UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM10-Q

~~(Mark One)~~

☒[X]	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the ~~quarterly period ended March 31,~~Quarterly Period Ended June 30, 2019

☐[ ]	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the ~~transition period~~Transition Period from _________ to

~~Commission File Number:0-21990~~ _________

Commission file number:000-21990

~~Mateon Therapeutics, Inc.~~MATEON THERAPEUTICS, INC.

(Exact name of registrant as specified in its charter)

Delaware

13-3679168

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

~~701 Gateway Blvd, Suite 210~~

29397 Agoura Road Suite 107

Agoura Hills, CA

91301

(Address of principal executive offices)

(Zip Code)

~~South San Francisco, CA 94080~~

~~(Address of principal executive offices, including zip code)~~

(650) 635-7000

(Registrant’s telephone number, including area code)

~~Not applicable~~

N/A

(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 ☒[X] No ☐[ ]

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files). Yes ☒[X] 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 accelerated ~~filer”,~~filer,” “accelerated ~~filer”,~~filer,” a “smaller reporting company” and an “emerging growth company” in Rule12b-2 of the Exchange Act.


Large accelerated filer		☐	[ ]	Accelerated filer	☐[ ]

~~Non-accelerated~~ ~~filer~~		☐
Non-accelerated filer	[X]	Smaller reporting company		☒[X]

~~Emerging Growth Company~~		☐
		Emerging growth company		[ ]

~~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 [X]

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

~~Trading~~Name of exchange on which registered

~~Symbols~~

None

~~Name of each exchange~~

~~on which registered~~

N/A

As of ~~May 15,~~August 19, 2019, there were ~~82,100,664~~82,450,664 shares of the ~~Registrant’s Common Stock issued and~~registrant’s common stock outstanding.

~~Mateon Therapeutics, Inc.~~MATEON THERAPEUTICS, INC.

~~Cautionary Factors that May Affect Future Results~~FORM 10-Q

This report contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements in this report, other than statements of historical facts, are forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “expect,” “intend,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” “continue,” “assumption” or the negative of these terms or other comparable terminology.FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2019

Statements in this report concerning our business plans, forecasts or strategies; estimates of our operating expenses and future financial performance; the efficacy or safety of our product candidates; the timing and outcomes of future clinical trials; the benefits or synergies anticipated from our merger with Oncotelic, Inc.; expected outcomes from product combinations or collaborations; anticipated market size and customer adoption of any products that we develop; our ability to obtain and maintain regulatory approval of our existing products and any future products we may develop; the effectiveness of intellectual property protection for our products and our ability to operate our business without infringing upon the intellectual property rights of others; and the manner, timing or success of any future capital raising efforts; are all forward-looking statements.

Forward-looking statements reflect management’s current views about future events and are based on currently available financial, economic and competitive data and on current business plans. Forward-looking statements, by their nature, involve known and unknown risks, uncertainties and other factors that may cause our 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. We have endeavored to discuss certain of those risks and other factors in this report, as well as in Item 1A “Risk Factors” in our Annual Report on Form~~10-K~~TABLE OF CONTENTS ~~filed with the SEC on April 10, 2019, and other reports that we file with the SEC.~~

We do not undertake any responsibility to release publicly any revisions to these forward-looking statements, whether as a result of new information, future events or otherwise, except to the extent required by law.

~~Mateon Therapeutics, Inc.~~

~~Condensed Balance Sheets~~

~~(in thousands, except per share data)~~PART I – FINANCIAL INFORMATION

   March 31, 2019 December 31, 2018
   (Unaudited) (See Note 1)
ASSETS

Current assets:

Cash
   $ 200 $ 629
Prepaid expenses and deposits
   140 170


Total current assets
   340 799
Right of use operating assets
   51 —


Total assets
   $ 391 $ 799


LIABILITIES AND STOCKHOLDERS’ DEFICIT

Current liabilities:

Accounts payable
   $ 901 $ 915
Accrued consulting and professional service expenses
   99 126
Facility lease obligations
   55 —
Accrued compensation and employee benefits
   49 24
Accrued clinical trial expenses
   27 27
Other accrued liabilities
   43 69


Total current liabilities
   1,174 1,161


Commitments and contingencies

Stockholders’ deficit:

Preferred stock, $0.01 par value, 15,000 shares authorized;

No shares issued and outstanding
   —   —
Common stock, $0.01 par value, 150,000 shares authorized;

41,420 shares issued and outstanding
   414 414
Additionalpaid-in capital
   294,448 294,236
Accumulated deficit
   (295,645 ) (295,012 )


Total stockholders’ deficit
   (783 ) (362 )


Total liabilities and stockholders’ deficit
   $ 391 $ 799

~~See accompanying notes.~~

~~Mateon Therapeutics, Inc.~~

~~Condensed~~Item 1. Financial Statements ~~of Comprehensive Loss~~

~~(in thousands, except per share data)~~

~~(unaudited)~~

   Three months ended March 31,
   2019 2018
Operating expenses:

Research and development
   $ 135 $ 225
General and administrative
   499 570


Total operating expenses
   634 795


Loss from operations
   (634 ) (795 )
Interest income
   1 1


Net loss and comprehensive loss
   $ (633 ) $ (794 )


Basic and diluted net loss per share attributable to common stock
   $ (0.02 ) $ (0.03 )


Weighted-average number of common shares outstanding
   41,420 26,545

~~See accompanying notes.~~

~~Mateon Therapeutics, Inc.~~

~~Condensed Statements of Stockholders’ Deficit~~MATEON THERAPEUTICS, INC. AND SUBSIDIARY

~~(in thousands)~~

~~(unaudited)~~CONDENSED Consolidated Balance Sheets

   Common
Stock    Additional
Paid-In    Accumulated Total
Stockholders’
   Shares    Amount    Capital    Deficit Deficit
Balance December 31, 2017
   26,545    $ 265    $ 291,533    $ (292,275 ) $ (477 )
Net loss and comprehensive loss
   —      —      —      (794 ) (794 )
Stock based compensation expense
   —      —      184    —   184








Balance March 31, 2018
   26,545    $ 265    $ 291,717    $ (293,069 ) $ (1,087 )








Balance December 31, 2018
   41,420    $ 414    $ 294,236    $ (295,012 ) $ (362 )
Net loss and comprehensive loss
   —      —      —      (633 ) (633 )
Stock based compensation expense
   —      —      212    —   212








Balance March 31, 2019
   41,420    $ 414    $ 294,448    $ (295,645 ) $ (783 )

	June 30,				December 31,
	2019				2018
		(unaudited)				(audited)
ASSETS
Current assets:				��
Cash	$	84,272			$	2,498
Prepaid expenses		104,966				-

Total current assets		189,238				2,498

Long-term investment		1,769,300				1,769,300
Intangibles, net of amortization of $59,926 and $34,189		950,254				975,991
Goodwill		4,751,055				-
Total assets	$	7,659,847			$	2,747,789

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable and accrued liabilities	$	1,414,711			$	-
Accounts payable to related party		400,713				283,030
Convertible debt, net of costs of $572,075 and $0		227,925				-

Total current liabilities		2,043,349				283,030

Commitments and contingencies

Stockholders’ equity:
Convertible Preferred stock, $0.01 par value, 15,000,000 shares authorized; 193,713 and 0 shares issued and outstanding		1,937				-
Common stock, $.01 par value; 150,000,000 shares authorized; 83,469,967 and 6,843,802 issued and outstanding as of June 30, 2019 and December 31, 2018, respectively		834,700				68,438
Additional paid-in capital		12,434,430				7,886,598
Accumulated deficit		(7,654,569	)			(5,490,277	)

Total stockholders’ equity		5,616,498				2,464,759

Total liabilities and stockholders’ equity	$	7,659,847			$	2,747,789

~~See~~

The accompanying ~~notes.~~

~~Mateon Therapeutics, Inc.~~

~~Condensed Statements of Cash Flows~~MATEON THERAPEUTICS, INC.AND SUBSIDIARY

~~(in thousands)~~CONDENSED Consolidated STATEMENTS OF OPERATIONS

~~(unaudited)~~For the Three and Six Months ended June 30, 2019 and 2018

Three months ended March 31,

   2019 2018
Operating activities:

Net loss
   $ (633 ) $ (794 )
Adjustments to reconcile net loss to net cash used in operating activities:

Depreciation
   —   2
Stock-based compensation
   212 184
Changes in operating assets and liabilities:

Prepaid expenses, other current assets and right of use operating assets
   80 (149 )
Accounts payable and accrued liabilities
   (88 ) (125 )


Net cash used in operating activities
   (429 ) (882 )
Investing activities
   —   —
Financing activities
   —   —


Decrease in cash and cash equivalents
   (429 ) (882 )
Cash and cash equivalents at beginning of period
   629 1,115


Cash and cash equivalents at end of period
   $ 200 $ 233


Supplemental disclosue of non-cash activities

Initial recognition of right of use operating assets
   $ 101 $ —


Initial recognition of facility lease obligations
   $ 109 $ —


Three Months Ended Six Months Ended
2019 2018 2019 2018

Operating expenses:
Research and development $ 363,774 $ 100,045 $ 765,261 $ 231,386
General and administrative 797,231 53,263 1,371,807 112,716

Total operating expenses 1,161,005 153,308 2,137,068 344,102

Loss from operations (1,161,005 ) (153,308 ) (2,137,068 ) (344,102 )

Interest income 123 - 123 -
Interest expense (28,228 ) - (28,228 ) -

Net Loss $ (1,189,110 ) $ (153,308 ) $ (2,165,173 ) $ (344,102 )

Basic and diluted net loss per share attributable to common stock $ (0.02 ) $ (0.03 ) $ (0.06 ) $ (0.06 )
Basic and diluted weighted average common stock outstanding 65,384,431 6,051,953 36,114,117 6,022,794
~~See~~
The accompanying ~~notes.~~

~~Leases~~

~~At the inception of an arrangement of over 12 months duration, the Company determines whether it contains a lease~~values based on the ~~arrangement’s facts~~short-term maturity of these instruments. As defined in ASC 820, “Fair Value Measurements and ~~circumstances. When~~Disclosures,” fair value is the ~~arrangement contains~~price that would be received to sell an asset or paid to transfer a ~~lease~~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 three levels of ~~over 12 months duration,~~the fair value hierarchy defined by ASC 820 are as follows:

●	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.

			Fair Value Measurement Using
	Carrying Value		Level 1		Level 2		Level 3		Total
Investments in Equity Securities
Adhera Therapeutics – Convertible Series E Preferred Shares	$	1,769,300	$	-	$	-	$	1,769,300	$	1,769,300
	$	1,769,300	$	-	$	-	$	1,769,300	$	1,769,300

The Adhera Therapeutics, Inc. (Adhera) Convertible Series E Preferred shares contain “full-ratchet” anti-dilution provisions. If Adhera issues any new common shares or derivative securities convertible into shares of common stock at a price that is lower than the conversion price for the Convertible Series E Preferred Stock (other than certain limited exempt issuances) then the conversion price for the Convertible Series E Preferred Stock will automatically adjust to the lower conversion price~~right-of-use~~ ~~assets~~, as defined in the agreement with Adhera. The Adhera Convertible Series E Preferred shares are not publicly traded and ~~corresponding operating lease liabilities~~there are ~~recorded based on the present~~no freely observable inputs from objective sources. Any short term changes in value of lease payments over the expected term. The Company uses its estimated incremental borrowing rate for collateralized assets as the basis for the discount rate used to determine the present value. Lease expense is recognized over the expected term on a straight-line basis.

~~Recent Accounting Pronouncements~~

~~In February 2016, the FASB issued ASUNo. 2016-2,~~ ~~“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. ASUNo. 2016-2~~ became effective for the Company’s interim and annual reporting periods beginning on January 1, 2019, which is the date the Company adopted the new standard. On the date of adoption, the Company had only one lease, which is for the Company’s principal executive office and the lease expires on June 30, 2019.

~~The Company elected to use the modified retrospective approach for the adoption of ASU2016-2.~~ The Company also elected to apply the transition method that allows companies to continue applying the guidance under the lease standard in effect at that time in the comparative periods presented in the financial statements. The Company further elected practical expedients not to reassess prior conclusions about lease identification, lease classification and initial direct costs under the new standard. Results for reporting periods beginning January 1, 2019 are presented under the new standard, while prior period amountsAdhera common stock are not ~~adjusted~~indicative of a change in value of Adhera Convertible Series E Preferred shares given the different rights and ~~continue to be reported under the accounting standards in effect for the prior period.~~

~~Upon adoption~~preferences of the new lease standard on January 1, 2019, the Company capitalized right of use assets of $101,000 and recognized a total of $109,000 of lease liabilities on its balance sheet. On December 31, 2018, prior to the adoption of ASU~~2016-2,~~such shares. the Company had recognized $8,000 of lease liabilities on its balance sheet, therefore the adoption of the new lease standard resulted in an increase to the Company’s liabilities of $101,000 on the date of adoption. The Company used a discount rate of 10%. As of January 1, 2019, minimum remaining lease payments aggregated $112,000, and as of March 31, 2019, minimum remaining lease payments aggregated $56,000.

~~3. Stockholders’ Equity~~

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

      March 31, 2019    December 31, 2018
Expiration Date
   Exercise
Price    (number of shares in thousands)
02/11/19
   $ 2.56    —      293
02/18/19
   $ 2.75    —      1,872
08/28/19
   $ 2.90    2,700    2,700
03/20/20
   $ 2.13    234    234
03/25/20
   $ 1.71    2,920    2,920
04/12/20
   $ 0.40    7,437    7,437
06/20/20
   $ 0.40    7,437    7,437
04/30/23
   $ 0.20    1,488    1,488




Total Warrants Outstanding
      22,216    24,381

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

   Options
Available
for Grant    Options
Outstanding Weighted
Average
Exercise
Price    Weighted
Average
Remaining
Contractual
Life    Aggregate
Intrinsic
Value
   (in thousands)    (years)    (in thousands)
Balance at December 31, 2018
   2,465    6,785 $ 0.75    7.1
Options forfeited
   11    (11 ) $ 4.78





Balance at March 31, 2019
   2,476    6,774 $ 0.74    6.9    $ —





Vested and exercisable at March 31, 2019
      4,335 $ 0.72    6.9    $ —
Vested and expected to vest at March 31, 2019
      6,461 $ 0.59    6.9    $ —
Unvested at March 31, 2019
      2,439 $ 0.78

As of March 31, 2019, there was approximately $366,000 of unrecognized compensation cost related to stock option awards that is expected to be recognized as expense over a weighted average period of approximately 1.0 years.

The fair value for stock options granted is estimated at the date of grant using a Black-Scholes option pricing model. No stock options were granted during the three months ended March 31, 2019 or March 31, 2018.

4. Net Loss Per Share

Basic ~~and diluted~~ net loss per common share ~~was calculated~~is computed 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~~(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:

	Six months ended
	June 30, 2019		June 30, 2018

Convertible notes		8,000,000		-
Stock options		6,477,922		7,319,000
Warrants		22,216,211		24,528,000
Potentially dilutive securities		36,694,133		31,847,000

	Three months ended
	June 30, 2019		June 30, 2018

Convertible notes		8,000,000		-
Stock options		6,477,922		545,000
Warrants		22,216,211		2,312,000
Potentially dilutive securities		36,694,133		2,857,000

Stock-Based Compensation

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, including employee stock options, in the statements of operations.

For stock options issued to employees and members of the board of directors for their services, 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 ~~Company’s~~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.

Pursuant to ASU 2018-07 Compensation – Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting, the Company accounts for stock options issued to non-employees for their services in accordance with ASC 718. The Company uses valuation methods and assumptions to value the stock options that are in line with the process for valuing employee stock options noted above.

Impairment of Long-Lived Assets

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- and six-months ending June 30, 2019 and 2018, there were no impairment losses recognized for long-lived assets.

Intangible 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.

Goodwill

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 (during the last quarter of the fiscal year), 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 ~~position~~equivalent to the difference is recorded.

Convertible Instruments

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 ~~periods presented. Accordingly,~~intrinsic value of conversion options embedded in debt instruments based upon the differences between the fair value of the underlying common stock ~~equivalents~~at the commitment date of ~~approximately 6,774,000~~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 ~~options~~at the commitment date of the note transaction and ~~22,216,000 warrants at March 31,~~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.

Research & Development Costs

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

Prior Period Reclassifications

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

Recent Accounting Pronouncements

In January 2017, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2017-04, Intangibles – Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. ASU 2017-04 is effective for annual periods beginning after December 15, 2019. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The adoption of ASU 2017-04 is not expected to have any impact on the Company’s financial statements and related disclosures.

In August 2016, the FASB issued ASU 2016-15, “Statement of Cash Flows (Topic 230) Classification of Certain Cash Receipts and Cash Payments”. The new guidance is intended to reduce diversity in practice in how certain transactions are classified in the statement of cash flows. ASU 2016-15 is effective for annual periods beginning after December 15, 2018. Early adoption is permitted, provided that all of the amendments are adopted in the same period. The guidance requires application using a retrospective transition method. The adoption of ASU 2016-15 is not expected to have any impact on the Company’s financial statements and related disclosures.

In August 2015, the FASB issued ASU 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date, which defers the effective date of ASU 2014-09 for all entities by one year. ASU 2014-09 became effective for the Company on January 1, 2018. The ASU also requires expanded disclosures relating to the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. Additionally, qualitative and quantitative disclosures are required about customer contracts, significant judgments and changes in judgments, and assets recognized from the costs to obtain or fulfill a contract. The Company did not have any revenues for the three and six months ended June 30, 2019 and ~~4,705,000 stock options~~2018, and ~~9,626,000 warrants at March 31, 2018, were excluded from~~may not have revenues in the ~~calculation~~near future. The adoption of ~~weighted average shares for diluted net loss per share.~~ASC 606 is not likely to have any impact on the Company’s financial statements and related disclosures.

~~5. Subsequent Events~~

~~Merger with Oncotelic~~

On February 25, 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). The new guidance establishes the principles to report transparent and economically neutral information about the assets and liabilities that arise from leases. The new guidance is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. The adoption of ASU 2016-02 did not have a material impact on the Company’s financial statements and related disclosures as the Company does not have any leases.

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

NOTE 3 - ACQUISITIONS

Merger Agreement with Oncotelic, Inc.

Effective April ~~17,~~22, 2019, the Company ~~entered into a merger agreement with~~completed the Merger pursuant to the Merger Agreement. Pursuant to the terms of the Merger Agreement, Oncotelic, Inc. ~~(“Oncotelic”, a clinical-stage biopharmaceutical company focused on the treatment of cancer usingTGF-b~~ RNA), and Oncotelic Acquisition Corporation (the “Merger Sub”, a newly formed wholly-owned subsidiary of the Company). Mateon and Oncotelic entered into the merger agreement in order to create a publicly-traded company with a pipeline of immunotherapies that target several cancer markets which currently lack adequate treatment options.

~~On April 22, 2019, following the satisfaction of closing conditions contained in the merger agreement, the Merger Sub was~~ merged with and into Merger Sub. Oncotelic, ~~with Oncotelic~~Inc. was the surviving ~~the merger~~corporation and, as a subsidiary of the Company. In connection with the merger, the Company issued approximately 41,000,000 shares of common stock and 193,713 shares of newly designated Series A Preferred Stock to the former stockholders of Oncotelic in exchange for all of the previously outstanding shares of Oncotelic common stock. Included in the shares issued to the former stockholders of Oncotelic are approximately 2,110,000 shares of common stock and approximately 10,000 shares of Series A Preferred Stock which are to be issued subject to the holders’ waiver of dissenter’s rights.

~~Each share of Series A Preferred Stock is convertible into 1,000 shares of common stock and is eligible to vote on stockholder matters on anas-converted~~ ~~basis. The Series A Preferred Stock will convert into common stock upon the availability of a sufficient number of authorized shares of common stock. As~~ a result of the ~~merger, the former Oncotelic security holders immediately before the transaction own approximately 85%~~Merger, became a wholly owned subsidiary of the issued and outstanding common stock, including shares of common stock that are issuable upon conversion of the Series A Preferred Stock, and the stockholders of the Company immediately before the transaction own the remaining 15%.Mateon.

The Company plans to report data regarding the financial statements of Oncotelic, including pro forma financial information, once Oncotelic’s financial statements are completed. Oncotelic is in the process of preparing its financial statements for all relevant reporting periods and obtaining audits for its fiscal years ended December 31, 2018 and 2017, and, accordingly, it is currently impractical to include such information.

~~Contingent Value Right for previous Mateon stockholders~~

~~Holders of Mateon common stock at the close of business on the date prior to~~On the effectiveness of the ~~merger were issued a Contingent Value Right (“CVR”),~~Merger it is reflected that:

●	for all bookkeeping and accounting purposes, the closing of the Merger (the “Closing”) was to be deemed to have occurred at 10:00 am local time on April 22, 2019;

●	for the purposes of calculating the number of shares of Mateon’s common stock, $0.01 par value per share, to be issued in exchange for common equity units of Oncotelic, Inc. in connection with the Merger, the conversion ratio was to be 3.97335267 for Common Stock and 0.01877292 of newly designated Series A Convertible Preferred Stock;

●	41,419,934 shares of Mateon common stock were issued and outstanding as of the date of the Merger;

●	Oncotelic’s outstanding 10,318,746 shares of common stock, consisting of 7,866,335 outstanding shares of common stock, 3,102,411 converted options and 150,000 converted warrants, that were exchanged for an aggregatge of (a) 41,000,033 shares of the Company’s Common Stock and (b) 193,713 shares of the Company’s newly designated Series A Preferred Stock, par value $0.01 per share each of which are initially convertible into 1,000 shares of Common Stock. Included in the shares issued to the former stockholders of Oncotelic are approximately 2.1 million shares of common stock and approximately 10,000 shares of the Preferred Stock which are to be issued subject to the holders’ waiver of dissenter’s rights.

●	Holders of the Company’s Common Stock at the close of business on the date prior to the effectiveness of the Merger were issued a Contingent Value Right (“CVR”).

Each CVR provides ~~them with~~its holder the right to receive 75% of the net proceeds received from the full or partial sale, license, transfer or other disposition of the intellectual property rights and related assets of ~~the Company’s~~Mateon’s product candidates OXi4503 and CA4P, in

their ~~current~~ form and for their ~~currently~~ contemplated uses at the time of Closing, that occurs under a definitive agreement executed prior to the fourth anniversary of the ~~merger~~Merger (after the initial $500,000 of such net proceeds, which will be retained by the Company). The ~~Company’s stock transfer agent acts as the rights agent for the CVR holders. The~~ CVRs are not ~~transferrable,~~transferable, do not entitle ~~their holders~~the holder to any equity interest in the Company and do not have any voting or dividend rights.
~~Management Change~~
Immediately following the Merger, Mateon had 82,419,967 shares of common stock issued and outstanding and 193,713 shares of preferred stock which converted at a 1:1,000 ratio resulting in an additional 193,712,995 shares of common stock. The pre-Merger stockholders of Mateon retained an aggregate of 41,419,934 shares of common stock of Mateon, representing approximately 15% ownership of the post-Merger company. Therefore, upon consummation of the Merger, there was a change in control of Mateon, with the former owners of Oncotelic effectively acquiring control of Mateon.The Merger has been treated as a recapitalization and reverse acquisition for financial accounting purposes. As such, Oncotelic is considered the acquirer for financial accounting purposes, and the registrant’s historical financial statements of the Company before the Merger has been replaced with the historical financial statements of Oncotelic before the Merger in the financial statements and filings with the Securities and Exchange Commission.
The Company obtained a preliminary 3^rd party valuation on the fair value of the assets acquired and liabilities assumed for use in the purchase price allocation, as well as the value the consideration exchanged in the Merger. It was determined that the market price of the Company’s common stock was not the most readily determinable measurement for calculating the fair value of the consideration, and instead the estimation of the consideration was based on an income approach to value the equity interest exchanged.
The following table summarizes the allocation of the purchase price to the fair values of the assets acquired and liabilities assumed as of the transaction date:
Cash $ 182,883
Prepaid expenses 56,175
Right of use operating asset 33,825
Accounts payable and other current liabilities assumed (1,296,186 )
Net liability acquired (1,023,303 )
Goodwill (a.) 4,751,055
Total purchase price (b.) $ 3,727,752
a. The primary items that generate goodwill include the value of the synergies between the acquired company and Oncotelic, Inc. and the acquired assembled workforce, neither of which qualifies for recognition as an intangible asset.
Goodwill is the excess of the purchase price over the fair value of the underlying net tangible and identifiable intangible assets. In accordance with applicable accounting standards, goodwill is not amortized but instead is tested for impairment at least annually or more frequently if certain indicators are present. Goodwill and intangibles is not deductible for tax purposes. The Company has considered the valuation as a preliminary allocation of assets and liabilities and may adjust such estimates in the future, if deemed material.
b. The total purchase price of $3,727,752 represents the consideration transferred from Mateon in the Merger and was calculated based on the number of shares of Common Stock of the combined company that Mateon stockholders ownded as of the closing of the transaction and the fair value of assets and liabilities assumed by Oncotelic.
NOTE 4 - INTANGIBLE ASSETS AND GOODWILL
Mateon completed a Merger with Oncotelic, Inc. (Note 3), which gave rise to Goodwill of $4,751,055. The Goodwill will be tested on the annual impairment date chosen of December 31.
Arrangements with Adhera Therapeutics, Inc.
In July 2017, Oncotelic entered into a License Agreement (the “License Agreement”) with Adhera Therapeutics, Inc. (“Adhera”) pursuant to which, among other things, we were provided from Adhera a license to their SMARTICLES platform for the delivery of antisense DNA therapeutics, as well as a license to their conformationally restricted nucleotide (“CRN”) technology with respect to TGF-Beta. Under the terms of the ~~merger~~License Agreement, Oncotelic agreed to purchase 49,019 shares of Adhera’s common stock for an aggregate purchase price of $0.25 million ($5.10 per share), with such purchase and sale to be made pursuant to a Stock Purchase Agreement to be entered into between us and Adhera within thirty (30) days following the date of the License Agreement. As of May 2018, we had not completed the purchase of the stock and were not able to reach a definitive agreement, and as part of the Omnibus Settlement Agreement, entered into on October 1, 2018, between Adhera, Vuong Trieu, Ph.D. and affiliated entities, the License Agreement was terminated effective May 15, 2018.
Assignment and Assumption Agreement with Autotelic, Inc.
In April 2018, we entered into an Assignment and Assumption Agreement (the “Assignment Agreement”) with Autotelic Inc., ~~Oncotelic’s Chairman~~an affiliate company, and Autotelic LLC, an affiliate company, pursuant to which the Company acquired the rights to all intellectual property (“IP”) related to a patented product. As consideration for the Assignment Agreement, the Company issued 204,798 shares of our common stock for a value of $819,191. The Assignment Agreement also provides that the Company shall be responsible for all costs related to the IP, including development and maintenance, going forward. All previous pass through charges related to this asset from Autotelic Inc. to Autotelic, LLC and then to the Company will be null and void. As a result, Oncotelic wrote-off approximately $458,000 in previously billed charges related to the Oncotelic IP for the year ended December 31, 2018 which was recorded in general and administrative expenses. Dr. Trieu, a related party, is a control person in Autotelic LLC and Autotelic Inc.
Intangible Asset Summary
The following table summarizes the balances as of June 30, 2019 and December 31, 2018, of the intangible assets acquired, their useful life, and annual amortization:
June 30, 2019
Remaining
Estimated
Useful Life
(Years)

Intangible asset – Intellectual Property $ 819,191 19.02
Intangible asset – Capitalization of license cost 190,989 19.02
1,010,180
Less Accumulated Amortization (59,926 )
Total $ 950,254
December 31, 2018
Remaining
Estimated
Useful Life
(Years)

Intangible asset – Intellectual Property $ 819,191 19.27
Intangible asset – Capitalization of license cost 190,989 19.27
1,010,180
Less Accumulated Amortization (34,189 )
Total $ 975,991
Amortization of identifiable intangible assets for the three and six months ended June 30, 2019 and 2018 was $12,896 and $25,737; and $8,561 and $8,561, respectively.
The future yearly amortization expense over the next five years and thereafter are as follows:
For the six-month period ended June 30,

2020 $ 51,365
2021 51,365
2022 51,365
2023 51,365
2024 51,365
Thereafter 693,429
$ 950,254
NOTE 5 – ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Accounts payable and accrued expenses consist of the following amounts:
June 30, 2019 December 31, 2018

Accounts payable $ 1,183,893 $ -
Accrued expenses 230,818 -
$
1,414,711
$ -
June 30, 2019 December 31, 2018

Accounts payable – related party $ 400,713 $ 283,030
NOTE 6 – CONVERTIBLE DEBENTURES AND NOTES PAYABLE
As of June 30, 2019, convertible debentures, net of debt discount, consist of the following amounts:

June 30,2019

10% Convertible note payable, due April 23, 2022 for Peak One and TFK 194,456
10% Convertible note payable, due April 23, 2022 for Officer and private investor 31,168
10% Convertible note payable due June 12, 2022 for Peak One 2,301
$ 227,925
17
The above convertible notes gross $800,000 and included an initial debt discount totaling $600,140. Total amortization expense related to these debt discounts was $28,065 and $28,065 for the three and six months ended June 30, 2019, respectively. No similar expense was recorded in the same periods of 2018. The total unamortized debt discount for the six months ended June 30, 2019, was $572,075.
Bridge Financing
Peak One Financing
On April 17, 2019, the Company entered into a Securities Purchase Agreement (the “Purchase Agreement”) with Peak One Opportunity Fund, L.P. (the “Buyer”, “Peak One”), for a commitment to purchase convertible notes in the aggregate amount of $400,000, pursuant to which, for an aggregate purchase price of $400,000, the Buyer purchased (a) Traunche #1 in the form of a Convertible Promissory Note in the principal amount of $200,000 (the “Convertible Note”) and (b) 350,000 restricted shares of the Company’s common stock (the “Shares”) (the “Purchase and Sale Transaction”). The Company used the net proceeds from the Purchase and Sale Transaction for working capital and general corporate purposes.
The Convertible Note has a principal balance of $200,000 and a stated maturity date of April 23, 2022. Upon issuance of the Convertible Note, a 10% OID of $20,000 and a $5,000 debt issunce cost that was applied to the principal amount of the Convertible Note. 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 “Traunche #1 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 the Traunche #1 Conversion Shares. The Company may redeem the Convertible Note at rates of 110% to 140% over the principal balance dependent on certain events and redeem the value with accrued interest thereon, if any.
The issuance of the Convertible Note resulted in a discount from the beneficial conversion feature totaling $84,570, including $52,285 related to the beneficial conversion feature and a discount from the issuance of restricted stock of 350,000 shares for $32,285. Total amortization of these OID and debt issuance cost discounts totaled $6,798 during each of the three and six months ended June 30, 2019. Total unamortized interest expense on this note was $102,772 as of June 30, 2019.
On June 12, 2019, the Company entered into an amendment of the Purchase Agreement (“Amendment #1”) in connection with the draw-down of the second traunche, and to provide for additional borrowing capacity under that agreement. Amendment #1 increased the borrowing amount up to $600,000, adding the ability to borrow an additional $200,000 in a third traunche.
On June 12, 2019, the Company drew Convertible Note Traunche #2 (“Traunche #2”) totaling $200,000, including a 10% OID of $20,000 and a $1,000 debt isusance cost, receiving net proceeds of $179,000 against the April 17, 2019, Purchase Agreement with Peak One, with a maturity date of June 12, 2022. Amounts due under Traunche #2 are convertible at the same terms as Traunche #1 above.
The issuance of Traunche #2 resulted in a discount from the beneficial conversion feature totaling $180,000, including $132,091 related to the conversion feature and a discount from the issuance of restricted stock of 350,000 shares for $47,909. Total amortization of these OID and debt issuance cost discounts totaled $3,301 during each of the three and six months ended June 30, 2019. Total unamortized interest expense on this note was $197,699 as of June 30, 2019.
TFK Financing
On April 23, 2019, the Company, entered into a Convertible Note (the “TFK Note”) with TFK Investments, LLC (“TFK”). The TFK Note has a principal balance of $200,00, including a 10% OID of $20,000 and $5,000 in debt issuance costs, receiving net proceeds of $175,000, 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“TFK 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 the TFK 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 TFK Note resulted in a discount from the beneficial conversion feature totaling $84,570, including $53,285 related to the beneficial conversion feature and a discount from the issuance of restricted stock of 350,000 shares for $32,285. Total amortization of these OID and debt issuance cost discounts totaled $6,798 during each of the three and six months ended June 30, 2019. Total unamortized interest expense on this note was approximately $102,772 as of June 30, 2019.
Notes with Officer and private investor
On April 23, 2019, the Company entered into a convertible note with our Chief Executive Officer, ~~was appointed~~Vuong Trieu, M.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 10% OID discount totaled $9,182 during each of the three and six months ended June 30, 2019. Total unamortized interest expense on this note was $138,817 as of June 30, 2019.
On April 17, 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.
On April 23, 2019, pursuant to the Bridge SPA the Company entered into Convertible Note Traunche #1 (“Traunche #1”) with the Bridge Investor. Traunche #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, 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 Traunche #1 may also be converted into shares (the “Bridge SPA Conversion Shares”) of the Company’s ~~board~~common stock at any time, at the option of ~~directors~~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 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 $1,985 during each of the three and six months ended June 30, 2019. Total unamortized interest expense on this note was ~~appointed Chief Executive Officer~~$30,015 as of June 30, 2019.
NOTE 7 - RELATED PARTY TRANSACTIONS
Master Service Agreement with Autotelic Inc.
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 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 ~~Chairman~~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 ~~board~~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 $355,827 and $695,121 for the three and six months ended June 30, 2019 as compared to $130,773 and $301,707 for the three and six months ended June 30, 2019 and 2018, respectively.
In January 2019, Oncotelic issued a total of ~~directors. The~~$80,772 shares of common stock with a fair value otf $4.00 per share to Autotelic, Inc. in lieu of cash for the settlement of outstanding accounts payable.
Stock Purchase Agreements
On December 26, 2018, Oncotelic entered into a Stock Purchase Agreement with the Company’s ~~previous~~ CEO, ~~William D. Schwieterman, M.D., resigned~~Vuong Trieu, Ph.D. (the “Vuong SPA”). In connection with the Vuong SPA Oncotelic issued 189,238 shares of common shares at $4.00 per share. As consideration for the shares Oncotelic received 151.39 Preferred Series E shares of Adhera Therapeutics, Inc. with a value of $756,950.
On December 26, 2018, Oncotelic entered into a Stock Purchase Agreement with Autotelic Inc. (the “Autotelic SPA”). In connection with the Autotelic SPA Oncotelic issued 226,988 shares of common shares at $4.00 per share. As consideration for the shares Oncotelic received 181.59 Preferred Series E shares of Adhera Therapeutics, Inc. with a value of $907,950.
License Fee with Autotelic
In December 2015, the Company paid Autotelic Inc. $395,150 for the right to license the use of Trabedersen (OT-101) for 5 years. On April 13, 2018, the Company purchased the license for OT-101 from ~~his position~~Autotelic Inc. for $819,191, which was recorded as ~~CEO, although he will remain~~an intangible asset, and as a ~~member~~result, expensed the remaining prepaid expense of $191,191. In addition, the Company recorded a charge of approximately $10,000 and $21,000 and $7,000 and $7,000 for the three and six months ended June 30, 2019 and 2018, respectively, as amortization of the intangibles acquired. As such, the Company had approximately $770,000 and $791,000 of unamortized intangibles as of June 30, 2019 and December 31, 2018, respectively. On December 31, 2018, we issued Autotelic Inc. 204,798 shares of the Company’s ~~board of directors. Also in accordance with~~common stock as consideration for the ~~terms of the merger agreement, all of the other previous directors of the Company resigned effective on the closing date of the merger.~~license.
~~Bridge financing~~
Note Payable – Related Party
On April 23, 2019, the Company ~~completed~~issued a convertible note to our Chief Executive Officer totaling $164,444, including OID of $16,444, receiving net proceeds of $148,000, which will be used by the Company for working capital and general corporate purposes. (Note 6)
NOTE 8 - STOCKHOLDERS’ EQUITY
The following transactions affected the Company’s Stockholders’ Equity:
Equity Transactions During the Period Prior to the Merger
Issuance of Common Stock
On December 26, 2018, Oncotelic issued 26,100 shares of common stock to a third-party investor in connection with a Share Purchase Agreement for 20.88 shares of Preferred Series E Stock of Adhera Therapeutics, Inc. with a value of $104,400.
On December 26, 2018, Oncotelic entered into a Stock Purchase Agreement with the Company’s CEO, Vuong Trieu, Ph.D. (the “Vuong SPA”). In connection with the Vuong SPA Oncotelic issued 189,238 shares of common shares at $4.00 per share. As consideration for the shares Oncotelic received 151.39 Preferred Series E shares of Adhera Therapeutics, Inc. with a value of $756,950.
On December 26, 2018, Oncotelic entered into a Stock Purchase Agreement with Autotelic Inc. (the “Autotelic SPA”). In connection with the Autotelic SPA Oncotelic issued 226,988 shares of common shares at $4.00 per share. As consideration for the shares Oncotelic received 181.59 Preferred Series E shares of Adhera Therapeutics, Inc. with a value of $907,950.
On January 11, 2019, Oncotelic issued 11,250 shares of common stock with a fair value of $4.00 per share to an ~~initial tranche aggregating $0.6 million~~employee in lieu of ~~bridge financing. Under~~cash for compensation.
In January 2019, Oncotelic issued a total of 80,772 shares of common stock with a fair value of $4.00 per share to Autotelic, Inc. in lieu of cash for the ~~bridge financing,~~settlement of outstanding accounts payable and services received during the three months ended March 31, 2019.
On January 29, 2019, Oncotelic issued a total of 20,750 shares of common stock with a fair value of $4.00 per share to two separates investors for $83,000 in cash.
On March 31, 2019, Oncotelic issued 80,594 shares of common stock with a fair value of $4.00 per share to various employees in lieu of cash for accrued compensation.
In April 2019, the Company issued ~~$600,000~~a total of debentures to four investors (including $168,000 with Dr. Trieu, the incoming Chairman and Chief Executive Officer of the Company). The debentures were issued at a 10% discount for proceeds to the Company of $540,000. Under the terms of the bridge financing agreements, after May 23, 2019 the Company has the potential to draw down a second tranche of $600,000 of debentures for an aggregate purchase price of $540,000. The debentures are payable on sliding schedule of premiums over a six month period, and during this period the debentures are convertible into common stock at a fixed price of $0.10 per share. Thereafter, the debentures are convertible into common stock at a discount to the market price at the time of conversion.
~~Upon closing the bridge financing, the Company issued 700,000~~150,000 shares of common stock to two ~~of the unaffiliated bridge~~ investors as a ~~commitment fee~~result of the conversion of warrants for $120 in cash.
Equity Transactions During the Period Since the Merger
Issuance of Preferred Stock
On April 22, 2019, pursuant to the Merger the Company issued 193,713 shares of Series A Convertible Preferred Stock in exchange for 77,154 shares of Oncotelic Common Stock. (Note 3)
Issuance of Common Stock
On April 22, 2019, pursuant to the Merger the Company issued 41,000,033 shares of Common Stock in exchange for 10,318,746 shares of Oncotelic Common Stock. (Note 3)
On April 23, 2019, the Company issued 700,000 restricted shares of Common Stock with a fair value of $0.11 per share to two noteholders in connection with convertible notes payable. (Note 6)
On June 12, 2019, the ~~financing.~~Company issued 350,000 restricted shares of Common Stock with a fair value of $0.18 per share in connection with a convertible note payable. (Note 6)
~~For additional~~
NOTE 9 – STOCK-BASED COMPENSATION
The Company accounted for its stock-based compensation in accordance with the fair value recognition provisions of FASB ASC Topic 718, “Compensation – Stock Compensation.”
Options
Pursuant to the Merger, Mateon’s common stock and corresponding outstanding options survived. The below information ~~concerning~~details represents Mateon’s associated option activity pre and post merger.
As of June 30, 2019, options to purchase common stock were outstanding under three stock option plans – the ~~merger with Oncotelic,~~2017 Equity Incentive Plan (the “2017 Plan”), the ~~CVRs, the management change~~2015 Equity Incentive Plan (the “2015 Plan”) and the ~~bridge financings, see~~2005 Stock Plan (the “2005 Plan”). Under the 2017 Plan, up to 2,000,000 shares of the Company’s ~~Current Reports~~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, taken together, 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. 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 are summarized as follows:
Weighted
Average
Shares Exercise Price
Outstanding at December 31, 2018 6,785,617 $ 0.75
Granted/Additions - -
Exercised - -
Expired or canceled (307,695 ) 0.41
Outstanding at June 30, 2019 6,477,922 $ 0.75
The following table summarizes information about options to purchase shares of the Company’s common stock outstanding and exercisable at June 30, 2019:
Weighted- Weighted-
Average Average
Outstanding Remaining Life Exercise Number
Exercise prices Options In Years Price Exercisable

$ 0.22 2,524,513 8.97 $ 0.22 2,524,513
0.38 1,162,500 7.54 0.375 1,162,500
0.51 364,449 7.94 0.51 364,449
0.58 271,224 7.32 0.58 271,224
0.65 91,564 6.92 0.65 91,564
0.73 1,124,711 6.72 0.73 1,124,711
1.37 150,000 6.05 1.37 150,000
1.43 525,000 5.91 1.43 525,000
2.60 5,280 5.00 2.60 5,280
2.70 20,120 4.00 2.70 20,120
2.79 9,760 4.51 2.79 9,760
2.95 150,000 4.87 2.95 150,000
11.88 2,359 2.50 11.88 2,359
15.00 75,000 5.91 15.00 75,000
19.80 1,442 2.33 19.80 1,442
6,477,922 7.69 $ 0.75 6,477,922
The compensation expense attributed to the issuance of the options is recognized as they are vested.
The employee stock option plan stock options are 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 $0 and was based on ~~Form8-K~~ ~~filed~~the Company’s closing stock price of $0.185 as of June 30, 2019, which would have been received by the option holders had all option holders exercised their options as of that date.
All the compensation expense was recorded prior to the close of the Merger, as the vesting of all the options was accelerated due to the effective change in control of the Company, and as such no compensation expense related to the above options was recorded during the three and six months ended June 30, 2019 and 2018, respectively. As of June 30, 2019, there was no future compensation cost as all stock options are vested at June 30, 2019.
On April 22, 2019 and in conjunction with the ~~SEC~~close of the Merger, the Company recorded approximately $341,000 in compensation cost as a result of the acceleration of the vesting schedule of approximately 328,000 Oncotelic options. Pursuant to the Merger these options were converted into Common and Series A Preferred Shares in the Company.
Warrants
Pursuant to the Merger, Mateon’s common stock and corresponding outstanding warrants survived. The below information details represents Mateon’s associated warrant activity pre and post merger.
The issuance of warrants to purchase shares of the Company’s common stock including those attributed to debt issuances are summarized as follows:
Weighted-
Average
Shares Exercise Price
Outstanding at December 31, 2018 24,380,893 $ 1.05
Granted - -
Exercised - -
Expired or cancelled (2,164,682 ) 2.72
Outstanding at June 30, 2019 22,216,211 $ 0.88
The following table summarizes information about warrants outstanding and exercisable at June 30, 2019:
Outstanding and exercisable
Weighted- Weighted-
Average Average
Number Remaining Life Exercise Number
Exercise Price Outstanding in Years Price Exercisable

$ 0.20 1,487,500 3.84 $ 0.20 1,487,500
0.40 14,875,000 0.88 0.40 14,875,000
1.71 2,919,710 0.74 1.71 2,919,710
2.13 233,577 0.72 2.13 233,577
2.90 2,700,424 0.16 2.90 2,700,424
22,216,211 0.97 $ 0.88 22,216,211
The expense attributed to the issuances of the warrants was recognized as they vested/earned. These warrants are exercisable for three to five years from the grant date. All are currently exercisable. There were no warrants issued during the three and six months ended June 30, 2019.
NOTE 10 – COMMITMENTS AND CONTINGENCIES
Leases
The Company had a lease for its corporate headquarters, which expired in June 2019. The lease was for a total of 5,275 square feet of office space located in South San Francisco, California. Rental expense was $35,772 and $35,772 for the three and six months ended June 30, 2019. Currently, the Company is leasing the office located at 29397 Agoura Road, Suite 107, Agoura Hills, CA 91301 on ~~April 18~~a month to month basis until such time a new office is identified.
Legal Claims
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.
NOTE 11 – SUBSEQUENT EVENTS
On July 22, 2019, the Company entered into a convertible note purchase agreement with a third-party for $200,000. The convertible note bears an interest rate of 8% per annum due on 15^th of each month and ~~April 25, 2019.~~are payable, at the option of the holder, either in cash or in shares of the Company’s common stock. The convertible note has a maturity date of January 1, 2020.
On August 6, 2019, the Company closed the second traunche of financing with the Bridge Investor, issuing an additional $200,000 face amount Debenture for gross proceeds of $175,000 after original issue discount. Following, the drawdown of the second traunche from the Bridge Investor, up to $400,000 in face value of Debentures remains available under the Securities Purchase Agreements.
23
~~Item~~ITEM 2. ~~Management’s Discussion~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Note Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q (the “Quarterly Report”) includes a number of forward-looking statements that reflect management’s current views with respect to future events and ~~Analysis~~financial performance. Forward-looking statements are projections in respect of ~~Financial Condition~~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 ~~Results~~members of ~~Operations~~our management team, as well as the assumptions on which such statements are based.

~~The following discussion~~

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 ~~analysis should be read together with~~involve known and unknown risks, uncertainties and other factors. Some of these risks are included in the ~~audited financial statements~~section entitled “Risk Factors” set forth in this Quarterly Report and ~~notes~~ in our Annual Report on Form10-K for the fiscal year ended December 31, 2018, as ~~well as “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contained therein. The following discussion and analysis should also be read in conjunction~~filed with the ~~unaudited~~Securities and Exchange Commission (the “SEC”) on April 10, 2019, 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:

●	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 brands;
●	supply constraints or difficulties;
●	general economic and business conditions;
●	our ability to continue as a going concern;
●	our need to raise additional funds in the future;
●	our ability to successfully recruit and retain qualified personnel;
●	our ability to successfully implement our business plan;
●	our ability to successfully acquire, develop or commercialize new products;
●	intellectual property claims brought by third parties; and
●	the impact of any industry regulation.

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 ~~set forth~~for our subsidiary, Oncotelic, Inc., a Delaware corporation (“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 ~~Part I, Item 1~~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.

As used in this Quarterly Report, ~~on Form~~and unless otherwise indicated, the terms “Mateon,” “Company,” “we,” “us,” and “our” refer to Mateon Therapeutics, Inc. (formerly known as OXiGENE, Inc.), a Delaware corporation, and our wholly-owned subsidiary: Oncotelic, Inc., a Delaware corporation (“Oncotelic”). Unless otherwise specified, all dollar amounts are expressed in United States dollars.

~~10-Q.~~Corporate History

~~Overview~~

Mateon Therapeutics, Inc. (f/k/a OXiGENE, Inc.), was formed in the State of New York in 1988, was reincorporated in the State of Delaware in 1992 and ~~Recent Developments~~

~~We are a clinical stage biopharmaceutical company developing drugs for~~changed its name to Mateon Therapeutics, Inc. in 2016. The Company conducts business activities through both Mateon and its wholly-owned subsidiary Oncotelic. Mateon is currently evaluating the ~~treatment~~further development of ~~cancer. Our goal is to advance our drug~~its product candidates into late stage pivotal clinical trials and either sell marketing rights to a larger pharmaceutical company or seek FDA approval ourselves. For over the past year we have been operating under significant capital constraints, which has curtailed our ability to achieve meaningful progress in either of Mateon’s two clinical programs – one of which is developing OXi4503 as a treatment for acute myeloid leukemia and myelodysplastic syndromes and ~~the other of which is developing~~ CA4P in combination with a checkpoint inhibitor for the treatment of advanced metastatic ~~melanoma.~~melanoma

~~After~~On April 17, 2019, the Company entered into a ~~thorough consideration~~merger agreement with Oncotelic a clinical-stage biopharmaceutical company focused on the treatment of ~~potential strategic alternatives, we determined~~cancer using TGF-b RNA), and Oncotelic Acquisition Corporation (the “Merger Sub”, a newly formed wholly-owned subsidiary of the Company). Mateon and Oncotelic entered into the merger agreement in order to create a publicly-traded company with a pipeline of immunotherapies that ~~the best course for our future would be to merge with another oncology drug development company.~~ target several cancer markets which currently lack adequate treatment options.

On April 22, 2019, ~~after~~following the ~~period covered by this report, we~~satisfaction of closing conditions contained in the merger agreement, the Merger Sub was merged ~~a newly formed subsidiary entity~~with and into Oncotelic, with Oncotelic Inc., a Delaware corporation (“Oncotelic”). Oncotelic is also a biopharmaceutical company developing drugs for the treatment of cancer, and has late clinical-stage product candidates in several important areas of unmet medical need. We believe thatsurviving the merger of Oncotelic and Mateon 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 paucity of therapeutic options and lack of an effective immunotherapy protocol. In addition, we believe that there is a natural synergy between Mateon’s necrotic cell death product candidate, CA4P, and Oncotelic’s proprietary self-immunization protocol (SIP) platform, particularly its~~TGF-ß~~ ~~inhibitorOT-101.~~

~~Oncotelic’s lead 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 fordifficult-to-treat~~ ~~cancers. Together, we plan to initiate phase 3 clinical trials forOT-101~~ in both high-grade glioma and pancreatic cancer. During phase 2 clinical trials in pancreatic cancer, melanoma, and colorectal cancers (Study P001) and in high-grade gliomas (Study G004), meaningful clinical benefits were observed and~~OT-101~~ exhibited a favorable safety profile. These clinical benefits included long-term survival and meaningful tumor reduction. Both partial and complete responses have been observed in the G004 Phase 2 clinical trial of~~OT-101~~ ~~as a single agent in patients with aggressive brain tumors.~~

~~Oncotelic’s self-immunization protocol (SIP~~^©~~) is based on novel and proprietary sequential treatment of cancers withOT-101~~ ~~(an antisense againstTGF-ß2)~~ and chemotherapies. This sequential treatment strategy is aimed at achieving effective self-immunization against a patients’ own cancer, resulting in robust therapeutic immune response and consequently better controlwholly-owendsubsidiary of the cancer and improved survival. Prolonged states of being cancer-free have been observed in some patients with the most aggressive forms of cancer, raising a renewed hope for a potential cure. The use of~~OT-101~~ lifts the suppression of the patient’s immune cells around the cancer tissue, providing the foundation for an effective initial priming, which is critical for a successful immune response. The subsequent chemotherapy results in the release of neoantigens that result in a robust boost of the immune response. We believe that a rational combination of the Oncotelic SIP platform with immune-modulatory drugs like interleukin 2~~(IL-2)~~ ~~and/or immune checkpoint inhibitors has the potential to help achieve sustained and robust immune responses in patients with the mostdifficult-to-treat~~ ~~forms of cancer.~~

Company. In connection with the merger, ~~on April 22, 2019 we~~the Company issued approximately ~~41,000,000~~41 million shares of common stock and 193,713 shares of newly designated ~~Series A~~ Preferred Stock (the “Preferred Stock”) to the former stockholders of Oncotelic in exchange for all of the previously outstanding shares of Oncotelic common stock. Included in the shares issued to the former stockholders of Oncotelic are approximately ~~2,110,000~~2.1 million shares of common stock and approximately 10,000 shares of ~~Series A~~the Preferred Stock which are to be issued subject to the holders’ waiver of dissenter’s rights.

Each share of ~~Series A~~ Preferred Stock is convertible into 1,000 shares of common stock and is eligible to vote on stockholder matters on an ~~as converted~~as-converted basis. The ~~Series A~~ Preferred Stock will convert into common stock upon the availability of a sufficient number of authorized shares of common stock.

~~Following~~ As a result of the merger, the former Oncotelic security holders immediately before the ~~transaction~~merger own approximately 85% of the issued and outstanding common stock, including shares of common stock that are issuable upon conversion of the ~~Series A~~ Preferred Stock, and the stockholders of the Company immediately before the ~~transaction~~merger own the remaining 15%.

Holders of Mateon common stock at the close of business on the date prior to the effectiveness of the merger ~~transaction~~ were issued a Contingent Value Right (“CVR”), which provides them with the right to receive 75% of the net proceeds received from the full or partial sale, license, transfer or other disposition of the intellectual property rights and related assets of the Company’s product candidates OXi4503 and CA4P, in their current form and for their currently contemplated uses, that occurs under a definitive agreement executed prior to the fourth anniversary of the merger (after the initial $500,000 of such net proceeds, which will be retained by the Company). The Company’s stock transfer agent acts as the rights agent for the CVR holders. The CVRs are not transferrable, do not entitle their holders to any equity interest in the Company and do not have any voting or dividend rights.

Board and Management Changes

In accordance with the terms of the merger agreement, Vuong Trieu, Ph.D., Oncotelic’s Chairman and Chief Executive Officer, was appointed to the Company’s board of directors and was appointed as Chief Executive Officer of the Company and Chairman of the board of directors. The Company’s previous Chief Executive Officer, William D. Schwieterman, M.D., resigned from his position as Chief Executive Officer, although he will remain a member of the Company’s board of directors. Also in accordance with the terms of the merger agreement, all of the other previous directors of the Company resigned effective with the closing of the merger.

Effective June 30, 2019, Matthew Loar resigned from his position as Chief Financial Officer of the Company. The Company has retained Amit Shah as his successor. Mr. Shah commenced his position as Chief Financial Officer of the Company effective July 1, 2019.

Company Overview

We are a clinical stage biopharmaceutical company developing drugs for the treatment of 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.

Oncotelic’s lead 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, we plan to initiate phase 3 clinical trials for OT-101 in both high-grade glioma and pancreatic cancer. During phase 2 clinical trials in pancreatic cancer, melanoma, and colorectal cancers (Study P001) and in high-grade gliomas (Study G004), meaningful clinical benefits were observed and OT-101 exhibited a favorable safety profile. These clinical benefits included long-term survival and meaningful tumor reduction. Both partial and complete responses have been observed in the G004 Phase 2 clinical trial of OT-101 as a single agent in patients with aggressive brain tumors.

Oncotelic’s self-immunization protocol (SIP©) is based on novel and proprietary sequential treatment of cancers with OT-101 (an antisense against TGF-ß2) and chemotherapies. This sequential treatment strategy is aimed at achieving effective self-immunization against a patients’ own cancer, resulting in robust therapeutic immune response and consequently better control of the cancer and improved survival. Prolonged states of being cancer-free have been observed in some patients with the most aggressive forms of cancer, raising a renewed hope for a potential cure. The use of OT-101 lifts the suppression of the patient’s immune cells around the cancer tissue, providing the foundation for an effective initial priming, which is critical for a successful immune response. The subsequent chemotherapy results in the release of neoantigens that result in a robust boost of the immune response. We believe that a rational combination of the Oncotelic SIP platform with immune-modulatory drugs like interleukin 2 (IL-2) and/or immune checkpoint inhibitors has the potential to help achieve sustained and robust immune responses in patients with the most difficult-to-treat forms of cancer.

For the past year we have been operating under significant capital constraints, which has curtailed our ability to achieve meaningful progress in either of Mateon’s two clinical programs – one of which is developing OXi4503 as a treatment for acute myeloid leukemia 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 Mateon 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 paucity of therapeutic options and lack of an effective immunotherapy protocol.

Bridge Financing

On April 17, 2019, the Company entered into securities purchase agreements in connection with the issuance of up to $1.2 million in principal amount of debentures. Two of the securities purchase agreements, aggregating up to $800,000 in principal amount of debentures, are with Peak One Opportunity Fund, L.P. (“Peak One”) and TFK Investments, LLC (“TKF”) pursuant to which the Company agreed to issue to Peak One and TKF convertible debentures due three years from the dates of issuance (the “Convertible Debentures”). The other securities purchase agreements, aggregating up to $400,000 in principal amount of debentures, are with Vuong Trieu, Ph.D. and another investor (the “Bridge Investors”) pursuant to which the Company agreed to issue Convertible Debentures to the Bridge Investors on substantially the same terms issued to Peak One and TKF, although without share reservation requirements, commitment fees or right to certain liquidated damages.

On April 23, 2019, wethe Company completed the initial traunche of financing pursuant to the Bridge Financing. In connection with the Bridge Financing, the Company issued a $200,000 principal amount Convertible Debenture to Peak One, a $200,000 principal amount Convertible Debenture to TFK and an ~~initial tranche aggregating $0.6 million~~aggregate $200,000 principal amount Convertible Debenture to the Bridge Investors. Each of ~~bridge financing. Under~~ the ~~bridge financing, we issued $600,000 of debentures to four investors, including Dr. Trieu. The debentures~~Convertible Debentures were issued at a 10% original issue discount for gross proceeds of $540,000. The Debentures will mature on the third anniversary of their issuance and may be redeemed by the Company prior to maturity, subject to the prepayment penalties.

On June 12, 2019, the Company entered into an amendment of ~~$540,000. Under the terms of the bridge financing agreements, we have the potential to draw down a second tranche of $600,000 of debentures for an aggregate~~its securities purchase price of $540,000 after May 23, 2019. The debentures are payable on sliding schedule of premiums over a six month period, and during this period the debentures are convertible into common stock at a fixed price of $0.10 per share. Thereafter, the debentures are convertible into common stock at a discount to the stock price at the time of conversion. Upon closing the bridge financing, we issued 700,000 shares of common stock to two of the unaffiliated bridge investors as a commitment feeagreement with Peak One (the “Amendment”) in connection with the ~~financing.~~draw-down of the second traunche, and to provide for additional borrowing capacity under the agreement.

On June 14, 2019, the Company closed the second traunche of financing with Peak One, issuing an additional $200,000 face amount Convertible Debenture for gross proceeds of $179,000 after original issue discount. Concurrent with the issuance of the second traunche, the Company entered into the Amendment to increase the total borrowing amount under the Securities Purchase Agreement with Peak One to up to $600,000, adding the ability to borrow up to an additional $200,000 in a third traunche through the issuance of an additional Convertible Debenture.

On August 6, 2019, after the period covered by this Quarterly Report, the Company closed the second traunche of financing with the Bridge Investor, issuing an additional $200,000 face amount Convertible Debenture for gross proceeds of $175,000 after original issue discount.

Following, the drawdown of the second traunche from the Bridge Investor, up to $400,000 in face value of Convertible Debentures remains available under the Securities Purchase Agreements.

For additional information concerning the merger with Oncotelic, the CVRs, the management change and the bridge financings, see our Current Reports on Form8-K filed with the SEC on April 18 and April 25, 2019.

~~RESULTS OF OPERATIONS~~

Results of Operations

The merger was treated as a “reverse merger” for accounting purposes. In accordance with the reporting requirements and commencing with this Quarterly Report, the Company will be reporting historical financial data of Oncotelic for all periods prior to the date of the merger, and for the combined company for all periods after the date of the merger. Accordingly, the following management discussion and analysis should be read together with the audited financial statements and notes for Oncotelic, Inc. included in our Current Report on Form 8K/A filed with the SEC on July 8, 2019. The financial statements for the Company included in this Quarterly Report for periods prior to the merger are not the same as those reported Company’s prior filings with the SEC which were derived the operations of Mateon.

Comparison of the Three Months Ended June 30, 2019 to the Three Months Ended June 30, 2018

A comparison of the Company’s operating results for the three months ended June 30, 2019 and 2018, respectively, is as follows.

Three months ended ~~March 31,~~June 30, 2019 and ~~2018~~2018:

	2019			2018			Variance
Operating expenses:
Research and development	$	363,774		$	100,045		$	263,729
General and administrative		797,231			53,263			743,968
Total operating expenses		1,161,005			153,308			1,007,697
Loss from operations		(1,161,005	)		(153,308	)		(1,007,697	)
Interest income		123			-			123
Interest paid		(28,228	)		-			(28,228	)
Net loss	$	(1,189,110	)	$	(153,308	)	$	(1,035,802	)

We recorded a net loss of ~~$0.6~~approximately $1.2 million for the three months ended ~~March 31,~~June 30, 2019, compared to a net loss of ~~$0.8~~approximately $0.2 million for the three months ended ~~March 31,~~June 30, 2018. The ~~reduced net~~increased loss ~~was due to both lower research and development expenses and lower general and administrative expenses~~of approximately $1.0 million for the three months ended ~~March 31, 2019.~~June 30, 2019 as compared to the same period of 2018 was due to recording approximately $0.4 million of expenses related to the Mateon operations and an increase of approximately $0.6 million in expenses related to Oncotelic operations. The financial information presented does not include any expenses for the Mateon operations for the period ended June 30, 2018.

Research and Development ~~expenses~~Expenses

Research and development (R&D) expenses ~~decreased~~increased by ~~40%~~approximately $0.3 million for the three months ended ~~March 31,~~June 30, 2019 compared to the same period in ~~2018, due to our lower level of clinical trial work in 2019 because~~2018. Of this amount, approximately $0.2 million was the result of the ~~limited funding available to us. The table below summarizes~~inclusion of Mateon’s R&D operations and approximately $0.1 million was the ~~most significant components~~result of ~~our research and development expenses for the periods indicated and provides the amount and percentage change in these components (in thousands):~~

   Three months ended March 31,    Change
   2019    2018    Amount    %
Clinical studies
   $ 5    $ 50    $ (45 )    -90 %
Employee compensation and related
   44    54    (10 )    -19 %
Stock-based compensation
   44    69    (25 )    -36 %
Consulting and professional services
   2    33    (31 )    -94 %
Drug manufacturing and storage
   21    15    6    40 %
Other
   19    4    15    375 %








Total research and development
   $ 135    $ 225    $ (90 )    -40 %

~~We conducted only a small amount of research and development during the first three months of 2019, and accordingly had a low level of research and development expenses.~~

Clinical study activity was limited to maintaining the active status of Study OX1222, which is evaluating our investigational drug OXi4503 as a treatment for acute myeloid leukemia and myelodysplastic syndromes. No new patients were treated or screened for the study during the first three months of 2019, accounting for the minimal $5,000 recorded for clinical study expenses, which was a 90% decrease from the first three months of 2018.

Employee compensation declined by 19% for the three months ended March 31, 2019 compared to the same period in 2018 due to severance costs recorded in the 2018 period related to our reduction in workforce. This decline in compensation expenses was partially offset by an increase in ~~expenses~~Oncotelic’s R&D operations. Mateon’s R&D activities of $0.2 million was primarily due to personnel costs. The financial information presented does not include any R&D activity for~~on-going~~ ~~employee compensation because~~ Mateon for the ~~2019~~ period ~~we allocated a portion~~ended June 30, 2018 and as such the results for the Company are not directly comparative from period to period.

The increase of ~~expenses for one of our two employees to research and development, but we did not do so for 2018~~approximately $0.1 million in Oncotelic’s R&D activities is primarily due to higher personnel costs of approximately $0.1 million paid to a related party to conduct the ~~specific tasks being performed at~~R&D activities with the ~~time.~~lead product candidate OT-101.

Stock-based compensation decreased by 36% in the first quarter of 2019 compared to the same period in 2018 due to expenses recorded for the continued vesting of consultant options in 2018 as the consultants’ continued service, with no such continued service or option vesting occurring during the three months ended March 31, 2019.

Consulting and professional services declined to nearly nothing for the three months ended March 31, 2019 due to lack of new patients in Study OX1222 in the 2019 period, combined with our efforts to minimize expenses and no new planning activities for future clinical studies.

Drug manufacturing and storage expenses increased by $6,000 for the three months ended March 31, 2019 compared to the three months ended March 31, 2018 due to additional work we preformed to seek to extend the shelf-life of our investigational agent OXi4503.

Other expenses include facility related expenses which are generally allocated between research and development and general and administrative expenses based on employee headcount. For the three months ended March 31, 2019, we allocated a portion of these facility costs to research and development based on~~one-half~~ ~~of one employee in research and development, compared to no employees in research and development for the first quarter of 2018, accounting for the $15,000 increase.~~

As a result of our merger with Oncotelic, we expect to increase research and development activities, including the initiation of new clinical trials, and therefore believe that research and development expenses will increase for the remainder of 2019 compared to research and development expenses in 2018, subject to our continuing ability to secure sufficient funding to continue planned ~~operations~~operations.

General and ~~administrative expenses~~Administrative Expenses

General and administrative (G&A) expenses ~~decreased~~increased by ~~13%~~approximately $0.9 million for the three months ended ~~March 31,~~June 30, 2019 compared to the three months ended ~~March 31,~~June 30, 2018, ~~as we continued~~primarily due to ~~minimize expenses based on our limited capital resources. The table below summarizes the most significant components~~an increase of ~~our general and administrative~~approximately $0.5 million in G&A expenses for ~~the periods indicated~~Oncotelic’s operations and the ~~amount and percentage change in these components (in thousands):~~addition of approximately $0.3 million related to Mateon’s G&A operations.

   Three months ended March 31,    Change
   2019    2018    Amount    %
Employee compensation and related
   $ 99    $ 205    $ (106 )    -52 %
Stock-based compensation
   168    116    52    45 %
Consulting and professional services
   137    132    5    4 %
Rent, insurance and other
   95    118    (23 )    -19 %








Total general and administrative
   $ 499    $ 571    $ (72 )    -13 %

Employee compensation and related expenses decreased by 52% for the three months ended March 31, 2019 compared to the three months ended March 31, 2018. For both periods, the Company only had two employees, however, for the 2019 period the salary for one

The increase of the employees, Dr. Schwieterman, was partially allocated to research and development based on drug development tasks performed, as opposed to none allocated to research and development during the 2018 period when his primary function was fundraising. Allocating a part of the salary

~~to research and development during the 2019 period reduced the portion recorded~~approximately $0.5 million in general and administrative expenses. Also contributing to the decrease in employee compensation expenses for the 2019 period compared to the 2018 period was a severance payment made to an employee terminated at the beginning of 2018.

Conversely, employee stock-based compensation increased by 45% for the three months ended March 31, 2019 compared to the three months ended March 31, 2018 due to short-vesting options granted to our two employees in~~mid-2018.~~ ~~These options were granted with aone-year~~ ~~vesting period, to partially compensate for the company only paying 50% of the employees’ salaries. The shorter vesting period for thesemid-2018~~ ~~options increased stock compensation expense for the first three months of 2019 as compared to the first three months of 2018 when the options had not yet been granted.~~

~~Consulting and professional services expenses increased by 4% for the three months ended March 31, 2019 compared to the three months ended March 31, 2018~~Oncotelic’s G&A activities is primarily due to higher legal ~~expenses~~and professional costs of approximately $0.3 million, related party personnel costs of approximately $0.1 million and stock based compensation of approximately $0.3 million. The approximately $0.3 million in ~~the 2019 period which were largely offset by lower accounting~~Mateon’s G&A activities was primarily due to approximately $0.1 million of higher personnel costs, approximately $0.1 million for legal and ~~administrative consulting~~professional services and approximately $0.1 million of other corporate and facility expenses.

Rent, insurance and other expenses are allocated between research and development and general and administrative expenses based on the employee headcount in each department. While these costs were relatively similar for the three months ended March 31, 2019 and 2018, for the three months ended March 31, 2019 a portion of the costs were allocated to research and development based on the tasks which the employees performed, as opposed to no allocation to research and development in the 2018 period.

As a result of our merger with Oncotelic, we expect general and administrative expenses to increase for the remainder of 2019 compared to the first ~~three~~six months of 2019 in order to support our anticipated additional business development, fundraising, investor relations and administrative activities, subject to our continuing ability to secure sufficient funding to continue planned operations.

~~LIQUIDITY AND CAPITAL RESOURCES~~

Comparison of the Six Months Ended June 30, 2019 to the Six Months Ended June 30, 2018

A comparison of the Company’s operating results for the six months ended June 30, 2019 and 2018, respectively, is as follows.

Six months ended June 30, 2019 and 2018:

	2019			2018			Variance
Operating expenses:
Research and development	$	756,261		$	231,386		$	524,875
General and administrative		1,371,807			112,716			1,259,091
Total operating expenses		2,137,068			344,102			1,792,966
Loss from operations		(2,137,068	)		(344,102	)		(1,792,966	)
Interest income		123			-			123
Interest paid		(28,228	)		-			(28,228	)
Net loss	$	(2,165,173	)	$	(344,102	)	$	(1,821,071	)

We recorded a net loss of approximately $2.2 million for the six months ended June 30, 2019, compared to a net loss of approximately $0.3 million for the six months ended June 30, 2018. The increased loss of approximately $1.8 million for the three months ended June 30, 2019 as compared to the same period of 2018 was due to recording approximately $0.4 million of expenses related to the Mateon operations and an increase of approximately $1.4 million related to Oncotelic operations. The financial information presented does not include any expense for the Mateon operations for the period ended June 30, 2018.

Research and Development Expenses

Research and development (R&D) expenses increased by approximately $0.5 million for the six months ended June 30, 2019 compared to the same period in 2018, primarily due to the inclusion of approximately $0.2 million in Mateon’s R&D operations and an increase of approximately $0.3 million in Oncotelic’s R&D operations. Mateon’s R&D activities was primarily due to personnel costs of approximately $0.2 million. The financial information presented does not include any R&D activity for Mateon for the period ended June 30, 2018 and as such the results for the Company are not directly comparative from period to period.

The ~~following table summarizes key balance sheet data~~increase of approximately $0.3 million in Oncotelic’s R&D activities is primarily due to higher personnel costs of approximately $0.3 million paid to a related party to conduct the R&D activities with the lead product candidate OT-101.

As a result of our merger with Oncotelic, we expect to increase research and development activities, including the initiation of new clinical trials, and therefore believe that research and development expenses will increase for the remainder of 2019 compared to research and development expenses in 2018, subject to our ~~liquidity and capital resources (in thousands):~~continuing ability to secure sufficient funding to continue planned operations.

   March 31, 2019
(Unaudited)    December 31, 2018
Cash
   $ 200    $ 629
Working capital
   $ (834 )    $ (362 )
Stockholders’ deficit
   $ (783 )    $ (362 )

General and Administrative Expenses

General and administrative (G&A) expenses increased by approximately $1.3 million for the six months ended June 30, 2019 compared to the three months ended June 30, 2018, primarily due to an increase of approximately $1.0 million in G&A expenses for Oncotelic’s operations and the inclusion of approximately $0.3 million in Mateon’ G&A operations.

The increase of approximately $1.0 million in Oncotelic’s G&A activities is primarily due to higher legal and professional costs of approximately $0.3 million, related party personnel costs of approximately $0.1 million, stock based compensation of approximately $0.3 million and approximately $0.1 million of other corporate and facility expenses. The approximately $0.3 million in Mateon’s G&A activities was primarily due to approximately $0.1 million of higher personnel costs, approximately $0.1 million for legal and professional services and approximately $0.2 million of other corporate and facility expenses.

As a result of our merger with Oncotelic, we expect general and administrative expenses to increase for the remainder of 2019 compared to the first six months of 2019 in order to support our anticipated additional business development, fundraising, investor relations and administrative activities, subject to our continuing ability to secure sufficient funding to continue planned operations.

Liquidity, Financial Condition and Capital Resources ($s in ‘000’s)

	*June 30, 2019* *(Unaudited)*			December 31, 2018
Cash	$	84		$	2
Working capital		(1,854	)		(281	)
Stockholders’ Equity		5,616			2,465

The Company has experienced net losses every year since inception and as of ~~March 31,~~June 30, 2019 had an accumulated deficit of ~~over $295~~approximately $7.7 million. As of ~~March 31,~~June 30, 2019, the Company had ~~$0.2 million~~approximately $84,000 in cash and current liabilities of ~~$1.2 million.~~approximately $2.0 million, of which approximately $1.3 million are net assumed liabilities of Mateon as part of the merger. The Company does not expect to generate revenue from product sales in the near future, and expects to incur significant additional operating losses over the next several years, primarily as a result of the Company’s plans to continue clinical trials for its investigational drugs. The Company’s limited capital resources, history of recurring losses and uncertainties as to whether the Company’s operations will become profitable raise substantial doubt about 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 working capital deficit to date has been the sale of equity securities. The Company will need to raise additional capital in order to fund its operations and continue development of product ~~candidates~~candidates. The Company is evaluating the options to further the development of Oncotelic’s lead product candidate, OT-101 in addition to evaluating the development pathway of its product candidates; OXi4503 and/or CA4P. InSince April 2019, ~~after the period covered by this report,~~ the Company has raised ~~$540,000~~$889,000, net of cash discounts of $111,000, through the sale of convertible debentures. ~~Under~~

Following, the ~~terms~~drawdown of the second traunche from the Bridge Investor, up to $400,000 in face value of Convertible Debentures remains available under the Securities Purchase Agreements.

On July 22, 2019, the Company entered into a separate convertible ~~debentures, we have~~note purchase agreement with a third-party for $200,000. The convertible note bears an interest rate of 8% per annum due on 15^th of each month and are payable, at the ~~potential to raise an additional $540,000 after May 23, 2019.~~ option of the holder, either in cash or in shares of the Company’s common stock. The convertible note has a maturity date of January 1, 2020.

The Company anticipates raising substantial additional capital through the sale of 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 when needed, it may not be able to continue the development of these investigational drugs and 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 current stockholders and may not be available on favorable terms. Additional debt financing, if available, may involve restrictive covenants and could also be dilutive. The Company’s ability to access capital is not assured and, if access is not achieved on a timely basis, would materially harm the Company’s financial condition, the value of its common stock and its business prospects.

Cash Flows

	Six Month Ended June 30,
	2019			2018
Net cash used in operating activities	$	(893,229	)	$	(200,890	)
Net cash provided by (used in) investing activities		182,883			-
Net cash provided by financing activities		792,120			200,000
Increase (decrease) in cash	$	81,774		$	(890	)

Operating Activities

Net cash used in operating activities was $893,229 for the six months ended June 30, 2019. This was due to the net loss of $2,165,173, which was partially offset by non-cash charges of $812,612 and changes in operating assets and liabilities of $459,332.

Net cash used in operating activities was $9,901 for the six months ended June 30, 2018, due to the net loss of $344,102 and changes in operating assets and liabilities of $29,951, which were partially offset by non-cash charges of $304,250.

Investing Activities

For the six months ended June 30, 2019, net cash provided by investing activities, which was $182,883 and which was attributable to the cash received in the merger.

Financing Activities

For the six months ended June 30, 2019, net cash provided by financing activities was $792,120, consisting of $709,000 from the issuance of the Debentures in connection with the Bridge Financing and $83,120 from the sale of common stock.

For the six months ended June 30, 2018, net cash provided by financing activities was $200,000 from the sale of Oncotelic common stock.

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements.

Effects of Inflation

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

Critical Accounting Policies and ~~Significant Judgments and~~ Estimates

There have been no changes to our critical accounting policies and significant judgments and estimates from our ~~Annual Report~~Financial Results incorporated with our form 8-K/A filed with the SEC on ~~Form10-K~~ ~~for the year ended December 31, 2018.~~July 8, 2019. Although we adopted a new accounting standard related to the treatment of operating leases at the beginning of 2019, ~~we do not believe that~~ the adoption ~~of this standard involved~~did not have any ~~significant judgments or estimates important to readers of~~impact on our financial statements primarily because we only had one operating lease which was subject to the new accounting standard at the beginning of 2019, and the lease terminated on June 30, 2019. We currently have only ~~had six months remaining life at the time of the standard’s adoption.~~

New and Recently Adopted Accounting Pronouncements

Any new and recently adopted accounting pronouncements are more fully described in Note 2 to our unaudited condensed consolidated financial statements included in this Quarterly Report.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

~~There have been no changes~~

As a smaller reporting company, we are not required to ~~our market risks from our Annual Report on Form10-K~~ ~~for~~provide the ~~year ended December 31, 2018.~~information required by this Item.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures (as that term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) 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 ~~Securities~~design of any disclosure controls and ~~Exchange Commission (the “SEC”) requires~~procedures also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that asany 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 ~~end~~desired control objectives.

Our management, with the participation of ~~the period covered by this Quarterly Report onForm 10-Q,~~ ~~the Chief Executive Officer (CEO)~~our principal executive officer and ~~the Chief Financial Officer (CFO) evaluate~~principal financial officer, has evaluated the effectiveness of the design and operation of our disclosure controls and procedures ~~(as defined inRules 13a-15(e)~~ ~~and15d-15(e))~~ ~~under the Securities Exchange Act of 1934,~~ as ~~amended, or the Exchange Act, and report on the effectiveness~~ of the ~~design and operation~~end of ~~our disclosure controls and procedures.~~the period covered by this report. Based upon that evaluation and subject to the foregoing, our ~~CEO~~principal executive officer and ~~CFO~~principal financial officer concluded that, our disclosure controls and procedures were not effective due to certain material weaknesses in internal control over financial reporting described below.

Material weaknesses in Internal Control over Financial Reporting

Management conducted an assessment of the effectiveness of the Registrant’s internal control over financial reporting as of June 30, 2019 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 June 30, 2019 was not effective as a result of ~~March 31, 2019,~~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 the Company’s 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:

●	Lack of formal policies and procedures;
●	Lack of a functioning audit committee and independent directors on the Company’s board of directors to oversee financial reporting responsibilities;
●	Inadequate or lack of segregation of duties
●	Lack of dedicated resources and experienced personnel to design and implement internal control procedures to support financial reporting objectives;
●	Lack of qualified accounting personnel to prepare and report financial information in accordance with GAAP; and
●	Lack of risk assessment procedures on internal controls to detect financial reporting risks on a timely manner.

Management’s Plan to Remediate the Material weaknesses

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:

●	Continue to search for, evaluate and recruit qualified independent outside directors;
●	Once independent directors are on Board, to set up a formal Audit Committee (and other Committees) of the Board of Directors
●	Hire qualified accounting personnel to prepare and report financial information in accordance with GAAP;
●	Identify gaps in our skills base and the expertise of our staff required to meet the financial reporting requirements of a public company; and
●	Continue to develop policies and procedures on internal control over financial reporting and monitor the effectiveness of operations on existing controls and procedures.

During the three months ended June 30, 2019, we continued to execute upon our planned remediation actions which are all intended to strengthen our overall control environment. While our permanent CFO resigned from the office on June 30, 2019, we have hired a consultant CFO, since the beginning of June 2019, as well as to start the process of hiring additional resources, internally or as consultants. During the fiscal year ended December 31, 2019, and as a result of the merger with our wholly-owned subsidiary Oncotelic, Inc. we have consolidated all accounting functions to the Company headquarters and all record ~~process, summarize~~keeping has been migrated into the same accounting software.

We are committed to maintaining a strong internal control environment and ~~report~~believe that these remediation efforts will represent significant improvements in our control environment. Our management will continue to monitor and evaluate the ~~information we must disclose in reports that we file or submit under~~relevance of our risk-based approach and the ~~Exchange Act, within the time periods specified in the SEC’s rules~~effectiveness of our internal controls and ~~forms,~~procedures over financial reporting on an ongoing basis and is ~~accumulated~~committed to taking further action and ~~communicated to our management, including our CEO~~implementing additional enhancements or improvements, as necessary and ~~CFO,~~ as ~~appropriate to allow timely decisions regarding required disclosure.~~funds allow.

Changes in Internal Control over Financial Reporting

~~There were no changes~~

Management has identified the following material weaknesses in our internal control over financial reporting ~~identified~~(as defined in ~~connection with~~Rule 13a-15(f) and 15d-15(f) under the ~~evaluation of such control that occurred~~Exchange Act) during the ~~last~~ fiscal quarter ~~which~~ended June 30, 2019 that have materially affected, or that are reasonably likely to materially affect, our internal control over financial ~~reporting.~~reporting:

~~Important Considerations~~

●	During period ending June 30, 2019, we completed the Merger with Oncotelic. In connection with the Merger, we acquired control of the operations, assets and liabilities of Oncotelic, Inc. as a wholly-owned subsidiary of the Company. During the period covered by this report we integrated supervision and oversight of Oncotelic’s financial reporting into our internal control systems.

●	Effective June 30, 2019, Matthew Loar resigned as our Chief Financial Officer. Mr. Loar was replaced by Mr. Amit Shah who currently serves as our Chief Financial Officer.

The effectiveness of our disclosure controls and procedures and our internal control over financial reporting is subject 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, 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 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.

PART ~~II—~~II – OTHER INFORMATION

Item 1. Legal Proceedings

None.

Item 1A. Risk Factors

~~There have been no material changes~~

In addition to the risk factors asdescribed below, for information about the risks and uncertainties related to our business, please see the risk factors described in our ~~Annual Report~~annual report on Form10-K for the year ended December 31, 2018. The risks described below and in our Form 10-K are not the only risks facing our Company. Additional risks and 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.

The risks arising with respect to the historic Oncotelic business and operations may be different from what we anticipate, which could lead to significant, unexpected costs and liabilities and could materially and adversely affect our business going forward.

It is possible that we may not have fully anticipated the extent of the risks associated with the recent merger completed with Oncotelic. After the Merger, Oncotelic’s historic business was combined with Mateon and prior to the merger Oncotelic had a significant operating history. As a consequence, we may be subject to claims, demands for payment, regulatory issues, costs and liabilities that were not and are not currently expected or anticipated. The risks involved with taking over a business with a significant operating history and the costs and liabilities associated with these risks may be greater than we anticipate. We may not be able to contain or control the costs or liabilities associated with Oncotelic’s historic business, which could materially and adversely affect our business, liquidity, capital resources or results of operation.

Our historical results of operation may not fully reflect the underlying performance of our business and period-to-period comparisons of our operating results may not be meaningful.

For accounting purposes, the our merger is treated as a “reverse merger” under U.S. GAAP and Oncotelic is considered the accounting acquirer. Oncotelic’s historical results of operations will replace the Mateon’s historical results of operations for all periods prior to the merger and, for all periods following the merger, the Company’s financial statements will reflect the results of operations of the combined Company. Accordingly, the financial statements for the Company included in this Quarterly Report for periods prior to the merger are not the same as the Company’s prior reported filings with the SEC, which were derived from the operations of Mateon. As a result, period-to-period comparisons of our operating results may not be meaningful. The results of any one quarter should not be relied upon as an indication of future performance.

Item 2. Unregistered Sales of Equity Securities and Use Of Proceeds

Other than as reported in our Current Reports on Form 8-K, or prior periodic reports, we have not sold any of ~~Proceeds~~our equity securities during the period covered by this Quarterly Report, or subsequent period through the date hereof, except as set forth below:

Equity Transactions

On April 22, 2019, in connection with athe merger agreement with Oncotelic, we issued 41,000,033 shares of common stock and 193,713 shares of Series A Convertible Preferred Stock to the former stockholders of Oncotelic. Included in the shares issued to the former stockholders of Oncotelic are 2,113,799 shares of common stock and 9,987 shares of ~~Series A~~ Preferred Stock which are to be issued subject to the holders’ waiver or termination of dissenter’s rights. The securities issued in the merger were issued in reliance upon exemptions from registration requirements pursuant to Section 4(a)(2) under the Securities Act of 1933, as amended, the rules promulgated thereunder and pursuant to applicable state securities laws and regulations. Included in the shares issued to the former stockholders of Oncotelic are approximately 2.1 million shares of common stock and approximately 10,000 shares of the Preferred Stock which are to be issued subject to the holders’ waiver of dissenter’s rights.

On April 23, 2019, in connection with a bridge financing agreement, we issued an aggregate of $400,000 in principal amount of debentures to Peak One Opportunity Fund, L.P. and TFK Investments, LLC and an aggregate of $200,000 in principal amount of debentures to Dr. Trieu, Ph.D. and another ~~investor.~~investor (the “Bridge Investor”)for total net proceeds of $530,000. In connection with the bridge financing, we also issued 350,000 shares of common stock to Peak One Investments, LLC, and 350,000 shares of common stock to TFK Investments, LLC, as commitment fees. The securities issued in the first ~~tranche~~traunche of the Bridge Financing and for the commitment fees were issued in reliance upon exemptions from registration requirements pursuant to Section 4(a)(2) under the Securities Act of 1933, as amended, the rules promulgated thereunder and pursuant to applicable state securities laws and regulations.

On June 12, 2019, the Company closed the second tranche of financing with Peak One, issuing an additional $200,000 face amount Debenture for net proceeds of $180,000 after original issue discount. Concurrent with the issuance of the second traunche, the Company entered into the Amendment to increase the total borrowing amount under the Securities Purchase Agreement with Peak One to up to $600,000, adding the ability to borrow up to an additional $200,000 in a third traunche through the issuance of an additional debenture. In connection with the bridge financing, we also issued 350,000 shares of common stock to Peak One Investments, LLC, as commitment fees. The securities issued in the first traunche of the Bridge Financing and for the commitment fees were issued in reliance upon exemptions from registration requirements pursuant to Section 4(a)(2) under the Securities Act of 1933, as amended, the rules promulgated thereunder and pursuant to applicable state securities laws and regulations.

On July 22, 2019, after the period covered by this Quarterly Report, the Company entered into a Note Purchase Agreement with PointR Data, Inc. Pursuant to the Note Purchase Agreement, the Company issued a Convertible Promissory Note to PointR Data, Inc. in the principal amount of $200,000. The Convertible Promissory Note bears interest at a rate of 8% per annum. Interest payments are due monthly on the 15th day of each calendar month (or the next business day thereafter), and are payable, at the option of the holder, either in cash or in shares of the Company’s Common Stock, valued at the closing price of the Common Stock on the principal market on which the Common Stock is either traded or quoted at such time. The Convertible Promissory Note is due and payable on demand by the holder (a) at any time after January 1, 2020 or (b) upon the occurrence of an Event of Default (as defined in the Convertible Note and the Note Purchase Agreement). All amounts outstanding under the Convertible Promissory Note will be automatically be converted into the Company’s securities issued in next equity financing raising gross proceeds of $10 million or more (a “Qualified Financing”) at the price per share paid by investors in the Qualified Financing. The Convertible Promissory Note was issued in reliance upon the exemption from registration requirements pursuant to Section 4(a)(2) under the Securities Act of 1933, as amended, the rules promulgated thereunder and pursuant to applicable state securities laws and regulations.

On August 6, 2019, after the period covered by this Quarterly Report, the Company closed the second traunche of financing with the Bridge investor, issuing an additional $200,000 face amount Debenture for gross proceeds of $175,000 after original issue discount. The securities issued in the second traunche of the Bridge Financing and for the commitment fees were issued in reliance upon exemptions from registration requirements pursuant to Section 4(a)(2) under the Securities Act of 1933, as amended, the rules promulgated thereunder and pursuant to applicable state securities laws and regulations.

Item 3. Defaults ~~Upon~~upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not ~~applicable~~Applicable.

Item 5. Other Information

~~None.~~

~~Item 6. Exhibits~~

Incorporated by Reference

Exhibit
Number

Description

Form
   Filing Date    Exhibit
Number    Filed
Herewith
  2.1    Agreement and Plan of Merger, dated as of April 17, 2019, by and among the Company, Oncotelic and Oncotelic Acquisition Corporation.*    8-K    4/18/2019    2.1
  3.1    Certificate of Designation of Preferences, Rights and Limitations of Series A Convertible Preferred Stock of the Company.    8-K    4/25/2019    3.1
  4.1    Form of Debenture, issued by the Company to PeakOne Opportunity Fund, L.P. and TFK Investments, LLC.    8-K    4/18/2019    4.1
  4.2    Form of Debenture, issued by the Company to the Bridge Investors.    8-K    4/18/2019    4.2
10.1    Separation and Release Agreement, dated April 17, 2019, by and between the Company and William D. Schwieterman, M.D.±    8-K    4/18/2019    10.1
10.2    Form of Securities Purchase Agreement, dated as of April 17, 2019, by and among the Company and PeakOne Opportunity Fund, L.P. and TFK Investments, LLC.    8-K    4/18/2019    10.2
10.3    Form of Securities Purchase Agreement, dated as of April 17, 2019, by and among the Company and the Bridge Investors.    8-K    4/18/2019    10.3
10.4    Contingent Value Rights Agreement, dated April 17, 2019, by and among the Company, Oncotelic and American Stock Transfer and Trust Company LLC.    8-K    4/25/2019    10.1
31.1    Certification of Chief Executive Officer pursuant to Rule13a-14(a) and15d-14(a).             x
31.2    Certification of Chief Financial Officer pursuant to Rule13a-14(a) and15d-14(a).             x
32.1    Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.             x
   The following materials from Mateon Therapeutics, Inc.’s Quarterly Report on Form10-Q for the quarter ended March 31, 2019, formatted in XBRL (eXtensible Business Reporting Language): (i) Condensed Balance Sheets at March 31, 2019 and December 31, 2018, (ii) Condensed Statements of Comprehensive Loss for the three months ended March 31, 2019 and 2018, (iii) Condensed Statements of Stockholders’ Deficit for the three months ended March 31, 2019 and 2018, (iv) Condensed Statements of Cash Flows for the three months ended March 31, 2019 and 2018, and (v) Notes to Condensed Financial Statements             x

				Page
		~~Page~~ ~~No.~~
PART I. FINANCIAL INFORMATION
~~PART I—FINANCIAL INFORMATION~~
~~Item 1. Financial Statements~~
4ITEM 1.	Financial Statements (unaudited)	3

	Condensed Consolidated Balance Sheets as of June 30, 2019 and December 31, 2018	3

	Condensed Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2019 and 2018	4

	Condensed Consolidated Statements of ~~Comprehensive Loss~~Changes in Stockholders’ Equity (Deficit) for the Three and Six Months Ended June 30, 2019 and 2018	5

5	Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2019 and 2018	7

	Notes to Condensed Consolidated Financial Statements ~~of Stockholders’ Deficit~~	8
			6
~~Condensed Statements of Cash Flows~~ ITEM 2.			7
~~Notes to Condensed Financial Statements~~			8
~~Item 2.~~ Management’s Discussion and Analysis of Financial Condition and Results of Operations	24
			11
ITEM 3.	~~Item 3.~~ Quantitative and Qualitative Disclosures about Market Risk	31

15ITEM 4.	Controls and Procedures	31

~~Item 4. Controls and Procedures~~PART II. OTHER INFORMATION

15ITEM 1.	Legal Proceedings	33

ITEM 1A.	Risk Factors	33
~~PART II—OTHER INFORMATION~~
~~Item 1. Legal Proceedings~~			15
~~Item 1A. Risk Factors~~ ITEM 2.			15
~~Item 2.~~ Unregistered Sales of Equity Securities and Use of Proceeds	34
			15
ITEM 3.	~~Item 3.~~ Defaults Upon Senior Securities	34

15ITEM 4.	Mine Safety Disclosures	34

ITEM 5.	~~Item 4. Mine Safety Disclosures~~Other Information	34

15ITEM 6.	Exhibits	34

~~Item 5. Other Information~~SIGNATURES		36

	Preferred Stock				Common Stock				Additional Paid-in		Accumulated			Stockholders’
	Shares		Amount		Shares		Amount		Capital		Deficit			Deficit

Balance at December 31, 2017		-	$	-		5,948,710	$	59,487	$	4,233,576	$	(4,776,658	)	$	(483,595	)
Common shares issued for cash		-		-		50,000		500		199,500		-			200,000
Common shares issued in lieu of cash for services		-		-		40,290		403		160,759		-			161,162

Net loss		-		-		-		-		-		(190,794	)		(190,794	)
Balance at March 31, 2018		-		-		6,039,000		60,390		4,593,835		(4,967,452	)		(313,227	)

Common shares issued in lieu of cash for services		-		-		33,632		336		134,191		-			134,527

Net loss		-		-		-		-		-		(153,308	)		(153,308	)
Balance as of June 30, 2018		-	$	-		6,072,632		60,726		4,728,026		(5,120,760	)		(332,008	)

	For the Six Months Ended
	June 30, 2019			June 30, 2018
Cash flows from operating activities:
Net loss	$	(2,165,173	)	$	(344,102	)
Adjustments to reconcile net loss to net cash used in operating activities:
Amortization of debt discount and deferred finance costs		28,065			-
Amortization of intangible assets		25,737			8,561
Stock-based compensation		340,674			-
Issuance of common stock in lieu of cash for services		418,136			295,689
Changes in operating assets and liabilities:
Prepaid expenses and other current assets		(14,967	)		26,344
Accounts payable and accrued expenses		118,566			-
Accounts payable to related party		355,733			(187,382	)

Net cash used in operating activities		(893,229	)		(200,890	)

Cash flows from investing activities:
Cash acquired in merger		182,883			-

Net cash provided by investing activities		182,883			-

Cash flows from financing activities:
Proceeds from sales of common stock		83,120			200,000
Net proceeds from convertible debt		709,000			-

Net cash provided by financing activities		792,120			200,000

Net increase (decrease) in cash		81,774			(890	)

Cash - beginning of period		2,498			3,478

Cash - end of period	$	84,272		$	2,588

Supplemental cash flow information:
Cash paid for:		-			-
Interest paid	$	-		$	-
Income taxes paid	$			$

Non cash investing and financing activities:
Recapitalization under reverse merger	$	3,727,752		$	-
Issuance of common stock for settlement of accounts payable to related party	$	238,090		$	-
Beneficial Conversion Feature on convertible debt and restricted common shares	$	509,140		$	-
Capitalization of prepaid expenses related to product acquisition	$	-		$	190,989

Exhibit Number		Description
(2)		Plan of acquisition, reorganization, arrangement, liquidation or succession
2.1		Agreement and Plan of Merger, dated as of April 17, 2019, by and among the Company, Oncotelic and Oncotelic Acquisition Corporation (incorporated by reference to Exhibit No. 2.1 to our Current Report on Form 8-K filed on April 18, 2019)
(3)		(i) Articles of Incorporation; and (ii) Bylaws
3.1		Certificate of Designation of Preferences, Rights and Limitations of Series A Convertible Preferred Stock of the Company (incorporated by reference to Exhibit No. 3.1 to our Current Report on Form 8-K filed on April 25, 2019).
(4)		Instruments Defining the Rights of Security Holders, Including Indentures
4.1		Form of Debenture, issued by the Company to the PeakOne Opportunity Fund, L.P. and TFK Investments, LLC. (incorporated by reference to Exhibit No. 4.1 to our Current Report on Form 8-K filed on April 18, 2019).
4.2		Form of Debenture, issued by the Company to the Bridge Investors (incorporated by reference to Exhibit No. 4.2 to our Current Report on Form 8-K filed on April 18, 2019)
4.3		Form of Debenture, issued by the Company to PointeR Data (incorporated by reference to Exhibit No. 4.1 to our Current Report on Form 8-K filed on July 23, 2019)
(10)		Material Agreements
101		Separation and Release Agreement, dated April 17, 2019, by and between the Company and William D. Schwieterman‡ (incorporated by reference to Exhibit No. 10.1 to our Current Report on Form 8-K filed on April 18, 2019)
10.2		Form of Securities Purchase Agreement, Dated as of April 17, 2019, by and among the Company and PeakOne Opportunity Fund, L.P. and TFK Investments, LLC (incorporated by reference to Exhibit No. 10.2 our Current Report on Form 8-K filed on April 18, 2019)
10.3		Form of Securities Purchase Agreement, dated April 17, 2019, by and among the Company and the Bridge Investors (incorporated by reference to Exhibit No. 10.3 to our Current Report on Form 8-K filed on April 18, 2019)
10.4		Contingent Value Rights Agreement, dated April 17, 2019, by and among the Company, Oncotelic and American Stock Transfer and Trust Company LLC (incorporated by reference to Exhibit No. 10.1 to our Current Report on Form 8-K filed on April 25, 2019)
10.5		Seperation and Release Agreement, dated July 1, 2019, by and between the Company and Matthew M. Loar‡ (incorporated by reference to Exhibit No. 10.1 to our Current Report on Form 8-K filed on July 5, 2019)
10.6		Note Purchase Agreement, dated July 22, 2019, between the Company and PointR Data, Inc. (incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K filed on July 23, 2019)
(31)		Rule 13a-14(a)/15d-14(a) Certifications
31.1*		Section 302 Certification under the Sarbanes-Oxley Act of 2002 of the Principal Executive Officer
31.2*		Section 302 Certification under the Sarbanes-Oxley Act of 2002 of the Principal Financial Officer and Principal Accounting Officer
(32)		Section 1350 Certifications
32.1*		Section 906 Certification under the Sarbanes-Oxley Act of 2002 of the Principal Executive Officer
32.2*		Section 906 Certification under the Sarbanes-Oxley Act of 2002 of the Principal Financial and Accounting Officer
(101)*		Interactive Data Files
101.INS		XBRL Instance Document
101.SCH		XBRL Taxonomy Extension Schema Document
101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF		XBRL Taxonomy Extension Definition Linkbase Document
101.LAB		XBRL Taxonomy Extension Label Linkbase Document
101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document

By:
/s/ Vuong Trieu		~~Mateon Therapeutics, Inc.~~ ~~(Registrant)~~

~~Date: May 15, 2019~~		~~By:~~	~~/s/~~~~Vuong Trieu~~
			Vuong Trieu, Ph.D.
			Chief Executive Officer ~~(Principal~~ and Director (Principal Executive Officer)

Date: ~~May 15,~~	August 19, 2019


	March 31, 2019			December 31, 2018
	(Unaudited)			(See Note 1)
ASSETS
Current assets:
Cash	$	200		$	629
Prepaid expenses and deposits		140			170

Total current assets		340			799
Right of use operating assets		51			—

Total assets	$	391		$	799

LIABILITIES AND STOCKHOLDERS’ DEFICIT
Current liabilities:
Accounts payable	$	901		$	915
Accrued consulting and professional service expenses		99			126
Facility lease obligations		55			—
Accrued compensation and employee benefits		49			24
Accrued clinical trial expenses		27			27
Other accrued liabilities		43			69

Total current liabilities		1,174			1,161

Commitments and contingencies
Stockholders’ deficit:
Preferred stock, $0.01 par value, 15,000 shares authorized;
No shares issued and outstanding		—			—
Common stock, $0.01 par value, 150,000 shares authorized;
41,420 shares issued and outstanding		414			414
Additionalpaid-in capital		294,448			294,236
Accumulated deficit		(295,645	)		(295,012	)

Total stockholders’ deficit		(783	)		(362	)

Total liabilities and stockholders’ deficit	$	391		$	799


	Three months ended March 31,
	2019			2018
Operating expenses:
Research and development	$	135		$	225
General and administrative		499			570

Total operating expenses		634			795

Loss from operations		(634	)		(795	)
Interest income		1			1

Net loss and comprehensive loss	$	(633	)	$	(794	)

Basic and diluted net loss per share attributable to common stock	$	(0.02	)	$	(0.03	)

Weighted-average number of common shares outstanding		41,420			26,545


	Common Stock				Additional Paid-In		Accumulated			Total Stockholders’
	Shares		Amount		Capital		Deficit			Deficit
Balance December 31, 2017		26,545	$	265	$	291,533	$	(292,275	)	$	(477	)
Net loss and comprehensive loss		—		—		—		(794	)		(794	)
Stock based compensation expense		—		—		184		—			184

Balance March 31, 2018		26,545	$	265	$	291,717	$	(293,069	)	$	(1,087	)

Balance December 31, 2018		41,420	$	414	$	294,236	$	(295,012	)	$	(362	)
Net loss and comprehensive loss		—		—		—		(633	)		(633	)
Stock based compensation expense		—		—		212		—			212

Balance March 31, 2019		41,420	$	414	$	294,448	$	(295,645	)	$	(783	)

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

Balance at December 31, 2018		-	$	-		6,843,802	$	68,438	$	7,886,598		$	(5,490,277	)	$	2,464,759

Common shares issued for cash						20,750		208		82,792			-			83,000
Common shares issued for services		-		-		91,844		918		417,218			-			418,136
Stock-based compensation		-		-		-		-		268,259			-			268,259
Common shares issued for settlement of accounts payable to related party		-		-		80,772		808		237,282			-			238,090
Net loss		-		-		-		-		-			(976,063	)		(976,063	)
Balance at March 31, 2019		-		-		7,037,168		70,372		8,892,149			(6,466,340	)		2,496,181

Recapitalization under reverse merger		193,713		1,937		75,232,799		752,328		2,972,606			881			3,727,752
Stock-based compensation		-		-		-		-		72,415			-			72,415
Beneficial Conversion Feature on convertible debt and restricted common shares		-		-		1,050,000		10,500		498,640			-			509,140
Common shares issued in conversion of warramts		-		-		150,000		1,500		(1,380	)		-			120
Net loss		-		-		-		-		-			(1,189,110	)		(1,189,110	)
Balance as of June 30, 2019		193,713	$	1,937	$	83,469,967	$	834,700	$	12,434,430		$	(7,654,569	)	$	5,616,498


			March 31, 2019		December 31, 2018
Expiration Date	Exercise Price		(number of shares in thousands)
02/11/19	$	2.56		—		293
02/18/19	$	2.75		—		1,872
08/28/19	$	2.90		2,700		2,700
03/20/20	$	2.13		234		234
03/25/20	$	1.71		2,920		2,920
04/12/20	$	0.40		7,437		7,437
06/20/20	$	0.40		7,437		7,437
04/30/23	$	0.20		1,488		1,488

Total Warrants Outstanding				22,216		24,381


	Options Available for Grant		Options Outstanding			Weighted Average Exercise Price		Weighted Average Remaining Contractual Life		Aggregate Intrinsic Value
	(in thousands)					Weighted Average Exercise Price		(years)		(in thousands)
Balance at December 31, 2018		2,465		6,785		$	0.75		7.1
Options forfeited		11		(11	)	$	4.78

Balance at March 31, 2019		2,476		6,774		$	0.74		6.9	$	—

Vested and exercisable at March 31, 2019				4,335		$	0.72		6.9	$	—
Vested and expected to vest at March 31, 2019				6,461		$	0.59		6.9	$	—
Unvested at March 31, 2019				2,439		$	0.78

	June 30, 2019			Remaining Estimated Useful Life (Years)
Intangible asset – Intellectual Property	$	819,191			19.02
Intangible asset – Capitalization of license cost		190,989			19.02
		1,010,180
Less Accumulated Amortization		(59,926	)
Total	$	950,254

For the six-month period ended June 30,

2020	$	51,365
2021		51,365
2022		51,365
2023		51,365
2024		51,365
Thereafter		693,429
	$	950,254

	June 30, 2019		December 31, 2018

Accounts payable – related party	$	400,713	$	283,030

	June 30,2019

10% Convertible note payable, due April 23, 2022 for Peak One and TFK		194,456
10% Convertible note payable, due April 23, 2022 for Officer and private investor		31,168
10% Convertible note payable due June 12, 2022 for Peak One		2,301
	$	227,925

				Weighted
				Average
	Shares			Exercise Price
Outstanding at December 31, 2018		6,785,617		$	0.75
Granted/Additions		-			-
Exercised		-			-
Expired or canceled		(307,695	)		0.41
Outstanding at June 30, 2019		6,477,922		$	0.75

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

$	0.22		2,524,513		8.97	$	0.22		2,524,513
	0.38		1,162,500		7.54		0.375		1,162,500
	0.51		364,449		7.94		0.51		364,449
	0.58		271,224		7.32		0.58		271,224
	0.65		91,564		6.92		0.65		91,564
	0.73		1,124,711		6.72		0.73		1,124,711
	1.37		150,000		6.05		1.37		150,000
	1.43		525,000		5.91		1.43		525,000
	2.60		5,280		5.00		2.60		5,280
	2.70		20,120		4.00		2.70		20,120
	2.79		9,760		4.51		2.79		9,760
	2.95		150,000		4.87		2.95		150,000
	11.88		2,359		2.50		11.88		2,359
	15.00		75,000		5.91		15.00		75,000
	19.80		1,442		2.33		19.80		1,442
			6,477,922		7.69	$	0.75		6,477,922

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

$	0.20		1,487,500		3.84	$	0.20		1,487,500
	0.40		14,875,000		0.88		0.40		14,875,000
	1.71		2,919,710		0.74		1.71		2,919,710
	2.13		233,577		0.72		2.13		233,577
	2.90		2,700,424		0.16		2.90		2,700,424
			22,216,211		0.97	$	0.88		22,216,211


	Three months ended March 31,				Change
	2019		2018		Amount			%
Clinical studies	$	5	$	50	$	(45	)		-90	%
Employee compensation and related		44		54		(10	)		-19	%
Stock-based compensation		44		69		(25	)		-36	%
Consulting and professional services		2		33		(31	)		-94	%
Drug manufacturing and storage		21		15		6			40	%
Other		19		4		15			375	%

Total research and development	$	135	$	225	$	(90	)		-40	%


	March 31, 2019 (Unaudited)			December 31, 2018
Cash	$	200		$	629
Working capital	$	(834	)	$	(362	)
Stockholders’ deficit	$	(783	)	$	(362	)

	●	should not in all instances be treated as categorical statements of fact, but rather as a way of allocating the risk to one of the parties if those statements prove to be inaccurate;

	●	have been qualified by disclosures that were made to the other party in connection with the negotiation of the applicable agreement, which disclosures are not necessarily reflected in the agreement;

	●	may apply standards of materiality in a way that is different from what may be viewed as material to you or other investors; and

	●	were made only as of the date of the applicable agreement or such other date or dates as may be specified in the agreement and are subject to more recent developments.

By:	/s/ Amit Shah
~~By:~~	Amit Shah	~~/s/~~~~Matthew M. Loar~~
			~~Matthew M. Loar~~
			Chief Financial Officer (Principal Financial and Accounting Officer)
Date:	August 19, 2019