{"url_path":"/sec/ctrvp/10-q/2026/item-2","section_key":"item-2","section_title":"Item 2 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS**","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":2211,"has_tables":true,"body_markdown":"**ITEM\n2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS**\n\n** **\n\n*The\nfollowing discussion should be read in conjunction with our condensed consolidated financial statements and other financial information\nappearing elsewhere in this quarterly report. In addition to historical information, the following discussion and other parts of this\nquarterly report contain forward-looking statements. You can identify these statements by forward-looking words such as “plan,”\n“may,” “will,” “expect,” “intend,” “anticipate,” believe,” “estimate”\nand “continue” or similar words. Forward-looking statements include information concerning possible or assumed future business\nsuccess or financial results. You should read statements that contain these words carefully because they discuss future expectations\nand plans, which contain projections of future results of operations or financial condition or state other forward-looking information.\nWe believe that it is important to communicate future expectations to investors. However, there may be events in the future that we are\nnot able to accurately predict or control. Accordingly, we do not undertake any obligation to update any forward-looking statements for\nany reason, even if new information becomes available or other events occur in the future.*\n\n* *\n\n*The\nforward-looking statements included herein are based on current expectations that involve a number of risks and uncertainties set forth\nunder “Risk Factors” in our Annual Report on Form 10-K as of and for the year ended December 31, 2025 filed with the United\nStates Securities and Exchange Commission (“SEC”) on March 12, 2026, as well as under “Risk Factors” within this\nthis Form 10-Q. Accordingly, to the extent that this Report contains forward-looking statements regarding the financial condition, operating\nresults, business prospects or any other aspect of us, please be advised that our actual financial condition, operating results and business\nperformance may differ materially from that projected or estimated by us in forward-looking statements, and you should not unduly rely\non such statements*.\n\n \n\n**Overview**\n\n \n\nHepion Pharmaceuticals, Inc. (we, our, or us) is a medical diagnostic company\nheadquartered in Red Bank, New Jersey, that was previously focused on the development of drug therapy for treatment of chronic liver diseases.\nOur cyclophilin inhibitor, rencofilstat (formerly CRV431), was being developed to offer benefits to address multiple complex pathologies\nrelated to the progression of liver disease.\n\n \n\nOn February 25, 2026, we entered into an intellectual property license agreement\nwith Cirna Diagnostics, LLC (“**Cirna**”) pursuant to which we licensed certain liver disease diagnostic assets from Cirna.\nWe will pay an upfront payment of $50,000 as well as certain patent expenses, up to $2,350,000 in milestone payments, up to $4,500,000\nin sales milestone payments and a royalty payment on net sales in the low single digits. We accounted for this transaction as an asset\nacquisition. The total consideration of $70,000 (upfront payment and certain patent expenses) was allocated to purchased in-process research\nand development, and it was expensed upon the completion of the transaction. We did not recognize any contingent consideration (milestone\npayments) given the low probability of meeting those targets. Royalties will be recognized when earned.\n\n** **\n\nOn May 5, 2026, we entered into an employment agreement with each of Vincent LoPriore, our Executive Chairman and Gary Stetz, our Chief\nExecutive Officer.\n\n \n\n**FINANCIAL\nOPERATIONS OVERVIEW**\n\n \n\nFrom\ninception through March 31, 2026, we have an accumulated deficit of $246.9 million, and we have not generated any revenue from operations.\n\n \n\n16\n\n [Table of Contents](#toc_001)\n\n \n\n**CRITICAL\nACCOUNTING ESTIMATES**\n\n \n\nOur\ncondensed consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States\n(U.S. GAAP). The preparation of these condensed consolidated financial statements requires us to make estimates and assumptions that\naffect the reported amounts of assets, liabilities, costs and expenses, income taxes and related disclosures. On an ongoing basis, we\nevaluate our estimates and assumptions. Our actual results may differ from these estimates under different assumptions or conditions.\n\n \n\nDuring\nthe three months ended March 31, 2026, there were no significant changes to our critical accounting estimates from those described in\nthe “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contained in the Annual\nReport on Form 10-K for the year ended December 31, 2025.\n\n** **\n\n**RECENT\nACCOUNTING PRONOUNCEMENTS**\n\n \n\nPlease\nrefer to Note 3 of Notes to Condensed Consolidated Financial Statements, Recent Accounting Pronouncements, in this Quarterly Report on\nForm 10-Q.\n\n** **\n\n**RESULTS\nOF OPERATIONS**\n\n \n\n**Comparison\nof the three months ended March 31, 2026 and 2025:**\n\n \n\n  \nThree Months Ended\nMarch 31,  \n  \n\n  \n2026  \n2025  \nChange \n\nRevenues \n$—  \n$—  \n$— \n\nCosts and Expenses: \n    \n    \n   \n\nResearch and development \n 70,000  \n 22,235  \n 47,765\n\nGeneral and administrative \n 728,509  \n 1,258,360  \n (529,851)\n\nTotal operating expenses \n 798,509  \n 1,280,595  \n (482,086)\n\nLoss from operations \n (798,509) \n (1,280,595) \n 482,086 \n\n  \n    \n    \n   \n\nOther income (expense): \n    \n    \n   \n\nInterest income (expense) \n (2,129) \n (24,811) \n 22,682 \n\nChange in fair value of derivative financial instruments—warrants \n (10,153) \n (4,800,481) \n 4,790,328 \n\nLoss before income taxes \n (810,791) \n (6,105,887) \n 5,295,096 \n\nNet loss \n$(810,791) \n$(6,105,887) \n$5,295,096 \n\n \n\nWe\nhad no revenues during the three months ended March 31, 2026 and 2025, respectively,\nbecause we have not commercialized any of our medical diagnostic products and we do not expect to have such products for several years,\nif at all.\n\n \n\nResearch and development expenses for the three months ended March 31, 2026 and 2025 was $70,000\nand $22,235, respectively. The $70,000 incurred in 2026 is primarily related to Cirna licensing agreement, whereas the $22,235 incurred\nin prior period was primarily due to certain residual costs to close out the prior our phase 2b study.\n\n \n\nGeneral\nand administrative expenses for the three months ended March 31, 2026 and 2025 was $0.7 million and $1.3 million, respectively. The\ndecrease of $0.5 million was primarily due to a $0.4 million decrease in legal fees and accounting fees, $0.1 million\ndecrease in insurance, and $0.2 million decrease in consulting and outside services. These increases were partially offset by a $0.2 million increase in severance.\n\n** **\n\n17\n\n [Table of Contents](#toc_001)\n\n** **\n\n**Liquidity\nand Capital Resources**\n\n \n\n**Sources\nof Liquidity**\n\n \n\nWe\nhave funded our operations through March 31, 2026 primarily through the issuance of convertible preferred stock, warrants, the issuance\nand sale of shares of our common stock, and subsequent issuances of shares of our common stock through at-the market offerings.\n\n \n\nOn\nApril 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\nreceived prior to March 31, 2025, and is recorded as a subscription liability.\n\n \n\n**Future\nFunding Requirements**\n\n \n\nWe\nhave no products approved for commercial sale in the United States. However, with the assets related to the New Day licensing agreement,\nthere are three products that have CE marks and are eligible to be sold in the European Union (“EU”) and certain eligible\nmarkets that accept the CE mark, with the notable exception of the United States at the present time but we cannot guarantee when and\nhow much revenue will be generated from those products. To date, we have devoted substantially all of our resources to organizing and\nstaffing our company, business planning, raising capital, undertaking preclinical studies and clinical trials of our product candidate.\nAs a result, we are not profitable and have incurred losses in each period since our inception in 2013. As of March 31, 2026, we had\nan accumulated deficit of $246.9 million. We expect to continue to incur significant losses for the foreseeable future.\n\n \n\nWe\nmay encounter unforeseen expenses, difficulties, complications, delays and other unknown factors that may adversely affect our business.\nThe 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.\nOur prior losses and expected future losses have had and will continue to have an adverse effect on our stockholders’ equity and\nworking capital.\n\n \n\nWe\nwill require additional financing and a failure to obtain this necessary capital could force us to delay, limit, reduce or terminate\nour operations.\n\n \n\nSince\nour inception, we have invested a significant portion of our efforts and financial resources in research and development activities for\nour non-replicating and replicating technologies and our product candidates derived from these technologies. We believe that we will\ncontinue to expend substantial resources for the foreseeable future in connection with the development of acquired assets in connection\nwith our strategic alternatives strategy. In addition, other unanticipated costs may arise.\n\n \n\n18\n\n [Table of Contents](#toc_001)\n\n \n\nOur\nfuture capital requirements depend on many factors, including:\n\n \n\n \n●\nthe\nscope, progress, results and costs of researching and developing our current and future product candidate and programs, and of conducting\npreclinical studies and clinical trials;\n\n \n \n \n\n \n●\nthe\nnumber and development requirements of other product candidates that we may pursue, and other indications for our current product\ncandidate that we may pursue;\n\n \n \n \n\n \n●\nthe\nstability, scale and yields during the manufacturing process as we scale-up production and formulation of our product candidate for\nlater stages of development and commercialization;\n\n \n \n \n\n \n●\nthe\ntiming of, and the costs involved in, obtaining regulatory and marketing approvals and developing our ability to establish sales\nand marketing capabilities, if any, for our current and future product candidates we develop if clinical trials are successful;\n\n \n \n \n\n \n●\nour\nability to establish and maintain collaborations, strategic licensing or other arrangements and the financial terms of such agreements;\n\n \n \n \n\n \n●\nthe\ncost of commercialization activities for our current and future product candidates that we may develop, whether alone or with a collaborator;\n\n \n \n \n\n \n●\nthe\ncosts involved in preparing, filing, prosecuting, maintaining, expanding, defending and enforcing patent claims, including litigation\ncosts and the outcome of such litigation;\n\n \n \n \n\n \n●\nthe\ntiming, receipt and amount of sales of, or royalties on, our future products, if any; and\n\n \n\nA\nchange in the outcome of any of these or other variables with respect to the development of any of our current and future product candidates\ncould significantly change the costs and timing associated with the development of that product candidate. Furthermore, our operating\nplans may change in the future, and we will need additional funds to meet operational needs and capital requirements associated with\nsuch operating plans.\n\n \n\nThe\ncondensed consolidated financial statements as of March 31, 2026 have been prepared under the assumption that we will continue as a going\nconcern within one year after the financial statements are issued. Due to our accumulated deficit and our recurring and expected continuing\nlosses from operations, we have concluded there is substantial doubt in our ability to continue as a going concern without additional\ncapital becoming available to attain further operating efficiencies and, ultimately, to generate revenue. Our financial statements do\nnot include any adjustments that might result from the outcome of this uncertainty.\n\n \n\n19\n\n [Table of Contents](#toc_001)\n\n \n\nWe\nwill be required to raise additional capital to continue to fund operations. We cannot be certain that additional funding will be available\non acceptable terms, or at all. To the extent that we raise additional funds by issuing equity securities, our stockholders may experience\nsignificant dilution. Any debt financing, if available, may involve restrictive covenants that impact our ability to (i) acquire new\nproduct candidates; or (ii) relinquish or otherwise dispose of rights to technologies, product candidates or products that we would otherwise\nseek to develop or commercialize on unfavorable terms.\n\n \n\n**Cash\nFlows**\n\n \n\nThe\nfollowing table summarizes our cash flows for the following periods:\n\n \n\n  \nThree Months Ended\nMarch 31, \n\n  \n2026  \n2025 \n\nNet cash provided by (used in): \n    \n   \n\nOperating activities \n$578,584  \n$(1,117,422)\n\nInvesting activities \n —  \n — \n\nFinancing activities \n 195,934  \n 5,297,403 \n\n \n\nAs of March 31, 2026, we had working capital of $2.0 million compared to working capital of $2.8 million as of December\n31, 2025. The decrease of $0.8 million in working capital is primarily\ndue to operating costs incurred during the period.\n\n \n\n*Operating\nActivities:*\n\n \n\nAs of March 31, 2026, we had $2.6 million in cash. Net\ncash from operating activities was $0.6 million for the three months ended March 31, 2026 was primarily due to a refund receipt of a $1.0\nmillion from a previously inactive prepaid insurance policy, partially offset by operating loss, adjusted for non-cash charges.\n\n \n\nAs of March 31, 2025, we had $4.6 million in cash. Net cash used in operating activities was $1.1 million for the\nthree months ended March 31, 2025 consisting primarily of our net loss of $6.1 million, adjusted non-cash charges of $4.8 million, including\n$20,783 for stock-based compensation, and $4.8 million in change in fair value of derivative warrants. Changes in working capital accounts\nhad a positive impact of $0.2 million on cash primarily due to an increase in accounts payable and accrued expenses.\n\n \n\n*Investing\nActivities:*\n\n \n\nThere\nwas no cash provided by or used in investing activities during the three months ended March 31, 2026 and 2025.\n\n \n\n*Financing\nActivities:*\n\n \n\nNet cash provided by financing activities\nwas $0.2 million for the three months ended March 31, 2026, a $250,000 cash receipt related to a stock subscription liability, partially offset by the $54,066 payment on the D&O note payable.\n\n \n\nNet cash provided by financing activities was $5.3 million for the three months ended March 31, 2025, due primarily\nto $8.2M net proceeds received from the exercise of the warrants\nand equity issuance offset by $2.9 million payment on notes payable.\n\n \n\n20\n\n [Table of Contents](#toc_001)"}