HCW Biologics Inc. 10-Q

Item 1. Financial Statements. HCW Biologics Inc. Condensed Balance Sheets December 31, March 31, 2024 2025 Unaudited ASSETS Current assets: Cash and cash equivalents $ 4,674,572 $ 1,107,613 Accounts receivable, net 582,201 87,493 Prepaid expenses 328,181 256,291 Other current assets 113,528 443,311 Total current assets 5,698,482 1,894,708 Investments 1,599,751 1,599,751 Property, plant and equipment, net 22,909,869 22,762,471 Other assets 28,476 28,476 Total assets $ 30,236,578 $ 26,285,406 LIABILITIES AND STOCKHOLDERS’ DEFICIT Liabilities Current liabilities: Accounts payable $ 22,332,261 $ 19,734,057 Accrued liabilities and other current liabilities 981,940 1,173,695 Short-term debt, net 6,314,684 6,234,338 Total current liabilities 29,628,885 27,142,090 Debt, net 7,377,865 7,705,364 Total liabilities 37,006,750 34,847,454 Commitments and contingencies (Note 9) Stockholders’ deficit: Common stock: Common, $ 0.0001 par value; 250,000,000 shares authorized and 44,541,295 shares issued at December 31, 2024; 250,000,000 shares authorized and 44,934,120 shares issued at March 31, 2025 4,454 4,493 Additional paid-in capital 93,781,511 94,186,471 Accumulated deficit ( 100,556,137 ) ( 102,753,012 ) Total stockholders’ deficit ( 6,770,172 ) ( 8,562,048 ) Total liabilities and stockholders’ deficit $ 30,236,578 $ 26,285,406 See accompanying notes to the unaudited condensed interim financial statements. 1 HCW Biologics Inc. Condensed Statements of Operations (Unaudited) Three Months Ended March 31, 2024 2025 Revenues: Revenues $ 1,126,712 $ 5,065 Cost of revenues ( 511,965 ) ( 4,052 ) Net revenues 614,747 1,013 Operating expenses: Research and development 2,123,284 1,478,711 General and administrative 1,566,092 2,227,597 Legal expenses, net 4,419,034 ( 1,739,493 ) Total operating expenses 8,108,410 1,966,815 Loss from operations ( 7,493,663 ) ( 1,965,802 ) Interest expense — ( 255,822 ) Other income, net 25,602 24,749 Net loss $ ( 7,468,061 ) $ ( 2,196,875 ) Net loss per share, basic and diluted $ ( 0.20 ) $ ( 0.05 ) Weighted average shares outstanding, basic and diluted 37,223,588 44,675,656 See accompanying notes to the unaudited condensed interim financial statements. 2 HCW Biologics Inc. Condensed Statements of Changes in Stockholders’ Equity (Deficit) For the Three Months Ended March 31, 2024 and 2025 (Unaudited) Stockholders’ Equity Common Stock Additional Paid-In Accumulated Total Stockholders’ Shares Amount Capital Deficit Equity Balance, January 1, 2024 36,025,104 $ 3,603 $ 83,990,437 $ ( 70,532,323 ) $ 13,461,717 Issuance of Common Stock upon exercise of stock options 12,572 1 2,254 — 2,255 Issuance of Common Stock upon equity subscription 1,785,718 178 2,499,827 — 2,500,005 Stock-based compensation — — 244,685 — 244,685 Net loss — — — ( 7,468,061 ) ( 7,468,061 ) Balance, March 31, 2024 37,823,394 $ 3,782 $ 86,737,203 $ ( 78,000,384 ) $ 8,740,601 Stockholders’ Deficit Common Stock Additional Paid-In Accumulated Total Stockholders’ Shares Amount Capital Deficit Deficit Balance, January 1, 2025 44,541,295 $ 4,454 $ 93,781,511 $ ( 100,556,137 ) $ ( 6,770,172 ) Issuance of Common Stock upon exercise of stock options 8,210 1 1,653 — 1,654 Issuance of Common Stock to Square Gate 384,615 38 149,962 — 150,000 Issuance cost of Common Stock — — ( 22,297 ) — ( 22,297 ) Stock-based compensation — — 275,642 — 275,642 Net loss — — — ( 2,196,875 ) ( 2,196,875 ) Balance, March 31, 2025 44,934,120 $ 4,493 $ 94,186,471 $ ( 102,753,012 ) $ ( 8,562,048 ) See accompanying notes to the unaudited condensed interim financial statements. 3 HCW Biologics Inc. Condensed Statements of Cash Flows (Unaudited) Three Months Ended March 31, 2024 2025 Cash flows from operating activities: Net loss $ ( 7,468,061 ) $ ( 2,196,875 ) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 243,501 419,010 Stock-based compensation 244,685 275,642 Commitment fee — 150,000 Changes in the carrying amount of right-of-use asset ( 418 ) — Changes in operating assets and liabilities: Accounts receivable 631,873 494,708 Prepaid expenses and other assets 302,640 ( 257,894 ) Accounts payable and other liabilities 2,498,451 ( 2,398,447 ) Operating lease liability ( 56,541 ) — Net cash used in operating activities ( 3,603,870 ) ( 3,513,856 ) Cash flows from investing activities: Purchases of property and equipment ( 129,709 ) — Net cash used in investing activities ( 129,709 ) — Cash flows from financing activities: Proceeds from issuance of common stock 2,502,260 1,654 Proceeds from issuance of debt, net 1,750,000 — Issuance costs for common stock — ( 22,297 ) Debt repayment ( 29,706 ) ( 32,460 ) Net cash provided by (used in) financing activities 4,222,554 ( 53,103 ) Net increase (decrease) in cash and cash equivalents 488,975 ( 3,566,959 ) Cash and cash equivalents at the beginning of the period 3,595,101 4,674,572 Cash and cash equivalents at the end of the period $ 4,084,076 $ 1,107,613 Supplemental disclosure of cash flow information: Cash paid for interest, net of amounts capitalized $ — $ 244,269 Noncash operating, investing and financing activities: Capital expenditures accrued, but not yet paid $ 2,192,255 $ — See accompanying notes to the unaudited condensed interim financial statements. 1 4 HCW Biologics Inc. Notes to Condensed Interim Financial Statements (Unaudited) 1. Organization and Summary of Significant Accounting Policies Organization HCW Biologics Inc. (the “Company”) is a biopharmaceutical company focused on discovering and developing novel immunotherapies to lengthen healthspan by disrupting the link between chronic, low-grade inflammation and age-related diseases. The Company believes age-related low-grade chronic inflammation, or “inflammaging,” is a significant contributing factor to several chronic diseases and conditions, such as cancer, cardiovascular disease, diabetes, neurodegenerative diseases, and autoimmune diseases. The Company is located in Miramar, Florida and was incorporated in the state of Delaware in April 2018. Reverse Stock Split On March 31, 2025, at a Special Meeting of the Stockholders (the “Special Meeting”), the stockholders of the Company approved a reverse stock split of all outstanding shares of the Common Stock, and the Board approved a reverse stock split of the Common Stock at a final ratio of one-for-forty ( 1 ::40) (the “Reverse Stock Split”). The Reverse Stock Split was effective at 12:01 a.m. Eastern Time on April 11, 2025. The Common Stock commenced trading on a reverse split-adjusted basis when the markets opened on April 11, 2025, under the existing trading symbol “HCWB.” The stockholders approved two other proposals at the Special Meeting, including approval of the use of an equity line of credit up to $ 40.0 million and the principal terms for the conversion of up to $ 6.6 million of the outstanding principal of Secured Notes. The condensed interim financial statements included in this Quarterly Report on Form 10-Q for the period ended March 31, 2025 contained herein, are presented without giving effect to the Reverse Stock Split, except where the context otherwise requires. See Note 10. Subsequent Events. Liquidity and Going Concern In accordance with ASC 205-40, Presentation of Financial Statements – Going Concern (“Topic 205-40”), we are required to evaluate whether there are conditions and events, considered in the aggregate, that raise substantial doubt about our ability to continue as a going concern for at least 12 months from the issuance date of the Company’s condensed interim financial statements. This evaluation does not take into consideration the potential mitigating effect of management’s plans that have not been fully implemented or are not within control of the Company as of the date the financial statements are issued. When substantial doubt exists under this methodology, management evaluates whether the mitigating effect of its plans sufficiently alleviates substantial doubt about the Company’s ability to continue as a going concern. The mitigating effect of management’s plans, however, is only considered if both (1) it is probable that the plans will be effectively implemented within one year after the date that the financial statements are issued, and (2) it is probable that the plans, when implemented, will mitigate the relevant conditions or events that raise substantial doubt about the entity’s ability to continue as a going concern within one year after the date that the financial statements are issued. As of March 31, 2025, 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. During its development activities, the Company has sustained operating losses, experienced negative operating cash flows and negative working capital position and it expects to continue to incur operating losses for the foreseeable future. Since inception to March 31, 2025, the Company incurred cumulative net losses of $ 100.0 million. These losses reflect the events previously reported in the Form 10-K/A filed on May 15, 2024 with the Securities and Exchange Commission (“SEC”), involving reserve for credit losses and other expenses of $ 6.6 million. The reserve for credit losses and other expenses arose from two events previously reported by the Company on the Form 8-K filed on January 12, 2024 and the Form 8-K filed on May 1, 2024. 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 had 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 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. 5 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 as part of their responses to the BE&K Complaint. 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 Complaint) 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. To date, the Company has funded operations primarily through the sale of stock, issuance of Senior Notes and other debt, and revenues generated from the Company’s exclusive worldwide license with Wugen, Inc. (“Wugen”), 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. In the three months ended March 31, 2024 and 2025, the Company recognized revenues generated from the supply of clinical and research grade material to Wugen of $ 1.1 million and $ 5,065 , respectively. 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. Hing C. 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, the Company resolved the attendant uncertainties for the outcome of the Arbitration and additional complexities, and it launched its new financing plan. In the accompanying condensed balance sheet as of March 31, 2025, the Com pany 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. 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 who 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. In multiple closings that occurred from March to October 2024, the Company issued an aggregate of $ 6.9 million in Secured Notes, which are secured by the Company’s shares of Wugen common stock. The Company’s holdings in Wugen common stock are reported within Investments on the accompanying condensed interim financial statements. The holders of $ 6.6 million of the outstanding principal for the Secured Notes agreed to Principal Terms for the conversion into shares of the Company’s common stock, par value $ 0.0001 (“Common Stock”), which were approved by the stockholders of the Company at the Special Meeting. On May 1, 2025, the converting holders of Secured Notes entered into the Second Amendment to Amended and Restated Senior Secured Note Purchase Agreement and Related Agreements to effect the conversion. The conversion occurred on May 7, 2025. See Note 10. Subsequent Events. 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. Since that time, the Company has issued $ 11.9 million through issuance of equity securities. In November 2024, the Company raised gross proceeds of $ 6.9 million in a registered direct offering and a concurrent private placement of common stock and warrants. The offering, priced above market under Nasdaq rules and closed on November 20, 2024. On May 15, 2025, the Company closed an equity offering with gross proceeds of $ 5.0 million. 6 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. 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. 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 an Equity Purchase Agreement (the “ELOC 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”). At the Special Meeting, stockholders approved the Company’s use of the ELOC Purchase Agreement. 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 ELOC 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). 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 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. As of the date of issuance of this Quarterly Report, the Company has completed several elements of its compliance plan to regain and maintain compliance with all Nasdaq Listing Rules. On March 31, 2025, there was a Special Meeting of the Stockholders of the Company, at which three matters were put to a vote, and all three proposals were approved, as noted below. Each proposal represented a critical element in the Company’s plan to regain compliance with all Listing Rules for the Nasdaq Exchange. 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. Since December 31, 2024, the Company completed the following transactions in furtherance of regaining compliance with the Nasdaq Listing Rule for the market value of listed securities under the alternative measure based on a minimum balance in stockholders’ equity: • An increase of $ 2.0 million on January 14, 2025, upon receipt of a $ 2.0 million insurance reimbursement for legal fees incurred for the defense of Dr. Hing C. Wong, the Company’s Founder and Chief Executive Officer, in connection with the Arbitration. • Access to up to $ 40.0 million through the ELOC Purchase Agreement. On February 20, 2025, the Company entered into the ELOC Purchase Agreement; and with a registration statement effective as of April 16, 2025, the Company may access up to $ 40.0 million of capital through the sale of stock to the Investor under the terms of the ELOC Purchase Agreement. The Company has not issued any shares under the ELOC Purchase Agreement as of the date of issuance of this Quarterly Report. 7 • On April 17, 2025, the Company formally applied to move to the Nasdaq Capital Markets tier, thus we will refer to the Listing Rules for that tier for the compliance with all Listing Rules. • The Company completed the conversion of $ 6.6 million of the outstanding principal of the Secured Notes. Participating noteholders converted their outstanding principal into shares of the Company’s Common Stock at a conversion price of $ 0.65 per share (post-split, $ 26.00 per share), received warrants that may be exercised for a period of five years to purchase $ 3.3 million of Common Stock at an exercise price of $ 0.65 per share (post-split, $ 26.00 per share), and rights to receive their pro rata shares of 49.1 % of the proceeds of the liquidation of the Company’s Wugen shares, if such an event occurs. • On May 15, 2025, the Company closed 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 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. As of March 31, 2025, the conclusion of a going concern assessment, before consideration of our financing plans, was that there is substantial doubt about the Company’s ability to continue as a going concern. The Company considered future elements of its 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 the going concern analysis, in addition to considering continued operating losses and the burden of obligations for expenses incurred in connection with past legal proceedings. Management concluded that there were no mitigating circumstances which alleviated the substantial doubt over its ability to continue as a going concern. If the Company is not successful in raising additional capital through these activities, management intends to revise its business plan and reduce costs. If such revisions are insufficient, the Company may have to curtail or cease operations. 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 audited financial statements and that the substantial doubt that existed in its going concern analysis was not alleviated. Summary of Significant Accounting Policies Basis of Presentation Unaudited Interim Financial Information The accompanying unaudited condensed interim financial statements as of March 31, 2025 and for the three-month periods ended March 31, 2024 and 2025 have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and pursuant to Article 10 of Regulation S-X of the Securities Act of 1933, as amended (the “Securities Act”). Accordingly, they do not include all of the information and notes required by U.S. GAAP for complete financial statements. These unaudited condensed interim financial statements include only normal and recurring adjustments that the Company believes are necessary to fairly state the Company’s financial position and the results of its operations and cash flows. The results for the three-month period ended March 31, 2025 are not necessarily indicative of the results expected for the full fiscal year or any subsequent interim period. The condensed interim balance sheet at December 31, 2024 has been derived from the audited financial statements at that date but does not include all disclosures required by U.S. GAAP for complete financial statements. Because all of the disclosures required by U.S. GAAP for complete financial statements are not included herein, these unaudited condensed interim financial statements and the notes accompanying them should be read in conjunction with the Company’s audited financial statements for the year ended December 31, 2024 which appear in our Annual Report on Form 10-K for the year ended December 31, 2024 filed with the Securities and Exchange Commission (the “SEC”) on March 28, 2025 (the “Annual Report”) and in other filings with the SEC. 8 Segment Reporting The Company operates and manages its business as one reportable and operating segment, which is the business of developing and commercializing novel immunotherapies for diseases promoted by chronic inflammation, especially age-related diseases. The Company’s chief executive officer, who is the chief operating decision maker (“CODM”), reviews financial information on an aggregate basis for allocating and evaluating financial performance. In addition, our CODM is regularly provided with detailed results of preclinical and clinical data which is considered in his decision for the allocation of resources. See Note 8. Segment Reporting for further details. The single operating segment constitutes all of the Company activity, the chief operating decision maker regularly reviews the entity-wide operating results and performance . All long-lived assets are maintained in the United States of America. Reclassification of Prior Period Presentation of Legal Expenses Certain prior period amounts have been reclassified to distinguish between General and administrative expenses in the ordinary course of business and legal expenses incurred in connection with the arbitration and Settlement Agreement described in Liquidity and Going Concern in this Note 1. Reclassification of legal expenses incurred in connection with legal proceedings impacts the condensed interim statements of operations. There is no effect on reporting results of operations from prior periods. Use of Estimates The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts in the financial statements and accompanying notes. Management must apply significant judgment in this process. The Company evaluates its estimates and assumptions on an ongoing basis using historical experience and other factors and adjusts those estimates and assumptions when facts and circumstances dictate. Actual results could differ from estimates. Fair Value Measurements Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 820, Fair Value Measurement (“Topic 820”), establishes a fair value hierarchy for those instruments measured at fair value that distinguishes between fair value measurements based on market data (observable inputs) and those based on the Company’s own assumptions (unobservable inputs). This hierarchy maximizes the use of observable inputs and minimizes the use of unobservable inputs. The three levels of inputs used to measure fair value are as follows: Level 1: Observable inputs such as quoted prices in active markets; Level 2: Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and Level 3: Unobservable inputs in which there is little or no market data, which require a reporting entity to develop its own assumptions. Fair value measurements are classified based on the lowest level of input that is significant to the measurement. The Company’s assessment of the significance of a particular input to the fair value measurement requires judgment, which may affect the valuation of the assets and liabilities and their placement within the fair value hierarchy levels. The determination of the fair values takes into account the market for the Company’s financial assets and liabilities, the associated credit risk, and other factors as required. The Company considers active markets as those in which transactions for the assets or liabilities occur in sufficient frequency and volume to provide pricing information on an ongoing basis. Revenue Recognition The Company accounts for revenues in accordance with Accounting Standards Codification Topic 606, Revenue from Contracts with Customers (“Topic 606”). To determine revenue recognition for arrangements that fall within the scope of Topic 606, the Company performs the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the Company satisfies a performance obligation. The Company only applies the five-step model to contracts when it is probable that it will collect the consideration it is entitled to in exchange for the goods or services transferred to the customer. 9 At contract inception, the Company assesses the goods or services promised within each contract, determines those that are performance obligations, and assesses whether each promised good or service is distinct. The Company then recognizes as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied. To date, the Company's revenues have been generated exclusively from the Wugen License, which consists of licenses of intellectual property, cost reimbursements, upfront signing fees, milestone payments and royalties on future licensee’s product sales. In addition, the Company and Wugen have an agreement for the supply of clinical and research grade materials under which the Company also recognized revenues. License Grants: For out-licensing arrangements that include a grant of a license to the Company’s intellectual property, the Company considers whether the license grant is distinct from the other performance obligations included in the arrangement. For licenses that are distinct, the Company recognizes revenues from nonrefundable, upfront payments and other consideration allocated to the license when the license term has begun and the Company has provided all necessary information regarding the underlying intellectual property to the customer, which generally occurs at or near the inception of the arrangement. Milestone and Contingent Payments: At the inception of the arrangement and at each reporting date thereafter, the Company assesses whether it should include any milestone and contingent payments or other forms of variable consideration in the transaction price using the most likely amount method. If it is probable that a significant reversal of cumulative revenue would not occur upon resolution of the uncertainty, the associated milestone value is included in the transaction price. At the end of each subsequent reporting period, the Company re-evaluates the probability of achievement of each such milestone and any related constraint and, if necessary, adjusts its estimate of the overall transaction price. Since milestone and contingent payments may become payable to the Company upon the initiation of a clinical study or filing for or receipt of regulatory approval, the Company reviews the relevant facts and circumstances to determine when the Company should update the transaction price, which may occur before the triggering event. When the Company updates the transaction price for milestone and contingent payments, the Company allocates the changes in the total transaction price to each performance obligation in the agreement on the same basis as the initial allocation. Any such adjustments are recorded on a cumulative catch-up basis in the period of adjustment, which may result in recognizing revenue for previously satisfied performance obligations in such period. The Company’s licensees will generally pay milestones payments subsequent to achievement of the triggering event. Materials Supply: The Company provides clinical and research grade materials so that licensees may develop products based on the licensed molecules. The amounts billed are recognized as revenue as the performance obligations are satisfied by the Company, once the Company determines that a contract exists. On June 18, 2021, the Company entered into a master services agreement (“MSA”) with Wugen for the supply of materials for clinical development of licensed products. Each of these transactions represents a single performance obligation that is satisfied over time. The Company recognizes revenue 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. As part of the accounting for these arrangements, the Company must develop estimates and assumptions that require judgement to determine the progress towards completion. The Company reviews its estimate of the progress toward completion based on the best information available to recognize the cumulative progress toward completion as of the end of each reporting period, and makes revisions to such estimates, if facts and circumstances change during each reporting period. For each in process SOW, amounts are billed in the same quarter the costs are incurred. For the three months ended March 31, 2024 and March 31, 2025, the Company recogni zed $1.1 million and $ 5,065 in re venue, respectively, all of which is related to sale of development supply materials to our licensee, Wugen. Investments The Company holds a minority interest in Wugen which is accounted for using the measurement alternative whereby the investment is recorded at cost less impairment, adjusted for observable price changes in orderly transactions for an identical or similar investment of the same investee. No impairment has been recognized. As of March 31, 2025 and December 31, 2024, the Company included $ 1.6 million for the investment in Wugen in Investments in the accompanying condensed interim balance sheets. The Company used its equity interest in Wugen to collateralize the Secured Notes. See Note 3. Debt, Net. Subsequent to March 31, 2025, the Company transferred some of its rights to receive proceeds from the sale or liquidation of Wugen shares, if such an event occurs. See Note 10. Subsequent Events. 10 The Company invests excess cash in bills and notes issued by the U.S. Treasury which are classified as trading securities. As of December 31, 2024 and March 31, 2025 , the Company had no Short-term investments. Operating Leases The Company determines if an arrangement is a lease at inception. Operating leases are included in Other assets, Accrued liabilities and other current liabilities, and Other liabilities on its condensed interim balance sheets. Operating lease Right of Use (“ROU”) assets and operating lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at commencement date. As the Company’s leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at commencement date in determining the present value of future payments. The operating lease ROU asset also includes any lease payments made and excludes lease incentives and initial direct costs incurred. The Company has a lease agreement with lease and non-lease components, which are accounted for separately. For short-term leases with a term of one year or less, the Company uses the practical expedient and does not record an ROU asset or lease liability for such short-term leases. Net Loss Per Share Basic loss per share of common stock is computed by dividing net loss attributable to common stockholders by the weighted-average number of shares of common stock outstanding during each period. Diluted loss per share of common stock includes the effect, if any, from the potential exercise of stock options and unvested shares of restricted stock, which would result in the issuance of incremental shares of common stock. For diluted net loss per share, the weighted-average number of shares of common stock is the same for basic net loss per share due to the fact that when a net loss exists, dilutive securities are not included in the calculation as the impact is anti-dilutive. 2. Accrued Liabilities and Other Current Liabilities As of December 31, 2024 , the Company had a balance of $ 981,940 included in Accrued liabilities and other current liabilities in the audited condensed balance sheet, consisting of $ 422,000 for construction expenses, $ 49,000 for manufacturing expenses, $ 155,000 for legal fees, $ 121,000 for clinical expenses, $ 5,000 for bonus expense, $ 202,000 for salary expenses and $ 28,000 for other liabilities. As of March 31, 2025 , the Company had a balance of $ 1.2 million included in Accrued liabilities and other current liabilities in the accompanying condensed interim balance sheet, consisting of $ 422,000 for construction in progress, $ 49,000 for manufacturing expenses, $ 409,000 for legal fees, $ 127,000 for clinical expenses, $ 103,000 for salary and benefits and $ 54,000 for other liabilities. 3. Debt, Net Cogent Bank Loan On August 15, 2022, the Company entered the 2022 Loan Agreement with Cogent Bank, pursuant to which it received $ 6.5 million in proceeds to purchase a property where the Company planned to construct a manufacturing facility for biologics and upgraded research laboratory facilities. The loan is secured by a first priority lien on the building. As of March 31, 2025, the Company had $ 6.3 million in principal outstanding under the 2022 Loan Agreement. The interest-only period was one year followed by 48 months of equal payments of principal and interest beginning on September 15, 2023 based on a 25-year amortization rate. The unamortized balance is due on August 15, 2027 (the “Maturity Date”), and bears interest at a fixed per annum rate equal to 5.75 %. Upon the Maturity Date, a final payment of unamortized principal will be due. The Company is in compliance with covenants related to current payment of principal and interest as of March 31, 2025. The Company has the option to prepay the outstanding balance of the loan prior to the Maturity Date without penalty. As of December 31, 2024 and March 31, 2025, certain subcontractors filed mechanics liens related to unpaid invoices issued in connection with the Company’s construction of its 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 December 31, 2024 and 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. As of March 31, 2025, $ 6.3 million is included in Short-term debt, net in the accompanying condensed interim balance sheet. 11 Senior Secured Notes As of March 31, 2024, the Company issued $ 2.0 million of Secured Notes which were classified as non-current liabilities in the accompany condensed interim balance sheet. Purchasers (as defined in the Note Purchase Agreement) included: Dr. Hing C. Wong, Founder and Chief Executive Officer, who invested $ 620,000 ; Rebecca Byam, Chief Financial Officer, who invested $ 220,000 ; and Gary M. Winer, member of our Board of Directors, who invested $ 50,000 , as well as unrelated parties. As of March 31, 2024, the Company received $ 1.8 million in cash payments for the Secured Notes. A check payment of $ 250,000 , that has since cleared, is included in Secured note receivable in the accompanying condensed interim balance sheet. As of March 31, 2025, the Company issued $ 6.9 million of Secured Notes which were classified as non-current liabilities in the accompanying condensed interim balance sheet. Purchasers included Dr. Hing C. Wong, Founder and Chief Executive Officer, who invested $ 2.4 million; Rebecca Byam, Chief Financial Officer, who invested $ 220,000 ; Lee Flowers, Senior Vice President of Business Development, who invested $ 25,000 ; Scott T. Garrett, the Chairman of the Company’s board of directors, who invested $ 140,000 ; Gary M. Winer, a member of our board of directors, who invested $ 60,000 ; Rick S. Greene, a member of the board of directors, who invested $ 25,000 , as well as unrelated parties. As of July 2, 2024, existing investors in Secured Notes unanimously agreed to an Amended and Restated Note Purchase Agreement and related documents (“Amended and Restated Note Purchase Agreement”). On September 30, 2024, existing investors approved an amendment to the Amended and Restated Note Purchase Agreement which extended the last closing date to October 31, 2024. No other terms were changed. Under the terms of the Amended and Restated Note Purchase Agreement, the Secured Notes continue to bear interest at a rate of 9 % per annum, payable quarterly in arrears. The Secured Notes will mature on August 30, 2026 (the “Maturity Date”), on which date the principal balance, accrued but unpaid interest and other amounts owed under the terms of the Amended and Restated Note Purchase Agreement shall be due and payable. The Company pledged its equity ownership interest in Wugen, which was equivalent to a 5.6 % ownership stake in that company as of March 31, 2025 (“Pledged Collateral”). The Pledged Collateral will be held and released according to the terms of the Escrow Agreement, as security for the Secured Notes. The Secured Notes have a Mandatory Prepayment provision, according to which the Company is required to prepay the Secured Notes before the Maturity Date under certain circumstances. In the event of a Mandatory Prepayment, Secured Notes may receive a bonus payment based on the gross proceeds of the sale of the Pledged Collateral. If the Secured Notes are repaid on the Maturity Date, holders will receive their pro rata share of a fixed bonus payment of $ 3.4 million in addition to payment of outstanding principal and accrued and unpaid interest. If a bonus payment is paid, then there is no prepayment penalty. The Amended and Restated Note Purchase Agreement also contains default provisions, according to which, following an event of default, the Company may be required to distribute the Pledged Collateral to the Purchasers on a pro rata basis based on a $ 10.0 million issuance of Secured Notes, in full satisfaction of the indebtedness evidenced by the Secured Notes. In the three months ended March 31, 2025, the Company recognized $ 273,059 in expenses for accretion of the fixed bonus payment due in the event the Secured Notes are repaid on the Maturity Date. On May 7, 2025, certain Purchasers elected to convert $ 6.6 million of outstanding principal into shares of the Company’s Common Stock, warrants to purchase Common Stock and rights to a portion of the Company’s Wugen shares, according to Principal Terms of Conversion approved by the stockholders at the Special Meeting held on March 31, 2025. See Note 10. Subsequent Events. 4. Preferred Stock As of December 31, 2024 and March 31, 2025 , the Company had 10,000,000 shares of preferred stock authorized and no shares issued. 12 5. Net Loss Per Share The following table summarizes the computation of the basic and diluted net loss per share: Three Months Ended March 31, 2024 2025 Numerator: Net loss $ ( 7,468,061 ) $ ( 2,196,875 ) Denominator: Weighted-average common shares outstanding 37,223,588 44,675,656 Net loss per share, basic and diluted $ ( 0.20 ) $ ( 0.05 ) The following table summarizes the outstanding potentially dilutive securities that have been excluded in the calculation of diluted net loss per share because their inclusion would be anti-dilutive: At March 31, 2024 2025 Common stock options 1,764,766 1,775,026 Potentially dilutive securities 1,764,766 1,775,026 6. Fair Value of Financial Instruments The carrying amount of the Company’s financial instruments, including cash and cash equivalents, accounts receivable, prepaid expenses and other current assets, U.S. government-backed securities with maturity dates up to one year, accounts payable and accrued liabilities, approximate fair value due to their short-term maturities. Money market funds included in cash and cash equivalents and U.S. government-backed securities are measured at fair value based on quoted prices in active markets, which are considered Level 1 inputs. No transfers between levels occurred during the periods presented. The following table presents the Company’s assets which were measured at fair value at December 31, 2024 and March 31, 2025: At December 31, 2024: Level 1 Level 2 Level 3 Total Assets: Money market funds $ 3,748,325 $ — $ — $ 3,748,325 Total $ 3,748,325 $ — $ — $ 3,748,325 At March 31, 2025: Level 1 Level 2 Level 3 Total Assets: Money market funds $ 590,524 $ — $ — $ 590,524 Total $ 590,524 $ — $ — $ 590,524 7. Income Taxes The Company computes its quarterly income tax expense/(benefit) by using a forecasted annual effective tax rate and adjusts for any discrete items arising during the quarter. The Company did no t have a provision for income taxes (current or deferred tax expense) as of December 31, 2024 and March 31, 2025. The Company will continue to maintain a 100 % valuation allowance on total deferred tax assets. The Company believes it is more likely than not that the related deferred tax assets will not be realized. As a result, the Company’s effective tax rate will remain at 0.00 % because no items either estimated or discrete items would impact the tax provision. 13 8. Segment Reporting HCW Biologics, Inc. has one reportable segment: life science. The life science segment consists of operations focused on discovering and developing novel immunotherapies to lengthen health span by disrupting the link between chronic, low-grade inflammation and diseases. The Company’s CODM is the chief executive officer . The accounting policies of the life science segment are the same as those described in the summary of significant accounting policies. The CODM assesses performance for the life science segment based on net loss, which is reported on the statement of operations as net loss. The measure of segment assets is reported on the balance sheet as total assets. The Company has not generated any product revenue from commercial product sales of internally-developed immunotherapeutic products for the treatment of diseases, as no products have been approved for commercial sale as of March 31, 2025. The Company expects to continue to incur significant expenses and operating losses for the foreseeable future as it advances molecules through all stages of development and clinical trials and, ultimately, seek approval for commercial sale. As such, the CODM uses cash forecast models in deciding how to invest into the life science segment. Such cash forecast models are reviewed to assess the entity-wide operating results and performance in conjunction with monitoring the results of R&D experiments for preclinical compounds and clinical trial data for clinical-stage compounds. The assessment of results of preclinical and clinical studies are critical to the allocation of resources by the CODM. There were no material changes to the measures for segment revenue, profit or loss, and other metrics since December 31, 2024. The tables below summarizes the significant expense categories regularly reviewed by the CODM for the three months ended March 31, 2024 and March 31, 2025: Three Months Ended March 31, 2024 2025 Revenues: Revenues $ 1,126,712 $ 5,065 Cost of revenues ( 511,965 ) ( 4,052 ) Net revenues 614,747 1,013 Operating expenses: Research and development expenses Salaries, benefits and related expenses 779,747 701,106 Manufacturing and materials 576,301 262,798 Preclinical expenses 285,091 177,111 Clinical trials 266,640 187,820 Overhead allocations 215,505 149,876 Total research and development expenses 2,123,284 1,478,711 General and administrative Salaries, benefits and related expenses 521,610 788,490 Professional services (a) 353,806 454,369 Facilities and office expenses 203,599 94,330 Depreciation expenses 67,081 61,237 Rent and occupancy expenses 42,716 49,750 Insurance 173,270 290,269 Taxes 34,155 32,592 Other expenses 169,855 183,501 Total general and administrative expenses 1,566,092 1,954,538 Other segment items (b) 4,393,432 ( 1,235,361 ) Total operating expenses 8,082,808 2,197,888 Net segment loss $ ( 7,468,061 ) $ ( 2,196,875 ) (a) Professional services consist primarily of audit and accounting advisory services, tax advisory services, corporate legal services related to SEC compliance, and legal fees related to patent filings. (b) Other segment items include the following unusual or nonrecurring items: 14 Three Months Ended March 31, 2024 2025 Arbitration legal fees, net $ 4,419,034 $ ( 1,739,493 ) Accretion of fixed bonus upon maturity of Senior Notes, net — 273,059 Interest expense — 255,822 Other income, net ( 25,602 ) ( 24,749 ) Other segment items $ 4,393,432 $ ( 1,235,361 ) 9. Commitments and Contingencies Operating Leases The Company has operating leases for approximately 12,250 square feet of space located in Miramar, Florida. On February 29, 2024, the lease on the Company's current location reached the end of its term and the Company entered a new one-year lease for the same location which commenced on March 1, 2024 and terminated on February 28, 2025 . On January 27, 2025, the Company entered a new one-year lease for the same location which commenced on March 1, 2025 and terminates on February 28, 2026 . As a lease of 12 months or less in duration and qualifies for a short-term lease exemption under ASC 842-20-25-2. The Company elected to account for this lease on a straight-line basis over the lease term and will not recognize a ROU asset and a lease liability as a result. The Company has no obligations under financing leases. For the three months ended March 31, 2024 and 2025 , rent expense recognized by the Company was $ 47,838 and $ 50,556 , respectively, of which $ 23,453 and $ 26,476 , respectively, are included in research and development in the accompanying condensed interim statements of operations . Contractual Commitments The Company has commitments with a third-party manufacturing organization to supply us with clinical grade materials. As of March 31, 2025, it is under contract for obligatio ns of $ 12,500 it expects to pay during the year ending December 31, 2025. On January 22, 2025, the Company entered into a forbearance agreement with BE&K to allow the Company until March 31, 2025 to continue efforts to find the financing required to complete the construction and renovation of the building. 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. Upon the expiration of the forbearance agreement, BE&K took additional legal actions. See Legal - Other Matters below. 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. Project Financing On January 10, 2024 (the “Termination Date”), the Company exercised its right to terminate its credit agreement (the “Credit Agreement”), dated April 21, 2023, with Prime Capital Ventures, LLC (the “Lender”), as permitted under the terms of the Credit Agreement. The termination followed repeated delays in funding and related concerns. There were no borrowings under the Credit Agreement as of the Termination Date, and the Company did not incur any penalties as a result of such termination under the terms of the Agreement. Upon exercising its right to terminate the Agreement, the Company was entitled to receive the return of the $ 5.3 million that the Company placed on deposit to establish an interest reserve account with the Lender. In the three months ended March 31, 2024, the Lender defaulted on its obligation to return the interest reserve deposit. Given the uncertainty of when or if funds will be recovered from the Lender, the Company recognized a reserve for a credit loss for $ 5.3 million as of December 31, 2023. The Company intends to pursue all available remedies to recover these funds, including legal actions, receivership and insurance. 15 Legal Legal Proceedings From time to time, the Company is a party to or otherwise involved in legal proceedings, including suits, assessments, regulatory actions and investigations generally arising out of the normal course of business. In addition, the Company enters into agreements that may include indemnification provisions, pursuant to which the Company agrees to indemnify, hold harmless and defend the indemnified parties for losses suffered or incurred by the indemnified party. When the Company believes that the outcome of such a matter will result in a liability that is probable to be incurred and result in a potential loss, or range of loss, that can be reasonably estimated, the Company will accrue a liability and make the appropriate disclosure in the footnotes to the financial statements. Arbitration, Settlement and General Release On December 23, 2022, Altor BioScience, LLC and NantCell, Inc. (collectively “ImmunityBio”) initiated an arbitration against Dr. Hing C. Wong, the Company’s Founder and Chief Executive Officer, in California alleging breach of contract and fiduciary duty, among other claims . On that same date, ImmunityBio filed a lawsuit against the Company in federal court alleging misappropriation of trade secrets, inducement of breach of contract and breach of fiduciary duty, among other claims against the Company. On April 26, 2023, the parties stipulated that ImmunityBio’s action against the Company would be consolidated with the ImmunityBio Arbitration demand against Dr. Wong. On April 27, 2023, the Court approved the parties’ stipulation and ordered the parties to Arbitration. On May 1, 2023, ImmunityBio filed a demand against the Company before JAMS. On May 3, 2023, ImmunityBio dismissed the federal court action without prejudice and the Court ordered the case dismissed without prejudice and closed the case. ImmunityBio’s proceeding against the Company proceeded in Arbitration before JAMS and consolidated with the arbitration ImmunityBio initiated against Dr. Wong (the “Arbitration”). On March 26, 2024, ImmunityBio 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. As reported in the Company’s Form 8-K filed on July 18, 2024 and described in Part II, Item 1. – “Legal Proceedings,” as of July 13, 2024, the Company and Dr. Hing C. Wong, the Company’s Founder and Chief Executive Officer, entered into a confidential Settlement Agreement and Release (the “Settlement Agreement”) with Altor BioScience, LLC (“Altor”), NantCell, Inc. (“NantCell”), and ImmunityBio, Inc. (the parent of Altor and NantCell, together with Altor and NantCell, “ImmunityBio”), to resolve the previously disclosed Arbitration before JAMS brought by Altor and NantCell as well as the Complaint Altor filed against the Company in the Chancery Court of the State of Delaware for the contribution of legal fees and expenses advanced to Dr. Wong. The Settlement Agreement includes mutual general releases by and among the parties thereto. 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 Arbitration and the Complaint were dismissed as of December 31, 2024. Other Matters 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 filed counterclaims and cross-claims in response to the BE&K Complaint. 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 Complaint) 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 Litigation. . The Company intends to respond in a timely fashion to the BE&K and Fisk Complaints and cross-claims. 16 Inflationary Cost Environment, Banking Crisis, Supply Chain Disruption and the Macroeconomic Environment 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. The Company has been impacted by inflation, and may continue to be so, 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. Management employs a number of strategies to effectively navigate these issues, including product redesign, alternate sourcing, and establishing contingencies in budgeting and timelines. Future developments in these and other areas present material uncertainty and risk with respect to the Company's clinical trials, IND-enabling activities, buildout of the new manufacturing and laboratory facilities, as well as the Company's financial condition and results of operations. The extent and duration of such events and conditions, and resulting disruptions to our operations, are highly unpredictable. 10. Subsequent Events Subsequent events have been evaluated through the date the financial statements were filed. In addition to the required recognition or disclosure disclosed in the footnotes herein, there were also the following subsequent events after the reporting date: At the Special Meeting, Stockholders approved three proposals, including the Reverse Stock Split, the issuance of up to $ 40.0 million of shares of the Company’s Common Stock to Investor under the terms of the ELOC Purchase Agreement, and the Principal Terms of Conversion for the conversion of at least $ 6.6 million of the outstanding principal of Secured Notes. Each proposal represented a critical element in the Company’s plan to regain compliance with all Listing Rules for the Nasdaq Exchange. Subsequent to March 31, 2025, the Company completed the following elements of its plan to regain compliance with all Nasdaq Listing Rules: • On April 17, 2025, the Company formally applied to move to the Capital Markets tier, thus will refer to the Listing Rules for that tier for the compliance with all Listing Rules. • The Reverse Split was effective on April 11, 2025. On April 28, 2025, the Company completed 10 consecutive trading days with a trading price for its listed securities at $ 1.00 or above, thus achieving compliance with the minimum bid price rule. The Company remains in compliance as of the date of issuance of this Quarterly Report. • On April 16, 2025, after the SEC declared a registration statement effective, the Company has registered the underlying shares of Common stock for up to $ 40.0 million of shares issuable to Investor under the terms of a Equity Purchase Agreement. • On April 16, 2025, after the SEC declared a registration statement effective, the Company has registered the underlying shares of Common Stock for the Common Stock Warrant issued in its November 2024 financing. • On May 1, 2025, the noteholders of $ 6.6 million of outstanding principal of Secured Notes entered a definitive conversion agreement with the Company. 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”). The BE&K Complaint was filed by BE&K Building Group, LLC as Plaintiff and each of the Company, Cogent Bank, B&I Contractors, Southern Painting, Dash Door & Closer Service, Inc., Fisk Electric Company and Lotspeich Co. of Florida as Defendants. BE&K Building Group, LLC v. HCW Biologics, et al., CACE-25-004668 (Fla. 17 th Cir. Ct. 2025) (the “BE&K Litigation”). The Company was also served with a cross claim from B&I Contractors and Dash Door & Closer Service, Inc. and a complaint filed by Fisk Electric Company. See Note 9. Commitments and contingencies - Legal, Other Matters. 17 On May 7, 2025, the noteholders of $ 6.6 million of the outstanding principal of the Secured Notes (participating noteholders) effected the conversion of the Secured Notes held by them into shares of the Company’s Common Stock at a conversion price of $ 26.00 per share (adjusted for the Reverse Stock Split), warrants to purchase approximately $ 3.3 million of the Company’s Common Stock at an exercise price of $ 26.00 per share (as adjusted for the Reverse Stock Split), and the right to their pro rata share of 49.1 % of the proceeds of the Company’s shares of Wugen common stock, if and when such shares are ever sold. This transaction was effected pursuant to the terms of a Second Amendment to Amended and Restated Senior Secured Note Purchase Agreement and Related Agreements dated as of May 1, 2025 (the “Conversion Agreement”). The conversion was completed on May 7, 2025 , pursuant to the Conversion Amendment, the Secured Notes held by the participating noteholders were cancelled, and the Company issued unregistered shares of Common Stock (which are subject to a 180-day lock-up from the conversion date) and warrants to purchase up to $ 3.3 million of Common Stock that may be exercised at any time up to five years from the closing date (any such shares also subject to a 180-day lock-up from the conversion date). As of May 5, 2025, the Company issued a total of $ 270,000 principal amount of unsecured convertible promissory notes that mature on May 5, 2026 with paid in kind interest accruing thereon, payable quarterly in arrears at 10 % per annum (the “Convertible Bridge Notes”). In accordance with their terms, following the completion of a qualified offering, the Convertible Bridge Notes will be converted into shares of our Common Stock at the final offering price in an o ffering that closed on May 15, 2025. In addition, holders of the Convertible Bridge Notes have the right to receive a portion of the proceeds of the Company’s shares of Wugen common stock, if and when such shares are ever sold, determined by the number of the Wugen shares equal to 0.25 multiplied by the original principal amount, in dollars, of the Convertible Bridge Notes. Investors included: $ 60,000 invested by Hing C. Wong, the Company’s Founder and CEO; $ 100,000 invested by Scott T. Garrett, the Chairman of the Company’s Board of Directors; and $ 10,000 invested by Gary M. Winer, a member of the Company’s Board of Directors. On May 13, 2025, the Company completed its performance obligation under the WY Biotech Agreement, as amended. By doing so, the Company delivered a technology transfer report which characterized the licensed molecules, HCW11-006. WY Biotech has a 30-day due diligence period during which it will assess the contents of this report. At the end of the due diligence period, WY may either elect to terminate the Agreement with no penalties or continue with the Agreement, as which point it would become binding. 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. Also on May 15, 2025, the Company received a notification for exercise of 177,140 of its 513,140 Pre-Funded Warrants. 18