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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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HEPION PHARMACEUTICALS, INC. AND SUBSIDIARIES

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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HEPION PHARMACEUTICALS, INC. AND SUBSIDIARIES

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).

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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HEPION PHARMACEUTICALS, INC. AND SUBSIDIARIES

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		$	23.50
Expected warrant term (years)		3.39 years			4.1 years
Risk-free interest rate		3.68	%		4.3	%
Expected volatility		154.84	%		90.1	%
Dividend yield		—			—

	Series B-1 Warrants						Series B-2 Warrants
	September 30			December 31,			September 30,		December 31,
	2025			2024			2025		2024
Stock price	$	0.05		$	23.50		$	N/A	$	23.50
Expected warrant term (years)		3.39 years			4.1 years			N/A		0.6 year
Risk-free interest rate		3.68	%		4.3	%		N/A		4.2	%
Expected volatility		154.84	%		90.1	%		N/A		92.6	%
Dividend yield		—			—			—		—

As of September 30, 2025, the Series B-2 warrants had expired.

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 exercise periods for the Series A and B warrants are five years and two and half years, respectively. The Series B warrants have an alternate cashless exercise of one warrant for three common shares.

The Company accounted for Series A and Series B warrants as liability awards and the Pre-Funded Warrant as a permanent equity, using an allocation of 75% for the liability and 25% for the equity components. A total of $2.3 million was recorded to permanent equity for the common stock and pre-funded warrants. The Series A and Series B Warrants were recorded at fair value on the date of issuance, and remeasured at fair value at the balance sheet date, with changes in fair value recorded to earnings. The Series A and Series B Warrant liabilities were assessed to be $1.3 million and $5.4 million, respectively, on the day of the transaction. As of September 30, 2025, a total of 10,173,402 Series B warrants were exercised and converted into common shares. As of September 30, 2025, none of the Series A warrants have been exercised, and the fair value of the Series A warrant liability was $0.1 million. The total number of unexercised Series A warrants as of September 30, 2025 was 3,443,461. All the pre-funded warrants were exercised as of March 31, 2025.

As part of the transaction, the Company incurred equity issuance costs of $0.8 million related to advisory and legal fees directly attributable to the issuance of the common stock from the Series A and Series B Warrant Agreement, which were allocated at $0.2 million and $0.6 million against additional paid-in-capital and warrant liability (expensed to change in fair value), respectively.

The combined offering price of each share of common stock together with the accompanying Series A and Series B common warrants is $16.250, and the combined offering price of each pre-funded warrant, all of which were exercised as of April 2, 2025, together with the accompanying series A and series B common warrants is $16.245. 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 ($2.9M note payable) and expected to be used for general corporate purposes, including working capital, operating expenses and capital expenditures.

The Series B warrants contained certain volume weighted average price provisions that reset the exercise price to a minimum floor price of $3.21 and also resets the number of warrants to 3,406,390 which are exercisable into 10,173,402 common shares.

As of April 4, 2025 all of the Series B warrants were exercised into common shares at a weighted average reset price of $3.27. Since the Series B warrants were exercised on a cashless basis, there were no proceeds to the company. No Series A warrants were exercised, however the reset provisions increased the amount of Series A warrants such that 3,443,461 are outstanding at an exercise price of $3.21.

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HEPION PHARMACEUTICALS, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited)

	2025 Series A Warrants
	September 30,			January 23,
	2025			2025
Stock price	$	0.05		$	10.00
Expected warrant term (years)		4.44 years			5.17 years
Risk-free interest rate		3.68	%		4.12	%
Expected volatility		137.25	%		114.0	%
Dividend yield		—			—

The Series B Warrants are exercisable on a cashless basis for a quantity equal to three times the gross quantity of shares underlying the warrants, and there is no exercise price associated with a cashless exercise (including no exercise price incorporated into the calculation of shares issuable under the cashless exercise). To calculate the fair value, we performed a back solve at inception that contemplated a DLOM and dilution adjustments. The fair value of the Series B warrants as of January 23, 2025 was $5.4 million.

On March 18, 2025, we received written notice from Nasdaq indicating that the bid price for our common stock, for the last 10 consecutive business days, had closed below $0.10 per share and, as a result, we are subject to the provisions contemplated under Listing Rule 5810(c)(3)(A)(iii) (the “Low Priced Stocks Rule”). In addition, on April 15, 2025, we received written notice from Nasdaq indicating that Nasdaq believes we are a “public shell” and that the continued listing of our securities was no longer warranted.

On March 25, 2025, we requested a hearing, which hearing was held on April 29, 2025. On May 9, 2025, the Company received written notice (the “Notice”) from the Office of General Counsel of The Nasdaq Stock Market (“Nasdaq”) indicating that the Nasdaq Hearings Panel has determined to delist the Company’s shares from Nasdaq due to the Company’s failure to meet Nasdaq’s continued listing standards. The Notice indicated that trading in the Company’s shares of common stock on Nasdaq was suspended effective at the open of trading on Tuesday, May 13, 2025. On June 25, 2025, the Company successfully completed the process of transitioning to the OTCQB Venture Market.

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HEPION PHARMACEUTICALS, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited)

The following table sets forth the components of changes in our derivative financial instruments liability balance for the nine months ended September 30, 2025.

Date	Number of Warrants Outstanding			Derivative Instrument Liability
Balance of derivative liability at December 31, 2024		49,020			333,189
Issuance of 2025 Series A warrants		3,443,461			1,348,441
Issuance of 2025 Series B warrants		10,173,402			5,360,673
Exercise of 2025 Series B warrants		(8,834,034	)		(9,757,913	)
Change in fair value of warrants¹		—			4,202,178
Balance of derivative liability at March 31, 2025		4,831,849			1,486,568
Exercise of 2025 Series B warrants		(1,339,368	)		(672,818	)
Change in fair value of warrants		—			(698,073	)
Balance of derivative liability at June 30, 2025		3,492,481			115,677
Expiration of Series B-2 warrants		(14,706	)		—
Change in fair value of warrants		—			(47,280	)
Balance of derivative liability at September 30, 2025		3,477,775			68,397

¹	The total change in fair value of warrants excludes the expense of $0.6 million of issuance cost.

5. Notes Payable

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”). 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. The principal amount of the note was discounted by $400,000 (discount rate of 13.8%), fees and expenses. The Company allocated the proceeds of the $2,500,000 received in exchange for the Notes and common shares in accordance with their relative fair values, which was 65% and 35%, respectively. The difference between the allocated proceeds and the face value was treated as debt discount.

On December 11, 2024, the Company announced that it had entered into a termination agreement with Pharma Two B Ltd. which terminates the merger agreement between the two parties that was previously entered into on July 19, 2024. The termination of the merger triggered the notes to become due and payable, and began accruing interest at 14%. The $2.9 million notes payable was paid off on January 23, 2025.

On March 15, 2025, the Company entered into a one-year Directors and Officers Liability Insurance agreement for $656,178. The Company made a down payment of $130,000, with the remaining balance financed with a third-party over the following ten months at an annual percentage rate of 7.30%. Beginning April 2025, the Company will make 10 monthly payments of $54,394, with the last payment expected to be made in January 2026. At the end of September 30, 2025, the outstanding balance on this note payable was $214,309.

6. Fair Value Measurements

The following table presents our liabilities that are measured and recognized at fair value on a recurring basis classified under the appropriate level of the fair value hierarchy at September 30, 2025 and December 31, 2024.

Description	Fair value		(Level 1)		(Level 2)		(Level 3)
	Fair Value Measurement at Reporting Date Using
Description	Fair value		(Level 1)		(Level 2)		(Level 3)
As of September 30, 2025:
Derivative liabilities related to warrants	$	68,397	$	—	$	68,397	$	—

As of December 31, 2024:
Derivative liabilities related to warrants	$	333,189	$	—	$	333,189	$	—

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HEPION PHARMACEUTICALS, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited)

The unrealized gains or losses on the derivative liabilities are recorded as a change in fair value of derivative liabilities- warrants in our consolidated statement of operations. See Note 4 for a rollforward of the derivative liability for nine months ended September 30, 2025. The 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. At each reporting period, we review the assets and liabilities that are subject to ASC 815-40. At each reporting period, all assets and liabilities for which the fair value measurement is based on significant unobservable inputs or instruments which trade infrequently and therefore have little or no price transparency are classified as Level 3.

7. Accrued Liabilities

At September 30, 2025 and December 31, 2024, the other accrued expenses was made up of accrued interest on note payable resulting from the Securities Purchase Agreement (the “SPA”) entered into in July 2024 (Refer to Note 4) and accrued tax payable.

8. Accounting for Share-Based Payments

On June 3, 2013, we adopted the 2013 Equity Incentive Plan (the 2013 Plan), which expired in June 2023 and we are no longer making grants under it. Stock options granted under the 2013 Plan typically vest after 3 three years of continuous service from the grant date and will have a contractual term of 10 ten years.

In April 2023, our board of directors approved the 2023 Omnibus Equity Incentive Plan (the 2023 Plan), which became effective in June 2023 upon stockholder approval. The 2023 Plan allows for the grant of up to 10,000 awards for the purpose of attracting, motivating and retaining employees (including officers), non-employee directors and non-employee consultants. On March 6, 2024 pursuant to the 2023 Plan, we granted 1,000 RSUs with a fair value of $114.50 per share, which vest upon the earlier of (i) 1 one year after date of grant or (ii) change of control of the Company. The RSUs vested in March 2025.

In addition, during the nine months ended September 30, 2024, the Company granted 6,800 options with a term of 2 to 10 years that were vested upon issuance. There were no grants during the three and nine months ended September 30, 2025. As of September 30, 2025, we had 3,451 awards available for grant from the 2023 Plan.

We classify stock-based compensation expense in our consolidated statement of operations in the same way the award recipient’s payroll costs are classified or in which the award recipients’ service payments are classified. We recorded stock-based compensation expense as follows:

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Notes to Condensed Consolidated Financial Statements

(Unaudited)

	2025		2024		2025		2024
	Three Months Ended September 30,				Nine Months Ended September 30,
	2025		2024		2025		2024
General and administrative	$	—	$	28,625	$	20,783	$	763,020
Total stock-based compensation expense	$	—	$	28,625	$	20,783	$	763,020

A summary of stock option activity under the 2013 Plan and 2023 Plan is presented as follows:

Schedule of Stock Option Activity

	Number of Options			Weighted Average Exercise Price Per Share		Intrinsic Value		Weighted Average Remaining Contractual Term
Balance outstanding, December 31, 2024		7,813		$	382.00	$	—		8.75 years
Granted		—		$	—	$	—
Forfeited		(1,991	)	$	143.07	$	—
Balance outstanding, September 30, 2025		5,822		$	356.42	$	—		5.40 years
Awards outstanding, vested awards and those expected to vest at September 30, 2025		5,822		$	356.42	$	—		5.40 years
Vested and exercisable at September 30, 2025		5,822		$	356.42	$	—		5.40 years

The total fair value of awards vested during the nine months ended September 30, 2025 and 2024 was $13,870 and $0.7 million, respectively.

As of September 30, 2025, the unrecognized compensation cost related to non-vested stock options outstanding, net of expected forfeitures, was $0.0 million.

9. Loss per Share

Basic and diluted net loss per common share was determined by dividing net loss attributable to common stockholders by the weighted-average common shares outstanding during the period.

Basic and diluted net loss per common share:	2025			2024			2025			2024
	Three Months Ended September 30,						Nine Months Ended September 30,
Basic and diluted net loss per common share:	2025			2024			2025			2024
Numerator:
Net loss	$	(472,506	)	$	(4,865,948	)	$	(7,620,965	)	$	(11,644,966	)
Denominator:
Weighted average common shares outstanding		11,620,317			134,379			8,653,428			117,410
Net loss per share of common stock—basic and diluted	$	(0.04	)	$	(36.21	)	$	(0.88	)	$	(99.18	)

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HEPION PHARMACEUTICALS, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited)

In connection with series B warrants exercise (see Note 4), 6,520 warrants that were exercised during the quarter ended March 31, 2024 were not yet issued as common stock and are held by the Company in abeyance, were included in the Company’s calculation of basic and diluted loss per share. The shares of common stock held by the Company in abeyance are considered outstanding for the purposes of computing earnings per share, as these shares may be issued for little or no consideration, are fully vested, and are exercisable after the original issuance date.

The 6,520 warrants that were exercised during the quarter ended March 31, 2024 were issued as common stock in June 2024.

The following outstanding securities at September 30, 2025 and 2024 have been excluded from the computation of basic and diluted weighted shares outstanding, as they would have been anti-dilutive due to net loss:

	2025		2024
	Nine Months Ended September 30,
	2025		2024
Common shares issuable for:
Series A preferred stock		3		3
Series C preferred stock		16		16
Restricted Stock Units		—		1,000
Stock options		7,813		9,375
Warrants – liability classified		34,314		49,020
Warrants – equity classified		1,795		1,795
2025 Series A warrants		3,443,461		—
Total		3,487,402		61,209

The strike prices for the equity classified warrant ranges from $1,875- $2,500 each and the expiration dates are in 2025 and 2026.

10. Commitments and Contingencies

Legal Proceedings

We are involved in various legal proceedings. Significant judgment is required to determine both the likelihood and the estimated amount of a loss related to such matters. Additionally, while any litigation contains an element of uncertainty, we have at this time no reason to believe that the outcome of such proceedings or claims will have a material adverse effect on our consolidated financial condition or results of operations.

Leases

In July 2014, we entered into a lease for corporate office space in Edison, New Jersey (“Edison Lease”). In July 2017, we entered into the first amendment to the Edison Lease expanding the office footprint and extending the Edison Lease for an approximate 5-year period that ended on March 31, 2023. In August 2023, we signed a second amendment to the Edison Lease in which we reduced our corporate office space and extended the lease for a period of 2.3 years ending July 31, 2025. As of December 2024, we had paid all outstanding rent on the lease, terminated the lease and vacated the office.

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HEPION PHARMACEUTICALS, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited)

We account for leases in accordance with ASC Topic 842, Leases, (“ASC 842”). We determine if an arrangement is a lease at contract inception. A lease exists when a contract conveys to the customer the right to control the use of identified property or equipment for a period in exchange for consideration. The definition of a lease embodies two conditions: (1) there is an identified asset in the contract that is land or a depreciable asset (i.e., property and equipment), and (2) the customer has the right to control the use of the identified asset.

Operating leases where we are the lessee are included under the caption “Right of Use Assets” (“ROU”) on our consolidated balance sheets. The lease liabilities are initially and subsequently measured at the present value of the unpaid lease payments at the lease commencement date. Key estimates and judgments include how we determine (1) the discount rate used to discount the unpaid lease payments to present value, (2) lease term and (3) lease payments.

The ROU asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for lease payments made at or before the lease commencement date, plus any initial direct costs incurred less any lease incentives received. For operating leases, the ROU asset is subsequently measured throughout the lease term at the carrying amount of the lease liability, plus initial direct costs, plus (minus) any prepaid (accrued) lease payments, less the unamortized balance of lease incentives received. Lease expense for lease payments is recognized on a straight-line basis over the lease term.

As of September 30, 2025, there were no ROU and lease liabilities as we had paid all outstanding rent on the lease, terminated the lease and vacated the office.

Rent expense for the three months ended September 30, 2025 and 2024 was $0 and $0.1 million, respectively, which included a de minimis amount for a short-term lease.

There were no future minimum rental payments under operating leases at September 30, 2025.

Employment Agreements

We do not have any employment agreements with employees which require the funding of a specific level of payments, if certain events, such as a change in control, termination without cause or retirement, occur.

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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 consolidated 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 as of and for the year ended December 31, 2024 filed with the United States Securities and Exchange Commission (“SEC”) on April 8, 2025, as well as under “Risk Factors” within this this Form 10-Q. 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.

Overview

We are 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.

On January 23, 2025, we consummated a best-efforts registered offering for 73,222 shares of common stock, Pre-Funded Warrants to purchase 480,624 shares of common stock, Series A Warrants to purchase 553,846 shares of common stock and Series B Warrant to purchase 553,846 shares of common stock for gross proceeds of $9,000,000. A portion of the net proceeds was used to repay the Notes along with accrued interest.

On May 9, 2025, we entered into a license agreement (the “License Agreement”) with New Day Diagnostics LLC (“New Day”) pursuant to which we 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, we paid $525,000 in cash to New Day along with $200,000 in shares of our common stock. In addition, we have agreed to pay New Day up to $17.15 million upon achievement of certain regulatory, sales and reimbursement milestones. In addition, we will pay New Day royalty rates in the upper single to low double digits based on net sales.

FINANCIAL OPERATIONS OVERVIEW

From inception through September 30, 2025, we have an accumulated deficit of $245.4 million, and we have not generated any revenue from operations.

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CRITICAL ACCOUNTING ESTIMATES

Our condensed consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States (U.S. GAAP). The preparation of these condensed consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, costs and expenses, income taxes and related disclosures. On an ongoing basis, we evaluate our estimates and assumptions. Our actual results may differ from these estimates under different assumptions or conditions.

During the nine months ended September 30, 2025, there were no significant changes to our critical accounting estimates from those described in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contained in the Annual Report on Form 10-K for the year ended December 31, 2024.

RECENT ACCOUNTING PRONOUNCEMENTS

Please refer to Note 3 of Notes to Condensed Consolidated Financial Statements, Recent Accounting Pronouncements, in this Quarterly Report on Form 10-Q.

RESULTS OF OPERATIONS

Comparison of the three months ended September 30, 2025 and 2024:

	Three Months Ended September 30,
	2025			2024			Change
Revenues	$	—		$	—		$	—
Costs and Expenses:
Research and development		—			2,762,709			(2,762,709	)
General and administrative		527,902			1,695,550			(1,167,648	)
Total operating expenses		527,902			4,458,259			(3,930,357	)
Loss from operations		(527,902	)		(4,458,259	)		3,930,357

Other income (expense):
Interest income (expense)		8,116			(474,570	)		482,686
Change in fair value of contingent consideration and derivative financial instruments		47,280			66,881			(19,601	)
Loss before income taxes		(472,506	)		(4,865,948	)		4,393,442
Income tax benefit: (See Note 3)		—			—			—
Net loss	$	(472,506	)	$	(4,865,948	)	$	4,393,442

We had no revenues during the three months ended September 30, 2025 and 2024, because we do not currently have any commercial products. However, with the assets related to the New Day licensing agreement, there are three products that 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 but we cannot guarantee when and how much revenue will be generated from those products.

Research and development expenses for the three months ended September 30, 2025 and 2024 was $0 million and $2.8 million, respectively. The decrease of $2.8 million was primarily due to a $2.1 million decrease in clinical trial costs primarily for our phase 2b study, $0.4 million in consulting and outside services costs, $0.2 million in employee compensation costs due to reduced headcounts, and $0.1 million decrease in Chemistry, Manufacturing and Controls costs. The Company anticipates an increase in research and development expenses as it pursues the development of assets acquired from New Day.

General and administrative expenses for the three months ended September 30, 2025 and 2024 was $0.5 million and $1.7 million, respectively. The decrease of $1.2 million was primarily due to a $0.4 million in employee salaries due to reduced headcount, and $0.8 million in professional fees.

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Comparison of the nine months ended September 30, 2025 and 2024:

	Nine Months Ended September 30,
	2025			2024			Change
Revenues	$	—		$	—		$	—
Costs and Expenses:
Research and development		445,512			12,438,956			(11,993,444	)
General and administrative		2,705,750			5,705,468			(2,999,718	)
Asset impairment loss		402,746			—			402,746
Total operating expenses		3,554,008			18,144,424			(14,590,416	)
Loss from operations		(3,554,008	)		(18,144,424	)		(14,590,416	)

Other income (expense):
Interest income (expense)		(11,829	)		(429,383	)		417,554
Change in fair value of contingent consideration and derivative financial instrument		(4,055,128	)		6,526,633			(10,581,761	)
Inducement expense		—			(2,567,044	)		2,567,044
Loss before income taxes		(7,620,965	)		(14,614,218	)		6,993,253
Income tax benefit: (See Note 3)		—			2,969,252			(2,969,252	)
Net loss	$	(7,620,965	)	$	(11,644,966	)	$	4,024,001

We had no revenues during the nine months ended September 30, 2025 and 2024, because we do not currently have any commercial products. However, with the assets related to the New Day licensing agreement, there are three products that 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 but we cannot guarantee when and how much revenue will be generated from those products.

Research and development expenses for the nine months ended September 30, 2025 and 2024 was $0.4 million and $12.4 million, respectively. The decrease of $12.0 million was primarily due to a $7.7 million decrease in clinical trial costs primarily for our phase 2b study, a $3.3 million decrease of Chemistry, Manufacturing and Controls costs, a decrease of $0.8 million in employee compensation costs due to reduced headcounts, and a decrease of $0.7 million in consulting and outside services, partially offset by $0.4 million in expense related to purchased in-process research and development from the New Day asset acquisition.

General and administrative expenses for the nine months ended September 30, 2025 and 2024 was $2.2 million and $5.7 million, respectively. The decrease of $3.0 million was primarily due to a $1.5 million decrease in employee compensation due to reduced headcount, a $0.7 million decrease in employee stock compensation, $0.6 million decrease in professional and consulting fees and $0.1 million in insurance.

Asset impairment loss for the nine months ended September 30, 2025 and 2024 was $0.4 million and $0 million, respectively. The increase of $0.4 million was primarily impairment expense related to the asset acquired in the license agreement. 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, resulting in an impairment loss.

Liquidity and Capital Resources

Sources of Liquidity

We have funded our operations through September 30, 2025 primarily 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.

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Future Funding Requirements

We have no products approved for commercial sale in the United States. However, with the assets related to the New Day licensing agreement, there are three products that 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 but we cannot guarantee when and how much revenue will be generated from those products. To date, we have devoted substantially all of our resources to organizing and staffing our company, business planning, raising capital, undertaking preclinical studies and clinical trials of our product candidate. As a result, we are not profitable and have incurred losses in each period since our inception in 2013. As of September 30, 2025, we had an accumulated deficit of $245.4 million. We expect to continue to incur significant losses for the foreseeable future.

We may encounter unforeseen expenses, difficulties, complications, delays and other unknown factors that may adversely affect our business. The size of our future net losses will depend, in part, on the rate of future growth of our expenses and our ability to generate revenue. Our prior losses and expected future losses have had and will continue to have an adverse effect on our stockholders’ equity and working capital.

We will require additional financing and a failure to obtain this necessary capital could force us to delay, limit, reduce or terminate our operations.

Since our inception, we have invested a significant portion of our efforts and financial resources in research and development activities for our non-replicating and replicating technologies and our product candidates derived from these technologies. We believe that we will continue to expend substantial resources for the foreseeable future in connection with the development of acquired assets in connection with our strategic alternatives strategy. In addition, other unanticipated costs may arise.

Our future capital requirements depend on many factors, including:

	●	the scope, progress, results and costs of researching and developing our current and future product candidate and programs, and of conducting preclinical studies and clinical trials;

	●	the number and development requirements of other product candidates that we may pursue, and other indications for our current product candidate that we may pursue;

	●	the stability, scale and yields during the manufacturing process as we scale-up production and formulation of our product candidate for later stages of development and commercialization;

	●	the timing of, and the costs involved in, obtaining regulatory and marketing approvals and developing our ability to establish sales and marketing capabilities, if any, for our current and future product candidates we develop if clinical trials are successful;

	●	our ability to establish and maintain collaborations, strategic licensing or other arrangements and the financial terms of such agreements;

	●	the cost of commercialization activities for our current and future product candidates that we may develop, whether alone or with a collaborator;

	●	the costs involved in preparing, filing, prosecuting, maintaining, expanding, defending and enforcing patent claims, including litigation costs and the outcome of such litigation;

	●	the timing, receipt and amount of sales of, or royalties on, our future products, if any; and

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A change in the outcome of any of these or other variables with respect to the development of any of our current and future product candidates could significantly change the costs and timing associated with the development of that product candidate. Furthermore, our operating plans may change in the future, and we will need additional funds to meet operational needs and capital requirements associated with such operating plans.

The condensed consolidated financial statements as of September 30, 2025 have been prepared under the assumption that we will continue as a going concern within one year after the financial statements are issued. Due to our accumulated deficit and our recurring and expected continuing losses from operations, we have concluded there is substantial doubt in our ability to continue as a going concern without additional capital becoming available to 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 to continue to fund operations. 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 (i) acquire new product candidates; 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.

Cash Flows

The following table summarizes our cash flows for the following periods:

	Nine Months Ended September 30,
	2025			2024
Net cash provided by (used in):
Operating activities	$	(2,938,745	)	$	(17,063,429	)
Investing activities		(132,117	)		(600,000	)
Financing activities		4,985,532			4,349,707

As of September 30, 2025, we had working capital of $3.4 million compared to working capital deficit of $1.5 million as of December 31, 2024. The increase of $4.9 million in working capital is primarily due to $8.2 million in net proceeds received from equity issuance offset by the $2.9 million related to settlement of a note payable, and the Company’s other operating costs for the nine months ended September 30, 2025.

Operating Activities:

As of September 30, 2025, we had $2.3 million in cash. Net cash used in operating activities was $2.9 million for the nine months ended September 30, 2025 consisting primarily of our net loss of $7.6 million, adjusted non-cash charges of $4.6 million, including $0.4 million for asset impairment, and $4.1 million in change in fair value of derivative warrants. Changes in working capital accounts had a positive impact of on cash primarily due to a decrease in accounts payable and accrued expenses.

As of September 30, 2024, we had $0.8 million in cash. Net cash used in operating activities was $17.1 million for the nine months ended September 30, 2024 consisting primarily of our net loss of $11.6 million, adjusted for an increase in non-cash charges of $3.8 million, primarily for stock-based compensation, amortization of debt discount, and warrant related inducement expense, partially offset by $6.5 million in change in fair value of contingent consideration and the change in fair value of derivative warrants. Changes in working capital accounts had a negative impact of $2.7 million on cash primarily due to an increase in accounts payable, accrued expenses and prepaid expenses.

Investing Activities:

Net cash used in investing activities was $0.1 million for the nine months ended September 30, 2025 related to the acquisition of licenses from New Day Diagnostics. Net cash used in investing activities was $600,000 for the nine months ended September 30, 2024. The $600,000 in 2024 was primarily due to the note receivable from Pharma Two B.

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Financing Activities:

Net cash provided by financing activities was $5.0 million for the nine months ended September 30, 2025, due primarily to proceeds received from the exercise of the warrants and equity issuance offset by $3.2 million payment on notes payable.

Net cash provided by financing activities was $4.3 million for the nine months ended September 30, 2024, due primarily to proceeds received from the exercise of the warrants and equity issuance.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Based on an evaluation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended) required by paragraph (b) of Rule 13a-15 or Rule 15d-15, as of September 30, 2025, our Interim Principal Executive Officer/Principal Financial Officer has concluded that due to the material weaknesses in our internal control over financial reporting noted below, our disclosure controls and procedures were not effective.

	●	Our control environment was ineffective because we did not maintain a sufficient complement of personnel to execute controls as designed including the absence of proper segregation of duties. Such impacted controls include indirect controls affecting the risk assessment and monitoring components of COSO along with certain control activities.
	●	We identified a material weakness in our internal controls related to the proper design and implementation of controls over formal review, approval, and evaluation of non-core, complex accounting transactions.
	●	We identified a material weakness in internal control related to the proper design and implementation of certain controls over our income tax provision and management’s review of the income tax provision. We utilize a third-party to assist in the preparation of our tax provision. Specifically, we did not sufficiently design and implement controls related to the completeness and accuracy of certain aspects of the tax provision and the completeness and accuracy income tax disclosures.

Remediation of Material Weaknesses

We are committed to the remediation of the material weaknesses described above, as well as the continued improvement of our internal control over financial reporting. We need to raise additional capital in order to add additional personnel and implement additional internal control procedures. If we are able to raise additional capital, we plan on implementing several remedial actions to improve our internal controls, including:

	●	We will need to increase personnel in the future in order to have proper segregation of duties.
	●	We are utilizing the services of external consultants for non-routine and\or technical accounting issues as they arise.
	●	Expanding and improving our review process for complex accounting transactions. We plan to further improve this process by enhancing access to accounting literature, identification of third-party professionals with whom to consult regarding complex accounting applications and consideration of additional staff with the requisite experience and training to supplement existing accounting professionals.
	●	Management, with the assistance of a third party, will perform an evaluation of the processes and procedures around our tax provision processes, internal control design gaps, and recommend process enhancements.
	●	Implementing enhancements and process improvements, including the design and implementation of well-defined controls and related control attributes regarding income tax provision and income tax disclosures.
	●	Developing a detailed timeline of the tax provision calculation, to ensure that sufficient time is allocated to complete the process as designed.

As we continue our evaluation and improve our internal control over financial reporting, management may identify and take additional measures to address control deficiencies. We cannot assure you that we will be successful in remediating the material weaknesses in a timely manner.

Changes in Internal Control over Financial Reporting

Except as noted above, there have been no changes in our internal controls over financial reporting during the three months ended September 30, 2025 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II. OTHER INFORMATION

ITEM 1A. RISK FACTORS

There have been no material changes from the risk factors disclosed in our Form 10-K for the year ended December 31, 2024.

ITEM 5. Other Information

During the three months ended September 30, 2025, no director or officer adopted or terminated any Rule 10b5-1 trading arrangement, and/or any non-Rule 10b5-1 trading arrangement (as such terms are defined pursuant to Item 408(a) of Regulation S-K).

ITEM 6. EXHIBITS

31.1		Certification of Interim Chief Executive Officer required under Rule 13a-14(a)/15d-14(a) under the Exchange Act.
31.2		Certification of Principal Financial And Accounting Officer required under Rule 13a-14(a)/15d-14(a) under the Exchange Act.
32.1		Certification of Interim 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 Principal Financial and Accounting 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-the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL 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
104		Cover Page Interactive Data File (formatted as Inline XBRL in Exhibit 101)

* Portions of this exhibit (indicated by asterisks) have been redacted in compliance with Regulation S-K Item 601(b)(10)(iv).

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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.

	HEPION PHARMACEUTICALS, INC. (Registrant)

Date: 11/12/2025	By:	/s/ KAOUTHAR LBIATI
		Kaouthar Lbiati
		Interim Chief Executive Officer
		(Principal Executive Officer)

Date: 11/12/2025	By:	/s/ JONATHAN KWOFIE
		Jonathan Kwofie
		Corporate Financial Controller
		(Principal Financial and Accounting Officer)

Hepion Pharmaceuticals, Inc. 10-Q