UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-K
☒ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For
the year ended December 31, 2025
or
☐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)
55
Madison Ave, Suite 400- PMB# 4362, Morristown, New Jersey07960
(Address
of Principal Executive Offices)
Registrant’s
telephone number, including area code: (732)902-4000
Securities
registered pursuant to Section 12(b) of the Act:
Title of each class Trading Symbol Name of each exchange on which registered
Common Stock, par value $0.0001 per share HEPA OTC QB
Securities
registered pursuant to Section 12(g) of the Act: None
Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒
Indicate
by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒
Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate
by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule
405 of Regulation S-T (? 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was
required to submit such files). Yes ☒ No ☐
Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III
of this Form 10-K or any amendment to this Form 10-K. ☒
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.:
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 has filed a report on and attestation to its management’s assessment of the effectiveness
of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered
public accounting firm that prepared or issued its audit report. ☐
If
securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant
included in the filing reflect the correction of an error to previously issued financial statements. ☐
Indicate
by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation
received by any of the registrant’s executive officers during the relevant recovery period pursuant to ?240.10D-1(b). ☐
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
As
of June 30, 2025, the aggregate market value of the registrant’s voting stock held by non-affiliates was approximately $0.9 million
based on the last reported sale price of the registrant’s common stock.
The
number of shares of the registrant’s Common Stock outstanding as of March 11, 2026 was 11,620,317.
Documents
Incorporated by Reference:
Parts
of the registrant’s Proxy Statement for the Registrant’s 2026 Annual Meeting of Stockholders are incorporated by reference
into Part III of this Annual Report on Form 10-K. Such Proxy Statement will be filed with the Securities and Exchange Commission within
120 days of the registrant’s fiscal year ended December 31, 2025.
TABLE
OF CONTENTS
Page
Cautionary Note Regarding Forward-Looking Statements 3
PART I
Item 1. Business 5
Item 1A. Risk Factors 12
Item 1B. Unresolved Staff Comments 43
Item 1C. Cybersecurity 43
Item 2. Properties 44
Item 3. Legal Proceedings 44
Item 4. Mine Safety Disclosures 44
PART II
Item 6. [Reserved] 45
Item 7A. Quantitative and Qualitative Disclosures About Market Risk 50
Item 8. Financial Statements and Supplementary Data 51
Item 9A. Controls and Procedures 75
Item 9B. Other Information 76
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections 76
PART III
PART IV
Item 15. Exhibits and Financial Statement Schedules 78
SIGNATURES 80
Table of Contents
Cautionary
Note Regarding Forward-Looking Statements
This
Annual Report on Form 10-K (this “Annual Report”) contains forward-looking statements that involve substantial risks and
uncertainties. Any statements in this Annual Report about our expectations, beliefs, plans, objectives, assumptions or future events
or performance are not historical facts and are forward-looking statements. These statements are often, but not always, made through
the use of words or phrases such as “believe,” “will,” “expect,” “anticipate,” “estimate,”
“intend,” “plan” and “would.” For example, statements concerning financial condition, possible or
assumed future results of operations, growth opportunities, industry ranking, plans and objectives of management, markets for our common
stock and future management and organizational structure are all forward-looking statements. Forward-looking statements are not guarantees
of performance. They involve known and unknown risks, uncertainties and assumptions that may cause actual results, levels of activity,
performance or achievements to differ materially from any results, levels of activity, performance or achievements expressed or implied
by any forward-looking statement. We do not assume any obligation to update forward-looking statements as circumstances change and thus
you should not unduly rely on these statements.
Any
forward-looking statements are qualified in their entirety by reference to the risk factors discussed throughout this Annual Report.
Some of the risks, uncertainties and assumptions that could cause actual results to differ materially from estimates or projections contained
in the forward-looking statements include but are not limited to:
● our public securities’ potential liquidity and trading;
● the potential advantages of our product candidates and those being developed;
● the success of our collaborations and partnerships with third parties;
● our sales, marketing and distribution capabilities and strategy;
The
foregoing list sets forth some, but not all, of the factors that could affect our ability to achieve results described in any forward-looking
statements, which speak only as of the date of this Annual Report. We assume no obligation and expressly disclaim any duty to update
any forward-looking statement to reflect events or circumstances after the date of this Annual Report or to reflect the occurrence of
unanticipated events. In addition, we cannot assess the impact of each factor on our business or the extent to which any factor, or combination
of factors, may cause actual results to differ materially from those contained in any forward-looking statements contained in this Annual
Report. All written and oral forward-looking statements attributable to us or any person acting on our behalf are expressly qualified
in their entirety by the cautionary statements contained or referred to in this section.
All
share amounts included in this Annual Report have been retroactively adjusted to reflect a 1-for-50 reverse stock split, which took effect
on March 17, 2025.
Table of Contents
Risk
Factor Summary
Our
business is subject to significant risks and uncertainties that make an investment in us speculative and risky. Below we summarize what
we believe are the principal risk factors but these risks are not the only ones we face, and you should carefully review and consider
the full discussion of our risk factors in the section titled “Risk Factors”, together with the other information in this
Annual Report on Form 10-K. If any of the following risks actually occurs (or if any of those listed elsewhere in this Annual Report
on Form 10-K occur), our business, reputation, financial condition, results of operations, revenue, and future prospects could be seriously
harmed. Additional risks and uncertainties that we are unaware of, or that we currently believe are not material, may also become important
factors that adversely affect our business.
Risks
Related to Our Business
We
have incurred losses since inception, anticipate that we will incur continued losses for the foreseeable future indicating the possibility
that we may not be able to operate in the future.
We,
and our collaborators, must comply with extensive government regulations in order to advance our product candidates through the development
process and ultimately obtain and maintain marketing approval for our products in the U.S. and abroad.
We
will require substantial additional funding which may not be available to us on acceptable terms, or at all. If we fail to raise the
necessary additional capital, we may be unable to complete the development and commercialization of our product candidates or continue
our development programs.
Our
product candidates, if approved for sale, may not gain acceptance among physicians, patients and the medical community, thereby limiting
our potential to generate revenues.
Risks
Relating to the Commercialization of our Product Candidates
We
may delay or terminate the development of a product candidate at any time if we believe the perceived market or commercial opportunity
does not justify further investment, which could materially harm our business.
If
we fail to enter into collaborations, license agreements or other transactions with third parties to accelerate the development of our
product candidates, we will bear the risk of developmental failure.
If
government and third-party payers fail to provide adequate reimbursement or coverage for our products or those we develop through collaborations,
our revenues and potential for profitability will be harmed.
Risks
Related to Our Intellectual Property
If
we are unable to adequately protect or expand our intellectual property related to our current or future product candidates, our business
prospects could be harmed.
If
a third party claims we are infringing on its intellectual property rights, we could incur significant expenses, or be prevented from
further developing or commercializing our product candidates.
Our
failure to successfully discover, acquire, develop, and market additional product candidates or approved products would impair our ability
to grow.
Risks
Related to Government Regulation
Even
if our product candidate receives regulatory approval, it may still face future development and regulatory difficulties.
Health
care reform measures and other recent legislative initiatives could adversely affect our business.
Risks
Related to Our Common Stock
If
we fail to comply with the rules under the Sarbanes-Oxley Act of 2002 related to accounting controls and procedures in the future, or,
if we discover additional material weaknesses and other deficiencies in our internal control and accounting procedures, our stock price
could decline significantly and raising capital could be more difficult. Our management determined that our disclosure controls and procedures
and internal controls were ineffective as of December 31, 2025 and if they continue to be ineffective could result in material misstatements
in our financial statements.
Certain
provisions in our certificate of incorporation and by-laws, and of Delaware law, may prevent or delay an acquisition of our company,
which could decrease the trading price of our common stock.
Table of Contents
PART
I
ITEM
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
May 9, 2025, we entered into a license agreement (“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 $270,629 in shares of our common stock. In addition, we agreed to pay New Day up to $17.15 million upon achievement of
certain regulatory, sales and reimbursement milestones. Further, we will pay New Day royalty rates in the upper single to low double
digits based on net sales.
We
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, we entered into a patent and associated assets acquisition agreement (the “Agreement”) with Panetta Partners
Limited (“Panetta”) whereby Panetta purchased from us 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 agreed to
provide a contingent value right (“CVR”) to our stockholders to receive one or more contingent payments upon the achievement
of certain milestones as set forth below:
We
did not recognize any contingent consideration given the high uncertainty of achieving these milestones.
On
February 25, 2026, we entered into an intellectual property license agreement with Cirna Diagnostics, LLC (“Cirna”)
pursuant to which we licensed certain liver disease diagnostic assets from Cirna. We 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 in sales milestone payments and a royalty payment on
net sales in the low single digits.
Table of Contents
Sales
and Marketing
We
currently do not have any commercialization or sales and marketing capabilities, and currently have no plans to invest in or build such
capabilities internally.
Manufacturing
We
do not own or operate any facilities in which we can formulate and manufacture our product candidates.
Pharmaceutical
Pricing and Reimbursement
In
the U.S. and most foreign markets, any revenue associated with the sale of our product candidate, if approved for sale, will depend largely
upon the availability of reimbursement from third-party payers. Third-party payers include various government health authorities such
as The Centers for Medicare and Medicaid Services (“CMS”), which administers Medicare and Medicaid in the U.S., managed-care
providers, private health insurers and other organizations. Third-party payers are increasingly challenging the price and examining the
cost-effectiveness of medical products and services, including pharmaceuticals. In addition, significant uncertainty exists as to the
reimbursement status of newly approved pharmaceutical products. Our products may ultimately not be considered cost-effective, and adequate
third-party reimbursement may not be available to enable us to maintain price levels sufficient to support a profitable operation or
generate an appropriate return on our investment in product development.
The
U.S. and foreign governments periodically propose and pass legislation designed to reduce the cost of healthcare and pharmaceutical products.
Accordingly, legislation and regulations affecting the pricing of pharmaceuticals may change before our product candidate is ever approved
for sale. In addition, the adoption of new legislation could further limit reimbursement for pharmaceuticals. Further, an increasing
emphasis on managed care in the U.S. has and will continue to increase the pressure on pharmaceutical pricing. The marketability of our
products may suffer if the government and other third-party payers fail to provide adequate coverage and reimbursement rates for our
product candidate.
Regulatory
Matters
Overview
The
preclinical and clinical testing, manufacture, labeling, storage, distribution, promotion, sale, export, reporting and record-keeping
of drug products and product candidates are subject to extensive regulation by numerous governmental authorities in the U.S., principally
the FDA and corresponding state agencies, and regulatory agencies in foreign countries.
Non-compliance
with applicable regulatory requirements can result in, among other things, total or partial suspension of the clinical development of
a product candidate, manufacturing and marketing, failure of the FDA or similar regulatory agency in other countries to grant marketing
approval, withdrawal of marketing approvals, fines, injunctions, seizure of products and criminal prosecution.
Government
Regulation
The
design, development, manufacture, testing and sale of our products in the U.S. are subject to regulation by numerous governmental authorities,
principally the FDA, and corresponding state and local regulatory agencies.
FDA
Regulation
Medical
Devices
Generally,
the products we develop must be cleared by the FDA before they are marketed in the United States. Before and after approval, authorization,
or clearance in the United States, our products are subject to extensive regulation by the FDA, as well as by other regulatory bodies.
FDA regulations govern, among other things, the development, testing, manufacturing, labeling, safety, storage, recordkeeping, market
clearance, authorization or approval, advertising and promotion, import and export, marketing and sales, and distribution of medical
devices, including IVDs. IVDs are a type of medical device and include reagents and instruments used in the diagnosis or detection of
diseases, conditions or infections, including, without limitation, the presence of certain chemicals or other biomarkers. Predictive,
prognostic and screening tests can also be IVDs.
Table of Contents
In
the United States, medical devices are subject to varying degrees of regulatory control and are classified in one of three classes depending
on the extent of controls the FDA determines are necessary to reasonably ensure their safety and effectiveness:
● Class III: special controls and requires a premarket approval (“PMA”).
FDA
Premarket Clearance and Approval Requirements
Unless
an exemption applies, each medical device commercially distributed in the United States requires either FDA clearance of a 510(k) premarket
notification, approval of a de novo application, or approval of a premarket approval (PMA).
While
most Class I devices are exempt from the 510(k) premarket notification requirement, manufacturers of most Class II devices are required
to submit to the FDA a premarket notification under Section 510(k) of the FDCA requesting permission to commercially distribute the device.
The FDA’s permission to commercially distribute a device subject to a 510(k) premarket notification is generally known as 510(k)
clearance. Devices deemed by the FDA to pose the greatest risks, such as life sustaining, life supporting or some implantable devices,
or devices that have a new intended use, or use advanced technology that is not substantially equivalent to that of a legally marketed
device, are placed in Class III, requiring approval of a PMA. Some pre-amendment devices are unclassified, but are subject to FDA’s
premarket notification and clearance process in order to be commercially distributed. Our initial product is a Class II device subject
to 510(k) clearance.
510(k)
Clearance Marketing Pathway
510(k)
clearance, a company must submit to the FDA a premarket notification submission demonstrating that the proposed device is “substantially
equivalent” to a predicate device already on the market. A predicate device is a legally marketed device that is not subject to
PMA, i.e., a device that was legally marketed prior to May 28, 1976 (pre-amendments device) and for which a PMA is not required, a device
that has been reclassified from Class III to Class II or I, or a device that was found substantially equivalent through the 510(k) process.
The FDA’s 510(k) clearance process usually takes from three to twelve months, but often takes longer. The FDA may require additional
information, including clinical data, to make a determination regarding substantial equivalence. In addition, the FDA collects user fees
for certain medical device submissions and annual fees for medical device establishments.
After
a device receives 510(k) marketing clearance, any modification that could significantly affect its safety or effectiveness, or that would
constitute a major change or modification in its intended use, will require a new 510(k) clearance or, depending on the modification,
PMA approval. The FDA requires each manufacturer to determine whether the proposed change requires submission of a 510(k) or a PMA in
the first instance, but the FDA can review any such decision and disagree with a manufacturer’s determination. If the FDA disagrees
with a manufacturer’s determination, the FDA can require the manufacturer to cease marketing and/or request the recall of the modified
device until 510(k) marketing clearance or PMA approval is obtained. Also, in these circumstances, the manufacturer may be subject to
significant regulatory fines or penalties.
De
Novo Classification
Devices
of a new type that FDA has not previously classified based on risk are automatically classified into Class III by operation of section
513(f)(1) of the FDCA, regardless of the level of risk they pose. To avoid requiring PMA review of low- to moderate-risk devices classified
in Class III by operation of law, Congress enacted section 513(f)(2) of the FDCA. This provision allows FDA to classify a low- to moderate-risk
device not previously classified into Class I or II. After de novo authorization, an authorized device may be used as a predicate for
future devices going through the 510(k) process.
Table of Contents
Clinical
Trials
Clinical
trials are often required for a de novo authorization. All clinical investigations of devices to determine safety and effectiveness must
be conducted in accordance with the FDA’s IDE regulations which govern investigational device labeling, prohibit promotion of the
investigational device, and specify an array of recordkeeping, reporting and monitoring responsibilities of study sponsors and study
investigators. If the device presents a “significant risk,” to human health, as defined by the FDA, the FDA requires the
device sponsor to submit an IDE application to the FDA, which must become effective prior to commencing human clinical trials. A significant
risk device is one that presents a potential for serious risk to the health, safety or welfare of a patient and either is implanted,
used in supporting or sustaining human life, substantially important in diagnosing, curing, mitigating or treating disease or otherwise
preventing impairment of human health, or otherwise presents a potential for serious risk to a subject. An IDE application must be supported
by appropriate data, such as animal and laboratory test results, showing that it is safe to test the device in humans and that the testing
protocol is scientifically sound. The IDE will automatically become effective 30 days after receipt by the FDA unless the FDA notifies
the company that the investigation may not begin. If the FDA determines that there are deficiencies or other concerns with an IDE for
which it requires modification, the FDA may permit a clinical trial to proceed under a conditional approval.
In
addition, the study must be approved by, and conducted under the oversight of, an Institutional Review Board (IRB) for each clinical
site. The IRB is responsible for the initial and continuing review of the IDE study and may pose additional requirements for the conduct
of the study. If an IDE application is approved by the FDA and one or more IRBs, human clinical trials may begin at a specific number
of investigational sites with a specific number of patients, as approved by the FDA. If the device presents a non-significant risk to
the patient, a sponsor may begin the clinical trial after obtaining approval for the trial by one or more IRBs without separate approval
from the FDA, but must still follow abbreviated IDE requirements, such as monitoring the investigation, ensuring that the investigators
obtain informed consent, and labeling and record-keeping requirements. Acceptance of an IDE application for review does not guarantee
that the FDA will allow the IDE to become effective and, if it does become effective, the FDA may or may not determine that the data
derived from the trials support the safety and effectiveness of the device or warrant the continuation of clinical trials. An IDE supplement
must be submitted to, and approved by, the FDA before a sponsor or investigator may make a change to the investigational plan that may
affect its scientific soundness, study plan or the rights, safety or welfare of human subjects.
During
a study, the sponsor is required to comply with the applicable FDA requirements, including, for example, trial monitoring, selecting
clinical investigators and providing them with the investigational plan, ensuring IRB review, adverse event reporting, record keeping
and prohibitions on the promotion of investigational devices or on making safety or effectiveness claims for them. The clinical investigators
in the clinical study are also subject to FDA regulations and must obtain patient informed consent, rigorously follow the investigational
plan and study protocol, control the disposition of the investigational device, and comply with all reporting and recordkeeping requirements.
Additionally, after a trial begins, we, the FDA or the IRB could suspend or terminate a clinical trial at any time for various reasons,
including a belief that the risks to study subjects outweigh the anticipated benefits.
Sponsors
of applicable clinical trials of devices also are required to register with www.clinicaltrials.gov, a public database of clinical trial
information. Information related to the device, patient population, phase of investigation, study sites and investigators and other aspects
of the clinical trial is made public as part of the registration. Although the FDA’s Quality System Regulation (QSR) does not fully
apply to investigational devices, the requirement for controls on design and development does apply.
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Post-market
Regulation
After
a device is cleared or approved for marketing, numerous and pervasive regulatory requirements continue to apply. These include:
● establishment registration and device listing with the FDA;
● requirements related to promotional activities;
Once
we have a commercialized product, our manufacturing processes will be required to comply with the applicable portions of the QSR, which
cover the methods and the facilities and controls for the design, manufacture, testing, production, processes, controls, quality assurance,
labeling, packaging, distribution, installation and servicing of finished devices intended for human use. The QSR also requires, among
other things, maintenance of a device master file, device history file, and complaint files. As a manufacturer, we are subject to periodic
scheduled or unscheduled inspections by the FDA. Our failure to maintain compliance with the QSR requirements could result in the shut-down
of, or restrictions on, our manufacturing operations and the recall or seizure of our products, which would have a material adverse effect
on our business. The discovery of previously unknown problems with any of our products, including unanticipated adverse events or adverse
events of increasing severity or frequency, whether resulting from the use of the device within the scope of its clearance or off-label
by a physician in the practice of medicine, could result in restrictions on the device, including the removal of the product from the
market or voluntary or mandatory device recalls.
The
FDA has broad regulatory compliance and enforcement powers. If the FDA determines that we failed to comply with applicable regulatory
requirements, it can take a variety of compliance or enforcement actions, which may result in any of the following sanctions:
● unanticipated expenditures to address or defend such actions;
● operating restrictions, partial suspension or total shutdown of production;
● refusal to grant export approval for our products; or
● criminal prosecution.
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Federal
and State Fraud and Abuse Laws
We
are subject to federal fraud and abuse laws such as the federal Anti-Kickback Statute (AKS), the federal prohibition against physician
self-referral (Stark Law), the Eliminating Kickbacks in Recovery Act (EKRA), and the federal False Claims Act (FCA). We are also subject
to similar state and foreign fraud and abuse laws.
The
AKS (Social Security Act § 1128B(b)) prohibits knowingly and willfully offering, paying, soliciting, or receiving remuneration,
directly or indirectly, overtly or covertly, in cash or in kind, in return for or to induce such person to refer an individual, or to
purchase, lease, order, arrange for, or recommend purchasing, leasing or ordering, any item or service that may be reimbursable, in whole
or in part, under a federal healthcare program, such as Medicare or Medicaid. There are a number of statutory exceptions and regulatory
safe harbors to the AKS that provide protection from AKS liability to arrangements that fully satisfy the applicable requirements.
EKRA
(18 USC § 220) prohibits knowingly and willfully soliciting, receiving, offering or paying remuneration, directly or indirectly,
in return for the referral of a patient to, or in exchange for an individual using the services of certain entities, including laboratories,
if the services are covered by a health care benefit program. The term “health care benefit program” is broadly defined such
that EKRA extends to referrals reimbursed by both governmental and commercial third-party payers. EKRA includes a number of statutory
exceptions that provide protection from EKRA liability if the applicable requirements are met.
The
Stark Law (Social Security Act § 1877) generally prohibits, among other things, clinical laboratories and other so-called “designated
health services” entities from billing Medicare for any designated health services when the physician ordering the service, or
any member of such physician’s immediate family, has a financial relationship, such as a direct or indirect investment interest
in or compensation arrangement with the billing entity, unless the arrangement meets an exception to the prohibition. The Stark Law also
prohibits physicians from making such referrals to a designated health services entity. There are also similar state laws that apply
where Medicaid and/or commercial payers are billed.
The
FCA (31 USC § 3729) imposes penalties against individuals or entities for, among other things, knowingly presenting, or causing
to be presented, claims for payment to the government that are false or fraudulent, or knowingly making, using or causing to be made
or used a false record or statement material to such a false or fraudulent claim, or knowingly concealing or knowingly and improperly
avoiding, decreasing, or concealing an obligation to pay money to the federal government. This statute also permits a private individual
acting as a “qui tam” whistleblower to bring actions on behalf of the federal government alleging violations of the FCA and
to share in any monetary recovery. FCA liability is potentially significant in the healthcare industry because the statute provides for
treble damages and mandatory penalties per false claim or statement for penalties assessed.
Other
federal statutes pertaining to healthcare fraud and abuse include the civil monetary penalties statute, which prohibits, among other
things, the offer or payment of remuneration to a Medicaid or Medicare beneficiary that the offeror or payer knows or should know is
likely to influence the beneficiary to order or receive a reimbursable item or service from a particular provider, practitioner, or supplier,
and contracting with an individual or entity that the person knows or should know is excluded from participation in a federal health
care program. In addition, federal criminal statutes created by the Health Insurance Portability and Accountability Act (HIPAA) prohibit,
among other things, knowingly and willfully executing or attempting to execute a scheme to defraud any healthcare benefit program or
obtain by means of false or fraudulent pretenses, representations or promises any money or property owned by or under the control of
any healthcare benefit program in connection with the delivery of or payment for healthcare benefits, items or services.
In
addition to these federal laws, there are often similar state anti-kickback and false claims laws that typically apply to arrangements
involving reimbursement by a state-funded Medicaid or other health care program. Often, these laws closely follow the language of their
federal law counterparts, although they do not always have the same exceptions or safe harbors. In some states, these anti-kickback laws
apply with respect to all payers, including commercial payers.
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A
number of states have enacted laws that require pharmaceutical and medical device companies to monitor and report payments, gifts and
other remuneration made to physicians and other healthcare providers, and, in some states, marketing expenditures. In addition, some
state statutes impose outright bans on certain manufacturer gifts to physicians or other health care professionals. Some of these laws,
referred to as “aggregate spend” or “gift” laws, carry substantial fines if they are violated.
Efforts
to ensure that our business arrangements with third parties will comply with applicable healthcare laws and regulations will involve
substantial costs and extensive annual trainings for all of our employees and contractors. If our operations are found to be in violation
of any of these laws or any other governmental regulations that may apply to us, we may be subject to significant civil, criminal and
administrative penalties, damages, fines, imprisonment, exclusion from participation in government-funded healthcare programs, such as
Medicare and Medicaid, disgorgement, contractual damages, reputational harm, diminished profits and future earnings, additional reporting
or oversight obligations if we become subject to a corporate integrity agreement or other agreement to resolve allegations of non-compliance
with the law, and the curtailment or restructuring of our operations, any of which could adversely affect our ability to operate our
business and our results of operations. If any of the physicians or other healthcare providers or entities with whom we do business is
found to be not in compliance with applicable laws, they may be subject to criminal, civil or administrative sanctions, including exclusions
from government-funded healthcare programs.
Anti-Corruption
The
FCPA and similar international bribery laws make it unlawful for persons or entities to make payments to foreign government officials
to assist in obtaining and maintaining business. Specifically, the anti-bribery provisions of the FCPA prohibit any offer, payment, promise
to pay, or authorizing the payment of money or anything of value to any person, while knowing that all or a portion of such money or
thing of value will be offered, given or promised, directly or indirectly, to a foreign official to do or omit to do an act in violation
of his or her duty, or to secure any improper advantage in order to assist in obtaining or retaining business for or with, or directing
business, to any person. In addition to the anti-bribery provisions of the FCPA, the statute also contains accounting requirements designed
to operate in tandem with the anti-bribery provisions. Covered companies are required to make and keep books and records that accurately
and fairly reflect the transactions of the company and devise and maintain an adequate system of internal accounting controls. With our
international operations through our third-party partnerships, we could incur significant fines and penalties, as well as criminal liability,
if we fail to comply with either the anti-bribery or accounting requirements of the FCPA, or similar international bribery laws. Even
an unsuccessful challenge of our compliance with these laws could cause us to incur adverse publicity and significant legal and related
costs.
Human
Capital
The
human capital objectives we focus on in managing our business include attracting, developing, and retaining key personnel. Our employees
are critical to the success of our organization, and we are committed to supporting our employees’ professional development. We
believe our management team has the experience necessary to effectively implement our growth strategy and continue to drive shareholder
value. We provide competitive compensation and benefits to attract and retain key personnel, while also providing a safe, inclusive and
respectful workplace. In December 2023, the board of directors approved a strategic restructuring plan to preserve capital by reducing
operating costs, which included a reduction in personnel in the first quarter of 2024.
As
of December 31, 2025, we had two employees.
Corporate
Information
We
were incorporated under the laws of the State of Delaware in May 2013. Our principal executive offices are located at 55 Madison Ave,
Suite 400- PMB #462, Morristown, New Jersey.
Available
Information
Our
annual report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and other filings with the United States Securities
and Exchange Commission, or the SEC, and all amendments to these filings, are available, free of charge, on our website at www.Hepion.com
as soon as reasonably practicable following our filing of any of these reports with the SEC. You can also obtain copies free of charge
by contacting our Investor Relations department at our office address listed above. The public may read and copy any materials we file
with the SEC at the SEC’s Public Reference Room at 100 F Street NE, Room 1580, Washington, DC 20549. The public may obtain information
on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC maintains an Internet site that contains
reports, proxy, and information statements, and other information regarding issuers that file electronically with the SEC at www.sec.gov.
The information posted on or accessible through these websites are not incorporated into this filing.
Table of Contents
ITEM
1A. RISK FACTORS
An
investment in our common stock involves a high degree of risk. Before making an investment decision, you should give careful consideration
to the following risk factors, in addition to the other information included in this Annual Report, including our consolidated financial
statements and related notes, before deciding whether to invest in shares of our common stock. The occurrence of any of the adverse developments
described in the following risk factors could materially and adversely harm our business, financial condition, results of operations
or prospects. In that case, the trading price of our common stock could decline, and you may lose all or part of your investment.
Risks
Related to Our Business
We
have incurred losses since inception, anticipate that we will incur continued losses for the foreseeable future indicating the possibility
that we may not be able to operate in the future.
For
the years ended December 31, 2025 and 2024, we had an accumulated deficit of $246.1 million, and $237.8 million, respectively. We expect
to incur significant and increasing operating losses for the next several years as we expand our research and development efforts, initiate
new clinical trials, acquire or license technologies, advance other product candidates into clinical development, complete clinical trials,
seek regulatory approval and, if we receive FDA approval, commercialize our products. For the years ended December 31, 2025 and 2024,
we raised net proceeds of approximately $8.2 million and $4.3 million, respectively, through the sale of notes payable, common stock
and warrants, to fund our future operations.
The
consolidated financial statements included in this Annual Report on Form 10-K 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 consolidated financial statements without additional
capital becoming available.
Our
ability to raise additional funds is contingent upon, among other factors, the sale of the shares of our common stock or obtaining
alternate financing. We cannot provide any assurance that we will be able to raise additional capital. The accompanying consolidated
financial statements do not include any adjustments that may be necessary should we be unable to continue as a going concern. It is
not possible for us to predict at this time the potential success of our business. The revenue and income potential of our business
and operations are currently unknown. If we cannot continue as a viable entity, you may lose some or all of your investment in our
company. Absent further funding, we currently expect to run out of available cash resources during the third quarter of 2026. As
a result of our lack of cash resources, we have slowed the timeline of our clinical trial work to preserve cash resources in the
near-term. If we fail to obtain additional financing, we likely will be forced to abandon such activities entirely and file for
bankruptcy protection, with the possible loss of such properties or assets (including the license to our core technology). Based on
our explorations to date, we do not expect that any other strategic alternatives, such as a potential sale of the Company or its
assets or other restructuring efforts, will be available to us in the near-term. As a result, any inability to obtain additional
financing in the near-term, including a material amount of financing over the next 2-3 years, would likely result in a material
adverse effect on our business, results of operations, cash flow, financial condition and prospects and cause our stockholders to
receive little or no return on their shares of common stock.
Table of Contents
We
expect future product candidates to be in the early stages of development and commercial viability remains subject to the successful
outcome of current and future preclinical studies, clinical trials, regulatory approvals and the risks generally inherent in the development
of a pharmaceutical product candidate. If we are unable to successfully advance or develop our product candidates, our business will
be materially harmed.
In
the near-term, failure to successfully advance the development of our product candidates may have a material adverse effect on us. To
date, we have not successfully developed or commercially marketed, distributed or sold any product candidate. The success of our business
depends primarily upon our ability to successfully advance the development of our product candidates through preclinical studies and
clinical trials, have these product candidates approved for sale by the FDA or regulatory authorities in other countries, and ultimately
have these product candidates successfully commercialized by us or a strategic partner. We cannot assure you that the results of our
ongoing preclinical studies or clinical trials will support or justify the continued development of our product candidates, or that we
will receive approval from the FDA, or similar regulatory authorities in other countries, to advance the development of our product candidates.
If
the results of preclinical studies or clinical trials for our product candidates, including those that are subject to existing or future
license or collaboration agreements, are unfavorable or delayed, we could be delayed or precluded from the further development or commercialization
of our product candidate, which could materially harm our business.
In
order to further advance the development of, and ultimately receive regulatory approval to sell, our product candidates, we must conduct
extensive preclinical studies and clinical trials to demonstrate their safety and efficacy to the satisfaction of the FDA or similar
regulatory authorities in other countries, as the case may be. Preclinical studies and clinical trials are expensive, complex, can take
many years to complete, and have highly uncertain outcomes. Delays, setbacks, or failures can occur at any time, or in any phase of preclinical
or clinical testing, and can result from concerns about safety or toxicity, a lack of demonstrated efficacy or superior efficacy over
other similar products that have been approved for sale or are in more advanced stages of development, poor study or trial design, and
issues related to the formulation or manufacturing process of the materials used to conduct the trials. The results of prior preclinical
studies or clinical trials are not necessarily predictive of the results we may observe in later stage clinical trials. In many cases,
product candidates in clinical development may fail to show desired safety and efficacy characteristics despite having favorably demonstrated
such characteristics in preclinical studies or earlier stage clinical trials.