Akers Biosciences, Inc. (NASDAQ: AKER) — Form 10-K Summary
Reporting period: Fiscal year ended December 31, 2020; filed March 1, 2021. This is an annual report, not a standalone fourth-quarter report. The company historically developed rapid diagnostic products, but in 2020 shifted focus to a COVID-19 vaccine candidate and a proposed merger with MYMD Pharmaceuticals.
Financial performance and liquidity
| Metric | 2020 | 2019 |
|---|---|---|
| Revenue from continuing operations | $0 | $0 |
| Loss from continuing operations | $12.15 million | $3.38 million |
| Loss from discontinued operations | $5.43 million | $0.51 million |
| Net loss | $17.58 million | $3.89 million |
| Operating cash used | $11.92 million | $3.07 million |
| Investing cash used | $8.76 million | $3.94 million |
| Financing cash provided | $38.67 million | $6.97 million |
- At year-end, cash and cash equivalents were $18.62 million and marketable securities were $16.72 million. Working capital and shareholders’ equity were each $34.58 million; total liabilities were $2.26 million. The balance sheet reports no outstanding debt, but the company had a secured loan receivable from MYMD.
- Research and development expense was $7.96 million, versus none in 2019, primarily reflecting COVID-19 vaccine development. Administrative expense rose 27% to $4.30 million; sales and marketing expense was $23,000.
- No income tax benefit was recognized. The accumulated deficit was $137.16 million. Federal net operating loss carryforwards were approximately $100.62 million, but management expected the merger to limit their future use.
- The company reported no capital expenditures and no significant known off-balance-sheet arrangements. It stated that resources available at issuance were sufficient for its operating budget and contractual obligations for the following 12 months, while also anticipating a need for significant additional funding for vaccine development.
Material changes and unusual items
- Akers stopped producing and selling its rapid screening and testing products in July 2020 due to declining sales and operational challenges. The business was classified as discontinued operations, and the Thorofare facility lease ended in November. Discontinued operations generated $361,827 of 2020 revenue and a $5.43 million loss; the 2019 comparative was revised to separate discontinued operations.
- The company acquired Cystron in March 2020 for $1.0 million cash and shares valued at approximately $1.23 million, obtaining an exclusive Premas license for vaccine development. The filing records $5.87 million of Cystron-related payments in R&D expense and $2.0 million of Premas development milestone payments. Additional seller obligations include milestone payments, royalties of 5% of vaccine net sales (reduced to 3% above $500 million), and certain change-of-control consideration.
- Discontinued-operations expenses included $3.98 million of litigation settlement expense. The company paid $1.35 million to settle the Novotek dispute and provided ChubeWorkx $300,000 cash plus shares valued at $2.51 million. Five lawsuits filed in early 2021 challenged merger disclosures; the company said it considered the claims without merit and did not expect a material financial impact.
- Financing materially increased: 2020 financing cash inflows included $29.18 million net from common-stock issuance, $1.74 million from pre-funded warrants and $7.74 million from warrant exercises. Common shares outstanding increased from 1.74 million at year-end 2019 to 17.59 million at year-end 2020. The November private placement raised approximately $18.1 million gross and included substantial warrants.
Outlook, risks and contingencies
- MYMD merger: The proposed transaction remained subject to stockholder and other closing conditions, including a minimum-cash condition and continued Nasdaq listing. MYMD holders and optionholders were expected to own about 80% of the combined company, leaving Akers holders about 20% on the stated assumptions. The merger also contemplated a reverse split intended to support a post-merger share price of at least $5.00, possible milestone share issuance, and a potential spin-off of legacy assets. Completion was not assured.
- MYMD funding: Akers had advanced $1.2 million under a secured note by year-end, with two further $600,000 draws in January and February 2021. The note bears 5% interest, is secured by MYMD assets, and was part of a facility of up to $3.0 million. Further merger extensions could require additional loans or investment.
- Vaccine development: The candidate had shown positive proof-of-concept results in a mouse study, but remained early-stage. The filing states that preclinical testing had not yet begun, and no U.S. IND had been submitted. Preclinical and clinical testing, regulatory approval, manufacturing scale-up and commercialization would require substantial time and capital; success was uncertain.
- Management cited intense competition, including vaccines already authorized for emergency use, reliance on Premas and its licensed intellectual property, third-party development and manufacturing dependencies, COVID-related disruptions, financing and dilution risk, potential Nasdaq delisting, and regulatory, reimbursement and intellectual-property risks.
- The auditor issued an unqualified opinion on the financial statements and identified management’s going-concern assessment as a critical audit matter. Management concluded that available resources addressed the next 12 months; the filing provides no assurance of longer-term funding or profitability.
Important facts for investors to verify
- Merger status and closing conditions, including the minimum-cash requirement, shareholder approvals, Nasdaq listing, reverse split, and any legacy-asset spin-off.
- Current cash, marketable securities, subsequent financing and cash burn, and whether the company can fund development beyond the stated 12-month period.
- Outstanding shares and potential dilution from private-placement warrants, pre-funded warrants, merger consideration, assumed MYMD options and contingent milestone shares.
- Progress and regulatory status of the vaccine program, Premas license standing, and the timing and cost of required studies.
- Resolution and potential financial consequences of merger-related lawsuits, Cystron seller obligations, the Starwood line-of-credit payoff referenced in the merger cash condition, and other contingencies.
- The filing contains a cash-flow narrative inconsistency: one MD&A passage gives discontinued-operations loss as $5.25 million, while the audited statements and related cash-flow presentation report $5.43 million. Confirm against the financial statements and any subsequent filings.