HCW Biologics restates Q1 results after EPS error; shares jump 17%

What happened

HCW Biologics Inc., a Florida-based biopharmaceutical company focused on immunotherapies for cancer and inflammatory diseases, said on August 14, 2026 that its previously issued financial statements for the first quarter of 2026 should no longer be relied upon. The company's Audit Committee, together with management and its independent auditor Crowe LLP, concluded that an error in the calculation of earnings per share (EPS) made the results materially misstated.

The error involved the two-class method of calculating EPS, which is used when a company has securities that participate in dividends. HCW Biologics said it failed to allocate undistributed earnings between common stock and participating warrants that have non-forfeitable dividend rights. As a result, the company reported basic and diluted EPS of $2.19 per share for the quarter ended March 31, 2026, but that figure was overstated by $0.80 per share.

The company plans to file an amendment to its first-quarter report on Form 10-Q/A to restate the affected financial statements. It also intends to update any related registration statement filings. The stock rose 17.41% to close at $3.17 on the day of the announcement.

Management also concluded that a material weakness existed in internal control over financial reporting related to the accounting for complex warrant instruments, and said it is implementing remediation measures.

Why the error occurred

According to the filing, the EPS error stemmed from the company's misapplication of the two-class method. Specifically, HCW Biologics allocated 100% of undistributed earnings to its weighted-average common shares outstanding, but it should have allocated approximately 63.3% to common stock and approximately 36.7% to the participating securities—warrants that can be exercised for 524,501 shares of common stock.

Management said the error exposed a material weakness in the company's technical accounting review controls over complex warrant instruments and financing transactions. The company is implementing enhanced technical accounting review procedures and improved coordination with legal counsel and other advisors.

What this means

A Form 8-K with Item 4.02 is the formal SEC notice a company files when it determines that previously issued financial statements can no longer be relied upon. It is a serious disclosure because it tells investors that the numbers they saw earlier were wrong. Here, the company will have to file a Form 10-Q/A to correct the first-quarter report.

The two-class method is an accounting rule used when a company has securities—like certain warrants—that give holders the right to share in dividends along with common stockholders. In such cases, net income must be allocated between the common stock and those participating securities. HCW Biologics failed to do that, which inflated EPS.

The company's restatement does not change its underlying business; it corrects how earnings per share were calculated. The share price rise after the announcement suggests investors focused on the company's net income rather than the accounting error, but the material weakness and restatement add regulatory and reporting risks. The company will need to file the amended report and work to fix the internal control deficiency.

For context, HCW Biologics is a biotech company developing therapies that target the immune system. The restatement itself does not indicate any issue with its drug pipeline or clinical programs.