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, 2022

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 7, 2022, the registrant had 35,871,470 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, 2021 and September 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

5

 

 

Notes to financial statements

6

 

Item 2.

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

14

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

24

 

Item 4.

Controls and Procedures

24

 

PART II.

OTHER INFORMATION

25

 

Item 1.

Legal Proceedings

25

 

Item 1A.

Risk Factors

25

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

47

 

Item 3.

Defaults Upon Senior Securities

47

 

Item 4.

Mine Safety Disclosures

48

 

Item 5.

Other Information

48

 

Item 6.

Exhibits

49

 

Signatures

50

 

 

i


 

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

HCW Biologics Inc.

Condensed Balance Sheets

 

 

 

December 31,

 

 

September 30,

 

 

 

2021

 

 

2022

 

 

 

 

 

 

(unaudited)

 

ASSETS

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

11,730,677

 

 

$

26,224,260

 

Short-term investments

 

 

24,983,520

 

 

 

 

Accounts receivable, net

 

 

133,000

 

 

 

355,555

 

Prepaid expenses

 

 

2,196,557

 

 

 

1,921,993

 

Other current assets

 

 

1,436,616

 

 

 

205,921

 

Total current assets

 

 

40,480,370

 

 

 

28,707,729

 

Investments

 

 

11,522,050

 

 

 

11,268,500

 

Property and equipment, net

 

 

1,119,091

 

 

 

10,957,946

 

Other assets

 

 

393,318

 

 

 

419,027

 

Total assets

 

$

53,514,829

 

 

$

51,353,202

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

223,664

 

 

$

1,410,357

 

Accrued liabilities and other current liabilities

 

 

2,097,925

 

 

 

882,775

 

Total current liabilities

 

 

2,321,589

 

 

 

2,293,132

 

Debt

 

 

 

 

 

6,448,166

 

Other liabilities

 

 

 

 

 

56,676

 

Total liabilities

 

 

2,321,589

 

 

 

8,797,974

 

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
35,836,135 shares issued at September 30, 2022

 

 

3,577

 

 

 

3,584

 

Additional paid-in capital

 

 

81,827,006

 

 

 

82,670,949

 

Accumulated deficit

 

 

(30,637,343

)

 

 

(40,119,305

)

Total stockholders’ equity

 

 

51,193,240

 

 

 

42,555,228

 

Total liabilities and stockholders’ equity

 

$

53,514,829

 

 

$

51,353,202

 

 

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,

 

 

 

 

2021

 

 

2022

 

 

2021

 

 

2022

 

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenues

 

$

 

 

$

1,809,025

 

 

$

 

 

$

5,380,570

 

 

Cost of revenues

 

 

 

 

 

(1,447,220

)

 

 

 

 

 

(3,062,496

)

 

Net revenues

 

 

 

 

 

361,805

 

 

 

 

 

 

2,318,074

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

 

2,687,341

 

 

 

2,648,794

 

 

 

6,690,317

 

 

 

6,408,353

 

 

General and administrative

 

 

1,404,823

 

 

 

1,732,666

 

 

 

3,565,013

 

 

 

5,321,262

 

 

Total operating expenses

 

 

4,092,164

 

 

 

4,381,460

 

 

 

10,255,330

 

 

 

11,729,615

 

 

Loss from operations

 

 

(4,092,164

)

 

 

(4,019,655

)

 

 

(10,255,330

)

 

 

(9,411,541

)

 

Interest and other income (loss), net

 

 

(2,540

)

 

 

105,461

 

 

 

566,268

 

 

 

(70,421

)

 

Net loss

 

$

(4,094,704

)

 

$

(3,914,194

)

 

$

(9,689,062

)

 

$

(9,481,962

)

 

Net loss per share, basic and diluted

 

$

(0.14

)

 

$

(0.11

)

 

$

(0.74

)

 

$

(0.26

)

 

Weighted average shares outstanding, basic and diluted

 

 

29,572,267

 

 

 

35,835,135

 

 

 

13,111,087

 

 

 

35,809,216

 

 

 

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, 2021 and September 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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

73,487

 

 

 

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

)

 

 

(463,623

)

 

 

(482,658

)

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

 

 

 

 

4,955,582

 

 

 

496

 

 

 

 

 

 

(23,240,198

)

 

 

(23,239,702

)

Issuance of common stock upon initial public offering, net of issuance cost

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

7,000,000

 

 

 

700

 

 

 

49,239,247

 

 

 

 

 

 

49,239,947

 

Conversion of Series A Redeemable Preferred Stock, with forfeited cumulative dividends

 

 

(6,316,691

)

 

 

(6,333,842

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

6,316,691

 

 

 

632

 

 

 

6,353,474

 

 

 

(20,265

)

 

 

6,333,841

 

Conversion of Series B Redeemable Preferred Stock, with forfeited cumulative dividends

 

 

 

 

 

 

 

 

(12,012,617

)

 

 

(14,118,483

)

 

 

 

 

 

 

 

 

 

12,012,613

 

 

 

1,201

 

 

 

14,170,312

 

 

 

(53,030

)

 

 

14,118,483

 

Conversion of Series C Redeemable Preferred Stock, with forfeited cumulative dividends

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(5,439,112

)

 

 

(11,651,350

)

 

 

 

5,439,112

 

 

 

544

 

 

 

11,706,544

 

 

 

(55,741

)

 

 

11,651,347

 

Issuance of Common Stock upon exercise of stock options

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4,114

 

 

 

 

 

 

576

 

 

 

 

 

 

576

 

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,660

 

 

 

 

 

 

1,660

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(4,094,704

)

 

 

(4,094,704

)

Balance, September 30, 2021

 

 

 

 

$

 

 

 

 

 

$

 

 

 

 

 

$

 

 

 

 

35,728,112

 

 

$

3,573

 

 

$

81,471,813

 

 

$

(27,463,938

)

 

$

54,011,448

 

 

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, 2021 and September 30, 2022

(Unaudited)

 

 

 

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