Nephros Reports Third Quarter 2005 Financial Results NEP.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 nine months ended September September: see month. 30, 2005. For the quarter ended September 30, 2005, Nephros reported net revenue of $225,248, attributable to sales of its OLpur(TM) 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 to $46,379 in the corresponding period of
2004. The Company's net loss was $1,747,882 for the third quarter
of 2005, versus a net loss of $1,881,849 in the third quarter of 2004.
Nephros reported a net loss attributable to common stockholders in the
third quarter of 2005 of $1,747,882, or $0.14 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 $8,864,795, or $3.89 loss per basic and diluted share, in the year-earlier period. The average number of common basic and diluted shares for the quarter ended September 30, 2005 was 12,307,089, compared to 2,280,176 for the quarter ended September 30, 2004. For the nine months ended September 30, 2005, Nephros reported net revenue of $2,353,339 compared with $46,379 in the same period of 2004. For the first nine months of 2005 net revenue recognized from product sales totaled $603,339. Nine month net 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 $4,173,102 for the first nine months of 2005, versus a net loss of $5,579,615 in the comparable period last year. Nephros reported a net loss attributable to common stockholders of $4,173,102, or $0.34 loss per basic and diluted share, for the first nine months of 2005, compared to a loss of $17,314,148, or $9.49 loss per basic and diluted share, in the same period last year. The average number of common basic and diluted shares for the nine months ended September 30, 2005 was 12,254,753, compared to 1,825,013 for the nine months ended September 30, 2004. It should be noted that 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. . 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 September 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 $6,827,693. "Nephros continues to build key relationships with physicians, clinical groups and government agencies on both sides of the Atlantic that can lead to future growth, and pursue sales opportunities for our core OLpur(TM) MD190 filter in Europe. Our marketing trials are progressing in Europe, with preliminary data expected before year-end year-end also year·end n. The end of a year. adj. Occurring or done at the end of the year: a year-end audit. Noun 1. . We were also issued a key U.S. patent 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 in July July: see month. , highlighting the unique and proprietary value we've we've Contraction of we have. we've have created with this technology. We are moving ahead with our strategy to be the first to introduce more effective therapy here 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. using our H2H(TM) platform, increasing our OLpur(TM) filter sales opportunities accordingly," 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. 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 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 (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 and/or and/or conj. Used to indicate that either or both of the items connected by it are involved. Usage Note: And/or is widely used in legal and business writing. 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 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 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 build key relationships with physicians, clinical groups and government agencies, pursue or increase sales opportunities in Europe or elsewhere, or be the first to introduce hemodiafiltration therapy in the United States; (vii) Nephros may not be able to secure or enforce adequate legal protection, including patent protection, for its 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 December: see month. 31, 2004 and its Quarterly Report on Form 10-QSB filed with the SEC for the fiscal quarter ended June June: see month. 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
September 30, December 31,
2005 2004
------------ ------------
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 828,943 $ 3,719,181
Short-term investments 5,998,750 5,995,940
Accounts receivable 229,610 174,797
Inventory 468,906 653,351
Prepaid expenses and other current assets 717,155 468,355
------------ ------------
Total current assets 8,243,364 11,011,624
Property and equipment, at cost less
accumulated depreciation of $813,958 and
$584,130 at September 30, 2005 and
December 31, 2004, respectively 1,191,018 1,191,856
Other assets 3,822 3,822
------------ ------------
Total assets $ 9,438,204 $ 12,207,302
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 755,982 $ 629,814
Accrued expenses 504,608 362,789
Deferred revenue -- 64,058
Accrued liabilities 1,500,000 1,500,000
------------ ------------
Total current liabilities 2,760,590 2,556,661
------------ ------------
Stockholders' equity:
Preferred stock, $.001 par value,
5,000,000 and 31,000,000 shares
authorized at September 30, 2005 and
December 31, 2004, respectively; no
shares issued and outstanding at
September 30, 2005 and December 31, 2004 -- --
Common stock, $.001 par value;
25,000,000 and 49,000,000 shares
authorized at September 30, 2005 and
December 31, 2004, respectively;
12,308,996 and 12,120,248 shares
issued and outstanding at September
30, 2005 and December 31, 2004,
respectively 12,309 12,120
Additional paid-in capital 54,729,588 53,740,171
Deferred compensation (2,141,144) (2,479,317)
Accumulated other comprehensive income
- foreign currency translation 25,919 156,433
Accumulated other comprehensive loss -
unrealized losses on available-for-
sale securities (1,250) (4,060)
Accumulated deficit (45,947,808) (41,774,706)
------------ ------------
Total stockholders' equity 6,677,614 9,650,641
------------ ------------
Total liabilities and
stockholders' equity $ 9,438,204 $ 12,207,302
============ ============
NEPHROS, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------- --------------------------
2005 2004 2005 2004
------------ ------------ ------------ -------------
Net contract
revenues $ -- $ -- $ 1,750,000 $ --
Net product
revenues 225,248 46,379 603,339 46,379
----------- ----------- ----------- ------------
Net revenues 225,248 46,379 2,353,339 46,379
----------- ----------- ----------- ------------
Operating costs
and expenses:
Cost of product
revenue 151,646 38,550 400,695 105,472
Research and
development 401,873 358,120 1,415,584 1,650,136
Selling,
general and
administrative 1,480,005 1,533,923 4,889,025 3,874,666
----------- ----------- ----------- ------------
Total operating
expenses 2,033,524 1,930,593 6,705,304 5,630,274
----------- ----------- ----------- ------------
Loss from
operations (1,808,276) (1,884,214) (4,351,965) (5,583,895)
----------- ----------- ----------- ------------
Other income:
Interest income 60,394 2,365 178,863 4,280
----------- ----------- ----------- ------------
Total other
income 60,394 2,365 178,863 4,280
----------- ----------- ----------- ------------
Net loss (1,747,882) (1,881,849) (4,173,102) (5,579,615)
Dividends and
accretion to
redemption
value of
redeemable
convertible
preferred stock -- (6,982,946) -- (11,734,533)
----------- ----------- ----------- ------------
Net loss
attributable to
common
stockholders $(1,747,882) $(8,864,795) $(4,173,102) $(17,314,148)
=========== =========== =========== ============
Basic and diluted
net loss
attributable to
common stockholders
per common
share $ (0.14) $ (3.89) $ (0.34) $ (9.49)
=========== =========== =========== ============
Shares used in
computing basic
and diluted net
loss
attributable to
common
stockholders
per common share 12,307,089 2,280,176 12,254,753 1,825,013
=========== =========== =========== ============
NEPHROS, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
Nine months ended
September 30,
-------------------------
2005 2004
------------ ------------
Operating activities
Net loss $(4,173,102) $(5,579,615)
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation and amortization 229,828 122,788
Noncash stock-based compensation 326,458 582,698
(Increase) decrease in operating assets
Accounts receivable (54,813) (23,627)
Prepaid expenses and other current
assets (248,800) (562,325)
Inventory 184,445 (135,254)
Increase (decrease) in operating
liabilities
Accounts payable and accrued expenses 267,987 740,997
Deferred revenue (64,058) 6,792
----------- -----------
Net cash used in operating
activities (3,532,055) (4,847,546)
----------- -----------
Investing activities
Purchase of property and equipment (228,990) (470,146)
Purchase of short-term investments -- (4,000,000)
----------- -----------
Net cash used in investing
activities (228,990) (4,470,146)
----------- -----------
Financing activities
Proceeds from issuance of preferred
stock, net -- 3,811,538
Proceeds from initial public offering
of common stock, net -- 10,784,586
Proceeds from exercise of warrants -- 87,500
Proceeds from exercise of stock options 1,439 --
Proceeds from private placement
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 1,001,321 14,683,624
----------- -----------
Effect of exchange rates on cash (130,514) (47,784)
----------- -----------
Net increase (decrease) in cash
and cash equivalents (2,890,238) 5,318,148
Cash and cash equivalents, beginning of
period 3,719,181 4,121,263
----------- -----------
Cash and cash equivalents, end of
period $ 828,943 $ 9,439,411
=========== ===========
Supplemental disclosure of cash flow
information
Cash paid for income taxes $ 11,630 $ 723
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