{"url_path":"/sec/ctrvp/10-q/2026/item-1","section_key":"item-1","section_title":"Item 1 Condensed Consolidated Financial Statements**","topic":"sec","document":{"doc_type":"10-Q","doc_date":"2026-05-14","source_url":"https://www.sec.gov/Archives/edgar/data/1583771/0001493152-26-023136-index.html","accession_number":"0001493152-26-023136","cik":"0001583771","ticker":"HEPA","issuer_name":"Hepion Pharmaceuticals, Inc.","edgar_url":"https://www.sec.gov/Archives/edgar/data/1583771/0001493152-26-023136-index.html","primary_entity_key":"0001583771","primary_entity_name":"Hepion Pharmaceuticals, Inc."},"word_count":4631,"has_tables":true,"body_markdown":"** **\n\n**Item\n1. Condensed Consolidated Financial Statements**\n\n** **\n\n**HEPION\nPHARMACEUTICALS, INC. AND SUBSIDIARIES**\n\n**CONDENSED\nCONSOLIDATED BALANCE SHEETS**\n\n**(Unaudited)**\n\n \n\n  \nMarch 31,\n2026  \nDecember 31,\n2025 \n\nAssets \n    \n   \n\nCurrent assets: \n    \n   \n\nCash \n$2,602,580  \n$1,828,062 \n\nPrepaid expenses \n 102,923  \n 1,241,890 \n\nTotal current assets \n 2,705,503  \n 3,069,952 \n\nTotal assets \n$2,705,503  \n$3,069,952 \n\n  \n    \n   \n\nLiabilities and Stockholders’ Equity \n    \n   \n\nCurrent liabilities: \n    \n   \n\nAccounts payable \n$138,442  \n$167,810 \n\nAccrued expenses \n 347,130  \n 77,507 \n\nSubscription liability \n 250,000  \n — \n\nNotes payable, current \n —  \n 54,066 \n\nTotal current liabilities \n 735,572  \n 299,383 \n\n  \n    \n   \n\nDerivative financial instruments—warrants \n 113,175  \n 103,022 \n\nTotal liabilities \n 848,747  \n 402,405 \n\nCommitments and contingencies (see Note 10) \n    \n   \n\nStockholders’ equity: \n    \n   \n\nSeries A convertible preferred stock, stated value $10 per share, 85,581 shares issued and outstanding at March 31, 2026 and December 31, 2025. \n 855,808  \n 855,808 \n\nSeries C convertible preferred stock, stated value $1,000 per share, 1,688 shares issued and outstanding at March 31, 2026 and December 31, 2025. \n 839,320  \n 839,320 \n\nConvertible preferred stock. \n 839,320  \n 839,320 \n\n  \n    \n   \n\nCommon stock—$0.0001\npar value per share; 120,000,000\nshares authorized, 11,620,317 issued\nand outstanding at March 31, 2026 and December 31, 2025.  \n 1,162  \n 1,162 \n\nAdditional paid-in capital \n 247,060,568  \n 247,060,568 \n\nAccumulated other comprehensive income. \n 8,345  \n 8,345 \n\nAccumulated deficit \n (246,908,447) \n (246,097,656)\n\nTotal stockholders’ equity \n 1,856,756  \n 2,667,547 \n\nTotal liabilities and stockholders’ equity \n$2,705,503  \n$3,069,952 \n\n \n\nThe\naccompanying notes are an integral part of these condensed consolidated financial statements (unaudited).\n\n** **\n\n2\n\n [Table of Contents](#toc_001)\n\n** **\n\n**HEPION\nPHARMACEUTICALS, INC. AND SUBSIDIARIES**\n\n**Condensed\nConsolidated Statements of Operations**\n\n**(Unaudited)**\n\n \n\n  \n2026  \n2025 \n\n  \nThree Months Ended\nMarch 31, \n\n  \n2026  \n2025 \n\nRevenues \n$—  \n$— \n\nCost and expenses: \n    \n   \n\nResearch and development \n 70,000  \n 22,235 \n\nGeneral and administrative \n 728,509  \n 1,258,360 \n\nTotal operating expenses \n 798,509  \n 1,280,595 \n\nLoss from operations \n (798,509) \n (1,280,595)\n\n  \n    \n   \n\nOther income (expense): \n    \n   \n\nInterest expense, net \n (2,129) \n (24,811)\n\nChange in fair value of derivative financial instruments—warrants \n (10,153) \n (4,800,481 \n\nNet loss \n$(810,791) \n$(6,105,887)\n\n  \n    \n   \n\nWeighted-average common shares outstanding: \n    \n   \n\nBasic and diluted \n 11,620,317  \n 2,836,700 \n\n  \n    \n   \n\nNet loss per common share: (see Note 9) \n    \n   \n\nBasic and diluted \n$(0.07) \n$(2.15)\n\n \n\nThe\naccompanying notes are an integral part of these condensed consolidated financial statements (unaudited).\n\n \n\n3\n\n [Table of Contents](#toc_001)\n\n \n\n**HEPION\nPHARMACEUTICALS, INC. AND SUBSIDIARIES**\n\n**Condensed\nConsolidated Statements of Comprehensive Loss**\n\n**(Unaudited)**\n\n \n\n  \n2026  \n2025 \n\n  \nThree Months Ended\nMarch 31, \n\n  \n2026  \n2025 \n\nNet loss \n$(810,791) \n$(6,105,887)\n\nOther comprehensive income (loss): \n    \n   \n\nForeign currency translation \n —  \n — \n\nTotal other comprehensive income (loss) \n —  \n — \n\nComprehensive loss \n$(810,791) \n$(6,105,887)\n\n \n\nThe\naccompanying notes are an integral part of these condensed consolidated financial statements (unaudited).\n\n \n\n4\n\n [Table of Contents](#toc_001)\n\n \n\n**HEPION\nPHARMACEUTICALS, INC. AND SUBSIDIARIES**\n\n**Condensed\nConsolidated Statements of Changes in Stockholders’ Equity**\n\n**(Unaudited)**\n\n \n\n  \nShares  \nAmount  \nShares  \nAmount  \nShares  \nAmount  \nCapital  \nIncome (Loss)  \nDeficit  \nEquity \n\n  \nPreferred Stock  \nPreferred Stock  \n   \nAdditional  \nAccumulated other  \n   \nTotal \n\n  \nSeries A  \nSeries C  \nCommon Stock  \nPaid in  \nComprehensive  \nAccumulated  \nStockholders’ \n\n  \nShares  \nAmount  \nShares  \nAmount  \nShares  \nAmount  \nCapital  \nIncome   \nDeficit  \nEquity \n\nBalance at December 31, 2024 \n 85,581  \n$855,808  \n 1,688  \n$839,320  \n 139,168  \n$14  \n$234,252,981  \n$8,345  \n$(237,819,806) \n$       (1,863,338)\n\n  \n    \n    \n    \n    \n    \n    \n    \n    \n    \n   \n\nNet loss \n —  \n —  \n —  \n —  \n —  \n —  \n —  \n —  \n (6,105,887) \n (6,105,887)\n\nStock-based compensation expense \n —  \n —  \n —  \n —  \n —  \n —  \n 20,783  \n —  \n —  \n 20,783 \n\nIssuance of restricted stock units \n —  \n —  \n —  \n —  \n 1,000  \n —  \n —  \n —  \n —  \n — \n\nIssuance of common stock and pre-funded warrants, net \n —  \n —  \n —  \n —  \n 553,846  \n 55  \n 2,086,537  \n —  \n —  \n 2,086,592 \n\nIssuance of common stock in connection with stock split \n —  \n —  \n —  \n —  \n 60,860  \n 6  \n (6) \n —  \n —  \n — \n\nConversion of 2025 Series B warrants into common stock \n —  \n —  \n —  \n —  \n 8,834,034  \n 884  \n 9,757,029  \n —  \n —  \n 9,757,913 \n\nBalance at March 31, 2025 \n 85,581  \n 855,808  \n 1,688  \n 839,320  \n 9,588,908  \n 959  \n 246,117,324  \n 8,345  \n (243,925,693) \n 3,896,063 \n\n \n\n  \nPreferred Stock  \nPreferred Stock  \n   \nAdditional  \nAccumulated other  \n   \nTotal \n\n  \nSeries A  \nSeries C  \nCommon Stock  \nPaid in  \nComprehensive  \nAccumulated  \nStockholders’ \n\n  \nShares  \nAmount  \nShares  \nAmount  \nShares  \nAmount  \nCapital  \nIncome   \nDeficit  \nEquity \n\nBalance at December 31, 2025 \n 85,581  \n$855,808  \n 1,688  \n$839,320  \n 11,620,317  \n$1,162  \n$247,060,568  \n$8,345  \n$(246,097,656) \n$    2,667,547 \n\nNet loss \n —  \n —  \n —  \n —  \n —  \n —  \n —  \n —  \n (810,791) \n (810,791)\n\nBalance at March 31, 2026 \n 85,581  \n 855,808  \n 1,688  \n 839,320  \n 11,620,317  \n 1,162  \n 247,060,568  \n 8,345  \n (246,908,447) \n 1,856,756 \n\n \n\nThe\naccompanying notes are an integral part of these condensed consolidated financial statements (unaudited).\n\n \n\n5\n\n [Table of Contents](#toc_001)\n\n \n\n**HEPION\nPHARMACEUTICALS, INC. AND SUBSIDIARIES**\n\n**Condensed\nConsolidated Statements of Cash Flows**\n\n**(Unaudited)**\n\n \n\n  \n2025  \n2024 \n\n  \nThree Months Ended\nMarch 31, \n\n  \n2026  \n2025 \n\nCash flows from operating activities: \n    \n   \n\nNet loss \n$(810,791) \n$(6,105,887)\n\nAdjustments to reconcile net loss to net cash used in operating activities: \n    \n   \n\nStock-based compensation \n —  \n 20,783 \n\nChange in fair value of derivative financial instruments—warrants \n 10,153  \n 4,800,481 \n\nChanges in operating assets and liabilities: \n    \n   \n\nAccounts payable and accrued expenses \n 240,255  \n 165,860 \n\nPrepaid expenses and other assets \n 1,138,967  \n 1,341 \n\nNet cash provided by (used in) operating activities \n 578,584  \n (1,117,422)\n\n  \n    \n   \n\nCash flows from investing activities: \n    \n   \n\nNet cash used in investing activities \n —  \n — \n\n  \n    \n   \n\nCash flows from financing activities: \n    \n   \n\nProceeds from the issuance of common stock and warrants, net \n —  \n 9,000,000 \n\nEquity issuance costs \n —  \n (802,597)\n\nSubscription liability \n 250,000  \n — \n\nPayments on notes payable \n (54,066) \n (2,900,000)\n\nNet cash provided by financing activities \n 195,934  \n 5,297,403 \n\nNet increase in cash \n 774,518  \n 4,179,981 \n\nCash at beginning of period \n 1,828,062  \n 406,408 \n\nCash at end of period \n$2,602,580  \n$4,586,389 \n\n  \n    \n   \n\nSupplementary disclosure of non-cash financing activities: \n    \n   \n\nIssuance of Note Payable for payment of prepaid expense \n —  \n 526,178 \n\nCashless Exercise of 2025 Series B Warrants \n$—  \n$9,757,914 \n\n \n\nThe\naccompanying notes are an integral part of these condensed consolidated financial statements (unaudited).\n\n \n\n6\n\n [Table of Contents](#toc_001)\n\n \n\n**HEPION\nPHARMACEUTICALS, INC. AND SUBSIDIARIES**\n\n**Notes to Condensed Consolidated Financial Statements**\n\n**(Unaudited)**\n\n \n\n**1.\nBusiness Overview**\n\n** **\n\nHepion\nPharmaceuticals, Inc. (we, our, or us) is a medical diagnostic company headquartered in Red Bank, New Jersey, that was previously focused\non the development of drug therapy for treatment of chronic liver diseases. Our cyclophilin inhibitor, rencofilstat (formerly CRV431),\nwas being developed to offer benefits to address multiple complex pathologies related to the progression of liver disease.\n\n \n\nOn February 25, 2026,\nwe entered into an intellectual property license agreement with Cirna Diagnostics, LLC (“**Cirna**”) pursuant to which\nwe licensed certain liver disease diagnostic assets from Cirna. We will pay an upfront payment of $50,000 as well as certain patent expenses,\nup to $2,350,000 in milestone payments, up to $4,500,000 in sales milestone payments and a royalty payment on net sales in the low single\ndigits. We accounted for this transaction as an asset acquisition. The total consideration of $70,000 (upfront payment and certain patent\nexpenses) was allocated to purchased in-process research and development, and it was expensed upon the completion of the transaction.\nWe did not recognize any contingent consideration (milestone payments) given the low probability of meeting those targets. Royalties\nwill be recognized when earned.\n\n \n\n**2.\nBasis of Presentation**\n\n \n\n*Basis\nof Presentation*\n\n* *\n\nThese\nunaudited condensed consolidated financial statements have been prepared following the requirements of the Securities and Exchange Commission\n(“SEC”) and accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim\nreporting. In the opinion of management, the accompanying unaudited condensed consolidated financial statements include all adjustments,\nwhich include only normal recurring adjustments, necessary to present fairly our interim financial information. The consolidated balance\nsheet as of December 31, 2025, was derived from the audited annual consolidated financial statements but does not include all disclosures\nrequired by U.S. GAAP. The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the\naudited consolidated financial statements and notes thereto as of and for the year ended December 31, 2025, contained in our Annual Report\non Form 10-K filed with the SEC on March 12, 2026.\n\n \n\n*Principles\nof Consolidation*\n\n \n\nThe\naccompanying condensed consolidated financial statements include our accounts and the accounts of our subsidiaries, Contravir\nResearch Inc. and Hepion Research Corp, which conduct their operations in Canada (all subsidiaries are currently dormant). All\nintercompany balances and transactions have been eliminated in consolidation.\n\n  \n\n*Going\nConcern*\n\n* *\n\nAs\nof March 31, 2026, we had $2.6 million in\ncash, an accumulated deficit of $246.9\nmillion, and working capital of $2.0\nmillion. For the three months ended March 31, 2026, cash from operating activities was $0.6\nmillion (was primarily due to a refund receipt of $1.0 million from a previously inactive prepaid insurance policy, a one-time\nevent) and we had a net loss of $0.8\nmillion. We have not generated revenue to date and have incurred substantial losses and negative cash flows from operations since\nour inception. We have historically funded our operations through the issuance of convertible preferred stock, warrants, the\nissuance and sale of shares of our common stock, and subsequent issuances of shares of our common stock through at-the market\nofferings. Our ability to continue operations after our current cash resources are exhausted depends on future events outside of our\ncontrol, including our ability to obtain additional financing or to achieve profitable operations, as to which no assurances can be\ngiven. If adequate additional funds are not available when required, management may need to curtail planned operations to conserve\ncash until sufficient additional capital can be raised. There can be no assurances that such a plan would be successful.\n\n \n\n7\n\n [Table of Contents](#toc_001)\n\n \n\n**HEPION\nPHARMACEUTICALS, INC. AND SUBSIDIARIES**\n\n**Notes to Condensed Consolidated Financial Statements**\n\n**(Unaudited)**\n\n \n\nThese\ncondensed consolidated financial statements have been prepared under the assumption that we will continue as a going concern. Due to\nour recurring and expected continuing losses from operations, we have concluded there is substantial doubt in our ability to continue\nas a going concern within one year of the issuance of these condensed consolidated financial statements without additional capital becoming\navailable to us. The condensed consolidated financial statements do not include any adjustments that might result from the outcome of\nthis uncertainty.\n\n \n\nWe\ncannot be certain that additional funding will be available on acceptable terms, or at all. To the extent that we raise additional funds\nby issuing equity securities, our stockholders may experience significant dilution. Any debt financing, if available, may involve restrictive\ncovenants that impact our ability to conduct business. If we are unable to raise additional capital when required or on acceptable terms,\nwe may have to (i) seek collaborators for our product candidates on terms that are less favorable than might otherwise be available;\nor (ii) relinquish or otherwise dispose of rights to technologies, product candidates or products that we would otherwise seek to develop\nor commercialize on unfavorable terms.\n\n \n\nOn April 21, 2026, we entered into securities purchase agreements (the “Agreements”) with certain accredited investors (the\n“Investors”) pursuant to which the Company agreed to sell and issue to the Investors in a private placement offering (the\n“Offering”), an aggregate offering of 17,500,000 shares of common stock, par value $0.0001 per share at an offering price\nof $0.04 per share for gross proceeds of $700,000. The Offering closed on April 21, 2026. Approximately $250,000 of the $700,000 was received\nprior to March 31, 2026, and is recorded as a subscription liability.\n\n \n\n**3.\nSummary of Significant Accounting Policies**\n\n \n\n*Use\nof Estimates*\n\n \n\nThe\npreparation of condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions\nthat affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed\nconsolidated financial statements and the reported amounts of expenses during the reporting period. Changes in estimates and assumptions\nare reflected in reported results in the period in which they become known. Actual results could differ from those estimates.\n\n \n\nOur\nsignificant accounting policies are disclosed in the audited consolidated financial statements for the year ended December 31, 2025,\nincluded in our Annual Report on Form 10-K. Since the date of such consolidated financial statements, there have been no changes to our\nsignificant accounting policies.\n\n \n\n*Recent\nAccounting Pronouncements*\n\n* *\n\nThere\nare no recent accounting pronouncements that will have a material effect on our condensed consolidated financial statements for the three\nmonths ended March 31, 2026.\n\n** **\n\n8\n\n [Table of Contents](#toc_001)\n\n** **\n\n**HEPION\nPHARMACEUTICALS, INC. AND SUBSIDIARIES**\n\n**Notes to Condensed Consolidated Financial Statements**\n\n**(Unaudited)**\n\n****\n\n \n\n**4.\nStockholders’ Equity**\n\n \n\nOn April 21, 2026, the Company entered into securities purchase agreements (the “Agreements”) with certain accredited investors\n(the “Investors”) pursuant to which the Company agreed to sell and issue to the Investors in a private placement offering\n(the “Offering”), an aggregate offering of 17,500,000 shares of common stock, par value $0.0001 per share (the “Common\nStock”) at an offering price of $0.04 per share for gross proceeds of $700,000. Approximately $250,000 of the gross proceeds was\nreceived during March 2026.\n\n \n\n*Series\nA Convertible Preferred Stock*\n\n* *\n\nEach\nshare of the Series A is convertible at the option of the holder into the number of shares of common stock determined by dividing the\nstated value of such share by the conversion price that is subject to adjustment. As of March 31, 2026, there were 85,581 shares outstanding.\nDuring the three months ended March 31, 2026 and 2025, no\nshares of the Series A were converted. If we sell common stock\nor equivalents at an effective price per share that is lower than the conversion price, the conversion price may be reduced to the lower\nconversion price. The Series A will be automatically convertible into common stock in the event of a fundamental transaction as defined\nin the offering.\n\n \n\n*Series\nC Convertible Preferred Stock Issuance*\n\n \n\nAs\nof March 31, 2026, there were 1,688\nshares outstanding. There were no\nconversions for the three months ended March 31, 2026 and 2025.\nEach share of Series C is convertible into common stock at any time at the option of the holder thereof at the conversion price then\nin effect. The conversion price for the Series C is determined by dividing the stated value of $1,000\nper share by $0.0092\nper share (subject to adjustments upon the occurrence of certain\ndilutive events).\n\n \n\n*Common\nStock and Warrant Offering*\n\n \n\nThe\nfair value of these liability classified warrants was estimated using the Black-Scholes option pricing model. This method of valuation\ninvolves using inputs such as the fair value of our common stock, historical volatility, the contractual term of the warrants, risk-free\ninterest rates and dividend yields. Due to the nature of these inputs, the valuation of the warrants is considered a Level 2 measurement\n(see Note 5). The following assumptions were used to measure the Series A and Series B Warrants as of March 31, 2026 and December 31,\n2025.\n\n Schedule of Assumptions Used to Calculate Fair Value of Liability\n\n  \nMarch 31,  \nDecember 31, \n\n  \n2026  \n2025 \n\nStock price \n$0.06  \n$0.06 \n\nExpected warrant term (years) \n 2.9 years  \n 3.1 years \n\nRisk-free interest rate \n 3.8% \n 3.64%\n\nExpected volatility \n 186.42% \n 171.05%\n\nDividend yield \n —  \n — \n\n \n\n9\n\n [Table of Contents](#toc_001)\n\n \n\n**HEPION\nPHARMACEUTICALS, INC. AND SUBSIDIARIES**\n\n**Notes to Condensed Consolidated Financial Statements**\n\n**(Unaudited)**\n\n****\n\n \n\nThe exercise price, amount of\nwarrants outstanding and fair value for all warrants as of March 31, 2026 and December 31, 2025 are as follows:\n\n \n\nSchedule\nof Warrants Outstanding and Fair Value for Warrants\n\nSeries B-1 Warrants* *\n*$**Exercise Price** ** *\n* **Warrants Outstanding** ** *\n* **Fair Value** ** *\n*$**Exercise Price** ** *\n* **Warrants Outstanding** ** *\n* **Fair Value** *\n\n  \nMarch 31, 2026  \nDecember 31, 2025 \n\n** **** **\n**Exercise Price**** **** **\n**Warrants Outstanding**** **** **\n**Fair Value**** **** **\n**Exercise Price**** **** **\n**Warrants Outstanding**** **** **\n**Fair Value**** **\n\nSeries A Warrants \n$95.50  \n 19,608  \n —  \n$95.50  \n 19,608  \n — \n\nSeries B-1 Warrants* *\n*$**95.50** ** *\n* **14,706** ** *\n* **—** ** *\n*$**95.50** ** *\n* **14,706** ** *\n* **—** *\n\n2025 Series A Warrants \n$3.22  \n 3,443,461  \n$113,175  \n$3.22  \n 3,443,461  \n$103,022 \n\nTotal \n    \n 3,477,775  \n$113,175  \n    \n 3,477,775  \n$103,022 \n\n** **\n\nOn\nJanuary 23, 2025, we consummated a “best efforts” public offering of 553,846\nshares of common stock (or pre-funded warrants in lieu thereof)\nwith each share of common stock (or pre-funded warrant) accompanied by (i) a series A common warrant to purchase one (1) common share\nat an exercise price of $20.00\nper share and (ii) a series B common warrant to purchase one\n(1) common share at an exercise price of $20.00\nper share. The exercise periods for the Series A and B warrants\nare five years and two and half years, respectively. The Series B warrants have an alternate cashless exercise of one warrant for three\ncommon shares.\n\n \n\nThe\nCompany accounted for Series A and Series B warrants as liability awards and the Pre-Funded Warrant as a permanent equity, using an allocation\nof 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\nand pre-funded warrants. The Series A and Series B Warrants were recorded at fair value on the date of issuance, and remeasured at fair\nvalue at the balance sheet date, with changes in fair value recorded to earnings. The Series A and Series B Warrant liabilities were\nassessed to be $1.3 million and $5.4 million, respectively, on the day of the transaction. As of December 31, 2025, a total of 10,173,402\nSeries B warrants were exercised and converted into common shares. As of March 31, 2026, none of the Series A warrants have been exercised,\nand the fair value of the Series A warrant liability was $0.1 million. The total number of unexercised Series A warrants as of March\n31, 2026 was 3,443,461. All the pre-funded warrants were exercised as of March 31, 2025.\n\n \n\nAs\npart of the transaction, the Company incurred equity issuance costs of $0.8 million related to advisory and legal fees directly attributable\nto 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\nagainst additional paid-in-capital and warrant liability (expensed to change in fair value), respectively.\n\n \n\nThe\ncombined offering price of each share of common stock together with the accompanying Series A and Series B common warrants is $16.250,\nand the combined offering price of each pre-funded warrant, all of which were exercised as of April 2, 2025, together with the accompanying\nseries A and series B common warrants is $16.245. The gross proceeds of the public offering were approximately $9.0 million before deducting\nplacement agent fees and offering expenses and were used to repay certain indebtedness ($2.9M note payable) and expected to be used for\ngeneral corporate purposes, including working capital, operating expenses and capital expenditures.\n\n \n\nThe\nSeries B warrants contained certain volume weighted average price provisions that reset the exercise price to a minimum floor price of\n$3.21 and also resets the number of warrants to 3,406,390 which are exercisable into 10,173,402 common shares.\n\n \n\nAs\nof 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\nSeries B warrants were exercised on a cashless basis, there were no proceeds to the company. No Series A warrants were exercised, however\nthe reset provisions increased the amount of Series A warrants such that 3,443,461 are outstanding at an exercise price of $3.21.\n\n \n\n10\n\n [Table of Contents](#toc_001)\n\n \n\n**HEPION\nPHARMACEUTICALS, INC. AND SUBSIDIARIES**\n\n**Notes\nto Condensed Consolidated Financial Statements**\n\n**(Unaudited)**\n\n \n\nThe\nfair value of these liability classified warrants was estimated using the Black-Scholes option pricing model. This method of valuation\ninvolves using inputs such as the fair value of our common stock, historical volatility, the contractual term of the warrants, risk-free\ninterest rates and dividend yields. Due to the nature of these inputs, the valuation of the warrants is considered a Level 2 measurement\n(see Note 6). The following assumptions were used to measure the 2025 Series A and Series B Warrants.\n\n \n\n  \n2025 Series A Warrants\n \n\n  \nMarch 31,  \nDecember 31, \n \n\n**January 23,**\n\n \n\n  \n2026  \n2025 \n \n**2025**\n \n\nStock price \n$0.06  \n$0.06 \n \n$\n10.00\n \n\nExpected warrant term (years) \n 3.9 years  \n 4.2 years \n \n \n5.1 years\n \n\nRisk-free interest rate \n 3.87% \n 3.64%\n \n \n4.12\n%\n\nExpected volatility \n 167.65% \n 151.25%\n \n \n114.0\n%\n\nDividend yield \n —  \n —\n \n \n—\n\n \n\nThe\nSeries B Warrants are exercisable on a cashless basis for a quantity equal to three times the gross quantity of shares underlying the\nwarrants, and there is no exercise price associated with a cashless exercise (including no exercise price incorporated into the calculation\nof shares issuable under the cashless exercise). To calculate the fair value, we performed a back solve at inception that contemplated\na DLOM and dilution adjustments. The fair value of the Series B warrants as of January 23, 2025 was $5.4 million.\n\n** **\n\nThe following table sets forth the components of changes in our derivative\nfinancial instruments liability balance for the three months ended March 31, 2026.\n\n Schedule of Derivative Liabilities at Fair Value\n\nDate \nNumber of\nWarrants\nOutstanding  \n\n**Derivative Instrument**\n\n**Liability**\n \n\nBalance of derivative liability at December 31, 2025 \n 3,477,775  \n$103,022 \n\nChange in fair value of warrants \n —  \n 10,153 \n\nBalance of derivative liability at March 31, 2026 \n 3,477,775  \n 113,175 \n\n \n\n**5.\nNotes Payable**\n\n \n\nOn\nMarch 15, 2025, the Company entered into a one-year Directors and Officers Liability Insurance agreement for $656,178. The Company made\na down payment of $130,000, with the remaining balance financed with a third-party over the following ten months at an annual percentage\nrate of 7.30%. Beginning April 2025, the Company will make 10 monthly payments of $54,394, with the last payment to be made\nin January 2026. At the end of March 31, 2026, there was no outstanding balance on this note payable.\n\n \n\n11\n\n [Table of Contents](#toc_001)\n\n \n\n**HEPION\nPHARMACEUTICALS, INC. AND SUBSIDIARIES**\n\n**Notes\nto Condensed Consolidated Financial Statements**\n\n**(Unaudited)**\n\n \n\n**6.\nFair Value Measurements**\n\n** **\n\nThe\nfollowing table presents our liabilities that are measured and recognized at fair value on a recurring basis classified under the appropriate\nlevel of the fair value hierarchy at March 31, 2026 and December 31, 2025.\n\n \n\n Schedule of Liabilities Measured and Recognized at Fair Value on a Recurring Basis\n\nDescription \nFair value  \n(Level 1)  \n(Level 2)  \n(Level 3) \n\n  \nFair Value Measurement at Reporting Date Using \n\nDescription \nFair value  \n(Level 1)  \n(Level 2)  \n(Level 3) \n\nAs of March 31, 2026: \n    \n    \n    \n   \n\nDerivative liabilities related to warrants \n$113,175  \n$—  \n$113,175  \n$— \n\n  \n    \n    \n    \n   \n\nAs of December 31, 2025: \n    \n    \n    \n   \n\nDerivative liabilities related to warrants \n$103,022  \n$—  \n$103,022  \n$— \n\n \n\nThe unrealized gains or losses on the derivative liabilities are recorded as a change\nin fair value of derivative financial instruments—warrants in our consolidated statement of operations. See Note 4 for a rollforward\nof the derivative liability for three months ended March 31, 2026.\n\n \n\n**7.\nAccrued Liabilities**\n\n \n\nThe following table presents our accrued liabilities at March 31, 2026 and December 31, 2025.\n\n Schedule\nof Accrued Liabilities\n\n  \n**March 31, 2026**  \n**December 31, 2025** \n\n  \n   \n  \n\nPayroll related \n$259,915  \n$29,172 \n\nCirna license fees \n 30,000  \n — \n\nOther\n \n 57,215  \n 48,335 \n\nTotal accrued expenses \n$347,130  \n$77,507 \n\n \n\nAt\nMarch 31, 2026, the payroll related accrued liabilities related to the accrued severance for Dr. Kaouthar Lbiati following her resignation\nas Chief Executive Officer effective March 16, 2026 and related separation agreement dated April 13, 2026.\n\n \n\n**8.\nAccounting for Share-Based Payments**\n\n** **\n\nOn\nJune 3, 2013, we adopted the 2013 Equity Incentive Plan (the 2013 Plan), which expired in June 2023 and we are no longer making\ngrants under it. Stock options granted under the 2013 Plan typically vest after 3 three years of continuous service from the grant\ndate and will have a contractual term of 10\nten years.\n\n \n\nIn\nApril 2023, our board of directors approved the 2023 Omnibus Equity Incentive Plan (the 2023 Plan), which became effective in June 2023\nupon stockholder approval. The 2023 Plan allows for the grant of up to 10,000\nawards for the purpose of attracting, motivating and retaining\nemployees (including officers), non-employee directors and non-employee consultants. As of March 31, 2026, we had 5,492 awards available for grant from the 2023 Plan.\n\n \n\nWe\nclassify stock-based compensation expense in our consolidated statement of operations in the same way the award recipient’s payroll\ncosts are classified or in which the award recipients’ service payments are classified. We recorded stock-based compensation expense\nas follows:\n\n \n\n12\n\n [Table of Contents](#toc_001)\n\n \n\n**HEPION\nPHARMACEUTICALS, INC. AND SUBSIDIARIES**\n\n**Notes\nto Condensed Consolidated Financial Statements**\n\n**(Unaudited)**\n\n Schedule of Stock Based Compensation Expense\n\n  \n2026  \n2025 \n\n  \n\nThree Months Ended\n\nMarch 31,\n \n\n  \n2026  \n2025 \n\nGeneral and administrative \n$—  \n$20,783 \n\nTotal stock-based compensation expense \n$—  \n$20,783 \n\n \n\nA\nsummary of stock option activity under the 2013 Plan and 2023 Plan is presented as follows:\n\n Schedule of Stock Option Activity\n\n  \nNumber of Options  \n\n**Weighted**\n\n**Average**\n\n**Exercise Price**\n\n**Per Share**\n  \n\n**Intrinsic**\n\n**Value**\n  \n\n**Weighted**\n\n**Average**\n\n**Remaining**\n\n**Contractual**\n\n**Term**\n \n\nBalance outstanding, December 31, 2025 \n 5,822  \n$356.90  \n$       —  \n 5.15 years \n\nForfeited \n (2,041) \n$453.22  \n$—  \n   \n\nBalance outstanding, March 31, 2026 \n 3,781  \n$304.16  \n$—  \n 4.05\nyears  \n\nAwards outstanding, vested awards and those expected to vest at March 31, 2026 \n 3,781  \n$304.16  \n$—  \n 4.05\nyears \n\nVested and exercisable at March 31, 2026 \n 3,781  \n$304.16  \n$—  \n 4.05\nyears \n\n \n\nAs\nof March 31, 2026, there was no unrecognized compensation cost related to non-vested stock options outstanding, net of expected forfeitures.\n\n \n\n**9.\nLoss per Share**\n\n \n\nBasic\nand diluted net loss per common share was determined by dividing net loss attributable to common stockholders by the weighted-average\ncommon shares outstanding during the period.\n\n \n\n Schedule of Computation of Basic and Diluted Net Loss Per Share\n\nBasic and diluted net loss per common share \n2026  \n2025 \n\n  \nThree Months Ended\nMarch 31, \n\nBasic and diluted net loss per common share \n2026  \n2025 \n\nNumerator: \n    \n   \n\nNet loss \n$(810,791) \n$(6,105,887)\n\nDenominator: \n    \n   \n\nWeighted average common shares outstanding \n 11,620,317  \n 2,836,700 \n\nNet loss per share of common stock—basic and diluted \n$(0.07) \n$(2.15)\n\n** **\n\n13\n\n [Table of Contents](#toc_001)\n\n** **\n\n**HEPION\nPHARMACEUTICALS, INC. AND SUBSIDIARIES**\n\n**Notes\nto Condensed Consolidated Financial Statements**\n\n**(Unaudited)**\n\n \n\nThe\nfollowing outstanding securities at March 31, 2026 and 2025 have been excluded from the computation of basic and diluted weighted shares\noutstanding, as they would have been anti-dilutive due to net loss:\n\n \n\n Schedule of Outstanding Securities Excluded from Computation of Basic and Diluted Weighted Shares Outstanding\n\n  \n2026  \n2025 \n\n  \nThree Months Ended\nMarch 31, \n\n  \n2026  \n2025 \n\nCommon shares issuable for: \n    \n   \n\nSeries A preferred stock \n 3  \n 3 \n\nSeries C preferred stock \n 16  \n 16 \n\nStock options \n 3,781  \n 7,813 \n\nWarrants – liability classified \n 34,314  \n 49,020 \n\nWarrants – equity classified \n —  \n 1,795 \n\n2025 Series A warrants \n 3,443,461  \n 3,443,461 \n\nTotal \n 3,481,575  \n 3,502,108 \n\n \n\nThe\nstrike price for the equity classified warrants is $2,500 each and its expired in February 2026.\n\n \n\n**10.\nCommitments and Contingencies**\n\n \n\n**Legal\nProceedings**\n\n \n\nWe\nare involved in various legal proceedings. Significant judgment is required to determine both the likelihood and the estimated amount\nof a loss related to such matters. Additionally, while any litigation contains an element of uncertainty, we have at this time no reason\nto believe that the outcome of such proceedings or claims will have a material adverse effect on our consolidated financial condition\nor results of operations.\n\n \n\n14\n\n [Table of Contents](#toc_001)\n\n \n\n**HEPION\nPHARMACEUTICALS, INC. AND SUBSIDIARIES**\n\n**Notes\nto Condensed Consolidated Financial Statements**\n\n**(Unaudited)**\n\n \n\n**Employment\nAgreements**\n\n \n\nAs of March 31, 2026, we do not have any\nemployment agreements with active employees which require the funding of a specific level of payments, if certain events, such as a change\nin control, termination without cause or retirement, occur.\n\n \n\nOn\nMarch 16, 2026, Dr. Kaouthar Lbiati, the Chief Executive Officer of Hepion Pharmaceuticals, Inc. (the “Company”) informed\nthe Board of Directors (the “Board”) of the Company that she was resigning as Chief Executive Officer for personal reasons,\neffective immediately.\n\n \n\n**11.\nSubsequent Events**\n\n \n\nOn\nApril 13, 2026 (the “Separation Date”), the Company entered into a separation agreement with Dr. Lbiati pursuant to which,\namong other things, she will be paid (i) $225,000, (ii) $30,625 representing the pro-rata portion of her potential cash bonus and (iii)\nreimbursement of her COBRA payments for 6 months.\n\n \n\nFurther,\npursuant to the separation agreement, Dr. Lbiati agreed to a general release and confidentiality. Also on April 13, 2026, Dr. Lbiati\nresigned as a director of the Company.\n\n \n\nOn\nApril 21, 2026, the Company entered into securities purchase agreements (the “Agreements”)\nwith certain accredited investors (the “Investors”) pursuant to which the Company agreed to sell and issue to the Investors\nin a private placement offering (the “Offering”), an aggregate offering of 17,500,000 shares of common stock, par value $0.0001\nper share (the “Common Stock”) at an offering price of $0.04 per share for gross proceeds of $700,000.\n\n \n\nThe\nOffering closed on April 21, 2026. The issuance of the Common Stock has not been registered under the Securities Act and such securities\nmay not be offered or sold in the United States absent registration or an exemption from registration under the Securities Act and any\napplicable state securities laws.\n\n \n\nOn May 5, 2026, we entered into\nan employment agreement with each of Vincent LoPriore, our Executive Chairman and Gary Stetz, our Chief Executive Officer.\n\n \n\n15\n\n [Table of Contents](#toc_001)"}