HCW Biologics Inc. 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations. The following discussion and analysis of our financial condition and results of operations should be read in conjunction with (i) our unaudited condensed interim financial statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q and (ii) our audited financial statements and related notes and the discussion under the heading “Management's Discussion and Analysis of Financial Condition and Results of Operations” for the fiscal year ended December 31, 2024 included in the Annual Report on Form 10-K filed with the U.S. Securities and Exchange Commission (the “SEC”) on March 28, 2025 (the “Annual Report”). Our historical results are not necessarily indicative of the results that may be expected for any period in the future. Unless the context requires otherwise, references in this Quarterly Report on Form 10-Q to the “Company,” “HCW Biologics,” “HCWB”, “we,” “us” and “our” refer to HCW Biologics Inc. Forward-Looking Statements This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. All statements other than statements of historical facts contained in this quarterly report, including statements regarding our future results of operations and financial position, business strategy, prospective products, product approvals, research and development costs, timing and likelihood of success of our clinical trials, plans and objectives of management for future operations, adequacy of our cash resources and working capital, future economic conditions or performance, and future results of anticipated products, are forward-looking statements. These statements involve known and unknown risks, uncertainties and other important factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. In some cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,” “expect,” “plan,” “anticipate,” “could,” “intend,” “target,” “project,” “contemplates,” “believes,” “estimates,” “predicts,” “potential” or “continue” or the negative of these terms or other similar expressions. The forward-looking statements in this Quarterly Report on Form 10-Q are only predictions. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our business, financial condition and results of operations. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those anticipated in the forward-looking statements. Factors that might cause such a difference include, but are not limited to, those discussed in this report in Part II, Item 1A -“Risk Factors,” in this Quarterly Report on Form 10-Q and in other filings we make with the SEC from time to time. The events and circumstances reflected in our forward-looking statements may not be achieved or occur and actual results could differ materially from those projected in the forward-looking statements. Moreover, we operate in an evolving environment. New risk factors and uncertainties may emerge from time to time, and it is not possible for management to predict all risk factors and uncertainties. These forward-looking statements speak only as of the date hereof. Except as required by applicable law, we do not plan to publicly update or revise any forward-looking statements contained herein, whether as a result of any new information, future events, changed circumstances or otherwise. Overview HCW Biologics Inc. (“HCWB” or the “Company”) is a clinical-stage biopharmaceutical company developing proprietary immunotherapies to treat diseases promoted by chronic inflammation, especially age-related and senescence-associated diseases. Our immunotherapeutics represent a new class of drug that we believe has the potential to fundamentally change the treatment of cancer and many other diseases and conditions that are promoted by chronic inflammation — and in doing so, improve patients’ quality of life and possibly extend longevity. While chronic inflammation is possible at any age, it is more common as we age. In this case, the condition is known as inflammaging. The induction and retention of low-grade inflammation in an aging human body is mainly the result of the accumulation of non-proliferative but metabolically active senescent cells, which can also be caused by persistent activation of immune cells. Chronic inflammation, including inflammaging, is believed to be a significant contributing factor to the cause for senescence-associated diseases and conditions that diminish health span, including many types of cancer, autoimmune diseases, and neurodegenerative diseases, as well as indications that impact quality-of-life that are not life-threatening. Senescence is a physiologic process important in promoting wound healing, tissue homeostasis, regeneration, embryogenesis, fibrosis regulation, and tumorigenesis suppression. However, accumulation of senescent cells with Senescence-Associated Phenotype (“SASP”) proinflammatory factors has been implicated as a major source of chronic sterile inflammation leading to many aging-related pathologies. SASP factors, including proinflammatory cytokines, chemokines, and proteinases, drive an inflammation cycle. Senescence is considered a stress response and can be induced by a wide range of intrinsic and extrinsic insults. Over time, these insults cause normal tissue cells to enter a senescent state of irreversible growth arrest accompanied by the release of SASP factors. The inflammation cycle promoted by SASP factors also activates immune cells. Similar to senescent cells, prolonged activation of immune cells promotes the release of highly proinflammatory cytokines. Unresolved activation of immune cells leads to chronic low-grade inflammation, which perpetuates this cycle. 27 Studies have shown that strategies to reduce or eliminate senescent cells can delay, prevent, and improve age-related dysfunctions, including cancer. Unfortunately, to date, there has been limited clinical success in targeting senescent cell accumulation or aberrant inflammasome activity using small molecule-based approaches. Preclinical research and preliminary results from first-in-human clinical trials indicate that our immunotherapeutic approach may achieve success for cancer indications, and many other age-related diseases and conditions. We believe our lead product candidates represent a novel immunotherapeutic approach and a clinically promising new class of senotherapeutic drugs for the treatment of age-related diseases. The Company has developed two different drug discovery and development platforms, our legacy TOBI™ (Tissue factOr-Based fusIon) platform and our newly developed targeted platform technology – the T-cell Receptor β Chain constant region (“TRBC”) platform: • The TOBI platform is designed to engineer multi-functional fusion protein molecules and protein complexes. It employs a Tissue Factor (“TF”) scaffold that can be packaged with multiple protein targets, including cytokines, chemokines, ligands, receptors, and single-chain antibodies. • The Company invented its second-generation platform, the TRBC platform, to create novel immunotherapeutics designed to treat diseases, including cancer, as well as improve quality-of-life conditions. The immunotherapeutics created using the TRBC platform include multi-specific cytokines, targeted second-generation immune checkpoint inhibitors, and immune-cell engagers, which have the capabilities to activate subsets of immune cells that specifically target cancerous cells, infected cells, or senescent cells associated with age-related diseases. As of July 13, 2024, the Company, Dr. Wong, Altor BioScience, LLC, NantCell, Inc. and ImmunityBio, Inc. (collectively, Altor BioScience, LLC, NantCell, Inc. and ImmunityBio Inc. will be referred to herein as “ImmunityBio”), entered into a Settlement Agreement that is described in Part II, Item 1. – “Legal Proceedings” below. The Settlement Agreement eliminated the uncertainty of the outcome of the previously disclosed Arbitration proceedings and provided clarity for the future direction and emphasis of our clinical development strategy. The settlement involved intellectual property the Company developed based on our proprietary TOBI TM drug discovery platform and its unique Tissue-Factor scaffold used to create protein-fusion molecules. With clarity on ownership of intellectual property, the Company reassessed its clinical development pipeline and the future direction of our Company. Our expertise is in immunotherapeutic treatments and our clinical development pipeline will remain so. Our focus continues to be to develop protein-based immunotherapies that are administered by subcutaneous injection. We remain focused on diseases promoted by chronic inflammation driven by senescence, including cancer, especially age-related diseases. The diseases we will target will have no curative FDA approved treatments. Finally, we have selected programs that include life-threatening diseases, such as pancreatic and ovarian cancer, as well as “quality-of-life” indications, such as alopecia areata and senile lentigo. HCW9302 will remain one of our lead product candidates. Future drug discovery and new drug development will be based on TRBC Molecules. There are several potential candidates in each class of TRBC Molecules from which the Company will select lead molecules for each program. Part of this selection will be to determine which TRBC molecules will be developed in-house and which are more appropriate to develop through business development transactions, such as out-licensing agreements. Our clinical development program is based on a few select lead product candidates which will be evaluated in Company-sponsored clinical trials in autoimmune disorders, solid tumors and quality-of-life conditions. We have a large portfolio of non-core programs and assets and, for these, we anticipate that clinical development will be conducted through licensing agreements and other business development transactions. HCWB has an experienced team led by Dr. Hing C. Wong, our Founder and CEO, who discovered and developed the immunotherapeutic Anktiva® (also known as ALT-803, an IL-15 agonist receptor) through pivotal trials. This blockbuster immunotherapeutic treatment for cancer was sold to ImmunityBio, Inc. in 2017 in a $1.0 billion acquisition. Anktiva® was approved by the U.S. Food and Drug Administration (“FDA”) for a bladder cancer indication in 2024. 28 Business Highlights Financing Our financing strategy includes capital raising through the issuance of securities as well as business development transactions, especially out-licensing certain rights outside of our focus areas. The Company continues to evaluate its portfolio to identify compounds which may be good candidates for licensing or other collaborations, where it will be to our advantage to leverage the expertise and financial strength of a partner in the development of a compound or market. WY Biotech License Agreement The Company and WY Biotech Co., Ltd. (“WY Biotech”) are currently finalizing the terms of an amendment to an exclusive worldwide license agreement (“WY Biotech License”) that the parties first entered on November 17, 2024. The subject of the license is the use of in vivo rights to one of the Company’s preclinical molecules, HCW11-006. The Company had extended the date for payment of the $7.0 million upfront license fee due under the WY Biotech License while WY Biotech worked to finalize agreements with their contract development and manufacturing organization (“CDMO”) and investors. On September 5, 2025, WY Biotech proposed further revisions and additions to the terms of the WY Biotech License. Negotiations between the parties to restructure the terms of the WY Biotech License are ongoing. Pursuant to the terms currently being negotiated, the Company will retain its payment-free, milestone-free, and royalty-free option to recapture the development and commercialization in vivo rights of the licensed molecule for the United States, Canada, Central America, and South America (Opt-in Territory) after the conclusion of the Phase 1 clinical trial. WY Biotech is financially responsible for all costs associated with research and development, manufacturing, clinical development, regulatory approval, and commercialization for the molecule. The Company will be responsible for costs associated with clinical development, regulatory approval, and commercialization in the Opt-in Territory, if it exercises its opt-in rights. $2.2 Million Raised through Issuance of Common Stock through Standby Equity Purchase Agreement The Company has issued, and may issue additional, shares of Common Stock under its Standby Equity Purchase Agreement (“SEPA”) as a means of accessing the public market. In the three and nine months ended September 30, 2025, the Company issued 475,000 shares of Common Stock through the SEPA, resulting in net proceeds of $2.2 million, $2.0 million of which settled as of September 30, 2025. Compliance with Nasdaq Listing Rules An important part of the Company’s future financing plans is the ability to access the public markets for the sale of securities. This requires that the Company remain in compliance with all Nasdaq Listing Rules, and it is currently deficient in meeting the requirements of Listing Rule 5550(b)(1), or the Equity Rule, related to the requirement to maintain a minimum balance of $2.5 million in stockholders’ equity. The Company was recently granted an extension to regain compliance with the Equity Rule until December 31, 2025, as discussed in more detail below. In the first quarter of 2025, after a hearing with a Nasdaq Hearings Panel (the “Panel”), the Panel granted the Company an extension to June 30, 2025 to regain compliance with all Nasdaq Listing Rules. In particular, the Company was deficient in three areas: Listing Rule 5550(a)(2), or requirements for the minimum bid price; Listing Rule 5550(a)(4), or requirements for the public float requirement in and the market value of publicly held shares; and the Equity Rule. On June 26, 2025, the Company announced that it received a formal notice from the Listing Qualifications Staff (the “Staff”) of the Nasdaq Stock Market LLC (“Nasdaq”) that the Company was in compliance with the Equity Rule for continued listing on the Nasdaq Capital Market (the “Exchange”). At that time, 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. While the Company successfully completed several elements of its compliance plan including the Reverse Stock Split, restructuring or converting $7.7 million of debt, putting a Standby Equity Purchase Agreement in place, and completing a $5.0 million equity financing by June 30, 2025, as previously reported, the Company’s upfront license fee from WY Biotech did not meet the criteria for revenue recognition for the period ended June 30,2025. As a result, as of June 30, 2025, the Company did not meet the requirements of the Equity Rule. 29 The Company filed its Form 10-Q for the quarter ended June 30, 2025 on August 18, 2025. On August 19, 2025, the Company received written notice from the Staff that as of June 30, 2025, the Company was non-compliant with the Equity Rule for continued listing on the Exchange. The Company made a timely request for a hearing before the Panel and was granted a hearing. On October 13, 2025, the Panel granted the Company an extension in which to regain compliance with all continued listing rules of the Exchange. The Panel’s determination follows the Company’s hearing on September 25, 2025, at which the Company presented, and the Panel considered, the Company’s plan to regain compliance with the Equity Rule. The Panel granted the Company’s request for continued listing on the Exchange, subject to, among other things, the Company demonstrating compliance with the Equity Rule by December 31, 2025, and with all other Exchange continued listing rules by February 16, 2026. The Company was advised that February 16, 2026, represents the full extent of the Panel’s discretion to grant continued listing while the Company is non-compliant with the Nasdaq Listing Rules. The Panel also required that the Company provide prompt notification of any significant events that occur during the exception period that may affect the Company’s compliance with Nasdaq requirements. In addition, the Company must timely file Form 10-Q for the third quarter, and provide notice of the status of certain elements of the Company’s compliance plan. Any compliance documentation submitted by the Company will be subject to review by the Panel, which may, in its discretion, request additional information before determining that the Company has complied with the terms of the exception. The Panel has discretion to review its decision to grant an exception period within 45 calendar days after issuance of the written decision. 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 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. The forbearance agreement terminated on March 31, 2025, and the Company did not have financing in place to satisfy the liens. On April 17, 2025, the Company received a summons and a copy of a complaint filed by BE&K in the Circuit Court of the 17th Judicial Circuit in and for Broward County, Florida (the “BE&K Complaint”). 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.” 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 as well as the B&I MSJ. The parties are engaged in discovery and the court has set the case for trial in early December 2026. The Company entered a loan agreement with Cogent Bank (“2022 Loan Agreement”) for $6.5 million on August 15, 2022, to provide a portion of the funds required to purchase this facility. The 2022 Loan Agreement contains discretionary acceleration provisions, one of which was triggered as a result of the mechanics liens discussed above. On October 24, 2025, the Company received a demand letter in which Cogent Bank gave notice that the loan was in default and the Company had thirty (30) days after receipt of the demand letter to cure the mechanics liens. The Company and Cogent Bank are negotiating for the terms of a forbearance agreement to provide the Company more time to comply with the demand made by Cogent Bank. 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. Clinical Development The following compounds have been identified by the Company as our product candidates for clinical development. The Company has constructed over 50 proprietary compounds, of which only a select few will be developed through internal programs and Company-sponsored clinical trials. Other compounds may be selected by the Company to develop through corporate partners who will advance clinical development and commercialization through business development transactions, such as licensing agreements. 30 HCW9302 HCW9302 is the lead product candidate for the Company’s clinical development program for autoimmune disorders. In the fourth quarter of 2025, the Company expects to dose the first patient in a Company-sponsored, multi-center Phase 1 dose-escalation clinical trial (NCT07049328) to evaluate HCW9302 in patients with alopecia areata, a common autoimmune disease in humans that currently has no curative FDA approved treatments. The Company currently has two clinical sites open, one at The Ohio State University Wexner Medical Center (“The Ohio State University”) and one at the Tampa James A. Haley Veterans' Hospital (“Tampa VA Hospital”). Both sites are actively screening patients. HCW9302 is a fusion protein molecule that contains two IL-2 domains linked by an extracellular tissue factor domain. IL-2 signaling is essential for homeostasis of T reg cells. Unfortunately, recombinant IL-2 has an unfavorable pharmacokinetic profile and induces cytokine release syndrome limiting its therapeutic use. HCW9302 provides a potential solution to this problem. It is designed to have the therapeutic advantages of IL-2 while being well tolerated. In our preclinical and non-human primate studies, we found that HCW9302 exhibited a longer serum half-life with an approximately 1,000-fold higher affinity for the IL2Rα than IL-2. In addition, preclinical studies have shown HCW9302 can be administered at a dosing range that expanded and activated T reg cells but not CD4 + effector T cells. CD4 + effector T cells (also known as helper T cells) are crucial for immune responses, but under certain conditions, their excessive activation can lead to negative effects like inflammation, tissue damage, and autoimmune reactions, particularly when they become dysregulated and target self-antigens, contributing to conditions like multiple sclerosis, rheumatoid arthritis, and inflammatory bowel disease. 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. The Company has selected its T-Cell Engager program as a candidate for clinical development through a business development transaction with a large pharmaceutical company. T-cell engagers revolutionized the immunotherapeutic approach against cancer. Currently, T-cell engagers have approval from the FDA to be used in the treatment of a small number of indications, including various hematological and solid tumors. The Company believes that it has created 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 immunosuppression in the 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. On November 7, 2025, the Company presented a poster at the 40th annual meeting of the Society for Immunotherapy of Cancer (“SITC”) entitled, “A novel multi-functional bispecific T-cell engager molecule for cancer therapy.” Highlights of the data presented include the unique features of the Company’s T-cell engager: • Broad coverage for human solid tumor indications by targeting tissue factor, with high potency and precision, shown in xenograft models including Patient-Derived Xenograft (PDX) tumor. • Tetra-valent construct to address immunosuppressive tumor microenvironment. • Activates tumor-infiltrated exhausted T cells. • Favorable tolerability profile in non-human primates at dosing levels significantly higher than the efficacious level. • Long serum half-life and favorable pharmacokinetics shown in non-human primate studies, without using the Fc fusion technology commonly found in bi-specific or tri-specific fusion molecules. • Streamlined GMP manufacturing process similar to the process used for therapeutic monoclonal antibody. • Subcutaneous administration to improve safety and quality-of-life for patients. 31 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 immune checkpoint inhibitor (“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 immunotherapeutic blocks 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. On November 8, 2025, the Company presented a poster at SITC entitled, “A novel tetra-specific pembrolizumab-based immunotherapeutic.” The Company’s lead product candidate is HCW11-040, a second-generation immune checkpoint inhibitor that is a unique combination of cytokines in a multi-functional fusion protein molecule, constructed with a unique combination IL-15 and IL-7 domains and a Transforming Growth Factor β (“TGF-β”) trap. It demonstrates PD-1/PD-L1 blocking activity equivalent to pembrolizumab (generic form of Keytruda®) in preclinical studies. Results of these preclinical studies also highlight the advantages of HCW11-040 over the first generation immune checkpoint inhibitors: • To improve efficacy, HCW11-040 is equipped with other moieties in addition to pembrolizumab which neutralizes the immunosuppressive cytokine, TGF-β, and activates effector immune cell responses. • The mouse homologue of HCW11-040 expands progenitor exhausted T (TPEX) cells significantly better than mouse ICI or pembrolizumab alone. TPEX cells are a key subset of T cells that respond to ICIs. TPEX cells have self-renewal capabilities and are considered a primary driver for the success of ICI therapies, making them a target for improving treatment outcomes. • HCW11-040 expands and activates human peripheral blood lymphocytes (“PBMCs”) significantly better than pembrolizumab alone. • HCW11-040 exhibits significantly better anti-tumor activity of human PBMCs than pembrolizumab alone against human pancreatic cancer and leukemia cells in organoid models. • No evidence of inducing cytokine release syndrome. • Subcutaneous administration expected to improve safety and quality-of-life for patients. • Streamlined GMP manufacturing process is similar to the process used for therapeutic monoclonal antibodies. KE YTRUDA® is a registered trademark of Merck Sharp & Dohme LLC, a subsidiary of Merck & Co., Inc. and the company is not affiliated with HCW Biologics Inc. HCW9206 We have an opportunity to enter into a new license agreement based on using HCW9206 as a reagent in the manufacture of CAR-T products. On May 29, 2025, the Company agreed to a request from Wugen Inc. (“Wugen”) to suspend the Wugen License. The suspension will run for a period of one year from the effective date of suspension 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 use of the licensed molecules. 32 In research conducted with two leading research institutions, studies have shown that HCW9206 has the potential to provide a solution for key challenges facing chimeric antigen 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 significant challenges. In the results of the studies shared by the Company, we demonstrated that HCW9206 has the potential to significantly reduce costs and improve clinical efficacy of engineered effector T cells. At the 2025 Annual Meeting of the American Association of Immunologists, our collaborator gave a poster presentation demonstrating that HCW9206 is not only a better reagent than the current anti-CD3/anti-CD28/IL-2 method for CAR-T viral transduction, but 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-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 a novel alternative strategy for CAR-T cell production with the advantage of generating a large population of CAR-Ts with a T scm cell phenotype, which should enhance the persistence of CAR-Ts in patients. This strategy will likely improve long-term survival of disease-specific CAR-Ts following adoptive transfer and enable sustained suppression of malignancies, chronic infections and autoimmune diseases. The GMP master cell bank of HCW9206 and its manufacturing process have been established, and its drug master file as an ex vivo reagent has been filed with the FDA. The Company has commenced a search to identify a strong commercial partner for the sale and/or integration of HCW9206 as a reagent for incorporation into CAR-T based manufacturing processes. HCW11-006 HCW11-006 is one of the molecules constructed using the Company’s novel TRBC platform. HCW11-006 is part of the group of compounds the Company classifies as Class I, Multi-Functional Immune Cell Stimulators. T he Company continues to hold worldwide exclusive ex vivo rights to HCW11-006. WY Biotech has licensed HCW11-006 for in vivo applications. Our preclinical studies demonstrated that this multi-functional product candidate is highly effective at inducing anti-tumor CD8 + T cell and NK cell responses without triggering unwanted side effects in relevant solid tumor animal models. It appears to be a potent immunostimulatory agent and should combine well with other therapies, including immune checkpoint inhibitors, immune cell engagers, therapeutic antibodies, and CAR-T therapies. In ex vivo applications, the Company has studied the benefit of using HCW11-006 as a reagent useful in the manufacture of CAR-T therapies. In these studies, the Company has seen that HCW11-006 has the potential to significantly reduce costs and improve clinical efficacy of engineered effector T cells. On November 8, 2025, the Company presented a poster at SITC entitled, “Enhancing immune cell expansion, checkpoint inhibitor synergy, and in vivo CAR-T and lymphocyte support using HCW11-006 -- a novel cytokine fusion molecule.” Trends and Uncertainties Inflationary Cost Environment, Banking Crisis, Supply Chain Disruption and the Macroeconomic Environment including Government Shutdown The Company’s operations have been affected by many headwinds, including inflationary pressures, including those brought about by tariffs and other economic policies, high interest rates, ongoing global supply chain disruptions resulting from increased geopolitical tensions such as the war in the Middle East, the conflict between Russia and Ukraine, China-Taiwan relations as well as U.S. trade policies, financial market volatility and currency movements. These headwinds, specifically the supply chain disruptions, have adversely impacted our ability to procure certain services and materials, which in some cases impacts the cost and timing of clinical trials and IND-enabling activities. In addition, we have been impacted by inflation when procuring materials required for the buildout of our new manufacturing and laboratory facilities, the costs for recruiting and retaining employees and other employee-related costs. Further, rising interest rates would also increase borrowing costs to the extent that the Company takes on any additional debt. The Company uses a number of strategies to effectively navigate these issues, including product redesign, alternate sourcing, and establishing contingencies in budgeting and timelines. The Company has used equity financing as a key element of its financing strategy, which relies on registration statements that must be declared effective by the SEC. On October 1, 2025 at 12:01 a.m. EDT, the federal government of the United States began a shutdown as a result of the failure by the U.S. Senate to pass appropriations legislation for the 2026 fiscal year, which began that day. During the shutdown, the SEC has only limited operations. As a result of the shutdown, the Company will have limited access to public markets through public offerings of our stock, which could negatively impact the Company’s operations and ability to carry on clinical development programs. However, the extent and duration of such events and conditions, and resulting disruptions to our operations, are highly unpredictable. 33 For discussion of risks related to potential impacts of supply chain, inflation, geopolitical and macroeconomic challenges on our operations, business results and financial condition, see Item 1A. “Risk Factors” in our Annual Report. Components of our Results of Operation Revenues We have no products approved for commercial sale and have not generated any revenue from commercial product sales of internally-developed immunotherapeutic products for the treatment of cancer and other age-related diseases. The principal source of our revenues to date have been generated from our Wugen License and Master Services Agreement (the “MSA”) with Wugen. 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 license agreements. The Company entered the Wugen License in December 2020. In the second quarter of 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. Additionally, HCW Biologics retained manufacturing rights and has agreed to provide Wugen with clinical and research grade materials for clinical development and commercialization of licensed products under separate agreements. We assessed which activities in the Wugen License should be considered distinct performance obligations that should be accounted for separately. We develop assumptions that require judgement to determine whether the license to our intellectual property is distinct from the research and development services or participation in activities under the Wugen License. Performance obligations relating to the granting a license and delivery of licensed product and R&D know-how were satisfied when transferred upon the execution of the Wugen License on December 24, 2020. The Company recognized revenue for the related consideration at a point in time. The revenue recognized from a transaction to supply clinical and research grade materials entered into under the MSA and covered by a Statement of Work (“SOW”), represents one performance obligation that is satisfied over time. The Company recognizes revenue generated for supply of material for clinical development using an input method based on the costs incurred relative to the total expected cost, which determines the extent of the Company’s progress toward completion. The Company and WY Biotech Co., Ltd. (“WY Biotech”) are currently finalizing the terms of an amendment to an exclusive worldwide license agreement (“WY Biotech License”) that the parties first entered on November 17, 2024. The subject of the license is the use of in vivo rights to one of the Company’s preclinical molecules, HCW11-006. The Company had extended the date for payment of the $7.0 million upfront license fee due under the WY Biotech License while WY Biotech worked to finalize agreements with their contract development and manufacturing organization (“CDMO”) and investors. On September 5, 2025, WY Biotech proposed further revisions and additions to the terms of the WY Biotech License. Negotiations between the parties to restructure the terms of the WY Biotech License are ongoing. Pursuant to the terms currently being negotiated, the Company will retain its payment-free, milestone-free, and royalty-free option to recapture the development and commercialization in vivo rights of the licensed molecule for the United States, Canada, Central America, and South America (Opt-in Territory) after the conclusion of the Phase 1 clinical trial. WY Biotech is financially responsible for all costs associated with research and development, manufacturing, clinical development, regulatory approval, and commercialization for the molecule. The Company will be responsible for costs associated with clinical development, regulatory approval, and commercialization in the Opt-in Territory, if it exercises its opt-in rights. Operating Expenses Our operating expenses are reported as research and development expenses and general and administrative expenses. 34 Research and Development Our research and development expenses consist primarily of costs incurred for the development of our product candidates, which include: • Employee-related expenses, including salaries, benefits, and stock-based compensation expense; • Expenses related to manufacturing and materials, consisting primarily of expenses incurred in connection with CMOs, which produce cGMP materials for clinical trials on our behalf; • Expenses associated with preclinical activities, including research and development and other IND-enabling activities; • Expenses incurred in connection with clinical trials; and • Other expenses, such as facilities-related expenses, direct depreciation costs for capitalized scientific equipment, and allocation for overhead. We expense research and development costs as they are incurred. Costs for contract manufacturing are recognized based on an evaluation of the progress to completion of specific tasks using information provided to us by our vendors. Payments for these activities are based on the terms of the agreement, and the pattern of payments for goods and services will change depending on the material. Nonrefundable advance payments for goods or services to be received in the future for use in research and development activities are recorded as prepaid expenses and expensed as the related goods are delivered or the services are performed. We expect research and development expenses to increase substantially for the foreseeable future as we continue the development of our product candidates. We cannot reasonably determine the nature, timing, and costs of the efforts that will be necessary to complete the development of, and obtain regulatory approval for, any of our product candidates. Product candidates in later stages of development generally have higher development costs than those in earlier stages. See “Risk Factors -- Risks Related to the Development and Clinical Testing of Our Product Candidates,” in our Annual Report for a discussion of some of the risks and uncertainties associated with the development and commercialization of our product candidates. Any changes in the outcome of any of these risks and uncertainties with respect to the development of our product candidates in preclinical and clinical development could mean a significant change in the costs and timing associated with the development of these product candidates. For example, if the FDA or another regulatory authority were to delay our planned start of clinical trials or require us to conduct clinical trials or other testing beyond those that we currently expect or if we experience significant delays in enrollment in any of our planned clinical trials, we could be required to expend significant additional financial resources and time on the completion of clinical development of that product candidate. General and Administrative Expenses 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, expenses related to maintaining our listing on Nasdaq and remaining in compliance with SEC filings, and other expenses. We expect general and administrative expenses incurred in the normal course of business for other purposes, such as costs for recruitment and retention of personnel, service fees for consultants, advisors and accountants, as well as costs to comply with government regulations, corporate governance, internal control over financial reporting, insurance and other requirements for a public company, to continue to increase for the foreseeable future as we build our clinical programs. Legal Expenses (Recoveries), Net Legal expenses (recoveries), net include legal fees incurred by the Company for its own defense and for the defense of Dr. Hing C. Wong, our Founder and Chief Executive Officer, net of insurance reimbursements in connection with the Arbitration brought by ImmunityBio and its affiliates against the Company and Dr. Wong. The Arbitration and related Complaint were dismissed with prejudice as of December 31, 2024. See Part II, Item 1, “Legal Proceedings.” 35 Nonoperating Loss As reported in the Company’s Form 8-K filed on May 1, 2024 with the SEC, the Company became aware that it was the victim of a criminal scheme involving the impersonation of a purchaser upon the default on a legally binding commitment to purchase $8.0 million of secured notes from the Company. The scheme resulted in the misdirection of approximately $1.3 million held in Company accounts to a fraudulent account controlled by a third party. The Company is pursuing all available remedies to recover this loss. Given the limited success that these efforts have had to date for the recovery of funds, the Company recognized a loss of $1.3 million in the nine-month period ended September 30, 2024. Interest Expense Interest expense includes interest paid on debt. This includes interest due on the Cogent Bank loan, Secured Notes issued by the Company and accretion of original issue discount and accretion of debt issuance costs. 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%. 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. From March 31, 2024 to October 30, 2024, the Company issued $6.9 million in Secured Notes in multiple closings. During the second quarter of 2025, certain noteholders agreed to restructure amounts owed by the Company and convert to equity. Noteholders who purchased notes for $325,000 did not elect to convert their Secured Notes. The Secured Notes bear interest at an annual rate of 9%, payable quarterly in arrears. These noteholders are also entitled to a fixed bonus, payable on the Maturity Date, which is accreted on a straight line basis. 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 (the “Secured Promissory Note”). Change in Fair Value of Investment and Contingent Liability, net The Company accounts for our investment in Wugen shares at fair value beginning in the second quarter of 2025. Similarly, the Company’s contingent liability is recorded at fair value. A change in fair value of investment and contingent liability, net is recognized through earnings. Prior to that time, the Company accounted for the Wugen shares using the fair value measurement alternative. Therefore, the value of the investment in Wugen, and similarly the contingent liability, is recognized at fair value each reporting period based on available market information and valuation techniques. Gain (Loss) on Sale of Put Shares The Company recognizes an unrealized or realized gain or loss on put shares when we sell shares of Common Stock under the SEPA, which is recognized through earnings. Other Income, Net Other income, net consists of interest earned on our cash, cash equivalents, unrealized gains and losses related to our investments in U.S. government-backed securities, and other income and expenses related to non-operating activities. 36 Results of Operations Three Months Ended September 30, Nine Months Ended September 30, 2024 2025 2024 2025 Revenues: Revenues $ 426,423 $ 15,606 $ 2,171,988 $ 27,222 Cost of revenues (341,138 ) (12,485 ) (1,291,546 ) (21,777 ) Net revenues 85,285 3,121 880,442 5,445 Operating expenses: Research and development 1,186,913 1,404,247 5,339,383 4,109,782 General and administrative 1,633,457 1,884,994 4,788,558 6,187,296 Legal expenses (recoveries), net 949,455 6,006 15,761,531 (1,590,945 ) Nonoperating loss — — 1,300,000 — Total operating expenses 3,769,825 3,295,247 27,189,472 8,706,133 Loss from operations (3,684,540 ) (3,292,126 ) (26,309,030 ) (8,700,688 ) Interest expense (229,058 ) (127,070 ) (393,908 ) (632,923 ) Change in fair value of investment and contingent liability, net — (966,284 ) — 782,404 Loss on sale of put shares — (182,146 ) — (182,146 ) Other income, net 11,310 13,290 52,397 54,412 Net loss $ (3,902,288 ) $ (4,554,336 ) $ (26,650,541 ) $ (8,678,941 ) Comparison of the Three Months ended September 30, 2024 and September 30, 2025 Revenues The Company recognized revenues of $426,423 and $15,606 for the three months ended September 30, 2024 and 2025, respectively. Revenues were derived exclusively from the sale of licensed molecules to Wugen and related ancillary services such as storage and insurance. As of September 30, 2025, the Company agreed to a request from Wugen to suspend the Wugen License, which will run for a period of one year from the effective date of the suspension, or until May 29, 2026. The Company expects to generate revenue for ancillary services provided to Wugen during this time, as provided for under the amended Wugen license. 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 seeking a large biologics manufacturer who has a use for a reagent based on HCW9206 and like molecules to improve the efficacy of their manufacturing process of CAR-T products. Research and Development Expenses The following table summarizes our research and development expenses for the three months ended September 30, 2024 and September 30, 2025: Three Months Ended September 30, 2024 2025 $ Change % Change Salaries, benefits and related expenses $ 652,867 $ 801,504 $ 148,637 23 % Manufacturing and materials 47,748 50,259 2,511 5 % Preclinical expenses 144,746 315,725 170,979 118 % Clinical trials 164,139 80,358 (83,781 ) (51 )% Other expenses 177,413 156,401 (21,012 ) (12 )% Total research and development expenses $ 1,186,913 $ 1,404,247 $ 217,334 18 % 37 Research and development expenses increased by $217,334, or 18%, from $1.2 million for the three months ended September 30, 2024 to $1.4 million for the three months ended September 30, 2025. The increase was primarily due to increases in expenses related to salaries and benefits and preclinical expenses. Salaries, benefits, and related expenses increased by $148,637, or 23%, from $652,867 for the three months ended September 30, 2024 to $801,504 for the three months ended September 30, 2025. This increase was primarily attributable to the suspension of the Wugen license and its obligation to reimburse certain research and development expenses. In the third quarter of 2024, the Company received $125,000 for reimbursement of certain research and development expenses, which did not occur in the same period in 2025. Manufacturing and materials expense increased by $2,511, or 5%, from $47,748 for the three months ended September 30, 2024 to $50,259 for the three months ended September 30, 2025. For both periods, costs were related to ancillary costs, such as storage and insurance for drug supply that was already manufactured and ready for future use. Expenses associated with preclinical activities increased by $170,979, or 118%, from $144,746 for the three months ended September 30, 2024 to $315,725 for the three months ended September 30, 2025. In the three months ended September 30, 2024, costs were incurred primarily for IND-enabling studies to prepare for the submission of an IND application to evaluate HCW9302 in a clinical study in patients with an autoimmune disease. In the three months ended September 30, 2025, the Company conducted preclinical studies for TRBC-based molecules, many of which were required to prepare the complete the package needed to launch the business development program to identify a corporate partner to advance the clinical development of the Company’s T-cell engager lead product candidate. Also during this time, the Company narrowed down candidates in the group of compounds known as second-generation immune checkpoint inhibitors, to identify HCW11-040 as the lead product candidate with the greatest potential for treating large, unmet medical needs, especially in cancer and other aging-related diseases. Expenses associated with clinical activities decreased by $83,781, or 51%, from $164,139 for the three months ended September 30, 2024 to $80,358 for the three months ended September 30, 2025 primarily because the Company completed two Phase 1/1b clinical trials in 2024, but the Company had no ongoing clinical trials in the three months ended September 30, 2025. The decrease in cost is primarily due to decreases of $41,125 for R&D outsourcing and other professional fees, $27,890 for start-up and Institutional Review Board (“IRB”) fees, and $38,061 in patient fees, offset by an increase of $25,895 in fees for software licenses and data management. We anticipate clinical activities and related expenses to increase in the future. In the fourth quarter of 2025, the Company expects to dose the first patient in a Company-sponsored, multi-center Phase 1 clinical trial (NCT07049328) to evaluate HCWC9302 in an autoimmune disease. There are currently two clinical sites opened at The Ohio State University and the Tampa VA Hospital, both of which are actively screening patients. As clinical activities increase, the Company expect to incur increased expenses. Other expenses, which include overhead allocations, decreased by $21,012, or 12%, from $177,413 for the three months ended September 30, 2024 to $156,401 for the three months ended September 30, 2025. This decrease is primarily attributable to a $21,634 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 September 30, 2024 and September 30, 2025: Three Months Ended September 30, 2024 2025 $ Change % Change Salaries, benefits and related expenses $ 619,070 $ 699,989 $ 80,919 13 % Professional services 376,910 552,371 175,461 47 % Facilities and office expenses 134,580 125,521 (9,059 ) (7 )% Accretion of fixed bonus upon maturity of Secured Notes — 15,502 15,502 NM Depreciation 69,370 58,451 (10,919 ) (16 )% Rent and occupancy expense 49,160 39,633 (9,527 ) (19 )% Other expenses 384,367 393,527 9,160 2 % Total general and administrative expenses $ 1,633,457 $ 1,884,994 $ 251,537 15 % NM = Not meaningful 38 General and administrative expenses increased $251,537, or 15%, from $1.6 million for the three months ended September 30, 2024 to $1.9 million for the three months ended September 30, 2025. The increase is primarily attributable to an increase in expenses for salaries and benefits and professional services. Salaries, benefits and related expenses increased by $80,919, or 13%, from $619,070 for the three months ended September 30, 2024 to $699,989 for the three months ended September 30, 2025. There was a $116,337 increase in salaries, bonus payments and related taxes, partially offset by decreases of $25,415 in expense related to stock-based compensation and $11,445 in Board compensation, brought about by the resignation of Gary M. Winer from the Company’s Board of Directors at the end of the second quarter of 2025. Professional services increased by $175,461, or 47%, from $376,910 for the three months ended September 30, 2024 to $552,371 for the three months ended September 30, 2025. There was a $239,812 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, partially offset by a decrease of $69,183 for legal fees related to patent filings and other matters related to the Company’s intellectual property portfolio. Facilities and office expenses decreased by $9,059, or 7%, from $134,580 for the three months ended September 30, 2024 to $125,521 for the three months ended September 30, 2025, primarily due to a decrease of $28,353 in fees paid for licenses, software, partially offset by an increase of $21,060 in fees for IT services. In the three months ended September 30, 2025, the Company began a data migration project which is expected to yield significant improvements in cybersecurity. Other expenses increased by $9,160, or 2%, from $384,367 for the three months ended September 30, 2024 to $393,527 for the three months ended September 30, 2025. There was a $62,255 increase in finance costs related to SEPA issuance costs, partially offset by decreases of $25,953 in insurance premiums and $20,283 in tax expenses. Legal Expenses (Recoveries), Net In the three months ended September 30, 2024, the Company incurred $949,455 in legal expenses in connection with the Arbitration. 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 September 30, 2025, the Company incurred legal expenses of $6,006 related to the Arbitration. Prospectively, we anticipate we will incur some expenses for costs of remaining in compliance with the terms of the Settlement Agreement. As of September 30, 2025, the Company reported a balance of $12.1 million for legal fees incurred as a result of the Arbitration but not yet paid, and these are included within Accounts payable. The Company is engaged in discussions with the law firms involved with this matter to negotiate terms for a payment plan. See Part II, Item 1, “Legal Proceedings.” Interest Expense Related to the 2022 Loan, in the three months ended September 30, 2024 and September 30, 2025, we paid $93,936 and $92,106, respectively, in cash for interest. For the three months ended September 30, 2024 and 2025, interest was expensed. For the three months ended September 30, 2024 and September 30, 2025, the Company recognized interest of $87,386 and $7,373, respectively, related to the Secured Notes. In the three months ended September 30, 2025, the Company recognized $25,000 of accretion expense for the Secured Promissory Note. For the three months ended September 30, 2024 and 2025, the Company recognized $2,592 and $27,592, respectively, for the amortization of debt issuance costs included within Interest expense on the condensed interim statement of operations. 39 Change in Fair Value of Investment and Contingent Liability, Net The Company recognized a $966,284 loss due to the change in fair value of the investment in Wugen shares and the related contingent liability, net for the three months ended September 30, 2025. During the three months ended September 30, 2025, the Company’s investment in Wugen was diluted as a result of a new Wugen capital raise through the issuance of preferred stock; and therefore, the estimated fair value of the Company’s investment was reduced as was the fair value of the related contingent liability. There was no change in fair value of the investment in Wugen shares and contingent liability, net in the comparable period in 2024. The net change in fair value was recognized through earnings on the accompanying condensed interim statements of operations. Loss on Sale of Put Shares In the three months ended September 30, 2025, the Company recognized $182,146 for a loss on the sale of put shares, related to the 475,000 shares sold using the Company’s SEPA. The Company entered the SEPA agreement in the first quarter of 2025. Other Income, Net Other income, net had a de minimis increase from $11,310 for the three months ended September 30, 2024 to $13,290 for the three months ended September 30, 2025. Comparison of the Nine Months ended September 30, 2024 and September 30, 2025 Revenues The Company recognized $2.2 million and $27,222 of revenues for the nine months ended September 30, 2024 and 2025, respectively. Revenues were derived exclusively from the sale of licensed molecules to Wugen and related ancillary services such as storage and insurance. As of September 30, 2025, the Company agreed to a request from Wugen to suspend the Wugen License, which will run for a period of one year from the effective date of the suspension, or until May 29, 2026. The Company expects to generate revenue for ancillary services provided to Wugen during this time, as provided for under the amended Wugen license. 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 seeking a large biologics manufacturer who has a use for a reagent based on HCW9206 and like molecules to improve the efficacy of their manufacturing process of CAR-T products. Research and Development Expenses The following table summarizes our research and development expenses for the nine months ended September 30, 2024 and September 30, 2025: Nine Months Ended September 30, 2024 2025 $ Change % Change Salaries, benefits and related expenses $ 2,189,250 $ 2,281,050 $ 91,800 4 % Manufacturing and materials 1,375,830 347,042 (1,028,788 ) (75 )% Preclinical expenses 688,310 639,785 (48,525 ) (7 )% Clinical trials 495,910 379,113 (116,797 ) (24 )% Other expenses 590,083 462,792 (127,291 ) (22 )% Total research and development expenses $ 5,339,383 $ 4,109,782 $ (1,229,601 ) (23 )% 40 Research and development expenses decreased by $1.2 million, or 23%, from $5.3 million for the nine months ended September 30, 2024 to $4.1 million for the nine months ended September 30, 2025. This decrease was primarily attributable to decreases in expenses related to manufacturing and materials and clinical trials. Salaries, benefits, and related expenses increased by $91,800, or 4%, from $2.2 million for the nine months ended September 30, 2024 to $2.3 million for the nine months ended September 30, 2025. This increase was primarily attributable to the suspension of the Wugen license and its obligation to reimburse certain research and development expenses. In the nine months ended September 30, 2024, the Wugen reimbursement was $312,500 higher than it was in the nine months ended September 30, 2025. To partially offset the impact of the suspension of the Wugen reimbursement for certain research and development expenses, the Company reduced salaries by $146,884 and other benefits and related tax expenses by $78,476. Manufacturing and materials expense decreased by $1.0 million, or 75%, from $1.4 million for the nine months ended September 30, 2024 to $347,042 for the nine months ended September 30, 2025. In the nine months ended September 30, 2024, costs were primarily attributable to the costs of production and materials related to manufacturing the high producing cell-line of HCW9101, which is used in the manufacturing process for all TOBI-based molecules. In the nine months ended September 30, 2025, decrease in manufacturing and materials costs were primarily attributable to decreases of $1.0 million in raw materials and other production costs and $26,579 in ancillary expenses such as shipping and storage costs, partially offset by an increase of $16,953 in insurance expenses. Expenses associated with preclinical activities decreased by $48,525, or 7%, from $688,310 for the nine months ended September 30, 2024 to $639,785 for the nine months ended September 30, 2025. In the nine months ended September 30, 2024, toxicology and other IND-enabling studies were winding down, and the IND application to be granted authorization to conduct a clinical study to evaluate HCW9302 in an autoimmune disease was finalized and submitted for review. In the nine months ended September 30, 2025, there was a decrease of $195,830 in drug testing, partially offset by increases of $55,448 expenses for fees to collaborators and $91,857 for supply of experimental research materials for studies. Expenses associated with clinical activities decreased by $116,797, or 24%, from $495,910 for the nine months ended September 30, 2024 to $379,113 for the nine months ended September 30, 2025. The decrease was primarily attributable to decreases of $144,715 for fees for collaborators and other professional fees and $111,293 in patient fees, partially offset by increases of $108,889 in other clinical expenses, such as start up costs and IRB fees, and $30,322 in software and data management expenses. In the nine months ended September 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 a clinical trial for HCW9302. In the fourth quarter of 2025, the Company expects to dose the first patient in a Company-sponsored, multi-center Phase 1 clinical trial (NCT07049328) to evaluate HCWC9302 in an autoimmune disease. There are two sites open at The Ohio State University and the Tampa VA Hospital, both of which are actively screening patients. As clinical activities increase, the Company expect to incur increased expenses. Other expenses, which include overhead allocations, decreased by $127,291, or 22%, from $590,083 for the nine months ended September 30, 2024 to $462,792 for the nine months ended September 30, 2025. The decrease in other expenses is primarily attributable to decreases of $109,351 in the allocation of depreciation and $16,924 in costs for repairs and maintenance. General and Administrative Expenses The following table summarizes our general and administrative expenses for the nine months ended September 30, 2024 and September 30, 2025: Nine Months Ended September 30, 2024 2025 $ Change % Change Salaries, benefits and related expenses $ 1,855,660 $ 2,254,015 $ 398,355 21 % Professional services 960,680 1,503,381 542,701 56 % Facilities and office expenses 542,890 331,588 (211,302 ) (39 )% Accretion of fixed bonus upon maturity of Secured Notes — 390,809 390,809 NM Depreciation 203,050 178,849 (24,201 ) (12 )% Rent expense 155,860 151,911 (3,949 ) (3 )% Other expenses 1,070,418 1,376,743 306,325 29 % Total general and administrative expenses $ 4,788,558 $ 6,187,296 $ 1,398,738 29 % NM = Not meaningful 41 General and administrative expenses increased by $1.4 million, or 29%, from $4.8 million for the nine months ended September 30, 2024 to $6.2 million for the nine months ended September 30, 2025. The increase is primarily attributable to increases in expenses related to salaries and benefits, professional services, accretion of the fixed bonus payable if Secured Notes are repaid on the Maturity Date, and financing activities. Salaries, benefits and related expenses increased by $398,355, or 21%, from $1.9 million for the nine months ended September 30, 2024 to $2.3 million for the nine months ended September 30, 2025. In the nine months ended September 30, 2024, officers waived a $298,159 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 $99,645 increase in salaries offset by decreases of $25,847 in expenses for employee benefits and $11,445 in Board compensation, due to the resignation of Gary M. Winer from the Board of Directors late in the second quarter of 2025. Professional services increased by $542,701, or 56%, from $960,680 for the nine months ended September 30, 2024 to $1.5 million for the nine months ended September 30, 2025. The increase is primarily attributable to increases of $157,100 in fees for audit services, $169,443 in fees for technical accounting advice, $119,977 in legal fees and other services required for SEC filings, and $65,810 for fees for Nasdaq listing and preparation for a meeting with the Nasdaq Hearings Panel, partially offset by a decrease of $75,147 for legal fees related to patent filings and other matters related to the Company’s intellectual property portfolio. Facilities and office expenses decreased by $211,302, or 39%, from $542,890 for the nine months ended September 30, 2024 to $331,588 for the nine months ended September 30, 2025. The decrease is primarily due to a $199,176 decrease in fees paid for licenses, software and IT services, primarily due to the termination of certain software licenses required for the data management system utilized during the Arbitration. The Arbitration and related Complaint were dismissed with prejudice as of December 31, 2024. Other expenses increased by $306,325, or 29%, from $1.1 million for the nine months ended September 30, 2024 to $1.4 million for the nine months ended September 30, 2025. The increase is primarily attributable to increases of $168,974 in insurance premiums and $159,714 related to expenses for financing costs, including the Commitment Fee and issuance costs for the SEPA, partially offset by decreases of $26,262 in travel-related expenses and $22,315 in tax expenses. Legal Expenses (Recoveries), Net In the nine months ended September 30, 2024, Legal expenses (recoveries), net were $15.8 million, incurred for preparations leading up to the Arbitration hearing, which was held from May 20 - 31, 2024, negotiations for the Settlement Agreement entered into on July 13, 2024, and other activities related to remediation necessary to comply with the terms of the Settlement Agreement. As of September 30, 2025, the Company reported a balance of $12.1 million for legal fees incurred in connection to the Arbitration but not yet paid that were included within Accounts payable. We are engaged in discussions with the law firms involved to negotiate a reasonable payment plan. See Part II, Item 1, “Legal Proceedings.” In the nine months ended September 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 (recoveries), net, along with legal fees related to the Arbitration of $409,055 incurred in the nine months ended September 30, 2025. For the nine months ended September 30, 2025, the Company reported a contra expense of $1.6 million in Legal expenses (recoveries), net in the accompanying condensed interim statement of operations. Interest Expense Related to the 2022 Loan, in the nine months ended September 30, 2024 and September 30, 2025, we paid $282,098 and $275,710, respectively, in cash for interest. For the nine months ended September 30, 2024, three months interest was capitalized and six months interest was expensed. For the nine months ended September 30, 2025, interest was expensed. For the nine months ended September 30, 2024 and September 30, 2025, the Company recognized interest of $152,679 and $227,931, respectively, related to the Secured Notes. In the nine months ended September 30, 2025, the Company recognized $39,722 of accretion expense for the Secured Promissory Note. For the nine months ended September 30, 2024 and 2025, the Company recognized $7,775 and $47,497, respectively, for the amortization of debt issuance costs included within Interest expense on the condensed interim statement of operations. 42 Change in Fair Value of Investment and Contingent Liability, Net The Company recognized a net gain of $782,404 as a result of the change in fair value of the investment in Wugen shares and the related contingent liability, net for the nine months ended September 30, 2025. There was no change in fair value of investment and contingent liability, net in the comparable period in 2024. The net change in fair value was recognized through earnings on the accompanying condensed interim statements of operations. During the nine months ended September 30, 2025, the Company’s investment value of Wugen shares was impacted by (a) the Company made an election to fair value its investment in Wugen shares in the second quarter of 2025, whereas previously the Company was accounting for the investment under the measurement alternative and (b) during the third quarter of 2025, the Company’s investment was diluted as a result of a new capital raise by Wugen through the issuance of preferred stock. The Company’s contingent liability was similarly impacted by the dilution subsequent to the recognition of the liability during the second quarter of 2025. Loss on Sale of Put Shares In the nine months ended September 30, 2025, the Company recognized a $182,146 loss for a loss on the sale of put shares, related to the 475,000 shares sold using the Company’s SEPA. Other Income, Net Other income, net increased from $52,397 for the nine months ended September 30, 2024 to $54,412 in the nine months ended September 30, 2025. Liquidity and Capital Resources Sources of Liquidity As of September 30, 2025, our principal source of liquidity was $1.1 million in cash and cash equivalents, including money market investments, and as a result, there was substantial doubt over whether the Company had sufficient capital to operate for the next twelve months from the issuance date of this Quarterly Report. We considered elements of our financing plan that were probable and likely to be implemented within the next year. While we have already begun to successfully execute our financing plan, including raising $7.0 million in the nine months ended September 30, 2025 through issuance of equity securities. In addition, during the nine months ended September 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 the initiation of the Phase 1 clinical trial to evaluate HCW9302 in an autoimmune disease, licensing agreements, and disclosures of our discoveries regarding the lead product candidates among 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. In the three and nine months ended September 30, 2025, the Company issued 475,000 shares of Common Stock through the SEPA for net proceeds of $2.2 million, $2.0 million of which were settled as of September 30, 2025. On February 20, 2025, the Company entered the SEPA 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 August 14, 2025, the parties agreed to amend the SEPA to allow for intraday trading. See Note 7. Standby Equity Purchase Agreement. In the nine months ended September 30, 2025, the Company closed on a $5.0 million in a follow-on public offering with an offering priced at the market under Nasdaq rules. Contemporaneously with the May 2025 financing, the Company entered into an agreement with the Investor to set a new exercise price of $7.45 per share, with respect to certain Common Stock Warrants to purchase 167,925 shares of the Company’s Common Stock which were issued in the November 20, 2024 financing. On November 20, 2024, the Company closed a $6.9 million registered direct offering and a concurrent private placement of common stock and warrants with an offering priced above market under Nasdaq rules. All of these transactions were all completed with one institutional investor. See Note 4. Sale of Common Stock and Warrants . 43 An important part of the Company’s future financing plans is the ability to access the public markets for the sale of securities. This requires that the Company remain in compliance with all Nasdaq Listing Rules, and it is currently deficient in meeting the requirements of Listing Rule 5550(b)(1), or the Equity Rule, related to the minimum requirements to maintain a $2.5 million balance in stockholders’ equity. The Company was recently granted an extension to regain compliance with the Equity Rule until December 31, 2025, as discussed in more detail below. In the first quarter of 2025, following a hearing before the Panel, the Panel granted the Company an extension until June 30, 2025 to regain compliance with all Nasdaq Listing Rules The Company had been deficient in three areas: Listing Rule 5550(a)(2), or requirements for the minimum bid price; Listing Rule 5550(a)(4), or requirements for the public float requirement in and the market value of publicly held shares, and the Equity Rule. On June 26, 2025, the Company announced that it received a formal notice from the Listing Qualifications Staff (the “Staff”) of the Nasdaq Stock Market LLC (“Nasdaq”) that the Company was in compliance with the Equity Rule for continued listing on the Nasdaq Capital Market (the “Exchange”). At that time, 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. While the Company successfully completed several elements of its compliance plan including the Reverse Stock Split, the restructuring or conversion of $7.7 million of debt, putting a Standby Equity Purchase Agreement in place, and completing a $5.0 million equity financing by June 30, 2025, as previously reported, the Company’s upfront license fee from WY Biotech did not meet the criteria for revenue recognition for the period ended June 30,2025. As a result, as of June 30, 2025, the Company did not meet the requirements of the Equity Rule. The Company filed its Form 10-Q for quarter ended June 30, 2025 on August 18, 2025. On August 19, 2025, the Company received written notice from the Staff that as of June 30, 2025, the Company was non-compliant with the Equity Rule for continued listing on the Exchange. The Company made a timely request for a hearing before the Panel and was granted a hearing. On October 13, 2025, the Panel granted the Company an extension in which to regain compliance with all continued listing rules of the Exchange. The Panel’s determination follows the Company’s hearing on September 25, 2025, at which the Company presented, and the Panel considered, the Company’s plan to regain compliance with the Equity Rule. The Panel granted the Company’s request for continued listing on the Exchange, subject to, among other things, the Company demonstrating compliance with the Equity Rule by December 31, 2025, and with all other Exchange continued listing rules by February 16, 2026. The Company was advised that February 16, 2026, represents the full extent of the Panel’s discretion to grant continued listing while the Company is non-compliant with the Nasdaq Listing Rules. The Panel also required that the Company provide prompt notification of any significant events that occur during the exception period that may affect the Company’s compliance with Nasdaq requirements. In addition, the Company must timely file Form 10-Q for the third quarter, and provide notice of the status of certain elements of the Company’s compliance plan. Any compliance documentation submitted by the Company will be subject to review by the Panel, which may, in its discretion, request additional information before determining that the Company has complied with the terms of the exception. The Panel has discretion to review its decision to grant an exception period within 45 calendar days after issuance of the written decision. 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 began 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. During the nine months ended September 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 research and development 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. 44 The Company and WY Biotech Co., Ltd. (“WY Biotech”) are currently finalizing the terms of an amendment to an exclusive worldwide license agreement (“WY Biotech License”) that the parties first entered on November 17, 2024. The subject of the license is the use of in vivo rights to one of the Company’s preclinical molecules, HCW11-006. The Company had extended the date for payment of the $7.0 million upfront license fee due under the WY Biotech License while WY Biotech worked to finalize agreements with their contract development and manufacturing organization (“CDMO”) and investors. On September 5, 2025, WY Biotech proposed further revisions and additions to the terms of the WY Biotech License. Negotiations between the parties to restructure the terms of the WY Biotech License are ongoing. Pursuant to the terms currently being negotiated, the Company will retain its payment-free, milestone-free, and royalty-free option to recapture the development and commercialization in vivo rights of the licensed molecule for the United States, Canada, Central America, and South America (Opt-in Territory) after the conclusion of the Phase 1 clinical trial. WY Biotech is financially responsible for all costs associated with research and development, manufacturing, clinical development, regulatory approval, and commercialization for the molecule. The Company will be responsible for costs associated with clinical development, regulatory approval, and commercialization in the Opt-in Territory, if it exercises its opt-in rights. As reported in the Company’s Form 8-K filed on July 18, 2024 and further described in Part II, Item 1. – “Legal Proceedings” below, as of July 13, 2024, the Company and Dr. Hing C. Wong, the Company’s Founder and Chief Executive Officer, entered into a confidential Settlement Agreement with ImmunityBio and its affiliates. The Settlement Agreement includes mutual general releases by and among the parties thereto. No party was required to make any monetary payments to any other party or person under the Settlement Agreement and each party will bear its own expenses incurred in connection with the matter. The Arbitration and related Complaint were dismissed on December 24, 2024. With the execution of the Settlement Agreement, we resolved the attendant uncertainties for the outcome of the Arbitration and additional complexities, and we launched our new financing plan. In the accompanying condensed interim balance sheet as of September 30, 2025, the Company reported a balance of $12.1 million for legal fees incurred but not yet paid that were included within Accounts payable. The Company is in discussions with the law firms involved with this matter to establish a reasonable payment plan for the related legal fees. During the nine months ended September 30, 2025, the Company received an insurance reimbursement of $2.0 million, which was paid directly to the law firm who represented Dr. Wong in connection with his defense in the Arbitration. The insurance recovery is reported within Legal expenses (recoveries), net in the condensed interim statement of operations for the nine months ended September 30, 2025. 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 September 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 September 30, 2025, the Company has reported the balance $6.2 million for this loan as Short-term debt, net. As discussed below, on October 24, 2025, the Company was notified by Cogent Bank that it exercised its discretion to make a demand that the Company cure mechanics liens. On January 22, 2025, the Company entered into a forbearance agreement with BE&K Building Group (“BE&K”), its general contractor, to allow the Company until March 31, 2025 to continue efforts to find the financing required to complete the construction and renovation of the property. Pursuant to the forbearance agreement, the Company made an initial payment of $1.0 million in partial satisfaction of amounts owing to BE&K and its subcontractors. As the Company reported in a Form 8-K, on April 17, 2025, the Company received a summons and a copy of a complaint filed by BE&K in the Circuit Court of the 17th Judicial Circuit in and for Broward County, Florida (the “BE&K Complaint”). Other Defendants named in the BE&K Complaint who are subcontractors elected to file counterclaims and cross-claims as part of their responses to the BE&K Complaint. Cogent Bank, also named as a Defendant in the BE&K Complaint, has not elected to take legal action at this time. In addition, on April 28, 2025, the Company received a summons and a copy of a complaint filed by Fisk Electric Company (which is a defendant in the BE&K Complaint) in the Circuit Court of the 17th Judicial Circuit in and for Broward County, Florida (the “Fisk Complaint”) against the Company, BE&K, and the other defendants in the BE&K Complaint. 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 as well as the B&I MSJ. The parties are engaged in discovery and the court set the case for trial in early December 2026. 45 On October 24, 2025, the Company was notified by Cogent Bank that it exercised its discretion to make a demand that the Company cure the mechanics liens no later than thirty (30) days after receipt of this letter in strict compliance with Section 7.2(3) of the Loan Agreement by: (i) paying and discharging all of the Claims of Lien and causing satisfactions to be recorded in the Public Records of Broward County, Florida for all of the Claims of Lien, and (ii) resolving all litigation against the Borrower and the mortgaged property described in the Mortgage and causing such claims in the Foreclosure Actions to be dismissed and all related notices of lis pendens to be released. The Company and Cogent Bank are in negotiations to come to terms for a forbearance agreement to provide additional time for the Company to comply with the demands it made in the demand letter. The accompanying condensed interim financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the ordinary course of business. The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might result from the outcome of the uncertainties described above. The Company believes that substantial doubt exists regarding its ability to continue as a going concern for at least 12 months from the date of issuance of the Company’s condensed interim financial statements, without additional funding or financial support. After considering management’s plan for financing and funds raised that are probable to occur within one year, as well as that the Company expects to continue to incur losses from operations for the foreseeable future, management concluded that the substantial doubt that existed in its going concern analysis as of September 30, 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. Our funding requirements will depend on many factors, including, but not limited to: • timing, progress, costs, and results of our ongoing preclinical studies and clinical trials of our immunotherapeutic products; • costs, timing, and outcome of regulatory review of our product candidates; • number of trials required for regulatory approval; • whether we enter into any cooperative, collaboration or co-development agreements and the terms of such agreements; • whether we raise additional funding through bank loan facilities, other debt arrangements, out-licensing or joint ventures, cooperative agreements or strategic collaborations; • effect of competing technology and market developments; • cost of maintaining, expanding, and enforcing our intellectual property rights; • impact of future arbitration, litigation, regulatory inquiries, or investigations, as well as costs to indemnify our officers and directors against third-party claims related to our patents and other intellectual property: • cost and timing of buildout of the Company’s new manufacturing and laboratory facilities, including manufacturing for biologics and upgraded research and development facilities, including risks of cost overruns and delays, and ability to obtain additional financing, if needed; • impact of legal actions taken by BE&K and other lien holders related to foreclosure and other claims; and • costs and timing of future commercialization activities, including product manufacturing, marketing, sales, and distribution, for any of our product candidates for which we receive regulatory approval. A change in the outcome of any of these or other factors with respect to the clinical development and commercialization of our product candidates could significantly change the costs and timing associated with the development of that product candidate. 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. 46 Comparison of the Cash Flows for the Nine Months Ended September 30, 2024 and September 30, 2025 The following table summarizes our cash flows for the nine months ended September 30, 2024 and September 30, 2025: Nine Months Ended September 30, 2024 2025 Cash used in operating activities $ (11,392,547 ) $ (10,036,100 ) Cash (used in) provided by investing activities (148,205 ) — Cash provided by financing activities 8,943,872 6,458,437 Net decrease in cash and cash equivalents $ (2,596,880 ) $ (3,577,663 ) Operating Activities Net cash used in operating activities were $11.4 million for the nine months ended September 30, 2024 and $10.0 million for the nine months ended September 30, 2025. Cash used in operating activities for the nine months ended September 30, 2024 consisted primarily of net loss for the period of $26.7 million, partially offset by a $12.4 million increase in accounts payable and other liabilities, a decrease of $883,917 in accounts receivable and a decrease of $829,043 in prepaid expenses and other current assets. Further offset to the use of cash resulted from noncash adjustments of $1.2 million, consisting primarily of $501,882 of cash provided by an adjustment for depreciation and accretion and $716,940 of cash provided by an adjustment for stock-based compensation. Cash used in operating activities for the nine months ended September 30, 2025 consisted primarily of net loss for the period of $8.7 million, a decrease in accounts payable of $3.1 million and an adjustment for a noncash transaction of a change in fair value of investment and contingent liability, net of $782,404, partially offset by $551,534 of cash provided by a decrease in accounts receivable, $162,903 of cash provided from a decrease in prepaid expenses and other assets, and several adjustments to reconcile net loss to net cash used in operating activities. Adjustments for noncash transactions provided $2.0 million of cash by operating activities, including $884,831 in depreciation and accretion expense, $759,441 for stock-based compensation, $150,000 for a Commitment Fee paid in shares of the Company’s Common Stock, and $182,146 for a loss on the sale of Put Shares issued under the provisions of the SEPA. Investing Activities Cash used in investment activities for the nine months ended September 30, 2024 consisted of $148,205 used for purchases of property and equipment. There was no cash used in or provided by investing activities in the nine months ended September 30, 2025. Financing Activities Cash provided by financing activities for the nine months ended September 30, 2024 resulted from a $2.5 million private placement of the Company’s common stock and $6.5 million from the issuance of Secured Notes, partially offset a $88,388 principal repayment under the 2022 Loan Agreement related to the acquisition financing used to purchase a building. In the nine months ended September 30, 2024, there were noncash transactions of $1.9 million for capital expenditures accrued but not yet paid and $829,207 for purchases of property and equipment that were included in accounts payable. During the nine months ended September 30, 2025, $6.5 million of cash provided by financing activities consisted of the following: • $3.5 million of gross proceeds for the issuance of shares of the Company’s Common Stock, $2.0 million of which were proceeds received from the sale of shares under the Company’s Standby Equity Purchase Agreement. • $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. These were partially offset by cash used in financing activities consisted of $888,399 used for issuance costs and $94,776 used to repay debt. 47 In the nine months ended September 30, 2025, there were significant noncash transactions. The Company restructured and extinguished $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 $4.0 million gain from restructuring was recorded to additional paid-in capital for the period ended September 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 as of September 30, 2025. Critical Accounting Policies, Significant Judgements and Use of Estimates Our management’s discussion and analysis of our financial condition and results of operations is based on our unaudited condensed interim financial statements, which have been prepared in accordance with U.S. GAAP. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported expenses incurred during the reporting periods. Our estimates are based on our historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgements about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. We believe that the accounting policies discussed below are critical to understanding our historical and future performance, as these policies relate to the more significant areas involving management’s judgements and estimates. Revenue Recognition We recognize revenue under the guidance of Topic 606. To determine the appropriate amount of revenue to be recognized for arrangements determined to be within the scope of Topic 606, we perform the following five steps: (i) identification of the contract(s) with the customer, (ii) identification of the promised goods or services in the contract and determination of whether the promised goods or services are performance obligations, (iii) measurement of the transaction price, (iv) allocation of the transaction price to the performance obligations, and (v) recognition of revenue when (or as) we satisfy each performance obligation. We only apply the five-step model to contracts when it is probable that we will collect the consideration we are entitled to in exchange for the goods or services we transfer to our customer. See Note 1 to our condensed interim financial statements appearing elsewhere in this Quarterly Report on Form 10-Q for more information. Investments As part of its financing strategy, the Company may enter into licensing or collaboration agreements under which it receives consideration in the form of a minority equity interest in a counterparty, in lieu of or in addition to cash payments. These financial instruments are presented within Investments in the accompanying condensed interim balance sheets. When consideration is an equity interest in a private entity whose equity has limited marketability with no readily determinable fair value and for which the Company does not have significant influence over the investee, the Company has elected to measure the equity interest using the measurement alternative, at cost less impairment, adjusted for observable price changes in orderly transactions for the identical or similar investment of the same issuer (ASC Topic 321, Investments - Equity Securities), unless the fair value method is otherwise elected. If the Company elects to measure an equity security at fair value, the entity shall measure all identical or similar investments of the same issuer, including future purchases of identical or similar investments of the same issuer, at fair value. The election to measure those securities at fair value shall be irrevocable. Any resulting gains or losses on the securities for which that election is made shall be recorded in earnings at the time of the election. See Note 8. Fair Value of Financial Instruments. In the period ended June 30, 2025, the Company elected to account for its Wugen common shares at fair value. The Company utilized a valuation report that used the adjusted enterprise valuation method to fair value the Wugen common shares, which is considered a Level 3 input. We believe are useful to consider in the amounts reported in the financial statements for the carrying value for the Wugen investment and the change in the carrying value recognized in earnings in the financial statements. The fair value of the Wugen common shares is also used to fair value the contingent liability the Company recognizes for rights granted to converting noteholders to a portion of the proceeds received in the liquidation or sale of the Wugen shares. 48 In the period ended September 30, 2025, Wugen has its first closing for a Series C Preferred Stock equity offering. While this closing was completed with only existing investors and was not widely marketed, we considered that these parties invested nearly $100.0 million through the purchase of shares in cash to through conversion of debt. In addition, they are sophisticated investors who are market participants with knowledge of the life sciences industry as well as Wugen. Therefore, we considered this first closing of the Series C Preferred Stock equity offering to be an orderly transaction. Wugen may have subsequent closings for this offering in the future, at which time the Company will assess the impact on our investment in Wugen common shares. During the period, the Company utilized a combination of valuation techniques, consisting of adjusted enterprise valuation method and the backsolve method (based on the capital raise described above) to estimate the fair value as of September 30, 2025. Wugen is a private company, and we have a limited amount of information available to us. We are aware of the sensitivity of the backsolve method to the quality of inputs, which can sometimes be subjective, especially when relying on a single recent funding event. To mitigate the risks of using a backsolve valuation approach, the Company used the adjusted enterprise valuation method in combination with the backsolve method. The Company concluded that the fair value of the Wugen investment declined from $3.3 million as of June 30, 2025 to $1.3 million as of September 30, 2025. The fair value of the related contingent liability for the rights to proceeds from the sale or liquidation of Wugen shares declined from $1.7 million as of June 30, 2025 to $692,531 as of September 30, 2025. The Company recognized an unrealized loss of $966,284 in the three months ended September 30, 2025 and an unrealized net gain of $782,404 in the nine months ended September 30, 2025 presented within Change in fair value of investment and contingent liability, net in the accompanying condensed interim statements of operations. Standby Equity Line of Credit The Company and Square Gate Capital Master Fund, LLC - Series 4 (“Square Gate”) entered a Standby Equity Purchase Agreement (“SEPA”) providing for an equity line of credit with Square Gate on February 20, 2025. This agreement provides a mechanism for submission by the Company and acceptance by Square Gate of Put Notices under the SEPA pursuant to which Square Gate and the Company may agree to and execute one purchase and sale of Put Shares (“Standard Put Shares”). The Standard Put Notice has a pricing mechanism based on a volume-adjusted weighted average trading price over three days following the acceptance of the Standard Put. On August 14, 2025, the parties entered into a First Amendment to the SEPA (the “First Amendment”) to provide a mechanism for submission by the Company and acceptance by Square Gate of Put Notices under the SEPA pursuant to which Square Gate and the Company may agree to and execute multiple purchases and sales of Put Shares on the same trading day (“Intraday Put Shares”). Under the First Amendment, among other things, the purchase price of the Intraday Put Shares will be the lowest traded price during a specified valuation time period which begins with the acceptance of the Intraday Put and ends when trading volume reaches 1000% of the amount of shares included in the Intraday Put. A SEPA is an equity-linked instrument for which an investor has the right, but not the obligation, to purchase shares of the entity’s common stock over a specified period of time. The SEPA creates a purchase put option for the overarching arrangement which was determined to be a derivative. 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 issued constitutes a financial instrument. 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. Further, individual draws must also be evaluated to determine if they meet criteria for equity classification. With regards to the individual draws for a Standard Put under the SEPA, an individual draw would create a separate financial instrument with settlement criteria that does not meet indexation guidance. While the number of shares is known at inception and therefore not subject to the overarching share cap, there are two inputs into the settlement amount paid by the Investor which are not inputs into a fixed for fixed option: (1) the maximum amount to be funded under the SEPA of $20 million, which inherently limits the settlement amount regardless of the Company’s stock price and (2) the discount which reduces the amount to be paid upon settlement. With regards to the individual draws for an Intraday Put under the First Amendment to the SEPA, an individual draw would create a separate financial instrument with settlement criteria that does not meet the indexation guidance. While the number of shares is known at inception and therefore not subject to an overarching share cap, the only inputs into its settlement is the Company’s stock price and trading volume during the pricing period. 49 Inputs noted above are not all inputs into a fixed for fixed option pricing model, thus the individual draw issuances are not eligible for equity classification in accordance with ASC 815-40, and therefore an asset or liability will be recorded and marked to market while the financial instrument is outstanding. Up settlement of the financial instruments, the Company should recognize the following amounts in earnings: • The gain (loss) for the excess (deficit) of (a) the carrying amount of the asset or liability for the financial instrument plus the proceeds received and (b) the fair value of the common shares. • Any discount, issuance or transaction costs incurred in conjunction with the settlement of the put shares. 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. For all of the significant accounting policies see Note 1 to our Annual Report. Recent Accounting Pronouncements See Note 1 to our Annual Report.