UNITES STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 8-K

 

CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

 

Date of Report (Date of earliest event reported): December 31, 2018

 

NEPHROS, INC.

(Exact name of Registrant as Specified in its Charter)

 

Delaware   001-32288   13-3971809
(State or other jurisdiction
of incorporation) 		  (Commission
File Number) 		  (IRS Employer
Identification No.)

 

380 Lackawanna Place, South Orange, New Jersey 07079
(Address of principal executive offices, including ZIP code)

 

(201) 343-5202
(Registrant’s telephone number, including area code)

 

n/a
(Former Name or Former Address, if Changed Since Last Report)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

[  ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
   
[  ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
   
[  ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
   
[  ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§ 230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§ 240.12b-2 of this chapter).

 

Emerging growth company [  ]

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [  ]

 

 

 

 
 

 

Item 1.01. Entry Into a Material Definitive Agreement

 

On December 31, 2018, Nephros, Inc. (the “Company”) entered into a Membership Interest Purchase Agreement (the “Agreement”) with Biocon 1, LLC, a Nevada limited liability company (“Biocon”), Aether Water Systems, LLC, a Nevada limited liability company (“Aether”), and Gregory Lucas, the sole member of each of Biocon and Aether (“Lucas”). Pursuant to the terms of the Agreement, the Company acquired 100% of the outstanding membership interests of each of Aether and Biocon.

 

At closing, the Company paid $750,000 to Lucas, which included payment of certain transaction expenses, and repaid approximately $8,000 in debt of Biocon. In addition to the initial purchase price, the Company will pay contingent consideration to Lucas based on the net revenue of Biocon and Aether over each quarter of the 2019 and 2020 fiscal years, up to a maximum aggregate payment of $2,625,000.

 

The Agreement contains customary representations and warranties by each of Aether, Biocon and Lucas. Additionally, Lucas agreed to customary indemnification obligations to Nephros over the two-year period ending December 31, 2020, subject to certain limitations as set forth in the Agreement.

 

The Company and Biocon previously had a strategic partnership, announced in November 2015, pursuant to which Biocon had the exclusive right, in the food service market, to distribute the Company’s custom filter cartridge developed for the AETHER Water System line of filtration products. Additionally, the strategic partnership included an equipment lease between the Company and Biocon, which lease commenced on January 1, 2016 with a term of 60 months and monthly rental payments to the Company of approximately $1,800.

 

The foregoing summary of the Agreement is qualified in its entirety by reference to the complete Agreement, a copy of which will be filed with the Company’s Form 10-K for the year ended December 31, 2018.

 

A copy of the press release announcing the acquisition is filed herewith as Exhibit 99.1.

 

Item 2.01 Completion of Acquisition or Disposition of Assets.

 

The disclosures under Item 1.01 above are incorporated herein by reference.

 

Item 9.01. Financial Statements and Exhibits.

 

(a) Financial Statements of Business Acquired: All financial statements required with respect to the acquisition described in Item 2.01 above will be filed by amendment to this Current Report on Form 8-K within the required time period.

 

(b) Pro forma financial information: All pro forma financial information required with respect to the acquisition described in Item 2.01 above will be filed by amendment to this Current Report on Form 8-K within the required time period.

 

(d) Exhibits:

 

Exhibit No.   Description
     
99.1   Press Release of Nephros, Inc., dated January 2, 2019

 

 
 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned hereunto duly authorized.

 

  Nephros, Inc.
     
Dated: January 3, 2019 By: /s/ Andrew Astor
    Andrew Astor
    Chief Financial Officer

 

 
 

 

 

 

 

 

PRESS RELEASE

 

Nephros Announces Acquisition of Biocon

 

Adds Growing Water Filtration Business in Food Service, Hospitality, and Industrial Markets

 

Expands Water Filter Product Portfolio

 

SOUTH ORANGE, NJ, January 2, 2019 – Nephros, Inc. (OTCQB: NEPH) (“Nephros”), a commercial stage company that develops and sells high performance liquid purification ultrafilters, today announced that it has acquired Biocon 1, LLC and its affiliate Aether Water Systems, LLC (together, “Biocon”), adding a growing water filtration business that targets the food service, hospitality, and commercial markets. The acquisition was completed on December 31, 2018. Greg Lucas, the founder of Biocon and a recognized leader in the hospitality water solutions space, will continue to lead Biocon as President of the new Nephros subsidiary.

 

“Greg and the Biocon team have developed a broad portfolio of products that perform well in the market. We have been working together since 2015 to manufacture ultrafiltration products that plug-and-play with standard commercial filter manifolds,” said Daron Evans, President and CEO of Nephros. “Over the course of our relationship, we identified a number of synergies that could be enabled by combining our efforts into a single organization. Specifically, we believe we can accelerate Biocon’s growth into its target markets, and also integrate Biocon products into the Nephros portfolio, to provide more complete solutions for our existing customers.”

 

“Biocon grew its revenue over 85% in 2018 and has tremendous potential to further accelerate growth in the near term,” said Greg Lucas, President of Biocon. “We expect that combining forces with Nephros will enable us to deliver more complete and integrated turnkey solutions to our customers, along with enhanced engineering, research and development, and quality control systems. We also believe we will compete more effectively for national accounts against the large firms that today dominate the water filter systems market. We have worked well with the Nephros team over the last few years and look forward to integrating our businesses.”

 

Nephros purchased all of the outstanding membership interests of Biocon for a total of up to $3.4 million, subject to earnouts based on Biocon’s net revenue performance in the 2019 and 2020 fiscal years.

 

About Nephros, Inc.

 

Nephros is a commercial stage medical device company that develops and sells high performance liquid purification filters, known as ultrafilters. Nephros ultrafilters are primarily used in hospitals and medical clinics for added protection in retaining bacteria (e.g., Legionella, Pseudomonas), viruses, and endotoxins 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 biological contaminants from the water and bicarbonate concentrate supplied to hemodialysis machines and the patients.

 

For more information about Nephros, please visit its website at www.nephros.com.

 

 
 

 

About Biocon

 

Biocon 1, LLC and Aether Water Systems, LLC (together, “Biocon”) are commercial water treatment companies that develop and sell high performance water and air purification systems to food service, hospitality and commercial markets, as well as other air and gas filtration markets. Biocon’s technology and assets are based on engineered innovations that effectively control biofilm, bacteria, scale, and other water related issues.

 

For more information about Biocon, please visit its website at www.aetherfilters.com.

 

Forward-Looking Statements

 

This release contains forward-looking statements that are subject to various risks and uncertainties. Such statements include statements regarding the expected synergies from the acquisition of Biocon, the expected growth and integration of the combined businesses, 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 Nephros’s reports filed with the U.S. Securities and Exchange Commission, including its Annual Report on Form 10-K for the year ended December 31, 2017. Nephros does not undertake any responsibility to update the forward-looking statements in this release.

 

Contact:

 

Andy Astor, Chief Financial Officer

Phone: 201-345-0824

Email: andy@nephros.com