Bankroll – Empresaris http://empresaris.info/ Wed, 22 Sep 2021 02:18:50 +0000 en-US hourly 1 https://wordpress.org/?v=5.8 https://empresaris.info/wp-content/uploads/2021/05/default.png Bankroll – Empresaris http://empresaris.info/ 32 32 AdaptHealth Corp. Announces Fourth Quarter and Full Year 2020 Financial Results https://empresaris.info/adapthealth-corp-announces-fourth-quarter-and-full-year-2020-financial-results/ https://empresaris.info/adapthealth-corp-announces-fourth-quarter-and-full-year-2020-financial-results/#respond Fri, 14 May 2021 07:05:12 +0000 https://empresaris.info/?p=614 PLYMOUTH MEETING, Pa.–(BUSINESS WIRE)–AdaptHealth Corp. (NASDAQ: AHCO) (“AdaptHealth” or the “Company”), a national leader in providing patient-centric and technology-enabled chronic disease management solutions including home healthcare equipment, medical supplies to the home and related services in the United States, announced today financial results for the fourth quarter and full year ended December 31, 2020. Highlights […]]]>

PLYMOUTH MEETING, Pa.–()–AdaptHealth Corp. (NASDAQ: AHCO) (“AdaptHealth” or the “Company”), a national leader in providing patient-centric and technology-enabled chronic disease management solutions including home healthcare equipment, medical supplies to the home and related services in the United States, announced today financial results for the fourth quarter and full year ended December 31, 2020.

Highlights

  • The Company closed the acquisition of AeroCare Holdings Inc. on February 1, 2021. Integration efforts are underway and progressing well. The Company expects to generate previously announced pre-tax annual run rate cost synergies of approximately $50 million.
  • In the fourth quarter, the Company acquired several additional diabetes management businesses including Pinnacle Medical Solutions (October 1, 2020), New England Home Medical (November 30, 2020), and Diabetes Management and Supply (December 31, 2020).
  • The Company acquired several additional Home Medical Equipment businesses in the fourth quarter of 2020 and the first quarter of 2021 including Allina Health Home Oxygen & Medical Equipment on February 22, 2021.
  • In January 2021, the Company completed approximately $1.7 billion of financing transactions, including its issuance of $500 million unsecured senior notes, its equity offering with gross proceeds of approximately $280 million, and its refinancing of, and increase to, its existing senior secured credit facilities including a $700 million term loan A and a $250 million revolving credit facility.

Fourth Quarter Results

  • Net revenue was $348.4 million, a 133% increase from the fourth quarter of 2019 and 23% higher than the third quarter of 2020.
  • Net loss attributable to AdaptHealth Corp. was $31.0 million, or $0.47 per diluted share, compared to a net loss of $3.4 million, or $0.10 per diluted share, in the fourth quarter of 2019. The fourth quarter of 2020 was impacted by a $56.9 million ($0.72 per diluted share) pre-tax non-cash charge for the change in the estimated fair value of contingent consideration common shares issuable as part of the Business Combination (as described more fully below).
  • Adjusted EBITDA less Patient Equipment Capex was $58.5 million compared to $21.8 million in the fourth quarter of 2019.
  • Adjusted EBITDA was $79.4 million compared to $33.7 million in the fourth quarter of 2019.
  • The Company’s fourth quarter results included income of $14.3 million from the recognition of amounts received in connection with the CARES Act provider relief fund.

Full Year Results

  • Net revenue was $1.06 billion, a 99% increase from full year 2019.
  • Net loss attributable to AdaptHealth Corp. was $64.5 million, or $1.23 per diluted share, compared to a net loss of $15.0 million, or $0.66 per diluted share, in full year 2019. The full year 2020 was impacted by a $98.7 million ($1.56 per diluted share) pre-tax non-cash charge for the change in the estimated fair value of contingent consideration common shares issuable as part of the Business Combination (as described more fully below).
  • Adjusted EBITDA less Patient Equipment Capex was $142.5 million compared to $75.6 million in full year 2019.
  • Adjusted EBITDA was $205.6 million compared to $123.0 million in full year 2019.
  • The Company’s full year results included income of $14.3 million from the recognition of amounts received in connection with the CARES Act provider relief fund.

Increased Guidance

While it is difficult to predict the duration and impact of the COVID-19 crisis, based on current business and market trends, the Company is increasing its previously issued financial guidance for fiscal year 2021 as follows:

  • Net revenue of $2.18 billion to $2.35 billion, up from prior guidance of $2.05 billion to $2.20 billion
  • Adjusted EBITDA of $510 million to $550 million, up from prior guidance of $480 million to $515 million; and
  • Adjusted EBITDA less Patient Equipment Capex to $320 million to $350 million, up from prior guidance of $300 million to $330 million.

CEO Commentary

Luke McGee, Co-CEO of AdaptHealth, commented, “We are very pleased with our 2020 performance, which we believe is a testament to our relentless focus on our patients and referral sources and our ability to drive growth through process improvements and technology solutions. In the fourth quarter, our diabetes business drove substantial growth as the result of high ordering patterns in December and our continued investment in accretive acquisitions. We are increasing guidance for 2021 as a result of these acquisitions as well as from our prospects for organic growth in 2021. We are benefiting not only from the underlying growth in the diabetes business in general, but also from our investments in our other chronic disease businesses such as obstructive sleep apnea. The enhanced scale of the combined AdaptHealth and AeroCare (serving nearly 3 million patients annually) positions us as a national leader in helping patients manage chronic diseases.”

Steve Griggs, Co-CEO of AdaptHealth, added, “Joining the AdaptHealth team and witnessing the collaboration between AdaptHealth and AeroCare employees has been incredibly rewarding. As a result of the strong cultural fit between both organizations, we feel we have already become one company. The AeroCare team has been welcomed with open arms and recognized for the complementary skills we’re able to bring to AdaptHealth. The transition has thus far been incredibly smooth and we are already hard at work to deliver the $50 million cost synergy target and enhance the organic growth of the combined company.”

Luke and Steve together commented, “One of the most exciting aspects of our integration is bringing together the proprietary patient care technology both organizations have been developing independently. We are combining the best features of each technology solution as part of our integration plans. Our technology enables interactive patient engagement, advances compliance and monitoring capabilities, lowers operating costs, and provides patients with greater care.”

Accounting for Contingent Consideration Common Shares Liability

Together with our independent auditors, we have reevaluated the accounting treatment of the previously disclosed contingent consideration common shares to which the former owners of AdaptHealth Holdings are entitled (the “Contingent Common Shares”) in connection with the Business Combination. Due to the fact that the issuance of the Contingent Common Shares would be accelerated on a change of control regardless of the transaction value, we have determined, consistent with recent SEC comments to other SPAC registrants, to present the Contingent Common Shares as liability-classified, not equity-classified as previously presented. Accordingly, the fair value of the Contingent Common Shares is reflected as a liability on the Company’s consolidated balance sheets at December 31, 2020 and 2019, and the non-cash change in the fair value each period is recognized in the Company’s consolidated statements of operations. In our 2020 Form 10-K we will recast our December 31, 2019 consolidated balance sheet and adjust our unaudited 2020 quarterly consolidated statements of operations to reflect such accounting. We will also update our unaudited pro forma financial information recently filed on Form 8-K with respect to the AeroCare acquisition, consistent with this treatment. When presenting diluted earnings (loss) per share for 2020 and 2019 periods in prior SEC filings, the Contingent Common Shares were included in the diluted share count in accordance with U.S. GAAP. The change in fair value each period is a non-cash charge and has no impact on historical reported revenues, operating income and adjusted EBITDA of the Company for any period.

Conference Call

Management will host a conference at 8:30 am ET today to discuss the results and business activities. Interested parties may participate in the call by dialing:

  • (877) 423-9820 (Domestic) or
  • (201) 493-6749 (International)

Webcast registration: Click Here

Following the live call, a replay will be available for six months on the Company’s website, www.adapthealth.com under “Investor Relations.”

About AdaptHealth Corp.

AdaptHealth is a national leader in providing patient-centric and technology enabled chronic disease management solutions including home healthcare equipment, medical supplies to the home and related services in the United States. AdaptHealth provides a full suite of medical products and solutions designed to help patients manage chronic conditions in the home, adapt to life and thrive. Product and services offerings include (i) sleep therapy equipment, supplies and related services (including CPAP and bi PAP services) to individuals suffering from obstructive sleep apnea, (ii) medical devices and supplies to patients for the treatment of diabetes (including continuous glucose monitors and insulin pumps), (iii) home medical equipment (HME) to patients discharged from acute care and other facilities, (iv) oxygen and related chronic therapy services in the home, and (v) other HME medical devices and supplies on behalf of chronically ill patients with wound care, urological, incontinence, ostomy and nutritional supply needs. The Company is proud to partner with an extensive and highly diversified network of referral sources, including acute care hospitals, sleep labs, pulmonologists, skilled nursing facilities, and clinics. AdaptHealth services beneficiaries of Medicare, Medicaid and commercial insurance payors. AdaptHealth services nearly 3 million patients annually in all 50 states through its network of over 500 locations in 46 states. Learn more at www.adapthealth.com.

On July 8, 2019, AdaptHealth Holdings LLC (“AdaptHealth Holdings”) entered into an Agreement and Plan of Merger (the “Merger Agreement”), as amended on October 15, 2019, with DFB Healthcare Acquisitions Corp. (“DFB”), pursuant to which AdaptHealth Holdings combined with DFB (the “Business Combination”). The merger was approved by DFB’s stockholders, and the Business Combination closed on November 8, 2019. AdaptHealth Holdings was the accounting acquirer in the merger, which was treated as a reverse recapitalization. Accordingly, for accounting purposes, the merger was treated as the equivalent of AdaptHealth Holdings issuing stock for the net assets of DFB, accompanied by a recapitalization. In connection with the Business Combination, the name of the combined company was changed to AdaptHealth Corp.

Forward-Looking Statements

This press release includes certain statements that are not historical facts but are forward-looking statements for purposes of the safe harbor provisions under the United States Private Securities Litigation Reform Act of 1995. Forward-looking statements generally are accompanied by words such as “believe,” “may,” “will,” “estimate,” “continue,” “anticipate,” “intend,” “expect,” “should,” “would,” “plan,” “predict,” “potential,” “seem,” “seek,” “future,” “outlook,” and similar expressions that predict or indicate future events or trends or that are not statements of historical matters. These forward-looking statements include, but are not limited to, statements regarding projections, estimates and forecasts of revenue and other financial and performance metrics and projections of market opportunity and expectations and the Company’s acquisition pipeline. These statements are based on various assumptions and on the current expectations of AdaptHealth management and are not predictions of actual performance. These forward-looking statements are provided for illustrative purposes only and are not intended to serve as, and must not be relied on, by any investor as, a guarantee, an assurance, a prediction or a definitive statement of fact or probability. Actual events and circumstances are difficult or impossible to predict and will differ from assumptions. Many actual events and circumstances are beyond the control of the Company.

These forward-looking statements are subject to a number of risks and uncertainties, including the outcome of judicial and administrative proceedings to which the Company may become a party or governmental investigations to which the Company may become subject that could interrupt or limit the Company’s operations, result in adverse judgments, settlements or fines and create negative publicity; changes in the Company’s clients’ preferences, prospects and the competitive conditions prevailing in the healthcare sector; and the impact of the recent coronavirus (COVID-19) pandemic and the Company’s response to it. A further description of such risks and uncertainties can be found in the Company’s filings with the Securities and Exchange Commission. If the risks materialize or assumptions prove incorrect, actual results could differ materially from the results implied by these forward-looking statements. There may be additional risks that the Company presently knows or that the Company currently believes are immaterial that could also cause actual results to differ from those contained in the forward-looking statements. In addition, forward-looking statements reflect the Company’s expectations, plans or forecasts of future events and views as of the date of this press release. The Company anticipates that subsequent events and developments will cause the Company’s assessments to change. However, while the Company may elect to update these forward-looking statements at some point in the future, the Company specifically disclaims any obligation to do so. These forward-looking statements should not be relied upon as representing the Company’s assessments as of any date subsequent to the date of this press release. Accordingly, undue reliance should not be placed upon the forward-looking statements.

Use of Non-GAAP Financial Information and Financial Guidance

This release contains non-GAAP financial guidance, which is adjusted to exclude certain costs, expenses, gains and losses and other specified items that are evaluated on an individual basis. These non-GAAP items are adjusted after considering their quantitative and qualitative aspects and typically have one or more of the following characteristics, such as being highly variable, difficult to project, unusual in nature, significant to the results of a particular period or not indicative of future operating results. Similar charges or gains were recognized in prior periods and will likely reoccur in future periods.

The Company uses EBITDA, Adjusted EBITDA and Adjusted EBITDA less Patient Equipment Capex, which are financial measures that are not prepared in accordance with generally accepted accounting principles in the United States, or U.S. GAAP, to analyze its financial results and believes that they are useful to investors, as a supplement to U.S. GAAP measures. In addition, the Company’s ability to incur additional indebtedness and make investments under its existing credit agreement is governed, in part, by its ability to satisfy tests based on a variation of Adjusted EBITDA less Patient Equipment Capex.

The Company believes Adjusted EBITDA less Patient Equipment Capex is useful to investors in evaluating the Company’s financial performance. The Company’s business requires significant investment in equipment purchases to maintain its patient equipment inventory. Some equipment title transfers to patients’ ownership after a prescribed number of fixed monthly payments. Equipment that does not transfer wears out or oftentimes is not recovered after a patient’s use of the equipment terminates. The Company uses this metric as the profitability measure in its incentive compensation plans that have a profitability component and to evaluate acquisition opportunities, where it is most often used for purposes of contingent consideration arrangements. In addition, the Company’s debt agreements contain covenants that use a variation of Adjusted EBITDA less Patient Equipment Capex for purposes of determining debt covenant compliance. For purposes of this metric, patient equipment capital expenditure is measured as the value of the patient equipment received during the accounting period without regard to whether the equipment is purchased or financed through lease transactions.

EBITDA, Adjusted EBITDA and Adjusted EBITDA less Patient Equipment Capex should not be considered as measures of financial performance under U.S. GAAP, and the items excluded from EBITDA, Adjusted EBITDA and Adjusted EBITDA less Patient Equipment Capex are significant components in understanding and assessing financial performance. Accordingly, these key business metrics have limitations as an analytical tool. They should not be considered as an alternative to net income or any other performance measures derived in accordance with U.S. GAAP or as an alternative to cash flows from operating activities as a measure of the Company’s liquidity.

There is no reliable or reasonably estimable comparable GAAP measure for the Company’s non-GAAP financial guidance because the Company is not able to reliably predict the impact of certain items, including equity-based compensation expense, transaction costs, changes in fair value of the contingent consideration common shares liability, and other non-recurring (income) expense in full year 2021. As a result, reconciliation of these non-GAAP measures to the most directly comparable GAAP measure is not available without unreasonable effort. In addition, the Company believes such a reconciliation would imply a degree of precision and certainty that could be confusing to investors. The variability of the specified items may have a significant and unpredictable impact on the Company’s future GAAP results.

In addition, the Company’s non-GAAP financial guidance in this release excludes the impact of any potential additional future strategic acquisitions and any specified items that have not yet been identified and quantified. The guidance also excludes macro-economic effects due to the COVID-19 pandemic that are not yet quantifiable. The financial guidance is subject to risks and uncertainties applicable to all forward-looking statements as described elsewhere in this press release.

ADAPTHEALTH CORP.

Condensed Consolidated Balance Sheets (Unaudited)

 
(in thousands)

December 31,

2020

December 31,

2019

Assets
Current assets:
Cash and cash equivalents $

99,962

$

76,878

 

Accounts receivable

176,641

78,619

 

Inventory

58,783

13,239

 

Prepaid and other current assets

37,441

12,679

 

Total current assets

372,827

181,415

 

Equipment and other fixed assets, net

110,468

63,559

 

Goodwill

1,002,024

266,791

 

Identifiable intangible assets, net

116,061

 

Other assets

16,483

6,851

 

Deferred tax asset

208,400

27,922

 

Total assets $

1,826,263

$

546,538

 

Liabilities and Stockholders’ Equity (Deficit)
Current liabilities:
Accounts payable and accrued expenses

267,003

102,728

 

Current portion of capital lease obligations

22,282

19,750

 

Current portion of long-term debt

8,146

1,721

 

Contract liabilities

11,043

9,556

 

Other liabilities

89,524

17,139

 

Contingent consideration common shares liability

36,846

3,158

 

Total current liabilities

434,844

154,052

 

Long-term debt, less current portion

776,568

395,112

 

Other long-term liabilities

186,470

29,364

 

Long-term portion of contingent consideration common shares liability

33,631

6,158

 

Total liabilities

1,431,513

584,686

 

Total Stockholders’ Equity (Deficit)

394,750

(38,148

)

Total Liabilities and Stockholders’ Equity (Deficit) $

1,826,263

$

546,538

 

ADAPTHEALTH CORP.

Consolidated Statements of Operations (Unaudited)

Three Months Ended

Twelve Months Ended

(in thousands, except per share data)

December 31,

December 31,

2020

2019

2020

2019

 
Net revenue $

348,429

 

$

149,541

 

$

1,056,389

 

$

529,644

 

Grant income

14,277

 

 

14,277

 

 

 
Costs and expenses:
Cost of net revenue

290,380

 

123,212

 

895,157

 

440,386

 

General and administrative expenses

31,601

 

24,985

 

89,346

 

56,493

 

Depreciation and amortization, excluding patient equipment depreciation

4,975

 

630

 

11,373

 

3,069

 

Total costs and expenses

326,956

 

148,827

 

995,876

 

499,948

 

Operating income

35,750

 

714

 

74,790

 

29,696

 

Interest expense

13,604

 

7,653

 

41,430

 

39,304

 

Loss on extinguishment of debt, net

 

 

5,316

 

2,121

 

Change in fair value of contingent consideration common shares liability

56,867

 

 

98,717

 

 

Loss before income taxes

(34,721

)

(6,939

)

(70,673

)

(11,729

)

Income tax expense (benefit)

(7,219

)

(4,288

)

(11,955

)

1,156

 

Net loss

(27,502

)

(2,651

)

(58,718

)

(12,885

)

Income attributable to noncontrolling interests

3,541

 

775

 

5,763

 

2,111

 

Net loss attributable to AdaptHealth Corp. $

(31,043

)

$

(3,426

)

$

(64,481

)

$

(14,996

)

 
Weighted average common shares outstanding – basic and diluted

65,897

 

32,726

 

52,488

 

22,557

 

 
Basic and diluted loss per share $

(0.47

)

$

(0.10

)

$

(1.23

)

$

(0.66

)

ADAPTHEALTH CORP.
Condensed Consolidated Statements of Cash Flows (Unaudited)
 
Twelve Months Ended
(in thousands) December 31,

2020

2019

 
Net cash provided by operating activities $

195,634

 

$

60,418

 

Net cash used in investing activities

(815,703

)

(84,870

)

Net cash provided by financing activities

643,153

 

76,144

 

Net increase in cash and cash equivalents

23,084

 

51,692

 

Cash and cash equivalents at beginning of period

76,878

 

25,186

 

Cash and cash equivalents at end of period $

99,962

 

$

76,878

 

Non-GAAP Financial Measures

This press release presents AdaptHealth’s EBITDA, Adjusted EBITDA and Adjusted EBITDA less Patient Equipment Capex for the three and twelve months ended December 31, 2020 and 2019.

AdaptHealth defines EBITDA as net income (loss) attributable to AdaptHealth Corp., plus net income (loss) attributable to noncontrolling interests, interest expense (income), income tax expense (benefit), and depreciation and amortization.

AdaptHealth defines Adjusted EBITDA as EBITDA (as defined above), plus loss on extinguishment of debt, equity‑based compensation expense, transaction costs, severance, change in fair value of contingent consideration common shares liability, and similar items of expense (income).

AdaptHealth defines Adjusted EBITDA less Patient Equipment Capex as Adjusted EBITDA (as defined above) less patient equipment acquired during the period without regard to whether the equipment was purchased or financed through lease transactions.

The following unaudited table presents the reconciliation of net income (loss) attributable to AdaptHealth Corp., to EBITDA, Adjusted EBITDA and Adjusted EBITDA less Patient Equipment Capex for the three and twelve months ended December 31, 2020 and 2019:

Three Months Ended

Twelve Months Ended

(in thousands)

December 31,

December 31,

2020

2019

2020

2019

Net income (loss) attributable to AdaptHealth Corp. $

(31,043

)

$

(3,426

)

$

(64,481

)

$

(14,996

)

Income attributable to noncontrolling interests

3,541

 

775

 

5,763

 

2,111

 

Interest expense excluding change in fair value of interest rate swaps

13,604

 

8,586

 

41,430

 

27,878

 

Interest expense (income) – change in fair value of interest rate swaps

 

(933

)

 

11,426

 

Income tax (benefit) expense

(7,219

)

(4,288

)

(11,955

)

1,156

 

Depreciation and amortization

24,584

 

17,490

 

82,445

 

62,567

 

EBITDA

3,467

 

18,204

 

53,202

 

90,142

 

Loss on extinguishment of debt, net (a)

 

 

5,316

 

2,121

 

Equity-based compensation expense (b)

7,701

 

5,264

 

18,670

 

11,070

 

Transaction costs (c)

9,961

 

7,752

 

26,573

 

15,984

 

Severance (d)

2,351

 

1,580

 

5,596

 

2,301

 

Change in fair value of contingent consideration common shares liability (e)

56,867

 

 

98,717

 

 

Other non-recurring (income) expense (f)

(982

)

869

 

(2,455

)

1,403

 

Adjusted EBITDA

79,365

 

33,669

 

205,619

 

123,021

 

Less: Patient equipment capex (g)

(20,853

)

(11,832

)

(63,136

)

(47,421

)

Adjusted EBITDA less Patient Equipment Capex $

58,512

 

$

21,837

 

$

142,483

 

$

75,600

 

(a)

 

Represents write offs of deferred financing costs related to refinancing of debt.

(b)

 

Represents amortization of equity-based compensation to employees and non-employee directors. The higher expense in 2020 is due to a full year of expense for awards granted in late 2019, and overall increased equity-compensation grant activity in 2020. The 2019 period includes expense resulting from accelerated vesting and modification of certain awards in that period.

(c)

 

Represents transaction costs related to acquisitions. The 2019 period also includes costs associated with the 2019 Recapitalization and the Business Combination.

(d)

 

Represents severance costs related to acquisition integration and internal AdaptHealth restructuring and workforce reduction activities.

(e)

 

Represents non-cash charges for the change in the estimated fair value of contingent consideration common shares issuable as part of the Business Combination.

(f)

 

The 2020 period includes $4.2 million of net reductions in the fair value of contingent consideration liabilities related to acquisitions, a $0.6 million gain in connection with the sale of a cost method investment, offset by a $1.5 million expense associated with the PCS Transition Services Agreement and $0.8 million of other non-recurring expenses.

(g)

 

Represents the value of patient equipment obtained during the respective period without regard to whether the equipment is purchased or financed through lease transactions.

 

]]>
https://empresaris.info/adapthealth-corp-announces-fourth-quarter-and-full-year-2020-financial-results/feed/ 0
Akers Biosciences, Inc. 10-K Mar. 1, 2021 5:20 PM https://empresaris.info/akers-biosciences-inc-10-k-mar-1-2021-520-pm/ https://empresaris.info/akers-biosciences-inc-10-k-mar-1-2021-520-pm/#respond Fri, 14 May 2021 07:01:40 +0000 https://empresaris.info/?p=608 Washington, D.C. 20549 [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [  ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule […]]]>


Washington,
D.C. 20549


[X]
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


[  ]
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes [  ]
No [X]


Indicate
by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes [  ]
No [X]


Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [  ]


Indicate
by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant
to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that
the registrant was required to submit and post such files). Yes [X] No [  ]


Indicate
by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting
company or an emerging growth company. See definition of “large accelerated filer,” “accelerated filer, “smaller
reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


If
an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for
complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [  ]


Indicate
by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness
of its internal controls over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered
public accounting firm that prepared or issued its audit report. [  ]


Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes [  ] No [X]


The aggregate market value of the voting
and non-voting common equity held by non-affiliates of the registrant on June 30, 2020, based on a
closing price of $3.48
was $21,254,305.


As
of February 26, 2021, the registrant had 16,652,829 shares of its common stock, no par value per share, outstanding.


None.


This
Annual Report and the documents we have filed with the Securities and Exchange Commission (which we refer to herein as the “SEC”)
that are incorporated by reference herein contain “forward-looking statements” within the meaning of the safe harbor
provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements may be identified by the use of
forward-looking terms such as “anticipates,” “assumes,” “believes,” “can,” “could,”
“estimates,” “expects,” “forecasts,” “guides,” “intends,” “is
confident that,”, “may,” “plans,” “seeks,” “projects,” “targets,”
and “would” or the negative of such terms or other variations on such terms or comparable terminology. These statements
relate to future events or our future financial performance or condition and involve known and unknown risks, uncertainties and
other factors that could cause our actual results, levels of activity, performance or achievement to differ materially from those
expressed or implied by these forward-looking statements.


Examples
of forward-looking statements in this Annual Report and our other SEC filings include, but are not limited to, our expectations
regarding our business strategy, business prospects, operating results, operating expenses, working capital, liquidity and capital
expenditure requirements. These statements are based on our management’s expectations, beliefs and assumptions concerning
future events affecting us, which in turn are based on currently available information and are subject to significant risks and
uncertainties that could cause actual outcomes and results to differ materially. Important factors that could cause actual results
to differ materially from those indicated by such forward-looking statements include, without limitation, the risks and uncertainties
set forth under “Risk Factors” in Item 1A of this Annual Report on Form 10-K, which discussions are incorporated herein
by reference.


We
operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for us
to predict all of those risks, nor can we assess the impact of all of those risks on our business or the extent to which any factor
may cause actual results to differ materially from those contained in any forward-looking statement. The forward-looking statements
in this Annual Report on Form 10-K and our other filings with the SEC are based on assumptions management believes are reasonable.
However, due to the uncertainties associated with forward-looking statements, you should not place undue reliance on any forward-looking
statements. Further, forward-looking statements speak only as of the date they are made, and unless required by law, we expressly
disclaim any obligation or undertaking to publicly update any of them in light of new information, future events, or otherwise.
All subsequent written and oral forward-looking statements attributable to us or persons acting on our behalf are expressly qualified
in their entirety by the cautionary statements contained throughout this Annual Report and the documents we have filed with the
SEC.



PART
I


 


Unless
the context provides otherwise, all references in this Annual Report to “Akers”, the “Company”, “we”,
“our” and “us” refer to Akers Biosciences, Inc.


 




Item
1. Business.


 


We
were incorporated in 1989 in the state of New Jersey under the name “A.R.C. Enterprises, Inc,” which was changed to
“Akers Research Corporation” on September 28, 1990 and “Akers Laboratories, Inc.” on February 24, 1996.
Pursuant to the Amended and Restated Certificate of Incorporation filed on March 26, 2002, the corporation’s name was changed
to “Akers Biosciences, Inc.”


 


We
were historically a developer of rapid health information technologies. On March 23, 2020, we entered into that certain membership
interest purchase agreement (the “Original MIPA” and, as subsequently amended by Amendment No, 1 on May 14, 2020,
the “MIPA”) with the members of Cystron (the “Cystron Sellers”), pursuant to which we acquired 100% of
the membership interests of Cystron (the “Cystron Membership Interests”). Cystron was incorporated on March 10, 2020
and is a party to a license agreement with Premas whereby Premas granted Cystron, among other things, an exclusive license with
respect to Premas’ genetically engineered yeast (S. cerevisiae)-based vaccine platform, D-Crypt™, for the development
of a vaccine against COVID-19 and other coronavirus infections. Since our entry into the MIPA, we have been primarily focused
on the rapid development and manufacturing of a COVID-19 vaccine candidate (the “COVID-19 Vaccine Candidate”), in
collaboration with Premas.


 


Proposed
Merger


 


On
November 11, 2020, we entered into the Merger Agreement, pursuant to which, among other things, subject to the satisfaction or
waiver of the conditions set forth in the Merger Agreement, Merger Sub will merge with and into MYMD, with MYMD being the surviving
corporation and becoming a wholly owned subsidiary of the Company (the “Merger”). The Merger is intended to qualify
for federal income tax purposes as a tax-free reorganization under the provisions of Section 368(a) of the Internal Revenue Code
of 1986, as amended (the “Code”). In addition, in connection with the execution of the Merger Agreement, Akers agreed
to advance a bridge loan of up to $3,000,000 to MYMD pursuant to a secured promissory note (the “Note”). Upon completion
of the merger, the combined company is expected to be renamed MyMD Pharmaceuticals, Inc.


 


Pursuant
to the Merger Agreement, upon the effectiveness of the Merger, (i) holders of outstanding shares of MYMD common stock (“
MYMD stockholders”) will be entitled to receive (x) the number of shares of Akers common stock equal to an exchange ratio
as described in the Merger Agreement (the “Exchange Ratio”) per share of MYMD common stock they hold, prior to giving
effect to the proposed reverse stock split discussed below, (y) an amount in cash, on a pro rata basis, equal to the aggregate
cash proceeds received by Akers from the exercise of any options to purchase shares of MYMD common stock assumed by Akers upon
closing of the merger prior to the second-year anniversary of the closing of the merger (the “Option Exercise Period”),
such payment (the “Additional Consideration”) to occur not later than 30 days after the last day of the Option Exercise
Period, up to the maximum amount of cash consideration that may be received by MYMD stockholders without affecting the intended
tax consequences of the merger, and (z) potential milestone payments (“Milestone Shares”) of up to the number of shares
of Akers common stock issued to MYMD stockholders at closing of the Merger (“Milestone Payments”) payable upon achievement
of certain market capitalization milestone events during the 36-month period immediately following the closing of the merger (the
“Milestone Period”); and (ii) each outstanding option to purchase MYMD common stock granted under the Second Amendment
to Amended & Restated 2016 Stock Incentive Plan with an effective date of July 1, 2019, as established and maintained by MYMD
(and, as amended and restated from time to time, the “MyMD Incentive Plan”) that has not previously been exercised
prior to the closing of the Merger, whether or not vested, will be assumed by Akers subject to certain terms contained in the
Merger Agreement, and become an option to purchase a number of shares of the Akers common stock equal to the number of shares
of MYMD common stock underlying such option multiplied by the Exchange Ratio, which options to purchase MYMD common stock shall
be amended to expire on the second-year anniversary of the closing of the Merger, and the exercise price for each share of Akers
common stock underlying an assumed option to purchase MYMD common stock will be equal to the exercise price per share of the option
to purchase MYMD common stock in effect immediately prior to the completion of the merger divided by the Exchange Ratio. Assuming
the exercise in full of the outstanding pre-funded warrants to purchase 1,040,540 shares of our common stock (“Pre-Funded
Warrants”) issued in connection with the private placement between Akers and certain institutional and accredited investors
that closed on November 17, 2020 (the “Private Placement”) and the exercise in full of additional pre-funded warrants
to purchase 932,432 shares of common stock issued certain investors in February 2021 upon cancellation of shares of common stock
purchased in the Private Placement and including 9,979,664 shares of combined company common stock underlying options to purchase
shares of MYMD common stock to be assumed at the closing of the Merger, (i) MYMD stockholders and optionholders will own approximately
80% of the equity of the combined company; and (ii) our current stockholders, holders of certain outstanding of our options and
warrants (excluding shares issuable upon exercise of options and warrants having an exercise price in excess of $1.72, prior to
giving effect to any such stock splits, combinations, reorganizations and the like with respect to the Akers common stock between
the announcement of the Merger and the closing of the Merger) and holders of our outstanding restricted stock units (“RSUs”)
immediately prior to the Merger will own approximately 20% of the equity of the combined company.


 






 


Pursuant
to the Merger Agreement, on January 15, 2020, we and MYMD filed an initial Registration Statement on Form S-4 (Registration No.
333-252181) (together with the joint proxy and consent solicitation/prospectus included therein, the “S-4 Registration Statement”)
describing the Merger and other related matters. Consummation of the Merger is conditioned upon, among other things, approval
of the Merger by the stockholders of Akers (including (i) approval, for purposes of complying with Nasdaq Listing rule 5635(a),
the issuance of shares of Akers common stock to MYMD stockholders and other parties in connection with the Merger, the Merger
Agreement, and the transactions contemplated thereby or in connection therewith (the “Share Issuance Proposal”), (ii)
approval of an amendment to the amended and restated certificate of incorporation of the combined company, which will be in effect
at the effective time of the merger (the “A&R Charter”) to effect a reverse stock split, if applicable, at a reverse
stock split ratio mutually agreed by the Company and MYMD and within the range approved by our stockholders immediately prior
to the Effective Time (as defined in the Merger Agreement), which range shall be sufficient to cause the price of our common
stock on the Nasdaq Capital Market following the reverse stock split and the Effective Time to be no less than $5.00 per share
with respect to the issued and outstanding common stock of the combined company immediately following the merger (the “Reverse
Stock Split Proposal”), and (iii) approval of the amended and restated certificate of incorporation of Akers which will
be in effect upon consummation of the Merger (the “A&R Charter Proposal”), among others), approval of the Merger
by the stockholders of MYMD, the continued listing of Akers’ common stock on The Nasdaq Capital Market after the Merger
and satisfaction of a minimum cash threshold by Akers. In addition, the Merger Agreement requires that MYMD consummate the purchase
of substantially all of the assets and certain liabilities of Supera Pharmaceuticals, Inc., a Florida corporation (“Supera”)
pursuant to an Asset Purchase Agreement pursuant to which MYMD agreed to acquire from Supera, immediately prior to the completion
of the Merger, substantially all of its assets (the “Supera Purchase”). After closing of the Merger, the operations
of MYMD’s business will comprise substantially all of the combined company’s operations. There is no assurance when
or if the Merger will be completed. Any delay in completing the Merger may substantially reduce the potential benefits that we
expect to obtain from the Merger. Furthermore, the intended benefits of the Merger may not be realized.


 


Coronavirus
and COVID-19 Pandemic


 


In
December 2019, SARS-CoV-2 was reported to have surfaced in Wuhan, China, and on March 12, 2020, the World Health Organization
(“WHO”) declared the global outbreak of COVID-19, the disease caused by SARS-CoV-2, to be a pandemic. In an effort
to contain and mitigate the spread of COVID-19, many countries, including the United States, Canada, China, and India, have imposed
unprecedented restrictions on travel, quarantines, and other public health safety measures. According to the WHO situation report,
dated as of February 16, 2021, approximately 108.2 million cases were reported globally and 2.4 million of
these were deadly, making the development of effective vaccines to prevent this disease a major global priority. Multiple vaccine
candidates against SARS-CoV-2 are under development, and in December 2020, certain large, multinational pharmaceutical companies
were granted authorizations for emergency use by the FDA. Widespread distribution of the currently-available vaccines has begun
pursuant to Operation Warp Speed, a partnership among components of the U.S. Department of Health and Human Services, the Centers
for Disease Control and Prevention, the National Institutes of Health, the Biomedical Advanced Research and Development Authority,
and the Department of Defense, as well as certain private firms and other federal agencies. The treatments for COVID-19, including
symptomatic and supportive therapies, among other things, continue to be updated on a rolling basis by healthcare authorities
and agencies.


 






 


Impact
of the COVID-19 Pandemic on Our Business


 


The
ultimate impact of the global COVID-19 pandemic or a similar health epidemic is highly uncertain and subject to future developments.
These include but are not limited to the duration of the COVID-19 pandemic, new information which may emerge concerning the severity
of the COVID-19 pandemic, and any additional preventative and protective actions that regulators, or our board of directors or
management, may determine are needed. We do not yet know the full extent of potential delays or impacts on our business, our vaccine
development efforts, healthcare systems or the global economy as a whole. However, the effects are likely to have a material impact
on our operations, liquidity and capital resources, and we will continue to monitor the COVID-19 situation closely.


 


In
response to public health directives and orders, we have implemented work-from-home policies for many of our employees and temporarily
modified our operations to comply with applicable social distancing recommendations. The effects of the orders and our related
adjustments in our business are likely to negatively impact productivity, disrupt our business and delay our timelines, the magnitude
of which will depend, in part, on the length and severity of the restrictions and other limitations on our ability to conduct
our business in the ordinary course. Similar health directives and orders are affecting third parties with whom we do business,
including Premas, whose operations are located in India. Further, restrictions on our ability to travel, stay-at-home orders and
other similar restrictions on our business have limited our ability to support our operations.


 


Severe
and/or long-term disruptions in our operations will negatively impact our business, operating results and financial condition
in other ways, as well. Specifically, we anticipate that the stress of COVID-19 on healthcare systems generally around the globe
will negatively impact regulatory authorities and the third parties that we and Premas may engage in connection with the development
and testing of our COVID-19 Vaccine Candidate.


 


In
addition, while the potential economic impact brought by, and the duration of, COVID-19 may be difficult to assess or predict,
it has significantly disrupted global financial markets, and may limit our ability to access capital, which could in the future
negatively affect our liquidity. A recession or market correction resulting from the continuation of the COVID-19 pandemic could
materially affect our business and the value of our common stock.


 


Coronavirus
Vaccine Development


 


We
have partnered with Premas on the development of the COVID-19 Vaccine Candidate as we seek to advance such candidate through the
regulatory process, both with the U.S. Food and Drug Administration (“FDA”) and the office of the drug controller
in India. Premas is primarily responsible for the development of the COVID-19 Vaccine Candidate through proof of concept and is
entitled to receive milestone payments upon achievement of certain development milestones through proof of concept.


 


Premas’
D-Crypt platform has been developed to express proteins that are difficult to clone, express and manufacture and are a key component
in vaccine development. Premas has identified three major structural proteins of SARS-CoV-2 as antigens for potential vaccine
candidates for COVID-19: spike protein or S protein, envelope protein or E protein, and membrane protein or M protein. In April
2020, Premas used its D-Crypt platform to recombinantly express all three of such antigens, which we considered a significant
milestone for development of a triple antigen vaccine. We believe including a combination of all three antigens will provide advantages
against the likelihood of protein mutation, in which case a single-protein vaccine can be rendered non-efficacious, and therefore,
enhance efficacy of our vaccine candidates. We believe the D-Crypt provides us advantages in vaccine production and manufacturing,
as the technology platform is highly scalable with a robust process, which we expect will ultimately result in significant cost
savings compared to other similar vaccine platforms. Based on genetically engineered baker’s yeast S. cerevisiae, the platform
is highly scalable into commercial production quantities and has been previously utilized for the production of multiple human
and animal health vaccines candidates during its 10-year development track record. Yeast has a large endoplasmic reticulum, or
(“ER”), which is a desirable attribute for expressing membrane protein. In complex cells, ER is where the protein
is formed. The larger the surface, the more membrane protein that can attach to the ER inside the cell. Yeast is also generally
believed to be easily manipulated and allow for results to be gathered quickly. Yeast multiplies faster than mammalian cells and
is cheaper to work with than mammalian systems, which are much more complex and slower to grow comparatively. Yeast has received
“Generally Recommended as Safe” status from the FDA.


 






 


As
of May 14, 2020, Premas successfully completed its vaccine prototype and obtained transmission electron microscopic (“TEM”)
images of the recombinant virus like particle (“VLP”) assembled in yeast. A manufacturing protocol has also been established
and large-scale production studies have been initiated for our COVID-19 Vaccine Candidate. Though the prototype is complete, the
COVID-19 Vaccine Candidate is still in early stages of development, and, accordingly, must undergo pre-clinical testing and all
phases of clinical trials before we can submit a marketing application (in this case, a Biologics License Application, or “BLA”)
to the FDA. The BLA must be approved by the FDA before any biological product, including vaccines, may be lawfully marketed in
the United States. We believe the most pivotal, yet difficult, stage in our anticipated development of the contemplated COVID-19
Vaccine Candidate is the requisite conduct of extensive clinical trials to demonstrate the safety and efficacy of our COVID-19
Vaccine Candidate. Additionally, after we complete the necessary pre-clinical testing, but before we may begin any clinical studies
in the United States, we must submit an Investigational New Drug (“IND”) application to the FDA, as this is required
before any clinical studies may be conducted in the United States. In some cases, clinical studies may be conducted in other countries;
however, the FDA may not accept data from foreign clinical studies in connection with a BLA (or other marketing application) submission.


 


In
July 2020, animal studies for our COVID-19 Vaccine Candidate were initiated in India. In addition, we announced that Premas has
successfully completed the manufacturing process for the VLP vaccine candidate. On August 27, 2020, we announced with Premas positive
proof of concept results from the animal studies conducted during a four-week test of the COVID-19 Vaccine Candidate in mice.
The test had two primary endpoints, safety and immune responses, both of which were met. The study consisted of 50 mice, divided
into 10 cohorts dosed with 5, 10 and 20 micrograms of the COVID-19 Vaccine Candidate. The COVID-19 Vaccine Candidate was generally
well tolerated and safe at all doses, with no adverse events reported. The COVID-19 Vaccine Candidate was safe even at higher
doses and generated a robust immune response against the three SARS-Cov2 antigens, S, E, and M. The COVID-19 Vaccine Candidate
elicited neutralizing antibody titers levels in all the dose cohorts starting from 5 microgram to 20 microgram dose regimens.
After three doses in mice, all the groups’ cohorts showed binding antibody levels similar to convalescent patients’
levels. Clinical testing is expensive, time consuming, and uncertain as to outcome. We cannot guarantee that any clinical trials
will be conducted as planned or completed in a timely manner, if at all. Failures in connection with one or more clinical trials
can occur at any stage of testing.


 


 


Premas
owns, and has exclusively licensed rights to us to, two provisional Indian patent applications filed in January and March 2020.
The scope of these Indian provisional patent applications is directed, respectively, to (i) a platform for the expression of difficult
to express proteins (“DTE-Ps”), which might provide coverage for a method of making the to-be-developed vaccine; and
(ii) an expression platform for SARS-CoV-2-like virus proteins, methods relevant thereto, and a relevant vaccine. If non-provisional
patent rights are pursued claiming priority to each of these two provisional applications, any resulting patent rights that issue
might not expire until approximately January 20, 2041 and March 4, 2041, if all annuities and maintenance fees are timely paid.
The expiration dates may be extendable beyond these dates depending on the jurisdiction and the vaccine development process. As
we do not own the patents or patent applications that we license, we may need to rely upon Premas to properly prosecute and maintain
those patent applications and prevent infringement of those patents.


 


Competition


 


We
face, and will continue to face, intense competition from large pharmaceutical companies, specialty pharmaceutical and biotechnology
companies as well as academic and research institutions pursing research and development of technologies, drugs or other therapies
that would compete with our products or product candidates. The pharmaceutical market is highly competitive, subject to rapid
technological change and significantly affected by existing rival drugs and medical procedures, new product introductions and
the market activities of other participants. Our competitors may develop products more rapidly or more effectively than us. If
our competitors are more successful in commercializing their products than us, their success could adversely affect our competitive
position and harm our business prospects.


 






 


Specifically,
the competitive landscape of potential COVID-19 vaccines and treatment therapies has been rapidly developing since the beginning
of the COVID-19 pandemic, with several hundreds of companies claiming to be investigating possible candidates and approximately
4,800 studies registered worldwide as investigating COVID-19 (source: clinicaltrials.gov). Given the global footprint and
the widespread media attention on the COVID-19 pandemic, there are efforts by public and private entities to develop a COVID-19
vaccine as soon as possible, including large, multinational pharmaceutical companies such as AstraZeneca, GlaxoSmithKline, Johnson
& Johnson, Moderna, Pfizer, and Sanofi. In December 2020, the FDA issued emergency use authorizations for vaccines developed
by certain of these large, multinational pharmaceutical companies and it is possible that additional vaccines developed by such
large, multinational pharmaceutical companies may receive further approvals and authorizations in the near term. Those other entities
have vaccine candidates that are currently at a more advanced stage of development than our COVID-19 Vaccine Candidate and may
develop COVID-19 vaccines that are more effective than any vaccine we may develop, may develop a COVID-19 vaccine that becomes
the standard of care, may develop a COVID-19 vaccine at a lower cost or earlier than we are able to jointly develop any COVID-19
vaccine, or may be more successful at commercializing a COVID-19 vaccine. Many of these other organizations are much larger than
we are and have access to larger pools of capital, and as such, are able to fund and carry on larger research and development
initiatives. Such other entities may have greater development capabilities than we do and have substantially greater experience
in undertaking nonclinical and clinical testing of vaccine candidates, obtaining regulatory approvals and manufacturing and marketing
pharmaceutical products. Our competitors may also have greater name recognition and better access to customers. In addition, based
on the competitive landscape, additional COVID-19 vaccines or therapeutics may continue be approved to be marketed. Should another
party be successful in producing a more efficacious vaccine for COVID-19, such success could reduce the commercial opportunity
for our COVID-19 Vaccine Candidate and could have a material adverse effect on our business, financial condition, results of operations
and future prospects. Moreover, if we experience delayed regulatory approvals or disputed clinical claims, we may not have the
commercial or clinical advantage over competitors’ products that we believe we currently possess. The success or failure
of other entities, or perceived success or failure, may adversely impact our ability to obtain any future funding for our vaccine
development efforts or for us to ultimately commercialize and market any vaccine candidate, if approved. In addition, we may not
be able to compete effectively if our product candidates do not satisfy government procurement requirements with respect to biodefense
products.


 


Acquisition
and License Agreements


 


On
March 23, 2020, we acquired Cystron pursuant to the MIPA. As consideration for the Cystron Membership Interests, we delivered
to the Cystron Sellers: (1) that number of newly issued shares of our common stock equal to 19.9% of the issued and outstanding
shares of our common stock and pre-funded warrants as of the date of the MIPA, but, to the extent that the issuance of our common
stock would have resulted in any Seller owning in excess of 4.9% of our outstanding common stock, then, at such Seller’s
election, such Seller received “common stock equivalent” preferred shares with a customary 4.9% blocker (with such
common stock and preferred stock collectively referred to as “Common Stock Consideration”), and (2) $1,000,000 in
cash. On March 24, 2020, we paid $1,000,000 to the Cystron Sellers and delivered 411,403 shares of common stock and 211,353 shares
of Series D Convertible Preferred Stock with a customary 4.9% blocker, with an aggregate fair market value of $1,233,057.


 


Additionally,
we are required to (A) make an initial payment to the Cystron Sellers of up to $1,000,000 upon its receipt of cumulative gross
proceeds from the consummation of an initial equity offering after the date of the MIPA of $8,000,000, and (B) pay to the Cystron
Sellers an amount in cash equal to 10% of the gross proceeds in excess of $8,000,000 raised from future equity offerings after
the date of the MIPA until the Cystron Sellers have received an aggregate additional cash consideration equal to $10,000,000 (collectively,
the “Equity Offering Payments”). On May 14, 2020, we entered into an Amendment No. 1 to the MIPA with the Cystron
Sellers, which provided that any Equity Offering Payments in respect of an equity offering that is consummated prior to September
23, 2020, shall be accrued, but shall not be due and payable until September 24, 2020. The other provisions of the MIPA remained
unmodified and in full force and effect. Upon the achievement of certain milestones, including the completion of a Phase 2 study
for a COVID-19 Vaccine Candidate that meets its primary endpoints, the Cystron Sellers are entitled to receive an additional 750,000
shares of our common stock or, in the event we are unable to obtain stockholder approval for the issuance of such shares, 750,000
shares of non-voting preferred stock that are valued following the achievement of such milestones and shall bear a 10% annual
dividend (the “Cystron Milestone Shares”). At the 2020 annual meeting of our stockholders, held on August 27, 2020,
pursuant to Nasdaq listing rule 5635(a), our stockholders approved of the issuance of Common Stock Consideration (as defined in
the MIPA) and the potential future issuance of Cystron Milestone Shares in excess of 20% of our common stock outstanding prior
to the closing of the Cystron acquisition.


 


Pursuant to the
MIPA, the Company shall make contingent payments for the achievement of certain development and commercial milestones as follows;
(i) $250,000 upon the dosing of the first patient in a Phase I Clinical Trial, (ii) $500,000 upon the dosing of the first patient
in a Phase II Clinical Trial, (iii) $5,000,000 upon the dosing of the first patient in a Phase III Clinical Trial, and (iv) $15,000,000
upon approval by the FDA of the NDA for the COVID-19 vaccine.


 






 


Pursuant
to the Original MIPA, upon our consummation of the registered direct equity offering closed on April 8, 2020, we paid the Cystron
Sellers $250,000 on April 20, 2020 (the “April Payment”). On April 30, 2020, Premas, one of the Cystron Sellers, returned
to us $83,334, representing their portion of the $250,000 amount paid to the Cystron Sellers on April 20, 2020. Premas advised
us that these funds were returned temporarily for Premas to meet certain regulatory requirements in India. We recorded liabilities
of $892,500 (the “May Payment”) and $684,790 (the “August Payment”) to the Cystron Sellers upon the consummation
of the registered direct equity offerings that closed on May 18, 2020 and August 13, 2020, respectively. These funds (including
funds of $299,074 representing Premas’ portion of the cash purchase price and $83,334 representing Premas’ portion
of the April Payment temporarily returned to us in April 2020) due the sellers under the MIPA were disbursed on September 25,
2020. On October 13, 2020, Premas returned $908,117 representing Premas’ portion of the initial cash component for the purchase
of Cystron and Premas’ portion of the April Payment, May Payment and August Payment under the MIPA.
Premas
is working with the Reserve Bank of India to comply with regulations related to its ownership in a foreign entity and its ability
to receive funds for the sale of that entity. The Company believes that (i) Premas will be successful in its efforts to resolve
such regulatory matters with the Reserve Bank of India, (ii) the Company will disburse the amounts due to Premas under the MIPA,
and (iii) the Company maintains a 100% membership interest in Cystron.


 



Upon
the consummation
of the Private Placement, the Company paid
$1,204,525 of the proceeds from the Private Placement to three of the four former members of Cystron and recorded a liability
of $602,172 to the fourth former member of Cystron pursuant to the MIPA.


 


We
shall also make quarterly royalty payments to the Cystron Sellers equal to 5% of the net sales of a COVID-19 vaccine or combination
product by us for a period of five (5) years following the first commercial sale of the COVID-19 vaccine; provided, that such
payment shall be reduced to 3% for any net sales of the COVID-19 vaccine above $500 million.


 


In
addition, the Cystron Sellers shall be entitled to receive 12.5% of the transaction value, as defined in the MIPA, of any change
of control transaction, as defined in the MIPA, that occurs prior to the fifth (5th) anniversary of the closing date of the MIPA,
provided that we are still developing the COVID-19 Vaccine Candidate at that time. Following the consummation of any change of
control transaction, the Cystron Sellers shall not be entitled to any payments as described above under the MIPA.


 


Support
Agreement


 


On
March 23, 2020, as an inducement to enter into the MIPA, and as one of the conditions to the consummation of the transactions
contemplated by the MIPA, the Cystron Sellers entered into a shareholder voting agreement with us, pursuant to which each Cystron
Seller agreed to vote their shares of our common stock or preferred stock in favor of each matter proposed and recommended for
approval by our management at every meeting of the stockholders and on any action or approval by written consent of the stockholders.


 


Registration
Rights Agreement


 


To
induce the Cystron Sellers to enter into the MIPA, on March 23, 2020, we entered into a registration rights agreement with the
Cystron Sellers, pursuant to which we filed with the SEC a Registration Statement on Form S-3, as amended, covering resale of
the Common Stock Consideration, which was declared effective on June 12, 2020. We also agreed to subsequently register Cystron
Milestone Shares, if such securities are issued in the future.


 






 


License
Agreement


 


Cystron
is a party to the License Agreement with Premas. As a condition to our entry into the MIPA, Cystron amended and restated the Initial
License Agreement on March 19, 2020. Pursuant to the License Agreement, Premas granted Cystron, amongst other things, an exclusive
license with respect to Premas’ vaccine platform for the development of a vaccine against COVID-19 and other coronavirus
infections.


 


Upon
the achievement of certain developmental milestones by Cystron, Cystron shall pay to Premas a total of up to $2,000,000. On April
16, 2020, we paid Premas $500,000 for the achievement of the first two development milestones. On May 18, 2020, we paid
Premas $500,000 for the achievement of the third development milestone. On July 7, 2020, we agreed with Premas that the fourth
milestone under the License Agreement had been satisfied. Due to the achievement of this milestone on July 7, 2020, Premas was
paid $1,000,000 on August 4, 2020.


 


Intellectual
Property


 


We
have exclusive rights in-licensed from Premas (as discussed above) to certain know-how and two provisional Indian patent applications
filed in January and March 2020. The following table summarizes the two provisional Indian patent applications.


 








Description

 

Jurisdiction

 

Application
No.

 

Expiration
Date

Platform
for the expression of difficult to express proteins (DTE-Ps)

 

India

 

202011002479

 

If
a nonprovisional application is filed within one year of the provisional application, any resulting patent would expire on
January 20, 2041.

Expression
platform for SARS-Co-V-like virus proteins, methods relevant thereto, and relevant vaccine

 

India

 

202011009383

 

If
a nonprovisional application is filed within one year of the provisional application, any resulting patent would expire on
March 4, 2041.



 


As
we do not own the patent applications that we in-license, we may need to rely upon Premas to properly prosecute and maintain those
and additional related patent applications, and to prevent infringement of any resulting patents.


 


We
have two U.S. registered trademarks for “Akers Bio.”


 


Government
Regulation and Product Approval


 


Federal,
state, and local government authorities in the United States and in other countries extensively regulate, among other things,
the research, development, testing, manufacturing, quality control, approval, labeling, packaging, storage, record-keeping, promotion,
advertising, distribution, post-approval monitoring and reporting, marketing and export and import of biological and pharmaceutical
products such as those we are developing. Our prospective vaccine candidate(s) must be approved by the FDA before they may be
legally marketed in the United States and by the appropriate foreign regulatory agency before they may be legally marketed in
foreign countries. Generally, our activities in other countries will be subject to regulation that is similar in nature and scope
as that imposed in the United States. The process for obtaining regulatory marketing approvals and the subsequent compliance with
appropriate federal, state, local, and foreign statutes and regulations require the expenditure of substantial time and financial
resources.


 






 


U.S.
Product Development Process


 


In
the United States, the FDA regulates pharmaceutical and biological products under the Federal Food, Drug, and Cosmetic Act (“FD&C
Act”), the Public Health Service Act (“PHSA”), and their respective implementing regulations. Products
are also subject to other federal, state, and local statutes and regulations. The process of obtaining regulatory approvals and
the subsequent compliance with appropriate federal, state, local and foreign statutes and regulations require the expenditure
of substantial time and financial resources. Failure to comply with the applicable U.S. requirements at any time during the product
development process, approval process or after approval, may subject an applicant to administrative or judicial sanctions. FDA
sanctions could include, among other actions, refusal to approve pending applications, withdrawal of an approval, a clinical hold,
warning letters, product recalls or withdrawals from the market, product seizures, total or partial suspension of production or
distribution injunctions, fines, refusals of government contracts, restitution, disgorgement or civil or criminal penalties. Any
agency or judicial enforcement action could have a material adverse effect on us. The process required by the FDA before a drug
or biological product may be marketed in the United States generally involves the following:


 
















 


completion
of nonclinical laboratory tests and animal studies according to FDA’s Good Laboratory Practices (“GLPs”),
and applicable requirements for the humane use of laboratory animals or other applicable regulations;

 

 

 

 


submission
to the FDA of an IND which must become effective before human clinical trials may begin;

 

 

 

 


performance
of adequate and well-controlled human clinical trials according to the FDA’s regulations commonly referred to as good
clinical practice, and any additional requirements for the protection of human research subjects and their health information,
to establish the safety and efficacy of the proposed biological product for its intended use;

 

 

 

 


submission
to the FDA of a BLA for marketing approval that meets applicable requirements to ensure the continued safety, purity, and
potency of the product that is the subject of the BLA based on results of nonclinical testing and clinical trials;

 

 

 

 


satisfactory
completion of an FDA inspection of the manufacturing facility or facilities where the biological product is produced, to assess
compliance with current Good Manufacturing Practices (“cGMPs”), to assure that the facilities, methods and controls
are adequate to preserve the biological product’s identity, strength, quality and purity;

 

 

 

 


potential
FDA audit of the nonclinical study and clinical trial sites that generated the data in support of the BLA; and

 

 

 

 


FDA
review and approval, or licensure, of the BLA.


 


Before
testing any biological vaccine candidate in humans, the vaccine candidate enters the pre-clinical testing stage. Pre-clinical
tests, also referred to as nonclinical studies, include laboratory evaluations of product chemistry, toxicity and formulation,
as well as animal studies to assess the potential safety and activity of the vaccine candidate. The conduct of the pre-clinical
tests must comply with federal regulations and requirements including GLPs. The clinical trial sponsor must submit the results
of the pre-clinical tests, together with manufacturing information, analytical data, any available clinical data or literature
and a proposed clinical protocol, to the FDA as part of the IND. Some pre-clinical testing may continue even after the IND is
submitted. The IND automatically becomes effective 30 days after receipt by the FDA, unless the FDA raises concerns or questions
regarding the proposed clinical trials and places the trial on a clinical hold within that 30-day time period. In such a case,
the IND sponsor and the FDA must resolve any outstanding concerns before the clinical trial can begin. The FDA may also impose
clinical holds on a biological product candidate at any time before or during clinical trials due to safety concerns or non-compliance.
If the FDA imposes a clinical hold, trials may not recommence without FDA authorization and then only under terms authorized by
the FDA. Accordingly, we cannot be sure that submission of an IND will result in the FDA allowing clinical trials to begin, or
that, once begun, issues will not arise that suspend or terminate such trials.


 






 


Clinical
trials involve the administration of the biological product candidate to healthy volunteers or patients under the supervision
of qualified investigators, generally physicians not employed by or under the trial sponsor’s control. Clinical trials are
conducted under protocols detailing, among other things, the objectives of the clinical trial, dosing procedures, subject selection
and exclusion criteria, and the parameters to be used to monitor subject safety, including stopping rules that assure a clinical
trial will be stopped if certain adverse events should occur. Each protocol and any amendments to the protocol must be submitted
to the FDA as part of the IND. Clinical trials must be conducted and monitored in accordance with the FDA’s regulations
composing the Good Clinical Practice (“GCP”) requirements, including the requirement that all research subjects provide
informed consent. Further, each clinical trial must be reviewed and approved by an independent institutional review board, (“IRB”),
at or servicing each institution at which the clinical trial will be conducted. An IRB is charged with protecting the welfare
and rights of trial participants and considers such items as whether the risks to individuals participating in the clinical trials
are minimized and are reasonable in relation to anticipated benefits. The IRB also approves the form and content of the informed
consent that must be signed by each clinical trial subject or his or her legal representative and must monitor the clinical trial
until completed. Human clinical trials are typically conducted in three sequential phases that may overlap or be combined:


 








 


Phase
1. The biological product is initially introduced into healthy human subjects and tested for safety. In the case of some products
for severe or life-threatening diseases, especially when the product may be too inherently toxic to ethically administer to
healthy volunteers, the initial human testing is often conducted in subjects having the specific disease.

 

 

 

 


Phase
2. The biological product is evaluated in a limited patient population to identify possible adverse effects and safety risks,
to preliminarily evaluate the efficacy of the product for specific targeted diseases and to determine dosage tolerance, optimal
dosage and dosing schedule.

 

 

 

 


Phase
3. Clinical trials are undertaken to further evaluate dosage, clinical efficacy, potency, and safety in an expanded patient
population at geographically dispersed clinical trial sites. These clinical trials are intended to establish the overall risk
to benefit ratio of the product and provide an adequate basis for product labeling.


 


Post-approval
clinical trials, sometimes referred to as Phase 4 clinical trials, may be conducted after initial marketing approval. These clinical
trials are used to gain additional experience from the treatment of patients in the intended therapeutic indication, particularly
for long-term safety follow-up.


 


During
all phases of clinical development, regulatory agencies require extensive monitoring and auditing of all clinical activities,
clinical data, and clinical trial investigators. Annual progress reports detailing the results of the clinical trials must be
submitted to the FDA. Written IND safety reports must be promptly submitted to the FDA and the investigators for serious and unexpected
adverse events, any findings from other studies, tests in laboratory animals or in vitro testing that suggest a significant
risk for human subjects, or any clinically important increase in the rate of a serious suspected adverse reaction over that listed
in the protocol or investigator brochure. The sponsor must submit an IND safety report within 15 calendar days after the sponsor
determines that the information qualifies for reporting. The sponsor also must notify the FDA of any unexpected fatal or life-threatening
suspected adverse reaction within seven calendar days after the sponsor’s initial receipt of the information. Phase 1, Phase
2 and Phase 3 clinical trials may not be completed successfully within any specified period, if at all. The FDA or the sponsor
or its data safety monitoring board may suspend or terminate a clinical trial at any time on various grounds, including a finding
that the research subjects are being exposed to an unacceptable health risk. Similarly, an IRB can suspend or terminate approval
of a clinical trial at its institution if the clinical trial is not being conducted in accordance with the IRB’s requirements
or if the biological product has been associated with unexpected serious harm to subjects.


 


Concurrently
with clinical trials, companies usually complete additional studies and must also develop additional information about the physical
characteristics of the biological product as well as finalize a process for manufacturing the product in commercial quantities
in accordance with cGMP requirements. To help reduce the risk of the introduction of adventitious agents with use of biological
products, the PHSA emphasizes the importance of manufacturing control for products whose attributes cannot be precisely defined.
The manufacturing process must be capable of consistently producing quality batches of the product candidate and, among other
criteria, the sponsor must develop methods for testing the identity, strength, quality, potency and purity of the final biological
product. Additionally, appropriate packaging must be selected and tested, and stability studies must be conducted to demonstrate
that the biological product candidate does not undergo unacceptable deterioration over its shelf life.


 






 


U.S.
Review and Approval Processes


 


After
the completion of clinical trials of a biological product, FDA approval of a BLA must be obtained before commercial marketing
of the biological product. The BLA must include results of product development, laboratory and animal studies, human trials, information
on the manufacture and composition of the product, proposed labeling and other relevant information. The FDA may grant deferrals
for submission of data, or full or partial waivers. The testing and approval processes require substantial time and effort and
there can be no assurance that the FDA will accept the BLA for filing and, even if filed, that any approval will be granted on
a timely basis, if at all.


 


Under
the Prescription Drug User Fee Act, as amended (“PDUFA”), each BLA must be accompanied by a significant user fee.
The FDA adjusts the PDUFA user fees on an annual basis. PDUFA also imposes an annual program fee for biological products. Fee
waivers or reductions are available in certain circumstances, including a waiver of the application fee for the first application
filed by a small business.


 


Within
60 days following submission of the application, the FDA reviews a BLA submitted to determine if it is substantially complete
before the agency accepts it for filing. The FDA may refuse to file any BLA that it deems incomplete or not properly reviewable
at the time of submission and may request additional information. In this event, the BLA must be resubmitted with the additional
information. The resubmitted application also is subject to review before the FDA accepts it for filing. Once the submission is
accepted for filing, the FDA begins an in-depth substantive review of the BLA. The FDA reviews the BLA to determine, among other
things, whether the proposed product is safe, potent, and/or effective for its intended use, and has an acceptable purity profile,
and whether the product is being manufactured in accordance with cGMP to assure and preserve the product’s identity, safety,
strength, quality, potency and purity. The FDA may refer applications for novel biological products or biological products that
present difficult questions of safety or efficacy to an advisory committee, typically a panel that includes clinicians and other
experts, for review, evaluation, and a recommendation as to whether the application should be approved and under what conditions.
The FDA is not bound by the recommendations of an advisory committee, but it considers such recommendations carefully when making
decisions. During the biological product approval process, the FDA also will determine whether a REMS, is necessary to assure
the safe use of the biological product. If the FDA concludes a REMS is needed, the sponsor of the BLA must submit a proposed REMS.
The FDA will not approve a BLA without a REMS, if required.


 


Before
approving a BLA, the FDA will inspect the facilities at which the product is manufactured. The FDA will not approve the product
unless it determines that the manufacturing processes and facilities are in compliance with cGMP requirements and adequate to
assure consistent production of the product within required specifications. Additionally, before approving a BLA, the FDA will
typically inspect one or more clinical sites to assure that the clinical trials were conducted in compliance with IND trial requirements
and GCP requirements. To assure cGMP and GCP compliance, an applicant must incur significant expenditure of time, money and effort
in the areas of training, record keeping, production, and quality control.


 


Notwithstanding
the submission of relevant data and information, the FDA may ultimately decide that the BLA does not satisfy its regulatory criteria
for approval and deny approval. Data obtained from clinical trials are not always conclusive and the FDA may interpret data differently
than we interpret the same data. If the agency decides not to approve the BLA in its present form, the FDA will issue a complete
response letter that describes all of the specific deficiencies in the BLA identified by the FDA. The deficiencies identified
may be minor, for example, requiring labeling changes, or major, for example, requiring additional clinical trials. Additionally,
the complete response letter may include recommended actions that the applicant might take to place the application in a condition
for approval. If a complete response letter is issued, the applicant may either resubmit the BLA, seeing all of the deficiencies
identified in the letter, or withdraw the application.


 


If
a product receives regulatory approval, the approval may be significantly limited to specific diseases and dosages or the indications
for use may otherwise be limited, which could restrict the commercial value of the product.


 






 


Further,
the FDA may require that certain contraindications, warnings or precautions be included in the product labeling. The FDA may impose
restrictions and conditions on product distribution, prescription, or dispensation in the form of a risk management plan, or otherwise
limit the scope of any approval. In addition, the FDA may require post marketing clinical trials, sometimes referred to as Phase
4 clinical trials, designed to further assess a biological product’s safety and effectiveness, and testing and surveillance
programs to monitor the safety of approved products that have been commercialized.


 


In
addition, under the Pediatric Research Equity Act, a BLA or supplement to a BLA must contain data to assess the safety and effectiveness
of the product for the claimed indications in all relevant pediatric subpopulations and to support dosing and administration for
each pediatric subpopulation for which the product is safe and effective. The FDA may grant deferrals for submission of data or
full or partial waivers.


 


Post-Approval
Requirements


 


Any
products for which we receive FDA approvals are subject to continuing regulation by the FDA, including, among other things, record-keeping
requirements, reporting of adverse experiences with the product, providing the FDA with updated safety and efficacy information,
product sampling and distribution requirements, and complying with FDA promotion and advertising requirements, which include,
among others, standards for direct-to-consumer advertising, restrictions on promoting products for uses or in patient populations
that are not described in the product’s approved uses, known as “off-label” use, limitations on industry-sponsored
scientific and educational activities, and requirements for promotional activities involving the internet. Although physicians
may prescribe legally available products for off-label uses, if the physicians deem to be appropriate in their professional medical
judgment, manufacturers may not market or promote such off-label uses.


 


In
addition, quality control and manufacturing procedures must continue to conform to applicable manufacturing requirements after
approval to ensure the long-term stability of the product. cGMP regulations require among other things, quality control and quality
assurance as well as the corresponding maintenance of records and documentation and the obligation to investigate and correct
any deviations from cGMP. Manufacturers and other entities involved in the manufacture and distribution of approved products are
required to register their establishments with the FDA and certain state agencies and are subject to periodic unannounced inspections
by the FDA and certain state agencies for compliance with cGMP and other laws. Accordingly, manufacturers must continue to expend
time, money, and effort in the area of production and quality control to maintain cGMP compliance. Discovery of problems with
a product after approval may result in restrictions on a product, manufacturer, or holder of an approved BLA, including, among
other things, recall or withdrawal of the product from the market. In addition, changes to the manufacturing process are strictly
regulated, and depending on the significance of the change, may require prior FDA approval before being implemented. Other types
of changes to the approved product, such as adding new indications and claims, are also subject to further FDA review and approval.


 


Discovery
of previously unknown problems with a product or the failure to comply with applicable FDA requirements can have negative consequences,
including adverse publicity, judicial or administrative enforcement, warning letters from the FDA, mandated corrective advertising
or communications with doctors, and civil or criminal penalties, among others. Newly discovered or developed safety or effectiveness
data may require changes to a product’s approved labeling, including the addition of new warnings and contraindications,
and also may require the implementation of other risk management measures. Also, new government requirements, including those
resulting from new legislation, may be established, or the FDA’s policies may change, which could delay or prevent regulatory
approval of our prospective vaccine candidate(s).


 


Other
U.S. Healthcare Laws and Compliance Requirements


 


In
the United States, our activities are potentially subject to regulation by various federal, state and local authorities in addition
to the FDA, including but not limited to, the Centers for Medicare and Medicaid Services (“CMS”), other divisions
of the U.S. Department of Health and Human Services (“HHS”), for instance the Office of Inspector General, the U.S.
Department of Justice, or (“DOJ”), and individual U.S. Attorney offices within the DOJ, and state and local governments.
For example, sales, marketing and scientific/educational grant programs must comply with the anti-fraud and abuse provisions of
the Social Security Act, the false claims laws, the physician payment transparency laws, the privacy and security provisions of
the federal Health Insurance Portability and Accountability Act (“HIPAA”), as amended by the Health Information Technology
for Economic and Clinical Health or “HITECH” Act, and similar state laws, each as amended.


 






 


The
federal Anti-Kickback Statute (“AKS”) prohibits, among other things, any person or entity, from knowingly and willfully
offering, paying, soliciting or receiving any remuneration, directly or indirectly, overtly or covertly, in cash or in kind, to
induce or in return for purchasing, leasing, ordering or arranging for the purchase, lease or order of any item or service reimbursable
under Medicare, Medicaid or other federal healthcare programs. The term remuneration has been interpreted broadly to include anything
of value. The AKS has been interpreted to apply to arrangements between pharmaceutical manufacturers on one hand and prescribers,
purchasers, and formulary managers on the other. There are a number of statutory exceptions and regulatory safe harbors protecting
some common activities from prosecution. The exceptions and safe harbors are drawn narrowly and practices that involve remuneration
that may be alleged to be intended to induce prescribing, purchasing or recommending may be subject to scrutiny if they do not
qualify for an exception or safe harbor. Our practices may not in all cases meet all of the criteria for protection under a statutory
exception or regulatory safe harbor. Failure to meet all of the requirements of a particular applicable statutory exception or
regulatory safe harbor, however, does not make the conduct per se illegal under the AKS. Instead, the legality of the arrangement
will be evaluated on a case-by-case basis based on a cumulative review of all of its facts and circumstances.


 


Additionally,
the intent standard under the AKS was amended by the Affordable Care Act (“ACA”) to a stricter standard, such that
a person or entity no longer needs to have actual knowledge of the statute or specific intent to violate it in order to have committed
a violation. In addition, the ACA codified case law that a claim including items or services resulting from a violation of the
AKS constitutes a false or fraudulent claim for purposes of the federal False Claims Act, or (“FCA”), as discussed
below.


 


The
civil monetary penalties statute imposes penalties against any person or entity that, among other things, is determined to have
presented or caused to be presented a claim to a federal health program that the person knows or should know is for an item or
service that was not provided as claimed or is false or fraudulent.


 


The
federal FCA prohibits, among other things, any person or entity from knowingly presenting, or causing to be presented, a false
claim for payment to, or approval by, the federal government or knowingly making, using, or causing to be made or used a false
record or statement material to a false or fraudulent claim to the federal government. As a result of a modification made by the
Fraud Enforcement and Recovery Act of 2009, a claim includes “any request or demand” for money or property presented
to the U.S. government. Recently, several pharmaceutical and other healthcare companies have been prosecuted under these laws
for allegedly providing free product to customers with the expectation that the customers would bill federal programs for the
product. Other companies have been prosecuted for causing false claims to be submitted because of the companies’ marketing
of the product for unapproved, and thus non-reimbursable, uses.


 


HIPAA
created new federal criminal statutes that prohibit knowingly and willfully executing, or attempting to execute, a scheme to defraud
or to obtain, by means of false or fraudulent pretenses, representations or promises, any money or property owned by, or under
the control or custody of, any healthcare benefit program, including private third-party payors and knowingly and willfully falsifying,
concealing or covering up by trick, scheme or device, a material fact or making any materially false, fictitious or fraudulent
statement in connection with the delivery of or payment for healthcare benefits, items or services. Similar to the AKS, a person
or entity does not need to have actual knowledge of the statute or specific intent to violate it in order to have committed a
violation.


 


Also,
many states have similar fraud and abuse statutes or regulations that apply to items and services reimbursed under Medicaid and
other state programs, or, in several states, apply regardless of the payor.


 






 


We
may be subject to data privacy and security regulations by both the federal government and the states in which we conduct our
business. HIPAA, as amended by the HITECH Act, imposes requirements relating to the privacy, security and transmission of individually
identifiable health information. Among other things, HITECH makes HIPAA’s privacy and security standards directly applicable
to business associates, independent contractors or agents of covered entities that receive or obtain protected health information
in connection with providing a service on behalf of a covered entity. HITECH also created four new tiers of civil monetary penalties,
amended HIPAA to make civil and criminal penalties directly applicable to business associates, and gave state attorneys general
new authority to file civil actions for damages or injunctions in federal courts to enforce the federal HIPAA laws and seek attorneys’
fees and costs associated with pursuing federal civil actions. In addition, state laws govern the privacy and security of health
information in specified circumstances, many of which differ from each other in significant ways, thus complicating compliance
efforts.


 


Additionally,
the federal Physician Payment Sunshine Act of 2010 (“PPSA”) under the ACA, and its implementing regulations, require
that certain manufacturers of drugs, devices, biological and medical supplies for which payment is available under Medicare, Medicaid
or the Children’s Health Insurance Program, with certain exceptions, to report information related to certain payments or
other transfers of value made or distributed to physicians and teaching hospitals, or to entities or individuals at the request
of, or designated on behalf of, the physicians and teaching hospitals and to report annually certain ownership and investment
interests held by physicians and their immediate family members. Failure to submit timely, accurately, and completely the required
information may result in civil monetary penalties of up to an aggregate of $150,000 per year and up to an aggregate of $1 million
per year for “knowing failures”. Certain states also mandate implementation of compliance programs, impose restrictions
on pharmaceutical manufacturer marketing practices and/or require the tracking and reporting of gifts, compensation and other
remuneration to healthcare providers and entities.


 


In
order to distribute products commercially, we must also comply with state laws that require the registration of manufacturers
and wholesale distributors of drug and biological products in a state, including, in certain states, manufacturers and distributors
who ship products into the state even if such manufacturers or distributors have no place of business within the state. Some states
also impose requirements on manufacturers and distributors to establish the pedigree of product in the chain of distribution,
including some states that require manufacturers and others to adopt new technology capable of tracking and tracing product as
it moves through the distribution chain. Several states have enacted legislation requiring pharmaceutical and biotechnology companies
to establish marketing compliance programs, file periodic reports with the state, make periodic public disclosures on sales, marketing,
pricing, clinical trials and other activities, and/or register their sales representatives, as well as to prohibit pharmacies
and other healthcare entities from providing certain physician prescribing data to pharmaceutical and biotechnology companies
for use in sales and marketing, and to prohibit certain other sales and marketing practices. All of our activities are potentially
subject to federal and state consumer protection and unfair competition laws.


 


If
our operations are found to be in violation of any of the federal and state healthcare laws described above or any other governmental
regulations that apply to us, we may be subject to penalties, including without limitation, civil, criminal and/or administrative
penalties, damages, fines, disgorgement, exclusion from participation in government programs, such as Medicare and Medicaid, injunctions,
private “qui tam” actions brought by individual whistleblowers in the name of the government, or refusal to allow
us to enter into government contracts, contractual damages, reputational harm, administrative burdens, diminished profits and
future earnings, and the curtailment or restructuring of our operations, any of which could adversely affect our ability to operate
our business and our results of operations.


 


U.S.
Healthcare Reform


 


We
anticipate that current and future U.S. legislative healthcare reforms may result in additional downward pressure on the price
that we receive for any approved product, if covered, and could seriously harm our business. Any reduction in reimbursement from
Medicare and other government programs may result in a similar reduction in payments from private payors. The implementation of
cost containment measures or other healthcare reforms may prevent us from being able to generate revenue, attain profitability
or commercialize our prospective vaccine candidate(s). In addition, it is possible that there will be further legislation or regulation
that could harm our business, financial condition and results of operations.


 


Available
information


 


Our
website address is www.akersbio.com. We do not intend our website address to be an active link or to otherwise incorporate
by reference the contents of the website into this Annual Report on Form 10-K. The SEC maintains an Internet website (http://www.sec.gov)
that contains reports, proxy and information statements and other information regarding issuers that file electronically with
the SEC.


 






 


Employees


 


We
currently employ four (4) full-time equivalent employees, contractors or consultants, all in general and administrative.
None of our employees are represented by a labor union or are a party to a collective bargaining agreement. We believe that we
have good relations with our employees.



 




Item
1A. Risk Factors


 


An
investment in our common stock involves a high degree of risk. Before deciding whether to invest in our securities, you should
consider carefully the risks described below, together with other information in this Annual Report on Form 10-K and the other
information and documents we file with the SEC. Our business, financial condition and operating results can be affected by a number
of factors, whether currently known or unknown, including but not limited to those described below, any one or more of which could,
directly, or indirectly, cause our actual financial condition and operating results to vary materially from past, or from anticipated
future, financial condition and operating results. Any of these factors in whole or in part, could materially and adversely affect
our business, financial condition, operating results and stock price.


 


Risk
Factor Summary


 


Below
is a summary of the principal factors that make an investment in our common stock speculative or risky. This summary does not
address all of the risks that we face. Additional discussion of risks summarized in this risk factor summary, and other risks
that we face, can be found below under the heading “Risk Factors” and should be carefully considered, together with
other information in this Annual Report on Form 10-K and our other filings with the SEC before making investment decisions regarding
our common stock.


 


Risks
Related to the Proposed Merger


 



The ongoing COVID-19 pandemic may pose risks and could harm business and results of operations for us and the combined company
following the completion of the Merger.



There is no assurance when or if the Merger will be complete. Any delay in completing the Merger may substantially reduce the
potential benefits that we expect to obtain from the Merger. Furthermore, the intended benefits of the Merger may not be realized.



The issuance of shares of our common stock to MYMD stockholders in the Merger will substantially dilute the voting power of current
Akers stockholders. Having a minority share position will reduce the influence that current stockholders have on the management
of the combined company.



The issuance, or expected issuance, of our common stock in connection with the Merger, including the Milestone Shares, could decrease
the market price of our common stock.



Because the lack of a public market for MYMD common stock makes it difficult to evaluate the fairness of the Merger, MYMD stockholders
may receive consideration in the Merger that is greater than or less than the fair market value of MYMD common stock.



Our directors and officers may have interests in the Merger that are different from, or in addition to, those of our stockholders
generally that may influence them to support or approve the Merger.



If the Merger is completed, MYMD executive officers and MYMD appointees to the combined company’s board of directors will
have the ability to significantly influence the combined company’s management and business affairs, as well as matters submitted
to the combined company’s board of directors or stockholders for approval, especially if they decide to act together with
the current MYMD stockholders.



The announcement and pendency of the Merger could have an adverse effect on our business, financial condition, results of operations
or business prospects.



During the pendency of the Merger, we may not be able to enter into a business combination with another party and will be subject
to contractual limitations on certain actions because of restrictions in the Merger Agreement.


 






 



Certain provisions of the Merger Agreement may discourage third parties from submitting competing proposals, including proposals
that may be superior to the arrangements contemplated by the Merger Agreement.



The Exchange Ratio is not adjustable based on the market price of our common stock, so the merger consideration at the closing
may have a greater or lesser value than at the time the Merger Agreement was signed.



We are expected to incur substantial expenses related to the Merger.



Failure to complete the Merger could negatively affect the value of our common stock and our future business and financial results.



The Merger may be completed even though material adverse changes may result from the announcement of the Merger, industry-wide
changes or other causes.



We may become involved in additional securities litigation or stockholder derivate litigation in connection with the Merger,
and this could divert the attention of our management and harm the combined company’s business, and insurance coverage may
not be sufficient to cover all related costs and damages.



The reverse stock split may not increase the combined company’s stock price over the long term.



The reverse stock split would have the effect of increasing the amount of common stock that the combined company is authorized
to issue without further approval by the combined company’s stockholders.



The reverse stock split may decrease the liquidity of our common stock and lead to a decrease in overall market capitalization
of the combined company.


 


Risks
Related to Our Business Prior to Consummation of the Merger


 



We have a history of operating losses and we cannot guarantee that we can ever achieve sustained profitability.



We may fail to realize the anticipated benefits related to our acquisition of Cystron and those benefits may take longer to realize
than expected.



Our pursuit of the COVID-19 Vaccine Candidate is at an early stage. We have not previously tested our rapid response capability
and may be unable to produce a vaccine that successfully treats the virus in a timely manner, if at all.



We operate in a highly competitive industry.



Our business may be materially adversely affected by the COVID-19 pandemic.



With regard to our COVID-19 Vaccine Candidate, we must conduct pre-clinical testing, prepare and submit an IND to the FDA, and
conduct all phases of clinical studies (which may include postmarket or “Phase 4” studies), which will likely take
several years and substantial expenses to complete, before we can submit an application for marketing approval to the FDA, and
there is no guarantee that we will complete such clinical development in a timely manner or at all or that our BLA will be approved,
if submitted.



We may be unable to advance the COVID-19 Vaccine Candidate successfully through the pre-clinical and clinical development process.



Governmental involvement may limit the commercial success of the COVID-19 Vaccine Candidate.



Even if we are able to commercialize our prospective or future product candidates, the products may not receive coverage or adequate
reimbursement from third-party payors in the United States or in other countries in which we seek to commercialize such products,
which could harm our business.



We expect to require additional capital in the future in order to develop the COVID-19 Vaccine Candidate. If we do not obtain
any such additional financing, it may be difficult to complete development of the COVID-19 Vaccine Candidate or effectively realize
our long-term strategic goals and objectives.



Our failure to meet the continued listing requirements of The Nasdaq Capital Market could result in a delisting of our common
stock. The delisting could adversely affect the market liquidity of our common stock and the market price of our common stock
could decrease.


 


In
addition, we face other business, financial, operational and legal risks and uncertainties set forth under “Risk Factors”
in Item 1A of this Annual Report on Form 10-K.


 






 


Risks
Related to the Proposed Merger


 


The
ongoing COVID-19 pandemic may pose risks and could harm business and results of operations for each of Akers, MYMD, and the combined
company following the completion of the merger.


 


The
global outbreak of COVID-19 has resulted in, and is likely to continue to result in, substantial disruptions to markets and economies
around the world, including the United States.


 


Given
the ongoing and dynamic nature of the circumstances, it is difficult to predict the full impact of the COVID-19 pandemic on our
businesses, or the business of MYMD, and the combined company following the completion of the Merger, and there is no guarantee
that our efforts, or the efforts of MYMD, and the combined company following the completion of the Merger to address the adverse
impacts of the COVID-19 pandemic will be effective. The extent of such impact will depend on future developments, which are highly
uncertain and cannot be predicted, including the duration of the pandemic, continued travel restrictions, social distancing requirements,
and government mandates, among others.


 


COVID-19
poses a material risk to the business, financial condition and results of operations of both us and MYMD, and potentially could
create risks for the combined company following the completion of the merger, including:


 






 


potential
delays or impacts on business operations, product candidate development efforts, healthcare systems or the global economy
as a whole;

 


effects
on key employees, including operational management personnel and those charged with preparing, monitoring and evaluating the
companies’ financial reporting and internal controls; and

 


increasing
or protracted volatility in the price of our common stock.


 


These
factors, together or in combination with other events or occurrences not yet known or anticipated, could adversely affect the
value of the merger consideration or could delay or prevent the completion of the Merger and the related transactions. If we are,
or MYMD is, unable to recover from a business disruption on a timely basis, the Merger and the combined company’s business
and financial conditions and results of operations following the completion of the Merger could be adversely affected. The Merger
may also be delayed and adversely affected by the COVID-19 pandemic and become more costly. Each of Akers, MYMD, and the combined
company may also incur additional costs to remedy damages caused by such disruptions, which could adversely affect each of their
financial condition and results of operations.


 


 


There
is no assurance when or if the Merger will be completed. Any delay in completing the Merger may substantially reduce the potential
benefits that we expect to obtain from the Merger.


 


Completion
of the Merger is subject to the satisfaction or waiver of a number of conditions, as set forth in the Merger Agreement, including
the approval by our stockholders, approval by Nasdaq of our application for the initial listing of our common stock to be issued
in connection with the Merger, and other customary closing conditions. There can be no assurance that we and MYMD will be able
to satisfy the closing conditions or that closing conditions beyond our or MYMD’s control will be satisfied or waived. If
the conditions are not satisfied or waived, the Merger may not occur or may not be completed within the expected timeframe, and
we may materially and adversely lose some or all of the potential benefits that we expect to achieve as a result of the Merger
and could result in additional transaction costs or other effects associated with uncertainty about the Merger. In addition, pursuant
to the Merger Agreement, we may extend the originally scheduled End Date (defined in the Merger Agreement as April 15, 2021) to
a later date, but we will have to make additional
loans to MYMD or purchase MYMD common stock for such extensions. Moreover, we
have incurred and expect to continue to incur significant expenses related to the Merger, such as legal and accounting fees, some
of which must be paid even if the Merger is not completed.


 


We
and MYMD can agree at any time to terminate the Merger Agreement, even if our stockholders and/or MYMD’s securityholders
have already adopted the Merger Agreement and thereby approved the Merger and the other transactions contemplated by the Merger
Agreement. We and MYMD can also terminate the Merger Agreement under other specified circumstances.


 






 


In
addition, if the Merger Agreement is terminated and our board of directors determines to seek another business combination, we
may not be able to find a third party willing to provide equivalent or more attractive consideration than the consideration to
be provided in the Merger. In such circumstances, our board of directors may elect to, among other things, divest all or a portion
of our business, or take the steps necessary to liquidate all of our business and assets, and in either such case, the consideration
that we receive may be less attractive than the consideration to be received by us pursuant to the Merger Agreement.


 


The
issuance of shares of our common stock to MYMD stockholders in the Merger will substantially dilute the voting power of our current
stockholders. Having a minority share position will reduce the influence that current stockholders have on our management.


 


Pursuant
to the Merger Agreement, upon the effectiveness of the Merger, (i) (“ MYMD stockholders”) will be entitled to receive
(x) the number of shares of Akers common stock equal to Exchange Ratio per share of MYMD common stock they hold, prior to giving
effect to the proposed reverse stock split discussed below, (y) an amount in cash, on a pro rata basis, equal to the Additional
Consideration, such payment to occur not later than 30 days after the last day of the Option Exercise Period, up to the maximum
amount of cash consideration that may be received by MYMD stockholders without affecting the intended tax consequences of the
merger, and (z) potential Milestone Shares payable upon achievement of certain market capitalization milestone events during the
Milestone Period; and (ii) each outstanding option to purchase MYMD common stock granted under the MyMD Incentive Plan that has
not previously been exercised prior to the closing of the Merger, whether or not vested, will be assumed by Akers subject to certain
terms contained in the Merger Agreement, and become an option to purchase a number of shares of Akers common stock equal to the
number of shares of MYMD common stock underlying such option multiplied by the Exchange Ratio, which options to purchase MYMD
common stock shall be amended to expire on the second-year anniversary of the closing of the Merger, and the exercise price for
each share of Akers common stock underlying an assumed option to purchase MYMD common stock will be equal to the exercise price
per share of the option to purchase MYMD common stock in effect immediately prior to the completion of the Merger divided by the
Exchange Ratio. Assuming the exercise in full of the outstanding Pre-Funded Warrants issued in connection with the Private Placement
and including 9,979,664 shares of combined company common stock underlying options to purchase shares of MYMD common stock to
be assumed at the closing of the Merger, (i) MYMD stockholders and optionholders will own approximately 80% of the equity of the
combined company; and (ii) our current stockholders, holders of certain outstanding of our options and warrants (excluding shares
issuable upon exercise of options and warrants having an exercise price in excess of $1.72, prior to giving effect to any such
stock splits, combinations, reorganizations and the like with respect to the Akers common stock between the announcement of the
Merger and the closing of the Merger) and holders of our outstanding RSUs immediately prior to the Merger will own approximately
20% of the equity of the combined company. Accordingly, the issuance of the shares of Akers common stock to MYMD stockholders
in the Merger will significantly reduce the ownership stake and relative voting power of each share of Akers common stock held
by current Akers stockholders. Consequently, following the Merger, the ability of our current stockholders to influence the management
of the combined company will be substantially reduced.


 


Moreover,
under the terms of the Merger Agreement, we agreed to pay Milestone Payments, payable in shares of Akers common stock to MYMD
stockholders upon the achievement of certain market capitalization milestone events during the Milestone Period, up to the number
of shares of Akers common stock issuable to the MYMD stockholders upon the closing of the Merger. In the event that such milestone
events are achieved and Milestone Payments are made, our current stockholders will experience further reduction in relative voting
power.


 


The
issuance, or expected issuance, of our common stock in connection with the Merger could decrease the market price of our common
stock.


 


In
connection with the Merger and as part of the merger consideration, we expect to issue shares of our common stock to MYMD stockholders.
The anticipated issuance of our common stock in the Merger may result in fluctuations in the market price of our common stock,
including a stock price decrease. In addition, issuance of the milestone shares, if any applicable milestone is achieved, and
the perception in the market that the holders of a large number of shares of our common stock may intend to sell shares could
reduce the market price of our common stock.


 






 


The
intended benefits of the Merger may not be realized.


 


The
Merger poses risks for our ongoing operations, including, among others:


 






 


that
senior management’s attention may be diverted from the management of our current operations and development of the COVID-19
Vaccine Candidate;

 


costs
and expenses associated with any undisclosed or potential liabilities; and

 


unforeseen
difficulties may arise in integrating MYMD’s and Akers’ business in the combined company.


 


As
a result of the foregoing, the combined company may be unable to realize the full strategic and financial benefits currently anticipated
from the Merger, and we cannot assure you that the Merger will be accretive to us in the near term or at all. Furthermore, if
we fail to realize the intended benefits of the Merger, the market price of our common stock could decline to the extent that
the market price reflects those benefits. Our stockholders will have experienced substantial dilution of their ownership interests
in the Company without receiving any commensurate benefit, or only receiving part of the commensurate benefit to the extent the
combined company is able to realize only part of the strategic and financial benefits currently anticipated from the Merger.


 


Because
the lack of a public market for MYMD common stock makes it difficult to evaluate the fairness of the Merger, MYMD stockholders
may receive consideration in the Merger that is greater than or less than the fair market value of MYMD common stock.


 


The
outstanding common stock of MYMD is privately held and is not traded in any public market. The lack of a public market makes it
extremely difficult to determine the fair market value of MYMD shares. Since the percentages of Akers common stock to be issued
to MYMD stockholders was determined based on negotiations between the parties, it is possible that the value of Akers common stock
to be issued in connection with the Merger will be greater than the fair market value of MYMD shares. Alternatively, it is possible
that the value of the shares of Akers common stock to be issued in connection with the Merger will be less than the fair market
value of MYMD shares.


 


Our
directors and officers may have interests in the Merger that are different from, or in addition to, those of our stockholders
generally that may influence them to support or approve the Merger.


 


Our
officers and directors may have interests in the Merger that are different from, or are in addition to, those of our stockholders
generally. Effective upon the closing of the Merger, Christopher Schreiber, current President and Chief Executive Officer of Akers,
is expected to serve as an executive officer of the Supera line of business. It is expected that four of the current directors
of Akers, Messrs. Schreiber, Silverman, White and Schroeder, are to be appointed as directors of the combined company after the
completion of the Merger and will receive cash and equity compensation in consideration for such service. The outstanding unvested
RSUs held by our current executive officers and directors will vest in connection with the Merger. In addition, our directors
and executive officers also have certain rights to indemnification or to directors’ and officers’ liability insurance
that will survive the completion of the Merger. These interests may have influenced our directors and executive officers to support
or recommend the proposals that will be presented to our stockholders.


 


If
the Merger is completed, MYMD executive officers and MYMD appointees to the combined company’s board of directors will have
the ability to significantly influence the combined company’s management and business affairs, as well as matters submitted
to the combined company’s board of directors or stockholders for approval, especially if they decide to act together with
the current MYMD stockholders.


 


Upon
completion of the merger, the former MYMD stockholders will own approximately 80% of the combined company on a partially diluted
basis, excluding the effect of warrants issued in the Private Placement. If the Merger is completed, the combined company is expected
to be led by MYMD executive officers. Furthermore, the combined company’s anticipated board of directors will consist of
seven members, three of which will be appointed by MYMD pursuant to the terms of the Merger Agreement. As a result, such persons,
if they choose to act together, will have the ability to significantly influence the combined company’s management and business
affairs, as well as matters submitted to the combined company’s board of directors or stockholders for approval.


 






 


The
announcement and pendency of the Merger could have an adverse effect on our business, financial condition, results of operations
or business prospects.


 


The
announcement and pendency of the Merger could disrupt Akers’ businesses in the following ways, among others:


 







 


Our
current and prospective employees could experience uncertainty about their future roles within the combined company, and this
uncertainty might adversely affect our ability to retain, recruit and motivate key personnel;

 


the
attention of our management may be directed towards the completion of the Merger and other transaction-related considerations
and may be diverted from the day-to-day business operations of the Company, and matters related to the Merger may require
commitments of time and resources that could otherwise have been devoted to other opportunities that might have been beneficial
to Akers;

 


customers,
prospective customers, suppliers, collaborators and other third parties with business relationships with Akers may decide
not to renew or may decide to seek to terminate, change or renegotiate their relationships with Akers as a result of the Merger,
whether pursuant to the terms of their existing agreements with Akers; and

 


the
market price of Akers’ common stock may decline to the extent that the current market price reflects a market assumption
that the proposed Merger will be completed.


 


Should
they occur, any of these matters could adversely affect our businesses of, or harm our financial condition, results of operations
or business prospects.


 


During
the pendency of the Merger, we may not be able to enter into a business combination with another party and will be subject to
contractual limitations on certain actions because of restrictions in the Merger Agreement.


 


Covenants
in the Merger Agreement impede our ability to make dispositions or acquisitions or complete other transactions that are not in
the ordinary course of business pending completion of the Merger, other than the Supera Purchase, potential spin-off of all or
a portion of our assets prior to the consummation of the Merger, and certain permitted financings as set forth in the Merger Agreement.
As a result, if the Merger is not completed, we may be at a disadvantage to our competitors. In addition, while the Merger Agreement
is in effect and subject to limited exceptions, we are prohibited from soliciting, initiating, encouraging or taking actions designed
to facilitate any inquiries or the making of any proposal or offer that could lead to entering into certain extraordinary transactions
with any third party, such as a sale of assets, an acquisition, a tender offer, a merger or other business combination outside
the ordinary course of business. These restrictions may prevent us from pursuing otherwise attractive business opportunities or
other capital structure alternatives and making other changes to our business or executing certain of our business strategies
prior to the completion of the Merger, which could be favorable to our stockholders.


 


Certain
provisions of the Merger Agreement may discourage third parties from submitting competing proposals, including proposals that
may be superior to the arrangements contemplated by the Merger Agreement.


 


The
terms of the Merger Agreement prohibit us from soliciting competing proposals or cooperating with persons making unsolicited takeover
proposals, except in limited circumstances if our board of directors determines in good faith, after consultation with its independent
financial advisor and outside counsel, that an unsolicited competing proposal constitutes, or would reasonably be expected to
result in, a superior competing proposal and that failure to take such action would be reasonably likely to result in a breach
of the fiduciary duties of our board of directors. In the event that our board of directors withdraws or modifies its recommendation
for the Share Issuance Proposal based on such superior competing proposal, MYMD may terminate the Merger Agreement.


 






 


The
rights of MYMD stockholders who become Akers stockholders in the Merger and Akers stockholders following the merger will be governed
by the A&R Charter and the Akers Bylaws.


 


Upon
consummation of the Merger, outstanding shares of MYMD common stock will be converted into the right to receive shares of Akers
common stock. MYMD stockholders who receive shares of Akers common stock in the merger will become Akers stockholders. As a result,
MYMD stockholders who become stockholders in Akers will be governed by Akers’ organizational documents and bylaws, rather
than being governed by MYMD’s organizational documents and bylaws. Pursuant to the Merger Agreement, the Akers Charter will
be amended and restated, subject to Akers stockholders’ approval of the A&R Charter Proposal, immediately prior to the
Effective Time.


 


The
Exchange Ratio is not adjustable based on the market price of our common stock, so the merger consideration at the closing may
have a greater or lesser value than at the time the Merger Agreement was signed.


 


The
Merger Agreement has set the Exchange Ratio formula for the MYMD common stock, and the Exchange Ratio (as defined in the Merger
Agreement) is only adjustable upward or downward to reflect our and MYMD’s equity capitalization as of immediately prior
to the Effective Time. Any changes in the market price of common stock before the completion of the Merger will not affect the
number of shares MYMD securityholders will be entitled to receive pursuant to the Merger Agreement. Therefore, if before the completion
of the Merger, the market price of our common stock declines from the market price on the date of the Merger Agreement, then MYMD
securityholders could receive merger consideration with substantially lower value. Similarly, if before the completion of the
merger, the market price of our common stock increases from the market price on the date of the Merger Agreement, then MYMD securityholders
could receive merger consideration with substantially more value for their shares of MYMD common stock than the parties had negotiated
for in the establishment of the Exchange Ratio. In addition, the Exchange Ratio (as defined in the Merger Agreement) does not
reflect the potential issuance of the Milestone Shares upon the achievement of certain market capitalization milestone events.


 


If
the merger does not qualify as a reorganization under Section 368(a) of the Internal Revenue Code of 1986, as amended, or is otherwise
taxable to United States MYMD stockholders, then such holders may be required to pay United States federal income taxes.


 


For
United States federal income tax purposes, the Merger is intended to constitute a reorganization within the meaning of Section
368(a) of the Code. If the Internal Revenue Service (the “IRS”) or a court determines that the Merger should not be
treated as a reorganization, a holder of MYMD common stock would recognize taxable gain or loss upon the exchange of MYMD common
stock for our common stock pursuant to the Merger Agreement.


 


We
are expected to incur substantial expenses related to the Merger.


 


We
have incurred, and expect to continue to incur, substantial expenses in connection with the Merger, as well as operating as a
public company. We will incur significant fees and expenses relating to legal, accounting, financial advisory and other transaction
fees and costs associated with the merger. Actual transaction costs may substantially exceed our estimates and may have an adverse
effect on the combined company’s financial condition and operating results.


 


Failure
to complete the Merger could negatively affect the value of our common stock and our future business and financial results.


 


If
the Merger is not completed, our ongoing businesses could be adversely affected and we will be subject to a variety of risks associated
with the failure to complete the Merger, including without limitation the following:


 






 


diversion
of management focus and resources from operational matters and other strategic opportunities while working to implement the
Merger;

 


reputational
harm due to the adverse perception of any failure to successfully complete the Merger; and

 


having
to pay certain costs relating to the Merger, such as legal, accounting, financial advisory, filing and printing fees.


 






 


If
the Merger is not completed, these risks could materially affect the market price of our common stock and our business and financial
results (including the cessation of our operations).


 


The
Merger is expected to result in a limitation on the combined company’s ability to utilize its net operating loss carryforward.


 


Under
Section 382 of the Code, use of our net operating loss carryforwards (“NOLs”) will be limited if we experience a cumulative
change in ownership of greater than 50% in a moving three-year period. At December 31, 2020, we had approximately $100,615,000
of operating loss carryforwards for federal and approximately $7,548,000 for New Jersey state tax purposes that may
be applied against future taxable income. We will experience an ownership change as a result of the Merger and therefore our ability
to utilize our NOLs and certain credit carryforwards remaining at the Effective Time will be limited. The limitation will be determined
by the fair market value of our common stock outstanding prior to the ownership change, multiplied by the applicable federal rate.
It is expected that the Merger will impose a limitation on our NOLs. Limitations imposed on our ability to utilize NOLs could
cause United States federal and state income taxes to be paid earlier than would be paid if such limitations were not in effect
and could cause such NOLs to expire unused, in each case reducing or eliminating the benefit of such NOLs.


 


The
opinion received by our board of directors from Gemini Valuation Services (“GVS”) has not been, and is not expected
to be, updated to reflect changes in circumstances that may have occurred since the date of the opinion.


 


At
a board of directors meeting held on November 11, 2020, our financial advisor, GVS, rendered its opinion as to the fairness, from
a financial point of view, of the contribution made and consideration received by the holders of our common stock pursuant to
the Merger Agreement and rendered its oral opinion to our board of directors (which was subsequently confirmed in writing as of
November 11, 2020) that, as of the date of such opinion and subject to the various assumptions made, procedures followed, matters
considered and qualifications and limitations set forth in such opinion, the contribution made and consideration received by the
holders of our common stock pursuant to the Merger Agreement was fair to the holders of our common stock from a financial
point of view. Such opinion was one of many factors considered by our board of directors in approving the Merger. The opinion
does not speak as of the time the Merger will be completed or any date other than the date of such opinion. Subsequent changes
in our or MYMD’s operation and prospects, general market and economic conditions and other factors that may be beyond our
control, may significantly alter the value of Akers or MYMD or the prices of the shares of our common stock by the time the Merger
is to be completed. The opinion does not address the fairness of the merger consideration from a financial point of view to us
at the time the Merger is to be completed, or as of any other date other than the date of such opinion, and the Merger Agreement
does not require that the opinion be updated, revised or reaffirmed prior to the closing of the Merger to reflect any changes
in circumstances between the date of the signing of the Merger Agreement and the completion of the Merger as a condition to closing
the Merger.


 


The
Merger may be completed even though material adverse changes may result from the announcement of the Merger, industry-wide changes
or other causes.


 


In
general, either party can refuse to complete the Merger if there is a material adverse effect (as defined in the Merger Agreement)
affecting the other party between November 11, 2020, the date of the Merger Agreement, and the closing of the Merger. However,
some types of changes do not permit either party to refuse to complete the merger, even if such changes would have a material
adverse effect on Akers or MYMD, as the case may be:


 










 


changes
or events affecting the industries or industry sectors in which the parties operate generally;

 


changes
or events generally affecting the U.S. or global economy or capital markets as a whole;

 


with
respect to us, changes in the trading price or trading volume of our common stock;

 


hurricane,
flood, tornado, earthquake or other natural disaster, epidemic, plague, pandemic (including the COVID-19 pandemic) or other
public health event or any other force majeure event;

 


changes
in GAAP or other applicable law or legal requirement;

 


changes
caused by the announcement or pendency of the Merger; or

 


changes
caused by any action taken, or the failure to take any action that is expressly required by the Merger Agreement.


 


If
adverse changes occur but we must still complete the merger, the market price of our common stock may suffer.


 






 


We
may become involved in additional securities litigation or stockholder derivative litigation in connection with the merger,
and this could divert the attention of our management and harm the combined company’s business, and insurance coverage may
not be sufficient to cover all related costs and damages.


 


Securities
litigation or stockholder derivative litigation frequently follows the announcement of certain significant business transactions,
such as the sale of a business division or announcement of a business combination transaction. Between January 22, 2021 and
February 10, 2021, five alleged Akers stockholders filed separate actions in the state and federal courts of New York and New
Jersey against Akers and the members of its board of directors, respectively captioned as follows: (i) Douglas McClain v. Akers
Biosciences, Inc., et al.,
No. 650497/2021 (Sup. Ct., N.Y. Cty.); (ii) Owen Murphy v. Akers Biosciences, Inc., et al.,
No. 650545/2021 (Sup. Ct., N.Y. Cty.); Sue Gee Cheng v. Akers Biosciences, Inc., et al., No. 1:21-cv-01110 (S.D.N.Y.);
Danny Lui v. Akers Biosciences, Inc., et al., No. GLO-C-000006-21 (N.J. Super. Ct., Ch. Div.); and Alan Misenheimer
v. Akers Biosciences, Inc., et al.
, No. 1:21-cv-02310 (D.N.J.) (collectively, the “MYMD Merger Complaints”).
The McClain and Lui actions are styled as putative class actions brought on behalf of the plaintiff and other similarly
situated stockholders, while the Murphy, Cheng, and Misenheimer actions are brought solely on behalf of the individual
stockholders. The MYMD Merger Complaints generally assert that Akers and its board of directors failed to disclose allegedly material
information in the joint proxy and consent solicitation statement/prospectus and seek an order enjoining or unwinding the consummation
of the Merger Agreement and awarding damages. The defendants believe that the claims asserted in the MYMD Merger Complaints are
without merit and intend to appropriately defend themselves against them. Accordingly, we do not expect that these claims will
have a material adverse effect on its financial condition or results of operations. We may become involved in more of
this type of litigation in connection with the Merger, and the combined company may become involved in this type of litigation
in the future. Litigation often is expensive and diverts management’s attention and resources, which could adversely affect
our business and the business of the combined company.


 


If
the Merger is consummated, the business operations, strategies and focus of the combined company will fundamentally change, and
these changes may not result in an improvement in the value of its common stock.


 


Pending
the consummation of the Merger, it is currently anticipated that the combined company would focus its resources on executing MYMD’s
current business plan. In addition, prior to the consummation of the Merger, we may, in our discretion, consummate a spin-off
of all or a part of our legacy assets. In the event we consummate such spin-off, the stockholders of Akers and MYMD will not participate
in the future prospects of such legacy assets.


 


Following
the Merger, it is expected that the combined company’s primary products will be MYMD’s product candidates: MyMD-1,
a clinical-stage immunometabolic regulator and Supera-1R, a pre-clinical stage patented synthetic cannabidiol derivative. Consequently,
if the merger is consummated, an investment in our common stock will primarily represent an investment in the business operations,
strategies and focus of MYMD. MYMD expects to incur losses as it develops its product candidates, and MYMD’s product candidates,
may never get approved by the FDA or even if approved for marketing, may not be profitable. The failure to successfully develop
product candidates will significantly diminish the anticipated benefits of the Merger and have a material adverse effect on the
business of the combined company. There is no assurance that the combined company’s business operations, strategies or focus
will be successful following the Merger, and the Merger could depress the value of the combined company’s common stock.


 


The
reverse stock split may not increase the combined company’s stock price over the long term.


 


If
the Reverse Stock Split Proposal is approved, the combined company anticipates effecting a reverse stock split at a reverse
stock split ratio as mutually agreed to by Akers and MYMD, which range shall be sufficient to cause its stock price to be
at least $5.00 immediately following the Merger. While it is expected that the reduction in the number of outstanding shares of
common stock will proportionally increase the market price of the combined company’s common stock upon effectiveness of
the reverse stock split, it cannot be assured that the reverse stock split will result in any sustained proportionate increase
in the market price of the combined company’s common stock, which is dependent upon many factors, including the business
and financial performance of the combined company, general market conditions, and prospects for future success, which are unrelated
to the number of shares of the combined company’s common stock outstanding. Thus, while the stock price of the combined
company might meet the initial listing requirements for Nasdaq initially, it cannot be assured that it will continue to do so.


 






 


The
reverse stock split would have the effect of increasing the amount of common stock that the combined company is authorized to
issue without further approval by the combined company’s stockholders.


 


The
proposed A&R Charter for the combined company is anticipated to authorize the combined company to issue 500,000,000 shares
of common stock and does not anticipate reducing this amount in connection with the reverse stock split. Except in certain instances,
as required by law or by the rules of the securities exchange that lists the combined company’s common stock, these additional
shares may be issued by the combined company without further vote of the combined company’s stockholders. If the combined
company’s board of directors chooses to issue additional shares of the combined company’s common stock, such issuance
could have a dilutive effect on the equity, earnings and voting interests of the combined company’s stockholders.


 


The
reverse stock split may decrease the liquidity of our common stock.


 


Although
our board of directors believes that the anticipated increase in the market price of our common stock could encourage interest
in our common stock and possibly promote greater liquidity for our stockholders, such liquidity could also be adversely affected
by the reduced number of shares outstanding after the reverse stock split. The reduction in the number of outstanding shares may
lead to reduced trading and a smaller number of market makers for our common stock.


 


The
reverse stock split may lead to a decrease in overall market capitalization of the combined company.


 


Should
the market price of our common stock decline after the reverse stock split, the percentage decline may be greater, due to the
smaller number of shares outstanding, than it would have been prior to the reverse stock split. A reverse stock split is often
viewed negatively by the market and, consequently, can lead to a decrease in the overall market capitalization of the combined
company. If the per share market price does not increase in proportion to the reverse stock split ratio, then the value of the
combined company, as measured by its stock capitalization, will be reduced. In some cases, the per-share stock price of companies
that have effected reverse stock splits subsequently declined back to pre-reverse split levels and, accordingly, it cannot be
assured that the total market value of our common stock will remain the same after the reverse stock split is effected, or that
the reverse stock split will not have an adverse effect on our stock price due to the reduced number of shares outstanding after
the reverse stock split.


 


Risks
Related to Our Business Prior to Consummation of the Merger


 


We
have a history of operating losses and we cannot guarantee that we can ever achieve sustained profitability.


 


We
have recorded a net loss attributable to common stockholders in most reporting periods since our inception. We had a net loss
of $17,580,609 during the year ended December 31, 2020. Our accumulated deficit at December 31, 2020 was $137,163,739. On account
of the unfavorable factors existing within our rapid, point-of-care screening and testing products business, we ceased the production
and sale of our screening testing products. We are focusing on the development and manufacturing of the COVID-19 Vaccine Candidate,
or combination product candidate in partnership with Premas and expect to incur additional operating losses for the foreseeable
future. As part of our efforts to increase shareholder value, on November 11, 2020, Akers entered into the Merger Agreement with
MYMD, pursuant to which Merger Sub will merge with and into MYMD, with MYMD becoming our wholly owned subsidiary. For risks related
to the merger, please see risk factors set forth under the heading “— Risks Related to the Proposed Merger”
herein. However, there can be no assurance of success in reducing our loss, becoming profitable, or having sufficient cash to
develop a COVID-19 Vaccine Candidate or to complete the consummation of the Merger.


 






 


We
may fail to realize the anticipated benefits of our acquisition of Cystron and those benefits may take longer to realize than
expected.


 


On
March 23, 2020, we entered into the MIPA with the Cystron Sellers, pursuant to which we acquired the Cystron Membership Interests.
Cystron is a party to a License and Development Agreement (the “Initial License Agreement”) with Premas. As a condition
to our entry into the MIPA, Cystron amended and restated the Initial License Agreement on March 19, 2020 (as amended and restated,
the “License Agreement”). Pursuant to the License Agreement, Premas granted Cystron, amongst other things, an exclusive
license with respect to Premas’ vaccine platform for the development of the COVID-19 Vaccine Candidate. Our ability to realize
the anticipated benefits of the acquisition will depend, to a large extent, on our ability to produce an effective vaccine against
COVID-19. The development of the COVID-19 Vaccine Candidate is in very early stages and there is no assurance that we will be
able to produce an effective vaccine. Moreover, we have the right to terminate the License Agreement on a country-by-country basis
for any reason or for no reason at any time upon sixty (60) days’ prior written notice to Premas, and may decide to cease
development of the COVID-19 Vaccine Candidate and terminate the License Agreement. The failure to produce the COVID-19 Vaccine
Candidate or termination of the License Agreement could adversely affect our business, financial condition and results of operations.
In addition, we have incurred and expect to incur significant expenses related to the acquisition. These expenses include, but
are not limited to, the Common Stock Consideration (as defined in the MIPA), a cash consideration of $1.0 million, related contingent
fees, legal fees and other related fees and expenses. Many of these expenses have been paid or will be payable by us regardless
of our ability to successfully develop the COVID-19 Vaccine Candidate, and we will not be able to recover these expenses in the
event that we fail to develop the COVID-19 Vaccine Candidate.


 


Our
pursuit of the COVID-19 Vaccine Candidate is at an early stage. We have not previously tested our rapid response capability and
may be unable to produce a vaccine that successfully treats the virus in a timely manner, if at all.


 


In
response to the COVID-19 pandemic, we are pursuing the rapid development of the COVID-19 Vaccine Candidate. Our development of
the COVID-19 Vaccine Candidate is in early stages, and we may be unable to produce the COVID-19 Vaccine Candidate. Additionally,
our ability to develop an effective COVID-19 Vaccine Candidate depends on the success of its rapid response capability, which
we have not previously tested and which will need to be funded by third parties in order to enable us to have sufficient capacity
to respond to a global health challenge. If the COVID-19 pandemic is effectively contained or the risk of COVID-19 infection is
diminished or eliminated before we can successfully develop and manufacture a COVID-19 Vaccine Candidate, including availabilities
of effective vaccines, we may be unable to successfully generate revenue from the manufacturing of the COVID-19 Vaccine Candidate.
We are also committing financial resources and personnel to the development of the COVID-19 Vaccine Candidate which may divert
resources from other transactions, despite uncertainties surrounding the longevity and extent of COVID-19 as a global health concern.
Our business could be negatively impacted by our allocation of significant resources to a global health threat that is unpredictable
and could rapidly dissipate or against which the COVID-19 Vaccine Candidate, if developed, may not be partially or fully effective.


 


Our
acquisition of Cystron could result in additional costs, integration or operating difficulties, dilution and other adverse consequences.


 


In
connection with the acquisition of the Cystron and in pursuit of developing the COVID-19 Vaccine Candidate, we may:


 






 


issue
equity securities that may substantially dilute our stockholders’ percentage of ownership;

 


be
obligated to make milestone, royalty or other contingent or non-contingent payments; and

 


incur
debt or non-recurring and other charges, or assume liabilities.


 


In
addition, the process of integrating Cystron’s business may create operating difficulties and expenditures and pose numerous
additional risks to our operations, including:


 






 


failure
to develop, manufacture or supply the COVID-19 Vaccine Candidate economically or successfully commercialize or achieve market
acceptance of the COVID-19 Vaccine Candidate;

 


exposure
to liabilities of Cystron, including known or unknown risks relating to the validity or enforceability of exclusivity rights
and generic competition;

 


adverse
effects on our operating results or financial condition, including due to expenditures or acquisition-related costs, costs
of commercialization or amortization or impairment costs for acquired goodwill and other intangible assets;


 






 






 


impairment
of relationships with key suppliers and manufacturers due to changes in management and ownership and difficulty in maintaining
existing agreements, licenses and other arrangements or rights on substantially similar terms as existed prior to the acquisition;

 


regulatory
changes and market dynamics after the acquisition; and

 


potential
loss of key employees, particularly those of the acquired entity.


 


If
any of the above events (or more) occur, or if we cannot effectively manage or respond to such events following the acquisition,
they may have material adverse effect on our business, results of operations and financial condition.


 


Cystron
is dependent on technologies that it has licensed, and Cystron may need to license in the future, and if Cystron fails to obtain
licenses it needs, or fails to comply with its payment obligations in the agreements under which Cystron in-licenses intellectual
property and other rights from third parties, Cystron could lose its ability to develop a COVID-19 Vaccine Candidate.


 


Cystron
currently is dependent on a license from Premas for its key technologies. Any failure to make the payments required by the License
Agreement may permit Premas to terminate the license. If Cystron were to lose or otherwise be unable to maintain the license for
any reason, it would halt Cystron’s ability to develop a COVID-19 Vaccine Candidate. The foregoing could result in a material
adverse effect on Akers’ business or results of operations.


 


In
addition, Cystron does not own the patents or patent applications that it licenses, and as such, Cystron may need to rely upon
Premas to properly prosecute and maintain those patent applications and prevent infringement of those patents. If Premas is unable
to adequately protect the proprietary intellectual property Cystron licenses from legal challenges, or if Cystron is unable to
enforce such licensed intellectual property against infringement or alternative technologies, Akers will not be able to compete
effectively in the drug discovery and development business.


 


We
operate in a highly competitive industry.


 


We
face, and will continue to face, intense competition from large pharmaceutical companies, specialty pharmaceutical and biotechnology
companies as well as academic and research institutions pursuing research and development of technologies, drugs or other therapies
that would compete with our products or product candidates. The pharmaceutical market is highly competitive, subject to rapid
technological change and significantly affected by existing rival drugs and medical procedures, new product introductions and
the market activities of other participants. Our competitors may develop products more rapidly or more effectively than us. If
our competitors are more successful in commercializing their products than us, their success could adversely affect our competitive
position and harm our business prospects and may also lead to the diversion of funding away from us and toward other companies.


 


Specifically,
the competitive landscape of potential COVID-19 vaccines and treatment therapies has been rapidly developing since the beginning
of the COVID-19 pandemic, with several hundreds of companies claiming to be investigating possible candidates and approximately
4,800 studies registered worldwide as investigating COVID-19 (source: clinicaltrials.gov). Given the global footprint
and the widespread media attention on the COVID-19 pandemic, there are efforts by public and private entities to develop a vaccine
against SARS-CoV-2 as soon as possible, including large, multinational pharmaceutical companies such as AstraZeneca, GlaxoSmithKline,
Johnson & Johnson, Moderna, Pfizer, and Sanofi, with vaccine candidates that are currently at more advanced stage of development
than our COVID-19 Vaccine Candidate. In December 2020, the FDA began to issue emergency use authorizations for vaccines developed
by certain of these large, multinational pharmaceutical companies and it is possible that additional vaccines developed by such
large, multinational pharmaceutical companies may receive further approvals and authorizations in the near term. Those other entities
may develop COVID-19 vaccines that are more effective than any vaccine we may develop, may develop a COVID-19 vaccine that becomes
the standard of care, may develop a COVID-19 vaccine at a lower cost or earlier than we are able to jointly develop any COVID-19
vaccine, or may be more successful at commercializing a COVID-19 vaccine. Many of these other organizations are much larger than
we are and have access to larger pools of capital, and as such, are able to fund and carry on larger research and development
initiatives. Such other entities may have greater development capabilities than we do and have substantially greater experience
in undertaking nonclinical and clinical testing of vaccine candidates, obtaining regulatory approvals and manufacturing and marketing
pharmaceutical products. Our competitors may also have greater name recognition and better access to customers. In addition, based
on the competitive landscape, additional COVID-19 vaccines or therapeutics may continue to be approved to be marketed. Should
another party be successful in producing a more efficacious vaccine for COVID-19, such success could reduce the commercial opportunity
for our COVID-19 Vaccine Candidate and could have a material adverse effect on our business, financial condition, results of operations
and future prospects. Moreover, if we experience delayed regulatory approvals or disputed clinical claims, we may not have a commercial
or clinical advantage over competitors’ products that we believe we currently possesses. The success or failure of other
entities, or perceived success or failure, may adversely impact our ability to obtain any future funding for our vaccine development
efforts or for us to ultimately commercialize and market any vaccine candidate, if approved. In addition, we may not be able to
compete effectively if our product candidates do not satisfy government procurement requirements with respect to biodefense products.


 






 


Our
business may be materially adversely affected by the COVID-19 pandemic.


 


In
December 2019, a novel strain of coronavirus, COVID-19, was reported to have surfaced in Wuhan, China and has reached multiple
other countries, resulting in government-imposed quarantines, travel restrictions and other public health safety measures, including
in the United States and India. On March 12, 2020, the WHO COVID-19 to be a global pandemic. The various precautionary measures
taken by many governmental authorities around the world in order to limit the spread of COVID-19 have had and may continue to
have an adverse effect on the global markets and global economy. Such government-imposed precautionary measures may have been
relaxed in certain countries or states, but there is no assurance that more strict measures will not be put in place again due
to a resurgence in COVID-19 cases.


 


The
ultimate impact of the global COVID-19 pandemic or a similar health epidemic is highly uncertain and subject to change. We do
not yet know the full extent of potential delays or impacts on our business, our vaccine development efforts, healthcare systems
or the global economy as a whole. However, the effects are likely to have a material impact on our operations, liquidity and capital
resources, and we will continue to monitor the COVID-19 situation closely.


 


In
response to public health directives and orders, we implemented and have continued to maintain work-from-home policies for many
of our employees and the temporary modification of our operations to comply with applicable social distancing recommendations.
The effects of the orders and our related adjustments in our business are likely to negatively impact productivity, disrupt our
business and delay our timelines, the magnitude of which will depend, in part, on the length and severity of the restrictions
and other limitations on our ability to conduct our business in the ordinary course. Similar health directives and orders are
affecting third parties with whom we do business, including Premas, whose operations are located in India. Further, restrictions
on our ability to travel, stay-at-home orders and other similar restrictions on our business have limited, and may continue to
limit, our ability to support our operations.


 


Severe
and/or long-term disruptions in our operations will negatively impact our business, operating results and financial condition
in other ways as well. Specifically, we anticipate that the stress of COVID-19 on healthcare systems generally around the globe
will negatively impact regulatory authorities and the third parties that we and Premas may engage in connection with the development
and testing of our COVID-19 Vaccine Candidate.


 


The
anticipated economic consequences of the COVID-19 pandemic have adversely impacted financial markets, resulting in high share
price volatility, reduced market liquidity, and substantial declines in the market prices of the shares of most publicly traded
companies, including Akers. Volatile or declining markets for equities could adversely affect our ability to raise capital when
needed through the sale of shares of common stock or other equity securities. Should these market conditions persist when we need
to raise capital, and if we are able to sell shares of our common stock under then prevailing market conditions, we might have
to accept lower prices for our shares and issue a larger number of shares than might have been the case under better market conditions,
resulting in significant dilution of the interests of our shareholders.


 






 


Risks
Related to Our Product Development


 


With
regard to our COVID-19 Vaccine Candidate, we must conduct pre-clinical testing, prepare and submit an IND to the FDA, and conduct
all phases of clinical studies (which may include postmarket or “Phase 4” studies), which will likely take several
years and substantial expenses to complete, before we can submit an application for marketing approval to the FDA, and there is
no guarantee that we will complete such clinical development in a timely manner or at all or that our BLA will be approved, if
submitted.


 


We
expect that a substantial portion of our efforts and expenditures over the next few years will be devoted to our COVID-19 Vaccine
Candidate. Accordingly, our business currently depends heavily on the successful development, FDA approval, and commercialization
of such candidate, which may never receive FDA approval or be successfully commercialized even if FDA approval is received. The
research, testing, manufacturing, labeling, approval, sale, marketing, and distribution of the COVID-19 Vaccine Candidate are,
and will remain, subject to extensive regulation by the FDA and other regulatory authorities in the United States and other countries,
as applicable. We are not permitted to market our tablet vaccines in the United States until we receive FDA approval of our applicable
BLA. To date, we have not-yet begun any pre-clinical studies for the COVID-19 Vaccine Candidate, nor have we prepared or submitted
an IND. Accordingly, we have not submitted a BLA to the FDA or comparable applications to other regulatory authorities and do
not expect to be in a position to do so for the foreseeable future, as there are numerous developmental steps that must be completed
before we can prepare and submit a BLA.


 


In
the United States, the FDA regulates pharmaceutical and biological products (including vaccines and vaccine candidates, such as
the COVID-19 Vaccine Candidate currently in early stages of development) under the FD&C Act and the PHSA, as well as their
respective implementing regulations. Such products and product candidates are also subject to other federal, state, and local
statutes and regulations. The process of obtaining regulatory approvals and the subsequent compliance with appropriate federal,
state, local, and foreign statutes and regulations requires the expenditure of substantial time and financial resources. The process
required by the FDA before a drug or biological product may be marketed in the United States generally involves the following:


 










 


completion
of pre-clinical laboratory tests and animal studies in accordance with FDA’s GLPs and applicable requirements for the
humane use of laboratory animals or other applicable regulations;

 


submission
to the FDA of an IND, which must become effective before human clinical trials in the United States may begin;

 


performance
of adequate and well-controlled human clinical trials in accordance with FDA’s IND regulations, GCPs, and any additional
requirements for the protection of human research subjects and their health information, to establish the safety and efficacy
of the proposed biological product for its intended use;

 


submission
to the FDA of a BLA for marketing approval that meets applicable requirements to ensure the continued safety, purity, and
potency of the product that is the subject of the BLA based on results of pre-clinical testing and clinical trials;

 


satisfactory
completion of an FDA inspection of the manufacturing facility or facilities where the biological product is produced, to assess
compliance with current cGMPs and assure that the facilities, methods and controls are adequate to preserve the biological
product’s identity, strength, quality and purity;

 


potential
FDA audit of the nonclinical study and clinical trial sites that generated the data in support of the BLA; and

 


FDA
review and approval, or denial, of the BLA.


 






 


Notwithstanding
the submission of relevant data and information, the FDA may ultimately decide that the BLA does not satisfy its regulatory criteria
for approval and deny approval. Data obtained from clinical trials is not always conclusive and the FDA may interpret data differently
than we interpret the same data. The COVID-19 Vaccine Candidate is in the earliest stages of clinical development and, therefore,
a long way from BLA submission. We cannot predict with any certainty if or when we might submit a BLA for regulatory approval
for the COVID-19 Vaccine Candidate or whether any such BLA will be approved by the FDA. Human clinical trials are very expensive
and difficult to design and implement, in part because they are subject to rigorous regulatory requirements. For example, the
FDA may not agree with our proposed endpoints for any clinical trial we propose, which may delay the commencement of our clinical
trials. The clinical trial process is also lengthy and requires substantial time and effort. We estimate that the clinical trials
we need to conduct to be in a position to submit a BLA for the COVID-19 Vaccine Candidate will take several years to complete.
Furthermore, failure can occur at any stage of the trials, and we could encounter problems that cause us to abandon or repeat
clinical trials. Also, the results of early pre-clinical and clinical testing of the COVID-19 Vaccine Candidate may not be predictive
of the results of subsequent clinical trials. A number of companies in the biopharmaceutical industry have suffered significant
setbacks in advanced clinical trials due to lack of efficacy or adverse safety profiles, notwithstanding promising results in
earlier studies. Moreover, pre-clinical and clinical data are often susceptible to multiple interpretations and analyses. Many
companies that have believed their vaccine candidates performed satisfactorily in pre-clinical studies and clinical trials have,
nonetheless, failed to obtain marketing approval of their products. Success in pre-clinical testing and early clinical trials
does not ensure that later clinical trials, which involve many more subjects, will be successful, and the results of later clinical
trials may not replicate the results of prior clinical trials and pre-clinical testing. Any failure or substantial delay in our
vaccine development plans may have a material adverse effect on our business.


 


We
may opt to conduct future clinical studies for the COVID-19 Vaccine Candidate outside the United States, which could heighten
the risk of delay and/or failure, as the FDA may not accept data from such studies in support of any BLA we may submit after completing
the applicable developmental and regulatory prerequisites, if ever.


 


We
are still in the earliest stages of development with respect to the COVID-19 Vaccine Candidate and may ultimately decide to conduct
pre-clinical and/or clinical studies in one or more countries outside the United States. Although the FDA may accept data from
clinical trials conducted outside the United States that are not conducted under an IND, the FDA’s acceptance of such data
is subject to certain conditions. For example, the clinical trial must be well designed and conducted and performed by qualified
investigators in accordance with ethical principles and all applicable FDA regulations. The trial population must also adequately
represent the intended United States population, and the data must be applicable to the United States population and United States
medical practice in ways that the FDA deems clinically meaningful. In general, the patient population for any clinical trials
conducted outside of the United States must be representative of the population for whom we intend to market the COVID-19 Vaccine
Candidate in the United States, if approved. In addition, while these clinical trials are subject to the applicable local laws,
FDA acceptance of the data will be dependent upon its ability to verify the data and its determination that the trials also complied
with all applicable United States laws and regulations. We cannot guarantee that the FDA will accept data from trials we conduct
outside of the United States, if any. If the FDA does not accept the data from such clinical trials, it would likely result in
the need for additional trials and the completion of additional regulatory steps, which would be costly and time-consuming and
could delay or permanently halt our development of the COVID-19 Vaccine Candidate.


 


If
we are successful in producing the COVID-19 Vaccine Candidate, we may need to devote significant resources to our scale-up and
development including for use by the United States government.


 


In
the event that the pre-clinical and clinical trials for the COVID-19 Vaccine Candidate are perceived to be successful, we may
need to work toward the large scale technical development, manufacturing scale-up and larger scale deployment of this potential
vaccine through a variety of United States government mechanisms such as an Expanded Access Program or an Emergency Use Authorization
program. In this case, we may need to divert significant resources to this program, which would require diversion of resources
from our other businesses. In addition, since the path to licensure of any vaccine against COVID-19 is unclear, if use of the
vaccine is mandated by the United States government, we may have a widely used vaccine in circulation in the United States or
another country prior to our full validation of the overall long term safety and efficacy profile of its vaccine platform and
technology. Unexpected safety issues in these circumstances could lead to significant reputational damage for the Company going
forward and other issues, including delays in our other programs, the need for re-design of our clinical trials and the need for
significant additional financial resources.


 






 


We
may be unable to advance the COVID-19 Vaccine Candidate successfully through the pre-clinical and clinical development process.


 


Our
ability to develop, obtain regulatory approval for, and ultimately commercialize, the COVID-19 Vaccine Candidate effectively will
depend on many factors, including the following:


 











 


successful
completion of pre-clinical studies and clinical trials;

 


successful
achievement of the objectives of planned pre-clinical studies and clinical trials;

 


receipt
of marketing approvals from the FDA and similar regulatory authorities outside the United States;

 


establishing
efficient and effective commercial manufacturing, supply and distribution arrangements;

 


establishing
sufficient market share and promoting acceptance of the product by patients, the medical community and third-party payors;

 


successfully
executing an effective pricing and reimbursement strategy;

 


maintaining
a continued acceptable safety and adverse event profile following regulatory approval; and

 


qualifying
for, identifying, registering, maintaining, enforcing and defending intellectual property rights and claims.


 


The
COVID-19 Vaccine Candidate will require additional non-clinical and clinical development, regulatory review and approval, substantial
investment, access to sufficient commercial manufacturing capacity and significant marketing efforts before we can be in a position
to generate any revenue from product sales. We are not permitted to market or promote any vaccine before it receives regulatory
approval from the FDA or comparable foreign regulatory authorities, and we may never receive such regulatory approval. If we are
unable to develop or receive marketing approval in a timely manner or at all, we could experience significant delays or an inability
to commercialize the COVID-19 Vaccine Candidate, which would materially and adversely affect our business, financial condition
and results of operations.


 


Government
involvement may limit the commercial success of our COVID-19 Vaccine Candidate.


 


The
COVID-19 pandemic has been classified as a pandemic by public health authorities, and it is possible that one or more government
entities may take actions that directly or indirectly have the effect of abrogating some of our rights or opportunities.


 


Various
government entities, including the United States government, are offering incentives, grants, and contracts to encourage additional
investment by commercial organizations into preventative and therapeutic agents against COVID-19, which may have the effect of
increasing the number of competitors and/or providing advantages to known competitors. Accordingly, there can be no assurance
that we will be able to successfully establish a competitive market share, if any, for our COVID-19 Vaccine Candidate even if
we succeed in developing one.


 


If
we fail to obtain regulatory approval in foreign jurisdictions, then we cannot market our products, including the COVID-19 Vaccine
Candidate, in those jurisdictions.


 


Many
foreign countries in which we market or may market our products have regulatory bodies and restrictions similar to those of the
FDA. International sales are subject to foreign government regulation, the requirements of which vary substantially from country
to country. The time required to obtain approval by a foreign country may be longer or shorter than that required for FDA approval
and the requirements may differ. We may be required to conduct additional testing or to provide additional information, resulting
in additional expenses, to obtain necessary approvals. If we fail to obtain approval in such foreign jurisdictions, we would not
be able to market our products, including the COVID-19 Vaccine Candidate, in such jurisdictions, thereby reducing the potential
revenue from the sale of our products.


 






 


We
are subject to inspection and market surveillance by the FDA to determine compliance with regulatory requirements. If the FDA
finds that we have failed to comply, the agency can institute a wide variety of enforcement actions which may materially affect
our business operations.


 


We
are subject to inspection and market surveillance by the FDA to determine compliance with regulatory requirements. If the FDA
finds that we have failed to comply, the agency can institute a wide variety of enforcement actions, ranging from a public warning
letter to more severe sanctions such as:


 










 


fines,
injunctions and civil penalties;

 


recall,
detention or seizure of our products;

 


the
issuance of public notices or warnings;

 


operating
restrictions, partial suspension or total shutdown of production;

 


refusing
Akers’ requests for a 510(k) clearance of new products;

 


withdrawing
a 510(k) clearance already granted; and

 


criminal
prosecution.


 


Our
failure to comply with applicable requirements could lead to an enforcement action that may have an adverse effect on our financial
condition and results of operations.


 


Even
if we are able to commercialize our prospective or future product candidates, the products may not receive coverage or adequate
reimbursement from third-party payors in the United States or in other countries in which we seek to commercialize such products,
which could harm our business.


 


Our
ability to commercialize any product successfully will depend, in part, on the extent to which coverage and adequate reimbursement
for such products will be available from government health administration authorities, private health insurers, and other organizations.
Government authorities and third-party payors, such as private health insurers and health maintenance organizations, determine
which medications they will cover and establish reimbursement levels. A primary trend in the healthcare industry is cost containment.


 


Government
authorities and third-party payors have attempted to control costs by limiting coverage and the amount of reimbursement for particular
medications. Increasingly, third-party payors are requiring that drug companies provide them with predetermined discounts from
list prices and are challenging the prices charged for medical products. Third-party payors may also seek additional clinical
evidence, beyond the data required to obtain regulatory approval, demonstrating clinical benefits and value in specific patient
populations before covering our products for those patients. We cannot be sure that coverage and adequate reimbursement will be
available for any product that we commercialize and, if reimbursement is available, what the level of reimbursement will be. Coverage
and reimbursement may impact the demand for, or the price of, any product candidate for which we obtain regulatory approval. If
reimbursement is not available or is available only at limited levels, we may not be able to successfully commercialize any product
candidate for which we obtain regulatory approval.


 


 


We
may not have the resources to conduct clinical protocols sufficient to yield data suitable for publication in peer-reviewed journals
and our inability to do so in the future could have an adverse effect on marketing our products effectively.


 


In
order for our products targeted for use by hospital laboratory professionals and healthcare providers to be widely adopted, we
would have to conduct clinical protocols that are designed to yield data suitable for publication in peer-reviewed journals. These
studies are often time-consuming, labor-intensive and expensive to execute. We have not previously had the resources to effectively
implement such clinical programs within our clinical development activities and may not be able to do so in the future. In addition,
if a protocol is initiated, the results of such protocol may ultimately not support the anticipated positioning and benefit proposition
for the product. Either of these scenarios could hinder our ability to market our products, and revenue may decline.


 






 


We
may experience delays in any phase of the pre-clinical or clinical development of a product, including during its research and
development.


 


The
completion of any of these studies may be delayed or halted for numerous reasons, including, but not limited to, the following:


 













 


the
FDA or other regulatory authorities do not approve a clinical study protocol or place a clinical study on hold;

 


patients
do not enroll in a clinical study or results from patients are not received at the expected rate;

 


patients
discontinue participation in a clinical study prior to the scheduled endpoint at a higher than expected rate;

 


patients
experience adverse events from a product we develop;

 


third-party
clinical investigators do not perform the studies in accordance with the anticipated schedule or consistent with the study
protocol and GCPs or other third-party organizations do not perform data collection and analysis in a timely or accurate manner;

 


third-party
clinical investigators engage in activities that, even if not directly associated with our studies, result in their debarment,
loss of licensure, or other legal or regulatory sanctions;

 


regulatory
inspections of manufacturing facilities, which may, among other things, require us to undertake corrective action or suspend
the pre-clinical or clinical studies;

 


changes
in governmental regulations or administrative actions;

 


the
interim results of the pre-clinical or clinical study, if any, are inconclusive or negative; and

 


the
study design, although approved and completed, is inadequate to demonstrate effectiveness and safety.


 


If
the pre-clinical and clinical studies that we are required to conduct to gain regulatory approval are delayed or unsuccessful,
we may not be able to market any product that we develop in the future. Pre-clinical studies and clinical trials are expensive
and difficult to design and implement and any delays or prolongment in our pre-clinical and clinical studies will require additional
capital. There is no assurance that we will be able to acquire additional capital to support our studies. The failure to obtain
additional capital would have a material adverse effect on our business, results of operations and financial condition.


 


We
anticipate that we will rely completely on third parties to manufacture certain pre-clinical and all clinical drug supplies. Our
business could be harmed if those third parties fail to provide us with sufficient quantities of drug product or fail to
do so at acceptable quality levels or prices.


 


We
do not currently have, nor do we plan to acquire, the infrastructure or capability internally to manufacture our pre-clinical
and clinical drug supplies for use in the conduct of our clinical studies, and we lack the resources and the capability to manufacture
any of our product candidates on a clinical or commercial scale. In order to develop products, apply for regulatory approvals
and commercialize our products, we will need to develop, contract for, or otherwise arrange for access to the necessary manufacturing
capabilities. We anticipate that we will rely on CMOs, or contract manufacturing organizations, and other third party contractors,
some of whom may have limited cGMP experience, to manufacture formulations and produce larger scale amounts of drug substance
and the drug product required for any clinical trials that we initiate.


 


The
manufacturing process for any vaccine candidate is subject to the FDA and foreign regulatory authority approval process, and we
will need to contract with manufacturers who can meet all applicable FDA and foreign regulatory authority requirements on an ongoing
basis. In addition, if we receive the necessary regulatory approval for any product candidate, we also expect to rely on third
parties to produce materials required for commercial supply. We may experience difficulty in obtaining adequate manufacturing
capacity for our needs. Furthermore, it is our responsibility to ensure that all of our third-party contractors meet cGMP laws,
regulations and guidance. Due to their failure to comply with applicable regulatory requirements, we may face fines and civil
penalties, suspension of production, suspension or delay in product approval, product seizure or recall, or withdrawal of product
approval. These actions could have a material impact on the availability of products. If we are unable to obtain or maintain contract
manufacturing for these product candidates, or to do so on commercially reasonable terms, we may not be able to successfully develop
and commercialize our products.


 






 


To
the extent that we enter into manufacturing arrangements with third parties, we will depend on these third parties to perform
their obligations in a timely manner and consistent with regulatory requirements, including those related to quality control and
quality assurance. The failure of a third-party manufacturer to perform its obligations as expected could adversely affect our
business in a number of ways, including:


 










 


we
may not be able to initiate or continue pre-clinical and clinical trials of products that are under development;

 


we
may need to repeat pivotal clinical trials;

 


we
may be delayed in submitting regulatory applications, or receiving regulatory approvals, for our product candidates;

 


we
may lose the cooperation of its collaborators;

 


our
products could be the subject of inspections by regulatory authorities;

 


we
may be required to cease distribution or recall some or all batches of our products; and

 


ultimately,
we may not be able to meet commercial demands for our products.


 


If
a third-party manufacturer with whom we contract fails to perform its obligations, we may be forced to seek out one or more other
third-party manufacturers to manufacture our pre-clinical and/or clinical trial materials, which could cause delays in the FDA
approval process. Further, should the COVID-19 Vaccine Candidate be approved for marketing by the FDA, a change in a third-party
manufacturer could cause significant delays to meeting the demand of patients. In some cases, the technical skills required to
manufacture our product may be unique to the original manufacturer and we may have difficulty transferring such skills to a back-up
or alternate manufacturer, or we may be unable to transfer such skills at all. In addition, if we are required to change manufacturers
for any reason, we will be required to verify that the new manufacturer maintains facilities and procedures that comply with quality
standards and with all applicable regulations and guidelines. We will also be required to demonstrate that the newly manufactured
material is the same or similar to the previously manufactured material, or we may need to repeat clinical trials with the newly
manufactured material. The delays associated with the verification of a new manufacturer could negatively affect our ability to
develop product candidates in a timely manner or within budget. Furthermore, a manufacturer may possess technology related to
the manufacture of our product candidate that such manufacturer owns independently, which would increase our reliance on such
manufacturer or require us to obtain a license from such manufacturer in order to have another third party manufacture our products.


 


We
intend to rely on third parties to conduct our pre-clinical studies and clinical trials and perform other tasks for us. If these
third parties do not successfully carry out their contractual duties, meet expected deadlines, or comply with regulatory requirements,
we may not be able to obtain regulatory approval for or commercialize our product candidates and our business, financial condition
and results of operations could be substantially harmed.


 


We
plan to rely upon third-party contract research organizations, or CROs, medical institutions, clinical investigators and contract
laboratories to monitor and manage data for our licensed ongoing pre-clinical and clinical programs. We expect to continue to
rely on these parties for execution of our pre-clinical studies and clinical trials, and we control only certain aspects of their
activities. Nevertheless, we maintain responsibility for ensuring that each of our clinical trials and pre-clinical studies is
conducted in accordance with the applicable protocol, legal, regulatory, and scientific standards and our reliance on these third
parties does not relieve us of our regulatory responsibilities. We and our CROs and other vendors are required to comply with
cGMP, current GCP, and current GLPs, which are a collection of laws and regulations enforced by the FDA or comparable foreign
authorities for all of our product candidates in clinical development. Regulatory authorities enforce these regulations through
periodic inspections of manufacturing facilities, pre-clinical study and clinical trial sponsors, principal investigators, preclinical
study and clinical trial sites, and other contractors. If we or any of our CROs or vendors fails to comply with applicable regulations,
the data generated in our pre-clinical studies and clinical trials may be deemed unreliable and the FDA or comparable foreign
authorities may require us to perform additional pre-clinical studies and clinical trials before approving our marketing applications.
We cannot assure that upon inspection by a given regulatory authority, such regulatory authority will determine that any of our
clinical trials comply with GCP regulations. In addition, our clinical trials must be conducted with products manufactured consistently
with cGMP regulations. Failure by us or our third party CROs to comply with these regulations may require us to repeat clinical
trials, which would delay the development and regulatory approval processes.


 






 


If
any of our relationships with these third-party CROs, medical institutions, clinical investigators or contract laboratories terminate,
we may not be able to enter into arrangements with alternative CROs on commercially reasonable terms, or at all. In addition,
our CROs are not our employees, and except for remedies available to us under our agreements with such CROs, we cannot control
whether or not they devote sufficient time and resources to our ongoing pre-clinical and clinical programs. If CROs do not successfully
carry out their contractual duties, or comply with current GCP laws, regulations and guidance, or obligations or meet expected
deadlines, if they need to be replaced or if the quality or accuracy of the data they obtain is compromised due to the failure
to adhere to our protocols, regulatory requirements, or for other reasons, our clinical trials may be extended, delayed or terminated
and we may not be able to obtain regulatory approval for or successfully commercialize our product candidates. CROs may also generate
higher costs than anticipated. As a result, our business, financial condition and results of operations and the commercial prospects
for our product candidates could be materially and adversely affected, our costs could increase, and our ability to generate revenue
could be delayed.


 


Switching
or adding additional CROs, medical institutions, clinical investigators or contract laboratories involves additional cost and
requires management time and focus. In addition, there is a natural transition period when a new CRO commences work replacing
a previous CRO. As a result, delays occur, which can materially impact our ability to meet our desired clinical development timelines.


 



We are opportunistically reviewing
strategic transactions and there can be no assurance that any such strategic transaction we pursue will result in additional
value for our stockholders. As a result, the makeup of our lines of business may change.


 



We
are assessing alternate ways to generate value for shareholders, including reviewing opportunities that may lead to acquisitions,
dispositions, business combinations or other strategic transactions. Strategies we may employ include seeking new or expanding
existing specialty market niches, expanding our presence, acquiring businesses complementary to existing strengths and continually
evaluating the performance and strategic fit of our existing business units. As a result, the makeup of our lines of business
is subject to change. For example, as previously disclosed, in light of the unfavorable factors persistent in our rapid, point-of-care
screening and testing product business and the progress we have made in its partnership with Premas, we conducted a strategic
review of the screening and testing products business. Following such review, in early July 2020, we ceased the production and
sale of our rapid, point-of-care screening and testing products. In connection with the discontinuation of its existing product
line, we decided to close the facility located in Thorofare, New Jersey (the “Thorofare Facility”), which previously
housed our manufacturing, operations and support personnel, and terminated the lease (the “Thorofare Lease”) on
November 30, 2020. Furthermore, on November 11, 2020, we entered into the Merger Agreement with MYMD. For risks related to
the Merger, please see risks set forth under the heading “— Risks Related to the Proposed Merger” herein. However,
there can be no assurance that our pursuit of such strategic alternatives will result in any transaction or other alternatives.


 


To
the extent we engage in other strategic transactions, the process may be time consuming and disruptive to our business operations
and, our business, financial condition and results of operations could be adversely affected. We could incur substantial expenses
associated with evaluating and negotiating potential strategic alternatives. Furthermore, our ability to effectively integrate
any future acquisitions or mergers will depend on, among other things, our ability to integrate businesses, the adequacy of our
implementation plans, the ability of our management to oversee and operate effectively the combined operations and our ability
to achieve desired operational efficiencies. If we are unable to successfully integrate the operations of any businesses that
we may acquire in the future, our business, financial position, results of operations or cash flows could be adversely affected.
There can be no assurance that any potential transaction, if consummated, will provide greater value to our stockholders than
that reflected in the current price of our common stock.


 


If
we are unable to make acquisitions and investments, or successfully integrate them into our business, our business could be harmed.


 


As
part of our business strategy, we may acquire other companies or businesses. However, we may not be able to find suitable acquisition
candidates, and we may not be able to complete acquisitions on favorable terms, if at all. Acquisitions involve numerous risks,
any of which could harm our business and negatively affect our operating results, including:


 





 


difficulties
in integrating the technologies, operations, existing contracts and personnel of an acquired company;

 


difficulties
in supporting and transitioning clients and suppliers, if any, of an acquired company;


 






 











 


diversion
of financial and management resources from existing operations or alternative acquisition opportunities;

 


failure
to realize the anticipated benefits or synergies of a transaction;

 


failure
to identify all of the problems, liabilities or other shortcomings or challenges of an acquired company or technology, including
issues related to intellectual property, regulatory compliance practices, revenue recognition or other accounting practices,
or employee or client issues;

 


risks
of entering new markets in which we have limited or no experience;

 


potential
loss of key employees, clients, vendors and suppliers from either our current business or an acquired company’s business;

 


inability
to generate sufficient revenue to offset acquisition costs;

 


additional
costs or equity dilution associated with funding the acquisition; and

 


possible
write-offs or impairment charges relating to acquired businesses.


 


The
use of our PIFA products could result in serious injuries, product liability claims, regulatory enforcement action, and/or recalls
or market withdrawals, any of which would likely subject us to substantial costs and reputational harm and have a material adverse
effect on our business.


 


In
July 2020, we ceased the production and sale of its rapid, point-of-care screening and testing products. We will continue to provide
support for these testing products that remain in the market through their respective product expiration dates. We believe that
the users of our PIFA products are likely to be particularly sensitive to test defects and errors, as the conditions that the
PIFA products are designed to identify may cause limb- and life-threatening complications if not accurately diagnosed in a timely
manner. As a result, the failure of our tests or services to perform as expected could subject us to legal claims arising from
any defects or errors.


 


The
use of our PIFA products and our other products could lead to product liability (and other similar) claims against us if someone
were to allege that one of our tests failed to perform as it was designed or as claimed in our promotional materials, was performed
pursuant to incorrect or inadequate laboratory procedures, if we delivered incorrect or incomplete test results, or if someone
were to misinterpret test results. In addition, we may be subject to liability for errors in, a misunderstanding of, or inappropriate
reliance upon, the information we provide, or for failure to provide such information, in connection with the results generated
by our products. A product liability or professional liability claim could result in substantial damages and be costly and time-consuming
for us to defend.


 


Our
PIFA products are not 100% accurate and may generate erroneous results that could cause patient harm. For example, PIFA could
provide a so-called “false negative” result upon which a patient or physician may rely to make a conclusion about
how to proceed with the patient’s treatment. If the false negative causes, or exacerbates, a patient injury or condition,
the patient (and/or the patient’s family) may file a lawsuit against us based on product liability.


 


Any
product liability or professional liability claim brought against us, with or without merit, could increase our insurance rates,
cause our insurance coverage to be terminated or prevent us from securing insurance coverage in the future.


 


Further,
under the FDA’s Medical Device Regulations, we are required to report to the FDA any incident in which its product may have
caused or contributed to a death or serious injury or in which our product malfunctioned and, if the malfunction were to recur,
would likely cause or contribute to death or serious injury. Repeated product malfunctions may result in a voluntary or involuntary
product recall, which could divert managerial and financial resources and have an adverse effect on our reputation, financial
condition and operating results.


 


Any
adverse event involving our products could result in future voluntary corrective actions, such as recalls or customer notifications,
or regulatory agency action, which could include inspection, mandatory recall or other enforcement action. Any corrective action,
whether voluntary or involuntary, will require the dedication of our time and capital, distract management from operating our
business and may harm our reputation and financial results.


 






 


If
we market products or interact with health care practitioners in a manner that violates healthcare fraud or abuse laws, we may
be subject to civil or criminal penalties, including exclusion from participation in government healthcare programs.


 


If
we receive payments directly from or bill directly to Medicare, Medicaid or other national or third-party payers for its products,
United States federal and state healthcare laws and regulations pertaining to fraud or abuse will be applicable to our business.
We are subject to healthcare fraud and abuse regulation by the United States federal government and the states in which we conduct
our business.


 


The
laws that may affect our ability to operate include the AKS, which prohibits, among other things, knowingly and willfully offering,
paying, soliciting, or receiving remuneration to induce, or in return for, the purchase, lease or order, or arrangement for the
purchase, lease or order of any healthcare item or service reimbursable under Medicare, Medicaid or other federally financed healthcare
programs. This statute applies to arrangements between pharmaceutical manufacturers and prescribers, purchasers and formulary
managers. Although there are a number of statutory exceptions and regulatory safe harbors protecting certain common activities,
the exceptions and safe harbors are drawn narrowly, and practices that involve remuneration intended to induce prescribing, purchases
or recommendations may be subject to scrutiny if they do not qualify for an exception or safe harbor.


 


Federal
false claims laws prohibit any person from knowingly presenting, or causing to be presented, a false claim for payment to the
federal government, or knowingly making, or causing to be made, a false statement to get a false claim paid. Pharmaceutical companies
have been prosecuted under these laws for a variety of alleged promotional and marketing activities, such as providing free product
to customers with the expectation that the customers would bill federal programs for the product, reporting to pricing services
inflated average wholesale prices that were then used by federal programs to set reimbursement rates, engaging in off-label promotion
that caused claims to be submitted to Medicaid for non-covered off-label uses and submitting inflated best price information to
the Medicaid Drug Rebate Program.


 


HIPAA
also created prohibitions against healthcare fraud and false statements relating to healthcare matters. The healthcare fraud statute
prohibits knowingly and willfully executing a scheme to defraud any healthcare benefit program, including private payers. The
false statements statute immediately noted above prohibits knowingly and willfully falsifying, concealing or covering up a material
fact or making any materially false, fictitious or fraudulent statement in connection with the delivery of or payment for healthcare
benefits, items or services.


 


In
addition, there has been a trend of increased federal and state regulation of payments made to physicians. The ACA, through the
PPSA, imposed new requirements on manufacturers of drugs, devices, biologics and medical supplies for which payment is available
under Medicare, Medicaid or the Children’s Health Insurance Program (with certain exceptions) to report annually to the
Centers for Medicare and Medicaid Services (“CMS”) information related to payments or other “transfers of value”
made to physicians (defined to include doctors, dentists, optometrists, podiatrists and chiropractors) and teaching hospitals,
and applicable manufacturers and group purchasing organizations to report annually to CMS ownership and investment interests held
by physicians (as defined above) and their immediate family members and payments or other “transfers of value” to
such physician owners and their immediate family members. Manufacturers are required to report such data to the government by
the 90th calendar day of each year.


 


The
majority of states also have statutes or regulations similar to these federal laws, which apply to items and services reimbursed
under Medicaid and other state programs, or, in several states, apply regardless of the payer. In addition, some states have laws
that require pharmaceutical companies to adopt comprehensive compliance programs. For example, under California law, pharmaceutical
companies must comply with both the April 2003 Office of Inspector General Compliance Program Guidance for Pharmaceutical Manufacturers
and the PhRMA Code on Interactions with Healthcare Professionals, as amended. Moreover, certain states mandate the tracking and
reporting of gifts, compensation and other remuneration paid by us to physicians and other healthcare providers.


 


Although
compliance programs can mitigate the risk of investigation and prosecution for violations of these laws, the risks cannot be entirely
eliminated. Any action against us for violation of these laws, even if we successfully defend against it, could cause us to incur
significant legal expenses, cause reputational harm and divert our management’s attention from the operation of our business.
Moreover, achieving and sustaining compliance with applicable U.S. federal and state laws may prove costly.


 






 


Our
internal computer systems, or those of its third-party vendors, collaborators, or other contractors may be subject to various
federal and state confidentiality and privacy laws in the United States and abroad and could sustain system failures, security
breaches, or other disruptions, any of which could have a material adverse effect on our business.


 


Numerous
international, national, federal, provincial and state laws, including state privacy laws (such as the California Consumer Privacy
Act), state security breach notification and information security laws, and federal and state consumer protection laws govern
the collection, use, and disclosure of personal information. In addition, most healthcare providers who may, in the future, prescribe
and dispense our products in the United States and research institutions in the United States with whom we may collaborate in
the future are “covered entities” subject to privacy and security requirements under HIPAA. Among other things, HITECH
makes HIPAA’s privacy and security standards directly applicable to business associates, independent contractors, or agents
of covered entities that receive or obtain protected health information in connection with providing a service on behalf of a
covered entity. HITECH also created four new tiers of civil monetary penalties, amended HIPAA to make civil and criminal penalties
directly applicable to business associates, and gave state attorneys general new authority to file civil actions for damages or
injunctions in federal courts to enforce the federal HIPAA laws and seek attorneys’ fees and costs associated with pursuing
federal civil actions. We could be subject to a wide range of penalties and sanctions under HIPAA, including criminal penalties
if we, our affiliates, or our agents knowingly obtain or disclose individually identifiable health information maintained by a
covered entity in a manner that is not authorized or permitted by HIPAA. Failure to comply with applicable HIPAA requirements
or other current and future privacy laws and regulations could result in governmental enforcement actions (including the imposition
of significant penalties), criminal and civil liability, and/or adverse publicity that negatively affects our business.


 


Moreover,
we rely on our internal and third-party provided information technology systems and applications to support our operations and
to maintain and process company information including personal information, confidential business information and proprietary
information. If these information technology systems are subject to cybersecurity attacks, or are otherwise compromised, due to
cyberattacks, human error or malfeasance, system errors or otherwise, it may adversely impact our business, disrupt our operations,
or lead to the loss, theft, destruction, corruption, or compromise of our information or that of our collaborators, study subjects,
or other third-party contractors, as applicable. Such information technology or security events could also lead to legal liability,
regulatory investigations or enforcement actions, loss of business, negative media coverage, and reputational damage. While we
seek to protect our information technology systems from these types of incidents, the healthcare sector continues to see a high
frequency of cyberattacks and increasingly sophisticated threat actors, and our systems and the information maintained within
those systems remain potentially vulnerable to data security incidents.


 


Any
of the above-described cyber or other security-related incidents may trigger notification obligations to affected individuals
and government agencies, legal claims or proceedings, and liability under foreign, federal, provincial and state laws that protect
the privacy and security of personal information. Our proprietary and confidential information may also be accessed. Any one of
these events could cause our business to be materially harmed and our results of operations may be adversely impacted. Finally,
as cyber threats continue to evolve, and privacy and cybersecurity laws and regulations continue to develop, we may need to invest
additional resources to implement new compliance measures, strengthen our information security posture, or respond to cyber threats
and incidents.


 


We
may fail to retain qualified personnel.


 


We
have substantially reduced the number of our employees in order to reduce our costs. Accordingly, retaining our remaining personnel
in the future will be critical to our success. If we fail to retain and motivate these highly skilled personnel, we may be unable
to continue our operating activities, and this could have a material adverse effect or our business, financial condition, results
of operations and future prospects.


 


We
rely on the key executive officers of the management team.


 


We
are dependent on our management team to execute against our business plan. Failure could result in delays in product development,
loss of customers and sales and diversion of management resources, which could adversely affect our operating results.


 






 


Expenses
incurred with respect to monitoring, protecting, and defending our intellectual property rights could adversely affect our business.


 


Competitors
and others may infringe on our intellectual property rights, or may allege that we have infringed on theirs. Monitoring infringement
and misappropriation of intellectual property can be difficult and expensive, and we may not be able to detect infringement or
misappropriation of our proprietary rights.


 


We
may incur substantial costs as a result of litigation or other proceedings relating to patent and other intellectual property
rights and we may be unable to protect our rights to, or use of, our technology.


 


Some
or all of our patent applications may not result in the issue of patents, or the claims of any issued patents may not afford meaningful
protection for our technologies or products. In addition, patents issued to us or our licensors, if any, may be challenged and
subsequently narrowed, invalidated, found unenforceable or circumvented. Patent litigation is widespread in the biotechnology
industry and could harm our business. Litigation might be necessary to protect our patent position. Patentability, invalidity,
freedom-to-operate or other opinions may be required to determine the scope and validity of third-party proprietary rights. If
we choose to go to court to stop a third party from using the inventions protected by our patent, that third party would have
the right to ask the court to rule that such patents are invalid and/or should not be enforced against that third party. These
lawsuits are expensive and we may not have the required resources to pursue such litigation or to protect our patent rights. In
addition, there is a risk that the court will decide that our patents are not valid or that we cannot stop the other party from
using their inventions. There is also the risk that, even if the validity of these patents is upheld, the court will find that
the third party’s activities do not infringe our rights in these patents.


 


Furthermore,
a third party may claim that we are infringing the third party’s patent rights and may go to court to stop us from engaging
in its normal operations and activities, including making or selling our products or product candidates. These lawsuits are costly
and could affect our results of operations and divert the attention of managerial and technical personnel. There is a risk that
a court would decide that we are infringing the third party’s patents and would order us to stop the activities covered
by the patents. In addition, there is a risk that a court will order us to pay the other party’s treble damages or attorneys’
fees for having violated the other party’s patents. The biotechnology industry has produced a proliferation of patents,
and it is not always clear to industry participants, including us, which patents cover various types of products or methods of
use. The coverage of patents is subject to interpretation by the courts, and the interpretation is not always uniform. If we are
sued for patent infringement, we would need to demonstrate that our products or methods of use either do not infringe the claims
of the relevant patent and/or that the third-party patent claims are invalid, and we may not be able to do this. Proving invalidity
in the United Sates is difficult since it requires a showing of clear and convincing evidence to overcome the presumption of validity
enjoyed by issued patents.


 


In
addition, changes in either patent laws or in interpretations of patent laws in the United States and other countries may materially
diminish the value of our intellectual property or narrow the scope of our patent protection.


 


We
may be subject to claims that our employees have wrongfully used or disclosed alleged trade secrets of their former employers.


 


As
is common in the biotechnology and pharmaceutical industry, we employ individuals who were previously employed at other biotechnology
or pharmaceutical companies, including our competitors or potential competitors. Although we have no knowledge of any claims against
us, we may be subject to claims that these employees or we have inadvertently or otherwise used or disclosed trade secrets or
other proprietary information of their former employers. Litigation may be necessary to defend against these claims. Even if we
are successful in defending against these claims, litigation could result in substantial costs and be a distraction to management.
To date, none of our employees have been subject to such claims.


 






 


We
may be at risk that our former employees may wrongfully use or disclose our trade secrets.


 


In
addition to patent protection, we rely heavily upon know-how and trade secret protection, as well as non-disclosure agreements
and invention assignment agreements with our employees, consultants, and third parties, to protect our confidential and proprietary
information, especially where we do not believe patent protection is appropriate or obtainable. In addition to contractual measures,
we try to protect the confidential nature of our proprietary information using physical and technological security measures. Such
measures may not, for example, in the case of misappropriation of a trade secret by an employee, former employee, consultant,
former consultant or third party with authorized access, provide adequate protection for our proprietary information. Our security
measures may not prevent an employee or consultant from misappropriating our trade secrets and providing them to a competitor,
and recourse we take against such misconduct may not provide an adequate remedy to protect our interests fully. Enforcing a claim
that a party illegally disclosed or misappropriated a trade secret can be difficult, expensive, and time-consuming, and the outcome
is unpredictable. In addition, trade secrets may be independently developed by others in a manner that could prevent legal recourse
by us. If any of our confidential or proprietary information, such as our trade secrets, were to be disclosed or misappropriated,
or if any such information was independently developed by a competitor, our competitive position could be harmed.


 


We
are subject to various internal control reporting requirements under the Sarbanes-Oxley Act. We can provide no assurance that
we will at all times in the future be able to report that our internal controls over financial reporting are effective.


 


As
a public company, we are required to comply with Section 404. In any given year, we cannot be certain as to the time of completion
of our internal control evaluation, testing and remediation actions or of their impact on our operations. Upon completion of this
process, we may identify control deficiencies of varying degrees of severity under applicable SEC and Public Company Accounting
Oversight Board (United States) rules and regulations. Our management, including our chief executive officer and chief financial
officer, does not expect that our internal controls and disclosure controls will prevent all errors and all fraud. A control system,
no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control
system are met. In addition, the design of a control system must reflect the fact that there are resource constraints and the
benefit of controls must be relative to their costs. Because of the inherent limitations in all control systems, no evaluation
of controls can provide absolute assurance that all control issues and instances of fraud, if any, in us have been detected. These
inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because
of simple errors or mistakes. Further, controls can be circumvented by individual acts of some persons, by collusion of two or
more persons, or by management override of the controls. The design of any system of controls is also based in part upon certain
assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving our
stated goals under all potential future conditions. Over time, a control may be inadequate because of changes in conditions, such
as growth of the company or increased transaction volume, or the degree of compliance with the policies or procedures may deteriorate.
Because of inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.


 


In
addition, as a public company, we are required to report, among other things, control deficiencies that constitute material weaknesses
or changes in internal controls that, or that are reasonably likely to, materially affect internal controls over financial reporting.
A “material weakness” is a deficiency, or a combination of deficiencies, in internal control over financial reporting,
such that there is a reasonable possibility that a material misstatement of our annual consolidated financial statements will
not be prevented or detected on a timely basis. If we fail to comply with the requirements of Section 404 or if we report a material
weakness, we might be subject to regulatory sanction and investors may lose confidence in our consolidated financial statements,
which may be inaccurate if we fail to remedy such material weakness.


 


We
incur increased costs and demands on management as a result of compliance with laws and regulations applicable to public companies,
which could harm our operating results.


 


As
a public company, we incur significant legal, accounting and other expenses that we did not incur as a private company, including
costs associated with public company reporting requirements. In addition, the Sarbanes-Oxley Act and the Dodd-Frank Act, as well
as rules implemented by the SEC and Nasdaq, impose a number of requirements on public companies, including with respect to corporate
governance practices. Our management and other personnel need to devote a substantial amount of time to these compliance and disclosure
obligations. Moreover, compliance with these rules and regulations has increased our legal, accounting and financial compliance
costs and has made some activities more time-consuming and costly. It is also more expensive for us to obtain director and officer
liability insurance.


 






 


Risks
Related to Our Financial Position and Need for Additional Capital


 


We
expect to require additional capital in the future in order to develop the COVID-19 Vaccine Candidate. If we do not obtain any
such additional financing, it may be difficult to complete development of the COVID-19 Vaccine Candidate or effectively realize
our long-term strategic goals and objectives.


 


Our
current cash resources will not be sufficient to fund the development of the COVID-19 Vaccine Candidate through all of the required
clinical trials to receive regulatory approval and commercialization. While we do not currently have an estimate of all of the
costs that we will incur in the development of the COVID-19 Vaccine Candidate, we anticipate that we will need to raise significant
additional funds in order to continue the development of the COVID-19 Vaccine Candidate during the next 12-months. If we cannot
secure this additional funding when such funds are required, we may fail to develop a COVID-19 Vaccine Candidate or be forced
to forego certain strategic opportunities.


 


Any
additional capital raised through the sale of equity or equity-backed securities may dilute our stockholders’ ownership
percentages and could also result in a decrease in the market value of our equity securities.


 


The
terms of any securities issued by us in future capital transactions may be more favorable to new investors, and may include preferences,
superior voting rights and the issuance of warrants or other derivative securities, which may have a further dilutive effect on
the holders of any of our securities then outstanding.


 


In
addition, we may incur substantial costs in pursuing future capital financing, including investment banking fees, legal fees,
accounting fees, securities law compliance fees, printing and distribution expenses and other costs. We may also be required to
recognize non-cash expenses in connection with certain securities we issue, such as convertible notes and warrants, which may
adversely impact our financial condition.


 


General
Risk Factors


 


The
market price for our common stock may be volatile, and your investment in our common stock could decline in value.


 


The
stock market in general has experienced extreme price and volume fluctuations. The market prices of the securities of biotechnology
and specialty pharmaceutical companies, particularly companies like ours without product revenues and earnings, have been highly
volatile and may continue to be highly volatile in the future. This volatility has often been unrelated to the operating performance
of particular companies. The following factors, in addition to other risk factors described in this section, may have a significant
impact on the market price of our common stock:


 






 


announcements
of technological innovations or new products by us or our competitors;

 


announcement
of FDA approval or disapproval of our product candidates or other product-related actions;

 


developments
involving our discovery efforts and clinical studies;


 






 













 


developments
or disputes concerning patents or proprietary rights, including announcements of infringement, interference or other litigation
against us or our potential licensees;

 


announcements
concerning our competitors, or the biotechnology, pharmaceutical or drug delivery industry in general;

 


public
concerns as to the safety or efficacy of our products or our competitors’ products;

 


changes
in government regulation of the pharmaceutical or medical industry;

 


changes
in the reimbursement policies of third party insurance companies or government agencies;

 


actual
or anticipated fluctuations in our operating results;

 


changes
in financial estimates or recommendations by securities analysts;

 


developments
involving corporate collaborators, if any;

 


changes
in accounting principles; and

 


the
loss of any of our key scientific or management personnel.


 


Moreover,
the COVID-19 pandemic has resulted in significant financial market volatility and uncertainty in recent weeks. A continuation
or worsening of the levels of market disruption and volatility seen in the recent past could have an adverse effect on our ability
to access capital, on our business, results of operations and financial condition, and on the market price of our common stock.


 


In
the past, securities class action litigation has often been brought against companies that experience volatility in the market
price of their securities. Whether or not meritorious, litigation brought against us could result in substantial costs and a diversion
of management’s attention and resources, which could adversely affect our business, operating results and financial condition.


 


Our
failure to meet the continued listing requirements of Nasdaq could result in a delisting of our common stock. The delisting could
adversely affect the market liquidity of our common stock and the market price of our common stock could decrease.


 


Our
common stock is listed on The Nasdaq Capital Market. In order to maintain our listing, we must meet minimum financial and other
requirements, including requirements for a minimum amount of capital and a minimum price per share. We cannot assure you that
we will continue to meet the continued listing requirements in the future.


 


If
Nasdaq delists our common stock from trading on its exchange, due to failure to meet its continued listing requirements, and we
are not able to list our common stock on another national securities exchange, we expect our securities could be quoted on an
over-the-counter market. If this were to occur, we could face significant material adverse consequences, including:


 








 


a
limited availability of market quotations for our common stock;

 


reduced
liquidity for our common stock;

 


a
determination that our common stock is a “penny stock” which will require brokers trading in our common stock
to adhere to more stringent rules and possibly result in a reduced level of trading activity in the secondary trading market
for our common stock;

 


a
limited amount of news and analyst coverage; and

 


a
decreased ability to issue additional securities or obtain additional financing in the future.


 


If
we sell shares of our common stock in future financings, stockholders may experience immediate dilution and, as a result, our
stock price may decline.


 


We
may from time to time issue additional shares of common stock at a discount from the current market price of our common stock.
As a result, our stockholders would experience immediate dilution upon the purchase of any shares of our common stock sold at
such discount. As opportunities present themselves, we may enter into financing or similar arrangements in the future, including
the issuance of debt securities, preferred stock or common stock. If we issue common stock or securities convertible or exercisable
into common stock, our common stockholders would experience additional dilution and, as a result, our stock price may decline.


 






 


We
do not anticipate paying cash dividends on our common stock and, accordingly, stockholders must rely on stock appreciation for
any return on their investment.


 


We
have never declared or paid cash dividends on our common stock and do not expect to do so in the foreseeable future. The declaration
of dividends is subject to the discretion of our board of directors and limitations under applicable law, and will depend on various
factors, including our operating results, financial condition, future prospects and any other factors deemed relevant our board
of directors. You should not rely on an investment in us if you require dividend income from your investment in us. The success
of your investment will likely depend entirely upon any future appreciation of the market price of our common stock, which is
uncertain and unpredictable. There is no guarantee that our common stock will appreciate in value.


 


Future
sales of our common stock, or the perception that future sales may occur, may cause the market price of our common stock to decline,
even if our business is doing well.


 


Sales
by our stockholders of a substantial number of shares of our common stock in the public market could occur in the future. Pursuant
to the Securities Purchase Agreement for the Private Placement (the “Private Placement SPA”), we are required to file
a registration statement for the resale of 9,765,933 shares of common stock issued at an offering price of $1.85 per share or,
at the election of each investor, Pre-Funded Warrants, and up to 9,765,933 shares of our common stock issuable upon exercise of
the Pre-Funded Warrants shortly after we file a proxy statement with the SEC in connection with the Merger. Following their registration
and resale under a registration statement, such shares would become freely tradable. Sales by our stockholders of a substantial
number or resales by the purchasers of such shares and shares issuable upon exercise of such warrants pursuant to a registration
statement, or the perception in the market that the holders of a large number of shares of common stock may or intend to sell
their shares, could reduce the market price of our common stock and make it more difficult for us to sell equity or equity-related
securities in the future at a time and at a price that we might otherwise desire.


 


If
securities or industry analysts do not publish or cease publishing research or reports about us, our business or our market, or
if they change their recommendations regarding our stock adversely, our stock price and trading volume could decline.


 


The
trading market for our common stock will be influenced by the research and reports that industry or securities analysts may publish
about us, our business, our market or our competitors. If any of the analysts who may cover us change their recommendation regarding
our stock adversely, or provide more favorable relative recommendations about our competitors, our stock price would likely decline.
If any analyst who may cover us were to cease coverage of us or fail to regularly publish reports on us, we could lose visibility
in the financial markets, which in turn could cause our stock price or trading volume to decline.


 


We
are currently subject to a number of securities litigations, and we may be subject to similar or other litigation in
the future.


 



We
are currently subject to a number of litigations as described elsewhere in these “Risk Factors” and in Note 10 to
our consolidated financial statements. In connection with certain of these litigations, we have entered into settlements of claims
for significant monetary damages. We may also be subject to judgements or enter into additional settlements of claims for significant
monetary damages for the securities litigations that we have yet to enter into settlement agreements. Defending against the current
litigations is or can be time-consuming, expensive and cause diversion of our management’s attention.


 


Companies
that have experienced volatility in the market price of their stock have frequently been the objects of securities class action
litigation. We may be the target of this type of litigation in the future. Class action and derivative lawsuits could result in
substantial costs to us and cause a diversion of our management’s attention and resources, which could materially harm our
financial condition and results of operations.


 


With
respect to any litigation, our insurance may not reimburse us, or may not be sufficient to reimburse us, for the expenses or losses
we may suffer in contesting and concluding such lawsuit. Substantial litigation costs, including the substantial self-insured
retention that we are required to satisfy before any insurance applies to a claim, unreimbursed legal fees or an adverse result
in any litigation may adversely impact our business, operating results or financial condition. We believe that our directors’
and officers’ liability insurance will cover our potential liability with respect to any securities class-action lawsuit;
however, the insurer has reserved its rights to contest the applicability of the insurance to such claims and the limits of the
insurance may be insufficient to cover any eventual liability.


 







 




Item
1B. Unresolved Staff Comments


 


Not
applicable.



 




Item
2. Property


 


The
company utilizes a virtual office facility as our
corporate
headquarters which is located at 1185 Avenue of the Americas, 3rd Floor, New York, New York 10036. The current
lease term is effective for a six-month term beginning on January 13, 2021, which term shall automatically renew monthly thereafter
until termination by either party, with a monthly rent of approximately $125.00.


 


We
believe our current facilities are sufficient and adequate for our current needs.



 




Item
3. Legal Proceedings.


 


From
time to time we are a party to litigation and subject to claims incident to the ordinary course of business. Future litigation
may be necessary to defend ourselves and our customers by determining the scope, enforceability, and validity of third-party
proprietary rights or to establish our proprietary rights. For a discussion of material legal proceedings affecting us
as of December 31, 2020, please read Note 10 to the consolidated financial statements under “Litigation and Settlements,”
which information is incorporated herein by reference.



 




Item
4. Mine Safety Disclosures


 


Not
Applicable.


 





17
Akers to confirm whether this document was filed and resolution was reached.


 





The
accompanying notes are an integral part to these consolidated financial statements.


The
accompanying notes are an integral part to these consolidated financial statements.


The
accompanying notes are an integral part to these consolidated financial statements.


The
accompanying notes are an integral part to these consolidated financial statements.


AKERS
BIOSCIENCES, INC. AND SUBSIDIARIES



Notes
to Consolidated Financial Statements


 


Note
1 – Organization and Description of Business


 


Akers
Biosciences, Inc. (“Akers”), is a New Jersey corporation. These consolidated financial statements include three wholly
owned subsidiaries, Cystron Biotech, LLC (“Cystron”), Akers Acquisition Sub, Inc. and Bout Time Marketing Corporation,
(together, the “Company”). All material intercompany transactions have been eliminated in consolidation.


 


The
Company was historically a developer of rapid health information technologies, but, since March 2020, has been primarily focused
on the development of a vaccine candidate against SARS-CoV-2, a coronavirus currently causing a pandemic throughout the world.
In response to the global pandemic, the Company is pursuing rapid development and manufacturing of its COVID-19 vaccine candidate,
or combination product candidate (the “COVID-19 Vaccine Candidate”) in collaboration with Premas Biotech PVT Ltd.
(“Premas”), an entity incorporated in India.


 


On
July 7, 2020, the Company immediately ceased the production and sale of its rapid, point-of-care screening and testing products.
The Company will continue to provide support for these testing products that remain in the market through respective product expiration
dates. For a more detailed discussion of the Company’s cessation of its screening and testing products, see Note 3 and Note
6 herein.


 


Note
2 – Significant Accounting Policies


 




 

(a)

Basis
of Presentation


 






 

 

The
accompanying consolidated financial statements for the years ended December 31, 2020 and 2019 have been prepared in accordance
and in conformity with the accounting principles generally accepted in the United States of America (“U.S. GAAP”)
and the applicable rules and regulations of the Securities and Exchange Commission (“SEC”) regarding consolidated
financial information.

 

 

 

 

 

On
November 25, 2019, the Company effectuated a reverse stock split of its shares of Common Stock whereby every twenty-four (24)
pre-split shares of Common Stock were exchanged for one (1) post-split share of the Company’s Common Stock (“Reverse
Stock Split”). No fractional shares were issued in connection with the Reverse Stock Split and the remaining fractions
were rounded up to the next whole share. Shareholders who would otherwise have held a fractional share of the Common Stock
were given one additional full share of the Company’s Common Stock. Share amounts presented in these consolidated financial
statements have been adjusted to reflect the Reverse Stock Split.


 






 


AKERS
BIOSCIENCES, INC. AND SUBSIDIARIES


Notes
to Consolidated Financial Statements


 


Note
2 – Significant Accounting Policies, continued


 




 

(b)

Use
of Estimates and Judgments


 




 

 

The
preparation of financial statements in conformity with US GAAP requires management to make judgments, estimates and assumptions
that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual
results may differ from these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions
to accounting estimates are recognized in the period in which the estimates are revised and in any future periods affected.
Information about significant areas of estimation, uncertainty and critical judgments in applying accounting policies that
have the most significant effect on the amounts recognized in the financial statements are included in the following notes
for revenue recognition, allowances for doubtful accounts, inventory valuations, impairment of intangible assets and valuation
of share-based payments.


 




 

(c)

Functional
and Presentation Currency


 




 

 

These
consolidated financial statements are presented in U.S. Dollars, which is the Company’s functional currency. All financial
information presented in U.S. Dollars has been rounded to the nearest dollar. Foreign Currency Transaction Gains or Losses,
resulting from cash balances denominated in Foreign Currencies, are recorded in the Consolidated Statements of Comprehensive
Loss.


 




 

(d)

Comprehensive
Loss


 




 

 

The
Company follows Financial Accounting Standards Board Accounting Standards Codification (“FASB ASC”) 220 in reporting
comprehensive loss. Comprehensive income is a more inclusive financial reporting methodology that includes disclosure of certain
financial information that historically has not been recognized in the calculation of net income.


 




 

(e)

Cash
and Cash Equivalents


 




 

 

The
Company considers all highly liquid investments, which include short-term bank deposits (up to three months from date of deposit)
that are not restricted as to withdrawal date or use, to be cash equivalents.


 



 




 

 

At
December 31, 2020 and 2019, restricted cash included in non-current assets on the Company’s Consolidated Balance Sheets
was $0 and $115,094, respectively, representing cash in trust for the purpose of funding legal fees for certain litigations.


 






 


AKERS
BIOSCIENCES, INC. AND SUBSIDIARIES


Notes
to Consolidated Financial Statements


 


Note
2 – Significant Accounting Policies, continued


 





 

(g)

Fair
Value of Financial Instruments


 






 

 

The
Company’s financial instruments consist of cash and cash equivalents, marketable securities, receivables and trade and
other payables. The carrying value of cash and cash equivalents, receivables and trade and other payables approximate their
fair value because of their short maturities.

 

 

 

 

 

The
framework for measuring fair value provides a fair value hierarchy that prioritizes the inputs to valuation techniques used
to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical
assets or liabilities (level 1) and the lowest priority to unobservable inputs (level 3). The three levels of the fair value
hierarchy under FASB ASC 820 are described as follows:


 






 

Level
1

Inputs
to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets that the Company
has the ability to access.

 

 

 

 

Level
2

Inputs
to the valuation methodology include:


 












 


quoted
prices for similar assets or liabilities in active markets;

 

 

 

 


quoted
prices for identical or similar assets or liabilities in inactive markets;

 

 

 

 


inputs
other than quoted prices that are observable for the asset or liability;

 

 

 

 


inputs
that are derived principally from or corroborated by observable market data by correlation or other means

 

 

 

 

If
the asset or liability has a specified (contractual) term, the level 2 input must be observable for substantially the full
term of the asset or liability.


 




 

Level
3

Inputs
to the valuation methodology are unobservable and significant to the fair value measurement.


 




 

 

The
asset or liability’s fair value measurement level within the fair value hierarchy is based on the lowest level of input
that is significant to the fair value measurement. Valuation techniques maximize the use of relevant observable inputs and
minimize the use of unobservable inputs.


 






 


AKERS
BIOSCIENCES, INC. AND SUBSIDIARIES


Notes
to Consolidated Financial Statements


 


Note
2 – Significant Accounting Policies, continued


 




 

(g)

Fair
Value of Financial Instruments, continued


 






 

 

Following
is a description of the valuation methodologies used for assets measured at fair value as of December 31, 2020 and December
31, 2019.

 

 

 

 

 


Marketable
Securities:
Valued using quoted prices in active markets for identical assets.


 









 

 


Quoted
Prices in Active


Markets
for Identical Assets


or
Liabilities

(Level 1)


 

 


Quoted
Prices for


Similar
Assets or


Liabilities
in


Active
Markets

(Level 2)


 

 


Significant


Unobservable

Inputs

(Level 3)


 

Marketable securities
at December 31, 2020

 

$

16,718,452

 

 

$


 

 

$


 

 

 

 

 

 

 

 

 

 

 

 

 

 

Marketable securities at December
31, 2019

 

$

9,164,273

 

 

$


 

 

$


 



 





 

 

Marketable
securities are classified as available for sale and are valued at fair market value. Maturities of the securities are less
than one year.

 

 


 


As
of December 31, 2020, the Company held certain mutual funds which, under FASB ASC 321-10, were considered equity
investments. As such, the change in fair value in the year ended December 31, 2020 of a gain of $54,100 includes
the reclassification of the accumulated other comprehensive income of $17,886 as of December 31, 2019, which
was included in net loss from continuing operations in the Consolidated Statements of Comprehensive Loss.


 


Gains
and losses resulting from the sales of marketable securities were (losses) and gains of ($36,714) and $3,952 for the years
ended December 31, 2020 and 2019, respectively


 


Proceeds
from the sales of marketable securities in the years ended December 31, 2020 and 2019 were $2,314,374 and $2,857,960,
respectively.


 






 


AKERS
BIOSCIENCES, INC. AND SUBSIDIARIES


Notes
to Consolidated Financial Statements


 


Note
2 – Significant Accounting Policies, continued


 





 

(h)

Trade
Receivables and Allowance for Doubtful Accounts


 








 

 

The
carrying amounts of current trade receivables is stated at cost, net of allowance for doubtful accounts and approximate their
fair value given their short-term nature.

 

 

 

 

 

The
normal credit terms extended to customers ranges between 30 and 90 days. Credit terms longer than these may be extended after
considering the credit worthiness of the customers and the business requirements. The Company reviews all receivables that
exceed terms and establishes an allowance for doubtful accounts based on management’s assessment of the collectability
of trade and other receivables. A considerable amount of judgment is required in assessing the amount of allowance. The Company
considers the historical level of credit losses, makes judgments about the credit worthiness of each customer based on ongoing
credit evaluations and monitors current economic trends that might impact the level of credit losses in the future.

 

 

 

 

 

As
of December 31, 2020, and 2019, allowances for doubtful accounts for trade receivables were $0. Bad debt expenses for trade
receivables were $0 and $5,325 for the years ended December 31, 2020 and 2019.


 



 






 

 

Further
to the Company’s pursuit of strategic alternatives, pursuant to an unsecured promissory note dated July 4, 2019, on
July 25, 2019 the Company advanced $100,000 to a company in the hemp related industry with which the Company had been considering
a potential business transaction. Discussions with this party toward a potential transaction have been suspended.

 

 

 

 

 


During
the year ended December 31, 2020,

the Company deemed the promissory note uncollectable and wrote the note off against the
reserve.


 


During
the year ended December 31, 2020, the Company advanced MYMD $1,200,000 under a Secured Promissory Note. The Company advanced
two additional draws of $600,000, or $1,200,000 cumulatively, on January 21, 2021 and February 25, 2021 to MYMD under this
secured promissory note (see Note 3).


 


As
of December 31, 2020 and 2019, allowance for doubtful accounts for other receivables was $0 and $100,000, respectively.
Bad debts expense for other receivables were $0 and $100,000 for the years ended December 31, 2020 and 2019.


 






 


AKERS
BIOSCIENCES, INC. AND SUBSIDIARIES


Notes
to Consolidated Financial Statements


 


Note
2 – Significant Accounting Policies, continued


 




 


Prepaid
expenses represent expenses paid prior to the date that the related services are rendered or used are recorded as prepaid expenses.
Prepaid expenses are comprised principally of prepaid insurance.


 



 


Financial
instruments which potentially subject the Company to concentrations of credit risk consist principally of cash on deposit with
financial institutions and accounts receivable. At times, the Company’s cash in banks is in excess of the FDIC insurance
limit. The Company has not experienced any loss as a result of these cash deposits. These cash balances are maintained with two
banks.


 




 

(l)

Risk
Management of Cash Investments


 


It
is the Company’s policy to minimize the Company’s capital resources to investment risks, prioritizing the preservation
of capital over investment returns. Investments are maintained in securities, primarily publicly traded, short-term money market
funds based on highly rated federal, state and corporate bonds, that minimize the risk to the Company’s capital resources
and provide ready access to funds.


 


The
Company’s investment portfolios are regularly monitored for risk and are held with two brokerage firms.


 








 


AKERS
BIOSCIENCES, INC. AND SUBSIDIARIES


Notes
to Consolidated Financial Statements


 


Note
2 – Significant Accounting Policies, continued


 




 

(m)

Property,
Plant and Equipment


 










 

 

Items
of property, plant and equipment are measured at cost less accumulated depreciation and accumulated impairment losses. Costs
include expenditures that are directly attributable to the acquisition of the asset.

 

 

 

 

 

Gains
and losses on disposal of an item of property, plant and equipment are determined by comparing the proceeds from disposal
with the carrying amount of property, plant and equipment and are recognized within “other (income)/expense” in
the Consolidated Statements of Comprehensive Loss.

 

 

 

 

 

Depreciation
is recognized in profit and loss on the accelerated basis over the estimated useful lives of the property, plant and equipment.
Leased assets are depreciated over the shorter of the lease term or their useful lives.

 

 

 

 

 

The
estimated useful lives for the current and comparative periods are as follows:


 











 

 

Useful
Life

 

 

(in
years)

Plant
and equipment

 

5-12

Furniture
and fixtures

 

5-10

Computer
equipment & software

 

3-5

Leasehold
Improvements

 

Shorter
of the


remaining lease or


estimated useful life



  




 

 

Depreciation
methods, useful lives and residual values are reviewed at each reporting date.


 






 


AKERS
BIOSCIENCES, INC. AND SUBSIDIARIES


Notes
to Consolidated Financial Statements


 


Note
2 – Significant Accounting Policies, continued


 



 


The
Company’s long-lived intangible assets, other than goodwill, are assessed for impairment when events or circumstances indicate
there may be an impairment. These assets were initially recorded at their estimated fair value at the time of acquisition and
assets not acquired in acquisitions were recorded at historical cost. However, if their estimated fair value is less than the
carrying amount, other intangible assets with indefinite lives are reduced to their estimated fair value through an impairment
charge to our Consolidated Statements of Comprehensive Loss.


 


Patents
and Trade Secrets


 


The
Company has developed or acquired several diagnostic tests that can detect the presence of various substances in a person’s
breath, blood, urine and saliva. Propriety protection for the Company’s products, technology and process is important to
its competitive position. As of December 31, 2019, the Company has ten patents from the United States Patent Office in effect.
Other patents are in effect in Australia through the Design Registry European Union Patents, in Hong Kong and in Japan. Patents
are in the national phase of prosecution in many Patent Cooperation Treaty participating countries.  Additional proprietary
technology consists of numerous different inventions. Management intends to protect all other intellectual property (e.g. copyrights,
trademarks and trade secrets) using all legal remedies available to the Company.


 


Patent
Costs


 


Costs
associated with applying for patents are capitalized as patent costs. Once the patents are approved, the respective costs are
amortized over their estimated useful lives (maximum of 17 years) on a straight-line basis and assessed for impairment when necessary.
Patent pending costs for patents that are not approved are charged to the Consolidated Statements of Comprehensive Loss the year
the patent is rejected.


 


In
addition, patents may be purchased from third parties. The costs of acquiring the patent are capitalized as patent costs if it
represents a future economic benefit to the Company. Once a patent is acquired it is amortized over its remaining useful life
and assessed for impairment when necessary.


 


Other
Intangible Assets


 


Other
intangible assets that are acquired by the Company, which have definite useful lives, are measured at cost less accumulated amortization
and accumulated impairment losses.


 


Amortization


 


Amortization
is recognized on a straight-line basis over the estimated useful lives of intangible assets, other than goodwill, from the date
that they are available for use. The estimated useful lives for the current and comparative periods are as follows:


 






 

 

 

Useful
Life

 

 

 

 

(in
years)

 

Patents and trademarks

 

 

12-17

 


 






 


AKERS
BIOSCIENCES, INC. AND SUBSIDIARIES


Notes
to Consolidated Financial Statements


 


Note
2 – Significant Accounting Policies, continued


 




 

(o)

Right-of-Use
Assets


 


The
Company leased its facility in West Deptford, New Jersey (the “Thorofare Facility”) under an operating lease
(“Thorofare Lease”) with annual rentals of $132,000 plus common area maintenance (CAM) charges. The Thorofare Facility
houses the Company’s office, manufacturing, laboratory and warehouse space. The Thorofare Lease took effect on January 1,
2008. On January 7, 2013, the Company extended the Thorofare Lease extending the term to December 31, 2019. On November 11, 2019,
the Company entered into another extension of the Thorofare Lease, extending the term to December 31, 2021, effective January
1, 2020, and providing for an early termination option with a 150-day notice period. On July 16, 2020, the Company exercised the
early termination option under the lease agreement, with the effect of the post exercise lease maturity date changing to December
13, 2020. The lease terminated on November 30, 2020, at the lessor’s request, and the property was handed over to the
property manager on November 30, 2020.


 


On
January 1, 2020 (“Effective Date”), the Company adopted FASB ASC, Topic 842, Leases (“ASC 842”), which
increases transparency and comparability by recognizing a lessee’s rights and obligations resulting from leases by recording
them on the balance sheet as lease assets and lease liabilities. The new guidance requires the recognition of the right-of-use
(“ROU”) assets and related operating and finance lease liabilities on the balance sheet. The Company adopted the new
guidance using the modified retrospective approach on January 1, 2020. As a result, the Consolidated Balance Sheet as of December
31, 2019 was not restated and is not comparative.


 


The
adoption of ASC 842 resulted in the recognition of ROU assets of $306,706 and lease liabilities for an operating lease of $306,706
on the Company’s Consolidated Balance Sheet as of January 1, 2020.


 


The
Company elected the package of practical expedients permitted within the standard, which allows an entity to forgo reassessing
(i) whether a contract contains a lease, (ii) classification of leases, and (iii) whether capitalized costs associated with a
lease meet the definition of initial direct costs. Also, the Company elected the expedient allowing an entity to use hindsight
to determine the lease term and impairment of ROU assets and the expedient to allow the Company to not have to separate lease
and non-lease components. The Company has also elected the short-term lease accounting policy under which the Company would not
recognize a lease liability or ROU asset for any lease that at the commencement date has a lease term of twelve months or less
and does not include a purchase option that the Company is more than reasonably certain to exercise.


 


For
contracts entered into on or after the Effective Date, at the inception of a contract, the Company will assess whether the contract
is, or contains, a lease. The Company’s assessment is based on: (i) whether the contract involves the use of a distinct
identified asset, (ii) whether the Company obtained the right to substantially all the economic benefit from the use of the asset
throughout the period, and (iii) whether the Company has the right to direct the use of the asset. Leases entered into prior to
January 1, 2020, which were accounted for under ASC 840, were not reassessed for classification.


 


For
operating leases, the lease liability is initially and subsequently measured at the present value of the unpaid lease payments.
The Company generally uses its incremental borrowing rate as the discount rate for leases, unless an interest rate is implicitly
stated in the lease. The present value of the lease payments is calculated using the incremental borrowing rate for operating
leases, which was determined using a portfolio approach based on the rate of interest that the Company would have to pay to borrow
an amount equal to the lease payments on a collateralized basis over a similar term. The lease term for all of the Company’s
leases includes the non-cancellable period of the lease plus any additional periods covered by either a Company option to extend
the lease that the Company is reasonably certain to exercise, or an option to extend the lease controlled by the lessor. All ROU
assets are reviewed for impairment.


 


Lease
expense for operating leases consists of the lease payments plus any initial direct costs and is recognized on a straight-line
basis over the lease term.


 






 


AKERS
BIOSCIENCES, INC. AND SUBSIDIARIES


Notes
to Consolidated Financial Statements


 


In
June 2020, the Company recorded an adjustment to its right-of-use asset and liability in the amounts of $153,709 and $155,737,
respectively, to adjust for the effect of the Company having elected to exercise the early termination option under the lease
agreement, as discussed earlier. The following information reflects the effect of the adjustments discussed above in connection
with the Company’s exercise of the early termination option.



 


The
Company’s lease expense, including CAM charges was $154,362 for the year ended December 31, 2020.


 


Other
information related to leases is presented below:


  










Other
information

 

As
of

December 31, 2020

 

 

 

 

 

Operating cash used by operating
leases

 

$

151,640

 

Weighted-average remaining lease term
– operating leases (in months)

 

 


 

Weighted-average discount rate –
operating leases

 

 

10

%



 




 

(p)

Recoverability
of Long-Lived Assets


 


In
accordance with FASB ASC 360-10-35 “Impairment or Disposal of Long-lived Assets”, long-lived assets to be held and
used are analyzed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may
not be fully recoverable or that the useful lives of those assets are no longer appropriate. The Company evaluates at each balance
sheet date whether events and circumstances have occurred that indicate possible impairment.


 


The
Company determines the existence of such impairment by measuring the expected future cash flows (undiscounted and without interest
charges) and comparing such amount to the carrying amount of the assets. An impairment loss, if one exists, is then measured as
the amount by which the carrying amount of the asset exceeds the discounted estimated future cash flows. Assets to be disposed
of are reported at the lower of the carrying amount or fair value of such assets less costs to sell. Asset impairment charges
are recorded to reduce the carrying amount of the long-lived asset that will be sold or disposed of to their estimated fair values.
Charges for the asset impairment reduce the carrying amount of the long-lived assets to their estimated salvage value in connection
with the decision to dispose of such assets.


 



 


In
accordance with FASB ASC 323, the Company recognizes investments in joint ventures based upon the Company’s ability to significantly
influence the operational or financial policies of the joint venture. An objective judgment of the level of influence is made
at the time of the investment based upon several factors including, but not limited to the following:


 




 

a)

Representation
on the Board of Directors


 












 

b)

Participation
in policy-making processes

 

 

 

 

c)

Material
intra-entity transactions

 

 

 

 

d)

Interchange
of management personnel

 

 

 

 

e)

Technological
dependencies

 

 

 

 

f)

Extent
of ownership and the ability to influence decision making based upon the makeup of other owners when the shareholder group
is small.


 


The
Company follows the equity method for valuating investments in joint ventures when the existence of significant influence over
operational and financial policy has been established, as determined by management; otherwise, the Company will valuate these
investments using the cost method.


 


Investments
recorded using the cost method will be assessed for any decrease in value that has occurred that is other than temporary and the
other than temporary decrease in value shall be recognized. As and when circumstances and facts change, the Company will evaluate
the Company’s ability to significantly influence operational and financial policy to establish a basis for converting the
investment accounted for using the cost method to the equity method of valuation.


 






 


AKERS
BIOSCIENCES, INC. AND SUBSIDIARIES


Notes
to Consolidated Financial Statements


 


Note
2 – Significant Accounting Policies, continued


 




 

(r)

Revenue
Recognition


 


Beginning
on January 1, 2019, the Company recognizes revenue under ASC 606, Revenue from Contracts with Customers. The core principle of
the revenue standard is that a company should recognize revenue to depict the transfer of promised goods or services to customers
in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services.
The Company only applies the five-step model to contracts when it is probable that the Company will collect the consideration
it is entitled to in exchange for the goods and services transferred to the customer. The following five steps are applied to
achieve that core principle:


 


Step
1: Identify the contract with the customer


Step
2: Identify the performance obligations in the contract


Step
3: Determine the transaction price


Step
4: Allocate the transaction price to the performance obligations in the contract


Step
5: Recognize revenue when the company satisfies a performance obligation


 


The
Company does not have any significant contracts with customers requiring performance beyond delivery. Shipping and handling activities
are performed before the customer obtains control of the goods and therefore represent a fulfillment activity rather than a promised
service to the customer. Revenue and costs of sales are recognized when control of the product transfers to our customer, which
generally occurs upon delivery to the customer but can also occur when goods are shipped by the Company, depending on the shipment
terms of the contract. The Company’s performance obligations are satisfied at that time. The Company has not historically
experienced customer returns of its products.


 


The
Company uses the most likely amount approach to determine the variable consideration of the transaction price in order to account
for the contractual rebates and incentives that are estimated and adjusted for over time. The Company provides for rebates to
its distributors.


 



 


The
Company utilizes an asset and liability approach for financial accounting and reporting for income taxes. The provision for income
taxes is based upon income or loss after adjustment for those permanent items that are not considered in the determination of
taxable income. Deferred income taxes represent the tax effects of differences between the financial reporting and tax basis of
the Company’s assets and liabilities at the enacted tax rates in effect for the years in which the differences are expected
to reverse.


 


The
Company evaluates the recoverability of deferred tax assets and establishes a valuation allowance when it is more likely than
not that some portion or all the deferred tax assets will not be realized. Management makes judgments as to the interpretation
of the tax laws that might be challenged upon an audit and cause changes to previous estimates of tax liability. In management’s
opinion, adequate provisions for income taxes have been made. If actual taxable income by tax jurisdiction varies from estimates,
additional allowances or reversals of reserves may be necessary.


 






 


AKERS
BIOSCIENCES, INC. AND SUBSIDIARIES


Notes
to Consolidated Financial Statements


 


Note
2 – Significant Accounting Policies, continued


 




 

(s)

Income
Taxes, continued


 


Tax
benefits are recognized only for tax positions that are more likely than not to be sustained upon examination by tax authorities.
The amount recognized is measured as the largest amount of benefit that is greater than 50 percent likely to be realized upon
settlement. A liability for “unrecognized tax benefits” is recorded for any tax benefits claimed in the Company’s
tax returns that do not meet these recognition and measurement standards. For the years ended December 31, 2020 and 2019, no liability
for unrecognized tax benefits was required to be reported.


 


There
is no income tax benefit for the losses for the years ended December 31, 2020 and 2019 since management has determined that the
realization of the net deferred assets is not assured and has created a valuation allowance for the entire amount of such tax
benefits.


 


The
Company’s policy for recording interest and penalties associated with tax audits is to record such items as a component
of general and administrative expense. There were no amounts accrued for penalties and interest for the years ended December 31,
2020 and 2019. The Company does not expect its uncertain tax position to change during the next twelve months. Management is currently
unaware of any issues under review that could result in significant payments, accruals or material deviations from its position.


 





 


Research
and Development Costs


 


In
accordance with FASB ASC 730,
research and development
costs are expensed as incurred and consist of fees paid to third parties that conduct certain research and development activities
on the Company’s behalf. These costs included costs incurred to acquire and develop the license for the COVID-19 vaccine
project (See Note 3).


 




 

(u)

Shipping
and Handling Fees and Costs


 


The
Company charges actual shipping costs plus a handling fee to customers which are classified as product revenue in the Consolidated
Statement of Comprehensive Loss. Shipping and other related delivery costs, including those for incoming raw materials are classified
as product cost of sales.


 






 


AKERS
BIOSCIENCES, INC. AND SUBSIDIARIES


Notes
to Consolidated Financial Statements


 


Note
2 – Significant Accounting Policies, continued


 




 

(v)

Stock-based
Payments


 


The
Company accounts for stock-based compensation under the provisions of Financial Accounting Standards Board (FASB) Accounting Standards
Codification (ASC) 718, “Compensation – Stock Compensation”, which requires the measurement and recognition of compensation
expense for all stock-based awards made to employees and directors based on estimated fair values on the grant date. The Company
estimates the fair value of stock-based awards on the date of grant using the Black-Scholes model. The value of the portion of
the award that is ultimately expected to vest is recognized as expense over the requisite service periods using the straight-line
method. In June 2018, the FASB issued ASU No. 2018-07, Compensation – Stock Compensation (Topic 718), Improvements to Nonemployee
Share-Based Payment Accounting. The amendments in this Update expand the scope of Topic 718 to include share-based payment transactions
for acquiring goods and services from nonemployees. Prior to this Update, Topic 718 applied only to share-based transactions to
employees. Consistent with the accounting requirement for employee share-based payment awards, nonemployee share-based payment
awards within the scope of Topic 718 are measured at grant-date fair value of the equity instruments that an entity is obligated
to issue when the good has been delivered or the service has been rendered and any other conditions necessary to earn the right
to benefit from the instruments have been satisfied.


 


The
Company has elected to account for forfeiture of stock-based awards as they occur.



 






 


AKERS
BIOSCIENCES, INC. AND SUBSIDIARIES


Notes
to Consolidated Financial Statements


 


Note
2 – Significant Accounting Policies, continued


 




 

(w)

Basic
and Diluted Earnings per Share of Common Stock


 


Basic
earnings per common share is based on the weighted average number of shares outstanding during the periods presented. Diluted
earnings per share is computed using the weighted average number of common shares plus dilutive common share equivalents outstanding
during the period. Potential common shares that would have the effect of increasing diluted earnings per share are considered
anti-dilutive.


 


As
the Company reported a net loss for the years ended December 31, 2020 and 2019, respectively, common stock equivalents were anti-dilutive.


 


Diluted
net loss per share is computed using the weighted average number of common and dilutive potential common shares outstanding during
the years ended December 31, 2020 and 2019. The following securities are excluded from the calculation of weighted average dilutive
common shares because their inclusion would have been anti-dilutive:


 














 

 

For
the Years Ended December 31,

 

 

 

2020

 

 

2019

 

Stock Options

 

 


 

 

 

40

 

Restricted Stock Units

 

 

789,360

 

 

 

15,603

 

Warrants to purchase Common Stock

 

 

10,925,952

 

 

 

247,215

 

Pre-funded Warrants to purchase Common
Stock

 

 

1,040,540

 

 

 

795,000

 

Warrants to purchase Series C Preferred
Stock

 

 

55,000

 

 

 

1,990,000

 

Series D Convertible
Preferred Stock

 

 

72,992

 

 

 


 

Total
potentially dilutive shares

 

 

12,883,844

 

 

 

3,047,858

 



 






 


AKERS
BIOSCIENCES, INC. AND SUBSIDIARIES


Notes
to Consolidated Financial Statements


 


Note
2 – Significant Accounting Policies, continued


 





 

(x)

Discontinued
Operations


 


In
accordance with FASB ASC 205, results of operations of a component of an entity that has either been disposed of or is held for
sale is to be reported as discontinued operations in the consolidated financial statements if the disposition or sale represents
a strategic shift that has (or will have) a major effect on an entity’s operations and financial results. See Note 6 herein.


 










 


AKERS
BIOSCIENCES, INC. AND SUBSIDIARIES


Notes
to Consolidated Financial Statements


 


Note
2 – Significant Accounting Policies, continued


 




 

(y)

Recently
Issued Accounting Pronouncements


 


Recently
Issued Accounting Pronouncements Adopted


 


In
February 2016, the FASB issued ASU 2016-02—Leases (Topic 842) (“ASU-2016-02”), which requires an entity to recognize
right-of-use assets and lease liabilities on its balance sheet and disclose key information about leasing arrangements. ASU 2016-02
offers specific accounting guidance for a lessee, a lessor, and sale and leaseback transactions. Lessees and lessors are required
to disclose qualitative and quantitative information about leasing arrangements to enable a user of the financial statements to
assess the amount, timing and uncertainty of cash flows arising from leases. Leases will be classified as either finance or operating,
with classification affecting the pattern of expense recognition in the income statement. The Company has adopted ASU-2016-02,
effective January 1, 2020.


 


Recently
Issued Accounting Pronouncements Not Adopted


 


In
June 2016, the FASB issued ASU No. 2016-13, Financial Instruments – Credit Losses (Topic 326), Measurement of Credit Losses on
Financial Instruments (“ASU-2016-13”). ASU 2016-13 affects loans, debt securities, trade receivables, and any other
financial assets that have the contractual right to receive cash. The ASU requires an entity to recognize expected credit losses
rather than incurred losses for financial assets. ASU 2016-13 is effective for the fiscal year beginning after December 15, 2022,
including interim periods within that fiscal year. The Company expects that there would be no material impact on the Company’s
consolidated financial statements upon the adoption of this ASU.


 





In
July 2017, the FASB issued ASU No. 2017-11, Earnings Per Share (Topic 260), Distinguishing Liabilities from Equity (Topic 480),
Derivatives and Hedging (Topic 815): (I) Accounting for Certain Financial Instruments with Down Round Features, (II) Replacement
of the Indefinite Deferral for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily
Redeemable Noncontrolling Interests with a Scope Exception.
The amendments in Part I change the classification analysis of
certain equity-linked financial instruments (or embedded features) with down round features. When determining whether certain
financial instruments should be classified as liabilities or equity instruments, a down round feature no longer precludes equity
classification when assessing whether the instrument is indexed to an entity’s own stock. The amendments also clarify existing
disclosure requirements for equity-classified instruments. The amendments in Part II recharacterize the indefinite deferral of
certain Topic 480, Distinguishing Liabilities from Equity, provisions that now are presented as pending content in the Codification
to a scope exception. Those amendments do not have an accounting effect. The amendments in Part I are effective for fiscal years,
and interim periods within those fiscal years, beginning after December 15, 2019. Early adoption in permitted. As of January 1,
2020, the Company adopted the amendments in Part I which has no impact on the Company’s financial statements


 


In
August 2020, the FASB issued ASU No. 2020-06, Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives
and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40), Accounting for Convertible Instruments and Contracts
in an Entity’s Own Equity.
The amendments in this Update affect entities that issue convertible instruments and/or contracts
in an entity’s own equity. For convertible instruments, the instruments primarily affected are those issued with beneficial
conversion features or cash conversion features because the accounting models for those specific features are removed. However,
all entities that issue convertible instruments are affected by the amendments to the disclosure requirements in this Update.
For contracts in an entity’s own equity, the contracts primarily affected are freestanding instruments and embedded features
that are accounted for as derivatives under the current guidance because of failure to meet the settlement conditions of the derivatives
scope exception related to certain requirements of the settlement assessment. The settlement assessment was simplified by removing
the requirements (1) to consider whether the contract would be settled in registered shares, (2) to consider whether collateral
is required to be posted, and (3) to assess shareholder rights. Those amendments also affect the assessment of whether an embedded
conversion feature in a convertible instrument qualifies for the derivatives scope exception. Additionally, the amendments in
this Update affect the diluted EPS calculation for instruments that may be settled in cash or shares and for convertible instruments.
The amendments in this Update are effective for public business entities that meet the definition of a Securities and Exchange
Commission (SEC) filer, excluding entities eligible to be smaller reporting companies as defined by the SEC, for fiscal years
beginning after December 15, 2021, including interim periods within those fiscal years. For all other entities, the amendments
are effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. Early adoption
is permitted, but no earlier than fiscal years beginning after December 15, 2020, including interim periods within those fiscal
years. An entity should adopt the guidance as of the beginning of its annual fiscal year. Entities are allowed to adopt the guidance
through either a modified retrospective method of transition or a fully retrospective method of transition. The Company expects
to adopt this standard as of January 1, 2021 and does not anticipate the adoption to have a material impact on its financial statements.



 



 


Certain
reclassifications were made to the reported amounts in these consolidated financial statements as of December 31, 2019 to conform
to the presentation as of December 31, 2020.


 






 


AKERS
BIOSCIENCES, INC. AND SUBSIDIARIES


Notes
to Consolidated Financial Statements


 


Note
3 – Recent Developments, Liquidity and Management’s Plans


 


Ceasing
Production and Sale of Rapid, Point-Of-Care Screening and Testing Products


 


As
previously disclosed, in light of the unfavorable factors persistent in our rapid, point-of-care screening and testing product
business and the progress the Company has made in its partnership with Premas, the Company conducted a strategic review of the
screening and testing products business. Following such review, in early July 2020, the Company ceased the production and sale
of its rapid, point-of-care screening and testing products. The Company will continue to provide support for these testing products
that remain in the market through their respective product expiration dates. The Company had been experiencing declining sales
revenue and production backlogs for these products and, as it previously reported, had eliminated its sales force for such products.
The Company intends to devote its attention to its partnership with Premas for the development of its COVID-19 Vaccine Candidate
and transactions that the Company believes will increase shareholder value. In connection with the ceasing production and sale
of its existing product line, on July 16, 2020, the Company decided to close the Thorofare Facility and exercised the early termination
option under the Thorofare Lease, which provided for a 150-day notice to terminate the lease. Pursuant to the early termination
option, the Thorofare Lease which matured on December 13, 2020.
The
lease terminated on November 30, 2020, at the lessor’s request, and the property was handed over to the property manager
on November 30, 2020.



 


The
Company determined that the discontinuation of the production and distribution of the Company’s screening and testing products
constituted a strategic shift in the Company’s business and as a result the elimination of the product lines should be presented
as discontinued operations under FASB ASC 205-20 Presentation of Financial Statements, Discontinued Operations.


 


Acquisition
of Cystron


 


On
March 23, 2020, the Company acquired Cystron pursuant to that certain Membership Interest Purchase Agreement (the “MIPA”).
Cystron was incorporated on March 10, 2020. Upon the Company’s purchase of Cystron, Cystron’s sole asset consisted
of an exclusive license with respect to Premas’ vaccine platform for the development of a vaccine against COVID-19 and other
coronavirus infections. Since its formation and through the date of its acquisition by the Company, Cystron did not have any employees.
The acquisition of Cystron was accounted for as the purchase of an asset.


 


As
consideration for the Membership Interests (as defined in the MIPA), the Company delivered to the members of Cystron (the “Sellers”):
(1) that number of newly issued shares of its common stock equal to 19.9% of the issued and outstanding shares of its common stock
and pre-funded warrants as of the date of the MIPA, but, to the extent that the issuance of its common stock would have resulted
in any Seller owning in excess of 4.9% of the Company’s outstanding common stock, then, at such Seller’s election,
such Seller received “common stock equivalent” preferred shares with a customary 4.9% blocker (with such common stock
and preferred stock collectively referred to as “Common Stock Consideration”), and (2) $1,000,000 in cash. On March
24, 2020 the Company paid $1,000,000 to the Sellers and delivered 411,403 shares of common stock and 211,353 shares of Series
D Convertible Preferred Stock with a customary 4.9% blocker, with an aggregate fair market value of $1,233,057, totaling
$2,233,057 (“March Transaction”).


 






 


AKERS
BIOSCIENCES, INC. AND SUBSIDIARIES


Notes
to Consolidated Financial Statements


 


Additionally,
the Company shall (A) make an initial payment to the Sellers of up to $1,000,000 upon its receipt of cumulative gross proceeds
from the consummation of an initial equity offering after the date of the MIPA of $8,000,000, and (B) pay to Sellers an amount
in cash equal to 10% of the gross proceeds in excess of $8,000,000 raised from future equity offerings after the date of the MIPA
until the Sellers have received an aggregate additional cash consideration equal to $10,000,000 (collectively, the “Equity
Offering Payments”). Upon the achievement of certain milestones, including the completion of a Phase 2 study for a COVID-19
Vaccine Candidate that meets its primary endpoints, Sellers will be entitled to receive an additional 750,000 shares of the Company’s
common stock or, in the event the Company is unable to obtain stockholder approval for the issuance of such shares, 750,000 shares
of non-voting preferred stock that are valued following the achievement of such milestones and shall bear a 10% annual dividend
(the “Milestone Shares”).



 


Pursuant to the MIPA, the Company shall
make contingent payments for the achievement of certain development and commercial milestones as follows; (i) $250,000 upon the
dosing of the first patient in a Phase I Clinical Trial, (ii) $500,000 upon the dosing of the first patient in a Phase II Clinical
Trial, (iii) $5,000,000 upon the dosing of the first patient in a Phase III Clinical Trial, and (iv) $15,000,000 upon approval
by the FDA of the NDA for the COVID-19 vaccine.



 


Pursuant
to the MIPA, upon the Company’s consummation of the registered direct equity offering closed on April 8, 2020, the Company
paid the Sellers $250,000 on April 20, 2020 (the “April Payment”). Upon consummation of the registered direct equity
offerings that closed on May 18, 2020 and August 13, 2020, the Company paid $892,500 (the “May Payment”)
and $684,790 (the “August Payment”), respectively, on September 25, 2020.


 




On
October 13, 2020, Premas, one of the former members of Cystron, returned $908,117 representing its portion of the initial cash
component for the purchase of Cystron (the “March Transaction”) and its portion of the April Payment, May Payment
and August Payment under the MIPA, as amended.


 



Premas
is working with the Reserve Bank of India to comply with regulations related to its ownership in a foreign entity and its ability
to receive funds for the sale of that entity. The Company believes that (i) Premas will be successful in its efforts to resolve
such regulatory matters with the Reserve Bank of India, (ii) the Company will disburse the amounts due to Premas under the MIPA,
and (iii) the Company maintains a 100% membership in Cystron.



 



Upon
the Company’s consummation of the Private Placement (as defined below), the Company paid $1,204,525 of the proceeds from
the Private Placement to three of the four former members of Cystron on December 1, 2020 (the “November Payment”)
and recorded a liability of $602,172 to the fourth former member of Cystron pursuant to the MIPA.



 


As
of December 31, 2020, $1,510,290 is included in Trade and Other Payables for Premas’ portion of the initial cash component,
the April Payment, May Payment, August Payment and November Payment.



 


For
the year ended December 31, 2020, $5,867,046 is included in Research and Development Expense within the Consolidated
Statement of Comprehensive Loss for the March Payment, April Payment, May Payment, August Payment and November
Payment.


 



The
Company shall also make quarterly royalty payments to Sellers equal to 5% of the net sales of a COVID-19 vaccine or combination
product by the Company for a period of five (5) years following the first commercial sale of the COVID-19 vaccine; provided, that
such payment shall be reduced to 3% for any net sales of the COVID-19 vaccine above $500 million.


 


In
addition, Sellers shall be entitled to receive 12.5% of the transaction value, as defined in the MIPA, of any change of control
transaction, as defined in the MIPA, that occurs prior to the fifth (5th) anniversary of the closing date of the MIPA, provided
that the Company is still developing the COVID-19 Vaccine Candidate at that time. Following the consummation of any change of
control transaction, the Sellers shall not be entitled to any royalty payments as described above under the MIPA.


 


License
Agreement


 


Cystron
is a party to a License and Development Agreement (the “Initial License Agreement”) with Premas. As a condition to
the Company’s entry into the MIPA, Cystron amended and restated the Initial License Agreement on March 19, 2020 (as amended
and restated, the “License Agreement”). Pursuant to the License Agreement, Premas granted Cystron, amongst other things,
an exclusive license with respect to Premas’ vaccine platform for the development of a vaccine against COVID-19 and other
coronavirus infections.


 


Upon
the achievement of certain developmental milestones by Cystron, Cystron shall pay to Premas a total of up to $2,000,000. On April
16, 2020, the Company paid Premas $500,000 for the achievement of the first two development milestones. On May 18, 2020, the Company
paid Premas $500,000 for the achievement of the third development milestone. On July 7, 2020, the Company and Premas agreed that
the fourth milestone under the License Agreement had been satisfied. Due to the achievement of this milestone on July 7, 2020,
Premas was paid $1,000,000 on August 4, 2020. Accordingly, for the year ended December 31, 2020, Research and Development
Expenses of $2,000,000 were recorded in the Consolidated Statement of Comprehensive Loss.


 






 


AKERS
BIOSCIENCES, INC. AND SUBSIDIARIES


Notes
to Consolidated Financial Statements


 


Cystron
Medical Panel


 


On
April 10, 2020, the Company established the Cystron Medical Panel and appointed its first member to the panel. Each member shall
be compensated with an initial grant of the Company’s common stock with an aggregate fair market value of $25,000 and a
monthly cash stipend in the initial amount of $2,500. During the year ended December 31, 2020, the Company recorded $31,573 as
a charge to research and development expense within the Consolidated Statements of Comprehensive Loss. The Cystron Medical
Panel was disbanded effective January 31, 2021.


 







 


AKERS
BIOSCIENCES, INC. AND SUBSIDIARIES


Notes
to Consolidated Financial Statements


 


Agreement
and Plan of Merger and Reorganization


 


On
November 11, 2020, the Company, XYZ Merger Sub Inc., a Florida corporation and a wholly-owned subsidiary of the Company (“Merger
Sub
”), and MYMD Pharmaceuticals, Inc., a privately-held Florida corporation (“MYMD”), entered into
an Agreement and Plan of Merger and Reorganization (the “Merger Agreement”), pursuant to which, among other
things, subject to the satisfaction or waiver of the conditions set forth in the Merger Agreement, Merger Sub will merge with
and into MYMD, with MYMD being the surviving corporation and becoming a wholly-owned subsidiary of the Company (the “Merger”).
The Merger is intended to qualify for federal income tax purposes as a tax-free reorganization under the provisions of Section
368(a) of the Internal Revenue Code of 1986, as amended. In addition, in connection with the execution of the Merger Agreement,
Akers agreed to advance a bridge loan of up to $3,000,000 to MYMD pursuant to a Secured Promissory Note.


 


Subject
to the terms and conditions of the Merger Agreement, at the effective time of the Merger (the “Effective Time”),
(i) each outstanding share of common stock of MYMD (“MYMD common stock”), will be converted into the right
to receive the number of shares of the common stock of Akers (the “Akers common stock”) equal to the exchange
ratio described below; and (ii) each outstanding stock option of MYMD (collectively, “MYMD options”) that has
not previously been exercised prior to the Effective Time, whether or not vested, will be assumed by the Company subject to certain
terms contained in the Merger Agreement (including, but not limited to, the amendment of such stock option to extend the term
of such stock option for a period expiring on the second-year anniversary of the Effective Time). In connection with the Merger,
each holder of options is required to enter into a Lock-Up Agreement/Leak-Out Agreement with respect to the shares of Akers common
stock issued upon the exercise of such option. Also, not later than 30 days after the second-year anniversary of the Effective
Date, the Company will pay stockholders of MYMD on a pro rata basis an amount in cash equal to the aggregate cash proceeds received
by Akers from the exercise of any MYMD options assumed by the Company prior to the second-year anniversary of the Effective Time;
provided, however, the amount of such payment will not exceed the maximum amount of cash consideration that may be received by
stockholders of MYMD without affecting the intended tax consequences of the Merger.


 


Additionally,
under the terms of the Merger Agreement, the Company has agreed to pay contingent consideration to MYMD stockholders in the form
of milestone payments payable in shares of Akers common stock (collectively, the “Milestone Payments”). The
Milestone Payments are payable in the dollar amounts set forth in the chart below upon the achievement of the milestone events
set forth opposite such dollar amount during the 36-month period immediately following the Effective Date (the “Milestone
Period
”) as follows:


 












Milestone
Event

 

Milestone
Payment

 

 

 

Market
capitalization of Akers for at least 10 trading days during any 20 consecutive trading day period during the Milestone Period
is equal to or greater than $500 million (the “First Milestone Event”).

 

$20
million.

 

 

 

For
every $250 million incremental increase in market capitalization of Akers after the First Milestone Event to the extent such
incremental increase occurs for at least 10 trading days during any 20 consecutive trading day period during the Milestone
Period, up to a $1 billion market capitalization of Akers.

 

$10
million per each incremental increase (it being understood, however, that, if such incremental increase results in market
capitalization equal to $1 billion, such $20 million payment in respect of such incremental increase shall be payable without
duplication of any amount payable in respect of a Second Milestone Event).

 

 

 

Market
Capitalization of Akers for at least 10 trading days during any 20 consecutive trading day period is equal to or greater than
$1 billion (the “Second Milestone Event”).

 

$25
million.



 




For
every $1 billion incremental increase in market capitalization of Akers after the Second Milestone Event to the extent such
incremental increase occurs for at least 10 trading days during any 20 consecutive trading day period during the Milestone
Period.

 

$25
million per each incremental increase.


 






 


AKERS
BIOSCIENCES, INC. AND SUBSIDIARIES


Notes
to Consolidated Financial Statements


 


Each
milestone payment will be payable in shares of common stock of Akers (the “Milestone Shares”), with the number of
Milestone Shares to be issued determined by dividing the applicable Milestone Payment amount by the volume-weighted average price
of a share of Akers’ common stock during the 10 trading days immediately preceding the achievement of the milestone event;
provided, however, that in no event shall the price of a share of Akers common stock used to determine the number of Milestone
Shares to be issued be deemed to be less than $5.00 per share (as adjusted for stock splits, stock dividends, reverse stock splits,
and the like occurring after the closing date).


 


Notwithstanding
the above, the number of Milestone Shares payable by Akers shall not exceed the number of shares of Akers common stock to be issued
to MyMD stockholders at the Effective Time in connection with the Merger (as described in the following paragraph).


 


Under
the exchange ratio formula in the Merger Agreement, and immediately upon the closing of the Merger, the former MYMD securityholders
are expected to own approximately 80% of the aggregate number of shares of Akers common stock issued and outstanding immediately
following the consummation of the Merger (the “Post-Closing Shares”), and the stockholders of the Company as
of immediately prior to the Merger are expected to own approximately 20% of the aggregate number of Post-Closing Shares.


 


Immediately
prior to the Effective Time, the name of the Company will be changed from “Akers Biosciences, Inc.” to “MyMD
Pharmaceuticals, Inc.” At the Effective Time, the Merger Agreement contemplates that the board of directors of the Company
will consist of seven directors, with (i) Akers having the right to designate up to four members and (ii) MYMD having the right
to designate up to three members. The officers of the Company immediately after the Effective Time will be elected by the board
of directors of Akers.


 


The
Merger Agreement contains customary representations, warranties and covenants made by the Company and MYMD, including covenants
relating to obtaining the requisite approvals of the stockholders of the Company and MYMD, indemnification of directors and officers,
and the Company’s and MYMD’s conduct of their respective businesses between the date of signing the Merger Agreement
and the closing of the Merger. Consummation of the Merger is subject to certain closing conditions, including, among other things,
approval by the stockholders of Akers and MYMD.


 


The
Merger Agreement contains certain termination rights for both the Company and MYMD, including, among other things, (a) Akers may,
upon written notice, extend the originally scheduled End Date (defined in the Merger Agreement as April 15, 2021) to May 15, 2021
(the “Extended Date”) so long as (i) Akers and Merger Sub are not then in material breach of any provision
of the Merger Agreement and (ii) within three calendar days of the written request by MYMD, Akers makes an additional loan to
MYMD of up to $600,000, which will have the same terms and conditions of the Note (as defined below and such additional note “Second
Note
”) and (b) Akers may, upon written notice, extend the Extended Date to June 30, 2021, so long as (i) Akers and Merger
Sub are not then in material breach of any provision of the Merger Agreement, (ii) on the effective date of such extension, the
loan amount evidenced by the Note and the Second Note may, at the sole option of MYMD upon written notice to Akers, be converted
into shares of MYMD common stock at a conversion price of $2.00 per share, subject to certain adjustments and (iii) Akers will,
at MYMD’s request, either (at the option of MYMD); (A) subscribe for 300,000 shares of MYMD common stock at a subscription
price of $2.00 per share, subject to certain adjustments as set forth in the Merger Agreement, or (B) make an additional loan
to MYMD of up to $600,000, which will have the same terms and conditions of the Note (the “Third Note,” and
all amounts outstanding under the Note, the Second Note and the Third Note, the “Loan Amount”). In addition,
if Akers terminates the Merger Agreement under certain circumstances specified therein, the Loan Amount, if any, at the sole discretion
of MYMD, will be convertible into shares of common stock of MYMD at a conversion price of $2.00 per share upon delivery of written
notice by MYMD to Akers within 30 calendar days after the effective date of termination of the Merger Agreement.


 






 


AKERS
BIOSCIENCES, INC. AND SUBSIDIARIES


Notes
to Consolidated Financial Statements


 


The
Merger Agreement also contemplates that the Company will seek approval from its stockholders to effect a reverse stock split,
if applicable, at a reverse stock split ratio mutually agreed to by the Company and MYMD and within the range approved by the
Company’s stockholders immediately prior to the Effective Time, which range shall be sufficient to cause the price of Akers
common stock on the Nasdaq Capital Market following such reverse stock split and the Effective Time to be no less than $5.00 per
share. In addition, under the Merger Agreement, Akers may, in its discretion, consummate a spin-off of all or a part of its pre-closing
assets and liabilities (the “Spin-Off”).


 


In
connection with the Merger, the Company will seek the approval of its stockholders of (a) the transactions contemplated in the
Merger Agreement, including the issuance of Akers common stock pursuant to the Merger and (b) the amendment of its certificate
of incorporation, including for purposes of (i) effectuating a reverse split of Akers common stock at a ratio to be determined
by a split ratio to be mutually agreed to by Akers and MYMD within the range approved by the Company’s stockholders immediately
prior to the Effective Time and on certain terms as specifically described herein, (ii) change Akers’ name to “MyMD
Pharmaceuticals, Inc.,” and (c) to the extent necessary, the Spin-Off.


 


In
accordance with the terms of the Merger Agreement, (i) the officers and directors of Akers have each entered into a voting agreement
with MYMD (the “Akers Voting Agreements”), and (ii) the officers, directors and certain affiliated stockholders
of MYMD have each entered into a voting agreement with Akers (the “MYMD Voting Agreements,” together with the
Akers Voting Agreements, the “Voting Agreements”). The Voting Agreements place certain restrictions on the
transfer of the shares of Akers and MYMD held by the respective signatories thereto and include covenants as to the voting of
such shares in favor of approving the transactions contemplated by the Merger Agreement and against any actions that could adversely
affect the consummation of the Merger.


 


Concurrently
with the execution of the Merger Agreement or prior to the closing, the officers and directors of Akers, and the officers,
directors and certain stockholders of MYMD, each entered into lock-up/leak-out agreements (the “Lock-Up/Leak-Out Agreements”)
pursuant to which they have agreed, among other things, not to sell or dispose of (subject to certain exceptions specified therein)
any shares of Akers common stock which are or will be beneficially owned by them at the Effective Time or which are acquired thereafter,
with such shares being released from such restrictions 180 days after the Effective Time. After the expiration of such initial
180-day period, such stockholders will be subject to a 180-day leak-out period during which they may not sell shares in excess
of the amount permitted by the Rule 144 volume limitations (even if such stockholder is not currently subject to such provisions
of Rule 144), which leak- out period shall be extended for an additional 180 days for any shares of Akers common stock issued
upon the exercise of existing options or warrants.


 


Secured
Promissory Note


 


As
set forth above, in connection with the execution of the Merger Agreement, Akers will advance a bridge loan to MYMD in an amount
of up to $3,000,000 pursuant to a Secured Promissory Note (the “Note”). Advances under the Note will be made
in accordance with MYMD’s cash needs pursuant to a pre-agreed operating budget for MYMD. The Note accrues interest on the
outstanding principal amount at the rate of 5% per annum and matures on the earliest of (i) April 15, 2022, (ii) upon demand of
Akers in the event the Merger is consummated, or (iii) the date on which MYMD’s obligations under the Note are accelerated
in accordance with the terms of the Note. As set forth above, in the event the Merger Agreement is terminated by MYMD upon a change
in Akers’ board of directors’ recommendations to the Akers stockholders in connection with the Merger Agreement and
certain other circumstances specified in the Merger Agreement, the principal amount of the Note, and all accrued and unpaid interest
thereon, shall be converted into shares of MYMD common stock at a conversion price of $2.00 per share. MYMD may prepay the Note
in whole or in part at any time or from time to time at its sole discretion. Under the terms of the Note, if, at any time after
the termination or expiration of the Merger Agreement, MYMD (i) incurs any debt other than Permitted Debt (as defined in the Note),
(ii) issues any equity interests, or (iii) consummates any Asset Sale or Recovery Event (each as defined in the Note) then, in
each case, no later than two business days after MYMD receives the net cash proceeds of such incurrence, issuance or other action,
then MYMD shall be required to prepay an amount under the Note equal to the net cash proceeds received, up to the total amount
of the advances made under the Note at such time, including all accrued and unpaid interest thereon, of the Note. The payment
and performance of all obligations under the Note are secured by a first priority security interest in all of MYMD’s right,
title and interest in and to its assets as collateral.



 



As of December 31, 2020, the Company had
advanced MYMD $1,200,000 under the Note, which is classified as Other Receivables on the Consolidated Balance Sheets. The Company
advanced two additional draws of $600,000, or $1,200,000 cumulatively, on January 21, 2021 and February 25, 2021 to MYMD under
this secured promissory note (see Note 2(i)).




 






 


AKERS
BIOSCIENCES, INC. AND SUBSIDIARIES


Notes
to Consolidated Financial Statements


 


Securities
Purchase Agreement


 


Concurrently
with the Merger Agreement, on November 11, 2020, the Company entered into a Securities Purchase Agreement (the “Private
Placement SPA
”) with certain institutional and accredited investors (the “SPA Purchasers”),
pursuant to which the Company agreed to issue and sell to the SPA Purchasers in a private placement (the “Private
Placement
”) (i) an aggregate of 9,765,933 shares of Akers common stock, at an offering price of $1.85 per share or,
at the election of each investor, pre-funded warrants (“Pre-Funded Warrants”), and (ii) for each share of Akers
common stock (or for each Pre-Funded Warrant, as applicable) purchased in the Private Placement, a common warrant (the “Investor
Warrants
” and, together with the Pre-Funded Warrants, the “Warrants”) to purchase one share
of Akers common stock, for gross proceeds of approximately $18.1 million before the deduction of placement agent fees and expenses
and estimated offering expenses. In addition, the Company also issued the Placement Agent a warrant to purchase up to 390,368
shares of its common stock at an exercise price of $1.85 (the “Placement Agent Warrant”). The Placement Agent
Warrant will be exercisable at any time and from time to time in whole or in part for a term of five and a half years. The
Private Placement closed on November 17, 2020, and the Company issued an aggregate of 8,725,393 shares of the Company’s
common stock, Pre-Funded Warrants to purchase 1,040,540 shares of its common stock, and Investor Warrant to purchase 9,765,933
shares of its common stock. In February 2021, an investor exchanged 932,432 shares of common stock purchased in the Private Placement
into Pre-Funded Warrants to purchase 932,432 shares of common stock.


 


In
the Private Placement SPA, the Company agreed not to (i) issue, enter into any agreement to issue or announce the issuance
or proposed issuance of, any shares of the Company’s common stock or any securities convertible into or exercisable or exchangeable
for shares of the Company’s common stock at an effective price less than the exercise price of the Investor Warrants or
(ii) file any registration statement or any amendment or supplement thereto, other than as contemplated under the Private Placement
SPA, for a period of 90 days following the later of (x) the date the Registration Statement (as defined below) is declared
effective by the SEC and (y) the record date for the Company’s stockholder meeting called to approve the Merger. In addition,
the Company agreed not to effect or enter into an agreement to effect any issuance of the Company’s common stock or common
stock equivalents involving a variable rate transaction (as defined in the Private Placement SPA) from the date of the
Private Placement SPA until such time as no SPA Purchaser holds any of the Investor Warrants, subject to certain
exceptions (including the issuance of any of the Company’s common stock pursuant to the Merger Agreement).


 


The
Private Placement SPA provides that (i) within 10 days following the date that the Company first files a proxy statement
with the SEC in connection with the Merger (including by means of a registration statement on Form S-4), the Company shall file
a registration statement (the “Registration Statement”) under the Securities Act of 1933, as amended (the “Securities
Act
”) for the resale of all of the Shares and the shares of the Company’s common stock issuable upon exercise
of the Warrants (the “Warrant Shares”) by the Purchasers and (ii) the Company shall use commercially reasonable
efforts to cause such Registration Statement to be declared effective within 60 days of the filing thereof (or 90 days in the
event of a full review); provided, however, that the Company shall not be required to register any Shares or Warrant Shares that
are eligible for resale pursuant to Rule 144 under the Securities Act (assuming cashless exercise of the Warrants).


 



The
Company currently intends to use the proceeds from the Private Placement in order to satisfy the closing conditions set forth
in the Merger Agreement that requires the Company to have a minimum parent net cash amount equal to $25 million, less certain amounts advanced to MyMD, which
shall also include any amounts to be used to payoff The Starwood Trust to repay in full the Starwood Line of Credit at the
closing of the Merger, and for general working capital purposes. In addition, the Company paid $1,204,525 of the proceeds
from the Private Placement to three of the former members of Cystron and recorded a liability of $602,172 to the fourth
former member of Cystron pursuant to the MIPA. In addition, the Company paid a cash fee of $501,500 and issued warrants to
purchase an aggregate of 255,135 shares of common stock to the designees of H.C. Wainwright & Co., LLC
(“HCW”), pursuant to a side letter by and between the Company and HCW, dated November 23, 2020, regarding
certain tail fees provided in two engagement letters (one dated October 18, 2019 and the other dated April 7, 2020) entered
into in connection with prior offerings by and between Akers and HCW. Such warrants issued were in the same form as the
Investor Warrants except that the HCW warrants have an exercise price of $2.3125 per share.



 






 


AKERS
BIOSCIENCES, INC. AND SUBSIDIARIES


Notes
to Consolidated Financial Statements


 


The
Investor Warrants


 


Each
Investor Warrant issued in the Private Placement has an initial exercise price equal to $2.06 per share of common stock. The Investor
Warrants are immediately exercisable and will terminate five and a half years following issuance. The exercise price and number
of shares of Akers common stock issuable upon exercise is subject to appropriate adjustment in the event of stock dividends, stock
splits, reorganizations or similar events affecting Akers common stock and the exercise price.


 


If,
at any time following the six-month anniversary of November 17, 2020, there is no effective registration statement registering,
or the prospectus contained therein is not available for the issuance of the shares underlying the Investor Warrants (the “Investor
Warrant Shares
”) to the holder, then the Investor Warrants may also be exercised, in whole or in part, at such time
by means of a “cashless exercise” in which the holder shall be entitled to receive a number of Investor Warrant Shares
according to a formula set forth in the Investor Warrants.


 


A
holder (together with its affiliates) may not exercise any portion of the Investor Warrant to the extent that the holder would
own more than 4.99% (or, at the election of the holder prior to the date of issuance, 9.99%) of the outstanding Akers common stock
immediately after exercise; provided, however that upon notice to Akers, the holder may increase or decrease the beneficial ownership
limitation, provided that in no event shall the beneficial ownership limitation exceed 9.99% and any increase in the beneficial
ownership limitation will not be effective until 61 days following notice of such increase from the holder to Akers.


 


In
the event of a fundamental transaction, as described in the Investor Warrants and generally including any reorganization, recapitalization
or reclassification of Akers common stock, the sale, transfer or disposition of all or substantially all of Akers’ properties
or assets, Akers’ consolidation or merger with or into another person, the acquisition of more than 50% of Akers outstanding
common stock, or any person or group becoming the beneficial owner of 50% of the voting power represented by Akers’ outstanding
common stock, the holders of the Investor Warrants will be entitled to receive upon exercise of such warrants the kind and amount
of securities, cash or other property that the holders would have received had they exercised the Investor Warrants immediately
prior to such fundamental transaction. The Merger shall not be deemed a fundamental transaction as defined in the Investor Warrants.


 


The
Pre-Funded Warrants


 


At
the request of an investor, in lieu of Akers common stock, certain investors received Pre-Funded Warrants. The Pre-Funded Warrants
are exercisable at any time immediately upon issuance and until such warrant is exercised in full. The exercise price of the Pre-Funded
Warrants is $0.001 per share of Akers common stock, and, in lieu of making the cash payment otherwise contemplated to be made
to Akers upon such exercise in payment of the aggregate exercise price, the holder may elect instead to receive upon such exercise
(either in whole or in part) the net number of shares of Akers common stock determined according to a formula set forth in the
Pre-Funded Warrants.


 


A
holder (together with its affiliates) may not exercise any portion of the Pre-Funded Warrants to the extent that the holder would
own more than 4.99% (or, at the election of the holder prior to the date of issuance, 9.99%) of the outstanding Akers common stock
immediately after exercise; provided, however, that upon notice to the Company, the holder may increase or decrease the beneficial
ownership limitation, provided that in no event shall the beneficial ownership limitation exceed 9.99% and any increase in the
beneficial ownership limitation will not be effective until 61 days following notice of such increase from the holder to the Company.


 







 


AKERS
BIOSCIENCES, INC. AND SUBSIDIARIES


Notes
to Consolidated Financial Statements


 


Lock-up
and Support Agreement


 


On
November 11, 2020, the Company entered into a Lock-Up and Support Agreement (the “Support Agreement”) with
substantially all of the SPA Purchasers, pursuant to which, from the date of the Support Agreement until May 31, 2021, such SPA
Purchasers agreed to vote their respective shares of Akers common stock in favor of each matter proposed and recommended for approval
by the Akers board of directors or management at every shareholders’ meeting. Pursuant to the Support Agreement, such SPA
Purchasers also agreed to, until the earlier of (a) the termination of the Merger Agreement or (b) the date that the SPA Purchasers
vote their respective shares of Akers common stock in support of the Merger and all matters related to the Merger, will not, directly
or indirectly, without the Company’s prior written consent, transfer, assign, or dispose of their rights to vote the shares
of Akers common stock issued in the private placement or otherwise take any act that could restrict or otherwise affect their
legal power, authority, or right to vote all of their shares of Akers common stock issued in the Private Placement in the manner
required by the Support Agreement.


 


Katalyst
Securities LLC Engagement Letter


 


On
October 31, 2020, the Company entered into an engagement letter (the “Engagement Letter”) with Katalyst Securities
LLC (the “Placement Agent”), pursuant to which the Placement Agent agreed to serve as the non-exclusive placement
agent for the Company, on a reasonable best efforts basis, in connection with the Private Placement. The Company has agreed to
pay the Placement Agent an aggregate cash fee equal to 6.5% of the gross proceeds received in the Private Placement and reimburse
the Placement Agent’s expenses in the Private Placement up to $25,000. In addition, the Company agreed to grant to Katalyst
the Placement Agent Warrant, which was issued upon closing of the Private Placement. The Placement Agent Warrant is
exercisable at any time and from time to time, in whole or in part, following the date of issuance and for a term of five
years.


 


Liquidity


 



As of December 31, 2020, the Company’s
cash and cash equivalents on hand were $18,617,955, and marketable securities were $16,718,452. Historically, the Company has
incurred net losses and the Company incurred a net loss of $17,580,609 for the year ended December 31, 2020. As of December 31,
2020, the Company had working capital of $34,579,466 and stockholder’s equity of $34,579,466 and an accumulated deficit
of $137,163,739. During the year ended December 31, 2020, cash flows used in operating activities were $11,924,941, consisting
primarily of a net loss from operations of $12,152,214 and a net loss from discontinued operations of $5,428,395. Since its inception,
the Company has met its liquidity requirements principally through the sale of its common stock in public and private placements.



 


Development and
commercialization of the Company’s COVID-19 Vaccine Candidate will require the Company to raise significant additional funds
as the project proceeds through clinical trials, the attainment of the required regulatory approvals and the commercialization
of the vaccine. The timing of these events is difficult to estimate and are unlikely to be fully completed within the next twelve-months.
The Company’s ability to obtain additional capital may depend on prevailing economic conditions and financial, business
and other factors beyond its control. The COVID-19 pandemic has caused an unstable economic environment globally, and the ultimate
impact of the COVID-19 pandemic on the Company’s operations is unknown and will depend on future developments, which are
highly uncertain and cannot be predicted with confidence. These include but are not limited to the duration of the COVID-19 pandemic,
new information which may emerge concerning the severity of the COVID-19 pandemic, and any additional preventative and protective
actions that regulators, or the board or management of the Company, may determine are needed. Disruptions in the global financial
markets may adversely impact the availability and cost of credit, as well as the Company’s ability to raise money in the
capital markets. Current economic conditions have been and continue to be volatile. Continued instability in these market conditions
may limit the Company’s ability to access the capital necessary to fund and grow its business.


 


The Company evaluated
the current cash requirements for operations in conjunction with management’s strategic plan and believes that the Company’s
current financial resources as of the date of the issuance of these consolidated financial statements, are sufficient to fund
its current operating budget and contractual obligations as of December 31, 2020 as they fall due within the next twelve-month
period, alleviating any substantial doubt raised by the Company’s historical operating results and satisfying its estimated
liquidity needs for twelve months from the issuance of these consolidated financial statements.



 




Note
4 – Inventories


 


Inventories
are measured at the lower of cost or net realizable value. The cost of inventories is based on the weighted-average principle,
and includes expenditures incurred in acquiring the inventories, production or conversion costs and other costs incurred in bringing
them to their existing location and condition. In the case of manufactured inventories and work in progress, costs include an
appropriate share of production overhead based on normal operating capacity. As the Company discontinued the production and
distribution of all of the Company’s diagnostic tests on July 7, 2020, all inventories amounting to $197,723 was fully impaired
and disposed of as of December 31, 2020.


 






 




AKERS
BIOSCIENCES, INC. AND SUBSIDIARIES


Notes
to Consolidated Financial Statements


 


Note
5 – Trade and Other Payables


 


Trade
and other payables consist of the following:


 










 

 


December
31,


2020


 

 


December
31,


2019


 

 

 

 

 

 

 

 

Accounts Payable –
Trade

 

$

569,999

 

 

$

599,306

 

Accrued Expenses

 

 

123,613

 

 

 

232,827

 

Deferred Compensation

 

 


 

 

 

59,750

 

Accounts Payable
– Other (Note 3)

 

 

1,510,290

 

 

 


 

 

 

$

2,203,902

 

 

$

891,883

 



 


See
Note 11 for related party information.


 






 


AKERS
BIOSCIENCES, INC. AND SUBSIDIARIES


Notes
to Consolidated Financial Statements


 


Note
6 – Discontinued Operations


 


The
Company conducted a strategic review of the screening and testing products business. Following such review, in early July 2020,
the Company ceased the production and sale of its rapid, point-of-care screening and testing products. The Company had been experiencing
declining sales revenue and production backlogs for these products and, as it previously reported, had eliminated its sales force
for such products.


 


The
assets and liabilities of the discontinued operations have been reflected in the Consolidated Balance Sheet as of December 31,
2020 and consist of the following:


 





















 

 

As
of

 

 

 

December
31,

 

 

 

2020

 

Current Assets:

 

 

Prepaid
Expenses

 

$

12,002

 

Total Assets

 

$

12,002

 

 

 

 

 

 

Current Liabilities:

 

 

 

 

Trade
and Other Payables of Discontinued Operations

 

$

59,393

 

Total Current Liabilities

 

 

59,393

 

Non-Current Liabilities

 

 


 

Total Liabilities

 

$

59,393

 

 

 

 

 

 

Shareholders’
Equity

 

$


 

 

 

 

 

 

Total Liabilities
and Shareholders’ Equity

 

$

59,393

 



 






 




AKERS
BIOSCIENCES, INC. AND SUBSIDIARIES


Notes
to Consolidated Financial Statements


 


The
results from the discontinued operations have been reflected in the Consolidated Statement of Comprehensive Loss for the year
ended December 31, 2020 and consist of the following:


 























 

 

For
the

 

 

 

Year

 

 

 

Ended

 

 

 

December
31,

 

 

 

2020

 

Product Revenue

 

$

361,827

 

Product Cost
of Sales

 

 

(659,405

)

Gross Loss

 

 

(297,578

)

 

 

 

 

 

Research and Development Expenses

 

 

2,788

 

Administrative Expenses

 

 

417,730

 

Sales and Marketing Expenses

 

 

51,311

 

Regulatory and Compliance Expenses

 

 

197,312

 

Litigation Settlement Expenses

 

 

3,981,131

 

Amortization of Non-Current Assets

 

 

17,601

 

Impairment of Prepaid Royalties

 

 

291,442

 

Impairment of Production Equipment

 

 


18,680


 

Impairment of
Intangible Assets

 

 

152,822

 

 

 

 

 

 

Loss from Discontinued
Operations

 

$

(5,428,395

)



 


As
a result of the discontinued operations, the previously presented 2019 financial statements have been revised to present the consolidated
financial statements of the continuing operations separate from the discontinued operations. The effects on the Consolidated Balance
Sheet as of December 31, 2019 were as follows:


 
















































 

 

December
31, 2019

 

 

 

As previously

 

 

 

 

 

 

 

 

 

Reported

 

 

Adjustment

 

 

As
Revised

 

ASSETS

 

 

 

 

 

 

 

 

 

Current
Assets

 

 

 

 

 

 

 

 

 

 

 

 

Cash

 

$

517,444

 

 

$


 

 

$

517,444

 

Marketable Securities

 

 

9,164,273

 

 

 


 

 

 

9,164,273

 

Accounts Receivable,
net

 

 

42,881

 

 

 

42,881

 

 

 


 

Deposits and Other
Receivables

 

 


 

 

 


 

 

 


 

Inventories, net

 

 

198,985

 

 

 

198,985

 

 

 


 

Prepaid Expenses

 

 

387,231

 

 

 

53,172

 

 

 

334,059

 

Current
Assets – discontinued operations

 

 


 

 

 

(295,038

)

 

 

295,038

 

Total
Current Assets

 

 

10,310,814

 

 

 


 

 

 

10,310,814

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-Current
Assets

 

 

 

 

 

 

 

 

 

 

 

 

Prepaid Expenses,
net of current

 

 

252,308

 

 

 

252,308

 

 

 


 

Restricted Cash

 

 

115,094

 

 

 


 

 

 

115,094

 

Plant, Property
and Equipment, net

 

 

33,574

 

 

 

33,574

 

 

 


 

Intangible assets,
net

 

 

170,423

 

 

 

170,423

 

 

 


 

Other assets

 

 

2,722

 

 

 


 

 

 

2,722

 

Non-current
Assets – discontinued operations

 

 

 

 

 

 

(456,305

)

 

 

456,305

 

Total
Non-Current Assets

 

 

574,121

 

 

 


 

 

 

574,121

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total
Assets

 

$

10,884,935

 

 

$


 

 

$

10,884,935

 

 

 

 

 

 

 

 

 

 

 

 

 

 

LIABILITIES

 

 

 

 

 

 

 

 

 

 

 

 

Current
Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

Trade and Other
Payables

 

 

1,529,765

 

 

 

637,882

 

 

 

891,883

 

Current
Liabilities – discontinued operations

 

 


 

 

 

(637,882

)

 

 

637,882

 

Total
Current Liabilities

 

 

1,529,765

 

 

 


 

 

 

1,529,765

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total
Liabilities

 

 

1,529,765

 

 

 


 

 

 

1,529,765

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commitments and Contingencies

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

SHAREHOLDERS’
EQUITY

 

 

 

 

 

 

 

 

 

 

 

 

Preferred Stock,
No par value, 50,000,000 total preferred shares authorized

 

 


 

 

 


 

 

 


 

Common stock, No par value, 100,000,000
shares authorized 1,738,837 issued and outstanding as of December 31, 2019

 

 

128,920,414

 

 

 


 

 

 

128,920,414

 

Accumulated Other
Comprehensive Income

 

 

17,886

 

 

 


 

 

 

17,886

 

Accumulated
Deficit

 

 

(119,583,130

)

 

 


 

 

 

(119,583,130

)

Total
Shareholders’ Equity

 

 

9,355,170

 

 

 


 

 

 

9,355,170

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total
Liabilities and Shareholders’ Equity

 

$

10,884,935

 

 

$


 

 

$

10,884,935

 



 






 




AKERS
BIOSCIENCES, INC. AND SUBSIDIARIES


Notes
to Consolidated Financial Statements


 


The
effects on the Consolidated Statement of Comprehensive Loss for the year ended December 31, 2019 were as follows:


 










































 

 

For the Year Ended

 

 

 

December
31, 2019

 

 

 

As
Previously Reported

 

 

Adjusted

 

 

As
Revised

 

Product Revenue

 

$

1,577,033

 

 

$

1,577,033

 

 

$


 

Product Cost
of Sales

 

 

(1,098,286

)

 

 

(1,098,286

)

 

 


 

Gross Income

 

 

478,747

 

 

 

478,747

 

 

 


 

 

 

 

 

 

 

 

 

 

 

 

 

 

Research and Development Expenses

 

 


 

 

 


 

 

 


 

Administrative Expenses

 

 

3,728,514

 

 

 

356,411

 

 

 

3,372,103

 

Sales and Marketing Expenses

 

 

238,036

 

 

 

213,036

 

 

 

25,000

 

Compliance and Regulatory Expenses

 

 

276,788

 

 

 

276,788

 

 

 


 

Litigation Settlement Expenses

 

 

141,478

 

 

 

66,478

 

 

 

75,000

 

Amortization of Non-Current Assets

 

 

40,008

 

 

 

40,008

 

 

 


 

Impairment of
Intangible Assets

 

 

32,980

 

 

 

32,980

 

 

 


 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss
from Operations

 

 

(3,979,057

)

 

 

(506,954

)

 

 

(3,472,103

)

 

 

 

 

 

 

 

 

 

 

 

 

 

Other (Income) Expense

 

 

 

 

 

 

 

 

 

 

 

 

Loss on Disposal
of Non-Current Assets

 

 

9,576

 

 

 


 

 

 

9,576

 

Foreign Currency
Transaction (Gain) Loss

 

 

5,051

 

 

 


 

 

 

5,051

 

Gain on Investments

 

 

(3,952

)

 

 


 

 

 

(3,952

)

Interest
and Dividend Income

 

 

(101,483

)

 

 


 

 

 

(101,483

)

Total Other Income

 

 

(90,808

)

 

 


 

 

 

(90,808

)

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss from Continuing Operations

 

 

(3,888,249

)

 

 


 

 

 

(3,381,295

)

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss
from Discontinued Operations

 

 


 

 

 

(506,954

)

 

 

(506,954

)

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss Before Income Taxes

 

 

(3,888,249

)

 

 


 

 

 

(3,888,249

)

 

 

 

 

 

 

 

 

 

 

 

 

 

Income Tax Benefit

 

 


 

 

 


 

 

 


 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Loss

 

 

(3,888,249

)

 

 


 

 

 

(3,888,249

)

 

 

 

 

 

 

 

 

 

 

 

 

 

Other Comprehensive Income

 

 

 

 

 

 

 

 

 

 

 

 

Net
Unrealized Gain on Marketable Securities

 

 

43,799

 

 

 


 

 

 

43,799

 

Total Other Comprehensive
Income

 

 

43,799

 

 

 


 

 

 

43,799

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Comprehensive
Loss

 

$

(3,844,450

)

 

 


 

 

$

(3,844,450

)



 






 




AKERS
BIOSCIENCES, INC. AND SUBSIDIARIES


Notes
to Consolidated Financial Statements


 


The
depreciation, amortization and significant operating noncash items of the discontinued operations were as follows:


 














 

 

For
the Year Ended

 

 

 

December
31,

 

 

 

2020

 

 

2019

 

Depreciation and amortization

 

$

29,452

 

 

$

74,064

 

Impairment of Prepaid Royalties

 

 

291,442

 

 

 


 

Impairment of intangible assets

 

 

152,822

 

 

 

32,980

 

Impairment of production equipment

 

 

18,680

 

 

 


 

Inventory adjustment for net realizable
value

 

 

197,723

 

 

 


 

Reserve for obsolete inventory

 

 


 

 

 

371,997

 

Share based compensation
– shares issued to Chubeworkx

 

 

2,510,000

 

 

 


 

 

 

$

3,200,119

 

 

$

479,041

 



 






 


AKERS
BIOSCIENCES, INC. AND SUBSIDIARIES


Notes
to Consolidated Financial Statements


 


Note
7 – Share-based Compensation


 


Equity
incentive Plans


 


2013
Stock Incentive Plan


 


On
January 23, 2014, the Company adopted the 2013 Stock Incentive Plan (“2013 Plan”). The 2013 Plan was amended by the
Board on January 9, 2015 and September 30, 2016, and such amendments were ratified by shareholders on December 7, 2018. The 2013
Plan provides for the issuance of up to 4,323 shares of the Company’s common stock. As of December 31, 2020, grants of restricted
stock and options to purchase 2,813 shares of Common Stock have been issued pursuant to the 2013 Plan, and 1,510 shares of Common
Stock remain available for issuance.


 


2017
Stock Incentive Plan


 


On
August 7, 2017, the shareholders approved, and the Company adopted the 2017 Stock Incentive Plan (“2017 Plan”). The
2017 Plan provides for the issuance of up to 7,031 shares of the Company’s common stock. As of December 31, 2020, grants
of restricted stock and options to purchase 3,064 shares of Common Stock have been issued pursuant to the 2017 Plan, and 3,967
shares of Common Stock remain available for issuance.


 


2018
Stock Incentive Plan


 


On
December 7, 2018, the shareholders approved, and the Company adopted the 2018 Stock Incentive Plan (“2018 Plan”).
On August 27, 2020, the 2019 Plan was modified to increase the total authorized shares. The 2018 Plan, as amended, provides for
the issuance of up to 1,120,125 shares of the Company’s common stock. As of December 31, 2020, grants of RSUs to purchase
804,963 shares of Common Stock have been issued pursuant to the 2018 Plan, and 315,162 shares of Common Stock remain available
for issuance.


 






 




AKERS
BIOSCIENCES, INC. AND SUBSIDIARIES


Notes
to Consolidated Financial Statements


 


Note
7 – Share-based Compensation, continued


 


Stock
Options


 


The
following table summarizes the option activities for the years ended December 31, 2020:


 
















 

 

 

 

 

 

 

 

 

 

 

Weighted

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Average

 

 

 

 

 

 

 

 

 

Weighted

 

 

Weighted

 

 

Remaining

 

 

 

 

 

 

Number

 

 

Average

 

 

Average

 

 

Contractual

 

 

Aggregate

 

 

 

of

 

 

Exercise

 

 

Grant
Date

 

 

Term

 

 

Intrinsic

 

 

 

Shares

 

 

Price

 

 

Fair
Value

 

 

(years)

 

 

Value

 

Balance
at December 31, 2019

 

 

40

 

 

$

236.16

 

 

$

151.68

 

 

 

0.99

 

 

$


 

Granted

 

 


 

 

 


 

 

 


 

 

 


 

 

 


 

Exercised

 

 


 

 

 


 

 

 


 

 

 


 

 

 


 

Forfeited

 

 


 

 

 


 

 

 


 

 

 

 

 

 

 


 

Canceled/Expired

 

 

(40

)

 

$

236.16

 

 

$

151.68

 

 

 

0.24

 

 

 


 

Balance
at December 31, 2020

 

 


 

 

$


 

 

$


 

 

 


 

 

$


 

Exercisable
as of December 31, 2020

 

 


 

 

$


 

 

$


 

 

 


 

 

$


 



 


The
aggregate intrinsic value is calculated as the difference between the exercise price of the underlying awards and the closing
stock price of $1.99 for the Company’s common shares on December 31, 2020. As the closing stock price on December 31, 2020
is lower than the exercise price, there is no intrinsic value to disclose.


 


The
Company had no outstanding stock options as of December 31, 2020.


 


During
the years ended December 31, 2020 and 2019, the Company incurred stock option expenses totaling $0 and $0, respectively.


 






 


AKERS
BIOSCIENCES, INC. AND SUBSIDIARIES


Notes
to Consolidated Financial Statements


 


Note
7 – Share-based Compensation, continued


 


Restricted
Stock Units


 


On
March 29, 2019, the Compensation Committee of the Board of Directors approved the grant of 5,201 Restricted Stock Units (“RSU”)
to each of the three directors. Each RSU had a grant date fair value of $23.28 which shall be amortized on a straight-line basis
over the vesting period into administrative expenses within the Consolidated Statement of Comprehensive Loss. Such RSUs were granted
under the 2018 Plan, and vested on January 1, 2020. Upon vesting, such RSUs shall be settled with the issuance of common stock.
The Company stock underlying these RSUs are subject to a lock-up/leak-out agreement for a period of 180 days from the effective
date of the merger with MyMD (Note 3).


 


On
September 11, 2020, the Compensation Committee of the Board of Directors approved grants totaling 789,360 Restricted Stock Units
to the Company’s four directors. Each RSU had a grant date fair value of $2.24 which shall be amortized on a straight-line
basis over the vesting period into administrative expenses within the Consolidated Statement of Comprehensive Loss. Such RSUs
were granted under the 2018 Plan, as amended. Fifty percent (50%) of each RSU will vest on the first anniversary date of the Grant
and the remaining fifty percent (50%) will vest on the second anniversary date; provided that the RSUs shall vest immediately
upon the occurrence of (i) a change in control, provided that the director is employed by or providing services to the Company
and its affiliates on the closing date of such change of control, or (ii) the director’s termination of employment of service
by the Company was without cause.


 


As
of December 31, 2020, the unamortized value of the RSUs was $1,364,879. A summary of activity related to the RSUs for the year
ended December 31, 2020 is as follows:


 

















 

 

 

 

 

Weighted

 

 

 

 

 

 

Average

 

 

 

Number of

 

 

Grant Date

 

 

 

RSUs

 

 

Fair
Value

 

Balance
at December 31, 2019

 

 

15,603

 

 

$

23.28

 

Granted

 

 

789,360

 

 

 

2.24

 

Exercised

 

 


 

 

 


 

Forfeited

 

 


 

 

 


 

Vested

 

 

(15,603

)

 

 

23.28

 

Canceled/Expired

 

 


 

 

 


 

Balance
at December 31, 2020

 

$

789,360

 

 

$

2.24

 

Exercisable
as of December 31, 2020

 

$


 

 

$


 



 


During
the years ended December 31, 2020 and 2019, the Company incurred RSU expense of $404,589 and $362,005, respectively.


 






 




AKERS
BIOSCIENCES, INC. AND SUBSIDIARIES


Notes
to Consolidated Financial Statements


 


Note
7 – Share-based Compensation, continued


 


Common
Stock Warrants


 


The
table below summarizes the warrant activity for the year ended December 31, 2020:


 














 

 

 

 

 

Weighted

 

 

Average

 

 

 

 

 

 

 

 

 

Average

 

 

Remaining

 

 

Aggregate

 

 

 

Number
of

 

 

Exercise

 

 

Contractual

 

 

Intrinsic

 

 

 

Warrants

 

 

Price

 

 

Term
(years)

 

 

Value

 

Balance
at December 31, 2019

 

 

247,215

 

 

$

29.79

 

 

 

4.72

 

 

$


 

Granted

 

 

10,678,737

 

 

 

2.16

 

 

 

5.36

 

 

 


 

Exercised

 

 


 

 

 


 

 

 


 

 

 


 

Forfeited

 

 


 

 

 


 

 

 


 

 

 


 

Canceled/Expired

 

 


 

 

 


 

 

 


 

 

 


 

Balance
at December 31, 2020

 

 

10,925,952

 

 

$

2.78

 

 

 

5.31

 

 

$


 

Exercisable
as of December 31, 2020

 

 

10,925,952

 

 

$

2.78

 

 

 

5.31

 

 

$


 



 


The
aggregate intrinsic value is calculated as the difference between the exercise price of the underlying awards and the closing
stock price of $1.99 for the Company’s common shares on December 31, 2020. All warrants were vested on date of grant.


 






 




AKERS
BIOSCIENCES, INC. AND SUBSIDIARIES


Notes
to Consolidated Financial Statements


 


Note
7 – Share-based Compensation, continued


 


Pre-funded
Common Stock Warrants


 


The
table below summarizes the pre-funded warrant activity for the year ended December 31, 2020:


 














 

 

 

 

 

Weighted

 

 

Average

 

 

 

 

 

 

 

 

 

Average

 

 

Remaining

 

 

Aggregate

 

 

 

Number
of

 

 

Exercise

 

 

Contractual

 

 

Intrinsic

 

 

 

Warrants

 

 

Price

 

 

Term
(years)

 

 

Value

 

Balance
at December 31, 2019

 

 

795,000

 

 

$

0.0001

 

 

 


 

 

$

2,543,921

 

Granted

 

 

1,040,540

 

 

 

0.001

 

 

 


 

 

 


 

Exercised

 

 

(795,000

)

 

 

0.0001

 

 

 


 

 

 


 

Forfeited

 

 


 

 

 


 

 

 


 

 

 


 

Canceled/Expired

 

 


 

 

 


 

 

 


 

 

 


 

Balance
at December 31, 2020

 

 

1,040,540

 

 

$

0.001

 

 

 


 

 

$

2,069,634

 

Exercisable
as of December 31, 2020

 

 

1,040,540

 

 

$

0.001

 

 

 


 

 

$

2,069,634

 



 


All
pre-funded warrants were vested on date of grant and are exercisable at any time.
The
aggregate intrinsic value is calculated as the difference between the exercise price of the underlying award and the closing stock
price of $1.99 for the Company’s common shares on December 31, 2020.


 


During
the year ended December 31, 2020, pre-funded warrants to purchase 795,000 shares of common stock were exercised at an exercise
price of $0.0001 per share, yielding net proceeds of $80.



 




Preferred
Series ‘C’ Stock Warrants


 


The
table below summarizes the warrant activity for the year ended December 31, 2020:


 














 

 

 

 

 

Weighted

 

 

Average

 

 

 

 

 

 

 

 

 

Average

 

 

Remaining

 

 

Aggregate

 

 

 

Number
of

 

 

Exercise

 

 

Contractual

 

 

Intrinsic

 

 

 

Warrants

 

 

Price

 

 

Term
(years)

 

 

Value

 

Balance
at December 31, 2019

 

 

1,990,000

 

 

$

4.00

 

 

 

5.00

 

 

$


 

Granted

 

 


 

 

 


 

 

 


 

 

 


 

Exercised

 

 


(1,935,000


)

 

 


4.00


 

 

 


 

 

 


 

Forfeited

 

 


 

 

 


 

 

 


 

 

 


 

Canceled/Expired

 

 


 

 

 


 

 

 


 

 

 


 

Balance
at December 31, 2020

 

 

55,000

 

 

$

4.00

 

 

 

3.94

 

 

$


 

Exercisable
as of December 31, 2020

 

 

55,000

 

 

$

4.00

 

 

 

3.94

 

 

$


 



 


The
aggregate intrinsic value is calculated as the difference between the exercise price of the underlying awards and the closing
stock price of $1.99 for the Company’s common shares on December 31, 2020.


 


All
preferred series ‘C’ warrants were vested on date of grant.
During
the year ended December 31, 2020, 1,935,000 warrants to purchase 1,935,000 shares of the Company’s common stock were exercised
yielding net proceeds of $7,740,000.


 






 


AKERS
BIOSCIENCES, INC. AND SUBSIDIARIES


Notes
to Consolidated Financial Statements


 


Note
8 – Equity


 


The
holders of common shares are entitled to one vote per share at meetings of the Company. On December 30, 2019, the Company’s
shareholders approved an increase to 100,000,000 of the number of the authorized shares of Common Stock.


 


The
holders of preferred shares or preferred warrants are entitled to vote per share, as limited by the Certificate of Designation
for each class of preferred shares or warrants, at meetings of the Company. As of December 31, 2020, 50,000,000 shares of Preferred
Stock were authorized and four classes of Preferred Stock or Warrants are designated as described below.


 



Series
A Convertible Preferred Stock


 



On
September 14, 2012, the Company designated 10,000,000 Series A Convertible Preferred Shares, $0.001 par value, with a stated value
of $0.0725. The Series A Convertible Preferred Shares have the following rights:


 


Voting
Rights
: Preferred stockholders have voting rights equal to the number of common shares stockholder would own upon conversion
of shares of preferred stock.


 


Dividends:
The holders of the Convertible Preferred Stock are entitled to receive preferential dividends at a rate of $0.00135 per
share. Such dividends compound annually and are fully cumulative and have priority to any dividends on common stock.


 


Liquidation
Preferences
: The holders of the Convertible Preferred Stock are entitled to receive liquidation preferences for payment
of any dividends due the holders. After payment of the liquidation preferences, the remaining assets, if any, are to be distributed
to the holders of the Convertible Preferred Stock and common stock on a pro rata basis.


 


Conversion:
One share of the Convertible Preferred Stock is convertible into five shares of the Company’s common stock at the option
of the holder.


 







 


AKERS
BIOSCIENCES, INC. AND SUBSIDIARIES


Notes
to Consolidated Financial Statements


 


Series
C Convertible Preferred Stock


 


On
December 9, 2019, the Company designated 1,990,000 Series C Convertible Preferred Shares, no par value with a stated value of
$4.00. The Series C Preferred Shares have the following rights.


 


Voting
Rights
: Except as otherwise expressly provided or otherwise required by law, the
holders of shares of Series C Preferred Stock shall have no voting rights. However, as long as any shares of Preferred Stock are
outstanding, the Company shall not, without the affirmative vote of the Holders of a majority of the then outstanding shares of
Preferred Stock, (a) alter or change adversely the powers, preferences or rights given to the Preferred Stock or alter or amend
the Certificate of Designation, (b) increase the number of authorized shares of Preferred Stock, or (c) enter into any agreement
with respect to any of the foregoing. with respect to any of the foregoing


 


Dividends:
 Except for stock dividends or distributions for which adjustments are to be
made, holders shall be entitled to receive, and the Company shall pay, dividends on shares of Series C Preferred Stock equal (on
an as-if-converted-to-Common-Stock basis) to and in the same form as dividends actually paid on shares of the Common Stock when,
as and if such dividends are paid on shares of the Common Stock. No other dividends shall be paid on shares of Series C Preferred
Stock.


 


Liquidation
Preferences
: Upon any liquidation, dissolution or winding-up of Company, whether
voluntary or involuntary (a “ Liquidation ”), the Holders shall be entitled to participate on an
as-converted-to-Common Stock basis with holders of the Common Stock in any distribution of assets of the Company to the holders
of the Common Stock.


 


Conversion:
Each share of Series C Preferred Stock shall be convertible, at any time and from time to
time from and after the Original Issue Date at the option of the Holder thereof, into that number of shares of Common Stock determined
by dividing the Stated Value of such share of Series C Preferred Stock by the Conversion Price then in effect.


 


Series
D Convertible Preferred Stock


 


On
March 24, 2020, the Company designated 211,353 Series D Convertible Preferred Shares, no par value with a stated value of $0.01
per share and filed the Certificate of Designation of Preferences, Rights and Limitations of Series D Convertible Preferred Stock
(the “Certificate of Designation”) with the Secretary of State of the State of New Jersey. Pursuant to the Certificate
of Designation, in the event of the Company’s liquidation or winding up of its affairs, the holders of its Series D Convertible
Preferred Stock (the “Preferred Stock”) will be entitled to receive the same amount that a holder of the Company’s
common stock would receive if the Preferred Stock were fully converted (disregarding for such purposes any conversion limitations
set forth in the Certificate of Designation) to common stock which amounts shall be paid pari passu with all holders of the Company’s
common stock. Each share of Preferred Stock has a stated value equal to $0.01 (the “Stated Value”), subject to increase
as set forth in Section 7 of the Certificate of Designation.


 


A
holder of Preferred Stock is entitled at any time to convert any whole or partial number of shares of Preferred Stock into shares
of the Company’s common stock determined by dividing the Stated Value of the Preferred Stock being converted by the conversion
price of $0.01 per share.


 


A
holder of Preferred Stock will be prohibited from converting Preferred Stock into shares of the Company’s common stock if,
as a result of such conversion, the holder, together with its affiliates, would own more than 4.99% of the total number of shares
of the Company’s common stock then issued and outstanding (with such ownership restriction referred to as the “Beneficial
Ownership Limitation”). However, any holder may increase or decrease such percentage to any other percentage not in excess
of 9.99%, provided that any increase in such percentage shall not be effective until 61 days after such notice to the Company.


 


Subject
to the Beneficial Ownership Limitation, on any matter presented to the Company’s stockholders for their action or consideration
at any meeting of the Company’s stockholders (or by written consent of stockholders in lieu of a meeting), each holder of
Preferred Stock will be entitled to cast the number of votes equal to the number of whole shares of the Company’s common
stock into which the shares of Preferred Stock beneficially owned by such holder are convertible as of the record date for determining
stockholders entitled to vote on or consent to such matter (taking into account all Preferred Stock beneficially owned by such
holder). Except as otherwise required by law or by the other provisions of the Company’s certificate of incorporation, the
holders of Preferred Stock will vote together with the holders of the Company’s common stock and any other class or series
of stock entitled to vote thereon as a single class.


 


A
holder of Preferred Stock shall be entitled to receive dividends as and when paid to the holders of the Company’s common
stock on an as-converted basis.


 







 


AKERS
BIOSCIENCES, INC. AND SUBSIDIARIES


Notes
to Consolidated Financial Statements


 


Series
E Junior Participating Preferred Stock (Rights Agreement)


 


On
September 9, 2020 the Company designated 100,000 Series E Junior Participating Preferred Shares, no par value with a stated value
of $0.001. The Series E Junior Participating Preferred Shares have the following rights.


 


The
Company’s board of directors (the “Board”) declared a dividend of one preferred share purchase right (a “Right”)
for each of the Company’s issued and outstanding shares of common stock. The dividend is payable to the stockholders of
record on September 21, 2020 (the “Record Date”). Each Right entitles the registered holder, subject to the terms
of the Rights Agreement (as defined below), to purchase from the Company one one-thousandth of a share of the Company’s
Series E Junior Participating Preferred Stock, no par value with a stated value of $0.001 (the “Preferred Stock”)
at $15.00 (the “Purchase Price”), subject to certain adjustments. The description and terms of the Rights are set
forth in the Rights Agreement dated as of September 9, 2020 (the “Rights Agreement”) between the Company and VStock
Transfer, LLC, as Rights Agent (the “Rights Agent”).


 


The
Rights will not be exercisable until the earlier to occur of (i) the tenth business day following a public announcement or filing
that a person has, or affiliates or associates of such person have, become an “Acquiring Person,” which is defined
as a person, or affiliates or associates of such person, who, at any time after the date of the Rights Agreement, has acquired,
or obtained the right to acquire, Beneficial Ownership of 10% or more of the Company’s outstanding shares of common stock,
subject to certain exceptions, or (ii) the tenth business day (or such later date as may be determined by action of the Board
prior to such time as any person or group of affiliated or associated persons becomes an Acquiring Person) after the commencement
of, or announcement of an intention to commence, a tender offer or exchange offer the consummation of which would result in any
person becoming an Acquiring Person (the earlier of such dates being called the “Distribution Date”). Beneficial Ownership,
as defined in the Rights Agreement, includes certain interests in securities created by derivatives contracts, which are beneficially
owned, directly or indirectly, by a counterparty (or any of such counterparty’s affiliates or associates) under any derivatives
contract to which such person or any of such person’s affiliates or associates is a receiving party (as such terms are defined
in Rights Agreement), subject to certain limitations.


 


Until
the Distribution Date, (i) the Rights will be evidenced by the common stock certificates (or, for uncertificated shares of common
stock, by the book-entry account that evidences record ownership of such shares) and will be transferred with, and only with,
such Common Stock, and (ii) new common stock certificates issued after the Record Date will contain a legend incorporating the
Rights Agreement by reference (for book entry common stock, this legend will be contained in the notations in book entry accounts).
Until the earlier of the Distribution Date and the Expiration Date (defined below), the transfer of any shares of common stock
outstanding on the Record Date will also constitute the transfer of the Rights associated with such shares of common stock. As
soon as practicable after the Distribution Date, the Rights Agent will send by first-class, insured, postage prepaid mail, to
each record holder of the common stock as of the close of business on Distribution Date separate rights certificates evidencing
the Rights (“Right Certificates”), and such Right Certificates alone will evidence the Rights. The Company may choose
book entry in lieu of physical certificates, in which case, references to “Rights Certificates” shall be deemed to
mean the uncertificated book entry representing the Rights.


 


The
Rights, which are not exercisable until the Distribution Date, expire upon the earliest to occur of (i) the close of business
on September 8, 2021; (ii) the time at which the Rights are redeemed or exchanged pursuant to the Rights Agreement; and (iii)
the time at which the Rights are terminated upon the closing of any merger or other acquisition transaction involving the Company
pursuant to a merger or other acquisition agreement that has been approved by the Board prior to any person becoming an Acquiring
Person (the earliest of (i), (ii), and (iii) is referred to as the “Expiration Date”).


 


Each
share of Preferred Stock will be entitled to a preferential per share dividend rate equal to the greater of (i) $0.001 and (ii)
the sum of (1) 1,000 times the aggregate per share amount of all cash dividends, plus (2) 1,000 times the aggregate per share
amount (payable in kind) of all non-cash dividends or other distributions other than certain dividends or subdivisions of the
outstanding shares of common stock. Each Preferred Stock will entitle the holder thereof to a number of votes equal to 1,000 on
all matters submitted to a vote of the stockholders of the Company. In the event of any merger, consolidation or other transaction
in which shares of common stock are exchanged, each Preferred Stock will be entitled to receive 1,000 times the amount received
per one share of common stock. Pursuant to the Rights Agreement, the preferential rates noted above may be adjusted in the event
that the Company (i) pays dividends in common stock, (ii) subdivides the outstanding common stock or (iii) combines outstanding
Common Stock into a smaller number of shares.


 


The
Purchase Price payable, and the number of shares of Preferred Stock or other securities or property issuable, upon exercise of
the Rights are subject to adjustment from time to time to prevent dilution (i) in the event of a stock dividend, or a subdivision,
combination or reclassification of the Preferred Stock, (ii) if the holders of Preferred Stock are granted certain rights, options
or warrants to subscribe for the applicable Preferred Stock or securities convertible into the applicable Preferred Stock at less
than the current market price of the applicable Preferred Stock, or (iii) upon the distribution to holders of Preferred Stock
of evidences of indebtedness, cash (excluding regular quarterly cash dividends), assets (other than dividends payable in Preferred
Stock) or subscription rights or warrants (other than those referred to in (ii) immediately above). The number of outstanding
Rights and the number of one one-thousandths of a Preferred Stock issuable upon exercise of each Right are also subject to adjustment
in the event of a stock split, reverse stock split, stock dividends and other similar transactions.


 


With
some exceptions, no adjustment in the purchase price relating to a Right will be required until cumulative adjustments amount
to at least one percent (1%) of the purchase price relating to the Right. No fractional shares of Preferred Stock are required
to be issued (other than fractions which are integral multiples of one one-thousandth of a share of Preferred Stock) and, in lieu
of the issuance of fractional shares, the Company may make an adjustment in cash based on the market price of the Preferred Stock
on the trading date immediately prior to the date of exercise.


 







 


In
the event that a person or group of affiliated or associated persons becomes an Acquiring Person, each holder of a Right will
thereafter have the right to receive, upon exercise, common stock (or, in certain circumstances, other securities, cash or other
assets of the Company) having a value equal to two (2) times the exercise price of the Right. Notwithstanding any of the foregoing,
following the occurrence of a person becoming an Acquiring Person, all Rights that are, or (under certain circumstances specified
in the Rights Agreement) were, Beneficially Owned by any Acquiring Person (or by certain related parties) will be null and void
and any holder of such Rights (including any purported transferee or subsequent holder) will be unable to exercise or transfer
any such Rights. However, Rights are not exercisable following the occurrence of a person becoming an Acquiring Person until the
Distribution Date.


 


In
the event that, after a person or a group of affiliated or associated persons has become an Acquiring Person, the Company is acquired
in a merger or other business combination transaction, or 50% or more of the Company’s assets or earning power are sold,
proper provision will be made so that each holder of a Right will thereafter have the right to receive, upon the exercise of a
Right that number of shares of common stock of the person with whom the Company has engaged in the foregoing transaction (or its
parent) that at the time of such transaction have a market value of two (2) times the exercise price of the Right.


 


At
any time before any person or group of affiliated or associated persons becomes an Acquiring Person, the Board may redeem the
Rights in whole, but not in part, at a price of $0.001 per Right (subject to certain adjustments) (the “Redemption Price”).
The redemption of the Rights may be made effective at such time, on such basis and with such conditions as the Board in its sole
discretion may establish. Immediately upon the action of the Board electing to redeem or exchange the Rights, the right to exercise
the Rights will terminate and the only right of the holders of Rights will be to receive the Redemption Price.


 


The
Board may, at its option, at any time after the first occurrence of a Flip-in Event (as defined in the Rights Agreement), exchange
all or part of the then outstanding and exercisable Rights for shares of common stock at an exchange ratio of one share of common
stock per Right, appropriately adjusted to reflect any stock split, stock dividend or similar transaction occurring after the
effective date. However, the Board shall not effect such an exchange at any time after any person, together with all affiliates
and associates of such person, becomes a beneficial owner of 50% or more of the outstanding shares of common stock. Immediately
upon the action of the Board to exchange the Rights, the Rights will terminate and the only right of the holders of Rights will
be to receive the number of shares of Common equal to the number of Rights held by such holder multiplied by the exchange ratio.


 


Until
a Right is exercised or exchanged, the holder thereof, as such, will have no rights as a stockholder of the Company, including,
without limitation, the right to vote or to receive dividends.


 


The
Board may amend or supplement the Rights Agreement without the approval of any holders of Rights at any time so long as the Rights
are redeemable. At any time the Rights are no longer redeemable, no such supplement or amendment may (i) adversely affect the
interests of the holders of Rights (other than an Acquiring Person or an affiliate or associate of an Acquiring Person), (ii)
cause the Rights Agreement to become amendable other than in accordance with Section 27 of the Rights Agreement, or (iii) cause
the Rights again to become redeemable.


 




The
Company does not anticipate any material impact on the consolidated financial statements.


 






 


AKERS
BIOSCIENCES, INC. AND SUBSIDIARIES


Notes
to Consolidated Financial Statements


 


Note
8 – Equity, continued


 


Equity
Transactions


 


On
December 9, 2019, the Company entered into that certain “Purchase Agreement” pursuant to which the Company agreed
to sell an aggregate of 613,500 shares of Common Stock, 1,376,500 pre-funded warrants (the “Pre-funded Warrants”),
Preferred ‘C’ warrants to purchase approximately 1,990,000 shares of Common Stock (the “Preferred ‘C’
Warrants”) and Underwriter’s Warrants to purchase approximately 159,200 shares of Common Stock (the “Underwriter’s
Warrants”). The combined purchase price for one share of Common Stock was $4.00 and each Pre-funded Warrant was priced at
$3.9999 with (the “Offering”). The Purchase Agreement contains customary representations, warranties, and covenants
by the Company. Through the Offering, the Company raised proceeds of $6,965,635, net of offering costs of $994,227. Offering
costs were allocated on a pro rata basis to the proceeds from the sale of each of the Common Stock and the pre-funded warrants.


 


Each
Pre-Funded Warrant has an initial exercise price of $0.0001 per share and is exercisable immediately after the date of issuance.
Subject to limited exceptions, a holder of the Pre-Funded Warrants will not have the right to exercise any portion of such securities
if the holder, together with its affiliates, would beneficially own in excess of 4.99% of the number of shares of the Company’s
Common Stock outstanding immediately after the exercise. The exercise price of the Pre-Funded Warrants, and in some cases the
number of shares of Common Stock issuable upon exercise of the Pre-Funded Warrants, will be subject to adjustment in the event
of stock splits, stock dividends, combinations, rights offerings and similar events affecting the Common Stock. The pre-funded
warrants represented prepaid equity forward contracts that were equity classified, as they were not subject to ASC 480 and did
not meet the definition of a derivative under ASC 815 due to their requiring a substantial upfront payment.


 


Each
Preferred ‘C’ Warrant has an initial exercise price of $4.00 per share, is exercisable immediately after the date
of issuance and will expire five years from December 30, 2019, the date it became exercisable. Subject to limited exceptions,
a holder of the Preferred ‘C’ Warrants will not have the right to exercise any portion of such securities if the holder,
together with its affiliates, would beneficially own in excess of 4.99% of the number of shares of the Company’s Common
Stock outstanding immediately after the exercise. The exercise price of the Preferred ‘C’ Warrants, and in some cases
the number of shares of Common Stock issuable upon exercise of the Preferred ‘C’ Warrants, will be subject to adjustment
in the event of stock splits, stock dividends, combinations, rights offerings and similar events affecting the Common Stock.


 


Each
Underwriter’s Warrant has an initial exercise price of $5.00 per share, will be exercisable immediately after the
date of issuance and will expire five years from December 30, 2019, the date it became exercisable. Subject to limited exceptions,
a holder of the Underwriter’s Warrants will not have the right to exercise any portion of such securities if the holder,
together with its affiliates, would beneficially own in excess of 4.99% of the number of shares of the Company’s Common
Stock outstanding immediately after the exercise. The exercise price of the Underwriter’s Warrants, and in some cases the
number of shares of Common Stock issuable upon exercise of the Underwriter’s Warrants, will be subject to adjustment in
the event of stock splits, stock dividends, combinations, rights offerings and similar events affecting the Common Stock.



 






 


AKERS
BIOSCIENCES, INC. AND SUBSIDIARIES


Notes
to Consolidated Financial Statements


 


Note
8 – Equity, continued


 




Equity
Transactions, continued



 


In
addition, the Warrants provide that, in the event of a fundamental transaction (as such term is described in the Warrant), the
holder of such Warrant, at the holder’s option, may receive, for each warrant share (as such term is described in the Warrant)
that would have been issuable upon such exercise immediately prior to the occurrence of such fundamental transaction, the number
of shares of Common Stock of the successor or acquiring corporation or of the Company, if it is the surviving corporation, and
any additional consideration receivable as a result of such fundamental transaction by a holder of the number of shares of Common
Stock for which the Warrant is exercisable immediately prior to such fundamental transaction. If holders of Common Stock are given
any choice as to the securities, cash or property to be received in a fundamental transaction, then the holder shall be given
the same choice as to the alternate consideration it receives upon any exercise of the Warrant following such fundamental transaction.
The Company shall cause any successor entity (as such term is described in the Warrant), at the option of the holder, to deliver
to the holder in exchange for the Warrant a security of the successor entity evidenced by a written instrument substantially similar
in form and substance to the Warrant which is exercisable for a corresponding number of shares of capital stock of such successor
entity (or its parent entity) equivalent to the shares of Common Stock acquirable and receivable upon exercise of the Warrant
(without regard to any limitations on the exercise of this Warrant) prior to such fundamental transaction, and with an exercise
price which applies the exercise price hereunder to such shares of capital stock.


 


The
Offering was made pursuant to a registration statement on Form S-1 (Files No. 333-234447 and 333-235359 previously filed with
the Securities and Exchange Commission on November 1, 2019 and declared effective on December 5, 2019. Such securities are being
offered only by means of a prospectus.


 



During
the year ended December 31, 2019, pursuant to his October 2018 employment agreement, the Company issued 1,563 shares of Common
Stock under the 2017 Plan to Mr. Yeaton, with a fair value on the date of grant, of $27,367.


 


On
April 8, 2020, pursuant to a securities purchase agreement with certain institutional and accredited investors, the Company issued
and sold in a registered direct offering (the “April Offering”) an aggregate of 766,667 shares of common stock of
the Company at an offering price of $6.00 per share, for gross and net proceeds of $4,600,002 and $4,086,207, respectively.


 


In
connection with the April Offering, the Company issued to the placement agent or designees warrants to purchase up to 61,333 shares
of its common stock at an exercise price of $7.50 (the “April Placement Agent Warrants”) in a private placement. The
April Placement Agent Warrants will be exercisable at any time and from time to time, in whole or in part, following the date
of issuance and for a term of five years from the effective date of the April Offering.



 


On
May 18, 2020, pursuant to a securities purchase agreement with certain institutional and accredited investors, the Company issued
and sold in a registered direct offering (the “May Offering”) an aggregate of 1,366,856 shares of its common stock
at an offering price of $3.53 per share, for gross and net proceeds of $4,825,002 and $4,320,720, respectively.


 






 


AKERS
BIOSCIENCES, INC. AND SUBSIDIARIES


Notes
to Consolidated Financial Statements


 


In
connection with the May Offering, the Company issued to the placement agent or designees warrants to purchase up to 109,348 shares
of its common stock at an exercise price of $4.4125 (the “May Placement Agent Warrants”) in a private placement. The
May Placement Agent Warrants will be exercisable at any time and from time to time, in whole or in part, following the date of
issuance and for a term of five years from the effective date of the May Offering.




 


On
August 13, 2020, pursuant to a securities purchase agreement with certain institutional and accredited investors,

dated August 11, 2020, the Company issued and sold in a registered direct offering (the “August Offering”) an aggregate
of 1,207,744 shares of its common stock at an offering price of $5.67 per share, for gross and net proceeds of $6,847,908 and
$6,158,034, respectively.


 


In
connection with the August Offering, the Company issued to the placement agent or designees warrants to purchase up to 96,620
shares of its common stock at an exercise price of $7.0875 (the “August Placement Agent Warrants”) in a private placement.
The August Placement Agent Warrants will be exercisable at any time and from time to time, in whole or in part, following the
date of issuance and for a term of five years from the effective date of the August Offering.



 


On
November 17, 2020, pursuant to the Private Placement SPA, the Company issued and sold in the Private Placement an
aggregate of 8,725,393 shares of its common stock and 1,040,540 Pre-Funded Warrants at an offering price of $1.85 per share,
for gross and net proceeds of $18,066,976 and $16,362,786, respectively.


 


In
connection with the Private Placement, the Company issued Investor Warrants to purchase up to 9,765,933 shares of
common stock at an exercise price of $2.06. The Investor Warrants are exercisable at any time and from time to time,
in whole or in part, following the date of issuance and for a term of five and one-half years from the effective date of the Private
Placement.


 


In
connection with the Private Placement, the Company issued to the Placement Agent or designees the Placement Agent
Warrants to purchase up to 390,368 shares of its common stock at an exercise price of $1.85 in a private placement. The Placement
Agent Warrants are exercisable at any time and from time to time, in whole or in part, following the date of issuance and
for a term of five and one-half years from the effective date of the Private Placement.



 


During
the year ended December 31, 2020, 138,361 shares of Series D Preferred Stock were converted to 138,361 common shares. As of December
31, 2020, 72,992 shares of Series D Preferred Stock were issued and outstanding.


 


During
the year ended December 31, 2020, warrants to purchase an aggregate of 1,935,000 shares of Series C Convertible Preferred Stock
were exercised at an exercise price of $4.00 per share, yielding proceeds of $7,740,000 and immediately converted to 1,935,000
shares of common stock.


 


During
the year ended December 31, 2020, Pre-Funded Warrant holders from the December 9, 2019 public offering exercised warrants
for the purchase of 795,000 shares of Common Stock, with an exercise price of $0.0001 per common share, raising net proceeds of
$80.


 






 




AKERS
BIOSCIENCES, INC. AND SUBSIDIARIES


Notes
to Consolidated Financial Statements


 


Note
9 – Income Taxes


 


The
Company’s income tax (benefit)/provision is as follows:


 









 

 

Years
Ended December 31,

 

 

 

2020

 

 

2019

 

Current

 

$


 

 

$


 

Deferred

 

 

(1,958,000

)

 

 

(738,000

)

Change in Valuation
Allowance

 

 

1,958,000

 

 

 

738,000

 

Income Tax Benefit

 

$


 

 

$


 



 


The
reconciliation of income taxes using the statutory U.S. income tax rate and the benefit from income taxes for the years ended
December 31, 2020 and 2019 are as follows:


 














 

 

Years
Ended December 31,

 

 

 

2020

 

 

2019

 

 

 

 

 

 

 

 

Statutory U.S. Federal Income
Tax Rate

 

 

(21.0

)%

 

 

(21.0

)%

New Jersey State
income taxes, net of U.S. Federal tax effect

 

 

(5.1

)%

 

 

(5.1

)%

True-up for prior year deferred tax
assets

 

 

10.2

%

 

 

5.9

%

Other

 

 

4.8

%

 

 

1.2

%

Change in Valuation
Allowance

 

 

11.1

%

 

 

19.0

%

Net

 

 

0.0

%

 

 

0.0

%



 


As
of December 31, 2020 and 2019, the Company had Federal net operating loss carry forwards of approximately $100,615,000 and $79,678,000,
expiring through the year ending December 31, 2037 for net operating losses originating in tax years beginning before January
1, 2018. Net operating losses recorded in tax years beginning January1, 2018 and after are allowed for an indefinite carryforward
period but limited to 80% of each subsequent year’s net income. As of December 31, 2020 and 2019, the Company had New
Jersey state net operating loss carry forwards of approximately $7,548,000 and $28,855,000, expiring through the year ending December
31, 2040. The timing and manner in which the Company can utilize operating loss carryforwards in any year may be limited
by provisions of the Internal Revenue Code regarding changes in ownership of corporations. Such limitation may have an impact
on the ultimate realization of its carryforwards and future tax deductions.




 




Under
Section 382 of the Code, use of our net operating loss carryforwards (“NOLs”) will be limited if we experience a cumulative
change in ownership of greater than 50% in a moving three-year period. We will experience an ownership change as a result of the
Merger and therefore our ability to utilize our NOLs and certain credit carryforwards remaining at the Effective Time will be
limited. The limitation will be determined by the fair market value of our common stock outstanding prior to the ownership change,
multiplied by the applicable federal rate. It is expected that the Merger will impose a limitation on our NOLs.



 


The
principal components of the deferred tax assets and related valuation allowances as of December 31, 2020 and 2019 are as follows:


 





 

 

Years
Ended December 31,

 

 

 

2020