PART I—FINANCIAL INFORMATION [Item 1. Condensed Consolidated Financial Statements (unaudited)](index=5&type=section&id=Item%201.%20Condensed%20Consolidated%20Financial%20Statements%20(unaudited)) This section presents the unaudited condensed consolidated financial statements and accompanying notes for the period [Condensed Consolidated Balance Sheets](index=5&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Condensed Consolidated Balance Sheets Summary | Metric ($ in millions) | March 31, 2021 | December 31, 2020 | | :--- | :--- | :--- | | Cash | $115.4 | $40.7 | | Total Current Assets | $117.7 | $42.6 | | Total Assets | $123.8 | $48.6 | | Total Current Liabilities | $2.9 | $4.7 | | Total Liabilities | $6.2 | $8.1 | | Total Stockholders' Equity | $117.6 | $40.5 | [Condensed Consolidated Statements of Operations and Comprehensive Loss](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Loss) Condensed Consolidated Statements of Operations and Comprehensive Loss | Metric ($ in millions, except per share data) | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | | :--- | :--- | :--- | | Revenues | $— | $— | | Research and development | $3.5 | $2.6 | | General and administrative | $2.5 | $1.5 | | Total operating expenses | $6.0 | $4.2 | | Loss from operations | $(6.0) | $(4.2) | | Net loss and comprehensive loss | $(6.1) | $(4.2) | | Net loss per common share (Basic and diluted) | $(0.12) | $(0.97) | [Condensed Consolidated Statements of Changes in Stockholders' Equity](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Changes%20in%20Stockholders'%20Equity) Condensed Consolidated Statements of Changes in Stockholders' Equity (Three Months Ended March 31, 2021) | Item ($ in millions) | Amount | | :--- | :--- | | Balance at December 31, 2020 | $40.5 | | Net loss | $(6.1) | | Stock-based compensation expense | $1.0 | | Issuance of common stock, net | $82.2 | | Balance at March 31, 2021 | $117.6 | Condensed Consolidated Statements of Changes in Stockholders' Equity (Three Months Ended March 31, 2020) | Item ($ in millions) | Amount | | :--- | :--- | | Balance at December 31, 2019 | $15.6 | | Net loss | $(4.2) | | Stock-based compensation expense | $0.01 | | Issuance of common stock, net | $6.8 | | Balance at March 31, 2020 | $18.2 | [Condensed Consolidated Statements of Cash Flows](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Condensed Consolidated Statements of Cash Flows | Activity ($ in millions) | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | | :--- | :--- | :--- | | Net cash used in operating activities | $(7.3) | $(4.7) | | Net cash (used in) provided by investing activities | $(0.1) | $0.0 | | Net cash provided by financing activities | $82.2 | $6.8 | | Net increase (decrease) in cash | $74.7 | $2.1 | | Cash at end of period | $115.4 | $16.0 | [Notes to Condensed Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) The notes detail the company's business, accounting policies, financial instruments, equity, and commitments [Note 1. Business Overview](index=10&type=section&id=Note%201.%20Business%20Overview) The company develops drug therapies for chronic liver diseases, with its lead molecule, CRV431, in clinical trials - Hepion Pharmaceuticals is a biopharmaceutical company focused on drug therapy for chronic liver diseases, with its lead molecule being **CRV431**, a cyclophilin inhibitor[27](index=27&type=chunk)[28](index=28&type=chunk) - Preclinical studies with CRV431 in NASH models demonstrated **consistent reductions in liver fibrosis**, inflammation, and cancerous tumors[27](index=27&type=chunk)[28](index=28&type=chunk) - The company completed **Phase 1 clinical activities for CRV431 in HBV** and **multiple ascending dose ("MAD") clinical trials for NASH**[29](index=29&type=chunk)[31](index=31&type=chunk)[32](index=32&type=chunk) - Future milestone payments related to the Ciclofilin acquisition could total up to **$16 million plus shares**, contingent on clinical trial progress[30](index=30&type=chunk) [Note 2. Basis of Presentation](index=11&type=section&id=Note%202.%20Basis%20of%20Presentation) The company faces liquidity challenges from ongoing losses but has sufficient cash for over one year of operations - The unaudited condensed consolidated financial statements are prepared following SEC requirements and U.S. GAAP[34](index=34&type=chunk)[35](index=35&type=chunk) - The company has not generated revenue and incurred substantial losses, with an **accumulated deficit of $110.2 million** as of March 31, 2021[36](index=36&type=chunk) - Management anticipates current cash is sufficient to fund operations for **more than one year**, but additional capital will be required in the future[36](index=36&type=chunk)[37](index=37&type=chunk) [Liquidity](index=11&type=section&id=Liquidity) The company holds significant cash and working capital but faces an accumulated deficit and ongoing losses, necessitating future capital raises Liquidity Snapshot (March 31, 2021) | Metric | Amount | | :--- | :--- | | Cash | $115.4 million | | Accumulated Deficit | $110.2 million | | Working Capital | $114.9 million | | Net Loss (3 months ended Mar 31, 2021) | $6.1 million | | Cash Used in Operating Activities (3 months ended Mar 31, 2021) | $7.3 million | - The company has historically funded operations through issuances of convertible debt, common stock, and preferred stock[36](index=36&type=chunk) - Raising additional funds through equity may lead to **significant stockholder dilution**, while debt financing could involve restrictive covenants[37](index=37&type=chunk) [COVID-19 Pandemic](index=11&type=section&id=COVID-19%20Pandemic) The COVID-19 pandemic's impact remains uncertain, potentially delaying clinical trials and increasing costs - The full impact of the COVID-19 outbreak remains uncertain, with potential for **delays in clinical testing, regulatory reviews, and patient enrollment**[39](index=39&type=chunk)[40](index=40&type=chunk)[42](index=42&type=chunk)[43](index=43&type=chunk) - Any delays in completing clinical trials will **increase costs, slow product development, and delay revenue generation**[42](index=42&type=chunk) - The company received a **$176,585 PPP loan** in April 2020, which it plans to repay in 2021[44](index=44&type=chunk)[45](index=45&type=chunk) [Note 3. Summary of Significant Accounting Policies](index=12&type=section&id=Note%203.%20Summary%20of%20Significant%20Accounting%20Policies) The company's financial statements rely on U.S. GAAP and management estimates, with no significant policy changes - The preparation of financial statements requires management to make estimates and assumptions, with **no significant changes to accounting policies** since December 31, 2020[46](index=46&type=chunk)[47](index=47&type=chunk) - Cash balances were **$115.4 million** as of March 31, 2021, and **$40.7 million** as of December 31, 2020[48](index=48&type=chunk) - Derivative financial instruments and contingent consideration are measured at fair value using **Level 3 inputs** (Black-Scholes option pricing model)[52](index=52&type=chunk)[53](index=53&type=chunk)[54](index=54&type=chunk)[55](index=55&type=chunk)[56](index=56&type=chunk) - Goodwill and acquired In-Process Research & Development (IPR&D) are tested annually for impairment, with **no impairment recorded** for the three months ended March 31, 2021[60](index=60&type=chunk)[63](index=63&type=chunk)[66](index=66&type=chunk) - Research and development costs are **expensed as incurred**, with prepaid R&D costs of **$1.9 million** as of March 31, 2021[73](index=73&type=chunk)[74](index=74&type=chunk)[75](index=75&type=chunk) - Share-based compensation expense is measured using the Black-Scholes model, with an unrecognized cost of **$5.2 million** as of March 31, 2021[76](index=76&type=chunk)[77](index=77&type=chunk)[117](index=117&type=chunk) [Note 4. Recent Accounting Pronouncements](index=17&type=section&id=Note%204.%20Recent%20Accounting%20Pronouncements) The company adopted ASU No. 2020-06 on January 1, 2021, with an immaterial impact on its financial statements - The company adopted ASU No. 2020-06, which simplifies the accounting for certain financial instruments, on January 1, 2021[84](index=84&type=chunk) - The impact of this adoption on the condensed consolidated financial statements was **immaterial**[84](index=84&type=chunk) [Note 5. Stockholders' Equity and Derivative Liability — Warrants](index=17&type=section&id=Note%205.%20Stockholders'%20Equity%20and%20Derivative%20Liability%20%E2%80%94%20Warrants) This note details changes in stockholders' equity and the accounting for derivative liabilities related to warrants - As of March 31, 2021, there were **85,581 shares of Series A Convertible Preferred Stock** and **1,807 shares of Series C Convertible Preferred Stock** outstanding[85](index=85&type=chunk)[87](index=87&type=chunk) - Certain warrants are classified as derivative liabilities and their fair value is determined using the **Black-Scholes option pricing model** with Level 3 inputs[90](index=90&type=chunk)[94](index=94&type=chunk)[96](index=96&type=chunk)[97](index=97&type=chunk) - A public offering in February 2021 resulted in net proceeds of approximately **$82.1 million** to fund research and development[102](index=102&type=chunk) Components of Changes in Derivative Financial Instruments Liability (Three Months Ended March 31, 2021) | Description | Amount ($) | | :--- | :--- | | Balance at December 31, 2020 | $11,673 | | Change in fair value of warrants | $(6,211) | | Balance at March 31, 2021 | $5,462 | [Note 6. Fair Value Measurements](index=20&type=section&id=Note%206.%20Fair%20Value%20Measurements) Contingent consideration and derivative liabilities are measured at fair value on a recurring basis using Level 3 inputs - Contingent consideration from the Ciclofilin acquisition is estimated based on a **probability-weighted discounted cash flow model**[105](index=105&type=chunk)[106](index=106&type=chunk) - The contingent consideration balance increased by $30,000 to **$2,600,000** for the three months ended March 31, 2021, and is classified as a non-current liability[108](index=108&type=chunk)[106](index=106&type=chunk) Fair Value Measurement at March 31, 2021 | Description | Fair Value ($) | Level 3 ($) | | :--- | :--- | :--- | | Contingent consideration | $2,600,000 | $2,600,000 | | Derivative liabilities related to warrants | $5,462 | $5,462 | Fair Value Measurement at December 31, 2020 | Description | Fair Value ($) | Level 3 ($) | | :--- | :--- | :--- | | Contingent consideration | $2,570,000 | $2,570,000 | | Derivative liabilities related to warrants | $11,673 | $11,673 | [Note 7. Indefinite-lived Intangible Assets and Goodwill](index=21&type=section&id=Note%207.%20Indefinite-lived%20Intangible%20Assets%20and%20Goodwill) IPR&D and Goodwill balances remained unchanged, with no impairment losses recorded during the period - **No impairment losses** were recorded on IPR&D or goodwill during the three months ended March 31, 2021, and 2020[109](index=109&type=chunk)[110](index=110&type=chunk) Indefinite-lived Intangible Asset (IPR&D) Balance | Description | Amount ($) | | :--- | :--- | | CRV431 balance at December 31, 2020 | $3,190,000 | | Change during the three months ended March 31, 2021 | — | | CRV431 balance at March 31, 2021 | $3,190,000 | Goodwill Balance | Description | Amount ($) | | :--- | :--- | | Goodwill balance at December 31, 2020 | $1,870,924 | | Change during the three months ended March 31, 2021 | — | | Goodwill balance at March 31, 2021 | $1,870,924 | [Note 8. Accrued Liabilities](index=22&type=section&id=Note%208.%20Accrued%20Liabilities) Total accrued expenses increased, driven primarily by higher payroll and related costs and legal fees Accrued Expenses | Category ($) | March 31, 2021 | December 31, 2020 | | :--- | :--- | :--- | | Payroll and related costs | $306,487 | $150,702 | | Research and development | $420,817 | $438,856 | | Legal fees | $52,875 | $— | | Accrued taxes | $— | $37,160 | | Professional fees | $15,900 | $— | | Other | $21,201 | $32,854 | | **Total accrued expenses** | **$817,280** | **$659,572** | [Note 9. Accounting for Share-Based Payments](index=22&type=section&id=Note%209.%20Accounting%20for%20Share-Based%20Payments) Stock-based compensation expense increased significantly, with $5.2 million in unrecognized costs remaining - As of March 31, 2021, the company had **35,229 shares available for grant** under its 2013 Equity Incentive Plan[113](index=113&type=chunk) - As of March 31, 2021, the unrecognized compensation cost related to non-vested stock options was **$5.2 million**, to be recognized over approximately 2.0 years[117](index=117&type=chunk) - The fair value of stock option grants is estimated using the **Black-Scholes option-pricing model**[118](index=118&type=chunk)[119](index=119&type=chunk)[120](index=120&type=chunk) Stock-Based Compensation Expense | Category ($) | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | | :--- | :--- | :--- | | General and administrative | $711,591 | $5,910 | | Research and development | $246,280 | $2,336 | | **Total stock-based compensation expense** | **$957,871** | **$8,246** | [Note 10. Loss per Share](index=23&type=section&id=Note%2010.%20Loss%20per%20Share) Basic and diluted net loss per common share was $(0.12), with several outstanding securities excluded as anti-dilutive - Outstanding securities, including preferred stock, stock options, and warrants, totaling **6,806,725 shares**, were excluded from diluted EPS computation as they were anti-dilutive[125](index=125&type=chunk) Net Loss Per Common Share | Metric | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | | :--- | :--- | :--- | | Net loss attributable to common stockholders ($) | $(6,062,593) | $(4,226,617) | | Weighted average common shares outstanding | 52,160,742 | 4,345,699 | | **Net loss per share of common stock—basic and diluted** | **$(0.12)** | **$(0.97)** | [Note 11. Commitments and Contingencies](index=24&type=section&id=Note%2011.%20Commitments%20and%20Contingencies) The company has various contractual obligations, including leases with future minimum payments totaling $541,436 - The company has noncancelable operating leases for office and lab space with a weighted average remaining term of **1.89 years**[126](index=126&type=chunk)[133](index=133&type=chunk) - The company is involved in legal proceedings but does not believe the outcome will have a **material adverse effect** on its financial condition[127](index=127&type=chunk) - Employment agreements require specific payments upon events such as a **change in control or termination without cause**[134](index=134&type=chunk) Future Minimum Rental Payments Under Noncancelable Operating Leases (as of March 31, 2021) | Period | Amount ($) | | :--- | :--- | | Remainder of 2021 | $215,649 | | 2022 | $271,885 | | 2023 | $53,902 | | **Total** | **$541,436** | [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=26&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the company's financial condition, operational results, and strategic focus on developing CRV431 [Business Overview](index=26&type=section&id=Business%20Overview) Hepion Pharmaceuticals develops CRV431 for chronic liver diseases like NASH, a growing global health issue - Hepion Pharmaceuticals is a biopharmaceutical company focused on developing its cyclophilin inhibitor, **CRV431**, for chronic liver diseases[138](index=138&type=chunk) - Preclinical studies with CRV431 demonstrated **reductions in liver fibrosis, inflammation, and cancerous tumors**[138](index=138&type=chunk) - NASH is a rapidly increasing global liver disease, estimated to affect **4–5% of the global population**, with no approved specific treatments[139](index=139&type=chunk) [Artificial Intelligence (AI)](index=26&type=section&id=Artificial%20Intelligence%20(AI)) The company uses its proprietary AI-POWR™ platform to optimize clinical programs and identify new drug targets - The company created a proprietary AI tool called **"AI-POWR™"** to optimize clinical programs and identify novel indications for CRV431[140](index=140&type=chunk)[141](index=141&type=chunk) - AI-POWR™ utilizes a multi-omics approach with machine learning to **improve patient selection, biomarker selection, and drug target selection**[141](index=141&type=chunk) - The platform is intended to **mitigate risks, save time, and reduce costs** in drug development[142](index=142&type=chunk)[143](index=143&type=chunk) [Impact of COVID-19](index=27&type=section&id=Impact%20of%20COVID-19) The COVID-19 pandemic's full impact remains uncertain, posing risks of delays to clinical trials and operations - The full impact of the COVID-19 outbreak remains uncertain, with potential for **delays in clinical testing, regulatory reviews, and patient enrollment**[145](index=145&type=chunk)[146](index=146&type=chunk)[147](index=147&type=chunk) - The company received a **$176,585 PPP loan** in April 2020, which is planned for repayment in 2021[148](index=148&type=chunk)[149](index=149&type=chunk) [FINANCIAL OPERATIONS OVERVIEW](index=28&type=section&id=FINANCIAL%20OPERATIONS%20OVERVIEW) The company has an accumulated deficit of $110.2 million and recently raised $82.1 million to fund R&D - From inception through March 31, 2021, the company had an **accumulated deficit of $110.2 million** and has not generated any revenue[150](index=150&type=chunk) - A public offering in February 2021 resulted in net proceeds of approximately **$82.1 million** to fund research and development[151](index=151&type=chunk) - Product development efforts are in early stages with **high completion risk** due to clinical, regulatory, and financial uncertainties[152](index=152&type=chunk) [CRITICAL ACCOUNTING POLICIES AND ESTIMATES](index=28&type=section&id=CRITICAL%20ACCOUNTING%20POLICIES%20AND%20ESTIMATES) There were no significant changes to critical accounting policies and estimates during the first quarter of 2021 - The condensed consolidated financial statements are prepared in accordance with U.S. GAAP, requiring management to make estimates and assumptions[153](index=153&type=chunk) - There were **no significant changes** to critical accounting policies and estimates during the three months ended March 31, 2021[154](index=154&type=chunk) [OFF-BALANCE SHEET ARRANGEMENTS](index=28&type=section&id=OFF-BALANCE%20SHEET%20ARRANGEMENTS) As of March 31, 2021, the company had no off-balance sheet arrangements - The company had **no off-balance sheet arrangements** as of March 31, 2021[155](index=155&type=chunk) [RECENT ACCOUNTING PRONOUNCEMENTS](index=28&type=section&id=RECENT%20ACCOUNTING%20PRONOUNCEMENTS) Information on recent accounting pronouncements is available in Note 4 of the financial statements - Refer to **Note 4** of Notes to Condensed Consolidated Financial Statements for information on recent accounting pronouncements[156](index=156&type=chunk) [JOBS Act](index=28&type=section&id=JOBS%20Act) The company's emerging growth company status ended, but it now qualifies as a smaller reporting company - The company's status as an emerging growth company **ended on December 31, 2020**[157](index=157&type=chunk) - The company expects to qualify as a **"smaller reporting company,"** retaining certain disclosure exemptions[157](index=157&type=chunk)[158](index=158&type=chunk) [RESULTS OF OPERATIONS](index=29&type=section&id=RESULTS%20OF%20OPERATIONS) The company reported no revenues and an increased net loss of $6.1 million, driven by higher R&D and G&A expenses - Research and development expenses increased by **$0.9 million**, primarily due to drug supply and employee compensation costs[161](index=161&type=chunk) - General and administrative expenses increased by **$1.0 million**, mainly due to higher stock-based compensation and insurance costs[162](index=162&type=chunk) Results of Operations (Three Months Ended March 31) | Metric ($ in millions) | 2021 | 2020 | Change | | :--- | :--- | :--- | :--- | | Revenues | $— | $— | $— | | Research and development | $3.5 | $2.6 | +$0.9 | | General and administrative | $2.5 | $1.5 | +$1.0 | | Loss from operations | $(6.0) | $(4.2) | $(1.8) | | Net loss | $(6.1) | $(4.2) | $(1.9) | [Liquidity and Capital Resources](index=29&type=section&id=Liquidity%20and%20Capital%20Resources) Working capital increased significantly to $114.9 million due to an $82.1 million public offering - Net cash provided by financing activities was **$82.2 million** for the quarter, primarily from the issuance of common stock[167](index=167&type=chunk) - The company expects to incur significant operating losses and will require **additional capital in the future**, although current cash is sufficient for over one year[169](index=169&type=chunk)[170](index=170&type=chunk) - Raising additional funds may lead to **significant stockholder dilution** or restrictive debt covenants[170](index=170&type=chunk) Working Capital | Metric ($ in millions) | March 31, 2021 | March 31, 2020 | Change | | :--- | :--- | :--- | :--- | | Working Capital | $114.9 | $38.0 | +$76.9 | Cash Flows Summary (Three Months Ended March 31) | Activity ($ in millions) | 2021 | 2020 | | :--- | :--- | :--- | | Operating activities | $(7.3) | $(4.7) | | Investing activities | $(0.1) | $0.0 | | Financing activities | $82.2 | $6.8 | | Net increase (decrease) in cash | $74.7 | $2.1 | [Common Stock Offerings during 2021](index=30&type=section&id=Common%20Stock%20Offerings%20during%202021) A February 2021 public offering generated approximately $82.1 million in net proceeds for R&D and general purposes - On February 16, 2021, the company completed an underwritten public offering of **44,200,000 shares** of common stock at $2.00 per share, raising **$82.1 million** in net proceeds[168](index=168&type=chunk) - The net proceeds are intended to fund **research and development activities** and general corporate purposes[168](index=168&type=chunk) [Contractual Obligations and Commitments](index=30&type=section&id=Contractual%20Obligations%20and%20Commitments) A detailed description of contractual obligations is available in Note 11 of the financial statements - Refer to **Note 11** of Notes to Condensed Consolidated Financial Statements for a description of the company's contractual obligations and commitments[171](index=171&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=30&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section is not applicable as the company has no material market risk disclosures for the reporting period - The company states that quantitative and qualitative disclosures about market risk are **not applicable**[172](index=172&type=chunk) [Item 4. Controls and Procedures](index=30&type=section&id=Item%204.%20Controls%20and%20Procedures) Disclosure controls were not effective due to material weaknesses, and the company is actively pursuing remediation - As of September 30, 2020, the company's disclosure controls and procedures were **not effective** due to material weaknesses in internal control over financial reporting[173](index=173&type=chunk) - There have been **no material changes** in internal controls over financial reporting during the three months ended March 31, 2021[174](index=174&type=chunk) - Remediation efforts include **hiring experienced accounting personnel**, implementing software solutions, and utilizing external consultants[175](index=175&type=chunk)[177](index=177&type=chunk) PART II—OTHER INFORMATION [Item 1A. Risk Factors](index=32&type=section&id=Item%201A.%20Risk%20Factors) There have been no material changes to the risk factors previously disclosed in the company's annual report - There have been **no material changes** from the risk factors disclosed in the company's Form 10-K for the year ended December 31, 2020[180](index=180&type=chunk) [Item 6. Exhibits](index=32&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including CEO and CFO certifications and XBRL documents - Exhibits include **certifications of the CEO and CFO** and various XBRL taxonomy documents[185](index=185&type=chunk) SIGNATURES [Signatures](index=32&type=section&id=Signatures) The report was duly signed by the CEO and CFO on behalf of Hepion Pharmaceuticals, Inc. on May 14, 2021 - The report was signed by **Robert Foster, Chief Executive Officer**, and **John Cavan, Chief Financial Officer**, on May 14, 2021[185](index=185&type=chunk)

Company Highlights - Hepion Pharmaceuticals has a clinical phase 2a NASH program underway[7] - The company utilizes an Artificial Intelligence and Smart Algorithms Platform (AIPOWR ™) to identify and optimize responder outcomes[7] - As of June 30, 2020, the company had $17.6 million in cash[7] - As of June 30, 2020, the company had 9.0 million shares outstanding and 13.1 million fully diluted shares[7] - The company has robust IP protection in major markets with exclusivity until 2039, potentially extending to 2044[7] Pipeline Development - CRV431 is being developed for NASH, with a projected NDA filing in 2025[19] - Preclinical studies identified CRV431 as a lead molecule after screening approximately 200 molecules[19] - Preclinical efficacy models for CRV431 included 5 in vivo, 5 in vitro fibroblast, and 2 human explants (liver and lung) studies[19] - Phase 1 trials for CRV431 have been completed, showing drug exposure in the range where efficacy was demonstrated in preclinical models[19, 28] AI-POWR™ Platform - The AI-POWR™ platform analyzes multi-omic data to improve drug development efficiency and reduce costs[10, 11] - Novartis reported a 10-15% reduction in patient enrolment times in pilot trials using AI to predict and monitor trial costs[16] - AI-POWR™ identified key NASH-related genes altered by CRV431, such as TM6SF2 (+4.2 fold change, p=0.0007) and ApoB (+10.9 fold change, p=0.0001)[30]

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number 001-36856 HEPION PHARMACEUTICALS, INC. (Exact name of registrant as specified in its charter) Delaware (State or other jurisdiction of incorporation or organization) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 19 ...

1 Nasdaq: HEPA theplon PHARMACEUTICALS CORPORATE PRESENTATION • 2019 Nasdaq: HEPA Forward-Looking Statements This presentation 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 co ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarterly Period Ended: June 30, 2019 o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number: 001-36856 HEPION PHARMACEUTICALS, INC. (Exact name of registrant as specified in its charter) Incorporation or Organization) Delaware ...

Cautionary Note Regarding Forward-Looking Statements [Forward-Looking Statements](index=4&type=section&id=Forward-Looking%20Statements) This section highlights that the Annual Report contains forward-looking statements subject to substantial risks and uncertainties, which are not guarantees of performance and actual results may differ materially - The report contains forward-looking statements that are **not guarantees of performance** and involve **substantial risks and uncertainties**[9](index=9&type=chunk) - Key risk factors include market conditions, capital position, competition, uncertainty of product development, regulatory approvals, intellectual property, financing, cost control, key employee retention, strategic collaborations, government regulation changes, litigation, market acceptance, and third-party reimbursement policies[10](index=10&type=chunk) PART I [ITEM 1. BUSINESS](index=5&type=section&id=ITEM%201.%20BUSINESS) ContraVir Pharmaceuticals focuses on developing pleiotropic drug therapies for chronic liver diseases, prioritizing CRV431 in Phase 1 over TXL - ContraVir Pharmaceuticals, Inc. is a **biopharmaceutical company** focused on developing **pleiotropic drug therapy for chronic liver disease**, including NASH, viral hepatitis, and HCC[13](index=13&type=chunk) - **CRV431**, a cyclophilin inhibitor, is the **lead molecule**, targeting multiple biochemical pathways involved in liver disease progression, with **preclinical studies** showing reductions in liver inflammation, fibrosis, and cancerous tumors, and **antiviral activity** against HBV, HCV, and HDV[13](index=13&type=chunk)[19](index=19&type=chunk)[20](index=20&type=chunk) - **TXL**, a nucleotide pro-drug of tenofovir, is more clinically advanced (**Phase 2 completed**) for inhibiting HBV viral replication, but the company plans to **out-license, partner, or divest it** to focus resources on CRV431[21](index=21&type=chunk)[35](index=35&type=chunk) - The company completed a **Phase 1 study** for CRV431, demonstrating safety, tolerability, and pharmacokinetics, and received FDA approval for its IND in **June 2018**[20](index=20&type=chunk)[26](index=26&type=chunk) - TXL has completed **Phase 1 and Phase 2 clinical trials**, demonstrating efficacy and a **favorable safety profile** with lower systemic tenofovir levels compared to TDF, reducing the risk of bone and kidney-related toxicities[27](index=27&type=chunk)[29](index=29&type=chunk)[30](index=30&type=chunk) - The FDA granted **Orphan Drug Designation** to TXL for chronic hepatitis B infection in pediatric patients (up to 11 years of age) on **February 22, 2018**[33](index=33&type=chunk) [Transition Period](index=5&type=section&id=Transition%20Period) The company's fiscal year end changed from June 30 to December 31, effective December 31, 2017 - The Company's Board of Directors approved a change in its fiscal year end from **June 30 to December 31**, effective **December 31, 2017**[12](index=12&type=chunk) [Overview](index=5&type=section&id=Overview) ContraVir is a biopharmaceutical company developing pleiotropic drug therapies for chronic liver diseases like NASH, viral hepatitis, and HCC - ContraVir is a **biopharmaceutical company** focused on developing **pleiotropic drug therapy for chronic liver disease**, including NASH, viral hepatitis, and HCC[13](index=13&type=chunk) - NASH is a rapidly increasing liver disease, predicted to be the **leading reason for liver transplants** in the USA **by 2020**, with **no approved drugs** specifically for its treatment[14](index=14&type=chunk) - HCC is the **major type of liver cancer**, with **high mortality rates**, often preceded by significant liver damage, inflammation, and fibrosis[15](index=15&type=chunk)[16](index=16&type=chunk) - Chronic HBV, HCV, and HDV infections are major triggers of progressive liver disease, with chronic HBV affecting an estimated **240 million** people worldwide and being the **leading cause of HCC**[17](index=17&type=chunk)[18](index=18&type=chunk) - **CRV431** is a cyclophilin inhibitor in **Phase 1**, showing **reductions in HBV DNA, HBsAg, HBeAg**, inhibition of virus uptake, and stimulation of innate immunity, as well as **reducing fibrosis and liver tumor burden** in NASH models[19](index=19&type=chunk)[20](index=20&type=chunk) - **TXL** is a nucleotide pro-drug of tenofovir, more clinically advanced (**Phase 2 completed**), that inhibits HBV replication and targets the liver, but the company plans to **out-license or divest it** to focus on CRV431[21](index=21&type=chunk) [CRV431](index=7&type=section&id=CRV431) CRV431, a novel cyclophilin inhibitor, targets multiple liver disease pathways, demonstrated nanomolar efficacy against HBV in vitro, and completed a positive Phase 1 clinical trial in October 2018 - **CRV431** is a **novel cyclophilin inhibitor** targeting **multiple isoforms** involved in liver disease and viral hepatitis, including cell death, inflammation, fibrosis, cirrhosis, and cancer[22](index=22&type=chunk)[23](index=23&type=chunk) - In vitro testing showed **nanomolar efficacy** and **micromolar toxicity** against HBV, with a wide selective index, and in vivo studies demonstrated **reduced HBV DNA and HBsAg**[25](index=25&type=chunk) - An Investigational New Drug Application (IND) for CRV431's HBV clinical development program was submitted to the FDA on **May 10, 2018**, and approved in **June 2018**. A **Phase 1 clinical trial** was completed in **October 2018** with **positive data**[26](index=26&type=chunk) - The positive Phase 1 data triggered a **$1 million** milestone payment and the issuance of **100,737** shares of common stock to Ciclofilin shareholders as per the merger agreement[26](index=26&type=chunk) [TXL](index=7&type=section&id=TXL) TXL, a lipid acyclic nucleoside phosphonate, completed Phase 1 and 2 trials showing efficacy and a favorable safety profile, and received Orphan Drug Designation for pediatric HBV in February 2018 - **TXL** is a **novel lipid acyclic nucleoside phosphonate** designed to deliver high intracellular concentrations of tenofovir diphosphate, reducing systemic exposure and potential renal side effects[27](index=27&type=chunk) - **Phase 1 and Phase 2 clinical trials** in healthy volunteers and HBV patients demonstrated TXL as an **efficacious agent** with a **favorable safety and tolerability profile**[27](index=27&type=chunk)[29](index=29&type=chunk) - Phase 2a data showed TXL doses of **50-100mg** achieved comparable HBV viral load reductions to **300mg** TDF after **28 days**, with **substantially lower systemic tenofovir levels**, indicating reduced risk of bone and kidney toxicities[30](index=30&type=chunk) - A safety study in patients with severe renal impairment confirmed TXL's **safety and tolerability**, showing **no need for dosing adjustments** in patients with compromised renal function[31](index=31&type=chunk) - The FDA granted **Orphan Drug Designation** to TXL for chronic hepatitis B infection in a pediatric patient population (up to 11 years of age) on **February 22, 2018**[33](index=33&type=chunk) - The company decided to **out-license/partner TXL** to **focus resources on advancing CRV431**, aligning programs to address broader liver diseases (NASH, fibrosis, HCC) and HBV infection[35](index=35&type=chunk) [License Agreement](index=9&type=section&id=License%20Agreement) ContraVir licensed TXL from Chimerix for an upfront payment of **$1.2 million** in Series B Preferred Stock, with Chimerix eligible for up to **$20 million** in milestones and royalties - ContraVir licensed TXL from Chimerix for an upfront payment of 120,000 shares of Series B Convertible Preferred Stock, valued at **$1.2 million**[36](index=36&type=chunk) - Chimerix is eligible for up to approximately **$20 million** in clinical, regulatory, and initial commercial milestones, plus royalties and additional milestones based on commercial sales[36](index=36&type=chunk) - Chimerix converted all Series B Preferred Stock into approximately **134,000** shares of ContraVir's common stock on **September 30, 2016**[37](index=37&type=chunk) [Intellectual Property](index=9&type=section&id=Intellectual%20Property) The company protects its product candidates through patents, trade secrets, and licensing, including two U.S. patents for TXL from Chimerix and five from UC, and acquired CRV431 with future milestone payments - The company relies on **patents, trade secrets, know-how, and licensing** to protect its product candidates and maintain a competitive advantage[38](index=38&type=chunk) - Patents filed on or after June 8, 1995, have a term of **20 years** from the filing date, which may shorten the period of protection for biopharmaceutical products due to long development times[40](index=40&type=chunk) - The company licenses **two** issued U.S. patents related to TXL from Chimerix, covering composition of matter (expiring **2031**) and methods of use (expiring **2030**)[44](index=44&type=chunk) - Through the UC Agreement, the company licenses **five** issued U.S. patents and **one** allowed patent application for TXL's composition of matter (expiring **2020-2021**) and one U.S. patent for methods of use (expiring **2020**)[45](index=45&type=chunk)[46](index=46&type=chunk) - The company also licenses **numerous foreign granted patents** and pending applications for TXL, with expiration dates ranging from **2020 to 2033**[44](index=44&type=chunk)[47](index=47&type=chunk) - The company acquired Ciclofilin Pharmaceuticals, Inc. in **June 2016**, gaining its lead asset CPI-431-32 (renamed CRV431), with future milestone payments up to CAD **$2.9 million** and a **2.5%** royalty on net sales[41](index=41&type=chunk) [Sales and Marketing](index=10&type=section&id=Sales%20and%20Marketing) The company lacks internal commercialization capabilities and plans to partner or license product rights to larger pharmaceutical companies for late-stage development and commercialization - The company currently **lacks commercialization or internal sales and marketing capabilities** and plans to **partner or license rights** to larger pharmaceutical companies for late-stage development and commercialization[51](index=51&type=chunk) [Manufacturing](index=11&type=section&id=Manufacturing) The company relies on contract manufacturers for all preclinical and clinical trial materials under cGMP, without owning its own manufacturing facilities - The company **does not own manufacturing facilities** and intends to **rely on contract manufacturers** for all preclinical and clinical trial materials under **cGMP**, with management oversight[52](index=52&type=chunk)[53](index=53&type=chunk) [Pharmaceutical Pricing and Reimbursement](index=11&type=section&id=Pharmaceutical%20Pricing%20and%20Reimbursement) Future product revenue depends on reimbursement from third-party payers, who increasingly challenge prices, and healthcare cost-reduction legislation could limit reimbursement - Future revenue from product sales, if approved, will **largely depend on reimbursement availability** from **third-party payers** (government, managed-care, private insurers)[54](index=54&type=chunk) - Third-party payers are **increasingly challenging prices and cost-effectiveness**, and there is **significant uncertainty** regarding reimbursement status for new pharmaceutical products[54](index=54&type=chunk) - Legislation and regulations aimed at **reducing healthcare costs** could **limit reimbursement** for pharmaceuticals, potentially affecting future sales and profitability[55](index=55&type=chunk) [Regulatory Matters](index=11&type=section&id=Regulatory%20Matters) Drug products are subject to extensive U.S. and foreign governmental regulations, involving rigorous preclinical and clinical trials, IND/NDA/BLA submissions, and ongoing post-approval compliance - Drug products are subject to **extensive regulation** by governmental authorities in the **U.S. (FDA) and foreign countries**, covering testing, manufacturing, labeling, distribution, and more[57](index=57&type=chunk) - Non-compliance can lead to **suspension** of development, manufacturing, or marketing, **failure to obtain approval**, **withdrawal of approvals**, fines, and criminal prosecution[58](index=58&type=chunk) - The U.S. regulatory approval process is **long and rigorous**, involving **preclinical studies (GLP)**, IND submission, IRB approval, and successful completion of **Phase 1, 2, and 3 clinical trials (GCP)** before NDA/BLA submission and **FDA approval**[59](index=59&type=chunk)[62](index=62&type=chunk)[64](index=64&type=chunk)[65](index=65&type=chunk)[66](index=66&type=chunk)[67](index=67&type=chunk)[69](index=69&type=chunk)[70](index=70&type=chunk) - Post-approval, products are subject to **ongoing FDA regulation**, including record-keeping, adverse event reporting, **cGMP compliance** for manufacturing, and review of product changes[83](index=83&type=chunk)[84](index=84&type=chunk) - Foreign regulatory approval processes are **similar to the U.S.**, requiring **separate approvals** (e.g., CTA in Europe) and compliance with **local regulations** and ethical principles like the Declaration of Helsinki[90](index=90&type=chunk)[91](index=91&type=chunk)[92](index=92&type=chunk)[93](index=93&type=chunk) - The European Union offers **centralized and national authorization procedures** for medicinal products, with the centralized procedure providing a **single marketing authorization** valid across the EU[94](index=94&type=chunk)[95](index=95&type=chunk) [Employees](index=20&type=section&id=Employees) As of December 31, 2018, the company had **fourteen** employees, maintaining satisfactory employee relations - As of **December 31, 2018**, the company had **fourteen** employees, and relations with employees were satisfactory[97](index=97&type=chunk) [Corporate Information](index=20&type=section&id=Corporate%20Information) The company, incorporated in Delaware in May 2013, has principal executive offices in Edison, New Jersey, and a research laboratory in Edmonton, Canada - The company was incorporated in **Delaware** in **May 2013**, with principal executive offices in **Edison, New Jersey**, and a research laboratory in **Edmonton, Canada**[98](index=98&type=chunk) [Available Information](index=20&type=section&id=Available%20Information) Annual, Quarterly, and Current Reports, along with other SEC filings, are freely available on the company's and SEC's websites - Annual, Quarterly, and Current Reports, along with other SEC filings, are available **free of charge** on the **company's website** (www.contravir.com) and the **SEC's website** (www.sec.gov)[98](index=98&type=chunk) [ITEM 1A. RISK FACTORS](index=20&type=section&id=ITEM%201A.%20RISK%20FACTORS) ContraVir faces significant risks including going concern uncertainty, early-stage product development, regulatory hurdles, competition, IP challenges, and financial volatility - The company has incurred **losses since inception**, anticipates **continued losses**, and its independent registered public accounting firm's report expresses **substantial doubt about its ability to continue as a going concern**[100](index=100&type=chunk)[101](index=101&type=chunk) - **Substantial additional funding is required** for preclinical and clinical development, regulatory approval, and commercialization, which may not be available on acceptable terms, potentially leading to **delays or discontinuation** of product candidates[103](index=103&type=chunk)[104](index=104&type=chunk)[105](index=105&type=chunk) - **CRV431 is in early development**, and its commercial viability depends on successful preclinical studies, clinical trials, and regulatory approvals, with **no assurance of favorable results or market approval**[106](index=106&type=chunk)[109](index=109&type=chunk)[110](index=110&type=chunk) - Product candidates may exhibit **undesirable side effects**, **delaying or precluding development**, regulatory approval, or limiting use if approved[112](index=112&type=chunk) - The company **relies on third-party vendors** for preclinical studies and clinical trials; their **failure to perform or comply** with regulations could cause delays, termination, or increased expenses[116](index=116&type=chunk) - The pharmaceutical industry is **highly competitive**, with **larger companies** possessing **greater resources and experience**, posing a significant challenge to ContraVir's ability to develop and commercialize products[176](index=176&type=chunk)[177](index=177&type=chunk) - The company has **limited experience** in small molecule antiviral development and **relies on outsourcing**, requiring continuous attraction and retention of qualified personnel and consultants[125](index=125&type=chunk)[126](index=126&type=chunk)[127](index=127&type=chunk) - Regulatory approval processes are **lengthy, expensive, and unpredictable**, with **no guarantee of approval** for product candidates, and even if approved, products may face **restrictions or withdrawal**[133](index=133&type=chunk)[134](index=134&type=chunk)[135](index=135&type=chunk)[140](index=140&type=chunk)[141](index=141&type=chunk) - **Failure to adequately protect or expand intellectual property rights** could harm business prospects, as patents may be **challenged, invalidated, or circumvented**, and trade secrets are difficult to protect[197](index=197&type=chunk)[198](index=198&type=chunk)[199](index=199&type=chunk)[200](index=200&type=chunk)[211](index=211&type=chunk)[212](index=212&type=chunk) - **Market acceptance and sales** of approved products depend on factors like safety, efficacy, convenience, pricing, reimbursement, and competition, with **no assurance of meaningful market penetration**[166](index=166&type=chunk)[169](index=169&type=chunk)[189](index=189&type=chunk)[191](index=191&type=chunk) - **Healthcare reform measures**, such as the PPACA, could **adversely impact pricing and reimbursement** for pharmaceutical products, limiting potential revenue and profitability[228](index=228&type=chunk)[229](index=229&type=chunk)[230](index=230&type=chunk)[233](index=233&type=chunk)[235](index=235&type=chunk) [Risks Related to Our Business](index=20&type=section&id=Risks%20Related%20to%20Our%20Business) The company faces substantial doubt about its going concern ability due to accumulated losses of **$76.5 million** and the need for additional capital, alongside risks in early-stage product development, regulatory compliance, and intense competition - The company has an accumulated deficit of **$76.5 million** as of **December 31, 2018**, and expects continued significant operating losses, raising **substantial doubt about its ability to continue as a going concern**[101](index=101&type=chunk) - **Failure to raise additional capital** could lead to **significant delays** in clinical and regulatory efforts, or require **scaling back/discontinuing product development**[102](index=102&type=chunk)[104](index=104&type=chunk) - Product candidates are in **early development**, and **success is uncertain**, with **no guarantee of favorable results** in clinical trials or regulatory approval[106](index=106&type=chunk)[109](index=109&type=chunk)[110](index=110&type=chunk) - **Undesirable side effects** from product candidates could **delay or prevent further development or regulatory approval**[112](index=112&type=chunk) - **Reliance on third-party vendors** for preclinical studies and clinical trials poses **risks of delays or failures** if they do not perform or comply with regulations[116](index=116&type=chunk) - **Limited capacity for recruiting and managing clinical trials** could impair timing for initiation or completion[117](index=117&type=chunk)[118](index=118&type=chunk) - The company faces **extensive government regulations** for product development and marketing, with potential for **delays, failures, or withdrawal of approvals**[121](index=121&type=chunk)[122](index=122&type=chunk) - **Limited experience in small molecule antiviral development** necessitates **supplementing capabilities** through key employees, consultants, or third-party contractors[125](index=125&type=chunk)[126](index=126&type=chunk) - **Delays in clinical testing** **increase costs and delay revenue generation**[132](index=132&type=chunk) - The regulatory approval process is **lengthy, time-consuming, and unpredictable**, with many reasons for **potential failure to receive approval**[133](index=133&type=chunk)[134](index=134&type=chunk) - **Failure to comply with healthcare regulations** could lead to **substantial enforcement actions**, including civil and criminal penalties[142](index=142&type=chunk)[143](index=143&type=chunk) - The industry is **highly competitive** and subject to **rapid technological changes**, with **larger competitors** having **significantly more resources**[176](index=176&type=chunk)[177](index=177&type=chunk) - **Dependence on in-licensing or acquiring** development programs from third parties due to **limited internal drug discovery capabilities**[181](index=181&type=chunk) - **Product liability claims**, if uninsured or exceeding coverage, could result in **substantial damage awards**[182](index=182&type=chunk) - Use of **hazardous materials** in clinical activities carries **risks of contamination or injury**, potentially leading to **significant financial loss**[183](index=183&type=chunk) [Risks Relating to the Commercialization of our Product Candidates](index=42&type=section&id=Risks%20Relating%20to%20the%20Commercialization%20of%20our%20Product%20Candidates) Commercialization risks include market opportunity, reliance on third-party collaborations, uncertain reimbursement, low market acceptance, and intellectual property protection - Development of a product candidate may be **delayed or terminated** if the perceived **market or commercial opportunity does not justify further investment**[184](index=184&type=chunk) - **Failure to enter into collaborations or licensing agreements** to accelerate development means the company bears the **full risk of developmental failure**[185](index=185&type=chunk) - **Lack of internal sales and marketing organization** means **reliance on third parties** for commercialization, which may not be successful or yield favorable terms[186](index=186&type=chunk) - Product revenues **depend heavily on adequate reimbursement and coverage** from government and third-party payers, which are **increasingly challenging prices and cost-effectiveness**[187](index=187&type=chunk)[188](index=188&type=chunk) - Even if approved, products may **not gain meaningful market acceptance** among physicians, patients, or third-party payers, **limiting revenue generation**[189](index=189&type=chunk)[191](index=191&type=chunk) - Social or political pressure to lower drug costs could lead to **downward pricing pressure**, **reducing revenue and profitability**[192](index=192&type=chunk) - **Reliance on collaborators** for product development and commercialization means **risks if collaborators do not perform, terminate agreements, or delay efforts**[193](index=193&type=chunk)[194](index=194&type=chunk)[195](index=195&type=chunk) - **Inability to adequately protect or expand intellectual property** related to product candidates could **harm business prospects**, as patents may be **challenged or circumvented**[197](index=197&type=chunk)[198](index=198&type=chunk)[199](index=199&type=chunk)[200](index=200&type=chunk) - **Claims of intellectual property infringement** by third parties could lead to **significant expenses or prevent further development/commercialization**[201](index=201&type=chunk)[205](index=205&type=chunk)[206](index=206&type=chunk)[207](index=207&type=chunk) - **Material breach or default** under the Chimerix License Agreement could result in **loss of critical license rights for TXL**[209](index=209&type=chunk) - Confidentiality agreements may **not adequately prevent disclosure of trade secrets or protect intellectual property**[211](index=211&type=chunk)[212](index=212&type=chunk) - **Failure to successfully discover, acquire, develop, and market additional product candidates** would **impair growth**[213](index=213&type=chunk)[214](index=214&type=chunk)[215](index=215&type=chunk) - Even with regulatory approval, products may face **future development and regulatory difficulties**, including **significant restrictions or post-approval studies**[216](index=216&type=chunk)[217](index=217&type=chunk) - **Failure to obtain foreign regulatory approval** could **prevent commercialization outside the U.S.**[219](index=219&type=chunk) - **Reliance on third parties to conduct clinical trials** means risks if they **fail to perform or meet deadlines**, potentially delaying or terminating trials[220](index=220&type=chunk)[221](index=221&type=chunk) - **Need to increase organization size** to support clinical trials and commercialization, imposing **significant responsibilities on management**[222](index=222&type=chunk)[224](index=224&type=chunk) - **Uncertainty of reimbursement availability** for product candidates could **impede sales**[225](index=225&type=chunk)[226](index=226&type=chunk)[227](index=227&type=chunk) - **Healthcare reform measures** could **hinder commercial success** by **impacting pricing and reimbursement**[228](index=228&type=chunk)[229](index=229&type=chunk)[230](index=230&type=chunk)[233](index=233&type=chunk)[235](index=235&type=chunk) - **Security breaches and other disruptions** could **compromise information**, leading to liability and reputational damage[237](index=237&type=chunk) - Handling **hazardous materials** in clinical activities requires compliance with environmental laws, with **risks of contamination or injury**[238](index=238&type=chunk) [Risks Related to Our Common Stock](index=55&type=section&id=Risks%20Related%20to%20Our%20Common%20Stock) Common stock risks include ineffective controls, potential Nasdaq delisting, price volatility, future dilution, and reduced investor appeal as an 'emerging growth company' - **Ineffective disclosure controls and procedures** and **material weaknesses** in internal control over financial reporting as of **December 31, 2018**, could lead to material misstatements and **negatively impact stock price**[239](index=239&type=chunk)[240](index=240&type=chunk) - **Failure to comply with Nasdaq's minimum bid price** and other listing requirements could result in **delisting**, reducing liquidity and ability to raise capital[241](index=241&type=chunk)[242](index=242&type=chunk) - The market price of common stock may be **volatile** due to various factors, including industry developments, financial results, and economic conditions[243](index=243&type=chunk)[245](index=245&type=chunk) - **U.S. federal income tax reform (TCJA)** has not materially impacted projections but could **adversely affect stockholders**[246](index=246&type=chunk) - Provisions in the certificate of incorporation, by-laws, and Delaware law may **prevent or delay an acquisition** of the company, potentially **decreasing stock price**[247](index=247&type=chunk)[248](index=248&type=chunk) - Future sales and issuances of common stock or rights to purchase common stock could result in **additional dilution** for existing stockholders[249](index=249&type=chunk)[251](index=251&type=chunk) - As an **'emerging growth company'** under the JOBS Act, **reduced disclosure requirements** may make common stock **less attractive to investors**, leading to **less active trading or more volatile stock price**[252](index=252&type=chunk) - The company is at **risk of securities class action litigation**, especially due to dependence on clinical trial outcomes and regulatory approvals[254](index=254&type=chunk) - **Lack of research coverage** by industry or securities analysts, or adverse changes in recommendations, could cause **stock price and trading volume to decline**[255](index=255&type=chunk) - The company **does not intend to pay cash dividends** on its common stock in the foreseeable future, retaining earnings for business expansion[256](index=256&type=chunk) [ITEM 1B. UNRESOLVED STAFF COMMENTS](index=57&type=section&id=ITEM%201B.%20UNRESOLVED%20STAFF%20COMMENTS) There are no unresolved staff comments from the SEC - **No unresolved staff comments**[257](index=257&type=chunk) [ITEM 2. PROPERTIES](index=58&type=section&id=ITEM%202.%20PROPERTIES) The company's corporate headquarters are in Edison, New Jersey, occupying **6,400 square feet** of leased space, with a research laboratory in Edmonton, Canada, of **2,200 square feet** - Corporate headquarters are in **Edison, New Jersey** (**6,400 sq ft** leased space)[258](index=258&type=chunk) - Research laboratory and office space in **Edmonton, Canada** (**2,200 sq ft** leased space)[258](index=258&type=chunk) [ITEM 3. LEGAL PROCEEDINGS](index=58&type=section&id=ITEM%203.%20LEGAL%20PROCEEDINGS) The company is not currently involved in any legal proceedings but may face future actions that could materially affect its financial performance - **Not currently involved** in any legal proceedings[258](index=258&type=chunk) - **May become party to various legal actions** and complaints in the ordinary course of business[258](index=258&type=chunk) - Unfavorable resolution of contingencies could **materially affect cash flows or results of operations**[258](index=258&type=chunk) [ITEM 4. MINE SAFETY DISCLOSURES](index=58&type=section&id=ITEM%204.%20MINE%20SAFETY%20DISCLOSURES) This item is not applicable to the company's operations - **Not applicable**[259](index=259&type=chunk) PART II [ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES](index=59&type=section&id=ITEM%205.%20MARKET%20FOR%20REGISTRANT%27S%20COMMON%20EQUITY%2C%20RELATED%20STOCKHOLDER%20MATTERS%20AND%20ISSUER%20PURCHASES%20OF%20EQUITY%20SECURITIES) The company's common stock trades on Nasdaq under 'CTRV' since February 27, 2015, with approximately **207** record holders as of December 31, 2018, and no cash dividends are anticipated - Common stock traded on **The Nasdaq Capital Market** under symbol **"CTRV"** since **February 27, 2015**[262](index=262&type=chunk) - As of **December 31, 2018**, there were approximately **207** holders of record of common stock[262](index=262&type=chunk) - The company has **never paid cash dividends** and **does not anticipate paying any** in the foreseeable future, intending to retain all available funds for business development and expansion[263](index=263&type=chunk)[256](index=256&type=chunk) Equity Compensation Plan Information as of December 31, 2018 | Plan Category | Number of Shares of Common Stock to be Issued upon Exercise of Outstanding Options (a) | Weighted Average Exercise Price of Outstanding Options ($) | Number of Options Remaining Available for Future Issuance Under Equity Compensation Plans (excluding securities reflected in column (a)) | | :--- | :--- | :--- | :--- | | Equity Compensation Plans Approved by Stockholders | 642,596 | $12.32 | 694,904 | [ITEM 6. SELECTED FINANCIAL DATA](index=59&type=section&id=ITEM%206.%20SELECTED%20FINANCIAL%20DATA) This item is not applicable to the company - **Not applicable**[266](index=266&type=chunk) [ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS](index=59&type=section&id=ITEM%207.%20MANAGEMENT%27S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) MD&A reviews ContraVir's financial condition, detailing significant losses, going concern uncertainty, and the need for capital to advance CRV431 and TXL drug candidates - The company changed its fiscal year end from **June 30 to December 31**, effective **December 31, 2017**[268](index=268&type=chunk) - The company is a **biopharmaceutical company** focused on developing targeted pharmaceutical therapies for **liver disease**, including those arising from chronic alcohol use, viral hepatitis (HBV, HCV, HDV), and non-alcoholic steatohepatitis (NASH)[269](index=269&type=chunk) - **CRV431**, a cyclophilin inhibitor, is the **lead compound**, having completed a **Phase 1 study** demonstrating safety, tolerability, and pharmacokinetics, and showing **preclinical efficacy** in reducing liver inflammation, fibrosis, and tumors, as well as **antiviral activity** against HBV[272](index=272&type=chunk) - **TXL**, a nucleotide pro-drug of tenofovir, is clinically more advanced (**Phase 2 completed**) for inhibiting HBV replication, but the company plans to **out-license/partner it** to focus resources on CRV431[273](index=273&type=chunk)[285](index=285&type=chunk) - From inception through **December 31, 2018**, the company had an **accumulated deficit of approximately $76.5 million** and has **not generated any revenue** from operations[286](index=286&type=chunk) - As of **December 31, 2018**, the company had **$2.8 million** in cash and a working capital of **$0.1 million**, down from **$5.95 million** cash and **$3.5 million** working capital as of **December 31, 2017**[293](index=293&type=chunk)[355](index=355&type=chunk) - Management concluded there is **substantial doubt about the company's ability to continue as a going concern** without additional capital, as it expects to incur **significant and continuing losses**[294](index=294&type=chunk)[405](index=405&type=chunk)[406](index=406&type=chunk) - **Net cash used in operating activities was $15.6 million** for the year ended **December 31, 2018**, primarily for clinical R&D and G&A operations[293](index=293&type=chunk)[355](index=355&type=chunk) - **Net cash provided by financing activities** for the year ended **December 31, 2018**, was **$12.5 million**, mainly from a rights offering (**$9.9 million** net proceeds) and debt financing (**$2.0 million**)[356](index=356&type=chunk)[357](index=357&type=chunk) - The company will need to **raise additional capital within the next year** to continue development and commercialization of product candidates and fund operations[295](index=295&type=chunk)[373](index=373&type=chunk)[407](index=407&type=chunk) [Business Overview](index=59&type=section&id=Business%20Overview) ContraVir focuses on liver diseases, with CRV431 as its lead Phase 1 cyclophilin inhibitor and TXL (Phase 2 completed) planned for out-licensing - ContraVir focuses on **liver diseases** from **chronic alcohol use, HBV, HCV, HDV, and NASH**, which can progress to cirrhosis and hepatocellular carcinoma (HCC)[269](index=269&type=chunk)[270](index=270&type=chunk) - Chronic HBV infection leads to liver failure, cirrhosis, or liver cancer in up to **25%** of infected individuals, accounting for nearly **1 million** deaths annually[271](index=271&type=chunk) - **CRV431** is a cyclophilin inhibitor in **Phase 1**, showing **reductions in HBV DNA, HBsAg, HBeAg**, and liver inflammation, fibrosis, and tumor burden in NASH models[272](index=272&type=chunk) - **TXL** is a **Phase 2 completed** nucleotide pro-drug for HBV, which the company plans to **out-license/partner** to focus on CRV431[273](index=273&type=chunk)[285](index=285&type=chunk) - CRV431's mechanism involves **inhibiting host cyclophilins**, making it **less susceptible to viral mutations and drug resistance**[276](index=276&type=chunk) - A **Phase 1 clinical trial** for CRV431 was completed in **October 2018** with **positive data**, triggering a **$1 million** milestone payment and issuance of common stock[278](index=278&type=chunk) - **TXL Phase 2a data** showed **comparable HBV viral load reductions** to TDF with **substantially lower systemic tenofovir levels**, indicating reduced bone and kidney toxicities[281](index=281&type=chunk) - TXL received **Orphan Drug Designation** for chronic HBV in pediatric patients in **February 2018** and FDA agreement to use the **505(b)(2) regulatory pathway**[284](index=284&type=chunk) [Financial Operations Overview](index=61&type=section&id=Financial%20Operations%20Overview) As of December 31, 2018, the company had an accumulated deficit of **$76.5 million** with no revenue, and raised **$9.9 million** net proceeds from a July 2018 rights offering - From inception through **December 31, 2018**, the company had an accumulated deficit of approximately **$76.5 million** and **no revenue** from operations[286](index=286&type=chunk) - In **July 2018**, the company completed a **rights offering**, selling 10,826 units (Series C Preferred Stock and common stock warrants) for net proceeds of **$9.9 million**[289](index=289&type=chunk) - Product development is in **early stages**, with **high risk and uncertain costs/timelines** due to clinical testing, regulatory approvals, capital needs, and competition[290](index=290&type=chunk) [Critical Accounting Policies](index=62&type=section&id=Critical%20Accounting%20Policies) GAAP financial statements show an accumulated deficit of **$76.5 million** as of December 31, 2018, raising substantial doubt about the company's going concern ability without additional capital - The financial statements are prepared under **GAAP**, requiring **estimates and assumptions** that affect reported amounts[291](index=291&type=chunk) - As of **December 31, 2018**, the company had **$2.8 million** in cash, **$15.6 million** net cash used in operating activities, a **$9.4 million** net loss, and an accumulated deficit of **$76.5 million**[293](index=293&type=chunk) - There is **substantial doubt about the company's ability to continue as a going concern** without additional capital, as it expects **recurring losses**[294](index=294&type=chunk) - Financial instruments (convertible notes, contingent consideration, derivative instruments) are stated at **fair value**, with **Level 3 measurements** due to unobservable market data[297](index=297&type=chunk)[298](index=298&type=chunk)[299](index=299&type=chunk)[302](index=302&type=chunk) - Warrants issued in equity financings are classified as **derivative liabilities** and adjusted to **fair value** each reporting period using the **Black-Scholes model** with **Level 3 inputs**[300](index=300&type=chunk)[301](index=301&type=chunk)[302](index=302&type=chunk) - Income taxes are accounted for under the **asset and liability method**, recognizing **deferred tax assets and liabilities** for temporary differences and operating loss carry-forwards[303](index=303&type=chunk) - Research and development costs are **expensed as incurred** due to the absence of commercial biopharmaceutical products and **no history of successful commercialization**[308](index=308&type=chunk)[309](index=309&type=chunk) - Goodwill and acquired in-process research & development (IPR&D) are **indefinite-lived assets**, **tested annually for impairment**; **no impairment was found** as of **December 31, 2018**[311](index=311&type=chunk)[313](index=313&type=chunk)[314](index=314&type=chunk)[316](index=316&type=chunk) - Share-based payment expense for employees is measured at **fair value at grant date** and recognized over the vesting period; for non-employees, it's **remeasured at each reporting period**[318](index=318&type=chunk)[319](index=319&type=chunk)[320](index=320&type=chunk) [Off-Balance Sheet Arrangements](index=69&type=section&id=Off-Balance%20Sheet%20Arrangements) The company had no off-balance sheet arrangements as of December 31, 2018 - The company had **no off-balance sheet arrangements** as of **December 31, 2018**[324](index=324&type=chunk) [Recent Accounting Pronouncements](index=69&type=section&id=Recent%20Accounting%20Pronouncements) This section outlines recent accounting pronouncements, including ASU 2018-13 (Fair Value Measurement), ASU 2016-02 (Leases), and ASU 2018-07 (Stock Compensation), with the company evaluating their impacts - **ASU 2018-13 (Fair Value Measurement)** amends disclosure requirements for fair value measurements, effective for fiscal years beginning after **December 15, 2019**[325](index=325&type=chunk)[448](index=448&type=chunk) - **ASU 2018-11 and ASU 2018-10 (Leases)** provide targeted improvements and codification improvements to ASU 2016-02, with the company **evaluating their impact**[326](index=326&type=chunk)[327](index=327&type=chunk)[449](index=449&type=chunk)[451](index=451&type=chunk) - **ASU 2018-07 (Stock Compensation)** expands Topic 718 to include share-based payments for nonemployees, effective for fiscal years beginning after **December 15, 2018**[328](index=328&type=chunk)[452](index=452&type=chunk) - **ASU 2018-05 (Income Taxes)** amends codification based on the **Tax Cuts and Jobs Act (2017)** and SAB 118, with the company incorporating changes into deferred tax liability determination[329](index=329&type=chunk)[453](index=453&type=chunk) - **ASU 2017-09 (Stock Compensation)** provides guidance on modification accounting, adopted by the company with **no material impact**[330](index=330&type=chunk)[454](index=454&type=chunk) - **ASU 2017-04 (Goodwill and Other Intangibles)** simplifies goodwill impairment testing by eliminating step 2, effective for fiscal years beginning after **December 15, 2019**[331](index=331&type=chunk)[455](index=455&type=chunk) - **ASU 2016-15 (Cash Flows)** amends classification issues for cash flows, required adoption in **Q1 2019**, with retrospective application[332](index=332&type=chunk)[456](index=456&type=chunk) - **ASU 2016-09 (Stock Compensation)** simplifies accounting for share-based payments, adopted by the company with **no material impact**[333](index=333&type=chunk)[457](index=457&type=chunk) - **ASU 2016-02 (Leases)** establishes a right-of-use (ROU) model, effective for annual periods beginning after **December 15, 2018**, expected to have a **material impact on the balance sheet**[334](index=334&type=chunk)[458](index=458&type=chunk)[459](index=459&type=chunk) [JOBS Act](index=70&type=section&id=JOBS%20Act) The company qualifies as an 'emerging growth company' under the JOBS Act, allowing reduced disclosure requirements, and has irrevocably opted out of the extended transition period for new accounting standards - The company qualifies as an **'emerging growth company'** under the JOBS Act, allowing for **reduced disclosure requirements**[335](index=335&type=chunk) - The company **irrevocably elected not to use the extended transition period** for complying with new or revised accounting standards[335](index=335&type=chunk) - The **'emerging growth company' status will cease** upon meeting certain criteria, such as total annual gross revenues of **$1.07 billion** or more, or exceeding **$1 billion** in nonconvertible debt[336](index=336&type=chunk) - As a **'smaller reporting company,'** certain exemptions from the Sarbanes-Oxley Act and scaled executive compensation disclosures may continue to be available[339](index=339&type=chunk) [Results of Operations](index=72&type=section&id=Results%20of%20Operations) No revenues for 2018 and 2017; net loss of **$9.4 million** in 2018, an improvement from **$13.0 million** in 2017, due to decreased R&D expenses - The company had **no revenues** for the years ended **December 31, 2018 and 2017**, and does not expect any for several years[341](index=341&type=chunk) Comparison of Financial Results (Years Ended December 31, 2018 vs. 2017) | Item | December 31, 2018 ($) | December 31, 2017 ($) | Change ($) | | :--- | :--- | :--- | :--- | | Revenues | 0 | 0 | 0 | | Research and development | 7,593,715 | 13,368,165 | (5,774,450) | | General and administrative | 7,000,444 | 7,277,951 | (277,507) | | Loss from operations | (14,594,159) | (20,646,116) | 6,051,957 | | Change in fair value of debt | (108,942) | 0 | (108,942) | | Interest on debt | (339,158) | 0 | (339,158) | | Change in fair value of derivatives | 5,056,964 | 5,618,598 | (561,634) | | Loss before income taxes | (9,985,295) | (15,027,518) | 5,042,223 | | Income tax benefit | 536,000 | 1,947,760 | (1,411,760) | | Net loss | (9,449,295) | (13,079,758) | 3,630,463 | - Research and development expenses **decreased by $5.8 million** in **2018 compared to 2017**, mainly due to lower Valnivudine and TXL clinical trial costs, partially offset by increased CRV431 clinical trial costs[342](index=342&type=chunk) - General and administrative expenses **decreased by $0.3 million** in **2018**, primarily due to lower stock compensation expense, partially offset by increased payroll and severance costs[343](index=343&type=chunk) - Net loss for **2018 was $9.4 million**, an **improvement from $13.0 million in 2017**, influenced by operating expenses and changes in fair value of derivative instruments[345](index=345&type=chunk) Comparison of Financial Results (Transition Period Ended December 31, 2017 vs. 2016) | Item | December 31, 2017 ($) | December 31, 2016 ($) | Change ($) | | :--- | :--- | :--- | :--- | | Revenues | 0 | 0 | 0 | | Research and development | 7,163,530 | 7,447,352 | (283,822) | | General and administrative | 3,358,091 | 3,452,025 | (93,934) | | Loss from operations | (10,521,621) | (10,899,377) | (377,756) | | Change in fair value of warrant liability and contingent consideration | 1,062,769 | (331,010) | 1,393,779 | | Loss before income taxes | (9,458,852) | (11,230,387) | 1,771,535 | | Income tax benefit | 1,947,760 | 1,908,003 | 39,757 | | Net loss | (7,511,092) | (9,322,384) | 1,811,292 | - R&D expenses **decreased by $0.3 million** in the transition period ended **December 31, 2017**, primarily due to lower TXL and Valnivudine costs, offset by increased CRV431 preclinical costs[348](index=348&type=chunk) Comparison of Financial Results (Years Ended June 30, 2017 vs. 2016) | Item | June 30, 2017 ($) | June 30, 2016 ($) | Change ($) | | :--- | :--- | :--- | :--- | | Revenues | 0 | 0 | 0 | | Research and development | 13,651,987 | 15,019,276 | (1,367,289) | | General and administrative | 7,371,885 | 5,786,209 | 1,585,676 | | Loss from operations | (21,023,872) | (20,805,485) | (218,387) | | Change in fair value of warrant liability and contingent consideration | 4,224,819 | 3,806,847 | 417,972 | | Loss before income taxes | (16,799,053) | (16,998,638) | 199,585 | | Income tax benefit | 1,908,003 | 0 | 1,908,003 | | Net loss | (14,891,050) | (16,998,638) | 2,107,588 | - R&D expenses **decreased by $1.4 million** in **FY2017**, mainly due to lower Valnivudine clinical trial expenses, partially offset by increased payroll, TXL development, and stock-based compensation[351](index=351&type=chunk) - G&A expenses **increased by $1.6 million** in **FY2017**, primarily due to increased payroll, general operating costs from the June 2016 acquisition, and stock-based compensation[352](index=352&type=chunk) [Liquidity and Capital Resources](index=74&type=section&id=Liquidity%20and%20Capital%20Resources) Cash decreased to **$2.8 million** as of December 31, 2018, with **$15.6 million** used in operations, requiring additional capital within the next year due to going concern uncertainty Cash Flow Summary | Cash Flows From | Year ended December 31, 2018 ($) | For the transition period ended December 31, 2017 ($) | Year ended June 30, 2017 ($) | | :--- | :--- | :--- | :--- | | Operating activities | (15,646,027) | (8,209,286) | (19,172,110) | | Investing activities | 900 | 0 | (14,709) | | Financing activities | 12,523,539 | 1,180,555 | 24,765,627 | | Net (decrease) increase in cash | (3,121,588) | (7,028,731) | 5,578,808 | | Cash at end of period | 2,832,429 | 5,954,017 | 12,982,748 | - As of **December 31, 2018**, cash was **$2.8 million**, down from **$6.0 million** at **December 31, 2017**, and **$13.0 million** at **June 30, 2017**[355](index=355&type=chunk) - Net cash used in operating activities was **$15.6 million** in **2018**, primarily for clinical R&D and G&A[355](index=355&type=chunk) - Net cash provided by financing activities in **2018 was $12.5 million**, including **$9.9 million** net proceeds from a rights offering and **$2.0 million** from debt financing[356](index=356&type=chunk)[357](index=357&type=chunk) - The company has an accumulated deficit of **$76.5 million** as of **December 31, 2018**, and expects continued operating losses, indicating **substantial doubt about its going concern ability**[371](index=371&type=chunk)[372](index=372&type=chunk) - **Additional capital is required within the next year** to continue development and commercialization, with **uncertainty regarding funding availability** and potential for **significant dilution or restrictive covenants**[373](index=373&type=chunk) Contractual Obligations and Commitments as of December 31, 2018 | Contractual Obligations | Total ($) | Less Than 1 Year ($) | 1-3 Years ($) | 4-5 Years ($) | After 5 Years ($) | | :--- | :--- | :--- | :--- | :--- | :--- | | Operating lease | 872,723 | 202,734 | 616,087 | 53,902 | 0 | | Convertible debt (remaining principal) | 1,556,000 | 1,556,000 | 0 | 0 | 0 | | Total contractual obligations | 2,428,723 | 1,758,734 | 616,087 | 53,902 | 0 | - Contingent consideration and accrued milestone/royalty payments from licensing agreements are **not included in the table** as management **cannot reasonably estimate** if or when they will occur[374](index=374&type=chunk) [ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK](index=77&type=section&id=ITEM%207A.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) This item is not applicable to the company - **Not applicable**[376](index=376&type=chunk) [ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA](index=77&type=section&id=ITEM%208.%20FINANCIAL%20STATEMENTS%20AND%20SUPPLEMENTARY%20DATA) This section refers to the consolidated financial statements and supplementary data, including the Report of Independent Registered Public Accounting Firm, presented on subsequent pages - Refers to the **Index to Consolidated Financial Statements** on **page 55** of the report[377](index=377&type=chunk)[379](index=379&type=chunk) PART III [ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING FINANCIAL DISCLOSURE](index=78&type=section&id=ITEM%209.%20CHANGES%20IN%20AND%20DISAGREEMENTS%20WITH%20ACCOUNTANTS%20ON%20ACCOUNTING%20FINANCIAL%20DISCLOSURE) This item is not applicable to the company - **Not applicable**[542](index=542&type=chunk) [ITEM 9A. CONTROLS AND PROCEDURES](index=78&type=section&id=ITEM%209A.%20CONTROLS%20AND%20PROCEDURES) As of December 31, 2018, the company's disclosure controls and internal control over financial reporting were ineffective due to material weaknesses, which management is committed to remediating - As of **December 31, 2018**, disclosure controls and procedures were **not effective** due to **material weaknesses** in internal control over financial reporting[543](index=543&type=chunk) - Material weaknesses identified include an **ineffective control environment** due to insufficient personnel with appropriate accounting knowledge and **ineffective controls over the preparation and review of financial statements**[547](index=547&type=chunk)[549](index=549&type=chunk) - Management is **committed to remediating these weaknesses** and continues to evaluate internal controls, including **using external consultants** for non-routine/technical accounting issues[543](index=543&type=chunk) - The Annual Report **does not include an attestation report** from the registered public accounting firm regarding internal control over financial reporting, due to **exemptions for non-accelerated filers or emerging growth companies**[548](index=548&type=chunk)[550](index=550&type=chunk) - **No material changes** in internal control over financial reporting occurred during the quarter ended **December 31, 2018**[551](index=551&type=chunk) [ITEM 9B. OTHER INFORMATION](index=79&type=section&id=ITEM%209B.%20OTHER%20INFORMATION) There is no other information to report under this item - **None**[552](index=552&type=chunk) [Item 10. Directors, Executive Officers and Corporate Governance](index=79&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance) This section details ContraVir's executive officers and Board of Directors, their roles, and the structure and functions of the Audit, Compensation, and Corporate Governance/Nominating Committees Executive Officers, Directors and Key Employees as of March 07, 2019 | Name | Age | Present Position with ContraVir Pharmaceuticals, Inc. | | :--- | :--- | :--- | | Gary S. Jacob | 71 | Chairman of the Board of Directors | | Dr. Robert T. Foster | 60 | Chief Executive Officer | | John Cavan | 60 | Chief Financial Officer | | John P. Brancaccio | 70 | Director | | Timothy Block | 64 | Director | | Arnold Lippa | 72 | Director | | Thomas Adams | 76 | Director | - Dr. Robert T. Foster has served as **Chief Executive Officer** since **October 3, 2018**, and **Chief Scientific Officer** since **June 10, 2016**[556](index=556&type=chunk) - John Cavan has served as **Chief Financial Officer** since **April 1, 2016**[557](index=557&type=chunk) - The Board of Directors oversees management, establishes corporate policies, and reviews overall performance, meeting **15 times** in **2018**[565](index=565&type=chunk)[566](index=566&type=chunk) - The Board has established **Audit, Compensation, and Corporate Governance/Nominating Committees**, all operating under written charters and composed of **independent directors**[567](index=567&type=chunk)[569](index=569&type=chunk)[571](index=571&type=chunk)[574](index=574&type=chunk) - **John Brancaccio** is the **audit committee financial expert**[569](index=569&type=chunk) - All officers, directors, and greater than ten percent stockholders **complied with Section 16(a)** beneficial ownership reporting requirements for the year ended **December 31, 2018**[577](index=577&type=chunk)[578](index=578&type=chunk) - The company has adopted a **Code of Business Conduct and Ethics**, available on its website, requiring compliance from all employees, executive officers, and directors[579](index=579&type=chunk)[580](index=580&type=chunk) [Item 11. Executive Compensation](index=83&type=section&id=Item%2011.%20Executive%20Compensation) This section details executive compensation for 2018, 2017, and June 30, 2017, including salaries, bonuses, and equity awards, noting separation agreements with former CEO James Sapirstein and EVP Theresa Matkovits Summary Compensation Table | Name & Principal Position | Year | Salary ($) | Bonus(1) ($) | Stock In Lieu of Cash Bonus ($) | Options granted(2) ($) | Non-equity incentive plan compensation(1)(3) ($) | Other ($) | Total ($) | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | James Sapirstein, R.Ph. Former Chief Executive Officer | December 2018 | 380,000 | 0 | 199,179 | 0 | 0 | 835,335(4) | 1,414,514 | | | December 2017 | 240,000 | 0 | 0 | 0 | 0 | 0 | 240,000 | | | June 2017 | 410,000 | 0 | 0 | 610,995 | 228,940 | 0 | 1,249,935 | | Theresa Matkovits, Ph.D. Former Executive Vice President | December 2018 | 249,129 | 28,490 | 34,331 | 0 | 0 | 116,563(5) | 428,513 | | | December 2017 | 153,414 | 0 | 0 | 11,769 | 0 | 0 | 165,183 | | | June 2017 | 275,000 | 0 | 0 | 0 | 64,870 | 0 | 339,870 | | Dr. Robert Foster Chief Executive Officer(6) | December 2018 | 312,345 | 0 | 62,244 | 0 | 0 | 0 | 374,589 | | John Sullivan-Bolyai, M.D. Former Chief Medical Officer(7) | December 2018 | 0 | 0 | 34,622 | 0 | 0 | 0 | 34,622 | | | December 2017 | 166,400 | 0 | 0 | 0 | 0 | 0 | 166,400 | | | June 2017 | 332,800 | 0 | 0 | 102,904 | 0 | 0 | 435,704 | - Dr. Robert Foster's Executive Agreement commenced **October 1, 2018**, with an annual base compensation of **$400,000** and eligibility for a cash bonus up to **50%** of base salary[585](index=585&type=chunk) - James Sapirstein, former CEO, received approximately **$0.8 million** in severance and COBRA payments as per his separation agreement in **October 2018**, and his vested stock options' exercise period was extended to **two years**[587](index=587&type=chunk) - Theresa Matkovits, former COO, received approximately **$0.1 million** in severance and COBRA payments as per her settlement agreement in **October 2018**, and her vested stock options' exercise period was extended to **two years**[590](index=590&type=chunk) Outstanding Equity Awards as of December 31, 2018 for Named Executive Officers | Name | Options () Exercisable | Options () Unexercisable | Exercise Price ($) | Expiration Date | | :--- | :--- | :--- | :--- | :--- | | James Sapirstein, Former Chief Executive Officer | 125,000 | — | 18.48 | 10/15/2020 | | | 60,416 | — | 12.00 | 10/15/2020 | | | 18,750 | — | 28.80 | 10/15/2020 | | | 41,666 | — | 7.92 | 10/15/2020 | | | 13,079 | — | 11.44 | 10/15/2020 | | | 13,079 | — | 11.44 | 10/15/2020 | | Theresa Matkovits, Former Executive Vice President | 6,250 | — | 30.64 | 10/12/2020 | | | 833 | — | 7.60 | 10/12/2020 | | | 2,083 | — | 7.92 | 10/12/2020 | | | 1,041 | — | 4.64 | 10/12/2020 | | Dr. Robert Foster, Chief Executive Officer | 6,250 | 6,250 | 7.36 | 6/10/2026 | Director Compensation for Year Ended December 31, 2018 | Name | Cash Fees ($) | Option Awards(1) ($) | Total ($) | | :--- | :--- | :--- | :--- | | Gary S. Jacob | 38,000 | 0 | 38,000 | | John P. Brancaccio | 59,000 | 0 | 59,000 | | Arnold Lippa | 41,625 | 0 | 41,625 | | Timothy Block | 55,500 | 0 | 55,500 | | Thomas Adams | 50,500 | 0 | 50,500 | - As of **December 31, 2018**, a liability of approximately **$82,000** related to director fees was recorded, which was paid in **January 2019**[597](index=597&type=chunk) [Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.](index=86&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters.) Beneficial ownership of common stock as of March 07, 2019, for key personnel, includes shares acquirable within **60 days** via options/warrants, based on **17,179,331** shares outstanding Beneficial Ownership of Common Stock as of March 07, 2019 | Beneficial Owner | Number of Shares Beneficially Owned | Shares of common stock issuable upon exercise of stock options | Shares of common stock issuable upon exercise of warrants | Percentage of Common Stock Beneficially Owned | | :--- | :--- | :--- | :--- | :--- | | John Cavan | 20,993 | 11,557 | 8,625 | * | | Dr. Robert Foster | 18,092 | 6,250 | — | * | | Gary S. Jacob | 4,116 | 126,875 | 8,625 | * | | John Brancaccio | 251 | 25,081 | 1,725 | * | | Timothy Block | — | 21,210 | — | * | | Arnold Lippa | — | 9,687 | 8,625 | * | | Thomas Adams | — | 3,750 | — | * | | All current executive officers and directors as a group (7 persons) | 43,452 | 204,410 | 27,600 | 1.6% | - Beneficial ownership is determined by SEC rules and includes voting or investment power, as well as shares acquirable within **60 days** via options or warrants[598](index=598&type=chunk) - Percentage of ownership is based on **17,179,331** shares of common stock outstanding as of **March 07, 2019**[598](index=598&type=chunk) [Item 13. Certain Relationships, Related Person Transactions and Director Independence.](index=87&type=section&id=Item%2013.%20Certain%20Relationships%2C%20Related%20Person%20Transactions%20and%20Director%20Independence.) There are no certain relationships, related person transactions, or director independence matters to report under this item - **None**[603](index=603&type=chunk) [Item 14. Principal Accountant Fees and Services.](index=87&type=section&id=Item%2014.%20Principal%20Accountant%20Fees%20and%20Services.) This section details audit fees of approximately **$318,000** for 2018 and tax fees of **$40,000**, all pre-approved by the Audit Committee Principal Accountant Fees and Services | Fee Type | Year Ended December 31, 2018 ($) | Transition Period Ended December 31, 2017 ($) | Fiscal Year Ended June 30, 2017 ($) | | :--- | :--- | :--- | :--- | | Audit Fees | 318,000 | 105,000 | 298,800 | | Tax and Other Fees | 40,000 | 31,000 | 21,400 | - The Audit Committee is responsible for **pre-approving all audit and permissible non-audit services** provided by the principal accountants, and **all services provided have been pre-approved**[605](index=605&type=chunk) PART IV [ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES](index=87&type=section&id=ITEM%2015.%20EXHIBITS%20AND%20FINANCIAL%20STATEMENT%20SCHEDULES) This section lists the financial statements, schedules, and exhibits filed as part of the 10-K report, including corporate governance documents and various agreements - Refers to the **Index to Consolidated Financial Statements** on **page 55** of the report[607](index=607&type=chunk) - Financial statement schedules are **omitted** due to absence of conditions or inclusion of information in consolidated financial statements/notes[608](index=608&type=chunk) - A **comprehensive list of exhibits** is provided, including corporate governance documents, agreements, and certifications[609](index=609&type=chunk)[610](index=610&type=chunk)[611](index=611&type=chunk)[612](index=612&type=chunk) [ITEM 16. FORM 10-K SUMMARY](index=89&type=section&id=ITEM%2016.%20FORM%2010-K%20SUMMARY) This item indicates that no Form 10-K Summary is provided - **None**[614](index=614&type=chunk) SIGNATURES [Signatures](index=90&type=section&id=Signatures) This section contains the required signatures for the Annual Report on Form 10-K from the CEO, CFO, and Board of Directors, all dated March 13, 2019 - The Annual Report on Form 10-K is signed by the **Chief Executive Officer** (Robert Foster), **Chief Financial Officer** (John Cavan), and members of the **Board of Directors** (Gary S. Jacob, John Brancaccio, Arnold Lippa, Timothy Block, Thomas Adams)[617](index=617&type=chunk)[619](index=619&type=chunk) - All signatures are dated **March 13, 2019**[617](index=617&type=chunk)[619](index=619&type=chunk)