SEC Filing - HCW Biologics, Inc.

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10-Q

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 June 30, 2022


☐	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 August 10, 2022, the registrant had 35,833,135 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 six months ended June 30, 2021 and June 30, 2022:
	Balance sheets	1
	Statements of operations	2
	Statements of changes in redeemable preferred stock and stockholders’ (deficit) equity	3
	Statements of cash flows	4
	Notes to financial statements	5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	12
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	22
Item 4.	Controls and Procedures	22
PART II.	OTHER INFORMATION	23
Item 1.	Legal Proceedings	23
Item 1A.	Risk Factors	23
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	23
Item 3.	Defaults Upon Senior Securities	23
Item 4.	Mine Safety Disclosures	23
Item 5.	Other Information	23
Item 6.	Exhibits	24
Signatures		25

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

HCW Biologics Inc.

Condensed Balance Sheets


	December 31,			June 30,
	2021			2022
				(unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	11,730,677		$	15,420,331
Short-term investments		24,983,520			16,993,523
Accounts receivable, net		133,000			346,934
Prepaid expenses		2,196,557			1,397,497
Other current assets		1,436,616			470,021
Total current assets		40,480,370			34,628,306
Investments		11,522,050			11,302,870
Property and equipment, net		1,119,091			913,734
Other assets		393,318			563,512
Total assets	$	53,514,829		$	47,408,422
LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities
Current liabilities:
Accounts payable	$	223,664		$	296,207
Accrued liabilities and other current liabilities		2,097,925			848,340
Total current liabilities		2,321,589			1,144,547
Other liabilities		—			98,447
Total liabilities		2,321,589			1,242,994
Commitments and contingencies (Note 7)
Stockholders’ equity:
Common stock:
Common, $0.0001 par value; 250,000,000 shares authorized and 35,768,264 shares issued at December 31, 2021; 250,000,000 shares authorized and 35,823,923 shares issued at June 30, 2022		3,577			3,582
Additional paid-in capital		81,827,006			82,366,957
Accumulated deficit		(30,637,343	)		(36,205,111	)
Total stockholders’ equity		51,193,240			46,165,428
Total liabilities and stockholders’ equity	$	53,514,829		$	47,408,422

See accompanying notes to the unaudited condensed interim financial statements.

HCW Biologics Inc.

Condensed Statements of Operations

(Unaudited)


	Three Months Ended June 30,						Six Months Ended June 30,
	2021			2022			2021			2022
Revenues:
Revenues	$	—		$	454,000		$	—		$	3,571,545
Cost of revenues		—			(287,200	)		—			(1,615,276	)
Net revenues		—			166,800			—			1,956,269

Operating expenses:
Research and development	$	1,673,163		$	1,969,882		$	4,002,976		$	3,759,558
General and administrative		1,077,830			1,707,995			2,160,190			3,588,597
Total operating expenses		2,750,993			3,677,877			6,163,166			7,348,155
Loss from operations		(2,750,993	)		(3,511,077	)		(6,163,166	)		(5,391,886	)
Interest and other income (loss), net		631			516			568,808			(175,882	)
Net loss	$	(2,750,362	)	$	(3,510,561	)	$	(5,594,358	)	$	(5,567,768	)
Less: cumulative preferred dividends earned in the period		(482,662	)		—			(960,020	)		—
Net loss available for distribution to common stockholders	$	(3,233,024	)	$	(3,510,561	)	$	(6,554,378	)	$	(5,567,768	)
Net loss per share, basic and diluted	$	(0.66	)	$	(0.10	)	$	(1.34	)	$	(0.16	)
Weighted average shares outstanding, basic and diluted		4,921,121			35,814,482			4,880,496			35,796,257

See accompanying notes to the unaudited condensed interim financial statements.

HCW Biologics Inc.

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

For the Six Months Ended June 30, 2021 and June 30, 2022

(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, 2020		6,316,691	$	6,140,792			12,012,617	$	13,680,306		5,439,112	$	11,294,301		4,793,393	$	480	$	—		$	(16,718,877	)	$	(16,718,397	)
Issuance of Class A Common Stock upon exercise of stock options		—		—			—		—		—		—		88,702		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		—		—	0		—		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		4,882,095	$	488	$	—		$	(20,026,213	)	$	(20,025,725	)
Issuance of Class A Common Stock upon exercise of stock options		—		—			—		—		—		—		73,505		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	)		(482,662	)
Accretion of issuance costs		—		—			—		3,929		—		10,198		—		—		—			—			—
Net loss		—		—			—		—		—		—		—		—		—			(2,750,362	)		(2,750,362	)
Balance, June 30, 2021		6,316,691	$	6,333,842			12,012,617	$	14,118,483		5,439,112	$	11,651,350		4,955,600	$	496	$	—		$	(23,240,202	)	$	(23,239,706	)


	Redeemable Preferred Stock												Stockholders’ Equity
	Series A				Series B				Series C				Common Stock				Additional Paid-In		Accumulated			Total Stockholders’
	Shares		Amount		Shares		Amount		Shares		Amount		Shares		Amount		Capital		Deficit			Equity
Balance, December 31, 2021		—	$	—		—	$	—		—	$	—		35,768,264	$	3,577	$	81,827,006	$	(30,637,343	)	$	51,193,240
Issuance of Class A Common Stock upon exercise of stock options		—		—		—		—		—		—		11,225		1		2,272		—			2,273
Stock-based compensation		—		—		—		—		—		—		—		—		260,348		—			260,348
Net loss		—		—		—		—		—		—		—		—		—		(2,057,207	)		(2,057,207	)
Balance, March 31, 2022		—	$	—		—	$	—		—	$	—		35,779,489	$	3,578	$	82,089,626	$	(32,694,550	)	$	49,398,654
Issuance of Class A Common Stock upon exercise of stock options		—		—		—		—		—		—		44,434		4		5,996		—			6,000
Stock-based compensation		—		—		—		—		—		—		—		—		271,335		—			271,335
Net loss		—		—		—		—		—		—		—		—		—		(3,510,561	)		(3,510,561	)
Balance, June 30, 2022		—	$	—		—	$	—		—	$	—		35,823,923	$	3,582	$	82,366,957	$	(36,205,111	)	$	46,165,428

See accompanying notes to the unaudited condensed interim financial statements.

HCW Biologics Inc.

Condensed Statements of Cash Flows

(Unaudited)


	Six Months Ended June 30,
	2021			2022
Cash flows from operating activities:
Net loss	$	(5,594,358	)	$	(5,567,768	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		313,679			292,363
Stock-based compensation		10,218			531,683
Gain on extinguishment of debt		(567,311	)		—
Unrealized loss on investments, net		—			209,337
Reduction in the carrying amount of right-of-use asset		—			836
Changes in operating assets and liabilities:
Accounts receivable		2,450,000			(213,934	)
Prepaid expenses and other assets		(563,436	)		1,863,759
Accounts payable and other liabilities		1,470,966			(1,347,729	)
Operating lease liability		—			(50,545	)
Net cash used in operating activities		(2,480,242	)		(4,281,998	)
Cash flows from investing activities:
Purchases of property and equipment		(23,279	)		(36,461	)
Proceeds for sale or maturities of short-term investments		—			7,999,840
Net cash (used in) provided by investing activities		(23,279	)		7,963,379
Cash flows from financing activities:
Proceeds from issuance of common stock		22,850			8,273
Offering costs		(