UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the Quarterly Period Ended September 30, 2025

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

55 Madison Ave, Suite 400- PMB# 4362, Morristown, New Jersey 07960

(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		OTC Markets

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 ☐

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 X 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 12, 2025 was 11,620,317.

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	22
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

CAUTIONARY 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, 2024 contained in our Annual Report on Form 10-K filed with the Securities and Exchange Commission on April 8, 2025, as well as under Item 1A . Risk Factors within this Form 10-Q. These factors include the uncertainties associated with:

●	our ability to raise substantial additional capital to continue as a going concern and fund our planned operations in the near term;

●	estimates regarding our expenses, use of cash, timing of future cash needs and anticipated capital requirements;

●	success in retaining, or changes required in, our officers, key employees or directors;

●	our public securities’ potential liquidity and trading;

●	our ability to obtain and maintain regulatory approval of our product candidates, and any related restrictions, limitations or warnings in the label of any of our product candidates, if approved;

●	our plans to pursue research and development of other future product candidates;

●	the potential advantages of our product candidates and those being developed;

●	the rate and degree of market acceptance and clinical utility of our product candidates;

●	the success of our collaborations and partnerships with third parties;

●	our estimates regarding the potential market opportunity for our product candidates;

●	our sales, marketing and distribution capabilities and strategy;

●	our ability to establish and maintain arrangements for manufacture of our product candidates;

●	our ability to compete with companies currently marketing or engaged in the development of treatments for indications that our product candidates are designed to target; and

●	our intellectual property position, including the strength and enforceability of our intellectual property rights.

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. Condensed Consolidated Financial Statements

HEPION PHARMACEUTICALS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

	September 30, 2025			December 31, 2024
Assets
Current assets:
Cash	$	2,321,078		$	406,408
Prepaid expenses		1,419,162			1,207,329
Total current assets		3,740,240			1,613,737
Total assets	$	3,740,240		$	1,613,737

Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	77,243		$	220,202
Accrued expenses		55,859			23,684
Notes payable, current		214,309			2,900,000
Total current liabilities		347,411			3,143,886
Derivative financial instruments-warrants		68,397			333,189
Total liabilities		415,808			3,477,075
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 September 30, 2025 and December 31, 2024, respectively		855,808			855,808
Series C convertible preferred stock, stated value $1,000 per share, 1,688 shares issued and outstanding at September 30, 2025 and December 31, 2024, respectively		839,320			839,320
Convertible preferred stock		839,320			839,320


Common stock—$0.0001 par value per share; 120,000,000 shares authorized, 11,620,317 and 139,168 shares issued and outstanding at September 30, 2025 and December 31, 2024, respectively.		1,162			14
Additional paid-in capital		247,060,568			234,252,981
Accumulated other comprehensive income		8,345			8,345
Accumulated deficit		(245,440,771	)		(237,819,806	)
Total stockholders’ equity		3,324,432			(1,863,338	)
Total liabilities and stockholders’ equity	$	3,740,240		$	1,613,737

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)

	2025			2024			2025			2024
	Three Months Ended September 30,						Nine Months Ended September 30,
	2025			2024			2025			2024
Revenues	$	—		$	—		$	—		$	—
Cost and expenses:
Research and development		—			2,762,709			445,512			12,438,956
General and administrative		527,902			1,695,550			2,705,750			5,705,468
Asset impairment loss		—			—			402,746			—
Total operating expenses		527,902			4,458,259			3,554,008			18,144,424
Loss from operations		(527,902	)		(4,458,259	)		(3,554,008	)		(18,144,424	)

Other income (expense):
Interest income (expense)		8,116			(474,570	)		(11,829	)		(429,383	)
Change in fair value of contingent consideration and derivative financial instruments		47,280			66,881			(4,055,128	)		6,526,633
Inducement expense		—			—			—			(2,567,044	)
Loss before income taxes		(472,506	)		(4,865,948	)		(7,620,965	)		(14,614,218	)
Income tax benefit		—			—			—			2,969,252
Net loss	$	(472,506	)	$	(4,865,948	)	$	(7,620,965	)	$	(11,644,966	)

Weighted-average common shares outstanding:
Basic and diluted		11,620,317			134,379			8,653,428			117,410

Net loss per common share: (see Note 10)
Basic and diluted	$	(0.04	)	$	(36.21	)	$	(0.88	)	$	(99.18	)

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)

	2025			2024			2025			2024
	Three Months Ended September 30,						Nine Months Ended September 30,
	2025			2024			2025			2024
Net loss	$	(472,506	)	$	(4,865,948	)	$	(7,620,965	)	$	(11,644,966	)
Other comprehensive income (loss):
Foreign currency translation		—			(9	)		—			24,948
Total other comprehensive income (loss)		—			(9	)		—			24,948
Comprehensive loss	$	(472,506	)	$	(4,865,957	)	$	(7,620,965	)	$	(11,620,018	)

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)

	Shares		Amount		Shares		Amount		Shares		Amount		Capital		Income (Loss)			Deficit			Equity
	Preferred Stock				Preferred Stock								Additional		Accumulated other						Total
	Series A				Series C				Common Stock				Paid in		Comprehensive			Accumulated			Stockholders’
	Shares		Amount		Shares		Amount		Shares		Amount		Capital		Income (Loss)			Deficit			Equity
Balance at December 31, 2023		85,581	$	855,808		1,688	$	839,320		96,375	$	10	$	230,291,834	$	(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		—		—		—		—		13,088		1		2,300,688		—			—			2,300,689

Balance at March 31, 2024		85,581		855,808		1,688	$	839,320		109,463	$	11	$	233,298,292	$	9,200		$	(227,481,192	)	$	7,521,439
Net loss		—		—		—		—		—		—		—		—			(3,925,212	)		(3,925,212	)
Other comprehensive income (loss)		—		—		—		—		—		—		—		(63,022	)		—			(63,022	)
Stock-based compensation expense		—		—		—		—		—		—		28,625		—			—			28,625
Issuance of shares in abeyance		—		—		—		—		6,520		—		—		—			—			—

Balance at June 30, 2024		85,581		855,808		1,688	$	839,320		115,983	$	11	$	233,326,917	$	(53,822	)	$	(231,406,404	)	$	3,561,830
Net loss		—		—		—		—		—		—		—		—			(4,865,948	)		(4,865,948	)
Other comprehensive income (loss)		—		—		—		—		—		—		—		(9	)		—			(9	)
Stock-based compensation expense		—		—		—		—		—		—		28,625		—			—			28,625
Issuance of common stock		—		—		—		—		23,185		3		868,814		—			—			868,817
Balance at September 30, 2024		85,581		855,808		1,688	$	839,320		139,168	$	14	$	234,224,356	$	(53,831	)	$	(236,272,352	)	$	406,685

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			Accumulated other					Total
	Series A				Series C				Common Stock				Paid in			Comprehensive		Accumulated			Stockholders’
	Shares		Amount		Shares		Amount		Shares		Amount		Capital			Income (Loss)		Deficit			Equity
Balance at December 31, 2024		85,581	$	855,808		1,688	$	839,320		139,168	$	14	$	234,252,981		$	8,345	$	(237,819,806	)	$	(1,863,338	)

Net loss		—		—		—		—		—		—		—			—		(6,105,887	)		(6,105,887	)
Stock-based compensation expense		—		—		—		—		—		—		20,783			—		—			20,783
Issuance of restricted stock units		—		—		—		—		1,000		—		—			—		—			—
Issuance of common stock and pre-funded warrants, net		—		—		—		—		553,846		55		2,086,537			—		—			2,086,592
Issuance of common stock in connection with stock split		—		—		—		—		60,860		6		(6	)		—		—			—
Conversion of 2025 Series B warrants into common stock		—		—		—		—		8,834,034		884		9,757,029			—		—			9,757,913
Balance at March 31, 2025		85,581	$	855,808		1,688	$	839,320		9,588,908		959	$	246,117,324		$	8,345	$	(243,925,693	)	$	3,896,063

Net loss		—		—		—		—		—		—		—			—		(1,042,572	)		(1,042,572	)
Conversion of 2025 Series B warrants into common stock		—		—		—		—		1,339,368		134		672,684			—		—			672,818
Issuance of common stock in connection with license agreement		—		—		—		—		692,041		69		270,560			—		—			270,629
Balance at June 30, 2025		85,581	$	855,808		1,688	$	839,320		11,620,317		1,162	$	247,060,568		$	8,345	$	(244,968,265	)	$	3,796,938
Balance		85,581	$	855,808		1,688	$	839,320		11,620,317		1,162	$	247,060,568		$	8,345	$	(244,968,265	)	$	3,796,938
Net loss		—		—		—		—		—		—		—			—		(472,506	)		(472,506	)
Balance at September 30, 2025		85,581	$	855,808		1,688	$	839,320		11,620,317		1,162	$	247,060,568		$	8,345	$	(245,440,771	)	$	3,324,432
Balance		85,581	$	855,808		1,688	$	839,320		11,620,317		1,162	$	247,060,568		$	8,345	$	(245,440,771	)	$	3,324,432

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 Cash Flows

(Unaudited)

	2025			2024
	Nine Months Ended September 30,
	2025			2024
Cash flows from operating activities:
Net loss	$	(7,620,965	)	$	(11,644,966	)
Adjustments to reconcile net loss to net cash used in operating activities:
Stock-based compensation		20,783			763,020
Asset impairment loss		402,746			—
Depreciation		—			30,758
Amortization of debt discount		—			474,570
Inducement expense		—			2,567,044
Change in fair value of derivative instrument-warrants		4,055,133			(4,506,633	)
Change in fair value of contingent consideration		—			(2,020,000	)
Changes in operating assets and liabilities:
Accounts payable and accrued expenses		(110,786	)		(4,297,192	)
Right of use asset		—			94,577
Operating lease liability		—			(91,068	)
Prepaid expenses and other assets		314,344			1,566,461
Net cash used in operating activities		(2,938,745	)		(17,063,429	)

Cash flows from investing activities:
Investment in license agreement		(132,117	)		—
Investment in related party receivable		—			(600,000	)
Net cash used in investing activities		(132,117	)		(600,000	)

Cash flows from financing activities:
Proceeds from the issuance of common stock and warrants, net		9,000,000			1,849,707
Equity issuance costs		(802,597	)		—
Payments on notes payable		(3,211,871	)		—
Proceeds from equity and debt issuance under SPA, net of discount		—			2,500,000
Net cash provided by financing activities		4,985,532			4,349,707
Effect of exchange rates on cash		—			24,948
Net increase (decrease) in cash		1,914,670			(13,288,774	)
Cash at beginning of period		406,408			14,785,880
Cash at end of period	$	2,321,078		$	1,497,106

Supplementary disclosure of cash flow information:

Supplementary disclosure of non-cash investing and financing activities:
Issuance of Note Payable for payment of prepaid expense		526,178			—
Inducement expense for issuance of Series B-1 and B-2 warrants	$	—		$	2,821,399
Cashless Exercise of 2025 Series B Warrants	$	10,430,732		$	—
Issuance of common stock in connection with license agreement	$	270,629

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

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HEPION PHARMACEUTICALS, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited)

1. Business Overview

Hepion Pharmaceuticals, Inc. (we, our, or us) is a medical diagnostic company headquartered in Morristown, New Jersey, that was previously focused on the development of drug therapy for treatment of chronic liver diseases. Our cyclophilin inhibitor, rencofilstat (formerly CRV431), was being developed to offer benefits to address multiple complex pathologies related to the progression of liver disease.

We were developing rencofilstat as our lead molecule. Rencofilstat is a compound that binds and inhibits the function of a specific class of isomerase enzymes called cyclophilins that regulate protein folding, in addition to other activities. Many closely related isoforms of cyclophilins exist in humans. Cyclophilins A, B, and D are the best characterized cyclophilin isoforms. Inhibition of cyclophilins has been shown in scientific literature to have therapeutic effects in a variety of experimental models, including liver disease models.

On April 19, 2024, we announced that we have begun wind-down activities in our ASCEND- NASH clinical trial. We did not have access to sufficient funding to complete the study, as designed. The wind-down activities were implemented to halt further clinical activities other than those which would allow for an orderly and patient safety manner that would meet the minimum FDA requirements for safely closing a clinical trial. All clinical trial activities were completed and the trial was closed in August 2024.

On July 19, 2024, we along with Pharma Two B Ltd., a company organized under the laws of the State of Israel (“Parent”), and Pearl Merger Sub, Inc., a Delaware corporation and an indirect wholly owned subsidiary of Parent (“Merger Sub”), entered into an Agreement and Plan of Merger (the “Merger Agreement”), pursuant to which, among other things, on the terms and subject to the conditions set forth therein, Merger Sub will merge with and into us (the “Merger”), pursuant to which we would survive the Merger as an indirect wholly owned subsidiary of Parent.

Concurrently with the Merger, on July 19, 2024, we entered into a Securities Purchase Agreement (the “SPA”) with certain purchasers pursuant to which we sold an aggregate of $2.9 million in principal amount of our Original Issue Discount Senior Unsecured Nonconvertible Notes (the “Notes”). The Notes are due on the earlier of: (i) December 31, 2024, (ii) the date of the closing of the Merger, (iii) the date that the Merger is terminated pursuant to the terms of the Merger Agreement, or (iv) such earlier date as the Notes are required or permitted to be repaid as provided in the Note, as may be extended at the option of the holder of the Note as described in the Note.

On December 10, 2024, Parent informed us that Nasdaq would not exclude our historical losses from its burn rate calculation and as a result on December 10, 2024, we and Pharma Two B and Pearl entered into an agreement to terminate the Merger Agreement (the “Termination Agreement”). Pursuant to the Termination Agreement, the Merger Agreement was terminated.

On May 9, 2025, Hepion Pharmaceuticals, Inc., a Delaware corporation (the “Company”), entered into a license agreement (“License Agreement”) with New Day Diagnostics LLC (“New Day”) pursuant to which the Company in-licensed certain diagnostic tests for celiac disease, respiratory multiplex (Covid/Influenza A/B and RSV), helicobacter pylori (“H. pylori”) and hepatocellular carcinoma (“HCC”). The celiac, respiratory multiplex and H. pylori tests have CE marks and are eligible to be sold in the European Union (“EU”) and certain eligible markets that accept the CE mark, with the notable exception of the United States at the present time. Pursuant to the License Agreement, the Company paid $525,000 in cash to New Day along with $270,629 in common stock of the Company. In addition, the Company has agreed to pay New Day up to $17.15 million upon achievement of certain regulatory, sales and reimbursement milestones. In addition, the Company will pay New Day royalty rates in the upper single to low double digits based on net sales.

The Company accounted for this transaction as an asset acquisition. The total consideration of $815,045, including the $19,146 of transaction fees, was allocated between purchased in-process research and development and Intangibles for the assets with CE mark in the EU. The portion allocated to in-process research and development was $412,299 and it was expensed upon the completion of the transaction, as research and development cost. We did not recognize any contingent consideration (milestone payments) given the low probability of meeting those targets. Royalties will be recognized when earned.

In accordance with ASC 360-10-35-21, a long-lived asset (asset group) shall be tested for recoverability whenever events or changes in circumstances indicate that its carrying amount may not be recoverable. We tested the asset for impairment during the reporting period, noting there were triggering events related to delayed timing to market resulting in an adverse effect on estimated cashflow over the next two years. Given that the license agreement requires both parties to agree to renewal after the initial two years, we projected the estimated cashflows for the first two years for the assets available for sales in eligible markets, noting the projected cashflow will not be enough to recover the allocated cost in the first two years of the license agreement. The total impairment loss recorded was $402,746. Therefore, the total cost related to the New Day licensing agreement was expensed.

On May 26, 2025, Hepion Pharmaceuticals, Inc., a Delaware corporation (the “Company”), entered into a patent and associated assets acquisition agreement (the “Agreement”) with Panetta Partners Limited (“Panetta”) whereby Panetta purchased from the Company all patent assets, knowhow, clinical trial data and drug product relating to Rencofilstat (formerly CRV431) for a nominal amount. There was no gain or loss resulting from this transaction. Panetta also assumed all contingent consideration obligations to the predecessor company’s shareholders. Pursuant to the Agreement, Panetta has agreed to provide a contingent value right (“CVR”) to the stockholders of the Company to receive one or more contingent payments upon the achievement of certain milestones as set forth below:

	a)	a payment of US$500,000 on the regulatory approval by the US Food and Drug Administration of the first new drug application for Rencofilstat (formerly CRV431)
	b)	a further payment of US$1,000,000 on first instance of net sales of an approved drug product containing Rencofilstat (a “Licensed Product”) exceeding US$350,000,000; and
	c)	a further payment of US$3,000,000 on first instance of net sales of a Licensed Product exceeding US$750,000,000.

We did not recognize any contingent consideration given the high uncertainty of achieving these milestones.

2. Basis of Presentation

Basis of Presentation

These unaudited condensed consolidated financial statements have been prepared following the requirements of the Securities and Exchange Commission (“SEC”) and accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim reporting. In the opinion of management, the accompanying unaudited condensed consolidated financial statements include all adjustments, which include only normal recurring adjustments, necessary to present fairly our interim financial information. The consolidated balance sheet as of December 31, 2024, was derived from the audited annual consolidated financial statements but does not include all disclosures required by U.S. GAAP. The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto as of and for the year ended December 31, 2024, contained in our Annual Report on Form 10-K filed with the SEC on April 8, 2025.

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HEPION PHARMACEUTICALS, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Principles of Consolidation

The accompanying condensed consolidated financial statements include our accounts and the accounts of our subsidiaries, Contravir Research Inc. and Hepion Research Corp, which conduct their operations in Canada. All intercompany balances and transactions have been eliminated in consolidation.

Reverse Stock Split

On March 17, 2025, we effected a reverse stock split of our voting common stock at a ratio of one-for-fifty (the “Reverse Stock Split”). When the Reverse Stock Split became effective, every fifty (50) shares of our issued and outstanding Common Stock immediately prior to the effective time was automatically reclassified into one (1) share of Common Stock, without any change in the par value per share. The Reverse Stock Split reduced the number of shares of Common Stock issuable upon the exercise or vesting of its outstanding stock options and warrants in proportion to the ratio of the Reverse Stock Split and causes a proportionate increase in the conversion and exercise prices of such stock options and warrants. In addition, the number of shares reserved for issuance under our equity compensation plans immediately prior to the effective time was reduced proportionately. The Reverse Stock Split did not change the total number of authorized shares of Common Stock or preferred stock.

Going Concern

As of September 30, 2025, we had $2.3 million in cash, an accumulated deficit of $245.4 million, and working capital of $3.4 million. For the nine months ended September 30, 2025, cash used in operating activities was $2.9 million and we had a net loss of $7.6 million. We have not generated revenue to date and have incurred substantial losses and negative cash flows from operations since our inception. We have historically funded our operations through the issuance of convertible preferred stock, warrants, the issuance and sale of shares of our common stock, and subsequent issuances of shares of our common stock through at-the market offerings. Our ability to continue operations after our current cash resources are exhausted depends on future events outside of our control, including our ability to obtain additional financing or to achieve profitable operations, as to which no assurances can be given. If adequate additional funds are not available when required, management may need to curtail planned operations to conserve cash until sufficient additional capital can be raised. There can be no assurances that such a plan would be successful.

These condensed consolidated financial statements have been prepared under the assumption that we will continue as a going concern. Due to our recurring and expected continuing losses from operations, we have concluded there is substantial doubt in our ability to continue as a going concern within one year of the issuance of these condensed consolidated financial statements without additional capital becoming available to us. The condensed consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

We cannot be certain that additional funding will be available on acceptable terms, or at all. 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 business. If we are unable to raise additional capital when required or on acceptable terms, we may have to (i) seek collaborators for our product candidates on terms that are less favorable than might otherwise be available; or (ii) relinquish or otherwise dispose of rights to technologies, product candidates or products that we would otherwise seek to develop or commercialize on unfavorable terms.

On January 23, 2025, we consummated a “best efforts” public offering of 553,846 shares of common stock (or pre-funded warrants in lieu thereof) with each share of common stock (or pre-funded warrant) accompanied by (i) a series A common warrant to purchase one (1) common share at an exercise price of $20.00 per share and (ii) a series B common warrant to purchase one (1) common share at an exercise price of $20.00 per share. The gross proceeds of the public offering were approximately $9.0 million before deducting placement agent fees and offering expenses and were used to repay certain indebtedness and for general corporate purposes, including working capital, operating expenses and capital expenditures.

3. Summary of Significant Accounting Policies

Use of Estimates

The preparation of condensed consolidated 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 condensed consolidated 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.

Our significant accounting policies are disclosed in the audited consolidated financial statements for the year ended December 31, 2024, included in our Annual Report on Form 10-K. Since the date of such consolidated financial statements, there have been no changes to our significant accounting policies.

Cash

As of September 30, 2025 and December 31, 2024, cash was $2.3 million and $0.4 million, respectively, consisting of checking and money market accounts held at U.S. and Canadian commercial banks. At certain times, our cash balances with any one financial institution may exceed Federal Deposit Insurance Corporation insurance limits. We believe it mitigates our risk by depositing our cash balances with high credit, quality financial institutions. We have never experienced losses related to these balances.

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HEPION PHARMACEUTICALS, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Fair Value of Financial Instruments

Accounting Standards Codification (“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 our 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 us. Unobservable inputs are inputs that reflect our 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 we can 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 us 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, accounts payable, contingent consideration and derivative financial instruments. Cash and accounts payable are stated at their respective historical carrying amounts, which approximate fair value due to their short-term nature. Contingent consideration, and derivative financial instruments are recorded at fair value at the end of each reporting period.

Property, equipment and depreciation

As of September 30, 2025 and December 31, 2024, we had $0 of property and equipment. Expenditures for additions, renewals and improvements will be capitalized at cost. Depreciation will generally be computed on a straight-line method based on the estimated useful lives of the related assets. The estimated useful lives of the depreciable assets are 3 years to 7 years. Expenditures for repairs and maintenance are charged to operations as incurred. We will periodically evaluate whether current events or circumstances indicate that the carrying value of our depreciable assets may not be recoverable. There were no adjustments to the carrying value of property and equipment at September 30, 2025 or December 31, 2024.

Income Taxes

We account for income taxes under the asset and liability method. We recognize deferred tax assets and liabilities for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases, as well as for operating loss and tax credit carryforwards. We measure deferred tax assets and liabilities using enacted tax rates expected to apply to taxable income in the years in which we expect to recover or settle those temporary differences. We recognize the effect of a change in tax rates on deferred tax assets and liabilities in the results of operations in the period that includes the enactment date. We reduce the measurement of a deferred tax asset, if necessary, by a valuation allowance if it is more likely than not that we will not realize some or all of the deferred tax asset. We account for uncertain tax positions by recognizing the financial statement effects of a tax position only when, based upon technical merits, it is “more-likely-than-not” that the position will be sustained upon examination. Potential interest and penalties associated with unrecognized tax positions are recognized in income tax expense.

We continue to maintain a full valuation allowance for our net deferred tax assets.

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Notes to Condensed Consolidated Financial Statements

(Unaudited)

Under the provisions of the Internal Revenue Code, the net operating loss (NOL) and tax credit carryforwards are subject to review and possible adjustment by the Internal Revenue Service and state tax authorities. NOL and tax credit carryforwards may become subject to an annual limitation in the event of certain cumulative changes in the ownership interest of significant shareholders over a three-year period in excess of 50%, as defined under Sections 382 and 383 of the Internal Revenue Code of 1986, respectively, as well as similar state tax provisions. This could limit the amount of tax attributes that we can utilize annually to offset future taxable income or tax liabilities. The amount of the annual limitation, if any, will be determined based on our value immediately prior to the ownership change. Subsequent ownership changes may further affect the limitation in future years. The utilization of these NOLs is subject to limitations based on past and future changes in our ownership pursuant to Section 382. We completed a Section 382 study of transactions in our stock through December 31, 2021 and concluded that we have experienced ownership changes since inception that we believe under Section 382 and 383 of the Internal Revenue Code will result in limitations on our ability to use certain pre-ownership change NOLs and credits. We believe that additional ownership changes have likely occurred since that time as a result of equity offerings and other changes in the ownership of our stock. As a result, the amount of the NOLs and tax credit carryforwards presented in our consolidated financial statements could be further limited. Similar provisions of state tax law may also apply to limit the use of accumulated state tax attributes.

There was no income tax expense or benefit for the three and nine months ended September 30, 2025. The income tax benefit for the three and nine months ended September 30, 2024 was 0 and $3.0 million, respectively. The $3 million tax benefit from the nine months ended September 30, 2024 was related to the sale of our state NOLs related to prior years under the State of New Jersey’s Technology Business Tax Certificate Transfer Program.

Contingencies

In the normal course of business, we are subject to loss contingencies, such as legal proceedings and claims arising out of our business that cover a wide range of matters, including, among others, government investigations, shareholder lawsuits, product and environmental liability, and tax matters. In accordance with ASC Topic 450, Accounting for Contingencies, (“ASC 450”), we record accruals for such loss contingencies when it is probable that a liability will be incurred, and the amount of loss can be reasonably estimated. In accordance with this guidance, we do not recognize gain contingencies until realized.

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.

As part of the New Day licensing agreement, Company in-licensed certain diagnostic tests for celiac disease, respiratory multiplex (Covid/Influenza A/B and RSV), helicobacter pylori (“H. pylori”) and hepatocellular carcinoma (“HCC”). The celiac, respiratory multiplex and H. pylori tests have CE marks and are eligible to be sold in the European Union (“EU”) and certain eligible markets that accept the CE mark, with the notable exception of the United States at the present time.

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 we have no history of successful commercialization of product candidates to base any estimate of the number of future periods that would be benefited.

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. At September 30, 2025 and December 31, 2024, we had prepaid research and development costs of $0.

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HEPION PHARMACEUTICALS, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Share-based payments

ASC Topic 718, Compensation—Stock Compensation (“ASC 718”), requires companies to measure the cost of employee and non-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, we issue stock options with only service-based vesting conditions and record the expense for awards using the straight-line method (see Note 8). We account for awards granted to employees that are in excess of what is available to grant as a liability recorded at fair value each reporting period in the consolidated financial statements.

The fair value of each stock option grant is estimated on the date of grant using the Black-Scholes option-pricing model. The estimated expected stock volatility is based on the historical volatility of our own traded stock price. The expected term of 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 we have never paid cash dividends and do not expect to pay any cash dividends in the foreseeable future.

ASC 718 allows for the election of forfeitures to be estimated at the time of grant and revised if necessary, in subsequent periods if actual forfeitures differ from those estimates. Our actual historical forfeiture rate of 3% was used for the three months ended September 30, 2025 and 2024. We will continue to analyze the forfeiture rate on at least an annual basis or when there are any identified triggers that would justify immediate review.

Foreign Exchange

The functional currency of Hepion Pharmaceuticals, Inc. and ContraVir Research Inc. is the U.S. dollar. The functional currency of Hepion Research Corp. is the Canadian dollar. Assets and liabilities of Hepion Research Corp. are translated into U.S. dollars using period-end exchange rates; income and expenses are translated using the average exchange rates for the reporting period. Unrealized foreign currency translation adjustments are deferred in accumulated other comprehensive loss, a separate component of shareholders’ equity. The amount of currency translation adjustment was de minimis at September 30, 2025 and December 31, 2024. Transactions in foreign currencies are remeasured into the functional currency of the relevant subsidiaries at the exchange rate in effect at the date of the transaction. Any monetary assets and liabilities arising from these transactions are translated into the functional currency at exchange rates in effect at the balance sheet date or on settlement. Resulting gains and losses are recorded in general and administrative expense within the consolidated statements of operations. The impact of foreign exchange losses (gains) was $0 and $72,806 for the nine months ended September 30, 2025 and 2024, respectively. The impact of foreign exchange loss was $0 and $20,402 for the three months ended September 30, 2025 and 2024, respectively.

Segment Information

Operating segments are defined as components of an enterprise about which separate discrete information is available for evaluation by the chief operating decision maker (CODM), or decision-making group, in deciding how to allocate resources and in assessing performance. Our chief operating decision maker views our operations and manages the business in one segment. The Company reports its segment information to reflect the manner in which the CODM reviews and assesses performance. The Company’s Interim Chief Executive Officer has the responsibility as the CODM and reviews and assesses the performance of the Company as a whole.

The primary financial measures used by the CODM to evaluate performance and allocate resources is consolidated net loss. The CODM uses consolidated net loss to evaluate the performance of the Company’s ongoing operations and as part of the Company’s internal planning and forecasting processes.

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Notes to Condensed Consolidated Financial Statements

(Unaudited)

Net loss per share

Basic and diluted net loss per share is presented in conformity with ASC Topic 260, Earnings per Share, (“ASC 260”) for all periods presented. In accordance with this guidance, 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.

Recent Accounting Pronouncements

There are no recent accounting pronouncements that will have a material effect on our condensed consolidated financial statements for the three months ended September 30, 2025.

4. Stockholders’ Equity

On July 19, 2024, Hepion Pharmaceuticals, Inc., a Delaware corporation (the “Company”), Pharma Two B Ltd., a company organized under the laws of the State of Israel (“Parent”), and Pearl Merger Sub, Inc., a Delaware corporation and an indirect wholly owned subsidiary of Parent (“Merger Sub”), entered into an Agreement and Plan of Merger to which, among other things, on the terms and subject to the conditions set forth therein, Merger Sub will merge with and into the Company (the “Merger”), with the Company surviving the Merger as an indirect wholly owned subsidiary of Parent. Merger Sub is a newly incorporated Delaware corporation and a wholly owned, direct subsidiary of P2B HoldCo, Inc., a Delaware corporation (“Holdco”). Holdco is a wholly owned, direct subsidiary of P2B Topco, Inc., a Delaware corporation (“Topco”). Topco is a wholly owned, direct subsidiary of Parent. Each of Merger Sub, Holdco and Topco were formed for purposes of consummating the transactions contemplated by the Merger Agreement and the other Transaction Agreements (as defined in the Merger Agreement).

Concurrently with the Merger, on July 19, 2024, the Company entered into a Securities Purchase Agreement (the “SPA”) with certain purchasers pursuant to which the Company sold an aggregate of $2.9 million in principal amount of the Company’s Original Issue Discount Senior Unsecured Nonconvertible Notes (the “Notes”). In addition, pursuant to the SPA, the Company issued to the purchasers an aggregate 23,185 shares of Common Stock.

The Merger was expected to be consummated in the fourth quarter of 2024, however, on December 11, 2024, the Company announced the termination of the Merger Agreement, as Pharma Two B informed the Company that Nasdaq will not exclude historical losses of the Company from its burn rate calculation.

Series A Convertible Preferred Stock

On October 14, 2014, our Board of Directors authorized the sale and issuance of up to 1,250,000 shares of Series A Convertible Preferred Stock (the “Series A”). All shares of the Series A were issued between October 2014 and February 2015. Each share of the Series A is convertible at the option of the holder into the number of shares of common stock determined by dividing the stated value of such share by the conversion price that is subject to adjustment. As of December 31, 2024, there were 85,581 shares outstanding. During the nine months ended September 30, 2025 and 2024, no shares of the Series A were converted. If we sell common stock or equivalents at an effective price per share that is lower than the conversion price, the conversion price may be reduced to the lower conversion price. The Series A will be automatically convertible into common stock in the event of a fundamental transaction as defined in the offering.

Series C Convertible Preferred Stock Issuance

On July 3, 2018, we completed a rights offering pursuant to our effective registration statement on Form S-1. We offered for sale units in the rights offering and each unit sold in connection with the rights offering consisted of 1 share of our Series C Convertible Preferred Stock, or Series C, and common stock warrants (the “Rights Offering”). Upon completion of the offering, pursuant to the rights offering, we sold an aggregate of 10,826 units at an offering price of $1,000 per unit comprised of 10,826 shares of Series C and 89 common stock warrants that expired in July 2023. As of September 30, 2025, there were 1,688 shares outstanding. During nine months ended September 30, 2025 and 2024, no shares of the Series C were converted. Each share of Series C is convertible into common stock at any time at the option of the holder thereof at the conversion price then in effect. The conversion price for the Series C is determined by dividing the stated value of $1,000 per share by $0.0092 per share (subject to adjustments upon the occurrence of certain dilutive events).

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Notes to Condensed Consolidated Financial Statements

(Unaudited)

Common Stock and Warrant Offering

On February 16, 2024, the Company entered into an agreement with a current warrant holder to exercise the outstanding Series B Warrants (the “Series B Warrant Agreement”). Pursuant to the terms of the Series B Warrant Agreement, the holder agreed to exercise the Series B Warrant in full and purchase a total of 19,608 shares of common stock at a reduced price of $105.00 per share, generating total gross cash proceeds of $2,058,825.

The Company accounted for this transaction as a modification and settlement of the Series B Warrant liability. As such, the Company first recognized a gain of $286,007 as a result of the change in fair value of the Series B Warrant immediately prior to the modification. As the modified Series B Warrant was immediately exercisable, the post-modification fair value was determined to be the intrinsic value of the Series B Warrant at the date of the modification. Therefore, the change in fair value on the date of the modification prior to the modification compared to the fair value on the date of the modification after the modification, but prior to exercise was determined to be $601,224, which was recorded as an inducement charge, within other expenses in the Company’s consolidated statement of operations. The Company then subsequently reclassified the liability into equity upon settlement.

As part of the transaction, the Company incurred equity issuance costs of $209,118 related to advisory and legal fees directly attributable to the issuance of the common stock from the Series B Warrant Agreement, which were recorded against additional paid-in-capital.

In connection with the offering, the Company agreed to amend, effective upon the closing of this offering, the terms of the October 2023 Series A common stock purchase warrant held by a purchaser in the offering to reduce the exercise price thereof to $95.50 per share and to extend the expiration date to February 2029. All of the other terms of the October 2023 Series A common stock purchase warrant will remain unchanged.

The Company accounted for this transaction as a modification of the Series A Warrant liability. As such the Company first recognized a gain of $669,466 as a result of the change in fair value of the Series A Warrant immediately prior to the modification. As a result of the modification, the change in fair value on the date of the modification prior to the modification compared to the fair value on the date of the modification after the modification, but prior to exercise was an fair value of $346,869, which was recorded as an inducement expense, due to the modification being a result of the Series B Warrant Agreement, and is recorded within the Company’s consolidated statement of operations.

Additionally, as part of the Series B Warrant Agreement, we issued to the investor unregistered Series B-1 Warrants to purchase up to an aggregate of 14,706 shares of common stock and Series B-2 Warrants to purchase up to an aggregate of 14,706 shares of common stock, collectively the “New Warrant Shares”. The Series B-1 and Series B-2 Warrants will have an exercise price of $95.50 per share, will be exercisable immediately following the date of issuance and will expire in 5 years and 1.5 years, respectively. The grant date value of the New Warrant Shares issued of $2,821,000 was recorded as inducement expense within other expenses in the Company’s consolidated statement of operations.

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HEPION PHARMACEUTICALS, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited)

The fair value of these liability classified warrants was estimated using the Black-Scholes option pricing model. This method of valuation involves using inputs such as the fair value of our common stock, historical volatility, the contractual term of the warrants, risk-free interest rates and dividend yields. Due to the nature of these inputs, the valuation of the warrants is considered a Level 2 measurement (see Note 6). The following assumptions were used to measure the Series A and Series B Warrants as of September 30, 2025 and December 31, 2024.

	Series A Warrants
	September 30,		December 31,
	2025		2024
Stock price	$	0.05	$

SEC Form 10-Q filed by Hepion Pharmaceuticals Inc.