AKR.L Regulatory News (AKR)

13 November 2014

Akers Biosciences, Inc.

Akers Biosciences Announces its Financial Results for Third Quarter 2014

Sales Up 32% from Third Quarter 2013 Driven By PIFA Heparin/PF4 Rapid Assay Products

THOROFARE, N.J., November 13, 2014 Akers Biosciences, Inc. (AIM: AKR.L) (NASDAQ: AKER), (the "Company" or "ABI"), a leading designer and manufacturer of rapid diagnostic screening and testing products, reports its financial results for the third quarter ended September 30, 2014 and for the nine months ended September 30, 2014. The Form 10-Q containing the financial statements is available for viewing on the Company's website at www.akersbiosciences.com or www.sec.gov.

Highlights:

· Revenue for the third quarter totaled $453,313 (Q3 2013: $344,709), a 32% increase from the same period in 2013, primarily driven by sales of PIFA Heparin/PF4 Rapid Assay products in the US 

· US sales of PIFA Heparin/PF4 Rapid Assay products increased by 39% in the third quarter with distribution now being performed by Cardinal Health, Medline Industries, Fisher HealthCare and Typenex - supported by ABI's account executives

· Net loss for the third quarter attributable to shareholders of $1,124,320 (Q3 2013: $544,370) as a result of hiring additional personnel, capital market commitments and marketing activities

· Gross profit margin in third quarter of 64% continues to be substantially ahead of 2013's average of 47%

· Company had total current assets at the end of the third quarter of $14,312,949 (September 30, 2013: $3,369,382) of which $10,206,992 was held in the form of marketable securities (September 30, 2013 $-)

· EBITDA: Net loss of $1,055,913 for the third quarter (Q3 2013: $454,857)

· Revenue for the nine months ended September 30, 2014 totaled $2,980,389 (2013: $3,006,377))

· The Board is confident of a strong fourth quarter, contingent on the materialization of international product orders in the pipeline; as well as of a continuing upward trend in PIFA Heparin/PF4 Rapid Assay product sales

· The performance for the full year will thus depend on when a number of significant contracts, as referred to above, are shipped

"Domestic sales of our current flagship PIFA Heparin/PF4 Rapid Assay products are currently driving sales while we establish the foundations for an international sales push," said Raymond F. Akers, Jr. PhD, Co-founder and Executive Chairman of the Board. "The addition of new sales and marketing partners for PIFA Heparin/PF4 Rapid Assay products in the second quarter has delivered a measurable increase in trials and adoption in the third quarter," continued Dr. Akers.

"Moving forward, a major emphasis is being placed on positioning the Company to commence volume sales of core products from the PIFA, MPC and REA technology platforms in the largest international markets. Progress is evident in the Company's recent establishment of a Joint Venture Agreement in China, the signing of marketing and distribution agreements in India, the Middle East, Australia and Singapore, the appointment of a senior international sales and marketing executive entirely dedicated to creating distribution channels outside of the US, and the first significant international orders last quarter for our Tri-Cholesterol "Check" tests."

"Domestically we are working with our four distribution partners to open up new PIFA Heparin/PF4 Rapid Assay customers and to convert new customer trials into sales. We are also accelerating development of the VIVO product line (from the MPC technology platform) in order to gain greater exposure to the large Health and Wellness segment which exists in the US. Clinical development of the Company's other mass market products of the future in the field of diagnosis of medical conditions through biomarkers in exhaled breath is ongoing," continued Dr. Akers. "This includes the development of breath tests for biomarkers indicating lung cancer, COPD, asthma and ketones for diabetic health."

"The Company's revenues during this early commercialization phase are expected to continue to be staggered as we receive initial stocking orders from new distributors in new territories. The effect is that some quarters' sales are more positively impacted than others due to the timing of product shipments for initial stocking orders to new markets. As such, the Board is confident of a strong fourth quarter, contingent on the materialization of international product orders in the pipeline; as well as of a continuing upward trend in PIFA Heparin/PF4 Rapid Assay product sales. The performance for the full year will thus depend on when a number of significant contracts, as referred to above, are shipped," concluded Dr. Akers.

Results of Operations for the three months ended September 30, 2014 and 2013

Revenue

ABI's total revenue for the three months ended September 30, 2014 was $453,313, a 32% increase from the same period in 2013. Product revenue totaled $359,980 (2013: $261,376) while the Company's license fee revenue increased to $93,333 (2013: $83,333) for the period.

MicroParticle Catalyzed Biosensor ("MPC") product revenues increased by 53% to $38,201 (2013: $24,892) during the period. This increase was attributable to orders from customers which regularly purchase products on an annual or semi-annual basis. No orders were received from our world-wide distributor of the alcohol breathalyzer product, ChubeWorkx Guernsey Limited ("ChubeWorkx"). The decline of orders from ChubeWorkx is as a result of the French government's postponement, indefinitely, of the fine that was to be imposed for drivers failing to possess breathalyzers in their vehicles. Although drivers are still required to carry the self-tests, the lack of a monetary fine has reduced product demand. It is unknown how long this interruption will continue for, but the Company's distributor of alcohol breathalyzers believes that it is well positioned to resume large volume sales of the product should full enforcement resume.

Domestic sales of the Company's PIFA Heparin/PF4 Rapid Assay products increased by 39% during the period to $309,459 (2013: $222,102). The Company's dedicated technical sales account executives are supporting over 300 sales representatives of ABI's US distribution partners, Cardinal Health ("Cardinal"), Medline Industries ("Medline"), Fisher HealthCare ("Fisher") and Typenex Medical ("Typenex"). The Company's addition of Typenex and Medline during the second quarter and the relationship-building initiative with our other partners has already delivered a measureable increase in product trials and adoptions.

Cost of sales for the three months ended September 30, 2014 increased by 72% compared to the same period in 2013 to $162,145 from $94,036 in 2013. Production costs of incremental product components transferred to inventory during the three months ended September 30, 2014 declined by 75% to $43,163 (2013: $171,454), resulting in the higher total cost of sales for the period. Overall, cost of sales, as a percentage of product revenue, was 45% and 36% for the three month periods ended September 30, 2014 and 2013.

Direct costs associated with the MPC products increased to 14% (2013: 11%) while PIFA products declined slightly to 11% (2013: 12%). Indirect costs decreased to 26% (2013: 53%) of product revenue for the three months ended September 30, 2014.

The decrease in indirect cost of sales is attributed to decreases in personnel expenses, repairs and maintenance of equipment, and warehouse rental due to the reduced levels of production. In addition, continuing improvements to component inventory handling and reporting procedures resulted in a reduction of materials lost to the production process during the three months ended September 30, 2014.

Our gross profit margin, as a percentage of total revenue, declined to 64% for the three months ended September 30, 2014 as compared to 73% in 2013. The decline in the gross profit margin was derived from events described above for the three months ended September 30, 2014.

General and Administrative Expenses

General and administrative expenses for the three months ended September 30, 2014, totaled $826,756, which was a 123% increase as compared to $370,737 for the three months ended September 30, 2013. The increase is related to personnel ($186,667 (2013: $37,734)), professional services ($356,267 (2013: $151,929)), stock market and investor relations activities ($141,496 (2013: $-21,946)) and travel ($39,578 (2013 $127)) The increase in personnel costs relates to the salaries and benefits of the Chief Executive Officer and the Vice President of Finance; positions that were previously contracted. Increases in professional services and stock market and investor relations activities are directly related to the maintenance of our stock listings in the United States (NASDAQ) and Great Britain (London Stock Exchange). The dual listing requires us to maintain public relations, stock registrars, nominated advisors and legal counsel for both markets and requires additional accounting services to insure compliance with regulators.

Sales and Marketing Expenses

Sales and marketing expenses for the three months ended September 30, 2014 totaled $358,650, which was a 183% increase as compared to $126,624 for the three months ended September 30, 2013. The increase was the result of general consulting services ($177,778 (2013: $3,900)), sales commissions ($26,404 (2013: $580) and travel ($27,785 (2013: $10,551)).

The increase in general consulting fees are for the development of sales and marketing programs for existing domestic and international markets, exploration of governmental opportunities and the identification of additional international markets for our products.

Research and Development

Research and development expenses for the three months ended September 30, 2014 totaled $183,886, which was a 21% decrease as compared to $233,848 for the three months ended September 30, 2013. The decrease was the result of personnel reassignments which reduced personnel costs ($127,602 (2013: $189,486) and travel ($- (2013: 7,581)) but was partially offset by increases in general consulting services ($25,967 (2013: $7,581)). There has been a significant increase in activities related to obtaining regulatory approvals.

The Company entered into an agreement with an outside product and design firm on July 14, 2014 to work with internal personnel to review and further develop the VIVO product line. The Company believes that enhancing the capabilities of the VIVO product will allow further exposure into the large Health and Wellness market segment.

The following table illustrates research and development costs by project for the three months ended September 30, 2014 and 2013, respectively.

Other Income and Expense

Other income increased for the three months ended September 30, 2014 to $18,447 from $809 for the same period in 2013. Gains from interest and dividends from investments ($19,469 (2013: $-)) were offset by losses on foreign currency transactions ($1,022 (2013: Gain of $809)).

Results of Operations for the nine months ended September 30, 2014 and 2013

Revenue

ABI's product revenue increased 7% to $2,720,389 (2013: $2,556,377), licensing fee revenue declined by 42% to $260,000 (2013: $450,000) and total revenue declined 1% to $2,980,389 (2013: $3,006,377) in the nine months ended September 30, 2014. MPC product sales decreased by 48% ($878,659 (2013: $1,675,349)), PIFA product sales increased by 14% ($931,647 (2013: $815,055)), REA product sales increased by 100% ($864,000 (2013: $-)) and other product categories decreased 40% ($20,406 (2013: $33,816)). In the nine months ended September 30, 2013, the Company received a one-time restricted licensing fee of $200,000 from a customer while they performed a product evaluation, otherwise the Company's license fee revenue increased by 4% for the period ended September 30, 2014.

MPC product revenues decreased during the period. This is attributable to a decline in orders from our world-wide distributor of the alcohol breathalyzer product, ChubeWorkx Guernsey Limited. During the nine months ended September 30, 2014, ChubeWorkx accounted for $766,379 (2013: $1,551,340) of our MPC product revenue all of which was recorded during the first quarter. The decline is as a result of the French government's postponement indefinitely of the fine that was to be imposed for drivers failing to possess breathalyzers in their vehicles. Although drivers are still required to carry the self-tests, the lack of a monetary fine has naturally reduced the demand. It is unknown how long this interruption will continue for, but the Company's distributor of alcohol breathalyzers believes that it is well positioned to resume large volume sales of the product should full enforcement resume.

Domestic sales of the Company's PIFA Heparin/PF4 Rapid Assay products increased to $931,647 (2013: $815,055) for the period ended September 30, 2014. The Company's dedicated technical sales account executives are supporting over 300 sales representatives of ABI's US distribution partners, Cardinal Health ("Cardinal"), Medline Industries ("Medline"), Fisher HealthCare ("Fisher") and Typenex Medical ("Typenex"). The Company's addition of Typenex and Medline during the second quarter and the relationship-building initiative with our other partners has already delivered a measureable increase in product trials and adoptions.

International sales of REA products totaled $864,000 (2013: $-) for the period ended September 30, 2014. ABI, with the assistance of its distributor in the region, has submitted the product to Australia's Therapeutic Goods Administration ("TGA") and is awaiting final government approval for 36S to begin marketing the product.

Cost of sales for the nine months ended September 30, 2014 decreased by 40% compared to the same period in 2013 to $907,876 from $1,503,303 in 2013. Direct cost of sales declined to 22% (2013: 38%) while indirect cost of sales declined to 11% (2013: 21%) of product revenue for the nine months ended September 30, 2014. Overall, cost of sales, as a percentage of product revenue, was 33% and 59% for the nine month periods ended September 30, 2014 and 2013.

Direct costs associated with the MPC products increased to 45% (2013: 41%), PIFA products remained unchanged at 12%. During prior periods, the Company had removed its REA products from inventory while it 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 direct cost of sales for the REA products reported for the nine months ended September 30, 2014.

The decrease in indirect cost of sales is attributed to decreases in personnel expenses, repairs and maintenance of equipment, and warehouse rental due to the reduced levels of production. In addition, continuing improvements to component inventory handling and reporting procedures resulted in a reduction of materials lost to the production process during the three months ended September 30, 2014.

ABI's gross profit margin, as a percentage of total revenue, improved to 70% for the nine months ended September 30, 2014 as compared to 50% in 2013. The decline in the gross profit margin was derived from events described above for the nine months ended September 30, 2014. The increase in gross margin was due in large part to the REA product sales having no significant cost of sales attached; therefore, it should not be assumed that this level of gross profit margin will be maintained in the future.

General and Administrative Expenses

General and administrative expenses for the nine months ended September 30, 2014, totaled $2,497,485, which was a 139% increase as compared to $1,046,426 for the nine months ended September 30, 2013. The increase is related personnel ($624,533 (2013: $113,869)), professional services ($578,102 (2013: $226,664)), stock market and investor relations activities ($490,527 (2013: $79,252)) and travel ($63,945 (2013 $680)).

The increase in personnel costs relates to the salaries and benefits of the Chief Executive Officer and the Vice President of Finance; positions that were previously contracted. The increases in professional services and stock market and investor relations activities are directly related to the maintenance of our stock listings in the United States (NASDAQ) and Great Britain (London Stock Exchange). The dual listing requires us to maintain public relations, stock registrars, nominated advisors and legal counsel for both markets and requires additional accounting services to insure compliance with regulators.

Sales and Marketing Expenses

Sales and marketing expenses for the nine months ended September 30, 2014 totaled $966,357, which was a 80% increase as compared to $536,631 for the nine months ended September 30, 2013. The increase was the result of personnel ($376,785 (2013: $322,517)), general consulting services ($408,906 (2013: $15,775)) and travel ($52,175 (2013: $20,816)) and was offset by declines in royalties ($67,967 (2013: $116,732)) and outside sales commissions ($36,404 (2013: $43,820).

The increase in general consulting fees are for the development of sales and marketing programs for existing domestic and international markets, exploration of governmental opportunities and the identification of additional international markets for our products.

Research and Development

Research and development expenses for the nine months ended September 30, 2014 totaled $686,376, which was a 9% decline as compared to $755,981 for the nine months ended September 30, 2013. The decrease was the result of personnel reassignments which reduced personnel costs ($543,321 (2013: $636,484) but was partially offset by increases in professional services ($50,580 (2013: $11,093)) and consumable supplies ($36,055 (2013: $21,854)). There has been a significant increase in activities related to obtaining regulatory approvals.

The Company entered into an agreement with an outside product and design firm on July 14, 2014 to work with internal personnel to review and further develop the VIVO product line. The Company believes that enhancing the capabilities of the VIVO product will allow further exposure into the large Health and Wellness market segment.

The following table illustrates research and development costs by project for the nine months ended September 30, 2014 and 2013, respectively.

Other Income and Expense

Other income declined for the nine months ended September 30, 2014 to $56,719 from $284,678 for the same period in 2013. During the nine months ended September 31, 2014, the Company recognized gains from foreign currency transactions of $2,874 (2013: $732), interest and dividends from investments amounted to $49,176 (2013: $1,054) and $4,669 (2013: $91,286)) in other income from the net proceeds gained from ABI's insurer demutualizing. During the nine months ended September 30, 2013, the Company recognized $91,905 as the result of reversals of old trade payables and $99,710 from the sale of its 20% equity stake in BreathScan International to Chubeworkx Guernsey Limited.

Income Taxes

As of September 30, 2014, 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 nine months ended September 30, 2014 and 2013, the Company generated a net loss attributable to shareholders of $2,230,708 and $745,215, respectively. As of September 30, 2014 and December 31, 2013, the Company has an accumulated deficit of $83,951,834 and $81,721,126 and had cash totaling $642,515 and $103,634, respectively.

Currently, our primary focus is to expand the domestic and international distribution of our PIFA Heparin/PF4 rapid assays and support Chubeworkx international distribution of its CHUBE private-labeled breath alcohol detectors. The Company continues initial commercialization tasks for METRON and VIVO, 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, $13,313,561 as of September 30, 2014, will be sufficient to meet our estimated cash needs for at least 36 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 to 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 already-commercialized products (PIFA Heparin/PF4 rapid assays, PIFA PLUSS® PF4, breath alcohol detectors, METRON and VIVO)) in the US 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 the capitalized costs that we have incurred for the patents may be deemed impaired.

The Company is currently pursuing ISO certification of it quality management system which would allow the Company to meet the regulatory requirements for product sales in large, international markets (e.g. India). We may also consider acquisitions of development technologies or products, if opportunities arise that we believe fit our business strategy and would be appropriate from a capital standpoint.

As per the Company's lease agreement, the owner of the facility will handle the majority of any 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

ABI's net cash consumed by operating activities totaled $2,757,258 during the nine months ended September 30, 2014. Cash was consumed by the loss of $2,214,915 less non-operating gains of $16,604 plus non-cash adjustments of $1,007,923 for depreciation and amortization of non-current assets, the issuance of stock options and the issuance of common shares for services. For the nine months ended September 30, 2014, decreases in inventory and other assets of $337,966 provided cash while a net increase in trade receivables, trade receivables - related parties and other receivables of $1,280,684 and a decreases in trade and other payables, trade and other payables - related parties and deferred revenue - related party of $590,944 consumed cash from operating activities.

ABI's net cash consumed by operating activities was $1,868,345 during the nine months ended September 30, 2013. Cash was consumed by the loss of $745,215, less non-operating gains of $282,901 plus a non-cash adjustment of $265,799 for depreciation and amortization of non-current assets. For the nine months ended September 30, 2013, decreases in trade receivables and license fees receivable - related party generated cash of $477,880. Increases in trade receivables - related party, other receivables, inventory, other assets and decreases in trade and other payables, other payables - related party, legal settlements and deferred revenue - related party of $1,583,908 consumed cash from operating activities.

Conference Call Information:

ABOUT AKERS BIOSCIENCES, INC.

Akers Biosciences develops, manufactures, and supplies rapid, point of care screening and testing products designed to bring healthcare information both rapidly and directly to the consumer or healthcare provider. 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 products 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 on our website at www.akersbiosciences.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.

For more information:

Akers Biosciences, Inc.

Raymond F. Akers, Jr. PhD

Executive Chairman of the Board

Tel. +1 856 848 8698

RedChip Companies, Inc. (US Investor Relations)

Jon Cunningham

Tel. +1 407 644 4256 x107

finnCap (UK Nominated Adviser and Broker)

Geoff Nash / Scott Mathieson (Corporate Finance)

Steve Norcross (Broking)

Tel: +44 (0)20 7220 0500

Vigo Communications (UK Investor Relations)

Ben Simons / Alexandra Roper

Tel. +44 (0)20 7016 9570

Email. akers@vigocomms.com