Akers Biosciences, Inc. (NASDAQ: AKER) (AIM: AKR.L), (“Akers Bio”
or the "Company"), a developer of rapid health information
technologies, reports its financial results for the first quarter
ended March 31, 2018. A Form 10-Q containing the full financial
statements is available for viewing on the Company's website at
www.akersbio.com or www.sec.gov.
Q1 Financial Summary:
- Total revenue $302,475 (Q1 2017: $667,250)
- Revenue from flagship PIFA Heparin PF/4 Rapid Assay products
$259,983 (Q1 2017: $560,921) – the Company experienced lower yields
in the process of extracting antigen used to produce these
products, resulting in production under target levels, and
backorders
- Gross profit margin 2% (Q1 2017: 61%)
- Costs associated with the low antigen yields and steps to
remediate the issue significantly affected the direct costs of
production and the fixed nature of key components of the indirect
production costs impacted the margin during the period
- Overall expenses increased by 7%:
- General and Administrative expenses increased by 16% to
$915,533 (Q1 2017: $790,529)
- Sales and Marketing expenses decreased by 15% to $500,152 (Q1
2017: $588,934)
- Research and Development expenses increased by 26% to $439,970
(Q1 2017: $348,442)
- Net loss attributable to shareholders $1,859,991 (Q1 2017:
$1,349,270)
- Cash and marketable securities at March 31, 2018 of $9,326,277
(31 December 2017: $5,450,039)
- During Q1 2018, warrant holders executed 30,492,070 warrants
with an exercise price of $0.1875 per common share, raising net
proceeds of $5,717,325
Q1 Operational Summary:
- Entered into a three-year National Distribution Agreement with
Diagnostica Stago, Inc. (“Stago”) for the sale of PIFA Heparin PF/4
Rapid Assay products across the US - Stago is a global leader in
hemostasis, with an extensive US-based team dedicated to the sale
and support of hemostasis products and equipment to hospitals
across the country
- During the quarter, the Company experienced lower yields in the
process of extracting antigen from the supplier provided platelets
used to produce PIFA Heparin PF/4 Rapid Assay products. At these
yield levels, production of this product was under target levels,
resulting in backorders. The Company’s engineers and supplier
representatives have been working together to adjust processes in
order to restore the yield to appropriate levels, the results of
which are not yet determined
- The Company is taking steps to improve its market presence for
PIFA Heparin PF/4 Rapid Assay products including through the use of
specialized Independent Sales Representatives (ISRs) and through a
program to educate the marketplace through the preparation and
publication of additional clinical studies and physician seminars
on the risks associated with heparin induced thrombocytopenia – the
ISR strategy is gaining momentum with coverage extending to 27
states across the US
Update Regarding Recent Key
Events
The Company has updated its product pipeline to
reflect products marketed and/or within its pipeline as
follows:
|
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PIFA
® Heparin/PF4 & PIFA PLUSS ® PF4 |
|
PIFA |
|
Marketed |
|
Prescription Use |
|
Obtained |
|
Rapid
tests for Heparin/PF4 antibodies to detect an allergy to the widely
used blood thinner, Heparin |
|
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|
|
|
|
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|
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PIFA
PLUSS ® Chlamydia |
|
PIFA |
|
Pipeline |
|
Prescription Use |
|
Required/withdrawn on May 29, 2018 *See explanation below. |
|
Rapid
tests for the most prevalent sexually transmitted disease |
|
|
|
|
|
|
|
|
|
|
|
seraSTAT ® |
|
seraSTAT |
|
Marketed |
|
Prescription Use |
|
Obtained |
|
Rapid
Blood Cell Separator, marketed under the brand name seraSTAT ®,
further accelerates the rate at which a test result is obtained as
the often-required sample preparation step is abbreviated
drastically. |
|
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|
|
|
|
|
|
|
|
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Tri-Cholesterol “Check” ® |
|
REA |
|
Marketed |
|
OTC |
|
Obtained |
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Rapid
test for Total and high density lipoprotein cholesterol and
estimates low density lipo protein |
|
|
|
|
|
|
|
|
|
|
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BreathScan OxiChek |
|
MPC |
|
Marketed |
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Health and wellness |
|
n/a |
|
Breath test for oxidative stress using the Lync reader and digital
app |
|
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|
|
|
|
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|
|
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BreathScan KetoChek |
|
MPC |
|
Pipeline |
|
Health and wellness |
|
n/a |
|
Breath test for ketosis using the Lync reader and digital app |
Product |
|
Platform |
|
Marketed/Pipe line |
|
FDA Clearance Required Prescription Use/OTC |
|
FDA Clearance Status Obtained/Needed |
|
Description |
BreathScan TM |
|
MPC |
|
Marketed |
|
OTC |
|
Obtained |
|
Disposable breath alcohol detector |
|
|
|
|
|
|
|
|
|
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BreathScan ® PRO |
|
MPC |
|
Marketed |
|
OTC |
|
Obtained |
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Quantitative breath alcohol detection system |
|
|
|
|
|
|
|
|
|
|
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METRON ® |
|
MPC |
|
Marketed |
|
Health and wellness |
|
n/a |
|
Disposable breath ketone device to monitor ketosis |
|
|
|
|
|
|
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BreathScan Lync |
|
MPC |
|
Marketed |
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Health and wellness |
|
n/a |
|
Non-invasive, quantitative measurement of biological markers for
health and wellness |
The Company follows a disciplined and rigorous
process to determine market needs and the commercial viability of
potential new products within its development pipeline. In doing
so, the Company has targeted products that are aligned with our
served markets and core capabilities, to further support our quest
of enhancing business profitability and shareholder value.
All of the Company’s existing development
projects and platforms are being subjected to this process which
involves the re-evaluation of the scientific feasibility and
potential marketability of the products and platforms. The new
business development process ruled out the commercial viability of
the following products: Breath Diabetic Ketoacidosis, Breath
PulmoHealth “Check” products, and breath cardiac marker test
(Troponin).
In May 2018, after extensive review both
internally and with the FDA, we withdrew our initial 510(k)
application for the PIFA Chlamydia rapid assay. We are currently
evaluating the feasibility and marketability of this product in
order to determine when and if the 510(k) application will be
resubmitted.
Regulatory requirements vary across the globe.
Our authorized distributors are tasked to meet local and regional
regulatory requirements.
Rapid Blood Cell Separation Technology
In addition to the Company’s testing platforms,
Akers’ patented Rapid Blood Cell Separation (“Separator”)
Technology, marketed under the brand name seraSTAT ®, further
accelerates the rate at which a test result is obtained as the
often-required sample preparation step is abbreviated drastically.
Conventional methods of blood cell separation are labor-intensive
and time-consuming, typically involving blood collection and
laboratory personnel, as well as electrically-powered centrifuges
and other specialized equipment. We wanted to clarify that the
separator device requires a small-volume of venous whole blood
sample.
Manufacturing and Suppliers
We are a vertically integrated manufacturer,
producing substantially all of our devices in-house. The vast
majority of our products start out as high quality, medical grade
polymers and exit our facilities as fully manufactured and packaged
medical devices. As a result, we have a short supply line between
our raw materials and finished goods which gives us greater control
over our product quality. The downside of our in-house
manufacturing is the requirements for facilities, power, and
equipment. This approach also requires mid-to-long-term planning
and the ability to predict future needs. Many of our processes are
unique to us, but the Company’s flexible manufacturing capabilities
and unused current capacity generally translate into relatively
short production timelines. As demand for our products increase,
additional capacities may be required to advance our evolving
needs.
We use a diverse and broad range of raw
materials in the manufacturing of our products. We purchase all of
our raw materials and select items such as packaging from external
suppliers. In addition, we purchase some supplies from single
sources for reasons of proprietary know-how, quality assurance,
sole source availability, or due to regulatory qualification
requirements. U.S. medical device manufacturers must establish and
follow quality systems to help ensure that their products
consistently meet applicable requirements and specifications. The
quality systems for FDA-regulated products are known as current
good manufacturing practices (“cGMP’s”). cGMP requirements for
devices in part 820 (21 CFR part 820) were first authorized by
section 520(f) of the Federal Food, Drug, and Cosmetic Act. We work
closely with our suppliers to ensure continuity of supply while
maintaining high quality and reliability. To date, we have not
experienced any significant difficulty locating and obtaining the
materials necessary to fulfill our production requirements.
During the three months ended March 31, 2018, we
experienced lower yields in the process of extracting antigen from
the supplier provided platelets used to produce our PIFA Heparin
product. At these yield levels, our production of this
product was under target levels, resulting in backorders. Our
engineers and representatives from our supplier have been working
together to adjust our processes in order to restore the yield to
appropriate levels, the results of which are not yet
determined.
Furthermore, we are evaluating and testing a
resolution that may involve one or more alternative antigen
suppliers and processes that may provide a path to restoring yield
levels for this product. For each of these potential solutions, we
will be conducting production validation and stability testing.
The following is an update of our distribution
strategy
We distribute our products through direct and
indirect channels of distribution. We have well-developed indirect
distribution channels in the U.S. with, among others, Cardinal
Health, Thermo Fisher Healthcare, a Division of Fisher Scientific
Company L.L.C. and Diagnostica Stago, SA (“Stago”) for the
Company’s PIFA Heparin/PF4 assays. These relationships provide us
with access to most U.S. hospitals.
Our dedicated sales force works in tandem with
independent and distributor sales representatives to uncover
opportunities in the clinical laboratory marketplace. The Company
facilitates direct sales for hospitals that prefer to purchase
direct from the manufacturer.
Since 2012, the Company has had a distribution
relationship with Novotek Pharmaceuticals, Inc., a division of
Yifan Pharmaceuticals (“Novotek”), a Beijing-based pharmaceutical
and in vitro diagnostic business development corporation. Through a
multi-year distribution agreement. NovoTek has exclusive sales and
marketing rights to distribute Akers’ PIFA products in Mainland
China and Poland. Prior to
being able to distribute our products in these markets, NovoTek
must first obtain product reimbursement approval from each of the
Provincial (regional) jurisdictions. Through June 2018, NovoTek has
not been able to obtain these approvals in any of these
jurisdictions. We do not anticipate additional PIFA revenue from
this region until these approvals are received.
With respect to the Company’s breath alcohol
franchise, historically Akers focused its commercial attention
within the on-the-job safety/human resources sector. Access was and
currently is largely achieved through designated BreathScan®
distributors and limited arrangements in which the Company serves
in an OEM capacity.
In select European countries and Australia, we
have distribution relationships with specialized sales and
marketing organizations for some of our products. We do not have a
strong presence in many emerging markets, but are seeking to enter
into agreements to enable us to enter other international markets
in the current fiscal year.
Other Emerging MPC Platform Products
The Company’s MPC Biosensor technology is being
applied to the development of products that serve the
nutraceutical, fitness, and weight loss marketplaces. As a
category, these disposable screening tests are exempt from FDA
510(k) premarket clearances. Biomarkers related to various
metabolic processes can be measured in breath condensate. As a
result, Akers has used its proprietary, easy-to-use platform to
design disposable breath devices that measure ketone (acid)
production associated with fat-burning (METRON ® and KetoChek) and
oxidative stress levels that relate to cellular damage and the
development of many preventable diseases (OxiChek). The Company
believes that personalized health and wellness – and eventually
personalized medicine – will become an increasingly significant
market. The Company is positioning its tests for fitness, weight
loss and oxidative stress for this market by designing a more
consumer-focused reagent device, and linking this device to an
application for smartphones and tablets that can not only produce a
result, but also track progress over time. Initial marketing
activities have commenced for these products and the Company is
preparing for commercialization. Since devices with claims related
to weight loss or nutrition are exempt from FDA oversight, a
clinical program to support a 510(k) submission is not required for
any of these products. Given the non-medical intended use, the
Company does not believe products will be required to hold a
CE-mark prior to marketing in the EU.
Health and Wellness Market Development
(OxiChek)
The Company is currently assessing distribution
opportunities with companies specializing in weight loss and/or
mass distribution through health-related multilevel marketing
organizations. We had been engaged with a with a large network
marketing firm to secure a multi-year contractual
arrangement. We failed to produce a custom
product that satisfactorily met customer expectations, and as a
result we were not able to finalize this arrangement. The Company
is pursuing alternative customer options within the Multi-Level
Market segment.
During October 2016 the Company was served with
a notice that Pulse Health, LLC (“Pulse”) filed a lawsuit against
the Company. This litigation has been assigned to mediation and our
intention is to resolve this issue in the third quarter. There is
risk associated with the BreathScan OxiChek product related to this
litigation and an adverse decision may affect our ability to market
the product. The Company is aggressively defending our product
intellectual property and market position.
Update regarding the marketing of the BreathScan
Breath Alcohol products acquired in settlement with ChubeWorkx
The Company has been actively marketing, on a
global basis, the BreathScan Breath Alcohol products that were
produced for and/or acquired as part of the ChubeWorkx settlement
agreement in August 2016. Unfortunately, we have not been
successful in securing buyers in sufficient
volumes.
An extensive analysis of the market opportunity
has been performed and it was determined that the on-hand quantity
of this group of products exceeded the expected near term demand
for the product prior to its expiration. As such, the Company’s
management elected to establish a reserve.
Chief Executive Officer’s
Remarks:
“The decline in total revenues in Q1 was
disappointing and was a result primarily of the lower antigen
yields experienced in the process of extracting antigen from the
supplier provided platelets used to produce PIFA Heparin PF/4 Rapid
Assay products. This had an impact on production levels of this
product, resulting in backorders. Our engineers and supplier
representatives have been working together to adjust processes in
order to restore the yield to appropriate levels, the results of
which are not yet determined. We are additionally evaluating and
testing a resolution that may involve one or more alternative
antigen suppliers and processes that may provide a path to
restoring yield levels for this product. For each of these
potential solutions, we will be conducting production validation
and stability testing.
The Company is taking steps to improve its
market presence for PIFA Heparin PF/4 Rapid Assay products
including through the use of specialized Independent Sales
Representatives (ISRs) and through a program to educate the
marketplace through the preparation and publication of additional
clinical studies and physician seminars on the risks associated
with heparin induced thrombocytopenia. I am pleased to say we have
significantly enhanced our ISR network across the US, focused on
surgeons and surgical teams. At the core of our strategy is to
influence the clinical pathway for the diagnosis of heparin induced
thrombocytopenia and therefore drive sales of PIFA Heparin/PF4
Rapid Assay products. Earlier this month, we announced that our ISR
coverage extended to 27 states and we expect this to increase
further in the near-term.
With our rapidly expanding ISR coverage, working
in tandem with our existing distribution partners, as well as our
own technical sales personnel targeting large Integrated Delivery
Networks, we remain confident in the growth potential of PIFA
Heparin PF/4 Rapid Assay products.
The Company continues to pursue opportunities to
accelerate the commercialization of BreathScan OxiChek™, the first
commercialized Akers Wellness™ breath test which rapidly determines
levels of oxidative stress in the body by measuring the levels of
certain abundant free radicals. The Company is currently assessing
distribution opportunities with companies specializing in weight
loss and/or mass distribution through health-related multilevel
marketing organizations. The Company is pursuing opportunities
within the multilevel marketing segment.
We remain highly focused on driving profitable
growth of our core commercialized products, currently led by PIFA
Heparin/PF4 Rapid Assay products. We are building strong sales and
distribution partnerships with extensive national coverage in order
to help achieve this. At the same time, we continue to advance the
research and development of targeted products that are aligned with
our served markets and core capabilities, to further support our
quest of enhancing business profitability and shareholder value. I
look forward to reporting developments in our commercial and
product development strategies in the future.”
John J. GormallyChief
Executive Officer
Summary of Statements of Operations for
the Three Months Ended March 31, 2018 and 2017
Revenue
Akers’ revenue for the three months ended March
31, 2018 totaled $302,475, a 55% decrease from the same period in
2017. The table below summarizes revenue by product line for the
three months ended March 31, 2018 and 2017 as well as the
percentage of change year-over-year:
Product
Lines |
|
3 Months Ended March 31, 2018 |
|
|
3 Months Ended March 31, 2017 |
|
|
Percent Change |
|
Particle
ImmunoFiltration Assay (“PIFA”) |
|
$ |
259,983 |
|
|
$ |
560,921 |
|
|
|
(54 |
)% |
MicroParticle Catalyzed
Biosensor (“MPC”) |
|
|
18,950 |
|
|
|
85,659 |
|
|
|
(78 |
)% |
Rapid Enzymatic Assay
(“REA”) |
|
|
9,900 |
|
|
|
- |
|
|
|
- |
% |
Other |
|
|
13,642 |
|
|
|
20,670 |
|
|
|
(34 |
)% |
Product Revenue
Total |
|
$ |
302,475 |
|
|
$ |
667,250 |
|
|
|
(55 |
)% |
License and Service
Fees |
|
|
- |
|
|
|
- |
|
|
|
- |
% |
Total Revenue |
|
$ |
302,475 |
|
|
$ |
667,250 |
|
|
|
(55 |
)% |
Revenue from the Company’s PIFA Heparin/PF4
Rapid Assay products decreased 54% to $259,983 (2017: $560,921)
during the three months ended March 31, 2018, over the same period
of 2017. The Company is taking steps to improve its market presence
including the use of specialized Independent Sales Representatives
(“ISRs”) and through a program to educate the marketplace through
the preparation and publication of additional clinical studies and
physician seminars on the risks associated with heparin induced
thrombocytopenia.
During the three months ended March 31, 2018, we
experienced lower yields in the process of extracting antigen from
the supplier provided platelets used to produce our PIFA Heparin
product. At these yield levels, our production of this
product was under target levels, resulting in
backorders. Our engineers and representatives
from our supplier have been working together to adjust our
processes in order to restore the yield to appropriate levels, the
results of which are not yet determined.
Furthermore, we are evaluating and testing a
resolution that may involve one or more alternative antigen
suppliers and processes that may provide a path to restoring yield
levels for this product. For each of these potential
solutions, we will be conducting production validation and
stability testing.
The Company’s dedicated technical sales account
executives are supporting over 300 sales representatives of Akers’
U.S. distribution partners, Cardinal Health, Thermo Fisher
Scientific and Diagnostica Stago. The Company’s
relationship-building initiative with our partners has delivered a
measurable increase in product trials and adoptions. Domestic sales
for the three months ended March 31, 2018, of our distributors,
Cardinal Health and Thermo Fisher Scientific, accounted for
$209,471 of the total PIFA Heparin/PF4 Rapid Assay sales as
compared to $454,656 for the same period of 2017.
The Company’s MPC product sales decreased by 78%
to $18,950 (2017: $85,659) during the three months ended March 31,
2018. Sales of the Company’s Metron and BreathScan Alcohol products
accounted for the revenue.
The Company’s REA products generated $9,900
(2017: $-) during the three months ended March 31, 2018. The
Company’s re-introduced Tri-Cholesterol product is produced with
this technology.
Other operating revenue decreased to $13,642
(2017: $20,670) during the three months ended March 31, 2018. The
category is made up of the sales of miscellaneous raw material
components, sub-assembled products and fees billed for shipping and
handling charges.
The table below summarizes our revenue by
geographic region for the three months ended March 31, 2018 and
2017 as well as the percentage of change year-over-year:
Geographic Region |
|
3 months ended March 31,
2018 |
|
|
3 months ended March 31,
2017 |
|
|
Percent Change |
|
United States |
|
$ |
294,733 |
|
|
$ |
617,691 |
|
|
|
(52 |
)% |
People’s Republic of
China |
|
|
- |
|
|
|
21,030 |
|
|
|
(100 |
)% |
Rest of World |
|
|
7,742 |
|
|
|
28,529 |
|
|
|
(73 |
)% |
Total Revenue |
|
$ |
302,475 |
|
|
$ |
667,250 |
|
|
|
(55 |
)% |
Domestic sales represent the most significant
portion of the Company’s revenue, contributing 97% (2016: 93%). The
primary sales and marketing efforts are concentrated on expanding
the Company’s domestic market share in the rapid clinical
diagnostic and health and wellness segments. The introduction of
the Tri-Cholesterol test has allowed the Company to re-enter the
retail market.
Gross Margin
The Company’s gross margin declined to 2% (2017:
61%) for the three months ended March 31, 2018. Increases in direct
personnel costs ($96,824 (2017: $65,353)) and the transfer of raw
materials and sub-assemblies from/to inventory for production
($13,419 (2017: $133,111)) were offset by a decrease in services
provided by sub-contractors for material preparation, assembly and
packaging to $600 (2017: $113,761).
During the three months ended March 31, 2018,
low yields during antigen extraction processes and the addition of
a production laboratory technician to the direct manufacturing
staff in anticipation of increased demand for the PIFA and REA
platform products significantly affected direct costs of
production.
Cost of production also includes significant
components that are fixed expenses which effectively reduces the
gross margin when revenue declines. These expenses include the cost
of personnel, manufacturing and warehousing space, depreciation of
equipment and other similar items.
Cost of sales for the three months ended March
31, 2018 totaled $297,500 (2017: $258,721). Direct cost of sales
increased to 44% of product revenue while other cost of sales
increased to 54% for the three months ended March 31, 2018 as
compared to 16% and 23% respectively for the same
period in 2017.
Direct cost of sales for the three-month period
ended March 31, 2018 were $132,653 (2017: $106,129). Other cost of
sales for the three months ended March 31, 2018 were $164,847
(2017: $152,593).
General and Administrative
Expenses
General and administrative expenses for the
three months ended March 31, 2018, totaled $915,532, which was a
16% increase as compared to $790,529 for the three months ended
March 31, 2017.
The table below summarizes our general and
administrative expenses for the three months ended March 31, 2018
and 2017 as well as the percentage of change year-over-year:
Description |
|
3 Months Ended March 31, 2018 |
|
|
3 Months Ended March 31, 2017 |
|
|
Percent Change |
|
Personnel Costs |
|
$ |
306,936 |
|
|
$ |
334,527 |
|
|
|
(8 |
)% |
Professional Service
Costs |
|
|
303,937 |
|
|
|
191,753 |
|
|
|
59 |
% |
Stock Market &
Investor Relations Costs |
|
|
114,166 |
|
|
|
82,386 |
|
|
|
39 |
% |
Other General and
Administrative Costs |
|
|
190,493 |
|
|
|
181,863 |
|
|
|
5 |
% |
Total General and
Administrative Expense |
|
$ |
915,532 |
|
|
$ |
790,529 |
|
|
|
16 |
% |
Personnel expenses decreased by 8% for the three
months ended March 31, 2018 as compared to the same period of 2017.
A reduction in bonuses included in salaries and wages to $243,941
(2017: $277,456) was offset by increases in auto allowance and
employee benefit expenses of $19,938 (2017: $14,286).
Professional service costs increased 59% for the
three months ended March 31, 2018 as compared to the same period of
2017. A significant increase in legal fees ($278,277 (2017:
$138,688)) were offset partially by a decrease in engineering fees
($6,475 (2017: $30,090)) resulting in the change. The Company
replaced its SEC attorneys in February 2018 and continues to incur
legal expenses related to ongoing litigation (Part II, Item
1). Investor relations totaled $52,573 (2017: $39,354)
and transfer agent fees of $21,402 (2017: $7,369) were the major
contributors to the 39% increase in stock market and investor
relations costs for the three months ended March 31, 2018.
Other general and administrative expenses
increased by 5%. This increase is the result of increases in
building expenses of $74,909 (2017: $45,253) for the addition of
the Ramsey, New Jersey satellite office and licenses, permits and
fees of $16,374 (2017: $4,869).
Sales and Marketing
Expenses
Sales and marketing expenses for the three
months ended March 31, 2018 totaled $500,152 which was a 15%
decrease compared to $588,934 for the three months ended March 31,
2017.
The table below summarizes our sales and
marketing expenses for the three months ended March 31, 2018 and
2017 as well as the percentage of change year-over-year:
Description |
|
3 Months Ended March 31, 2018 |
|
|
3 Months Ended March 31, 2017 |
|
|
Percent Change |
|
Personnel Costs |
|
$ |
321,708 |
|
|
$ |
335,832 |
|
|
|
(4 |
)% |
Professional Service
Costs |
|
|
71,559 |
|
|
|
65,046 |
|
|
|
10 |
% |
Royalties and Outside
Commission Costs |
|
|
27,855 |
|
|
|
45,133 |
|
|
|
(38 |
)% |
Other Sales and
Marketing Costs |
|
|
79,030 |
|
|
|
142,923 |
|
|
|
(45 |
)% |
Total Sales and
Marketing Expenses |
|
$ |
500,152 |
|
|
$ |
588,934 |
|
|
|
(15 |
)% |
The US market has been divided into two regional
zones, each with a business director that is responsible for
recruiting and supporting ISRs and independent manufacturing
representatives (“IMRs”) to target large integrated delivery
networks and individual facilities. This strategy requires more
experienced and technically knowledgeable sales personnel to
interact with surgeons, executive management, laboratory and
medical directors. The Company has increased its sales and
marketing staff from 4 members on March 31, 2017 to 5 as of March
31, 2018.
Personnel costs decreased in the three months
ended March 31, 2018 as compared to the same period of 2017. A
reduction in compensation, bonuses and commissions to $257,352
(2017: $293,269) primarily due to changes in the bonus and
compensation plan was offset by increases in auto allowance and
employee benefit expenses of $31,648 (2017: $14,208).
The Company renegotiated or eliminated several
consulting arrangements targeted at improving market penetration or
identifying marketing or distribution partners during the first
half of 2017. The result was a significant reduction of in
professional services for the three months ended March 31, 2017.
The Company continually monitors the effectiveness of the remaining
agreements and a few have been expanded to provide additional
services resulting in an increase in professional service costs
during the three months ended March 31, 2018.
The legal settlement with ChubeWorkx Guernsey,
Ltd (“ChubeWorkx”), signed on August 11, 2016, requires the Company
to pay a 5% royalty on adjusted gross sales to ChubeWorkx on a
quarterly basis. During the three months ended March 31, 2018, this
royalty totaled $31,689 (2017: $32,279). The Company received a
credit for an overpayment of commissions to an IMR for $14,208
which contributed to the decline in royalty and outside commission
costs during the three months ended March 31, 2018.
The Company recognized significant reductions in
advertising expenses ($12,167 (2017: $54,700)) and trade show
expenses ($885 (2017: $29,523)) plus smaller reductions in several
other operating categories that resulted in a 45% reduction in
other sales and marketing
costs. Research and
Development
Research and development expenses for the three
months ended March 31, 2018 totaled $439,970, which was a 26%
increase as compared to $348,442 for the three months ended March
31, 2018.
The table below summarizes our research and
development expenses for the three months ended March 31, 2018 and
2017 as well as the percentage of change year-over-year:
Description |
|
3 Months Ended March 31, 2018 |
|
|
3 Months EndedMarch 31, 2017 |
|
|
Percent Change |
|
Personnel Costs |
|
$ |
299,212 |
|
|
$ |
284,949 |
|
|
|
5 |
% |
Clinical Trial
Costs |
|
|
905 |
|
|
|
150 |
|
|
|
503 |
% |
Professional Service
Costs |
|
|
89,276 |
|
|
|
29,124 |
|
|
|
207 |
% |
Other Research and
Development Costs |
|
|
50,577 |
|
|
|
34,219 |
|
|
|
48 |
% |
Total Research and
Development Expenses |
|
$ |
439,970 |
|
|
$ |
348,442 |
|
|
|
26 |
% |
Personnel costs increased 5% during the three
months ended March 31, 2018 as compared to the same period of 2017.
The Company expanded the research and development staff by one
position to assist with the development of the health and wellness
products. Professional services consisted of fees paid
to engineering consultants to address production mold designs,
specialized tooling and manufacturing process development,
regulatory consultants to assist with governmental filings and
facility certifications and the medical director. Engineering
service costs increased to $72,496 (2017: $17,705), fees for the
consulting medical director totaled $9,000 (2017: $6,000) and other
regulatory consulting fees totaled $5,280 (2017: $-) in the three
months ended March 31, 2018.
Increases in laboratory supplies ($15,642 (2017:
$8,059)) and the utilization of internal resources ($16,037 (2017:
$1,887)) resulted in an increase of 48% for other research and
development costs during the three months ended March 31, 2018.
The following table illustrates research and
development costs by project for the three months ended March 31,
2018 and 2017, respectively:
Project |
|
2018 |
|
|
2017 |
|
Breath Alcohol |
|
$ |
- |
|
|
$ |
4,669 |
|
Chlamydia
Trachomatis |
|
|
32,690 |
|
|
|
51,709 |
|
Heparin/PF4 |
|
|
46,593 |
|
|
|
11,499 |
|
Ketone |
|
|
- |
|
|
|
1,707 |
|
KetoChek™ /
OxiChek™ |
|
|
342,605 |
|
|
|
89,724 |
|
Metron |
|
|
9,723 |
|
|
|
- |
|
Other Projects |
|
|
- |
|
|
|
59,688 |
|
SeraSTAT |
|
|
- |
|
|
|
5,610 |
|
Tri-Cholesterol |
|
|
8,359 |
|
|
|
123,244 |
|
VIVO |
|
|
- |
|
|
|
592 |
|
Total R&D
Expenses: |
|
$ |
439,970 |
|
|
$ |
348,442 |
|
Other Income and Expense
Other income, net of expense for the three
months ended March 31, 2018 totaled $33,466, which was a 160%
increase as compared to $12,883 for the three months ended March
31, 2017. The table below summarizes our other income
and expenses for the three months ended March 31, 2018 and 2017 as
well as the percentage of change year-over-year:
Description |
|
3 Months Ended March 31, 2018 |
|
|
3 Months Ended March 31, 2017 |
|
|
Percent Change |
|
Currency Translation
Gain/(Loss) |
|
$ |
(2,875 |
) |
|
$ |
10,346 |
|
|
|
(128 |
)% |
Realized Gains on
Investments |
|
|
- |
|
|
|
1,051 |
|
|
|
(100 |
)% |
Interest and
Dividends |
|
|
36,341 |
|
|
|
1,486 |
|
|
|
2,346 |
% |
Total Other Income, Net
of Expenses |
|
$ |
33,466 |
|
|
$ |
12,883 |
|
|
|
160 |
% |
Losses associated with foreign currency
transactions totaled $2,875 during the three months ended March 31,
2018 as compared to a gain of $10,346 the same period of 2017,
primarily a result of the increased strength of the British Pound
as compared to the US Dollar.
Realized gains, interest and dividend income
increased to $36,341 (2017: $2,537). The Company’s available
capital for investment activities increased significantly due to
the capital raise in December 2017 and the subsequent exercises of
warrants during the three months ended March 31, 2018 resulting in
the increase in investment income.
Income Taxes
As of March 31, 2018, 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 three months ended March 31, 2018 and
2017, the Company generated a net loss attributable to shareholders
of $1,859,991 and $1,349,270, respectively. As of March 31, 2018
and December 31, 2017, the Company has an accumulated deficit of
$106,705,838 and $104,845,847 and had cash and marketable
securities totaling $9,326,277 and $5,450,039, respectively.
Our primary focus is to expand the global
distribution of our PIFA Heparin PF/4 rapid assays. The Company
continues commercialization of its BreathScan OxiChek, BreathScan
Lync Readers, METRON, BreathScan Alcohol detection devices and the
Tri-Cholesterol assay and development activities for PIFA PLUSS
Chlamydia rapid assay and BreathScan KetoChek products.
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 expect that our current
working capital position will be sufficient to meet our estimated
cash needs for at least the next twelve 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
BreathScan KetoChek via the enrollment of patients in clinical
trials.to support performance claims and generate studies in
peer-reviewed journals to support product marketing. We will also
continue to support commercialization and marketing activities of
in-line products PIFA Heparin/PF4 rapid assays, PIFA PLUSS® PF4,
breath alcohol detectors, METRON BreathScan OxiChek and BreathScan
Lync Readers globally. 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 three months ended
March 31, 2018 were $37,827 (2017: $16,774). Capital expenditures,
primarily for production, laboratory and facility improvement costs
for the year ending December 31, 2018 are expected to be
approximately $250,000. As per the Company’s lease agreement, the
owner of the facility will be handling most of the facility
upgrades, and we anticipate financing any production and laboratory
capital expenditures through working capital.
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.
The Company executed a lease for a satellite office in Ramsey, New
Jersey on June 23, 2017 which expires May 31, 2019. The satellite
office supports members of executive management and the sales and
marketing team with convenient access to resources in the greater
New York City area.
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 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 environment and their impact on the
Company’s results.
The table below summarizes our cash flows for
the three months ended March 31, 2018 and 2017 as well as the
percentage of change year-over-year:
Description |
|
3 Months Ended March 31, 2018 |
|
|
3 Months Ended March 31, 2017 |
|
|
Percent Change |
|
Cash at beginning of
period |
|
$ |
438,432 |
|
|
|
$ |
72,700 |
|
|
|
|
503 |
% |
Loss from
operations |
|
|
(1,859,991 |
|
) |
|
|
(1,349,270 |
|
) |
|
|
38 |
% |
Adjustments |
|
|
|
|
|
|
|
|
|
|
|
|
Non-Cash
Activities |
|
|
90,858 |
|
|
|
|
79,157 |
|
|
|
|
15 |
% |
Cash Used in Operating
Activities |
|
|
|
|
|
|
|
|
|
|
|
|
Cash
Consumed by Operating Activities |
|
|
(591,939 |
|
) |
|
|
(439,121 |
|
) |
|
|
35 |
% |
Cash
Contributed by Operating Activities |
|
|
560,700 |
|
|
|
|
147,571 |
|
|
|
|
280 |
% |
Net Cash Consumed by
Operating Activities |
|
$ |
(1,800,372 |
) |
|
|
$ |
(1,561,663 |
) |
|
|
|
15 |
% |
Cash Flows from
Investing Activities |
|
|
|
|
|
|
|
|
|
|
|
|
Cash
Consumed by Investing Activities |
|
|
(4,010,213 |
|
) |
|
|
(1,218,984 |
|
) |
|
|
229 |
% |
Cash
Contributed by Investing Activities |
|
|
302,095 |
|
|
|
|
1,095,218 |
|
|
|
|
(72 |
)% |
Cash Flows from
Financing Activities |
|
|
|
|
|
|
|
|
|
|
|
|
Cash
Consumed by Financing Activities |
|
|
- |
|
|
|
|
- |
|
|
|
|
- |
% |
Cash
Contributed by Financing Activities |
|
|
5,717,325 |
|
|
|
|
3,697,811 |
|
|
|
|
55 |
% |
Cash at end of
period |
|
$ |
647,267 |
|
|
|
$ |
2,085,082 |
|
|
|
|
(69 |
)% |
Our net cash consumed by operating
activities totaled $1,800,372 during the three months ended March
31, 2018. Cash was consumed by the loss of $1,859,991 plus non-cash
adjustments of $56,452 for depreciation and amortization of
non-current assets, $3,469 for the amortization of deferred
compensation, $24,460 for the reserve and write-off for obsolete
inventory, $7,887 for share based compensation to employees and
$12,545 for share based compensation to non-employees less $13,955
for accrued interest and dividends on marketable securities. For
the three months ended March 31, 2018, decreases in trade
receivables of $547,773 and prepaid expenses – related party of
$12,927 provided cash, primarily related to routine changes in
operating activities. A net increase in deposits and other
receivables of $12,905, deposits and other receivables – related
party of $33,243, inventory of $50,795, prepaid expenses of $89,497
and decreases in trade and other payables of $384,683 and trade and
other payables – related party of $20,816 consumed cash from
operating activities.
Our net cash consumed by operating activities
totaled $1,561,663 during the three months ended March 31, 2017.
Cash was consumed by the loss of $1,349,270 plus non-cash
adjustments of $60,718 for depreciation and amortization of
non-current assets, $5,203 for the fair value of restricted Common
Stock issued for services and $5,036 for share based compensation
to employees less $326 for accrued interest and dividends on
marketable securities and $32,333 for a reduction in the reserve
for obsolete inventory. For the three months ended March 31, 2017,
decreases in trade receivables of $43,351, trade receivables –
related parties of $7,458, deposits and other receivables of
$10,692, prepaid expenses of $69,930, and prepaid expenses –
related party of $16,140 provided cash, primarily related to
routine changes in operating activities. A net increase in
inventories of $100,878 and decreases in trade and other payables
of $200,059 and trade and other payables – related party of
$138,184 consumed cash from operating activities.
Investing and Financing
Activities
The table below summarizes our cash flows from
investing and financing activities for the three months ended March
31, 2018 and 2017 as well as the percentage of change
year-over-year:
Description |
|
3 months ended March 31, 2018 |
|
|
3 months ended March 31, 2017 |
|
|
Percent Change |
|
Cash Flows from
Investing Activities |
|
|
|
|
|
|
|
|
|
|
|
|
Cash
Consumed by Investing Activities |
|
|
(4,010,213 |
) |
|
|
(1,218,984 |
) |
|
|
229 |
% |
Cash
Contributed by Investing Activities |
|
|
302,095 |
|
|
|
1,095,218 |
|
|
|
(72 |
)% |
Cash Flows from
Financing Activities |
|
|
|
|
|
|
|
|
|
|
|
|
Cash
Consumed by Financing Activities |
|
|
- |
|
|
|
- |
|
|
|
- |
% |
Cash
Contributed by Financing Activities |
|
|
5,717,325 |
|
|
|
3,697,811 |
|
|
|
55 |
% |
The Company’s net cash provided by investing and
financing activities totaled $6,019,420 (2017: $4,793,028) during
the three months ended March 31, 2018. Cash of $4,010,213 (2017:
$1,218,984) was consumed by capital expenditures and the purchase
of marketable securities. Proceeds from the sale of marketable
securities contributed cash of $302,095 (2017: $1,095,218) and net
proceeds from the public and private placements of common and
Series B preferred stock and the exercise of warrants for Common
Stock contributed $5,717,325 (2017: $3,697,811) for the three
months ended March 31, 2018.
About Akers Biosciences,
Inc.
Akers Bio 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 Note Regarding Forward
Looking Statements
Statements contained herein that are not based
upon current or historical fact are forward-looking in nature and
constitute forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995. Such
forward-looking statements reflect the Company's expectations about
its future operating results, performance and opportunities that
involve substantial risks and uncertainties. Such statements may
include, without limitation, statements with respect to the
Company’s plans, compliance with the requirements of various
regulatory agencies and certain NASDAQ Stock Market listing rules,
objectives, projections, expectations and intentions and other
statements identified by words such as “projects,” “may,” “will,”
“could,” “would,” “should,” “believes,” “expects,” “anticipates,”
“estimates,” “intends,” “plans,” “potential” or similar
expressions, as they relate to the Company, its subsidiaries, or
its management. These statements are based upon the current beliefs
and expectations of the Company’s management and are subject to
significant risks and uncertainties, including those detailed in
the Company’s filings with the Securities and Exchange Commission.
Actual results, performance, prospects, and opportunities to may
differ materially from those set forth in, or implied by, the
forward-looking statements. These forward-looking statements
involve certain risks and uncertainties that are subject to change
based on various factors (many of which are beyond the Company’s
control). The Company undertakes no obligation to publicly update
any forward-looking statements, whether as a result of new
information, future events or otherwise, except as required by
applicable law.
Enquiries:
Akers Biosciences, Inc.
John J. Gormally, Chief Executive Officer
Tel. +1 856 848 8698
Vigo Communications (Global Public Relations)
Ben Simons / Fiona Henson
Tel. +44 (0)20 7390 0234
Email: akers@vigocomms.com
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