TIDMAKR
RNS Number : 6657U
Akers Biosciences, Inc.
16 July 2018
July 16, 2018
This announcement contains inside information
Akers Biosciences, Inc.
First Quarter 2018 Results
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 appears in full below and 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)
o 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%)
o 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%:
o General and Administrative expenses increased by 16% to
$915,533 (Q1 2017: $790,529)
o Sales and Marketing expenses decreased by 15% to $500,152 (Q1
2017: $588,934)
o 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)
o 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:
We have updated our product pipeline to reflect products
marketed and/or within our pipeline as follows:
FDA Clearance
Required FDA Clearance
Prescription Status
Product Platform Marketed/Pipe line Use/OTC Obtained/Needed Description
------------------ -------- ------------------ ------------------ ------------------ ------------------
BreathScan (TM) MPC Marketed OTC Obtained Disposable breath
alcohol detector
BreathScan (R) PRO MPC Marketed OTC Obtained Quantitative
breath alcohol
detection system
METRON (R) MPC Marketed Health and n/a Disposable breath
wellness ketone device to
monitor ketosis
BreathScan Lync MPC Marketed Health and n/a Non-invasive,
wellness quantitative
measurement of
biological markers
for health and
wellness
PIFA (R) PIFA Marketed Prescription Use Obtained Rapid tests for
Heparin/PF4 & PIFA Heparin/PF4
PLUSS (R) PF4 antibodies to
detect an allergy
to the widely used
blood thinner,
Heparin
PIFA PLUSS (R) PIFA Pipeline Prescription Use Required/withdrawn Rapid tests for
Chlamydia on May 29, 2018 the most prevalent
*See explanation sexually
below. transmitted
disease
seraSTAT (R) seraSTAT Marketed Prescription Use Obtained Rapid Blood Cell
Separator,
marketed under the
brand name
seraSTAT (R) ,
further
accelerates
the rate at which
a test result is
obtained as the
often-required
sample preparation
step
is abbreviated
drastically.
Tri-Cholesterol REA Marketed OTC Obtained Rapid test for
"Check" (R) Total and high
density
lipoprotein
cholesterol and
estimates low
density lipo
protein
BreathScan OxiChek MPC Marketed Health and n/a Breath test for
wellness oxidative stress
using the Lync
reader and digital
app
BreathScan MPC Pipeline Health and n/a Breath test for
KetoChek wellness ketosis using the
Lync reader and
digital app
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 (R) , 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 (R) 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 (R) 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.
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.
Enquiries:
Akers Biosciences, Inc.
John J. Gormally, Chief Executive Officer
Tel. +1 856 848 8698
finnCap (UK Nominated Adviser and Broker)
Adrian Hargrave / Scott Mathieson (Corporate Finance)
Steve Norcross (Broking)
Tel. +44 (0)20 7220 0500
Vigo Communications (Global Public Relations)
Ben Simons / Fiona Henson
Tel. +44 (0)20 7390 0234
Email: akers@vigocomms.com
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: March 31, 2018
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission File No. 001-36268
AKERS BIOSCIENCES, INC.
(Exact name of registrant as specified in its charter)
New Jersey 22-2983783
------------------------------ --------------------
(State or other jurisdiction (IRS Employer
of incorporation) Identification No.)
201 Grove Road
Thorofare, NJ 08086
(Address of principal executive offices)
(856) 848-8698
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by section 13 or 15(d) of the
Securities Exchange Act of 1934 during the past 12 months, and (2)
has been subject to such filing requirements for the past 90 days.
Yes [X] No [ ]
Indicate by check mark whether the registrant has submitted
electronically and posted on its corporate Web site, if any, every
Interactive Data File required to be submitted and posted pursuant
to Rule 405 of Regulation S-T (Sec.232.405 of this chapter) during
the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files). Yes [X] No
[ ]
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated filer,
smaller reporting company, or an emerging growth company. See the
definitions of "large accelerated filer," "accelerated filer,"
"smaller reporting company" and "emerging growth company" in Rule
12b-2 of the Exchange Act.
Large accelerated filer [ ] Accelerated filer [ ]
Non-accelerated filer [ ] Smaller reporting company [X]
Emerging growth company [X]
If an emerging growth company, indicate by check mark if the
registrant has elected not to use the extended transition period
for complying with any new or revised financial accounting
standards provided pursuant to Section 13(a) of the Exchange Act. [
]
Indicate by check mark whether the registrant is a shell company
(as defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [X]
As of July 13, 2018, there were 94,106,292 shares outstanding of
the registrant's Common Stock.
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
AKERS BIOSCIENCES, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
March 31, 2018 and December 31, 2017
March 31, 2018 December 31, 2017
(unaudited) (audited)
---------------- -------------------
ASSETS (restated)
Current Assets
Cash $ 647,267 $ 438,432
Marketable Securities 8,679,010 5,011,607
Trade Receivables, net 416,898 964,671
Deposits and other receivables 29,495 16,590
Deposits and other receivables - Related Party 33,243 -
Inventories, net 973,947 947,612
Prepaid expenses 234,985 145,488
Prepaid expenses - Related Party 148,916 251,499
------------ ---------------
Total Current Assets 11,163,761 7,775,899
------------ ---------------
Non-Current Assets
Prepaid expenses - Related Party 209,774 120,118
Property, Plant and Equipment, net 259,265 235,113
Intangible Assets, net 1,087,890 1,130,667
Other Assets 76,093 76,093
------------ ---------------
Total Non-Current Assets 1,633,022 1,561,991
------------ ---------------
Total Assets $ 12,796,783 $ 9,337,890
============ ===============
LIABILITIES
Current Liabilities
Trade and Other Payables $ 1,360,533 $ 1,745,216
Trade and Other Payables - Related Party 19,005 39,821
------------ ---------------
Total Current Liabilities 1,379,538 1,785,037
------------ ---------------
Total Liabilities 1,379,538 1,785,037
------------ ---------------
SHAREHOLDERS' EQUITY
Convertible Preferred Stock, No par value, 50,000,000 shares
authorized, 0 and 1,755 shares
issued and outstanding as of March 31, 2018 and December 31, 2017 - 1,755,000
Common Stock, No par value, 500,000,000 shares authorized,
86,437,624 and 44,220,552 issued
and outstanding as of March 31, 2018 and December 31, 2017 118,139,926 110,647,169
Deferred Compensation - (3,469)
Comprehensive Loss (16,843) -
Accumulated Deficit (106,705,838) (104,845,847)
------------ ---------------
Total Shareholders' Equity 11,417,245 7,552,853
------------ ---------------
Total Liabilities and Shareholders' Equity $ 12,796,783 $ 9,337,890
============ ===============
See accompanying notes to these condensed consolidated financial
statements.
AKERS BIOSCIENCES, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations and
Comprehensive Loss
For the three months ended March 31, 2018 and 2017
(unaudited)
Three months ended
March 31,
2018 2017
----------- -----------
Revenues:
Product Revenue $ 302,475 $ 643,187
Product Revenue - Related party - 24,063
---------- ----------
Total Revenues 302,475 667,250
Cost of Sales:
Product Cost of Sales (297,500) (258,721)
---------- ----------
Gross Income 4,975 408,529
Administrative Expenses 915,533 790,529
Sales and Marketing Expenses 468,463 556,655
Sales and Marketing Expenses - Related Party 31,689 32,279
Research and Development Expenses 391,381 348,442
Research and Development Expenses - Related Party 48,589 -
Amortization of Non-Current Assets 42,777 42,777
---------- ----------
Loss from Operations (1,893,457) (1,362,153)
---------- ----------
Other (Income)/Expenses
Foreign Currency Transaction (Gain)/Loss 2,875 (10,346)
Interest and Dividend Income (36,341) (2,537)
---------- ----------
Total Other Income (33,466) (12,883)
---------- ----------
Loss Before Income Taxes (1,859,991) (1,349,270)
Income Tax Benefit - -
---------- ----------
Net Loss Attributable to Common Shareholders (1,859,991) (1,349,270)
---------- ----------
Other Comprehensive Income/(Loss)
Net Unrealized Gain/(Loss) on Marketable Securities (16,843) 156
---------- ----------
Total Other Comprehensive Income/(Loss) (16,843) 156
---------- ----------
Comprehensive Loss $(1,876,834) $(1,349,114)
========== ==========
Basic and Diluted loss per common share $ (0.03) $ (0.19)
========== ==========
Weighted average basic and diluted common shares outstanding 71,315,461 6,993,574
========== ==========
See accompanying notes to these condensed consolidated financial
statements.
AKERS BIOSCIENCES, INC. AND SUBSIDIARIES
Condensed Consolidated Statement of Changes in Shareholder's
Equity
For the three months ended March 31, 2018 and 2017
Preferred Common Accumulated
Shares Shares Other
Issued and Preferred Issued and Common Deferred Accumulated Comprehensive Total
Outstanding Stock Outstanding Stock Compensation Deficit Loss Equity
------------ ----------- ----------- ------------ -------------- ------------- --------------- -----------
Balance at December
31, 2017 (audited)
(restated) 1,755 $ 1,755,000 44,220,552 $110,647,169 $ (3,469) $(104,845,847) $ - $ 7,552,853
Net loss - - - - - (1,859,991) - (1,859,991)
Exercise of
warrants for
common stock - - 30,492,070 5,717,325 - - - 5,717,325
Conversion of
preferred stock
to common stock (1,755) (1,755,000) 11,700,002 1,755,000 -
Amortization of
deferred
compensation - - - - 3,469 - - 3,469
Issuance of
stock grants to
key employees 25,000 5,175 5,175
Issuance of
non-qualified
stock options
to key
employees - - - 2,712 - - - 2,712
Issuance of
restricted
stock for
services for
non-employees - - - 12,545 - - - 12,545
Net unrealized
loss on
marketable
securities (16,843) (16,843)
Balance at March
31, 2018
(unaudited) - $ - 86,437,624 $118,139,926 $ - $(106,705,838) $ (16,843) $11,417,245
=========== ========== =========== =========== ========== ============ =========== ==========
See accompanying notes to these condensed consolidated financial
statements.
AKERS BIOSCIENCES, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
For the three months ended March 31, 2018 and 2017
(unaudited)
2018 2017
----------- -----------
Cash flows from operating activities
Net loss $(1,859,991) $(1,349,270)
Adjustments to reconcile net loss to net cash used in operating activities:
Accrued income on marketable securities (13,955) (326)
Depreciation and amortization 56,452 60,718
Reserve and write-off for obsolete inventory 24,460 (32,333)
Reserve for doubtful accounts - 40,859
Amortization of deferred compensation 3,469 5,203
Share based compensation to employees - options 2,712 5,036
Share based compensation to employees - restricted stock 5,175 -
Share based compensation to non-employees - restricted stock 12,545 -
Changes in assets and liabilities:
Decrease in trade receivables 547,773 43,351
Decrease in trade receivables - related party - 7,458
(Increase)/decrease in deposits and other receivables (12,905) 10,692
Increase in deposit and other receivables - related party (33,243) -
Increase in inventories (50,795) (100,878)
(Increase)/decrease in prepaid expenses (89,497) 69,930
Decrease in prepaid expenses - related party 12,927 16,140
Decrease in trade and other payables (384,683) (200,059)
Decrease in trade and other payables - related party (20,816) (138,184)
---------- ----------
Net cash used in operating activities (1,800,372) (1,561,663)
---------- ----------
Cash flows from investing activities
Purchases of property, plant and equipment (37,827) (16,774)
Purchases of marketable securities (3,972,386) (1,202,210)
Proceeds from sale of marketable securities 302,095 1,095,218
---------- ----------
Net cash used in investing activities (3,708,118) (123,766)
---------- ----------
Cash flows from financing activities
Net proceeds from issuance of common stock - 3,452,861
Net proceeds from exercise of warrants for common stock 5,717,325 244,950
---------- ----------
Net cash provided by financing activities 5,717,325 3,697,811
---------- ----------
Net increase in cash 208,835 2,012,382
Cash at beginning of period 438,432 72,700
---------- ----------
Cash at end of period $ 647,267 $ 2,085,082
========== ==========
Supplemental Schedule of Non-Cash Financing and Investing Activities
Net unrealized gains/(losses) on marketable securities $ (16,843) $ 156
========== ==========
Conversion of Series B Preferred Stock to common shares $ 1,755,000 $ -
========== ==========
See accompanying notes to these condensed consolidated financial
statements.
AKERS BIOSCIENCES, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
Note 1 - Nature of Business
(a) Reporting Entity
The accompanying financial statements have been prepared by
Akers Biosciences, Inc. ("Akers" or the "Company"), a company
domiciled in the United States of America. The address of the
Company's registered office is 201 Grove Road, West Deptford, New
Jersey, 08086. The Company is incorporated in the United States of
America under the laws of the State of New Jersey.
The condensed consolidated financial statements include two
dormant subsidiaries, Akers Acquisition Sub, Inc. and Bout Time
Marketing Corporation. All material intercompany transactions have
been eliminated upon consolidation.
(b) Nature of Business
The Company's primary focus is the development and sale of
disposable diagnostic testing devices that can be performed in
minutes, to facilitate time sensitive therapeutic decisions. The
Company's main products are a disposable breathalyzer test that
measures the blood alcohol content of the user, a rapid test
detecting the antibody causing an allergic reaction to Heparin and
a disposable breathalyzer test that measures Free Radical activity
in the human body.
Note 2 - Basis of Presentation and Significant Accounting
Policies
(a) Basis of Presentation
The Condensed Consolidated Financial Statements of the Company
are prepared in U.S. Dollars and in accordance with accounting
principles generally accepted in the United States of America (US
GAAP).
Certain information and note disclosures normally included in
the financial statements prepared in accordance with US GAAP have
been condensed. As such, the information included in these
financial statements should be read in conjunction with the audited
financial statements as of and for the years ended December 31,
2017 and 2016 included in the Company's 2017 Form 10-K/A, Amendment
No. 1, as filed on July 13, 2018. In the opinion of the management,
these condensed consolidated financial statements include all
adjustments, consisting of only normal recurring nature, necessary
for a fair statement of the financial position of the Company as of
March 31, 2018 and its results of operations and cash flows for the
three months ended March 31, 2018 and 2017. The results of
operations for the three months ended March 31, 2018 are not
necessarily indicative of the results to be expected for the full
fiscal year ending December 31, 2018.
The Company is an emerging growth company as the term is used in
The Jumpstart Our Business Startups Act enacted on April 5, 2012
and has elected to comply with certain reduced public company
reporting requirements.
AKERS BIOSCIENCES, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(b) Use of Estimates and Judgments
The preparation of financial statements in conformity with US
GAAP requires management to make judgments, estimates and
assumptions that affect the application of accounting policies and
the reported amounts of assets, liabilities, income and expenses.
Actual results may differ from these estimates. Estimates and
underlying assumptions are reviewed on an ongoing basis. Revisions
to accounting estimates are recognized in the period in which the
estimates are revised and in any future periods affected.
Information about significant areas of estimation, uncertainty and
critical judgments in applying accounting policies that have the
most significant effect on the amounts recognized in the financial
statements is included in the following notes for revenue
recognition, allowances for doubtful accounts, inventory
write-downs, impairment of intangible assets and valuation of share
based payments.
(c) Functional and Presentation Currency
These condensed consolidated financial statements are presented
in U.S. Dollars, which is the Company's functional currency. All
financial information presented in U.S. Dollars has been rounded to
the nearest dollar. Foreign Currency Transaction Gains or Losses,
resulting from loans and cash balances denominated in Foreign
Currencies, are recorded in the Condensed Consolidated Statement of
Operations and Comprehensive Loss.
(d) Comprehensive Income (Loss)
The Company follows Financial Accounting Standards Board
Accounting Standards Codification (FASB ASC) 220 in reporting
comprehensive income (loss). Comprehensive income is a more
inclusive financial reporting methodology that includes disclosure
of certain financial information that historically has not been
recognized in the calculation of net income.
(e) Cash and Cash Equivalents
Cash and cash equivalents comprise cash balances. The Company
considers all highly liquid investments, which include short-term
bank deposits (up to 3 months from date of deposit) that are not
restricted as to withdrawal date or use, to be cash equivalents.
Bank overdrafts are shown as part of trade and other payables in
the Condensed Consolidated Balance Sheet.
(f) Fair Value of Financial Instruments
The Company's financial instruments consist of cash and cash
equivalents, marketable securities, receivables and trade and other
payables. The carrying value of cash and cash equivalents,
receivables and trade and other payables approximate their fair
value because of their short maturities. The fair value of
marketable securities is described in Note 4.
AKERS BIOSCIENCES, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(g) Fair Value Measurement - Marketable Securities
The framework for measuring fair value provides a fair value
hierarchy that prioritizes the inputs to valuation techniques used
to measure fair value. The hierarchy gives the highest priority to
unadjusted quoted prices in active markets for identical assets or
liabilities (level 1) and the lowest priority to unobservable
inputs (level 3). The three levels of the fair value hierarchy
under FASB ASC 820 are described as follows:
Level Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities
1 in active markets that the Company has the ability to access.
Level 2 Inputs to the valuation methodology include:
-- quoted prices for similar assets or liabilities in active markets;
-- quoted prices for identical or similar assets or liabilities in inactive markets;
-- inputs other than quoted prices that are observable for the asset or liability;
-- inputs that are derived principally from or corroborated by observable market data by correlation
or other means
If the asset or liability has a specified (contractual) term, the level 2 input must be observable
for substantially the full term of the asset or liability.
Level Inputs to the valuation methodology are unobservable and significant to the fair value measurement.
3
The asset or liability's fair value measurement level within the
fair value hierarchy is based on the lowest level of input that is
significant to the fair value measurement. Valuation techniques
maximize the use of relevant observable inputs and minimize the use
of unobservable inputs.
(h) Trade Receivables, Trade Receivables - Related Party and Allowance for Doubtful Accounts
The carrying amounts of current trade receivables is stated at
cost, net of allowance for doubtful accounts and approximate their
fair value given their short-term nature.
The normal credit terms extended to customers ranges between 30
and 90 days. Credit terms longer than these may be extended after
considering the credit worthiness of the customers and the business
requirements. The Company reviews all receivables that exceed terms
and establishes an allowance for doubtful accounts based on
management's assessment of the collectability of trade and other
receivables. A considerable amount of judgment is required in
assessing the amount of allowance. The Company considers the
historical level of credit losses, makes judgments about the credit
worthiness of each customer based on ongoing credit evaluations and
monitors current economic trends that might impact the level of
credit losses in the future.
AKERS BIOSCIENCES, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
As of March 31, 2018 and December 31, 2017, allowances for
doubtful accounts for trade receivables were $596,196. Bad debt
expenses for trade receivables were $- and $42,361 for the three
months ended March 31, 2018 and 2017.
As of March 31, 2018 and December 31, 2017, the aging of trade
receivables was as follows:
March 31, December 31,
Aging Period 2018 % 2017 %
----------------------- ---------- ----------
(restated)
Current $ 237,066 24% $1,181,335 76%
01-30 Days 4,657 0% 79,535 5%
31-60 Days 1,428 0% 20,154 1%
61-90 Days 117 0% 25,100 2%
>90 Days 769,826 76% 254,743 16%
--------- ---------
Subtotal $1,013,094 $1,560,867
Bad Debts Allowance (596,196) (596,196)
--------- ---------
Total $ 416,898 $ 964,671
========= =========
The aging above represents the number of days that the account
receivable balance exceeds the credit terms. Included in the
current category is accounts receivable of $- and $470,000 as of
March 31, 2018 and December 31, 2017 with payment terms extended to
180 days.
(i) Concentration of Credit Risk
The Company is exposed to credit risk in the normal course of
business primarily related to trade receivables and cash and cash
equivalents.
All of the Company's cash is maintained with Fulton Bank of New
Jersey, Bank of America, NA and PayPal. The funds are insured by
the FDIC up to a maximum of $250,000, but are otherwise
unprotected. The Company placed $631,099 and $426,927 with Fulton
Bank of New Jersey, $12,578 and $7,915 with Bank of America, NA and
$3,590 with PayPal as of March 31, 2018 and December 31, 2017. No
losses have been incurred in these accounts.
Three customers accounted for 76% of trade receivables as of
March 31, 2018. To limit such risks, the Company performs ongoing
credit evaluations of its customers' financial condition.
(j) Inventories
Inventories are measured at the lower of cost or net realizable
value. The cost of inventories is based on the weighted-average
principle, and includes expenditures incurred in acquiring the
inventories, production or conversion costs and other costs
incurred in bringing them to their existing location and condition.
In the case of manufactured inventories and work in progress, costs
include an appropriate share of production overhead based on normal
operating capacity.
AKERS BIOSCIENCES, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(k) Property, Plant and Equipment
Items of property, plant and equipment are measured at cost less
accumulated depreciation and accumulated impairment losses. Costs
include expenditures that are directly attributable to the
acquisition of the asset.
Gains and losses on disposal of an item of property, plant and
equipment are determined by comparing the proceeds from disposal
with the carrying amount of property, plant and equipment and are
recognized within "other income" in the Condensed Consolidated
Statement of Operations and Comprehensive Loss.
Depreciation is recognized in profit and loss on the accelerated
basis over the estimated useful lives of the property, plant and
equipment. Leased assets are depreciated over the shorter of the
lease term or their useful lives.
The estimated useful lives for the current and comparative
periods are as follows:
Useful Life
(in years)
-------------------------------------------------------
Plant and equipment 5-12
Furniture and fixtures 5-10
Computer equipment & software 3-5
Leasehold Improvements Shorter of the remaining lease or estimated useful life
Depreciation methods, useful lives and residual values are
reviewed at each reporting date.
(l) Intangible Assets
(i) Patents and Trade Secrets
The Company has developed or acquired several diagnostic tests
that can detect the presence of various substances in a person's
breath, blood, urine and saliva. Propriety protection for the
Company's products, technology and process is important to its
competitive position. As of March 31, 2018, the Company has ten
patents from the United States Patent Office in effect (9,383,368;
7,896,167; 8,097,171; 8,003,061; 8,425,859; 8,871,521; 8,808,639;
D691,056; D691,057 and D691,058). Other patents are in effect in
Australia through the Design Registry (348,310; 348,311 and
348,312), European Union Patents 1793906, 2684025, 002216895-0001;
002216895-0002 and 002216895-0003), in Hong Kong (HK11004006) and
in Japan (1,515,170; 4,885,134; 4,931,821 5,775,790, and 6023096).
Patents are in the national phase of prosecution in many Patent
Cooperation Treaty participating countries. Additional proprietary
technology consists of numerous different inventions. The Company
intends to file additional patent applications, where appropriate,
relating to new products, technologies and their use in the U.S.,
European and Asian markets. Management intends to protect all other
intellectual property (e.g. copyrights, trademarks and trade
secrets) using all legal remedies available to the Company.
AKERS BIOSCIENCES, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(ii) Patent Costs
Costs associated with applying for patents are capitalized as
patent costs. Once the patents are approved, the respective costs
are amortized over their estimated useful lives (maximum of 17
years) on a straight-line basis. Patent pending costs for patents
that are not approved are charged to operations the year the patent
is rejected.
In addition, patents may be purchased from third parties. The
costs of acquiring the patent are capitalized as patent costs if it
represents a future economic benefit to the Company. Once a patent
is acquired it is amortized over its remaining useful life.
(iii) Other Intangible Assets
Other intangible assets that are acquired by the Company, which
have definite useful lives, are measured at cost less accumulated
amortization and accumulated impairment losses.
(iv) Amortization
Amortization is recognized on a straight-line basis over the
estimated useful lives of intangible assets, other than goodwill,
from the date that they are available for use. The estimated useful
lives for the current and comparative periods are as follows:
Useful Life
(in years)
-----------
Patents and trademarks 12-17
Customer lists 5
(m) Recoverability of Long Lived Assets
In accordance with FASB ASC 360-10-35 "Impairment or Disposal of
Long-lived Assets", long-lived assets to be held and used are
analyzed for impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be fully
recoverable or that the useful lives of those assets are no longer
appropriate. The Company evaluates at each balance sheet date
whether events and circumstances have occurred that indicate
possible impairment.
The Company determines the existence of such impairment by
measuring the expected future cash flows (undiscounted and without
interest charges) and comparing such amount to the carrying amount
of the assets. An impairment loss, if one exists, is then measured
as the amount by which the carrying amount of the asset exceeds the
discounted estimated future cash flows. Assets to be disposed of
are reported at the lower of the carrying amount or fair value of
such assets less costs to sell. Asset impairment charges are
recorded to reduce the carrying amount of the long-lived asset that
will be sold or disposed of to their estimated fair values. Charges
for the asset impairment reduce the carrying amount of the
long-lived assets to their estimated salvage value in connection
with the decision to dispose of such assets.
(n) Investments
In accordance with FASB ASC 323, the Company recognizes
investments in joint ventures based upon the Company's ability to
significantly influence the operational or financial policies of
the joint venture. An objective judgment of the level of influence
is made at the time of the investment based upon several factors
including, but not limited to the following:
a) Representation on the Board of Directors
b) Participation in policy-making processes
c) Material intra-entity transactions
d) Interchange of management personnel
e) Technological dependencies
f) Extent of ownership and the ability to influence decision making based upon the makeup of
other owners when the shareholder group is small.
The Company follows the equity method for valuating investments
in joint ventures when the existence of significant influence over
operational and financial policy has been established, as
determined by management; otherwise, the Company will valuate these
investments using the cost method.
Investments recorded using the cost method will be assessed for
any decrease in value that has occurred that is other than
temporary and the other than temporary decrease in value shall be
recognized. As and when circumstances and facts change, the Company
will evaluate the Company's ability to significantly influence
operational and financial policy to establish a basis for
converting the investment accounted for using the cost method to
the equity method of valuation.
(o) Revenue Recognition
In accordance with FASB ASC 605, the Company recognizes revenue
when (i) persuasive evidence of a customer or distributor
arrangement exists, (ii) a retailer, distributor or wholesaler
receives the goods and acceptance occurs, (iii) the price is fixed
or determinable, and (iv) the collectability of the revenue is
reasonably assured. Subject to these criteria, the Company
recognizes revenue from product sales when title passes to the
customer based on shipping terms. The Company typically does not
accept returns nor offer charge backs or rebates except for certain
distributors. Revenue recorded is net of any discount, rebate or
sales return. The accrual for estimated sales returns was $- as of
March 31, 2018 and December 31, 2017. In cases where the right of
return is granted and the Company does not have historical
experience to reasonably estimate the sales returns, the revenue is
recognized when the return privilege has substantially expired.
The Company implemented a standard dealer cost model during the
year ended December 31, 2016 which includes a provision for rebates
to the distributors under limited circumstances. The Company
established an accrual of $57,725 and $126,471 as of March 31, 2018
and December 31, 2017. Accounts receivable will be reduced when the
rebates are applied by the customer. The Company recognized $37,544
and $102,824 during the three months ended March 31, 2018 and 2017
for rebates, which is included as a reduction of product revenue in
the Condensed Consolidated Statement of Operations and
Comprehensive Loss.
AKERS BIOSCIENCES, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
License fee revenue is recognized on a straight-line basis over
the term of the license agreement.
When the Company enters into arrangements that contain more than
one deliverable, the Company allocates revenue to the separate
elements under the arrangement based on their relative selling
prices in accordance with FASB ASC 605-25.
(p) Income Taxes
The Company follows FASB ASC 740 when accounting for income
taxes, which requires an asset and liability approach to financial
accounting and reporting for income taxes. Deferred income tax
assets and liabilities are computed annually for temporary
differences between the financial statements and tax bases of
assets and liabilities that will result in taxable or deductible
amounts in the future based on enacted tax laws and rates
applicable to the periods in which the differences are expected to
affect taxable income. Valuation allowances are established when
necessary to reduce deferred tax assets to the amount expected to
be realized. Income tax expense or benefit is the tax payable or
refundable for the period plus or minus the change during the
period in deferred tax assets and liabilities.
(q) Shipping and Handling Fees and Costs
The Company charges actual shipping plus a handling fee to
customers, which amounted to $13,641 and $18,420 for the three
months ended March 31, 2018 and 2017. These fees are classified as
part of product revenue in the Condensed Consolidated Statement of
Operations and Comprehensive Loss. Shipping and other related
delivery costs, including those for incoming raw materials are
classified as part of the cost of net revenue, which amounted to
$26,944 and $16,177 for the three months ended March 31, 2018 and
2017.
(r) Research and Development Costs
In accordance with FASB ASC 730, research and development costs
are expensed when incurred.
(s) Stock-based Payments
The Company accounts for stock-based compensation under the
provisions of FASB ASC 718, "Compensation-Stock Compensation",
which requires the measurement and recognition of compensation
expense for all stock-based awards made to employees and directors
based on estimated fair values on the grant date. The Company
estimates the fair value of stock-based awards on the date of grant
using the Black-Scholes model. The value of the portion of the
award that is ultimately expected to vest is recognized as expense
over shorter of the period over which services are to be received
or the vesting period.
AKERS BIOSCIENCES, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
The Company accounts for stock-based compensation awards to
non-employees in accordance with FASB ASC 505-50, "Equity-Based
Payments to Non-Employees". Under FASB ASC 505-50, the Company
determines the fair value of the stock warrants or stock-based
compensation awards granted as either the fair value of the
consideration received or the fair value of the equity instruments
issued, whichever is more reliably measurable.
The Company estimates the fair value of stock-based awards to
non-employees on the date of grant using the Black-Scholes model.
The value of the portion of the award that is ultimately expected
to vest is recognized as expense over the period which services are
to be received. At the end of each financial reporting period,
prior to vesting or prior to completion of services, the fair value
of equity based payments will be re-measured and the non-cash
expense recognized during the period will be adjusted accordingly.
Since the fair value of equity based payments granted to
non-employees is subject to change in the future, the amount of the
future expense will include fair value re-measurement until the
equity based payments are fully vested or the service is
completed.
(t) Basic and Diluted Earnings per Share of Common Stock
Basic earnings per common share are based on the weighted
average number of shares outstanding during the periods presented.
Diluted earnings per share are computed using the weighted average
number of common shares plus dilutive common share equivalents
outstanding during the period. Potential common shares that would
have the effect of increasing diluted earnings per share are
considered anti-dilutive, i.e. the exercise prices of the
outstanding stock options were greater than the market price of the
common stock.
(u) Recently Adopted Accounting Pronouncements
As of March 31, 2018 and for the three months then ended, there
were no recently adopted accounting pronouncements that had a
material effect on the Company's financial statements.
(v) Recently Issued Accounting Pronouncements Not Yet Adopted
As the Company is an emerging growth company, it has elected to
adopt recently issued standards based on effective dates applicable
to nonpublic entities. All effective dates as mentioned in the
following paragraphs refer to that applicable to nonpublic
entities.
In May 2014 and April 2016, the FASB issued ASU No. 2014-09 and
ASU No. 2016-10, Revenue from Contracts with Customers (Topic 606).
The core principle of the guidance is that an entity should
recognize revenue to depict the transfer of promised goods or
services to customers in an amount that reflects the consideration
to which the entity expects to be entitled in exchange for those
goods or services. In August 2015, FASB issued ASU 2015-14 which
deferred the effective date of Update 2014-09 to annual reporting
periods beginning after December 15, 2018 and interim reporting
periods within annual reporting periods beginning after December
15, 2019. Early application is permitted as of annual reporting
periods beginning after December 15, 2016 including interim
reporting periods within that reporting period. The Company is
currently evaluating the effect of the amendments but it does not
anticipate a material impact of its financial statements. The
Company expects to use the modified retrospective adoption method
and will adopt this Update as of January 1, 2019.
AKERS BIOSCIENCES, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
In November 2015, the FASB issued ASU No. 2015-17, Income Taxes
(Topic 740), Balance Sheet Classification of Deferred Taxes. The
amendments in this Update require that deferred tax liabilities and
assets be classified as noncurrent in a classified statement of
financial position. The amendments in this Update are effective for
financial statements issued for annual periods beginning after
December 15, 2017, and interim periods within annual periods
beginning after December 31, 2018. Earlier application is permitted
for all entities as of the beginning of an interim or annual
reporting period. The Company has no deferred tax balances as a
100% valuation allowance has been made. No material impact is
expected.
In January 2016, the FASB issued ASU No. 2016-01, Financial
Instruments - Overall (Subtopic 825-10), Recognition and
Measurement of Financial Assets and Financial Liabilities. The
amendments in this Update require all equity investments to be
measured at fair value with changes in the fair value recognized
through net income (other than those accounted for under the equity
method of accounting or those that result in consolidation of the
investee). The amendments in this Update also require an entity to
present separately in other comprehensive income the portion of the
total change in the fair value of a liability resulting from a
change in the instrument-specific credit risk when the entity has
elected to measure the liability at fair value in accordance with
the fair value option for financial instruments. The amendments in
this Update are effective for fiscal years beginning after December
15, 2018, and interim periods within fiscal years beginning after
December 15, 2019. The Company is evaluating the effect of the
adoption of this Update on its financial statements.
In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic
842). The amendments in this Update specify the accounting for
leases. The core principle of Topic 842 is that a lessee should
recognize the assets and liabilities that arise from leases. The
amendments in this Update are effective for fiscal years beginning
after December 15, 2019, and interim periods within fiscal years
beginning after December 15, 2020. Early application of the
amendments in this Update is permitted. The Company is currently
evaluating the effect the amendments in this Update will have on
its financial statements and related disclosures.
In March 2016, the FASB issued ASU No. 2016-08, Revenue from
Contracts with Customers (Topic 606): Principal versus Agent
Considerations (Reporting Revenue Gross versus Net), which
clarifies certain aspects of the principal versus agent guidance in
the new revenue recognition standard. The effective date and
transition requirement for this ASU are the same as the effective
date and transition requirements of ASU 2014-09, Revenue from
Contracts with Customers (Topic 606), as amended by ASU 2015-14,
Revenue from Contracts with Customers (Topic 606): Deferral of the
Effective Date, which deferred the effective date to annual
reporting periods beginning after December 15, 2018. The Company is
currently evaluating the effect the amendments in this Update will
have on its financial statements and related disclosures.
AKERS BIOSCIENCES, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
In March 2016, the FASB issued ASU No. 2016-09, Compensation -
Stock Compensation (Topic 718): Improvements to Employee
Share-Based Payment Accounting, which simplifies several aspects of
the accounting for share-based payment award transactions,
including: (1) income tax consequences; (2) classification of
awards as either equity or liabilities, and (3) classification on
the statement of cash flows. The amendments in this ASU are
effective for annual periods beginning after December 15, 2017, and
interim periods within annual periods beginning after December 15,
2018. Early adoption is permitted in any interim or annual period.
The Company is currently evaluating the effect the amendments in
this Update will have on its financial statements and related
disclosures.
In August 2016, the FASB issued ASU No. 2016-15, Statement of
Cash Flows (Topic 230), Classification of Certain Cash Receipts and
Cash Payments. The Update addresses eight specific changes to how
cash receipts and cash payments are presented and classified in the
statement of cash flows. The amendments in this Update are
effective for fiscal years beginning after December 15, 2018, and
interim periods within fiscal years beginning after December 15,
2019. Early adoption is permitted. An entity that elects early
adoption must adopt all of the amendments in the same period. The
amendments in this Update should be applied using a retrospective
transition method to each period presented. If it is impracticable
to apply the amendments retrospectively for some of the issues, the
amendments for those issues would be applied prospectively as of
the earliest date practicable. The Company is currently evaluating
the effect the amendments in this Update will have on its financial
statements and related disclosures.
In May 2017, the FASB issued ASU 2017-09, Compensation - Stock
Compensation (Topic 718), Scope of Modification Accounting. The
amendments in this Update provide guidance about which changes to
the terms or conditions of a share-based payment award require an
entity to apply modification accounting. The amendments in this
Update are effective for all entities for annual periods, and
interim periods within those annual periods, beginning after
December 15, 2017. Early adoption is permitted, including adoption
in any interim period, for (1) public business entities for
reporting periods for which financial statements have not yet been
issued and (2) all other entities for reporting periods for which
financial statements have not yet been made available for issuance.
The amendments in this Update should be applied prospectively to an
award modified on or after the adoption date.
Note 3 - Key Recent Events and Management Plans
On April 25, 2018, the Board of Directors of the Company
terminated Dr. Raymond F. Akers from his position as Executive
Chairman of the Board and from each of his officer positions as
Chief Scientific Director and Secretary of the Company. Dr. Raymond
F. Akers continued as a member of the Board of Directors until his
resignation on May 27, 2018.
On April 25, 2018, the Board appointed Richard Carlyle Tarbox
III, a current director of the Company as the interim Non-Executive
Chairman of the Board, to hold that position until his successor is
appointed, and to the position of Secretary of the Company.
The Company was not able to timely file this Quarterly Report on
Form 10-Q due to delays in evaluating certain accounting and
reporting matters. The Company's evaluation resulted in its filing
a notification on June 18, 2018 on Form 8-K providing notice that
investors should no longer rely upon the financial statements
included within the Company's Quarterly Reports as of and for the
periods ended June 30, 2017 and September 30, 2017, as well as the
Company's Annual Report on Form 10-K for the year ended December
31, 2017. The Company has since prepared amended financial
statements for such periods and the respective amended Quarterly
and Annual financial reports have been filed contemporaneously with
the filing of this Quarterly Report on Form 10-Q for the three
months ended March 31, 2018.
AKERS BIOSCIENCES, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
By way of a letter dated May 22, 2018, the Listing
Qualifications Department of the NASDAQ Stock Market LLC ("NASDAQ")
advised the Company that it did not comply with NASDAQ Listing Rule
5250(c)(1) for continued listing because NASDAQ has not received
the Company's Form 10-Q for the period ended March 31, 2018 (the
"Quarterly Report"). NASDAQ has informed the Company that the
Company is required to submit a plan to regain compliance with
NASDAQ's filing requirements for continued listing within 60
calendar days of the date of the Notice. Upon acceptance of the
Company's compliance plan, NASDAQ is permitted to grant an
extension of up to 180 calendar days from the Quarterly Report's
filing due date, or until November 19, 2018, for the Company to
regain compliance with NASDAQ Listing Rule 5250(c)(1). The Company
believes that its filing of this Quarterly Report and the Amended
Quarterly and Annual Reports as discussed above have cured the
potential default as to the Company meeting the requirements to
continue its listing in good standing under NASDAQ.
On June 11, 2018, the Company received a letter from the Listing
Qualifications Department NASDAQ notifying the Company that it has
determined that the Company violated the shareholder approval
requirements of Listing Rule 5635(c). Listing Rule 5635(c) requires
shareholder approval prior to the issuance of securities when a
stock option or purchase plan is to be established or materially
amended or other equity compensation arrangement made or materially
amended, pursuant to which stock may be acquired by officers,
directors, employees or consultants.
Prior to the Company's public offering and listing on NASDAQ,
the Company's 2013 Incentive Stock and Award Plan (the "2013 Plan")
was approved by its Board of Directors. NASDAQ has concluded that
the 2013 Plan was materially amended on two occasions after the
Company's public offering and listing on NASDAQ. The first
amendment, as approved by the Board on January 9, 2015, increased
the number of shares available under the 2013 Plan from 400,000 to
800,000 shares and the second amendment, as approved by the Board
on October 5, 2016, increased the number of shares under the 2013
Plan from 800,000 to 830,000 shares (the "2013 Plan
Amendments").
During the first quarter of 2018, the Company promptly notified
NASDAQ, as required by Listing Rule 5625, when it became aware of
its potential non-compliance with Listing Rule 5635(c). On May 4,
2018, the Staff requested additional information from the Company
with respect to such non-compliance and on May 31, 2018, the
Company responded. On June 25, 2018, the Company submitted a plan
to NASDAQ to remediate this matter (the "5635 Compliance Plan").
The 5635 Compliance Plan included that a proposal for shareholders
of the Company to ratify the 2013 Plan Amendments be included in
the proxy statement for the Company's 2018 annual meeting of the
shareholders of the Company and that the Company shall suspend the
trading of each share granted, and each share granted upon the
exercise of any option granted, in excess of 400,000 shares under
the 2013 Plan (the number of shares properly approved pursuant to
the 2013 Plan prior to the 2013 Plan Amendments until shareholder
ratification). The 5635 Compliance Plan also proposes to prevent
the exercise of any option granted under the 2013 Plan until
shareholder ratification.
On July 12, 2018, NASDAQ approved of the 5635 Compliance Plan
and granted the Company until December 10, 2018, to regain
compliance with Listing Rule 5635.
On or about June 15, 2018, certain parties brought certain class
action lawsuits against the Company.
Faulkner v. Akers Biosciences, Inc., No. 2:18-cv-10521
(D.N.J.)
On June 13, 2018, Plaintiff Tim Faulkner filed a class action
complaint alleging securities violations against Akers Biosciences,
Inc. ("Akers"), John J. Gormally, and Gary M. Rauch ("Individual
Defendants") (together with Akers, "Defendants") on behalf of all
persons and entities who purchased publicly traded Akers securities
from May 15, 2017 through June 5, 2018. The complaint alleges
violations of Section 10(b) of the Exchange Act and Rule 10b-5
against all Defendants, and violations of Section 20(a) of the
Exchange Act against the Individual Defendants. In particular, the
complaint alleges that Defendants made false and/or misleading
statements and/or failed to disclose in its first, second, and
third quarter 2017 10-Qs and its 2017 10-K that: (1) Akers was
improperly recognizing revenue for the fiscal year ended December
31, 2017; and, (2) Akers had downplayed weaknesses in its internal
controls over financial reporting and failed to disclose the true
extent of those weaknesses. On July 10, 2018, Plaintiff and
Defendants entered into a stipulation that Defendants are not
required to respond to the complaint until the court appoints a
lead plaintiff and lead counsel for the class, and then after the
lead plaintiff chooses whether to file an amended complaint or
whether to designate the complaint as the operative complaint.
Gleason v. Akers Biosciences, Inc., No. 2:18-cv-10805
(D.N.J.)
On June 20, 2018, Plaintiff David Gleason filed a class action
complaint alleging securities violations against Akers Biosciences,
Inc. ("Akers"), John J. Gormally, and Gary M. Rauch ("Individual
Defendants") (together with Akers, "Defendants") on behalf of all
persons and entities who purchased publicly traded Akers securities
from May 15, 2017 through June 5, 2018. The complaint alleges
violations of Section 10(b) of the Exchange Act and Rule 10b-5
against all Defendants, and violations of Section 20(a) of the
Exchange Act against the Individual Defendants. In particular, the
complaint alleges that Defendants made false and/or misleading
statements and/or failed to disclose in its first, second, and
third quarter 2017 10-Qs and its 2017 10-K that: (1) Akers was
improperly recognizing revenue for the fiscal year ended December
31, 2017; and, (2) Akers had downplayed weaknesses in its internal
controls over financial reporting and failed to disclose the true
extent of those weaknesses. No Defendant has been served yet, and
no response is due at this time.
Other class action lawsuits have been threatened against the
Company and may be filed shortly. Ultimately, there will be one
class action complaint upon the appointment of a lead plaintiff and
lead Counsel.
The Company maintains D&O liability insurance coverage,
insuring both the Company and the Directors and Officers for
covered defense and indemnification, and has noticed these matters
thereunder.
Historically, the Company has relied upon public offerings and
private placements of Common Stock to raise operating capital.
During the year ended December 31, 2017, the Company raised
$9,478,897, net of expenses, in public and private offerings and an
additional $981,948, net of expenses, from the exercise of
warrants. During the three months ended March 31, 2018, the Company
raised an additional $5,717,325 from the exercise of warrants (Note
10). As of July 6, 2018, the Company had cash and marketable
securities of approximately $8.1 million and working capital of
approximately $8.8 million. The Company is not yet able to
determine the impact of the key events during June and July of 2018
may have on the Company's ability to raise capital, nor the impact
that these matters might have on its business operations.
Additionally, a former executive has threatened to sue the
Company, Board members, and executives under the New Jersey
Conscientious Employee Protection Act ("CEPA"), N.J. Stat. Ann. --
34-19.1 over the termination of his employment. That statute
prohibits any retaliatory action against an employee who discloses,
or threatens to disclose to a supervisor or to a public entity any
activity, policy or practice of the employer that is a violation of
a law, or a rule or regulation. Remedies may include a counter
claim for back pay, reinstatement, compensatory and punitive
damages and attorneys' fees if appropriate. The Company will
vigorously defend any litigation brought by this former
executive.
The Company believes that its current working capital position
will be sufficient to meet its obligations as they fall due within
one year after the financial statements are issued.
AKERS BIOSCIENCES, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
Note 4 - Fair Value Measurement - Marketable Securities
Following is a description of the valuation methodologies used
for assets measured at fair value as of March 31, 2018 and December
31, 2017.
U.S. Agency Securities and Corporate and Municipal Securities:
Valued using pricing models maximizing the use of observable inputs
for similar securities. This includes basing value on yields
currently available on comparable securities of issuers with
similar credit ratings.
As of March 31, 2018
------------------------------------------------------------
Accrued Unrealized Unrealized Fair
Cost Income Gains Losses Value
---------- ------- ------------ ------------ ----------
Level 2:
Money market funds $ 26 $ 5 $ - $ - $ 31
Municipal securities 8,680,430 15,392 - (16,843) 8,678,979
--------- ------ -------- -------- ---------
Total Level 2: 8,680,456 15,397 - (16,843) 8,679,010
--------- ------ -------- -------- ---------
Total: $8,680,456 $15,397 $ - $ (16,843) $8,679,010
========= ====== ======== ======== =========
As of December 31, 2017
------------------------------------------------------------
Accrued Unrealized Unrealized Fair
Cost Income Gains Losses Value
---------- --------- ------------ ----------- ----------
Level 2:
Money market funds $ 5,165 $ 161 $ - $ - $ 5,326
Municipal securities 5,005,000 1,281 - - 5,006,281
--------- ----- -------- ---------- ---------
Total Level 2: 5,010,165 1,442 - - 5,011,607
--------- ----- -------- ---------- ---------
Total: $5,010,165 $ 1,442 $ - $ - $5,011,607
========= ===== ======== ========== =========
Marketable securities include U.S. agency securities, corporate
securities, and municipal securities, which are classified as
available for sale. The securities are valued at fair market value.
Maturities of the securities are less than one year. Unrealized
gains relating to the available for sale investment securities were
recorded in the Condensed Consolidated Statement of Changes in
Shareholders' Equity as comprehensive income. These amounts were an
unrealized loss of $16,843 and unrealized gain of $156 (net of
effect of income tax expense of $-) for the three months ended
March 31, 2018 and 2017.
Proceeds from the sale of marketable securities in the three
months ended March 31, 2018 and 2017 were $302,095 and $1,095,218.
Gross gains of $- and $1,051 resulted from these sales for the
three months ended March 31, 2018 and 2017.
AKERS BIOSCIENCES, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
Note 5 - Inventories
Inventories consists of the following categories:
March 31, 2018 December 31, 2017
---------------- -------------------
(restated)
Raw Materials $ 513,052 $ 458,441
Sub-Assemblies 898,778 886,274
Finished Goods 774,725 815,505
Reserve for Obsolescence (1,212,608) (1,212,608)
------------ ---------------
$ 973,947 $ 947,612
============ ===============
Obsolete inventory charged to cost of goods during the three
months ended March 31, 2018 and 2017 totaled $24,460 and a credit
of $32,333.
Note 6 - Property, Plant and Equipment
Property, plant and equipment consists of the following:
March 31, 2018 December 31, 2017
---------------- -------------------
Computer Equipment $ 114,771 $ 114,771
Computer Software 40,681 40,681
Office Equipment 39,959 39,959
Furniture & Fixtures 38,356 38,356
Machinery & Equipment 1,153,960 1,138,134
Molds & Dies 890,571 868,570
Leasehold Improvements 222,593 222,593
------------ ---------------
2,500,891 2,463,064
Less
Accumulated Depreciation 2,241,626 2,227,951
------------ ---------------
$ 259,265 $ 235,113
============ ===============
Depreciation expenses totaled $13,675 and $17,941 for the three
months ended March 31, 2018 and 2017.
Note 7 - Intangible Assets
Intangible assets as of March 31, 2018 and December 31, 2017 and
the movements for the periods then ended are as follows:
AKERS BIOSCIENCES, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
Distributor &
Patents & Customer
Trademarks Relationships Totals
---------- --------------- ----------
Cost or Deemed Cost
At December 31, 2017 $2,626,996 $ 1,270,639 $3,897,635
Additions - - -
Disposals - - -
--------- ----------- ---------
At March 31, 2018 $2,626,996 $ 1,270,639 $3,897,635
========= =========== =========
Accumulated Amortization
At December 31, 2017 $1,496,329 $ 1,270,639 $2,766,968
Amortization Charge 42,777 - 42,777
Disposals - - -
--------- ----------- ---------
At March 31, 2018 $1,539,106 $ 1,270,639 $2,809,745
========= =========== =========
Net Book Value
At December 31, 2017 $1,130,667 $ - $1,130,667
========= =========== =========
At March 31, 2018 $1,087,890 $ - $1,087,890
========= =========== =========
Amortization expense totaled $42,777 for the three months ended
March 31, 2018 and 2017.
The estimated aggregate amortization expense for each of the
five succeeding fiscal years is as follows:
Period Amount
------- --------
2019 $171,108
2020 149,298
2021 147,315
2022 147,315
2023 147,315
Note 8 - Trade and Other Payables
Trade and other payables consists of the following:
March 31, 2018 December 31, 2017
---------------- -------------------
(restated)
Trade Payables $ 598,359 $ 948,951
Accrued Expenses 702,424 736,515
Deferred Compensation 59,750 59,750
------------ ---------------
$ 1,360,533 $ 1,745,216
============ ===============
AKERS BIOSCIENCES, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
Trade and other payables - related party are as follows:
March 31, 2018 December 31, 2017
---------------- -------------------
Trade Payables $ 19,005 $ 39,821
------------ --- --------------
$ 19,005 $ 39,821
============ === ==============
As of March 31, 2018 the Company owed ChubeWorkx Guernsey
Limited, previously a major shareholder, royalties of $15,845 (Note
13) which was paid on April 23, 2018.
As of March 31, 2018, the Company owed Hainan $670. Senior
management at Hainan are actively involved in Shenzhen Savy-Akers
Biosciences ("Shenzhen") which is therefore being included as a
related party. The Company owed Shenzhen $2,490 as of March 31,
2018.
Trade and other payables are non-interest bearing and are
normally settled on 30 - 60 day terms.
Note 9 - Share-based Payments
On January 23, 2014, upon effectiveness of the registration
statement filed with the SEC, the Company adopted the 2013 Stock
Incentive Plan (the "Plan") which will provide for the issuance of
up to 400,000 shares. The purpose of the Plan is to provide
additional incentive to those officers, employees, consultants and
non-employee directors of the Company and its parents, subsidiaries
and affiliates whose contributions are essential to the growth and
success of the Company's business.
On January 9, 2015, the Board of Directors of the Company
approved, upon recommendation from the Compensation Committee of
the Board, by unanimous written consent the Amended and Restated
2013 Incentive Stock and Award Plan (the "Amended Plan"), which
increases the number of authorized shares of Common Stock subject
to the Plan to 800,000 shares (Note 3).
On September 30, 2016, the Board of Directors increased the
number of authorized shares of Common Stock subject to the Amended
Plan to 830,000 shares. As of March 31, 2018, grants of restricted
stock and options to purchase 255,000 shares of Common Stock have
been issued, pursuant to the Amended Plan, and are unvested or
unexercised and 7,292 shares of Common Stock remain available for
grants under the Amended Plan.
On August 7, 2017, the Shareholders approved and the Company
adopted the 2017 Equity Incentive Plan (the "Plan") which will
provide for the issuance of up to 1,350,000 shares. The purpose of
the Plan is to provide additional incentive to those officers,
employees, consultants and non-employee directors of the Company
and its parents, subsidiaries and affiliates whose contributions
are essential to the growth and success of the Company's business.
As of March 31, 2018, grants totaling 320,107 shares of restricted
Common Stock have been issued pursuant to the Plan and 1,029,893
shares of Common Stock remain available for grants under the
Plan.
AKERS BIOSCIENCES, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
The Plan may be administered by the Board or a Board-appointed
committee. Eligible recipients of option awards are employees,
officers, consultants or directors (including non-employee
directors) of the Company or of any parent, subsidiary or affiliate
of the Company. The Board has the authority to grant to any
eligible recipient any options, restricted stock or other awards
valued in whole or in part by reference to, or otherwise based on,
the Company's Common Stock.
Qualified option holders may exercise their options at their
discretion. Each option granted may be exchanged for a prescribed
number of shares of Common Stock.
The Company did not issue any options or warrants under the
above plan during the three months ended March 31, 2018.
The following table summarizes the option activities for the
three months ended March 31, 2018:
Weighted
Weighted Average
Average Remaining Aggregate
Number of Exercise Contractual Intrinsic
Shares Price Term (years) Value
---------- ---------- ------------ -----------
Balance at December 31, 2017 255,000 $ 4.25 2.02 $ -
Granted - - - -
Exercised - - - -
Forfeited - - - -
Canceled/Expired - - - -
--------- ------
Balance at March 31, 2018 255,000 $ 4.25 1.78 $ -
========= ======
Exercisable as of March 31, 2018 250,334 $ 4.27 1.75 $ -
========= ======
The aggregate intrinsic value is calculated as the difference
between the exercise price of the underlying awards and the closing
stock price of $0.83 for our common shares on March 31, 2018.
A summary of the Company's non-vested shares as of March 31,
2018 and the changes during the three months then ended are as
follows:
Weighted
Average Grant
Non-Vested Shares Shares Date Fair Value
-------------------------------- ------- -----------------
Non-vested at December 31, 2017 4,666 $ 2.36
Granted - -
Vested - -
Forfeited - -
------
Non-vested at March 31, 2018 4,666 $ 2.36
======
Unrecognized compensation cost related to non-vested employee
stock options totaled $4,219 as of March 31, 2018. The cost is to
be recognized over a weighted average period of 0.38 years.
During the three months ended March 31, 2018 and 2017, the
Company incurred stock option expenses totaling $2,712 and
$5,036.
AKERS BIOSCIENCES, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
The table below summarizes the warrant activity for the three
months ended March 31, 2018:
Weighted Average
Average Remaining
Number of Exercise Contractual
Warrants Price Term (years)
------------ ---------- ------------
Balance at December 31, 2017 49,490,571 $ 0.22 4.95
Granted - - -
Exercised (30,492,070) 0.19 -
Forfeited - - -
Canceled/Expired - - -
----------- ------
Balance at March 31, 2018 18,998,501 $ 0.28 4.68
=========== ======
Exercisable as of March 31, 2018 18,998,501 $ 0.28 4.68
=========== ======
Note 10 - Equity
The holders of common shares are entitled to one vote per share
at meetings of the Company. Holders of Series B convertible
preferred shares have no voting rights at meetings of the
Company.
A restricted stock award is an award of common shares that are
subject to certain restrictions during a specified period.
Restricted stock awards are independent of option grants and are
generally subject to forfeiture if employment terminates prior to
the release of the restrictions. The grantee cannot transfer the
shares before the restricted shares vest. Shares on non-vested
restricted stock have the same voting rights as Common Stock, are
entitled to receive dividends and other distributions thereon and
are considered to be currently issued and outstanding. The Company
expenses the cost of the restricted stock awards, which is
determined to be the fair market value of the shares at the date of
grant, straight-line over the period during which the restrictions
lapse. For these purposes, the fair market value of the restricted
stock is determined based on the closing price of the Company's
Common Stock on the grant date.
On June 8, 2016, the Company issued 27,500 restricted common
shares to an officer in connection with his employment agreement.
These shares vest 1/3 immediately on the date of the grant and the
remaining 2/3 vests equally on March 1, 2017 and March 1, 2018. The
fair value of these shares was $54,725 and was based on the share
price on the date of the grant. $3,469 and $5,203 was recorded
during the three months ended March 31, 2018 and 2017 as
administrative expense on the Condensed Consolidated Statement of
Operations and Comprehensive Loss.
On April 11, 2017, the Company issued 10,000 restricted shares
to a consultant for services to be rendered during the year ending
December 31, 2017. These shares vested on the date of the grant.
The fair value of these shares was $18,000 and was based on the
share price on the date of the grant. During the year ended
December 31, 2017, $5,455 was recognized as stock based
compensation expense. The remaining $12,545 was recognized during
the three months ended March 31, 2018 as sales and marketing
expenses on the Condensed Consolidated Statement of Operations and
Comprehensive Loss.
On January 16, 2018, the Board of Directors issued 25,000
restricted shares of Common Stock to a key employee of the Company
as part of the Plan. The fair value of the shares was $5,175 and
was based on the closing share price of $0.2070 per share. The
share grants vested immediately. The Company recorded the expense
as sales and marketing expenses on the Condensed Consolidated
Statement of Operations and Comprehensive Loss for the three months
ended March 31, 2018.
During the three months ended March 31, 2018, 1,755 shares of
the Company's Series B Preferred Stock, no par value, converted
into 11,700,002 shares of Common Stock.
During the three months ended March 31, 2018, warrant holders
from the December 21, 2017 public offering executed 30,492,070
warrants with an exercise price of $0.1875 per common share,
raising net proceeds of $5,717,325.
Note 11 - Loss per share
The calculation of basic and diluted loss per share at March 31,
2018 and 2017 was based on the loss attributable to common
shareholders of $1,859,991 and $1,349,270. The basic and diluted
weighted average number of common shares outstanding at March 31,
2018 and 2017 was 71,315,461 and 6,993,574.
Diluted net loss per share is computed using the weighted
average number of common and dilutive potential common shares
outstanding during the period.
Potential common shares consist of options, warrants and
unvested restricted stock. Diluted net loss per common share was
the same as basic net loss per common share for the three months
ended March 31, 2018 and 2017 since the effect of options and
warrants would be anti-dilutive due to the net loss attributable to
the common shareholders. Instruments excluded from dilutive
earnings per share, because their inclusion would be anti-dilutive,
were as follows: incentive and award stock options - 255,000 and
259,000; unvested restricted shares of Common Stock - - and 9,166;
warrants - 18,998,501 and 1,455,650 as of March 31, 2018 and
2017.
Note 12 - Income Tax Expense
There is no income tax benefit for the losses for the three
months ended March 31, 2018 and 2017 since management has
determined that the realization of the net deferred tax asset is
not assured and has created a valuation allowance for the entire
amount of such benefits.
The Company's policy is to record interest and penalties
associated with unrecognized tax benefits as additional income
taxes in the statement of operations. As of January 1, 2018, the
Company had no unrecognized tax benefits, or any tax related
interest or penalties. There were no changes in the Company's
unrecognized tax benefits during the three months ended March 31,
2018 related to unrecognized tax benefits. With few exceptions, the
U.S. and state income tax returns filed for the tax years ended on
December 31, 2014 and thereafter are subject to examination by the
relevant taxing authorities.
AKERS BIOSCIENCES, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
Note 13 - Related Party Transactions
On June 19, 2012, the Company entered into a 3-year exclusive
License & Supply Agreement with ChubeWorkx Guernsey Limited (as
successor to SONO International Limited) ("ChubeWorkx") for the
purchase and distribution of Akers' proprietary breathalyzers
outside North America. ChubeWorkx paid a licensing fee of
$1,000,000 which was recognized over the term of the agreement
through September 30, 2015.
On June 13, 2013, the Company announced an expansion of the
License and Supply Agreement with ChubeWorkx to include worldwide
marketing and distribution of the "Be CHUBE" program using the
Company's breathalyzer.
On August 17, 2016, the Company entered into a Settlement
Agreement (the "Settlement Agreement") with ChubeWorkx Guernsey
Limited ("ChubeWorkx"), a major shareholder, which settled all
pending claims between the Company and ChubeWorkx. Specifically,
the Company and ChubeWorkx agreed to voluntarily dismiss (i) the
action in the United States Federal Court, District of New Jersey
brought by the Company against ChubeWorkx for outstanding amounts
due to the Company under a promissory note and (ii) the action in
The High Court of Justice, Queen's Bench Division Commercial Court,
Royal Courts of Justice, United Kingdom brought by ChubeWorkx
against the Company arising from an exclusive licensing agreement
between ChubeWorkx and the Company ("Licensing Agreement").
Under the terms of the Settlement Agreement, the Company would
receive the full outstanding principal amount in the year ended
December 31, 2016 in the form of $750,000 of BreathScan(R) Alcohol
Detector inventory and the balance of $549,609 as prepaid royalty.
Akers' established an allowance for this doubtful note in the
Company's financial statements for the year ended December 31,
2015. As a result of the Settlement Agreement, the Company reversed
the allowance for doubtful note in the amount of $1,299,609 which
was included in the Consolidated Statement of Operations and
Comprehensive Loss for the year ended December 31, 2016.
In addition to addressing the promissory note described above,
the Settlement Agreement also allows the Company to market and sell
all of the Company's breath technology tests worldwide,
unencumbered by any past/future claims by ChubeWorkx under the
Licensing Agreement (entered into with ChubeWorkx in 2012 and
subsequently amended in 2013). Under the terms of the Settlement
Agreement, ChubeWorkx no longer holds any rights pertaining to
Akers' BreathScan(R) technology, which serves as the basis for a
number of commercialized products including BreathScan(R) Alcohol
Detector and BreathScan OxiChek(TM); and a number of products in
development.
AKERS BIOSCIENCES, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
In return for the Company regaining the full rights to sell
breath technology products, under the terms of the Settlement
Agreement, ChubeWorkx is entitled to receive a royalty of 5% of the
Company's gross revenues (the "ChubeWorkx Royalty") until
ChubeWorkx has earned an aggregate $5,000,000, after which point
ChubeWorkx will no longer be entitled to receive any royalties from
the Company and the Company shall have no further obligation to
ChubeWorkx. The Settlement Agreement further allows the Company to
retain 50% of the ChubeWorkx Royalty until the full $549,609 cash
component of the monies owed by ChubeWorkx to the Company as
described above has been satisfied. The Company recorded royalty
expenses of $31,689 and $32,279 for the three months ended March
31, 2018 and 2017 which are included in sales and marketing
expenses - related party on the Condensed Consolidated Statement of
Operations and Comprehensive Loss.
Other terms of the Settlement include: 1) the pledge as security
of all earned but unpaid royalties by the Company to ChubeWorkx all
Company assets, worthy to satisfy its obligations, including all
inventory and receivables, with the exception of (i) distribution
contracts of the Company or any of its affiliates, (ii) customer
lists, (iii) manufacturing processes (including all intellectual
property required to use those processes and exploit products made
thereby), and (iv) all equipment required to perform said
manufacturing processes and other equipment; 2) the pledge as
security of the settlement sum which remains unpaid by the Company
to ChubeWorkx all Company (i) distribution contracts of the Company
or any of its affiliates, (ii) customer lists, (iii) manufacturing
processes (including all intellectual property required to use
those processes and exploit products made thereby), and (iv) all
equipment required to perform said manufacturing processes and
other equipment; and 3) the grant of voting proxy by ChubeWorkx to
the Company which allows the Company to vote ChubeWorkx's shares
for corporate formalities under certain conditions.
The pledged assets are only at risk in the event that the
Company cannot satisfy any outstanding royalty payment obligations
subject to various cure periods and/or through a restructuring
and/or liquidation under the United States Bankruptcy laws of the
Company in favor of payment of said obligation.
During the three months ended March 31, 2018 and 2017, the
Company recognized $- for the BreathScan Breath Alcohol products
acquired from the Settlement.
The Company began purchasing manufacturing molds, plastic
components and the assembled BreathScan Lync(TM) device through
Hainan and its related party during the year ended December 31,
2016 (Note 8). The Company purchased a total of $23,805 and $16,744
during the three months ended March 31, 2018 and 2017. As of March
31, 2018, the Company owed the Hainan and its related party $3,160
which is included in trade and other payables - related party on
the Condensed Consolidated Balance Sheet.
During the three months ended March 31, 2018, the Company
engaged Medical Horizons, Inc. ("Medical Horizons"), a company
owned and operated by the spouse of a member of the Company's
leadership team, to provide engineering and design services. The
Company recorded $48,589 during the three months ended March 31,
2018 related to the engagement of Medical Horizons which is
included in research and development - related party on the
Condensed Consolidated Statement of Operations and Comprehensive
Loss.
Product revenue - related party for the three months ended March
31, 2018 and 2017 were $- and $24,063. The revenue was the result
of sales to Hainan and its related party.
AKERS BIOSCIENCES, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
Note 14 - Commitments
The Company leases its facility in West Deptford, New Jersey
under an operating lease ("Thorofare Lease") with annual rentals of
$132,000 plus common area maintenance (CAM) charges. The lease,
which took effect on January 1, 2008, reduced the CAM charges
allowing the Company to reach their own agreements with utilities
and other maintenance providers. On January 7, 2013, the Company
extended its lease agreement for a term of 7 years, expiring
December 31, 2019. Rent expense for the Thorofare Lease, including
related CAM charges for the three months ended March 31, 2018 and
2017 totaled $42,218 and $40,487, respectively.
The Company entered into a 24-month lease for a satellite office
located in Ramsey, New Jersey ("Ramsey Lease") with annual rents of
$25,980 plus common area maintenance (CAM) charges. The lease took
effect on June 1, 2017 and runs through May 31, 2019. Rent expenses
for the Ramsey Lease, including related CAM charges totaled $6,495
and $- for the three months ended March 31, 2018 and 2017. The
Company posted a security deposit of $4,330 which is included in
other assets on the Condensed Consolidated Balance Sheet.
The Company entered into a 29-month lease for warehouse space
located in Pitman, New Jersey ("Pitman Lease") with annual rents of
$39,650. The lease took effect on August 1, 2017 and runs through
December 31, 2019. Rent expenses for the Pitman Lease totaled
$9,913 and $- for the three months ended March 31, 2018 and 2017. A
security deposit of $4,950 is included in other assets on the
Condensed Consolidated Balance Sheet.
The Company entered into a 60-month operating lease for
equipment with annual rentals of $6,156 on September 29, 2014. The
lease commenced on October 21, 2014 upon the delivery of the
equipment.
The schedule of lease commitments is as follows:
Thorofare Ramsey Pitman Equipment
Lease Lease Lease Lease Total
----------- ------- ------- ----------- --------
Next 12 Months $ 132,000 $25,980 $39,650 $ 6,156 $203,786
Next 13-24 Months 99,000 4,330 29,736 3,591 136,657
On June 30, 2017, the Company signed the Third Amendment to the
exclusive Distribution Agreement with NovoTek Pharmaceuticals
Limited ('NovoTek') which expanded the geographic area of coverage
to include Poland and grants NovoTek the right to assemble certain
PIFA Heparin PF/4 products in their facilities from components
acquired from the Company.
AKERS BIOSCIENCES, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
Note 15 - Major Customers
For the three months ended March 31, 2018, one customer
generated 10% or more of the Company's revenue. Sales to this
customer accounted for 79% of the Company's revenue. As of March
31, 2018, the amount due from this customer was $175,881. This
concentration makes the Company vulnerable to a near-term severe
impact should the relationships be terminated.
For the three months ended March 31, 2017, two customers
generated 10% or more of the Company's revenue. Sales to these
customers accounted for 67% of the Company's revenue.
Note 16 - Major Suppliers
For the three months ended March 31, 2018, one supplier
accounted for 10% or more of the Company's purchases. As of March
31, 2018, the amount due to the supplier was $9,302.
For the three months ended March 31, 2017, two suppliers each
accounted for more than 10% of the Company's purchases. In
aggregate, these suppliers accounted for 23% of the Company's total
purchases.
Note 17 - Contingencies
On October 17, 2016 the Company was served with a notice that
Pulse Health LLC ("Pulse") filed a lawsuit against the Company on
September 30, 2016 in United States Federal District Court,
District of Oregon, alleging a breach of contract under the
settlement agreement entered into by the Company and Pulse on April
8, 2011 which settled all claims and disputes between the Company
and Pulse arising from a previously executed Technology Development
Agreement entered into by the Company and Pulse and damages
resulting from said alleged breach. Additionally, Pulse alleges
false advertising and unlawful trade practices in connection with
the Company's sales activities related to the Company's OxiChek(TM)
products.
AKERS BIOSCIENCES, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
The Company filed a series of motions with the Court seeking (1)
to dismiss the Pulse complaint for lack of jurisdiction or, in the
alternative, transfer the matter to the District Court for the
District of New Jersey, Camden Vicinage and (2) to dismiss the
unfair competition claims for failure to state a claim on which
relief could be granted. Oral arguments on these motions were heard
by the Court on March 10, 2017.
The Court decided by order dated April 14, 2017 in favor of the
Company and has dismissed with prejudice the claims brought by
Pulse for unfair competition (both federal and state counts). The
court decided against the Company in its motions for transfer of
venue and for lack of jurisdiction. As such, the case shall proceed
in the District Court of Oregon.
Pulse subsequently filed an Amended Complaint, in which Pulse
seeks not less than $500,000 in damages and, among other items, an
injunction prohibiting the Company from manufacture, use and sale
of the OxiChek product. The Company answered the Amended Complaint
on May 11, 2017. Discovery concluded on January 22, 2018.
The Company filed a Motion for Summary Judgment on January 24,
2018. On June 21, 2018, the Court ruled in favor of the Company on
some issues and determined that other issues warranted a trial.
Trial has been set for November 13, 2018 in Portland, Oregon.
On or about June 15, 2018, certain parties brought certain class
action lawsuits against the Company.
Faulkner v. Akers Biosciences, Inc., No. 2:18-cv-10521
(D.N.J.)
On June 13, 2018, Plaintiff Tim Faulkner filed a class action
complaint alleging securities violations against Akers Biosciences,
Inc. ("Akers"), John J. Gormally, and Gary M. Rauch ("Individual
Defendants") (together with Akers, "Defendants") on behalf of all
persons and entities who purchased publicly traded Akers securities
from May 15, 2017 through June 5, 2018. The complaint alleges
violations of Section 10(b) of the Exchange Act and Rule 10b-5
against all Defendants, and violations of Section 20(a) of the
Exchange Act against the Individual Defendants. In particular, the
complaint alleges that Defendants made false and/or misleading
statements and/or failed to disclose in its first, second, and
third quarter 2017 10-Qs and its 2017 10-K that: (1) Akers was
improperly recognizing revenue for the fiscal year ended December
31, 2017; and, (2) Akers had downplayed weaknesses in its internal
controls over financial reporting and failed to disclose the true
extent of those weaknesses. On July 10, 2018, Plaintiff and
Defendants entered into a stipulation that Defendants are not
required to respond to the complaint until the court appoints a
lead plaintiff and lead counsel for the class, and then after the
lead plaintiff chooses whether to file an amended complaint or
whether to designate the complaint as the operative complaint.
Gleason v. Akers Biosciences, Inc., No. 2:18-cv-10805
(D.N.J.)
On June 20, 2018, Plaintiff David Gleason filed a class action
complaint alleging securities violations against Akers Biosciences,
Inc. ("Akers"), John J. Gormally, and Gary M. Rauch ("Individual
Defendants") (together with Akers, "Defendants") on behalf of all
persons and entities who purchased publicly traded Akers securities
from May 15, 2017 through June 5, 2018. The complaint alleges
violations of Section 10(b) of the Exchange Act and Rule 10b-5
against all Defendants, and violations of Section 20(a) of the
Exchange Act against the Individual Defendants. In particular, the
complaint alleges that Defendants made false and/or misleading
statements and/or failed to disclose in its first, second, and
third quarter 2017 10-Qs and its 2017 10-K that: (1) Akers was
improperly recognizing revenue for the fiscal year ended December
31, 2017; and, (2) Akers had downplayed weaknesses in its internal
controls over financial reporting and failed to disclose the true
extent of those weaknesses. No Defendant has been served yet, and
no response is due at this time.
Other class action lawsuits have been threatened against the
Company and may be filed shortly. Ultimately, there will be one
class action complaint upon the appointment of a lead plaintiff and
lead Counsel.
The Company maintains D&O liability insurance coverage,
insuring both the Company and the Directors and Officers for
covered defense and indemnification, and has noticed these matters
thereunder.
Additionally, a former executive has threatened to sue the
Company, Board members, and executives under CEPA over the
termination of his employment. That statute prohibits any
retaliatory action against an employee who discloses, or threatens
to disclose to a supervisor or to a public entity any activity,
policy or practice of the employer that is a violation of a law, or
a rule or regulation. Remedies may include a counter claim for back
pay, reinstatement, compensatory and punitive damages and
attorneys' fees if appropriate. The Company will vigorously defend
any litigation brought by this former executive.
The Company intends to establish a rigorous defense of all
claims. The Company is unable to assess the potential outcome, so
no accrual for losses was made as of March 31, 2018. All legal fees
were expensed as and when incurred.
Note 18 - Segment Information
The Company is organized and operates as one operating segment.
In accordance with FASB ASC 280 "Segment Reporting", the Chief
Operating Officer is the chief operating decision-maker who reviews
operating results to make decisions on allocation of resources and
assessment of performance for the entire company.
The total revenue by different product lines was as follows:
Three months ended
March 31,
Product Line 2018 2017
------------------------------------------ ------------ --------
MicroParticle Catalyzed Biosensor ("MPC") $ 18,950 $ 85,659
Particle ImmunoFiltration Assay ("PIFA") 259,983 560,921
Rapid Enzymatic Assay ("REA") 9,900 -
Other 13,642 20,670
-------- -------
Product Revenue Total $ 302,475 $667,250
License Fees - -
-------- -------
Total Revenue $ 302,475 $667,250
======== =======
AKERS BIOSCIENCES, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
The total revenue by geographic area determined based on the
location of the customers was as follows:
Three months ended
March 31,
Geographic Region 2018 2017
--------------------------- ------------ --------
United States $ 294,733 $617,691
People's Republic of China - 21,030
Rest of World 7,742 28,529
-------- -------
Total Revenue $ 302,475 $667,250
======== =======
The Company had long-lived assets totaling $74,339 and $59,830
located in the People's Republic of China and $1,272,816 and
$1,305,950 located in the United States as of March 31, 2018 and
December 31, 2017, respectively.
Note 19 - Subsequent Events
During the period April 1, 2018 through July 6, 2018, the
Company received $1,437,875 from the exercise of 7,668,667
warrants. See also Note 3.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
This quarterly report on Form 10-Q and other reports filed by
Akers Biosciences, Inc. ("Akers", "Akers Bio", "we" or the
"Company") from time to time with the SEC (collectively, the
"Filings") contain or may contain forward-looking statements and
information that are based upon beliefs of, and information
currently available to, the Company's management as well as
estimates and assumptions made by Company's management. Readers are
cautioned not to place undue reliance on these forward-looking
statements, which are only predictions and speak only as of the
date hereof. When used in the Filings, the words "anticipate,"
"believe," "estimate," "expect," "future," "intend," "plan," or the
negative of these terms and similar expressions as they relate to
the Company or the Company's management identify forward-looking
statements. Such statements reflect the current view of the Company
with respect to future events and are subject to risks,
uncertainties, assumptions, and other factors, including the risks
relating to the Company's business, industry, and the Company's
operations and results of operations. Should one or more of these
risks or uncertainties materialize, or should the underlying
assumptions prove incorrect, actual results may differ
significantly from those anticipated, believed, estimated,
expected, intended, or planned.
Although the Company believes that the expectations reflected in
the forward-looking statements are reasonable, the Company cannot
guarantee future results, levels of activity, performance, or
achievements. Except as required by applicable law, including the
securities laws of the United States, the Company does not intend
to update any of the forward-looking statements to conform these
statements to actual results.
Our financial statements are prepared in accordance with
accounting principles generally accepted in the United States
("GAAP"). These accounting principles require us to make certain
estimates, judgments and assumptions. We believe that the
estimates, judgments and assumptions upon which we rely are
reasonable based upon information available to us at the time that
these estimates, judgments and assumptions are made. These
estimates, judgments and assumptions can affect the reported
amounts of assets and liabilities as of the date of the financial
statements as well as the reported amounts of revenues and expenses
during the periods presented. Our financial statements would be
affected to the extent there are material differences between these
estimates and actual results. In many cases, the accounting
treatment of a particular transaction is specifically dictated by
GAAP and does not require management's judgment in its application.
There are also areas in which management's judgment in selecting
any available alternative would not produce a materially different
result. The following discussion should be read in conjunction with
our financial statements and notes thereto appearing elsewhere in
this report.
Overview
Akers Bio develops, manufactures, and supplies rapid,
point-of-care screening and testing products designed to bring
health-related information directly to the patient or clinician in
a timely and cost-efficient manner. Akers believes it has advanced
the science of diagnostics through the development of several
proprietary platform technologies that provide product development
flexibility.
All of Akers' rapid, single-use tests are performed in vitro
(outside the body) and are designed to enhance patient well-being
and reduce the cost of healthcare. The Company's current product
offerings and pipeline products focus on delivering diagnostic
assistance in a wide variety of healthcare fields/specialties,
including diagnostic rapid manual point-of-care tests for the
detection of allergic reactions to Heparin, metabolism/nutrition
and for on- and off-the-job alcohol safety initiatives.
Akers believes that low-cost, single-use testing not only saves
time and money, but allows for more frequent, near-patient testing
which may save lives. We believe that our FDA-cleared rapid
diagnostic tests help facilitate targeted diagnoses and real-time
treatment. We also believe that our rapid diagnostic tests surpass
most other current diagnostic products with their flexibility,
speed, ease-of-use, readability, low cost and accuracy. In minutes,
detection of disease states and medical conditions can be performed
on single-patient specimens without sacrificing accuracy.
We believe the use of rapid tests, which can be performed at the
point-of-care when and where the patient is being consulted, can
result in immediate diagnostic decisions and subsequent treatment
regimens and is an important development in the practice of
medicine. Point-of-care testing addresses today's challenges in the
healthcare industry, such as:
-- cost pressures/efficiency of healthcare delivery;
-- need for affordable mass screening tests for key infectious diseases and metabolic markers;
-- need for easy to use, accurate at-home tests for individuals to monitor their personal health
and wellness; and
The Company has also developed tests for non-medical use within
the health and wellness industry. These tests monitor general
markers of health and wellness as they relate to diet, nutrition
and exercise programs.
Key Events, Management's Plans and Basis of Presentation
On April 25, 2018, the Board of Directors of the Company
terminated Dr. Raymond F. Akers from his position as Executive
Chairman of the Board and from each of his officer positions as
Chief Scientific Director and Secretary of the Company. Dr. Raymond
F. Akers continued as a member of the Board of Directors until his
resignation on May 27, 2018.
On April 25, 2018, the Board appointed Richard Carlyle Tarbox
III, a current director of the Company as the interim Non-Executive
Chairman of the Board, to hold that position until his successor is
appointed, and to the position of Secretary of the Company.
The Company was not able to timely file this Quarterly Report on
Form 10-Q due to delays in evaluating certain accounting and
reporting matters. The Company's evaluation resulted in its filing
a notification on June 18, 2018 on Form 8-K providing notice that
investors should no longer rely upon the financial statements
included within the Company's Quarterly Reports as of and for the
periods ended June 30, 2017 and September 30, 2017, as well as the
Company's Annual Report on Form 10-K for the year ended December
31, 2017. The Company has since prepared amended financial
statements for such periods and the respective amended Quarterly
and Annual financial reports have been filed contemporaneously with
the filing of this Quarterly Report on Form 10-Q for the three
months ended March 31, 2018.
By way of a letter dated May 22, 2018, the Listing
Qualifications Department of the NASDAQ advised the Company that it
did not comply with NASDAQ Listing Rule 5250(c)(1) for continued
listing because NASDAQ has not received the Company's Quarterly
Report. NASDAQ has informed the Company that the Company is
required to submit a plan to regain compliance with NASDAQ's filing
requirements for continued listing within 60 calendar days of the
date of the Notice. Upon acceptance of the Company's compliance
plan, NASDAQ is permitted to grant an extension of up to 180
calendar days from the Quarterly Report's filing due date, or until
November 19, 2018, for the Company to regain compliance with NASDAQ
Listing Rule 5250(c)(1). The Company believes that its filing of
this Quarterly Report and the Amended Quarterly and Annual Reports
as discussed above have cured the potential default as to the
Company meeting the requirements to continue its listing in good
standing under NASDAQ.
On June 11, 2018, the Company received a letter from the Listing
Qualifications Department NASDAQ notifying the Company that it has
determined that the Company violated the shareholder approval
requirements of Listing Rule 5635(c). Listing Rule 5635(c) requires
shareholder approval prior to the issuance of securities when a
stock option or purchase plan is to be established or materially
amended or other equity compensation arrangement made or materially
amended, pursuant to which stock may be acquired by officers,
directors, employees or consultants.
Prior to the Company's public offering and listing on NASDAQ,
the Company's 2013 Plan was approved by its Board. NASDAQ has
concluded that the 2013 Plan was materially amended on two
occasions after the Company's public offering and listing on
NASDAQ. The first amendment, as approved by the Board on January 9,
2015, increased the number of shares available under the 2013 Plan
from 400,000 to 800,000 shares and the second amendment, as
approved by the Board on October 5, 2016, increased the number of
shares under the 2013 Plan from 800,000 to 830,000 shares.
During the first quarter of 2018 the Company promptly notified
NASDAQ, as required by Listing Rule 5625, when it became aware of
its potential non-compliance with Listing Rule 5635(c). On May 4,
2018, the Staff requested additional information from the Company
with respect to such non-compliance and on May 31, 2018, the
Company responded. On June 25, 2018, the Company submitted the 5635
Compliance Plan to NASDAQ to remediate this matter. The 5635
Compliance Plan included that a proposal for shareholders of the
Company to ratify the 2013 Plan Amendments be included in the proxy
statement for the Company's 2018 annual meeting of the shareholders
of the Company and that the Company shall suspend the trading of
each share granted, and each share granted upon the exercise of any
option granted, in excess of 400,000 shares under the 2013 Plan
(the number of shares properly approved pursuant to the 2013 Plan
prior to the 2013 Plan Amendments until shareholder ratification).
The 5635 Compliance Plan also proposes to prevent the exercise of
any option granted under the 2013 Plan until shareholder
ratification.
On July 12, 2018, NASDAQ approved of the 5635 Compliance Plan
and granted the Company until December 10, 2018, to regain
compliance with Listing Rule 5635.
On or about June 15, 2018, certain parties brought certain class
action lawsuits against the Company.
Faulkner v. Akers Biosciences, Inc., No. 2:18-cv-10521
(D.N.J.)
On June 13, 2018, Plaintiff Tim Faulkner filed a class action
complaint alleging securities violations against Akers Biosciences,
Inc. ("Akers"), John J. Gormally, and Gary M. Rauch ("Individual
Defendants") (together with Akers, "Defendants") on behalf of all
persons and entities who purchased publicly traded Akers securities
from May 15, 2017 through June 5, 2018. The complaint alleges
violations of Section 10(b) of the Exchange Act and Rule 10b-5
against all Defendants, and violations of Section 20(a) of the
Exchange Act against the Individual Defendants. In particular, the
complaint alleges that Defendants made false and/or misleading
statements and/or failed to disclose in its first, second, and
third quarter 2017 10-Qs and its 2017 10-K that: (1) Akers was
improperly recognizing revenue for the fiscal year ended December
31, 2017; and, (2) Akers had downplayed weaknesses in its internal
controls over financial reporting and failed to disclose the true
extent of those weaknesses. On July 10, 2018, Plaintiff and
Defendants entered into a stipulation that Defendants are not
required to respond to the complaint until the court appoints a
lead plaintiff and lead counsel for the class, and then after the
lead plaintiff chooses whether to file an amended complaint or
whether designate the complaint as the operative complaint.
Gleason v. Akers Biosciences, Inc., No. 2:18-cv-10805
(D.N.J.)
On June 20, 2018, Plaintiff David Gleason filed a class action
complaint alleging securities violations against Akers Biosciences,
Inc. ("Akers"), John J. Gormally, and Gary M. Rauch ("Individual
Defendants") (together with Akers, "Defendants") on behalf of all
persons and entities who purchased publicly traded Akers securities
from May 15, 2017 through June 5, 2018. The complaint alleges
violations of Section 10(b) of the Exchange Act and Rule 10b-5
against all Defendants, and violations of Section 20(a) of the
Exchange Act against the Individual Defendants. In particular, the
complaint alleges that Defendants made false and/or misleading
statements and/or failed to disclose in its first, second, and
third quarter 2017 10-Qs and its 2017 10-K that: (1) Akers was
improperly recognizing revenue for the fiscal year ended December
31, 2017; and, (2) Akers had downplayed weaknesses in its internal
controls over financial reporting and failed to disclose the true
extent of those weaknesses. No Defendant has been served yet, and
so no response is due at this time.
Other class action lawsuits have been threatened against the
Company and may be filed shortly. Ultimately, there will be one
class action complaint upon the appointment of a lead plaintiff and
lead Counsel.
The Company maintains D&O liability insurance coverage,
insuring both the Company and the Directors and Officers for
covered defense and indemnification, and has noticed these matters
thereunder.
As of March 31, 2018, the Company has in large part relied on
equity financing to fund its operations, raising $29,279,506, net
of expenses, in various public and private offering on the NASDAQ
Capital Market and through the exercise of warrants associated with
the offerings. The Company has experienced recurring losses and
negative cash flows from operations. Management's strategic plans
include the following:
-- continuing to advance the development and commercialization of the Company's products, especially
those that utilize MPC Biosensor, PIFA and seraSTAT technologies;
-- continuing to strengthen and forge domestic and international relationships with well-established
sales organizations with strong distribution channels in specific target markets for both
our currently marketed and emerging products;
-- establishing clinical protocols that support regulatory submissions and publication of data
within peer-reviewed journals; and
-- continuing to monitor and implement cost control initiatives to conserve cash.
Despite our plans, the Company expects to continue to incur
losses from operations for the near-term for the following
reasons:
-- some of Akers' distribution partnerships (Diagnostica Stago) have been recently established
or are in the process of being initiated and, therefore, consistent and historical ordering
patterns have not been instituted;
-- the Company continues to incur expenses related to the commercialization and marketing activities
for its existing product platforms and product development (research, clinical trials, regulatory
tasks) costs;
-- And to expand the use of its clinical laboratory products, the Company may need to invest
in additional marketing support programs to increase brand awareness.
At March 31, 2018, Akers had cash of $647,267, working capital
of $9,784,223, shareholders' equity of $11,417,245 and an
accumulated deficit of $106,705,838. The Company believes that its
current working capital position will be sufficient to meet its
estimated cash needs for at least the next 12 months. The Company
closely monitors its cash balances, cash needs and expense levels.
The Company is not yet able to determine the impact of the key
events during June and July of 2018 as discussed above may have on
the Company's ability to raise capital, nor the impact that these
matters might have on its business operations.
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:
3 Months Ended 3 Months Ended
Product Lines March 31, 2018 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:
3 months ended 3 months ended Percent
Geographic Region March 31, 2018 March 31, 2017 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 $915,533, 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:
3 Months Ended 3 Months Ended
Description March 31, 2018 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 190,494 181,863 5%
------------- -------------
Total General and Administrative Expense $ 915,533 $ 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:
3 Months Ended 3 Months Ended
Description March 31, 2018 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:
3 Months Ended 3 Months Ended
Description March 31, 2018 March 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(TM) / OxiChek(TM) 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:
3 Months Ended 3 Months Ended
Description March 31, 2018 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(R) 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:
3 Months Ended 3 Months Ended Percent
Description March 31, 2018 March 31, 2017 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 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:
3 months ended 3 months ended
Description March 31, 2018 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 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.
Critical Accounting Policies
The Company intends to utilize the extended transition period
provided in Securities Act Section 7(a)(2)(B) as allowed by Section
107(b)(1) of the JOBS Act for the adoption of new or revised
accounting standards as applicable to emerging growth companies.
Under the JOBS Act, emerging growth companies may delay adopting
new or revised accounting standards that have different effective
dates for public and private companies until such time as those
standards apply to private companies. The Company has elected to
use the extended transition period for complying with these new or
revised accounting standards. Since the Company will not be
required to comply with new or revised accounting standards on the
relevant dates on which adoption of such standards is required for
other public companies, our financial statements may not be
comparable to the financial statements of companies that comply
with public company effective dates. If the Company were to elect
to comply with these public company effective dates, such election
would be irrevocable pursuant to Section 107 of the JOBS Act.
The preparation of financial statements in conformity with
accounting principles generally accepted in the United States of
America (US GAAP) requires management to make estimates and
assumptions about future events that affect the amounts reported in
the financial statements and accompanying notes. Future events and
their effects cannot be determined with absolute certainty.
Therefore, the determination of estimates requires the exercise of
judgment. Actual results inevitably will differ from those
estimates, and such differences may be material to the financial
statements. The most significant accounting estimates inherent in
the preparation of our financial statements include estimates
associated with revenue recognition, impairment analysis of
intangibles and stock-based compensation.
The Company's financial position, results of operations and cash
flows are impacted by the accounting policies the Company has
adopted. In order to get a full understanding of the Company's
financial statements, one must have a clear understanding of the
accounting policies employed. A summary of the Company's critical
accounting policies follows:
Trade Receivables, Trade Receivables - Related Party and
Allowance for Doubtful Accounts
The carrying amounts of current trade receivables is stated at
cost, net of allowance for doubtful accounts and approximate their
fair value given their short term nature.
The normal credit terms extended to customers ranges between 30
and 90 days. The Company reviews all receivables that exceed terms
and establishes an allowance for doubtful accounts based on
management's assessment of the collectability of trade and other
receivables. A considerable amount of judgment is required in
assessing the amount of allowance. The Company considers the
historical level of credit losses, makes judgments about the credit
worthiness of each customer based on ongoing credit evaluations and
monitors current economic trends that might impact the level of
credit losses in the future.
Fair Value Measurement - Marketable Securities
The framework for measuring fair value provides a fair value
hierarchy that prioritizes the inputs to valuation techniques used
to measure fair value. The hierarchy gives the highest priority to
unadjusted quoted prices in active markets for identical assets or
liabilities (level 1) and the lowest priority to unobservable
inputs (level 3). The three levels of the fair value hierarchy
under FASB ASC 820 are described as follows:
Level Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities
1 in active markets that the Company has the Ability to access.
Level Inputs to the valuation methodology include:
2
-- quoted prices for similar assets or liabilities in active markets;
-- quoted prices for identical or similar assets or liabilities in inactive markets;
-- inputs other than quoted prices that are observable for the asset or liability;
-- inputs that are derived principally from or corroborated by observable market data by correlation
or other means
If the asset or liability has a specified (contractual) term,
the level 2 input must be observable for substantially the full
term of the asset or liability.
Level Inputs to the valuation methodology are unobservable and significant to the fair value measurement.
3
The asset or liability's fair value measurement level within the
fair value hierarchy is based on the lowest level of input that is
significant to the fair value measurement. Valuation techniques
maximize the use of relevant observable inputs and minimize the use
of unobservable inputs.
Intangible Assets
Intangible assets primarily represent legal and filing costs
associated with obtaining patents on the Company's new discoveries
or acquiring patents for diagnostic technologies or tests that will
enhance the Company's product portfolio. The Company has developed
or acquired several diagnostic tests that can detect the presence
of various substances in a person's breath and blood. Propriety
protection for the Company's products, technology and process is
important to its competitive position. Patents are in the national
phase of prosecution in many PCT participating countries.
Additional proprietary technology consists of numerous different
inventions. The Company intends to file additional patent
applications, where appropriate, relating to new products,
technologies and their use in the U.S., European and Asian markets.
Management intends to protect all other intellectual property (e.g.
copyrights, trademarks and trade secrets) using all legal remedies
available to the Company.
Propriety protection for the Company's products, technology and
process is important to its competitive position. As of March 31,
2018, the Company has ten patents from the United States Patent
Office in effect (9,383,368; 7,896,167; 8,097,171; 8,003,061;
8,425,859; 8,871,521; 8,808,639; D691,056; D691,057 and D691,058).
Other patents are in effect in Australia through the Design
Registry (348,310; 348,311 and 348,312), European Union Patents
1793906, 2684025, 002216895-0001; 002216895-0002 and
002216895-0003), in Hong Kong (HK11004006) and in Japan (1,515,170;
4,885,134; 4,931,821 5,775,790, and 6023096). Patents are in the
national phase of prosecution in many Patent Cooperation Treaty
participating countries. Additional proprietary technology consists
of numerous different inventions. The Company intends to file
additional patent applications, where appropriate, relating to new
products, technologies and their use in the US, European and Asian
markets. Management intends to protect all other intellectual
property (e.g. copyrights, trademarks and trade secrets) using all
legal remedies available to the Company.
Costs associated with applying for patents are capitalized as
patent costs. Once the patents are approved, the respective costs
are amortized over a period of twelve to seventeen years on a
straight-line basis. Patent pending costs for patents that are not
approved are charged to operations the year the patent is
rejected.
In addition, patents may be purchased from third parties. The
costs of acquiring the patent are capitalized as patent costs if it
represents a future economic benefit to the Company. Once a patent
is acquired it is amortized over its remaining life. The Company
amortizes these costs over the shorter of the legal life of the
patent or its estimated economic life using the straight-line
method. The Company tests intangible assets with finite lives upon
significant changes in the Company's business environment.
Long-Lived Assets
In accordance with FASB ASC 360-10-35 "Impairment or Disposal of
Long-lived Assets", long-lived assets to be held and used are
analyzed for impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be fully
recoverable or that the useful lives of those assets are no longer
appropriate. The Company evaluates at each balance sheet date
whether events and circumstances have occurred that indicate
possible impairment.
The Company determines the existence of such impairment by
measuring the expected future cash flows (undiscounted and without
interest charges) and comparing such amount to the carrying amount
of the assets. An impairment loss, if one exists, is then measured
as the amount by which the carrying amount of the asset exceeds the
discounted estimated future cash flows. Assets to be disposed of
are reported at the lower of the carrying amount or fair value of
such assets less costs to sell. Asset impairment charges are
recorded to reduce the carrying amount of the long-lived asset that
will be sold or disposed of to their estimated fair values. Charges
for the asset impairment reduce the carrying amount of the
long-lived assets to their estimated salvage value in connection
with the decision to dispose of such assets.
Investment
In accordance with FASB ASC 323, the Company recognizes
investments in joint ventures based upon the Company's ability to
significantly influence the operational or financial policies of
the joint venture. An objective judgment of the level of influence
is made at the time of the investment based upon several factors
including, but not limited to the following:
a) Representation on the Board of Directors
b) Participation in policy-making processes
c) Material intra-entity transactions
d) Interchange of management personnel
e) Technological dependencies
f) Extent of ownership and the ability to influence decision making based upon the makeup of
other owners when the shareholder group is small
The Company follows the equity method for valuating investments
in joint ventures when the existence of significant influence over
operational and financial policy has been established, as
determined by management; otherwise, the Company will valuate these
investments using the cost method.
Investments recorded using the cost method will be assessed for
any decrease in value that has occurred that is other than
temporary and the other than temporary decrease in value shall be
recognized. As and when circumstances and facts change, the Company
will evaluate the Company's ability to significantly influence
operational and financial policy to establish a basis for
converting the investment accounted for using the cost method to
the equity method of valuation.
Revenue Recognition
In accordance with FASB ASC 605, the Company recognizes revenue
when (i) persuasive evidence of a customer or distributor
arrangement exists, (ii) a retailer, distributor or wholesaler
receives the goods and acceptance occurs, (iii) the price is fixed
or determinable, and (iv) the collectability of the revenue is
reasonably assured. Subject to these criteria, the Company
recognizes revenue from product sales when title passes to the
customer based on shipping terms. The Company typically does not
accept returns nor offer charge backs or rebates except for certain
distributors. Revenue recorded is net of any discount, rebate or
sales return. The accrual for estimated sales returns was $87,510
and $- as of March 31, 2018 and December 31, 2017. In cases where
the right of return is granted and the Company does not have
historical experience to reasonably estimate the sales returns, the
revenue is recognized when the return privilege has substantially
expired.
The Company implemented a standard dealer cost model during the
year ended December 31, 2016 which includes a provision for rebates
to the distributors under limited circumstances. The Company
established an accrual of $57,725 and $126,471, which is a
reduction of revenue as of March 31, 2018 and December 31, 2017.
Accounts receivable will be reduced when the rebates are applied by
the customer. The Company recognized $37,544 and $102,824 during
the three months ended March 31, 2018 and 2017 for rebates, which
is included as a reduction of product revenue in the Condensed
Consolidated Statement of Operations and Comprehensive Loss.
License fee revenue is recognized on a straight-line basis over
the term of the license agreement.
When the Company enters into arrangements that contain more than
one deliverable, the Company allocates revenue to the separate
elements under the arrangement based on their relative selling
prices in accordance with FASB ASC 605-25. As of March 31, 2018 and
December 31, 2017, the Company had deferred revenue of $49,655 and
$- related to transactions with multiple deliverables.
In May 2014 and April 2016, the FASB issued ASU No. 2014-09 and
ASU No. 2016-10, Revenue from Contracts with Customers (Topic 606).
The core principle of the guidance is that an entity should
recognize revenue to depict the transfer of promised goods or
services to customers in an amount that reflects the consideration
to which the entity expects to be entitled in exchange for those
goods or services. In August 2015, FASB issued ASU 2015-14 which
deferred the effective date of Update 2014-09 to annual reporting
periods beginning after December 15, 2018 and interim reporting
periods within annual reporting periods beginning after December
15, 2019. Early application is permitted as of annual reporting
periods beginning after December 15, 2016 including interim
reporting periods within that reporting period. The Company is
currently evaluating the effect of the amendments but it does not
anticipate a material impact of its financial statements. The
Company expects to use the modified retrospective adoption method
and will adopt this Update as of January 1, 2019.
Stock-based Compensation
FASB ASC 718, Share-Based Payment, defines the fair-value-based
method of accounting for stock-based employee compensation plans
and transactions used by the Company to account for its issuances
of equity instruments to record compensation cost for stock-based
employee compensation plans at fair value as well as to acquire
goods or services from non-employees. Transactions in which the
Company issues stock-based compensation to employees, directors and
consultants and for goods or services received from non-employees
are accounted for based on the fair value of the equity instruments
issued. The Company utilizes pricing models in determining the fair
values of options and warrants issued as stock-based compensation.
The Black-Scholes model is utilized to calculate the fair value of
equity instruments.
Recently Issued and Adopted Accounting Pronouncements
The Company has evaluated all recently issued and adopted
accounting pronouncements and believes such pronouncements do not
have a material effect on the Company's financial statements.
Quantitative and Qualitative Disclosure About Market Risk
We have limited exposure to market risks from instruments that
may impact the Balance Sheets, Statements of Operations, and
Statements of Cash Flows. Such exposure is due primarily to
changing interest rates.
The primary objective for our investment activities is to
preserve principal while maximizing yields without significantly
increasing risk. This is accomplished by investing excess cash in
highly liquid debt and equity investments of highly rated entities
which are classified as trading securities.
Interest Rates
The primary objective for our investment activities is to
preserve principal while maximizing yields without significantly
increasing risk. This is accomplished by investing excess cash in
highly liquid debt and equity investments of highly rated entities
which are classified as trading securities.
Off-Balance Sheet Arrangements
We have no significant known off balance sheet arrangements.
Item 3. Quantitative and Qualitative Disclosures About Market
Risk
We do not hold any derivative instruments and do not engage in
any hedging activities.
Item 4. Controls and Procedures.
(a) Evaluation of Disclosure Controls and Procedures
Pursuant to Rule 13a- 15(b) under the Exchange Act, the Company
carried out an evaluation, with the participation of the Company's
management, including the Company's Principal Executive Officer
("PEO") and Principal Financial Officer ("PFO"), of the
effectiveness of the Company's disclosure controls and procedures
(as defined under Rule 13a-15(e) under the Exchange Act) as of the
end of the period covered by this report.
Subsequent to the filing of the Company's Form 10-K for the year
ended December 31, 2017, the Company determined that there were
material errors within its Quarterly Reports on Form 10-Q for the
periods ended June 30, 2017 and September 30, 2017 and in its
Annual Report on Form 10-K for the year ended December 31, 2017.
Specifically, the Company determined that certain revenue
transactions did not qualify for revenue recognition under
generally accepted accounting principles, that certain obligations
were not recorded as expenses on a timely basis and that the
Company did not properly value its inventory. The Company concluded
that the impact of applying corrections for these errors was
materially different from its previously reported results under its
historical practice. Furthermore, on account of the time and
resources required to assess these accounting matters, the Company
was not able to timely file this Quarterly Report on Form 10-Q.
As of March 31, 2018 and based upon that evaluation, and in
light of the restatement discussion above, the Company's PEO and
PFO concluded that the Company's disclosure controls and procedures
were not effective to ensure that information required to be
disclosed by the Company in the reports that the Company files or
submits under the Exchange Act, are recorded, processed, summarized
and reported, within the time periods specified in the SEC's rules
and forms, and that such information is accumulated and
communicated to the Company's management, including the Company's
PEO and PFO, as appropriate, to allow timely decisions regarding
required disclosure.
Management is actively engaged in the planning for and
implementation of remediation efforts to address the material
weakness identified above. The remediation plan includes (i) hiring
and/or engagement of additional qualified personnel, (ii) the
implementation of new controls designed to evaluate the
appropriateness of revenue recognition policies and procedures,
(iii) the implementation of review and monitoring of transactions
to ensure compliance with the new policies and procedures, and (iv)
the training of personnel responsible for revenue and
inventory.
(b) Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial
reporting, as defined in Rules 13a-15(f) and 15d-15(f) under the
Exchange Act, during our most recently completed fiscal quarter
that have materially affected, or are reasonably likely to
materially affect, our internal control over financial
reporting.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
From time to time, we are a party to litigation and subject to
claims incident to the ordinary course of business. Future
litigation may be necessary to defend ourselves and our customers
by determining the scope, enforceability and validity of third
party proprietary rights or to establish our proprietary
rights.
On October 17, 2016 the Company was served with a notice that
Pulse Health LLC ("Pulse") filed a lawsuit against the Company on
September 30, 2016 in United States Federal District Court,
District of Oregon, alleging a breach of contract under the
settlement agreement entered into by the Company and Pulse on April
8, 2011 which settled all claims and disputes between the Company
and Pulse arising from a previously executed Technology Development
Agreement entered into by the Company and Pulse and damages
resulting from said alleged breach. Additionally, Pulse alleges
false advertising and unlawful trade practices in connection with
the Company's sales activities related to the Company's OxiChek(TM)
products.
The Company filed a series of motions with the Court seeking (1)
to dismiss the Pulse complaint for lack of jurisdiction or, in the
alternative, transfer the matter to the District Court for the
District of New Jersey, Camden Vicinage and (2) to dismiss the
unfair competition claims for failure to state a claim on which
relief could be granted. Oral arguments on these motions were heard
by the Court on March 10, 2017.
The Court decided by order dated April 14, 2017 in favor of the
Company and has dismissed with prejudice the claims brought by
Pulse for unfair competition (both federal and state counts). The
court decided against the Company in its motions for transfer of
venue and for lack of jurisdiction. As such, the case shall proceed
in the District Court of Oregon.
Pulse subsequently filed an Amended Complaint, in which Pulse
seeks not less than $500,000 in damages and, among other items, an
injunction prohibiting the Company from manufacture, use and sale
of the OxiChek product. The Company answered the Amended Complaint
on May 11, 2017. Discovery concluded on January 22, 2018.
The Company filed a Motion for Summary Judgment on January 24,
2018. On June 21, 2018, the Court ruled in favor of the Company on
some issues and determined that other issues warranted a trial.
Trial has been set for November 13, 2018 in Portland, Oregon.
On or about June 15, 2018, certain parties brought certain class
action lawsuits against the Company.
Faulkner v. Akers Biosciences, Inc., No. 2:18-cv-10521
(D.N.J.)
On June 13, 2018, Plaintiff Tim Faulkner filed a class action
complaint alleging securities violations against Akers Biosciences,
Inc. ("Akers"), John J. Gormally, and Gary M. Rauch ("Individual
Defendants") (together with Akers, "Defendants") on behalf of all
persons and entities who purchased publicly traded Akers securities
from May 15, 2017 through June 5, 2018. The complaint alleges
violations of Section 10(b) of the Exchange Act and Rule 10b-5
against all Defendants, and violations of Section 20(a) of the
Exchange Act against the Individual Defendants. In particular, the
complaint alleges that Defendants made false and/or misleading
statements and/or failed to disclose in its first, second, and
third quarter 2017 10-Qs and its 2017 10-K that: (1) Akers was
improperly recognizing revenue for the fiscal year ended December
31, 2017; and, (2) Akers had downplayed weaknesses in its internal
controls over financial reporting and failed to disclose the true
extent of those weaknesses. On July 10, 2018, Plaintiff and
Defendants entered into a stipulation that Defendants are not
required to respond to the complaint until the court appoints a
lead plaintiff and lead counsel for the class, and then after the
lead plaintiff chooses whether to file an amended complaint or
whether to designate the complaint as the operative complaint.
Gleason v. Akers Biosciences, Inc., No. 2:18-cv-10805
(D.N.J.)
On June 20, 2018, Plaintiff David Gleason filed a class action
complaint alleging securities violations against Akers Biosciences,
Inc. ("Akers"), John J. Gormally, and Gary M. Rauch ("Individual
Defendants") (together with Akers, "Defendants") on behalf of all
persons and entities who purchased publicly traded Akers securities
from May 15, 2017 through June 5, 2018. The complaint alleges
violations of Section 10(b) of the Exchange Act and Rule 10b-5
against all Defendants, and violations of Section 20(a) of the
Exchange Act against the Individual Defendants. In particular, the
complaint alleges that Defendants made false and/or misleading
statements and/or failed to disclose in its first, second, and
third quarter 2017 10-Qs and its 2017 10-K that: (1) Akers was
improperly recognizing revenue for the fiscal year ended December
31, 2017; and, (2) Akers had downplayed weaknesses in its internal
controls over financial reporting and failed to disclose the true
extent of those weaknesses. No Defendant has been served yet, and
no response is due at this time.
Other class action lawsuits have been threatened against the
Company and may be filed shortly. Ultimately, there will be one
class action complaint upon the appointment of a lead plaintiff and
lead Counsel.
The Company maintains D&O liability insurance coverage,
insuring both the Company and the Directors and Officers for
covered defense and indemnification, and has noticed these matters
thereunder.
Additionally, a former executive has threatened to sue the
Company, Board members, and executives under CEPA over the
termination of his employment. That statute prohibits any
retaliatory action against an employee who discloses, or threatens
to disclose to a supervisor or to a public entity any activity,
policy or practice of the employer that is a violation of a law, or
a rule or regulation. Remedies may include a counter claim for back
pay, reinstatement, compensatory and punitive damages and
attorneys' fees if appropriate. The Company will vigorously defend
any litigation brought by this former executive.
The Company intends to establish a rigorous defense of all
claims. The Company is unable to assess the potential outcome, so
no accrual for losses was made as of March 31, 2018. All legal fees
were expensed as and when incurred.
With the exception of the foregoing, we are not currently
involved in any litigation that we believe could have a materially
adverse effect on our financial condition or results of operations.
There is no action, suit, proceeding, inquiry or investigation
before or by any court, public Board, government agency,
self-regulatory organization or body pending or, to the knowledge
of the executive officers of our Company, threatened against or
affecting our Company or our Common Stock, in which an adverse
decision could have a material adverse effect.
Item 1A. Risk Factors
In addition to the risk factors in our Annual Report on Form
10-K/A, Amendment No. 1, filed with the SEC on July 13, 2018,
please see additional risk factors provided below.
The market price of our common stock is likely to be volatile
and could subject us to litigation.
The market price of our common stock is likely to be highly
volatile and could be subject to wide fluctuations in response to a
number of factors that are beyond our control, including, but not
limited to:
-- variations in our revenue and operating expenses;
-- actual or anticipated changes in the estimates of our operating results or changes in stock
market analyst recommendations regarding our ordinary shares, other comparable companies or
our industry generally;
-- market conditions in our industry and the economy as a whole;
-- developments in the financial markets and worldwide or regional economies;
-- announcements of innovations or new products or services by us or our competitors;
-- announcements by the government relating to regulations that govern our industry;
-- sales of our common stock or other securities by us or in the open market;
-- recruitment or departure of key personnel;
-- any actions taken against the Company by former executives;
-- Potential delisting from the NASDAQ Stock Market;
-- any class action lawsuits brought against the Company; and
-- changes in the market valuations of other comparable companies
In addition, if the market for biotech stocks or the stock
market in general experiences loss of investor confidence, the
trading price of our common stock could decline for reasons
unrelated to our business, financial condition or operating
results. The trading price of our shares might also decline in
reaction to events that affect other companies in our industry,
even if these events do not directly affect us. Each of these
factors, among others, could harm the value of your investment in
our common stock. In the past, following periods of volatility in
the market, securities class-action litigation has often been
instituted against companies. Such litigation, if instituted
against us, could result in substantial costs and diversion of
management's attention and resources, which could materially and
adversely affect our business, operating results and financial
condition. Specifically, on or about June 15, 2018, certain parties
have brought certain class action lawsuits against the Company, and
a former executive has threatened to sue the Company, Board
members, and executives under the New Jersey CEPA, N.J. Stat. Ann.
-- 34-19.1 over the termination of his employment. Both, the class
action lawsuits brought against the Company and CEPA action
threatened by a former executive could result in substantial costs
and diversion of management's attention and resources, which could
harm the value of your investment in our common stock and
materially and adversely affect our business, operating results and
financial condition.
A robust public market for our common stock may not develop or
be sustained, which could affect your ability to sell our common
stock or depress the market price of our common stock.
Our common stock is listed on NASDAQ, but we cannot assure you
that our common stock will continue to trade on this market or
another national securities exchange. In addition, we are unable to
predict whether an active trading market for our common stock will
develop or will be sustained.
Moreover, by way of a letter dated May 22, 2018, the Listing
Qualifications Department of the NASDAQ advised the Company that it
did not comply with NASDAQ Listing Rule 5250(c)(1) for continued
listing because NASDAQ has not received the Company's Quarterly
Report. NASDAQ had informed the Company that the Company is
required to submit a plan to regain compliance with NASDAQ's filing
requirements for continued listing within 60 calendar days of the
date of the Notice. Upon acceptance of the Company's compliance
plan, NASDAQ is permitted to grant an extension of up to 180
calendar days from the Quarterly Report's filing due date, or until
November 19, 2018, for the Company to regain compliance with NASDAQ
Listing Rule 5250(c)(1). The Company believes that its filing of
this Quarterly Report and the Amended Quarterly and Annual Reports
as discussed above have cured the potential default as to the
Company meeting the requirements to continue its listing in good
standing under NASDAQ.
On June 11, 2018, the Company received a letter from the Listing
Qualifications Department NASDAQ notifying the Company that it has
determined that the Company violated the shareholder approval
requirements of Listing Rule 5635(c). Listing Rule 5635(c) requires
shareholder approval prior to the issuance of securities when a
stock option or purchase plan is to be established or materially
amended or other equity compensation arrangement made or materially
amended, pursuant to which stock may be acquired by officers,
directors, employees or consultants.
Prior to the Company's public offering and listing on NASDAQ,
the Company's 2013 Plan was approved by its Board NASDAQ has
concluded that the 2013 Plan was materially amended on two
occasions after the Company's public offering and listing on
NASDAQ. The first amendment, as approved by the Board on January 9,
2015, increased the number of shares available under the 2013 Plan
from 400,000 to 800,000 shares and the second amendment, as
approved by the Board on October 5, 2016, increased the number of
shares under the 2013 Plan from 800,000 to 830,000 shares. The
Company has until December 10, 2018, to regain compliance with
Listing Rule 5635.
During the first quarter of 2018 the Company promptly notified
NASDAQ, as required by Listing Rule 5625, when it became aware of
its potential non-compliance with Listing Rule 5635(c). On May 4,
2018, the Staff requested additional information from the Company
with respect to such non-compliance and on May 31, 2018, the
Company responded. On June 25, 2018, the Company submitted the 5635
Compliance Plan to NASDAQ to remediate this matter. The 5635
Compliance Plan included that a proposal for shareholders of the
Company to ratify the 2013 Plan Amendments be included in the proxy
statement for the Company's 2018 annual meeting of the shareholders
of the Company and that the Company shall suspend the trading of
each share granted, and each share granted upon the exercise of any
option granted, in excess of 400,000 shares under the 2013 Plan
(the number of shares properly approved pursuant to the 2013 Plan
prior to the 2013 Plan Amendments). The 5635 Compliance Plan also
proposes to prevent the exercise of any option granted under the
2013 Plan.
If NASDAQ (i) does not believe that the filing of this Quarterly
Report and the Amended Quarterly and Annual Reports as discussed
above have cured the potential default as to the Company meeting
the requirements to continue its listing in good standing under
NASDAQ, or (ii) does not find that the 5635 Compliance Plan
acceptable to cure the Company's violation of Listing Rule 5635(c),
then we cannot assure you that our common stock will continue to
trade on this market or another national securities exchange.
The restatement of our previously issued financial statements
contained in our Forms 10-Q for the periods ended June 30, 2017 and
September 30, 2017 and the Form 10-K for the year ended December
31, 2017 may lead to additional risks and uncertainties, including
regulatory, stockholder or other actions, loss of investor
confidence and negative impacts on our stock price.
Our Audit Committee, after consultation with management and
discussing with outside counsel, external auditors and third-party
consultants, concluded that our previously issued consolidated
financial statements for the quarterly periods ended June 30, 2017
and September 30, 2017 and for the year ended December 31, 2017
should be restated. The Company determined that certain revenue
transactions did not qualify for revenue recognition under
generally accepted accounting principles, that certain obligations
were not recorded as expenses on a timely basis and that the
Company did not properly value its inventory. The Company concluded
that the impact of applying corrections for these errors was
materially different from its previously reported results under its
historical practice. As a result, the Company restated its
consolidated financial statements for the periods impacted, as more
fully described within each of the respective amended reports, as
filed on July 13, 2018. Financial information included in our
previously filed Form 10-K and our Quarterly Reports on Form 10-Q
and all earnings press releases and similar communications issued
by us, for such periods, should not be relied upon and are
superseded in their entirety by the above described amended
Quarterly and Annual reports. We are filing this Form 10-Q, which
was delayed due to the restatement, concurrently with our
aforementioned amended filings on Form 10-Q and Form 10-K.
Accordingly, this Form 10-Q includes to: (1) changes to our
Condensed Consolidated Balance Sheet and our Condensed Consolidated
Statements of Shareholders' Equity as of December 31, 2017; (2)
expanded risk factor disclosures within Part II, Item 1A, and (3)
additional disclosures and conclusions regarding Controls and
Procedures in Part II, Item 4.
As a result of the 2017 restatements and associated non-reliance
on previously issued financial information, we have become subject
to a number of additional costs and risks, including unanticipated
costs for accounting and legal fees in connection with or related
to the restatement and the remediation of our ineffective
disclosure controls and procedures and material weakness in
internal control over financial reporting. Likewise, the attention
of our management team has been diverted by these efforts. In
addition, we could also be subject to additional shareholder,
governmental, regulatory or other actions or demands in connection
with the restatement or other matters. Any such proceedings will,
regardless of the outcome, consume a significant amount of
management's time and attention and may result in additional legal,
accounting, insurance and other costs. If we do not prevail in any
such proceedings, we could be required to pay damages or settlement
costs. In addition, the restatement and related matters could
impair our reputation or could cause our customers, shareholders,
or other counterparties to lose confidence in us. Any of these
occurrences could have a material adverse effect on our business,
results of operations, financial condition and stock price.
In connection with the restatement of our financial statements
for the Relevant Periods, our management identified material
weaknesses in our internal control over financial reporting, as
described in Item 9A, "Control and Procedures" of this Form 10-K. A
material weakness is a deficiency, or combination of deficiencies
in internal controls over financial reporting that results in a
reasonable possibility that a material misstatement of our annual
or interim financial statements will not be prevented or detected
on a timely basis. Further, management determined that control
deficiencies existed with respect to certain aspects of our
historical financial reporting and, accordingly, management has
concluded that management's reports related to the effectiveness of
internal and disclosure controls may not have been correct.
A deterioration of global economic conditions may adversely
affect our industry, business and results of operations.
Disruptions in the global credit and financial markets and in
economic conditions generally may include diminished liquidity and
credit availability, a decline in consumer confidence, a decline in
economic growth, an increased unemployment rate and uncertainty
about economic stability. Such disruptions may affect businesses
such as ours in a number of ways, making it difficult to accurately
forecast and plan our future business activities. Any adverse
global economic conditions and tightening of credit in financial
markets may lead consumers to postpone spending, which may cause
our customers to cancel, decrease or delay their existing and
future orders with us. In addition, financial difficulties
experienced by our suppliers, manufacturers, distributors or
customers could result in product delays, increased accounts
receivable defaults and inventory challenges. We are unable to
predict the likely duration and severity of disruptions in the
credit and financial markets and adverse global economic
conditions.
Our ability to grow and compete in the future will be adversely
affected if adequate capital is not available to us or not
available on terms favorable to us.
Historically, our cash generated from operations has not been
sufficient to meet our expenses. We have financed our operations
principally through the raising of equity capital, debt and through
trade credit with our vendors. Our ability to continue our
operations and to pay our obligations when they become due is
contingent upon obtaining additional financing. If we are unable to
obtain sufficient amounts of additional capital, we may be required
to reduce the scope of our planned market development activities,
and/or consider reductions in personnel costs or other operating
costs. These conditions raise substantial doubt about the Company's
ability to continue as a going concern.
Obligations associated with being a public company require
significant company resources and management attention, which may
have a material adverse effect on our financial condition and
results of operations.
We are subject to the reporting requirements of the Securities
Exchange Act of 1934, as amended, or the "Exchange Act," and the
other rules and regulations of the SEC, including the
Sarbanes-Oxley Act. The Exchange Act requires, among other things,
that we file annual, quarterly and current reports with respect to
our business and financial condition and the Sarbanes-Oxley Act
requires, among other things, that we maintain effective disclosure
controls and procedures and internal control over financial
reporting. These reporting and other obligations place significant
demands on our management, administrative, operational and
accounting resources, make certain activities more time-consuming
and cause us to incur significant legal, accounting and other
expenses. In order to comply with these obligations, we may need to
upgrade our systems or create new systems, implement additional
financial and management controls, reporting systems and
procedures, expand or outsource our internal audit function, and
hire additional accounting and finance staff. Because our resources
are limited compared to many public companies, these requirement
may impose a disproportionate financial burden on us. Furthermore,
our limited management resources may exacerbate the difficulties in
complying with these reporting and other requirements and prevent
us from focusing on executing our business strategy. In addition,
if we are unable to comply with the financial reporting
requirements and other rules that apply to reporting companies, the
market price of our common stock could be adversely affected.
As an "emerging growth company" and a "smaller reporting
company" we intend to continue to take advantage of certain
exemptions from various reporting requirements that are applicable
to other public companies that are not "emerging growth companies"
or "smaller reporting companies," including, but not limited to,
not being required to comply with the auditor attestation
requirements of Section 404 of the Sarbanes-Oxley Act, reduced
disclosure obligations regarding executive compensation in our
periodic reports and proxy statements and other scaled disclosure
requirements, and exemptions from the requirements of holding a
nonbinding advisory vote on executive compensation and stockholder
approval of any golden parachute payments not previously approved.
In general, we will remain an "emerging growth company" until
December 31, 2020, although a variety of circumstances could cause
us to lose that status earlier, and will remain a "smaller
reporting company" for each fiscal year where our public float
remains below $75 million as of the last day of the second fiscal
quarter of the prior fiscal year. We intend to take advantage of
some or all of these exemptions and reduced reporting requirements
until we are no longer an "emerging growth company" and/or a
"smaller reporting company," at which time, we expect to incur
significant additional expenses and devote substantial management
effort toward ensuring compliance with these additional
requirements.
The Company's business would suffer if the Company were unable
to acquire adequate sources of supply.
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 and
disruption of these sources could have, at a minimum, a temporary
adverse effect on shipments and the financial results of the
Company. We work closely with our suppliers to ensure continuity of
supply while maintaining high quality and reliability. Any
prolonged inability to obtain certain materials or components could
have an adverse effect on the Company's financial condition or
results of operations and could result in damage to its
relationships with its customers and, accordingly, adversely affect
the Company's business.
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 solution that may involve one or more
alternative antigen suppliers and processes that may provide a path
to restoring yield levels for this product.
Negotiations are underway with multiple customers for the
Company's products and are anticipated to be completed in the near
term, but a significant delay will impact revenue projections.
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.
Item 2. Unregistered Sales of Equity Securities and Use of
Proceeds
The Company's Board of Directors authorized the issuance of
25,000 shares of Common Stock to a key employee on January 16, 2018
under the Plan.
There were no other unregistered sales of the Company's equity
securities during the quarter ended March 31, 2018, other than
those previously reported in a Current Report on Form 8-K.
Item 3. Defaults Upon Senior Securities
There has been no default in the payment of principal, interest,
sinking or purchase fund installment, or any other material
default, with respect to any indebtedness of the Company.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information.
In this section, Akers is providing additional information to
provide updates regarding recent key events in its business.
We have updated our product pipeline to reflect products
marketed and/or within our pipeline as follows:
FDA Clearance
Required FDA Clearance
Prescription Status
Product Platform Marketed/Pipe line Use/OTC Obtained/Needed Description
------------------ -------- ------------------ ------------------ ------------------ ------------------
BreathScan (TM) MPC Marketed OTC Obtained Disposable breath
alcohol detector
BreathScan (R) PRO MPC Marketed OTC Obtained Quantitative
breath alcohol
detection system
METRON (R) MPC Marketed Health and n/a Disposable breath
wellness ketone device to
monitor ketosis
BreathScan Lync MPC Marketed Health and n/a Non-invasive,
wellness quantitative
measurement of
biological markers
for health and
wellness
PIFA (R) PIFA Marketed Prescription Use Obtained Rapid tests for
Heparin/PF4 & PIFA Heparin/PF4
PLUSS (R) PF4 antibodies to
detect an allergy
to the widely used
blood thinner,
Heparin
PIFA PLUSS (R) PIFA Pipeline Prescription Use Required/withdrawn Rapid tests for
Chlamydia on May 29, 2018 the most prevalent
*See explanation sexually
below. transmitted
disease
seraSTAT (R) seraSTAT Marketed Prescription Use Obtained Rapid Blood Cell
Separator,
marketed under the
brand name
seraSTAT (R) ,
further
accelerates
the rate at which
a test result is
obtained as the
often-required
sample preparation
step
is abbreviated
drastically.
Tri-Cholesterol REA Marketed OTC Obtained Rapid test for
"Check" (R) Total and high
density
lipoprotein
cholesterol and
estimates low
density lipo
protein
BreathScan OxiChek MPC Marketed Health and n/a Breath test for
wellness oxidative stress
using the Lync
reader and digital
app
BreathScan MPC Pipeline Health and n/a Breath test for
KetoChek wellness ketosis using the
Lync reader and
digital app
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 (R) , 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 (R) 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 (R) 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.
Item 6. Exhibits.
31.1 Certification by the Principal Executive Officer of Registrant pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002 (Rule 13a-14(a) or Rule 15d-14(a)). *
31.2 Certification by the Principal Financial Officer of Registrant pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002 (Rule 13a-14(a) or Rule 15d-14(a)). *
32.1 Certification by the Principal Executive Officer pursuant to 18 U.S.C. 1350 as adopted pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002. *
32.2 Certification by the Principal Financial Officer pursuant to 18 U.S.C. 1350 as adopted pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002. *
101.INS XBRL Instance Document
101.SCH XBRL Taxonomy Extension Schema
101.CAL XBRL Taxonomy Extension Calculation Linkbase
101.DEF XBRL Taxonomy Extension Definition Linkbase
101.LAB XBRL Taxonomy Extension Label Linkbase
101.PRE XBRL Taxonomy Extension Presentation Linkbase
* Filed herewith
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
AKERS BIOSCIENCES, INC.
Date: July 13, 2018 By: /s/ John J. Gormally
-----------------------------------
Name: John J. Gormally
Title: Chief Executive Officer
(Principal Executive Officer)
Date: July 13, 2018 By: /s/ Gary M. Rauch
-----------------------------------
Name: Gary M. Rauch
Title: Vice President, Finance & Treasurer
(Principal Financial Officer)
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER
PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 302 OF
THE SARBANES-OXLEY ACT OF 2002
I, John J. Gormally, certify that:
1. I have reviewed this Form 10-Q of Akers Biosciences, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact
or omit to state a material fact necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to the period covered by
this report;
3. Based on my knowledge, the financial statements, and other financial information included
in this report, fairly present in all material respects the financial condition, results of
operations and cash flows of the registrant as of, and for, the periods presented in this
report;
4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining
disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e))
and internal control over financial reporting (as defined in Exchange Act Rules 13-a-15(f)
and 15d-15(f)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures
to be designed under our supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over
financial reporting to be designed under our supervision, to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements
for external purposes in accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented
in this report our conclusions about the effectiveness of the disclosure controls and procedures,
as of the end of the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the registrant's internal control over financial reporting
that occurred during the registrant's most recent fiscal quarter (the registrant's fourth
fiscal quarter in the case of an annual report) that has materially affected, or is reasonably
likely to materially affect, the registrant's internal control over financial reporting; and
5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent
evaluation of internal control over financial reporting, to the registrant's auditors and
the audit committee of the registrant's Board of Directors (or persons performing the equivalent
functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal
control over financial reporting which are reasonably likely to adversely affect the registrant's
ability to record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a
significant role in the registrant's internal control over financial reporting.
Date: July 13, 2018 By: /s/ John J. Gormally
---------------------------
John J. Gormally
Principal Executive Officer
Akers Biosciences, Inc.
CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER
PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 302 OF
THE SARBANES-OXLEY ACT OF 2002
I, Gary M. Rauch, certify that:
1. I have reviewed this Form 10-Q of Akers Biosciences, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact
or omit to state a material fact necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to the period covered by
this report;
3. Based on my knowledge, the financial statements, and other financial information included
in this report, fairly present in all material respects the financial condition, results of
operations and cash flows of the registrant as of, and for, the periods presented in this
report;
4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining
disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e))
and internal control over financial reporting (as defined in Exchange Act Rules 13-a-15(f)
and 15d-15(f)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures
to be designed under our supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over
financial reporting to be designed under our supervision, to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements
for external purposes in accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented
in this report our conclusions about the effectiveness of the disclosure controls and procedures,
as of the end of the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the registrant's internal control over financial reporting
that occurred during the registrant's most recent fiscal quarter (the registrant's fourth
fiscal quarter in the case of an annual report) that has materially affected, or is reasonably
likely to materially affect, the registrant's internal control over financial reporting; and
5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent
evaluation of internal control over financial reporting, to the registrant's auditors and
the audit committee of the registrant's Board of Directors (or persons performing the equivalent
functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal
control over financial reporting which are reasonably likely to adversely affect the registrant's
ability to record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a
significant role in the registrant's internal control over financial reporting.
Date: July 13, 2018 By: /s/ Gary M. Rauch
---------------------------
Gary M. Rauch
Principal Financial Officer
Akers Biosciences, Inc.
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906 OF
THE SARBANES-OXLEY ACT OF 2002
In connection with this Quarterly Report of Akers Biosciences,
Inc. (the "Company"), on Form 10-Q for the period ended March 31,
2018, as filed with the U.S. Securities and Exchange Commission on
the date hereof, I, John J. Gormally, Principal Executive Officer
of the Company, certify to the best of my knowledge, pursuant to 18
U.S.C. Sec. 1350, as adopted pursuant to Sec. 906 of the
Sarbanes-Oxley Act of 2002, that:
(1) Such Quarterly Report on Form 10-Q for the period ended March 31, 2018, fully complies with
the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in such Quarterly Report on Form 10-Q for the period ended March
31, 2018, fairly presents, in all material respects, the financial condition and results of
operations of the Company.
Date: July 13, 2018 By: /s/ John J. Gormally
---------------------------
John J. Gormally
Principal Executive Officer
Akers Biosciences, Inc.
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906 OF
THE SARBANES-OXLEY ACT OF 2002
In connection with this Quarterly Report of Akers Biosciences,
Inc. (the "Company"), on Form 10-Q for the period ended March 31,
2018, as filed with the U.S. Securities and Exchange Commission on
the date hereof, I, Gary M. Rauch, Principal Financial Officer of
the Company, certify to the best of my knowledge, pursuant to 18
U.S.C. Sec. 1350, as adopted pursuant to Sec. 906 of the
Sarbanes-Oxley Act of 2002, that:
(1) Such Quarterly Report on Form 10-Q for the period ended March 31, 2018, fully complies with
the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in such Quarterly Report on Form 10-Q for the period ended March
31, 2018, fairly presents, in all material respects, the financial condition and results of
operations of the Company.
Date: July 13, 2018 By: /s/ Gary M. Rauch
---------------------------
Gary M. Rauch
Principal Financial Officer
Akers Biosciences, Inc.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
QRFUVSVRWOABAAR
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