SOURCE: Nephros, Inc.

Nephros, Inc.

March 30, 2016 08:41 ET

Nephros Reports 2015 Fourth Quarter and Full Year Financial Results; Provides Guidance and Potential Upcoming Milestones

RIVER EDGE, NJ--(Marketwired - Mar 30, 2016) - Nephros, Inc. (OTCQB: NEPH), (the "Company") a commercial stage medical device company that develops and sells high performance liquid purification ultrafilters and an on-line mid-dilution hemodiafiltration ("HDF") system for use with a hemodialysis machine for the treatment of patients with end stage renal disease, announced today financial results for the three months and full year ended December 31, 2015.

"Clear progress was demonstrated in 2015 as we executed our growth strategy during a year of transformation," said Daron Evans, President and Chief Executive Officer of the Nephros. "Our focused efforts on growing the ultrafilter business through increased distributor support drove the 90% annual growth in product revenue. Additionally, we reinvigorated our HDF program to prepare for a potential expansion of use at our existing site, and for a potential deployment into an additional dialysis clinic. Going forward, we anticipate that our product portfolio expansion will provide a sustainable revenue boost and will propel the Company into positive cash flow. We look forward to shifting our HDF focus to working with partners to gather, and potentially publish, observational clinical data."

Review of 2015
In 2015, the Company made significant progress towards the goal of growing its ultrafilter business. Ultrafilter product sales grew by over 90% from 2014 to 2015, driven primarily by sales into hospitals for infection control. Ultrafilter sales into the dialysis space grew by 40%.

To add additional sales momentum in 2016, the Company worked with distributors and end-users in 2015 to develop additional ultrafilter products for the hospital, dialysis, industrial and food service markets. The Company anticipates that the S100 end-of-faucet filter for the hospital market and the EndoPur™ endotoxin filter for the dialysis market will provide significant contributions to revenue growth.

The Company developed new training content and completed validation of a software update for its HDF modules in preparation for a potential expansion of use in its ongoing product evaluation and for deployment at an additional dialysis clinic in 2016. Additionally, the Company initiated efforts to develop version 2.0 of its HDF modules to enable a broader deployment in the coming years.

On the regulatory side, the Company expended focused effort towards reviewing and improving its quality systems following its receipt from the U.S. Food and Drug Administration ("FDA") of a warning letter in May 2015. In February 2016, the Company successfully completed an on-site FDA audit.

Financially, the Company raised approximately $3.8 million through a PIPE transaction in May 2015 and the discounted exercise of warrants in the second half of the year. The exercise of the warrants removed a significant balance sheet liability and improved the capital structure of the Company, better positioning the Company for a possible future transition onto a national securities exchange.

Recently Launched Products
The SSUmini, an FDA 510(k) cleared, economical solution to provide hemodialysis quality water as a polish filter for smaller, portable reverse osmosis ("RO") systems and to provide hemodialysis quality bicarbonate concentrate for dialysis clinics with centralized bicarbonate systems, was launched in March 2016.

The first shipment of AETHER® products with Nephros fiber membrane was made in March 2016 and are now available through Biocon 1, LLC. Nephros' partner, Biocon 1, LLC, sells its AETHER® Water System filtration products to the food service industry.

Financial Performance for the Year Ended December 31, 2015
Total revenues for the year ended December 31, 2015, were approximately $1,944,000 compared to approximately $1,748,000 for the year ended December 31, 2014. The Company experienced 95% growth in product revenues in 2015, which was offset by an 80% decrease in license and royalty revenue.

Cost of goods sold was approximately $884,000 for the year ended December 31, 2015, compared to approximately $549,000 for the year ended December 31, 2014. The increase reflects the increase in product revenue.

Research and development expenses were approximately $826,000 and $781,000, respectively, for the years ended December 31, 2015 and December 31, 2014. Depreciation and amortization expense was approximately $212,000 for the year ended December 31, 2015, compared to approximately $217,000 for the year ended December 31, 2014. Selling, general and administrative expenses ("SG&A") were approximately $3,443,000 for the year ended December 31, 2015 compared to approximately $2,870,000 for the year ended December 31, 2014. A severance expense, increased auditor costs and increased marketing costs contributed to the 20% increase in SG&A.

As of December 31, 2015, Nephros had cash and cash equivalents of approximately $1.2 million.

Revenue Guidance
The Company expects total revenue for the quarter ending March 31, 2016 to exceed $550,000, and believes that it can be cash flow positive by the end of 2016.

Upcoming Potential Milestones

S100 510(k) Update
The Company filed for 510(k) clearance for its S100 Point of Use microfilter with the FDA in October 2015. In December 2015, the FDA requested additional information. On March 8, 2016, the Company submitted a package to the FDA with supplemental information. Pending FDA clearance, the Company aims to launch the S100 in the second quarter of 2016.

EndoPur Endotoxin Filter Cartridge Update
The Company intends to file for 510(k) clearance of its endotoxin cartridge filter in April 2016. The endotoxin cartridge filter is designed to provide hemodialysis quality water through ultrafiltration of the water in a dialysis clinic's RO loop. Because the cartridge conforms to the design controls of the DSU-D, and has the same intended use, the cartridge qualifies for the Special 510(k): Device Modification process, which has a 30 day FDA review timeline. Pending FDA clearance, the Company aims to launch the filter near the end of the second quarter of 2016.

About Nephros, Inc.
Nephros is a commercial stage medical device company that develops and sells high performance liquid purification filters, as well as a hemodiafiltration system for the treatment of patients with End Stage Renal Disease. Its filters, which it calls ultrafilters, are used primarily in medical applications. Nephros ultrafilters are used by dialysis centers for the removal of biological contaminants from the water and bicarbonate concentrate feeding hemodialysis devices. Additionally, Nephros ultrafilters are used in hospitals and medical clinics as an aid in infection control by retaining bacteria (i.e. Legionella, Pseudomonas), virus and endotoxin from water used by patients.

For more information about Nephros, please visit the company's website at

Forward-Looking Statements
Certain statements in this press release constitute "forward-looking statements." Such statements include statements regarding our expectations that our EndoPur filter will significantly contribute to our projected revenue growth, our ability to obtain listing of our common stock on a national securities exchange, our expected 2016 product revenue, our ability to grow revenue, our ability to become cash flow positive in 2016, our expectation of increased adoption of our ultrafiltration products, our expectation to deploy our HDF module to an additional dialysis clinic, our expectations for 510(k) approval of our products, the efficacy and intended use of our technologies under development, the timelines for bringing such products to market and the availability of funding sources for continued development of such products and other statements that are not historical facts, including statements which may be accompanied by the words "intends," "may," "will," "plans," "expects," "anticipates," "projects," "predicts," "forecasts," "estimates," "aims," "believes," "hopes," "potential" or similar words. Forward-looking statements are not guarantees of future performance, are based on certain assumptions and are subject to various known and unknown risks and uncertainties, many of which are beyond our control. Actual results may differ materially from the expectations contained in the forward-looking statements. Factors that may cause such differences include, but are not limited to, the risks that: (i) we may not be able to continue as a going concern; (ii) we may not be able to obtain funding if and when needed or on terms favorable to us in order to continue operations and successfully implement our business plan; (iii) we face significant challenges in obtaining market acceptance of our products and sales growth in key geographic areas, which could adversely affect our potential sales and revenues; (iv) we face potential liability associated with the production, marketing and sale of our products including with respect to potential serious injuries, product-related deaths or product malfunctions, product recalls, product liability claims, class action lawsuits or other events that could cause us to incur expenses and may also limit our ability to generate revenues from such products; (v) to the extent our products or marketing materials are found to violate any provisions of the U.S. Food Drug and Cosmetic Act or any other statutes or regulations then we could be subject to enforcement actions by the FDA or other governmental agencies; (vi) the voluntary recalls of point of use and DSU in-line ultrafilters used in hospital water treatment applications announced on October 30, 2013 and the related circumstances could subject us to claims or proceedings by consumers, the FDA or other regulatory authorities which may adversely impact our sales and revenues; (vii) we are dependent on third party suppliers, manufacturers and distributors over whom we may not control; and (viii) we may not be able to secure or enforce adequate legal protection, including patent protection, for our products.

More detailed information about us and the risk factors that may affect the realization of forward-looking statements, including the forward-looking statements contained in this press release, is set forth in our filings with the SEC, including our Annual Report on Form 10-K for the fiscal year ended December 31, 2015, and our other periodic reports filed with the SEC. We urge investors and security holders to read those documents free of charge at the SEC's website at We do not undertake to publicly update or revise our forward-looking statements as a result of new information, future events or otherwise, except as required by law.

(In Thousands, Except Share and Per Share Amounts)
  December 31, 2015   December 31, 2014  
Current assets:            
Cash $ 1,248   $ 1,284  
Accounts receivable, net   397     110  
Inventory, net   591     186  
Prepaid expenses and other current assets   228     104  
Total current assets   2,464     1,684  
Property and equipment, net   12     1  
Other assets, net   1,494     1,684  
Total assets $ 3,970   $ 3,369  
Current liabilities:            
Accounts payable $ 652   $ 835  
Accrued expenses   237     342  
Deferred revenue, current portion   70     70  
Total current liabilities   959     1,247  
Warrant liability   -     7,386  
Long-term portion of deferred revenue   347     417  
Total liabilities   1,306     9,050  
Commitments and Contingencies            
Stockholders' equity (deficit):            
Preferred stock, $.001 par value; 5,000,000 shares authorized at December 31, 2015 and 2014; no shares issued and outstanding at December 31, 2015 and 2014.   -     -  
Common stock, $.001 par value; 90,000,000 shares authorized at December 31, 2015 and 2014; 48,580,355 and 30,391,513 shares issued and outstanding at December 31, 2015 and December 31, 2014, respectively.   49     30  
Additional paid-in capital   119,797     108,382  
Accumulated other comprehensive income   71     72  
Accumulated deficit   (117,253 )   (114,165 )
Total stockholders' equity (deficit)   2,664     (5,681 )
Total liabilities and stockholders' equity (deficit) $ 3,970   $ 3,369  
(In Thousands, Except Share and Per Share Amounts)
  Years Ended December 31,  
  2015   2014  
Net revenue:            
Product revenues $ 1,790   $ 914  
License and royalty revenues   154     834  
Total net revenues   1,944     1,748  
Cost of goods sold   884     549  
Gross margin   1,060     1,199  
Operating expenses:            
Research and development   826     781  
Depreciation and amortization   212     217  
Selling, general and administrative   3,443     2,870  
Total operating expenses   4,481     3,868  
Loss from operations   (3,421 )   (2,669 )
Change in fair value of warrant liability   2,099     (4,277 )
Warrant modification expense   (1,761 )   -  
Interest expense   (42 )   (483 )
Other income (expense), net   37     58  
Net loss   (3,088 )   (7,371 )
Other comprehensive loss, foreign currency translation adjustments   (1 )   (2 )
Total comprehensive loss $ (3,089 ) $ (7,373 )
Net loss $ (3,088 ) $ (7,371 )
Deemed dividend as a result of warrant modification   (73 )   -  
Net loss attributable to common stockholders $ (3,161 ) $ (7,371 )
Net loss per common share, basic and diluted $ (0.09 ) $ (0.31 )
Weighted average common shares outstanding, basic and diluted   34,780,506     23,817,184  

Contact Information

  • Contact:

    PCG Advisory Group
    Kirin M. Smith
    Chief Operating Officer
    Direct: 646-863-6519