AKR.L Regulatory News (AKR)

Embargoed: 0700hrs 30 March 2016

Akers Biosciences, Inc.

Financial Results for the Year Ended December 31, 2015

US Sales of PIFA Heparin/PF4 Rapid Tests Up 12%

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 fiscal year ended December 31, 2015. A Form 10-K containing the detailed report of operations and financial statements (annual report) will be available for viewing later today on the Company's website at www.akersbio.com or www.sec.gov.

2015 Financial Highlights:

· 12% increase in US sales of flagship heparin allergy test to $1,391,017 (2014: $1,241,406)

· Total revenue declined to $2,115,050 (2014: $4,427,174), partly due to deferment of certain international orders into 2016 - received in Q1 2016

· Net cash loss from operations of $5,132,343 (2014: loss of $3,883,929)

· Total loss of $9,311,913 (2014: loss of $3,142,960) substantially increased by non-cash and non-recurring items totaling approximately $4.7 million

· Maintaining liquid balance sheet with cash and marketable securities of $4,427,163 (2014: $9,720,802)

2015 Operational Highlights:

· Significant operational and regulatory approval progress achieved in China laying the groundwork for Chinese sales to commence this year

· China Food and Drug Administration approved the Company's rapid heparin allergy test leading to $2.5 million of placed orders for 2016 to date

· Chinese production facility completed and made fully operational

· In addition to the rapid heparin allergy test, marketing commenced in China for four breath tests focused on the major markets of diabetes, weight loss, fitness and alcohol

· Introduced new Akers Wellness product line targeting large and growing market for personalized health - including app-enabled tests for monitoring and tracking personal health over time

· Expanded global distribution network for rapid heparin allergy test providing access to all major diagnostic markets

· Appointed a new, highly experienced CEO to drive product commercialization - impact already showing in strong US sales in Q1 2016 for the Company's rapid heparin allergy tests

· European Patent Office issued a patent surrounding the Company's novel blood separator technology and method of separating a fluid fraction from whole blood

· Achieved ISO 13485 certification of quality management system enabling acceleration of regulatory approval process for the Company's products in certain countries

2016 Current Trading

· Company performing well in 2016 with orders for rapid heparin allergy tests already exceeding $3 million in the current year

· Sales of rapid heparin allergy tests into US hospitals in Q1 are up 70% over the same quarter in 2015

Chairman's Statement

2015 was principally about augmenting the senior commercial team, refining the execution strategy, laying the groundwork for entry into China and developing a product suite to target the huge personalized health and wellness market. I am pleased to say that this preparatory work in 2015 is already paying off in 2016 with orders for our rapid heparin allergy tests already exceeding $3 million in the current year.

We already have sufficient visibility from the first twelve weeks of the year in our core heparin allergy test business to know that sales are materially outperforming last year's. Not only is this being driven by orders from China but it is also coming from improvements in our domestic US business. We hope to see this trend continue as the full impact of our new commercial team and execution strategy begins to be felt.

Substantial work was undertaken in 2015 to prepare for market entry into China. In November we received clearance from the China Food and Drug Administration for our flagship rapid heparin allergy test which led to our Chinese distributor placing $2.5 million worth of orders for 2016. Furthermore, we worked extensively in 2015 with our Chinese joint venture partners to establish a first class manufacturing facility in Hainan province which is now fully operational. It is envisaged that the majority of Akers' products for sale into China will be manufactured in-country leading to significant commercial benefits. Marketing in China commenced for four of our breath tests in the prolific areas of diabetes, weight loss, fitness and alcohol. The Chinese healthcare system has identified the critical need to address soaring obesity rates and a diabetes epidemic which highlights the compelling opportunity to introduce Akers' simple, inexpensive breath-based tests in these areas.

While not yet generating significant revenue, the Company has developed and introduced three transformational breath tests designed for the health and wellness industry and consumers during 2015. These include the consumer-focused METRON®, as well as the BreathScan OxiChek™ ("OxiChek") and BreathScan KetoChek™ ("KetoChek") tests which work with a new bluetooth-enabled reading device, BreathScan Lync™ and its associated BreathScan™ mobile app, to enable consumers and professional users to monitor trends in health via a mobile device. Being able to generate near-instant health information is, I believe, key to the future of medicine. With our Akers Wellness tests, clinicians, suppliers of nutritional supplements and diet plans, health coaches or even consumers themselves, can now monitor their - or their clients' - health over time by utilizing Akers Wellness products.

With the development for the Akers Wellness line now largely completed, the focus has turned to marketing and sales execution, and we look forward to reporting on progress in these areas later this year.

In February, the Company's Management System was certified to ISO 13485. The certification is a requirement in certain countries to enable regulatory approval of medical devices, so it an extremely important asset when seeking accelerated product clearance in certain countries.

Another regulatory milestone achieved in 2015 was the European Patent Office's issuance of a patent surrounding the Company's novel blood separator technology and method of separating a fluid fraction from whole blood. We now have patent protection both in the US and Europe enabling Akers to incorporate the technology into certain of our blood-based assays where the speed of our test is paramount to clinical decision making. It may also enable the Company in the future to offer the technology under license to third parties seeking to accelerate their own testing procedures by facilitating the blood cell separation process as a component of their test.

Multiple new distribution agreements outside of the US were signed in 2015 giving the Company access to every major diagnostic market in the world. The primary drivers of this distribution network are the Company's flagship rapid heparin allergy tests, and we are supporting our distribution partners' efforts to introduce these tests in their respective territories. Additionally, the Company's BreathScan® Alcohol Detector continues to generate interest through our international distribution network with sales to the EU and South Africa contributing to revenues in 2015.

Towards the end of last year I was delighted to welcome a new CEO to focus entirely on product and technology commercialization. The commercial team is being further strengthened with a number of new senior hires and the improved execution of our US heparin allergy test sales strategy has led to encouraging early sales indicators from the first twelve weeks of this year. I am very excited about the team we are building at Akers Bio.

Looking ahead through 2016, we have had a tremendous start to the year with the receipt of $2.5 million worth of orders from China (with initial sales expected imminently) and approximately $600,000 worth of sales of tests into US hospitals already recorded in Q1 - an increase of 70% over the same quarter in 2015. We hope to see a continuing upward trajectory in the US heparin allergy test business and look forward to seeing meaningful contributions beginning to flow through again from our alcohol breathalyzers and from the newly launched Akers Wellness line.

Raymond F. Akers, Jr. PhD, Co-founder and Executive Chairman

March 30, 2016

Conference Call Information:

For more information:

Akers Biosciences, Inc.

Raymond F. Akers, Jr. PhD

Executive Chairman

Tel. +1 856 848 8698

Taglich Brothers, Inc. (Investor Relations)

Chris Schreiber

Tel. +1 917 445 6207

Email: cs@taglichbrothers.com 

finnCap (UK Nominated Adviser and Broker)

Adrian Hargrave / Scott Mathieson (Corporate Finance)

Steve Norcross (Broking)

Tel. +44 (0)20 7220 0500

Vigo Communications (Public Relations)

Ben Simons / Fiona Henson

Tel. +44 (0)20 7830 9700

Email: akers@vigocomms.com

Summary of Statements of Operations for the Year Ended December 31, 2015

Results of Operations

Management's Plans and Basis of Presentation

To date, the Company has in large part relied on equity financing to fund its operations, raising $13,101,336, net of expenses, in an initial public offering on the NASDAQ Stock Exchange in 2014. The Company continues to experience recurring losses and negative cash flows from operations. Management's strategic plans include the following:

Despite our plans, the Company expects to continue to incur losses from operations for the near-term and these losses could be significant for the following reasons:

At December 31, 2015, Akers had cash of $402,059, working capital of $4,812,337, stockholders' equity of $6,603,178 and an accumulated deficit of $94,175,999. 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 fair value of the Company's investments in marketable securities as of December 31, 2015 was $4,025,104 (2014: $9,264,961). The Company restricts its investments to Level I and Level II securities and maturities generally range up to three years. Securities are evaluated with an emphasis on minimizing risk while achieving reasonable rates of return on the investment. These marketable securities are a key component of the Company's cash management strategy and as such are monitored regularly.

If the Company does not obtain additional capital as needed, the Company would potentially be required to reduce the scope of its research and development activities. The Company is closely monitoring its cash balances, cash needs and expense levels.

Revenue

The Company's total revenue for the year ended December 31, 2015 was $2,115,050, a 52% decrease compared to the same period in 2014. The table below presents a summary of our sales by product line:

This decline in product revenue is associated with three significance transactions that occurred during the year ended December 31, 2014, which were not repeated in 2015. These transactions (ChubeWorkx (MPC: $766,379), NovoTek (PIFA: $1,000,000) and 36S (REA: $864,000)) are further described below.

The Company's MPC product sales declined during the year ended December 31, 2015. This reflects that during the same period of 2014, the Company received its last order from ChubeWorkx ($766,379) for the Company's alcohol breathalyzer product. Three new distributors began placing orders for the alcohol breathalyzer products during the year, two in the European Union ("EU") and one in South Africa which generated revenue of $189,889 for the year ended December 31, 2015.

The Company's total PIFA sales declined during the year ended December 31, 2015; however, the domestic sales of the PIFA Heparin/PF4 Rapid Assay products increased by 12% to $1,391,017 (2014: $1,241,406). The Company's dedicated technical sales account executives are supporting over 300 sales representatives of Akers' US distribution partners, Cardinal Health ("Cardinal Health"), Fisher HealthCare ("Fisher Healthcare"), Typenex Medical, LLC ("Typenex") and Medline Industries, Inc. ("Medline"). The Company's relationship-building initiative with our partners has already delivered a measureable increase in product trials and adoptions. Domestic sales for the year ended December 31, 2015 of our distributors, Cardinal Health and Fisher Health, accounted for $1,161,199 of the total PIFA Heparin/PF4 Rapid Assay as compared to $1,064,733 for the same period of 2014 and individually represented 55% and 28% of such sales.

The Company did not generate any international sales of its PIFA Heparin/PF4 Rapid Assay products during the year ended December 31, 2015 (2014: $1,000,000) primarily the result of pending regulatory approvals. The recent approval of the product in China is expected to stimulate minimum purchase requirements with our distributor, NovaTek Therapeutics Inc. ("NovaTek") beginning in 2016.

There were no sales in the year ended December 31, 2015 for the Tri-Cholesterol "Check" tests, part of the REA line of products, which generated sales of $864,000 during the same period of 2014. The revenue generated in the 2014 sale of the Tri-Cholesterol "Check" tests was due to an initial stocking order from 36 Strategies General Trading, LLC, a related party, to distribute the tests in Australia, Singapore, the United Arab Emirates and Oman (See Note 5 - Trade Receivables - Related Party).

Other operating revenue increased due to a rise in shipping and handling fees, a result of the mix of domestic and international shipments and an increase in sales of miscellaneous components.

The Company's exclusive License and Supply Agreement with ChubeWorkx Guernsey Limited ("ChubeWorkx") for the Company's proprietary breathalyzer product was cancelled by both parties on May 7, 2015. As a result of this event, and per the terms of the original agreement, the Company recognized the remaining $166,667 of deferred revenue in the statement of operations and comprehensive income for the year ended December 31, 2015. The Company is now able to solicit business outside the United States for its alcohol breathalyzer products and has begun to receive and ship orders.

Licensing fee revenue declined to $320,556 (2014: $343,333). The decline is associated with the cancellation of the Company's exclusive License and Supply Agreement with ChubeWorkx as described above.

Cost of sales for the year ended December 31, 2015 decreased by 19% to $950,792 (2014: $1,175,232). The reduction is primarily reflective of the decrease in revenue during the year ended December 31, 2015. Direct cost of sales increased to 29% (2014: 18%) and indirect cost of sales increased to 24% (2014: 11%) of product revenue for year ended December 31, 2015. Overall, cost of sales, as a percentage of product revenue, was 53% and 29% for the years ended December 31, 2015 and 2014.

Prior to 2014, the Company had removed its REA products from its active inventory while the Company worked to develop a market and identify a distributor for the product line. As a result of this inventory write-down, there was no significant cost of sales for the REA products reported for the year ended December 31, 2014. Direct costs associated with the MPC products decreased to 30% (2014: 44%) primarily related to the mix of products sold and PIFA products decreased to 11% (2014: 15%) related to the increased use of sub-contractors for the assembly of components.

The increase in indirect cost of sales is attributed to an ongoing project to improve the management, reporting and turn-over rate of our production inventory which was completed during the fourth quarter, significantly higher shipping costs associated with an increase in international shipments and an increase in the cost of consumable supplies related to production. In addition, the percentage increase is affected by the fixed cost nature of many of the components in this category.

Akers' gross profit margin, as a percentage of revenue, decreased to 55% for the year ended December 31, 2015 as compared to 73% in 2014 for the reasons described above.

General and Administrative Expenses

General and administrative expenses in the year ended December 31, 2015 totaled $6,193,125, which was a 56% increase as compared to $3,979,079 for the year ended December 31, 2014. The table below summarizes our general and administrative expenses for the years ended December 31, 2015 and 2014 as well as the percentage of change year-over-year:

Several specific categories of expense increased significantly during the year ended December 31, 2015. Below is a summary of these categories:

Professional services included significant increases in recruiting services and legal fees during the year ended December 31, 2015. The increase in recruiting fees are related to the expansion of the sales and marketing staff and the recruitment of the Company's Chief Executive Officer. The increase in legal fees are associated with various corporate and legal affairs. Offsetting the professional service expenses was the elimination of management fees paid to Nicolette Consulting Group for services that were incurred in the year ended December 31, 2014.

The Company recognized cost savings in all of its stock market and investor relations categories. These include consulting, investor relations, stock exchange fees and transfer agent fees.

The Company established an allowance for doubtful accounts of $864,000 for a trade receivable - related party that was due June 30, 2015 after receiving communications from the customer that indicated a high level of risk of collectability. In addition, the Company also established an allowance for doubtful accounts for $1,299,609 for a note receivable - related party as a result of an internal assessment indicating a high level of risk of collectability. These allowances are reflected in the other general and administrative expenses in the table above for the year ended December 31, 2015.

Sales and Marketing Expenses

Sales and marketing expenses in the year ended December 31, 2015 totaled $2,543,286, which was a 95% increase as compared to $1,302,103 for the year ended 2014. The table below summarizes our sales and marketing expenses for the years ended December 31, 2015 and 2014 as well as the percentage of change year-over-year:

Personnel costs increased in the year ended December 31, 2015 due to the expansion of the sales and marketing department from 5 employees at December 31, 2014 to 10 employees as of December 31, 2015.

The increase in professional service costs is for international sales consultants and domestic marketing consultants to assist in the development of new market opportunities and to increase our market penetration in our existing markets; and web designers to assist with the design and implementation of a new internet presence.

Travel expenses are a result of the increased size of the sales force and make up the most significant component of the other sales and marketing costs.

Research and Development

Research and development expenses in the year ended December 31, 2015 totaled $1,406,895, which was a 54% increase as compared to $916,308 for the year ended 2014. The table below summarizes our research and development expenses for the years ended December 31, 2015 and 2014 as well as the percentage of change year-over-year:

Clinical trial costs, professional service costs and other research and development costs have increased in the year ended December 31, 2015 due to the significant costs associated with preparing several key products for market. Major expenses include engineering fees related to the development of molds for new products, development of the BreathScan Lync and associated apps for tablets and smartphones, new packaging design, testing and clinical trials.

The following table illustrates research and development costs by project for the years ended December 31, 2015 and 2014, respectively.

Other Income and Expense

Other income and expense increased for the year ended December 31, 2015 to $370,317 from $61,161 for the same period in 2014. The table below summarizes our other income and expenses for the years ended December 31, 2015 and 2014 as well as the percentage of change year-over-year:

The increase is the result of interest and dividend earning on the marketable securities and note receivable - related party and the sale of the Company's New Jersey Net Operating Losses.

Income Taxes

During 2015, the Company was approved by the State of New Jersey to sell a portion of its state tax benefits that existed as of December 31, 2014, pursuant to the Technology Tax Certificate Transfer Program. The Company received net proceeds of $269,344 for the year ended December 31, 2015 (2014: $-) as a result of the sale of the tax benefits.

As of December 31, 2015 and 2014, the Company had Federal net operating loss carry forwards of approximately $58,000,000 and $51,300,000, respectively, expiring through the year ending December 31, 2034. As of December 31, 2015 and 2014, the Company had New Jersey state net operating loss carry forwards of approximately $7,200,000 and $11,900,000, respectively, expiring the year ending December 31, 2021.

The principal components of deferred tax assets and valuation allowance as of December 31, 2014 and December 31, 2013 are as follows:

Deferred Tax Assets

The valuation allowance for deferred tax assets as of December 31, 2015 and 2014 was $23,234,000 and $19,438,896. The change in the total valuation for the years ended December 31, 2015 and 2014 were increases of $3,795,104 and $1,428,358. In assessing the realization of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which the net operating losses and temporary differences become deductible. Management considered projected future taxable income and tax planning strategies in making this assessment. The value of the deferred tax assets was fully offset by a valuation allowance, due to the current uncertainty of the future realization of the deferred tax assets.

The reconciliation of income taxes using the statutory U.S. income tax rate and the benefit from income taxes for the years ended December 31, 2015 and December 31, 2014 are as follows.

Tax Rates & Benefits

Liquidity and Capital Resources

For the years ended December 31, 2015 and 2014, the Company generated a net loss attributable to shareholders of $9,311,913 and $3,142,960, respectively. As of December 31, 2015 and 2014, the Company has an accumulated deficit of $94,175,999 and $84,864,086 and had cash and cash equivalents totaling $402,059 and $455,841, respectively (although the Company had additional marketable securities of $4,025,104 and $9,264,961 available as of December 31, 2015 and 2014).

Currently, our primary focus is to expand the domestic and international distribution of our PIFA Heparin/PF4 rapid assays. The Company continues initial commercialization tasks for METRON and BreathScan Lync, as well as development activities for its PIFA PLUSS® Infectious Disease single-use assays, Breath Ketone "Check", and Breath PulmoHealth "Check" products, including advancement of the steps required for FDA clearance or CE marking in the EU where necessary.

We expect to continue to incur losses from operations for the near-term and these losses could be significant as we incur product development, clinical and regulatory activities, contract consulting and other product development and commercialization related expenses. We believe that our current working capital position will be sufficient to meet our estimated cash needs for at least the next 12 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 PIFA PLUSS® Infectious Disease single-use assays, Breath Ketone "Check" and Breath PulmoHealth "Check" products and enroll patients in clinical trials to support performance claims, generate 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 in-line products (PIFA Heparin/PF4 rapid assays, PIFA PLUSS® PF4, breath alcohol detectors, METRON and BreathScan Lync) in the U.S. and internationally. Based upon our experience, clinical trial and related regulatory expenses can be significant costs. Steps to achieve commercialization of emerging products will be an ongoing and evolving process with expected improvements and possible subsequent generations being evaluated for commercialized and emerging tests. Should we be unable to achieve FDA clearance for products that require such regulatory "approval", develop performance characteristics for rapid tests that satisfy market needs, or generate sufficient revenue from commercialized products, we would need to rely on other business or product opportunities to generate revenue and costs that we have incurred for the patents may be deemed impaired.

Capital expenditures, primarily for production, laboratory and facility improvement costs for the year ending December 31, 2015 are approximately $112,951 (2014: $24,988). 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. 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.

Operating Activities

The Company's net cash consumed by operating activities in the year ended December 31, 2015 totaled $5,132,343, which was a 32% increase as compared to $3,883,929 for the year ended 2014. The table below summarizes our net cash consumed for the years ended December 31, 2015 and 2014 as well as the percentage of change year-over-year:

For the year ended December 31, 2015, cash was consumed by the loss of $9,311,913 less non-operating gains of $6,052 plus a non-cash adjustment of $4,199 for accrued interest and dividends, $766,471 for depreciation, amortization and impairment of non-current assets, $2,163,609 for allowances for doubtful accounts and $397,012 for non-cash share based compensation and services. Decreases in trade receivables ($513,583), trade receivables - related party ($176,157) and an increase in trade and other payables ($827,601) provided cash. Increases in other receivables ($54,142), inventories ($226,538), other assets ($76,774) and a decrease in deferred revenue - related party ($305,556) consumed cash. The increase in net cash used in operating activities was related to routine changes in operating activities.

For the year ended December 31, 2014, cash was consumed by the loss of $3,127,167 less non-operating gains of $26,203 plus a non-cash adjustment of $349,398 for depreciation and amortization of non-current assets and $746,400 for non-cash share based compensation and services. Decreases in inventories ($123,049), other assets ($56,257) and an increase in trade and other payables ($538,017) provided cash. Increases in trade receivables ($1,899,886), notes receivable - related party ($266,378) and other receivables ($37,497) and a decreases other payables - related party ($6,586) and in deferred revenue - related party ($333,333) consumed cash. The increase in net cash used in operating activities was related to routine changes in operating activities.

Financial statements

Consolidated Balance Sheets

December 31, 2015 and 2014

Consolidated Statements of Operations and Comprehensive Income

Years ended December 31, 2015 and 2014

Consolidated Statement of Cash Flows

Years ended December 31, 2015 and 2014

About Akers Biosciences, Inc.

Akers Biosciences develops, manufactures, and supplies rapid screening and testing products designed to deliver quicker and more cost-effective healthcare information to healthcare providers and consumers. The Company has advanced the science of diagnostics while responding to major shifts in healthcare through the development of several proprietary platform technologies. The Company's state-of-the-art rapid diagnostic assays can be performed virtually anywhere in minutes when time is of the essence. The Company has aligned with major healthcare companies and high volume medical product distributors to maximize product offerings, and to be a major worldwide competitor in diagnostics.

Additional information on the Company and its products can be found at www.akersbio.com. Follow us on Twitter @AkersBio.

Cautionary Statement Regarding Forward Looking Statements

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.