Business Context and Reporting Period
This Form 8-K, dated November 11, 2020, reports that Akers Biosciences, Inc. (the "Company") has entered into a definitive merger agreement with privately-held MYMD Pharmaceuticals, Inc. ("MYMD"). The transaction involves a reverse merger where MYMD will become a wholly-owned subsidiary of Akers, and the Company will change its name to "MyMD Pharmaceuticals, Inc." The filing also details a concurrent private placement of equity securities to fund the transaction.
Key Financial Metrics and Transaction Terms
The filing does not provide historical revenue, profit, or cash flow statements for the reporting period. Key financial terms of the transaction include:
- Private Placement Proceeds: The Company agreed to sell approximately 9,765,933 shares of common stock and/or pre-funded warrants at $1.85 per share, generating gross proceeds of approximately $20 million.
- Net Proceeds: After deducting fees and expenses, net proceeds are expected to be approximately $18.1 million.
- Bridge Loan: Akers agreed to advance a secured bridge loan of up to $3,000,000 to MYMD at 5% annual interest.
- Ownership Structure: Post-merger, former MYMD securityholders are expected to own approximately 80% of the combined company, while existing Akers stockholders will own approximately 20%.
- Contingent Consideration: MYMD stockholders are eligible for milestone payments totaling up to $20 million initially, with potential additional payments of $10 million or $25 million based on Akers' market capitalization reaching $500 million, $1 billion, or higher within 36 months.
Material Changes and Transaction Mechanics
The primary material change is the execution of the Merger Agreement and the Securities Purchase Agreement. Key mechanics include:
- Exchange Ratio: MYMD common stock will convert into Akers common stock based on a formula resulting in the 80/20 ownership split described above.
- Reverse Stock Split: The Company intends to seek stockholder approval for a reverse stock split to ensure the post-merger share price is no less than $5.00 per share.
- Spin-Off Option: Akers retains the discretion to spin off all or part of its pre-closing assets and liabilities.
- Warrant Terms: Investors receive warrants exercisable at $2.06 per share, terminating 5.5 years after issuance. Placement agent warrants are exercisable at $1.85 per share.
Guidance, Risks, and Contingencies
Management commentary focuses on the strategic rationale of combining Akers' public platform with MYMD's assets. The filing outlines significant risks and contingencies:
- Closing Conditions: The merger is subject to stockholder approval from both companies and the satisfaction of other customary conditions, including Akers maintaining at least $25 million in cash at closing.
- Termination Rights: Akers may extend the termination date to May 15, 2021, or June 30, 2021, contingent on providing additional loans or converting existing loans to equity at $2.00 per share.
- Forward-Looking Statements: The filing includes standard disclaimers that actual results may differ due to risks such as failure to obtain regulatory or stockholder approval, integration challenges, and market conditions.
- Lock-Up Agreements: Officers, directors, and certain stockholders of both companies have entered into lock-up agreements restricting sales for 180 days post-closing, followed by a leak-out period.
Investor Verification Checklist
- Verify the final exchange ratio and the exact number of shares to be issued upon closing, as the 80/20 split is an expectation based on the formula.
- Confirm the outcome of the stockholder votes required to approve the Merger Agreement and the reverse stock split.
- Monitor the Company's cash position to ensure the $25 million closing condition is met using the private placement proceeds.
- Review the upcoming proxy statement and Form S-4 for detailed risk factors and the full text of the Merger Agreement.
- Track the market capitalization of the combined entity to assess the likelihood of triggering the contingent milestone payments.