Nephros Reports Second Quarter Financial Results a

RIVER EDGE, NJ--(Marketwired - Aug 8, 2017) - Nephros, Inc. ( OTCQB : NEPH ) (the "Company"), 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 (HD) machine for the treatment of patients with End Stage Renal Disease (ESRD), announced financial results for the three months ended June 30, 2017. The Company also announced that it has received approval to sell a percentage of its net operating losses ("NOLs") and research and development tax credits under The Technology Business Tax Certificate Transfer Program by the New Jersey Economic Development Authority ("NJEDA").

"In the second quarter, we continued to see meaningful growth in our hospital infection control business with our existing products and worked to launch the HydraGuard and EndoPur product lines," said Daron Evans, President and Chief Executive Officer of Nephros, Inc. "We expect to see accelerated revenue growth in the back half of the year as we launch the new product lines in the coming weeks. Additionally, the approval to sell our NOLs and R&D tax credits by the NJEDA will provide balance sheet buffer as we approach our primary goal for 2017 -- cash flow positive operations."

NJEDA Program

In June 2017, the Company submitted an application to the Technology Business Tax Certificate Transfer Program at the NJEDA. The program enables New Jersey-based technology or biotechnology companies who meet certain criteria to sell a percentage of NOLs and research and development tax credits to unrelated profitable corporations.

"We are excited that our application has been approved by NJEDA, and expect cash proceeds of approximately $1.5 million in late fourth quarter 2017," said Andy Astor, CFO of Nephros. "In the meantime, to support our short-term cash needs, we are pursuing a non-dilutive asset-based credit facility with a commercial lender. Furthermore, we continue to expect cash flow breakeven around the end of this year."

Financial Performance for the Quarter Ended June 30, 2017

Total net revenues for the three months ended June 30, 2017 were approximately $859,000 compared to approximately $509,000 for the three months ended June 30, 2016, an increase of approximately $350,000 or 69%.

Cost of goods sold was approximately $342,000 for the three months ended June 30, 2017 compared to approximately $212,000 for the three months ended June 30, 2016, an increase of approximately $130,000, or 61%.

Research and development expenses were approximately $277,000 for the three months ended June 30, 2017 compared to approximately $254,000 for the three months ended June 30, 2016. Selling, general and administrative expenses were approximately $880,000 for the three months ended June 30, 2017 compared to approximately $804,000 for the three months ended June 30, 2016.

As of June 30, 2017, Nephros had cash and cash equivalents of approximately $301,000.

About Nephros, Inc.

Nephros is a commercial stage medical device company that develops and sells high performance liquid purification filters, as well as a hemodiafiltration system for the treatment of patients with End Stage Renal Disease. Nephros filters or ultrafilters are used primarily in medical applications in various settings. These ultrafilters are used by dialysis centers for assisting in the added removal of biological contaminants from the water and bicarbonate concentrate supplied to hemodialysis machines and the patients. Additionally, Nephros ultrafilters are used in hospitals and medical clinics for added protection in retaining bacteria (i.e. Legionella, Pseudomonas), virus and endotoxin from water. These ultrafilters provide barriers that assist in improving infection control with showers, sinks, and ice machines.

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

Forward-Looking Statements (Chris to update)

This release contains forward-looking statements that are subject to various risks and uncertainties. Such statements include statements regarding the expected growth in sales of the Company's products, including expected growth of our hospital filter products resulting from the recently-announced CMS requirements, the expected timing of shipping and product launch of the Company's HydraGuard, EndoPur™ and NanoGuard™ products, the Company's ability to meet future demand for its products, the Company's ability to obtain additional non-dilutive financing, the Company's ability to achieve positive cash flow from operations and the timing thereof, 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 uncertainty in clinical outcomes, potential delays in the regulatory approval process, changes in business, economic and competitive conditions, the availability of capital when needed, our 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 Inc.'s reports filed with the U.S. Securities and Exchange Commission, including with respect to Nephros, its Annual Report on Form 10-K for the year ended December 31, 2015. Nephros, Inc. does not undertake any responsibility to update the forward-looking statements in this release.

CONSOLIDATED BALANCE SHEETS
(In Thousands, Except Share and Per Share Amounts)
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share amounts)
				(Unaudited)				(Audited)
				June 30, 2017				December 31, 2016
ASSETS
Current assets:
	Cash			$	301			$	275
	Accounts receivable, net				584				388
	Investment in lease, net-current portion				15				27
	Inventory, net				603				479
	Prepaid expenses and other current assets				50				95
		Total current assets			1,553				1,264
	Property and equipment, net				56				70
	Investment in lease, net-less current portion				54				61
	License and supply agreement, net				1,157				1,262
	Other asset				21				21
		Total assets		$	2,841			$	2,678
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
	Accounts payable			$	513			$	585
	Accrued expenses				340				240
	Deferred revenue, current portion				70				70
		Total current liabilities			923				895
	Unsecured long-term note payable, net of debt issuance costs and debt discount of $295 and $349, respectively				892				838
	Long-term portion of deferred revenue				243				278
		Total liabilities			2,058				2,011
Commitments and Contingencies (Note 13)
Stockholders' equity:
Preferred stock, $.001 par value; 5,000,000 shares authorized at June 30, 2017 and December 31, 2016; no shares issued and outstanding at June 30, 2017 and December 31, 2016					-				-
Common stock, $.001 par value; 90,000,000 shares authorized at June 30, 2017 and December 31, 2016; 54,160,547 and 49,782,797 shares issued and outstanding at June 30, 2017 and December 31, 2016, respectively.					54				50
Additional paid-in capital					122,417				120,835
Accumulated other comprehensive income					75				67
Accumulated deficit					(121,763	)			(120,285	)
Total stockholders' equity					783				667
Total liabilities and stockholders' equity				$	2,841			$	2,678

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(In thousands, except share and per share amounts)
(Unaudited)
			Three Months Ended June 30,								Six Months Ended June 30,
			2017				2016				2017				2016
Net revenues:
Product revenues			$	785			$	452			$	1,475			$	997
License, royalty and other revenues				74				57				118				102
Total net revenues				859				509				1,593				1,099
Cost of goods sold				342				212				621				507
Gross margin				517				297				972				592
Operating expenses:
	Research and development			277				254				507				523
	Depreciation and amortization			60				56				119				111
	Selling, general and administrative			880				804				1,651				1,582
Total operating expenses				1,217				1,114				2,277				2,216
Loss from operations				(700	)			(817	)			(1,305	)			(1,624	)
Interest expense				(64	)			(30	)			(130	)			(44	)
Interest income				1				1				2				3
Other income (expense)				(23	)			11				(33	)			(6	)
Net loss				(786	)			(835	)			(1,466	)			(1,671	)
Other comprehensive income (loss), foreign currency translation adjustments				7				(1	)			8				-
Total comprehensive loss			$	(779	)		$	(836	)		$	(1,458	)		$	(1,671	)
Net loss per common share, basic and diluted			$	(0.01	)		$	(0.02	)		$	(0.03	)		$	(0.03	)
Weighted average common shares outstanding, basic and diluted				53,626,707				48,545,720				51,625,048				48,359,620