GALECTIN THERAPEUTICS INC 10-K

Item 9A. Controls and Procedures (a) Evaluation of Disclosure Controls and Procedures As required by Rule 13a-15 under the Securities Exchange Act of 1934, (the “Exchange Act”) as of the end of the period covered by this Annual Report, we carried out an evaluation, under the supervision and with the participation of our Chief Executive Officer and our Chief Financial Officer, of the effectiveness of our disclosure controls and procedures as of December 31, 2022. Our management has concluded, based on their evaluation, that our disclosure controls and procedures were effective as of December 31, 2022 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. (b) Management’s Annual Report on Internal Control Over Financial Reporting Management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting. As defined in Rule 13a-15(f) under the Exchange Act, internal control over financial reporting is a process designed by, or under the supervision of, a company’s principal executive and principal financial officers and effected by a company’s board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. It includes those policies and procedures that: a) Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Company; b) Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of a company are being made only in accordance with authorizations of management and the board of directors of the Company; and c) Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on its financial statements. Because of the inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. The Company’s management has used the criteria established in “Internal Control-Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), or COSO, to evaluate the effectiveness of the Company’s internal control over financial reporting. Management has selected the COSO 2013 framework for its evaluation as it is a control framework recognized by the SEC and the Public Company Accounting Oversight Board, that is free from bias, permits reasonably consistent qualitative and quantitative measurement of the Company’s internal controls, is sufficiently complete so that relevant controls are not omitted, and is relevant to an evaluation of internal controls over financial reporting. Management conducted an evaluation of internal controls based on the COSO 2013 framework. The evaluation included a full scale, documented risk assessment, based on the principles described in the framework, and included identification of key controls. Management completed documentation of its testing to verify the effectiveness of the key controls. Based on the evaluation, management concluded that our internal control over financial reporting was effective as of December 31, 2022. (c) Changes in Internal Control Over Financial Reporting Except as follows, there was no change in our internal control over financial reporting that occurred during the fourth quarter of 2022 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. During the course of preparing and reviewing the Company’s interim financial statements for the period ended September 30, 2022, we identified a computational error in an accrual relating to research and development costs. This error was corrected in the financial statements as of and for the period ended September 30, 2022. We determined that this deficiency constitutes a "material weakness" in our internal control over financial reporting. We have advised our audit committee of this deficiency in our internal control over financial reporting, and the fact that this deficiency constitutes a "material weakness." A material weakness in internal control over financial reporting is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis by our internal controls. We performed additional procedures during the fourth quarter of 2022 to remediate this material weakness. Specifically, we have implemented additional reviews of research and development accruals and have enhanced documentation of processes. Management believes that these efforts have effectively remediated the material weakness. 26 Index Item 9B. Other Information None. Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections Not applicable. 27 Index PART III Item 10. Directors, Executive Officers and Corporate Governance Each of our directors is elected annually and holds office until his or her successor has been elected and qualified or until the earlier of his or her death, resignation or removal. Our board of directors currently consists of eleven members, all of whom were elected at our 2022 Annual Meeting of Stockholders. The following table sets for the certain biographical information about our directors as of February 28, 2023, and the qualifications, experiences and skills considered in determining that each such person should serve as a director. 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 Gilbert F. Amelio, Ph.D ., a director since February 2009, began his career at Bell Labs in Murray Hill, New Jersey. Since January 1, 2012, Dr. Amelio has provided consulting and advisory services through GFA, LLC, a California limited liability company. He was a Senior Partner of Sienna Ventures (a privately held venture capital firm in Sausalito, California) from April 2001 until the fund closed per plan on December 31, 2011. Dr. Amelio was Chairman and Chief Executive Officer of Jazz Technologies, Inc. (now a wholly owned subsidiary of Tower Semiconductor Ltd., an independent specialty wafer foundry) from August 2005 until his retirement in September 2008 (when he was named Chairman Emeritus). Dr. Amelio was Chairman and Chief Executive Officer of Beneventure Capital, LLC (a full-service venture capital firm in San Francisco, California) from 1999 to 2005 and was Principal of Aircraft Ventures, LLC (a consulting firm in Newport Beach, California) from April 1997 to December 2004. Dr. Amelio was elected a Director of AT&T in February 2001 and had previously served as an Advisory Director of AT&T (then known as SBC Communications Inc.) from April 1997 to February 2001. He served as a Director of Pacific Telesis Group from 1995 until the company was acquired by AT&T in 1997. Prior to 1997, he served as Chairman, President and CEO of National Semiconductor (1991-1996) and Apple Computer (1996-1997). We believe Dr. Amelio’s qualifications to sit on our Board of Directors include his executive leadership and management experience, as well as his extensive experience with global companies, his financial expertise and his years of experience providing strategic advisory services to organizations. James C. Czirr , has served as a director pursuant to contractual rights set forth in certain warrants to purchase Common Stock that 10X Fund L.P. holds since February 2009, served as Chairman of the Board from February 2009 until January 2016 and Executive Chairman from February 2010 until January 2016, is a co-founder of 10X Fund, L.P. and is a managing member of 10X Capital Management LLC, the general partner of 10X Fund, L.P. Mr. Czirr was a co-founder of Galectin Therapeutics in July 2000. Mr. Czirr was instrumental in the early-stage development of Safe Science Inc., a developer of anti-cancer drugs; served from 2005 to 2008 as Chief Executive Officer of Minerva Biotechnologies Corporation, a developer of nano particle bio chips to determine the cause of solid tumors. Mr. Czirr is an early stage investor and on the board of directors of Gold Express a private gold mining company with multiple exploration properties in the U.S. Mr. Czirr received a B.B.A. degree from the University of Michigan. We believe that Mr. Czirr is best situated to sit on our Board because he is the director who was a co-founder of the Company and is familiar with our business and industry. Kary Eldred, is a director since 2018 and Chief Investment Officer for the Living Stones Foundation since July 2015 and has been an active private equity investor for many years. In these capacities, he serves and has served on a number of corporate boards of companies with potential for and driving toward initial public offerings and is currently serving as a board member in Buy It Installed (since 2017), Babywise and Wise King Media (since 2015). Kary Eldred also served on the board and audit committee of GCT Semiconductor. From January 2011 through October 2014, Mr. Eldred was CEO & Chairman of Altadona, S.A. a software integration company based in Europe and prior to that was a principal in Parakletos Ventures, an institutional venture capital firm with several investments in companies that went on to be acquired or become publicly listed on different exchanges around the world including the NASDAQ, KOSDAQ and the GEM market. Mr. Eldred has an Executive MBA from IE Business School and a BA in Foreign Service from Baylor University. We believe that Mr. Eldred’s qualifications to sit on our board include his experience serving on boards of several companies and experience in venture capital and private equity investing. Kevin D. Freeman, a director since May 2011, holds the Chartered Financial Analyst designation and is Chief Executive Officer of Cross Consulting and Services, LLC, an investment advisory and consulting firm founded in 2004. He is also author of a New York Times best-selling book about the stock market and economy and the host of a television program (Economic War Room with Kevin Freeman) that airs on BlazeTV. Formerly he was Chairman of Separate Account Solutions, Inc. and held several offices at Franklin Templeton Investment Services from 1991 to 2000. He holds a B.S. in business administration from University of Tulsa, Tulsa, Oklahoma. We believe Mr. Freeman’s qualifications to sit on our Board of Directors includes his extensive financial expertise and his years of experience providing financial advisory services. 28 Index Joel Lewis , a director since 2017, became our President and Chief Executive Officer on September 2, 2020. Previously, he was the Managing Director of Shareholder Services at Uline, Inc. (a distributor of shipping, packaging and industrial supplies), a position he held from 2007 through 2019. Mr. Lewis is a financial executive with over 26 years of experience started his career in public accounting in 1992. Prior to his employment with Uline Inc., Mr. Lewis served as a Tax and Accounting Manager for Century America LLC from 2001 to 2006 and a Tax Manager for Deloitte & Touche from 1998 to 2001. After spending a decade in public accounting where he specialized in both financial reporting and taxation, Mr. Lewis migrated to privately held companies focusing on high-net-worth family businesses. Mr. Lewis has a wide range of expertise including working in a variety of industries and disciplines including taxation, restructuring, acquisition and private equity ventures. Mr. Lewis is a registered CPA in the state of Illinois. He holds a B.S. in Accountancy from the University of Illinois and a Masters in Taxation from DePaul University. We believe that Mr. Lewis’ qualifications to sit on our Board include his business and financial expertise and his service as a board observer on our Board during 2017. Gilbert S. Omenn, M.D., Ph.D. , a director since September 2014, served on the board of directors of Amgen Inc. for 27 years and of Rohm & Haas Company for 22 years. He currently serves on the boards of Oncofusion Therapeutics and MedsynBio LLC of Ann Arbor, MI. Dr. Omenn is the Harold T. Shapiro Distinguished University Professor of Computational Medicine & Bioinformatics, Internal Medicine, Human Genetics, and Public Health and Director of the university-wide Center for Computational Medicine and Bioinformatics at the University of Michigan. Dr. Omenn served as executive vice president for medical affairs and as chief executive officer of the University of Michigan Health System from 1997 to 2002. Prior, he was dean of the School of Public Health and Community Medicine and professor of medicine and a Howard Hughes Medical Institute investigator at the University of Washington and Member of the Fred Hutchinson Cancer Research Center. Earlier he was Associate Director of the White House Office of Science and Technology Policy and of the Office of Management and Budget. He is the author of 600 research papers and scientific reviews and author/editor of 18 books. Dr. Omenn received his B.A. summa cum laude from Princeton University, M.D. magna cum laude from Harvard Medical School, and Ph.D. in genetics from the University of Washington. We believe Dr. Omenn’s qualifications to sit on our Board of Directors include his extensive executive leadership and management experience in the medical industry and his continuing cutting-edge research. Marc Rubin, M.D, a director since October 2011 and Chairman of the Board from January 2016 through May 2018, is Executive Chairman of the Board of Directors of Titan Pharmaceuticals, Inc. (TTNP: OTC BB) and served as its President and Chief Executive Officer from October 2007 to January 2009. Until February 2007, Dr. Rubin served as Head of Global Research and Development for Bayer Schering Pharma, as well as a member of the Executive Committee of Bayer Healthcare and the Board of Management of Bayer Schering Pharma. Prior to the merger of Bayer Pharmaceuticals and Schering AG in June 2006, Dr. Rubin was a member of the Executive Board of Schering AG since joining the company in October 2003, as well as Chairman of Schering Berlin Inc. and President of Berlex Pharmaceuticals, a division of Schering AG. From 1990 until August 2003, Dr. Rubin was employed by 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. Elissa J. Schwartz, Ph.D., a director appointed by the board in September 2020, is a disease modeler who is currently a professor of biological sciences and mathematics at Washington State University (WSU). She received a PhD in Biomedical Sciences from Mount Sinai–NYU, a BA in Mathematics from UC Berkeley, and interdisciplinary postdoctoral training in Biomathematics and Biostatistics from UCLA. She is also affiliated with the WSU College of Veterinary Medicine in microbiology and pathology, and she is currently on the WSU COVID-19 modeling task force. Dr. Schwartz is the author of over 30 scientific publications on infectious disease, the immune response, and biological modeling. She serves on the Board of Directors for the Society for Mathematical Biology, and she previously served as a consultant for Pharmerit International, LP, a pharmaceutical economics company. Dr. Schwartz has held fellowships with the Mathematical Biosciences Institute (Ohio State University) and the African Institute for Mathematical Sciences (Cape Town, South Africa), and she served on the teaching faculty for courses in British Columbia, India, and Nepal. We believe Dr. Schwartz’ qualifications to sit on our Board of Directors include her extensive expertise in biomathematics and biostatistics in the pharmaceutical industry. Harold Shlevin, Ph.D. , retired from being our President and Chief Executive Officer on September 2, 2020, a position he had held since June 14, 2018; however, Dr. Shlevin has entered into a consulting agreement with the Company which ran through December 31, 2021. Dr. Shlevin previously served as our Chief Operating Officer and Secretary from October 1, 2012. Dr. Shlevin previously had been employed at the Georgia Institute of Technology’s Advanced Technology Development Center as Principle and Manager of bioscience commercialization efforts since November 2009, where he has assisted faculty in identifying technology worthy of commercialization, catalyzed formation of new start-up bioscience companies, and mentored new company management. From October 2008 to November 2009, he served as Head of Operations and Commercial Development for Altea Therapeutics Corporation, an advanced drug delivery company focused on the delivery of therapeutic levels of water-soluble biotherapeutics and small drugs through the skin. At Altea, he was responsible for pharmaceutical research and development, clinical research, regulatory affairs, engineering, clinical and commercial manufacturing, quality assurance, information technology, facility operations and finance. From July 2006 to September 2008, Dr. Shlevin served as the President and Chief Executive Officer of Tikvah Therapeutics, Inc., a start-up pharmaceutical enterprise focused on later-stage development of neuroscience therapeutics. From May 2000 to January 2006, he served as President and CEO of Solvay Pharmaceuticals, Inc. (US). In January 2006, he was promoted to a global senior Vice President role within Solvay Pharmaceuticals, SA and member of the Board of Solvay Pharmaceuticals, SA. Previously, Dr. Shlevin served on the Board of Directors of Cardiome Pharma Corporation (NASDAQ: CRME), now known as Correvio Pharma Corp. (NASDAQ: CORV) from 2004 to June 2016. He was Chair of the Compensation Committee and member of the Corporate Governance Committee and Audit Committees. We believe Dr. Shlevin’s qualifications to sit on our Board of Directors include his extensive executive leadership and management experience in the pharmaceutical industry. Richard E. Uihlein , a director since 2017 and Chairman since May 2018, co-founded Uline, Inc. (a leading distributor of shipping, packaging and industrial supplies) in 1980, and has served as its Chief Executive Officer and Chairman since its founding. Prior to founding Uline Inc., Mr. Uihlein was employed at General Bindings Corp., Northbrook, IL from 1967 to 1980. Mr. Uihlein graduated from Stanford University, Palo Alto, CA. with a BA degree in history in 1967. We believe Mr. Uihlein’s qualifications to sit on our Board includes his extensive executive leadership and management experience. 29 Index Richard A. Zordani, a director appointed by the board in September 2020, has been the Director of Shareholder Services at Uline, Inc. (a distributor of shipping, packaging and industrial supplies) since 2013. Prior to joining Uline, Mr. Zordani served as a Director and Vice President for Diversified Financial Management Corp. (Pritzker family office) where he advised on complex legal and tax structures for domestic and foreign entities and trusts from 2003 through 2013 and an Audit Manager for Altschuler, Melvoin & Glasser LLP (now RSM McGladrey) from 1996 through 2003. Mr. Zordani received his undergraduate degree from the University of Illinois at Urbana/Champaign and is a Registered CPA in the state of Illinois. We believe that Mr. Zordani’s qualifications to sit on our Board include his business and financial expertise. Code of Ethics We have adopted a Code of Ethics that applies to all our directors, officers and employees. The Code of Ethics is publicly available on our website at www.galectintherapeutics.com. Amendments to the Code of Ethics and any grant of a waiver from a provision of the Code of Ethics requiring disclosure under applicable SEC rules will be disclosed on our website. Hedging Policy At this time, the Company has not adopted a policy regarding the ability of officers, directors and employees to purchase financial instruments (including prepaid variable forward contracts, equity swaps, collars, and exchange funds) or otherwise engage in transactions, that hedge or offset, or are designed to hedge or offset, any decrease in the market value of the Company’s equity securities. Clawback Policy At this time, the Company has not adopted a policy regarding the recovery by the Company of certain incentive-based compensation awarded to current and former executives in the event of a accounting errors. In February 2023, the Nasdaq Stock Market released a proposed version of a clawback rule that would require listed companies to have a clawback policy. Upon the SEC’s approval of such rule, the Company intends to adopt a clawback policy in compliance with Nasdaq listing requirements. Director Nominations No material changes have been made to the procedures by which security holders may recommend nominees to our board of directors. Audit Committee The members of this committee are Richard A. Zordani (chair), Kary Eldred and Kevin D. Freeman. The Audit Committee is responsible for oversight of the quality and integrity of the accounting, auditing and reporting practices of Galectin Therapeutics. More specifically, it assists the Board of Directors in fulfilling its oversight responsibilities relating to (i) the quality and integrity of our financial statements, reports and related information provided to stockholders, regulators and others, (ii) our compliance with legal and regulatory requirements, (iii) the qualifications, independence and performance of our independent registered public accounting firm, (iv) the internal control over financial reporting that management and the Board have established, and (v) the audit, accounting and financial reporting processes generally. The Committee is also responsible for review and approval of related-party transactions. The Board has determined that Mr. Zordani is an “audit committee financial expert” within the meaning of SEC rules. The Audit Committee has the authority to obtain advice and assistance from, and receive appropriate funding from the Company for, outside legal, accounting or other advisors as it deems necessary to carry out its duties. Risk Management The Board has an active role, as a whole and also at the committee level, in overseeing management of our risks. The Board regularly reviews information regarding our credit, liquidity and operations, as well as the risks associated with each. The Compensation Committee of our Board is responsible for overseeing the management of risks relating to our executive compensation plans and arrangements. The Audit Committee of our Board oversees management of financial risks. The Nominating and Corporate Governance Committee of our Board manages risks associated with the independence of the Board members and potential conflicts of interest. While each committee is responsible for evaluating certain risks and overseeing the management of such risks, the entire Board of Directors is regularly informed through committee reports about such risks. We believe that any risks arising from our policies and programs are not reasonably likely to have a material adverse effect on the Company. Our programs reflect sound risk management practices including: • Use of multiple compensation vehicles that provide a balance of long- and short-term incentives with fixed and variable components; and • Equity incentive awards that generally vest over several years, so while the potential compensation payable for equity incentive awards is tied directly to appreciation of our stock price, taking excessive risk for a short term gain is discouraged because it would not maximize the value of equity incentive awards over the long-term. 30 Index EXECUTIVE OFFICERS Joel Lewis , see above under directors. Pol F. Boudes, M.D., age 65, became the Company’s Chief Medical Officer on March 2, 2020. Prior to joining the Company, Dr. Boudes served as the Chief Medical Officer of CymaBay Therapeutics from March 2014 through October 2019, where he worked on CymaBay’s proprietary NASH compound and was instrumental in inventing and launching programs in rare liver diseases. Prior to his time at CymaBay, Dr. Boudes served as the Chief Medical Officer of Amicus Therapeutics, a company focusing on rare lysosomal storage disorders. Following this experience, Dr. Boudes became a Board member of Protalix BioTherapeutics, a company developing plant cell expressed recombinant proteins with improved therapeutic profiles, notably for lysosomal disorders. Before his time working as a Chief Medical Officer, Dr. Boudes held positions of increased responsibilities in clinical development at Bayer HealthCare Pharmaceuticals, Wyeth Research, Hoffman-La Roche and Pasteur Merieux. Jack W. Callicutt , age 55, became our Chief Financial Officer on July 1, 2013. From August 2011 through June 2012, Mr. Callicutt was the Chief Financial Officer of REACH Health, Inc., a telemedicine technology company headquartered in Alpharetta, GA. From April 2010 through August 2012, Mr. Callicutt was the Chief Financial Officer of Vystar Corporation, a publicly traded company that holds proprietary technology to remove antigenic proteins from natural rubber latex. Prior to that Mr. Callicutt was Chief Financial Officer of IVOX, Inc., Tikvah Therapeutics and Corautus Genetics, a publicly traded biotechnology company which was developing gene therapy for treatment of cardiovascular disease. Mr. Callicutt previously spent more than fourteen years in public accounting, most recently as a senior manager at Deloitte, where he specialized in technology companies from 1989 to 2003. Mr. Callicutt is a Certified Public Accountant and graduated with honors from Delta State University with a B.B.A. in accounting and computer information systems. None of the directors, executive officers and significant employees share any familial relationship. Section 16(a) Beneficial Ownership Reporting Compliance Section 16(a) of the Exchange Act requires our officers and directors, and persons who beneficially own more than ten percent of our common stock, to file reports of ownership and changes of ownership of such securities with the SEC. All reports were timely filed during the fiscal year ended December 31, 2022, except as set forth below. Delinquent Section 16(a) Reports One of our directors, James C. Czirr, and one of our 10% shareholders, 10X Fund, L.P. did not timely file two change on ownership reports on Form 4, resulting in the untimely disclosure of two transactions. Item 11. Executive Compensation COMPENSATION PHILOSOPHY DISCUSSION The Compensation Committee is responsible for creating and reviewing the compensation of the Company’s executive officers, as well as overseeing the Company’s compensation and benefit plans and policies and administering the Company’s equity incentive plans. The following Compensation Philosophy Discussion (“Compensation Discussion”) describes our 2022 executive compensation program and explains the Company’s compensation philosophy, policies, and practices, focusing primarily on the compensation of our named executive officers, or NEOs. This Compensation Discussion is intended to be read in conjunction with the tables that follow, which provide detailed historical compensation information for our following NEOs: Name Title Joel Lewis Chief Executive Officer and President Pol F. Boudes, M.D. Chief Medical Officer Jack W. Callicutt Chief Financial Officer Compensation Philosophy The Company believes in providing a competitive total compensation package to its executives through a combination of base salary, annual performance bonuses, and long-term equity awards. The executive compensation program is designed to achieve the following objectives: • provide competitive compensation that will help attract, retain and reward qualified executives; • align executives’ interests with our success by making a portion of the executive’s compensation dependent upon corporate performance; and • align executives’ interests with the interests of stockholders by including long-term equity incentives. 31 Index The Compensation Committee believes that the Company’s executive compensation program should include annual and long-term components, including cash and equity-based compensation, and should reward consistent performance that meets or exceeds expectations. The Compensation Committee evaluates both performance and compensation to make sure that the compensation provided to executives remains competitive relative to compensation paid by companies of similar size and stage of development operating in the life sciences industry and taking into account the Company’s relative performance and its own strategic objectives. Executive Compensation Review and Design The Company has historically conducted a review of the aggregate level of its executive compensation, as well as the mix of elements used to compensate its NEOs. The Company has based this review primarily on the experience of the members of the Compensation Committee and our Board, many of whom sit on the boards of directors of, or have previously advised, numerous companies, including companies in the life sciences industry. At our last “Say-on-Pay vote” held at our 2022 annual meeting of stockholders approximately 90% of votes cast were in favor of the compensation of our NEOs, as disclosed in the proxy materials for the 2022 annual meeting. At our 2019 annual meeting, the holders of approximately 78% of our outstanding common stock voting on the matter voted in favor of holding the tockholder advisory vote every three years. As a result of such vote, our Board decided to hold the “Say-on-Pay” advisory vote every three years. Accordingly, the Company’s next “Say-on-Pay” advisory vote on the compensation of our NEOs will be held at our 2025 annual meeting of stockholders. In 2014 and 2015, the Compensation Committee undertook a review of our compensation policies and practices and retained the compensation consulting firm of Barney & Barney LLC to provide compensation information and analysis with respect to the life science and healthcare industry and with respect to our peer companies within the industry. Barney & Barney LLC reviewed information from industry and other sources, surveys and databases, including publicly-available compensation information of other companies with which we compete, to gauge the competitiveness of our compensation programs. Barney & Barney LLC then reported its findings to the Compensation Committee, with recommendations to bring the Company’s executive compensation closer to the 50 th percentile of the total compensation of our competitor companies. These findings continued to inform the Compensation Committee’s decisions on compensation in subsequent years, including 2022. The Compensation Committee may use a compensation consultant in 2023 and will take into account publicly-available data relating to the compensation practices and policies of other companies within and outside our industry. The Compensation Committee intends to benchmark its executive compensation program to target at least the 50 th percentile of the total compensation programs of our competitor companies; however, adjusted as deemed to be in the best interest of the Company to assure retention of key employees during the NAVIGATE trial. Elements of Executive Compensation The compensation program for the Company’s NEOs consists principally of three components: • base salary; • performance and retention bonuses; • long-term compensation in the form of equity-based awards. Base Salary Base salary is the only fixed-pay component in our executive compensation program. Base salaries for the NEOs are initially established through arm’s-length negotiation at the time the NEO is hired, taking into account such NEO’s qualifications, experience, prior salary, the scope of his or her responsibilities, and known competitive market compensation paid by other companies for similar positions within the industry. Base salaries are reviewed annually and adjusted from time to time to realign salaries with market levels after taking into account individual responsibilities, performance, and experience. In making decisions regarding salary increases, the Company may also draw upon the experience of members of the Compensation Committee and the Board of Directors, many of whom sit on the boards of directors of, or have previously advised, numerous companies, including companies in the life sciences industry. The Compensation Committee has not previously applied specific formulas to determine increases. This strategy is consistent with the Company’s intent of offering base salaries that are cost-effective while remaining competitive. 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. 32 Index Performance Bonuses In addition to the payment of base salaries, the Company believes that annual performance bonuses can play an important role in providing appropriate incentives to its NEOs to achieve the Company’s strategic objectives. In prior years, performance bonuses were awarded based on the Company’s Employee Short-Term and Long-Term Incentive Program (the “Program”), which was adopted for executives and employees of the Company. The Program is a performance-based program and was adopted in recognition of the importance of aligning executive and employee interests with that of our stockholders. Our Program is designed to reward the efforts of our executives and employees and to be competitive in attracting and retaining them. There are two elements of the Program: (1) a short-term incentive in the form of cash bonuses and (2) a long-term incentive in the form of stock option grants. The cash bonus incentive is targeted to be up to 30% to 50% of the NEO’s base salary as of the end of the applicable year. Half of each NEO’s annual performance bonus is based upon achievement of the Company’s documented performance objectives for the year and the other half is based upon achievement of individual performance objectives set for the year. The 2022 performance bonuses were paid in February 2023. 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 % (1) Pursuant to Mr. Lewis’s Employment Agreement and Deferred Stock Unit Agreement, 20% of Mr. Lewis’ bonus 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 Long-Term Incentive Compensation The Company believes that by providing its NEOs the opportunity to increase their ownership of Company stock, the interests of its NEOs will be more closely-aligned with the best interests of the Company’s stockholders and it will encourage long-term performance. The stock awards enable the NEOs to participate in the appreciation in the value of the Company’s stock, while personally participating in the risks of business setbacks. Under the long-term incentive portion of the Program, the NEOs are granted options based upon achievement of the Company performance and individual performance objectives and rank in the Company. All option grants under the Program through December 2019 were made under the 2009 Incentive Compensation Plan. Grants made after January 1, 2020, were made pursuant to the 2019 Omnibus Equity Incentive Plan. On January 24, 2022, the NEOs were awarded the options noted below based on 2021 performance. For the performance options, 25% vest on each of June 30, 2022, December 31, 2022, June 30, 2023, and December 31, 2023. The exercise price of the options is set at the closing price of our stock as of the grant date. 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 Material Terms of Employment Contracts of Named Executive Officers Set forth below are descriptions of the principal terms of the employment agreements for each of our NEOs. Each employment agreement provides for post-termination restrictive covenants and payments due upon termination of employment or change in control of the Company, which is provided in further detail under the section entitled “Potential Payments Upon Termination or Change in Control.” Joel Lewis, Chief Executive Officer In connection with the appointment of Mr. Lewis, the Company and Mr. Lewis entered into an employment agreement, dated August 31, 2020 (the “ Employment Agreement ”), and a Deferred Stock Unit Agreement, dated August 31, 2020 (the “ DSU Agreement ”). The Employment Agreement has an initial term of two years and automatically renews for additional one-year terms thereafter, unless either Mr. Lewis or the Company elects not to renew. Mr. Lewis will serve as Chief Executive Officer of the Company effective as of September 2, 2020 (the “ Start Date ”), and will be paid an annual base salary of $500,000. Under the terms of the Employment Agreement, 20% of his base salary will be paid in cash, and 80% will be paid in the form of deferred-stock-units (“ DSUs ”) in accordance with the terms and subject to the provisions set forth in the DSU Agreement. In addition, Mr. Lewis is entitled to participate in the Company’s performance bonus plan with a potential of up to 50% of his annual base salary, which will also be paid 20% in cash and 80% in DSU’s. Further, Mr. Lewis received on the date of the agreement an initial grant of options to purchase 250,000 shares of the Company’s common stock, par value $0.001 per share, which options shall vest one-twelfth on a quarterly basis for twelve consecutive quarters, such that the options shall be fully vested twelve quarters following the date of grant (the “ Award ”). The options under the Award shall be issued pursuant to the Company’s 2019 Omnibus Equity Incentive Plan (the “ Plan ”). Pursuant to the Employment Agreement, Mr. Lewis is also eligible to receive healthcare benefits as may be provided from time to time by the Company to its employees generally, to participate in the Company’s 401(k) plan and to receive paid time off annually in accordance with the Company’s policies in effect from time to time. Finally, pursuant to the Employment Agreement, the Company will be required to furnish a lump sum cash payment to Mr. Lewis upon a termination of Mr. Lewis without “Cause” or upon Mr. Lewis’ resignation for “Good Reason” as such terms are defined in the Employment Agreement or in the event the Company gives notice of non-renewal on or before September 30, 2023. The Employment Agreement includes customary intellectual property, assignment, and other representations by Mr. Lewis. On July 25, 2022, we entered into amendments to the Employment Agreement and DSU Agreement with Mr. Lewis. Pursuant to the amendments, Mr. Lewis’ base salary earned in 2023 will be paid 20% in cash and 80% in DSUs. Additionally, the term of the Employment Agreement was extended until December 31, 2024. Unless either party gives written notice of non-renewal at least 60 days prior to December 31, 2024, the amended employment agreement will automatically renew for an additional twelve months. Also, if either Mr. Lewis terminates his employment for Good Reason (ii) the Company terminates Mr. Lewis’s employment without Cause, or if this Employment Agreement expires as a result of the Company giving written notice of non-renewal, then the Company shall pay to Mr. Lewis (1) any accrued benefits, (2) a lump sum amount equal to twelve (12) months of Mr. Lewis’s base salary payable within thirty (30) days after the date of such termination, and (3) the performance bonus, if any, for the year in which termination occurs, based on actual individual and Company performance results and multiplied by a fraction, (A) the numerator of which shall be the number of days elapsed from the beginning of the fiscal year in which such termination occurs and (B) the denominator of which shall be 365; provided, however, that the portion of the performance bonus payable in the form of DSUs, will be paid in accordance with the terms of the DSU Award Agreements. Notwithstanding the foregoing, the payments described in clauses above are expressly conditioned upon Mr. Lewis executing returning a full release of the Company and its affiliates and from all obligations and any usual and customary indemnification obligations of the Company to Mr. Lewis as an officer thereof. 33 Index Pursuant to the DSU Agreement, 80% of Mr. Lewis’ base salary under the Employment Agreement shall be payable in DSUs, which DSUs credited to Mr. Lewis as of any date shall be fully vested and nonforfeitable at all times. Pursuant to an amendment to the DSU Agreement in July 2022, the Company shall issue the shares underlying the outstanding whole number of DSUs credited to Mr. Lewis as follows: twenty five percent shall be issued on March 1, 2023, twenty five percent shall be issued on September 1, 2028 and fifty percent shall be issued on March 1, 2024. Pol F. Boudes, M.D., Chief Medical Officer On February 19, 2020, the Company entered into an Employment Agreement with Dr. Boudes (the “ Agreement ”), which governs the terms of Dr. Boudes’ employment in his position as the Company’s Chief Medical Officer. Dr. Boudes will serve as the Chief Medical Officer of the Company during an initial term that commences on March 2, 2020 (the “ Commencement Date ”) and expires on February 28, 2021 (the “ Initial Term ”). Following the Initial Term, the term of the Agreement automatically renews for successive twelve (12) month terms unless either party provides the other party with notice of non-renewal at least sixty (60) days prior to the expiration of the then-current term. Under the Agreement, the Company has agreed to pay Dr. Boudes a base salary of $444,500 per year (the “ Base Salary ”). Provided that certain performance objectives are met, Dr. Boudes will also be entitled to receive an annual performance bonus equal to thirty percent (30%) of the Base Salary (the “ Performance Bonus ”). Subject to certain restrictions described in the Agreement, Dr. Boudes will receive a $100,000 signing bonus pursuant to the Agreement. Dr. Boudes will also be granted options to purchase 300,000 shares (the “ Options ”) of the Company’s common stock pursuant to the Company’s 2019 Omnibus Equity Incentive Plan. The Options vest as follows: twenty percent (20%) of the Options shall vest upon one (1) year of employment, twenty percent (20%) of the Options shall vest upon two (2) years of employment, twenty percent (20%) of the Options shall vest upon three (3) years of employment, and the remaining forty percent (40%) of the Options shall vest upon four (4) years of employment. Jack W. Callicutt, Chief Financial Officer We entered into an employment agreement with Mr. Callicutt dated July 1, 2013 (the “Callicutt Employment Agreement”), in conjunction with Mr. Callicutt’s appointment as our Chief Financial Officer. Pursuant to the terms of the Callicutt Employment Agreement, Mr. Callicutt received an initial base salary of $175,000 and was eligible to receive a performance bonus equal to 20% of his base salary. Effective March 31, 2015, Mr. Callicutt’s annual base salary was increased to $240,000, and his annual base salary was increased again to $260,000 in February 2016. In June 2018, Mr. Callicutt’s annual base salary increased to $285,000. He also received a signing bonus of $10,000. In addition to his cash compensation, the Company awarded Mr. Callicutt a grant of options to purchase 200,000 shares of the Company’s Common Stock at an exercise price equal to the closing price of the Company’s Common Stock on July 1, 2013, with 25,000 shares vesting on December 31, 2013, 50,000 shares vesting on December 31, 2014, 50,000 shares vesting on December 31, 2015 and 75,000 shares vesting on December 31, 2016. The options were granted pursuant to the 2009 Incentive Compensation Plan and expire ten years after the date of grant. On August 11, 2017, we entered into an amendment to the Callicutt Employment Agreement with Mr. Callicutt (the “Amendment”). Pursuant to the Amendment, (i) Mr. Callicutt’s target bonus opportunity was increased to 30% of his base salary and (ii) an error in the severance provision of the Callicutt Employment Agreement was corrected. Prior to the Amendment, the Callicutt Employment Agreement did not provide for any severance if Mr. Callicutt’s employment was terminated by the Company “without cause,” or by Mr. Callicutt for “good reason” after the date that was 24 months after the Commencement Date. Employee Benefits & Perquisites From time to time, the Company has provided the NEOs with employee benefits and perquisites that our Board believes are reasonable. Our NEOs are eligible to participate in the same broad-based employee benefit plans that are offered to our other employees, such as health insurance, disability insurance, life insurance and a 401(k) plan. These benefits are provided as part of the basic conditions of employment for all of our employees, and therefore providing them to our NEOs does not represent a significant incremental cost to us. The Company does not view employee benefits and perquisites as a significant element of its comprehensive compensation structure, but does believe they can be useful in attracting, motivating, and retaining the executive talent for which the Company competes. The Company believes that these additional benefits may assist the NEOs in performing their duties and provide time efficiencies for the NEOs in appropriate circumstances, and the Company may consider providing additional employee benefits and perquisites in the future. All future practices regarding employee benefits and perquisites will be approved and subject to periodic review by the Compensation Committee. 34 Index SUMMARY COMPENSATION TABLE The following table summarizes the compensation paid to our NEOs for the fiscal years ended December 31, 2022 and 2021. 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 $11,600 for 401(k) plan contributions. 35 Index OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END 2022 The following table sets forth information regarding all outstanding equity awards held by the NEOs at December 31, 2022. The exercise price of the options is set at the closing price of our stock at the date prior to or as of the date of grant. Outstanding options have been approved by our Compensation Committee and our Board. Option Awards Stock Awards Name Number of Securities Underlying Unexercised Options (#) Exercisable Number of Securities Underlying Unexercised Options (#) Unexercisable Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#) Option Exercise Price ($) 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. 36 Index 2009 Incentive Compensation Plan The options granted under our 2009 Incentive Compensation Plan, the options will become immediately vested and exercisable upon a change of control. Upon termination of employment for cause, all outstanding options immediately terminate. Options remain exercisable for one year following termination due to the executive’s death or disability or retirement, or for twelve months after termination for any other reason other than for cause. Under the 2009 Incentive Compensation Plan, change of control is defined as: (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. “Disability” is defined as a permanent and total disability (within the meaning of Code Section 22(e)), as determined by a medical doctor satisfactory to the Compensation Committee. “Cause” means the failure by the executive to perform, in a reasonable manner, his or her duties as assigned by the Company, (ii) any violation or breach by the executive of his or her employment, consulting or other similar agreement with the Company, if any, (iii) any violation or breach by the executive of any non-competition, non-solicitation, non-disclosure and/or other similar agreement with the Company, (iv) any act by the executive of dishonesty or bad faith with respect to the Company, (v) use of alcohol, drugs or other similar substances in a manner that adversely affects the executive’s work performance, or (vi) the commission by the executive of any act, misdemeanor, or crime reflecting unfavorably upon the executive or the Company. 2019 Omnibus Equity Incentive Plan Under the 2019 Omnibus Equity Incentive Plan, if there is a merger or consolidation of the Company with or into another corporation or a sale of substantially all of the Company’s stock (a “Corporate Transaction”), and the outstanding awards are not assumed by surviving company (or its parent company) or replaced with economically equivalent awards granted by the surviving company (or its parent company), the Company will cancel any outstanding awards that are not vested and nonforfeitable as of the consummation of such Corporate Transaction (unless the Company accelerates the vesting of any such awards) and with respect to any vested and nonforfeitable awards, the Company may either (i) allow all grantees to exercise options and SARs within a reasonable period prior to the consummation of the Corporate Transaction and cancel any outstanding options or SARs that remain unexercised upon consummation of the Corporate Transaction, or (ii) cancel any or all of such outstanding awards (including options and SARs) in exchange for a payment (in cash, or in securities or other property) in an amount equal to the amount that the grantee would have received (net of the exercise price with respect to any options or SARs) if the vested awards were settled or distributed or such vested options and SARs were exercised immediately prior to the consummation of the Corporate Transaction. If an exercise price of the option or SAR exceeds the fair market value of our Common Stock and the option or SAR is not assumed or replaced by the surviving company (or its parent company), such options and SARs will be cancelled without any payment to the grantee. 37 Index Potential Payments Upon Termination or Change-in-Control Joel Lewis: If either Mr. Lewis terminates his employment for Good Reason (ii) the Company terminates Mr. Lewis’s employment without Cause, or if this Employment Agreement expires as a result of the Company giving written notice of non-renewal, then the Company shall pay to Mr. Lewis (1) any accrued benefits, (2) a lump sum amount equal to twelve (12) months of Mr. Lewis’s base salary payable within thirty (30) days after the date of such termination, and (3) the performance bonus, if any, for the year in which termination occurs, based on actual individual and Company performance results and multiplied by a fraction, (A) the numerator of which shall be the number of days elapsed from the beginning of the fiscal year in which such termination occurs and (B) the denominator of which shall be 365; provided, however, that the portion of the performance bonus payable in the form of DSUs, will be paid in accordance with the terms of the DSU Award Agreements. Notwithstanding the foregoing, the payments described in clauses above are expressly conditioned upon Mr. Lewis executing returning a full release of the Company and its affiliates and from all obligations and any usual and customary indemnification obligations of the Company to Mr. Lewis as an officer thereof. Under the Deferred Stock Unit Agreement, if a Change in Control of the Company occurs prior to the date on which Mr. Lewis is scheduled to receive shares and cash in an installment payment or in a lump sum (a “Settlement Date”), Mr. Lewis’ account will be credited with the consideration payable in such Change in Control with respect to the shares subject to the DSUs then credited to Mr. Lewis’ Account immediately prior to such Change in Control. If Mr. Lewis’ employment with the Company continues after a Change in Control, Mr. Lewis’ account will be credited with the cash value of the portion of his base salary and annual performance bonus that would have been credited in the form of DSUs but for the Change in Control. The portion of Mr. Lewis’ Account denominated in cash pursuant to the preceding sentence (i.e., the amount attributable to base salary and annual performance bonuses credited to Mr. Lewis’ Account after the Change in Control) shall be credited with interest at three (3%) percent compounded annually. For avoidance of doubt, a Change in Control shall not result in acceleration of the settlement of Mr. Lewis’ Account and the payment of all amounts or other property credited to Mr. Lewis’ Account in connection with the Change in Control shall be paid or delivered to Mr. Lewis on as soon as reasonably practicable after the Settlement Date. Pol Boudes: Under the Employment Agreement with Dr. Boudes, if (i) Dr. Boudes terminates the Agreement for Good Reason (as defined in the Agreement) or (ii) the Company terminates the Agreement without Cause (as defined in the Agreement), then the Company shall pay to Dr. Boudes: (1) the Base Salary accrued through the date of termination, (2)(A) if termination occurs within twelve (12) months of the Commencement Date, an amount equal to three (3) months of the Base Salary, or (B) if such termination occurs after the twelve-month anniversary of the Commencement Date, but prior to the eighteen-month anniversary of the Commencement Date, an amount equal to six (6) months of the Base Salary or (C) if termination occurs after the eighteen-month anniversary of the Commencement Date, but prior to the twenty four-month anniversary of the Commencement Date, an amount equal to nine (9) months of Base Salary or (D) if termination occurs after the twenty four-month anniversary of the Commencement Date, an amount equal to twelve (12) months of the Base Salary, (3) reimbursement of unreimbursed expenses and (4) payment of a portion of the Performance Bonus. If, within the period ending twelve (12) months after the date of a Change of Control, Dr. Boudes’ employment with the Company is (i) terminated without Cause or (ii) terminated for Good Reason by Dr. Boudes, the Company shall pay to Dr. Boudes (A) the Base Salary accrued through the date of termination, to the extent not theretofore paid, (B) reimbursement of any unreimbursed expenses, (C) a pro-rated amount of the Performance Bonus assuming payout at maximum performance and (D) an amount equal to twelve (12) months of Base Salary, payable in a lump sum no later than thirty (30) days following such termination. Upon any such Change of Control, Dr. Boudes’ unvested Options shall be one hundred percent (100%) vested, but shall otherwise continue to be governed by the terms and conditions of the Plan and the applicable stock option agreement. Jack Callicutt: Mr. Callicutt’s Employment Agreement provides that if, within the period ending twelve (12) months after the date of a Change of Control, Mr. Callicutt’s employment with the Company is (i) without Cause by the Company (or by the acquiring or successor business entity following a Change of Control), or (ii) terminated for Good Reason by Mr. Callicutt, the Company shall pay to Mr. Callicutt (A) the Base Salary accrued through the date of termination, to the extent not theretofore paid, (B) reimbursement of any unreimbursed expenses, (C) a portion of the amount of the Performance Bonus (as defined in the Employment Agreement) equal to the maximum amount of the Performance Bonus multiplied by a fraction, (X) the numerator of which shall be the number of days elapsed from the beginning of the calendar year in which such termination occurs and (Y) the denominator of which shall be the total number of days in the calendar year in which such termination occurs (being 365 in a full year and 184 in 2013) and (D) an amount equal to twelve (12) months of Mr. Callicutt’s Base Salary, payable in a lump sum no later than thirty (30) days following such termination. Upon any such Change of Control, Mr. Callicutt’s unvested options to purchase shares of the Company’s common stock shall be one hundred percent (100%) vested, but shall otherwise continue to be governed by the terms and conditions of the Stock Option Agreement. However, if, in connection with a transaction that technically meets, or may meet, the definition of Change of Control (as defined in the Employment Agreement), Mr. Callicutt’s employment by the Company or a successor to the Company is terminated, but Mr. Callicutt is immediately re-hired as an employee of a successor to the Company or surviving company in such a transaction in a comparable position, with the same or greater total annual cash compensation, including bonus potential, and with an employment agreement containing substantially equivalent provisions as this Agreement with respect to termination of the Mr. Callicutt and severance, no benefits shall be payable under the Change of Control provision of the Employment Agreement. 38 Index DIRECTOR COMPENSATION The following table details the total compensation earned by our non-employee directors during the year ended December 31, 2022. Name Fees Earned or Paid in Cash ($) Restricted Stock Awards ($) (1) Option Awards ($) (2) Non-Equity Incentive Plan Compensation ($) All Other Compensation ($) (3) Total ($) 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 to Option Awards Held as of December 31, 2022 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 For a more detailed description of the assumptions used for purposes of determining grant date fair value, see Note 9 to the Consolidated Financial Statements and “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Critical Accounting Policies and Estimates — Stock-Based Compensation” included herein the Form 10-K for the 2022 fiscal year. We also reimburse our directors for reasonable travel and other related expenses. Pursuant to the Company’s cash compensation program for directors, non-employee directors of the Company will receive an annual cash retainer of $35,000. Each Nominating and Corporate Governance Committee member will receive an additional cash retainer of $3,500; each Compensation Committee member will receive an additional cash retainer of $5,000; and each Audit Committee member will receive an additional cash retainer of $7,500. In addition to the annual fee and committee membership retainers, the Nominating and Corporate Governance Committee Chairman will receive an annual cash retainer of $3,500; the Compensation Committee Chairman will receive an annual cash retainer of $5,000; and the Audit Committee Chairman will receive an annual cash retainer of $7,500. Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters The following table sets forth, as of February 28, 2023, certain information concerning the beneficial ownership of our common stock and Series A Preferred Stock by (i) each person known by us to own beneficially five percent (5%) or more of the outstanding shares of each class, (ii) each of our directors and named executive officers, and (iii) all of our executive officers and directors as a group. The table also sets forth, in its final column, the combined voting power of the voting securities on all matters presented to the stockholders for their approval at the Annual Meeting, except for such separate class votes as are required by law. 39 Index The number of shares beneficially owned by each 5% stockholder, director or executive officer is determined under the rules of the Securities and Exchange Commission, or SEC, and the information is not necessarily indicative of beneficial ownership for any other purpose. Under those rules, beneficial ownership includes any shares as to which the individual or entity has sole or shared voting power or investment power and also any shares that the individual or entity has the right to acquire within 60 days after February 28, 2023 through the exercise of any stock option, warrant or other right, or the conversion of any security. Unless otherwise indicated, each person or entity has sole voting and investment power (or shares such power with his or her spouse) with respect to the shares set forth in the following table. The inclusion in the table below of any shares deemed beneficially owned does not constitute an admission of beneficial ownership of those shares. Name and Address (1) Shares of Common Stock Beneficially Owned (2) Percent of Common Stock (3) Shares of Series A Preferred Stock Beneficially Owned Percent of Series A Preferred Stock (4) 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 % * Less than 1%. (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. 40 Index EQUITY COMPENSATION PLAN INFORMATION The following table provides information as of December 31, 2022, about the securities issued, or authorized for future issuance, under our equity compensation plans, consisting of our 2001 Stock Incentive Plan, our 2003 Non-Employee Director Stock Incentive Plan, our 2009 Incentive Compensation Plan and our 2019 Omnibus Equity Incentive Plan at December 31, 2022. 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 Certain Relationships and Related Transactions Except as set forth below, since the beginning of fiscal year 2022, we did not participate in any transactions in which any of the Company’s executive officers, any beneficial owner of more than 5% of our common stock, nor any of their immediate family members, had a direct or indirect material interest. Our Audit Committee Charter requires that members of the Audit Committee, all of whom are independent directors, conduct an appropriate review of, and be responsible for the oversight of, all related party transactions on an ongoing basis. Except as set forth below, there were no related party transactions during the fiscal year ended December 31, 2022. The Company entered into an unsecured convertible line of credit totaling $60 million convertible notes payable with Richard E. Uihlein, a director and shareholder, pursuant to an agreement in July 2022. Additional details of the convertible line of credit are included in Footnote 10 to the financial statements in this Form 10-K. Compensation Committee Interlocks and Insider Participation None of our executive officers or directors serves as a member of the board of directors or compensation committee of any entity that has one or more of its executive officers serving as a member of our Board of Directors or Compensation Committee. Board Determination of Director Independence Our board of directors has reviewed the materiality of any relationship that each of our directors has with the Company, either directly or indirectly. Based upon this review, our board has determined that all of our directors other than Mr. Lewis and Dr. Shlevin are “independent directors” as defined by The NASDAQ Stock Market. Our board of directors also determined that Drs. Amelio, Rubin, and Mr. Freeman, who comprise our nominating and governance committee, all satisfy the independence standards for such committees established by the SEC and the NASDAQ Marketplace Rules, as applicable. With respect to our audit committee, our board of directors has determined that Messrs. Zordani, Freeman and Eldred satisfy the independence standards for such committee established by Rule 10A-3 under the Exchange Act, the SEC and the NASDAQ Marketplace Rules, as applicable. Furthermore, the Nominating and Corporate Governance Committee, with concurrence by the Board, has determined that Mr. Zordani is an “audit committee financial expert” within the meaning of SEC rules. With respect to our compensation committee, our board of directors has determined that Drs. Omenn, Amelio and Mr. Freeman satisfy the independence standards for such committee established by Rule 10C-1 under the Exchange Act, the SEC and the NASDAQ Marketplace Rules, as applicable. 41 Index In making such determinations, the board of directors considered the relationships that each such non-employee director or director nominee has with our company and all other facts and circumstances the board of directors deemed relevant in determining their independence, including the beneficial ownership of our capital stock by each non-employee director. In considering the independence of our directors, our board of directors considered the association of each such non-employee director has with us and all other facts and circumstances our board of directors deemed relevant in determining independence. Item 14. Principal Accountant Fees and Services The Board of Directors has appointed Cherry Bekaert LLP as our independent auditors for the fiscal year ending December 31, 2022. FEES PAID TO CHERRY BEKAERT LLP 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 in our 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 our financial 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. The Audit Committee has considered whether the provision of non-core audit services to Galectin Therapeutics by Cherry Bekaert LLP is compatible with maintaining independence. Pre-Approval Policy and Procedures The Audit Committee of our Board of Directors has adopted policies and procedures which set forth the manner in which the Committee will review and approve all services to be provided by the independent auditor before the auditor is retained to provide such services. The policy requires Audit Committee pre-approval of the terms and fees of the annual audit services engagement, as well as any changes in terms and fees resulting from changes in audit scope or other items. The Audit Committee also pre-approves, on an annual basis, other audit services, and audit-related and tax services set forth in the policy, subject to estimated fee levels, on a project basis and aggregate annual basis, which have been pre-approved by the Committee. All other services performed by the auditor that are not prohibited non-audit services under SEC or other regulatory authority rules must be separately pre-approved by the Audit Committee. Amounts in excess of pre-approved limits for audit services, audit-related services and tax services require separate pre-approval of the Audit Committee. Our Chief Financial Officer reports quarterly to the Audit Committee on the status of pre-approved services, including projected fees. All of the services reflected in the above table were approved by the Audit Committee. 42 Index PART IV Item 15. Exhibits and Financial Statement Schedules (a) 1. Consolidated Financial Statement Schedules The Consolidated Financial Statements are filed as part of this report. 2. Consolidated Financial Statement Schedules All schedules are omitted because of the absence of conditions under which they are required or because the required information is included in the Consolidated Financial Statements or notes thereto. 3. Exhibits Exhibit Number Description of Document 3.1 Amended and Restated Articles of Incorporation of Galectin Therapeutics Inc., as amended (Incorporated by reference to the Company’s Current Report on Form 8-K filed with the Commission on May 30, 2012.) 3.2 Amended and Restated Bylaws of Galectin Therapeutics Inc., as amended (Incorporated by reference to the Company’s Current Report on Form 8-K filed with the Commission on September 27, 2016.) 3.3 Certificate of Designation of Preferences, Rights and Limitations of Series A 12% Convertible Preferred Stock of Pro Pharmaceuticals, Inc., as filed with the Secretary of State of the State of Nevada on October 5, 2007. (Incorporated by reference to the Company’s Current Report on Form 8-K filed with the Commission on October 9, 2007.) 3.4 First Amendment to Certificate of Designation of Preferences, Rights and Limitations of Series A 12% Convertible Preferred Stock of Galectin Therapeutics, Inc., as filed with the Secretary of State of the State of Nevada on May 15, 2017. (Incorporated by reference to the Company’s Current Report on Form 8-K filed with the Commission on May 19, 2017.) 3.5 Certificate of Designation of Preferences, Rights and Limitation of Series C Super Dividend Convertible Preferred Stock of Pro-Pharmaceuticals, Inc., as filed with the Secretary of State of Nevada on December 30, 2010. (Incorporated by reference to the Company’s Current Report on Form 8-K as filed with the Commission on January 6, 2011.) 3.6 Certificate of Change as filed with the Nevada Secretary of State on March 1, 2012. (Incorporated by reference to the Company’s Current Report on Form 8-K as filed with the Commission on March 23, 2012.) 3.7* Amendment to the Articles of Incorporation of Galectin Therapeutics Inc. 4.1 Form of Common Stock Purchase Warrant (Incorporated by reference to the Company’s Current Report on Form 8-K as filed with the Commission on December 29, 2016.) 4.2 Form of Common Stock Purchase Warrant issued to Richard E. Uihlein (Incorporated by reference to the Company’s Current Report on Form 8-K as filed with the Commission on December 19, 2017.) 4.3 First Amendment to Common Stock Purchase Warrant, dated December 20, 2018, by and between Richard E. Uihlein and the Company (Incorporated by reference to the Company’s Current Report on Form 8-K as filed with the Commission on January 3, 2019.) 4.4 Second Amendment to Common Stock Purchase Warrant, dated January 11, 2019, by and between Richard E. Uihlein and the Company (Incorporated by reference to the Company’s Current Report on Form 8-K as filed with the Commission on January 15, 2019.) 4.5 Form of Amended and Restated Class B Common Stock Purchase Warrant (Incorporated by reference to the Company’s Current Report on Form 8-K as filed with the Commission on January 15, 2019.) 43 Index Exhibit Number Description of Document 4.6 Form of Amended and Restated 10X Fund Class B Common Stock Purchase Warrant (Incorporated by reference to the Company’s Current Report on Form 8-K as filed with the Commission on January 15, 2019.) 4.7 Form of Common Stock Purchase Warrant (Incorporated by reference to the Company’s Registration Statement on Form S-3 as filed with the Commission on March 6, 2019.) 4.8 Form of Warrant Agency Agreement (Incorporated by reference to the Company’s Registration Statement on Form S-3 as filed with the Commission on March 6, 2019.) 4.9 Form of Common Stock Purchase Warrant (Incorporated by reference to the Company’s Registration Statement on Form S-3 as filed with the Commission on March 6, 2019.) 4.10 Form of Common Stock Purchase Warrant (Incorporated by reference to exhibit 4.1 the Company’s Current Report on Form 8-K as filed with the Commission on July 26, 2022.) 4.11 Description of Registrant’s securities (Incorporated by reference to exhibit 4.20 the Company’s Annual Report on Form 10-K for the year ended December 31, 2020, as filed on March 31, 2021.) 10.1† Galectin Therapeutics 2009 Incentive Compensation Plan (as amended) (Incorporated by reference to the Company’s Annual Report on Form 10-K as filed with the Commission on March 6, 2019.) 10.2† Form of Restricted Stock Grant Agreement (under the 2009 Incentive Compensation Plan). (Incorporated by reference to the Company’s Annual Report on Form 10-K as filed with the Commission on March 30, 2009.) 10.3† Form of Non-Qualified Stock Option Grant Agreement (under the 2009 Incentive Compensation Plan). (Incorporated by reference to the Company’s Annual Report on Form 10-K as filed with the Commission on March 30, 2009.) 10.4† Form of Incentive Stock Option Grant Agreement (under the 2009 Incentive Compensation Plan). (Incorporated by reference to the Company’s Annual Report on Form 10-K as filed with the Commission on March 30, 2009.) 10.5† Galectin Therapeutics 2019 Omnibus Equity Incentive Plan (Incorporated by reference to Appendix A to the Company’s definitive proxy statement filed with the Commission on October 17, 2019.) 44 Index Exhibit Number Description of Document 10.6† Employment Agreement dated June 20, 2013 between Jack W. Callicutt and Galectin Therapeutics Inc. (Incorporated by reference to the Company’s Quarterly Report on Form 10-Q as filed with the Commission on August 14, 2013.) 10.7† Amendment to Employment Agreement dated August 11, 2017 between Jack W. Callicutt and Galectin Therapeutics Inc. (Incorporated by reference to the Company’s Quarterly Report on Form 10-Q as filed with the Commission on August 14, 2017.) 10.8 Project Addendum (with Master Services Agreement), dated March 6, 2015, by and between Galectin Therapeutics Inc. and PPD Development, L.P. (Incorporated by reference to the Company’s Current Report on Form 8-K as filed with the Commission on March 12, 2015.)*** 10.9 Project Addendum Modification, dated March 11, 2016, by and between Galectin Therapeutics, Inc. and PPD Development, L.P. (Incorporated by reference to the Company’s Annual Report on Form 10-K as filed with the Commission on March 15, 2016.)*** 10.10† Employment Agreement, dated February 19, 2020, by and between Galectin Therapeutics Inc. and Pol F. Boudes, M.D. (Incorporated by reference to the Company’s Current Report on Form 8-K as filed with the Commission on February 20, 2020.) 10.11*** Master Services Agreement, effective as of March 12, 2020, by and between Galectin Therapeutics, Inc. and Covance Inc. (Incorporated by reference to the Company’s Current Report on Form 8-K as filed with the Commission on March 17, 2020.) 10.12*** Work Order, dated as of March 12, 2020, by and between Galectin Therapeutics, Inc. and Covance Clinical Research Unit Inc. (Incorporated by reference to the Company’s Current Report on Form 8-K as filed with the Commission on March 17, 2020.) 10.13*** Work Order, dated as of June 22, 2020, by and between Galectin Therapeutics Inc. and Covance Inc. (Incorporated by reference to the Company’s Current Report on Form 8-K as filed with the Commission on June 26, 2020.) 10.14 Convertible Promissory Note, dated April 16, 2021 (Incorporated by reference to the Company’s Current Report on Form 8-K as filed with the Commission on April 19, 2021.) 10.15 Loan Agreement, dated September 17, 2021 (Incorporated by reference to the Company’s Current Report on Form 8-K as filed with the Commission on September 21, 2021.) 10.16 Unsecured Convertible Promissory Note, dated September 17, 2021 (Incorporated by reference to the Company’s Current Report on Form 8-K as filed with the Commission on September 21, 2021.) 10.17 Unsecured Convertible Promissory Note, dated December 20, 2021 (Incorporated by reference to the Company’s Current Report on Form 8-K as filed with the Commission on December 21, 2021.) 10.18 Line of Credit Letter Agreement, dated as of July 25, 2022, by and between Richard E. Uihlein and the Company. (Incorporated by reference to exhibit 10.1 the Company’s Current Report on Form 8-K as filed with the Commission on July 26, 2022.) 10.19 Form of Convertible Promissory Note issued to Richard E. Uihlein. (Incorporated by reference to exhibit 10.2 the Company’s Current Report on Form 8-K as filed with the Commission on July 26, 2022.) 10.20 Employment Agreement Amendment of Joel Lewis. (Incorporated by reference to exhibit 10.3 the Company’s Current Report on Form 8-K as filed with the Commission on July 26, 2022.) 10.21 2023 Deferred Stock Unit Agreement. (Incorporated by reference to exhibit 10.4 the Company’s Current Report on Form 8-K as filed with the Commission on July 26, 2022.) 10.22 2020 Deferred Stock Unit Amendment. (Incorporated by reference to exhibit 10.5 the Company’s Current Report on Form 8-K as filed with the Commission on July 26, 2022.) 45 Index Exhibit Number Description of Document 21.1* Subsidiaries of Galectin Therapeutics Inc. 23.1* Consent of Cherry Bekaert LLP, an independent registered public accounting firm. 31.1* Certification Pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934. 31.2* Certification Pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934. 32.1# Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 32.2# Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 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 Document 101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document 101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document 101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document 101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document 104 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 and contained in Exhibit 101 * 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 None 46 Index SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on March 30, 2023. GALECTIN THERAPEUTICS INC. By: /S/ JOEL LEWIS Name: JOEL LEWIS. Title: Chief Executive Officer and President Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Signature Title Date /S/ JOEL LEWIS Chief Executive Officer, President and Director March 30, 2023 Joel Lewis (principal executive officer) /S/ JACK W. 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 30, 2023 Richard E. Uihlein /S/ GILBERT F. AMELIO, Ph.D. Director March 30, 2023 Gilbert F. Amelio, Ph.D. /S/ JAMES C. CZIRR Director March 30, 2023 James C. Czirr /S/ KARY ELDRED Director March 30, 2023 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 47 Index Galectin Therapeutics Inc. and subsidiaries Table of Contents 1. Reports of Independent Registered Public Accounting Firm (PCAOB ID 677 ) F-1 2. Consolidated Balance Sheets as of December 31, 2022 and 2021 F-3 3. Consolidated Statements of Operations for the years ended December 31, 2022 and 2021 F-4 4. Consolidated Statements of Changes in Redeemable Convertible Preferred Stock and Stockholders’ Equity (Deficit) for the years ended December 31, 2022 and 2021 F-5 5. Consolidated Statements of Cash Flows for the years ended December 31, 2022 and 2021 F-7 6. Notes to Consolidated Financial Statements F-8 48 Index Report of Independent Registered Public Accounting Firm To the Board of Directors and Stockholders Galectin Therapeutics Inc. and Subsidiaries Opinion on the Consolidated Financial Statements We have audited the accompanying consolidated balance sheets of Galectin Therapeutics Inc. and Subsidiaries (the “Company”) as of December 31, 2022 and 2021, and the related consolidated statements of operations, changes in redeemable convertible preferred stock and stockholders’ equity (deficit), and cash flows for each of the years then ended, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the years then ended, in conformity with accounting principles generally accepted in the United States of America. Basis for Opinion These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinions. Critical Audit Matters The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate. Going Concern Description of Matter As described further in Note 1 to the consolidated financial 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. F-1 Index 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 We have served as the Company’s auditor since 2015. Atlanta, Georgia March 30, 2023 F-2 Index GALECTIN THERAPEUTICS INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS 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 See notes to consolidated financial statements. F-3 Index GALECTIN THERAPEUTICS INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS 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 See notes to consolidated financial statements. F-4 Index GALECTIN THERAPEUTICS INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY (DEFICIT) For the Years Ended December 31, 2022 and 2021 (amounts in thousands except share data) 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 See notes to consolidated financial statements. F-5 Index GALECTIN THERAPEUTICS INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY (DEFICIT) — (Continued) For the Years Ended December 31, 2022 and 2021 (amounts in thousands except share data) 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 ) See notes to consolidated financial statements. F-6 Index GALECTIN THERAPEUTICS INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF 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 — See notes to consolidated financial statements. F-7 Index GALECTIN THERAPEUTICS INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. Nature of Business, Basis of Presentation and Liquidity Galectin Therapeutics Inc. and subsidiaries (the “Company”) is a clinical stage biopharmaceutical company that is applying its leadership in galectin science and drug development to create new therapies for fibrotic disease and cancer. These candidates are based on the Company’s targeting of galectin proteins which are key mediators of biologic and pathologic function. These compounds also may have application for drugs to treat other diseases and chronic health conditions. The Company was founded in July 2000, was incorporated in the State of Nevada in January 2001 under the name “Pro-Pharmaceuticals, Inc.,” and changed its name to “Galectin Therapeutics Inc.” on May 26, 2011. The Company has operated at a loss since its inception and has had no revenues. The Company anticipates that losses will continue for the foreseeable future. At December 31, 2022, the company had $ 18,592,000 of unrestricted cash and cash equivalents available to fund future operations. In July 2022, the Company entered into a $ 60 million unsecured line of credit financing with its chairman, Richard E. Uihlein (See Note 10). The Company believes there is sufficient cash, including availability of the line of credit, to fund currently planned operations at least through December 31, 2024. To meet its future capital needs, the Company intends to raise additional capital through debt or equity financings, collaborations, partnerships or other strategic transactions. However, there can be no assurance that the Company will be able to complete any such transactions on acceptable terms or otherwise. The inability of the Company to obtain sufficient funds on acceptable terms when needed could have a material adverse effect on the Company’s business, results of operations and financial condition. The Company has the ability to delay certain research activities and related clinical expenses if necessary due to liquidity concerns until a date when those concerns are relieved. The Company is subject to a number of risks similar to those of clinical stage companies, including dependence on key individuals, uncertainty of product development and generation of revenues, dependence on outside sources of capital, risks associated with clinical trials of products, dependence on third-party collaborators for research operations, need for regulatory approval of products, risks associated with protection of intellectual property, and competition with larger, better-capitalized companies. Successful completion of the Company’s development program and, ultimately, the attainment of profitable operations is dependent upon future events, including obtaining adequate financing to fulfill its development activities and achieving a level of revenues adequate to support the Company’s cost structure. There are no assurances that the Company will be able to obtain additional financing on favorable terms, or at all, or successfully market its products. 2. Summary of Significant Accounting Policies The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States (“GAAP”). Basis of Consolidation. The consolidated financial statements include the accounts of the Company and Galectin Therapeutics Security Corp., its wholly-owned subsidiary, which was incorporated in Delaware on December 23, 2003 and Galectin Sciences LLC (see Note 13). All intercompany transactions have been eliminated. Use of Estimates. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and judgments that may affect the reported amounts of assets, liabilities, equity, revenue, expenses and related disclosure of contingent assets and liabilities. Management’s estimates and judgments include assumptions used in stock option valuations, useful lives of property and equipment and intangible assets, accrued 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. Fair Value Measurements . The Company has certain financial assets and liabilities recorded at fair value. Fair values determined by Level 1 inputs utilize observable data such as quoted prices in active markets. Fair values determined by Level 2 inputs utilize data points other than quoted prices in active markets that are observable either directly or indirectly. Fair values determined by Level 3 inputs utilize unobservable data points in which there is little or no market data, which require the reporting entity to develop its own assumptions. The estimated value of accounts payable and accrued expenses approximates their carrying value due to their short-term nature. See Footnote 6 for Fair Value of Derivatives related to Convertible Notes Payable at December 31, 2022 and 2021, which are level 3 liabilities. Cash and Cash Equivalents. The Company considers all highly-liquid investments with original maturities of 90 days or less at the time of acquisition to be cash equivalents. The Company had no cash equivalents at December 31, 2022 or 2021. Prepaid Expenses and Other Current Assets. Prepaid expenses and other assets consist principally of prepaid insurance, deposits related to the NAVIGATE trial and deferred financing costs (see Note 10). F-8 Index Property and Equipment. Property and equipment, including leasehold improvements, are stated at cost, net of accumulated depreciation and amortization, and are depreciated or amortized using the straight-line method over the estimated useful lives of the related assets of generally three years for computers and office equipment, five years for furniture and fixtures and the shorter of the useful life or life of the lease for leasehold improvements. Security Deposit. At December 31, 2022 and 2021, the Company had a security deposit of $ 6,000 for leased office space included in Prepaid Expenses and Other Current Assets. Long-Lived Assets. The Company reviews all long-lived assets for impairment whenever events or circumstances indicate the carrying amount of such assets may not be recoverable. Recoverability of assets to be held or used is measured by comparison of the carrying value of the asset to the future undiscounted net cash flows expected to be generated by the asset. If such asset is considered to be impaired, the impairment recognized is measured by the amount by which the carrying value of the asset exceeds the discounted future cash flows expected to be generated by the asset. There were no impairments of long-lived assets at December 31, 2022 or 2021. Accrued Expenses . As part of the process of preparing our consolidated financial statements, we are required to estimate accrued expenses. This process involves identifying services that third parties have performed on our behalf and estimating the level of service performed and the associated cost incurred on these services as of each balance sheet date in our consolidated financial statements. Examples of estimated accrued expenses include professional service fees, such as those arising from the services of attorneys and accountants and accrued payroll expenses. In connection with these service fees, our estimates are most affected by our understanding of the status and timing of services provided relative to the actual services incurred by the service providers. In the event that we do not identify certain costs that have been incurred or we under- or over-estimate the level of services or costs of such services, our reported expenses for a reporting period could be understated or overstated. The date on which certain services commence, the level of services performed on or before a given date, and the cost of services are often subject to our judgment. We make these judgments based upon the facts and circumstances known to us in accordance with accounting principles generally accepted in the U.S. Warrants. The Company has issued common stock warrants in connection with the execution of certain equity and debt financings. The fair value of warrants is determined using the Black-Scholes option-pricing 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, 2022 or 2021. Research and Development Expenses. Research and development expenses, including personnel costs, allocated facility costs, lab supplies, outside services, contract laboratory costs related to manufacturing drug product, clinical trials and preclinical 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. Income Taxes. The Company accounts for income taxes in accordance with the accounting rules that requires an asset and liability approach to accounting for income taxes based upon the future expected values of the related assets and liabilities. Deferred income tax assets and liabilities are determined based on the differences between the financial reporting and tax bases of assets and liabilities and for tax loss and credit carry forwards and are measured using the expected tax rates estimated to be in effect when such basis differences reverse. Valuation allowances are established, if necessary, to reduce the deferred tax asset to the amount that will, more likely than not, be realized. Concentration of Credit Risk. Financial instruments that subject the Company to credit risk consist of cash and cash equivalents. The Company maintains cash and cash equivalents and certificates of deposit with well-capitalized financial institutions. At times, those amounts may exceed federally insured limits. The Company has not experienced any losses in such accounts and believes it is not exposed to significant credit risk beyond the normal credit risk associated with commercial banking relationships. The Company has no other significant concentrations of credit risk. Stock-Based Compensation. Stock-based compensation cost is measured at the grant date based on the fair value of the award and is recognized as expense over the service period, which generally represents the vesting period. For awards that have performance-based vesting conditions the Company recognizes the expense over the estimated period that the awards are expected to be earned. The Company generally uses the Black-Scholes option-pricing model to calculate the grant date fair value of stock options. The expense recognized over the service period is required to include an estimate of the awards that will be forfeited. Recent Accounting Standards. In August 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2020-06, Debt — Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging — Contracts in Entity’s Own Equity (Subtopic 815-40) (“ASU 2020-06”) to simplify accounting for certain financial instruments. ASU 2020-06 eliminates the current models that require separation of beneficial conversion and cash conversion features from convertible instruments and simplifies the derivative scope exception guidance pertaining to equity classification of contracts in an entity’s own equity. The new standard also introduces additional disclosures for convertible debt and freestanding instruments that are indexed to and settled in an entity’s own equity. ASU 2020-06 amends the diluted earnings per share guidance, including the requirement to use the if-converted method for all convertible instruments. ASU 2020-06 is effective January 1, 2022 and should be applied on a full or modified retrospective basis, with early adoption permitted beginning on January 1, 2021. The Company adopted ASU 2020-06 effective January 1, 2022. The adoption of ASU 2020-06 did not have an impact on the Company’s financial statements. See Notes 5 and 10 for disclosures related to convertible borrowings. F-9 Index 3. Property and Equipment Property and equipment consist of the following at December 31: 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 $ — $ — Depreciation and amortization expense for the years ended December 31, 2022 and 2021 was $ 0 and $ 0 , respectively. 4. Accrued Expenses Accrued expenses consist of the following at December 31: 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 On April 16, 2021, the Company and Richard E. Uihlein entered into a debt financing arrangement whereby Mr. Uihlein loaned $ 10,000,000 to Company. In consideration for the loan, the Company issued a convertible promissory note (the “April 2021 Note”) in the principal amount of ten million dollars. The April 2021 Note has a maturity date of April 16, 2025 , is prepayable at the option of the Company in whole or in part at any time and is convertible into the Company’s common stock at a conversion price equal to $ 5.00 per share at the option of the noteholder. The April 2021 Note bears interest at the rate of two percent ( 2 %) per annum, compounded annually with an effective interest rate of approximately 3 %. For the years ended December 31, 2022 and 2021, approximately $ 200,000 and $ 142,000 , respectively, of interest expense was accrued and included with the principal in the financial statements. The April 2021 Note also includes a contingent interest component that requires the Company to pay additional interest at a rate of two and one-half percent ( 2.5 %) per quarter ( 10 % per annum) (the “Additional Interest”) beginning on the date of issuance of this Note and ending on the maturity date, provided however, that such payment is only required if and only if the noteholder elects to convert the entire balance of the April 2021 Note into the Company’s common stock on or prior to maturity. As the contingent event is not based on creditworthiness, such feature is not clearly and closely related to the host instrument and accordingly must be bifurcated and recognized as a derivative liability and a debt discount on the April 2021 Note at its inception. The fair value of the contingent interest derivative liability was $ 420,000 at note inception (April 16, 2021). The fair value of the contingent interest derivative liability was $ 249,000 and $ 495,000 and December 31, 2022 and 2021, respectively, and is recognized as a derivative liability in the consolidated balance sheet. The change in the fair value of the derivative liability from April 16, 2021 to December 31, 2021 and for the year ended December 31, 2022 of $ 75,000 and $( 246,000 ), respectively, was charged to other expense/(income) for the years ended December 31, 2022 and 2021. The amortization of the original $ 420,000 debt discount of $ 105,000 and $ 74,000 was recorded as additional interest expense for the years ended December 31, 2022 and 2021, respectively. F-10 Index On September 17, 2021, the Company and Mr. Uihlein entered into a loan agreement in the aggregate of $ 20,000,000 (the “Loan Agreement”) to be funded in two closings and evidenced by two separate unsecured convertible promissory notes. The first of the two promissory notes was also executed and delivered on September 17, 2021, (the “September 2021 Note”) to evidence the first loan in the principal amount of $ 10,000,000 . The second closing under the Loan Agreement for the remaining $ 10,000,000 occurred on December 20, 2021. The September 2021 Note has a maturity date of September 17, 2025 , is prepayable at the option of the Company in whole or in part at any time and is convertible into the Company’s common stock at a conversion price equal to $ 8.64 per share at the option of the noteholder. The September 2021 Note bears interest at the rate of two percent ( 2 %) per annum, compounded annually with an effective interest rate of approximately 3 %. For the years ended December 31, 2022 and 2021, approximately $ 200,000 and $ 58,000 , respectively, of interest expense was accrued and included with the principal in the financial statements. The September 2021 Note also includes a contingent interest component that requires the Company to pay additional interest at a rate of two and one-half percent ( 2.5 %) per quarter ( 10 % per annum) (the “Additional Interest”) beginning on the date of issuance of this Note and ending on the maturity date, provided however, that such payment is only required if and only if the noteholder elects to convert the entire balance of the September 2021 Note into the Company’s common stock on or prior to maturity. As the contingent event is not based on creditworthiness, such feature is not clearly and closely related to the host instrument and accordingly must be bifurcated and recognized as a derivative liability and a debt discount on the September Note at its inception. The fair value of the contingent interest derivative liability was $ 433,000 at note inception (September 17, 2021). The fair value of the contingent interest derivative liability was $ 109,000 and $ 250,000 and December 31, 2022 and 2021, respectively, and is recognized as a derivative liability in the consolidated balance sheet. The change in the fair value of the derivative liability from September 17, 2021 to December 31, 2021 and for the year ended December 31, 2022 of ($ 183,000 ) and ($ 141,000 ), respectively, was recorded to other expense/(income) for the years ended December 31, 2021 and 2022. The amortization of the original $ 433,000 debt discount of $ 108,000 and $ 32,000 was recorded as additional interest expense for the years ended December 31, 2022 and 2021, respectively. On December 20, 2021, the second of the two promissory notes under the Loan Agreement was executed and delivered, (the “December 2021 Note”) to evidence the second loan in the principal amount of $ 10,000,000 . The December 2021 Note has a maturity date of December 20, 2025 , is prepayable at the option of the Company in whole or in part at any time and is convertible into the Company’s common stock at a conversion price equal to $ 5.43 per share at the option of the noteholder. The December Note bears interest at the rate of two percent ( 2 %) per annum, compounded annually with an effective interest rate of approximately 3 %. For the year ended December 31, 2022 and 2021, approximately $ 200,000 and $ 7,000 , respectively, of interest expense was accrued and included with the principal in the financial statements. The December 2021 Note also includes a contingent interest component that requires the Company to pay additional interest at a rate of two and one-half percent ( 2.5 %) per quarter ( 10 % per annum) (the “Additional Interest”) beginning on the date of issuance of this Note and ending on the maturity date, provided however, that such payment is only required if and only if the noteholder elects to convert the entire balance of the December 2021 Note into the Company’s common stock on or prior to maturity. As the contingent event is not based on creditworthiness, such feature is not clearly and closely related to the host instrument and accordingly must be bifurcated and recognized as a derivative liability and a debt discount on the December Note at its inception. The fair value of the contingent interest derivative liability was $ 415,000 at note inception (December 20, 2021). The fair value of the contingent interest derivative liability was $ 214,000 and $ 385,000 at December 31, 2022 and 2021, respectively, and is recognized as a derivative liability in the consolidated balance sheet. The change in the fair value of the derivative liability from December 20, 2021 to December 31, 2021 and for the year ended December 31, 2022 of ($ 30,000 ) and ($ 170,000 ), respectively was recorded to other expense/(income) for the years ended December 31, 2022 and 2021. The amortization of the original $ 415,000 debt discount of $ 104,000 and $ 3,000 was recorded as additional interest expense for the years ended December 31, 2022 and 2021, respectively. The Company’s contractual cash obligations related to the outstanding convertible notes payable is a repayment of the April 2021 Note of the $ 10,000,000 plus accrued interest on April 16, 2025 and a repayment of the September 2021 Note of the $ 10,000,000 plus accrued interest on September 17, 2025 and a repayment of the December 2021 Note of the $ 10,000,000 plus accrued interest on December 30, 2025, unless converted at the option of the noteholder. F-11 Index 6. Fair Value of Financial Instruments There were no level 1 or 2 assets or liabilities at December 31, 2022 or 2021. Level 3 assets and liabilities measured and recorded at fair value on a recurring basis at December 31, 2022 and 2021 were as follows: 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 The April 2021 Note derivative liability – contingent interest was valued using a Monte Carlo Geometric Brownian Stock Path Model. The key assumptions used in the model at December 31, 2022 and 2021 are as follows: 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 % The roll forward of the April 2021 Note derivative liability – contingent interest is as follows: 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 The September 2021 Note derivative liability – contingent interest was valued using a Monte Carlo Geometric Brownian Stock Path Model. The key assumptions used in the model at inception, and at December 31, 2022 and 2021 are as follows: 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 % The roll forward of the September 2021 Note derivative liability – contingent interest is as follows: 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 F-12 Index The December 2021 Note derivative liability – contingent interest was valued using a Monte Carlo Geometric Brownian Stock Path Model. The key assumptions used in the model at inception, and at December 31, 2022 and 2021 are as follows: 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 % The roll forward of the December 2021 Note derivative liability – contingent interest is as follows: 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 At December 31, 2022, the Company had 150,000,000 shares of common stock and 20,000,000 undesignated shares authorized. As of December 31, 2022, 1,742,500 shares have been designated for Series A 12% Convertible Preferred Stock, 900,000 shares have been designated for Series B-1 Convertible Preferred Stock, 2,100,000 shares have been designated for Series B-2 Convertible Preferred Stock, 1,000 shares have been designated for Series C Super Dividend Convertible Preferred Stock, 2,508,000 shares have been designated for Series B-3 Convertible Preferred Stock, 12,748,500 have been designated as common stock and no shares remain undesignated. 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. 2020 At Market Issuance of Common Stock On May 11, 2020, the Company entered into an At Market Issuance Sales Agreement (the “2020 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 $ 40.0 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 2020 At Market Agreement. During the year ended December 31, 2021, the Company issued 845,214 shares of common stock under the 2020 At Market Agreement for net proceeds of $ 3,864,000 . There were no issuances of common stock under the 2020 At Market Agreement during the year ended December 31, 2022. F-13 Index Series A 12 % Convertible Preferred Stock — February 4, 2008 Private Placement On February 4, 2008, the Company closed a private placement begun in October 2007 of its Series A 12 % Convertible Preferred Stock (“Series A”) and related warrants. In this transaction, the Company sold units of securities at $ 6.00 per unit, each unit comprised of (i) one share of Series A Preferred, (ii) a warrant to purchase one share of common stock for $ 9.00 , and (iii) a warrant to purchase one share of common stock for $ 12.00 . Each share of the Series A is entitled to dividends at the rate of 12 % per annum payable at the Company’s option in cash or shares of common stock valued at the higher of $ 6.00 per share or 100 % of the value weighted average price of the Company’s share price for the 20 consecutive trading days prior to the applicable dividend payment date. Dividends are payable semi-annually on March 30 and September 30. The dividend paid on the initial dividend payment date is calculated from the date the Company deposited each subscription advance. The shares of Series A are entitled to vote as a class with the Company’s common stock and each share of Series A is convertible at any time to one-sixth of a share of common stock, subject to adjustment in the event of a stock dividend, stock split or combination, reclassification or similar event. The Company has the right to require conversion if the closing price of the common stock exceeds $ 18.00 for 15 consecutive trading days and a registration statement covering the resale of the shares of common stock issuable upon conversion of the Series A is then in effect. Each warrant is exercisable solely for cash beginning August 3, 2008 and expired on February 4, 2012. The exercise price of each warrant is adjustable in the event of a stock split or stock combination, capital reorganization, merger or similar event. In 2022, 42,500 shares of Series A were converted into 7,287 shares of common stock. There were no shares of Series A converted into shares of common stock in 2021. Prior to 2021, a total of 465,000 shares of Series A had been converted into 73,865 shares of common stock. Series C 6 % Super Dividend Redeemable Convertible Preferred Stock On December 29, 2010, the Company designated and authorized the sale and issuance of up to 1,000 shares of Series C Super Dividend Redeemable Convertible Preferred Stock (“Series C”) with a par value of $ 0.01 and a stated value equal to $ 10,000 (the “Stated Value”). On December 30, 2010, the Company sold and issued 212 shares of Series C at a price of $ 10,000 per share for gross proceeds of $ 2,120,000 . The Company incurred $ 47,000 of cash transaction costs resulting in net cash proceeds of $ 2,073,000 . In addition, the Company issued 500 warrants exercisable at $ 7.20 to a placement agent which had a de minimis value. Additionally, in January 2011, the Company sold and issued 13 shares of Series C at a price of $ 10,000 per share for gross proceeds of $ 130,000 . The terms of the Series C are as follows: Conversion Rights . Each holder of Series C may convert all, but not less than all, of his Series C shares plus accrued and unpaid dividends into Common Stock at the price of $ 6.00 per share of Common Stock (“Conversion Price”), such that approximately 1,667 shares of Common Stock will be issued per each converted share of Series C (accrued and unpaid dividends will be issued as additional shares). At December 31, 2018 and 2017, the 176 outstanding shares of Series C were convertible into a total of approximately 293,340 shares of Common Stock. Subject to the continuing obligation to pay post conversion dividends, the Company may convert all, but not less than all, of the Series C (plus all accrued and unpaid dividends) into Common Stock, at the Conversion Price, upon such time that the closing price of the Common Stock is no less than $ 18.00 per share for 15 consecutive trading days. Dividends . Holders of Series C shall be entitled to receive cumulative non-compounding dividends at the rate per share of Series C equal to the greater of (i) 6 % per annum of the Stated Value (also defined as the “Floor”) or (ii) 2.5 % of net sales until the total dividends paid is equal to the initial investment and 1.25 % of net sales thereafter. The maximum amount each Series C shareholder will receive in dividend payments is equal to $ 100,000 (the “Maximum Payout”). For purposes of this dividend calculation, net sales shall mean gross revenues actually received by the Company, from the sale or licensing of the product DAVANAT ® (GM-CT-01), less chargebacks, returns, expenses attributable to product recalls, duties, customs, sales tax, freight, insurance, shipping expenses, allowances and other customary deductions. The dividend shall be payable in arrears semiannually on March 31 and September 30, beginning with the first such date after the original issue date; provided, however, that all dividends and all other distributions shall cease, and no further dividends or other distributions shall be paid, in respect of each share of Series C from and after such time that the Maximum Payout has been paid in respect of such share of Series C. Such dividends shall be payable at the Company’s option either in cash or in duly authorized, fully paid and non-assessable shares of Common Stock valued at the higher of (i) $ 3.00 per share or (ii) the average of the Common Stock trading price for the ten ( 10 ) consecutive trading days ending on the trading day that is immediately prior to the dividend payment date. Series C Post Conversion Dividend Right . In the event that any share of Series C is converted into Common Stock before the Maximum Payout is paid in respect of such converted share of Series C, then the holder shall have the right to continue to receive dividends in respect of such converted share of Series C equal to the remaining payout (the “Series C Preferred Stock Post Conversion Dividend Right”) which shall be equal to the Maximum Payout less the cumulative dividends received through the conversion date. One share of Series C Preferred Stock Post Conversion Dividend Right shall be issued for each such converted share of Series C. The holder of each Series C Preferred Stock Post Conversion Dividend Right shall receive the remaining payout on an equal basis and in conjunction with the then outstanding shares of Series C and all the other then outstanding Series C Post Conversion Dividend Rights, in the same manner and subject to the same terms and conditions as applicable to the payment of dividends on each share of Series C, except that for purposes of calculating the dividend the Floor shall not apply. The Series C Preferred Stock Post Conversion Dividend Right shall have no stated value, liquidation preference or right to any dividends or distributions other than the remaining payout. The Series C Preferred Stock Post Conversion Right is subject to redemption in the same manner as outstanding Series C shares. F-14 Index At the date of issuance, the Series C have an embedded dividend right to continue to receive dividend payments after conversion to common stock (the Series C Post Conversion Dividend Right) which requires bifurcation. The value of this post conversion dividend right on the date of issuance was determined to be de minimis due to the fact that the payment of a dividend stream other than the 6 % dividend and conversion of Series C prior to the Company achieving sales of GM-CT-01 was deemed improbable at that time. Upon a conversion of the Series C, the Company will be required to record a liability and the related expense during the period of conversion. In July 2011, 5 shares of Series C were converted into 8,334 shares of common stock and 5 Series C Post Conversion Dividend Rights (Dividend Rights) were issued. In 2013, 24 shares of Series C were converted into 40,193 shares of common stock and 24 Dividend Rights were issued. In 2014, 20 shares of Series C were converted into 33,756 shares of common stock and 20 Dividend Rights were issued. Per the terms of the Series C, these Dividend Rights shall continue to participate in dividends, however the Floor shall not apply. At December 31, 2016 and 2015, these Dividend Rights were determined to have a de minimis value, as the payment of a dividend is considered improbable at this time. The Company will continue to evaluate and assess the Series C Post Conversion Dividend Right for each reporting period. Liquidation Rights . In the event of any liquidation, dissolution or winding up of the Company, either voluntarily or involuntarily, the holders of Series C will receive $ 10,000 per share plus accrued and unpaid dividends, payable prior and in preference to any distributions to the holders of Common Stock but after and subordinate to the Series A 12 % Convertible Preferred Stock (“Series A”), Series B-1 and Series B-2, subject to the Maximum Payout. Redemption . Upon a sale of the Company, the Company shall redeem all of the then outstanding shares of Series C and Series C Preferred Stock Post Conversion Rights within thirty ( 30 ) days after the transaction constituting the sale of the Company is closed and such closing is fully funded. The price to redeem a share of Series C and each redeemed Series C Preferred Stock Post Conversion Redemption Right shall be equal to (i) (A) the applicable return on investment (“ROI”) percentage, multiplied by (B) $ 10,000 , minus (ii) the cumulative dividends received through the redemption date. The redemption price shall be payable at the Company’s option either in cash or in shares of common stock valued at the higher of (i) $ 3.00 per share or (ii) the average market price for the ten consecutive trading days ending immediately prior to the date of redemption. The ROI Percentage shall mean the percentage that applies as of the redemption date, as follows: ROI Percentage 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. Due to the redemption feature, the Company has presented the Series C outside of permanent equity, in the mezzanine of the consolidated balance sheets at December 31, 2022 and 2021. At December 31, 2022, the Series C redemption value was $ 8,335,000 . Voting Rights . The Series C shares have no voting rights. 8. Warrants Warrant activity is summarized as follows: 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 F-15 Index The following table summarizes information with regard to outstanding warrants issued in connection with equity and debt financings and consultants as of December 31, 2022. 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 F-16 Index 9. Stock-Based Compensation Summary of Stock-Based Compensation Plans At December 31, 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 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, after amendments, provided for issuance of up to 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. Provisions of the 2009 Plan stipulated that no grants could be made after February 2019; however, grants made prior to that date remain outstanding for their legal term. Stock-Based Compensation Following is the stock-based compensation expense related to common stock options, restricted common stock, common stock warrants and deferred stock units: Year Ended December 31, 2022 2021 Research and development $ 810 $ 420 General and administrative 2,057 1,656 Total stock-based compensation expense $ 2,867 $ 2,076 The fair value of the options granted is determined using the Black-Scholes option-pricing model. The following weighted average assumptions were used: 2022 2021 Risk-free interest rate 1.85 % 0.66 % Expected life of the options 5.7 years 6.0 years Expected volatility of the underlying stock 93.7 % 91.7 % Expected dividend rate 0 % 0 % As noted above, the fair value of stock options is determined by using the Black-Scholes option pricing model. For all options granted since January 1, 2006 the Company has generally used option terms of between 5 to 10 years, generally with 5 to 6 years representing the estimated life of options granted to employees. The volatility of the common stock is estimated using historical volatility over a period equal to the expected life at the date of grant. The risk-free interest rate used in the Black-Scholes option pricing model is determined by reference to historical U.S. Treasury constant maturity rates with terms equal to the expected terms of the awards. An expected dividend yield of zero is used in the option valuation model, because the Company does not expect to pay any cash dividends on common stock in the foreseeable future. At December 31, 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; however, any forfeitures will be accounted for as incurred. F-17 Index The following table summarizes the stock option activity in the stock-based compensation plans: 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 The aggregate intrinsic value in the table above represents the total pre-tax amount, net of exercise price, which would have been received by option holders if all option holders had exercised all options with an exercise price lower than the market price on December 31, 2022, based on the closing price of the Company’s common stock of $ 1.13 on that date. The weighted-average grant-date fair values of options granted during 2022 and 2021 were $ 1.31 and $ 1.78 , respectively. As of December 31, 2022 and 2021, there were unvested options to purchase 2,194,166 and 2,737,084 shares of common stock, respectively. Total expected unrecognized compensation cost related to such unvested options is $ 2,209,000 at December 31, 2022, which is expected to be recognized over a weighted-average period of 1.45 years. The aggregate intrinsic value of stock options exercised for the year ended December 31, 2022 and 2021 was $ 0 and $ 532,447 , respectively. During the years ended December 31, 2022 and 2021, 1,452,918 and 284,583 options became vested, respectively. The total grant date fair value of options vested during the years ended December 31, 2022 and 2021 was $ 2,382,842 and $ 514,287 , respectively. The following table summarizes additional information regarding outstanding and exercisable options under our stock-based compensation plans at December 31, 2022: 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 F-18 Index Restricted Stock Issuances In March 2021, one director elected to take a restricted stock grant in lieu of cash retainers for 2021. A total of 16,588 shares of restricted stock valued at approximately $ 35,000 is being amortized to expense on a straight-line basis until December 31, 2021 when the stock vested in full. In January 2022, one director elected to take a restricted stock grant in lieu of cash retainers for 202 2. A total of 17,677 shares of restricted stock valued at approximately $ 35,000 is being amortized to expense on a straight-line basis until December 31, 2022 when the stock vested in full. Deferred Stock Units In September 2020, the Company entered into an employment agreement with its new Chief Executive Officer whereby 20 % of his base salary and performance bonuses will be paid in cash, and 80 % will be paid in the form of deferred stock units (“ DSUs ”) in accordance with the terms and subject to the provisions set forth in the DSU Agreement. DSUs credited to Mr. Lewis as of any date shall be fully vested and nonforfeitable at all times. Pursuant to an amendment to the DSU Agreement in July 2022, the Company shall issue the shares underlying the outstanding whole number of DSUs credited to Mr. Lewis as follows: twenty five percent shall be issued on March 1, 2023, fifty percent shall be issued on March 1, 2024 and twenty five percent shall be issued on September 1, 2028 . For the year ended December 31, 2022, $ 418,000 of Mr. Lewis’ compensation was recorded as stock compensation expense representing 268,596 shares of common stock to be issued under the DSU agreement with a weighted average grant date fair value of $ 1.56 per share. Also, Mr. Lewis’ bonus for the year ended December 31, 2021 of $ 200,000 (which was included in accrued compensation at December 31, 2021) was approved in January 2022, and represents 103,627 shares of common stock to be issued under the DSU agreement with a grant date fair value of $ 1.93 per share. The $ 200,000 was reclassified from accrued compensation to additional paid in capital in January 2022. For the year ended December 31, 2021, $ 400,000 of Mr. Lewis’ compensation was recorded as stock compensation expense representing 142,206 shares of common stock to be issued under the DSU agreement with a weighted average grant date fair value of $ 2.81 per share. Also, Mr. Lewis’ bonus for the year ended December 31, 2020 of $ 60,000 (which was included in accrued compensation at December 31, 2020) was approved in March 2021 and represents 27,027 shares of common stock to be issued under the DSU agreement with a grant date fair value of $ 2.22 per share. The $ 60,000 was reclassified from accrued compensation to additional paid in capital in March 2021. There is no unrecognized compensation expense related to the DSUs. 10. Convertible Line of Credit – Related Party On July 25, 2022, the Company and Richard E. Uihlein (the “Lender”) entered into a Line of Credit Letter Agreement (the “Credit Agreement”), pursuant to which the Lender shall provide the Company a line of credit of up to $ 60.0 million (the “Line of Credit”) to finance the Company’s working capital needs. The Company may draw upon the Line of Credit through July 31, 2024. Each advance made pursuant to the Credit Agreement shall be evidenced by an unsecured, convertible promissory note (individually, a “Promissory Note,” and collectively, the “Promissory Notes”), and bear interest at the Applicable Federal Rate for short term loans, plus two ( 2 %) percent. Principal and interest on the Promissory Notes are due on or before January 31, 2026 . Only with the consent of the Lender, may the Promissory Notes be prepaid, in whole or in part, at any time without premium or penalty, but with interest on the amount or amounts prepaid. At the election of Lender, the principal and accrued interest on Promissory Note(s) may be converted into the number of shares of the Company’s Common Stock equal to the amount of principal and accrued interest on such Promissory Note divided by the price equal to the closing price of the Common Stock on the date of such Promissory Note, but in no event less than $ 3.00 per share. In connection with the Credit Agreement, the Company agreed to issue the Lender warrants to purchase up to an aggregate of 1,700,000 shares of the Company’s common stock, par value $ 0.001 per share (collectively, the “Warrants”). Upon execution of the Credit Agreement, the Company issued the Lender a Warrant to purchase up to 500,000 shares of Company’s Common Stock at an exercise price of $ 5.00 per share, which Warrant is exercisable upon issuance. Further, pursuant to the Credit Agreement, the Company shall issue to the Lender additional Warrants to purchase up to the remaining 1,200,000 shares of the Company’s common stock, ratably, upon borrowings under the Credit Agreement, with exercise prices equal to 150 % of the closing price of the Company’s common Stock on the date of the Promissory Note evidencing such draw, but in no event more than $ 10.00 per share nor less than $ 3.00 per share. The Warrants expire on July 31, 2029 . The fair value of the 500,000 warrants vested at closing on July 25, 2022 was $ 738,000 at the date of issuance based on the following assumptions: an expected life of 7 years, volatility of 92 %, risk free interest rate of 3.19 % and zero dividends. The fair value of the vested warrants was recorded in other assets (non-current) as a deferred financing cost and will be amortized on a straight-line basis from July 25, 2022 through January 31, 2026. Amortization for the period ended December 31, 2022 of $ 92,000 was recorded as interest expense. On December 19, 2022, the Company executed a $ 10 million Promissory Note under the Line of Credit. The interest rate on this draw is 6.4 % (Applicable Federal Rate for short term loans on date of draw of 4.46 % plus 2 %). The effective interest rate is approximately 7.1 %. Accrued interest on this draw was $ 23,000 at December 31, 2022. The principal and accrued interest is convertible at the option of the Lender at $ 3.00 per share. In accordance with the Credit Agreement, the Company issued the Lender a Warrant to purchase up to 200,000 shares of Company’s Common Stock at an exercise price of $ 3.00 per share, which Warrant is exercisable upon issuance. F-19 Index The fair value of the 200,000 warrants vested at closing on December 19, 2022 was $ 160,780 at the date of issuance based on the following assumptions: an expected life of 7 years , volatility of 91 %, risk free interest rate of 4.06 % and zero dividends. The proceeds were allocated between the Promissory Note and the warrants issued, and the amount allocated to the warrants was recorded as a debt discount netted against principal to be amortized on a straight-line basis, which is not materially different than the effective interest method, from December 19, 2022 through January 31, 2026. Amortization for the period ended December 31, 2022 of $ 2,000 was recorded as interest expense. The fair value of warrants that vest in the future based on borrowings will be computed when those borrowings occur and amortized over the remaining period through January 31, 2026. 11. Loss Per Share Basic net loss per common share is computed by dividing the net loss available to common stockholders by the weighted average number of common shares outstanding during the period. For the years ended December 31, 2022 and 2021, as the Company was in a net loss position, the diluted loss per share computations for such periods did not assume the exercise of warrants and stock options or the conversion of Convertible Notes, or the conversion of convertible preferred stock as they would have had an anti-dilutive effect on loss per share. The following potentially dilutive securities have been excluded from the computations of diluted weighted average shares outstanding as of December 31, 2022 and 2021 as the inclusion thereof would have been anti-dilutive: 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 12. Commitments and Contingencies Lease Commitments The Company has one operating lease for its office space which was amended effective March 1, 2022 for a term of 38 months with no residual value guarantees or material restrictive covenants. The amended lease provided for free rent for the first six and one-half months of the lease and continues the security deposit of $ 6,000 . In addition to base rental payments included in the contractual obligations table below, the Company is responsible for our pro-rata share of the operating expenses for the building. Our lease cost for the years ended December 31, 2022 and 2021 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. Maturity of operating lease as of December 31, 2022 in thousands: 2023 $ 50 2024 51 2025 18 Total 119 Less imputed interest 13 Present value of lease liability $ 106 The discount rate used in calculating the present value of the lease payments was 11 %. F-20 Index Legal Proceedings The Company records accruals for such contingencies to the extent that the Company concludes that their occurrence is probable and the related damages are estimable. There are no pending legal proceedings. Clinical Trial and Research Contingencies The Company has entered into agreements with contractors for research and development activities to further its product candidates. The contracts generally may be canceled at any time by providing thirty days ’ notice. 13. Galectin Sciences LLC In January 2014, we created Galectin Sciences, LLC (the “LLC” or “Investee”), a collaborative joint venture co-owned by SBH Sciences, Inc. (“SBH”), to research and develop small organic molecule inhibitors of galectin-3 for oral administration. The LLC was initially capitalized with a $ 400,000 cash investment to fund future research and development activities, which was provided by the Company, and specific in-process research and development (“IPR&D”) contributed by SBH. The estimated fair value of the IPR&D contributed by SBH, on the date of contribution, was $ 400,000 . Initially, the Company and SBH have a 50 % equity ownership interest in the LLC, with neither party having control over the LLC. Accordingly, from inception through the fourth quarter of 2014, the Company accounted for its investment in the LLC using the equity method of accounting. Under the equity method of accounting, the Company’s investment was initially recorded at cost with subsequent adjustments to the carrying value to recognize additional investments in or distributions from the Investee, as well as the Company’s share of the Investee’s earnings, losses and/or changes in capital. The estimated fair value of the IPR&D contributed to the LLC was immediately expensed upon contribution as there was no alternative future use available at the point of contribution. The operating agreement provides that if either party does not desire to contribute its equal share of funding required after the initial capitalization, then the other party, providing all of the funding, will have its ownership share increased in proportion to the total amount contributed from inception. In the fourth quarter of 2014, after the LLC had expended the $ 400,000 in cash, SBH decided not to contribute its share of the funding required. As a result, the Company contributed the $ 73,000 needed for the fourth quarter of 2014 expenses of the LLC and an additional $ 2,306,000 in total from 2015 through 2020. The Company contributed $ 213,000 and $ 226,000 for the LLC expenses (recorded in research and development expenses) in 2022 and 2021, and SBH contributed $ 35,000 in 2019 and a total of $ 123,000 in 2017 and 2016, respectively. As of December 31, 2022, the Company’s ownership percentage in the LLC was 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 . 14. Income Taxes The components of the net deferred tax assets are as follows at December 31: 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 $ — $ — The primary factors affecting the Company’s income tax rates were as follows: 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-21 Index As of December 31, 2022, the Company has federal and state net operating loss carryforwards totaling $ 80,810,000 and $ 87,141,000 , respectively, which will never expire as a result of the 2017 Tax Act. As of December 31, 2022, the Company has federal and state net operating loss carryforwards totaling $ 131,317,000 and $ 102,003,000 respectively, which expire through 2037 . In addition, the Company has federal and state research and development credits of $ 2,276,000 and $ 1,282,000 , respectively, which expire through 2042 . Ownership changes, as defined by Section 382 of the Internal Revenue Code, may have limited the amount of net operating loss carryforwards that can be utilized annually to offset future taxable income. Past and subsequent ownership changes could further affect the limitation in future years. Because of the Company’s limited operating history and its recorded losses, management has provided, in each of the last two years, a 100 % valuation allowance against the Company’s net deferred tax assets. The Company is subject to taxation in the U.S. and various states. Based on the history of net operating losses all jurisdictions and tax years are open for examination until the operating losses are utilized or the statute of limitations expires. As of December 31, 2022 and 2021, the Company does not have any significant uncertain tax positions. F-22