Nephros Reports First Quarter 2016 Financial Results

RIVER EDGE, NJ–(Marketwired – May 11, 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 ended March 31, 2016.

“During the first quarter of 2016, we continued to focus on executing our strategy and achieving our operational goals,” said Daron Evans, President and Chief Executive Officer of the Nephros. “We attained 510(k) clearance on two additional products and we successfully completed the software upgrade and additional training development for our H2H modules needed to expand our hemodiafiltration footprint. Moving forward in 2016, our primary goal is to achieve positive cash flow by the end of the year.”

Recently Launched Products

The SSUmini, launched in March 2016, offers dialysis clinics with an 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.

The S100, which received 510(k) clearance from the Food and Drug Administration (FDA) in April 2016, offers hospitals and medical facilities an end-of-faucet solution to protect patients from water-borne bacteria.

The AETHER® ultrafilter, launched in March 2016, offers the food service and hospitality industry protection from particulate contaminants larger than 0.005 microns, the smallest barrier currently available in the industry.

Upcoming Milestones by Product Line

EndoPur™

The Company filed for Special 510(k) clearance of its 10″, 20″, 30″ and 40″ endotoxin cartridge filters in April 2016. In May 2016, the FDA converted the application to a Traditional 510(k) filing. The Company filed a separate Special 510(k) for the 10″ version of its EndoPur™ filter. The Company aims to launch the 10″ filter size early in the third quarter of 2016, subject to completion of the FDA clearance process. Due to the longer FDA review process associated with a Traditional 510(k) submission, the Company aims to launch the 20″, 30″ and 40″ filter sizes late in the third quarter or early in the fourth quarter of 2016, subject to completion of the FDA clearance process.

EndoPur™ will become the brand name for all of the Company’s ultrafiltration products for dialysis water and bicarbonate concentrate, including the DSU-D, the SSU-D, the SSUmini and the 10″ cartridge platform.

PathoGuard™

The Company recently filed for the “PathoGuard” trademark, which will become the brand name for its hospital infection prevention products which are designed to protect patients from water borne pathogens, including the DSU-H, the SSU-H, and the S100.

The Company intends to file for 510(k) clearance for the 10″ cartridge platform to be used in hospitals and medical clinics as part of its goal to provide its distributors and customers with a broad portfolio of products to simplify installation.

NanoGuard™

The NanoGuard™ product line will become the brand name encompassing the Company’s industrial and household products.

The Company is on track to ship its first 30 GPM systems at the beginning of the third quarter. The stainless steel flushable filter system is designed to remove submicron particulates in high-pressure, closed-loop water systems, including cooling systems for data centers and hot water return loops in commercial buildings. Initial data suggests the filters have ability to remove both organic and inorganic particulates.

In the third quarter, the Company intends to begin beta testing flushable versions of its 10″ cartridge platform at selected sites, including private residences. A smaller, flushable system could be ideal for homes utilizing well-water, or in locations where boil-water warnings are frequent.

Financial Performance for the Quarter Ended March 31, 2016

Total revenues for the quarter ended March 31, 2016 were approximately $590,000, compared to approximately $544,000 for the year ended March 31, 2015. Total operating expenses for the quarter ended March 31, 2016 were approximately $1,101,000, compared to approximately $1,088,000 for the quarter ended March 31, 2015.

Net cash used in operating activities for the quarter ended March 31, 2016 was approximately $522,000, compared to $917,000 for the quarter ended March 31, 2015. As of March 31, 2016, Nephros had cash and cash equivalents of approximately $701,000.

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

This release contains forward-looking statements that are subject to various risks and uncertainties. Such statements include statements regarding the EndoPur™, including its eligibility for Special 510(k) clearance and the timing of its commercial launch, the PathoGuard™, including the Company’s plans to submit a 510(k) application for such product, the NanoGuard™, including the timing of planned testing, 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,” “estimates,” “aims,” “believes,” “hopes,” “potential” or similar words. Actual results could differ materially from those described in these forward-looking statements due to certain factors, including potential delays in the regulatory approval process, changes in business, economic and competitive conditions, the availability of capital when needed, our dependence on third party manufacturers, regulatory reforms, uncertainties in litigation or investigative proceedings, and the availability of financing. These and other risks and uncertainties are detailed in Nephros Inc.’s reports filed with the U.S. Securities and Exchange Commission, including with respect to Nephros, its Annual Report on Form 10-K for the year ended December 31, 2015. Nephros, Inc. does not undertake any responsibility to update the forward-looking statements in this release.

NEPHROS, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(In Thousands, Except Share and Per Share Amounts)
				(Unaudited)				(Audited)
				March 31, 2016				December 31, 2015
ASSETS
Current assets:
	Cash			$	701			$	1,248
	Accounts receivable, net				569				397
	Investment in lease, net – current portion				22				–
	Inventory, net				476				591
	Prepaid expenses and other current assets				105				228
		Total current assets			1,873				2,464
	Property and equipment, net				41				12
	Investment in lease, net – less current portion				71				–
	Other assets, net				1,442				1,494
		Total assets		$	3,427			$	3,970
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
	Accounts payable			$	744			$	652
	Accrued expenses				290				237
	Deferred revenue, current portion				70				70
		Total current liabilities			1,104				959
	Long-term portion of deferred revenue				330				347
		Total liabilities			1,434				1,306
Commitments and Contingencies
Stockholders’ equity:
Preferred stock, $.001 par value; 5,000,000 shares authorized at March 31, 2016 and December 31, 2015; no shares issued and outstanding at March 31, 2016 and December 31, 2015					–				–
Common stock, $.001 par value; 90,000,000 shares authorized at March 31, 2016 and December 31, 2015; 48,825,461 and 48,580,355 shares issued and outstanding at March 31, 2016 and December 31, 2015, respectively.					49				49
Additional paid-in capital					119,961				119,797
Accumulated other comprehensive income					72				71
Accumulated deficit					(118,089	)			(117,253	)
Total stockholders’ equity					1,993				2,664
Total liabilities and stockholders’ equity				$	3,427			$	3,970

NEPHROS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(In Thousands, Except Share and Per Share Amounts)
(Unaudited)
			Three Months Ended March 31,
			2016				2015
Net revenues:
Product revenues			$	545			$	527
License and royalty revenues				45				17
Total net revenues				590				544
Cost of goods sold				295				262
Gross margin				295				282
Operating expenses:
	Research and development			269				192
	Depreciation and amortization			55				53
	Selling, general and administrative			777				843
Total operating expenses				1,101				1,088
Loss from operations				(806	)			(806	)
Change in fair value of warrant liability				–				1,009
Interest expense				(14	)			(11	)
Interest income				1				–
Other income (expense)				(17	)			51
Net income (loss)				(836	)			243
Other comprehensive income, foreign currency translation adjustments				1				–
Total comprehensive income (loss)			$	(835	)		$	243
Net income (loss) per common share, basic			$	(0.02	)		$	0.01
Weighted average common shares outstanding, basic				48,173,521				30,259,823
Net loss per common share, diluted			$	(0.02	)		$	(0.02	)
Weighted average common shares outstanding, diluted				48,173,521				37,082,499