HCW Biologics Inc.

PROPOSAL THREE

APPROVAL OF THE

NOTE CONVERSION TRANSACTION

We are asking our stockholders to approve, for purposes of complying with applicable Nasdaq listing rules, the issuance of shares of our Common Stock upon conversion of up to $6,905,000 of the principal amount of notes previously issued to noteholders, including certain officers, directors and stockholders of the Company (the “Noteholders”) pursuant to that certain Amended and Restated Note Purchase Agreement dated July 2, 2024, as amended by the First Amendment to Amended and Restated Senior Secured Note Purchase Agreement dated September 30, 2024, and as it may be further amended in accordance with the Principal Terms for Conversion Amendment, which has been approved in principle by the Board of Directors and the Noteholders and set forth on Appendix B attached hereto (the “Principal Terms”) and such additional terms and conditions not materially inconsistent with such Principal Terms our Board may hereafter approve (the “Note Conversion”). As of the Record Date, assuming stockholders approve this Proposal Three, and based on the assumptions below, if all $6,905,000 principal amount of notes held by the Noteholders are converted to shares of Common Stock pursuant to the Principal Terms for Conversion, such shares of Common Stock would represent approximately 19.26% of the outstanding shares of our Common Stock as of the Record Date if they were outstanding on such date.

We are seeking stockholder approval of Proposal Three because certain of the Noteholders are also officers, directors and/or stockholders of the Company. The stockholders who are also Noteholders will abstain from voting on Proposal Three.

Summary of Secured Note Financing and Proposed Conversion Terms

On March 31, 2024, the Company entered into a Note Purchase Agreement with certain Noteholders, pursuant to which the Company could issue secured notes up to an aggregate principal amount up to $10.0 million (“Secured Notes”).

As of July 2, 2024, existing investors in Secured Notes unanimously agreed to an Amended and Restated Note Purchase Agreement and related documents (“Amended and Restated Note Purchase Agreement”). On September 27, 2024, existing investors approved an amendment to the Amended and Restated Note Purchase Agreement which extended the last closing date to October 31, 2024. No other terms were changed. Under the terms of the Amended and Restated Note Purchase Agreement, the Secured Notes continue to bear interest at a rate of 9% per annum, payable quarterly in arrears. The Secured Notes will mature on August 30, 2026 (the “Maturity Date”), on which date the principal balance, accrued but unpaid interest and other amounts owed under the terms of the Amended and Restated Note Purchase Agreement shall be due and payable. The Company pledged its equity ownership interest in Wugen, Inc., which is 2,174,311 shares of Wugen, Inc. common stock, which was equivalent to a 5.6% ownership stake in that company’s fully-diluted stock as of September 30, 2024 (“Pledged Collateral”). The Pledged Collateral is to be held and released according to the terms of the Escrow Agreement, as security for the Secured Notes.

As of October 31, 2024, the Company had received approximately $6.9 million in funding from the issuance of Secured Notes. Investors included Dr. Hing C. Wong, Founder and Chief Executive Officer, who invested $2.4 million; Rebecca Byam, Chief Financial Officer, who invested $220,000; Lee Flowers, Senior Vice President of Business Development, who invested $25,000; Scott T. Garrett, the Chairman of the Company’s board of directors, who invested $140,000; Gary M. Winer, a member of our board of directors, who invested $60,000; Rick S. Greene, a member of the board of directors, who invested $25,000, as well as unrelated parties.

The Secured Notes have a Mandatory Prepayment provision, according to which the Company is required to prepay the Secured Notes before the Maturity Date under certain circumstances. In the event of a Mandatory

Prepayment, Secured Notes may receive a bonus payment based on the gross proceeds of the sale of the Pledged Collateral. If the Secured Notes are repaid on the Maturity Date, holders will receive a fixed bonus payment in addition to payment of outstanding principal and accrued and unpaid interest. If a bonus payment is paid, then there is no prepayment penalty. The Amended and Restated Note Purchase Agreement also contains default provisions, according to which, following an event of default, the Company may be required to distribute the Pledged Collateral to the Noteholders on a pro rata basis based on a $10.0 million issuance of Secured Notes, in full satisfaction of the indebtedness evidenced by the Secured Notes. In other words, 69.05% of the total Wugen shares are security for the Senior Secured Notes and would be transferred in the event of a default, pro rata, to the Holders.

Amended terms of the Amended and Restated Note Purchase Agreement included a conversion feature, which would give Noteholders a right to convert the outstanding indebtedness to shares of the our Common Stock under certain conditions, subject to final documentation. The holders of the Secured Notes have no obligation to exercise the conversion option, however, if the holders of the majority of principal of Secured Notes outstanding choose to do so, then all the holders of Secured Notes must do so.

Under the Principal Terms for Conversion, as more fully set forth in Appendix B, [Noteholders and the Company will agree that at least $6,580,000 principal amount of the Secured Notes will be converted into shares of our Common Stock at a conversion price of $0.65 per share. As part of the conversion, the Company will issue warrants to purchase shares of our Common Stock to the converting Noteholders for up to an additional $3,290,000 of shares of our Common Stock, at an exercise price of $0.65 per share (as these amounts may be adjusted to account for a Reverse Stock Split or similar transaction). Upon conversion, converting Noteholders would be subject to a lock-up period of 180 days from the date of conversion. Further, the Escrow Agreement will be amended such that the proceeds from the Pledged Collateral will be allocated among the Company and the converting Noteholders. Specifically, assuming $6,580,000 principal amount of Secured Notes will be converted, upon a sale of the Pledged Collateral, converting Noteholders will have the right to receive their pro rata share of 49.11% of the net proceeds received in such sale. The Company will retain the remaining 50.89% of proceeds upon the sale of the Pledged Collateral (subject to the rights of any non-converting Noteholders in such proceeds as collateral for repayment of their Notes). As described below, conversion of principal amount of the Secured Notes will result in adollar-for-dollar increase in stockholders’ equity (partially offset by the carrying value of 49.11% of the Company’s investment in the Pledged Collateral the proceeds of which will be paid to converting Noteholders of approximately $785,000), contributing to the Company’s plan to gain compliance with the Nasdaq Minimum Shareholder Equity Rule and to maintaining listing of the our Common Stock on Nasdaq.

Possible Effects if Proposal Three is Approved

If our stockholders approve Proposal Three, we would be able to convert up to approximately $6.6 million principal amount of debt to stockholders equity by issuance of shares of our Common Stock and warrants to purchase shares of our Common Stock, and agreeing that a portion of the proceeds from the Pledged Collateral will be paid to the converting Noteholders, thus increasing the Company’s stockholders’ equity by up to approximately $5.8 million, significantly contributing to the Company gaining compliance with the Nasdaq Minimum Shareholder Equity Rule. After the 180-day lock-up period for converting Noteholders expires, shares of our Common Stock that would be issuable to the Noteholders in connection with the conversion of the Notes would have the same rights and privileges as the shares of our currently authorized Common Stock. The issuance of such shares will not affect the rights of the holders of outstanding Common Stock, but such issuance will have a dilutive effect on our existing stockholders, including on the voting power and economic rights of our existing stockholders, and may result in a decline in the price of our Common Stock or in greater price volatility. The carrying value of the Pledged Collateral is $1.6 million. Wugen is a private company and there is currently no market for its stock. It is uncertain whether or if Wugen will have a liquidity event that will allow the Pledged Collateral to be sold and proceeds to be distributed. In addition, these shares are subject to certain standard lock-up provisions which will remain in place in the event there is a transaction that requires such a lock-up period, such as an IPO.

Possible Effects if Proposal Three is Not Approved

If our stockholders do not approve this proposal and we are not able to issue shares of our Common Stock in connection with the conversion of the Notes, we would be required to make repayments of the Notes in cash and the Pledged Collateral would continue to be held in escrow to secure such repayments. In addition, if our stockholders do not approve this proposal and we are not able to issue shares of our Common Stock to the Noteholders, the Company will not be able to increase its stockholders’ equity by the principal amount of the Notes intended to be converted, which is an important part of the Company’s plan to gain and retain continued compliance with applicable Nasdaq listing rules, including the Minimum Stockholder Equity Rule.

Executive Officer and Director Interest

Four out of our five directors and certain of our executive officers are also Noteholders and stockholders of the Company, as set forth in the table below.

All of the Noteholders who are also stockholders will abstain from voting on Proposal Three.

Vote Required

Assuming that a quorum is present at the Special Meeting, approval of Proposal Three requires the affirmative vote of the majority of the votes cast (meaning the number of shares voted** “for”** the proposal must exceed the number of shares voted** “against”** the proposal); provided, however, that the vote of any shares of our Common Stock issued to Noteholders will not be counted in determining whether or not this proposal is approved. Any shares that are not voted on the proposal for any reason, including abstentions and Broker Non-Votes, will not be counted as votes cast and accordingly will not affect the outcome of the proposal, but such votes will be counted for purposes of determining the presence or absence of a quorum.

SINCE FOUR OF FIVE DIRECTORS ARE ALSO NOTEHOLDERS, OUR BOARD ABSTAINS FROM MAKING A RECOMMENDATION WITH RESPECT TO PROPOSAL THREE.