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Third Quarter Net Revenue of $2.6 Million
Up 24% Year-Over-Year and 16% Quarter-over-Quarter
SOUTH ORANGE, NJ – 
Financial Highlights
Water Filtration Business Segment Highlights*
- Net revenue of $2.6 million, an increase of 22%
- Net loss of $0.8 million, an increase of 92%
- Adjusted EBITDA of ($0.3 million) an improvement of 6%
Consolidated Highlights*
- Net revenue of $2.6 million, an increase of 24%
- Net loss of $1.2 million, an increase of 15%
- Adjusted EBITDA of ($0.7 million), an improvement of 22%
*Stated performance is relative to same period prior year (third quarter of 2020)
“Year-to-date revenue through September 30 was the highest in the company’s history, and a 23% over the same period last year,” said Andy Astor, Chief Executive Officer of Nephros. “We are pleased with these results, especially given the prevalence of the COVID-19 Delta variant during the quarter, which may have suppressed our sales. We are optimistic that revenue growth rates will continue to increase, as the pandemic subsides and our markets fully reopen.”
Mr. Astor continued, “Our Pathogen Detection Systems (PDS) business segment generated small but promising new revenue. We believe this relatively young business will see significant growth in 2022. Regarding our second-generation HDF system, the FDA completed its Acceptance Review for the product, and has now entered its Substantive Review phase, which we anticipate will be completed around the end of this year.”
Consolidated Financial Performance for the Quarter Ended September 30, 2021
Net revenue for the quarter ended September 30, 2021 was $2.6 million, compared with $2.1 million in the corresponding period in 2020, an increase of 24%.
Net loss for the quarter ended September 30, 2021 was $1.2 million, compared with a net loss of $1.0 million for the quarter ended September 30, 2020, an increase of 15%.
Adjusted EBITDA for the quarter ended September 30, 2021 was ($0.7 million), compared with ($1.0 million) during the same period in 2020.
Cost of goods sold for the quarter ended September 30, 2021 was $1.2 million, compared with $0.9 million for the quarter ended September 30, 2020, an increase of 37%. Gross margins for the quarter ended September 30, 2021 were 54%, compared with 58% in the same period in 2020.
Research and development expenses for the quarter ended September 30, 2021 were $0.6 million, compared with $0.8 million during the quarter ended September 30, 2020.
Depreciation and amortization expenses for the quarter ended September 30, 2021 were approximately $50,000, compared with approximately $49,000 for the corresponding period 2020, an increase of 2%.
Selling, general and administrative expenses for the quarter ended September 30, 2021 were $1.9 million, compared with $1.5 million during the same period in 2020, an increase of 23%.
As of September 30, 2021, Nephros had cash and cash equivalents of $7.4 million.
Adjusted EBITDA Definition and Reconciliation to GAAP Financial Measures
Adjusted EBITDA is calculated by taking net (loss) income calculated in accordance with generally accepted accounting principles (“GAAP”) and excluding all interest-related expenses and income, tax-related expenses and income, non-recurring expenses and income, and non-cash items, including depreciation and amortization and non-cash compensation. The following table presents a reconciliation of Adjusted EBITDA to net (loss) income, the most directly comparable GAAP financial measure, for the third quarter of the 2021 and 2020 fiscal years for both Nephros (on a consolidated basis) and the Water Filtration Business Segment:
| 3 Months Ended Sep 30, | ||
| Water Filtration Business Segment | 2021 | 2020 |
| Net loss | (755) | (394) |
| Adjustments: | ||
| Depreciation of property and equipment | 7 | 7 |
| Amortization of other assets | 46 | 46 |
| Interest expense | 10 | 22 |
| Interest income | (2) | (3) |
| Change in fair value of contingent consideration | – | (187) |
| Stock based compensation | 257 | 160 |
| Other noncash items | 90 | 2 |
| Adjusted EBITDA | (347) | (347) |
| 3 Months Ended Sep 30, | ||
| Consolidated Results | 2021 | 2020 |
| Net loss | (1,162) | (1,012) |
| Adjustments: | ||
| Depreciation of property and equipment | 7 | 7 |
| Amortization of other assets | 46 | 46 |
| Interest expense | 10 | 22 |
| Interest income | (2) | (3) |
| Change in fair value of contingent consideration | – | (187) |
| Noncash compensation | 267 | 172 |
| Other noncash items | 90 | 2 |
| Adjusted EBITDA | (744) | (953) |
Nephros believes that Adjusted EBITDA provides useful information to management and investors regarding certain financial and business trends relating to Nephros’s financial condition and results of operations. Management does not consider Adjusted EBITDA in isolation or as an alternative to financial measures determined in accordance with GAAP. The principal limitation of Adjusted EBITDA is that it excludes significant expenses and income that are required by GAAP to be recognized in Nephros’s consolidated financial statements. In addition, Adjusted EBITDA is subject to inherent limitations as it reflects the exercise of judgments by management about which expenses and income are excluded or included in determining Adjusted EBITDA. In order to compensate for these limitations, management presents Adjusted EBITDA in connection with net (loss) income, the most directly comparable GAAP financial measure. Nephros urges investors to review the reconciliation of Adjusted EBITDA to net (loss) income and not to rely on any single financial measure to evaluate the business.
Conference Call Today at 4:30 p.m. ET
Nephros will host a conference call today at 4:30 PM Eastern Time, during which management will discuss Nephros’s financial results and provide a general business overview.
Participants may dial into the call as follows:
Domestic access: 1-844-808-7106
International access: 1-412-317-5285
Upon joining, please ask to be joined into the Nephros conference call.
A replay of the call can be accessed until November 11, 2021 at 1-877-344-7529 or 1-412-317-0088 for international callers and entering replay access code: 10160005.
An audio archive of the call will be available shortly after the call on the Nephros investor relations page at https://investors.nephros.com/events/.
About Nephros
Nephros, Inc. is a company committed to improving the human relationship with water through leading, accessible technology. We provide innovative filtration and pathogen detection as part of an integrated approach to water safety that combines science, solutions, and support services. Nephros products serve the needs of customers within the healthcare and commercial markets, offering both proactive and emergency responses for water management.
For more information about Nephros, please visit 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 Nephros’s expected benefits from its recent acquisition of GenArraytion, expected future growth in demand and the timing of such growth, expected future revenue and gross margins, the timing of receiving 510(k) clearance for Nephros’s second-generation HDF Assist Module and the expected timing of commercially launching such product, if cleared, and other statements that are not historical facts, including statements that 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 the impact of the ongoing COVID-19 pandemic, uncertainty in clinical outcomes, potential delays in the regulatory approval process, changes in business, economic and competitive conditions, the availability of capital when needed, dependence on third-party manufacturers and researchers, regulatory reforms, uncertainties in litigation or investigative proceedings, and the availability of financing. These and other risks and uncertainties are detailed in Nephros’s reports filed with the U.S. Securities and Exchange Commission. Nephros does not undertake any responsibility to update the forward-looking statements in this release.
Investor Relations Contacts:
Kirin Smith, President
PCG Advisory, Inc.
(646) 823-8656
ksmith@pcgadvisory.com
Andy Astor, CEO
Nephros, Inc.
(201) 345-0824
andy@nephros.com
| NEPHROS, INC. AND SUBSIDIARIES | ||||
| CONSOLIDATED BALANCE SHEETS | ||||
| (In thousands, except share amounts) | ||||
| ASSETS | September 30, 2021 | December 31, 2020 | ||
| Current assets: | ||||
| Cash and cash equivalents | $7,350 | $8,249 | ||
| Accounts receivable, net | 1,555 | 1,364 | ||
| Inventory | 4,649 | 5,304 | ||
| Prepaid expenses and other current assets | 67 | 237 | ||
| Total current assets | 13,621 | 15,154 | ||
| Property and equipment, net | 382 | 295 | ||
| Lease right-use-of assets | 814 | 1,037 | ||
| Intangible assets, net | 1,573 | 506 | ||
| Goodwill | 759 | 759 | ||
| License and supply agreement, net | 569 | 670 | ||
| Other assets | 102 | 89 | ||
| Total assets | $17,820 | $18,510 | ||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||
| Current liabilities: | ||||
| Current portion of secured note payable | $243 | $229 | ||
| Accounts payable | 641 | 423 | ||
| Accrued expenses | 573 | 341 | ||
| Current portion of lease liabilities | 366 | 332 | ||
| Total current liabilities | 1,823 | 1,325 | ||
| Secured note payable, net of current portion | 164 | 364 | ||
| PPP loan | – | 482 | ||
| Equipment financing, net of current portion | 5 | 7 | ||
| Lease liabilities, net of current portion | 498 | 759 | ||
| Total liabilities | 2,490 | 2,937 | ||
| Commitments and Contingencies | ||||
| Stockholders’ equity: | ||||
| Preferred stock, $.001 par value; 5,000,000 shares authorized at September 30, 2021 and December 31, 2020; no shares issued and outstanding and September 30, 2021 and December 31, 2020 | – | – | ||
| Common stock, $.001 par value; 40,000,000 authorized at September 30, 2021 and December 31, 2020; 10,233,083 and 9,873,006 shares issued and outstanding and September 30, 2021 and December 31, 2020, respectively |
10 | 10 | ||
| Additional paid-in capital | 146,883 | 144,296 | ||
| Accumulated other comprehensive income | 66 | 74 | ||
| Accumulated deficit | (134,683) | (131,858) | ||
| Subtotal | 12,276 | 12,522 | ||
| Noncontrolling interest | 3,054 | 3,051 | ||
| Total stockholders’ equity | 15,330 | 15,573 | ||
| Total liabilities and equity | $17,820 | $18,510 | ||
| NEPHROS, INC. AND SUBSIDIARIES | ||||
| CONSOLIDATED OF OPERATIONS AND COMPREHENSIVE LOSS | ||||
| (In thousands, except share amounts) | ||||
| Three Months Ended September 30, | ||||
| 2021 | 2020 | |||
| Net revenues: | ||||
| Product revenues | $2,595 | $2,094 | ||
| Royalty and other revenues | 42 | 27 | ||
| Total net revenues | 2,637 | 2,121 | ||
| Cost of goods sold | 1,225 | 896 | ||
| Gross margin | 1,412 | 1,225 | ||
| Gross margin % | 54% | 58% | ||
| Operating expenses: | ||||
| Research and development | 632 | 751 | ||
| Depreciation and amortization | 50 | 49 | ||
| Selling, general and administrative | 1,892 | 1,544 | ||
| Change in fair value of contingent consideration | – | (187) | ||
| Total operating expenses | 2,574 | 2,157 | ||
| Loss from operations | (1,162) | (932) | ||
| Interest expense | (10) | (22) | ||
| Interest income | 2 | 3 | ||
| Other income (expense), net | 8 | (61) | ||
| Net loss | (1,162) | (1,012) | ||
| Less: Undeclared deemed dividend attributable to noncontrolling interest | (60) | (60) | ||
| Net loss attributable to Nephros, Inc. shareholders | (1,222) | (1,072) | ||
| Net loss per common share, basic and diluted | $(0.12) | $(0.12) | ||
| Weighted average common shares outstanding, basic and diluted | 10,044,745 | 9,039,673 | ||
| Comprehensive loss: | ||||
| Net Loss | (1,162) | (1,012) | ||
| Other comprehensive (loss) income, foreign currency translation adjustments | (4) | 4 | ||
| Comprehensive loss | (1,166) | (1,008) | ||
| Comprehensive loss attirbutable to noncontrolling interest | (60) | (60) | ||
| Total comprehensive loss attributable to Nephros, Inc. shareholders | $(1,226) | $(1,068) | ||
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