For the ~~quarterly period ended September 30, 2017~~Quarterly Period Ended March 31, 2022

(Former name, former address and former fiscal year, if changed since last report)

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

Indicate by check mark whether the registrant has submitted electronically ~~and posted on its corporate Web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ pursuant to Rule 405 ofRegulation S-T (§ (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit ~~and post~~ such files). Yes ☑ ☒ No ☐☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, anon-accelerated filer, or a ~~smaller~~small reporting company or an emerging growth company. See the definitions of ~~“large~~“large accelerated ~~filer”, “accelerated filer”, “smaller~~filer,” “accelerated filer,” a “smaller reporting ~~company”~~company” and ~~“emerging~~an “emerging growth ~~company”~~company” in Rule12b-2 of the Exchange Act.

~~Indicate by check mark whether the registrant is a shell company (as defined inRule 12b-2~~ ~~of the Exchange Act). Yes ☐ No ☑~~

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

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

As of ~~November 10, 2017,~~May 16, 2022, there were ~~26,544,934~~378,630,104 shares of the ~~Registrant’s Common Stock issued and~~registrant’s common stock outstanding.

This report contains “forward-looking statements,” which give management’s current expectations or forecasts of future events. You can identify these statements by the fact that they do not relate strictly to historic or current facts. They use words, such as “may,” “will,” “would,” “expect,” “plan,” “anticipate,” “could,” “project,” “believe,” “estimate,” “potential,” “seek,” “indicate,” “assume,” or “continue” or the negative of these terms and other words and terms of similar meaning.

Any or all of our forward-looking statements in this report may turn out to be wrong. They can be affected by inaccurate assumptions we might make or by known or unknown risks and uncertainties. Consequently, no forward-looking statement can be guaranteed. Actual results may vary materially from those set forth in forward-looking statements. Forward-looking statements include, but are not limited to, statements regarding our or our management’s expectations, hopes, beliefs, intentions or strategies regarding the future, such as our estimates regarding the initiation, timing, progress and results of our preclinical and clinical trials; anticipated operating losses, future performance, future revenues and projected expenses; our liquidity and our expectations regarding our needs for and ability to raise additional capital; our ability to select and capitalize on commercially desirable product opportunities as a result of limited financial resources; our ability to manage our expenses effectively and raise the funds needed to continue our business; our ability to retain the services of our current executive officers, directors and principal consultants; the competitive nature of our industry and the possibility that our product candidates may become obsolete; our ability to obtain and maintain regulatory approval of our product candidates and any future products we may develop; the clinical development of and the process of commercializing OXi4503; research and development programs including preclinical studies of CA4P; regulatory and legislative developments in the United States and foreign countries; the timing, costs and other limitations involved in obtaining regulatory approval for any product candidate; the further development and commercialization of our product candidates; our ability to obtain and maintain orphan drug exclusivity for some of our product candidates; the potential benefits of our product candidates over other therapies; our ability to enter into and maintain any collaboration with respect to product candidates; our ability to continue to develop or commercialize our product candidates in the event any license agreements in place with third parties expire or are terminated; the performance and conduct of third parties, including our third-party manufacturers and third party service providers used in our clinical trials; our ability to obtain and maintain intellectual property protection for our product candidates and any future products we may develop and operate our business without infringing upon the intellectual property rights of others; the potential liability exposure related to our product candidates and any future products we may develop and our insurance coverage for such exposure; the size and growth of the potential markets for our products and our ability to serve those markets; the rate and degree of market acceptance of any future products; the sufficiency of potential proceeds from any financing; the volatility of the price of our common stock; the ability to achieve secondary trading of our stock in certain states; the dilutive effects of potential future equity issuances; our expectation that no dividends will be declared on our common stock in the foreseeable future; our ability to maintain an effective system of internal controls; the payment and reimbursement methods used by private or governmental third-party payers; our ability to retain adequate staffing levels; unfavorable global economic conditions; a failure of our internal computer systems or those of our contractors and consultants; potential misconduct or other improper activities by our employees, contractors or consultants; the ability of our business continuity and disaster recovery plans to protect us in the event of a natural disaster, and other factors discussed in our Annual Report on Form~~10-K~~ ~~for the year ended December~~FOR THE QUARTERLY PERIOD ENDED MARCH 31, ~~2016 filed with the Securities and Exchange Commission (the SEC) on March 30, 2017 or any document incorporated by reference herein or therein.~~2021

We will not update forward-looking statements, whether as a result of new information, future events or otherwise, unless required by law. You are advised to consult any further disclosures we make in our reports to the SEC, including our reports on~~Form 10-Q,8-K~~ ~~and10-K.~~ Our filings list various important factors that could cause actual results to differ materially from expected results. We note these factors for investors as permitted by the Private Securities Litigation Reform Act of 1995. You should understand that it is not possible to predict or identify all such factors. Consequently, you should not consider any such list to be a complete set of all potential risks or uncertainties.

The accompanying footnotes are an integral part of these unaudited consolidated financial statements.

The accompanying footnotes are an integral part of these unaudited condensed consolidated financial statements.

Oncotelic Therapeutics, Inc. (f/k/a Mateon Therapeutics, Inc.) (“Oncotelic”), was formed in the State of New York in 1988 as OXiGENE, Inc., was reincorporated in the State of Delaware in 1992, and changed its name to Mateon Therapeutics, Inc. in 2016, and Oncotelic Therapeutics, Inc. in November 2020. Oncotelic conducts business activities through Oncotelic and its wholly owned subsidiaries, Oncotelic, Inc., a Delaware corporation, PointR Data, Inc. (“PointR”), a Delaware corporation: and EdgePoint AI, Inc. (“Edgepoint”), a Delaware Corporation for which there are non-controlling interests, (Oncotelic, Oncotelic Inc., PointR and Edgepoint are collectively called the “Company” or “We”). The Company is currently developing OT-101 for various cancers and COVID-19, Artemisinin for COVID-19 and AI technologies for clinical development and manufacturing. The Company has acquired apomorphine for Parkinson’s Disease, erectile dysfunction and female sexual dysfunction. In addition, the Company is evaluating the further development of its product candidates OXi4503 as a treatment for acute myeloid leukemia and myelodysplastic syndromes and CA4P in combination with a checkpoint inhibitor for the treatment of advanced metastatic melanoma.

In April 2019, Oncotelic completed a merger with Oncotelic Inc., which became a wholly owned subsidiary of Oncotelic. The merger was treated as a recapitalization and reverse acquisition for financial accounting purposes. Oncotelic Inc. is considered the acquirer for accounting purposes, and Oncotelic Inc.’s historical financial statements before the merger have been replaced with the historical financial statements of Oncotelic Inc. prior to the merger in the financial statements and filings with the Securities and Exchange Commission (“SEC”). For more information on this merger, refer to our 2020 Annual Report on Form 10-K filed with the SEC on April 15, 2021.

In August 2019, the Company entered into an Agreement and Plan of Merger with PointR Date, Inc. PointR survived the merger as a wholly-owned subsidiary of the Company. The PointR Merger was intended to create a publicly-traded artificial intelligence (“AI”) driven immuno-oncology company with a robust pipeline of first in class TGF-β immunotherapies for late stage cancers such as gliomas, pancreatic cancer and melanoma. In November 2019, pursuant to the terms of the PointR Merger Agreement, the Company completed the PointR Merger. For more information on this merger, refer to our 2020 Annual Report on Form 10-K filed with the SEC on April 15, 2021.

In February 2020, the Company formed a subsidiary, Edgepoint. Edgepoint was formed as a start-up company, with plans to develop technologies and IP related to various unmet issues within the pharma and medical device industries. The Company may spin off Edgepoint into a separate public company in the future.

The Company is a cancer immunotherapy company dedicated to the development of first in class self-immunization protocol (“SIP™”) candidates for difficult to treat cancers. The Company’s proprietary SIP™ candidates offer advantages over other immunotherapies because they do not require extraction of the tumor or isolation of the antigens, and they have the potential for broad-spectrum applicability for multiple cancer types. The Company’s proprietary product candidates have shown promising clinical activity in phase 2 trials for the treatment of gliomas and pancreatic cancers. The Company aims to translate its unique insights, which span more than three decades of original work using RNA therapeutics, into the deployment of antisense as a RNA therapeutic for diseases which are caused by TGF-β overexpression, starting with cancer and expanding to Duchenne Muscular Dystrophy (“DMD”) and others. Oncotelic Inc.’s product candidate, OT-101, is being developed as a broad-spectrum anti-cancer drug that can also be used in combination with other standard cancer therapies to establish an effective multi-modality treatment strategy for difficult-to-treat cancers. Together, the Company plans to initiate phase 3 clinical trials for OT-101 in both high-grade glioma and pancreatic cancer, and any other indications that may evolve. The Company is evaluating the further development of its product candidates OXi4503 as a treatment for acute myeloid leukemia and myelodysplastic syndromes and CA4P in combination with a checkpoint inhibitor for the treatment of advanced metastatic melanoma.

The Company is also developing OT-101 for the various epidemics and pandemics, similar to the current coronavirus (“COVID-19”) pandemic. In this connection, the Company entered into an agreement and supplemental agreement with Golden Mountain Partners (“GMP”) for a total of $1.2 million to render services for the development of OT-101. Such amount was recorded as revenue upon completion of all performance obligations under the agreement. Further, In June 2020, the Company secured $2 million in debt financing from GMP to conduct a clinical trial evaluating OT-101 against COVID-19. The Company discontinued enrollment in its OT-101 clinical trial in patients with COVID-19 in June 2021. In September 2021, the Company secured a further $1.5 million in debt from GMP to complete the study. The trial completed randomization of 32 out of 36 patients planned, on an intent to treat basis. The discontinuance of the trial was due to the continuing rise of more severe variants in Latin America, leading to exhaustion of medical care infrastructure in Latin America.

In 2020 and 2021, the Company was developing Artemisinin as a potential therapy for COVID-19. Artemisinin, purified from a plant Artemisia annua. It can inhibit TGF-β activity and is able to neutralize COVID-19. The Company initially conducted a study and the test results during an in vitro study at Utah State University showed Artemisinin having an EC50 of 0.45 ug/ml, and a Safety Index of 140. Artemisinin can target multiple viral threats, including COVID-19, by suppressing both viral replication and clinical symptoms that arise from viral infection. Viral replication cannot occur without TGF-β. In a clinical study undertaken in India, clinical consequences related to the TGF-β surge, including ARDS and cytokine storm, were suppressed by targeting TGF-β with Artemisinin. The ARTI-19 trials were conducted in India by Windlas Biotech Limited (“Windlas”), the Company’s business partner in India. Windlas had applied for regulatory approval for its Artemisinin based product, ArtiShield^TM, but has not been able to obtain regulatory approval for use of ArtiShield^TM as a COVID-19 therapy and as such, no significant revenues have been reported by Windlas nor have we accrued any royalties on Artemisinin due from Windlas. We intend to focus future development on Artemisinin against other respiratory viruses with unmet needs.

Between October 2021 and March 2022, GMP provided $1.0 million to the Company to fund operations on the way to complete a JV with the Company.

Between July 2020 and March 2021, the Company issued and sold a total of 100 units (“Units”), with each Unit consisting of (i) 25,000 shares of Edgepoint common stock, par value $0.01 per share (“Edgepoint Common Stock”), for a price of $1.00 per share of Edgepoint Common Stock; (ii) one convertible promissory note issued by the Company (the “Unit Note”), convertible into up to 25,000 shares of EdgePoint Common Stock at a conversion price of $1.00 per share, or up to 138,889 shares of the Company’s Common Stock, at a conversion price of $0.18 per share; and (iii) 100,000 warrants, consisting of (a) 50,000 warrants to purchase an equivalent number of shares of EdgePoint Common Stock at $1.00 per share (“Edgepoint Warrant”), and (b) 50,000 warrants to purchase an equivalent number of shares of Company Common Stock at $0.20 per share (“Oncotelic Warrant”) (collectively, the “JH Darbie Financing”).

In June 2021, the Company and the Investors agreed to extend the maturity date of the Notes from June 30, 2021, to March 31, 2022. In addition, the Company and JHDarbie identified an error in the Oncotelic Warrants and JH Darbie Financing documents which intended to have the investors to purchase $50,000 of shares of Common Stock or Edgepoint Common Stock. However, the Company only issued 50,000 Oncotelic Warrants, with an aggregate exercise price of $10,000. The error was corrected by the Company and the Company issued to the Investors an aggregate of 20.0 million additional Oncotelic Warrants, and 2.0 million additional Oncotelic Warrants to J.H. Darbie., as placement agent. Each Investor was entitled to receive 200,000 additional Oncotelic Warrants for each Unit purchased. The issuance of the additional warrants resulted in the Company recording an expense of $2,023,552 in the Company’s statement of operations during the year ended December 31, 2021. No similar expense was recorded in the same period in 2020. Management reviewed the guidance per ASC 470-60 Troubled debt restructurings and ASC 470-50 Debt-Modifications and Extinguishments and concluded that the terms of the agreements were not substantially different as of June 30, 2021, and, accounted for the transaction as a debt modification.

In February 2022, the Company and 99 out of 100 of the Investors agreed to extend the maturity date of the Notes from March 31, 2022, to March 31, 2023. In addition, the Company issued approximately 33 million Oncotelic Warrants to purchase $50,000 of shares of Common Stock in connection with agreeing to extend the maturity date by one year. The issuance of the additional warrants resulted in the Company recording an expense of approximately $2.9million in the Company’s statement of operations during the three months ended March 31, 2022. No similar expense was recorded in the same period in 2020. Management reviewed the guidance per ASC 470-60 Troubled debt restructurings and ASC 470-50 Debt-Modifications and Extinguishments and concluded that the terms of the agreements were not substantially different as of June 30, 2021, and, accounted for the transaction as a debt extinguishment.

In May 2021, the Company entered into an Equity Purchase Agreement (the “EPL”) and Registration Rights Agreement (the “Registration Rights Agreement”) with Peak One Opportunity Fund, L.P. (“Peak One”), pursuant to which the Company shall have the right, but not the obligation, to direct Peak One to purchase up to $10.0 million (the “Maximum Commitment Amount”) in shares of the common stock, par value $0.01 per share (“Common Stock”) in multiple tranches. The Company has directed Peak One, on ten occasions, for an aggregate of 3.7 million shares of Common Stock for aggregate net cash proceeds of approximately $0.4 million.

The Company filed a post-effective amendment to reregister the EPL on April 26, 2022 and the post effective amendment was found effective by the SEC on May 6, 2022.

In August 2021, the Company issued Note Purchase Agreements with Autotelic Inc., the Company’s Chief Financial Officer (“CFO”), and certain other accredited investors. Under the terms of the Note Purchase Agreements, the Company issued an aggregate of $698,500 (the “Principal Amount”) in debt in the form of unsecured convertible promissory notes (collectively, the “Notes”). The Notes are unsecured and provide for interest at the rate of 5% per annum. Such Notes were issued against some of the short-term debt due as of June 30, 2021. All amounts outstanding under the Notes become due and payable at such time as determined by the holders of a majority of the Principal Amount of the Notes (the “Majority Holders”), on or after (a) the one-year anniversary of the Notes, or (b) the occurrence of an Event of Default (as defined in the Note Purchase Agreements) (the “Maturity Date”). The Company may prepay the Notes at any time. Events of Default under the Notes include, without limitation, (i) failure to make payments under the Notes within thirty (30) days of the Maturity Date, (ii) breaches of the Note Purchase Agreement or Notes by the Company which is not cured within thirty (30) days of notice of the breach, (iii) bankruptcy, or (iv) a change in control of the Company (as defined in the Note Purchase Agreements). The Majority Holders have the right, at any time not more than five days following the Maturity Date, to elect to convert all, and not less than all, of the outstanding accrued and unpaid interest and principal on the Notes. The Notes may be converted, at the election of the Majority Holders, into shares of the Company’s common stock, par value $0.01 per share (“Common Stock”), at a fixed conversion price of $0.18 per share.

On March 31, 2022, the Company formalized a joint venture (“JV”) with Dragon Overseas Capital Limited (“Dragon”) and GMP Biotechnology Limited (“GMP Bio”), both affiliates of GMP. For more information on the JV, refer to Note 6 of the Notes and our Current Report on Form 8-K filed with the SEC on April 6, 2022.

Although no assurances can be given, the Company and GMP currently intend to conduct an initial public offering of the JV, at a future date, on either the Hong Kong Exchange or other stock exchange.

In September 2021, the Company entered into an Unsecured Convertible Note Purchase Agreement (the “Purchase Agreement”) with GMP, pursuant to which the Company issued a convertible promissory note in the aggregate principal amount of $1.5 million (the “September 2021 Note”), which September 2021 Note is convertible into shares of the Company’s Common Stock.

In October 2021, the Company entered into an Unsecured Convertible Note Purchase Agreement (the “October Purchase Agreement”) with GMP, pursuant to which the Company issued a convertible promissory note in the aggregate principal amount of $0.5 million (the “October 2021 Note”), which October 2021 Note is convertible into shares of the Company’s Common Stock.

In January 2022, the Company entered into an Unsecured Convertible Note Purchase Agreement (the “January 2022 Purchase Agreement”) with GMP, pursuant to which the Company issued a convertible promissory note in the aggregate principal amount of $0.5 million (the “January 2022 Note”), which January 2022 Note is convertible into shares of the Company’s Common Stock.

For more information on the September 2021 Note, the October 2021 Note and the January 2022 Note, refer to our 2021 Annual Report on Form 10K filed with the SEC on April 15, 2022.

In November and December 2021, the Company entered into various Securities Purchase Agreements with Talos Victory Fund, LLC (the (“Talos”), Mast Hill Fund, LP (“Mast”), FirstFire Global Opportunities Fund, LLC (“FirstFire”), Blue Lake Partners, LLC (“Blue Lake”) and Fourth Man, LLC (“Fourth Man”), pursuant to which the Company issued convertible promissory notes in the aggregate principal amount of $0.25 million each, aggregating gross $1.25 million (the “Notes”), which Notes are convertible into shares of the Company’s common stock, par value $0.01 per share (“Common Stock”).

The Purchase Agreements were entered into as part of a convertible note financing round with aggregate gross proceeds to the Company of up to $1.25 million (the “Financing”), undertaken by the Company pursuant to that certain Finder’s Fee Agreement between the Company and JH Darbie & Co., Inc. (“JH Darbie”), dated October 26, 2021 (the “Agreement”). All of the Purchase Agreements and the Note contain identical terms except with reference to the name of the holders, the use of proceeds, which include repayment of certain debt, general corporate expenses and payroll, as applicable and the jurisdictions.

In January 2022, three of the five note holders under the November and December 2021 Notes exercised their warrants to purchase shares of Common Stock of the Company on a cashless basis. As such, the Company issued the note holders 3,041,958 shares of Common Stock.

For more information on the notes, refer to Note 6: November – December 2021 Financing of the Notes to the Unaudited Consolidated Financial Statements.

In September 2021, the Company entered into an exclusive License Agreement (the “Agreement”) with Autotelic, Inc. (“Autotelic”), pursuant to which Autotelic granted Oncotelic, among other things: (i) the exclusive right and license to certain Autotelic Patents (as defined in the Agreement) and Autotelic Know-How (as defined in the Agreement); and (ii) a right of first refusal to acquire at least a majority of the outstanding capital stock of Autotelic prior to Autotelic entering into any transaction that is a financing collaboration, distribution revenues, earn-outs, sales, out-licensing, purchases, debt, royalties, merger acquisition, change of control, transfer of cash or non-cash assets, disposition of capital stock by way of tender or exchange offer, partnership or any other joint or collaborative venture, research collaboration, material transfer, sponsored research or similar transaction or agreements. In exchange for the rights granted to Oncotelic, Autotelic will be entitled to earn the milestone payments of up to $50 million upon achievement of certain financial, development and regulatory milestones. In addition to the milestone payments, Autotelic would be entitled to earn royalties equal to 15% of the net sales of any products that incorporate the Autotelic Patents or Autotelic Know-How. The Agreement contains representations, warranties and indemnification provisions of each of the parties thereto that are customary for transactions of this type.

The consolidated financial statements include the accounts of Oncotelic, its wholly owned subsidiaries, Oncotelic Inc. and PointR, and Edgepoint our non-controlled interest entity. Intercompany accounts and transactions have been eliminated in consolidation.

The accompanying consolidated financial statements have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission including Form 10-Q and Regulation S-X. The information furnished herein reflects all adjustments (consisting of normal recurring accruals and adjustments) which are, in the opinion of management, necessary to fairly state the operating results for the respective periods. Certain information and footnote disclosures normally present in annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”) have been omitted pursuant to such rules and regulations.

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. The Company has incurred net accumulated losses of approximately $35.9 million since inception of Oncotelic Inc., as the Company’s historical financial statements before the Merger have been replaced with the historical financial statements of Oncotelic Inc. The Company also has a negative working capital of approximately $16.7 million at March 31, 2022, of which approximately $2.6million contingent liability of issuance of common shares of the Company to PointR shareholders upon achievement of certain milestones in accordance with the PointR Merger Agreement. The Company has negative cash flows from operations for the three months ended March 31, 2022 of approximately $1.0million. These conditions raise substantial doubt about the Company’s ability to continue as a going concern for a period of one year from the date of this filing. Management expects to incur additional losses in the foreseeable future and recognizes the need to raise capital to remain viable. The accompanying consolidated financial statements do not include any adjustments that might be necessary should the Company be unable to continue as a going concern.

The Company’s long-term plans include continued development of its current pipeline of products, in addition to continue the development of OT-101 which is now the product of the JV, to generate sufficient revenues, through either technology transfer or product sales, to cover its anticipated expenses. Until the Company is able to generate sufficient revenues from its current pipeline, the Company plans on funding its operations through the sale of equity and/or the issuance of debt, combined with or without warrants or other equity instruments.

Although no assurances can be given as to the Company’s ability to deliver on its revenue plans, or that unforeseen expenses may arise, management believes that the potential equity and debt financing or other potential financing will provide the necessary funding for the Company to continue as a going concern. Also, management cannot guarantee any potential debt or equity financing will be available on favorable terms or at all. As such, management does not believe the Company has sufficient cash for 12 months from the date of this report. If adequate funds are not available on acceptable terms, or at all, the Company will need to curtail operations, or cease operations completely.

The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, equity-based transactions and disclosure of contingent liabilities at the date of the financial statements and revenues and expense during the reporting period. Actual results could materially differ from those estimates.

The Company believes the following critical accounting policies affect its more significant judgments and estimates used in the preparation of the financial statements. Significant estimates include the valuation of goodwill and intangible assets for impairment, deferred tax asset and valuation allowance, and fair value of financial instruments.

As of March 31, 2022 and December 31, 2021, respectively, the Company held all its cash in banks in the United States of America. The Company considers investments in highly liquid instruments with a maturity of three months or less to be cash equivalents. The Company did not have any cash equivalents as of March 31, 2022 and December 31, 2021, respectively. Restricted cash consists of certificates of deposits held at banks as collateral for various purposes.

Issuance costs are specific incremental costs that are (1) paid to third parties and (2) directly attributable to the issuance of a debt or equity instrument. The issuance costs attributable to the initial sale of the instrument are offset against the associated proceeds in the determination of the instrument’s initial net carrying amount.

Debt issuance costs and debt discounts are being amortized over the lives of the related financings on a basis that approximates the effective interest method. Costs and discounts are presented as a reduction of the related debt in the accompanying balance sheets if related to the issuance of debt or presented as a reduction of additional paid in capital if related to the issuance of an equity instrument. The Company applies the relative fair value to allocate the issuance costs among freestanding instruments that form part of the same transaction.

If the Company amends the terms of its convertible notes, the Company reviews and applies the guidance per ASC 470-60 Troubled debt restructurings and ASC 470-50 Debt-Modifications and Extinguishments, evaluates and concludes whether the terms of the agreements were or were not substantially different as of a particular reporting date and accounts the transaction as a debt modification or a troubled debt restructuring.

The carrying value of cash, accounts payable and accrued expense approximate their fair values based on the short-term maturity of these instruments. As defined in ASC 820, “Fair Value Measurements and Disclosures,” fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). The Company utilizes market data or assumptions that market participants would use in pricing the asset or liability, including assumptions about risk and the risks inherent in the inputs to the valuation technique. These inputs can be readily observable, market corroborated, or generally unobservable. ASC 820 establishes a fair value hierarchy that prioritizes the inputs used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurement) and the lowest priority to unobservable inputs (level 3 measurement). This fair value measurement framework applies at both initial and subsequent measurement.

The derivative liabilities associated with its 2019 bridge financing Convertible Notes (see Note 5), consisted of conversion feature derivatives at March 31, 2022 and 2021, are Level 3 fair value measurements.

The table below sets forth a summary of the changes in the fair value of the Company’s derivative liabilities classified as Level 3 as of March 31, 2022 and 2021:

As of March 31, 2022 and 2021, the Company estimated the fair value of the conversion feature derivatives embedded in the convertible debentures based on assumptions used in the Black-Scholes valuation model. The key valuation assumptions used consists, in part, of the price of the Company’s Common Stock, a risk-free interest rate based on the yield of a Treasury note and expected volatility of the Company’s Common Stock all as of the measurement dates. The Company used the following assumptions to estimate fair value of the derivatives as of March 31, 2022 and 2021:

When the Company changes its valuation inputs for measuring financial liabilities at fair value, either due to changes in current market conditions or other factors, it may need to transfer those liabilities to another level in the hierarchy based on the new inputs used. The Company recognizes these transfers at the end of the reporting period that the transfers occur. For the periods ended March 31, 2022 and March 31, 2021, there were no transfers of financial assets or financial liabilities between the hierarchy levels.

The $2,625,000 of contingent consideration, of shares issuable to PointR shareholders which was recorded and associated with the PointR Merger, is also classified as Level 3 fair value measurements. The Company initially recorded the contingency based on a valuation conducted by a third-party valuation expert. The valuation was based on a probability of the completion of certain milestones by PointR for the shareholders to earn additional shares. The Company evaluated the probability of the earning of the milestones and concluded that the probability of achievement of the milestones had not changed, primarily due to the shifting of focus by the Company to develop AI technologies for the COVID-19 pandemic. As such, the Company did not record any change to the valuation during the three months ended March 31, 2022 or 2021, respectively.

Basic net loss per common share is computed by dividing the net loss by the weighted-average number of common shares outstanding during the period. Diluted net loss per share includes the effect of Common Stock equivalents (notes convertible into Common Stock, stock options and warrants) when, under either the treasury or if-converted method, such inclusion in the computation would be dilutive. The following number of shares have been excluded from diluted loss since such inclusion would be anti-dilutive:

The Company applies the provisions of ASC 718, Compensation—Stock Compensation (“ASC 718”), which requires the measurement and recognition of compensation expense for all stock-based awards made to employees and non-employees, including employee stock options, in the statements of operations.

For stock options issued, the Company estimates the grant date fair value of each option using the Black-Scholes option pricing model. The use of the Black-Scholes option pricing model requires management to make assumptions with respect to the expected term of the option, the expected volatility of the Common Stock consistent with the expected life of the option, risk-free interest rates and expected dividend yields of the Common Stock. For awards subject to service-based vesting conditions, including those with a graded vesting schedule, the Company recognizes stock-based compensation expense equal to the grant date fair value of stock options on a straight-line basis over the requisite service period, which is generally the vesting term. Forfeitures are recorded as they are incurred as opposed to being estimated at the time of grant and revised.

For warrants issued in connection with fund raising activities, the Company estimates the grant date fair value of each warrant using the Black-Scholes pricing model. The use of the Black-Scholes option pricing model requires management to make assumptions with respect to the expected term of the warrant, the expected volatility of the Common Stock consistent with the expected life of the warrant, risk-free interest rates and expected dividend yields of the Common Stock. If the warrants are issued upon termination or cancellation of prior issued warrants, then the Company estimates the grant date fair value of the new warrants using the Black-Scholes pricing model and evaluates whether the new warrants are deemed as equity instruments or liability instruments. If the warrants are deemed to be equity instruments, the Company records stock compensation expense and an addition to additional paid in capital. If however, the warrants are deemed to be liability instruments, then the fair value is treated as a deemed dividend and credited to additional paid in capital.

The Company reviews long-lived assets, including definite-lived intangible assets, for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. Recoverability of these assets is determined by comparing the forecasted undiscounted net cash flows of the operation to which the assets relate to the carrying amount. If the operation is determined to be unable to recover the carrying amount of its assets, then these assets are written down first, followed by other long-lived assets of the operation to fair value. Fair value is determined based on discounted cash flows or appraised values, depending on the nature of the assets. For the three months ended March 31, 2022 and the year ended December 31, 2021, there were 0 impairment losses recognized for long-lived assets.

The Company records its intangible assets at cost in accordance with ASC 350, Intangibles – Goodwill and Other. The Company reviews the intangible assets for impairment on an annual basis or if events or changes in circumstances indicate it is more likely than not that they are impaired. These events could include a significant change in the business climate, legal factors, a decline in operating performance, competition, sale or disposition of a significant portion of the business, or other factors. If the review indicates the impairment, an impairment loss would be recorded for the difference of the value recorded and the new value. For the three months ended March 31, 2022 and the year ended December 31, 2021, there were 0impairment losses recognized for intangible assets.

Goodwill represents the excess of the purchase price of acquired business over the estimated fair value of the identifiable net assets acquired. Goodwill is not amortized but is tested for impairment at least once annually, at the reporting unit level or more frequently if events or changes in circumstances indicate that the asset might be impaired. The goodwill impairment test is applied by performing a qualitative assessment before calculating the fair value of the reporting unit. If, on the basis of qualitative factors, it is considered not more likely than not that the fair value of the reporting unit is less than the carrying amount, further testing of goodwill for impairment would not be required. Otherwise, goodwill impairment is tested using a two-step approach.

The first step involves comparing the fair value of the reporting unit to its carrying amount. If the fair value of the reporting unit is determined to be greater than its carrying amount, there is no impairment. If the reporting unit’s carrying amount is determined to be greater than the fair value, the second step must be completed to measure the amount of impairment, if any. The second step involves calculating the implied fair value of goodwill by deducting the fair value of all tangible and intangible assets, excluding goodwill, of the reporting unit from the fair value of the reporting unit as determined in step one. The implied fair value of the goodwill in this step is compared to the carrying value of goodwill. If the implied fair value of the goodwill is less than the carrying value of the goodwill, an impairment loss equivalent to the difference is recorded. For the three months ended March 31, 2022 and year ended December 31, 2021, there were 0 impairment losses recognized for Goodwill.

We have generally issued derivative financial instruments, such as warrants, in connection with our equity offerings. We evaluate the terms of these derivative financial instruments in order to determine their accounting treatment in our financial statements. Key considerations include whether the financial instruments are freestanding and whether they contain conditional obligations. If the warrants are freestanding, do not contain conditional obligations and meet other classification criteria, we account for the warrants as an equity instrument. However, if the warrants contain conditional obligations, then we account for the warrants as a liability until the conditional obligations are met or are no longer relevant. Because no established market prices exist for the warrants that we issue in connection with our equity offerings, we must estimate the fair value of the warrants, which is as inherently subjective as it is for stock options, and for similar reasons as noted in the stock-based compensation section above. For financial instruments which are accounted for as a liability, we report any changes in their estimated fair values as gains or losses in our Consolidated Statement of Income.

The Company evaluates and accounts for conversion options embedded in its convertible instruments in accordance with ASC 815 “Derivatives and Hedging”.

ASC 815 generally provides three criteria that, if met, require companies to bifurcate conversion options from their host instruments and account for them as free-standing derivative financial instruments. These three criteria include circumstances in which (a) the economic characteristics and risks of the embedded derivative instrument are not clearly and closely related to the economic characteristics and risks of the host contract, (b) the hybrid instrument that embodies both the embedded derivative instrument and the host contract is not re-measured at fair value under otherwise applicable generally accepted accounting principles with changes in fair value reported in earnings as they occur, and (c) a separate instrument with the same terms as the embedded derivative instrument would be considered a derivative instrument. Professional standards also provide an exception to this rule when the host instrument is deemed to be conventional as defined under professional standards as “The Meaning of Conventional Convertible Debt Instrument.”

The Company accounts for convertible instruments (when it has determined that the embedded conversion options should not be bifurcated from their host instruments) in accordance with ASC 470-20 “Debt – Debt with Conversion and Other Options.” Accordingly, the Company records, when necessary, discounts to convertible notes for the intrinsic value of conversion options embedded in debt instruments based upon the differences between the fair value of the underlying Common Stock at the commitment date of the note transaction and the effective conversion price embedded in the note. Original issue discounts (“OID”) under these arrangements are amortized over the term of the related debt to their earliest date of redemption. The Company also records when necessary deemed dividends for the intrinsic value of conversion options embedded in preferred shares based upon the differences between the fair value of the underlying Common Stock at the commitment date of the note transaction and the effective conversion price embedded in the note.

ASC 815-40 “Derivatives and Hedging – Contracts in Entity’s Own Equity” provides that, among other things, generally, if an event occurs that is not within the entity’s control could or would require net cash settlement, then the contract shall be classified as an asset or a liability.

The Company evaluates its ownership, contractual relationships and other interests in entities to determine the nature and extent of the interests, whether such interests are variable interests and whether the entities are VIEs in accordance with ASC 810, Consolidations. These evaluations can be complex and involve Management judgment as well as the use of estimates and assumptions based on available historical information, among other factors. Based on these evaluations, if the Company determines that it is the primary beneficiary of a VIE, the entity is consolidated into the financial statements. At March 31, 2022 and December 31, 2021, the Company identified EdgePoint to be the Company’s sole VIE. At March 31, 2022 and December 31, 2021, the Company’s ownership percentage of EdgePoint was 29% and 29%, respectively. The VIE’s net assets were $0.1 million and $0.1 million at March 31, 2022 and December 31, 2021, respectively.

The Company signed a joint venture agreement (“JVA”) with Dragon to form a joint venture called GMP Biotechnology, LLC, both affiliates of GMP, on March 31, 2022. The JVA prescribes certain requirements to be completed during the three months ended June 30, 2022 to make the JV fully functional and operational, including issuance of the shares issuable to the Company and Dragon. The Company will evaluate the accounting for the JV and once these functional and operational activities are completed, the Company will appropriately record the transactions.

The Company recognizes revenue in accordance with ASC Topic 606, Revenue from Contracts with Customers.

Under ASC 606, the Company recognizes revenue when its customers obtain control of the promised good or services, in an amount that reflects the consideration which the Company expects to receive in exchange for those goods or services. The Company applies the following five-step process: (i) identify the contract(s) with a customer; (ii) identify the performance obligation(s) in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligation(s) in the contract; and (v) recognize revenue when (or as) the Company satisfies a performance obligation.

At contract inception, once the contract is determined to be within the scope of ASC 606, the Company identifies the performance obligation(s) in the contract by assessing whether the goods or services promised within each contract are distinct. The Company then recognizes revenue for the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied.

The Company anticipates generating revenues from rendering services to other third party customers for the development of certain drug products and/or in connection with certain out-licensing agreements. In the case of services rendered for development of the drugs, revenue is recognized upon the achievement of the performance obligations or over time on a straight-line basis over the extended service period. In the case of out-licensing contracts, the Company records revenues either (i) upon achievement of certain pre-defined milestones when there is no obligation of the Company achieve any performance obligations in connection with the said pre-defined milestones, or (ii) upon achievement of the performance obligations if the milestones require the Company to provide the performance obligations.

The Company occasionally collects advance payments from customers toward commitments to provide services or performance obligations, in which case the advance payment is recorded as a liability until the obligations are fulfilled and revenue is recognized.

In accordance with ASC 730-10-25 “Research and Development”, research and development costs are charged to expense as and when incurred.

In August 2020, the FASB issued “ASU 2020-06, Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40)” (“ASU 2020-06”) which simplifies the accounting for convertible instruments. The guidance removes certain accounting models which separate the embedded conversion features from the host contract for convertible instruments. Either a modified retrospective method of transition or a fully retrospective method of transition was permissible for the adoption of this standard. Update No. 2020-06 is effective for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. Early adoption was permitted no earlier than the fiscal year beginning after December 15, 2020. The Company has not adopted ASU 2020-06 during the three months ended March 31, 2022 and is evaluating the impact of implementation on its financial statements, if any.

All other newly issued but not yet effective accounting pronouncements have been deemed to be not applicable or immaterial to the Company.

Certain amounts in prior periods may have been reclassified to conform with current period presentation.

The Company completed the merger with Oncotelic Inc. (“Merger”) in April 2019. The Company completed the merger with PointR Data Inc (“PointR Merger”) in November 2019. For more details, refer to our 2020 Annual Report on Form 10-K for the year ended December 31, 2020 filed by the Company on April 15, 2021.

The Oncotelic merger gave rise to Goodwill of $4,879,999. Further, we added goodwill of $16,182,456 upon the completion of the Merger with PointR. In general, the goodwill is tested on an annual impairment date of December 31. However, as of March 31, 2022, since both assets are currently being developed for various cancer and COVID-19 therapies, the Company does not believe the there are any factors or indications that the goodwill is impaired.

In April 2018, Oncotelic Inc. entered into an Assignment and Assumption Agreement (the “Assignment Agreement”) with Autotelic Inc., an affiliate company, and Autotelic LLC, an affiliate company, pursuant to which Oncotelic acquired the rights to all intellectual property (“IP”) related to a patented product. As consideration for the Assignment Agreement, Oncotelic Inc. issued 204,798 shares of its Common Stock for a value of $819,191. The Assignment Agreement also provides that Oncotelic Inc. shall be responsible for all costs related to the IP, including development and maintenance, going forward.

The following table summarizes the balances as of March 31, 2022 and December 31, 2021, of the intangible assets acquired, their useful life, and annual amortization:

Amortization of identifiable intangible assets for the three months ended March 31, 2022 and 2022 was $12,841 and $12,841, respectively.

The future yearly amortization expense over the next five years and thereafter are as follows:

The IPR&D assets were acquired in the PointR Merger during the year ended December 31, 2019. Since January 2021, the Company has determined that the IPR&D should be reported as an indefinitely lived asset and therefore will evaluate, on an annual basis, for any impairment on the IPR&D and will record an impairment if identified. The balance of IPR&D as of March 31, 2022 and December 31, 2021 was $1,101,760. The following table summarizes the balances as of March 31, 2022 and December 31, 2021 of the IPR&D assets. The Company evaluates, on an annual basis, for any impairment and records an impairment if identified. The Company identified no impairment to IPR&D assets during its evaluation.

As of March 31, 2022, special purchase agreements (SPAs) with convertible debentures and notes, net of debt discount and including accrued interest, if any, consist of the following amounts:

For information on the special purchase agreements (SPAs) with convertible debentures and notes, net of debt discount and including accrued interest, if any, as of December 31, 2022, refer to our Annual Report on Form 10-K for the year ended December 31, 2021.

The gross principal balances on the convertible debentures listed above totaled $1,000,000 and included initial debt discounts totaling $800,140, resulting from the recording of the original issue discount, the related financing costs, the beneficial conversion feature (“BCF”) for the intrinsic value of the non-bifurcated conversion option and the restricted shares issued contemporaneously with the convertible notes.

Total amortization expense related to these debt discounts was $22,918 and $54,572 for the three months ended March 31, 2022, and 2021, respectively. In addition, during the three months ended March 31, 2022, and 2021, we recorded additional and accelerated amortization of debt discounts, which was created from the bifurcation of the conversion option related the host hybrid instruments, of $0 and $24,491, respectively, upon the partial and/or full conversion of debt by TFK to shares of the Company’s common stock. The total unamortized debt discount at March 31, 2022, and December 31, 2021 was approximately $12,646 and $35,564, respectively.

All the above notes issued to Peak One, TFK, our CEO, and the bridge investors reached the 180 days during the fiscal year ended December 31, 2020. As such, all the note holders had the ability to convert that debt into equity at the variable conversion price of 65% of the Company’s lowest traded price after the first 180 days or at the lower of the Fixed Price or 55% of the Company’s traded stock price under certain circumstances. This gave rise to a derivative liability for the debt instrument of approximately $870,000, since the conversion option attached to certain notes became convertible into a variable number of shares of our common stock, and correspondingly debited additional debt discounts of approximately $258,000 and interest expense of approximately $612,000.

As of March 31, 2022, the Company had a derivative liability of approximately $531,000 and a change in fair value of approximately $191,000.

In April 2019, the Company entered into a Securities Purchase Agreement (the “Bridge SPA”) with our CEO and the Bridge Investor with a commitment to purchase convertible notes in the aggregate of $400,000.

In April 2019, the Company entered into a convertible note with our Chief Executive Officer, Vuong Trieu, Ph. D. (the “Trieu Note”). The Trieu Note has a principal balance of $164,444, including a 10% OID of $16,444, resulting in net proceeds of $148,000, with a maturity date of April 23, 2022. Upon the occurrence of certain events of default, the Buyer, amongst other remedies, has the right to charge a penalty in a range of 18% to 40% dependent on the specific default event. Amounts due under the Convertible Note may also be converted into shares (the “Trieu Conversion Shares”) of the Company’s Common Stock at any time, at the option of the holder, at a conversion price of $0.10 per share (the “Fixed Price”), at the lower of the Fixed Price or 65% of the Company’s lowest traded price after the 180^th day or at the lower of the Fixed Price or 55% of the Company’s traded stock price under certain circumstances. The Company has agreed to at all times reserve and keep available out of its authorized Common Stock a number of shares equal to at least two times the full number of Conversion Shares. The Company may redeem the Convertible Note at rates of 110% to 140% rates over the principal balance dependent on certain events and redeem the value with accrued interest thereon, if any.

The issuance of the Trieu Note resulted in a discount from the beneficial conversion feature totaling $131,555 related to the conversion feature. Total amortization of the OID and the discount totaled $14,620 and $18,058 for the three months ended March 31, 2022, and 2021. Total unamortized discount on this note was approximately $4,900 and $19,000 as of March 31, 2022, and December 31, 2021, respectively.

In April 2019, pursuant to the Bridge SPA the Company entered into Convertible Note Tranche #1 (“Tranche #1”) with the Bridge Investor. Tranche #1 has a principal balance of $35,556, an OID of $3,556, resulting in net proceeds of $32,000, with a maturity date of April 23, 2022. Upon the occurrence of certain events of default, the Buyer, among other remedies, has the right to charge a penalty in a range of 18% to 40% dependent on the specific default event. Amounts due under Tranche #1 may also be converted into shares (the “Bridge SPA Conversion Shares”) of the Company’s Common Stock at any time, at (i) a conversion price, during the first 180 days, of $0.10 per share (the “Fixed Price”), and then (2) at the lower of the Fixed Price or 65% of the Company’s lowest traded price after the first 180 days or at the lower of the Fixed Price or 55% of the Company’s traded stock price under certain circumstances. The Company may redeem the Convertible Note at rates of 110% to 140% rates over the principal balance dependent on certain events and redeem the value with accrued interest thereon, if any.

The issuance of the note resulted in a discount from the beneficial conversion feature totaling $28,445. Total amortization of the OID and discount totaled approximately $3,300 and $4,100 for the three months March 31, 2022, and 2021, respectively. Total unamortized discount on this note was approximately $1,100 and $4,400 as of March 31, 2022, and December 31, 2021.

On August 6, 2019, pursuant to the Bridge SPA the Company entered into Convertible Note Tranche #2 (“Tranche #2”) with the Bridge Investor. Tranche #2 has a principal balance of $200,000, an OID of $20,000 and debt issuance costs of $5,000, resulting in net proceeds of $175,000, with a maturity date of August 6, 2022. Upon the occurrence of certain events of default, the Buyer, among other remedies, has the right to charge a penalty in a range of 18% to 40% dependent on the specific default event. Amounts due under Tranche #1 may also be converted into Bridge Conversion Shares of the Company’s Common Stock at any time, at the option of the holder, at a conversion price equal to the Fixed Price, at the lower of the Fixed Price or 65% of the Company’s lowest traded price after the 180^th day or at the lower of the Fixed Price or 55% of the Company’s traded stock price under certain circumstances. The Company may redeem the Convertible Note at rates of 110% to 140% rates over the principal balance dependent on certain events and redeem the value with accrued interest thereon, if any.

The issuance of the note resulted in a discount from the beneficial conversion feature totaling $175,000. Total amortization of the OID and discount totaled approximately $5,000 and $4,900 for the three months ended March 31, 2022, and March 31, 2021, respectively. Total unamortized discount on this note was $6,700 and $12,000 as of March 31, 2022, and December 31, 2021.

In December 2019, the Company closed its Fall 2019 Debt Financing, raising an additional $500,000 bringing the gross proceeds of all debt financings under the Fall 2019 Debt Financing to $1,000,000. The Company entered into those certain Note Purchase Agreements (the “Fall 2019 Note Purchase Agreements”) with certain accredited investors and the officers of the Company for the sale of convertible promissory notes (the “Fall 2019 Notes”). The Company completed the initial closing under the Fall 2019 Note Purchase Agreements in November 2019. The Company issued Fall 2019 Notes in the principal amount of $250,000 to each of Dr. Vuong Trieu, the Company’s Chief Executive Officer, and Stephen Boesch, in exchange for gross proceeds of $500,000. In connection with the second and final closing of the Fall 2019 Debt Financing, the Company issued Fall 2019 Notes to additional investors including $250,000 to Dr. Sanjay Jha, through his family trust, the former CEO of Motorola and COO/President of Qualcomm. The Company also offset certain amounts due to Dr. Vuong Trieu, the Company’s Chief Executive Officer, Chulho Park, the Company’s Chief Technology Officer, and Amit Shah, the Company’s Chief Financial Officer, all related parties as Officers of the Company, and converted such amounts due into the Fall 2019 Notes. $35,000 due to Dr. Vuong Trieu, $27,000 due to Chulho Park and $20,000 due to Amit Shah were converted into debt. The Company also issued the Fall 2019 Notes of $168,000 to two accredited investors.

The Company repaid $0 and $50,000 of principal in the three months ended March 31, 2022, and 2021, respectively. The total unamortized principal amount of the Fall 2019 Notes was $850,000 as of March 31, 2022, and December 31, 2021, respectively.

All the Fall 2019 Notes provided for interest at the rate of 5% per annum and are unsecured. All amounts outstanding under the Fall 2019 Notes became due and payable upon the approval of the holders of a majority of the principal amount of outstanding Fall 2019 Notes (the “Majority Holders”) on or after (a) November 23, 2020 or (b) the occurrence of an event of default (either, the “Maturity Date”). The Majority Holders have waived the default in the maturity of the Fall 2019 Notes and as such there is no event of default. The Company had the option to prepay the Fall 2019 Notes at any time. Events of default under the Fall 2019 Notes included failure to make payments under the Fall 2019 Notes within thirty (30) days of the date due, failure to observe of the Fall 2019 Note Purchase Agreement or Fall 2019 Notes which is not cured within thirty (30) days of notice of the breach, bankruptcy, or a change in control of the Company (as defined in the Fall 2019 Note Purchase Agreement).

The Majority Holders had the right, at any time not more than five (5) days following the Maturity Date, to elect to convert all, and not less than all, of the outstanding accrued and unpaid interest and principal on the Fall 2019 Notes. The Fall 2019 Notes may be converted, at the election of the Majority Holders, either (a) into shares of the Company’s Common Stock at a conversion price of $0.18 per share, or (b) into shares of common stock of the Edgepoint, at a conversion price of $5.00 (based on a $5.0 million pre-money valuation) of Edgepoint and 1,000,000 shares outstanding. The issuance of the Fall 2019 notes resulted in a discount from the BCF totaling $222,222 related to the conversion feature. Total amortization of the discount totaled $0 for the three months ended March 31, 2022, and 2021.Total unamortized discount on this note was $0 as of March 31, 2022, and December 31, 2021.

Further, the Company recorded interest expense of $10,625 and approximately $11,460 on these Fall 2019 Notes for the three months ended March 31, 2022, and 2021, respectively. The total amount outstanding under the Fall 2019 Notes, net of discounts and including accrued interest thereon, as of March 31, 2022, and December 31, 2021, was $957,048 and $946,424, respectively.

In June 2020, the Company secured $2 million in debt financing, evidenced by a one-year convertible note (the “GMP Note”) from GMP, to conduct a clinical trial evaluating OT-101 against COVID-19 bearing 2% annual interest, and is personally guaranteed by Dr. Vuong Trieu, the Chief Executive Officer of the Company. The GMP Note is convertible into the Company’s Common Stock upon the GMP Note’s maturity of the GMP Note, at the Company’s Common Stock price on the date of conversion with no discount. GMP has waived the default in the maturity of the GMP Note and as such there is no event of default and also agreed to extend the date of maturity of the GMP Note to June 30, 2022. GMP does not have the option to convert prior to the GMP Note’s maturity. Such financing will be utilized solely to fund the clinical trial. The Company’s liability under GMP Note commenced to accrue when GMP first began to pay for services related to the clinical trial to our third-party clinical research organization, up to a maximum of $2 million. GMP has been invoiced by the clinical research organization for the full $2 million as of March 31, 2022, and as such the Company has recognized the liability as a convertible debt.

In September 2021, the Company secured a further $1.5 million in debt financing, evidenced by a one-year convertible note (the “GMP Note 2”) from GMP, to fund the same clinical trial evaluating OT-101 against COVID-19 bearing 2% annual interest. The GMP Note is convertible into the Company’s Common Stock upon the GMP Note 2’s maturity one year from the date of the GMP Note 2, at the Company’s Common Stock price on the date of conversion with no discount. GMP does not have the option to convert prior to the GMP Note 2’s maturity at the end of one year. Such financing was to be utilized solely to fund the clinical trial. As of March 31, 2022, GMP was invoiced by the clinical research organization for $0.5 million. GMP paid the clinical trial organization the first tranche of $0.5 million in October 2021.

In January 2022, the Company entered into an Unsecured Convertible Note Purchase Agreement (the “January Purchase Agreement”) with GMP, pursuant to which the Company issued a convertible promissory note in the aggregate principal amount of $0.5 million (the “January 2022 Note”), which January 2022 Note is convertible into shares of the Company’s Common Stock.

The GMP Note 2, the October 2021 Note and the January 2022 Note carries an interest rate of 2% per annum and matures on the earlier of (a) the one-year anniversary of the date of the Purchase Agreement, or (b) the acceleration of the maturity by GMP upon occurrence of an Event of Default (as defined below). The GMP Note 2, the October 2021 Note and the January 2022 Note contains a voluntary conversion mechanism whereby GMP may convert the outstanding principal and accrued interest under the terms of the GMP Note 2, the October 2021 Note and the January 2022 Note into shares of Common Stock (the “Conversion Shares”), at the consolidated closing bid price of the Company’s Common Stock on the applicable OTC Market as of the date the Company receives a Notice of Conversion from GMP. Prepayment of the GMP Note 2, the October 2021 Note and the January 2022 Note may be made at any time by payment of the outstanding principal amount plus accrued and unpaid interest. The October Note contains customary events of default (each an “Event of Default”). If an Event of Default occurs, at GMP’s election, the outstanding principal amount of the GMP Note 2, the October 2021 Note and the January 2022 Note, plus accrued but unpaid interest, will become immediately due and payable in cash. The October Purchase Agreement and the January Purchase Agreement requires the Company to use of the proceeds received under the October 2021 Note and January 2022 Note to support the clinical development of OT-101, including payroll and has been made in continuation of the relationship between the Company and GMP.

The total principal outstanding on all the GMP notes, inclusive of accrued interest, was $4,569,781 and $4,069,781 as of March 31, 2022, and December 31, 2021, respectively.

In August 2021, the Company entered into Note Purchase Agreements with Autotelic - a related party, our CFO - a related party, and certain accredited investors (the “August 2021 investors”), whereby the Company issued four convertible notes in the aggregate principal amount of $698,500 convertible into shares of common stock of the Company for net proceeds of $690,825. The convertible notes carry a five (5%) percent coupon and mature one year from issuance. The majority of the August 2021 investors have the right, but not the obligation, not more than five days following the maturity date, to convert all, but not less than all, the outstanding and unpaid principal plus accrued interest into the Company’s common stock, at a conversion price of $0.18. The Company determined that the economic characteristics and risks of the embedded conversion option are not clearly and closely related to the economic characteristics and risks of the debt host instrument. Further, the Company determined that the embedded conversion feature meets the definition of a derivative but met the scope exception to the derivative accounting required under ASC 815 for certain contracts involving a reporting entity’s own equity.

As of March 31, 2022, and December 31, 2021, the August 2021 convertible notes, net of debt discount, consist of the following amounts:

During the three months ended March 31, 2022, and 2021, the Company recognized approximately $5,700 and $0 of interest, respectively. At March 31, 2022, and December 31, 2021, accrued interests on these convertible notes totaled approximately $20,000 and $14,260, respectively.

In November and December 2021, the Company entered into securities purchase agreement with five institutional investors, whereby the Company issued five convertible notes in the aggregate principal amount of $1,250,000 convertible into shares of common stock of the Company. The convertible notes carry a twelve (12%) percent coupon and a default coupon of 16% and mature at the earliest of one year from issuance or upon event of default. Investors has the right at any time following issuance date to convert all or any part of the outstanding and unpaid amount of the note into the Company’s common stock at a conversion price established at a fixed rate of $0.07. The Company granted a total number of 9,615,385 warrants convertible into an equivalent number of the Company common shares at a strike price of $0.13 up to five years after issuance. The Placement agent was also granted a total amount of 961,540 as part of a finder’s fee agreement.

In January 2022, three of the five investors made a cashless exercise for their warrants. In this connection, the Company issued approximately 3 million shares of the Common Stock in exchange of approximately 5.8 million warrants.

As of March 31, 2022, and December 31, 2021, convertible notes under the November-December 2021 Financing, net of debt discount, consist of the following amounts:

The Company recognized approximately $48,000 and $0 of accrued interest during the three months ended March 31, 2022, and 2021, respectively. The Company recognized approximately $309,500 and $0 of interest expense attributable to the amortization of the debt discount from the original debt discount, deferred financing costs, fair value allocated to the warrants and the beneficial conversion feature during the three months ended March 31, 2022, and 2021, respectively.

The Company recorded an initial debt discount of approximately $0.4 million representing the intrinsic value of the conversion option embedded in the convertible debt instrument based upon the difference between the fair value of the underlying common stock at the commitment date of the note transaction and the effective conversion price embedded in the note. The Company recognized amortization expense related to the debt discount and debt issuance costs of approximately $0.3 million for the three months ended March 31, 2022, which is included in interest expense in the consolidated statements of operations.

As of March 31, 2022 compared to December 31, 2021, other short-term advances consist of the following amounts obtained from various employees and related parties:

   September 30, 2017 December 31, 2016
   (Unaudited) (See Note 1)
ASSETS
Current assets:

Cash and cash equivalents
   $ 1,908 $ 3,535
Short-term investments
   —   8,512
Prepaid clinical trial expenses
   772 1,946
Other prepaid expenses and current assets
   258 77


Total current assets
   2,938 14,070
Property and equipment, net
   4 11
Other assets
   33 33


Total assets
   $ 2,975 $ 14,114


LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:

Accounts payable
   $ 312 $ 310
Accrued compensation and employee benefits
   261 842
Accrued severance
   220 —
Accrued clinical trial expenses
   88 64
Other accrued liabilities
   330 398


Total current liabilities
   1,211 1,614


Commitments and contingencies

Stockholders’ equity:

Preferred stock, $0.01 par value, 15,000 shares authorized; No shares issued and outstanding
   —   —
Common stock, $0.01 par value, 70,000 shares authorized; 26,545 shares issued and outstanding
   265 265
Additionalpaid-in capital
   291,340 290,698
Accumulated deficit
   (289,841 ) (278,463 )


Total stockholders’ equity
   1,764 12,500


Total liabilities and stockholders’ equity
   $ 2,975 $ 14,114

~~Condensed Statements~~During the year ended December 31, 2020, the Company’s CEO provided additional funding of ~~Comprehensive Loss~~$70,000 to the Company, of which $50,000 was repaid before December 31, 2020. Further, during the three months ended March 31, 2022, $20,000 repaid to the Company’s CEO. As such, $0 and $20,000 was outstanding at March 31, 2022 and December 31, 2021, respectively.

During the year ended December 31, 2021, Autotelic Inc. provided a short-term funding of $120,000 to the Company, which was repaid in ~~thousands, except per share data)~~

~~Condensed Statements~~2021. In May 2021, Autotelic provided an additional short-term funding of ~~Cash Flows~~

~~Notes~~$250,000 to ~~Condensed Financial Statements~~the Company, which was converted into the August 2021 Notes. Autotelic provided an additional $20,000 short-term loan to the Company, and as such, $20,000 was outstanding and payable to Autotelic at March 31, 2022 a December 31, 2021, respectively.

~~1. Summary~~During the year ended December 31, 2021, the Company’s CFO, a related Party, provided short term advances of ~~Significant Accounting Policies~~

~~Description~~approximately $45,000. During the year ended December 31, 2020, the Company’s CFO had provided a short term advance of ~~Business~~$25,000, which was repaid during the year ended December 31, 2021. $20,000 was repaid to the CFO during the three months ended March 31, 2022. As such approximately $25,000 and $45,000 was outstanding at March 31, 2022 and December 31, 2021, respectively.

On March 31, 2022, the Company entered into (i) a joint venture (the “JV”) agreement with Dragon and GMP Bio, both affiliates of GMP, (and the Company, Dragon and GMP Bio are collectively called the “Parties”) (the “JVA”), (ii) a license agreement for rights to OT-101 (the “US License Agreement”) for the territory within the United States of America (the “US”) with Sapu Holdings, LLC, a subsidiary of GMP Bio and (iii) a license agreement for rights to OT-101 for the rest of the world with GMP Bio (the “Ex-US Rights Agreement”, and the US License Agreement and the Ex-US License Agreement are collectively called the “Agreements”).

Dragon and the Company entered into the JVA to regulate their relationship and the operation and management of the JV. The JVA contains provisions for the licensed products and licensed technologies related to OT-101 (the “Licensed products and technologies”). Pursuant to the JVA the Company is required to transfer to GMP Bio all of the Company’s rights and obligations under the research and development agreement dated 3 February 2020 between the Company and Golden Mountain Partners, LLC (“GMP”), an affiliate of Dragon, as amended, varied and/or supplemented by a supplement to research and Services Agreement dated 23 March 2020 between the Company, Mateon Therapeutics, Inc. ~~(“Mateon”~~(subsequently renamed the Company) and GMP (the “R&D Agreement”). The JVA permits GMP to seek conversion of certain convertible promissory notes entered into between the Company and GMP (see reference to Purchase Agreements and Notes below) into shares of the Common Stock of the Company within 15 business days of the execution of the JVA at a price of $0.2242 per Common Share, the closing price of the Common Share as traded on the OTCQB the day prior to the execution of the JVA, or the ~~“Company”~~closing price of the Common Stock prior to the date of conversion if not within 15 business days of the JVA. Upon the execution of the JVA, Dragon will pay for and hold 55 shares of GMP Bio and the Company will pay for and hold 45 shares of GMP Bio, both to be acquired at $1.00 per share of GMP Bio. Such shares of GMP Bio were issued shortly after the date of the JVA. The JVA required the entering into of the Agreements on or before the execution of the JVA. The JVA defines the valuation of the Agreements (taking into account the transfer of the Company’s rights and obligations under the R&D Agreement) each at $11,320,237.25, for an aggregate of $22,640,474.50. The Parties also agreed that if a Rare Pediatric Disease (“RPD”) Priority Review Voucher, upon clinical approval of OT-101 Technologies for treatment of diffuse intrinsic pontine glioma (the “DIPG Voucher”), is issued to GMP Bio and GMP Bio, or a subsidiary thereof, sells the DIPG Voucher to a non-GMP subsidiary, then the Company shall be eligible to receive up to 50% of the net sales proceeds or $50 million, whichever is less. Dragon shall fund the JVA, for a total of $27,671,691, based on the conditions contained in the JVA, and the Company will input the licenses under the Agreements into the JV. The Company is obligated to (i) (A) rectify the chain of legal title such that the Company is the sole legal owner of such rights, (B) complete registration as the sole owner of all the Company’s Patent Rights and (C) provide evidence of such registration that is satisfactory to Dragon; (ii) provide Dragon with copies of official documents issued by the relevant patent offices in the relevant countries evidencing the Company’s legal ownership of all the Company’s Patents Rights; and (iii) reflect the Company’s legal ownership of all the Company’s Patent Rights in the relevant online registers of the relevant patent offices in the relevant countries. The JVA intends to raise funding for the JVA through a Series A round of financing of not less than $20 million. Dragon can suspend funding the JVA if the Series A round of financing is not successfully completed by August 31, 2022, in which case Dragon’s funding obligation would be restricted to $250,000per month to GMP Bio. If Dragon decides to terminate the JVA, the licenses granted under the Agreements shall be terminated and the OT-101 assets licensed by the Company will revert back to the Company. The rest of the JVA deals with the conduct of the JV, the board of directors of GMP Bio and other administrative matters. Dragon shall nominate up to three directors of their choosing to the board of directors of GMP Bio, two of whom are already nominated as “A” Directors and the Company shall nominate up to two directors of their choosing to the board of directors of GMP Bio, one of whom is already nominated as a “B” Director. The JVA defines how the board of directors will operate as well as the general management and operations of the JV. Other standard terms on shareholder rights, indemnification etc. are also defined in the JVA. Also included are the other terms with relation to insurance, indemnification, jurisdiction and other customary terms and conditions.

The Agreements include terms of an exclusive, irrevocable, perpetual, royalty-free, sublicensable license under the Licensed Technology to manufacture, have manufactured, use, import, sell, offer for sale or otherwise exploit the Licensed Products, which is OT-101, in the Field, which is all therapeutic uses in humans, and in the Territories, which is the US and the rest of the world. In addition, the Company grants a non-exclusive, irrevocable, perpetual, royalty-free, non-sublicensable license for its sole use of the Company’s Vision Grid system for monitoring process, man flow, equipment flow, and material flow in contract development and manufacturing organization operations. These have been granted to GMP Bio and Sapu Holdings, LLC as the capital contribution by the Company to GMP Bio. The Agreements include the contributions by the key employees, as defined and included in the Agreements, standard representations and warranties, intellectual property protection, insurance, indemnification, jurisdiction and other customary terms and conditions.

The Company is currently evaluating the estimated impact the accounting for the JV will have on its financial statements upon completion of the formation.

For information on the various notes from GMP, refer to Note 5 – GMP Notes of the Notes to the Consolidated Financial Statements above.

During the period from July 2020 to March 2021 the Company entered into subscription agreements with certain accredited investors pursuant to the JH Darbie Financing, whereby the Company issued and sold a total of 100 Units, for total gross proceeds of approximately $5 million, pursuant to the JH Darbie Placement Agreement, with each Unit consisting of:

As March 31, 2022 and December 31, 2021 funds received under the JH Darbie Financing, net of debt discount, consist of the following amounts:

The Company incurred approximately $0.64 million of issuance costs, including legal costs of approximately $39,000, that are incremental costs directly related to the issuance of the various instruments bundled in the offering.

Concurrently with the sale of the Units, JH Darbie was granted a warrant, exercisable over a five-year period, to purchase 10% of the number of Units sold in the JH Darbie Financing. As such, the Company granted 10 Units to JH Darbie pursuant to the JH Darbie Placement Agreement.

The Company allocated the proceeds among the freestanding financial instruments that were issued in the single transaction using the relative fair value method, which affects the determination of each financial instrument initial carrying amount. The Company utilized the relative fair value method as none of the freestanding financial instruments issued as part of the single transaction are measured at fair value. Under the relative fair value method, the Company made separate estimates of the fair value of each freestanding financial instrument and then allocated the proceeds in proportion to those fair value amounts. The Company recorded non-controlling interests of approximately $1.8 million in Edgepoint between July 2020 and March 2021. Non-controlling interests represent the portion of net assets in consolidated entities that are not owned by the Company and are reported as a component of equity in the consolidated balance sheets.

As of the multiple closings of the Company during the three months ended March 31, 2021, under the private placement memorandum with JH Darbie, the estimated grant date fair value of approximately $0.20 per share associated with the warrants to purchase up to 2,035,000 shares of common stock issued in this offering, or a total of approximately $ 0.7 million, was recorded to additional paid-in capital on a relative fair value basis. All warrants sold in this offering had an exercise price of $0.20 per share of the Company stock or $1.00 per share of Edge Point, subject to adjustment, are exercisable immediately and expire three years from the date of issuance. The fair value of the warrants was estimated using a Black Scholes valuation models using the following input values:

As of the multiple closings of the Company through December 31, 2020, under the private placement memorandum with JH Darbie, the estimated grant date fair value of approximately $0.20 per share associated with the warrants to purchase up to 3,465,000 shares of common stock issued in this offering, or a total of approximately $0.4 million, was recorded to additional paid-in capital on a relative fair value basis. All warrants sold in this offering had an exercise price of $0.20 per share of the Company stock or $1.00 per share of Edge Point, subject to adjustment, are exercisable immediately and expire three years from the date of issuance. The fair value of the warrants was estimated using a Black Scholes valuation models using the following input values.

The Company recorded an initial debt discount of approximately $0.7 million representing the intrinsic value of the conversion option embedded in the convertible debt instrument based upon the difference between the fair value of the underlying common stock at the commitment date of the note transaction and the effective conversion price embedded in the note.

In February 2022, the Company and all except one of the Investors agreed to extend the maturity date of the Notes from March 31, 2022, to March 31, 2023. In consideration for the extension of the Notes, the Company issued to the Investors an aggregate of 33,000,066 Oncotelic Warrants at a price of $0.15 per share of Company’s Common Stock. Each Investor will be entitled to receive 333,334 Oncotelic Warrants for each Unit purchased. Upon the amendment of the terms of the convertible notes under the private placement memorandum. As incentive to extend the maturity date, approximately 33 million warrants were issued to the Unit Holders who participated in the amendment, The Company repaid the 1 unit holder who did not participate in the amendment shortly after March 31, 2022.

The Company reviewed the guidance per ASC 470-60 Troubled debt restructurings and ASC 470-50 Debt-Modifications and Extinguishments and concluded that the terms of the agreements were substantially different as of March 31, 2022, and, accounted for the transaction as a debt extinguishment. The loss is recognized equal to the difference between the net carrying amount of the original debt and the fair value of the modified debt instrument.

At March 31, 2022, the Company estimated the fair value of the warrants issued in conjunction with the amendment of the private placement under the JH Darbie financing based on assumptions used in the Black-Scholes valuation model. The key valuation assumptions used consists, in part, of the price of the Company’s Common Stock, a risk-free interest rate based on the yield of a Treasury note and expected volatility of the Company’s Common Stock all as of the measurement date. The Company used the following assumptions to estimate fair value of the warrants as of March 31, 2022:

All the warrants issued in conjunction with the amendment #5 had an exercise price of $0.15 per share and are immediately exercisable and expire two years from the date of issuance or February 9, 2024. The warrants resulted in an aggregate fair value of approximately $2.9 million.

The Company recognized amortization expense related to the debt discount and debt issuance costs of $30,775 and $373,949 for the three months ended March 31, 2022 and March 31, 2021 respectively, which is included in interest expense in the statements of operations.

In October 2015, Oncotelic entered into a Master Service Agreement (the “MSA”) with Autotelic Inc., a related party that is partly-owned by the Company’s CEO Vuong Trieu, Ph.D. Dr. Trieu, a related party, is a ~~clinical-stage~~control person in Autotelic Inc. Autotelic Inc. currently owns less than 10% of the Company. The MSA stated that Autotelic Inc. will provide business functions and services to the Company and allowed Autotelic Inc. to charge the Company for these expenses paid on its behalf. The MSA includes personnel costs allocated based on amount of time incurred and other services such as consultant fees, clinical studies, conferences and other operating expenses incurred on behalf of the Company. The MSA requires a 90-day written termination notice in the event either party requires to terminate such services.

Expenses related to the MSA were approximately $66,000 for the three months ended March 31, 2022 as compared to approximately $77,000 for the same period of 2021.

In September 2021, the Company entered into an exclusive License Agreement (the “Agreement”) with Autotelic, pursuant to which Autotelic granted Oncotelic, among other things: (i) the exclusive right and license to certain Autotelic Patents (as defined in the Agreement) and Autotelic Know-How (as defined in the Agreement); and (ii) a right of first refusal to acquire at least a majority of the outstanding capital stock of Autotelic prior to Autotelic entering into any transaction that is a financing collaboration, distribution revenues, earn-outs, sales, out-licensing, purchases, debt, royalties, merger acquisition, change of control, transfer of cash or non-cash assets, disposition of capital stock by way of tender or exchange offer, partnership or any other joint or collaborative venture, research collaboration, material transfer, sponsored research or similar transaction or agreements. In exchange for the rights granted to Oncotelic, Autotelic would be entitled to earn the following milestone payments (collectively, the “Milestone Payments”).

In addition to the Milestone Payments, Autotelic will be entitled to royalties equal to 15% of the net sales of any products that incorporate the Autotelic Patents or Autotelic Know-How. The Agreement contains representations, warranties and indemnification provisions of each of the parties thereto that are customary for transactions of this type.

In April 2019, the Company issued a convertible note to Dr. Trieu totaling $164,444, including OID of $16,444, receiving net proceeds of $148,000, which was used by the Company for working capital and general corporate purposes. The Company issued a Fall 2019 Note to Dr. Trieu in the principal amount of $250,000. Dr. Trieu also offset certain amounts due to him in the amount of $35,000 and was converted into the Fall 2019 debt. During the year ended December 31, 2020, Dr. Trieu provided additional short-term funding of $70,000 to the Company, of which the Company repaid $50,000 prior to December 31, 2020. Further, the Company repaid $20,000 to Dr. Trieu for the balance of his short term loan of $20,000. During the year ended December 31, 2020, Dr. Trieu purchased a total of 5 Units under the private placement for a gross total of $250,000.

During the year ended December 2021, Autotelic Inc provided a short term loans of $270,000, of which $250,000 was converted into the August 2021 loan and the balance of $20,000 continues to be a short term loan. During the three months ended March 31, 2021, Autotelic Inc, provided a short-term loan of $120,000 to the Company. Such loan was repaid in April 2021. No loans or repayments were made to Autotelic Inc. during the same period in 2022.

On March 9, 2020, the Company and Artius Bioconsulting, LLC (“Artius”), for which Mr. King is the Managing Member, entered into an amendment to the Consulting Agreement dated December 1, 2018, under which Artius agreed to serve as a consultant to the Company for services related to the Company’s business from time to time, effective December 1, 2019 (the “Effective Date”) (the “Artius Agreement”). In connection with the Artius Agreement, Mr. King also agreed to assist the Company with strategic advisory services with respect to transactional and operational contracts, budgetary input, among other matters in connection with the formation of a new business unit to develop AI and Blockchain Driven Vision Systems (“EdgePoint AI”), for which Mr. King is Chief Executive Officer.

Under the terms of the Artius Agreement, the Company agreed to grant to Artius, subject to approval by the Company’s Board of Directors and pursuant to the Company’s 2017 Equity Incentive Plan, 148,837 restricted shares of the Company’s common stock, par value $.01 per share (“Common Stock”), in addition to a 30% pre-financing ownership stake in EdgePoint AI. The Artius Agreement contemplates that Mr. King will generally provide his services at a rate of $237 per hour, not to exceed 44 hours per month and payable monthly, and to reimburse Mr. King for reasonable and necessary expenses incurred by him or Artius in connection with providing services to the Company.

Either the Company or Artius may terminate the Artius Agreement at any time, for any reason following the Effective Date. The Artius Agreement will automatically renew one year from the Effective Date, unless the Parties agree to terminate the Artius Agreement at that time.

NaN expense was recorded during the three months ended March 31, 2022 or March 31, 2021 related to this Agreement.

Effective May 5, 2020, the Company and Dr. Maida entered into an independent consulting agreement, commencing April 1, 2020 (the “Maida Agreement”), under which Dr. Maida will assist the Company in providing medical expertise and advice from time to time in the design, conduct and oversight of the Company’s existing and future clinical trials.

Pursuant to the terms of the Maida Agreement, the Company granted to Dr. Maida 400,000 restricted shares of the Company’s Common Stock to vest on May 5, 2021. The Company will also pay Dr. Maida $15,000 per month for a minimum of 20 hours per week, in in addition to reimbursement of reasonable and necessary expenses incurred by Dr. Maida in connection with his services to the Company.

Either the Company or Dr. Maida may terminate the Maida Agreement, for any reason, upon 30 days advance written notice.

The Company recorded an expense of $75,000 during the three months ended March 31, 2022 as compared to $45,000 during the three months ended March 31, 2021 related to this Agreement.

On May 3, 2021, the Company entered into an Equity Purchase Agreement (“EPL”) and Registration Rights Agreement with Peak One Opportunity Fund LP (“Peak One” or the “Investor”). Under the terms of the EPL, the Company issued 250,000 shares of Common Stock to Peak One. Further, under the terms of the EPL, Peak One agreed to purchase from the Company up to $10,000,000 of the Company’s Common Stock upon effectiveness of a registration statement on Form S-1 filed with the U.S. Securities and Exchange Commission and subject to certain limitations and conditions set forth in the Equity Purchase Agreement. The Registration Rights Agreement provided that the Company would (i) file the Registration Statement with the SEC by July 2, 2021; and (ii) use its best efforts to have the Registration Statement declared effective by the Commission at the earliest possible date (in any event, within 90 days after the execution date of the definitive agreements). The Company filed a Registration Statement on Form S-1 with the Commission on May 24, 2021, and the Form S-1 was declared effective on June 2, 2021.

Following effectiveness of the Registration Statement, and subject to certain limitations and conditions set forth in the Equity Purchase Agreement, the Company shall have the discretion to deliver put notices to the Investor and the Investor will be obligated to purchase shares of the Company’s Common Stock based on the investment amount specified in each put notice. The minimum amount that the Company shall be entitled to put to the Investor in each put notice is $20,000 and the maximum amount is up to the lesser of $1.0 million or two hundred fifty percent (250%) of the average daily trading volume of the Company’s Common Stock defined as the average trading volume of the Company’s Common Stock in the ten (10) days preceding the date on the put notice multiplied by the lowest closing bid price in the ten (10) immediately preceding the date of the put notice. Pursuant to the Equity Purchase Agreement, the Investor will not be permitted to purchase, and the Company may not put shares of the Company’s Common Stock to the Investor that would result in the Investor’s beneficial ownership of the Company’s outstanding Common Stock exceeding 4.99%. The price of each put share shall be equal to ninety one percent (91%) of the market price, which is defined as the lesser of (i) closing bid price of the Common stock on the trading date immediately preceding the respective put date, or (ii) the lowest closing bid price of the Common Stock during the seven (7) trading days immediately following the clearing date associated with the applicable put notice.

The Company filed a post-effective amendment Registration Statement on Form S-1 with the Commission on April 26, 2022, and the Form S-1 was declared effective on May 6, 2022. The Company filed the prospectus in this connection on May 11, 2022.

In connection with the EPL, the Company issued 250,000 shares of Common Stock to Peak One and recorded a fair value in lieu of service of approximately $70,000.

During the three months ended March 31, 2022, the Company sold a total of 300,000 shares of Common Stock at price of $0.21 for total gross proceeds of approximately $65,500 and approximately $51,800, net of issuance costs. No similar sales were recorded during the three months ended March 31, 2021.

In January 2022, three of the five investors from the November/December 2021 financing made a cashless exercise for their warrants. In connection with this exercise, the Company issued 3,041,958 shares of Common Stock in exchange of approximately 5,769,231 million warrants.

In March 2022, the Company sold 300,000 shares of its Common Stock to Peak One under the EPL for net proceeds of approximately $52 thousand.

In January 2021, the Company issued 657,200 shares of its common stock to TFK in connection with the part conversion of their convertible notes payable.

In March 2021, the Company converted 278,188 shares of our Series A Preferred Stock to 278,187,847 shares of its common stock.

Pursuant to the Merger, the Company’s Common Stock and corresponding outstanding options survived. The below information details the Company’s associated option activity.

As of March 31, 2022, options to purchase Common Stock were outstanding under three stock option plans – the 2017 Equity Incentive Plan (the “2017 Plan”), the 2015 Equity Incentive Plan (the “2015 Plan”) and the 2005 Stock Plan (the “2005 Plan”). Under the 2017 Plan, up to 2,000,000 shares of the Company’s Common Stock may be issued pursuant to awards granted in the form of nonqualified stock options, restricted and unrestricted stock awards, and other stock-based awards. Under the 2015 and 2005 Plans, in aggregate, up to 7,250,000 shares of the Company’s Common Stock may be issued pursuant to awards granted in the form of incentive stock options, nonqualified stock options, restricted and unrestricted stock awards, and other stock-based awards.

Employees, consultants, and directors are eligible for awards granted under the 2017 and 2015 Plans. The Company registered an additional total of 20,000,000 shares of its Common Stock, which may be issued pursuant to the Registrant’s Amended and Restated 2015 Equity Incentive Plan (the “Plan”). Such additional shares were approved by the shareholders of the Company on August 10, 2020 and as reported to the SEC vide a Current Report on Form 8-K on August 14, 2020. As such, the total number of shares of the Company’s common stock available for issuance under the 2015 plan is 27,250,000. Since the adoption of the 2015 Plan, no further awards may be granted under the 2005 Plan, although options previously granted remain outstanding in accordance with their terms.

Compensation-based stock option activity for qualified and unqualified stock options for the three months ended March 31, 2022 is summarized as follows:

Information on compensation-based stock option activity for qualified and unqualified stock options for the year ended December 31, 2021 can be found in our Annual Report on Form 10-K for the year ended December 31, 2021 filed with the SEC on April 15, 2022.

The following table summarizes information about options to purchase shares of the Company’s Common Stock outstanding and exercisable at March 31, 2022:

The compensation expense attributed to the issuance of the options is recognized as they are vested.

The employee stock option plan stock options are generally exercisable for ten years from the grant date and vest over various terms from the grant date to three years.

The aggregate intrinsic value totaled approximately $1.0 million and was based on the Company’s closing stock price of $0.23 as of March 31, 2022, which would have been received by the option holders had all option holders exercised their options as of that date. Information on the aggregate intrinsic value for the year ended December 31, 2021 can be found in our Annual Report on Form 10-K for the year ended December 31, 2021 filed with the SEC on April 15, 2022.

The Company amortized approximately $297,000 of stock compensation expense during the three months ended March 31, 2022 on the grants of certain milestone driven options that were granted during the year ended December 31, 2021. No similar expense was recorded during the same period of 2021.

In August 2019, the Company entered into Employment Agreements and incentive compensation arrangements with each of its executive officers, including Dr. Vuong Trieu, the Chief Executive Officer; Dr. Fatih Uckun, the Chief Medical Officer; Dr. Chulho Park, its Chief Technology Officer; and Mr. Amit Shah, the Chief Financial Officer. Details of the agreements and the incentive compensation is described in detail in Note 11 – Commitments & Contingencies under “Employment Agreements”. The incentive stock options or the restricted stock awards granted to the Company’s executive officers have not been granted as of the date of this filing.

Pursuant to the Merger, the Company’s Common Stock and corresponding outstanding warrants survived. The below information represents the Company’s associated warrant activity.

In February 2022, the Company and all except one of the Investors agreed to extend the maturity date of the Notes from March 31, 2022, to March 31, 2023. In consideration for the extension of the Notes, the Company issued to the Investors an aggregate of approximately 33 million Oncotelic Warrants at a price of $0.15 per share of Company’s Common Stock. At March 31, 2022, the Company estimated the fair value of the warrants issued in conjunction with the amendment of the private placement under the JH Darbie financing based on assumptions used in the Black-Scholes valuation model. The key valuation assumptions used consists, in part, of the price of the Company’s Common Stock, a risk-free interest rate based on the yield of a Treasury note and expected volatility of the Company’s Common Stock all as of the measurement date. The Company used the following assumptions to estimate fair value of the warrants as of March 31, 2022:

The issuance of warrants to purchase shares of the Company’s Common Stock, including those attributed to debt issuances, as of March 31, 2022 are summarized as follows:

Information on warrants for the year ended December 31, 2022 can be found in our Annual Report on Form 10-K for the year ended December 31, 2021 filed with the SEC on April 15, 2022.

The following table summarizes information about warrants outstanding and exercisable at March 31, 2022:

In January 2022, three of the five November/December accredited investors made a cashless exercise for their warrants. In this connection, the Company issued 3,041,958 shares of Common Stock in exchange of approximately 5,769,231 million warrants.

The Company had gross deferred tax assets, which primarily relate to net operating loss carryforwards. As of December 31, 2021, the Company had gross federal and state net operating loss carryforwards of approximately $236.1 million and $76.3 million, respectively, which are available to offset future taxable income, if any. The Company recorded a valuation allowance in the full amount of its net deferred tax assets since realization of such tax benefits has been determined by our management to be less likely than not. Information on our deferred tax assets and liabilities can be found in our Annual Report on Form 10-K for the year ended December 31, 2021 filed with the SEC on April 15, 2022.

Portions of these carryforwards will expire through 2038, if not otherwise utilized. The Company’s utilization of net operating loss carryforwards could be subject to an annual limitation. as a result of certain past or future events, such as stock sales or other equity events constituting a “change in ownership” under the provisions of Sections 382 and 383 of the Internal Revenue Code of 1986, as amended, and similar state provisions. The annual limitations could result in the expiration of net operating loss carryforwards and tax credits before they can be utilized. We have not performed a formal analysis, but we believe our ability to use such net operating losses and tax credit carryforwards will be subject to annual limitations, due to change of ownership control provisions under Section 382 and 383 of the Internal Revenue Code, which would significantly impact our ability to realize these deferred tax assets.

Currently, the Company is leasing the office located at 29397 Agoura Road, Suite 107, Agoura Hills, CA 91301 on a month-to-month basis until such time a new office is identified. The Company believes the office is sufficient for its current operations.

From time to time, the Company may become involved in legal proceedings arising in the ordinary course of business. The Company is not presently a party to any legal proceedings that it currently believes, if determined adversely to the Company, would individually or taken together have a material adverse effect on the Company’s business, operating results, financial condition or cash flows.

The total purchase price of $17,831,427 represented the consideration transferred from the Company in the PointR Merger and was calculated based on the number of shares of Common Stock plus the preferred shares outstanding but convertible into Common Stock outstanding at the date of the PointR Merger and included $2,625,000 of contingent consideration of shares issuable to PointR shareholders, which can increase to $15 million of contingent consideration, upon achievement of certain milestones. The $2,625,000 of contingent consideration of shares issuable to PointR shareholders was recorded and associated with the PointR Merger is also classified as Level 3 fair value measurements. The Company initially recorded the contingency based on a valuation conducted by a third-party valuation expert. The valuation was based on a probability of the completion of certain milestones by PointR for the shareholders to earn additional shares. The Company evaluated the probability of the earning of the milestones and concluded that the probability of achievement of the milestones had not changed, primarily due to the shifting of focus by the Company to develop AI technologies for the COVID-19 pandemic. As such, the Company did not record any change to the valuation during the years ended and as of March 31, 2022 or December 31, 2021, respectively.

In March 2022, the Company entered into a securities purchase agreement with an accredited investor, whereby the Company issued a promissory note in the aggregate principal amount of $250,000 convertible into shares of common stock of the Company. The convertible note carries a twelve (12%) percent coupon and a default coupon of 16% and mature one year from issuance. The investor has the right at any time following issuance date to convert all or any part of the outstanding and unpaid amount of the note into the Company’s common stock at a conversion price established at a fixed rate of $0.10. The Company also granted a total number of 1,250,000 warrants convertible into an equivalent number of the Company common shares at a strike price of $0.20 up to five years after issuance. As the funds for the Note were received in April 2022, the Company will record the transaction during the six months ended June 30, 2022.

The Company filed a post-effective amendment to reregister the EPL on April 26, 2022 and the post effective amendment was found effective by the SEC on 6 May, 2022. The Company filed the prospectus in this connection on May 11, 2022.

The Company appointed Dr. Fatih Uckun and Dr. Seymour Fein as its Consulting Chief Medical Officer and Chief Regulatory Officer in May 2022. For more information on the appointments of Drs. Uckun and Fein, refer to our Current Report on form 8-K filed with the SEC on May 6, 2022.

On May 13, 2022, the Company received a request from one of the November/December 2021 note holders for a cashless exercise of their warrants. The Company will issue 1,403,326 shares of Common Stock to the debt holder in lieu of 1,923,077 warrants.

ITEM 2: MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This Quarterly Report on Form 10-Q (the “Quarterly Report” or “Report”) includes a number of forward-looking statements that reflect management’s current views with respect to future events and financial performance. Forward-looking statements are projections in respect of future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as “may,” “should,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential” or “continue” or the negative of these terms or other comparable terminology. Those statements include statements regarding the intent, belief or current expectations of us and members of our management team, as well as the assumptions on which such statements are based.

Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, or performance. These statements are only predictions and involve known and unknown risks, uncertainties and other factors. Some of these risks are included in the section entitled “Risk Factors” set forth in this Quarterly Report and in other reports that we file with the SEC. The occurrence of any of these risks, or others of which we are currently unaware, may cause our company’s actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. These risks include, by way of example and without limitation:

Readers are urged to carefully review and consider the various disclosures made by us in this report and in our other reports filed with the SEC, including our Form 8-K/A filed with the SEC on July 8, 2019, which includes the audited financial statements for our subsidiary, Oncotelic, as of and for the years ended December 31, 2018 and 2017. We undertake no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes in the future operating results over time except as required by law. We believe that our assumptions are based upon reasonable data derived from and known about our business and operations. No assurances are made that actual results of operations or the results of our future activities will not differ materially from our assumptions.

Oncotelic Therapeutics, Inc. (also d/b/a Mateon Therapeutics, Inc.) (“Oncotelic”), was formed in the State of New York in 1988 as OXiGENE, Inc., was reincorporated in the State of Delaware in 1992, changed its name to Mateon Therapeutics, Inc. in 2016, and then Oncotelic Therapeutics, Inc. in November 2020. Oncotelic conducts business activities through Oncotelic and its wholly owned subsidiaries, Oncotelic, Inc., a Delaware corporation, PointR Data, Inc. (“PointR”), a Delaware corporation, and EdgePoint AI, Inc. (“Edgepoint”), a Delaware Corporation for which there are non-controlling interests, (Oncotelic, Oncotelic Inc., PointR and Edgepoint are collectively called the “Company”). The Company is evaluating the further development of its product candidates OXi4503 as a treatment for acute myeloid leukemia and myelodysplastic syndromes and CA4P in combination with a checkpoint inhibitor for the treatment of advanced metastatic melanoma.

We are a clinical stage biopharmaceutical company developing drugs for the treatment of ~~orphan oncology indications,~~cancer. Our goal is to advance our drug candidates into late-stage pivotal clinical trials and either sell marketing rights to a larger pharmaceutical company or seek FDA approval ourselves.

The Company is also developing OT-101 for the various epidemics and pandemics, similar to the current corona virus (“COVID-19”) pandemic. In this connection, the Company entered into an agreement and supplemental agreement with Golden Mountain Partners (“GMP”) for a total of $1.2 million to render services for the development of OT-101. Such amount was recorded as revenue upon completion of all performance obligations under the agreement. Further, In June 2020, the Company secured $2 million in debt financing from GMP to conduct a clinical trial evaluating OT-101 against COVID-19. The Company discontinued enrollment in its ~~lead program~~OT-101 clinical trial in patients with COVID-19 in June 2021. In September 2021, the Company secured a further $1.5 million in debt from GMP to complete the study. The trial completed randomization of 32 out of 36 patients planned, on an intent to treat basis. The discontinuance of the trial was due to the continuing rise of more severe variants in Latin America, leading to exhaustion of medical care infrastructure in Latin America.

In 2020 and 2021, the Company was developing Artemisinin as a potential therapy for COVID-19. Artemisinin, purified from a plant Artemisia annua. It can inhibit TGF-β activity and is able to neutralize COVID-19. The Company initially conducted a study and the test results during an in vitro study at Utah State University showed Artemisinin having an EC50 of 0.45 ug/ml, and a Safety Index of 140. Artemisinin can target multiple viral threats, including COVID-19, by suppressing both viral replication and clinical symptoms that arise from viral infection. Viral replication cannot occur without TGF-β. In a clinical study undertaken in India, clinical consequences related to the TGF-β surge, including ARDS and cytokine storm, were suppressed by targeting TGF-β with Artemisinin. The ARTI-19 trials were conducted in India by Windlas Biotech Limited (“Windlas”), the Company’s business partner in India. Windlas had applied for regulatory approval for it’s Artemisinin based product, ArtiShield^TM, but has not been able to obtain regulatory approval for use of ArtiShield^TM as a COVID-19 therapy and as such, no significant revenues have been reported by Windlas nor have we accrued any royalties on Artemisinin due from Windlas. We intend to focus future development on Artemisinin against other respiratory viruses with unmet needs.

Between October 2021 and January 2022, GMP provided $1.0 million to the Company to fund operations on the way to complete a JV. On March 31, 2022, the Company formalized a joint venture (“JV”) with Dragon Overseas Capital Limited (“Dragon”) and GMP Biotechnology Limited (“GMP Bio”), both affiliates of GMP. For more information on the JV, refer to Note 6 of the Notes to the unaudited Consolidated Financial Statements for this Quarterly Report on Form 10Q.

Since April 2019, we have been operating under significant capital constraints, which has curtailed our ability to achieve meaningful progress in either of the Company’s two clinical programs – one of which is developing OXi4503 as a treatment for acute myeloid leukemia ~~(“AML”~~and myelodysplastic syndromes and the other of which is developing CA4P in combination with a checkpoint inhibitor for the treatment of advanced metastatic melanoma. We believe that the merger of Oncotelic and Oncotelic Inc. creates a combined company that has potential to generate shareholder value through a promising pipeline of next generation immunotherapies targeting several significant cancer markets where there is a lack of therapeutic options and lack of an effective immunotherapy protocol

On March 31, 2022, the Company entered into (i) a joint venture (the “JV”) agreement with Dragon and GMP Bio (and the Company, Dragon and GMP Bio are collectively called the “Parties”) (the “JVA”), (ii) a license agreement for rights to OT-101 (the “US License Agreement”) for the territory within the United States of America (the “US”) with Sapu Holdings, LLC, a subsidiary of GMP Bio and (iii) a license agreement for rights to OT-101 for the rest of the world with GMP Bio (the “Ex-US Rights Agreement”, and the US License Agreement and the Ex-US License Agreement are collectively called the “Agreements”).

The Company ~~was originally incorporated under~~will evaluate the ~~name OXiGENE, Inc. in 1988~~accounting for the JV and once these functional and operational activities are completed, the Company will appropriately record the transactions.

For information on the various notes from GMP, refer to Note 6 – Joint Venture and GMP of the Notes to the Consolidated Financial Statements above.

In November and December 2021, the Company entered into securities purchase agreement with five institutional investors, whereby the Company issued five convertible notes in the ~~state~~aggregate principal amount of ~~New York~~$1,250,000 convertible into shares of common stock of the Company. The convertible notes carry a twelve (12%) percent coupon and ~~reincorporated~~a default coupon of 16% and mature at the earliest of one year from issuance or upon event of default. Investors has the right at any time following issuance date to convert all or any part of the outstanding and unpaid amount of the note into the Company’s common stock at a conversion price established at a fixed rate of $0.07. The Company granted a total number of 9,615,385 warrants convertible into an equivalent number of the Company common shares at a strike price of $0.13 up to five years after issuance. The Placement agent was also granted a total amount of 961,540 as part of a finder’s fee agreement.

In January 2022, three of the five investors made a cashless exercise for their warrants. In this connection, the Company issued 3,041,958 million shares of the Common Stock in ~~1992~~exchange of approximately 5,761,231 million warrants.

In March 2022, the Company entered into a securities purchase agreement with an accredited investor, whereby the Company issued a promissory note in the ~~state~~aggregate principal amount of ~~Delaware.~~$250,000 convertible into shares of common stock of the Company. The convertible note carries a twelve (12%) percent coupon and a default coupon of 16% and mature one year from issuance. The investor has the right at any time following issuance date to convert all or any part of the outstanding and unpaid amount of the note into the Company’s common stock at a conversion price established at a fixed rate of $0.10. The Company ~~changed its name~~also granted a total number of 1,250,000 warrants convertible into an equivalent number of the Company common shares at a strike price of $0.20 up to ~~Mateon Therapeutics, Inc. on~~five years after issuance. As the funds for the Note were received in April 2022, the Company will record the transaction during the six months ended June ~~17, 2016.~~30, 2022.

On May 13, 2022, the Company received a request from one of the November/December 2021 note holders for a cashless exercise of their warrants. The ~~accompanying unaudited condensed~~Company will issue 1,403,326 shares of Common Stock to the debt holder in lieu of 1,923,077 warrants.

The preparation of financial statements ~~have been prepared~~ in accordance with U.S. generally accepted accounting principles ~~for interim financial information and with the instructions to Form10-Q~~ ~~and Article 10 ofRegulation S-X.~~ The financial statements do not include all of the information and footnotes required by U.S. generally accepted accounting principles for complete financial statements. In the opinion of management, however, all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair presentation have been included. Operating results for the three and nine months ended September 30, 2017 are not necessarily indicative of the results that may be expected for any other interim period or for the year ending December 31, 2017.

The balance sheet at December 31, 2016 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by U.S. generally accepted accounting principles for complete financial statements. For further information, refer to the financial statements and footnotes thereto included in the Annual Report on Form~~10-K~~ ~~for the Company for the year ended December 31, 2016.~~

~~The preparation of financial statements in conformity with U.S. generally accepted accounting principles~~ requires ~~management~~us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, ~~and~~as well as the reported ~~amounts of income~~revenues and ~~expenses~~expense during the reporting ~~period.~~periods. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances at the time we make such estimates. Actual results and outcomes may differ materially from our estimates, judgments and assumptions. We periodically review our estimates in light of changes in circumstances, facts and experience. The effects of material revisions in estimates are reflected in the financial statements prospectively from the date of the change in estimate. Our significant accounting policies are more fully described in Note 2 to our Unaudited Consolidated Financial Statements included elsewhere in this Quarterly Report.

We define our critical accounting policies as those accounting principles that require us to make subjective estimates and judgments about matters that are uncertain and are likely to have a material impact on our financial condition and results of operations, as well as the specific manner in which we apply those principles. We believe the critical accounting policies used in the preparation of our financial statements that require significant estimates and judgments are the following:

The Company reviews long-lived assets, including definite-lived intangible assets, for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. Recoverability of these assets is determined by comparing the forecasted undiscounted net cash flows of the operation to which the assets relate to the carrying amount. If the operation is determined to be unable to recover the carrying amount of its assets, then these assets are written down first, followed by other long-lived assets of the operation to fair value. Fair value is determined based on discounted cash flows or appraised values, depending on the nature of the assets. For the three months ended March 31, 2022 and 2021, there were no impairment losses recognized for long-lived assets.

The Company evaluates and accounts for conversion options embedded in its convertible instruments in accordance with ASC 815 “Derivatives and Hedging”.

ASC 815 generally provides three criteria that, if met, require companies to bifurcate conversion options from their host instruments and account for them as free standing derivative financial instruments. These three criteria include circumstances in which (a) the economic characteristics and risks of the embedded derivative instrument are not clearly and closely related to the economic characteristics and risks of the host contract, (b) the hybrid instrument that embodies both the embedded derivative instrument and the host contract is not re-measured at fair value under otherwise applicable generally accepted accounting principles with changes in fair value reported in earnings as they occur, and (c) a separate instrument with the same terms as the embedded derivative instrument would be considered a derivative instrument. Professional standards also provide an exception to this rule when the host instrument is deemed to be conventional as defined under professional standards.

The Company accounts for convertible instruments (when it has determined that the embedded conversion options should not be bifurcated from their host instruments) in accordance with ASC 470-20 “Debt – Debt with Conversion and Other Options.” Accordingly, the Company records, when necessary, discounts to convertible notes for the intrinsic value of conversion options embedded in debt instruments based upon the differences between the fair value of the underlying common stock at the commitment date of the note transaction and the effective conversion price embedded in the note. Original issue discounts under these arrangements are amortized over the term of the related debt to their earliest date of redemption. The Company also records when necessary deemed dividends for the intrinsic value of conversion options embedded in preferred shares based upon the differences between the fair value of the underlying common stock at the commitment date of the note transaction and the effective conversion price embedded in the note.

ASC 815-40 “Derivatives and Hedging – Contracts in Entity’s Own Equity” provides that, among other things, generally, if an event is not within the entity’s control could or require net cash settlement, then the contract shall be classified as an asset or a liability.

We evaluate our ownership, contractual relationships and other interests in entities to determine the nature and extent of the interests, whether such interests are variable interests and whether the entities are VIEs in accordance with ASC 810, Consolidations. These evaluations can be complex and involve Management judgment as well as the use of estimates and assumptions based on available historical information, among other factors. Based on these evaluations, if the Company determines that it is the primary beneficiary of a VIE, the entity is consolidated into the financial statements.

Research and development expense consist of costs we incur for the development of our investigational drugs and, to a lesser extent, for preclinical research activities. Research and development costs are expensed as incurred. Research and development expense include clinical trial costs, salaries and benefits of employees, including associated stock-based compensation, payments to clinical investigators, drug manufacturing costs, laboratory supplies and facility costs. Clinical trial costs are a significant component of our research and development expense, and these can be difficult to accurately estimate. Included in clinical trial costs are fees paid to other entities that conduct certain research and development activities on our behalf, such as clinical research organizations, or CROs. We estimate clinical trial expense based on the services performed pursuant to contracts with research institutions such as CROs and the actual clinical investigators. These estimates are based on actual time and expenses incurred by the CRO and the clinical investigators. Also included in clinical trial expense are costs based on the level of patient enrollment into the clinical trial and the actual services performed under the related clinical trial agreement. Changes in clinical trial assumptions, such as the length of time estimated to enroll all patients, rate of screening failures, patient drop-out rates, number and nature of adverse event reports and the total number of patients enrolled can impact the average and expected cost per patient and the overall cost of the clinical trial. Based on patient enrollment reports and services provided, we may periodically adjust estimates for the clinical trial costs. If we do not identify costs that we have begun to incur or if we underestimate or overestimate the level of services performed, the length of time for these services or the costs of these services, our actual expenses could differ from ~~those~~our estimates.

~~Highly liquid investments with original maturities of three months or less at~~Share-Based Compensation

We record the ~~date of purchase are considered to be cash equivalents. Cash equivalents are stated at fair value.~~

~~All marketable securities have been classified as “available for sale” and are carried at~~estimated fair value ~~based upon quoted~~of all share-based payments issued to employees and other service providers. Our share-based payments consist primarily of stock options. The valuation of stock options is an inherently subjective process, since market ~~prices. The Company considers itsavailable-for-sale~~ ~~portfolio to be~~values are not available for ~~use~~any stock options in current operations. Accordingly, the Company classifies certain investments as short-term marketable securities, even though the stated maturity date may be one year or more beyond the current balance sheet date. Unrealized gains and losses, net of any related tax effects,our equity securities. Market values are ~~excluded from earnings and are included~~also not available on long-term, non-transferable stock options in other ~~comprehensive income~~equity securities. With no market values on options to trade in our common stock and ~~reported as~~no comparable market values on any long-term non-transferable stock options, the process of valuing our stock options is even more uncertain and subjective. Accordingly, we use a ~~separate component~~Black-Scholes option pricing model to derive an estimated fair value of ~~stockholders’ deficit until realized. Realized gains~~the stock options which we issue. The Black-Scholes option pricing model requires certain input assumptions, including the expected term of the options and ~~losses and declines~~the expected volatility of our common stock. Changes in these assumptions could have a material impact on the estimated fair value ~~judged to be other than temporary, if any, onavailable-for-sale~~ ~~securities are included in other income (expense), net. The cost~~that we record for share-based payments that we issue. We determine the term of ~~securities sold is~~the options based on the ~~specific-identification method.~~simplified method, which averages the vesting period and the contractual life of the stock option. We determine the expected volatility based on the historical volatility of our common stock over a period commensurate with the option’s expected term. The Black-Scholes option pricing model also requires assumptions for risk-free interest rates and the expected dividend yield of our common stock, but we feel that these values are more objective and note that changes in these values do not have a significant impact on the estimated value of the options when compared to the volatility and term assumptions.

We are also required to estimate the level of award forfeitures expected to occur and record compensation expense only for those awards that are ultimately expected to vest. Accordingly, we perform a historical analysis of option awards that are forfeited prior to vesting, and record total stock option expense that reflects this estimated forfeiture rate.

Comparison of the Results of Operations for the Three Months Ended March 31, 2022 to the Three Months Ended March 31, 2021

A comparison of the Company’s operating results for the three months ended March 31, 2022 and 2021, respectively, is as follows.

We recorded a net loss of approximately $5.1 million for the three months ended March 31, 2022 as compared to approximately $3.1 million for the three months ended March 31, 2021. The increased loss of approximately $2.0 million for the three months ended March 31, 2022 as compared to the same period of 2021 was primarily due to higher operating expenses of approximately $2.3 million, higher loss on extinguishment of debt of approximately $0.2 million and offset by approximately $0.3 million on change in value of derivatives on debt and lower interest expense of $0.2 million.

Research and development (“R&D”) expenses decreased by approximately $1.0 million for the three months ended March 31, 2022 compared to the same period in 2021. The lower R&D cost was primarily related to lower clinical trial activity of approximately $0.9 million and $0.1 million of other operational costs.

As a result of our joint venture with Dragon and GMP Bio, we expect to decrease R&D activities related to OT-101, including the initiation of new clinical trial, and therefore believe that R&D expenses will decrease for the remainder of 2022. Any other development expenses will be subject to our continuing ability to secure sufficient funding to continue planned operations.

General and administrative (“G&A”) expenses increased by approximately $3.3 million for the three months ended March 31, 2022 compared to the three months ended March 31, 2021, primarily due to the increase of approximately $3.2 million in stock compensation expense, incurred in connection with issuance of new warrants of approximately $2.9 million and approximately $0.3 million on stock options during the three months ended March 2022 and $0.1 million in increase in compensation costs, as reduced by $0.1 million in other operating costs. A majority of the stock options granted during the year ended December 31, 2021 were performance and milestone driven, which milestones were met upon the entering into the JV with Dragon and GMP Bio at the end of March 31, 2022.

As a result of our joint venture with Dragon and GMP Bio, we expect to decrease G&A activities to reduce, and therefore believe that G&A expenses will decrease for the remainder of 2022. Any other G&A expenses will be subject to our continuing ability to secure sufficient funding to continue planned operations.

We recorded interest expense, including amortization of debt costs, of approximately $0.3 million for the three months ended March 31, 2022 in connection with debt raised from various convertible notes, including the JH Darbie Financing, as compared to $0.5 million for the same period of 2021, in connection with debt raised from convertible notes during 2019. For more information on debt raised from convertible notes and the JH Darbie Financing, see Note 5 and Note 7 of the Unaudited Consolidated Financial Statements of this Quarterly Report.

During the three months ended March 31, 2022, we recorded a change in the value of the derivative of $0.2 million. Correspondingly, during the three months ended March 31, 2021, we recorded approximately $0.5 million change in value upon conversion of the debt to liabilities as a derivative as well as new debt converting to liabilities on the convertible notes issued to our CEO and a bridge investor. (collectively, the “Convertible Notes”). The Convertible Notes became convertible 180 days after issuance, and as such the CEO and the bridge investor had the ability to convert that debt into equity at a variable conversion price, giving rise to a derivative feature within the debt instrument resulting in the recording of a derivative liability and change in value of the derivative. For more information on value of derivatives, refer to the Note 2 of the Unaudited Consolidated Financial Statements of this Quarterly Report.

During the three months ended March 31, 2022, we recorded a loss on extinguishment of debt of approximately $0.3 million on our JH Darbie Financing when we granted approximately 33 million warrants to our investors. During the three months ended March 31, 2021, we recorded a loss on conversion of debt by Peak One and TFK of approximately $28,000 related to the difference in fair value to the price at which the debt was converted, compared to a loss of $0.1 million during the same period in 2020.

The Company has experienced net losses every year since inception and as of ~~September 30, 2017,~~March 31, 2022 had an accumulated deficit of approximately ~~$290~~$35.9 million. As of March 31, 2022, the Company had approximately $0.1 million in cash, and current liabilities of approximately $16.8 million. Of the approximately $16.8 million in current liabilities, including approximately $4.6 million was debt for conducting clinical trials for OT-101 from GMP and $2.6 million related to contingent liability to issue Common Stock of the Company to PointR shareholders upon achievement of certain milestones (see Note 1 of the Unaudited Consolidated Financial Statements of this Quarterly Report). The Company ~~has no source of revenue and~~ does not expect to ~~receive~~generate any meaningful revenue from product ~~revenue~~sales in the near ~~future. If the Company remains in business, the Company~~future and expects to incur additional operating losses over the next several years, ~~principally~~primarily as a result of the ~~Company’s continuing development of~~Company’s plans to continue clinical trials for its investigational drugs. AsThe Company’s limited capital resources, history of ~~September 30, 2017,~~recurring losses and uncertainties as to whether the Company ~~had approximately $1.9 million in cash and cash equivalents. Based on the Company’s planned~~’s operations including recent reductions in the Company’s development programs and personnel and assuming the receipt of an anticipated cash refund from one of the Company’s vendors, Management expects Mateon’s existing cash to support operations into February 2018. Prior to this time, the Company will need to secure additional funding or it would be forced to terminate or further curtail operations. Because the Company does not currently have a guaranteed source of capital that will sustain operations past February 2018, Management has determined that there isbecome profitable raise substantial doubt about ~~the Company’s~~its ability to continue as a going concern. The financial statements contained in this report do not include any adjustments related to the recoverability of assets or classifications of liabilities that might be necessary should the Company be unable to continue as a going concern.

The principal source of the ~~Company’s~~Company’s working capital deficit to date has been the ~~proceeds from~~issuance of convertible notes, a substantial part of which has been provided by officers and certain insiders. The Company will need to raise additional capital in order to fund its operations and continue development of product candidates. The Company is evaluating the options to further the development of theOT-101 for both cancer and COVID-19 through our JV, Artemisinin for COVID-19, developing AI technologies to support the COVID-19 therapies; in addition to evaluating the development pathway of its product candidates; OXi4503 and/or CA4P.

The Company anticipates raising substantial additional capital through the sale of ~~equity.~~ equity securities and/or debt, but no other financing arrangements are in place at this time.

If the Company is unable to access additional funds ~~in the near term, whether through the sale of additional equity or another means, the Company may not be able to continue in business. The Company also~~when needed, it may not be able to continue the development of ~~its~~these investigational drugs and ~~Mateon~~the Company could be required to delay, scale back or eliminate some or all of its development programs and operations. Any additional equity financing, if available, would be dilutive to the ~~Company,~~current stockholders and may not be available on favorable ~~terms and would most likely be dilutive to current stockholders. Any~~terms. Additional debt financing, if available, may involve restrictive covenants and could also be ~~dilutive to current stockholders. If the~~dilutive. The Company accesses funds through collaborative or licensing arrangements, it may be required to relinquish rights to some of its technologies or product candidates on terms that are not favorable to the Company. The Company’s’s ability to access capital ~~when needed is not assured. If access to capital is not achieved in the near term, it will materially harm the Company’s business, financial condition and results of operations.~~

~~In February 2016, the FASB issued ASUNo. 2016-02,~~ ~~“Leases (Topic 842),” which requires substantially all leases, including operating leases, to be recognized by lessees on their balance sheet as aright-of-use~~ asset and corresponding lease liability. This ASU is effective for the Company’s interim and annual reporting periods beginning January 1, 2019 and early adoption is permitted. The Company is currently evaluating the impact that the adoption of this ASU will have on its financial statements.

~~In March 2016, the FASB issued ASUNo. 2016-09,~~ “Compensation—Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting,” which simplified several aspects of the accounting for share-based payments, including immediate recognition of all excess tax benefits and deficiencies in the income statement, changing the threshold to qualify for equity classification up to the employees’ maximum statutory tax rates, allowing an entity-wide accounting policy election to either estimate the number of awards that are expected to vest or account for forfeitures as they occur, and clarifying the classification on the statement of cash flows for the excess tax benefit and employee taxes paid when an employer withholds shares for~~tax-withholding~~ purposes. This ASU became effective for Mateon’s interim and annual reporting periods beginning January 1, 2017, and the adoption of this standard did not have a material impact on the Company’s financial statements. As part of the adoption of this standard, the Company elected to continue estimating the expected option forfeiture rate.

~~In August 2016, the FASB issued ASUNo. 2016-15,~~ “Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments,” which addresses several cash flow issues that diversify in practice. The new guidance is effective for fiscal years beginning after December 31, 2017 and for interim periods within those years. The Company currently does not expect the adoption of this ASU to have a material impact on its financial statements.

Fair value is defined as the price at which an asset could be exchanged or a liability transferred in a transaction between knowledgeable, willing parties in the principal or most advantageous market for the asset or liability. Where available, fair value is based on observable market prices or parameters or derived from such prices or parameters. Where observable prices or parameters are not available, valuation models are applied.

Assets and liabilities recorded at fair value are categorized based upon the level of judgment associated with the inputs used to measure their fair value. Hierarchical levels directly related to the amount of subjectivity associated with the inputs to fair valuation of these assets and liabilities, are as follows:

Level 1—Inputs are unadjusted, quoted prices in active markets for identical assets at the reporting date. Active markets are those in which transactions for the asset or liability occur in sufficient frequency and volume to provide reasonably accurate pricing information on an ongoing basis.

Level 2—Inputs, other than quoted prices included in Level 1, that are either directly or indirectly observable for the asset or liability through correlation with market data at the reporting date and for the duration of the instrument’s anticipated life.

The Company utilizes third party pricing services in developing fair value measurements where fair value is based on observable market inputs, including benchmark yields, reported trades, broker/dealer quotes, bids, offers and other reference data. The Company uses quotes from external pricing service providers and other~~on-line~~ ~~quotation systems to verify the fair value of investments provided by third party pricing service providers.~~

Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities reflect management’s best estimate of what market participants would use in pricing the asset or liability at the reporting date. Consideration is given to the risk inherent in the valuation technique and the risk inherent in the inputs to the model.

~~Financial assets measured at fair value on a recurring basis are categorized in the table below based upon the lowest level of significant input to the valuations (in thousands):~~

~~The following is a summary of the Company’s outstanding warrants to purchase common stock:~~

~~The following is a summary of the Company’s stock option activity under its equity incentive plans:~~

As of September 30, 2017, there was approximately $1.1 million of unrecognized compensation cost related to stock option awards that is expected to be recognized as expense over a weighted average period of approximately 2.2 years.

The fair values for the stock options granted were estimated at the date of grant using the Black-Scholes option pricing model with the following weighted-average assumptions for the periods indicated:

Basic and diluted net loss per share was calculated by dividing the net loss per share attributed to the Company’s common shares by the weighted-average number of common shares outstanding during the period. Diluted net loss per share includes the effect of all dilutive, potentially issuable common equivalent shares as defined using the treasury stock method. All of the Company’s common stock equivalents are anti-dilutive due to the Company’s net loss position for all periods presented. Accordingly, common stock equivalents of approximately 5,565,000 stock options and 9,626,000 warrants outstanding at September 30, 2017 and 4,049,000 stock options and 9,842,000 warrants outstanding at September 30, 2016, were excluded from the calculation of weighted average shares for diluted net loss per share.

On October 2, 2017, the Company terminated the employment of seven employees, reducing the total number of Company employees from 13 employees to six employees. The Company provided severance payments to the employees whose employment was terminated in return for each employees’ release of any potential claims against the Company. Also, effective October 2, 2017, the Company’s Chief Executive Officer, Chief Financial Officer and Chief Scientific Officer each agreed to a 50% reduction of their base salary, with reinstatement of their base salaries to previous levels contingent on the Company raising additional funding of at least $4 million or a change in control of the Company.

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

The following discussion and analysis should be read together with the audited financial statements and notes, as well as our “Management’s Discussion and Analysis of Financial Condition and Results of Operations” that are included in our Annual Report on Form~~10-K~~ ~~for the year ended December 31, 2016, and also with the unaudited financial statements set forth in Part I, Item 1 of this Quarterly Report on Form10-Q.~~

We are a clinical-stage biopharmaceutical company developing drugs for the treatment of orphan oncology indications, with a lead program evaluating the investigational drug OXi4503 in relapsed/refractory acute myeloid leukemia, or AML. We have recently observed that two of four patients in the fifth dose cohort of our ascending-dose study, which we call OX1222, experienced complete remissions of their disease after just one cycle of treatment with 9.76 mg/m2 of OXi4503. In earlier, lower dose cohorts in this same study, we observed three patients with complete remissions following two cycles of treatment and two patients with partial remissions. As a result of these signs of efficacy observed in clinical trials of OXi4503, advancing this asset in this indication is now our highest priority program.

In addition to OXi4503, prior to September 25, 2017 we were also developing a different compound, CA4P, in a clinical trial called FOCUS for patients with platinum-resistant ovarian cancer. On September 26, 2017, we announced that due to the lack of a clear efficacy signal in a planned interim analysis of the FOCUS Study, we were terminating the FOCUS Study, as well as future development of CA4P, except for investigator-sponsored and preclinical studies.

~~Effective October 2, 2017 and as reported on the Company’s Current Report on Form8-K~~ filed on September 27, 2017, we terminated the employment of over 50% of our workforce, reducing the total number of employees at Mateon to six. Concurrent with the reduction in workforce, we reduced the salaries of our Chief Executive Officer, Chief Financial Officer and Chief Scientific Officer by 50%, with reinstatement to previous levels contingent on the Company raising additional funding of at least $4 million or a change in control of the Company.

Research and development expenses increased for both the three and nine month periods ended September 30, 2017 compared to the same periods in 2016, primarily due to additional clinical trial activity related to our investigational drugs CA4P and OXi4503. The table below summarizes the most significant components of our research and development expenses for the periods indicated and provides the amount and percentage change in these components (in thousands):

We incurred higher expenses for clinical studies for both three and nine month periods ended September 30, 2017 compared to the same periods in 2016. These expenses were higher in the 2017 periods due to a higher number of patients under treatment in our phase 2/3 FOCUS study of CA4P in platinum-resistant ovarian cancer, prior to the study’s termination on September 26, 2017, and in our OX1222 study of OXi4503 in AML. The higher FOCUS and OX1222 clinical study costs in the 2017 periods were partially offset by lower clinical costs for a study of CA4P in neuroendocrine tumors which completed during 2016.

Employee compensation and related expenses were comparable for the three month period ended September 30, 2017 and the three month period ended September 30, 2016, as severance expenses recorded during the 2017 period offset cost savings that resulted from other reduced personnel costs. Employee compensation and related expenses for the nine month period ended September 30, 2017 increased compared to the same period in 2016 primarily due to the severance expenses recognized in the 2017 period, which were only partially offset by other reduced personnel costs.

~~Employee stock-based compensation was generally comparable between the 2017 and 2016 periods, with changes aggregating less than 1% of total research and development expenses.~~

Consulting and professional services decreased for the three month period ended September 30, 2017 compared to the same period in 2016 due to lower expenses related to scientific publications. Consulting and professional services increased for the nine month period ended September 30, 2017 compared to the same period in 2016 largely due to external expenses incurred associated with recruiting patients into our FOCUS clinical trial.

The decrease in drug manufacturing expenses for the three month period ended September 30, 2017 compared to the three month period ended September 30, 2016 was due to expenses incurred during the 2016 period for supplying and labeling the investigational drug for the FOCUS study. The increase in drug manufacturing expenses for the nine month period ended September 30, 2017 compared to the nine month period ended September 30, 2016 was due to expenses incurred for the optimization of the manufacturing process for our investigational drugs.

~~Other expenses include facility related expenses and were generally comparable between the 2017 and 2016 periods, with changes aggregating less than 1% of total research and development expenses.~~

~~Our future research and development expenses will be dependent upon our ability to secure sufficient funding to continue these activities.~~

General and administrative expenses decreased for both the three and nine month periods ended September 30, 2017 compared to the same periods in 2016. The table below summarizes the most significant components of our general and administrative expenses for the periods indicated, in thousands, and provides the amount and percentage changes in these components:

Employee compensation and related expenses decreased for the three month and nine month periods ended September 30, 2017 compared to the same periods ended September 30, 2016 due to reduced headcount in the 2017 period and lower incentive bonus accruals for the remaining employees, partially offset by an increase in severance expenses due to our reduction in headcount.

The increase in stock-based compensation for the three month period ended September 30, 2017 compared to the three month period ended September 30, 2016 was due to normal fluctuations resulting from the timing of grants and forfeitures. Stock-based compensation expenses were comparable for the nine month periods ended September 30, 2017 and 2016.

Consulting and professional services decreased for both the three month and nine month periods ended September 30, 2017 compared to the same periods in 2016 due to reduced expenses across nearly all external general and administrative services used, other than business development, and higher~~one-time~~ ~~market research costs incurred at the beginning of 2016.~~

Other expenses, which include facility related expenses and insurance expenses, decreased for both the three and nine month periods ended September 30, 2017 compared to the same periods ended September 30, 2016 due to lower costs across most areas, none of which were individually significant.

~~Our future general and administrative expenses will be dependent upon our ability to secure sufficient funding to continue operations.~~

We have one drug in clinical development, for the treatment of acute myeloid leukemia, and currently have no sources of revenue to support the continued development costs for this investigational drug. Accordingly, we measure liquidity by the cash and other capital we have available to fund our operations, which are primarily focused on the development of this drug candidate. To date, we have financed our operations principally through proceeds received from the sale of equity. We have experienced net losses in each year since our inception, and negative cash flows from operations in nearly every year. As of September 30, 2017, we had an accumulated deficit of approximately $290 million, including a net loss of approximately $11.4 million for the first three quarters of 2017 and a net loss of $13.7 million for the year ended December 31, 2016. As of September 30, 2017, we held cash and cash equivalents of approximately $1.9 million, which, together with an anticipated receipt of a cash refund from one of the Company’s vendors, we expect to be sufficient to fund our recently curtailed operating activities into February 2018. If we are unable to secure additional funding prior to that date, we may be required to scale back or conclude our development activities altogether.

We will require additional capital before we can complete any further clinical trials and development of OXi4503. Additional funding may not be available to us on acceptable terms, or at all. If we are unable to access additional funds in the near term we may not be able to continue the development of our product candidates and we could be required to terminate operations altogether. Any additional equity financing, if available, may not be available on favorable terms and would be dilutive to our current stockholders. Debt financing, if available, may involve

restrictive covenants and could also be dilutive to our current stockholders. If we are able to access funds through collaborative or licensing arrangements, we may be required to relinquish rights to some of our technologies or product candidates that we would otherwise seek to develop or commercialize on our own, on terms that are not favorable to us. Our ability to access capital when needed is not assured and, if access is not achieved on a timely basis, ~~will~~would materially harm the Company’s financial condition, the value of its Common Stock and its business prospects.

Net cash used in operating activities was approximately $1.0 million for the three months ended March 31, 2022. This was due to the net loss of approximately $5.1 million, primarily offset by non-cash stock-based compensation on issuance of warrants and stock option of approximately $3.2 million, non-cash amortization of debt discounts and deferred financing costs of approximately $0.2 million, non-cash loss on extinguishment of debt of approximately $0.3 million non-cash loss on conversion of debt and change in fair value of derivatives of $0.2 million and changes in operating assets and liabilities of approximately $0.3 million.

Net cash used in operating activities was approximately $1.3 million for the three months ended March 31, 2021. This was due to the net loss of approximately $3.1 million, primarily offset by non-cash amortization of debt discounts and deferred financing costs of $0.4 million, non-cash loss on conversion of debt and change in fair value of derivatives of $0.5 million and changes in operating assets and liabilities of approximately $0.9 million.

For the three months ended March 31, 2022, net cash provided by financing activities was $0.5 million, due to a receipt of cash from sale of shares under the EPA of approximately $0.1 million, a short-term convertible loan GMP of $0.5 million, offset by repayments of debt of approximately $0.1 million.

For the three months ended March 31, 2021, net cash provided by financing activities was $1.6 million, due to a receipt of cash from the JH Darbie Financing of $1.6 million and a short-term loan from a related party of $0.1 million, offset by repayments of debt of approximately $0.1 million. For more information regarding the JH Darbie Financing and the related party loan, see Note 5 and Note 7, respectively, of the Unaudited Consolidated Financial Statements of this Quarterly Report.

We do not believe that inflation has had a material impact on our business, ~~financial condition and~~revenues or operating results during the periods presented.

compounds called combretastatins, which we have exclusively licensed from Arizona State University, or ASU. If our current drug candidates are approved, we ~~are able~~will be required to ~~secure additional funding~~pay low to ~~continue our operations,~~mid-single-digit royalties on future net sales of products associated with the ASU patent rights until these patent rights expire.

We also have an exclusive license from Bristol-Myers Squibb, or BMS, for certain patent rights to particular combretastatins, including CA4P. If CA4P is approved, we ~~expect~~will be required to ~~incur additional costs and expenses to develop new agents for~~pay low-single-digit royalties on future net sales of products associated with the ~~treatment of cancer, including continuing our existing clinical trial OX1222 as well as conducting new, additional clinical trials and anticipated research and development expenditures.~~BMS patent rights until these patent rights expire.

~~There have been no changes to our critical accounting policies and significant judgments and estimates from our Annual Report on Form10-K~~ ~~for the year ended December 31, 2016.~~

Our cash is maintained in U.S. dollar accounts. We have ~~been no changes to our market risks from our Annual Report on Form10-K~~adopted a policy for the ~~year ended December 31, 2016.~~cash that we hold, and also for any cash equivalents and investments that we may hold, the primary objective of which is to preserve principal, while also maintaining liquidity to meet our operating needs and maximize yields to the extent possible. Although our investments can be subject to credit risk, we follow procedures to limit the amount of credit exposure in any single issue, issuer or type of investment. Our investments are also subject to interest rate risk and would be likely to decrease in value if market interest rates increase. However, due to the generally conservative nature of our investments and relatively short duration, we believe that interest rate risk is mitigated.

Although we may from time to time manufacture drugs and conduct preclinical or clinical trials outside of the United States, we believe our exposure to foreign currency risk to be immaterial.

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosures. In designing disclosure controls and procedures, our management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible disclosure controls and procedures. The ~~SEC requires~~design of any disclosure controls and procedures also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Any controls and procedures, no matter how well designed and operated, can provide only reasonable, not absolute, assurance of achieving the desired control objectives.

As required by Rule 13a-15(b) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) our Chief Executive Officer (“CEO”) and our Chief Financial Officer (“CFO”) conducted an evaluation as of the end of the period covered by this Quarterly Report onForm 10-Q, ~~the Chief Executive Officer (CEO) and the Chief Financial Officer (CFO) evaluate the effectiveness~~ of the ~~design and operation~~effectiveness of our disclosure controls and procedures ~~(as~~as defined inRules 13a-15(e) and15d-15(e)) under the ~~Securities~~ Exchange ~~Act of 1934, as amended, or the Exchange Act, and report~~Act. Based on ~~the effectiveness of the design and operation of our disclosure controls and procedures. Based upon~~ that evaluation, our CEO and our CFO each concluded that our disclosure controls and procedures ~~were~~are not effective ~~as of September 30, 2017,~~ to ~~ensure~~provide reasonable assurance that ~~we record, process, summarize and report~~information required to be disclosed in the ~~information we must disclose in~~ reports that we file or submit under the Exchange Act, (i) is recorded, processed, summarized and reported within the time periods specified in the ~~SEC’s~~Securities and Exchange Commission’s rules and forms and (ii) is accumulated and communicated to our management, including our CEO and our CFO, as appropriate to allow timely decisions regarding required disclosure.

Management conducted an assessment of the effectiveness of our internal control over financial reporting as of March 31, 2022 based on the framework established in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this assessment, management has determined that the Registrant’s internal control over financial reporting as of March 31, 2021 was not effective as a result of certain material weaknesses.

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.

The ineffectiveness of our internal control over financial reporting was due to the following material weaknesses which are observed in many small companies with a small number of accounting and financial reporting staff:

Management has been implementing and continues to implement measures designed to ensure that control deficiencies contributing to the material weakness are remediated, such that these controls are designed, implemented, and operating effectively. The remediation actions planned include:

During the three months ended March 31, 2022, we continued to execute upon our planned remediation actions which are all intended to strengthen our overall control environment. While we have made progress in our planned remediation efforts and we expect the Company to complete its planned execution of internal ~~control~~controls over financial reporting ~~identified in connection with the evaluation of such control that occurred~~ during the ~~last fiscal quarter, which have materially affected, or~~year ended December 31, 2022, however, our ability to do so would depend on our ability to obtain financial and other resources to complete the remediation.

We are ~~reasonably likely~~committed to ~~materially affect, our~~maintaining a strong internal control ~~over financial reporting.~~

~~The~~environment and believe that these remediation efforts will represent significant improvements in our control environment. Our management will continue to monitor and evaluate the relevance of our risk-based approach and the effectiveness of our ~~disclosure~~internal controls and procedures ~~and our internal control~~ over financial reporting on an ongoing basis and is ~~subject~~committed to various inherent limitations, including cost limitations, judgments used in decision making, assumptions about the likelihood of future events, the soundness of our systems, the possibility of human error,taking further action and ~~the risk of fraud. Moreover, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions~~implementing additional enhancements or improvements, as necessary and the risk that the degree of compliance with policies or procedures may deteriorate over time. Because of these limitations, there can be no assurance that any system of disclosure controls and procedures or internal control over financial reporting will be successful in preventing all errors or fraud or in making all material information known in a timely manner to the appropriate levels of management.as funds allow.

In addition to the ~~other~~risk factor described below, for information ~~set forth in this report, you should carefully consider~~about the risks and uncertainties related to our business, please see the risk factors ~~discussed in Part I, Item 1A. “Risk Factors”~~described in our Annual Report on Form10-K for the fiscal year ended December 31, 2016, which could materially affect our business, financial condition, or results of operations. Other than the following, there have been no material changes in or additions to the risk factors included in our Annual Report on Form~~10-K~~ for the year ended December 31, ~~2016.~~

~~Shares of our common stock may be subject to the Securities~~2020 filed on April 15, 2022. The risks described below and ~~Exchange Commission’s “penny stock” rules. Broker-dealers may experience difficulty in completing customer transactions~~ in our ~~securities~~Form 10-K are not the only risks facing our Company. Additional risks and ~~trading activity~~uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results.

Our business may suffer from the severity or longevity of the COVID-19 Global Outbreak.

The COVID-19 is currently impacting countries, communities, supply chains and markets, as well as the global financial markets. To date, COVID-19 has not had a material impact on the Company, other than as set forth above. However, the Company cannot predict whether COVID-19 will have a material impact on our financial condition and results of operations due to understaffing, disruptions in government spending, among other factors. In addition, at this time we cannot predict the impact of COVID-19 on our ~~securities may be adversely affected.~~

~~We currently have net tangible assets of $2,000,000 or less and our common stock has a market price per share of less than $5.00. As a result, transactions in our common stock may be subject~~ability to obtain financing necessary for the Securities and Exchange Commission’s “penny stock” rules. The designation of our common stock as a “penny stock” may limit the liquidity of our common stock. Prices for penny stocks are often not availableCompany to buyers and sellers and the market may be very limited. Broker-dealers who sell penny stocks must provide purchasers of these stocks with a standardized risk-disclosure document prepared by the SEC. The document provides information about penny stocks and the nature and level of risks involved

~~in investing~~fund its working capital requirements. In most respects, it is too early in the ~~penny stock market. A broker must also provide purchasers with bid and offer quotations and information regarding broker and salesperson compensation and make a written determination that~~COVID-19 pandemic to be able to quantify or qualify the penny stock is a suitable investment for the purchaser and obtain the purchaser’s written agreement to the purchase. Many brokers choose not to participate in penny stock transactions. Because of the penny stock rules, there may be less trading activity in penny stocks. If shares oflonger-term ramifications on our ~~common stock become subject to these penny stock rules, your ability to trade~~ business, our customers and/or ~~dispose of shares of~~ our ~~common stock may be adversely affected.~~potential investors.

In January 2022, three of ~~Proceeds~~the five investors made a cashless exercise for their warrants. In this connection, the Company issued 3,041,958 million shares of the Common Stock in exchange of approximately 5,769,231 million warrants.

In ~~a Current~~reviewing the agreements included as exhibits to this Quarterly Report, please remember that they are included to provide you with information regarding their terms and are not intended to provide any other factual or disclosure information about the Company or the other parties to the agreements. The agreements may contain representations and warranties by each of the parties to the applicable agreement. These representations and warranties have been made solely for the benefit of the parties to the applicable agreement and:

Accordingly, these representations and warranties may not describe the actual state of affairs as of the date they were made or at any other time. Additional information about the Company may be found elsewhere in this Quarterly Report and the Company’s other public filings, which are available without charge through the SEC’s website at http://www.sec.gov.

The following exhibits are included as part of this Quarterly Report. A more complete list of previously filed Exhibits can be found with our Annual Report on Form~~8-K~~ 10K filed on September 27, 2017, we announced a reduction in workforce, in which a planned six employees would be departing the Company effective October 2, 2017. We subsequently increased the number of employees departing the Company from six to seven. The estimated severance and other cash charges related to the workforce reduction were $220,000, which have all been incurred as of September 30, 2017. The estimated monthly savings in operating expenses as a result of the workforce reductions and salary reductions implemented effective October 2, 2017 are approximately $125,000.

~~On November 9, 2017, David J. Chaplin, our Chief Scientific Officer, provided notice of his intention to retire from employment~~ with the ~~Company, effective January 11, 2018. Dr. Chaplin will remain a member of the Board of Directors and has agreed to provide consulting services as needed by the Company.~~SEC on April 15, 2021:

Title of each class		Trading Symbol(s)		Name of exchange on which registered
None		OTLC		N/A


Large accelerated filer	☐	☐		Accelerated filer	☐☐

Non-accelerated filer	☒	~~☐ (Do not check if a smaller reporting company)~~		Smaller reporting company	☑☒

		Emerging ~~Growth Company~~growth company	☐	☐

		Page

PART I. FINANCIAL INFORMATION

ITEM 1.	Financial Statements (unaudited)	3

		~~Page~~ ~~No.~~
~~PART I—FINANCIAL INFORMATION~~
~~Item 1. Financial Statements~~			4
~~Condensed~~Consolidated Balance Sheets as of March 31, 2022 and December 31, 2021			4	3

	~~Condensed~~Consolidated Statements of ~~Comprehensive Loss~~Operations for the Three Months Ended March 31, 2022 and 2021			5	4

	~~Condensed~~Consolidated Statements of Changes in Stockholders’ Equity for the Three Months Ended March 31, 2022 and 2021	5

	Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2022 and 2021			6	7

	Notes to ~~Condensed~~Consolidated Financial Statements			7	8

ITEM 2.	~~Item 2. Management’s~~Management’s Discussion and Analysis of Financial Condition and Results of Operations			11	39

ITEM 3.	~~Item 3.~~ Quantitative and Qualitative Disclosures about Market Risk			13	47

ITEM 4.	~~Item 4.~~ Controls and Procedures			13	48

PART II. OTHER INFORMATION

ITEM 1.	Legal Proceedings	49

~~PART II—OTHER INFORMATION~~ ITEM 1A.
~~Item 1. Legal Proceedings~~			13
~~Item 1A.~~ Risk Factors			13	49

ITEM 2.	~~Item 2.~~ Unregistered Sales of Equity Securities and Use of Proceeds	49

ITEM 3.	Defaults Upon Senior Securities	50

ITEM 4.	Mine Safety Disclosures	50

ITEM 5.	Other Information	50

ITEM 6.	Exhibits, Financial Statement Schedules	50

SIGNATURES		52

		March 31, 2022			December 31, 2021
	March 31,			December 31,
	2022			2021

ASSETS
Current assets:
Cash	$	97,906		$	568,769
Restricted cash		20,000			20,000
Accounts receivable		19,748			19,748
Prepaid & other current assets		20,682			18,778

Total current assets		158,336			627,295

Intangibles, net of accumulated amortization of $201,180 and $188,339		809,000			821,841
In process R&D		1,101,760			1,101,760
Goodwill		21,062,455			21,062,455
Total assets	$	23,131,551		$	23,613,351

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable and accrued liabilities	$	3,525,102		$	3,092,723
Accounts payable to related party		358,074			403,423
Contingent consideration		2,625,000			2,625,000
Derivative liability on Notes		531,131			340,290
Convertible and short-term debt, net of costs		8,931,916			8,166,622
Convertible debt and short-term debt, related party, net of costs		837,737			826,862

Total current liabilities		16,808,960			15,454,920

Commitments and contingencies (Note 13)		-

Stockholders’ equity:
Convertible preferred stock, $0.01par value, 15,000,000shares authorized; 0shares issued and outstanding		-			-
Common stock, $.01par value; 750,000,000shares authorized; 378,630,104and 375,288,146issued and outstanding, respectively		3,786,301			3,752,881
Additional paid-in capital		38,444,903			35,223,842
Accumulated deficit		(35,870,831	)		(31,021,050	)

Total Oncotelic Therapeutics, Inc. stockholders’ equity		6,360,373			7,955,673
Non-controlling interests		(37,782	)		202,758

Total stockholders’ equity		6,322,591			8,158,431
Total liabilities and stockholders’ equity	$	23,131,551		$	23,613,351


	For the Three Months Ended March 31,
	2022			2021

Operating expenses:
Research and development	$	580,296		$	1,556,672
General and administrative		3,763,910			481,209
Total operating expenses		4,344,206			2,037,881

Loss from operations		(4,344,206	)		(2,037,881	)
Other expense:
Interest expense, net		(297,464	)		(520,907	)
Change in fair value of derivative on debt		(190,841	)		(536,345	)
Loss on extinguishment / conversion of debt		(257,810	)		(27,504	)
Total other expense		(746,115	)		(1,084,756	)
Net loss before non-controlling interests		(5,090,321	)		(3,122,637	)
Net loss attributable to non-controlling interests		(240,540	)		(319,557	)
Net loss attributable to Oncotelic Therapeutics, Inc.	$	(4,849,781	)	$	(2,803,080	)

Basic and diluted net loss per share attributable to common stock	$	(0.01	)	$	(0.03	)
Basic and diluted weighted average common stock outstanding		377,392,785			94,193,348

		Shares		Amount		Shares		Amount		Capital			Deficit			Interests			Equity
	Preferred Stock				Common Stock				Additional Paid-in			Accumulated			Non-controlling			Stockholders’
	Shares		Amount		Shares		Amount		Capital			Deficit			Interests			Equity

Balance at January 1, 2022		-	$	-		375,288,146	$	3,752,881	$	35,223,842		$	(31,021,050	)	$	202,758		$	8,158,431

Common shares issued upon cashless exercise of warrants		-		-		3,041,958		30,420		(30,420	)		-			-		$	-
Common shares issued for cash						300,000		3,000		48,805								$	51,805
Stock Compensation expense		-		-		-		-		297,360			-			-		$	297,360
Warrants issued in connection with note extension		-		-		-		-		2,905,316			-			-		$	2,905,316
Net loss		-		-									(4,849,781	)		(240,540	)	$	(5,090,321	)
Balance at March 31, 2022		-	$	-		378,630,104	$	3,786,301	$	38,444,903		$	(35,870,831	)	$	(37,782	)	$	6,322,591

		2022			2021
	For the Three Months Ended March 31,
	2022			2021
Cash flows from operating activities:
Net loss	$	(5,090,321	)	$	(3,122,637	)
Adjustments to reconcile net loss to net cash used in operating activities:
Stock-based cost on issuance of warrants		2,874,896		14	-
Amortization of debt discount and deferred financing costs		176,659			421,217
Amortization of intangible assets		12,841			12,841
Stock-based compensation		297,360			-
Depreciation on development equipment		-			2,538
Change in fair value of derivative		190,841			536,345
Loss on debt extinguishment / conversion		257,810			27,504

Changes in operating assets and liabilities:
Prepaid expenses and other current assets		(1,906	)		17,162
Accounts payable and accrued expenses		364,499			879,838
Accounts payable to related party		(45,348	)		(26,308	)
Net cash provided by (used in) operating activities		(962,668	)		(1,251,500	)

Cash flows from financing activities:

Proceeds from convertible notes		-			1,613,200
Proceeds from sales of common stock		51,805			-
Proceeds from convertible debt related to joint venture		500,000			-
Proceeds from short-term loan, other		-			120,000
Repayment of short-term loans, others		(60,000	)		(50,000	)
Repaid to others		-			(75,000	)
Net cash provided by financing activities		491,805			1,608,200

Net increase (decrease) in cash		(470,863	)		356,700

Cash - beginning of period		588,769			474,019

Cash - end of period	$	117,906		$	830,719

Supplemental cash flow information:
Cash paid for:
Interest paid	$	100,882		$	65,754
Income taxes paid	$	-		$	-

●	Level 1 – Quoted prices are available in active markets for identical assets or liabilities as of the reporting date. Active markets are those in which transactions for the asset or liability occur in sufficient frequency and volume to provide pricing information on an ongoing basis. Level 1 primarily consists of financial instruments such as exchange-traded derivatives, marketable securities and listed equities.

●	Level 2 – Pricing inputs are other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reported date. Level 2 includes those financial instruments that are valued using models or other valuation methodologies. These models are primarily industry-standard models that consider various assumptions, including quoted forward prices for commodities, time value, volatility factors and current market and contractual prices for the underlying instruments, as well as other relevant economic measures. Substantially all of these assumptions are observable in the marketplace throughout the full term of the instrument, can be derived from observable data or are supported by observable levels at which transactions are executed in the marketplace. Instruments in this category generally include non-exchange-traded derivatives such as commodity swaps, interest rate swaps, options and collars.

●	Level 3 – Pricing inputs include significant inputs that are generally less observable from objective sources. These inputs may be used with internally developed methodologies that result in management’s best estimate of fair value.

		1		2
	March 31, 2022 Conversion Feature		March 31, 2021 Conversion Feature
Balance at January 1, 2021 and 2020	$	340,290	$	777,024
New derivative liability		-		-
Reclassification to additional paid in capital from conversion of debt to common stock		-		(144,585	)
Change in fair value		190,841		536,345

Balance at March 31, 2021 and 2020	$	531,131	$	1,168,784

	March 31, 2022 Key Assumptions for fair value of conversions			March 31, 2021 Key Assumptions for fair value of conversions
Risk free interest		0.17% to 0.52	%		0.07% to 0.12	%
Market price of share	$	0.22 to 0.36		$	0.36
Life of instrument in years		0.81 to 1.1			1.06 – 1.35
Volatility		94.4 to 148.8	%		148.79	%
Dividend yield		0	%		0	%

	Three Months Ended March 31,
	2022		2021

Convertible notes		68,070,034		35,388,901
Stock options		16,590,261		3,941,301
Warrants		80,545,259		20,737,500
Potentially dilutive securities		165,205,554		60,067,702

	March 31, 2022			~~Item 3. Defaults Upon Senior Securities~~Remaining Estimated Useful Life (Years)
Intangible asset – Intellectual Property	$	819,191			16.75
Intangible asset – Capitalization of license cost		190,989			16.75
		1,010,180
Less Accumulated Amortization		(201,180	)
Total	$	809,000

	December 31, 2021			Remaining Estimated Useful Life (Years)
Intangible asset – Intellectual Property	$	819,191			17.00
Intangible asset – Capitalization of license cost		190,989			17.00
		1,010,180
Less Accumulated Amortization		(188,339	)
Total	$	821,841

For the years ended December 31,

2022	$	38,524
2023		51,365
2024		51,365
2025		51,365
2026		51,365
Thereafter		577,857
	$	821,841

	March 31, 2022
Intangible asset – Intellectual Property	$	1,377,200
		1,377,200
Less Accumulated Amortization		(275,440	)
Total	$	1,101,760

	March 31, 2022
Convertible debentures
10% Convertible note payable, due April 23, 2022 – Bridge Investor	$	34,459
10% Convertible note payable, due April 23, 2022 – Related Party		159,571
10% Convertible note payable, due August 6, 2022 – Bridge Investor		193,325
		387,355
Fall 2019 Notes
5% Convertible note payable – Stephen Boesch		120,208
5% Convertible note payable – Related Party		279,358
5% Convertible note payable – Dr. Sanjay Jha (Through his family trust)		278,878
5% Convertible note payable – CEO, CTO* & CFO– Related Parties		91,382
5% Convertible note payable – Bridge Investors		187,222
		957,048

August 2021 Convertible Notes
5% Convertible note – Autotelic Inc– Related Party		257,158
5% Convertible note – Bridge investors		384,193
5% Convertible note – CFO – Related Party		77,147
		718,498

JH Darbie PPM Debt
16% Convertible Notes - Non-related parties		2,312,023
16% Convertible Notes – CEO – Related Party		121,650
		2,433,673

November/December 2021 & March 2022 Notes
12% Convertible Notes – Accredited Investors		386,459

Debt for Clinical Trials – GMP
2% Convertible Notes - GMP		4,591,973

Other Debt
Short term debt – Bridge investors		245,000
Short term debt from CFO – Related Party		25,050
Short term debt – Autotelic Inc– Related Party		20,000
Accrued Interest on Loans		4,597
		294,647
Total of convertible debentures & notes and other debt	$	9,769,653

		March 31, 2022	14	December 31, 2021
	~~Item 4. Mine Safety Disclosures~~March 31, 2022		14 December 31, 2021

Autotelic Related party convertible note, 5% coupon August 2022	$	257,158	$	256,634
CFO Related party convertible note, 5% coupon August 2022		77,147		76,531
Accredited investors convertible note, 5% coupon August 2022		384,193		381,123
Total	$	718,498	$	714,288

	~~Item 5. Other Information~~	March 31, 2022		14	December 31, 2021
	~~Item 6. Exhibits~~March 31, 2022			14 December 31, 2021

Mast Hill Convertible note, 12% coupon November 21	$	250,000		$	250,000
Talos Victory Convertible note, 12% coupon November 2021		250,000			250,000
First Fire Global Opportunities LLC Convertible note, 12% coupon, December 2021		250,000			250,000
Blue Lake Partners LLC Convertible note, 12% coupon, December 2021		250,000			250,000
Fourth Man LLC Convertible note, 12% coupon December 2021		250,000			250,000
Convertible notes, gross	$	1,250,000		$	1,250,000
Less Debt discount recorded		(1,250,000	)		(1,250,000	)
Amortization debt discount		386,459			76,994
Convertible notes, net	$	386,459		$	76,994

Other Advances	~~SIGNATURES~~	March 31, 2022	15	December 31, 2021
Other Advances	March 31, 2022		December 31, 2021
Short term advance from CEO – Related Party	$	-	$	20,000
Short term advances – bridge investors		245,000		265,000
Short term advances from CFO – Related Party		25,050		45,050
Short term advance – Autotelic Inc. – Related Party		20,000		20,000
Accrued Interest on advances		5,003		9,212
Total	$	295,053	$	359,262


	September 30, 2017			December 31, 2016
	(Unaudited)			(See Note 1)
ASSETS
Current assets:
Cash and cash equivalents	$	1,908		$	3,535
Short-term investments		—			8,512
Prepaid clinical trial expenses		772			1,946
Other prepaid expenses and current assets		258			77

Total current assets		2,938			14,070
Property and equipment, net		4			11
Other assets		33			33

Total assets	$	2,975		$	14,114

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	312		$	310
Accrued compensation and employee benefits		261			842
Accrued severance		220			—
Accrued clinical trial expenses		88			64
Other accrued liabilities		330			398

Total current liabilities		1,211			1,614

Commitments and contingencies
Stockholders’ equity:
Preferred stock, $0.01 par value, 15,000 shares authorized; No shares issued and outstanding		—			—
Common stock, $0.01 par value, 70,000 shares authorized; 26,545 shares issued and outstanding		265			265
Additionalpaid-in capital		291,340			290,698
Accumulated deficit		(289,841	)		(278,463	)

Total stockholders’ equity		1,764			12,500

Total liabilities and stockholders’ equity	$	2,975		$	14,114


	Three months ended September 30,						Nine months ended September 30,
	2017			2016			2017			2016
Operating expenses:
Research and development	$	2,832		$	2,075		$	8,699		$	6,429
General and administrative		708			1,187			2,707			3,855

Total operating expenses		3,540			3,262			11,406			10,284

Loss from operations		(3,540	)		(3,262	)		(11,406	)		(10,284	)
Interest income		7			26			33			84
Other expense		(3	)		—			(5	)		(1	)

Net loss and comprehensive loss	$	(3,536	)	$	(3,236	)	$	(11,378	)	$	(10,201	)

Basic and diluted net loss per share attributable to common stock	$	(0.13	)	$	(0.12	)	$	(0.43	)	$	(0.38	)

Weighted-average number of common shares outstanding		26,545			26,545			26,545			26,545


	Nine months ended September 30,
	2017			2016
Operating activities:
Net loss	$	(11,378	)	$	(10,201	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation		7			16
Stock-based compensation		642			627
Changes in operating assets and liabilities:
Prepaid expenses and other current assets		993			(829	)
Accounts payable and accrued expenses		(403	)		(618	)

Net cash used in operating activities		(10,139	)		(11,005	)

Investing activities:
Purchase of short-term investments		—			(18,915	)
Sale of short-term investments		8,512			7,802

Net cash provided by (used in) investing activities		8,512			(11,113	)

Decrease in cash and cash equivalents		(1,627	)		(22,118	)
Cash and cash equivalents at beginning of period		3,535			27,285

Cash and cash equivalents at end of period	$	1,908		$	5,167

	■	25,000 shares of Edgepoint Common Stock for a price of $1.00 per share of Edgepoint Common Stock.
	■	One convertible promissory note, convertible into up to 25,000 shares of Edgepoint Common Stock, at a conversion price of $1.00 per share or up to 138,889 shares of the Company’s Common Stock, at a conversion price of $0.18 per share.
	■	50,000 warrants to purchase an equivalent number of shares of Edgepoint Common Stock at $1.00 per share or an equivalent number of shares of the Company’s Common Stock at $0.20 per share with a three-year expiration date.

	■	Term: Through March 31, 2022.
	■	Coupon: 16%.
	■	Convertible at the option of the holder at any time in the Company’s Common Stock or Edgepoint Common Stock.
	■	The conversion price is initially set at $0.18 per share for the Company’s Common Stock or $1.00 for Edgepoint Common Stock, subject to adjustment.

Expected Term	1.5 years
Expected volatility		152.3%-164.8	%
Risk-free interest rates		0.09%-0.11	%
Dividend yields		0.00	%

Expected Term	1 year
Strike price	$	0.15
Expected volatility		115.1	%
Risk-free interest rates		1.36	%
Dividend yields		0.00	%

Milestones	Transaction Value		Actions

Tranche 1	$	1,000,000	Upon the earlier to occur of: (i) the Company receiving an investment of at least $20 million, and (ii) the uplisting of the Company’s common stock to any NASDAQ market or the New York Stock Exchange.

Tranche 2	$	2,000,000	Upon approval by the United States Food and Drug Administration of the Company’s 505(b)2 application for purposes of treating PD.

Tranche 3	$	2,000,000	Upon first patient in (“FPI”) for any clinical trial supporting the use of AL-101 for the treatment of PD or ED.

Tranche 4	$	2,500,000	Upon FPI for phase 2 clinical trials supporting the use of AL-101 to treat FSD.

Tranche 5	$	2,500,000	Upon FPI for phase 3 clinical trials supporting the use of AL-101 to treat FSD

Tranche 6	$	10,000,000	Upon Marketing approval for the use of AL-101 to treat PD.

Tranche 7	$	10,000,000	Upon Marketing approval for the use of AL-101 to treat ED.

Tranche 8	$	10,000,000	Upon Marketing approval for the use of AL-101 to treat FSD

Tranche 9	$	10,000,000	Upon the earlier of: (i) the Company entering into a licensing agreement with a third party for the use of AL-101 for the treatment of PD, ED or FSD with an aggregate licensing value of at least $50 million; and (ii) the Company’s gross revenue derived from sales of AL-101 for the treatment of PD, ED or FSD reaches at least $50.0 million.

				Weighted
For the three months ended March 31, 2022				Average
	Shares			Exercise Price
Outstanding at January 1, 2022		16,592,620		$	0.30
Expired or cancelled		(2,359	)		11.88
Outstanding at March 31, 2022		16,590,261		$	0.30

				Weighted-		Weighted-
				Average		Average
		Outstanding		Remaining Life		Exercise		Number
Exercise prices		Options		In Years		Price		Exercisable

$	0.14		7,150,000		9.43	$	0.14		3,707,500
	0.16		5,502,761		9.27		0.16		5,502,761
	0.22		1,750,000		4.09		0.22		1,750,000
	0.38		900,000		3.41		0.38		900,000
	0.73		762,500		3.04		0.73		762,500
	1.37		150,000		1.25		1.37		150,000
	1.43		300,000		3.16		1.43		300,000
	15.00		75,000		3.16		15.00		75,000
			16,590,261		7.97	$	0.30		13,147,761

		Outstanding and exercisable
				Weighted-		Weighted-
				Average		Average
		Number		Remaining Life		Exercise		Number
Exercise Price		Outstanding		in Years		Price		Exercisable

$	0.20		42,737,500		1.00	$	0.20		4,237,500
	0.13		4,807,693		5.00		0.13		4,807,693
	0.15		33,000,066		2.00		0.15		33,000,066
			80,545,259		2.15	$	0.18		80,545,259

●	our ability to successfully commercialize our products and services on a large enough scale to generate profitable operations;
●	our ability to maintain and develop relationships with customers and suppliers;
●	our ability to successfully integrate acquired businesses or new products, or to realize anticipated synergies in connection with acquisitions of businesses or products;
●	expectations concerning our ability to raise additional funding and to continue as a going concern;
●	our ability to successfully implement our business plan; and
●	our ability to avoid, or to adequately address any intellectual property claims brought by third parties; and
●	the anticipated impact of any changes in industry regulation.

	March 31, 2022			March 31, 2021			Variance

Operating expense:
Research and development		580,296			1,556,673			(976,377	)
General and administrative		3,763,910			481,209			3,282,701
Total operating expense		4,344,206			2,037,882			2,306,324
Loss from operations		(4,344,206	)		(2,037,882	)		(2,306,324	)
Interest expense, net		(297,464	)		(520,907	)		223,443
Change in fair value of derivative on debt		(190,841	)		(536,345	)		345,504
Loss on conversion of debt		(257,810	)		(27,504	)		(230,306	)

Net loss	$	(5,090,321	)	$	(3,122,637	)	$	(1,967,684	)


	September 30, 2017
	Amortized Cost		Unrealized Gain		Unrealized (Loss)		Estimated Fair Value
Cash	$	202	$	—	$	—	$	202
Money market funds		1,706		—		—		1,706

	$	1,908	$	—	$	—	$	1,908


Reported as:
Cash and cash equivalents	$	3,535
Short-term investments		8,512

Total cash, cash equivalents and short-term investments	$	12,047


	September 30, 2017
	Level 1		Level 2		Level 3		Total
Money market funds	$	1,706	$	—	$	—	$	1,706


	December 31, 2016
	Level 1		Level 2		Level 3		Total
Money market funds	$	2,864	$	—	$	—	$	2,864
U.S. government treasury bills		—		3,008		—		3,008
Corporate bonds and commercial paper		—		5,504		—		5,504

	$	2,864	$	8,512	$	—	$	11,376