Quarterly Report (10-q)

Table of Contents

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, 2020

◻

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.)

200 Pine Street, Suite 400

San Francisco, California 94104

(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 6, 2020 there were 69,441,067 shares of voting common stock, par value $0.0001 per share, outstanding, 21,821,410 shares of non-voting common stock, par value $0.0001 per share, outstanding (convertible into 20,782 shares of voting common stock), 6,559 shares of Series B-2 convertible preferred stock, par value $0.0001 per share, outstanding (convertible into 1,246,210 shares of voting common stock, subject to certain restrictions as provided in the Certificate of Designation for the Series B-2 convertible preferred stock), 571,600 shares of Series C perpetual preferred stock, par value $0.0001 per share, outstanding, and 853,771 shares of Series D perpetual preferred stock, par value $0.0001 per share, outstanding.

Table of Contents

	Page No.
PART I. — FINANCIAL INFORMATION	1
Item 1. 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	7
Notes to Condensed Consolidated Financial Statements	9
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations	54
Item 3. Quantitative and Qualitative Disclosures About Market Risk	78
Item 4. Controls and Procedures	79
PART II. — OTHER INFORMATION	81
Item 1. Legal Proceedings	81
Item 1A. Risk Factors	82
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	83

Item 3. Defaults upon senior securities	83
Item 4. Mine safety disclosures	83
Item 5. Other Information	83
Item 6. Exhibits	84
SIGNATURE	86

Table of Contents

PART I. — FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements

JAGUAR HEALTH, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS


	September 30,		December 31,
(In thousands, except share and per share data)	2020		2019
Assets		(unaudited)
Current assets:
Cash	$	1,349	$	3,495
Restricted cash		—		388
Accounts receivable		1,505		1,692
Accounts receivable - pledged		3,150		—
Other receivable		3		2
Inventory		2,219		2,129
Operating lease - right-of-use asset		—		553
Prepaid expenses and other current assets		2,497		1,263
Total current assets		10,723		9,522
Property and equipment, net		686		710
Intangible assets, net		24,759		26,024
Other assets		66		154
Total assets	$	36,234	$	36,410

Liabilities, convertible preferred stock and stockholders' equity
Current liabilities:
Accounts payable	$	5,456	$	5,352
Accrued liabilities		6,975		2,922
Warrant liability		126		3
Operating lease liability		—		337
Notes payable, net of discount		6,781		6,778
Series D perpetual preferred stock: $0.0001 par value; 977,300 and zero shares authorized at September 30, 2020 and December 31, 2019, respectively; 848,117 and zero shares issued and outstanding at September 30, 2020 and December 31, 2019, respectively; (redemption amount of $6,785 and zero at September 30, 2020 and December 31, 2019, respectively; liquidation preference of $6,785 and zero at September 30, 2020 and December 31, 2019, respectively)		6,430		—
Total current liabilities		25,768		15,392
Notes payable long term		2,660		450
Total liabilities		28,428		15,842

Commitments and contingencies (See Note 6)

Series A redeemable convertible preferred stock: $0.0001 par value, zero and 5,524,926 shares authorized at September 30, 2020 and December 31, 2019, respectively; zero and 5,524,926 shares issued and outstanding at September 30, 2020 and December 31, 2019, respectively; (redemption amount of zero and $12,739 at September 30, 2020 and December 31, 2019, respectively; liquidation preference of zero and $9,199 at September 30, 2020 and December 31, 2019, respectively)		—		9,895

Stockholders' equity
Series B convertible preferred stock: $0.0001 par value, zero and 11,000 shares authorized at September 30, 2020 and December 31, 2019, respectively; zero and 1,971 shares issued and outstanding at September 30, 2020 and December 31, 2019, respectively		—		476
Series B-2 convertible preferred stock: $0.0001 par value, 10,165 shares authorized at September 30, 2020 and December 31, 2019; 7,534 and 10,165 shares issued and outstanding at September 30, 2020 and December 31, 2019, respectively		916		1,236
Series C perpetual preferred stock: 1,011,000 and zero shares authorized at September 30, 2020 and December 31, 2019, respectively; 849,521 and zero shares issued and outstanding at September 30, 2020 and December 31, 2019, respectively; (redemption amount of $6,796 and zero at September 30, 2020 and December 31, 2019, respectively; liquidation preference of $6,796 and zero at September 30, 2020 and December 31, 2019, respectively)		4,773		—
Common stock - voting: $0.0001 par value, 150,000,000 shares authorized at September 30, 2020 and December 31, 2019; 48,862,970 and 14,273,061 shares issued and outstanding at September 30, 2020 and December 31, 2019, respectively		5		1
Common stock - non-voting: $0.0001 par value, 50,000,000 shares authorized at September 30, 2020 and December 31, 2019; 40,301,237 shares issued and outstanding at September 30, 2020 and December 31, 2019		4		4
Additional paid-in capital		160,238		142,046
Accumulated deficit		(158,130)		(133,090)
Total stockholders' equity		7,806		10,673
Total liabilities, convertible preferred stock and stockholders' equity	$	36,234	$	36,410

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

Table of Contents

JAGUAR HEALTH, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(In thousands, except share and per share data)	2020		2019		2020		2019
Product revenue	$	2,773	$	973	$	6,809	$	4,268
Total revenue		2,773		973		6,809		4,268
Operating expenses
Cost of product revenue		784		948		2,491		3,073
Research and development		1,522		1,307		4,509		4,426
Sales and marketing		1,529		1,698		4,728		5,436
General and administrative		4,313		3,107		11,218		9,817
Settlement of Tempesta Royalty License Agreement		—		640		—		640
Impairment of indefinite-lived intangible assets		—		—		—		4,000
Series B convertible preferred stock inducement expense		—		—		1,647		—
Series 3 warrants inducement expense		—		—		3,696		—
Total operating expenses		8,148		7,700		28,289		27,392
Loss from operations		(5,375)		(6,727)		(21,480)		(23,124)
Interest expense		(581)		(1,353)		(1,259)		(5,557)
Other income, net		194		29		190		49
Change in fair value of financial instruments		(2,104)		842		(2,491)		1,003
Loss on extinguishment of debt		—		(336)		—		(4,941)
Loss before income tax		(7,866)		(7,545)		(25,040)		(32,570)
Income tax expense		—		(10)		—		(10)
Net loss and comprehensive loss		(7,866)		(7,555)		(25,040)		(32,580)
Deemed dividend attributable to accretion of Series A redeemable convertible preferred stock		(349)		—		(1,332)		—
Deemed dividend attributable to Series B preferred stock		—		(3,876)		—		(3,876)
Stock dividend attributable to Series C perpetual preferred stock		(56)		—		(56)		—
Deemed dividend attributable to the Series 1 warrant modification		—		(252)		—		(252)
Deemed dividend attributable to Series 1, Series 2 and Bridge warrant holders		—		—		(856)		—
Net loss attributable to common shareholders	$	(8,271)	$	(11,683)	$	(27,284)	$	(36,708)
Net loss per share, basic and diluted	$	(0.21)	$	(2.00)	$	(1.03)	$	(13.37)
Weighted-average common shares outstanding, basic and diluted		40,218,324		5,841,790		26,467,423		2,746,523

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

Table of Contents

JAGUAR HEALTH, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES

IN CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY (DEFICIT)

(Unaudited)


	Series A			Series B			Series B-2			Series C
	Convertible Preferred Stock			Convertible Preferred Stock			Convertible Preferred Stock			Perpetual Preferred Stock			Common Stock - voting			Common Stock - non-voting			Additional		Accumulated		Total Stockholders'
(In thousands, except share data)	Shares	Amount		Shares	Amount		Shares	Amount		Shares	Amount		Shares	Amount		Shares	Amount		paid-in capital		deficit		Equity
Balances as of June 30, 2020	5,524,926	$	10,878	—	$	—	7,534	$	916	—	$	—	32,408,421	$	3	40,301,237	$	4	$	150,885	$	(150,264)	$	1,544
Shares issued on exercise of Series 3 warrants	—		—	—		—	—		—	—		—	8,248,330		1	—		—		5,992		—		5,993
Shares issued on exercise of Series 1 and Series 2 warrants	—		—	—		—	—		—	—		—	1,154,266		—	—		—		565		—		565
Series A convertible preferred stock redeemed and Series C perpetual preferred issued under the exchange transaction	(5,524,926)		(11,227)	—		—	—		—	842,500		4,717	—		—	—		—		150		—		4,867
Stock dividend attributable to Series C perpetual preferred stock of $8 per share	—		—	—		—	—		—	7,021		56	—		—	—		—		(56)		—		—
Shares issued to third party for services	—		—	—		—	—		—	—		—	2,289,474		—	—		—		879		—		879
Shares issued in exchange of CVP Exchange Notes	—		—	—		—	—		—	—		—	4,761,904		1	—		—		1,497		—		1,498
Accretion to redemption value of redeemable preferred stock	—		349	—		—	—		—	—		—	—		—	—		—		(349)		—		(349)
Fractional shares	—		—	—		—	—		—	—		—	20		—	—		—		—		—		—
Shares issued upon exercise of stock options	—		—	—		—	—		—	—		—	555		—	—		—		—		—		—
Stock-based compensation	—		—	—		—	—		—	—		—	—		—	—		—		675		—		675
Net loss	—		—	—		—	—		—	—		—	—		—	—		—		—		(7,866)		(7,866)
Balances as of September 30, 2020	—	$	—	—	$	—	7,534	$	916	849,521	$	4,773	48,862,970	$	5	40,301,237	$	4	$	160,238	$	(158,130)	$	7,806

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

Table of Contents

JAGUAR HEALTH, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES

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

(Unaudited)


	Series A			Series B			Series B-2			Series C
	Convertible Preferred Stock			Convertible Preferred Stock			Convertible Preferred Stock			Perpetual Preferred Stock			Common Stock - voting			Common Stock - non-voting			Additional		Accumulated		Total Stockholders'
(In thousands, except share data)	Shares	Amount		Shares	Amount		Shares	Amount		Shares	Amount		Shares	Amount		Shares	Amount		paid-in capital		deficit		Equity
Balances as of June 30, 2019	5,524,926	$	9,000	—	$	—	—	$	—	—	$	—	1,799,381	$	1	40,301,237	$	4	$	117,925	$	(119,576)	$	(1,646)
Issuance of Series B convertible preferred stock, net	—		—	10,787		2,241	—		—	—		—	—		—	—		—		—		—		2,241
Beneficial conversion feature of the Series B convertible preferred stock	—		—	—		(3,876)	—		—	—		—	—		—	—		—		3,876		—		—
Deemed dividend on the Series B convertible preferred stock	—		—	—		3,876	—		—	—		—	—		—	—		—		(3,876)		—		—
Issuance of common stock in Class A Units, net	—		—	—		—	—		—	—		—	2,886,500		—	—		—		1,201		—		1,201
Issuance of Series 1 warrants in Class A and B Units	—		—	—		—	—		—	—		—	—		—	—		—		5,305		—		5,305
Issuance of Series 2 warrants in Class A and B Units	—		—	—		—	—		—	—		—	—		—	—		—		5,305		—		5,305
Modification of Series 1 warrants	—		—	—		—	—		—	—		—	—		—	—		—		252		—		252
Deemed dividend attributable to Series 1 warrant modification	—		—	—		—	—		—	—		—	—		—	—		—		(252)		—		(252)
Bridge warrant reclassification from liability to equity	—		—	—		—	—		—	—		—	—		—	—		—		4,259		—		4,259
LOC warrant reclassification from liability to equity	—		—	—		—	—		—	—		—	—		—	—		—		71		—		71
Issuance of common stock upon conversion of Series B convertible preferred stock	—		—	(8,816)		(1,831)	—		—	—		—	4,408,000		—	—		—		1,831		—		—
Shares issued in exchange of CVP Exchange Notes	—		—	—		—	—		—	—		—	301,577		—	—		—		1,089		—		1,089
Stock-based compensation	—		—	—		—	—		—	—		—	—		—	—		—		1,110		—		1,110
Net loss	—		—	—		—	—		—	—		—	—		—	—		—		—		(7,555)		(7,555)
Balances as of September 30, 2019	5,524,926	$	9,000	1,971	$	410	—	$	—	—	$	—	9,395,458	$	1	40,301,237	$	4	$	138,096	$	(127,131)	$	11,380

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

Table of Contents

JAGUAR HEALTH, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES

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

(Unaudited)


	Series A			Series B			Series B-2			Series C
	Convertible Preferred Stock			Convertible Preferred Stock			Convertible Preferred Stock			Perpetual Preferred Stock			Common Stock - voting			Common Stock - non-voting			Additional		Accumulated		Total Stockholders'
(In thousands, except share data)	Shares	Amount		Shares	Amount		Shares	Amount		Shares	Amount		Shares	Amount		Shares	Amount		paid-in capital		deficit		Equity
Balances as of January 1, 2020	5,524,926	$	9,895	1,971	$	476	10,165	$	1,236	—	$	—	14,273,061	$	1	40,301,237	$	4	$	142,046	$	(133,090)	$	10,673
Shares issued on exercise of Series 1, Series 2, and 2019 Bridge Note warrants	—		—	—		—	—		—	—		—	548,962		—	—		—		392		—		392
Shares issued on exercise of Series 2 warrants and inducement offer conversion of Series B-1 convertible preferred stock	—		—	—		—	—		—	—		—	1,250,000		1	—		—		2,340		—		2,341
Shares issued on exercise of Series 1, Series 2, and 2019 Bridge Note warrants, net of issuance costs of $461; May 2020	—		—	—		—	—		—	—		—	8,670,852		1	—		—		3,787		—		3,788
Shares issued on conversion of Series 1, Series 2, and 2019 Bridge Note warrants; June 2020	—		—	—		—	—		—	—		—	732,315		—	—		—		359		—		359
Shares issued on exercise of Series 3 warrants	—		—	—		—	—		—	—		—	8,248,330		1	—		—		5,992		—		5,993
Shares issued on exercise of Series 1 and Series 2 warrants	—		—	—		—	—		—	—		—	1,154,266		—	—		—		565		—		565
Issuance of common stock in PIPE financing, net of issuance costs of $51	—		—	—		—	—		—	—		—	1,714,283		—	—		—		668		—		668
Shares issued in Underwriter settlement agreement	—		—	—		—	—		—	—		—	100,000		—	—		—		45		—		45
Warrants issued in Underwriter settlement agreement	—		—	—		—	—		—	—		—	—		—	—		—		31		—		31
Underwriter settlement offering cost	—		—	—		—	—		—	—		—	—		—	—		—		(185)		—		(185)
Conversion of Series B-2 convertible preferred stock into common stock	—		—	—		—	(2,631)		(320)	—		—	499,890		—	—		—		320		—		—
Conversion of Series B convertible preferred stock into common stock	—		—	(1,971)		(476)	—		—	—		—	4,423,251		—	—		—		476		—		—
Shares issued to Oasis as consideration under the March 2020 equity purchase agreement	—		—	—		—	—		—	—		—	68,807		—	—		—		33		—		33
Shares issued to Oasis under the March 2020 equity purchase agreement, put option exercise, net of issuance costs of $13	—		—	—		—	—		—	—		—	52,000		—	—		—		10		—		10
Series A convertible preferred stock redeemed and Series C perpetual preferred issued under the exchange transaction	(5,524,926)		(11,227)	—		—	—		—	842,500		4,717	—		—	—		—		150		—		4,867
Stock dividend attributable to Series C perpetual preferred stock of $8 per share	—		—	—		—	—		—	7,021		56	—		—	—		—		(56)		—		—
Shares issued to third party for services	—		—	—		—	—		—	—		—	2,364,474		—	—		—		916		—		916
Shares issued in exchange of CVP Exchange Notes	—		—	—		—	—		—	—		—	4,761,904		1	—		—		1,497		—		1,498
Accretion to redemption value of redeemable preferred stock	—		1,332	—		—	—		—	—		—	—		—	—		—		(1,332)		—		(1,332)
Fractional shares	—		—	—		—	—		—	—		—	20		—	—		—		—		—		—
Shares issued upon exercise of stock options	—		—	—		—	—		—	—		—	555		—	—		—		—		—		—
Stock-based compensation	—		—	—		—	—		—	—		—	—		—	—		—		2,184		—		2,184
Net loss	—		—	—		—	—		—	—		—	—		—	—		—		—		(25,040)		(25,040)
Balances as of September 30, 2020	—	$	—	—	$	—	7,534	$	916	849,521	$	4,773	48,862,970	$	5	40,301,237	$	4	$	160,238	$	(158,130)	$	7,806

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

Table of Contents

JAGUAR HEALTH, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES

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

(Unaudited)


	Series A			Series B			Series B-2			Series C
	Convertible Preferred Stock			Convertible Preferred Stock			Convertible Preferred Stock			Perpetual Preferred Stock			Common Stock - voting			Common Stock - non-voting			Additional		Accumulated		Total Stockholders'
(In thousands, except share data)	Shares	Amount		Shares	Amount		Shares	Amount		Shares	Amount		Shares	Amount		Shares	Amount		paid-in capital		deficit		Equity
Balances as of January 1, 2019	5,524,926	$	9,000	—	$	—	—	$	—	—	$	—	351,472	$	—	40,301,237	$	4	$	99,930	$	(94,551)	$	5,383
Issuance of common stock, net of offering costs	—		—	—		—	—		—	—		—	195,319		—	—		—		2,602		—		2,602
Issuance of common stock, net of offering costs, March 2019	—		—	—		—	—		—	—		—	19,019		—	—

JAGX

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