HCW Biologics Inc. 10-K/A

Item 9A Controls and Procedures . Evaluation of Disclosure Controls and Procedures As of December 31, 2023, our management, with participation of our principal executive officer and principal financial officer, performed an evaluation of the effectiveness of our disclosure controls and procedures (as defined in Rules 13a – 15(e) under the Exchange Act). Based on that evaluation, at the time of the original filing of Form 10-K on April 1, 2024, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures are effective at the reasonable assurance level. Subsequent to the original filing, two material weaknesses in the internal control over financial reporting (described below) were identified. Our principal executive officer and principal financial officer re-evaluated and concluded that our disclosure controls and procedures were not effective at the reasonable assurance level as of December 31, 2023. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, or the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act are recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports we file or submit under the Exchange Act is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and our management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Management's Report on Internal Control over Financial Reporting Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rules 13a-15(f) under the Exchange Act). Internal control over financial reporting is a process designed under the supervision and with the participation of our management, including our principal executive officer and our principal financial officer, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles in the United States. As of December 31, 2023, our management assessed the effectiveness of our internal control over financial reporting using the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control-Integrated Framework. Based on this assessment, at the time of the original filing of Form 10-K on April 1, 2024, our management concluded that our internal control over financial reporting was effective as of December 31, 2023. Subsequent to the original filing, material weaknesses over financial reporting were identified (described below). Our principal executive officer and principal financial officer re-evaluated and concluded that our internal control over financial reporting was not effective as of December 31, 2023. In a Current Report on Form 8-K filed with the SEC, we reported that we became aware that we were the victim of a criminal scheme involving the impersonation of a purchaser of senior secured notes (“Secured Notes”) upon the default on a legally binding commitment to purchase Secured Notes. The scheme resulted in the misdirection of approximately $1.3 million held in Company accounts to a fraudulent account controlled by a third party. As a result of the default and the related misdirection of funds, management re-evaluated the effectiveness of our disclosure controls and procedures and internal control over financial reporting. Based on this assessment, management identified material weaknesses in two areas, including the methods used to review, evaluate and accept financing proposals from investors and lenders and the process used to enter unusual significant transactions. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that a reasonable possibility exists that a material misstatement of our annual or interim financial statements would not be prevented or detected on a timely basis. There was no impact on the financial position, results of operations and cash flows.as a result of the material weaknesses. Remediation Plans for Material Weakness in Internal Control over Financial Reporting 110 We are committed to establishing and maintaining a stronger internal control environment. In response to the identified material weakness above, the Company’s Board of Directors and its Audit Committee are conducting an internal investigation to determine the root cause of the material weakness, with advice from outside advisors. Upon conclusion of this investigation, they will work with management to evaluate internal controls over financial reporting based on criteria set forth in “Internal Control – Integrated Framework (2013)” issued by the Committee of Sponsoring Organizations of the Treadway Commission. Remediation being considered includes but is not limited to adjusting authorization thresholds for unusual or significant transactions, enhancing the Company's due diligence procedures in connection with vetting of potential financial transactions with investors and lenders, requiring that transactions are performed in U.S. dollars in compliance with authorization thresholds, and requiring that transfers are made only by wire or check. A final remediation plan is expected to be in place by June 30, 2024. Inherent Limitations of Internal Controls While we strive to create a stronger control environment, we recognize that it is impossible for our internal controls over financial reporting to prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within our company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of a simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. While we are committed to continuously improve and strengthen our control environment, over time, our internal controls over financial reporting may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Projections of any evaluation of effectiveness to future periods are subject to the risk that internal controls over financial reporting may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected. Changes in Internal Control over Financial Reporting There have been no changes in our internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act during the three months ended December 31, 2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. Attestation Report of the Independent Registered Public Accounting Firm This Annual Report does not include an attestation report of our registered public accounting firm. For as long as we remain an “emerging growth company” as defined in Section 2(a) of the Securities Act of 1933, or the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012, we intend to take advantage of the exemption permitting us not to comply with the requirement that our independent registered public accounting firm provide an attestation on the effectiveness of our internal control over financial reporting. Item 9B Other Information. 10b5-1 Trading Plans During the fiscal quarter ended December 31, 2023, none of our officers or directors adopted or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408(a) of Regulation S-K. Secured Note Financing The following information is being included in this Item 9B in lieu of filing such information on a Current Report on Form 8-K under Item 1.01. Entry into a Material Definitive Agreement and Item 2.03. Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant. On March 28, 2024, we entered into a senior secured note purchase agreement (the “Note Purchase Agreement”) with the Purchasers (as defined in the Note Purchase Agreement), pursuant to which we agreed to issue senior secured notes in an aggregate principal amount of $10.0 million (the “Secured Notes”) to certain accredited investors, including unrelated parties as well as officers and directors of the Company, among whom were: Dr. Hing C. Wong, Founder and Chief Executive Officer, who invested $620,000; 111 Rebecca Byam, Chief Financial Officer, who invested $220,000; and Gary M. Winer, member of our Board of Directors, who invested $50,000. The Note Purchase Agreement sets forth the terms and conditions, including representations and warranties, for our issuance and sale of the Secured Notes to the Purchasers. We issued an aggregate principal amount of $2.0 million in Secured Notes prior to the issuance of this Annual Report. The Senior Notes bear interest at a rate of 9% per annum, payable quarterly in arrears, and mature on March 27, 2026 (the “Maturity Date”), on which date the principal balance and accrued but unpaid interest under the Secured Notes shall be due and payable. The Secured Notes may be prepaid in whole or in part at any time prior to the Maturity Date and are subject to a 5% prepayment penalty (“Premium Amount”). As a condition to entering into the Note Purchase Agreement, we, Mercedes M. Sellek, P.A. (“Escrow Agent”), and the Purchasers entered into that certain Escrow Agreement and Pledge Agreement, dated March 28, 2024, pursuant to which we agreed to pledge our equity ownership interest in Wugen, which was equivalent to a 5.6% ownership stake in that company as of December 31, 2023 (the “Pledged Collateral”), to be held and released by Escrow Agent according to the terms of the Escrow Agreement, as security for the Secured Notes. Upon a qualifying event involving a transaction such as an acquisition, merger or initial public offering in which the Pledged Collateral can be sold or liquidated prior to the Maturity Date, subject to certain limitations (such as a threshold price per share in the case of an initial public offering), we agreed to repay all indebtedness (including accrued interest) related to the Secured Notes plus a Premium Amount (as defined in the Note Purchase Agreement). Upon an Event of Default (as defined in the Note Purchase Agreement), we will have a thirty (30) day cure period (the “Cure Period”), and if the Event of Default is not so cured at the end of the Cure Period, we are required to distribute the Pledged Collateral to the Purchasers on a pro rata basis, in full satisfaction of the indebtedness evidenced by the Secured Notes. The issuance of the Secured Notes was exempt from the registration requirements of the Securities Act of 1933, as amended, in accordance with Section 4(a)(2) and/or Regulation 506 promulgated thereunder, as a transaction by an issuer not involving a public offering. The foregoing descriptions of the Note Purchase Agreement, Senior Notes, Escrow Agreement and Pledge Agreement do not purport to be complete and are qualified in their entirety by reference to the full text of the Form of Senior Secured Note Purchase Agreement, Form of Senior Secured Promissory Note, Form of Escrow Agreement and Form of the Pledge Agreement, copies of which are filed as Exhibit 10.17, Exhibit 10.18, Exhibit 10.19 and Exhibit 10.20, respectively, to this Annual Report and are incorporated herein by reference. Item 9C Disclosure Regarding Foreign Jurisdictions That Prevent Inspections . Not applicable. 112 PAR T III Item 10 Directors, Executive Officers and Corporate Governance. The information required by this item is included under the captions “Board of Directors and Corporate Governance,” “Proposal One: Director Election,” “Executive Officers” and “Delinquent Section 16(a) Reports” included in our definitive Proxy Statement for the 2024 Annual Meeting of Stockholders to be filed with the SEC within 120 days after the end of the year ended December 31, 2023, and is incorporated herein by reference. Our board of directors has adopted a Code of Conduct and Ethics applicable to all officers, directors, and employees, which is available on our website (https://investors.hcwbiologics.com/) under “Governance.” We intend to satisfy the disclosure requirement under Item 5.05 of Form 8-K regarding amendment to, or waiver from, a provision of our Code of Conduct and Ethics by posting such information on the website address and location specified above. Item 11 Executive Compensation. The information required by this item is included under the captions “Board of Directors and Corporate Governance” and “Executive Compensation” in our definitive Proxy Statement for the 2024 Annual Meeting of Stockholders to be filed with the SEC within 120 days after the end of the year ended December 31, 2023, and is incorporated herein by reference. Item 12 Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters. The information required by this item is included under the captions “Equity Compensation Plan Information” and “Security Ownership of Certain Beneficial Owners and Management” in our definitive Proxy Statement for the 2024 Annual Meeting of Stockholders to be filed with the SEC within 120 days after the end of the year ended December 31, 2023, and is incorporated herein by reference. Item 13 Certain Relationships and Related Transactions, and Director Independence. The information required by this item is included under the captions “Board of Directors and Corporate Governance” and “Certain Relationships and Related Party Transactions” in our definitive Proxy Statement for the 2024 Annual Meeting of Stockholders to be filed with the SEC within 120 days after the end of the year ended December 31, 2023 and is incorporated herein by reference. Item 14 Principal Accounting Fees and Services. The information required by this item is included under the caption “Proposal Two: Ratification of Appointment of Independent Registered Public Accounting Firm” in our definitive Proxy Statement for the 2024 Annual Meeting of Stockholders to be filed with the SEC within 120 days after the end of the year ended December 31, 2023, and is incorporated herein by reference. 113 PART IV Item 15 Exhibits, Financial Statement Schedules. (a)(1) Financial Statements The information concerning HCW Biologics’ audited financial statements and the Report of Independent Registered Public Accounting Firm required by this Item 15(a)(1) is incorporated by reference herein to the section of this Annual Report, Item 8, titled, “Financial Statements and Supplementary Data.” (a)(2) Financial Statement Schedules All financial statement schedules have been omitted as the information is not required under the related instructions or is not applicable or because the information required is already included in the audited financial statements or the notes to those audited financial statements. (a)(3) Exhibits We have filed, or incorporated into this Annual Report by reference, the exhibits listed on the accompanying Exhibit Index immediately preceding the signature page of this Annual Report. 114 Exhibit Index Incorporated by reference Filed or furnished herewith Exhibit No. Exhibit title Form File No. Exhibit No. Filing date 3.1 Amended and Restated Certificate of Incorporation 8-K 001-40591 3.1 07/26/2021 3.2 Amended and Restated Bylaws 8-K 001-40591 3.2 07/26/2021 4.1 Specimen Stock Certificate S-1/A 333-256510 4.1 07/09/2021 4.2 Description of Securities 10-K 001-40591 4.2 03/29/2022 10.1 Form of Indemnification Agreement between HCW Biologics Inc. and each of its officers and directors. S-1/A 333-256510 10.1 07/09/2021 10.2+ 2019 Equity Incentive Plan, as amended, and forms of agreement thereunder. S-1 333-256510 10.2 07/09/2021 10.3+ First Amendment to 2019 Equity Incentive Plan. S-1 333-256510 10.3 07/09/2021 10.4+ 2021 Equity Incentive Plan and forms of agreement thereunder S-1 333-256510 10.4 07/09/2021 10.5+ Employment Agreement, dated July 6, 2021, between Peter Rhode and HCW Biologics Inc. S-1 333-256510 10.6 07/09/2021 10.6+ Employment Agreement, dated October 9, 2019, between Rebecca Byam and HCW Biologics Inc. S-1 333-256510 10.7 07/09/2021 10.7+ Non-Employee Director Compensation Policy. S-1 333-256510 10.8 07/09/2021 10.8+ Employment Agreement, dated June 18, 2021, between Dr. Hing C. Wong and HCW Biologics Inc. S-1 333-256510 10.13 07/09/2021 10.9+ Executive Incentive Bonus Plan S-1 333-256510 10.11 07/09/2021 10.10† Exclusive License Agreement, dated December 24, 2020, between HCW Biologics Inc. and Wugen, Inc. S-1 333-256510 10.10 07/09/2021 10.11† Master Services Agreement, dated March 14, 2019, between HCW Biologics Inc. and EirGenix, Inc. S-1 333-256510 10.12 07/09/2021 10.12†# Purchase and Sale Agreement, by and between HCW Biologics Inc. and Wai 3300 Corporate Way, LLC, dated May 27, 2022 10-Q 001-40591 10.1 08/12/2022 10.13 Capital on Demand TM Sales Agreement, dated August 19, 2022, by and between HCW Biologics Inc. and Jones Trading Institutional Services LLC S-3 333-266991 1.2 08/19/2022 10.14 Loan Agreement by and between HCW Biologics Inc. and Cogent Bank, dated August 15, 2022 10-Q 001-40591 10.1 11/07/2022 10.15 Mortgage and Security Agreement by and between HCW Biologics Inc. and Cogent Bank, dated August 15, 2022 10-Q 001-40591 10.2 11/07/2022 10.16 Form of Subscription Agreement, dated February 20, 2024, by and between the Company and the Subscribers party thereto 8-K 011-40591 10.1 02/22/2024 10.17*†# Form of Senior Secured Note Purchase Agreement, dated March 28, 2024, by and between the Company and the Purchaser party thereto 10-K 011-40591 10.17 04/01/2024 10.18*†# Form of Senior Secured Promissory Note, dated March 28, 2024, by and between the Company and the Holder party thereof 10-K 011-40591 10.18 04/01/2024 10.19*†# Form of Pledge Agreement, dated March 28, 2024, by and between the Company, Escrow Agent and Noteholder party thereto 10-K 011-40591 10.19 04/01/2024 10.20*†# Form of Escrow Agreement, dated March 28, 2024, by and between the Company, Escrow Agent and Noteholder party thereto 10-K 011-40591 10.20 04/01/2024 23.1 Consent of Independent Registered Public Accounting Firm X 31.1 Certification of Chief Executive Officer pursuant to Rules 13a-14(a) and Rule 15d-14(a) of the Exchange Act X 115 31.2 Certification of Chief Financial Officer pursuant to Rules 13a-14(a) and Rule 15d-14(a) of the Exchange Act X 32.1* Certification of Chief Executive Officer pursuant to Rule 13a-14(b) of the Exchange Act and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 X 32.2* Certification of Chief Financial Officer pursuant to Rule 13a-14(b) of the Exchange Act and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 X 97.1 HCW Biologics Inc. Compensation Recovery Policy 10-K 011-40591 97.1 04/01/2024 101.INS Inline XBRL Instance Document X 101.SCH Inline XBRL Taxonomy Extension Schema Document X 101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document X 101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document X 101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document X 101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document X 104 Cover Page Interactive Data File (embedded within the Inline XBRL document) X * Furnished and not filed. + Indicates a management contract or compensatory plan or arrangement. †† Certain information in this document has been excluded pursuant to Item 601(b)(10) of Regulation S-K. Such excluded information is not material and is the type of information the Registrant treats as private and confidential. The Registrant agrees to furnish supplementally such information to the SEC upon request. # Certain information in this document has been excluded pursuant to Item 601(a)(5) or (a)(6) of Regulation S-K. The Registrant agrees to furnish supplementally such information to the SEC upon request. Item 16 Form 10-K Summary None. 116 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized . HCW Biologics Inc. Date: May 15, 2024 By: /s/ Hing C. Wong, Ph.D. Hing C. Wong, Ph.D. Founder and Chief Executive Officer POWER OF ATTORNEY Each person whose signature appears below constitutes and appoints Hing C. Wong and Rebecca Byam, and each of them, as his or her true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for him or her and in his or her name, place and stead, in any and all capacities, to sign any and all amendments to this Annual Report on Form 10-K, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in connection therewith, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, or their or his substitutes, may lawfully do or cause to be done by virtue thereof. Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this Report has been signed below by the following persons on behalf of the Registrant in the capacities and on the dates indicated. Name Title Date /s/ Hing C. Wong, Ph.D. Founder, Chief Executive Officer May 15, 2024 Hing C. Wong, Ph.D. (Principal Executive Officer) /s/ Rebecca Byam Chief Financial Officer May 15, 2024 Rebecca Byam (Principal Financial and Accounting Officer) /s/ Scott T. Garrett Chairperson of the Board of Directors May 15, 2024 Scott T. Garrett /s/ Lisa M. Giles Director May 15, 2024 Lisa M. Giles /s/ Rick S. Greene Director May 15, 2024 Rick S. Greene /s/ Gary M. Winer Director May 15, 2024 Gary M. Winer 117