GlobeNewswire Inc | Mar 1, 2021 04:15PM EST

March 01, 2021

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

SOUTH ORANGE, NJ, March 01, 2021 (GLOBE NEWSWIRE) -- via NewMediaWire-- 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 AnnualWaterFiltration 03/31/20 06/30/20 09/30/20 12/31/20 TotalsBusinessSegment Net (loss) (620) (911) (394) (298) (2,223)income Adjustments: Depreciation of property 5 6 7 7 25and equipmentAmortization of other 45 45 46 47 183assetsInterest 110expense 43 30 22 15Interest (3) income (1) (4) (3) (11)Change in FV of contingent (42) - (187) - (229)considerationNon-cashstock-based 190 166 160 200 716compensationOther non-cash 11 12 2 21 46itemsAdjusted (369) (656) (347) (11) (1,383)EBITDA

Three Month Period Ended Annual2019WaterFiltration 03/31/19 06/30/19 09/30/19 12/31/19 TotalsBusinessSegment Net loss (778) (346) (167) 234 (1,057) Adjustments: Depreciation of property 8 8 4 4 24and equipmentAmortization of other 44 44 44 44 176assetsInterest 195expense 46 46 48 55Change in FV of contingent (10) (9) (94) (43) (156)considerationIncome tax - - - benefit (225) (225)Noncash 158 150 348 665 compensation 1,321Other noncash items 35 31 29 13 108Nonrecurring:Aether 78 - - - 78Acquisition Adjusted (419) (76) 212 747 464EBITDA

2020 Three Month Period Ended AnnualConsolidated 03/31/20 06/30/20 09/30/20 12/31/20 Totals Net (loss) (1,098) (1,657) (1,012) (759) (4,526)income Adjustments: Depreciation of property 5 6 7 7 25and equipmentAmortization of other 45 45 46 47 183assetsInterest 30 15 110expense 43 22Interest (4) (3) income (1) (3) (11)Change in FV of contingent (42) - (187) - (229)considerationNon-cashstock-based 222 179 172 206 779compensationOther non-cash 11 12 2 21 46items Adjusted (815) (1,389) (953) (466) (3,623)EBITDA

Three Month Period Ended Annual2019Consolidated 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 8 8 4 4 24and equipmentAmortization of other 44 44 44 44 176assetsInterest 46 46 195expense 48 55Change in FV (94) of contingent (10) (9) (43) (156)considerationIncome tax - (225) (225)benefit - -Noncash 158 150 354 670 1,332compensationOther noncash 35 31 108items 29 13Nonrecurring:AetherAcquisition & 188 150 150 - 488PathogenDetection Adjusted (880) (522) (209) 374 (1,237)EBITDA

Nephros believes that Adjusted EBITDA provides useful information to management and investors regarding certain financial and business trends relating to Nephross 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 Nephross 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 at4:30 pm ET, during which management will discuss Nephross 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 Nephross 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, PresidentPCG Advisory, Inc.(646) 863-6519ksmith@pcgadvisory.comwww.pcgadvisory.com

Andy Astor, CEONephros, Inc.(201) 345-0824andy@nephros.comwww.nephros.com

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

December December 31, 2020 31, 2019ASSETS 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 10 8 outstanding at December 31, 2020 and 2019, respectively 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 SUBSIDIARIESCONSOLIDATED 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 (229 ) (156 )consideration 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 (240 ) (241 )attributable to noncontrolling interestNet loss attributable to Nephros, Inc. $ (4,766 ) $ (3,420 )shareholders Net loss per common share, basic and $ (0.52 ) $ (0.45 )dilutedWeighted average common shares 9,078,549 7,542,299 outstanding, basic and diluted Comprehensive loss: Net loss $ (4,526 ) $ (3,179 )Other comprehensive gain (loss), foreign )currency translation adjustments, net of 9 (6 taxComprehensive loss (4,517 ) (3,185 )Comprehensive loss attributable to (240 ) (241 )noncontrolling interestComprehensive loss attributable to $ (4,757 ) $ (3,426 )Nephros, Inc. shareholders