HCW Biologics Inc. (NASDAQ:HCWB), a pharmaceutical company, announced the dismissal of its independent auditing firm, Grant Thornton LLP, on Thursday. The decision, confirmed by the Audit Committee of the Board of Directors, was not due to any disputes over accounting principles or practices, financial statement disclosures, or auditing scope or procedure.
The company's financial statements for the years ending December 31, 2022, and 2023, audited by Grant Thornton, did not contain any adverse opinions or disclaimers. However, an explanatory paragraph was included, highlighting concerns about HCW Biologics' ability to continue as a going concern as of December 31, 2023.
During the fiscal years and subsequent interim period through September 19, 2024, HCW Biologics reported no disagreements with Grant Thornton that would have merited mention in their reports. However, there were notable events, including a criminal scheme that victimized the company, leading to a default on a $8.0 million commitment and the misdirection of approximately $1.3 million from company accounts.
Grant Thornton has provided a letter, dated today, agreeing with the disclosures made by HCW Biologics in the SEC filing. Crowe LLP has been appointed as the new independent registered public accounting firm for HCW Biologics starting in the current quarter. Prior to their engagement, the company had not consulted with Crowe on any issues that would require disclosure under SEC regulations.
In other recent news, HCW Biologics Inc. has been navigating through noteworthy developments. The company received notices from the Nasdaq Stock Market indicating non-compliance with the exchange's minimum bid price and market value requirements, which could potentially lead to the delisting of its common stock. The pharmaceutical firm has a 180-day period to regain compliance by meeting the Nasdaq's requirements.
In parallel, HCW Biologics managed to resolve a previously disclosed arbitration case with ImmunityBio and its entities, Altor BioScience, and NantCell. The settlement, which involved no monetary exchange, included the transfer of certain rights and intellectual property to ImmunityBio.
Adding to these developments, the company's shareholders elected Dr. Hing C. Wong as a Class III director, a position he will hold until the 2027 Annual Meeting of Stockholders. Further, the shareholders ratified the appointment of Grant Thornton LLP as the company's independent registered public accounting firm for the current fiscal year.
InvestingPro Insights
In light of HCW Biologics Inc.'s recent auditor change and the financial challenges outlined, InvestingPro provides additional context on the company's financial health. According to real-time data, HCW Biologics has a market capitalization of just $18.91 million, reflecting a small-scale operation within the pharmaceutical industry. The company's revenue for the last twelve months as of Q2 2024 stands at $3.92 million, with a slight growth of 2.82%. However, the gross profit margin during the same period is notably negative at -102.67%, indicating costs far exceeding revenues.
InvestingPro Tips highlight critical concerns for potential investors. HCW Biologics is quickly burning through cash and has short-term obligations that exceed its liquid assets. Moreover, the company is not profitable over the last twelve months, which aligns with the auditor's going concern note. These factors could be contributing to the significant price drop over the past year, with a 75.96% decline in the one-year price total return as of the latest data.
For investors seeking a deeper analysis, InvestingPro offers additional tips on HCW Biologics, including anticipated sales decline and weak gross profit margins, which could be of interest considering the company's recent financial restatement and auditor change. For a comprehensive view of HCW Biologics' financials and future prospects, including more than 11 expert tips, investors can refer to the detailed analysis available on InvestingPro.
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