Galectin Therapeutics Inc.
Annual Report 2018

Plain-text annual report

Table of Contents UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549 FORM 10-K ☒Annual report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934For the fiscal year ended December 31, 2018 ☐Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934For the transition period from to Commission File No. 001-31791 GALECTIN THERAPEUTICS INC. Nevada 04-3562325(State or other jurisdictionof incorporation) (I.R.S. EmployerIdentification 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 pursuant to Section 12(b) of the Act: Title of each class Name of each exchange on which registeredCommon Stock, $0.001 Par Value Per Share The NASDAQ Capital MarketUnits, each consisting of two shares of Common Stock and one Warrantto purchase one share of Common Stock The NASDAQ Capital MarketCommon Stock Purchase Warrants The NASDAQ Capital MarketSecurities registered pursuant to Section 12(g) of the Act:None Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒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 thepreceding 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 90days. 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 if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best ofregistrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ☐Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growthcompany. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the ExchangeAct. 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 revisedfinancial 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 aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity wassold, or the average bid and asked price of such common equity, as of June 30, 2018 was $213 million.The number of shares outstanding of the registrant’s common stock as of February 20, 2019 was 45,550,226. Table of ContentsINDEX TO FORM 10-KFOR THE YEAR ENDED DECEMBER 31, 2018 PAGE PART 1 ITEM 1. Business 1 ITEM 1A. Risk Factors 17 ITEM 1B. Unresolved Staff Comments 32 ITEM 2. Properties 32 ITEM 3. Legal Proceedings 32 ITEM 4. Mine Safety Disclosure 32 PART II ITEM 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 33 ITEM 6. Selected Financial Data 33 ITEM 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 33 ITEM 7A. Quantitative and Qualitative Discussions About Market Risk 40 ITEM 8. Financial Statements and Supplementary Data 40 ITEM 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 40 ITEM 9A. Controls and Procedures 40 ITEM 9B. Other Information 41 PART III ITEM 10. Directors, Executive Officers and Corporate Governance 42 ITEM 11. Executive Compensation 47 ITEM 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 60 ITEM 13. Certain Relationships, Related Transactions and Director Independence 62 ITEM 14. Principal Accountant Fees and Services 64 PART IV ITEM 15. Exhibits and Financial Statement Schedules 65 SIGNATURES 71 Table of ContentsPART I Item 1.BusinessOverviewWe are a clinical stage biopharmaceutical company engaged in drug research and development to create new therapies for fibrotic disease, severeskin disease, and cancer. Our drug candidates are based on our method of targeting galectin proteins, which are key mediators of biologic andpathologic 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 areappropriately formulated into acceptable pharmaceutical formulations. Using these unique carbohydrate-based candidate compounds that largely bindand inhibit galectin proteins, particularly galectin-3, we are undertaking the focused pursuit of therapies for indications where galectins have ademonstrated role in the pathogenesis of a given disease. We focus on diseases with serious, life-threatening consequences to patients and those wherecurrent treatment options are limited. Our strategy is to establish and implement clinical development programs that add value to our business in theshortest period of time possible and to seek strategic partners when a program becomes advanced and requires significant additional resources.Our lead galectin-3 inhibitor is GR-MD-02, which has been demonstrated in preclinical models to reverse liver fibrosis and cirrhosis. GR-MD-02has the potential to treat many diseases due to galectin-3’s involvement in multiple key biological pathways such as fibrosis, immune cell function andimmunity, cell differentiation, cell growth, and apoptosis (cell death). The importance of galectin-3 in the fibrotic process is supported by experimentalevidence. Animals with the gene responsible for galectin-3 “knocked-out” can no longer develop fibrosis in response to experimental stimulicompared to animals with an intact galectin-3 gene. Galectin Therapeutics Inc. is using its galectin-3inhibitor to treat advanced liver fibrosis and livercirrhosis in NASH (non-alcoholic steatohepatitis) patients. We have completed two Phase 1 clinical studies, a Phase 2 clinical study in NASH patientswith advanced fibrosis (NASH-FX) and a second Phase 2B clinical trial in NASH patients with well compensated cirrhosis. We announced, in December2017 top line results from our Phase 2b study in NASH patients with cirrhosis (NASH-CX) and results of an End of Phase 2 meeting with the FDA inMay 2018which provided direction on potentially acceptable end points for a Phase 3 trial. The company with its external NASH consultants hasdesigned a Phase 3 study which has been sent to various contract research organizations (CROs) for their input on feasibility, timing costs and otherimportant considerations. NASH cirrhosis is a progressive disease, currently not treatable and ultimately may result in liver failure that has poorprognosis and no effective, approved medical therapies other than liver transplant. Galectin-3 expression is highly increased in the liver of patientswith liver fibrosis and liver cirrhosis. We believe that our galectin-3 inhibitor, by reducing galectin-3 at the cellular level, ultimately showing a stronganti-fibrotic potential may provide a novel treatment for various forms of liver fibrosis.We endeavor to leverage our scientific and product development expertise as well as established relationships with outside sources to achievecost-effective and efficient drug development. These outside sources, amongst others, provide us with expertise in preclinical models, pharmaceuticaldevelopment, toxicology, clinical trial operations, pharmaceutical manufacturing, sophisticated physical and chemical characterization, andcommercial development. We also have established several collaborative scientific discovery programs with leading experts in carbohydrate chemistryand characterization. These discovery programs are generally aimed at the targeted development of new carbohydrate molecules that bind galectinproteins and offer alternative options to larger market segments in our primary disease indications. We also have established through Galectin SciencesLLC, a discovery program aimed at the targeted development of small molecules (generally, non-carbohydrate) that bind galectin proteins and mayafford options for alternative means of drug delivery (e.g., oral) and as a result expand the potential uses of our galectin-3 inhibitor compounds. We arealso pursuing a development pathway to clinical enhancement and commercialization for our lead compounds in immuno-oncology for cancertherapy. However, our clinical development efforts are focused on both liver fibrosis and fatty liver disease as represented by a Phase 2 clinical trial inNASH-cirrhosis which reported top 1Table of Contentsline data in December 2017 and on planning for Phase 3 studies. All of our proposed products are presently in development, including pre-clinical andclinical trials.We were founded in July 2000 as Pro-Pharmaceuticals, Inc., a Massachusetts corporation. On April 25, 2001, DTR-Med Pharma Corp. (“DTR”),which was incorporated in Nevada on January 26, 2001, entered into a stock exchange agreement with Pro-Pharmaceuticals, Inc., whereby DTRacquired all of the outstanding shares of common stock of Pro-Pharmaceuticals, Inc. On May 10, 2001, DTR changed its name to “Pro-Pharmaceuticals,Inc.” and on June 7, 2001, the Massachusetts corporation was merged into the Nevada corporation. On May 26, 2011, Pro-Pharmaceuticals, Inc.changed its name to “Galectin Therapeutics Inc.” In October, 2012, we moved our headquarters to a suburb of Atlanta, GA to be closer to a center ofdiscovery collaboration while maintaining a laboratory operation in the Boston area.Our Drug Development ProgramsGalectins 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, theseproteins are able to bind to sugar molecules that are part of other proteins, glycoproteins, in and on the cells of our body. Galectin proteins act as a kindof molecular glue, bringing together molecules that have sugars on them. Galectin proteins, in particular galectin-3, are known to be markedlyincreased in a number of important diseases including inflammatory diseases, scarring of organs (e.g. liver, lung, kidney, and heart) and cancers ofmany kinds. The increase in galectin protein promotes the disease and is detrimental to the patient. Published data substantiating the importance ofgalectin-3 in the fibrotic process arises from gene knockout experiments in animal studies. Mice genetically altered to eliminate the galectin-3 gene,and thus unable to produce galectin-3, are incapable of developing liver fibrosis in response to toxic insult to the liver and in fatty liver disease as wellas development of fibrosis in other tissues.We have one new proprietary chemical entity (NCE) in development, GR-MD-02, which has shown promise in preclinical and early clinicalstudies in treatment of fibrosis, severe skin disease, and in cancer therapy. Currently we are focusing on development of GR-MD-02 intended to be usedin the treatment of liver fibrosis associated with fatty liver disease (NASH) and more specifically in NASH cirrhosis. We have also leveraged ourrelationships with well-known investigators to demonstrate clinical effects of GR-MD-02 in treating moderate to severe plaque psoriasis, severe atopicdermatitis, and in cancer therapy in combination with immune-system modifying agent(s). GR-MD-02 is a proprietary, patented compound derivedfrom natural, readily available, plant-based starting materials, which, following chemical processing, exhibits the properties of binding to andinhibiting galectin-3 proteins. A second NCE, GM-CT-01 is a proprietary, patented compound that is made from a completely different starting sourceplant material and also binds and inhibits galectin proteins. Previously in clinical development for cancer indications, GM-CT-01 compound has beenexplored in limited other preclinical studies.Our product pipeline is shown below: Indication Drug StatusFibrosis NASH with Advanced Fibrosis:NASH-CX trial andNASH-FX trial GR-MD-02 IND submitted January 2013. Results from the Phase 1clinical trial were reported in 2014, with final resultsreported in January 2015. End of Phase 1 meeting held withFDA in 2014. Two Phase 2 clinical trials were designed. The NASH FX trial was designed for patients with advancedfibrosis but not cirrhosis. The NASH FX trial top line datawas reported in September 2016 2Table of ContentsIndication Drug Status The NASH CX trial, was designed for patients with wellcompensated cirrhosis. The NASH CX trial top line data wasreported in December 2017. End of Phase 2 (EOP2) meetingheld with FDA in May 2018. NASH – RX The NASH -RX trial, a Phase 3 trial designed for NASHpatients with well compensated cirrhosis, is in planningstage based on feedback on potential endpoints receivedfrom FDA at EOP2 meeting and in consultation with ourexternal hepatology consultants. As part of the planningrelated to the Phase 3 trial, the Company has had ongoingdiscussions with FDA regarding Galectin’s proposal for thenext clinical study as well as the overall developmentprogram. These ongoing conversations included a recentType C Meeting via teleconference with the Agency onFebruary 6, 2019, to discuss Galectin’s proposal for use ofprogression to varices as the primary surrogate endpointmoving forward. In the meeting, FDA confirmed that the Agency issupportive of the use of progression to varices as a potentialsurrogate endpoint and progression to large varices as acomponent of a composite clinical benefit endpointpending additional requested information. Galectin willaddress and implement additional FDA requests andconsiderations for the Phase 3 trial, when and wherepossible. Given the newness of the endpoint and the newinformation to be generated in the trial, some informationrequested may not currently be available or may not be ableto be addressed fully until data from the Phase 3 trial isavailable to address the information requests. Lung Fibrosis GR-MD-02 In pre-clinical developmentKidney Fibrosis GR-MD-02 In pre-clinical developmentCardiac and Vascular Fibrosis GR-MD-02 andGM-CT-01 In pre-clinical developmentCancer Immunotherapy Melanoma, Head,Neck Squamous CellCarcinoma (HNSCC) GR-MD-02 Investigator IND submitted in December 2013. Phase 1Bstudy in process. A second Phase 1B study began in Q-12016. Investigator IND for that study submitted inSeptember 2015. Early data was reported in 3Table of ContentsIndication Drug Status February 2017 and studies with the 3rd cohort were reportedin September 2018. Continuation of trial is ongoing toexpand the dataset of melanoma and HNSCC patients at the4 mg/Kg dose.Psoriasis Moderate to Severe Plaque PsoriasisSevere Atopic Dermatitis GR-MD-02 IND submitted March 2015. A phase 2a trial in moderate tosevere plaque psoriasis patients began in January 2016.Interim data on the first four patients were positive and werereported in May 2016. Further positive data was reported inSeptember 2016. Investigator initiated IND submitted fortreatment of three patients with severe atopic dermatitis,with positive preliminary data presented in February 2017.Further studies are dependent on finding a suitable strategicpartner.Fibrosis. GR-MD-02 is our lead product candidate for treatment of fibrotic disease. Our preclinical data show that GR-MD-02 has a significanttherapeutic effect on liver fibrosis as shown in several relevant animal models. In addition, in NASH animal models, GR-MD-02 has been shown toreduce liver fat, inflammation, and ballooning degeneration or death of liver cells. Therefore, we chose GR-MD-02 as the lead candidate in adevelopment program targeted initially at fibrotic liver disease associated with non-alcoholic steatohepatitis (NASH, or fatty liver disease). In January2013, an Investigational New Drug (“IND”) was submitted to the FDA with the goal of initiating a Phase 1 study in patients with NASH and advancedliver fibrosis to evaluate the human safety of GR-MD-02 and pharmacodynamics biomarkers of disease. On March 1, 2013, the FDA indicated we couldproceed with a US Phase 1 clinical trial for GR-MD-02 with a development program aimed at obtaining support for a proposed indication of GR-MD-02 for treatment of NASH with advanced fibrosis. The Phase 1 trial was completed and demonstrated that GR-MD-02 up to 8 mg/kg, i.v. was safe andwell tolerated. The human pharmacokinetic data defined a drug dose for use in the planned Phase 2 trials based on extrapolation from efficacy data inNASH animal models of liver fibrosis and/or cirrhosis. Additionally, there was evidence of a pharmacodynamic effect of GR-MD-02 at the 8 mg/kgdose with a decrease in alpha 2 macroglobulin, a serum marker of fibrotic activity, and a reduction in liver stiffness as determined by FibroScan®. An“End of Phase 1 Meeting” was held with FDA which, amongst other items, provided guidance on the primary endpoint for the Phase 2 clinical trial, theNASH-CX trial.Additionally, an open label drug-drug interaction study was completed in healthy volunteers during the second quarter of 2015 with GR-MD-02and it showed that with 8 mg/kg dose of GR-MD-02 and 2 mg/kg dose of midazolam there was no drug-drug interaction and no serious adverse eventsor drug-related adverse events were observed. This study was required by the U.S. Food and Drug Administration (FDA) and the primary objective wasto determine if single or multiple intravenous (IV) doses of GR-MD-02 affect the pharmacokinetics (PK) of midazolam. The secondary objective was toassess the safety and tolerability of GR-MD-02 when administered concomitantly with midazolam. The lack of a drug interaction in this study enabledthe Company to expand the number of patients eligible for its Phase 2 clinical trial. In addition, should GR-MD-02 be approved for marketing, thesuccess of this study supports a broader patient population for the drug label.Our Phase 2 program in fibrotic disease consisted of two separate human clinical trials. The primary clinical trial was the Phase 2b NASH-CXstudy for one year for patients with NASH with well compensated cirrhosis, which began enrolling in June, 2015. This study was the primary focus ofour program and is a randomized, placebo-controlled, double-blind, parallel-group Phase 2b trial to evaluate the safety and efficacy of GR-MD-02 fortreatment of liver fibrosis and resultant portal hypertension in NASH patients with well compensated 4Table of Contentscirrhosis. A smaller, exploratory NASH-FX trial was conducted to explore potential use of various non-invasive imaging techniques in NASH patientswith advanced fibrosis but not cirrhosis.NASH-FX Trial: The NASH-FX trial, a Phase 2a pilot trial NASH-FX for patients with NASH advanced fibrosis that explored use of three non-invasive imaging technologies, is now complete. It was a short, single site, four-month trial in 30 NASH patients with advanced fibrosis, but notcirrhosis, randomized 1:1 to either 9 bi-weekly doses of 8 mg/kg of GR-MD-02 or placebo. The trial did not meet its primary biomarker endpoint asmeasured using multi-parametric magnetic resonance imaging (LiverMultiScan(R), Perspectum Diagnostics). The trial also did not meet secondaryendpoints that measure liver stiffness as a surrogate for fibrosis using, magnetic resonance-elastography and FibroScan® score. We, and many experts inthe field, now believe that a four-month treatment period may not be sufficient to show efficacy results in established liver fibrosis. This small studywas not powered for the secondary endpoints and thus, not surprisingly, did not meet the secondary endpoints. In the trial, GR-MD-02 was found to besafe and well tolerated among the patient population with no serious adverse events. Although there was no apparent improvement in the three non-invasive tests for assessment of liver fibrosis in the four-month NASH-FX trial, the principal investigator of the NASH-FX trial has stated that theinhibition of galectin-3 with GR-MD-02 remains promising for the treatment of NASH fibrosis. Of note is that GR-MD-02 has demonstrated animproved clinical effect in moderate-to-severe psoriasis, suggesting the compound has activity in humans in an immune-mediated inflammatoryhuman disease that can occur in association with NASH. We believe our drug candidate provides a promising new approach for the therapy of fibroticdiseases, and liver fibrosis in particular. Fibrosis is the formation of excess connective tissue (collagen and other proteins plus cellular elements such asmyofibroblasts) in response to damage, inflammation or repair. When the fibrotic tissue becomes confluent, it obliterates the cellular architecture,leading to scarring and dysfunction of the underlying organ. Given galectin-3’s broad biological functionality, it has been demonstrated to beinvolved in cancer, inflammation and fibrosis, heart disease, and renal disease. We have further demonstrated the broad applicability of the actions ofour galectin-3 inhibitor’s biological effect in ameliorating fibrosis involving lung, kidney, blood vessels, and cardiac tissues in a wide variety ofanimal models.NASH-CX Trial: The NASH-CX trial was a larger well-designed multi-center clinical trial that explored use of GR-MD-02 for the treatment ofliver fibrosis and resultant portal hypertension in patients with well-compensated NASH cirrhosis. Enrollment in this trial was completed in September2016, and a total of 162 patients at 36 sites in the United States were randomized to receive either 2 mg/kg of GR-MD-02, 8 mg/kg of GR-MD-02 orplacebo, with approximately 54 patients in each group. The primary endpoint was a reduction in change in hepatic venous pressure gradient (HVPG).Patients received an infusion every other week for one year, total of 26 infusions, and were evaluated to determine the change in HVPG as comparedwith placebo. HVPG was also correlated with secondary endpoints of fibrosis on liver biopsy as well as with measurement of liver stiffness(FibroScan(R)) and assessment of liver metabolism (13C-methacetin breath test, Exalenz), which are non-invasive measures of the liver that may be usedin future studies. Top line data readout was reported in December 2017 demonstrating positive efficacy data and safety and clinically meaningfulresults in the NASH patients with well compensated cirrhosis without esophageal varices (stage 1 cirrhosis).In the total patient population, the primary endpoint HVPG showed a trend toward benefit with GR-MD-02 treatment, but the difference fromplacebo was not statistically significant. The mean change in HVPG of placebo from baseline to week 54 was 0.3 mm Hg. The mean change in HVPGfrom baseline was -0.37 and -0.42 for the 2 mg/kg dose and 8 mg/kg dose of GR-MD-02, respectively.Further analysis showed that the drug effect was significantly dependent on dose “varices” in the total group of patients (p<0.02). In those NASHcirrhosis patients without varices at baseline (about 50% of the total population), there was a statistically significant effect of the 2 mg/kg dose of GR-MD-02 on the absolute change in HVPG (-1.08 mm Hg, p<0.01). The effect of the 8 mg/Kg dose of GR-MD-02 on absolute or percent change in HVPGfrom baseline to week 54 was not significant. The population of patients without varices at baseline were further subdivided into those with mild portalhypertension (HVPG greater or equal to 6 mm Hg and less than 10 mm Hg). In patients with mild portal hypertension (MPH), both doses of GR-MD-02demonstrated a statistically significant effect on change in HVPG. The mean change in HVPG in the MPH group were +1.8 mm 5Table of ContentsHg for placebo and -0.3 and -0.4 mm Hg in the 2 mg/kg and 8 mg/kg dose groups, respectively. In patients with clinically significant portalhypertension (HVPG greater than 10 Mm Hg) with no varices at baseline, there was a statistically significant effect of 2 mg/kg of GR-MD-02 on thechange in HVPG.A responder analysis was performed on those patients without varices at baseline. Analysis was performed looking at two groups: those with anequal to or greater than 2 mm Hg decrease in HVPG from baseline or those with an equal to or greater than 2 mm Hg and a greater than or equal to 20%decrease in HVPG from baseline. In both cases, the change observed in the GR-MD-02 2 mg/kg group was statistically significant (p<0.01) while thatof the 8 mg/kg group was not.In terms of cirrhosis complications over the 54-week treatment period, in patients without varices there were statistically significantly fewer newvarices that developed in the treatment groups vs placebo. We believe this may represent a useful measure of clinical outcome.The major conclusions, to date from the NASH-CX trial results are that: i) GR-MD-02 had a statistically significant and clinically meaningfuleffect in improving HVPG vs placebo in patients with NASH cirrhosis who did not have esophageal varices at baseline. This effect was seen regardlessof the patient’s baseline portal hypertension. Furthermore, we believe that patients with esophageal varices may have masked benefits in the totalpatient population. ii) There was an important drug effect of GR-MD-02 in the total patient population on liver biopsy with a statistically significantimprovement in hepatocyte ballooning (ie cell death), (iii) There was a statistically significant reduction (p=0.02) in the development of newesophageal varices in drug-treated patients compared to placebo. We believe that this is a clinically relevant endpoint related to patient outcomes,(iv) While there was a drug effect in both the 2 mg/kg and 8 mg/kg dosage groups on liver biopsy and in the mild portal hypertension group, there wasa consistently greater and statistically significant effect of the 2 mg/kg dose of GR-MD-02, (v) GR-MD-02 appears to be safe and well tolerated in thisone year clinical trial and (vi) We believe this is the first large, randomized clinical trial of any drug to demonstrate a clinically meaningfulimprovement in portal hypertension or liver biopsy in patients with compensated NASH cirrhosis without esophageal varices.Further information and details on the NASH-CX results summarized above is available in public presentations posted to our website and filedwith the SEC.NASH-RX Trial: The NASH-RX Trial is a phase 3 trial of GR-MD-02 in NASH cirrhosis patients. We have met with the FDA to discuss theresults of the NASH-CX trial in an End of Phase 2 meeting as disclosed in our May 14, 2018 press release. The proposed target population of the Phase3 clinical trial will be patients with well compensated established NASH cirrhosis and portal hypertension. Patients will be selected based on criteriacommonly used in clinical practice to identify patients with portal hypertension who are at risk of developing esophageal varices. Ongoingconversations with FDA included a recent Type C Meeting via teleconference with the Agency on February 6, 2019, to discuss Galectin’s proposal foruse of progression to varices as the primary surrogate endpoint moving forward.In the meeting, FDA confirmed that the Agency is supportive of the use of progression to varices as a potential surrogate endpoint andprogression to large varices as a component of a composite clinical benefit endpoint pending additional requested information. Galectin will addressand implement additional FDA requests and considerations for the Phase 3 trial, when and where possible. Given the newness of the endpoint and thenew information to be generated in the trial, some information requested may not currently be available or may not be able to be addressed fully untildata from the Phase 3 trial is available to address the information requests.The focus and goal of the therapeutic program is to stop the progression of and reverse the fibrosis and/or portal hypertension in the liver and,thereby improve liver function and prevent the development of complications of fibrosis/cirrhosis and liver-related mortality in patients. The results ofthe NASH-CX trial substantiate that, subject to confirmation in later stage clinical trials, we believe that this goal is achievable in a significant portionof the NASH cirrhosis patient population i.e. those NASH cirrhosis patients with portal 6Table of Contentshypertension at risk of developing esophageal varices that may bleed and experience other decompensating events. The trial design has been refinedwith external consultants and sent out to potential CROs in a confidential Request for Proposal (RFP) process. We are in the process of evaluating andinterviewing the CRO candidates. The final primary endpoint and the Phase 3 clinical trial design, including projected timing and costs will beannounced once the planning phase is completed.Cancer Immunotherapy. We believe there is potential for galectin inhibition to play a key role in the burgeoning area of cancer immunotherapy.For example, there have been several recent approvals of drugs that enhance a patient’s immune system to fight cancer. It is our goal to use a galectininhibitor to further enhance the immune system function to fight cancer in a way that complements other approaches to this type of therapy. Thishypothesis is supported by the fact that galectin-3 is expressed at high levels in multiple types of tumors, adds to the malignant nature of the tumors,and protects the tumors from immune system attack. Our drug candidates provide a promising new therapeutic approach to enhance the activity of theimmune system against cancer cells. Preclinical studies have indicated that GR-MD-02 enhances the immune response to cancer cells, increased tumorshrinkage and enhanced survival in immune competent mice with prostate, breast, melanoma and sarcoma cancers when combined with one of theimmune checkpoint inhibitors, anti-CTLA-4 or anti-PD-1, or with the immune cell activator anti-OX40. These preclinical data led to the filing of twoInvestigator-sponsored INDs and the initiation of studies of GR-MD-02 in combination with Yervoy® (ipilimumab) and KEYTRUDA (pembrolizumab)in Phase 1B studies of patients with metastatic melanoma. The KEYTRUDA trial has also been expanded to include patients with non-small cell lungcancer and head and neck squamous cell carcinoma. These studies are being conducted under the sponsorship of Providence Portland Medical Center’sEarle A. Chiles Research Institute (EACRI).Data on this combination immunotherapy program was presented on February 7, 2017 at the 9th GTCBio Immunotherapeutics &Immunomonitoring Conference in San Diego, CA by Dr. William L. Redmond, Providence Cancer Center. Preclinical results in mouse models ofmultiple types of cancers showed important anti-tumor activity and increased survival effects of combining GR-MD-02 with different types of immunemodulators, providing a case for progressing studies into human patients with cancer. Seven patients were treated in the GR-MD-02 in combinationwith Yervoy trial, with no safety concerns in these low dose cohorts. Due to changes in the standard of care for metastatic melanoma (i.e., approval ofanti-PD-1), recruitment has been slowed significantly in this trial. Promising results were reported in the Phase 1b trial combining GR-MD-02 withpembrolizumab (KEYTRUDA). Cohort 1 was completed (n=6, 5 with melanoma, one head and neck) with one partial response and one mixed responsein 5 melanoma patients. There was a rapid and marked tumor response after 3 doses of combined GR-MD-02 and pembrolizumab in the one partialresponse patient who had failed high-dose IL-2 and oncolytic virus + ipilimumab. The study is ongoing and progression to further development will bebased on response rate as compared to historical response rates to pembrolizumab alone. In September 2018 we announced additional preliminaryclinical data from cohort 3 of this investigator-initiated trial. When aggregated with cohorts previously reported, the data shows a 50% objectiveresponse rate in advanced melanoma with GR-MD-02 in combination with KEYTRUDA, and a significant decrease in the frequency of suppressivemyeloid-derived suppressor cells following treatment in the responding patients (on day 85 post-treatment). Fourteen advanced melanoma patientsacross three dose cohorts now have Objective Response Rate (ORR) and Disease Control Rate (DCR) data. Six patients completed in cohort 3 (8mg/Kg) have now been added to the three patients completed in cohort 2 (4 mg/Kg) and five patients completed in cohort 1 (2 mg/Kg). Cohorts 1 and 3each had two patients with an objective response. All three patients in cohort 2 had an objective response. In addition to the fourteen advancedmelanoma patients, six patients with head and neck cancer were enrolled in this trial with a 33% ORR and 67% DCR. These data, taken together withthe observed favorable safety and tolerability of the combination, in the view of the principal investigator, provide compelling rationale to moveforward. Given that all three melanoma patients were responders at the 4 mg/Kg dose, the investigators plan to continue the trial with the expansion ofthe 4 mg/Kg cohort to include additional advanced melanoma patients and additional head and neck cancer patients. 7Table of ContentsSevere skin diseases. During our Phase 1 NASH fibrosis trial with GR-MD-02, a clinical effect on plaque psoriasis was observed in a NASHpatient who also had this disease. This patient had marked improvement in her psoriasis, with improvement beginning after the third infusion. Shereported that her psoriasis was “completely gone” and her skin was “normal” after the fourth infusion. Her skin remained normal for 17 months after thefinal infusion of study drug. The patient is convinced that the improvement in her psoriasis is related to the study drug.This serendipitous finding, combined with galectin-3 protein being markedly upregulated in the capillary epithelia (small blood vessels) of thepsoriatic dermis (plaque lesions), led to a phase 2a trial in patients with moderate to severe plaque psoriasis. GR-MD-02 inhibition of galectin-3 mayattenuate capillary changes in the psoriatic dermis and inflammatory recruitment, perhaps explaining the improvements observed in the NASH fibrosistrial patient. In this open-label, unblinded trial (no placebo, all patients knowingly receive active drug), 5 patients with moderate to severe plaquepsoriasis were administered GR-MD-02 every two weeks for 24 weeks. In May 2016, we reported positive results on the first four patients after12 weeks of therapy. Based on these results, we modified the trial to include 24 weeks of therapy. In August 2016, we reported on four patients after24 weeks of therapy and one patient after 12 weeks of therapy. The four patients who received 24 weeks of therapy experienced an average of 48%improvement in their plaque psoriasis. At this time, the average response in all five patients remains at 50% with one patient having an 82%improvement. However, there are existing drugs on the market in this disease that produce 75% and higher improvements in 60-90% of patients. Whilewe are encouraged that this study has demonstrated clinically meaningful results in a human disease with GR-MD-02, the next steps would entail acontrolled, does-ranging clinical trial which we do not expect to conduct absent a strategic partnership.We believe the mechanism of action for GR-MD-02 is based upon interaction with, and inhibition of, galectin proteins, particularly galectin-3,which are expressed at high levels in certain pathological states including inflammation, fibrosis and cancer. While GR-MD-02 is capable of binding tomultiple galectin proteins, we believe that it has the greatest affinity for galectin-3, the most prominent galectin implicated in pathological processes.Blocking galectin in cancer and liver fibrosis has specific salutary effects on the disease process, as discussed below.Liver Fibrosis: New Approach for a Significant Unmet Medical NeedWhen an internal organ is exposed to chronic disease one of the responses is that scar tissue is laid down in the organ (this process is calledfibrosis). The longer the disease affects the organ, the more fibrous tissue is deposited, and this ultimately results in the failure of the organ. Thischronic fibrosis of organs may occur in the liver, lung, kidney, and heart, as well as others and, as a result, fibrosis of organs has been estimated toaccount for as much as 45% of all mortality in the United States. Scientific findings during the last few years indicate that the galectin-3 protein iscritically important in this fibrotic process in multiple organs.In the liver, fibrosis is the end result of multiple inflammatory conditions and infections. Progressive liver fibrosis leads to cirrhosis, which resultsin reduction of liver function, multiple medical complications and ultimately death. It is estimated that one to two million patients have cirrhosis in theUnited States with close to 50,000 losing their lives yearly. Only a fraction of patients’ lives, approximately 6,200 per year, are saved by livertransplantation at a cost of at least $350,000 per transplantation with significant additional costs of care and medications after the transplant. Onecondition in particular that frequently leads to cirrhosis is non-alcoholic steatohepatitis, or NASH, a liver disease characterized by the accumulation offat in the liver with associated inflammation and fibrosis, which can lead to end-stage cirrhosis requiring liver transplantation. The National Institutesof Health estimates that 9 to 15 million Americans are affected by NASH, and other sources suggest it may be as many as 30 million people haveNASH, and forecasts that the number of Americans affected by this disease is growing due to obesity and diabetes, with the potential to become theleading cause of liver cirrhosis and liver transplantation in the future. Liver transplantation is currently the only therapeutic approach to NASH or otherforms of liver fibrosis because, to the best of our knowledge, there are no drug therapies on the market. Organ transplantation is a difficult, risky andcostly procedure, and organ availability is scarce. There is also the 8Table of Contentsrisk of developing cirrhosis in the transplanted liver from the same disease that damaged the patient’s original liver. Therefore, there is a great need forother therapeutic options. All diseases that affect the liver (viral hepatitis, alcoholic liver disease, and fatty liver as examples) lead to the developmentof scarring of the liver.The primary focus of the Company is to use galectin inhibitors to block galectin-3 and treat organ scarring or fibrosis in the liver. There are noapproved therapies for treatment of liver fibrosis. We believe that our drug candidates have the potential to treat NASH and other forms of liver fibrosis.Scientific evidence suggests that galectin-3 is essential for the development of liver fibrosis in animals. Published data show that mice lacking thegalectin-3 gene, and thus unable to produce galectin-3, are essentially incapable of developing liver fibrosis in response to toxic insult to the liver andin fatty liver disease. Moreover, mice that do not have the galectin-3 gene are resistant to lung and kidney fibrosis. These published data show thatgalectin-3 is a critical protein for the development of organ fibrosis. Our drugs, based on experiments in well characterized animal models, are alsopotentially useful in scarring or fibrosis of other organs such as lung and kidney which expands the possibilities for future therapeutic indications.We have evaluated the ability of GR-MD-02 to block galectin-3 in animal models of liver fibrosis, the conclusions of which yielded positiveresults. Our pre-clinical data show that GR-MD-02 may have a therapeutic effect on liver fibrosis as shown in several relevant animal models.Therefore, we chose GR-MD-02 as the lead candidate in a development program targeted initially at fibrotic liver disease associated with NASH.We evaluated GR-MD-02 in pre-clinical toxicology and pharmacology studies during 2013, and filed an IND with the FDA in January 2013, forinitiating human studies in patients with NASH. In February 2013, we entered into an agreement with CTI Clinical Trial Services to assist with thedesign, development and conduct of one or more clinical research studies, specifically for services with respect to our Phase 1 clinical trials to evaluatesafety of GR-MD-02 in patients with NASH. The FDA notified us in March 2013 that we may proceed with a Phase 1 clinical trial for patients withNASH, and we began enrolling patients in the Phase 1 clinical trial in the third quarter of 2013. In August 2013, GR-MD-02 was granted Fast Trackdesignation by the FDA for NASH with hepatic fibrosis, commonly known as fatty liver disease with advanced fibrosis. In January 2014, we completedthe enrollment of the first cohort of patients in the Phase 1 trial with no serious adverse events being reported. We reported initial safety andtolerability results from the first cohort of patients on June 30, 2014. The second cohort of this Phase 1 trial began, and enrollment was completed inApril 2014. In July 2014, we reported the results from the second cohort of patients. Enrollment of the third cohort of Phase 1 began in July 2014, withinterim results presented in November 2014 with the final report on cohort 3 presented in January 2015. The results of the Phase 1 study demonstratethat (i) GR-MD-02 was safe and well tolerated by patients with advanced NASH liver fibrosis after IV administration of four doses of 2 mg/kg, 4 mg/kgand 8mg/kg lean body weight, (ii) Pharmacokinetics in patients with advanced fibrosis, but not cirrhosis, revealed drug exposure in humans at the 8mg/kg dose that was equivalent to the upper range of the targeted therapeutic dose determined from effective doses in NASH animal models,(iii) Disease Serum Marker Effect showed there was a statistically significant, dose-dependent reduction in FibroTest® scores due to a statisticallysignificant reduction in alpha-2 macroglobulin (A2M) serum levels, and (iv) Liver Stiffness Effect, as measured by FibroScan® showed that there was asignal of reduced liver stiffness in patients receiving GR-MD-02. The reduction seen in A2M does not necessarily mean fibrosis got better in this shortstudy but does suggest changes in the fibrogenic process that might lead to an improvement in fibrosis with longer-term therapy. These Phase 1 resultsin NASH patients with advanced fibrosis, in addition to completion of further toxicology and drug-drug interaction studies provided a firm foundationfor entry into a Phase 2 development program (described above). Top line results of our Phase 2b in compensated NASH cirrhosis patients was reportedin December 2017 and is more fully described above as well in our SEC filings.GR-MD-02 is a proprietary, patented galactoarabino-rhamnogalacturonan polysaccharide polymer that is comprised predominantly ofgalacturonic acid, galactose, arabinose, rhamnose, and smaller amounts of other sugars. Structural studies have shown that GR-MD-02 binds togalectin-1 and to galectin-3 with binding affinity to galectin-3 being significantly greater than binding to galectin-1. With respect to GR-MD-02, wecurrently 9Table of Contentshave, as of December 31, 2018, 20 granted U.S. patents, and 57 foreign granted patents. These patents more fully described below, include acomposition of matter patent, and methods of use including manufacture, use patient in patients with NASH, in patients with liver fibrosis, and inpatients with diabetic kidney disease. Additional patent applications are pending with respect to, amongst other uses, cancer immunotherapy, lungfibrotic disease, and inflammatory disease associated with increase in inducible nitric oxide synthase. Patents have also been granted with respect toliver fibrosis, NASH, and liver fibrosis in combination with other therapeutic agents. Compounds for subcutaneous administration and oral delivery arecurrently under pre-clinical development.Galectin Inhibition in Cancer TherapyWe believe the potential exists for galectin inhibition to play an important role in cancer therapy. Galectin proteins, particularly galectin-1 andgalectin-3, have been shown to be highly expressed in the majority of cancers and have multiple roles in promoting cancer progression, includingtumor cell invasion, metastasis, angiogenesis, and tumor evasion of the immune system.The role of galectins in cancer immunotherapy can be understood through the “Galectin Effect”, a recent discovery of how tumors avoid thebody’s own immune system, i.e., the tumors secrete galectin proteins that block the body’s efforts to fight tumors. Our current program to block the“Galectin Effect” is based on the research of Dr. Pierre van der Bruggen (of the Ludwig Institute of Cancer Research in Brussels, Belgium),demonstrating that galectin-3, which is produced by the vast majority of human cancers, binds to and blocks the actions of tumor-infiltrating T-lymphocytes, the major immune cell in the body’s defense against cancers. In addition, Dr. William L. Redmond of Providence Portland MedicalCenter’s Earl A. Chiles Research Institute (EACRI) has shown that our galectin inhibitors can enhance the anti-tumor immunogenic effect of otherimmunotherapies based on targeting lymphocyte checkpoints such as CTLA4. Based on these results, we believe that the body’s immune cells may beunable to attack and kill tumor cells in the presence of galectins. Using this approach, the mechanism of action for our drugs seeks to block galectinsand, in turn, restore the ability of the T-lymphocytes to kill tumor cells.The preclinical study found that GR-MD-02 increased tumor shrinkage and enhanced survival in immune competent mice with prostate or breastcancers when combined with one of the immune checkpoint inhibitors, anti-CTLA-4 or anti-PD-1. These findings suggest a role for GR-MD-02 incancer immunotherapy. These preclinical observations by Dr Redmond provided scientific rationale for proceeding and lead to the filing byProvidence Portland Medical Center of an Investigator-sponsored IND to conduct a Phase 1B study to determine if GR-MD-02 enhances theprobability of melanoma response with ipilimumab by inducing proliferation, activation and memory function of CD8+ T cells in human patients. Thecompany has licensed the underlying invention from Providence Portland Medical Center. This study represents a novel approach for patients withmetastatic melanoma. The IND was approved by FDA in February 2014. This study is being conducted under the sponsorship of Providence PortlandMedical Center’s Earle A. Chiles Research Institute (EACRI) and is being supported by the Company.The study employs a dose escalation of GR-MD-02 in conjunction with the standard therapeutic dose of ipilimumab in patients with advancedmelanoma for whom ipilimumab would be considered standard of care. In addition to monitoring for toxicity and clinical response by irRECISTcriteria on imaging tests, blood samples will be obtained to assess immunologic measures relevant to galectin biology and ipilimumab T-cell check-point inhibition. Galectin Therapeutics is providing its proprietary compound GR-MD-02 to EACRI researchers, as well as supplying researchers withsupporting analysis of the pharmacokinetics of GR-MD-02 and the right to reference the Company’s open IND on GR-MD-02. To date the first twodosing groups have been completed without serious adverse events that were determined to be related to GR-MD-02. The third dosing group is nolonger enrolling due to the availability of newer agents such as the anti-PD! agents.Similar to the agreement set forth for the ipilimumab (Yervoy®) Phase 1B study, Providence Portland Medical Center submitted an IND inSeptember 2015 to conduct a Phase 1B study of GR-MD-02 and 10Table of Contentspembrolizumab (Keytruda®) in patients with metastatic melanoma. The combination of GR-MD-02 and an anti-PD1 (pembrolizumab) has been shownto enhance T-cell activation, memory, and effector function, and promote better antitumor responses in multiple mouse studies. The study will test thehypothesis that galectin-3 antagonism using GR-MD-02 with enhance the probability of melanoma response using pembrolizumab in patients byinducing proliferation, activation and memory function of CD8+ T cells that recognize melanoma antigens. Similar to the ipilimumab study, the studyemploys a dose escalation of GR-MD-02 in conjunction with the standard therapeutic dose of pembrolizumab in patients with metastatic melanomawho have had progression of their melanoma after ipilimumab and/or BRAF targeted therapy when a BRAF mutation is present. In addition tomonitoring for toxicity and clinical response, blood and tumor samples will be obtained to assess immunologic measures relevant to galectin biologyand pembrolizumab T-cell checkpoint inhibition. Top line results of the combination of the 3 dosing cohorts was reported in September 2018 and ismore fully described above as well in our SEC filings and press releases. These data, taken together with the observed favorable safety and tolerabilityof the combination, in the view of the principal investigator, provide compelling rationale to move forward. Given that all three melanoma patientswere responders at the 4 mg/Kg dose, the investigators plan to continue the trial with the expansion of the 4 mg/Kg cohort to include additionaladvanced melanoma patients and additional head and neck cancer patients. If these additional results should continue to be encouraging, the next stepin development would entail a controlled randomized Phase 2 clinical trial.Patents and Proprietary RightsOur development and commercial viability, and ultimately our competitiveness, depend on our ability to develop and maintain the proprietaryaspects of our technology and operate without infringing on the proprietary rights of others. We rely on a combination of patent, trademark, trade secretand copyright law and contract restrictions to protect the proprietary aspects of our technologies. We seek to limit disclosure of our intellectualproperty by requiring employees, consultants, and any third parties with access to our proprietary information to execute confidentiality agreementsand by restricting access to that information.In August 2015, we received a notice of allowance from the U.S. Patent and Trademark Office for patent application number 13/726,900, titled“Galactose-pronged polysaccharides in a formulation for antifibrotic therapies.” This patent extends coverage of the Company’s pectin-derivedcompounds (including broad molecular weight ranges and other sources of pectin) to include treatment of chronic kidney disease associated with thedevelopment of fibrosis, established kidney fibrosis, chronic lung disease associated with the development of fibrosis and established lung fibrosis.Claims in this patent include administering pectin-derived compound parenterally to a patient having at least one of the four aforementioned diseaseswhere the established fibrosis or progression of the fibrosis or cirrhosis is inhibited or slowed down. Additional specific claims encompass deriving thecompound from citrus pectin, apple pectin, soybean hull pectin or sugar beet pectin with a molecular weight between 2 kDa and 400kDa. Also coveredis the step of administering the modified galacto-rhamnogalacturonan compound in an admixture with a therapeutic agent, where the agent is anantifibrotic compound.In August 2014, we received a notice of allowance from the U.S. Patent and Trademark Office for patent application number 13/573,442 titled“Composition of Novel Carbohydrate Drug for Treatment of Human Diseases.” The patent covers composition and chemical structural claims forcompounds that includes the Company’s lead galectin inhibitor compound GR-MD-02 and will expire in December 2031. Claims include multipleroutes of administration, including intravenous, subcutaneous and oral. The application also covers therapeutic formulations for use in the treatment ofNASH (fatty liver disease), cancer and fibrotic, inflammatory and autoimmune disorders in which galectin proteins are involved, at least in part, in thepathogenesis. Additional specific claims encompass liver fibrosis, kidney fibrosis, lung fibrosis or heart fibrosis. The patent, assigned U.S. PatentNo. 8,871,925, was issued October 28, 2014.In May 2014, we received notice of allowance from the U.S. Patent and Trademark Office for patent application number 13/998,197 titled“Galactose-Pronged Carbohydrate Compounds for the Treatment of 11Table of ContentsDiabetic Nephropathy and Associated Disorders.” The patent covers both composition claim for and uses of the Company’s carbohydrate-basedgalectin inhibitor compound GR-MD-02 in patients with diabetic nephropathy, a type of progressive kidney disease that occurs in individuals withdiabetes. Diabetic nephropathy is the major cause for chronic renal failure in the United States. The patent, assigned U.S. Patent No. 8,828,971, wasissued September 9, 2014.In February 2014, we received notice of issuance that the U.S. Patent and Trademark Office issued patent number 8,658,787 to the Company forits application titled “Galacto-rhamnogalacturonate compositions for the treatment of non-alcoholic steatohepatitis and non-alcoholic fatty liverdisease.” The patent covers the Company’s carbohydrate-based galectin inhibitor compound GR-MD-02 for use in patients with fatty liver disease withor without fibrosis or cirrhosis, providing patent protection through 2031. The major claims are for methods of obtaining galectin inhibitorcompounds, obtaining a composition for parenteral or enteral administration in an acceptable pharmaceutical carrier and administering to a subjecthaving at least one of the following: fatty liver, non-alcoholic fatty liver disease, non-alcoholic steatohepatitis, non-alcoholic hepatitis with liverfibrosis, non-alcoholic steatohepatitis with cirrhosis, or non-alcoholic steatohepatitis with cirrhosis and hepatocellular carcinoma. The use coversreversing or slowing the progression of disease activity or medical consequences of the disease. Applications are pending in multiple countries toextend patent protection globally.In January 2014, we received a notice of allowance from the U.S. Patent and Trademark Office for Patent Application Number 13/550,962 titled“Galactose-Pronged Polysaccharides in a Formulation for Anti-fibrotic Therapies.” The patent covers both composition claim for and uses of theCompany’s carbohydrate-based galectin inhibitor compound GR-MD-02 for use in patients with liver fibrosis in combination with other potentialtherapeutic agents. The patent covers use of GR-MD-02 with agents directed at multiple targets, some of which are currently in clinical developmentfor fibrotic disorders including monoclonal antibodies to connective tissue growth factor, integrins, and TGF-ß1. The patent, assigned U.S. PatentNo. 8,722,645, was issued May 13, 2014.In July 2012, we received a notice of issuance from the U.S. Patent and Trademark Office for the U.S. Patent number 8,236,780 issued onAugust 7, 2013 titled “Galactose-prolonged polysaccharides in a formulation for antifibrotic therapies”. This methods patent covers key methods ofderivation and use for our carbohydrate-based galectin inhibitor compound for use in patients with chronic liver disease associated with thedevelopment of fibrosis, established liver fibrosis or end-stage scarring, or cirrhosis. The major claim is for a method of obtaining a galacto-rhamnogalacturan compound from an apple pectin, obtaining a composition for parenteral administration the galacto-rhamnogalacturonan compoundin an acceptable pharmaceutical carrier and administering to a subject having at least one of the following: chronic liver disease associated with thedevelopment of fibrosis, established liver fibrosis or cirrhosis. The use covers inhibiting or slowing the progression of fibrosis. GR-MD-02 is coveredby this patent and it provides opportunities for development of additional compounds in the class.As of December 31, 2018, Galectin Therapeutics Inc. held 20 granted U.S. patents, 57 foreign granted, 3 Foreign patent applications allowed, 25Foreign patent applications pending, and 3 U.S. patent applications pending. Many of our patents and patent applications cover composition of matterfor complex carbohydrate drugs and/or methods of use for reducing toxicity and enhancing chemotherapeutic drugs by co-administering apolysaccharide with a chemotherapeutic agent or for use in treatment of fibrosis. The scheduled expiration dates of our United States patents span from2020 to 2033 before considering any potential extensions. We have corresponding patent applications pending in various territories where we seepotential for commercial interest. Additionally, we have patent applications in other areas to utilize our carbohydrate-based compounds to treat diseaseother than cancer. See “Risk Factors — Risks Related to Our Intellectual Property”. Our competitive position, in part, is contingent upon protection ofour intellectual property. Galectin Sciences LLC has 1 US patent application pending and 10 foreign applications pending; 4 PCT Internationalapplications are pending. 12Table of ContentsResearchOur primary focus is on the design and testing of agents that target galectins in various in vitro and in vivo systems and that demonstrate efficacyin treatment of experimentally induced fibrosis or enhance immune system responsiveness in various tissues and in live animal models. We contractwith independent laboratories and other facilities to conduct our research, which is designed, evaluated and managed by our scientists. While weconduct in house research related to our compounds at SBH laboratories in Massachusetts, we do not anticipate building additional in-house researchor development facilities or hiring staff other than for purposes of designing and managing our out-sourced research.As we develop products eligible for clinical trials, we contract with independent parties to assist in the design of the clinical trial protocols,arrange for and monitor the clinical trials, collect data and analyze data. In addition, certain clinical trials for our products may be conducted bygovernment-sponsored agencies and will be dependent on governmental participation and funding. Our dependence on independent parties andclinical sites involves risks including reduced control over the timing and other aspects of our clinical trials.In February 2013, the Company established a collaborative drug discovery program with Dr. Geert-Jan Boons’ (“Dr. Boons”) laboratory locatedin the Complex Carbohydrate Research Center at the University of Georgia. This on-going program is focused on the discovery of new carbohydratemolecules that can be used in the therapy of diseases where galectin proteins play a major role, including cancer, and inflammatory and fibroticdisorders. The aim of this program is to develop a pipeline of drugs that can target galectins. This is an important goal as follow-on compounds for ourdrugs currently in development and to extend the potential indications and routes of administration. The Complex Carbohydrate Research Center is aworld-class program, and Dr. Boons is a world renowned and pre-eminent carbohydrate chemist.In September 2014, the Company established a collaborative research program with Dr. William Redmond’s laboratory located at the ProvidencePortland Medical Center, Portland, Oregon. This program focuses on combination immunotherapy plus galectin inhibition to augment tumorimmunogenicity.During the years ended December 31, 2018 and 2017, our expenditures for research and development were $6.5 million and $11.7 million,respectively. We expense all research and development costs as they are incurred.In January 2014 we created, with SBH Sciences, Inc. (Natick, Ma), Galectin Sciences, LLC, a collaborative joint venture to research and developsmall organic molecule inhibitors of galectin-3 for oral administration.Using computer molecular modeling techniques coupled with in vitro screening of a variety of compound libraries, SBH Sciences had identifiedseveral small organic molecules with promising galectin-3 inhibitory activity in vitro. Galectin Sciences LLC will further develop these uniqueorganic molecule inhibitors of galectin-3 as drug candidates as well as develop additional candidates. Subject to availability of funding, GalectinSciences LLC will build on the scientific body of knowledge amassed by SBH Sciences, coupled with Galectin Therapeutics’ knowledge and expertiseof galectins’ pathological role and mechanism of action in inflammation, fibrosis and many cancers. The long-term goal of this effort is to identify anddevelop drug candidates that are highly specific galectin inhibitors which may be formulated for oral administration. The intermediate term goal is thedevelopment of small molecule inhibitors of galectin-3 which exhibit activity in in vivo preclinical disease models of fibrosis and cancer in whichgalectins play a key role. Several patent applications have been filed to protect the various series of compounds discovered by these efforts.Because, increased levels of galectin proteins have been implicated in a very large number of inflammatory, fibrotic and neoplastic diseases; thediscovery and development of orally active galectin inhibitors would be a major step towards expanded treatment approaches for these disorders. Thisearly drug discovery effort may lead to drugs that would expand our pipeline as follow on compounds to our first in class galectin inhibitors, GR-MD-02 and GM-CT-01. These efforts have identified several potential compounds which are continuing to be explored to identify lead molecules that maybe identified for clinical development. 13Table of ContentsManufacturing and MarketingWe are a development stage Company at this time and do not intend to establish internal facilities for the manufacture of our products for clinicalor commercial production. To have our products manufactured, we have developed and will continue to develop relationships with third-parties thathave established pharmaceutical manufacturing capabilities and expertise. We are not a party to any long-term agreement with any of our suppliersand, accordingly, we have our products manufactured on a purchase-order basis from one of two primary well-known and established pharmaceuticalsuppliers that meeting FDA requirements.Because our products are in the development stage, we have not created a sales and marketing staff to commercialize pharmaceutical products. Ifwe develop products eligible for commercial sale, we will need to develop a sales and marketing capability or rely on third parties such as licensees,collaborators, joint venture partners or independent distributors to market and sell those products. Our dependence on third-party manufacturers,analytical testing and other laboratories and marketers will involve risks relating to our reduced control, and other risks including those discussed in“Risk Factors — Risks Related to our Company — There are risks associated with reliance on third parties for manufacturing, marketing, sales,managed care and distribution infrastructure channels.”CompetitionMany biotechnology and pharmaceutical companies are developing new technologies for the treatment of cancer, fibrotic diseases and otherdiseases. Technologies such as monoclonal antibodies could be competitive with our galectin therapeutic platforms. Other companies are trying toimprove the therapeutic profile of widely used protein-based drugs. While these companies may broaden the market for our products they may alsoprovide competitive alternatives to our products. We expect increased competition in the area of galectins will be fueled by a nearly exponentialincrease in the publication rate of research papers on galectins.See “Risk Factors — Risks Related to Our Company — We face intense competition in the biotechnology and pharmaceutical industries” foradditional discussion related to our current and potential competition.Government RegulationThe research, development, testing, manufacture, labeling, promotion, advertising, distribution, and marketing, among other things, of ourproducts are extensively regulated by governmental authorities in the United States and other countries. The FDA regulates drugs under the federalFood, Drug, and Cosmetic Act and its implementing regulations. Failure to comply with the applicable U.S. requirements may subject us toadministrative or judicial sanctions, such as FDA refusal to approve pending New Drug Applications (“NDAs”), warning letters, product recalls,product seizures, total or partial suspension of production or distribution, injunctions, and/or criminal prosecution.Drug Approval ProcessDrugs may not be marketed in the U.S. until the FDA has approved them. The steps required before a drug may be marketed in the U.S. include: 1.Pre-clinical laboratory tests, animal studies, and formulation studies, 2.Submission to the FDA of an IND for human clinical testing, which must become effective before human clinical trials may begin, 3.Adequate and well-controlled human clinical trials to establish the safety and efficacy of the drug for each indication, 4.Submission to the FDA of a NDA, 14Table of Contents 5.Satisfactory completion of an FDA inspection of the manufacturing facility or facilities, at which the drug is produced to assess compliancewith current good manufacturing procedures (“cGMP”) established by the FDA, 6.FDA review and approval of the NDA, and 7.FDA review and approval of a trademark used in connection with a pharmaceutical.Pre-clinical tests include laboratory evaluation of product chemistry, toxicity, and formulation, as well as numerous in vitro and in vivo animalstudies. The results of the pre-clinical tests, together with manufacturing information and analytical data, are submitted to the FDA as part of an IND,which must become effective before human clinical trials may begin and the Company must resolve any outstanding FDA concerns or questions beforeclinical trials can proceed. There is no certainty that submission of an IND will result in the FDA allowing clinical trials to begin.Clinical trials involve the administration of the investigational drug to human subjects under the supervision of qualified investigators andconstant oversight by the FDA or foreign regulatory authorities. Clinical trials are conducted under protocols detailing the objectives of the study, theparameters to be used in monitoring safety, and the effectiveness criteria to be evaluated. Each protocol must be submitted to the FDA as part of theIND.Clinical trials typically are conducted in three sequential phases, but the phases may overlap or be combined. Each trial must be reviewed andapproved by an independent Institutional Review Board (“IRB”), before it can begin. Study subjects must sign an informed consent form beforeparticipating in a clinical trial. Phase 1 usually involves the initial introduction of the investigational drug into patients to evaluate its safety, dosagetolerance, pharmacodynamics, and, if possible, to gain an early indication of its effectiveness. Phase 2 usually involves trials in a limited patientpopulation to (i) evaluate dosage tolerance and appropriate dosage; (ii) identify possible adverse effects and safety risks; and (iii) evaluatepreliminarily the efficacy of the drug for specific indications. Phase 3 trials usually further evaluate clinical efficacy and test further for safety by usingthe drug in its final form in an expanded patient population. There is no assurance that these trials will be completed within a specified period of time,if at all.Assuming successful completion of the required clinical testing, the results of the pre-clinical studies and of the clinical studies, together withother detailed information, including information on the manufacture and composition of the drug, are submitted to the FDA in an NDA requestingapproval to market the product for one or more indications. Before approving an NDA, the FDA usually will inspect the facilities at which the drug ismanufactured and will not approve the product unless compliance with cGMP is satisfactory. If the FDA evaluates the NDA and the manufacturingfacilities as acceptable, the FDA will generally issue an approval letter. If the FDA evaluates the NDA submission or the manufacturing facilities as notacceptable, the FDA will generally outline the deficiencies in the submission and often will request additional testing or information. Even if anapplicant submits the requested additional information, the FDA ultimately may decide that the NDA does not satisfy the regulatory criteria forapproval. The testing and approval process require substantial time, effort, and financial resources, and there is no assurance that any approval will begranted on a timely basis, if at all. After approval, certain changes to the approved product, such as adding new indications, manufacturing changes, oradditional labeling claims are subject to further FDA review and approval.See “Risk Factors — Risks Related to the Regulation of Our Products — We will need regulatory approvals to commercialize our products” foradditional discussion of regulatory risks related to our drug development program.FDA Priority ReviewFDA procedures provide for priority review of an NDA submitted for drugs that, compared to currently marketed products, offer a significantimprovement in the treatment, diagnosis, or prevention of a disease. NDAs 15Table of Contentsthat are granted priority review are acted upon more quickly than NDAs given standard review. If we were to seek priority review, there can be noguarantee that the FDA will grant priority review status, that priority review status will affect the time of review, or that the FDA will approve the NDAsubmitted for any of our product candidates, whether or not priority review status is granted.Post-Approval RequirementsIf FDA approval of one or more of our products is obtained, we will be required to comply with a number of post-approval requirements. Forexample, holders of an approved NDA are required to report certain adverse reactions to the FDA and to comply with certain requirements concerningadvertising and promotional labeling for their products. Also, quality control and manufacturing procedures must continue to conform to current GoodManufacturing Practices (“cGMP”) after approval, and the FDA periodically inspects manufacturing facilities to assess compliance with cGMP.Accordingly, manufacturers must continue to expend time, money, and effort in the area of production and quality control to maintain cGMPcompliance. In addition, discovery of problems with a product after approval may result in restrictions on a product, manufacturer, or holder of anapproved NDA, including withdrawal of the product from the market. Also, new government requirements may be established that could delay orprevent regulatory approval of our products under development.Regulation Outside the United StatesBefore our products can be marketed outside of the United States, they are subject to regulatory approval similar to that required in the UnitedStates, although the requirements governing the conduct of clinical trials, product licensing, pricing and reimbursement vary widely from country tocountry. No action can be taken to market any product in a country until an appropriate application has been approved by the regulatory authorities inthat country. The current approval process varies from country to country, and the time spent in gaining approval varies from that required for FDAapproval. In certain countries, the sales price of a product must also be approved. The pricing review period often begins after market approval isgranted. No assurance can be given that even if a product is approved by a regulatory authority, satisfactory prices will be approved for such product.Environmental RegulationPharmaceutical research and development involves the controlled use of hazardous materials. Biotechnology and pharmaceutical companiesmust comply with laws and regulations governing the use, generation, manufacture, storage, air emission, effluent discharge, handling and disposal ofcertain materials, biological specimens and wastes. We do not anticipate building in-house research, development or manufacturing facilities, and,accordingly, do not expect to have to comply directly with environmental regulation. However, our contractors and others conducting research,development or manufacturing activities for us may be required to incur significant compliance cost, and this could in turn could increase our expenseor delay our completion of research or manufacturing programs.EmployeesWe currently have six full-time employees, four of whom are involved primarily in management of our pre-clinical research and development andclinical trials and three who were involved primarily in management and administration of our Company. We also utilize contractors and consultantswho provide product development, manufacture, analytical testing, clinical trial expertise, and clinical trial support.Available InformationThe Company is required to file annual, quarterly and current reports, proxy statements and other information with the Securities and ExchangeCommission (“SEC”), including Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments toreports filed pursuant to 16Table of ContentsSections 13(a) and 15(d) of the Securities Exchange Act of 1934. The SEC maintains an Internet site that contains reports, proxy and informationstatements, and other information regarding issuers that file electronically with the SEC at http://www.sec.gov. The Company’s website iswww.galectintherapeutics.com. The information contained on, or hyperlinked from, our website is not a part of, nor is it incorporated by reference into,this Annual Report on Form 10-K. Item 1A.Risk FactorsAn investment in our common stock involves a high degree of risk. You should carefully consider the risks described below and the other informationbefore deciding to invest in our common stock. The risks described below are not the only ones facing our Company. Additional risks not presentlyknown to us or that we currently consider immaterial may also adversely affect our business. We have attempted to identify below the major factors thatcould cause differences between actual and planned or expected results, but we cannot assure you that we have identified all of those factors.If any of the following risks actually happen, our business, financial condition and operating results could be materially adversely affected. In this case,the trading price of our common stock could decline, and you could lose all or part of your investment.Risks Related to Our CompanyWe have incurred net losses to date and must raise additional capital in order to continue to operate after December 31, 2019.We have incurred net losses in each year of operation since our inception in July 2000 and have no revenues. Our accumulated deficit as ofDecember 31, 2018 was $196.2 million. We had $8.3 million of unrestricted cash as of December 31, 2018. In December 2018, the Companyannounced an extension of its $10 million unsecured line of credit facility with stockholder and director, Richard E. Uihlein. The Company has notdrawn under the line of credit. Additionally, the Company generated approximately $1.87 million in net proceeds via sale of common stock under itsAt Market Sales Agreement in January and February 2019. The Company believes there is sufficient cash, including availability of the line of credit, tofund currently planned operations at least through March 31, 2020. We will require more cash to fund our operations after March 31, 2020 and believewe will be able to obtain additional financing. The currently planned operations do not include costs related to a planned Phase 3 clinical trial. Whilethe costs of the trial and general overhead during the Phase 3 trial are expected to be approximately $100 million, the costs and timing of such trial arenot yet finalized. The Company has not made commitments for such trial that cannot be covered with available cash. The costs of a Phase 3 clinicaltrial will require additional funding. However, there can be no assurance that we will be successful in obtaining such new financing or, if available, thatsuch financing will be on terms favorable to us.We may raise capital through public or private equity financings, partnerships, debt financings, bank borrowings, or other sources. Additional fundingmay not be available on favorable terms or at all. If adequate funds are not otherwise available, we may need to significantly curtail operations orpostpone the commencement of our Phase 3 clinical trial. To obtain additional funding, we may need to enter into arrangements that require us torelinquish rights to certain technologies, products and/or potential markets. To the extent that additional capital is raised through the sale of equity, orsecurities convertible into equity, our equity holders may experience dilution of their proportionate ownership of the Company.We are a development stage company and have not yet generated any revenue.We are a development stage company and have not generated any revenues to date. There is no assurance that we will obtain FDA approval of GR-MD-02 or any other of our products in development and, even if we do so, that we will generate revenue sufficient to become profitable. Our failure togenerate revenue and profit would likely lead to loss of your investment. 17Table of ContentsOur ability to generate revenue from product sales and achieve profitability will depend upon our ability to successfully commercialize products,including any of our current product candidates, or other product candidates that we may in-license or acquire in the future. Even if we are able tosuccessfully achieve regulatory approval for these product candidates, we do not know when any of these products will generate revenue from productsales for us, if at all. Our ability to generate revenue from product sales from our current or future product candidates also depends on a number ofadditional factors, including our ability to: • successfully complete development activities, including the necessary clinical trials; • complete and submit new drug applications, or NDAs, to the U.S. Food and Drug Administration, or FDA, and obtain regulatory approvalfor indications for which there is a commercial market; • complete and submit applications to, and obtain regulatory approval from, foreign regulatory authorities; • successfully complete all required regulatory agency inspections; • set a commercially viable price for our products; • obtain commercial quantities of our products at acceptable cost levels; • find suitable distribution partners to help us market, sell and distribute our approved products in other markets; and • obtain coverage and adequate reimbursement from third parties, including government and private payers.In addition, because of the numerous risks and uncertainties associated with product development, including that our product candidates may notadvance through development or achieve the endpoints of applicable clinical trials, we are unable to predict the timing or amount of increasedexpenses, or when or if we will be able to achieve or maintain profitability. Even if we are able to complete the development and regulatory process forany product candidates, we anticipate incurring significant costs associated with commercializing these products.If we are unable to generate revenues from the sale of our products, we may not become profitable and may need to obtain additional funding tocontinue operations. If we fail to become profitable or are unable to sustain profitability on a continuing basis, then we may be unable to continue ouroperations at planned levels and be forced to reduce our operations.We are dependent on the success of our lead product candidate, GR-MD-02, and we cannot be certain that these product candidates will receiveregulatory approval or be successfully commercialized.We currently have no products for sale, and we cannot guarantee that we will ever have any drug products approved for sale. We and our productcandidates are subject to extensive regulation by the FDA and comparable regulatory authorities in other countries governing, among other things,research, testing, clinical trials, manufacturing, labeling, promotion, selling, adverse event reporting and recordkeeping. We are not permitted to marketany of our product candidates in or outside the United States until we receive approval of a new drug application for a product candidate from the FDAor the equivalent approval from a foreign regulatory authority. Obtaining FDA approval is a lengthy, expensive and uncertain process.Before obtaining regulatory approval for the sale of any drug candidate, we must conduct extensive pre-clinical studies and clinical trials todemonstrate the safety and efficacy of our product candidates in humans.GR-MD-02 our lead product candidate for fibrosis completed its Phase 2 of the human clinical trial phase in 2017, and during 2018 we have beendesigning a Phase 3 clinical trial. GR-MD-02 is also currently in investigator sponsored, human Phase 1B clinical trials being conducted byProvidence Portland Medical Center in combination with Yervoy® (ipilimumab) and Keytruda (pembrolizmab) in patients with metastatic melanoma. 18Table of ContentsTo obtain FDA approval, we will need to conduct one or more Phase 3 clinical trial for GR-MD-02; however, we cannot assure you that we will be ableto finance Phase 3 trials. Additionally, we cannot assure you that future our trials will yield successful results, that they will lead to the generation ofrevenue, or that we will obtain regulatory approval in other countries.We filed for an IND with the FDA for GR-MD-02 in January 2013 for initiating human clinical trials in patients with NASH, and the FDA notified us inMarch 2013 that we may proceed with a Phase 1 clinical trial. Our Phase 1 clinical trial began in July 2013 and was completed in 2014. Pre-clinicalstudies and clinical trials are expensive, time-consuming and ultimately may not be successful. The results of pre-clinical and initial clinical testing ofthese products may not necessarily indicate the results that will be obtained from later or more extensive testing. Also, it is possible to suffer significantsetbacks in advanced clinical trials, even after obtaining promising results in earlier trials. For example, although there was positive data from ourNASH-CX Phase 2 trial for GR-MD-02, which we believe will allow us to conduct a Phase 3 trial, it did not meet its primary endpoint. Similarly, ourPhase 2a pilot trial NASH-FX for patients with advanced fibrosis, which explored three non-invasive imaging technologies, did not meet its primaryendpoint. We may engage others to conduct our clinical trials, including clinical research organizations and, possibly, government-sponsoredagencies. Additional clinical trials may not start or be completed as we forecast and may not achieve the desired results. The time required to obtainFDA and other approvals is unpredictable but often can take years following the commencement of clinical trials, depending upon the complexity ofthe drug candidate.Even if we receive regulatory approval, we may be unable to commercialize our product candidates.Even if GR-MD-02 and other future product candidates achieve positive results in clinical trials, we may be unable to commercialize them. Theavailability of government and third-party payer reimbursement, and pricing, especially compared to competitor products, could affect our ability tocommercialize our product candidates. Our general inability to obtain necessary regulatory approvals and, if obtained, to commercialize our productswould substantially impair our viability.There are risks associated with our reliance on third parties to design trial protocols, arrange for and monitor the clinical trials, and collect andanalyze data.As we develop products eligible for clinical trials, we will contract with independent parties to assist us in the design of the trial protocols, arrange forand monitor the clinical trials, collect data and analyze data. For instance, for our NASH-CX trial we engaged the services of PPD Development, L.P.(PPD) for the purpose of assisting us in the design, development and conduct of the trial. In addition, certain clinical trials for our products may beconducted by government-sponsored agencies and will be dependent on governmental participation and funding. Additionally, GR-MD-02 is beingstudied by Providence Portland Medical Center in Investigator-sponsored INDs to conduct a Phase 1B studies to determine if GR-MD-02 enhances theprobability of melanoma response with ipilimumab and pembrolizumab by inducing proliferation, activation and memory function of CD8+ T cells inhuman patients. This study represents a novel approach for patients with metastatic melanoma. As with our Phase 2 trial, to undertake Phase 3 trials forGR-MD-02, we will need to contract with a third party for assistance with the design and conduct of the trial. We cannot be certain that the terms of anysuch agreement will be favorable to the company.Our dependence on independent parties and clinical sites involves risks including reduced control over the timing and other aspects of our clinicaltrials.There are risks associated with our reliance on third parties for manufacturing, marketing, sales, managed care and distribution infrastructure andchannels.We do not have, and do not now intend to develop, facilities for the manufacture of any of our products for clinical or commercial production. At thistime, we are not a party to any long-term agreement with any of our 19Table of Contentssuppliers, and accordingly, we have our products manufactured on a purchase-order basis from one of two primary suppliers. We are developingrelationships with manufacturers and will enter into collaborative arrangements with licensees or have others manufacture our products on a contractbasis. We expect to depend on such collaborators to supply us with products manufactured in compliance with standards imposed by the FDA andforeign regulators.We have limited experience in marketing, sales or distribution, and we do not intend to develop a sales and marketing infrastructure to commercializeour pharmaceutical products. If we develop commercial products, we will need to rely on licensees, collaborators, joint venture partners or independentdistributors to market and sell those products. Thus, we expect that we will be required to enter into agreements with commercial partners to engage insales, marketing and distribution efforts around our products in development. We may be unable to establish or maintain third-party relationships on acommercially reasonable basis, if at all. In addition, these third parties may have similar or more established relationships with our competitors. If wedo not enter into relationships with third parties for the sales and marketing of our proposed products, we will need to develop our own sales andmarketing capabilities.Even if engaged, these distributors may: • fail to satisfy financial or contractual obligations to us; • fail to adequately market our products; • cease operations with little or no notice to us; or • offer, design, manufacture or promote competing formulations or products.If we fail to develop sales, managed care, marketing and distribution channels, we would experience delays in generating sales and incur increasedcosts, which would harm our financial results.We are exposed to product liability, pre-clinical and clinical liability risks, which could place a financial burden upon us, should we be sued,because we do not currently have product liability insurance beyond our general insurance coverage.Our business exposes us to potential product liability and other liability risks that are inherent in the testing, manufacturing and marketing ofpharmaceutical formulations and products; accordingly, claims may be asserted against us. In addition, the use in our clinical trials of pharmaceuticalformulations and products that our potential collaborators may develop and the subsequent sale of such formulations or products by us or our potentialcollaborators may cause us to assume a portion of or all of the product liability risks. A successful liability claim or series of claims brought against uscould have a material adverse effect on our business, financial condition and results of operations.Because we do not currently have any FDA-approved products or formulations, we do not currently have any product liability insurance coveringcommercialized products. We may not be able to obtain or maintain adequate product liability insurance on acceptable terms, if at all, or suchinsurance may not provide adequate coverage against our potential liabilities. Furthermore, our current and potential partners with whom we havecollaborative agreements or our future licensees may not be willing to indemnify us against these types of liabilities and may not, themselves, besufficiently insured or have sufficient liquidity to satisfy any product liability claims. Claims or losses in excess of any product liability insurancecoverage that may be obtained by us could have a material adverse effect on our business, financial condition and results of operations.We face intense competition in the biotechnology and pharmaceutical industries.The biotechnology and pharmaceutical industries are intensely competitive. We face direct competition from U.S. and foreign companies focusing onpharmaceutical products, which are rapidly evolving. Our competitors 20Table of Contentsinclude major multinational pharmaceutical and chemical companies, specialized biotechnology firms and universities and other research institutions.Many of these competitors possess greater financial and other resources, larger research and development staffs and more effective marketing andmanufacturing organizations than we possess. In addition, academic and government institutions are increasingly likely to enter into exclusivelicensing agreements with commercial enterprises, including our competitors, to market commercial products based on technology developed at suchinstitutions. Our competitors may succeed in developing or licensing technologies and products that are more effective or succeed in obtaining FDA orother regulatory approvals for product candidates before we do. Acquisitions of, or investments in, competing pharmaceutical or biotechnologycompanies by large corporations could increase such competitors’ financial, marketing, manufacturing and other resources.The market for our proposed products is rapidly changing and competitive, and new drugs and new treatments which may be developed by otherscould impair our ability to maintain and grow our business and remain competitive.The pharmaceutical and biotechnology industries are subject to rapid and substantial technological change. Developments by others may render ourproposed products noncompetitive or obsolete, or we may be unable to keep pace with technological developments or other market factors.Technological competition from pharmaceutical and biotechnology companies, universities, governmental entities and others diversifying into thefield is intense and is expected to increase.As a pre-revenue company engaged in the development of drug technologies, our resources are limited and we may experience technical challengesinherent in such technologies. Competitors have developed or are in the process of developing technologies that are, or in the future may be, the basisfor competition. Some of these technologies may have an entirely different approach or means of accomplishing similar therapeutic effects compared toour proposed products. Our competitors may develop drugs that are safer, more effective and less costly than our proposed products and, therefore,present a serious competitive threat to us.The potential widespread acceptance of therapies that are alternatives to ours may limit market acceptance of our proposed products, even ifcommercialized. Some of our targeted diseases and conditions may also be treated by other medications. These treatments may be widely accepted inmedical communities and have a longer history of use. The established use of these competitive drugs may limit the potential for our technologies,formulations and products to receive widespread acceptance even if commercialized.Our lack of operating experience may cause us difficulty in managing our growth.We have limited experience in manufacturing or procuring products in commercial quantities, conducting other later-stage phases of the regulatoryapproval process, selling pharmaceutical products, or negotiating, establishing and maintaining strategic relationships. Although we may engageconsultants to assist us, any additional growth may require us to expand our management, operational and financial systems and controls. If we areunable to do so, our business and financial condition would be materially harmed. If rapid growth occurs, it may strain our managerial, operational andfinancial resources.We depend on key individuals to develop our products and core technologies and pursue collaborative relationships.We are highly dependent on our current base of employees and external hepatology consultants. These individuals, among other things, design andlead our pre-clinical and clinical studies, as well as our U.S. and European regulatory processes. The loss of any personnel or failure to attract or retainother key personnel and consultants could prevent us from developing our products and core technologies and pursuing collaborative relationships. 21Table of ContentsWe may fail to comply with our reporting and other requirements under federal securities laws.As a publicly traded company, we are subject to the reporting requirements of the Exchange Act. The Exchange Act requires that we file annual,quarterly and current reports. Our failure to prepare and disclose this information in a timely manner could subject us to penalties under federalsecurities laws, expose us to lawsuits and restrict our ability to access financing. We may be required to implement additional and expensive financeand accounting systems, procedures and controls as we grow our business and organization to satisfy new reporting requirements, which will increaseour costs and require additional management resources.Our long-term success is dependent not only upon the success of our trials but also upon us being able to capitalize upon potential positive results ofour trials, which is not assured.To conduct Phase 3 clinical trials or other clinical trials we will need sufficient cash resources to conduct those undertakings. We will also need toobtain sufficient dosages of GR-MD-02 for such trials. Manufacturing of GR-MD-02 is performed by third parties on a contract basis and production isongoing to generate what we believe is sufficient quantities of GR-MD-02 for planned Phase 3 clinical trials. Manufacturing could become delayeddue to circumstances beyond our control which could delay any planned Phase 3 clinical trials. Further because of limited resources, we have curtailedmost of our expenditures in research focused on the development of an oral galectin inhibitor to replace our current drug candidate that is delivered viainfusion.We have been a defendant in a shareholder derivative action, and any future such lawsuits may adversely affect our business, financial condition,results of operations and cash flows.We and certain of our officers and directors were defendants in a state court shareholder derivative action. This lawsuit, nor concluded, is described inPart I, Item 3 “Legal Proceedings” in this Form 10-K. In addition, there is the potential for additional shareholder litigation and for governmentalinvestigations and/or enforcement actions. Similar lawsuits in the future may divert our attention from our ordinary business operations, and we mayincur significant expenses associated with their defense (including, without limitation, substantial attorneys’ fees and other fees of professionaladvisors and potential obligations to indemnify current and former officers and directors who are or may become parties to such actions). If similarlawsuits do arise in the future, we may be required to pay material damages and fines, consent to injunctions on future conduct and/or suffer otherpenalties, remedies or sanctions. Accordingly, the ultimate resolution of these matters could have a material adverse effect on our business, results ofoperations, financial condition, liquidity and ability to meet our debt obligations and, consequently, could negatively impact the trading price of ourcommon stock. Any existing or future shareholder lawsuits and any future governmental investigations and/or enforcement actions could adverselyimpact our reputation, our relationships with our customers and our ability to generate revenue.Risks Related to the Regulation of our ProductsWe will need regulatory approvals to commercialize our products.We are required to obtain approval (i) from the FDA in order to sell our products in the U.S. and (ii) from foreign regulatory authorities in order to sellour products in other countries. The FDA’s review and approval process is lengthy, expensive and uncertain. Extensive pre-clinical and clinical dataand supporting information must be submitted to the FDA for each indication for each product candidate in order to secure FDA approval. Beforereceiving FDA clearance to market our proposed products, we will have to demonstrate that our products are safe on the patient population andeffective for the diseases that are to be treated. Clinical trials, manufacturing and marketing of drugs are subject to the rigorous testing and approvalprocess of the FDA and equivalent foreign regulatory authorities. FDA may change, at any time, its requirements for approval of new drugs based oninformation and data received from others and ourselves potentially resulting in product approval delays or non-approvals. The Federal Food, Drugand Cosmetic Act and other federal, state and foreign statutes and regulations govern and influence the testing, manufacture, labeling, advertising,distribution and promotion of drugs and medical devices. As a result, regulatory approvals can take several years to acquire and may further require the 22Table of Contentsexpenditure of substantial financial, managerial and other resources. The FDA could reject an application or, in the alternative, require us to conductadditional clinical or other studies as part of the regulatory review process. Delays in obtaining or failure to obtain FDA approvals would delay orprevent the commercialization of our product candidates, which would prevent, defer or decrease our receipt of revenues. In addition, should wereceive initial regulatory approval, our product candidates will be subject to extensive and rigorous ongoing domestic and foreign governmentregulation.Even if we obtain regulatory approvals, our marketed drugs will be subject to ongoing regulatory review. If we fail to comply with ongoingregulatory requirements, we could lose our approvals to market drugs, in which case our business would be materially adversely affected.Following regulatory approval in the United States of any drugs we may develop, we will remain subject to continuing regulatory review, includingthe review of adverse drug experiences and clinical results that are reported after our drug products are made available to patients. This would includeresults from any post marketing tests or vigilance required as a condition of approval. The manufacturer and manufacturing facilities we use to makeany of our drug products will also be subject to periodic review and inspection by the FDA. The discovery of any new or previously unknown problemswith the product, manufacturer or facility may result in restrictions on the drug or manufacturer or facility, including withdrawal of the drug from themarket. We would continue to be subject to the FDA requirements governing the labeling, packaging, storage, advertising, promotion, recordkeeping,and submission of safety and other post-market information for all of our product candidates, even those that the FDA had approved. If we fail tocomply with applicable continuing regulatory requirements, we may be subject to fines, suspension or withdrawal of regulatory approval, productrecalls and seizures, operating restrictions and other adverse consequences.The drug development process to obtain FDA approval is very costly and time consuming, and if we cannot complete our clinical trials in a cost-effective manner, our results of operations may be adversely affected.Costs and timing of clinical trials may vary significantly over the life of a project owing to the following non-exclusive reasons: • the duration of the clinical trials; • the number of sites included in the trials; • the countries in which the trial are conducted; • the length of time required and ability to enroll eligible patients; • the number of patients that participate in the trials; • the number of doses that patients receive; • the drop-out or discontinuation rates of patients; • per patient trial costs; • third party contractors failing to comply with regulatory requirements or meet their contractual obligations to us in a timely manner; • our drug product candidates having different chemical and pharmacological properties in humans than in lab testing; • the need to suspend or terminate our clinical trials; • insufficient or inadequate supply or quality of drug product candidates or other necessary materials to conduct our trials; • potential additional safety monitoring, or other conditions required by FDA or comparable foreign regulatory authorities regarding thescope or design of our clinical trials, or other studies requested by regulatory agencies; 23Table of Contents • problems engaging IRBs to oversee trials or in obtaining and maintaining IRB approval of studies; • the duration of patient follow-up; • the efficacy and safety profile of the product candidate; • the costs and timing of obtaining regulatory approvals; and • the costs involved in enforcing or defending patent claims or other intellectual property rights.Each of the above factors and other unanticipated factors beyond our control could prevent us from gaining approval for our drugs in a cost-effectiveand timely manner, which could have a material adverse impact on our business.If users of our proposed products are unable to obtain adequate reimbursement from third-party payers, market acceptance of our proposedproducts may be limited, and we may not achieve revenues or profits.The continuing efforts of governments, insurance companies, health maintenance organizations and other payers of healthcare costs to contain orreduce costs of health care may affect our future revenues and profitability as well as the future revenues and profitability of our potential customers,suppliers and collaborative partners in addition to the availability of capital. In other words, our ability to commercialize our proposed products willdepend in large part on the extent to which appropriate reimbursement levels for the cost of our proposed formulations, products and related treatmentsare obtained by the health care providers of these products and treatments. It is possible that the adoption of this legislation or replacement legislationcould harm our business, financial condition and results of operations.Data obtained from clinical trials are not necessarily predictive of future results, may be negative or inconclusive, and are susceptible to varyinginterpretations, which could delay, limit or prevent regulatory clearances.Data already obtained, or in the future obtained, from pre-clinical studies and clinical trials do not necessarily predict the results that will be obtainedfrom later pre-clinical studies and clinical trials. Moreover, pre-clinical and clinical data may be negative or inconclusive. In addition, data issusceptible to varying interpretations. Negative or inconclusive data, or data interpreted in various ways, could delay, limit or prevent regulatoryapproval. A number of companies in the pharmaceutical industry have suffered significant setbacks in advanced clinical trials, even after havingobtained promising results in earlier trials. Despite the results reported in some of our earlier clinical trials for GR-MD-02, our clinical trials may notdemonstrate sufficient levels of safety and efficacy necessary to obtain the requisite regulatory approvals for our drugs, and thus, our proposed drugsmay not be approved for marketing. If later-stage clinical trials do not produce favorable results, our ability to achieve regulatory approval for any ofour product candidates may be adversely impacted. The failure to adequately demonstrate the safety and effectiveness of a proposed formulation orproduct under development could delay or prevent regulatory clearance of the potential drug. The resulting delays in commercialization couldmaterially harm our business.Our product candidates may cause undesirable side effects or have other properties that could delay or prevent their regulatory approval, limit thecommercial profile of an approved label, or result in significant negative consequences following any marketing approval.Undesirable side effects caused by our product candidates could cause us or regulatory authorities to interrupt, delay or halt clinical trials and couldresult in a more restrictive label or the delay or denial of regulatory approval by the FDA or other comparable foreign regulatory authority. Althoughwe are not currently aware of any undesirable side effects caused by our product candidates, it is possible that they may be identified in the clinicaltrial process. 24Table of ContentsAs a result of undesirable side effects or safety or toxicity issues that we may experience in our clinical trials, we may not receive approval to marketany product candidates, which could prevent us from ever generating revenues or achieving profitability. Results of our trials could reveal anunacceptably high severity and prevalence of side effects. In such an event, our trials could be suspended or terminated, and the FDA or comparableforeign regulatory authorities could order us to cease further development or deny approval of our product candidates for any or all targetedindications. These side effects could affect patient recruitment or the ability of enrolled subjects to complete the trial or result in potential productliability claims.Additionally, if any of our product candidates receives marketing approval, and we or others later identify undesirable side effects caused by suchproduct, a number of potentially significant negative consequences could result, including: • we may be forced to suspend marketing of such product; • regulatory authorities may withdraw their approvals of such product; • regulatory authorities may require additional warnings on the label that could diminish the usage or otherwise limit the commercial successof such products; • we may be required to conduct post-market studies; • we could be sued and held liable for harm caused to subjects or patients; and • our reputation may suffer.Any of these events could prevent us from achieving or maintaining market acceptance of the particular product candidate, if approved.We will need to obtain FDA approval of any proposed product brand names, and any failure or delay associated with such approval may adverselyimpact our business.A pharmaceutical product cannot be marketed in the U.S. or other countries until it has completed rigorous and extensive regulatory review processes,including approval of a brand name. Any brand names we intend to use for our product candidates will require approval from the FDA regardless ofwhether we have secured a formal trademark registration from the U.S. Patent and Trademark Office, or the PTO. The FDA typically conducts a reviewof proposed product brand names, including an evaluation of potential for confusion with other product names. The FDA may also object to a productbrand name if it believes the name inappropriately implies medical claims. If the FDA objects to any of our proposed product brand names, we may berequired to adopt an alternative brand name for our product candidates. If we adopt an alternative brand name, we would lose the benefit of our existingtrademark applications for such product candidate and may be required to expend significant additional resources in an effort to identify a suitableproduct brand name that would qualify under applicable trademark laws, not infringe the existing rights of third parties and be acceptable to the FDA.We may be unable to build a successful brand identity for a new trademark in a timely manner or at all, which would limit our ability to commercializeour product candidates.Failure to obtain regulatory approval in international jurisdictions would prevent our product candidates from being marketed abroad.In order to market and sell our products in the European Union and many other jurisdictions, we must obtain separate marketing approvals and complywith numerous and varying regulatory requirements. The approval procedure varies among countries and can involve additional testing. The timerequired to obtain approval may differ substantially from that required to obtain FDA approval. The regulatory approval process outside the UnitedStates generally includes all of the risks associated with obtaining FDA approval. In addition, in many countries outside the United States, it is requiredthat the product be approved for reimbursement before the product can be approved for sale in that country. We may not obtain approvals fromregulatory authorities 25Table of Contentsoutside the United States on a timely basis, if at all. Approval by the FDA does not ensure approval by regulatory authorities in other countries orjurisdictions, and approval by one regulatory authority outside the United States does not ensure approval by regulatory authorities in other countriesor jurisdictions or by the FDA. We may not be able to file for marketing approvals and may not receive necessary approvals to commercialize ourproducts in any market. If we are unable to obtain approval of any of our product candidates by regulatory authorities in the European Union or othercountries, the commercial prospects of that product candidate may be significantly diminished, and our business prospects could decline.Risks Related to Our Intellectual PropertyOur competitive position is contingent upon the protection of our intellectual property.Development and protection of our intellectual property are critical to our business. All of our intellectual property, patented or otherwise, has beeninvented and/or developed by employees or former employees of the Company. Our success depends, in part, on our ability to obtain patent protectionfor our products or processes in the U.S. and other countries, protect trade secrets and prevent others from infringing on our proprietary rights. We willonly be able to protect our product candidates from unauthorized making, using, selling, offering to sell or importation by third parties to the extentthat we have rights under valid and enforceable patents or trade secrets that cover these activities. If we do not adequately protect our intellectualproperty, competitors may be able to practice our technologies.The patent positions of pharmaceutical and biotechnology companies can be highly uncertain and involve complex legal and factual questions forwhich important legal principles remain unresolved. No consistent policy regarding the breadth of claims allowed in biotechnology patents hasemerged to date in the United States. The biotechnology patent situation outside the United States is even more uncertain. Changes in either the patentlaws or in interpretations of patent laws in the United States and other countries may diminish the value of our intellectual property. Accordingly, wecannot predict the breadth of claims that may be allowed in our pending patent applications or enforced in our issued patents or in third-party patents.The degree of future protection for our proprietary rights is uncertain because legal means afford only limited protection and may not adequatelyprotect our rights or permit us to gain or keep our competitive advantage. For example: • others may be able to make compounds that are competitive with our product candidates but are not covered by the claims of our patents; • we might not have been the first to make the inventions covered by our pending patent applications; • we might not have been the first to file patent applications for these inventions; • it is possible that our pending patent applications will not result in issued patents; • we may not develop additional proprietary technologies that are patentable; or • the patents of others may have an adverse effect on our business.We also may rely on trade secrets to protect our technology, especially where we do not believe patent protection is appropriate or obtainable.However, trade secrets are difficult to protect. Although we require our scientific and technical employees and consultants to enter into broadassignment of inventions agreements, and all of our employees, consultants and corporate partners with access to proprietary information to enter intoconfidentiality agreements, these agreements may not be honored. Enforcing a claim that a third party illegally obtained, and is using, our trade secretsis expensive and time consuming, and the outcome is unpredictable. In addition, courts outside the United States are sometimes less willing to protecttrade secrets. Moreover, our competitors may independently develop equivalent knowledge, methods and know-how. 26Table of ContentsWe may incur substantial costs as a result of litigation or other proceedings relating to patent and other intellectual property rights and we may beunable to protect our rights to, or use of, our technology.Some or all of our patent applications may not issue as patents, or the claims of any issued patents may not afford meaningful protection for ourtechnologies or products. In addition, patents issued to us or our licensors, if any, may be challenged and subsequently narrowed, invalidated orcircumvented. Patent litigation is widespread in the biotechnology industry and could harm our business. Litigation might be necessary to protect ourpatent position or to determine the scope and validity of third-party proprietary rights.If we choose to go to court to stop someone else from using the inventions claimed in our patents, that individual or company would have the right toask the court to rule that such patents are invalid and/or should not be enforced against that third party. These lawsuits are expensive, and we may nothave the required resources to pursue such litigation or to protect our patent rights. In addition, there is a risk that the court will decide that thesepatents are not valid and that we do not have the right to stop the other party from using the inventions. There is also the risk that, even if the validityof these patents is upheld, the court will refuse to stop the other party on the ground that such other party’s activities do not infringe our rights in thesepatents.Furthermore, a third party may claim that we are using inventions covered by the third party’s patent rights and may go to court to stop us fromengaging in our normal operations and activities, including making or selling our product candidates. These lawsuits are costly and could affect ourresults of operations and divert the attention of managerial and technical personnel. There is a risk that a court would decide that we are infringing thethird party’s patents and would order us to stop the activities covered by the patents. In addition, there is a risk that a court will order us to pay theother party treble damages for having violated the other party’s patents. The biotechnology industry has produced a proliferation of patents, and it isnot always clear to industry participants, including us, which patents cover various types of products or methods of use. The coverage of patents issubject to interpretation by the courts, and the interpretation is not always uniform. If we are sued for patent infringement, we would need todemonstrate that our products or methods of use either do not infringe the claims of the relevant patent and/or that the patent claims are invalid, and wemay not be able to do this. Proving invalidity in the U.S., in particular, is difficult since it requires a showing of clear and convincing evidence toovercome the presumption of validity enjoyed by issued patents.Because some patent applications in the United States may be maintained in secrecy until the patents are issued, patent applications in the UnitedStates and many foreign jurisdictions are typically not published until eighteen months after filing, and publications in the scientific literature oftenlag behind actual discoveries, we cannot be certain that others have not filed patent applications for technology covered by our issued patents or ourpending applications or that we were the first to invent the technology. Our competitors may have filed, and may in the future file, patent applicationscovering technology similar to ours. Any such patent application may have priority over our patent applications and could further require us to obtainrights to issued patents covering such technologies. If another party has filed a United States patent application on inventions similar to ours, we mayhave to participate in an interference or other proceeding in the PTO or a court to determine priority of invention in the United States. The costs ofthese proceedings could be substantial, and it is possible that such efforts would be unsuccessful, resulting in a loss of our United States patent positionwith respect to such inventions.Some of our competitors may be able to sustain the costs of complex patent litigation more effectively than we can because they have substantiallygreater resources. In addition, any uncertainties resulting from the initiation and continuation of any litigation could have a material adverse effect onour ability to raise the funds necessary to continue our operations.Obtaining and maintaining our patent protection depends upon compliance with various procedural, document submission, fee payment and otherrequirements imposed by governmental patent agencies, and our patent protection could be reduced or eliminated for non-compliance with theserequirements.The PTO and various foreign governmental patent agencies require compliance with a number of procedural, documentary, fee payment and otherprovisions during the patent process. There are situations in which 27Table of Contentsnoncompliance can result in abandonment or lapse of a patent or patent application, resulting in partial or complete loss of patent rights in the relevantjurisdiction. In such an event, competitors might be able to enter the market earlier than would otherwise have been the case.Our failure to secure trademark registration could adversely affect our ability to market our product candidates and our business.Our trademark applications in the United States, when filed, and any other jurisdictions where we may file may not be allowed for registration, and ourregistered trademarks may not be maintained or enforced. During trademark registration proceedings, we may receive rejections. Although we are givenan opportunity to respond to those rejections, we may be unable to overcome such rejections. In addition, in the PTO and in comparable agencies inmany foreign jurisdictions, third parties are given an opportunity to oppose pending trademark applications and to seek to cancel registeredtrademarks. Opposition or cancellation proceedings may be filed against our applications and/or registrations, and our applications and/or registrationsmay not survive such proceedings. Failure to secure such trademark registrations in the United States and in foreign jurisdictions could adversely affectour ability to market our product candidates and our business.Confidentiality agreements with employees and others may not adequately prevent disclosure of our trade secrets and other proprietary informationand may not adequately protect our intellectual property, which could impede our ability to compete.Because we operate in the highly technical field of biotechnology and pharmaceutical development, we rely in part on trade secret protection in orderto protect our proprietary trade secrets and unpatented know-how. However, trade secrets are difficult to protect, and we cannot be certain that otherswill not develop the same or similar technologies on their own. We have taken steps, including entering into confidentiality agreements with all of ouremployees, consultants and corporate partners to protect our trade secrets and unpatented know-how. These agreements generally require that the otherparty keep confidential and not disclose to third parties all confidential information developed by the party or made known to the party by us duringthe course of the party’s relationship with us. We also typically obtain agreements from these parties which provide that inventions conceived by theparty in the course of rendering services to us will be our exclusive property. However, these agreements may not be honored and may not effectivelyassign intellectual property rights to us. Enforcing a claim that a party illegally obtained and is using our trade secrets or know-how is difficult,expensive and time consuming, and the outcome is unpredictable. In addition, courts outside the United States may be less willing to protect tradesecrets or know-how. The failure to obtain or maintain trade secret protection could adversely affect our competitive position.We may be subject to claims that our employees have wrongfully used or disclosed alleged trade secrets of their former employers.As is common in the biotechnology and pharmaceutical industry, we employ individuals who were previously employed at other biotechnology orpharmaceutical companies, including our competitors or potential competitors. Although no claims against us are currently pending, we may besubject to claims that these employees or we have inadvertently or otherwise used or disclosed trade secrets or other proprietary information of theirformer employers. Litigation may be necessary to defend against these claims. Even if we are successful in defending against these claims, litigationcould result in substantial costs and be a distraction to management.Risks Related to Our Common StockThe market price of our common stock may be volatile and adversely affected by several factors. This could subject us to securities class actionlitigation and our stockholders could incur substantial losses.The market price of our common stock could fluctuate significantly in response to various factors and events, including but not limited to: • the results of our pre-clinical studies and clinical trials, including interim results, as well as those of our competitors; 28Table of Contents • regulatory actions with respect to our products or our competitors’ products; • our ability to integrate operations, technology, products and services; • our ability to execute our business plan; • operating results below expectations; • our issuance of additional securities, including debt or equity or a combination thereof, which may be necessary to fund our operatingexpenses and the cost of our clinical trials; • announcements of technological innovations or new products by us or our competitors; • the success of competitive products; • loss of any strategic relationship; • industry developments, including, without limitation, changes in healthcare policies or practices or third-party reimbursement policies; • regulatory or legal developments in the United States and other countries; • the level of expenses related to any of our product candidates or clinical development programs; • disputes or other developments related to proprietary rights, including patents, litigation matters, and our ability to obtain patentprotection for our technologies; • economic and other external factors; • period-to-period fluctuations in our financial results; • sales of our common stock by us, our insiders or our other stockholders; • whether an active trading market in our common stock develops and is maintained; and • engagement and retention of senior management needed for our clinical trials.In addition, the market price for securities of pharmaceutical and biotechnology companies historically has been highly volatile, and the securitiesmarkets have from time to time experienced significant price and volume fluctuations that are unrelated to the operating performance of particularcompanies. These broad market fluctuations may cause the market price of our common stock to decline substantially.In the past, securities class action litigation has often been brought against a company, including us, following a decline in the market price of itssecurities. This risk is especially relevant for us because biotechnology and biopharmaceutical companies have experienced significant stock pricevolatility in recent years. As described above, we have recently defended a consolidated federal securities class action lawsuit and a consolidatedshareholder derivative actions, and we may become involved in additional instances of this type of litigation in the future. Litigation often isexpensive and diverts management’s attention and resources, which could materially and adversely affect our business.Additionally, fluctuations in the trading price or liquidity of our common stock may materially and adversely affect, among other things, the interest ofinvestors to purchase our common stock on the open market and, generally, our ability to raise capital.Our board of directors has the power to designate, without stockholder approval, additional series of preferred capital, the shares of which could besenior to our common stock and be entitled to conversion or voting rights that adversely affect the holders of our common stock.Our articles of incorporation authorize the issuance of capital stock including 20,000,000 authorized undesignated shares (all have been designated asof December 31, 2018), and empowers our board of directors to 29Table of Contentsprescribe, by resolution and without stockholder approval, a class or series of undesignated shares, including the number of shares in the class or seriesand the voting powers, designations, rights, preferences, restrictions and the relative rights in each such class or series. Accordingly, we may designateand issue additional shares or series of preferred stock that would rank senior to the shares of common stock as to dividend rights or rights upon ourliquidation, winding-up, or dissolution.Nevada law and our charter documents could make it more difficult for a third party to acquire us and discourage a takeover, which could depressthe trading price of our common stock.Nevada corporate law and our articles of incorporation and bylaws contain provisions that could discourage, delay, or prevent a change in control ofour Company or changes in our management that our stockholders may deem advantageous. For example, holders of our common stock do not havecumulative voting rights in the election of directors, meaning that stockholders owning a majority of our outstanding shares of common stock will beable to elect all of our directors. In addition, because we have more than 200 stockholders of record, we are subject to the “business combinations”provisions of the Nevada Revised Statutes, or NRS. These provisions could prohibit or delay a merger or other takeover or change in control attemptand, accordingly, may discourage attempts to acquire our Company even though such a transaction may be in our stockholders’ best interest and offerour stockholders the opportunity to sell their stock at a price above the prevailing market price.We may issue additional common stock, which might dilute the net tangible book value per share of our common stock.Our board of directors has the authority, without action or vote of our stockholders, to issue all or a part of our authorized but unissued shares. Suchstock issuances could be made at a price that reflects a discount to, or a premium from, the then-current market price of our common stock. In addition,in order to raise capital, we may need to issue securities that are convertible into or exchangeable for a significant amount of our common stock. We arecurrently contemplating additional capital raising transactions within the next twelve months, which would likely result in issuances of additionalshares which would be dilutive to current shareholders. These issuances would dilute the percentage ownership interest, which would have the effect ofreducing your influence on matters on which our stockholders vote, and might dilute the net tangible book value per share of our common stock. Youmay incur additional dilution if holders of stock options, whether currently outstanding or subsequently granted, exercise their options, or if theholders of warrants, whether currently outstanding or subsequently granted, exercise their warrants to purchase shares of our common stock.A sale of a substantial number of shares of the common stock may cause the price of our common stock to decline.Finance transactions resulting in a large amount of newly issued shares that become readily tradable, or other events that cause current stockholders tosell shares, could place downward pressure on the trading price of our stock. Some of our shareholders have registration rights to facilitate sales of largeblocks of our common stock. We have filed a shelf registration statement to allow registered sales by us of up to $100 million. We may consideradditional or other capital raising transactions within the next twelve months, which would likely result in issuances of additional shares that would bedilutive to current shareholders. In addition, the lack of a robust resale market may require a stockholder who desires to sell a large number of shares ofcommon stock to sell the shares in increments over time to mitigate any adverse impact of the sales on the market price of our stock.If our stockholders sell, or the market perceives that our stockholders intend to sell for various reasons substantial amounts of our common stock in thepublic market, including shares issued upon the exercise of outstanding options or warrants, the market price of our common stock could fall. Sales of asubstantial number of shares of our common stock may make it more difficult for us to sell equity or equity-related securities in the future at a time andprice that we deem reasonable or appropriate. We may become involved in securities class action litigation that could divert management’s attentionand harm our business. 30Table of ContentsWe have not paid cash dividends on our common stock in the past and do not expect to pay cash dividends in the foreseeable future.We have never paid cash dividends on our common stock and do not anticipate paying cash dividends on our common stock in the foreseeable future.The payment of dividends on our common stock will depend on our earnings, financial condition and other business and economic factors affecting usat such time as the board of directors may consider relevant. If we do not pay dividends, our common stock may be less valuable because a return onyour investment will only occur if the market price of our common stock price appreciates.At times, our shares of common stock and warrants have been thinly traded, so you may be unable to sell at or near ask prices or even at all if youneed to sell your shares to raise money or otherwise desire to liquidate your shares.We cannot predict the extent to which an active public market for our common stock will develop or be sustained. Our common stock is currentlytraded on The NASDAQ Capital Market and experiences periods when it could be considered “thinly-traded.” This situation may be attributable to anumber of factors, including the fact that we are a small company that is relatively unknown to stock analysts, stock brokers, institutional investors andothers in the investment community that generate or influence sales volume, and that even if we came to the attention of such persons, they tend to berisk averse and would be reluctant to follow an unproven company such as ours or purchase or recommend the purchase of our shares until such time aswe became more seasoned and viable. As a consequence, there may be periods of several days, weeks or months when trading activity in our shares isminimal, as compared to a seasoned issuer that has a large and steady volume of trading activity that will generally support continuous sales withoutan adverse effect on share price. We cannot give you any assurance that a broader or more active public trading market for our common stock will besustained, or that current trading levels will be sustained or not diminish.Concentration of ownership by our principal stockholders may limit your ability to influence the outcome of director elections and othertransactions requiring stockholder approval.A significant percentage of our outstanding stock is held by a limited number of investors, including Richard E. Uihlein. Mr. Uihlein, the chairman ofour board of directors, who beneficially owns approximately 5.7% of our outstanding common stock as of February 20, 2019 (which does not includeany shares issuable upon exercise of options and warrants) and the 10X Fund, LP , which now owns 14.3% of the issued and outstanding shares ofcommon stock of the Company as of February 20, 2019 (which does not include any shares issuable upon exercise of options and warrants). Mr.Uihlein is also an investor in the 10X Fund as a limited partner but is not deemed to be a beneficial owner of, or have a reportable interest in, any sharesowned by 10X Fund. As a result of their ownership of shares of common stock, Mr. Uihlein and 10X Fund have and will have significant influence overcorporate actions requiring stockholder approval, including the following actions: • to elect or defeat the election of our directors; • to amend or prevent amendment of our certificate of incorporation or bylaws; • to effect or prevent a merger, sale of assets or other corporate transaction; and • to control the outcome of any other matter submitted to our stockholders for vote.Such persons’ stock ownership may discourage a potential acquirer from making a tender offer or otherwise attempting to obtain control of ourcompany, which in turn could reduce our stock price or prevent our stockholders from realizing a premium over our stock price.Richard E. Uihlein’s and 10X Fund’s significant ownership positions may deter or prevent efforts by other companies to acquire us, which couldprevent our stockholders from realizing a control premium.As a result of Mr. Uihlein’s and 10X Fund’s significant ownership and Mr. Uihlein’s position as chairman of the board of directors, other companiesmay be less inclined to pursue an acquisition of us or we may not have the opportunity to be acquired in a transaction that stockholders mightotherwise deem favorable, including transactions in which our stockholders might realize a substantial premium for their shares. 31Table of ContentsRichard E. Uilhlein and/or 10X Fund could sell or transfer a substantial number of shares of our common stock, which could depress the price ofour securities or result in a change in control of our company.Although Mr. Uihlein has held common stock of the Company since 2012 and has not sold any of the shares of common stock that he has acquiredduring this time period, and although 10X Fund has been a long-time investor in the Company, neither Mr. Uihlein nor 10X Fund are subject to anycontractual restrictions with us on their ability to sell or transfer our common stock on the open market, in privately negotiated transactions orotherwise, and these sales or transfers could create substantial declines in the price of our securities or, if these sales or transfers were made to a singlebuyer or group of buyers, could contribute to a transfer of control of our company to a third party. Sales by Mr. Uihlein or 10X Fund of a substantialnumber of shares, or the expectation of such sales, could cause a significant reduction in the market price of our common stock. Item 1B.Unresolved Staff CommentsNone. Item 2.PropertiesWe lease 3,610 square feet for our executive offices located at 4960 Peachtree Industrial Blvd., Norcross, GA. We also lease on a month-to-monthbasis approximately 300 square feet in Natick, MA, for use by research and development employee and which is collocated with one of our researchand development service vendors. We believe these spaces are suitable for our present operations. Item 3.Legal ProceedingsFrom time to time, the Company is exposed to litigation relating to its operations. The Company is not currently engaged in any legalproceedings that are expected, individually or in the aggregate, to have a material, adverse effect on its financial condition or results of operations. Item 4.Mine Safety DisclosuresNot applicable. 32Table of ContentsPART II Item 5.Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity SecuritiesOur common stock began trading on The NASDAQ Capital Market under the symbol GALT effective March 23, 2012.Holders of Common StockAs of February 20, 2019, there were 279 shareholders of record of our common stock. Because shares of our common stock are held bydepositaries, brokers and other nominees, the number of beneficial holders of our shares is substantially larger than the number of record holders. Basedon information available to us, we believe there are approximately 12,500 non-objecting beneficial owners of our shares of our common stock inaddition to the record holders.DividendsAs we have never paid cash dividends on our common stock and do not anticipate paying cash dividends on our common stock in theforeseeable future. The payment of dividends on our common stock will depend on our earnings, financial condition and other business and economicfactors affecting us at such time as the board of directors may consider relevant. Item 6.Selected Financial DataNot applicable. Item 7.Management’s Discussion and Analysis of Financial Condition and Results of OperationsForward-Looking StatementsIn addition to historical information, the following Management’s Discussion and Analysis of Financial Condition and Results of Operationscontains forward-looking statements as defined under Section 21E of the Securities Exchange Act of 1934, as amended, and is subject to the safeharbor created therein for forward-looking statements. Such statements include, but are not limited to, statements concerning our anticipated operatingresults, research and development, clinical trials, regulatory proceedings, and financial resources, and can be identified by use of words such as, forexample, “anticipate,” “estimate,” “expect,” “project,” “intend,” “plan,” “believe” and “would,” “should,” “could” or “may.” All statements, other thanstatements of historical facts, included herein that address activities, events, or developments that the Company expects or anticipates will or mayoccur in the future, are forward-looking statements, including statements regarding: plans and expectations regarding clinical trials; plans andexpectations regarding regulatory approvals; our strategy and expectations for clinical development and commercialization of our products; potentialstrategic partnerships; expectations regarding the effectiveness of our products; plans for research and development and related costs; statements aboutaccounting assumptions and estimates; expectations regarding liquidity and the sufficiency of cash to fund currently planned operations through atleast March 31, 2020; our commitments and contingencies; and our market risk exposure. Forward-looking statements are based on currentexpectations, estimates and projections about the industry and markets in which Galectin Therapeutics operates, and management’s beliefs andassumptions. These statements are not guarantees of future performance and involve certain known and unknown risks and uncertainties that couldcause 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, 33Table of Contents • our dependence on additional outside capital, • we may be unable to enter into strategic partnerships for the development, commercialization, manufacturing and distribution of ourproposed product candidates, • uncertainties related to any litigation, including shareholder class actions and derivative lawsuits filed, • 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 ourSEC reports, andWe caution investors that actual results or business conditions may differ materially from those projected or suggested in forward-lookingstatements as a result of various factors including, but not limited to, those described above and in the Risk Factors section of this annual report onForm 10-K. We cannot assure you that we have identified all the factors that create uncertainties. Moreover, new risks emerge from time to time and it isnot possible for our management to predict all risks, nor can we assess the impact of all risks on our business or the extent to which any risk, orcombination of risks, may cause actual results to differ from those contained in any forward-looking statements. Readers should not place unduereliance on forward-looking statements. We undertake no obligation to publicly release the result of any revision of these forward-looking statementsto reflect events or circumstances after the date they are made or to reflect the occurrence of unanticipated events.Results of Operations from the Years Ended December 31, 2018 and 2017Research and Development Expense Year endedDecember 31, 2018 as Compared to 2017 2018 2017 $ Change % Change (in thousands, except %) Research and development $6,471 $11,721 $(5,250) (45)% We generally categorize research and development expenses as either direct external expenses, comprised of amounts paid to third party vendorsfor services, or all other research and development expenses, comprised of employee payroll and general overhead allocable to research anddevelopment. We consider a clinical program to have begun upon acceptance by the FDA, or similar agency outside of the United States, to commencea clinical trial in humans, at which time we begin tracking expenditures by the product candidate. Clinical program expenses comprise payments tovendors related to preparation for, and conduct of, all phases of the clinical trial, including costs for drug manufacture, patient dosing and monitoring,data collection and management, oversight of the trials and reports of results. Pre-clinical expenses comprise all research and development amountsincurred before human trials begin, including payments to vendors for services related to product experiments and discovery, toxicology,pharmacology, metabolism and efficacy studies, as well as manufacturing process development for a drug candidate. We have two product candidates,GR-MD-02 and GM-CT-01; however only GR-MD-02 is in active development. 34Table of ContentsOur research and development expenses were as follows: Year EndedDecember 31, 2018 2017 (in thousands) Direct external expenses: Clinical programs $2,296 $9,362 Pre-clinical activities 208 194 Other research and development expenses: Payroll and other including stock-based compensation 3,967 2,165 $6,471 $11,721 Clinical programs expenses decreased primarily due to costs related to our Phase 2 clinical trials during the year ended December 31, 2018 ascompared to the same period in 2017. Because we completed our NASH-CX Phase 2 trial in 2017, we expected our clinical activities costs to decreasein 2018 absent additional clinical trials commencing. Other research and development expenses increased during the year ended December 31, 2018compared to 2017 primarily due to non-cash stock-based compensation expense.Both the time required and costs we may incur in order to commercialize a drug candidate that would result in material net cash inflow aresubject to numerous variables, and therefore we are unable at this stage of our development to forecast useful estimates. Variables that make estimatesdifficult include the number of clinical trials we may undertake, the number of patients needed to participate in the clinical trial, patient recruitmentuncertainties, trial results as to the safety and efficacy of our products, and uncertainties as to the regulatory agency response to our trial data prior toreceipt of marketing approval. Moreover, the FDA or other regulatory agencies may suspend clinical trials if we or an agency believes patients in thetrial are subject to unacceptable risks or find deficiencies in the conduct of the clinical trial. Delays or rejections may also occur if governmentalregulation or policy changes during our clinical trials or in the course of review of our clinical data. Due to these uncertainties, accurate andmeaningful estimates of the ultimate cost to bring a product to market, the timing of costs and completion of our program and the period during whichmaterial net cash inflows will commence are unavailable at this time.General and Administrative Expense Year endedDecember 31, 2018 as Compared to 2017 2018 2017 $ Change % Change (in thousands, except %) General and administrative $7,131 $4,526 $2,605 58% General and administrative expenses consist primarily of salaries including stock-based compensation, legal and accounting fees, insurance,investor relations, business development and other office related expenses. The primary reasons for the increase for the year ended December 31, 2018,as compared to the same period for 2017, are due to increased non-cash stock-based compensation of $1,922,000 and increased investorrelations/business development expenses of $540,000.Other Income and ExpenseDuring the year ended December 31, 2018, other income and expense consisted of $38,000 of interest income offset by amortization of thewarrants issued with a line of credit entered into in December 2017 of $336,000 which is classified as interest expense. 35Table of ContentsResults of Operations from the Years Ended December 31, 2017 and 2016Research and Development Expense Year endedDecember 31, 2017 as Compared to 2016 2017 2016 $ Change % Change (in thousands, except %) Research and development $11,721 $15,325 $(3,604) (24)% We generally categorize research and development expenses as either direct external expenses, comprised of amounts paid to third party vendorsfor services, or all other research and development expenses, comprised of employee payroll and general overhead allocable to research anddevelopment. We consider a clinical program to have begun upon acceptance by the FDA, or similar agency outside of the United States, to commencea clinical trial in humans, at which time we begin tracking expenditures by the product candidate. Clinical program expenses comprise payments tovendors related to preparation for, and conduct of, all phases of the clinical trial, including costs for drug manufacture, patient dosing and monitoring,data collection and management, oversight of the trials and reports of results. Pre-clinical expenses comprise all research and development amountsincurred before human trials begin, including payments to vendors for services related to product experiments and discovery, toxicology,pharmacology, metabolism and efficacy studies, as well as manufacturing process development for a drug candidate. We have two product candidates,GR-MD-02 and GM-CT-01; however only GR-MD-02 is in active development.Our research and development expenses were as follows: Year EndedDecember 31, 2017 2016 (in thousands) Direct external expenses: Clinical programs $9,362 $11,994 Pre-clinical activities 194 856 Other research and development expenses: Payroll and other including stock-based compensation 2,165 2,475 $11,721 $15,325 Clinical programs expenses decreased primarily due to costs related to our Phase 2 clinical trials during the year ended December 31, 2017 ascompared to the same period in 2016. As we have completed our NASH-CX Phase 2 trial in 2017, we expect our clinical activities costs will furtherdecrease absent additional clinical trials commencing. Pre-clinical activities decreased primarily because we have completed pre-clinical work directlyrelated to our Phase 2 clinical trial program.Both the time required and costs we may incur in order to commercialize a drug candidate that would result in material net cash inflow aresubject to numerous variables, and therefore we are unable at this stage of our development to forecast useful estimates. Variables that make estimatesdifficult include the number of clinical trials we may undertake, the number of patients needed to participate in the clinical trial, patient recruitmentuncertainties, trial results as to the safety and efficacy of our products, and uncertainties as to the regulatory agency response to our trial data prior toreceipt of marketing approval. Moreover, the FDA or other regulatory agencies may suspend clinical trials if we or an agency believes patients in thetrial are subject to unacceptable risks or find deficiencies in the conduct of the clinical trial. Delays or rejections may also occur if governmentalregulation or policy changes during our clinical trials or in the course of review of our clinical data. Due to these uncertainties, accurate andmeaningful estimates of the ultimate cost to bring a product to market, the timing of 36Table of Contentscosts and completion of our program and the period during which material net cash inflows will commence are unavailable at this time.General and Administrative Expense Year endedDecember 31, 2017 as Compared to 2016 2017 2016 $ Change % Change (in thousands, except %) General and administrative $4,526 $6,156 $(1,630) (26)% General and administrative expenses consist primarily of salaries including stock-based compensation, legal and accounting fees, insurance,investor relations, business development and other office related expenses. The primary reasons for the decrease for the year ended December 31, 2017as compared to the same period for 2016 are due to, decreased legal expenses of $251,000, decreased stock-based compensation of $1,068,000 anddecreased investor relations expenses of $352,000.Other Income and ExpenseDuring the year ended December 31, 2017, other income and expense consisted of interest income offset by amortization of the warrants issuedwith a line of credit entered into in December 2017 of $12,000 which is classified as interest expense.Liquidity and Capital ResourcesAs described above in the Overview and elsewhere in this Annual Report on Form 10-K, we are in the development stage and have not generatedany revenues to date. Since our inception on July 10, 2000, we have financed our operations from proceeds of public and private offerings of debt andequity. As of December 31, 2018, we raised a net total of $147.4 million from these offerings. At December 31, 2018, the Company had $8.3 million ofunrestricted cash and cash equivalents available to fund future operations. In December 2018, the Company announced the extension of its $10million unsecured line of credit facility with stockholder and director, Richard E. Uihlein. The Company has not drawn under the line of credit.Additionally, in January 2019, the Company received $1.87 million in net proceeds from the ATM. The Company believes there is sufficient cash,including availability of the line of credit, to fund currently planned operations at least through March 31, 2020. We will require more cash to fund ouroperations after March 31, 2020 and believe we will be able to obtain additional financing. The currently planned operations do not include costsrelated to a planned Phase 3 clinical trial. While the costs of the trial and general overhead during the Phase 3 trial are expected to be approximately$100 million, the costs and timing of such trial are not yet finalized. The Company has not made commitments for such trial that cannot be coveredwith available cash. The costs of a Phase 3 clinical trial will require additional funding. However, there can be no assurance that we will be successfulin obtaining such new financing or, if available, that such financing will be on terms favorable to us2018 compared to 2017Net cash used in operations decreased by $5,713,000 to $10,179,000 for 2018, as compared to $15,892,000 for 2017. Cash operating expensesdecreased principally due to decreased research and development activities primarily related to our Phase 2 clinical programs.There were no equipment purchases or other investing activities in 2018 or 2017.Net cash provided by financing activities was $15,379,000 during 2018 as compared to $3,583,000 during 2017, due primarily to thetransactions described below. 37Table of ContentsIn 2018, we completed sales of common stock through At the Market issuances totaling $5,603,000. Additionally, in 2018, we received proceedstotaling $6,003,000 and $3,773,000 from the exercise of common stock warrants and options, respectively. In 2017, we completed a private placementof common stock with warrants totaling $200,000 and sales of common stock through At the Market issuances totaling $3,383,000.2017 compared to 2016Net cash used in operations decreased by $517,000 to $15,892,000 for 2017, as compared to $16,409,000 for 2016. Cash operating expensesdecreased principally due to decreased research and development activities primarily related to our Phase 2 clinical programs.There were no equipment purchases or other investing activities in 2017 or 2016.Net cash provided by financing activities was $3,583,000 during 2017 as compared to $5,925,000 during 2016, due primarily to the transactionsdescribed below.In 2017, we completed a private placement of common stock with warrants totaling $200,000 and sales of common stock through At the Marketissuances totaling $3,383,000. In 2016, we completed sales of Series B-3 preferred stock with warrants totaling $2,508,000, private placements ofcommon stock and warrants totaling $3,000,000 and sales of common stock through At the Market issuances totaling $417,000.Operating leasesEffective December 31, 2018, the Company entered into an amendment to its operating lease for office space in Norcross, GA for a term of thirty-eight months, beginning on January 1, 2019 and ending February 28, 2022 at a rate of approximately $3,800 per month. The amended lease providedfor 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 thecontractual obligations table above, the Company is responsible for our pro-rata share of the operating expenses for the building.In October 2012, the Company entered into an operating lease for office space collocated with lab space for research and development activities.The lease is for a period of one year, beginning on October 1, 2012, for a rate of $15,000 for the term, payable in equal monthly increments. This leasewas continued on a month to month basis from October 1, 2013.Other. We have engaged outside vendors for certain services associated with our clinical trials. These services are generally available fromseveral providers and, accordingly, our arrangements are typically cancellable on 30 days notice.Off-Balance Sheet ArrangementsWe have not created, and are not a party to, any special-purpose or off-balance sheet entities for the purpose of raising capital, incurring debt oroperating parts of our business that are not consolidated into our financial statements. We do not have any arrangements or relationships with entitiesthat are not consolidated into our financial statements that are reasonably likely to materially affect our liquidity or the availability of capitalresources. 38Table of ContentsContractual Obligations and CommitmentsThe following table summarizes contractual obligations and commitments as of December 31, 2018: Payments due by period (in thousands) Contractual Obligations Total Less than1 year 1-3years 3-5years More than5 years Operating Leases $140 $38 $102 Total $140 $38 $102 Critical Accounting Policies and EstimatesOur significant accounting policies are more fully described in Note 2 to our consolidated financial statements included elsewhere in this annualreport on Form 10-K. Certain of our accounting policies, however, are critical to the portrayal of our financial position and results of operations andrequire the application of significant judgment by our management, which subjects them to an inherent degree of uncertainty. In applying ouraccounting policies, our management uses its best judgment to determine the appropriate assumptions to be used in the determination of certainestimates. Our more significant estimates include stock option and warrant liability valuations and performance vesting features of certain of theseinstruments, accrued liabilities, deferred income taxes and cash flows. These estimates are based on our historical experience, terms of existingcontracts, our observance of trends in the industry, information available from other outside sources, and on various other factors that we believe to beappropriate under the circumstances. We believe that the critical accounting policies discussed below involve more complex management judgmentdue to the sensitivity of the methods, assumptions and estimates necessary in determining the related asset, liability, revenue and expense amounts.Accrued Expenses. As part of the process of preparing our consolidated financial statements, we are required to estimate accrued expenses. Thisprocess involves identifying services that third parties have performed on our behalf and estimating the level of service performed and the associatedcost incurred on these services as of each balance sheet date in our consolidated financial statements. Examples of estimated accrued expenses includecontract service fees in conjunction with pre-clinical and clinical trials, professional service fees, such as those arising from the services of attorneysand accountants and accrued payroll expenses. In connection with these service fees, our estimates are most affected by our understanding of the statusand timing of services provided relative to the actual services incurred by the service providers. In the event that we do not identify certain costs thathave 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 beunderstated or overstated. The date on which certain services commence, the level of services performed on or before a given date, and the cost ofservices are often subject to our judgment. We make these judgments based upon the facts and circumstances known to us in accordance withaccounting principles generally accepted in the U.S.Research and Development Expenses. Costs associated with research and development are expensed as incurred. Research and developmentexpenses include, among other costs, salaries and other personnel-related costs, and costs incurred by outside laboratories and other accreditedfacilities in connection with clinical trials and preclinical studies.Stock-Based Compensation. Stock-based compensation cost is measured at the grant date based on the fair value of the award and is recognizedas expense over the service period, which generally represents the vesting period. For awards that have performance-based vesting conditions theCompany recognizes the expense over the estimated period that the awards are expected to be earned. The Company generally uses the Black-Scholesoption-pricing model to calculate the grant date fair value of stock options. For options that only vest upon the achievement of market conditions, theCompany values the options using a Monte Carlo model to calculate the grant date fair value of the stock options. The expense related to options thatvest based on market conditions is not reversed should those options not ultimately vest. The expense recognized over the service period is required 39Table of Contentsto include an estimate of the awards that will be forfeited. Stock options issued to non-employees are accounted for in accordance with the provisionsof ASC Subtopic 505-50, Equity-Based Payments to Non-employees, which requires valuing the stock options using an option pricing model (theCompany uses Black-Scholes) and measuring such stock options to their current fair value when they vest. Item 7A.Quantitative and Qualitative Disclosures About Market RiskDue to the nature of our operations, assets and absence of debt, we are not exposed to any significant market risks at December 31, 2018 and2017. Item 8.Financial Statements and Supplementary DataThe financial statements required by this item are attached to this Annual Report on Form 10-K beginning on Page F-1. Item 9.Changes in and Disagreements with Accountants on Accounting and Financial DisclosureNone. Item 9A.Controls and Procedures(a) Evaluation of Disclosure Controls and ProceduresAs 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 AnnualReport, we carried out an evaluation, under the supervision and with the participation of our Chief Executive Officer and our Chief Financial Officer, ofthe effectiveness of our disclosure controls and procedures as of December 31, 2018. Our management has concluded, based on their evaluation, thatour disclosure controls and procedures were effective as of December 31, 2018 to ensure that information required to be disclosed by us in the reportswe file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities andExchange Commission’s rules and forms.(b) Management’s Annual Report on Internal Control Over Financial ReportingManagement of the Company is responsible for establishing and maintaining adequate internal control over financial reporting. As defined inRule 13a-15(f) under the Exchange Act, internal control over financial reporting is a process designed by, or under the supervision of, a company’sprincipal executive and principal financial officers and effected by a company’s board of directors, management and other personnel, to providereasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordancewith generally accepted accounting principles. It includes those policies and procedures that:a) Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of theCompany;b) Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance withgenerally accepted accounting principles, and that receipts and expenditures of a company are being made only in accordance with authorizations ofmanagement and the board of directors of the Company; andc) Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assetsthat could have a material effect on its financial statements. 40Table of ContentsBecause of the inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of anyevaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that thedegree 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 ofSponsoring Organizations of the Treadway Commission (2013 framework), or COSO, to evaluate the effectiveness of the Company’s internal controlover financial reporting. Management has selected the COSO 2013 framework for its evaluation as it is a control framework recognized by the SEC andthe Public Company Accounting Oversight Board, that is free from bias, permits reasonably consistent qualitative and quantitative measurement of theCompany’s internal controls, is sufficiently complete so that relevant controls are not omitted, and is relevant to an evaluation of internal controls overfinancial reporting. Management conducted an evaluation of internal controls based on the COSO 2013 framework. The evaluation included a fullscale, documented risk assessment, based on the principles described in the framework, and included identification of key controls. Managementcompleted documentation of its testing to verify the effectiveness of the key controls. Based on the evaluation, management concluded that ourinternal control over financial reporting was effective as of December 31, 2018.(c) Changes in Internal Control Over Financial ReportingThere was no change in our internal control over financial reporting that occurred during the fourth quarter of 2018 that has materially affected,or is reasonably likely to materially affect, our internal control over financial reporting. Item 9B.Other InformationNone. 41Table of ContentsPART III Item 10.Directors, Executive Officers and Corporate GovernanceEach 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 herdeath, resignation or removal. Our board of directors currently consists of nine members, all of whom were elected at our 2018 Annual Meeting ofStockholders.The following table sets for the certain biographical information about our directors as of February 20, 2019, and the qualifications, experiencesand skills considered in determining that each such person should serve as a director. Name Age Position Director SinceGilbert F. Amelio, Ph.D (2)(3) 75 Director 2009James C. Czirr 63 Director 2009Kary Eldred (1) 45 Director 2018Kevin D. Freeman (1)(3) 57 Director 2011Joel Lewis (1) (2) 49 Director 2017Gilbert S. Omenn, M.D., Ph.D. (2) 77 Director 2014Marc Rubin, M.D. (3) 64 Director 2011Stephen Shulman 74 Director 2017Richard E. Uihlein, Chairman 73 Director 2017 (1)Member of audit committee(2)Member of compensation committee(3)Member of nominating and governance committeeGilbert 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 SiennaVentures (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., anindependent specialty wafer foundry) from August 2005 until his retirement in September 2008 (when he was named Chairman Emeritus). Dr. Ameliowas Chairman and Chief Executive Officer of Beneventure Capital, LLC (a full-service venture capital firm in San Francisco, California) from 1999 to2005 and was Principal of Aircraft Ventures, LLC (a consulting firm in Newport Beach, California) from April 1997 to December 2004. Dr. Amelio waselected 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. Priorto 1997, he served as Chairman, President and CEO of National Semiconductor (1991-1996) and Apple Computer (1996-1997). We believeDr. Amelio’s qualifications to sit on our Board of Directors include his executive leadership and management experience, as well as his extensiveexperience with global companies, his financial expertise and his years of experience providing strategic advisory services to organizations.James C. Czirr, was nominated and elected by the holder(s) of the Series B Preferred Stock voting as a separate class to serve on our Board ofDirectors. Mr. Czirr served as Chairman of the Board from February 2009 until January 2016 and Executive Chairman from February 2010 untilJanuary 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., adeveloper of anti-cancer drugs; served from 2005 to 2008 as Chief Executive Officer of Minerva Biotechnologies Corporation, a developer of nanoparticle bio chips to determine the cause of solid tumors; and was a consultant to Metalline Mining Company Inc., now known as Silver BullResources, Inc., (AMEX: SVBL), a mineral exploration company seeking to become a low cost producer of zinc. Mr. Czirr 42Table of Contentsreceived 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 whowas a co-founder of the Company and is familiar with our business and industry.Kary Eldred, is a director and Chief Investment Officer for the Living Stones Foundation since July 2015 and has been an active private equityinvestor for many years. In these capacities, he serves and has served on a number of corporate boards of companies with potential for and drivingtoward initial public offerings and is currently serving as a board member in Buy It Installed (since 2017), Babywise and Wise King Media (since2015). Kary Eldred also served on the board and audit committee of GCT Semiconductor. From January 2011 through October 2014, Mr. Eldred wasCEO & Chairman of Altadona, S.A. a software integration company based in Europe and prior to that was a principal in Parakletos Ventures, aninstitutional venture capital firm with several investments in companies that went on to be acquired or become publicly listed on different exchangesaround the world including the NASDAQ, KOSDAQ and the GEM market. Mr. Eldred has an Executive MBA from IE Business School and a BA inForeign Service from Baylor University. We believe that Mr. Eldred’s qualifications to sit on our board include his experience serving on boards ofseveral 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 CrossConsulting and Services, LLC, an investment advisory and consulting firm founded in 2004. He is also author of a New York Times best-selling bookabout the stock market and economy and the host of television segments (Economic War Room with Kevin Freeman) that airs nationally during localnewscasts on 200 stations. Formerly he was Chairman of Separate Account Solutions, Inc. and held several offices at Franklin Templeton InvestmentServices from 1991 to 2000. He holds a B.S. in business administration from University of Tulsa, Tulsa, Oklahoma. We believe Mr. Freeman’squalifications to sit on our Board of Directors includes his extensive financial expertise and his years of experience providing financial advisoryservices.Joel Lewis, a director since 2017, is the Managing Director of Shareholder Services at Uline, Inc. (a distributor of shipping, packaging andindustrial supplies), a position he has held since 2007. Mr. Lewis is a financial executive with over 25 years of experience started his career in publicaccounting in 1992. Prior to his employment with Uline Inc., Mr. Lewis served as a Tax and Accounting Manager for Century America LLC from 2001to 2006 and a Tax Manager for Deloitte & Touche from 1998 to 2001. After spending a decade in public accounting where he specialized in bothfinancial reporting and taxation, Mr. Lewis migrated to privately held companies focusing on high net worth family businesses. Mr. Lewis has a widerange of expertise including working in a variety of industries and disciplines including taxation, restructuring, acquisition and private equityventures. 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 Taxationfrom DePaul University. We believe that Mr. Lewis’ qualifications to sit on our Board include his business and financial expertise and his service as aboard 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 & HaasCompany for 22 years. He currently serves on the boards of Esperion Therapeutics Inc., and Oncofusion. Dr. Omenn is Professor of ComputationalMedicine & Bioinformatics, Internal Medicine, Human Genetics, and Public Health and Director of the university-wide Center for ComputationalMedicine and Bioinformatics at the University of Michigan where he leads major research programs in proteomics and integrative biomedicalinformatics. Dr. Omenn served as executive vice president for medical affairs and as chief executive officer of the University of Michigan HealthSystem from 1997 to 2002. Prior to this, he was the dean of the School of Public Health and Community Medicine and professor of medicine at theUniversity of Washington. Earlier he was Associate Director of the White House Office of Science and Technology and of the Office of Managementand Budget. He is the author of more than 563 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 43Table of ContentsWashington. We believe Dr. Omenn’s qualifications to sit on our Board of Directors include his extensive executive leadership and managementexperience in the medical industry and his continuing cutting-edge research.Marc Rubin, M.D, a director since October 2011 and Chairman of the Board since January 2016, is Executive Chairman of the Board of Directorsof Titan Pharmaceuticals, Inc. (TTNP: OTC BB) and served as its President and Chief Executive Officer from October 2007 to January 2009. UntilFebruary 2007, Dr. Rubin served as Head of Global Research and Development for Bayer Schering Pharma, as well as a member of the ExecutiveCommittee of Bayer Healthcare and the Board of Management of Bayer Schering Pharma. Prior to the merger of Bayer Pharmaceuticals and ScheringAG 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 ofSchering Berlin Inc. and President of Berlex Pharmaceuticals, a division of Schering AG. From 1990 until August 2003, Dr. Rubin was employed byGlaxoSmithKline 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 subspecialtiesin medical oncology and infectious diseases. Dr. Rubin is a member of the Board of Directors of Curis Inc. (Nasdaq: CRIS) and formerly served on theBoard of Directors of Medarex, Inc., now a subsidiary of Bristol-Myers Squibb Company. We believe Dr. Rubin’s qualifications to sit on our Board ofDirectors include his extensive executive leadership and management experience in the pharmaceutical industry.Stephen Shulman, a director since 2017, is the Chief Executive Officer of Medical Devices Inc. (MDI), a position he has held since 1982. MDI isresponsible for numerous medical device startups such as defibrillator electrodes, Fiberoptic pressure sensors, occlusive dressings, surgical glue, non-invasive body temperature control and end stage renal care. Prior to the formation of MDI, he was Director of Sales and Marketing/Asia Pacific forMedtronic from 1970 to 1981. Mr. Shulman received a B.S.C. in microbiology and physics from Wayne State University. We believe that Mr. Shulmanis best situated to sit on our Board because of his extensive executive leadership and management experience in the medical device industry.Richard E. Uihlein, a director since 2017, 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 GeneralBindings Corp., Northbrook, IL from 1967 to 1980. Mr. Uihlein graduated from Stanford University, Palo Alto, CA. with a BA degree in history in1967. We believe Mr. Uihlein’s qualifications to sit on our Board includes his extensive executive leadership and management experience.Code of EthicsWe have adopted a Code of Ethics that applies to all our directors, officers and employees. The Code of Ethics is publicly available on ourwebsite at www.galectintherapeutics.com. Amendments to the Code of Ethics and any grant of a waiver from a provision of the Code of Ethicsrequiring disclosure under applicable SEC rules will be disclosed on our website.Director NominationsNo material changes have been made to the procedures by which security holders may recommend nominees to our board of directors.Audit CommitteeThe members of this committee are Joel Lewis (chair), Kary Eldred and Kevin D. Freeman. The Audit Committee is responsible for oversight ofthe quality and integrity of the accounting, auditing and reporting 44Table of Contentspractices of Galectin Therapeutics. More specifically, it assists the Board of Directors in fulfilling its oversight responsibilities relating to (i) the qualityand integrity of our financial statements, reports and related information provided to stockholders, regulators and others, (ii) our compliance with legaland regulatory requirements, (iii) the qualifications, independence and performance of our independent registered public accounting firm, (iv) theinternal control over financial reporting that management and the Board have established, and (v) the audit, accounting and financial reportingprocesses generally. The Committee is also responsible for review and approval of related-party transactions. The Board has determined that Mr. Lewisis 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 ManagementThe Board has an active role, as a whole and also at the committee level, in overseeing management of our risks. The Board regularly reviewsinformation regarding our credit, liquidity and operations, as well as the risks associated with each. The Compensation Committee of our Board isresponsible for overseeing the management of risks relating to our executive compensation plans and arrangements. The Audit Committee of our Boardoversees management of financial risks. The Nominating and Corporate Governance Committee of our Board manages risks associated with theindependence of the Board members and potential conflicts of interest. While each committee is responsible for evaluating certain risks and overseeingthe 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. Ourprograms 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 istied directly to appreciation of our stock price, taking excessive risk for a short term gain is discouraged because it would not maximize thevalue of equity incentive awards over the long-term.Executive officers, key employees and key consultants:Harold H. Shlevin, Ph.D., age 69, became our Chief Operating Officer and Secretary on October 1, 2012 and was named Chief Executive Officerand President effective July 6, 2018. Dr. Shlevin previously had been employed at the Georgia Institute of Technology’s Advanced TechnologyDevelopment Center as Principal and Manager of bioscience commercialization efforts since November 2009, where he has assisted faculty inidentifying technology worthy of commercialization, catalyzed formation of new start-up bioscience companies, and mentored new companymanagement. From October 2008 to November 2009, he served as Head of Operations and Commercial Development for Altea TherapeuticsCorporation, an advanced drug delivery company focused on the delivery of therapeutic levels of water-soluble biotherapeutics and small drugsthrough the skin. At Altea, he was responsible for pharmaceutical research and development, clinical research, regulatory affairs, engineering, clinicaland 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-stagedevelopment of neuroscience therapeutics. From May 2000 to December 2005, he served as President and CEO of Solvay Pharmaceuticals, Inc. (US). InJanuary 2006, he was promoted to a global senior Vice President role within Solvay Pharmaceuticals, SA and member of the Board of SolvayPharmaceuticals, SA, until his resignation in June 2006.Jack W. Callicutt, age 51, became our Chief Financial Officer on July 1, 2013 and was appointed Secretary on July 6, 2018. From August 2012through June 2012, Mr. Callicutt was the Chief Financial Officer of REACH 45Table of ContentsHealth, Inc., a telemedicine technology company headquartered in Alpharetta, GA. From April 2010 through August 2012, Mr. Callicutt was the ChiefFinancial Officer of Vystar Corporation, a publicly-traded company that holds proprietary technology to remove antigenic proteins from natural rubberlatex. Prior to that Mr. Callicutt was Chief Financial Officer of IVOX, Inc., Tikvah Therapeutics and Corautus Genetics, a publicly-tradedbiotechnology company which was developing gene therapy for treatment of cardiovascular disease. Mr. Callicutt previously spent more than fourteenyears 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 computerinformation systems.J. Rex Horton, age 48, became the Company’s Executive Director of Regulatory Affairs and Quality Assurance in January 2013. Mr. Horton mostrecently was Director of Regulatory Affairs at Chelsea Therapeutics, where he successfully led the organization through its first NDA filing andfavorable FDA Advisory Committee Meeting. In past leadership roles at Solvay Pharmaceuticals and Abbott Laboratories, he led approval efforts forkey products including Androgel® Stickpack, Creon® Capsules and Luvox® CR Capsules. He has also provided chemistry, manufacturing andcontrols (CMC) regulatory leadership and support of INDs and NDAs, including Estrogel® and Androgel® Pump. Mr. Horton was a member of theexecutive leadership team that successfully implemented solutions to significant regulatory issues encountered by Solvay in its interactions with theFDA. Mr. Horton earned his Bachelor’s degree in industrial/manufacturing & systems engineering from The Georgia Institute of Technology. He is amember of the Regulatory Affairs Professional Society (RAPS), Drug Information Association (DIA) and American Association of PharmaceuticalScientists (AAPS).Eliezer Zomer, Ph.D., age 71, has been our Executive Vice President of Manufacturing and Product Development since the Company’s inceptionin 2000. Prior to joining our Company, Dr. Zomer had been the founder of Alicon Biological Control, where he served from November 2000 to July2002. From December 1998 to July 2000, Dr. Zomer served as Vice President of Product Development at SafeScience, Inc. and Vice President ofResearch and Development at Charm Sciences, Inc. from June 1987 to November 1998. Dr. Zomer received a B. Sc. degree in industrial microbiologyfrom 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 atthe National Institute of Health.Adam E. Allgood, Pharm.D., R.Ph, age 54, became our Executive Director of Clinical Development on June 29, 2015. Dr. Allgood was mostrecently associate director of global pharmaceutical regulatory affairs at UCB Inc., a multinational biopharmaceutical company, from October 2011 toMay 2015. His prior positions include leadership roles at Abbott Laboratories from February 2009 to September 2011 in regulatory affairs and SolvayPharmaceuticals from January 1988 to January 2009 in clinical development and medical affairs, spanning a variety of therapeutic areas includinggastroenterology, immunology, rheumatology, neurology, and women’s health. Dr. Allgood earned his Doctor of Pharmacy (Pharm.D.) degree summacum laude from Mercer University College of Pharmacy and Health Sciences in Atlanta and is a Registered Pharmacist (R.Ph.). He is a member of theAmerican Pharmacists Association (APHA), and the Association of the United States Army (AUSA).None of the directors, executive officers and key employees share any familial relationship.Section 16(a) Beneficial Ownership Reporting ComplianceSection 16(a) of the Exchange Act requires our officers and directors, and persons who beneficially own more than ten percent of our common stock, tofile reports of ownership and changes of ownership of such securities with the SEC. Except as set forth below, all reports were timely filed during thefiscal year ended December 31, 2018. 46Table of ContentsOn May 29, 2018, Kary Eldred filed a Form 3 relating to his appointment as a director of the Company on May 22, 2018. Upon the reporting person’sappointment as a director, he also received a grant of stock options on May 22, 2018. The reporting person filed a Form 4 relating to such grant onMay 29, 2018. Both of these referenced filings should have been made within two business days of the date of grant of the stock options.On June 18, 2018, Harold H. Shlevin filed a Form 4 reporting the acquisition of a stock option, which was granted on June 8, 2018. The Form 4 shouldhave been filed within two business days after the date of grant.On June 20, 2018, each of 10X Fund, L.P. and 10X Capital Management, LLC, the general partner of 10X Fund, L.P., filing jointly, and James C. Czirr,the managing member of 10X Capital Management, LLC, filing separately, reported on Forms 4 (i) the disposition by 10X Fund, L.P. of 31,860 sharesof common stock on June 14, 2018, (ii) a separate disposition by 10X Fund, L.P. of 44,525 shares of common stock also on June 14, 2018, (iii) adisposition of 15,475 shares of common stock by 10X Fund, L.P. on June 15, 2018, and (iv) a disposition of 60,000 shares of common stock by 10XFund, L.P. on June 18, 2018. The above transactions on June 14, 2018 and June 15, 2018, should have been reported on Forms 4 within two businessdays of the respective transactions. Item 11.Executive CompensationCOMPENSATION DISCUSSION AND ANALYSISThe Compensation Committee is responsible for creating and reviewing the compensation of the Company’s executive officers, as well asoverseeing the Company’s compensation and benefit plans and policies and administering the Company’s equity incentive plans. The followingCompensation Discussion and Analysis (“CD&A”) describes our 2018 executive compensation program and explains the Company’s compensationphilosophy, policies, and practices, focusing primarily on the compensation of our named executive officers, or NEOs. This CD&A is intended to beread in conjunction with the tables that follow, which provide detailed historical compensation information for our following NEOs: Name TitlePeter G. Traber, M.D. Chief Executive Officer, President and Chief Medical Officer until July6, 2018Harold H. Shlevin, Ph.D. Chief Operating Officer until July 6, 2018, then Chief ExecutiveOfficer and PresidentJack W. Callicutt Chief Financial OfficerCompensation PhilosophyThe Company believes in providing a competitive total compensation package to its executives through a combination of base salary, annualperformance 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 CompensationCommittee evaluates both performance and compensation to make sure that the compensation provided to executives remains competitive relative tocompensation paid by companies of similar size and stage of development operating in the life sciences industry and taking into account theCompany’s relative performance and its own strategic objectives. 47Table of ContentsExecutive Compensation Review and DesignThe Company has historically conducted a review of the aggregate level of its executive compensation, as well as the mix of elements used tocompensate 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 2016 annual meeting of stockholders approximately 91% of our outstanding common stock voting on the matter voted in favor of thecompensation of our NEOs, as disclosed in the proxy materials for the 2016 annual meeting. At our 2013 annual meeting, the holders of approximately62% of our outstanding common stock voting on the matter voted in favor of holding the stockholder advisory vote every three years. As a result ofsuch vote, our Board decided to hold the “Say-on-Pay” advisory vote every three years. Accordingly, the Company’s next “Say-on-Pay” advisory voteon the compensation of our NEOs will be held at our 2019 annual meeting of stockholders.In 2014 and 2015, the Compensation Committee undertook a review of our compensation policies and practices and retained the compensationconsulting firm of Barney & Barney LLC to provide compensation information and analysis with respect to the life science and healthcare industry andwith respect to our peer companies within the industry. Barney & Barney LLC reviewed information from industry and other sources, surveys anddatabases, including publicly-available compensation information of other companies with which we compete, to gauge the competitiveness of ourcompensation programs. Barney & Barney LLC then reported its findings to the Compensation Committee, with recommendations to bring theCompany’s executive compensation closer to the 50th percentile of the total compensation of our competitor companies. These findings continued toinform the Compensation Committee’s decisions on compensation in subsequent years, including 2018.The Compensation Committee plans to use a compensation consultant in the future and to take into account publicly-available data relating tothe compensation practices and policies of other companies within and outside our industry. For 2019 and future years, the Compensation Committeeintends to benchmark its executive compensation program to target the 50th percentile of the total compensation programs of our competitorcompanies; however, adjusted as deemed to be in the best interest of the Company to assure retention of key employees as the Phase 3 clinical trial isdesigned and commenced.Elements of Executive CompensationThe 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 SalaryBase salary is the only fixed-pay component in our executive compensation program. Base salaries for the NEOs are initially established througharm’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 herresponsibilities, and known competitive market compensation paid by other companies for similar positions within the industry. Base salaries arereviewed 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 theCompensation Committee and the Board of Directors, many of whom sit on the boards of directors of, or have previously advised, numerouscompanies, including companies in the life sciences industry. The Compensation Committee has not previously applied specific formulas to determineincreases. This strategy is consistent with the Company’s intent of offering base salaries that are cost-effective while remaining competitive. 48Table of ContentsIn June 2018 after the resignation of Dr. Traber from his position as Chief Executive Officer, President and Chief Medical Officer, theCompensation Committee reviewed the base salaries of our NEOs, taking into account the considerations described above. As a result, as a result of hiselection as Chief Executive Officer and President, Dr. Shlevin’s base salary was adjusted to $500,000 effective June 6, 2018. As a result of his electionto Secretary, Mr. Calllicutt’s base salary was adjusted to $285,000. Name 2018 Base Salary 2017 Base Salary Peter G. Traber, M.D. $512,500 $512,500 Harold H. Shlevin, Ph.D. $500,000 $260,000 Jack W. Callicutt $285,000 $260,000 For 2019, the Compensation Committee made no adjustments to the base salaries of our NEO’s.Performance BonusesIn addition to the payment of base salaries, the Company believes that annual performance bonuses can play an important role in providingappropriate incentives to its NEOs to achieve the Company’s strategic objectives. In prior years, performance bonuses were awarded based on theCompany’s Employee Short-Term and Long-Term Incentive Program (the “Program”), which was adopted for executives and employees of theCompany. The Program is a performance-based program and was adopted in recognition of the importance of aligning executive and employeeinterests with that of our stockholders. Our Program is designed to reward the efforts of our executives and employees and to be competitive inattracting 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-termincentive 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 theapplicable year. Half of each NEO’s annual performance bonus is based upon achievement of the Company’s documented performance objectives forthe year and the other half is based upon achievement of individual performance objectives set for the year. In 2018, however, in lieu of the standardindividual performance objectives, the Board approved potential cash incentive bonuses (the “Transaction Bonuses”) applicable only to employeeswho were employed by the Company on January 1, 2018, including Peter G. Traber, Harold H. Shlevin and Jack W. Callicutt.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) theacquisition of the Company or any of its material assets (an “Acquisition Transaction”). The amounts payable pursuant to the Transaction Bonuses willbe equal to 10% of the recipient’s 2018 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 aPartnership Transaction and payments to the Company are deferred or otherwise made over time, the amount of the Transaction Bonuses will be basedon the Board’s reasonable estimate of the value of the Transaction. To be entitled to receive a Transaction Bonus, if the Transaction is an AcquisitionTransaction, an individual must be employed by the Company on the date the Transaction is consummated, or, if the Transaction is a PartnershipTransaction, an individual must be employed by the Company on the date that the definitive transaction agreement(s) are executed. No TransactionBonuses were earned in 2018.Additionally, the Board also approved retention bonuses payable to certain employees of the Company, including Dr. Traber, Dr. Shlevin andMr. Callicutt, equal to 75% of such employee’s 2018 salary (the “Retention Bonuses”) if such employees remained employed by the Company throughDecember 31, 2018 and based upon the annualized salary level in effect on such date. If no Transaction was consummated on or prior to December 31,2018, then the Retention Bonuses was payable no later than January 15, 2019. If a Transaction was consummated on or prior to December 31, 2018,each eligible employee was to receive that portion of the Retention Bonus equal to any cash bonuses paid to such employee for 2017 on or beforeJanuary 15, 2019. The 49Table of Contentsbalance of the Retention Bonus was to be payable in equal monthly installments over a period of six (6) months, but only if the employee remainsemployed by the Company on the applicable payment date unless the employee’s employment is terminated by the Company without cause (or as aresult of the death or disability of the employee), in which case any unpaid portion of the Retention Bonus was to be paid immediately upon suchtermination. As stated above, Dr. Traber resigned from the Company effective July 6, 2018 and therefore, no bonuses of any kind were paid to him for2018. Name Retention BonusAmount Awarded AmountAs % of Base Salary Peter G. Traber, M.D. $0 0% Harold H. Shlevin, Ph.D. $375,000 75% Jack W. Callicutt $213,750 75% Long-Term Incentive CompensationThe Company believes that by providing its NEOs the opportunity to increase their ownership of Company stock, the interests of its NEOs willbe more closely-aligned with the best interests of the Company’s stockholders and it will encourage long-term performance. The stock awards enablethe 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 andindividual performance objectives and rank in the Company. All option grants under the Program have been made under the 2009 IncentiveCompensation Plan.There were no grants to NEO’s in 2017; however, on January 15, 2018, the NEOs were awarded the options noted below based on 2017performance. Of the options, 25% vested immediately upon grant, 25% vesedt on June 30, 2018 and 50% vested on December 31, 2018. The exerciseprice of the options is set at the closing price of our stock as of the grant date. Name Grant Date Number of SecuritiesUnderlying Options Exercise Price Peter G. Traber, M.D. 1/5/2018 125,000 $5.87 Harold H. Shlevin, Ph.D. 1/5/2018 90,000 $5.87 Jack W. Callicutt 1/5/2018 90,000 $5.87 On May 22, 2018, the NEOs were awarded the options noted below for 2018. Of the options, 25% vested immediately upon grant, 25% vested onJune 30, 2018 and 50% vested on December 31, 2018. 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 SecuritiesUnderlying Options Exercise Price Peter G. Traber, M.D. 5/22/2018 125,000 $4.16 Harold H. Shlevin, Ph.D. 5/22/2018 90,000 $4.16 Jack W. Callicutt 5/22/2018 90,000 $4.16 Additionally, in conjunction with his election to Chief Executive Officer and President effective June 6, 2018, Dr. Shlevin was awarded anadditional stock option grant on that date for 35,000 options with an exercise price of $6.17. Of the options, 25% vested on June 30, 2018 and 25%vested on September 30, 2018, and 50% vested on December 31, 2018. The exercise price of the options is set at the closing price of our stock as of thegrant date. 50Table of ContentsMaterial Terms of Employment Contracts of Named Executive OfficersSet forth below are descriptions of the principal terms of the employment agreements for each of our NEOs. Each employment agreementprovides for post-termination restrictive covenants and payments due upon termination of employment or change in control of the Company, which isprovided in further detail under the section entitled “Potential Payments Upon Termination or Change in Control.” We had an employment agreementwith Dr. Traber however due to his resignation effective July 6, 2018 the material terms are not presented below.Harold H. Shlevin, Ph.D., Chief Operating OfficerWe entered into an amended and restated employment agreement with Dr. Shlevin on December 11, 2014. The agreement provides for an initialterm from December 11, 2014 through December 31, 2015, and automatically renews for additional one-year periods, unless otherwise terminated byeither party. In accordance with the terms of the agreement, Dr. Shlevin received a base salary of $230,000 per year beginning in 2015 and received anannual performance bonus based on attainment of one or more pre-established individual and/or Company performance goals established by theCompensation Committee. Effective March 31, 2015, Dr. Shlevin’s annual base salary was increased to $250,000 and was increased again to $260,000in February 2016. Dr. Shlevin’s target performance bonus opportunity in a given year may not be less than 30% of his base salary in such year.On June 8, 2018, we entered into a first amendment to the employment agreement with Dr. Shlevin in recognition of his appointment as ChiefExecutive Officer and President of the Company. In accordance with the amendment, Dr. Shlevin will receive a base salary of $500,000, was granted35,000 stock options as noted above, and his target bonus opportunity was increased to 50% of his base salary.Jack W. Callicutt, Chief Financial OfficerWe entered into an employment agreement with Mr. Callicutt dated July 1, 2013 (the “Callicutt Employment Agreement”), in conjunction withMr. Callicutt’s appointment as our Chief Financial Officer. Pursuant to the terms of the Callicutt Employment Agreement, Mr. Callicutt received aninitial 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. He alsoreceived a signing bonus of $10,000. In addition to his cash compensation, the Company awarded Mr. Callicutt a grant of options to purchase 200,000shares 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 25,000shares vesting on December 31, 2013, 50,000 shares vesting on December 31, 2014, 50,000 shares vesting on December 31, 2015 and 75,000 sharesvesting on December 31, 2016. The options were granted pursuant to the 2009 Incentive Compensation Plan and expire ten years after the date ofgrant.On August 11, 2017, we entered into an amendment to the Callicutt Employment Agreement with Mr. Callicutt (the “Amendment”). TheAmendment was entered into to correct an error in the severance provision of the Callicutt Employment Agreement. Pursuant to the Amendment, ifMr. Callicutt’s employment with the Company is terminated by the Company “without cause,” or by Mr. Callicutt for “good reason,” (as such terms aredefined in his agreement) he shall receive severance equal to: 3 months’ base salary if such termination occurred within 12 months of July 1, 2013 (the“Commencement Date”); 6 months’ base salary if such termination occurred between 12 and 18 months after the Commencement Date; or 9 months’base salary if such termination occurs after the date that is 18 months after the Commencement Date, plus, in each case, a portion of the performancebonus for the then-current year based on the number of days elapsed in the year. Prior to the Amendment, the Callicutt Employment Agreement did notprovide for any severance if Mr. Callicutt’s employment with the Company 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. Mr. Callicutt’s target bonus opportunity was also increased to 30% ofhis base salary. 51Table of ContentsEmployee Benefits & PerquisitesFrom time to time, the Company has provided the NEOs with employee benefits and perquisites that our Board believes are reasonable. OurNEOs 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 ouremployees, and therefore providing them to our NEOs does not represent a significant incremental cost to us. The Company does not view employeebenefits 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 theNEOs in performing their duties and provide time efficiencies for the NEOs in appropriate circumstances, and the Company may consider providingadditional employee benefits and perquisites in the future. All future practices regarding employee benefits and perquisites will be approved andsubject to periodic review by the Compensation Committee.COMPENSATION COMMITTEE REPORTThe following report is not deemed to be “soliciting material” or to be “filed” with the SEC or subject to the SEC’s proxy rules or the liabilitiesof Section 18 of the Exchange Act, and the report shall not be deemed to be incorporated by reference into any prior or subsequent filing by us underthe Securities Act of 1933, as amended, or the Exchange Act.The Compensation Committee has reviewed and discussed with management the Compensation Discussion and Analysis included in this proxystatement. Based on this review and discussion, the Compensation Committee recommended to the Board that the Compensation Discussion andAnalysis be included in this Proxy Statement. COMPENSATION COMMITTEEGilbert S. Omenn, M.D., Ph.D., ChairmanGilbert F. Amelio, Ph.D.Joel LewisSUMMARY COMPENSATION TABLEThe following table summarizes the compensation paid to our NEOs for the fiscal years ended December 31, 2018, 2017 and 2016. Name and Principal Position Year Salary($) Bonus($) (1) OptionAwards($) (2) All OtherCompensation($) Total($) Peter G. Traber, M.D. 2018 (3) 270,211 — 993,499 44,899 (4) 1,308,609 Former Chief Executive Officer & President 2017 512,500 299,492 — 65,397 (5) 877,389 2016 512,500 160,877 288,136 60,567 (6) 1,022,080 Harold H. Shlevin, Ph.D., 2018 395,833 375,000 891,113 68,869 (7) 1,730,815 Chief Executive Officer & President 2017 260,000 91,163 — 53,992 (8) 405,155 2016 260,000 50,920 140,587 48,118 (9) 499,625 Jack W. Callicutt, 2018 275,278 213,750 715,319 62,150 (10) 1,266,497 Chief Financial Officer 2017 260,000 91,163 — 54,848 (11) 406,011 2016 260,000 54,172 140,587 49,097 (12) 503,856 (1)Bonuses for 2018 were paid in January 2019. Bonuses for 2017 were paid in January 2018. Bonuses for 2016 were paid in February 2017. 52Table of Contents(2)Represents the aggregate grant date fair value of option awards made during 2018, 2017 and 2016 computed in accordance with the StockCompensation 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 ourAnnual Reports on Form 10-K (or Form 10-K/A, as applicable) for the fiscal years ended December 31, 2018, 2017 and 2016.(3)Dr. Traber resigned from the Company effective July 6, 2018. He received no compensation after that date.(4)Includes $33,899 for health and other insurance and $11,000 for 401(k) plan contributions.(5)Includes $54,597 for health and other insurance and $10,800 for 401(k) plan contributions.(6)Includes $49,967 for health and other insurance and $10,600 for 401(k) plan contributions.(7)Includes $60,634 for health and other insurance and $8,235 for 401(k) plan contributions.(8)Includes $45,927 for health and other insurance and $8,065 for 401(k) plan contributions.(9)Includes $39,994 for health and other insurance and $8,124 for 401(k) plan contributions.(10)Includes $51,910 for health and other insurance and $10,240 for 401(k) plan contributions.(11)Includes $46,765 for health and other insurance and $8,083 for 401(k) plan contributions.(12)Includes $40,972 for health and other insurance and $8,125 for 401(k) plan contributions.GRANTS OF PLAN-BASED AWARDS IN 2018 Name GrantDate Estimated Possible PayoutsUnder Non-EquityIncentive Plan Awards Estimated Future PayoutsUnder Equity IncentivePlan Awards All OtherStockAwards:Numberof Sharesof Stockor Units(#) All OtherOptionAwards:Number ofSecuritiesUnderlyingOptions(#) Exercise orBase Priceof OptionAwards($/Sh) GrantDate FairValue ofStock andOptionAwards Threshold($) Target($) Maximum($) Threshold(#) Target(#) Maximum(#) Peter G. Traber,M.D. 01/15/2018 (1) 125,000 $5.87 $570,738 (2) 5/22/2018 (1) 125,000 $4.16 $422,761 (2) — Harold H. Shlevin,Ph.D. 01/15/2018 (1) 90,000 $5.87 $410,931 (2) 5/22/2018 (1) 90,000 $4.16 $304,388 (2) 6/8/2018 (1) 35,000 $6.17 $175,793 (2) — Jack W. Callicutt 01/15/2018 (1) 90,000 $5.87 $410,931 (2) 5/22/2018 (1) 90,000 $4.16 $304,388 (2) — (1)Grants of stock options under our 2009 Incentive Compensation Plan in accordance with the Program.(2)Represents the grant date fair value of option awards based upon the Black Scholes valuation model made in 2018. For a description of the assumptions used todetermine these amounts, see footnote 7 to the Notes to the Consolidated Financial Statements included in this Annual Report on Form 10-K for the fiscal year endedDecember 31, 2018. 53Table of ContentsOUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END 201The following table sets forth information regarding all outstanding equity awards held by the NEOs at December 31, 2018. The exercise price ofthe options is set at the closing price of our stock at the date prior to or as of the date of grant. Outstanding options have been approved by ourCompensation Committee and our Board. Option Awards Stock Awards Name Number ofSecuritiesUnderlyingUnexercisedOptions(#)Exercisable Number ofSecuritiesUnderlyingUnexercisedOptions(#)Unexercisable EquityIncentivePlanAwards:Number ofSecuritiesUnderlyingUnexercisedUnearnedOptions(#) OptionExercisePrice($) OptionExpirationDate Numberof Sharesor Unitsof StockThatHave NotVested(#) MarketValue ofSharesor Unitsof StockThatHave NotVested($) EquityIncentivePlanAwards:Number ofUnearnedShares,Units orOtherRightsThatHaveNotVested(#) EquityIncentivePlanAwards:MarketorPayoutValue ofUnearnedShares,Units orOtherRightsThatHave NotVested($) Peter G. Traber, M.D. (5) — — — — — — — Harold H. Shlevin, Ph.D. 38,000 (1) — 13.38 01/21/2024 — — — — 7,915 (2) 791 (2) 1.37 01/20/2026 90,000 (3) — 5.87 01/15/2028 90,000 (4) — 4.16 05/22/2028 35,000 (4) — 6.17 06/08/2028 Jack W. Callicutt 26,000 (1) — 13.38 01/21/2024 — — — — 7,915 (2) 791 (2) 1.37 01/20/2026 90,000 (3) — 5.87 01/15/2028 90,000 (4) — 4.16 05/22/2028 (1)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.(2)25% of the options vested on January 29, 2015, the grant date, with the remainder vesting ratably on a monthly basis over a three-year period.(3)25% of the options vested on January 15, 2018 (grant date), 25% vested on June 30, 2018, and 50% vested on December 31, 2018.(4)25% of the options vested on June 30, 2018, 25% vested on September 30, 2018, and 50% vested on December 31, 2018.(5)Dr. Traber resigned effective July 6, 2018 and had no outstanding stock option or stock awards as of December 31, 2018. 54Table of ContentsOption Exercises and Stock Vested Table in 2018The following table sets forth the number of shares and value realized by the named executive officers during 2018 on the exercise of stockoptions and the vesting of restricted stock (or restricted stock units). Option Awards Stock Awards Name Number ofSharesAcquired onExercise(#) ValueRealized onExercise($) (1) Number ofSharesAcquired onVesting(#) ValueRealizedon Vesting($) (2) Peter G. Traber, M.D. (3) 393,369 2,512,906 — — Harold H. Shlevin, Ph.D 367,294 1,394,518 — — Jack W. Callicutt 405,294 1,820,755 — — (1)The value realized on the exercise of options was calculated by multiplying the number of options exercised on the applicable exercise date bythe difference between the closing market price of the shares on such date and the exercise price of the options.(2)The value realized on the vesting of restricted stock (or restricted stock units) was calculated by multiplying the number of shares vesting on theapplicable vesting date by the closing market price of the shares on such date.(3)Represents transactions occurring prior to Dr. Traber’s resignation from the Company effective July 6, 2018.Pension BenefitsNone of our NEOs are covered by a pension plan or similar benefit plan that provides for payment or other benefits at, following, or in connectionwith retirement.Nonqualified Deferred CompensationNone of our NEOs are covered by a deferred contribution or other plan that provides for the deferral of compensation on a basis that is not tax-qualified.Potential Payments Upon Termination or Change in ControlThis section describes the limited benefits that would be provided to our NEOs under our executive compensation plans upon a change ofcontrol of the Company or following termination of employment (provided, in some cases further described below, the termination must be a“separation from service” as defined in Code Section 409A). We also provide a table below showing the potential benefits payable to each of our NEOsupon a change of control of the Company or following termination of employment as of December 31, 2018.2009 Incentive Compensation PlanUnder our 2009 Incentive Compensation Plan, the options we have granted will become immediately vested and exercisable upon a change ofcontrol. Upon termination of employment for cause, all outstanding options immediately terminate. Options remain exercisable for one year followingtermination 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 thecombined voting power of our securities, except for any acquisition directly from us, any acquisition by us or any person that owns acontrolling interest in the Company, or any acquisition by any of our employee benefit plans; 55Table of Contents (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 ofthat 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 substantiallyall 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 securitiesimmediately before the transaction beneficially own more than 50% of, respectively, the common stock and the combined voting power ofthe 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 resultingentity 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 theBoard 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 doctorsatisfactory 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 orbreach by the executive of his or her employment, consulting or other similar agreement with the Company, if any, (iii) any violation or breach by theexecutive of any non-competition, non-solicitation, non-disclosure and/or other similar agreement with the Company, (iv) any act by the executive ofdishonesty or bad faith with respect to the Company, (v) use of alcohol, drugs or other similar substances in a manner that adversely affects theexecutive’s work performance, or (vi) the commission by the executive of any act, misdemeanor, or crime reflecting unfavorably upon the executive orthe Company.Employment Agreements with our Named Executive OfficersPeter G. Traber, MDOn May 6, 2016, the Company entered into an amended and restated employment agreement with Dr. Traber. Under his restated employmentagreement, if his employment is terminated (i) by the Company without Cause (as defined in the Employment Agreement), or (ii) by Dr. Traber forGood Reason (as defined in the Employment Agreement), subject to his execution of a release of claims against the Company, Dr. Traber will receive(A) severance benefits equal to one year of his then current base salary (paid over time, but subject to Dr. Traber’s ability to request a lump-sumpayment if such election does not otherwise violate Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”)), (B) any bonus forthe year prior to termination to the extent not otherwise paid prior to such termination, (C) a prorated bonus for the year of termination, (D) COBRAcoverage at a reduced premium (or a cash payment in lieu of such reduced-cost coverage) for the two-year period following termination, (E) immediatevesting of all unvested options held by Dr. Traber at the time of his termination, and (F) an extension of the post-termination exercise period of all ofhis options until the date such options would have otherwise expired if he remained employed by the Company.The restated employment agreement provides that during its term Dr. Traber will not engage in any business competitive with the Company,whether as employee, consultant, agent, principal, officer, director, shareholder or otherwise. Following employment, the restated employmentagreement provides that Dr. Traber will not (i) accept business from the Company’s customers or accounts relating to “competing products” or servicesof the Company for a period of 12 months, or (ii) render services to any “competing organization” (as such quoted terms are defined in the EmploymentAgreement) for a period of six months. The restated employment 56Table of Contentsagreement also contains provisions binding Dr. Traber with respect to (A) protection of the Company’s confidential information; (B) requirements todisclose and assign inventions or other intellectual property to the Company; (C) non-solicitation of the Company’s executives, or persons with whomthe Company has a business relationship such as investors, suppliers and customers; and (D) advance review and approval of all writings he proposes topublish.Dr. Traber voluntarily resigned from the Company effective July 6, 2018 and no termination or other benefits of any kind were paid to him postemployment.Harold H. Shlevin , PhDDr. Shlevin’s employment agreement provides that he shall receive severance equal to nine months of his then base salary paid in a lump sum,medical coverage for the remaining portion of the term of his agreement and a lump sum payment of a portion of the performance bonus for the then-current year based on the number of days elapsed in the year if his employment is terminated (i) by the Company “without cause,” (ii) by Dr. Shlevinfor “good reason,” or (iii) following a “change of control” (as defined in his agreement). If his employment is terminated “for cause”, subject to “curerights” in certain instances, he is not entitled to severance. If the agreement is terminated within 12 months after a change of control by the Company“without cause,” or by Dr. Shlevin for “good reason,” Dr. Shlevin is entitled to receive severance equal to 24 months’ salary paid in a lump sum,medical coverage for the remaining portion of the term of his agreement and immediate vesting of all unvested options.The agreement provides that during its term Dr. Shlevin shall not engage in any business competitive with the Company. Following terminationof employment, Dr. Shlevin shall not, for 18 months (i) solicit customers or employees of the Company or (ii) render services to any “competingbusiness” (as defined in the agreement). The agreement also contains provisions binding on Dr. Shlevin with respect to protection of our confidentialinformation.Jack W. CallicuttMr. Callicutt’s employment agreement, as amended, provides that, if his employment is terminated by the Company “without cause,” or byMr. Callicutt for “good reason,” (as such terms are defined in his agreement) he shall receive severance equal to: 3 months’ base salary if suchtermination occurred within 12 months of July 1, 2013 (the “Commencement Date”); 6 months’ base salary if such termination occurred between 12and 18 months after the Commencement Date; 9 months’ base salary if such termination occurs after 18 months after the Commencement Date, plus, ineach case, a portion of the performance bonus for the then-current year based on the number of days elapsed in the year. If his employment isterminated “for cause”, subject to “cure rights” in certain instances, he is not entitled to severance. If the agreement is terminated within 12 monthsafter a change of control by the Company “without cause,” or by Mr. Callicutt for “good reason,” Mr. Callicutt shall receive severance equal to 12months’ base salary, a portion of the performance bonus for the then-current year based on the number of days elapsed in the year and immediatevesting of all unvested options.The agreement provides that during its term Mr. Callicutt shall not engage in any business competitive with the Company. Followingtermination of employment, Mr. Callicutt shall not, for 18 months (i) solicit customers or employees of the Company or (ii) render services to any“competing business” (as defined in the agreement). The agreement also contains provisions binding on Mr. Callicutt with respect to protection of ourconfidential information. 57Table of ContentsThe following table sets forth the potential benefits payable to our NEOs pursuant to the arrangements described above, assuming termination ofemployment or a change of control had occurred on December 31, 2018. Benefit/Plan/Program Peter G.Traber, M.D. (6) Harold H.Shlevin, Ph.D. Jack W.Callicutt Options (1) $— $1,629 $1,629 Employment Agreement Change of Control Severance (2) $— $500,000 $285,000 Employment Agreement Termination Severance (3) $— $375,000 $213,750 Total value upon a change of control (4) $— $501,629 $286,629 Total value upon termination of employment due to death ordisability (5) $— $0 $0 (1)Amounts represent the potential value of unvested stock options held by the NEOs under the 2009 Incentive Compensation Plan that would havevested upon a change of control or upon termination of employment by reason of death or disability on December 31, 2018, based on a price of$3.43 per share, the closing price of our common stock on December 31, 2018.(2)Represents the amount of the severance and bonus payments that would have been payable to each participant upon a change of control onDecember 31, 2018.(3)Represents the amount of the severance and bonus payments that would have been payable to each participant upon a termination ofemployment by the Company without “cause” or by the executive for “good reason”.(4)Reflects the sum of (1) the value of accelerated vesting of options; (2) the value of shares of common stock received upon partial vesting ofunvested performance shares; and (3) severance and bonus payments that would have been payable to each participant upon a change of control,in each case as of December 31, 2018.(5)Reflects the amounts payable under the executive’s employment agreement as a result of termination of employment due to death or disability asof December 31, 2018.(6)Amounts for Dr. Traber reflect actual amounts payable to Dr. Traber upon termination of his employment on July 6, 2018.DIRECTOR COMPENSATIONThe following table details the total compensation earned by our non-employee directors during the year ended December 31, 2018. Name Fees Earnedor Paid inCash ($) RestrictedStockAwards($) (5) OptionAwards($) (3) Non-EquityIncentive PlanCompensation($) All OtherCompensation($) (4) Total($) Gilbert F. Amelio, Ph.D. 47,000 — — — — 47,000 James C. Czirr 38,500 — — — — 38,500 Kevin D. Freeman 46,000 — — — — 46,000 Kary Eldred (1) 42,645 — 158,535 — — 201,180 Joel Lewis — 55,000 — — — 55,000Gilbert S. Omenn, M.D., Ph.D. 45,000 — — — — 45,000 Marc Rubin, M.D. 50,864 — — — — 50,864 Stephen Shulman 41,444 — — — — 41,444 Richard Uihlein — 35,000 — — — 35,000Theodore Zucconi, Ph.D. (2) 9,625 — — — — 9,625 (1)Mr. Eldred was elected to the board for the first time on May 22, 2018. 58Table of Contents(2)Dr. Zucconi was not nominated for reelection to the board and his service ended on May 22, 2018.(3)Represents the grant date fair value of option awards based upon the Black Scholes valuation model made in 2018. Options were granted onMay 22, 2018 and will vest in full on May 22, 2019. For a description of the assumptions used to determine these amounts, see Note 7 to theNotes to the Consolidated Financial Statements herein our Annual Report on Form 10-K for the fiscal year ended December 31, 2018.(4)Excludes travel expense reimbursements.(5)Mr. Lewis and Mr. Uihlein elected to receive restricted stock in lieu of cash retainer for their service. The restricted shares vested in full onDecember 14, 2018. Name Number ofShares Subjectto OptionAwards Held as ofDecember 31,2018 Gilbert F. Amelio, Ph.D. 103,750 James C. Czirr 700,125 Kary Eldred 46,875 Kevin D. Freeman 94,839 Joel Lewis 62,250 Gilbert S. Omenn, M.D., Ph.D. 103,750 Marc Rubin, M.D. 93,750 Stephen Shulman 46,875 Richard Uihlein 46,875 Theodore Zucconi, Ph.D. 36,893 TOTAL 1,335,982 For a more detailed description of the assumptions used for purposes of determining grant date fair value, see Note 7 to the ConsolidatedFinancial Statements and “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Critical Accounting Policiesand Estimates — Stock-Based Compensation” included herein the Form 10-K for the 2018 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 retainerof $35,000. Each Nominating and Corporate Governance Committee member will receive an additional cash retainer of $3,500; each CompensationCommittee 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 willreceive an annual cash retainer of $3,500; the Compensation Committee Chairman will receive an annual cash retainer of $5,000; and the AuditCommittee Chairman will receive an annual cash retainer of $7,500. Additionally, in December 2016, the Board approved cash retainers of $3,500 tobe paid to each member of the Board’s investor relation/public relations committee.On January 16, 2019, stock option grants were made to non-employee directors which vest 100% on January 16, 2020. The Chairman wasgranted 40,000 stock options, the chairs of the Nominating and Corporate Governance Committee, the Audit Committee and the CompensationCommittee were each granted 35,000 stock options and remaining non-employee directors were each granted 25,000 stock options. 59Table of ContentsItem 12.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder MattersThe following table sets forth, as of February 20, 2019, certain information concerning the beneficial ownership of our common stock and SeriesA 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 ourdirectors, new director nominee and named executive officers, and (iii) all of our executive officers, directors and new director nominee as a group. Thetable also sets forth, in its final column, the combined voting power of the voting securities on all matters presented to the stockholders for theirapproval 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 andExchange 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 sharesthat the individual or entity has the right to acquire within 60 days after February 20, 2019 through the exercise of any stock option, warrant or otherright, or the conversion of any security. Unless otherwise indicated, each person or entity has sole voting and investment power (or shares such powerwith 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 beneficiallyowned does not constitute an admission of beneficial ownership of those shares. Name and Address (1) Shares ofCommonStockBeneficiallyOwned (2) Percent ofCommonStock (3) Shares ofSeries APreferredStockBeneficiallyOwned Percent ofSeries APreferredStock (4) 5% Stockholders James C. Czirr 13,949,651 (5) 26.8% 100,000 7.3% 10X Fund, L.P. (8) 12,343,229 (6) 24.0% — — David Smith (9) — — 175,000 12.7% Fivex LLC (9) — — 100,000 (7) 7.3% Richard E. Uihlein (11) 5,203,202 (12) 10.8% — — Directors, New DirectorNominee and Other NamedExecutive Officers James C. Czirr 13,949,651 (5) 26.8% 100,000 7.3% Gilbert F. Amelio, Ph.D. 154,614 * — — Kevin Freeman 301,110 (10) * — — Joel Lewis 127,383 * — — Gilbert S. Omenn, M.D., Ph.D. 179,144 * 50,000 3.6% Marc Rubin, M.D. 114,331 * — — Stephen Shulman 58,875 * — — Richard E. Uihlein 5,203,202 (12) 10.8% — — Kary Eldred 820,029 (13) 1.8% — — Harold H. Shlevin, Ph.D. 261,706 * — — Jack W. Callicutt 215,966 * — — All executive officers and directors as a group(11 persons) 21,386,011 (14) 38.2% 150,000 10.9% *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. 60Table of Contents(2)Includes the following number of shares of our common stock issuable upon exercise of outstanding stock options granted to our namedexecutive officers and directors that are exercisable within 60 days after February 20, 2019. Directors, Nominees and Named Executive Officers Options ExercisableWithin 60 Days James C. Czirr 700,125 Gilbert F. Amelio, Ph.D. 0 Marc Rubin, M.D. 93,750 Gilbert S. Omenn, M.D., Ph.D 103,750 Kevin Freeman 94,839 Kary Eldred 369,109 Joel Lewis. 62,250 Richard E. Uihlein. 46,875 Harold Shlevin, Ph.D. 261,706 Jack Callicutt 215,966 All executive officers and directors as a group 1,948,370 (3)For each named person and group included in this table, percentage ownership of our common stock is calculated by dividing the number ofshares of our common stock beneficially owned by such person or group by the sum of (i) 45,550,226 shares of our common stock outstanding asof February 20, 2019 and (ii) the number of shares of our common stock that such person has the right to acquire within 60 days afterFebruary 20, 2019.(4)Based on 1,327,500 shares of Series A preferred stock outstanding as of February 20, 2019.(5)Includes (i) 12,343,229 shares of common stock held by 10X Fund, L.P., as to which Mr. Czirr, in his capacity as a managing member of 10XCapital 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: 5,823,680 common shares issuable uponexercise of warrants; shares of common stock acquired upon exercise of warrants; and common shares issued as stock dividends paid on the SeriesB preferred stock which is net of shares sold or distributed to 10X Fund, L.P.; and (ii) 1,606,422 shares of common stock owned directly byMr. Czirr, consisting of 889,630 shares of common stock owned by Mr. Czirr, 700,125 shares issuable upon the exercise of vested stock optionsowned 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 5,823,680 common shares issuable upon exercise of warrants; shares of common stock acquired upon exercise of warrants; and commonshares 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 towhich Mr. Czirr, in his capacity as a managing member of 10X Capital Management Fund, LLC, a Florida limited liability company and generalpartner of 10X Fund, has voting and investment power, and disclaims beneficial ownership, of these securities.(7)Mr. Smith is the manager of Fivex LLC, a Connecticut limited liability company, and may be deemed to have voting and investment controlover, 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, GA30324.(9)Contact: c/o David Smith 34 Shorehaven Road E., Norwalk, CT 06855.(10)Includes 166,728 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 andinvestment control over, but disclaims beneficial ownership of, these shares.(11)Contact: c/o Uline Corporation, 12575 Uline Drive, Pleasant Prairie, WI 53158 61Table of Contents(12)Includes (i) 2,606,789 shares of common stock, (ii) 2,466,204 common shares issuable upon the exercise of common stock purchase warrants,(iii) 46,875 common shares issuable upon the exercise of common stock options, and (iv) 83,334 common shares issuable upon conversion ofSeries C preferred non-voting stock.(13)Includes 41,382 shares of common stock, 16,111 common stock purchase warrants, and 46,875 common stock options personally owned byMr. Eldred and 409,538 shares of common stock and 306,123 common stock purchase warrants owned by trusts over which Mr. Eldred sharesmanagement control; however, Mr. Eldred disclaims beneficial ownership of the shares and warrants owned by such trusts.(14)Includes 5,823,680 common shares issuable upon exercise of warrants and common shares acquired upon exercise of warrants or issued as stockdividends on the Series B preferred stock net of shares sold or distributed to 10X Fund limited partners, as to which Mr. Czirr has voting andinvestment control but are counted one time for purposes of this total. For additional information about the beneficial ownership of our capitalstock by Mr. Czirr, see note 5.EQUITY COMPENSATION PLAN INFORMATIONThe following table provides information as of December 31, 2018 about the securities issued, or authorized for future issuance, under our equitycompensation plans, consisting of our 2001 Stock Incentive Plan, our 2003 Non-Employee Director Stock Incentive Plan, and our 2009 IncentiveCompensation Plan. Plan Category Number of Securitiesto be issued uponexercise ofoutstanding options Weighted-averageexercise price ofoutstandingoptions Number of securitiesremaining available forfuture issuance underequity compensationplans (excludingsecurities reflected incolumn (a)) Equity compensation plans approved bysecurity holders 2,213,979 $4.14 889,920 Equity compensation plans not approvedby security holders (1) 500,000 $7.02 — Total 2,713,979 $4.67 889,920 (1)Represents grants by our Board for stock options granted to employees and consultants that are outside of the stockholder approvedcompensation plans. The shares underlying these grants are not registered upon exercise and have six month holding restrictions under Rule 144of the SEC. Item 13.Certain Relationships, Related Transactions and Director IndependenceCertain Relationships and Related TransactionsExcept as set forth below, since the beginning of fiscal year 2018, we did not participate in any transactions in which any of the CompanyNominees, Series B Directors or Series B Nominees, executive officers, any beneficial owner of more than 5% of our common stock, nor any of theirimmediate 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 appropriatereview of, and be responsible for the oversight of, all related party transactions on an ongoing basis. Except as set forth below, there were no relatedparty transactions during the fiscal year ended December 31, 2018.On December 19, 2017, the Company entered into a $10 million Line of Credit arrangement with Richard E. Uihlein, a director and shareholderwho has an approximate 7% ownership interest in the Company on a fully-diluted basis at December 31, 2017. Originally, borrowings may be made bythe Company through December 31, 2018. Borrowings bear interest at the Applicable Federal Rate for short term loans published by the InternalRevenue Service (2.7% in January 2019). All borrowings and interest are due on December 31, 2019 but may be 62Table of Contentsprepaid without penalty. In connection with the Line of Credit agreement, the Company issued to Mr. Uihlein warrants to purchase 1 million shares ofthe 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 withborrowings under the agreement. As of the date of this Annual Report, there have been no borrowings under the Line of Credit.On December 20, 2018, the Line of Credit arrangement was extended for one year for both borrowings and maturity. Further, on January 15,2019, the Line of Credit arrangement was extended for an additional two years for both borrowings and maturity. After the second amendment to theLine of Credit arrangement, borrowings may be made through December 31, 2021 with repayment due on December 31, 2022. There was no additionalconsideration or benefits provided to Mr. Uihlein for any of the extensions of the Line of Credit.Compensation Committee Interlocks and Insider ParticipationNone of our executive officers or directors serves as a member of the board of directors or compensation committee of any entity that has one ormore of its executive officers serving as a member of our Board of Directors or Compensation Committee.Board Determination of Director IndependenceOur board of directors has reviewed the materiality of any relationship that each of our directors has with the Company, either directly orindirectly. Based upon this review, our board has determined that all of our directors other than Mr. Czirr are “independent directors” as defined by TheNASDAQ Stock Market. Our board of directors also determined that Drs. Amelio, Rubin and Mr. Freeman, who comprise our nominating andgovernance committee, all satisfy the independence standards for such committees established by the SEC and the NASDAQ Marketplace Rules, asapplicable. With respect to our audit committee, our board of directors has determined that Messrs. Lewis, Freeman and Eldred satisfy theindependence standards for such committee established by Rule 10A-3 under the Exchange Act, the SEC and the NASDAQ Marketplace Rules, asapplicable. Furthermore, the Nominating and Corporate Governance Committee, with concurrence by the Board, has determined that Mr. Lewis is an“audit committee financial expert” within the meaning of SEC rules. With respect to our compensation committee, our board of directors hasdetermined that Drs. Omenn, Amelio and Mr. Lewis satisfy the independence standards for such committee established by Rule 10C-1 under theExchange 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 haswith our company and all other facts and circumstances the board of directors deemed relevant in determining their independence, including thebeneficial ownership of our capital stock by each non-employee director. In considering the independence of our directors, our board of directorsconsidered the association of each such non-employee director has with us and all other facts and circumstances our board of directors deemed relevantin determining independence. 63Table of ContentsItem 14.Principal Accountant Fees and ServicesThe Board of Directors has appointed Cherry Bekaert LLP as our independent auditors for the fiscal year ending December 31, 2018.FEES PAID TO CHERRY BEKAERT LLP Fiscal Year2018 Fiscal Year2017 Audit Fees (1) $155,000 $123,000 Audit-Related Fees (2) 23,300 3,550 Tax Fees 16,400 15,080 All Other Fees — — Total Fees $191,700 $141,630 (1)Audit Fees. These are fees for professional services for the audit of our annual financial statements dated December 31, 2018 and 2017 and theand the effectiveness of internal control over financial reporting for the Company as of December 31, 2018 included in our Annual Reports onForm 10-K for fiscal years then ended, and review of financial statements included in our Quarterly Reports on Form 10-Q for each fiscal quarterduring the 2018 and 2017 fiscal years.(2)Audit-Related Fees. These are fees for assurance and related services that are reasonably related to the performance of the audit or review of ourfinancial statements, including financial disclosures made in our equity finance documentation and registration statements filed with the SECthat incorporate financial statements and the auditors’ report thereon and reviewed with our Audit Committee on financial accounting/reportingstandards.The Audit Committee has considered whether the provision of non-core audit services to Galectin Therapeutics by Cherry Bekaert LLP is compatiblewith maintaining independence.Pre-Approval Policy and ProceduresThe Audit Committee of our Board of Directors has adopted policies and procedures which set forth the manner in which the Committee will reviewand approve all services to be provided by the independent auditor before the auditor is retained to provide such services. The policy requires AuditCommittee pre-approval of the terms and fees of the annual audit services engagement, as well as any changes in terms and fees resulting from changesin audit scope or other items. The Audit Committee also pre-approves, on an annual basis, other audit services, and audit-related and tax services setforth in the policy, subject to estimated fee levels, on a project basis and aggregate annual basis, which have been pre-approved by the Committee.All other services performed by the auditor that are not prohibited non-audit services under SEC or other regulatory authority rules must be separatelypre-approved by the Audit Committee. Amounts in excess of pre-approved limits for audit services, audit-related services and tax services requireseparate 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 servicesreflected in the above table were approved by the Audit Committee. 64Table of ContentsPART IV Item 15.Exhibits and Financial Statement Schedules(a) 1. Consolidated Financial Statement SchedulesThe Consolidated Financial Statements are filed as part of this report.2. Consolidated Financial Statement SchedulesAll schedules are omitted because of the absence of conditions under which they are required or because the required information isincluded in the Consolidated Financial Statements or notes thereto.3. Exhibits ExhibitNumber Description of Document 3.1* Amended and Restated Articles of Incorporation of Galectin Therapeutics Inc., as amended 3.2 Amended and Restated Bylaws of Galectin Therapeutics Inc., as amended (Incorporated by reference to the Company’s CurrentReport 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’sCurrent 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 ofGalectin Therapeutics, Inc., as filed with the Secretary of State of the State of Nevada on May 15, 2017. (Incorporated by reference tothe 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 PreferredStock, Series B-2 Convertible Preferred Stock and Series B-3 Convertible Preferred Stock of Galectin Therapeutics, Inc., as filed withthe Secretary of State of the State of Nevada on September 22, 2016. (Incorporated by reference to the Company’s Current Report onForm 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-1Convertible Preferred Stock, Series B-2 Convertible Preferred Stock and Series B-3 Convertible Preferred Stock of GalectinTherapeutics, Inc., as filed with the Secretary of State of the State of Nevada on May 15, 2017. (Incorporated by reference to theCompany’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 filedwith the Secretary of State of the State of Nevada on February 13, 2017. (Incorporated by reference to the Company’s Current Reporton 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 GalectinTherapeutics, Inc., as filed with the Secretary of State of the State of Nevada on May 15, 2017. (Incorporated by reference to theCompany’s Current Report on Form 8-K filed with the Commission on May 19, 2017.) 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 theCompany’s Current Report on Form 8-K as filed with the Commission on January 6, 2011.) 65Table of ContentsExhibitNumber Description of Document 3.10 Certificate of Change as filed with the Nevada Secretary of State on March 1, 2012. (Incorporated by reference to the Company’sCurrent 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 filedwith 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 filedwith 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 filedwith 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 Form8-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 Form8-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 theCommission 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 theCommission 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 filedwith 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 filedwith 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 theCommission 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 onForm 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 theCompany (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 theCompany (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 CurrentReport on Form 8-K as filed with the Commission on January 15, 2019.) 4.16 Form of Amended and Restated 10X Fund Class B Common Stock Purchase Warrant (Incorporated by reference to the Company’sCurrent Report on Form 8-K as filed with the Commission on January 15, 2019.) 10.1† Pro-Pharmaceuticals, Inc. 2001 Stock Incentive Plan. (Incorporated by reference to the Company’s Quarterly Report on Form 10-QSBfor the quarter ended September 30, 2001 filed with the Commission on November 14, 2001.) 66Table of ContentsExhibitNumber Description of Document 10.2† Pro-Pharmaceuticals, Inc. 2003 Non-employee Director Stock Incentive Plan. (Incorporated by reference to the Company’sRegistration Statement on Form S-8, as filed with the Commission on October 22, 2003.) 10.3† Form of Incentive Stock Option Agreement (under the 2001 Stock Incentive Plan). (Incorporated by reference to the Company’sQuarterly Report on Form 10-Q for the period ended September 30, 2004 as filed with the Commission on November 19, 2004.) 10.4† Form of Non-Qualified Stock Option Agreement (under the 2003 Non-Employee Director Stock Incentive Plan). (Incorporated byreference to the Company’s Quarterly Report on Form 10-Q for the period ended September 30, 2004 as filed with the Commission onNovember 19, 2004.) 10.5 Form of Common Stock Purchase Warrant. (Incorporated by reference to the Company’s Current Report on Form 8-K as filed with theCommission on February 15, 2008.) 10.6 Registration Rights Agreement dated February 12, 2009 between Pro Pharmaceuticals, Inc. and 10X Fund, L.P. (Incorporated byreference to the Company’s Current Report on Form 8-K filed with the Commission on February 18, 2009.) 10.7†* Galectin Therapeutics 2009 Incentive Compensation Plan (as amended). 10.8† Form of Restricted Stock Grant Agreement (under the 2009 Incentive Compensation Plan). (Incorporated by reference to theCompany’s Annual Report on Form 10-K as filed with the Commission on March 30, 2009.) 10.9† Form of Non-Qualified Stock Option Grant Agreement (under the 2009 Incentive Compensation Plan). (Incorporated by reference tothe Company’s Annual Report on Form 10-K as filed with the Commission on March 30, 2009.) 10.10† Form of Incentive Stock Option Grant Agreement (under the 2009 Incentive Compensation Plan). (Incorporated by reference to theCompany’s Annual Report on Form 10-K as filed with the Commission on March 30, 2009.) 10.12† Common Stock Purchase Warrant dated August 3, 2010 issued to Peter Traber. (Incorporated by reference to the Company’s QuarterlyReport on Form 10-Q as filed with the Commission on August 13, 2010.) 10.14 Form of Securities Purchase Agreement for Series C Super Dividend Convertible Preferred Stock (Incorporated by reference to theCompany’s Current Report on Form 8-K as filed with the Commission on January 6, 2011.) 10.15 Agreement dated January 21, 2011, between Pro-Pharmaceuticals, Inc. and 10X Fund L.P. (Incorporated by reference to theCompany’s Current Report on Form 8-K as filed with the Commission on January 27, 2011.) 10.16† 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.) 10.17† Employment Agreement dated March 31, 2011 between Eli Zomer and Pro-Pharmaceuticals, Inc. (Incorporated by reference to theCompany’s Current Report on Form 8-K as filed with the Commission on April 6, 2011.) 10.18 Agreement dated April 22, 2011, between Pro-Pharmaceuticals, Inc. and Sigma-Aldrich, Inc. (Incorporated by reference to theCompany’s Current Report on Form 8-K as filed with the Commission on April 28, 2011.) 10.19† Employment Agreement dated May 6, 2016 between Peter Traber, and Galectin Therapeutics Inc. (Incorporated by reference to theCompany’s Quarterly Report on Form 10-Q as filed with the Commission on May 10, 2016.) 67Table of ContentsExhibitNumber Description of Document 10.21† Non-Qualified Stock Option Agreement for Peter G. Traber, M.D. (Incorporated by reference to the Company’s Registration Statementon Form S-8, as filed with the Commission on August 15, 2011.) 10.22† Non-Qualified Stock Option Agreement for James C. Czirr (Incorporated by reference to the Company’s Registration Statement onForm S-8, as filed with the Commission on August 15, 2011.) 10.23† 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.) 10.24† 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) 10.25† Amended and Restated Master Services Agreement dated February 1, 2013 between Galectin Therapeutics Inc. and CTI Clinical TrialServices, Inc. and CTI Clinical Consulting Services Inc. (Incorporated by reference to the Company’s Quarterly Report on Form 10-Qas filed with the Commission on May 10, 2013.) 10.26 Amended Form of Class A-2 Common Stock Purchase Warrant (Incorporated by reference to the Company’s Quarterly Report on Form10-Q as filed with the Commission on August 14, 2013.) 10.27 Amended Form of Class B Common Stock Purchase Warrant (Incorporated by reference to the Company’s Quarterly Report on Form10-Q as filed with the Commission on August 14, 2013.) 10.28 Employment Agreement dated June 20, 2013 between Jack W. Callicutt and Galectin Therapeutics Inc. (Incorporated by reference tothe Company’s Quarterly Report on Form 10-Q as filed with the Commission on August 14, 2013.) 10.29† 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.) 10.30† Stock Option Agreement with Thomas A. McGauley dated June 19, 2013 (Incorporated by reference to the Company’s QuarterlyReport on Form 10-Q as filed with the Commission on August 14, 2013.) 10.31† Project Addendum (with Master Services Agreement), dated March 6, 2015, by and between Galectin Therapeutics Inc. and PPDDevelopment, L.P. (Incorporated by reference to the Company’s Current Report on Form 8-K as filed with the Commission onMarch 12, 2015.)*** 10.32 Securities Purchase Agreement, dated November 19, 2015, by and among Galectin Therapeutics Inc. and the Purchasers identifiedtherein (Incorporated by reference to the Company’s Current Report on Form 8-K as filed with the Commission on November 20,2015.) 10.33 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.) 10.34 Registration Rights Agreement, dated November 19, 2015, by and between Galectin Therapeutics Inc. and the Purchasers signatorythereto (Incorporated by reference to the Company’s Current Report on Form 8-K as filed with the Commission on November 20,2015.) 10.35 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.)*** 10.36 Jack W. Callicutt Retention Bonus Letter Agreement (Incorporated by reference to the Company’s Current Report on Form 8-K as filedwith the Commission on June 20, 2016.) 68Table of ContentsExhibitNumber Description of Document 10.37† Harold H. Shlevin, Ph.D. Retention Bonus Letter Agreement (Incorporated by reference to the Company’s Current Report on Form8-K as filed with the Commission on June 20, 2016.) 10.38† 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.) 10.39 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.) 10.41 Form of Subscription Agreement entered into between Galectin Therapeutics Inc. and certain purchasers (Incorporated by referenceto the Company’s Current Report on Form 8-K as filed with the Commission on December 29, 2016.) 10.42 Amendment to Securities Purchase Agreement, dated December 23, 2016, by and between Galectin Therapeutics Inc. and 10XFund, L.P. (Incorporated by reference to the Company’s Current Report on Form 8-K as filed with the Commission on December 29,2016.) 10.43 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.) 10.44 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.) 10.45 First Amendment to Line of Credit Agreement, dated as of December 20, 2018, by and between Richard E. Uihlein and theCompany (Incorporated by reference to the Company’s Current Report on Form 8-K as filed with the Commission on January 3,2019.) 10.46 Second Amendment to Line of Credit Letter Agreement, dated January 11, 2019, by and between Richard E. Uihlein and theCompany (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* XBRL Instance document.101.SCH* XBRL Taxonomy Extension Schema Document.101.CAL* XBRL Taxonomy Calculation Linkbase Document.101.DEF* XBRL Taxonomy Definition Linkbase Document.101.LAB* XBRL Taxonomy Label Linkbase Document.101.PRE* XBRL Taxonomy Presentation Linkbase Document. *Filed herewith. 69Table of Contents#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 fromthe 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 70Table of ContentsSIGNATURESPursuant 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 itsbehalf by the undersigned, thereunto duly authorized, on March 6, 2019. GALECTIN THERAPEUTICS INC.By: /S/ Harold H. Shlevin Name: Harold H. Shlevin, PhD.Title: Chief Executive Officer and PresidentPursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of theregistrant and in the capacities and on the dates indicated. Signature Title Date/S/ HAROLD H. SHLEVIN, PhD.Harold H. Shlevin. Chief Executive Officer and President(principal executive officer) March 6, 2019/S/ JACK W. CALLICUTTJack W. Callicutt Chief Financial Officer(principal financial and accounting officer) March 6, 2019/S/ RICHARD E. UIHLEINRichard E. Uihlein Director and Chairman of the Board March 6, 2019/S/ MARC RUBINMarc Rubin Director March 6, 2019/S/ GILBERT F. AMELIOGilbert F. Amelio Director March 6, 2019/S/ JAMES C. CZIRRJames C. Czirr Director March 6, 2019/S/ KEVIN D. FREEMANKevin D. Freeman Director March 6, 2019/S/ JOEL LEWISJoel Lewis Director March 6, 2019/S/ GILBERT S. OMENNGilbert S. Omenn Director March 6, 2019/S/ STEPHEN SHULMANStephen Shulman Director March 6, 2019/S/ KARY ELDREDKary Eldred Director March 6, 2019 71Table of ContentsGalectin Therapeutics Inc. and subsidiariesTable of Contents 1. Reports of Independent Registered Public Accounting Firm F-1 2. Consolidated Balance Sheets as of December 31, 2018 and 2017 F-3 3. Consolidated Statements of Operations for the years ended December 31, 2018 and 2017 F-4 4. Consolidated Statements of Changes in Redeemable Convertible Preferred Stock and Stockholders’ Equity (Deficit) for the years endedDecember 31, 2018 and 2017 F-5 5. Consolidated Statements of Cash Flows for the years ended December 31, 2018 and 2017 F-7 6. Notes to Consolidated Financial Statements F-8 72Table of ContentsREPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMTo the Board of Directors and Stockholders of Galectin Therapeutics, Inc.Opinions on the Financial Statements and Internal Control over Financial ReportingWe have audited the accompanying consolidated balance sheets of Galectin Therapeutics, Inc. and Subsidiaries (the “Company”) as of December 31,2018 and 2017, 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 “financial statements”). We also haveaudited the Company’s internal control over financial reporting as of December 31, 2018, based on criteria established in Internal Control —Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as ofDecember 31, 2018 and 2017, and the results of its operations and its cash flows for each of the years then ended, in conformity with accountingprinciples generally accepted in the United States of America. Also, in our opinion, the Company maintained, in all material respects, effective internalcontrol over financial reporting as of December 31, 2018, based on criteria established in Internal Control — Integrated Framework (2013) issued byCOSO.Basis for OpinionThe Company’s management is responsible for these financial statements, for maintaining effective internal control over financial reporting, and for itsassessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report of Internal Controlover Financial Reporting included in Item 9A — Controls and Procedures in the Company’s 2018 Annual Report on Form 10-K. Our responsibility isto express an opinion on the Company’s financial statements and an opinion on the Company’s internal control over financial reporting based on ouraudits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are requiredto be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of theSecurities 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 obtainreasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud, and whether effectiveinternal control over financial reporting was maintained in all material respects.Our audits of the financial statements included performing procedures to assess the risks of material misstatement of the financial statements, whetherdue to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regardingthe amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimatesmade by management, as well as evaluating the overall presentation of the financial statements. Our audit of internal control over financial reportingincluded obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing andevaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such otherprocedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.Definition and Limitations of Internal Control over Financial ReportingA company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financialreporting and the preparation of financial statements for external purposes in F-1Table of Contentsaccordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies andprocedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of theassets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements inaccordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance withauthorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection ofunauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of anyevaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that thedegree of compliance with the policies or procedures may deteriorate.CHERRY BEKAERT LLPWe have served as the Company’s auditor since 2015.Atlanta, GeorgiaMarch 6, 2019 F-2Table of ContentsGALECTIN THERAPEUTICS INC. AND SUBSIDIARIESCONSOLIDATED BALANCE SHEETS December 31, 2018 2017 (in thousands) ASSETS Current assets: Cash and cash equivalents $8,253 $3,053 Prepaid expenses and other current assets 579 766 Total current assets 8,832 3,819 Property and equipment, net — — Other 174 342 Intangible assets, net — — Total assets $9,006 $4,161 LIABILITIES, REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’(DEFICIT) EQUITY Current liabilities: Accounts payable $297 $608 Accrued expenses 1,512 2,292 Accrued dividends payable 299 68 Total current liabilities 2,108 2,968 Total liabilities 2,108 2,968 Commitments and contingencies (Note 10) Series C 6% super dividend redeemable convertible preferred stock; 1,000 shares authorized, 176 issued andoutstanding at December 31, 2018 and 2017, redemption value: $8,863,000, liquidation value: $1,786,000at December 31, 2018 1,723 1,723 Stockholders’ (deficit) equity: Undesignated stock, $0.01 par value; 20,000,000 shares authorized at December 31, 2018 and 2017,20,000,000 shares designated at December 31, 2018 and 2017, respectively — — Series A 12% convertible preferred stock; 1,742,500 shares authorized, 1,327,500 and 1,377,500issued and outstanding at December 31, 2018 and 2017, respectively, liquidation value $1,367,000at December 31, 2018 537 557 Series B-1 12% convertible preferred stock; 900,000 shares authorized, issued and outstanding atDecember 31, 2018 and 2017, liquidation value $1,800,000 at December 31, 2018 1,761 1,761 Series B-2 12% convertible preferred stock; 2,100,000 shares authorized, issued and outstanding atDecember 31, 2018 and 2017, liquidation value $4,200,000 at December 31, 2018 3,697 3,697 Series B-3 8% convertible preferred stock; 2,508,000 shares authorized, 2,508,000 issued andoutstanding at December 31, 2018 and 2017, liquidation value $2,508,000 at December 31, 2018 1,224 1,224 Common stock, $0.001 par value; 100,000,000 and 50,000,000 shares authorized at December 31,2018 and 2017, respectively, 41,190,905 and 35,789,388 issued and outstanding at December 31,2018 and 2017, respectively 41 36 Additional paid-in capital 194,130 173,363 Retained deficit (196,215) (181,168) Total stockholders’ (deficit) equity 5,175 (530) Total liabilities, redeemable convertible preferred stock and stockholders’ (deficit) equity $9,006 $4,161 See notes to consolidated financial statements. F-3Table of ContentsGALECTIN THERAPEUTICS INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF OPERATIONS Year EndedDecember 31, 2018 2017 (in thousands, exceptper share amounts) Operating expenses: Research and development $6,471 $11,721 General and administrative 7,131 4,526 Total operating expenses 13,602 16,247 Total operating loss (13,602) (16,247) Other income (expense): Interest income 38 24 Interest expense (336) (12) Total other income (expense) (298) 12 Net loss $(13,900) $(16,235) Preferred stock dividends (1,147) (1,232) Net loss applicable to common stockholders $(15,047) $(17,467) Basic and diluted net loss per share $(0.38) $(0.49) Shares used in computing basic and diluted net loss per share 39,414 35,521 See notes to consolidated financial statements. F-4Table of ContentsGALECTIN THERAPEUTICS INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CHANGES IN REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’EQUITY (DEFICIT)For the Years Ended December 31, 2018 and 2017(amounts in thousands except share data) Series C SuperDividend RedeemableConvertiblePreferred Stock Number ofShares Amount Balance at December 31, 2016 176 $1,723 Balance at December 31, 2017 176 $1,723 Balance at December 31, 2018 176 $1,723 See notes to consolidated financial statements. F-5Table of ContentsGALECTIN THERAPEUTICS INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CHANGES IN REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’EQUITY (DEFICIT) — (Continued)For the Years Ended December 31, 2018 and 2017(amounts in thousands except share data) Series A 12%ConvertiblePreferred Stock Series B-1 12%ConvertiblePreferred Stock Series B-2 12%ConvertiblePreferred Stock Series B-3 8%ConvertiblePreferred Stock Common Stock Number ofShares Amount Number ofShares Amount Number ofShares Amount Number ofShares Amount Number ofShares Amount AdditionalPaid-InCapital RetainedDeficit TotalStockholders’Equity (Deficit) Balance at December 31,2016 1,377,500 $557 900,000 $1,761 2,100,000 $3,697 2,508,000 $1,224 32,912,942 $33 $166,721 $(163,701) $10,292 Series A 12% convertiblepreferred stock dividend 27,550 62 (62) Series B-1 12%convertible preferredstock dividend 103,691 257 (257) Series B-2 12%convertible preferredstock dividend 241,945 599 (599) Series B-3 8% convertiblepreferred stock dividend 95,998 237 (237) Series C super dividendredeemable convertiblepreferred stock dividend 35,200 77 (77) Issuance of common stock 2,213,360 3 3,380 3,383 Issuance of common stockand warrants in privateplacements 102,368 200 200 Issuance of common stockfor services 18,677 33 33 Issuance of restrictedcommon stock todirectors 37,657 4 4 Issuance of warrants inconnection with line ofcredit 696 696 Stock-based compensationexpense 1,097 1,097 Net loss (16,235) (16,235) Balance at December 31,2017 1,377,500 $557 900,000 $1,761 2,100,000 $3,697 2,508,000 $1,224 35,789,388 $36 $173,363 $(181,168) $(530) Series A 12% convertiblepreferred stock dividend 27,126 146 (146) Series B-1 12%convertible preferredstock dividend 27,835 155 (210) (55)Series B-2 12%convertible preferredstock dividend 64,948 363 (490) (127)Series B-3 8% convertiblepreferred stock dividend 25,769 144 (194) (50)Series C super dividendredeemable convertiblepreferred stock dividend 20,394 107 (107) Issuance of common stock 669,714 1 5,602 5,603 Issuance of common stockfor warrant exercises 2,455,595 2 6,001 6,003 Issuance of common stockfor services 2,883 12 12 Issuance of common stockfor stock optionexercises 2,098,829 2 3,771 3,773 Issuance of common stockfrom Series Aconversion (50,000) (20) 8,424 20 Stock-based compensationexpense 4,445 4,445 Net loss (13,900) (13,900) Balance at December 31,2018 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 See notes to consolidated financial statements. F-6Table of ContentsGALECTIN THERAPEUTICS INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWS Year EndedDecember 31, 2018 2017 (in thousands) CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $(13,900) $(16,235) Adjustments to reconcile net loss to net cash from operating activities: Depreciation and amortization — 1 Stock-based compensation expense 4,445 1,101 Issuance of common stock for services 12 33 Non-cash interest expense 336 12 Changes in operating assets and liabilities: Prepaid expenses and other assets 19 8 Accounts payable and accrued expenses (1,091) (812) Net cash from operating activities (10,179) (15,892) CASH FLOWS FROM INVESTING ACTIVITIES: Net cash from investing activities — — CASH FLOWS FROM FINANCING ACTIVITIES: Net proceeds from issuance of common stock and warrants 15,379 3,583 Net cash from financing activities 15,379 3,583 NET DECREASE IN CASH AND CASH EQUIVALENTS 5,200 (12,309) CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 3,053 15,362 CASH AND CASH EQUIVALENTS, END OF PERIOD $8,253 $3,053 NONCASH FINANCING ACTIVITIES: Payment of preferred stock dividends in common stock $915 $1,232 Common stock purchase warrants issued in connection with line of credit — $696 See notes to consolidated financial statements. F-7Table of ContentsGALECTIN THERAPEUTICS INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1.Nature of Business and Basis of PresentationGalectin Therapeutics Inc. and subsidiaries (the “Company”) is a clinical stage biopharmaceutical company that is applying its leadership ingalectin science and drug development to create new therapies for fibrotic disease and cancer. These candidates are based on the Company’stargeting of galectin proteins which are key mediators of biologic and pathologic function. These compounds also may have application fordrugs 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. On March 23, 2012, the Company effected a one-for-six reverse stocksplit. All common share and per share amounts in these financial statements have been adjusted to reflect the effect of the reverse split.The Company has operated at a loss since its inception and has had no revenues. The Company anticipates that losses will continue for theforeseeable future. At December 31, 2018, the Company had $8,253,000 of unrestricted cash and cash equivalents available to fund futureoperations. Additionally, the Company generated approximately $1.87 million in net proceeds via sale of common stock under its At MarketSales Agreement in January and February 2019 (see Note 5). The Company believes there is sufficient cash, including availability of the line ofcredit (see Note 8), to fund currently planned operations at least through March 31, 2020. We will require more cash to fund our operations afterMarch 31, 2020 and believe we will be able to obtain additional financing. The currently planned operations do not include costs related to aplanned Phase 3 clinical trial. While the costs of the trial and general overhead during the Phase 3 trial are expected to be approximately $100million, the costs and timing of such trial is not yet finalized. These costs will require additional funding. However, there can be no assurancethat we will be successful in obtaining such new financing or, if available, that such financing will be on terms favorable to us. If we areunsuccessful in raising additional capital to fund operations before March 31, 2020, 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, uncertaintyof 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 ofintellectual property, and competition with larger, better-capitalized companies. Successful completion of the Company’s development programand, ultimately, the attainment of profitable operations is dependent upon future events, including obtaining adequate financing to fulfill itsdevelopment activities and achieving a level of revenues adequate to support the Company’s cost structure. There are no assurances that theCompany will be able to obtain additional financing on favorable terms, or at all, or successfully market its products. 2.Summary of Significant Accounting PoliciesThe accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in theUnited 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). Allintercompany transactions have been eliminated.Use of Estimates. The preparation of financial statements in conformity with accounting principles generally accepted in the United States ofAmerica requires management to make estimates and judgments that may affect the reported amounts of assets, liabilities, equity, revenue,expenses and related disclosure of F-8Table of Contentscontingent assets and liabilities. Management’s estimates and judgments include assumptions used in stock option and warrant liabilityvaluations, useful lives of property and equipment and intangible assets, accrued liabilities, deferred income taxes and various other assumptionsthat are believed to be reasonable under the circumstances. Actual results may differ from those estimates under different assumptions orconditions.Fair Value Measurements. The Company has certain financial assets and liabilities recorded at fair value. Fair values determined by Level 1inputs utilize observable data such as quoted prices in active markets. Fair values determined by Level 2 inputs utilize data points other thanquoted prices in active markets that are observable either directly or indirectly. Fair values determined by Level 3 inputs utilize unobservabledata points in which there is little or no market data, which require the reporting entity to develop its own assumptions. The estimated value ofaccounts payable and accrued expenses approximates their carrying value due to their short-term nature. There were no Level 2 or 3 assets orliabilities at December 31, 2018 or 2017.Cash and Cash Equivalents. The Company considers all highly-liquid investments with original maturities of 90 days or less at the time ofacquisition to be cash equivalents. The Company had no cash equivalents at December 31, 2018 or 2017.Prepaid Expenses and Other Current Assets. Prepaid expenses and other assets consist principally of prepaid insurance and deferred financingcosts (see Note 8).Property and Equipment. Property and equipment, including leasehold improvements, are stated at cost, net of accumulated depreciation andamortization, and are depreciated or amortized using the straight-line method over the estimated useful lives of the related assets of generallythree years for computers and office equipment, five years for furniture and fixtures and the shorter of the useful life or life of the lease forleasehold improvements.Security Deposit. At December 31, 2018 and 2017, the Company had a security deposit of $6,000 for leased office space included in PrepaidExpenses and Other Current Assets.Intangible Assets. Intangible assets include patent costs, consisting primarily of related capitalized legal fees, which are amortized over anestimated useful life of five years from issuance. Amortization expense in 2018 and 2017 was approximately $0 and $1,000, respectively. Grossintangible assets at December 31, 2018 and 2017 totaled $78,000 each year, and accumulated amortization at December 31, 2018 and 2017totaled $78,000 and $78,000, respectively.Long-Lived Assets. The Company reviews all long-lived assets for impairment whenever events or circumstances indicate the carrying amount ofsuch 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 thefuture undiscounted net cash flows expected to be generated by the asset. If such asset is considered to be impaired, the impairment recognized ismeasured by the amount by which the carrying value of the asset exceeds the discounted future cash flows expected to be generated by the asset.Accrued Expenses. As part of the process of preparing our consolidated financial statements, we are required to estimate accrued expenses. Thisprocess involves identifying services that third parties have performed on our behalf and estimating the level of service performed and theassociated cost incurred on these services as of each balance sheet date in our consolidated financial statements. Examples of estimated accruedexpenses include contract service fees in conjunction with clinical trials, professional service fees, such as those arising from the services ofattorneys and accountants and accrued payroll expenses. In connection with these service fees, our estimates are most affected by ourunderstanding of the status and timing of services provided relative to the actual services incurred by the service providers. In the event that wedo not identify certain costs that have been incurred or we under- or over-estimate the level of services or costs of such services, our reportedexpenses for a reporting period could be understated or overstated. The date on which certain services commence, the level of services performedon or before a given date, and the cost of services are often subject to our judgment. We make these judgments based upon the facts andcircumstances known to us in accordance with accounting principles generally accepted in the U.S. F-9Table of ContentsWarrants. The Company has issued common stock warrants in connection with the execution of certain equity and debt financings. The fairvalue 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, 2018 or 2017.Research and Development Expenses. Costs associated with research and development are expensed as incurred. Research and developmentexpenses include, among other costs, salaries and other personnel-related costs, and costs incurred by outside laboratories and other accreditedfacilities in connection with clinical trials and preclinical studies.Income Taxes. The Company accounts for income taxes in accordance with the accounting rules that requires an asset and liability approach toaccounting for income taxes based upon the future expected values of the related assets and liabilities. Deferred income tax assets and liabilitiesare determined based on the differences between the financial reporting and tax bases of assets and liabilities and for tax loss and credit carryforwards and are measured using the expected tax rates estimated to be in effect when such basis differences reverse. Valuation allowances areestablished, 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 certificatesof 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 recognizedas expense over the service period, which generally represents the vesting period. For awards that have performance-based vesting conditions theCompany 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. For options that only vest upon the achievement of marketconditions, the Company values the options using a Monte Carlo model to calculate the grant date fair value of the stock options. The expenserelated to options that vest based on market conditions is not reversed should those options not ultimately vest. The expense recognized over theservice period is required to include an estimate of the awards that will be forfeited. Stock options issued to non-employees are accounted for inaccordance with the provisions of ASC Subtopic 505-50, Equity-Based Payments to Non-employees, which requires valuing the stock optionsusing an option pricing model (the Company uses Black-Scholes) and measuring such stock options to their current fair value when they vest.New Accounting Pronouncements. In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), which requires lessees to recognizethe most leases on the balance sheet. The provisions of this guidance are effective for the annual periods beginning after December 15, 2018, andinterim periods within those years, with early adoption permitted. The Company is evaluating the requirements of this guidance and has not yetdetermined the impact of the adoption on our financial position or results of operations. 3.Property and EquipmentProperty and equipment consist of the following at December 31: 2018 2017 (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 $— $— F-10Table of ContentsDepreciation and amortization expense for the years ended December 31, 2018 and 2017 was $0 and $0, respectively. 4.Accrued ExpensesAccrued expenses consist of the following at December 31: 2018 2017 (in thousands) Legal and accounting fees $45 $74 Accrued compensation 1,294 790 Accrued research and development costs and other 173 1,428 Total $1,512 $2,292 5.Stockholders’ EquityAt December 31, 2018, the Company had 100,000,000 shares of common stock and 20,000,000 undesignated shares authorized. As ofDecember 31, 2018, 1,742,500 shares have been designated for Series A 12% Convertible Preferred Stock, 900,000 shares have been designatedfor Series B-1 Convertible Preferred Stock, 2,100,000 shares have been designated for Series B-2 Convertible Preferred Stock, 1,000 shares havebeen designated for Series C Super Dividend Convertible Preferred Stock, 2,508,000 shares have been designated for Series B-3 ConvertiblePreferred Stock, 12,748,500 have been designated as common stock and no shares remain undesignated.At Market Issuances of Common StockOn March 30, 2014, the Company entered into an At Market Issuance Sales Agreement (the “2014 At Market Agreement”) with a sales agentunder 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 totime 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 deemedan “at the market” offering as defined by the U.S. Securities and Exchange Commission. The Company will pay to the sales agent a commissionrate equal to 3.0% of the gross proceeds from the sale of any shares of common stock sold through the sales agent under the 2014 At MarketAgreement. In 2017, the Company issued 1,496,797 shares of common stock for net proceeds of approximately $1,946,000 under the 2014 AtMarket Agreement.On May 19, 2017, the Company entered into an At Market Issuance Sales Agreement (the “2017 At Market Agreement”) with a sales agent underwhich 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 timethrough 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 “atthe market” offering as defined by the U.S. Securities and Exchange Commission. The Company will pay to the sales agent a commission rateequal 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 MarketAgreement. During the years ended December 31, 2018 and 2017, the Company issued 669,714 and 716,563 shares of common stock for netproceeds of approximately $5,603,000 and $1,437,000, respectively, under the 2017 At Market Agreement.2017 Private PlacementOn February 28, 2017, the Company closed a transaction with five individual investors through a private placement of common stock andwarrants. In total, the Company issued 102,368 shares of common stock for proceeds of $200,000. The Company also issued, to the fiveinvestors, warrants to purchase 76,776 shares of common stock at $5.00 per share. The warrants have an expiration date of February 28, 2024. Theexercise F-11Table of Contentsprice of each warrant is adjustable in the event of a stock split or stock combination, capital reorganization, merger or similar event. The warrantswere valued at approximately $101,000 as of the issuance, using the closing price of $1.86, a life of 7 years, a volatility of 97% and a risk-freeinterest rate of 1.92%. Based upon the Company’s analysis of the criteria contained in ASC Topic 815-40, “Derivatives and Hedging —Contracts in Entity’s Own Equity” the Company has determined that warrants issued in connection with this financing transaction were notderivative liabilities and therefore, were recorded as additional paid-in capital.OtherIn 2017, the Company entered an agreement with a vendor whereby the Company will issue common stock to the vendor in lieu of paying incash in amount up to $100,000 for the year. In 2018 and 2017, the Company issued 2,883 and 18,667 shares of common stock and 290 and 1,867warrants to purchase shares of common stock at $5.00 per share pursuant to this agreement and the value of such shares and warrants, totalingapproximately $12,000 and $33,000, respectively, has been recorded as research and development expense.Series A 12% Convertible Preferred Stock — February 4, 2008 Private PlacementOn February 4, 2008, the Company closed a private placement begun in October 2007 of its Series A 12% Convertible Preferred Stock (“SeriesA”) 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 SeriesA 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 commonstock 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 consecutivetrading days prior to the applicable dividend payment date. Dividends are payable semi-annually on March 30 and September 30. The dividendpaid 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 toone-sixth of a share of common stock, subject to adjustment in the event of a stock dividend, stock split or combination, reclassification orsimilar event. The Company has the right to require conversion if the closing price of the common stock exceeds $18.00 for 15 consecutivetrading days and a registration statement covering the resale of the shares of common stock issuable upon conversion of the Series A is then ineffect. Each warrant is exercisable solely for cash beginning August 3, 2008 and expired on February 4, 2012. The exercise price of each warrantis adjustable in the event of a stock split or stock combination, capital reorganization, merger or similar event.In 2018, 50,000 shares of Series A were converted into 8,424 shares of common stock which included 90 shares relating to the prorated dividendprior conversion. There were no shares of Series A converted into shares of common stock in 2017. Prior to 2016, a total of 360,000 shares ofSeries A had been converted into 60,888 shares of common stock.Series B Convertible Preferred Stock (also see Note 13 Subsequent Events)On February 12, 2009, the Company entered into a securities purchase agreement (the “10X Agreement”) pursuant to which it agreed to issue andsell 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 aggregatestated value of $6.0 million and convertible into 2,000,000 shares of common stock at December 31, 2011 and (ii) warrants to purchase6,000,000 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 F-12Table of Contentsconvertible preferred stock” or “Series B-1”) and related common stock warrants for 1,800,000 shares of common stock and (ii) 2,100,000 sharesof Series B-2 convertible preferred stock (“Series B-2 convertible preferred stock” or “Series B-2”) and related warrants for 4,200,000 shares ofcommon 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 issueand 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 anaggregate stated value and proceeds of $1.5 million and convertible into 892,349 shares of common stock, and (ii) warrants to purchase up to669,262 shares of common stock. Also, pursuant to agreements signed on September 22, 2016 with 10X Fund LP, the Company issued 875,000warrants to purchase common stock in exchange in exchange for the 10X Fund LP agreeing not to sell any shares of common or preferred stock inthe Company for 18 months, except in limited circumstances. Additionally, as previously agreed to by the 10X Fund LP, the sole holder of theCompany’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 SecondAmended and Restated Certificate of Designation of Preferences, Rights and Limitations of Series B preferred stock we removed the ability of theholders of the Series B to cause a redemption of their shares of Series B. Accordingly, the Company accounted for the removal of this redemptionfeature 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 FundLP 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 into896,997 shares of common stock, and (ii) warrants to purchase up to 924,780 shares of common stock.The terms of the Series B are as follows:Dividends. Holders of the Series B will be entitled to receive cumulative dividends at the rate of 12% for Series B-1 and B-2 and 8% for Series B-3 per annum (compounding monthly) payable quarterly which may, at the Company’s option, be paid in cash or common stock. Pursuant to anagreement with the holder of all shares of Series B, on January 26, 2011, the Company amended and restated the Certificate of Designation ofPreferences, Rights and Limitations for the Series B-1 and Series B-2, to provide that dividends are payable in cash or shares of Common Stockvalued at 100% of the volume weighted average price of the Common Stock for the 20 consecutive trading days prior to the dividend paymentdate on and after September 30, 2011. If the Company does not pay any dividend on the Series B, dividends will accrue at the rate of 15% perannum (compounding monthly).Conversion Rights. Each share of Series B-1 and B-2 is convertible into two-thirds (approximately 0.667) shares of common stock at theconversion price of $3.00 per share at the option of the holder, at any time. The shares of Series B-3 are convertible into 1,789,346 shares ofcommon stock at the option of the holder, at any time.Liquidation Rights. In the event of any liquidation, dissolution or winding up of the Company, either voluntarily or involuntarily, the holders ofSeries B-1 and B-2 will receive $2 per share and holders of B-3 will receive $1 per share plus accrued and unpaid dividends, payable prior and inpreference to any distributions to the holders of Common Stock but pari passu with the holders of the Series A 12% Convertible Preferred Stock.Voting Rights. Except as noted below, the holder of each share of Series B-3 shall be entitled to the number of votes equal to the number of sharesof Common Stock into which such share of Series B-3 would be convertible, and shall otherwise have voting rights and powers equal to thevoting rights and powers of the Common Stock. With respect to the election of directors, the holders of the Series B-3, together with the holdersof Series B-1 and Series B-2, shall vote together as a separate class to elect two (2) members of the Board of Directors (the “Series B Directors”),and the Company shall take all reasonably necessary or desirable actions within its control (including, without limitation, calling specialmeetings of the Board of F-13Table of ContentsDirectors, nominating such persons designated by the holders of the Series B as directors on the applicable proxy statements and recommendingtheir election) to permit the holders of the Series B to appoint three additional (3) members of the Board of Directors (the “Series B Nominees”),who shall be subject to election by all shares of voting stock of the Company voting together as a single group,) until there are no longer anyshares of Series B outstanding. The holders of Series B shall vote together with the holders of Common Stock and other voting capital stock ofthe Company to elect all other members of the Board of Directors.Other Restrictions. So long as any shares of the Series B remain outstanding, the Company may not, without the approval of the holders of amajority of the shares of Series B outstanding, among other things, (i) change the size of the Company’s Board of Directors; (ii) amend or repealthe Company’s Articles of Incorporation or Bylaws or file any articles of amendment designating the preferences, limitations and relative rightsof any series of preferred stock, that would alter or change the preferences, rights, privileges or powers of, or restriction provided for the benefit ofthe Series B; (iii) create or increase the authorized amount of any additional class or series of shares of stock that is equal to or senior to Series B;(iv) increase or decrease the authorized number of shares of the Series B; (v) purchase, redeem or otherwise acquire for value any shares of anyclass of capital stock; (vi) merge or consolidate the Company into or with any other corporation or sell, assign, lease, pledge, encumber orotherwise dispose of all or substantially all of the Company’s assets or those of any subsidiary; (vii) voluntarily or involuntarily liquidate,dissolve or wind up the Company or the Company’s business; (viii) pay or declare dividends on any capital stock other than the Preferred Stock,unless the Series B share ratably in such dividend and all accrued dividends payable with respect to the Series B have been paid prior to thepayment or declaration of such dividend; (ix) acquire an equitable interest in, or the assets or business of any other entity in any form oftransaction; (x) create or commit us to enter into a joint venture, licensing agreement or exclusive marketing or other distribution agreement withrespect to the Company’s products, other than in the ordinary course of business; (xi) permit the Company or any subsidiary to sell or issue anysecurity of such subsidiary to any person or entity other than the Company; (xii) enter into, create, incur, assume or guarantee any indebtednessfor borrowed money of any kind (other than indebtedness existing on the initial closing date and approved by Series B shareholders); (xiii) enterinto, create, incur or assume any liens of any kind (other than certain permitted liens); (xiv) issue any common stock or common stockequivalents; (xv) increase the number of shares of the Company’s common stock that may be issued pursuant to options, warrants or rights toemployees, directors, officers, consultants or advisors above the number of shares that were authorized for issuance under our 2001 StockIncentive Plan, 2003 Non-Employee Director Stock Incentive Plan and 2009 Incentive Compensation Plan as of September 9, 2016.Warrants. Each Series B-1 or B-2 related warrant is exercisable at $3.00 per share of common stock at any time on or after the date of issuanceuntil the fifth anniversary of the respective issue date. The Company may, upon 30 days’ notice and so long as an effective registration statementregarding the underlying shares of common stock is in effect, issue a termination notice with respect to (i) each Class A-1 warrant on any tradingday on which the market value of the common stock for each of the 15 previous trading days exceeded $7.50 per share and (ii) each Class A-2warrant on any trading day on which the market value of the common stock for each of the 15 previous trading days exceeded $10.50 per share.All Class A-1 warrants were exercised for cash proceeds of $3,000,000 in 2011 and 500,000 of the Class A-2 warrants were exercised for cashproceeds of $1,500,000 in 2013. Subsequently, in January 2014, the remaining 500,000 Class A-2 warrants were exercised for cash proceeds of$1,500,000.The fair value of the warrants issued in connection with the Series B-1 was $1,296,000 at the date of issuance based on the followingassumptions: an expected life of 5 years, volatility of 118%, risk free interest rate of 1.79% and zero dividends. The Company allocated the grossproceeds based on the relative fair value of the Series B-1 and the related warrants, resulting in $1,105,000 of the proceeds being allocated toadditional paid-in capital. The Company analyzed the Series B-1, post-allocation of the gross proceeds, and determined that there was nobeneficial conversion feature at the date of issuance. The issuance costs of the Series B-1 and the amounts allocated to warrants were recorded asa reduction to the carrying value of F-14Table of Contentsthe Series B-1 when issued and are accreted to the redemption value of the Series B-1 through the earliest redemption date. Due to the redemptionfeature, the Company has presented the Series B-1 outside of permanent equity, in the mezzanine of the consolidated balance sheets throughJune 30, 2016. As noted above, the Series B-1 preferred was reclassified to permanent equity as of September 30, 2016 and forward and accretionwas ended.The fair value of the warrants issued during the year ended December 31, 2010 in connection with the Series B-2 was $4,148,000 at the dates ofissuance based on the following assumptions: an expected life of 5 years, volatility of 126% to 129%, risk free interest rates of 2.27% to 2.43%and zero dividends. The fair value of the warrants issued during the year ended December 31, 2009 in connection with the Series B-2 was$5,333,000 at the dates of issuance based on the following assumptions: an expected life of 5 years, volatility of 124% to 127%, risk free interestrates of 1.98% to 2.70% and zero dividends. The Company allocated the gross proceeds based on the relative fair value of the Series B-2 and therelated warrants, resulting in $1,028,000 and $1,732,000 of the proceeds being allocated to additional paid-in capital for the years endedDecember 31, 2010 and 2009, respectively. The issuance costs of the Series B-2 and the amounts allocated to warrants were recorded as areduction to the carrying value of the Series B-2 when issued, and are accreted to the redemption value of the Series B-2 through the earliestredemption dates. Due to the redemption feature, the Company has presented the Series B-2 outside of permanent equity, in the mezzanine of theconsolidated balance sheets through June 30, 2016. As noted above, the Series B-2 preferred was reclassified to permanent equity as ofSeptember 30, 2016 and forward and accretion was ended.The Company analyzed the Series B-2, post-allocation of the gross proceeds, and determined that there was a beneficial conversion feature at thedates of issuance. Because the closing price of the common stock on the closing date was greater than the effective conversion price, $388,000and $628,000 of the proceeds (limited to the allocation of the proceeds) during the years ended December 31, 2010 and 2009, respectively, wereallocated to an embedded beneficial conversion feature of the Series B-2. The amount allocated to the beneficial conversion feature was recordedas a discount to the Series B-2 is being accreted, with such accretion being charged through the earliest redemption dates. As noted above, theSeries B-2 preferred was reclassified to permanent equity as of September 30, 2016 and forward and accretion was ended.All warrants issued in the Series B-3 transaction are exercisable at $3.00 per share of common stock at any time on or after the date of issuanceuntil the seventh anniversary of the respective issue date.The fair value of the warrants issued in connection with the September 22, 2016, Series B-3 was $2,262,000 at the date of issuance based on thefollowing assumptions: an expected life of 7 years, volatility of 95%, risk free interest rate of 1.42% and zero dividends. The Company allocatedthe gross proceeds of $1.5 million based on the relative fair value of the Series B-3 and the related warrants, resulting in $890,000 of the proceedsbeing allocated to additional paid-in capital and $610,000 being allocated to the Series B-3.The Company analyzed the September 22, 2016, Series B-3, post-allocation of the gross proceeds, and determined that there was a beneficialconversion feature at the dates of issuance. Because the closing price of the common stock on the closing date was greater than the effectiveconversion price, an embedded beneficial conversion feature of the Series B-3 amounting to $991,000 was charged to additional paid in capitaland accumulated deficit.The fair value of the warrants issued in connection with the December 23, 2016, Series B-3 was $658,000 at the date of issuance based on thefollowing assumptions: an expected life of 7 years, volatility of 96%, risk free interest rate of 2.35% and zero dividends. The Company allocatedthe gross proceeds of $1.008 million based on the relative fair value of the Series B-3 and the related warrants, resulting in $394,000 of theproceeds being allocated to additional paid-in capital and $614,000 being allocated to the Series B-3.The Company analyzed the December 23, 2016, Series B-3, post-allocation of the gross proceeds, and determined that there was a beneficialconversion feature at the dates of issuance. Because the closing price of the common stock on the closing date was greater than the effectiveconversion price, an embedded F-15Table of Contentsbeneficial conversion feature of the Series B-3 amounting to $310,000 was charged to additional paid in capital and accumulated deficit.Series C 6% Super Dividend Redeemable Convertible Preferred StockOn December 29, 2010, the Company designated and authorized the sale and issuance of up to 1,000 shares of Series C Super DividendRedeemable 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. TheCompany incurred $47,000 of cash transaction costs resulting in net cash proceeds of $2,073,000. In addition, the Company issued 500 warrantsexercisable at $7.20 to a placement agent which had a de minimis value. Additionally, in January 2011, the Company sold and issued 13 sharesof 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 intoCommon Stock at the price of $6.00 per share of Common Stock (“Conversion Price”), such that approximately 1,667 shares of Common Stockwill be issued per each converted share of Series C (accrued and unpaid dividends will be issued as additional shares). At December 31, 2018 and2017, 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 (plusall accrued and unpaid dividends) into Common Stock, at the Conversion Price, upon such time that the closing price of the Common Stock is noless 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 thegreater 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 theinitial investment and 1.25% of net sales thereafter. The maximum amount each Series C shareholder will receive in dividend payments is equalto $100,000 (the “Maximum Payout”). For purposes of this dividend calculation, net sales shall mean gross revenues actually received by theCompany, from the sale or licensing of the product DAVANAT® (GM-CT-01), less chargebacks, returns, expenses attributable to product recalls,duties, customs, sales tax, freight, insurance, shipping expenses, allowances and other customary deductions.The dividend shall be payable in arrears semiannually on March 31 and September 30, beginning with the first such date after the original issuedate; provided, however, that all dividends and all other distributions shall cease, and no further dividends or other distributions shall be paid, inrespect 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. Suchdividends shall be payable at the Company’s option either in cash or in duly authorized, fully paid and non-assessable shares of Common Stockvalued 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 endingon 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 ispaid in respect of such converted share of Series C, then the holder shall have the right to continue to receive dividends in respect of suchconverted share of Series C equal to the remaining payout (the “Series C Preferred Stock Post Conversion Dividend Right”) which shall be equalto the Maximum Payout less the cumulative dividends received through the conversion date. One share of Series C Preferred Stock PostConversion Dividend Right shall be issued for each such converted share of Series C. The holder of each Series C Preferred Stock PostConversion Dividend Right shall receive the remaining payout on an equal basis and in conjunction with the then outstanding shares of Series Cand all F-16Table of Contentsthe other then outstanding Series C Post Conversion Dividend Rights, in the same manner and subject to the same terms and conditions asapplicable 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 ordistributions other than the remaining payout. The Series C Preferred Stock Post Conversion Right is subject to redemption in the same manneras 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 commonstock (the Series C Post Conversion Dividend Right) which requires bifurcation. The value of this post conversion dividend right on the date ofissuance was determined to be de minimis due to the fact that the payment of a dividend stream other than the 6% dividend and conversion ofSeries C prior to the Company achieving sales of GM-CT-01 was deemed improbable at that time. Upon a conversion of the Series C, theCompany 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 (DividendRights) were issued. In 2013, 24 shares of Series C were converted into 40,193 shares of common stock and 24 Dividend Rights were issued. In2014, 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 SeriesC, these Dividend Rights shall continue to participate in dividends, however the Floor shall not apply. At December 31, 2016 and 2015, theseDividend Rights were determined to have a de minimis value, as the payment of a dividend is considered improbable at this time. The Companywill 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 ofSeries C will receive $10,000 per share plus accrued and unpaid dividends, payable prior and in preference to any distributions to the holders ofCommon Stock but after and subordinate to the Series A 12% Convertible Preferred Stock (“Series A”), Series B-1 and Series B-2, subject to theMaximum 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 StockPost Conversion Rights within thirty (30) days after the transaction constituting the sale of the Company is closed and such closing is fullyfunded. 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 throughthe redemption date. The redemption price shall be payable at the Company’s option either in cash or in shares of common stock valued at thehigher of (i) $3.00 per share or (ii) the average market price for the ten consecutive trading days ending immediately prior to the date ofredemption. The ROI Percentage shall mean the percentage that applies as of the redemption date, as follows:ROI Percentage 200% before the second anniversary of the date of issuance;250% on or after the second anniversary of the date of issuance, but before the third anniversary of the date of issuance;300% on or after the third anniversary of the date of issuance, but before the fourth anniversary of the date of issuance;350% on or after the fourth anniversary of the date of issuance, but before the fifth anniversary of the date of issuance;400% on or after the fifth anniversary of the date of issuance, but before the sixth anniversary of the date of issuance;450% on or after the sixth anniversary of the date of issuance, but before the seventh anniversary of the date of issuance; F-17Table of Contents500% on or after the seventh anniversary of the date of issuance, but before the eighth anniversary of the date of issuance; and550% 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 consolidatedbalance sheets at December 31, 2018 and 2017. At December 31, 2018, the Series C redemption value was $8,863,000.Voting Rights. The Series C shares have no voting rights. 6.WarrantsWarrant activity is summarized as follows: Outstanding at December 31, 2016 13,488,296 Issued 1,078,643 Exercised — Canceled (1,337,161) Outstanding at December 31, 2017 13,229,778 Issued 290 Exercised (2,583,042) Canceled — Outstanding at December 31, 2018 10,647,026 The following table summarizes information with regard to outstanding warrants issued in connection with equity and debt financings andconsultants as of December 31, 2018. Issued in Connection With NumberIssued ExercisePrice Exercisable Date Expiration DateFebruary 12, 2009 Series B-1 Transaction $3.00Investor Warrants — Class B 1,200,000 $3.00 February 12, 2009 February 12, 2019May 13, 2009 Series B-2 Transaction $3.00 InvestorWarrants — Class B 600,000 $3.00 May 13, 2009 May 13, 2019June 30, 2009 Series B-2 Transaction $3.00 InvestorWarrants — Class B 333,333 $3.00 June 30, 2009 June 30, 2019August 12, 2009 Series B-2 Transaction $3.00 InvestorWarrants — Class B 200,000 $3.00 August 12, 2009 August 12, 2019September 30, 2009 Series B-2 Transaction $3.00Investor Warrants — Class B 216,666 $3.00 September 30, 2009 September 30, 2019November 4, 2009 Series B-2 Transaction $3.00Investor Warrants — Class B 106,666 $3.00 November 4, 2009 November 4, 2019December 8, 2009 Series B-2 Transaction $3.00Investor Warrants — Class B 133,143 $3.00 December 8, 2009 December 8, 2019 F-18Table of ContentsIssued in Connection With NumberIssued ExercisePrice Exercisable Date Expiration DateJanuary 29, 2010 Series B-2 Transaction $3.00Investor Warrants — Class B 216,667 $3.00 January 29, 2010 January 29, 2020March 8, 2010 Series B-2 Transaction $3.00 InvestorWarrants — Class B 223,334 $3.00 March 8, 2010 March 8, 2020April 30, 2010 Series B-2 Transaction $3.00 InvestorWarrants — Class B 206,667 $3.00 April 30, 2010 April 30, 2020May 10, 2010 Series B-2 Transaction $3.00 InvestorWarrants — Class B 371,667 $3.00 May 10, 2010 May 10, 2020November 25, 2015 Offering Warrants 1,180,240 $2.50 May 25, 2016 May 25, 2021September 22, 2016 Series B-3 Transaction $3.00Investor Warrants 698,158 $3.00 September 22, 2016 September 22, 2023September 29, 2016 Series B-3 Transaction $3.00Investor Warrants 846,100 $3.00 September 29, 2016 September 29, 2023December 22, 2016 Private placement warrants 1,466,204 $5.00 December 22, 2016 December 23, 2023December 23, 2016 Series B-3 Transaction $3.00Investor Warrants 924,780 $3.00 December 23, 2016 December 23, 2023December 28, 2016 Private placement warrants 644,468 $5.00 December 28, 2016 December 28, 2023February 27, 2017 Private placement warrants 76,776 $5.00 February 27, 2017 February 27, 20242018 and 2017 Warrants issued for services 2,157 $5.00 Various dates in 2018 and2017 Various dates in 2025 and2024December 19, 2017 Line of credit warrants 1,000,000 $5.00 December 19, 2017 December 19, 2024Total outstanding warrants 10,647,026 Offering WarrantsOn March 28, 2012, the Company sold and issued 1,333,361 Units (2,666,722 shares of common stock and related $5.63 warrants to purchase1,333,361 shares of common stock) for gross proceeds of $12.0 million (net cash proceeds of $10,403,000 after the underwriting discount andoffering costs). The warrants were valued at $4,445,000 as of the issuance date of March 28, 2012, using the closing price of $4.20, a life of5 years, a volatility of 119% and a risk-free interest rate of 1.05%. Based upon the Company’s analysis of the criteria contained in ASC Topic815-40, “Derivatives and Hedging — Contracts in Entity’s Own Equity” the Company has determined that warrants issued in connection withthis financing transaction were not derivative liabilities and therefore, were recorded as additional paid-in capital. The remaining balance of1,317,161 of these warrants expired on March 28, 2017. F-19Table of Contents7.Stock-Based CompensationSummary of Stock-Based Compensation PlansAt December 31, 2018, the Company has a stock-based compensation plan where the Company’s common stock has been made available forequity-based incentive grants as part of the Company’s compensation programs. In February 2009, the Company adopted the 2009 IncentiveCompensation Plan (the “2009 Plan”) which originally provided for the issuance of up to 3,333,334, which was subsequently increased to4,733,334 in May 2014, to 5,733,334 in December 2017, and to 6,733,334 in May 2018 shares of the Company’s common stock in the form ofoptions, stock appreciation rights, restricted stock and other stock-based awards to employees, officers, directors, consultants and other eligiblepersons. At December 31, 2018, 889,920 shares were available for future grant under the 2009 Plan.In addition, the Company has awarded 1,477,379 non-plan stock option grants to employees and non-employees. These non-plan grants havevesting periods and expiration dates similar to those options granted under the Incentive Plans. At December 31, 2018, 500,000 non-plan grantswere outstanding.Stock-Based CompensationFollowing is the stock-based compensation expense related to common stock options, restricted common stock and common stock warrants: Year EndedDecember 31, 2018 2017 Research and development $1,944 $521 General and administrative 2,501 580 Total stock-based compensation expense $4,445 $1,101 The fair value of the options granted is determined using the Black-Scholes option-pricing model. The following weighted average assumptionswere used: 2018 2017 Risk-free interest rate 2.47% 2.05% Expected life of the options 5.7 years 5.5 years Expected volatility of the underlying stock 104% 103% 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 sinceJanuary 1, 2006 the Company has generally used option terms of between 5 to 10 years, generally with 5 to 6 years representing the estimatedlife of options granted to employees. The volatility of the common stock is estimated using historical volatility over a period equal to theexpected life at the date of grant. The risk-free interest rate used in the Black-Scholes option pricing model is determined by reference tohistorical U.S. Treasury constant maturity rates with terms equal to the expected terms of the awards. An expected dividend yield of zero is usedin the option valuation model, because the Company does not expect to pay any cash dividends on common stock in the foreseeable future. AtDecember 31, 2018, the Company does not anticipate any option awards will be forfeited in the calculation of compensation expense due to thelimited number of employees that receive stock option grants and the Company’s historical employee turnover. F-20Table of ContentsThe following table summarizes the stock option activity in the stock-based compensation plans: Number ofShares WeightedAverageExercisePrice WeightedAverageRemainingContractualLife(in years) AggregateIntrinsic Value(in thousands) Outstanding, December 31, 2016 4,656,888 $4.30 Granted 498,375 2.39 Forfeited/Cancelled — — Exercised — — Outstanding, December 31, 2017 5,155,263 $4.11 Granted 1,011,875 5.01 Forfeited/Cancelled (1,354,330) 7.31 Exercised (2,098,829) 2.00 Outstanding, December 31, 2018 2,713,979 $4.67 6.74 $1,524 Exercisable, December 31, 2018 2,659,114 $4.69 6.69 $1,518 The aggregate intrinsic value in the table above represents the total pre-tax amount, net of exercise price, which would have been received byoption holders if all option holders had exercised all options with an exercise price lower than the market price on December 31, 2018, based onthe closing price of the Company’s common stock of $3.43 on that date.The weighted-average grant-date fair values of options granted during 2018 and 2017 were $3.98 and $1.88, respectively. As of December 31,2018 and 2017, there were unvested options to purchase 54,865 and 628,584 shares of common stock, respectively. Total expected unrecognizedcompensation cost related to such unvested options is $83,000 at December 31, 2018, which is expected to be recognized over a weighted-average period of 0.41 years.The aggregate intrinsic value of stock options exercised for the year ended December 31, 2018 was $11,076,199. There were no optionsexercised during the year ended December 31, 2017.During the years ended December 31, 2018 and 2017, 1,409,804 and 1,142,441 options became vested, respectively. The total grant date fairvalue of options vested during the years ended December 31, 2018 and 2017 was $4,519,000 and $1,066,000, respectively.The following table summarizes additional information regarding outstanding and exercisable options under our stock-based compensationplans at December 31, 2018: Options Outstanding Options Exercisable ExercisePrice (Range) Number ofShares WeightedAverageRemainingContractualLife WeightedAverageExercisePrice Number ofShares WeightedAverageExercisePrice (in years) $0.87 – 1.00 232,000 7.95 $0.88 232,000 $0.88 $1.01 – 3.00 854,137 7.35 2.34 851,147 2.34 $3.01 – 5.00 558,392 8.22 3.99 506,517 3.98 $5.01 – 8.00 886,950 5.24 6.55 886,950 6.55 $8.01 – 13.38 182,500 5.06 13.38 182,500 13.38 2,713,979 6.74 $4.67 2,659,114 $4.68 F-21Table of ContentsRestricted Stock IssuancesIn December 2017, two directors elected to take restricted stock grants in lieu of cash retainers for 2018. A total of 37,657 shares of restrictedstock valued at approximately $90,000 was amortized to expense on a straight-line basis until December 14, 2018 when the stock vested in full. 8.Line of CreditOn December 19, 2017, the Company entered into a $10 million Line of Credit arrangement with Richard E. Uihlein, a director and shareholderwho has an approximate 7% ownership interest in the Company on a fully-diluted basis at December 31, 2017. Originally, borrowings may bemade by the Company through December 31, 2018. Borrowings bear interest at the Applicable Federal Rate for short term loans published by theInternal Revenue Service (2.7% in January 2019). All borrowings and interest are due on December 31, 2019 but may be prepaid without penalty.In connection with the Line of Credit agreement, the Company issued to Mr. Uihlein warrants to purchase 1 million shares of the Company’scommon 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 underthe agreement. There were no borrowings under the Line of Credit during the year ended December 31, 2018 or 2017.On December 20, 2018, the Line of Credit arrangement was extended for one year for both borrowings and maturity. At the time of the conversionof the Series B Convertible Preferred stock into common stock (See Note 13), on January 11, 2019, the Line of Credit arrangement was extendedfor an additional two years for both borrowings and maturity. After the second amendment to the Line of Credit arrangement, borrowings may bemade through December 31, 2021 with repayment due on December 31, 2022. There was no additional consideration or benefits provided toMr. Uihlein for any of the extensions of 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 followingassumptions: an expected life of 7 years, volatility of 98%, risk free interest rate of 2.05% and zero dividends. The fair value of the vestedwarrants was recorded in other current assets and other assets (non-current) as a deferred financing cost and were to be amortized on a straight-linebasis from December 19, 2017 through December 31, 2019. The remaining unamortized balance of the deferred financing cost on December 20,2018 was adjusted to be recorded as expense on a straight-line basis through December 31, 2020. Amortization for the year ended December 31,2018 and 2017 of $336,000 and $12,000, respectively, was recorded as interest expense. The fair value of warrants that vest in the future basedon borrowings will be computed when those borrowings occur and amortized over the remaining period through December 31, 2022 reflectingthe second extension. 9.Loss Per ShareBasic net loss per common share is computed by dividing the net loss available to common stockholders by the weighted average number ofcommon shares outstanding during the period. Diluted net loss per common share is computed by dividing the net loss available to commonstockholders by the weighted average number of common shares and other potential common shares then outstanding. Potential common sharesconsist of common shares issuable upon the assumed exercise of in-the-money stock options and warrants and potential common shares related tothe conversion of the preferred stock. The computation of diluted F-22Table of Contentsnet 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, exceptper share amounts) 2018 2017 Net loss $(13,900) $(16,235) Preferred stock dividends (1,147) (1,232) Net loss applicable to common stockholders $(15,047) $(17,467) Basic and diluted net loss per share $(0.38) $(0.49) Shares used in computing basic and diluted net loss per share 39,414 35,521 Dilutive shares which could exist pursuant to the exercise of outstanding stock instruments and which were not included in the calculationbecause their affect would have been anti-dilutive are as follows: Year EndedDecember 31, 2018(Shares) 2017(Shares) Warrants to purchase shares of common stock 10,647,026 13,229,778 Options to purchase shares of common stock 2,713,979 5,155,263 Shares of common stock issuable upon conversion preferred stock 4,303,948 4,312,282 17,664,953 22,697,323 10.Commitments and ContingenciesLease CommitmentsEffective December 31, 2018, the Company entered into an amendment to its operating lease for office space in Norcross, GA for a term of thirty-eight months, beginning on January 1, 2019 and ending February 28, 2022 at a rate of approximately $3,800 per month. The amended leaseprovided for free rent for the first two months of the lease and continues the security deposit of $6,000. In addition to base rental paymentsincluded in the contractual obligations table above, the Company is responsible for our pro-rata share of the operating expenses for the building.Rent expense under this operating lease was $55,000 and $49,000 for the years ended December 31, 2018 and 2017, respectively. Futureminimum payments under this lease as of December 31, 2018 are as follows (in thousands): Year ended December 31, 2019 38 2020 46 2021 48 2022 8 Total $140 F-23Table of ContentsLegal ProceedingsThe Company records accruals for such contingencies to the extent that the Company concludes that their occurrence is probable and the relateddamages are estimable. There are no other pending legal proceedings except as noted above. 11.Galectin Sciences LLCIn 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-processresearch and development (“IPR&D”) contributed by SBH. The estimated fair value of the IPR&D contributed by SBH, on the date ofcontribution, was $400,000. Initially, the Company and SBH have a 50% equity ownership interest in the LLC, with neither party having controlover the LLC. Accordingly from inception through the fourth quarter of 2014, the Company accounted for its investment in the LLC using theequity method of accounting. Under the equity method of accounting, the Company’s investment was initially recorded at cost with subsequentadjustments to the carrying value to recognize additional investments in or distributions from the Investee, as well as the Company’s share of theInvestee’s earnings, losses and/or changes in capital. The estimated fair value of the IPR&D contributed to the LLC was immediately expensedupon contribution as there was no alternative future use available at the point of contribution. The operating agreement provides that if eitherparty does not desire to contribute its equal share of funding required after the initial capitalization, then the other party, providing all of thefunding, will have its ownership share increased in proportion to the total amount contributed from inception. In the fourth quarter of 2014, afterthe LLC had expended the $400,000 in cash, SBH decided not to contribute its share of the funding required. As a result, the Companycontributed the $73,000 needed for the fourth quarter of 2014 expenses of the LLC. The Company contributed $164,000, $201,000, $659,000and $687,000 for the LLC expenses (recorded in research and development expenses) in 2018, 2017, 2016 and 2015, respectively, and SBHcontributed $73,000 and $50,000 in 2017 and 2016, respectively. As of December 31, 2018, the Company’s ownership percentage in the LLCwas 80.8%. The Company accounts for the interest in the LLC as a consolidated, less than wholly owned subsidiary. Because the LLC’s equity isimmaterial, 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, priorto the change in accounting discussed previously, was $400,000, which includes the Company’s proportionate share of the non-cash chargeassociated with the contributed IPR&D of $200,000. 12.Income TaxesOn 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 afterDecember 31, 2017. The 2017 Tax Act also provides for the implementation of a territorial tax system, a one-time transition tax on certainforeign earnings, the acceleration of depreciation for certain assets placed into service after September 27, 2017 and other prospective changesbeginning in 2018, including repeal of the domestic manufacturing deduction, acceleration of tax revenue recognition, capitalization of researchand development expenditures, additional limitations on executive compensation and limitations on the deductibility of interest.Pursuant to the SEC Staff Accounting Bulletin No. 118, Income Tax Accounting Implications of the Tax Cuts and Jobs Act, the Company hascalculated as final its re-measurement of deferred taxes and has no uncertain tax positions. This includes a provisional amount related to the re-measurement of deferred tax assets based on the rates at which they are expected to reverse in the future, which is generally 21% plus theapplicable state tax rate, with a corresponding change to the valuation allowance as of December 31, 2017. No further adjustments were recordedin the year ended December 31, 2018. F-24Table of ContentsThe components of the net deferred tax assets are as follows at December 31: 2018 2017 (in thousands) Operating loss carryforwards $36,417 $34,173 Tax credit carryforwards 1,195 1,195 Other temporary differences 4,678 4,064 42,290 39,432 Less valuation allowance (42,290) (39,432) Net deferred tax asset $— $— The primary factors affecting the Company’s income tax rates were as follows: 2018 2017 Tax benefit at U.S. statutory rates (21%) (34%) State tax benefit (4.7%) (3.8%) Permanent differences 4.0% 1.7% Impact of the 2017 Tax Act — 113.1% Other 1.1% (4.9%) Expiring state NOL’s — — Changes in valuation allowance 20.6% (72.1%) 0% 0% As of December 31, 2018, the Company has federal and state net operating loss carryforwards totaling $8,924,000 which will never expire as aresult of the 2017 Tax Act. As of December 31, 2018, the Company has federal and state net operating loss carryforwards totaling $136,202,000and $103,172,000 respectively, which expire through 2037. The net operating losses include Federal and State excess benefits related to stockoptions of $2,121,000 that will be charged to additional paid-in capital when utilized. In addition, the Company has federal and state researchand development credits of $1,263,000 and $216,000, respectively, which expire through 2034. Ownership changes, as defined by Section 382of the Internal Revenue Code, may have limited the amount of net operating loss carryforwards that can be utilized annually to offset futuretaxable income. Past and subsequent ownership changes could further affect the limitation in future years. Because of the Company’s limitedoperating history and its recorded losses, management has provided, in each of the last two years, a 100% valuation allowance against theCompany’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 areopen for examination until the operating losses are utilized or the statute of limitations expires. As of December 31, 2018 and 2017, theCompany does not have any significant uncertain tax positions.13. Subsequent EventsOn 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-3Convertible Preferred Stock into 3,789,346 shares of Common Stock of Galectin Therapeutics. All special voting rights and protective provisionsthat 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 for3,579,642 shares of Common Stock issued by the Company in connection with F-25Table of Contentssale of the Series B-1 and Series B-2 Preferred Stock. Before the extension, the warrants had various expiration dates in 2019 and 2020. Thewarrant amendments give 10X Fund the right to nominate one director to the Company’s board of directors. Previously, under the nowextinguished 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 hasrecognized a charge for the change in fair value of the warrants immediately before and immediately after the modification. In January 2019, theCompany recognized a one-time non-cash charge of $6,622,000 related to the extension of the 3,579,642 warrants. The following assumptionswere used to value the extension of the warrants immediately before and immediately after the modification: a) immediately before themodification — 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 dividendsand; b) immediately following the modification — an expected life range of 5.09 to 6.33 years, volatility range of 106%, risk free interest raterange of 2.56% to 2.6% and zero dividends. F-26Exhibit 10.7AMENDED AND RESTATEDGALECTIN THERAPEUTICS INC.2009 INCENTIVE COMPENSATION PLANGALECTIN THERAPEUTICS, INC.AMENDED AND RESTATED 2009 INCENTIVE COMPENSATION PLAN1. Purpose. The purpose of this GALECTIN THERAPEUTICS, INC. AMENDED AND RESTATED 2009 INCENTIVE COMPENSATION PLAN(the “Plan”) is to assist Galectin Therapeutics, Inc., a Nevada corporation (the “Company”) and its Related Entities (as hereinafter defined) in attracting,motivating, retaining and rewarding high-quality executives and other employees, officers, directors, consultants and other persons who provideservices to the Company or its Related Entities by enabling such persons to acquire or increase a proprietary interest in the Company in order tostrengthen the mutuality of interests between such persons and the Company’s shareholders, and providing such persons with annual and long termperformance incentives to expend their maximum efforts in the creation of shareholder value.2. Definitions. For purposes of the Plan, the following terms shall be defined as set forth below, in addition to such terms defined in Section 1hereof and elsewhere herein.(a) “Award” means any Option, Stock Appreciation Right, Restricted Stock Award, Deferred Stock Award, Share granted as a bonus or inlieu of another Award, Dividend Equivalent, Other Stock-Based Award or Performance Award, together with any other right or interest, granted to aParticipant under the Plan.(b) “Award Agreement” means any written agreement, contract or other instrument or document evidencing any Award granted by theCommittee hereunder.(c) “Beneficiary” means the person, persons, trust or trusts that have been designated by a Participant in his or her most recent writtenbeneficiary designation filed with the Committee to receive the benefits specified under the Plan upon such Participant’s death or to which Awards orother rights are transferred if and to the extent permitted under Section 10(b) hereof. If, upon a Participant’s death, there is no designated Beneficiary orsurviving designated Beneficiary, then the term Beneficiary means the person, persons, trust or trusts entitled by will or the laws of descent anddistribution to receive such benefits.(d) “Beneficial Owner” and “Beneficial Ownership” shall have the meaning ascribed to such term in Rule 13d-3 under the Exchange Actand any successor to such Rule.(e) “Board” means the Company’s Board of Directors.(f) “Cause” shall, with respect to any Participant, have the meaning specified in the Award Agreement. In the absence of any definition inthe Award Agreement, “Cause” shall have the equivalent meaning or the same meaning as “cause” or “for cause” set forth in any employment,consulting, or other agreement for the performance of services between the Participant and the Company or a Related Entity or, in the absence of anysuch agreement or any such definition in such agreement, such term shall mean (i) the failure by the Participant to perform, in a reasonable manner, hisor her duties as assigned by the Company or a Related Entity, (ii) any violation or breach by the Participant of his or her employment, consulting orother similar agreement with the Company or a Related Entity, if any, (iii) any violation or breach by the Participant of any non-competition,non-solicitation, non-disclosure and/or other similar agreement with the Company or a Related Entity, (iv) any act by the Participant of dishonesty orbad faith with respect to the Company or a Related Entity, (v) use of alcohol, drugs or other similar substances in a manner that adversely affects theParticipant’s work performance, or (vi) the commission by the Participant of any act, misdemeanor, or crime reflecting unfavorably upon the Participantor the Company or any Related Entity. The good faith determination by the Committee of whether the Participant’s Continuous Service was terminatedby the Company for “Cause” shall be final and binding for all purposes hereunder.(g) “Change in Control” means a Change in Control as defined in Section 9(b) of the Plan.(h) “Code” means the Internal Revenue Code of 1986, as amended from time to time, including regulations thereunder and successorprovisions and regulations thereto.(i) “Committee” means a committee designated by the Board to administer the Plan; provided, however, that if the Board fails to designatea committee or if there are no longer any members on the committee so designated by the Board, or for any other reason determined by the Board, thenthe Board shall serve as the Committee. While it is intended that the Committee shall consist of at least two directors, each of whom shall be (i) a“non-employee director” within the meaning of Rule 16b-3 (or any successor rule) under the Exchange Act, unless administration of the Plan by“non-employee directors” is not then required in order for exemptions under Rule 16b-3 to apply to transactions under the Plan, (ii) an “outsidedirector” within the meaning of Section 162(m) of the Code, and (iii) “Independent”, the failure of the Committee to be so comprised shall notinvalidate any Award that otherwise satisfies the terms of the Plan.(j) “Consultant” means any Person (other than an Employee or a Director, solely with respect to rendering services in such Person’scapacity as a director) who is engaged by the Company or any Related Entity to render consulting or advisory services to the Company or such RelatedEntity.(k) “Continuous Service” means the uninterrupted provision of services to the Company or any Related Entity in any capacity ofEmployee, Director, Consultant or other service provider. Continuous Service shall not be considered to be interrupted in the case of (i) any approvedleave of absence, (ii) transfers among the Company, any Related Entities, or any successor entities, in any capacity of Employee, Director, Consultantor other service provider, or (iii) any change in status as long as the individual remains in the service of the Company or a Related Entity in anycapacity of Employee, Director, Consultant or other service provider (except as otherwise provided in the Award Agreement). An approved leave ofabsence shall include sick leave, military leave, or any other authorized personal leave.(l) “Covered Employee” means the Person who, as of the end of the taxable year, either is the principal executive officer of the Company oris serving as the acting principal executive officer of the Company, and each other Person whose compensation is required to be disclosed in theCompany’s filings with the Securities and Exchange Commission by reason of that person being among the three highest compensated officers of theCompany as of the end of a taxable year, or such other person as shall be considered a “covered employee” for purposes of Section 162(m) of the Code.(m) “Deferred Stock” means a right to receive Shares, including Restricted Stock, cash measured based upon the value of Shares or acombination thereof, at the end of a specified deferral period.(n) “Deferred Stock Award” means an Award of Deferred Stock granted to a Participant under Section 6(e) hereof.(o) “Director” means a member of the Board or the board of directors of any Related Entity.(p) “Disability” means a permanent and total disability (within the meaning of Section 22(e) of the Code), as determined by a medicaldoctor satisfactory to the Committee.(q) “Dividend Equivalent” means a right, granted to a Participant under Section 6(g) hereof, to receive cash, Shares, other Awards or otherproperty equal in value to dividends paid with respect to a specified number of Shares, or other periodic payments.(r) “Effective Date” means the effective date of the Plan, which shall be February 12, 2009.(s) “Eligible Person” means each officer, Director, Employee, Consultant and other person who provides services to the Company or anyRelated Entity. The foregoing notwithstanding, only Employees of the Company, or any parent corporation or subsidiary corporation of the Company(as those terms are defined in Sections 424(e) and (f) of the Code, respectively), shall be Eligible Persons for purposes of receiving any Incentive StockOptions. An Employee on leave of absence may, in the discretion of the Committee, be considered as still in the employ of the Company or a RelatedEntity for purposes of eligibility for participation in the Plan.(t) “Employee” means any person, including an officer or Director, who is an employee of the Company or any Related Entity. Thepayment of a director’s fee by the Company or a Related Entity shall not be sufficient to constitute “employment” by the Company.(u) “Exchange Act” means the Securities Exchange Act of 1934, as amended from time to time, including rules thereunder and successorprovisions and rules thereto.(v) “Fair Market Value” means the fair market value of Shares, Awards or other property as determined by the Committee, or underprocedures established by the Committee. Unless otherwise determined by the Committee, the Fair Market Value of a Share as of any given date shallbe (i) the last sale price of a Share on the principal national securities exchange on which the Common Stock is traded, if the Common Stock is thentraded on a national securities exchange; or (ii) the average of the closing bid and asked prices for the Common Stock quoted by an establishedquotation service for over-the-counter securities, if the Common Stock is not then traded on a national securities exchange.(w) “Good Reason” shall, with respect to any Participant, have the meaning specified in the Award Agreement. In the absence of anydefinition in the Award Agreement, “Good Reason” shall have the equivalent meaning or the same meaning as “good reason” or “for good reason” setforth in any employment, consulting or other agreement for the performance of services between the Participant and the Company or a Related Entityor, in the absence of any such agreement or any such definition in such agreement, such term shall mean (i) the assignment to the Participant of anyduties inconsistent in any material respect with the Participant’s duties or responsibilities as assigned by the Company or a Related Entity, or any otheraction by the Company or a Related Entity which results in a material diminution in such duties or responsibilities, excluding for this purpose anisolated, insubstantial and inadvertent action not taken in bad faith and which is remedied by the Company or a Related Entity promptly after receiptof notice thereof given by the Participant; (ii) any material failure by the Company or a Related Entity to comply with its obligations to the Participantas agreed upon, other than an isolated, insubstantial and inadvertent failure not occurring in bad faith and which is remedied by the Company or aRelated Entity promptly after receipt of notice thereof given by the Participant; or (iii) the Company’s or Related Entity’s requiring the Participant tobe based at any office or location outside of fifty miles from the location of employment or service as of the date of Award, except for travel reasonablyrequired in the performance of the Participant’s responsibilities.(x) “Incentive Stock Option” means any Option intended to be designated as an incentive stock option within the meaning of Section 422of the Code or any successor provision thereto.(y) “Independent”, when referring to either the Board or members of the Committee, shall have the same meaning as used in the rules of theListing Market.(z) “Incumbent Board” means the Incumbent Board as defined in Section 9(b)(ii) hereof.(aa) “Listing Market” means the OTC Bulletin Board or any other national securities exchange on which any securities of the Companyare listed for trading, and if not listed for trading, by the rules of the Nasdaq Market.(bb) “Option” means a right granted to a Participant under Section 6(b) hereof, to purchase Shares or other Awards at a specified priceduring specified time periods.(cc) “Optionee” means a person to whom an Option is granted under this Plan or any person who succeeds to the rights of such personunder this Plan.(dd) “Other Stock-Based Awards” means Awards granted to a Participant under Section 6(i) hereof.(ee) “Participant” means a person who has been granted an Award under the Plan which remains outstanding, including a person who is nolonger an Eligible Person.(ff) “Performance Award” means any Award of Performance Shares or Performance Units granted pursuant to Section 6(h) hereof.(gg) “Performance Period” means that period established by the Committee at the time any Performance Award is granted or at any timethereafter during which any performance goals specified by the Committee with respect to such Award are to be measured.(hh) “Performance Share” means any grant pursuant to Section 6(h) hereof of a unit valued by reference to a designated number of Shares,which value may be paid to the Participant by delivery of such property as the Committee shall determine, including cash, Shares, other property, orany combination thereof, upon achievement of such performance goals during the Performance Period as the Committee shall establish at the time ofsuch grant or thereafter.(ii) “Performance Unit” means any grant pursuant to Section 6(h) hereof of a unit valued by reference to a designated amount of property(including cash) other than Shares, which value may be paid to the Participant by delivery of such property as the Committee shall determine,including cash, Shares, other property, or any combination thereof, upon achievement of such performance goals during the Performance Period as theCommittee shall establish at the time of such grant or thereafter.(jj) “Person” shall have the meaning ascribed to such term in Section 3(a)(9) of the Exchange Act and used in Sections 13(d) and 14(d)thereof, and shall include a “group” as defined in Section 13(d) thereof.(kk) “Related Entity” means any Subsidiary, and any business, corporation, partnership, limited liability company or other entitydesignated by the Board, in which the Company or a Subsidiary holds a substantial ownership interest, directly or indirectly.(ll) “Restriction Period” means the period of time specified by the Committee that Restricted Stock Awards shall be subject to suchrestrictions on transferability, risk of forfeiture and other restrictions, if any, as the Committee may impose.(mm) “Restricted Stock” means any Share issued with the restriction that the holder may not sell, transfer, pledge or assign such Share andwith such risks of forfeiture and other restrictions as the Committee, in its sole discretion, may impose (including any restriction on the right to votesuch Share and the right to receive any dividends), which restrictions may lapse separately or in combination at such time or times, in installments orotherwise, as the Committee may deem appropriate.(nn) “Restricted Stock Award” means an Award granted to a Participant under Section 6(d) hereof.(oo) “Rule 16b-3” means Rule 16b-3, as from time to time in effect and applicable to the Plan and Participants, promulgated by theSecurities and Exchange Commission under Section 16 of the Exchange Act.(pp) “Shares” means the shares of common stock of the Company, par value $0.001 per share, and such other securities as may besubstituted (or resubstituted) for Shares pursuant to Section 10(c) hereof.(qq) “Stock Appreciation Right” means a right granted to a Participant under Section 6(c) hereof.(rr) “Subsidiary” means any corporation or other entity in which the Company has a direct or indirect ownership interest of 50% or more ofthe total combined voting power of the then outstanding securities or interests of such corporation or other entity entitled to vote generally in theelection of directors or in which the Company has the right to receive 50% or more of the distribution of profits or 50% or more of the assets onliquidation or dissolution.(ss) “Substitute Awards” means Awards granted or Shares issued by the Company in assumption of, or in substitution or exchange for,Awards previously granted, or the right or obligation to make future Awards, by a company (i) acquired by the Company or any Related Entity,(ii) which becomes a Related Entity after the date hereof, or (iii) with which the Company or any Related Entity combines.3. Administration.(a) Authority of the Committee. The Plan shall be administered by the Committee except to the extent (and subject to the limitationsimposed by Section 3(b) hereof) the Board elects to administer the Plan, in which case the Plan shall be administered by only those members of theBoard who are Independent members of the Board, in which case references herein to the “Committee” shall be deemed to include references to theIndependent members of the Board. The Committee shall have full and final authority, subject to and consistent with the provisions of the Plan, toselect Eligible Persons to become Participants, grant Awards, determine the type, number and other terms and conditions of, and all other mattersrelating to, Awards, prescribe Award Agreements (which need not be identical for each Participant) and rules and regulations for the administration ofthe Plan, construe and interpret the Plan and Award Agreements and correct defects, supply omissions or reconcile inconsistencies therein, and to makeall other decisions and determinations as the Committee may deem necessary or advisable for the administration of the Plan. In exercising anydiscretion granted to the Committee under the Plan or pursuant to any Award, the Committee shall not be required to follow past practices, act in amanner consistent with past practices, or treat any Eligible Person or Participant in a manner consistent with the treatment of any other Eligible Personsor Participants.(b) Manner of Exercise of Committee Authority. The Committee, and not the Board, shall exercise sole and exclusive discretion (i) on anymatter relating to a Participant then subject to Section 16 of the Exchange Act with respect to the Company to the extent necessary in order thattransactions by such Participant shall be exempt under Rule 16b-3 under the Exchange Act, (ii) with respect to any Award that is intended to qualify as“performance-based compensation” under Section 162(m), to the extent necessary in order for such Award to so qualify; and (iii) with respect to anyAward to an Independent Director. Any action of the Committee shall be final, conclusive and binding on all persons, including the Company, itsRelated Entities, Eligible Persons, Participants, Beneficiaries, transferees under Section 10(b) hereof or other persons claiming rights from or through aParticipant, and shareholders.The express grant of any specific power to the Committee, and the taking of any action by the Committee, shall not be construed as limiting any poweror authority of the Committee. The Committee may delegate to officers or managers of the Company or any Related Entity, or committees thereof, theauthority, subject to such terms and limitations as the Committee shall determine, to perform such functions, including administrative functions as theCommittee may determine to the extent that such delegation will not result in the loss of an exemption under Rule 16b-3(d)(1) for Awards granted toParticipants subject to Section 16 of the Exchange Act in respect of the Company and will not cause Awards intended to qualify as “performance-basedcompensation” under Code Section 162(m) to fail to so qualify. The Committee may appoint agents to assist it in administering the Plan.(c) Limitation of Liability. The Committee and the Board, and each member thereof, shall be entitled to, in good faith, rely or act upon anyreport or other information furnished to him or her by any officer or Employee, the Company’s independent auditors, Consultants or any other agentsassisting in the administration of the Plan. Members of the Committee and the Board, and any officer or Employee acting at the direction or on behalfof the Committee or the Board, shall not be personally liable for any action or determination taken or made in good faith with respect to the Plan, andshall, to the extent permitted by law, be fully indemnified and protected by the Company with respect to any such action or determination.4. Shares Subject to Plan.(a) Limitation on Overall Number of Shares Available for Delivery Under Plan. Subject to adjustment as provided in Section 10(c) hereof,the total number of Shares reserved and available for delivery under the Plan shall be 6,733,334. Any Shares delivered under the Plan may consist, inwhole or in part, of authorized and unissued shares or treasury shares.(b) Application of Limitation to Grants of Awards. No Award may be granted if the number of Shares to be delivered in connection withsuch an Award exceeds the number of Shares remaining available for delivery under the Plan, minus the number of Shares deliverable in settlement ofor relating to then outstanding Awards. The Committee may adopt reasonable counting procedures to ensure appropriate counting, avoid doublecounting (as, for example, in the case of tandem or substitute awards) and make adjustments if the number of Shares actually delivered differs from thenumber of Shares previously counted in connection with an Award.(c) Availability of Shares Not Delivered under Awards and Adjustments to Limits.(i) If any Awards are forfeited, expire or otherwise terminate without issuance of such Shares, or any Award is settled for cash orotherwise does not result in the issuance of all or a portion of the Shares subject to such Award, the Shares to which those Awards were subject, shall, tothe extent of such forfeiture, expiration, termination, cash settlement or non-issuance, again be available for delivery with respect to Awards under thePlan, subject to Section 4(c)(iv) below.(ii) In the event that any Option or other Award granted hereunder is exercised through the tendering of Shares (either actually or byattestation) or by the withholding of Shares by the Company, or withholding tax liabilities arising from such option or other award are satisfied by thetendering of Shares (either actually or by attestation) or by the withholding of Shares by the Company, then only the number of Shares issued net of theShares tendered or withheld shall be counted for purposes of determining the maximum number of Shares available for grant under the Plan.(iii) Substitute Awards shall not reduce the Shares authorized for delivery under the Plan or authorized for delivery to a Participantin any period. Additionally, in the event that a company acquired by the Company or any Related Entity or with which the Company or any RelatedEntity combines has shares available under a pre-existing plan approved by its shareholders, the shares available for delivery pursuant to the terms ofsuch pre-existing plan (as adjusted, to the extent appropriate, using the exchange ratio or other adjustment or valuation ratio or formula used in suchacquisition or combination to determine the consideration payable to the holders of common stock of the entities party to such acquisition orcombination) may be used for Awards under the Plan and shall not reduce the Shares authorized for delivery under the Plan; if and to the extent that theuse of such Shares would not require approval of the Company’s shareholders under the rules of the Listing Market.(iv) Any Share that again becomes available for delivery pursuant to this Section 4(c) shall be added back as one (1) Share.(v) Notwithstanding anything in this Section 4(c) to the contrary but subject to adjustment as provided in Section 10(c) hereof, themaximum aggregate number of Shares that may be delivered under the Plan as a result of the exercise of the Incentive Stock Options shall be 6,533,334Shares.5. Eligibility; Per-Person Award Limitations. Awards may be granted under the Plan only to Eligible Persons. Subject to adjustment as providedin Section 10(c), in any fiscal year of the Company during any part of which the Plan is in effect, no Participant may be granted (i) Options or StockAppreciation Rights with respect to more than 2,000,000 Shares or (ii) Restricted Stock, Deferred Stock, Performance Shares and/or Other Stock-BasedAwards with respect to more than 2,000,000 Shares. In addition, the maximum dollar value payable to any one Participant with respect to PerformanceUnits is (x) $1,000,000 with respect to any 12 month Performance Period and (y) with respect to any Performance Period that is more than 12 months,$3,000,000.6. Specific Terms of Awards.(a) General. Awards may be granted on the terms and conditions set forth in this Section 6. In addition, the Committee may impose on anyAward or the exercise thereof, at the date of grant or thereafter (subject to Section 10(e)), such additional terms and conditions, not inconsistent withthe provisions of the Plan, as the Committee shall determine, including terms requiring forfeiture of Awards in the event of termination of theParticipant’s Continuous Service and terms permitting a Participant to make elections relating to his or her Award. Except as otherwise expresslyprovided herein, the Committee shall retain full power and discretion to accelerate, waive or modify, at any time, any term or condition of an Awardthat is not mandatory under the Plan. Except in cases in which the Committee is authorized to require other forms of consideration under the Plan, or tothe extent other forms of consideration must be paid to satisfy the requirements of Massachusetts law, no consideration other than services may berequired for the grant (as opposed to the exercise) of any Award.(b) Options. The Committee is authorized to grant Options to any Eligible Person on the following terms and conditions:(i) Exercise Price. Other than in connection with Substitute Awards, the exercise price per Share purchasable under an Option shallbe determined by the Committee, provided that such exercise price shall not be less than 100% of the Fair Market Value of a Share on the date of grantof the Option and shall not, in any event, be less than the par value of a Share on the date of grant of the Option. If an Employee owns or is deemed toown (by reason of the attribution rules applicable under Section 424(d) of the Code) more than 10% of the combined voting power of all classes ofstock of the Company (or any parent corporation or subsidiary corporation of the Company, as those terms are defined in Sections 424(e) and (f) of theCode, respectively) and an Incentive Stock Option is granted to such Employee, the exercise price of such Incentive Stock Option (to the extentrequired by the Code at the time of grant) shall be no less than 110% of the Fair Market Value of a Share on the date such Incentive Stock Option isgranted.(ii) Time and Method of Exercise. The Committee shall determine the time or times at which or the circumstances under which anOption may be exercised in whole or in part (including based on achievement of performance goals and/or future service requirements), the time ortimes at which Options shall cease to be or become exercisable following termination of Continuous Service or upon other conditions, the methods bywhich the exercise price may be paid or deemed to be paid (including in the discretion of the Committee a cashless exercise procedure), the form ofsuch payment, including, without limitation, cash, Shares (including without limitation the withholding of Shares otherwise deliverable pursuant tothe Award), other Awards or awards granted under other plans of the Company or a Related Entity, or other property (including notes or othercontractual obligations of Participants to make payment on a deferred basis provided that such deferred payments are not in violation of Section 13(k)of the Exchange Act, or any rule or regulation adopted thereunder or any other applicable law), and the methods by or forms in which Shares will bedelivered or deemed to be delivered to Participants.(iii) Incentive Stock Options. The terms of any Incentive Stock Option granted under the Plan shall comply in all respects with theprovisions of Section 422 of the Code. Anything in the Plan to the contrary notwithstanding, no term of the Plan relating to Incentive Stock Options(including any Stock Appreciation Right issued in tandem therewith) shall be interpreted, amended or altered, nor shall any discretion or authoritygranted under the Plan be exercised, so as to disqualify either the Plan or any Incentive Stock Option under Section 422 of the Code, unless theParticipant has first requested, or consents to, the change that will result in such disqualification. Thus, if and to the extent required to comply withSection 422 of the Code, Options granted as Incentive Stock Options shall be subject to the following special terms and conditions:(A) the Option shall not be exercisable for more than ten years after the date such Incentive Stock Option is granted;provided, however, that if a Participant owns or is deemed to own (by reason of the attribution rules of Section 424(d) of the Code) more than 10% ofthe combined voting power of all classes of stock of the Company (or any parent corporation or subsidiary corporation of the Company, as those termsare defined in Sections 424(e) and (f) of the Code, respectively) and the Incentive Stock Option is granted to such Participant, the term of the IncentiveStock Option shall be (to the extent required by the Code at the time of the grant) for no more than five years from the date of grant; and(B) The aggregate Fair Market Value (determined as of the date the Incentive Stock Option is granted) of the Shares withrespect to which Incentive Stock Options granted under the Plan and all other option plans of the Company (and any parent corporation or subsidiarycorporation of the Company, as those terms are defined in Sections 424(e) and (f) of the Code, respectively) that become exercisable for the first timeby the Participant during any calendar year shall not (to the extent required by the Code at the time of the grant) exceed $100,000.(c) Stock Appreciation Rights. The Committee may grant Stock Appreciation Rights to any Eligible Person in conjunction with all or partof any Option granted under the Plan or at any subsequent time during the term of such Option (a “Tandem Stock Appreciation Right”), or withoutregard to any Option (a “Freestanding Stock Appreciation Right”), in each case upon such terms and conditions as the Committee may establish in itssole discretion, not inconsistent with the provisions of the Plan, including the following:(i) Right to Payment. A Stock Appreciation Right shall confer on the Participant to whom it is granted a right to receive, uponexercise thereof, the excess of (A) the Fair Market Value of one Share on the date of exercise over (B) the grant price of the Stock Appreciation Right asdetermined by the Committee. The grant price of a Stock Appreciation Right shall not be less than 100% of the Fair Market Value of a Share on thedate of grant, in the case of a Freestanding Stock Appreciation Right, or less than the associated Option exercise price, in the case of a Tandem StockAppreciation Right.(ii) Other Terms. The Committee shall determine at the date of grant or thereafter, the time or times at which and the circumstancesunder which a Stock Appreciation Right may be exercised in whole or in part (including based on achievement of performance goals and/or futureservice requirements), the time or times at which Stock Appreciation Rights shall cease to be or become exercisable following termination ofContinuous Service or upon other conditions, the method of exercise, method of settlement, form of consideration payable in settlement, method by orforms in which Shares will be delivered or deemed to be delivered to Participants, whether or not a Stock Appreciation Right shall be in tandem or incombination with any other Award, and any other terms and conditions of any Stock Appreciation Right.(iii) Tandem Stock Appreciation Rights. Any Tandem Stock Appreciation Right may be granted at the same time as the relatedOption is granted or, for Options that are not Incentive Stock Options, at any time thereafter before exercise or expiration of such Option. Any TandemStock Appreciation Right related to an Option may be exercised only when the related Option would be exercisable and the Fair Market Value of theShares subject to the related Option exceeds the exercise price at which Shares can be acquired pursuant to the Option. In addition, if a Tandem StockAppreciation Right exists with respect to less than the full number of Shares covered by a related Option, then an exercise or termination of suchOption shall not reduce the number of Shares to which the Tandem Stock Appreciation Right applies until the number of Shares then exercisable undersuch Option equals the number of Shares to which the Tandem Stock Appreciation Right applies. Any Option related to a Tandem Stock AppreciationRight shall no longer be exercisable to the extent the Tandem Stock Appreciation Right has been exercised, and any Tandem Stock AppreciationRight shall no longer be exercisable to the extent the related Option has been exercised.(d) Restricted Stock Awards. The Committee is authorized to grant Restricted Stock Awards to any Eligible Person on the following termsand conditions:(i) Grant and Restrictions. Restricted Stock Awards shall be subject to such restrictions on transferability, risk of forfeiture andother restrictions, if any, as the Committee may impose, or as otherwise provided in this Plan during the Restriction Period. The terms of any RestrictedStock Award granted under the Plan shall be set forth in a written Award Agreement which shall contain provisions determined by the Committee andnot inconsistent with the Plan. The restrictions may lapse separately or in combination at such times, under such circumstances (including based onachievement of performance goals and/or future service requirements), in such installments or otherwise, as the Committee may determine at the date ofgrant or thereafter. Except to the extent restricted under the terms of the Plan and any Award Agreement relating to a Restricted Stock Award, aParticipant granted Restricted Stock shall have all of the rights of a shareholder, including the right to vote the Restricted Stock and the right to receivedividends thereon (subject to any mandatory reinvestment or other requirement imposed by the Committee). During the period that the RestrictionStock Award is subject to a risk of forfeiture, subject to Section 10(b) below and except as otherwise provided in the Award Agreement, the RestrictedStock may not be sold, transferred, pledged, hypothecated, margined or otherwise encumbered by the Participant.(ii) Forfeiture. Except as otherwise determined by the Committee, upon termination of a Participant’s Continuous Service duringthe applicable Restriction Period, the Participant’s Restricted Stock that is at that time subject to a risk of forfeiture that has not lapsed or otherwisebeen satisfied shall be forfeited and reacquired by the Company; provided that, subject to the limitations set forth in Section 6(j)(ii) hereof, theCommittee may provide, by rule or regulation or in any Award Agreement, or may determine in any individual case, that forfeiture conditions relatingto Restricted Stock Awards shall be waived in whole or in part in the event of terminations resulting from specified causes, and the Committee may inother cases waive in whole or in part the forfeiture of Restricted Stock.(iii) Certificates for Stock. Restricted Stock granted under the Plan may be evidenced in such manner as the Committee shalldetermine. If certificates representing Restricted Stock are registered in the name of the Participant, the Committee may require that such certificatesbear an appropriate legend referring to the terms, conditions and restrictions applicable to such Restricted Stock, that the Company retain physicalpossession of the certificates, and that the Participant deliver a stock power to the Company, endorsed in blank, relating to the Restricted Stock.(iv) Dividends and Splits. As a condition to the grant of a Restricted Stock Award, the Committee may require or permit aParticipant to elect that any cash dividends paid on a Share of Restricted Stock be automatically reinvested in additional Shares of Restricted Stock orapplied to the purchase of additional Awards under the Plan. Unless otherwise determined by the Committee, Shares distributed in connection with astock split or stock dividend, and other property distributed as a dividend, shall be subject to restrictions and a risk of forfeiture to the same extent asthe Restricted Stock with respect to which such Shares or other property have been distributed.(e) Deferred Stock Award. The Committee is authorized to grant Deferred Stock Awards to any Eligible Person on the following terms andconditions:(i) Award and Restrictions. Satisfaction of a Deferred Stock Award shall occur upon expiration of the deferral period specified forsuch Deferred Stock Award by the Committee (or, if permitted by the Committee, as elected by the Participant). In addition, a Deferred Stock Awardshall be subject to such restrictions (which may include a risk of forfeiture) as the Committee may impose, if any, which restrictions may lapse at theexpiration of the deferral period or at earlier specified times (including based on achievement of performance goals and/or future service requirements),separately or in combination, in installments or otherwise, as the Committee may determine. A Deferred Stock Award may be satisfied by delivery ofShares, cash equal to the Fair Market Value of the specified number of Shares covered by the Deferred Stock, or a combination thereof, as determinedby the Committee at the date of grant or thereafter. Prior to satisfaction of a Deferred Stock Award, a Deferred Stock Award carries no voting ordividend or other rights associated with Share ownership.(ii) Forfeiture. Except as otherwise determined by the Committee, upon termination of a Participant’s Continuous Service duringthe applicable deferral period or portion thereof to which forfeiture conditions apply (as provided in the Award Agreement evidencing the DeferredStock Award), the Participant’s Deferred Stock Award that is at that time subject to a risk of forfeiture that has not lapsed or otherwise been satisfiedshall be forfeited; provided that, subject to the limitations set forth in Section 6(j)(ii) hereof, the Committee may provide, by rule or regulation or inany Award Agreement, or may determine in any individual case, that forfeiture conditions relating to a Deferred Stock Award shall be waived in wholeor in part in the event of terminations resulting from specified causes, and the Committee may in other cases waive in whole or in part the forfeiture ofany Deferred Stock Award.(iii) Dividend Equivalents. Unless otherwise determined by the Committee at the date of grant, any Dividend Equivalents that aregranted with respect to any Deferred Stock Award shall be either (A) paid with respect to such Deferred Stock Award at the dividend payment date incash or in Shares of unrestricted stock having a Fair Market Value equal to the amount of such dividends, or (B) deferred with respect to such DeferredStock Award and the amount or value thereof automatically deemed reinvested in additional Deferred Stock, other Awards or other investmentvehicles, as the Committee shall determine or permit the Participant to elect. The applicable Award Agreement shall specify whether any DividendEquivalents shall be paid at the dividend payment date, deferred or deferred at the election of the Participant. If the Participant may elect to defer theDividend Equivalents, such election shall be made within 30 days after the grant date of the Deferred Stock Award, but in no event later than 12months before the first date on which any portion of such Deferred Stock Award vests.(f) Bonus Stock and Awards in Lieu of Obligations. The Committee is authorized to grant Shares to any Eligible Persons as a bonus, or togrant Shares or other Awards in lieu of obligations to pay cash or deliver other property under the Plan or under other plans or compensatoryarrangements, provided that, in the case of Eligible Persons subject to Section 16 of the Exchange Act, the amount of such grants remains within thediscretion of the Committee to the extent necessary to ensure that acquisitions of Shares or other Awards are exempt from liability under Section 16(b)of the Exchange Act. Shares or Awards granted hereunder shall be subject to such other terms as shall be determined by the Committee.(g) Dividend Equivalents. The Committee is authorized to grant Dividend Equivalents to any Eligible Person entitling the Eligible Personto receive cash, Shares, other Awards, or other property equal in value to the dividends paid with respect to a specified number of Shares, or otherperiodic payments. Dividend Equivalents may be awarded on a free-standing basis or in connection with another Award. The Committee may providethat Dividend Equivalents shall be paid or distributed when accrued or shall be deemed to have been reinvested in additional Shares, Awards, or otherinvestment vehicles, and subject to such restrictions on transferability and risks of forfeiture, as the Committee may specify. Any such determination bythe Committee shall be made at the grant date of the applicable Award.(h) Performance Awards. The Committee is authorized to grant Performance Awards to any Eligible Person payable in cash, Shares, orother Awards, on terms and conditions established by the Committee, subject to the provisions of Section 8 if and to the extent that the Committeeshall, in its sole discretion, determine that an Award shall be subject to those provisions. The performance criteria to be achieved during anyPerformance Period and the length of the Performance Period shall be determined by the Committee upon the grant of each Performance Award;provided, however, that a Performance Period shall not be shorter than 12 months nor longer than 5 years. Except as provided in Section 9 or as may beprovided in an Award Agreement, Performance Awards will be distributed only after the end of the relevant Performance Period. The performance goalsto be achieved for each Performance Period shall be conclusively determined by the Committee and may be based upon the criteria set forth inSection 8(b), or in the case of an Award that the Committee determines shall not be subject to Section 8 hereof, any other criteria that the Committee, inits sole discretion, shall determine should be used for that purpose. The amount of the Award to be distributed shall be conclusively determined by theCommittee. Performance Awards may be paid in a lump sum or in installments following the close of the Performance Period or, in accordance withprocedures established by the Committee, on a deferred basis.(i) Other Stock-Based Awards. The Committee is authorized, subject to limitations under applicable law, to grant to any Eligible Personsuch other Awards that may be denominated or payable in, valued in whole or in part by reference to, or otherwise based on, or related to, Shares, asdeemed by the Committee to be consistent with the purposes of the Plan. Other Stock-Based Awards may be granted to Participants either alone or inaddition to other Awards granted under the Plan, and such Other Stock-Based Awards shall also be available as a form of payment in the settlement ofother Awards granted under the Plan. The Committee shall determine the terms and conditions of such Awards. Shares delivered pursuant to an Awardin the nature of a purchase right granted under this Section 6(i) shall be purchased for such consideration, (including without limitation loans from theCompany or a Related Entity provided that such loans are not in violation of Section 13(k) of the Exchange Act, or any rule or regulation adoptedthereunder or any other applicable law) paid for at such times, by such methods, and in such forms, including, without limitation, cash, Shares, otherAwards or other property, as the Committee shall determine.7. Certain Provisions Applicable to Awards.(a) Stand-Alone, Additional, Tandem, and Substitute Awards. Awards granted under the Plan may, in the discretion of the Committee, begranted either alone or in addition to, in tandem with, or in substitution or exchange for, any other Award or any award granted under another plan ofthe Company, any Related Entity, or any business entity to be acquired by the Company or a Related Entity, or any other right of a Participant toreceive payment from the Company or any Related Entity. Such additional, tandem, and substitute or exchange Awards may be granted at any time. Ifan Award is granted in substitution or exchange for another Award or award, the Committee shall require the surrender of such other Award or award inconsideration for the grant of the new Award. In addition, Awards may be granted in lieu of cash compensation, including in lieu of cash amountspayable under other plans of the Company or any Related Entity, in which the value of Shares subject to the Award is equivalent in value to the cashcompensation (for example, Deferred Stock or Restricted Stock), or in which the exercise price, grant price or purchase price of the Award in the natureof a right that may be exercised is equal to the Fair Market Value of the underlying Shares minus the value of the cash compensation surrendered (forexample, Options or Stock Appreciation Right granted with an exercise price or grant price “discounted” by the amount of the cash compensationsurrendered), provided that any such determination to grant an Award in lieu of cash compensation must be made in compliance with Section 409A ofthe Code.(b) Term of Awards. The term of each Award shall be for such period as may be determined by the Committee; provided that in no eventshall the term of any Option or Stock Appreciation Right exceed a period of ten years (or in the case of an Incentive Stock Option such shorter term asmay be required under Section 422 of the Code).(c) Form and Timing of Payment Under Awards; Deferrals. Subject to the terms of the Plan and any applicable Award Agreement,payments to be made by the Company or a Related Entity upon the exercise of an Option or other Award or settlement of an Award may be made insuch forms as the Committee shall determine, including, without limitation, cash, Shares, other Awards or other property, and may be made in a singlepayment or transfer, in installments, or on a deferred basis, provided that any determination to pay in installments or on a deferred basis shall be madeby the Committee at the date of grant. Any installment or deferral provided for in the preceding sentence shall, however, be subject to the Company’scompliance with applicable law and all applicable rules of the Listing Market, and in a manner intended to be exempt from or otherwise satisfy therequirements of Section 409A of the Code. Subject to Section 7(e) hereof, the settlement of any Award may be accelerated, and cash paid in lieu ofShares in connection with such settlement, in the sole discretion of the Committee or upon occurrence of one or more specified events (in addition to aChange in Control). Any such settlement shall be at a value determined by the Committee in its sole discretion, which, without limitation, may in thecase of an Option or Stock Appreciation Right be limited to the amount if any by which the Fair Market Value of a Share on the settlement dateexceeds the exercise or grant price. Installment or deferred payments may be required by the Committee (subject to Section 7(e) of the Plan, includingthe consent provisions thereof in the case of any deferral of an outstanding Award not provided for in the original Award Agreement) or permitted atthe election of the Participant on terms and conditions established by the Committee. The Committee may, without limitation, make provision for thepayment or crediting of a reasonable interest rate on installment or deferred payments or the grant or crediting of Dividend Equivalents or otheramounts in respect of installment or deferred payments denominated in Shares.(d) Exemptions from Section 16(b) Liability. : If the It is the intent of the Company that the grant of any Awards to or other transaction bya Participant who is subject to Section 16 of the Exchange Act shall be exempt from Section 16 pursuant to an applicable exemption (except fortransactions acknowledged in writing to be non-exempt by such Participant). Accordingly, if any provision of this Plan or any Award Agreement doesnot comply with the requirements of Rule 16b-3 then applicable to any such transaction, such provision shall be construed or deemed amended to theextent necessary to conform to the applicable requirements of Rule 16b-3 so that such Participant shall avoid liability under Section 16(b).(e) Code Section 409A.(i) The Award Agreement for any Award that the Committee reasonably determines to constitute a Section 409A Plan, and theprovisions of the Plan applicable to that Award, shall be construed in a manner consistent with the applicable requirements of Section 409A, and theCommittee, in its sole discretion and without the consent of any Participant, may amend any Award Agreement (and the provisions of the Planapplicable thereto) if and to the extent that the Committee determines that such amendment is necessary or appropriate to comply with therequirements of Section 409A of the Code.(ii) If any Award constitutes a “nonqualified deferred compensation plan” under Section 409A of the Code (a “Section 409A Plan”),then the Award shall be subject to the following additional requirements, if and to the extent required to comply with Section 409A of the Code:(A) Payments under the Section 409A Plan may not be made earlier than the first to occur of (u) the Participant’s “separationfrom service”, (v) the date the Participant becomes “disabled”, (w) the Participant’s death, (x) a “specified time (or pursuant to a fixed schedule)”specified in the Award Agreement at the date of the deferral of such compensation, (y) a “change in the ownership or effective control of thecorporation, or in the ownership of a substantial portion of the assets” of the Company, or (z) the occurrence of an “unforeseeable emergency”;(B) The time or schedule for any payment of the deferred compensation may not be accelerated, except to the extent providedin applicable Treasury Regulations or other applicable guidance issued by the Internal Revenue Service;(C) Any elections with respect to the deferral of such compensation or the time and form of distribution of such deferredcompensation shall comply with the requirements of Section 409A(a)(4) of the Code; and(D) In the case of any Participant who is “specified employee”, a distribution on account of a “separation from service” maynot be made before the date which is six months after the date of the Participant’s “separation from service” (or, if earlier, the date of the Participant’sdeath).For purposes of the foregoing, the terms in quotations shall have the same meanings as those terms have for purposes of Section 409A of theCode, and the limitations set forth herein shall be applied in such manner (and only to the extent) as shall be necessary to comply with anyrequirements of Section 409A of the Code that are applicable to the Award. The Company does not make any representation to the Participant that anyAwards awarded under this Plan will be exempt from, or satisfy, the requirements of Section 409A, and the Company shall have no liability or otherobligation to indemnify or hold harmless any Participant or Beneficiary for any tax, additional tax, interest or penalties that any Participant orBeneficiary may incur in the event that any provision of this Plan, any Award Agreement, or any amendment or modification thereof, or any otheraction taken with respect thereto, is deemed to violate any of the requirements of Section 409A.(iii) Notwithstanding the foregoing, the Company does not make any representation to any Participant or Beneficiary that anyAwards made pursuant to this Plan are exempt from, or satisfy, the requirements of Section 409A, and the Company shall have no liability or otherobligation to indemnify or hold harmless the Participant or any Beneficiary for any tax, additional tax, interest or penalties that the Participant or anyBeneficiary may incur in the event that any provision of this Plan, or any Award Agreement, or any amendment or modification thereof, or any otheraction taken with respect thereto, is deemed to violate any of the requirements of Section 409A.8. Code Section 162(m) Provisions.(a) Covered Employees. Unless otherwise specified by the Committee,] the provisions of this Section 8 shall be applicable to anyPerformance Award granted to an Eligible Person who is, or is likely to be, as of the end of the tax year in which the Company would claim a taxdeduction in connection with such Award, a Covered Employee.(b) Performance Criteria. If a Performance Award is subject to this Section 8, then the payment or distribution thereof or the lapsing ofrestrictions thereon and the distribution of cash, Shares or other property pursuant thereto, as applicable, shall be contingent upon achievement of oneor more objective performance goals. Performance goals shall be objective and shall otherwise meet the requirements of Section 162(m) of the Codeand regulations thereunder including the requirement that the level or levels of performance targeted by the Committee result in the achievement ofperformance goals being “substantially uncertain.” One or more of the following business criteria for the Company, on a consolidated basis, and/or forRelated Entities, or for business or geographical units of the Company and/or a Related Entity (except with respect to the total shareholder return andearnings per share criteria), shall be used by the Committee in establishing performance goals for such Awards: (1) earnings per share; (2) revenues ormargins; (3) cash flow; (4) operating margin; (5) return on net assets, investment, capital, or equity; (6) economic value added; (7) direct contribution;(8) net income; pretax earnings; earnings before interest and taxes; earnings before interest, taxes, depreciation and amortization; earnings after interestexpense and before extraordinary or special items; operating income or income from operations; income before interest income or expense, unusualitems and income taxes, local, state or federal and excluding budgeted and actual bonuses which might be paid under any ongoing bonus plans of theCompany; (9) working capital; (10) management of fixed costs or variable costs; (11) identification or consummation of investment opportunities orcompletion of specified projects in accordance with corporate business plans, including strategic mergers, acquisitions or divestitures; (12) totalshareholder return; (13) debt reduction; (14) market share; (15) entry into new markets, either geographically or by business unit; (16) customerretention and satisfaction; (17) strategic plan development and implementation, including turnaround plans; and/or (18) the Fair Market Value of aShare. Any of the above goals may be determined on an absolute or relative basis or as compared to the performance of a published or special indexdeemed applicable by the Committee including, but not limited to, the Standard & Poor’s 500 Stock Index or a group of companies that arecomparable to the Company. In determining the achievement of the performance goals, the Committee shall exclude the impact of any(i) restructurings, discontinued operations, extraordinary items, and other unusual or non-recurring charges, (ii) event either not directly related to theoperations of the Company or not within the reasonable control of the Company’s management, or (iii) change in accounting standards required bygenerally accepted accounting principles.(c) Performance Period; Timing For Establishing Performance Goals. Achievement of performance goals in respect of PerformanceAwards shall be measured over a Performance Period no shorter than 12 months and no longer than 5 years, as specified by the Committee. Performancegoals shall be established not later than 90 days after the beginning of any Performance Period applicable to such Performance Awards, or at such otherdate as may be required or permitted for “performance-based compensation” under Section 162(m) of the Code.(d) Adjustments. The Committee may, in its discretion, reduce the amount of a settlement otherwise to be made in connection with Awardssubject to this Section 8, but may not exercise discretion to increase any such amount payable to a Covered Employee in respect of an Award subject tothis Section 8. The Committee shall specify the circumstances in which such Awards shall be paid or forfeited in the event of termination ofContinuous Service by the Participant prior to the end of a Performance Period or settlement of Awards.(e) Committee Certification. No Participant shall receive any payment under the Plan that is subject to this Section 8 unless the Committeehas certified, by resolution or other appropriate action in writing, that the performance criteria and any other material terms previously established bythe Committee or set forth in the Plan, have been satisfied to the extent necessary to qualify as “performance based compensation” underSection 162(m) of the Code.9. Change in Control.(a) Effect of “Change in Control.” If and only to the extent provided in any employment or other agreement between the Participant andthe Company or any Related Entity, or in any Award Agreement, or to the extent otherwise determined by the Committee in its sole discretion andwithout any requirement that each Participant be treated consistently, upon the occurrence of a “Change in Control,” as defined in Section 9(b):(i) Any Option or Stock Appreciation Right that was not previously vested and exercisable as of the time of the Change in Control,shall become immediately vested and exercisable, subject to applicable restrictions set forth in Section 10(a) hereof.(ii) Any restrictions, deferral of settlement, and forfeiture conditions applicable to a Restricted Stock Award, Deferred Stock Awardor an Other Stock-Based Award subject only to future service requirements granted under the Plan shall lapse and such Awards shall be deemed fullyvested as of the time of the Change in Control, except to the extent of any waiver by the Participant and subject to applicable restrictions set forth inSection 10(a) hereof.(iii) With respect to any outstanding Award subject to achievement of performance goals and conditions under the Plan, theCommittee may, in its discretion, deem such performance goals and conditions as having been met as of the date of the Change in Control.(b) Definition of “Change in Control”. Unless otherwise specified in any employment agreement between the Participant and theCompany or any Related Entity, or in an Award Agreement, a “Change in Control” shall mean the occurrence of any of the following:(i) The acquisition by any Person of Beneficial Ownership (within the meaning of Rule 13d-3 promulgated under the ExchangeAct) of more than fifty percent (50%) of either (A) the value of then outstanding equity securities of the Company (the “Outstanding Company Stock”)or (B) the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors (the“Outstanding Company Voting Securities) (the foregoing Beneficial Ownership hereinafter being referred to as a “Controlling Interest”); provided,however, that for purposes of this Section 9(b), the following acquisitions shall not constitute or result in a Change in Control: (v) any acquisitiondirectly from the Company; (w) any acquisition by the Company; (x) any acquisition by any Person that as of the Effective Date owns BeneficialOwnership of a Controlling Interest; (y) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company orany Related Entity; or (z) any acquisition by any entity pursuant to a transaction which complies with clauses (A), (B) and (C) of subsection (iii) below;or(ii) During any period of three (3) consecutive years (not including any period prior to the Effective Date) individuals whoconstitute the Board on the Effective Date (the “Incumbent Board”) cease for any reason to constitute at least a majority of the Board; provided,however, that any individual becoming a director subsequent to the Effective Date whose election, or nomination for election by the Company’sshareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though suchindividual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as aresult of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxiesor consents by or on behalf of a Person other than the Board; or(iii) Consummation of a reorganization, merger, statutory share exchange or consolidation or similar transaction involving theCompany or any of its Related Entities, a sale or other disposition of all or substantially all of the assets of the Company, or the acquisition of assets orequity of another entity by the Company or any of its Related Entities (each a “Business Combination”), in each case, unless, following such BusinessCombination, (A) all or substantially all of the individuals and entities who were the Beneficial Owners, respectively, of the Outstanding CompanyStock and Outstanding Company Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, morethan fifty percent (50%) of the value of the then outstanding equity securities and the combined voting power of the then outstanding voting securitiesentitled to vote generally in the election of members of the board of directors (or comparable governing body of an entity that does not have such aboard), as the case may be, of the entity resulting from such Business Combination (including, without limitation, an entity which as a result of suchtransaction owns the Company or all or substantially all of the Company’s assets either directly or through one or more subsidiaries) in substantiallythe same proportions as their ownership, immediately prior to such Business Combination of the Outstanding Company Stock and OutstandingCompany Voting Securities, as the case may be, (B) no Person (excluding any employee benefit plan (or related trust) of the Company or such entityresulting from such Business Combination or any Person that as of the Effective Date owns Beneficial Ownership of a Controlling Interest) beneficiallyowns, directly or indirectly, fifty percent (50%) or more of the value of the then outstanding equity securities of the entity resulting from such BusinessCombination or the combined voting power of the then outstanding voting securities of such entity except to the extent that such ownership existedprior to the Business Combination and (C) at least a majority of the members of the Board of Directors or other governing body of the entity resultingfrom such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement, or of the action of theBoard, providing for such Business Combination; or(iv) Approval by the shareholders of the Company of a complete liquidation or dissolution of the Company.10. General Provisions.(a) Compliance With Legal and Other Requirements. The Company may, to the extent deemed necessary or advisable by the Committee,postpone the issuance or delivery of Shares or payment of other benefits under any Award until completion of such registration or qualification of suchShares or other required action under any federal or state law, rule or regulation, listing or other required action with respect to the Listing Market, orcompliance with any other obligation of the Company, as the Committee, may consider appropriate, and may require any Participant to make suchrepresentations, furnish such information and comply with or be subject to such other conditions as it may consider appropriate in connection with theissuance or delivery of Shares or payment of other benefits in compliance with applicable laws, rules, and regulations, listing requirements, or otherobligations.(b) Limits on Transferability; Beneficiaries. No Award or other right or interest granted under the Plan shall be pledged, hypothecated orotherwise encumbered or subject to any lien, obligation or liability of such Participant to any party, or assigned or transferred by such Participantotherwise than by will or the laws of descent and distribution or to a Beneficiary upon the death of a Participant, and such Awards or rights that may beexercisable shall be exercised during the lifetime of the Participant only by the Participant or his or her guardian or legal representative, except thatAwards and other rights (other than Incentive Stock Options and Stock Appreciation Rights in tandem therewith) may be transferred to one or moreBeneficiaries or other transferees during thelifetime of the Participant, and may be exercised by such transferees in accordance with the terms of such Award, but only if and to the extent suchtransfers are permitted by the Committee pursuant to the express terms of an Award Agreement (subject to any terms and conditions which theCommittee may impose thereon). A Beneficiary, transferee, or other person claiming any rights under the Plan from or through any Participant shall besubject to all terms and conditions of the Plan and any Award Agreement applicable to such Participant, except as otherwise determined by theCommittee, and to any additional terms and conditions deemed necessary or appropriate by the Committee.(c) Adjustments.(i) Adjustments to Awards. In the event that any extraordinary dividend or other distribution (whether in the form of cash, Shares, orother property), recapitalization, forward or reverse split, reorganization, merger, consolidation, spin-off, combination, repurchase, share exchange,liquidation, dissolution or other similar corporate transaction or event affects the Shares and/or such other securities of the Company or any other issuersuch that a substitution, exchange, or adjustment is determined by the Committee to be appropriate, then the Committee shall, in such manner as it maydeem equitable, substitute, exchange or adjust any or all of (A) the number and kind of Shares which may be delivered in connection with Awardsgranted thereafter, (B) the number and kind of Shares by which annual per-person Award limitations are measured under Section 4 hereof, (C) thenumber and kind of Shares subject to or deliverable in respect of outstanding Awards, (D) the exercise price, grant price or purchase price relating toany Award and/or make provision for payment of cash or other property in respect of any outstanding Award, and (E) any other aspect of any Awardthat the Committee determines to be appropriate.(ii) Adjustments in Case of Certain Transactions. In the event of any merger, consolidation or other reorganization in which theCompany does not survive, or in the event of any Change in Control, any outstanding Awards may be dealt with in accordance with any of thefollowing approaches, without the requirement of obtaining any consent or agreement of a Participant as such, as determined by the agreementeffectuating the transaction or, if and to the extent not so determined, as determined by the Committee: (a) the continuation of the outstanding Awardsby the Company, if the Company is a surviving entity, (b) the assumption or substitution for, as those terms are defined in Section 9(a)(iv) hereof, theoutstanding Awards by the surviving entity or its parent or subsidiary, (c) full exercisability or vesting and accelerated expiration of the outstandingAwards, or (d) settlement of the value of the outstanding Awards in cash or cash equivalents or other property followed by cancellation of such Awards(which value, in the case of Options or Stock Appreciation Rights, shall be measured by the amount, if any, by which the Fair Market Value of a Shareexceeds the exercise or grant price of the Option or Stock Appreciation Right as of the effective date of the transaction). The Committee shall givewritten notice of any proposed transaction referred to in this Section 10(c)(ii) at a reasonable period of time prior to the closing date for suchtransaction (which notice may be given either before or after the approval of such transaction), in order that Participants may have a reasonable periodof time prior to the closing date of such transaction within which to exercise any Awards that are then exercisable (including any Awards that maybecome exercisable upon the closing date of such transaction). A Participant may condition his exercise of any Awards upon the consummation of thetransaction.(iii) Other Adjustments. The Committee (and the Board if and only to the extent such authority is not required to be exercised bythe Committee to comply with Section 162(m) of the Code) is authorized to make adjustments in the terms and conditions of, and the criteria includedin, Awards (including Performance Awards, or performance goals and conditions relating thereto) in recognition of unusual or nonrecurring events(including, without limitation, acquisitions and dispositions of businesses and assets) affecting the Company, any Related Entity or any business unit,or the financial statements of the Company or any Related Entity, or in response to changes in applicable laws, regulations, accounting principles, taxrates and regulations or business conditions or in view of the Committee’s assessment of the business strategy of the Company, any Related Entity orbusiness unit thereof, performance of comparable organizations, economic and business conditions, personal performance of a Participant, and anyother circumstances deemed relevant; provided that no such adjustment shall be authorized or made if and to the extent that such authority or themaking of such adjustment would cause Options, Stock Appreciation Rights, Performance Awards granted pursuant to Section 8(b) hereof toParticipants designated by the Committee as Covered Employees and intended to qualify as “performance-based compensation” under CodeSection 162(m) and the regulations thereunder to otherwise fail to qualify as “performance-based compensation” under Code Section 162(m) andregulations thereunder. Adjustments permitted hereby may include, without limitation, increasing the exercise price of Options and Stock AppreciationRights, increasing performance goals, or other adjustments that may be adverse to the Participant.(d) Taxes. The Company and any Related Entity are authorized to withhold from any Award granted, any payment relating to an Awardunder the Plan, including from a distribution of Shares, or any payroll or other payment to a Participant, amounts of withholding and other taxes due orpotentially payable in connection with any transaction involving an Award, and to take such other action as the Committee may deem advisable toenable the Company or any Related Entity and Participants to satisfy obligations for the payment of withholding taxes and other tax obligationsrelating to any Award. This authority shall include authority to withhold or receive Shares or other property and to make cash payments in respectthereof in satisfaction of a Participant’s tax obligations, either on a mandatory or elective basis in the discretion of the Committee.(e) Changes to the Plan and Awards. The Board may amend, alter, suspend, discontinue or terminate the Plan, or the Committee’sauthority to grant Awards under the Plan, without the consent of shareholders or Participants, except that any amendment or alteration to the Plan shallbe subject to the approval of the Company’s shareholders not later than the annual meeting next following such Board action if such shareholderapproval is required by any federal or state law or regulation (including, without limitation, Rule 16b-3 or Code Section 162(m)) or the rules of theListing Market, and the Board may otherwise, in its discretion, determine to submit other such changes to the Plan to shareholders for approval;provided that, except as otherwise permitted by the Plan or Award Agreement, without the consent of an affected Participant, no such Board action maymaterially and adversely affect the rights of such Participant under the terms of any previously granted and outstanding Award. The Committee maywaive any conditions or rights under, or amend, alter, suspend, discontinue or terminate any Award theretofore granted and any Award Agreementrelating thereto, except as otherwise provided in the Plan; provided that, except as otherwise permitted by the Plan or Award Agreement, without theconsent of an affected Participant, no such Committee or the Board action may materially and adversely affect the rights of such Participant underterms of such Award.(f) Limitation on Rights Conferred Under Plan. Neither the Plan nor any action taken hereunder or under any Award shall be construed as(i) giving any Eligible Person or Participant the right to continue as an Eligible Person or Participant or in the employ or service of the Company or aRelated Entity; (ii) interfering in any way with the right of the Company or a Related Entity to terminate any Eligible Person’s or Participant’sContinuous Service at any time, (iii) giving an Eligible Person or Participant any claim to be granted any Award under the Plan or to be treateduniformly with other Participants and Employees, or (iv) conferring on a Participant any of the rights of a shareholder of the Company including,without limitation, any right to receive dividends or distributions, any right to vote or act by written consent, any right to attend meetings ofshareholders or any right to receive any information concerning the Company’s business, financial condition, results of operation or prospects, unlessand until such time as the Participant is duly issued Shares on the stock books of the Company in accordance with the terms of an Award. None of theCompany, its officers or its directors shall have any fiduciary obligation to the Participant with respect to any Awards unless and until the Participant isduly issued Shares pursuant to the Award on the stock books of the Company in accordance with the terms of an Award. Neither the Company nor anyof the Company’s officers, directors, representatives or agents is granting any rights under the Plan to the Participant whatsoever, oral or written,express or implied, other than those rights expressly set forth in this Plan or the Award Agreement.(g) Unfunded Status of Awards; Creation of Trusts. The Plan is intended to constitute an “unfunded” plan for incentive and deferredcompensation. With respect to any payments not yet made to a Participant or obligation to deliver Shares pursuant to an Award, nothing contained inthe Plan or any Award shall give any such Participant any rights that are greater than those of a general creditor of the Company; provided that theCommittee may authorize the creation of trusts and deposit therein cash, Shares, other Awards or other property, or make other arrangements to meetthe Company’s obligations under the Plan. Such trusts or other arrangements shall be consistent with the “unfunded” status of the Plan unless theCommittee otherwise determines with the consent of each affected Participant. The trustee of such trusts may be authorized to dispose of trust assetsand reinvest the proceeds in alternative investments, subject to such terms and conditions as the Committee may specify and in accordance withapplicable law.(h) Nonexclusivity of the Plan. Neither the adoption of the Plan by the Board nor its submission to the shareholders of the Company forapproval shall be construed as creating any limitations on the power of the Board or a committee thereof to adopt such other incentive arrangements asit may deem desirable including incentive arrangements and awards which do not qualify under Section 162(m) of the Code.(i) Payments in the Event of Forfeitures; Fractional Shares. Unless otherwise determined by the Committee, in the event of a forfeiture ofan Award with respect to which a Participant paid cash or other consideration, the Participant shall be repaid the amount of such cash or otherconsideration. No fractional Shares shall be issued or delivered pursuant to the Plan or any Award. The Committee shall determine whether cash, otherAwards or other property shall be issued or paid in lieu of such fractional shares or whether such fractional shares or any rights thereto shall be forfeitedor otherwise eliminated.(j) Governing Law. The validity, construction and effect of the Plan, any rules and regulations under the Plan, and any Award Agreementshall be determined in accordance with the laws of the Commonwealth of Massachusetts without giving effect to principles of conflict of laws, andapplicable federal law.(k) Non-U.S. Laws. The Committee shall have the authority to adopt such modifications, procedures, and subplans as may be necessary ordesirable to comply with provisions of the laws of foreign countries in which the Company or its Related Entities may operate to assure the viability ofthe benefits from Awards granted to Participants performing services in such countries and to meet the objectives of the Plan.(l) Plan Effective Date and Shareholder Approval; Termination of Plan. The Plan shall become effective on the Effective Date, subject tosubsequent approval, within 12 months of its adoption by the Board, by shareholders of the Company eligible to vote in the election of directors, by avote sufficient to meet the requirements of Code Sections 162(m) (if applicable) and 422, Rule 16b-3 under the Exchange Act (if applicable),applicable requirements under the rules of any stock exchange or automated quotation system on which the Shares may be listed or quoted, and otherlaws, regulations, and obligations of the Company applicable to the Plan. Awards may be granted subject to shareholder approval, but may not beexercised or otherwise settled in the event the shareholder approval is not obtained. The Plan shall terminate at the earliest of (a) such time as no Sharesremain available for issuance under the Plan, (b) termination of this Plan by the Board, or (c) the tenth anniversary of the Effective Date. Awardsoutstanding upon expiration of the Plan shall remain in effect until they have been exercised or terminated, or have expired.Exhibit 21.1SUBSIDIARIES OF REGISTRANTThe following is a list of the Corporation’s subsidiaries as of December 31, 2018. The Corporation owns, directly or indirectly, 100% of thevoting securities of each subsidiary, unless noted otherwise. NAME STATE OR JURISDICTIONOF ORGANIZATIONGalectin Therapeutics Security Corp. DelawareGalectin Sciences LLC GeorgiaExhibit 23.1CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMWe hereby consent to the incorporation by reference in the Registration Statement Nos. 333-116629, 333-109893, 333-159247, 333-198070, 333-176306, 333-176305, and 333-225890 on Form S-8, and Registration Statement Nos. 333-194747, 333-172849, 333-150898, 333-148911, 333-132459, 333-118907, 333-115118, 333-111650, 333-109887, 333-208674, 333-213138, 333-218112, and 333-226402 on Form S-3 of our reportdated March 5, 2019 included in this Annual Report on Form 10-K of Galectin Therapeutics, Inc. and subsidiaries (the “Company”) relating to theconsolidated balance sheets of the Company as of December 31, 2018 and 2017, and the related consolidated statements of operations, changes inredeemable convertible preferred stock and stockholders’ equity (deficit), and cash flows for each of the two years in the period ended December 31,2018 and the effectiveness of internal control over financial reporting for the Company as of December 31, 2018./S/ CHERRY BEKAERT LLPAtlanta, GeorgiaMarch 6, 2019Exhibit 31.1Certification pursuant to Rule 13a-14(a) of the Securities Act of 1934I, Harold H. Shlevin, certify that: 1.I have reviewed this annual report on Form 10-K of Galectin Therapeutics Inc.; 2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make thestatements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by thisreport; 3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respectsthe financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined inExchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and we have: a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision,to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others withinthose entities, particularly during the period in which this report is being prepared; b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under oursupervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements forexternal purposes in accordance with generally accepted accounting principles; c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about theeffectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s mostrecent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likelyto materially affect, the registrant’s internal control over financial reporting; and 5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, tothe registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which arereasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internalcontrol over financial reporting. March 6, 2019 /s/ Harold H. Shlevin Name: Harold H. Shlevin, Ph.D Title: Chief Executive Officer and President(principal executive officer)Exhibit 31.2Certification pursuant to Rule 13a-14(a) of the Securities Act of 1934I, Jack W. Callicutt, certify that: 1.I have reviewed this annual report on Form 10-K of Galectin Therapeutics Inc.; 2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make thestatements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by thisreport; 3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respectsthe financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined inExchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and we have: a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision,to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others withinthose entities, particularly during the period in which this report is being prepared; b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under oursupervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements forexternal purposes in accordance with generally accepted accounting principles; c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about theeffectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s mostrecent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likelyto materially affect, the registrant’s internal control over financial reporting; and 5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, tothe registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which arereasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internalcontrol over financial reporting. March 6, 2019 /s/ Jack W. Callicutt Name: Jack W. Callicutt Title: Chief Financial Officer(principal financial and accounting officer)Exhibit 32.1CERTIFICATION PURSUANT TO18 U.S.C. SECTION 1350,AS ADOPTED PURSUANT TOSECTION 906 OF THE SARBANES-OXLEY ACT OF 2002In connection with the Annual Report of Galectin Therapeutics Inc. (the “Company”) on Form 10-K for the period ended December 31, 2018 asfiled with the Securities and Exchange Commission on the date hereof (the “Report”), I, Harold H. Shlevin, Chief Executive Officer and President of theCompany, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge: (1)The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2)The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company. March 6, 2019 /s/ Harold H. Shlevin Name: Harold H. Shlevin, Ph.D Title: Chief Executive Officer and President(principal executive officer)Exhibit 32.2CERTIFICATION PURSUANT TO18 U.S.C. SECTION 1350,AS ADOPTED PURSUANT TOSECTION 906 OF THE SARBANES-OXLEY ACT OF 2002In connection with the Annual Report of Galectin Therapeutics Inc. (the “Company”) on Form 10-K for the period ended December 31, 2018 asfiled with the Securities and Exchange Commission on the date hereof (the “Report”), I, Jack W. Callicutt, Chief Financial Officer of the Company,certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge: (1)The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2)The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company. March 6, 2019 /s/ Jack W. Callicutt Name: Jack W. Callicutt Title: Chief Financial Officer(principal financial and accounting officer)

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