10-Q
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

 

(Mark One)

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended September 30, 2021

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: 001-40591

 

HCW Biologics Inc.

(Exact Name of Registrant as Specified in its Charter)

 

 

Delaware

82-5024477

( State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer
Identification No.)

 

 

2929 N. Commerce Parkway

Miramar, Florida

33025

(Address of principal executive offices)

(Zip Code)

Registrant’s telephone number, including area code: (954) 842–2024

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

 

Trading

Symbol(s)

 

Name of each exchange
on which registered

 

Common Stock, par value $0.0001 per share

HCWB

The Nasdaq Stock Market LLC

 

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 whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

Accelerated filer

 

 

 

 

Non-accelerated filer

Smaller reporting company

 

 

 

 

Emerging growth company

 

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No

As of November 12, 2021, the registrant had 35,728,112 shares of common stock, $0.0001 par value per share, outstanding.

 

 

 


 

Table of Contents

 

 

 

Page

 

PART I.

FINANCIAL INFORMATION

1

 

Item 1.

Financial Statements

1

 

 

Unaudited condensed interim financial statements as of and for the three and nine months ended September 30, 2020 and September 30, 2021:

 

 

 

Balance sheets

1

 

 

Statements of operations

2

 

 

Statements of changes in redeemable preferred stock and stockholders’ (deficit) equity

3

 

 

Statements of cash flows

5

 

 

Notes to financial statements

6

 

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

12

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

26

 

Item 4.

Controls and Procedures

26

 

PART II.

OTHER INFORMATION

27

 

Item 1.

Legal Proceedings

27

 

Item 1A.

Risk Factors

27

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

27

 

Item 3.

Defaults Upon Senior Securities

27

 

Item 4.

Mine Safety Disclosures

27

 

Item 5.

Other Information

27

 

Item 6.

Exhibits

28

 

Signatures

29

 

 

i


 

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

HCW Biologics Inc.

Condensed Balance Sheets

 

 

 

December 31,

 

 

September 30,

 

 

 

2020

 

 

2021

 

 

 

 

 

 

(unaudited)

 

ASSETS

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

8,455,834

 

 

$

15,125,073

 

Short-term investment

 

 

 

 

 

24,989,700

 

Accounts receivable, net

 

 

2,500,000

 

 

 

70,000

 

Prepaid expenses

 

 

538,306

 

 

 

1,990,890

 

Other current assets

 

 

654,528

 

 

 

1,383,436

 

Total current assets

 

 

12,148,668

 

 

 

43,559,099

 

Investments

 

 

1,599,750

 

 

 

11,577,850

 

Property and equipment, net

 

 

1,649,668

 

 

 

1,269,001

 

Total assets

 

$

15,398,086

 

 

$

56,405,950

 

LIABILITIES, REDEEMABLE PREFERRED STOCK AND STOCKHOLDERS’
   (DEFICIT) EQUITY

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

155,343

 

 

$

637,193

 

Accrued liabilities and other current liabilities

 

 

845,741

 

 

 

1,757,309

 

Total current liabilities

 

 

1,001,084

 

 

 

2,394,502

 

Commitments and contingencies (Note 7)

 

 

 

 

 

 

Redeemable preferred stock:

 

 

 

 

 

 

Series A, $0.0001 par value; 14,738,948 shares authorized and 6,316,691
   shares issued at December 31, 2020;
nil shares authorized or issued at
   September 30, 2021

 

 

6,140,792

 

 

 

 

Series B, $0.0001 par value; 28,029,449 shares authorized and 12,012,617
   shares issued at December 31, 2020;
nil shares authorized or issued at
   September 30, 2021

 

 

13,680,306

 

 

 

 

Series C, $0.0001 par value; 18,181,818 shares authorized and 5,439,112
   shares issued at December 31, 2020;
nil shares authorized or issued at
   September 30, 2021

 

 

11,294,301

 

 

 

 

Total redeemable preferred stock

 

 

31,115,399

 

 

 

 

Stockholders’ (deficit) equity:

 

 

 

 

 

 

Common stock:

 

 

 

 

 

 

Class B convertible, $0.0001 par value; 10,000,000 shares authorized and
   
4,285,714 shares issued at December 31, 2020; nil shares authorized or issued at
  September 30, 2021

 

 

429

 

 

 

 

Common, $0.0001 par value; 74,950,215 shares authorized and 507,680
   shares issued at December 31, 2020;
250,000,000 shares authorized
   and
35,728,112 shares issued at September 30, 2021

 

 

51

 

 

 

3,573

 

Additional paid-in capital

 

 

 

 

 

81,471,813

 

Accumulated deficit

 

 

(16,718,877

)

 

 

(27,463,938

)

Total stockholders’ (deficit) equity

 

 

(16,718,397

)

 

 

54,011,448

 

Total liabilities, redeemable preferred stock and stockholders’ (deficit) equity

 

$

15,398,086

 

 

$

56,405,950

 

 

See accompanying notes to the unaudited condensed interim financial statements.

 

1


 

HCW Biologics Inc.

Condensed Statements of Operations

(Unaudited)

 

 

 

Three Months Ended
September 30,

 

 

Nine Months Ended
September 30,

 

 

 

2020

 

 

2021

 

 

2020

 

 

2021

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

$

2,098,688

 

 

$

2,687,341

 

 

$

5,845,895

 

 

$

6,690,317

 

General and administrative

 

 

609,944

 

 

 

1,404,823

 

 

 

2,039,738

 

 

 

3,565,013

 

Total operating expenses

 

 

2,708,632

 

 

 

4,092,164

 

 

 

7,885,633

 

 

 

10,255,330

 

Loss from operations

 

 

(2,708,632

)

 

 

(4,092,164

)

 

 

(7,885,633

)

 

 

(10,255,330

)

Interest and other income, net

 

 

(374

)

 

 

(2,540

)

 

 

22,627

 

 

 

566,268

 

Net loss

 

$

(2,709,006

)

 

$

(4,094,704

)

 

$

(7,863,006

)

 

$

(9,689,062

)

Less: cumulative preferred dividends earned in the period, net of forfeitures

 

 

(282,861

)

 

 

 

 

 

(842,433

)

 

 

 

Net loss available for distribution to common stockholders

 

$

(2,991,867

)

 

$

(4,094,704

)

 

$

(8,705,439

)

 

$

(9,689,062

)

Net loss per share, basic and diluted

 

$

(0.63

)

 

$

(0.14

)

 

$

(1.84

)

 

$

(0.74

)

Weighted average shares outstanding, basic and diluted

 

 

4,743,823

 

 

 

29,572,267

 

 

 

4,728,816

 

 

 

13,111,087

 

 

See accompanying notes to the unaudited condensed interim financial statements.

 

2


 

HCW Biologics Inc.

Condensed Statements of Changes in Redeemable Preferred Stock and Stockholders’ (Deficit) Equity

For the Nine Months Ended September 30, 2020 and 2021

(Unaudited)

 

 

 

Redeemable Preferred Stock

 

 

 

Stockholders’ Deficit

 

 

 

Series A

 

 

 

Series B

 

 

Series C

 

 

 

Common Stock

 

 

Additional
Paid-In

 

 

Accumulated

 

 

Total
Stockholders’

 

 

 

Shares

 

 

Amount

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

Deficit

 

Balance, December 31, 2019

 

 

6,316,691

 

 

$

5,792,302

 

 

 

 

12,012,617

 

 

$

12,883,859

 

 

 

 

 

$

 

 

 

 

4,717,542

 

 

$

472

 

 

$

 

 

$

(9,676,766

)

 

$

(9,676,294

)

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

76

 

 

 

 

 

 

76

 

6% cumulative dividends on
   redeemable preferred
   stock

 

 

 

 

 

86,646

 

 

 

 

 

 

 

193,140

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(76

)

 

 

(279,710

)

 

 

(279,786

)

Accretion of issuance costs

 

 

 

 

 

 

 

 

 

 

 

 

7,857

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(2,375,514

)

 

 

(2,375,514

)

Balance, March 31, 2020

 

 

6,316,691

 

 

 

5,878,948

 

 

 

 

12,012,617

 

 

 

13,084,856

 

 

 

 

 

 

 

 

 

 

4,717,542

 

 

 

472

 

 

 

 

 

 

(12,331,990

)

 

 

(12,331,518

)

Issuance of Class A
   Common Stock upon
   exercise of stock
   options

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

20,742

 

 

 

2

 

 

 

2,304

 

 

 

 

 

 

2,306

 

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

9,515

 

 

 

 

 

 

9,515

 

6% cumulative dividends on
   redeemable preferred
   stock

 

 

 

 

 

86,646

 

 

 

 

 

 

 

193,140

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(11,819

)

 

 

(267,967

)

 

 

(279,786

)

Accretion of issuance costs

 

 

 

 

 

 

 

 

 

 

 

 

3,929

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(2,778,485

)

 

 

(2,778,485

)

Balance, June 30, 2020

 

 

6,316,691

 

 

 

5,965,594

 

 

 

 

12,012,617

 

 

 

13,281,925

 

 

 

 

 

 

 

 

 

 

4,738,284

 

 

 

474

 

 

 

 

 

 

(15,378,442

)

 

 

(15,377,968

)

Issuance of Series C Redeemable
     Preferred Stock, net of issuance
     costs

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3,004,048

 

 

 

6,141,940

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commitment of Series C Redeemable
    Preferred Stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2,435,064

 

 

 

5,000,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of Class A
   Common Stock upon
   exercise of stock
   options

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

6,685

 

 

 

1

 

 

 

813

 

 

 

 

 

 

814

 

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,752

 

 

 

 

 

 

1,752

 

6% cumulative dividends on
   redeemable preferred
   stock

 

 

 

 

 

87,599

 

 

 

 

 

 

 

195,262

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(2,565

)

 

 

(280,296

)

 

 

(282,861

)

Accretion of issuance costs

 

 

 

 

 

 

 

 

 

 

 

 

3,929

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(2,709,006

)

 

 

(2,709,006

)

Balance, September 30, 2020

 

 

6,316,691

 

 

$

6,053,193

 

 

 

 

12,012,617

 

 

$

13,481,116

 

 

 

5,439,112

 

 

$

11,141,940

 

 

 

 

4,744,969

 

 

$

475

 

 

$

 

 

$

(18,367,744

)

 

$

(18,367,269

)

 

 

See accompanying notes to the unaudited condensed interim financial statements

 

 

3


 

HCW Biologics Inc.

Condensed Statements of Changes in Redeemable Preferred Stock and Stockholders’ (Deficit) Equity

For the Nine Months Ended September 30, 2020 and 2021 Continued

(Unaudited)

 

 

Redeemable Preferred Stock

 

 

 

Stockholders’ Deficit

 

 

 

Series A

 

 

Series B

 

 

Series C

 

 

 

Common Stock

 

 

Additional
Paid-In

 

 

Accumulated

 

 

Total
Stockholders’

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

(Deficit) Equity

 

Balance, December 31, 2020

 

 

6,316,691

 

 

$

6,140,792

 

 

 

12,012,617

 

 

$

13,680,306

 

 

 

5,439,112

 

 

$

11,294,301

 

 

 

 

4,793,394

 

 

$

480

 

 

$

 

 

$

(16,718,877

)

 

$

(16,718,397

)

Issuance of Class A
   Common Stock upon
   exercise of stock options

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

88,706

 

 

 

8

 

 

 

13,377

 

 

 

 

 

 

13,385

 

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

641

 

 

 

 

 

 

641

 

6% cumulative dividends
   on redeemable preferred
   stock

 

 

 

 

 

95,992

 

 

 

 

 

 

213,971

 

 

 

 

 

 

167,395

 

 

 

 

 

 

 

 

 

 

(14,018

)

 

 

(463,340

)

 

 

(477,358

)

Accretion of issuance costs

 

 

 

 

 

 

 

 

 

 

 

3,929

 

 

 

 

 

 

10,200

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(2,843,996

)

 

 

(2,843,996

)

Balance, March 31, 2021

 

 

6,316,691

 

 

 

6,236,784

 

 

 

12,012,617

 

 

 

13,898,206

 

 

 

5,439,112

 

 

 

11,471,896

 

 

 

 

4,882,100

 

 

 

488

 

 

 

 

 

 

(20,026,213

)

 

 

(20,025,725

)

Issuance of Class A
   Common Stock upon
   exercise of stock options

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

73,500

 

 

 

8

 

 

 

9,457

 

 

 

 

 

 

9,465

 

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

9,578

 

 

 

 

 

 

9,578

 

6% cumulative dividends
   on redeemable preferred
   stock

 

 

 

 

 

97,058

 

 

 

 

 

 

216,348

 

 

 

 

 

 

169,256

 

 

 

 

 

 

 

 

 

 

(19,035

)

 

 

(463,627

)