S-1: HCW Biologics Files for Resale of up to $40 Million in Shares, Including Potential Armistice Warrant Shares

HCW Biologics has filed a registration statement for the resale of up to $40 million in shares of common stock, including shares issuable under an equity line of credit with Square Gate Capital and shares issuable upon exercise of warrants held by Armistice Capital.

Summary

• HCW Biologics has filed a Form S-1 registration statement with the SEC to register the resale of up to $40 million of its common stock.
• The filing includes shares that may be issued under an equity purchase agreement with Square Gate Capital Master Fund, LLC Series 4, and shares issuable upon exercise of a common stock purchase warrant held by Armistice Capital Master Fund Ltd.
• The offering involves the resale of up to $20 million of shares under an ELOC Purchase Agreement with Square Gate, with a potential additional $20 million based on HCWB's option.
• It also includes 384,615 commitment shares issued to Square Gate and up to 6,717,000 shares issuable to Armistice upon exercise of a purchase warrant at $1.03 per share.
• HCW Biologics will not receive any proceeds from the resale of shares by the selling stockholders, but may receive proceeds from Square Gate under the ELOC and Armistice under the Purchase Warrants.
• The company intends to use any proceeds from the sale of shares to Square Gate under the ELOC and sales of shares to Armistice under the Purchase Warrants for general corporate purposes.
• HCW Biologics is an emerging growth company and a smaller reporting company, which allows it to take advantage of certain reduced reporting requirements.
• The company's common stock is listed on the Nasdaq under the symbol HCWB, with a last quoted sale price of $0.2817 per share on April 2, 2025.

Sentiment

Score: 3

Explanation: The document highlights significant financial risks, including substantial losses, going concern uncertainty, and potential Nasdaq delisting, overshadowing any potential positives from the financing agreements. The legal proceedings and clinical trial setbacks further contribute to a negative outlook.

Positives

• The ELOC Purchase Agreement and Purchase Warrants provide potential sources of funding for HCW Biologics.
• The company retains control over the timing and amount of sales to Square Gate under the ELOC Purchase Agreement.
• HCW Biologics is eligible for reduced reporting requirements as an emerging growth company and smaller reporting company.

Negatives

• The issuance and sale of shares under the ELOC Purchase Agreement and Purchase Warrant will likely cause substantial dilution and the price of our Common Stock to decline.
• We may not have access to the full amount available under the ELOC Purchase Agreement.
• Square Gate will pay less under the terms of the ELOC Purchase Agreement than the then-prevailing market price for our Common Stock, which could cause the price of our Common Stock to decline.
• It is not possible to predict the actual number of shares we will sell under the ELOC Purchase Agreement or the Purchase Warrant to the selling stockholders, or the actual gross proceeds resulting from those sales.
• Investors who buy shares in this offering at different times will likely pay different prices.
• Our need for future financing may result in the issuance of additional securities, which will cause investors to experience dilution.
• We have incurred significant financial losses since our inception, and we expect to incur losses for the foreseeable future. We have no products approved for commercial sale and may never achieve or maintain profitability.
• There is substantial doubt regarding our ability to continue as a going concern based on our cash and cash equivalents as of December 31, 2024. We will need to raise additional funding, which may not be available on acceptable terms, if at all, to continue as a going concern and advance our current and any potential future product candidates. Failure to obtain capital when needed may force us to delay, limit or terminate our product development efforts or other operations. Raising additional capital may dilute our existing shareholders, restrict our operations or cause us to relinquish valuable rights.
• The Company implemented remediation of material weaknesses identified in previous reporting periods. If we fail to maintain an effective system of disclosure controls and internal control over financial reporting, our ability to produce timely and accurate financial statements or comply with applicable laws and regulations could be impaired, which may cause investors to lose confidence in our reported financial information and may lead to a decline in the market price of our Common Stock.
• We and our Chief Executive Officer were involved in legal proceedings with Altor BioScience, LLC and NantCell (collectively, Altor/NantCell). In July 2024, the parties entered a Settlement Agreement which removed some of the uncertainties as to the outcome and cost of these proceedings. However, the Company has significant obligations that remain as a result of legal fees incurred but not paid for the defense of the Company, as well as our Chief Executive Officer. If we cannot negotiate acceptable payment plans to satisfy these obligations, an adverse result could have a negative material impact on our business and operations.
• As a result of the Settlement Agreement, the Company is unable to progress into Phase 2 clinical trials for HW9218, our lead product candidate for cancer indications. The Company is prepared to progress HCW9218 in Phase 2 clinical trials for nononcology indications; however, we must secure supply of clinical materials to do so. As a condition of the Settlement Agreement, the Company transferred the master cell line for HCW9218 to ImmunityBio, who in turn agreed to enter a supply agreement with the Company by January 2025. As of the date of this prospectus, there is no supply agreement in place. As a result of the delay in securing supply, there is no assurance that the Company will be able to continue the clinical development of HCW9218 in nononcology indications.
• The Company has been out of compliance with three applicable rules with respect to its continued listing on The Nasdaq Stock Market LLC (Nasdaq), namely, Nasdaq Listing Rule 5450(b)(2)(A) (the MVLS Rule), Nasdaq Listing Rule 5450(a)(1) (the Bid Price Rule) and Nasdaq Listing Rule 5450(b)(2&3)(C) (the MVPHS Rule). As a result, the Listing Staff of Nasdaq delivered notices of its determination that the Companys Common Stock was subject to delisting from The Nasdaq Global Market tier of Nasdaq. Nasdaq granted the Company a hearing before the Nasdaq Hearings Panel (the Panel) to appeal the delisting determination of the Nasdaq Listing Staff, which hearing was held on February 13, 2025, at which we presented our plan to regain compliance with all listing requirements. On March 3, 2025, the Panel granted our request to continue our listing on Nasdaq, subject to our demonstrating compliance with the Bid Price Rule on or before April 25, 2025, which date has been extended to April 28, 2025, and to our demonstrating compliance with all other Nasdaq Listing Rules on or before June 15, 2025. While the Company is exercising diligent efforts to maintain the listing of our Common Stock on Nasdaq, there can be no assurance that the Company will be able to regain or maintain compliance with the applicable Nasdaq Listing Rules. If the Companys Common Stock were to be delisted from Nasdaq, it could have a material adverse effect on us and our stockholders.
• Our clinical trials may fail to demonstrate the safety and efficacy of our product candidates or any future product candidates, which would prevent, delay or limit the scope of regulatory approval and commercialization.
• Preliminary, topline or interim data from our clinical trials that we announce or publish from time to time may change as more patient data becomes available and are subject to audit and verification procedures that could result in material changes in the final data.
• The development and commercialization of biopharmaceutical products is subject to extensive regulation, and the regulatory approval processes of the FDA and comparable foreign authorities are lengthy, time-consuming, and inherently unpredictable. If we are ultimately unable to obtain regulatory approval for our product candidates on a timely basis, if at all, our business will be substantially harmed.
• Clinical drug development is a lengthy and expensive process with uncertain timelines and uncertain outcomes. If clinical trials of our product candidates are prolonged or delayed, we or any collaborators may be unable to obtain required regulatory approvals, and, therefore, be unable to commercialize our product candidates on a timely basis or at all.
• Even if our product candidates obtain regulatory approval, we will be subject to ongoing obligations and continued regulatory review, which may result in significant additional expense. Additionally, our product candidates, if approved, could be subject to labeling and other restrictions and market withdrawal and we may be subject to penalties if we fail to comply with regulatory requirements or experience unanticipated problems with our products.
• We expect to rely on patents and other intellectual property rights to protect our technology, including product candidates and our immunotherapy platform technology, the prosecution, enforcement, defense, and maintenance of which may be challenging, time-consuming and costly. Failure to defend, protect or enforce these rights adequately, and costs and expenses associated with the same, could impact our financial condition and results of operations or otherwise harm our ability to compete and impair our business.
• We rely on third parties to manufacture our product candidates. Any failure by a third-party manufacturer to produce acceptable drug substance for us or to obtain authorization from the FDA or comparable regulatory authorities may delay or impair our ability to initiate or complete our clinical trials, obtain regulatory approvals or commercialize approved products.
• Our information technology systems, or those used by our third-party contractors or consultants, may fail or suffer security breaches, which could adversely affect our business.

Risks

• The issuance and sale of shares under the ELOC Purchase Agreement and the Purchase Warrant will likely cause substantial dilution and the price of our Common Stock to decline.
• We may not have access to the full amount available under the ELOC Purchase Agreement.
• Square Gate will pay less under the terms of the ELOC Purchase Agreement than the then-prevailing market price for our Common Stock, which could cause the price of our Common Stock to decline.
• It is not possible to predict the actual number of shares we will sell under the ELOC Purchase Agreement or the Purchase Warrant to the selling stockholders, or the actual gross proceeds resulting from those sales.
• Investors who buy shares in this offering at different times will likely pay different prices.
• Our need for future financing may result in the issuance of additional securities, which will cause investors to experience dilution.
• We have incurred significant financial losses since our inception, and we expect to incur losses for the foreseeable future. We have no products approved for commercial sale and may never achieve or maintain profitability.
• There is substantial doubt regarding our ability to continue as a going concern based on our cash and cash equivalents as of December 31, 2024. We will need to raise additional funding, which may not be available on acceptable terms, if at all, to continue as a going concern and advance our current and any potential future product candidates. Failure to obtain capital when needed may force us to delay, limit or terminate our product development efforts or other operations. Raising additional capital may dilute our existing shareholders, restrict our operations or cause us to relinquish valuable rights.
• The Company implemented remediation of material weaknesses identified in previous reporting periods. If we fail to maintain an effective system of disclosure controls and internal control over financial reporting, our ability to produce timely and accurate financial statements or comply with applicable laws and regulations could be impaired, which may cause investors to lose confidence in our reported financial information and may lead to a decline in the market price of our Common Stock.
• We and our Chief Executive Officer were involved in legal proceedings with Altor BioScience, LLC and NantCell (collectively, Altor/NantCell). In July 2024, the parties entered a Settlement Agreement which removed some of the uncertainties as to the outcome and cost of these proceedings. However, the Company has significant obligations that remain as a result of legal fees incurred but not paid for the defense of the Company, as well as our Chief Executive Officer. If we cannot negotiate acceptable payment plans to satisfy these obligations, an adverse result could have a negative material impact on our business and operations.
• As a result of the Settlement Agreement, the Company is unable to progress into Phase 2 clinical trials for HW9218, our lead product candidate for cancer indications. The Company is prepared to progress HCW9218 in Phase 2 clinical trials for nononcology indications; however, we must secure supply of clinical materials to do so. As a condition of the Settlement Agreement, the Company transferred the master cell line for HCW9218 to ImmunityBio, who in turn agreed to enter a supply agreement with the Company by January 2025. As of the date of this prospectus, there is no supply agreement in place. As a result of the delay in securing supply, there is no assurance that the Company will be able to continue the clinical development of HCW9218 in nononcology indications.
• The Company has been out of compliance with three applicable rules with respect to its continued listing on The Nasdaq Stock Market LLC (Nasdaq), namely, Nasdaq Listing Rule 5450(b)(2)(A) (the MVLS Rule), Nasdaq Listing Rule 5450(a)(1) (the Bid Price Rule) and Nasdaq Listing Rule 5450(b)(2&3)(C) (the MVPHS Rule). As a result, the Listing Staff of Nasdaq delivered notices of its determination that the Companys Common Stock was subject to delisting from The Nasdaq Global Market tier of Nasdaq. Nasdaq granted the Company a hearing before the Nasdaq Hearings Panel (the Panel) to appeal the delisting determination of the Nasdaq Listing Staff, which hearing was held on February 13, 2025, at which we presented our plan to regain compliance with all listing requirements. On March 3, 2025, the Panel granted our request to continue our listing on Nasdaq, subject to our demonstrating compliance with the Bid Price Rule on or before April 25, 2025, which date has been extended to April 28, 2025, and to our demonstrating compliance with all other Nasdaq Listing Rules on or before June 15, 2025. While the Company is exercising diligent efforts to maintain the listing of our Common Stock on Nasdaq, there can be no assurance that the Company will be able to regain or maintain compliance with the applicable Nasdaq Listing Rules. If the Companys Common Stock were to be delisted from Nasdaq, it could have a material adverse effect on us and our stockholders.
• Our clinical trials may fail to demonstrate the safety and efficacy of our product candidates or any future product candidates, which would prevent, delay or limit the scope of regulatory approval and commercialization.
• Preliminary, topline or interim data from our clinical trials that we announce or publish from time to time may change as more patient data becomes available and are subject to audit and verification procedures that could result in material changes in the final data.
• The development and commercialization of biopharmaceutical products is subject to extensive regulation, and the regulatory approval processes of the FDA and comparable foreign authorities are lengthy, time-consuming, and inherently unpredictable. If we are ultimately unable to obtain regulatory approval for our product candidates on a timely basis, if at all, our business will be substantially harmed.
• Clinical drug development is a lengthy and expensive process with uncertain timelines and uncertain outcomes. If clinical trials of our product candidates are prolonged or delayed, we or any collaborators may be unable to obtain required regulatory approvals, and, therefore, be unable to commercialize our product candidates on a timely basis or at all.
• Even if our product candidates obtain regulatory approval, we will be subject to ongoing obligations and continued regulatory review, which may result in significant additional expense. Additionally, our product candidates, if approved, could be subject to labeling and other restrictions and market withdrawal and we may be subject to penalties if we fail to comply with regulatory requirements or experience unanticipated problems with our products.
• We expect to rely on patents and other intellectual property rights to protect our technology, including product candidates and our immunotherapy platform technology, the prosecution, enforcement, defense, and maintenance of which may be challenging, time-consuming and costly. Failure to defend, protect or enforce these rights adequately, and costs and expenses associated with the same, could impact our financial condition and results of operations or otherwise harm our ability to compete and impair our business.
• We rely on third parties to manufacture our product candidates. Any failure by a third-party manufacturer to produce acceptable drug substance for us or to obtain authorization from the FDA or comparable regulatory authorities may delay or impair our ability to initiate or complete our clinical trials, obtain regulatory approvals or commercialize approved products.
• Our information technology systems, or those used by our third-party contractors or consultants, may fail or suffer security breaches, which could adversely affect our business.

Future Outlook

The company expects to continue to incur significant operating losses for the foreseeable future and will need to obtain substantial additional funding for its continuing operations.

Industry Context

The biotechnology and pharmaceutical industries are highly competitive and subject to significant and rapid technological change, which could render HCW Biologics' product candidates or technology obsolete, less competitive or uneconomical.

Legal Proceedings

• The Company and Dr. Wong, our Founder and Chief Executive Officer, were parties in an extended Arbitration, which was ongoing for over a year, during which time the Company incurred legal fees of nearly $28.4 million for its own defense and the defense of Dr. Wong.
• On December 16, 2024, BE&K Building Group, the prime contractor on the project, sent the Company a draft, unfiled lawsuit and requested the parties 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 Property.

Related Party Transactions

• On February 20, 2024, we entered into subscription agreements with certain of our officers and directors, pursuant to which we sold an aggregate of 1,785,718 shares of our Common Stock, $0.0001 par value per share, at a purchase price of $1.40 per share for an aggregate purchase price of $2.5 million.
• As of October 31, 2024, we received approximately $6.9 million from the issuance of senior secured notes to certain accredited investors (the Secured Notes). Of the total issuance of Secured Notes, the Company issued $2.9 million to members of the Companys board of directors and officers, including $2.4 million purchased by Dr. Hing C. Wong, Founder and CEO, $220,000 purchased by Rebecca Byam, Chief Financial Officer, $140,000 purchased by Scott T. Garrett, Chairman of the board of directors, $60,000 purchased by Gary M. Winer, member of the board of directors, $25,000 purchased by Lee Flowers, Senior Vice President for Business Development, and $25,000 purchased by Rick S. Greene, member of the board of directors.
• The holders of $6.6 million of the outstanding principal of the Secured Notes have agreed to the conversion of the Secured Notes held by them into shares of the Companys Common Stock at a conversion price of $0.65 per share, warrants to purchase $3.3 million of the Companys Common Stock at an exercise price of $0.65 per share, and the right to a pro rata share of 51.55% of the proceeds of the Companys shares of Wugen common stock, if and when such shares are ever sold.

Stakeholder Impact

• The issuance and sale of shares under the ELOC Purchase Agreement and the Purchase Warrant will likely cause substantial dilution and the price of our Common Stock to decline.
• There is substantial doubt regarding our ability to continue as a going concern based on our cash and cash equivalents as of December 31, 2024. We will need to raise additional funding, which may not be available on acceptable terms, if at all, to continue as a going concern and advance our current and any potential future product candidates. Failure to obtain capital when needed may force us to delay, limit or terminate our product development efforts or other operations. Raising additional capital may dilute our existing shareholders, restrict our operations or cause us to relinquish valuable rights.
• The Company has been out of compliance with three applicable rules with respect to its continued listing on The Nasdaq Stock Market LLC (Nasdaq), namely, Nasdaq Listing Rule 5450(b)(2)(A) (the MVLS Rule), Nasdaq Listing Rule 5450(a)(1) (the Bid Price Rule) and Nasdaq Listing Rule 5450(b)(2&3)(C) (the MVPHS Rule). As a result, the Listing Staff of Nasdaq delivered notices of its determination that the Companys Common Stock was subject to delisting from The Nasdaq Global Market tier of Nasdaq. Nasdaq granted the Company a hearing before the Nasdaq Hearings Panel (the Panel) to appeal the delisting determination of the Nasdaq Listing Staff, which hearing was held on February 13, 2025, at which we presented our plan to regain compliance with all listing requirements. On March 3, 2025, the Panel granted our request to continue our listing on Nasdaq, subject to our demonstrating compliance with the Bid Price Rule on or before April 25, 2025, which date has been extended to April 28, 2025, and to our demonstrating compliance with all other Nasdaq Listing Rules on or before June 15, 2025. While the Company is exercising diligent efforts to maintain the listing of our Common Stock on Nasdaq, there can be no assurance that the Company will be able to regain or maintain compliance with the applicable Nasdaq Listing Rules. If the Companys Common Stock were to be delisted from Nasdaq, it could have a material adverse effect on us and our stockholders.

Next Steps

• The company intends to implement its compliance plan and continue to actively monitor MVLS, the Bid Price and MVPHS while it considers all options available to it and to take other action, if necessary and as deemed appropriate by the Company's Board, to remedy the deficiency, including potentially effecting a reverse stock split, entering into a $20.0 million equity life of credit and converting at least $6.6 million in senior secured notes to equity.

Key Dates

Keywords

common stock, resale, HCW Biologics, ELOC Purchase Agreement, Armistice Capital, Square Gate Capital, registration statement, warrant, offering, securities