| ☒ | Annual report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
| ☐ | Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
Nevada 04-3562325 4960 Peachtree Industrial Blvd., Suite 240, Norcross, GA 30071 (Address of Principal Executive Offices) (Zip Code)
Title of each class | Trading Symbol | Name of each exchange on which registered | ||
| Common Stock, $0.001 Par Value Per Share | GALT | The NASDAQ | ||
Large accelerated filer | ☐ | Accelerated filer | ☐ | |||
Non-accelerated filer | ☒ | Smaller reporting company | ☒ | |||
Emerging growth company | ☐ |
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the definitive Proxy Statement for the 2018 Annual Meeting of Stockholders are incorporated by reference into Part III of this Report.
| PAGE | ||||||
| PART 1 | ||||||
| ITEM 1. | 1 | |||||
| ITEM 1A. | 9 | |||||
| ITEM 1B. | 20 | |||||
| ITEM 2. | 20 | |||||
| ITEM 3. | 20 | |||||
| ITEM 4. | 20 | |||||
| PART II | ||||||
| ITEM 5. | 21 | |||||
| ITEM 6. | 21 | |||||
| ITEM 7. | 21 | |||||
| ITEM 7A. | 25 | |||||
| ITEM 8. | 26 | |||||
| ITEM 9. | 26 | |||||
| ITEM 9A. | 26 | |||||
| ITEM 9B. | 27 | |||||
| PART III | ||||||
| ITEM 10. | 28 | |||||
| ITEM 11. | 31 | |||||
| ITEM 12. | 39 | |||||
| ITEM 13. | 41 | |||||
| ITEM 14. | 42 | |||||
| PART IV | ||||||
| ITEM 15. | 43 | |||||
| 47 | ||||||
| Item 1. | Business |
Belapectin (GR-MD-02) in Subjects With Normal Hepatic Function and Subjects With Varying Degrees of Hepatic Impairment” has been filed with the FDA to examine the effects of the drug in subjects with normal hepatic function and subjects with varying degrees of hepatic impairment (study details are listed under study NCT04332432 on www.clinicaltrials.gov); this study became fully enrolled in February 2022.
of common stock of Pro-Pharmaceuticals, Inc. On May 10, 2001, DTR changed its name to “Pro-Pharmaceuticals, Inc.” and on June 7, 2001, the Massachusetts corporation was merged into the Nevada corporation. On May 26, 2011, Pro-Pharmaceuticals, Inc. changed its name to “Galectin Therapeutics Inc.” In October 2012, we moved our headquarters to a suburb of Atlanta, GA to be closer to a center of discovery collaboration while maintaining a laboratory operation in the Boston area.
liver.
galectin-3.
Indication | Prevention of esophageal varices in NASH cirrhosis | Drug | Status | |
| ||||
Phase 1 interaction trial: NASH-CX trial and NASH-FX trial | belapectin | IND submitted January 2013. Results from the Phase 1 The Phase
and published in Alimentary Pharmacology and Therapeutics in 2016. | ||
The Phase 2 NASH CX trial was | ||||
NASH NAVIGATE | ||||
| Phase 1 study: hepatic insufficiency | A hepatic impairment study is being conducted in subjects with normal hepatic function and subjects with varying degrees of hepatic impairment (www.clinicaltrials.gov NCT04332432) and began enrolling patients in the second quarter of 2020. The study completed enrollment in February 2022. | |||
| Cancer Immunotherapy | ||||
| ||||
Melanoma, Head,Neck Squamous Cell Carcinoma (HNSCC) | belapectin | Investigator IND | ||
| ||||
| ||||
Fibrosis. GR-MD-02
belapectin for treatment of liver fibrosis and resultant portal hypertension in NASH patients with well compensated cirrhosis. A smaller, exploratory NASH-FX trial was conducted to explore potential use of various non-invasive imaging techniques in NASH patients with advanced fibrosis but not cirrhosis.
at baseline as demonstrated by a decrease in portal pressure associated with the prevention of development of varices when compared to placebo.
Further analysis showed that the drug effect was significantly dependent on dose “varices” in the total group of patients (p<0.02).
statistically significant effect on change in HVPG. The mean change in HVPG in the MPH group were +1.8 mm Hg for placebo and -0.3 and -0.4 mm Hg in the 2 mg/kg and 8 mg/kg dose groups, respectively. In patients with clinically significant portal hypertension (HVPG greater than 10 Mm Hg) with no varices at baseline, there was a statistically significant effect of 2 mg/kg of GR-MD-02 on the change in HVPG.
A responder analysis was performed on those patients without esophageal varices at baseline. Analysis was performed looking at two groups: those with an equal to or greater than 2 mm Hg decrease in HVPG from baseline or those with an equal to or greater than 2 mm Hg and a greater than or equal to 20% decrease in HVPG from baseline. In both cases, the change observed in the GR-MD-02belapectin 2 mg/kg LBM group was statistically significant (p<0.01) while that of the 8 mg/kg LBM group was not.
In terms of cirrhosis complications over
efficacy in patients with NASH cirrhosis.
We are planning to meet with the FDA in the second quarter of 2018 to discuss the results of the NASH-CX trial and plans for a phase
SEC and in a peer reviewed publication in Gastroenterology 2020;158:1334–1345.
with clinical signs of portal hypertension for whom, currently no specific, liver targeted, treatment are available.
expanded to include patients with non-small cell lung cancermelanoma and head and neck squamous cell carcinoma. These studies are beingwere conducted under the sponsorship of Providence Portland Medical Center’s Earle A. Chiles Research Institute (EACRI).
Data on this combination immunotherapy program was presented on February 7, 2017 at the 9th GTCBio Immunotherapeutics & Immunomonitoring Conference in San Diego, CA by Dr. William L. Redmond, Providence Cancer Center. Preclinical results in mouse models of multiple types of cancers showed important anti-tumor and increased survival effects of combining GR-MD-02 with different types of immune modulators, providing a case for progressing studies into human patients with cancer. Seven patients were treated in theGR-MD-02
Severe skin diseases.During our Phase 1 NASH fibrosis trial with GR-MD-02, a clinical effect on plaque psoriasisrate was observed in a NASH patient who also had this disease. This patient had marked improvement in her psoriasis, with improvement beginning after the third infusion. She reported that her psoriasis was “completely gone” and her skin was “normal” after the fourth infusion. Her skin remained normal for 17 months after the final infusion of study drug. The patient is convinced that the improvement in her psoriasis is related to the study drug.
This serendipitous finding, combined with galectin-3 protein being markedly upregulated in the capillary epithelia (small blood vessels) of the psoriatic dermis (plaque lesions), led to a phase 2a trialdocumented in patients with moderate to severe plaque psoriasis. GR-MD-02 inhibition of galectin-3 may attenuate capillary changeshead and neck cancer The results have been published in the psoriatic dermis and inflammatory recruitment, perhaps explaining the improvements observed in the NASH fibrosis trial patient. In this open-label, unblinded trial (no placebo, all patients knowingly receive active drug), 5 patients with moderate to severe plaque psoriasis were administered GR-MD-02 every two weeks for 24 weeks. In May 2016, we reported positive results on the first four patients after 12 weeks of therapy. Based on these results, we modified the trial to include 24 weeks of therapy. In August 2016, we reported on four patients after 24 weeks of therapy and one patient after 12 weeks of therapy. The four patients who received 24 weeks of therapy experienced an average of 48% improvement in their plaque psoriasis. At this time, the average response in all five patients remains at 50% with one patient having an 82% improvement. However, there are existing drugs on the market in this disease that produce 75% and higher improvements in 60-90% of patients. While we are encouraged that this study has demonstrated clinically meaningful results2021 in a human diseasehighly rated peer reviewed journal (Curti et al. Journal of Immunotherapy of cancer 2021;9:e002371). There was also a suggestion that the combination of belapectin with GR-MD-02,pembrolizumab could decrease the next steps would entail a controlled, does-ranging clinical trialauto-immune side-effect induced by pembrolizumab. These side-effects, which we do not expectare directly linked to conduct absent a strategic partnership.
We believe the mechanism of action for GR-MD-02 is based upon interaction with,of pembrolizumab, can be poorly tolerated and inhibition of, galectin proteins, particularly galectin-3, which are expressed at high levels in certain pathological states including inflammation, fibrosis and cancer. While GR-MD-02 is capable of bindingeven severe enough to multiple galectin proteins, we believe that it haslead to treatment interruption, even if the greatest affinity for galectin-3, the most prominent galectin implicated in pathological processes. Blocking galectin in cancer and liver fibrosis has specific salutary effectseffect on the disease process, as discussed below.
Liver Fibrosis: New Approachcancer was encouraging. This is, a very frustrating situation for a Significant Unmet Medical Need
Whenpatients who have to discontinue an internal organ is exposedactive treatment but have no other options available to chronic disease onethem. We believe these data, taken together with the observed favorable safety and tolerability of the responses is that scar tissue is laid downcombination, provide a rationale to move the belapectin program in oncology forward.
deposited and this ultimately results in the failure of the organ. This chronic fibrosis of organs may occur in the liver, lung, kidney, and heart, as well as others and, as a result, fibrosis of organs has been estimated to account for as much as 45% of all mortality in the United States. Scientific findings during the last few years indicate that the galectin-3 protein is critically important in this fibrotic process in multiple organs.
In the liver, fibrosis is the end result of multiple inflammatory conditions and infections. Progressive liver fibrosis leads to cirrhosis, which results in reduction of liver function, multiple medical complications and ultimately death. It is estimated that one to two million patients have cirrhosis in the United States with close to 50,000 losing their lives yearly. Only a fraction of patients’ lives, approximately 6,200 per year, are saved by liver transplantation at a cost of at least $350,000 per transplantation with significant additional costs of care and medications after the transplant. One condition in particular that frequently leads to cirrhosis is non-alcoholic steatohepatitis, or NASH, a liver disease characterized by the accumulation of fat in the liver with associated inflammation and fibrosis, which can lead to end-stage cirrhosis requiring liver transplantation. The National Institute of Health estimates that 9 to 15 million Americans are affected by NASH, and other sources suggest it may be as many as 30 million people have NASH, and forecasts that the number of Americans affected by this disease is growing due to obesity and diabetes, with the potential to become the leading cause of liver cirrhosis and liver transplantation in the future. Liver transplantation is currently the only therapeutic approach to NASH or other forms of liver fibrosis as, to the best of our knowledge, there are no drug therapies on the market. Organ transplantation is a difficult, risky and costly procedure as organ availability is scarce. There is also the risk of developing cirrhosis in the transplanted liver from the same disease that damaged the patient’s original liver and therefore, there is a great need for other therapeutic options. All diseases that affect the liver (viral hepatitis, alcoholic liver disease, and fatty liver as examples) lead to the development of scarring of the liver.
The primary focus of the Company is to use galectin inhibitors to block galectin-3 and treat organ scarring or fibrosis in the liver. There are no approved therapies for treatment of liver fibrosis. We believe that our drug candidates have the potential to treat NASHrecurrent or metastatic head and other forms of liver fibrosis. Scientific evidence suggests that galectin-3 is essential for the development of liver fibrosis in animals. Published data show that mice lacking the galectin-3 gene, and thus unable to produce galectin-3, are essentially incapable of developing liver fibrosis in response to toxic insult to the liver and in fatty liver disease. Moreover, mice that do not have the galectin-3 gene are resistant to lung and kidney fibrosis. These published data show that galectin-3 is a critical protein for the development of organ fibrosis. Our drugs, based on experiments in well characterized animal models, are also potentially useful in scarring or fibrosis of other organs such as lung and kidney which expands the possibilities for future therapeutic indications.
We have evaluated the ability of GR-MD-02 to block galectin-3 in animal models of liver fibrosis, the conclusions of which yielded positive results. Our pre-clinical data show that GR-MD-02 may have a therapeutic effect on liver fibrosis as shown in several relevant animal models. Therefore, we chose GR-MD-02neck cancer as the lead candidateindication to pursue for belapectin in acombination with an immune checkpoint inhibitor. The decision is notably based on the lack of available treatments for these patients, the limited number of therapies in development, program targeted initially at fibrotic liver disease associated with NASH.
We evaluated GR-MD-02 in pre-clinical toxicology and pharmacology studies during 2013 andthe resulting very high medical need. We filed an IND with FDA and are planning a phase 2 trial to be filed with the FDA in January 2013 for initiating human studies in patients with NASH. In February 2013 we entered into an agreement with CTI Clinical Trial Services to assist with the design, development and conduct of one or more clinical research studies, specifically for services with respect to our Phase 1 clinical trials to evaluate safety of GR-MD-02 in patients with NASH. The FDA notified us in March 2013 that we may proceed with a Phase 1 clinical trial for patients with NASH and we began enrolling patients in the Phase 1 clinical trial in the third quarter of 2013. In August 2013, GR-MD-02 was granted Fast Track designation by the FDA for NASH with hepatic fibrosis, commonly known as fatty liver disease with advanced fibrosis. In January 2014, we completed the enrollment of the first cohort of patients in the Phase 1 trial with no serious adverse events being reported. We reported initial safety and tolerability results from the first cohort of patients on June 30, 2014. The second cohort of this Phase 1 trial began and enrollment was completed in April 2014. In July 2014, we reported the results from the second cohort of patients. Enrollment of the third cohort of Phase 1 began in July 2014 with interim results presented in November 2014 with the final report on cohort 3 presented in January 2015. The
results of the Phase 1 study demonstrate that (i) GR-MD-02 was safe and well tolerated by patients with advanced NASH liver fibrosis after IV administration of four doses of 2 mg/kg, 4 mg/kg and 8mg/kg lean body weight, (ii) Pharmacokinetics revealed drug exposure in humans at the 8 mg/kg dose that was equivalent to the upper range of the targeted therapeutic dose determined from effective doses in NASH animal models, (iii) Disease Serum Marker Effect showed there was a statistically significant, dose-dependent reduction in FibroTest® scores due to a statistically significant reduction in alpha-2 macroglobulin (A2M) serum levels, and (iv) Liver Stiffness Effect, as measured by FibroScan® showed that there was a signal of reduced liver stiffness in patients receiving GR-MD-02. The reduction seen in A2M doesnotnecessarily mean fibrosis got better in this short study, but does suggest changes in the fibrogenic process that might lead to an improvement in fibrosis with longer-term therapy. These Phase 1 results in NASH patients with advanced fibrosis, in addition to completion of further toxicology and drug-drug interaction studies provided a firm foundation for entry into a Phase 2 development program (described above). Top line results of our Phase 2b in compensated NASH cirrhosis patients was reported in December 2017 and is more fully described above as well in our SEC filings.
GR-MD-02 is a proprietary, patented galactoarabino-rhamnogalacturonan polysaccharide polymer that is comprised predominantly of galacturonic acid, galactose, arabinose, rhamnose, and smaller amounts of other sugars. Structural studies have shown that GR-MD-02 binds to galectin-1 and to galectin-3 with binding affinity to galectin-3 being significantly greater than binding to galectin-1. With respect to GR-MD-02, we currently have a number of issued US patents including one composition of matter patent, one method of manufacture patent, one method of use patient in patients with NASH, one method of use patent in patients with liver fibrosis, and one method of use patent in patients with diabetic kidney disease. Additional patent applications are pending with respect to, amongst other uses, cancer immunotherapy, lung fibrotic disease, and inflammatory disease associated with increase in inducible nitric oxide synthase. Patents have also been granted with respect to liver fibrosis, NASH, and liver fibrosis in combination with other therapeutic agents. Compounds for subcutaneous administration and oral delivery are currently under pre-clinical development.
Galectin Inhibition in Cancer Therapy
We believe the potential exists for galectin inhibition to play an important role in cancer therapy. Galectin proteins, particularly galectin-1 and galectin-3, have been shown to be highly expressed in the majority of cancers and have multiple roles in promoting cancer progression, including tumor cell invasion, metastasis, angiogenesis, and tumor evasion of the immune system.
The role of galectins in cancer immunotherapy can be understood through the “Galectin Effect”, a recent discovery of how tumors avoid the body’s own immune system, i.e., the tumors secrete galectin proteins that block the body’s efforts to fight tumors. Our current program to block the “Galectin Effect” is based on the research of Dr. Pierre van der Bruggen (of the Ludwig Institute of Cancer Research in Brussels, Belgium), demonstrating that galectin-3, which is produced by the vast majority of human cancers, binds to and blocks the actions of tumor-infiltrating T-lymphocytes, the major immune cell in the body’s defense against cancers. In addition, Dr. William L. Redmond of Providence Portland Medical Center’s Earl A. Chiles Research Institute (EACRI) has shown that our galectin inhibitors can enhance the anti-tumor immunogenic effect of other immunotherapies based on targeting lymphocyte checkpoints such as CTLA4. Based on these results, we believe that the body’s immune cells may be unable to attack and kill tumor cells in the presence of galectins. Using this approach, the mechanism of action for our drugs seeks to block galectins and, in turn, restore the ability of the T-lymphocytes to kill tumor cells.
The preclinical study found that GR-MD-02 increased tumor shrinkage and enhanced survival in immune competent mice with prostate and breast cancers when combined with one of the immune checkpoint inhibitors, anti-CTLA-4 or anti-PD-1. These findings suggest a role for GR-MD-02 in cancer immunotherapy. These preclinical observations by Dr Redmond provided scientific rationale for proceeding and lead to the filing by Providence Portland Medical Center of an Investigator-sponsored IND to conduct a Phase 1B study to determine if GR-MD-02 enhances the probability of melanoma response with ipilimumab by inducing proliferation,
activation and memory function of CD8+ T cells in human patients. The company has licensed the underlying invention from Providence Portland Medical Center. This study represents a novel approach for patients with metastatic melanoma. The IND was approved by FDA in February 2014. This study is being conducted under the sponsorship of Providence Portland Medical Center’s Earle A. Chiles Research Institute (EACRI) and is being supported by the Company.
The study employs a dose escalation of GR-MD-02 in conjunction with the standard therapeutic dose of ipilimumab in patients with advanced melanoma for whom ipilimumab would be considered standard of care. In addition to monitoring for toxicity and clinical response by irRECIST criteria on imaging tests, blood samples will be obtained to assess immunologic measures relevant to galectin biology and ipilimumab T-cell check-point inhibition. Galectin Therapeutics is providing its proprietary compound GR-MD-02 to EACRI researchers, as well as supply researchers with supporting analysis of the pharmacokinetics of GR-MD-02 and the right to reference the Company’s open IND on GR-MD-02. To date the first two dosing groups have been completed without serious adverse events that were determined to be related to GR-MD-02. The third dosing group is now enrolling.
Similar to the agreement set forth for the ipilimumab (Yervoy®) Phase 1B study, Providence Portland Medical Center submitted an IND in September 2015 to conduct a Phase 1B study of GR-MD-02 and pembrolizumab (Keytruda®) in patients with metastatic melanoma. The combination of GR-MD-02 and an anti-PD1 (pembrolizumab) has been shown to enhance T-cell activation, memory, and effector function, and promote better antitumor responses in multiple mouse studies. The study will test the hypothesis that galectin-3 antagonism using GR-MD-02 with enhance the probability of melanoma response using penbrolizumab in patients by inducing proliferation, activation and memory function of CD8+ T cells that recognize melanoma antigens. Similar to the ipilimumab study, the study employs a dose escalation of GR-MD-02 in conjunction with the standard therapeutic dose of pembrolizumab in patients with metastatic melanoma who have had progression of their melanoma after ipilimumab and/or BRAF targeted therapy when a BRAF mutation is present. In addition to monitoring for toxicity and clinical response, blood and tumor samples will be obtained to assess immunologic measures relevant to galectin biology and pembrolizumab T-cell checkpoint inhibition.
Patents and Proprietary Rights
compound.
Diseases.” The patent covers composition and chemical structural claims for compounds that includes the Company’s lead galectin inhibitor compound GR-MD-02belapectin and will expire in December 2031. Claims include multiple routes of administration, including intravenous, subcutaneous and oral. The application also covers therapeutic formulations for use in the treatment of NASH (fatty liver disease), cancer and fibrotic, inflammatory and autoimmune disorders in which galectin proteins are involved, at least in part, in the pathogenesis. Additional specific claims encompass liver fibrosis, kidney fibrosis, lung fibrosis or heart fibrosis. The patent, assigned U.S. Patent No. 8,871,925, was issued October 28, 2014.
chemotherapeutic agent or for use in treatment of fibrosis. The scheduled expiration dates of our many of our United States patents span from 2020out to 20332034 before considering any potential extensions. We have corresponding patent applications pending in Europe, Israel, Australia and Brazil.various territories where we see potential for commercial interest. Additionally, we have patent applications in other areas to utilize our carbohydrate-based compounds to treat disease other than cancer. See “Risk Factors — Risks Related to Our Intellectual Property”. Our competitive position, in part, is contingent upon protection of our intellectual property.
Galectin Sciences LLC has 3 granted U.S. patents, 11 granted international patents, 2 US patent application pending, and 21 foreign applications pending.
research and development activities.
In February 2013, the Company established a collaborative drug discovery program with Dr. Geert-Jan Boons’ (“Dr. Boons”) laboratory located in the Complex Carbohydrate Research Center at the University of Georgia. This on-going program is focused on the discovery of new carbohydrate molecules that can be used in the therapy of diseases where galectin proteins play a major role, including cancer, and inflammatory and fibrotic disorders. The aim of this program is to develop a pipeline of drugs that can target galectins. This is an important goal as follow-on compounds for our drugs currently in development and to extend the potential indications and routes of administration. The Complex Carbohydrate Research Center is a world-class program and Dr. Boons is a world renowned and pre-eminent carbohydrate chemist.
In September 2014, the Company established a collaborative research program with Dr. William Redmond’s laboratory located at the Providence Portland Medical Center, Portland, Oregon. This program focuses on combination immunotherapy plus galectin inhibition to augment tumor immunogenicity.
Additionally, belapectin is manufactured as a sterile liquid formulation. We have experienced, and may experience in the future, certain delays related to COVID-19 related supply issues with certain components necessary to manufacture belapectin.
| 1. | Pre-clinical laboratory tests, animal studies, and formulation studies, |
| 2. | Submission to the FDA of an IND for human clinical testing, which must become effective before human clinical trials may begin, |
| 3. | Adequate and well-controlled human clinical trials to establish the safety and efficacy of the drug for each indication, |
| 4. | Submission to the FDA of a NDA, |
| 5. | Satisfactory completion of an FDA inspection of the manufacturing facility or facilities, at which the drug is produced to assess compliance with current good manufacturing procedures (“cGMP”) established by the FDA, |
| 6. | FDA review and approval of the NDA, and |
| 7. | FDA review and approval of a trademark used in connection with a pharmaceutical. |
Employees
We
operate.
GR-MD-02 our lead product candidate for fibrosis completed its Phase 2 of the human clinical trial phase in 2017. GR-MD-02 is also currently in investigator sponsored, human Phase 1B clinical trials being conducted by Providence Portland Medical Center in combination with Yervoy® (ipilimumab) and Keytruda (pembrolizmab) in patients with metastatic melanoma.
We filed for an IND with the FDA for GR-MD-02 in January 2013 for initiating human clinical trials in patients with NASH, and the FDA notified us in March 2013 that we may proceed with a Phase 1 clinical trial. Our Phase 1 clinical trial began in July 2013 and was completed in 2014.
promising results in earlier trials. For example, although there was positive data from our NASH-CX Phase 2 trial for GR-MD-02, which we believe will allow us to conduct a Phase 3 trial,belapectin, it did not meet its primary endpoint. Similarly, our Phase 2a pilot trial NASH-FX for patients with advanced fibrosis, which explored three non-invasive imaging technologies, did not meet its primary endpoint. We may engage others to conduct our clinical trials, including clinical research organizations and, possibly, government-sponsored agencies. Additional clinical trials may not start or be completed as we forecast and may not achieve the desired results. The time required to obtain FDA and other approvals is unpredictable but often can take years following the commencement of clinical trials, depending upon the complexity of the drug candidate.
belapectin.
We have limited experience in marketing, sales or distribution, and we do not intend to develop a sales and marketing infrastructure to commercialize our pharmaceutical products. If we develop commercial products, we will need to rely on licensees, collaborators, joint venture partners or independent distributors to market and sell those products. Thus, we expect that we will be required to enter into agreements with commercial partners to engage in sales, marketing and distribution efforts around our products in development. We may be unable to
establish or maintain third-party relationships on a commercially reasonable basis, if at all. In addition, these third parties may have similar or more established relationships with our competitors. If we do not enter into relationships with third parties for the sales and marketing of our proposed products, we will need to develop our own sales and marketing capabilities.
Even if engaged, these distributors may:
If we fail to develop sales, managed care, marketing and distribution channels, we would experience delays in generating sales and incur increased costs, which would harm our financial results.
We are exposed to product liability, pre-clinical and clinical liability risks which could place a financial burden upon us, should we be sued, because we do not currently have product liability insurance beyond our general insurance coverage.
Because we do not currently have any FDA-approved products or formulations, we do not currently have any product liability insurance covering commercialized products. We may not be able to obtain or maintain adequate product liability insurance on acceptable terms, if at all, or such insurance may not provide adequate coverage against our potential liabilities. Furthermore, ourOur current and potential partners with whom we have collaborative agreements or our future licensees may not be willing to indemnify us against these types of liabilities and may not, themselves, be sufficiently insured or have sufficient liquidity to satisfy any product liability claims. Claims or losses in excess of any product liability insurance coverage that may be obtained by us could have a material adverse effect on our business, financial condition and results of operations.
As a pre-revenue company engaged in the development of drug technologies, our Our resources are limited and we may experience technical challenges inherent in such technologies. Competitors have developed or are in the process of developing technologies that are, or in the future may be, the basis for competition. Some of these technologies may have an entirely different approach or means of accomplishing similar therapeutic effects compared to our proposed products. Our competitors may develop drugs that are safer, more effective and less costly than our proposed products and, therefore, present a serious competitive threat to us.
deferred the manufacturebelieve are sufficient quantities of additional GR-MD-02 that would be requiredbelapectin for follow-on trials, and lead times are needed for this manufacturing.our NAVIGATE or other clinical trials. Manufacturing could become delayed due to circumstances beyond our control which could delay any clinical trials. Further because of limited resources, we have curtailed most of our expenditures in research focused on the development of an oral galectin inhibitor to replace our current drug candidate that is delivered via infusion. Further, because of financial limits we
We arepreviously been a defendant in a state court shareholder derivative action, and these lawsuits and any possible future such lawsuits may adversely affect our business, financial condition, results of operations and cash flows.
reported after our drug products are made available to patients. This would include results from any post marketing tests or vigilance required as a condition of approval. The manufacturer and manufacturing facilities we use to make any of our drug products will also be subject to periodic review and inspection by the FDA. The discovery of any new or previously unknown problems with the product, manufacturer or facility may result in restrictions on the drug, or manufacturer or facility, including withdrawal of the drug from the market. We would continue to be subject to the FDA requirements governing the labeling, packaging, storage, advertising, promotion, recordkeeping, and submission of safety and other post-market information for all of our product candidates, even those that the FDA had approved. If we fail to comply with applicable continuing regulatory requirements, we may be subject to fines, suspension or withdrawal of regulatory approval, product recalls and seizures, operating restrictions and other adverse consequences.
If users of our proposed products are unable to obtain adequate reimbursement from third-party payers, market acceptance of our proposed products may be limited, and we may not achieve revenues or profits.
The continuing efforts of governments, insurance companies, health maintenance organizations and other payers of healthcare costs to contain or reduce costs of health care may affect our future revenues and profitability as well as the future revenues and profitability of our potential customers, suppliers and collaborative partners in addition to the availability of capital. In other words, our ability to commercialize our proposed products will depend in large part on the extent to which appropriate reimbursement levels for the cost of our proposed formulations, products and related treatments are obtained by the health care providers of these products and treatments. It is possible that the adoption of this legislation or replacement legislation could harm our business, financial condition and results of operations.
We will need to obtain FDA approval of any proposed product brand names, and any failure or delay associated with such approval may adversely impact our business.
A pharmaceutical product cannot be marketed in the U.S. or other countries until it has completed rigorous and extensive regulatory review processes, including approval of a brand name. Any brand names we intend to use for our product candidates will require approval from the FDA regardless of whether we have secured a formal trademark registration from the U.S. Patent and Trademark Office, or the PTO. The FDA typically conducts a review of proposed product brand names, including an evaluation of potential for confusion with other product names. The FDA may also object to a product brand name if it believes the name inappropriately implies medical claims. If the FDA objects to any of our proposed product brand names, we may be required to adopt an alternative brand name for our product candidates. If we adopt an alternative brand name, we would lose the benefit of our existing trademark applications for such product candidate and may be required to expend significant additional resources in an effort to identify a suitable product brand name that would qualify under applicable trademark laws, not infringe the existing rights of third parties and be acceptable to the FDA. We may be unable to build a successful brand identity for a new trademark in a timely manner or at all, which would limit our ability to commercialize our product candidates.
the U.S. and other countries, protect trade secrets and prevent others from infringing on our proprietary rights. We will only be able to protect our product candidates from unauthorized making, using, selling, offering to sell or importation by third parties to the extent that we have rights under valid and enforceable patents or trade secrets that cover these activities. If we do not adequately protect our intellectual property, competitors may be able to practice our technologies.
dissolution
could prohibit or delay a merger or other takeover or change in control attempt and, accordingly, may discourage attempts to acquire our Company even though such a transaction may be in our stockholders’ best interest and offer our stockholders the opportunity to sell their stock at a price above the prevailing market price.
One investor and certain directors, by virtue of ownership of our securities and related rights, may be able to control the Company.
The 10X Fund owns all of our issued and outstanding Series B Preferred Stock, which are convertible into 3,789,346 shares of our common stock. The 10X Fund owns related warrants exercisable to purchase an aggregate of 6,469,038 shares of our common stock. As of December 31, 2017, we have issued 2,379,632 shares of our common stock as dividends on the Series B Preferred Stock and 2,000,000 shares of our common stock on the exercise of warrants by 10X Fund. In addition, James C. Czirr, a managing member of 10X Capital Management, LLC, the general partner of the 10X Fund and one of our directors, owns or controls approximately 906,000 shares of our common stock, including shares of Series A on an as converted basis, and has the right to acquire 700,125 additional shares of our common stock upon the exercise of outstanding stock options (653,250 of which are exercisable as of December 31, 2017. As of December 31, 2017, on a fully diluted basis, assuming conversion of all Series B Preferred Stock and exercise of all outstanding warrants, the 10X Fund would own approximately 24% of our then outstanding shares of common stock, which, together with the shares of our common stock that would be owned by Mr. Czirr (assuming exercise of all options at that date), would constitute approximately 27% of the then fully diluted shares.
As holder of Series B Preferred Stock, the 10X Fund is entitled to elect two directors in a separate class vote, nominate three directors for election by all shares entitled to vote, and provide or withhold consent to a range of fundamental corporate actions we may wish to undertake, such as recapitalization, sale of our Company, and other matters. Such concentration of stock ownership and related rights could have the effect of delaying, deterring or preventing corporate events that our other security holders may desire or consider beneficial to the Company, such as sales of additional securities of the Company needed to fund the ongoing clinical trial program of the Company. In addition to the conversion rights and the right to elect and nominate directors noted above, the 10X Fund, as holder of the Series B Preferred Stock, has certain approval rights, including the right to approve certain financing transactions, as well as the right to participate in certain financing transactions. These rights could negatively impact our ability to raise capital in the future, which could materially and adversely affect our business.
stock. Some of our shareholders have registration rights to facilitate sales of large blocks of our common stock. We have filed a shelf registration statement to allow registered sales by us of up to 9.7$100 million, which includes the offer and sell shares by these shareholders.of our common stock having an aggregate offering price of up to $40,000,000 from time to time pursuant to our At The Market Issuance Sales Agreement with H.C. Wainwright & Co., LLC. We may consider additional or other capital raising transactions within the next twelve months, which would likely result in issuances of additional shares whichthat would be dilutive to current shareholders. In addition, the lack of a robust resale market may require a stockholder who desires to sell a large number of shares of common stock to sell the shares in increments over time to mitigate any adverse impact of the sales on the market price of our stock.
At times, our
shares.
| Item 1B. | Unresolved Staff Comments |
| Item 2. | Properties |
| Item 3. | Legal Proceedings |
Shareholder Class Actions and Derivative Lawsuits
On August 1 and 25, 2014, persons claiming to be Galectin shareholders filed putative shareholder derivative complaints in the Nevada District Court, seeking recovery on behalf of the Company against certain of the Company’s directors and officers. On September 10, 2014, the Nevada District Court entered an order consolidating the two cases, relieving the defendants of any obligation to respond to the initial complaints, and providing that defendants may respond to a consolidated complaint to be filed by the plaintiffs. On January 5, 2015, the Nevada District Court granted Defendants’ motion to transfer the consolidated putative derivative litigation to the United States District Court for the Northern District of Georgia (hereinafter referred to as the “Georgia Federal Derivative Action.”). The plaintiffs filed a consolidated complaint on February 27, 2015. On April 6, 2015, the Company and defendants filed motions to dismiss the consolidated complaint. Rather than respond to those motions, the plaintiffs sought and obtained leave to file an amended complaint. Plaintiffs filed their amended complaint (the “Complaint”) on May 26, 2015. The Complaint alleges that certain of the Company’s directors and officers (the “Derivative Action Individual Defendants”) breached their fiduciary duties to the Company’s shareholders by causing or permitting the Company to make allegedly false and misleading public statements concerning the Company’s financial and business prospects. The Complaint also alleges that the Derivative Action Individual Defendants violated the federal securities laws by allegedly making false or misleading statements of material fact in the Company’s proxy filings, committed waste of corporate assets, were unjustly enriched, and that certain defendants breached their fiduciary duties through allegedly improper sales of Galectin stock. In addition, the Complaint alleges that the Derivative Action Individual Defendants and one of the Company’s shareholders aided and abetted the alleged breaches of fiduciary duties. The Complaint seeks unspecified monetary damages on behalf of the Company, corporate governance reforms, disgorgement of profits, benefits and compensation by the defendants, costs, and attorneys’ and experts’ fees. The Company and defendants filed motions to dismiss the Complaint on July 8, 2015. On December 30, 2015, the United States District Court for the Northern District of Georgia dismissed the Georgia Federal Derivative Action with prejudice and entered a final judgment in favor of the defendants. Plaintiffs filed a notice of appeal seeking review of the dismissal order and final judgment. On July 7, 2016, the United States Court of Appeals for the Eleventh Circuit dismissed the appeal as the Plaintiffs failed to timely file their appeal brief. In September 2016, the Board received a demand letter from one of the plaintiffs in the Georgia Federal Derivative Action. The demand letter, among other things, requests that the Board investigate the conduct alleged in the Complaint and implement certain remedial measures purportedly designed to address the alleged conduct. It is expected that the Board will consider the demand letter in due course and in light of the related pending shareholder litigation described herein.
On August 29, 2014, another alleged Galectin shareholder filed a putative shareholder derivative complaint in state court in Las Vegas, Nevada, seeking recovery on behalf of the Company against the same Galectin directors and officers who are named as defendants in the derivative litigation pending in the Georgia Federal Derivative Action. The plaintiff in the Nevada action subsequently filed first and second amended complaints. The second amended complaint alleges claims for breach of fiduciary duties, unjust enrichment, and waste of corporate assets, based on allegations that are substantially similar to those asserted in the Georgia Federal Derivative Action (except that the Nevada action does not allege violations of the federal securities laws and does not assert any claim against the Galectin shareholder named as a defendant in the Georgia Federal Derivative Action), and seeks unspecified monetary damages on behalf of the Company, corporate governance reforms, disgorgement of profits, benefits and compensation by the defendants, costs, and attorneys’ and experts’ fees. The Company and defendants filed motions to dismiss the second amended complaint on April 22, 2015. On April 29, 2015, the plaintiffs in the Georgia Federal Derivative Action (the “Intervenor Plaintiffs”) filed a
motion to intervene in the Nevada action which, among other things, raised questions regarding the Nevada plaintiff’s standing. Thereafter, the Nevada plaintiff filed a motion to join additional plaintiffs. At a hearing held on June 11, 2015, the Nevada court: (i) granted the Intervenor Plaintiffs’ motion to intervene; (ii) directed the Intervenor Plaintiffs to file a complaint in intervention; (iii) directed the Nevada plaintiff to file a motion for leave to file a further amended complaint to add additional plaintiffs; (iv) stated that the defendants’ motions to dismiss the second amended complaint were denied “at this point;” (v) ordered the Nevada action stayed until December 11 , 2015; and (vi) directed the parties to submit a status report on December 11, 2015, updating the court on the progress and status of the Georgia Federal Derivative Action. On July 9, 2015, pursuant to the Nevada State Court’s instruction, the Intervenor Plaintiffs filed a complaint-in-intervention in Nevada State Court, asserting similar claims to the ones they alleged in the Georgia Federal Derivative Action described above. On December 11, 2015, further to the Nevada State Court’s instruction, the parties submitted status reports detailing the status of the Georgia Federal Derivative Action. On January 5, 2016, the Nevada State Court held a status conference during which the dismissal of the Georgia Federal Derivative Action was discussed. Subsequent to that conference, on January 19, 2016, the defendants filed a motion to dismiss the Nevada State Court litigation based on the dismissal of the similar Georgia Federal Derivative Action, among other grounds. Following full briefing and a hearing on March 3, 2016, the Nevada State Court granted dismissal of the Nevada State Court litigation. Notice of Entry of the Nevada State Court’s order dismissing the Nevada State Court litigation was docketed on June 21, 2016. The Nevada plaintiff and Intervenor Plaintiffs (“Appellants”) filed notices of appeal seeking review of the Nevada State Court’s order and judgment dismissing the claims. The appeal is now fully briefed and awaiting a decision from the Nevada Supreme Court.
Estimating an amount or range of possible losses resulting from litigation proceedings is inherently difficult and requires an extensive degree of judgment, particularly where the matters involve indeterminate claims for monetary damages, are in the early stages of the proceedings, and are subject to appeal. In addition, because most legal proceedings are resolved over extended periods of time, potential losses are subject to change due to, among other things, new developments, changes in legal strategy, the outcome of intermediate procedural and substantive rulings and other parties’ settlement posture and their evaluation of the strength or weakness of their case against us. For these reasons, we are currently unable to predict the ultimate timing or outcome of, or reasonably estimate the possible losses or a range of possible losses resulting from, the matters described above. Based on information currently available, the Company does not believe that any reasonably possible losses arising from currently pending legal matters will be material to the Company’s results of operations or financial condition. However, in light of the inherent uncertainties involved in such matters, an adverse outcome in one or more of these matters could materially and adversely affect the Company’s financial condition, results of operations or cash flows in any particular reporting period.
| Item 4. | Mine Safety Disclosures |
| Item 5. | Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities |
Price Range of Common Stock
| High | Low | |||||||
Fiscal Year Ended December 31, 2017 | ||||||||
First Quarter | $ | 2.45 | $ | 0.94 | ||||
Second Quarter | $ | 3.68 | $ | 2.04 | ||||
Third Quarter | $ | 2.52 | $ | 1.51 | ||||
Fourth Quarter | $ | 3.84 | $ | 1.28 | ||||
Fiscal Year Ended December 31, 2016 | ||||||||
First Quarter | $ | 1.82 | $ | 1.08 | ||||
Second Quarter | $ | 1.75 | $ | 1.25 | ||||
Third Quarter | $ | 3.05 | $ | 1.10 | ||||
Fourth Quarter | $ | 1.18 | $ | 0.49 | ||||
Dividends
There have been no cashforeseeable future. The payment of dividends declared on our common stock sincewill depend on our Company was formed. Dividends are declaredearnings, financial condition and other business and economic factors affecting us at such time as the sole discretionboard of our Board of Directors. Our intention is not to declare cash dividends and retain all cash for our operations.
| Item 6. |
Not applicable.
| Item 7. | Management’s Discussion and Analysis of Financial Condition and Results of Operations |
expectations regarding clinical trials; plans and expectations regarding regulatory approvals; our strategy and expectations for clinical development and commercialization of our products; potential strategic partnerships; expectations regarding the effectiveness of our products; plans for research and development and related costs; statements about accounting assumptions and estimates; expectations regarding liquidity and the sufficiency of cash to fund currently planned operations through at least MarchDecember 31, 2019;2024; our commitments and contingencies; and our market risk exposure. Forward-looking statements are based on current expectations, estimates and projections about the industry and markets in which Galectin Therapeutics operates, and management’s beliefs and assumptions. These statements are not guarantees of future performance and involve certain known and unknown risks and uncertainties that could cause actual results to differ materially from those expressed or implied by such statements. Such risks and uncertainties are related to and include, without limitation,
2021
| Year ended December 31, | 2017 as Compared to 2016 | |||||||||||||||
| 2017 | 2016 | $ Change | % Change | |||||||||||||
| (in thousands, except %) | ||||||||||||||||
Research and development | $ | 11,721 | $ | 15,325 | $ | (3,604 | ) | (24 | )% | |||||||
Year ended December 31, | 2022 as Compared to 2021 | |||||||||||||||
| 2022 | 2021 | $Change | % Change | |||||||||||||
| (in thousands, except %) | ||||||||||||||||
Research and development | $ | 31,737 | $ | 23,818 | $ | 7,919 | 33 | % | ||||||||
| Year Ended December 31, | ||||||||
| 2017 | 2016 | |||||||
| (in thousands) | ||||||||
Direct external expenses: | ||||||||
Clinical programs | $ | 9,362 | $ | 11,994 | ||||
Pre-clinical activities | 194 | 856 | ||||||
Other research and development expenses: | ||||||||
Payroll and other including stock based compensation | 2,165 | 2,475 | ||||||
|
|
|
| |||||
| $ | 11,721 | $ | 15,325 | |||||
|
|
|
| |||||
Year Ended December 31, | ||||||||
| 2022 | 2021 | |||||||
Direct external expenses: | (in thousands) | |||||||
| Clinical programs | $ | 26,748 | $ | 20,830 | ||||
| Pre-clinical activities | 1,262 | 562 | ||||||
Other research and development expenses: | ||||||||
| Payroll and other including stock-based compensation | 3,727 | 2,426 | ||||||
$ | 31,737 | $ | 23,818 | |||||
Both the time requiredactivities and costs we may incurpreparations and some preclinical activities incurred in order to commercialize a drug candidate that would result in material net cash inflow are subject to numerous variables, and therefore we are unable at this stage of our development to forecast useful estimates. Variables that make estimates difficult include the number of clinical trials we may undertake, the number of patients needed to participate in the clinical trial, patient recruitment uncertainties, trial results as to the safety and efficacy of our products, and uncertainties as to the regulatory agency response to our trial data prior to receipt of marketing approval. Moreover, the FDA or other regulatory agencies may suspend clinical trials if we or an agency believes patients in the trial are subject to unacceptable risks or find deficiencies in the conductsupport of the planned clinical trial. Delays or rejections may also occur if governmental regulation or policy changes during ourprogram such as development and reproductive toxicity studies, clinical trials orsupplies and other supportive activities. Payroll and other costs increased primarily due to additional employees being hired in the course of review of our clinical data. Due to these uncertainties, accurateresearch and meaningful estimates of the ultimate cost to bring a product to market, the timing of costs and completion of our program and the period during which material net cash inflows will commence are unavailable at this time.
development.
| Year ended December 31, | 2017 as Compared to 2016 | |||||||||||||||
| 2017 | 2016 | $ Change | % Change | |||||||||||||
| (in thousands, except %) | ||||||||||||||||
General and administrative | $ | 4,526 | $ | 6,156 | $ | (1,630 | ) | (26 | )% | |||||||
Year ended December 31, | 2022 as Compared to 2021 | |||||||||||||||
| 2022 | 2021 | $ Change | % Change | |||||||||||||
| (in thousands, except %) | ||||||||||||||||
General and administrative | $ | 6,615 | $ | 6,361 | $ | 254 | 4 | % | ||||||||
$146,000 and $131,000, respectively.
expense, and interest expense and amortization of debt discounts on convertible notes payable of $315,000.
2020
| Year ended December 31, | 2016 as Compared to 2015 | |||||||||||||||
| 2016 | 2015 | $ Change | % Change | |||||||||||||
| (in thousands, except %) | ||||||||||||||||
Research and development | $ | 15,325 | $ | 13,114 | $ | 2,211 | 17 | % | ||||||||
Year ended December 31, | 2021 as Compared to 2020 | |||||||||||||||
| 2021 | 2020 | $Change | % Change | |||||||||||||
| (in thousands, except %) | ||||||||||||||||
Research and development | $ | 23,818 | $ | 17,976 | $ | 5,842 | 32 | % | ||||||||
| Year Ended December 31, | ||||||||
| 2016 | 2015 | |||||||
| (in thousands) | ||||||||
Direct external expenses: | ||||||||
Clinical programs | $ | 11,994 | $ | 9,177 | ||||
Pre-clinical activities | 856 | 1,531 | ||||||
Other research and development expenses: | ||||||||
Payroll and other including stock-based compensation | 2,475 | 2,406 | ||||||
|
|
|
| |||||
| $ | 15,325 | $ | 13,114 | |||||
|
|
|
| |||||
Year Ended December 31, | ||||||||
| 2021 | 2020 | |||||||
Direct external expenses: | (in thousands) | |||||||
| Clinical programs | $ | 20,830 | $ | 14,229 | ||||
| Pre-clinical activities | 562 | 532 | ||||||
Other research and development expenses: | ||||||||
| Payroll and other including stock-based compensation | 2,426 | 3,215 | ||||||
$ | 23,818 | $ | 17,976 | |||||
activities and preparations and some preclinical activities incurred in support of the planned clinical program such as development and reproductive toxicity studies, clinical supplies and other supportive activities.
| Year ended December 31, | 2016 as Compared to 2015 | |||||||||||||||
| 2016 | 2015 | $ Change | % Change | |||||||||||||
| (in thousands, except %) | ||||||||||||||||
General and administrative | $ | 6,156 | $ | 6,965 | $ | (809 | ) | (12 | )% | |||||||
Year ended December 31, | 2021 as Compared to 2020 | |||||||||||||||
| 2021 | 2020 | $ Change | % Change | |||||||||||||
| (in thousands, except %) | ||||||||||||||||
General and administrative | $ | 6,361 | $ | 5,468 | $ | 893 | 16 | % | ||||||||
income offset by amortization of the debt discount associated with warrants issued with a line of credit entered into in December 2017 of $174,000 which is classified as interest expense, and interest expense and amortization of debt discounts on convertible notes payable of $315,000.
2017
2021
There were no equipment purchases or other investing activities in 2017.
Net cash provided by financing activities was $3,583,000 during 2017 as compared to $5,925,000 during 2016, due primarily to the transactions described below.
In 2017, we completed a private placement of common stock with warrants totaling $200,000 and sales of common stock through At the Market issuances totaling $3,383,000. In 2016, we completed sales of Series B-3 preferred stock with warrants totaling $2,508,000, private placements of common stock and warrants totaling $3,000,000 and sales of common stock through At the Market issuances totaling $417,000.
2016 compared to 2015
Net cash used in operations decreased by $574,000 to $16,409,000 for 2016, as compared to $16,983,000 for 2015.2021. Cash operating expenses increased principally due to increased research and development activities primarily related to our Phase 2NAVIGATE clinical programs.
trial and associated activities.
2022 or 2021.
In September 2012,
Contractual Obligations and Commitments
The following table summarizes contractual obligations and commitments as of December 31, 2017:
| Payments due by period (in thousands) | ||||||||||||||||||||
Contractual Obligations | Total | Less than 1 year | 1-3 years | 3-5 years | More than 5 years | |||||||||||||||
Operating Leases | $ | 48 | $ | 48 | ||||||||||||||||
|
|
|
|
|
| |||||||||||||||
Total | $ | 48 | $ | 48 | ||||||||||||||||
|
|
|
|
|
| |||||||||||||||
studies are charged to research and development expense as incurred. The Company accounts for nonrefundable advance payments for goods and services that will be used in future research and development activities as expense when the service has been performed or when the goods have been received. Our current NAVIGATE clinical trial is being supported by third-party contract research organizations, or CROs, and other vendors. We accrue expenses for clinical trial activities performed by CROs based upon the estimated amount of work completed on each trial. For clinical trial expenses and related expenses associated with the conduct of clinical trials, the significant factors used in estimating accruals include the number of patients enrolled, the number of active clinical sites, and the duration for which the patients have been enrolled in the trial. We monitor patient enrollment levels and related activities to the extent possible through internal reviews, review of contractual terms and correspondence with CROs. We base our estimates on the best information available at the time. We monitor patient enrollment levels and related activities to the extent possible through discussions with CRO personnel and based our estimates of clinical trial costs on the best information available at the time. However, additional information may become available to us which will allow us to make a more accurate estimate in future periods. In that event, we may be required to record adjustments to research and development expenses in future periods when the actual level of activity becomes more certain.
| Item 7A. | Quantitative and Qualitative Disclosures About Market Risk |
| Item 8. | Financial Statements and Supplementary Data |
| Item 9. | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure |
| Item 9A. | Controls and Procedures |
disclosure controls and procedures as of December 31, 2017.2022. Our management has concluded, based on their evaluation, that our disclosure controls and procedures were effective as of December 31, 20172022 to ensure that information required to be disclosed by us in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms.
2022.
There
| Item 9B. | Other Information |
| Item 9C. | Disclosure Regarding Foreign Jurisdictions that Prevent Inspections |
| Item 10. | Directors, Executive Officers and Corporate Governance |
The information required by this Item will be contained in
| Name | Age | Director Since | ||
Gilbert F. Amelio, Ph.D. (2)(3) | 79 | 2009 | ||
James C. Czirr | 69 | 2009 | ||
Kary Eldred (1) | 48 | 2018 | ||
Kevin D. Freeman (1)(2)(3) | 61 | 2011 | ||
Joel Lewis | 53 | 2017 | ||
Gilbert S. Omenn, M.D., Ph.D. (2) | 81 | 2014 | ||
Marc Rubin, M.D. (3) | 68 | 2011 | ||
Elissa J. Schwartz, Ph.D. (3) | 52 | 2020 | ||
Harold H. Shlevin, Ph.D. | 73 | 2019 | ||
Richard E. Uihlein, Chairman | 77 | 2017 | ||
Richard A. Zordani (1) | 50 | 2020 |
(1) | Member of audit committee |
(2) | Member of compensation committee |
(3) | Member of nominating and governance committee |
GlaxoSmithKline where he held positions of responsibility in global clinical and commercial development overseeing programs in the United States, Europe, Asia and Latin America. From 2001 through 2003 at GlaxoSmithKline, he was Senior Vice President of Global Clinical Pharmacology & Discovery Medicine. Dr. Rubin holds an M.D. from Cornell University Medical College and is board certified in internal medicine with subspecialties in medical oncology and infectious diseases. Dr. Rubin is a member of the Board of Directors of Curis Inc. (Nasdaq: CRIS) and formerly served on the Board of Directors of Medarex, Inc., now a subsidiary of Bristol-Myers Squibb Company. We believe Dr. Rubin’s qualifications to sit on our Board of Directors include his extensive executive leadership and management experience in the pharmaceutical industry.
| Name | Title | |
Joel Lewis | Chief Executive Officer and President | |
Pol F. Boudes, M.D. | Chief Medical Officer | |
Jack W. Callicutt | Chief Financial Officer |
| Name | 2022 Base Salary | 2021 Base Salary | ||||||
Joel Lewis | $ | 525,000 | (1) | $ | 500,000 | (1) | ||
Pol F. Boudes, M.D.. | $ | 475,000 | $ | 455,000 | ||||
Jack W. Callicutt | $ | 320,000 | $ | 302,100 | ||||
| (1) | Pursuant to Mr. Lewis’s Employment Agreement and Deferred Stock Unit Agreement, 20% of Mr. Lewis’ base salary will be paid in cash and 80% will be paid in the form of deferred-stock units in accordance with the terms and subject to the provisions of the DSU Agreement. |
| Name | Performance Bonus Amount | Awarded Amount As % of Base Salary | ||||||
Joel Lewis | $ | 262,500 | (1) | 50 | % | |||
Pol F. Boudes, M.D. | $ | 142,500 | 30 | % | ||||
Jack W. Callicutt | $ | 96,000 | 30 | % | ||||
| Name | Grant Date | Number of Securities Underlying Options | Exercise Price | |||||||
Joel Lewis | 1/24/2022 | 70,000 | $ | 1.98 | ||||||
Pol Boudes, M.D. | 1/24/2022 | 50,000 | $ | 1.98 | ||||||
Jack W. Callicutt | 1/24/2022 | 50,000 | $ | 1.98 | ||||||
| Salary | Bonus | Option Awards | All Other Compensation | Total | ||||||||||||||||||
| Name and Principal Position | Year | ($) | ($) | ($) (1) | ($) | ($) | ||||||||||||||||
Joel Lewis, Chief Executive Officer & President | 2022(2) | 522,917 | 262,500 | 103,517 | 85,247(3 | ) | 974,181 | |||||||||||||||
2021(2) | 500,000 | 250,000 | 329,177 | 88,444(4 | ) | 1,167,621 | ||||||||||||||||
Pol F. Boudes, M.D., Chief Medical Officer | 2022(5) | 473,333 | 142,500 | 73,940 | 104,804(6 | ) | 794,577 | |||||||||||||||
2021(5) | 452,583 | 136,500 | 235,126 | 99,474(7 | ) | 923,683 | ||||||||||||||||
Jack W. Callicutt, | 2022(8) | 318,508 | 96,000 | 73,940 | 78,116(9 | ) | 566,564 | |||||||||||||||
| Chief Financial Officer | 2021(8) | 302,100 | 90,630 | 235,126 | 78,062(10 | ) | 705,918 | |||||||||||||||
| (1) | Represents the aggregate grant date fair value of option awards made during 2022 and 2021 computed in accordance with the Stock Compensation Topic of the FASB ASC, as modified of supplemented. Fair value was calculated using the Black-Scholes options pricing model. For a description of the assumptions used to determine these amounts, see Note 9 of the Notes to the Consolidated Financial Statements in our Annual Reports on Form 10-K (or Form 10-K/A, as applicable) for the fiscal years ended December 31, 2022 and 2021. |
| (2) | Mr. Lewis’s performance bonuses for 2022 and 2021 were approved in January 2022 and January 2023, respectively. Pursuant to his employment agreement 20% of his salary and bonus are paid in cash and 80% are awarded in deferred stock units. |
| (3) | Includes $73,047 for health and other insurance and $12,200 for 401(k) plan contributions. |
| (4) | Includes $76,844 for health and other insurance and $11,600 for 401(k) plan contributions. |
| (5) | Dr. Boudes’ performance bonuses for 2022 and 2021 were approved in January 2022 and January 2023, respectively. |
| (6) | Includes $92,604 for health and other insurance and $11,200 for 401(k) plan contributions. |
| (7) | Includes $87,874 for health and other insurance and $11,600 for 401(k) plan contributions. |
| (8) | Mr. Callicutt’s performance bonuses for 2022 and 2021 were approved in January 2022 and January 2023, respectively. |
| (9) | Includes $65,916 for health and other insurance and $12,200 for 401(k) plan contributions. |
| (10) | Includes $66,462 for health and other insurance and $11,600 for 401(k) plan contributions. |
| Option Awards | Stock Awards | ||||||||||||||||||||||||||||||||
| Name | Number of Securities Underlying Unexercised Options (#) Exercisable | Number of Securities Underlying Unexercised Options (#) Unexercisable | Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#) | Option Exercise Price ($) | Option Expiration Date | Number of Shares or Units of Stock That Have Not Vested (#) | Market Value of Shares or Units of Stock That Have Not Vested ($) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($) | ||||||||||||||||||||||||
Joel Lewis | 54,250(1 | ) | — | 2.39 | 12/14/2027 | — | — | — | — | ||||||||||||||||||||||||
35,000(2 | ) | — | 4.72 | 01/16/2029 | |||||||||||||||||||||||||||||
40,000(3 | ) | — | 2.86 | 01/09/2030 | |||||||||||||||||||||||||||||
187,500(4 | ) | 62,500(4 | ) | 2.65 | 08/31/2030 | ||||||||||||||||||||||||||||
52,500(5 | ) | 17,500(5 | ) | 2.11 | 03/25/2031 | ||||||||||||||||||||||||||||
— | 140,000(6 | ) | 2.11 | 03/25/2031 | |||||||||||||||||||||||||||||
35,000(7 | ) | 35,000(7 | ) | 1.98 | 01/24/2032 | ||||||||||||||||||||||||||||
| Pol F. Boudes, M.D. | 120,000(8 | ) | 180,000(8 | ) | 1.75 | 03/12/2030 | — | — | — | — | |||||||||||||||||||||||
37,500(5 | ) | 12,500(5 | ) | 2.11 | 03/25/2031 | ||||||||||||||||||||||||||||
— | 100,000(6 | ) | 2.11 | 03/25/2031 | |||||||||||||||||||||||||||||
25,000(7 | ) | 25,000(7 | ) | 1.98 | 01/24/2032 | ||||||||||||||||||||||||||||
| Jack W. Callicutt | 26,000(9 | ) | — | 13.38 | 01/21/2024 | — | — | — | — | ||||||||||||||||||||||||
8,706(10 | ) | — | 1.37 | 01/20/2026 | |||||||||||||||||||||||||||||
90,000(11 | ) | — | 5.87 | 01/15/2028 | |||||||||||||||||||||||||||||
90,000(12 | ) | — | 4.16 | 05/22/2028 | |||||||||||||||||||||||||||||
50,000(13 | ) | — | 4.72 | 01/16/2029 | |||||||||||||||||||||||||||||
50,000(14 | ) | — | 2.86 | 01/09/2030 | |||||||||||||||||||||||||||||
37,500(5 | ) | 12,500(5 | ) | 2.11 | 03/25/2031 | ||||||||||||||||||||||||||||
— | 100,000(6 | ) | 2.11 | 03/25/2031 | |||||||||||||||||||||||||||||
25,000(7 | ) | 25,000(7 | ) | 1.98 | 01/24/2032 | ||||||||||||||||||||||||||||
| (1) | 100% of the options vested in full on December 14, 2018. |
| (2) | 100% of the options vested in full on January 16, 2020. |
| (3) | 100% of the options vested in full on December 31, 2020. |
| (4) | One-twelfth of the total options vest quarterly from August 31, 2020, which was the grant date. |
| (5) | 25% of the options vested on September 30, 2021, 25% vested on March 31, 2022, 25% vested on September 30, 2022, 25% vest on March 31, 2023. |
| (6) | 100% of the options vest when the Company has received the interim results of the NAVIGATE clinical trial and makes a public announcement that it has received the interim results. |
| (7) | 25% of the options vested on June 30, 2022, 25% vested on December 31, 2022, 25% vest on June 30, 2023, 25% vest on December 31, 2023. |
| (8) | 20% of the options vest on each of March 2, 2021, March 2, 2022, and March 2023 and 40% of the options vest on March 2, 2024. |
| (9) | 25% of the options vested on January 21, 2014, the grant date with the remainder vested ratably on a monthly basis over a three-year period. |
| (10) | 25% of the options vested on January 29, 2015, the grant date with the remainder vested ratably on a monthly basis over a three-year period. |
| (11) | 25% of the options vested on January 15, 2018 (grant date), 25% vested on June 30, 2018, and 50% vested on December 31, 2018. |
| (12) | 25% of the options vested on June 30, 2018, 25% vested on September 30, 2018, and 50% vested on December 31, 2018. |
| (13) | 25% of the options vested on June 30, 2019, 25% vested on December 31, 2019, 25% vested on June 30, 2020, and 25% vested on December 31, 2020. |
| (14) | 25% of the options vested on June 30, 2020, 25% vested on December 31, 2020, 25% vested on June 30, 2021, and 25% vested on December 31, 2021. |
| (1) | the acquisition of beneficial ownership of 50% or more of either the value of then outstanding equity securities of the Company or the combined voting power of our securities, except for any acquisition directly from us, any acquisition by us or any person that owns a controlling interest in the Company, or any acquisition by any of our employee benefit plans; |
| (2) | during any period of three (3) consecutive years, a majority of the Board is no longer comprised of individuals who, as of the beginning of that period, constituted our Board and individuals whose nomination for election was approved by the Board; |
| (3) | a reorganization, merger, statutory share exchange or consolidation or similar transaction, a sale or other disposition of all or substantially all of the assets of the Company, or the acquisition of assets or equity of another entity by the Company, in each case unless (i) substantially all of the owners, respectively, of our outstanding shares of common stock or the combined voting power of our securities immediately before the transaction beneficially own more than 50% of, respectively, the common stock and the combined voting power of the securities of the resulting corporation, in substantially the same proportions as their ownership immediately prior to the transaction, (ii) no person owns 50% of, respectively, the common stock and the combined voting power of the securities of the resulting corporation, unless such ownership existed prior to the transaction and (iii) at least a majority of the members of the board of directors of the resulting entity were members of the Board of Directors of the Company at the time of the execution of the initial agreement or of the action of the Board providing for such transaction ; or |
| (4) | approval by the stockholders of a complete liquidation or dissolution of the Company. |
| Name | Fees Earned or Paid in | Restricted Stock | Option Awards | Non-Equity Incentive Plan | All Other Compensation | Total ($) | ||||||||||||||||||
Gilbert F. Amelio, Ph.D. | 50,500 | — | 58,934 | — | — | 109,434 | ||||||||||||||||||
James C. Czirr | 35,000 | — | 58,934 | — | — | 93,934 | ||||||||||||||||||
Kary Eldred | 42,500 | — | 58,934 | — | — | 101,434 | ||||||||||||||||||
Kevin D. Freeman | 51,000 | — | 58,934 | — | — | 109,934 | ||||||||||||||||||
Gilbert S. Omenn, M.D., Ph.D. | 45,000 | — | 58,934 | — | — | 109,934 | ||||||||||||||||||
Marc Rubin, M.D. | 38,500 | — | 58,934 | — | — | 97,434 | ||||||||||||||||||
Elissa J. Schwartz, Ph.D. | 38,500 | — | 58,934 | — | — | 97,434 | ||||||||||||||||||
Harold H. Shlevin, Ph.D. | 35,000 | — | 58,934 | — | — | 114,200 | ||||||||||||||||||
Richard Uihlein | — | 35,000 | 58,934 | — | — | 93,394 | ||||||||||||||||||
Richard A. Zordani | 50,000 | — | 58,934 | — | — | 108,934 | ||||||||||||||||||
| (1) | Mr. Uihlein elected to receive restricted stock in lieu of cash retainer for their service. The restricted shares vested in full on December 31, 2022. |
| (2) | Represents the grant date fair value of option awards based upon the Black Scholes valuation model made in 2022. The option grants were made on January 24, 2022. Each non-employee director received one grant of 40,000 options which will vest in full on December 31, 2022. For a description of the assumptions used to determine these amounts, see Note 9 to the Notes to the Consolidated Financial Statements herein our Annual Report on Form 10-K for the fiscal year ended December 31, 2022. |
| (3) | Excludes travel expense reimbursements. |
| Name | Number of Shares Subject | |||
Gilbert F. Amelio, Ph.D. | 225,000 | |||
James C. Czirr | 405,125 | |||
Kary Eldred | 251,875 | |||
Kevin D. Freeman | 329,839 | |||
Gilbert S. Omenn, M.D., Ph.D. | 328,750 | |||
Marc Rubin, M.D. | 254,565 | |||
Elissa J. Schwartz, Ph.D. | 150,000 | |||
Harold H. Shlevin, Ph.D. | 543,000 | |||
Richard Uihlein | 216,362 | |||
Richard A. Zordani | 150,000 | |||
TOTAL | 2,854,516 | |||
| Item 12. | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters |
| Name and Address (1) | Shares of Common | Percent of Common | Shares of Series A | Percent of Series A | ||||||||||||
| 5% Stockholders | ||||||||||||||||
James C. Czirr | 13,026,601(5 | ) | 19.9 | % | 100,000 | 7.9 | % | |||||||||
10X Fund, L.P. (8) | 11,901,193(6 | ) | 18.3 | % | — | — | ||||||||||
David Smith (9) | — | — | 175,000 | 13.9 | % | |||||||||||
Early Equities LLC (9) | — | — | 100,000(7 | ) | 7.9 | % | ||||||||||
Richard E. Uihlein (11) | 20,684,300(12 | ) | 28.7 | % | — | — | ||||||||||
| Directors and Named Executive Officers | ||||||||||||||||
James C. Czirr | 13,026,601(5 | ) | 19.9 | % | 100,000 | 7.9 | % | |||||||||
Gilbert F. Amelio, Ph.D. | 215,614 | * | — | — | ||||||||||||
Kevin Freeman | 996,625(10 | ) | 1.6 | % | — | — | ||||||||||
Joel Lewis | 1,342,623 | 2.2 | % | — | — | |||||||||||
Gilbert S. Omenn, M.D., Ph.D. | 340,990 | * | 50,000 | 3.8 | % | |||||||||||
Marc Rubin, M.D. | 198,146 | * | — | — | ||||||||||||
Richard E. Uihlein | 20,684,300(12 | ) | 24.4 | % | — | — | ||||||||||
Richard A. Zordani | 110,353 | * | — | — | ||||||||||||
Elissa J. Schwartz, Ph.D. | 81,000 | * | — | — | ||||||||||||
Kary Eldred | 993,875(13 | ) | 1.7 | % | — | — | ||||||||||
Harold H. Shlevin, Ph.D. | 481,706 | * | — | — | ||||||||||||
Pol F. Boudes | 255,000 | * | — | — | ||||||||||||
Jack W. Callicutt | 397,905 | * | — | — | ||||||||||||
| All executive officers and directors as a group (13 persons) | 39,124,738(14 | ) | 48.1 | % | 150,000 | 11.7 | % | |||||||||
| (1) | Except as otherwise indicated, the address for each named person is c/o Galectin Therapeutics Inc., 4960 Peachtree Industrial Blvd., Suite 240, Norcross, GA 30071. |
| (2) | Includes the following number of shares of our common stock issuable upon exercise of outstanding stock options granted to our named executive officers and directors that are exercisable within 60 days after February 28, 2023. |
| Directors, Nominees and Named Executive Officers | Options Exercisable Within 60 Days | |||
James C. Czirr | 335,125 | |||
Gilbert F. Amelio, Ph.D. | 155,000 | |||
Marc Rubin, M.D. | 184,565 | |||
Gilbert S. Omenn, M.D., Ph.D | 258,750 | |||
Kevin Freeman | 259,839 | |||
Kary Eldred | 181,875 | |||
Joel Lewis | 442,583 | |||
Richard E. Uihlein. | 146,362 | |||
Harold Shlevin, Ph.D. | 473,000 | |||
Richard A. Zordani | 80,000 | |||
Elissa J. Schwartz, Ph.D. | 80,000 | |||
Pol F. Boudes, M.D. | 255,000 | |||
Jack Callicutt | 389,706 | |||
All executive officers and directors as a group | 3,241,805 | |||
| (3) | For each named person and group included in this table, percentage ownership of our common stock is calculated by dividing the number of shares of our common stock beneficially owned by such person or group by the sum of (i) 59,443,682 shares of our common stock outstanding as of February 28, 2023 and (ii) the number of shares of our common stock that such person has the right to acquire within 60 days after February 28, 2023. |
| (4) | Based on 1,260,000 shares of Series A preferred stock outstanding as of February 28, 2023. |
| (5) | Includes (i) 6,178,940 shares of common shares, and (ii) 5,732,253 common shares issuable upon exercise of warrants as to which Mr. Czirr, in his capacity as a managing member of 10X Capital Management Fund, LLC, a Florida limited liability company and general partner of 10X Fund (referred to herein as 10X Management) has shared voting and investment power, and disclaims beneficial ownership, also includes 773,616 shares of common stock owned directly by Mr. Czirr, 335,125 shares issuable upon the exercise of vested stock options owned by Mr. Czirr, and 16,667 shares of our common stock issuable upon conversion of Series A preferred stock owned by Mr. Czirr. |
| (6) | Includes (i) 6,178,940 shares of common shares, and (ii) 5,732,253 common shares issuable upon exercise of warrants. |
| (7) | Mr. Smith is the manager of Early Equities LLC, a Connecticut limited liability company, and may be deemed to have voting and investment control over, but disclaims beneficial ownership of, the shares of Series A preferred stock. |
| (8) | Contact: c/o 10X Capital Management, LLC at Investment Law Group attn: Bob Mottern 545 Dutch Valley Road NE, Suite A, Atlanta, GA 30324. |
| (9) | Contact: c/o David Smith 34 Shorehaven Road E., Norwalk, CT 06855. |
| (10) | Includes 546,885 shares of the Company’s common stock managed by Cross Consulting and Services, LLC, a Texas limited liability company, d/b/a Freeman Global Investment Counsel. Mr. Freeman, in his capacity as CEO of Freeman Global Investment Counsel, has voting and investment control over, but disclaims beneficial ownership of, these shares. |
| (11) | Contact: c/o Uline Corporation, 12575 Uline Drive, Pleasant Prairie, WI 53158 |
| (12) | Includes (i) 8,027,001 shares of common stock, (ii) 3,136,384 common shares issuable upon the exercise of common stock purchase warrants, (iii) 146,362 common shares issuable upon the exercise of common stock options, (iv) 83,334 common shares issuable upon conversion of Series C preferred non-voting stock, (iv) 5,915,409 common shares issuable upon conversion of convertible notes payable and (v) 3,375,810 common shares issuable upon conversion of convertible line of credit.. |
| (13) | Includes 47,215 shares of common stock, 16,869 common stock purchase warrants, and 181,875 common stock options personally owned by Mr. Eldred and 431,527 shares of common stock and 311,964 common stock purchase warrants owned by two private foundations over which Mr. Eldred shares management control, and 4,425 shares of Common Stock held in a trust for a minor child; however, Mr. Eldred disclaims beneficial ownership of the shares and warrants owned by such private foundations and trust. |
| (14) | Includes 5,732,253 common shares issuable upon exercise of warrants and common shares acquired upon exercise of warrants or issued as stock dividends on the Series B preferred stock net of shares sold or distributed to 10X Fund limited partners, as to which Mr. Czirr has voting and investment control but are counted one time for purposes of this total. For additional information about the beneficial ownership of our capital stock by Mr. Czirr, see note 5. |
| Plan Category | Number of Securities to be issued upon exercise of outstanding options | Weighted- average exercise price of outstanding options | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) | |||||
Equity compensation plans approved by security holders | 5,745,561 | $ | 2.90 | 1,966,279 |
Item 13. | Certain Relationships, Related Transactions and Director Independence |
The information required by this item will be incorporated by reference from the information under the caption “Certain
| Item 14. | Principal Accountant Fees and Services |
Fiscal Year 2022 | Fiscal Year 2021 | |||||||
Audit Fees (1) | $ | 155,000 | $ | 143,000 | ||||
Audit-Related Fees (2) | 15,000 | 8,500 | ||||||
Tax Fees | 27,875 | 33,275 | ||||||
All Other Fees | — | — | ||||||
Total Fees | $ | 197,875 | $ | 184,775 | ||||
| (1) | Audit Fees. These are fees for professional services for the audit of our annual financial statements dated December 31, 2022 and 2021 included inour Annual Reports on Form 10-K for fiscal years then ended, and review of financial statements included in our Quarterly Reports on Form 10-Q for each fiscal quarter during the 2022 and 2021 fiscal years. |
| (2) | Audit-Related Fees. These are fees for assurance and related services that are reasonably related to the performance of the audit or review of ourfinancial statements, including financial disclosures made in our equity finance documentation and registration statements filed with the SEC that incorporate financial statements and the auditors’ report thereon and reviewed with our Audit Committee on financial accounting/reporting standards. |
| Item 15. | Exhibits and Financial Statement Schedules |
| | ||
10.10† | ||
| | ||
10.11*** | ||
| | ||
10.12*** | ||
| | ||
10.13*** | ||
| | ||
10.14 | ||
| | ||
10.15 | ||
| | ||
10.16 | ||
10.17 | ||
| | ||
| 10.18 | ||
| 10.19 | ||
| 10.20 | ||
| 10.21 | ||
| 10.22 | ||
Exhibit Number | Description of Document | |
21.1* | ||
| | ||
23.1* | ||
| | ||
| 31.1* | ||
| | ||
| 31.2* | ||
| | ||
32.1# | ||
| | ||
32.2# | ||
101.INS | Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. | |
101.SCH | ||
| Inline XBRL Taxonomy Extension Schema | ||
101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document | |
101.DEF | Inline XBRL Taxonomy | |
101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document | |
101.PRE | Inline XBRL Taxonomy | |
| The cover page for the Company’s Annual Report on Form 10-K for the year ended December 31, 2021, has been formatted in Inline XBRL | ||
| * | Filed herewith. |
| # | Furnished herewith and not “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended. |
| *** | Galectin Therapeutics, Inc. has requested confidential treatment with respect to portions of this exhibit. Those portions have been omitted from the exhibit and filed separately with the U.S. Securities and Exchange Commission. |
| † | Executive Compensation Arrangement pursuant to 601(b)(10)(iii)(A) of Regulation S-K |
| Item 16. | Form 10–K Summary |
GALECTIN THERAPEUTICS INC. | |||
By: | /S/ JOEL LEWIS | ||
Name: JOEL LEWIS. | |||
Title: Chief Executive Officer and President | |||
Signature | Title | Date | ||
| ||||
/S/ JOEL LEWIS | Chief Executive Officer, President and Director | March 30, 2023 | ||
Joel Lewis | (principal executive officer) | |||
/ CALLICUTT | Chief Financial Officer | March 30, 2023 | ||
Jack W. Callicutt |
(principal financial and accounting officer) | |||
| ||||
/S/ RICHARD E. UIHLEIN | Director and Chairman of the Board | March | ||
Richard E. Uihlein | ||||
| ||||
/
| Director | March | ||
Gilbert F. Amelio, Ph.D. | ||||
| ||||
/
| Director | March | ||
James C. Czirr | ||||
| ||||
/S/ KARY ELDRED | Director | March | ||
Kary Eldred | ||||
/S/ KEVIN D. FREEMAN | Director | March 30, 2023 | ||
Kevin D. Freeman | ||||
/S/ GILBERT S. OMENN, M.D., Ph.D. | Director | March 30, 2023 | ||
Gilbert S. Omenn, M.D., Ph.D. | ||||
/S/ MARC RUBIN, M.D. | Director | March 30, 2023 | ||
Marc Rubin, M.D. | ||||
/S/ ELISSA J. SCHWARTZ, Ph.D. | Director | March 30, 2023 | ||
Elissa J. Schwartz, Ph.D. | ||||
/S/ HAROLD H. SHLEVIN, Ph.D. | Director | March 30, 2023 | ||
Harold H. Shlevin, Ph.D. | ||||
/S/ RICHARD A. ZORDANI | Director | March 30, 2023 | ||
Richard A. Zordani | ||||
Reports of Independent Registered Public Accounting Firm | (PCAOB ID 677) | F-1 | |||
| Consolidated Balance Sheets as of December 31, | F-3 | ||||
| Consolidated Statements of Operations for the years ended December 31, | F-4 | ||||
Consolidated Statements of Changes in Redeemable Convertible Preferred Stock and Stockholders’ Equity (Deficit) for the years ended December 31, | F-5 | ||||
| Consolidated Statements of Cash Flows for the years ended December 31, | 2021 | F-7 | |||
| Notes to Consolidated Financial Statements | F-8 |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
and Subsidiaries
opinions.
Going Concern | ||
| Description of Matter | As described further in Note 1 to the consolidatedfinancial statements, the Company has incurred losses each year from inception through December 31, 2022, and expects to incur additional losses in the foreseeable future. Currently, management’s forecasts and related assumptions illustrate the Company’s ability to sufficiently fund operations and satisfy the Company’s obligations as they come due for at least one year from the financial statement issuance date. Management made judgments to conclude that it is probable that the Company’s plans will be effectively implemented and will provide the necessary cash flows to fund the Company’s obligations as they become due. The judgments with the highest degree of impact and subjectivity in reaching this conclusion included management’s estimates of research and development clinical trial costs and other general and administrative costs. As a result, a high degree of auditor judgment and increased audit effort was required in performing audit procedures to evaluate the reasonableness of management’s estimates. | |
| How We Addressed the Matter in Our Audit | Our audit procedures included the following: • Obtained an understanding of the internal controls and processes in place over the Company’s preparation of forecasted information and considerations of the Company’s obligations. •We tested the reasonableness of the forecasted research and development expenses, operating expenses, and uses and sources of cash used in management’s assessment of whether the Company has sufficient liquidity to fund operations for at least one year from the financial statement issuance date. This testing included inquiries with management, comparison of prior period forecasts to actual results, consideration of positive and negative evidence impacting management’s forecasts, the Company’s financing arrangements in place as of the report date, consideration of the Company’s relationships with its financing partners, performance of a sensitivity analysis of accelerated uses of cash, and creation of an independent estimate of expected future cash flows. |
Valuation of Derivative Liabilities | ||
| Description of Matter | As discussed in Note 5 to the consolidated financial statements, during the year ended December 31, 2021, the Company and a related party entered into three debt financing arrangements for a total of $30 million loaned to the Company. These arrangements include various conversion and other features, including a contingent interest component that has been bifurcated and recognized as a derivative liability. At December 31, 2022, the Company’s derivative liabilities related to the related party convertible notes payable totaled $573 thousand. As more fully described in Note 6 to the consolidated financial statements, the Company utilizes a Monte Carlo Geometric Brownian Stock Path Model in measuring the fair value of the derivative liabilities, which requires the use of estimates and assumptions. Auditing management’s valuations of the derivative liabilities was challenging due to the complexity of the valuation model and the inputs that are highly sensitive to changes such as the common stock market price, volatility, risk free rates, and yields. | |
| How We Addressed the Matter in Our Audit | Our audit procedures included, among others, the following: • Obtained an understanding of the internal controls and processes in place over the Company’s process used in determining the valuation of the derivative liabilities. • Evaluated the Company’s use of the models used and tested the significant assumptions used in the models, as described above. • We evaluated the completeness and accuracy of underlying data used in supporting the assumptions and estimates. • In addition, we involved valuation specialists to assist in assessing the significant assumptions and methodologies used by the Company. | |
Accrued and Prepaid Clinical Trial Expenses | ||
| Description of Matter | The Company’s accrued expenses total approximately $9.1 million at December 31, 2022, which included the estimated obligation for clinical trial expenses incurred as of December 31, 2022, but not paid as of that date in the amount of approximately $7.3 million. In addition, the Company’s total prepaid expenses and other current assets totaled $2.0 million, which included amounts that were paid in advance of services incurred pursuant to clinical trials in the amount of approximately $1.1 million. As discussed in Note 2 to the consolidated financial statements, when the third-party contract research organization and other vendor billing terms do not coincide with the Company’s period-end, the Company is required to make estimates of its obligations to those vendors, including personnel costs, allocated facility costs, lab supplies, outside services, contract laboratory costs related to manufacturing drug product, clinical trials and preclinical studies costs incurred in a given accounting period and record accruals at the end of the period. The Company bases its estimates on its knowledge of the research and development programs, services performed for the period, past history for related activities, and the expected duration of the vendor service contract, where applicable. Payments for these activities are based on the terms of the individual arrangements and may result in payment terms that differ from the pattern of costs incurred. There may be instances in which payments made to vendors will exceed the level of services provided and result in a prepayment of the clinical expense. Auditing the Company’s accrued and prepaid clinical trial expenses is especially challenging due to the large volume of information received from multiple vendors that perform services on the Company’s behalf. While the Company’s estimates of accrued and prepaid clinical trial expenses are primarily based on information received related to each study from its vendors, the Company may need to make an estimate for additional costs incurred. Additionally, due to the long duration of clinical trials and the timing of invoicing received from vendors, the actual amounts incurred are not typically known at the time the financial statements are issued. | |
| How We Addressed the Matter in Our Audit | Our audit procedures included, among others, the following: • Obtained an understanding of the internal controls and processes in place over the Company’s process used in determining the completeness and existence of accrued and prepaid clinical trial expenses. • Tested the accuracy and completeness of the underlying data used in determining the accrued and prepaid clinical trial expenses and evaluating the assumptions and estimates used by management to adjust the actual information received. We corroborated the schedules of the underlying data used in the accrual calculation with the Company’s third-party contract research organization who oversees the clinical trials. To evaluate the completeness of the accrual, we also tested subsequent invoices received to assess the impact to the accrual. |
/s/ CHERRY BEKAERT LLP
2015.
| December 31, | ||||||||
| 2017 | 2016 | |||||||
| (in thousands) | ||||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 3,053 | $ | 15,362 | ||||
Prepaid expenses and other current assets | 766 | 432 | ||||||
|
|
|
| |||||
Total current assets | 3,819 | 15,794 | ||||||
|
|
|
| |||||
Property and equipment, net | — | — | ||||||
Other | 342 | — | ||||||
Intangible assets, net | — | 1 | ||||||
|
|
|
| |||||
Total assets | $ | 4,161 | $ | 15,795 | ||||
|
|
|
| |||||
LIABILITIES, REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ (DEFICIT) EQUITY | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 608 | $ | 910 | ||||
Accrued expenses | 2,292 | 2,802 | ||||||
Accrued dividends payable | 68 | 68 | ||||||
|
|
|
| |||||
Total current liabilities | 2,968 | 3,780 | ||||||
|
|
|
| |||||
Total liabilities | 2,968 | 3,780 | ||||||
|
|
|
| |||||
Commitments and contingencies (Note 9) | ||||||||
Series C super dividend redeemable convertible preferred stock; 1,000 shares authorized, 176 issued and outstanding at December 31, 2017 and 2016, redemption value: $8,036,000, liquidation value: $1,786,000 at December 31, 2017 | 1,723 | 1,723 | ||||||
Stockholders’ (deficit) equity: | ||||||||
Undesignated stock, $0.01 par value; 20,000,000 shares authorized at December 31, 2017 and 2016, 20,000,000 and 14,001,000 shares designated at December 31, 2016 and 2015, respectively | — | — | ||||||
Series A 12% convertible preferred stock; 1,742,500 shares authorized, 1,377,500 issued and outstanding at December 31, 2017 and 2016, respectively, liquidation value $1,418,000 at December 31, 2017 | 557 | 557 | ||||||
Series B-1 12% convertible preferred stock; 900,000 shares authorized, issued and outstanding at December 31, 2017 and 2016, liquidation value $1,800,000 at December 31, 2017 | 1,761 | 1,761 | ||||||
Series B-2 12% convertible preferred stock; 2,100,000 shares authorized, issued and outstanding at December 31, 2017 and 2016, liquidation value $4,200,000 at December 31, 2017 | 3,697 | 3,697 | ||||||
Series B-3 8% convertible preferred stock; 2,508,000 shares authorized, 2,508,000 issued and outstanding at December 31, 2017 and 2016, liquidation value $2,508,000 at December 31, 2017 | 1,224 | 1,224 | ||||||
Common stock, $0.001 par value; 50,000,000 shares authorized at December 31, 2017 and 2016, 35,789,388 and 32,912,942 issued and outstanding at December 31, 2017 and 2016, respectively | 36 | 33 | ||||||
Additional paid-in capital | 173,363 | 166,721 | ||||||
Retained deficit | (181,168 | ) | (163,701 | ) | ||||
|
|
|
| |||||
Total stockholders’ (deficit) equity | (530 | ) | 10,292 | |||||
|
|
|
| |||||
Total liabilities, redeemable convertible preferred stock and stockholders’ (deficit) equity | $ | 4,161 | $ | 15,795 | ||||
|
|
|
| |||||
| December 31, | ||||||||
| 2022 | 2021 | |||||||
(in thousands, except per share amounts) | ||||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 18,592 | $ | 39,648 | ||||
| Prepaid expenses and other current assets | 1,960 | 2,172 | ||||||
| Total current assets | 20,552 | 41,820 | ||||||
| Property and equipment, net | — | — | ||||||
| Other | 733 | 7 | ||||||
| Total assets | $ | 21,285 | $ | 41,827 | ||||
| LIABILITIES, REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY (DEFICIT) | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | 3,890 | $ | 1,805 | ||||
| Accrued expenses | 9,058 | 7,163 | ||||||
| Accrued dividends payable | 64 | 65 | ||||||
| Total current liabilities | 13,012 | 9,033 | ||||||
| Convertible notes payable and accrued interest, net of debt discounts – related party (Note 5) | 29,964 | 29,048 | ||||||
| Derivative liabilities (Note 6) | 573 | 1,130 | ||||||
| Borrowing and accrued interest under convertible line of credit, net of debt discount – related party (Note 10) | 9,864 | — | ||||||
| Other liabilities | 66 | — | ||||||
| Total liabilities | 53,479 | 39,211 | ||||||
| Commitments and contingencies (Note 12) | ||||||||
Series C 6% super dividend redeemable convertible preferred stock; 1,000 shares authorized, 176 issued and outstanding at December 31, 2022 and 2021, redemption value: $8,335,000, liquidation value: $1,786,000 at December 31, 2022 | 1,723 | 1,723 | ||||||
| Stockholders’ equity (deficit): | ||||||||
Undesignated stock, $0.01 par value; 20,000,000 shares authorized at December 31, 2022 and 2021, 20,000,000 shares designated at December 31, 2022 and 2021, respectively | — | — | ||||||
Series A 12% convertible preferred stock; 1,742,500 shares authorized, 1,260,000 and 1,302,500 issued and outstanding at December 31, 2022 and 2021, respectively, liquidation value $1,260,000 at December 31, 2022 | 510 | 527 | ||||||
Common stock, $0.001 par value; 150,000,000 shares authorized at December 31, 2022 and 2021, 59,426,005 and 59,341,305 issued and outstanding at December 31, 2022 and 2021, respectively | 59 | 59 | ||||||
| Additional paid-in capital | 275,081 | 271,001 | ||||||
| Accumulated deficit | (309,567 | ) | (270,694 | ) | ||||
| Total stockholders’ equity (deficit) | (33,917 | ) | 893 | |||||
| Total liabilities, redeemable convertible preferred stock and stockholders’ equity (deficit) | $ | 21,285 | $ | 41,827 | ||||
| Year Ended December 31, | ||||||||
| 2017 | 2016 | |||||||
| (in thousands, except per share amounts) | ||||||||
Operating expenses: | ||||||||
Research and development | $ | 11,721 | $ | 15,325 | ||||
General and administrative | 4,526 | 6,156 | ||||||
|
|
|
| |||||
Total operating expenses | 16,247 | 21,481 | ||||||
|
|
|
| |||||
Total operating loss | (16,247 | ) | (21,481 | ) | ||||
|
|
|
| |||||
Other income (expense): | ||||||||
Interest income | 24 | 45 | ||||||
Interest expense | (12 | ) | — | |||||
|
|
|
| |||||
Total other income (expense) | 12 | 45 | ||||||
|
|
|
| |||||
Net loss | $ | (16,235 | ) | $ | (21,436 | ) | ||
|
|
|
| |||||
Preferred stock dividends | (1,232 | ) | (741 | ) | ||||
Preferred stock accretion | — | (173 | ) | |||||
|
|
|
| |||||
Net loss applicable to common stockholders | $ | (17,467 | ) | $ | (22,350 | ) | ||
|
|
|
| |||||
Basic and diluted net loss per share | $ | (0.49 | ) | $ | (0.76 | ) | ||
Shares used in computing basic and diluted net loss per share | 35,521 | 29,216 | ||||||
Year Ended December 31, | ||||||||
| 2022 | 2021 | |||||||
(in thousands, except per share amounts) | ||||||||
| Operating expenses: | ||||||||
| Research and development | $ | 31,737 | $ | 23,818 | ||||
| General and administrative | 6,615 | 6,361 | ||||||
| Total operating expenses | 38,352 | 30,179 | ||||||
| Total operating loss | (38,352 | ) | (30,179 | ) | ||||
| Other income (expense): | ||||||||
| Interest income | 52 | 3 | ||||||
| Interest expense | (1,033 | ) | (489 | ) | ||||
| Change in fair value of derivatives | 557 | 138 | ||||||
| Total other income (expense) | (424 | ) | (348 | ) | ||||
| Net loss | $ | (38,776 | ) | $ | (30,527 | ) | ||
| Preferred stock dividends | (97 | ) | (171 | ) | ||||
| Net loss applicable to common stockholders | $ | (38,873 | ) | $ | (30,698 | ) | ||
| Basic and diluted net loss per share | $ | (0.65 | ) | $ | (0.52 | ) | ||
| Weighted average common and potential common shares outstanding basic and diluted | 59,391 | 58,527 | ||||||
2021
| Series B-1 12% Redeemable Convertible Preferred Stock | Series B-2 12% Redeemable Convertible Preferred Stock | Series C Super Dividend Redeemable Convertible Preferred Stock | ||||||||||||||||||||||
| Number of Shares | Amount | Number of Shares | Amount | Number of Shares | Amount | |||||||||||||||||||
Balance at December 31, 2015 | 900,000 | $ | 1,748 | 2,100,000 | $ | 3,537 | 176 | $ | 1,723 | |||||||||||||||
Accretion of Series B redeemable convertible preferred stock | 13 | 119 | ||||||||||||||||||||||
Accretion of beneficial conversion feature for Series B-2 | 41 | |||||||||||||||||||||||
Reclassification of Series B-1 and B-2 convertible stock to stockholders’ equity upon elimination of redemption feature | (900,000 | ) | (1,761 | ) | (2,100,000 | ) | (3,697 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Balance at December 31, 2016 | — | $ | — | — | $ | — | 176 | $ | 1,723 | |||||||||||||||
Balance at December 31, 2017 | — | $ | — | — | $ | — | 176 | $ | 1,723 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Series C Super Dividend Redeemable Convertible Preferred Stock | ||||||||
Number of Shares | Amount | |||||||
| Balance at January 1, 2021 | 176 | $ | 1,723 | |||||
| Balance at December 31, 2021 | 176 | $ | 1,723 | |||||
| Balance at December 31, 2022 | 176 | $ | 1,723 | |||||
2021
| Series A 12% Convertible Preferred Stock | Series B-1 12% Convertible Preferred Stock | �� | Series B-2 12% Convertible Preferred Stock | Series B-3 8% Convertible Preferred Stock | Common Stock | |||||||||||||||||||||||||||||||||||||||||||||||
| Number of Shares | Amount | Number of Shares | Amount | Number of Shares | Amount | Number of Shares | Amount | Number of Shares | Amount | Additional Paid-In Capital | Retained Deficit | Total Stockholders’ Equity (Deficit) | ||||||||||||||||||||||||||||||||||||||||
Balance at December 31, 2015 | 1,377,500 | $ | 557 | 28,825,033 | $ | 28 | $ | 157,504 | $ | (140,049 | ) | $ | 18,040 | |||||||||||||||||||||||||||||||||||||||
Accretion of Series B redeemable convertible preferred stock | (132 | ) | (132 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||
Accretion of beneficial conversion feature for Series B-2 | (41 | ) | (41 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||
Reclassification of Series B-1 and B-2 convertible stock to stockholders’ equity upon elimination of redemption feature | 900,000 | 1,761 | 2,100,000 | 3,697 | 5,458 | |||||||||||||||||||||||||||||||||||||||||||||||
Issuance of Series B-3 8% convertible preferred stock | 2,508,000 | 1,224 | 2,585 | (1,301 | ) | 2,508 | ||||||||||||||||||||||||||||||||||||||||||||||
Series A 12% convertible preferred stock dividend | 27,550 | 34 | (34 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||
Series B-1 12% convertible preferred stock dividend | 155,020 | 192 | (192 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||
Series B-2 12% convertible preferred stock dividend | 361,713 | 1 | 446 | (447 | ) | |||||||||||||||||||||||||||||||||||||||||||||||
Series B-3 8% convertible preferred stock dividend | 32,289 | 31 | (31 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||
Series C super dividend convertible preferred stock dividend | 29,938 | 38 | (38 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||
Issuance of common stock and warrants in private placements | 2,814,230 | 3 | 2,997 | 3,000 | ||||||||||||||||||||||||||||||||||||||||||||||||
Issuance of common stock | 329,234 | 416 | 416 | |||||||||||||||||||||||||||||||||||||||||||||||||
Issuance of common stock upon vesting of stock grants to directors | 337,935 | 1 | (1 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||
Stock-based compensation expense | 2,479 | 2,479 | ||||||||||||||||||||||||||||||||||||||||||||||||||
Net loss | (21,436 | ) | (21,436 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||
Balance at December 31, 2016 | 1,377,500 | $ | 557 | 900,000 | $ | 1,761 | 2,100,000 | $ | 3,697 | 2,508,000 | $ | 1,224 | 32,912,942 | $ | 33 | $ | 166,721 | $ | (163,701 | ) | $ | 10,292 | ||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||
Series A 12% Convertible Preferred Stock | Common Stock | |||||||||||||||||||||||||||
Number of Shares | Amount | Number of Shares | Amount | Additional Paid-In Capital | Retained Deficit | Total Stockholders’ Equity (Deficit) | ||||||||||||||||||||||
| Balance at January 1, 2021 | 1,302,500 | $ | 527 | 57,077,055 | $ | 56 | $ | 261,883 | $ | (239,996 | ) | $ | 22,470 | |||||||||||||||
| Series A 12% convertible preferred stock dividend | 26,050 | 79 | (79 | ) | ||||||||||||||||||||||||
| Series C super dividend redeemable convertible preferred stock dividend | 31,112 | 92 | (92 | ) | ||||||||||||||||||||||||
| Issuance of common stock | 845,214 | 1 | 3,863 | 3,864 | ||||||||||||||||||||||||
| Issuance of common stock for warrant exercises | 1,180,240 | 2 | 2,948 | 2,950 | ||||||||||||||||||||||||
| Issuance of common stock for stock option exercises | 148,941 | |||||||||||||||||||||||||||
| Stock-based compensation expense | 32,693 | 2,136 | 2,136 | |||||||||||||||||||||||||
| Net loss | (30,527 | ) | (30,527 | ) | ||||||||||||||||||||||||
| Balance at December 31, 2021 | 1,302,500 | $ | 527 | 59,341,305 | $ | 59 | $ | 271,001 | $ | (270,694 | ) | $ | 893 | |||||||||||||||
| Series A 12% convertible preferred stock dividend | 25,625 | 40 | (40 | ) | ||||||||||||||||||||||||
| Series C super dividend redeemable convertible preferred stock dividend | 35,200 | 57 | (57 | ) | ||||||||||||||||||||||||
| Conversion of Series A Convertible Preferred to common | (42,500 | ) | (17 | ) | 7,287 | 17 | ||||||||||||||||||||||
| Issuance of common stock purchase warrants in connection with related party line of credit | 899 | 899 | ||||||||||||||||||||||||||
| Stock-based compensation expense | 16,588 | 3,067 | 3,067 | |||||||||||||||||||||||||
| Net loss | (38,776 | ) | (38,776 | ) | ||||||||||||||||||||||||
| Balance at December 31, 2022 | 1,260,000 | $ | 510 | 59,426,005 | $ | 59 | $ | 275,081 | $ | (309,567 | ) | $ | (33,917 | ) | ||||||||||||||
For the Years Ended December 31, 2017 and 2016
(amounts in thousands except share data)
| Series A 12% Convertible Preferred Stock | Series B-1 12% Convertible Preferred Stock | Series B-2 12% Convertible Preferred Stock | Series B-3 8% Convertible Preferred Stock | Common Stock | ||||||||||||||||||||||||||||||||||||||||||||||||
| Number of Shares | Amount | Number of Shares | Amount | Number of Shares | Amount | Number of Shares | Amount | Number of Shares | Amount | Additional Paid-In Capital | Retained Deficit | Total Stockholders’ Equity (Deficit) | ||||||||||||||||||||||||||||||||||||||||
Balance at December 31, 2016 | 1,377,500 | $ | 557 | 900,000 | $ | 1,761 | 2,100,000 | $ | 3,697 | 2,508,000 | $ | 1,224 | 32,912,942 | $ | 33 | $ | 166,721 | $ | (163,701 | ) | $ | 10,292 | ||||||||||||||||||||||||||||||
Series A 12% convertible preferred stock dividend | 27,550 | 62 | (62 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||
Series B-1 12% convertible preferred stock dividend | 103,691 | 257 | (257 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||
Series B-2 12% convertible preferred stock dividend | 241,945 | 599 | (599 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||
Series B-3 8% convertible preferred stock dividend | 95,998 | 237 | (237 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||
Series C super dividend redeemable convertible preferred stock dividend | 35,200 | 77 | (77 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||
Issuance of common stock | 2,213,360 | 3 | 3,380 | 3,383 | ||||||||||||||||||||||||||||||||||||||||||||||||
Issuance of common stock and warrants in private placements | 102,368 | 200 | 200 | |||||||||||||||||||||||||||||||||||||||||||||||||
Issuance of common stock for services | 18,677 | 33 | 33 | |||||||||||||||||||||||||||||||||||||||||||||||||
Issuance of restricted common stock to directors | 37,657 | 4 | 4 | |||||||||||||||||||||||||||||||||||||||||||||||||
Issuance of warrants in connection with line of credit | 696 | 696 | ||||||||||||||||||||||||||||||||||||||||||||||||||
Stock-based compensation expense | 1,097 | 1,097 | ||||||||||||||||||||||||||||||||||||||||||||||||||
Net loss | (16,235 | ) | (16,235 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||
Balance at December 31, 2017 | 1,377,500 | $ | 557 | 900,000 | $ | 1,761 | 2,100,000 | $ | 3,697 | 2,508,000 | $ | 1,224 | 35,789,388 | $ | 36 | $ | 173,363 | $ | (181,168 | ) | $ | (530 | ) | |||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||
CASH FLOWS
Year Ended December 31, | ||||||||
| 2022 | 2021 | |||||||
| (in thousands) | ||||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
| Net loss | $ | (38,776 | ) | $ | (30,527 | ) | ||
| Adjustments to reconcile net loss to net cash from operating activities: | ||||||||
| Amortization of right to use asset | 32 | 41 | ||||||
| Stock-based compensation expense | 2,867 | 2,076 | ||||||
| Non-cash interest expense | 410 | 283 | ||||||
| Change in fair value of derivatives | (557 | ) | (138 | ) | ||||
| Changes in operating assets and liabilities: | ||||||||
| Prepaid expenses and other assets | 101 | 65 | ||||||
| Accrued interest on convertible notes payable and convertible line of credit – related party | 623 | 206 | ||||||
| Accounts payable, accrued expenses and other liabilities | 4,244 | 3,686 | ||||||
| Net cash from operating activities | (31,056 | ) | (24,308 | ) | ||||
| CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
| Net cash from investing activities | — | — | ||||||
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
| Net proceeds from convertible line of credit – related party | 10,000 | — | ||||||
| Net proceeds from convertible notes payable – related party | — | 30,000 | ||||||
| Net proceeds from issuance of common stock and warrants | — | 6,814 | ||||||
| Net cash from financing activities | 10,000 | 36,814 | ||||||
| NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS | (21,056 | ) | 12,506 | |||||
| CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD | 39,648 | 27,142 | ||||||
| CASH AND CASH EQUIVALENTS, END OF PERIOD | $ | 18,592 | $ | 39,648 | ||||
| NONCASH FINANCING ACTIVITIES: | ||||||||
| Payment of preferred stock dividends in common stock | $ | 97 | $ | 171 | ||||
Fair value of derivatives regarding related party convertible notes payable | — | 1,268 | ||||||
Reclassification of accrued bonus to additional paid in capital | 200 | 60 | ||||||
| Noncash right to use lease asset | 111 | — | ||||||
| Common stock purchase warrants issued in connection with related party line of credit | 899 | — | ||||||
CONSOLIDATED STATEMENTS OF CASH FLOWS
| Year Ended December 31, | ||||||||
| 2017 | 2016 | |||||||
| (in thousands) | ||||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
Net loss | $ | (16,235 | ) | $ | (21,436 | ) | ||
Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
Depreciation and amortization | 1 | 7 | ||||||
Stock-based compensation expense | 1,101 | 2,479 | ||||||
Issuance of common stock for services | 33 | — | ||||||
Non-cash interest expense | 12 | — | ||||||
Changes in operating assets and liabilities: | ||||||||
Prepaid expenses and other assets | 8 | 122 | ||||||
Accounts payable and accrued expenses | (812 | ) | 2,419 | |||||
|
|
|
| |||||
Net used in from operating activities | (15,892 | ) | (16,409 | ) | ||||
|
|
|
| |||||
CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
Net cash from investing activities | — | — | ||||||
|
|
|
| |||||
CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
Net proceeds from issuance of common stock and warrants | 3,583 | 5,925 | ||||||
|
|
|
| |||||
Net cash from financing activities | 3,583 | 5,925 | ||||||
|
|
|
| |||||
NET DECREASE IN CASH AND CASH EQUIVALENTS | (12,309 | ) | (10,484 | ) | ||||
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD | 15,362 | 25,846 | ||||||
|
|
|
| |||||
CASH AND CASH EQUIVALENTS, END OF PERIOD | $ | 3,053 | $ | 15,362 | ||||
|
|
|
| |||||
NONCASH FINANCING ACTIVITIES: | ||||||||
Payment of preferred stock dividends in common stock | $ | 1,232 | $ | 742 | ||||
Common stock purchase warrants issued in connection with line of credit | $ | 696 | — | |||||
See notes to consolidated financial statements.
| 1. | Nature of Business, |
relieved.
| 2. | Summary of Significant Accounting Policies |
liabilities, derivative valuations, deferred income taxes and various other assumptions that are believed to be reasonable under the circumstances. Actual results may differ from those estimates under different assumptions or conditions.
2022 and 2021, which are level 3 liabilities.
2021.
Intangible Assets. Intangible assets include patent costs, consisting primarily of related capitalized legal fees, which are amortized over an estimated useful life of five years from issuance. Amortization expense in 2017 and 2016 was approximately $1,000 and $7,000, respectively. Gross intangible assets at December 31, 2017 and 2016 totaled $78,000 each year, and accumulated amortization at December 31, 2017 and 2016 totaled $78,000 and $77,000, respectively.
There were no impairments of long-lived assets at December 31, 2022 or 2021.
model using assumptions regarding volatility of our common share price, remaining life of the warrant, and risk-free interest rates at each period end. There were no warrant liabilities as of December 31, 20172022 or 2016.
2021.
studies are charged to research and development expense as incurred. The Company accounts for nonrefundable advance payments for goods and services that will be used in future research and development activities as expense when the service has been performed or when the goods have been received. Our current NAVIGATE clinical trial is being supported by third-party contract research organizations, or CROs, and other vendors. We accrue expenses for clinical trial activities performed by CROs based upon the estimated amount of work completed on each trial. For clinical trial expenses and related expenses associated with the conduct of clinical trials, the significant factors used in estimating accruals include the number of patients enrolled, the number of active clinical sites, and the duration for which the patients have been enrolled in the trial. We monitor patient enrollment levels and related activities to the extent possible through internal reviews, review of contractual terms and correspondence with CROs. We base our estimates on the best information available at the time. We monitor patient enrollment levels and related activities to the extent possible through discussions with CRO personnel and based our estimates of clinical trial costs on the best information available at the time. However, additional information may become available to us which will allow us to make a more accurate estimate in future periods. In that event, we may be required to record adjustments to research and development expenses in future periods when the actual level of activity becomes more certain.
New Accounting Pronouncements. In February 2016, the FASB issued ASU No. 2016-02,Leases (Topic 842), which requires lessees to recognize the most leasesshould be applied on the balance sheet. The provisions of this guidance are effective for the annual periods beginning after December 15, 2018, and interim periods within those years,a full or modified retrospective basis, with early adoption permitted.permitted beginning on January 1, 2021. The Company is evaluatingadopted ASU 2020-06 effective January 1, 2022. The adoption of ASU 2020-06 did not have an impact on the requirements of this guidanceCompany’s financial statements. See Notes 5 and has not yet determined the impact of the adoption on our financial position or results of operations.
| 3. | Property and Equipment |
| 2017 | 2016 | |||||||
| (in thousands) | ||||||||
Leasehold improvements | $ | 2 | $ | 2 | ||||
Computer and office equipment | 13 | 13 | ||||||
Furniture and fixtures | 59 | 59 | ||||||
|
|
|
| |||||
Total | 74 | 74 | ||||||
Less accumulated depreciation and amortization | (74 | ) | (74 | ) | ||||
|
|
|
| |||||
Property and equipment — net | $ | — | $ | — | ||||
|
|
|
| |||||
| 2022 | 2021 | |||||||
| (in thousands) | ||||||||
| Leasehold improvements | $ | 2 | $ | 2 | ||||
| Computer and office equipment | 13 | 13 | ||||||
| Furniture and fixtures | 59 | 59 | ||||||
| Total | 74 | 74 | ||||||
| Less accumulated depreciation and amortization | (74 | ) | (74 | ) | ||||
| Property and equipment — net | $ | — | $ | — | ||||
| 4. | Accrued Expenses |
| 2017 | 2016 | |||||||
| (in thousands) | ||||||||
Legal and accounting fees | $ | 74 | $ | 14 | ||||
Accrued compensation | 790 | 614 | ||||||
Accrued research and development costs and other | 1,428 | 2,174 | ||||||
|
|
|
| |||||
Total | $ | 2,292 | $ | 2,802 | ||||
|
|
|
| |||||
| 2022 | 2021 | |||||||
| (in thousands) | ||||||||
| Legal and accounting fees | $ | 65 | $ | 68 | ||||
| Accrued compensation | 973 | 728 | ||||||
Lease liability | 40 | 8 | ||||||
| Accrued research and development costs and other | 7,980 | 6,359 | ||||||
| Total | $ | 9,058 | $ | 7,163 | ||||
| 5. | Convertible Notes Payable – Related Party |
| 6. | Fair Value of Financial Instruments |
| December 31, 2022 | December 31, 2021 | |||||||
| Derivative Liability – Contingent Interest April Note | $ | 249,000 | $ | 495,000 | ||||
| Derivative Liability – Contingent Interest September Note | $ | 109,000 | $ | 250,000 | ||||
| Derivative Liability – Contingent Interest December Note | $ | 215,000 | $ | 385,000 | ||||
| December 31, 2022 | December 31, 2021 | |||||||
| Stock Price | $ | 1.13 | $ | 2.07 | ||||
| Conversion Price of conversion feature | $ | 5.00 | $ | 5.00 | ||||
| Term | 2.29 years | 3.29 years | ||||||
| Risk Free Interest Rate | 4.41 | % | 0.97 | % | ||||
| Credit Adjusted Discount Rate | 14.76 | % | 8.43 | % | ||||
| Volatility | 81 | % | 80 | % | ||||
| Dividend Rate | 0 | % | 0 | % | ||||
Balance – December 31, 2020 | $ | — | ||
| Issuance of April convertible note payable – related party | 420,000 | |||
| Fair Value Adjustment | 75,000 | |||
Balance – December 31, 2021 | 495,000 | |||
| Fair Value Adjustment | (246,000 | ) | ||
| Balance – December 31, 2022 | $ | 249,000 |
| December 31, 2022 | December 31, 2021 | |||||||
| Stock Price | $ | 1.13 | $ | 2.07 | ||||
| Conversion Price of conversion feature | $ | 8.64 | $ | 8.64 | ||||
| Term | 2.72 years | 3.72 years | ||||||
| Risk Free Interest Rate | 4.22 | % | 1.12 | % | ||||
| Credit Adjusted Discount Rate | 14.76 | % | 8.42 | % | ||||
| Volatility | 81 | % | 82 | % | ||||
| Dividend Rate | 0 | % | 0 | % | ||||
Balance – December 31, 2020 | $ | — | ||
| Issuance of September convertible note payable – related party | 433,000 | |||
| Fair Value Adjustment | (183,000 | ) | ||
Balance – December 31, 2021 | 250,000 | |||
| Fair Value Adjustment | (141,000 | ) | ||
| Balance – December 31, 2022 | $ | 109,000 |
| December 31, 2022 | December 31, 2021 | |||||||
| Stock Price | $ | 1.13 | $ | 2.07 | ||||
| Conversion Price of conversion feature | $ | 5.43 | $ | 5.43 | ||||
| Term | 2.97 years | 3.97 years | ||||||
| Risk Free Interest Rate | 4.22 | % | 1.12 | % | ||||
| Credit Adjusted Discount Rate | 14.76 | % | 8.42 | % | ||||
| Volatility | 83 | % | 84 | % | ||||
| Dividend Rate | 0 | % | 0 | % | ||||
Balance – December 31, 2020 | $ | — | ||
| Issuance of September convertible note payable – related party | 415,000 | |||
| Fair Value Adjustment | (30,000 | ) | ||
Balance – December 31, 2021 | 385,000 | |||
| Fair Value Adjustment | (170,000 | ) | ||
| Balance – December 31, 2022 | $ | 215,000 |
| 7. | Stockholders’ Equity |
All issued and outstanding shares of Series B-1, Series B-2 and Series B-3 Preferred Stock were converted into Common Stock on January 19, 2019.
On May 19, 2017, the Company entered into an At Market Issuance Sales Agreement (the “2017 At Market Agreement”) with a sales agent under which the Company may issue and sell shares of its common stock having an aggregate offering price of up to $30.0 million from time to time through the sales agent. Sales of the Company’s common stock through the sales agent, if any, will be made by any method that is deemed an “at the market” offering as defined by the U.S. Securities and Exchange Commission. The Company will pay to the sales agent a commission rate equal to 3.0% of the gross proceeds from the sale of any shares of common stock sold through the sales agent under the 20172020 At Market Agreement. During the year ended December 31, 2017,2021, the Company issued 716,563845,214 shares of common stock under the 2020 At Market Agreement for net proceeds of approximately $1,437,000 under the 2017 At Market Agreement.
2016 Private Placement
In December 2016, the Company closed two transactions with individual investors through private placements$3,864,000. There were no issuances of common stock and warrants. In total,under the Company issued approximately 2,814,000 shares of common stock for proceeds of $3,000,000. The Company also issued, to2020 At Market Agreement during the two investors, warrants to purchase 2,110,672 shares of common stock at $5.00 per share. The warrants have an expiration date in late
December 2023. The warrants are exercisable beginning in late June 2017. The exercise price of each warrant is adjustable in the event of a stock split or stock combination, capital reorganization, merger or similar event. The warrants were valued at $1,258,000 as of the issuance dates in late December 2016, using a weighted average closing price of $0.97, a life of 7 years, a volatility of 96% and a risk free interest rate of 1.90%. Based upon the Company’s analysis of the criteria contained in ASC Topic 815-40, “Derivatives and Hedging — Contracts in Entity’s Own Equity” the Company has determined that warrants issued in connection with this financing transaction were not derivative liabilities and therefore, were recorded as additional paid-in capital.
2017 Private Placement
On February 28, 2017, the Company closed a transaction with five individual investors through a private placement of common stock and warrants. In total, the Company issued 102,368 shares of common stock for proceeds of $200,000. The Company also issued, to the five investors, warrants to purchase 76,776 shares of common stock at $5.00 per share. The warrants have an expiration date of February 28, 2024. The exercise price of each warrant is adjustable in the event of a stock split or stock combination, capital reorganization, merger or similar event. The warrants were valued at approximately $101,000 as of the issuance, using the closing price of $1.86, a life of 7 years, a volatility of 97% and a risk-free interest rate of 1.92%. Based upon the Company’s analysis of the criteria contained in ASC Topic 815-40, “Derivatives and Hedging — Contracts in Entity’s Own Equity” the Company has determined that warrants issued in connection with this financing transaction were not derivative liabilities and therefore, were recorded as additional paid-in capital.
Other
In 2017, the Company entered an agreement with a vendor whereby the Company will issue common stock to the vendor in lieu of paying in cash in amount up to $100,000 for the year. Throughyear ended December 31, 2017, the Company issued 18,667 shares of common stock and 1,867 warrants to purchase shares of common stock at $5.00 per share pursuant to this agreement and the value of such shares and warrants, totaling approximately $33,000, has been recorded as research and development expense.
2022.
As
stock. There were no shares of Series A converted into shares of common stock in 2017 or 2016.2021. Prior to 2016,2021, a total of 360,000465,000 shares of Series A had been converted into 60,88873,865 shares of common stock.
Series B Redeemable Convertible Preferred Stock
On February 12, 2009, the Company entered into a securities purchase agreement (the “10X Agreement”) pursuant to which it agreed to issue and sell to 10X Fund LP, at two or more closings, up to: (i) 3,000,000 shares its Series B-1 and B-2 convertible preferred stock with an aggregate stated value of $6.0 million and convertible into 2,000,000 shares of common stock at December 31, 2011 and (ii) warrants to purchase 6,000,000 shares of common stock.
Through a series of closings from February 2009 through May 2010, the Company issued and sold, pursuant to the 10X Agreement, a total of (i) 900,000 shares of Series B-1 convertible preferred stock (“Series B-1 convertible preferred stock” or “Series B-1”) and related common stock warrants for 1,800,000 shares of common stock and (ii) 2,100,000 shares of Series B-2 convertible preferred stock (“Series B-2 convertible preferred stock” or “Series B-2”) and related warrants for 4,200,000 shares of common stock for total net proceeds of $5,483,000.
On September 22, 2016, the Company entered into a securities purchase agreement (the “B-3 Agreement”) pursuant to which it agreed to issue and sell to 10X Fund LP: (i) 1,500,000 shares its Series B-3 convertible preferred stock (“Series B-3 preferred stock” or “Series B-3”) with an aggregate stated value and proceeds of $1.5 million and convertible into 892,349 shares of common stock, and (ii) warrants to purchase up to 669,262 shares of common stock. Also, pursuant to agreements signed on September 22, 2016 with 10X Fund LP, the Company issued 875,000 warrants to purchase common stock in exchange in exchange for the 10X Fund LP agreeing not to sell any shares of common or preferred stock in the Company for 18 months, except in limited circumstances. Additionally, as previously agreed to by the 10X Fund LP, the sole holder of the Company’s Series B-1, Series B-2 and Series B-3 preferred stock (collectively, with the Series B-1 and Series B-2, the “Series B”), in the Second Amended and Restated Certificate of Designation of Preferences, Rights and Limitations of Series B preferred stock we removed the ability of the holders of the Series B to cause a redemption of their shares of Series B. Accordingly, the Company accounted for the removal of this redemption feature as a modification and reclassified the Series B-1 and Series B-2 preferred stock into permanent equity at September 30, 2016 and forward.
On December 23, 2016, the Company and 10X Fund LP amended the B-3 Agreement whereby the Company agreed to issue and sell to 10X Fund LP an additional (i) 1,008,000 shares of its B-3 preferred stock with an aggregate stated value and proceeds of $1.0 million and convertible into 896,997 shares of common stock, and (ii) warrants to purchase up to 924,780 shares of common stock.
The terms of the Series B are as follows:
Dividends. Holders of the Series B will be entitled to receive cumulative dividends at the rate of 12% for Series B-1 and B-2 and 8% for Series B-3 per annum (compounding monthly) payable quarterly which may, at the Company’s option, be paid in cash or common stock. Pursuant to an agreement with the holder of all shares of Series B, on January 26, 2011, the Company amended and restated the Certificate of Designation of Preferences, Rights and Limitations for the Series B-1 and Series B-2, to provide that dividends are payable in cash or shares of Common Stock valued at 100% of the volume weighted average price of the Common Stock for the 20 consecutive trading days prior to the dividend payment date on and after September 30, 2011. If the Company does not pay any dividend on the Series B, dividends will accrue at the rate of 15% per annum (compounding monthly).
Conversion Rights. Each share of Series B-1 and B-2 is convertible into two-thirds (approximately 0.667) shares of common stock at the conversion price of $3.00 per share at the option of the holder, at any time. The shares of Series B-3 are convertible into 1,789,346 shares of common stock at the option of the holder, at any time.
Liquidation Rights. In the event of any liquidation, dissolution or winding up of the Company, either voluntarily or involuntarily, the holders of Series B-1 and B-2 will receive $2 per share and holders of B-3 will receive $1 per share plus accrued and unpaid dividends, payable prior and in preference to any distributions to the holders of Common Stock butpari passu with the holders of the Series A 12% Convertible Preferred Stock.
Voting Rights. Except as noted below, the holder of each share of Series B-3 shall be entitled to the number of votes equal to the number of shares of Common Stock into which such share of Series B-3 would be convertible, and shall otherwise have voting rights and powers equal to the voting rights and powers of the Common Stock. With respect to the election of directors, the holders of the Series B-3, together with the holders of Series B-1 and Series B-2, shall vote together as a separate class to elect two (2) members of the Board of Directors (the “Series B Directors”), and the Company shall take all reasonably necessary or desirable actions within its control (including, without limitation, calling special meetings of the Board of Directors, nominating such persons designated by the holders of the Series B as directors on the applicable proxy statements and recommending their election) to permit the holders of the Series B to appoint three additional (3) members of the Board of Directors (the “Series B Nominees”), who shall be subject to election by all shares of voting stock of the Company voting together as a single group,) until there are no longer any shares of Series B outstanding. The holders of Series B shall vote together with the holders of Common Stock and other voting capital stock of the Company to elect all other members of the Board of Directors.
Other Restrictions. So long as any shares of the Series B remain outstanding, the Company may not, without the approval of the holders of a majority of the shares of Series B outstanding, among other things, (i) change the size of the Company’s Board of Directors; (ii) amend or repeal the Company’s Articles of Incorporation or Bylaws or file any articles of amendment designating the preferences, limitations and relative rights of any series of preferred stock, that would alter or change the preferences, rights, privileges or powers of, or restriction provided for the benefit of the Series B; (iii) create or increase the authorized amount of any additional class or series of shares of stock that is equal to or senior to Series B; (iv) increase or decrease the authorized number of shares of the Series B; (v) purchase, redeem or otherwise acquire for value any shares of any class of capital stock; (vi) merge or consolidate the Company into or with any other corporation or sell, assign, lease, pledge, encumber or otherwise dispose of all or substantially all of the Company’s assets or those of any subsidiary; (vii) voluntarily or involuntarily liquidate, dissolve or wind up the Company or the Company’s business; (viii) pay or declare dividends on any capital stock other than the
Preferred Stock, unless the Series B share ratably in such dividend and all accrued dividends payable with respect to the Series B have been paid prior to the payment or declaration of such dividend; (ix) acquire an equitable interest in, or the assets or business of any other entity in any form of transaction; (x) create or commit us to enter into a joint venture, licensing agreement or exclusive marketing or other distribution agreement with respect to the Company’s products, other than in the ordinary course of business; (xi) permit the Company or any subsidiary to sell or issue any security of such subsidiary to any person or entity other than the Company; (xii) enter into, create, incur, assume or guarantee any indebtedness for borrowed money of any kind (other than indebtedness existing on the initial closing date and approved by Series B shareholders); (xiii) enter into, create, incur or assume any liens of any kind (other than certain permitted liens); (xiv) issue any common stock or common stock equivalents; (xv) increase the number of shares of the Company’s common stock that may be issued pursuant to options, warrants or rights to employees, directors, officers, consultants or advisors above the number of shares that were authorized for issuance under our 2001 Stock Incentive Plan, 2003 Non-Employee Director Stock Incentive Plan and 2009 Incentive Compensation Plan as of September 9, 2016.
Warrants. Each Series B-1 or B-2 related warrant is exercisable at $3.00 per share of common stock at any time on or after the date of issuance until the fifth anniversary of the respective issue date. The Company may, upon 30 days’ notice and so long as an effective registration statement regarding the underlying shares of common stock is in effect, issue a termination notice with respect to (i) each Class A-1 warrant on any trading day on which the market value of the common stock for each of the 15 previous trading days exceeded $7.50 per share and (ii) each Class A-2 warrant on any trading day on which the market value of the common stock for each of the 15 previous trading days exceeded $10.50 per share. All Class A-1 warrants were exercised for cash proceeds of $3,000,000 in 2011 and 500,000 of the Class A-2 warrants were exercised for cash proceeds of $1,500,000 in 2013. Subsequently, in January 2014, the remaining 500,000 Class A-2 warrants were exercised for cash proceeds of $1,500,000.
The fair value of the warrants issued in connection with the Series B-1 was $1,296,000 at the date of issuance based on the following assumptions: an expected life of 5 years, volatility of 118%, risk free interest rate of 1.79% and zero dividends. The Company allocated the gross proceeds based on the relative fair value of the Series B-1 and the related warrants, resulting in $1,105,000 of the proceeds being allocated to additional paid-in capital. The Company analyzed the Series B-1, post-allocation of the gross proceeds, and determined that there was no beneficial conversion feature at the date of issuance. The issuance costs of the Series B-1 and the amounts allocated to warrants were recorded as a reduction to the carrying value of the Series B-1 when issued, and are accreted to the redemption value of the Series B-1 through the earliest redemption date. Due to the redemption feature, the Company has presented the Series B-1 outside of permanent equity, in the mezzanine of the consolidated balance sheets at December 31, 2015. As noted above, the Series B-1 preferred was reclassified to permanent equity as of September 30, 2016 and forward and accretion was ended.
The fair value of the warrants issued during the year ended December 31, 2010 in connection with the Series B-2 was $4,148,000 at the dates of issuance based on the following assumptions: an expected life of 5 years, volatility of 126% to 129%, risk free interest rates of 2.27% to 2.43% and zero dividends. The fair value of the warrants issued during the year ended December 31, 2009 in connection with the Series B-2 was $5,333,000 at the dates of issuance based on the following assumptions: an expected life of 5 years, volatility of 124% to 127%, risk free interest rates of 1.98% to 2.70% and zero dividends. The Company allocated the gross proceeds based on the relative fair value of the Series B-2 and the related warrants, resulting in $1,028,000 and $1,732,000 of the proceeds being allocated to additional paid-in capital for the years ended December 31, 2010 and 2009, respectively. The issuance costs of the Series B-2 and the amounts allocated to warrants were recorded as a reduction to the carrying value of the Series B-2 when issued, and are accreted to the redemption value of the Series B-2 through the earliest redemption dates. Due to the redemption feature, the Company has presented the Series B-2 outside of permanent equity, in the mezzanine of the consolidated balance sheets at December 31, 2015. As noted above, the Series B-2 preferred was reclassified to permanent equity as of September 30, 2016 and forward and accretion was ended.
The Company analyzed the Series B-2, post-allocation of the gross proceeds, and determined that there was a beneficial conversion feature at the dates of issuance. Because the closing price of the common stock on the closing date was greater than the effective conversion price, $388,000 and $628,000 of the proceeds (limited to the allocation of the proceeds) during the years ended December 31, 2010 and 2009, respectively, were allocated to an embedded beneficial conversion feature of the Series B-2. The amount allocated to the beneficial conversion feature was recorded as a discount to the Series B-2 is being accreted, with such accretion being charged through the earliest redemption dates. As noted above, the Series B-2 preferred was reclassified to permanent equity as of September 30, 2016 and forward and accretion was ended.
All warrants issued in the Series B-3 transaction are exercisable at $3.00 per share of common stock at any time on or after the date of issuance until the seventh anniversary of the respective issue date.
The fair value of the warrants issued in connection with the September 22, 2016, Series B-3 was $2,262,000 at the date of issuance based on the following assumptions: an expected life of 7 years, volatility of 95%, risk free interest rate of 1.42% and zero dividends. The Company allocated the gross proceeds of $1.5 million based on the relative fair value of the Series B-3 and the related warrants, resulting in $890,000 of the proceeds being allocated to additional paid-in capital and $610,000 being allocated to the Series B-3.
The Company analyzed the September 22, 2016, Series B-3, post-allocation of the gross proceeds, and determined that there was a beneficial conversion feature at the dates of issuance. Because the closing price of the common stock on the closing date was greater than the effective conversion price, an embedded beneficial conversion feature of the Series B-3 amounting to $991,000 was charged to additional paid in capital and accumulated deficit.
The fair value of the warrants issued in connection with the December 23, 2016, Series B-3 was $658,000 at the date of issuance based on the following assumptions: an expected life of 7 years, volatility of 96%, risk free interest rate of 2.35% and zero dividends. The Company allocated the gross proceeds of $1.008 million based on the relative fair value of the Series B-3 and the related warrants, resulting in $394,000 of the proceeds being allocated to additional paid-in capital and $614,000 being allocated to the Series B-3.
The Company analyzed the December 23, 2016, Series B-3, post-allocation of the gross proceeds, and determined that there was a beneficial conversion feature at the dates of issuance. Because the closing price of the common stock on the closing date was greater than the effective conversion price, an embedded beneficial conversion feature of the Series B-3 amounting to $310,000 was charged to additional paid in capital and accumulated deficit.
Series C 6% Super Dividend Redeemable Convertible Preferred Stock
200% | before the second anniversary of the date of issuance; | |
250% | on or after the second anniversary of the date of issuance, but before the third anniversary of the date of issuance; | |
300% | on or after the third anniversary of the date of issuance, but before the fourth anniversary of the date of issuance; | |
350% | on or after the fourth anniversary of the date of issuance, but before the fifth anniversary of the date of issuance; | |
400% | on or after the fifth anniversary of the date of issuance, but before the sixth anniversary of the date of issuance; | |
450% | on or after the sixth anniversary of the date of issuance, but before the seventh anniversary of the date of issuance; | |
500% | on or after the seventh anniversary of the date of issuance, but before the eighth anniversary of the date of issuance; and | |
550% | on or after the eighth anniversary of the date of issuance, but before the ninth anniversary of the date of issuance. |
$8,335,000.
6. Warrants
| 8. | Warrants |
| ||||
| ||||
| ||||
| ||||
| ||||
| ||||
| ||||
| ||||
| ||||
| Warrants | Weighted average exercise price | |||||||
Outstanding at December 31, 2020 | 12,538,204 | $ | 4.22 | |||||
| Issued | — | |||||||
| Exercised | (1,180,240 | ) | 2.50 | |||||
| Canceled | (500,000 | ) | 5.00 | |||||
| Outstanding at December 31, 2021 | 10,857,964 | $ | 4.37 | |||||
| Issued | 700,000 | 4.43 | ||||||
| Exercised | — | |||||||
| Canceled | — | |||||||
Outstanding at December 31, 2022 | 11,557,964 | $ | 4.37 | |||||
Issued in Connection With | Number Issued | Exercise Price | Exercisable Date | Expiration Date | ||||||||||||
February 12, 2009 Series B-1 Transaction | ||||||||||||||||
$3.00 Investor Warrants — Class B | 1,200,000 | $ | 3.00 | February 12, 2009 | February 12, 2019 | |||||||||||
May 13, 2009 Series B-2 Transaction | ||||||||||||||||
$3.00 Investor Warrants — Class B | 600,000 | $ | 3.00 | May 13, 2009 | May 13, 2019 | |||||||||||
June 30, 2009 Series B-2 Transaction | ||||||||||||||||
$3.00 Investor Warrants — Class B | 333,333 | $ | 3.00 | June 30, 2009 | June 30, 2019 | |||||||||||
August 12, 2009 Series B-2 Transaction | ||||||||||||||||
$3.00 Investor Warrants — Class B | 200,000 | $ | 3.00 | August 12, 2009 | August 12, 2019 | |||||||||||
September 30, 2009 Series B-2 Transaction | ||||||||||||||||
$3.00 Investor Warrants — Class B | 216,666 | $ | 3.00 | September 30, 2009 | September 30, 2019 | |||||||||||
November 4, 2009 Series B-2 Transaction | ||||||||||||||||
$3.00 Investor Warrants — Class B | 206,666 | $ | 3.00 | November 4, 2009 | November 4, 2019 | |||||||||||
December 8, 2009 Series B-2 Transaction | ||||||||||||||||
$3.00 Investor Warrants — Class B | 216,667 | $ | 3.00 | December 8, 2009 | December 8, 2019 | |||||||||||
January 29, 2010 Series B-2 Transaction | ||||||||||||||||
$3.00 Investor Warrants — Class B | 216,667 | $ | 3.00 | January 29, 2010 | January 29, 2020 | |||||||||||
March 8, 2010 Series B-2 Transaction | ||||||||||||||||
$3.00 Investor Warrants — Class B | 223,334 | $ | 3.00 | March 8, 2010 | March 8, 2020 | |||||||||||
April 30, 2010 Series B-2 Transaction | ||||||||||||||||
$3.00 Investor Warrants — Class B | 206,667 | $ | 3.00 | April 30, 2010 | April 30, 2020 | |||||||||||
May 10, 2010 Series B-2 Transaction | ||||||||||||||||
$3.00 Investor Warrants — Class B | 380,000 | $ | 3.00 | May 10, 2010 | May 10, 2020 | |||||||||||
November 25, 2015 Offering Warrants | 3,571,425 | $ | 2.50 | May 25, 2016 | May 25, 2021 | |||||||||||
September 22, 2016 Series B-3 Transaction | ||||||||||||||||
$3.00 Investor Warrants | 698,158 | $ | 3.00 | September 22, 2016 | September 22, 2023 | |||||||||||
September 29, 2016 Series B-3 Transaction | ||||||||||||||||
$3.00 Investor Warrants | 846,100 | $ | 3.00 | September 29, 2016 | September 29, 2023 | |||||||||||
December 22, 2016 Private placement warrants | 1,466,204 | $ | 5.00 | December 22, 2016 | December 23, 2023 | |||||||||||
December 23, 2016 Series B-3 Transaction | ||||||||||||||||
$3.00 Investor Warrants | 924,780 | $ | 3.00 | December 23, 2016 | December 23, 2023 | |||||||||||
December 28, 2016 Private placement warrants | 644,468 | $ | 5.00 | December 28, 2016 | December 28, 2023 | |||||||||||
February 27, 2017 Private placement warrants | 76,776 | $ | 5.00 | February 27, 2017 | February 27, 2024 | |||||||||||
2017 Warrants issued for services | 1,867 | $ | 5.00 | Various dates in 2017 | Various dates in 2024 | |||||||||||
December 19, 2017 Line of credit warrants | 1,000,000 | $ | 5.00 | December 19, 2017 | December 19, 2024 | |||||||||||
|
| |||||||||||||||
Total outstanding warrants | 13,229,778 | |||||||||||||||
|
| |||||||||||||||
Offering Warrants
On March 28, 2012, the Company sold and issued 1,333,361 Units (2,666,722 shares of common stock and related $5.63 warrants to purchase 1,333,361 shares of common stock) for gross proceeds of $12.0 million (net cash proceeds of $10,403,000 after the underwriting discount and offering costs). The warrants were valued at $4,445,000 as of the issuance date of March 28, 2012, using the closing price of $4.20, a life of
5 years, a volatility of 119% and a risk free interest rate of 1.05%. Based upon the Company’s analysis of the criteria contained in ASC Topic 815-40, “Derivatives and Hedging — Contracts in Entity’s Own Equity” the Company has determined that warrants issued in connection with this financing transaction were not derivative liabilities and therefore, were recorded as additional paid-in capital. The remaining balance of 1,317,161 of these warrants expired on March 28, 2017.
| Issued in Connection With | Number Issued | Exercise Price | Exercisable Date | Expiration Date | ||||||
February 12, 2009 Series B-1 Transaction $3.00 Investor Warrants — Class B | 1,200,000 | $ | 3.00 | February 12, 2009 | February 12, 2024 | |||||
May 13, 2009 Series B-2 Transaction $3.00 Investor Warrants — Class B | 600,000 | $ | 3.00 | May 13, 2009 | May 13, 2024 | |||||
June 30, 2009 Series B-2 Transaction $3.00 Investor Warrants — Class B | 333,333 | $ | 3.00 | June 30, 2009 | June 30, 2024 | |||||
August 12, 2009 Series B-2 Transaction $3.00 Investor Warrants — Class B | 200,000 | $ | 3.00 | August 12, 2009 | August 12, 2024 | |||||
September 30, 2009 Series B-2 Transaction $3.00 Investor Warrants — Class B | 216,666 | $ | 3.00 | September 30, 2009 | September 30, 2024 | |||||
November 4, 2009 Series B-2 Transaction $3.00 Investor Warrants — Class B | 106,666 | $ | 3.00 | November 4, 2009 | November 4, 2024 | |||||
December 8, 2009 Series B-2 Transaction $3.00 Investor Warrants — Class B | 133,143 | $ | 3.00 | December 8, 2009 | December 8, 2024 | |||||
January 29, 2010 Series B-2 Transaction $3.00 Investor Warrants — Class B | 216,667 | $ | 3.00 | January 29, 2010 | January 29, 2025 | |||||
March 8, 2010 Series B-2 Transaction $3.00 Investor Warrants — Class B | 223,334 | $ | 3.00 | March 8, 2010 | March 8, 2025 | |||||
April 30, 2010 Series B-2 Transaction $3.00 Investor Warrants — Class B | 204,192 | $ | 3.00 | April 30, 2010 | April 30, 2025 | |||||
May 10, 2010 Series B-2 Transaction $3.00 Investor Warrants — Class B | 143,166 | $ | 3.00 | May 10, 2010 | May 10, 2025 | |||||
September 22, 2016 Series B-3 Transaction $3.00 Investor Warrants | 698,158 | $ | 3.00 | September 22, 2016 | September 22, 2023 | |||||
September 29, 2016 Series B-3 Transaction $3.00 Investor Warrants | 846,100 | $ | 3.00 | September 29, 2016 | September 29, 2023 | |||||
December 22, 2016 Private placement warrants | 1,466,204 | $ | 5.00 | December 22, 2016 | December 23, 2023 | |||||
December 23, 2016 Series B-3 Transaction $3.00 Investor Warrants | 924,780 | $ | 3.00 | December 23, 2016 | December 23, 2023 | |||||
December 28, 2016 Private placement warrants | 644,468 | $ | 5.00 | December 28, 2016 | December 28, 2023 | |||||
February 27, 2017 Private placement warrants | 76,776 | $ | 5.00 | February 27, 2017 | February 27, 2024 | |||||
| 2018 and 2017 Warrants issued for services | 2,157 | $ | 5.00 | Various dates in 2018 and 2017 | Various dates in 2025 and 2024 | |||||
May 23, 2019 Rights offering warrants | 2,622,154 | $ | 7.00 | May 23, 2019 | May 23, 2026 | |||||
July 22, 2022 Warrants issued in connection of related party line of credit | 500,000 | $ | 5.00 | July 22, 2022 | July 31, 2029 | |||||
December 19, 2022 Warrants issued for draw on related party line of credit | 200,000 | $ | 3.00 | December 19, 2022 | July 31, 2029 | |||||
| Total outstanding warrants | 11,557,964 | |||||||||
| Stock-Based Compensation |
that date remain outstanding for their legal term. Research and development General and administrative Total stock-based compensation expense warrants and deferred stock units: Risk-free interest rate Expected life of the options Expected volatility of the underlying stock Expected dividend rate2017,2022, the Company has a stock-based compensation plan where the Company’s common stock has been made available for equity-based incentive grants as part of the Company’s compensation programs. In February 2009,December 2019, the Company adopted the 2019 Omnibus Equity Incentive Plan (the “2019 Plan”) which provided originally for the issuance of up to 4,000,000 shares of the Company’s common stock, subsequently increased to 7,000,000 in December 2021, in the form of options, stock appreciation rights, restricted stock and other stock-based awards to employees, officers, directors, consultants and other eligible persons. At December 31, 2022, 1,966,279 shares were available for future grant under the 2019 Plan. Also, the Company previously had the 2009 Incentive Compensation Plan (the “2009 Plan”) which, originallyafter amendments, provided for the issuance of up to 3,333,334, which was subsequently increased to 4,733,334 in May 2014 and to 5,733,334 in December 2017,6,733,334 shares of the Company’s common stock in the form of options, stock appreciation rights, restricted stock and other stock-based awards to employees, officers, directors, consultants and other eligible persons. At December 31, 2017, 464,134 shares were available for future grant underProvisions of the 2009 Plan.In addition, the Company has awarded 1,477,379 non-plan stock optionPlan stipulated that no grants could be made after February 2019; however, grants made prior to employees and non-employees. These non-plan grants have vesting periods and expiration dates similar to those options granted under the Incentive Plans. At December 31, 2017, 1,416,669 non-plan grants were outstanding.and common stock warrants: Year Ended December 31, 2017 2016 $ 521 $ 831 580 1,648 $ 1,101 $ 2,479 2022 2021 Research and development General and administrative Total stock-based compensation expense 2017 2016 2.05 % 1.49 % 5.5 years 6 years 103 % 96 % 0 % 0 % 2022 2021 Risk-free interest rate Expected life of the options 5.7 years 6.0 years Expected volatility of the underlying stock Expected dividend rate 2017,2022, the Company does not anticipate any option awards will be forfeited in the calculation of compensation expense due to the limited number of employees that receive stock option grants and the Company’s historical employee turnover.turnover; however, any forfeitures will be accounted for as incurred.
| Number of Shares | Weighted Average Exercise Price | Weighted Average Remaining Contractual Life (in years) | Aggregate Intrinsic Value (in thousands) | |||||||||||||
Outstanding, December 31, 2015 | 3,342,325 | $ | 5.70 | |||||||||||||
Granted | 1,434,750 | 0.97 | ||||||||||||||
Forfeited/Cancelled | (120,187 | ) | 3.41 | |||||||||||||
Exercised | — | — | ||||||||||||||
|
|
|
| |||||||||||||
Outstanding, December 31, 2016 | 4,656,888 | $ | 4.30 | |||||||||||||
Granted | 498,375 | 2.39 | ||||||||||||||
Forfeited/Cancelled | — | — | ||||||||||||||
Exercised | — | — | ||||||||||||||
|
|
|
|
|
|
|
| |||||||||
Outstanding, December 31, 2017 | 5,155,263 | $ | 4.11 | 6.23 | $ | 4,824 | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Exercisable, December 31, 2017 | 4,526,679 | $ | 4.37 | 5.77 | $ | 4,175 | ||||||||||
Number of Shares | Weighted Average Exercise Price | Weighted Average Remaining Contractual Life (in years) | Aggregate Intrinsic Value (in thousands) | |||||||||||||
| Outstanding, December 31, 2020 | 3,987,575 | $ | 4.29 | |||||||||||||
| Granted | 2,660,000 | 2.39 | ||||||||||||||
| Forfeited/Cancelled | (1,603,073 | ) | 5.31 | |||||||||||||
| Exercised | (148,941 | ) | 2.35 | |||||||||||||
| Outstanding, December 31, 2021 | 4,895,561 | $ | 3.14 | |||||||||||||
| Granted | 1,070,000 | 1.75 | ||||||||||||||
| Forfeited/Cancelled | (220,000 | ) | 2.68 | |||||||||||||
| Exercised | — | — | ||||||||||||||
| Outstanding, December 31, 2022 | 5,745,561 | $ | 2.90 | 7.38 | $ | 30 | ||||||||||
| Exercisable, December 31, 2022 | 3,551,395 | $ | 3.35 | 6.71 | $ | 29 | ||||||||||
There were no
2022 and 2021 was $0 and $532,447, respectively.
| Options Outstanding | Options Exercisable | |||||||||||||||||||
Exercise Price (Range) | Number of Shares | Weighted Average Remaining Contractual Life | Weighted Average Exercise Price | Number of Shares | Weighted Average Exercise Price | |||||||||||||||
| (in years) | ||||||||||||||||||||
$0.87 – 1.00 | 1,157,250 | 8.9 | $ | 0.88 | 1,157,250 | $ | 0.88 | |||||||||||||
$1.37 – 1.83 | 341,668 | 7.2 | 1.45 | 266,522 | 1.48 | |||||||||||||||
$2.32 – 2.93 | 1,308,375 | 6.9 | 2.32 | 759,999 | 2.25 | |||||||||||||||
$3.45 – 3.97 | 364,517 | 6.8 | 3.50 | 359,455 | 3.50 | |||||||||||||||
$4.41 – 7.80 | 1,666,953 | 3.5 | 6.69 | 1,666,953 | 6.69 | |||||||||||||||
$13.38 | 316,500 | 6.0 | 13.38 | 316,500 | 13.38 | |||||||||||||||
|
|
|
| |||||||||||||||||
| 5,155,263 | 6.2 | $ | 4.11 | 4,526,679 | $ | 4.37 | ||||||||||||||
|
|
|
| |||||||||||||||||
| Options Outstanding | Options Exercisable | ||||||||||||||||||||
Exercise Price (Range) | Number of Shares | Weighted Average Remaining Contractual Life | Weighted Average Exercise Price | Number of Shares | Weighted Average Exercise Price | ||||||||||||||||
| (in years) | |||||||||||||||||||||
$0.87 – 1.00 | 120,500 | 3.96 | $ | 0.89 | 120,500 | $ | 0.89 | ||||||||||||||
$1.01 – 3.00 | 4,364,521 | 8.11 | 2.19 | 2,300,356 | 2.31 | ||||||||||||||||
$3.01 – 5.00 | 903,040 | 5.85 | 4.14 | 773,039 | 4.31 | ||||||||||||||||
$5.01 – 8.00 | 220,000 | 5.11 | 5.92 | 220,000 | 5.92 | ||||||||||||||||
$8.01 – 13.38 | 137,500 | 1.06 | 13.38 | 137,500 | 13.38 | ||||||||||||||||
5,745,561 | 7.38 | $ | 2.90 | 3,551,395 | $ | 3.35 | |||||||||||||||
On
On April 8, 2015, the Company granted 177,618 shares of restricted stock to non-employee directors in exchange for cancelation of 222,615 stock options. As the exchange was made at fair value, there was no additional non-cash compensation expense recorded in accordance with FASB ASC 718-20. Additionally, on April 8, 2015, the Company granted 71,378 shares of restricted stock to2021, one non-employee director representing $236,975 of non-cash compensation expense which was recorded on a straight-line basis from grant date to December 15, 2016, when the restricted shares vested in full. Also, in April and May 2015, the Company granted a total of 7,587 shares of restricted stock to four non-employee directors for service as committee chairs or lead independent director representing $23,500 of non-cash compensation expense which was be recorded on a straight-line basis from grant date to December 15, 2016, when the restricted shares vested in full.
In December 2017, two directors elected to take a restricted stock grantsgrant in lieu of cash retainers for 2018.2021. A total of 37,65716,588 shares of restricted stock valued at approximately $90,000 will be$35,000 is being amortized to expense on a straight-line basis until December 14, 201831, 2021 when the stock vestsvested in full.
On
| 10. | Convertible Line of Credit – Related Party |
2029.
| Loss Per Share |
net loss per share does not assume the issuance of common shares thatstock as they would have had an anti-dilutive effect on net loss per share.
| Year Ended December 31, | ||||||||
| (in thousands, except per share amounts) | ||||||||
| 2017 | 2016 | |||||||
Net loss | $ | (16,235 | ) | $ | (21,436 | ) | ||
Preferred stock dividends | (1,232 | ) | (741 | ) | ||||
Preferred stock accretion | — | (173 | ) | |||||
|
|
|
| |||||
Net loss applicable to common stockholders | $ | (17,467 | ) | $ | (22,350 | ) | ||
|
|
|
| |||||
Basic and diluted net loss per share | $ | (0.49 | ) | $ | (0.76 | ) | ||
Shares used in computing basic and diluted net loss per share | 35,521 | 29,216 | ||||||
Dilutive
| Year Ended December 31, | ||||||||
| 2017 (Shares) | 2016 (Shares) | |||||||
Warrants to purchase shares of common stock | 13,229,778 | 13,488,296 | ||||||
Options to purchase shares of common stock | 5,155,263 | 4,656,888 | ||||||
Shares of common stock issuable upon conversion preferred stock | 4,312,282 | 4,312,282 | ||||||
|
|
|
| |||||
| 22,697,323 | 22,457,466 | |||||||
|
|
|
| |||||
Year Ended December 31, | ||||||||
2022 (Shares) | 2021 (Shares) | |||||||
| Warrants to purchase shares of common stock | 11,557,964 | 10,857,964 | ||||||
| Options to purchase shares of common stock | 5,745,561 | 4,895,561 | ||||||
| Shares of common stock issuable upon conversion of convertible notes payable – related party | 5,815,514 | 5,214,806 | ||||||
| Shares of common stock issuable upon conversion of convertible line of credit – related party | 3,341,003 | - | ||||||
| Shares of common stock issuable upon conversion preferred stock | 503,340 | 510,424 | ||||||
| 26,963,382 | 21,478,755 | |||||||
| Commitments and Contingencies |
Year ended December 31, 2018 Total In September 2012, theentered into anhas one operating lease for its office space in Norcross, GAwhich was amended effective March 1, 2022 for a term of twenty-six38 months beginning on October 1, 2012 and ending November 30, 2014 at a rate of approximately $3,000 per month. In June 2014, the Company signed an amendment to the lease extending the term through November 30, 2017 with a base monthly rental of approximately $3,300 through the extended term.no residual value guarantees or material restrictive covenants. The Company signed an additional amendment in 2017 to extend the term through December 31, 2018 with a base rental of approximately $4,000 per month. The originalamended lease provided for free rent for the first twosix and one-half months of the lease and required acontinues the security deposit of $6,000. In addition to base rental payments included in the contractual obligations table above,below, the Company is responsible for our pro-rata share of the operating expenses for the building.Rent expense under this operating Our lease was $49,000 and $50,000cost for the years ended December 31, 20172022 and 2016, respectively. Future minimum payments under this2021 was $43,000 and $44,000, respectively, and is included in general and administrative expenses. As of December 31, 2022, the right to use lease asset consisted of $86,000 and is included in other assets. Also, at December 31, 2022, current lease liability of $40,000 is included in accrued expenses and the noncurrent lease liability of $66,000 is included in other long term liabilities. The Company renewed its existing office space lease effective in February 2022 for 38 months at substantially the same terms.2017 are as follows (in thousands): 48 $ 48 Shareholder Class Actions and Derivative LawsuitsOn August 1 and 25, 2014, persons claiming to be Galectin shareholders filed putative shareholder derivative complaints2022 in thousands:2023 2024 51 2025 18 Total Less imputed interest Present value of lease liability Nevada District Court, seeking recovery on behalfpresent value of the Company against certain
of the Company’s directors and officers. On September 10, 2014, the Nevada District Court entered an order consolidating the two cases, relieving the defendants of any obligation to respond to the initial complaints, and providing that defendants may respond to a consolidated complaint to be filed by the plaintiffs. On January 5, 2015, the Nevada District Court granted Defendants’ motion to transfer the consolidated putative derivative litigation to the United States District Court for the Northern District of Georgia (hereinafter referred to as the “Georgia Federal Derivative Action.”). The plaintiffs filed a consolidated complaint on February 27, 2015. On April 6, 2015, the Company and defendants filed motions to dismiss the consolidated complaint. Rather than respond to those motions, the plaintiffs sought and obtained leave to file an amended complaint. Plaintiffs filed their amended complaint (the “Complaint”) on May 26, 2015. The Complaint alleges that certain of the Company’s directors and officers (the “Derivative Action Individual Defendants”) breached their fiduciary duties to the Company’s shareholders by causing or permitting the Company to make allegedly false and misleading public statements concerning the Company’s financial and business prospects. The Complaint also alleges that the Derivative Action Individual Defendants violated the federal securities laws by allegedly making false or misleading statements of material fact in the Company’s proxy filings, committed waste of corporate assets, were unjustly enriched, and that certain defendants breached their fiduciary duties through allegedly improper sales of Galectin stock. In addition, the Complaint alleges that the Derivative Action Individual Defendants and one of the Company’s shareholders aided and abetted the alleged breaches of fiduciary duties. The Complaint seeks unspecified monetary damages on behalf of the Company, corporate governance reforms, disgorgement of profits, benefits and compensation by the defendants, costs, and attorneys’ and experts’ fees. The Company and defendants filed motions to dismiss the Complaint on July 8, 2015. On December 30, 2015, the United States District Court for the Northern District of Georgia dismissed the Georgia Federal Derivative Action with prejudice and entered a final judgment in favor of the defendants. Plaintiffs filed a notice of appeal seeking review of the dismissal order and final judgment. On July 7, 2016, the United States Court of Appeals for the Eleventh Circuit dismissed the appeal as the Plaintiffs failed to timely file their appeal brief. In September 2016, the Board received a demand letter from one of the plaintiffs in the Georgia Federal Derivative Action. The demand letter, among other things, requests that the Board investigate the conduct alleged in the Complaint and implement certain remedial measures purportedly designed to address the alleged conduct. It is expected that the Board will consider the demand letter in due course and in light of the related pending shareholder litigation described herein.
On August 29, 2014, another alleged Galectin shareholder filed a putative shareholder derivative complaint in state court in Las Vegas, Nevada, seeking recovery on behalf of the Company against the same Galectin directors and officers who are named as defendants in the derivative litigation pending in the Georgia Federal Derivative Action. The plaintiff in the Nevada action subsequently filed first and second amended complaints. The second amended complaint alleges claims for breach of fiduciary duties, unjust enrichment, and waste of corporate assets, based on allegations that are substantially similar to those asserted in the Georgia Federal Derivative Action (except that the Nevada action does not allege violations of the federal securities laws and does not assert any claim against the Galectin shareholder named as a defendant in the Georgia Federal Derivative Action), and seeks unspecified monetary damages on behalf of the Company, corporate governance reforms, disgorgement of profits, benefits and compensation by the defendants, costs, and attorneys’ and experts’ fees. The Company and defendants filed motions to dismiss the second amended complaint on April 22, 2015. On April 29, 2015, the plaintiffs in the Georgia Federal Derivative Action (the “Intervenor Plaintiffs”) filed a motion to intervene in the Nevada action which, among other things, raised questions regarding the Nevada plaintiff’s standing. Thereafter, the Nevada plaintiff filed a motion to join additional plaintiffs. At a hearing held on June 11, 2015, the Nevada court: (i) granted the Intervenor Plaintiffs’ motion to intervene; (ii) directed the Intervenor Plaintiffs to file a complaint in intervention; (iii) directed the Nevada plaintiff to file a motion for leave to file a further amended complaint to add additional plaintiffs; (iv) stated that the defendants’ motions to dismiss the second amended complaint were denied “at this point;” (v) ordered the Nevada action stayed until December 11 , 2015; and (vi) directed the parties to submit a status report on December 11, 2015, updating the court on the progress and status of the Georgia Federal Derivative Action. On July 9, 2015, pursuant to the Nevada State Court’s instruction, the Intervenor Plaintiffs filed a complaint-in-intervention in Nevada State Court, asserting similar claims to the
ones they alleged in the Georgia Federal Derivative Action described above. On December 11, 2015, further to the Nevada State Court’s instruction, the parties submitted status reports detailing the status of the Georgia Federal Derivative Action. On January 5, 2016, the Nevada State Court held a status conference during which the dismissal of the Georgia Federal Derivative Actionlease payments was discussed. Subsequent to that conference, on January 19, 2016, the defendants filed a motion to dismiss the Nevada State Court litigation based on the dismissal of the similar Georgia Federal Derivative Action, among other grounds. Following full briefing and a hearing on March 3, 2016, the Nevada State Court granted dismissal of the Nevada State Court litigation. Notice of Entry of the Nevada State Court’s order dismissing the Nevada State Court litigation was docketed on June 21, 2016. The Nevada plaintiff and Intervenor Plaintiffs (“Appellants”) filed notices of appeal seeking review of the Nevada State Court’s order and judgment dismissing the claims. The appeal is now fully briefed and awaiting a decision from the Nevada Supreme Court.
Estimating an amount or range of possible losses resulting from litigation proceedings is inherently difficult and requires an extensive degree of judgment, particularly where the matters involve indeterminate claims for monetary damages, are in the early stages of the proceedings, and are subject to appeal. In addition, because most legal proceedings are resolved over extended periods of time, potential losses are subject to change due to, among other things, new developments, changes in legal strategy, the outcome of intermediate procedural and substantive rulings and other parties’ settlement posture and their evaluation of the strength or weakness of their case against us. For these reasons, we are currently unable to predict the ultimate timing or outcome of, or reasonably estimate the possible losses or a range of possible losses resulting from, the matters described above. Based on information currently available, the Company does not believe that any reasonably possible losses arising from currently pending legal matters will be material to the Company’s results of operations or financial condition. However, in light of the inherent uncertainties involved in such matters, an adverse outcome in one or more of these matters could materially and adversely affect the Company’s financial condition, results of operations or cash flows in any particular reporting period.
Other 11%.
| Galectin Sciences LLC |
quarter of 2014 expenses of the LLC.LLC and an additional $2,306,000 in total from 2015 through 2020. The Company contributed $201,000, $659,000$213,000 and $687,000$226,000 for the LLC expenses (recorded in 2017, 2016research and 2015, respectively,development expenses) in 2022 and 2021, and SBH contributed $73,000$35,000 in 2019 and $50,000a total of $123,000 in 2017 and 2016, respectively. As of December 31, 2017,2022, the Company’s ownership percentage in the LLC was 79.6%85.3%. The Company accounts for the interest in the LLC as a consolidated, less than wholly owned subsidiary. Because the LLC’s equity is immaterial, the value of the non-controlling interest is also deemed to be immaterial. The Company’s portion of the LLC’s net loss for 2014, prior to the change in accounting discussed previously, was $400,000, which includes the Company’s proportionate share of the non-cash charge associated with the contributed IPR&D of $200,000.
| Income Taxes |
On December 22, 2017, the Tax Cuts and Jobs Act (2017 Tax Act) was enacted. The 2017 Tax Act includes a number of changes to existing U.S. tax laws that impact the Company, most notably a reduction of the U.S. corporate tax rate from 34% to 21%, for tax years beginning after December 31, 2017. The 2017 Tax Act also provides for the implementation of a territorial tax system, a one-time transition tax on certain foreign earnings, the acceleration of depreciation for certain assets placed into service after September 27, 2017 and other prospective changes beginning in 2018, including repeal of the domestic manufacturing deduction, acceleration of tax revenue recognition, capitalization of research and development expenditures, additional limitations on executive compensation and limitations on the deductibility of interest.
Pursuant to the SEC Staff Accounting Bulletin No. 118, Income Tax Accounting Implications of the Tax Cuts and Jobs Act, the Company has not finalized its accounting for the income tax effects of the 2017 Tax Act. This includes a provisional amount related to the re-measurement of deferred tax assets based on the rates at which they are expected to reverse in the future, which is generally 21% plus the applicable state tax rate, with a corresponding change to the valuation allowance as of December 31, 2017. The impact of the 2017 Tax Act may differ from this estimate during the one-year measurement period due to, among other things, further refinement of the Company’s calculation, changes in interpretations and assumptions the Company has made, additional guidance that may be issued and actions the Company may take as a result of the 2017 Tax Act.
| 2017 | 2016 | |||||||
| (in thousands) | ||||||||
Operating loss carryforwards | $ | 34,173 | $ | 44,219 | ||||
Tax credit carryforwards | 1,195 | 1,195 | ||||||
Other temporary differences | 4,064 | 5,707 | ||||||
|
|
|
| |||||
| 39,432 | 51,121 | |||||||
Less valuation allowance | (39,432 | ) | (51,121 | ) | ||||
|
|
|
| |||||
Net deferred tax asset | $ | — | $ | — | ||||
|
|
|
| |||||
| 2022 | 2021 | |||||||
| (in thousands) | ||||||||
| Operating loss carryforwards | $ | 53,119 | $ | 54,949 | ||||
| Tax credit carryforwards | 3,558 | 3,720 | ||||||
| Other temporary differences | 9,168 | 1,652 | ||||||
| 65,845 | 60,321 | |||||||
| Less valuation allowance | (65,845 | ) | (60,321 | ) | ||||
| Net deferred tax asset | $ | — | $ | — | ||||
| 2017 | 2016 | |||||||
Tax benefit at U.S. statutory rates | (34% | ) | (34% | ) | ||||
State tax benefit | (3.8% | ) | (3.7% | ) | ||||
Permanent differences | 1.7% | 2.3% | ||||||
Impact of the 2017 Tax Act | 113.1% | — | ||||||
Other | (4.9% | ) | — | |||||
Expiring state NOL’s | — | 1.6% | ||||||
Changes in valuation allowance | (72.1% | ) | 33.8% | |||||
|
|
|
| |||||
| 0% | 0% | |||||||
|
|
|
| |||||
| 2022 | 2021 | |||||||
| Tax benefit at U.S. statutory rates | (21 | %) | (21 | %) | ||||
| State tax benefit | 4.2 | % | (4.7 | %) | ||||
| Permanent differences | 0.5 | % | 0.5 | % | ||||
| Other | (1.4 | %) | (0.1 | %) | ||||
| Changes in valuation allowance | 17.7 | % | 25.3 | % | ||||
| 0 | % | 0 | % | |||||
F-27