UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM10-Q

(Mark One)

For the quarterly period ended June 30, 2018March 31, 2019

OR

For the transition period from                to                

Commission File Number:0-21990

Mateon Therapeutics, Inc.

(Exact name of registrant as specified in its charter)

701 Gateway Blvd, Suite 210

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.applicable

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

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

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

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

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

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

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

As of August 14, 2018,May 15, 2019, there were 41,419,93482,100,664 shares of the Registrant’s Common Stock issued and outstanding.

Mateon Therapeutics, Inc.

Cautionary Factors that May Affect Future Results

This report contains “forward-lookingforward-looking statements” which give management’s current expectations or forecasts within the meaning of future events. Youthe 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 theseforward-looking statements by the fact that they do not relate strictly to historic or current facts. They use wordsterminology such as “promising,“may,” “potential,” “may,“will,” “should,” “expect,” “intend,” “plan,” “anticipate,” “could,” “would,” “will,” “intend,” “project,“believe,” “estimate,” “predict,” “seek,“potential,” “indicate” or “continue,” “assumption” or the negative of these terms and others of similar meaning.or other comparable terminology.

Any or all of our forward-looking statementsStatements in this report may turn out to be wrong. They can be affected by inaccurate assumptions we might makeconcerning our business plans, forecasts or by known or unknown risks and uncertainties. Consequently, no forward-looking statement can be guaranteed. Actual results may vary materially from those set forth in forward-looking statements. Forward-looking statements include, but are not limited to, statements regarding our or our management’s expectations, hopes, beliefs, intentions or strategies regarding the future, such as our liquidity and our expectations regarding our needs for and ability to raise additional capital; our ability to continue as a going concern; ourstrategies; estimates regarding anticipated operating losses, future performance, future revenues and projected expenses; our ability to select and capitalize on commercially desirable product opportunities as a result of limited financial resources; our ability to manage our expenses effectively and raise the funds needed to continue our business; our ability to retain the services of our current executive officers, directorsoperating expenses and principal consultants;future financial performance; the competitive natureefficacy or safety of our industryproduct candidates; the timing and outcomes of future clinical trials; the possibilitybenefits 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 our products or product candidates may become obsolete;we develop; our ability to obtain and maintain regulatory approval of our existing products and any future products we may develop; the clinical developmenteffectiveness of and the process of commercializing OXi4503 and CA4P (which is also known as combretastatinA4-phosphate, fosbretabulin or fosbretabulin tromethamine and ZYBRESTAT^®); the combination of OXi4503 with cytarabine and the combination of CA4P with immune-oncology agents; the initiation, timing, progress and results of our preclinical and clinical trials, research and development programs; regulatory and legislative developments in the United States and foreign countries; the timing, costs and other limitations involved in obtaining regulatory approval for any product; the further preclinical or clinical development and commercialization of our product candidates; our ability to obtain and maintain orphan drug exclusivity for some of our product candidates; the potential benefits of our product candidates over other therapies; our ability to enter into and maintain any collaboration with respect to product candidates; our ability to continue to develop or commercialize our products or product candidates in the event any license agreements in place with third parties expire or are terminated; the performance and conduct of third parties, including our third-party manufacturers and third party service providers used in our clinical trials; our ability to obtain and maintain intellectual property protection for our products and our ability to operate our business without infringing upon the intellectual property rights of others; and the potential liability exposure related to our products and our insurance coverage for such exposure; the successful development of our sales and marketing capabilities; the size and growth of the potential markets for our products and our ability to serve those markets; the rate and degree of market acceptancemanner, timing or success of any future products; the volatility of the price of our common stock; the ability to achieve secondary trading of our stock in certain states; the dilutive effects of potentialcapital raising efforts; are all forward-looking statements.

Forward-looking statements reflect management’s current views about future equity issuances; our expectation that no dividends will be declaredevents and are based on our common stock in the foreseeable future; our ability to maintain an effective system of internal controls; the paymentcurrently available financial, economic and reimbursement methods usedcompetitive data and on current business plans. Forward-looking statements, by private or governmental third-party payers; our ability to retain adequate staffing levels; unfavorable global economic conditions; a failure of our internal computer systems or those of our contractorstheir nature, involve known and consultants; potential misconduct or other improper activities by our employees, contractors or consultants; the ability of our business continuity and disaster recovery plans to protect us in the event of a natural disaster;unknown risks, uncertainties and other factors discussedthat 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 Form10-K for the year ended December 31, 2017 filed with the Securities and Exchange Commission (the SEC)SEC on April 17, 2018 or any document incorporated by reference herein or therein.10, 2019, and other reports that we file with the SEC.

We willdo not updateundertake any responsibility to release publicly any revisions to these forward-looking statements, whether as a result of new information, future events or otherwise, unlessexcept to the extent required by law. You are advised to consult any further disclosures we make in our reports to the SEC, including our reports on Form10-Q,8-K and10-K. Our filings list various important factors that could cause actual results to differ materially from expected results. We note these factors for investors as permitted by the Private Securities Litigation Reform Act of 1995. You should understand that it is not possible to predict or identify all such factors. Consequently, you should not consider any such list to be a complete set of all potential risks or uncertainties.

INDEX

Mateon Therapeutics, Inc.

Condensed Balance Sheets

(in thousands, except per share data)

See accompanying notes.

Mateon Therapeutics, Inc.

Condensed Statements of Comprehensive Loss

(in thousands, except per share data)

(unaudited)

See accompanying notes.

Mateon Therapeutics, Inc.

Condensed Statements of Cash FlowsStockholders’ Deficit

(in thousands)

(unaudited)

See accompanying notes.

Mateon Therapeutics, Inc.

Condensed Statements of Cash Flows

(in thousands)

(unaudited)

See accompanying notes.

Mateon Therapeutics, Inc.

Notes to Condensed Financial Statements

June 30, 2018March 31, 2019

(Unaudited)

1. SummaryDescription of Significant Accounting PoliciesBusiness and Basis of Presentation

Description of Business

Mateon Therapeutics, Inc. (“Mateon”Mateon” or the “Company”“Company”) is a clinical-stage biopharmaceutical company developing investigational drugs for the treatment of orphan oncology indications, with a program in acute myeloid leukemia (“AML”) and myelodysplastic syndromes (“MDS”) and a program in immuno-oncology.indications.

Basis of Presentation

The accompanying unaudited condensed financial statements have been prepared in accordance with U.S. generally accepted accounting principles for interim financial information and with the instructions to Form10-Q and Article 10 ofRegulation S-X. The financial statements do not include all of the information and footnotes required by U.S. generally accepted accounting principles for complete financial statements. In the opinion of management, however, all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair presentation of the financial position, results of operations and cash flows for the interim periods ended March 31, 2019 and 2018 have been included.made. Operating results for the three and six months ended June 30, 2018March 31, 2019 are not necessarily indicative of the results that may be expected for any other interim period or for the year ending December 31, 2018.2019.

The balance sheet at December 31, 20172018 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by U.S. generally accepted accounting principles for complete financial statements. For further information, refer to the financial statements and footnotes thereto included in the Annual Report on Form10-K for the Company for the year ended December 31, 2017.2018.

Liquidity and Going Concern

The Company has experienced net losses every year since inception and as of March 31, 2019 had an accumulated deficit of over $295 million. As of March 31, 2019, the Company had $0.2 million in cash and current liabilities of $1.2 million. 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 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, since the Company’s capital resources are not sufficient to sustain operations for the next twelve months. The condensed 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 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 candidatesOT-101, OXi4503 and/or CA4P. In April 2019, after the period covered by this report, the Company raised $540,000 through the sale of convertible debentures. The terms of the convertible debentures contemplate the availability to the Company of an additional $540,000 after May 23, 2019. See Note 5 “Subsequent Events”. The Company anticipates raising substantial additional capital through the sale of equity securities, 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 its 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.

2. Summary of Significant Accounting Policies

Use of Estimates

The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements andas well as the reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates.

Cash Equivalents

Highly liquid investments with original maturities of three months or less at the date of purchase are considered to be cash equivalents. Cash equivalents are stated at fair value.

Leases

At the Company’s Common Stock

inception of an arrangement of over 12 months duration, the Company determines whether it contains a lease based on the arrangement’s facts and circumstances. When the arrangement contains a lease of over 12 months duration,right-of-use assets and corresponding operating lease liabilities are recorded based on the present value of lease payments over the expected term. The Company has generally issued derivative financial instruments, suchuses its estimated incremental borrowing rate for collateralized assets as warrants, in connection with its equity offerings. The Company evaluates the terms of these derivative financial instruments in orderbasis for the discount rate used to determine their accounting treatment in the Company’s financial statements. Key considerations include whetherpresent value. Lease expense is recognized over the financial instruments are freestanding and whether they contain conditional obligations. If the warrants are freestanding, do not contain conditional obligations and meet other classification criteria, the Company accounts for the warrants as an equity instrument. If the warrants are freestanding but contain conditional obligations, then the Company accounts for the warrants as a liability until the conditional obligations are met or are no longer relevant. For financial instruments which are accounted for as a liability, the Company reports changes in their estimated fair value as a gain or loss in the Company’s Statement of Comprehensive Loss.

Going Concern Evaluation

The Company has experienced net losses every year since inception and, as of June 30, 2018, had an accumulated deficit of approximately $294 million. The Company has no source of revenue and does not expect to receive any product revenue in the near future. The Company expects to incur significant additional operating losses over at least the next several years, principally as a result of the Company’s continuing clinical trials for its investigational drugs. The principal source of the Company’s working capital to date has been the proceeds from the sale of equity. As of June 30, 2018, the Company had $2.0 million in cash and current liabilities of $1.6 million. Based on the Company’s planned operations, the Company’s management expects its cash to support its operations into the fourth quarter of 2018. Prior to this time, the Company will need to secure additional funding or could be forced to curtail or terminate operations. Because the Company does not currently have a guaranteed source of working capital that will sustain planned operations past the fourth quarter of 2018, Management has determined that there is substantial doubt about the Company’s ability to continue as a going concern. The Company will need to raise capital in order to fund its planned operations beyond this time. If the Company is unable to access additional funds when needed, it may not be able to continue the development of its investigational drugs and the Company could be required to delay, scale back or eliminate some or all of its development programs and other operations. Any additional equity financing, if available to the Company, may not be available on favorable terms, would most likely be dilutive to its current stockholders and debt financing, if available, may involve restrictive covenants. If the Company accesses funds through collaborative or licensing arrangements, it may be required to relinquish rights to some of its technologies or product candidates that it would otherwise seek to develop or commercialize on its own, on terms that are not favorable to the Company. The Company’s ability to access capital when needed is not assured and, if not achievedexpected term on a timely basis, will materially harm its business, financial condition and results of operations.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. This ASU isNo. 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 early adoption is permitted. the lease expires on June 30, 2019.

The Company is currently evaluatingelected to use the impact thatmodified retrospective approach for the adoption of this ASU will have2016-2. 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 amounts are not adjusted and continue to be reported under the accounting standards in effect for the prior period.

Upon adoption 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 financial statements.

In August 2016, The FASB issuedbalance sheet. On December 31, 2018, prior to the adoption of ASUNo. 2016-152016-2, “Statementthe Company had recognized $8,000 of Cash Flows (Topic 230): Classificationlease liabilities on its balance sheet, therefore the adoption of Certain Cash Receipts and Cash Payments,” which addresses several cash flow issues that diversifythe new lease standard resulted in practice. The new guidance is effective for fiscal years beginning after December 15, 2017 and for interim periods within those years. The Company adopted this ASU as of January 1, 2018, and its adoption did not have a material impact onan increase to the Company’s financial statements.

2. Stockholders’ Equity

April 2018 Private Placement

In April 2018, the Company entered into a private placement transaction, raising net proceedsliabilities of approximately $2.4 million from the sale of 14,875,000 shares of common stock and warrants to purchase 14,875,000 shares of common stock. The purchase price of the common stock was $0.20 per share and the exercise price of the warrants is $0.40 per share. The warrants expire two years from the date they initially became exercisable. In connection with the private placement transaction, the Company also issued 1,487,500 warrants to the placement agent. The placement agent warrants have an exercise price of $0.20 per share and expire five years from the date of issuance.

The warrants consist of 7,437,500 Series A warrants (the “Series A Warrants”) and 7,437,500 Series B warrants (the “Series B Warrants”). The exercise price of all warrants is payable in cash and there are no cashless exercise provisions.

The Series A Warrants were immediately exercisable upon issuance and expire on April 12, 2020. The Company has accounted for the Series A Warrants as an equity instrument from the date of issuance.

When the Company completed the private placement transaction, the exercisability and expiration of the Series B Warrants were dependent on the Company’s receipt of stockholder approval for an increase in the number of authorized shares of the Company’s common stock. Accordingly,$101,000 on the date of issuance, the Company accounted for the Series B Warrants as a liability, utilizing the Black-Scholes option pricing model to determine the fair value of these derivative financial instruments based on the following key measurements and assumptions: $0.26 per share stock price; $0.40 per share exercise price; 2.2 year term to maturity; 2.37% risk-free interest rate and 100.9% annualized volatility, resulting in an estimated fair value of the warrant liability of $886,000.

On June 20, 2018, the Company’s stockholders approved an increase in the number of authorized shares of common stock, satisfying the conditional obligation of the Series B Warrants. The Series B Warrants became exercisable on June 20, 2018 and expire on June 20, 2020. Following the stockholder approval, the Company determined that liability accounting was no longer appropriate and that equity accounting was appropriate for the Series B Warrants.adoption. The Company utilized the Black-Scholes option pricing model to determine the Series B Warrants’ fair valueused a discount rate of 10%. As of January 1, 2019, minimum remaining lease payments aggregated $112,000, and as of June 20, 2018, based on the following key measurements and assumptions: $0.22 per share stock price; $0.40 per share exercise price; 2.0 year term to maturity; 2.56% risk-free interest rate and 100.0% annualized volatility, resulting in an estimated fair value of the warrant liability of $636,000.March 31, 2019, minimum remaining lease payments aggregated $56,000.

The decrease in the fair value of the Series B Warrants from the date of issuance through the satisfaction of the conditional criteria has been classified as a “Gain on change in fair value of warrants” in the Statement of Comprehensive Loss.

Outstanding Warrants to Purchase Common Stock3. Stockholders’ Equity

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

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

As of June 30, 2018,March 31, 2019, there was approximately $0.9 million$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 1.51.0 years.

The fair value for stock options granted is estimated at the date of grant using thea Black-Scholes option pricing model. The Company usedNo stock options were granted during the following weighted average assumptions to estimate the fair value of the stock options.three months ended March 31, 2019 or March 31, 2018.

3.4. Net Loss Per Share

Basic and diluted net loss per share was calculated by dividing the net loss per share attributed to the Company’s common shares by the weighted-average number of common shares outstanding during the period. Diluted net loss per share includes the effect of all dilutive, potentially issuable common equivalent shares as defined using the treasury stock method. All of the Company’s common stock equivalents are anti-dilutive due to the Company’s net loss position for allthe periods presented. Accordingly, common stock equivalents of approximately 7,319,0006,774,000 stock options and 24,528,00022,216,000 warrants at June 30, 2018March 31, 2019 and 5,941,0004,705,000 stock options and 9,842,0009,626,000 warrants at June 30, 2017,March 31, 2018, were excluded from the calculation of weighted average shares for diluted net loss per share.

5. Subsequent Events

Merger with Oncotelic

On April 17, 2019, the Company entered into a merger agreement with 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 Oncotelic, with Oncotelic surviving the merger 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% 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%.

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 the effectiveness of the merger 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.

Management Change

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 Chief Executive Officer of the Company and Chairman of the board of directors. The Company’s previous CEO, William D. Schwieterman, M.D., resigned from his position as CEO, 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 on the closing date of the merger.

Bridge financing

On April 23, 2019, the Company completed an initial tranche aggregating $0.6 million of bridge financing. Under the bridge financing, the Company issued $600,000 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 shares of common stock to two of the unaffiliated bridge investors as a commitment fee in connection with the financing.

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

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

The following discussion and analysis should be read together with the audited financial statements and notes in our Annual Report on Form10-K for the year ended December 31, 2017,2018, 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 with the unaudited financial statements set forth in Part I, Item 1 of this Quarterly Report on Form10-Q.

Overview and Recent Developments

We are a clinical-stageclinical stage biopharmaceutical company developing drugs for the treatment of orphan oncology indications. We currentlycancer. 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. 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 active drug developmentclinical programs – one of which is evaluating the investigational drugdeveloping OXi4503 for theas a treatment of two related conditions –for acute myeloid leukemia or AML, and myelodysplastic syndromes or MDS, and the other of which is evaluatingdeveloping CA4P in combination with a checkpoint inhibitor for the investigational drug CA4P as an immuno-oncology agent intreatment of advanced metastatic melanoma.

InAfter a thorough consideration of potential strategic alternatives, we determined that the best course for our future would be to merge with another oncology drug development company. On April 2018,22, 2019, after the period covered by this report, we raised net proceeds of approximately $2.4 million in an equity financing transaction. Prior to closing the first tranche of this financing, we had curtailed nearly all operating activities, includingmerged a pause in enrollment in our ascending-dose study of OXi4503newly formed subsidiary entity with Oncotelic, Inc., a Delaware corporation (“Oncotelic”). Oncotelic is also a biopharmaceutical company developing drugs for the treatment of relapsed/refractory AMLcancer, and MDS. Followinghas late clinical-stage product candidates in several important areas of unmet medical need. We believe that the financing,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 resumed enrollment in this trial. Newly enrolled patients are entering into the trial’s sixth cohort (12.2 mg/m² of OXi4503;believe that there is a 25% greater dose than the most recently completed fifth cohort). In the fifth cohort, we observed two complete remissions (50%) after one cycle of treatment with 9.76 mg/m² of OXi4503,natural synergy between Mateon’s necrotic cell death product candidate, CA4P, and did not observe any dose-limiting toxicities. Among the first four cohorts (lower doses of OXi4503 ranging from 3.75 to 7.81 mg/m²), we observed three complete remissions (18%), each occurring after two cycles of treatment. Because of the promising data observed through the first five cohorts, we are enrolling a higher number of patients into the sixth cohort in order to better evaluate the potential efficacy of OXi4503. Initial data from the sixth cohortOncotelic’s proprietary self-immunization protocol (SIP) platform, particularly itsTGF-ß inhibitorOT-101.

Oncotelic’s lead product candidate,OT-101, is expected in late summer 2018.

In immuno-oncology, our goal and the next step for establishing CA4Pbeing developed as a safe and effective agent is to initiate a clinical trial in a setting where immuno-oncology agents are currentlybroad-spectrum anti-cancer drug that can also be used as standard therapy but have historically been associated with a low overall durable response rate. Animal models, for example, show that CA4P in combination with other standard cancer therapies to establish an immuno-oncology agent significantly enhances the number and activity of cancer-fightingeffective multi-modality treatment strategy forT-cellsdifficult-to-treat within tumors compared to the immuno-oncology agent alone. In these animal models, when CA4P was tested the cancer-fightingT-cells were shown to be evident throughout the tumor and were associated with twice the amount of tumor necrosis than with the immuno-oncology agent alone. Therefore,cancers. Together, we are planningplan 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 andOT-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 evaluating CA4P in combination with an approved immuno-oncologyofOT-101 as a single agent Opdivo^® (nivolumab, marketed by Bristol-Myers Squibb), in patients with advanced metastatic melanoma who have previously failed Opdivoaggressive 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 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 poor prognosis.renewed hope for a potential cure. The use ofOT-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.

In connection with the merger, on April 22, 2019 we 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 an 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 the merger, the former Oncotelic security holders immediately before the transaction 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 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.

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.

On April 23, 2019, we completed an initial tranche aggregating $0.6 million of bridge financing. Under the bridge financing, we issued $600,000 of debentures to four investors, including Dr. Trieu. The debentures were issued at a 10% discount for gross proceeds to the Company 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 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 fee in connection with the financing.

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

Three and six months ended June 30,March 31, 2019 and 2018

We recorded a net loss of $0.6 million for the three months ended March 31, 2019, compared to a net loss of $0.8 million for the three months ended March 31, 2018. The reduced net loss was due to both lower research and 2017development expenses and lower general and administrative expenses for the three months ended March 31, 2019.

Research and Development expenses

Research and development expenses decreased markedlyby 40% for both the three and six months ended June 30, 2018March 31, 2019 compared to the same periodsperiod in 2017. The decreased research and development expenses in 2018, were due to our terminationlower level of clinical trial work in 2019 because of the FOCUS clinical trial in late 2017 as well as significant reductions in nearly all operating activities while we soughtlimited funding available to obtain additional capital to continue operations.us. The table below summarizes the most significant components of our research and development expenses for the periods indicated and provides the amount and percentage change in these components (in thousands):

AllWe conducted only a small amount of research and development activitiesduring 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 substantiallyby 19% for both the three months and six months ended June 30, 2018March 31, 2019 compared to the same periodsperiod in 2017. For2018 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 foron-going employee compensation because for the 2019 period we allocated a portion of expenses for one of our two employees to research and development, but we did not do so for 2018 due to the specific tasks being performed at the time.

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 June 30, 2018, our research and development activities were limited tore-initiating enrollment into our OX1222 Study of OXi4503 for relapsed/refractory AML and MDS and planning for a study of CA4P as an immuno-oncology agent in advanced metastatic melanoma.March 31, 2019.

On September 26, 2017, we terminated the FOCUS Study of CA4P in platinum-resistant ovarian cancer – prior to this date, expenses for the FOCUS Study were our largest area of expenditure at the Company in recent years. Due to the limited operating cash at the Company at the time we terminated the FOCUS Study, we also terminated nearly all other research and development employees and nearly all other research and development activities. Accordingly, expenses in all categories of research and development have declined significantly for the 2018 periods compared to the 2017 periods. Clinical study expenses and employee compensation both declined by over 90% for both the three months and six months ended June 30, 2018 compared to the same periods in 2017. Employee stock-based compensation declined by a lower percentage than employee compensation because we continued vesting certain stock options for former employees that continued to provide services to us. 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 also declinedand no new planning activities for similar reasons, butfuture clinical studies.

Drug manufacturing and storage expenses increased by $6,000 for the percentage declines were lower as we utilized certain services to continue the OX1222 study in AML/MDS and for planning a study in melanoma. For the 2018 periods, drug manufacturing expenses declinedthree months ended March 31, 2019 compared to the 2017 periods becausethree months ended March 31, 2018 due to additional work we limitedpreformed to seek to extend the 2018 activities to external storage fees for previously manufactured batchesshelf-life of our investigational drugs and only performed minimally required stability work, whereas 2017 expenditures included additional activities.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. With virtually no separate research and development headcount forFor the 2018 periods, there was minimal allocationthree months ended March 31, 2019, we allocated a portion of these facility expensescosts to research and development based onone-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 declines$15,000 increase.

As a result of 84%our merger with Oncotelic, we expect to 89%.

Following our April 2018 financing transaction, we resumed enrollmentincrease research and development activities, including the initiation of patients into our study of OXi4503 for AMLnew clinical trials, and MDS. We also incurredstart-up costs for planning a study of CA4P in immuno-oncology, evaluating CA4P in combination with Opdivo^® (nivolumab, marketed by Bristol-Myers Squibb), in patients with advanced metastatic melanoma who have previously failed Opdivo and consequently have a poor prognosis. For the second half of 2018, we expecttherefore believe that research and development expenses will increase for the remainder of 2019 compared to increaseresearch and development expenses in comparison to the first half of 2018, subject to our continuing ability to secure sufficient funding to continue with drug development activities.planned operations

General and administrative expenses

General and administrative expenses decreased significantlyby 13% for both the three and six months ended June 30, 2018March 31, 2019 compared to the same periods in 2017. The decreases inthree months ended March 31, 2018, were primarily dueas we continued to minimize expenses based on our reduction of nearly all operating activities through April 2018 while we sought to obtain additionallimited capital to continue operations.resources. The table below summarizes the most significant components of our general and administrative expenses for the periods indicated and the amount and percentage change in these components (in thousands):

Employee compensation and related expenses decreased by over 60% for the three and six month periods ended June 30, 2018 compared to the same periods in 2017 due to our 2018 reduction in headcount to only two employees, our Chief Executive and Financial Officers, who each have agreed to receive half of their regular salary to date in 2018. Conversely, employee stock-based compensation increased by 22% for the three months ended June 30, 2018 compared to the three months ended June 30, 2017 primarily due to the expenses associated with stock options granted to our former Chief Scientific Officer, who remains a member of our board of directors and therefore the expenses associated with his stock options are now classified in general and administrative expenses. In addition, there were additional expenses incurred in 2018 due to stock options recently granted to our Chief Executive and Financial Officers to partially compensate for their reduced 2018 salaries. Finally with respect to stock-based compensation, as a result of the timing of employee terminations and their stock option vesting schedules,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 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 we experienced decreasesperiod when his primary function was fundraising. Allocating a part of the salary

to research and development during the 2019 period reduced the portion recorded 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 expenses, resulting in comparable employee stock-based compensationincreased by 45% for the fullthree months ended March 31, 2019 compared to the three months ended March 31, 2018 and 2017due to short-vesting options granted to our two employees inyear-to-datemid-2018. periods. 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 decreasedincreased by 32% and 50%4% for the three and six month periodsmonths ended June 30, 2018March 31, 2019 compared to the same periods in 2017three months ended March 31, 2018 due to our minimization ofhigher legal expenses with a focus on continuing in businessthe 2019 period which were largely offset by lower accounting and seeking new sources of capital.administrative consulting expenses.

OtherRent, insurance and other expenses which include facility related expenses such as rent, insurance expenses and taxes that are not based on income, are allocated between research and development and general and administrative expenses. For 2018, we reducedexpenses based on the employee headcount in each department. While these expenses to primarily focus on continuing our operations and seeking funding. Because of our curtailed research and development activities for the 2018 periods compared to the 2017 periods, the resulting allocation of these expenses into general and administrative expenses increased the amount reported in general and administrative expenses by 4%costs were relatively similar for the three months ended June 30,March 31, 2019 and 2018, and 18% for the sixthree months ended June 30,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 compared to the same periods in 2017.period.

WeAs a result of our merger with Oncotelic, we expect general and administrative expenses to increase for the remainder of 20182019 compared to the first sixthree months of 2018 as we2019 in order to support the resumption of our clinical trial activity and pursueanticipated additional business development, andfundraising, investor relations and administrative activities, subject to our continuing ability to secure sufficient funding to continue planned operations.

Other Income and Expenses

Mateon issued two series of warrants to the investors in its April 2018 equity financing transaction. The Series B Warrants required the Company to receive stockholder approval for additional authorized shares of common stock sufficient to allow for the exercise of the Series B Warrants. Because the Company did not have sufficient shares of authorized common stock at the time of the transaction, the Company accounted for the fair value of the Series B Warrants as a liability, measured at fair value, until the Company received stockholder approval for the additional authorized shares of common stock. The estimated fair value of the Series B Warrants was $886,000 in April 2018 and $636,000 on June 20, 2018, when shareholder approval was received. The decrease in fair value was primarily attributed to a decline in the price of the Company’s common stock and a shorter estimated warrant term. The resulting $250,000 gain on change in the fair value of warrants in the second quarter of 2018 was recorded innon-operating income, and there was no comparable line-item for other periods.

LIQUIDITY AND CAPITAL RESOURCES

We measureThe following table summarizes key balance sheet data related to our liquidity by the cash and other capital we have available to fund our operations, which are primarily focused on the development of our drug candidates. To date, we have financed our operations principally through proceeds received from the sale of equity. We haveresources (in thousands):

The Company has experienced net losses in eachevery year since our inception and negative cash flows from operations in nearly every year. Asas of June 30, 2018, weMarch 31, 2019 had an accumulated deficit of over $293 million, including a net loss of approximately $1.4 million for the six months ended June 30, 2018 and $13.8 million for the year ended December 31, 2017.$295 million. As of June 30, 2018, we heldMarch 31, 2019, the Company had $0.2 million in cash and cash equivalentscurrent liabilities of $2.0 million, which we$1.2 million. 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 sufficientnecessary should the Company be unable to continue as a going concern.

The principal source of the Company’s working capital to date has been the sale of equity securities. The Company will need to raise additional capital in order to fund our planned operating activities only intoits operations and continue development of product candidatesOT-101, OXi4503 and/or CA4P. In April 2019, after the fourth quarterperiod covered by this report, the Company raised $540,000 through the sale of 2018. Ifconvertible debentures. Under the terms of the convertible debentures, we are unablehave the potential to secureraise an additional funding prior to this time, we may be required to scale back or conclude our development activities altogether.

We will require$540,000 after May 23, 2019. The Company anticipates raising substantial additional capital before we can completethrough the developmentsale of OXi4503 and CA4P. Additional funding may not be available to us on acceptable terms, orequity securities, but no other financing arrangements are in place at all. this time.

If we arethe Company is unable to access additional funds in the near term wewhen needed, it may not be able to continue the development of our product candidatesthese investigational drugs and wethe Company could be required to terminate operations altogether.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 and would be dilutive to our current stockholders. Debtterms. Additional debt financing, if available, may involve

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

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 on Form10-K for the year ended December 31, 2017.2018. 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 any significant judgments or estimates important to readers of 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 only had six months remaining life at the time of the standard’s adoption.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

There have been no changes to our market risks from our Annual Report on Form10-K for the year ended December 31, 2017.2018.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

The SECSecurities and Exchange Commission (the “SEC”) requires that as of the end of the period covered by this Quarterly Report onForm 10-Q, the Chief Executive Officer (CEO) and the Chief Financial Officer (CFO) evaluate the effectiveness of the design and operation 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 of our disclosure controls and procedures. Based upon that evaluation, our CEO and CFO concluded that our disclosure controls and procedures were effective, as of June 30, 2018,March 31, 2019, to ensure that we record, process, summarize and report the information we must disclose in reports that we file or submit under the Exchange Act, within the time periods specified in the SEC’s rules and forms, and is accumulated and communicated to our management, including our CEO and CFO, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting, identified in connection with the evaluation of such control that occurred during the last fiscal quarter, which have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Important Considerations

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—OTHER INFORMATION

Item 1. Legal Proceedings

From time to time, we may become involved in legal proceedings arising in the ordinary course of our business.None.

On July 20, 2018, Accelovance, Inc., a clinical trial vendor that the Company used in 2016 and 2017, filed an action in Superior Court of California, San Mateo County against Mateon alleging that Mateon failed to pay certain amounts owed under a 2016 Clinical Development Master Services Agreement and various amendments to and work orders under that agreement. The complaint seeks approximately $912,000 in damages, plus costs and attorneys’ fees. Mateon believes that it has meritorious defenses to the claims and intends to defend this action vigorously. The Company further believes that it has accrued adequate reserves for the likely outcome of the lawsuit, although the outcome of any lawsuit is difficult to predict, particularly in an early stage. Depending on the outcome or resolution of this lawsuit, it could have a material effect on our financial condition. A status conference for the lawsuit is currently scheduled to occur in November 2018, at which time an initial trial date is likely to be established.

Item 1A. Risk Factors

There have been no material changes to the risk factors as described in our Annual Report on Form10-K for the year ended December 31, 2017.2018.

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

Not applicable.On April 22, 2019, in connection with a 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 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.

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. 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 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 Senior Securities

None.

Item 4. Mine Safety Disclosures

None.Not applicable

Item 5. Other Information

None.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

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