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, 2020. Our management has concluded, based on their evaluation, that our disclosure controls and procedures were effective as of December 31, 2020 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: 32 Table of Contents 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, 2020. (c) Changes in Internal Control Over Financial Reporting There was no change in our internal control over financial reporting that occurred during the fourth quarter of 2020 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. Item 9B. Other Information None. 33 Table of Contents 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 2020 Annual Meeting of Stockholders. The following table sets for the certain biographical information about our directors as of February 28, 2021, 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) 77 2009 James C. Czirr 67 2009 Kary Eldred (1) 46 2018 Kevin D. Freeman (1)(2)(3) 59 2011 Joel Lewis 51 2017 Gilbert S. Omenn, M.D., Ph.D. (2) 79 2014 Marc Rubin, M.D. (3) 66 2011 Elissa J. Schwartz, Ph.D. 50 2020 Harold H. Shlevin, Ph.D. 71 2019 Richard E. Uihlein, Chairman 75 2017 Richard A. Zordani (1) 48 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 , is being nominated by 10X Fund L.P., pursuant to contractual rights set forth in certain warrants to purchase Common Stock that 10X Fund L.P. holds. Mr. Czirr has served as a director 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; and was a consultant to Metalline Mining Company Inc., now known as Silver Bull Resources, Inc., (AMEX: SVBL), a mineral exploration company seeking to become a low cost producer of zinc. 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 34 Table of Contents 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. 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. 35 Table of Contents 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. 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. 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. Director Nominations No material changes have been made to the procedures by which security holders may recommend nominees to our board of directors. 36 Table of Contents 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. EXECUTIVE OFFICERS Harold Shlevin, Ph.D. , was President and Chief Executive Officer until September 2, 2020, see above under directors. Joel Lewis , age 51, became our President and Chief Executive Officer on September 2, 2020, see above under directors. Pol F. Boudes, M.D., age 62, became our Chief Medical Officer on March 3, 2020. Prior to joining the Company, Dr. Boudes served as the Chief Medical Officer of CymaBay Therapeutics, 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 53, became our Chief Financial Officer on July 1, 2013. From August 2012 through June 2013, 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. SIGNIFICANT EMPLOYEES The following employees are not executive officers of the Company but make significant contributions to the Company. 37 Table of Contents J. Rex Horton, age 51, joined the Company and January 2013 and currently serves as Vice President Commercial Development, Regulatory Affairs and Quality Assurance. Mr. Horton most recently was Director of Regulatory Affairs at Chelsea Therapeutics, where he successfully led the organization through its first NDA filing and favorable FDA Advisory Committee Meeting. In past leadership roles at Solvay Pharmaceuticals and Abbott Laboratories, he led approval efforts for key products including Androgel ® Stickpack, Creon ® Capsules and Luvox ® CR Capsules. He has also provided chemistry, manufacturing and controls (CMC) regulatory leadership and support of INDs and NDAs, including Estrogel ® and Androgel ® Pump. Mr. Horton was a member of the executive leadership team that successfully implemented solutions to significant regulatory issues encountered by Solvay in its interactions with the FDA. Mr. Horton earned his Bachelor’s degree in industrial/manufacturing & systems engineering from The Georgia Institute of Technology. He is a member of the Regulatory Affairs Professional Society (RAPS), Drug Information Association (DIA) and American Association of Pharmaceutical Scientists (AAPS). Eliezer Zomer, Ph.D., age 74, has been our Executive Vice President of Manufacturing and Product Development since the Company’s inception in 2000. Prior to joining our Company, Dr. Zomer had been the founder of Alicon Biological Control, where he served from November 2000 to July 2002. From December 1998 to July 2000, Dr. Zomer served as Vice President of Product Development at SafeScience, Inc. and Vice President of Research and Development at Charm Sciences, Inc. from June 1987 to November 1998. Dr. Zomer received a B. Sc. degree in industrial microbiology from the University of Tel Aviv in 1972, a Ph.D. in biochemistry from the University of Massachusetts in 1978 and undertook a post-doctoral study at the National Institute of Health. 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, 2020. 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 2020 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 Harold H. Shlevin, Ph.D. Chief Executive Officer and President, until September 2, 2020 Joel Lewis Chief Executive Officer and President, from September 2, 2020 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. 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. 38 Table of Contents 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 2019 annual meeting of stockholders approximately 86% of our outstanding common stock voting on the matter voted in favor of the compensation of our NEOs, as disclosed in the proxy materials for the 2019 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 stockholder 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 2022 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 2020. The Compensation Committee may use a compensation consultant in the future and to 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 2020 Base Salary 2019 Base Salary Joel Lewis $ 500,000 (3) - (1) Pol F. Boudes, M.D.. $ 440,500 - (2) Jack W. Callicutt $ 302,100 $ 285,000 (1) Mr. Lewis became our President and Chief Executive Officer on September 2, 2020. 39 Table of Contents (2) Dr. Boudes became our Chief Medical Officer on March 3, 2020. (3) 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 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 2020 performance bonuses were paid in March 2021. Name Performance Bonus Amount Awarded Amount As % of Base Salary Joel Lewis $ 75,000 (3) 45 % (1) Pol F. Boudes, M.D. $ 110,000 30 % (2) Jack W. Callicutt $ 85,000 28 % (1) Mr. Lewis joined the Company on September 2, 2020 and his bonus was prorated for his employment duration in 2020. (2) Dr. Boudes the Company on March 2, 2020 and his bonus was prorated for his employment duration in 2020. (3) 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 In 2018, the Board approved potential cash incentive bonuses (the “Transaction Bonuses”). The potential Transaction Bonuses are payable in connection with a Transaction (as defined below). A “Transaction” is (i) any licensing, development, partnership, or similar arrangements relating to any of the Company’s drug candidates (a “Partnership Transaction”) or (ii) the acquisition of the Company or any of its material assets (an “Acquisition Transaction”). The amounts payable pursuant to the Transaction Bonuses will be equal to 10% of the recipient’s base salary for each $50 million payable to the Company or the Company’s shareholders, as applicable, pursuant to the Transaction to the extent paid in cash or marketable securities, up to a maximum payment of 300% of base salary. If Transaction is a Partnership Transaction and payments to the Company are deferred or otherwise made over time, the amount of the Transaction Bonuses will be based on the Board’s reasonable estimate of the value of the Transaction. To be entitled to receive a Transaction Bonus, if the Transaction is an Acquisition Transaction, an individual must be employed by the Company on the date the Transaction is consummated, or, if the Transaction is a Partnership Transaction, an individual must be employed by the Company on the date that the definitive transaction agreement(s) are executed. No Transaction Bonuses were earned in 2020. Additionally in 2018, the Board also approved retention bonuses payable to certain employees of the Company, including Dr. Shlevin and Mr. Callicutt, equal to 25% of such employee’s base salary (the “Retention Bonuses”) if such employees remained employed by the Company on each of June 30, 2019, December 31, 2019, June 30, 2020 and December 31, 2020 and based upon the annualized salary level in effect on such date. Mr. Lewis and Dr. Boudes joined the Company as employees and officers in 2020 and thus were not part of the retention bonus plan. 40 Table of Contents Name Retention Bonus Amount Awarded Amount As % of Base Salary Harold H. Shlevin, Ph.D. $ 125,000 25 % (1) Jack W. Callicutt $ 151,050 50 % (1) Dr. Shlevin retired as our President and Chief Executive Officer effective September 2, 2020 and thus did not receive a retention bonus at December 31, 2020. 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 9, 2020, the NEOs were awarded the options noted below based on 2019 performance. Of the options, 25% vest on each of June 30, 2020, December 31, 2020, June 30, 2021 and December 31, 2021. 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 Harold H. Shlevin, Ph.D. 1/9/2020 70,000 $ 2.86 Jack W. Callicutt 1/9/2020 50,000 $ 2.86 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 (effective September 2, 2020) 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. 41 Table of Contents 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. 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, 2023 and fifty percent shall be issued on March 1, 2024. Harold H. Shlevin, Ph.D., Chief Executive Officer (until September 2, 2020) Dr. Shlevin retired as Chief Executive Officer effective September 2, 2020. Prior to his retirement his employment was pursuant to an employment agreement dated December 11, 2014 as amended June 8, 2018. Under his employment agreement as amended Dr. Shlevin received a base salary of $500,000 with a target bonus opportunity equal to 50% of his base salary. In connection with his retirement, Dr. Shlevin entered into a Retirement Agreement with the Company dated August 31, 2020 (the “Retirement Agreement”) and a Consulting Agreement with the Company dated August 31, 2020 (the “Consulting Agreement”). The Retirement Agreement provides that Dr. Shlevin shall receive his base compensation through the separation date of September 2, 2020 plus a cash bonus for 2020 of $210,000 in lieu of any other bonuses. He shall be eligible to receive his portion of the “pharma deal achievement bonus” as established by the Board of Directors of the Company on May 22, 2018 in the event a transaction qualifying under such program were to occur during the term of the Consulting Agreement. In addition, Dr. Shlevin’s previously issued stock option awards under the Plan shall continue to vest so long as Dr. Shlevin provides consulting services to the Company under the Consulting Agreement. The Consulting Agreement has an initial term of one year, and for his services Dr. Shlevin shall receive payment of $432 per hour, but not less than $8,640 per month. The Consulting Agreement also includes certain intellectual property, assignment, and non-compete obligations by Dr. Shlevin. 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. 42 Table of Contents 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. SUMMARY COMPENSATION TABLE The following table summarizes the compensation paid to our NEOs for the fiscal years ended December 31, 2020 and 2019. Name and Principal Position Year Salary ($) Bonus ($) Option Awards ($) (1) All Other Compensation ($) Total ($) Harold H. Shlevin, Ph.D., 2020(2) 375,583 335,000 154,266 54,487 (4) 919,336 Chief Executive Officer & President 2019 (3) 500,000 465,625 268,196 72,686 (5) 1,306,507 Joel Lewis, Chief Executive Officer & President 2020(10) 164,773 75,000 486,125 27,660 (11) 753,558 Pol F. Boudes, M.D., Chief Medical Officer 2020(12) 367,083 210,000 419,460 85,938 (13) 1,082,481 Jack W. Callicutt, 2020 (6) 300,675 236,050 110,190 73,457 (8) 720,372 Chief Financial Officer 2019 (7) 285,000 233,451 191,568 68,105 (9) 778,124 (1) Represents the aggregate grant date fair value of option awards made during 2020 and 2019 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 7 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, 2020 and 2019. (2) Dr. Shlevin retired from employment as our President and Chief Executive Officer effective September 2, 2020. His salary in 2020 includes the salary earned prior to his retirement. Dr. Shlevin’s bonus amount in 2020 consisted of $125,000 retention bonus in July 2020 and a bonus of $210,000 pursuant to his retirement agreement. (3) Dr. Shlevin’s bonus amount in 2019 consisted of $125,000 retention bonuses paid in July 2019 and January 2020 and $215,625 performance bonus earned in 2019 which was paid in January 2020. (4) Includes $48,635 for health and other insurance and $5,852 for 401(k) plan contributions. (5) Includes $61,486 for health and other insurance and $11,200 for 401(k) plan contributions. (6) Mr. Callicutt’s bonus amount in 2020 consisted of $75,525 retention bonuses paid in July 2020 and January 2021 and $85,000 performance bonus earned in 2020 which was paid in March 2021. (7) Mr. Callicutt’s bonus amount in 2019 consisted of $71,250 retention bonuses paid in July 2019 and January 2020 and $90,951 performance bonus earned in 2019 which was paid in January 2020. (8) Includes $62,057 for health and other insurance and $11,400 for 401(k) plan contributions. (9) Includes $56,905 for health and other insurance and $11,200 for 401(k) plan contributions. (10) Mr. Lewis became our Chief Executive Officer and President effective September 2, 2020, and his performance bonus was prorated for 2021 and paid in March 2021. Pursuant to his employment agreement, 20% his salary and bonus are paid in cash and 80% are in deferred stock units. (11) Includes $25,419 for health and other insurance and $2,341 for 401(k) plan contributions. (12) Dr. Boudes became our Chief Medical Officer effective March 2, 2020. He was paid a $100,000 bonus upon joining the Company. His performance bonus of $110,000 was prorated for 2020 and paid in March 2021. (13) Includes $74,538 for health and other insurance and $11,400 for 401(k) plan contributions. 43 Table of Contents OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END 2020 The following table sets forth information regarding all outstanding equity awards held by the NEOs at December 31, 2020. The exercise price of the options is set at the closing price of our stock at the date prior to or as of the date of grant. Outstanding options have been approved by our Compensation Committee and our Board. Option Awards Stock Awards Name Number of Securities Underlying Unexercised Options (#) Exercisable Number of Securities Underlying Unexercised Options (#) Unexercisable Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#) Option Exercise Price ($) 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 20,455 (12) 45,819 35,000 (2) — 4.72 01/16/2029 40,000 (3) — 2.86 01/09/2030 20,833 (4) 229,167 (4) 2.65 08/31/2030 Pol F. Boudes, M.D. — (5) 300,000 (5) 1.75 03/12/2030 — — — — Jack W. Callicutt 26,000 (6) — 13.38 01/21/2024 — — — — 8,706 (7) — 1.37 01/20/2026 90,000 (8) — 5.87 01/15/2028 90,000 (9) — 4.16 05/22/2028 50,000 (10) — 4.72 01/16/2029 25,000 (11) 25,000 (11) 2.86 01/09/2030 (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) 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. (6) 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. (7) 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. (8) 25% of the options vested on January 15, 2018 (grant date), 25% vested on June 30, 2018, and 50% vested on December 31, 2018. (9) 25% of the options vested on June 30, 2018, 25% vested on September 30, 2018, and 50% vested on December 31, 2018. (10) 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. (11) 25% of the options vested on June 30, 2020, 25% vested on December 31, 2020, 25% vest on June 30, 2021, and 25% vest on December 31, 2021. (12) Mr. Lewis’ stock awards in the table are from board compensation taken in restricted stock in lieu of cash compensation prior to becoming president and CEO in September 2020. 44 Table of Contents 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. 45 Table of Contents Employment Agreements with our Named Executive Officers Joel Lewis: Under Mr. Lewis’ Employment Agreement, the Company is 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. 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 46 Table of Contents 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. DIRECTOR COMPENSATION The following table details the total compensation earned by our non-employee directors during the year ended December 31, 2020. Name Fees Earned or Paid in Cash ($) Restricted Stock Awards ($) (4) Option Awards ($) (2) Non-Equity Incentive Plan Compensation ($) All Other Compensation ($) (3) Total ($) Gilbert F. Amelio, Ph.D. 47,000 — 87,997 — — 134,997 James C. Czirr 38,500 — 65,998 — — 104,498 Kevin D. Freeman 48,500 — 98,997 — — 147,497 Kary Eldred 42,500 — 65,998 — — 108,498 Joel Lewis — 58,500 87,997 — — 146,497 Gilbert S. Omenn, M.D., Ph.D. 45,000 — 87,997 — — 132,997 Marc Rubin, M.D. 38,500 — 65,998 — — 104,498 Elissa J. Schwartz, Ph.D. (1) 11,569 — — — — 11,569 Harold H. Shlevin, Ph.D. (1) 11,569 — — — — 11,569 Richard Uihlein — 35,000 98,997 — — 133,997 Richard A. Zordani (1) 16,528 — — — — 16,528 (1) Dr. Schwartz and Mr. Zordani were appointed to the board effective August 31, 2020. Dr. Shlevin retired as our Chief Executive Officer and president effective September 2, 2020 but retained his position on our board. Dr. Shlevin’s board compensation is for the period after his retirement from employment through the end of the year. (2) Represents the grant date fair value of option awards based upon the Black Scholes valuation model made in 2020. Options were granted on January 9, 2020 and will vested in full on December 31, 2020. For a description of the assumptions used to determine these amounts, see Note 7 to the Notes to the Consolidated Financial Statements herein our Annual Report on Form 10-K for the fiscal year ended December 31, 2020. (3) Excludes travel expense reimbursements. (4) Mr. Lewis and Mr. Uihlein elected to receive restricted stock in lieu of cash retainer for their service. The restricted shares vest in full on January 9, 2021. Name Number of Shares Subject to Option Awards Held as of December 31, 2020 Gilbert F. Amelio, Ph.D. 75,000 James C. Czirr 755,125 Kary Eldred 101,875 Kevin D. Freeman 179,839 Joel Lewis (1) 379,250 Gilbert S. Omenn, M.D., Ph.D. 178,750 Marc Rubin, M.D. 104,565 Richard Uihlein 66,362 TOTAL 1,436,154 (1) Mr. Lewis became our Chief Executive Officer and president effective September 2, 2020 and was granted 250,000 stock options which is included here. 47 Table of Contents For a more detailed description of the assumptions used for purposes of determining grant date fair value, see Note 7 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 2020 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. Additionally, in December 2016, the Board approved cash retainers of $3,500 to be paid to each member of the Board’s investor relation/public relations committee. On January 9, 2020, stock option grants were made to non-employee directors which vest 100% on December 31, 2020. The Chairman and Vice-Chairman were each granted 45,000 stock options, the chairs of the Nominating and Corporate Governance Committee, the Audit Committee and the Compensation Committee were each granted 40,000 stock options and remaining non-employee directors were each granted 30,000 stock options. Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters The following table sets forth, as of February 28, 2021, 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. 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, 2021 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 13,610,095 (5) 21.4 % 100,000 7.5 % 10X Fund, L.P. (8) 12,068,687 (6) 19.2 % — — David Smith (9) — — 175,000 13.2 % Early Equities LLC (9) — — 100,000 (7) 7.5 % Richard E. Uihlein (11) 11,223,949 (12) 18.6 % — — Directors and Named Executive Officers James C. Czirr 13,610,095 (5) 21.4 % 100,000 7.3 % Gilbert F. Amelio, Ph.D. 139,614 * — — Kevin Freeman 888,881 (10) 1.5 % — — Joel Lewis 361,785 * — — Gilbert S. Omenn, M.D., Ph.D. 260,990 * 50,000 3.7 % Marc Rubin, M.D. 118,146 * — — Richard E. Uihlein 11,223,949 (12) 18.6 % — — Richard A. Zordani 15,353 * — — 48 Table of Contents 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) Elissa J. Schwartz — — — — Kary Eldred 911,575 (13) 1.6% — — Harold H. Shlevin, Ph.D. 366,706 * — — Pol F. Boudes 60,000 * — — Jack W. Callicutt 293,905 * — — All executive officers and directors as a group (13 persons) 28,250,999 (14) 42.4% 150,000 11.0% * 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, 2021. Directors, Nominees and Named Executive Officers Options Exercisable Within 60 Days James C. Czirr 755,125 Gilbert F. Amelio, Ph.D. 75,000 Marc Rubin, M.D. 104,565 Gilbert S. Omenn, M.D., Ph.D 178,750 Kevin Freeman 179,839 Kary Eldred 101,875 Joel Lewis. 170,916 Richard E. Uihlein. 66,362 Harold Shlevin, Ph.D. 358,000 Pol F. Boudes, M.D. 60,000 Jack Callicutt 289,706 All executive officers and directors as a group 2,340,138 (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) 57,156,030 shares of our common stock outstanding as of February 28, 2021 and (ii) the number of shares of our common stock that such person has the right to acquire within 60 days after February 28, 2021. (4) Based on 1,302,500 shares of Series A preferred stock outstanding as of February 28, 2021. (5) Includes (i) 12,068,687 shares of common stock and stock held by 10X Fund, L.P., 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, which shares consist of: 5,732,253 common shares issuable upon exercise of warrants; shares of common stock acquired upon exercise of warrants; and common shares issued as stock dividends paid on the Series B preferred stock which is net of shares sold or distributed to 10X Fund, L.P.; and (ii) 1,541,408 shares of common stock owned directly by Mr. Czirr, consisting of 769,616 shares of common stock owned by Mr. Czirr, 755,125 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 5,732,253 common shares issuable upon exercise of warrants; shares of common stock acquired upon exercise of warrants; and common shares issued as stock dividends paid on the Series B preferred stock which is net of shares sold or distributed to 10X Fund limited partners, 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, has voting and investment power, and disclaims beneficial ownership, of these securities. (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. 49 Table of Contents (10) Includes 569,141 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) 7,937,869 shares of common stock, (ii) 3,136,384 common shares issuable upon the exercise of common stock purchase warrants, (iii) 66,362 common shares issuable upon the exercise of common stock options, and (iv) 83,334 common shares issuable upon conversion of Series C preferred non-voting stock. (13) Includes 44,915 shares of common stock, 16,869 common stock purchase warrants, and 101,875 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. EQUITY COMPENSATION PLAN INFORMATION The following table provides information as of December 31, 2020 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, 2020. 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 3,487,575 $ 3.90 2,872,307 Equity compensation plans not approved by security holders (1) 500,000 $ 7.02 — Total 3,987,575 $ 4.29 2,872,307 (1) Represents grants by our Board for stock options granted to employees and consultants that are outside of the stockholder approved compensation plans. The shares underlying these grants are not registered upon exercise and have six month holding restrictions under Rule 144 of the SEC. 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 2020, we did not participate in any transactions in which any of the Company Nominees, Series B Directors or Series B Nominees, 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, 2020. The Company has a $10 million Line of Credit arrangement with Richard E. Uihlein, a director and shareholder pursuant to an agreement established in December, 2017 and amended in December, 2018 and January, 2019. Under the arrangement the Company may borrow up to $10 million from Mr. Uihlein on an unsecured basis and with any borrowings bearing interest at the Applicable Federal Rate for short terms loans published by the Internal Revenue Service (0.14% in January 2021). Borrowings may be made through December 31, 2021 with repayment due on December 31, 2022. In connection with the Line of Credit agreement, the Company issued to Mr. Uihlein warrants to purchase 1 million shares of the Company’s common stock for $5 per share. Half of the warrants vested at closing of the Line of Credit and the other half vest ratably with borrowings under the agreement. As of the date of this Annual Report, there have been no borrowings under the Line of Credit. 50 Table of Contents 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. 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, 2020. FEES PAID TO CHERRY BEKAERT LLP Fiscal Year 2020 Fiscal Year 2019 Audit Fees (1) $ 135,000 $ 161,000 Audit-Related Fees (2) 14,323 22,000 Tax Fees 17,000 16,400 All Other Fees — — Total Fees $ 166,323 $ 199,400 (1) Audit Fees. These are fees for professional services for the audit of our annual financial statements dated December 31, 2020 and 2019 and the and the effectiveness of internal control over financial reporting for the Company as of December 31, 2019 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 2020 and 2019 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. 51 Table of Contents 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. 52 Table of Contents 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 Second Amended and Restated Certificate of Designation of Preferences, Rights and Limitations of Series B-1 Convertible Preferred Stock, Series B-2 Convertible Preferred Stock and Series B-3 Convertible Preferred Stock of Galectin Therapeutics, Inc., as filed with the Secretary of State of the State of Nevada on September 22, 2016. (Incorporated by reference to the Company’s Current Report on Form 8-K filed with the Commission on September 27, 2016.) 3.6 First Amendment to Second Amended and Restated Certificate of Designation of Preferences, Rights and Limitations of Series B-1 Convertible Preferred Stock, Series B-2 Convertible Preferred Stock and Series B-3 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.) 3.7 Certificate of Designation of Preferences, Rights and Limitations of Common Stock (Class W) of Galectin Therapeutics, Inc., as filed with the Secretary of State of the State of Nevada on February 13, 2017. (Incorporated by reference to the Company’s Current Report on Form 8-K filed with the Commission on February 17, 2017.) 3.8 First Amendment to Certificate of Designation of Preferences, Rights and Limitations of Common Stock (Class W) 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.) 53 Table of Contents Exhibit Number Description of Document 3.9 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.) 3.10 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.) 4.1 Form of Class A-1 Common Stock Purchase Warrant (Incorporated by reference to the Company’s Current Report on Form 8-K filed with the Commission on February 18, 2009.) 4.2 Form of Class A-2 Common Stock Purchase Warrant (Incorporated by reference to the Company’s Current Report on Form 8-K filed with the Commission on February 18, 2009.) 4.3 Form of Class B Common Stock Purchase Warrant (Incorporated by reference to the Company’s Current Report on Form 8-K filed with the Commission on February 18, 2009.) 4.4 Amended Form of Class A-1 Common Stock Purchase Warrant (Incorporated by reference to the Company’s Current Report on Form 8-K as filed with the Commission on January 27, 2011.) 4.5 Amended Form of Class A-2 Common Stock Purchase Warrant (Incorporated by reference to the Company’s Current Report on Form 8-K as filed with the Commission on January 27, 2011.) 4.6 Amended Form of 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 27, 2011.) 4.7 Form of Warrant Agreement between Galectin Therapeutics Inc. and Continental Stock Transfer and Trust Company, as warrant agent (including form of warrant certificate) (Incorporated by reference to the Company’s Current Report on Form 8-K as filed with the Commission on March 23, 2012.) 4.8 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 November 20, 2015.) 4.9 Form of Class B-3 Common Stock Purchase Warrant (Incorporated by reference to the Company’s Current Report on Form 8-K filed with the Commission on September 27, 2016.) 4.10 Form of Lock-Up Common Stock Purchase Warrant (Incorporated by reference to the Company’s Current Report on Form 8-K filed with the Commission on September 27, 2016.) 4.11 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.) 4.12 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.) 4.13 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.) 4.14 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.) 4.15 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.) 54 Table of Contents Exhibit Number Description of Document 4.16 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.) 4.17 Form of Non-Transferable Subscription Rights Certificates (Incorporated by reference to the Company’s Registration Statement on Form S-3 as filed with the Commission on March 6, 2019.) 4.18 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.) 4.19 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.) 4.20* Description of Registrant’s securities 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.) 10.6† Common Stock Purchase Warrant dated August 3, 2010 issued to Peter Traber. (Incorporated by reference to the Company’s Quarterly Report on Form 10-Q as filed with the Commission on August 13, 2010.) 10.7† Non-Qualified Stock Option Agreement dated March 7, 2011 (Incorporated by reference to the Company’s Current Report on Form 8-K as filed with the Commission on March 9, 2011.) 10.8 Agreement dated April 22, 2011, between Pro-Pharmaceuticals, Inc. and Sigma-Aldrich, Inc. (Incorporated by reference to the Company’s Current Report on Form 8-K as filed with the Commission on April 28, 2011.) 10.9† Non-Qualified Stock Option Agreement for James C. Czirr (Incorporated by reference to the Company’s Registration Statement on Form S-8, as filed with the Commission on August 15, 2011.) 10.10† Amended and Restated Employment Agreement dated December 11, 2014 between Harold H. Shlevin and Galectin Therapeutics Inc. (Incorporated by reference to the Company’s Current Report on Form 8-K as filed with the Commission on December 12, 2014.) 10.11† First Amendment to Employment Agreement, dated June 8, 2018, by and between Galectin Therapeutics Inc. and Harold H. Shlevin, Ph.D. (Incorporated by reference to the Company’s Current Report on Form 8-K as filed with the Commission on June 12, 2018) 10.12 Amended Form of Class A-2 Common Stock Purchase Warrant (Incorporated by reference to the Company’s Quarterly Report on Form 10-Q as filed with the Commission on August 14, 2013.) 10.14 Amended Form of Class B Common Stock Purchase Warrant (Incorporated by reference to the Company’s Quarterly Report on Form 10-Q as filed with the Commission on August 14, 2013.) 55 Table of Contents Exhibit Number Description of Document 10.15† 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.) 10.16† 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.) 10.17 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.)*** 10.18 Securities Purchase Agreement, dated November 19, 2015, by and among Galectin Therapeutics Inc. and the Purchasers identified therein (Incorporated by reference to the Company’s Current Report on Form 8-K as filed with the Commission on November 20, 2015.) 10.19 Placement Agency Agreement, dated November 19, 2015, by and between Galectin Therapeutics Inc. and Roth Capital Partners, LLC (Incorporated by reference to the Company’s Current Report on Form 8-K as filed with the Commission on November 20, 2015.) 10.20 Registration Rights Agreement, dated November 19, 2015, by and between Galectin Therapeutics Inc. and the Purchasers signatory thereto (Incorporated by reference to the Company’s Current Report on Form 8-K as filed with the Commission on November 20, 2015.) 10.21 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.)*** 10.22† Jack W. Callicutt Retention Bonus Letter Agreement (Incorporated by reference to the Company’s Current Report on Form 8-K as filed with the Commission on June 20, 2016.) 10.23† Harold H. Shlevin, Ph.D. Retention Bonus Letter Agreement (Incorporated by reference to the Company’s Current Report on Form 8-K as filed with the Commission on June 20, 2016.) 10.24 Securities Purchase Agreement, dated September 22, 2016, by and between Galectin Therapeutics Inc. and 10X Fund, L.P. (Incorporated by reference to the Company’s Current Report on Form 8-K as filed with the Commission on September 27, 2016.) 10.25† 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.) 10.26 Registration Rights Agreement, dated September 22, 2016, by and between Galectin Therapeutics Inc. and 10X Fund, L.P. (Incorporated by reference to the Company’s Current Report on Form 8-K as filed with the Commission on September 27, 2016.) 10.27 Form of Subscription Agreement entered into between Galectin Therapeutics Inc. and certain purchasers (Incorporated by reference to the Company’s Current Report on Form 8-K as filed with the Commission on December 29, 2016.) 10.28 Amendment to Securities Purchase Agreement, dated December 23, 2016, by and between Galectin Therapeutics Inc. and 10X Fund, L.P. (Incorporated by reference to the Company’s Current Report on Form 8-K as filed with the Commission on December 29, 2016.) 10.29 At Market Issuance Sales Agreement, dated May 19, 2017, by and between Galectin Therapeutics Inc. and FBR Capital Markets & Co. (Incorporated by reference to the Company’s Current Report on Form 8-K as filed with the Commission on May 19, 2017.) 56 Table of Contents Exhibit Number Description of Document 10.30 Line of Credit Agreement, dated December 19, 2017, by and between Galectin Therapeutics Inc. and 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.) 10.31 First Amendment to Line of Credit Agreement, dated as of 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.) 10.32 Second Amendment to Line of Credit Letter Agreement, 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.) 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, 2020, 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 57 Table of Contents 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 31, 2021. 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 Joel Lewis Chief Executive Officer, President and Director (principal executive officer) March 31, 2021 /S/ JACK W. CALLICUTT Jack W. Callicutt Chief Financial Officer (principal financial and accounting officer) March 31, 2021 /S/ RICHARD E. UIHLEIN Richard E. Uihlein Director and Chairman of the Board March 31, 2021 /S/ GILBERT F. AMELIO, Ph.D. Gilbert F. Amelio, Ph.D. Director March 31, 2021 /S/ JAMES C. CZIRR James C. Czirr Director March 31, 2021 /S/ KARY ELDRED Kary Eldred Director March 31, 2021 /S/ KEVIN D. FREEMAN Kevin D. Freeman Director March 31, 2021 /S/ GILBERT S. OMENN, M.D., Ph.D. Gilbert S. Omenn, M.D., Ph.D. Director March 31, 2021 /S/ MARC RUBIN, M.D. Marc Rubin, M.D. Director March 31, 2021 /S/ ELISSA J. SCHWARTZ, Ph.D. Elissa J. Schwartz, Ph.D. Director March 31, 2021 /S/ HAROLD H. SHLEVIN, Ph.D. Harold H. Shlevin, Ph.D. Director March 31, 2021 /S/ RICHARD A. ZORDANI Richard A. Zordani Director March 31, 2021 58 Table of Contents Galectin Therapeutics Inc. and subsidiaries Table of Contents 1. Reports of Independent Registered Public Accounting Firm F-1 2. Consolidated Balance Sheets as of December 31, 2020 and 2019 F-4 3. Consolidated Statements of Operations for the years ended December 31, 2020 and 2019 F-5 4. Consolidated Statements of Changes in Redeemable Convertible Preferred Stock and Stockholders’ Equity (Deficit) for the years ended December 31, 2020 and 2019 F-6 5. Consolidated Statements of Cash Flows for the years ended December 31, 2020 and 2019 F-8 6. Notes to Consolidated Financial Statements F-9 59 Table of Contents REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors and Stockholders of Galectin Therapeutics Inc. and Subsidiaries: Opinions 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, 2020 and 2019, 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, 2020 and 2019, 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. F-1 Table of Contents 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, 2020, and expects to incur additional losses in the foreseeable future. Currently, management’s forecasts and related assumptions illustrate their 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 its ability to raise capital through debt and equity issuances to fund research and development clinical trial costs and other general and administrative costs. As a result, a high degree of auditor judgment and increased audit effort was required in performing audit procedures to evaluate the reasonableness of management’s estimates. How We Addressed the Matter in Our Audit Our audit procedures included the following: •   Obtained an understanding of the internal controls and processes in place over the Company’s preparation of forecasted information and considerations of the Company’s obligations. •   We tested the reasonableness of the forecasted research and development expenses, operating expenses, and uses and sources of cash used in management’s assessment of whether the Company has sufficient liquidity to fund operations for at least one year from the financial statement issuance date. This testing included inquiries with management, comparison of prior period forecasts to actual results, consideration of positive and negative evidence impacting management’s forecasts, the Company’s financing arrangements in place as of the report date, consideration of the Company’s relationships with its financing partners, performance of a sensitivity analysis of accelerated uses of cash, and creation of an independent estimate of expected future cash flows. Valuation of Accrued and Prepaid Clinical Trial Expenses Description of Matter The Company’s accrued expenses total approximately $4 million at December 31, 2020, which included the estimated obligation for clinical trial expenses incurred as of December 31, 2020 but not paid as of that date in the amount of approximately $3.1 million. In addition, the Company’s total prepaid expenses and other current assets totaled $2.3M, 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. F-2 Table of Contents 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 process used in determining the valuation and completeness of accrued and prepaid clinical trial expenses. •   We 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 and valuation 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 31, 2021 F-3 Table of Contents GALECTIN THERAPEUTICS INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS December 31, 2020 2019 (in thousands) ASSETS Current assets: Cash and cash equivalents $ 27,142 $ 47,480 Prepaid expenses and other current assets 2,323 729 Total current assets 29,465 48,209 Property and equipment, net — — Other 135 258 Total assets $ 29,600 $ 48,467 LIABILITIES, REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ (DEFICIT) EQUITY Current liabilities: Accounts payable $ 1,292 $ 1,661 Accrued expenses 4,042 1,093 Accrued dividends payable 65 66 Total current liabilities 5,399 2,820 Other liabilities 8 52 Total liabilities 5,407 2,872 Commitments and contingencies (Note 10) Series C 6% super dividend redeemable convertible preferred stock; 1,000 shares authorized, 176 issued and outstanding at December 31, 2020 and 2019, redemption value: $ 8,546,000 , liquidation value: $ 1,786,000 at December 31, 2020 1,723 1,723 Stockholders’ equity: Undesignated stock, $ 0.01 par value; 20,000,000 shares authorized at December 31, 20 20 and 201 9 , 20,000,000 shares designated at December 31, 2020 and 2019, respectively — — Series A 12% convertible preferred stock; 1,742,500 shares authorized, 1,302,500 and 1,327,500 issued and outstanding at December 31, 2020 and 2019, respectively, liquidation value $ 1,302,500 at December 31, 2020 527 537 Common stock, $ 0.001 par value; 100,000,000 shares authorized at December 31, 2020 and 2019, 57,077,055 and 56,894,642 issued and outstanding at December 31, 2020 and 2019, respectively 56 56 Additional paid-in capital 261,883 259,673 Accumulated deficit ( 239,996 ) ( 216,394 ) Total stockholders’ equity 22,470 43,872 Total liabilities, redeemable convertible preferred stock and stockholders’ equity $ 29,600 $ 48,467 See notes to consolidated financial statements. F-4 Table of Contents GALECTIN THERAPEUTICS INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS Year Ended December 31, 2020 2019 (in thousands, except per share amounts) Operating expenses: Research and development $ 17,976 $ 7,467 General and administrative 5,468 5,971 Total operating expenses 23,444 13,438 Total operating loss ( 23,444 ) ( 13,438 ) Other income (expense): Interest income 66 231 Interest expense ( 87 ) ( 87 ) Total other income (expense) ( 21 ) 144 Net loss $ ( 23,465 ) $ ( 13,294 ) Preferred stock dividends ( 137 ) ( 263 ) Warrant modification (Note 5) — ( 6,622 ) Net loss applicable to common stockholders $ ( 23,602 ) $ ( 20,179 ) Basic and diluted net loss per share $ ( 0.41 ) $ ( 0.39 ) Shares used in computing basic and diluted net loss per share 57,029 52,238 See notes to consolidated financial statements. F-5 Table of Contents GALECTIN THERAPEUTICS INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY (DEFICIT) For the Years Ended December 31, 2020 and 2019 (amounts in thousands except share data) Series C Super Dividend Redeemable Convertible Preferred Stock Number of Shares Amount Balance at January 1, 2019 176 $ 1,723 Balance at December 31, 2019 176 $ 1,723 Balance at December 31, 2020 176 $ 1,723 See notes to consolidated financial statements. F-6 Table of Contents 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, 2020 and 2019 (amounts in thousands except share data) Series A 12% Convertible Preferred Stock Series B-1 12% Convertible Preferred Stock Series B-2 12% Convertible Preferred Stock Series B-3 8% Convertible Preferred Stock Common Stock Number of Shares Amount Number of Shares Amount Number of Shares Amount Number of Shares Amount Number of Shares Amount Additional Paid-In Capital Retained Deficit Total Stockholders’ Equity (Deficit) Balance at January 1, 2019 1,327,500 $ 537 900,000 $ 1,761 2,100,000 $ 3,697 2,508,000 $ 1,224 41,190,905 $ 41 $ 194,130 $ ( 196,215 ) $ 5,175 Series A 12% convertible preferred stock dividend 13,275 49 ( 129 ) ( 80 ) Series B-1 12% convertible preferred stock dividend ( 6 ) ( 6 ) Series B-2 12% convertible preferred stock dividend ( 15 ) ( 15 ) Series B-3 8% convertible preferred stock dividend ( 9 ) ( 9 ) Series C super dividend redeemable convertible preferred stock dividend 14,280 53 ( 104 ) ( 51 ) Issuance of common stock 11,150,620 10 47,809 47,819 Conversion of Series B Convertible Preferred to common ( 900,000 ) ( 1,767 ) ( 2,100,000 ) ( 3,697 ) ( 2,508,000 ) ( 1,224 ) 3,789,346 4 6,678 Issuance of common stock for warrant exercises 585,223 1 2,499 2,500 Issuance of common stock for stock option exercises 150,993 150 150 Warrant modification (Note 5) 6,622 ( 6,622 ) Stock-based compensation expense 1,683 1,683 Net loss ( 13,294 ) ( 13,294 ) Balance at December 31, 2019 1,327,500 $ 537 — — — — — — 56,894,642 $ 56 $ 259,673 $ ( 216,394 ) $ 43,872 Series A 12% convertible preferred stock dividend 26.300 61 ( 61 ) Series C super dividend redeemable convertible preferred stock dividend 33,416 76 ( 76 ) Issuance of common stock 14,452 44 44 Conversion of Series A Convertible Preferred to common ( 25,000 ) ( 10 ) 4,553 11 1 Issuance of common stock for stock option exercises 84,624 219 219 Stock-based compensation expense 19,068 1,799 1,799 Net loss ( 23,465 ) ( 23,465 ) Balance at December 31, 2020 1,302,500 $ 527 — — — — — — 57,077,055 $ 56 $ 261,883 $ ( 239,996 ) $ 22,470 See notes to consolidated financial statements. F-7 Table of Contents GALECTIN THERAPEUTICS INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS Year Ended December 31, 2020 2019 (in thousands) CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $ ( 23,465 ) $ ( 13,294 ) Adjustments to reconcile net loss to net cash from operating activities: Amortization of right to use asset 36 35 Stock-based compensation expense 1,799 1,683 Non-cash interest expense 87 87 Changes in operating assets and liabilities: Prepaid expenses and other assets ( 1,594 ) ( 356 ) Accounts payable and accrued expenses 2,536 997 Net cash from operating activities ( 20,601 ) ( 10,848 ) CASH FLOWS FROM INVESTING ACTIVITIES: Net cash from investing activities — — CASH FLOWS FROM FINANCING ACTIVITIES: Net proceeds from issuance of common stock and warrants 263 50,469 Payment of preferred stock dividends — ( 394 ) Net cash from financing activities 263 50,075 NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS ( 20,338 ) 39,227 CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 47,480 8,253 CASH AND CASH EQUIVALENTS, END OF PERIOD $ 27,142 $ 47,480 NONCASH FINANCING ACTIVITIES: Payment of preferred stock dividends in common stock $ 137 $ 102 See notes to consolidated financial statements. F-8 Table of Contents 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, 2020, the Company had $ 27,142 ,000 of unrestricted cash and cash equivalents available to fund future operations. The Company believes there is sufficient cash, including availability of the line of credit (see Note 8), to fund currently planned operations at least through March 31, 2022. We will require more cash to fund our operations after March 31, 2022 and believe we will be able to obtain additional financing. The currently planned operations include costs related to our adaptively designed NAVIGATE Phase 2b/3 clinical trial. Currently, we expect to require an additional approximately $ 45 -$ 50 million to cover costs of the trial to reach the planned interim analysis estimated to occur in the second half of 2023 along with drug manufacturing and other scientific support activities and general and administrative costs. However, there can be no assurance that we will be successful in obtaining such new financing or, if available, that such financing will be on terms favorable to us. If we are unsuccessful in raising additional capital to fund operations before March 31, 2022, we may be required to cease operations. 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 11). 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, 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. There were no Level 2 or 3 assets or liabilities at December 31, 2020 or 2019. 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, 2020 or 2019. 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 8). F-9 Table of Contents 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, 2020 and 2019, 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, 2020 or 2019. 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, 2020 or 2019. 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 and certificates of deposit. 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 no 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. F-10 Table of Contents Recently Adopted Accounting Standards . In December 2019, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) No. 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (“ASU 2019-12”), which is intended to simplify various aspects related to accounting for income taxes. ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application. This standard will be effective for the Company’s interim and annual periods beginning with the first quarter of fiscal 2021 and must be applied on a modified retrospective basis. This standard will not materially impact the Company’s consolidated financial statements. 3. Property and Equipment Property and equipment consist of the following at December 31: 2020 2019 (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, 2020 and 2019 was $ 0 and $ 0 , respectively. 4. Accrued Expenses Accrued expenses consist of the following at December 31: 2020 2019 (in thousands) Legal and accounting fees $ 122 $ 81 Accrued compensation 789 973 Lease liability 44 39 Accrued research and development costs and other 3,087 — Total $ 4,042 $ 1,093 5. Stockholders’ Equity At December 31, 2020, the Company had 100,000,000 shares of common stock and 20,000,000 undesignated shares authorized. As of December 31, 2020, 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. In June 2020, the Company issued 14,452 shares of its common stock under the 2020 At Market Agreement for net proceeds of approximately $ 44,000 . F-11 Table of Contents 2017 At Market Issuance of Common Stock On May 19, 2017, the Company entered into an At Market Issuance Sales Agreement (the “2017 At Market Agreement”) with a sales agent under which the Company may issue and sell shares of its common stock having an aggregate offering price of up to $ 30.0 million from time to time through the sales agent. Sales of the Company’s common stock through the sales agent, if any, will be made by any method that is deemed an “at the market” offering as defined by the U.S. Securities and Exchange Commission. The Company will pay to the sales agent a commission rate equal to 3.0 % of the gross proceeds from the sale of any shares of common stock sold through the sales agent under the 2017 At Market Agreement. During the year ended December 31, 2019, the Company issued 662,459 shares of its common stock under the 2017 At Market Agreement for net proceeds of approximately $ 2,930,000 . There were no issuances of common stock under the 2017 At Market Agreement in 2020, and the 2017 At Market Agreement was terminated in May 2020. Rights Offering On May 23, 2019, the Company completed an offering of common stock and warrants to its shareholders of record as of April 29, 2019. In the offering, the Company received approximately $ 44.9 million for the issuance of 10,488,161 shares of common stock and warrants which may be exercised for 2,622,154 shares of common stock. The warrants may be exercised at $ 7.00 per share of common stock and expire on May 23, 2026. The warrants were valued at approximately $ 8.2 million as of the issuance, using the closing price of $ 4.01 , a life of 7 years, a volatility of 101 % and a risk-free interest rate of 2.33 %. Based upon the Company’s analysis of the criteria contained in ASC Topic 815-40, “Derivatives and Hedging — Contracts in Entity’s Own Equity” the Company has determined that warrants issued in connection with this financing transaction were not derivative liabilities and therefore, were recorded as additional paid-in capital. 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 2020, 25,000 shares of Series A were converted into 4,553 shares of common stock which included 387 shares relating to the prorated dividend prior to conversion. There were no shares of Series A converted into shares of common stock in 2019. Prior to 2018, a total of 410,000 shares of Series A had been converted into 69,312 shares of common stock. Series B Convertible Preferred Stock On February 12, 2009, the Company entered into a securities purchase agreement (the “10X Agreement”) pursuant to which it agreed to issue and sell to 10X Fund LP, at two or more closings, up to: (i) 3,000,000 shares its Series B-1 and B-2 convertible preferred stock with an aggregate stated value of $ 6.0 million and convertible into 2,000,000 shares of common stock at December 31, 2011 and (ii) warrants to purchase 6,000,000 shares of common stock. Through a series of closings from February 2009 through May 2010, the Company issued and sold, pursuant to the 10X Agreement, a total of (i) 900,000 shares of Series B-1 convertible preferred stock (“Series B-1 convertible preferred stock” or “Series B-1”) and related common stock warrants for 1,800,000 shares of common stock and (ii) 2,100,000 shares of Series B-2 convertible preferred stock (“Series B-2 convertible preferred stock” or “Series B-2”) and related warrants for 4,200,000 shares of common stock for total net proceeds of $5,483,000. On September 22, 2016, the Company entered into a securities purchase agreement (the “B-3 Agreement”) pursuant to which it agreed to issue and sell to 10X Fund LP: (i) 1,500,000 shares its Series B-3 convertible preferred stock (“Series B-3 preferred stock” or “Series B-3”) with an aggregate stated value and proceeds of $ 1.5 million and convertible into 892,349 shares of F-12 Table of Contents common stock, and (ii) warrants to purchase up to 669,262 shares of common stock. Also, pursuant to agreements signed on September 22, 2016 with 10X Fund LP, the Company issued 875,000 warrants to purchase common stock in exchange in exchange for the 10X Fund LP agreeing not to sell any shares of common or preferred stock in the Company for 18 months, except in limited circumstances. Additionally, as previously agreed to by the 10X Fund LP, the sole holder of the Company’s Series B-1, Series B-2 and Series B-3 preferred stock (collectively, with the Series B-1 and Series B-2, the “Series B”), in the Second Amended and Restated Certificate of Designation of Preferences, Rights and Limitations of Series B preferred stock we removed the ability of the holders of the Series B to cause a redemption of their shares of Series B. Accordingly, the Company accounted for the removal of this redemption feature as a modification and reclassified the Series B-1 and Series B-2 preferred stock into permanent equity at September 30, 2016 and forward. On December 23, 2016, the Company and 10X Fund LP amended the B-3 Agreement whereby the Company agreed to issue and sell to 10X Fund LP an additional (i) 1,008,000 shares of its B-3 preferred stock with an aggregate stated value and proceeds of $ 1.0 million and convertible into 896,997 shares of common stock, and (ii) warrants to purchase up to 924,780 shares of common stock. On January 11, 2019, 10X Fund L.P., converted all of its Series B Convertible Preferred Stock into Common Stock of Galectin Therapeutics. Pursuant to the terms of the conversion, as of January 11, 2019, 10X Fund L.P. converted 5,508,000 shares of its Series B-1, B-2 and B-3 Convertible Preferred Stock into 3,789,346 shares of Common Stock of Galectin Therapeutics. All special voting rights and protective provisions that previously benefited the Series B Preferred Stock were extinguished by the conversion to Common Stock. In connection with the conversion of the Series B Preferred Stock, the Company extended by five years the exercise date of warrants for 3,579,642 shares of Common Stock issued by the Company in connection with sale of the Series B-1 and Series B-2 Preferred Stock. Before the extension, the warrants had various expiration dates in 2019 and 2020. The warrant amendments give 10X Fund the right to nominate one director to the Company’s board of directors. Previously, under the now extinguished voting rights of the Series B Preferred, 10X Fund had the right to name two directors and nominate an additional three directors. The Company has accounted for the modified terms of the warrants pursuant to ASC 718, Stock Compensation, whereby the Company has recognized a charge for the change in fair value of the warrants immediately before and immediately after the modification. In January 2019, the Company recognized a one-time non-cash charge of $ 6,622,000 related to the extension of the 3,579,642 warrants. The following assumptions were used to value the extension of the warrants immediately before and immediately after the modification: a) immediately before the modification — an expected life range of 0.09 to 1.33 years, volatility of 98 %, risk free interest rate range of 2.4 % to 2.59 % and zero dividends and; b) immediately following the modification — an expected life range of 5.09 to 6.33 years, volatility range of 106 %, risk free interest rate range of 2.56 % to 2.6 % and zero dividends. 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. F-13 Table of Contents 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. 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 F-14 Table of Contents 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, 2020 and 2019. At December 31, 2020, the Series C redemption value was $ 8,546,000 . Voting Rights . The Series C shares have no voting rights. 6. Warrants Warrant activity is summarized as follows: Outstanding at December 31, 2018 10,647,026 Issued 2,622,154 Exercised ( 730,976 ) Canceled — Outstanding at December 31, 2019 12,538,204 Issued — Exercised — Canceled — Outstanding at December 31, 2020 12,538,204 The following table summarizes information with regard to outstanding warrants issued in connection with equity and debt financings and consultants as of December 31, 2020. 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 F-15 Table of Contents Issued in Connection With Number Issued Exercise Price Exercisable Date Expiration Date 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 November 25, 2015 Offering Warrants 1,180,240 $ 2.50 May 25, 2016 May 25, 2021 September 22, 2016 Series B-3 Transaction $ 3.00 Investor Warrants 698,158 $ 3.00 September 22, 2016 September 22, 2023 September 29, 2016 Series B-3 Transaction $ 3.00 Investor Warrants 846,100 $ 3.00 September 29, 2016 September 29, 2023 December 22, 2016 Private placement warrants 1,466,204 $ 5.00 December 22, 2016 December 23, 2023 December 23, 2016 Series B-3 Transaction $ 3.00 Investor Warrants 924,780 $ 3.00 December 23, 2016 December 23, 2023 December 28, 2016 Private placement warrants 644,468 $ 5.00 December 28, 2016 December 28, 2023 February 27, 2017 Private placement warrants 76,776 $ 5.00 February 27, 2017 February 27, 2024 2018 and 2017 Warrants issued for services 2,157 $ 5.00 Various dates in 2018 and 2017 Various dates in 2025 and 2024 December 19, 2017 Line of credit warrants 500,000 $ 5.00 December 19, 2017 December 19, 2024 May 23, 2019 Rights offering warrants 2,622,154 $ 7.00 May 23, 2019 May 23, 2026 Total outstanding warrants 12,538,204 7. Stock-Based Compensation Summary of Stock-Based Compensation Plans At December 31, 2020, 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 for the issuance of up to 4,000,000 shares of the Company’s common stock in the form of options, stock appreciation rights, restricted stock and other stock-based awards to employees, officers, directors, consultants and other eligible persons. At December 31, 2020, 2,822,000 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. In addition, the Company has awarded 1,477,379 non-plan stock option grants to employees and non-employees. These non-plan grants have vesting periods and expiration dates similar to those options granted under the Incentive Plans. At December 31, 2020, 500,000 non-plan grants were outstanding. 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: F-16 Table of Contents Year Ended December 31, 2020 2019 Research and development $ 516 $ 318 General and administrative 1,283 1,365 Total stock-based compensation expense $ 1,799 $ 1,683 The fair value of the options granted is determined using the Black-Scholes option-pricing model. The following weighted average assumptions were used: 2020 2019 Risk-free interest rate 1.26 % 2.68 % Expected life of the options 6.0 years 6.0 years Expected volatility of the underlying stock 97.9 % 103.7 % 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, 2020, 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. 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, 2018 2,713,979 $ 4.67 Granted 530,000 4.72 Forfeited/Cancelled ( 92,730 ) 2.91 Exercised ( 150,993 ) 1.83 Outstanding, December 31, 2019 3,000,256 $ 4.88 Granted 1,095,000 2.51 Forfeited/Cancelled ( 834 ) 1.80 Exercised ( 106,847 ) 2.61 Outstanding, December 31, 2020 3,987,575 $ 4.29 6.34 $ 450 Exercisable, December 31, 2020 3,335,908 $ 4.68 5.75 $ 303 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, 2020, based on the closing price of the Company’s common stock of $ 2.24 on that date. The weighted-average grant-date fair values of options granted during 2020 and 2019 were $ 1.92 and $ 3.83 , respectively. As of December 31, 2020 and 2019, there were unvested options to purchase 651,667 and 407,500 shares of common stock, respectively. Total expected unrecognized compensation cost related to such unvested options is $ 1,052,000 at December 31, 2020, which is expected to be recognized over a weighted-average period of 2.53 years. The aggregate intrinsic value of stock options exercised for the year ended December 31, 2020 and 2019 was $ 39,792 and $ 594,302 , respectively. During the years ended December 31, 2020 and 2019, 850,833 and 130,490 options became vested, respectively. The total grant date fair value of options vested during the years ended December 31, 2020 and 2019 was $ 2,531,758 and $ 491,000 , respectively. F-17 Table of Contents The following table summarizes additional information regarding outstanding and exercisable options under our stock-based compensation plans at December 31, 2020: 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 – 1.00 190,500 5.95 $ 0.88 190,500 $ 0.88 $ 1.01 – 3.00 1,683,060 7.81 2.47 1,031,393 2.60 $ 3.01 – 5.00 1,053,040 7.17 4.35 1,053,040 4.35 $ 5.01 – 8.00 878,475 3.27 6.55 878,475 6.55 $ 8.01 – 13.38 182,500 3.06 13.38 182,500 13.38 3,987,575 6.34 $ 4.29 3,335,908 $ 4.68 Restricted Stock Issuances In January 2020, two directors elected to take restricted stock grants in lieu of cash retainers for 2020. A total of 32,693 shares of restricted stock valued at approximately $ 94,000 is being amortized to expense on a straight-line basis until January 9, 2021 when the stock vested in full. In January 2019, two directors elected to take restricted stock grants in lieu of cash retainers for 2019. A total of 19,068 shares of restricted stock valued at approximately $ 90,000 is being amortized to expense on a straight-line basis until January 16, 2020 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. 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, 2023 and fifty percent shall be issued on March 1, 2024. For the year ended December 31, 2020, approximately $ 132,000 of his compensation was recorded as stock compensation expense representing 50,307 shares of common stock to be issued under the DSU agreement with a weighted average grant date fair value of $ 2.62 per share. There is no unrecognized compensation expense related to the DSUs. 8. Line of Credit The Company has a $ 10 million Line of Credit arrangement with Richard E. Uihlein, a director and shareholder pursuant to an agreement established in December, 2017 and amended in December, 2018 and January, 2019. Under the arrangement the Company may borrow up to $ 10 million from Mr. Uihlein on an unsecured basis and with any borrowings bearing interest at the Applicable Federal Rate for short terms loans published by the Internal Revenue Service ( 0.14 % in January 2021). Borrowings may be made through December 31, 2021 with repayment due on December 31, 2022. In connection with the Line of Credit agreement, the Company issued to Mr. Uihlein warrants to purchase 1 million shares of the Company’s common stock for $ 5 per share. Half of the warrants vested at closing of the Line of Credit and the other half vest ratably with borrowings under the agreement. As of the date of this Annual Report, there have been no borrowings under the Line of Credit. The fair value of the 500,000 warrants vested at closing in December 2017 was $ 696,000 at the date of issuance based on the following assumptions: an expected life of 7 years, volatility of 98 %, risk free interest rate of 2.05 % and zero dividends. The fair value of the vested warrants was recorded in other current assets and other assets (non-current) as a deferred financing cost and were to be amortized on a straight-line basis from December 19, 2017 through December 31, 2019. The remaining unamortized balance of the deferred financing cost on January 11, 2019 was adjusted to be recorded as expense on a straight-line basis through December 31, 2022. Amortization for the year ended December 31, 2020 and 2019 of $ 87,000 and $ 87,000 , respectively, 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 December 31, 2022 reflecting the second extension. F-18 Table of Contents 9. 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. Diluted net loss per common share is computed by dividing the net loss available to common stockholders by the weighted average number of common shares and other potential common shares then outstanding. Potential common shares consist of common shares issuable upon the assumed exercise of in-the- money stock options and warrants and potential common shares related to the conversion of the preferred stock. The computation of diluted net loss per share does not assume the issuance of common shares that have an anti-dilutive effect on net loss per share. Year Ended December 31, (in thousands, except per share amounts) 2020 2019 Net loss $ ( 23,465 ) $ ( 13,294 ) Preferred stock dividends ( 137 ) ( 263 ) Warrant modification — ( 6,622 ) Net loss applicable to common stockholders $ ( 23,602 ) $ ( 20,179 ) Basic and diluted net loss per share $ ( 0.41 ) $ ( 0.39 ) Shares used in computing basic and diluted net loss per share 57,029 52,238 Dilutive shares which could exist pursuant to the exercise of outstanding stock instruments and which were not included in the calculation because their affect would have been anti-dilutive are as follows: Year Ended December 31, 2020 (Shares) 2019 (Shares) Warrants to purchase shares of common stock 12,538,204 12,538,204 Options to purchase shares of common stock 3,987,575 3,000,256 Shares of common stock issuable upon conversion preferred stock 510,424 514,590 17,036,203 16,053,050 10. Commitments and Contingencies Lease Commitments The Company has one operating lease for its office space which was amended effective January 1, 2019 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 two 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, 2020 and 2019 was $ 44,000 and $ 44,000 and is included in general and administrative expenses. As of December 31, 2020, the right to use lease asset consisted of $ 48,000 and is included in other assets. Also, at December 31, 2020, current lease liability of $ 44,000 is included in accrued expenses and other and noncurrent lease liability of $ 8,000 is in other noncurrent liabilities. Maturity of operating lease as of December 31, 2020 in thousands: 2021 $ 48 2022 8 Total 56 Less imputed interest 4 Present value of lease liability $ 52 The discount rate used in calculating the present value of the lease payments was 11.04 %. F-19 Table of Contents 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. 11. 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 $ 1,711,000 in total from 2015 through 2018. The Company contributed $ 448,000 and $ 147,000 for the LLC expenses (recorded in research and development expenses) in 2020 and 2019, and SBH contributed $ 35,000 in 2019 and a total of $ 123,000 in 2017 and 2016, respectively. As of December 31, 2020, the Company’s ownership percentage in the LLC was 83.4 %. 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 . 12. Income Taxes On December 22, 2017, the Tax Cuts and Jobs Act (2017 Tax Act) was enacted. The 2017 Tax Act includes a number of changes to existing U.S. tax laws that impact the Company, most notably a reduction of the U.S. corporate tax rate from 34 % to 21 %, for tax years beginning after December 31, 2017. The 2017 Tax Act also provides for the implementation of a territorial tax system, a one-time transition tax on certain foreign earnings, the acceleration of depreciation for certain assets placed into service after September 27, 2017 and other prospective changes beginning in 2018, including repeal of the domestic manufacturing deduction, acceleration of tax revenue recognition, capitalization of research and development expenditures, additional limitations on executive compensation and limitations on the deductibility of interest. F-20 Table of Contents The components of the net deferred tax assets are as follows at December 31: 2020 2019 (in thousands) Operating loss carryforwards $ 46,203 $ 39,982 Tax credit carryforwards 910 910 Other temporary differences 5,438 5,278 52,551 46,170 Less valuation allowance ( 52,551 ) ( 46,170 ) Net deferred tax asset $ — $ — The primary factors affecting the Company’s income tax rates were as follows: 2020 2019 Tax benefit at U.S. statutory rates ( 21 %) ( 21 %) State tax benefit ( 4.7 %) ( 4.7 %) Permanent differences 0.8 % 0.8 % Impact of the 2017 Tax Act — — Other ( 2.2 %) ( 4.2 %) Expiring state NOL’s — — Changes in valuation allowance 27.1 % 29.1 % 0 % 0 % As of December 31, 2020, the Company has federal and state net operating loss carryforwards totaling $ 44,838,000 which will never expire as a result of the 2017 Tax Act. As of December 31, 2020, the Company has federal and state net operating loss carryforwards totaling $ 136,202,000 and $ 138,676,000 respectively, which expire through 2037 . The net operating losses include Federal and State excess benefits related to stock options of $ 2,120,000 that will be charged to additional paid-in capital when utilized. In addition, the Company has federal and state research and development credits of $ 733,000 and $ 176,000 , respectively, which expire through 2034 . 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, 2020 and 2019, the Company does not have any significant uncertain tax positions. F-2 1