Jaguar Animal Health (JAGX) Risk Analysis

The SEC has adopted rules that regulate broker-dealer practices in connection with transactions in penny stocks. Penny stocks are generally equity securities with a price of less than $5.00, other than securities registered on certain national securities exchanges or authorized for quotation on certain automated quotation systems, provided that current price and volume information with respect to transactions in such securities is provided by the exchange or system. If we do not retain a listing on The Nasdaq Capital Market and if the price of our common stock is less than $5.00, our common stock will be deemed a penny stock. The penny stock rules require a broker-dealer, before a transaction in a penny stock not otherwise exempt from those rules, to deliver a standardized risk disclosure document containing specified information. In addition, the penny stock rules require that before effecting any transaction in a penny stock not otherwise exempt from those rules, a broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive (i) the purchaser's written acknowledgment of the receipt of a risk disclosure statement; (ii) a written agreement to transactions involving penny stocks and (iii) a signed and dated copy of a written suitability statement. These disclosure requirements may have the effect of reducing the trading activity in the secondary market for our common stock, and therefore, stockholders may have difficulty selling their shares.

We have experienced and may continue to experience significant volatility in the price of our common stock. From January 2, 2025, through January 30, 2026, the share price of our common stock ranged from a high of $32 to a low of $0.67. The reason for the volatility in our stock is not well understood and may continue. Factors that may have contributed to such volatility include but are not limited to, those discussed previously in this "Risk Factors" section of this report and others, such as: - delays in the commercialization of Mytesi, Canalevia-CA1, or our other current or future prescription drug product candidates and non-prescription products;- any delays in, or suspension or failure of, our current and future studies;- announcements of regulatory approval or disapproval of any of our current or future product candidates or of regulatory actions affecting our company or our industry;- manufacturing and supply issues that affect product candidate or product supply for our studies or commercialization efforts;- quarterly variations in our results of operations or those of our competitors;- changes in our earnings estimates or recommendations by securities analysts;- the payment of licensing fees or royalties in shares of our common stock;- announcements by us or our competitors of new prescription drug products or product candidates or non-prescription products, significant contracts, commercial relationships, acquisitions or capital commitments;- announcements relating to future development or license agreements including termination of such agreements;- adverse developments with respect to our intellectual property rights or those of our principal collaborators;- commencement of litigation involving us or our competitors;- any major changes in our board of directors or management;- new legislation in the US relating to the prescription, sale, distribution or pricing of gastrointestinal health products;- product liability claims, other litigation or public concern about the safety of our prescription drug product or product candidates and non-prescription products or any such future products;- market conditions in the human or animal industry, in general, or in the gastrointestinal health sector, in particular, including performance of our competitors;- future issuances of shares of common stock or other securities;- general economic conditions in the US and abroad; and - market speculation regarding any of the foregoing. In addition, the stock market, in general, or the market for stocks in our industry, in particular, may experience broad market fluctuations, which may adversely affect the market price or liquidity of our common stock. Any sudden decline in the market price of our common stock could trigger securities class-action lawsuits against us. If any of our stockholders were to bring such a lawsuit against us, we could incur substantial costs defending the lawsuit, and the time and attention of our management would be diverted from our business and operations. We also could be subject to damages claims if we were found to be at fault in connection with a decline in our stock price.

Investors may purchase shares of our common stock to hedge existing exposure in our common stock or to speculate on the price of our common stock. Speculation on the price of our common stock may involve long and short exposures. To the extent aggregate short exposure exceeds the number of shares of our common stock available for purchase in the open market, investors with short exposure may have to pay a premium to repurchase our common stock for delivery to lenders of our common stock. Those repurchases may dramatically increase the price of our common stock until investors with short exposure can purchase additional shares of common stock to cover their short position. This is often referred to as a "short squeeze." A short squeeze could lead to volatile price movements in shares of our common stock that are not directly correlated to our company's performance or prospects. Once investors purchase the shares necessary to cover their short position, the price of our common stock may decline.

The listing of our common stock on The Nasdaq Capital Market does not assure that a meaningful, consistent, and liquid trading market exists. Although our common stock is listed on The Nasdaq Capital Market, its trading volume has been limited, and an active trading market for our shares may never develop or be sustained. If an active market for our common stock does not develop, you may be unable to sell your shares when you wish to sell them or at a price that you consider attractive or satisfactory. The lack of an active market may also adversely affect our ability to raise capital by selling securities in the future or impair our ability to license or acquire other product candidates, businesses, or technologies using our shares as consideration.

The trading market for our common stock depends in part on the research and reports that industry or financial analysts publish about us or our business. We do not influence or control the reporting of these analysts. If one or more of the analysts who do cover us downgrade or provide a negative outlook on our company, our industry, or the stock of any of our competitors, the price of our common stock could decline. If one or more of these analysts ceases coverage of our company, we could lose visibility in the market, which in turn could cause the price of our common stock to decline.

As of December 31, 2025, we had (i) outstanding options to purchase an aggregate of 196,052 shares of our common stock at a weighted average exercise price of $252.84 per share, (ii) outstanding options to purchase an aggregate of 520 share of our common stock issuable upon exercise of outstanding inducement options, with a weighted-average exercise price of $540.69 per share, (iii) 3,708,349 shares of our common stock issuable upon exercise of warrants outstanding, with weighted-average exercise price of $3.03, (iv) 181,011 shares of our common stock issuable upon vesting of outstanding RSUs, (v) 181,338 shares of our common stock issuable to third parties upon exercise of those shares, and (vi) 9 shares of our non-voting common stock issuable at an equivalent share of voting common stock. The exercise of such options, warrants, and vesting of RSUs will result in further dilution of your investment. In addition, you may experience further dilution if we issue common stock in the future, including common stock from other equity arrangements or issued pursuant to our existing At The Market Offering Agreement dated December 10, 2021, by and between the Company and Ladenburg Thalmann & Co. Inc. ("Ladenburg") (as amended, the "ATM Agreement"), and securities issued upon exercise of the Rights pursuant to our stockholder rights plan. Pursuant to the ATM Agreement, we may offer and sell our common stock from time to time pursuant to the terms of the ATM Agreement. During the year ended December 31, 2025, we sold 2,159,049 shares of common stock pursuant to the terms of the ATM Agreement for net proceeds of $6.3 million. As a result of this dilution, you may receive significantly less in net tangible book value than the full purchase price you paid for the shares in the event of liquidation.

Our third amended and restated certificate of incorporation and amended and restated bylaws contain provisions that could delay or prevent changes in control or changes in our management without the consent of our board of directors. These provisions include the following: - a classified board of directors with three-year staggered terms, which may delay the ability of stockholders to change the membership of a majority of our board of directors;- no cumulative voting in the election of directors, which limits the ability of minority stockholders to elect director candidates;- the exclusive right of our board of directors to elect a director to fill a vacancy created by the expansion of the board of directors or the resignation, death or removal of a director, which prevents stockholders from being able to fill vacancies on our board of directors;- the ability of our board of directors to authorize the issuance of shares of preferred stock and to determine the terms of those shares, including preferences and voting rights, without stockholder approval, which could adversely affect the rights of our common stockholders or be used to deter a possible acquisition of our company;- the ability of our board of directors to alter our bylaws without obtaining stockholder approval;- the required approval of the holders of at least 75% of the shares entitled to vote at an election of directors to adopt, amend, or repeal our bylaws or repeal the provisions of our third amended and restated certificate of incorporation regarding the election and removal of directors;- a prohibition on stockholder action by written consent, which forces stockholder action to be taken at an annual or special meeting of our stockholders;- the requirement that a special meeting of stockholders may be called only by the chairman of the board of directors, the chief executive officer, the president, or the board of directors, which may delay the ability of our stockholders to force consideration of a proposal or to take action, including the removal of directors; and - advance notice procedures that stockholders must comply with in order to nominate candidates to our board of directors or to propose matters to be acted upon at a stockholders' meeting, which may discourage or deter a potential acquirer from conducting a solicitation of proxies to elect the acquirer's own slate of directors or otherwise attempting to obtain control of us. These provisions could inhibit or prevent possible transactions that some stockholders may consider attractive. We are also subject to the anti-takeover provisions contained in Section 203 of the Delaware General Corporation Law. Under Section 203, a corporation generally may not engage in a business combination with any holder of 15% or more of its capital stock unless the holder has held the stock for three years or, among other exceptions, the board of directors has approved the transaction.

In addition to the holders of record of shares of our common stock at the close of business on the Preferred Stock Dividend Record Date, holders of certain warrants to purchase, in aggregate, 2,400,765 shares of our common stock with dividend rights (the "Eligible Warrants") outstanding at the close of business on the Preferred Stock Dividend Record Date will also be entitled to the Preferred Stock Dividend. However, pursuant to the terms and conditions of the Eligible Warrants respectively, a holder of an Eligible Warrant will not actually receive shares of Series O Preferred Stock as a dividend (or alternatively, shares of our common stock issued upon conversion of the Series O Preferred Stock in accordance with the terms of the Certificate of Designation for Series O Preferred Stock, if the Series O Preferred Stock has been converted), in respect of any shares of our common stock issuable upon exercise of the Eligible Warrant (the "Warrant Shares"), unless and until such holder exercises the Eligible Warrant at any time prior to the expiration of the Eligible Warrant. Moreover, an Eligible Warrant may be transferrable by its holder, with the right to receive the Preferred Stock Dividend (or the Conversion Shares upon and after the conversion of Series O Preferred Stock, as described hereunder) transferrable along with such Eligible Warrant, pursuant to the terms of such Eligible Warrant (a "Transferrable Eligible Warrant"). In the event that a Transferrable Eligible Warrant is transferred by its holder in accordance with its terms after the Preferred Stock Dividend Record Date, the transferee of such Transferrable Eligible Warrant shall become entitled to receive the Series O Preferred Stock as a dividend (or alternatively, the Conversion Shares issued upon conversion of the Series O Preferred Stock in accordance with the terms of the Certificate of Designation for Series O Preferred Stock, if the Series O Preferred Stock has been converted), in respect of the Warrant Shares issued upon exercise of the Transferrable Eligible Warrant by the transferee. The transferor of the Transferrable Eligible Warrant shall, upon such transfer, cease to have any right to receive the Preferred Stock Dividend (or the Conversion Shares upon and after the conversion of Series O Preferred Stock).

The Certificate of Designation for Series O Preferred Stock provides that all of the then outstanding shares of Series O Preferred Stock shall convert, either as of December 31, 2026 or upon such earlier date, as determined by our board of directors in its sole discretion, to shares of common stock (the "Conversion Shares") at a ratio, for each share of Series O Preferred Stock (the "Series O Conversion Ratio"), equal to (i) the Stated Value of $ 8.01 of a share of Series O Preferred Stock, divided by (ii) the Minimum Price (as defined hereunder) as of the applicable conversion date (the "Series O Conversion Price"). The "Minimum Price" as defined in the form of the Certificate of Designation for Series O Preferred Stock means, with respect to any given date, the lower of: (i) the closing price of our common stock immediately preceding such date or (ii) the average closing price of the common stock for the five trading days immediately preceding such date. This conversion of all of the Series O Preferred Stock will result in the issuance of a substantial number of additional shares of our common stock and, as a result, the percentage ownership and voting power held by our stockholders who do not receive the Series O Preferred Stock as described below will be significantly reduced. Such stockholders will experience significant dilution. A stockholder's entitlement to the Preferred Stock Dividend as declared by our board of directors was determined by whether such stockholder held shares of our common stock as of the Preferred Stock Dividend Record Date for the Preferred Stock Dividend. Our board of directors set March 2, 2026 as the Preferred Stock Dividend Record Date and March 4, 2026 as the dividend payment date (the "Dividend Payment Date"). By way of example only, if a person acquired shares of our common stock on March 3, 2026, the day between the Record Date and the Dividend Payment Date, even though such person was a holder of record of our common stock when the Preferred Stock Dividend was paid, such dividend would be paid to the seller of the common stock who was the holder of record as of the Record Date rather than such person, because such person was not a holder of record of our common stock as of the Record Date. Because the Series O Conversion Ratio for a future conversion will be based on the Series O Conversion Price as of the time of such conversion, the exact magnitude of the dilutive effect of a future conversion cannot be conclusively determined as of the date of this Form 10-K but will very likely be material to those stockholders who do not receive our Preferred Stock Dividend. Potential future reverse stock splits and potential exchanges of our existing debt for our common stock after the Preferred Stock Dividend Record Date pursuant to Section 3(a)(9) of the Securities Act, for example, could result in significant future dilution to our holders of common stock acquired after the dates outlined above who do not benefit from holding our Series O Preferred Stock. By way of example only, based on an assumed effective Series O Conversion Price of $0.40 per share (the "Assumed Series O Conversion Price") and the Stated Value of $ 8.01 for one share of Series O Preferred Stock, and assuming there are [1,361,945] shares of Series O Preferred Stock outstanding, which is approximately the total number of shares of Series O Preferred Stock that would be received by holders of record of the share of Common Stock outstanding as of March 2, 2026, the Record Date, and those certain warrants to purchase Common Stock with dividend rights (the "Eligible Warrants") outstanding as of March 2, 2026 as the Preferred Stock Dividend, (the "Assumed Series O Share Amount"), all of which shall be converted, up to a maximum of [20,994,382] shares of our common stock will be issuable upon such conversion. Based on the shares of our common stock outstanding as of April 7, 2026 which was 13,019,277, the shares of common stock issued upon the full conversion of the Series O Preferred Stock would represent approximately [60.65]% of our outstanding common stock (after giving effect to such conversion and assuming full exercise of the Eligible Warrants into shares of common stock). The Conversion Price in connection with a future conversion could be materially lower than the Assumed Series O Conversion Price, which, for example, would have an even greater material dilutive effect on those stockholders who do not receive our Preferred Stock Dividend. For illustration purposes only, below is a table showing the number of shares of common stock that may potentially be issued upon full conversion of the shares of Series O Preferred Stock, based on the Assumed Series O Share Amount and three hypothetical conversion prices. The number of shares of common stock issuable will correspondingly increase or decrease depending on the actual Conversion Price for the Series O Preferred Stock. (in thousands)   Scenario A   Scenario B   Scenario C Hypothetical Series O Conversion Price   $   0.10       $   0.60       $   1.50     Hypothetical Series O Conversion Ratio       80.10           13.35           5.34     Hypothetical Aggregate Outstanding Shares of Series O Preferred Stock       1,361,945           1,361,945           1,361,945     Total Number of Shares of Common Stock Issued Upon Full Conversion of Series O Preferred Stock       83,977,529           13,996,255           5,598,502     Percentage of outstanding common stock represented by shares of common stock issued upon full exchange of assumed debt amount (after giving effect to such exchange)*       86.05   %       50.68   %       29.13   %*Calculated based on the shares of our common stock outstanding as of April 7, 2026 which was 13,019,277. The potential for the issuance of such a substantial number of shares of common stock may depress the price of our common stock regardless of our business performance. We may find it more difficult to raise additional equity capital while the Series O Preferred Stock is outstanding. Further, it is possible that we will not have a sufficient number of available shares of common stock to satisfy the full conversion of the Series O Preferred Stock if the applicable Conversion Price is reduced. If we do not have a sufficient number of available shares for such conversion, we will be required to increase our authorized shares of common stock or conduct a reverse stock split with respect to issued and outstanding shares of common stock, which may require additional stockholder approval and will be time consuming and expensive.

On February 18, 2026, we announced that our board of directors declared a special one-time dividend of one-tenth of one share of Series O Preferred Stock (as defined below) for each share of voting common stock outstanding, plus each share issuable upon exercise of certain warrants to purchase, in aggregate, 2,400,765 shares of our common stock with dividend rights (the "Eligible Warrants") outstanding, at the close of business on March 2, 2026 (the "Preferred Stock Dividend Record Date") (the "Preferred Stock Dividend"). The Preferred Stock Dividend was paid as of the close of business on March 4, 2026. In connection with the Preferred Stock Dividend, on March 2, 2026 we filed a Certificate of Designation of Preferences, Rights and Limitations of Series O Convertible Preferred Stock (the "Certificate of Designation for Series O Preferred Stock") with the Secretary of State of the State of Delaware, to designate 1,557,000 shares of our preferred stock, par value $0.0001 per share, as Series O Convertible Preferred Stock (the "Series O Preferred Stock"). The Series O Preferred Stock provides limited liquidity since the Series O Preferred Stock may not be transferred, assigned or pledged by any holder without the prior written consent of the Company and are not certificated, listed on any exchange, or quoted on any quotation system. Moreover, the Series O Preferred Stock does not trade with our common stock.

Since March 2020, we have sold royalty interests to certain lenders that entitle such lenders to receive future royalties on sales of our products. The royalty interests (as amended) require us to make minimum royalty payments beginning in July 2026, even if we do not sell a sufficient amount of products to cover such payments, which may strain our cash resources. Pursuant to the terms of the royalty interests (as amended), we have the right, at our sole discretion and subject to certain limitations, to exchange from time to time, all or any portion of such royalty interests for shares of our common stock at a price per share equal to the Nasdaq Minimum Price (as defined in Nasdaq Listing Rule 5635(d)) as of the date of the applicable exchange. Since January 2025, we have conducted various debt-for-equity and equity-for-equity exchanges in accordance with Section 3(a)(9) of the Securities Act of 1933, as amended ("Securities Act"), whereby we issued, in the aggregate, approximately [1.27] million shares of common stock and pre-funded warrants to purchase up to [13.39] million shares of common stock in exchange for a reduction in the outstanding balance of the royalty interests of approximately $[12.17] million. As of April 7, 2026, approximately [4.22] million shares of Common Stock were issued upon exercise of the aforementioned pre-funded warrants. In addition to the royalty interests, we also issued secured promissory notes to certain lenders in January 2021 and November 2025, respectively. The total outstanding balance of the royalty interests and the secured promissory notes as of April 7, 2026, was approximately $[30] million. Since our inception, we have incurred recurring operating losses and negative cash flows from operations. We expect to incur substantial losses and negative cash flows in future periods. At the present time, we have very limited cash resources to allocate to the repayment of outstanding debt when any part thereof becomes due. We have previously, as described above, issued equity securities including shares of our common stock and pre-funded warrants in exchange for debt, and we may continue to do so based upon such factors as the board of directors may deem relevant in its sole discretion, including, but not limited to, our cash balances. It is very likely that we will continue to issue additional securities to reduce debt in the future. Because the exchange ratio for a future exchange would be based on the Nasdaq Minimum Price as of the time of such exchange, the exact magnitude of the dilutive effect of a future exchange cannot be conclusively determined as of the date of this Form 10-K. By way of example only, based on an assumed effective Nasdaq Minimum Price of $0.40 per share (the "Assumed Exchange Price"), and assuming the Company has $30,000,000 debt outstanding (the "Assumed Debt Amount"), all of which shall be exchanged, up to a maximum of 75,000,000 shares of our common stock would be issuable upon such exchange. Based on the shares of our common stock outstanding as of April 7, 2026, which was 13,019,277, the shares of Common Stock issued upon the full exchange of the Assumed Debt Amount would represent approximately 86.99% of our outstanding Common Stock (after giving effect to such exchange). The Nasdaq Minimum Price in connection with any future exchange could be materially lower than the Assumed Exchange Price, which, for example, would have a material dilutive effect on existing stockholders. For illustration purposes only, below is a table showing the number of shares of Common Stock that may potentially be issued upon full exchange of the Assumed Debt Amount, based on three hypothetical exchange prices. The number of shares of Common Stock issuable will correspondingly increase or decrease depending on the actual Nasdaq Minimum Price for the exchange. (in thousands)   Scenario A   Scenario B   Scenario C   Hypothetical Nasdaq Minimum Price   $   0.10       $   0.60       $   1.50   Assumed debt amount       30,000           30,000           30,000   Total number of shares of common stock issued upon full exchange of assumed debt amount       300,000           50,000           20,000   Percentage of outstanding common stock represented by shares of common stock issued upon full exchange of assumed debt amount (after giving effect to such exchange)*       96.40   %       81.67   %       64.06 *Calculated based on the shares of our Common Stock outstanding as of April 7, 2026 which was 13,019,277. The potential for the issuance of such a substantial number of shares of common stock may depress the price of our common stock regardless of our business performance.

We are a smaller reporting company ("SRC") and a non-accelerated filer, which allows us to take advantage of exemptions from various reporting requirements that are applicable to other public companies that are not SRCs or non-accelerated filers, including not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, as amended, reduced disclosure obligations regarding executive compensation in our Annual Report and our periodic reports and proxy statements and providing only two years of audited financial statements in our Annual Report and our periodic reports. We will remain an SRC so long as (a) the aggregate market value of our outstanding common stock held by non-affiliates as of the last business day our most recently completed second fiscal quarter is less than $250 million or (b) (1) we have less than $100 million in annual revenues and (2) the aggregate market value of our outstanding common stock held by non-affiliates as of the last business day our most recently completed second fiscal quarter is less than $700 million. We cannot predict whether investors will find our common stock less attractive if we rely on certain or all of these exemptions. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock, and our stock price may be more volatile and may decline.