HCW Biologics Inc.

**1. Organization and Summary of Significant Accounting Policies **

Organization

HCW Biologics Inc. (“HCW Biologics” or the “Company”) is a clinical-stage biopharmaceutical company developing transformative fusion immunotherapeutics to support or treat diseases promoted by chronic inflammation. Our assets include both clinical-stage immunotherapeutics as well as commercial-ready proprietary compounds for use as reagents in the production of immunotherapeutics for the treatment of infectious diseases and cancer. The Company believes low-grade chronic inflammation is a significant contributing factor to several diseases and conditions, such as autoimmune disorders and other inflammatory diseases such as neurodegenerative disease, cancer, and senescence-associated dysplasia. The Company is located in Miramar, Florida and was incorporated in the state of Delaware in April 2018.

Reverse Stock Splits

On March 31, 2025, at a Special Meeting of the Stockholders, the stockholders of the Company approved a reverse stock split of all outstanding shares of the Company’s common stock (“Common Stock”), and the Board approved a reverse stock split of the Common Stock at a final ratio of one-for-forty (1::40). This reverse stock split was effective on Apri 11, 2025, and 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.” All authorized, issued, and outstanding shares of Common Stock, Preferred Stock, stock option awards, and per share data included in condensed financial statements have been recast to give retrospective effect to the adjusted authorized shares and reverse stock split for all periods presented. There was no 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.

On March 26, 2026, the Company received a written notice from the Nasdaq Listing Qualifications Staff (the “Staff”) indicating that the Company was not in compliance with the minimum bid price requirement (“Bid Price Rule”) for continued listing set forth in Nasdaq Listing Rule 5810(c)(3)(A), which requires listed securities to maintain a minimum bid price of $1.00 per share. In accordance with Nasdaq rules, because the Company effected a reverse stock split in April 2025, the Company was not eligible for a 180-calendar day compliance period to regain compliance with the bid price requirement.

On May 5, 2026, the Company was granted a hearing with the Nasdaq Hearings Panel to present a compliance plan to regain compliance with the Bid Price Rule. If relief is granted, the Company intends to proceed with a proposal to effect a reverse stock split, which has been included in the definitive proxy statement for the Annual Meeting of Stockholders. On April 28, 2026, the Company filed a definitive proxy which contained a proposal to the stockholders for a potential reverse stock split (the “Reverse Stock Split Proposal”), in which the Company asked its stockholders to approve a proposed amendment to the Company’s Certificate of Incorporation (the “Charter”) to implement, at the discretion of the Board at any time prior to the one-year anniversary of the Annual Meeting, one or more reverse stock splits of the outstanding shares of our Common Stock in an aggregate range of not less than one-for-five (1::5) and not more than one-for-twenty (1::20). The implementation of this reverse stock split will not reduce the total number of authorized shares of Common Stock. The Board of Directors unanimously approved and declared advisable the Reverse Stock Split Proposal and recommended that the Company’s stockholders approve an amendment to the Charter to effect this proposal, at the discretion of our Board. The Annual Meeting of Stockholders will be held on June 15, 2026.

Liquidity and Going Concern

In accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 205-40, Presentation of Financial Statements – Going Concern (“Topic 205-40”), management is required to evaluate whether there are conditions and events, considered in the aggregate that raise substantial doubt about the Company’s ability to continue as a going concern for at least 12 months from the issuance date of the Company’s condensed 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 condensed 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 condensed 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 condensed financial statements are issued.

As of March 31, 2026, the Company had not generated any revenue from commercial product sales of its internally developed immunotherapeutic products. During its development activities, the Company has sustained operating losses, experienced negative operating cash flows and negative working capital position and expects to continue to incur operating losses for the foreseeable future. Since inception to March 31, 2026, the Company incurred cumulative net losses of $102.3 million. These factors raise substantial doubt regarding the Company’s ability to continue as a going concern.

The accompanying condensed 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 continuation of the Company as a going concern is dependent upon the ability of the Company to obtain debt or equity financings to continue operations. 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 financial statements and that the substantial doubt that existed in its going concern analysis was not alleviated.

Summary of Significant Accounting Policies

**Basis of Presentation **

Unaudited Condensed Financial Information

The accompanying unaudited condensed financial statements as of March 31, 2026 and for the three months ended March 31, 2025 and 2026 have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and pursuant to Article 10 of Regulation S-X of the Securities Act of 1933, as amended (the “Securities Act”). Accordingly, they do not include all of the information and notes required by U.S. GAAP for complete financial statements. These unaudited condensed financial statements include only normal and recurring adjustments that the Company believes are necessary to fairly state the Company’s financial position and the results of its operations and cash flows. The results for the three months ended March 31, 2026 are not necessarily indicative of the results expected for the full fiscal year or any subsequent interim period. The condensed balance sheet at December 31, 2025 has been derived from the audited financial statements at that date but does not include all disclosures required by U.S. GAAP for complete financial statements. Because all of the disclosures required by U.S. GAAP for complete financial statements are not included herein, these unaudited condensed financial statements and the notes accompanying them should be read in conjunction with the Company’s audited financial statements for the year ended December 31, 2025 which appear in our Annual Report on Form 10-K for the year ended December 31, 2025 filed with the Securities and Exchange Commission (the “SEC”) on March 31, 2026 (the “Annual Report”) and in other filings with the SEC.

Segment Reporting

The Company operates and manages its business as one reportable and operating segment, which is the business of developing and commercializing novel immunotherapies for diseases promoted by chronic inflammation, especially age-related diseases. The Company’s chief executive officer, who is the chief operating decision maker (“CODM”), reviews financial information on an aggregate basis for allocating and evaluating financial performance. In addition, our CODM is regularly provided with detailed results of preclinical and clinical data which is considered in his decision for the allocation of resources. See Note 11. Segment Reporting for further details. The single operating segment constitutes all of the Company activity, the CODM regularly reviews the entity-wide operating results and performance. All long-lived assets are maintained in the United States of America.

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts in the financial statements and accompanying notes. Management uses estimates in financial statements to approximate monetary amounts for items that cannot be measured precisely, such as asset valuations, liabilities, and revenue recognition. These estimates are based on subjective judgments, experience, and future assumptions. The Company evaluates its estimates and assumptions on an ongoing basis using historical experience and other factors and adjusts those estimates and assumptions when facts and circumstances dictate. Actual results could differ from estimates.

Fair Value Measurements

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 820, Fair Value Measurement (“Topic 820”) establishes a fair value hierarchy for those instruments measured at fair value that distinguishes between fair value measurements based on market data (observable inputs) and those based on the Company’s own assumptions (unobservable inputs). This hierarchy maximizes the use of observable inputs and minimizes the use of unobservable inputs. The three levels of inputs used to measure fair value are as follows:

Fair value measurements are classified based on the lowest level of input that is significant to the measurement. The Company’s assessment of the significance of a particular input to the fair value measurement requires judgment, which may affect the valuation of the assets and liabilities and their placement within the fair value hierarchy levels. The determination of the fair values takes into account the market for the Company’s financial assets and liabilities, the associated credit risk, and other factors as required. The Company considers active markets as those in which transactions for the assets or liabilities occur in sufficient frequency and volume to provide pricing information on an ongoing basis.

Revenue Recognition

The Company accounts for revenues in accordance with FASB ASC 606, Revenue from Contracts with Customers (“Topic 606”). To determine revenue recognition for arrangements that fall within the scope of Topic 606, the Company performs the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the Company satisfies a performance obligation. The Company only applies the five-step model to contracts when it is probable that it will collect the consideration it is entitled to in exchange for the goods or services transferred to the customer.

At contract inception, the Company assesses the goods or services promised within each contract, determines those that are performance obligations, and assesses whether each promised good or service is distinct. The Company then recognizes as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied. To date, the Company’s revenues have been generated exclusively from license agreements, which consists of licenses of intellectual property, cost reimbursements, upfront signing fees, milestone payments and royalties on future licensee’s product sales. In addition, the Company and Wugen have an agreement for the supply of clinical and research grade materials under which the Company also recognized revenues.

License Grants:

For out-licensing arrangements that include a grant of a license to the Company’s intellectual property, the Company considers whether the license grant is distinct from the other performance obligations included in the arrangement. For licenses that are distinct, the Company recognizes revenues from nonrefundable, upfront payments and other consideration allocated to the license when the license term has begun and the Company has provided all necessary information regarding the underlying intellectual property to the customer, which generally occurs at or near the inception of the arrangement.

License related services:

For license agreements that include service-based performance obligations, the Company evaluates whether these separately identifiable services are distinct performance obligations. The Company considers whether the customer could benefit from the licensed intellectual property with other readily available resources, whether the performance of the service would significantly modify or customize the licensed intellectual property or whether the service is highly interrelated or interdependent with the licensed intellectual property. Revenue attributable to services that are deemed distinct performance obligations are recognized over time as the customer simultaneously receives and consumes the benefits of the Company’s performance. The Company measures progress toward completion using an input method, typically cost-to-cost, which reflects the pattern in which services are delivered. Amounts received in advance for optional future services are recorded as deferred revenue and recognized as revenue when the related services are performed or when the option expires. The transaction price is allocated to the service performance obligations based on their relative standalone selling prices.

Milestone and Contingent Payments:

At the inception of the arrangement and at each reporting date thereafter, the Company assesses whether it should include any milestone and contingent payments or other forms of variable consideration in the transaction price using the most likely amount method. If it is probable that a significant reversal of cumulative revenue would not occur upon resolution of the uncertainty, the associated milestone value is included in the transaction price. At the end of each subsequent reporting period, the Company re-evaluates the probability of achievement of each such milestone and any related constraint and, if necessary, adjusts its estimate of the overall transaction price. Since milestone and contingent payments may become payable to the Company upon the initiation of a clinical study or filing for or receipt of regulatory approval, the Company reviews the relevant facts and circumstances to determine when the Company should update the transaction price, which may occur before the triggering event. When the Company updates the transaction price for milestone and contingent payments, the Company allocates the changes in the total transaction price to each performance obligation in the agreement on the same basis as the initial allocation. Any such adjustments are recorded on a cumulative catch-up basis in the period of adjustment, which may result in recognizing revenue for previously satisfied performance obligations in such period. The Company’s licensees will generally pay milestones payments subsequent to achievement of the triggering event.

Materials Supply:

The Company provides clinical and research grade materials so that licensees may develop products based on the licensed molecules. The amounts billed are recognized as revenue as the performance obligations are satisfied by the Company, once the Company determines that a contract exists.

**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 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 measures 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 or Topic 321), 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.

In the second quarter of 2025, the Company elected to account for its Wugen shares, previously accounted for under the measurement alternative, at fair value as determined using financial valuation techniques and market information available. Further, the Company will remeasure the change in fair value of the Wugen shares, and related contingent liability, in reporting periods subsequent to the second quarter of 2025 and recognize the change in earnings. See Note 2. Fair Value of Financial Instruments.

On March 16, 2026, the Company received full payment of the nonrefundable upfront license fee from Trimmune. See Note 5. License Agreements. A portion of the upfront license fee was made in the form of a transferable minority equity interest in Trimmune. The Company has elected to use the measurement alternative under ASC 321-10-35-2 — cost less impairment, with adjustment for observable price changes in orderly transactions for the identical or a similar investment of the same issuer. The Company has a related-party relationship with Trimmune through the Trimmune License. The initial fair value was derived by reference to the implied post-financing valuation of Trimmune of RMB 175,000,000 from the contemporaneous Licensee Funding Transaction (a Level 2 fair value indicator under Topic 820), using the exchange rate on the closing date of the transaction.

From time to time, the Company invests excess cash in U.S. Treasury bills and notes, which are classified as trading securities. As of March 31, 2025 and 2026, the Company hadno short-term investments.

Standby Equity Purchase Agreement

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 $20.0 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.

Net Income (Loss) Per Share

Basic net income (loss) per share is calculated by dividing the net income (loss) attributable to Common Stockholders by the daily weighted-average number of common shares outstanding for the period, without consideration of potential dilutive securities. Diluted net income (loss) per share is computed by dividing the net income (loss) attributable to Common Stockholders by the sum of the daily weighted average number of common shares plus the potential dilutive effects of potential dilutive securities outstanding during the period. Potential dilutive securities are excluded from diluted income or loss per share if the effect of such inclusion is anti-dilutive. The Company’s potentially dilutive securities, which include options granted under the 2019 Equity Incentive Plan (“2019 Plan”) and the 2021 Equity Incentive Plan (“2021 Plan”) as well as the Company’s Common Stock Warrants, have been excluded from the computation of diluted net income (loss) per share as their exercise prices exceeded the average market price of the Company’s Common Stock during the period. Options and warrants are considered dilutive to the income per share calculation when their exercise price is below the average market price of the stock (“in-the-money”).

Recently Issued Accounting Pronouncements

In November 2024, the FASB issued ASU No. 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (ASU 2024-03) which requires public business entities to provide enhanced disaggregation of expenses in financial statements, including detailed disclosures on inventory purchases, employee compensation, depreciation, and amortization. The new guidance is effective for the Company for fiscal periods beginning after December 15, 2026 and interim periods within fiscal years beginning after December 15, 2027. The Company is evaluating the impact of the standard on the Company’s financial statements.

In September 2025, the FASB issued Accounting Standards Update (ASU) 2025-06, Intangibles — Goodwill and Other — Internal-Use Software (Subtopic 350-40): Accounting for and Disclosure of Software Costs to update the accounting for internal use software costs. The guidance requires entities to start capitalizing eligible costs when (1) management has authorized and committed to funding the software project, and (2) it is probable that the project will be completed and the software will be used to perform the function intended. The guidance, which applies to all entities, is effective for fiscal years beginning after December 15, 2027, and interim periods within those fiscal years. Entities may apply the guidance using a prospective, retrospective or modified transition approach. Early adoption is permitted. The Company is evaluating the impact of the standard on the Company’s financial statements.

In September 2025, the FASB issued Accounting Standards Update (ASU) 2025-07—Derivatives and Hedging (“Topic 815”) and Revenue from Contracts with Customers (Topic 606): Derivatives Scope Refinements and Scope Clarification for Share-based Noncash Consideration from a Customer in a Revenue Contract to expand the scope of contracts that are excluded from derivative accounting (i.e., measured at fair value through earnings). ASU 2025-07 addresses stakeholders’ concerns about (1) the application of derivative accounting to contracts with features based on the operations or activities of one of the parties to the contract and (2) the diversity in accounting for share-based noncash consideration from a customer that is consideration for the transfer of goods or services. The guidance is effective for annual reporting periods beginning after December 15, 2026, and interim periods within those annual periods. Entities may apply the guidance either on a modified retrospective or prospective basis. Early adoption is permitted. The Company is evaluating the impact of the standard on the Company’s financial statements.

As of December 31, 2026, the Company will cease to be an ‘emerging growth company’ as defined in the Jumpstart Our Business Startups Act of 2012. We expect to remain a nonaccelerated filer and smaller reporting company. The Company is currently assessing potential regulatory and operational changes that may be required as a result.

**2. Fair Value of Financial Instruments **

The carrying amount of the Company’s financial instruments, including cash and cash equivalents, accounts receivable, prepaid expenses, 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 warrant liability is measured at fair value using the Black-Scholes options pricing model. The fair value is classified as Level 3 within the fair value hierarchy due to the use of significant unobservable inputs.

The Company’s investment in shares of Wugen common stock and the related contingent liability are classified as Level 3 within the fair value hierarchy due to the use of significant unobservable inputs. The fair value of these instruments is estimated using a combination of valuation techniques, including an adjusted enterprise valuation method and a backsolve method, which incorporates information from recent financing transactions and the Company’s assessment of the underlying enterprise value of Wugen.

Significant unobservable inputs used in these valuations include assumptions related to the enterprise value of Wugen, discounts for lack of marketability, the capital structure of the investee, and the probability and timing of potential liquidity events. The valuation of the contingent liability is based on assumptions that are consistent with those used in valuing the related Wugen investment, including the expected distribution of proceeds upon a liquidity event.

The Company remeasures the fair value of the contingent liability at each reporting date, with changes in fair value recognized in earnings. The fair value of the Wugen investment is also reassessed each reporting period based on updated assumptions and available market information.

There were no material changes in the valuation techniques or significant unobservable inputs used to measure these Level 3 instruments during the three months ended March 31, 2026.

The following table presents the Company’s assets and liabilities which were measured at fair value at December 31, 2025 and March 31, 2026:

**3. Accrued Liabilities and Other Current Liabilities **

As of December 31, 2025, the Company had a balance of $1.1 million included in Accrued liabilities and other current liabilities in the accompanying condensed balance sheet, consisting of $422,000 for construction expenses, $87,000 for accrued interest expense, $49,000 for manufacturing expenses, $159,000 for legal fees, $186,000 for clinical expenses, $79,000 for salary expenses and $118,000 for other accrued expenses or current liabilities.

As of March 31, 2026, the Company had a balance of $1.1 million included in Accrued liabilities and other current liabilities in the accompanying condensed balance sheet, consisting of $422,000 for construction expenses, $87,000 for accrued interest expense, $49,000 for manufacturing expenses, $153,000 for legal fees, $224,000 for clinical expenses, $119,000 for salary expenses and $46,000 for other accrued expenses.

4. Debt

Cogent Bank Loan

On August 15, 2022, the Company entered the 2022 Loan Agreement with Cogent Bank (the “2022 Loan Agreement”), 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 March 31, 2026, the Company had $6.2 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 “2022 Loan Agreement Maturity Date”), and bears interest at a fixed per annum rate equal to 5.75%. Upon the 2022 Loan Agreement 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 March 31, 2026. The Company has the option to prepay the outstanding balance of the loan prior to the 2022 Loan Agreement Maturity Date without penalty.

As of December 31, 2025 and March 31, 2026, 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. As of December 31, 2025 and March 31, 2026, the Company has reported this loan as Short-term debt, net. 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 have had negotiations regarding terms of a forbearance agreement to provide additional time for the Company to comply with the demands it made in the demand letter.

Senior Secured Notes

During the year ended December 31, 2024, the Company received $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, who was serving as a member of the Company’s board of directors at the time of his investment, who invested $60,000; Rick S. Greene, a member of the board of directors, who invested $25,000, and other significant investors. In July and October 2024, the terms of the Secured Notes were amended, including but not limited to a fixed bonus payable on Maturity, or August 30, 2026 (the “Maturity Date”).

As a condition to entering into the Amended and Restated Note Purchase Agreement, the Company, Mercedes M. Sellek, P.A. (“Escrow Agent”), and the Purchasers entered into that certain Escrow Agreement and Amended and Restated Pledge Agreement, dated July 2, 2024, pursuant to which the Company agreed to pledge our equity ownership interest in Wugen (the “Pledged Collateral”), to be held and released by Escrow Agent according to the terms of the Escrow Agreement, as security for the Secured Notes.

The Secured Notes bear interest at a rate of 9% per annum, payable quarterly in arrears, and mature on August 30, 2026 (the “Maturity Date”), on which date the principal balance, accrued but unpaid interest, and other amounts that may be due under the terms of the Amended and Restated Note Purchase Agreement shall be due and payable. The Senior Notes may be repaid upon a Mandatory Redemption event or at the end of the term.

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. The Pledged Collateral will be held and released according to the terms of the Escrow Agreement, as security for 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 interest. If a bonus payment is paid, there isno prepayment penalty.

The Secured Notes were deemed to be a hybrid instrument, consisting of a debt host with embedded derivatives requiring bifurcation and accounting for separately. The embedded derivatives consist of the Mandatory Redemption, which depends on certain events occurring, and the fixed bonus payable upon the Maturity Date. The fair value of the embedded derivative, which incorporated the likelihood of certain events occurring, was immaterial. Thus, as of December 31, 2025 and March 31, 2026, the Company did not recognize the embedded derivative in the accompanying condensed balance sheets. The Company accounts for the fixed bonus payment to be paid if the Secured Notes are repaid on the Maturity Date by accreting the bonus payment to the full amount due on the Maturity Date, utilizing the effective interest rate method.

On May 1, 2025, the noteholders holding $6.6 million of the principal of the outstanding Secured Notes elected to convert their outstanding indebtedness to equity and 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 and an obligation of $860,462 of accumulated accretion as of the conversion date of a fixed bonus to be paid on the Maturity Date to these noteholders were extinguished upon conversion. For those noteholders who converted to equity, the right to a fixed bonus payable on the Maturity Date was terminated and previously accumulated fixed bonus was waived. See section “Troubled Debt Restructuring of Secured Notes” below.

For those Secured Notes which remain outstanding, as of December 31, 2025 and March 31, 2026, the Company reported $397,065 and $404,773, respectively, for the outstanding principal and accumulated accretion of a fixed bonus payment due upon maturity as a current liability in Short-term debt, net in the accompanying condensed balance sheets.

For the three months ended March 31, 2025 and 2026, the Company recognized $273,059 and $14,413, 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 General and administrative expenses in the accompanying condensed statements of operations.

Troubled Debt Restructuring of 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 Subtopic 470-50, Debt Modifications and Extinguishments, and ASC Subtopic 470-60, Troubled Debt Restructurings by Debtors 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 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 and is reflected in the beginning balance as of January 1, 2026 for the period ended March 31, 2026, in the accompanying condensed statements of stockholders’ equity (deficit).

Unsecured Promissory Notes

During the year ended December 31, 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 serving as 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 $131,135 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 and is reflected in the beginning balance as of January 1, 2026 for the period ended March 31, 2026, in the accompanying condensed statements of stockholders’ equity (deficit).

Contingent Liabilities

In connection with the Trouble Debt Restructuring and the conversion of the Unsecured Promissory Note discussed above, the converting noteholders have a right to receive a portion of the proceeds of the sale or liquidation of the Company’ shares of Wugen common stock if such an event occurs. The Company retained ownership of all of its Wugen shares which is presented in Investments on the accompanying condensed balance sheets. The Company recognized contingent liability for the rights transferred to the converting noteholders presented as a contingent liability on the accompanying condensed balance sheets. As of December 31, 2025 and March 31, 2026, the fair value of the Company’s Wugen shares was $1.3 million and the fair value for the Contingent liability was $692,531 in the accompanying condensed balance sheets. See Note 2. Fair Value of Financial Instruments.

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 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 was obligated to repay $225,000. For the three months ended March 31, 2026, the Company recognized accretion of original issue discount of $10,278 in Interest expense in the accompanying condensed statement of operations. As of December 31, 2025, the Company reported a balance of $214,722 for the promissory note in Short-term debt, net in the accompanying condensed balance sheet. The Company repaid the promissory note in full on February 6, 2026.

5. License Agreements

Wugen License

During the year ended December 31, 2025, the Company agreed to a request from Wugen to suspend the Wugen License for a period of one year from the effective date of the suspension, or until May 29, 2026. During the suspension, the Company is free to enter licenses with other parties for the molecules that are the subject of the Wugen license. In the three months ended March 31, 2026, the Company recognized $13,001 in revenue for ancillary services provided to Wugen, such as storage of clinical supply of licensed molecules.

Beijing Trimmune Biotech Co. Ltd. License

On November 17, 2025, the Company and Beijing Trimmune Biotech Co. Ltd. (“Trimmune”) entered into an Amended and Restated License, Research and Co-Development Agreement (“Trimmune License”) following the assignment of the original License, Research and Co-Development Agreement, which includes an exclusive license to HCW11-006 for in vivo applications (“WY Biotech License”) from WY Biotech Co., Ltd. to Trimmune. The parties restructured the terms of the original WY Biotech License to include the assignment of rights to Trimmune and an option to license HCW9302 for in vivo applications in China or Asia. In addition to the license for HCW11-006, the parties agreed that for additional consideration, Trimmune has an option to license the exclusive China rights to clinical development and commercialization for in vivo applications of HCW9302, the Company’s clinical-stage molecule currently being evaluated for the treatment of an autoimmune disorder.

On March 16, 2026, the Company received the full nonrefundable upfront license fee, consisting of $3.5 million in gross cash proceeds, or $2.9 million net of foreign taxes, and a transferable minority equity ownership interest in Trimmune with a fair value of $3.5 million, whereupon the transaction was deemed closed and the contract was binding.

In addition, the Company is eligible to receive up to $16.0 million in development and regulatory milestone payments, royalties on future product sales, and a share of proceeds from certain future transactions involving the licensed molecule. Trimmune is responsible for all research, development, manufacturing, regulatory, and commercialization costs in its territory, including the Phase 1 clinical trial in China. Following completion of that trial, the Company has a payment-free, milestone-free, and royalty-free option (the “Opt-in Right”) to recapture development and commercialization rights to HCW11-006 in the United States, Canada, Central America, and South America (the “Opt-in Territory”).

Because the Trimmune License and the equity interest were negotiated as a package with a single commercial objective, the Company combined and accounted for them as a single arrangement under ASC 606. The equity interest represents non-cash consideration, measured at its fair value of $3.5 million at contract inception. The corresponding equity investment is accounted for under the measurement alternative in ASC 321. The Company identified two distinct performance obligations: (i) the delivery of licensed intellectual property— comprising the licensed patent rights, licensed know-how, a related license to HCW9109, and a technology transfer (collectively, the “Licensed IP”); and (ii) post-transfer development services consisting of an improved cell line and a master cell bank (collectively, the “Services”). The transaction price at inception was $6,650,000, reflecting the $7.0 million in upfront consideration less $350,000 was carved out as a contract liability related to prepaid optional post-transfer services. Development and regulatory milestone payments, royalties, and sales-based sublicensing consideration are fully constrained at inception and excluded from the transaction price. Non-sales-based sublicensing consideration remains constrained until the related uncertainty is resolved.

The Company allocated the transaction price to the two performance obligations using a relative standalone selling price basis. The standalone selling price of the Services was estimated using contemporaneous third-party Contract Research Organization (“CRO”) and Contract Manufacturing Organization (“CMO”) contracted pricing. The standalone selling price of the Licensed IP was estimated using the residual approach. The Licensed IP has significant standalone functionality and the Company does not expect to undertake activities that will change that functionality. Accordingly, the license is a right to use the Company’s functional intellectual property, and revenue allocated to the Licensed IP performance obligation was recognized at the point in time control of the Licensed IP transferred to Trimmune. Trimmune simultaneously receives and consumes the benefits of the Services as they are performed; accordingly, revenue allocated to the Services is recognized over time using a cost-to-cost measure of progress. Milestone payments will be recognized when the related constraint is resolved, typically upon achievement of the underlying clinical or regulatory event. Royalties and sales-based sublicensing consideration will be recognized when the underlying sales occur. The Opt-in Right is not a repurchase feature and does not require deferral of revenue at inception. If exercised, the Opt-in Right will be accounted for as a contract modification at that time.

For the three months ended March 31, 2026, the Company recognized $6.5 million of revenue under the Trimmune License, comprising the $6.3 million allocated to the Licensed IP recognized at closing and $230,000 of Services revenue earned through the reporting period. The contract liability of $470,000 reported in the accompanying condensed consolidated balance sheet represents $120,000 of remaining Services consideration and the $350,000 prepayment associated with the optional post-transfer services.

Trimmune is a variable interest entity. Through equity ownership in Trimmune, licensing fees, Opt-In Rights, milestone payments and other potential payments, the Company has variable interests. The carrying value of the Company’s interest in Trimmune was $3.5 million as of March 31, 2026, which is included in investments in the accompanying condensed balance sheet. The Company concluded that it is not the primary beneficiary and should not consolidate the entity. The Company has no control over the operating and business activities that most significantly impact the entity’s economic performance. The Company has contractually agreed to cede its voting rights as they relate to operations of the entity. This was accomplished through a voting rights agreement in which all shares are voted by the Chief Executive Officer of Trimmune and an agreement related to voting on the joint steering committee by which the Company agreed that Trimmune will have the tie-breaking vote. As a result, the Company’s role is to act as an advisor and expert for technical advice, but it does not have any power to control the activities of the entity. The Company’s exposure to loss is limited to its investment and rights under the contractual arrangement with Trimmune. Risk of economic loss is borne by Trimmune’s investors, who are not related parties with the Company. The Company is not obligated to participate in future investment rounds in Trimmune, nor does the Company have contractual obligations or guarantees to Trimmune or any of its employees or investors.

6. Sale of Common Stock and Warrants

Inducement Transaction and Shares held in Abeyance

On November 19, 2025, the Company entered into a warrant inducement agreement with a single institutional investor (the Investor”) who is an existing stockholder of the Company (the “Inducement Agreement”), pursuant to which the Investor agreed to immediately exercise in full all of its outstanding Common Stock Warrants originally issued on November 20, 2024 (as amended on May 15, 2025) and on May 15, 2025 to purchase an aggregate of 1,510,205 shares of Common Stock at an amended exercise price of $2.66 per share, resulting in aggregate gross proceeds to the Company of approximately $4.0 million before fees and expenses.

In consideration for the immediate exercise of the Common Stock Warrants, the Company issued to the Investor, in a private placement pursuant to Section 4(a)(2) of the Securities Act, new Common Stock Warrants to purchase up to 3,020,410 shares of Common Stock at an exercise price of $2.41 per share. In a private transaction entered into contemporaneously with the February 2026 Sale of Common Stock and Warrants discussed below, the Company agreed to an amendment to reduce the exercise price of these Common Stock Warrants to $0.6055 per share. However, the effectiveness of this amendment is subject to stockholder approval, which the Company expects to seek at its annual meeting of stockholders scheduled to be held on June 15, 2026.

As of December 31, 2025, there were 977,000 shares held in abeyance. On February 25, 2026 and March 16, 2026, the Investor requested that the Company issue 237,000 and 740,000 shares, respectively, of the remaining shares in abeyance.

February 2026 Sale of Common Stock and Warrants

On February 17, 2026, the Company entered into a securities purchase agreement (“SPA”) with the Investor, pursuant to which the Company issued 2,477,292 units (the “Units”) consisting of (i)2,477,292 pre-funded warrants (the “Pre-Funded Warrants”) to purchase up to 2,477,292 shares of Common Stock, and (ii) up to 2,477,292 Common Stock purchase warrants the exercise of which is conditioned on stockholder approval (the “Common Warrants”, and together with the Pre-Funded Warrants, the “Warrants”) to purchase up to 2,477,292 shares of Common Stock.

The Company’s Common Stock is listed on The Nasdaq Capital Market and, as such, the Company is subject to the Nasdaq Stock Market Rules. Nasdaq Stock Rule 5635(d) is referred to as the “Nasdaq 20% Rule.” In order to comply with the Nasdaq 20% Rule, the Company must seek stockholder approval to permit the potential issuance of more than 19.99% of outstanding Common Stock upon exercise of the Common Warrants in accordance with their terms. To meet the Nasdaq 20% Rule, the Company needs stockholder approval under the listing rules of Nasdaq to remove the Exchange Cap provisions in the SPA to permit the potential issuance of more than 20% of our outstanding Common Stock in accordance with the terms of the SPA.

The combined purchase price for each Unit consisting of one Pre-Funded Warrant that may be exercised for one share of Common Stock and an accompanying Common Stock Warrant to purchase one share of Common Stock was $0.6054. The Common Stock Warrants have an exercise price of $0.6055 per share, will be exercisable only upon receipt of stockholder approval thereof in accordance with applicable Nasdaq rules, and expire on thefive-year anniversary of such stockholder approval. The Pre-Funded Warrants have an exercise price of $0.0001, are exercisable immediately and will not expire until exercised in full.

The securities were offered pursuant to a registration statement on Form S-1, as amended (File No. 333-293396), which was declared effective by the Securities and Exchange Commission on February 17, 2026. The gross proceeds to the Company from the 2026 Offering are approximately $1.5 million before deducting the placement agent’s fees and other offering expenses of $389,056 payable by the Company. The offering closed on February 19, 2026.

The Investor may not exercise any portion of the Common Stock 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 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.

On February 17, 2026, the Company also entered into a privately negotiated agreement with the Investor, which holds certain existing outstanding warrants to purchase up to 3,020,410 shares of Common Stock (the “Existing Warrants”) to seek stockholder approval in accordance with applicable Nasdaq rules to reduce the exercise price of such Existing Warrants to the public offering price per Unit paid in the Offering (the “Existing Warrants Amendment Agreement”). There can be no assurance that we will obtain such stockholder approval or amend the Existing Warrants or as to the final terms of any amendments to the Existing Warrants. Until such time as stockholder approval is obtained, the Existing Warrants continue to remain outstanding with an exercise price of $2.41 per share.

The fair value of the Common Stock Warrants issued in this transaction was estimated at $1.3 million using the Black-Scholes option pricing model with assumptions including a term of 5 years, volatility of 131.8% and a risk-free rate of 3.57%. The change in fair value of the Existing Warrants which were amended to lower the exercise price from $2.41 to $0.6055 per share was estimated at $193,910 using the Black Scholes pricing model with the assumptions including term of 5.26 years, volatility of 131.8% and risk-free rate of 3.57%. As this was a transaction with an existing stockholder, the difference between the gross proceeds of $1.5 million and the fair value of securities issued and the modification of the warrant, or $3.0 million, was deemed to be an equity dividend to the Investor which was recorded in additional-paid-in capital as of March 31, 2026.

On March 16, 2026, the Investor exercised all of its Pre-Funded Warrants issued from the February 2026 offering, and the Company issued 2,477,292 shares of Common Stock.

Warrant Classification

The Common Warrants that may be exercised to purchase up to 2,477,292 shares of Common Stock issued on February 17, 2026 were classified as a component of permanent stockholders’ equity within additional paid-in-capital and were recorded at the issuance date. The Common 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 Warrants and the Pre-Funded Warrants do not provide any guarantee of value or return.

Upon modification of Existing Warrants, as of February 17, 2026, the Existing Warrants were reclassified as a warrant liability. Until stockholders approve the new strike price of $0.6055 per share, these warrants have a contingent strike price adjustment and will be treated as derivative liabilities, recorded at the fair value on the date of the transaction and remeasured to fair value for each subsequent reporting date, with changes in fair value recorded in earnings. As of February 17, 2026, the Company reclassified $1.6 million from Additional paid-in capital to noncurrent liabilities as a warrant liability. As of March 31, 2026, the Company reported a warrant liability of $928,435 on the condensed balance sheet and a change in fair value of $667,343 for the three months ended March 31, 2026 on the condensed statements of operations.

Compliance to Obtain Stockholder Approval

The Company held a Special Meeting of Stockholders on April 27, 2026 to obtain stockholder approval for the warrants issued or potentially amended in the February 2026 offering, but this meeting was adjourned for lack of quorum. The Company filed a definitive proxy statement for its Annual Meeting of Stockholders on April 28, 2026, which resubmitted the two proposals regarding these warrants. The Company is obliged to submit this matter to stockholders for their consideration every 60 days, until the Company obtains stockholder approval for the exercise of these warrants at $0.6055 per share. See Note 13. Subsequent Events.

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.

On August 14, 2025, the Company and the Square Gate entered into a First Amendment to the Equity Purchase Agreement to provide a mechanism for submission by the Company and acceptance by the Square Gate of Put Notices under the Equity Purchase Agreement pursuant to which the Square Gate and the Company may agree to and execute multiple purchases and sales of Put Shares on the same trading day. Under the First Amendment, among other things, the purchase price of the intraday Put Shares will be the lowest traded price during a specified shortened valuation time period.

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.

As of March 31, 2025, the Company concluded that the Equity Purchase Agreement for Standard Put Shares 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 paid in-kind with an equivalent value of shares of the Company’s Common Stock. On March 12, 2025, the Company issued 9,616 shares of the Company’s Common Stock to Square Gate in payment of the Commitment Fee. At the Special Meeting of Stockholders held on March 31, 2025, stockholders approved the Company’s use of the Equity Purchase Agreement. Pursuant to the Registration Agreement, the Company filed a registration statement to register the underlying shares. On April 16, 2025, the 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 Commitment Fee and issuance costs for the registration statement to register the underlying shares of Common Stock issued under the Equity Purchase Agreement were expensed.

For the three months ended March 31, 2025, the Company expensed the $150,000 Commitment Fee in the accompanying condensed statement of operations. During the three months ended March 31, 2025 and 2026, the Company did not put any shares to Square Gate under the SEPA.

**8. Preferred Stock **

As of December 31, 2025 and March 31, 2026, the Company had 10,000,000 shares of preferred stock authorized and no shares issued.

9. Net Income (Loss) Per Share

The following table summarizes the computation of the basic and diluted net income (loss) per share:

The following table summarizes the outstanding potentially dilutive securities that have been excluded in the calculation of diluted net loss per share because their inclusion would be anti-dilutive:

The potential dilutive common stock options are options granted under the Company’s 2019 Equity Plan and 2021 Equity Plan were excluded from the calculation of diluted earnings per share and weighted average shares of Common Stock outstanding, as each of them had an exercise price that exceeded the average market price of the Company’s Common Stock during the period.

The potentially dilutive common stock warrants are (1) warrants to purchase up to 126,540 shares of Common Stock at $26.00 per share, (2) warrants to purchase up to 2,477,292 shares of Common Stock at $0.6055 per share (subject to stockholder approval) and (3) warrants to purchase up to 3,020,410 shares of Common Stock at $2.41 per share, which may be amended, subject to stockholder approval, to reduce the exercise price to $0.6055 per share. These Common Stock Warrants each had an exercise price that exceeded the closing price of the Company’s Common Stock as of March 31, 2026, and were excluded from the calculation of diluted earnings per share and weighted average shares of Common Stock outstanding.

**10. Income Taxes **

The Company accounts for income taxes under ASC 740, Income Taxes. The income tax provision for interim periods is determined using an estimated annual effective tax rate, adjusted for discrete items, if any, recognized in the period in which they occur.

For the three months ended March 31, 2025 and 2026, the Company recorded an income tax provision of $0 and $330,186 on pre-tax losses of $2.2 million and pre-tax income $3.8 million for effective tax rates of 0% and 8.68%, respectively. The effective tax rate differed from the statutory rate primarily because the Company recorded foreign withholding tax expense on China licensing revenue while receiving no corresponding U.S. tax benefit due to its full valuation allowance.

The following are income taxes paid by jurisdiction:

11. Segment Reporting

HCW Biologics Inc. hasone 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 segment income (loss). The measure of segment assets is reported on the condensed 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 March 31, 2026. 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 is critical to the allocation of resources by the CODM.

The tables below summarize the significant expense categories regularly reviewed by the CODM for the three months ended March 31, 2025 and 2026**:**

12. Commitments and Contingencies

Operating Leases

The Company has operating leases for approximately 12,250 square feet of space located in Miramar, Florida. On January 27, 2025, the Company entered into aone-year lease for the same location which commenced on March 1, 2025 and terminated on February 28, 2026. On February 2, 2026, the Company entered into a one-year lease for the same location which commenced on March 1, 2026 and terminates on February 28, 2027. As a lease of 12 months or less in duration and qualifies for a short-term lease exemption under FASB ASC 842, Leases, for short-term leases, as provided for in ASC 842-20-25-2, which is the short-term lease exception whereby a lessee recognizes the lease payments in profit or loss on a straight-line basis over the lease term. The Company elected to account for this lease on a straight-line basis over the lease term and will not recognize a ROU asset and a lease liability as a result. The Company has no obligations under financing leases.

For the three months ended March 31, 2025 and 2026, rent expense recognized by the Company was $50,556 and $53,651, respectively, of which $26,476 and $28,097, respectively, are included in research and development in the accompanying condensed statements of operations.

Contractual Commitments

The Company has commitments with R&D outsourcing and development companies to supply us with clinical grade materials or other development services. As of March 31, 2026, it is under contract for future obligations of $396,100 it expects to pay during the year ending December 31, 2026.

Legal Matters

Legal Proceedings

From time to time, the Company is a party to or otherwise involved in legal proceedings, including suits, assessments, regulatory actions and investigations generally arising out of the normal course of business. In addition, the Company enters into agreements that may include indemnification provisions, pursuant to which the Company agrees to indemnify, hold harmless and defend the indemnified parties for losses suffered or incurred by the indemnified party. When the Company believes that the outcome of such a matter will result in a liability that is probable to be incurred and result in a potential loss, or range of loss, that can be reasonably estimated, the Company will accrue a liability and make the appropriate disclosure in the footnotes to the condensed financial statements.

Arbitration, Settlement and General Release

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 Altor BioScience, LLC (“Altor”), NantCell, Inc. (“NantCell”), and ImmunityBio, Inc. (the parent of Altor and NantCell, together with Altor and NantCell, “ImmunityBio”), to resolve the previously disclosed Arbitration. The Arbitration and related Complaint were dismissed with prejudice as of December 31, 2024.

In January 2025, the Company received a $2.0 million insurance reimbursement which was paid directly to Cooley LLP (“Cooley”), the law firm that represented Dr. Wong in his defense in the Arbitration. On December 30, 2025, the Company entered a settlement agreement with Cooley related to legal fees incurred in connection with the defense of Dr. Wong. As a result of that agreement, the Company, Dr. Wong and Cooley agreed to settle a $7.5 million obligation for $2.0 million in cash and contingent payments up to $5.5 million upon achievement of certain triggering events, all of which were deemed to be remote as of December 31, 2025 and March 31, 2026. In accordance with the terms of the settlement agreement, $500,000 was paid on December 31, 2025. Based on amendments to the settlement agreement, the Company paid $750,000 on March 20, 2026, and will pay the remaining $750,000 upon the earlier of the completion of a financing for at least $4.0 million in gross proceeds or August 31, 2026.

After this settlement, as of December 31, 2025 and March 31, 2026, the Company recognized a liability of $6.2 million and $5.4 million, respectively, for remaining amounts owed for legal fees related to the Arbitration which continue to remain outstanding in the accompanying condensed balance sheets.

Other Matters

During the year ended December 31, 2025, certain subcontractors had filed mechanics liens related to unpaid invoices issued in connection with the facility. 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. To our knowledge as of the date hereof, 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. (“B&I), 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 filed a timely response to the B&I MSJ. The cases were consolidated, and a Case Management conference was held. On February 19, 2026, a stipulation was submitted to the Court in connection with a settlement and release agreement between the Company and B&I calling for payment of $860,000 in total installments in settlement of amounts owed and an allowance for interest and other fees, the last installment of which is payable on or before May 31, 2026.

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 have had negotiations to come to terms on a forbearance agreement to provide additional time for the Company to comply with the demands it made in the demand letter.

On December 9, 2025, the Company entered into a settlement agreement with its contract development and manufacturing organization, EirGenix, Inc. (“EirGenix”). Outstanding obligations owed to EirGenix related to manufacturing costs were $1.7 million. The parties agreed to reduce this amount to $1.2 million if the amount was paid in full by April 30, 2026. The Company paid $620,000 on March 3, 2026. On May 13, 2026, The Company was granted an extension for the repayment of the remaining $620,000 to May 26, 2026, under the condition that the balance amount will need to be re-settled to reflect the additional costs associated with legal attorney and interest loss through the extension date. See Note 13. Subsequent Events.

Inflationary Cost Environment, Geopolitical Risks and Other Macroeconomic Factors

The Company’s operations have been affected by many headwinds, including inflationary pressures, tariffs, rising 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, financial market volatility and currency movements. The Company has been impacted by inflation, and may continue to be so, when procuring materials required for the buildout of our new headquarters, the costs for recruiting and retaining employees and other employee-related costs. Management employs a number of strategies to effectively navigate these issues, including product redesign, alternate sourcing, and establishing contingencies in budgeting and timelines. Future developments in these and other areas present material uncertainty and risk with respect to the Company’s clinical trials, IND-enabling activities, buildout of the new headquarters, as well as the Company’s financial condition and results of operations. The extent and duration of such events and conditions, and resulting disruptions to our operations, are highly unpredictable.

**13. Subsequent Events **

Subsequent events have been evaluated through the date the condensed financial statements were filed. In addition to the required recognition or disclosure disclosed in the footnotes herein, there were also the following subsequent events after the reporting date:

The Company held a Special Meeting of Stockholders on April 27, 2026, at which the stockholders were asked to vote to approve two proposals that related to warrants held by the Investor where (1) certain warrants require stockholder approval for the issuance of Common Stock upon exercise and (2) previously issued warrants require stockholder approval to be repriced. Under applicable Nasdaq rules, the terms of these warrants make it necessary to obtain stockholder approval. These warrants were issued or amended in connection with the equity financing the Company completed on February 19, 2026. The Company is obliged to seek stockholder approval every 60 days until such approval is obtained. The Company will be required to continue incurring the costs associated with holding additional stockholder meetings until approval is obtained.

On April 27, 2026, the Company adjourned the Special Meeting of Stockholders due to a lack of quorum. The two proposals that were submitted for stockholder approval related to the Investor’s Common Stock Warrants that were issued or repriced in connection with the February 19, 2026 equity financing will be included in the proposals for the Annual Meeting of Stockholders that will be held on June 15, 2026.

On April 28, 2026, the Company filed a definitive proxy statement for the Annual Meeting of Stockholders. Stockholders will be asked to vote on five proposals, including a reverse stock split proposal, pursuant to which the Board recommends that the Company consider a range of 1-for-5 to 1-for-20. In addition, the stockholders will be asked to consider the two proposals related to the Investor’s Common Stock Warrants that were issued or repriced in connection with the February 19, 2026 equity financing. This vote will take place at the Annual Meeting on June 15, 2026.

On April 15, 2026, our Board of Directors unanimously approved and adopted an amendment to the Company’s Bylaws (as amended and restated to date, the “Bylaws”). The amendment, which is effective from and after April 28, 2026, lowers the quorum requirement contained in Section 1.5 of the Bylaws to provide that holders of thirty-three and one-third percent (33 1/3%) of the voting power, which includes the voting power that is present in person or by proxy, regardless of whether the proxy has authority to vote on any matter, constitutes a quorum for the transaction of business.

On May 5, 2026, the Company was granted a hearing with the Nasdaq Hearings Panel to present a compliance plan to regain compliance with the Bid Price Rule. As of the date of issuance, the Company has not received the Panel’s determination.

The Company is engaged in negotiations with B&I and EirGenix to extend payment terms for settlement agreements, which have not been finalized as of the issuance date.