Nephros Reports Second Quarter 2005 Financial Results.NEW YORK New York, state, United States New York, Middle Atlantic state of the United States. It is bordered by Vermont, Massachusetts, Connecticut, and the Atlantic Ocean (E), New Jersey and Pennsylvania (S), Lakes Erie and Ontario and the Canadian province of -- Nephros, Inc. (AMEX AMEX See: American Stock Exchange : NEP NEP: see New Economic Policy. ) announced today financial results for the three months and six months ended June June: see month. 30, 2005. For the quarter ended June 30, 2005, Nephros reported net revenue of $226,426, attributable to sales of its OLpur MD190 product in Europe Europe (y  r`əp), 6th largest continent, c.4,000,000 sq mi (10,360,000 sq km) including adjacent islands (1992 est. pop. 512,000,000). ,
compared with no revenue in the corresponding period of 2004.The Company's net loss was $2,032,333 for the second quarter of 2005 versus a net loss of $1,680,033 in the second quarter of 2004. Nephros reported a net loss attributable to common stockholders in the second quarter of 2005 of $2,032,333, or $0.17 loss per basic and diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. share, compared to a loss of $4,360,120, or $2.74 loss per basic and diluted share, in the year-earlier period. For the six months ended June 30, 2005, Nephros reported net revenue of $2,128,091 compared with no revenue in the first six months of 2004. In the first half of 2005, net revenue recognized from product sales totaled $378,091. Half-year revenue also included a one-time one-time adj. 1. or one·time a. Occurring or undertaken only once: a one-time winner in 1995. b. , upfront fee of $1.75 million resulting from Nephros's license agreement with Asahi Asahi (朝日 or 旭) means "morning sun" in Japanese. It is a name of several places in Japan:
Nephros's net loss was $2,425,220 for the first half of 2005 versus a net loss of $3,697,766 in the comparable period last year. Nephros reported a net loss attributable to common stockholders for the first half of 2005 of $2,425,220, or $0.20 loss per basic and diluted share, compared to a loss of $8,449,353, or $5.30 loss per basic and diluted share, in the year-earlier period. It should be noted that, although Nephros began selling products in the first quarter of 2004, Nephros does not recognize revenue from product sales until a customer's right of return has expired ex·pire v. ex·pired, ex·pir·ing, ex·pires v.intr. 1. To come to an end; terminate: My membership in the club has expired. 2. . Accordingly, Nephros reported no revenue during the first half of 2004. It should also be noted that the differences between net loss and net loss attributable to common stockholders for the 2004 periods are the result of the accrual accrual, n continually recurring short-term liabilities. Examples are accrued wages, taxes, and interest. of preferred dividends preferred dividend n. a payment of a corporation's profits to holders of preferred shares of stock. (See: preferred stock) and the accretion The act of adding portions of soil to the soil already in possession of the owner by gradual deposition through the operation of natural causes. The growth of the value of a particular item given to a person as a specific bequest under the provisions of a will between the of a beneficial conversion feature associated with Nephros's issuance of series D convertible preferred stock Convertible Preferred Stock Preferred stock that includes an option for the holder to convert the preferred shares into a fixed number of common shares, usually anytime after a predetermined date. Also known as "convertible preferred shares". . As of June 30, 2005, Nephros had cash, cash equivalents and short-term Short-term Any investments with a maturity of one year or less. short-term 1. Of or relating to a gain or loss on the value of an asset that has been held less than a specified period of time. investments of $8,813,624. "I am pleased with our achievements in the second quarter of 2005. In June, we received approval from the FDA FDA abbr. Food and Drug Administration FDA, n.pr See Food and Drug Administration. FDA, n.pr the abbreviation for the Food and Drug Administration. to market our OLpur(TM) HD190 high flux flux In metallurgy, any substance introduced in the smelting of ores to promote fluidity and to remove objectionable impurities in the form of slag. Limestone is commonly used for this purpose in smelting iron ores. filter in the U.S., a significant milestone for our company. While the OLpur(TM) HD190 is not expected to offer a substantial sales opportunity in the foreseeable fore·see tr.v. fore·saw , fore·seen , fore·see·ing, fore·sees To see or know beforehand: foresaw the rapid increase in unemployment. future, we believe that the FDA approval of the OLpur(TM) HD190 is an important step in the regulatory process to gain approval for our more advanced End-Stage Renal Disease End-stage renal disease (ESRD) Total kidney failure; chronic kidney failure is diagnosed as ESRD when kidney function falls to 5-10% of capacity. Mentioned in: Chronic Kidney Failure end-stage renal disease therapies in the U.S. In addition, we recently received U.S. patent confirmation for our OLpur(TM) H2H H2H Head to Head H2H Hand to Hand (combat) H2H Heart to Heart H2H Human to Human (information technology, business process management) H2H Human to Human (transmission of disease) (TM) online hemodiafiltration hemodiafiltration /he·mo·di·a·fil·tra·tion/ (-di?ah-fil-tra´shun) hemofiltration with a dialytic component, so that blood flow is accelerated. module, giving us the exclusive right, subject to FDA approval, to use our OLpur(TM) H2H(TM) product to open the U.S. market to hemodiafiltration, which has been shown to be a superior therapy to hemodialysis hemodialysis /he·mo·di·al·y·sis/ (-di-al´i-sis) removal of certain elements from the blood by virtue of the difference in rates of their diffusion through a semipermeable membrane while being circulated outside the body; the process ," stated Norman Norman, city (1990 pop. 80,071), seat of Cleveland co., central Okla.; inc. 1891. It is the center of a livestock region. Oil wells, food processing, and printing and publishing contribute to the economy, and there is diverse manufacturing (machinery, communication Barta, chief executive officer of Nephros. "In addition to progress in the U.S., we continue to make marked strides in the European European emanating from or pertaining to Europe. European bat lyssavirus see lyssavirus. European beech tree fagussylvaticus. European blastomycosis see cryptococcosis. market. During the second quarter, we built upon the initial sales of our OLpur(TM) MD190 and initiated supplemental clinical trials in five European countries which are designed to demonstrate the OLpur(TM) MD190's effectiveness in removing a range of blood toxins and other factors contributing to overall therapy cost savings and patient well-being. We're we're Contraction of we are. we're we are pursuing our strategy of attaining targeted, measurable sales growth throughout Europe, and in turn expanding into other key geographic areas including the U.S. We have made measurable progress in the execution of our business plan during the first half of 2005, and remain focused on increasing sales and driving market penetration Noun 1. market penetration - the extent to which a product is recognized and bought by customers in a particular market penetration - the act of entering into or through something; "the penetration of upper management by women" of our advanced mid-dilution hemodiafiltration technologies," Barta concluded. About Nephros Inc. Nephros, Inc., headquartered in New York, is a medical device company developing and marketing products designed to improve the quality of life for the End-Stage Renal Disease (ESRD ESRD end-stage renal disease. ESRD End-stage renal disease; chronic or permanent kidney failure. Mentioned in: Dialysis, Kidney ESRD End-stage renal disease, see there ) patient, while addressing the critical financial and clinical needs of the care provider. ESRD is a disease state characterized char·ac·ter·ize tr.v. character·ized, character·iz·ing, character·iz·es 1. To describe the qualities or peculiarities of: characterized the warden as ruthless. 2. by the irreversible irreversible (ir´ēvur´seb  l),adj incapable of being reversed or returned to the original state. loss of kidney function. Nephros believes that its products are designed to remove a range of harmful substances more effectively, and more cost-effectively, than existing treatment methods; particularly with respect to substances known collectively as "middle molecules," due to their molecular weight, that have been found to contribute to such conditions as dialysis dialysis (dīăl`ĭsĭs), in chemistry, transfer of solute (dissolved solids) across a semipermeable membrane. Strictly speaking, dialysis refers only to the transfer of the solute; transfer of the solvent is called osmosis. related amyloidosis Amyloidosis Definition Amyloidosis is a progressive, incurable, metabolic disease characterized by abnormal deposits of protein in one or more organs or body systems. , carpal tunnel syndrome carpal tunnel syndrome: see repetitive stress injury. carpal tunnel syndrome (CTS) Painful condition caused by repetitive stress to the wrist over time. , degenerative de·gen·er·a·tive adj. Of, relating to, causing, or characterized by degeneration. Degenerative Degenerative disorders involve progressive impairment of both the structure and function of part of the body. bone disease and ultimately, to mortality in the ESRD patient. Forward Looking Statements This news release contains certain "forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. " within the meaning of the Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and of 1995, as amended a·mend v. a·mend·ed, a·mend·ing, a·mends v.tr. 1. To change for the better; improve: amended the earlier proposal so as to make it more comprehensive. 2. . Such statements may include statements regarding the efficacy and intended use of Nephros's technologies under development, the timelines This article or section contains self-references. For other uses of "Timeline", see Timeline (disambiguation). The following is an index of timelines found on Wikipedia. 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. For such statements, Nephros claims the protection of the Private Securities Litigation Reform Act of 1995. 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 the control of Nephros. Actual results may differ materially from the expectations contained in the forward-looking statements. Factors that may cause such differences include the risks that: (i) products that appeared promising in research or clinical trials to Nephros may not demonstrate anticipated efficacy, safety or cost savings in subsequent pre-clinical or clinical trials; (ii) Nephros may not obtain appropriate or necessary governmental approvals to achieve its business plan; (iii) product orders may be cancelled, patients currently using Nephros's products may cease to do so and patients expected to begin using Nephros's products may not; (iv) hemodiafiltration therapy may not be accepted in the United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. and/or Nephros's technology and products may not be accepted in current or future target markets, which could lead to the failure to achieve market penetration of Nephros's products; (v) Nephros may not be able to sell its products at competitive prices or profitably; (vi) Nephros may not be able to secure or enforce adequate legal protection, including patent protection, for its products; (vii) FDA approval relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc Nephros's OLpur(TM) HD190 filter may not facilitate or have any effect on the regulatory approval process for Nephros's other products; and (viii) Nephros may not be able to achieve sales growth in Europe or expand into other key geographic markets. More detailed information about Nephros and the risk factors that may affect the realization of forward-looking statements is set forth in Nephros's filings with the Securities and Exchange Commission, including Nephros's Annual Report on Form 10-KSB filed with the SEC for the fiscal year ended December 31, 2004 and its Quarterly Report on Form 10-QSB filed with the SEC for the fiscal quarter ended June 30, 2005. Investors and security holders are urged to read those documents free of charge on the SEC's web site at www.sec.gov. Nephros does not undertake to publicly update or revise its forward-looking statements as a result of new information, future events or otherwise.
NEPHROS, INC. AND SUBSIDIARY
Condensed Consolidated Balance Sheets
June 30, December 31,
2005 2004
---- ----
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents $2,817,064 $3,719,181
Short-term investments 5,996,560 5,995,940
Accounts receivable 219,720 174,797
Inventory 528,125 653,351
Prepaid expenses and other current assets 370,408 468,355
------------ ------------
Total current assets 9,931,877 11,011,624
Property and equipment, at cost less
accumulated depreciation of $739,719 and
$584,130 at June 30, 2005 and December 31,
2004, respectively 1,148,751 1,191,856
Other assets 3,822 3,822
------------ ------------
Total assets $11,084,450 $12,207,302
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
(DEFICIENCY)
Current liabilities:
Accounts payable $ 709,769 $ 629,814
Accrued expenses 517,517 362,789
Deferred revenue 21,031 64,058
Accrued liabilities 1,500,000 1,500,000
------------ ------------
Total current liabilities 2,748,317 2,556,661
------------ ------------
Stockholders' equity:
Preferred stock, $.001 par value,
5,000,000 and 31,000,000 shares
authorized at June 30, 2005 and December
31, 2004, respectively; no shares issued
and outstanding at June 30, 2005 and
December 31, 2004 -- --
Common stock, $.001 par value; 25,000,000
and 49,000,000 shares authorized at June
30, 2005 and December 31, 2004,
respectively; 12,304,498 and 12,120,248
shares issued and outstanding at June
30, 2005 and December 31, 2004,
respectively 12,304 12,120
Additional paid-in capital 54,739,869 53,740,171
Deferred compensation (2,188,424) (2,479,317)
Accumulated other comprehensive income -
foreign currency translation (24,250) 156,433
Accumulated other comprehensive loss -
unrealized losses on available-for-sale
securities (3,440) (4,060)
Accumulated deficit (44,199,926) (41,774,706)
------------ ------------
Total stockholders' equity 8,336,133 9,650,641
------------ ------------
Total liabilities and stockholders'
equity $11,084,450 $12,207,302
============ ============
NEPHROS, INC. AND SUBSIDIARY
Condensed Consolidated Statements of Operations
(unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
------------------------- -------------------------
2005 2004 2005 2004
---- ---- ---- ----
Net contract
revenues $ -- $ -- $ 1,750,000 $ --
Net product
revenues 226,426 -- 378,091 --
----------- ----------- ----------- -----------
Net revenues 226,426 -- 2,128,091 --
----------- ----------- ----------- -----------
Operating costs
and expenses:
Cost of product
revenue 113,681 54,304 249,049 66,922
Research and
development 551,009 601,992 1,013,710 1,292,016
Selling,
general and
administrative 1,656,533 1,024,307 3,409,021 2,340,743
----------- ----------- ----------- -----------
Total
operating
expenses 2,321,223 1,680,603 4,671,780 3,699,681
----------- ----------- ----------- -----------
Loss from
operations (2,094,797) (1,680,603) (2,543,689) (3,699,681)
----------- ----------- ----------- -----------
Other income:
Interest income 62,464 570 118,469 1,915
----------- ----------- ----------- -----------
Total other
income 62,464 570 118,469 1,915
----------- ----------- ----------- -----------
Net loss (2,032,333) (1,680,033) (2,425,220) (3,697,766)
Dividends and
accretion to
redemption value
of redeemable
convertible
preferred stock -- (2,680,087) -- (4,751,587)
----------- ----------- ----------- -----------
Net loss
attributable to
common
stockholders $(2,032,333) $(4,360,120) $(2,425,220) $(8,449,353)
=========== =========== =========== ===========
Basic and diluted
net loss
attributable to
common
stockholders per
common share $ (0.17) $ (2.74) $ (0.20) $ (5.30)
=========== =========== =========== ===========
Shares used in
computing basic
and diluted net
loss attributable
to common
stockholders per
common share 12,304,498 1,593,659 12,228,151 1,593,659
=========== =========== =========== ===========
NEPHROS, INC. AND SUBSIDIARY
Condensed Consolidated Statements of Cash Flows
(unaudited)
Six months ended June 30,
--------------------------
2005 2004
---- ----
Operating activities
Net loss $(2,425,220) $(3,697,766)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization 155,589 71,554
Noncash stock-based compensation 290,893 417,608
(Increase) decrease in operating
assets
Accounts receivable (44,923) (24,113)
Prepaid expenses and other current
assets 97,947 (542,764)
Inventory 125,226 98,799
Increase (decrease) in operating
liabilities
Accounts payable and accrued
expenses 234,683 (165,507)
Deferred revenue (43,027) 38,830
------------- ------------
Net cash used in operating
activities (1,608,832) (3,803,359)
------------- ------------
Investing activities
Purchase of property and equipment (112,484) (481,042)
------------- ------------
Net cash used in investing
activities (112,484) (481,042)
------------- ------------
Financing activities
Proceeds from issuance of preferred
stock, net -- 3,811,538
Proceeds from exercise of warrants -- 87,500
Proceeds from issuance of common stock
subsequent to the initial public
offering 955,521 --
Adjustment to proceeds from initial
public offering of common stock 44,361 --
------------- ------------
Net cash provided by financing
activities 999,882 3,899,038
------------- ------------
Effect of exchange rates on cash (180,683) (38,397)
------------- ------------
Net increase (decrease) in
cash and cash equivalents (902,117) (423,760)
Cash and cash equivalents, beginning of
period 3,719,181 4,121,263
------------- ------------
Cash and cash equivalents, end of period $2,817,064 $3,697,503
============= ============
Supplemental disclosure of cash flow
information
Cash paid for income taxes $ 11,630 $ 723
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