Business Context and Reporting Period
Company: Akers Biosciences, Inc. (Ticker: AKER)
Filing Type: Form 8-K (Current Report)
Date of Report: March 18, 2021
Reporting Period: Events occurring on March 16, 2021, and March 18, 2021.
This filing details material definitive agreements regarding the restructuring of the Company's COVID-19 vaccine assets and amendments to its pending merger with MyMD Pharmaceuticals, Inc. (MYMD).
Key Financial Metrics and Transaction Values
The filing does not provide standard financial statements (revenue, profit, cash flow, or margins) as it is a current report on specific events. However, the following transaction values and equity metrics are disclosed:
- Cash Contribution to Oravax: $1,500,000 committed by Akers.
- Cash Contribution from Oramed: $1,500,000 committed to Oravax.
- Equity Issued to Akers: 390,000 shares of Oravax capital stock.
- Equity Issued to Oramed: 1,890,000 shares of Oravax capital stock.
- Akers Ownership in Oravax: 13% of outstanding shares.
- Future Royalties: 2.5% of net sales of products manufactured by Oravax.
- Merger Cash Condition: MYMD Merger requires Akers to have net cash of at least $25 million at closing (subject to adjustments).
Material Changes and Agreements
Contribution and Assignment Agreement (Oravax Transaction)
Akers and its subsidiary Cystron entered into an agreement to contribute Cystron's COVID-19 vaccine assets and $1.5 million in cash to Oravax Medical, Inc. In exchange, Akers received 390,000 Oravax shares and a 2.5% royalty on future net sales. This transaction is contingent on the closing of the MYMD Merger or the passage of 90 days from March 18, 2021.
Termination of Cystron Acquisition
Akers terminated the Membership Interest Purchase Agreement (MIPA) regarding the acquisition of Cystron. The Cystron Sellers waived any change of control payments triggered by the MYMD Merger.
Amendment to MYMD Merger Agreement
The Company amended its merger agreement with MYMD Pharmaceuticals, Inc. Key changes include:
- Ownership Structure: MYMD stockholders are expected to own approximately 80% of the combined company's fully diluted equity (approximately 68.8% after adjustments for Akers' net cash exceeding $25 million).
- Preferred Stock: The amendment excludes certain shareholders unable to convert Series D Convertible Preferred Stock from the "no preferred stock outstanding" closing condition.
- Rights Agreement: The poison pill Rights Agreement will remain in effect post-merger.
Amendment to Rights Agreement
The Rights Agreement was amended to designate holders of MYMD common stock and options (and their affiliates) as "Exempt Persons," preventing the rights from triggering against them upon the merger.
Guidance, Outlook, and Risks
Outlook: The Company is proceeding with the MYMD Merger, which is expected to result in a combined entity where MYMD shareholders hold the majority stake. The separation of the COVID-19 vaccine assets into Oravax allows Akers to retain a minority stake and royalty rights while divesting the operational assets.
Risks and Contingencies:
- Merger Closing Conditions: The MYMD Merger is subject to conditions, including maintaining a minimum net cash balance of $25 million.
- Transaction Effectiveness: The Oravax asset contribution is not effective until the earlier of 90 days post-signing or the MYMD Merger closing.
- Regulatory and Legal: The agreements contain customary representations, warranties, and covenants.
Investor Verification Checklist
- Verify the current net cash position of Akers to ensure it meets the $25 million threshold required for the MYMD Merger closing.
- Confirm the status of the MYMD Merger closing date and any regulatory approvals required.
- Review the full text of the Contribution and Assignment Agreement (Exhibit 10.1) for specific liabilities assumed by Oravax.
- Monitor the conversion status of Series D Convertible Preferred Stock holders to assess potential dilution or equity adjustments.
- Assess the commercial viability of the Oravax vaccine platform given the transfer of assets and the 2.5% royalty structure.