10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☑ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2017

OR

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

For the transition period from                  to                 

Commission File Number: 0-21990

Mateon Therapeutics, Inc.

(Exact name of registrant as specified in its charter)

Delaware	13-3679168
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

701 Gateway Blvd, Suite 210

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

(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 of Regulation 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, a non-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 Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☐  (Do not check if a smaller reporting company)	Smaller reporting company	☑
Emerging Growth Company	☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 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.    ☐

As of November 10, 2017, there were 26,544,934 shares of the Registrant’s Common Stock issued and outstanding.

Mateon Therapeutics, Inc.

Cautionary Factors that May Affect Future Results

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

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

We will not update forward-looking statements, whether as a result of new information, future events or otherwise, unless required by law. You are advised to consult any further disclosures we make in our reports to the SEC, including our reports on Form 10-Q, 8-K and 10-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

	Page No.
PART I—FINANCIAL INFORMATION
Item 1. Financial Statements		4
Condensed Balance Sheets		4
Condensed Statements of Comprehensive Loss		5
Condensed Statements of Cash Flows		6
Notes to Condensed Financial Statements		7
Item  2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		11
Item 3. Quantitative and Qualitative Disclosures about Market Risk		13
Item 4. Controls and Procedures		13
PART II—OTHER INFORMATION
Item 1. Legal Proceedings		13
Item 1A. Risk Factors		13
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		14
Item 3. Defaults Upon Senior Securities		14
Item 4. Mine Safety Disclosures		14
Item 5. Other Information		14
Item 6. Exhibits		14
SIGNATURES		15

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

Mateon Therapeutics, Inc.

Condensed Balance Sheets

(in thousands, except per share data)

	September 30, 2017			December 31, 2016
	(Unaudited)			(See Note 1)
ASSETS
Current assets:
Cash and cash equivalents	$	1,908		$	3,535
Short-term investments		—			8,512
Prepaid clinical trial expenses		772			1,946
Other prepaid expenses and current assets		258			77
Total current assets		2,938			14,070
Property and equipment, net		4			11
Other assets		33			33
Total assets	$	2,975		$	14,114
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	312		$	310
Accrued compensation and employee benefits		261			842
Accrued severance		220			—
Accrued clinical trial expenses		88			64
Other accrued liabilities		330			398
Total current liabilities		1,211			1,614
Commitments and contingencies
Stockholders’ equity:
Preferred stock, $0.01 par value, 15,000 shares authorized; No shares issued and outstanding		—			—
Common stock, $0.01 par value, 70,000 shares authorized; 26,545 shares issued and outstanding		265			265
Additional paid-in capital		291,340			290,698
Accumulated deficit		(289,841	)		(278,463	)
Total stockholders’ equity		1,764			12,500
Total liabilities and stockholders’ equity	$	2,975		$	14,114

See accompanying notes.

4

Mateon Therapeutics, Inc.

Condensed Statements of Comprehensive Loss

(in thousands, except per share data)

(unaudited)

	Three months ended September 30,						Nine months ended September 30,
	2017			2016			2017			2016
Operating expenses:
Research and development	$	2,832		$	2,075		$	8,699		$	6,429
General and administrative		708			1,187			2,707			3,855
Total operating expenses		3,540			3,262			11,406			10,284
Loss from operations		(3,540	)		(3,262	)		(11,406	)		(10,284	)
Interest income		7			26			33			84
Other expense		(3	)		—			(5	)		(1	)
Net loss and comprehensive loss	$	(3,536	)	$	(3,236	)	$	(11,378	)	$	(10,201	)
Basic and diluted net loss per share attributable to common stock	$	(0.13	)	$	(0.12	)	$	(0.43	)	$	(0.38	)
Weighted-average number of common shares outstanding		26,545			26,545			26,545			26,545

See accompanying notes.

5

Mateon Therapeutics, Inc.

Condensed Statements of Cash Flows

(in thousands)

(unaudited)

	Nine months ended September 30,
	2017			2016
Operating activities:
Net loss	$	(11,378	)	$	(10,201	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation		7			16
Stock-based compensation		642			627
Changes in operating assets and liabilities:
Prepaid expenses and other current assets		993			(829	)
Accounts payable and accrued expenses		(403	)		(618	)
Net cash used in operating activities		(10,139	)		(11,005	)
Investing activities:
Purchase of short-term investments		—			(18,915	)
Sale of short-term investments		8,512			7,802
Net cash provided by (used in) investing activities		8,512			(11,113	)
Decrease in cash and cash equivalents		(1,627	)		(22,118	)
Cash and cash equivalents at beginning of period		3,535			27,285
Cash and cash equivalents at end of period	$	1,908		$	5,167

See accompanying notes.

6

Mateon Therapeutics, Inc.

Notes to Condensed Financial Statements

September 30, 2017

(Unaudited)

1. Summary of Significant Accounting Policies

Description of Business

Mateon Therapeutics, Inc. (“Mateon” or the “Company”) is a clinical-stage biopharmaceutical company developing drugs for the treatment of orphan oncology indications, with its lead program in acute myeloid leukemia (“AML”). The Company was originally incorporated under the name OXiGENE, Inc. in 1988 in the state of New York and reincorporated in 1992 in the state of Delaware. The Company changed its name to Mateon Therapeutics, Inc. on June 17, 2016.

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

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

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 and 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.

Short-term Investments

All marketable securities have been classified as “available for sale” and are carried at fair value, based upon quoted market prices. The Company considers its available-for-sale portfolio to be available for use in current operations. Accordingly, the Company classifies certain investments as short-term marketable securities, even though the stated maturity date may be one year or more beyond the current balance sheet date. Unrealized gains and losses, net of any related tax effects, are excluded from earnings and are included in other comprehensive income and reported as a separate component of stockholders’ deficit until realized. Realized gains and losses and declines in value judged to be other than temporary, if any, on available-for-sale securities are included in other income (expense), net. The cost of securities sold is based on the specific-identification method.

Going Concern Evaluation

The Company has experienced net losses every year since inception and, as of September 30, 2017, had an accumulated deficit of approximately $290 million. The Company has no source of revenue and does not expect to receive any product revenue in the near future. If the Company remains in business, the Company expects to incur additional operating losses over the next several years, principally as a result of the Company’s continuing development of its investigational drugs. As of September 30, 2017, the Company had approximately $1.9 million in cash and cash equivalents. Based on the Company’s planned operations, including recent reductions in the Company’s development programs and personnel and assuming the receipt of an anticipated cash refund from one of the Company’s vendors, Management expects Mateon’s existing cash to support operations into February 2018. Prior to this time, the Company will need to secure additional funding or it would be forced to terminate or further curtail operations. Because the Company does not currently have a guaranteed source of capital that will sustain operations past February 2018, Management has determined that there is substantial doubt about the Company’s ability to continue as a going concern.

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

7

Recent Accounting Pronouncements

In February 2016, the FASB issued ASU No. 2016-02, “Leases (Topic 842),” which requires substantially all leases, including operating leases, to be recognized by lessees on their balance sheet as a right-of-use asset and corresponding lease liability. This ASU is effective for the Company’s interim and annual reporting periods beginning January 1, 2019 and early adoption is permitted. The Company is currently evaluating the impact that the adoption of this ASU will have on its financial statements.

In March 2016, the FASB issued ASU No. 2016-09, “Compensation—Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting,” which simplified several aspects of the accounting for share-based payments, including immediate recognition of all excess tax benefits and deficiencies in the income statement, changing the threshold to qualify for equity classification up to the employees’ maximum statutory tax rates, allowing an entity-wide accounting policy election to either estimate the number of awards that are expected to vest or account for forfeitures as they occur, and clarifying the classification on the statement of cash flows for the excess tax benefit and employee taxes paid when an employer withholds shares for tax-withholding purposes. This ASU became effective for Mateon’s interim and annual reporting periods beginning January 1, 2017, and the adoption of this standard did not have a material impact on the Company’s financial statements. As part of the adoption of this standard, the Company elected to continue estimating the expected option forfeiture rate.

In August 2016, the FASB issued ASU No. 2016-15, “Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments,” which addresses several cash flow issues that diversify in practice. The new guidance is effective for fiscal years beginning after December 31, 2017 and for interim periods within those years. The Company currently does not expect the adoption of this ASU to have a material impact on its financial statements.

2. Cash and Cash Equivalents

Cash and cash equivalents consisted of the following (in thousands):

	September 30, 2017
	Amortized Cost		Unrealized Gain		Unrealized (Loss)		Estimated Fair Value
Cash	$	202	$	—	$	—	$	202
Money market funds		1,706		—		—		1,706
	$	1,908	$	—	$	—	$	1,908

	December 31, 2016
	Amortized Cost		Unrealized Gain		Unrealized (Loss)		Estimated Fair Value
Cash	$	671	$	—	$	—	$	671
Money market funds		2,864		—		—		2,864
U.S. government treasury bills		3,008		—		—		3,008
Corporate bonds and commercial paper		5,504		—		—		5,504
	$	12,047	$	—	$	—	$	12,047

Reported as:
Cash and cash equivalents	$	3,535
Short-term investments		8,512
Total cash, cash equivalents and short-term investments	$	12,047

3. Fair Value Measurements

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

8

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

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

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

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

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

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

	September 30, 2017
	Level 1		Level 2		Level 3		Total
Money market funds	$	1,706	$	—	$	—	$	1,706
	December 31, 2016
	Level 1		Level 2		Level 3		Total
Money market funds	$	2,864	$	—	$	—	$	2,864
U.S. government treasury bills		—		3,008		—		3,008
Corporate bonds and commercial paper		—		5,504		—		5,504
	$	2,864	$	8,512	$	—	$	11,376

4. Stockholders’ Equity

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

	Exercise Price		September 30, 2017		December 31, 2016
Expiration Date			(in thousands)
06/14/17	$	3.70		—		216
04/16/18	$	3.40		1,460		1,460
09/23/18	$	2.80		147		147
02/11/19	$	2.56		293		293
02/18/19	$	2.75		1,872		1,872
08/28/19	$	2.90		2,700		2,700
03/20/20	$	2.13		234		234
03/25/20	$	1.71		2,920		2,920
Total				9,626		9,842

9

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

	Options Available for Grant			Options Outstanding			Weighted Average Exercise Price		Weighted Average Remaining Contractual Life		Aggregate Intrinsic Value
	(in thousands)								(years)		(in thousands)
Balance at December 31, 2016		549			4,177		$	1.47		8.14
Options authorized		2,000
Options granted		(2,484	)		2,484		$	0.42
Options forfeited		1,096			(1,096	)	$	1.27
Balance at September 30, 2017		1,161			5,565		$	1.04		7.98	$	—
Vested and exercisable at September 30, 2017					2,037		$	1.22		7.59	$	—
Vested and expected to vest at September 30, 2017					4,478		$	0.91		7.87	$	—
Unvested at September 30, 2017					3,528		$	0.94

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

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

	Nine months ended September 30,
	2017			2016
Risk-free interest rate		2.0	%		1.5	%
Expected life (years)		6.0			6.0
Expected volatility		88	%		89	%
Dividend yield		0	%		0	%

5. 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 all periods presented. Accordingly, common stock equivalents of approximately 5,565,000 stock options and 9,626,000 warrants outstanding at September 30, 2017 and 4,049,000 stock options and 9,842,000 warrants outstanding at September 30, 2016, were excluded from the calculation of weighted average shares for diluted net loss per share.

6. Subsequent Events

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

10

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

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

Overview

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

Recent Developments

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

Effective October 2, 2017 and as reported on the Company’s Current Report on Form 8-K filed on September 27, 2017, we terminated the employment of over 50% of our workforce, reducing the total number of employees at Mateon to six. Concurrent with the reduction in workforce, we reduced the salaries of our Chief Executive Officer, Chief Financial Officer and Chief Scientific Officer by 50%, with reinstatement to previous levels contingent on the Company raising additional funding of at least $4 million or a change in control of the Company.

Results of Operations

Three and Nine Months Ended September 30, 2017 and September 30, 2016

Research and development expenses

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

	Three months ended September 30,				Change						Nine months ended September 30,				Change
	2017		2016		Amount			%			2017		2016		Amount		%
Clinical studies	$	1,875	$	948	$	927			98	%	$	4,899	$	3,072	$	1,827		59	%
Employee compensation and related		662		664		(2	)		0	%		2,240		2,006		234		12	%
Employee stock-based compensation		92		111		(19	)		-17	%		303		299		4		1	%
Consulting and professional services		109		177		(68	)		-38	%		685		568		117		21	%
Drug manufacturing		16		107		(91	)		-85	%		332		270		62		23	%
Other		78		68		10			15	%		240		214		26		12	%
Total research and development	$	2,832	$	2,075	$	757			36	%	$	8,699	$	6,429	$	2,270		35	%

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

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

11

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

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

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

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

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

General and administrative expenses

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

	Three months ended September 30,				Change						Nine months ended September 30,				Change
	2017		2016		Amount			%			2017		2016		Amount			%
Employee compensation and related	$	295	$	460	$	(165	)		-36	%	$	1,218	$	1,559	$	(341	)		-22	%
Stock-based compensation		105		90		15			17	%		340		328		12			4	%
Consulting and professional services		209		521		(312	)		-60	%		858		1,608		(750	)		-47	%
Other		99		116		(17	)		-15	%		291		360		(69	)		-19	%
Total general and administrative	$	708	$	1,187	$	(479	)		-40	%	$	2,707	$	3,855	$	(1,148	)		-30	%

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

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

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

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

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

LIQUIDITY AND CAPITAL RESOURCES

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

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

12

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

If we are able to secure additional funding to continue our operations, we expect to incur additional costs and expenses to develop new agents for the treatment of cancer, including continuing our existing clinical trial OX1222 as well as conducting new, additional clinical trials and anticipated research and development expenditures.

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 Form 10-K for the year ended December 31, 2016.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

There have been no changes to our market risks from our Annual Report on Form 10-K for the year ended December 31, 2016.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

The SEC requires that as of the end of the period covered by this Quarterly Report on Form 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 in Rules 13a-15(e) and 15d-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 September 30, 2017, 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

Not applicable.

Item 1A. Risk Factors

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

Shares of our common stock may be subject to the Securities and Exchange Commission’s “penny stock” rules. Broker-dealers may experience difficulty in completing customer transactions in our securities and trading activity in our securities may be adversely affected.

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

13

in investing in the penny stock market. A broker must also provide purchasers with bid and offer quotations and information regarding broker and salesperson compensation and make a written determination that the penny stock is a suitable investment for the purchaser and obtain the purchaser’s written agreement to the purchase. Many brokers choose not to participate in penny stock transactions. Because of the penny stock rules, there may be less trading activity in penny stocks. If shares of our common stock become subject to these penny stock rules, your ability to trade or dispose of shares of our common stock may be adversely affected.

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

None.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

None.

Item 5. Other Information

In a Current Report on Form 8-K filed on September 27, 2017, we announced a reduction in workforce, in which a planned six employees would be departing the Company effective October 2, 2017. We subsequently increased the number of employees departing the Company from six to seven. The estimated severance and other cash charges related to the workforce reduction were $220,000, which have all been incurred as of September 30, 2017. The estimated monthly savings in operating expenses as a result of the workforce reductions and salary reductions implemented effective October 2, 2017 are approximately $125,000.

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

Item 6. Exhibits

		Incorporated by Reference
Exhibit Number	Description	Form	Filing Date	Exhibit Number	Filed Herewith
10.1	Amendment No. 2 to Employment Agreement by and between the Registrant and William D. Schwieterman, dated as of October 2, 2017*				x
10.2	Amendment No. 1 to Employment Agreement by and between the Registrant and Matthew M. Loar, dated as of October 2, 2017*				x
10.3	Amendment No. 1 to Second Amended and Restated Employment Agreement by and between the Registrant and David J. Chaplin, dated as of October 2, 2017*				x
31.1	Certification of Chief Executive Officer pursuant to Rule 13a-14(a) and 15d-14(a).				x
31.2	Certification of Chief Financial Officer pursuant to Rule 13a-14(a) and 15d-14(a).				x
32.1	Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.				x
101	The following materials from Mateon Therapeutics, Inc.’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2017, formatted in XBRL (eXtensible Business Reporting Language): (i) Condensed Balance Sheets at September 30, 2017 and December 31, 2016, (ii) Condensed Statements of Comprehensive Loss for the three and nine months ended September 30, 2017 and 2016, (iii) Condensed Statements of Cash Flows for the nine months ended September 30, 2017 and 2016, and (iv) Notes to Condensed Financial Statements				x

* Management contract or compensatory plan or arrangement.

14

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.

	Mateon Therapeutics, Inc. (Registrant)
Date: November 14, 2017	By:	/s/ William D. Schwieterman
		William D. Schwieterman
		Chief Executive Officer
		(Principal Executive Officer)
Date: November 14, 2017	By:	/s/ Matthew M. Loar
		Matthew M. Loar
		Chief Financial Officer
		(Principal Financial Officer)

15

EX-10.1

Exhibit 10.1

AMENDMENT NO. 2 TO EMPLOYMENT AGREEMENT

This Amendment No. 2 to Employment Agreement (the “Amendment”) is entered into as of October 2, 2017 by and between Mateon Therapeutics, Inc., a Delaware corporation formerly known as OXiGENE, Inc. (the “Company”), and Dr. William D. Schwieterman, an individual (the “Executive”). Capitalized terms used but not defined herein shall have the meaning ascribed to such terms in the Employment Agreement (as defined below).

W I T N E S S E T H:

WHEREAS, the Company and the Executive are parties to an Employment Agreement dated May 12, 2015, as amended by that certain Amendment No. 1 to Employment Agreement on July 31, 2015 (as amended, the “Employment Agreement”); and

WHEREAS, the Company and the Executive desire to amend the Employment Agreement with respect to the compensation to be paid to the Executive in order to conserve funds until further financing is secured, as specified herein.

NOW, THEREFORE, in consideration of the mutual covenants contained herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Employment Agreement is amended as follows:

1. Temporary Reduction in Salary. Notwithstanding Section 3 of the Employment Agreement, effective October 2, 2017, Executive’s Base Salary shall be reduced to $205,000 (the “Reduced Salary”). Executive shall be paid the Reduced Salary in accordance with the Company’s normal payroll policies until the occurrence of a Financing Event. For purposes of this Amendment, the term “Financing Event” means: (a) the closing of an equity financing with gross proceeds equal to or greater than $4,000,000, (b) the execution of a licensing or collaboration agreement for OXi4503 or CA4P with an up-front payment equal to or greater than $4,000,000 if the Company funds the remainder of Study OX1222, (c) any combination of (a) and (b) whereby the gross proceeds are equal to or greater than $4,000,000, or (d) the execution of a licensing or collaboration agreement for OXi4503 or CA4P with an up-front payment equal to or greater than $1,000,000 if the licensee or collaborator funds the remainder of Study OX1222. Immediately upon the closing of a Financing Event, provided Executive remains employed with the Company as of the date of the closing of the Financing Event, Executive’s salary shall be reinstated to the previous Base Salary amount of $410,000. The Compensation Committee will consider whether any additional compensation shall be paid to Executive related to the period of Reduced Salary. Executive understands and agrees that Executive has already been paid all wages due and owing under the Employment Agreement as of the date of this Amendment.

2. Effect of Amendment on “Good Reason”. Notwithstanding the definition of “Good Reason” as stated in Section 6.6 of the Employment Agreement, nothing in this Amendment, including the temporary reduction of Executive’s Base Salary, shall constitute Good Reason for Executive to resign Executive’s Employment. The parties agree that the Reduced Salary is intended to be temporary and that Executive is receiving the additional consideration of continued employment with the Company. During the period of Reduced Salary, if there is a Change in Control of the Company and Executive’s employment is terminated or Executive terminates for Good Reason, any sums due to Executive shall be based on Executive’s Base Salary before the salary reduction effective with this Amendment No. 2.

3. Effective Date. This Amendment shall be effective as of October 2, 2017 (the “Effective Date”).

4. Other Provisions. Except as specifically modified herein, the terms of the Employment Agreement shall remain in full force and effect. It is understood and agreed that this Amendment to the Employment Agreement shall become part of the Employment Agreement and shall be a binding agreement upon execution by the parties.

IN WITNESS WHEREOF, Company and Executive have caused this Amendment to be executed as of the date first above written.

	MATEON THERAPEUTICS, INC.
By:	/S/ MATTHEW M. LOAR	/S/ WILLIAM D. SCHWIETERMAN
	Matthew M. Loar	William D. Schwieterman, M.D.

EX-10.2

Exhibit 10.2

AMENDMENT NO. 1 TO EMPLOYMENT AGREEMENT

This Amendment No. 1 to Employment Agreement (the “Amendment”) is entered into as of October 2, 2017 by and between Mateon Therapeutics, Inc., a Delaware corporation formerly known as OXiGENE, Inc. (the “Company”), and Mr. Matthew M. Loar, an individual (the “Executive”). Capitalized terms used but not defined herein shall have the meaning ascribed to such terms in the Employment Agreement (as defined below).

W I T N E S S E T H:

WHEREAS, the Company and the Executive are parties to an Employment Agreement dated July 20, 2015 (the “Employment Agreement”); and

WHEREAS, the Company and the Executive desire to amend the Employment Agreement with respect to the compensation to be paid to the Executive in order to conserve funds until further financing is secured, as specified herein.

NOW, THEREFORE, in consideration of the mutual covenants contained herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Employment Agreement is amended as follows:

1. Temporary Reduction in Salary. Notwithstanding Section 3 of the Employment Agreement, effective October 2, 2017, Executive’s Base Salary shall be reduced to $162,500 (the “Reduced Salary”). Executive shall be paid the Reduced Salary in accordance with the Company’s normal payroll policies until the occurrence of a Financing Event. For purposes of this Amendment, the term “Financing Event” means: (a) the closing of an equity financing with gross proceeds equal to or greater than $4,000,000, (b) the execution of a licensing or collaboration agreement for OXi4503 or CA4P with an up-front payment equal to or greater than $4,000,000 if the Company funds the remainder of Study OX1222, (c) any combination of (a) and (b) whereby the gross proceeds are equal to or greater than $4,000,000, or (d) the execution of a licensing or collaboration agreement for OXi4503 or CA4P with an up-front payment equal to or greater than $1,000,000 if the licensee or collaborator funds the remainder of Study OX1222. Immediately upon the closing of a Financing Event, provided Executive remains employed with the Company as of the date of the closing of the Financing Event, Executive’s salary shall be reinstated to the current Base Salary amount of $325,000. The Compensation Committee will consider whether any additional compensation shall be paid to Executive related to the period of Reduced Salary. Executive understands and agrees that Executive has already been paid all wages due and owing under the Employment Agreement as of the date of this Amendment.

2. Effect of Amendment on “Good Reason”. Notwithstanding the definition of “Good Reason” as stated in Section 6.6 of the Employment Agreement, nothing in this Amendment, including the temporary reduction of Executive’s Base Salary, shall constitute Good Reason for Executive to resign Executive’s Employment. The parties agree that the Reduced Salary is intended to be temporary and that Executive is receiving the additional consideration of continued employment with the Company. During the period of Reduced Salary, if there is a Change in Control of the Company and Executive’s employment is terminated or Executive terminates for Good Reason, any sums due to Executive shall be based on Executive’s Base Salary before the salary reduction effective with this Amendment No. 1.

3. Effective Date. This Amendment shall be effective as of October 2, 2017 (the “Effective Date”).

4. Other Provisions. Except as specifically modified herein, the terms of the Employment Agreement shall remain in full force and effect. It is understood and agreed that this Amendment to the Employment Agreement shall become part of the Employment Agreement and shall be a binding agreement upon execution by the parties.

IN WITNESS WHEREOF, Company and Executive have caused this Amendment to be executed as of the date first above written.

	MATEON THERAPEUTICS, INC.
By:	/S/ WILLIAM D. SCHWIETERMAN		/S/ MATTHEW M. LOAR
	Name:	William D. Schwieterman, M.D.	Matthew M. Loar
	Title:	Chief Executive Officer

EX-10.3

Exhibit 10.3

AMENDMENT NO. 1 TO SECOND AMENDED AND RESTATED EMPLOYMENT AGREEMENT

This Amendment No. 1 to Second Amended and Restated Employment Agreement (the “Amendment”) is entered into as of October 2, 2017 by and between Mateon Therapeutics, Inc., a Delaware corporation formerly known as OXiGENE, Inc. (the “Company”), and Dr. David J. Chaplin, an individual (the “Executive”). Capitalized terms used but not defined herein shall have the meaning ascribed to such terms in the Second Amended and Restated Employment Agreement (as defined below).

W I T N E S S E T H:

WHEREAS, the Company and the Executive are parties to a Second Amended and Restated Employment Agreement dated January 1, 2017 (the “Second Amended and Restated Employment Agreement”); and

WHEREAS, the Company and the Executive desire to amend the Second Amended and Restated Employment Agreement with respect to the compensation to be paid to the Executive in order to conserve funds until further financing is secured, as specified herein.

NOW, THEREFORE, in consideration of the mutual covenants contained herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Second Amended and Restated Employment Agreement is amended as follows:

1. Temporary Reduction in Salary. Notwithstanding Section 3 of the Second Amended and Restated Employment Agreement, effective October 2, 2017, Executive’s Base Salary shall be reduced to $110,000 (the “Reduced Salary”). Executive shall be paid the Reduced Salary in accordance with the Company’s normal payroll policies until the occurrence of a Financing Event. For purposes of this Amendment, the term “Financing Event” means: (a) the closing of an equity financing with gross proceeds equal to or greater than $4,000,000, (b) the execution of a licensing or collaboration agreement for OXi4503 or CA4P with an up-front payment equal to or greater than $4,000,000 if the Company funds the remainder of Study OX1222, (c) any combination of (a) and (b) whereby the gross proceeds are equal to or greater than $4,000,000, or (d) the execution of a licensing or collaboration agreement for OXi4503 or CA4P with an up-front payment equal to or greater than $1,000,000 if the licensee or collaborator funds the remainder of Study OX1222. Immediately upon the closing of a Financing Event, provided Executive remains employed with the Company as of the date of the closing of the Financing Event, Executive’s salary shall be reinstated to the previous Base Salary amount of $220,000. The Compensation Committee will consider whether any additional compensation shall be paid to Executive related to the period of Reduced Salary. Executive understands and agrees that Executive has already been paid all wages due and owing under the Second Amended and Restated Employment Agreement as of the date of this Amendment.

2. Effect of Amendment on “Good Reason”. Notwithstanding the definition of “Good Reason” as stated in Section 6.6 of the Second Amended and Restated Employment Agreement, nothing in this Amendment, including the temporary reduction of Executive’s Base Salary, shall constitute Good Reason for Executive to resign Executive’s Employment. The parties agree that the Reduced Salary is intended to be temporary and that Executive is receiving the additional consideration of continued employment with the Company. During the period of Reduced Salary, if there is a Change in Control of the Company and Executive’s employment is terminated or Executive terminates for Good Reason, any sums due to Executive shall be based on Executive’s Base Salary before the salary reduction effective with this Amendment No. 1.

3. Effective Date. This Amendment shall be effective as of October 2, 2017 (the “Effective Date”).

4. Other Provisions. Except as specifically modified herein, the terms of the Second Amended and Restated Employment Agreement shall remain in full force and effect. It is understood and agreed that this Amendment to the Second Amended and Restated Employment Agreement shall become part of the Second Amended and Restated Employment Agreement and shall be a binding agreement upon execution by the parties.

IN WITNESS WHEREOF, Company and Executive have caused this Amendment to be executed as of the date first above written.

	MATEON THERAPEUTICS, INC.
By:	/S/ WILLIAM D. SCHWIETERMAN		/S/ DAVID J. CHAPLIN
	Name:	William D. Schwieterman, M.D.	David J. Chaplin, Ph.D.
	Title:	Chief Executive Officer

EX-31.1

Exhibit 31.1

Certification Under Section 302

I, William D. Schwieterman, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Mateon Therapeutics, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 14, 2017	By:	/s/ William D. Schwieterman
		William D. Schwieterman
		Chief Executive Officer

EX-31.2

Exhibit 31.2

Certification Under Section 302

I, Matthew M. Loar, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Mateon Therapeutics, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 14, 2017	By:	/s/ Matthew M. Loar
		Matthew M. Loar
		Chief Financial Officer

EX-32.1

Exhibit 32.1

Certification

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

(Subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code)

Pursuant to section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of section 1350, chapter 63 of title 18, United States Code), each of the undersigned officers of Mateon Therapeutics, Inc. (the “Company”), does hereby certify, to such officer’s knowledge, that:

The Quarterly Report on Form 10-Q for the three and nine months ended September 30, 2017 (the “Form 10-Q”) of the Company fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, and the information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: November 14, 2017	By:	/s/ William D. Schwieterman
		William D. Schwieterman
		Chief Executive Officer
Date: November 14, 2017	By:	/s/ Matthew M. Loar
		Matthew M. Loar
		Chief Financial Officer

A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

XML

Document and Entity Information - shares	9 Months Ended
	Sep. 30, 2017	Nov. 10, 2017
Document And Entity Information [Abstract]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Sep. 30, 2017
Document Fiscal Year Focus	2017
Document Fiscal Period Focus	Q3
Trading Symbol	OXGN
Entity Registrant Name	MATEON THERAPEUTICS INC
Entity Central Index Key	0000908259
Current Fiscal Year End Date	--12-31
Entity Filer Category	Smaller Reporting Company
Entity Common Stock, Shares Outstanding		26,544,934

XML

Condensed Balance Sheets - USD ($) $ in Thousands	Sep. 30, 2017	Dec. 31, 2016
Current assets:
Cash and cash equivalents	$ 1,908	$ 3,535
Short-term investments		8,512
Prepaid clinical trial expenses	772	1,946
Other prepaid expenses and current assets	258	77
Total current assets	2,938	14,070
Property and equipment, net	4	11
Other assets	33	33
Total assets	2,975	14,114
Current liabilities:
Accounts payable	312	310
Accrued compensation and employee benefits	261	842
Accrued severance	220
Accrued clinical trial expenses	88	64
Other accrued liabilities	330	398
Total current liabilities	1,211	1,614
Commitments and contingencies
Stockholders' equity:
Preferred stock, $0.01 par value, 15,000 shares authorized; No shares issued and outstanding
Common stock, $0.01 par value, 70,000 shares authorized; 26,545 shares issued and outstanding	265	265
Additional paid-in capital	291,340	290,698
Accumulated deficit	(289,841)	(278,463)
Total stockholders' equity	1,764	12,500
Total liabilities and stockholders' equity	$ 2,975	$ 14,114

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Condensed Balance Sheets (Parenthetical) - $ / shares	Sep. 30, 2017	Dec. 31, 2016
Statement of Financial Position [Abstract]
Preferred stock, par value	$ 0.01	$ 0.01
Preferred stock, shares authorized	15,000,000	15,000,000
Preferred stock, shares issued	0	0
Preferred stock, shares outstanding	0	0
Common stock, par value	$ 0.01	$ 0.01
Common stock, shares authorized	70,000,000	70,000,000
Common stock, shares issued	26,545,000	26,545,000
Common stock, shares outstanding	26,545,000	26,545,000

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Condensed Statements of Comprehensive Loss (Unaudited) - USD ($) shares in Thousands, $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016
Operating expenses:
Research and development	$ 2,832	$ 2,075	$ 8,699	$ 6,429
General and administrative	708	1,187	2,707	3,855
Total operating expenses	3,540	3,262	11,406	10,284
Loss from operations	(3,540)	(3,262)	(11,406)	(10,284)
Interest income	7	26	33	84
Other expense	(3)		(5)	(1)
Net loss and comprehensive loss	$ (3,536)	$ (3,236)	$ (11,378)	$ (10,201)
Basic and diluted net loss per share attributable to common stock	$ (0.13)	$ (0.12)	$ (0.43)	$ (0.38)
Weighted-average number of common shares outstanding	26,545	26,545	26,545	26,545

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Condensed Statements of Cash Flows (Unaudited) - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016
Operating activities:
Net loss	$ (11,378)	$ (10,201)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation	7	16
Stock-based compensation	642	627
Changes in operating assets and liabilities:
Prepaid expenses and other current assets	993	(829)
Accounts payable and accrued expenses	(403)	(618)
Net cash used in operating activities	(10,139)	(11,005)
Investing activities:
Purchase of short-term investments		(18,915)
Sale of short-term investments	8,512	7,802
Net cash provided by (used in) investing activities	8,512	(11,113)
Decrease in cash and cash equivalents	(1,627)	(22,118)
Cash and cash equivalents at beginning of period	3,535	27,285
Cash and cash equivalents at end of period	$ 1,908	$ 5,167

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Summary of Significant Accounting Policies

9 Months Ended

Sep. 30, 2017

Accounting Policies [Abstract]

Summary of Significant Accounting Policies

1. Summary of Significant Accounting Policies

Description of Business

Mateon Therapeutics, Inc. (“Mateon” or the “Company”) is a clinical-stage biopharmaceutical company developing drugs for the treatment of orphan oncology indications, with its lead program in acute myeloid leukemia (“AML”). The Company was originally incorporated under the name OXiGENE, Inc. in 1988 in the state of New York and reincorporated in 1992 in the state of Delaware. The Company changed its name to Mateon Therapeutics, Inc. on June 17, 2016.

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

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

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 and 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.

Short-term Investments

All marketable securities have been classified as “available for sale” and are carried at fair value, based upon quoted market prices. The Company considers its available-for-sale portfolio to be available for use in current operations. Accordingly, the Company classifies certain investments as short-term marketable securities, even though the stated maturity date may be one year or more beyond the current balance sheet date. Unrealized gains and losses, net of any related tax effects, are excluded from earnings and are included in other comprehensive income and reported as a separate component of stockholders’ deficit until realized. Realized gains and losses and declines in value judged to be other than temporary, if any, on available-for-sale securities are included in other income (expense), net. The cost of securities sold is based on the specific-identification method.

Going Concern Evaluation

The Company has experienced net losses every year since inception and, as of September 30, 2017, had an accumulated deficit of approximately $290 million. The Company has no source of revenue and does not expect to receive any product revenue in the near future. If the Company remains in business, the Company expects to incur additional operating losses over the next several years, principally as a result of the Company’s continuing development of its investigational drugs. As of September 30, 2017, the Company had approximately $1.9 million in cash and cash equivalents. Based on the Company’s planned operations, including recent reductions in the Company’s development programs and personnel and assuming the receipt of an anticipated cash refund from one of the Company’s vendors, Management expects Mateon’s existing cash to support operations into February 2018. Prior to this time, the Company will need to secure additional funding or it would be forced to terminate or further curtail operations. Because the Company does not currently have a guaranteed source of capital that will sustain operations past February 2018, Management has determined that there is substantial doubt about the Company’s ability to continue as a going concern.

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

Recent Accounting Pronouncements

In February 2016, the FASB issued ASU No. 2016-02, “Leases (Topic 842),” which requires substantially all leases, including operating leases, to be recognized by lessees on their balance sheet as a right-of-use asset and corresponding lease liability. This ASU is effective for the Company’s interim and annual reporting periods beginning January 1, 2019 and early adoption is permitted. The Company is currently evaluating the impact that the adoption of this ASU will have on its financial statements.

In March 2016, the FASB issued ASU No. 2016-09, “Compensation—Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting,” which simplified several aspects of the accounting for share-based payments, including immediate recognition of all excess tax benefits and deficiencies in the income statement, changing the threshold to qualify for equity classification up to the employees’ maximum statutory tax rates, allowing an entity-wide accounting policy election to either estimate the number of awards that are expected to vest or account for forfeitures as they occur, and clarifying the classification on the statement of cash flows for the excess tax benefit and employee taxes paid when an employer withholds shares for tax-withholding purposes. This ASU became effective for Mateon’s interim and annual reporting periods beginning January 1, 2017, and the adoption of this standard did not have a material impact on the Company’s financial statements. As part of the adoption of this standard, the Company elected to continue estimating the expected option forfeiture rate.

In August 2016, the FASB issued ASU No. 2016-15, “Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments,” which addresses several cash flow issues that diversify in practice. The new guidance is effective for fiscal years beginning after December 31, 2017 and for interim periods within those years. The Company currently does not expect the adoption of this ASU to have a material impact on its financial statements.

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Cash and Cash Equivalents

9 Months Ended

Sep. 30, 2017

Cash and Cash Equivalents [Abstract]

Cash and Cash Equivalents

2. Cash and Cash Equivalents

Cash and cash equivalents consisted of the following (in thousands):

	September 30, 2017
	Amortized Cost		Unrealized Gain		Unrealized (Loss)		Estimated Fair Value
Cash	$	202	$	—	$	—	$	202
Money market funds		1,706		—		—		1,706
	$	1,908	$	—	$	—	$	1,908

	December 31, 2016
	Amortized Cost		Unrealized Gain		Unrealized (Loss)		Estimated Fair Value
Cash	$	671	$	—	$	—	$	671
Money market funds		2,864		—		—		2,864
U.S. government treasury bills		3,008		—		—		3,008
Corporate bonds and commercial paper		5,504		—		—		5,504
	$	12,047	$	—	$	—	$	12,047

Reported as:
Cash and cash equivalents	$	3,535
Short-term investments		8,512
Total cash, cash equivalents and short-term investments	$	12,047

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Fair Value Measurements

9 Months Ended

Sep. 30, 2017

Fair Value Disclosures [Abstract]

Fair Value Measurements

3. Fair Value Measurements

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

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

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

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

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

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

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

	September 30, 2017
	Level 1		Level 2		Level 3		Total
Money market funds	$	1,706	$	—	$	—	$	1,706
	December 31, 2016
	Level 1		Level 2		Level 3		Total
Money market funds	$	2,864	$	—	$	—	$	2,864
U.S. government treasury bills		—		3,008		—		3,008
Corporate bonds and commercial paper		—		5,504		—		5,504
	$	2,864	$	8,512	$	—	$	11,376

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Stockholders' Equity

9 Months Ended

Sep. 30, 2017

Equity [Abstract]

Stockholders' Equity

4. Stockholders’ Equity

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

	Exercise Price		September 30, 2017		December 31, 2016
Expiration Date			(in thousands)
06/14/17	$	3.70		—		216
04/16/18	$	3.40		1,460		1,460
09/23/18	$	2.80		147		147
02/11/19	$	2.56		293		293
02/18/19	$	2.75		1,872		1,872
08/28/19	$	2.90		2,700		2,700
03/20/20	$	2.13		234		234
03/25/20	$	1.71		2,920		2,920
Total				9,626		9,842

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

	Options Available for Grant			Options Outstanding			Weighted Average Exercise Price		Weighted Average Remaining Contractual Life		Aggregate Intrinsic Value
	(in thousands)								(years)		(in thousands)
Balance at December 31, 2016		549			4,177		$	1.47		8.14
Options authorized		2,000
Options granted		(2,484	)		2,484		$	0.42
Options forfeited		1,096			(1,096	)	$	1.27
Balance at September 30, 2017		1,161			5,565		$	1.04		7.98	$	—
Vested and exercisable at September 30, 2017					2,037		$	1.22		7.59	$	—
Vested and expected to vest at September 30, 2017					4,478		$	0.91		7.87	$	—
Unvested at September 30, 2017					3,528		$	0.94

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

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

	Nine months ended September 30,
	2017			2016
Risk-free interest rate		2.0	%		1.5	%
Expected life (years)		6.0			6.0
Expected volatility		88	%		89	%
Dividend yield		0	%		0	%

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Net Loss Per Share

9 Months Ended

Sep. 30, 2017

Earnings Per Share [Abstract]

Net Loss Per Share

5. 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 all periods presented. Accordingly, common stock equivalents of approximately 5,565,000 stock options and 9,626,000 warrants outstanding at September 30, 2017 and 4,049,000 stock options and 9,842,000 warrants outstanding at September 30, 2016, were excluded from the calculation of weighted average shares for diluted net loss per share.

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Subsequent Events

9 Months Ended

Sep. 30, 2017

Subsequent Events [Abstract]

Subsequent Events

6. Subsequent Events

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

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Summary of Significant Accounting Policies (Policies)

9 Months Ended

Sep. 30, 2017

Accounting Policies [Abstract]

Description of Business

Description of Business

Mateon Therapeutics, Inc. (“Mateon” or the “Company”) is a clinical-stage biopharmaceutical company developing drugs for the treatment of orphan oncology indications, with its lead program in acute myeloid leukemia (“AML”). The Company was originally incorporated under the name OXiGENE, Inc. in 1988 in the state of New York and reincorporated in 1992 in the state of Delaware. The Company changed its name to Mateon Therapeutics, Inc. on June 17, 2016.

Basis of Presentation

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

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

Use of Estimates

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 and the reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates.

Cash Equivalents

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.

Short-term Investments

Short-term Investments

All marketable securities have been classified as “available for sale” and are carried at fair value, based upon quoted market prices. The Company considers its available-for-sale portfolio to be available for use in current operations. Accordingly, the Company classifies certain investments as short-term marketable securities, even though the stated maturity date may be one year or more beyond the current balance sheet date. Unrealized gains and losses, net of any related tax effects, are excluded from earnings and are included in other comprehensive income and reported as a separate component of stockholders’ deficit until realized. Realized gains and losses and declines in value judged to be other than temporary, if any, on available-for-sale securities are included in other income (expense), net. The cost of securities sold is based on the specific-identification method.

Going Concern Evaluation

Going Concern Evaluation

The Company has experienced net losses every year since inception and, as of September 30, 2017, had an accumulated deficit of approximately $290 million. The Company has no source of revenue and does not expect to receive any product revenue in the near future. If the Company remains in business, the Company expects to incur additional operating losses over the next several years, principally as a result of the Company’s continuing development of its investigational drugs. As of September 30, 2017, the Company had approximately $1.9 million in cash and cash equivalents. Based on the Company’s planned operations, including recent reductions in the Company’s development programs and personnel and assuming the receipt of an anticipated cash refund from one of the Company’s vendors, Management expects Mateon’s existing cash to support operations into February 2018. Prior to this time, the Company will need to secure additional funding or it would be forced to terminate or further curtail operations. Because the Company does not currently have a guaranteed source of capital that will sustain operations past February 2018, Management has determined that there is substantial doubt about the Company’s ability to continue as a going concern.

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

Recent Accounting Pronouncements

Recent Accounting Pronouncements

In February 2016, the FASB issued ASU No. 2016-02, “Leases (Topic 842),” which requires substantially all leases, including operating leases, to be recognized by lessees on their balance sheet as a right-of-use asset and corresponding lease liability. This ASU is effective for the Company’s interim and annual reporting periods beginning January 1, 2019 and early adoption is permitted. The Company is currently evaluating the impact that the adoption of this ASU will have on its financial statements.

In March 2016, the FASB issued ASU No. 2016-09, “Compensation—Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting,” which simplified several aspects of the accounting for share-based payments, including immediate recognition of all excess tax benefits and deficiencies in the income statement, changing the threshold to qualify for equity classification up to the employees’ maximum statutory tax rates, allowing an entity-wide accounting policy election to either estimate the number of awards that are expected to vest or account for forfeitures as they occur, and clarifying the classification on the statement of cash flows for the excess tax benefit and employee taxes paid when an employer withholds shares for tax-withholding purposes. This ASU became effective for Mateon’s interim and annual reporting periods beginning January 1, 2017, and the adoption of this standard did not have a material impact on the Company’s financial statements. As part of the adoption of this standard, the Company elected to continue estimating the expected option forfeiture rate.

In August 2016, the FASB issued ASU No. 2016-15, “Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments,” which addresses several cash flow issues that diversify in practice. The new guidance is effective for fiscal years beginning after December 31, 2017 and for interim periods within those years. The Company currently does not expect the adoption of this ASU to have a material impact on its financial statements.

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Cash and Cash Equivalents (Tables)

9 Months Ended

Sep. 30, 2017

Cash and Cash Equivalents [Abstract]

Summary of Cash and Cash Equivalents

Cash and cash equivalents consisted of the following (in thousands):

	September 30, 2017
	Amortized Cost		Unrealized Gain		Unrealized (Loss)		Estimated Fair Value
Cash	$	202	$	—	$	—	$	202
Money market funds		1,706		—		—		1,706
	$	1,908	$	—	$	—	$	1,908

	December 31, 2016
	Amortized Cost		Unrealized Gain		Unrealized (Loss)		Estimated Fair Value
Cash	$	671	$	—	$	—	$	671
Money market funds		2,864		—		—		2,864
U.S. government treasury bills		3,008		—		—		3,008
Corporate bonds and commercial paper		5,504		—		—		5,504
	$	12,047	$	—	$	—	$	12,047

Reported as:
Cash and cash equivalents	$	3,535
Short-term investments		8,512
Total cash, cash equivalents and short-term investments	$	12,047

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Fair Value Measurements (Tables)

9 Months Ended

Sep. 30, 2017

Fair Value Disclosures [Abstract]

Summary of Financial Assets Measured at Fair Value on a Recurring Basis

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

	September 30, 2017
	Level 1		Level 2		Level 3		Total
Money market funds	$	1,706	$	—	$	—	$	1,706
	December 31, 2016
	Level 1		Level 2		Level 3		Total
Money market funds	$	2,864	$	—	$	—	$	2,864
U.S. government treasury bills		—		3,008		—		3,008
Corporate bonds and commercial paper		—		5,504		—		5,504
	$	2,864	$	8,512	$	—	$	11,376

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Stockholders' Equity (Tables)

9 Months Ended

Sep. 30, 2017

Equity [Abstract]

Summary of Company's Outstanding Warrants to Purchase Common Stock

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

	Exercise Price		September 30, 2017		December 31, 2016
Expiration Date			(in thousands)
06/14/17	$	3.70		—		216
04/16/18	$	3.40		1,460		1,460
09/23/18	$	2.80		147		147
02/11/19	$	2.56		293		293
02/18/19	$	2.75		1,872		1,872
08/28/19	$	2.90		2,700		2,700
03/20/20	$	2.13		234		234
03/25/20	$	1.71		2,920		2,920
Total				9,626		9,842

Summary of the Company's Stock Option Activity under Equity Incentive Plans

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

	Options Available for Grant			Options Outstanding			Weighted Average Exercise Price		Weighted Average Remaining Contractual Life		Aggregate Intrinsic Value
	(in thousands)								(years)		(in thousands)
Balance at December 31, 2016		549			4,177		$	1.47		8.14
Options authorized		2,000
Options granted		(2,484	)		2,484		$	0.42
Options forfeited		1,096			(1,096	)	$	1.27
Balance at September 30, 2017		1,161			5,565		$	1.04		7.98	$	—
Vested and exercisable at September 30, 2017					2,037		$	1.22		7.59	$	—
Vested and expected to vest at September 30, 2017					4,478		$	0.91		7.87	$	—
Unvested at September 30, 2017					3,528		$	0.94

Weighted-Average Assumptions

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

	Nine months ended September 30,
	2017			2016
Risk-free interest rate		2.0	%		1.5	%
Expected life (years)		6.0			6.0
Expected volatility		88	%		89	%
Dividend yield		0	%		0	%

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Summary of Significant Accounting Policies - Additional Information (Detail) - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2017	Dec. 31, 2016	Sep. 30, 2016	Dec. 31, 2015
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Accumulated deficit	$ (289,841)	$ (278,463)
Cash and cash equivalents	$ 1,908	$ 3,535	$ 5,167	$ 27,285
Substantial doubt about going concern, management's evaluation	Mateon’s existing cash to support operations into February 2018. Prior to this time, the Company will need to secure additional funding or it would be forced to terminate or further curtail operations. Because the Company does not currently have a guaranteed source of capital that will sustain operations past February 2018, Management has determined that there is substantial doubt about the Company’s ability to continue as a going concern.
Substantial doubt about going concern	Any additional equity financing, if available to the Company, may not be available on favorable terms and would most likely be dilutive to current stockholders.

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Cash and Cash Equivalents - Summary of Cash and Cash Equivalents (Detail) - USD ($) $ in Thousands	Sep. 30, 2017	Dec. 31, 2016
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	$ 1,908	$ 12,047
Unrealized Gain	0	0
Unrealized (Loss)	0	0
Estimated Fair Value	1,908	12,047
Cash and Cash Equivalents [Member]
Schedule of Available-for-sale Securities [Line Items]
Estimated Fair Value		3,535
Short-term Investments [Member]
Schedule of Available-for-sale Securities [Line Items]
Estimated Fair Value		8,512
Cash [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	202	671
Unrealized Gain	0	0
Unrealized (Loss)	0	0
Estimated Fair Value	202	671
Money Market Funds [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	1,706	2,864
Unrealized Gain	0	0
Unrealized (Loss)	0	0
Estimated Fair Value	$ 1,706	2,864
U.S. Government Treasury Bills [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost		3,008
Unrealized Gain		0
Unrealized (Loss)		0
Estimated Fair Value		3,008
Corporate Bonds and Commercial Paper [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost		5,504
Unrealized Gain		0
Unrealized (Loss)		0
Estimated Fair Value		$ 5,504

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Fair Value Measurements - Summary of Financial Assets Measured at Fair Value on a Recurring Basis (Detail) - Fair Value Measurements Recurring [Member] - USD ($) $ in Thousands	Sep. 30, 2017	Dec. 31, 2016
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets fair value disclosure		$ 11,376
Money Market Funds [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets fair value disclosure	$ 1,706	2,864
U.S. Government Treasury Bills [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets fair value disclosure		3,008
Corporate Bonds and Commercial Paper [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets fair value disclosure		5,504
Level 1 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets fair value disclosure		2,864
Level 1 [Member] | Money Market Funds [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets fair value disclosure	$ 1,706	2,864
Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets fair value disclosure		8,512
Level 2 [Member] | U.S. Government Treasury Bills [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets fair value disclosure		3,008
Level 2 [Member] | Corporate Bonds and Commercial Paper [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets fair value disclosure		$ 5,504

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Stockholders' Equity - Summary of Company's Outstanding Warrants to Purchase Common Stock (Detail) - $ / shares shares in Thousands	9 Months Ended
	Sep. 30, 2017	Dec. 31, 2016
Class of Warrant or Right [Line Items]
Number of warrants outstanding	9,626	9,842
2014 Private Placement [Member]
Class of Warrant or Right [Line Items]
Expiration Date	Jun. 14, 2017
Exercise Price	$ 3.70
Number of warrants outstanding		216
Private Placement Series A [Member]
Class of Warrant or Right [Line Items]
Expiration Date	Apr. 16, 2018
Exercise Price	$ 3.40
Number of warrants outstanding	1,460	1,460
2013 Private Placement [Member]
Class of Warrant or Right [Line Items]
Expiration Date	Sep. 23, 2018
Exercise Price	$ 2.80
Number of warrants outstanding	147	147
2014 Public Offering [Member]
Class of Warrant or Right [Line Items]
Expiration Date	Feb. 11, 2019
Exercise Price	$ 2.56
Number of warrants outstanding	293	293
2014 Public Offering [Member]
Class of Warrant or Right [Line Items]
Expiration Date	Feb. 18, 2019
Exercise Price	$ 2.75
Number of warrants outstanding	1,872	1,872
2014 Private Placement [Member]
Class of Warrant or Right [Line Items]
Expiration Date	Aug. 28, 2019
Exercise Price	$ 2.90
Number of warrants outstanding	2,700	2,700
2015 Private Placement [Member]
Class of Warrant or Right [Line Items]
Expiration Date	Mar. 20, 2020
Exercise Price	$ 2.13
Number of warrants outstanding	234	234
2015 Private Placement [Member]
Class of Warrant or Right [Line Items]
Expiration Date	Mar. 25, 2020
Exercise Price	$ 1.71
Number of warrants outstanding	2,920	2,920

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Stockholders' Equity - Summary of the Company's Stock Option Activity under Equity Incentive Plans (Detail) $ / shares in Units, $ in Thousands	9 Months Ended
	Sep. 30, 2017 USD ($) $ / shares shares
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]
Options Available for Grant, Beginning Balance	549,000
Options Available for Grant, Options authorized	2,000,000
Options Available for Grant, Options granted	(2,484,000)
Options Available for Grant, Options forfeited	1,096,000
Options Available for Grant, Ending Balance	1,161,000
Options Outstanding, Beginning Balance	4,177,000
Options Outstanding, Options granted	2,484,000
Options Outstanding, Options forfeited	(1,096,000)
Options Outstanding, Ending Balance	5,565,000
Options Outstanding, Vested and exercisable	2,037,000
Options Outstanding, Vested and expected to vest, Ending Balance	4,478,000
Options Outstanding, Unvested	3,528,000
Weighted Average Exercise Price, Beginning Balance | $ / shares	$ 1.47
Weighted Average Exercise Price, Options granted | $ / shares	0.42
Weighted Average Exercise Price, Options forfeited | $ / shares	1.27
Weighted Average Exercise Price, Ending Balance | $ / shares	1.04
Weighted Average Exercise Price, Vested and exercisable | $ / shares	1.22
Weighted Average Exercise Price, Vested and expected to vest, Ending Balance | $ / shares	0.91
Weighted Average Exercise Price, Unvested | $ / shares	$ 0.94
Weighted Average Remaining Contractual Life, Beginning Balance	8 years 1 month 20 days
Weighted Average Remaining Contractual Life, Ending Balance	7 years 11 months 23 days
Weighted Average Remaining Contractual Life, Vested and exercisable	7 years 7 months 2 days
Weighted Average Remaining Contractual Life, Vested and expected to vest, Ending Balance	7 years 10 months 14 days
Aggregate Intrinsic Value | $	$ 0
Aggregate Intrinsic Value, Vested and exercisable | $	0
Aggregate Intrinsic Value, Vested and expected to vest, Ending Balance | $	$ 0

XML

Stockholders' Equity - Additional Information (Detail) $ in Millions	9 Months Ended
	Sep. 30, 2017 USD ($)
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]
Weighted average period for recognizing unrecognized compensation cost as expense	2 years 2 months 12 days
Unrecognized compensation cost related to stock option awards	$ 1.1

XML

Stockholders' Equity - Weighted-Average Assumptions (Detail)	9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]
Risk-free interest rate	2.00%	1.50%
Expected life (years)	6 years	6 years
Expected volatility	88.00%	89.00%
Dividend yield	0.00%	0.00%

XML

Net Loss Per Share - Additional Information (Detail) - shares	9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016
Stock Option [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Common stock excluded from the calculation of weighted average shares for diluted net loss per share	5,565,000	4,049,000
Warrants [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Common stock excluded from the calculation of weighted average shares for diluted net loss per share	9,626,000	9,842,000

XML

Subsequent Events - Additional Information (Detail)	Oct. 02, 2017 USD ($) Employees	Sep. 30, 2017 Employees
Subsequent Events [Line Items]
Total number of employees		13
Subsequent Event [Member]
Subsequent Events [Line Items]
Number of employees terminated	7
Total number of employees	6
Percentage of base salary reduction of CEO, CFO and CSO	50.00%
Additional funding amount required | $	$ 4,000,000