UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM10-Q

(Mark One)

For the quarterly period ended September 30, 20182019

For the transition period from                    to                    

Commission file number001-13467

HedgePath Pharmaceuticals,Inhibitor Therapeutics, 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)

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

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 if any, every Interactive Data File required to be submitted pursuant to Rule 405 of RegulationS-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit 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  ☒

As of November 13, 2018,6, 2019, there were 369,959,064370,446,185 shares of company common stock issued and outstanding.

HedgePath Pharmaceuticals,Inhibitor Therapeutics, Inc.

Quarterly Report on Form10-Q

TABLE OF CONTENTS

HEDGEPATH PHARMACEUTICALS, INC.

INHIBITOR THERAPEUTICS, INC.

CONDENSED BALANCE SHEETS

AS OF SEPTEMBER 30, 20182019 AND DECEMBER 31, 20172018

(Unaudited)

See notes to condensed financial statements

1

HEDGEPATH PHARMACEUTICALS, INC.

INHIBITOR THERAPEUTICS, INC.

CONDENSED STATEMENTS OF OPERATIONS

FOR THE THREE MONTH AND NINE MONTH PERIODS ENDED SEPTEMBER 30, 20182019 AND 20172018

(Unaudited)

See notes to condensed financial statements

2

HEDGEPATH PHARMACEUTICALS, INC.

INHIBITOR THERAPEUTICS, INC.

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

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2019 AND 2018

(Unaudited)

See notes to condensed financial statements

3

HEDGEPATH PHARMACEUTICALS, INC.

INHIBITOR THERAPEUTICS, INC.

CONDENSED STATEMENTS OF CASH FLOWS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 20182019 AND 20172018

(Unaudited)

See notes to condensed financial statements

4

HEDGEPATH PHARMACEUTICALS, INC.

INHIBITOR THERAPEUTICS, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 20182019 AND 20172018

(Unaudited)

Overview

The accompanying unaudited condensed financial statements of Inhibitor Therapeutics, Inc. (formerly HedgePath Pharmaceuticals, Inc.), a Delaware corporation (the “Company”, “HPPI”“INTI”, “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 September 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 nine month periods ended September 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, developfocused on developing and commercializeultimately commercializing innovative therapeutics for patients with certain cancers.cancers and certain non-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 initial product candidatecurrent primary focus is based uponon the usedevelopment of SUBA™therapies initially for prostate and also lung cancers in the U.S. market utilizing SUBA^®-Itraconazole, which is a patented, oral formulation of the currently marketed anti-fungal drug itraconazole to which the Company holds an exclusive U.S. license.

The Company’s current focus is on the development of therapies for skin, lung and prostate cancerslicense in the U.S. market, withlicensed field from its majority stockholder, Mayne Pharma Ventures Pty Ltd. (“Mayne Pharma”). SUBA-Itraconazole is currently licensed to the first indicationCompany by Mayne Pharma on an exclusive basis in the United States in the field of certain cancers (including prostate and lung cancer) and certain non-cancerous proliferation disorders pursuant to the Third Amended and Restated Supply and License Agreement between the Company and Mayne Pharma, dated December 17, 2018 (the “Third Amended SLA”). Previously, the Company conducted a Phase 2b trial studying the use of SUBA-Itraconazole targeting basal cell carcinoma in patients with Basal Cell Carcinoma Nevus Syndrome (also known as Gorlin Syndrome) (“BCCNS”), for which 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. As described further guidance regarding the filingbelow, Mayne Pharma assumed control of the New Drug Application (“NDA”)Company’s clinical and regulatory program for SUBA-Itraconazole for the treatment of BCCNS (“SUBA BCCNS”).

In Octoberin December 2018 the Company announced the results of its September 25, 2018 meeting with FDA regarding the requirements for filing the NDA. Specifically, FDA instructed the Companypursuant to (i) update its efficacy and safety information to include more recent data than its proposed cutoff date of December 2017 in order to provide additional data on the ten remaining patients who were still receiving therapy beyond December 2017, (ii) provide an analysis of basal cell carcinoma tumor burden responses via independent analysis of tumor photographs to confirm results reported by the clinical investigators and (iii) submit an Integrated Safety Summary (“ISS”) that includes data not only from the Company’s clinical trial, but all human trials of SUBA-Itraconazole regardless of strength and indication. The consequence of FDA requiring the completion of the ISS module is that the Company requires more time than previously anticipated to submit the NDA, resulting in a revised anticipated NDA submission date of sometime in the first quarter of 2019. Under the Company’s 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”) with Mayne Pharma Ventures Pty Ltd., the Company’s majority stockholder, and its affiliates (“Mayne Pharma”), if the NDA is not accepted for filing by December 31, 2018 (subject to limited extension if the NDA is filed in December), Mayne Pharma may elect to take back the SUBA BCCNS product in the United States (including by way of an exclusive license from the Company of its clinical data) in exchange for a royalty on any future net sales. Additionally, Mayne Pharma will not be obligated to fund the Third Closing (as defined below) of the Financing (as defined below) The Company and Mayne Pharma have commenced discussions on this important matter. See “Relationship with Mayne Pharma Ventures Pty Ltd. – Amendment to Supply and License Agreement” and “Relationship with Mayne Pharma Ventures Pty Ltd. – Series B Preferred Stock Purchase Agreement” below for more information.

5

HEDGEPATH PHARMACEUTICALS,INHIBITOR THERAPEUTICS, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 20182019 AND 20172018

(Unaudited)

Overview of December 2018 Transactions with Mayne Pharma

On December 17, 2018 (the “Effective Date”), the Company entered into the following related agreements (collectively, the “Transaction Documents”):

In addition, underpursuant to the Purchaseterms of the Agreement, the Company and Mayne Pharma agreed thatto vote in favor of the adoption of an Amended and Restated Certificate of Designation (the “Amended and Restated COD”) for the period fromCompany’s Series B Convertible Preferred Stock (the “Series B Preferred Stock”), which amended and restated the dateterms of the Initial Closing through December 31, 2018 (the “Market Standoff Period”), the Company will not undertake external financing (which shall specifically exclude exercise 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 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 September 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. On July 15, 2018, the Company made the first semi-annual dividend payment of approximately $0.06 million by issuing 184,798 shares of Common Stock.

Voluntary and Mandatory Conversion. The shares of Series B Preferred Stock 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 thewill seek an uplisting to a U.S. national securities exchange or implement a reverse stock split of its Common Stock) an amount per share 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.

7

HEDGEPATH PHARMACEUTICALS,INHIBITOR THERAPEUTICS, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 20182019 AND 20172018

(Unaudited)

1.       Corporate overview (continued):

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:

INHIBITOR THERAPEUTICS, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2019 AND 2018

(Unaudited)

1.       Corporate overview (continued):

With respect to each Advance made by Mayne Pharma prior to the five (5) year anniversaryreceipt 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 Initial Closing,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 causesatisfy all of its remaining Royalty obligations by making a single lump sum payment to the Company in an amount equal to redeem all (but not less than all)seventy percent (70%) of the outstanding sharesfair market value of Series B Preferred Stock for a price per share equalthe remaining royalties payable to the Per Share Price plus any accrued but unpaid dividends on such shares. As such,Company as determined by an independent appraisal process. The Third Amended SLA also gives Mayne Pharma the proceedsright to convert the Company’s rights licensed from Mayne Pharma under the saleThird Amended SLA to anon-exclusive license if the FDA has not approved an NDA filed by the Company for the Product in part of the Series B Preferred Stock have been classified as mezzanine equity on the September 30, 2018 condensed balance sheet.

Terms of the Warrants

The Warrants are divided equally between 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 relation to the total investment in the Series B Preferred Stock, at each Closing.

The Warrants are substantially identical in form, except that: (i) the exercise price per share 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 “Patents”). The Amended and replace such right with provisions that grantRestated Sublicense Agreement amends the required payments to Mayne Pharma a60-day right (exercisable onlyfor certain development-related milestone payments related to SUBA-Itraconazole BCCNS and allows for the termination of the Amended and Restated Sublicense Agreement if the Third Amended SLA expires or is terminated. On August 21, 2019, the Company received written notice of termination of the Amended and Restated Sublicense Agreement due to the fact that the third party from whom Mayne Pharma International was itself sublicensing the Patents had terminated such sublicense agreement. Thereafter, on a Target Failure (as defined below)) to elect to assume all responsibility and control for clinical, regulatory and commercial activities for SUBA BCCNS (the “Mayne BCCNS Assumption Right”) by way of an exclusive license fromAugust 27, 2019, the Company and full accessMayne Pharma International entered into a new Sublicense Agreement, effective August 20, 2019 (the “Company BCCNS License”“New Sublicense Agreement”) solely to, under which the Company’s SUBA BCCNS clinical data and the Company’s own itraconazole intellectual property solely for the field 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 under and in accordance with the terms of the SLA.

The Company BCCNS License includes: (i) a cash royalty to the Companyreceived from Mayne Pharma International a sublicense to the Patents on all net sales of SUBA BCCNS innearly identical terms as the United States, (ii) the forfeiture by Mayne Pharma under theAmended and Restated Sublicense Agreement (as defined below) of (x) royalties from the Company(including with respect to SUBA BCCNS saleslicensed field, the licensed indications and (y) a portion of the license fees, milestone payments dueand minimum annual and running royalties that may be owed by the Company to Mayne Pharma underInternational, as well as the terms related to patent prosecution and infringement, reporting and indemnification). Mayne Pharma International was able to enter into the New Sublicense Agreement and (iii) indemnificationbecause, subsequent to the termination of the CompanyAmended and Restated Sublicense Agreement, Mayne Pharma International entered into a direct license agreement with respect to the Patents with The Johns Hopkins University, the owner of the Patents.

The New Sublicense Agreement has a term commencing on August 20, 2019 and continuing until the earlier of: (a) the date of expiration of the last to expire Patent; or (b) notice by Mayne Pharma for any claims incurred byInternational with immediate effect promptly after termination or expiry of its rights to license the Patents. Mayne Pharma International and the Company arising outhave the right to terminate the New Sublicense Agreement upon the occurrence of Mayne Pharma’s SUBA BCCNS activities followingcertain events, including the exercisebankruptcy of a party or breach of a party’s obligations under 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 NDA is filed with FDA during December 2018New Sublicense Agreement (subject to a date which is 30 days fromnotice and cure period). Mayne Pharma International may also terminate the date of such filingNew Sublicense Agreement upon the expiration or (ii) the commercial launch of SUBA BCCNS is not achieved by June 30, 2020. In October 2018, the Company announced that it revised the anticipated NDA submission date to sometime in the first quarter of 2019 which would constitute a Target Failure under the amended SLA.

The SLA Amendment also amends corresponding provisionstermination 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.Third Amended SLA.

INHIBITOR THERAPEUTICS, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2019 AND 2018

(Unaudited)

The Company had cash and cash equivalents of approximately $1.4 million as of September 30, 2018.2019. Based on the Company’s current operational plan and budget, 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.

8

INHIBITOR THERAPEUTICS, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2019 AND 2018

(Unaudited)

3.       Summary of Significant Accounting Policies (continued):

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 September 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 September 30, 2018,2019, the Company had approximately $1.2$1.0 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 on 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 is classifying the amount of the proceeds from the sale of these shares as mezzanine equity.

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.

9

INHIBITOR THERAPEUTICS, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2019 AND 2018

(Unaudited)

3.       Summary of Significant Accounting Policies (continued):

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, the FASB issued Accounting Standards Update (“ASU”)2014-09, “Revenue from Contracts with Customers,” which supersedes the revenue recognition requirements of ASC Topic 605, “Revenue Recognition” and most industry-specific guidance on revenue recognition throughout 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 of the new standard is that revenue should be recognized when a company transfers promised goods or services to customers in an amount that reflects the consideration to which 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. 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 February 2016, the FASB issued ASU2016-02, “Leases,” which created a new Topic, ASC Topic 842 and established 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 12 months or less, a lessee is permitted to make an election under which such assets and liabilities would not be recognized, and lease expense would be recognized generally on a straight-line basis over the lease term. This standard iswas effective for the Company beginning in 2019 and early application is permitted. Thewas adopted by the Company has evaluatedfor the potential impact of this guidance and does not believe it will have a material impact on the Company’s financial statements.

In April 2016, the FASB issued ASU2016-10, “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 periodsyear beginning after December 15, 2017.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.

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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,Inhibitor Therapeutics, 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 September 30, 20182019 compared to the three months ended September 30, 20172018

Research and Development Expenses. We recognized approximately $0.8$0.4 million in research and development expenses during the three months ended September 30, 20182019 compared to approximately $0.4$0.8 million for the three months ended September 30, 2017.2018. Research and development expenses for both periodsthe three months ended September 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 September 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 $0.4 million is due primarily to an increasea 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 regulatory consulting associated withexploiting the preparationSUBA-Itraconazole BCCNS product in the BCCNS field in exchange for an NDA filing.a 9% quarterly cash royalty and 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 September 30, 20182019 compared to $0.2$0.4 million for the three months ended September 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 $3,995 during the three months ended September 30, 2018 compared to $2,086 for the three months ended September 30, 2017 for interest earned on cash balances in our money market account.

For the nine months ended September 30, 2018 compared to the nine months ended September 30, 2017

Research and Development Expenses. We recognized approximately $2.0 million in research and development expenses during the nine months ended September 30, 2018 compared to approximately $1.7 million for the nine months ended September 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 increase is due primarily to an increase in expenses related to regulatory consulting associated with the preparation for an NDA filing.

General and Administrative Expenses. We recognized approximately $1.3 million in general and administrative expenses during the nine months ended September 30, 2018 compared to $2.5 million for the nine months ended September 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 induring the revaluation of RSUs increasing the expense which carried forward to the nine monthsquarter ended September 30, 2017.2019 primarily due to a majority of outstanding stock options vesting prior to the beginning of the current period as well as the expiration of certain unvested stock options upon the 2019 retirement of our former Chairman of the Board.

Interest Income.We recognized interest income of $10,707$4,373 during the ninethree months ended September 30, 20182019 compared to $16,726$3,995 for the ninethree months ended September 30, 20172018 for interest earned on cash balances in our money market account.

For the nine months ended September 30, 2019 compared to the nine months ended September 30, 2018

Research and Development Expenses. We recognized approximately $0.9 million in research and development expenses during the nine months ended September 30, 2019 compared to approximately $2.0 million for the nine months ended September 30, 2018. Research and development expenses for the nine months ended September 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 nine months ended September 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 $1.1 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 $1.2 million in general and administrative expenses during the nine months ended September 30, 2019 compared to approximately $1.3 million for the nine months ended September 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. The decrease of approximately $0.1 million was due primarily to a decrease in stock compensation expense primarily due to a majority of outstanding stock options vesting prior to the beginning of the current period as well as the expiration of certain unvested stock options upon the 2019 retirement of our former Chairman of the Board.

Interest Income.We recognized interest income of $12,494 during the nine months ended September 30, 2019 compared to $10,707 for the nine months ended September 30, 2018 for interest earned on cash balances in our money market account.

Liquidity and Capital Resources

We had cash and cash equivalents of approximately $1.4 million cash on hand atas of September 30, 2018.2019. 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 the 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 statement, 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 andpre-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:

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Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting during the nine months ended September 30, 2018our third fiscal quarter of 2019 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Limitations on the Effectiveness of Internal Controls

Readers are cautioned that our management does not expect that our disclosure controls and procedures or our internal control over financial reporting will necessarily prevent all fraud and material error. An internal control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Because of the 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”, “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,

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PART II. OTHER INFORMATION

None.On July 9, 2019, Hedgepath, LLC (“HPPLC”), a stockholder of ours, 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 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, (collectively the “Individual Defendants”) and 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 BCCNS, 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 SEC. 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. Legal costs associated directly with us as a nominal defendant will be payable by us until certain retention amounts are reached. Such costs were immaterial through September 30, 2019 and are included in general and administrative expenses for the current period. We believe the Action is legally and factually baseless, and the named director and officer defendants intend to defend themselves vigorously. On September 27, 2109, the Individual Defendants and Mayne Pharma each filed a Motion to Dismiss the Action, and such motion is pending as of the date of this filing.

The Company hereby supplements it risk factor disclosure as set forth in the Company’s Annual Report on Form10-KNot required for the fiscal year ended December 31, 2017, which was filed with the SEC on February 16, 2018, with the following additional risk factor:

There is a material risk that Mayne Pharma could in the foreseeable future exercise a right to assume full control of our lead SUBA BCCNS product, which would materially and adversely affect our value as a company and our ability to conduct and finance our operations.

Under our Supply and License Agreement with Mayne Pharma, as amended, if our NDA for SUBA BCCNS is not accepted for filing by the FDA by December 31, 2018 (subject to limited extension if the NDA is filed in December), Mayne Pharma may elect to assume full control of the SUBA BCCNS product in the United States (including by way of an exclusive license from us of our clinical data) in exchange for a royalty on any future net sales.

In October 2018, we announced the results of our September 25, 2018 meeting with FDA regarding the requirements for filing the SUBA BCCNS NDA. We believe that the time necessary to fulfill the FDA’s requirements as articulated to us at the meeting will (absent any alternatives) most likely push the anticipated timing for the SUBA BCCNS NDA into the first quarter of 2019. As a result, there is presently a significant risk that Mayne Pharma will have the right to assume full control of the SUBA BCCNS product in the foreseeable future.

Should this occur, there is a material risk that the overall value of our company will be materially and adversely affected, as we will be left only with a speculative future royalty on net sales of the SUBA BCCNS product (should the product ever be approved by the FDA and should such sales ever occur) as well as uncertain prospects for prosecuting clinical development work for other cancer indications under the Supply and License Agreement with Mayne Pharma. In this instance, our stock price could fall, and our overall business prospects, including our ability to conduct and finance our ongoing operations, would be severely and negatively impacted.smaller reporting companies.

None.

None.

Not applicable.

Not applicable.

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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.

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