TIDMAKR
RNS Number : 5949F
Akers Biosciences, Inc.
13 November 2015
Embargoed: 0700hrs 13 November 2015
Akers Biosciences, Inc.
Financial Results for Third Quarter 2015
PIFA Heparin/PF4 Rapid Tests Set to be in 250 US Hospitals by
Year End
Akers Biosciences, Inc. (NASDAQ: AKER) (AIM: AKR.L), ("Akers",
"Akers Bio" or the "Company"), a medical device company focused on
reducing the cost of healthcare through faster, easier diagnostics,
reports its financial results for the third quarter ended September
30, 2015. The Form 10-Q containing the financial statements for the
third quarter - and nine months - ended September 30, 2015 will be
available for viewing later today on the Company's website at
www.akersbio.com or at www.sec.gov.
Q3 Highlights
-- Product Revenue for Q3 2015 was $169,473 (Q3 2014: $359,980), reflecting lower than usual
distributor stock depletion of PIFA Heparin/PF4 Rapid tests
during the summer months - we believe
demand will return to normal levels in Q4
-- PIFA Heparin/PF4 Rapid Assay products now in over 200 US hospitals - and growing by
approximately 20 new hospitals per month, each worth an
annualised average of $15,000 per
annum to Akers Bio
-- Added further sales executives across the US to support
distributors - Company now has 10 sales
executives in the field which, together with the expanded head
office personnel, has had a
corresponding impact on the cost base
-- Loss before income tax was $2,326,893 (Q3 2014: loss of
$1,124,320), reflecting significantly
expanded personnel costs, higher marketing costs associated with
product launches, higher R&D
costs associated with new product development and a one-off
impairment ($466,476) of historic
patents/trademarks no longer contributing to sales
-- Cash and marketable securities at September 30, 2015 were
$5,622,597 ($9,720,802 at December 31,
2014)
Raymond F. Akers, Jr. PhD, Co-founder and Executive Chairman,
commented:
"Akers Bio's product revenues in the first nine months of the
year were $1,325,877. This is primarily being driven by the growth
in domestic sales of our flagship rapid tests for Heparin-Induced
Thrombocytopenia - an allergic reaction to the widely used blood
thinner, heparin. Sales of these products are up 9% in the year to
date. In fact, Akers Bio now has over 200 hospital customers in the
US using these tests out of the 2,500 large hospitals we are
initially targeting. Each of our PIFA Heparin/PF4 Rapid Assay
hospital customers is worth an average of $15,000 to Akers Bio
annually.
"On this basis, assuming these average metrics continue,
annualized PIFA Heparin/PF4 Rapid Assay product revenue for the US
alone should be $3.75 million entering 2016. Furthermore, at the
current growth rate, we believe we have the potential to be at
close to 500 hospitals in the US by December 31, 2016. This would
represent a significant milestone for Akers Bio as the US hospital
base for PIFA Heparin/PF4 Rapid Assay products alone would
substantially underpin the Company's overhead.
"In addition to the core domestic PIFA Heparin/PF4 Rapid Assay
business, the Company is making significant progress on its
international strategy for these tests. We believe that China could
ultimately become one of the Company's biggest ex-US markets for
these tests and a huge advancement was made in the Chinese
commercialization strategy when, earlier this month, the China Food
and Drug Administration (CFDA) approved our tests for medical use
throughout Mainland China. As a result, the Company is confident of
a growing and material contribution to PIFA Heparin/PF4 Rapid Assay
revenues from NovoTek, our exclusive distributor for this product
in Mainland China.
"Beyond the US and China, we have a growing network of
distributors - currently totaling 27 - seeking to establish
marketing channels for PIFA Heparin/PF4 Rapid Assay products in
countries including within Europe and Scandinavia.
"Another area of significant progress during the third quarter
was in the commercialization of our new breath tests designed for
the health and wellness industry and consumers. We strongly believe
that consumers are increasingly looking for personalized health
information and that our BreathScan technology platform, which
facilitates diagnoses through simple breath tests, will provide the
footprint for the Company to enter into this new era of digital
medicine.
"Our new health and wellness products, under the Akers Wellness
line, are poised to make an impact as we commenced first production
during the third quarter. The response to their launch has been
overwhelmingly positive. In addition to selling through the Amazon
Marketplace, we are in the advanced stages of appointing
distributors to target multi-level marketing companies in the
nutraceutical business, fitness and weight loss centers,
chiropractors, and anti-aging medicine physicians.
Outlook
"Like many medical device companies in the early phases of
commercialization, Akers Bio has yet to establish consistent
ordering patterns with its customers. This was evident in the third
quarter in the lower than usual distributor stock depletion of PIFA
Heparin/PF4 Rapid Assays during the summer months which, in turn,
reduced domestic product revenue for these products during the
third quarter. However, I am pleased to say that our early sales
figures indicate that demand in the US is returning to normal
levels in the fourth quarter.
"We remain confident that the CFDA's approval of PIFA
Heparin/PF4 Rapid Assay products in China will serve as a catalyst
for further orders there from our exclusive distributor for these
products prior to year-end. We believe these factors, combined with
a resurgence of demand in the EU for alcohol breathalyzers, will
deliver a significantly stronger fourth quarter than all three
quarters of the year thus far.
"While we have good revenue visibility through the remainder of
the year in the domestic PIFA Heparin/PF4 Rapid Assay business, the
overall outlook for the year is wholly dependent on the Company
obtaining and fulfilling a number of substantial orders for these -
and other - products from outside of the US in the remainder of the
year. Without such sales, revenues would be materially below market
expectations. Given the significantly increased cost base and other
factors to affect the operating loss, such as the impairment of
certain assets and a reserve for a past due receivable, regardless
of the outturn in respect of revenues, we now expect to report a
larger loss at the year end and a lower cash balance than
previously expected. However, it should be noted that $2.4 million
of the $5.7 million loss before income tax in the first nine months
of the year is non-recurring.
"Beyond year end, assuming we continue to add hospital customers
in the US for PIFA Heparin/PF4 Rapid Assay products at the same
rate, we should be moving into 2016 with a core revenue base from
these products in the US alone of $3.75 million; and, with further
acceleration of this growth rate anticipated, be on a clear path to
doubling that moving into 2017.
"Whilst trading for the first three quarters of the year has
been disappointing, the core US PIFA Heparin/PF4 Rapid Assay
business, combined with the additional potential offered from
international sales and from our Akers Wellness line, provides us
confidence in the long term growth prospects of Akers Bio."
Conference Call Information:
Friday, November 13, 2015 at 2.00 p.m.
GMT (9:00 a.m. Eastern Time)
International: 1-719-325-2244
US: 1-888-503-8175
Conference ID:464156
Webcast: http://public.viavid.com/index.php?id=117263.
Summary of Statements of Operations for the Three Months Ended
September 30, 2015 and 2014
Revenue
Akers' revenue for the three months ended September 30, 2015
totaled $169,473, a 63% decrease from the three months ended
September 30, 2014. The revenue decline is attributed to two
factors; first, lower than usual distributor stock depletion of our
PIFA Heparin/PF4 Rapid Assay products; and second, no licensing
revenue was recorded during the three month period ended September
30, 2015 (2014: $93,333) following the cancellation of the License
and Supply Agreement with ChubeWorkx Guernsey Limited
("ChubeWorkx") in May, 2015.
The table below summarizes our revenue by product line for the
three months ended September 30, 2015 and 2014 as well as the
percentage of change year-over-year:
3 Months 3 Months
Ended Ended Percent
Product Lines September 30, 2015 September 30, 2014 Change
------------------------------------------ --------------------- --------------------- -------
MicroParticle Catalyzed Biosensor ("MPC") $ 23,953 $ 38,201 (37)%
Particle ImmunoFiltration Assay ("PIFA") 116,783 309,459 (62)%
Rapid Enzymatic Assay ("REA") - - -%
Other 28,737 12,320 133%
--- ---------------- --- ----------------
Product Revenue Total $ 169,473 $ 359,980 (53)%
License Fees - 93,333 (100)%
--- ---------------- --- ----------------
Total Revenue $ 169,473 $ 453,313 (63)%
--- ---------------- --- ----------------
(MORE TO FOLLOW) Dow Jones Newswires
November 13, 2015 02:00 ET (07:00 GMT)
The Company's MPC product sales declined 37%. The decline is
related to the irregular timing of orders from various distributors
that purchase alcohol breathalyzers annually or semi-annually. The
new distributor in the European Union ("EU"), which placed an
initial order for 2,000,000 devices in June, 2015, did not request
the release of any additional device shipments during the three
month period ending September 30, 2015; however, the Company will
release product as directed by the distributor over the next nine
months. The Company launched its METRON disposable breath test for
ketones on the Amazon Marketplace in the three month period ended
September 30, 2015. While the METRON sales were small in its debut
quarter, the Company believes that revenues will grow in the fourth
quarter. The Company also expects to realize revenue from its
BreathScan Lync health and wellness line in the fourth quarter.
Domestic sales of the Company's PIFA Heparin/PF4 Rapid Assay
products, part of the PIFA line, declined 62%, primarily reflecting
lower than usual distributor stock depletion of our PIFA
Heparin/PF4 Rapid Assay products during the third quarter. Demand
for these products is returning to normal levels in the fourth
quarter and our distributors are returning to their usual
purchasing patterns. The Company has expanded its sales and
marketing staff to cover most of the United States, adding
technical sales account executives whose role is to significantly
support the sales representatives of Akers' US distribution
partners, Cardinal Health ("Cardinal"), Fisher HealthCare
("Fisher") and Typenex Medical ("Typenex"). We expect to see the
revenue benefits from the expansion of the sales and marketing
staff as the additional sales executives become more involved with
the distributor representatives in their sales regions.
International sales of the Company's PIFA Heparin/PF4 Rapid
Assay products were still developing, but will be greatly enhanced
with the recent approval of the product in China. This approval is
expected to stimulate minimum purchase requirements with our
distributor, Novotek, of approximately $1 million in 2015 and $6
million in 2016.
Other operating revenue increased due to a rise in miscellaneous
component sales and shipping and handling fees.
Cost of sales for the three months ended September 30, 2015
increased by 10% to $177,952 (2014: $162,145). Direct cost of sales
increased to 42% of product revenue while indirect cost of sales
increased to 63% for the three months ended September 30, 2015 as
compared to 19% and 26% respectively for the same period in
2014.
Direct cost of sales for the three month period ended September
30, 2015 were $71,722 (2014: 67,940). The increase for the three
months ended September 30, 2015 was related to direct personnel
costs.
Indirect cost of sales for the three months ended September 30,
2015 were $106,230 (2014: 94,205). The increase is attributed to an
ongoing project to improve the management, reporting and turn-over
rate of our production inventory. The increase was mitigated by a
reduction in indirect personnel expenses in the three months ended
September 30, 2015. In addition, the percentage increase is
affected by the fixed cost nature of many of the components in this
category.
General and Administrative Expenses
General and administrative expenses for the three months ended
September 30, 2015, totaled $760,336, which was an 8% decrease as
compared to $826,756 for the three months ended September 30,
2014.
The table below summarizes our general and administrative
expenses for the three months ended September 30, 2015 and 2014 as
well as the percentage of change year-over-year:
3 Months 3 Months
Ended Ended Percent
Description September 30, 2015 September 30, 2014 Change
----------------------------------------- --------------------- --------------------- -------
Personnel Costs $ 194,740 $ 186,667 4 %
Professional Service Costs 242,355 356,266 (32 )%
Stock Market & Investor Relations Costs 146,859 141,496 4 %
Other General and Administrative Costs 176,382 142,327 23 %
--- ---------------- --- ----------------
Total General and Administrative Expense $ 760,336 $ 826,756 (8 )%
--- ---------------- --- ----------------
The decline in professional service costs for the three months
ended September 30, 2015 is related to a decrease in legal fees
($146,640 (2014: $297,232)) but was offset by increases in
personnel recruiting and general consulting services ($61,292
(2014: $-)).
The increase in other general and administrative costs for the
three months ended September 30, 2015 is due to a significant
increase in travel costs associated with the stimulation of sales
and marketing initiatives globally, including the Hainan-Savy Akers
Biosciences joint venture in Mainland China.
Sales and Marketing Expenses
Sales and marketing expenses for the three months ended
September 30, 2015 totaled $725,832, which was a 102% increase as
compared to $358,650 for the three months ended September 30,
2014.
The table below summarizes our sales and marketing expenses for
the three months ended September 30, 2015 and 2014 as well as the
percentage of change year-over-year:
3 Months 3 Months
Ended Ended Percent
Description September 30, 2015 September 30, 2014 Change
--------------------------------------- --------------------- --------------------- -------
Personnel Costs $ 371,133 $ 110,496 236 %
Professional Service Costs 170,985 177,778 (4 )%
Royalties and Outside Commission Costs 113,308 30,180 275 %
Other Sales and Marketing Costs 70,406 40,196 75 %
--- ---------------- --- ----------------
Total Sales and Marketing Expenses $ 725,832 $ 358,650 102 %
--- ---------------- --- ----------------
Personnel costs increased in the three months ended September
30, 2015 due to the expansion of the sales and marketing department
from 3 employees at September 30, 2014 to 11 employees as of
September 30, 2015.
Royalties and outside commission costs increased due to the
accrual of a legal settlement liability of $75,000 (2014: $-).
Other sales and marketing costs increased primarily due to the
increased travel by the expanded sales and marketing staff in
support of our customer and distributor base.
Research and Development
Research and development expenses for the three months ended
September 30, 2015 totaled $319,646, which was a 74% increase as
compared to $183,886 for the three months ended September 30,
2014.
The table below summarizes our research and development expenses
for the three months ended September 30, 2015 and 2014 as well as
the percentage of change year-over-year:
3 Months 3 Months
Ended Ended Percent
Description September 30, 2015 September 30, 2014 Change
---------------------------------------- --------------------- --------------------- -------
Personnel Costs $ 156,569 $ 127,602 23 %
Clinical Trial Costs 12,075 2,500 383 %
Professional Service Costs 106,763 25,967 311 %
Other Research and Development Costs 44,239 27,817 59 %
--- ---------------- --- ----------------
Total Research and Development Expenses $ 319,646 $ 183,886 74 %
--- ---------------- --- ----------------
Personnel costs increased during the three months ended
September 30, 2015. The increase is due to the addition of
laboratory technicians and the promotion of a senior technician to
provide technical product support to the Company's sales
associates, distributors and end customers.
Clinical trial costs, professional service costs and other
research and development costs have increased in the three months
ended September 30, 2015 due to the significant costs associated
with preparing several key products for market. Major expenses
include engineering fees related to the development of molds for
new products, development of the BreathScan Lync and associated
apps for tablets and smartphones, new packaging design, testing and
clinical trials.
(MORE TO FOLLOW) Dow Jones Newswires
November 13, 2015 02:00 ET (07:00 GMT)
The following table illustrates research and development costs
by project for the three months ended September 30, 2015 and 2014,
respectively:
Project 2015 2014
--------------------------------- -------- --------
Asthma/pH $- $-
Breath Alcohol Phone Application - 2,299
Breath Alcohol 54,340 -
Chlamydia Trachomatis 18,635 56,490
CHUBE - -
Heparin/PF4 55,363 14,306
HIV - -
Ketone 14,288 55
KetoChek / OxiChek 103,629 -
Lithium 448 -
Lyophilization - 6,050
Malaria - 55
METRON 16,174 -
Other Projects 3,324 -
PIFA PLUSS(R) PF4 - 16,881
Pulmo Health 6,745 -
Sonicator OQ - -
Troponin (heart attacks) 22,503 -
Tri-Cholesterol 17,261 70,759
VIVO 6,936 16,991
------- -------
Total R&D Expenses: $319,646 $183,886
------- -------
Impairment of Non-Current Assets
The Company performed a routine analysis of its intangible
assets and determined that two patents and a trademark acquired in
the fiscal year ended December 31, 2007 are no longer contributing
to the Company's revenue flows and were therefore impaired for
$466,476 (2014: $-) during the three months ended September 30,
2015.
Other Income and Expense
Other income increased for the three months ended September 30,
2015 to $18,519 from $18,447 for the same period in 2014. Other
income and expenses primarily consist of interest and dividend
earnings on the marketable securities and the note receivable
totaling $20,478 (2014: $19,469) and a loss on foreign currency
transactions of $2,001 (2014: $1,022).
Income Taxes
As of September 30, 2015, the Company does not believe any
uncertain tax positions exist that would result in the Company
having a liability to the taxing authorities. The Company's policy
is to classify interest and penalties related to unrecognized tax
benefits, if and when required, as part of interest expense and
general and administrative expense, respectively in the
consolidated statement of operations.
Summary of Statements of Operations for the Nine Months Ended
September 30, 2015 and 2014:
Revenue
Akers' revenue for the nine months ended September 30, 2015
totaled $1,646,443, a 45% decrease from the same period in 2014.
Importantly, sales of the flagship PIFA Heparin/PF4 Rapid Assay
products increased by 9% over the nine month period ended September
30, 2014. The reduction in overall revenue resulted from there
having been an initial stocking order for Tri-Cholesterol "Check"
tests during the nine months ended September 30, 2014 which was not
repeated in the nine months ended September 30, 2015; and from the
impact on sales of BreathScan breathalyzer products following the
French government's postponement, indefinitely, of the fine that
was to be imposed for drivers failing to possess breathalyzers in
their vehicles.
The table below summarizes our revenue by product line for the
nine months ended September 30, 2015 and 2014 as well as the
percentage of change year-over-year:
9 Months 9 Months
Ended Ended Percent
Product Lines September 30, 2015 September 30, 2014 Change
------------------------------------------ --------------------- --------------------- -------
MicroParticle Catalyzed Biosensor ("MPC") $ 233,758 $ 878,659 (73 )%
Particle ImmunoFiltration Assay ("PIFA") 1,015,742 931,647 9 %
Rapid Enzymatic Assay ("REA") - 864,000 (100 )%
Other 76,387 46,083 66 %
----------------- -----------------
Product Revenue Total $ 1,325,887 $ 2,720,389 (51 )%
License Fees 320,556 260,000 23 %
----------------- -----------------
Total Revenue $ 1,646,443 $ 2,980,389 (45 )%
----------------- -----------------
The Company's MPC product sales declined during the nine months
ended September 30, 2015. This reflects that during the same period
of 2014, the Company received its last order from ChubeWorkx for
the Company's alcohol breathalyzer product. The decline was
partially offset by an initial stocking order from a new
distributor in the European Union ("EU") for alcohol breathalyzers.
An initial order for 2,000,000 devices was received and units began
to ship in June, 2015. Additional shipments will be released as
directed by the distributor over the next nine months. The company
launched its METRON disposable breath test for ketones on the
Amazon Marketplace in the three month period ended September 30,
2015. While the METRON sales were small in its debut quarter, the
Company believes that revenues will grow in the fourth quarter. The
Company also expects to realize revenue from its BreathScan Lync
health and wellness line in the fourth quarter.
Domestic sales of the Company's PIFA Heparin/PF4 Rapid Assay
products continue to grow. The Company has expanded its sales and
marketing staff to cover most of the United States, adding
technical sales account executives whose role is to significantly
support the sales representatives of Akers' US distribution
partners, Cardinal Health ("Cardinal"), Fisher HealthCare
("Fisher") and Typenex Medical ("Typenex"). We have begun to
recognize the revenue benefits from the expansion of the sales and
marketing staff and expect this to continue as the additional sales
executives become more involved with the distributor
representatives in their sales regions.
In fact, there are now over 200 US hospitals using our product,
and we expect this number to a total close to 250 by the end of
2015. We are currently experiencing growth rates of approximately
20 hospitals per month, on average. Each hospital represents
approximately $15,000 per annum in revenue net to Akers. On this
basis, assuming these average metrics continue, by December 31,
2015, annualized PIFA Heparin/PF4 Rapid Assay product revenue for
the US alone should be $3.75 million entering 2016.
International sales of the Company's PIFA Heparin/PF4 Rapid
Assay products were still developing, but will be greatly enhanced
with the recent approval of the product in China. This approval is
expected to stimulate minimum purchase requirements with our
distributor, Novotek, of approximately $1 million in 2015 and $6
million in 2016.
There were no sales in the nine months ended September 30, 2015
for the Tri-Cholesterol "Check" tests, part of the REA line of
products, which generated sales of $864,000 during the same period
of 2014. The revenue generated in the 2014 sale of the
Tri-Cholesterol "Check" tests was due to an initial stocking order
from 36 Strategies General Trading, LLC to distribute the tests in
Australia, Singapore, the United Arab Emirates and Oman. The
Company continues to work with 36S to gain approval for the
Company's Tri-Cholesterol product in Australia.
Other operating revenue increased due to a rise in shipping and
handling fees, a result of the mix of domestic and international
shipments and an increase in sales of miscellaneous components.
The Company's exclusive License and Supply Agreement with
ChubeWorkx Guernsey Limited ("ChubeWorkx") for the Company's
proprietary breathalyzer product was cancelled by both parties on
May 7, 2015. As a result of this event, and per the terms of the
original agreement, the Company recognized the remaining $166,667
of deferred revenue in the statement of operations for the nine
months ended September 30, 2015. The Company is now able to solicit
business outside the United States for its alcohol breathalyzer
products and has begun to receive and ship orders.
Cost of sales for the nine months ended September 30, 2015
decreased by 18% to $745,319 (2014: $907,876). Direct cost of sales
increased to 26% of product revenue while indirect cost of sales
increased to 30% for the nine months ended September 30, 2015 as
compared to 22% and 12% respectively for the same period in 2014.
Overall, cost of sales, as a percentage of product revenue, was 56%
and 34% for the nine month periods ended September 30, 2015 and
2014.
Direct cost of sales for the nine month period ended September
30, 2015 showed an increase due to one significant event that
occurred in the nine months ended September 30, 2014; during prior
periods, the Company had written-off its REA product inventory
while it worked to develop a market and identify a distributor for
the product line. As a result of this action, no significant cost
of sales was associated with the REA product revenue in the nine
months ended September 30, 2014.
(MORE TO FOLLOW) Dow Jones Newswires
November 13, 2015 02:00 ET (07:00 GMT)
The increase in indirect cost of sales is attributed to an
ongoing project to improve the management, reporting and turn-over
rate of our production inventory which will be completed during the
fourth quarter. The increase was mitigated by a reduction in
indirect personnel expenses in the nine months ended September 30,
2015. In addition, the percentage increase is affected by the fixed
cost nature of many of the components in this category.
Akers' gross profit margin, as a percentage of revenue,
decreased to 55% for the nine months ended September 30, 2015 as
compared to 70% in 2014 for the reasons described above.
General and Administrative Expenses
General and administrative expenses for the nine months ended
September 30, 2015, totaled $3,205,300, which was a 28% increase as
compared to $2,497,485 for the nine months ended September 30,
2014.
The table below summarizes our general and administrative
expenses for the nine months ended September 30, 2015 and 2014 as
well as the percentage of change year-over-year:
9 Months 9 Months
Ended Ended Percent
Description September 30, 2015 September 30, 2014 Change
------------------------------------------ --------------------- --------------------- -------
Personnel Costs $ 611,841 $ 624,533 (2 )%
Professional Service Costs 740,825 791,854 (6 )%
Stock Market & Investor Relations Costs 418,866 490,527 (15 )%
Other General and Administrative Costs 1,433,768 590,571 143 %
----------------- -----------------
Total General and Administrative Expenses $ 3,205,300 $ 2,497,485 28 %
----------------- -----------------
Professional services included significant increases in
recruiting services and legal fees during the nine months ended
September 30, 2015. The increase in recruiting fees are related to
the expansion of the sales and marketing staff while the legal fees
are associated with various corporate and legal affairs. Offsetting
the professional service expenses was the elimination of management
fees paid to Nicolette Consulting Group for services that were
incurred in the nine months ended September 30, 2014.
The Company recognized cost savings in all of its stock market
and investor relations categories. These include consulting,
investor relations, stock exchange fees and transfer agent
fees.
The Company established an allowance for doubtful accounts of
$864,000 for a receivable that was due June 30, 2015 after
receiving communications from the customer that indicated a high
level of risk of collectability in the nine months ended September
30, 2015. This allowance is reflected in the other general and
administrative expenses.
Sales and Marketing Expenses
Sales and marketing expenses for the nine months ended September
30, 2015 totaled $1,854,623, which was a 92% increase as compared
to $966,357 for the nine months ended September 30, 2014.
The table below summarizes our sales and marketing expenses for
the nine months ended September 30, 2015 and 2014 as well as the
percentage of change year-over-year:
9 Months 9 Months
Ended Ended Percent
Description September 30, 2015 September 30, 2014 Change
--------------------------------------- --------------------- --------------------- -------
Personnel Costs $ 987,740 $ 376,785 162 %
Professional Service Costs 537,766 408,907 32 %
Royalties and Outside Commission Costs 140,762 104,371 35 %
Other Sales and Marketing Costs 188,355 76,294 147 %
----------------- --- ----------------
Total Sales and Marketing Expenses $ 1,854,623 $ 966,357 92 %
----------------- --- ----------------
Personnel costs increased in the nine months ended September 30,
2015 due to the expansion of the sales and marketing department
from 3 employees at September 30, 2014 to 11 employees as of
September 30, 2015.
The increase in professional service costs is for international
sales consultants and domestic marketing consultants to assist in
the development of new market opportunities and to increase our
market penetration in our existing markets; and web designers to
assist with the design and implementation of a new internet
presence.
Royalties and outside commission costs increased due to the
accrual of a legal settlement liability of $75,000 (2014: $-).
Research and Development
Research and development expenses for the nine months ended
September 30, 2015 totaled $1,003,445, which was a 46% increase as
compared to $686,376 for the nine months ended September 30,
2014.
The table below summarizes our research and development expenses
for the nine months ended September 30, 2015 and 2014 as well as
the percentage of change year-over-year:
9 Months 9 Months
Ended Ended Percent
Description September 30, 2015 September 30, 2014 Change
---------------------------------------- --------------------- --------------------- -------
Personnel Costs $ 488,260 $ 543,321 (10 )%
Clinical Trial Costs 35,688 10,500 240 %
Professional Service Costs 352,889 50,580 598 %
Other Research and Development Costs 126,608 81,975 54 %
----------------- --- ----------------
Total Research and Development Expenses $ 1,003,445 $ 686,376 46 %
----------------- --- ----------------
Personnel costs decreased during the nine months ended September
30, 2015. During the nine months ended September 30, 2014, the
Company issued stock options to key employees, where during the
same period of 2015, no costs were incurred which was offset by
increased due to the addition of laboratory technicians and the
promotion of a senior technician to provide technical product
support of the Company's sales associates, distributors and end
customers.
Clinical trial costs, professional service costs and other
research and development costs have increased in the nine months
ended September 30, 2015 due to the significant costs associated
with preparing several key products for market. Major expenses
include engineering fees related to the development of molds for
new products, development of the BreathScan Lync and associated
apps for tablets and smartphones, new packaging design, testing and
clinical trials.
The following table illustrates research and development costs
by project for the nine months ended September 30, 2015 and 2014,
respectively.
Project 2015 2014
--------------------------------- ---------- --------
Asthma/pH $4,917 $5,359
Breath Alochol Phone Application - 9,045
Breath Alcohol 100,966 13,866
Chlamydia Trachomatis 98,496 56,490
CHUBE 397 3,867
Heparin/PF4 98,876 69,431
HIV 58,718 56,586
Ketone 60,210 43,401
KetoChek / OxiChek 103,629 -
Lithium 41,086 -
Lyophilization - 74,956
Malaria - 6,810
METRON 77,473 4,904
Other Projects 77,625 6,199
PIFA PLUSS(R) PF4 - 36,960
Pulmo Health 6,745 -
Sonicator OQ 886 -
Troponin (heart attacks) 127,094 -
Tri-Cholesterol 82,151 125,553
VIVO 64,176 172,949
--------- -------
Total R&D Expenses: $1,003,445 $686,376
--------- -------
Impairment of Non-Current Assets
The Company performed a routine analysis of its intangible
assets and determined that two patents and a trademark acquired in
the fiscal year ended December 31, 2007 are no longer contributing
to the Company's revenue flows and were therefore impaired for
$466,476 (2014: $-) during the nine months ended September 30,
2015.
Other Income and Expense
Other income increased for the nine months ended September 30,
2015 to $87,728 from $56,719 for the same period in 2014. The
increase is the result of interest and dividend earnings on the
marketable securities and the note receivable totaling $89,647
(2014: $49,176) and was partially offset by a loss on foreign
currency transactions of $7,971 (2014: gain of $2,874).
Income Taxes
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As of September 30, 2015, the Company does not believe any
uncertain tax positions exist that would result in the Company
having a liability to the taxing authorities. The Company's policy
is to classify interest and penalties related to unrecognized tax
benefits, if and when required, as part of interest expense and
general and administrative expense, respectively in the
consolidated statement of operations.
Liquidity and Capital Resources
For the nine months ended September 30, 2015 and 2014, the
Company generated a net loss attributable to shareholders of
$5,734,921 and $2,230,708, respectively. As of September 30, 2015
and December 31, 2014, the Company has an accumulated deficit of
$90,599,007 and $84,864,086 and had cash totaling $393,272 and
$455,841, respectively.
Currently, our primary focus is to expand the domestic and
international distribution of our PIFA Heparin/PF4 rapid assays.
The Company's secondary focus is preparing for the launch of our
health and wellness product line linked to smartphones and tablets.
The Company continues commercialization tasks for METRON as well as
development activities for its PIFA PLUSS(R) Infectious Disease
single-use assays, BreathScan(R) DKA, and Breath PulmoHealth
products, including advancement of the steps required for FDA
clearance or CE marking in the EU where necessary.
We expect to continue to incur losses from operations for the
near-term and these losses could be significant as we incur product
development, clinical and regulatory activities, contract
consulting and other product development and commercialization
related expenses. We believe that our current working capital
position will be sufficient to meet our estimated cash needs for at
least 24 months. We are closely monitoring our cash balances, cash
needs and expense levels. The accompanying financial statements do
not include any adjustments to reflect the possible future effects
on the recoverability and classification of assets or the amounts
and classification of liabilities that might result in the possible
inability of the Company to continue as a going concern.
We expect that our primary expenditures will be to continue
development of our health and wellness line, PIFA PLUSS(R)
Infectious Disease single-use assays, BreathScan(R) DKA and Breath
PulmoHealth products, enrolling patients in clinical trials to
support performance claims, generating studies in peer-reviewed
journals to support product marketing, and provide data for the FDA
510(k) clearance/CE certifications processes when required. We will
also continue to support commercialization and marketing activities
of commercialized products (PIFA Heparin/PF4 rapid assays, PIFA
PLUSS(R) PF4, breath alcohol detectors and METRON in the US and
internationally. Based upon our experience, clinical trial and
related regulatory expenses can be significant costs. Steps to
achieve commercialization of emerging products will be an ongoing
and evolving process with expected improvements and possible
subsequent generations being evaluated for commercialized and
emerging tests. Should we be unable to achieve FDA clearance for
products that require such regulatory "approval", develop
performance characteristics for rapid tests that satisfy market
needs, or generate sufficient revenue from commercialized products,
we would need to rely on other business or product opportunities to
generate revenue and costs that we have incurred for the patents
may be deemed impaired.
Capital expenditures for the nine months ended September 30,
2015 were $60,254 (2014: $24,987). Capital expenditures, primarily
for production, laboratory and facility improvement costs for the
year ending December 31, 2015 are expected to be approximately
$250,000. As per the Company's lease agreement, the owner of the
facility will be handling the majority of facility upgrades, and we
anticipate financing any production and laboratory capital
expenditures through working capital.
The Company invested $64,091 for a 19.9% ownership position in a
joint venture with Hainan Savy Investment Management, Ltd and Mr.
Thomas Knox, the Company's Non-executive Co-chairman, to research,
develop, produce and sell Akers' rapid diagnostic screening and
testing products in China. The new entity, incorporated in the
People's Republic of China, operates as Hainan Savy Akers
Biosciences, Ltd.
The Company may enter into generally short-term consulting and
development agreements primarily for testing services and in
connection with clinical trials conducted as part of the Company's
development process which may include activities related to the
development of technical files for FDA 510(k) clearance
submissions. Such commitments at any point in time may be
significant but the agreements typically contain cancellation
provisions.
We lease our manufacturing facility which also contains our
administrative offices. Our current lease was executed January 1,
2013 and is effective through December 31, 2019. The Company has
leased this property from the current owner since 1997.
Due to recent market events that have adversely affected all
industries and the economy as a whole, management has placed
increased emphasis on monitoring the risks associated with the
current environment, particularly the recoverability of current
assets, the fair value of assets, and the Company's liquidity. At
this point in time, there has not been a material impact on the
Company's assets and liquidity. Management will continue to monitor
the risks associated with the current environment and their impact
on the Company's results.
The Company's net cash provided by investing and financing
activities totaled $3,937,978 during the nine months ended
September 30, 2015. Cash was consumed by capital expenditures, the
investment in Hainan Savy Akers Biosciences, Ltd. and the purchase
of marketable securities of $176,664. Proceeds from the sale of
marketable securities and a policy renewal incentive from an
insurer contributed cash of $4,114,642 for the period ended
September 30, 2015.
The Company's net cash provided by investing and financing
activities totaled $3,296,139, during the nine months ended
September 30, 2014. Cash was consumed by capital expenditures, the
payment of a short-term note payable - related party, the purchase
of marketable securities and the payment of dividends on Series A
Convertible Preferred Stock totaling $12,885,482. Proceeds from the
issuance of common shares, proceeds from the sale of marketable
securities and the demutualization of an insurer contributed cash
of $16,181,621 for the period ended September 30, 2014.
Our net cash consumed by operating activities totaled $4,000,447
during the nine months ended September 30, 2015. Cash was consumed
by the loss of $5,734,921 less non-operating gains of $6,010 plus a
non-cash adjustments of $241,512 for depreciation and amortization
of non-current assets, $466,476 for impairment of non-current
assets, $864,000 for an allowance for doubtful accounts and $8,387
for accrued interest and dividends on marketable securities. For
the nine months ended September 30, 2015, decreases in trade
receivables and notes receivable - related party $221,219 and an
increase in trade and other payables of $415,163 provided cash,
primarily related to routine changes in operating activities. A net
increase in other receivables, inventories, and other assets of
$170,717 and a decrease in deferred revenue - related party of
$305,556 consumed cash from operating activities.
Akers' net cash consumed by operating activities totaled
$2,757,258 during the nine months ended September 30, 2014. Cash
was consumed by the loss of $2,214,915 less non-operating gains of
$16,604 plus non-cash adjustments of $1,007,923 for depreciation
and amortization of non-current assets and the issuance of stock
options. For the nine months ended September 30, 2014, decreases in
inventory and other assets of $337,966 provided cash while a net
increase in trade receivables, trade receivables - related parties
and other receivables of $1,280,684 and decreases in trade and
other payables, trade and other payables - related parties and
deferred revenue - related party of $590,944 consumed cash from
operating activities.
ABOUT AKERS BIOSCIENCES, INC.
Akers Biosciences develops, manufactures, and supplies rapid
screening and testing products designed to deliver quicker and more
cost-effective healthcare information to healthcare providers and
consumers. The Company has advanced the science of diagnostics
while responding to major shifts in healthcare through the
development of several proprietary platform technologies. The
Company's state-of-the-art rapid diagnostic assays can be performed
virtually anywhere in minutes when time is of the essence. The
Company has aligned with major healthcare companies and high volume
medical product distributors to maximize product offerings, and to
be a major worldwide competitor in diagnostics.
Additional information on the Company and its products can be
found at www.akersbio.com. Follow us on Twitter @AkersBio.
Cautionary Statement Regarding Forward Looking Statements
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