UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM10-Q

(Mark One)

For the quarterly period ended June 30, 20182019

For the transition period from    to    

Commission file number001-13467

HedgePath Pharmaceuticals, Inc.

(Exact name of registrant as specified in its charter)

Registrant’s telephone number (including area code):813-864-2559813-509-2417

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 ofRegulationS-T (§232.405 of this chapter) during the preceding 12 months (or for 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, or anon-accelerated filer or a smaller reporting company. See definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” inRule 12b-2 of the Exchange Act.

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.  ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule12b-2 of the Exchange Act).    Yes  ☐    No  ☒

Securities registered pursuant to Section 12(b) of the Act: None.

As of July 23, 2018,August 12, 2019 there were 369,959,064370,446,185 shares of company common stock issued and outstanding.

HedgePath Pharmaceuticals, Inc.

Quarterly Report on Form10-Q

TABLE OF CONTENTS

HEDGEPATH PHARMACEUTICALS, INC.

CONDENSED BALANCE SHEETS

AS OF JUNE 30, 20182019 AND DECEMBER 31, 2017

(Unaudited)2018

See notes to condensed financial statements

HEDGEPATH PHARMACEUTICALS, INC.

CONDENSED STATEMENTS OF OPERATIONS

FOR THE THREE MONTH AND SIX MONTH PERIODS ENDED JUNE 30, 20182019 AND 20172018

(Unaudited)

See notes to condensed financial statements

HEDGEPATH PHARMACEUTICALS, INC.

CONDENSED STATEMENTSTATEMENTS OF STOCKHOLDERS’ (DEFICIT) EQUITY AND REDEEMABLE PREFERRED STOCK(DEFICIT)

FOR THE SIX MONTHS ENDED JUNE 30, 2019 AND 2018

(Unaudited)

HEDGEPATH PHARMACEUTICALS, INC.

CONDENSED STATEMENTS OF CASH FLOWS

FOR THE SIX MONTHS ENDED JUNE 30, 20182019 AND 20172018

(Unaudited)

See notes to condensed financial statements

HEDGEPATH PHARMACEUTICALS, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED JUNE 30, 20182019 AND 20172018

(Unaudited)

Overview

The accompanying unaudited condensed financial statements of HedgePath Pharmaceuticals, Inc., a Delaware corporation (the “Company”, “HPPI”, “we”, “us” or similar terminology), have been prepared by the Company without audit. In the opinion of management, all adjustments (which include normal recurring adjustments) necessary to present fairly the financial position, results of operations and cash flows as of June 30, 2018,2019, and for all periods presented, have been made.

Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) have been condensed or omitted pursuant to the Securities and Exchange Commission (“SEC”) rules and regulations. These unaudited condensed financial statements should be read in conjunction with the audited financial statements and notes thereto for the year ended December 31, 2017,2018, which are included in the Company’s Annual Report on Form10-K for the fiscal year ended December 31, 2017,2018, which was filed with the SEC on February 16, 2018March 7, 2019 (the “2017“2018 Annual Report”). The accompanying condensed balance sheet as of December 31, 20172018 has been derived from the audited financial statements at that date, but does not include all information and footnotes required by GAAP for complete financial statements.

As used herein, the term “Common Stock” means the Company’s common stock, $0.0001 par value per share.

The results of operations for the three and six month periods ended June 30, 20182019 are not necessarily indicative of results that may be expected for any other interim period or for the full fiscal year. Readers of this Quarterly Report are strongly encouraged to review the risk factors relating to the Company which are set forth in the Company’s 20172018 Annual Report on Form10-K and our other filings with the SEC.

Nature of the Business and Background

The Company is a clinical stage biopharmaceuticalpharmaceutical development company that is seeking to discover, develop and ultimately commercialize innovative therapeutics for patients with certain cancers.cancers and certainnon-cancerous proliferation disorders. The Company mayhas also explored and expects to continue to explore acquiring or licensing other innovative preclinical and clinical stage therapeutics addressing unmet needs and orphan indications beyond cancer. The Company’s current primary focus is on the development of therapies initially for prostate and also lung cancers in the U.S. market after assigning the rights to its initial product candidateindication targeting basal cell carcinoma in patients with Basal Cell Carcinoma Nevus Syndrome (“BCCNS”) to the Company’s majority stockholder, Mayne Pharma Ventures Pty Ltd (“Mayne Pharma”), in December 2018.

The Company’s primary proposed therapy is based upon the use of SUBA™SUBA^™-Itraconazole, which is a patented, oral formulation of the currently marketed anti-fungal drug itraconazoleitraconazole. SUBA-Itraconazole is licensed to which the Company holdsby Mayne Pharma on an exclusive U.S. license.

The Company’s current focus is on the development of therapies for skin, lung and prostate cancersbasis in the U.S. market, withUnited States in the first indication targeting basal cell carcinoma in patients with Basal Cell Carcinoma Nevus Syndrome (also known as Gorlin Syndrome) (“BCCNS”), for whichfield of certain cancers (including prostate and lung cancer) and certainnon-cancerous proliferation disorders pursuant to the Third Amended and Restated Supply and License Agreement between the Company commenced an open label, Phase 2(b) clinical trial in the third quarter of 2015. The Company continues to interact with the U.S. Food and Drug Administration (“FDA”) regarding the results of its Phase 2(b) trial in order to gain further guidance regarding the filing of the New Drug Application (“NDA”) for SUBA-Itraconazole for the treatment of BCCNS (“SUBA BCCNS”Mayne Pharma, dated December 17, 2018 (the “Third SLA”). In June 2018, the Company announced the FDA granted the Company aface-to-face meeting to discuss the results obtained in the Phase 2(b) clinical trial. The Company believes that this meeting (known as a Type C Meeting, which is scheduled to occur on July 23, 2018), will provide the opportunity for the Company to advocate for and gain further guidance from FDA relating to the anticipated filing by the Company of a New Drug Application (NDA) for SUBA BCCNS later in 2018.

The Company believesdemonstrated in its previous Phase 2b trial in BCCNS that the dosing of oral capsules of SUBA-Itraconazole can affectaffects the Hedgehog signaling pathway, a major regulator of many fundamental cellular processes, which, in turn, can impact the development and growth of cancers such as basal cell carcinoma. Itraconazole has been approved by the FDAU.S. Food and Drug Administration (“FDA”) for, and has been extensively used to, treat fungal infections and has an extensive history of safe and effective use in humans. The Company has developed, optioned and licensed intellectual property andknow-how related to the treatment of cancer patients using itraconazole.itraconazole and certain itraconazole analogues.

Manufacturing and Product Supply and Relationship with Mayne Pharma Ventures Pty Ltd.

The Company has exclusive rightsdoes not have any production facilities or manufacturing personnel. The Third SLA provides for the supply to the Company of specially formulated capsules of SUBA-Itraconazole, manufactured by Mayne Pharma under cGMP (current good manufacturing practice) standards, for use by the Company in its clinical trials and for the U.S.future commercial supply following FDA approvals, if obtained.

Pursuant to develop andthe Third SLA, Mayne Pharma is obligated to commercializesupply the Company with its patented formulation of SUBA-Itraconazole capsulesin a particular oral dose formulation for the treatment of human cancer via oral administration.patients with certain cancers andnon-cancerous proliferation disorders for as long as the Third SLA is in effect. The Company is required to perform specified development activities and to commercialize SUBA-Itraconazole was developed and is licensed to us byfor the Company’s manufacturing partner and majority shareholder Mayne Pharma Ventures Pty Ltd. and its affiliates (“Mayne Pharma”) under a supply and license agreement, originally dated September 3, 2013, amended and restated on June 24, 2014 and May 15, 2015, and as further amended on November 22, 2016 and January 10, 2018 (collectively, the “SLA”). Mayne Pharma is an Australian specialty pharmaceutical company that develops and manufactures branded and generic products, which it distributes directly or through distribution partners and also provides contract development and manufacturing services. In addition to being the Company’s licensor and supply partner, under the SLA and related agreements, Mayne Pharma holds a majority equity staketreatment of cancer in the Company and holds important contractual rights with respect to the Company, such as the right to appoint members to the Company’s board of directors, and in particular with respect to SUBA BCCNS, as further explained below.United States.

HEDGEPATH PHARMACEUTICALS, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED JUNE 30, 20182019 AND 20172018

(Unaudited)

Series B Preferred Stock Purchase AgreementOverview of December 2018 Transactions with Mayne Pharma

On January 8,December 17, 2018 (the “Effective Date”), the Company entered into a definitive securities purchasethe following related agreements (collectively, the “Transaction Documents”):

In addition, as partpursuant to the terms of the Financing,Agreement, the Company and Mayne Pharma agreed to amendvote in favor of the SLA, most notably to eliminate the provision that would have allowed Mayne Pharma to terminate the SLA in the event that the Company had not receivedadoption of an NDA approval for a product covered by the SLA by October 31, 2018.

Under the Purchase Agreement, the Company has agreed to use the proceeds from the Financing solely for purposesAmended and Restated Certificate of funding the continued development of SUBA BCCNSDesignation (the “Amended and for general corporate purposes; provided, however, that the Company may use the proceeds from the Third Closing (in a manner consistent with the SLA)Restated COD”) for the development of other SUBA-Itraconazole treatments for cancer and for general operating purposes of the Company. In addition, the Purchase Agreement provides for additional limitations on the use of proceeds from the Financing including, without limitation, that the Company shall not use the proceeds from any Closing for: (i) the satisfaction of any portion of the Company’s indebtedness (other than payment of trade payables in the ordinary course of the Company’s business and prior practices) or (ii) the redemption of any CommonSeries B Convertible Preferred Stock or other Company securities.

In addition, under the Purchase Agreement, the Company agreed that for the period from the date of the Initial Closing through December 31, 2018 (the “Market Standoff Period”“Series B Preferred Stock”), which amended and restated the Company will not undertake external financing (which shall specifically exclude exerciseterms of existing options and warrants) without the approval of Mayne Pharma, such approval not to be unreasonably withheld, conditioned or delayed, and giving due consideration to the fiduciary duties and business judgment of the Company’s Board of Directors; provided, however, that if, during the Market Standoff Period, any existing warrants or options of the Company are exercised, the proceeds of such exercises may, in the discretion of the Company’s Board of

HEDGEPATH PHARMACEUTICALS, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED JUNE 30, 2018 AND 2017

(Unaudited)

Directors, be used for preliminary work on SUBA-Itraconazole cancer indications other than SUBA BCCNS, in each case in accordance with the SLA.

Under the Purchase Agreement, Mayne Pharma has been afforded certain demand and “piggyback” rights to cause the Company to register the shares of Common Stock underlying the Series B Preferred Stock and(originally issued to Mayne Pharma on January 8, 2018) to remove the Warrants for public resale; provided, however, that suchredemption rights shall only become effective and exercisable from and after the termination of the SLA.Series B Preferred Stock as described below. At June 30, 2019, all 5,797,102 outstanding shares the Series B Preferred Stock are held by Mayne Pharma.

The Transaction Documents resulted from negotiations regarding the existing right of Mayne Pharma under the Second Amended SLA to elect to assume control of the regulatory and clinical development program for SUBA-Itraconazole for the treatment of BCCNS (such product candidate “SUBA-Itraconazole BCCNS”) in exchange for a royalty on any future net sales of SUBA-Itraconazole BCCNS by Mayne Pharma in the United States if an FDA New Drug Application (“NDA”) was not accepted for filing by FDA by December 31, 2018 (subject to limited extension if the NDA were filed in December 2018). Based on unforeseen requirements imposed by FDA in September 2018, the Company determined that it would be unable to responsibly file the SUBA-Itraconazole BCCNS NDA by this deadline, and thus the Company commenced negotiations with Mayne Pharma and preparationto transfer SUBA-Itraconazole BCCNS in advance of related transaction documentation associated with Financing and amendmentDecember 31, 2018 on negotiated terms deemed beneficial to the SLA was undertakenCompany.

The Transaction Documents were negotiated and approved on behalf of the Company by a special committee of disinterested, independent members of the Company’s Board of Directors.

TermsDirectors (the “Board”) which was formed on October 26, 2018 for such purpose. The special Board committee consisted of three members of the Series B Preferred StockBoard who were each disinterested with respect to Mayne Pharma.

December 2018 Agreement with Mayne Pharma

The Series B Preferred Stock carriesPursuant to the terms of the Agreement, on the Effective Date, Mayne Pharma (in its capacity as the holder of more than 50% of the outstanding voting securities of the Company) executed and delivered to the Company a stockholder consent which consented to the taking of the following provisions:

Price Per Share. The purchase price for each share of Series B Preferred Stock is $0.69 (which is equal to three times (3x)actions: (a) the Conversion Price (as defined below)) (the “Per Share Price”). An applicable number of shares of Series B Preferred Stock will be issued at each Closing based on the Per Share Price.

Dividends. The shares of Series B Preferred Stock will accrue dividends at a rate of 5%adoption of the Per Share Price per annum per share. Dividends will be paid semi-annually as of June 30 (with a payment date of July 15)Amended and December 31 (with a payment date of January 15) each year. The Company shall have the option in its discretion to pay dividends in cash or shares of Common Stock. If the Company elects to pay dividends in shares of Common Stock, the number of shares to be paid being calculated by dividing (i) the principal value of the dividend to be paid by (ii) the6-month volume-weighted average price of the Common Stock prior to the measurement date (being December 31st, or June 30th) of the applicable year.

Voluntary and Mandatory Conversion. The shares of Series B Preferred Stock shares will be convertible as provided for below into an aggregate of 21,739,131 shares of Common Stock (assuming all three Closings occur) based on a conversion price per share of $0.23 (the “Conversion Price”). Each share of Series B Preferred Stock shall be convertible into three (3) shares of Common Stock at any time atRestated COD; (b) the election of Mayne Pharmaeach E. Brendan Magrab, W. Mark Watson, Dr. R. Dana Ono, Stefan J. Cross and Robert D. Martin (each a current member of the Board, except Brendan Magrab, who resigned effective June 30, 2019) to serve on the Board for aone-year term that expires at the next annual meeting of the Company’s stockholders or until his earlier death, resignation or removal; and (c) the approval of an increase in the size of the Company’s 2014 Equity Incentive Plan (as amended, the “EIP”) by 11,000,000 shares of common stock from 32,583,475 shares to 43,583,475 shares.

In addition, pursuant to the Agreement, for the period beginning on the Effective Date and ending three (3) years from the Effective Date, in the event that the Company asks its stockholders (whether at a price per share equalmeeting of stockholders or pursuant to the Conversion Price. The Conversion Price shall be subjecta written consent of stockholders) to customary stock-based, but not price-based, anti-dilution protection. Each share of Series B Preferred Stock shall automatically convert into three (3) shares of Common Stock basedvote on the Conversion Price upon the approval by the FDA of an NDA for any SUBA-based therapeutic under the SLA (including SUBA BCCNS).

Liquidation Preference. In the event of any voluntary or involuntary liquidation, dissolution or winding upapprove a proposal to effect a reverse split of the Company capital stock for the purpose of uplisting the common stock to a U.S. national securities exchange (a “Reverse Stock Split Proposal”), Mayne Pharma (with respect(on behalf of itself and its affiliates) agreed to its holdings of Series B Preferred Stock only) will be entitledvote or cause to be paid outvoted (in person, by proxy or by action by written consent, as applicable) all shares of the assetsCompany’s voting capital stock that either Mayne Pharma then owns or over which Mayne Pharma has voting control in favor of the Company available for distribution to its stockholders beforeadoption and approval of any payment will be made to the holders of all other capital stock ofsuch Reverse Stock Split Proposal. No assurances are given that the Company (including the Common Stock)will seek an amount per shareuplisting to a U.S. national securities exchange or implement a reverse stock split of Series B Preferred Stock equal to the Per Share Price plus any dividends accrued but unpaid thereon.

Seniority. So long as the shares of Series B Preferred Stock are outstanding, the Company shall not, without the prior written approval of from the holders of a majority of the then outstanding shares of Series B Preferred Stock: (i) establish any security nor incur any secured or unsecured indebtedness (other than trade debt in the ordinary course of business) or (ii) establish any security that is pari passu or senior (or reclassify any junior security so as to make it pari passu or senior) in liquidation preference or senior to the Series B Preferred Stock.

Voting. With respect to its shares of Series B Preferred Stock, Mayne Pharma shall be entitled to vote together with the holders of Common Stock as a single class the number of votes Mayne Pharma would have if the Series B Preferred Stock were converted into Common Stock.

Redemption. On or after the five (5) year anniversary of the Initial Closing, Mayne Pharma shall have the right to cause the Company to redeem all (but not less than all) of the outstanding shares of Series B Preferred Stock for a price per share equal to the Per Share Price plus any accrued but unpaid dividends on such shares. As such, the proceeds from the sale of the Series B Preferred Stock have been classified as mezzanine equity in the June 30, 2018 condensed balance sheet.

HEDGEPATH PHARMACEUTICALS, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED JUNE 30, 20182019 AND 20172018

(Unaudited)

Also, pursuant to the Agreement, Mayne Pharma consented and agreed (under the terms of agreements previously executed with the Company) to an increase in the number of shares of common stock that the Company may issue under the EIP to 17,624,000 shares from the previous limit of 6,624,000 shares, with the agreement and understanding that such increase will be utilized by the Company during the period from the Effective Date through December 31, 2021.

December 2018 - Third Amended and Restated Supply and License Agreement with Mayne Pharma

Pursuant to the Third Amended SLA, as of the Effective Date, Mayne Pharma assumed control of the regulatory and clinical development program for SUBA-Itraconazole BCCNS and immediately assumed responsibility for all expenses related to exploiting the SUBA-Itraconazole product in the BCCNS field, provided that the Company continues to be responsible for all liabilities related to the product in the United States prior to the Effective Date. The Third Amended SLA will continue in effect on an exclusive basis in the United States on substantially the same terms as were provided for under the Second Amended SLA, except as described below.

In consideration of the transfer to Mayne Pharma of the SUBA-Itraconazole BCCNS clinical data and regulatory rights, the Company will receive the following consideration:

HEDGEPATH PHARMACEUTICALS, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED JUNE 30, 2019 AND 2018

(Unaudited)

With respect to each Advance made by Mayne Pharma prior to the receipt of FDA approval of an NDA for SUBA-Itraconazole BCCNS, each $0.75 increment of each such Advance will be credited and set off against each $1.00 increment of Royalty owed to the Company, and with respect to each Advance made by Mayne Pharma following the receipt of FDA approval of an NDA for SUBA-Itraconazole BCCNS, each $0.85 increment of each such Advance will be credited and set off against each $1.00 increment of Royalty owed to the Company. In addition, if, prior to June 30, 2021, the Company has not fulfilled the Equity Funding Achievement, Mayne Pharma shall have the right to satisfy all of its remaining Royalty obligations by making a single lump sum payment to the Company in an amount equal to seventy percent (70%) of the Warrants

The Warrants are divided equally betweenfair market value of the Series A Warrants and the Series B Warrants (i.e., with each being exercisable for an aggregate of 5,434,783 shares of Common Stock if all Closings occur), which represents fifty percent (50%) warrant coverage on the shares of Common Stock underlying the Series B Preferred Stock. The Warrants have been and will continue to be issued, pro rata in relationremaining royalties payable to the total investmentCompany as determined by an independent appraisal process. The Third Amended SLA also gives Mayne Pharma the right to convert the Company’s rights licensed from Mayne Pharma under the Third Amended SLA to anon-exclusive license if the FDA has not approved an NDA filed by the Company for the Product in the Series B Preferred Stock, at each Closing.

The Warrants are substantially identical in form, except that: (i) the exercise price per sharepart of the Series A Warrants shall be $0.23 per share and the exercise price per share of the Series B Warrants shall be $0.275 per share (collectively, the “Warrant Exercise Price”) and (ii) The Series A Warrants shall have a term of two (2)Field within eight (8) years from the date of issuanceEffective Date.

December 2018 Amended and the Series B Warrants shall have term of five (5) years from the date of issuance. The Warrant Exercise Price shall be subject to customary stock-based, but not price-based, anti-dilution protection. The Warrants will not be eligible for “cashless” exercise.

Amendment to Supply and LicenseRestated Sublicense Agreement

In connection with the Initial Closing, on January 10, 2018,The Amended and Restated Sublicense Agreement amends and replaces a similar agreement entered into between the Company and Mayne Pharma entered into an amendmentInternational, dated as of May 15, 2015, under which Mayne Pharma International sublicensed to the SLACompany the exclusive U.S. rights to eliminate Mayne Pharma’s righttwo certain third-party patents relating to terminate the SLA if the Company fails to secure NDA approval foruse of itraconazole as aSUBA-Itraconazole-based treatment for cancer by October 31, 2018andage-related macular degeneration. The Amended and replace such right with provisions that grantRestated Sublicense Agreement amends the required payments to Mayne Pharma a60-day right (exercisable only on a Target Failure (as defined below))for certain development-related milestone payments related to elect to assume all responsibilitySUBA-Itraconazole BCCNS and control for clinical, regulatory and commercial activities for SUBA BCCNS (the “Mayne BCCNS Assumption Right”) by way of an exclusive license from the Company and full access (the “Company BCCNS License”) solely to the Company’s SUBA BCCNS clinical data and the Company’s own itraconazole intellectual property solelyallows for the fieldtermination of the treatment of Basal Cell Carcinoma Nevus Syndrome.

Mayne Pharma’s election to trigger the Mayne BCCNS Assumption Right shall not terminate the SLA or impact the Company’s ability to pursue other product development opportunities underAmended and in accordance with the terms of the SLA.

The Company BCCNS License includes: (i) a cash royalty to the Company from Mayne Pharma on all net sales of SUBA BCCNS in the United States, (ii) the forfeiture by Mayne Pharma under theRestated Sublicense Agreement (as defined below) of (x) royalties fromif the Company with respect to SUBA BCCNS sales and (y) a portion of the milestone payments due by the Company to Mayne Pharma under the Sublicense Agreement and (iii) indemnification of the Company by Mayne Pharma for any claims incurred by the Company arising out of Mayne Pharma’s SUBA BCCNS activities following the exercise of the Mayne BCCNS Assumption Right.

The term “Target Failure” means if: (i) the FDA has not accepted for filing the Company’s NDA for SUBA BCCNS by December 31, 2018, provided that such date shall be automatically extended in the event that such NDAThird Amended SLA expires or is filed with FDA during December 2018 to a date which is 30 days from the date of such filing or (ii) the commercial launch of SUBA BCCNS is not achieved by June 30, 2020.

The SLA Amendment also amends corresponding provisions of that certain Sublicense Agreement, dated August 31, 2015, between Mayne Pharma International Pty Ltd, an affiliate of Mayne Pharma (“Mayne Pharma International”), and the Company, in order to conform to the business terms agreed to in the SLA Amendment.terminated.

The Company had cash and cash equivalents of approximately $0.8$1.6 million as of June 30, 2018.August 12, 2019. Based on the Company’s current operational plan and budget, (including the receipt of $1.6 million in July 2018 from Mayne Pharma following the Second Closing of the Financing as contemplated by the Purchase Agreement), the Company expects that it has sufficient cash to manage its business into approximately the secondthird quarter of 2019,2020, although this estimation assumes the Company does not build a commercial division,begin any clinical trials, acquire otheroptions or rights to additional drug development opportunities or otherwise face unexpected events, costs or contingencies, any of which could affect the Company’s cash requirements. Available resources may be consumed more rapidly than anticipated, potentially resulting in the need for additional funding.

HEDGEPATH PHARMACEUTICALS, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED JUNE 30, 2018 AND 2017

(Unaudited)

Additionally, and although named as only a nominal defendant in the civil action discussed in Note 5, the Company will have a role due to its technical connection with the matter in dispute. Extended legal proceedings could drain valuable time and resources away from the Company’s operations (including clinical and pre-clinical programs) and may also impede any future efforts to raise additional capital.

The Company intends to finance additional research and development, commercialization and distribution efforts and its working capital needs primarily through:

However, there is a risk that none of these plans will be implemented in a manner necessary to sustain the Company for an extended period of time and that the Company will be unable to obtain additional financing when needed on commercially reasonable terms, if at all. If adequate funds are not available when needed, the Company may be required to significantly reduce

HEDGEPATH PHARMACEUTICALS, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED JUNE 30, 2019 AND 2018

(Unaudited)

or refocus operations or to obtain funds through arrangements that may require the Company to relinquish rights to technologies or potential markets, any of which could have a material adverse effect on the Company, its viability, its financial condition and its results of operations beyond the secondthird quarter of 2019.2020. In addition, a lack of adequate funds may force the Company to cease operations.

Estimates

The preparation of condensed financial statements 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 revenues and expenses during the period. Actual results could differ from those estimates.

Revenue Recognition

The Company currently has no ongoing source of revenues. Miscellaneous income, including interest, is recognized when earned by the Company. Deferred revenue represents cash received for royalties in advance of being earned. Such payments are reflected as deferred revenue until recognized under the Company’s revenue recognition policy. Deferred revenue would be classified as current if management believes the Company will be able to recognize the deferred amount as revenue within twelve months of the balance sheet date. Deferred revenue will be recognized when the product is sold and the related royalty is earned. Currently, all deferred revenue is related to the SUBA-Itraconazole BCCNS product, which is yet to be approved by FDA. As such, the Company has determined that 100% of the advances of the royalty received by Mayne Pharma should be classified as anon-current liability. At June 30, 2019, deferred revenue consisted of $3.0 million of royalties advanced by Mayne Pharma under the Third Amended SLA. There was $0.5 million in deferred revenue at December 31, 2018.

Cash and Cash Equivalents

The Company considers all highly liquid debt instruments purchased with an original maturity of three months or less to be cash equivalents. At times, the Company may maintain cash balances in excess of Federal Deposit Insurance Corporation insured amounts which is $250,000 for substantially all depository accounts. As of June 30, 2018,2019, the Company had approximately $0.5$1.8 million in excess of the amount covered by Federal Deposit Insurance Corporation with one financial institution.

Mezzanine Equity

The Company issued Preferred Stock to Mayne Pharma pursuant to the Series B Preferred Stock Purchase Agreement. Based upon its initial analysis, the Company originally classified the proceeds from the sale of the Preferred Stock as permanent stockholders’ equity at March 31, 2018. Based on further analysis of Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 480, which requires that conditionally redeemable securities be classified outside of permanent stockholders’ equity, the Company reclassified the original amount of the proceeds from the sale of these shares as mezzanine equity as reflected in the accompanying Condensed Balance Sheet at June 30, 2018 and Condensed Statement of Stockholders’ (Deficit) Equity and Redeemable Preferred Stock for the six months ended June 30, 2018 which resulted in no change to total assets, total liabilities, net loss, earnings per share, or cash flow.

Research and Development Expenses

Research and development costs are expensed in the period in which they are incurred and include the expenses paid to third parties who conduct research and development activities on behalf of the Company and purchasedin-process research and development.

HEDGEPATH PHARMACEUTICALS, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED JUNE 30, 2018 AND 2017

(Unaudited)

Stock-Based Compensation

The Company accounts for stock-based awards to employees andnon-employees using FASB ASCFinancial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 718 – Accounting for Share-Based Payments, which provides for the use of the fair value based method to determine compensation for all arrangements where shares of stock or equity instruments are issued for compensation. Fair values of restricted stock units issued are determined by the Company based predominantly on the trading price of the common stock on the date of grant. Fair value of each common stock option is estimated on the date of grant using the Black-Scholes valuation model that uses assumptions for expected volatility, expected dividends, expected term, and the risk-free interest rate. Expected volatility is based on historical volatility of a peer group’s common stock and other factors estimated over the expected term of the options. The expected term of the options granted is derived using the “simplified method” which computes expected term as the average of the sum of the vesting term plus the contract term. The risk-free rate is based on the U.S. Treasury yield.

In applying the Black-Scholes optionsoption pricing model for options issued in March 2018 (see note 4), the assumptions were as follows: 1) for the options vesting on the grant date – expected price volatility of 113.67%; risk-free interest rate of 2.64%; weighted average expected life of 5 years;February 2019 and no dividend yield, and 2) for the options vesting on the first anniversary of the grant date – expected price volatility of 116.59%; risk-free interest rate of 2.64%; weighted average expected life of 5.5 years; and no dividend yield. In applying the Black-Scholes options pricing model for options issuedJune 2019 that vest in June 2018 (see note 4) which vest on the first anniversary of the grant date,February 2020, the assumptions were as follows: expected price volatility of 112.6%;85.4% and 85.33%, respectively; risk-free interest rate of 2.81%;2.51% and 1.83%, respectively; weighted average expected life in years of 5.5 years;6 and 5 years, respectively; and no dividend yieldyield. The value of these awards is based upon their grant-date fair value. That cost is recognized over the period during which the employee is required to provide service in exchange for the award. Forfeitures are recorded as incurred.

HEDGEPATH PHARMACEUTICALS, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED JUNE 30, 2019 AND 2018

(Unaudited)

Income Taxes

Deferred tax assets and liabilities are recognized for future tax consequences attributed to differences between the consolidated financial statement carrying amounts of existing assets and liabilities and their respective tax bases and are measured using enacted tax rates that are expected to apply to the differences in the periods that they are expected to reverse. These differences occur primarily in share-based compensation,in-process research and development, and net operating loss carry forward which are offset by a net deferred tax asset valuation allowance due to the Company’s recurring net losses.compensation.

Recent accounting pronouncements:

In May 2014,February 2016, the Financial Accounting Standards BoardFASB issued Accounting Standards UpdateASU2014-09,2016-02, “Revenue from Contracts with Customers,“Leases,” which supersedes the revenue recognition requirements ofcreated a new Topic, ASC Topic 605, “Revenue Recognition”842 and most industry-specific guidance on revenue recognition throughoutestablished the ASC. The new standard is principles-based and provides a five-step model to determine when and how revenue is recognized. The core principle that a lessee should recognize the assets, representingrights-of-use, and liabilities to make lease payments, that arise from leases. For leases with a term of the new standard12 months or less, a lessee is that revenue shouldpermitted to make an election under which such assets and liabilities would not be recognized, whenand lease expense would be recognized generally on a company transfers promised goods or services to customersstraight-line basis over the lease term. This standard was effective for the Company beginning in an amount that reflects2019 and was adopted by the consideration to whichCompany for the company expects to be entitled in exchange for those goods or services. The new standard also requires disclosure of qualitative and quantitative information surrounding the amount, nature, timing and uncertainty of revenues and cash flows arising from contracts with customers.year beginning January 1, 2019. The Company has evaluated the impact of this revised guidance on its financial statements which was effective January 1, 2018, and has determined that it had no material impact.

In April 2016,impact, as the FASB issued Accounting Standards Update (“ASU”)2016-10, “Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing.” ASU2016-10 clarifies the implementation guidance on identifying performance obligations. These ASUs apply to all companies that enter into contracts with customers to transfer goods or services. This ASUs is effective for public entities for interim and annual reporting periods beginning after December 15, 2017. The Company has evaluated the impact of this revised guidance on its financial statements, which was effective January 1, 2018, and determined it had no material impact.

In June 2018, the FASB issued ASU2018-07, “Compensation – Stock Compensation (Topic 718).” ASU2018-07 simplifies the accounting for nonemployee share-based payment transactions. This ASU is effective for public entities for interim and annual reporting periods beginning after December 15, 2018. The Company has evaluated the potential impact of this guidance and does not believe that it will have a material impact on the Company’s financial statements.leasing arrangements with terms greater than 12 months.

Management has considered all recent accounting pronouncements issued, but not effective, and does not believe that they will have a significant impact on the Company’s financial statements.

HEDGEPATH PHARMACEUTICALS, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED JUNE 30, 2018 AND 2017

(Unaudited)

Employee Stock Plans

On March 13, 2018, as compensation for 2017 service, management was awarded 570,000 stock options pursuant to the Company’s 2014 Equity Incentive Plan (the “Plan”) with an exercise price of $0.2722 and Black-Scholes value of $0.22 per share that vested on the grant date. Independent Board members were awarded a total of 188,000 stock options pursuant to the Plan with an exercise price of $0.2722 and Black-Scholes value of $0.22 that also vested on the grant date. 75,000 common shares were issued to the former Secretary of the Company for the prior year’s service.

In addition,February 3, 2019, Board members were awarded approximately 1.13.0 million stock options pursuant to the PlanEIP with an exercise price of $0.2722$0.076 and Black-Scholesgrant date fair value of $0.23$0.054 that vest on the first anniversary of the grant date. The grant date fair value of common stock options was determined using the Black-Scholes model on the date of issuance and the number of shares expected to vest. The total Black-Scholesgrant date fair value of the March 13, 2018February 3, 2019 stock optionsoption grants was approximately $0.4$0.2 million.

On June 15, 2018, as compensation for 2018 service, Board members were awarded a total of 912,0003, 2019, the Company issued 25,000 stock options to its newly appointed Chairman of the Board pursuant to the Company’s 2014 Equity Incentive Plan (the “Plan”)EIP with an exercise price of $0.33$0.073 and Black-Scholesgrant date fair value of $0.273 per share$0.05 that vest on February 3, 2020. The grant date fair value of common stock options was determined using the first anniversaryBlack-Scholes model on the date of issuance and the number of shares expected to vest. The total grant date fair value of the grant date.June 3, 2019 stock option grants was approximately $1,250.

Total stock-based compensation for the six months ended June 30, 20182019 was approximately $0.3$0.2 million and is primarily related to common stock options issued pursuant to the PlanEIP in March2018 and June 2018.2019. The expense is classified as research and development expense and general and administrative expense in the accompanying condensed statements of operations. As of June 30, 2018,2019, there were 3,424,0005,422,685 outstanding common stock options under the PlanEIP of which 1,408,0003,424,000 were vested. There was approximately $0.4$0.1 million in unamortized stock-based compensation at June 30, 2018.2019.

Subsequent to the period end, on July 9, 2019, Hedgepath, LLC (“HPLLC”), a stockholder of the Company, filed a civil action captionedHedgepath, LLC v. Magrab, et al., Civil Action Number2019-0529-JTL, in the Delaware Court of Chancery (the “Action”). In the complaint in the Action, purportedly brought directly and derivatively on behalf of the Company, HPLLC alleges claims for breach of fiduciary duty, declaratory judgement, and dilution of stockholder equity, against the Company’s directors and President and Chief Executive Officer, a former director of the Company, and Mayne Pharma, in connection with (i) the issuance of certain Company equity securities to Mayne Pharma on or about January 8, 2018, (ii) Mayne Pharma’s alleged influence over the timing and conduct of the Company’s clinical trials of SUBA-Itraconazole for the treatment of BCCNS, and (iii) previously announced amendments to the Supply and License Agreement, as amended, between the Company and Mayne Pharma and certain transactions contemplated thereby. The complaint also alleges claims for breach of fiduciary duty and fraudulent misrepresentation in connection with allegedly false and misleading statements included in Company press releases and filings with the SEC. The complaint seeks unspecified damages, equitable and other relief from the defendants. The Company’s director and officer insurance has reimbursed all of the Company’s legal costs to date from HPLLC’s initial inquiry related to this matter. The Company believes the Action is currently not subjectlegally and factually baseless, and the named director and officer defendants intend to any legal proceedings. However, thedefend themselves vigorously.

The Company may from time to time become a party to various legal proceedings arising in the ordinary course of business.

On July 5, 2018, the Company closed on a second tranche of funding from its majority shareholder, Mayne Pharma, as part of the Purchase Agreement executed in January 2018 as discussed further in note 1.

The following discussion and analysis should be read in conjunction with the Condensed Financial Statements and Notes thereto included elsewhere in this Quarterly Report. This discussion contains certain forward-looking statements that involve risks and uncertainties. The Company’s actual results and the timing of certain events could differ materially from those discussed in these forward-looking statements as a result of certain factors, including, but not limited to, those set forth herein and elsewhere in this Quarterly Report and in the Company’s other filings with the SEC. See “Cautionary Note Regarding Forward Looking Statements” below.

As used in this Management’s Discussion and Analysis of Financial Condition and Results of Operations, unless otherwise indicated, the terms “the Company”, “we”, “us”, “our” and similar terminology refer to HedgePath Pharmaceuticals, Inc.

Critical Accounting Policies

See Note 3 of the Notes to Condensed Financial Statements included in Item 1 of this Quarterly Report for a summary of significant accounting policies and information on recently issued accounting pronouncements.

Results of Operations

For the three months ended June 30, 20182019 compared to the three months ended June 30, 20172018

Research and Development Expenses. We recognized approximately $0.5$0.3 million in research and development expenses during the three months ended June 30, 20182019 compared to approximately $0.4$0.5 million for the three months ended June 30, 2017.2018. Research and development expenses for both periodsthe three months ended June 30, 2019 primarily includeincluded salary expenses and expenses related to preparation for the filing of an Investigational New Drug application for use of SUBA-Itraconazole for prostate cancer. The expenses for the three months ended June 30, 2018 primarily included salary expenses, stock-based compensation, and expenses related to our clinical trial for Basal Cell Carcinoma Nevus Syndrome, regulatory activities,BCCNS which concluded in 2018. Other expenses in both periods included legal expenses relating to patents and stock-based compensation.clinical trial insurance. The increasedecrease of $0.2 million is due primarily to a increasereduction in directclinical trial related expenses primarily dueas a result of Mayne Pharma assuming control of the regulatory and clinical development program for SUBA-Itraconazole BCCNS in December 2018 and immediately assuming responsibility for all expenses related to data analysis expenseexploiting the SUBA-Itraconazole BCCNS product in the BCCNS field in exchange for a 9% quarterly cash royalty and consulting associated with the preparation for an NDA filing.other considerations as discussed in Note 1.

General and Administrative Expenses. We recognized approximately $0.4$0.3 million in general and administrative expenses during the three months ended June 30, 20182019 compared to $0.3$0.4 million for the three months ended June 30, 2017.2018. General and administrative expenses consist primarily of compensation and related costs for corporate administrative staff and Board members, facility expenditures, professional fees, consulting and taxes. The increase is due primarily to an increase in stock compensation expense associated with stock options issued in March and June of 2018.

Interest Income.We recognized interest income of $2,490 during the three months ended June 30, 2018 compared to $2,995 for the three months ended June 30, 2017 for interest earned on cash balances in our money market account.

For the six months ended June 30, 2018 compared to the six months ended June 30, 2017

Research and Development Expenses. We recognized approximately $1.2 million in research and development expenses during the six months ended June 30, 2018 compared to approximately $1.3 million for the six months ended June 30, 2017. Research and development expenses for both periods primarily include expenses related to our clinical trial for Basal Cell Carcinoma Nevus Syndrome, regulatory activities, legal expenses relating to patents, and stock-based compensation. The decrease is due primarily to a reduction in stock compensation expense of $0.1 million and patient site and travel costs of $0.2 million offset by an increase in data management expense of $0.2 million associated with the preparation for an NDA filing.

General and Administrative Expenses. We recognized approximately $0.8 million in general and administrative expenses during the six months ended June 30, 2018 compared to $2.3 million for the six months ended June 30, 2017. General and administrative expenses consistconsisted primarily of compensation and related costs for corporate administrative staff and Board members, facility expenditures, professional fees, consulting and taxes. The decrease is due primarily to a reductiondecrease in stock compensation expense of approximately $1.4 million. A change in control in November 2016 resulted inlegal fees during the revaluation of RSUs increasing the expense which carried forward to the six monthsquarter ended June 30, 2017.2019.

Interest Income.We recognized interest income of $6,712$2,809 during the sixthree months ended June 30, 20182019 compared to $14,640$2,490 for the sixthree months ended June 30, 20172018 for interest earned on cash balances in our money market account.

For the six months ended June 30, 2019 compared to the six months ended June 30, 2018

Research and Development Expenses. We recognized approximately $0.5 million in research and development expenses during the six months ended June 30, 2019 compared to approximately $1.2 million for the six months ended June 30, 2018. Research and development expenses for the six months ended June 30, 2019 primarily included salary expenses and expenses related to preparation for the filing of an Investigational New Drug application for use of SUBA-Itraconazole for prostate cancer. The expenses for the six months ended June 30, 2018 primarily included salary expenses, stock-based compensation, and expenses related to our clinical trial for BCCNS which concluded in 2018. Other expenses in both periods included legal expenses relating to patents and clinical trial insurance. The decrease of $0.7 million is due primarily to a reduction in clinical trial related expenses as a result of Mayne Pharma assuming control of the regulatory and clinical development program for SUBA-Itraconazole BCCNS in December 2018 and immediately assuming responsibility for all expenses related to exploiting the SUBA-Itraconazole BCCNS product in the BCCNS field in exchange for a 9% quarterly cash royalty and other considerations as discussed in Note 1.

General and Administrative Expenses. We recognized approximately $0.9 million in general and administrative expenses during the six months ended June 30, 2019 compared to $0.9 million for the six months ended June 30, 2018. General and administrative expenses in both periods consisted primarily of compensation and related costs for corporate administrative staff and Board members, facility expenditures, professional fees, consulting and taxes.

Interest Income.We recognized interest income of $8,121 during the six months ended June 30, 2019 compared to $6,712 for the six months ended June 30, 2018 for interest earned on cash balances in our money market account.

Liquidity and Capital Resources

We had approximately $0.8 million cash on hand at June 30, 2018 (not including the receiptand cash equivalents of approximately $1.6 million as of August 12, 2019. Based on our current operational plan and budget, we expect that we will have sufficient cash to manage our business into the third quarter of 2020, although this estimation assumes we do not begin any clinical trials, acquire options or rights to additional drug development opportunities or otherwise face unexpected events, costs or contingencies, any of which could affect the Company’s cash requirements. Available resources may be consumed more rapidly than anticipated, potentially resulting in July 2018the need for additional funding. Additionally, and although named as only a nominal defendant in the civil action discussed in Note 5 in the accompanying financial statements, the Company will have a role due to its technical connection with the matter in dispute. Extended legal proceedings could drain valuable time and resources away from Mayne Pharma upon following the Second Closing of the Financing contemplated by the Purchase Agreement).Company’s operations (including clinical and pre-clinical programs) and may also impede any future efforts to raise additional capital.

We intend to seek additional financing for our research and development, commercialization and distribution efforts and our working capital needs primarily through:

inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within our control have been detected. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any control design will succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate.

CAUTIONARY NOTE ON FORWARD-LOOKING STATEMENTS

Certain information set forth in this Quarterly Report on Form10-Q, including in Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” (and the “Liquidity and Capital Resources” section thereof) and elsewhere may address or relate to future events and expectations and as such constitutes “forward-looking statements” within the meaning of the Private Securities Litigation Act of 1995. Such forward-looking statements involve significant risks and uncertainties. Such statements may include, without limitation, statements with respect to our plans, objectives, projections, expectations and intentions and other statements identified by words such as “projects”, “may”, “could”, “would”, “should”, “believes”, “expects”, “anticipates”,

“estimates” “estimates”, “intends”, “plans” or similar expressions. These statements are based upon the current beliefs and expectations of our management and are subject to significant risks and uncertainties, including those detailed in our filings with the SEC. Actual results, including, without limitation: (i) the results of our collaboration with Mayne Pharma,ability to develop and ultimately commercialize therapeutics, (ii) the application and availability of corporate funds and our need for future funds, or (iii) the timing for beginning, completion, and results of, scheduled or additional clinical trials and the FDA’s review and/or approval and potential commercial launch of our products and product candidates and regulatory filings related to the same, may differ significantly from those set forth in the forward-looking statements. Such forward-looking statements also involve other factors which may cause our actual results, performance or achievements to materially differ from any future results, performance, or achievements expressed or implied by such forward-looking statements and to vary significantly from reporting period to reporting period. Such factors include, among others,

Although management believes that the assumptions made and expectations reflected in the forward-looking statements are reasonable, there is no assurance that the underlying assumptions will, in fact, prove to be correct or that actual future results will not be different from the expectations expressed in this Report. We undertake no obligation to publically update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by applicable law.

PART II. OTHER INFORMATION

None.On July 9, 2019, Hedgepath, LLC (“HPPLC”), a stockholder of ours, filed a civil action captioned Hedgepath, LLC v. Magrab, et al., Civil Action Number2019-0529-JTL, in the Delaware Court of Chancery (the “Action”). In the complaint in the Action, purportedly brought directly and derivatively on behalf of us, HPLLC alleges claims for breach of fiduciary duty, declaratory judgement, and dilution of stockholder equity, against our directors and President and Chief Executive Officer, a former director of ours, and Mayne Pharma Ventures Pty Ltd., our majority stockholder (“Mayne Pharma”), in connection with (i) the issuance of certain equity securities to Mayne Pharma on or about January 8, 2018, (ii) Mayne Pharma’s alleged influence over the timing and conduct of our clinical trials

of SUBA-Itraconazole for the treatment of Basal Cell Carcinoma Nevus Syndrome, and (iii) previously announced amendments to the Supply and License Agreement, as amended, between us and Mayne Pharma and certain transactions contemplated thereby. The complaint also alleges claims for breach of fiduciary duty and fraudulent misrepresentation in connection with allegedly false and misleading statements included in our press releases and filings with the Securities and Exchange Commission. The complaint seeks unspecified damages, equitable and other relief from the defendants. Our director and officer insurance has reimbursed all of our legal costs to date from HPLLC’s initial inquiry related to this matter. We believe the Action is legally and factually baseless, and the named director and officer defendants intend to defend themselves vigorously.

Not required for smaller reporting companies.

None.

None.

Not applicable.

Not applicable.

Number		Description
101.pre		XBRL Taxonomy Presentation Linkbase Document

SIGNATURES

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

S-1