hepa-20240331

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

_________________________________

FORM 10-Q

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

For the Quarterly Period Ended March 31, 2024

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)


Delaware (State or other jurisdiction of incorporation or organization)			46-2783806 (I.R.S. Employer Identification Number)

399 Thornall Street, First Floor

Edison, New Jersey 08837

(Address of Principal Executive Offices)

(732) 902-4000

Registrant’s telephone number, including area code

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, par value $0.0001 per share

HEPA

The Nasdaq Capital Market

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 ☒ No ☐

Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted 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 such files). Yes ☒ No ☐

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

Large accelerated filer ☐

Accelerated filer ☐

Non-accelerated filer ☒

Smaller reporting company ☒

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

The number of shares of the registrant’s Common Stock outstanding as of May 15, 2024 was 5,473,126.


		Page
PART I—FINANCIAL INFORMATION
Item 1.	Condensed Consolidated Financial Statements (unaudited):	2
	Condensed Consolidated Balance Sheets	2
	Condensed Consolidated Statements of Operations	3
	Condensed Consolidated Statements of Comprehensive Loss	4
	Condensed Consolidated Statements of Changes in Stockholders’ Equity	5
	Condensed Consolidated Statements of Cash Flows	7
	Notes to Condensed Consolidated Financial Statements	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	20
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	23
Item 4.	Controls and Procedures	23

PART II—OTHER INFORMATION

Item 1A.	Risk Factors	24
Item 6.	Exhibits	26
SIGNATURES		27


	March 31, 2024		December 31, 2023

Assets
Current assets:
Cash	$	13,105,502	$	14,785,880
Prepaid expenses	2,324,869		2,701,960
Total current assets	15,430,371		17,487,840
Property and equipment, net	—		29,487
Right-of-use assets	182,019		212,878


Other assets	377,021		364,192
Total assets	$	15,989,411	$	18,094,397

Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	1,497,151	$	2,348,829
Accrued expenses	793,753		2,439,351
Operating lease liabilities, current	134,020		115,916
Short-term portion of contingent consideration	149,000		386,000
Total current liabilities	2,573,924		5,290,096
Contingent consideration, non-current	1,101,000		1,634,000

Operating lease liabilities, non-current	41,248		93,104
Derivative financial instruments-warrants	4,751,800		3,796,390
Total liabilities	8,467,972		10,813,590
Commitments and contingencies (see Note 10)
Stockholders' equity:
Series A convertible preferred stock, stated value $10 per share, 85,581 shares issued and outstanding at March 31, 2024 and December 31, 2023, respectively	855,808		855,808
Series C convertible preferred stock, stated value $1,000 per share, 1,688 shares issued and outstanding at March 31, 2024 and December 31, 2023, respectively	839,320		839,320
Common stock—$0.0001 par value per share; 120,000,000 shares authorized, 5,473,126 and 4,818,733 shares issued and outstanding at March 31, 2024 and December 31, 2023, respectively	547		482
Additional paid-in capital	233,297,756		230,291,362
Accumulated other comprehensive loss	9,200		(78,779)
Accumulated deficit	(227,481,192)		(224,627,386)
Total stockholders' equity	7,521,439		7,280,807
Total liabilities and stockholders' equity	$	15,989,411	$	18,094,397


	Three Months Ended March 31,
		2024		2023
Revenues		$	—	$	—
Cost and expenses:
Research and development		2,539,568		9,797,659
General and administrative		2,642,749		3,411,506

Total operating expenses		5,182,317		13,209,165
Loss from operations		(5,182,317)		(13,209,165)

Other income (expense):
Interest expense		(4,349)		(2,322)
Change in fair value of contingent consideration and derivative financial instruments		1,930,652		(48,434)
Inducement expense		(2,567,044)		—
Loss before income taxes		(5,823,058)		(13,259,921)
Income tax benefit: (See Note 3)		2,969,252		—
Net loss		$	(2,853,806)	$	(13,259,921)

Weighted-average common shares outstanding:
Basic and diluted		5,072,511		3,811,482

Net loss per common share: (see Note 9)
Basic and diluted		$	(0.56)	$	(3.48)


	Preferred Stock			Preferred Stock						Additional Paid in Capital		Accumulated other Comprehensive Income (Loss)		Accumulated Deficit		Total Stockholders' Equity
	Series A			Series C			Common Stock
	Shares	Amount		Shares	Amount		Shares	Amount
Balance at December 31, 2023	85,581	$	855,808	1,688	$	839,320	4,818,733	$	482	$	230,291,362	$	(78,779)	$	(224,627,386)	$	7,280,807
Net loss	—	—		—	—		—	—		—		—		(2,853,806)		(2,853,806)
Other comprehensive income (loss)	—	—		—	—		—	—		—		87,979		—		87,979
Stock-based compensation expense	—	—		—	—		—	—		705,770		—		—		705,770

Warrant exercises, net	—	—		—	—		654,393	65		2,300,624		—		—		2,300,689
March 31, 2024	85,581	855,808		1,688	839,320		5,473,126	547		233,297,756		9,200		(227,481,192)		7,521,439


	Series A Warrants
	Pre-Modification			Post-Modification
	February 16,			February 16,			March 31,			December 31,
	2024			2024			2024			2023
Stock price	$	2.56		$	2.56		$	2.49		$	3.24
Expected warrant term (years)	4.6 years			5.0 years			4.9 years			4.5 years
Risk-free interest rate	4.3		%	4.3		%	4.2		%	3.9		%
Expected volatility	111.0		%	116.0		%	113.0		%	116.6		%
Dividend yield	—			—			—			—


	Series B Warrants
	Pre-Modification			Post-Modification
	February 16,			February 16,		December 31,
	2024			2024		2023
Stock price	$	2.56		$	2.56	$	3.24
Expected warrant term (years)	1.1 years			n/a		1.5 years
Risk-free interest rate	4.9		%	n/a		4.6		%
Expected volatility	143.0		%	n/a		122.1		%
Dividend yield	—			—		—


	Series B-1 Warrants						Series B-2 Warrants
	February 16,			March 31,			February 16,			March 31,
	2024			2024			2024			2024
Stock price	$	2.56		$	2.49		$	2.56		$	2.49
Expected warrant term (years)	5.0 years			4.9 years			1.5 years			1.4 years
Risk-free interest rate	4.3		%	4.2		%	4.8		%	4.9		%
Expected volatility	116.0		%	113.0		%	130.0		%	138.0		%
Dividend yield	—			—			—			—


Date	Number of Warrants Outstanding	Derivative Instrument Liability
Balance of derivative liability at December 31, 2023	1,960,786	3,796,390

Issuance of Series B-1 and Series B-2 warrants *	1,470,590	2,821,399
Modification of Series A warrants *	—	346,869
Modification of Series B warrants *	—	(601,224)
Exercise of Series B warrants	(980,393)	(450,982)
Change in fair value of warrants	—	(1,160,652)
Balance of derivative liability at March 31, 2024	2,450,983	$	4,751,800


	Fair Value Measurement at Reporting Date Using
Description	Fair value		(Level 1)		(Level 2)		(Level 3)
As of March 31, 2024:
Contingent consideration	$	1,250,000	$	—	$	—	$	1,250,000
Derivative liabilities related to warrants	$	4,751,800	$	—	$	4,751,800	$	—

As of December 31, 2023:
Contingent consideration	$	2,020,000	$	—	$	—	$	2,020,000
Derivative liabilities related to warrants	$3,796,390		$	—	$3,796,390		$	—


	Assumptions
	March 31, 2024				December 31, 2023
Discount rate	10.0%				11.5%
Stock price	n/a				n/a
Projected milestone achievement dates	Apr 2024		—	Sep 2030	Mar 2023		—	Sep 2030
Probability of success of milestone achievements	5	%	—	15%	13	%	—	40%


	Estimated Useful Life (in years)	March 31, 2024		December 31, 2023
Equipment	3 years	$	358,548	$	346,770
Furniture and fixtures	7 years	62,183		62,183
Less: Accumulated depreciation		(420,732)		(379,466)
		$	—	$	29,487


	Number of Options	Exercise Price Per Share					Weighted Average Exercise Price Per Share		Intrinsic Value		Weighted Average Remaining Contractual Team
Balance outstanding, December 31, 2023	391,737	$	13.80	-	$	40,320.00	$	48.58	$	—	5.17 years
Granted	340,000	$	2.56	-	$	2.56	$	2.56	$	—


Forfeited	(109,243)	$	13.80	-	$	40,320.00	$	47.14	$	—

Balance outstanding, March 31, 2024	622,494	$	2.56	-	$	40,320.00	$	23.69	$	—	8.52 years
Awards outstanding, vested awards and those expected to vest at March 31, 2024	622,494	$	2.56	-	$	40,320.00	$	23.63	$	—	8.52 years
Vested and exercisable at March 31, 2024	610,893	$	2.56	-	$	40,320.00	$	23.70	$	—	8.54 years


Remainder of 2024	$	96,702
2025	97,815



Total	194,517
Present value adjustment	(19,249)
Lease liability at March 31, 2024	$	175,268


	Acquisition-related Contingent Consideration
Liabilities:
Balance at December 31, 2023	$	2,020,000
Change in fair value recorded in earnings	(770,000)
Balance at March 31, 2024	1,250,000


	Three Months Ended March 31,
Basic and diluted net loss per common share:		2024		2023
Numerator:
Net loss		$	(2,853,806)	$	(13,259,921)


Denominator:
Weighted average common shares outstanding		5,072,511		3,811,482
Net loss per share of common stock—basic and diluted		$	(0.56)	$	(3.48)

SEC Form 10-Q filed by Hepion Pharmaceuticals Inc.