| Segment Reporting |
11.
Segment Reporting
HCW
Biologics Inc. has one reportable segment: life science. The life science segment consists of operations focused on discovering and developing
novel immunotherapies to lengthen health span by disrupting the link between chronic, low-grade inflammation and diseases. The Company’s
CODM is the chief executive officer.
The
accounting policies of the life science segment are the same as those described in the summary of significant accounting policies. The
CODM assesses performance for the life science segment based on net segment income (loss). The measure of segment assets is reported
on the condensed balance sheet as total assets.
The
Company has not generated any product revenue from commercial product sales of internally-developed immunotherapeutic products for the
treatment of diseases, as no products have been approved for commercial sale as of June 30, 2026. The Company expects to continue to
incur significant expenses and operating losses for the foreseeable future as it advances molecules through all stages of development
and clinical trials and, ultimately, seek approval for commercial sale.
As
such, the CODM uses cash forecast models in deciding how to invest into the life science segment. Such cash forecast models are reviewed
to assess the entity-wide operating results and performance in conjunction with monitoring the results of R&D experiments for preclinical
compounds and clinical trial data for clinical-stage compounds. The assessment of results of preclinical and clinical studies is critical
to the allocation of resources by the CODM.
The
tables below summarize the significant expense categories regularly reviewed by the CODM for the three and six months ended June 30,
2025 and 2026:
Summary of Significant Expense Categories
| | |
2025 | | |
2026 | | |
2025 | | |
2026 | |
| | |
Three Months Ended June 30, | | |
Six Months Ended June 30, | |
| | |
2025 | | |
2026 | | |
2025 | | |
2026 | |
| Revenues: | |
| | |
| | |
| | |
| |
| Revenues | |
$ | 6,550 | | |
$ | 135,568 | | |
$ | 11,615 | | |
$ | 6,678,569 | |
| Cost of revenues | |
| (5,240 | ) | |
| (229,455 | ) | |
| (9,292 | ) | |
| (240,526 | ) |
| Gross Profit | |
| 1,310 | | |
| (93,887 | ) | |
| 2,323 | | |
| 6,438,043 | |
| | |
| | | |
| | | |
| | | |
| | |
| Operating expenses: | |
| | | |
| | | |
| | | |
| | |
| Research and development expenses | |
| | | |
| | | |
| | | |
| | |
| Salaries, benefits and related expenses | |
| 778,440 | | |
| 761,312 | | |
| 1,479,546 | | |
| 1,539,698 | |
| Manufacturing and materials | |
| 33,986 | | |
| 27,073 | | |
| 296,783 | | |
| 17,114 | |
| Preclinical expenses | |
| 146,948 | | |
| 158,917 | | |
| 324,060 | | |
| 376,483 | |
| Clinical trials | |
| 110,935 | | |
| 101,246 | | |
| 298,755 | | |
| 228,777 | |
| Overhead allocations | |
| 156,515 | | |
| 154,804 | | |
| 306,392 | | |
| 299,228 | |
| Total research and development expenses | |
| 1,226,824 | | |
| 1,203,352 | | |
| 2,705,536 | | |
| 2,461,300 | |
| General and administrative | |
| | | |
| | | |
| | | |
| | |
| Salaries, benefits and related expenses | |
| 765,539 | | |
| 523,466 | | |
| 1,554,026 | | |
| 1,046,820 | |
| Professional services(a) | |
| 496,641 | | |
| 504,837 | | |
| 951,008 | | |
| 989,975 | |
| Facilities and office expenses | |
| 111,740 | | |
| 103,883 | | |
| 206,068 | | |
| 216,796 | |
| Depreciation expenses | |
| 59,160 | | |
| 49,994 | | |
| 120,398 | | |
| 103,870 | |
| Rent and occupancy expenses | |
| 62,528 | | |
| 45,887 | | |
| 112,278 | | |
| 87,049 | |
| Insurance | |
| 270,598 | | |
| 191,080 | | |
| 560,866 | | |
| 385,523 | |
| Taxes | |
| 61,576 | | |
| 111,278 | | |
| 94,168 | | |
| 285,966 | |
| Other expenses | |
| 165,991 | | |
| 325,537 | | |
| 328,181 | | |
| 558,827 | |
| Total general and administrative expenses | |
| 1,993,773 | | |
| 1,855,962 | | |
| 3,926,993 | | |
| 3,674,826 | |
| Other segment items(b) | |
| (1,291,557 | ) | |
| 2,066,030 | | |
| (2,505,600 | ) | |
| 1,718,482 | |
| Total operating expenses | |
| 1,929,040 | | |
| 5,125,344 | | |
| 4,126,929 | | |
| 7,854,608 | |
| Net segment loss | |
$ | (1,927,730 | ) | |
$ | (5,219,231 | ) | |
$ | (4,124,606 | ) | |
$ | (1,416,565 | ) |
| (a) |
Professional
services consist primarily of audit and accounting advisory services, tax advisory services, corporate legal services and other services
related to SEC compliance, and legal fees related to patent filings. |
| |
|
| (b) |
Other
segment items include the following unusual or nonrecurring item that comprise other segment items for the three and six months ended
June 30, 2025 and 2026: |
| | |
2025 | | |
2026 | | |
2025 | | |
2026 | |
| | |
Three Months Ended June 30, | | |
Six Months Ended June 30, | |
| | |
2025 | | |
2026 | | |
2025 | | |
2026 | |
| Arbitration legal fees (recoveries), net | |
$ | 142,542 | | |
$ | (1,325 | ) | |
$ | (1,596,951 | ) | |
$ | 5,525 | |
| Accretion of fixed bonus upon maturity of Secured Notes | |
| 102,248 | | |
| 14,413 | | |
| 375,308 | | |
| 28,826 | |
| Interest expense | |
| 228,714 | | |
| 100,541 | | |
| 505,853 | | |
| 209,815 | |
| Indirect tax expense | |
| — | | |
| — | | |
| — | | |
| 198,146 | |
| Change in fair value of investment, net | |
| (1,748,688 | ) | |
| — | | |
| (1,748,688 | ) | |
| — | |
| Gain on extinguishment of liability | |
| — | | |
| (483,383 | ) | |
| — | | |
| (483,383 | ) |
| Change in fair value of warrant liability | |
| — | | |
| 2,443,335 | | |
| — | | |
| 1,775,992 | |
| Other income, net | |
| (16,373 | ) | |
| (7,551 | ) | |
| (41,122 | ) | |
| (16,439 | ) |
| Other segment items | |
$ | (1,291,557 | ) | |
$ | 2,066,030 | | |
$ | (2,505,600 | ) | |
$ | 1,718,482 | |
|