029	220,376
Total fair value	$ 10,029	$ 220,376

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Related Party Transactions - 2019 Bridge Notes (Details)	9 Months Ended
	Sep. 30, 2019 USD ($) individual shares	Jun. 30, 2019 USD ($)	Feb. 28, 2015 USD ($)
Related Party Transaction [Line Items]
Principal amount			$ 150,000
2019 Bridge Notes
Related Party Transaction [Line Items]
Number of members of Board of Directors | individual	3
Principal amount		$ 5,050,000
2019 Bridge Notes | Lisa Conte [Member]
Related Party Transaction [Line Items]
Principal amount	$ 100,000
Number of warrants are converted for each share | shares	37,500
2019 Bridge Notes | James Bochnowski [Member]
Related Party Transaction [Line Items]
Principal amount	$ 350,000
Number of warrants are converted for each share | shares	218,750
2019 Bridge Notes | Jonathan Siegel DBA JBS Healthcare Ventures [Member]
Related Party Transaction [Line Items]
Principal amount	$ 75,000
Number of warrants are converted for each share | shares	34,375
2019 Bridge Notes | Sagard Capital Partners [Member]
Related Party Transaction [Line Items]
Principal amount	$ 500,000
Number of warrants are converted for each share | shares	187,500
2019 Bridge Notes | Jonathan Glaser [Member]
Related Party Transaction [Line Items]
Principal amount	$ 500,000
Number of warrants are converted for each share | shares	250,000

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CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($)	Sep. 30, 2019	Dec. 31, 2018
Convertible preferred stock, par value (in dollars per share)	$ 0.0001	$ 0.0001
Convertible preferred stock, shares authorized	10,000,000	10,000,000
Convertible preferred stock, shares issued	5,524,926	5,524,926
Convertible preferred stock, shares outstanding	5,524,926	5,524,926
Redemption value and liquidation preference	$ 12,738,822	$ 9,199,002
Series B convertible preferred stock
Convertible preferred stock, par value (in dollars per share)	$ 0.0001	$ 0.0001
Convertible preferred stock, shares authorized	11,000	0
Convertible preferred stock, shares issued	1,971	0
Convertible preferred stock, shares outstanding	1,971	0
Common Stock | Common stock - voting
Common stock, par value (in dollars per share)	$ 0.0001	$ 0.0001
Common stock, shares authorized	150,000,000	150,000,000
Common stock, shares issued	9,395,458	351,472
Common stock, shares outstanding	9,395,458	351,472
Common Stock | Common stock - non-voting
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	40,301,237	40,301,237
Common stock, shares outstanding	40,301,237	40,301,237

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Organization and Business

9 Months Ended

Sep. 30, 2019

Organization and Business

Organization and Business

1. Organization and Business

Jaguar Health, Inc. (“Jaguar”, “we” or the “Company”), formerly known as Jaguar Animal Health, Inc., was incorporated on June 6, 2013 (inception) in Delaware. The Company was a majority-owned subsidiary of Napo 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 and Neonorm Foal was launched in the first quarter of 2016. The Company's activities are subject to significant risks and uncertainties, including failing to secure additional funding in order to timely complete the development and commercialization of products.

On July 31, 2017, Jaguar completed a merger with Napo pursuant to the Agreement and Plan of Merger dated March 31, 2017 by and among Jaguar, Napo, Napo Acquisition Corporation (“Merger Sub”), and Napo's representative (the “Merger Agreement”). In accordance with the terms of the Merger Agreement, upon the completion of the merger, Merger Sub merged with and into Napo, with Napo surviving as our wholly-owned subsidiary (the “Merger” or “Napo Merger”). Immediately following the Merger, Jaguar changed its name from “Jaguar Animal Health, Inc.” to “Jaguar Health, Inc.” Napo now operates as a wholly-owned subsidiary of Jaguar focused on human health and the ongoing commercialization of Mytesi, a Napo drug product approved by the U.S. Food and Drug Administration (“FDA”) for the symptomatic relief of noninfectious diarrhea in adults with HIV/AIDS on antiretroviral therapy.

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

Reverse stock-splits

On May 29, 2018, the Company filed the Certificate of Second Amendment to its Third Amended and Restated Certificate of Incorporation with the Secretary of State of the State of Delaware to effect a 1-for-15 reverse stock split of the Company’s issued and outstanding shares of voting common stock, effective June 1, 2018. The reverse split has been retrospectively reflected in all voting common stock, warrants, and common stock option shares disclosed in these condensed consolidated financial statements. The non-voting common stock and the convertible preferred stock were excluded from the reverse split.

On June 3, 2019, the Company filed the Certificate of Fifth Amendment to its Third Amended and Restated Certificate of Incorporation with the Secretary of State of the State of Delaware to effect a 1-for-70 reverse stock split of the Company’s issued and outstanding shares of voting common stock, effective June 7, 2019. The reverse split has been retrospectively reflected in all voting common stock, warrants, and common stock option shares disclosed in these condensed consolidated financial statements. The non-voting common stock and the convertible preferred stock were excluded from the reverse split.

Liquidity and Going Concern

The accompanying condensed consolidated 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 $127.1 million as of September 30, 2019. The net loss for the nine months ended September 30, 2019 was $32.6 million. 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, as well as securing additional financing. 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, collaboration arrangements with other entities, license royalty agreements, as well as revenue from future product sales. We do not believe our current capital is sufficient to fund our operating plan through one year from the issuance of these unaudited condensed consolidated financial statements. 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 within one year after the issuance date of the condensed consolidated financial statements. The accompanying condensed consolidated financial statements do not include any adjustments that might result from the outcome of these uncertainties.

July 2019 Underwritten Public Offering

In July 2019, the Company entered into an underwriting agreement, relating to a public offering, which was comprised of (1) 2,886,500 Class A Units, priced at $2.00 per unit, with each unit consisting of (i) one share of the Company’s voting common stock, (ii) one Series 1 warrant to purchase one share of Common Stock, and (iii) one Series 2 warrant to purchase one share of Common Stock, and (2) 10,787 Class B Units, priced at a price of $1,000 per unit, with each unit consisting of (i) one share of Series B convertible preferred stock, convertible into 500 shares of Common Stock, (ii) 500 Series 1 Warrants and (iii) 500 Series 2 Warrants.

In total, the Company sold 2,886,500 shares of common stock (see Note 10), 10,787 shares of Series B convertible preferred stock (see Note 9), Series 1 warrants to purchase 8,280,000 shares of common stock and Series 2 warrants to purchase 8,280,000 shares of common stock (see Note 8), including the full exercise of the over-allotment option. The total gross proceeds to the Company from the offering was $16,560,000, or $14,049,697 net of issuance and other costs of $2,510,303.

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Subsequent Events - Securities Purchase Agreement (Details) - USD ($) $ / shares in Units, $ in Millions	Nov. 13, 2019	Sep. 30, 2019
Subsequent Events.
Exercise price (in dollars per share)		$ 49.00
Investors | Subsequent event | Pre-funded Warrants | Securities purchase agreement
Subsequent Events.
Purchase of shares by issuing warrants	2,222,223
Offer price (per share)	$ 0.80
Exercise price (in dollars per share)	$ 0.01
Gross proceeds from issuance of pre-funded warrants	$ 1.8

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Segment Information (Details)	3 Months Ended		9 Months Ended
	Sep. 30, 2019 USD ($)	Sep. 30, 2018 USD ($)	Sep. 30, 2019 USD ($) segment	Sep. 30, 2018 USD ($)	Dec. 31, 2018 USD ($)
Segment Information
Number of segments | segment			2
Revenue from external customers	$ 972,779	$ 1,132,067	$ 4,268,206	$ 2,820,269
Segment profit (loss)	(7,555,065)	(6,138,352)	(32,580,053)	(19,492,172)
Segment assets	35,626,544		35,626,544		$ 41,041,945
Less: investment in subsidiary	(29,240,965)		(29,240,965)		(29,240,965)
Less: Intercompany loan	(33,501,296)		(33,501,296)		(22,596,618)
Human Health
Segment Information
Segment profit (loss)	(3,955,115)	(3,145,782)	(16,585,956)	(10,519,413)
Segment assets	33,571,477		33,571,477		37,985,935
Animal Health
Segment Information
Segment profit (loss)	(3,599,950)	(2,992,570)	(15,994,097)	(8,972,759)
Segment assets	64,797,329		64,797,329		54,893,593
Product revenue, net
Segment Information
Revenue from external customers	972,779	1,132,067	4,268,206	2,642,880
Product revenue, net | Human Health
Segment Information
Revenue from external customers	957,059	1,107,682	4,184,912	2,545,121
Product revenue, net | Animal Health
Segment Information
Revenue from external customers	15,720	$ 24,385	83,294	$ 275,148
Operating Segments
Segment Information
Segment assets	$ 98,368,806		$ 98,368,806		$ 92,879,528

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Debt - 2019 Bridge Notes (Details)		3 Months Ended	4 Months Ended	9 Months Ended
	Jul. 23, 2019 USD ($)	Jun. 26, 2019 USD ($) item	Jun. 30, 2019 USD ($) item	Sep. 30, 2019 USD ($)	Feb. 28, 2015 USD ($)
Convertible Promissory Notes and Common Stock Warrants [Line Items]
Principal amount					$ 150,000
Net cash proceeds				$ 5,050,000
Fair value of warrant				$ 493,688
2019 Bridge Notes
Convertible Promissory Notes and Common Stock Warrants [Line Items]
Number of promissory notes issued | item		21	21
Principal amount			$ 5,050,000
Net cash proceeds		$ 5,050,000
Interest rate (as a percent)		12.00%
Fair value of warrant		$ 5,005,739
Repayments of Debt	$ 5,192,923
Principal amount pertaining to repayment of Notes payable	5,050,000
Accrued Interest pertaining to repayment of Notes payable	142,923
Extinguishment loss on repayment of Notes	$ 335,753
Fourteen Promissory Notes [Member]
Convertible Promissory Notes and Common Stock Warrants [Line Items]
Number of promissory notes issued | item		14	14
Principal amount		$ 3,550,000	$ 3,550,000
Warrant coverage percentage		125.00%	125.00%
Seven Promissory Notes [Member]
Convertible Promissory Notes and Common Stock Warrants [Line Items]
Number of promissory notes issued | item		7	7
Principal amount		$ 1,500,000	$ 1,500,000
Warrant coverage percentage		75.00%	75.00%

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Debt - Convertible debt (Details)	Dec. 31, 2018 USD ($)
Convertible notes
Convertible debt, Gross	$ 11,294,770
Net convertible debt obligation	11,239,170
Convertible debt – current, net of discount	11,239,170
June 2017 Convertible debt
Convertible notes
Convertible debt, Gross	740,882
Less: unamortized debt discount and debt issuance costs	(55,600)
Napo convertible debt
Convertible notes
Convertible debt, Gross	$ 10,553,888

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Debt - Amendment to Note Purchase Agreement and Notes (Details)			1 Months Ended
	Mar. 23, 2018 USD ($) Y item $ / shares	Feb. 16, 2018 USD ($) shares	Dec. 31, 2017 USD ($) $ / shares shares	Nov. 30, 2017 $ / shares	Dec. 31, 2016 USD ($)	Feb. 28, 2015 USD ($)
Debt and Warrants
Principal amount						$ 150,000
Convertible note purchase agreement
Debt and Warrants
Principal amount					$ 12,500,000
First Amendment to Note Purchase Agreement and Notes | Convertible note purchase agreement | Napo
Debt and Warrants
Principal amount			$ 1,170,950
First Amendment to Note Purchase Agreement and Notes | Convertible note purchase agreement | Conversion option liability | Napo
Debt and Warrants
Percent of increase in the principal amount			12.00%
Conversion price (in dollars per share) | $ / shares			$ 14.00	$ 39.20
Issuance of common stock in exchange for services (in shares) | shares			35,601
Partial redemption of convertible notes			$ 299,050
Second Amendment to Note Purchase Agreement and Notes | Napo
Debt and Warrants
Principal amount		$ 435,950
Accrued interest on notes payable		$ 18,063
Shares issued to creditors | shares		54,049
Principal paid	$ 735,000
Interest paid	$ 20,699
Second Amendment to Note Purchase Agreement and Notes | Conversion option liability | Napo
Debt and Warrants
Strike price (in dollars per share) | $ / shares	$ 14.70
Second Amendment to Note Purchase Agreement and Notes | Conversion option liability | Napo | Level 3 | Recurring
Debt and Warrants
Increase to the fair value of the conversion option liability	$ 174,754
Conversion option liability written off	$ 286,595
Second Amendment to Note Purchase Agreement and Notes | Conversion option liability | Napo | Expected life
Debt and Warrants
Conversion option liability | Y	0.11
Second Amendment to Note Purchase Agreement and Notes | Conversion option liability | Napo | Volatility
Debt and Warrants
Conversion option liability | item	2.8816
Second Amendment to Note Purchase Agreement and Notes | Conversion option liability | Napo | Risk free rate
Debt and Warrants
Conversion option liability | item	0.0169
Second Amendment to Note Purchase Agreement and Notes | Conversion option liability | Napo | Dividend rate
Debt and Warrants
Conversion option liability | item	0.0000

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Organization and Business - July 2019 Underwritten Public Offering (Details) - USD ($)	1 Months Ended		3 Months Ended	9 Months Ended
	Jul. 31, 2019	Jul. 23, 2019	Sep. 30, 2019	Sep. 30, 2019
Warrants issued				12,713
Series B convertible preferred stock
Units issued	10,787		10,787	10,787
Number of shares issued for preferred stock converted		500
Series 1 warrants
Warrants issued		8,280,000
Series 2 warrants
Warrants issued		8,280,000
Underwritten Public Offering
Common stock issued	2,886,500
Gross proceeds from the issuance of common stock	$ 16,560,000
Net proceeds from issuance of common stock	14,049,697
Stock issuance and other costs	$ 2,510,303
Underwritten Public Offering | Series B convertible preferred stock
Number of shares issued for preferred stock converted	10,787
Underwritten Public Offering | Series 1 warrants
Number of shares in exchange for each unit	500
Common stock issued	5,393,500
Warrants issued	8,280,000
Underwritten Public Offering | Series 1 warrants | Class A units
Warrants issued	5,393,500
Underwritten Public Offering | Series 2 warrants
Number of shares in exchange for each unit	500
Common stock issued	5,393,500
Warrants issued	8,280,000
Underwritten Public Offering | Series 2 warrants | Class A units
Warrants issued	5,393,500
Class A units
Stock issuance and other costs				$ 875,122
Class A units | Series 1 warrants
Units issued		2,886,500
Common stock issued		2,886,500
Class A units | Series 2 warrants
Units issued		2,886,500
Common stock issued		2,886,500
Class A units | Underwritten Public Offering
Units issued	2,886,500	2,886,500
Public offering price	$ 2.00	$ 2.00
Number of shares in exchange for each unit	1	1
Net proceeds from issuance of common stock	$ 5,773,000
Stock issuance and other costs	$ 875,184
Class A units | Underwritten Public Offering | Series 1 warrants
Units issued		2,886,500
Public offering price		$ 2.00
Number of shares in exchange for each unit	1	1
Net proceeds from issuance of common stock	$ 1,849,378
Class A units | Underwritten Public Offering | Series 2 warrants
Number of shares in exchange for each unit	1	1
Net proceeds from issuance of common stock	$ 1,849,378
Class B units
Units issued		10,787
Public offering price		$ 1,000
Stock issuance and other costs	$ 1,635,184
Class B units | Series B convertible preferred stock
Number of shares in exchange for each unit		1
Number of shares issued for preferred stock converted		500
Class B units | Series 1 warrants
Units issued		10,787
Number of shares in exchange for each unit		500
Common stock issued		5,393,500
Class B units | Series 2 warrants
Units issued		10,787
Public offering price		$ 1,000
Number of shares in exchange for each unit		500
Common stock issued		5,393,500
Class B units | Underwritten Public Offering
Units issued	10,787
Public offering price	$ 1,000
Class B units | Underwritten Public Offering | Series B convertible preferred stock
Number of shares in exchange for each unit	1
Number of shares issued for preferred stock converted	500
Class B units | Underwritten Public Offering | Series 1 warrants
Units issued		10,787
Public offering price		$ 1,000
Number of shares in exchange for each unit		500
Number of shares issued for preferred stock converted	500
Class B units | Underwritten Public Offering | Series 1 warrants | Series B convertible preferred stock
Number of shares in exchange for each unit		1
Number of shares issued for preferred stock converted		500
Class B units | Underwritten Public Offering | Series 2 warrants
Number of shares in exchange for each unit		500
Number of shares issued for preferred stock converted	500

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Segment Information (Tables)

9 Months Ended

Sep. 30, 2019

Segment Information

Schedule of reportable segments net revenue and net loss

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2019		2018		2019		2018
	(unaudited)				(unaudited)
Revenue from external customers
Human Health	$	957,059	$	1,107,682	$	4,184,912	$	2,545,121
Animal Health		15,720		24,385		83,294		275,148
Consolidated Totals	$	972,779	$	1,132,067	$	4,268,206	$	2,820,269
Segment profit (loss)
Human Health	$	(3,955,115)	$	(3,145,782)	$	(16,585,956)	$	(10,519,413)
Animal Health		(3,599,950)		(2,992,570)		(15,994,097)		(8,972,759)
Consolidated Totals	$	(7,555,065)	$	(6,138,352)	$	(32,580,053)	$	(19,492,172)

Schedule of reconciliation of segments assets to the consolidated assets

		September 30,		December 31,
	2019		2018
Segment assets
Human Health	$	33,571,477	$	37,985,935
Animal Health		64,797,329		54,893,593
Total	$	98,368,806	$	92,879,528
The reconciliation of segments assets to the consolidated assets is as follows:
		September 30,		December 31,
	2019		2018
Total assets for reportable segments		98,368,806		92,879,528
Less: Investment in subsidiary		(29,240,965)		(29,240,965)
Less: Intercompany loan		(33,501,296)		(22,596,618)
Consolidated Totals	$	35,626,544	$	41,041,945

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Summary of Significant Accounting Policies - Revenue Recognition (Details) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Disaggregation of Product Revenue
Practical Expedients, not disclose the value of unsatisfied performance obligations			true
Revenue from external customers	$ 972,779	$ 1,132,067	$ 4,268,206	$ 2,820,269
Impact of adjustment	(7,555,065)	(6,138,352)	(32,580,053)	(19,492,172)
Adjustment of product donation incorrectly recorded as revenue
Disaggregation of Product Revenue
Revenue from external customers			(336,934)
Impact of adjustment			(336,934)
Mytesi
Disaggregation of Product Revenue
Product revenue	957,059	1,107,682	4,184,912	2,545,121
Neonorm
Disaggregation of Product Revenue
Product revenue	$ 15,720	$ 24,385	$ 83,294	$ 97,759

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Debt

9 Months Ended

Sep. 30, 2019

Debt and Warrants

Debt

7. Debt

Convertible Notes

Convertible notes at September 30, 2019 and December 31, 2018 consist of the following:

	September 30,
	2019		December 31,
	(unaudited)		2018
June 2017 convertible debt	$	—	$	740,882
Napo convertible debt		—		10,553,888
		—		11,294,770
Less: unamortized debt discount and debt issuance costs		—		(55,600)
Net convertible debt obligation	$	—	$	11,239,170
Convertible debt - non-current, net of discount		—		—
Convertible debt - current, net of discount	$	—	$	11,239,170

February 2015 Convertible Note

In February 2015, the Company issued a convertible promissory note to an accredited investor in the aggregate principal amount of $150,000. This note was issued pursuant to the convertible note purchase agreement dated December 23, 2014. In March of 2018, the debtor agreed to accept 1,937 shares of the Company’s common stock as payment for all outstanding principal and interest in the amount of $203,408.

June 2017 Convertible Note

On June 29, 2017, the Company issued a secured convertible promissory note to CVP in the aggregate principal amount of $2,155,000 less an original issue discount of $425,000 and less $30,000 to cover the lender's legal fees for net cash proceeds of $1,700,000 (the “June 2017 Note”). Interest on the outstanding balance will be paid 8% per annum from the purchase price date until the balance is paid in full.

The Note provides for two separate features that result in a derivative liability:

1. Repayment of mandatory default amount upon an event of default—upon the occurrence of any event of default, the lender may accelerate the Note resulting in the outstanding balance becoming immediately due and payable in cash; and

2. Automatic increase in the interest rate on and during an event of default—during an event of default, the interest rate will increase to the lesser of 17% per annum or the maximum rate permitted under applicable law.

The Company computed fair values at the date of issuance of $15,000 and $5,000 for the repayment and the interest rate increase feature, respectively, using the Binomial Lattice Model, which was based on the generalized binomial option pricing formula. The $20,000 combined fair value was carved out and was included as a derivative liability on the Balance Sheet. At September 30, 2018, the derivatives were determined to have a de-minimis fair value and were written-off.

On August 2, 2018, the Company and CVP agreed to an amendment extending the maturity date to August 26, 2019, and limiting the aggregate amount that CVP is permitted to redeem on a monthly basis to $500,000, which is the maximum aggregate redemption amount for all notes outstanding with CVP. This amendment resulted in the Company accounting for the transaction as a troubled debt restructuring, under which the carrying amount of the note payable remained unchanged but interest expense is computed using a new effective rate that equates the present value of the future cash payments specified by the new terms with the carrying amount of the note.

Between October 2018 and December 2018, the Company and CVP renegotiated the terms of the June 2017 Note agreement such that CVP agreed not to make any redemptions of the June 2017 Note until March 2019. In consideration of this standstill arrangement, the Company paid CVP a total standstill fee of $499,403 for all four CVP Notes. The standstill fee allocated to the June 2017 Note was $63,296, of which $37,296 increased the principal balance and $26,000 was paid in cash. These restructurings in whole represented four separate restructurings of the June 2017 ConvertibleNote agreement, resulting in two troubled debt restructurings accounted for under ASC 470-60 and two modificationsaccounted for under ASC 470-50. For the two modifications resulting in troubled debt restructurings, the changes wereaccounted for prospectively and a new effective interest rate was determined that equated the present value of the futurecash payments specified by the new terms with the carrying amount of the June 2017 Note. For the two modifications that resultedin modification accounting, a new effective rate was determined at the date of modification that equated the revisedcash flows to the carrying amount of the Note.

In May 2019, the Company and CVP amended the June 2017 Note agreement such that the Company made three separate exchanges of principal and related accrued interest for shares of the Company’s common stock. The first two exchanges of principal and accrued interest for common stock were not considered a substantial change to the June 2017 Note and therefore resulted in modification accounting and the determination of a new effective interest rate; the third exchange on May 29, 2019 resulted in the extinguishment of the entire June 2017 Note with a corresponding extinguishment loss of $27,176 for the three months ended June 30, 2019. At September 30, 2019 and December 31, 2018, the net carrying value of the June 2017 Note was zero and $685,282, respectively.

Napo Convertible Notes

March 2017 Convertible Notes

In March 2017, Napo entered into an exchangeable Note Purchase Agreement with two lenders for the funding of face amount of $1,312,500 in two $525,000 tranches of face amount $656,250. The notes bore interest at 3% and mature on December 1, 2017. The Company assumed the notes at fair value of $1,312,500 as part of the Napo Merger.

First Amendment to Note Purchase Agreement and Notes

In December 2017, Napo amended the exchangeable note purchase agreement to extend the maturity of the first tranche and second tranche of notes to February 15, 2018 and April 1, 2018, respectively, increase the principal amount by 12%, and reduce the conversion price from $39.20 per share to $14.00 per share. The Company also issued 35,601 shares of common stock to the lenders in connection with this amendment to partially redeem $299,050 from the first tranche of the notes. The amended face value of the notes was $1,170,950. This amendment resulted in the Company treating the notes as having been extinguished and replaced with new notes for accounting purposes due to meeting the 10% cash flow test. The conversion option in the notes was bifurcated and accounted for as a conversion option liability at fair value.

Second Amendment to Note Purchase Agreement and Notes

On February 16, 2018, Napo amended the exchangeable note purchase agreement to extend the maturity date of the Second Tranche Notes from April 1, 2018 to May 1, 2018. In addition, the Company also issued 54,049 shares of common stock to the Purchasers as repayment of the remaining $435,950 aggregate principal amount and $18,063 in accrued and unpaid interest thereon. On March 23, 2018, the Company paid off the remaining $735,000 of principal and $20,699 in interest due on the second tranche debt in cash with proceeds from the March 23, 2018 equity financing. The fair value of the conversion option liability was again revalued at March 23, 2018 using the Black-Scholes-Merton model using the following criteria: stock price of $14.70 per share, expected life of 0.11 years, volatility of 288.16%, risk free rate of 1.69% and dividend rate of 0%, resulting in an increase of $174,754 to the fair value of the conversion option liability and included in the change in fair value of warrants and conversion option liability in the statements of operations. The underlying debt was paid off in March of 2018 and the $286,595 conversion option liability was written off to other income in the statements of operations.

December 2016 Convertible Notes

In December 2016, Napo entered into a note purchase agreement which provided for the sale of up to $12,500,000 face amount of notes and issued convertible promissory notes (the Napo December 2016 Notes) in the aggregate face amount of $2,500,000 to three lenders and received proceeds of $2,000,000 which resulted in $500,000 of original issue discount. In July 2017, Napo issued convertible promissory notes (the Napo July 2017 Notes) in the aggregate face amount of $7,500,000 to four lenders and received proceeds of $6,000,000 which resulted in $1,500,000 of original issue discount. The Napo December 2016 Notes and the Napo July 2017 Notes mature on December 30, 2019 and bear interest at 10% with interest due each six-month period after December 30, 2016. On June 30, 2017, the accrued interest of $125,338 was added to principal of the Napo December Notes, and the new principal balance became $2,625,338. Interest may be paid in cash or in the stock of Jaguar per terms of the note purchase agreement. In each one year period beginning December 30, 2016, up to one-third of the principal and accrued interest on the notes may be converted into the common stock of the merged entity at a conversion price of $64.75 per share. The Company assumed these convertible notes at fair value of $11,161,000 as part of the Napo Merger. The $1,035,661 difference between the fair value of the notes and the principal balance was being amortized over the twenty-nine (29) month period from July 31, 2017 to December 31, 2019. Interest expense is paid every nine months through the issuance of common stock. On March 16, 2018, $534,775 of interest accrued through January 31, 2018 and $169,950 of certain legal expenses were paid through the issuance of 4,081 shares of the Company's common stock. In August 2018, the Company paid $479,808 of accrued interest through July 31, 2018 with the issuance of 4,582 shares of the Company’s common stock. In January 2019, $446,729 of accrued interest was paid through the issuance of 19,751 shares of the Company's common stock.

Extinguishment and Exchange of the Napo Convertible Notes

In May 2019, in a restructuring of the Notes, Chicago Venture Partners (“CVP”) acquired the Napo December 2016 and Napo July 2017 Notes, as well as all rights thereof, and immediately extinguished the two Notes; in their place, the Company issued to CVP a new note (“Exchange Note 1”). The collective carrying amount of the Napo December 2016 and Napo July 2017 Note immediately before the exchange was $10,375,326, or principal of $10,125,339 and unamortized premium of $249,987. The new Exchange Note 1 had an opening principal balance of $10,535,900, consisting of the $10,125,339 principal balance of the extinguished notes plus $410,562 in accrued but unpaid interest from the Napo December 2016 and Napo July 2017 Notes. At September 30, 2019 and December 31, 2018, the balance of the Napo December 2016 and Napo July 2017 Notes was zero and $10,553,888, respectively.

Concurrent with the restructuring, CVP also entered into security agreements with Jaguar (the “Jaguar Security Agreement”) and Napo (the “Napo Security Agreement”, and together with the Jaguar Security Agreement, the “Security Agreements”), pursuant to which CVP will receive (i) a security interest in substantially all of the Company’s assets as security for the Company’s obligations under Exchange Note 2 and (ii) a security interest in substantially all of Napo’s assets as security for Napo’s obligations under Exchange Note 1 and Exchange Note 2. Notwithstanding the foregoing, (a) the amount owing under Exchange Note 2 will not be considered part of the obligations secured by the Napo Security Agreement until such time as Jaguar receives permission from a third party and (b) the security interest granted under the Jaguar Security Agreement will be automatically terminated and released upon Jaguar’s receipt of a waiver from such third party.

Notes Payable

Notes payable at September 30, 2019 and December 31, 2018 consist of the following:

	September 30,
	2019		December 31,
	(unaudited)		2018
December 2017 note payable	$	—	$	1,673,237
February 2018 note payable		—		2,359,750
March 2018 note payable		—		1,147,870
2019 Exchange Note 1		4,381,535		—
2019 Exchange Note 2		2,296,926		—
		6,678,461		5,180,857
Less: unamortized discount and debt issuance costs		—		(335,282)
Note payable, net	$	6,678,461	$	4,845,575
Notes payable - non-current, net	$	6,678,461	$	—
Notes payable - current, net	$	—	$	4,845,575

December 2017 Note

On December 8, 2017, the Company entered into a securities purchase agreement with CVP pursuant to which the Company issued a promissory note (the “December 2017 Note”) in the aggregate principal amount of $1,587,500 for an aggregate purchase price of $1,100,000. The December 2017 Note carries an original issue discount of $462,500, and the initial principal balance also includes $25,000 to cover CVP’s transaction expenses. The December 2017 Note bears interest at the rate of 8% per annum and matures on August 26, 2019.

On August 2, 2018, the Company and CVP amended the December 2017 Note agreement, extending the maturity date from September 8, 2018 to August 26, 2019, and limiting the aggregate amount that CVP is permitted to redeem on a monthly basis to $500,000, which amount is the maximum aggregate amount for the CVP Notes collectively. This amendment resulted in the Company accounting for the transaction as a troubled debt restructuring, under which the carrying amount of the note payable remained unchanged but interest expense is computed using a new effective rate that equates the present value of the future cash payments specified by the new terms with the carrying amount of the note. The principal balance of the December 2017 Note is included in notes payable in the current liabilities section of the condensed consolidated balance sheet.

Between October 2018 and December 2018, the Company and CVP renegotiated the terms of the December 2017 Note agreement such that CVP agreed not to make any redemptions of the December 2017 Note until March 2019. In consideration of this standstill arrangement, the Company paid CVP a total standstill fee of $499,403 for all four CVP Notes. The standstill fee allocated to the December 2017 Note was $141,737, of which $85,737 increased the principal balance and $56,000 was paid in cash. These modifications in whole represented four separate restructurings of the December 2017 Note agreement, resulting in two troubled debt restructurings accounted for under ASC 470-60 and two modifications accounted for under ASC 470-50. For the two restructurings resulting in troubled debt restructurings, the changes were accounted for prospectively and a new effective interest rate was determined that equated the present value of the future cash payments specified by the new terms with the carrying amount of the December 2017 Note. For the two modifications that resulted in modification accounting, a new effective rate was determined at the date of modification that equated the revised cash flows to the carrying amount of the December 2017 Note.

In March 2019, the Company and CVP amended the December 2017 Note agreement such that the Company prepaid principal and accrued interest of $811,065 and $178,755, respectively, in 57,857 shares of the Company’s common stock. The exchange of debt for common stock was considered a substantial change to the December 2017 Note and therefore the exchange resulted in extinguishment accounting and a corresponding extinguishment loss of $243,419.  

In April 2019, the Company and CVP amended the December 2017 Note agreement such that the Company made two separate exchanges of principal and related accrued interest for shares of the Company’s common stock. The first exchange resulted in changes to cash flows that were considered substantial, resulting in extinguishment accounting with an extinguishment loss of $100,148; the second exchange on April 17, 2019 resulted in the extinguishment of the entire December 2017 Note with a corresponding extinguishment loss of $19,494. At September 30, 2019 and December 31, 2018, the net carrying value of the December 2017 Note was zero and $1,548,829, respectively.

February 2018 Note

On February 26, 2018, the Company entered into a securities purchase agreement with CVP, pursuant to which the Company issued to CVP a promissory note in the aggregate principal amount of $2,240,909 for an aggregate purchase price of $1,560,000 (the “February 2018 Note”). The February 2018 Note carries an original issue discount of $655,909, and the initial principal balance also includes $25,000 to cover CVP's transaction expenses. The February 2018 Note bears interest at the rate of 8% per annum and matures on August 26, 2019.

Between October 2018 and December 2018, the Company and CVP renegotiated the terms of the February 2018 Note agreement such that CVP agreed not to make any redemptions of the February 2018 Note until March 2019. In consideration of this standstill arrangement, the Company paid CVP a total standstill fee of $499,403 for all four CVP Notes. The standstill fee allocated to the February 2018 Note was $198,841, of which $118,841 increased the principal balance and $80,000 was paid in cash. These modifications in whole represented four separate restructurings of the February 2018 Note agreement, resulting in a debt extinguishment accounted for under ASC 470-50, two troubled debt restructurings accounted for under ASC 470-60 and a debt modification accounted for under ASC 470-50. For the debt extinguishment, the Company recorded an extinguishment loss of $102,296. For the two troubled debt restructurings, the changes were accounted for prospectively and a new effective interest rate was determined that equated the present value of the future cash payments specified by the new terms with the carrying amount of the February 2018 Note. For the modification that resulted in modification accounting, a new effective rate was determined at the date of modification that equated the revised cash flows to the carrying amount of the February 2018 Note.

In March 2019, the Company and CVP amended the February 2018 Note agreement such that the Company prepaid principal and accrued interest of $2,044,627 and $203,866, respectively, in 114,802 shares of the Company’s common stock. The exchange of debt for common stock was considered a substantial change to the February 2018 Note and therefore the exchange resulted in extinguishment accounting and a corresponding extinguishment loss of $487,865.  

In April 2019, the Company and CVP amended the February 2018 Note agreement such that the Company made a single exchange of principal and related accrued interest for 20,345 shares of the Company’s common stock. The first exchange on April 16, 2019 resulted in the extinguishment of the entire February 2018 Note with a corresponding extinguishment loss of $37,740. At September 30, 2019 and December 31, 2018, the net carrying value of the February 2018 Note was zero and $2,290,865, respectively.

March 2018 Note

On March 21, 2018, the Company entered into a securities purchase agreement with CVP, pursuant to which the Company issued to CVP a promissory note in the aggregate principal amount of $1,090,341 for an aggregate purchase price of $750,000 (the “March 2018 Note” and together with the June 2017 Note, the December 2017 Note and the February 2018 Note, the “CVP Notes”). The March 2018 Note carries an original issue discount of $315,341, and the initial principal balance also includes $25,000 to cover CVP's transaction expenses. The March 2018 Note bears interest at the rate of 8% per annum and matures on September 21, 2019.

Between October 2018 and December 2018, the Company and CVP renegotiated the terms of the March 2018 Note agreement such that CVP agreed not to make any redemptions of the March 2018 Note until March 2019. In consideration of this standstill arrangement, the Company paid CVP a total standstill fee of $499,403 for all four CVP Notes. The standstill fee allocated to the March 2018 Note was $95,529, of which $57,529 increased the principal balance and $38,000 was paid in cash. These modifications in whole represented four separate restructurings of the March 2018 Note agreement, resulting in a debt extinguishment accounted for under ASC 470-50, two troubled debt restructurings accounted for under ASC 470-60, and a debt modification accounted for under ASC 470-50. For the debt extinguishment, the Company recorded an extinguishment loss of $223,824. For the two troubled debt restructurings, the changes were accounted for prospectively and a new effective interest rate was determined that equated the present value of the future cash payments specified by the new terms with the carrying amount of the March 2018 Note. For the modification that resulted in modification accounting, a new effective rate was determined at the date of modification that equated the revised cash flows to the carrying amount of the March 2018 Note.

Between January 2019 and March 2019, the Company and CVP amended the March 2018 Note agreement such that the Company prepaid principal and accrued interest of $1,050,114 and $85,681, respectively, in 95,407 shares of the Company’s common stock. These exchanges in whole represented four separate prepayments of principal and accrued interest, resulting in three debt extinguishments and one debt modification accounted. For the debt extinguishments, the Company recorded an aggregate extinguishment loss of $1,210,676. For the modification, a new effective rate was determined at the date of modification that equated the revised cash flows to the carrying amount of the March 2018 Note. The March 2018 Note was fully extinguished in March 2019. At September 30, 2019 and December 31, 2018, the net carrying value of the March 2018 Note was zero and $1,005,880, respectively.

2019 Bridge Notes

Between March 18, 2019 and June 26, 2019 the Company entered into Promissory Note Purchase Agreements with certain accredited investors under which the Company issued (i) fourteen promissory notes with a principal balance of $3,550,000 and warrant coverage at 125% of principal, and (ii) seven promissory notes with a principal balance of $1,500,000 and warrant coverage at 75% of principal. Collectively, cash proceeds from the twenty-one promissory notes (collectively, the “Bridge Notes”) was $5,050,000. The Bridge Notes were not convertible and bore interest at 12% with a maturity date of July 18, 2019, at which date all principal and accrued interest were due. The exercise price of the warrants was either (i) the price the Company issued common shares in its next public offering subject to a registration statement or (ii) if no such offering is consummated by the four-month maturity date of the Notes, then the exercise price would be equal to the closing price of the Company’s common stock on the Notes four-month maturity date. The warrants for all twenty-one Bridge Notes had an issuance date fair value of $5,005,739 (see Note 3).

Between May and early July 2019, the Company and the Bridge Note investors extended the maturity date of the Bridge Notes from July 18, 2019 to July 31, 2019, or an addition of thirteen days; this amendment to the terms of the  Promissory Note Purchase Agreements did not represent a troubled debt restructuring per Subtopic 470-60, nor was it considered a substantial change requiring extinguishment accounting per Subtopic 470-50. Rather, it represented a modification under Subtopic 470-50 requiring the determination of a new effective interest rate at the modification date that equated the revised cash flows to the carrying amounts of the Bridge Notes.

On July 23, 2019, the Company paid-off all twenty-one Bridge Notes prior to maturity. The Company paid cash of $5,192,923, or $5,050,000 of principal and $142,923 of accrued interest. The extinguishment of the Bridge Notes resulted in an extinguishment loss of $335,753.  

2019 Exchange Notes

In May 2019, the Company and CVP entered into an Exchange Agreement whereby CVP purchased the two outstanding Napo convertible notes and all rights thereof from the current debt holders. Subject to the terms of the Exchange Agreement, CVP and the Company agreed to exchange the two Napo convertible notes for a single CVP Note (“CVP Exchange Note 1”). At the Exchange date, the principal balance of the two Napo convertible notes was $10,125,339, or $10,535,900 inclusive of accrued but unpaid interest of $410,562. The beginning principal balance of CVP Exchange Note 1 was $10,535,900, or equal to the principal balance of the two Napo convertible notes and accrued interest thereon. The maturity date of CVP Exchange Note 1 was December 31, 2020, with an interest rate of 10%. Per the terms of the Exchange Agreement, CVP agreed to extend the maturity date of CVP Exchange Note 1 from December 31, 2019 (the same maturity date carried over from the two Napo convertible notes ) to December 31, 2020; in consideration of this extension, the Company issued CVP Exchange Note 2 with a principal balance of $2,296,926. The maturity date of CVP Exchange Note 2 is December 31, 2020, with an interest rate of 10%. The exchange of the two outstanding Napo convertible notes for Exchange Note 1 and Exchange Note 2 resulted in the recording of a $2,046,939 loss on extinguishment of debt for the three months ended June 30, 2019.

Between May 2019 and June 2019, the Company and CVP entered into note exchange agreements pursuant to which the Company, in lieu of making a cash payment to CVP on Exchange Note 1, made a prepayment of principal and related accrued interest of $5,144,175 by issuing 817,863 shares of the Company’s common stock to CVP. These exchanges of principal and related accrued interest resulted in a debt extinguishment accounted for under ASC 470-50, with the accompanying recording of a loss on extinguishment of $439,978.  

In July 2019, the Company and CVP entered into note exchange agreements pursuant to which the Company, in lieu of making a cash payment to CVP on Exchange Note 1, made a prepayment of principal and related accrued interest of $1,100,000 by issuing 301,577 shares of the Company’s common stock to CVP. These exchanges of principal and related accrued interest resulted in a debt extinguishment accounted for under ASC 470-50, with the accompanying recording of a loss on extinguishment of $11,202.  

At September 30, 2019, the net carrying value of Exchange Note 1 and Exchange Note 2 was $4,381,535 and $2,296,926, respectively, or an aggregate principal balance of $6,678,461.

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Stock Incentive Plans

9 Months Ended

Sep. 30, 2019

Stock Incentive Plans

Stock Incentive Plans

11. Stock Incentive Plans

2013 Equity Incentive Plan

Effective November 1, 2013, the Company's board of directors and sole stockholder adopted the Jaguar Health, Inc. 2013 Equity Incentive Plan (the “2013 Plan”). The 2013 Plan allows the Company's board of directors to grant stock options, restricted stock awards and restricted stock unit awards to employees, officers, directors and consultants of the Company. Following the effective date of the IPO and after effectiveness of any grants under the 2013 Plan that were contingent on the IPO, no additional stock awards will be granted under the 2013 Plan. Outstanding grants continue to be exercisable; however, any unissued shares under the plan and any forfeitures of outstanding options do not rollover to the 2014 Stock Incentive Plan. As of September 30, 2019, there were 368 options outstanding.

2014 Stock Incentive Plan

In May 2015, the Company adopted the Jaguar Health, Inc. 2014 Stock Incentive Plan (“2014 Plan”). The 2014 Plan provides for the grant of options, restricted stock and restricted stock units to eligible employees, directors and consultants to purchase the Company's common stock. The 2014 Plan provides for automatic share increases on the first day of each fiscal year in the amount of 2% of the outstanding number of shares of the Company's common stock on the last day of the preceding calendar year. The final 2% increase under the terms of the 2014 Plan was on January 1, 2019, at which time 7,797 additional available shares were added to the 2014 Plan. In February 2019, the Company shareholders approved a 5-year extension of the annual 2% automatic increase from January 1, 2020 through January 1, 2024. The 2014 Plan replaced the 2013 Plan except that all outstanding options under the 2013 Plan remain outstanding until exercised, cancelled or expiration.

In July 2019, the Company adopted an amendment to the 2014 Plan to increase the number of shares of the Company’s common stock authorized for issuance such that the aggregate authorized but unissued shares available for issuance would be equal to 12.5% of the issued and outstanding shares of Common Stock on a fully diluted basis including for purposes of this calculation as if such shares available under the 2014 Plan were included in the denominator (and assuming conversion or exercise, as applicable, of all outstanding convertible securities, including but not limited to conversion of the Company’s Series A Convertible Participating Preferred Stock and Series B Convertible Preferred Stock  into shares of Common Stock, all issued and outstanding warrants, RSUs and stock options (whether issued under or outside the 2014 Plan and the like)), calculated as of the earlier of (i) the day immediately after the consummation of the Company’s next underwritten public equity offering with gross proceeds of $5 million or more or (ii) July 31, 2019 (collectively, the “Calculation Date”). The Calculation Date occurred on July 24, 2019 and the total number of shares of Common Stock approved for issuance under the 2014 Plan increased 4,330,400 shares.

As of September 30, 2019, there were 3,821,690 options outstanding and 554,016 options available for grant.

Stock Options and Restricted Stock Units (“RSUs”)

The following table summarizes incentive plan activity for the nine months ended September 30, 2019 (unaudited):

				Weighted		Weighted Average
	Shares	Stock		Average		Remaining	Aggregate
	Available	Options	RSUs	Stock Option		Contractual Life	Intrinsic
	for Grant	Outstanding	Outstanding	Exercise Price		(Years)	Value*
Outstanding at December 31, 2018	2,327	42,979	5,613	$	406.36	9.24	$	—
Additional shares authorized	4,330,400	—	—		—	—
Options granted	(4,306,832)	4,306,832	—		1.71	—		—
Options cancelled	528,121	(528,121)	—		4.45	—		—
Outstanding at September 30, 2019	554,016	3,821,690	5,613	$	5.72	9.81	$	—
Exercisable at September 30, 2019		503,943		$	24.61	9.76	$	—
Vested and expected to vest at September 30, 2019		3,197,953		$	6.82	9.81	$	—

*Fair market value of JAGX common stock on September 30, 2019 was $1.31 per share.

The intrinsic value is calculated as the difference between the exercise price of the underlying options and the fair market value of the Company's common stock for options that were in-the-money.

No options were exercised in the nine months ended September 30, 2019 and 2018.

The weighted average grant date fair value of stock options granted was $1.57 and $128.80 per share during the nine months ended September 30, 2019 and 2018, respectively.

The number of options that vested in the nine months ended September 30, 2019 and 2018 was 496,467 and 6,053, respectively. The grant date weighted average fair value of options that vested in the nine months ended September 30, 2019 and 2018 was $2,668,737 and $475,123, respectively.

The Company granted 2,993 inducement options in fiscal year 2018 to new employees. The weighted average grant-date fair value of the options was $93.80 per share.

Stock-Based Compensation

The following table summarizes stock-based compensation expense related to stock options, inducement stock options and RSUs for the three and nine months ended September 30, 2019 and 2018, and are included in the condensed consolidated statements of operations as follows:

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2019		2018		2019		2018
	(unaudited)				(unaudited)
Research and development expense	$	332,636	$	175,772	$	548,524	$	400,521
Sales and marketing expense		41,122		39,210		87,215		59,762
General and administrative expense		736,351		465,112		1,347,246		956,508
Total	$	1,110,109	$	680,094	$	1,982,985	$	1,416,791

As of September 30, 2019, the Company had $5,555,383 of unrecognized stock-based compensation expense for options, inducement options and restricted stock units outstanding, which is expected to be recognized over a weighted-average period of 2.31 years.

The estimated grant-date fair value of stock option grants for the nine months ended September 30, 2019 and 2018 was calculated using the Black-Scholes - Merton option-pricing model using the following weighted-average assumptions:

	Nine Months Ended
	September 30,
	2019		2018
	(unaudited)
Weighted-average volatility	142.9 -  145.9	%	95.6 - 95.9	%
Weighted-average expected term (years)	5.6 - 5.8		5.8
Risk-free interest rate	1.5 - 1.9	%	2.8 - 3.1	%
Expected dividend yield	—		—

401(k) Plan

The Company sponsors a 401(k) defined contribution plan covering all employees. There were no employer contributions to the plan from plan inception through September 30, 2019.