Akers Biosciences, Inc. — FY2016 Form 10-K
Reporting period: Fiscal year ended December 31, 2016. This is an annual report, not a standalone fourth-quarter filing. Akers develops and sells rapid diagnostic tests, including heparin/PF4 assays, breath alcohol tests, and health and wellness products.
Financial performance and liquidity
| Metric | FY2016 | FY2015 |
|---|---|---|
| Total revenue | $2.96 million | $2.12 million |
| Gross profit / margin | $1.88 million / 63% | $1.16 million / 55% |
| Operating loss | $3.33 million | $9.68 million |
| Net loss | $3.30 million | $9.31 million |
| Basic and diluted loss per share | $0.61 | $1.81 |
| Cash used in operating activities | $4.17 million | $5.13 million |
- Product revenue rose 65% to $2.96 million; licensing revenue fell to $3,750 from $320,556, principally after the Chube license agreement ended.
- PIFA revenue increased 85% to $2.58 million, supported by higher pricing and partial fulfillment of a $2.5 million China order. MPC revenue decreased 5% to $282,516; management said it would have increased excluding a prior-year distributor stocking order.
- Operating expenses declined, including general and administrative expenses down 25%, sales and marketing down 16%, and research and development down 15%. The net loss improvement also reflected a $1.30 million reversal of a prior-year allowance for a related-party note after settlement.
- At year-end, cash was $72,700, marketable securities $50,001, working capital $1.49 million, total assets $5.09 million, and stockholders’ equity $3.39 million. Total liabilities were $1.70 million; the filing reports no borrowings or debt balance.
- Inventory increased to $2.04 million from $1.13 million, including $750,000 of BreathScan inventory received through the Chube settlement. A $32,333 obsolete-inventory reserve was recorded.
Changes, outlook and notable matters
- Management expects near-term operating losses to continue and said operating cash flows are expected to be inadequate for anticipated expenses. It stated that year-end working capital was expected to cover at least twelve months, while also warning of possible cash shortages in the first half of 2017.
- The company’s 2017–2019 plan targets product launches, expanded distribution, greater market penetration, and expense management. Management anticipated cash-flow positivity over the next twelve months, relying on plan revenue targets, subsequent financing, and potential shareholder support; it was also discussing a line of credit. These are expectations, not guarantees.
- After year-end, Akers reported net proceeds of approximately $1.69 million from a January 2017 public offering and $1.76 million from a March 2017 private placement. It reported approximately $2.3 million of cash and marketable securities as of April 5, 2017.
- Important development programs include breath tests for diabetic ketoacidosis and pulmonary conditions and PIFA infectious-disease assays. Several pipeline products still require clinical work and/or regulatory clearance before marketing.
- The Chube settlement restored Akers’ worldwide rights to its breath technology and settled prior disputes. In return, Chube is entitled to 5% of gross revenue until aggregate royalties reach $5 million; certain company assets are pledged as security for settlement obligations.
- Pulse Health sued in 2016, alleging breach of contract, false advertising, and unlawful trade practices, and sought at least $500,000. Akers disputes the claims; no loss accrual was recorded because the outcome could not be reasonably estimated.
- Three customers generated 75% of 2016 revenue; Cardinal Health, Fisher Healthcare, and NovoTek were key distributors. One supplier accounted for 27% of purchases.
- Management concluded disclosure controls were not effective and identified a material weakness in segregation of duties, plus other documentation and data-management weaknesses. Management planned to hire a financial controller in 2017. The independent auditor gave an unqualified opinion on the financial statements, but did not attest to internal-control effectiveness.
Key investor verification points
- Confirm subsequent financing proceeds, warrant dilution, and current cash runway against actual cash burn and the company’s stated plan assumptions.
- Track provincial reimbursement approvals and further shipments or collections under the China PIFA order.
- Assess customer and supplier concentration, distributor commitments, and the risk of reduced orders or relationship termination.
- Monitor required clinical trials, FDA clearances, international certifications, and commercialization progress for pipeline products.
- Review the Pulse litigation and the amount and duration of Chube royalties and asset-security obligations.
- Check progress remediating the material weakness and improving disclosure and financial-reporting controls.