Hepion Pharmaceuticals, Inc. - Quarter Report: 2016 March (Form 10-Q)

Table of Contents

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: March 31, 2016

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

CONTRAVIR PHARMACEUTICALS, INC.

(Exact name of registrant as specified in its charter)

Delaware		46-2783806
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification No.)

399 Thornall Street, First Floor, Edison, New Jersey 08837

(Address of principal executive offices) (Zip Code)

(732) 902-4000

(Registrant’s telephone number)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes 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 definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting 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)

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 the registrant’s shares of common stock outstanding was 32,231,241 as of May 3, 2016.

Table of Contents

CONTRAVIR PHARMACEUTICALS, INC.

FORM 10-Q

TABLE OF CONTENTS

		Page
PART I—FINANCIAL INFORMATION
Item 1.	Financial Statements
	Condensed Balance Sheets as of March 31, 2016 (unaudited) and June 30, 2015	1
	Unaudited Condensed Statements of Operations and Comprehensive Loss for the Three and Nine Months Ended March 31, 2016 and the Three and Nine Months Ended March 31, 2015	2
	Unaudited Condensed Statement of Changes in Stockholders’ Equity for the Nine Months Ended March 31, 2016	3
	Unaudited Condensed Statements of Cash Flows for the Nine Months Ended March 31, 2016 and 2015	4
	Unaudited Notes to Condensed Financial Statements	5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	14
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	18
Item 4.	Controls and Procedures	18

PART II—OTHER INFORMATION

Item 6.	Exhibits	19

SIGNATURES

Table of Contents

NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q for ContraVir 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 the audited financial statements as of and for the period ended June 30, 2015 contained in the Company’s Annual Report on Form 10-K (“Form 10-K”) filed with the Securities and Exchange Commission (“SEC”) on September 25, 2015. 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.

Table of Contents

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements

CONTRAVIR PHARMACEUTICALS, INC.

CONDENSED BALANCE SHEETS

	March 31, 2016			June 30, 2015
	(Unaudited)
ASSETS
Current Assets:
Cash	$	5,956,761		$	4,563,165
Prepaid expenses	669,659			681,249
Total Current Assets	6,626,420			5,244,414
Property and equipment, net	71,920			81,441
Other assets	51,344			51,344
Total Assets	$	6,749,684		$	5,377,199
LIABILITIES AND STOCKHOLDER’S EQUITY
Current Liabilities:
Accounts payable	$	3,441,248		$	1,481,393
Accrued expenses	847,430			456,722

Total Current Liabilities	4,288,678			1,938,115

Derivative financial instruments - warrants	1,165,677			—
Total Liabilities	5,454,355			1,938,115

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, issued and outstanding 1,250,000 shares at March 31, 2016 and June 30, 2015, respectively	12,500,000			12,500,000
Series B convertible preferred stock, stated value $10.00 per share, issued and outstanding 120,000 shares at March 31, 2016 and June 30, 2015, respectively	1,200,000			1,200,000
Common stock, par value of $.0001 per share. Authorized 120,000,000 shares, issued and outstanding 27,301,663 and 22,276,730 shares at March 31, 2016 and June 30, 2015, respectively	2,731			2,228
Additional paid-in capital	26,998,824			17,350,713
Accumulated deficit	(39,406,226		)	(27,613,857		)

Total Stockholders’ Equity	1,295,329			3,439,084

Total Liabilities and Stockholders’ Equity	$	6,749,684		$	5,377,199

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

Table of Contents

CONTRAVIR PHARMACEUTICALS, INC.

CONDENSED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(Unaudited)

	Three Months Ended						Nine Months Ended
	March 31, 2016			March 31, 2015			March 31, 2016			March 31, 2015
Revenues	$	—		$	—		$	—		$	—

Costs and Expenses:
Research and development	3,186,781			2,606,032			10,994,712			4,813,747
General and administrative	1,465,939			1,791,794			4,016,503			3,771,031

Loss from Operations	(4,652,720		)	(4,397,826		)	(15,011,215		)	(8,584,778		)
Other income (expense):
Change in fair value of derivative financial instruments-warrants	735,227			—			3,218,846			(387,898		)
Comprehensive net loss	$	(3,917,493	)	$	(4,397,826	)	$	(11,792,369	)	$	(8,972,676	)
Series A and B convertible preferred stock beneficial conversion feature accreted as a dividend	—			(3,000,000		)	—			(7,844,643		)

Comprehensive net loss attributable to common stockholders	$	(3,917,493	)	$	(7,397,826	)	$	(11,792,369	)	$	(16,817,319	)

Weighted Average Common Shares Outstanding
Basic and Diluted	27,297,311			22,273,397			25,403,001			20,334,797

Net Loss per Common Share
Basic and Diluted	$	(0.14	)	$	(0.33	)	$	(0.46	)	$	(0.83	)

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

Table of Contents

CONTRAVIR PHARMACEUTICALS, INC.

CONDENSED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY

(Unaudited)

	Preferred Stock, Series A $0.0001 par value			Preferred Stock, Series B $0.0001 par value			Common Stock, $0.0001 par value			Additional						Total
								Par		Paid in			Accumulated			Stockholders’
	Shares	Amount		Shares	Amount		Shares	Value		Capital			Deficit			Equity
Balance June 30, 2015	1,250,000	$	12,500,000	120,000	$	1,200,000	22,276,730	$	2,228	$	17,350,713		$	(27,613,857	)	$	3,439,084
Stock-based compensation expense	—	—		—	—			—		473,084			—			473,084
Exercise of stock options	—	—		—	—		24,933	3		34,090			—			34,093
Issuance of common stock, net	—	—		—	—		5,000,000	500		13,525,460			—			13,525,960
Fair value of warrants issued in connection with equity offering, reclassified to derivative liability	—	—		—	—		—	—		(4,384,523		)	—			(4,384,523		)
Net loss	—	—		—	—		—	—		—			(11,792,369		)	(11,792,369		)
Balance March 31, 2016	1,250,000	$	12,500,000	120,000	$	1,200,000	27,301,663	$	2,731	$	26,998,824		$	(39,406,226	)	$	1,295,329

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

Table of Contents

CONTRAVIR PHARMACEUTICALS, INC.

CONDENSED STATEMENTS OF CASH FLOWS

(Unaudited)

	Nine Months Ended March 31,
	2016			2015
Cash Flows From Operating Activities:
Net loss	$	(11,792,369	)	$	(8,972,676	)
Adjustments to reconcile net loss to net cash used in operating activities:
Stock-based compensation expense	473,084			1,188,988
Change in fair value of derivative instrument-warrants	(3,218,846		)	387,898
Cost of license as research and development expense	—			1,200,000
Depreciation expense	16,124			11,189

Changes in operating assets and liabilities:
Accounts payable and accrued expenses	2,350,563			1,194,437
Prepaid expenses and other assets	11,590			(343,026		)
Total Adjustments	(367,485		)	3,639,486

Net Cash used in Operating Activities	(12,159,854		)	(5,333,190		)

Cash Flows From Investing Activities:
Purchases of property and equipment	(6,603		)	(83,269		)
Net Cash Used in Investing Activities	(6,603		)	(83,269		)

Cash Flows From Financing Activities:

Proceeds from the issuance of common stock and warrants, net	13,525,960			—
Proceeds from the issuance of preferred stock	—			12,500,000
Proceeds from the exercise of stock options	34,093			—
Net Cash provided by Financing Activities	13,560,053			12,500,000

Net increase in cash	1,393,596			7,083,541
Cash at beginning of period	4,563,165			1,817,757

Cash at end of period	$	5,956,761		$	8,901,298

Supplementary Disclosure Of Non-Cash Financing Activities:
Deemed dividend on beneficial conversion feature	$	—		$	7,844,643
Value of warrants exchanged for common stock	$	—		$	4,863,243
Fair value of warrants issued in conjunction with common stock offering	$	4,384,523		$	—

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

Table of Contents

CONTRAVIR PHARMACEUTICALS, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

(Unaudited)

1. Business Overview

ContraVir Pharmaceuticals Inc. (“ContraVir” or the “Company”) is a biopharmaceutical company focused primarily on the clinical development of FV-100 to treat herpes zoster (HZ), or shingles, which is an infection caused by the reactivation of varicella zoster virus (VZV) or “chickenpox”, and CMX157 to treat Hepatitis B (HBV).

2. Basis of Presentation and Going Concern

These unaudited condensed financial statements have been prepared following the requirements of the Securities and Exchange Commission (“SEC”) and United States generally accepted accounting principles (“GAAP”) for interim reporting. In the opinion of management, the accompanying unaudited financial statements include all adjustments, which include only normal recurring adjustments, necessary to present fairly ContraVir’s interim financial information. The accompanying unaudited financial statements should be read in conjunction with the audited financial statements as of and for the period ended June 30, 2015 contained in the Company’s Annual Report on Form 10-K (“Form 10-K”) filed with the Securities and Exchange Commission (“SEC”) on September 25, 2015.

Going Concern

As of March 31, 2016, ContraVir had $6.0 million in cash. Net cash used in operating activities was $12.2 million for the nine months ended March 31, 2016. Comprehensive net loss for the nine months ended March 31, 2016 was $11.8 million. As of March 31, 2016, ContraVir had working capital of $2.3 million.

These unaudited financial statements have been prepared under the assumption that the Company will continue as a going concern within one year of the issuance of these financial statements without additional capital becoming available to attain further operating efficiencies and, ultimately, to generate revenue. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

ContraVir will be required to raise additional capital within the next year to continue the development and commercialization of its current product candidates and to continue to fund operations at its current cash expenditure levels. ContraVir cannot be certain that additional funding will be available on acceptable terms, or at all. Any debt financing, if available, may involve restrictive covenants that impact ContraVir’s ability to conduct business. If ContraVir is unable to raise additional capital when required or on acceptable terms, ContraVir may have to (i) significantly delay, scale back or discontinue the development and/or commercialization of its product candidate; (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 ContraVir would otherwise seek to develop or commercialize.

On April 4, 2016, the Company closed on a public offering of 4,929,578 shares of 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 $7,000,000, before deducting the underwriting discount and other offering expenses payable by the Company of $700,000.

Use of Estimates

The preparation of 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 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.

Table of Contents

Cash

As of March 31, 2016 and June 30, 2015, the amount of cash was approximately $6.0 million and $4.6 million, respectively, consisting of checking accounts held at U.S. commercial banks. Cash is maintained at a single financial institution and, at times, balances may exceed federally insured limits. The Company has never experienced losses related to these balances.

Fair Value of Financial Instruments

ASC Topic 820, Fair Value Measurement (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’s 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. Unobservable inputs are inputs that reflect 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 to 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 Company 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 and accounts payable. These financial instruments are stated at their respective historical carrying amounts, which approximate fair value due to their short term nature.

Derivative financial instruments

The Company has issued common stock warrants in connection with the execution of certain equity financings. The 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 of the end of each reporting period and the changes in fair value of derivative liabilities are recorded in the statements of operations under the caption “Change in fair value of derivative financial instruments - warrants.” See Note 4 for additional information.

Research and 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 not currently have any commercial biopharmaceutical products, and does 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 has no history of successful commercialization of product candidates to base any estimate of the number of future periods that would be benefited.

Table of Contents

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. As of March 31, 2016 and June 30, 2015, ContraVir had prepaid research and development costs of approximately $0.5 million and $0.4 million, respectively.

Share-based payments

ASC Topic 718 “Compensation—Stock Compensation” (“ASC 718”) requires companies to measure the cost of 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 issues stock options with only service based vesting conditions and records the expense for these awards using the straight-line method.

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 its expected stock volatility 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 its 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 has never paid cash dividends and does not expect to pay any cash dividends in the foreseeable future.

The Company accounts for stock options issued to non-employees in accordance 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.

ASC 718 requires that cash flows resulting from tax deductions in excess of the cumulative compensation cost recognized 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.

Reclassifications

Certain reclassifications have been made to prior year amounts to conform with the current year presentation.

3. Recent Accounting Pronouncements

In March 2016, the FASB issued ASU No. 2016-09, Compensation—Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting (“ASU 2016-09”). The new standard identifies areas for simplification involving several aspects of accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, an option to recognize gross stock compensation expense with actual forfeitures recognized as they occur, as well as certain classifications on the statement of cash flows. This guidance is effective for the Company for annual reporting periods beginning after December 15, 2017, with early adoption permitted. The Company is currently evaluating the impact that this guidance will have on its results of operations, financial position and cash flows.

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) (“ASU 2016-02”). The new standard establishes a right-of-use (ROU) model that requires a lessee to record a ROU asset and a lease liability on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. ASU 2016-02 is effective for annual periods beginning after December 15, 2018, including interim periods within those annual periods, with early adoption permitted. A modified retrospective transition approach is required for lessees for capital and operating leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available. The Company is currently evaluating the impact that this guidance will have on its results of operations, financial position and cash flows.

In November 2014, the FASB issued ASU No. 2014-16, Derivatives and Hedging (Topic 815): Determining Whether the Host Contract in a Hybrid Financial Instrument Issued in the Form of a Share Is More Akin to Debt or to Equity, (“ASU 2014-16”). The amendments of ASU 2014-16 clarify how U.S. GAAP should be applied in determining whether the nature of a host contract

Table of Contents

is more akin to debt or equity and in evaluating whether the economic characteristics and risks of an embedded feature are “clearly and closely related” to its host contract. The guidance in ASU 2014-16 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. Early adoption is permitted. The Registrants adopted the standard effective January 1, 2015 and the adoption of this standard did not impact the Registrants’ results of operations, cash flows or financial position. The adoption of ASU 2014-16 did not impact the Company’s existing financial instruments.

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers. This guidance requires an entity to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. This guidance also requires an entity to disclose sufficient information to enable users of financial statements to understand the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. Qualitative and quantitative information is required about:

· Contracts with customers—including revenue and impairments recognized, disaggregation of revenue and information about contract balances and performance obligations (including the transaction price allocated to the remaining performance obligations).

· Significant judgments and changes in judgments—determining the timing of satisfaction of performance obligations (over time or at a point in time), and determining the transaction price and amounts allocated to performance obligations.

· Certain assets—assets recognized from the costs to obtain or fulfill a contract.

In August 2015, the FASB issued updated guidance deferring the effective date of the revenue recognition standard. In March and April 2016, 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.

4. Stockholder’s Equity and Derivative Liability

Common Stock and Warrant Offering

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 and warrants to purchase up to 3,000,000 shares of common stock, at a fixed combined price to the public of $3.00 under the Company’s current shelf registration statement on Form S-3. The shares of common stock and warrants were issued separately on October 13, 2015. 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 $4.25 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 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 $15,000,000, before deducting the underwriting discount and other offering expenses payable by the Company of approximately $1,450,000. If the warrants were exercised in full, ContraVir would receive additional proceeds of approximately $12,750,000.

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 $4,384,523 was recorded as derivative financial instruments liability - warrants.

Table of Contents

The fair value of the warrants classified as liabilities on each re-measurement date is estimated using the Black-Scholes option pricing model. For this liability, the Company develops its own assumptions 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:

	October 13, 2015	March 31, 2016
Price of ContraVir common stock	$2.76	$1.21
Expected warrant term (years)	5.00 years	4.53 years
Risk-free interest rate	1.36%	1.04%
Expected volatility	76%	76%
Dividend yield	—	—

The warrant liability is recorded on its own line on the Company’s Balance Sheet and is marked-to-market at each reporting period with the change in fair value recorded on its own line on the Statement of Operations and Comprehensive Loss.

The following table sets forth the components of changes in the Company’s derivative financial instruments liability balance for the period from July 1, 2015 to March 31, 2016:

Date	Description	Warrants	Derivative Instrument Liability
10/13/2015	Issuance of warrants	3,000,000	$	4,384,523
	Change in fair value of warrants through March 31, 2016	—	(3,218,846		)
3/31/2016	Balance of derivative financial instruments liability	3,000,000	$	1,165,677

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”), pursuant 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, including the Phase 3 clinical trial of FV-100, 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.

As of March 31, 2016, the Company has not made any sales under the Agreement.

5. Accounting for Share-Based Payments

On June 3, 2013, ContraVir 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 6,500,000 shares of common stock issuable pursuant to the Plan.

The Company classifies stock-based compensation expense in its statement of operations and comprehensive loss in the same manner in which the award recipient’s payroll costs are classified or in which the award recipients’ service payments are classified.

Table of Contents

For the three and nine months ended March 31, 2016 and 2015, respectively, ContraVir recorded the following stock-based compensation expense:

	Three months ended				Nine months ended
	March 31, 2016		March 31, 2015		March 31, 2016			March 31, 2015
General and administrative	$	187,964	$	168,534	$	515,778		$	317,690
Research and development	39,736		509,382		(42,694		)	871,298
Total stock based compensation expense	$	227,700	$	677,916	$	473,084		$	1,188,988

A summary of stock option activity and of changes in stock options outstanding under the Plan for the nine months ended March 31, 2016 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, 2015	4,117,745		$0.11 - $3.83	$	1.76	$	13,667,376	9.04 years
Granted	99,000		$0.95 - $4.38	$	1.85
Exercised	(24,933	)	$0.11 - $2.20	$	1.37	$	61,603
Forfeited	(136,667	)	$1.50 - $3.60	$	1.87
Balance outstanding, March 31, 2016	4,055,145		$0.11 - $4.38	$	1.76	$	708,614	8.26 years
Exercisable at March 31, 2016	1,921,014		$0.11 - $2.65	$	1.48	$	572,673	7.98 years

The weighted-average grant-date fair value of options granted to employees during the nine months ended March 31, 2016 and 2015 was $1.41 and $1.19, respectively. Included within the above table are 964,734 non-employee options outstanding as of March 31, 2016, of which 375,000 are unvested as of March 31, 2016 and therefore subject to remeasurement. The remeasurement impact for the nine months ended March 31, 2016 was negative due to decreases in stock price, which resulted in a decrease in the fair value.

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’s common stock for those stock options that had exercise prices lower than the fair value of the Company’s common stock.

As of March 31, 2016, the unrecognized compensation cost related to non-vested stock options outstanding, net of expected forfeitures, was approximately $1.9 million to be recognized over a weighted-average remaining vesting period of approximately 3.09 years.

The following weighted-average assumptions were used in the Black-Scholes valuation model to estimate the fair value of stock option awards granted to employees during the nine months ended March 31, 2016 and 2015, respectively.

	Nine Months Ended
	March 31, 2016	March 31, 2015
Stock price	$1.85	$1.63
Risk-free interest rate	1.90%	1.77%
Dividend yield	—	—
Expected volatility	79%	88%
Expected term (in years)	6 years	6 years

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

Table of Contents

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. Due to its limited history of issuing stock options as a standalone company, ContraVir estimated future unvested option forfeitures based on the historical experience of its former parent and is using a comparable 10% rate.

6. Loss per Share

Basic and diluted net loss per share is presented in conformity with ASC Topic 260, Earnings per Share, (“ASC Topic 260”) for all periods presented. In accordance with ASC Topic 260, basic and diluted net loss per common share was determined by dividing net loss applicable to common stockholders by the weighted-average common shares outstanding during the period. The following table sets forth the computation of basic and diluted net loss per share for the periods indicated:

	Three months ended						Nine months ended
	March 31, 2016			March 31, 2015			March 31, 2016			March 31, 2015
Numerator:
Net loss	$	(3,917,493	)	$	(4,397,826	)	$	(11,792,369	)	$	(8,972,676	)
Preferred stock deemed dividend	—			(3,000,000		)	—			(7,844,643		)
Net loss attributable to common stockholders	$	(3,917,493	)	$	(7,397,826	)	$	(11,792,369	)	$	(16,817,319	)

Denominator:
Weighted average common shares outstanding	27,297,311			22,273,397			25,403,001			20,334,797
Net loss per share of common stock—basic and diluted	$	(0.14	)	$	(0.33	)	$	(0.46	)	$	(0.83	)

Stock options outstanding at March 31, 2016 and 2015 of 4,055,145 and 3,838,578, respectively, have been excluded from the computation of diluted weighted average shares outstanding, as they would have been anti-dilutive. In addition, 3,000,000 warrants to purchase common stock outstanding at March 31, 2016 have been excluded from the computation of diluted earnings per share because their exercise price exceeds the average market price of the Company’s common stock for the period they were outstanding.

7. Commitments and Contingencies

License Agreement with Chimerix, Inc.

On December 17, 2014, the Company entered into an exclusive license agreement with Chimerix pursuant to which the Company has licensed CMX157 from Chimerix for further clinical development and commercialization. CMX157 is a highly potent analog of the antiviral drug tenofovir DF (Viread®). Under the terms of the agreement, ContraVir licensed CMX157 from Chimerix in exchange for 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 million in clinical, regulatory and initial commercial milestone payments in the United States and Europe, as well as royalties and additional milestone payments based on commercial sales in those territories. Either party may terminate the License Agreement upon the occurrence of a material breach by the other party (subject to standard cure periods), or upon certain events involving the bankruptcy or insolvency of the other party. The Company may also terminate the License Agreement without cause on a country by country basis upon sixty days’ prior written notice to Chimerix.

Table of Contents

The fair value of the Preferred B shares exchanged for the license was determined to be equal to the amount paid per share of the Series A, as the provision of the Preferred B shares were the same as the Preferred A Shares, based on an arm’s length transaction. Therefore, the fair value of the Preferred B shares issued was $10 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.

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%) percent 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 million, subsequent milestone payments of $3 million and $6 million, respectively, covering (i) marketing (FDA) approval and (ii) on achieving the milestone of aggregate net sales equal to or greater than $125 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

Table of Contents

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.

8. Related Party Transactions

The Company is a party to a Master Services Agreement dated June 19, 2014 with Clinical Supplies Management, Inc. (“CSM”), pursuant to which CSM provides the Company with pharmaceutical and clinical supply management services in support of clinical research programs. James Sapirstein, the CEO of ContraVir, is a director of CSM which is a private company. For the nine months ended March 31, 2016, the Company paid CSM, for services pursuant to the terms of the contract, approximately $433,000.

9. Subsequent Events

Common Stock and Warrant Offering

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 $7,000,000, before deducting the underwriting discount and other offering expenses payable by the Company of approximately $700,000.

Table of Contents

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

The following discussion should be read in conjunction with our condensed 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, 2015 filed with the United States Securities and Exchange Commission (“SEC”). 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 focused primarily on the clinical development of FV-100 to treat herpes zoster (HZ), or shingles, which is an infection caused by reactivation of varicella zoster virus (VZV), and CMX157 to treat Hepatitis B (HBV).

FV100

FV-100 is an orally available, small molecule, nucleoside analogue pro-drug of CF-1743 that we are developing for the treatment of herpes zoster, which is an infection caused by the reactivation of the varicella zoster virus or VZV. VZV is responsible for producing the infectious disease known as chicken pox in individuals upon initial exposure. After the initial infection, VZV can remain dormant in nerve endings for many years and if reactivated, causes a painful rash called shingles. FV-100 is being developed specifically for the treatment of shingles. Nucleoside analogs are capable of disrupting replication of the virus. FV-100 is a pro-drug of CF-1743, which enables us to take advantage of FV-100’s more readily absorbed properties compared to CF-1743 when given orally. FV-100 is then broken down to the active moiety, CF-1743, upon entry into the blood stream. Published preclinical studies demonstrate that FV-100 is significantly more potent against VZV than currently marketed compounds acyclovir, valacyclovir, and famciclovir, the FDA-approved drugs used for the treatment of shingles. We conducted an extensive review of the clinical data from the completed Phase 2 trial, including performing post-hoc analyses. We performed additional market research (including unmet medical need), reimbursement, pricing, and competitive landscape analyses, etc. We also evaluated a number of clinical, regulatory and commercial pathways for the potential future development of FV-100. Based upon the analyses of the completed Phase 2 study coupled with the additional market research, we approached the FDA to discuss our clinical development program and requested an End of Phase 2 (EoP2) meeting. The meeting was granted and the result was a streamlined development plan for FV-100 that allowed us to proceed directly into a Phase 3 trial without the need to conduct any additional Phase 2 studies. We had satisfied these criteria and initiated Protocol 007 during the second quarter of calendar year 2015.

In parallel to the Phase 3 initiation, Study 008, a drug-drug interaction trial was conducted during January - March 2015. The study’s objective was to highlight potential drug interactions with compounds which are metabolized using the CYP450 pathway. This is a very common trial in virology and in drug development overall.

CMX 157

CMX157 is a novel lipid acyclic nucleoside phosphonate that delivers high intracellular concentrations of the active antiviral agent tenofovir diphosphate. CMX157’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 CMX157 for chronic Hepatitis B (HBV) infection.

We licensed CMX157 from Chimerix in exchange for an upfront payment of 120,000 shares of our preferred stock, valued at $1.2 million (time of the deal). Chiomerix had completed a Phase 1 single dose escalation study in healthy subjects, demonstrating a favorable safety, tolerability and drug distribution profile.

Table of Contents

On March 21, 2016, we announced the commencement of screening healthy volunteers for enrollment into the Phase 1 portion of the our Phase 1/2a multiple ascending dose clinical study of CMX157, The Phase 1 portion of the study will enroll healthy volunteers assigned to one of five sequential, ascending CMX157 dosing cohorts. Following a Data Safety Monitoring Board review, we will initiate the Phase 2a portion of the study in parallel with the continuing Phase 1 portion. The Phase 2a will enroll treatment-naïve patients with chronic HBV infection to compare CMX157 to tenofovir DF (TDF, marketed by Gilead Sciences as Viread®). We are planning to meet with the FDA to discuss an appropriate clinical plan for CMX157. A recently issued composition of matter patent for CMX157 provides intellectual property protection to at least 2031.

The decision to develop CMX157 for Hepatitis B has been taken because we do not see a large opportunity to grow the HIV market with new compounds, even though CMX157 is 200 times more potent than tenofovir in vitro. We believe the Hepatitis B market is poised for exceptional growth. CMX157 is 97-fold more potent than PDFtenofovir in vitro and thus potentially allows for a lower dose to achieve similar results in future head to head clinical studies. The lower dose may also allow for a better safety profile than TDF. The strategy for CMX157 is to develop the compound to serve as a critical backbone therapy in future HBV combination therapies. We were expecting to submit an Investigational New Drug application (“IND”) to support an initiation of our HBV clinical development program at the end of 2015. Prior to that date, the FDA requested additional information from us and once that information is obtained, we will submit the IND as soon as possible.

FINANCIAL OPERATIONS OVERVIEW

From inception through March 31, 2016, we have sustained cumulative net losses of approximately $39.4 million. From inception through March 31, 2016, we have not generated any revenue from operations and 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 accounting policies or methods used in the preparation of financial statements. 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 year ended June 30, 2015, filed with the SEC on September 25, 2015. There have been no changes to our critical accounting policies since June 30, 2015.

OFF-BALANCE SHEET ARRANGEMENTS

We had no off-balance sheet arrangements as of March 31, 2016.

RECENT ACCOUNTING PRONOUNCEMENTS

See Recent Accounting Pronouncements in Note 3. Recent Accounting Pronouncements in the Notes to the Condensed Financial Statements.

Table of Contents

RESULTS OF OPERATIONS

Comparison of Three Months Ended March 31, 2016 and 2015

	Three months ended
	March 31, 2016			March 31, 2015			Change
Revenues	$	—		$	—		$	—
Costs and Expenses:
Research and development	3,186,781			2,606,032			580,749
General and administrative	1,465,939			1,791,794			(325,855		)
Loss from operations	(4,652,720		)	(4,397,826		)	(254,894		)
Other income (expense):
Change in fair value of warrant liability	735,227			—			735,227
Net loss	$	(3,917,493	)	$	(4,397,826	)	$	480,333

We had no revenues during the three months ended March 31, 2016 and 2015 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 for the three months ended March 31, 2016 and 2015 amounted to $3.2 million and $2.6 million, respectively, which were primarily scientific advisory fees and clinical data storage. The increase of $0.6 million is primarily due to an increase of $0.5 million in development phase costs for FV-100 and CMX157 and an increase of $0.2 million in costs associated with higher employee headcount and consulting fees, partially offset by a decrease in stock-based compensation expense of $0.1 million.

General and administrative expenses for the three months ended March 31, 2016 and 2015 amounted to $1.5 million and $1.8 million, respectively. The decrease of $0.3 million is primarily due to lower stock-based compensation expense of $0.3 million, lower investor relations costs and registration fees of $0.2 million and lower salary and benefits costs of $0.1 million, partially offset by an increase of $0.3 million in consulting and legal fees.

Comprehensive net loss for the three months ended March 31, 2016 and 2015 was approximately $3.9 million and $4.4 million, respectively, which was a result of the operating expenses discussed above, offset by Other income resulting from the change in fair value of derivative instruments-warrants of approximately $0.7 million for the three months ended March 31, 2016.

Comparison of Nine Months Ended March 31, 2016 or 2015

	Nine months ended
	March 31, 2016			March 31, 2015			Change
Revenues	$	—		$	—		$	—
Costs and Expenses:
Research and development	10,994,712			4,813,747			6,180,965
General and administrative	4,016,503			3,771,031			245,472
Loss from operations	(15,011,215		)	(8,584,778		)	(6,426,437		)

Other income (expense):
Change in fair value of warrant liability	3,218,846			(387,898		)	3,606,744
Net loss	$	(11,792,369	)	$	(8,972,676	)	$	(2,819,693	)

We had no revenues during the nine months ended March 31, 2016 and 2015 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 for the nine months ended March 31, 2016 and 2015 amounted to $11.0 million and $4.8 million, respectively, which were primarily scientific advisory fees and clinical data storage. The increase of $6.2 million is primarily due to an increase of $5.3 million in development phase costs for FV-100 and CMX157 and an increase of $1.3 million in costs

Table of Contents

associated with higher employee headcount and consulting fees, partially offset by a decrease of $0.4 million in stock-based compensation costs due primarily to the decrease in fair value of the awards granted to non-employees, which is subject to remeasurement each reporting period.

General and administrative expenses for the nine months ended March 31, 2016 and 2015 amounted to $4.0 million and $3.8 million, respectively. The increase of $0.2 million is primarily due to an increase of $0.5 million for consulting, legal, investor relations, public relations and conference related expenses, partially offset by a decrease in stock-based compensation expense of $0.3 million, primarily as a result of employee terminations.

Comprehensive net loss for the nine months ended March 31, 2016 and 2015 was approximately $11.8 million and $9.0 million, respectively, which was a result of the operating expenses discussed above, partially offset by income resulting from the change in fair value of derivative instruments-warrants of approximately $3.2 million for the nine months ended March 31, 2016 as compared to a loss of $0.4 million from the change in fair value of derivative instruments-warrants for the nine months ended March 31, 2015.

LIQUIDITY AND CAPITAL RESOURCES

The following table summarizes our cash flows for the nine months ended March 31, 2016 and 2015:

	Nine months ended
	March 31, 2016			March 31, 2015
Net cash (used in) provided by:
Operating activities	$	(12,159,854	)	$	(5,333,190	)
Investing activities	(6,603		)	(83,269		)
Financing activities	13,560,053			12,500,000
Net increase in cash	$	1,393,596		$	7,083,541

As of March 31, 2016, we had $6.0 million in cash.

Net cash used in operating activities was approximately $12.2 million and $5.3 million for the nine months ended March 31, 2016 and 2015, respectively. As of March 31, 2016, we had working capital of $2.3 million, as compared to working capital of $7.7 million as of March 31, 2015.

For the nine months ended March 31, 2016 and 2015, the cash used in operations was primarily related to the continued clinical development of FV-100 and CMX-157, as well as general and administrative costs and expenses. Additionally, for the nine months ended March 31, 2016, the cash used in operations included a $3.2 million decrease related to the change in fair market value of our warrant liability, partially offset by an increase in accounts payable and accrued expenses of $2.4 million related to the continuing clinical developments costs and $0.5 million of non-cash stock-based compensation expense.

Net cash used in investing activities for the nine months ended March 31, 2016 and 2015 represented purchases of property and equipment.

Net cash provided by financing activities for the nine months ended March 31, 2016 primarily consisted of the sale of 5,000,000 shares of common stock and warrants to purchase up to 3,000,000 shares of common stock, at a fixed combined price to the public of $3.00. The net proceeds to us were $13.5 million. If the warrants are exercised in full, we will receive additional proceeds of approximately $12,750,000.

On April 4, 2016 we closed on a public offering of 4,929,578 shares of our 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 our 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 us were $7,000,000, before deducting the underwriting discount and other offering expenses payable by us of $700,000.

Operating and Capital Expenditure Requirements

As of March 31, 2016, we had an accumulated deficit of $39.4 million, and expect to incur significant and increasing operating losses for the next several years as we expand our research, development and clinical trials of FV-100 and CMX157. We are unable to predict the extent of any future losses or when we will become profitable, if at all.

Table of Contents

Our unaudited financial statements as of March 31, 2016 have been prepared under the assumption that we will continue as a going concern. Our independent registered public accounting firm has issued a report on our audited June 30, 2015 financial statements that included an explanatory paragraph referring to our recurring losses from operations and stockholder’s deficit; and expressing substantial doubt in our ability to continue as a going concern without additional capital becoming available. Our ability to continue as a going concern is dependent upon our ability to obtain additional equity or debt financing, attain further operating efficiencies and, ultimately, to generate revenue. Our financial statements do not include any adjustments that might result from the outcome of this uncertainty.

We will be required to raise additional capital within the next year to continue the development and commercialization of current product candidates and to continue to fund operations at the current cash expenditure levels. We cannot be certain that additional funding will be available on acceptable terms, or at all. Recently worldwide economic conditions and the international equity and credit markets have significantly deteriorated and may remain difficult for the foreseeable future. These developments will make it more difficult to obtain additional equity or credit financing, when needed. 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.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable.

ITEM 4. CONTROLS AND PROCEDURES

Our chief executive officer and chief financial officer evaluated the effectiveness of our disclosure controls and procedures as of March 31, 2016. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Securities Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Securities Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. Based on that evaluation, as of March 31, 2016, our principal executive and financial officers concluded that our disclosure controls and procedures are not effective, due to weaknesses in our financial closing process. We intend to implement remedial measures designed to address the ineffectiveness of our disclosure controls and procedures.

Changes in Internal Control over Financial Reporting

As required by Rule 13a-15(d) of the Exchange Act, our management, including our principal executive officer and principal financial officer, conducted an evaluation of the internal control over financial reporting to determine whether any changes occurred during the quarter ended March 31, 2016 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. In November 2015, our Chief Financial Officer (“CFO”) resigned and we hired an outside accounting and financial services company to provide interim CFO services. On March 31, 2016, the interim CFO was named CFO. There were no other changes during the quarter ended March 31, 2016.

Table of Contents

PART II. OTHER INFORMATION

ITEM 6. EXHIBITS

31.1 Certification of Chief Executive Officer required under Rule 13a-14(a)/15d-14(a) under the Exchange Act.

31.2 Certification of Chief Financial Officer required under Rule 13a-14(a)/15d-14(a) under the Exchange Act.

32.1 Certification of Chief Executive Officer pursuant to 18 U.S.C Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2 Certification of Chief Financial Officer pursuant to 18 U.S.C Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS XBRL Instance Document

101.SCH XBRL Taxonomy Extension Schema

101.CAL XBRL Taxonomy Extension Calculation Linkbase

101.DEF XBRL Taxonomy Extension Definition Linkbase

101.LAB XBRL Taxonomy Label Linkbase

101.PRE XBRL Taxonomy Extension Presentation Linkbase

Table of Contents

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)

Date: May 13, 2016	By:	/s/ JAMES SAPIRSTEIN
		James Sapirstein
		President and Chief Executive Officer