HCW Biologics Inc.

PROPOSAL TWO

APPROVAL OF THE ISSUANCE OF SHARES OF THE

COMPANY’S COMMON STOCK PURSUANT TO AN EQUITY LINE OF CREDIT WITH

SQUARE GATE.

General Information About the Equity Line of Credit.

The Company entered into an Equity Purchase Agreement (the “Purchase Agreement”) and a Registration Rights Agreement (the “Registration Rights Agreement”) with Square Gate Capital Master Fund, LLC – Series 4 (“Square Gate”), pursuant which Square Gate agreed to purchase, from time to time at the Company’s election, up to $40,000,000 in shares of our common stock, subject to certain limitations (the “Equity Line of Credit” or “ELOC”). Copies of the Purchase Agreement and Registration Rights Agreement are attached hereto as Appendix A.

Under the applicable Nasdaq rules, in no event may we issue any shares of our Common Stock pursuant to the ELOC if the issuance of such shares of Common Stock would exceed 19.99% of the shares of our Common Stock outstanding immediately prior to the execution of the Purchase Agreement (the “Exchange Cap”), unless we obtain stockholder approval to issue shares of our Common Stock in excess of the Exchange Cap. In any event, we may not issue any shares of our Common Stock under the Purchase Agreement if such issuance or sale would breach any applicable rules or regulations of Nasdaq.

The Company may be limited in its ability to draw down on the ELOC and issue shares of our Common Stock under the Purchase Agreement unless and until the stockholders approve the issuance of shares in excess of 19.99%.

In order to gain compliance with the minimum stockholders’ equity of $2,500,000 required for listing on the Nasdaq Capital Market pursuant to Nasdaq Listing Rule 5550(b)(1) (the “Minimum Stockholder Equity Rule”), the Company may need to draw down on the ELOC and issue shares of our Common Stock under the Purchase Agreement in excess of the Exchange Cap.

Why Does the Company Need Stockholder Approval?

Our Common Stock is listed on Nasdaq and, as such, we are subject to the Nasdaq Stock Market Rules. Nasdaq Stock Market Rule 5635(d) is referred to as the “Nasdaq 20% Rule.” In order to comply with the Nasdaq 20% Rule and to satisfy conditions under the Purchase Agreement, we are seeking stockholder approval to permit the potential issuance of more than 19.99% of the outstanding shares of our Common Stock in accordance with the Purchase Agreement.

The Nasdaq 20% Rule requires that an issuer obtain stockholder approval prior to certain issuances of Common Stock or securities convertible into or exchangeable for Common Stock at a price less than the greater of market price or book value of such securities (on an as exercised basis) if such issuance equals 20% or more of our Common Stock or voting power of the issuer outstanding before the transaction. Upon entering into the Purchase Agreement, we could not issue or sell any shares of Common Stock, and Square Gate could not purchase or acquire any shares of our Common Stock pursuant to the Purchase Agreement, to the extent that after giving effect thereto, the aggregate number of shares of our Common Stock that would be issued pursuant to the Purchase Agreement and the transactions contemplated hereby would exceed 19.99% of the shares of our Common Stock issued and outstanding immediately prior to the execution of the Purchase Agreement) which number of shares is to be reduced, on ashare-for-share basis, by the number of shares of our Common Stock issued or issuable pursuant to any transaction or series of transactions that may be aggregated with the transactions contemplated by the Purchase Agreement under applicable rules of the trading market (such maximum number of shares, the “Exchange Cap”), unless the Company’s stockholders approved the issuance of Common Stock in excess of the Exchange Cap in accordance with the applicable rules of the trading market. While the Company is asking the stockholders to approve the issuance of all of the shares available under the Purchase Agreement, the Company may not need to issue and sell all such shares.

To meet the Nasdaq 20% Rule, we need stockholder approval under the listing rules of Nasdaq to remove the Exchange Cap provisions in the Purchase Agreement to permit the potential issuance of more than 20% of our outstanding Common Stock in accordance with the terms of the Purchase Agreement.

What is the Effect on Current Stockholders if Proposal Two is Approved?

If our stockholders approve this proposal, we will be able to eliminate the Exchange Cap in the Purchase Agreement and therefore have the option to issue the maximum number of shares of common stock issuable under the Purchase Agreement which would exceed 19.99% of the issued and outstanding shares of our Common Stock as of the date we executed the Purchase Agreement. This would allow the Company flexibility in accessing the equity line of credit to pursue its business growth, current announced partnerships and collaborations and maintain compliance with the Nasdaq Minimum Shareholder Equity Rule if other sources of capital are insufficient to fulfill these goals. If stockholders approve the Proposal Two, the rights or privileges of our existing stockholders will not be affected, except that the economic and voting interests of each of our existing stockholders will be significantly diluted should we choose to require Square Gate to purchase those shares pursuant to the Purchase Agreement. Although the number of shares of our Common Stock that our existing stockholders own will not decrease, the shares of our Common Stock owned by our existing stockholders will represent a smaller percentage of our total outstanding shares of our Common Stock after any such issuance.

What is the Effect on Current Stockholders if the Proposal Two is NOT approved?

If our stockholders do not approve this Proposal Two, we may be limited in the amount of money we can draw down on the line of credit under the Purchase Agreement. We are not seeking the approval of our stockholders to authorize our entry into the Purchase Agreement and related transaction documents. The failure of our stockholders to approve the proposal may result in our inability to take full advantage of the new equity line of credit and severely limit the Company’s ability to grow and/or maintain compliance with the Nasdaq Minimum Stockholder Equity Rule. Accordingly, if the Company is limited in the number of shares it can issue under the equity line of credit, dilution to stockholders will be limited and have the effect of limiting the Company’s growth potential and ability to maintain its Nasdaq listing with no additional capital under the ELOC.

Required Vote

In accordance with Delaware law, approval of Proposal Two requires the affirmative vote of a majority of the shares of common stock present or represented by proxy and entitled to vote on this proposal at the Special Meeting. As a result, abstentions will have the same effect as votes against this proposal.

Recommendation of the Board

The Board recommends a vote FOR Proposal Two.