HCW Biologics Inc. 10-Q

Item 5. Other Information. Insider Adoption or Termination of Trading Arrangements During the fiscal quarter ended September 30, 2024 , none of our directors or officers informed us of the adoption , modification or termination of a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as those terms are defined in Regulation S-K, Item 408. Secured Notes Issuance The following information is being included in this Item 5 in lieu of filing such information on a Current Report on Form 8-K under Item 2.03. Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant and Item 8.01: On March 28, 2024, the Company 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 up to $10.0 million (“Secured Notes”) to certain accredited investors, including unrelated parties as well 34 as officers and directors of the Company. As of March 31, 2024, the Company had an initial closing and issued $2.0 million in Initial Secured Notes. As of June 30, 2024, all existing investors approved an Amended and Restated Note Purchase Agreement (“Amended and Restated Note Purchase Agreement”), with terms described below. As of September 30, 2024, the Amended and Restated Note Purchase Agreement was amended to extend the last closing date to issue Additional Secured Notes to October 31, 2024. No other terms were amended. The material terms of the Additional Secured Notes are identical to the terms of the Initial Secured Notes. As of September 30, 2024, the Company issued an aggregate of $6.5 million of Secured Notes, with $2.8 million from the Company’s officers and members of the board of directors, including $2.4 million purchased by Dr. Hing C. Wong, Founder and CEO, $220,000 purchased by Rebecca Byam, Chief Financial Officer, $140,000 purchased by Scott T. Garrett, Chairman of the board of directors, $60,000 purchased by Gary M. Winer, member of the board of directors, $25,000 purchased by Lee Flowers, Senior Vice President for Business Development, and $25,000 purchased by Rick S. Greene, member of the board of directors. During October 2024, the Company issued $375,000 of Additional Secured Notes, including $50,000 purchased by Dr. Wong on October 31, 2024. The Senior Notes bear interest at a rate of 9% per annum, payable quarterly in arrears, and mature on August 30, 2026 (the “Maturity Date”), on which date the principal balance, accrued but unpaid interest, and other amounts that may be due under the terms of the Amended and Restated Note Purchase Agreement shall be due and payable. The Secured Notes may be prepaid on or prior to December 31, 2024, but will be subject to a 5% prepayment penalty (“Premium Amount”). Thereafter, the Senior Notes may be repaid upon a Mandatory Redemption event or at the end of the term. As a condition to entering into the Amended and Restated Note Purchase Agreement, the Company, Mercedes M. Sellek, P.A. (“Escrow Agent”), and the Purchasers entered into that certain Escrow Agreement and Amended and Restated Pledge Agreement, dated July 2, 2024, pursuant to which the Company agreed to pledge our equity ownership interest in Wugen, which was equivalent to a 5.6% ownership stake in that company as of September 30, 2024 (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 Mandatory Redemption 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), the Company agreed to repay all indebtedness (including accrued interest) related to the Secured Notes plus a Bonus Payment (as defined in the Amended and Restated Note Purchase Agreement). If there is no such Mandatory Redemption prior to the Maturity Date, the Company agreed to pay the holders of Secured Note a Bonus Payment under certain circumstances. Upon a bona fide equity offering (as defined in the Amended and Restated Note Purchase Agreement), Senior Note holders have the right to convert to shares of the Company’s common stock (as defined in the Amended and Restated Note Purchase Agreement). The Amended and Restated Note Purchase Agreement sets forth preliminary terms that are subject to final documentation. Upon an Event of Default (as defined in the Amended and Restated Note Purchase Agreement), the Company 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, the Company is required to distribute the Pledged Collateral to the Purchasers on a pro rata basis, determined based on the issuance of $10.0 million in Secured Notes, in full satisfaction of the indebtedness evidenced by the Secured Notes. The foregoing descriptions of the Amended and Restated Note Purchase Agreement, Amended and Restated Senior Notes, Escrow Agreement and Amended and Restated Pledge Agreement do not purport to be complete and are qualified in their entirety by reference to the full text of the Form of Amended and Restated Senior Secured Note Purchase Agreement, Form of Senior Secured Promissory Note, Form of the Amended and Restated Pledge Agreement and Form of Amended and Restated Escrow Agreement, copies of which are filed as Exhibit 10.1, Exhibit 10.2, Exhibit 10.3 and Exhibit 10.4, respectively, to this Quarterly Report and are incorporated herein by reference. The issuance of the Additional Secured Notes was exempt from the registration requirements of the Securities Act of 1933, as amended, in accordance with Section 4(a)(2), as a transaction by an issuer not involving a public offering. In addition, our Board of Directors and the Audit Committee of our Board of Directors reviewed the transaction under our policy for Related Party Transactions (the “Policy”) and determined that the issuance of the Additional Secured Notes was in compliance with the Policy. 35 Item 6. Exhibits. The exhibits filed or furnished as part of this Quarterly Report on Form 10-Q are set forth on the Exhibit Index, which Exhibit Index is incorporated herein by reference. Exhibit Number Incorporated by Reference Filed Herewith Description Form File No. Exhibit No. Filing Date 10.1 Form of Amended and Restated Senior Secured Note Purchase Agreement, dated July 2, 2024, by and between the Company and the Purchaser party thereto 10-Q 001-40591 10.1 8/14/2024 10.2 Form of Senior Secured Promissory Note by and between the Company and the Holder party thereof 10-Q 001-40591 10.2 8/14/2024 10.3 Form of Amended and Restated Pledge Agreement, dated July 2, 2024, by and among the Company, Escrow Agent and Noteholder parties thereto 10-Q 001-40591 10.3 8/14/2024 10.4 Form of Amended and Restated Escrow Agreement, dated July 2, 2024, by and among the Company, Escrow Agent and Noteholder parties thereto 10-Q 001-40591 10.4 8/14/2024 10.5 Form of First Amendment to the Amended and Restated Senior Secured Note Purchase Agreement, dated September 30, 2024, by and between the Company and Purchaser parties thereto X 10.6# Settlement Agreement and Release, dated July 13, 2024, by and between the Company and Altor BioScience, LLC, NantCell, Inc., and ImmunityBio, Inc. X 31.1 Certification of Principal Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. X 31.2 Certification of Principal Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. X 32.1* Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. X 32.2* Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. X 101 The following materials from the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2024, formatted in Inline XBRL (eXtensible Business Reporting Language): (i) the Condensed Interim Balance Sheets as of December 31, 2023 and September 30, 2024 (unaudited); (ii) the Condensed Interim Statements of Operations for the three and nine months ended September 30, 2023 (unaudited) and September 30, 2024 (unaudited); (iv) the Condensed Interim Statements of Changes in Stockholders’ Equity for the nine months ended September 30, 2023 (unaudited) and September 30, 2024 (unaudited); (v) the Condensed Interim Statements of Cash Flows for the nine months ended September 30, 2023 (unaudited) and September 30, 2024 (unaudited); and (vi) the notes to the Condensed Interim Financial Statements (unaudited). X 104 Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) X * This certification is deemed not filed for purpose of Section 18 of the Exchange Act or otherwise subject to the liability of that section, nor shall it be deemed incorporated by reference into any filing under the Securities Act or the Exchange Act. # 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. 36 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. HCW Biologics Inc. Date: November 14, 2024 By: /s/ Hing C. Wong Hing C. Wong Chief Executive Officer (Principal Executive Officer) Date: November 14, 2024 By: /s/ Rebecca Byam Rebecca Byam Chief Financial Officer (Principal Financial and Accounting Officer) 37