Nephros Inc. Reports Third Quarter 2014 Financial Results And Announces Launch Of Rights Offering

RIVER EDGE, N.J., Nov. 14, 2014 /PRNewswire/ -- Nephros, Inc. (OTCQB:NEPH), a commercial stage medical device company that develops and sells high performance liquid purification ultrafilters and an on-line mid-dilution hemodiafiltration system for use with a hemodialysis machine for the treatment of chronic renal failure patients, announced today financial results for the three and nine months ended September 30, 2014 and the launch of its previously announced rights offering.

Rights Offering
On November 10, 2014, the Company distributed to holders of its common stock and/or warrants one non-transferable subscription right for each share of common stock, and each share of common stock underlying a warrant, held as of November 5, 2014. The rights offering will expire at 5:00 p.m., Eastern Time, on December 15, 2014, if not extended by the Company in its sole discretion.

Each subscription right entitles its holder to purchase 0.11901 of a share of common stock of the Company at a subscription price of $0.60 per share. The Company will not issue fractional shares issuable upon exercise of the subscription rights. Instead, the Company will round up any such fractional shares to the nearest whole share.

The rights offering includes an over-subscription privilege which permits each rights holder that exercises its rights in full to purchase additional shares of common stock that remain unsubscribed at the expiration of the rights offering. This over-subscription privilege is subject to the availability and allocation of shares among holders exercising this over-subscription privilege. Assuming the rights offering is fully subscribed, the Company estimates that it will receive gross proceeds of $3 million, less the expenses of the rights offering.

To the extent that, after the closing of the rights offering, there still remain unsubscribed shares of common stock of the Company, Lambda Investors LLC has committed to purchase any or all such remaining unsubscribed shares subject to the Company’s satisfaction of certain conditions.

Financial Performance for the Third Quarter Ended September 30, 2014
Total net revenues for the three months ended September 30, 2014 were approximately $491,000 compared to approximately $418,000 for the three months ended September 30, 2013. Total net revenues increased approximately $73,000, or 17%, arising from an increase of approximately $56,000 in water filter sales as well as an increase of approximately $17,000 in licensing revenue related to the Bellco license agreement, each as compared to the 2013 period. Water filter sales for current product sales increased approximately $83,000 and were partially offset by a decrease in sales for recalled product of approximately $27,000 when comparing the three months ended September 30, 2014 with the three months ended September 30, 2013.

Total operating expenses for the quarter ended September 2014 were $997,000 compared with $837,000 for the quarter September 30, 2013. The increase is primarily related to regulatory and quality system management resource costs as a result of the product recall as well as increases in professional and legal fees partially offset by decreases in personnel expenses.

Net loss for the quarter ended September 30, 2014 was $706,000, or $(0.03) per share (based on 25.2 million weighted average shares outstanding) compared to a net loss of 611,000, or $(0.03) per share (based on 23.1 million weighted average shares outstanding) for the quarter ended September 30, 2014. As of September 30, 2014, the Company had approximately 25.2 million shares outstanding.

Nephros ended the third quarter of 2014 with cash of $1,047,000.

About Nephros, Inc.
Nephros is a commercial stage medical device company that develops and sells high performance liquid purification filters. Our filters, which we call ultrafilters, are primarily used in dialysis centers for the removal of biological contaminants from water, bicarbonate concentrate and/or blood.

We were founded in 1997 by healthcare professionals affiliated with Columbia University Medical Center/New York-Presbyterian Hospital to develop and commercialize an alternative method to hemodialysis (HD). We have extended our filtration technologies to meet the demand for liquid purification in other areas, in particular water purification.

Presently, we offer ultrafilters for sale to customers in five markets:

• Dialysis Centers - Water/Bicarbonate: Filtration of water or bicarbonate concentrate used in hemodialysis devices
• Dialysis Centers - Blood: Treatment of patients with chronic renal failure using the OLPur H2H Hemodiafiltration (“HDF”) Module in conjunction with a UF controlled hemodialysis machine and its accessories, the H2H Module accessories, appropriately prepared water and ultrapure dialysate for hemodialysis and the OLPur MD 220 Hemodiafilter
• Hospitals and Other Healthcare Facilities: Filtration of water to be used for patient washing and drinking as an aid in infection control. The filters also produce water that is suitable for wound cleansing, cleaning of equipment used in medical procedures and washing of surgeon’s hands
• Military and Outdoor Recreation: Highly compact, individual water purification devices used by soldiers and backpackers to produce drinking water in the field
• Commercial Facilities: Filtration of water for washing and drinking including use in ice machines and soda fountains

For more information about Nephros, please visit the company’s website at www.nephros.com.

This press release does not constitute an offer to sell or a solicitation of an offer to buy the securities described herein, nor shall there be any sale of these securities, in any jurisdiction in which such an offer, solicitation, or sale would be unlawful prior to registration or qualification under the securities laws of any jurisdiction. The offering may only be made by means of a prospectus, a copy of which may be obtained from Nephros, Inc., 41 Grand Avenue, River Edge, New Jersey 07661, Attention: John C. Houghton, (201) 343-5202, ext. 101.

Forward-Looking Statements
Certain statements in this press release constitute “forward-looking statements”. Such statements include statements regarding 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 preceded 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:

• we may not be able to find a strategic partner to successfully market our HDF system;
• our HDF system may not be accepted by patients or health care providers in the U.S. marketplace;
• we may not be able to continue as a going concern;
• a default under the terms of the secured note with Lambda Investors LLC would result in the lender foreclosing upon substantially all of our assets and could result in our inability to continue business operations;
• we may not be able to complete the contemplated rights offering which could result in our inability to continue business operations;
• even if we are able to complete the rights offering, we may not have sufficient capital to successfully implement our business plan;
• restrictions in the secured note and related security agreement, which require the prior consent of the lender, may restrict our ability to operate our business, sell the company or sell our assets;
• 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;
• we face significant challenges in obtaining market acceptance of our products, which could adversely affect our potential sales and revenues;
• there are product-related deaths or serious injuries or product malfunctions, which could trigger recalls, class action lawsuits and other events that could cause us to incur expenses and may also limit our ability to generate revenues from such products;
• we face potential liability associated with the production, marketing and sale of our products, and/or the expense of defending against claims of product liability, could materially deplete our assets and generate negative publicity which could impair our reputation;
• 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;
• we may not be able to obtain funding if and when needed or on terms favorable to us in order to continue operations;
• we may not be able to effectively market our products;
• we may not be able to sell our water filtration products or chronic renal failure therapy products at competitive prices or profitably;
• we may encounter problems with our suppliers, manufacturers and distributors;
• we may encounter unanticipated internal control deficiencies or weaknesses or ineffective disclosure controls and procedures;
• we may not obtain appropriate or necessary regulatory approvals to achieve our business plan;
• products that appeared promising to us in research or clinical trials may not demonstrate anticipated efficacy, safety or cost savings in subsequent pre-clinical or clinical trials;
• we may not be able to secure or enforce adequate legal protection, including patent protection, for our products; and
• we may not be able to achieve sales growth in key geographic markets.

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, 2013, 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 www.sec.gov. 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.

SOURCE Nephros, Inc.