via NEWMEDIAWIRE -- Nephros, Inc. (Nasdaq:NEPH), a commercial stage
company that develops and sells high performance water purification
products to the medical device and commercial markets, today
announced financial results for the three months ended September
30, 2019.
Water Filtration Business Segment
Highlights
- Product revenue was $3.1 million, up 85% compared with $1.6
million in 2018
- Net loss was $347,000, compared with $246,000 in 2018
- Adjusted EBITDA was $182,000, compared with ($18,000) in
2018
Consolidated Highlights
- Net revenue was $3.1 million, up 80% compared with $1.7 million
in 2018
- Net loss was $744,000, compared with $550,000 in 2018
- Adjusted EBITDA was ($209,000), compared with ($322,000) in
2018
“Our momentum continued in Q3, our 13th
consecutive quarter of year-over-year revenue growth averaging over
65%,” said Daron Evans, President and CEO. “Growth came from both
an expansion of our base business as well as from increased
outbreak support. We are pleased with the development progress of
our waterborne pathogen detection system and expect to be in the
field helping customers before the end of this year. We also
reaffirm our recently increased full-year revenue guidance of $9.5
to $10 million.”
Consolidated Financial Performance for the
Quarter Ended September 30, 2019
Net revenue for the quarter ended September 30,
2019 was $3.1 million, compared with $1.7 million in 2018, an
increase of 80%. Product revenues represented approximately 99% of
net revenues, and increased 85%, from $1.6 million to $3.1
million.
Cost of goods sold for the quarter ended
September 30, 2019 was $1.3 million, compared with $0.8 million in
2018, an increase of 65%. Gross margins for the quarter ended
September 30, 2019 were 59%, compared with 55% in 2018. Management
expects future gross margins to continue in the range of 55% to
60%.
Research and development expenses for the
quarter ended September 30, 2019 were $0.8 million, compared with
$0.4 million in 2018, an increase of 121%. The increase was driven
primarily by investments in a new water pathogen detection system,
and also by investments in the second-generation HDF product being
developed by Nephros’s SRP subsidiary.
Depreciation and amortization expenses for the
quarter ended September 30, 2019 were approximately $44,000,
compared with approximately $42,000 in 2018, an increase of 5%.
This increase was driven by the fixed assets acquired in the Biocon
transaction.
Selling, general and administrative expenses for
the quarter ended September 30, 2019 were $1.8 million, compared
with $1.1 million in 2018, an increase of 67%. This growth was
driven primarily by new headcount to support Nephros’s increased
product revenue, as well as non-cash stock compensation expense due
to employee option vesting.
As of September 30, 2019, Nephros had cash and
cash equivalents of approximately $3.9 million.
Adjusted EBITDA Definition and Reconciliation
to GAAP Financial Measures
Adjusted EBITDA is calculated by taking net
(loss) income 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) income,
the most directly comparable GAAP financial measure, for the third
quarter of the 2019 and 2018 fiscal years for both Nephros (on a
consolidated basis) and the Water Filtration Business Segment:
|
3 Months Ended Sep 30, |
Water
Filtration Business Segment |
2019 |
2018 |
|
|
|
Net loss |
(347) |
(246) |
|
|
|
Adjustments: |
|
|
Depreciation of property and equipment |
4 |
7 |
Amortization of other assets |
44 |
35 |
Interest expense |
48 |
32 |
Noncash interest expense |
- |
- |
Interest Income |
- |
(1) |
Change in fair value of contingent consideration |
(94) |
- |
Noncash compensation |
348 |
120 |
Other noncash items |
29 |
35 |
Sub-Total |
32 |
(18) |
Non-Recurring
Expenses: |
|
|
Pathogen Detection Product Development |
150 |
- |
|
|
|
Adjusted
EBITDA |
182 |
(18) |
|
3 Months Ended Sep 30, |
Consolidated
Results |
2019 |
2018 |
|
|
|
Net loss |
(744) |
(550) |
|
|
|
Adjustments: |
|
|
Depreciation of property and equipment |
4 |
7 |
Amortization of other assets |
44 |
35 |
Interest expense |
48 |
32 |
Noncash interest expense |
- |
- |
Interest Income |
- |
(1) |
Change in fair value of contingent consideration |
(94) |
- |
Noncash compensation |
354 |
120 |
Other noncash items |
29 |
35 |
Sub-Total |
(359) |
(322) |
Non-Recurring
Expenses: |
|
|
Pathogen Detection Product Development |
150 |
- |
|
|
|
Adjusted
EBITDA |
(209) |
(322) |
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) income, the most
directly comparable GAAP financial measure. Nephros urges investors
to review the reconciliation of Adjusted EBITDA to net (loss)
income and not to rely on any single financial measure to evaluate
the business.
Conference Call Today at 9:00 a.m. EDT
Nephros will host a conference call today
at 9:00 AM 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: 1-866-652-5200. International callers may use
+1-412-317-6060. Please ask to be joined into the Nephros
conference call. A replay of the call can be accessed until
November 13, 2019 at 1-877-344-7529 or +1-412-317-0088 for
international callers and entering replay access code: 10136668. An
audio archive of the call will be available shortly after the call
on the Nephros investor relations page at
https://www.nephros.com/investor-relations/.
About Nephros
Nephros is a commercial stage company that
develops and sells high performance water purification products to
the medical device and commercial markets. Nephros ultrafilters are
used in hospitals and medical clinics for added protection in
retaining bacteria (e.g., Legionella, Pseudomonas) and viruses from
water, providing barriers that assist in improving infection
control in showers, sinks, and ice machines. Additionally, Nephros
ultrafilters are used by dialysis centers for assisting in the
added removal of endotoxins and other biological contaminants from
the water and bicarbonate concentrate supplied to hemodialysis
machines and patients.
Nephros filters, including AETHER™ brand
filters, improve the taste and odor of water and reduce biofilm,
bacteria, and scale build-up in downstream equipment. Nephros and
AETHER™ products are used in the health care, food service,
hospitality, and convenience store markets.
For more information about Nephros, please visit
its website at 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 revenue and
financial performance in 2019, the potential for further growth and
the expected growth in medical, commercial and industrial filter
sales, the anticipated launch of a new waterborne pathogen
detection system, Nephros’s sales and marketing plans and
strategies, management’s expectations regarding future gross
margins, Nephros’s ability to respond to outbreaks in water borne
pathogens, anticipated investment in the development of a
second-generation HDF system 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,
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 our reports filed with the U.S.
Securities and Exchange Commission, including our Annual Report on
Form 10-K for the year ended December 31, 2018. 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, COO & CFONephros, Inc.(201)
345-0824andy@nephros.comwww.nephros.com
NEPHROS, INC. AND
SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share
amounts) (Unaudited)
|
|
|
|
|
|
|
|
|
|
September 30, 2019 |
|
|
December 31, 2018 |
|
ASSETS |
|
|
|
|
|
|
|
|
Current
assets: |
|
|
|
|
|
|
|
|
Cash |
|
$ |
3,855 |
|
|
$ |
4,581 |
|
Accounts receivable, net |
|
|
1,894 |
|
|
|
1,452 |
|
Inventory, net |
|
|
2,128 |
|
|
|
1,864 |
|
Prepaid expenses and other current assets |
|
|
240 |
|
|
|
276 |
|
Total current assets |
|
|
8,117 |
|
|
|
8,173 |
|
Property and
equipment, net |
|
|
85 |
|
|
|
91 |
|
Operating lease
right-of-use assets |
|
|
1,165 |
|
|
|
- |
|
Intangible assets,
net |
|
|
559 |
|
|
|
590 |
|
Goodwill |
|
|
759 |
|
|
|
748 |
|
License and supply
agreement, net |
|
|
837 |
|
|
|
938 |
|
Other assets |
|
|
32 |
|
|
|
18 |
|
TOTAL ASSETS |
|
$ |
11,554 |
|
|
$ |
10,558 |
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND
STOCKHOLDERS’ EQUITY |
|
|
|
|
|
|
|
|
Current
liabilities: |
|
|
|
|
|
|
|
|
Secured revolving credit facility |
|
$ |
982 |
|
|
$ |
991 |
|
Current portion of secured note payable |
|
|
207 |
|
|
|
195 |
|
Accounts payable |
|
|
690 |
|
|
|
836 |
|
Accrued expenses |
|
|
715 |
|
|
|
396 |
|
Current portion of contingent consideration |
|
|
271 |
|
|
|
236 |
|
Current portion of operating lease liabilities |
|
|
251 |
|
|
|
- |
|
Total current liabilities |
|
|
3,116 |
|
|
|
2,654 |
|
Secured note
payable, net of current portion |
|
|
672 |
|
|
|
843 |
|
Equipment
financing debt, net of current portion |
|
|
10 |
|
|
|
- |
|
Contingent
consideration, net of current portion |
|
|
78 |
|
|
|
263 |
|
Operating lease
liabilities, net of current portion |
|
|
956 |
|
|
|
- |
|
TOTAL
LIABILITIES |
|
|
4,832 |
|
|
|
3,760 |
|
COMMITMENTS AND
CONTINGENCIES (Note 16) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
STOCKHOLDERS’
EQUITY |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred stock, $.001 par value; 5,000,000 shares
authorized at September 30, 2019 and December 31, 2018; no shares
issued and outstanding at September 30, 2019 and December 31,
2018. |
|
|
- |
|
|
|
- |
|
Common stock, $.001 par value; 40,000,000 and
10,000,000 shares authorized at September 30, 2019 and December 31,
2018, respectively; 7,784,535 and 7,179,514 shares issued and
outstanding at September 30, 2019 and December 31, 2018,
respectively. |
|
|
8 |
|
|
|
7 |
|
Additional paid-in capital |
|
|
130,830 |
|
|
|
127,873 |
|
Accumulated other comprehensive income |
|
|
63 |
|
|
|
71 |
|
Accumulated deficit |
|
|
(127,188) |
|
|
|
(124,153) |
|
Subtotal |
|
|
3,713 |
|
|
|
3,798 |
|
Noncontrolling interest |
|
|
3,009 |
|
|
|
3,000 |
|
TOTAL
STOCKHOLDERS’ EQUITY |
|
|
6,722 |
|
|
|
6,798 |
|
TOTAL LIABILITIES
AND STOCKHOLDERS’ EQUITY |
|
$ |
11,554 |
|
|
$ |
10,558 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NEPHROS, INC. AND
SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS AND COMPREHENSIVE LOSS
(In thousands, except share and per share
amounts)(Unaudited)
|
|
Three Months EndedSeptember 30, |
|
|
Nine Months EndedSeptember 30, |
|
|
|
2019 |
|
|
2018 |
|
|
2019 |
|
|
2018 |
|
Net
revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Product
revenues |
|
$ |
3,054 |
|
|
$ |
1,648 |
|
|
$ |
7,067 |
|
|
$ |
3,822 |
|
|
Royalty
and other revenues |
|
|
41 |
|
|
|
76 |
|
|
|
106 |
|
|
|
253 |
|
|
Total net revenues |
|
|
3,095 |
|
|
|
1,724 |
|
|
|
7,173 |
|
|
|
4,075 |
|
|
Cost of goods
sold |
|
|
1,276 |
|
|
|
772 |
|
|
|
2,989 |
|
|
|
1,826 |
|
|
Gross margin |
|
|
1,819 |
|
|
|
952 |
|
|
|
4,184 |
|
|
|
2,249 |
|
|
Operating
expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development |
|
|
777 |
|
|
|
352 |
|
|
|
2,326 |
|
|
|
993 |
|
|
Depreciation and amortization |
|
|
44 |
|
|
|
42 |
|
|
|
142 |
|
|
|
123 |
|
|
Selling, general and administrative |
|
|
1,787 |
|
|
|
1,069 |
|
|
|
4,693 |
|
|
|
3,420 |
|
|
Change in fair value of contingent consideration |
|
|
(94) |
|
|
|
- |
|
|
|
(113) |
|
|
|
- |
|
|
Total operating expenses |
|
|
2,514 |
|
|
|
1,463 |
|
|
|
7,048 |
|
|
|
4,536 |
|
|
Loss from
operations |
|
|
(695) |
|
|
|
(511) |
|
|
|
(2,864) |
|
|
|
(2,287) |
|
|
Other income
(expense): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss on
extinguishment of debt |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(199) |
|
|
Interest
expense |
|
|
(48) |
|
|
|
(32) |
|
|
|
(140) |
|
|
|
(146) |
|
|
Interest
income |
|
|
- |
|
|
|
1 |
|
|
|
- |
|
|
|
3 |
|
|
Other
expense, net |
|
|
(1) |
|
|
|
(8) |
|
|
|
(31) |
|
|
|
(32) |
|
|
Net loss |
|
|
(744) |
|
|
|
(550) |
|
|
|
(3,035) |
|
|
|
(2,661) |
|
|
Less: Undeclared
deemed dividend attributable to noncontrolling interest |
|
|
(60) |
|
|
|
(16) |
|
|
|
(180) |
|
|
|
(16) |
|
|
Net loss
attributable to Nephros, Inc. shareholders |
|
$ |
(804) |
|
|
$ |
(566) |
|
|
$ |
(3,215) |
|
|
$ |
(2,677) |
|
|
NEPHROS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS AND COMPREHENSIVE LOSS
(In thousands, except share and per share
amounts)(Unaudited)
|
|
Three Months EndedSeptember 30, |
|
|
Nine Months EndedSeptember 30, |
|
Net loss per
common share, basic and diluted |
|
$ |
(0.10) |
|
|
$ |
(0.08) |
|
|
$ |
(0.43) |
|
|
$ |
(0.40) |
|
|
Weighted average
common shares outstanding, basic and diluted |
|
|
7,703,033 |
|
|
|
7,129,617 |
|
|
|
7,408,569 |
|
|
|
6,751,317 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive
loss: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(744) |
|
|
$ |
(550) |
|
|
$ |
(3,035) |
|
|
$ |
(2,661) |
|
|
Other
comprehensive loss, foreign currency translation adjustments, net
of tax |
|
|
(7) |
|
|
|
(1) |
|
|
|
(8) |
|
|
|
(4) |
|
|
Comprehensive
loss |
|
|
(751) |
|
|
|
(551) |
|
|
|
(3,043) |
|
|
|
(2,665) |
|
|
Comprehensive
loss attributable to noncontrolling interest |
|
|
(60) |
|
|
|
(16) |
|
|
|
(180) |
|
|
|
(16) |
|
|
Comprehensive
loss attributable to Nephros, Inc. shareholders |
|
$ |
(811) |
|
|
$ |
(567) |
|
|
$ |
(3,223) |
|
|
$ |
(2,681) |
|
|
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