Company: HCWB
Filing Date: 2025-03-28
Form Type: 10-K
Source: 0000950170-25-046724
Chunk: 148

Company: HCW Biologics Inc.
Filing Date: 2025-03-28
Form: 10-K
Item: Item 7
Chunk 148
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 discuss payment. On January 22, 2025, the Company entered into a forbearance agreement with BE&K to allow the Company until March 31, 2025 to continue efforts to find the financing required to complete the construction and renovation of the building.  Pursuant to the forbearance agreement, the Company made an initial payment of $1.0 million in partial satisfaction of amounts owing to BE&K and its subcontractors.  The 2022 Loan Agreement contains a provision for a discretionary default in the event that the Company fails to pay sums due in connection with construction of any improvements; however, as of the reporting date, to our knowledge, the lender has not elected to do so. As of December 31, 2024, the Company has reflected this loan as Short-term debt, net, to reflect that the lender has the right to accelerate the loan under a discretionary default provision at any time. See Part II, Item 9A. -- “Controls and Procedures.” The Company continues to seek the financing required to complete the construction project, with the cooperation of the lender and lien holders.  

The Company and Dr. Wong, our Founder and Chief Executive Officer, entered into a Settlement Agreement and Release of the previously reported Arbitration as of July 13, 2024, subsequently, the Arbitration and related Complaint were dismissed on December 24, 2024. See Part I., Item 3. - “Legal Proceedings.”  While the Settlement Agreement has resolved uncertainty regarding the outcome of these proceedings and the ongoing legal expenses, the Company incurred significant legal expenses in the period leading up to the Settlement Agreement.  As of December 31, 2024, we reported a balance of $14.4 million for legal fees incurred but not yet paid in the accompany audited balance sheet. Subsequent to the year end, the Company received the benefit of a $2.0 million insurance payment, which was paid directly to the law firm who represented Dr. Wong for his defense during the Arbitration.  In order not to overwhelm the Company’s resources, a reasonable payment plan is required, and the Company is engaged in discussions with the law firms involved with this matter.  

A benefit of reaching a Settlement Agreement and concluding the Arbitration is a release from restrictions related to protection of privileged information, which hampered investor ability to conduct due diligence.  As a result, we believe that other avenues of financing are now available to us, namely, capital-raising activities for equity and equity