(Mark One)
xQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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| ☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | ||||
oTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Ended March 31, 2021
| ☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | ||||
CONTRAVIR
Delaware (State or incorporation or |
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Principal Executive Offices) number, including area code Smaller reporting company Emerging growth company AND SUBSIDIARIES September 30, June 30, (Unaudited) ASSETS Current Assets: Cash $ 8,778,699 $ 12,982,748 Prepaid expenses 158,628 210,174 Total Current Assets 8,937,327 13,192,922 Property and equipment, net 61,572 67,564 In-process research and development 3,190,000 3,190,000 Goodwill 1,870,924 1,870,924 Other assets 61,289 63,182 Total Assets $ 14,121,112 $ 18,384,592 LIABILITIES AND STOCKHOLDERS’ EQUITY Current Liabilities: Accounts payable $ 1,483,093 $ 1,626,791 Accrued expenses 1,327,600 1,318,083 Total Current Liabilities 2,810,693 2,944,874 Contingent consideration 3,439,699 3,410,000 Deferred tax liability 1,269,620 1,269,620 Derivative financial instruments, at estimated fair value-warrants 1,608,335 1,702,231 Total Liabilities 9,128,347 9,326,725 Commitments and contingencies (Note 12) Stockholders’ Equity: Convertible preferred stock, par value $0.0001 per share. Authorized 20,000,000 shares — — Series A convertible preferred stock, stated value $10.00 per share, 104,013 and 104,013 shares issued and outstanding at September 30, 2017 and June 30, 2017, respectively 1,040,128 1,040,128 Common stock, par value of $.0001 per share. Authorized 120,000,000 shares, 78,169,715 and 75,707,348 shares issued and outstanding at September 30, 2017 and June 30, 2017, respectively 7,817 7,571 Additional paid-in capital 69,222,541 67,513,713 Accumulated deficit (65,277,721 ) (59,503,545 ) Total Stockholders’ Equity 4,992,765 9,057,867 Total Liabilities and Stockholders’ Equity $ 14,121,112 $ 18,384,592 SUBSIDIARIES Three Months Ended Three Months Ended Revenues $ — $ — Costs and Expenses: Research and development 3,963,477 3,129,708 General and administrative 1,874,896 1,747,351 Loss from Operations (5,838,373 ) (4,877,059 ) Change in fair value of derivative instruments-warrants and contingent consideration 64,197 60,162 Net loss (5,774,176 ) (4,816,897 ) Other comprehensive income Foreign currency translation adjustment — — Comprehensive loss $ (5,774,176 ) $ (4,816,897 ) Weighted Average Common Shares Outstanding Basic and Diluted 76,578,997 37,919,087 Net Loss per Common Share Basic and Diluted $ (0.08 ) $ (0.13 ) Preferred Stock, Common Stock, Additional Total Shares Amount Shares Par Paid in Accumulated Stockholder’s Balance July 1, 2017 104,103 $ 1,040,128 75,707,348 $ 7,571 $ 67,513,713 $ (59,503,545 ) $ 9,057,867 Issuance of common stock, net — — 2,462,367 246 1,317,683 — 1,317,929 Stock based compensation expense — — — — 391,145 — 391,145 Net loss — — — — — (5,774,176 ) (5,774,176 ) Balance September 30, 2017 104,103 $ 1,040,128 78,169,715 $ 7,817 $ 69,222,541 $ (65,277,721 ) 4,992,765 Changes in Stockholders’ Equity Three Months Ended Three Months Ended September 30, 2017 September 30, 2016 Cash Flows From Operating Activities: Net loss $ (5,774,176 ) $ (4,816,897 ) Adjustments to reconcile net loss to net cash used in operating activities: Stock-based compensation expense 391,145 501,116 Change in fair value of derivative instrument-warrants (93,896 ) (60,162 ) Change in fair value of contingent consideration 29,699 5,000 Depreciation and amortization expense 5,992 7,054 Changes in operating assets and liabilities: Accounts payable and accrued expense 14,722 88,922 Current portion of capital lease — (10,410 ) Prepaid expenses and other assets 53,439 (92,583 ) Net Cash used in Operating Activities (5,373,075 ) (4,377,960 ) Cash Flows From Investing Activities: Purchases of property and equipment — — Net Cash used in Investing Activities — — Cash Flows From Financing Activities: Proceeds from the issuance of common stock 1,169,026 — Issuance of common stock via stock option exercise — 2,180 Net Cash provided by Financing Activities 1,169,026 2,180 Net decrease in cash (4,204,049 ) (4,375,780 ) Cash at beginning of period 12,982,748 7,403,940 Cash at end of period $ 8,778,699 $ 3,028,160 Supplementary Disclosure Of Non-Cash Financing Activities: Stock issued to employees in lieu of cash payment for accrued bonus $ 148,903 $ — Conversion of Series A convertible preferred stock $ — $ 10,669,092 Conversion of Series B convertible preferred stock $ — $ 1,200,000 are investigating potential sources of collaboration and/or funding for the trial. 10-K. short-term nature, except for derivative instruments (warrants) and contingent consideration, which were recorded at fair value at the end of each reporting period. See Note 5 for additional information of the fair value of the derivative liabilities. We recorded contingent consideration from the 2016 acquisition of Ciclofilin, which is required to be carried at fair value. See Note 6 for additional information on the fair value of the contingent consideration. value of derivative liabilities are recorded in the statements of operations under the caption “Change in fair value of derivative financial instruments—warrants.” See Note necessary. for the three months ended March 31, 2021 and 2020. The projected discounted cash flow models used to estimate the fair values of These assumptions are based on significant inputs not observable in the market and thus represent Level 3 measurements within the fair value hierarchy. The use of different inputs and assumptions could increase or decrease our estimated discounted future cash flows, the resulting estimated fair values and the amounts of related impairments, if any. a change in tax rates on deferred tax assets and liabilities in the results of operations in the period that includes the enactment date. We reduce the measurement of a deferred tax asset, if $1.8 million, respectively. 260, Earnings per Share, (“ASC period. was immaterial. stock. liability-warrants. “Refer to Note 6”. The following assumptions were used to measure the warrants at issuance and to remeasure the liability as of September 30, June 30, Price of ContraVir common stock $ 0.52 $ 0.58 Expected warrant term (years) 3.03 years 3.28 years Risk-free interest rate 1.77 % 1.73 % Expected volatility 73 % 66 % Dividend yield — — December 31, 2020: liability-warrants. “Refer to Note 6”. September 30, June 30, Price of ContraVir common stock $ 0.52 $ 0.58 Expected warrant term (years) 3.51 years 3.76 years Risk-free interest rate 1.77 % 1.73 % Expected volatility 73 % 66 % Dividend yield — — exercise price. September 30, 2017 June 30, 2017 Price of ContraVir common stock $ 0.52 $ 0.58 Expected warrant term (years) 4.56 years 4.76 years Risk-free interest rate 1.77 % 1.72 % Expected volatility 73 % 66 % Dividend yield — — December 31, 2020: Date Description Number of Derivative July 1, 2017 Balance of derivative financial instruments liability 11,414,789 $ 1,702,231 Change in fair value of warrants for the three months ended September 30, 2017 — (93,896 ) September 30, 2017 Balance of derivative financial instruments liability 11,414,789 $ 1,608,335 equity classified. Fair value Quoted Prices in Significant Significant As of September 30, 2017 Derivative liabilities related to warrants $ (1,608,335 ) $ — $ — $ (1,608,335 ) Contingent consideration $ (3,439,699 ) $ — $ — $ (3,439,699 ) As of June 30, 2017 Derivative liabilities related to warrants $ (1,702,231 ) $ — $ — $ (1,702,231 ) Contingent consideration $ (3,410,000 ) $ — $ — $ (3,410,000 ) December 31, 2020. Acquisition- Liabilities Balance at June 30, 2017 $ 3,410,000 Change in fair value recorded in earnings 29,699 Balance at September 30, 2017 $ 3,439,699 for the three months ended March 31, 2021. September 30, June 30, IPR&D asset: CRV431 $ 3,190,000 $ 3,190,000 March 31, 2021 and 2020. Amount Goodwill balance at July 1, 2017 $ 1,870,924 Changes during the three months ended September 30, 2017 — Goodwill balance at September 30, 2017 $ 1,870,924 March 31, 2021 and 2020. September 30, June 30, Research and development $ 242,942 $ 307,544 Professional fees — 14,304 Payroll and related costs 975,426 931,664 Legal fees 83,241 64,571 Other 25,991 — Total accrued expenses $ 1,327,600 $ 1,318,083 Three months Three months General and administrative $ 313,100 $ 361,186 Research and development 78,045 139,930 Total stock-based compensation expense $ 391,145 $ 501,116 expense as follows: Number of Exercise Price Weighted Intrinsic Weighted Balance outstanding, July 1, 2017 6,481,186 $0.11—$4.38 $ 1.54 $ 220,019 7.53 Granted 190,000 0.50 - $0.58 $ 0.55 Balance outstanding, September 30, 2017 6,671,186 $0.11—$4.38 $ 1.51 $ 164,024 7.30 Vested awards and those expected to vest at September 30, 2017 3,779,099 $0.11—$4.38 $ 1.57 $ 164,024 7.30 Vested and exercisable at September 30, 2017 6,584,423 $0.11—$4.38 $ 1.51 $ 163,985 7.28 March 31, 2021 and 2020, respectively. The total fair value of the shares vested during the three months ended March 31, 2021 was de minimis. Condensed Consolidated Financial Statements 2.0 years. Three months Three months Stock price $ 0.58 $ 1.07 Risk-free interest rate 1.51 % 1.25 % Dividend yield — — Expected volatility 71.8 % 80.5 % Expected term (in years) 6.0years 5.7years employees. our common stock. Three months ended September 30, September 30, Net loss $ (5,774,176 ) $ (4,816,897 ) Weighted average common shares outstanding 76,578,997 37,919,087 Net loss per share of common stock—basic and diluted $ (0.08 ) $ (0.13 ) Three months Three months Common shares issuable upon conversion of Series A preferred stock 216 2,166,934 3,814,396 Stock options 6,671,186 5,738,456 Warrants 11,414,789 5,464,789 Total 20,252,909 15,017,641 period they were outstanding. and estimates as described in the financial statements contained in the Annual Report on Form 10-K for the year ended December 31, 2020. March 31, 2021. Three months ended September 30, September 30, Change Revenues $ — $ — $ — Costs and Expenses: Research and development 3,963,477 3,129,708 833,769 General and administrative 1,874,896 1,747,351 127,545 Loss from operations (5,838,373 ) (4,877,059 ) 961,314 Change in fair value of derivative instruments-warrants and contingent consideration 64,197 60,162 4,035 Net loss $ (5,774,176 ) $ (4,816,897 ) $ 957,279 2020: March 31, 2021, we had working capital of $114.9 million compared to working capital of $38.0 million as of March 31, 2020. The increase of $76.9 million in February 2021. Three months ended September 30, September 30, Net cash (used in) provided by: Operating activities $ (5,373,075 ) $ (4,377,960 ) Investing activities — — Financing activities 1,169,026 2,180 Net decrease in cash $ (4,204,049 ) $ (4,375,780 ) following periods: common stock, net of issuance costs. February 18, 2021. effective. 101.INS XBRL Instance Document 101.SCH XBRL Taxonomy Extension Schema 101.CAL XBRL Taxonomy Extension Calculation Linkbase 101.DEF XBRL Taxonomy Extension Definition Linkbase 101.LAB XBRL Taxonomy Label Linkbase 101.PRE XBRL Taxonomy Extension Presentation Linkbase Date: By: /s/ By: /s/ JOHN CAVAN John Cavan Chief Financial Officer
08837principal executive offices)08837(Zip Code)(number)Title of each class Name of each exchange on which registered Common Stock, par value $0.0001 per share HEPA The Nasdaq Capital Market registrant: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 x☒ No o☐and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit and post such files). Yes x☒ No o☐and “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act. (Check one):o☐o☐ o☒x(Do not check if a smaller reporting company)xo☐ No x☒shares of common stockCommon Stock outstanding was 78,278,306 as of November 13, 2017.May 7, 2021 was 76,225,245.CONTRAVIR PHARMACEUTICALS, INC.FORM 10-QPage1Condensed Consolidated Balance Sheets as of September 30, 2017and June 30, 201712345Management’s Discussion and Analysis of Financial Condition and Results of Operations1823232425ContraVirHepion Pharmaceuticals, Inc. may contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Such forward-looking statements are characterized by future or conditional verbs such as “may,” “will,” “expect,” “intend,” “anticipate,” believe,” “estimate” and “continue” or similar words. You should read statements that contain these words carefully because they discuss future expectations and plans, which contain projections of future results of operations or financial condition or state other forward-looking information. Such statements are only predictions and our actual results may differ materially from those anticipated in these forward-looking statements. We believe that it is important to communicate future expectations to investors. However, there may be events in the future that we are not able to accurately predict or control. Factors that may cause such differences include, but are not limited to, those discussed under Item 1A. Risk Factors and elsewhere in the audited condensed consolidated financial statements as of and for the periodyear ended June 30, 2017December 31, 2020 contained in the Company’sour Annual Report on Form 10-K (“Form 10-K”) filed with the Securities and Exchange Commission (“SEC”) on September 28, 2017.March 31, 2021. These factors include the uncertainties associated with product development, the risk that products that appeared promising in early clinical trials do not demonstrate safety and efficacy in larger-scale clinical trials, the risk that we will not obtain approval to market our products, the risks associated with dependence upon key personnel and the need for additional financing. We do not assume any obligation to update forward-looking statements as circumstances change and thus you should not unduly rely on these statements. Cautionary Note Regarding Forward-Looking Statements.Page
2017
2017March 31,
2021December 31,
2020(Note 2) Assets Current assets: Cash $ 115,449,085 $ 40,726,838 Prepaid expenses 2,295,646 1,907,461 Total current assets 117,744,731 42,634,299 Property and equipment, net 172,402 108,440 Right-of-use assets 493,717 556,492 In-process research and development 3,190,000 3,190,000 Goodwill 1,870,924 1,870,924 Other assets 285,098 285,098 Total assets $ 123,756,872 $ 48,645,253 Liabilities and Stockholders’ Equity Current liabilities: Accounts payable $ 1,662,444 $ 3,722,429 Accrued expenses 817,280 659,572 Operating lease liabilities, current 211,140 279,826 Current portion of long-term debt 176,585 0 Total current liabilities 2,867,449 4,661,827 Contingent consideration 2,600,000 2,570,000 Long-term debt 0 176,585 Deferred tax liability 409,022 409,022 Operating lease liabilities, non-current 300,383 295,755 Derivative financial instruments, at estimated fair value—warrants 5,462 11,673 Total liabilities 6,182,316 8,124,862 Commitments and contingencies (Note 11) 0 0 Stockholders’ equity: Series A convertible preferred stock, stated value $10 per share, 85,581 shares issued and outstanding at March 31, 2021 and December 31, 2020, respectively. 855,808 855,808 Series C convertible preferred stock, stated value $1,000 per share, 1,807 and 1,817 shares issued and outstanding at March 31, 2021 and December 31, 2020, respectively. 851,607 856,320 Common stock—$0.0001 par value per share; 120,000,000 shares authorized, 76,225,245 and 32,025,153 shares issued and outstanding at March 31, 2021 and December 31, 2020, respectively. 7,623 3,203 Additional paid in capital 226,022,287 142,910,523 Accumulated deficit (110,162,769) (104,105,463) Total stockholders’ equity 117,574,556 40,520,391 Total liabilities and stockholders’ equity $ 123,756,872 $ 48,645,253 statements.statements (unaudited).CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
September 30, 2017
September 30, 2016Three Months Ended
March 31,2021 2020 Revenues $ 0 $ 0 Costs and expenses: Research and development 3,498,655 2,637,331 General and administrative 2,532,808 1,549,606 Total operating expenses 6,031,463 4,186,937 Loss from operations (6,031,463) (4,186,937) Other income (expense): Interest expense (2,054) 0 Change in fair value of derivative instruments (warrants) and contingent consideration (23,789) (39,680) Loss before income taxes (6,057,306) (4,226,617) Income tax benefit (expense) 0 0 Net loss and comprehensive loss (6,057,306) (4,226,617) Deemed dividend (see Note 5) (5,287) 0 Net loss attributable to common shareholders $ (6,062,593) $ (4,226,617) Weighted average common shares outstanding: Basic and diluted 52,160,742 4,345,699 Net loss per common share: (see Note 10) Basic and diluted $ (0.12) $ (0.97) statements.statements (unaudited).CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY(Unaudited)
Series A
$0.0001 par value
$0.0001 par value
Value
Capital
Deficit
EquityThe accompanying notes are an integral part AND SUBSIDIARIESthese condensed financial statements.CONTRAVIR PHARMACEUTICALS, INC.CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWSPreferred Stock Preferred Stock Additional Paid in Capital Accumulated Deficit Total Stockholders' Equity Series A Series C Common Stock Shares Amount Shares Amount Shares Amount Balance at December 31, 2020 85,581 $ 855,808 1,817 $ 856,320 32,025,153 $ 3,203 $ 142,910,523 $ (104,105,463) $ 40,520,391 Net loss — — — — — — — (6,057,306) (6,057,306) Stock-based compensation expense — — — — — — 957,871 — 957,871 Conversion of preferred stock to common — — (10) (10,000) 92 — 10,000 — 0 Accretion of discount — — — 5,287 — — (5,287) — 0 Issuance of common stock, net — — — — 44,200,000 4,420 82,149,180 — 82,153,600 Balance at March 31, 2021 85,581 $ 855,808 1,807 $ 851,607 76,225,245 $ 7,623 $ 226,022,287 $ (110,162,769) $ 117,574,556 statements.statements (unaudited).NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AND SUBSIDIARIESPreferred Stock Preferred Stock Additional Paid in Capital Accumulated Deficit Total Stockholders’ Equity Series A Series C Common Stock Shares Amount Shares Amount Shares Amount Balance at December 31, 2019 85,581 $ 855,808 1,827 $ 861,033 3,760,255 $ 375 $ 97,651,006 $ (83,751,525) $ 15,616,697 Net loss — — — — — — — (4,226,617) (4,226,617) Stock-based compensation expense — — — — — — 8,246 — 8,246 Issuance of common stock, net — — — — 2,311,867 231 6,788,234 — 6,788,465 Warrant exercises — — — — 2,000 — 12,000 — 12,000 Balance at March 31, 2020 85,581 $ 855,808 1,827 $ 861,033 6,074,122 $ 606 $ 104,459,486 $ (87,978,142) $ 18,198,791 Three Months Ended
March 31,2021 2020 Cash flows from operating activities: Net loss $ (6,057,306) $ (4,226,617) Adjustments to reconcile net loss to net cash used in operating activities: Stock-based compensation 957,871 8,246 Depreciation and amortization 18,143 6,527 Change in fair value of derivative instrument-warrants (6,211) 9,680 Change in fair value of contingent consideration 30,000 30,000 Changes in operating assets and liabilities: Accounts payable and accrued expenses (1,902,277) 277,715 Prepaid expenses and other assets (389,468) (783,513) Net cash used in operating activities (7,349,248) (4,677,962) Cash flows from investing activities: Purchase of property and equipment (82,105) 0 Proceeds from disposal of property and equipment 0 2,194 Net cash (used in) provided by investing activities (82,105) 2,194 Cash flows from financing activities: Proceeds from the issuance of common stock, net of issuance costs 82,153,600 6,788,465 Proceeds from the exercise of warrants 0 12,000 Net cash provided by financing activities 82,153,600 6,800,465 Net increase in cash 74,722,247 2,124,697 Cash at beginning of period 40,726,838 13,922,972 Cash at end of period $ 115,449,085 $ 16,047,669 Supplementary disclosure of non-cash financing activities: Conversion of Series C convertible preferred stock (part of Series C deemed dividend) $ 10,000 $ 0 Accretion of Series C preferred stock discount upon conversion $ 5,287 $ 0 Warrants issued to placement agent $ 2,013,055 $ 0 ContraVir(“ContraVir”(we, our, or the “Company”)us) is a biopharmaceutical company headquartered in Edison, New Jersey, focused primarily on the development of drug therapy for treatment of chronic liver diseases. This therapeutic approach targets fibrosis and hepatocellular carcinoma (“HCC”) associated with non-alcoholic steatohepatitis (“NASH”), viral hepatitis, and other liver diseases. Our cyclophilin inhibitor, CRV431, is being developed to offer benefits to address these multiple complex pathologies. CRV431 is a cyclophilin inhibitor that targets multiple pathologic pathways involved in the progression of liver disease. Preclinical studies with CRV431 in NASH models demonstrated consistent reductions in liver fibrosis and additional reductions in inflammation and cancerous tumors in some studies. CRV431 additionally showed in vitro antiviral activity towards hepatitis B, C, and D viruses which also trigger liver disease. Preclinical studies also have shown potentially therapeutic activities of CRV431 in experimental models of acute lung injury, platelet activation, and SARS-CoV-2 coronavirus replication.commercializationreceived approval in June 2018. We completed the first segment of targeted antiviral therapiesour Phase 1 clinical activities for CRV431 in October 2018 wherein we reached a major clinical milestone of positive data from a Phase I trial of CRV431 in humans. This achievement triggered the first milestone payment, as stated in the Merger Agreement for the acquisition of Ciclofilin Pharmaceuticals, Inc. (“Ciclofilin”) and we paid a related milestone payment of approximately $346,000 to Aurinia Pharmaceuticals, Inc. ("Aurinia") and $654,000 to the former Ciclofilin shareholders along with the issuance of 1,439 shares of our common stock with a specific focus on developing a potentially curative therapy for hepatitis B virus (HBV). The Company is developing two novel anti-HBV compounds with complementary mechanismsfair value of action.$55,398, representing 2.5% of our issued and outstanding common stock as of June, 2016, to the former Ciclofilin shareholders. Our lead compound, TXL™, is currently in Phase 2a development and is designed to deliver high intrahepatic concentrations of TFV, while minimizing off-target effects caused by high levels of circulating TFV. CRV431, our second compound for HBV,CEO is a next-generation cyclophilin inhibitorformer Ciclofilin shareholder and received approximately $274,000 and 603 shares of common stock and Petrus Wijngaard, a director of our company, received $2,805 and 6 shares of common stock.unique structure that increases its potencyCRV431 clinical development program in the United States for COVID-19. We received approval December 17, 2020, to conduct a COVID-19 clinical trial and selective index against TXL and Going Concernthe Company’sour interim financial information. The consolidated balance sheet as of June 30, 2017December 31, 2020 was derived from the audited annual consolidated financial statements but does not include all disclosures required by U.S. GAAP. The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto as of and for the year ended June 30, 2017December 31, 2020 contained in the Company’sour Annual Report on Form 10-K (“Form 10-K”) filed with the SEC on September 28, 2017.ContraVir and itsour subsidiaries, ContraVirContravir Research Inc. and Ciclofilin PharmaceuticalsHepion Research Corp, which conducts itsconduct their operations in Canada. All intercompany balances and transactions have been eliminated in consolidation.Going ConcernThe accompanyingthe Companywe will continue as a going concern within one year of the issuance of these consolidated financial statements, contemplates the realization of assets and satisfaction of liabilities in the normal course of business and do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the inability of the Company to continue as a going concern. As of September 30, 2017, the Company had $8.8 million in cash. Net cash used in operating activities was $5.4 million for the three months ended September 30, 2017. Net loss for the three months ended September 30, 2017 was $5.7 million. As of September 30, 2017, the Company had working capital of $6.1 million. The Company has not generated revenue to date and has incurred substantial losses and negative cash flows from operations since its inception. The Company has historically funded its operations through issuances of common and preferred stock.The Companywithin the next yearin future years to continue the development and commercialization of its current product candidates and to continue to fund operations at itsthe current cash expenditure levels. The significant uncertainties surrounding the clinical development timelines and costs and the need to raise a significant amount of capital raises substantial doubt about the Company’s ability to continue as a going concern from one year after the Company’s financial statements have been issued without additional capital becoming available. The CompanyWe cannot be certain that additional funding will be available on acceptable terms, or at all. To the extent that we raise additional funds by issuing equity securities, our stockholders may experience significant dilution. Any debt financing, if available, may involve restrictive covenants that impact the Company’sour ability to conduct business. If the Company iswe are unable to raise additional capital when required or on acceptable terms, itwe may have to (i) significantly delay, scale back or discontinue the development and/or commercialization of itsone or more product candidate;candidates; (ii) seek collaborators for product candidates at an earlier stage than otherwise would be desirable and on terms that are less favorable than might otherwise be available; or (iii) relinquish or otherwise dispose of rights to technologies, product candidates or products that the Companywe would otherwise seek to develop or commercialize ourselves on unfavorable terms.The Company’sJune 30, 2017December 31, 2020 included in the Company’sour Annual Report on Form 10-K filed with the SEC on September 28, 2017.10-K. Since the date of such consolidated financial statements, there have been no changes to the Company’sour significant accounting policies.September 30, 2017March 31, 2021 and June 30, 2017, the amount ofDecember 31, 2020, cash was approximately $8.8$115.4 million and $13.0$40.7 million, respectively, consisting primarily of checking accounts held at U.S. and Canadian commercial banks. Cash is maintained at financial institutions and, at times, balances may exceed federally insured limits. The Company hasWe have never experienced losses related to these balances.(ASC 820)(“ASC 820”), establishes a fair value hierarchy for instruments measured at fair value that distinguishes between assumptions based on market data (observable inputs) and the Company’sour own assumptions (unobservable inputs). Observable inputs are inputs that market participants would use in pricing the asset or liability based on market data obtained from sources independent of the Company.us. Unobservable inputs are inputs that reflect our assumptions about the inputs that market participants would use in pricing the asset or liability and are developed based on the best information available in the circumstances.·the Company has the ability towe can access.··the Companyus in determining fair value is greatest for instruments categorized in Level 3. A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement.payable.payable, long-term debt, derivative instruments (warrants) and contingent consideration. These financial instruments are stated at their respective historical carrying amounts, which approximate fair value due to their short term nature.financial instrumentsThe Company hasFinancial Instruments45 for additional information.the Company’sour fourth quarter, and between annual tests if the Company becomeswe become aware of an event or a change in circumstances that would indicate the carrying value may be impaired. Pursuant to ASU No. 2011-08, —- Goodwill and Other (Topic 350): TestingOther: Simplifying the Test for Goodwill for Impairment,, and No. 2012-02, Intangibles — Goodwill and Other(Topic 350): Testing Indefinite-Lived Intangible Assets for Impairment, the Company has the option to first assess qualitative factors to determine whether the existence of events or circumstances leads the Company to determine that it is more likely than not (that is, a likelihood of more than 50%) that which eliminates Step 2 from the goodwill impairment test. The annual, or the acquired IPR&D is impaired. If the Company chooses to first assess qualitative factors and determines that it is not more likely than notinterim, goodwill or acquired IPR&D is impaired, the Company is not required to take further action to test for impairment. The Company also has the option to bypass the qualitative assessment and perform only the quantitative impairment test whichis performed by comparing the Company may choose to do in some periods but not in others.If the Company performs a quantitative assessment of goodwill, it utilizes the two-step approach prescribed under ASC Topic 350. Step 1 requires a comparison of the carryingfair value of a reporting unit includingwith its carrying amount. An impairment charge should be recognized for the amount by which the carrying amount exceeds the reporting unit's fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to its estimated fair value. The Company tests for impairment at the entity level because it operatesthat reporting unit. In addition, income tax effects from any tax deductible goodwill on the basiscarrying amount of a singlethe reporting unit. Ifunit should be considered when measuring the carrying value exceeds fair value, the Company then performs Step 2 to measure the amount ofgoodwill impairment loss, if any. Inapplicable.Company estimatesgoodwill impairment test. An entity still has the fair value of its individual assets, including identifiable intangible assets, and liabilitiesoption to perform the qualitative assessment for a reporting unit to determine if the implied fair value of goodwill. The Company then compares the carrying value of its goodwill to its implied fair value. The excess of the carrying value of goodwill over its implied fair value, if any,quantitative impairment test is recorded as an impairment charge.no0 impairment of goodwill as of September 30, 2017.&D&D") acquired in a business combination is capitalized as indefinite-lived assets on the Company’sour condensed consolidated balance sheets at itsthe acquisition-date fair value. Once the project is completed, the carrying value of the IPR&D is reclassified to other intangible assets, net and is amortized over the estimated useful life of the asset. Post-acquisition research and development expenses related to the IPR&D projects are expensed as incurred.the Company’sour IPR&D assets, acquired in connection with the Ciclofilin acquisition, reflect significant assumptions regarding the estimates a market participant would make in order to evaluate a drug development asset, including: (i) probability of successfully completing clinical trials and obtaining regulatory approval; (ii) market size, market growth projections, and market share; (iii) estimates regarding the timing of and the expected costs to advance clinical programs to commercialization; (iv) estimates of future cash flows from potential product sales; and (v) a discount rate.itsthe revised fair value with the related impairment charge recognized in the period in which the impairment occurs. If the carrying value of the asset becomes impaired as the result of unfavorable data from any ongoing or future clinical trial, changes in assumptions that negatively impact projected cash flows, or because of any other information regarding the prospects of successfully developing or commercializing our programs, the Companywe could incur significant charges in the period in which the impairment occurs.no0 impairment of IPR&D for the three months ended March 31, 2021 and 2020.September 30, 2017.the Company iswe are subject to loss contingencies, such as legal proceedings and claims arising out of itsour business that cover a wide range of matters, including, among others, government investigations, shareholder lawsuits, product and environmental liability, and tax matters. In accordance with ASC Topic 450, Accounting for Contingencies, (“ASC 450”), the Company recordswe record accruals for such loss contingencies when it is probable that a liability will be incurred, and the amount of loss can be reasonably estimated. The Company, inIn accordance with this guidance, doeswe do not recognize gain contingencies until realized.ContraVir doesdoesdo not expect to have such for several years, if at all. Accordingly, our research and development costs are expensed as incurred. While certain of our research and development costs may have future benefits, our policy of expensing all research and development expenditures is predicated on the fact that ContraVir haswe have no history of successful commercialization of product candidates to base any estimate of the number of future periods that would be benefited.September 30, 2017March 31, 2021 and June 30, 2017, the CompanyDecember 31, 2020, we had prepaid research and development costs of $55,123$1.9 million and $75,484.the Company issueswe issue stock options with only service basedservice-based vesting conditions and recordsrecord the expense for these awards using the straight-line method.ContraVir has a limited trading history in its common stock and lacks company-specific historical and implied volatility information. Therefore, it estimates itsThe estimated expected stock volatility is based on the historical volatility of a publicly traded set of peer companies and expects to continue to do so until such time as it has adequate historical data regarding the volatility of itsour own traded stock price. The expected term of the Company’s stock options has been determined utilizing the “simplified” method for awards that qualify as “plain-vanilla” options.the Company haswe have never paid cash dividends and doesdo not expect to pay any cash dividends in the foreseeable future.Company accountsfunctional currency of Hepion Pharmaceuticals, Inc. and ContraVir Research Inc. is the U.S. dollar. The functional currency of Hepion Research Corp. is the Canadian dollar. Our reporting currency is the U.S. dollar. The assets and liabilities of Hepion Research Corp. are translated into U.S. dollars using period-end exchange rates; income and expenses are translated using the average exchange rates for stock options issuedthe reporting period. Unrealized foreign currency translation adjustments are deferred in accumulated other comprehensive loss, a separate component of shareholders’ equity. The amount of currency translation adjustment was immaterial at March 31, 2021 and December 31, 2020.non-employeesallocate resources and in accordanceassessing performance. Our chief operating decision maker views our operations and manages the business in 1 segment.505-50 “Equity-Based Payment to Non-Employees” and accordingly the value of the stock compensation to non-employees is based upon the measurement date as determined at either a) the date at which a performance commitment is reached, or b) at the date at which the necessary performance to earn the equity instruments is complete. At the end of each financial reporting period prior to completion of the service, the fair value of these awards is remeasured using the then-current fair value of the Company’s common stock and updated assumption inputs in the Black-Scholes option-pricing model.718 requires that cash flows resulting from tax deductions in excess of the cumulative compensation cost recognized260”) for options exercised (excess tax benefits) be classified as cash inflows from financing activities and cash outflows from operating activities. Due to ContraVir’s accumulated deficit position, no excess tax benefits have been recognized.Business CombinationsThe Company accounts for its business acquisitions, such as our acquisition of Ciclofilin in June of 2016, under the acquisition method of accounting as indicated in FASB ASC 805, “Business Combinations”, which requires the acquiring entity in a business combination to recognize the fair value of all assets acquired, liabilities assumed, and any non-controlling interest in the acquired business; and establishes the acquisition date as the fair value measurement point. Accordingly, the Company recognizes assets acquired and liabilities assumed in business combinations, including contingent assets andliabilities and non-controlling interest in the acquiree, based on the fair value estimates as of the date of acquisition.periods presented. In accordance with ASC 805,this guidance, basic and diluted net loss per common share was determined by dividing net loss attributable to common stockholders by the Company recognizes and measures goodwill as ofweighted-average common shares outstanding during the acquisition date, as the excess of the fair value of the consideration paid over the fair value of the identified net assets acquired.Contingent consideration assumed in a business combination is remeasured at fair value each reporting period and any change in the fair value from either the passage of time or events occurring after the acquisition date, is recorded in other expense.May of 2017, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2017-09, Compensation — Stock Compensation (Topic 718): Scope of Modification Accounting (“ASU 2017-09”), which provides guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting in Topic 718. This guidance is to be applied for annual periods, and interim periods within those annual periods, beginning after December 15, 2017, with early adoption permitted and should be applied prospectively to an award modified on or after the adoption date. The Company is currently evaluating the impact that this guidance will have on its results of operations, financial position and cash flows.In January of 2017,August 2020, the FASB issued ASU No. 2017-04, Intangibles — Goodwill2020-06, Accounting for Convertible Instruments and Other (Topic 350): Simplifying the Test for Goodwill ImpairmentContracts in an Entity’s Own Equity (“ASU 2017-04”2020-06”), which amendedsimplifies the 2014 amendmentsaccounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts in an entity’s own equity. The standard eliminates the liability and equity separation model for convertible instruments with a cash conversion feature. As a result, after adoption, entities will no longer separately present in equity an embedded conversion feature for such debt. Additionally, the embedded conversion feature will no longer be amortized into income as interest expense over the instrument’s life. Instead, entities will account for a convertible debt instrument wholly as debt unless (1) a convertible instrument contains features that require bifurcation as a derivative under ASC Topic 815, Derivatives and Hedging, or (2) a convertible debt instrument was issued at a substantial premium. Additionally, the standard requires applying the if-converted method to the FASB Accounting Standards Codification that allowed companies an alternative accounting treatmentcalculate convertible instruments’ impact on diluted earnings per share (“EPS”). The standard is effective for subsequently measuring goodwill. This amendment is Phase 1 of a project by the FASB Board to simplify how an entity is required to test goodwill for impairment by eliminating step 2 from the goodwill impairment test. Step 2 measures a goodwill impairment loss by comparing the implied fair value of a reporting unit’s goodwill with the carrying amount of that goodwill. These amendments are to be applied on a prospective basis and are required to be adopted for annual and any interim goodwill impairment tests in fiscal years beginning after December 15, 2019. The Company is2021, with early adoption permitted for fiscal years beginning after December 15, 2020. It can be adopted on either a full retrospective or modified retrospective basis. We are currently evaluating the effect this ASU will have on our consolidated financial statements and related disclosures. We adopted this standard on January 1, 2021 and the impact that this guidance will havehad on its results of operations, financial position and cash flows.In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments (“ASU 2016-15”), which amended the existing accounting standards for the statement of cash flows. The amendments provide guidance on eight classification issues related to the statement of cash flows. The Company is required to adopt the guidance in the first quarter of fiscal 2019 and early adoption is permitted. The amendments should be applied retrospectively to all periods presented. For issues that are impracticable to apply retrospectively, the amendments may be applied prospectively as of the earliest date practicable. The Company is currently evaluating the timing and the impact of these amendments on its statement of cash flows.In March 2016, the FASB issued ASU No. 2016-09, Compensation—Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting (“ASU 2016-09”). The new standard identifies areas for simplification involving several aspects of accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, an option to recognize gross stock compensation expense with actual forfeitures recognized as they occur, as well as certain classifications on the statement of cash flows. This guidance is effective for the Company for annual reporting periods beginning after December 15, 2017, with early adoption permitted. The Company is currently evaluating the impact that this guidance will have on its results of operations, financial position and cash flows.In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) (“ASU 2016-02”). The new standard establishes a right-of-use (ROU) model that requires a lessee to record a ROU asset and a lease liability on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. ASU 2016-02 is effective for annual periods beginning after December 15, 2018, including interim periods within those annual periods, with early adoption permitted. A modified retrospective transition approach is required for lessees for capital and operating leases existing at, or entered into after, the beginning of the earliest comparative period presented in theour condensed consolidated financial statements with certain practical expedients available. The Company is currently evaluating the impact that this guidance will have on its results of operations, financial position and cash flows.In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers. This guidance requires an entity to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. This guidance also requires an entity to disclose sufficient information to enable users of financial statements to understand the nature, amount, timingand uncertainty of revenue and cash flows arising from contracts with customers. Qualitative and quantitative information is required about:·Contracts with customers—including revenue and impairments recognized, disaggregation of revenue and information about contract balances and performance obligations (including the transaction price allocated to the remaining performance obligations).·Significant judgments and changes in judgments—determining the timing of satisfaction of performance obligations (over time or at a point in time), and determining the transaction price and amounts allocated to performance obligations.·Certain assets—assets recognized from the costs to obtain or fulfill a contract.In August 2015, the FASB issued updated guidance deferring the effective date of the revenue recognition standard. In March, April and May 2016 and September 2017, the FASB issued additional updated guidance, which clarifies certain aspects of the ASU and the related implementation guidance issued by the FASB-IASB Joint Transition Resource Group for Revenue Recognition. This guidance is effective for the Company for annual reporting periods beginning after December 15, 2017. The Company is currently evaluating the impact that this guidance will have on its results of operations, financial position and cash flows.Stockholder’sStockholders’ Equity and Derivative LiabilityPreferred stock, Common Stock and Warrant OfferingDuring the period from August 5, 2016 to September 29, 2016, certain holders of the Company’s — Warrants electedconvert approximately 1.1 million1,250,000 shares of Series A Convertible Preferred stock into approximately 22.2 millionStock (the “Series A”). All shares of the Company’s common stock. In addition, in September 2016,Series A were issued between October 2014 and February 2015. Each share of the Series A is convertible at the option of the holder into the number of shares of common stock determined by dividing the stated value of such share by the conversion price that is subject to adjustment. As of March 31, 2021, there were 85,581 shares outstanding. During the three months ended March 31, 2021, 0 shares of the Company’s Series BA were converted.electedwarrants (the “Rights Offering”). Upon completion of the offering, pursuant to convert the outstanding 120,000rights offering, we sold an aggregate of 10,826 units at an offering price of $1,000 per unit comprised of 10,826 shares of Series B Convertible PreferredC and 88,928 common stock into approximately 1.1 millionwarrants. As of March 31, 2021, there were 1,807 shares outstanding. During the three months ended March 31, 2021, 10 shares of the Company’sSeries C were converted into 92 shares of our common stockthe Companywe entered into an underwriting agreement related to the public offering and sale of 5,000,0008,929 shares of common stock and warrants to purchase up to 3,000,0005,357 shares of common stock, at a fixed combined price to the public of $3.00$1,680 under the Company’s currentour prior shelf registration statement on Form S-3. The shares of common stock and warrants were issued separately on October 13, 2015. The warrants arewere immediately exercisable and will be exercisable for a period of five years from the date of issuance at an exercise price of $4.25$2,380.00 per share. There is not, nor is there expected to be, any trading market for theThese warrants issuedexpired in theOctober 2020.contemplated by the Underwriting Agreement. The Company also granted the Underwriters a 45-day option to purchase up to an additional 750,000 additionalof 8,803 shares of our common stock and additional warrants to purchase up to 450,0004,401 shares of common stock, at $3.00, which was not exercised.a fixed combined price to the public of $795.20 under our prior shelf registration statement on Form S-3. The warrants were immediately exercisable and will be exercisable for a period of five years from the date of issuance at an exercise price of $952.00 per share. The gross proceeds to the Companyus were $15.0$7.0 million, before deducting the underwriting discount and other offering expenses payable by the Companyus of approximately $1.5$0.7 million. If the warrants were exercised in full, ContraVirwe would receive additional proceeds of approximately $12.8$4.2 million.the Company consummateswe consummate any merger, consolidation, sale or other reorganization event in which itsour common stock is converted into or exchanged for securities, cash or other property (“Fundamental transaction”Transaction”), then the Companywe shall pay at the holder’s option, exercisable at any time commencing on the occurrence or the consummation of the fundamental transactionFundamental Transaction and continuing for 90 days, an amount of cash equal to the value of the remaining unexercised portion of the warrant as determined in accordance with the Black-Scholes option pricing model on the date of such fundamental transaction.Fundamental Transaction. As a result of these terms, in accordance with the guidance contained in ASC Topic 815-40, the Company haswe have determined that the warrants issued in connection with this financing transaction must be recorded as derivative liabilities upon issuance and marked to market on a quarterly basis in the Company’sour condensed consolidated statement of operations and comprehensive loss.operations. Upon the issuance of these warrants, the fair value of approximately $4.4$1.5 million was recorded as derivative financial instruments liability—warrants.The Company develops itsOther than for the fair value of common stock, we developed our own assumptions for use in the Black-Scholes option pricing model that do not have observable inputs or available market data to support the fair value. This method of valuation involves using inputs such as the fair value of the Company’sour common stock, our stock price volatility (stock price volatility of comparable companies prior to 2020), the contractual term of the warrants, risk free interest rates and dividend yields. The Company has a limited trading history in its common stock, therefore, expectedvolatility is based on that of comparable public development stage biotechnology companies. Due to the nature of these inputs, the valuation of the warrants is considered a Level 3 measurement.September 30, 2017March 31, 2021 and June 30, 2017:
2017
2017March 31,
2021December 31,
2020Price of Hepion common stock $ 1.84 $ 2.19 Expected warrant term (years) 0.01 years 0.25 years Risk-free interest rate 0.64 % 0.27 % Expected volatility 123 % 124 % Dividend yield 0 0 4, 2016, the Company25, 2017, we closed on a public offering of 4,929,57821,429 shares of itsour common stock and warrants to purchase up to 2,464,78910,714 shares of common stock, at a fixed combined price to the public of $1.42$560.00 under the Company’s currentour prior shelf registration statement on Form S-3. The warrants are immediately exercisable and will be exercisable for a period of five years from the date of issuance at an exercise price of $1.70$700.00 per share. There is not, nor is there expected to be, any trading market for the warrants issued in the offering contemplated by the Underwriting Agreement. The gross proceeds to the Companyus were $7.0$12.0 million, before deducting the underwriting discount and other offering expenses payable by the Companyus of approximately $0.7$0.5 million. If the warrants were exercised in full, ContraVirwe would receive additional proceeds of approximately $4.2$7.5 million.Similar to the terms of the warrants issued in October 2015, if the Company consummatesitsour common stock is converted into or exchanged for securities, cash or other property (“Fundamental transaction”Transaction”), then the Companywe shall pay at thefundamental transactionFundamental Transaction and continuing for 90 days, an amount of cash equal to the value of the remaining unexercised portion of the warrant as determined in accordance with the Black-Scholes option pricing model on the date of such fundamental transaction.Fundamental Transaction. As a result of these terms, in accordance with the guidance contained in ASC Topic 815-40, the Company haswe have determined that the warrants issued in connection with this financing transaction must be recorded as derivative liabilities upon issuance and marked to market on a quarterly basis in the Company’sour condensed consolidated statement of operations and comprehensive loss. Upon the issuance of these warrants, the fair value of approximately $1.5$4.0 million was recorded as derivative financial instruments liability—warrants.waswere estimated using the Black-Scholes option pricing model. The Company develops itsOther than for the fair value of common stock, we developed our own assumptions for use in the Black-Scholes option pricing model that do not have observable inputs or available market data to support the fair value. This method of valuation involves using inputs such as the fair value of the Company’sour common stock, our stock price volatility (stock price volatility of comparable companies prior to 2020), the contractual term of the warrants, risk free interest rates and dividend yields. The Company has a limited trading history in its common stock, therefore, expected volatility is based on that of comparable public development stage biotechnology companies. Due to the nature of these inputs, the valuation of the warrants is considered a Level 3 measurement.September 30, 2017March 31, 2021 and June 30, 2017:
2017
2017On April 25, 2017, the Company closed on a public offering of 12,000,000 shares of its common stock and warrants to purchase up to 6,000,000 shares of common stock, at a fixed combined price to the public of $1.00 under the Company’s current shelf registration statement on Form S-3. December 31, 2020:March 31,
2021December 31,
2020Price of Hepion common stock $ 1.84 $ 2.19 Expected warrant term (years) 1.06 years 1.31 years Risk-free interest rate 0.64 % 0.27 % Expected volatility 116 % 115 % Dividend yield 0 0 warrants are immediately exercisable and will be exercisable for a periodof five years from the date of issuance at an exercise price of $1.25 per share. There is not, nor is there expected to be, any trading market for the warrants, issued in connection with the offering contemplated by the Underwriting Agreement. The gross proceedsJuly 2018 Rights Offering are deemed to the Company were $12.0 million, before deducting the underwriting discountbe derivative instruments since if we do not maintain an effective registration statement, we are obligated to deliver registered shares upon exercise and other offering expenses payable by the Company of approximately $0.5 million. If the warrants were exercised in full, ContraVir would receive additional proceeds of approximately $7.5 million.If the Company consummates any merger, consolidation, sale or other reorganization event in which its common stock is converted into or exchanged for securities, cash or other property (“Fundamental transaction”), then the Company shall pay at the holder’s option, exercisable at any time commencing on the occurrence or the consummationsettlement of the fundamental transactionwarrant because there are further registration and continuing for 90 days, an amountprospectus delivery requirements that are outside of cash equal toour control. Therefore, the fair value of the remaining unexercised portion of the warrant aswarrants was determined in accordance withusing the Black-Scholes option pricing model, ondeemed to be an appropriate model due to the dateterms of such fundamental transaction. As a result of these terms, in accordance with the guidance contained in ASC Topic 815-40, the Company has determined that the warrants issued, in connection with this financing transaction must be recorded as derivative liabilities upon issuanceincluding a fixed term and marked to market on a quarterly basis in the Company’s statement of operations and comprehensive loss. Upon the issuance of these warrants, the fair value of approximately $4.0 million was recorded as derivative financial instruments liability - warrants.classifedclassified warrants were estimated using the Black-Scholes option pricing model. The Company develops itsOther than for the fair value of common stock, we developed our own assumptions for use in the Black-Scholes option pricing model that do not have observable inputs or available market data to support the fair value. This method of valuation involves using inputs such as the fair value of the Company’sour common stock, our stock price volatility (stock price volatility of comparable companies prior to 2020), the contractual term of the warrants, risk free interest rates and dividend yields. The Company has a limited trading history in its common stock, therefore, expected volatility is based on that of comparable public development stage biotechnology companies. Due to the nature of these inputs, the valuation of the warrants is considered a Level 3 measurement.September 30, 2017March 31, 2021 and June 30, 2017:March 31,
2021December 31,
2020Price of Hepion common stock $ 1.84 $ 2.19 Expected warrant term (years) 2.25 years 2.50 years Risk-free interest rate 0.64 % 0.27 % Expected volatility 117 % 118 % Dividend yield 0 0 the Company’sour derivative financial instruments liability balance for the three months ended September 30, 2017:
Warrants
Outstanding
Instrument
LiabilityControlled EquityThree Months Ended March 31, 2021:Date Description Number of Warrants Outstanding Derivative Instrument Liability December 31, 2020 Balance of derivative financial instruments liability 102,642 $ 11,673 Change in fair value of warrants for the three months ended March 31, 2021 0 (6,211) March 31, 2021 Balance of derivative financial instruments liability 102,642 $ 5,462 Sales AgreementMarch 9, 2015, the CompanyFebruary 16, 2021, we entered into an underwriting agreement ("Underwriting Agreement") with ThinkEquity, a Controlled Equity Offering Sales Agreement (the “Agreement”), with Cantor Fitzgerald & Co.division of Fordham Financial Management, Inc., as sales agent (“Cantor”the representative (the Representative"), pursuant of the underwriters ("collectively, the Underwriters") listed therein, with respect to which the Company may offer and sell, from time to time, through Cantoran underwritten public offering ("Offering") of 44,200,000 shares of the Company’sour common stock, par value $0.0001, per share (the “Shares”), up to an aggregateat a public offering price of $50.0 million. The Company intends$2.00 per share, which resulted in net proceeds to us of approximately $82.1 million, after deducting underwriting discounts and commissions and offering expenses payable by us. We intend to use the net proceeds from these sales to fund our research and development activities and for working capital and other general corporate purposes, including working capital, operating expenses and possible acquisitionscapital expenditures. Upon closing of other companies, products or technologies, though no such acquisitions are currently contemplated.Under the Agreement, Cantor may sell the Shares by methods deemed to be an “at-the-market” offering as defined in Rule 415 promulgated under the Securities Act of 1933, as amended (the “Securities Act”), including sales made directlyon The NASDAQ Capital Market, on any other existing trading market for the Shares or to or through a market maker. In addition, under the Agreement, Cantor may sell the Shares by any other method permitted by law, including in privately negotiated transactions. SubjectOffering, we issued to the termsRepresentative as compensation warrants to purchase 1,150,000 shares of common stock, or the Representative’s Warrants. The Representative’s Warrants will be exercisable at $2.50 per share. The Representative’s Warrants are exercisable at any time and conditions of the Agreement, Cantor will use commercially reasonable efforts, consistent with its normal trading and sales practices and applicable state and federal law, rules and regulations and the rules of The NASDAQ Capital Market, to sell the Shares from time to time, based uponin whole or in part, during the Company’s instructions (including any price, time or size limits or other customary parameters or conditionsfour and one half year period commencing 180 days from February 19, 2020. We determined that the Company may impose).The Company is not obligated to make any sales ofRepresentative Warrants should be recorded in the Shares under the Agreement. The offering of Shares pursuant to the Agreement will terminate upon the earlier of (1) the sale of all of the Shares subject to the Agreement or (2) the termination of the Agreement by Cantor or the Company. ContraVir will pay Cantor a commission of up to 3.0% of the gross sales price per share sold and has agreed to provide Cantor with customary indemnification and contribution rights.During the three months ended September 30, 2017, the Company sold approximately 2.2 million shares of the Company’s common stock resulting in net proceeds of approximately $1.2 million, under the Controlled Equity Offering Sales Agreement with Cantor Fitzgerald & Co.,consolidated financial statements as sales agent.the Company’sour liabilities that are measured and recognized at fair value on a recurring basis classified under the appropriate level of the fair value hierarchy as of September 30, 2017at March 31, 2021 and June 30, 2017.
Active Markets
for Identical
Assets and
Liabilities
(Level 1)
Other
Observable
Inputs
(Level 2)
Unobservable
Inputs
(Level 3)Fair Value Measurement at Reporting Date Using Description Fair value (Level 1) (Level 2) (Level 3) As of March 31, 2021: Contingent consideration $ 2,600,000 $ 0 $ 0 $ 2,600,000 Derivative liabilities related to warrants $ 5,462 $ 0 $ 0 $ 5,462 As of December 31, 2020: Contingent consideration $ 2,570,000 $ 0 $ 0 $ 2,570,000 Derivative liabilities related to warrants $ 11,673 $ 0 $ 0 $ 11,673 liabilities-warrantsliabilities- warrants in the Company’sour condensed consolidated statement of operations. See Note 5 for a rollfowardrollforward of the derivative liability for the three months ended September 30, 2017.March 31, 2021. The financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. At each reporting period, the Company reviewswe review the assets and liabilities that are subject to ASC 815-40. At each reporting period, all assets and liabilities for which the fair value measurement is based on significant unobservable inputs or instruments which trade infrequently and therefore have little or no price transparency are classified as Level 3.As discussed in Note 3, contingentCompanyour stock, upon the achievement of certain milestones and was estimated based on a probability-weighted discounted cash flow model. model utilizing a discount rate of 6.5% and a stock price of $19.60.Assumptions March 31,
2021December 31,
2020Discount rate 8.0% 8.0% Stock price $1.84 $2.19 Projected milestone achievement dates September 2021 — January 2025 June 2021 — January 2025 Probability of success of milestone achievements 13 % — 40% 13 % — 40% as of September 30, 2017.
related
Contingent
ConsiderationAcquisition- related Contingent Consideration Liabilities: Balance at December 31, 2020 $ 2,570,000 Change in fair value recorded in earnings 30,000 Balance at March 31, 2021 $ 2,600,000 The Company’s
2017
2017NoIndefinite-lived
Intangible AssetCRV431 balance at December 31, 2020 $ 3,190,000 Change during the three months ended March 31, 2021 0 CRV431 balance at March 31, 2021 $ 3,190,000 September 30, 2017.the Company’sour goodwill balance:NoAmount Goodwill balance at December 31, 2020 $ 1,870,924 Change during the three months ended March 31, 2021 0 Goodwill balance at March 31, 2021 $ 1,870,924 onto goodwill during the three months ended September 30, 2017.The Company’s accruedconsistconsisted of the following:
2017
2017March 31,
2021December 31,
2020Payroll and related costs $ 306,487 $ 150,702 Research and development 420,817 438,856 Legal fees 52,875 0 Accrued taxes 0 37,160 Professional fees 15,900 0 Other 21,201 32,854 Total accrued expenses $ 817,280 $ 659,572 ContraVirwe adopted the 2013 Equity Incentive Plan (the “Plan”). Stock options granted under the Plan typically will vest after three years of continuous service from the grant date and will have a contractual term of ten years. ContraVir has reserved 7,700,000At our annual meeting of stockholders on July 30, 2020, we received shareholder approval to increase the number of shares of common stock issuable pursuantunder the Plan to the Plan.2,500,000. As of September 30, 2017, the CompanyMarch 31, 2021, we had 1,028,81435,229 shares of common stock available for grant under the Plan.The Company classifiesgrant.itsour condensed consolidated statement of operations in the same manner in whichway the award recipient’srecipient's payroll costs are classified or in which the award recipients’recipients' service payments are classified. For the three months ended September 30, 2017 and 2016, ContraVirWe recorded the following stock basedstock-based compensation expense:
ended
September 30,
2017
ended
September 30,
2016Three Months Ended
March 31,2021 2020 General and administrative $ 711,591 $ 5,910 Research and development 246,280 2,336 Total stock-based compensation expense $ 957,871 $ 8,246 and of changes in stock options outstanding under the Plan foris presented as follows:Number of Options Exercise Price
Per ShareWeighted
Average Exercise Price Per ShareIntrinsic
ValueWeighted
Average Remaining Contractual TeamBalance outstanding, December 31, 2020 2,460,677 $ 1.63 - $ 2,452.80 $ 4.17 $ 990,930 9.40 years Granted 0 $ 0 - $ 0 $ 0 $ 0 Exercised 0 $ 0 - $ 0 $ 0 $ 0 Forfeited 0 $ 0 - $ 0 $ 0 $ 0 Cancelled 0 $ 0 - $ 0 $ 0 $ 0 Balance outstanding, March 31, 2021 2,460,677 $ 1.63 - $ 2,452.80 $ 4.17 $ 199,725 9.15 years Vested awards and those expected to vest at March 31, 2021 2,398,882 $ 3.24 - $ 2,452.80 $ 4.21 $ 195,065 9.15 years Vested and exercisable at March 31, 2021 47,515 $ 3.24 - $ 2,452.80 $ 88.38 $ 0 8.35 years September 30, 2017 is presented below:
Options
Per Share
Average
Exercise
Price
Per Share
Value
Average
Remaining
Contractual
Term in the tables above is calculated as the difference between the exercise price of the stock options and the fair value of the Company’sour common stock for those stock options that had exercise prices lower than the fair value of the Company’sour common stock.The weighted-average grant-date fair value per shareemployees during the three months ended September 30, 2017 and 2016 was $0.37 and $0.72.September 30, 2017,March 31, 2021, the unrecognized compensation cost related to non-vested stock options outstanding, net of expected forfeitures, was approximately $1.6$5.2 million to be recognized over a weighted-average remaining vesting period of approximately 2.07.wereare used in the Black-Scholes valuation model to estimate fair value of stock option awards when granted to employees during the three months ended September 30, 2017 and 2016.
ended
September 30,
2017
ended
September 30,
2016the Company’sour stock options.ContraVir has We have not paid any dividends on our common stock since its inception and doesdo not anticipate paying dividends on itsour common stock in the foreseeable future.Because ContraVir has a limited trading history in its common stock, the Company basedWe base expected volatility on thatthe trading price of comparable public development stage biotechnology companies.107. Options107, which SAB No. 107, options are considered to be “plain vanilla” if they have the following basic characteristics: (i) granted “at-the-money”; (ii) exercisability is conditioned upon service through the vesting date; (iii) termination of service prior to vesting results in forfeiture; (iv) limited exercise period following termination of service; and (v) options are non-transferable and non-hedgeable.The CompanyWe will use the simplified method until it haswe have the historical data necessary to provide a reasonable estimate of expected life in accordance with SAB No. 107, as amended by SAB No. 110. For the expected term, the Company haswe have “plain-vanilla” stock options, and therefore used a simple average of the vesting period and the contractual term for options granted as permitted by SAB No. 107.requiresallows for the election of forfeitures to be estimated at the time of grant and revised if necessary, in subsequent periods if actual forfeitures differ from those estimates. The Company uses its actual forfeiture rate of 3%. and diluted net loss per share is presented in conformity with ASC Topic 260, Earnings per Share, (“ASC Topic 260”) for all periods presented. In accordance with ASC Topic 260, basic and diluted net loss per common share was determined by dividing net loss applicable to common stockholders by the weighted-average common shares outstanding during the period. In addition, the net loss attributable to common stockholders’ is adjusted for the preferred stock deemed dividends related accretion of beneficial conversion feature and other discount on this instrument for the periods in which the preferred stock is outstanding.
2017
2016Three Months Ended
March 31,Basic and diluted net (loss) income per common share 2021 2020 Numerator: Net loss $ (6,057,306) $ (4,226,617) Preferred stock deemed dividend (5,287) 0 Net loss attributable to common stockholders $ (6,062,593) $ (4,226,617) Denominator: Weighted average common shares outstanding 52,160,742 4,345,699 Net loss per share of common stock—basic and diluted $ (0.12) $ (0.97) September 30, 2017March 31, 2021 and 20162020 have been excluded from the computation of basic and diluted weighted shares outstanding, as they would have been anti-dilutive:
ended
September 30,
2017
ended
September 30,
2016Three Months Ended
March 31,2021 2020 Common shares issuable upon conversion of Series A preferred stock 3,184 3,184 Common shares issuable upon conversion of Series C preferred stock 16,654 16,839 Stock options 2,460,677 41,271 Warrants – liability classified 102,642 107,998 Warrants – equity classified 4,223,568 2,428,568 Total 6,806,725 2,597,860 theirthe exercise price of the warrants exceeds the average market price of the Company’sour common stock duringfor the respective period.License Agreement with Chimerix, Inc.On December 17,the Companywe entered into a lease for corporate office space in Edison, New Jersey. In December 2017, we entered an exclusive license agreementamendment to the lease for corporate office space in Edison, New Jersey expanding the office footprint and extending the lease for an approximate 5-year period. In May 2018, we entered into a 3-year lease for office equipment to be used at our corporate office space in Edison, New Jersey. In October 2019, we entered into a 3-year lease for office and research laboratory space in Edmonton, Canada. Prior to signing this lease, the space was previously on a month to month basis.Chimerix pursuant to which the Company has licensed TXL from Chimerix for further clinical development and commercialization. TXLASC Topic 842, Leases, (“ASC 842”). We determine if an arrangement is a highly potent analoglease at contract inception. A lease exists when a contract conveys to the customer the right to control the use of the antiviral drug tenofovir DF (Viread®). Under the terms of the agreement, ContraVir licensed TXL from Chimerixidentified property or equipment for a period in exchange for consideration. The definition of a lease embodies two conditions: (1) there is an upfront payment consisting of 120,000 shares of ContraVir Series B Convertible Preferred Stock. In addition, Chimerix is eligible to receive up to approximately $20.0 million in clinical, regulatory and initial commercial milestone paymentsidentified asset in the United Statescontract that is land or a depreciable asset (i.e., property and Europe, as well as royaltiesequipment), and additional milestone payments based on commercial sales in those territories. Either party may terminate(2) the License Agreement uponcustomer has the occurrence of a material breach byright to control the other party (subject to standard cure periods), or upon certain events involving the bankruptcy or insolvencyuse of the other party.identified asset.Company may also terminatelease liabilities are initially and subsequently measured at the License Agreement without cause on a country by country basis upon sixty days’ prior written notice to Chimerix.The fairpresent value of the Preferred B shares exchanged forunpaid lease payments at the license was determinedlease commencement date. Key estimates and judgments include how we determine (1) the discount rate used to be equaldiscount the unpaid lease payments to present value, (2) lease term and (3) lease payments. paid per share of the Series A, aslease liability adjusted for lease payments made at or before the provisionlease commencement date, plus any initial direct costs incurred less any lease incentives received. For operating leases, the ROU asset is subsequently measured throughout the lease term at the carrying amount of the Preferred B shareslease liability, plus initial direct costs, plus (minus) any prepaid (accrued) lease payments, less the unamortized balance of lease incentives received. Lease expense for lease payments is recognized on a straight-line basis over the lease term.same ascurrent lease liabilities were $0.2 million, and the Preferred A Shares, based on an arm’s length transaction. Therefore, the fair value of the Preferred B shares issued was $10.00 per share or $1.2non-current lease liabilities were $0.3 million. The cost of the license was classified as a research and development expense in the amount of $1.2 million as the compound is early stage, has not yet reached technological feasibility and has no alternative use. As of the date of this report, no amounts had been accrued relateddiscount rate used to the milestone payments Chimerix is eligible to receive.License Agreement with University College Cardiff Consultants Limited (“Cardiff”)On June 10, 2013, the Company and Synergy entered into a Contribution Agreement, as amended and restated on August 5, 2013, or the Contribution Agreement, to transfer to the Company the FV-100 assets, in exchange for the issuance to Synergy of 9,000,000 shares of the Company’s common stock representing 100% of the outstanding shares of the Company’s common stock as of immediately following such issuance. Pursuant to the Contribution Agreement, Synergy transferred ownership of all intellectual property rights acquired from Bristol-Myers Squibb (“BMS”) including all historical research, clinical study protocols, data, results and patents related to the FV-100 assets as well as assumed the obligations of Synergy, including all liabilities of Synergy, under the asset purchase agreement, dated August 17, 2012, by and between Synergy and BMS, or the BMS Agreement.The FV-100 assets acquired from BMS are licensed from Cardiff pursuant to the terms of that certain Patent and Technology License Agreement, dated as of February 2, 2005, between Cardiff and CRI, an entity with no prior relationship with us, as amended March 27, 2007, or the Cardiff Agreement.The Cardiff Agreement shall remain in full force and effect until the date upon which the last of the last patent or the last continuation or extension to any patents within the Patent Rights (as defined in the Cardiff Agreement) expires. Any milestone and/or royalty payment under the Cardiff Agreement shall be payable for as long as the Cardiff Agreement is in effect. The Cardiff Agreement may be terminated in its entirety, for among other reasons and in the following manner as set forth below: (a) automatically by Cardiff, if we become bankrupt or insolvent and/or if our business shall be placed in the hands of a receiver, assignee, or trustee; (b) upon ninety (90) calendar days written notice from Cardiff, if we breach or default (i) on the payment or report obligations or use of name obligations or (ii) on any other obligation under the Cardiff Agreement, subject to a ninety (90) calendar-day cure period; (c) if we have defaulted or been in excess of one (1) month late on its payment obligations pursuant to the terms of the Cardiff Agreement on any two (2) occasions in a twelve (12) month period, subject to a cure period; (d) upon one hundred twenty (120) calendar days written notice from us if any particular patent or patents included in Patent Rights and which account for at least thirty (30%) percentour operating leases under ASC 842 is our estimated incremental borrowing rate of the total royalty to Cardiff, is or are irrevocably adjudicated to be invalid; or (e) upon ninety (90) calendar days written notice from us if Cardiff is in breach of Section 11.1 (Confidential Information and Publication) unless, before the end of the such ninety (90) calendar-day notice period, Cardiff has cured the default or breach to our reasonable satisfaction and so notifies us, stating the manner of the cure.The terms of the Cardiff Agreement provided in consideration for a license of all of Cardiff’s rights in any technical information, know-how, processes, procedures, compositions, devices, methods, formulae, protocols, techniques related to the FV-100 Assets, or the Patent Rights. The Cardiff Agreement provided for an initial base payment of $270,000, which has previously been paid by CRI, subsequent milestone payments covering (i) initiation of a clinical trial at each phase, (ii) marketing (FDA) approval and (iii) on achieving the milestone of aggregate net sales in three different tiers, as well as a low single digit royalty based on net sales. The total aggregate amount of milestone payments that could be payable to Cardiff by the Company under the Cardiff Agreement is equal to $400,000 as follows:Milestone payments upon occurrence of the following events:· Upon initiation of a Phase 3 clinical trial for a licensed product, $150,000· Upon approval of the first NDA for any licensed product, $250,000The terms of the BMS Agreement provided for an initial base payment of $1.0 million, subsequent milestone payments of $3.0 million and $6.0 million, respectively, covering (i) marketing (FDA) approval and (ii) on achieving the milestone of aggregate net sales equal to or greater than $125.0 million, as well as a single digit royalty based on net sales. The total aggregate amount of milestone payments that could be payable to BMS under the BMS Agreement is equal to $9 million. The duration of any milestone payment obligation owed to BMS shall continue until the earliest of (i) payment, in full, of all milestone payments as required under the BMS Agreement, (ii) our determination using commercially reasonable standards consistent with the exercise of prudent scientific and business judgment and consistent with those standards used by us for its other therapeutic products at a similar stage of development and with similar commercial potential, to terminate the development of the FV-100 assets, and (iii) the tenth (10th) anniversary of the date of the BMS Agreement, The duration of any royalty payment obligation to BMS shall commence on the date of the first commercial sale of the FV-100 assets in a country until the expiration of any claim of an issued and unexpired patent which has not been held permanently revoked, unenforceable or invalid by a decision of a court or other governmental agency of competent jurisdiction of any of our patents or any other patent covering the use or sale of the FV-100 assets in such country. The transactions contemplated by the BMS Agreement closed on August 17, 2012 and neither party can terminate the remaining obligations owed under theBMS Agreement. No milestone payments have been made under this agreement and as of the date of this report, no amounts had been accrued related to the remaining milestone payments BMS is eligible to receive.12. Related Party TransactionsOne of the Company’s Directors, Timothy Block, is President of the Baruch S. Blumberg Institute (“Blumberg Institute”)6.5%. On May 29, 2015, the Company entered into a Sponsored Research Agreement (“Agreement”) with Blumberg Institute, pursuant to which the Company is sponsoring research by investigators affiliated with the Blumberg Institute with respect to TXL. The Company incurred expenses related to the agreement of approximately $25,000 and $25,000September 30, 2017March 31, 2021 and 2016,2020 was $0.1 million and $0.1 million, respectively.Companyweighted average remaining term of our noncancelable operating leases is a party to a Consulting agreement dated June 1, 20161.89 years. Future minimum rental payments under our noncancelable operating leases at March 31, 2021 is as follows:Remainder of 2021 $ 215,649 2022 271,885 2023 53,902 2024 0 2025 and thereafter 0 Total 541,436 Present value adjustment (29,913) Lease liability at March 31, 2021 $ 511,523 Gabriele Cerrone. Mr. Cerrone is a principal stockholder ofcertain employees which require the Company and provides general corporate consulting services. For the three months ended September 30, 2017 and 2016, the Company incurred expenses related to services performed by Mr. Cerrone of $30,000 and $30,000, respectively.13. Subsequent EventOn October 27, 2017 the Company issued a press release on Form 8-K stating the decision to discontinue the Phase 3 trial of Valnivudine™, the company’s investigational drug being developed to reduce incidence of Postherpetic Neuralgia pain (“PHN”). The approvalfunding of a second herpes zoster vaccine, along with continued successspecific level of ZostavaxTM, is expected to further reduce the incidencepayments, if certain events, such as a change in control, termination without cause or retirement, occur.(“Form 10-K”) as of and for the year ended June 30, 2017December 31, 2020 filed with the United States Securities and Exchange Commission (“SEC”) on September 28, 2017.March 31, 2021. Accordingly, to the extent that this Report contains forward-looking statements regarding the financial condition, operating results, business prospects or any other aspect of us, please be advised that our actual financial condition, operating results and business performance may differ materially from that projected or estimated by us in forward-looking statements, and you should not unduly rely on such statements.antiviral drugs with a primary emphasis on thedrug therapy for treatment of Hepatitis B viruschronic liver diseases. This therapeutic approach targets fibrosis and hepatocellular carcinoma (“HBV”HCC”) infections. We are developing two compoundsassociated with non-alcoholic steatohepatitis (“NASH”), viral hepatitis, and other liver diseases. Our cyclophilin inhibitor, CRV431, is being developed to treat HBV infection, TXL and CRV431. TXL is a highly potent oral lipid prodrug of tenofovir. Prodrugs are designedoffer benefits to improve the characteristics of drugs, such as better efficacy, lower pill burden, improved safety, etc. Another prodrug of tenofovir, Viread®, is approved for the treatment of HIV and HBV infections.address these multiple complex pathologies. CRV431 is a cyclophilin inhibitor that targets multiple pathologic pathways involved in the progression of liver disease. Preclinical studies with CRV431 in NASH models demonstrated consistent reductions in liver fibrosis and additional reductions in inflammation and cancerous tumors in some studies. CRV431 additionally showed in vitro antiviral activity towards hepatitis B, C, and D viruses which also trigger liver disease. Preclinical studies also have shown potentially therapeutic activities of CRV431 in experimental models of acute lung injury, platelet activation, and SARS-CoV-2 coronavirus replication.candidate also designedtargets, biomarkers, and appropriate patient populations. AI-POWR™ is used to identify responders from big data sources using our multi-omics approach, while modelling inputs and scenarios to increase response rates. The components of AI-POWR™ include access to publicly available databases, and in-house genomic and multi-omic big data, processed via machine learning algorithms. We believe AI outputs will allow for improved response outcomes through enhanced patient selection, biomarker selection and drug target selection. We believe AI outputs will help identify responders a priori and reduce the treatmentneed for large sample sizes through study design enrichment.HBVContentsinfection. CRV431 is a novel drug candidate also designed for the treatment of HBV infection. CRV431, a non-immunosuppressive analog of cyclosporine that we acquired through our merger with Ciclofilin Pharmaceuticals Inc. CRV431 has been designed to target enzymes (“cyclophilins”) that play a key role in the HBV viral life cycle.TXLTXL is a novel lipid acyclic nucleoside phosphonate that delivers high intracellular concentrations of the active antiviral agent tenofovir diphosphate. TXL’s novel structure results in decreased circulating levels of tenofovir (TFV), lowering systemic exposure and thereby reducing the potential for renal side effects. develop TXLuse AI-POWR™ to help identify which NASH patients will best respond to CRV431. It is anticipated that applying this proprietary platform to our drug development program will ultimately save time, resources and money. In so doing, we believe that AI-POWR™ is a risk-mitigation strategy that should reap benefits all the way through from clinical trials to commercialization.treatmentcyclophilin inhibition therapeutic space.chronic Hepatitis B Virus (HBV) infectionCOVID-19Phase 1bhealth emergency. Clinical trials can be delayed for a variety of reasons, including delays in obtaining regulatory approval to commence a clinical trial, in healthy volunteers, demonstratingsecuring clinical trial agreements with prospective sites with acceptable terms, in obtaining institutional review board approval to conduct a favorable safety, tolerability and drug distribution profile. We are currently testing TXLclinical trial at a prospective site, in recruiting patients to participate in a Phase 2a proofclinical trial, related to the COVID-19 pandemic, or in obtaining sufficient supplies of concept study testing multiple doses of TXL versus Viread®.We licensed TXL from Chimerixclinical trial materials. Any delays in exchange for an upfront payment of 120,000 shares ofcompleting our preferred stock, valued at $1.2 million at the timeclinical trials will increase our costs, slow down our product development, timeliness and approval process and delay our ability to generate revenue.deal. During September 2016, Chimerix electedCOVID-19 pandemic is highly uncertain and subject to convert their Series B Preferred stock into approximately 1.0 million shares of our common stock. We have a composition of matter patent for TXL providing intellectual property protection to at least 2031. The decision to develop TXL for Hepatitis B has been taken becausechange and we do not seeyet know the full extent of potential delays or impacts on our business, financing or clinical trial activities or on healthcare systems or the global economy as a large opportunitywhole. Although we cannot estimate the length or gravity of the impact of the COVID-19 outbreak nor estimate the potential impact to growour fiscal year 2021 financial statements at this time, if the HIV market with new compounds, even though TXL is 200 times more potent than tenofovirpandemic continues, it could have a material adverse effect on our results of future operations, financial position, liquidity, and capital resources, and those of the third parties on which we rely in vitro. We believefiscal year 2021.Hepatitis B market is poisedCoronavirus Aid, Relief and Economic Security Act (the “CARES Act”), as amended on June 5, 2020 by the Paycheck Protection Program (“PPP”). The CARES Act, among other things, includes provisions relating to refundable payroll tax credits, deferment of employer side social security payments, net operating loss carryback periods, alternative minimum tax credit refunds, modifications to the net interest deduction limitations and technical corrections to tax depreciation methods for exceptional growth. The strategy for TXL is to develop the compound to serve as the backbone therapy in future HBV combination therapies. We have opened an Investigational New Drug (“IND”qualified improvement property. On April 13, 2020, we were granted a loan (the “Loan”) for HBV and have initiated our HBV clinical development programfrom JPMorgan Chase Bank, N.A. in the U.S.CRV431CRV431 is a novel drug candidate designedaggregate amount of $176,585, pursuant to target a classthe Paycheck Protection Program (the “PPP”) under Division A, Title I of proteins called cyclophilins, ofthe CARES Act.there are many types. Cyclophilins play a role in health andwas in the pathogenesisform of a Note dated April 13, 2020 issued by us, matures on April 13, 2022 and bears interest at a rate of 0.98% per annum, payable monthly commencing on November 13, 2020. The Note may be prepaid by us at any time prior to maturity with no prepayment penalties. Funds from the Loan may only be used for payroll costs, rent and utilities. We used the entire Loan amount for qualifying expenses. Under the terms of the PPP, certain diseases, andamounts of the Loan may be forgiven if they are knownused for qualifying expenses as peptidyl prolyl isomerases. The isomerase activity plays an important role in a number of biological processes including, for example, folding of proteins to confer certain 3-dimensional configurations. And, specific host cyclophilins (e.g., cyclophilin A, B, C, D) play a roledescribed in the life cycleCARES Act. We plan to repay the total amount of certain viruses, including for example, HBV, HIV, and hepatitis C virus (“HCV”) infections. CRV431 has been developed to inhibit the role of host cyclophilins and therefore interfereloan in 2021, which is reflected in the propagationconsolidated balance sheet as short-term debt.September 30, 2017,March 31, 2021, we have sustained an accumulated deficit of approximately $65.3. From inception through September 30, 2017,$110.2 million and we have not generated any revenue from operations andoperations. We expect to incur additional losses to perform further research and development activities and do not currently have any commercial biopharmaceutical products. We do not expect to have such for several years, if at all. thus in their early stages and we cannot make estimates of the costs or the time they will take to complete. The risk of completion of any program is high because of the many uncertainties involved in bringing new drugs to market including the long duration of clinical testing, the specific performance of proposed products under stringent clinical trial protocols, the extended regulatory approval and review cycles, our ability to raise additional capital, the nature and timing of research and development expenses and competing technologies being developed by organizations with significantly greater resources.Financial Reporting Release No. 60 requires all companies to include a discussion of critical AND ESTIMATESpolicies or methods usedprinciples generally accepted in the United States (U.S. GAAP). The preparation of these condensed consolidated financial statements.statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, costs and expenses, income taxes and related disclosures. On an ongoing basis, we evaluate our estimates and assumptions. Our accounting policies are described in ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA of our Annual Report on Form 10-K (“Form 10-K”) as of and for yearactual results may differ from these estimates under different assumptions or conditions.June 30, 2017, filed with the SEC on September 28, 2017. There have beenMarch 31, 2021, there were no significant changes to our critical accounting policies since June 30, 2017.September 30, 2017.In May2017,Notes to Condensed Consolidated Financial Statements, Recent Accounting Pronouncements, in this Quarterly Report on Form 10-Q.Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2017-09, Compensation — Stock Compensation (Topic 718): Scopeextent that we continue to qualify as a “smaller reporting company,” as such term is defined in Rule 12b 2 under the Securities Exchange Act of Modification Accounting (“ASU 2017-09”), which provides guidance about which changes1934, after we ceased to qualify as an emerging growth company on December 31, 2020, certain of the terms or conditions of a share-based payment award requireexemptions available to us as an entity to apply modification accounting in Topic 718. This guidance isemerging growth company may continue to be applied for annual periods, and interim periods within those annual periods, beginning after December 15, 2017, with early adoption permitted and should be applied prospectivelyavailable to an award modified on or after the adoption date. The Company is currently evaluating the impact that this guidance will have on its results of operations, financial position and cash flows.In January of 2017, the FASB issued ASU No. 2017-04, Intangibles — Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment (“ASU 2017-04”), which amended the 2014 amendments to the FASB Accounting Standards Codification that allowed companies an alternative accounting treatment for subsequently measuring goodwill. This amendment is Phase 1 ofus as a project by the FASB Board to simplify how an entity issmaller reporting company, including: (1) not being required to test goodwill for impairment by eliminating step 2 from the goodwill impairment test. Step 2 measures a goodwill impairment loss by comparing the implied fair value of a reporting unit’s goodwillcomply with the carrying amountauditor attestation requirements of that goodwill. These amendments areSection 404(b) of the Sarbanes Oxley Act; (2) scaled executive compensation disclosures; and (3) the requirement to be applied onprovide only two years of audited financial statements, instead of three years.prospective basis and are required to be adopted for annual and any interim goodwill impairment tests in fiscal years beginning after December 15, 2019. The Company is currently evaluating the impact that this guidance will have on its results of operations, financial position and cash flows.In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments (“ASU 2016-15”), which amended the existing accounting standards“smaller reporting company” for the statementforeseeable future.earliest date practicable. The Company is currently evaluating the timingthree months ended March 31, 2021 and the impact of these amendments on its statement of cash flows.In March 2016, the FASB issued ASU No. 2016-09, Compensation—Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting (“ASU 2016-09”). The new standard identifies areas for simplification involving several aspects of accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, an option to recognize gross stock compensation expense with actual forfeitures recognized as they occur, as well as certain classifications on the statement of cash flows. This guidance is effective for the Company for annual reporting periods beginning after December 15, 2017, with early adoption permitted. The Company is currently evaluating the impact that this guidance will have on its results of operations, financial position and cash flows.In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) (“ASU 2016-02”). The new standard establishes a right-of-use (ROU) model that requires a lessee to record a ROU asset and a lease liability on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. ASU 2016-02 is effective for annual periods beginning after December 15, 2018, including interim periods within those annual periods, with early adoption permitted. A modified retrospective transition approach is required for lessees for capital and operating leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available. The Company is currently evaluating the impact that this guidance will have on its results of operations, financial position and cash flows.In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers. This guidance requires an entity to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. This guidance also requires an entity to disclose sufficient information to enable users of financial statements to understand the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. Qualitative and quantitative information is required about:·Contracts with customers—including revenue and impairments recognized, disaggregation of revenue and information about contract balances and performance obligations (including the transaction price allocated to the remaining performance obligations).·Significant judgments and changes in judgments—determining the timing of satisfaction of performance obligations (over time or at a point in time), and determining the transaction price and amounts allocated to performance obligations.·Certain assets—assets recognized from the costs to obtain or fulfill a contract.In August 2015, the FASB issued updated guidance deferring the effective date of the revenue recognition standard. In March, April and May 2016 and September 2017, the FASB issued additional updated guidance, which clarifies certain aspects of the ASU and the related implementation guidance issued by the FASB-IASB Joint Transition Resource Group for Revenue Recognition. This guidance is effective for the Company for annual reporting periods beginning after December 15, 2017. The Company is currently evaluating the impact that this guidance will have on its results of operations, financial position and cash flows.RESULTS OF OPERATIONSComparison of Three Months Ended September 30, 2017 and 2016
2017
2016Three Months Ended
March 31,2021 2020 Change Revenues $ — $ — $ — Costs and Expenses: Research and development 3,498,655 2,637,331 861,324 General and administrative 2,532,808 1,549,606 983,202 Loss from operations (6,031,463) (4,186,937) (1,844,526) Other income (expense): Interest expense (2,054) — (2,054) Change in fair value of derivative instruments (warrants) and contingent consideration (23,789) (39,680) 15,891 Loss before income taxes (6,057,306) (4,226,617) (1,830,689) Income tax benefit (expense) — — — Net loss $ (6,057,306) $ (4,226,617) $ (1,830,689) September 30, 2017 or 2016March 31, 2021 and 2020, respectively, because we do not have any commercial biopharmaceutical products and we do not expect to have such products for several years, if at all. increased approximately $0.8 million from $3.1 million for the three months ended September 30, 2016March 31, 2021 and 2020 was $3.5 million and $2.6 million, respectively. The increase of $0.9 million was primarily due to $3.9an increase of $0.4 million for costs related to drug supply and various ongoing studies, a $0.2 million increase in employee compensation costs related to an increase in headcount, and a $0.2 million increase in stock-based compensation costs.September 30, 2017. The increaseMarch 31, 2021 and 2020 was primarily comprised of$2.5 million and $1.5 million, of Chemicals, Manufacturing and Controls (“CMC”) activities and regulatory consulting, partially offset by an $0.8 million decrease in costs associated with completed TXL clinical trialsGeneral and administrative expenses increased approximately $0.1 million from $1.7 million for the three months ended September 30, 2016 to $1.8 million for the three months ended September 30, 2017.respectively. The increase of $0.1$1.0 million is primarily duerelated to an increase of $0.7 million in stock-based compensation costs, a $0.1 million increase in salaries and related expenses due to added personnel, andinsurance costs, a $0.1 million increase in professionalconsulting costs and legal feesa $0.2 million increase in miscellaneous costs offset by a decrease of $0.1 million in professional fees.stock compensation.the changeworking capital is primarily related to our offering in fair value of derivative instruments and contingent consideration liabilities from the three months ended September 30, 2016 compared to the three months ended September 30, 2017 was due to the mark to market of our outstanding warrants and contingent consideration.LIQUIDITY AND CAPITAL RESOURCESthree months ended September 30, 2017 and 2016:
2017
2016Three Months Ended
March 31,2021 2020 Net cash provided by (used in): Operating activities $ (7,349,248) $ (4,677,962) Investing activities (82,105) 2,194 Financing activities 82,153,600 6,800,465 Net increase (decrease) in cash $ 74,722,247 $ 2,124,697 September 30, 2017,March 31, 2021, we had $8.8$115.4 million in cash. Net cash used in operating activities was approximately $5.4$7.3 million for the three months ended September 30, 2017. AsMarch 31, 2021 consisting primarily of September 30, 2017, weour net loss of $6.1 million. Changes in non-cash operating activities was $1.0 million, primarily for stock-based compensation. Changes in working capital accounts had a negative impact of $2.3 million on cash primarily for a decrease in accounts payable and accrued expenses.$6.1$0.2 million comparedon cash.negative working capitalequipment purchases for research and development. Net cash provided by in investing activities for the three months ended March 31, 2020 was immaterial.$1.5common stock, net of issuance costs. Net cash provided by financing activities was $6.8 million asfor the three months ended March 31, 2020 due primarily to the issuance of September 30, 2016.March 9, 2015,February 16, 2021, we entered into an underwriting agreement (the “Underwriting Agreement”) with ThinkEquity, a Controlled Equity Offering Sales Agreementdivision of Fordham Financial Management, Inc., as the representative (the “Agreement”“Representative”) of the underwriters listed therein (collectively, the “Underwriters”), with Cantor Fitzgerald & Co., as sales agent (“Cantor”), pursuantrespect to which we may offer and sell, from time to time, through Cantoran underwritten public offering (the “Offering”) of 44,200,000 shares of our common stock, par value $0.0001 per share (the “Shares”), up to an aggregateat a public offering price of $50.0 million.$2.00 per share, which resulted in net proceeds to us of approximately $82.1 million, after deducting underwriting discounts and commissions and offering expenses payable by us. We intend to use the net proceeds from these salesthis Offering to fund our research and development activities and for working capital and other general corporate purposes, including working capital, operating expenses and possible acquisitions of other companies, products or technologies, though no such acquisitions are currently contemplated.Under the Agreement, Cantor may sell the Shares by methods deemed to be an “at-the-market” offering as defined in Rule 415 promulgated under the Securities Act of 1933, as amended (the “Securities Act”), including sales made directlycapital expenditures. The Offering closed on The NASDAQ Capital Market, on any other existing trading market for the Shares or to or through a market maker. In addition, under the Agreement, Cantor may sell the Shares by any other method permitted by law, including in privately negotiated transactions.We are not obligated to make any sales of the Shares under the Agreement. The offering of Shares pursuant to the Agreement will terminate upon the earlier of (1) the sale of all of the Shares subject to the Agreement or (2) the termination of the Agreement by Cantor or us. We will pay Cantor a commission of up to 3.0% of the gross sales price per share sold.During the three months ended September 30, 2017, we sold approximately 2.2 million shares of our common stock resulting in net proceeds of approximately $1.2 million under the Agreement.In November 2017, we received approval from the New Jersey Economic Development Authority’s (NJEDA) Technology Business Tax Certificate Transfer (NOL) program to sell a percentage of our unused New Jersey net operating losses (NOL’s) and R&D tax credits. As a result, we expect to receive approximately $1.6 million of net cash proceeds prior to the end of 2017.September 30, 2017,March 31, 2021, we had an accumulated deficit of $65.3$110.2 million and expect to incur a significant and increasingincrease in operating losses for the next several years as we expand our research, development and clinical trials of TXL and CRV431. We are unable to predict the extent of any future losses or when we will become profitable, if at all.Our unaudited We currently anticipate that our cash and cash equivalents balances are sufficient to fund our anticipated operating cash requirements for more than one year from the date of issuance of these consolidated financial statements. These condensed consolidated financial statements as of September 30, 2017 have been prepared under the assumption that we will continue as a going concern within one year of the issuance of these consolidated financial statements, contemplates the realization of assets and satisfaction of liabilities in the normal course of business and do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from our inability to continue as a going concern. We have not generated revenue to date and have incurred substantial losses and negative cash flows from operations since our inception. We have historically funded our operations through issuances of common and preferred stock. Our independent registered public accounting firm has issued a report on our audited June 30, 2017 financial statements that included an explanatory paragraph referring to our recurring losses from operations; and expressing substantial doubt in our ability to continue as a going concern from one year after theour financial statements have been issued without additional capital becoming available. Our ability to continue as a going concern is dependent upon our ability to obtain additional equity or debt financing, attain further operating efficiencies and, ultimately, to generate revenue. Our financial statements do not include any adjustments that might result from the outcome of this uncertainty.within the nextin a future year to continue the development and commercialization of current product candidates and to continue to fund operations at the current cash expenditure levels. We cannot be certain that additional funding will be available on acceptable terms, or at all. To the extent that we raise additional funds by issuing equity securities, our stockholders may experience significant dilution. Any debt financing, if available, may involve restrictive covenants that impact our ability to conduct, delay, scale back or discontinue the development and/or commercialization of one or more product candidates; (ii) seek collaborators for product candidates at an earlier stage than otherwise would be desirable and on terms that are less favorable than might otherwise be available; or (iii) relinquish or otherwise dispose of rights to technologies, product candidates or products that we would otherwise seek to develop or commercialize its self on unfavorable terms.chief financial officer evaluated the effectivenessprocedures. Based on an evaluation of our disclosure controls and procedures as of September 30, 2017. The term “disclosure controls and procedures,” as(as defined in Rules 13a-15(e) and 15d-15(e) underof the Securities Exchange Act means controls and other procedures of a company that are designed to ensure that information1934, as amended) required to be disclosed by a company in the reports that it filesparagraph (b) of Rule 13a-15 or submits under the Securities Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Securities Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. Based on that evaluation,Rule 15d-15, as of September 30, 2017,2020, our principal executive officerPrincipal Executive Officer and principalPrincipal Financial Officer have concluded that, due to the material weaknesses in our internal control over financial officer concluded thatreporting, our disclosure controls and procedures arewere not effective, and that we have material weaknesses in our financial closing process that are more fully described in our Annual Report on Form 10-K. We intend to implement remedial measures designed to address the ineffectiveness of our disclosure controls and procedures.September 30, 2017March 31, 2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. Based on that evaluation,There have been no changes in our principal executive officer and principalinternal controls over financial officer concluded there were no such changesreporting during the quarterthree months ended September 30, 2017.March 31, 2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.31.1CONTRAVIR PHARMACEUTICALS, INC.(Registrant)November 14, 2017JAMES SAPIRSTEINJames SapirsteinPresident and Chief Executive Officer(Principal Executive Officer) Date: November 14, 201705/14/2021