Business Context and Reporting Period
Company: Akers Biosciences, Inc.
Filing Type: Form 8-K (Current Report)
Date of Report: August 17, 2016
Event: Entry into a Material Definitive Agreement (Settlement Deed) resolving multiple legal disputes involving Chuberworkx Guernsey Limited ("Chube"), Thirty Six Strategies, LLC ("36S"), and individuals Gavin Moran and Frank Runge.
Key Financial Metrics and Obligations
This filing details a settlement agreement rather than standard periodic financial results. Key financial terms include:
- Recovery of Note Principal: The Company will recover the full outstanding principal of a promissory note issued in 2014.
- Settlement Consideration:
- $750,000 worth of BreathScan Alcohol Detector stock (to be held as inventory).
- $500,000 in cash (the "Cash Payment").
- Future Royalty Obligation: The Company must pay Chube a royalty of 5% of gross revenues, capped at a total of $5,000,000.
- Security Interest: The Company pledged all assets (excluding specific settlement assets) to secure the royalty obligation until paid.
Material Changes and Resolutions
The Settlement Agreement resolves three distinct disputes:
- Dispute 1: Claims regarding outstanding amounts due on a promissory note.
- Dispute 2: Claims by Chube under a Licensing and Supply agreement in the UK High Court.
- Dispute 3: Claims against 36S and individuals regarding a Distribution Agreement.
Material Outcomes:
- All legal proceedings related to these disputes have been dismissed.
- The Company has regained full, unencumbered worldwide rights to market and sell its BreathScan technology.
- Chube no longer holds rights to the Company's BreathScan technology.
Outlook, Risks, and Contingencies
Management Commentary and Strategy: The Company intends to sell the BreathScan stock received as part of the settlement. The agreement allows the Company to retain 50% of the Chube Royalty until the $500,000 Cash Payment is made.
Risks and Contingencies:
- Asset Encumbrance: All Company assets (inventory and receivables) are currently pledged as security for the $5,000,000 royalty cap. These assets remain encumbered until the royalty is fully paid.
- Revenue Impact: Future gross revenues will be subject to a 5% royalty deduction until the $5,000,000 cap is reached.
Investor Verification Checklist
- Verify the fair market value of the $750,000 BreathScan stock inventory received.
- Confirm the timeline for the receipt of the $500,000 cash payment.
- Monitor the Company's gross revenue to track progress toward the $5,000,000 royalty cap.
- Review the Security Agreement to understand the specific scope of assets pledged and the conditions for their release.
- Assess the impact of the 5% royalty on future profit margins for BreathScan products.