Company: HCWB
Filing Date: 2025-03-28
Form Type: 10-K
Source: 0000950170-25-046724
Chunk: 313

Company: HCW Biologics Inc.
Filing Date: 2025-03-28
Form: 10-K
Item: Item 1B
Chunk 313
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s are available to offset 80% of taxable income. In addition, the Company had federal research and development credits carryforwards of $1.3 million and $1.5 million, as of December 31, 2023 and 2024, respectively, to reduce future federal income taxes, if any. These carryforwards expire from 2038 through 2044 and are subject to review and possible adjustment.                                                                                                                                                                                                                                                                                                            

120

Under Sections 382 and 383 of the Internal Revenue Code of 1986, as amended, (the Code), substantial changes in the Company’s ownership may limit the amount of net operating loss and research and development credit carryforwards that could be used annually in the future to offset taxable income.  A formal Section 382 study has not been completed to determine if an ownership change has occurred and if its net operating losses are subject to an annual limitation. Such annual limitations could affect the utilization of NOL and tax credit carryforwards in the future.   Effective for tax years beginning after December 31, 2021, Section 174 requires that research and experimental expenses (“R&E”) be capitalized and amortized. The amortization period is five years for domestic expenses and 15 years for foreign expenses. Since the Company has a significant amount of expenses that fall under the definition of R&E expenses, the change can materially affect the Company's tax provision. During the year ended December 31, 2023 and 2024, the Company analyzed its expenses and determined that expenses of $9.8 million and $6.4 million, respectively, fell within the definition of Section 174. Accordingly, these expenditures were capitalized and amortized for tax purposes. As of December 31, 2023 and 2024, the Company had $2.6 million and $3.8 million, respectively, of amortization expense related to Section 174 capitalized R&E costs.The Company’s tax returns remain subject to examination by tax authorities beginning with the tax year ended December 31, 2020. However, due to NOLs and credits carried forward from prior tax years, substantially all tax years may also be subject to examination. The Company recognizes the tax benefit of an uncertain tax position only if it is more likely than not that the position is sustainable upon review by the taxing authorities based on the technical merits. The Company recognizes interest accrued and penalties for unrecognized tax benefits in its tax provision. As of December 31, 2023 and 2024,