TMCnet News
Akers Biosciences Announces Q3 2017 Earnings
Revenues up 10% as Breathalyzers and Cholesterol Tests Begin to Contribute
THOROFARE, N.J, Nov. 15, 2017 (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 third quarter ended September 30, 2017. The Form 10-Q containing the full financial statements for the three months and six months ended September 30, 2017 is available for viewing on the Company's website at www.akersbio.com or at www.sec.gov.
Q3 and 9M Financial Highlights:
Q3 Operational Highlights
Q3 Corporate Highlights
Commentary from John J. Gormally, Chief Executive Officer and Raymond F. Akers Jr, PhD., Executive Chairman and Chief Scientific Director:
Total Revenues were up by 10% in the third quarter as increasing sales of the Company’s breathalyzer products and rapid cholesterol tests complemented the robust, albeit plateaued, core revenues from our flagship rapid test for heparin-induced thrombocytopenia (HIT).
The Company is not satisfied with the plateau in sales of rapid HIT tests, which were broadly flat in the US during the third quarter, and is actively campaigning to drive future growth by pursuing further clinical pathway studies, heparin-induced thrombocytopenia (HIT) awareness campaigns and a strategic focus on surgeons who are central to any decision to test for heparin platelet factor 4 antibodies.
We continue to anticipate strong growth from this core product as a result of these initiatives and of our strategy to market to large integrated delivery network customers in the US. While these have a longer sales cycle attached, we believe they will ultimately deliver higher quality revenues over the long-term than individual hospital purchasers. Additionally, we believe sales in China will materialize when NovoTek Pharmaceuticals (“NovoTek”), our distribution partner for the PIFA Heparin/PF4 Rapid Assay products in China, gains approvals for reimbursement rates from the various Provinces. Over the past several years, NovoTek has created significant product demand by identifying and working with the key opinion leaders and seeding the marketplace with sample products. As a result, they anticipate strong demand once reimbursement rates are approved, albeit the timing remains unknown.
Akers Bio recorded a 22% increase in breathalyzer product sales in the third quarter, driven by growing sales of BreathScan OxiChek™ cartridges and BreathScan Lync™ readers from the Akers Wellness line; as well as BreathScan® Alcohol Detector sales, which are beginning to pick up in Western Europe, Australia and East Asia. The Company expects this trend to continue as the distribution partners in these areas continue to expand their markets.
Notably, during August 2017, the Company received a non-refundable license fee from a potential customer for BreathScan OxiChek™ in exchange for the use of equipment, access to product documentation and data, technical support and to temporarily restrict the Company from actively pursuing another commercial partner for BreathScan OxiChek™ in a specific market segment. We look forward to reporting further progress as the commercialization of this test – aimed at the significant health and wellness market – continues to gain traction.
The Company began shipping its rapid cholesterol test product, based on the Company’s REA technology, during the third quarter, under the distribution agreement with First Check Diagnostics, whose products are sold through major retailers including, CVS, Rite Aid, Target, Kmart, Meijer, Giant Eagle, Stop & Shop, Giant and ShopKo. We are highly encouraged by the progress of this relationship which we anticipate will deliver at least a 4x increase in shipments in Q4 versus Q3, in line with over-the-counter demand.
Research and Development has focused on key projects designed to produce rapid growth potential from new product lines. Among those in the pipeline are BreathScan KetoChek™, a health and wellness test to determine the level of ketosis - or optimal fat burning metabolism - in individuals interested in weight loss, fitness or endurance athletic events. Also targeted for introduction in 2018 are BreathScan Asthma, the first 2-minute rapid test for asthma, and BreathScan DKA, the first home test for diabetic ketoacidosis, a serious complication of type 1, and some type 2, diabetes. The Company continues to work proactively with the US Food and Drug Administration to obtain market clearance for the rapid chlamydia assay. We are confident in our data package and submission but currently have no visibility over a market clearance date.
Akers Bio announced a series of highly experienced new non-executive director appointments to the Company's board in August 2017. Bill J. White joined with more than 30 years of experience in financial management, operations and business development; Richard C. Tarbox III joined with more than 40 years of management experience in the medical device and diagnostics sector of the healthcare industry; and Christopher C. Schreiber joined with more than 30 years of experience in the securities industry.
John J. Gormally, the Chief Executive Officer since November 2015, also joined the board of directors in Q3 2017; and Raymond F. Akers Jr, PhD., the Company’s co-founder and Chief Scientific Director, resumed the position of Executive Chairman. We believe the board of directors has a diverse and relevant skillset to steer Akers Bio through its next phase of growth and product commercialization.
We were also delighted to welcome Pamela E. Hibler in September 2017 to lead the Company's North American commercial team as Vice President, Sales and Distribution. Pamela has over 25 years of success in the medical device sector in sales, sales management and as a corporate director. In particular, she has specialized in helping companies to launch new and innovative technology into the healthcare market.
Outlook
Our year to date picture is an encouraging one overall which shows revenues tracking a 10% increase over 2016 and with cash burn shrinking (save for extraordinary legal expenses). There are a number of individual potential catalysts – such as the conversion of our integrated delivery network strategy in the US, the China opportunity and exciting projects ongoing with BreathScan OxiChek™ - which could take the Company into profitability in the near term. In addition, the Company remains excited about the introduction of several new products targeted for introduction in 2018 which we believe will further enhance sales growth potential.
Conference call information:
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.
Summary of Statements of Operations for the Three Months Ended September 30, 2017 and 2016
Revenue
Akers’ revenue for the three months ended September 30, 2017 totaled $675,831, a 10% increase from the same period in 2016.
Revenue from the Company’s PIFA Heparin/PF4 Rapid Assay products decreased 5% during the three months ended September 30, 2017 over the same period of 2016. The small decrease of $24,781 is due primarily to changes by the Company’s distribution partners to their management of inventory levels.
The Company is taking steps to improve its market presence and 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 Company’s MPC breathalyzer technology product sales increased 22% during the three months ended September 30, 2017 over the same period of 2016. Sales in this category include the BreathScan OxiChek and BreathScan Lync products as well as the traditional BreathScan Breath Alcohol product lines.
Demand for the BreathScan Breath Alcohol products is beginning to re-emerge in Western Europe, Australia and the Far East through the efforts of our Independent Manufacturing Representative (“IMR”) in Italy working in conjunction with our Corporate staff. The Company expects this trend to continue as the distribution partners in these areas continue to expand their markets.
The Company began shipping the Tri-Cholesterol product, based on the Company’s REA technology, during the three months ended September 30, 2017. The first order, totaling $27,500, was fulfilled in September and two additional orders have been received to date and will ship before the end of the fourth quarter.
Other operating revenue increased to $16,679 (2016: $13,021) during the three months ended September 30, 2017. The product group consists of fees received for shipping and handling and the sale of components.
During August 2017, the Company received a non-refundable $50,000 fee from potential customer for the Company’s BreathScan OxiChek products in exchange for the use of equipment, access to product documentation and data, technical support and to restrict the Company from actively pursuing another commercial partner in a specific market segment.
The Company recognized $37,500 of this fee as License & Service Revenue during the three months ended September 30, 2017 and will recognize the balance of $12,500 in the three months ended December 31, 2017.
Domestic sales represent the most significant portion of the Company’s revenue, contributing 92.6% (2016: 98.3%). 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 and the recent introduction of the Tri-Cholesterol test has allowed the Company to re-enter the retail market.
Revenue from China continues to be highly unpredictable. NovoTek Pharmaceuticals (“NovoTek”), our distribution partner for the PIFA Heparin/PF4 Rapid Assay products, continues to pursue approvals for reimbursement rates from the various Provinces and although they anticipate receipt of these approvals, their timing is unknown. Over the past several years, NovoTek has created significant product demand by identifying and working with the key opinion leaders and seeding the marketplace with sample products. As a result, they anticipate strong demand for the PIFA Heparin/PF4 Rapid Assay product once reimbursement rates are approved.
Revenue from the rest of the world consists mostly of the BreathScan Breath Alcohol products being distributed in Western Europe and Australia.
The Company’s gross margin declined to 52% (2016: 61%) for the three months ended September 30, 2017. The initial commercial production of the Company’s new Tri-Cholesterol product contributed to the decline in gross margin. One-time costs associated with the transition from Research and Development to Manufacturing as the production plans were implemented and adjusted included engineering, raw material waste as processes were fine-tuned to meet commercial production levels, training of the production staff and increased quality review and testing. The inclusion of several of the Research and Development department’s professional staff as part of the initial production team significantly increased direct labor costs.
Cost of sales for the three months ended September 30, 2017 totaled $323,526 (2016: $236,700). Direct cost of sales increased to 31% of product revenue while other cost of sales decreased to 20% for the three months ended September 30, 2017 as compared to 18% and 21% respectively for the same period in 2016.
Direct cost of sales for the three-month period ended September 30, 2017 were $196,866 (2016: $109,835). Other cost of sales for the three months ended September 30, 2017 were $126,660 (2016: $126,865).
General and Administrative Expenses
General and administrative expenses for the three months ended September 30, 2017, totaled $819,565, which was a 47% increase as compared to $558,293 for the three months ended September 30, 2016.
Personnel expenses increased by 32% for the three months ended September 30, 2017 as compared to the same period of 2016. The increase is related to the creation of the Controller’s position in the Finance department, salary adjustments for executive management and higher employee benefit expenses.
Professional service costs increased by 191% for the three months ended September 30, 2017 as compared to the same period of 2016. A significant increase in legal fees ($258,026 (2016: $56,919)) accounted for the majority of the change.
Stock market and investor relations costs increased by 36% for the three months ended September 30, 2017 as compared to the same period of 2016. Expenses related to the Company’s annual meeting, transfer agent fees and investor relations fees contributed to the increase.
The Company’s other general and administrative expenses declined by 18% for the three months ended September 30, 2017 as compared to the same period of 2016. Continued efforts to reduce costs resulted in savings across several expense categories, the most significant of which resulted from the travel restrictions put in place earlier in the year. Travel expenses for the executive and administrative staff totaled $10,140 (2016: $18,074).
Sales and Marketing Expenses
Sales and marketing expenses for the three months ended September 30, 2017 totaled $377,091, which was a 28% decrease as compared to $526,197 for the three months ended September 30, 2016.
Personnel costs decreased in the three months ended September 30, 2017 as compared to the same period of 2016. The Company has reduced its sales and marketing staff from 10 members on January 1, 2016 to 4 as of September 30, 2017. The new sales and marketing strategy targets large integrated delivery networks instead of individual facilities. This strategy requires fewer, but more experienced and technically knowledgeable sales personnel to interact with executive management, laboratory and medical directors.
The Company renegotiated or eliminated several consulting arrangements targeted at improving market penetration or identifying marketing or distribution partners during the first half of 2016. The result is a reduction of 13% in professional service costs with general consulting services ($60,862 (2016: $75,010)) accounting for the majority of the savings for the three months ended September 30, 2017.
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 September 30, 2017, this royalty totaled $34,328 (2016: $117,949).
A decline in travel expenses ($37,405 (2016: $46,189)), sponsorships ($- (2016: $10,500)) and small decreases in other expenses resulted in an overall decline of 16% in other sales and marketing costs.
Research and Development
Research and development expenses for the three months ended September 30, 2017 totaled $290,447, which was a 17% increase as compared to $247,578 for the three months ended September 30, 2016.
Clinical trial costs decreased 89% during the three months ended September 30, 2017 as compared to the same period of 2016. The Company continued to perform two clinical trials during the three months ended September 30, 2016, one to test the effectiveness of the PIFA Chlamydia assay and one for the KetoChek™ health and wellness product. Both studies were completed during 2016 and no significant expense was incurred during the three months ended September 30, 2017.
An increase is travel expenses ($9,282 (2016: $2)) was offset by reduced costs in several other expense categories which accounted for the 15% increase in other research and development expenses.
Other Income and Expense
Other expense, net of income for the three months ended September 30, 2017 totaled $68, which was a 101% decrease as compared to other income, net of expense of $8,893 for the three months ended September 30, 2016.
Gains and losses associated with foreign currency transactions declined by 188% during the three months ended September 30, 2017 as compared to the same period of 2016, primarily a result of the increased strength of the British Pound compared to the US Dollar.
Realized gains, interest and dividend income declined to $3,127 (2016: $5,264). The Company’s available capital for investment activities was limited during the three months ended September 30, 2017 resulting in the decline in investment income.
Summary of Statements of Operations for the Nine Months Ended September 30, 2017 and 2016:
Revenue
Akers’ revenue for the nine months ended September 30, 2017 totaled $2,540,942, a 10% increase from the same period in 2016.
Revenue from the Company’s PIFA Heparin/PF4 Rapid Assay products decreased 27% during the nine months ended September 30, 2017 over the same period of 2016. Additional revenue from PIFA related components, totaling $500,000, during the nine months ended September 30, 2017 is included in other revenue. During the nine months ended September 30, 2016 the Company recognized approximately $494,000 (2017: $-) in PIFA revenue from the Company’s distribution partner in the People’s Republic of China (“PRC”). The distributor continues to work with the various provincial governments in the PRC to finalize reimbursement rates for the providers. Once these rates are established, the distributor expects strong demand for the PIFA products.
The Company is taking steps to improve its market presence and 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 Company’s MPC breathalyzer technology product sales increased 96% during the nine months ended September 30, 2017 over the same period of 2016. Sales in this category include the BreathScan OxiChek and BreathScan Lync products as well as the traditional BreathScan Breath Alcohol product lines.
Demand for the BreathScan Breath Alcohol products is beginning to re-emerge in Western Europe, Australia and the Far East through the efforts of our Independent Manufacturing Representative (“IMR”) in Italy working in conjunction with our Corporate staff. The Company expects this trend to continue as the distribution partners in these areas continue to expand their markets.
The Company began shipping the Tri-Cholesterol product, based on the Company’s REA technology, during the nine months ended September 30, 2017. The first order, totaling $27,500, was fulfilled in September and two additional orders have been received to date and will ship before the end of the fourth quarter.
Other operating revenue increased to $616,647 (2016: $83,573) during the nine months ended September 30, 2017 as compared to the same period of 2016. The product group consists of fees received for shipping and handling and the sale of components. The significant increase resulted from an initial order, as explained above, for manufacturing components from NovoTek totaling $500,000. NovoTek will utilize these components along with additional materials to be purchased in a future period to assemble PIFA Heparin/PF4 products in either the PRC or Poland.
During August 2017, the Company received a non-refundable $50,000 fee from a potential customer for the Company’s BreathScan OxiChek products in exchange for the use of equipment, access to product documentation and data, technical support and to restrict the Company from actively pursuing another commercial partner in a specific market segment.
The Company recognized $37,500 of this fee as License & Service Revenue during the three months ended September 30, 2017 and will recognize the balance of $12,500 in the three months ended December 31, 2017.
Domestic sales represent the most significant portion of the Company’s revenue, contributing 69.1% (2016: 74.6%). 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 and the recent introduction of the Tri-Cholesterol test has allowed the Company to re-enter the retail market.
Revenue from China continues to be highly unpredictable. NovoTek Pharmaceuticals (“NovoTek”), our distribution partner for the PIFA Heparin/PF4 Rapid Assay products, continues to pursue approvals for reimbursement rates from the various Provinces and although they anticipate receipt of these approvals, their timing is unknown. Over the past several years, NovoTek has created significant product demand by identifying and working with the key opinion leaders and seeding the marketplace with sample products. As a result, they anticipate strong demand for the PIFA Heparin/PF4 Rapid Assay product once reimbursement rates are approved.
Revenue from the rest of the world consists mostly of the BreathScan Breath Alcohol products being distributed in Western Europe and Australia.
The Company’s gross margin declined to 67% (2016: 69%) for the nine months ended September 30, 2017. The initial commercial production of the Company’s new Tri-Cholesterol product contributed to the decline in gross margin. One-time costs associated with the transition from Research and Development to Manufacturing as the production plans were implemented and adjusted included engineering, raw material waste as processes were fine-tuned to meet commercial production levels, training of the production staff and increased quality review and testing. The inclusion of several of the Research and Development department’s professional staff as part of the initial production team significantly increased direct labor costs.
Cost of sales for the nine months ended September 30, 2017 totaled $846,488 (2016: $713,576). Direct cost of sales increased to 16% of product revenue while other cost of sales remained steady at 17% for the nine months ended September 30, 2017 as compared to 14% and 17% respectively for the same period in 2016.
Direct cost of sales for the nine-month period ended September 30, 2017 were $420,189 (2016: $325,922). Other cost of sales for the nine months ended September 30, 2017 were $426,299 (2016: $387,654).
General and Administrative Expenses
General and administrative expenses for the nine months ended September 30, 2017, totaled $2,440,023, which was a 6% increase as compared to $2,298,099 for the nine months ended September 30, 2016.
Personnel expenses increased by 10% for the nine months ended September 30, 2017 as compared to the same period of 2016. The increase is related to the creation of the Controller’s position in the Finance department, salary adjustments for executive management and higher employee benefit expenses.
Professional service costs increased by 48% for the nine months ended September 30, 2017 as compared to the same period of 2016. A significant increase in accounting and audit ($140,130 (2016: $80,896)), personnel recruitment ($22,355 (2016: $409)), engineering ($82,718 (2016: $51,072)), legal fees ($568,225 (2016: $443,065)) and general consulting services ($52,975 (2016: $5,513)) accounted for the change.
The Company’s other general and administrative expenses declined by 30% for the nine months ended September 30, 2017 as compared to the same period of 2016. Continued efforts to reduce costs resulted in savings across several expense categories, the most significant of which resulted from the travel restrictions put in place earlier in the year. Travel expenses for the executive and administrative staff totaled $36,345 (2016: $114,293).
Sales and Marketing Expenses
Sales and marketing expenses for the nine months ended September 30, 2017 totaled $1,382,416 which was a 22% decrease as compared to $1,764,952 for the nine months ended September 30, 2016.
Personnel costs decreased 25% in the nine months ended September 30, 2017 as compared to the same period of 2016. The Company has reduced its sales and marketing staff from 10 members on January 1, 2016 to 4 as of September 30, 2017. The new sales and marketing strategy targets large integrated delivery networks instead of individual facilities. This strategy requires fewer, but more experienced and technically knowledgeable sales personnel to interact with executive management, laboratory and medical directors. The Company incurred severance expenses related to staff reductions during the nine months ended September 30, 2016 which did not recur during the same period of 2017.
The Company renegotiated or eliminated several consulting arrangements targeted at improving market penetration or identifying marketing or distribution partners during the first half of 2016. The result is a reduction of 47% in professional service fees. General consulting services ($190,176 (2016: $295,299)) and marketing services ($161 (2016: $51,246)) accounted for the savings for the nine months ended September 30, 2017.
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 nine months ended September 30, 2017, this royalty totaled $128,109 (2016: $117,949).
The Company has launched an awareness campaign directed at surgeons, pathologists and laboratory and medical directors regarding the risks associated with heparin induced thrombocytopenia (“HIT”) and a campaign directed at health and wellness professionals to introduce the BreathScan Lync™ and OxiChek™ products. In support of the health and wellness project, the Company produced an infomercial in coordination with Balancing Act that aired on May 8, 2017. Expenses related to the production, which occurred in February 2017, totaled $54,700.
Research and Development
Research and development expenses for the nine months ended September 30, 2017 totaled $952,724, which was a 2% increase as compared to $932,858 for the nine months ended September 30, 2016.
Personnel costs increased 35% during the nine months ended September 30, 2017 as compared to the same period of 2016. This increase was a result of the transfer of Dr. Akers’ salary and benefits from the General and Administrative department to Research and Development as he assumed his new responsibilities for the Company. In addition, employee benefit expenses ($72,026 (2016: $45,052)) also contributed to the increase.
Clinical trial costs decreased 98% during the nine months ended September 30, 2017 as compared to the same period of 2016. The Company performed two clinical trials during the nine months ended September 30, 2016, one to test the effectiveness of the PIFA Chlamydia assay and one for the KetoChek™ health and wellness product. Both studies were completed during 2016 and no significant expense was incurred during the nine months ended September 30, 2017.
A reduction in general consulting services ($30,503 (2016: $57,651)) was offset by an increase in engineering and product design fees ($56,164 ($36,593)) for the nine months ended September 30, 2017 resulting in a 7% decline in professional service fees.
Moderate decreases in several expense categories were offset by increases in internal resource utilization ($17,110 (2016: $6,976)) and travel expenses ($28,875 (2016 $11,050)) to account for the 2% decrease in other research and development expenses.
Other income, net of expense for the nine months ended September 30, 2017 totaled $15,468, which was a 32% decrease as compared to $22,792 for the nine months ended September 30, 2016.
Gains and losses associated with foreign currency transactions increased by 619% during the nine months ended September 30, 2017 as compared to the same period of 2016, primarily a result of the increased strength of the US Dollar compared to the British Pound during the three quarters of 2017.
Realized gains, interest and dividend income declined to $9,296 (2016: $23,981). The Company’s available capital for investment activities was limited during the nine months ended September 30, 2017 resulting in the decline in investment income.
Liquidity and Capital Resources
For the nine months ended September 30, 2017 and 2016, the Company generated a net loss attributable to shareholders of $3,193,571 and $2,207,707, respectively. As of September 30, 2017 and December 31, 2016, the Company has an accumulated deficit of $100,673,108 and $94,479,537 and had cash and equivalents totaling $145,311 and $72,700, respectively.
Currently, our primary focus is to expand the domestic and international distribution of our PIFA Heparin/PF4 rapid assays. The Company’s secondary focus is fully commercializing the health and wellness product line linked to smartphones and tablets. The Company continues commercialization tasks for its PIFA PLUSS® Infectious Disease single-use assays, BreathScan® DKA, and Breath PulmoHealth products, including advancement of the steps required for FDA clearance or CE marking in the EU where necessary.
The Company continues to expand the global distribution of our PIFA Heparin/PF4 rapid assays. The Company’s future and focus resides in preparing for the launch of our health and wellness product line linked to smartphones and tablets and the Company’s rapid manual point-of-care chlamydia assay.
Substantial doubt exists about the Company’s ability to continue as a going concern within one year after the financial statements are issued. The company has identified three conditions or events that support this determination:
The Company’s current working capital position
Negotiations are underway with a potential customer for the Company’s BreathScan OxiChek products and are anticipated to be completed during the three months ending December 31, 2017; however, they have requested product design changes that must be completed prior to the consummation of the purchase agreement. All parties are confident that a solution can be achieved but a significant delay will impact revenue projections.
The Company is awaiting a 510(k) approval from the United States Food & Drug Administration (“FDA”) for its PIFA Chlamydia product. An extended delay in receipt of this approval will negatively impact revenue projections.
Please refer to Note 3, Management Plan, of the Financial Statements in the Form 10-Q for the Company’s plans to address the going concern.
We expect that our primary expenditures will be to continue development of our health and wellness line, Tri-cholesterol test, PIFA Chlamydia assay and PIFA PLUSS® Infectious Disease single-use assays products, enrolling patients in clinical trials to support performance claims, generating studies in peer-reviewed journals to support product marketing, and provide data for the FDA 510(k) clearance/CE certifications processes when required. We will also continue to support commercialization and marketing activities of commercialized products. Based upon our experience, clinical trial and related regulatory expenses can be significant costs. Steps to achieve commercialization of emerging products will be an ongoing and evolving process with expected improvements and possible subsequent generations being evaluated for commercialized and emerging tests. Should we be unable to achieve FDA clearance for products that require such regulatory “approval”, develop performance characteristics for rapid tests that satisfy market needs, or generate sufficient revenue from commercialized products, we would need to rely on other business or product opportunities to generate revenue and costs that we have incurred for the patents may be deemed impaired.
Capital expenditures for the nine months ended September 30, 2017 were $37,191 (2016: $88,023). Capital expenditures, primarily for production and laboratory costs for the year ending December 31, 2017 are expected to be approximately $50,000. As per the Company’s lease agreement, the owner of the facility will be handling the majority of facility upgrades, and we anticipate financing any production and laboratory capital expenditures through working capital.
The Company 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 is effective through May 31, 2019. The satellite office supports members of executive management and the sales and marketing team with convenient access to resources in the metro New York 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 current environment, particularly the recoverability of current assets, the fair value of assets, and the Company’s liquidity. At this point in time, there has not been a material impact on the Company’s assets and liquidity. Management will continue to monitor the risks associated with the current environment and their impact on the Company’s results.
The Company’s net cash provided by investing and financing activities totaled $3,452,833 during the nine months ended September 30, 2016. Cash of $125,383 was consumed by capital expenditures and the purchase of marketable securities. Proceeds from the sale of marketable securities contributed cash of $3,452,833 for the period ended September 30, 2016.
Our net cash consumed by operating activities totaled $3,654,858 during the nine months ended September 30, 2017. Cash was consumed by the loss of $3,193,571 plus non-cash adjustments of $182,866 for depreciation and amortization of non-current assets, $46,239 for allowances for doubtful accounts, $15,784 for amortization of deferred compensation, $14,502 for share based compensation, $2,183 for options issued for services and $5,455 for restricted stock issued for services less and $148 for accrued income on marketable securities. For the nine months ended September 30, 2017, decreases in deposits and other receivables of $2,034, prepaid expense of $68,798, prepaid expense – related parties of $38,438 and an increase in trade and other payables of $85,684 and deferred revenue of $12,500 provided cash, primarily related to routine changes in operating activities. A net increase in trade receivables of $570,065, trade receivables – related parties of $93,109, inventories of $49,346 and other assets of $9,280 and a decrease in trade and other payables – related party of $213,822 consumed cash from operating activities.
Our net cash consumed by operating activities totaled $3,533,649 during the nine months ended September 30, 2016. Cash was consumed by the loss of $2,207,707 plus non-cash adjustments of $221,946 for depreciation and amortization of non-current assets, $146,196 for allowances for doubtful accounts, $24,834 for amortization of deferred compensation, $22,828 for share based compensation, $23,676 for options issued for services and $13,380 for accrued income on marketable securities less $1,299,609 for the reversal of a bad debt allowance. For the nine months ended September 30, 2016, decreases in deposits and other receivables of $65,855. prepaid expense of $91,706, prepaid expense – related party of $58,974 and an increase in trade and other payables – related party of $59,673 provided cash, primarily related to routine changes in operating activities. A net increase in trade receivables of $275,541 and inventories of $60,862 and a decrease in trade and other payables of $418,998 consumed cash from operating activities.
Cautionary Statement 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 Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Such forward-looking statements reflect the Company's expectations about its future operating results, performance and opportunities that involve substantial risks and uncertainties. These statements include but are not limited to statements regarding the intended terms of the offering, closing of the offering and use of any proceeds from the offering. When used herein, the words "anticipate," "believe," "estimate," "upcoming," "plan," "target", "intend" and "expect" and similar expressions, as they relate to Akers Biosciences, Inc., its subsidiaries, or its management, are intended to identify such forward-looking statements. These forward-looking statements are based on information currently available to the Company and are subject to a number of risks, uncertainties, and other factors that could cause the Company's actual results, performance, prospects, and opportunities to differ materially from those expressed in, or implied by, these forward-looking statements.
For more information: Akers Biosciences, Inc. John J. Gormally, Chief Executive Officer Raymond F. Akers, Jr. PhD, Executive Chairman and Chief Scientific Director Tel. +1 856 848 8698 Taglich Brothers, Inc. (Investor Relations) Chris Schreiber Tel. +1 917 445 6207 Email: [email protected] Vigo Communications (Global Public Relations) Ben Simons / Fiona Henson Tel. +44 (0)20 7830 9704 Email: [email protected] |