hepa-20220930

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 September 30, 2022

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 November 9, 2022 was 76,229,617.

Table of Contents

HEPION PHARMACEUTICALS, INC.

FORM 10-Q

TABLE OF CONTENTS


		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	21
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	27
Item 4.	Controls and Procedures	27

PART II—OTHER INFORMATION

Item 1A.	Risk Factors	28
Item 6.	Exhibits	28
SIGNATURES		29

Table of Contents

NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q for Hepion Pharmaceuticals, Inc. may contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Such forward-looking statements are characterized by future or conditional verbs such as “may,” “will,” “expect,” “intend,” “anticipate,” believe,” “estimate” and “continue” or similar words. You should read statements that contain these words carefully because they discuss future expectations and plans, which contain projections of future results of operations or financial condition or state other forward-looking information. Such statements are only predictions and our actual results may differ materially from those anticipated in these forward-looking statements. We believe that it is important to communicate future expectations to investors. However, there may be events in the future that we are not able to accurately predict or control. Factors that may cause such differences include, but are not limited to, those discussed under Item 1A. Risk Factors and elsewhere in the audited consolidated financial statements as of and for the year ended December 31, 2021 contained in our Annual Report on Form 10-K filed with the Securities and Exchange Commission on April 8, 2022. These factors include the uncertainties associated with product development, the risk that products that appeared promising in early clinical trials do not demonstrate safety and efficacy in larger-scale clinical trials, the risk that we will not obtain approval to market our products, the risks associated with dependence upon key personnel and the need for additional financing. We do not assume any obligation to update forward-looking statements as circumstances change and thus you should not unduly rely on these statements. Cautionary Note Regarding Forward-Looking Statements.

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PART I—FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements

HEPION PHARMACEUTICALS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)


	September 30, 2022		December 31, 2021

Assets
Current assets:
Cash	$	59,145,193	$	91,348,967
Prepaid expenses	6,524,337		6,102,801
Total current assets	65,669,530		97,451,768
Property and equipment, net	82,986		152,772
Right-of-use assets	100,241		303,689
In-process research and development	3,190,000		3,190,000
Goodwill	—		1,870,924
Other assets	654,521		583,326
Total assets	$	69,697,278	$	103,552,479

Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	2,626,577	$	2,445,837
Accrued expenses	4,757,159		2,505,625
Operating lease liabilities, current	105,578		266,650
Short-term portion of contingent consideration	—		2,988,284
Total current liabilities	7,489,314		8,206,396
Contingent consideration	2,540,000		1,891,716
Deferred tax liability	409,022		409,022
Operating lease liabilities, non-current	—		50,342
Total liabilities	10,438,336		10,557,476
Commitments and contingencies
Stockholders' equity:
Series A convertible preferred stock, stated value $10 per share, 85,581 shares issued and outstanding at September 30, 2022 and December 31, 2021, respectively	855,808		855,808
Series C convertible preferred stock, stated value $1,000 per share, 1,801 and 1,806 shares issued and outstanding at September 30, 2022 and December 31, 2021, respectively	840,320		845,320
Common stock—$0.0001 par value per share; 120,000,000 shares authorized, 76,229,617 and 76,225,254 shares issued and outstanding at September 30, 2022 and December 31, 2021, respectively	7,623		7,623
Additional paid-in capital	226,535,396		224,787,547
Accumulated other comprehensive loss	(90,335)		—
Accumulated deficit	(168,889,870)		(133,501,295)
Total stockholders' equity	59,258,942		92,995,003
Total liabilities and stockholders' equity	$	69,697,278	$	103,552,479

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

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HEPION PHARMACEUTICALS, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Operations

(Unaudited)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Revenues	$	—	$	—	$	—	$	—
Cost and expenses:
Research and development	5,740,122		5,800,464		25,753,211		13,485,061
General and administrative	2,725,204		2,716,892		9,962,704		7,918,357
Total operating expenses	8,465,326		8,517,356		35,715,915		21,403,418
Loss from operations	(8,465,326)		(8,517,356)		(35,715,915)		(21,403,418)

Other income (expense):
Interest expense	(2,265)		(2,131)		(7,652)		(6,677)
Change in fair value of contingent consideration	(80,000)		(749,986)		334,992		(1,590,000)
Loss before income taxes	(8,547,591)		(9,269,473)		(35,388,575)		(23,000,095)
Income tax benefit (expense)	—		—		—		—
Net loss	$	(8,547,591)	$	(9,269,473)	$	(35,388,575)	$	(23,000,095)

Weighted-average common shares outstanding:
Basic and diluted	76,229,617		76,225,249		76,229,380		68,291,894

Net loss per common share: (see Note 10)
Basic and diluted	$	(0.11)	$	(0.12)	$	(0.46)	$	(0.34)

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

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HEPION PHARMACEUTICALS, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Comprehensive Loss

(Unaudited)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Net loss	$	(8,547,591)	$	(9,269,473)	$	(35,388,575)	$	(23,000,095)
Other comprehensive loss:
Foreign currency translation	(60,368)		—		(90,335)		—
Total other comprehensive loss	(60,368)		—		(90,335)		—
Comprehensive loss	$	(8,607,959)	$	(9,269,473)	$	(35,478,910)	$	(23,000,095)

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

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HEPION PHARMACEUTICALS, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Changes in Stockholders’ Equity

(Unaudited)


	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, 2021	85,581	$	855,808	1,806	$	845,320	76,225,254	$	7,623	$	224,787,547	$	—	$	(133,501,295)	$	92,995,003
Net loss	—	—		—	—		—	—		—		—		(6,929,685)		(6,929,685)
Other comprehensive income (loss)	—	—		—	—		—	—		—		9,146		—		9,146
Stock-based compensation expense	—	—		—	—		—	—		556,610		—		—		556,610
Conversion of Series C to common	—	—		(5)	(5,000)		46	—		5,000		—		—		—
Issuance of common stock, net	—	—		—	—		4,317	—		5,008		—		—		5,008
Balance at March 31, 2022	85,581	855,808		1,801	840,320		76,229,617	7,623		225,354,165		9,146		(140,430,980)		86,636,082
Net loss	—	—		—	—		—	—		—		—		(19,911,299)		(19,911,299)
Other comprehensive income (loss)	—	—		—	—		—	—		—		(39,113)		—		(39,113)
Stock-based compensation expense	—	—		—	—		—	—		634,651		—		—		634,651

Balance at June 30, 2022	85,581	855,808		1,801	840,320		76,229,617	7,623		225,988,816		(29,967)		(160,342,279)		67,320,321
Net loss	—	—		—	—		—	—		—		—		(8,547,591)		(8,547,591)
Other comprehensive income (loss)	—	—		—	—		—	—		—		(60,368)		—		(60,368)
Stock-based compensation expense	—	—		—	—		—	—		546,580		—		—		546,580

Balance at September 30, 2022	85,581	$	855,808	1,801