The Company did not have any Level 1 or Level 2 assets and liabilities at June 30, 2020. The derivative liabilities associated with its 2019 convertible note debt financing (see Note 5), consisted of conversion feature derivatives at June 30, 2020 hence are classified as Level 3 fair value measurements. The table below sets forth a summary of the changes in the fair value of the Company’s derivative liabilities classified as Level 3 as of June 30, 2020:

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

As of common stock at a price that is lower thanJune 30, 2020, and December 31, 2019, the Company estimated the fair value of 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, as definedfeature derivatives embedded in the agreement with Adhera.convertible debentures based on assumptions used in the Black-Scholes valuation model. The Adhera Convertible Series E Preferred shares are not publicly tradedkey valuation assumptions used consists, in part, of the price of the Company’s Common Stock, a risk free interest rate based on the yield of a Treasury note and there are no freely observableexpected volatility of the Company’s Common Stock all as of the measurement dates. The Company used the following assumptions to estimate fair value of the derivatives as of June 30, 2020:

When the Company changes its valuation inputs from objective sources. Any short termfor measuring financial liabilities at fair value, either due to changes in valuecurrent market conditions or other factors, it may need to transfer those liabilities to another level in the hierarchy based on the new inputs used. The Company recognizes these transfers at the end of Adhera common stock are not indicativethe reporting period that the transfers occur. For the period ended June 30, 2020, there were no transfers of a change in value of Adhera Convertible Series E Preferred shares givenfinancial assets or financial liabilities between the different rights and preferences of such shares.hierarchy levels.

Net LossIncome (Loss) Per Share

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

The following table reflects the inclusion of the common stock equivalents included in the calculation of the diluted net income per share for the three months ended June 30, 2020. No similar calculations are required for the three months ended June 30, 2019 or the six months ended June 30, 2020 and 2019, respectively as all these periods had losses.

Stock-Based Compensation

The Company applies the provisions of ASC 718, Compensation—Stock Compensation (“ASC 718”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 boardBoard of directorsDirectors (the “Board”) 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 expected term of the option, the expected volatility of the common stockCommon Stock consistent with the expected life of the option, risk-free interest rates and expected dividend yields of the common stock.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.

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

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 endingsix months ended June 30, 20192020 and 2018,year ended December 31, 2019, 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.

If the review indicates the impairment, an impairment loss would be recorded for the difference of the value recorded and the new value. For the six months ended June 30, 2020 and 2019, there were no impairment losses recognized for intangible assets.

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 equivalent to the difference is recorded. For the six months ended June 30, 2020 and 2019, there were no impairment losses recognized for Goodwill.

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 intrinsic value of conversion options embedded in debt instruments based upon the differences between the fair value of the underlying common stockCommon Stock at the commitment date of the note transaction and the effective conversion price embedded in the note. Original issue discounts (“OID”) under these arrangements are amortized over the term of the related debt to their earliest date of redemption. The Company also records when necessary deemed dividends for the intrinsic value of conversion options embedded in preferred shares based upon the differences between the fair value of the underlying common stockCommon Stock at the commitment date of the note transaction and the effective conversion price embedded in the note.

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

Revenue Recognition

The Company recognizes revenue in accordance with ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606).

Under ASU 2014-9, the Company recognizes revenue when its customers obtain control of the promised good or services, in an amount that reflects the consideration which the Company expects to receive in exchange for those goods or services. The Company applies the following five-step process: (i) identify the contract(s) with a customer; (ii) identify the performance obligation(s) in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligation(s) in the contract; and (v) recognize revenue when (or as) the Company satisfies a performance obligation.

At contract inception, once the contract is determined to be within the scope of ASU 2014-09, the Company identifies the performance obligation(s) in the contract by assessing whether the goods or services promised within each contract are distinct. The Company then recognizes revenue for the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied.

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

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

Research Service Agreement between GMP and Mateon Therapeutics Inc./Oncotelic Inc. (“Mateon Entities”).

Oncotelic and GMP entered into a research and services agreement (the “Agreement”) on February 3, 2020 memorializing their collaborative efforts to develop and test COVID-19 antisense therapeutics. On March 18, 2020, the Company reported the positive anti-viral activity results of OT-101 (the “Product”) in an in vitro antiviral testing performed by an independent laboratory to GMP. In March 2020, the Mateon Entities and GMP entered into a supplement to the Agreement (the “Supplement”) to confirm the inclusion of the Product within the scope of the Agreement, pending positive confirmatory testing against COVID-19. In consideration for the financial support provided by GMP for the research, pursuant to the terms of the Agreement (as amended by the Supplement) GMP was entitled to obtain certain exclusive rights to the use of the Product in the COVID field on a global basis, and an economic interest in the use of the Product in the COVID field including 50/50 profit sharing. GMP paid the Company fees of $0.3 million during the three months ended March 31, 2020 and an $0.9 million during the three months ended June 30, 2020 for the services rendered under the Agreement and Supplement, respectively. The Company also recorded approximately $40 thousand for reimbursement of actual costs incurred.

Agreement with Autotelic BIO

Oncotelic had entered into a license agreement in February 2018 (the “ATB Agreement”) with ATB. The ATB Agreement licensed the use of OT-101 in combination with Interleukin-2 (the “Combined Product”), and granted to ATB an exclusive license under the Oncotelic technology to develop, make, have made, use, sell, offer for sale, import and export the Combined Product, and the Combination Product only, in the field, throughout the entire world (excluding the United States of America and Canada) as the territory, on the terms and subject to the conditions of the ATB Agreement. The ATB Agreement requires ATB to be responsible for the development of the Combination Product. Oncotelic was responsible to provide to ATB the technical know-how and other pertinent information on the development of the Combination Product. ATB paid Oncotelic a non-refundable milestone payment in consideration for the rights and licenses granted to ATB under the ATB Agreement, and ATB was to pay Oncotelic $500,000 within sixty days from the successful completion of the in vivo efficacy studies. This payment was made in June 2020 after the successful completion of the in-vivo study and, as such, the Company recorded the revenue during the three months ended June 30, 2020. In addition, ATB is to pay Oncotelic: (i) $500,000 upon Oncotelic’s completion of the technology know how and Oncotelic’s technical assistance and regulatory consultation to ATB, as determined by the preparation of a Current Good Regulation Practices audit or certification by the Food and Drug Administration, with a mutual goal to obtain marketing approval of the Combined Product developed by ATB in the aforementioned territory; (ii) $1,000,000 upon receiving marketing approval of the Combined Product in Japan, China, Brazil, Mexico, Russia, or Korea; and (iii) $2,000,000 from receiving marketing approval of the Combined Product in Germany, France, Spain, Italy, or the United Kingdom. For the six months ended June 30, 2020, the Company recorded approximately $500,000 as revenue under the ATB Agreement for the successful completion of the in-vivo study.

Research & Development Costs

In accordance with ASC 730-10-25 “Research and Development”, research and development costs are charged to expense as and 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”FASB”) issued Accounting Standards Update (“ASU”)ASU No. 2017-04, Intangibles – Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. The new guidance requires only a one-step quantitative impairment test, whereby a goodwill impairment loss will be measured as the excess of a reporting period unit’s carrying amount over its fair value (not to exceed the total goodwill allocated to that reporting unit). It eliminates Step 2 of the current two-step goodwill impairment test, under which a goodwill impairment loss is measured by comparing the implied fair value of a reporting unit’s goodwill with the carrying amount of that goodwill. 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 anyhad no material impact on the Company’s consolidated 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 foradopted ASU 2015-14 during the three and six months ended June 30, 2019 and 2018, and may not have revenues in2020 as till then, no revenue was earned by the near future. The adoption of ASC 606 is not likely to have any impact on the Company’s financial statements and related disclosures.

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.Company.

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 22, 2019, the Company completed the Merger pursuant to the Merger Agreement. Pursuant to the terms of the Merger Agreement, Oncotelic, Inc. merged with and into Merger Sub. Oncotelic, Inc. was the surviving corporation and, as a result of the Merger, became a wholly owned subsidiary of Mateon.

On the effectiveness of the Merger it is reflected that:

Each CVR provides 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 Mateon’s product candidates OXi4503 and CA4P, in their form and for their contemplated uses at the time of Closing, 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 CVRs are not transferable, do not entitle the holder to any equity interest in the Company and do not have any voting or dividend rights.

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:

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 -– GOODWILL AND INTANGIBLE ASSETS AND GOODWILL

Mateon completed athe Merger with Oncotelic, Inc. (Note 3), which gave rise to Goodwill of $4,751,055. The Goodwill will be$4,879,999. Further, Mateon added goodwill of $16,182,456 upon the completion of the Merger with PointR. In general, the goodwill is tested on thean 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 However, since both mergers were provided from Adhera a license to their SMARTICLES platformcompleted in 2019 and both assets are currently being developed for various cancer and COVID-19 therapies, the delivery of antisense DNA therapeutics, as well as a license to their conformationally restricted nucleotide (“CRN”) technology with respect to TGF-Beta. UnderCompany does not believe the terms ofthere are any factors or indications that the 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.goodwill is impaired.

Assignment and Assumption Agreement with Autotelic, Inc.

In April 2018, weOncotelic entered into an Assignment and Assumption Agreement (the “Assignment Agreement”“Assignment Agreement”) with Autotelic Inc., an affiliate company, and Autotelic LLC, an affiliate company, pursuant to which the CompanyOncotelic acquired the rights to all intellectual property (“IP”IP”) related to a patented product. As consideration for the Assignment Agreement, the CompanyOncotelic issued 204,798 shares of our common stockits Common Stock for a value of $819,191. The Assignment Agreement also provides that the CompanyOncotelic 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, 20192020 and December 31, 2018,2019, of the intangible assets acquired, their useful life, and annual amortization:

Amortization of identifiable intangible assets for the three months ended June 30, 2020 and 2019 was $12,841 and $12,841, respectively. Amortization of identifiable intangible assets for the six months ended June 30, 2020 and 2019 was $25,683 and 2018 was $12,896 and $25,737; and $8,561 and $8,561,$25,737, respectively.

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

In-Process Research & Development (IPR&D) Summary

The following table summarizes the balances as of June 30, 2020 of the IPR&D assets acquired during the three months ended December 31, 2019. The Company will evaluate, on an annual basis, for any impairment and record an impairment if identified. No similar balances were present in 2019:

Amortization of identifiable intangible assets for the three months ended June 30, 2020 and 2019 was $68,860 and $0, respectively. Amortization of identifiable intangible assets for the six months ended June 30, 2020 and 2019 was $137,720 and $0, respectively.

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

NOTE 54 – ACCOUNTS PAYABLE AND ACCRUED EXPENSES

Accounts payable and accrued expenses consistexpense consists of the following amounts:

NOTE 65 – CONVERTIBLE DEBENTURESDEBENTURES. NOTES AND NOTES PAYABLEOTHER DEBT

As of June 30, 2019,2020, SPAs with convertible debentures and notes, net of debt discount, consist of the following amounts:

The gross principal balances on the convertible debentures listed above convertible notes gross $800,000totaled $1,000,000 and included an initial debt discountdiscounts totaling $600,140. $800,140, resulting from the recording of the OID, the related financing costs, the beneficial conversion feature for the intrinsic value of the non-bifurcated conversion option and the restricted shares issued contemporaneously with the convertible notes.

Total amortization expense related to these debt discounts related to the convertible debentures was $28,065$460,339 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$0 for the six months ended June 30, 2020 and 2019, respectively. In addition, during the six months ended June 30, 2020, Mateon recorded additional and accelerated amortization of debt discounts of $192,761, which was $572,075.created from the bifurcation of the conversion option related the host hybrid instruments upon the partial conversion of debt by Peak One Opportunity Fund, L.P. (“Peak One”) and TFK Investments, LLC (“TFK”) to shares of Mateon’s Common Stock. The total unamortized debt discount at June 30, 2020, was $472,632.

All the above SPAs with debenture notes issued to Peak One, TFK, our CEO and the bridge investors reached the 180 days prior to the end of the six months ended June 30, 2020. As such, all the note holders had the ability to convert that debt into equity at a conversion price of: (i) $0.10 per share during the first 180 days, and then (ii) at the lower of (a) the Fixed Price or the variable conversion price of 65% of the Company’s lowest traded price after the first 180 days, or (b) the lower of the Fixed Price or 55% of Mateon’s traded stock price under certain circumstances. This gave rise to a derivative feature within the debt instrument. As of December 31, 2019, the Company had a derivative liability of approximately $541,000. The Company recorded additional derivative liability of approximately $870,000 during the six months ended June 30, 2020 since the conversion option attached to certain notes became convertible into a variable number of shares of Mateon’s Common Stock. The Company also extinguished approximately $409,000 of derivative liability following the conversion of certain notes to Mateon’s Common Stock in the six months ended June 30, 2020. Following the recognition as derivative liability of the embedded conversion options, the Company fully amortized the remaining unamortized beneficial conversion feature for approximately $232,000, and recorded an initial $258,070 from the initial recognition of the debt discount following the bifurcation of the embedded conversion option. As of June 30, 2020, the Company had a derivative liability of approximately $991,000 and a change in fair value of $10,512.

Bridge Financing Under SPAs and Debentures

Peak One Financing

OnIn April 17, 2019, the Company entered into a SecuritiesSPA (the “Peak One 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 BuyerPeak One purchased (a) Traunche #1 in the form of a Convertible Promissory Note Tranch #1 in the principal amount of $200,000 (the “Convertible Note”“Peak One Tranche #1 Note”) and (b) 350,000 restricted shares of the Company’s common stockMateon’s Common Stock (the “Shares”) (the “Purchase“Peak One Purchase and Sale Transaction”Transaction”). The Company used the net proceeds from the Peak One Purchase and Sale Transaction for working capital and general corporate purposes.

The ConvertiblePeak One Tranche #1 Note has a principal balance of $200,000, and a stated maturity date of April 23, 2022. Upon issuance of the Convertible Note,including a 10% OID of $20,000 and $5,000 in debt issuance costs, receiving net proceeds of $175,000, with a $5,000 debt issunce cost that was applied to the principal amountmaturity date of the Convertible Note.April 2022. Upon the occurrence of certain events of default, the Buyer,Peak One, 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 ConvertiblePeak One Tranche #1 Note may also be converted into shares (the “Traunche“Peak One Tranche #1 Conversion Shares”Shares”) of the Company’s common stockMateon’s Common Stock at any time, at the option of the holder,Peak One, at (i) a conversion price, during the first 180 days, of $0.10 per share (the “Fixed Price”),the Fixed Price, and then (ii) at the lower of (a) the Fixed Price or 65% of the Company’sMateon’s lowest traded price after the first 180^th day days, or (b) at the lower of the Fixed Price or 55% of the Company’sMateon’s traded stock price under certain circumstances. The CompanyMateon has agreed to, at all times, reserve and keep available out of its authorized common stockCommon Stock a number of shares equal to at least two times the full number of the TraunchePeak One Tranche #1 Conversion Shares. The CompanyMateon may redeem the ConvertiblePeak One Tranche #1 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 ConvertiblePeak One Tranche #1 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$84,376 for the three and six months ended June 30, 2019.2020. Total unamortized interest expensediscount on this note was $102,772$0 as of June 30, 2019.2020.

OnIn June 12, 2019, the CompanyMateon entered into an amendment of the Peak One Purchase Agreement (“Amendment #1”#1”) in connection with the draw-down of the second traunche,tranche, and to provide for additional borrowing capacity under that agreement.the Peak One Purchase Agreement. Amendment #1 increased the borrowing amount up to $600,000, adding the ability to borrow an additional $200,000 in a third traunche.

Ontranche. Further, in June 12, 2019, the Company drewPeak One purchased Convertible Note TrauncheTranche #2 (“Traunche #2”(the “Peak One Tranche #2 Note”) totaling $200,000, including a 10% OID of $20,000 and a $1,000 debt isusanceissuance cost, receiving net proceeds of $179,000 against the April 17, 2019 Peak One Purchase Agreement, with Peak One, with a maturity date ofin June 12, 2022. Amounts due under Traunchethe Peak One Tranche #2 Note are convertible at the same terms as TraunchePeak One Tranche #1 Note, above.

The issuance of Traunchethe Peak One Tranche #2 Note 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$11,443 for the three and six months ended June 30, 2019.2020. Total unamortized interest expensediscount on this note was $197,699$152,511 as of June 30, 2020.

In November 2019, the Company and Peak One amended Peak One Tranche #1 Note to extend the date of conversion of the Peak One Tranche #1 Note into Common Stock of Mateon at 65% of the traded price of Mateon’s Common Stock until January 8, 2020. This amendment put a temporary hold on Peak One to convert the debt under the Peak One Tranche #1 Note. This restriction did not apply if Peak One opted to convert the Peak One Tranche #1 Note at $0.10. The Company compensated Peak One a total of 300,000 shares of Mateon’s Common Stock for delaying the conversion until January 8, 2020. Such shares were issued to Peak One in November 2019. Non-cash compensation expense of $60,000 was recorded for such issuance.

Peak One converted $150,000 of their total debt into 2,012,145 shares of Mateon during the three months ended March 31, 2020 and an additional $50,000 of their debt into 569,800 shares of Mateon during the three months ended June 30, 2020. Total debt outstanding payable to Peak One at June 30, 2020 is $200,000.

TFK Financing

OnIn April 23, 2019, the Company, entered into a Convertible Note (the “TFK Note”“TFK Note”) with TFK Investments, LLC (“TFK”).TFK. The TFK Note has a principal balance of $200,00,$200,000, 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,TFK, amongst other remedies, has the right to charge a penalty in a range of 18% to 40% dependent on the specific default eventevent. Amounts due under the ConvertibleTFK Note may also be converted into shares (the“(the “TFK Conversion Shares”Shares”) of the Company’s common stockMateon’s Common Stock at any time, at the option of the holder, at a conversion price of $0.10 per share (the “Fixed Price”),of: (i) the Fixed Price during the first 180 days, and then (ii) at the lower of (a) the Fixed Price or 65% of the Company’sMateon’s lowest traded price after the first 180^th day days, or (b) at the lower of the Fixed Price or 55% of the Company’sMateon’s traded stock price under certain circumstances. The CompanyMateon has agreed to, at all times, reserve and keep available out of its authorized common stockCommon Stock a number of shares equal to at least two times the full number of the TFK Conversion Shares. The Company may redeem the ConvertibleTFK 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$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$76,032 for the three and six months ended June 30, 2019.2020. Total unamortized interest expensediscount on this note was approximately $102,772$8,345 as of June 30, 2020.

On November 5, 2019, the Company and TFK amended the TFK Note to extend the date of conversion of the TFK Note into Common Stock of Mateon at 65% of the traded price of the Company’s Common Stock until January 8, 2020. This restriction did not apply if TFK wished to convert the TFK Note at $0.10 per share. The Company compensated TFK 300,000 shares of Mateon’s Common Stock for delaying the conversion until January 8, 2020. Such shares were issued to TFK on November 14, 2019. Non-cash compensation expense of $60,000 was recorded for such issuance.

TFK converted $133,430 of their total debt into 1,950,000 shares of Mateon during the six months ended June 30, 2020.

Notes with Officer and private investorBridge Investor

On April 17, 2019, Mateon entered into a SPA (the “Bridge SPA”) with Vuong Trieu, Ph. D., Mateon’s Chief Executive Officer, and the Bridge Investor with a commitment to purchase convertible notes in the aggregate of $400,000.

On April 23, 2019, the Company entered into a convertible note with our Chief Executive Officer, VuongDr. Trieu M.D. (the “Trieu Note”“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,Dr. Trieu, amongst other remedies, has the right to charge a penalty in a range of 18% to 40% dependent on the specific default eventevent. Amounts due under the ConvertibleTrieu Note may also be converted into shares (the“(the “Trieu Conversion Shares”Shares”) of the Company’s common stockMateon’s Common Stock at any time, at the option of the holder,Dr. Trieu, at a conversion price of $0.10 per share (the “Fixed Price”),(i) the Fixed Price during the first 180 days, and then (ii) at the lower of (a) the Fixed Price or 65% of the Company’sMateon’s lowest traded price after the 180^th day, or (b) at the lower of the Fixed Price or 55% of the Company’sMateon’s traded stock price under certain circumstances. The CompanyMateon has agreed to at all times reserve and keep available out of its authorized common stockCommon Stock a number of shares equal to at least two times the full number of Trieu Conversion Shares. The Company may redeem the Trieu 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 and beneficial conversion feature totaled $2,715 for the three months ended June 30, 2020. Total unamortized discount on this note was $9,948 as of June 30, 2020.

On April 23, 2019, pursuant to the Bridge SPA the Company entered into that certain Convertible Note Tranche #1 (“Bridge Tranche #1 Note”) with the Bridge Investor (the “Bridge Investor”). The Bridge Tranche #1 Note 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 Bridge Investor, among other remedies, has the right to charge a penalty in a range of 18% to 40% dependent on the specific default event. Amounts due under the Bridge Tranche #1 Note may also be converted into shares (the “Bridge Tranche #1 Conversion Shares”) of Mateon’s Common Stock at any time, at the option of the Bridge Investor, at a conversion price of: (i) the Fixed Price during the first 180 days, and then (ii) at the lower of (a) the Fixed Price or 65% of Mateon’s lowest traded price after the first 180 days, or (b) at the lower of the Fixed Price or 55% of Mateon’s traded stock price under certain circumstances. Mateon may redeem the Bridge Tranche #1 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 TrieuBridge Tranche #1 Note resulted in a discount from the beneficial conversion feature totaling $131,555 related to the conversion feature.$28,445. Total amortization of the 10% OID and discount totaled $9,182 during each of$590 for the three and six months ended June 30, 2019. Total unamortized interest expensediscount on this note was $138,817$2,147 as of June 30, 2019.

2020.

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,August 6, 2019, pursuant to the Bridge SPA, the Company entered into that certain Convertible Note Traunche #1 (“Traunche #1”Tranche #2 (the “Bridge Tranche #2 Note”) with the Bridge Investor. Traunche #1The Bridge Tranche #2 Note has a principal balance of $35,556,$200,000, an OID of $3,556,$20,000 and debt issuance costs of $5,000, resulting in net proceeds of $32,000,$175,000, with a maturity date of April 23,August 6, 2022. Upon the occurrence of certain events of default, the Buyer, amongstBridge Investor, among other remedies, has the right to charge a penalty in a range of 18% to 40% dependent on the specific default eventevent. Amounts due under Traunche #1the Bridge Tranche #2 Note may also be converted into shares (the “Bridge SPA“Bridge Tranche #2 Conversion Shares”Shares”) of the Company’s common stockMateon’s Common Stock at any time, at the option of the holder,Bridge Investor, at a conversion price of $0.10 per share (the “Fixed Price”), atequal to: (i) the Fixed Price during the first 180 days, and then (ii) the lower of (a) the Fixed Price or 65% of the Company’sMateon’s lowest traded price after the 180^thday, or (b) at the lower of the Fixed Price or 55% of the Company’sMateon’s traded stock price under certain circumstances. The CompanyMateon may redeem the ConvertibleBridge Tranche #2 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 noteBridge Tranche #2 Note resulted in a discount from the beneficial conversion feature totaling $28,445.$175,000. Total amortization of the OID and discount totaled $1,985 during$155,680 for the six months ended June 30, 2020. Total unamortized discount on this note was $17,495 as of June 30, 2020.

All the above notes issued to Peak One, TFK, our CEO and the bridge investors reached the 180 day conversion period prior to the end of the six months ended June 30, 2020. As such, all the note holders had the ability to convert that debt into equity at the variable conversion price of 65% of the Company’s lowest traded price after the first 180 days or at the lower of the Fixed Price or 55% of the Company’s traded stock price under certain circumstances. This gave rise to a derivative feature within the debt instrument.

As of December 31, 2019, we had a derivative liability of $541,000. Following the initial bifurcation of the conversion features related to certain hybrid convertible notes instruments, the Company recorded an initial fair value of such derivative of approximately $870,268. Following conversion of certain notes to the Company’s common stock, the Company reversed such derivative liability by approximately $408,812. This resulted in a change in fair value of approximately $10,512. As of June 30, 2020, the derivative liability had a fair value of approximately $991,460. During the six months ended June 30, 2020, the Company fully amortized $232,054 of the remaining unamortized beneficial conversion feature since the conversion feature of certain hybrid instruments were separated and accounted for as derivative liability. The Company recorded an initial debt discount of $258,070 resulting from the bifurcation of the conversion feature representing the net carrying amount of the underlying notes since the fair value of the initial derivative liability exceeds the net carrying amount of the underlying notes.

Convertible Note with PointR Data, Inc.

In July 2019, the Company entered into a Note Purchase Agreement with PointR (the “PointR Note Purchase Agreement”). Pursuant to the PointR Note Purchase Agreement, Mateon issued a Convertible Promissory Note to PointR in the principal amount of $200,000 (the “PointR Convertible Note”). The PointR Convertible Note bore interest at a rate of 8% per annum. Interest payments were due monthly on the 15th day of each calendar month (or the next business day thereafter), and were payable, at the option of PointR, either in cash or in shares of Mateon’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 PointR Convertible Note was due and payable on demand by PointR (a) at any time after January 1, 2020 or (b) upon the occurrence of an Event of Default (as defined in the PointR Convertible Note and the PointR Note Purchase Agreement). All amounts outstanding under the PointR Convertible Note would be automatically converted into the Company’s securities issued in next equity financing raising gross proceeds of $10,000,000 or more (a “Qualified Financing”) at the price per share paid by investors in the Qualified Financing. As the conversion feature is contingent upon a future event, the conversion feature will be evaluated under ASC 470-20 and ASC 815 when and if the Qualified Financing occurred.

In November 2019, the PointR Convertible Note, with accrued interest of $4,603 thereon, was converted into Company’s Series A Preferred Stock and is a part of the total consideration of 84,475 shares of Mateon’s Series A Preferred Stock issued to the PointR shareholders upon the completion of the PointR Merger. Since the conversion occurred prior to the Qualified Financing, the Company did not have to evaluate the conversion feature under ASC 470-20 and ASC 815.

Fall 2019 Debt Financing

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

All the Fall 2019 Notes provide for interest at the rate of 5% per annum and are unsecured. All amounts outstanding under the Fall 2019 Notes become due and payable upon the approval of the holders of a majority of the principal amount of outstanding Fall 2019 Notes (the “Majority Holders”) on or after (a) November 23, 2020 or (b) the occurrence of an event of default (either, the “Maturity Date”). The Company may prepay the Fall 2019 Notes at any time. Events of default under the Fall 2019 Notes include failure to make payments under the Fall 2019 Notes within thirty (30) days of the date due, failure to observe of the Fall 2019 Note Purchase Agreement or Fall 2019 Notes which is not cured within thirty (30) days of notice of the breach, bankruptcy, or a change in control of the Company (as defined in the Fall 2019 Note Purchase Agreement).

The Majority Holders have the right, at any time not more than five (5) days following the Maturity Date, to elect to convert all, and not less than all, of the outstanding accrued and unpaid interest and principal on the Fall 2019 Notes. The Fall 2019 Notes may be converted, at the election of the Majority Holders, either (a) into shares of the Company’s Common Stock at a conversion price of $0.18 per share, or (b) into shares of common stock of the Company’s newly formed subsidiary, EdgePoint AI, Inc., a Delaware Corporation, for AI/Blockchain in pharmaceutical manufacturing (“EdgePoint AI”), at a conversion price of $5.00 (based on a $5.0 million pre-money valuation) of EdgePoint AI and 1,000,000 shares outstanding.

The issuance of the Fall 2019 Notes resulted in a discount from the beneficial conversion feature totaling $222,222 related to the conversion feature. Total amortization of the discount totaled $111,112 and $0 for the six months ended June 30, 2020 and 2019, respectively; and $55,556 and $0 for the three months ended June 30, 2020 and 2019, respectively. As of June 30, 2020, the total unamortized discount on these notes was $88,888.

Further, the Company recorded interest expense of $12,500 and $25,000 for the three and six months ended June 30, 2019. Total unamortized2020, on these Fall 2019 Notes. The total amount outstanding under the Fall 2019 Notes, including accrued interest expense on this note was $30,015thereon, as of June 30, 2019.2020 and December 31, 2019 was $1,028,869 and $1,003,870, respectively.

During the six months ended June 30, 2020, Dr. Trieu provided additional funding of $70,000 to the Company.

Payment Protection Program

On April 21, 2020, the Company, entered into a Paycheck Protection Program Promissory Note (the “PPP Note”) with respect to a loan in the amount of $250,000 (the “PPP Loan”) from Silicon Valley Bank (the “Lender”). The PPP Loan was obtained pursuant to the Paycheck Protection Program (the “PPP”) of the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) administered by the U.S. Small Business Administration (“SBA”). The PPP Loan matures on April 21, 2022 and bears interest at a rate of 1.00% per annum. The PPP Loan is payable in 17 equal monthly payments commencing November 21, 2020. The PPP Loan may be prepaid at any time prior to maturity with no prepayment penalties.

All or a portion of the PPP Loan may be forgiven by the SBA and the Lender upon application by the Company not later than December 31, 2020 upon documentation of expenditures in accordance with the SBA requirements.

NOTE 76 - RELATED PARTY TRANSACTIONS

Master Service Agreement with Autotelic Inc.

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

Expenses related to the MSA were $355,827$117,980 and $695,121$469,454 for the three and six months ended June 30, 20192020, respectively; as compared to $130,773$355,827 and $301,707$695,121 for the three and six months ended June 30,same periods of 2019 and 2018, respectively.

In January 2019, Oncotelic issued a total of $80,77280,772 shares of its common stock with a fair value otfof $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 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.

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 Autotelic Inc. for $819,191, which was recorded as an intangible asset,Notes Payable and as a 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 common stock as consideration for the license.

Note PayableShort-Term Loan – Related Party

OnIn April 23, 2019, the CompanyMateon issued a convertible note to our Chief Executive OfficerDr. Trieu totaling $164,444, including OID of $16,444, receiving net proceeds of $148,000, which will bewas used by the Company for working capital and general corporate purposes. (Note 6)purposes (See Note 5). In addition, the Company issued a Fall 2019 Note to Dr. Trieu in the principal amount of $250,000, which also offset certain amounts due Dr. Trieu in the amount of $35,000 due to him, and was converted into debt. During the six months ended June 30, 2020, Dr. Trieu provided additional short term funding of $70,000 to the Company.

Artius Consulting Agreement

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

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

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

No expense was recorded during the six months ended June 30, 2020 related to this Agreement.

Maida Consulting Agreement

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

Pursuant to the terms of the Maida Agreement, the Company will grant to Dr. Maida 400,000 restricted shares of Mateon’s Common Stock corresponding to $80,000 at the stock value of $0.20 per share, to vest on May 5, 2021. The Company will also pay Dr. Maida $15,000 per month for a minimum of 20 hours per week, in in addition to reimbursement of reasonable and necessary expenses incurred by Dr. Maida in connection with his services to the Company.

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

Dr. Maida was appointed the Chief Clinical Director for Mateon effective July 7, 2020. As of the date of this Quarterly Report, Mateon and Dr. Maida are in discussions to finalize an employment agreement.

The Company recorded $30,000 as expense under the consulting agreement during the three and six months ended June 30, 2020. No similar expense was recorded during the same periods in 2019.

NOTE 8 -7 – 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 stockCommon Stock with a fair value of $4.00 per share to an employee in lieu of cash for compensation.

In January 2019, Oncotelic issued a total of 80,772 shares of common stockCommon Stock with a fair value of $4.00 per share to Autotelic, Inc. in lieu of cash for the settlement of outstanding accounts payable and services received during the three months ended March 31, 2019.received.

OnIn January 29, 2019, Oncotelic issued a total of 20,750 shares of common stockCommon Stock with a fair value of $4.00 per share to two separates investors for $83,000 in cash.

OnIn March 31, 2019, Oncotelic issued 80,594 shares of common stockCommon Stock with a fair value of $4.00 per share to various employees in lieu of cash for accrued compensation.

In April 2019, the CompanyOncotelic issued a total of 150,000 shares of common stock to two investors as a result of the conversion of warrants for $120 in cash.

Equity Transactions During the Period Since the Merger

Issuance of Preferred Stock

OnIn April 22, 2019, pursuant to the Merger, the CompanyMateon issued 193,713 shares of Series A Convertible Preferred Stock in exchange for 77,154 shares of Oncotelic Common Stock. (Note(See Note 3)

In November 2019 Mateon issued 84,475 shares of Series A Preferred Stock to PointR in exchange of 11,135,935 shares of PointR Common Stock upon the consummation of the PointR merger (See Note 3)

Issuance of Common Stock during the three and six months ended June 30, 2020

In February 2020, Mateon issued 500,000 shares of its Common Stock to Peak One in connection with the part conversion of one of their convertible notes payable. (See Note 5).

In February 2020, Mateon issued 1,200,000 shares of its Common Stock to Peak One in connection with the part conversion of one of their convertible notes payable. (See Note 5)

In March 2020, Mateon issued 750,000 shares of its Common Stock to TFK in connection with the part conversion of the TFK Note. (See Note 5).

In March 2020, Mateon issued 500,000 shares of its Common Stock to Peak One in connection with the part conversion of one of their convertible notes payable. (See Note 5)

In March 2020, Mateon issued 1,012,145 shares of its Common Stock to TFK in connection with the part conversion of the TFK Note. (See Note 5).

In June 2020, Mateon issued 569,800 shares of its Common Stock to Peak One in connection with the full conversion of one of their convertible notes payable. (See Note 5)

Issuance of Common Stock in 2019

OnIn April, 22, 2019, pursuant to the Merger, the CompanyMateon issued 41,000,033 shares of Common Stock in exchange for 10,318,746 shares of Oncotelic Common Stock. (Notecommon stock. (See Note 3)

OnIn April 23, 2019, the CompanyMateon issued 700,000 restricted shares of its Common Stock with a fair value of $0.11 per share to two noteholders in connection with convertible notes payable. (Note 6)(See Note 5)

OnIn June 12, 2019, the CompanyMateon issued 350,000 restricted shares of its Common Stock with a fair value of $0.18 per share in connection with a convertible note payable. (Note 6)(See Note 5)

In June 2019, Mateon issued 300,000 restricted shares of its Common Stock to Peak One with a fair value of $0.20 to extend the date of conversion of the Peak One Tranche #1 Note into Common Stock of Mateon at 65% of the traded price of Mateon’s Common Stock until January 18, 2020. This restriction did not apply if Peak One wished to convert the Peak One Tranche #1 Note at $0.10. The Company recorded a cost of $60,000 in lieu of such issuance.

In November 2019, Mateon issued 300,000 restricted shares of its Common Stock to TFK with a fair value of $0.20 to extend the date of conversion of the TFK Note into Common Stock of Mateon at 65% of the traded price of Mateon’s Common Stock until January 8, 2020. This restriction did not apply if TFK wished to convert the TFK Note at $0.10 per share. The Company recorded a cost of $60,000 in lieu of such issuance.

NOTE 98 – 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 stockCommon Stock and corresponding outstanding options survived. The below information details represents Mateon’s associated option activity pre and post merger.

As of June 30, 2019,2020, options to purchase common stockMateon’s Common Stock were outstanding under three stock option plans – the 2017 Equity Incentive Plan (the “2017 Plan”“2017 Plan”), the 2015 Equity Incentive Plan (the “2015 Plan”“2015 Plan”) and the 2005 Stock Plan (the “2005 Plan”“2005 Plan”). Under the 2017 Plan, up to 2,000,000 shares of the Company’s common stockMateon’s Common Stock may be issued pursuant to awards granted in the form of nonqualified stock options, restricted and unrestricted stock awards, and other stock-based awards. Under the 2015 and 2005 Plans, taken together, up to 7,250,000 shares of the Company’s common stockMateon’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:

The following table summarizes information about options to purchase shares of the Company’s common stockMateon’s Common Stock outstanding and exercisable at June 30, 2019:2020: