UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 

 
FORM 10-Q
 

 

Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended September 30, 2023
 

Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from                      to                    

Commission File No. 001-31791
 

 
GALECTIN THERAPEUTICS INC.
 

 
Nevada
04-3562325
(State or other jurisdiction of incorporation)
(I.R.S. Employer Identification No.)
 
4960 Peachtree Industrial Blvd.,
Suite 240, Norcross, GA
30071
(Address of Principal Executive Offices)
(Zip Code)

(678) 620 -3186
(Registrant’s Telephone Number, Including Area Code)
 

 
Securities registered or to be registered pursuant to Section 12(b) of the Act.
 
Title of each class
Trading
Symbol(s)
Name of each exchange
on which registered
Common Stock
GALT
The Nasdaq Stock Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    ☒ Yes       No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    ☒  Yes       No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act.
 
Large Accelerated Filer
Accelerated Filer
       
Non-Accelerated Filer
Smaller reporting company

       
Emerging growth company

   

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).      Yes     ☒  No

The number of shares outstanding of the registrant’s common stock as of November 8, 2023 was 61,848,657.
 


GALECTIN THERAPEUTICS INC.
INDEX TO FORM 10-Q
FOR THE QUARTER ENDED SEPTEMBER 30, 2023

  PART I — FINANCIAL INFORMATION PAGE
ITEM 1.
Unaudited Condensed Consolidated Financial Statements (unaudited)
 
     
 
3
     
 
4
     
 
5
     
 
 6
 


 
9
     
ITEM 2.
17
     
ITEM 3.
24
     
ITEM 4.
25
     
  PART II — OTHER INFORMATION  
     
ITEM 1.
25
     
ITEM 1A.
25
     
ITEM 2.
25
     
ITEM 3.
25
     
ITEM 4.
25
     
ITEM 5.
25
     
ITEM 6.
25
     
27

GALECTIN THERAPEUTICS INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

 
 
September 30,
2023
   
December 31,
2022
 
 
 
(in thousands)
 
ASSETS
           
Current assets:
           
Cash and cash equivalents
 
$
20,362
   
$
18,592
 
Prepaid expenses and other current assets
   
1,249
     
1,960
 
Total current assets
   
21,611
     
20,552
 
Other assets
   
552
     
733
 
Total assets
 
$
22,163
   
$
21,285
 
LIABILITIES, REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY (DEFICIT)
               
Current liabilities:
               
Accounts payable
 
$
2,681
   
$
3,890
 
Accrued expenses and other
   
7,841
     
9,058
 
Accrued dividends payable
   
     
64
 
Total current liabilities
   
10,522
     
13,012
 
Convertible notes payable and accrued interest, net of discounts – related party (Note 3)
   
30,666
     
29,964
 
Derivative liabilities (Note 4)    
1,342
     
573
 
Borrowing and accrued interest under convertible line of credit, net of debt discount – related party (Note 9)
    30,474       9,864  
Other liabilities
   
32
     
66
 
Total liabilities
   
73,036
     
53,479
 
Commitments and contingencies (Note 10)
           
Series C super dividend redeemable convertible preferred stock; 1,000 shares authorized, 176 shares issued and outstanding at September 30, 2023 and December 31, 2022, redemption value: $8,203,000, liquidation value: $1,760,000 at September 30, 2023
   
1,723
     
1,723
 
Stockholders’ equity (deficit):
               
Undesignated stock, $0.01 par value; 20,000,000 shares authorized, 20,000,000 designated at September 30, 2023 and December 31, 2022, respectively
   
     
 
Series A 12% convertible preferred stock; 1,742,500 shares authorized, 1,260,000 issued and outstanding at September 30, 2023 and December 31, 2022, liquidation value $1,260,000 at September 30, 2023
   
510
     
510
 
Common stock, $0.001 par value; 150,000,000 shares authorized at September 30, 2023 and December 31, 2022, 61,848,657 and 59,426,005 issued and outstanding at September 30, 2023 and December 31, 2022, respectively
   
61
     
59
 
Additional paid-in capital
   
291,145
     
275,081
 
Accumulated deficit
   
(344,312
)
   
(309,567
)
Total stockholders’ equity (deficit)
   
(52,596
)
   
(33,917
)
Total liabilities, redeemable convertible preferred stock and stockholders’ equity (deficit)
 
$
22,163
   
$
21,285
 

See notes to unaudited condensed consolidated financial statements.

3

GALECTIN THERAPEUTICS INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
 
 
 
Three Months Ended
September 30,
   
Nine Months Ended
September 30,
 
 
 
2023
   
2022
   
2023
   
2022
 
 
 
(in thousands, except per share
data)
   
(in thousands, except per share
data)
 
Operating expenses:
                       
Research and development
 
$
7,732
   
$
6,598
   
$
23,902
   
$
22,730
 
General and administrative
   
1,434
     
1,524
     
4,609
     
4,989
 
Total operating expenses
   
9,166
     
8,122
     
28,511
     
27,719
 
Total operating loss
   
(9,166
)
   
(8,122
)
   
(28,511
)
   
(27,719
)
Other income (expense):
                               
Interest income
   
62
     
18
     
156
     
22
 
Interest expense
   
(835
)
   
(269
)
   
(1,945
)
   
(725
)
Change in fair value of derivative
   
(489
)
   
(224
)
   
(769
)
   
280
 
Total other income (expense)
   
(1,262
)
   
(475
)
   
(2,558
)
   
(423
)
Net loss
 
$
(10,428
)
 
$
(8,597
)
 
$
(31,069
)
 
$
(28,142
)
Preferred stock dividends
   
6
     
16
     
(57
)
   
(32
)
Warrant modification
    (3,619 )           (3,619 )      
Net loss applicable to common stockholders
 
$
(14,041
)
 
$
(8,581
)
 
$
(34,745
)
 
$
(28,174
)
Net loss per common share — basic and diluted
 
$
(0.24
)
 
$
(0.14
)
 
$
(0.58
)
 
$
(0.47
)
Weighted average common shares outstanding — basic and diluted
   
59,704
     
59,396
     
59,590
     
59,380
 

See notes to unaudited condensed consolidated financial statements.

4

GALECTIN THERAPEUTICS INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
 
 
 
Nine Months Ended
September 30,
 
 
 
2023
   
2022
 
 
 
(in thousands)
 
CASH FLOWS FROM OPERATING ACTIVITIES:
           
Net loss
 
$
(31,069
)
 
$
(28,142
)
Adjustments to reconcile net loss to net cash flows from operating activities:
               
Stock-based compensation expense
   
1,764
     
2,186
 
Amortization of right to use lease asset
   
24
     
24
 
Non-cash interest expense
   
505
     
276
 
Change in fair value of derivative liabilities
   
769
     
(280
)
Changes in operating assets and liabilities:
               
Prepaid expenses and other assets
   
711
     
772
 
Accounts payable, accrued expenses and other liabilities
   
(2,406
)
   
899
 
Accrued interest on convertible debt - related party
    1,439       448  
Net cash from operating activities
   
(28,263
)
   
(23,817
)
CASH FLOWS FROM FINANCING ACTIVITIES:
               
Proceeds from exercise of common stock purchase warrants
    10,033        
Net proceeds from convertible line of credit – related party
    20,000        
Net cash flows from financing activities
   
30,033
     
 
NET DECREASE IN CASH AND CASH EQUIVALENTS
   
1,770
     
(23,817
)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD
   
18,592
     
39,648
 
CASH AND CASH EQUIVALENTS, END OF PERIOD
 
$
20,362
   
$
15,831
 
NONCASH FINANCING ACTIVITIES:
               
Payment of preferred stock dividends in common stock
  $ 57     $ 32  
Reclassification of accrued bonus to additional paid in capital
   
210
     
200
 
Common stock purchase warrants issued in connection with related party line of credit
    477       738  
Warrant modification
    3,619        
Noncash right to use lease asset
          111  

See notes to unaudited condensed consolidated financial statements.
 
5

GALECTIN THERAPEUTICS INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY (UNAUDITED)
(amounts in thousands except share data)
 
 
 
Series C Super
Dividend Redeemable
Convertible
Preferred Stock
 
 
 
Number of
Shares
   
Amount
 
Balance at December 31, 2021
   
176
   
$
1,723
 
Balance at September 30, 2022
   
176
   
$
1,723
 
Balance at December 31, 2022
   
176
   
$
1,723
 
Balance at September 30, 2023
   
176
   
$
1,723
 

See notes to unaudited condensed consolidated financial statements.
 
6

GALECTIN THERAPEUTICS INC.
CONSOLIDATED STATEMENTS OF CHANGES IN REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY (DEFICIT) — (Continued)
For the Three Months Ended September 30, 2023 and 2022
(amounts in thousands except share data)
 
 
 
Series A 12%
Convertible
Preferred Stock
   
Common Stock
                 
 
 
Number
of
Shares
   
Amount
   
Number
of
Shares
   
Amount
   
Additional
Paid-In
Capital
   
Retained
Deficit
   
Total
Stockholders’
Equity
(Deficit)
 
Balance at June 30, 2022
   
1,302,500
   
$
527
     
59,395,805
   
$
59
   
$
272,772
   
$
(290,287
)
 
$
(16,946
)
Series A 12% convertible preferred stock dividend
                    12,600               21      
18
     
39
 
Series C super dividend redeemable convertible preferred stock dividend
                    17,600               29      
(2
)
   
27
 
Issuance of common stock purchase warrants
from related party line of credit
                                    738               738  
Stock-based compensation expense
                                   
681
             
681
 
Net loss
                                           
(8,597
)
   
(8,597
)
Balance at September 30, 2022
   
1,260,000
   
$
510
     
59,426,005
   
$
59
   
$
274,241
   
$
(298,868
)
 
$
(24,058
)
Balance at June 30, 2023
   
1,260,000
   
$
510
     
59,582,253
   
$
59
   
$
276,852
   
$
(330,271
)
 
$
(52,850
)
Series A 12% convertible preferred stock dividend
                    12,600               24      
14
     
38
 
Series C super dividend redeemable convertible preferred
stock dividend
                    17,600               33      
(8
)
   
25
 
Issuance of common stock from exercise of warrants
                    2,236,204       2       10,031               10,033  
Warrant modification
                                    3,619       (3,619 )      
Stock-based compensation expense
                                   
586
             
586
 
Net loss
                                           
(10,428
)
   
(10,428
)
Balance at September 30, 2023
   
1,260,000
   
$
510
     
61,848,657
   
$
61
   
$
291,145
   
$
(344,312
)
 
$
(52,596
)
 
7

GALECTIN THERAPEUTICS INC.
CONSOLIDATED STATEMENTS OF CHANGES IN REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY (DEFICIT) — (Continued)
For the Nine Months Ended September 30, 2023 and 2022
(amounts in thousands except share data)
 
 
 
Series A 12%
Convertible
Preferred Stock
   
Common Stock
                 
 
 
Number
of
Shares
   
Amount
   
Number
of
Shares
   
Amount
   
Additional
Paid-In
Capital
   
Retained
Deficit
   
Total
Stockholders’
Equity
(Deficit)
 
Balance at December 31, 2021
   
1,302,500
   
$
527
     
59,341,305
   
$
59
   
$
271,001
   
$
(270,694
)
 
$
893
 
Series A 12% convertible preferred stock dividend
                   
25,625
             
41
     
(2
)
    39  
Series C super dividend redeemable convertible preferred
stock dividend
                   
35,200
             
58
     
(30
)
    28  
Issuance of common stock from conversion of Series A convertible preferred stock
    (42,500 )     (17 )     7,287               17                  
Issuance of common stock purchase warrants from
related party line of credit
                                    738               738  
Stock-based compensation expense
                   
16,588
             
2,386
             
2,386
 
Net loss
                                           
(28,142
)
   
(28,142
)
Balance at September 30, 2022
   
1,260,000
   
$
510
     
59,426,005
   
$
59
   
$
274,241
   
$
(298,868
)
 
$
(24,058
)
Balance at December 31, 2022
   
1,260,000
   
$
510
     
59,426,005
   
$
59
   
$
275,081
   
$
(309,567
)
 
$
(33,917
)
Series A 12% convertible preferred stock dividend
                   
25,200
             
50
     
(12
)
    38  
Series C super dividend redeemable convertible preferred stock dividend
                   
35,200
             
69
     
(45
)
    24  
Issuance of common stock from exercise of warrants
                    2,236,204       2       10,031               10,033  
Warrant modification
                                    3,619       (3,619 )      
Common stock purchase warrants issued in connection with related party line of credit
                                    477               477  
Stock-based compensation expense
                   
126,048
             
1,818
             
1,818
 
Net loss
                                           
(31,069
)
   
(31,069
)
Balance at September 30, 2023
   
1,260,000
   
$
510
     
61,848,657
   
$
61
   
$
291,145
   
$
(344,312
)
 
$
(52,596
)

See notes to consolidated financial statements.
 
8

GALECTIN THERAPEUTICS INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. 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 unaudited condensed consolidated financial statements as reported in this Quarterly Report on Form 10-Q reflect all adjustments which are, in the opinion of management, necessary to present fairly the financial position of the Company as of September 30, 2023 and the results of its operations for the three and nine months ended September 30, 2023 and 2022 and its cash flows for the nine months ended September 30, 2023 and 2022. All adjustments made to the interim financial statements include all those of a normal and recurring nature. Amounts presented in the condensed consolidated balance sheet as of December 31, 2022 are derived from the Company’s audited consolidated financial statements as of that date, but do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. The Company considers events or transactions that occur after the balance sheet date but before the financial statements are issued to provide additional evidence relative to certain estimates or to identify matters that require additional disclosure. Subsequent events have been evaluated through the date these financial statements are available to be issued. The results for interim periods are not necessarily indicative of results that may be expected for any other interim period or for the full year. The unaudited condensed consolidated financial statements of the Company should be read in conjunction with its Annual Report on Form 10-K for the year ended December 31, 2022.



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 September 30, 2023, the company had $20,362,000 of unrestricted cash and cash equivalents available to fund future operations.  In July 2022, the Company entered into a $60 million unsecured line of credit financing with its chairman, Richard E. Uihlein (See Note 12). The Company believes there is sufficient cash, including availability of the line of credit, to fund currently planned operations at least through December 31, 2024. To meet its future capital needs, the Company intends to raise additional capital through debt or equity financings, collaborations, partnerships or other strategic transactions. However, there can be no assurance that the Company will be able to complete any such transactions on acceptable terms or otherwise. The inability of the Company to obtain sufficient funds on acceptable terms when needed could have a material adverse effect on the Company’s business, results of operations and financial condition. The Company has the ability to delay certain research activities and related clinical expenses if necessary due to liquidity concerns until a date when those concerns are relieved.



The Company 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.

2. Accrued Expenses and Other


Accrued expenses consist of the following:
 
 
 
September 30,
2023
   
December 31,
2022
 
 
 
(in thousands)
 
Legal and accounting fees
 
$
150
   
$
65
 
Accrued compensation
   
857
     
973
 
Lease liability
   
45
     
40
 
Accrued research and development costs and other
   
6,789
     
7,980
 
Total
 
$
7,841
   
$
9,058
 



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.

9


3. Convertible Notes Payable – Related Party


On April 16, 2021, the Company and Richard E. Uihlein entered into a debt financing arrangement whereby Mr. Uihlein loaned $10,000,000 to Company. In consideration for the loan, the Company issued a convertible promissory note (the “April 2021 Note”) in the principal amount of ten million dollars.


The April 2021 Note has a maturity date of April 16, 2025, is prepayable at the option of the Company in whole or in part at any time and is convertible into the Company’s common stock at a conversion price equal to $5.00 per share at the option of the noteholder. The April 2021 Note bears interest at the rate of two percent (2%) per annum, compounded annually with an effective interest rate of approximately 3%. For the three months ended September 30, 2023 and 2022, approximately $52,000 and $52,000, respectively, of interest expense was accrued and included with the principal in the financial statements.  For the nine months ended September 30, 2023 and 2022, approximately $154,000 and $154,000, respectively, of interest expense was accrued and included with the principal in the financial statements.


The April 2021 Note also includes a contingent interest component that requires the Company to pay additional interest at a rate of two and one-half percent (2.5%) per quarter (10% per annum) (the “Additional Interest”) beginning on the date of issuance of this Note and ending on the maturity date, provided however, that such payment is only required if and only if the noteholder elects to convert the entire balance of the April 2021 Note into the Company’s common stock on or prior to maturity. As the contingent event is not based on creditworthiness, such feature is not clearly and closely related to the host instrument and accordingly must be bifurcated and recognized as a derivative liability and a debt discount on the April 2021 Note at its inception. The fair value of the contingent interest derivative liability was $420,000 at note inception (April 16, 2021). The fair value of the contingent interest derivative liability was $600,000 and $249,000 at September 30, 2023 and December 31, 2022, respectively, and is recognized as a derivative liability in the consolidated balance sheet. The change in the fair value of the derivative liability for the three months ended September 30, 2023 and 2022 of $233,000 and $97,000, respectively, was charged to other expense/(income) for the three months ended September 30, 2023 and 2022.  The change in the fair value of the derivative liability for the nine months ended September 30, 2023 and 2022 of $351,000 and $(122,000), respectively, was charged to other expense/(income) for the nine months ended September 30, 2023 and 2022. The amortization of the original $420,000 debt discount of $26,000 and $26,000 was recorded as additional interest expense for the three months ended September 30, 2023 and 2022, respectively.  The amortization of the original $420,000 debt discount of $78,000 and $78,000 was recorded as additional interest expense for the nine months ended September 30, 2023 and 2022, respectively.


The September 2021 Note has a maturity date of September 17, 2025, is prepayable at the option of the Company in whole or in part at any time and is convertible into the Company’s common stock at a conversion price equal to $8.64 per share at the option of the noteholder. The September 2021 Note bears interest at the rate of two percent (2%) per annum, compounded annually with an effective interest rate of approximately 3%. For the three months ended September 30, 2023 and 2022, approximately $52,000 and $51,000, respectively, of interest expense was accrued and included with the principal in the financial statements.  For the nine months ended September 30, 2023 and 2022, approximately $153,000 and $150,000, respectively, of interest expense was accrued and included with the principal in the financial statements.



The September 2021 Note also includes a contingent interest component that requires the Company to pay additional interest at a rate of two and one-half percent (2.5%) per quarter (10% per annum) (the “Additional Interest”) beginning on the date of issuance of this Note and ending on the maturity date, provided however, that such payment is only required if and only if the noteholder elects to convert the entire balance of the September 2021 Note into the Company’s common stock on or prior to maturity. As the contingent event is not based on creditworthiness, such feature is not clearly and closely related to the host instrument and accordingly must be bifurcated and recognized as a derivative liability and a debt discount on the September Note at its inception.  The fair value of the contingent interest derivative liability was $433,000 at note inception (September 17, 2021). The fair value of the contingent interest derivative liability was $238,000 and $109,000 and September 30, 2023 and December 31, 2022, respectively, and is recognized as a derivative liability in the consolidated balance sheet. The change in the fair value of the derivative liability for three months ended September 30, 2023 and 2022 of $78,000 and $46,000, respectively, was recorded to other expense/(income) for three months ended September 30, 2023 and 2022. The change in the fair value of the derivative liability for nine months ended September 30, 2023 and 2022 of $129,000 and ($73,000), respectively, was recorded to other expense/(income) for nine months ended September 30, 2023 and 2022.  The amortization of the original $433,000 debt discount of $27,000 and $27,000 was recorded as additional interest expense for the three months ended September 30, 2023 and 2022The amortization of the original $433,000 debt discount of $81,000 and $81,000 was recorded as additional interest expense for the nine months ended September 30, 2023 and 2022.


On December 20, 2021, the second of the two promissory notes under the Loan Agreement was executed and delivered, (the “December 2021 Note”) to evidence the second loan in the principal amount of $10,000,000. The December 2021 Note has a maturity date of December 20, 2025, is prepayable at the option of the Company in whole or in part at any time and is convertible into the Company’s common stock at a conversion price equal to $5.43 per share at the option of the noteholder. The December Note bears interest at the rate of two percent (2%) per annum, compounded annually with an effective interest rate of approximately 3%. For three months ended September 30, 2023 and 2022, approximately $51,000 and $50,000, respectively, of interest expense was accrued and included with the principal in the financial statements.  For nine months ended September 30, 2023 and 2022, approximately $152,000 and $150,000, respectively, of interest expense was accrued and included with the principal in the financial statements.


The December 2021 Note also includes a contingent interest component that requires the Company to pay additional interest at a rate of two and one-half percent (2.5%) per quarter (10% per annum) (the “Additional Interest”) beginning on the date of issuance of this Note and ending on the maturity date, provided however, that such payment is only required if and only if the noteholder elects to convert the entire balance of the December 2021 Note into the Company’s common stock on or prior to maturity. As the contingent event is not based on creditworthiness, such feature is not clearly and closely related to the host instrument and accordingly must be bifurcated and recognized as a derivative liability and a debt discount on the December Note at its inception. The fair value of the contingent interest derivative liability was $415,000 at note inception (December 20, 2021). The fair value of the contingent interest derivative liability was $504,000 and $215,000 at September 30, 2023 and December 31, 2022, respectively, and is recognized as a derivative liability in the consolidated balance sheet. The change in the fair value of the derivative liability for three months ended September 30, 2023 and 2022 of $178,000 and $81,000, respectively was recorded to other expense/(income) for three months ended September 30, 2023 and 2022.  The change in the fair value of the derivative liability for nine months ended September 30, 2023 and 2022 of $289,000 and ($85,000), respectively was recorded to other expense/(income) for nine months ended September 30, 2023 and 2022.  The amortization of the original $415,000 debt discount of $26,000 and $26,000 was recorded as additional interest expense for three months ended September 30, 2023 and 2022, respectivelyThe amortization of the original $415,000 debt discount of $78,000 and $78,000 was recorded as additional interest expense for nine months ended September 30, 2023 and 2022, respectively.



The Company’s contractual cash obligations related to the outstanding convertible notes payable are a repayment of the April 2021 Note of the $10,000,000 plus accrued interest on April 16, 2025 and a repayment of the September 2021 Note of the $10,000,000 plus accrued interest on September 17, 2025 and a repayment of the December 2021 Note of the $10,000,000 plus accrued interest on December 30, 2025, unless converted at the option of the noteholder.
 
10

4. Fair Value of Financial Instruments


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 carrying amounts reflected in the consolidated balance sheets for cash equivalents, accounts payable and accrued expenses approximate their carrying value due to their short-term nature. There were no level 1 or 2 assets or liabilities at September 30, 2023 or December 31, 2022. See below for Fair Value of Derivatives related to Convertible Notes Payable at September 30, 2023 and December 31, 2022, which are level 3 liabilities.


Level 3 assets and liabilities measured and recorded at fair value on a recurring basis at September 30, 2023 and December 31, 2022 were as follows:

 
September 30,
2023
   
December 31,
2022
 
Derivative Liability – Contingent Interest April Note
 
$
600,000
   
$
249,000
 
Derivative Liability – Contingent Interest September Note   $ 238,000     $ 109,000  
Derivative Liability – Contingent Interest December Note   $ 504,000     $ 215,000  


The April Note derivative liability – contingent interest was valued using a Monte Carlo Geometric Brownian Stock Path Model. The key assumptions used in the model at September 30, 2023 and December 31, 2022 are as follows:
 

 
September 30,
2023
   
December 31,
2022
 
Stock Price
 
$
1.92
   
$
1.13
 
Conversion Price of conversion feature
 
$
5.00
   
$
5.00
 
Term
 
   1.54 years
   
2.29 years
 
Risk Free Interest Rate
   
5.25
%
   
4.41
%
Credit Adjusted Discount Rate
   
12.97
%
   
14.76
%
Volatility
   
76
%
   
81
%
Dividend Rate
   
0
%
   
0
%





The roll forward of the April Note derivative liability – contingent interest is as follows for the nine months ended September 30, 2023 and 2022:

Balance – December 31, 2022
 
$
249,000
 
Fair Value Adjustment
   
351,000
 
Balance – September 30, 2023
 
$
600,000
 
         
Balance – December 31, 2021
  $
495,000  
Fair Value Adjustment     (122,000 )
Balance – September 30, 2022
  $ 373,000  

11


The September Note derivative liability – contingent interest was valued using a Monte Carlo Geometric Brownian Stock Path Model. The key assumptions used in the model at September 30, 2023 and December 31, 2022 are as follows:


 
September 30,
2023
   
December 31,
2022
 
Stock Price
 
$
1.92
   
$
1.13
 
Conversion Price of conversion feature
 
$
8.64
   
$
8.64
 
Term
 
1.97 years
   
2.72 years
 
Risk Free Interest Rate
   
5.03
%
   
4.22
%
Credit Adjusted Discount Rate
   
12.97
%
   
14.76
%
Volatility
   
72
%
   
81
%
Dividend Rate
   
0
%    
0
%


The roll forward of the September Note derivative liability – contingent interest is as follows:

Balance – December 31, 2022
  $ 109,000  
Fair Value Adjustment
    129,000  
Balance – September 30, 2023
  $ 238,000  
         
Balance – December 31, 2021
    250,000  
Fair Value Adjustment     (73,000 )
Balance – September 30, 2022   $ 177,000  


The December Note derivative liability – contingent interest was valued using a Monte Carlo Geometric Brownian Stock Path Model. The key assumptions used in the model at September 30, 2023 and December 31, 2022 are as follows:

   
September 30,
2023
   
December 31,
2022
 
Stock Price
 
$
1.92
   
$
1.13
 
Conversion Price of conversion feature
 
$
5.43
   
$
5.43
 
Term
  2.22 years
   
2.97 years
 
Risk Free Interest Rate
   
5.03
%
   
4.22
%
Credit Adjusted Discount Rate
   
12.97
%
   
14.76
%
Volatility
   
74
%
   
83
%
Dividend Rate
   
0
%    
0
%


The roll forward of the December Note derivative liability – contingent interest is as follows:

Balance – December 31, 2022
 
$
215,000
 
Fair Value Adjustment
   
289,000
 
Balance – September 30, 2023
 
$
504,000
 
         
Balance – December 31, 2021
  $ 385,000  
Fair Value Adjustment
   
(84,000
)
Balance – September 30, 2022
 
$
301,000
 

12

5. 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:
 
 
 
Three Months Ended
September 30,
   
Nine Months Ended
September 30,
 
 
 
2023
   
2022
   
2023
   
2022
 
 
 
in thousands
 
Research and development
 
$
223
   
$
216
   
$
626
   
$
595
 
General and administrative
   
363
     
465
     
1,138
     
1,591
 
Total stock-based compensation expense
 
$
586
   
$
681
   
$
1,764
   
$
2,186
 



The following table summarizes the stock option activity in the Company’s equity incentive plans, including non-plan grants to Company executives, from December 31, 2022 through September 30, 2023:
 
 
 
Shares
   
Weighted
Average
Exercise Price
 
Outstanding, December 31, 2022
   
5,745,561
   
$
2.90
 
Granted
   
1,025,000
     
1.18
 
Exercised
   
   
 
Options forfeited/cancelled
   
(343,803
)
   
2.50
 
Outstanding, September 30, 2023
   
6,426,758
   
$
2.64
 



As of September 30, 2023, there was $1,225,000 of unrecognized compensation related to 2,514,164 unvested options, which is expected to be recognized over a weighted–average period of approximately 1.1 years. The weighted-average grant date fair value for options granted during the nine months ended September 30, 2023 was $0.85. The Company granted 1,025,000 stock options during the nine months ended September 30, 2023.



The fair value of all other options granted is determined using the Black-Scholes option-pricing model. The following weighted average assumptions were used:
 
 
 
Nine
Months Ended
September 30,
   
Nine
Months Ended
September 30,
 
 
 
2023
   
2022
 
Risk-free interest rate
   
3.84
%
   
1.56
%
Expected life of the options
 
5.5 years
   
5.6 years
 
Expected volatility of the underlying stock
   
86
%
   
94
%
Expected dividend rate
   
0
%    
0
%


In January 2023, the Company’s board chairman elected to take restricted stock grants in lieu of cash retainers for 2023. A total of 36,036 shares of restricted stock valued at approximately $40,000 is being amortized to expense on a straight-line basis until December 31, 2023 when the stock vests in full. In January 2022, the Company’s board chairman elected to take restricted stock grants in lieu of cash retainers for 2022. A total of 17,677 shares of restricted stock valued at approximately $35,000 were amortized to expense on a straight-line basis until December 31, 2022 when the stock vested in full.


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”) through December 31, 2022 in accordance with the terms and subject to the provisions set forth in the DSU Agreement. DSUs credited to Mr. Lewis as of any date shall be fully vested and nonforfeitable at all times. Pursuant to an amendment to the DSU Agreement in July 2022, the Company shall issue the shares earned through December 31, 2022 underlying the outstanding whole number of DSUs credited to Mr. Lewis as follows: twenty five percent shall be issued on March 1, 2023, fifty percent shall be issued on March 1, 2024 and twenty five percent shall be issued on September 1, 2028.  On March 1, 2023, twenty five percent of the DSU’s were issued to Mr. Lewis in accordance with the DSU Agreement.   A total of 183,900 shares were due to be issued; however, 75,529 shares were withheld to cover income tax withholding of $156,345 resulting in 108,371 shares actually issued. Additionally, a 2023 DSU Agreement was executed in July 2022, whereby Mr. Lewis would continue to receive 20% of salary and bonus in cash and 80% in DSUs for 2023. The shares under the 2023 DSU Agreement are to be issued fifty percent on March 1, 2025 and fifty percent on January 5, 2026.


For the nine months ended September 30, 2023, approximately $343,000 of his compensation was recorded as stock compensation expense representing 212,266 shares of common stock to be issued under the DSU agreement with a weighted average grant date fair value of $1.66 per share.  For the nine months ended September 30, 2022, approximately $313,000 of his compensation was recorded as stock compensation expense representing 186,647 shares of common stock to be issued under the DSU agreement with a weighted average grant date fair value of $1.68 per share.


Also, Mr. Lewis’ bonus for the year ended December 31, 2022 of $210,000 (which was included in accrued compensation at December 31, 2022) was approved in January 2023 and represents 143,836 shares of common stock to be issued under the DSU agreement with a grant date fair value of $1.46 per share. The $210,000 was reclassified from accrued compensation to additional paid in capital in January 2023. There is no unrecognized compensation expense related to the DSUs.
 
13

6. Common Stock Warrants


The following table summarizes the common stock warrant activity from December 31, 2022 through September 30, 2023:
 
 
 
Shares
   
Weighted Average
Exercise Price
 
Outstanding, December 31, 2022
   
11,557,964
   
$
4.37
 
Granted
   
400,000
     
3.13
 
Exercised
   
(2,236,204
)
   
4.49
 
Forfeited/cancelled
   
(20,799
)
   
5.00
 
Outstanding, September 30, 2023
   
9,700,961
   
$
4.30
 



The weighted average expiration of the warrants outstanding as of September 30, 2023 is 2.7 years.


On September 22, 2023, the Company executed an agreement with 10X Fund L.P., and 10X Capital Management LLC whereby the Company extended the exercise date for a total of 5,732,253 common stock purchase warrants to the earliest of (a) September 30, 2026, (b) thirty days after 10X fails to vote all of the shares of common stock in the Company then owned by it in the manner recommended by the board of directors of the Company in any vote of the stockholders of the Company; or (c) thirty days after the shares of common stock of the Company have a closing price of $6.00 or greater for 10 consecutive trading days. Previously, the common stock purchase warrants exercise dates would have expired at various dates from September 22, 2023 through May 10, 2025.

Also pursuant to the terms of the agreement, the right of the 10X Fund L.P. to nominate a member of the board of directors was eliminated, and the cashless exercise option in certain of the common stock purchase warrants was deleted. Finally, a beneficial ownership limitation provision was added in the Series B Warrants, which would have the effect of decreasing 10X Fund’s beneficial ownership to 9.99% and would bar the voluntary exercise of any warrants that would result in 10X Fund’s ownership beyond 9.99% without at least 61 days’ prior notice from 10X Fund.

The Company has accounted for the modified terms of the warrants pursuant to ASC 815, Derivatives and Hedging, whereby the Company has recognized a deemed dividend for the change in fair value of the warrants immediately before and immediately after the modification. In September 2023, the Company recognized a non cash deemed dividend of $3,619,000 related to the extension of the 5,732,253 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 to 1.63 years, volatility range of 71% to 77%%, risk free interest rate range of 5.37% and zero dividends and; b) immediately following the modification — an expected life of 3 years, volatility of 79%, risk free interest rate range of 4.59% and zero dividends.

7. 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.



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:
 
 
 
September 30,
2023
   
September 30,
2022
 
    (shares)
    (shares)
 
Warrants to purchase shares of common stock
   
9,700,961
     
11,357,964
 
Options to purchase shares of common stock
   
6,426,758
     
5,645,561
 
Shares of common stock issuable upon conversion of convertible notes payable – related party
   
6,267,886
     
5,665,338
 
Shares of common stock issuable upon conversion of convertible line of credit – related party
    10,333,695        
Shares of common stock issuable upon conversion of preferred stock
   
503,340
     
503,340
 
 
   
33,232,640
     
23,172,203
 
8. Common Stock

2020 At Market Issuance of Common Stock


On May 11, 2020, the Company entered into an At Market Issuance Sales Agreement (the “2020 At Market Agreement”) with a sales agent under which the Company may issue and sell shares of its common stock having an aggregate offering price of up to $40.0 million from time to time through the sales agent. Sales of the Company’s common stock through the sales agent, if any, will be made by any method that is deemed an “at the market” offering as defined by the U.S. Securities and Exchange Commission. The Company will pay to the sales agent a commission rate equal to 3.0% of the gross proceeds from the sale of any shares of common stock sold through the sales agent under the 2020 At Market Agreement. During the nine months ended September 30, 2023, there were no issuances of shares of common stock under the 2020 At Market Agreement.


For each of the nine months ended September 30, 2023 and 2022, the Company issued a total of 60,400 and 60,825 shares of common stock, respectively, for dividends on Series A and Series C Preferred Stock.

14


9. Convertible Line of Credit – Related Party


On July 25, 2022, the Company and Richard E. Uihlein (the “Lender”) entered into a Line of Credit Letter Agreement (the “Credit Agreement”), pursuant to which the Lender shall provide the Company a line of credit of up to $60.0 million (the “Line of Credit”) to finance the Company’s working capital needs. The Company may draw upon the Line of Credit through July 31, 2024.



Each advance made pursuant to the Credit Agreement shall be evidenced by an unsecured, convertible promissory note (individually, a “Promissory Note,” and collectively, the “Promissory Notes”), and bear interest at the Applicable Federal Rate for short term loans, plus two (2%) percent. Principal and interest on the Promissory Notes are due on or before January 31, 2026. Only with the consent of the Lender, may the Promissory Notes be prepaid, in whole or in part, at any time without premium or penalty, but with interest on the amount or amounts prepaid.



At the election of Lender, the principal and accrued interest on Promissory Note(s) may be converted into the number of shares of the Company’s Common Stock equal to the amount of principal and accrued interest on such Promissory Note divided by the price equal to the closing price of the Common Stock on the date of such Promissory Note, but in no event less than $3.00 per share.



In connection with the Credit Agreement, the Company agreed to issue the Lender warrants to purchase up to an aggregate of 1,700,000 shares of the Company’s common stock, par value $0.001 per share (collectively, the “Warrants”). Upon execution of the Credit Agreement, the Company issued the Lender a Warrant to purchase up to 500,000 shares of Company’s Common Stock at an exercise price of $5.00 per share, which Warrant is exercisable upon issuance. Further, pursuant to the Credit Agreement, the Company shall issue to the Lender additional Warrants to purchase up to the remaining 1,200,000 shares of the Company’s common stock, ratably, upon borrowings under the Credit Agreement, with exercise prices equal to 150% of the closing price of the Company’s common Stock on the date of the Promissory Note evidencing such draw, but in no event more than $10.00 per share nor less than $3.00 per share. The Warrants expire on July 31, 2029.



The fair value of the 500,000 warrants vested at closing on July 25, 2022 was $738,000 at the date of issuance based on the following assumptions: an expected life of 7 years, volatility of 92%, risk free interest rate of 3.19% and zero dividends. The fair value of the vested warrants was recorded in other assets (non-current) as a deferred financing cost and will be amortized on a straight-line basis from July 25, 2022 through January 31, 2026. Amortization for the nine months ended September 30, 2023 and 2022 of $157,000 and $39,000, respectively, was recorded as interest expense.



On December 19, 2022, the Company executed a $10 million Promissory Note under the Line of Credit. The interest rate on this draw is 6.46% (Applicable Federal Rate for short term loans on date of draw of 4.46% plus 2%). The effective interest rate is approximately 7.1%. Accrued interest on this draw was $23,000 at December 31, 2022. The principal and accrued interest is convertible at the option of the Lender at $3.00 per share. In accordance with the Credit Agreement, the Company issued the Lender a Warrant to purchase up to 200,000 shares of Company’s Common Stock at an exercise price of $3.00 per share, which Warrant is exercisable upon issuance.



The fair value of the 200,000 warrants vested at closing on December 19, 2022 was $160,780 at the date of issuance based on the following assumptions: an expected life of 7 years, volatility of 91%, risk free interest rate of 4.06% and zero dividends. The proceeds were allocated between the Promissory Note and the warrants issued, and the amount allocated to the warrants was recorded as a debt discount netted against principal to be amortized on a straight-line basis, which is not materially different than the effective interest method, from December 19, 2022 through January 31, 2026. Amortization for the nine months ended September 30, 2023 of $30,000 was recorded as interest expense.



On March 31, 2023, the Company executed an additional $10 million Promissory Note under the Line of Credit. The interest rate on this draw is 6.41% (Applicable Federal Rate for short term loans on date of draw of 4.41% plus 2%). The effective interest rate is approximately 7.1%. The principal and accrued interest is convertible at the option of the Lender at $3.00 per share. In accordance with the Credit Agreement, the Company issued the Lender a Warrant to purchase up to 200,000 shares of Company’s Common Stock at an exercise price of $3.26 per share, which Warrant is exercisable upon issuance.


The fair value of the 200,000 warrants vested at closing on March 31, 2023 was $296,680 at the date of issuance based on the following assumptions: an expected life of 6.33 years, volatility of 88%, risk free interest rate of 3.94% and zero dividends. The proceeds were allocated between the Promissory Note and the warrants issued, and the amount allocated to the warrants was recorded as a debt discount netted against principal amortized on a straight-line basis, which is not materially different than the effective interest method, from March 31, 2023 through January 31, 2026. Amortization for the nine months ended September 30, 2023 of $52,000 was recorded as interest expense.


On June 30, 2023, the Company executed an additional $10 million Promissory Note under the Line of Credit. The interest rate on this draw is 6.34% (Applicable Federal Rate for short term loans on date of draw of 4.34% plus 2%). The effective interest rate is approximately 7.1%. The principal and accrued interest is convertible at the option of the Lender at $3.00 per share. In accordance with the Credit Agreement, the Company issued the Lender a Warrant to purchase up to 200,000 shares of Company’s Common Stock at an exercise price of $3.00 per share, which Warrant is exercisable upon issuance.


The fair value of the 200,000 warrants vested at closing on June 30, 2023 was $179,920 at the date of issuance based on the following assumptions: an expected life of 6.08 years, volatility of 85%, risk free interest rate of 3.59% and zero dividends. The proceeds were allocated between the Promissory Note and the warrants issued, and the amount allocated to the warrants was recorded as a debt discount netted against principal amortized on a straight-line basis, which is not materially different than the effective interest method, from June 30, 2023 through January 31, 2026. Amortization for the nine months ended September 30, 2023 of $18,000 was recorded as interest expense.



The fair value of warrants that vest in the future based on borrowings will be computed when those borrowings occur and amortized over the remaining period through January 31, 2026.

10. Commitments and Contingencies

Other 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 significant pending legal proceedings.

Clinical Trial and Research Commitments


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.

15

11. Leases


The Company has one operating lease for its office space which was amended effective March 1, 2022 for a term of 38 months with no residual value guarantees or material restrictive covenants. The amended lease provided for free rent for the first six and a half months of the lease and continues the security deposit of $6,000. In addition to base rental payments included in the contractual obligations table above, the Company is responsible for our pro-rata share of the operating expenses for the building. Our lease cost for the nine-month periods ended September 30, 2023 and 2022 was approximately $32,000 for each period and is included in general and administrative expenses. As of September 30, 2023, the right to use lease asset consisted of $62,000 and is included in other assets. Also, at September 30, 2023, current lease liability of $45,000 is included in accrued expenses and long term lease liability was $32,000 and included in other liabilities.



Maturity of operating lease as of September 30, 2023 in thousands:

2023
   
13
 
2024
   
51
 
2025     18  
Total
   
82
 
Less imputed interest
   
5
 
Present value of lease liability
 
$
77
 



The discount rate used in calculating the present value of the lease payments was 11%.

12. 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 each had 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. Cumulatively, the Company has contributed a total of $3,641,000, including $127,000 for the three months ended September 30, 2023, for expenses of the LLC. Since the end of 2014, SBH has contributed $711,000 for expenses in the LLC. As of September 30, 2023, the Company’s ownership percentage in the LLC was 83.7%. 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.

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Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations

In addition to historical information, the following Management’s Discussion and Analysis of Financial Condition and Results of Operations contains forward-looking statements as defined under Section 21E of the Securities Exchange Act of 1934, as amended, and is subject to the safe harbor created therein for forward-looking statements. Such statements include, but are not limited to, statements concerning our anticipated operating results, research and development, clinical trials, regulatory proceedings, and financial resources, and can be identified by use of words such as, for example, “anticipate,” “estimate,” “expect,” “project,” “intend,” “plan,” “believe” and “would,” “should,” “could” or “may.” All statements, other than statements of historical facts, included herein that address activities, events, or developments that the Company expects or anticipates will or may occur in the future, are forward-looking statements, including statements regarding: plans and expectations regarding clinical trials; plans and expectations regarding regulatory approvals; our strategy and expectations for clinical development and commercialization of our products; potential strategic partnerships; expectations regarding the effectiveness of our products; plans for research and development and related costs; statements about accounting assumptions and estimates; expectations regarding liquidity and the sufficiency of cash to fund currently planned operations through at least December 31, 2024; our commitments and contingencies; and our market risk exposure. Forward-looking statements are based on current expectations, estimates and projections about the industry and markets in which Galectin Therapeutics operates, and management’s beliefs and assumptions. These statements are not guarantees of future performance and involve certain known and unknown risks and uncertainties that could cause actual results to differ materially from those expressed or implied by such statements. Such risks and uncertainties are related to and include, without limitation,


our early stage of development,


we have incurred significant operating losses since our inception and cannot assure you that we will generate revenue or profit,


our dependence on additional outside capital,


we may be unable to enter into strategic partnerships for the development, commercialization, manufacturing and distribution of our proposed product candidates,


uncertainties related to any litigation,


uncertainties related to our technology and clinical trials, including expected dates of availability of clinical data,


we may be unable to demonstrate the efficacy and safety of our developmental product candidates in human trials,


we may be unable to improve upon, protect and/or enforce our intellectual property,


we are subject to extensive and costly regulation by the U.S. Food and Drug Administration (FDA) and by foreign regulatory authorities, which must approve our product candidates in development and could restrict the sales and marketing and pricing of such products,


competition and stock price volatility in the biotechnology industry,


limited trading volume for our stock, concentration of ownership of our stock, and other risks detailed herein and from time to time in our SEC reports,


the impact resulting from the outbreak of COVID-19, which has delayed and may continue to delay our clinical trial and development efforts, as well as the impact that COVID-19 has on the volatility of the capital market and our ability to access the capital market and,


other risks detailed herein and from time to time in our SEC reports, including our Annual Report on Form 10-K filed with the SEC for the fiscal year ended December 31, 2022, and our subsequent SEC filings.

The following discussion should be read in conjunction with the accompanying consolidated financial statements and notes thereto of Galectin Therapeutics appearing elsewhere herein.

Overview

We are a clinical stage biopharmaceutical company engaged in drug research and development to create new therapies for fibrotic disease, cancer and selected other diseases. Our drug candidates are based on our method of targeting galectin proteins, which are key mediators of biologic and pathologic functions. We use naturally occurring, readily available plant products as starting material in manufacturing processes to create proprietary, patented complex carbohydrates with specific molecular weights and other pharmaceutical properties. These complex carbohydrate molecules are appropriately formulated into acceptable pharmaceutical formulations. Using these unique carbohydrate-based candidate compounds that largely bind and inhibit galectin proteins, particularly galectin-3, we are undertaking the focused pursuit of therapies for indications where galectin proteins have a demonstrated role in the pathogenesis of a given disease. We focus on diseases with serious, life-threatening consequences and those where current treatment options are limited specifically in NASH (non-alcoholic steatohepatitis) with cirrhosis and certain cancer indications. Our strategy is to establish and implement clinical development programs that add value to our business in the shortest period of time possible and to seek strategic partners when one of our programs becomes advanced and requires significant additional resources.

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Our lead galectin-3 inhibitor is belapectin (GR-MD-02), which has been demonstrated in preclinical models to reverse liver fibrosis and cirrhosis and in clinical studies to decrease portal hypertension and prevent its complication: the development of esophageal varices. Belapectin has the potential to treat many diseases due to galectin-3’s involvement in multiple key biological pathways such as fibrosis, immune cell function and immunity, cell differentiation, cell growth, and apoptosis (cell death). The importance of galectin-3 in the fibrotic process is supported by experimental evidence. Animals with the galectin-3 gene “knocked-out” can no longer develop fibrosis in response to experimental stimuli compared to animals with an intact galectin-3 gene. We are using our galectin-3 inhibitor to treat advanced liver fibrosis and liver cirrhosis in NASH patients. We have completed two Phase 1 clinical studies, a Phase 2 clinical study in NASH patients with advanced fibrosis (NASH-FX) and a second Phase 2b clinical trial in NASH patients with compensated cirrhosis and portal hypertension (NASH-CX).

In February 2023, we completed randomizations totaling 357 patients in a large, global Phase 2b/3 clinical trial. Our study protocol was filed with the FDA on April 30, 2020, for a seamless adaptively-designed Phase 2b/3 clinical study, the NAVIGATE trial, evaluating the safety and efficacy of our galectin-3 inhibitor, belapectin, for the prevention of esophageal varices in patients with non-alcoholic steatohepatitis (NASH) cirrhosis (Further details are available at www.clinicaltrials.gov under study NCT04365868); this study began enrolling patients in Q2-2020. In September 2020, the Company received a letter from the FDA providing comments, asking questions and providing guidance on various aspects of the ongoing NAVIGATE trial. These comments were addressed, and the study proceeded accordingly.

Additionally, a study protocol entitled “A Single-dose, Open-label, Pharmacokinetic Study of Belapectin (GR-MD-02) in Subjects With Normal Hepatic Function and Subjects With Varying Degrees of Hepatic Impairment” has been filed with the FDA to examine the effects of the drug in subjects with normal hepatic function and subjects with varying degrees of hepatic impairment (study details are listed under study NCT04332432 on www.clinicaltrials.gov); this study became fully enrolled in February 2022 and results will be presented in an upcoming scientific congress.

We endeavor to leverage our scientific and product development expertise as well as established relationships with outside sources to achieve cost-effective and efficient drug development. These outside sources, amongst others, provide us with expertise in preclinical models, pharmaceutical development, toxicology, clinical trial operations, pharmaceutical manufacturing, including physical and chemical drug characterization, and commercial development. We also have established through our majority-owned joint venture subsidiary, Galectin Sciences LLC, a discovery program developing small molecules that inhibit galectin-3 and may afford alternative drug delivery (e.g., oral) and as a result expand the potential uses of galectin-3 inhibitor beyond belapectin. Three chemical series of composition of matter patents have been filed.

We are also pursuing a development pathway to clinical enhancement and commercialization for our lead compounds in immuno-oncology following our previous successful collaboration with Providence Portland Cancer Center. In 2022, we filed a new IND with FDA for advanced or metastatic head and neck cancer using belapectin in combination with a checkpoint (PD-1) inhibitor and received a Study May Proceed letter. The proposed phase 2 trial commencement is dependent on timing of financing.

All of our proposed products are presently in development, including pre-clinical and clinical trials.

Our Drug Development Programs

Galectins are a class of proteins that are made by many cells in the body, but predominantly in cells of the immune system. As a group, these proteins are able to bind to sugar molecules that are attached to other proteins, called glycoproteins that are responsible for various functions within the body, most notably inflammation and fibrosis. Galectins, in particular galectin-3,act as a molecular glue, bringing together molecules that have sugars on them.

Galectin-3, is known to be markedly increased in a number of significant diseases including inflammatory diseases leading to organs scarring (e.g. liver, lung, kidney, and heart) and cancers. The increase in galectin-3, by creating the so-called galectin-3 fibrosome, promotes the progression of multiple diseases. Published data substantiating the importance of galectin-3 in the fibrotic process arises from gene knockout experiments in animal studies. For instance, mice genetically altered to eliminate the galectin-3 gene, and thus unable to produce galectin-3, do not develop liver fibrosis in response to toxic insult to the liver.

We have one new proprietary chemical entity (NCE) in development, belapectin, which has shown promise in preclinical and clinical studies for the treatment of liver fibrosis, severe skin disease, and cancer (melanoma and head and neck squamous cell carcinoma). Currently, we are focusing on development of belapectin for the treatment of NASH cirrhosis and head and neck cancer. Belapectin is a proprietary, patented compound derived from natural, plant-based, starting materials, which following chemical processing, exhibits the properties of binding to and inhibiting galectin.

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Our product pipeline is shown below:
   
     
Indication
Drug
Status
Prevention of esophageal


varices


in


NASH cirrhosis


     
Phase 1 interaction trial:
belapectin
IND submitted January 2013. Results from the Phase 1 interaction trial were reported
NASH-CX trial and
 
in 2014, with final results reported in January 2015. The Phase 2 NASH FX trial was
NASH-FX trial

conducted in patients with advanced fibrosis but not cirrhosis. Its principal purpose


was to evaluate various imaging modalities. The NASH FX trial top line data was


reported in September 2016 and published in Alimentary Pharmacology and


Therapeutics in 2016.


 


The Phase 2 NASH CX trial was conducted in patients with compensated cirrhosis


and portal hypertension. The NASH CX trial top line data was reported in December


2017 and was published in Gastroenterology in 2020.



NASH NAVIGATE

Following FDA feedback, the NAVIGATE trial is an adaptive Phase 2b/3 trial for the


prevention of esophageal varices in NASH patients with compensated cirrhosis and


clinical signs of portal hypertension. A Phase 2b interim efficacy analysis will be


incorporated to confirm previous Phase 2 data, select an optimal dose and reaffirm


the risk/benefit of belapectin. The Phase 3 end of study analysis will evaluate the


development of esophageal varices as the same primary outcome of efficacy and a


composite clinical endpoint including progression to varices requiring treatment as a


key secondary outcome of efficacy ( www.clinicaltrials.gov NCT04365868).


The final patient was randomized in February 2023.



Phase 1 study: hepatic

A hepatic impairment study has been completed in subjects with normal hepatic
insufficiency

function and subjects with varying degrees of hepatic impairment


(www.clinicaltrials.gov NCT04332432) and began enrolling patients in the second


quarter of 2020. The study completed enrollment in February 2022.
Cancer Immunotherapy





Melanoma, Head, Neck
belapectin
Investigator IND study was completed. A Phase 1B study began in Q-1 2016.
Squamous Cell

Early data was reported in February 2017 and additional data were reported in
Carcinoma (HNSCC)

September 2018. Data from an extension trial was reported in July 2021 for


additional melanoma and HNSCC patients which provided a rational basis for


additional trials which the Company is exploring. In the third quarter of 2022, the


Company announced its IND application for belapectin in combination with a


checkpoint inhibitor for the treatment of HNSCC was filed and a Study May Proceed


letter was received from FDA. The Company is reviewing options for financing this


trial which will determine when such trial could commence.

Liver cirrhosis. Belapectin is our lead product candidate for treatment of compensated NASH cirrhosis in patients with portal hypertension. Our preclinical data show that belapectin has a significant therapeutic effect on liver fibrosis as shown in several relevant animal models. In addition, in NASH animal models, belapectin has been shown to reduce liver fat, inflammation, portal pressure, and ballooning degeneration (death of liver cells). Therefore, we chose belapectin as the lead candidate in a development program targeted initially at fibrotic liver disease associated with non-alcoholic steatohepatitis (NASH). In January 2013, an Investigational New Drug (“IND”) was submitted to the FDA with the goal of initiating a Phase 1 study in patients with NASH and advanced liver fibrosis to evaluate the safety of belapectin and pharmacodynamics biomarkers of disease. On March 1, 2013, the FDA indicated we could proceed with a US Phase 1 clinical trial for belapectin with a development program aimed at obtaining support for a proposed indication of belapectin for treatment of NASH with advanced fibrosis. The Phase 1 trial was completed and demonstrated that belapectin up to 8 mg/kg Lean Body Mass (LBM), i.v. was safe and well tolerated.

Additionally, an open label drug-drug phase 1 interaction study was completed in healthy volunteers during the second quarter of 2015 with belapectin and it showed that with 8 mg/kg LBM dose of belapectin and 2 mg/kg LBM dose of midazolam there was no drug-drug interaction, and no serious adverse events or drug-related adverse events were observed. The secondary objective was to assess the safety and tolerability of belapectin when administered concomitantly with midazolam.

Our Phase 2 program in fibrotic disease consisted of two separate human clinical trials. The main clinical trial was the Phase 2b NASH-CX study for one year for patients with NASH with compensated cirrhosis and portal hypertension, which began enrolling patients in June 2015. This study was a randomized, placebo-controlled, double-blind, parallel-group Phase 2b trial to evaluate the safety and efficacy of belapectin for treatment of liver fibrosis and resultant portal hypertension in NASH patients with compensated cirrhosis. A smaller, exploratory NASH-FX trial was conducted to explore potential use of various non-invasive imaging techniques in NASH patients with advanced fibrosis but not cirrhosis.

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NASH-FX Trial: The NASH-FX trial was a Phase 2a pilot trial for patients with NASH and advanced fibrosis that explored use of three non-invasive imaging technologies. It was a short, single site, four-month trial in 30 NASH patients with advanced fibrosis (F3) randomized 1:1 to either 9 bi-weekly doses of 8 mg/kg LBM of belapectin or placebo. The trial did not meet its primary endpoint as measured using multi-parametric magnetic resonance imaging (LiverMultiScan(R), Perspectum Diagnostics). The trial also did not meet secondary endpoints that measure liver stiffness as a surrogate for fibrosis using, magnetic resonance-elastography and FibroScan® score. With a four-month treatment period and a small number of patients per arm the study was not powered to demonstrate efficacy results in established advanced liver fibrosis. In the trial however, belapectin was found to be safe and well tolerated with no serious adverse events and showing evidence of a pharmacodynamic effect. These results provided support for further development in NASH.

NASH-CX Trial: The NASH-CX trial was a larger multi-c