Stock-Based Compensation

6 Months Ended

Jun. 30, 2020

Compensation Related Costs [Abstract]

Stock-Based Compensation

NOTE 8 – STOCK-BASED COMPENSATION

Options

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

As of June 30, 2020, options to purchase Mateon’s Common Stock were outstanding under three stock option plans – the 2017 Equity Incentive Plan (the “2017 Plan”), the 2015 Equity Incentive Plan (the “2015 Plan”) and the 2005 Stock Plan (the “2005 Plan”). Under the 2017 Plan, up to 2,000,000 shares of Mateon’s Common Stock may be issued pursuant to awards granted in the form of nonqualified stock options, restricted and unrestricted stock awards, and other stock-based awards. Under the 2015 and 2005 Plans, taken together, up to 7,250,000 shares of Mateon’s Common Stock may be issued pursuant to awards granted in the form of incentive stock options, nonqualified stock options, restricted and unrestricted stock awards, and other stock-based awards. Employees, consultants, and directors are eligible for awards granted under the 2017 and 2015 Plans. Since the adoption of the 2015 Plan, no further awards may be granted under the 2005 Plan, although options previously granted remain outstanding in accordance with their terms.

Compensation based stock option activity for qualified and unqualified stock options are summarized as follows:

				Weighted
				Average
	Shares			Exercise Price
Outstanding at December 31, 2019		6,145,044		$	0.75
Expired or canceled		(9,760	)		2.79
Outstanding at June 30, 2020		6,135,284		$	0.75

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

				Weighted-		Weighted-
				Average		Average
		Outstanding		Remaining Life		Exercise		Number
Exercise prices		Options		In Years		Price		Exercisable
$	0.22		2,524,513		7.98	$	0.22		2,524,513
	0.38		1,162,500		6.54		0.38		1,162,500
	0.51		242,966		6.95		0.51		242,966
	0.58		271,224		6.33		0.58		271,224
	0.73		1,025,000		5.73		0.73		1,025,000
	1.37		150,000		5.06		1.37		150,000
	1.43		525,000		4.91		1.43		525,000
	2.60		5,280		4.01		2.60		5,280
	2.95		150,000		3.98		2.95		150,000
	11.88		2,359		1.51		11.88		2,359
	15.00		75,000		4.91		15.00		75,000
	19.80		1,442		1.34		19.80		1,442
			6,135,284		6.44	$	0.74		6,135,284

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

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

The aggregate intrinsic value totaled $0 and was based on Mateon’s closing stock price of $0.19 as of June 30, 2020, which would have been received by the option holders had all option holders exercised their options as of that date.

As of June 30, 2020, there was no future compensation cost as all stock options vested as the compensation was fully expensed prior to the Merger and no new options have been granted since then.

In April 2019 and in conjunction with the close of the Merger, the Company recorded approximately $341,000 in compensation cost as a result of the acceleration of the vesting schedule of approximately 328,000 Oncotelic options. Pursuant to the Merger these options were converted into Common Stock and Series A Preferred Shares in the Company.

In August 2019, the Company entered into Employment Agreements and incentive compensation arrangements with each of its executive officers, including Dr. Vuong Trieu, the Chief Executive Officer; Dr. Fatih Uckun, the Chief Medical Officer; Dr. Chulho Park, its Chief Technology Officer; and Mr. Amit Shah, the Chief Financial Officer. Details of the agreements and the incentive compensation is described in detail in Note 10 – Commitments & Contingencies under “Employment Agreements”. The incentive stock options or the restricted stock awards granted to the Company’s executive officers have not been granted as of the date of this filing.

Warrants

Pursuant to the Merger, Mateon’s Common Stock and corresponding outstanding warrants survived. The below information represents Mateon’s associated warrant activity pre-merger and post-merger.

In February 2020, Mateon offered to cancel to all the prior warrants of the warrant holders from the 2018 debt financing and offered to reissue new warrants to such warrant holders. Out of all the warrant holders, holders of 13,750,000 warrants opted to participate in the reissuance. The issuance of warrants to purchase shares of Mateon’s Common Stock, including those attributed to debt issuances, as of June 30, 2020 and December 31, 2019 are summarized as follows:

				Weighted-
				Average
	Shares			Exercise Price
As of June 30, 2020
Outstanding at December 31, 2019		19,515,787		$	0.60
Issued during three months ended June 30, 2020		13,750,000			0.20
Expired or cancelled		(18,028,287	)		0.63
Outstanding at June 30, 2020		15,237,500		$	0.20

				Weighted-
				Average
	Shares			Exercise Price
As of December 31, 2019
Outstanding at December 31, 2018		24,380,893		$	1.05
Expired or cancelled		(4,865,106	)		2.82
Outstanding at December 31, 2019		19,515,787		$	0.60

The following table summarizes information about warrants outstanding and exercisable at June 30, 2020:

		Outstanding and exercisable
				Weighted-		Weighted-
				Average		Average
		Number		Remaining Life		Exercise		Number
Exercise Price		Outstanding		in Years		Price		Exercisable
$	0.20		1,487,500		2.75	$	0.20		1,487,500
	0.20		13,750,000		2.75		0.20		13,750,000
			15,237,500		2.75	$	0.20		15,237,500

The expense attributed to the issuances of the warrants was recognized as they vested/earned. These warrants were exercisable for three to five years from the grant date. All the warrants are currently exercisable. There were no warrants issued during the year ended December 31, 2019. 13,750,000 warrants were issued during the three months ended March 31, 2020 and Mateon recorded stock-based compensation of $2,100,000 as the fair value of the warrants using a Black Scholes valuation model using the following input values.

Expected Term	3 years
Expected volatility	140.5	%
Risk-free interest rates	1.40	%
Dividend yields	0.00	%