What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-05-15 compared with 2024-11-14 · 304 added, 369 removed, 154 unchanged (81% of the section changed)

1 unchanged sentence

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with (i) our unaudited condensed interim financial statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q and (ii) our audited financial statements and related notes and the discussion under the heading “Management's Discussion and Analysis of Financial Condition and Results of Operations” for the fiscal year ended December 31, 2023 included in the Annual Report on Form 10-K filed with the U.S.

Securities and Exchange Commission (the “SEC”) on May 15, 2024 (the “Annual Report”).

Securities and Exchange Commission (the “SEC”) on March 28, 2025 (the “Annual Report”).

Our historical results are not necessarily indicative of the results that may be expected for any period in the future.

15 unchanged sentences

HCW Biologics Inc.

is a clinical-stage biopharmaceutical company focused on discovering and developing novel immunotherapies to lengthen health span by disrupting the link between chronic, low-grade inflammation and age-related diseases.

We believe age-related, chronic, low-grade inflammation, or “inflammaging,” is a significant contributing factor to several diseases and conditions, such as cancer, cardiovascular disease, diabetes, neurodegenerative diseases, and autoimmune diseases.

The induction and retention of low-grade inflammation in an aging human body is mainly the result of the accumulation of non-proliferative but metabolically active senescent cells, which can also be caused by persistent activation of protein complexes, known as inflammasomes, in innate immune cells.

These two elements share common mechanisms in promoting secretion of proinflammatory proteins and in many cases interact to drive senescence, and thus, inflammaging.

Our novel approach is to reduce senescent cells and eliminate the proinflammatory factors they secrete systemically through multiple pathways.

We believe our approach has the potential to fundamentally change the treatment of age-related diseases.

Accumulation of senescent cells with senescence-associated proinflammatory factors has been implicated as a major source of chronic sterile inflammation leading to many aging-related pathologies.

The key to our immunotherapeutic approach is elimination of senescent cells and the proinflammatory factors they secrete.

The Settlement Agreement among the Company, Dr.

Wong, Altor, NantCell and ImmunityBio, which was entered into as of July 13, 2024, and is described in Part II, Item 1.

– “Legal Proceedings” below, eliminated the uncertainty of the outcome of the previously disclosed arbitration proceedings and provided clarity for the future direction and emphasis of our clinical development

The settlement involved intellectual property the Company developed, including the proprietary TOBI TM drug discovery platform and its unique Tissue-Factor scaffold used to create protein-fusion molecules that include several elements, such as multiple protein targets, including cytokines, single-chain antibodies, and ligands, as well as proprietary TOBI-based molecules.

The Backbone of the Company’s Clinical Development Program:

Two Novel Proprietary Drug Discovery Platforms

Two Novel Drug Discovery Platforms.

HCW Biologics created two novel drug discovery platforms, using two distinctly different scaffolds to anchor the composition of immunotherapeutic fusions.

This results in the creation of molecules with different mechanisms of action, which opens up different pathways for treatment of diseases promoted by chronic inflammation.

TOBI TM (Tissue factOr-Based fusIon) Platform .

This patented drug discovery platform is built around a Tissue Factor scaffold.

The TOBI TM platform packs multiple protein targets, including cytokines, single-chain antibodies, and ligands, into a single fusion molecule.

These molecules are capable of engaging immunostimulatory functions and addressing many signaling pathways simultaneously.

Some of these fusion protein complexes have ex vivo and in vivo applications, although the Company is primarily focused on drugs developed using subcutaneous injection.

Molecules created with the TOBI TM platform are reproducible and suitable for cGMP manufacturing.

We have manufactured quantities of four TOBI-based molecules in a cGMP manufacturing setting.

The Company’s clinical development program includes the following TOBI-based immunotherapeutics:

This is a clinical-stage bifunctional molecule that can impact senescence by reducing senescent cells (i.e., senescent-cell-reducing effect) and eliminating the proinflammatory factors they secrete (i.e., senomorphic effect).

Subcutaneous administration of HCW9218 activates NK cells, innate lymphoid group-1, and CD8 + T cells, and neutralizes TGF-β.

Our future HCW9218 program includes a Phase 2 study in ovarian cancer in a neoadjuvant setting.

The primary focus for future clinical development of HCW9218 will be in other senescence-associated diseases and conditions beyond cancer.

The Company has exclusive rights to develop treatments for all other age-related diseases other than cancer using HCW9218.

We will be able to use the Recommended Phase 2 Dose (“RP2D”) and other learnings based on findings in the Phase 1 studies which wrapped up at the beginning of 2024.

The Company has non-exclusive rights to develop HCW9218 treatments for ovarian cancer in a neoadjuvant setting.

The University of Pittsburgh Medical Center (“UMPC”) is the sponsor for an ongoing Phase 2 clinical study to evaluate HCW9218 in the treatment of ovarian cancer in a neoadjuvant setting.

For this study, HCW9218 will be administered in combination with neoadjuvant chemotherapy as a first-line treatment with neoadjuvant chemotherapy alone serving as a control arm.

The Company has learned that UPMC may change the principal investigator for this study, due to some changes at the institution.

Patient recruitment is in progress, but no patients have been enrolled in this study as of the reporting date.

Under the terms of the Settlement Agreement, UPMC has until year end to launch this study.

The Settlement Agreement among the Company, Dr.

Wong, Altor, NantCell and ImmunityBio, which was entered into as of July 13, 2024, and is described in Part II, Item 1.

However, under the Settlement Agreement, the Company agreed to transfer the HCW9218 master cell line to ImmunityBio.

In turn, ImmunityBio agreed to enter into a supply agreement with the Company by the end of January 2025 to ensure clinical supply of HCW9218 is available to carry on clinical studies.

HCW9302 is the basis for the Company’s autoimmune program.

Subcutaneous administration of HCW9302 is designed to activate and expand T reg cells to reduce senescence by suppressing the activity of inflammasome-bearing immune cells and the inflammatory factors which they secrete.

The Company filed our IND application to the U.S.

Food and Drug Administration (“FDA”), which is currently under review.

The Company is seeking approval to conduct a clinical study to evaluate HCW9302 in an autoimmune indication.

The Company cannot provide any assurance that the FDA will authorize it to initiate its planned clinical trials on a timely basis, or at all.

In the event that the FDA does not accept the Company’s IND, the Company may also be required to seek feedback, and the feedback may be unfavorable.

In the event that the Company does not receive feedback on a timely basis, or the Company is required to change the design of the clinical protocol or address other feedback, clinical development of the products would be delayed and the costs may increase.

Moreover, if the FDA does not accept the Company’s IND, the Company may be required to conduct additional preclinical testing or other IND-enabling activities, which would result in further delay and additional costs.

We intend to explore utility of HCW9302 for other aging-related diseases, such as neurodegenerative diseases, in relevant animal models.

Our plan is to identify the RP2D in patients based on a Phase 1b clinical trial to evaluate HCW9302 in an autoimmune indication, then expand to a neurodegenerative disease indication in a Phase 2 trial utilizing this RP2D.

HCW Biologics maintains the rights to the injectable form of HCW9206.

This form of HCW9206 is preclinical, and we are beginning IND-enabling activities.

Ex vivo rights have been licensed to Wugen.

This form of HCW9206 is clinical stage, and Wugen is evaluating it in combination with HCW9201 in a Phase 1 clinical trial.

HCW9206 has a unique design consisting of a multi-functional compound constructed with three powerful cytokines:

IL-7, IL-15, and IL-21.

It is designed to stimulate T cell proliferation and activation, enhance NK cell cytotoxicity, and improve overall immune surveillance against pathogens or tumors.

HCW9206 is being considered to be the basis of our future oncology and anti-infectious disease programs.

This is a clinical-stage molecule currently being evaluated by Wugen in a Phase 1 clinical trial in Acute Myeloid Leukemia, as a cell-based treatment.

We have not yet initiated any clinical trials to evaluate HCW9201 in other indications.

We retain the rights for administration by subcutaneous injection.

HCW9201 has a unique design that results in a multi-functional compound with three powerful cytokines, IL-12, IL-15, and IL-18, in a single protein complex.

We are exploring intra-tumoral injection of HCW9201 for treatment of cancer.

New Drug Discovery Platform with Novel Protein-Based Scaffold.

Our recently discovered a new drug development platform uses a novel protein scaffold that is not based on tissue factor, which differentiates it from TOBI TM platform.

With immunotherapeutic compounds that are constructed with this new platform without tissue factor, we expand the diseases and conditions that may be treated.

The Company has already used this novel protein scaffold to construct several immunotherapeutic fusions, which we are testing to determine the most promising programs, including those that could be licensed to others.

This scaffold has the capability to construct multiple classes of immunotherapeutic compounds, including:

• Multifunctional, cytokine-based immunotherapeutic compounds.

• Constructs with immune-cell engagers targeting tissue factor and other cell-surface antigens associated with diseased cells.

• Multifunctional immunotherapeutic fusions which improve the performance of immune checkpoint inhibitors.

The Company is conducting rigorous preclinical animal studies using several different models to characterize these new compounds and identify those that indicate the greatest potential to evaluate in treatments of cancer and other diseases promoted by chronic inflammation.

The clinical development plan is for at least one molecule constructed with this novel platform to be in clinical development in 2026, either through a Company-owned program or through an out-licensing program.

Business and Financing Strategies

The Company is exploring numerous additional molecules with substantial potential applications.

The Company considers business development transactions, such as out-licensing agreements, to be fundamental elements of our financing strategy to provide future non-dilutive capital required to fund clinical development of the Company’s lead immunotherapeutic programs.

We signed our first out-license agreement at the end of 2020, which was an exclusive worldwide license (the “Wugen License”) with Wugen, Inc.

(“Wugen”), a company that specializes in cell-based therapies for cancer.

As part of the upfront license fee, the Company received shares of Wugen’s common stock that currently represents a 5.6% ownership interest based on fully converted issued and outstanding shares.

Wugen licensed limited rights to develop, manufacture, and commercialize cell-based therapy treatments for cancer based on two of our internally-developed, multi-cytokine fusion protein molecules, HCW9201 and HCW9206.

The licensed molecules are the basis for Wugen’s memory-like NK cell therapy program.

Wugen also has a promising CAR-T program, based on its lead molecule WU-CART-007.

The WU-CART007 program was recognized by two regulatory designations by the FDA and EU, respectively, that have expedited regulatory review.

Wugen has been cleared to initiate a pivotal Phase 2 study in the first quarter of 2025 for its first-in-class, investigational, anti-CD7 CAR-T cell therapy, WU-CART-007, in patients with relapsed or refractory (R/R) T cell acute lymphoblastic leukemia or T cell lymphoblastic lymphoma (T-ALL/LBL).

We plan to continue to work with the National Institutes of Health and the National Cancer Institute (“NCI”) for collaborative agreements and assistance with funding research and clinical studies.

In 2022, the Company entered a Cooperative Research and Development Agreement (“CRADA”), and under the CRADA we collaborated with NCI on a Phase 1b/2 clinical study in patients with advanced/metastatic and chemo-refractory/chemo-resistant pancreatic cancer.

Our plan is to leverage these relationships to benefit the clinical development of HCW9206 and immunotherapeutic fusions we create in the future in cancer indications.

The Company remains committed to establishing some control over our clinical supply of materials, and the supply of licensed molecules for our licensees.

The Company has retained manufacturing rights for the licensed molecules under the Wugen License and intends to use the same framework in future if we enter other licensing agreements.

On September 9, 2024, the House of Representatives passed the BIOSECURE Act (the “Act”).

With strong bi-partisan support, the bill is expected to become law in 2024.

Somewhat unusually, the Act names specific companies as automatically qualifying as “biotechnology companies of concern.” The expectation is that this provision of the Act would effectively prohibit U.S.

companies from doing business with five Chinese firms, including WuXi AppTec, Complete Genomics and MGI Tech.

For life sciences companies, WuXi is one of the largest global providers of contract development and manufacturing services in the world.

By some estimates, WuXi, an important partner with many biotech and pharma companies, is involved in developing 25% of the drugs used in the United States.

The Act would effectively ban WuXi from conducting business in the United States, which is expected to disrupt the supply chain for life sciences companies.

The result is expected to produce delays, price increases, and supply shortages for many years as the industry replaces WuXi’s capacity as well as other firms named in the Act.

Business Highlights

Remediation and Dismissal of Arbitration

• The Settlement Agreement among the Company, Dr.

Wong, Altor, NantCell and ImmunityBio, which was entered into as of July 13, 2024, and is described in Part II, Item 1.

(“HCWB” or the “Company”) is a clinical-stage biopharmaceutical company developing proprietary immunotherapies to treat diseases promoted by chronic inflammation, especially age-related and senescence-associated diseases.

Our immunotherapeutics represent a new class of drug that we believe has the potential to fundamentally change the treatment of cancer and many other diseases and conditions that are promoted by chronic inflammation — and in doing so, improve patients’ quality of life and possibly extend longevity.

While chronic inflammation is possible at any age, it is more common as we age.

In this case, the condition is known as inflammaging.

Chronic inflammation, including inflammaging, is believed to be a significant contributing factor to the cause for senescence-associated diseases and conditions that diminish health span, including many types of cancer, autoimmune diseases, and neurodegenerative diseases, as well as indications that impact quality-of-life that are not life-threatening.

Senescence is a physiologic process important in promoting wound healing, tissue homeostasis, regeneration, embryogenesis, fibrosis regulation, and tumorigenesis suppression.

However, accumulation of senescent cells with Senescence-Associated Phenotype (“SASP”) proinflammatory factors has been implicated as a major source of chronic sterile inflammation leading to many aging-related pathologies.

SASP factors, including proinflammatory cytokines, chemokines, and proteinases, drive an inflammation cycle.

Senescence is considered a stress response and can be induced by a wide range of intrinsic and extrinsic insults.

Over time, these insults cause normal tissue cells to enter a senescent state of irreversible growth arrest accompanied by the release of SASP factors.

The inflammation cycle promoted by SASP factors also activates immune cells.

Similar to senescent cells, prolonged activation of immune cells promote the release of highly proinflammatory cytokines.

Unresolved activation of immune cells leads to chronic low-grade inflammation, which perpetuates this cycle.

Studies have shown that strategies to reduce or eliminate senescent cells can delay, prevent, and improve age-related dysfunctions, including cancer.

Unfortunately, to date, there has been limited clinical success in targeting senescent cell accumulation or aberrant inflammasome activity using small molecule-based approaches.

Preclinical research and preliminary results from first-in-human clinical trials indicate that our immunotherapeutic approach may achieve success for cancer indications, and many other age-related diseases and conditions.

We believe our lead product candidates represent a novel immunotherapeutic approach and a clinically promising new class of senotherapeutic drugs for the treatment of age-related diseases.

The Company has developed two different drug discovery and development platforms, our legacy TOBI (Tissue factOr-Based fusIon) platform and our newly developed targeted platform technology – the T-cell Receptor β Chain constant region (“TRBC”) platform:

• The TOBI platform is designed to engineer multi-functional fusion protein molecules and protein complexes.

It employs a Tissue Factor (“TF”) scaffold that can be packaged with multiple protein targets, including cytokines, chemokines, ligands, receptors, and single-chain antibodies.

• The Company invented its second-generation platform, the TRBC platform, to create novel immunotherapeutics designed to treat diseases, including cancer, as well as improve quality-of-life conditions.

The immunotherapeutics created using the TRBC platform include multi-specific cytokines, targeted second-generation immune checkpoint inhibitors, and immune-cell engagers, which have the capabilities to activate subsets of immune cells that specifically target cancerous or infected cells.

As of July 13, 2024, the Company, Dr.

Wong, Altor BioScience, LLC, NantCell, Inc.

and ImmunityBio, Inc.

(collectively, Altor BioScience, LLC, NantCell, Inc.

and ImmunityBio Inc.

will be referred to herein as “ImmunityBio”), entered into a Settlement Agreement that is described in Part I, Item 3.

– “Legal Proceedings” below.

• As required under the terms of the Settlement Agreement, the Company has substantially completed remediation procedures required to be in compliance with the terms of the Settlement Agreement.

• Under the provisions of the Settlement Agreement, upon completion of remediation procedures, the parties mutually agreed to stipulate that the Arbitration and Complaint should be dismissed.

As of the filing date, the parties to the Settlement Agreement are working together to finalize the notices and related final documentation to obtain dismissal of the Arbitration and Complaint.

• In the three-month period ended September 30, 2024, the Company launched a new financing plan.

With the execution of the Settlement Agreement, we resolved the attendant uncertainties for the outcome of the arbitration and additional complexities that hampered our ability to raise capital.

• We have a multi-faceted financing plan, and have already taken the first steps to put on financing plan into action during the third quarter of 2024:

o Licensing non-core assets is a fundamental facet of our financing plan.

On September 25, 2024, the Company entered into a nonbinding term sheet with a party interested in licensing one of the Company’s preclinical molecules.

The proposed license is for one of the Company’s preclinical molecules created with our new platform.

The Company has generated data from testing conducting in various animal models which have met requirements of the prospective licensee.

Definitive agreements are being finalized and the closing is expected in the fourth quarter of 2024.

The proposed license agreement includes guaranteed minimum payments which are expected within the first year of the term.

o We have launched a multi-step equity financing plan.

On November 13, 2024, we entered into an engagement letter with the Maxim Group to act as the exclusive placement agent for equity financings.

o Through October 31, 2024, the Company issued $6.9 million Secured Notes, secured by the Company’s Wugen shares.

We are authorized to issue up to $10.0 million in Secured Notes and we continue our fund-raising efforts to issue the fully authorized amount.

Additional closings can take place by amending the purchase agreement.

o The financing plan includes regaining compliance with all Listing Qualifications of the Nasdaq Stock Market LLC (“Nasdaq”) for the Nasdaq Global Market.

We have a deadline regain compliance by December 16, 2024.

We intend to take all reasonable measures available to us to regain compliance with the continued listing requirements for the Nasdaq Global Market, and we will utilize our right to appeal to Nasdaq to extend our deadline to regain compliance based on a solid financial plan that we are already beginning to execute.

• As of September 30, 2024, we believe that substantial doubt exists regarding our ability to continue as a going concern for at least 12 months from the date of issuance, without additional funding or financial support.

After considering elements of our financing plan that were probable to occur within a year of the date of issuance, we concluded that substantial doubt was not alleviated in the going concern analysis.

The Settlement Agreement eliminated the uncertainty of the outcome of the previously disclosed Arbitration proceedings and provided clarity for the future direction and emphasis of our clinical development strategy.

The settlement involved intellectual property the Company developed based on our proprietary TOBI TM drug discovery platform and its unique Tissue-Factor scaffold used to create protein-fusion molecules.

With clarity on ownership of intellectual property, the Company reassessed its clinical development pipeline and the future direction of our Company.

Our expertise is in immunotherapeutic treatments and our clinical development pipeline will remain so.

Our focus continues to be to develop protein-based immunotherapies that are administered by subcutaneous injection.

We remain focused on diseases promoted by chronic inflammation driven by senescence, including cancer, especially age-related diseases.

The diseases we will target will have no curative FDA approved treatments.

Finally, we have selected programs that include life-threatening diseases, such as pancreatic and ovarian cancer, as well as “quality-of-life” indications, such as alopecia areata and senile lentigo.

HCW9302 will remain one of our lead product candidates.

Future drug discovery and new drug development will be based on TRBC Molecules.

There are several potential candidates in each class of TRBC Molecules from which the Company will select lead molecules for each program.

Part of this selection will be to determine which TRBC molecules will be developed in-house and which are more appropriate to develop through business development transactions, such as out-licensing agreements.

Our clinical development program is based on a few select lead product candidates which will be evaluated in Company-sponsored clinical trials in autoimmune disorders, solid tumors and quality-of-life conditions.

We have a large portfolio of non-core programs and assets and, for these, we anticipate that clinical development will be conducted through licensing agreements and other business development transactions.

HCWB has an experienced team led by Dr.

Wong, our Founder and CEO, who discovered and developed the immunotherapeutic Anktiva® (also known as ALT-803, an IL-15 agonist receptor) through pivotal trials.

This blockbuster immunotherapeutic treatment for cancer was sold to ImmunityBio, Inc.

in 2017 in a $1.0 billion acquisition.

Anktiva® was approved by the U.S.

Food and Drug Administration (“FDA”) for a bladder cancer indication in 2024.

Business Highlights

Our financing strategy includes capital raising through the issuance of securities as well as business development transactions, especially out-licensing certain rights outside of our focus areas.

The Company continues to evaluate its portfolio to identify compounds which may be good candidates for licensing or other collaborations, where it will be to our advantage to leverage the expertise and financial strength of a partner in the development of a compound or market.

Amendment of WY Biotech License Agreement

As we reported in a Form 8-K filed on March 19, 2025, the Company and WY Biotech Co., Ltd.

(“WY Biotech”) agreed to amend their License, Research and Co-Development Agreement (“Agreement”) dated November 17, 2024, due to a delay in WY Biotech coming to a definitive agreement with their designated contract development and manufacturing organization (“CDMO”).

Under the amended terms, the Company expects to receive the license fee of $7.0 million in June 2025.

The Company delivered a report that characterizes the licensed molecule on May 13, 2025.

WY Biotech has 30-days to accept this report and elect to continue the Agreement.

There were no other material changes to the Agreement, which involves the grant to WY Biotech of an exclusive, world-wide license to use and apply HCW11-006, a preclinical molecule, for in vivo applications.

In particular, the Company will retain the Opt-In Right thereunder, which gives the Company the option to assume all control and responsibility for the development, manufacture and commercialization of HCW11-006 for in vivo applications in the North America, South America, and Central America.

The Company retains ex vivo rights.

$5.0 Million Equity Offering and Restructuring Existing Warrants

On May 15, 2025, the Company closed on an equity offering with gross proceeds of $5.0 million through a follow-on offering of an aggregate of 671,140 units at a purchase price of $7.45 per unit priced at-the-market under Nasdaq rules.

Each unit consisted of one share of Common Stock or one Pre-Funded Warrants to purchase one share of Common Stock, with two warrants, each of which can be exercised for one share of Common Stock for $7.45 per share.

In addition, the Company has entered into a privately negotiated agreement with the holder of certain existing outstanding warrants to purchase up to 167,925 shares of common stock (the “Existing Warrants”) to reduce the exercise price of such Existing Warrants from $41.20 per share to $7.45 per share.

Project to Create Manufacturing Facility

The Company remains committed to establishing some control over our clinical supply of materials, and the supply of licensed molecules for our licensees.

We have retained manufacturing rights for the licensed molecules under our license agreements.

With the threat of pharmaceutical tariffs hanging over the biopharmaceutical industry, a growing list of major drug makers are bolstering their manufacturing footprints in the U.S.

On January 22, 2025, the Company entered a forbearance agreement with BE&K Building Group (“BE&K”) and certain subcontractors filed mechanics liens related to unpaid invoices issued in connection with construction of the Company’s new manufacturing facilities and upgraded research laboratories.

The forbearance agreement terminated on March 31, 2025, and the Company did not have financing in place to satisfy the liens.

On April 17, 2025, the Company received a summons and a copy of a complaint filed by BE&K in the Circuit Court of the 17th Judicial Circuit in and for Broward County, Florida (the “BE&K Complaint”).

Subsequent to this filing date, certain other claims and cross claims were filed.

See Part II, Item 1.

– “Legal Proceedings.” The Company intends to respond in a timely fashion to the BE&K claims and cross-claims.

Cogent Bank has not joined in these legal proceedings.

The Company has continued to pursue financing alternatives to provide the funding needed to come current in past amounts due and complete the construction and renovation of the property.

Compliance with Nasdaq Listing Rules

On March 3, 2025, the Nasdaq Hearings Panel (the “Panel”) of The Nasdaq Stock Market LLC (“Nasdaq” or the “Exchange”) granted the Company an extension in which to regain compliance with all Nasdaq continued listing rules.

The Panel’s determination followed a hearing on February 13, 2025, at which the Panel considered the Company’s plan to regain compliance with Listing Rules 5450(a)(1), 5450(b)(2)(A) and 5450(b)(2&3)(C), the minimum bid price (“Bid Price”), the market value of publicly held securities (“MVPHS”) and the market value of listed securities (“MVLS”) rules, respectively.

As a result of the extension and a clarifying amendment the Company received on April 8, 2025, the Panel granted the Company’s request for continued listing on the Exchange, provided that the Company demonstrates compliance with the Bid Price Rule by April 28, 2025, and all other Exchange continued listing rules by June 16, 2025.

On March 31, 2025, at a Special Meeting of the Stockholders (the “Special Meeting”), stockholders approved three important elements of the Company’s compliance plan, including:

• Approval of a Reverse Split of the Company’s common stock, which the Company effected on April 11, 2025 with a one-for-forty (1::40) ratio.

As a result, Company regained compliance with the Nasdaq Listing Rule for Bid Price by the required date of April 28, 2025.

• Approval of the issuance of up to $40.0 million of our Common Stock under the ELOC Purchase Agreement.

As a result, the Company filed a registration statement to register the shares under the ELOC Purchase Agreement, which the SEC declared effective on April 16, 2025.

The Company has not issued any shares under the ELOC Purchase Agreement as of the date of issuance of this Quarterly Report.

• Approval of the Principal Terms for the conversion of at least $6.6 million of Secured Notes.

The Company completed the conversion transaction on May 7, 2025.

On April 17, 2025, the Company formally applied to move to the Capital Markets tier, thus we will refer to the Listing Rules for that tier for the compliance with all Listing Rules.

We anticipate recognition of $7.0 million in revenues as a result of the upfront license fee from WY Biotech in June 2025.

On May 13, 2025, the Company delivered the technology transfer report to WY Biotech.

WY Biotech has 30 days to accept the report and elect to continue with the license agreement.

Since November 2024 when we signed the WY Biotech License, the data generated from our internal research and external collaborators indicate that HCW-11-006 exhibits an unusual capacity of stimulating and expanding murine and human immune cells in vitro against tumor cells.

We intend to co-author a pivotal publication that will be submitted to a top-tier, peer-reviewed scientific journal in the second quarter of 2025.

On May 13, 2025, the Company received a letter from Nasdaq confirming that the Company has regained compliance with the Bid Price Rule, the public float requirement in Listing Rule 5550(a)(4) and the MVPHS Rule, as required by the Nasdaq Panel decision of April 8, 2025, as amended.

The Company remains subject to the remaining terms of the Panel’s April 8, 2025, decision to provide an extension to the compliance period for other Listing Rules.

The Company achieved compliance with the Bid Price rule on April 28, 2025, as required by the Nasdaq Panel.

As of the date of issuance of this Quarterly Report, the Company continues to be in compliance with the Bid Price rule.

Several elements of our plan to regain compliance with the MVLS rule have been accomplished through the following transactions which have increased or have the potential to increase the Company’s balance of stockholders’ equity to reach the minimum of $2.5 million:

• An increase of $2.0 million recognized on January 14, 2025, when the Company received a $2.0 million insurance reimbursement for legal fees incurred for the defense of Dr.

Wong, the Company’s Founder and Chief Executive Officer, in connection with the Arbitration.

• The Company may issue shares of Common Stock up to $40.0 million through a Equity Purchase Agreement.

The Company has not issued any shares under the Equity Purchase Agreement as of the date of issuance of this Quarterly Report.

• An net increase of $5.8 million resulting from the conversion of the Secured Notes.

The conversion was completed on May 7, 2025.

• The Company closed an equity financing with gross proceeds of $5.0 million on May 15, 2025.

Thereafter, the Convertible Bridge Notes with outstanding principal of $270,000 will convert into common stock at a price of $7.45 per share, according to the terms of the agreement.

Clinical Development

• There is an ongoing Investigator-sponsored Phase 2 clinical trial to evaluate HCW9218 in patients with metastatic advanced stage ovarian cancer in combination with neoadjuvant chemotherapy, sponsored by UPMC.

(NCT05145569)

• We have filed our IND application to seek approval from the FDA to conduct clinical trials to evaluate HCW9302 in an autoimmune disease, and we are currently under review.

In the review process, we will receive feedback from the FDA which may not be given on a timely basis, or we may be required to change the design of our clinical protocol in order to address the feedback, potentially resulting in delays and increased costs.

• The Company has filed provisional patents for its new drug discovery platform and several immunotherapeutic compounds constructed using this platform, based on a novel backbone different from Tissue Factor.

This new drug discovery platform will open new pathways to create first-in-class immunotherapy for the treatment of diseases promoted by chronic inflammation.

On January 28, 2025, the Company received clearance of its IND from the FDA to initiate a first-in-human Phase 1 dose escalation clinical trial to evaluate one of its lead drug candidates, HCW9302, in patients with moderate-to-severe alopecia areata, a common autoimmune disease in humans that currently has no curative FDA approved treatments.

The Company intends to include up to five clinical sites in this study.

Negotiations with three clinical sites are currently underway, and the Company estimates at least one site may open and initiate the study early in the third quarter of 2025.

HCW9302 is an injectable, first-in-kind interleukin 2 (“IL-2”) fusion protein complex constructed using the Company’s proprietary TOBI platform technology.

Its mechanism of action involves binding to IL-2αβγ receptors predominantly expressed on regulatory T (“T reg ”) cells, thereby activating and expanding T reg cells that can suppress unwanted immune and inflammatory responses.

The FDA recently cleared us to initiate a Phase 1 clinical study using HCW9302 to treat alopecia areata.

Our strategy is to expand to other indications upon successful completion of the Phase 1 study.

HCW9302 is a fusion protein molecule that contains two IL-2 domains linked by an extracellular tissue factor domain.

IL-2 signaling is essential for homeostasis of T reg cells.

Unfortunately, recombinant IL-2 has an unfavorable pharmacokinetic profile and induces cytokine release syndrome limiting its therapeutic use.

HCW9302 provides a potential solution to this problem.

It is designed to have the therapeutic advantages of IL-2 while being well tolerated.

In our preclinical and non-human primate studies, we found that HCW9302 exhibited a longer serum half-life with an approximately 1,000-fold higher affinity for the IL2Rα than IL-2.

In addition, preclinical studies have shown HCW9302 can be administered at a dosing range that expanded and activated T reg cells but not CD4 + effector T cells.

CD4 + effector T cells (also known as helper T cells) are crucial for immune responses, but under certain conditions, their excessive activation can lead to negative effects like inflammation, tissue damage, and autoimmune reactions, particularly when they become dysregulated and target self-antigens, contributing to conditions like multiple sclerosis, rheumatoid arthritis, and inflammatory bowel disease.

The Company recently announced results of studies of our proprietary compound, HCW9206, and its availability for commercialization.

Given the results of the studies, HCW9201 has the potential to provide a solution for key challenges facing CAR-T therapies.

While CAR-T therapy is a revolutionary technology that continues to play a pivotal role in treatment of cancer, autoimmune diseases, and age-related diseases, it faces challenges.

In the result of the studies shared by the Company, we showed that HCW9206 has the potential to significantly reduce costs and improve clinical efficacy of engineered effector T cells.

This data was first shared at the 2025 Annual Meeting of American Association of Immunologists.

HCW9206 is a proprietary fusion protein shown to be highly effective at generating chimeric T-cell receptor - T cells (CAR-Ts) for immunotherapy.

HCW9206 is a novel class of immunotherapeutic drug that enables the combination of multiple immune stimulatory cytokines within a single molecule.

The activity of HCW9206 was significantly better than that of standard methods employing anti-CD3/anti-CD28 and IL-2 regents for CAR lentiviral transduction and subsequent expansion of human CAR-Ts.

The Company’s research collaborator Dr.

Harris Goldstein’s Lab at Albert Einstein College of Medicine, Bronx, New York, recently presented findings of these studies at the 2025 Annual Meeting of American Association of Immunologists (AAI 2025), Honolulu, HI.

The poster presentation showed that HCW9206 is not only a better reagent than the current anti-CD3/anti-CD28/IL-2 method for CAR-T viral transduction, it also effectively expanded stem cell-like memory T cells (T scm ) carrying the CAR constructs.

It is well known that the T scm subset of T cells exhibits better targeted cell killing and persistence than other subsets of T cells, including memory T cells, following adoptive transfer into patients.

In experimental humanized models in mice, adoptively transferred HCW9206-generated HIV- and CD19-specific CAR-T displayed more potency in the suppression of HIV-1 and leukemic cells with enhanced persistence, respectively, when compared with the same CAR-Ts generated with the standard methods.

The results of these studies represent an alternative novel strategy for CAR-T cell production with the advantage of generating a large population of CAR-Ts with a T scm cell phenotype, which should enhance the persistence of CAR-Ts in patients.

This strategy will likely improve long-term survival

of disease-specific CAR-Ts following adoptive transfer and enable sustained suppression of malignancies, chronic infections and autoimmune diseases.

The GMP master cell bank of HCW9206 and its manufacturing process has been established, and its drug master file as an ex vivo reagent has been filed with the US Food and Drug Administration.

The Company is now seeking commercial partnerships for HCW9206 regent sale and/or integration into CAR-T based manufacturing processes.

Trends and Uncertainties

Inflationary Cost Environment, Banking Crisis, Supply Chain Disruption and the Macroeconomic Environment

Our operations have been affected by many headwinds, including inflationary pressures, rising interest rates, ongoing global supply chain disruptions resulting from increased geopolitical tensions such as the war between Russia and Ukraine, the war in the Middle East, China-Taiwan relations, financial market volatility and currency movements.

The Company’s operations have been affected by many headwinds, including inflationary pressures, including those brought about by tariffs and other economic policies, high interest rates, ongoing global supply chain disruptions resulting from increased geopolitical tensions such as the war in the Middle East, the conflict between Russia and Ukraine, China-Taiwan relations as well as U.S.

trade policies, financial market volatility and currency movements.

These headwinds, specifically the supply chain disruptions, have adversely impacted our ability to procure certain services and materials, which in some cases impacts the cost and timing of clinical trials and IND-enabling activities.

In addition, we have been impacted by inflation when procuring materials required for the buildout of our new headquarters, the costs for recruiting and retaining employees and other employee-related costs.

Further, rising interest rates have also increased borrowing costs.

In addition, we have been impacted by inflation when procuring materials required for the buildout of our new manufacturing and laboratory facilities, the costs for recruiting and retaining employees and other employee-related costs.

Further, rising interest rates would also increase borrowing costs to the extent that the Company takes on any additional debt.

The Company uses a number of strategies to effectively navigate these issues, including product redesign, alternate sourcing, and establishing contingencies in budgeting and timelines.

However, the extent and duration of such events and conditions, and resulting disruptions to our operations, are highly unpredictable.

For discussion of risks related to potential impacts of supply chain, inflation, geopolitical and macroeconomic challenges on our operations, business results and financial condition, see Part II, Item 1A.

– “Risk Factors” in the Company’s Annual Report.

For discussion of risks related to potential impacts of supply chain, inflation, geopolitical and macroeconomic challenges on our operations, business results and financial condition, see Item 1A.

“Risk Factors” in our Annual Report.

Components of our Results of Operation

9 unchanged sentences

The Company recognized revenue for the related consideration at a point in time.

The revenue recognized from a transaction to supply clinical and research grade materials entered into under the MSA and covered by a Statement of Work, represents one performance obligation that is satisfied over time.

The revenue recognized from a transaction to supply clinical and research grade materials entered into under the MSA and covered by a Statement of Work (“SOW”), represents one performance obligation that is satisfied over time.

The Company recognizes revenue generated for supply of material for clinical development using an input method based on the costs incurred relative to the total expected cost, which determines the extent of the Company’s progress toward completion.

4 unchanged sentences

• Employee-related expenses, including salaries, benefits, and stock-based compensation expense;

• Expenses related to manufacturing and materials, consisting primarily of expenses incurred primarily in connection with CMOs, which produce cGMP materials for clinical trials on our behalf;

• Expenses related to manufacturing and materials, consisting primarily of expenses incurred in connection with CMOs, which produce cGMP materials for clinical trials on our behalf;

• Expenses associated with preclinical activities, including research and development and other IND-enabling activities;

13 unchanged sentences

General and administrative expenses consist primarily of employee-related expenses, including salaries, related benefits, and stock-based compensation expense for employees in the executive, legal, finance and accounting, human resources, and other administrative functions.

General and administrative expenses also include third-party costs such as insurance costs, fees for professional services, such as legal fees in the ordinary course of business, auditing and tax services, facilities administrative costs, and other expenses.

General and administrative expenses also include third-party costs such as insurance costs, fees for professional services, such as legal fees in the ordinary course of business, accounting advisors, auditing and tax services, facilities administrative costs, and other expenses.

We expect general and administrative expenses incurred in the normal course of business for other purposes, such as costs for recruitment and retention of personnel, service fees for consultants, advisors and accountants, as well as costs to comply with government regulations, corporate governance, internal control over financial reporting, insurance and other requirements for a public company, to continue to increase for the foreseeable future as we build our clinical programs.

Legal Expenses

Legal expenses consist of fees incurred by the Company in its own defense and that of officers and employees in connection with a legal matter brought against the Company and Dr.

Wong, our Founder and Chief Executive Officer, by a former employer of Dr.

Legal expenses include fees incurred by the Company in its own defense and that of Dr.

Wong, our Founder and Chief Executive Officer, with a legal matter brought against the Company and Dr.

Wong by a former employer of Dr.

During the period ended December 31, 2022, Altor/NantCell initiated legal proceedings against Dr.

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Proceedings against the Company and Dr.

Wong were consolidated in the arbitration before JAMS (“Arbitration”).

On March 26, 2024, Altor/NantCell filed a complaint (the “Complaint”) against the Company in the Chancery Court of the State of Delaware for the contribution of legal fees and expenses advanced to Dr.

Wong were consolidated in the arbitration before JAMS (the “Arbitration”).

2024, Altor/NantCell filed a complaint (the “Complaint”) against the Company in the Chancery Court of the State of Delaware for the contribution of legal fees and expenses advanced to Dr.

The Arbitration hearing was held on May 20, 2024 to May 31, 2024, after which the parties entered into settlement negotiations.

As reported in the Company’s Form 8-K filed on July 18, 2024 and further described in Part II, Item 1.

As reported in the Company’s Form 8-K filed on July 18, 2024 and further described in Part I, Item 3.

– “Legal Proceedings” below, as of July 13, 2024, the Company and Dr.

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No party is required to make any monetary payments to any other party or person under the Settlement Agreement and each party will bear its own expenses incurred in connection with the matter.

The Company has substantially completed remediation procedures required to be in compliance with the terms of the Settlement Agreement.

Under the Settlement Agreement, upon completion of these procedures, the parties mutually agreed to stipulate that the Arbitration and Complaint should be dismissed.

In accordance with 17 CFR 229.601 (Item 601), the Company has included the Settlement Agreement in this Quarterly Report on Form 10-Q.

As of the filing date, the parties to the Settlement Agreement are working together to finalize the notices and related final documentation to obtain dismissal of the Arbitration and Complaint.

Nonoperating Loss

As reported in the Company’s Form 8-K filed on May 1, 2024 with the SEC, the Company became aware that it was the victim of a criminal scheme involving the impersonation of a purchaser upon the default on a legally binding commitment to purchase $8.0 million of secured notes from the Company.

The scheme resulted in the misdirection of approximately $1.3 million held in Company accounts to a fraudulent account controlled by a third party.

The Company is pursuing all available remedies to recover this loss.

Given the limited success that these efforts have had to date for the recovery of funds, the Company recognized a loss of $1.3 million in the nine-month period ended September 30, 2024.

The Arbitration and related Complaint were dismissed as of December 31, 2024.

Interest Expense

Interest expense includes interest paid on debt.

This includes interest due on the Cogent Bank loan and senior secured notes issued by the Company.

This includes interest due on the Cogent Bank loan and Secured Notes issued by the Company.

Other Income, Net

3 unchanged sentences

Three Months Ended

September 30,

Nine Months Ended

September 30,

Cost of revenues

2 unchanged sentences

General and administrative

Legal expenses

Nonoperating loss

Legal expenses, net

Total operating expenses

2 unchanged sentences

Other income, net

Comparison of the Three Months ended September 30, 2023 and September 30, 2024

The Company recognized revenues of $853,102 and $426,423 for the three months ended September 30, 2023 and 2024, respectively.

Comparison of the Three Months ended March 31, 2024 and March 31, 2025

The Company recognized revenues of $1.1 million and $5,065 for the three months ended March 31, 2024 and 2025, respectively.

Revenues were derived exclusively from the sale of licensed molecules to Wugen.

Under the terms of the supply agreement between Wugen and the Company, the Company earns an industry-standard gross margin.

Occasionally, Wugen acquires product which is part of inventory we made for our own use.

In these instances, we do not apply the standard costs since the cost of manufacturing these materials would have already been expensed in a prior period.

There were no deferred revenues as of March 31, 2024 or March 31, 2025.

Research and Development Expenses

The following table summarizes our research and development expenses for the three months ended September 30, 2023 and September 30, 2024:

The following table summarizes our research and development expenses for the three months ended March 31, 2024 and March 31, 2025:

Three Months Ended

September 30,

Salaries, benefits and related expenses

4 unchanged sentences

Total research and development expenses

Research and development expenses decreased by $480,529, or 29%, from $1.7 million for the three months ended September 30, 2023 to $1.2 million for the three months ended September 30, 2024.

The decrease was primarily attributable to a decrease in expenses for manufacturing and materials, preclinical activities and clinical studies.

Salaries, benefits, and related expenses decreased by $39,740, or 6%, from $692,607 for the three months ended September 30, 2023 to $652,867 for the three months ended September 30, 2024.

The decrease reflects cost cutting measures put in place in the second quarter of 2024, which resulted in a $11,572 decrease in salaries and related taxes and a $29,801 decrease in costs related to employee benefits for the three-month period ended September 30, 2024.

Manufacturing and materials expense decreased by $158,402, or 77%, from $206,150 for the three months ended September 30, 2023 to $47,748 for the three months ended September 30, 2024.

In the three months ended September 30, 2023, costs were incurred primarily for master cell bank characterization for HCW9101H, a high-producing cell line of a key component of the manufacturing process for the Company's proprietary molecules including those licensed to Wugen, as well as ancillary activities such as shipping, insurance and storage.

In the three months ended September 30, 2024, costs were associated with ancillary activities such as shipping and storage.

Expenses associated with preclinical activities decreased by $161,598, or 53%, from $306,344 for the three months ended September 30, 2023 to $144,746 for the three months ended September 30, 2024.

In the three months ended September 30, 2023 and 2024, costs were incurred primarily for IND-enabling studies to prepare for the submission of an IND application to evaluate HCW9302 in a clinical study.

Expenses associated with clinical activities decreased by $179,682, or 52%, from $343,821 for the three months ended September 30, 2023 to $164,139 for the three months ended September 30, 2024.

The decrease in costs was primarily attributable a $188,637 decrease in the expenses associated with patient fees, partially offset by a $9,290 increase in consulting and other professional fees.

Subject to our ability to successfully execute our plans to obtain financing, we anticipate expenses related to clinical activities will increase substantially in the future, in the event that we successfully advance our immunotherapeutic fusion molecules in clinical development.

If we are unable to complete planned capital-raising transactions and business development transactions for out-licensing, we may have to curtail or cease operations.

Other expenses, which include overhead allocations, increased by $58,893, or 50%, from $118,520 for the three months ended September 30, 2023 to $177,413 for the three months ended September 30, 2024.

This increase is primarily attributable to a change in allocation of overhead to cost of good sold and a $62,031 decrease in travel-related expenses partially offset by a $9,786 increase in costs associated with IT, office supplies and other office equipment.

Research and development expenses decreased by $644,573, or 30%, from $2.1 million for the three months ended March 31, 2024 to $1.5 million for the three months ended March 31, 2025.

The decrease was primarily due to a decline in manufacturing and materials and preclinical expenses, but expenses in all categories declined.

Salaries, benefits, and related expenses decreased by $78,641, or 10%, from $779,747 for the three months ended March 31, 2024 to $701,106 for the three months ended March 31, 2025.

This decrease was primarily attributable to decreases of $42,600 in salaries and $36,546 in employee benefits.

Lower salaries can be attributed to maintaining the reduced headcount that resulted from a cost reduction program the Company put in place in the second quarter of 2024.

Manufacturing and materials expense decreased by $313,503, or 54%, from $576,301 for the three months ended March 31, 2024 to $262,798 for the three months ended March 31, 2025.

In the three months ended March 31, 2024, costs were primarily attributable to the costs of production and materials related to manufacturing the high producing cell-line of HCW9101, which was substantially wrapped up prior to the three months ended March 31, 2025.

Expenses associated with preclinical activities decreased by $107,980, or 38%, from $285,091 for the three months ended March 31, 2024 to $177,111 for the three months ended March 31, 2025.

In the three months ended March 31, 2024, toxicology and other IND-enabling studies were winding down, as we prepare to submit the IND application in the fourth quarter of 2024.

The Company received clearance of its IND from FDA in the three months ended March 31, 2025.

Expenses associated with clinical activities decreased by $78,820, or 30%, from $266,640 for the three months ended March 31, 2024 to $187,820 for the three months ended March 31, 2025.

In the three months ended March 31, 2024, the Company completed two clinical studies evaluating HCW9218 in cancer indications.

The decline in expenses mainly consists of decreases in $57,656 in patient-related fees and $26,137 in collaborations, sponsorships and other professional fees, partially offset by an increase of $11,739 in other clinical trial costs for data management and similar activities.

Other expenses, which include overhead allocations, decreased by $65,629, or 30%, from $215,505 for the three months ended March 31, 2024 to $149,876 for the three months ended March 31, 2025.

This decrease is primarily attributable to a $46,721 decrease allocation of depreciation for scientific equipment, a $16,824 decrease in expenses for equipment and supplies and a $6,437 decrease in travel and travel-related expenses, partially offset by a $4,351 increase in allocations for rent and utilities.

General and Administrative Expenses

The following table summarizes our general and administrative expenses for the three months ended September 30, 2023 and September 30, 2024:

The following table summarizes our general and administrative expenses for the three months ended March 31, 2024 and March 31, 2025:

Three Months Ended

September 30,

Salaries, benefits and related expenses

1 unchanged sentence

Facilities and office expenses

Accretion of fixed bonus upon maturity of Senior Notes, net

Rent and occupancy expense

1 unchanged sentence

Total general and administrative expenses

General and administrative expenses related to the ordinary course of business increased by $129,216, or 9%, from $1.5 million for the three months ended September 30, 2023 to $1.6 million for the three months ended September 30, 2024.

The increase is primarily attributable to an increase in professional services, mainly legal fees related to patents, and an increase in other expenses, mainly costs related to insurance, offset by a decrease in salaries and benefits.

Salaries, benefits and related expenses decreased by $156,886, or 20%, from $775,956 for the three months ended September 30, 2023 to $619,070 for the three months ended September 30, 2024.

The decrease reflects cost cutting measures put in place in the second quarter of 2024, which resulted in a $152,332 decrease in salaries and related taxes and a $15,511 decrease in costs related to employee benefits for the three-month period ended September 30, 2024.

These costs were offset by an increase of $10,957 in expenses related to stock-based compensation.

Professional services increased by $169,095, or 81%, from $207,815 for the three months ended September 30, 2023 to $376,910 for the three months ended September 30, 2024.

Professional services include corporate legal services, legal services for procuring patents, as well as other professional services, such as auditing and tax advisory fees.

The increase is primarily attributable to a $133,263 increase legal fees for services incurred in connection with procuring patents and a $35,832 increase in costs related to other professional services such as auditing and tax advisory fees.

As a result of the Settlement Agreement, the Company agreed to maintain patent protection for rights retained under the agreement.

Facilities and office expenses decreased by $41,114, or 23%, from $175,694 for the three months ended September 30, 2023 to $134,580 for the three months ended September 30, 2024, primarily due to a $62,791 decrease in software and other licensing fees, partially offset by a $13,558 increase in other IT related expenses and a $10,818 increase in facilities expenses such as electricity and waste disposal.

Other expenses increased by $139,046, or 55%, from $251,016 for the three months ended September 30, 2023 to $390,046 for the three months ended September 30, 2024.

The increase is primarily attributable to a $115,668 increase in insurance-related costs and a $37,730 increase in finance costs.

Legal Expenses

Legal expenses were $2.1 million in the three months ended September 30, 2023 and $1.0 million for the three months ended September 30, 2024.

In the three months ended September 30, 2023, costs were incurred in connection with several legal proceedings which culminated by consolidating Altor/NantCell’s action against the Company with the Altor/NantCell arbitration demand against Dr.

Thereafter, proceedings against the Company and Dr.

Wong were consolidated in the arbitration before JAMS.

In the three months ended September 30, 2024, the Company reached a Settlement Agreement with the other parties to the arbitration and undertook the necessary steps for remediation and transfer of information required under the terms of the agreement.

As of the filing date, the parties to the Settlement Agreement are working together to finalize the notices and related final documentation to obtain dismissal of the Arbitration and Complaint.

While the Company has relief from the future burden of ongoing legal expenses related to these proceedings, we incurred significant legal expenses for our defense and for the defense of officers and employees.

We require a reasonable payment plan to prevent these expenses from overwhelming the Company’s resources.

We are engaged in discussions with the law firms involved with this matter to work out payment plans.

Interest Expense

On August 15, 2022, we entered into a loan and security agreement with Cogent Bank to partially fund our purchase of the property we acquired on that same date.

We borrowed $6.5 million under this agreement.

Amounts outstanding on the loan accrue interest at a rate per annum equal to 5.75%.

We were obligated to make interest-only payments on this loan from September 2022 through August 2023 and principal and interest payments in 47 equal monthly installments, based on a 25-year maturity schedule, commencing September 15, 2023.

We paid $95,514 and $93,936 in cash for interest on the Cogent Bank loan for the three months ended September 30, 2023 and 2024, respectively.

For the three months ended September 30, and September 30, 2024, interest was expensed.

As of September 30, 2024, the Company had issued $6.5 million in senior secured notes which bear interest at an annual rate of 9%, payable quarter in arrears.

We paid $87,386 in cash interest on the senior secured notes for the three months ended September 30, 2024.

There were no senior secured notes outstanding in 2023.

Other Income, Net

Other income, net decreased from $234,753 for the three months ended September 30, 2023 to $11,310 for the three months ended September 30, 2024.

The decrease is primarily attributable to a decline in interest earned from money market deposits and a decrease in unrealized gains from investments in U.S.

government-backed securities.

In addition, for the three months ended September 30, 2023, Other income included rental income.

On August 15, 2022, the Company entered into a short-term, market-rate lease with the former owner of the building we purchased on the same date, which terminated in the year ended December 31, 2023.

We received rental income of $60,003 for the three months ended September 30, 2023.

Comparison of the Nine Months ended September 30, 2023 and September 30, 2024

The Company recognized $1.5 million and $2.2 million of revenues for the nine months ended September 30, 2023 and 2024, respectively.

Revenues were derived exclusively from the sale of licensed molecules to Wugen.

Under the terms of the supply

agreement between Wugen and the Company, the Company earns an industry-standard gross margin.

Occasionally, Wugen acquires product which is part of inventory we made for our own use.

In these instances, we do not apply the standard costs since the cost of manufacturing these materials would have already been expensed in a prior period.

Research and Development Expenses

The following table summarizes our research and development expenses for the nine months ended September 30, 2023 and September 30, 2024:

Nine Months Ended

September 30,

Salaries, benefits and related expenses

Manufacturing and materials

Preclinical expenses

Clinical trials

Other expenses

Total research and development expenses

Research and development expenses decreased by $200,536, or 4%, from $5.5 million for the nine months ended September 30, 2024 to $5.3 million for the nine months ended September 30, 2024, primarily due to an increase in manufacturing and materials expenses, partially offset by a decrease in preclinical and clinical expenses.

Salaries, benefits, and related expenses decreased by $6,015, or 0%, from $2.2 million for the nine months ended September 30, 2023 to $2.2 million for the nine months ended September 30, 2024.

This decrease was primarily attributable to a difference in the costs allocated to cost of goods sold, as well as a $121,139 decrease in salaries, benefits and related expenses as a result of cost cutting measures put in place in the second quarter of 2024, consisting of a $83,893 decrease in salaries, bonuses and related taxes and a $29,185 decrease in costs related to employee benefits, for the nine-month period ended September 30, 2024.

Manufacturing and materials expense increased by $752,045, or 121%, from $623,785 for the nine months ended September 30, 2023 to $1.4 million for the nine months ended September 30, 2024.

In the nine months ended September 30, 2023, costs were incurred primarily for production activities associated with the master cell bank characterization for a high production cell line for HCW9101;

a 200L cGMP manufacturing run of HCW9302;

and ancillary activities such as shipping, insurance and storage.

In the nine months ended September 30, 2024, costs were primarily attributable to the costs of production and materials related to manufacturing the high producing cell-line of HCW9101, which is used in the manufacturing process for all TOBI-based molecules.

Expenses associated with preclinical activities decreased by $679,415, or 50%, from $1.4 million for the nine months ended September 30, 2023 to $688,310 for the nine months ended September 30, 2024.

In the nine months ended September 30, 2023, costs were incurred to complete the toxicology study and for additional studies required for submission of the HCW9302 IND.

In the nine months ended September 30, 2024, toxicology and other IND-enabling studies were winding down, and the IND application was finalized, submitted and is now under review.

Expenses associated with clinical activities decreased by $292,206, or 37%, from $788,116 for the nine months ended September 30, 2023 to $495,910 for the nine months ended September 30, 2024.

The decrease was primarily attributable to a $341,271 decrease in patient fees, partially offset by a $61,080 increase costs for post-clinical studies that we conducted through collaborations.

In the nine months ended September 30, 2023, there were two ongoing clinical trials, including a Phase 1 study sponsored by the University of Minnesota to evaluate HCW9218 in the treatment of various solid tumors, and a Company-sponsored Phase 1b clinical trial to evaluate HCW9218 in chemo-refractory/chemo-resistant pancreatic cancer.

In the nine months ended September 30, 2024, we completed enrollment in the Phase 1/1b clinical trials and the majority of our activities were focused on post-clinical correlative studies which we conducted through collaborations.

As a result of the Settlement Agreement, ImmunityBio has the exclusive right to the use of HCW9218 in the treatment of pancreatic cancer.

We will continue to evaluate HCW9218 in combination with neoadjuvant chemotherapy in the treatment of ovarian cancer.

Other expenses, which include overhead allocations, increased by $25,055, or 4%, from $565,028 for the nine months ended September 30, 2023 to $590,083 for the nine months ended September 30, 2024.

The decrease in other expenses is primarily attributable to a decrease in the allocation of depreciation to cost of goods sold, partially offset by a $38,055 decrease in travel-related expenses.

General and Administrative Expenses

The following table summarizes our general and administrative expenses for the nine months ended September 30, 2023 and September 30, 2024:

Nine Months Ended

September 30,

Salaries, benefits and related expenses

Professional services

Facilities and office expenses

Other expenses

Total general and administrative expenses

General and administrative expenses related to the ordinary course of business decreased by $307,237, or 6%, from $5.1 million for the nine months ended September 30, 2023 to $4.8 million for the nine months ended September 30, 2024.

The decrease is primarily attributable to a decrease in salaries and bonuses as a result of cost-cutting measures put in place in the second quarter of 2024.

Salaries, benefits and related expenses decreased by $552,962, or 23%, from $2.4 million for the nine months ended September 30, 2023 to $1.9 million for the nine months ended September 30, 2024.

The decrease is primarily attributable to a $212,014 decrease in salaries and related taxes, a $19,372 decrease in expenses for employee benefits, and a $304,175 decrease resulting from the waiver of performance-based bonuses earned in 2022 but deferred.

Professional services decreased by $48,127, or 5%, from $1,008,807 for the nine months ended September 30, 2023 to $960,680 for the nine months ended September 30, 2024.

General and administrative expenses increased $661,505, or 42%, from $1.6 million for the three months ended March 31, 2024 to $2.2 million for the three months ended March 31, 2025.

The increase is primarily due to increases in salaries and benefits and the accretion expense related to the fixed bonus payment due to the holders of the Secured Notes, in the event they are repaid on the Maturity Date.

Salaries, benefits and related expenses increased by $226,880, or 51%, from $521,610 for the three months ended March 31, 2024 to $788,490 for the three months ended March 31, 2025.

The increase can be explained by a contra-expense recognized in the three months ended March 31, 2024, as a result of a waiver of $293,159 for performance-based bonuses due to officers of the Company that were earned in 2022 and deferred until the time they were waived.

Excluding this unusual adjustment, in the three months ended March 31, 2025, salaries, benefits and related expenses decreased by $26,279, or 3%, from $814,769 for the three months ended March 31, 2024 to $788,490 for the three months ended March 31, 2025.

Decreases of $45,625 in salaries and related payroll expenses and $10,707 in employee benefits, were partially offset by an increase of $30,053 in stock-based compensation expenses.

Professional services increased by $100,563, or 28%, from $353,806 for the three months ended March 31, 2024 to $454,369 for the three months ended March 31, 2025.

Professional services include corporate legal services, legal services for procuring patents, as well as other professional services, such as auditing and tax advisory fees.

The decrease is primarily attributable to a $69,797 decrease in legal fees incurred in connection with procuring patents, partially offset by a $21,670 increase in fees for other professional services such as audit and tax advisory fees.

As a result of the Settlement Agreement, the Company agreed to maintain patent protection for rights retained under the agreement.

Facilities and office expenses increased by $103,517, or 24%, from $439,373 for the nine months ended September 30, 2023 to $542,890 for the nine months ended September 30, 2024, primarily due to a $78,185 increase in software and other licensing fees and a $21,157 increase in costs for waste disposal.

Other expenses increased by $138,175, or 15%, from $943,122 for the nine months ended September 30, 2023 to $1.1 million for the nine months ended September 30, 2024.

The increase is primarily attributable to a $227,470 increase in financing expenses primarily related to our search for a lender to complete the construction of the Company’s new headquarters and a $30,528 increase in insurance-related costs, partially offset by a $102,505 decrease in Delaware franchise taxes.

The increase is primarily attributable to a $146,281 increase in fees incurred for professional services such as technical accounting advisors, consultants to advise the Company on regaining compliance with all Nasdaq listing rules, audit fees, and tax advisory fees, partially offset by a decrease of $53,506 in legal services related to patents.

As a result of the Settlement Agreement, the Company agreed to maintain certain patent protection for rights retained under the Settlement Agreement as well as new patents related to the TRBC drug discovery and development platform and compounds created using this platform.

Facilities and office expenses decreased by $109,269, or 54%, from $203,599 for the three months ended March 31, 2024 to $94,330 for the three months ended March 31, 2025, primarily due to decreases of $94,753 in fees paid for licenses, software and IT services and $14,516 in expenses for utilities and other services, such as electricity and waste disposal.

Other expenses increased by $129, 082, or 34%, from $377,280 for the three months ended March 31, 2024 to $506,362 for the three months ended March 31, 2025.

The increase is primarily attributable a $116,999 increase in insurance-related costs.

Legal Expenses

Legal expenses were $4.6 million in the nine months ended September 30, 2023 and $15.8 million for the nine months ended September 30, 2024.

In the nine months ended September 30, 2023, costs were incurred in connection with several legal proceedings which culminated by consolidating Altor/NantCell’s action against the Company with the Altor/NantCell arbitration demand against Dr.

Thereafter, proceedings against the Company and Dr.

Wong were consolidated in the arbitration before JAMS.

In the nine months ended September 30, 2024, preparations for the arbitration were taking place with witness preparation and depositions.

The arbitration hearing was held from May 20, 2024 to May 31, 2024, which required a large team of lawyers to represent the Company;

Peter Rhode, our Chief Scientific Officer and Vice President of Clinical Affairs and an officer of the Company;

as well as other employees.

The hearing was followed by an extended period of intense negotiations which culminated in a Settlement Agreement entered into by the Company and Dr.

Wong as of July 13, 2024 with Altor/NantCell and its parent, ImmunityBio.

We require a reasonable payment plan to prevent these expenses from overwhelming the Company’s resources.

We are engaged in discussions with the law firms involved with this matter.

In the three months ended March 31, 2024, the Company incurred $4.4 million in legal expenses in connection with the Arbitration.

The Company incurred legal expenses on its own behalf and on behalf of Dr.

Wong in preparation for the hearing, which took place in May 2024.

The Arbitration was settled on July 13, 2024, and the Arbitration and related Complaint were dismissed with prejudice as of December 31, 2024.

In the three months ended March 31, 2025, the Company incurred $260,507 of legal expenses related to the Arbitration.

We anticipate we will continue to incur expenses for the costs of remaining in compliance with the terms of the Settlement Agreement.

Interest Expense

On August 15, 2022, we entered into a loan and security agreement with Cogent Bank to partially fund our purchase of the property we acquired on that same date.

On August 15, 2022, we entered into a loan and security agreement with Cogent Bank to partially fund our purchase of the property we acquired on that same date (the “2022 Loan”).

We borrowed $6.5 million under this agreement.

Amounts outstanding on the loan accrue interest at a rate per annum equal to 5.75%.

Amounts outstanding on the term loan accrue interest at a rate per annum equal to 5.75%.

We were obligated to make interest-only payments on this loan from September 2022 through August 2023 and principal and interest payments in 48 equal monthly installments, based on a 25-year maturity schedule, commencing September 15, 2023.

We paid $284,465 and $282,098 in cash for interest related to the Cogent Bank loan for the nine months ended September 30, 2023 and 2024, respectively.

For the nine months ended September 30,2023, interest was expensed.

Interest was capitalized the last quarter of 2023 and ceased in the second quarter of 2024.

In all other periods, interest was expensed.

As of September 30, 2024, the Company had issued $6.5 million in senior secured notes which bear interest at an annual rate of 9%, payable quarter in arrears.

We paid $152,679 in cash interest on the senior secured notes for the nine months ended September 30, 2024.

There were no senior secured notes outstanding in 2023.

Related to the 2022 Loan, in the three months ended March 31, 2024, we paid $93,789 in cash for interest.

For the three months ended March 31, 2024, interest was capitalized.

For the three months ended March 31, 2025, we paid interest expense of $91,035 related to the 2022 Loan.

From March 31, 2024 to October 30, 2024, the Company issued $6.9 million in Secured Notes in multiple closings.

The Senior Notes bear interest at an annual rate of 9%, payable quarterly in arrears.

During the three months ended March 31, 2025, the Company incurred $153,234 interest expenses related to the Senior Notes.

In addition, the Company recognized $11,553 for the accretion of debt issuance costs included with Interest expense on the condensed interim statement of operations.

Other Income, Net

Other income, net decreased from $919,688 for the nine months ended September 30, 2023, to $52,397 for the nine months ended September 30, 2024.

The decrease is primarily attributable to a decrease interest earned for money market deposits and unrealized gains for investments in U.S.

government-backed securities.

Other income included rental income for the nine months ended September 30, 2023.

On August 15, 2022, the Company entered into a short-term, market-rate lease with the former owner of the building we purchased on the same date, which terminated in the year ended December 31, 2023.

We received rental income of $178,910 for the nine months ended September 30, 2023.

Other income, net had a de minimis decrease from $25,602 for the three months ended March 31, 2024 to $24,749 for the three months ended March 31, 2025.

Liquidity and Capital Resources

Sources of Liquidity

As of September 30, 2024, we concluded that there is substantial doubt over as to whether the Company has sufficient capital to operate for the next 12 months from the issuance date of this Quarterly Report based on our liquidity, revenues and ongoing operating losses, as well as the legal fees incurred in conjunction with an arbitration with ImmunityBio prior to the Settlement Agreement executed in the third quarter of 2024.

As of September 30, 2024, our principal source of liquidity was $1.0 million in cash and cash equivalents.

To date, the Company has funded operations primarily through the sale of stock, issuance of senior secured notes and revenues generated the Wugen License, pursuant to which Wugen licensed limited rights to develop, manufacture, and commercialize cell therapy treatments for cancer based on two of the Company’s internally-developed multi-cytokine fusion protein molecules, and its manufacturing and supply arrangement with Wugen.

As of September 30, 2024, the Company had not generated any revenue from commercial product sales of its internally-developed immunotherapeutic products for the treatment of cancer and other age-related diseases.

In the course of its development activities, the Company has sustained operating losses and expects to continue to incur operating losses for the foreseeable future.

On August 15, 2022, the Company entered into the 2022 Loan Agreement with Cogent Bank, pursuant to which it received $6.5 million in proceeds to purchase a building that will become the Company's new headquarters.

The loan is secured by a first priority lien on the building.

As of September 30, 2024, certain subcontractors have filed mechanics liens related to unpaid invoices issued in connection with the Company’s construction of its new manufacturing facilities and upgraded research laboratories.

As of March 31, 2025, our principal source of liquidity was $1.1 million in cash and cash equivalents, including money market investments, and as a result, there was substantial doubt over whether the Company had sufficient capital to operate for the next twelve months from the issuance date of this Quarterly Report.

We considered elements of our financing plan that were probable and likely to be implemented within the next year.

While we have already begun to successfully execute our financing plan, including a $6.9 million financing in November 2024, a Equity Purchase Agreement that may allow the Company to sell shares to an Investor if certain conditions are met, and a license agreement with $7.0 million in minimum guarantees payments which the Company expects to receive in 2025, we concluded that remaining steps in our financing plan are not probable and thus they were not sufficient to include in our going concern analysis.

On August 15, 2022, the Company entered into a loan and security agreement (the “2022 Loan Agreement”) with Cogent Bank, pursuant to which it received $6.5 million in proceeds to purchase a property at which the Company planned to build a facility to manufacture biologics and upgrade its research laboratory facilities.

The loan is secured by a first priority lien on the property.

As of March 31, 2025, certain subcontractors filed mechanics liens related to unpaid invoices issued in connection with construction of the Company’s new manufacturing facilities and upgraded research laboratories.

The 2022 Loan Agreement contains a provision for a discretionary default in the event that the Company fails to pay sums due in connection with construction of any improvements;

however, as of the reporting date, the lender has not elected to do so.

As of September 30, 2024, the Company has reflected this loan as Short-term debt, net, to reflect that the lender has the right to accelerate the loan under a discretionary default provision.

The Company continues to seek the financing required to complete the construction project, with the cooperation of the lender and lien holders.

See Part I, Item 4.

-- “Controls and Procedures.”

In 2024, we have raised $9.4 million in financings.

On February 20, 2024, we completed a $2.5 million private placement of common stock in which we sold an aggregate of 1,785,718 shares to certain of our officers and directors, at a purchase price of $1.40 per share.

As of September 30, 2024, we received $6.5 million from the issuance of Secured Notes, and subsequent to the reporting period, the Company issued an additional $375,000 in Secured Notes.

Of the total issuance of Secured Notes, the Company issued $2.9 million to members of the Company’s board of directors and officers, including $2.4 million purchased by Dr.

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.

The Company expects the funds raised through the issuance of Secured Notes to be sufficient capital to reach a milestone in the fourth quarter of 2024.

Management has made some reductions in costs and there may be further reductions or restructuring in the future after we complete the reassessment of our clinical development strategy.

As of March 31, 2025, the Company has reflected this loan as Short-term debt, net, to reflect that the lender has the right to accelerate the loan under a discretionary default provision.

On January 22, 2025, the Company entered into a forbearance agreement with BE&K Building Group (“BE&K”), its general contractor, to allow the Company until March 31, 2025 to continue efforts to find the financing required to complete the construction and renovation of the property.

Pursuant to the forbearance agreement, the Company made an initial payment of $1.0 million in partial satisfaction of amounts owing to BE&K and its subcontractors.

As the Company reported in a Form 8-K, on April 17, 2025, the Company received a summons and a copy of a complaint filed by BE&K in the Circuit Court of the 17th Judicial Circuit in and for Broward County, Florida (the “BE&K Complaint”).

Other Defendants named in the BE&K Complaint who are subcontractors elected to file counterclaims and cross-claims in response thereto.

Cogent Bank, also named as a Defendant in the BE&K Complaint, has not elected to take legal action at this time.

In addition, on April 28, 2025, the Company received a summons and a copy of a complaint filed by Fisk Electric Company (which is a defendant in the BE&K Litigation) in the Circuit Court of the 17th Judicial Circuit in and for Broward County, Florida (the “Fisk Complaint”) against the Company, BE&K, and the other defendants in the BE&K Complaint.

The Company intends to respond in a timely fashion to the BE&K and Fisk Complaints and cross-claims.

As reported in the Company’s Form 8-K filed on July 18, 2024 and further described in Part II, Item 1.

– “Legal Proceedings” below, as of July 13, 2024, the Company and Dr.

Wong, the Company’s Founder and Chief Executive Officer, entered into a confidential Settlement Agreement and Release (the “Settlement Agreement”) with ImmunityBio and its affiliates.

The Settlement Agreement includes mutual general releases by and among the parties thereto.

No party was required to make any monetary payments to any other party or person under the Settlement Agreement and each party will bear its own expenses incurred in connection with the matter.

The Arbitration and related Complaint were dismissed on December 24, 2024.

With the execution of the Settlement Agreement, we resolved the attendant uncertainties for the outcome of the Arbitration and additional complexities, and we launched our new financing plan.

In the accompanying condensed balance sheet as of March 31, 2025, the Company reported a balance of $12.4 million for legal fees incurred but not yet paid that were included within Accounts payable and an accrual of $10,000 for accrued legal fees within Accrued liabilities and other current liabilities.

The Company is engaged in discussions with the law firms involved with this matter to arrange a reasonable payment plan with respect to those legal fees.

With the execution of the Settlement Agreement, the Company resolved the attendant uncertainties for the outcome of the Arbitration and additional complexities, and it launched its new financing plan.

In the three months ended March 31, 2025, the Company received a $2.0 million insurance payment, which was paid directly to the law firm that represented Dr.

Wong for his defense during the Arbitration.

The insurance payment is reported within Legal expenses, net in the condensed interim statement of operations.

A benefit of reaching a Settlement Agreement and concluding the Arbitration is a release from restrictions related to protection of privileged information, which hampered investor ability to conduct due diligence.

As a result, we believe that other avenues of financing are now available to us, namely, capital-raising activities for equity and equity-like investments as well as business development transactions such as out-licensing agreements for rights for our proprietary molecules.

However, there can be no assurance of our success in our capital-raising activities.

However, there can be

no assurance of our success in our capital-raising activities.

If we are not successful in raising additional capital, we have the ability to revise our business plan and reduce costs.

If such revisions are insufficient, we may have to curtail or cease operations.

The Company and Dr.

Wong, our Founder and Chief Executive Officer, entered into a Settlement Agreement and Release on a previously reported Arbitration as of July 13, 2024.

See Part II., Item 1.

- “Legal Proceedings.” While the Settlement Agreement has resolved uncertainty regarding the outcome of these proceedings and the ongoing legal expenses, the Company incurred significant legal expenses in the period leading up to the Settlement Agreement.

As of September 30, 2024, we reported a balance of $14.4 million for legal fees incurred but not yet paid in the accompany condensed balance sheet.

In order not to overwhelm the Company’s resources, a reasonable payment plan will be required.

The Company is engaged in discussions with the law firms involved with this matter.

We considered elements of our financing plan that were probable and likely to be implemented within the next year to determine if financing activities currently underway are sufficient mitigate the substantial doubt in our going concern analysis.

The Company launched a financing plan in the third quarter of 2024.

The plan includes several capital-raising activities, such as issuance of secured notes, equity financings, as well as business development transactions, such as license agreements with guaranteed minimum payments.

Through October 31, 2024, the Company had issued an aggregate of $6.9 million in secured notes.

On September 25, 2024, the Company entered into a nonbinding term sheet with a party interested in licensing one of the Company’s preclinical molecules.

The Company expects to close this license transaction in the fourth quarter of 2024.

The proposed terms of the license include a guaranteed minimum payments which are expected within the first year of the term.

On November 13, 2024, we entered into an engagement letter with the Maxim Group to act as the exclusive placement agent for a multi-step equity financing.

If the Company is not successful in raising additional capital through these activities, management intends to revise its business plan and reduce costs.

As the Company disclosed in the Form 8-K filed on March 19, 2025, the Company and WY Biotech Co., Ltd.

(“WY Biotech”) agreed on the principal terms for an amendment to the WY Biotech License Agreement, an exclusive worldwide license agreement with WY Biotech for the rights to develop and commercialize one of HCWB’s preclinical product candidates, HCW11-006, for in vivo applications (the “Agreement”).

Under the amended terms, the parties agreed to restructure the payment schedule for the $7.0 million upfront license fees, including delaying the initial $4.0 million portion thereof that was originally due on or about March 17, 2025.

There were no other material changes to the Agreement.

The Company retains ex vivo rights.

The Company completed its performance obligation to deliver a report on the characterization of the licensed molecule on May 13, 2025.

As agreed under the amended terms, WY Biotech has 30 days to study this report and elect whether to continue with the Agreement, as which time the Agreement will be binding and the full $7.0 million upfront license fee will be due.

On February 20, 2025, the Company entered into a Equity Purchase Agreement (the “Equity Purchase Agreement”) and a related Registration Rights Agreement with Square Gate Capital Master Fund, LLC - Series 4 (the “Investor”), pursuant to which the Company will have the right, but not the obligation, to sell to the Investor, and the Investor will have the obligation to purchase from the Company, up to $20.0 million (the “Maximum Commitment Amount”) worth of the Company’s shares of common stock, at the Company’s sole discretion, over the next 36 months (the “Put Shares”), subject to certain conditions precedent and other limitations.

On March 12, 2025, the Company issued 384,615 shares of the Company’s Common Stock (subject to adjustment for the Reverse Stock Split) to the Investor in payment of the Commitment Fee (“Commitment Shares”).

On April 16, 2025, the U.S.

Securities and Exchange Commission (“SEC”) declared a registration statement effective to register the Commitment Shares and shares required to sell up to $40.0 million of the Company’s shares to the Investor, according to provisions of the Equity Purchase Agreement.

In addition, this registration statement also registered the underlying shares for the warrant issued in November 2024, which gives the holder the right to exercise the warrant for 6,717,000 shares of common stock at an exercise price of $1.03 per share (subject to adjustment for the Reverse Stock Split).

In order to be able to optimize our financing strategy, the Company is focused on making progress to achieve full compliance with all Listing Rules for the Capital Markets tier.

The Panel’s determination follows a hearing on February 13, 2025, at which the Panel considered the Company’s plan to regain compliance with Listing Rules 5450(a)(1), 5450(b)(2)(A) and 5450(b)(2&3)(C), the minimum bid price (“Bid Price”), the market value of publicly held securities (“MVPHS”) and the market value of listed securities (“MVLS”) rules, respectively.

As a result of the extension and a clarifying amendment that the Company received on April 8, 2025, the Panel granted the Company’s request for continued listing on the Exchange on the Capital Markets tier, provided that the Company demonstrates compliance with the Bid Price Rule by April 28, 2025, and all other Exchange continued listing rules by June 16, 2025.

The Company achieved the following elements of plan to regain compliance with all Nasdaq listing rules:

After a Reverse Stock Split became effective on April 11, 2025, on April 28, 2025, the Company met compliance requirements for Listing Rule for Bid Price by maintaining its trading stock price at $1.00 or above for a period of 10 consecutive trading days.

As of the date of issuance of this Quarterly Report, the Company is in compliance with the Bid Price rule.

We are making progress toward regaining and maintaining compliance with Nasdaq Listing Rule for the market value of listed securities under the alternative rule related to maintaining a minimum balance of $2.5 million in stockholders’ equity, through the following transactions:

• An increase of $2.0 million recognized on January 14, 2025, when the Company received a $2.0 million insurance reimbursement for legal fees incurred for the defense of Dr.

Wong, the Company’s Founder and Chief Executive Officer, in connection with the Arbitration.

• Potential access to $40.0 million through the issuance of shares of Common Stock under the ELOC Purchase Agreement which the Company entered with Square Gate Capital Master Fund LLC - Series 4 on February 20, 2025.

Such shares were registered under a registration statement that became effective as of April 16, 2025.

The Company has not issued any shares under the ELOC Purchase Agreement as of the date of issuance of this Quarterly Report.

• An net increase of $5.8 million resulting from the conversion of the Secured Notes.

On May 1, 2025, the Company entered into a definitive conversion agreement with the holders of $6.6 million of the outstanding principal of the Secured Notes, to convert the Secured Notes for shares of the Company’s Common Stock, warrants to exercise to purchase up to $3.3 million of shares of Common Stock, and a portion of the proceeds from the sale of the Company’s shares of Wugen common stock, if and when such an sale occurs.

The conversion was completed on May 7, 2025.

• The Company issued equity securities to raise proceeds of $5.0 million on May 15, 2025.

Thereafter, the Convertible Bridge Notes with outstanding principal of $270,000 will convert into common stock at a price of $7.45 per share, according to the terms of the agreement.

See further discussion below.

On May 15, 2025, the Company completed a $5.0 million follow-on offering of an aggregate of 671,140 units at a purchase price of $7.45 per unit priced at-the-market under Nasdaq rules.

In addition, the Company entered into a privately negotiated agreement with the holder of certain existing outstanding warrants to purchase up to 167,925 shares of common stock (the “Existing Warrants”) to reduce the exercise price of such Existing Warrants from $41.20 per share to $7.45 per share.

On May 13, 2025, the Company delivered a technology transfer report to WY Biotech.

Since November 2024 when we signed the WY Biotech License, the data generated from our internal research and external collaborators indicate that HCW-11-006 exhibits an unusual capacity for stimulating and expanding murine and human immune cells in vitro against tumor cells.

We intend to co-author a pivotal publication that will be submitted to a top-tier, peer-reviewed scientific journal in the second quarter of 2025.

We expect WY Biotech to elect to continue, in which case the Company will recognize $7.0 million in revenues in June 2025.

In addition to equity financings, a key strategy in our financing plan is identifying candidates in our sizeable molecule portfolio would be appropriate to develop through business development transactions, especially out-licensing.

In the second quarter of 2025, we intend to begin our search for an appropriate partner to commercialize our Immune-Cell Engagers, including T-Cell Engagers, created using our TRBC drug discovery and development platform.

However, if the Company is not successful in raising additional capital through these activities, management may need to revise its business plan and reduce costs.

If such revisions are insufficient, the Company may have to curtail or cease operations.

The accompanying interim financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the ordinary course of business.

The accompanying condensed interim financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the ordinary course of business.

The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might result from the outcome of the uncertainties described above.

The Company believes that substantial doubt exists regarding its ability to continue as a going concern for at least 12 months from the date of issuance of the Company’s condensed interim financial statements, without additional funding or financial support.

After considering management’s plan for financing and funds raised that are probable to occur within one year, as well as that the Company expects to continue to incur losses from operations for the foreseeable future, management concluded that the substantial doubt that existed in its going concern analysis was not alleviated.

Because of the numerous risks and uncertainties associated with the clinical development and commercialization of immunotherapeutics, we are unable to estimate the exact amount of capital requirements to pursue these activities.

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• cost of maintaining, expanding, and enforcing our intellectual property rights;

• impact of arbitration, litigation, regulatory inquiries, or investigations, as well as costs to indemnify our officers and directors against third-party claims related to our patents and other intellectual property:

• cost and timing of buildout of new headquarters, including risks of cost overruns and delays, and ability to obtain additional financing, if needed;

• impact of future arbitration, litigation, regulatory inquiries, or investigations, as well as costs to indemnify our officers and directors against third-party claims related to our patents and other intellectual property:

• cost and timing of buildout of the Company’s new manufacturing and laboratory facilities, including manufacturing for biologics and upgraded research and development facilities, including risks of cost overruns and delays, and ability to obtain additional financing, if needed;

• impact of legal actions taken by BE&K and other lien holders related to foreclosure and other claims;

• costs and timing of future commercialization activities, including product manufacturing, marketing, sales, and distribution, for any of our product candidates for which we receive regulatory approval.

1 unchanged sentence

Further, our operating plan may change, and we may need additional funds to meet operational needs and capital requirements for clinical trials and other research and development expenditures.

Comparison of the Cash Flows for the Nine Months Ended September 30, 2023 and September 30, 2024

The following table summarizes our cash flows for the nine months ended September 30, 2023 and September 30, 2024:

Nine Months Ended

September 30,

Comparison of the Cash Flows for the Three Months Ended March 31, 2024 and March 31, 2025

The following table summarizes our cash flows for the three months ended March 31, 2024 and March 31, 2025:

Three Months Ended

Cash used in operating activities

Cash provided by (used in) investing activities

Cash provided by financing activities

Net (decrease) increase in cash and cash equivalents

Cash used in investing activities

Cash provided by (used in) financing activities

Net increase (decrease) in cash and cash equivalents

Operating Activities

Net cash used in operating activities were $18.6 million for the nine months ended September 30, 2023 and $11.4 million for the nine months ended September 30, 2024.

Cash used in operating activities for the nine months ended September 30, 2023 consisted primarily of a net loss of $14.3 million, as well as a deposit $5.3 million used to establish an interest reserve for future interest payments, as required under the terms of the Credit Agreement intended to be used to fund the construction and renovation of the Company’s new headquarters.

In addition, other uses of cash include a $292,383 increase in accounts receivable and a $251,008 increase in prepaid expenses and other current assets, partially offset by cash provided by a $392,802 net increase in accounts payable and other current liabilities.

Further offset to the use of cash resulted from net noncash adjustments of $1.1 million, consisting primarily of $860,634 of cash provided by an adjustment for depreciation and amortization, $742,477 of cash provided by an adjustment for stock-based compensation, reduced by $248,445 of cash used for an adjustment for unrealized gains on investments.

Cash used in operating activities for the nine months ended September 30, 2024 consisted primarily of net loss for the period of $26.7 million, partially offset by a $12.4 million increase in accounts payable and other liabilities, a decrease of $883,917 in accounts receivable and a decrease of $829,043 in prepaid expenses and other current assets.

Further offset to the use of case resulted from noncash adjustments of $1.2 million, consisting primarily of $501,882 of cash provided by an adjustment for depreciation and amortization and $716,940 of cash provided by an adjustment for stock-based compensation.

Net cash used in operating activities were $3.6 million for the three months ended March 31, 2024 and $3.5 million for the three months March 31, 2025.

Cash used in operating activities for the three months ended March 31, 2024 consisted primarily of net loss for the period of $7.5 million, partially offset by cash provided by operations from a $2.5 million increase from Accounts payable and other liabilities, a $631,873 decrease in Accounts receivable, and a $302,640 decrease in Prepaid expenses and other assets.

Further offsets were provided by noncash adjustments arising from an addback of $243,501 for depreciation and amortization and an addback of $244,685 from stock-based compensation.

Cash used by operating activities for the three months ended March 31, 2025 consisted primarily of net loss for the period of $2.2 million, as well as cash used due to an decrease of $398,447 in Accounts payable and other liabilities, an increase of $257,894 in Prepaid expenses and other assets, and a $2.0 million payment for legal fees, as a result of an insurance reimbursement for legal fees incurred on behalf of Dr.

Hing Wong, the Company’s Founder and Chief Executive Officer, for his defense costs associated with the Arbitration, in prior periods, which was paid directly to the law firm involved.

See Part II, Item 1, “Legal Proceedings.” The uses were partially offset by cash provided by operations, which consisted of a $494,708 decrease in Account receivable and noncash adjustments of $419,010 for Depreciation, amortization and accretion, $275,642 for stock-based compensation and $150,000 for a Commitment Fee paid in shares of the Company’s Common Stock.

Investing Activities

Cash used by investing activities for the nine months ended September 30, 2023, consisted of $10.0 million of cash provided when short-term investments reached maturity, partially offset by $2.5 million of cash used to purchase equipment.

Cash used by investment activities for the nine months ended September 30, 2024 consisted of $148,205 used for purchases of property and equipment.

Cash used by investment activities for the three months ended March 31, 2024 consisted of $129,709 used for purchases of property and equipment.

There was no cash used in or provided by investment activities in the three months ended March 31, 2025.

Financing Activities

Cash provided by financing activities for the nine months ended September 30, 2023 resulted from issuance of common stock upon exercise of vested employee stock options, partially offset by a principal repayment under the 2022 Loan Agreement related to the acquisition financing used to purchase a building.

Cash provided by financing activities for the nine months ended September 30, 2024 resulted from a $2.5 million private placement of the Company’s common stock and $6.5 million from the issuance of Secured Notes, partially offset a $88,388 principal repayment under the 2022 Loan Agreement related to the acquisition financing used to purchase a building.

During the three months ended March 31, 2024, the $4.2 million of cash provided by financing activities consisted of an increase arising from a $2.5 million private placement of the Company’s common stock and cash received from the issuance of $1.8 million of Secured Notes.

Subsequent to March 31, 2024, a check for the remaining $250,000 cleared to bring the total of cash received from the issuance of Secured Notes to $2.0 million.

The increase in cash provided by financing activities were partially offset by a $29,706 decrease arising from debt repayment.

During the three months ended March 31, 2025, the $53,103 of cash used by financing activities consisted primarily of $32,460 for a debt repayment and $22,297 for issuance of Common Stock.

Critical Accounting Policies, Significant Judgements and Use of Estimates

Our management’s discussion and analysis of our financial condition and results of operations is based on our unaudited condensed interim financial statements, which have been prepared in accordance with U.S.

The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of

contingent assets and liabilities at the date of the financial statements, as well as the reported expenses incurred during the reporting periods.

The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported expenses incurred during the reporting periods.

Our estimates are based on our historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgements about the carrying value of assets and liabilities that are not readily apparent from other sources.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis