Item 1.01 Entry into a Material Definitive Agreement.
On November 4, 2022,
Hepion Pharmaceuticals, Inc., a Delaware corporation (the “Company”), entered into a Securities Purchase Agreement
(the “Purchase Agreement”) with certain institutional investors (the “Investors”), pursuant to which
the Company agreed to issue and sell, in a private placement (the “Offering”), 1,900,000 shares of the Company’s
Series F Convertible Redeemable Preferred Stock, par value $0.0001 per share (the “Series F Preferred Stock”),
and 100,000 shares of the Company’s Series G Convertible Redeemable Preferred Stock, par value $0.0001 per share (the “Series G
Preferred Stock,” and together with the Series F Preferred Stock, the “Preferred Stock”), at an offering
price of $9.50 per share, representing a 5% original issue discount (“OID”) to the stated value of $10.00 per share,
for gross proceeds of $20 million in the aggregate for the Offering, before the deduction of discounts, fees and offering expenses. The
shares of Preferred Stock will be convertible, at a conversion price of $1.00 per share (subject in certain circumstances to adjustments),
into shares of the Company’s common stock, par value $0.0001 per share (the “Common Stock”), at the option of
the holders and, in certain circumstances, by the Company. The Purchase Agreement contains customary representations, warranties and agreements
by the Company and customary conditions to closing. The Offering closed on November 8, 2022.
The Company intends to call
a special meeting of shareholders to consider an amendment (the “Amendment”) to the Company’s Certificate of
Incorporation, as amended, to authorize a reverse split of the Common Stock (the “Reverse Split”). The Investors have
agreed in the Purchase Agreement to not transfer, offer, sell, contract to sell, hypothecate, pledge or otherwise dispose of the shares
of the Preferred Stock until the Reverse Split. Pursuant to the certificate of designation of the Series F Preferred Stock, the shares
of Series F Preferred Stock have the right to vote on such Amendment on an as-converted to Common Stock basis. In addition, pursuant
to the certificate of designation of the Series G Preferred Stock, the shares of Series G Preferred Stock have the right to
vote on such Amendment. Each Investor has separately agreed pursuant to a side letter (the “Side Letter”) entered into
in conjunction with the Purchase Agreement to vote the shares of the Series F Preferred Stock in favor of the Amendment and that
the shares of the Series G Preferred Stock shall automatically be voted in a manner that “mirrors” the proportions on
which the shares of Common Stock (excluding any shares of Common Stock that are not voted) and Series F Preferred Stock are voted
on the Amendment. The Amendment requires the approval of the majority of the votes associated with our outstanding stock entitled to vote
on the proposal. Because the Series G Preferred Stock will automatically and
without further action of the purchaser be voted in a manner that “mirrors” the proportions on which the shares of Common
Stock (excluding any shares of Common Stock that are not voted) and Series F Preferred Stock
are voted on the Reverse Split, abstentions by common stockholders will not have any effect on the votes cast by the holders of the Series G
Preferred Stock.
Pursuant to the Purchase Agreement,
on November 4, 2022, the Company filed certificates of designation (the “Certificates of Designation”) with the
Delaware Secretary of the State designating the rights, preferences and limitations of the shares of Series F Preferred Stock and
Series G Preferred Stock, which will provide, in particular, that the Preferred Stock will have no voting rights other than the right
to vote on the Amendment and as a class on certain other specified matters, and, with respect to the Series G Certificate of Designation,
the right to cast 100,000 votes per share of Series G Preferred Stock on the Reverse Split proposal. In addition, on November 7,
2022, the Company filed Certificates of Amendment to the Certificates of Designation to provide that the Series F Preferred Stock
and the Series G Preferred Stock shall be junior in rank to the Company’s Series A Convertible Preferred Stock with respect
to the preferences as to dividends, redemption, or distribution of assets and payments upon the liquidation, dissolution and winding up
of the Company.
The holders of Preferred Stock
will be entitled to dividends, on an as-if converted basis, equal to dividends actually paid, if any, on shares of Common Stock. The Preferred
Stock is convertible, at the option of the holders and, in certain circumstances, by the Company, into shares of Common Stock at a conversion
price of $1.00 per share. The conversion price can be adjusted pursuant to the Certificates of Designation for stock dividends and stock
splits, subsequent rights offering, pro rata distributions of dividends or the occurrence of a fundamental transaction (as defined in
the applicable Certificate of Designation). The holders of the Preferred Stock have the right to require the Company to redeem their shares
of preferred stock for cash at 105% of the stated value of such shares commencing after the earlier of the receipt of shareholder approval
of the Amendment and 60 days after the closing of the issuances of the Preferred Stock and until 90 days after such closing. The Company
has the option to redeem the Preferred Stock for cash at 105% of the stated value commencing after receipt of shareholder approval of
the Reverse Split, subject to the holders’ rights to convert the shares prior to such redemption.
The proceeds of the Offering
will be held in an escrow account, along with the additional amount that would be necessary to fund the 105% redemption price until the
expiration of the redemption period for the Preferred Stock, as applicable, subject to the earlier payment to redeeming holders. Upon
expiration of the redemption period, any proceeds remaining in the escrow account will be disbursed to the Company.
In connection with the Offering,
on November 4, 2022, the Company and the Investors entered into a Registration Rights Agreement (the “Registration Rights
Agreement”), pursuant to which the Company is required to file a registration statement with the Securities and Exchange Commission
to register for resale the shares that are issued upon the potential conversion of shares of Preferred Stock. The registration statement
will be filed with the Securities and Exchange Commission on or before the later of 10 calendar days following the date of the shareholder
meeting held to seek approval of the Amendment and the 70th calendar day following the date of the Registration Rights
Agreement.
In connection with the Offering,
the Company agreed to pay A.G.P./Alliance Global Partners, the Company’s Placement Agent for the Offering (the “Placement
Agent”), an aggregate cash fee equal to $1,000,000 and to reimburse the Placement Agent for certain of its expenses in an amount
not to exceed $135,000, as well as nonaccountable out-of-pocket expenses not to exceed $10,000.
Under the Purchase Agreement,
to the extent any shares of Preferred Stock are outstanding, for a period of 60 days from the date of the Purchase Agreement, the Company
and its subsidiaries are prohibited from issuing or entering into any agreement to issue or announce the issuance or proposed issuance
of any shares of common stock or common stock equivalents, and provided further that for a period of 60 days from the date of the Purchase
Agreement, the Company and its subsidiaries are prohibited from issuing or entering into any agreement to issue or announce the issuance
or proposed issuance of any shares of preferred stock senior to or pari passu with the Preferred Stock. Further, from
the date of the Purchase Agreement until the earlier of (A) the date of which all shares of the Preferred Stock are redeemed in accordance
with their terms and (B) the date that is 60 days following the Reverse Split Date, the Company is prohibited from effecting or entering
into an agreement to effect any issuance by the Company or any of its subsidiaries of common stock or common stock equivalents (or a combination
of units thereof) involving a Variable Rate Transaction, as defined in the Purchase Agreement. Also, until the Reverse Split Date, neither
the Company nor any subsidiary may make any issuance whatsoever of common stock or common stock equivalents. The above limitations on
issuances of stock under the Purchase Agreement do not apply to Exempt Issuances as defined in the Purchase Agreement.
The foregoing summaries of
the Purchase Agreement, the Registration Rights Agreement, the Side Letter, and Certificates of Designation do not purport to be complete
and are subject to, and qualified in their entirety by, forms of such documents attached as Exhibits 10.01, 10.02, 10.03, 3.01, and 3.02,
respectively, to this Current Report on Form 8-K, which are incorporated herein by reference.
The representations, warranties
and covenants contained in the Purchase Agreement were made only for purposes of such agreement and as of specific dates, were solely
for the benefit of the parties to the agreements and are subject to limitations agreed upon by the contracting parties. Accordingly, the
Purchase Agreement is incorporated herein by reference only to provide investors with information regarding the terms of the Purchase
Agreement and not to provide investors with any other factual information regarding the Company or its business and should be read in
conjunction with the disclosures in the Company’s periodic reports and other filings with the Securities and Exchange Commission.