Nephros Reports 2017 First Quarter Financial Results and Provides Corporate Update

RIVER EDGE, NJ–(Marketwired – May 9, 2017) – 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 ended March 31, 2017.

“During the first quarter, we continued to execute on our growth strategy,” said Daron Evans, President and Chief Executive Officer of Nephros. “Our approximately 25% year over year growth in product sales in the first quarter of 2017 was driven by our core existing products. Additionally, we intend to launch the HydraGuard™ product line at the end of May and the EndoPur™ product line this summer as we further bolster our product mix and expand our geographic footprint. We believe that we are on track to achieve our previously stated goal of 100% growth in 2017 versus 2016, and continue to project positive cash flow soon after the launch of the EndoPur™ product line this summer.”

Corporate Update

Geographic Expansion

The Company signed a distributor agreement with newly formed Nephros LatAm, S.A. to market and distribute Nephros water filtration products in the Andean Region, including Colombia, Venezuela, Panama, Ecuador, Peru, and Chile. Nephros LatAm will target medical clinics, restaurants and residential customers who currently purchase bottled water for safety reasons.

“We at Nephros LatAm are very excited to have the chance to bring the Nephros technology of ultrapure water to a part of the world where there is significant opportunity and it is desperately needed.” Manuel Villa, President Nephros-LatAm.

License Amendment

The Company and its contract manufacturer, Medica, S.p.A., have amended their License and Supply Agreement (the “License”) to add Versatile™, Medica’s proprietary microfiber, to the License. Additionally, the License was amended to redefine the licensed territory to consist of North America, Central America, the Andean Region, Ireland, the United Kingdom, Australia and New Zealand. Multinational distributors of Nephros branded products based in the licensed territory retain the ability to sell Nephros products to any country in the world except Italy.

Financial Performance for the Quarter Ended March 31, 2017

Total revenues for the quarter ended March 31, 2017, were approximately $734,000 compared to approximately $590,000 for the quarter ended March 31, 2016.

Cost of goods sold was approximately $279,000 for the year ended March 31, 2017, compared to approximately $295,000 for the year ended March 31, 2016.

Research and development expenses were approximately $231,000, and $269,000, respectively, for the quarters ended March 31, 2017 and March 31, 2016. Selling, general and administrative expenses were approximately $770,000 for the quarter ended March 31, 2017 compared to approximately $777,000 for the quarter ended March 31, 2016.

As of March 31, 2017, Nephros had cash and cash equivalents of approximately $803,000.

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 www.nephros.com.

Forward-Looking Statements

Certain statements in this press release constitute “forward-looking statements.” Such statements include statements regarding our expected launch of our HydraGuard™ and EndoPur™ product lines, our expectations that our EndoPur™ and HydraGuard™ filter products will significantly contribute to our projected revenue growth, our expected 2017 product revenue, our ability to grow revenue, our ability to become cash flow positive in 2017, our expectation of increased adoption of our ultrafiltration products, the efficacy and intended use of our technologies under development, 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) we are dependent on third party suppliers, manufacturers and distributors over whom we may not control; and (vii) 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, 2016, 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 www.sec.gov. 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.

NEPHROS, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(In Thousands, Except Share and Per Share Amounts)
			(Unaudited)			(Audited)
			March 31, 2017			December 31, 2016
ASSETS
Current assets:
	Cash		$	803		$	275
	Accounts receivable, net			582			388
	Investment in lease, net-current portion			21			27
	Inventory, net			401			479
	Prepaid expenses and other current assets			121			95
		Total current assets		1,928			1,264
	Property and equipment, net			63			70
	Investment in lease, net-less current portion			57			61
	License and supply agreement, net			1,210			1,262
	Other asset			21			21
		Total assets	$	3,279		$	2,678
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
	Accounts payable		$	361		$	585
	Accrued expenses			349			240
	Deferred revenue, current portion			70			70
		Total current liabilities		780			895
	Unsecured long-term note payable, net of debt issuance costs and debt discount of $323 and $349, respectively			864			838
	Long-term portion of deferred revenue			261			278
		Total liabilities		1,905			2,011
Commitments and Contingencies (Note 13)
Stockholders’ equity:
Preferred stock, $.001 par value; 5,000,000 shares authorized at March 31, 2017 and December 31, 2016; no shares issued and outstanding at March 31, 2017 and December 31, 2016				–			–
Common stock, $.001 par value; 90,000,000 shares authorized at March 31, 2017 and December 31, 2016; 54,160,547 and 49,782,797 shares issued and outstanding at March 31, 2017 and December 31, 2016, respectively.				54			50
Additional paid-in capital				122,229			120,835
Accumulated other comprehensive income				68			67
Accumulated deficit				(120,977	)		(120,285	)
Total stockholders’ equity				1,374			667
Total liabilities and stockholders’ equity			$	3,279		$	2,678

NEPHROS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(In Thousands, Except Share and Per Share Amounts)
		Three Months Ended March 31,
		2017			2016
Net revenues:
Product revenues		$	690		$	545
License and royalty revenues			44			45
Total net revenues			734			590
Cost of goods sold			279			295
Gross margin			455			295
Operating expenses:
	Research and development		231			269
	Depreciation and amortization		59			55
	Selling, general and administrative		770			777
Total operating expenses			1,060			1,101
Loss from operations			(605	)		(806	)
Interest expense			(66	)		(14	)
Interest income			1			1
Other expense			(10	)		(17	)
Net loss			(680	)		(836	)
Other comprehensive income, foreign currency translation adjustments			1			1
Total comprehensive loss		$	(679	)	$	(835	)
Net loss per common share, basic and diluted		$	(0.01	)	$	(0.02	)
Weighted average common shares outstanding, basic and diluted			49,601,521			48,173,521