What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2025-08-18 compared with 2025-05-15 · 397 added, 198 removed, 260 unchanged (70% of the section changed)

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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.

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

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

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and ImmunityBio Inc.

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

will be referred to herein as “ImmunityBio”), entered into a Settlement Agreement that is described in Part II, Item 1.

– “Legal Proceedings” below.

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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.

Wugen License Agreement and Potential Spin Off in Favor of HCWB

We signed our first out-license agreement at the end of 2020, when we entered into an exclusive worldwide license (the “Wugen License”) with Wugen, Inc., a company specializing in cell-based therapies for cancer.

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.

Wugen has created an off-the-shelf NK-cell treatment called WU-NK-101 based on the licensed molecules.

Wugen is focusing is clinical development strategy on its CAR-T program, which is in a pivotal clinical trial.

Since inception in December 2020, the Company has recognized $16.2 million of revenues derived from the Wugen License, including upfront license fees in cash and shares of Wugen common stock, purchase of the Company’s inventory of certain molecules needed for manufacturing, and purchases of materials for its clinical trials.

In addition, the Company received over $1.8 million of reimbursement for some of the Company’s R&D expenses.

In the quarter ended June 30, 2025, the Company agreed to a request from Wugen to suspend the Wugen License, including all of its rights related to the license molecules and its obligation to pay $500,000 annually to reimburse the Company for certain R&D expenses.

The suspension will run for a period of one year from the effective date and will end on May 29, 2026.

During the suspension, the Company has the right to terminate the license in order to enter other business development transactions related to the licensed molecules.

The Company is currently in active discussions for a license agreement with major biologics manufacturing companies who are interested in licensing molecules to use as reagents in the manufacturing process for CAR-T therapies.

The Company has no remaining performance obligations.

There is no deferred revenue related to the sale of clinical material to Wugen.

There is product in storage that is the responsibility of Wugen.

No impairment charges were taken in relation to the suspension.

WY Biotech License Agreement

In November 2024, the Company and WY Biotech Co., Ltd.

(“WY Biotech”) entered into a License, Research and Co-Development Agreement (“WY Biotech License”), as amended.

The WY Biotech License is a grant of an exclusive, worldwide license to use and apply HCW11-006, a preclinical molecule, for in vivo applications.

The Company holds an Opt-In Right under the provisions of the WY Biotech License, 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 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.

Under the amended terms, the parties agreed to extend the timing for the payment of the upfront license fee of $7.0 million and reduced the performance obligation for the Company to the delivery of a technical report that characterized the licensed molecule by May 13, 2025.

In the quarter ended June 30, 2025, the Company delivered the technical report and WY Biotech notified the Company that it completed its due diligence to study the technical report delivered by the Company and elected to continue with the exclusive worldwide WY Biotech License, as amended.

As a result, WY Biotech is financially obligated to the Company, as detailed in the WY Biotech License, as amended, including the obligation to pay a $7.0 million upfront license fee.

WY Biotech is in the process of finalizing agreements with its contract development and manufacturing organization (“CDMO”) and investors.

Since the Company has no payment history with WY Biotech, it did not recognize the upfront license fee as revenue as we concluded collectability was not probable.

In order to accommodate WY Biotech’s timing in finalizing agreements, the Company and WY Biotech agreed to extend the latest date for payment of the $7.0 million license fee to September 30, 2025.

As of June 30, 2025, the Company determined that it had fully satisfied the performance obligation under the agreement and that the $7.0 million non-refundable, upfront license fee was fixed and not subject to future performance.

Based on its assessment under ASC 606-10-25-1(e), the Company concluded revenue would be recognized when WY Biotech enters legally binding agreements with its investors, at which time it would be considered collectable.

$5.0 Million Equity Offering and Equity Dividend to Investor

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.

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

The Company estimated the fair value of the securities issued and the value of repricing the warrants, and determined a fair value of $15.2 million.

The difference between the gross proceeds and estimated fair value was recognized as an equity dividend to an existing stockholder.

Full Settlement of $7.7 million of Debt to Strengthen the Company’s Balance Sheet

On May 7, 2025, the Company restructured $7.4 million of debt that was issued in the form of Secured Notes including accumulated accretion of a fixed bonus payable upon Maturity Date for full settlement.

Investors included:

$2.4 million invested by Dr.

Wong, Founder and Chief Executive Officer;

$220,000 invested by Rebecca Byam, Chief Financial Officer;

$25,000 invested by Lee Flowers, Senior Vice President of Business Development;

$140,000 invested by Scott T.

Garrett, the Chairman of the Company’s Board of Directors;

$60,000 invested by Gary M.

Winer, who was a member of our Board of Directors at the time of his investment;

$25,000 invested by Rick S.

Greene, a member of our Board of Directors;

as well as other significant stockholders.

Converting noteholders received 253,083 unregistered shares of Common Stock at a conversion price of $26.00 per share, and Common Stock Warrants to purchase up to 126,540 shares of Common Stock at an exercise price of $26.00 per share.

In addition, the Company transferred to converting noteholders the right to receive the proceeds of the liquidation or sale of 1,067,796 of the Company’s Wugen shares, which was recorded as a contingent liability at a fair value of $1.6 million as of June 30, 2025.

The Company recognized a $3.5 million gain from the restructuring, inclusive of derecognition of accumulated accretion of a fixed bonus payable upon Maturity Date of $860,462.

Due to the related party nature of the noteholders, the gain was recorded to additional paid-in capital for the period ended June 30, 2025.

On May 15, 2025, the Company extinguished $270,000 of debt that was issued in the form unsecured promissory notes, according to conversion provisions of the purchase agreement.

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;

$10,000 invested by Gary M.

Winer, who was a member of the Company’s Board of Directors at the time of his investment;

and other significant stockholders.

According to the terms of the conversion provision contained in the purchase agreement, the Company issued 36,242 registered shares of the Company’s Common Stock at a conversion price of $7.45 per share.

These securities are subject to a 90-day lockup.

In addition, the Company transferred to converting noteholders the right to receive the proceeds of the liquidation or sale of 67,500 of the Company’s Wugen shares, which was recorded as a contingent liability at a fair value of $103,950 as of June 30, 2025.

The Company recognized a loss of upon conversion of $131,134.

Due to the related party nature of the noteholders, the loss was recorded to additional paid-in capital for the period ended June 30, 2025.

Compliance with Nasdaq Listing Rules

On June 26, 2025, HCW Biologics Inc.

(the “Company”) announced that it received formal notice from The Nasdaq Stock Market LLC (“Nasdaq”) that the Company is in compliance with Listing Rule 5550(b)(1) (the “Equity Rule”).

On May 13, 2025, the Company received formal notice from Nasdaq that it regained compliance with the bid price requirement in Listing Rule 5550(a)(2), the public float requirement in Listing Rule 5550(a)(4), and the market value of publicly held shares requirement in Listing Rule 5550(a)(5).

As a result, the Company was in compliance with all applicable criteria for continued listing on the Nasdaq Capital Market tier, and the previously disclosed listing compliance matters have been closed.

The Company was notified that it will remain subject to a “Panel Monitor,” as that term is defined in Nasdaq Listing Rule 5815(d)(4)(B), for a period of one year from the date of the Nasdaq notice, through June 23, 2026.

If, during the term of the Panel Monitor, the Company does not continue to remain in compliance with the Equity Rule, the Company will not be provided with the opportunity to submit a compliance plan for review by the Listing Qualifications Staff and must instead request a hearing before the Panel to address the deficiency, with such request staying any further action with respect to the Company’s listing on Nasdaq pending completion of the hearing process.

Biologics 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, as well as other clinical-stage companies developing biologics.

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.

With the threat of pharmaceutical tariffs hanging over the biopharmaceutical industry and a push to “re-shore” manufacturing, especially pharmaceuticals, 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.

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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”).

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.

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.

– “Legal Proceedings.” On August 8, 2025, B&I Contractors, Inc., one of the defendants in the BE&K Complaint, filed a motion for summary judgment (the “MSJ”) as to the Count I (Foreclosure of Construction Lien).

The Company has responded to the BE&K and Fisk Complaints and cross-claims and intends to file a timely response to the B&I MSJ.

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

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.

The Company intends to include up to five clinical sites in this study, and we expect to open and initiate the clinical trial in the third quarter of 2025.

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

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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.

Given the results of the studies, HCW9206 has the potential to provide a solution for key challenges facing T-cell receptor - T cell (“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.

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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 proprietary fusion protein shown to be highly effective at generating 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.

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

At the 2025 Annual Meeting of American Association of Immunologists, our collaborator gave a poster presentation that 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.

In experimental humanized models in mice, adoptively transferred HCW9206-generated HIV- and CD19-specific CAR-Ts 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.

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.

The Company has commenced a search to identify a strong commercial partner for the sale and/or integration of HCW9206 as a reagent into CAR-T based manufacturing processes.

Second-Generation Multi-Specific T-Cell Engagers

The Company has developed second-generation, multi-specific T-cell engagers against solid tumors, particularly for pancreatic cancer, using its novel proprietary TRBC product discovery and development platform technology.

T-cell engagers revolutionized the immunotherapeutic approach against cancer.

Currently, T-cell engagers have approval from the U.S.

Food and Drug Administration to be used in the treatment of a small number of indications, including various hematological and solid tumors.

The Company believe that it has created a potentially highly effective T-cell engagers against difficult-to-treat solid tumors by using exceptional targets while managing immunosuppression.

The TRBC technology enabled the Company to construct T-cell engagers that not only target cancer antigens and CD3 activation of effector T cells, but also simultaneously reduce the immunosuppression in tumor microenvironment.

Such immunosuppression plays a pivotal role in reducing effector T-cell infiltration and anti-tumor efficacy in solid tumors.

The Company’s two lead T-cell engagers target tissue factor and mesothelin, which are proven solid tumor antigens.

These product candidates exhibit potent and antigen-specific anti-pancreatic cancer activities both in vitro and in humanized mouse models at dose levels that are well tolerated.

We plan to begin actively seeking a partner for the development of the Company’s T-Cell Engager and other Immune Cell Engagers in Q3 2025.

Second-Generation Immune Checkpoint Inhibitors

The Company has developed second-generation, pembrolizumab-based immunotherapeutics against solid tumors, particularly for pancreatic and ovarian cancer, using its novel proprietary TRBC product discovery and development platform technology.

Pembrolizumab, known as KEYTRUDA ® (a registered trademark of Merck Sharp & Dohme LLC), is the leading FDA-approved ICI.

Since their introduction to the treatment of cancer in 2011, immune checkpoint inhibitors (“ICIs”) have been hailed as a breakthrough cancer therapy.

Immune checkpoint proteins are expressed on the surface of T cells as the acting regulators for inhibiting the over-activation of T cells.

By using ICIs, the immune response of T cells can be largely activated to re-establish the immune effects of anti-tumor exhausted T cells.

However, there is vast evidence in preclinical and clinical studies suggesting that the lack of immune-cell costimulatory activities on ICIs diminishes their anti-tumor efficacy.

The Company’s pembrolizumab-based fusion molecules have been selected as leading clinical product candidates because they exhibit potent anti-pancreatic cancer activities and outperform pembrolizumab as monotherapy for cancer both in vitro and in humanized mouse models at dose levels that are well tolerated.

This novel fusion immunotherapeutics block the checkpoint receptors and engages the costimulatory receptors, analogous to taking the foot off the brake and simultaneously hitting the gas, thus, representing a breakthrough second-generation ICI which revives anti-tumor function of T cells.

Trends and Uncertainties

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See Note 1 to our condensed interim financial statements included elsewhere in this Quarterly Report for these definitions and more information.

We derive revenue from a license agreement granting rights to Wugen to further develop and commercialize products based on two of our internally-developed molecules.

We derive revenue from license agreements.

The Company entered the Wugen License in December 2020.

On May 30, 2025, the Company agreed to a request from Wugen to suspend the Wugen License for a period of one-year.

During this time, the Company may seek other business development transactions and may choose to terminate the Wugen License.

Since inception, the Company has recognized $16.2 million of revenues derived from the Wugen License, including upfront license fees in cash and shares of Wugen common stock, payments for vials of materials, and for manufacturing of development supplies for clinical trials.

Consideration under our contract included a nonrefundable upfront payment, development, regulatory and commercial milestones, and royalties based on net sales of approved products.

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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.

The Company entered the WY Biotech License in November 2024.

On May 30, 2025, WY Biotech notified the Company that it completed its due diligence to study the technical report delivered by the Company and elected to continue with the WY Biotech License.

As a result, WY Biotech is financially obligated to the Company, as detailed in the WY Biotech License, as amended, including the obligation to pay a $7.0 million upfront license fee.

WY Biotech is in the process of finalizing agreements with its contract development and manufacturing organization (“CDMO”) and investors.

Since the Company has no payment history with WY Biotech, it did not recognize the upfront license fee as revenue as we concluded collectability was not probable.

In order to accommodate WY Biotech’s timing in finalizing agreements, the Company and WY Biotech agreed to extend the latest date for payment of the $7.0 million license fee to September 30, 2025.

Operating Expenses

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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, 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.

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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.

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.

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 I, Item 3.

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.

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

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 three- and six-month periods ended June 30, 2024.

Interest Expense

Interest expense includes interest paid on debt.

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

This includes interest due on the Cogent Bank loan, Secured Notes issued by the Company and accretion of original issue discount and debt issuance costs.

Unrealized Gain on Investment

Unrealized gain on investment includes the gain on Wugen shares which Company elected to measure at fair value in the period ended June 30, 2025.

Other Income, Net

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Three Months Ended

Six Months Ended

Cost of revenues

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General and administrative

Legal expenses, net

Legal expenses (recoveries), net

Nonoperating loss

Total operating expenses

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Interest expense

Unrealized gain on investment

Other income, net

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.

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

Comparison of the Three Months ended June 30, 2024 and June 30, 2025

The Company recognized revenues of $618,854 and $6,550 for the three months ended June 30, 2024 and 2025, respectively.

Revenues were derived exclusively from the sale of licensed molecules to Wugen in the three months ended June 30, 2024.

There were no deferred revenues as of June 30, 2024 or June 30, 2025.

Research and Development Expenses

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

The following table summarizes our research and development expenses for the three months ended June 30, 2024 and June 30, 2025:

Three Months Ended

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Total research and development expenses

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.

Research and development expenses decreased by $802,362, or 40%, from $2.0 million for the three months ended June 30, 2024 to $1.2 million for the three months ended June 30, 2025.

The decrease was primarily due to a decline in manufacturing and materials and preclinical expenses.

Salaries, benefits, and related expenses increased by $21,794, or 3%, from $756,646 for the three months ended June 30, 2024 to $778,440 for the three months ended June 30, 2025.

This increase was primarily attributable to the loss of $125,000 of the Wugen reimbursement of certain R&D expenses, which required that the Company pay all of these expenses.

Manufacturing and materials expense decreased by $717,784, or 95%, from $751,770 for the three months ended June 30, 2024 to $33,986 for the three months ended June 30, 2025.

In the three months ended June 30, 2024, costs were primarily attributable to increased costs of production and materials related to manufacturing high-producing cell line of HCW9101, an affinity ligand we use in our manufacturing process.

In the three months ended June 30, 2025, the Company had produced and vialed the product necessary for the clinical trials for HCW9302.

Manufacturing activities for the molecules invented with the Company’s new TRBC platform have not yet commenced.

the Company is focused on internal development and preparation for the subsequent creation of master cell banks to generate TRBC-based products.

Expenses associated with preclinical activities decreased by $111,528, or 43%, from $258,476 for the three months ended June 30, 2024 to $146,948 for the three months ended June 30, 2025.

In the three months ended June 30, 2024, toxicology and other IND-enabling studies were winding down, as we prepare to submit the IND application for HCW9302, for which the Company received clearance of its IND from FDA early in 2025.

In the three months ended June 30, 2025, there was a $195,830 decrease in cost related to toxicology and drug testing that were necessary for the IND application.

Expenses associated with clinical activities increased by $45,815, or 70%, from $65,120 for the three months ended June 30, 2024 to $110,935 for the three months ended June 30, 2025.

The increase of expenses is primarily attributable to a $45,217 increase in costs related to outside advisors and collaborators and a $16,163 increase in costs related to site fees and data management, partially offset by a $15,575 decrease in patient-related fees.

We anticipate that clinical expenses will increase in the coming year due to the initiation of the clinical trial to evaluate HCW9302 in an autoimmune indication.

Other expenses, which include overhead allocations, decreased by $40,659, or 21%, from $197,174 for the three months ended June 30, 2024 to $156,515 for the three months ended June 30, 2025.

This decrease is primarily attributable to a $40,955 decrease allocation of depreciation for scientific equipment.

General and Administrative Expenses

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

The following table summarizes our general and administrative expenses for the three months ended June 30, 2024 and June 30, 2025:

Three Months Ended

2 unchanged sentences

Facilities and office expenses

Accretion of fixed bonus upon maturity of Senior Notes, net

Accretion of fixed bonus upon maturity of Secured Notes

Rent and occupancy expense

1 unchanged sentence

Total general and administrative expenses

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 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.

NM = Not meaningful

General and administrative expenses increased $501,828, or 31%, from $1.6 million for the three months ended June 30, 2024 to $2.1 million for the three months ended June 30, 2025.

The increase is primarily due to increases in fees for professional services and 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, partially offset by a decrease in expenses related to facilities and office expenses.

Salaries, benefits and related expenses increased by $50,565, or 7%, from $714,974 for the three months ended June 30, 2024 to $765,539 for the three months ended June 30, 2025.

There was a $33,931 increase in salaries, bonus payments and related taxes and a $33,203 increase in expense related to stock-based compensation, partially offset by a $16,569 decrease in expenses related to employee benefits.

Professional services increased by $266,678, or 116%, from $229,963 for the three months ended June 30, 2024 to $496,641 for the three months ended June 30, 2025.

There was a $210,521 increase in fees paid for audit services, technical accounting advice, tax services, as well as the costs related to maintaining compliance with SEC and Nasdaq listing requirements.

During this period, the Company completed a reverse stock split and received a Nasdaq determination letter for compliance with all listing rules.

There was a $47,544 increase in fees paid 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.

Facilities and office expenses decreased by $92,975, or 45%, from $204,715 for the three months ended June 30, 2024 to $111,740 for the three months ended June 30, 2025, primarily due to decreases of $93,576 in fees paid for licenses, software and IT services.

Throughout 2024, the Company issued $6.9 million of Secured Notes.

The terms of the Secured Notes were amended on July 2, 2024 to include a fixed bonus payment in the event that the Secured Notes were repaid on their Maturity Date.

In the three months ended June 30, 2025, the Company recognized an expense of $102,248 for accretion of the fixed bonus payment.

On May 7, 2025, $6.6 million of the principal of the Secured Notes converted to equity.

The accretion expense represents the accretion for the period up to the conversion date for these Secured Notes.

Other expenses increased by $184,231, or 59%, from $313,934 for the three months ended June 30, 2024 to $498,165 for the three months ended June 30, 2025.

The increase is primarily attributable a $79,314 increase in insurance-related costs and an increase of $105,363 for expenses related to recognition of financing costs that did not qualify for deferral, primarily related to the registration of the underlying shares of the Equity Purchase Agreement with Square Gate.

Legal Expenses

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

In the three months ended June 30, 2024, the Company incurred $10.4 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.

During the three months ended June 30, 2024, terms for the Settlement were reached.

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.

As of June 30, 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 $6,700 for accrued legal fees within Accrued liabilities and other current liabilities.

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.

See Part II, Item 1, “Legal Proceedings.”

In the three months ended June 30, 2025, the Company incurred $142,542 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.

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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.

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.

Related to the 2022 Loan, in the three months ended June 30, 2024 and June 30, 2025, we paid $93,789 and $92,569, respectively, in cash for interest.

For the three months ended June 30, 2024 and 2025, interest was expensed.

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.

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

During the three months ended June 30, 2024 and 2025, the Company incurred $65,293 and $67,324, respectively, of interest expense related to the Secured Notes.

The noteholders holding $6.6 million of the outstanding principal of the Secured Notes converted their Secured Notes for equity on May 7, 2025.

On May 8, 2025, the Company issued a $150,000 promissory note with a personal guarantee from the Company’s Founder and Chief Executive Officer, which has an original issue discount of $75,000 which is accreted on a straight-line basis from the date of issuance to the Maturity Date of February 7, 2026.

In the three months ended June 30, 2025, the Company recognized $6,389 of accretion expense.

For the three months ended June 30, 2024 and 2025, the Company recognized $2,592 and $17,314, respectively, for the amortization of debt issuance costs included within Interest expense on the condensed interim statement of operations.

Unrealized Gain on Investment

The Company recognized $1.7 million of unrealized gain on investment for the three months ended June 30, 2025.

There was no unrealized gain on investment in the comparable period in 2024.

Other Income, Net

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.

Other income, net had a de minimis increase from $15,485 for the three months ended June 30, 2024 to $16,373 for the three months ended June 30, 2025.

Comparison of the Six Months ended June 30, 2024 and June 30, 2025

The Company recognized $1.7 million and $11,615 of revenues for the six months ended June 30, 2024 and 2025, respectively.

In the six months ended June 30, 2024 and 2025, 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.

As of June 30, 2025, the Company agreed to a request from Wugen to suspend the Wugen License for a period of one year, so the Company expects there will be no revenue under the Wugen license during this time.

The suspension will run for a period of one year from the effective date and will end on May 29, 2026.

During the suspension, the Company is free to enter licenses with other parties for the molecules that are subject of the Wugen license.

We are in active negotiations with some large biologics manufacturers concerning a license for HCW9206, which can be used to make the manufacturing of CAR-T products more efficient.

Research and Development Expenses

The following table summarizes our research and development expenses for the six months ended June 30, 2024 and June 30, 2025:

Six Months Ended

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 $1.5 million, or 35%, from $4.2 million for the six months ended June 30, 2024 to $2.7 million for the six months ended June 30, 2025.

This decrease was primarily attributable to a decrease in expenses related to manufacturing and materials and preclinical expenses, although expenses declined in all categories.

Salaries, benefits, and related expenses decreased by $56,847, or 4%, from $1.5 million for the six months ended June 30, 2024 to $1.5 million for the six months ended June 30, 2025.

This decrease is primarily attributable to a decrease in salaries and payroll taxes of $177,258 and a decrease of $73,277.

In addition, the Company did not have the Wugen reimbursement of certain R&D expenses at this time, which ordinarily would have offset costs.

During this time, the Wugen reimbursement to support the Company’s R&D activities declined by $187,500.

Manufacturing and materials expense decreased by $1.0 million, or 78%, from $1.3 million for the six months ended June 30, 2024 to $296,783 for the six months ended June 30, 2025.

In the six months ended June 30, 2024, costs were primarily attributable to the costs of production and materials related to manufacturing the high producing cell-line of HCW9101.

In the six months ended June 30, 2025, the decrease in manufacturing and materials costs were primarily attributable to a $1.0 million decrease in drug costs and a $15,107 decrease in ancillary expenses such as shipping and storage costs.

Expenses associated with preclinical activities decreased by $219,507, or 40%, from $543,567 for the six months ended June 30, 2024 to $324,060 for the six months ended June 30, 2025.

In the six months ended June 30, 2024, toxicology and other IND-enabling studies were winding down, as we prepared its IND application for the evaluation of HCW9302 in an autoimmune disease.

The Company received clearance of its IND from FDA early in 2025.

In the six months ended June 30, 2025, expenses were incurred in connection with further testing and research with collaborators.

Expenses associated with clinical activities decreased by $33,003, or 10%, from $331,758 for the six months ended June 30, 2024 to $298,755 for the six months ended June 30, 2025.

The decrease was primarily attributable to a $73,231 decrease in patient fees, partially offset by a $41,815 in costs related to clinical site maintenance and data management.

In the six months ended June 30, 2024, our activities were focused on post-clinical correlative studies which we conducted through collaborations.

In the six months ended June 30, 2024, as a result of the Settlement Agreement, ImmunityBio has the exclusive right to the use of HCW9218 in the treatment of cancer.

In the six months ended June 30, 2025, activities were focused on additional studies with collaborators and start up fees related to opening clinical sites in preparation for the initiation of the clinical trial to evaluate HCW9302 in an autoimmune disease.

Other expenses, which include overhead allocations, decreased by $106,288, or 26%, from $412,680 for the six months ended June 30, 2024 to $306,392 for the six months ended June 30, 2025.

The decrease in other expenses is primarily attributable to a $87,716 decrease in the allocation of depreciation and a $18,267 decrease in costs related to repairs and maintenance.

General and Administrative Expenses

The following table summarizes our general and administrative expenses for the six months ended June 30, 2024 and June 30, 2025:

Six Months Ended

Salaries, benefits and related expenses

Professional services

Facilities and office expenses

Accretion of fixed bonus upon maturity of Secured Notes

Other expenses

Total general and administrative expenses

NM = Not meaningful

General and administrative expenses related to the ordinary course of business increased by $1.1 million, or 36%, from $3.2 million for the six months ended June 30, 2024 to $4.3 million for the six months ended June 30, 2025.

The increase is primarily attributable to increases in salaries and benefits, professional fees, accretion of the fixed bonus payable if Secured Notes are repaid on the Maturity Date, and insurance costs.

Salaries, benefits and related expenses increased by $317,441, or 26%, from $1.2 million for the six months ended June 30, 2024 to $1.5 million for the six months ended June 30, 2025.

In the six months ended June 30, 2024, officers waived a $298,159 a performance-based bonus payment that was earned in 2022, which effectively reduced the salaries, benefits and related expenses by that amount.

Excluding the benefit of the waiver of the performance-based bonus, there was a $19,282 increase in salaries, benefits and related expenses from the six months ended June 30, 2024 to the six months ended June 30, 2025.

In the six months ended June 30, 2025, there was a $35,978 increase in employee benefits, partially offset by a $16,695 decrease in salaries and related taxes.

Professional services increased by $367,239, or 63%, from $583,769 for the six months ended June 30, 2024 to $951,008 for the six months ended June 30, 2025.

The increase is primarily attributable to a $356,801 increase in fees paid for audit services, technical accounting advice, tax services, as well as the costs related to maintaining compliance with SEC and Nasdaq listing requirements.

During this period, the Company completed a reverse stock split and received a Nasdaq determination letter for compliance with all listing rules.

There was an increase of $16,400 related to expenses for public relations activities such as press releases.

In the six months ended June 30, 2025, professional services include legal expenses of $305,536 for fees related to patents, a $5,962 decrease from the comparable period a year earlier.

Facilities and office expenses decreased by $202,246, or 50%, from $408,314 for the six months ended June 30, 2024 to $206,068 for the six months ended June 30, 2025.

The decrease is primarily due to a $187,483 decrease in fees paid for licenses, software and IT services.

Throughout 2024, the Company issued $6.9 million of Secured Notes.

The terms of the Secured Notes were amended on July 2, 2024 to include a fixed bonus payment in the event that the Secured Notes were repaid on their Maturity Date.

In the six months ended June 30, 2025, the Company recognized an expense of $375,308 for accretion of the fixed bonus payment.

On May 7, 2025, $6.6 million of the principal of the Secured Notes converted to equity.

The accretion expense represents the accretion for the period up to the conversion date for these Secured Notes.

Other expenses increased by $292,000, or 42%, from $691,215 for the six months ended June 30, 2024 to $983,215 for the six months ended June 30, 2025.

The increase is primarily attributable to a $108,848 related to expenses for financing costs, including the Equity Purchase Agreement with Square Gate and a $194,915 increase in insurance-related costs, partially offset by a $17,937 decrease in travel-related expenses.

Legal Expenses

Legal expenses related to the Arbitration were $14.8 million for the six months ended June 30, 2024.

In the six months ended June 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 primarily to represent the Company and Dr.

Wong, our Founder and Chief Executive Officer, but also for Dr.

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.

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.

See Part II, Item 1, “Legal Proceedings.”

In the six months ended June 30, 2025, the Company received a $2.0 million 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.

The insurance reimbursement is included within Legal expenses, net, along with legal fees related to the Arbitration of $402,995 incurred in the six months ended June 30, 2025.

For the six months ended June 30, 2025, the Company reported a contra expense of $1.6 million in Legal expenses, net in the accompanying condensed interim statement of operations.

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 (the “2022 Loan”).

We borrowed $6.5 million under this agreement.

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

Related to the 2022 Loan, in the six months ended June 30, 2024 and June 30, 2025, we paid $188,162 and $183,604, respectively, in cash for interest.

For the six months ended June 30, 2024, three months interest was capitalized and three months interest was expensed.

For the six months ended June 30, 2025, interest was expensed.

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

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

During the six months ended June 30, 2024 and 2025, the Company incurred $65,293 and $220,558, respectively, of interest expense related to the Secured Notes.

The noteholders holding $6.6 million of the outstanding principal of the Secured Notes converted their Secured Notes for equity on May 7, 2025.

On May 8, 2025, the Company issued a $150,000 promissory note with a personal guarantee from the Company’s Founder and Chief Executive Officer, which has an original issue discount of $75,000 which is accreted from the date of issuance to the Maturity Date of February 7, 2026.

In the six months ended June 30, 2025, the Company recognized $14,722 of accretion expense.

For the six months ended June 30, 2024 and 2025, the Company recognized $5,183 and $74,344, respectively, for the amortization of debt issuance costs included within Interest expense on the condensed interim statement of operations.

Unrealized Gain on Investment

The Company recognized $1.7 million of unrealized gain on investment for the six months ended June 30, 2025.

There was no unrealized gain on investment in the comparable period in 2024.

Other Income, Net

Other income, net increased from $41,086 for the six months ended June 30, 2024 to $41,122 in the six months ended June 30, 2025.

Liquidity and Capital Resources

Sources of Liquidity

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.

As of June 30, 2025, our principal source of liquidity was $2.4 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 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.

While we have already begun to successfully execute our financing plan, including raising $11.9 million in two equity financings, putting an Equity Purchase Agreement in place, and completing our performance obligation under the WY Biotech License to earn an $7.0 million upfront license fee which we expect to collect in the third quarter of 2025, we concluded that elements of our financing plan are not probable and thus they were not sufficient to include in our going concern analysis.

In addition, during the period ended June 30, 2025, the Company strengthened our balance sheet by extinguishing $7.7 million of debt through restructuring and conversion to equity, including restructuring $7.4 million of Secured Notes and accumulated accretion of a fixed bonus payable upon Maturity Date and converting $270,000 of unsecured promissory notes according to the terms in the agreement.

In the coming year, we believe we have some significant potential valuation inflection points related to expected initiation of a clinical trial to evaluate HCW9302 in an autoimmune disease, licensing agreements and revelations regarding the potential of some of the new class of molecules the Company has created with our TRBC platform.

These events could provide much needed momentum for successful financings.

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 Company expects to continue to access the public markets through the issuance of shares of Common Stock and other securities.

Thus, resolving the compliance issues with Nasdaq is a critical element to our liquidity and capital reserves.

On June 26, 2025, Company announced that it received formal notice from Nasdaq that the Company is in compliance with Listing Rule 5550(b)(1) (the “Equity Rule”).

As a result, the Company is in compliance with all applicable criteria for continued listing on the Nasdaq Capital Market tier, and the previously disclosed listing compliance matters have been closed.

The Company was also notified that it will remain subject to a “Panel Monitor,” as that term is defined in Nasdaq Listing Rule 5815(d)(4)(B), for a period of one year from the date of the Nasdaq notice, through June 23, 2026.

One of the means the Company has at its disposal for accessing the public market through the issuance of shares of Common Stock is a standby equity purchase agreement.

On February 20, 2025, the Company entered into an Equity Purchase Agreement and a related Registration Rights Agreement with Square Gate Capital Master Fund, LLC - Series 4 (“Square Gate”), pursuant to which the Company will have the right, but not the obligation, to sell to Square Gate, and Square Gate 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 April 16, 2025, the SEC declared a registration statement effective to sell up to $40.0 million of the Company’s shares to Square Gate, according to provisions of the Equity Purchase Agreement.

In addition to equity financings, a key strategy in our financing plan is identifying candidates in our sizeable molecule portfolio that 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.

Since the inception of the Wugen License in December 2020, the Company has recognized cumulative revenues of $16.2 million.

In the quarter ended June 30, 2025, the Company agreed to a request from Wugen to suspend the Wugen License, including Wugen’s clinical trial due diligence obligations and its obligation to pay $500,000 annually to reimburse the Company for certain R&D expenses.

The suspension will run for a period of one year from the effective date and will end on May 29, 2026.

During the suspension, the Company has the exclusive right to seek alternate licensees and terminate the license in order to enter other business development transactions related to the ex vivo rights of licensed molecules.

We are actively engaged in discussions with several large biologics manufacturing companies with interest in a license for these molecules.

In the quarter ended June 30, 2025, WY Biotech notified the Company that it completed its due diligence to study the technical report delivered by the Company and elected to continue with the exclusive worldwide license agreement, as amended (the “WY Biotech License”).

As a result, WY Biotech is financially obligated to the Company, as detailed in the WY Biotech License, as amended, including the obligation to pay the $7.0 million upfront license fee.

In order to accommodate WY Biotech’s timing in finalizing agreements with its CDMO and investors, the Company and WY Biotech agreed to extend the date for payment of the $7.0 million license fee on or before September 30, 2025.

Since the Company has no payment history with WY Biotech, the Company will recognize revenue when there are legally binding agreements with investors, as we concluded collectability was not probable.

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

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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.

In the accompanying condensed balance sheet as of June 30, 2025, the Company reported a balance of $12.3 million for legal fees incurred but not yet paid that were included within Accounts payable and an accrual of $8,000 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.

In the six months ended June 30, 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.

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.

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.

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 Company owns a property which we are renovating to create a biologics manufacturing facility to produce clinical trial quantities of material to serve our needs, the needs of our licensees, and other small clinical-stage immunotherapeutic companies.

We are actively seeking financing to complete this project.

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 our 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 June 30, 2025, certain subcontractors had filed mechanics liens related to unpaid invoices issued in connection with construction.

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 June 30, 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.

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.

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.

On August 8, 2025, B&I Contractors, Inc., one of the defendants in the BE&K Complaint, filed a motion for summary judgment (the “MSJ”) as to the Count I (Foreclosure of Construction Lien).

The Company has responded to the BE&K and Fisk Complaints and cross-claims and intends to timely respond to the B&I MSJ.

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.

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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 as of March 31, 2025 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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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 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

Comparison of the Cash Flows for the Six Months Ended June 30, 2024 and June 30, 2025

The following table summarizes our cash flows for the six months ended June 30, 2024 and June 30, 2025:

Six Months Ended

Cash used in operating activities

Cash used in investing activities

Cash provided by (used in) financing activities

Net increase (decrease) in cash and cash equivalents

Cash (used in) provided by investing activities

Cash provided by financing activities

Net decrease in cash and cash equivalents

Operating Activities

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.

Net cash used in operating activities were $8.5 million for the six months ended June 30, 2024 and $6.8 million for the six months June 30, 2025.

Cash used in operating activities for the six months ended June 30, 2024 consisted primarily of net loss for the period of $22.7 million, partially offset by cash from a $11.9 million increase in accounts payable primarily related to legal fees incurred in connection with the Arbitration and Settlement Agreement, a $880,784 decrease in accounts receivable, and a $703,805 decrease in prepaid expenses and other assets, as well as cash provided by non-cash adjustments, consisting of $373,433 of cash provided for adjustment for depreciation and accretion and $484,506 of cash provided for adjustment for stock-based compensation.

Cash used by operating activities for the six months ended June 30, 2025 consisted primarily of net loss for the period of $4.1 million, a $1.7 million adjustment for unrealized gain on investment, a $560,590 decrease in Accounts receivable, a $2.8 million decrease in Accounts payable, and a $131,134 loss on conversion with a related party, partially offset by non-cash adjustments of $710,926 for depreciation and accretion expenses, $553,949 for compensation expenses related to stock-based compensation, and a $150,000 Commitment Fee paid in the Company’s Common Stock.

Cash provided by operations includes a $2.0 million 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.

See Part II, Item 1, “Legal Proceedings.”

Investing Activities

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.

Cash used by investment activities for the six months ended June 30, 2024 consisted of $111,142 used for purchases of property and equipment.

There was no cash used in or provided by investing activities for the six months ended June 30, 2025.

Financing Activities

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.

During the six months ended June 30, 2024, $6.1 million of cash provided by financing activities consisted of a $2.5 million private placement of the Company’s common stock and $3.7 million from the issuance of Secured Notes, partially offset by $58,829 of cash used for debt repayment.

During the six months ended June 30, 2025, $4.6 million of cash provided by financing activities consisted of the following:

• $1.5 million of gross proceeds for the issuance of shares of the Company’s Common Stock.

• $3.8 million in gross proceeds for the issuance of Pre-Funded Warrants may be exercised to purchase shares of the Company’s Common Stock.

• $150,000 in gross proceeds upon the issuance of a promissory note secured by a personal guarantee by the Company’s Founder and Chief Executive Officer.

• $824,899 used for issuance costs.

• $63,385 used to repay debt.

In the six months ended June 30, 2025, there were significant noncash transactions.

The Company restructured $7.4 million of Secured Notes and accumulated accretion for a fixed bonus payable upon Maturity Date, in exchange for shares of Common Stock, warrants to exercise for Common Stock, and the right to receive proceeds upon the liquidation or sale of a portion of the Company’s shares of Wugen common stock.

Because this was a transaction with related parties, the gain from restructuring was recorded to additional paid-in capital for the period ended June 30, 2025.

Also during this period, the Company closed on a $5.0 million financing in which it issued shares of the Company’s Common Stock and warrants to exercise to purchase shares of the Company’s Common Stock and repriced previously issued warrants with an existing stockholder of the Company.

The Company estimated fair value of the securities issued and repriced warrants was $15.2 million.

The difference between the gross proceeds and fair value was recognized as an equity dividend to investor, as this transaction was with an existing stockholder of the Company.

The Company recorded a $10.2 million dividend to additional paid-in capital for the period ended June 30, 2025.

Critical Accounting Policies, Significant Judgements and Use of Estimates

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Other than the above, there have been no material changes to our critical accounting policies and estimates from those described under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations— Critical Accounting Policies, Significant Judgements and Use of Estimates” in our Annual Report.

Standby Equity Line of Credit

The Company entered an Equity Purchase Agreement (the “Equity Purchase Agreement”) with an investor on February 20, 2025, which the Company deemed to be a Standby Equity Purchase Agreement (“SEPA”).

A SEPA is an equity-linked instrument for which an entity has the right, but not the obligation, to sell the entity’s common stock to third-party investors over a specified period.

The total number of shares that the entity may issue to the investor is capped by either an aggregate dollar amount or an aggregate number of shares.

Furthermore, the number of shares that an entity may issue at any particular time during the life of the SEPA is also limited.

The price payable by the investor for each share of common stock purchased from the entity is generally discounted.

In exchange for its access to capital through the SEPA, the entity typically provides up-front consideration to the investor in the form of cash or shares of the entity’s common stock.

Economically, before the entity has elected to sell shares, a SEPA represents a purchased put option on the entity’s own equity.

However, once the entity “draws” on the SEPA, the related number of shares issuable constitutes a forward contract to issue common stock.

Thus, a SEPA contains both a purchased put option element and a forward share issuance element.

This generally means that a SEPA generally does not qualify for equity classification.

Accordingly, entities must recognize an asset or liability for its SEPA.

Such asset or liability must be measured at fair value, with changes in fair value recognized in net (loss) income.

Because SEPAs do not qualify for classification in equity, an entity must expense as incurred the amount by which any consideration provided to the investor at the inception of the arrangement exceeds the fair value of the asset recognized for the SEPA.

An entity should recognize at fair value the common shares issued to the investor upon settlement of a SEPA by using the quoted price of the shares on the date of issuance.

The then-current fair value of the asset or liability for the associated forward share issuance contract must be derecognized in conjunction with the settlement.

The proceeds received from the investor are reflected and any residual amount must be charged (or credited) to earnings.

This accounting is consistent with the guidance in ASC 815 that applies upon the settlement of a derivative instrument.

When an equity-linked instrument classified as an asset or liability is settled, entities should measure the instrument at its current fair value as of the settlement date and include in earnings any previously unrecognized fair value gain or loss.

In summary, upon settlement of a forward issuance contract element of a SEPA, an entity would recognize in earnings the following amounts:

• The gain (loss) for the excess (deficit) of (a) the carrying amount of the asset or liability for the forward issuance contract plus the proceeds received and (b) the fair value of the common shares as of the issuance date.

• Any issuance or transaction costs incurred in conjunction with the issuance of the shares.

Recent Accounting Pronouncements

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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