hepa-20230930

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, 2023

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 6, 2023 was 4,337,682.


		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	18
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	23
Item 4.	Controls and Procedures	23

PART II—OTHER INFORMATION

Item 1A.	Risk Factors	25
Item 6.	Exhibits	25
SIGNATURES		26


	September 30, 2023		December 31, 2022

Assets
Current assets:
Cash	$	19,284,080	$	51,189,088
Prepaid expenses and other current assets	1,985,356		5,306,985
Total current assets	21,269,436		56,496,073
Property and equipment, net	41,087		81,620
Right-of-use assets	242,507		50,585
In-process research and development	3,190,000		3,190,000

Other assets	260,078		426,174
Total assets	$	25,003,108	$	60,244,452

Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	3,006,221	$	2,665,896
Accrued expenses	2,907,565		4,799,983
Operating lease liabilities, current	112,282		53,614
Short-term portion of contingent consideration	376,430		366,229
Total current liabilities	6,402,498		7,885,722
Contingent consideration	1,903,570		2,093,771
Deferred tax liability	409,022		409,022
Operating lease liabilities, non-current	129,261		—
Total liabilities	8,844,351		10,388,515
Commitments and contingencies (see Note 11)
Stockholders' equity:
Series A convertible preferred stock, stated value $10 per share, 85,581 shares issued and outstanding at September 30, 2023 and December 31, 2022, respectively	855,808		855,808
Series C convertible preferred stock, stated value $1,000 per share, 1,800 and 1,801 shares issued and outstanding at September 30, 2023 and December 31, 2022, respectively	839,320		840,320
Common stock—$0.0001 par value per share; 120,000,000 shares authorized, 3,838,289 and 3,811,481 shares issued and outstanding at September 30, 2023 and December 31, 2022, respectively	384		381
Additional paid-in capital	228,124,931		223,950,940
Accumulated other comprehensive loss	(93,928)		(90,168)
Accumulated deficit	(213,567,758)		(175,701,344)
Total stockholders' equity	16,158,757		49,855,937
Total liabilities and stockholders' equity	$	25,003,108	$	60,244,452


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Revenues	$	—	$	—	$	—	$	—
Cost and expenses:
Research and development	8,518,520		5,740,122		30,196,848		25,753,211
General and administrative	2,146,045		2,725,204		7,842,512		8,091,780
Goodwill impairment loss	—		—		—		1,870,924
Total operating expenses	10,664,565		8,465,326		38,039,360		35,715,915
Loss from operations	(10,664,565)		(8,465,326)		(38,039,360)		(35,715,915)

Other income (expense):
Interest expense	(2,381)		(2,265)		(7,054)		(7,652)
Change in fair value of contingent consideration	140,000		(80,000)		180,000		334,992
Loss before income taxes	(10,526,946)		(8,547,591)		(37,866,414)		(35,388,575)
Income tax benefit (expense)	—		—		—		—
Net loss	$	(10,526,946)	$	(8,547,591)	$	(37,866,414)	$	(35,388,575)

Weighted-average common shares outstanding:
Basic and diluted	3,838,289		3,811,481		3,825,523		3,811,469

Net loss per common share: (see Note 10)
Basic and diluted	$	(2.74)	$	(2.24)	$	(9.90)	$	(9.28)


	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, 2022	85,581	$	855,808	1,801	$	840,320	3,811,481	$	381	$	223,950,940	$	(90,168)	$	(175,701,344)	$	49,855,937
Net loss	—	—		—	—		—	—		—		—		(13,259,921)		(13,259,921)
Other comprehensive income (loss)	—	—		—	—		—	—		—		19,353		—		19,353
Stock-based compensation expense	—	—		—	—		—	—		537,123		—		—		537,123
Conversion of Series C to common	—	—		(1)	(1,000)		1	—		1,000		—		—		—

Balance at March 31, 2023	85,581	855,808		1,800	839,320		3,811,482	381		224,489,063		(70,815)		(188,961,265)		37,152,492
Net loss	—	—		—	—		—	—		—		—		(14,079,547)		(14,079,547)
Other comprehensive income (loss)	—	—		—	—		—	—		—		(16,836)		—		(16,836)
Stock-based compensation expense	—	—		—	—		—	—		333,954		—		—		333,954
Stock-based liability awards converted to equity	—	—		—	—		—	—		2,983,006		—		—		2,983,006
Issuance of common stock in connection with stock split	—	—		—	—		26,807	3		(3)		—		—		—
Balance at June 30, 2023	85,581	855,808		1,800	839,320		3,838,289	384		227,806,020		(87,651)		(203,040,812)		26,373,069
Net loss	—	—		—	—		—	—		—		—		(10,526,946)		(10,526,946)
Other comprehensive income (loss)	—	—		—	—		—	—		—		(6,277)		—		(6,277)
Stock-based compensation expense	—	—		—	—		—	—		318,911		—		—		318,911

Balance at September 30, 2023	85,581	$	855,808	1,800	$	839,320	3,838,289	$	384	$	228,124,931	$	(93,928)	$	(213,567,758)	$	16,158,757


	Fair Value Measurement at Reporting Date Using
Description	Fair value		(Level 1)		(Level 2)		(Level 3)
As of September 30, 2023:
Contingent consideration	$	2,280,000	$	—	$	—	$	2,280,000


As of December 31, 2022:
Contingent consideration	$	2,460,000	$	—	$	—	$	2,460,000


	Assumptions
	September 30, 2023				December 31, 2022
Discount rate	11.0%				8.5%

Projected milestone achievement dates	Mar 2024		—	Jun 2029	Dec 2023		—	Dec 2028
Probability of success of milestone achievements	13	%	—	40%	13	%	—	40%


	Acquisition-related Contingent Consideration
Liabilities:
Balance at December 31, 2022	$	2,460,000
Change in fair value recorded in earnings	48,434
Balance at March 31,2023	2,508,434
Change in fair value recorded in earnings	(88,434)
Balance at June 30, 2023	2,420,000
Change in fair value recorded in earnings	(140,000)
Balance at September 30, 2023	$	2,280,000


	Estimated Useful Life (in years)	September 30, 2023		December 31, 2022
Equipment	3 years	$	340,133	$	326,382
Furniture and fixtures	7 years	62,183		62,183
Less: Accumulated depreciation		(361,229)		(306,945)
		$	41,087	$	81,620


	Indefinite-lived Intangible Asset
Rencofilstat balance at December 31, 2022	$	3,190,000
Change during the nine months ended September 30, 2023	—
Rencofilstat balance at September 30, 2023	$	3,190,000


	September 30, 2023		December 31, 2022
Payroll and related costs	$	945,029	$	838,683
Stock-based compensation	—		1,906,401
Research and development	1,752,939		1,716,035


Professional fees	35,322		246,664
Other	174,275		92,200
Total accrued expenses	$	2,907,565	$	4,799,983


	Number of Options	Exercise Price Per Share					Weighted Average Exercise Price Per Share		Intrinsic Value		Weighted Average Remaining Contractual Team
Balance outstanding, December 31, 2022	444,749	$	13.80	-	$	40,320.00	$	46.20	$	—	8.13 years
Granted	—	$	—	-	$	—	$	—	$	—
Adjustment for stock split	47	$	—	-	$	—	$	—	$	—
Exercised	—	$	—	-	$	—	$	—	$	—
Forfeited	(5,073)	$	34.00	-	$	74.40	$	34.05	$	—
Cancelled	(14,691)	$	32.60	-	$	11,648.00	$	40.31	$	—
Balance outstanding, September 30, 2023	425,032	$	13.80	-	$	40,320.00	$	47.51	$	—	7.08 years
Awards outstanding, vested awards and those expected to vest at September 30, 2023	424,345	$	13.80	-	$	40,320.00	$	47.54	$	—	7.07 years
Vested and exercisable at September 30, 2023	369,385	$	13.80	-	$

SEC Form 10-Q filed by Hepion Pharmaceuticals Inc.