15 Aug 2017 07:00
August 15, 2017
This announcement contains inside information
Akers Biosciences, Inc.
Financial Results for the Six Months Ended June 30, 2017
Total Revenues Up By 10% - Gross Profit Up By 10% - Overhead Lowered By 10%
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 six months ended June 30, 2017. The Form 10-Q containing the full financial statements for the six months and three months ended June 30, 2017 is available for viewing on the Company's website at www.akersbio.com or at www.sec.gov.
H1 Financial Highlights:
· Total revenues up 10% for H1 2017 to $1,865,112 (H1 2016: $1,694,510)
· Sales of flagship PIFA Heparin/PF4 Rapid Assay products and associated components account for 80% of total revenues and include sales to all key geographic regions: the U.S., China and Rest of World
· Strong gross margin of 72% maintained
· Gross profit up 10% to $1,342,160 (H1 2016: $1,217,634)
· Loss before income tax reduced by 20% to $(2,051,918) (H1 2016: $(2,517,861))
· Cash and marketable securities at June 30, 2017 of $1,208,800
· Further reductions of 10% in aggregate across in all key areas of expense
o General and Administrative expenses reduced by 7% to $1,620,457 (H1 2016: $1,739,806)
o Sales and Marketing expenses reduced by 19% to $1,005,326 (H1 2016: $1,238,754)
o Research and Development expenses reduced by 3% to $662,277 (H1 2016: $685,280)
H1 Operational & Corporate Highlights
· Significantly advanced commercialization of a key product of the future: BreathScan OxiCheck™ - a rapid breath test for oxidative stress
o Ongoing discussions with large organizations operating within the nutraceutical sector with regards to significant potential commercial partnerships
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 Major television marketing campaign initiated 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
· Ongoing manufacturing of initial order for rapid cholesterol self-test from First Check Diagnostics, LLC, the exclusive distributor for this product in the U.S., 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 - initial shipment now due September 2017
· Extensive sales and marketing efforts undertaken to increase awareness of PIFA Heparin/PF4 Rapid Assay products amongst prospective large integrated delivery network customers in the U.S.
· Began marketing rapid test for heparin-induced thrombocytopenia to the large number of hospital facilities in Puerto Rico as an extension of strategy to accelerate U.S. sales of this flagship product
o Puerto Rico represents a large new market opportunity which is closely aligned to the U.S. and has more than 60 potential hospital targets
· Following successful clinical trials, the Company submitted its PIFA Chlamydia Rapid Assay - the first rapid blood test for this highly prevalent sexually transmitted disease - to the U.S. Food and Drug Administration for review
· New directors elected with diverse and relevant skills to steer Akers Bio through next phase of growth and product commercialization
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
o John J. Gormally, the Company's CEO, elected to the Board of Directors - 30+ years of experience in the healthcare industry
Commentary from John J. Gormally, Chief Executive Officer and Raymond F. Akers Jr, PhD., Executive Chairman:
We are pleased to report growth of 10% in total revenues for the first half of 2017 to approximately $1.9 million; and 25% for the second quarter to approximately $1.2 million. The significant majority of these revenues continued to be generated from sales of our current flagship test - or associated components thereof - for an allergy to the widely-used blood thinner, heparin. It is encouraging to note that sales of these products or components in the first half were made in each of our core geographic regions of the U.S., China and Rest of World.
A great deal of sales and marketing emphasis in the first half and second quarter of 2017 has been placed on BreathScan OxiCheck™ - an Akers Wellness™ breath test which we believe will become a major contributor of profitable growth in the years ahead. This rapid breath test for oxidative stress - a good indicator of general health and wellbeing - works in conjunction with our BreathScan Lync™ bluetooth-enabled reading device which allows users to track the results of OxiChek™ via their mobile device, now including iOS devices.
We have already begun recording small sales of OxiChek™ to the anti-aging, functional and integrative health and wellness treatment practitioner market in the U.S. as part of our strategy to gain initial acceptance of the product from professionals.
We are also particularly excited by the discussions ongoing with large organizations operating within the nutraceutical product sector with regards to significant potential commercial partnerships with OxiChek™.
Furthermore, we have recently broadened the distribution of OxiChek™ to target the extensive U.S. chiropractic market where we have established a contractual relationship with a respected authority and key opinion leader to represent and promote the product.
A major television marketing campaign for OxiChek™ was initiated in April 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. The interest generated from this campaign has been highly encouraging.
We commenced production during the second quarter to fulfil the initial order for rapid cholesterol self-tests from First Check Diagnostics, LLC, the exclusive distributor for this product in the U.S., 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. Initial shipments are due September 2017 and we remain very excited about this over-the-counter opportunity.
We would finally like to note the elections, following the Company's annual shareholder meeting in Philadelphia, PA last week, of three very experienced non-executive directors. We are delighted to welcome Bill J. White, Richard C. Tarbox III and Christopher C. Schreiber who joined the Board of Directors - along with myself - last week. Each of them bears very relevant experience to help steer Akers Bio through its next phase of commercial growth, including profitability, as we seek to draw on their respective areas of expertise in financial management, medical devices and capital markets.
Outlook
While we are pleased with the broad financial improvements in H1, we are especially encouraged by the 25% increase in revenue in Q2 year-over-year; and the 1.8-fold increase over Q1 2017.
We are continuing to advance our sales strategy for PIFA Heparin/PF4 Rapid Assay products in the U.S. of focusing on integrated delivery networks and group purchasing organizations. Extensive work was undertaken in the first half and second quarter to educate prospective large customers on the value proposition of our PIFA Heparin/PF4 Rapid Assay products and we believe this groundwork will translate into material commercial growth in domestic sales in 2018 and beyond.
In addition, we are encouraged by the increase in non-US PIFA Heparin/PF4 Rapid Assay product sales. We continue to believe that, once additional regulatory hurdles in China are complete, China will become a very significant non-U.S. revenue stream for PIFA Heparin/PF4 Rapid Assay products; and our confidence is reflected in the distributor's placement of orders for components of the tests in the second quarter in anticipation of such regulatory hurdles completing.
Finally, we look forward to further commercial progress with the Company's OxiChek™ oxidative stress test which we believe can be a major driver of Akers Bio's profitable growth in the future.
Conference call information:
Tuesday, August 15, 2017 at 2.00 p.m. BST (9:00 a.m. Eastern Time) |
International: 1-719-457-2602 |
US: 1-800-210-9006 |
Conference ID: 7353698 |
Webcast: http://public.viavid.com/index.php?id=125855 |
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.
For more information:
Akers Biosciences, Inc.
John J. Gormally, Chief Executive Officer
Raymond F. Akers, Jr. PhD, Chief Scientific Director
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 (Global Public Relations)
Ben Simons / Fiona Henson
Tel. +44 (0)20 7830 9704
Email: akers@vigocomms.com
Summary of Statements of Operations for the Three Months Ended June 30, 2017 and 2016
Revenue
Akers' revenue for the three months ended June 30, 2017 totaled $1,197,862, a 25% increase from the same period in 2016. The tables below summarize our revenue by product line and geographic region for the three months ended June 30, 2017 and 2016 as well as the percentage of change year-over-year:
Product Lines | 3 Months Ended June 30, 2017 | 3 Months Ended June 30, 2016 | Percent Change | |||||||||
Particle ImmunoFiltration Assay ("PIFA") | $ | 426,747 | $ | 879,081 | (51 | )% | ||||||
MicroParticle Catalyzed Biosensor ("MPC") | 191,816 | 44,918 | 327 | % | ||||||||
Other | 579,299 | 32,487 | 1,683 | % | ||||||||
Total Revenue | $ | 1,197,862 | $ | 956,486 | 25 | % | ||||||
Geographic Region | 3 Months Ended June 30, 2017 | 3 Months Ended June 30, 2016 | Percent Change | |||||||||
United States | $ | 512,395 | $ | 452,756 | 13 | % | ||||||
People's Republic of China | 603,068 | 473,853 | 27 | % | ||||||||
Rest of World | 82,399 | 29,877 | 176 | % | ||||||||
Total Revenue | $ | 1,197,862 | $ | 956,486 | 25 | % | ||||||
Revenue from the Company's PIFA Heparin/PF4 Rapid Assay products decreased 51% during the three months ended June 30, 2017 over the same period of 2016. During the three months ended June 30, 2016 the Company recognized approximately $474,000 (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. Revenue from PIFA related components, totaling $500,000, during the three months ended June 30, 2017 is included in other revenue.
Total unit sales volumes for PIFA Classic and PIFA PLUSS in the United States remained steady, however; the ratio of each product sold changed slightly year-over-year. The Company experienced renewed interest in Western Europe and the Far East for the products after reviving the Conformité Européene Mark ("CE Mark"). The PIFA Classic product is being actively marketed in Great Britain and a clinical trial is scheduled in Italy.
MPC revenue increased 327% during the three months ended June 30, 2017 over the same period of 2016. Domestic and International sales of the BreathScan Breath Alcohol tests which accounted for the majority of the improvement.
The Company signed an amendment to the exclusive distribution agreement for the PIFA Heparin/PF4 products with NovoTek Pharmaceuticals Limited ("NovoTek") to expand their geographic region to include Poland, include other PIFA Heparin/PF4 products and allow NovoTek to assemble the products at its facilities in the PRC or Poland from components acquired from the Company.
Other revenue increased 1,683% during the three months ended June 30, 2017 as compared to the same period of 2016. The significant increase resulted from an initial order 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.
The Company's gross margin improved to 78% (2016: 71%) for the three months ended June 30, 2017. Generally, costs associated with production declined across the board; however, the Company was able to sell a large quantity of raw materials associated with a previously discontinued product that had been removed from inventory and, as such, had no book value. The Company expects the gross margin to return to the 65% to 68% range in the near-term.
Cost of sales for the three months ended June 30, 2017 totaled $264,231 (2016: $276,848). Direct cost of sales decreased to 10% of revenue while other cost of sales decreased to 12% for the three months ended June 30, 2017 as compared to 14% and 15% respectively for the same period in 2016.
Direct cost of sales for the three-month period ended June 30, 2017 were $117,184 (2016: $135,298). Other cost of sales for the three months ended June 30, 2017 were $147,047 (2016: $141,550).
General and Administrative Expenses
General and administrative expenses for the three months ended June 30, 2017, totaled $829,929, which was a 2% increase as compared to $816,244 for the three months ended June 30, 2016.
The table below summarizes our general and administrative expenses for the three months ended June 30, 2017 and 2016 as well as the percentage of change year-over-year:
Description | 3 Months EndedJune 30, 2017 | 3 MonthsEndedJune 30, 2016 | Percent Change | |||||||||
Personnel Costs | $ | 223,944 | $ | 165,021 | 36 | % | ||||||
Professional Service Costs | 354.570 | 227,246 | 56 | % | ||||||||
Stock Market & Investor Relations Costs | 117,253 | 116,962 | - | % | ||||||||
Other General and Administrative Costs | 134,162 | 307,015 | (56 | )% | ||||||||
Total General and Administrative Expense | $ | 829,929 | $ | 816,244 | 2 | % | ||||||
Personnel expenses increased by 36% for the three months ended June 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 and salary adjustments for executive management.
Professional service costs increased by 56% for the three months ended June 30, 2017 as compared to the same period of 2016. A significant increase in accounting and audit fees ($104,000 (2016: $20,600)), personnel recruitment ($22,355 (2016: $5,580)), engineering ($26,704 (2016: $7,847)) and general consulting services ($30,000 (2016: $847)) accounted for the change.
The Company established a reserve for an uncollectable account during the three months ended June 30, 2016 for $146,196 (2017: $5,380) which accounted for the decline of 56% in other general and administrative expenses for the three months ended June 30, 2017. Travel restrictions, put in place earlier in the year, also contributed to the decline, totaling $16,638 (2016: $34,276).
Sales and Marketing Expenses
Sales and marketing expenses for the three months ended June 30, 2017 totaled $416,391 which was a 19% decrease as compared to $513,430 for the three months ended June 30, 2016.
The table below summarizes our sales and marketing expenses for the three months ended June 30, 2017 and 2016 as well as the percentage of change year-over-year:
Description | 3 Months Ended June 30, 2017 | 3 Months Ended June 30, 2016 | Percent Change | |||||||||
Personnel Costs | $ | 181,653 | $ | 295,108 | (38 | )% | ||||||
Professional Service Costs | 72,079 | 113,916 | (37 | )% | ||||||||
Royalties and Outside Commission Costs | 103,702 | 30,302 | 242 | % | ||||||||
Other Sales and Marketing Costs | 58,957 | 74,104 | (20 | )% | ||||||||
Total Sales and Marketing Expenses | $ | 416,391 | $ | 513,430 | (19 | )% | ||||||
Personnel costs decreased in the three months ended June 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 June 30, 2017 as a result of a new sales and marketing strategy that 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 three months ended June 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 37% in professional service costs with general consulting services ($68,092 (2016: $104,958)) accounting for the majority of the savings for the three months ended June 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 June 30, 2017, this royalty totaled $61,502 (2016: $-).
A significant decline in travel expenses ($21,065 (2016: $50,435)) and small decreases in other expenses were partially offset by an increase in technology expenses ($21,099 (2016: $147)) which resulted in an overall decline of 20% in other sales and marketing costs.
Research and Development
Research and development expenses for the three months ended June 30, 2017 totaled $313,835, which was a 3% decrease as compared to $321,989 for the three months ended June 30, 2016.
The table below summarizes our research and development expenses for the three months ended June 30, 2017 and 2016 as well as the percentage of change year-over-year:
Description | 3 MonthsEndedJune 30, 2017 | 3 MonthsEnded June 30, 2016 | Percent Change | |||||||||
Personnel Costs | $ | 227,887 | $ | 219,530 | 4 | % | ||||||
Clinical Trial Costs | 150 | 44,265 | (100 | )% | ||||||||
Professional Service Costs | 18,588 | 18,579 | - | % | ||||||||
Other Research and Development Costs | 67,210 | 39,615 | 70 | % | ||||||||
Total Research and Development Expenses | $ | 313,835 | $ | 321,989 | (3 | )% | ||||||
Employee benefit expenses ($22,683 (2016: $14,050)) accounted for the majority of the 4% increase in personnel expenses during the three months ended June 30, 2017.
Clinical trial costs decreased 100% during the three months ended June 30, 2017 as compared to the same period of 2016. The Company continued to perform two clinical trials during the three months ended June 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 June 30, 2017.
Significant increases in internal resource utilization ($11,852 (2016: $853)) and supplies expense ($34,124 (2016 $10,637)) were offset by small declines in several expense categories to account for the 70% increase in other research and development expenses.
The following table illustrates research and development costs by project for the three months ended June 30, 2017 and 2016, respectively:
Project | 2017 | 2016 | ||||||
Breath Alcohol | $ | 502 | $ | - | ||||
Chlamydia Trachomatis | 98,325 | 5,345 | ||||||
Heparin/PF4 | 26,425 | 16,228 | ||||||
Ketone | 1,757 | 708 | ||||||
KetoChek™ / OxiChek™ | 124,499 | 181,281 | ||||||
Metron | 1,098 | - | ||||||
Other Projects | - | 33,358 | ||||||
Pulmo Health | 11,361 | 3,220 | ||||||
SeraSTAT | - | - | ||||||
Tri-Cholesterol | 49,868 | 76,633 | ||||||
VIVO | - | 5,216 | ||||||
Total R&D Expenses: | $ | 313,835 | $ | 321,989 | ||||
Other Income and Expense
Other income, net of expense for the three months ended June 30, 2017 totaled $2,653, which was a 55% decrease as compared to $5,870 for the three months ended June 30, 2016.
The table below summarizes our other income and expenses for the three months ended June 30, 2017 and 2016 as well as the percentage of change year-over-year:
Description | 3 Months Ended June 30, 2017 | 3 Months Ended June 30, 2016 | Percent Change | |||||||||
Currency Translation Loss | $ | (978 | ) | $ | (2,562 | ) | 62 | % | ||||
Realized Gains on Investments | 605 | 6,587 | (91 | )% | ||||||||
Interest and Dividends | 3,026 | 1,845 | 64 | % | ||||||||
Other Income | - | - | - | % | ||||||||
Total Other Income, Net of Expenses | $ | 2,653 | $ | 5,870 | (55 | )% | ||||||
Gains and losses associated with foreign currency transactions improved by 62% during the three months ended June 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.
Realized gains, interest and dividend income declined to $3,631 (2016: $8,432). The Company's available capital for investment activities was limited during the three months ended June 30, 2017 resulting in the decline in investment income.
Summary of Statements of Operations for the Six Months Ended June 30, 2017 and 2016
Revenue
Akers' revenue for the six months ended June 30, 2017 totaled $1,865,112, a 10% increase from the same period in 2016. The tables below summarize our revenue by product line and by geographic region for the six months ended June 30, 2017 and 2016 as well as the percentage of change year-over-year:
Product Lines | 6 Months Ended June 30, 2017 | 6 Months Ended June 30, 2016 | Percent Change | |||||||||
Particle ImmunoFiltration Assay ("PIFA") | $ | 987,668 | $ | 1,514,255 | (35 | )% | ||||||
MicroParticle Catalyzed Biosensor ("MPC") | 277,475 | 109,703 | 153 | % | ||||||||
Other | 599,969 | 70,552 | 750 | % | ||||||||
Total Revenue | $ | 1,865,112 | $ | 1,694,510 | 10 | % | ||||||
Geographic Region | 6 Months Ended June 30, 2017 | 6 Months Ended June 30, 2016 | Percent Change | |||||||||
United States | $ | 1,129,619 | $ | 1,118,961 | 1 | % | ||||||
People's Republic of China | 627,132 | 506,398 | 24 | % | ||||||||
Rest of World | 108,361 | 69,151 | 57 | % | ||||||||
Total Revenue | $ | 1,865,112 | $ | 1,694,510 | 10 | % | ||||||
Revenue from the Company's PIFA Heparin/PF4 Rapid Assay products decreased 35% during the six months ended June 30, 2017 over the same period of 2016. During the six months ended June 30, 2016 the Company recognized approximately $474,000 (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. Revenue from PIFA related components, totaling $500,000, during the six months ended June 30, 2017 is included in other revenue.
Total unit sales volumes for PIFA Classic and PIFA PLUSS in the United States remained steady, however; the sales mix changed slightly year-over-year. The Company experienced renewed interest in Western Europe and the Far East for the products after reviving the Conformité Européene Mark ("CE Mark"). The PIFA Classic products have shipped to Great Britain and India and is being actively marketed in the European Union and a clinical trial is scheduled in Italy.
MPC revenue increased 153% during the six months ended June 30, 2017 over the same period of 2016. Domestic and International sales of the BreathScan Breath Alcohol tests and domestic sales of the BreathScan Lync™ and OxiChek™ products accounted for the majority of the improvement.
The Company signed an amendment to the exclusive distribution agreement for the PIFA Heparin/PF4 products with NovoTek Pharmaceuticals Limited ("NovoTek") to expand their geographic region to include Poland, include other PIFA Heparin/PF4 products and allow NovoTek to assemble the products at its facilities in the PRC or Poland from components acquired from the Company.
Other revenue increased 750% during the six months ended June 30, 2017 as compared to the same period of 2016. The significant increase resulted from an initial order 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.
The Company's gross margin was 72% (2016: 72%) for the six months ended June 30, 2017. The Company's use of sub-contractors for assembly and packaging services increased to $119,072 (2016: $10,506) and increases in warehousing costs ($39,770 (2016: $7,662)) were offset by smaller declines in several expense categories. Additionally, the Company was able to sell its stock of raw materials associated with a previously discontinued product that had been removed from inventory and, as such, had no book value. The Company expects the gross margin to return to the 65% to 68% range in the near-term.
Cost of sales for the six months ended June 30, 2017 totaled $522,952 (2016: $476,876). Direct cost of sales decreased to 12% of revenue while other cost of sales increased to 16% for the six months ended June 30, 2017 as compared to 13% and 15% respectively for the same period in 2016.
Direct cost of sales for the six months ended June 30, 2017 were $223,313 (2016: $216,087). Other cost of sales for the six months ended June 30, 2017 were $299,639 (2016: $260,789).
General and Administrative Expenses
General and administrative expenses for the six months ended June 30, 2017, totaled $1,620,457, which was a 7% decrease as compared to $1,739,806 for the six months ended June 30, 2016.
The table below summarizes our general and administrative expenses for the three months ended June 30, 2017 and 2016 as well as the percentage of change year-over-year:
Description | 6 Months EndedJune 30, 2017 | 6 MonthsEndedJune 30, 2016 | Percent Change | |||||||||
Personnel Costs | $ | 558,471 | $ | 543,770 | 3 | % | ||||||
Professional Service Costs | 546,322 | 477,094 | 15 | % | ||||||||
Stock Market & Investor Relations Costs | 199,639 | 234,003 | (15 | )% | ||||||||
Other General and Administrative Costs | 316,025 | 484,939 | (35 | )% | ||||||||
Total General and Administrative Expense | $ | 1,620,457 | $ | 1,739,806 | (7 | )% | ||||||
Personnel expenses increased by 3% for the six months ended June 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 and salary adjustments for executive management.
Professional service costs increased by 15% for the six months ended June 30, 2017 as compared to the same period of 2016. A significant increase in accounting and audit ($104,000 (2016: $60,896)), personnel recruitment ($22,355 (2016: $409)), engineering ($56,794 (2016: $24,605)) and general consulting services ($52,975 (2016: $3,388)) were offset by a decrease in legal fees ($310,198 (2016: $386,146)) which accounted for the change.
Decreases in consulting ($47,185 (2016: $61,127)) and investor relation services ($106,687 (2016: $130,436)) accounted for the 15% decrease in stock market & investor relations expenses.
The Company established a reserve for an uncollectable account during the six months ended June 30, 2016 for $146,196 (2017: $47,741) which accounted for the decline of 35% in other general and administrative expenses for the six months ended June 30, 2017. Travel restrictions, put in place earlier in the year, also contributed to the decline, totaling $26,205 (2016: $96,219).
Sales and Marketing Expenses
Sales and marketing expenses for the six months ended June 30, 2017 totaled $1,005,326 which was a 19% decrease as compared to $1,238,754 for the six months ended June 30, 2016.
The table below summarizes our sales and marketing expenses for the six months ended June 30, 2017 and 2016 as well as the percentage of change year-over-year:
Description | 6 Months Ended June 30, 2017 | 6 Months Ended June 30, 2016 | Percent Change | |||||||||
Personnel Costs | $ | 517,485 | $ | 714,796 | (28 | )% | ||||||
Professional Service Costs | 137,126 | 307,020 | (55 | )% | ||||||||
Royalties and Outside Commission Costs | 148,836 | 50,045 | 197 | % | ||||||||
Other Sales and Marketing Costs | 201,879 | 166,893 | 21 | % | ||||||||
Total Sales and Marketing Expenses | $ | 1,005,326 | $ | 1,238,754 | (19 | )% | ||||||
Personnel costs decreased in the six months ended June 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 June 30, 2017 as a result of a new sales and marketing strategy that 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 six months ended June 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 55% in professional service fees for general consulting services ($136,714 (2016: $220,289)) and marketing services ($- (2016: $51,246)) for the six months ended June 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 six months ended June 30, 2017, this royalty totaled $93,781 (2016: $-).
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 six months ended June 30, 2017 totaled $662,277, which was a 3% decrease as compared to $685,280 for the six months ended June 30, 2016.
The table below summarizes our research and development expenses for the six months ended June 30, 2017 and 2016 as well as the percentage of change year-over-year:
Description | 6 MonthsEndedJune 30, 2017 | 6 MonthsEnded June 30, 2016 | Percent Change | |||||||||
Personnel Costs | $ | 512,837 | $ | 378,553 | 35 | % | ||||||
Clinical Trial Costs | 300 | 141,342 | (100 | )% | ||||||||
Professional Service Costs | 47,711 | 57,147 | (17 | )% | ||||||||
Other Research and Development Costs | 101,429 | 108,238 | (6 | )% | ||||||||
Total Research and Development Expenses | $ | 662,277 | $ | 685,280 | (3 | )% | ||||||
Personnel costs increased 35% during the six months ended June 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 as Chief Scientific Director for the Company. In addition, employee benefit expenses ($41,636 (2016: $31,221)) also contributed to the increase.
Clinical trial costs decreased 100% during the six months ended June 30, 2017 as compared to the same period of 2016. The Company performed two clinical trials during the six months ended June 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 six months ended June 30, 2017.
A reduction in general consulting services ($21,503 (2016: $31,619)) for the six months ended June 30, 2017 was responsible for the 17% decline in professional service fees.
Moderate decreases in several expense categories were offset by increases in internal resource utilization ($13,739 (2016: $2,937)) and travel expenses ($19,593 (2016 $11,047)) to account for the 6% decrease in other research and development expenses.
The following table illustrates research and development costs by project for the six months ended June 30, 2017 and 2016, respectively:
Project | 2017 | 2016 | ||||||
Breath Alcohol | $ | 5,171 | $ | 1,381 | ||||
Chlamydia Trachomatis | 150,033 | 10,685 | ||||||
Heparin/PF4 | 37,923 | 72,575 | ||||||
Ketone | 3,465 | 2,125 | ||||||
KetoChek™ / OxiChek™ | 214,224 | 365,178 | ||||||
Metron | 1,098 | 2,507 | ||||||
Other Projects | 59,688 | 101,584 | ||||||
Pulmo Health | 11,361 | 6,126 | ||||||
SeraSTAT | 5,610 | - | ||||||
Tri-Cholesterol | 173,112 | 117,903 | ||||||
VIVO | 592 | 5,216 | ||||||
Total R&D Expenses: | $ | 662,277 | $ | 685,280 | ||||
Other Income and Expense
Other income, net of expense for the six months ended June 30, 2017 totaled $15,536, which was a 12% increase as compared to $13,899 for the six months ended June 30, 2016.
The table below summarizes our other income and expenses for the six months ended June 30, 2017 and 2016 as well as the percentage of change year-over-year:
Description | 6 Months Ended June 30, 2017 | 6 Months Ended June 30, 2016 | Percent Change | |||||||||
Currency Translation Gain/(Loss) | $ | 9,367 | $ | (4,817 | ) | 294 | % | |||||
Realized Gains on Investments | 1,656 | 2,152 | (23 | )% | ||||||||
Interest and Dividends | 4,513 | 16,564 | (73 | )% | ||||||||
Other Income | - | - | - | % | ||||||||
Total Other Income, Net of Expenses | $ | 15,536 | $ | 13,899 | 12 | % | ||||||
Gains and losses associated with foreign currency transactions improved by 294% during the six months ended June 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 and Euro.
Realized gains, interest and dividend income declined to $6,169 (2016: $18,716). The Company's available capital for investment activities was limited during the six months ended June 30, 2017 resulting in the decline in investment income.
Income Taxes
As of June 30, 2017, the Company does not believe any uncertain tax positions exist that would result in the Company having a liability to the taxing authorities. The Company's policy is to classify interest and penalties related to unrecognized tax benefits, if and when required, as part of interest expense and general and administrative expense, respectively in the consolidated statement of operations.
Liquidity and Capital Resources
For the six months ended June 30, 2017 and 2016, the Company generated a net loss of $2,015,918 and $2,517,861, respectively. As of June 30, 2017 and December 31, 2016, the Company has an accumulated deficit of $99,495,455 and $97,479,537 and had cash and marketable securities totaling $1,208,800 and $122,701, respectively.
During the six months ended June 30, 2017, the Company raised $1,652,994 in net proceeds from a public offering of 1,789,500 shares of common stock, $1,760,317 in net proceeds from a private placement of 1,448,400 shares of common stock and $301,200 from the exercise of warrants for 200,800 shares of common stock.
Financial statements
Condensed Consolidated Balance Sheets
June 30, 2017 and December 31, 2016
2017 | 2016 | |||||||
(unaudited) | (audited) | |||||||
ASSETS | ||||||||
Current Assets | ||||||||
Cash | $ | 197,175 | $ | 72,700 | ||||
Marketable Securities | 1,011,625 | 50,001 | ||||||
Trade Receivables, net | 927,534 | 601,271 | ||||||
Trade Receivables - Related Party, net | 125,001 | 31,892 | ||||||
Deposits and other receivables | 13,090 | 23,782 | ||||||
Inventories, net | 2,166,699 | 2,036,521 | ||||||
Prepaid expenses | 147,526 | 168,277 | ||||||
Prepaid expenses - Related Party | 317,439 | 202,500 | ||||||
Total Current Assets | 4,906,089 | 3,186,944 | ||||||
Non-Current Assets | ||||||||
Prepaid expenses - Related Party | 108,353 | 270,183 | ||||||
Property, Plant and Equipment, net | 260,756 | 259,392 | ||||||
Intangible Assets, net | 1,216,221 | 1,301,775 | ||||||
Other Assets | 71,143 | 66,813 | ||||||
Total Non-Current Assets | 1,656,473 | 1,898,163 | ||||||
Total Assets | $ | 6,562,562 | $ | 5,085,107 | ||||
LIABILITIES | ||||||||
Current Liabilities | ||||||||
Trade and Other Payables | $ | 1,413,141 | $ | 1,463,363 | ||||
Trade and Other Payables - Related Party | 33,911 | 234,067 | ||||||
Total Current Liabilities | 1,447,052 | 1,697,430 | ||||||
Total Liabilities | 1,447,052 | 1,697,430 | ||||||
STOCKHOLDERS' EQUITY | ||||||||
Convertible Preferred Stock, No par value, 50,000,000 shares authorized, no shares issued and outstanding as of June 30, 2017 and December 31, 2016 | - | - | ||||||
Common Stock, No par value, 500,000,000 shares authorized, 8,901,245 and 5,452,545 issued and outstanding as of June 30, 2017 and December 31, 2016 | 104,624,119 | 100,891,786 | ||||||
Deferred Compensation | (14,163 | ) | (24,572 | ) | ||||
Accumulated Deficit | (99,495,455 | ) | (97,479,537 | ) | ||||
Accumulated Other Comprehensive Income | 1,009 | - | ||||||
Total Stockholders' Equity | 5,115,510 | 3,387,677 | ||||||
Total Liabilities and Stockholders' Equity | $ | 6,562,562 | $ | 5,085,107 | ||||
Condensed Consolidated Statements of Operations and Comprehensive Income (unaudited)
For six months ended June 30, 2016
Three months ended | Six months ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
Revenues: | ||||||||||||||||
Product Revenue | $ | 1,097,295 | $ | 956,486 | $ | 1,740,481 | $ | 1,694,510 | ||||||||
Product Revenue - Related party | 100,567 | - | 124,631 | - | ||||||||||||
Total Revenues | 1,197,862 | 956,486 | 1,865,112 | 1,694,510 | ||||||||||||
Cost of Sales: | ||||||||||||||||
Product Cost of Sales | (264,231 | ) | (276,848 | ) | (522,952 | ) | (476,876 | ) | ||||||||
Gross Income | 933,631 | 679,638 | 1,342,160 | 1,217,634 | ||||||||||||
Administrative Expenses | 829,929 | 816,244 | 1,620,457 | 1,739,806 | ||||||||||||
Sales and Marketing Expenses | 354,889 | 513,430 | 911,545 | 1,238,754 | ||||||||||||
Sales and Marketing Expenses - Related Party | 61,502 | - | 93,781 | - | ||||||||||||
Research and Development Expenses | 290,841 | 321,989 | 639,283 | 685,280 | ||||||||||||
Research and Development Expenses - Related Party | 22,994 | - | 22,994 | - | ||||||||||||
Amortization of Non-Current Assets | 42,777 | 42,777 | 85,554 | 85,554 | ||||||||||||
Loss from Operations | (669,301 | ) | (1,014,802 | ) | (2,031,454 | ) | (2,531,760 | ) | ||||||||
Other (Income)/Expenses | ||||||||||||||||
Foreign Currency Transaction (Gain)/Loss | 978 | 2,562 | (9,367 | ) | 4,817 | |||||||||||
Interest and Dividend Income | (3,632 | ) | (8,432 | ) | (6,169 | ) | (18,716 | ) | ||||||||
Other Income | - | - | - | - | ||||||||||||
Total Other Income | (2,654 | ) | (5,870 | ) | (15,536 | ) | (13,899 | ) | ||||||||
Loss Before Income Taxes | (666,647 | ) | (1,008,932 | ) | (2,015,918 | ) | (2,517,861 | ) | ||||||||
Income Tax Benefit | - | - | - | - | ||||||||||||
Net Loss | (666,647 | ) | (1,008,932 | ) | (2,015,918 | ) | (2,517,861 | ) | ||||||||
Other Comprehensive Income/(Loss) | ||||||||||||||||
Net Unrealized Gain/(Loss) on Marketable Securities | 852 | (2,006 | ) | 1,009 | 6,528 | |||||||||||
Total Other Comprehensive Income/(Loss) | 852 | (2,006 | ) | 1,009 | 6,528 | |||||||||||
Comprehensive Loss | $ | (665,795 | ) | $ | (1,010,938 | ) | $ | (2,014,909 | ) | $ | (2,511,333 | ) | ||||
Basic and diluted loss per common share | $ | (0.08 | ) | $ | (0.19 | ) | $ | (0.25 | ) | $ | (0.46 | ) | ||||
Weighted average basic and diluted common shares outstanding | 8,882,326 | 5,427,261 | 7,943,168 | 5,426,153 | ||||||||||||
Condensed Consolidated Statement of Changes in Stockholder's Equity
For six months ended June 30, 2017
Common | Accumulated | |||||||||||||||||||||||
Shares | Other | |||||||||||||||||||||||
Issued and | Common | Deferred | Accumulated | Comprehensive | Total | |||||||||||||||||||
Outstanding | Stock | Compensation | Deficit | Income/(Loss) | Equity | |||||||||||||||||||
Balance at December 31, 2016 (audited) | 5,452,545 | $ | 100,891,786 | $ | (24,572 | ) | $ | (97,479,537 | ) | $ | - | $ | 3,387,677 | |||||||||||
Net loss | - | - | - | (2,015,918 | ) | - | (2,015,918 | ) | ||||||||||||||||
Public offering of common stock, net of offering costs of $494,406 | 1,789,500 | 1,652,994 | - | - | - | 1,652,994 | ||||||||||||||||||
Private offering of common stock, net of offering costs of $267,443 | 1,448,400 | 1,760,317 | - | - | - | 1,760,317 | ||||||||||||||||||
Exercise of warrants for common stock | 200,800 | 301,200 | - | - | - | 301,200 | ||||||||||||||||||
Amortization of deferred compensation | - | - | 10,409 | - | - | 10,409 | ||||||||||||||||||
Issuance of non-qualified stock options to key employees | - | 10,184 | - | - | - | 10,184 | ||||||||||||||||||
Issuance of non-qualified stock options for services to non-employees | - | 2,183 | - | - | - | 2,183 | ||||||||||||||||||
Issuance of restricted stock for services to non-employees | 10,000 | 5,455 | - | - | - | 5,455 | ||||||||||||||||||
Net unrealized gain on marketable securities | - | - | - | - | 1,009 | 1,009 | ||||||||||||||||||
Balance at June 30 2017 (unaudited) | 8,901,245 | $ | 104,624,119 | $ | (14,163 | ) | $ | (99,495,455 | ) | $ | 1,009 | $ | 5,115,510 | |||||||||||
Condensed Consolidated Statements of Cash Flows
For six months ended June 30, 2017 and 2016 (unaudited)
2017 | 2016 | |||||||
Cash flows from operating activities | ||||||||
Net loss for the year | $ | (2,015,918 | ) | $ | (2,517,861 | ) | ||
Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
Accrued income on marketable securities | (1,001 | ) | 8,927 | |||||
Depreciation and amortization | 121,381 | 113,906 | ||||||
Reserve and write-off for obsolete inventory | 21,542 | - | ||||||
Allowance for doubtful accounts | 46,239 | 146,196 | ||||||
Fair value of restricted common stock issued for services | 15,864 | 18,243 | ||||||
Share based compensation to employees - options | 10,184 | - | ||||||
Share based compensation to non-employees - options | 2,183 | 8,241 | ||||||
Changes in assets and liabilities: | ||||||||
Increase in trade receivables | (372,502 | ) | (79,906 | ) | ||||
Increase in trade receivables - related party | (93,109 | ) | - | |||||
Decrease in deposits and other receivables | 10,692 | 31,196 | ||||||
Increase in inventories | (151,720 | ) | (85,588 | ) | ||||
Decrease in prepaid expenses | 20,752 | 43,933 | ||||||
Decrease in prepaid expenses - related party | 46,890 | - | ||||||
Increase in other assets | (4,330 | ) | - | |||||
Decrease in trade and other payables | (50,222 | ) | (103,029 | ) | ||||
Decrease in trade and other payables - related party | (200,156 | ) | - | |||||
Net cash used in operating activities | (2,593,231 | ) | (2,415,742 | ) | ||||
Cash flows from investing activities | ||||||||
Purchases of property, plant and equipment | (37,191 | ) | (81,462 | ) | ||||
Purchases of marketable securities | (2,705,168 | ) | (27,643 | ) | ||||
Proceeds from sale of marketable securities | 1,745,554 | 2,502,319 | ||||||
Net cash (used in)/provided by investing activities | (996,805 | ) | 2,393,214 | |||||
Cash flows from financing activities | ||||||||
Net proceeds from issuance of common stock | 3,413,311 | - | ||||||
Net proceeds from exercise of warrants for common stock | 301,200 | - | ||||||
Net cash provided by financing activities | 3,714,511 | - | ||||||
Net increase/(decrease) in cash | 124,475 | (22,528 | ) | |||||
Cash at beginning of period | 72,700 | 402,059 | ||||||
Cash at end of period | $ | 197,175 | $ | 379,531 | ||||
Supplemental Schedule of Non-Cash Financing and Investing Activities | ||||||||
Issuance of a restricted common stock grant for services | $ | 5,455 | $ | - | ||||
Issuance of a restricted common stock grant to an officer | $ | - | $ | 54,725 | ||||
Net unrealized gains on marketable securities | $ | 1,009 | $ | 6,528 | ||||
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.
The information communicated in this announcement is inside information for the purposes of Article 7 of Regulation 596/2014.