THOROFARE, N.J., Aug. 14, 2018 (GLOBE NEWSWIRE) -- 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 three months and six months ended June 30, 2018. A Form 10-Q containing the full financial statements is available for viewing on the Company's website at www.akersbio.com or www.sec.gov.
Q2 & H1 Financial Summary:
- Q2 total revenue $526,601 (Q2 2017: $1,072,861)
- Revenue from flagship PIFA Heparin PF/4 Rapid Assay products decreased by 17% to $356,082 (Q2 2017: $426,747), but increased by 37% against the first quarter of 2018 – the Company continued to experience lower yields in the process of extracting the antigen used to produce these products during Q2, resulting in production under target levels, and backorders
- Revenue from breathalyzer product sales utilizing MPC Biosensor technology increased by 53% to $106,680 (Q2 2017: 69,848), driven by sales of Metron, a disposable ketones breath test, and BreathScan Alcohol tests
- H1 total revenue $829,076 (H1 2017: $1,740,111)
- Revenue from flagship PIFA Heparin PF/4 Rapid Assay products decreased by 38% to $616,066 (H1 2017: $987,668)
- Revenue from breathalyzer product sales utilizing MPC Biosensor technology decreased by 19% to $125,630 (H1 2017: $155,507)
- Q2 gross profit margin reduced to 42% (Q2 2017: 73%), principally on account of the decline in revenue against a base of certain fixed costs within product cost of sales, but was a significant improvement on the first quarter of 2018
- H1 gross profit margin was 28% (H1 2017: 68%)
- Q2 overall expenses increased by 47%
- Administrative expenses increased by 89% to $1,565,602 (Q2 2017: $829,929)
- Sales and Marketing expenses increased by 13% to $469,469 (Q2 2017: $416,391)
- Research and Development expenses decreased by 17% to $259,124 (Q2 2017: $313,835)
- H1 overall expenses increased by 26%
- Administrative expenses increased by 53% to $2,481,134 (H1 2017: $1,620,457)
- Sales and Marketing expenses decreased by 4% to $969,620 (H1 2017: $1,005,326)
- Research and Development expenses increased by 6% to $699,094 (H1 2017: $662,277)
- Q2 net loss attributable to shareholders $2,067,453 (Q2 2017: $818,008)
- H1 net loss attributable to shareholders $3,927,444 (H1 2017: $2,167,279)
- Cash and marketable securities at June 30, 2018 of $8,753,538 (31 December 2017: $5,450,039)
Q2 & H1 Operational Summary:
- Significant expansion of outsourced US sales and marketing capabilities for PIFA Heparin/PF4 Rapid Assay products through independent sales representatives (ISRs). Since the start of 2018, Akers Bio has developed coverage through ISRs in 39 of the 50 United States, covering more than 75 per cent of the country’s total population
- In May 2018, after extensive review internally and with the FDA, the Company withdrew its initial 510(k) application for the PIFA Chlamydia rapid assay – Company currently evaluating the feasibility and marketability of this product in order to determine when and if the 510(k) application will be resubmitted
- 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 periods, 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
John J. Gormally, Chief Executive Officer, commented:
“Despite the manufacturing challenges associated with lower antigen yields experienced in the production of our core PIFA Heparin/PF4 Rapid Assay products during the quarter, demand and interest in these tests remains robust. The Company’s relationship-building initiatives with our partners is beginning to deliver a measurable increase in product trials and adoptions. The antigen yield levels are improving in the current quarter and backorders are being filled.
“Significant efforts have been made in recent months to expand our outsourced marketing capabilities for PIFA Heparin/PF4 Rapid Assay products through independent sales representatives (ISRs) with relevant relationships, particularly among prospective clinical end-users of these tests, including surgeons. In fact, since the start of 2018, Akers Bio has developed coverage through ISRs in 39 of the 50 United States, covering more than 75 per cent of the country’s total population.
“Following the recent review of the scientific feasibility and marketability of products within our development pipeline, we continue R&D activities for our more focused new product development pipeline. This includes PIFA PLUSS Chlamydia Rapid Assay, for which we are continuing to evaluate feasibility and marketability in order to determine when and if the 510(k) application will be resubmitted; as well as BreathScan KetoChek, an Akers Wellness product for nutritional ketosis.
“Our primary commercial focus is to continue to expand the global distribution of our PIFA Heparin PF/4 Rapid Assay products – the backbone of the Company - as well as commercialization efforts associated with other tests including our Tri-Cholesterol assay being sold under the “First Check” brand. The leadership team remains focused on building long-term shareholder value from our products and technologies.”
Summary of Statements of Operations for the Three Months Ended June 30, 2018 and 2017
Revenue
Akers’ revenue for the three months ended June 30, 2018 totaled $526,601, a 51% decrease from the same period in 2017. The table below summarizes our revenue by product line for the three months ended June 30, 2018 and 2017 as well as the percentage of change year-over-year:
| For the Three Months Ended June 30, | Percent | |||||||||||
| Product Lines | 2018 | 2017 | Change | |||||||||
| Particle ImmunoFiltration Assay (“PIFA”) | $ | 356,082 | $ | 426,747 | (17 | )% | ||||||
| MicroParticle Catalyzed Biosensor (“MPC”) | 106,680 | 69,848 | 53 | % | ||||||||
| Rapid Enzymatic Assay (“REA”) | 45,100 | - | 0 | % | ||||||||
| Other | 18,739 | 576,266 | (97 | )% | ||||||||
| Total Revenue | $ | 526,601 | $ | 1,072,861 | (51 | )% | ||||||
Revenue from the Company’s PIFA Heparin/PF4 Rapid Assay products decreased 17% to $356,082 (2017: $426,747) during the three months ended June 30, 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 June 30, 2018, we experienced lower yields in the process of extracting antigen from the 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, and the Company’s ISRs. Domestic sales for the three months ended June 30, 2018, of our distributors, Cardinal Health, Thermo Fisher Scientific and Diagnostica Stago, accounted for $327,556 of the total PIFA Heparin/PF4 Rapid Assay sales as compared to $328,076 for the same period of 2017.
The Company’s MPC product sales increased by 53% to $106,680 (2017: $68,848) during the three months ended June 30, 2018. Sales of the Company’s Metron and BreathScan Alcohol products accounted for the revenue.
The Company’s REA products generated $45,100 (2017: $-) during the three months ended June 30, 2018.
Other revenue decreased to $18,739 (2017: $576,266) during the three months ended June 30, 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. During the three months ended June 30, 2017, the Company received an initial order for manufacturing components from NovoTek totaling $500,000. NovoTek plans to utilize these components along with additional materials to be purchased in a future period to assemble PIFA Heparin/PF4 products in either the Peoples Republic of China or Poland.
Gross Margin
The Company’s gross margin declined to 42% (2017: 73%) for the three months ended June 30, 2018, principally on account of the decline in revenue against a base of certain fixed costs within product cost of sales. These fixed costs within product cost of sales consisted principally of direct personnel costs, manufacturing and warehousing space and depreciation of equipment. Within these fixed costs, direct personnel costs increased during the period to $110,629 (2017: $59,612).
Furthermore, during the three months ended June 30, 2018, we incurred additional product cost of sales of approximately $8,000 in our evaluation, testing and production efforts for the extraction of antigen from platelets used to produce our PIFA Heparin product.
As a result, cost of sales for the three months ended June 30, 2018 increased to $302,826 (2017: $290,591). Direct cost of sales increased to 31% of product revenue while other cost of sales increased to 26% for the three months ended June 30, 2018 as compared to 13% and 14% respectively for the same period in 2017 as described above.
Direct cost of sales for the three-month period ended June 30, 2018 were $164,712 (2017: $143,545). Other cost of sales for the three months ended June 30, 2018 were $138,114 (2017: $147,046).
General and Administrative Expenses
General and administrative expenses for the three months ended June 30, 2018, totaled $1,565,602, which was an 89% increase as compared to $829,929 for the three months ended June 30, 2017.
The table below summarizes our general and administrative expenses for the three months ended June 30, 2018 and 2017 as well as the percentage of change year-over-year:
| For the Three Months Ended June 30, | Percent Change | |||||||||||
| Description | 2018 | 2017 | ||||||||||
| Personnel Costs | $ | 192,792 | $ | 223,944 | (14 | )% | ||||||
| Professional Service Costs | 927,812 | 354,570 | 162 | % | ||||||||
| Stock Market & Investor Relations Costs | 145,771 | 117,253 | 24 | % | ||||||||
| Other General and Administrative Costs | 299,227 | 134,162 | 123 | % | ||||||||
| Total General and Administrative Expense | $ | 1,565,602 | $ | 829,929 | 89 | % | ||||||
Personnel expenses decreased by 14% for the three months ended June 30, 2018 as compared to the same period of 2017. A reduction in salaries, wages and bonuses to $162,756 (2017: $177,657) and employee benefit expenses of $4,994 (2017: $17,326) accounted for the savings.
Professional service costs increased 162% for the three months ended June 30, 2018 as compared to the same period of 2017. A significant increase in legal fees ($605,175 (2017: $171,511)) and accounting and audit expenses ($236,042 (2017: $104,000)) resulted in the change. The increase in the legal and accounting fees were principally in connection with our Board’s recent investigation and the resulting restatement of our previously issued financials, as well in connection with litigation matters.
Stock exchange fees totaling $45,819 (2017: $12,247) were the major contributors to the 24% increase in stock market and investor relations costs for the three months ended June 30, 2018.
Other general and administrative expenses increased by 123%. This increase is the result of increases in bad debts expense $125,500 (2017: $5,380) and rent and operating expenses of $79,361 (2017: $42,525) for the rental of the Ramsey, New Jersey satellite office.
Sales and Marketing Expenses
Sales and marketing expenses for the three months ended June 30, 2018 totaled $469,469 which was a 13% increase compared to $416,391 for the three months ended June 30, 2017.
The table below summarizes our sales and marketing expenses for the three months ended June 30, 2018 and 2017 as well as the percentage of change year-over-year:
| For the Three Months Ended June 30, | ||||||||||||
| Description | 2018 | 2017 | Percent Change | |||||||||
| Personnel Costs | $ | 266,889 | $ | 181,653 | 47 | % | ||||||
| Professional Service Costs | 69,065 | 72,079 | (4 | )% | ||||||||
| Royalties and Outside Commission Costs | 69,983 | 103,702 | (33 | )% | ||||||||
| Other Sales and Marketing Costs | 63,532 | 58,957 | 8 | % | ||||||||
| Total Sales and Marketing Expenses | $ | 469,469 | $ | 416,391 | 13 | % | ||||||
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 June 30, 2017 to 5 as of June 30, 2018.
Personnel costs increased in the three months ended June 30, 2018 as compared to the same period of 2017. A increase in compensation, bonuses, commissions and severance payments to $219,754 (2017: $153,273) primarily due to changes in the bonus and compensation plan and adjustments to staffing.
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 June 30, 2018, this royalty totaled $27,082 (2017: $61,502).
The Company recognized reductions in computer expenses ($11,709 (2017: $21,099)) plus smaller reductions in several other operating categories which were offset by an increase in travel expenses ($33,210 (2017: $21,065)) that resulted in an 8% increase in other sales and marketing costs.
Research and Development
Research and development expenses for the three months ended June 30, 2018 totaled $259,123, which was a 17% decrease as compared to $313,835 for the three months ended June 30, 2017.
The table below summarizes our research and development expenses for the three months ended June 30, 2018 and 2017 as well as the percentage of change year-over-year:
| For the Three Months Ended June 30, | ||||||||||||
| Description | 2018 | 2017 | Percent Change | |||||||||
| Personnel Costs | $ | 176,202 | $ | 227,887 | (23 | )% | ||||||
| Clinical Trial Costs | 575 | 150 | 283 | % | ||||||||
| Professional Service Costs | 48,620 | 18,588 | 162 | % | ||||||||
| Other Research and Development Costs | 33,727 | 67,210 | (50 | )% | ||||||||
| Total Research and Development Expenses | $ | 259,124 | $ | 313,835 | (17 | )% | ||||||
Personnel costs decreased 23% during the three months ended June 30, 2018 as compared to the same period of 2017. 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 resulting in the decline in personnel costs.
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 $25,304 (2017: $5,630) and other general and regulatory consulting fees totaled $23,316 (2017: $12,848) in the three months ended June 30, 2018.
Decreases in laboratory supplies ($10,665 (2017: $34,124)) and the consumption of raw materials ($1,888 (2017: $11,851)) resulted in a decrease of 50% for other research and development costs during the three months ended June 30, 2018.
Other Income and Expense
Other income, net of expense for the three months ended June 30, 2018 totaled $45,744, which was a 1,624% increase as compared to $2,654 for the three months ended June 30, 2017.
The table below summarizes our other income and expenses for the three months ended June 30, 2018 and 2017 as well as the percentage of change year-over-year:
| For the Three Months Ended June 30, | ||||||||||||
| Description | 2018 | 2017 | Percent Change | |||||||||
| Currency Translation Loss | $ | (3,029 | ) | $ | (978 | ) | 210 | % | ||||
| Realized Gains on Investments | (4,400 | ) | 605 | (827 | )% | |||||||
| Interest and Dividends | 53,173 | 3,027 | 1,657 | % | ||||||||
| Total Other Income, Net of Expenses | $ | 45,744 | $ | 2,654 | 1,624 | % | ||||||
Losses associated with foreign currency transactions totaled $3,029 during the three months ended June 30, 2018 as compared to a loss of $978 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 $48,773 (2017: $3,632). 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 June 30, 2018 resulting in the increase in investment income.
Summary of Statements of Operations for the Six Months Ended June 30, 2018 and 2017
Revenue
Akers’ revenue for the six months ended June 30, 2018 totaled $829,076, a 52% decrease from the same period in 2017. The table below summarizes our revenue by product line for the six months ended June 30, 2018 and 2017 as well as the percentage of change year-over-year:
| For the Six Months Ended June 30, | ||||||||||||
| Product Lines | 2018 | 2017 | Percent Change | |||||||||
| Particle ImmunoFiltration Assay (“PIFA”) | $ | 616,066 | $ | 987,668 | (38 | )% | ||||||
| MicroParticle Catalyzed Biosensor (“MPC”) | 125,630 | 155,507 | (19 | )% | ||||||||
| Rapid Enzymatic Assay (“REA”) | 55,000 | - | - | |||||||||
| Other | 32,380 | 596,936 | (95 | )% | ||||||||
| Total Revenue | $ | 829,076 | $ | 1,740,111 | (52 | )% | ||||||
Revenue from the Company’s PIFA Heparin/PF4 Rapid Assay products decreased 38% to $616,066 (2017: $987,668) during the six months ended June 30, 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 six months ended June 30, 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, Diagnostica Stago and the Company’s ISRs. Domestic sales for the six months ended June 30, 2018, of our distributors, Cardinal Health, Thermo Fisher Scientific and Diagnostica Stago accounted for $537,027 of the total PIFA Heparin/PF4 Rapid Assay sales as compared to $765,653 for the same period of 2017.
The Company’s MPC product sales decreased by 19% to $125,630 (2017: $155,508) during the six months ended June 30, 2018. Sales of the Company’s Metron and BreathScan Alcohol products accounted for the revenue.
The Company’s REA products generated $55,000 (2017: $-) during the six months ended June 30, 2018. The Company’s re-introduced Tri-Cholesterol product is produced with this technology.
Other revenue decreased to $32,380 (2017: $596,935) during the six months ended June 30, 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. During the six months ended June 30, 2017, the Company received an initial order for manufacturing components from NovoTek totaling $500,000. NovoTek plans to utilize these components along with additional materials to be purchased in a future period to assemble PIFA Heparin/PF4 products in either the Peoples Republic of China or Poland.
Gross Margin
The Company’s gross margin declined to 28% (2017: 68%) for the six months ended June 30, 2018 principally on account of the decline in revenue against a base of certain fixed costs within product cost of sales. These fixed costs within product cost of sales consisted principally of direct personnel costs, manufacturing and warehousing space, depreciation of equipment. Within these fixed costs, direct personnel costs increased during the period to $207,453 (2017: $124,965).
Furthermore, during the six months ended June 30, 2018, we incurred additional product cost of sales of approximately $19,200 in our evaluation, testing and production efforts for the extraction of antigen from platelets used to produce our PIFA Heparin product.
As a result, cost of sales for the six months ended June 30, 2018 increased to $600,326 (2017: $549,312). Direct cost of sales increased to 36% of product revenue while other cost of sales increased to 36% for the six months ended June 30, 2018 as compared to 15% and 17% respectively for the same period in 2017 as described above.
Direct cost of sales for the six -month period ended June 30, 2018 were $297,365 (2017: $249,673). Other cost of sales for the six months ended June 30, 2018 were $302,961 (2017: $299,639).
General and Administrative Expenses
General and administrative expenses for the six months ended June 30, 2018, totaled $2,481,135, which was a 53% increase as compared to $1,620,457 for the six months ended June 30, 2017.
The table below summarizes our general and administrative expenses for the six months ended June 30, 2018 and 2017 as well as the percentage of change year-over-year:
| For the Six Months Ended June 30, | ||||||||||||
| Description | 2018 | 2017 | Percent Change | |||||||||
| Personnel Costs | $ | 499,727 | $ | 558,471 | (11 | )% | ||||||
| Professional Service Costs | 1,231,750 | 546,322 | 125 | % | ||||||||
| Stock Market & Investor Relations Costs | 259,937 | 199,639 | 30 | % | ||||||||
| Other General and Administrative Costs | 489,721 | 316,025 | 55 | % | ||||||||
| Total General and Administrative Expense | $ | 2,481,135 | $ | 1,620,457 | 53 | % | ||||||
Personnel expenses decreased by 11% for the six months ended June 30, 2018 as compared to the same period of 2017. A reduction in salaries, wages and bonuses to $406,697 (2017: $455,113) and employee benefit expenses of $20,739 (2017: $31,612) accounted for the savings.
Professional service costs increased by 125% for the six months ended June 30, 2018 as compared to the same period of 2017. A significant increase in legal fees ($883,451 (2017: $310,198)) and accounting and audit services ($236,042 (2017: $104,000)) were offset partially by a decrease in engineering fees $14,658 (2017: $56,794). The increase in the legal and accounting fees were principally in connection with our Board’s recent investigation and the resulting restatement of our previously issued financials, as well in connection with litigation matters.
Stock exchange fees totaled $116,001 (2017: $106,687) and transfer agent fees of $34,308 (2017: $21,124) were the major contributors to the 30% increase in stock market and investor relations costs for the six months ended June 30, 2018.
Other general and administrative expenses increased by 55%. This increase is the result of increases in bad debts expenses of $125,500 (2017: $47,741), rent and operating expenses of $154,270 (2017: $87,778) for the addition of the Ramsey, New Jersey satellite office and insurance expenses of $95,752 (2017: $76,580).
Sales and Marketing Expenses
Sales and marketing expenses for the six months ended June 30, 2018 totaled $969,620 which was a 4% decrease compared to $1,005,326 for the six months ended June 30, 2017.
The table below summarizes our sales and marketing expenses for the six months ended June 30, 2018 and 2017 as well as the percentage of change year-over-year:
| For the Six Months Ended June 30, | ||||||||||||
| Description | 2018 | 2017 | Percent Change | |||||||||
| Personnel Costs | $ | 588,598 | $ | 517,485 | 14 | % | ||||||
| Professional Service Costs | 140,623 | 137,126 | 3 | % | ||||||||
| Royalties and Outside Commission Costs | 97,838 | 148,836 | (34 | )% | ||||||||
| Other Sales and Marketing Costs | 142,561 | 201,879 | (29 | )% | ||||||||
| Total Sales and Marketing Expenses | $ | 969,620 | $ | 1,005,326 | (4 | )% | ||||||
Personnel costs increased in the six months ended June 30, 2018 as compared to the same period of 2017. This was due to an increase in compensation, bonuses and commissions and severance payments to $476,106 (2017: $446,542) and employee benefit expenses of $27,327 (2017: $13,075) primarily due to changes in the bonus and compensation plan and adjustments to staffing.
During the six months ended June 30, 2018, the ChubeWorkx royalty totaled $58,771 (2017: $93,781) and commissions to IMRs were $39,067 (2017: $55,055) which contributed to the decline in royalty and outside commission costs during the six months ended June 30, 2018.
The Company recognized significant reductions in advertising expenses ($12,167 (2017: $54,700)) and trade show expenses ($885 (2017: $30,742)) plus smaller reductions in several other operating categories was offset by an increase in travel expenses ($60,921 (2017: $50,923)) that resulted in a 29% reduction in other sales and marketing costs.
Research and Development
Research and development expenses for the six months ended June 30, 2018 totaled $699,094, which was a 6% increase as compared to $662,277 for the six months ended June 30, 2017.
The table below summarizes our research and development expenses for the six months ended June 30, 2018 and 2017 as well as the percentage of change year-over-year:
| For the Six Months Ended June 30, | ||||||||||||
| Description | 2018 | 2017 | Percent Change | |||||||||
| Personnel Costs | $ | 475,415 | $ | 512,837 | (7 | )% | ||||||
| Clinical Trial Costs | 1,480 | 300 | 393 | % | ||||||||
| Professional Service Costs | 137,896 | 47,711 | 189 | % | ||||||||
| Other Research and Development Costs | 84,303 | 101,429 | (17 | )% | ||||||||
| Total Research and Development Expenses | $ | 699,094 | $ | 662,277 | 6 | % | ||||||
Personnel costs decreased 7% during the six months ended June 30, 2018 as compared to the same period of 2017. 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 resulting in the decline in personnel costs.
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 $97,800 (2017: $23,335), fees for the other general and regulatory consulting fees totaled $40,096 (2017: $21,503) in the six months ended June 30, 2018.
Decreases in laboratory supplies ($26,306 (2017: $42,183)) and travel expenses ($5,067 (2017: $19,593)) resulted in a decrease of 17% for other research and development costs during the six months ended June 30, 2018.
Other Income and Expense
Other income, net of expense for the six months ended June 30, 2018 totaled $79,209, which was a 410% increase as compared to $15,536 for the six months ended June 30, 2017.
The table below summarizes our other income and expenses for the six months ended June 30, 2018 and 2017 as well as the percentage of change year-over-year:
| For the Six Months Ended June 30, | ||||||||||||
| Description | 2018 | 2017 | Percent Change | |||||||||
| Currency Translation Gain/(Loss) | $ | (5,904 | ) | $ | 9,367 | (163 | )% | |||||
| Realized Gains on Investments | (4,401 | ) | 1,656 | (366 | )% | |||||||
| Interest and Dividends | 89,514 | 4,513 | 1,883 | % | ||||||||
| Total Other Income, Net of Expenses | $ | 79,209 | $ | 15,536 | 410 | % | ||||||
Losses associated with foreign currency transactions totaled $5,904 during the six months ended June 30, 2018 as compared to a gain of $9,367 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 $85,113 (2017: $6,169). 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 June 30, 2018 resulting in the increase in investment income.
Income Taxes
As of June 30, 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 six months ended June 30, 2018 and 2017, the Company generated a net loss attributable to shareholders of $3,927,444 and $2,167,279, respectively. As of June 30, 2018 and December 31, 2017, the Company has an accumulated deficit of $108,773,291 and $104,845,847 and had cash (excluding restricted cash) and marketable securities totaling $8,253,538 and $5,450,039, respectively.
Our primary focus is to expand the global distribution of our PIFA Heparin PF/4 rapid assays. The Company continues commercialization of its BreathScan OxiChek, BreathScan Lync Readers, METRON, BreathScan Alcohol detection devices and the Tri-Cholesterol assay and development activities for PIFA PLUSS Chlamydia rapid assay and BreathScan KetoChek products.
We expect to continue to incur losses from operations for the near-term and these losses could be significant as we incur product development, clinical and regulatory activities, contract consulting and other product development and commercialization related expenses. We expect that our current working capital position will be sufficient to meet our estimated cash needs for at least the next twelve months. We are closely monitoring our cash balances, cash needs and expense levels. The accompanying financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that might result in the possible inability of the Company to continue as a going concern.
We expect that our primary expenditures will be to continue development of BreathScan KetoChek via the enrollment of patients in clinical trials.to support performance claims and generate studies in peer-reviewed journals to support product marketing. We will also continue to support commercialization and marketing activities of in-line products PIFA Heparin/PF4 rapid assays, PIFA PLUSS® PF4, breath alcohol detectors, METRON BreathScan OxiChek and BreathScan Lync Readers globally. Based upon our experience, clinical trial and related regulatory expenses can be significant costs. Steps to achieve commercialization of emerging products will be an ongoing and evolving process with expected improvements and possible subsequent generations being evaluated for commercialized and emerging tests. Should we be unable to achieve FDA clearance for products that require such regulatory “approval”, develop performance characteristics for rapid tests that satisfy market needs, or generate sufficient revenue from commercialized products, we would need to rely on other business or product opportunities to generate revenue and costs that we have incurred for the patents may be deemed impaired.
Capital expenditures for the six months ended June 30, 2018 were $37,698 (2017: $37,191). Capital expenditures, primarily for production, laboratory and facility improvement costs for the year ending December 31, 2018 are expected to be approximately $60,000. 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.
Our net cash consumed by operating activities totaled $3,817,892 during the six months ended June 30, 2018. Cash was consumed by the loss of $3,927,444 plus non-cash adjustments of $112,903 for depreciation and amortization of non-current assets, $3,469 for the amortization of deferred compensation, $32,283 for the reserve and write-off for obsolete inventory, $97,000 for the reserve and write-off of doubtful accounts, $10,629 for share based compensation to employees and $12,545 for share based compensation to non-employees less $16,332 for accrued interest and dividends on marketable securities. For the six months ended June 30, 2018, decreases in trade receivables of $455,048, prepaid expenses – related party of $26,468 and an increase in trade and other payables of $89,964 provided cash, primarily related to routine changes in operating activities. A net increase in deposits and other receivables of $13,698, deposits and other receivables – related party of $30,243, inventory of $99,220, prepaid expenses of $548,144, and a decrease in trade and other payables – related party of $23,120 consumed cash from operating activities.
Our net cash consumed by operating activities totaled $2,593,231 during the six months ended June 30, 2017. Cash was consumed by the loss of $2,167,279 plus non-cash adjustments of $121,381 for depreciation and amortization of non-current assets, $21,542 for the write-off and reserve for obsolete inventory, $46,239 for the reserve and write-off of doubtful accounts, $15,864 for the fair value of restricted common stock issued for services and $12,367 for share-based compensation less $1,001 for accrued interest and dividends on marketable securities. For the six months ended June 30, 2017, decreases in deposits and other receivables of $10,692, trade receivables – related parties of $31,892, prepaid expenses of $20,752, prepaid expenses – related party of $46,890, and an increase in trade and other payables of $38,278 provided cash, primarily related to routine changes in operating activities. A net increase in trade receivables of $372,502, inventories of $213,860 and other assets of $4,330 and decreases trade and other payables – related party of $200,156 consumed cash from operating activities.
Investing and Financing Activities
The Company’s net cash provided by investing and financing activities totaled $4,155,423 (2017: $2,717,706) during the six months ended June 30, 2018. Cash of $5,306,452 (2017: $2,742,359) was consumed by capital expenditures and the purchase of marketable securities. Proceeds from the sale of marketable securities contributed cash of $2,306,675 (2017: $1,745,554) 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 $7,155,200 (2017: $3,714,511) for the six months ended June 30, 2018.
Enquiries:
Akers Biosciences, Inc.
John J. Gormally, Chief Executive Officer
Tel. +1 856 848 8698
Vigo Communications (Global Public Relations)
Ben Simons / Fiona Henson
Tel. +44 (0)20 7390 0234
Email: akers@vigocomms.com
About Akers Biosciences, Inc.
Akers Bio develops, manufactures, and supplies rapid screening and testing products designed to deliver quicker and more cost-effective healthcare information to healthcare providers and consumers. The Company has advanced the science of diagnostics while responding to major shifts in healthcare through the development of several proprietary platform technologies. The Company's state-of-the-art rapid diagnostic assays can be performed virtually anywhere in minutes when time is of the essence. The Company has aligned with major healthcare companies and high volume medical product distributors to maximize product offerings, and to be a major worldwide competitor in diagnostics.
Additional information on the Company and its products can be found at www.akersbio.com. Follow us on Twitter @AkersBio.
Cautionary Note Regarding Forward Looking Statements
Statements contained herein that are not based upon current or historical fact are forward-looking in nature and constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements reflect the Company's expectations about its future operating results, performance and opportunities that involve substantial risks and uncertainties. Such statements may include, without limitation, statements with respect to the Company’s plans, compliance with the requirements of various regulatory agencies and certain NASDAQ Stock Market listing rules, objectives, projections, expectations and intentions and other statements identified by words such as “projects,” “may,” “will,” “could,” “would,” “should,” “believes,” “expects,” “anticipates,” “estimates,” “intends,” “plans,” “potential” or similar expressions, as they relate to the Company, its subsidiaries, or its management. These statements are based upon the current beliefs and expectations of the Company’s management and are subject to significant risks and uncertainties, including those detailed in the Company’s filings with the Securities and Exchange Commission. Actual results, performance, prospects, and opportunities to may differ materially from those set forth in, or implied by, the forward-looking statements. These forward-looking statements involve certain risks and uncertainties that are subject to change based on various factors (many of which are beyond the Company’s control). The Company undertakes no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by applicable law.