9. Preferred Stock Conversion into Common Stock
On January 11, 2019, 10X Fund L.P. (10X Fund), 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 converted 5,508,000 shares of its Series B-1, B-2 and B-3 Convertible Preferred Stock into 3,789,346 shares of Common Stock of Galectin Therapeutics. All special voting rights and protective provisions that previously benefited the Series B Preferred Stock were
extinguished by the conversion to Common Stock.
In connection with the conversion of the Series B Preferred Stock, the Company extended
by five years the exercise date of warrants for 3,579,642 shares of Common Stock issued by the Company in connection with sale of the Series B-1 and Series B-2 Preferred
Stock. Before the extension, the warrants had various expiration dates in 2019 and 2020. The warrant amendments give 10X Fund the right to nominate one director to the Companys board of directors. Previously, under the now extinguished voting
rights of the Series B Preferred, 10X Fund had the right to name two directors and nominate an additional three directors.
The Company
has accounted for the modified terms of the warrants pursuant to ASC 718, Stock Compensation, whereby the Company has recognized a charge for the change in fair value of the warrants immediately before and immediately after the modification. In
January 2019, the Company recognized a one-time non-cash charge of $6,622,000 related to the extension of the 3,579,642 warrants. The following assumptions were used to
value the extension of the warrants immediately before and immediately after the modification: a) immediately before the modification an expected life range of 0.09 to 1.33 years, volatility of 98%, risk free interest rate range of 2.4% to
2.59% and zero dividends and; b) immediately following the modification an expected life range of 5.09 to 6.33 years, volatility range of 106%, risk free interest rate range of 2.56% to 2.6% and zero dividends.
10. Commitments and Contingencies
Other Legal
Proceedings
The Company records accruals for such contingencies to the extent that the Company concludes that their occurrence is
probable and the related damages are estimable. There are no significant pending legal proceedings.
11. Leases
The Company has one operating lease for its office space which was amended effective January 1, 2019 for a term of 38 months with no
residual value guarantees or material restrictive covenants. The amended lease provided for free rent for the first two months of the lease and continues the security deposit of $6,000. In addition to base rental payments included in the contractual
obligations table above, the Company is responsible for our pro-rata share of the operating expenses for the building. Our lease cost for the three-month periods ended March 31, 2020 and 2019 was $11,000
for each period and is included in general and administrative expenses. As of March 31, 2020, the right to use lease asset consisted of $75,000 and is included in other assets. Also, at March 31, 2020, current lease liability of $40,000 is
included in accrued expenses and other and noncurrent lease liability of $41,000 is in other liabilities.
Maturity of operating lease as
of March 31, 2020 in thousands:
|
|
|
|
|
2020
|
|
$
|
35
|
|
2021
|
|
|
48
|
|
2022
|
|
|
8
|
|
|
|
|
|
|
Total
|
|
|
91
|
|
Less imputed interest
|
|
|
10
|
|
|
|
|
|
|
Present value of lease liability
|
|
$
|
81
|
|
|
|
|
|
|
The discount rate used in calculating the present value of the lease payments was 11.04%
12. Galectin Sciences LLC
In January
2014, we created Galectin Sciences, LLC (the LLC or Investee), a collaborative joint venture co-owned by SBH Sciences, Inc. (SBH), to research and develop small organic
molecule inhibitors of galectin-3 for oral administration. The LLC was initially capitalized with a $400,000 cash investment to fund future research and development activities, which was provided by the
Company, and specific in-process research and development (IPR&D) contributed by SBH. The estimated fair value of the IPR&D
12