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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON,

Washington, D.C. 20549

FORM 10-Q

(Mark One)


xQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended: September 30, 2017

Ended March 31, 2022

Or
oTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


For the transition period from                           to                           

Commission File Number:Number 001-36856

CONTRAVIR

hepa-20220331_g1.jpg
HEPION PHARMACEUTICALS, INC.

(Exact name of registrant as specified in its charter)

Delaware
(State or Other Jurisdictionother jurisdiction of
Incorporation
incorporation or Organization)

organization)

46-2783806
(I.R.S. Employer
Identification No.)

Number)

399 Thornall Street, First Floor
Edison, New Jersey
08837
(Address of principal executive offices)

08837
(Zip Code)

Principal Executive Offices)

(732) 902-4000

(

Registrant’s telephone number)

number, including area code

Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Common Stock, par value $0.0001 per shareHEPAThe Nasdaq Capital Market
Indicate by check mark whether the 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

Indicate by check mark whether the Registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 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

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o

Accelerated filer o

Non-accelerated filer o

Smaller reporting company x

(Do not check if a smaller reporting company)

Emerging growth company x

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x

The number of shares of the registrant’s shares of common stockCommon Stock outstanding was 78,278,306 as of November 13, 2017.

May 9, 2022 was 76,229,617.






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CONTRAVIR



HEPION PHARMACEUTICALS, INC.

FORM 10-Q

TABLE OF CONTENTS

Page

Page

1

1

2

3

4

5

18

23

23

Item 6.

Exhibits

24

25






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NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q for ContraVirHepion 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, 2021 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.April 8, 2022. 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.

1


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PART I—FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements

CONTRAVIR

HEPION PHARMACEUTICALS, INC.

AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

 

 

September 30,
2017

 

June 30,
2017

 

 

 

(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

 

(Unaudited)
March 31,
2022
December 31,
2021
(Note 2)
Assets
Current assets:
Cash$79,222,826 $91,348,967 
Prepaid expenses10,551,555 6,102,801 
Total current assets89,774,381 97,451,768 
Property and equipment, net131,001 152,772 
Right-of-use assets236,519 303,689 
In-process research and development3,190,000 3,190,000 
Goodwill1,870,924 1,870,924 
Other assets652,182 583,326 
Total assets$95,855,007 $103,552,479 
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable$2,383,294 $2,445,837 
Accrued expenses3,629,269 2,505,625 
Operating lease liabilities, current247,340 266,650 
Short-term portion of contingent consideration— 2,988,284 
Total current liabilities6,259,903 8,206,396 
Contingent consideration2,550,000 1,891,716 
Deferred tax liability409,022 409,022 
Operating lease liabilities, non-current— 50,342 
Total liabilities9,218,925 10,557,476 
Commitments and contingencies00
Stockholders’ equity:
Series A convertible preferred stock, stated value $10 per share, 85,581 shares issued and outstanding at March 31, 2022 and December 31, 2021, respectively855,808 855,808 
Series C convertible preferred stock, stated value $1,000 per share, 1,801 and 1,806 shares issued and outstanding at March 31, 2022 and December 31, 2021, respectively840,320 845,320 
Common stock—$0.0001 par value per share; 120,000,000 shares authorized, 76,229,617 and 76,225,254 shares issued and outstanding at March 31, 2022 and December 31, 2021, respectively7,623 7,623 
Additional paid-in capital225,354,165 224,787,547 
Accumulated other comprehensive income9,146 — 
Accumulated deficit(140,430,980)(133,501,295)
Total stockholders’ equity86,636,082 92,995,003 
Total liabilities and stockholders’ equity$95,855,007 $103,552,479 
The accompanying notes are an integral part of these condensed consolidated financial statements.

statements (unaudited).
2

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CONTRAVIR



HEPION PHARMACEUTICALS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

SUBSIDIARIES

Condensed Consolidated Statements of Operations
(Unaudited)

 

 

Three Months Ended
September 30, 2017

 

Three Months Ended
September 30, 2016

 

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

)


Three Months Ended
March 31,
20222021
Revenues$— $— 
Costs and expenses:
Research and development4,311,134 3,498,655 
General and administrative2,941,334 2,532,808 
Total operating expenses7,252,468 6,031,463 
Loss from operations(7,252,468)(6,031,463)
Other income (expense):
Interest expense(2,209)(2,054)
Change in fair value of contingent consideration324,992 (30,000)
Loss before income taxes(6,929,685)(6,063,517)
Income tax benefit (expense)— — 
Net loss and comprehensive loss(6,929,685)(6,063,517)
Weighted average common shares outstanding:
Basic and diluted76,228,899 52,160,742 
Net loss per common share: (see Note 10)
Basic and diluted$(0.09)$(0.12)









The accompanying notes are an integral part of these condensed consolidated financial statements.

statements (unaudited).


3

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CONTRAVIR



HEPION PHARMACEUTICALS, INC.

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY

(Unaudited)

 

 

Preferred Stock,
Series A
$0.0001 par value

 

Common Stock,
$0.0001 par value

 

Additional

 

 

 

Total

 

 

 

Shares

 

Amount

 

Shares

 

Par
Value

 

Paid in
Capital

 

Accumulated
Deficit

 

Stockholder’s
Equity

 

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

 

The accompanying notes are an integral part AND SUBSIDIARIES

Condensed Consolidated Statements of these condensed financial statements.

CONTRAVIR PHARMACEUTICALS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Comprehensive Loss

(Unaudited)

 

 

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

 


Three Months Ended
March 31,
20222021
Net loss$(6,929,685)$(6,063,517)
Other comprehensive income:
Foreign currency translation9,146 — 
Total other comprehensive income:9,146 — 
Comprehensive loss$(6,920,539)$(6,063,517)

































The accompanying notes are an integral part of these condensed consolidated financial statements.

statements (unaudited).
4

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CONTRAVIR



HEPION PHARMACEUTICALS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AND SUBSIDIARIES

Condensed Consolidated Statements of Changes in Stockholders’ Equity
(Unaudited)

Preferred StockPreferred StockAdditional Paid in CapitalAccumulated other Comprehensive Income (Loss)Accumulated DeficitTotal Stockholders' Equity
Series ASeries CCommon Stock
SharesAmountSharesAmountSharesAmount
Balance at December 31, 202185,581 $855,808 1,806 $845,320 76,225,254 $7,623 $224,787,547 $— $(133,501,295)$92,995,003 
Net loss— — — — — — — — (6,929,685)(6,929,685)
Other comprehensive income (loss)— — — — — — — 9,146 — 9,146 
Stock-based compensation expense— — — — — — 556,610 — — 556,610 
Conversion of Series C to common— — (5)(5,000)46 — 5,000 — — — 
Issuance of common stock, net— — — — 4,317 — 5,008 — — 5,008 
Balance at March 31, 202285,581 $855,808 1,801 $840,320 76,229,617 $7,623 $225,354,165 $9,146 $(140,430,980)$86,636,082 











The accompanying notes are an integral part of these condensed consolidated financial statements (unaudited).
5

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HEPION PHARMACEUTICALS, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Changes in Stockholders’ Equity
(Unaudited)


Preferred StockPreferred StockAdditional Paid in CapitalAccumulated other Comprehensive Income (Loss)Accumulated DeficitTotal Stockholders’ Equity 
Series ASeries CCommon Stock
SharesAmountSharesAmountSharesAmount
Balance at December 31, 202085,581 $855,808 1,817 $856,320 32,025,153 $3,203 $142,910,523 $— $(104,105,463)$40,520,391 
Adoption of new accounting standard— — — — — — (3,314,663)— 3,326,335 11,672 
Net loss— — — — — — — — (6,063,517)(6,063,517)
Other comprehensive income (loss)— — — — — — — — — — 
Stock-based compensation expense— — — — — — 957,871 — — 957,871 
Conversion of Series C to common— — (10)(10,000)92 — 10,000 — — — 
Issuance of common stock, net— — — — 44,200,000 4,420 82,149,180 — — 82,153,600 
Balance at March 31, 202185,581 $855,808 1,807 $846,320 76,225,245 $7,623 $222,712,911 $— $(106,842,645)$117,580,017 















The accompanying notes are an integral part of these condensed consolidated financial statements (unaudited).
6

HEPION PHARMACEUTICALS, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(Unaudited)

Three Months Ended
March 31,
20222021
Cash flows from operating activities:
Net loss$(6,929,685)$(6,063,517)
Adjustments to reconcile net loss to net cash used in operating activities:
Stock-based compensation1,541,450 957,871 
Depreciation and amortization22,730 18,143 
Change in fair value of contingent consideration(324,992)30,000 
Changes in operating assets and liabilities:
Accounts payable and accrued expenses76,304 (1,902,277)
Right of use asset67,170 — 
Operating lease liability(69,652)— 
Prepaid expenses and other assets(4,512,635)(389,468)
Net cash used in operating activities(10,129,310)(7,349,248)
Cash flows from investing activities:
Purchase of property and equipment— (82,105)
Net cash used in investing activities— (82,105)
Cash flows from financing activities:
Proceeds from the issuance of common stock, net of issuance costs— 82,153,600 
Contingent consideration milestone payment(2,000,000)— 
Net cash provided by financing activities(2,000,000)82,153,600 
Effect of exchange rates on cash3,169 — 
Net increase in cash(12,126,141)74,722,247 
Cash at beginning of period91,348,967 40,726,838 
Cash at end of period$79,222,826 $115,449,085 
Supplementary disclosure of non-cash financing activities:
Conversion of Series C convertible preferred stock$5,000 $10,000 
Issuance of common stock in conjunction with milestone payment5,008 — 
Fair value of warrants issued to placement agent— 2,013,055 
Adoption of new accounting standard— 11,672 



The accompanying notes are an integral part of these condensed consolidated financial statements (unaudited).
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HEPION PHARMACEUTICALS, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)
1. Business Overview

ContraVir

Hepion Pharmaceuticals, Inc. (“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, inflammation, and shows potential for the treatment of hepatocellular carcinoma (“HCC”) associated with non-alcoholic steatohepatitis (“NASH”), viral hepatitis, and other liver diseases. Our cyclophilin inhibitor, Rencofilstat (formerly CRV431), is being developed to offer benefits to address multiple complex pathologies related to advanced liver disease. Rencofilstat is a cyclophilin inhibitor that targets multiple pathologic pathways involved in the progression of liver disease.
We are developing Rencofilstat as our lead molecule. Rencofilstat is a compound that binds and inhibits the function of a specific class of isomerase enzymes called cyclophilins that regulate protein folding. Many closely related isoforms of cyclophilins exist in humans. Cyclophilins A, B, and D are the best characterized cyclophilin isoforms. Inhibition of cyclophilins has been shown in the scientific literature to have therapeutic effects in a variety of experimental models, including liver disease models.
On May 10, 2018, we submitted an Investigational New Drug Application (“IND”) to the U.S. Food and Drug Administration (“FDA”) to support initiation of our Rencofilstat HBV clinical development program in the United States and commercializationreceived approval in June 2018. We completed the first segment of targeted antiviral therapiesour Phase 1 clinical activities for Rencofilstat in October 2018 wherein we reached a major clinical milestone of positive data from a Phase I trial of Rencofilstat in humans. This achievement triggered the first milestone payment, as stated in the May 26, 2016 acquisition agreement between the Company and Ciclofilin Pharmaceuticals, Inc. (“Ciclofilin”) (the “Merger Agreement") for the acquisition of Ciclofilin and we paid a related milestone payment of approximately $0.3 million to Aurinia Pharmaceuticals, Inc. ("Aurinia") and $0.7 million to the former Ciclofilin shareholders along with the issuance of 1,439 shares of our common stock with a specific focusfair value of $0.1 million, representing 2.5% of our issued and outstanding common stock as of June, 2016, to the former Ciclofilin shareholders. Our CEO is a former Ciclofilin shareholder and received approximately $0.3 million and 603 shares of common stock and Petrus Wijngaard, a director of our company, received $2,805 and 6 shares of common stock.
The Merger Agreement was amended on developingJanuary 14, 2022 for the following: (i) upon receipt of Phase II positive data from the first Phase II clinical trial of Rencofilstat in NASH patients which has been achieved: (1) such number of validly issued, fully paid and non-assessable shares of our common stock equal to 7.5% of the issued and outstanding of our common stock on the Closing Date as defined in the original agreement, which 4,317 was issued in March 2022, and (2) a potentially curative therapypayment of $2.0 million, made in January 2022 to Ciclofilin shareholders, including a payment to our CEO of $0.8 million and other Hepion employees of $0.2 million, (ii) a payment of $1.0 million upon the positive read out of the first planned interim futility analysis of a Phase IIb clinical trial of Rencofilstat in NASH patients, supporting the continuation of the Phase IIb trial. The original agreement required a $3.0 million payment upon receipt of Phase II positive data from a proof-of-concept clinical trial of CRV431, (iii) a payment of $5.0 million upon initiation of the first Phase III trial of Rencofilstat in patients, where initiation occurs with first patient in the study dosed with study medication, which remains unchanged from the original agreement, (iv) a payment of $5.0 million upon the filing and acceptance by the U.S. Food and Drug Administration of the first new drug application for hepatitis B virus (HBV). The Company is developing two novel anti-HBV compounds with complementary mechanismsRencofilstat, which was $8.0 million in the original agreement; and (v) a payment of action. Our lead compound, TXL™, is currently$8.0 million upon the regulatory approval by the U.S. Food and Drug Administration of the first new drug application for Rencofilstat.
On June 17, 2019, we submitted an IND to the FDA to support initiation of our Rencofilstat NASH clinical development program in the United States and received approval in July 2019. We completed dosing of Rencofilstat in our multiple ascending dose (“MAD") clinical trial in September 2020.
On July 13, 2021, we announced positive topline results from our Phase 2a "AMBITION" NASH clinical trial. All primary endpoints of the trial were met. This Phase 2a study confirmed Rencofilstat tolerability and successfully elucidated the drug dosing range for the upcoming Phase 2b trial.
On September 13, 2021, we announced additional positive data from the Phase 2a AMBITION trial and the initiation of the Phase 2b "ASCEND" NASH clinical trial.
On November 20, 2020, we submitted an IND to the FDA to support initiation of a Rencofilstat clinical development program in the United States for COVID-19. We received approval December 17, 2020, to conduct a COVID-19 clinical trial and are investigating potential sources of collaboration and/or funding for the trial. To date, we have not pursued funding.
On November 19, 2021 we submitted an IND to the FDA to support initiation of a Rencofilstat clinical development program in the United States for the treatment of HCC and received approval on December 17, 2021.
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HEPION PHARMACEUTICALS, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)
On November 30, 2021, the FDA granted Fast Track designation for our lead drug candidate, Rencofilstat, for the treatment of NASH. The FDA Fast Track designation allows sponsors to gain access to expedited drug approval reviews for medical conditions that are serious and potentially life-threatening, and where there is an unmet medical need. The program is also designed to deliver high intrahepatic concentrations of TFV, while minimizing off-target effects causedfacilitate drug development by high levels of circulating TFV. CRV431, our second compoundmaking provisions for HBV, is a next-generation cyclophilin inhibitormore frequent meetings with a unique structure that increases its potencythe FDA to discuss drug development plans, and selective index against TXL

Fast Track designation can lead to Accelerated Approval and/or Priority Review eligibility if certain criteria are met.

2.Basis of Presentation and Going Concern

Basis of Presentation
These unaudited condensed consolidated financial statements have been prepared following the requirements of the Securities and Exchange Commission (“SEC”) and accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim reporting. In the opinion of management, the accompanying unaudited condensed consolidated financial statements include all adjustments, which include only normal recurring adjustments, necessary to present fairly the Company’sour interim financial information. The consolidated balance sheet as of June 30, 2017December 31, 2021 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, 2021 contained in the Company’sour Annual Report on Form 10-K (“Form 10-K”) filed with the SEC on September 28, 2017.

April 8, 2022.

Principles of Consolidation

The accompanying condensed consolidated financial statements include our accounts and the accounts of 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 Concern

The accompanying

Liquidity
As of March 31, 2022, we had $79.2 million in cash, an accumulated deficit of $140.4 million, and working capital of $83.5 million. For the three months ended March 31, 2022, cash used in operating activities was $10.1 million and we had a net loss of $6.9 million. 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 convertible debt, common stock and preferred stock. We expect to continue to incur losses for the next several years as we expand our research, development and clinical trials of Rencofilstat. We are unable to predict the extent of any future losses or when we will become profitable, if at all. We believe 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 condensed consolidated financial statements. These condensed consolidated financial statements have been prepared under the assumption that the 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 Company

We will be required to raise additional capital within 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.

COVID-19 Pandemic
The COVID-19 outbreak in the United States has caused significant business disruption. The extent of the impact of COVID-19 on our future operational and financial performance will depend on certain developments, including the duration and spread of the outbreak, and impact on our clinical trials, employees and vendors, all of which are uncertain and cannot be predicted. At this point, the extent to which COVID-19 may impact our future financial condition or results of operations is uncertain. While there has not been a material impact on our condensed financial statements for the three months ended March 31, 2022, a continued outbreak could have a material adverse impact on our financial results and business operations, including the timing and our ability to complete certain clinical trials and other efforts required to advance the development of our product candidate and raise additional capital.
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Notes to Condensed Consolidated Financial Statements
(Unaudited)
Although we have data to suggest Rencofilstat may be beneficial in the treatment of COVID-19 and other viral infections (e.g., HBV), the main focus of our company is currently on liver disease. We may, at some point, re-visit the antiviral indications should the opportunity arise (e.g., external funding/collaboration).
3. Summary of Significant Accounting Policies

Use of Estimates

The preparation of condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of expenses during the reporting period. Changes in estimates and assumptions are reflected in reported results in the period in which they become known. Actual results could differ from those estimates.

The Company’s

Our significant accounting policies are disclosed in the audited consolidated financial statements for the year ended June 30, 2017December 31, 2021 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.

Cash

As of September 30, 2017March 31, 2022 and June 30, 2017, the amount ofDecember 31, 2021, cash was approximately $8.8$79.2 million and $13.0$91.3 million, respectively, consisting primarily of checking accounts held at U.S. and Canadian commercial banks. Cash is maintained atAt certain times, our cash balances with any one financial institutions and, at times, balancesinstitution may exceed federally insuredFederal Deposit Insurance Corporation insurance limits. The Company hasWe believe it mitigates our risk by depositing our cash balances with high credit, quality financial institutions. We have never experienced losses related to these balances.

Fair Value of Financial Instruments

Accounting Standards Codification (“ASC”) Topic 820, Fair Value Measurement (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.

ASC 820 identifies fair value as the exchange price, or exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As a basis for considering market participant assumptions in fair value measurements, ASC Topic 820 establishes a three-tier fair value hierarchy that distinguishes among the following:

·

Level 1—Valuations based on unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability towe can access.

·

Level 2—Valuations based on quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active and models for which all significant inputs are observable, either directly or indirectly.

·

Level 3—Valuations based on inputs that are unobservable and significant to the overall fair value measurement.

To the extent that the valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. Accordingly, the degree of judgment exercised by 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.

Financial instruments consist of cash, accounts payable, contingent consideration and accounts payable.derivative instruments. These financial instruments are stated at their respective historical carrying amounts, which approximate fair value due to their short term nature.

Derivative financialshort-term nature, except for contingent consideration and derivative instruments,

The Company has issued common stock warrants in connection with the execution of certain equity financings. The which are recorded at fair value of the warrants, which were deemed to be derivative instruments based on certain contingent put features, was recorded as a derivative liability under the provisions of ASC Topic 815 Derivatives and Hedging (“ASC 815”) upon issuance. Subsequently, the liability is adjusted to fair value as ofat the end of each reporting period andperiod. We recorded contingent consideration from the changes in2016 acquisition of Ciclofilin, which is required to be carried at fair

value of derivative liabilities are recorded in value. See Note 6 for additional information on the statements of operations under the caption “Change in fair value of derivative financial instruments—warrants.” See Note 4the contingent consideration.

Property, equipment and depreciation
As of March 31, 2022 and December 31, 2021, we had $0.1 million and $0.2 million, respectively, of property and equipment, consisting primarily of lab equipment, computer equipment, furniture and fixtures. Expenditures for additional information.

additions,

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Notes to Condensed Consolidated Financial Statements
(Unaudited)
renewals and improvements will be capitalized at cost. Depreciation will generally be computed on a straight-line method based on the estimated useful lives of the related assets. The estimated useful lives of the depreciable assets are 3 to 7 years. Leasehold improvements are amortized using the straight-line method over their estimated useful lives, or the remaining term of the lease, whichever is shorter. Expenditures for repairs and maintenance are charged to operations as incurred. We will periodically evaluate whether current events or circumstances indicate that the carrying value of our depreciable assets may not be recoverable. There were no adjustments to the carrying value of property and equipment at March 31, 2022 or December 31, 2021.
Goodwill and In-Process Research & Development

In accordance with ASC Topic 350, Intangibles — Goodwill and Other (“ASC Topic 350”), goodwill and acquired IPR&D are determined to have indefinite lives and, therefore, are not amortized. Instead, they are tested for impairment annually, in 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, Intangibles — Goodwill and Other (Topic 350): Testing 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
The annual, or interim (if events or changes in circumstances leads the Company to determineindicate that it is more likely than not (that is, a likelihood of more than 50%) that the asset is impaired), goodwill orimpairment test is performed by comparing the acquired IPR&D is impaired.fair value of a reporting unit with 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 that reporting unit. In addition, income tax effects from any tax-deductible goodwill on the carrying amount of the reporting unit should be considered when measuring the goodwill impairment loss, if applicable. As part of the impairment test, we may elect to perform an assessment of qualitative factors. If the Company chooses to first assessthis qualitative factors and determinesassessment indicates that it is not more likely than not goodwill or acquired IPR&D is impaired,that 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, which 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, including goodwill, is less than its carrying amount, or if we elect to its estimatedbypass the qualitative assessment, we would then proceed with the quantitative impairment test. The impairment test involves comparing the fair value. The Company tests for impairment atvalues of the entity level because it operates on the basis of a single reporting unit.units to their carrying amounts. If the carrying valueamount of a reporting unit exceeds its fair value, the Company then performs Step 2we recognize a goodwill loss in an amount equal to measure the amount of impairment loss, if any. In Step 2, the Company estimates the fair value of its individual assets, including identifiable intangible assets, and liabilities to determine 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 is recorded as an impairment charge.

excess.

Goodwill relates to amounts that arose in connection with the acquisition of Ciclofilin. Goodwill represents the excess of the purchase price over the fair value of the net assets acquired when accounted for using the acquisition method of accounting for business combinations. We performed a quantitative assessment of goodwill for fiscal year 2021 and determined that the fair value of our reporting unit was in excess of its carrying value. We performed a qualitative assessment of goodwill for fiscal year 2020 and determined that it was not more likely than not that goodwill was impaired. There was no impairment of goodwill as of September 30, 2017.

for the three months ended March 31, 2022 and 2021.

In-Process Research and Development ("IPR&D&D") acquired in a business combination is capitalized as indefinite-lived assets on the Company’sour consolidated balance sheets at itsthe acquisition-date fair value. IPR&D relates to amounts that arose in connection with the acquisition of Ciclofilin. 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 projected discounted cash flow models used to estimate the fair values of 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.

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.

The annual, or interim if events or changes in circumstances indicate that it is more likely than not that the asset is impaired), IPR&D impairment test is performed by comparing the fair value of the asset to the asset’s carrying amount. When testing indefinite-lived intangibles for impairment, we may assess qualitative factors for its indefinite-lived intangibles to determine whether it is more likely than not that the asset is impaired. Alternatively, we may bypass this qualitative assessment for our indefinite-lived intangible asset and perform the quantitative impairment test that compares the fair value of the indefinite-lived intangible asset with the asset’s carrying amount. If IPR&D becomes impaired or is abandoned, the carrying value of the IPR&D is written down to 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
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Notes to Condensed Consolidated Financial Statements
(Unaudited)
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.
We performed a quantitative assessment of IPR&D for fiscal year 2021 and determined that the asset was not impaired. We also performed a qualitative assessment of IPR&D for fiscal year 2020and determined that it was not more likely than not that IPR&D was impaired. There was no impairment of IPR&D for the three months ended March 31, 2022 and 2021.
Income Taxes
We account for income taxes under the asset and liability method. We recognize deferred tax assets and liabilities for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases, as well as for operating loss and tax credit carryforwards. We measure deferred tax assets and liabilities using enacted tax rates expected to apply to taxable income in the years in which we expect to recover or settle those temporary differences. We recognize the effect of September 30, 2017.

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 necessary, by a valuation allowance if it is more likely than not that we will not realize some or all of the deferred tax asset. We account for uncertain tax positions by recognizing the financial statement effects of a tax position only when, based upon technical merits, it is “more-likely-than-not” that the position will be sustained upon examination. Potential interest and penalties associated with unrecognized tax positions are recognized in income tax expense.

We continue to maintain a full valuation allowance for our U.S and foreign net deferred tax assets. Income tax expense for the three months ended March 31, 2022 and 2021 is related to our foreign operations.
Under the provisions of the Internal Revenue Code, the NOL and tax credit carryforwards are subject to review and possible adjustment by the Internal Revenue Service and state tax authorities. NOL and tax credit carryforwards may become subject to an annual limitation in the event of certain cumulative changes in the ownership interest of significant shareholders over a three-year period in excess of 50%, as defined under Sections 382 and 383 of the Internal Revenue Code of 1986, respectively, as well as similar state tax provisions. This could limit the amount of tax attributes that we can utilize annually to offset future taxable income or tax liabilities. The amount of the annual limitation, if any, will be determined based on our value immediately prior to the ownership change. Subsequent ownership changes may further affect the limitation in future years. The utilization of these NOLs is subject to limitations based on past and future changes in our ownership pursuant to Section 382. We completed a Section 382 study of transactions in our stock through December 31, 2021 and concluded that we have experienced ownership changes since inception that we believe under Section 382 and 383 of the Code will result in limitations on our ability to use certain pre-ownership change NOLs and credits. In addition, we may experience subsequent ownership changes as a result of future equity offerings or other changes in the ownership of our stock, some of which are beyond our control. As a result, the amount of the NOLs and tax credit carryforwards presented in our consolidated financial statements could be limited. Similar provisions of state tax law may also apply to limit the use of accumulated state tax attributes.
Contingencies

In the normal course of business, 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.

Researchand Development

Research and development costs, which include expenditures in connection with an in-house research and development laboratory, salaries and staff costs, application and filing for regulatory approval of proposed products, purchased in-process research and development, license costs, regulatory and scientific consulting fees, as well as contract research, insurance and FDA consultants, are accounted for in accordance with ASC Topic 730, Research and Development, (“ASC 730”). Also, as prescribed by this guidance, patent filing and maintenance expenses are considered legal in nature and therefore classified as general and administrative expense, if any.

ContraVir does

We do not currently have any commercial biopharmaceutical products and doesdo 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.

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Notes to Condensed Consolidated Financial Statements
(Unaudited)
Also as prescribed by ASC 730, non-refundable advance payments for goods or services that will be used or rendered for future research and development activities should be deferred and capitalized. As the related goods are delivered or the services are performed, or when the goods or services are no longer expected to be provided, the deferred amounts would be recognized as an expense. At September 30, 2017March 31, 2022 and June 30, 2017, the CompanyDecember 31, 2021, we had prepaid research and development costs of $55,123$10.1 million and $75,484.

$5.9 million, respectively.

Share-based payments

ASC Topic 718, “Compensation—Compensation—Stock Compensation”Compensation (“ASC 718”), requires companies to measure the cost of employee and non-employee services received in exchange for the award of equity instruments based on the estimated fair value of the award at the date of grant. The expense is to be recognized over the period during which an employee is required to provide services in exchange for the award. Generally, 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.

method (see Note 9). We account for awards granted to employees that are in excess of what is available to grant as a liability recorded at fair value each reporting period in the consolidated financial statements.

The fair value of each stock option grant is estimated on the date of grant using the Black-Scholes option-pricing model. 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 expected term of stock options granted to non-employees is equal to the contractual term of the option award. The risk-free interest rate is determined by reference to the U.S. Treasury yield curve in effect at the time of grant of the award for time periods approximately equal to the expected term of the award. Expected dividend yield is based on the fact that the Company haswe have never paid cash dividends and doesdo not expect to pay any cash dividends in the foreseeable future.

Foreign Exchange
For 2022, the functional currency of Hepion Pharmaceuticals, Inc. and ContraVir Research Inc. is the U.S. dollar. The Company accountsfunctional currency of Hepion Research Corp. is the Canadian dollar. The change in the functional currency for stock options issuedHepion Research Corp. was applied on a prospective basis starting January 1, 2022. Prior to non-employees2022, the functional and reporting currency of Hepion Pharmaceuticals, Inc., Hepion Research Corp. and ContraVir Research Inc. was the U.S. dollar. For 2022, 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 the reporting period. Unrealized foreign currency translation adjustments are deferred in accordanceaccumulated other comprehensive loss, a separate component of shareholders’ equity. The amount of currency translation adjustment was immaterial for the three months ended March 31, 2022. Transactions in foreign currencies are remeasured into the functional currency of the relevant subsidiaries at the exchange rate in effect at the date of the transaction. Any monetary assets and liabilities arising from these transactions are translated into the functional currency at exchange rates in effect at the balance sheet date or on settlement. Resulting gains and losses are recorded in general and administrative expense within the consolidated statements of operations. The impact of foreign exchange losses was $35,078 and $56,475 for the three months ended March 31, 2022 and 2021, respectively.
Segment Information
Operating segments are defined as components of an enterprise about which separate discrete information is available for evaluation by the chief operating decision maker, or decision-making group, in deciding how to allocate resources and in assessing performance. Our chief operating decision maker views our operations and manages the business in 1 segment.
Net loss per share
Basic and diluted net loss per share is presented in conformity with ASC Topic 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.

260, Earnings per Share, (“ASC 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 Combinations

The 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 and

liabilities 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.

period.

4. Recent Accounting Pronouncements

In 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 2017,2021, the FASB issued ASU No. 2017-04, Intangibles — Goodwill2021-04 ("ASU 2021-04), Earnings Per Share (Topic 260), Debt—Modifications and OtherExtinguishments (Subtopic 470-50), Compensation—Stock Compensation (Topic 350)718), and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Simplifying the TestIssuer’s Accounting for Goodwill Impairment (“ASU 2017-04”), which amended the 2014 amendments toCertain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options (a consensus of the FASB Accounting Standards Codification that allowed companies an alternative accounting treatmentEmerging Issues Task Force). The amendments in this update are 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 goodwillall entities 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 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 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, 2018,2021, including interim periods within those annual periods, with earlyfiscal years. We adopted this standard on January 1, 2022. The 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 thethis standard did not have a material effect on our condensed consolidated financial statements with certain practical expedients available. The Company is currently evaluating the impact that this guidance will have on its resultsand related disclosures.

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Table 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 entityContents

HEPION PHARMACEUTICALS, INC. AND SUBSIDIARIES
Notes 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.

Condensed Consolidated Financial Statements

(Unaudited)
5. Stockholder’sStockholders’ Equity and Derivative Liability

Preferred stock, Common Stock and Warrant Offering

During the period from August 5, 2016 to September 29, 2016, certain holders of the Company’s — Warrants

Series A Convertible Preferred Stock elected
On October 14, 2014, our Board of Directors authorized the sale and issuance of up to convert 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 ofinto the Company’s Series B Convertible Preferred stock elected to convert the outstanding 120,000 sharesnumber of Series B Convertible Preferred stock into approximately 1.1 million shares of the Company’s common stock

On October 7, 2015, the Company entered into an underwriting agreement related to the public offering and sale of 5,000,000 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, 2022, there were 85,581 shares outstanding. During the three months ended March 31, 2022 and warrants to purchase up to 3,000,0002021, no shares of the Series A were converted. If we sell common stock or equivalents at a fixed combinedan effective price per share that is lower than the conversion price, the conversion price may be reduced to the publiclower conversion price. The Series A will be automatically convertible into common stock in the event of $3.00 undera fundamental transaction as defined in the Company’s current shelfoffering.

Series C Convertible Preferred Stock Issuance
On July 3, 2018, we completed a rights offering pursuant to our effective registration statement on Form S-3.S-1. We offered for sale units in the rights offering and each unit sold in connection with the rights offering consisted of 1 share of our Series C Convertible Preferred Stock, or Series C, and common stock warrants (the “Rights Offering”). Upon completion of the offering, pursuant to the rights 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 C and 88,928 common stock warrants. As of March 31, 2022, there were 1,801 shares outstanding. During the three months ended March 31, 2022, 5 shares of the Series C were converted into 46 shares of our common stock and during the three months ended March 31, 2021, 10 shares of the Series C were converted into 92 shares of our common stock. Each share of Series C is convertible into common stock at any time at the option of the holder thereof at the conversion price then in effect. The sharesconversion price for the Series C is determined by dividing the stated value of $1,000 per share by $1.55 per share (subject to adjustments upon the occurrence of certain dilutive events).
Common Stock and Warrant Offerings
In April 2016, April 2017, and July 2018, we issued common stock and warrants were issued separatelyin connection with public offerings. Based on October 13, 2015. The warrants are immediately exercisablethe terms of the April 2016 and will2017 offering and warrant agreements, we could be exercisable for a period of five years from the date of issuance at an exercise price of $4.25 per share. There is not, nor is there expectedrequired to be, any trading market for the warrants issued in the offering contemplated by the Underwriting Agreement. The Company also granted the Underwriters a 45-day option to purchase up to an additional 750,000 additional shares of common stock and additional warrants to purchase up to 450,000 shares of common stock at $3.00, which was not exercised. The gross proceeds to the Company were $15.0 million, before deducting the underwriting discount and other offering expenses payable by the Company of approximately $1.5 million. If the warrants were exercised in full, ContraVir would receive additional proceeds of approximately $12.8 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 consummation of the fundamental transaction and continuing for 90 days,warrant holder, an amount of cash equal to the value of the remaining unexercised portion of the warrant as determined in accordance with thea Black-Scholes option pricing model, at the time of exercise of the warrant under certain terms and conditions. Based on the dateterms of such fundamental transaction.the July 2018 offering and warrant agreements, if we do not maintain an effective registration statement, which is outside of our control, we are obligated to deliver registered shares upon the exercise and settlement of the warrant. As a result of thesethe aforementioned terms and in accordance with the guidance contained in ASC Topic 815-40, the Company haswe determined that the April 2016, April 2017 and July 2018 warrants issued in connection with this financing transactionthese offerings must be recorded as derivative liabilities upon issuance and marked to market on a quarterly basis in the Company’sour consolidated statement of operations and comprehensive loss. Upon the issuance of these warrants, the fair value of approximately $4.4 million was recorded as derivative financial instruments liability—warrants.

The fair value of these liability classified warrants was estimated using the Black-Scholes option pricing model. The Company develops its 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’s common stock, stock price volatility of comparable companies, 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.

The following assumptions were used to measure the warrants at issuance and to remeasure the liability as of September 30, 2017 and June 30, 2017:

 

 

September 30,
2017

 

June 30,
2017

 

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

 

 

 

On April 4, 2016, the Company closed on a public offering of 4,929,578 shares of its common stock and warrants to purchase up to 2,464,789 shares of common stock, at a fixed combined price to the public of $1.42 under the Company’s current 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 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 Company were $7.0 million, before deducting the underwriting discount and other offering expenses payable by the Company of approximately $0.7 million. If the warrants were exercised in full, ContraVir would receive additional proceeds of approximately $4.2 million.

Similar to the terms of the warrants issued in October 2015, 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 consummation of the fundamental transaction and continuing for 90 days, an amount of cash equal to the value ofDuring 2021, the remaining unexercised portion of the warrant as determined in accordanceApril 2016 warrants expired. In connection with the Black-Scholes option pricing model onadoption of ASU 2020-06, we reclassified the date 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 issuance 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 $1.5 million was recorded as derivative financial instruments liability—warrants.

The fair value of these liability classified warrants was estimated using the Black-Scholes option pricing model. The Company develops its 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’s common stock, stock price volatility of comparable companies, 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.

The following assumptions were used to measure the warrants at issuance and to remeasure the liability as of September 30, 2017 and June 30, 2017:

 

 

September 30,
2017

 

June 30,
2017

 

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

 

 

 

On April 25, 2017, the Company closed on a public offering of 12,000,000 shares of its common stock andJuly 2018 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. 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 $1.25 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 Company were $12.0 million, before deducting the underwriting discount 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 consummation of the fundamental 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. 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 issuance 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.

The fair value of these liability classifed warrants were estimated using the Black-Scholes option pricing model. The Company develops its 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’s common stock, stock price volatility of comparable companies, 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.

The following assumptions were used to measure the warrants at issuance and to remeasure the liability as of September 30, 2017 and June 30, 2017:

 

 

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

 

 

 

equity.

The following table sets forth the components of changes in the Company’sour derivative financial instruments liability balance for the three months ended September 30, 2017:

Date

 

Description

 

Number of
Warrants
Outstanding

 

Derivative
Instrument
Liability

 

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

 

Controlled Equity Offering Sales Agreement

On March 9, 2015, the Company entered into a Controlled Equity Offering Sales Agreement (the “Agreement”), with Cantor Fitzgerald & Co., as sales agent (“Cantor”), pursuant31, 2022:
DateDescriptionNumber of Warrants OutstandingDerivative Instrument Liability
December 31, 2021Balance of derivative financial instruments liability10,714 $— 
Expiration of warrants— — 
Change in fair value of warrants for the three months ended March 31, 2022— — 
March 31, 2022Balance of derivative financial instruments liability10,714 $— 


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HEPION PHARMACEUTICALS, INC. AND SUBSIDIARIES
Notes to which the Company may offer and sell, from time to time, through Cantor shares of the Company’s common stock, par value $0.0001 per share (the “Shares”), up to an aggregate offering price of $50.0 million. The Company intends to use the net proceeds from these sales to fund research and development activities and for working capital and other general corporate purposes, 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 directly

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. Subject to the terms 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 upon the Company’s instructions (including any price, time or size limits or other customary parameters or conditions the Company may impose).

The Company is 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 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., as sales agent.

Condensed Consolidated Financial Statements

(Unaudited)
6. Fair Value Measurements

The following table presents 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, 2022 and June 30, 2017.

 

 

Fair value

 

Quoted Prices in
Active Markets
for Identical
Assets and
Liabilities
(Level 1)

 

Significant
Other
Observable
Inputs
(Level 2)

 

Significant
Unobservable
Inputs
(Level 3)

 

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

)

The unrealized gains or losses on the derivative liabilities are recorded as a change in fair value of derivative liabilities-warrants in the Company’s statement of operations. See Note 5 for a rollfoward of the derivative liability for the three months ended September 30, 2017. 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 reviews 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, contingentDecember 31, 2021.

Fair Value Measurement at Reporting Date Using
DescriptionFair value(Level 1)(Level 2)(Level 3)
As of March 31, 2022:
Contingent consideration$2,550,000 $— $— $2,550,000 
As of December 31, 2021:
Contingent consideration$4,880,000 $— $— $4,880,000 
Contingent consideration was recorded for the acquisition of Ciclofilin Pharmaceuticals, Inc. (Ciclofilin) on June 10, 2016. The contingent consideration represented the acquisition date fair value of potential future payments, to be paid in cash and Companyour 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.
At March 31, 2022 and December 31, 2021, the assumptions we used to calculate the fair value were as follows:
Assumptions
March 31,
2022
December 31,
2021
Discount rate7.0%7.0%
Stock pricen/a$1.14
Projected milestone achievement datesSeptember 2023September 2027December 2021June 2026
Probability of success of milestone achievements13 %40%18 %100%
We completed the first segment of our Phase I clinical activities for Rencofilstat in October 2018 wherein we reached a major clinical milestone of positive data from a Phase I trial of Rencofilstat in humans. This achievement triggered the first milestone payment, as stated in the Merger Agreement for the acquisition of Ciclofilin and in the fourth quarter of 2018, we paid a related milestone payment of $1,000,000 and issued 1,439 shares of our common stock with a fair value of $55,398, representing 2.5% of our issued and outstanding common stock as of June 2016, to the Ciclofilin shareholders.
The Merger Agreement was amended on January 14, 2022 for the following: (i) upon receipt of Phase II positive data from the first Phase II clinical trial of Rencofilstat in NASH patients which has been achieved: (1) such number of validly issued, fully paid and non-assessable shares of our common stock equal to 7.5% of the issued and outstanding of our common stock on the Closing Date as defined in the original agreement, which 4,317 was issued in March 2022, and (2) a payment of $2.0 million, made in January 2022 to Ciclofilin shareholders, including a payment to our CEO of $0.8 million and other Hepion employees of $0.2 million, (ii) a payment of $1.0 million upon the positive read out of the first planned interim futility analysis of a Phase IIb clinical trial of Rencofilstat in NASH patients, supporting the continuation of the Phase IIb trial. The original agreement required a $3.0 million payment upon receipt of Phase II positive data from a proof-of-concept clinical trial of CRV431, (iii) a payment of $5.0 million upon initiation of the first Phase III trial of Rencofilstat in patients, where initiation occurs with first patient in the study dosed with study medication, which remains unchanged from the original agreement, (iv) a payment of $5.0 million upon the filing and acceptance by the U.S. Food and Drug Administration of the first new drug application for Rencofilstat, which was $8.0 million in the original agreement; and (v) a payment of $8.0 million upon the regulatory approval by the U.S. Food and Drug Administration of the first new drug application for Rencofilstat.
As of March 31, 2022, $2,550,000 was classified as a non-current liability based upon management's best estimate using the latest available information. Management reviewed and updated the assumptions at March 31, 2022 for the amendment of the Merger Agreement.
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HEPION PHARMACEUTICALS, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)
The following table presents the change in fair value of the contingent consideration as of September 30, 2017.

 

 

Acquisition-
related
Contingent
Consideration

 

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, 2022.

Acquisition- related Contingent Consideration
Liabilities:
Balance at December 31, 2021$4,880,000 
Contingent consideration payment(2,005,008)
Change in fair value recorded in earnings(324,992)
Balance at March 31, 2022$2,550,000 
7. Indefinite-lived Intangible Assets and Goodwill,

and Property and Equipment

IPR&D

The Company’s

Our IPR&D asset consisted of the following at:

 

 

September 30,
2017

 

June 30,
2017

 

IPR&D asset:

 

 

 

 

 

CRV431

 

$

3,190,000

 

$

3,190,000

 

Indefinite-lived
Intangible Asset
Rencofilstat balance at December 31, 2021$3,190,000 
Change during the three months ended March 31, 2022— 
Rencofilstat balance at March 31, 2022$3,190,000 
No impairment losses were recorded on IPR&D during the three months ended September 30, 2017.

March 31, 2022 and 2021.

Goodwill

The table below provides a roll-forward of the Company’sour goodwill balance:

 

 

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

 

Amount
Goodwill balance at December 31, 2021$1,870,924 
Change during the three months ended March 31, 2022— 
Goodwill balance at March 31, 2022$1,870,924 
No impairment losses were recorded onto goodwill during the three months ended September 30, 2017.

March 31, 2022 and 2021.

Property and Equipment, net
Property and equipment are stated at cost and depreciated using the straight-line method, based on useful lives as follows:
Estimated Useful Life (in years)March 31,
2022
December 31,
2021
Equipment3 years$332,970 $330,830 
Furniture and fixtures7 years62,183 62,183 
Less: Accumulated depreciation(264,152)(240,241)
$131,001 $152,772 
Depreciation expense for the three months ended March 31, 2022 and 2021 was $22,730 and $18,143, respectively.



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HEPION PHARMACEUTICALS, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)
8. Accrued Liabilities

The Company’s accrued

Accrued expenses consistconsisted of the following:

 

 

September 30,
2017

 

June 30,
2017

 

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

 

March 31,
2022
December 31,
2021
Payroll and related costs$222,000 $— 
Stock-based compensation - see Note 92,622,148 1,637,308 
Research and development545,488 536,965 
Legal fees33,068 57,345 
Professional fees178,375 167,346 
Other28,190 106,661 
Total accrued expenses$3,629,269 $2,505,625 
9. Accounting for Share-Based Payments

On June 3, 2013, 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 7,700,000 shares of common stock issuable pursuant toWe granted options during the Plan. As of Septemberthree months ended June 30, 2017,2021 and at the Companytime that these grants were made, we had 1,028,814 shares of common stock35,229 options available for grant under the Plan.

The Company classifies We accounted for the option grant as liability-classified awards requiring us to measure the fair value of the awards each reporting period since there were not enough shares available at the time of the grant. As of March 31, 2022, the liability related to the awards was $2.6 million and is included in accrued expenses in our consolidated balance sheet with the corresponding expense included in our consolidated statements of operations and comprehensive loss. At our annual meeting of stockholders on October 7, 2021, shareholders voted against our 2021 Omnibus Equity Incentive Plan. Therefore, we will continue to account for this option grant as liability-classified until we receive stockholder approval to increase the available options to grant.

We classify stock-based compensation expense in 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:

 

 

Three months
ended
September 30,
2017

 

Three months
ended
September 30,
2016

 

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:

Three Months Ended
March 31,
20222021
General and administrative$1,083,101 $711,591 
Research and development458,349 246,280 
Total stock-based compensation expense$1,541,450 $957,871 
A summary of stock option activity and of changes in stock options outstanding under the Plan foris presented as follows:
Number of OptionsExercise Price
Per Share
Weighted
Average Exercise Price Per Share
Intrinsic
Value
Weighted
Average Remaining Contractual Team
Balance outstanding, December 31, 20218,774,974 $1.63 -$2,016.00 $2.33 $— 9.10 years
Granted— $— -$— $— $— 
Exercised— $— -$— $— $— 
Forfeited— $— -$— $— $— 
Cancelled— $— -$— $— $— 
Balance outstanding, March 31, 20228,774,974 $1.63 -$2,016.00 $2.33 $— 8.86 years
Awards outstanding, vested awards and those expected to vest at March 31, 20228,624,464 $1.63 -$2,016.00 $2.34 $— 8.86 years
Vested and exercisable at March 31, 20221,351,040 $1.63 -$2,016.00 $5.22 $— 8.16 years
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HEPION PHARMACEUTICALS, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)
There were no options granted to employees during the three months ended September 30, 2017 is presented below:

 

 

Number of
Options

 

Exercise Price
Per Share

 

Weighted
Average
Exercise
Price
Per Share

 

Intrinsic
Value

 

Weighted
Average
Remaining
Contractual
Term

 

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, 2022 and 2021. The total fair value of awards vested during the three months ended March 31, 2022 was $0.2 million. The total fair value of awards vested during the three months ended March 31, 2021 was de minimis.

The aggregate intrinsic value of stock options 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 share of options granted to employees during the three months ended September 30, 2017 and 2016 was $0.37 and $0.72.

As of September 30, 2017,March 31, 2022, the unrecognized compensation cost related to non-vested stock options outstanding, net of expected forfeitures, was approximately $1.6$6.8 million to be recognized over a weighted-average remaining vesting period of approximately 2.07.

The following weighted-average assumptions were used in the Black-Scholes valuation model to estimate fair value of stock option awards to employees during the three months ended September 30, 2017 and 2016.

 

 

Three months
ended
September 30,
2017

 

Three months
ended
September 30,
2016

 

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

 

Risk-free interest rate—Based on the daily yield curve rates for U.S. Treasury obligations with maturities which correspond to the expected term of the Company’s stock options.

Dividend yield—ContraVir has not paid any dividends on common stock since its inception and does not anticipate paying dividends on its common stock in the foreseeable future.

Expected volatility—Because ContraVir has a limited trading history in its common stock, the Company based expected volatility on that of comparable public development stage biotechnology companies.

Expected term—The expected option term represents the period that stock-based awards are expected to be outstanding based on the simplified method provided in 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.

In December 2007, the SEC issued SAB No. 110, Share-Based Payment, (“SAB No. 110”). SAB No. 110 was effective January 1, 2008 and expresses the views of the Staff of the SEC with respect to extending the use of the simplified method, as discussed in SAB No. 107, in developing an estimate of the expected term of “plain vanilla” share options in accordance with ASC 718. The Company will use the simplified method until it has 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 has “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.

Forfeitures—ASC 718 requires 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%.

1.7 years.

10. Loss per Share

Basic and diluted net loss per common share is presentedwas determined by dividing net loss by the weighted-average common shares outstanding during the period. Prior to the adoption of ASU 2020-06 in conformity with ASC Topic 260, Earnings per Share, (“ASC Topic 260”) for all periods presented. In accordance with ASC Topic 260,2021, 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. period with net loss attributable to common stockholders’ being adjusted for the preferred stock deemed dividends related accretion of the beneficial conversion feature and other discount on this instrument for the periods in which the preferred stock is outstanding.
The following table sets forth the computation of basic and diluted net loss per share for the periods indicated:

 

 

Three months ended

 

 

 

September 30,
2017

 

September 30,
2016

 

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 Ended
March 31,
Basic and diluted net loss per common share20222021
Numerator:
Net loss$(6,929,685)$(6,063,517)
Denominator:
Weighted average common shares outstanding76,228,899 52,160,742 
Net loss per share of common stock—basic and diluted$(0.09)$(0.12)
The following outstanding securities at September 30, 2017March 31, 2022 and 20162021 have been excluded from the computation of basic and diluted weighted shares outstanding, as they would have been anti-dilutive:

 

 

Three months
ended
September 30,
2017

 

Three months
ended
September 30,
2016

 

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

 

Three Months Ended
March 31,
20222021
Common shares issuable upon conversion of Series A preferred stock3,184 3,184 
Common shares issuable upon conversion of Series C preferred stock16,599 16,654 
Stock options8,774,974 2,460,677 
Warrants – liability classified10,714 102,642 
Warrants – equity classified4,311,182 4,223,568 
Total13,116,653 6,806,725 
The liability and equity classified warrants disclosed above have been excluded from the computation of basic and diluted earnings per share because theirthe exercise price of the warrants exceeds the average market price of the Company’sour common stock duringfor the respective period.

period they were outstanding.

11. Commitments and Contingencies

License Agreement with Chimerix, Inc.

On December 17,

Contractual Obligations
In August 2014, 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 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.
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HEPION PHARMACEUTICALS, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Legal Proceedings
We are involved in legal proceedings of various types from time to time. Significant judgment is required to determine both the likelihood and the estimated amount of a loss related to such matters. Additionally, while any litigation contains an element of uncertainty, we have at this time no reason to believe that the outcome of such proceedings or claims will have a material adverse effect on our condensed consolidated financial condition or results of operations.
Leases
We account for leases in accordance with 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.
Operating leases where we are the lessee are included under the caption “Right of Use Assets” on our condensed consolidated balance sheets. The 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.

The Right-Of-Use (“ROU”) asset is initially measured at cost, which comprises the initial amount 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 shares werelease liability, plus initial direct costs, plus (minus) any prepaid (accrued) lease payments, less the same asunamortized balance of lease incentives received. Lease expense for lease payments is recognized on a straight-line basis over 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 $1.2 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. lease term.
As of March 31, 2022, the date of this report, no amounts had been accrued relatedROU assets were $0.2 million, the current lease liabilities were $0.2 million, and there were 0 non-current lease liabilities. The discount 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, $250,000

The 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 the

BMS 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 Transactions

One 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 $25,000

Rent expense for the three months ended September 30, 2017March 31, 2022 and 2016,2021 was $0.1 million and $0.1 million, respectively.

The Companyweighted average remaining term of our noncancelable operating leases is a party to a Consulting agreement dated June 1, 20160.92 years.

Future minimum rental payments under our noncancelable operating leases at March 31, 2022 is as follows:
Remainder of 2022$200,078 
202353,902 
2024— 
2025— 
2026 and thereafter— 
Total253,980 
Present value adjustment(6,640)
Lease liability at March 31, 2022$247,340 
Employment Agreements
We have employment agreements with 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 Event

On 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.


19

Table of shingles and corresponding numbers of patients with PHN. The decision to discontinue the Phase 3 study enables the Company to utilize available capital to further advance the HBV product candidates. There is no impact to the Company’s recorded assets as of September 30, 2017.

In November 2017, the Company received approval from the New Jersey Economic Development Authority’s (NJEDA) Technology Business Tax Certificate Transfer (NOL) program to sell a percentage of its unused New Jersey net operating losses (NOL’s) and R&D tax credits. As a result, the Company expects to receive approximately $1.6 million of net cash proceeds prior to the end of 2017.

Contents

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OFOPERATIONS

The following discussion should be read in conjunction with our condensed consolidated financial statements and other financial information appearing elsewhere in this quarterly report. In addition to historical information, the following discussion and other parts of this quarterly report contain forward-looking statements. You can identify these statements by forward-looking words such as “plan,” “may,” “will,” “expect,” “intend,” “anticipate,” believe,” “estimate” and “continue” or similar words. Forward-looking statements include information concerning possible or assumed future business success or financial results. 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. 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. Accordingly, we do not undertake any obligation to update any forward-looking statements for any reason, even if new information becomes available or other events occur in the future.

The forward-looking statements included herein are based on current expectations that involve a number of risks and uncertainties set forth under “Risk Factors” in our Annual Report on Form 10-K (“Form 10-K”) as of and for the year ended June 30, 2017December 31, 2021 filed with the United States Securities and Exchange Commission (“SEC”) on September 28, 2017.April 8, 2022. 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.

Business Overview

We are a biopharmaceutical company headquartered in Edison, New Jersey, focused primarily on the development of antiviral drugs with a primary emphasis on thedrug therapy for treatment of Hepatitis B virus (“HBV”) infections. We are developing two compounds to treat HBV infection, TXLchronic liver diseases. This therapeutic approach targets fibrosis, inflammation, and CRV431. TXL is a highly potent oral lipid prodrug of tenofovir. Prodrugs are designed to improve the characteristics of drugs, such as better efficacy, lower pill burden, improved safety, etc. Another prodrug of tenofovir, Viread®, is approvedshows potential for the treatment of HIVhepatocellular carcinoma (“HCC”) associated with non-alcoholic steatohepatitis (“NASH”), viral hepatitis, and HBV infections. CRV431other liver diseases. Our cyclophilin inhibitor, Rencofilstat (formerly CRV431), is being developed to offer benefits to address multiple complex pathologies relate to advanced liver disease. Rencofilstat is a pan cyclophilin inhibitor that targets multiple pathologic pathways involved in the progression of liver disease. Preclinical studies with Rencofilstat in NASH models demonstrated consistent reductions in liver fibrosis and additional reductions in inflammation and cancerous tumors in some studies. Rencofilstat 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 Rencofilstat in experimental models of acute lung injury, platelet activation, and SARS-CoV-2 replication.
NASH is a form of liver disease that is triggered by what has come to be known as the “Western diet”, characterized especially by high-fat, high-sugar, and processed foods. Among the effects of a prolonged Western diet is fat accumulation in liver cells (steatosis), which is described as non-alcoholic fatty liver disease ("NAFLD") and can predispose cells to injury. NAFLD may evolve into NASH when the fatty liver begins to progress through stages of cell injury, inflammation, fibrosis, and carcinogenesis. People who develop NASH often have additional predisposing conditions such as diabetes and hypertension, but the exact biochemical events that trigger and maintain the progression are not fully understood. Many people in the early stages of disease do not have significant clinical symptoms and therefore do not know that they have NASH. NASH becomes evident and a major concern when the liver becomes fibrotic and puts the individual at increased risk of developing cirrhosis and other complications. Individuals with advanced liver fibrosis have significantly higher risk of developing liver cancer, although cancer may also arise in some patients before significant hepatitis or fibrosis. NASH is increasing worldwide at an alarming rate due to the spread of the Western diet, obesity, and other related conditions. Approximately 4-5% of the global population is estimated to have NASH, including the USA. NASH is the leading reason for individuals requiring a liver transplant in the USA. Considering the serious outcomes linked to advancing NASH, the economic and social burdens of the disease are enormous. There are no simple blood tests to diagnose or track the progression of NASH, and no drugs are approved to specifically treat the disease.
HCC is a major type of liver cancer, accounting for approximately 85% - 90% of all cases. NASH, hepatitis viral infections, and alcohol consumption are all major causes of HCC. Globally, over 700,000 people die each year from liver cancer which is second only to lung cancer among all cancer-related deaths. The high mortality is due to the fact that only around half of all people who develop HCC (in developed countries) receive the diagnosis early enough to have an opportunity for therapeutic intervention. Additionally, recurrence rates are high, and current treatment options remain limited.
HCC is a type of cancer in which the tissue microenvironment plays a major role in its development. In most cases HCC is preceded by significant, long-term damage to liver cells, inflammation, and fibrosis. One-third of people with cirrhosis, a very advanced stage of liver disease, will eventually progress to HCC. The chronic injury to the liver leads to many genetic mutations that eventually lead to transformation of cells and formation of tumors. The noxious tissue microenvironment also promotes cancer by altering the function of immune cells and endothelial cells which form tumor-supporting blood vessels.
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These various events underscore the importance of halting liver injury and scarring as early and effectively as possible to prevent cancer development.
Artificial Intelligence (AI)
We have created a proprietary AI tool called, “AI-POWR to optimize the outcomes of our current clinical programs and to potentially identify novel indications for Rencofilstat and possibly identify new targets and new drug molecules to broaden our pipeline.
AI-POWR™ is our acronym for Artificial Intelligence - Precision Medicine; Omics that include genomics, proteomics, metabolomics, transcriptomics, and lipidomics; World database access; and Response and clinical outcomes. AI-POWR™ allows for the selection of novel drug targets, 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 need for large sample sizes through study design enrichment.
We intend to use AI-POWR™ to help identify which NASH patients will best respond to Rencofilstat. 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. The AI-POWRplatform is continually updated with in-house and published data to further refine the accuracy of the neural network.
We believe that NASH is a heterogenous disease and we need to have a better understanding of interactions among proteins, genes, lipids, metabolites, and other disease variables to help predict disease progression, regression, and responses to Rencofilstat. All of this is further complicated by variable drug concentrations, patient traits and temporal factors. AI-POWR™ is designed to address many of the typical challenges in drug development, as we believe we can use our proprietary platform to shorten development timelines and increase the delta between placebo and treatment groups. AI-POWR™ will be used to drive our Phase 2b Ascend-NASH program and identify additional potential indications for Rencofilstat to expand our footprint in the cyclophilin inhibition therapeutic space.
Impact of COVID-19
The COVID-19 outbreak in the United States has caused significant business disruption. The extent of the impact of COVID-19 on our future operational and financial performance will depend on certain developments, including the duration and spread of the outbreak, and impact on our clinical trials, employees and vendors, all of which are uncertain and cannot be predicted. At this point, the extent to which COVID-19 may impact our future financial condition or results of operations is uncertain. While there has not been a material impact on our consolidated financial statements for the three months ended March 31, 2022, a continued outbreak could have a material adverse impact on our financial results and business operations, including the timing and our ability to complete certain clinical trials and other efforts required to advance the development of our product candidate also designed forand raise additional capital.
Although we have data to suggest Rencofilstat may be beneficial in the treatment of HBV

infection. CRV431 is a novel drug candidate also designed forCOVID-19 and other viral infections (e.g., HBV), 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.

TXL

TXL 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. We intend to develop TXL for the treatment of chronic Hepatitis B Virus (HBV) infection and have completed a Phase 1b clinical trial in healthy volunteers, demonstrating a favorable safety, tolerability and drug distribution profile. We are currently testing TXL in a Phase 2a proof of concept study testing multiple doses of TXL versus Viread®.

We licensed TXL from Chimerix in exchange for an upfront payment of 120,000 sharesmain focus of our preferred stock, valued at $1.2 million at the time of the deal. During September 2016, Chimerix elected 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 because we do not see a large opportunity to grow the HIV market with new compounds, even though TXLcompany is 200 times more potent than tenofovir in vitro. We believe the Hepatitis B market is poised 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”) for HBV and have initiated our HBV clinical development program in the U.S.

CRV431

CRV431 is a novel drug candidate designed to target a class of proteins called cyclophilins, of which there are many types. Cyclophilins play a role in health and in the pathogenesis of certain diseases, and are known 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 role in the life cycle 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 interfere in the propagation of these viruses. CRV431 does not directly target the virus and, as such, should be less susceptible to drug resistance, borne from viral mutations.

Thus far, in vitro testing of CRV431 has been conducted in-house and in collaboration with external groups including for example, the Scripps Research Institute (“Scripps”). Data in various cell lines of either transfected or infected HBV demonstrates nanomolar efficacy (EC50 values) and micromolar toxicity (CC50 values). The selective index (SI), therefore, is wide and suggests that CRV431 presents a viable clinical drug candidate for the treatment of viral infections, including HBV. Additional testing in a transgenic mouse model of HBV indicated that CRV431 reduced HBV DNA in the liver. In a non-alcoholic steatohepatitis (NASH) mouse model, CRV431 demonstrated anti-fibrotic potential, thus addressing an important concern of the downstream effects of chronic HBV infection andcurrently on liver disease. Both animal models confirmed that CRV431 is orally active and appeared to be well tolerated.

We may, at some point, re-visit the antiviral indications should the opportunity arise (e.g., external funding/collaboration).

FINANCIAL OPERATIONS OVERVIEW

From inception through September 30, 2017,March 31, 2022, we have sustained an accumulated deficit of approximately $65.3. From inception through September 30, 2017,$140.4 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.

Our product development efforts are 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.

CRITICAL ACCOUNTING POLICIES

Financial Reporting Release No. 60 requires all companies to include a discussion of critical AND ESTIMATES

Our condensed consolidated financial statements are prepared in accordance with accounting policies 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
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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.
During the three months ended June 30, 2017, filed with the SEC on September 28, 2017. There have beenMarch 31, 2022, there were no significant changes to our critical accounting policies since June 30, 2017.

OFF-BALANCE SHEET ARRANGEMENTS

We had no off-balance sheet arrangementsand estimates as of September 30, 2017.

RECENT ACCOUNTING PRONOUNCEMENTS

In 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, 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 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 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 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 presenteddescribed in the financial statements with certain practical expedients available. The Company is currently evaluatingcontained in the impact thatAnnual Report on Form 10-K for the year ended December 31, 2021.

RECENT ACCOUNTING PRONOUNCEMENTS
Please refer to Note 4 of Notes to Condensed Consolidated Financial Statements, Recent Accounting Pronouncements, in this guidance will haveQuarterly Report 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 dateForm 10-Q.

RESULTS OF OPERATIONS
Comparison of the revenue recognition standard. Inthree months ended March April31, 2022 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 OPERATIONS

Comparison of Three Months Ended September 30, 2017 and 2016

 

 

Three months ended

 

 

 

 

 

September 30,
2017

 

September 30,
2016

 

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

 

2021:

Three Months Ended
March 31,
20222021Change
Revenues$— $— $— 
Costs and Expenses:
Research and development4,311,134 3,498,655 812,479 
General and administrative2,941,334 2,532,808 408,526 
Loss from operations(7,252,468)(6,031,463)(1,221,005)
Other income (expense):
Interest expense(2,209)(2,054)(155)
Change in fair value of contingent consideration324,992 (30,000)354,992 
Loss before income taxes(6,929,685)(6,063,517)(866,168)
Income tax benefit (expense)— — — 
Net loss$(6,929,685)$(6,063,517)$(866,168)
We had no revenues during the three months ended September 30, 2017 or 2016March 31, 2022 and 2021, 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.

Research and development expenses increased approximately $0.8 million from $3.1 million for the three months ended September 30, 2016March 31, 2022 and 2021 was $4.3 million and $3.5 million, respectively. The increase of $0.8 million was primarily due to $3.9an increase of $0.7 million in clinical trial costs, a $0.3 million increase in employee compensation costs related to an increase in headcount, a $0.2 million increase in stock-based compensation costs, offset by a $0.6 million decrease in consulting costs.
General and administrative expenses for the three months ended September 30, 2017. The increaseMarch 31, 2022 and 2021 was primarily comprised of $1.5$2.9 million of Chemicals, Manufacturing and Controls (“CMC”) activities and regulatory consulting, partially offset by an $0.8$2.5 million, decrease in costs associated with completed TXL clinical trials

General 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$0.4 million is primarily due to an increase of $0.4 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 professional and legal feesemployee compensation costs related to an increase in headcount that was offset by a decrease of $0.1$0.2 million of professional fees.

Liquidity and Capital Resources
Sources of Liquidity
We have funded our operations through March 31, 2022 primarily through the issuance of convertible preferred stock, compensation.

The increase in the change in fair valueissuance and sale 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 RESOURCES

The following table summarizes our cash flows for the three months ended September 30, 2017 and 2016:

 

 

Three months ended

 

 

 

September 30,
2017

 

September 30,
2016

 

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

)

As of September 30, 2017, we had $8.8 million in cash. Net cash used in operating activities was approximately $5.4 million for the three months ended September 30, 2017. As of September 30, 2017, we had a working capital of $6.1 million compared to negative working capital of $1.5 million as of September 30, 2016.

On March 9, 2015, we entered into a Controlled Equity Offering Sales Agreement (the “Agreement”), with Cantor Fitzgerald & Co., as sales agent (“Cantor”), pursuant to which we may offer and sell, from time to time, through Cantor shares of our common stock par value $0.0001 per share (the “Shares”), up to an aggregate offering pricein our IPO, and subsequent issuances of $50.0 million. 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, 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 directly 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,through at-the market offerings.

Future Funding Requirements
We have no products approved for commercial sale. To date, we received approval from the New Jersey Economic Development Authority’s (NJEDA) Technology Business Tax Certificate Transfer (NOL) program to sell a percentagehave devoted substantially all of our unused New Jersey net operating losses (NOL’s)resources to organizing and R&D tax credits.staffing our company, business planning, raising capital, undertaking preclinical studies and clinical trials of our product candidate. As a result, we expect to receive approximately $1.6 million of net cash proceeds prior to the end of 2017.

Operatingare not profitable and Capital Expenditure Requirements

have incurred losses in each period since our inception in 2013. As of September 30, 2017,March 31, 2022, we had an accumulated deficit of $65.3 million, and$140.4 million. We expect to continue to incur significant and increasing operating losses for the next several yearsforeseeable future. We anticipate that our expenses will increase substantially as we we:

pursue the clinical and preclinical development of our current product candidate;
leverage our technologies to advance product candidates into preclinical and clinical development;
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seek regulatory approvals for our product candidate that successfully complete clinical trials, if any;
attract, hire and retain additional clinical, quality control and scientific personnel;
establish our manufacturing capabilities through third parties and scale-up manufacturing to provide adequate supply for clinical trials and commercialization;
expand our operational, financial and management systems and increase personnel, including personnel to support our clinical development, manufacturing and commercialization efforts and our operations as a public company;
expand and protect our intellectual property portfolio;
establish a sales, marketing, medical affairs and distribution infrastructure to commercialize any products for which we may obtain marketing approval and intend to commercialize on our own or jointly;
acquire or in-license other product candidates and technologies; and
incur additional legal, accounting and other expenses in operating our business, including ongoing costs associated with operating as a public company.
Even if we succeed in commercializing our product candidate, we will continue to incur substantial research and development and other expenditures to potentially develop and market additional product candidates. We may encounter unforeseen expenses, difficulties, complications, delays and other unknown factors that may adversely affect our business. The size of our future net losses will depend, in part, on the rate of future growth of our expenses and our ability to generate revenue. Our prior losses and expected future losses have had and will continue to have an adverse effect on our stockholders’ equity and working capital.
We will require substantial additional financing and a failure to obtain this necessary capital could force us to delay, limit, reduce or terminate our product development programs, commercialization efforts or other operations.
Since our inception, we have invested a significant portion of our efforts and financial resources in research and development activities for our non-replicating and replicating technologies and our product candidates derived from these technologies. Preclinical studies and clinical trials of TXL and CRV431.additional research and development activities will require substantial funds to complete. We are unable to predict the extent of any future losses or when we will become profitable, if at all.

Our unaudited financial statements as of September 30, 2017 have been prepared under the assumptionbelieve that we will continue to expend substantial resources for the foreseeable future in connection with the development of our current product candidates and programs as a going concern within one yearwell as any future product candidates we may choose to pursue, as well as the gradual gaining of control over our required manufacturing capabilities and other corporate uses. These expenditures will include costs associated with conducting preclinical studies and clinical trials, obtaining regulatory approvals, and manufacturing and supply, as well as marketing and selling any products approved for sale. In addition, other unanticipated costs may arise. Because the issuanceoutcome of these consolidated financial statements, contemplatesany preclinical study or clinical trial is highly uncertain, we cannot reasonably estimate the realizationactual amounts necessary to successfully complete the development and commercialization of assetsour current or future product candidates.

Our future capital requirements depend on many factors, including:
the scope, progress, results and satisfactioncosts of liabilitiesresearching and developing our current and future product candidate and programs, and of conducting preclinical studies and clinical trials;
the number and development requirements of other product candidates that we may pursue, and other indications for our current product candidate that we may pursue;
the stability, scale and yields during the manufacturing process as we scale-up production and formulation of our product candidate for later stages of development and commercialization;
the timing of, and the costs involved in, the normal course of businessobtaining regulatory and do not include any adjustments to reflect the possible future effects on the recoverabilitymarketing approvals 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 indeveloping our ability to continue as a going concern from one year after the

establish sales and marketing capabilities, if any, for our financial statements have been issued without additional capital becoming available. Our ability to continue as a going concern is dependent upon current and future product candidates we develop if clinical trials are successful;

our ability to obtain additional equityestablish and maintain collaborations, strategic licensing or debt financing, attain further operating efficienciesother arrangements and ultimately, to generate revenue. Ourthe financial statements do not include any adjustmentsterms of such agreements;
the cost of commercialization activities for our current and future product candidates that might result fromwe may develop, whether alone or with a collaborator;
the costs involved in preparing, filing, prosecuting, maintaining, expanding, defending and enforcing patent claims, including litigation costs and the outcome of such litigation;
the timing, receipt and amount of sales of, or royalties on, our future products, if any; and
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A change in the outcome of any of these or other variables with respect to the development of any of our current and future product candidates could significantly change the costs and timing associated with the development of that product candidate. Furthermore, our operating plans may change in the future, and we will need additional funds to meet operational needs and capital requirements associated with such operating plans.
We believe we have enough cash on hand to fund our operations for the next twelve months after the date of this uncertainty.

Quarterly Report on Form 10-Q for the three months ended March 31, 2022. We will be required to raise additional capital within the next year to continue the development and commercialization of our current product candidatescandidate 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.

Cash Flows
The following table summarizes our cash flows for the following periods:
Three Months Ended
March 31,
20222021
Net cash provided by (used in):
Operating activities$(10,129,310)$(7,349,248)
Investing activities— (82,105)
Financing activities(2,000,000)82,153,600 
Effect of exchange rates3,169 — 
Net (decrease) increase in cash$(12,126,141)$74,722,247 
As of March 31, 2022, we had working capital of $83.5 million compared to working capital of $89.2 million as of December 31, 2021. The decrease of $5.7 million in working capital is primarily related to our cash spend for the three months ended March 31, 2022.
Operating Activities:
As of March 31, 2022, we had $79.2 million in cash. Net cash used in operating activities was $10.1 million for the three months ended March 31, 2022 consisting primarily of our net loss of $6.9 million. Changes in non-cash operating activities was $1.2 million, primarily for stock-based compensation and the change in fair value of the contingent consideration. Changes in working capital accounts had a negative impact of $4.4 million on cash primarily for an increase in prepaid expenses.
Net cash used in operating activities was $7.3 million for the three months ended March 31, 2021 consisting primarily of our 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.
Investing Activities:
There was no cash used in investing activities during the three months ended March 31, 2022.
Net cash used in investing activities for the three months ended March 31, 2021 was $0.1 million related to equipment purchases for research and development.
Financing Activities:
Net cash used in financing activities was $2.0 million for the three months ended March 31, 2022 for the contingent consideration milestone payment per the Ciclofilin acquisition merger agreement.
Net cash provided by financing activities was $82.2 million for the three months ended March 31, 2021 due primarily to the issuance of common stock, net of issuance costs.
OFF-BALANCE SHEET ARRANGEMENTS
We had no off-balance sheet arrangements as of March 31, 2022.
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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable.

ITEM 4. CONTROLS AND PROCEDURES

Our chief

Evaluation of Disclosure Controls and Procedures
We have performed an evaluation under the supervision and with the participation of our management, including our principal executive officer (CEO) and chiefprincipal financial officer evaluated(CFO), of the effectiveness of our disclosure controls and procedures, as of September 30, 2017. The term “disclosure controls and procedures,” as defined in RulesRule 13a-15(e) and 15d-15(e) under the Securities Exchange Act meansof 1934, as amended (the “Exchange Act”). Based on that evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and other procedures were effective as of a company that are designedMarch 31, 2022 to ensureprovide reasonable assurance that information required to be disclosed by a companyus in the reports that it filesfiled or submitssubmitted by us 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
Our disclosure controls and procedures are designed to provide reasonable assurance of achieving their objectives as specified above. Management does not expect, however, that our disclosure controls and procedures will prevent or detect all errors and fraud. Any control system, no matter how well designed and operated, is based upon certain assumptions and can provide only reasonable, not absolute, assurance that its objectives will be met. Further, no evaluation of achieving their objectivescontrols can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and management necessarily applies its judgment in evaluating the cost-benefit relationshipinstances 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 afraud, if any, within our 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, as of September 30, 2017, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures are 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.

been detected.

Changes in Internal Control over Financial Reporting

As required by Rule 13a-15(d) of the Exchange Act,

There was no change in our management, including our principal executive officer and our principal financial officer, conducted an evaluation of the internal control over financial reporting to determine whether any changes occurred during the quarter ended September 30, 2017three months March 31, 2022 that have materially affected, or areis reasonably likely to materially affect, our internal control over financial reporting. Based on that evaluation, our principal executive officer and principal financial officer concluded there were no such changes during the quarter ended September 30, 2017.

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PART II. OTHER INFORMATION

ITEM 1A. RISK FACTORS
There have been no material changes from the risk factors disclosed in our Form 10-K for the year ended December 31, 2021.

ITEM 6. EXHIBITS

31.1

101.INS

XBRL Instance Document

Document-the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL 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

104Cover Page Interactive Data File (formatted as Inline XBRL in Exhibit 101)

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

CONTRAVIR PHARMACEUTICALS, INC.

(Registrant)

HEPION PHARMACEUTICALS, INC. (Registrant)

Date: November 14, 2017

05/16/2022

By:

/s/ JAMES SAPIRSTEIN

ROBERT FOSTER

James Sapirstein

Robert Foster

President and Chief Executive Officer

(Principal Executive Officer)

Date: November 14, 2017

05/16/2022

By:

/s/ JOHN CAVAN

John Cavan

Chief Financial Officer

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