Press Release - March 31, 2008 - CNN Money

Nephros Reports 2007 Fourth Quarter and Full Year Financial Results

Nephros, Inc. (AMEX: NEP) announced today financial results for the twelve month period ended December 31, 2007.

2007 Highlights

• Increased product revenues by 51% to $1,196,000

• Received approval to market OLpur(TM) MD Hemodiafilter series in Canada

• Commenced pivotal U.S. trial for the OLpur(TM) H2H(TM) Hemodiafiltration Module and OLpur(TM) MD 220 Hemodiafilter

• Awarded $2MM appropriation from U.S. Dept. of Defense for continued development of Nephros Dual Stage Ultra Reliable Filter

• Raised $12.7MM in new capital

• Converted outstanding notes and ended 2007 with no long-term debt

• Restructured Board of Directors

Financial Performance for the Year Ended December 31, 2007:

Product revenues for the twelve months ended December 31, 2007 were $1,196,000 compared to $794,000 in the corresponding period of 2006, an increase of approximately 51%. The Company's net loss was $26,356,000 or $1.68 per basic and diluted common share for the twelve months ended December 31, 2007 compared with $8,013,000 or $0.65 per basic and diluted common share for the corresponding period of 2006. Included in the Company's net loss is approximately $17,985,000 of non-cash expenses related to the conversion of approximately $18 million principal amount of the Company's notes and accrued interest thereon into shares of Nephros common stock on November 14, 2007. Such non-cash expenses included approximately $13,429,000 for the amortization beneficial conversion features and approximately $4,556,000 for the amortization of debt discount.

As of December 31, 2007, Nephros had cash, cash equivalents and short-term investments of $8,148,000. Of that amount the Company had $4,700,000 invested in short-term auction rate securities. The recent credit market environment has negatively affected the liquidity of this market. Nephros anticipates that the liquidity issues related to these short-term investments will be resolved prior to having an adverse effect on the Company's operations. Nonetheless, the Company is presently evaluating options to address any issues due to these investments which might arise in the future. Additionally, the Board of Directors has ratified a formal Investment Policy for Nephros to strengthen its cash management practices on an on-going basis.

The Company's independent registered public accountants, Rothstein Kass & Company, P.C. included a going concern explanatory paragraph in its audit report covering the Company's financial statements for the year ended December 31, 2007. This announcement is intended to comply with AMEX Company Guide Section 610(b) requiring a public announcement of the receipt of an audit report that contains a going concern qualification. For information regarding the going concern qualification, and management's response please see Nephros's Annual Report on Form 10-KSB for the year ended December 31, 2007, which is available free of charge on the Securities and Exchange Commission's web site at www.sec.gov.

Financial Performance for the Fourth Quarter Ended December 31, 2007. (Unaudited)

For the quarter ended December 31, 2007, Nephros reported product revenues of $441,000, attributable to sales of its OLpur(TM) MD190 and MD220 products in Europe, compared with $153,000 in the corresponding period of 2006, an increase of 188%. The Company's net loss was $21,693,000 or $0.85 per basic and diluted common share for the fourth quarter of 2007 versus a net loss of $2,255,000 or $0.18 per basic and diluted common share in the fourth quarter of 2006. The Company's net loss was increased in the current quarter primarily due to the conversion of the Company's notes into the Company's common stock on November 14, 2007, as described above.

Outlook for 2008

In 2008, Nephros plans to continue to develop as a commercial stage company. The Company is seeking to recruit strategic employees, pursue new product approvals, and solidify the Company's finances. Primary goals for Nephros in 2008 include aggressive expansion of its product sales in currently approved markets and preparation for the anticipated launch of the Company's OLpur(TM) H2H(TM) Hemodiafiltration Module and OLpur(TM) MD 220 Hemodiafilter products in the U.S.

ESRD Clinical Trial Update

In the first quarter of 2008, the Company completed enrollment in its pivotal U.S. clinical trial for the OLpur(TM) H2H(TM) Hemodiafiltration Module and OLpur(TM) MD 220 Hemodiafilter products for the treatment of patients with end-stage renal disease (ESRD). As of March 31, 2008, over half of the enrolled patients have completed the study protocol, and the Company anticipates final completion of all patient treatments in the second quarter of 2008.

"In the second half of 2008, we plan to seek FDA approval to market our leading-edge products here in the U.S.," said Mr. Barta. "Physician interest in our products continues to be strong; we believe the nephrology community has been waiting a long time to make therapies of this caliber available to their patients in the U.S., and we're excited to be moving our advanced convective therapies forward here." Nephros believes that, if approved in 2008, its mid-dilution HDF technology would be the first approved online HDF therapy in the U.S.

Water Ultrafiltration Products

Nephros is finalizing improvements to the functionality of its water ultrafiltration products and has applied for water filter performance certifications from NSF International, an independent non-profit product evaluation laboratory. The Company anticipates completion of required NSF testing during the second quarter of 2008.

The Company is continuing its military product development with support from its U.S. Department of Defense appropriations.

"We are moving forward with our water filter marketing and sales in hospitals, assisted living facilities, and related domains in the U.S. and abroad," said Mr. Barta. "To that end, in the second quarter of 2008, we plan to expand our senior ranks in the marketing and sales areas, bringing important new talent on board that will help us position our products and move them aggressively into the marketplace."

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) patient while addressing the critical financial and clinical needs of the care provider. ESRD is a disease state characterized by the irreversible loss of kidney function. The Nephros HDF system is designed to remove a range of harmful substances more effectively, and more cost-effectively, than existing ESRD treatment methods; particularly with respect to substances known collectively as "middle molecules." These molecules have been found to contribute to such conditions as dialysis-related amyloidosis, carpal tunnel syndrome, degenerative bone disease and, ultimately, mortality in the ESRD patient. Nephros products are sold and distributed throughout Europe and are currently being used in over fifty clinics in Europe.

Nephros also markets a line of water filtration products, the Dual Stage Ultrafilter (DSU). The Company's patented dual stage cold sterilization Ultrafilter has the capability to filter out bacteria and, due to its exceptional filtration levels, filter out many viruses and parasites. The DSU proprietary design provides dual-stage filtration which reduces the risk of filtration failure. With an initial focus on health care, the DSU is in a pilot-use program at a major U.S. medical center and has been selected for further development by the U.S. Marine Corps.

For more information on Nephros please visit the Company's website, www.nephros.com.

Forward-Looking Statements

This news release contains certain "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, as amended. Such statements include statements regarding the efficacy and intended use of the Company's technologies under development, the timelines 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, the Company 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 Company's control. 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) Nephros may not be able to obtain funding if and when needed or on terms favorable to it in order to continue operations or fund its clinical trials; (ii) Nephros may not be able to continue as a going concern; (iii) Nephros may not be able to liquidate its short-term investments when needed to fund its operations; (iv) Nephros may be unable to maintain compliance with the American Stock Exchange's continued listing standards; (v) products that appeared promising to Nephros in research or clinical trials may not demonstrate anticipated efficacy, safety or cost savings in subsequent pre-clinical or clinical trials; (vi) Nephros may not obtain appropriate or necessary governmental approvals to achieve its business plan or effectively market its products; (vii) Nephros may encounter unanticipated internal control deficiencies or weaknesses or ineffective disclosure controls and procedures; (viii) HDF therapy may not be accepted in the United States and/or Nephros' technology and products may not be accepted in current or future target markets, which could lead to failure to achieve market penetration of Nephros' products; (ix) Nephros may not be able to sell its ESRD therapy or water filtration products at competitive prices or profitably; (x) Nephros may not be able to secure or enforce adequate legal protection, including patent protection, for its products; and (xi) 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' filings with the Securities and Exchange Commission, including Nephros' Annual Report on Form 10-KSB filed with the SEC for the fiscal year ended December 31, 2007. Investors and security holders are urged to read these 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.

CONTACTS:
Norman J. Barta
Nephros, Inc.
212 781-5113
Email Contact
Paul G. Henning
Cameron Associates
212 554-5462