Nephros Reports 2015 Fourth Quarter and Full Year Financial Results; Provides 2016 Guidance and Potential Upcoming Milestones

Reports 90% Annual Ultrafilter Product Sales Growth—

–Pending FDA clearance, Aims to launch the S100 Point of Use microfilter in 2Q’16 and the EndoPurTM Endotoxin Filter Cartridge near the end of the 2Q’16–

RIVER EDGE, NJ, March 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,which was a transitional year, as we continue to execute our growth strategy,” said Daron Evans, President and Chief Executive Officer of the Nephros. “Our focused efforts on growing the ultrafilter business through a shift towards increased distributor support and product portfolio expansion is demonstrating solid traction with 90% annual growth. Additionally, we reinvigorate our HDF program as we prepare for potential expansion of use and a new dialysis clinic in 2016. Going forward, we are focused on our upcoming milestones and forecast that our new ultrafilter product launches will provide an incremental revenue boost that will propel us into positive cash flow. Lastly, we look forward to to collaborating with our HDF partners to gather, and potentially publish, observational clinical data.”

Review of 2015 and 2016 Opportunities

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 form factors 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 EndoPurTM endotoxin filter for the dialysis market will provide a significant contribution 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 at its currently active dialysis and for deployment at a new 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 the May 2015 FDA warning letter. In February 2016, the Company passed an on-site U.S. Food and Drug Administration (“FDA”) audit with no 483 observations.

Financially, the Company raised approximately $3.8 million through a PIPE transaction in May 2015 and the discounted exercise of warrants in the back half of the year. The exercise of the warrants removed a significant balance sheet liability and cleaned up the capital structure of the Company, better positioning the Company for any future transitions onto a national exchange.

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 were shipped in March 2016. 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.  95% growth in product revenues were 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 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 selling, general and administrative expenses.

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

2016 Revenue Guidance

The Company expects total revenue for the quarter ending March 31, 2016 to be greater than $550 thousand. On a quarterly basis, the Company believes that it can be cash flow positive with approximately $2 million in total revenue 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 late October 2015. In late December 2015, the FDA requested additional information. On March 8th, 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.

EndoPurTM 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 reverse osmosis (“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 expected Q1 2016 product revenue, our ability to grow revenue, our ability to become cash flow positive, 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,” “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 FDC 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 may encounter problems with our suppliers, manufacturers and distributors; (viii) we may encounter unanticipated internal control deficiencies or weaknesses or ineffective disclosure controls and procedures; and (ix) 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, 2014, 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.





PCG Advisory Group

Kirin M. Smith, Chief Operating Officer

Direct: 646-863-6519

[email protected]

(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