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Nephros Reports 2020 Fourth Quarter and Full Year Financial Results

Fourth Quarter Net Revenue $2.3 Million, Up 10% Sequentially Over Third Quarter
Full Year Revenue $8.6 million, Down 17% Against Prior Year

SOUTH ORANGE, NJ – (NewMediaWire) – March 01, 2021 – Nephros, Inc. (Nasdaq:NEPH), a leading water technology company providing filtration and pathogen detection solutions to the medical and commercial markets, today announced financial results for the fourth quarter and full year ended December 31, 2020.

Financial Highlights

Fourth Quarter Ended December 31, 2020 – Water Filtration Business Segment

  • Net revenue was $2.3 million, compared with $3.2 million in 2019, down 26%
  • Net loss was ($298,000), compared with net income of $234,000 in 2019
  • Adjusted EBITDA was ($11,000), compared with $747,000 in 2019

Fourth Quarter Ended December 31, 2020 – Consolidated

  • Net revenue was $2.3 million, compared with $3.2 million in 2019, down 26%
  • Net loss was ($759,000), compared with ($144,000) million in 2019
  • Adjusted EBITDA was ($466,000), compared with $374,000 in 2019

Year-End 2020 – Water Filtration Business Segment

  • Net revenue was $8.5 million, compared with $10.3 million in 2019, down 17%
  • Net loss was ($2.2 million), compared with ($1.1 million) in 2019
  • Adjusted EBITDA was ($1.4 million), compared with $464,000 in 2019

Year-end 2020 – Consolidated

  • Net revenue was $8.6 million, compared with $10.3 million in 2019, down 17%
  • Net loss was ($4.5 million), compared with ($3.2 million) in 2019
  • Adjusted EBITDA was ($3.6 million), compared with ($1.2 million) in 2019

“While 2020 was a challenging year overall, we were pleased to deliver consecutive quarter-over-quarter growth in the second half,” said Andy Astor, Chief Executive Officer of Nephros. “The two hardest hit segments of our business were new customer acquisitions and emergency response, offset by stable recurring revenue from our existing customer base, limiting our overall downturn for the year to 17%. As COVID-19 immunity increases over the coming weeks and months, we are optimistic that our business will return to pre-pandemic growth levels in the latter half of this year.”

Financial Performance for the Fourth Quarter and Year Ended December 31, 2020

Net revenue for the year ended December 31, 2020 was $8.6 million, compared with $10.3 million in 2019, a decrease of 17%. Net revenues for the fourth quarter of 2020 were $2.3 million, compared with $3.2 million in the fourth quarter of 2019, a decrease of 26%.

Cost of goods sold for the year ended December 31, 2020 was $3.6 million, compared with $4.3 million in 2019, a decrease of 14%. Cost of goods sold for the fourth quarter of 2020 was $1.0 million, compared with $1.3 million in the fourth quarter of 2019, a decrease of 18%.

Gross margins for the year ended December 31, 2020 were 57%, compared with 59% in 2019. Gross margins for the fourth quarter of 2020 were 56%, compared with 60% in the fourth quarter of 2019.

Research and development expenses for the year ended December 31, 2020 were $2.8 million, compared with $3.1 million in 2019, a decrease of 11%. Research and development expenses for the fourth quarter of 2020 were $0.6 million, compared with $0.8 million in the fourth quarter of 2019, a decrease of 20%.

Depreciation and amortization expenses for the year ended December 31, 2020 were approximately $192,000, compared with approximately $186,000 in 2019, an increase of 3%. Depreciation and amortization expenses for the fourth quarter of 2020 were approximately $50,000, compared with approximately $44,000 in the fourth quarter of 2019, an increase of 14%.

Selling, general and administrative expenses for the year ended December 31, 2020 were $6.5 million, compared with $6.1 million in 2019, an increase of 6%. Selling, general and administrative expenses in each of the fourth quarters of 2020 and 2019 were $1.4 million.

Net loss for the year ended December 31, 2020 was ($4.5 million), compared with a net loss of ($3.2 million) in 2019, a 42% increase in loss. Net loss for the fourth quarter of 2020 was approximately ($759,000), compared with a net loss of approximately ($144,000) in the fourth quarter of 2019, a 427% increase in loss.

Adjusted EBITDA for the year ended December 31, 2020 was ($3.6 million), compared with ($1.2 million) in 2019, a 193% increase in loss. Adjusted EBITDA for the fourth quarter of 2020 was approximately ($466,000), compared with approximately $374,000 in the fourth quarter of 2019.

As of December 31, 2020, Nephros had cash and cash equivalents of approximately $8.2 million.  

Adjusted EBITDA Definition and Reconciliation to GAAP Financial Measures

Adjusted EBITDA is calculated by taking net loss 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, the most directly comparable GAAP financial measure, for the 2020 and 2019 fiscal years for both Nephros on a consolidated basis and the Water Filtration Business Segment:

2020 Three Month Period Ended Annual
Water Filtration Business Segment 03/31/20 06/30/20 09/30/20 12/31/20 Totals
           
Net (loss) income             (620)             (911)             (394)             (298)         (2,223)
           
Adjustments:          
Depreciation of property and equipment                 5                 6                 7                 7                25
Amortization of other assets                45                45                46                47              183
Interest expense                43                30                22                15              110
Interest income                (1)                (4)               (3)                 (3)               (11)
Change in FV of contingent consideration               (42)                –            (187)             (229)
Non-cash stock-based compensation              190              166             160              200              716
Other non-cash items                11                12               2                21                46
Adjusted EBITDA             (369)             (656)             (347)              (11)            (1,383)
 

2019

Three Month Period Ended Annual
Water Filtration Business Segment 03/31/19 06/30/19 09/30/19 12/31/19 Totals
           
Net loss          (778)             (346)             (167)             234          (1,057)
           
Adjustments:          
Depreciation of property and equipment                 8                 8                 4                 4                24
Amortization of other assets                44                44                44                44              176
Interest expense                46                46                48                55              195
Change in FV of contingent consideration               (10)                (9)               (94)               (43)             (156)
Income tax benefit                –                –                –               (225)               (225)
Noncash compensation              158              150              348              665              1,321
Other noncash items                35                31                29                13                108
Nonrecurring: Aether Acquisition              78                –                –                – 78
           
Adjusted EBITDA             (419)              (76) 212              747             464
2020 Three Month Period Ended Annual
Consolidated 03/31/20 06/30/20 09/30/20 12/31/20 Totals
           
Net (loss) income         (1,098)             (1,657)             (1,012)            (759)         (4,526)
           
Adjustments:          
Depreciation of property and equipment                 5                 6                 7                  7                25
Amortization of other assets                45                45                46                47              183
Interest expense                43                30                22                15              110
Interest income                 (1)                (4)                (3)                (3)               (11)
Change in FV of contingent consideration               (42)                  –            (187)                  –             (229)
Non-cash stock-based compensation              222              179             172              206              779
Other non-cash items                11                12               2                21                46
           
Adjusted EBITDA             (815)             (1,389)           (953)           (466)          (3,623)
 

2019

Three Month Period Ended Annual
Consolidated 03/31/19 06/30/19 09/30/19 12/31/19 Totals
           
Net loss          (1,349)             (942)             (744)             (144)          (3,179)
           
Adjustments:          
Depreciation of property and equipment                 8                 8                 4                 4                24
Amortization of other assets                44                44               44                44              176
Interest expense                46                46                48                55              195
Change in FV of contingent consideration               (10)                (9)              (94)                (43)             (156)
Income tax benefit                  –                  –                 –             (225)             (225)
Noncash compensation              158              150              354              670            1,332
Other noncash items                35                31                29                13              108
Nonrecurring: Aether Acquisition &
Pathogen Detection
             188               150               150                –              488
           
Adjusted EBITDA             (880)             (522)            (209)            374         (1,237)
           

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, the most directly comparable GAAP financial measure. Nephros urges investors to review the reconciliation of Adjusted EBITDA to net loss and not to rely on any single financial measure to evaluate the business.

Conference Call Today at 4:30 pm Eastern Time

Nephros will host a conference call today at 4:30 pm ET, during which management will discuss Nephros’s financial results and provide a general business overview.

Participants may dial into the following number to access the call: 1-844-808-7106. International callers may use 1-412-317-5285. Please ask to be joined into the Nephros conference call. A replay of the call can be accessed until March 8, 2021 at 1-877-344-7529 or 1-412-317-0088 for international callers and entering replay access code: 10151848. 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 is a leading water technology company in medical and commercial water purification and pathogen detection, headquartered in the USA. Our diverse team of passionate employees are dedicated to advancing point-of-use water safety through education, product solutions, and emergency outbreak response 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 expected future growth and the timing of such growth 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 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, including our Annual Report on Form 10-K for the year ended December 31, 2020. 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) 863-6519
ksmith@pcgadvisory.com
www.pcgadvisory.com

Andy Astor, CEO
Nephros, Inc.
(201) 345-0824
andy@nephros.com
www.nephros.com

NEPHROS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share amounts) 

    December 31, 2020     December 31, 2019  
ASSETS                
Current assets:                
Cash and cash equivalents   $ 8,249     $ 4,166  
  Accounts receivable, net     1,364       1,045  
  Inventory, net     5,304       2,562  
  Prepaid expenses and other current assets     237       526  
  Total current assets     15,154       8,299    
Property and equipment, net     295       81  
Lease right-of-use assets     1,037       1,106  
Intangible assets, net     506       548  
Goodwill     759       759  
License and supply agreement, net     670       804  
Other assets     89       32  
TOTAL ASSETS   $ 18,510     $ 11,629    
LIABILITIES AND STOCKHOLDERS’ EQUITY                
Current liabilities:                
  Secured revolving credit facility   $     $ 560  
  Current portion of secured note payable     229       211  
  Accounts payable     423       959  
  Accrued expenses     341       136  
  Current portion of contingent consideration           300  
  Current portion of lease liabilities     332       262  
  Total current liabilities     1,325       2,428    
Secured note payable, net of current portion     364       613  
PPP loan     482        
Equipment financing, net of current portion     7       10  
Lease liabilities, net of current portion     759       889  
TOTAL LIABILITIES     2,937       3,940    
                 
COMMITMENTS AND CONTINGENCIES (Note 19)                
                 
STOCKHOLDERS’ EQUITY:                
                 
  Preferred stock, $.001 par value; 5,000,000 shares authorized at December 31, 2020 and 2019; no shares issued and outstanding at December 31, 2020 and 2019            
  Common stock, $.001 par value; 40,000,000 shares authorized at December 31, 2020 and 2019; 9,873,006 and 8,058,850 shares issued and outstanding at December 31, 2020 and 2019, respectively     10       8  
  Additional paid-in capital     144,296       131,934  
  Accumulated other comprehensive income     74       65  
  Accumulated deficit     (131,858 )     (127,332 )
  Subtotal     12,522       4,675    
  Noncontrolling interest     3,051       3,014  
TOTAL STOCKHOLDERS’ EQUITY     15,573       7,689    
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY   $ 18,510     $ 11,629    
                       

NEPHROS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(In thousands, except share and per share amounts)

    Years Ended December 31,  
    2020     2019  
Net revenue:                
Product revenues   $ 8,453     $ 10,182  
Royalty and other revenues     108       152  
Total net revenues     8,561       10,334  
                 
Cost of goods sold     3,648       4,250  
 Gross margin       4,913       6,084  
Operating expenses:                
Research and development     2,759       3,090  
Depreciation and amortization     192       186  
Selling, general and administrative     6,466       6,119  
Change in fair value of contingent consideration     (229     (156 )
 Total operating expenses       9,188       9,239  
Loss from operations     (4,275 )     (3,155 )
Other income (expense):                
Interest expense     (110 )     (195 )
Interest income     11        
Other expense, net     (152 )     (54 )
Loss before income taxes     (4,526 )     (3,404 )
Income tax benefit           225  
Net loss     (4,526 )     (3,179 )
Less: Undeclared deemed dividend attributable to noncontrolling interest     (240 )     (241 )
Net loss attributable to Nephros, Inc. shareholders   $  (4,766 )   $ (3,420 )
                 
Net loss per common share, basic and diluted   $ (0.52 )   $ (0.45 )
Weighted average common shares outstanding, basic and diluted     9,078,549       7,542,299  
                 
Comprehensive loss:                
Net loss   $ (4,526 )   $ (3,179 )
Other comprehensive gain (loss), foreign currency translation adjustments, net of tax     9        (6
Comprehensive loss     (4,517 )      (3,185 )
Comprehensive loss attributable to noncontrolling interest     (240 )     (241 )
Comprehensive loss attributable to Nephros, Inc. shareholders   $ (4,757 )   $ (3,426 )

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