HedgePath Pharmaceuticals, Inc.

In November 2019, the Company filed an Investigational New Drug Application (“IND”) to commence Phase 2b testing of SUBA-Itraconazole as a treatment for late-stage, castrate resistant prostate cancer (this product candidate is referred to as SUBA-Itraconazole Prostate). In December 2019, the Company received authorization from FDA to launch such Phase 2b of SUBA-Itraconazole Prostate. The Company’s 2020 goal for SUBA-Itraconazole Prostate is (assuming it obtains adequate funding and assuming no material delays due to the novel coronavirus outbreak) to commence the human testing of SUBA-Itraconazole Prostate in conjunction with chemotherapy for the treatment of late-stage prostate cancer.

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. In particular, the Company is presently subject to shareholder litigation (see Note 5 – Legal Proceedings). The existence of the Action and the Class Action (as defined below) and the uncertainty surrounding their outcome has impeded the Company’s ability to secure additional funding and may continue to do so for so long as the outcome of the Action and the Class Action is uncertain. While the Company believes the Company may have further clarity on the Action during the third quarter of 2020 when the court in which the Action is pending is anticipated to rule on the defendants’ motion to dismiss, such ruling may be adverse to the defendants or create additional uncertainties or may be further delayed due to the novel coronavirus outbreak, which could continue to hamper the Company’s ability to raise capital. If adequate funds are not available when needed, the Company may be required to significantly reduce 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. In addition, on January 30, 2020, the International Health Regulations Emergency Committee of the World Health Organization (“WHO”) declared the novel coronavirus outbreak a public health emergency of international concern and on March 12, 2020 the WHO announced the outbreak was a pandemic. On January 31, 2020 the U.S. Health and Human Services Secretary declared a public health emergency, and subsequently state and local governments have imposed various restrictions on public activity. The Company has maintained operations virtually during the outbreak, but the impact of the outbreak currently is unknown and rapidly evolving. The related health crisis has adversely affected the U.S. and global economy, resulting in an economic downturn that has impacted the financial markets and the Company’s ability to raise capital.

On April 10, 2020, the Compensation Committee of the Board of Directors of the Company (the “Committee”) approved a reduction in the annual base salaries for each of Nicholas J. Virca, the Company’s President and Chief Executive Officer (“Virca”), and Garrison J. Hasara, the Company’s Chief Financial Officer, Treasurer, Secretary and Chief Compliance Officer (“Hasara”) in order to allow the Company to preserve cash resources and to compensate Virca and Hasara in a manner commensurate with their current respective levels of activity with the Company. Accordingly, effective as of the regular pay period following the Committee’s approval, Virca’s annual base salary was reduced from $270,000 to $120,000, and Hasara’s annual base salary was reduced from $202,500 to $180,000. Aside from the reductions in annual base salary, there were no changes made to the Virca and Hasara employment letter agreements, dated December 31, 2018 and later modified on or about June 14, 2019 and December 31, 2019.

Research and Development Expenses. We recognized approximately $0.1 million in research and development expenses during the three months ended March 31, 2020 compared to approximately $0.2 million for the three months ended March 31, 2019. Research and development expenses for the three months ended March 31, 2020 primarily included salary expenses and expenses related to follow-up with the FDA on the Investigational New Drug application for use of SUBA-Itraconazole for prostate cancer that was cleared by the FDA in late 2019. The expenses for the three months ended March 31, 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.

In addition, on January 30, 2020, the International Health Regulations Emergency Committee of the World Health Organization (WHO) declared the novel coronavirus outbreak a public health emergency of international concern and on March 12, 2020 the WHO announced the outbreak was a pandemic. On January 31, 2020 the U.S. Health and Human Services Secretary declared a public health emergency, and subsequently state and local governments have imposed various restrictions on public activity. The Company has maintained operations virtually during the outbreak, but the impact of the outbreak currently is unknown and rapidly evolving. The related health crisis has adversely affect the U.S. and global economy, resulting in an economic downturn that has impacted the financial markets and the Company’s ability to raise capital.