Nephros Reports First Quarter 2005 Financial Results

New York, May 16, 2005 – Nephros, Inc. (AMEX: NEP) announced today financial results for the first quarter ended March 31, 2005.

For the quarter ended March 31, 2005, Nephros reported net revenue of $1,901,665 compared with no revenue in 2004. The Company’s net loss was $392,887 for the first quarter of 2005 versus a net loss of $2,017,732 in the comparable period last year. Nephros reported a net loss attributable to common stockholders in the first quarter of 2005 of $392,887, or $0.03 loss per basic and diluted share, compared to a loss of $4,089,232, or $2.57 loss per basic and diluted share, in the year-earlier period.

The net loss applicable to common shareholders for the three months ended March 31, 2004 includes losses of $2,071,500 attributed to preferred dividends and accretion of beneficial conversion features and issuance costs in connection with the issuance of convertible preferred stock. There were no such losses for the three months ended March 31, 2005 because all of the Company’s shares of preferred stock were converted into common stock upon the completion of the Company’s initial public offering in September 2004.

Revenue recognized from product sales was $151,665 in the first quarter of 2005. Product revenue is recognized once a customer’s right of return has expired. First quarter revenue also included non-recurring revenue of $1.75 million resulting from the Company’s licensing agreement with Asahi Kasei Medical Co., Ltd., announced March 2, 2005.

As of March 31, 2005, cash, cash equivalents and short-term investments were $10,310,473, compared to $9,715,121 as of December 31, 2004.

“I am pleased with our strong start in 2005 and the positive momentum we have established. We continue to increase awareness in the European market and build upon our initial sales. In March 2005, we filed our 510(k) application for our OLp?r HD190 with the FDA. We believe this will play a key role as we move forward with our OLp?r MD190 and OLp?r H2H FDA submissions,” stated Norman Barta, chief executive officer of Nephros. “In the first quarter, we announced a significant licensing agreement with Asahi Kasei Medical Co., Ltd. Under the agreement, Asahi will be able to develop and market its own products in Japan based on our mid dilution hemodiafiltration technology. Forging a relationship with this leader in the dialysis market, and the largest filter provider in Japan, is a key milestone for Nephros and our mid-dilution hemodiafiltration therapy. We believe our relationship with Asahi will complement our sales and marketing efforts for the OLp?r MD190 in Europe and help to build greater brand recognition worldwide.”

About Nephros Inc.

Nephros, Inc., headquartered in New York, is a medical device company developing and marketing products designed to improve the quality of life for the End Stage Renal Disease (ESRD) patient, while addressing the critical financial and clinical needs of the care provider. ESRD is a disease state characterized by the irreversible loss of kidney function. Nephros believes that its products are designed to remove a range of harmful substances more effectively, and more cost-effectively, than existing treatment methods; particularly with respect to substances known collectively as "middle molecules," due to their molecular weight, that have been found to contribute to such conditions as dialysis related amyloidosis, carpal tunnel syndrome, degenerative bone disease and ultimately, to mortality in the ESRD patient.

Forward Looking Statements

This news release contains certain "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, as amended. Such statements may include statements regarding the efficacy and intended use of Nephros’s 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 preceded by the words “intends,” “may,” “will,” “plans,” “expects,” “anticipates,” “projects,” “predicts,” “estimates,” “aims,” “believes,” “hopes,” “potential” or similar words. For such statements, we claim the protection of the Private Securities Litigation Reform Act of 1995.

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 the control of Nephros. Actual results may differ materially from the expectations contained in the forward-looking statements. Factors that may cause such differences include the risks that: (i) potential products that appeared promising in early research or clinical trials to Nephros may not demonstrate efficacy or safety in subsequent pre-clinical or clinical trials; (ii) Nephros may not obtain appropriate or necessary governmental approvals; (iii) product orders may be cancelled, patients currently using Nephros’s products may cease to do so and patients expected to begin using Nephros’s products may not; (iv) Nephros may not be able to obtain funding if and when needed; (v) Nephros may encounter unanticipated internal control deficiencies or weaknesses or ineffective disclosure controls and procedures; (vi) HDF therapy may not be accepted in the United States and/or Nephros’s technology and products may not be accepted in target markets; (vii) Nephros may not be able to sell its products at competitive prices or profitably; and (viii) Nephros may not be able to secure or enforce adequate legal protection, including patent protection, for its products. More detailed information about Nephros and the risk factors that may affect the realization of forward-looking statements is set forth in Nephros’s filings with the Securities and Exchange Commission, including Nephros’s Annual Report on Form 10-KSB filed with the SEC for the fiscal year ended December 31, 2004 and its Quarterly Report on Form 10-QSB filed with the SEC for the fiscal quarter ended March 31, 2005. Investors and security holders are urged to read those documents free of charge on the SEC’s web site at www.sec.gov. Nephros does not undertake to publicly update or revise our forward-looking statements as a result of new information, future events or otherwise.

 

 

NEPHROS, INC. AND SUBSIDIARY
Condensed Consolidated Statements of Operations
(unaudited)

	Three Months Ended March 31,
	2005	2004
Net contract revenues	$ 1,750,000	$            —
Net product revenues	151,665	—
Net revenues	1,901,665	—
Operating costs and expenses:
Cost of product revenue	135,368	12,618
Research and development	462,701	690,024
Selling, general and administrative	1,752,488	1,316,435
Total operating expenses	2,350,557	2,019,077
Loss from operations	(448,892)	(2,019,077)
Other income:
Interest income	56,005	1,345
Total other income	56,005	1,345
Net loss	(392,887)	(2,017,732)
Dividends and accretion to redemption value of redeemable convertible preferred stock	—	(2,071,500)
Net loss attributable to common stockholders	$  (392,887)	$ (4,089,232)
Basic and diluted net loss attributable to common stockholders per common share	$       (0.03)	$       (2.57)
Shares used in computing basic and diluted net loss attributable to common stockholders per common share	12,150,956	1,593,659

 

NEPHROS, INC. AND SUBSIDIARY
Condensed Consolidated Statements of Cash Flows
(unaudited)

 

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