AKR.L Regulatory News (AKR)

April 3, 2018 

Akers Biosciences, Inc.

Financial Results for the Year Ended December 31, 2017

Revenues Up 33%

Akers Biosciences, Inc. (NASDAQ: AKER) (AIM: AKR.L), ("Akers", "Akers Bio" or the "Company"), a developer of rapid health information technologies, reports its financial results for the fiscal year ended December 31, 2017. A Form 10-K containing the full financial statements is available for viewing on the Company's website at www.akersbio.com or www.sec.gov.

2017 Financial Highlights:

· Total revenue up 33% to $3,929,527 (2016: $2,960,912)

· PIFA Heparin/PF4 Rapid Assay products continue to account for the majority of revenues - however, growth was driven primarily by BreathScan Alcohol Breathalyzers, BreathScan OxiChek™ and the re-introduced Tri-Cholesterol test

· Total revenue up across all geographic regions

o USA: 23%

o China: 25%

o Rest of World: 247%

· Gross profit margin remained strong at 63% (2016: 63%)

· Gross profit up 34% to $2,509,564 (2016: $1,877,825)

· Major expense areas increased 17% overall

o General and Administrative expenses increased 36% to $4,082,313 (2016: $3,008,811) - the Company has been conservative in its approach to debt collectability and has reserved $494,436 for doubtful accounts during the year included in this figure

o Sales and Marketing expenses reduced by 4% to $2,048,571 (2016: $2,137,282)

o Research and Development expenses increased by 6% to $1,260,378 (2016: $1,188,868)

· Loss from operations increased 25% to $(5,805,326) (2016: $(4,628,244) (excluding allowance for reversal of bad debts))

· Balance sheet strengthened significantly with net proceeds of approximately $10.5 million from Public Offerings, a Private Placement and the execution of stock warrants in 2017

· Cash and marketable securities at December 31, 2017 of $5,450,039 (2016: $122,701)

2017 Operational and Corporate Highlights:

· Company continues to grow sales of a key product of the future: BreathScan OxiChek™ - a rapid breath test for oxidative stress

o Ongoing discussions within the nutraceutical sector with regards to significant potential commercial partnership

o United States Patent and Trademark Office allowed a patent covering the proprietary cartridge for the optical scanning device utilized in BreathScan Lync™ - the new bluetooth-enabled reading device from Akers Wellness™ which enables users to track the results of OxiChek™ via their mobile device, now including iOS devices

o Broadened distribution from anti-aging, functional and integrative health and wellness treatment practitioners in the US to now include the US chiropractic sector

o Established contractual relationship with a respected authority and key opinion leader within the US chiropractic sector to represent and promote OxiChek™

o Television marketing campaign undertaken through the popular Balancing Act national television show on the Lifetime network - America's premier morning show that introduces positive solutions to busy, on-the-go, modern women

· Sales of BreathScan Alcohol Breathalyzer products growing

o Received initial stocking order for products in Australia and New Zealand

o Demand re-emerging in Western Europe and the Far East

· Shipments of rapid cholesterol self-test commenced to First Check Diagnostics, LLC, the exclusive distributor for this product in the US, for sale under their popular "First Check" brand, which is sold in major retailers including CVS, Rite Aid, Target, Kmart, Meijer, Giant Eagle, Stop & Shop, Giant and ShopKo

· Continued progress in positioning PIFA Heparin/PF4 Rapid Assay products for sales to large integrated delivery network customers in the US

· Company actively campaigning to drive PIFA Heparin/PF4 Rapid Assay products to the next level by pursuing further clinical pathway studies, heparin-induced thrombocytopenia (HIT) awareness campaigns and a strategic focus on clinical end-users

· Began marketing rapid test for heparin-induced thrombocytopenia to hospital facilities in Puerto Rico

· In May 2017, the Company submitted its PIFA Chlamydia Rapid Assay - the first rapid blood test for this highly prevalent sexually transmitted disease - to the US Food and Drug Administration (FDA) for 510(k) approval

o The Company continues to work proactively with the FDA to advance the approval process. The Company is in communication with the FDA regarding a potential requirement for additional data. In the event that the FDA requires additional data to support the application, the Company is committed to completing further studies as expeditiously as possible in order to complete the FDA 510(k) process

· New directors elected with diverse and relevant skills to steer Akers Bio through next phase of growth and product commercialization

o John J. Gormally (the Company's CEO since November 2015) elected to the Board of Directors - 35+ years of experience in the healthcare industry

o Bill J. White elected as Non-executive Director - 30+ years of experience in financial management, operations and business development

o Richard C. Tarbox III elected as Non-executive Director - 40+ years of management experience in the medical device and diagnostics sector of the healthcare industry

o Christopher C. Schreiber elected as Non-executive Director - 30+ years of experience in the securities industry

· US commercial team strengthened with appointment of Pamela E. Hibler as Vice President, Sales and Distribution, North America - 25+ years of success in medical device sector sales

Chief Executive Officer's Commentary

Akers Bio grew stronger in 2017 on a number of levels. We strengthened our Board of Directors, with the appointments of highly experienced directors in the fields of healthcare, medical devices, finance and capital markets; we strengthened our leadership team, particularly in Sales and Distribution; we strengthened our product positioning across core products including PIFA Heparin/PF4 Rapid Assay and BreathScan OxiChek™; and we strengthened our balance sheet, with net proceeds from Public Offerings a Private Placement and the executions of stock warrants totaling approximately $10.5 million. The combined effect of these accomplishments will, I believe, be reflected in accelerated growth in the months and years ahead.

A key product of our future is BreathScan OxiChek™ - the first commercialized product from the Akers Wellness™ line which applies the Company's proprietary breath analysis technology to the large and growing health and wellness market. OxiChek™ is a rapid breath test for oxidative stress - a good indicator of a person's overall health and wellbeing. It works with BreathScan Lync™ - the new bluetooth-enabled reading device from Akers Wellness™ which enables users to track the results of OxiChek™ via their mobile device. The Company initiated discussions during the year within the nutraceutical sector with regards to a significant potential commercial partnership for OxiChek™. We further broadened distribution from anti-aging, functional and integrative health and wellness treatment practitioners in the US to now include the chiropractic sector; and undertook a major television marketing campaign on the Lifetime network.

I am encouraged that OxiChek™ and BreathScan Lync™ continued to contribute incrementally over the course of the year to our MPC Biosensor platform sales, which grew overall by 237% to $950,946. It is also notable that sales of BreathScan Alcohol Breathalyzer products - another commercialized product in this platform category - enjoyed a stronger year, boosted by a $267,750 initial stocking order from Australia and New Zealand; and interest re-emerging in Western Europe and the Far East.

Akers Bio is proud to see its over-the-counter rapid self-test for cholesterol on the shelves of major US retailers as shipments commenced to First Check Diagnostics, LLC, the exclusive distributor for this product in the US, for sale under their popular "First Check" brand, which is sold in stores including Rite Aid, Target, Kmart, Meijer, Giant Eagle, Stop & Shop, Giant and ShopKo. We are encouraged by demand and have received re-orders in 2018.

Revenue from the Company's PIFA Heparin/PF4 Rapid Assay products decreased 13% to $2,232,684 (2016: $2,577,148) during the year ended December 31, 2017. Additional revenue from PIFA-related components, totaling $500,000, is included in other revenue. We are disappointed by this plateau and continue to believe the Company has significant market share upside for these assays. Accordingly, we have adjusted our marketing strategy to target large integrated delivery network (IDN) customers in the US While these IDNs take longer to penetrate than smaller, individual hospitals, once they are converted, we believe they will drive a step-change in revenues. Other components of our strategy to break through this plateau include clinical pathway studies, heparin-induced thrombocytopenia (HIT) awareness campaigns and a strategic focus on clinical end-users (particularly cardiac and orthopedic surgeons). We expect to announce a number of exciting developments in this area in the coming months.

In July, we recruited Pamela E. Hibler as Vice President, Sales and Distribution, in particular to lead the sales strategy for PIFA Heparin/PF4 Rapid Assay products in North America. I have worked with Pamela prior to Akers Bio. She has more than 25 years of success in medical device sector sales and I am excited about the work that she and our expanding team of Regional Sales Representatives reporting to her are doing to take PIFA to the next level.

I was delighted that we announced, after the year-end, a three-year National Distribution Agreement with Diagnostica Stago, Inc. ("Stago") for the sale of the PIFA PLUSS PF4™ Rapid Assay across the US Stago is a global leader in hemostasis, with a specialized sales team and a large and established customer base to which to market our product.

Our most advanced products in the development pipeline are PIFA Chlamydia Rapid Assay and BreathScan KetoChek™. Each of these products has considerable market potential.

KetoChek™ is a breath-based device providing rapid, non-invasive identification of an optimal fat-burning state for weight loss (nutritional ketosis).

PIFA Chlamydia Rapid Assay is the first rapid blood test for this highly prevalent sexually transmitted disease. Subject to regulatory approval, we believe it will be highly appealing to our target markets which include Planned Parenthood, ambulatory care, health clinics and college campus clinics. In May 2017, the Company submitted PIFA Chlamydia to the FDA for 510(k) approval. The Company continues to work proactively with the FDA to advance the approval process. The Company is in communication with the FDA regarding a potential requirement for additional data. In the event that the FDA requires additional data to support the application, the Company is committed to completing further studies as expeditiously as possible in order to complete the FDA 510(k) process.

Having strengthened our business across key areas in 2017, Akers Bio is wholly focused on achieving a step-change in revenue growth in the current year and beyond. We aim to achieve this principally by breaking through the plateau in PIFA Heparin/PF4 Rapid Assay sales to take that product to the next level; securing a major channel to market for OxiChek™; and introducing new products to the market with large market potential.

John J. Gormally

Chief Executive Officer

Conference Call Information:

Tuesday, April 3, 2018 at 9:00 a.m. Eastern Time

International callers: 1-323-794-2093

US callers: 1-866-548-4713

Conference ID: 3259966

Webcast: http://public.viavid.com/index.php?id=128828 

For more information:

Akers Biosciences, Inc.

John J. Gormally, Chief Executive Officer

Tel. +1 856 848 8698

finnCap (UK Nominated Adviser and Broker)

Adrian Hargrave / Scott Mathieson (Corporate Finance)

Steve Norcross (Broking)

Tel. +44 (0)20 7220 0500

Vigo Communications (Global Public Relations)

Ben Simons / Fiona Henson

Tel. +44 (0)20 7830 9700

Email: akers@vigocomms.com

Management's Discussion and Analysis of Financial Condition and 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 $23,562,181, net of expenses, in public and private offerings since the Company's 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:

At December 31, 2017, Akers had cash of $438,432, working capital of $7,551,846, shareholders' equity of $9,113,837 and an accumulated deficit of $103,284,863. The Company believes that its current working capital position will be sufficient to meet its estimated cash needs for at least the next twelve months.

The fair value of the Company's investments in marketable securities as of December 31, 2017 was $5,011,607 (2016: $50,001). 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.

Revenue

The Company's total revenue for the year ended December 31, 2017 was $3,929,527, a 33% increase compared to the same period in 2016. The table below presents a summary of our sales by product line:

Product revenue increased by 31% to $3,879,527 (2016: $2,957,162) during the year ended December 31, 2017. The Company's PIFA Heparin/PF4 Rapid Assay products generated the majority of the product revenue but the growth was driven primarily by sales of BreathScan Alcohol Breathalyzers, BreathScan OxiChek™ and the Company's re-introduced Tri-Cholesterol products. License and service fees increased to $50,000 (2016: $3,750), the result a 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. 

Revenue from the Company's PIFA Heparin/PF4 Rapid Assay products decreased 13% to $2,232,684 (2016: $2,577,148) during the year ended December 31, 2017 over the same period of 2016. Additional revenue from PIFA -related components, totaling $500,000, during the year ended December 31, 2017 is included in other revenue. The Company is taking steps to improve its market presence including the use of specialized Independent Sales Representatives and a program to educate the marketplace through the preparation and publication of additional clinical studies and physician seminars on the risks associated with heparin induced thrombocytopenia.

The Company's dedicated technical sales account executives are supporting over 300 sales representatives of Akers' U.S. distribution partners, Cardinal Health ("Cardinal Health"), Fisher HealthCare ("Fisher Healthcare") and Typenex Medical, LLC ("Typenex"). The Company's relationship-building initiative with our partners has delivered a measurable increase in product trials and adoptions. Domestic sales for the year ended December 31, 2017 of our distributors, Cardinal Health and Fisher HealthCare, accounted for $1,902,606 of the total PIFA Heparin/PF4 Rapid Assay sales as compared to $1,820,186 for the same period of 2016.

During the year ended December 31, 2017 the Company recognized $- (2016: $505,380) in PIFA revenue from the Company's distribution partner in the People's Republic of China ("PRC"). During the year ended December 31, 2017, NovoTek purchased PIFA components totaling $500,000 which is included in other revenue. 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.

The Company's MPC product sales increased by 237% to $950,946 (2016: $282,516) during the year ended December 31, 2017. A distributor's initial stocking order of $267,750 for the Company's BreathScan Alcohol Breathalyzer products in Australia and New Zealand and revenue from the Company's new BreathScan Lync™ and BreathScan OxiChek™ products contributed to the increase for the year ended December 31, 2017.

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's re-introduction of its Tri-Cholesterol test generated $133,848 (2016: $-) during the year ended December 31, 2017. The first shipment of this product occurred in September with follow-on shipments in December of 2017.

Other operating revenue increased by 476% to $562,049 (2016: $97,498) for the year ended December 31, 2017. 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.

License and service fee revenue increased to $50,000 (2016: $3,750) during the year ended December 31, 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 table below summarizes our revenue by geographic region for the years ended December 31, 2017 and 2016 as well as the percentage of change year-over-year:

Domestic sales represent the most significant portion of the Company's revenue, contributing 73% (2016: 79%). 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 Alcohol Breathalyzer products being distributed in Western Europe and Australia.

Cost of sales for the year ended December 31, 2017 totaled $1,419,963 (2016: $1,083,087). Direct cost of sales increased to 21% (2016: 15%) and indirect cost of sales decreased to 16% (2016: 21%) of product revenue for year ended December 31, 2017. Overall, cost of sales, as a percentage of product revenue, remained unchanged at 37% for the years ended December 31, 2017 and 2016.

Direct costs of sales for the year ended December 31, 2017 were $809,059 (2016: $448,240). Other cost of sales for the year ended December 31, 2017 were $610,904 (2016: $634,848).

The initial commercial production of the Company's Tri-Cholesterol product contributed to the increase in direct costs. 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.

The Company continues to maintain strong gross margins which remained unchanged at 63% for the years ended December 31, 2017 and 2016.

General and Administrative Expenses

General and administrative expenses in the year ended December 31, 2017 totaled $4,082,313, which was a 36% increase as compared to $3,008,811 for the year ended December 31, 2016. The table below summarizes our general and administrative expenses for the years ended December 31, 2017 and 2016 as well as the percentage of change year-over-year:

Personnel costs rose 32% to $1,173,964 (2016: $886,294) for the year ended December 31, 2017. The increase is the result of changes to compensation for the Chief Executive Officer and Vice President of Finance, including base salaries, bonus and equity, and the establishment of a Financial Controller position to support daily operations and assist in the implementation of revised internal and disclosure controls.

Professional service costs increased by 53% for the year ended December 31, 2017 as compared to the same period of 2016. A significant increase in accounting and audit ($258,578 (2016: $182,396)), personnel recruitment ($43,298 (2016: $409)), engineering ($94,472 (2016: $73,405)), legal fees ($899,032 (2016: $613,159)) and general consulting services ($62,975 (2016: $10,138)) accounted for the change.

The Company recognized a small cost savings of 1% for the year ended December 31, 2017 from its stock market and investor relations categories. These include consulting, investor relations, stock exchange fees and transfer agent fees.

The Company's other general and administrative expenses increased by 40% for the year ended December 31, 2017 as compared to the same period of 2016. The Company recognized $494,436 (2016: $146,196) for uncollectable accounts during the year ended December 31, 2017 which were offset by continued efforts to reduce costs resulting in savings across several expense categories, the most significant of which resulted from a reduction in travel expenses for the executive and administrative staff totaled $49,155 (2016: $118,980).

Sales and Marketing Expenses

Sales and marketing expenses in the year ended December 31, 2017 totaled $2,048,571, which was a 4% decrease as compared to $2,137,282 for the year ended 2016. The table below summarizes our sales and marketing expenses for the years ended December 31, 2017 and 2016 as well as the percentage of change year-over-year:

Personnel costs decreased 2% in the year ended December 31, 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 5 as of December 31, 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 during the years ended December 31 2017 and 2016. The result is a reduction of 42% in professional service fees. General consulting services ($256,450 (2016: $390,386)) and marketing services ($161 (2016: $51,246)) accounted for the savings for the year ended December 31, 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 year ended December 31, 2017, this royalty totaled $202,126 (2016: $153,854).

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 in the year ended December 31, 2017 totaled $1,260,378, which was a 6% increase as compared to $1,188,868 for the year ended 2016. The table below summarizes our research and development expenses for the years ended December 31, 2017 and 2016 as well as the percentage of change year-over-year:

Personnel costs increased 28% during the year ended December 31, 2017 as compared to the same period of 2016. The increase is the result of changes to the compensation for the Chief Scientific Director as he assumed his new expanded responsibilities for the Company.

Clinical trial costs decreased 98% during the year ended December 31, 2017 as compared to the same period of 2016. The Company performed two clinical trials during the year ended December 31, 2016, one to test the effectiveness of the PIFA Chlamydia assay and one for Breath DKA. The trials collected data to support submissions to the U.S. Food and Drug Administration for 510(k) approvals and to support the clinical effectiveness of the products.

A reduction in general consulting services ($39,503 (2016: $71,844)) was offset by an increase in engineering and product design fees ($78,779 ($41,962)) for the year ended December 31, 2017 resulting in a 9% increase in professional service fees.

Moderate decreases in several expense categories were offset by increases in internal resource utilization ($19,176 (2016: $8,595)) and travel expenses ($40,799 (2016 $29,561)) to account for the 6% increase in other research and development expenses.

The following table illustrates research and development costs by project for the years ended December 31, 2017 and 2016, respectively.

(Reversal of Allowance for) Bad Debt Expense - Related Party

The Company 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 as of December 31, 2015. In August 2016, the two companies reached a settlement agreement which included recovery for the value of the note receivable. As a result, the allowance for doubtful accounts was reversed during the year ended December 31, 2016.

Other Income and Expense

Other income decreased 51% to $12,412 (2016: $25,097) and other expenses totaled $764,932 (2016: $-) for the year ended December 31, 2017. The table below summarizes our other income and expenses for the years ended December 31, 2017 and 2016 as well as the percentage of change year-over-year:

Gains and losses associated with foreign currency transactions decreased by 51% during the year ended December 31, 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 during 2017.

Realized gains, interest and dividend income declined to $10,753 (2016: $21,699). The Company's available capital for investment activities was limited during the year ended December 31, 2017 resulting in the decline in investment income.

The Company modified the exercise price for 724,200 warrants issued March 30, 2017 from $1.96 to $1.00 per common share and issued an additional 724,200 warrants to the original holders at an exercise price of $1.26 per common share to raise additional capital. The Company incurred modification expenses of $764,932, which includes the increase in the fair value of the warrants of $93,386 for the reduction in exercise price form $1.96 to $1.00 and the fair value of the new warrants of $671,546 in accordance with FASB ASC 718-20-35.

Income Taxes

As of December 31, 2017 and 2016, the Company had Federal net operating loss carry forwards of approximately $68,600,000 and $60,100,000, respectively, expiring through the year ending December 31, 2036. As of December 31, 2017 and 2016, the Company had New Jersey state net operating loss carry forwards of approximately $17,800,000 and $9,400,000, respectively, expiring the year ending December 31, 2023.

The principal components of deferred tax assets and valuation allowance as of December 31, 2017 and December 31, 2016 are as follows:

Tax Rates & Benefits

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, 2017 and December 31, 2016 are as follows.

In December 2017, the Tax Cuts and Jobs Act was enacted, which reduced the U.S. statutory corporate tax rate to 21% for tax years beginning in 2018. This change resulted in a re-measurement of the federal portion of the Company's deferred tax assets and the valuation allowance as of December 31, 2017 from 35% to the new 21% tax rate.

Deferred Tax Assets

The principle components of the deferred tax assets and related valuation allowances as of December 31, 2017 and 2016 are as follows:

The valuation allowance for deferred tax assets as of December 31, 2017 and 2016 was $16,043,000 and $22,483,000. The change in the total valuation for the years ended December 31, 2017 and 2016 were a decrease of $6,440,000 and an increase of $751,000. 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.

Liquidity and Capital Resources

For the years ended December 31, 2017 and 2016, the Company generated a net loss attributable to shareholders of $5,805,326 and $3,303,538, respectively. As of December 31, 2017 and 2016, the Company has an accumulated deficit of $103,284,863 and $97,479,537 and had cash and cash equivalents totaling $438,432 and $72,700, respectively The Company had marketable securities of $5,011,607 and $50,001 available as of December 31, 2017 and 2016.

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, BreathScan KetoChek, 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. These losses could be attributed to product development, clinical and regulatory activities, contract consulting and other product development and commercialization related expenses. The Company began implementing the 2017-19 Strategic Plan ("Strat Plan") in January 2017 and management remains confident that the objectives are achievable.

We expect that our primary expenditures will be to continue development of PIFA PLUSS® Infectious Disease single-use assays, BreathScan KetoChek 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, 2017 totaled $54,507 (2016: $123,301). 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.

Operating Activities

The Company's net cash consumed by operating activities in the year ended December 31, 2017 totaled $5,080,412, which was a 22% increase as compared to $4,173,148 for the year ended December 31, 2016. The table below summarizes our net cash consumed for the years ended December 31, 2017 and 2016 as well as the percentage of change year-over-year:

Net cash consumed by operating activities totaled $5,080,412 during the year ended December 31, 2017. Cash was consumed by the loss of $5,805,326 and $1,412 for accrued income on marketable securities offset by non-cash adjustment of $249,894 for depreciation, amortization of non-current assets, $26,122 for a reserve for obsolete inventory, $450,000 reserve for doubtful accounts, $21,103 for amortization of deferred compensation and $284,606 for non-cash share based compensation and services. For the year ended December 31, 2017, decreases in deposits and other receivables of $7,192, inventory of $165,118, prepaid expense of $22,789, prepaid expense - related parties of $101,066 and an increase in trade and other payables of $269,853 provided cash, primarily related to routine changes in operating activities. A net increase in trade receivables of $1,339,714, trade receivables - related parties of $93,109, and other assets of $9,280 and a decrease in trade and other payables - related party of $194,246 consumed cash from operating activities.

For the year ended December 31, 2016, cash was consumed by the loss of $3,303,538 and non-operating gains of $1,153,413 offset by a non-cash adjustment of $14,244 for accrued interest and dividends, $286,162 for depreciation, amortization of non-current assets, $32,333 for a reserve for obsolete inventory, $30,153 for amortization of deferred compensation and $51,653 for non-cash share based compensation and services. Decreases in deposits and other receivables ($71,795), prepaid expenses ($17,689), prepaid expenses - related party of ($76,927) and an increase in trade and other payables - related party ($234,067) provided cash. Increases in trade receivables ($138,272), trade receivables - related party ($380), inventories ($187,200) and a decrease in trade and other payables ($205,368) consumed cash. The decrease in net cash used in operating activities was related to improvements to the Company's budgeting process, termination of several consulting agreements and a significant reduction in legal expenses.

Investing and Financing Activities

The table below summarizes our cash flows from investing and financing activities for the years ended December 31, 2017 and 2016 as well as the percentage of change year-over-year:

The Company's net cash provided by investing and financing activities totaled $5,446,144 (2016: $3,843,789) during the year ended December 31, 2017. Cash of $7,763,848 (2016: $159,245) was consumed by capital expenditures and the purchase of marketable securities. Proceeds from the sale of marketable securities contributed cash of $2,749,147 (2016: $4,003,034) 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 $10,460,845 (2016: $-) for the year ended December 31, 2017.

Financial Statements

Consolidated Balance Sheets

December 31, 2017 and 2016

Consolidated Statements of Operations and Comprehensive Loss

For the years ended December 31, 2017 and 2016

Consolidated Statement of Changes in Stockholder's Equity

For the years ended December 31, 2017 and 2016

Consolidated Statements of Cash Flows

For the years ended December 31, 2017 and 2016