Nephros Announces Fourth Quarter and Fiscal Year 2021 Financial Results

Reports Full-Year Net Revenue of $10.4 Million, a 22% Year-Over-Year Increase and 
Fourth Quarter Net Revenue of $2.8 Million, an 18% Year-Over-Year Increase;
Reaffirms Fiscal Year 2022 Guidance of $13.0 Million to $13.5 Million in Annual Revenue

SOUTH ORANGE, NJ, Feb. 23, 2022 (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 fiscal year ended December 31, 2021.

Financial Highlights
Fourth Quarter Ended December 31, 2021– Water FiltrationBusiness Segment

  • Net revenue was $2.7 million, compared with $2.3 million in 2020, up 16%
  • Operating loss was ($0.7 million), compared to ($0.3 million) in 2020
  • Adjusted Operating Loss was ($64,000), compared with ($10,000) in 2020

Fourth Quarter Ended December 31, 2021 – Consolidated

  • Net revenue was $2.8 million, compared with $2.3 million in 2020, up 18%
  • Net loss was ($1.0 million), compared with ($0.8 million) in 2020, up 37%
  • Adjusted EBITDA was ($0.4 million), compared with ($0.5 million) in 2020

Year-End 2021 – Water Filtration Business Segment

  • Net revenue was $10.2 million, compared with $8.5 million in 2020, up 20%
  • Operating loss was ($2.9 million), compared with a net loss of ($2.0 million) in 2020
  • Adjusted Operating Loss was ($1.3 million) in 2021 and 2020

Year-end 2021 – Consolidated

  • Net revenue was $10.4 million, compared with $8.6 million in 2020, up 22%
  • Net loss was ($3.9 million), compared with ($4.5 million) in 2020, down 15%
  • Adjusted EBITDA was ($2.6 million), compared with ($3.6 million) in 2020

“We are pleased to report that Nephros delivered four consecutive quarters of year-over-year growth averaging 19%, ending the year at a new revenue record for the company,” said Andy Astor, President and Chief Executive Officer of Nephros. “Looking forward to 2022, we believe our recent investments into a scalable sales and marketing infrastructure, along with the expected retreat of COVID-19 to endemic state, will bring our growth rates even higher, as evidenced by our recent revenue guidance of $13.0-13.5 million, or 25-30% growth.”

Financial Performance for the Fourth Quarter and Year Ended December 31, 2021
Net revenue for the year ended December 31, 2021 was $10.4 million, compared with $8.6 million in 2020, an increase of 22%. Net revenues for the fourth quarter of 2021 were $2.8 million, compared with $2.3 million in the fourth quarter of 2020, an increase of 18%.

Cost of goods sold for the year ended December 31, 2021 was $4.7 million, compared with $3.6 million in 2020, an increase of 28%. Cost of goods sold for the fourth quarter of 2021 was $1.3 million, compared with $1 million in the fourth quarter of 2020, an increase of 26%.

Gross margins for the year ended December 31, 2021 were 55%, compared with 57% in 2020. Gross margins for the fourth quarter of 2021 were 53%, compared with 56% in the fourth quarter of 2020.

Selling, general and administrative expenses for the year ended December 31, 2021 were $7.7 million, compared with $6.5 million in 2020, an increase of 19%. Selling, general and administrative expenses for the fourth quarter of 2021 were approximately $2 million compared with approximately $1.4 million in the fourth quarter of 2020, an increase of 44%.

Research and development expenses for the year ended December 31, 2021 were $2.2 million, compared with $2.8 million in 2020, a decrease of 21%. Research and development expenses for the fourth quarter of 2021 were $0.5 million, compared with $0.6 million in the fourth quarter of 2020, a decrease of 19%.

Depreciation and amortization expenses for the year ended December 31, 2021 were approximately $202,000, compared with approximately $192,000 in 2020, an increase of 5%. Depreciation and amortization expenses for the fourth quarter of 2021 were approximately $51,000, compared with approximately $50,000 in the fourth quarter of 2020, an increase of 2%.

Net loss for the year ended December 31, 2021 was ($3.9 million), compared with a net loss of ($4.5 million) in 2020, a 15% decrease in loss. Net loss for the fourth quarter of 2021 was approximately ($1 million), compared with a net loss of approximately ($0.8 million) in the fourth quarter of 2020, a 37% increase.

Adjusted EBITDA for the year ended December 31, 2021 was ($2.6 million), compared with ($3.6 million) in 2020, a 29% decrease. Adjusted EBITDA for the fourth quarter 2021 was approximately ($0.4 million), compared with approximately ($0.5 million) in the fourth quarter of 2020, a 11% decrease.

As of December 31, 2021, Nephros had cash and cash equivalents of approximately $7.0 million. 

Water Filtration Adjusted Operating Loss Definition and Reconciliation to GAAP Financial Measures
Water Filtration Adjusted Operating Loss is calculated by taking operating loss calculated in accordance with generally accepted accounting principles (“GAAP”) and excluding all non-recurring expenses and income, and non-cash items, including depreciation and amortization and non-cash compensation. The following table presents a reconciliation of Water Filtration Adjusted Operating Loss to operating loss, the most directly comparable GAAP financial measure for segment reporting, for the 2021 and 2020 fiscal years: 

Water Filtration
(unaudited)
           
2021 Three Month Period Ended Annual
  3/31/21 6/30/21 9/30/21 12/31/21 Totals
           
Operating loss  $(634)  $(875)  $(755)  $(670)  $(2,934)
           
Adjustments:          
Depreciation of property and equipment  7   7   7   16   37 
Amortization of other assets  46   48   46   74   214 
Non-cash stock-based compensation  265   269   257   422   1,213 
Other non-cash items  5   24   90   94   213 
           
Adjusted EBITDA  $(311)  $(527)  $(355)  $(64)  $(1,257)
           
           
           
2020  Three Month Period Ended   Annual 
  3/31/20 6/30/20 9/30/20 12/31/20  Totals 
           
Operating loss  $(548)  $(852)  $(311)  $(285)  $(1,996)
           
Adjustments:          
Depreciation of property and equipment  5   6   7   7   25 
Amortization of other assets  45   45   46   47   183 
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  $(339)  $(623)  $(283)  $(10)  $(1,255)
           

Consolidated Adjusted EBITDA Definition and Reconciliation to GAAP Financial Measures
Consolidated 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, non-recurring expenses and income, and non-cash items, including depreciation and amortization and non-cash compensation. The following table presents a reconciliation of Consolidated Adjusted EBITDA to net loss, the most directly comparable GAAP financial measure, for the 2021 and 2020 fiscal years:

  Consolidated
(unaudited)
 
2021 Three Month Period Ended Annual
Consolidated 3/31/2021 6/30/2021 9/30/2021 12/31/2021 Totals
           
Net loss  $             (537)  $          (1,126)  $          (1,163)  $          (1,041) $           (3,867)
           
Adjustments:          
Depreciation of property and equipment                     7                      8                      7                    16                    38 
Amortization of other assets                   46                    48                    46                    74                  214 
Interest expense                   13                    11                    10                      7                    41 
Interest income                    (3)                    (3)                    (2)                    (2)                 (10)
Non-cash stock-based compensation                 276                  281                  268                  434              1,259 
Other non-cash items                     5                    24                    90                    97                  216 
PPP Loan Forgiveness               (482)                   –                       –                         –                   (482)
           
Adjusted EBITDA     $          (675)    $           (757)  $             (744)    $           (415)    $        (2,591)

2020 Three Month Period Ended Annual
Consolidated 3/31/2020 6/30/2020 9/30/2020 12/31/2020 Totals
           
Net loss    $        (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)

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 financialmeasure. 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 4:30pm Eastern Time
Nephros will host a conference call today at 4:30pm 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 2, 2022 at 1 (877) 344-7529 or 1 (412) 317-0088 for international callers and entering replay access code: 8949087. 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, Inc. is a company committed to improving the human relationship with water through leading, accessible technology. We provide innovative filtration and pathogen detection as part of an integrated approach to water safety that combines science, solutions, and support services. Nephros products serve the needs of customers within the healthcare and commercial markets, offering both proactive and emergency responses for water 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 Nephros’s expected revenue for the quarter and year ended December 31, 2021, expected future revenue growth and the timing of such growth, and other statements that are not historical facts, including statements that 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. 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) 823-8656
[email protected]

Andy Astor, CEO
Nephros, Inc.
(201) 345-0824
[email protected]

NEPHROS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except share amounts)
    December 31, 2021   December 31, 2020
    (unaudited)    
ASSETS        
Current assets:        
Cash and cash equivalents    $6,973     $8,249 
Accounts receivable, net    1,641     1,364 
Inventory    4,795     5,304 
Prepaid expenses and other current assets    225     237 
Total current assets    13,634     15,154 
Property and equipment, net    366     295 
Operating right-use-of assets    730     1,037 
Intangible assets, net    1,536     506 
Goodwill    759     759 
License and supply agreement, net    536     670 
Other assets    89     89 
Total assets    $17,650     $18,509 
         
LIABILITIES AND STOCKHOLDERS’ EQUITY        
Current liabilities:        
Secured revolving credit facility    –       $- 
Secured note, current portion    248     229 
PPP loan, current portion    –       –   
Accounts payable    1,334     423 
Accrued expenses    444     341 
Current portion of contingent consideration    –     – 
Current portion lease liabilities    364     332 
Total current liabilities    2,390     1,325 
Secured note payable, long term portion    95     364 
PPP loan, net of current portion    –     482 
Financing obligation, net of current portion    4     7 
Contingent consideration, net of current portion    –     – 
Lease liabilities    412     759 
Total liabilities    2,901     2,937 
         
Commitments and Contingencies        
         
Stockholders’ equity:        
Preferred stock, $.001 par value; 5,000,000 shares authorized at December 31, 2021 and 2020; no shares issued and outstanding December 31, 2021 and 2020    –     – 
Common stock, $.001 par value; 40,000,000 shares authorized at December 31, 2021 and 2020; 10,258,444 and 9,873,006 shares issued and outstanding and December 31, 2021 and 2020, respectively    10     10 
Additional paid-in capital    147,346     144,296 
Accumulated other comprehensive income    64     74 
Accumulated deficit    (135,725)    (131,858)
Subtotal    11,695     12,522 
Noncontrolling interest    3,054     3,051 
Total stockholders’ equity    14,749     15,573 
Total liabilities and equity    $17,650     $18,510 
         

NEPHROS, INC. AND SUBSIDIARIES
CONSOLIDATED OF OPERATIONS AND COMPREHENSIVE LOSS
(In thousands, except share amounts)
 
    Year Ended December 31,
    2021   2020
     (unaudited)    
Net revenues:        
Product revenues    $10,204     $8,453 
Royalty and other revenues    200     108 
Total net revenues    10,404     8,561 
Cost of goods sold    4,661     3,648 
Gross margin    5,743     4,913 
Gross margin %   55%   57%
Operating expenses:        
Research and development    2,166     2,759 
Depreciation and amortization    202     192 
Selling, general and administrative    7,710     6,466 
Change in fair value of contingent consideration    –     (229)
Total operating expenses    10,078     9,188 
Loss from operations    (4,335)    (4,275)
Interest expense    (41)    (110)
Interest income    10     11 
Other income (expense), net    499     (152)
Loss before income taxes    (3,867)    (4,526)
Income tax benefit    –     – 
Net profit (loss)    (3,867)    (4,526)
Less: Deemed dividend attributable to noncontrolling interest    (240)    (240)
Net loss attributable to Nephros Inc    (4,107)    (4,766)
         
Net loss per common share, basic and diluted    $(0.41)    $(0.52)
Weighted average common shares outstanding, basic and diluted    10,017,830     9,078,549 
         
Comprehensive loss:        
Net Loss    (3,867)    (4,526)
Other comprehensive income(loss), foreign currency translation adjustments    (10)    9 
Comprehensive loss    (3,877)    (4,517)
Comprehensive loss attirbutable to noncontrolling interest    (240)    (240)
Total comprehensive loss attributable to Nephros Inc shareholders    $(4,117)    $(4,757)
         

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