1. Organization and Summary of Significant Accounting Policies

Organization

HCW Biologics Inc. (the “Company”) is a biopharmaceutical company focused on discovering and developing novel immunotherapies to lengthen healthspan by disrupting the link between chronic, low-grade inflammation and age-related diseases. The Company believes age-related low-grade chronic inflammation, or “inflammaging,” is a significant contributing factor to several chronic diseases and conditions, such as cancer, cardiovascular disease, diabetes, neurodegenerative diseases, and autoimmune diseases. The Company is located in Miramar, Florida and was incorporated in the state of Delaware in April 2018.

Reverse Stock Split

On March 31, 2025, at a Special Meeting of the Stockholders (the “Special Meeting”), the stockholders of the Company approved a reverse stock split of all outstanding shares of the Common Stock, and the Board approved a reverse stock split of the Common Stock at a final ratio of one-for-forty (1::40) (the “Reverse Stock Split”). The Reverse Stock Split was effective at 12:01 a.m. Eastern Time on April 11, 2025. The Common Stock commenced trading on a reverse split-adjusted basis when the markets opened on April 11, 2025, under the existing trading symbol “HCWB.”

In addition to the Reverse Stock Split, the stockholders approved two other proposals at the Special Meeting: (1) use of our equity line of credit to raise up to $40.0 million through sales of shares of the Company’s Common Stock thereunder and (2) execution of the principal terms for the conversion of up to approximately $6.9 million of the outstanding principal of Secured Notes into shares of Common Stock.

All authorized, issued, and outstanding shares of common stock, preferred stock, stock option awards, and per share data included in these financial statements have been recast to give retrospective effect to the adjusted authorized shares and Reverse Stock Split for all periods presented. The Reverse Stock Split did not have any effect on the stated par value of the Company’s Common Stock or the rights and privileges of the holders of shares of Common Stock. Options, warrants and convertible securities outstanding immediately prior to the Reverse Stock Split were appropriately adjusted to reflect the Reverse Stock Split.

Liquidity and Going Concern

In accordance with ASC 205-40, Presentation of Financial Statements – Going Concern (“Topic 205-40”), we are required to evaluate whether there are conditions and events, considered in the aggregate, that raise substantial doubt about our ability to continue as a going concern for at least 12 months from the issuance date of the Company’s condensed interim financial statements. This evaluation does not take into consideration the potential mitigating effect of management’s plans that have not been fully implemented or are not within control of the Company as of the date the financial statements are issued. When substantial doubt exists under this methodology, management evaluates whether the mitigating effect of its plans sufficiently alleviates substantial doubt about the Company’s ability to continue as a going concern. The mitigating effect of management’s plans, however, is only considered if both (1) it is probable that the plans will be effectively implemented within one year after the date that the financial statements are issued, and (2) it is probable that the plans, when implemented, will mitigate the relevant conditions or events that raise substantial doubt about the entity’s ability to continue as a going concern within one year after the date that the financial statements are issued.

As of June 30, 2025, the Company had not generated any revenue from commercial product sales of its internally developed immunotherapeutic products for the treatment of cancer and other age-related diseases. During its development activities, the Company has sustained operating losses, experienced negative operating cash flows and negative working capital position and it expects to continue to incur operating losses for the foreseeable future. Since inception to June 30, 2025, the Company incurred cumulative net losses of $102.0 million. These losses reflect a $5.3 million reserve for credit losses and a $1.3 million nonoperating losses reported in prior periods.

To date, the Company has funded operations primarily through the sale of stock and warrants, issuance of Secured Notes and other debt, and revenues generated from the Company’s exclusive worldwide licenses and its development supply agreement with Wugen Inc. (“Wugen”), pursuant to which Wugen licensed limited rights to develop, manufacture, and commercialize cell-based therapy treatments for cancer based on two of our internally-developed, multi-cytokine fusion protein molecules, HCW9201 and HCW9206. In the quarter ended June 30, 2025, the Company agreed to a request from Wugen to suspend the Wugen License, including Wugen’s clinical trial due diligence obligations and its obligation to pay up to $500,000 annually to reimburse the Company for certain R&D expenses. The suspension will run for a period of one year from the effective date and will end on May 29, 2026. During the suspension, the Company has the exclusive right to seek alternate licensees and terminate the license in order to enter other business development transactions related to the ex vivo use of the licensed molecules.

In the quarter ended June 30, 2025, WY Biotech Co., Ltd. (“WY Biotech”) notified the Company that it had completed its due diligence and review of the technical report delivered by the Company and elected to proceed with next steps pursuant to the exclusive worldwide license agreement between WY Biotech and the Company with respect to development and commercialization of one of HCWB’s preclinical product candidates, HCW11-006, for in vivo applications (as amended, the “WY Biotech License”). As a result, WY Biotech is financially obligated to the Company, as detailed in the WY Biotech License, as amended, including the obligation to pay a $7.0 million upfront license fee. WY Biotech is in the process of finalizing agreements with its contract development and manufacturing organization (“CDMO”) and investors. Since the Company has no payment history with WY Biotech, it did not recognize the upfront license fee as revenue as we concluded collectability was not probable. In order to accommodate WY Biotech’s timing in finalizing agreements, the Company and WY Biotech agreed to extend the latest date for payment of the $7.0 million license fee to September 30, 2025.

During the period ended June 30, 2025, the Company extinguished $7.7 million of debt through restructuring or conversion of debt. This was accomplished by restructuring $7.4 million of Secured Notes, including accumulated accretion of a fixed bonus payable upon Maturity Date, through the Second Amendment to the Amended and Restated Note Purchase Agreement and converting $270,000 of unsecured promissory notes according to the terms of the purchase agreement. Both transactions include the right to a portion of the proceeds received on the liquidation or sale of the Wugen shares, if such an event occurs. The Company maintains ownership of the Wugen shares included in these transactions and has recorded a contingent liability to account for the right to receive proceeds upon liquidation or sale of the Wugen shares. The noteholders for this debt consisted of officers, directors and other significant stockholders. Due to the related party nature of the converting noteholders, the gain on restructuring and loss on conversion were recorded to additional paid-in capital for the period ended June 30, 2025.

On August 15, 2022, the Company entered into a loan and security agreement (the “2022 Loan Agreement”) with Cogent Bank, pursuant to which it received $6.5 million in proceeds to purchase a property at which the Company planned to build a facility to manufacture biologics and upgrade its research laboratory facilities. The loan is secured by a first priority lien on the property. As of June 30, 2025, certain subcontractors had filed mechanics liens related to unpaid invoices issued in connection with construction of the Company’s new manufacturing facilities and upgraded research laboratories. The 2022 Loan Agreement contains a provision for a discretionary default in the event that the Company fails to pay sums due in connection with construction of any improvements; however, as of the reporting date, the lender has not elected to do so. As of June 30, 2025, the Company has reflected this loan as Short-term debt, net, to reflect that the lender has the right to accelerate the loan under a discretionary default provision.

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 and intends to file a timely response to the B&I MSJ.

As of July 13, 2024, the Company and Dr. Hing C. Wong, the Company’s Founder and Chief Executive Officer, entered into a confidential Settlement Agreement and Release (the “Settlement Agreement”) with ImmunityBio and its affiliates. The Settlement Agreement includes mutual general releases by and among the parties thereto. No party was required to make any monetary payments to any other party or person under the Settlement Agreement and each party will bear its own expenses incurred in connection with the matter. The Arbitration and related Complaint were dismissed on December 24, 2024. With the execution of the Settlement Agreement, the Company resolved the attendant uncertainties for the outcome of the Arbitration and additional complexities, and it launched its new financing plan.

In the accompanying condensed balance sheet as of June 30, 2025, the Company reported a balance of $12.3 million for legal fees incurred but not yet paid that were included within Accounts payable and an accrual of $8,000 for accrued legal fees within Accrued liabilities and other current liabilities. The Company is engaged in discussions with the law firms involved with this matter to arrange a reasonable payment plan with respect to those legal fees. In the six months ended June 30, 2025, the Company received a $2.0 million insurance payment, which was paid directly to the law firm who represented Dr. Wong for his defense during the Arbitration. The insurance payment is reported within Legal expenses, net in the condensed interim statement of operations for the six months ended June 30, 2025.

With the ability to approach the equity markets post Settlement, the Company raised gross proceeds of $11.9 million through the issuance of equity securities in two offerings to the same intuitional investor who was the sole investor in both financings (the “Investor”). The first financing occurred on November 18, 2024, when the Company raised gross proceeds of $6.9 million in a registered direct offering and a concurrent private placement of common stock and warrants. This offering priced above market under Nasdaq rules and closed on November 20, 2024. The second financing occurred pursuant to a purchase agreement entered into on May 13, 2025, when the Company raised gross proceeds of $5.0 million in a follow-on public offering of common stock and warrants. This offering priced at the market under Nasdaq rules and closed on May 15, 2025. 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 November 2024. See Note 4. Sale of Common Stock and Warrants. Prior to the May 2025 financing, the Company obtained bridge financing in the form of a $150,000 promissory note, guaranteed by securities held by the Company’s Founder and Chief Executive Officer, and in the form of a $270,000 unsecured promissory note which converted to equity on May 15, 2025 according to the provision of the loan documents. See Note 3. Debt, Net.

On February 20, 2025, the Company entered into an Equity Purchase Agreement and a related Registration Rights Agreement with Square Gate Capital Master Fund, LLC - Series 4 (“Square Gate”), pursuant to which the Company will have the right, but not the obligation, to sell to Square Gate, and Square Gate will have the obligation to purchase from the Company, up to $20.0 million (the “Maximum Commitment Amount”) worth of the Company’s shares of Common Stock, at the Company’s sole discretion, over the next 36 months (the “Put Shares”), subject to certain conditions precedent and other limitations. On April 16, 2025, the U.S. Securities and Exchange Commission (“SEC”) declared a registration statement effective to register shares required to sell up to $40.0 million of the Company’s shares to Square Gate, according to provisions of the Equity Purchase Agreement. See Note 7. Standby Equity Purchase Agreement.

On June 26, 2025, the Company announced that it received formal notice from Nasdaq that the Company was in compliance with Listing Rule 5550(b)(1) (the “Equity Rule”). On May 13, 2025, the Company received formal notice from Nasdaq that it regained compliance with the bid price requirement in Listing Rule 5550(a)(2), the public float requirement in Listing Rule 5550(a)(4), and the market value of publicly held shares requirement in Listing Rule 5550(a)(5). As a result, the Company is in compliance with all applicable criteria for continued listing on the Nasdaq Capital Market tier, and the previously disclosed listing compliance matters have been closed. The Company was also notified that it will remain subject to a “Panel Monitor,” as that term is defined in Nasdaq Listing Rule 5815(d)(4)(B), for a period of one year from the date of the Nasdaq notice, through June 23, 2026. If, during the term of the Panel Monitor, the Company does not continue to remain in compliance with the Equity Rule, the Company will not be provided with the opportunity to submit a compliance plan for review by the Listing Qualifications Staff and must instead request a hearing before the Panel to address the deficiency, with such request staying any further action with respect to the Company’s listing on Nasdaq pending completion of the hearing process.

As of June 30, 2025, the conclusion of a going concern assessment, before consideration of our financing plans, was that there is substantial doubt about the Company’s ability to continue as a going concern. Future financial transactions planned in the next twelve months consist of business development transactions for out licenses and corporate partnering, as well as the sale of Common Stock through Put Shares to Square Gate under the Equity Purchase Agreement. The Company considered future elements of its financing plan that were probable and likely to be implemented within the next year to determine if financing activities currently underway are sufficient mitigate the substantial doubt in the going concern analysis, in addition to considering continued operating losses and the burden of obligations for expenses incurred in connection with past legal proceedings. Management concluded that there were no mitigating circumstances which alleviated the substantial doubt over its ability to continue as a going concern. If the Company is not successful in raising additional capital through these activities, management intends to revise its business plan and reduce costs. If such revisions are insufficient, the Company may have to curtail or cease operations.

The accompanying condensed interim financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the ordinary course of business. The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might result from the outcome of the uncertainties described above. The Company believes that substantial doubt exists regarding its ability to continue as a going concern for at least 12 months from the date of issuance of the Company’s audited financial statements and that the substantial doubt that existed in its going concern analysis was not alleviated.

Summary of Significant Accounting Policies

For the three months ended June 30, 2024 and June 30, 2025, the Company recognized $618,854 and $6,550 in revenue, respectively, related to sale of development supply materials to the Company’s licensee, Wugen. In the six months ended June 30, 2024 and June 30, 2025, the Company recognized $1.7 million and $11,615 in revenue, respectively, related to sale of clinical materials to Wugen. In the three months ended June 30, 2025, the Company agreed to Wugen’s request to suspend the Wugen License for a period of one year, ending on May 29, 2026.

Operating Leases

2. Accrued Liabilities and Other Current Liabilities

As of December 31, 2024, the Company had a balance of $981,940 included in Accrued liabilities and other current liabilities in the audited condensed balance sheet, consisting of $422,000 for construction expenses, $49,000 for manufacturing expenses, $155,000 for legal fees, $121,000 for clinical expenses, $5,000 for bonus expense, $202,000 for salary expenses and $28,000 for other liabilities.

As of June 30, 2025, the Company had a balance of $1.1 million included in Accrued liabilities and other current liabilities in the accompanying condensed interim balance sheet, consisting of $422,000 for construction expenses, $87,000 for property taxes, $52,000 for manufacturing expenses, $193,000 for legal fees, $127,000 for clinical expenses, and $180,000 for salary expenses.

3. Debt, Net

Cogent Bank Loan

On August 15, 2022, the Company entered the 2022 Loan Agreement with Cogent Bank, pursuant to which it received $6.5 million in proceeds to purchase a property where the Company planned to construct a manufacturing facility for biologics and upgraded research laboratory facilities. The loan is secured by a first priority lien on the building.

As of June 30, 2025, the Company had $6.3 million in principal outstanding under the 2022 Loan Agreement. The interest-only period was one year followed by 48 months of equal payments of principal and interest beginning on September 15, 2023 based on a 25-year amortization rate. The unamortized balance is due on August 15, 2027 (the “Maturity Date”), and bears interest at a fixed per annum rate equal to 5.75%. Upon the Maturity Date, a final payment of unamortized principal will be due. The Company is in compliance with covenants related to current payment of principal and interest as of June 30, 2025. The Company has the option to prepay the outstanding balance of the loan prior to the Maturity Date without penalty.

As of December 31, 2024 and June 30, 2025, certain subcontractors filed mechanics liens related to unpaid invoices issued in connection with the Company’s construction of its new manufacturing facilities and upgraded research laboratories. The 2022 Loan Agreement contains a provision for a discretionary default in the event that the Company fails to pay sums due in connection with construction of any improvements; however, as of the reporting date, the lender has not elected to do so. As of December 31, 2024 and June 30, 2025, the Company has reflected this loan as Short-term debt, net, to reflect that the lender has the right to accelerate the loan under a discretionary default provision.

Senior Secured Notes

As of June 30, 2025, there was $325,000 of outstanding principal amount of Secured Notes reported in Debt, net in the accompanying condensed interim balance sheet. As of June 30, 2025, the Company restructured $6.6 million outstanding principal of Secured Notes by conversion to equity. On May 1, 2025, those noteholders who elected to convert their outstanding principal to equity entered the Second Amendment to the Amended and Restated Note Purchase Agreement (the “Conversion Agreement”). On May 7, 2025, $6.6 million of outstanding principal amount of Secured Notes were extinguished upon conversion. See discussion in section “Troubled Debt Restructuring of Secured Notes” below. Those noteholders who elected not to convert had no change in terms, except for the termination of their conversion feature. Under the terms of the agreement, the Secured Notes continue to bear interest at a rate of 9% per annum, payable quarterly in arrears. The Secured Notes will mature on August 30, 2026 (the “Maturity Date”), on which date the principal balance, accrued but unpaid interest and other amounts owed under the terms of the agreement shall be due and payable. The Company pledged its equity ownership interest in Wugen, which was equivalent to a 5.6% ownership stake in that company as of June 30, 2025 (“Pledged Collateral”). The Pledged Collateral will be held and released according to the terms of the Escrow Agreement, as security for the Secured Notes.

The Secured Notes have a Mandatory Prepayment provision, according to which the Company is required to prepay the Secured Notes before the Maturity Date under certain circumstances. In the event of a Mandatory Prepayment, Secured Notes may receive a bonus payment based on the gross proceeds of the sale of the Pledged Collateral. The agreement also contains default provisions, according to which, following an event of default, the Company may be required to distribute the Pledged Collateral to the Purchasers on a pro rata basis based on a $10.0 million issuance of Secured Notes, in full satisfaction of the indebtedness evidenced by the Secured Notes.

If the Secured Notes are repaid on the Maturity Date, holders will receive their pro rata share of a fixed bonus payment of $3.4 million in addition to payment of outstanding principal and accrued and unpaid interest. If a bonus payment is paid, then there is no prepayment penalty. In the three and six months ended June 30, 2025, the Company recognized $102,248 and $375,308, respectively as an expense for accretion of the fixed bonus payment due in the event the Secured Notes are repaid on the Maturity Date, presented within Depreciation in the accompanying condensed interim statements of operations. On May 7, 2025, upon conversion of $6.6 million of outstanding principal of Secured Notes, accretion of the fixed bonus was terminated for these Secured Notes and the accumulated accretion balance of $860,462 was derecognized. See discussion in section “Troubled Debt Restructuring of Secured Notes” below.

For those Secured Notes which remain outstanding, as of June 30, 2025, the Company reported $367,151 for the outstanding principal and accumulated accretion of a fixed bonus payment due upon maturity as a noncurrent liability in Debt, net in the accompanying condensed interim balance sheet.

Troubled Debt Restructuring of Senior Secured Notes

The Company entered into the Second Amendment to its Secured Note in which certain Secured Note noteholders and the Company agreed to the terms to effectively extinguished $7.4 million of debt through the issuance of 253,083 shares of Common Stock, warrants to purchase 126,540 shares of Common Stock, and rights to receive a pro rata share of 49.11% of the proceeds or shares from the Company’s investment in Wugen. The transaction was accounted for under ASC 470-60 as a troubled debt extinguishment, as the Company was experiencing financial difficulty and it was granted a concession by Secured Note noteholders whereby the fair value of consideration transferred was less than the carrying amount of the Secured Notes. The net carrying amount of the restructured Secured Notes at the time of the amendment was $7.4 million including principal of $6.6 million and accumulated accretion of a fixed bonus payable upon Maturity Date of $860,462. The fair value of consideration transferred including Common Stock, warrants to purchase Common Stock, and rights to proceeds of a portion of the Company’s shares of Wugen common stock was $4.0 million, with the difference of $3.5 million being recognized as a troubled debt restructuring gain. Due to the related party nature of the converting noteholders, the gain was recorded to additional paid-in capital for the period ended June 30, 2025.

Unsecured Promissory Notes

As of May 5, 2025, the Company issued a total of $270,000 principal amount of unsecured convertible promissory notes that mature on May 5, 2026 with paid in kind interest accruing thereon, payable quarterly in arrears at 10% per annum (the “Convertible Bridge Notes”). In accordance with their terms, following the completion of a qualified offering, the Convertible Bridge Notes were converted into shares of our Common Stock at the final offering price in an offering that closed on May 15, 2025. In addition, holders of the Convertible Bridge Notes have the right to receive a portion of the proceeds of the Company’s shares of Wugen common stock, if and when such shares are ever sold, determined by the number of the Wugen shares equal to 0.25 multiplied by the original principal amount, in dollars, of the Convertible Bridge Notes. Investors included: $60,000 invested by Hing C. Wong, the Company’s Founder and CEO; $100,000 invested by Scott T. Garrett, the Chairman of the Company’s Board of Directors; and $10,000 invested by Gary M. Winer, who was a member of the Company’s Board of Directors at the time of his investment.

As of May 15, 2025, the outstanding principal of Convertible Bridge Notes were converted. The fair value of consideration transferred including 36,242 shares of Common Stock and rights to proceeds of a portion of the Company’s shares of Wugen common stock was $401,134, with the difference of $131,134 being recognized as a loss on conversion. Due to the related party nature of the converting noteholders, the loss was recorded to additional paid-in capital for the period ended June 30, 2025.

Promissory Note with Personal Guarantee

On May 8, 2025, the Company issued a promissory note for $150,000, secured by a personal guaranty and pledge given by the Company’s Founder and CEO, Dr. Hing C. Wong (“Guarantor”) in accordance with the provisions of that certain Guaranty and Pledge Agreement of even date herewith between the Company and the Holder. The promissory note was issued with an original issue discount of $75,000. On the Maturity Date of February 7, 2026, the Company will repay $225,000. There are provisions which allow the Company to prepay the promissory note before the Maturity Date. The proceeds of this promissory note were used to pay the expenses required to be paid prior to the equity financing which closed on May 15, 2025. The Company is accreting the original issue discount on a straight-line basis over the seven-month term. There is no current interest due on the promissory note with personal guarantee. In the three and six months ended June 30, 2025, the Company recognized accretion of original issue discount of $0 and $14,722, respectively, in Interest expense in the accompanying condensed interim statements of operations.

Contingent Liabilities

The Company extinguished $6.9 million of debt through conversion or restructuring of outstanding principal to shares of the Company’s Common Stock, warrants to purchase the Company’s Common Stock and the right to receive proceeds of a liquidation or sale of a portion of the Company’s Wugen shares. The Company retained ownership of the Wugen shares allocated to the converted noteholders and recorded a contingent liability for the right to receive proceeds upon liquidation or sale, if such event occurs. As of June 30, 2025, the Company elected to measure its investment in Wugen at fair value. Similar to the underlying asset, the Company recognized the contingent liability at fair value and will recognize changes in fair value in subsequent reporting periods in earnings. As of June 30, 2025, the Company included $1.7 million for this contingent liability in the accompanying condensed interim balance sheets.

4. Sale of Common Stock and Warrants

May 2025 Equity Financing

On May 13, 2025, the Company entered into a securities purchase agreement with a single institutional investor (the “Investor”) for the issuance and sale of (i) 158,000 shares (the “Shares”) of the Company’s Common Stock and (ii) pre-funded warrants to purchase up to 513,140 shares of Common Stock (the “Pre-Funded Warrants”) in a follow-on public offering (the “Offering”), pursuant to a registration statement filed under Rule 424(b)(4) (File No. 333-287136), which was declared effective by the SEC on May 15, 2025. The Company also issued warrants to purchase up to an aggregate of 1,342,280 shares of Common Stock (“Common Stock Warrants”) for $7.45 per share.

The Company sold the Common Stock and Pre-Funded Warrants with an accompanying two Common Stock Warrant, each of which may purchase one share of Common Stock, and the Common Stock and Pre-Funded Warrants were immediately separated from the Common Stock Warrants and issued separately. The combined purchase price for each Share and the two accompanying Common Stock Warrant was $7.45 per unit and the combined purchase price for each Pre-Funded Warrant and the two accompanying Common Stock Warrant was $7.4999 per unit. The Common Stock Warrants have an exercise price of $7.45 per share, are exercisable immediately, and expire on the five-year anniversary of the date of issuance. The Pre-Funded Warrants have an exercise price of $0.0001 per share, are exercisable immediately, and will not expire until exercised in full.

The gross proceeds to the Company from the Offering were approximately $5.0 million before deducting the placement agent’s fees and other offering expenses of $802,602 payable by the Company. The Offering closed on May 15, 2025. In this financing, the Company issued shares of Common Stock of Pre-Funded Warrants that may be exercised to purchase Common Stock in lieu thereof, and warrants that may be exercised to purchase Common Stock. In a contemporaneous private agreement entered into with the Investor, the Company agreed to reprice warrants to purchase up to 167,925 shares of Common Stock that were issued to the Investor in a financing that closed on November 20, 2024 to an exercise price of $7.45 per share. The Company estimated the fair value of the securities issued, using the Black Scholes valuation model to estimate the fair value of the warrants, and determined the fair value of securities issued was $15.2 million. As this was a transaction with an existing stockholder, the Company recognized a $10.2 million deemed equity dividend to the Investor which was recorded in additional-paid-in capital for the period ended June 30, 2025.

The Investor may not exercise any portion of the Common Stock Warrants or Pre-Funded Warrants to the extent it would beneficially own more than the limits defined in the respective Warrant Purchase Agreement. The exercise price and number of shares of Common Stock issuable upon the exercise of the Common Stock Warrants and Pre-Funded Warrants are subject to adjustment in the event of any stock dividends and distributions, stock splits, stock combinations or stock reclassifications, as described in the respective warrant agreements. Under certain circumstances, the warrants may be exercised on a “cashless” basis.

Both the Common Stock Warrants and Pre-Funded Warrants were classified as a component of permanent stockholders’ equity within additional paid-in-capital and were recorded at the issuance date. The Common Stock Warrants and Pre-Funded Warrants are equity classified because they are freestanding financial instruments that are legally detachable and separately exercisable from the equity instruments, are immediately exercisable, do not embody an obligation for the Company to repurchase its shares, permit the holders to receive a fixed number of shares of Common Stock upon exercise, are indexed to the Company’s Common Stock and meet the equity classification criteria. In addition, the Common Stock Warrants and the Pre-Funded Warrants do not provide any guarantee of value or return.

As of June 30, 2025, the Investor exercised all of the Pre-Funded Warrants by delivering a notice of exercise to the Company and paying the exercise price. As a result, as of June 30, 2025, the Company issued 513,140 shares of registered Common Stock to the Investor.

As of June 30, 2025, none of the Common Stock Warrants issued on May 15, 2025 had been exercised.

November 2024 Equity Financing

On November 18, 2024, the Company entered into a securities purchase agreement with the Investor for the issuance and sale of (i) 104,000 shares (the “Shares”) of the Company’s common stock, par value $0.0001 per share (the “Common Stock”) and (ii) pre-funded warrants to purchase up to 63,925 shares of Common Stock (the “Pre-Funded Warrants”) in a registered direct offering (the “Registered Offering”), pursuant to a shelf registration statement on Form S-3 (File No. 333-266991), which was declared effective by the SEC on August 26, 2022. The Registered Offering was made by means of a prospectus supplement filed with the SEC on November 20, 2024 that forms a part of such registration statement. In a concurrent private placement (the “Private Placement” and together with the Registered Offering, the Company also issued unregistered warrants to purchase up to an aggregate of 167,925 shares of Common Stock (“Common Stock Warrants”) for $41.20 per share. Share amounts and exercise price per share have been adjusted for the reverse stock split the Company effected on April 11, 2025.

The Company sold the Common Stock and Pre-Funded Warrants with an accompanying Common Stock Warrant to purchase one share of Common Stock, and the Common Stock and Pre-Funded Warrants were immediately separated from the Common Stock Warrants and issued separately. The combined purchase price for each Share and accompanying Common Stock Warrant was $41.20 per unit and the combined purchase price for each Pre-Funded Warrant and accompanying Common Stock Warrant was $41.1999 per unit. The Common Stock Warrants have an exercise price of $41.20 per share, are exercisable immediately, and expire on the five-year anniversary of the date of issuance. The Pre-Funded Warrants have an exercise price of $0.0001 per share, are exercisable immediately, and will not expire until exercised in full.

The gross proceeds to the Company from the offering were approximately $6.9 million before deducting the placement agent’s fees and other offering expenses of $638,045 payable by the Company. It closed on November 20, 2024.

The Investor may not exercise any portion of the Common Stock Warrants or Pre-Funded Warrants to the extent it would beneficially own more than the limits defined in the respective Warrant Purchase Agreement. The exercise price and number of shares of Common Stock issuable upon the exercise of the Common Stock Warrants and Pre-Funded Warrants are subject to adjustment in the event of any stock dividends and distributions, stock splits, stock combinations or stock reclassifications, as described in the respective warrant agreements. Under certain circumstances, the warrants may be exercised on a “cashless” basis.

Both the Common Stock Warrants and Pre-Funded Warrants were classified as a component of permanent stockholders’ equity within additional paid-in-capital and were recorded at the issuance date. The Common Stock Warrants and Pre-Funded Warrants are equity classified because they are freestanding financial instruments that are legally detachable and separately exercisable from the equity instruments, are immediately exercisable, do not embody an obligation for the Company to repurchase its shares, permit the holders to receive a fixed number of shares of Common Stock upon exercise, are indexed to the Company’s Common Stock and meet the equity classification criteria. In addition, the Common Stock Warrants and the Pre-Funded Warrants do not provide any guarantee of value or return.

On November 20, 2024, the Investor exercised all of the Pre-Funded Warrants by delivering a notice of exercise to the Company and paying the exercise price. The Company issued 63,925 registered shares of Common Stock to the Investor on November 21, 2024.

On April 16, 2025, the 167,925 shares of Common Stock underlying the Common Stock Warrants issued on November 20, 2024 were registered in a registration statement filed pursuant to Rule 424(b)(3) (File No. 333-286409). On May 15, 2025, the Company entered into a privately negotiated agreement with the Investor for its Common Stock Warrants to reduce the exercise price of such warrants from $41.20 per share to $7.45 per share. The Company considered the change in fair value of this modification of the warrant as a deemed dividend to the Investor related to the equity offering that closed in May 2025 with the Investor.

As of June 30, 2025, none of the Common Stock Warrants issued on November 20, 2024 and repriced on May 15, 2025 had been exercised.

5. Preferred Stock

6. Net Loss Per Share

7. Standby Equity Purchase Agreement

On February 20, 2025, the Company entered into an Equity Purchase Agreement (the “Equity Purchase Agreement”) with Square Gate Capital Master Fund, LLC - Series 4 (“Square Gate”), which the Company deemed to be a Standby Equity Purchase Agreement (“SEPA”). Under the Equity Purchase Agreement, 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 $20,000,000 (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. Square Gate has covenanted not to cause or engage in any short sales or hedging transactions with respect to the shares of the Company’s common stock. The Maxim Group LLC acted as the Company’s exclusive Placement Agent in connection with this transaction.

Unless earlier terminated, the Equity Purchase Agreement will remain in effect until the earlier of February 18, 2028 (i.e., the expiry of the 36-month period commencing on the date of the Equity Purchase Agreement) or the date on which Square Gate has purchased the Maximum Commitment Amount (the “Commitment Period”). The Company has the right to terminate the Equity Purchase Agreement at any time, subject to certain provisions as set forth in the Equity Purchase Agreement. Square Gate has the right to terminate the Equity Purchase Agreement under certain provisions as set forth in the Equity Purchase Agreement, including the continued listing of the Company's common stock on an Eligible Market.

During the Commitment Period, the Company will have the right, but not the obligation, to direct Square Gate to make a purchase of the Put Shares by delivering written notice (a “Put Notice”) to Square Gate on any trading day (the “Put Date”) to purchase a number of Put Shares pursuant to a formula set forth in the Equity Purchase Agreement. The number of Put Shares that the Company can issue to Square Gate from time to time under the Equity Purchase Agreement may not exceed 4.99% of the number of shares of our common stock outstanding immediately after giving effect to the issuance of shares issuable pursuant to a Put Notice.

The per share purchase price for the Put Shares that we elect to sell to Square Gate in a Put Notice pursuant to the Equity Purchase Agreement will be equal to 98% of the lowest daily VWAP during the Valuation Period (as defined in the Equity Purchase Agreement), in the case of a Valuation Period ending on the date that is at the end of the third trading day immediately following the applicable Put Date. The Company also agreed to a $150,000 commitment fee (the “Commitment Fee”), which shall be in the form of shares of Common Stock to be issued to Square Gate in accordance with the terms of the Equity Purchase Agreement.

The Equity Purchase Agreement and Registration Rights Agreement contain customary representations, warranties and agreements by the Company and customary conditions to Square Gate’s obligation to purchase the Put Shares. Actual sales of shares of our common stock, if any, to Square Gate under the Equity Purchase Agreement will depend on a variety of factors to be determined by the Company from time to time, including, among others, market conditions, the trading price of the Company’s common stock and determinations by the Company as to the appropriate sources of funding for the Company and its operations. The net proceeds to us from sales of our common stock to Square Gate under the Equity Purchase Agreement, if any, will depend on the frequency and prices at which the Company sells shares to Square Gate under the Equity Purchase Agreement. Any proceeds that the Company receives from sales of shares of our common stock to Square Gate under the Equity Purchase Agreement will be used to advance our clinical development programs and expand our discovery, research and preclinical activities in the near term and in the future.

On March 12, 2025, the Company issued 9,616 shares of the Company’s Common Stock (subject to adjustment for the Reverse Stock Split) to Square Gate in payment of the Commitment Fee (“Commitment Shares”). At the Special Meeting of Stockholders, stockholders approved the Company’s use of the Equity Purchase Agreement. On April 16, 2025, the U.S. Securities and Exchange Commission (“SEC”) declared a registration statement effective to register the Commitment Shares and shares required to sell up to $40.0 million of the Company’s shares to Square Gate, according to provisions of the Equity Purchase Agreement.

The Company concluded that the Equity Purchase Agreement does not qualify for equity classification. On the effective date, the Company concluded that the fair value of the Equity Purchase Agreement at inception was zero and no asset or liability was recorded. As a result, fees paid to Square Gate in excess of the fair value of the Equity Purchase Agreement were expensed as incurred. Any issuance costs or other transaction costs attributable to a freestanding equity-linked financial instrument that is classified as an asset or liability should be recognized in earnings in the period incurred. The Commitment Fee was expensed as of March 31, 2025. The issuance costs were expensed as of June 30, 2025.

When the Company wishes to draw on the Equity Purchase Agreement, the Company submits a put order to Square Gate on Day 0, issues the shares on Day 1, and the pricing of the transaction is determined from Day 1 – 3 trading days, with the price to be paid by Square Gate fixed by using the minimum trading price in one of the three trading days after the put order is accepted. Square Gate is required to pay for the Put Shares under the terms of the Equity Purchase Agreement by Day 5. When there is a lag between the pricing of the shares and the issuance of the shares, the Company will account for the sale as a forward contract and the issuance as a settlement of the forward contract.

The fair value of the Equity Purchase Agreement is zero since inception. In the three months ended June 30, 2025, the Company expensed $48,608 of issuance costs incurred during the period, which are reported within General and administrative expenses in the accompanying condensed interim statements of operations. In the six months ended June 30, 2025, the Company expensed the $150,000 Commitment Fee which was incurred in the period ended March 31, 2025 and $148,608 of issuance costs which were incurred in the period ended June 30, 2025.

No draws were made under the Equity Purchase Agreement as of June 30, 2025. Subsequent to June 30, 2025, the Company made draws on the Equity Purchase Agreement and the Equity Purchase Agreement was amended by mutual agreement to allow for intraday trading. See Note 12. Subsequent Events.

8. Fair Value of Financial Instruments

The carrying amount of the Company’s financial instruments, including cash and cash equivalents, accounts receivable, prepaid expenses and other current assets, U.S. government-backed securities with maturity dates up to one year, accounts payable and accrued liabilities, approximate fair value due to their short-term maturities.

Money market funds included in cash and cash equivalents and U.S. government-backed securities are measured at fair value based on quoted prices in active markets, which are considered Level 1 inputs. The investments and contingent liability included in the balance sheet are measured at fair value based on the adjusted enterprise value method, which is considered Level 3 inputs. No transfers between levels occurred during the periods presented. The following table presents the Company’s assets and liabilities which were measured at fair value at December 31, 2024 and June 30, 2025:

9. Income Taxes

For the three and six months ended June 30, 2025, The Company computes its quarterly income tax expense/(benefit) by using a forecasted annual effective tax rate and adjusts for any discrete items arising during the quarter. The Company did not have a provision for income taxes (current or deferred tax expense) as of December 31, 2024 and June 30, 2025. The Company will continue to maintain a 100% valuation allowance on total deferred tax assets. The Company believes it is more likely than not that the related deferred tax assets will not be realized. As a result, the Company’s effective tax rate will remain at 0.00% because no items either estimated or discrete items would impact the tax provision.

See Note 12. Subsequent Events for information on the recent One Big Beautiful Bill Act and the potential impacts thereof.

10. Segment Reporting

HCW Biologics, Inc. has one reportable segment: life science. The life science segment consists of operations focused on discovering and developing novel immunotherapies to lengthen health span by disrupting the link between chronic, low-grade inflammation and diseases. The Company’s CODM is the Chief Executive Officer.

The accounting policies of the life science segment are the same as those described in the summary of significant accounting policies. The CODM assesses performance for the life science segment based on net loss, which is reported on the statement of operations as net loss. The measure of segment assets is reported on the balance sheet as total assets.

The Company has not generated any product revenue from commercial product sales of internally-developed immunotherapeutic products for the treatment of diseases, as no products have been approved for commercial sale as of June 30, 2025. The Company expects to continue to incur significant expenses and operating losses for the foreseeable future as it advances molecules through all stages of development and clinical trials and, ultimately, seek approval for commercial sale.

As such, the CODM uses cash forecast models in deciding how to invest into the life science segment. Such cash forecast models are reviewed to assess the entity-wide operating results and performance in conjunction with monitoring the results of R&D experiments for preclinical compounds and clinical trial data for clinical-stage compounds. The assessment of results of preclinical and clinical studies are critical to the allocation of resources by the CODM.

There were no material changes to the measures for segment revenue, profit or loss, and other metrics since March 31, 2025. The tables below summarize the significant expense categories regularly reviewed by the CODM for the three and six months ended June 30, 2024 and June 30, 2025: