Akers Biosciences, Inc. — Q1 2016 Form 10-Q
Reporting period: Three months ended March 31, 2016; balance-sheet amounts are compared with December 31, 2015. The company develops and sells rapid diagnostic tests, including PIFA Heparin/PF4 assays and breath-based products.
Financial results
| Metric | Q1 2016 | Q1 2015 / comparison |
|---|---|---|
| Revenue | $738,023 | $510,047; up 45% |
| Product revenue | $738,023 | $411,714; up 79% |
| Gross profit / margin | $537,995 / 73% | $283,706 / 56% |
| Operating loss | $1,516,958 | $1,360,197 |
| Net loss | $1,508,929 | $1,321,799 |
| Loss per share, basic and diluted | $0.28 | $0.26 |
| Net cash used in operating activities | $1,719,855 | $1,241,976 |
PIFA product sales rose 88%, mainly reflecting higher PIFA Heparin/PF4 sales and pricing; MPC sales rose 57%. License revenue fell to zero from $98,333 after the ChubeWorkx agreement ended in 2015. Higher gross profit was more than offset by increased administrative, sales and marketing, and R&D expenses.
Liquidity, assets, and obligations
- At March 31, cash was $180,390 and marketable securities were $2,442,467, totaling $2,622,857, down from $4,427,163 at year-end. Cash alone fell from $402,059.
- Current assets were $4,836,063 and current liabilities were $1,543,173, yielding working capital of approximately $3.29 million. The filing reports no outstanding debt; liabilities shown are current payables and accruals.
- Operating cash use was funded in part by $1,601,456 of proceeds from sales of marketable securities. Capital expenditures were $83,772. Management estimated approximately $200,000 of capital expenditures for full-year 2016.
- Total assets were $6,654,197; stockholders’ equity was $5,111,024. The company had an accumulated deficit of $95,684,928.
Outlook, risks, and notable items
- Management expects near-term operating losses, potentially significant, as it funds product development, clinical trials, regulatory work, and commercialization. It believes working capital will cover estimated cash needs for at least 12 months and says it is monitoring cash and expenses.
- The company received a $2.5 million order from NovoTek, its exclusive China distributor, on February 29. On April 29 it received $250,000 for an initial release; the filing says revenue on $500,000 of initial goods was expected to be recognized in Q2, subject to revenue-recognition criteria. The remaining shipments were scheduled throughout 2016.
- Two customers generated 74% of Q1 product revenue; $500,742 was due from those customers at quarter-end. The filing warns that losing these relationships could have a severe near-term effect.
- ChubeWorkx-related litigation remains unresolved. Settlement discussions ended in March; the company said it would seek to reopen its U.S. case, while the U.K. case was suspended. The parties had agreed in principle to material terms of a global settlement, but definitive agreements remained to be completed. No loss accrual was recorded.
- Subsequent to quarter-end, Thomas Knox became sole Chairman and Raymond F. Akers, Jr. became Chief Scientific Director. Disclosure controls were assessed as effective, with no material quarterly change in internal control over financial reporting.
Important facts for investors to verify
- Whether NovoTek’s initial shipment and remaining order convert to recognized revenue and cash on the expected schedule.
- Whether customer concentration, especially the two customers representing 74% of product revenue, changes.
- Cash burn, marketable-security sales, and the adequacy of liquidity against continuing losses and development costs.
- Progress and costs for clinical trials, FDA/CE regulatory steps, and commercialization of the company’s pipeline products.
- The outcome and financial effect, if any, of the ChubeWorkx disputes and proposed global settlement.