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What changed in NEPHROS INC's 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of NEPHROS INC's 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+158 added−174 removedSource: 10-K (2025-03-24) vs 10-K (2024-03-15)

Top changes in NEPHROS INC's 2024 10-K

158 paragraphs added · 174 removed · 121 edited across 5 sections

Item 1. Business

Business — how the company describes what it does

45 edited+10 added−22 removed54 unchanged
Biggest changeFor the ultrafiltration systems business, we are continually working with existing and potential distributors of ultrafilter products to develop solutions to meet customer needs. 8 Major Customers For the years ended December 31, 2023 and 2022, the following customers accounted for the following percentages of our revenues, respectively: Customer 2023 2022 A 23 % 26 % B 11 % 10 % Total 34 % 36 % As of December 31, 2023 and 2022, the following customers accounted for the following percentages of our accounts receivable, respectively: Customer 2023 2022 A 12 % 21 % B 6 % 10 % C 3 % 10 % Total 21 % 41 % Competition With respect to the water filtration market, we compete with companies that are well-entrenched in the water filtration domain.
Biggest changeMajor Customers For the years ended December 31, 2024 and 2023, the following customers accounted for the following percentages of our revenues, respectively: Customer 2024 2023 A 25 % 23 % B 8 % 11 % Total 33 % 34 % As of December 31, 2024 and 2023, the following customer accounted for the following percentage of our accounts receivable: Customer 2024 2023 A 13 % 12 % 7 Competition With respect to the water filtration market, we compete with companies that are well-entrenched in the water filtration domain.
The EndoPur is a cartridge-based, “plug and play” market entry that requires no plumbing at installation or replacement. The EndoPur is available in 10”, 20”, and 30” configuration. Commercial and Industrial Facilities . Our commercial NanoGuard ® product line accomplishes ultrafiltration via small pore size (0.005 micron) technology, filtering bacteria and viruses from water.
The EndoPur is a cartridge-based, “plug and play” market entry that requires no plumbing at installation or replacement. The EndoPur is available in 10”, 20”, and 30” configuration. 5 Commercial and Industrial Facilities . Our commercial NanoGuard ® product line accomplishes ultrafiltration via small pore size (0.005 micron) technology, filtering bacteria and viruses from water.
The HydraGuard has an up to 6-month product life and the HydraGuard - Flush has an up to 12-month product life when used in a hospital setting . 5 Our complete hospital infection control product line, including in-line, and point-of-use can be viewed on our website at https://www.nephros.com/infection-control/ .
The HydraGuard has an up to 6-month product life and the HydraGuard - Flush has an up to 12-month product life when used in a hospital setting . Our complete hospital infection control product line, including in-line, and point-of-use can be viewed on our website at https://www.nephros.com/infection-control/ .
The filters retain bacteria, viruses, and endotoxin. By providing ultrapure water for patient washing and drinking, the filters aid in infection control. ● S100 Point of Use Filter: In April 2016, we received FDA 510(k) clearance of the S100 point-of-use filter to be used to filter EPA quality drinking water. The filters retain bacteria.
The filters retain bacteria, viruses, and endotoxin. By providing ultrapure water for patient washing and drinking, the filters aid in infection control. 9 ● S100 Point of Use Filter: In April 2016, we received FDA 510(k) clearance of the S100 point-of-use filter to be used to filter EPA quality drinking water. The filters retain bacteria.
These ultrafilters are primarily used in the water lines and bicarbonate concentrate lines leading into dialysis mach ines, and as a polish filter for portable RO machines . ● The EndoPur is a 0.005-micron cartridge ultrafilter that provides single-stage protection from bacteria, viruses, and endotoxins.
These ultrafilters are primarily used in the water lines and bicarbonate concentrate lines leading into dialysis machines, and as a polish filter for portable RO machines. ● The EndoPur is a 0.005-micron cartridge ultrafilter that provides single-stage protection from bacteria, viruses, and endotoxins.
The Exchange Act requires us to file periodic reports, proxy statements and other information with the SEC. The SEC maintains a website that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC. These materials may be obtained electronically by accessing the SEC’s website at http://www.sec.gov. 13
The Exchange Act requires us to file periodic reports, proxy statements and other information with the SEC. The SEC maintains a website that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC. These materials may be obtained electronically by accessing the SEC’s website at http://www.sec.gov. 11
By retaining bacteria in water for washing and drinking, the filter may aid in infection control. ● HydraGuard: In December 2016, we received FDA 510(k) clearance of the HydraGuard 10” ultrafilter intended to be used to filter EPA quality drinking water. The filter retains bacteria, viruses and endotoxin.
By retaining bacteria in water for washing and drinking, the filter may aid in infection control. ● HydraGuard: In December 2016, we received FDA 510(k) clearance of the HydraGuard 10” ultrafilter intended to be used to filter EPA quality drinking water. The filter retains bacteria, viruses and endotoxins.
Included in the NanoGuard product line are both conventional and flushable filters. ● The Nephros line of commercial filters provides a variety of technology solutions that improve water quality in food service, convenience store, hospitality, and industrial applications.
Included in the NanoGuard product line are both conventional and flushable filters. ● The Nephros line of commercial filters provide a variety of technology solutions that improve water quality in food service, convenience store, hospitality, and industrial applications.
These companies include Pall Corporation (wholly owned by Danaher Corporation), which manufactures point-of-use microfiltration products, as well as 3M and Pentair, who manufacture the Cuno® and Everpure® brands of water filtration and purification products, respectively.
These companies include Pall Corporation (wholly owned by Danaher Corporation), which manufactures point-of-use microfiltration products, as well as 3M Company and Pentair, which manufacture the Cuno® and Everpure® brands of water filtration and purification products, respectively.
(“Medica”), an Italy-based medical product manufacturing company, for the marketing and sale of certain filtration products based upon Medica’s proprietary Medisulfone ultrafiltration technology in conjunction with our filtration products, and for an exclusive supply arrangement for the filtration products.
(“Medica”), an Italy-based medical product manufacturing company, for the marketing and sale of certain filtration products based upon Medica’s proprietary Medisulfone ultrafiltration technology in conjunction with the Company’s filtration products, and for an exclusive supply arrangement for the filtration products.
None of our employees are currently represented by a labor union or covered by a collective bargaining agreement and we believe that our relations with our employees are good. During 2023, we had limited voluntary turnover.
None of our employees are currently represented by a labor union or covered by a collective bargaining agreement and we believe that our relations with our employees are good. During 2024, we had limited voluntary turnover.
Because our ultrafilters capture contaminants as small as 0.005 microns in size, they minimize exposure to a wide variety of bacteria, viruses, fungi, parasites, and endotoxins. In commercial markets, we manufacture and sell water filters that improve the taste and odor of water and reduce biofilm, bacteria, and scale build-up in downstream equipment.
Because our ultrafilters capture contaminants as small as 0.005 microns in size, they minimize exposure to a wide variety of bacteria, viruses, fungi, parasites, and endotoxins. In commercial markets, we manufacture and sell water filters that improve the taste and odor of water and reduce biofilm, bacteria, heavy metals, chemical compounds, scale build-up in downstream equipment, and other various contaminants.
In March 2022, we entered into an agreement to provide water filtration systems to an organization that services approximately 3,000 Quick Service Restaurants (“QSR”). Effective January 1, 2023, we entered into a new supply agreement with this commercial partner, which superseded the March 2022 agreement.
In March 2022, we entered into an agreement with Donastar LLC to provide water filtration systems to an organization that services approximately 3,000 Quick Service Restaurants (“QSR”). Effective January 1, 2023, we entered into a new supply agreement with Donastar, which superseded the March 2022 agreement.
To perform hemodialysis, all dialysis clinics have dedicated water purification systems to produce water and bicarbonate concentrate, two essential ingredients for making dialysate, the liquid that removes waste material from the blood. According to the National Institute of Health, there are approximately 7,100 dialysis clinics in the United States servicing approximately 500,000 patients annually.
To perform hemodialysis, all dialysis clinics have dedicated water purification systems to produce water and bicarbonate concentrate, two essential ingredients for making dialysate, the liquid that removes waste material from the blood. According to the American Journal of Kidney Diseases, there are approximately 7,100 dialysis clinics in the United States servicing approximately 500,000 patients annually.
This expansion provides Nephros the approval to sell the following medical devices in Brazil: ● SSSUmini Ultrafilters: Intended to be used to filter water or bicarbonate concentrate used in hemodialysis procedures. ● EndoPur Filters: The device is not a complete water treatment system but serves to remove biological contaminants.
This expansion provides Nephros the approval to sell the following medical devices in Brazil: ● SSSUmini Ultrafilters: Intended to be used to filter water or bicarbonate concentrate used in hemodialysis devices. It assists in providing hemodialysis quality water or bicarbonate concentrate. The device is not a complete water treatment system but serves to remove biological contaminants.
Department of Health and Human Services estimates that healthcare associated infections (“HAI”) occur in approximately 1 out of every 31 hospital patients, which calculates to over one million patients in 2023. HAIs affect patients in hospitals or other healthcare facilities and are not present or incubating at the time of admission.
Centers for Disease Control and Prevention (“CDC”) estimates that healthcare associated infections (“HAI”) occur in approximately 1 out of every 31 hospital patients, which calculates to over one million patients in 2023. HAIs affect patients in hospitals or other healthcare facilities and are not present or incubating at the time of admission.
Accordingly, if we do obtain Section 510(k) clearance for any of our ESRD therapy and/or filtration products, we will need to submit another Section 510(k) notification if we significantly affect that product’s safety or effectiveness through subsequent modifications or enhancements. 10 All of our products have been cleared by the FDA as Class II devices, such as. ● DSU Dual Stage UltraFilter: In June 2009, we received FDA 510(k) clearance of the DSU to be used to filter biological contaminants from water and bicarbonate concentrate used in hemodialysis procedures. ● SSU-D/DSU-D Dual Stage UltraFilter: In July 2011, we received FDA 510(k) clearance of the SSU/DSU to be used to filter water or bicarbonate concentrate used in hemodialysis procedures. ● OLpūr H2H Module and OLpūr MD 220 Hemodiafilter: In April 2012, we received FDA 510(k) clearance of the OLpūr H2H Module and OLpūr MD 220 Hemodiafilter for use with a UF controlled hemodialysis machine that provides ultrapure dialysate in accordance with current ANSI/AAMI/ISO standards, for the treatment of patients with chronic renal failure in the United States. ● DSU-H/SSU-H: In October 2014, we received FDA 510(k) clearance of the DSU-H and SSU-H ultrafilters to be used to filter EPA quality drinking water.
All of our products have been cleared by the FDA as Class II devices, such as: ● DSU Dual Stage UltraFilter: In June 2009, we received FDA 510(k) clearance of the DSU to be used to filter biological contaminants from water and bicarbonate concentrate used in hemodialysis procedures. ● SSU-D/DSU-D Dual Stage UltraFilter: In July 2011, we received FDA 510(k) clearance of the SSU/DSU to be used to filter water or bicarbonate concentrate used in hemodialysis procedures. ● OLpūr H2H Module and OLpūr MD 220 Hemodiafilter: In April 2012, we received FDA 510(k) clearance of the OLpūr H2H Module and OLpūr MD 220 Hemodiafilter for use with a UF controlled hemodialysis machine that provides ultrapure dialysate in accordance with current ANSI/AAMI/ISO standards, for the treatment of patients with chronic renal failure in the United States. ● DSU-H/SSU-H: In October 2014, we received FDA 510(k) clearance of the DSU-H and SSU-H ultrafilters to be used to filter EPA quality drinking water.
Our U.S. patent for the “Method and Apparatus for a Hemodiafiltration Module for use with a Dialysis Machine,” has claims that cover the OLpūr MDHDF filter series and the method of hemodiafiltration employed in the operation of the products. Technological developments in ESRD therapy could reduce the value of our intellectual property. Any such reduction could be rapid and unanticipated.
Our U.S. patent for the “Method and Apparatus for a Hemodiafiltration Module for use with a Dialysis Machine,” has claims that cover the OLpūr MDHDF filter series and the method of hemodiafiltration employed in the operation of the products. Technological developments in end stage renal disease (“ESRD”) therapy could reduce the value of our intellectual property.
We currently have an understanding with Medica whereby we have agreed to pay interest per month at the EURIBOR 360-day rate plus 500 basis points calculated on the principal amount of any outstanding invoices that are overdue by more than 15 days beyond the original payment terms.
As of December 11, 2023, the Company has agreed with Medica to pay interest per month at the EURIBOR 360-day rate plus 500 basis points calculated on the principal amount of any outstanding invoices that are overdue by more than 15 days beyond the original payment terms.
Employees As of December 31, 2023, we employed a total of 31 full-time employees, including 11 employed in sales/marketing/customer support, 15 in logistics, general, and administrative, and 4 in research and development and 1 in manufacturing.
Employees As of December 31, 2024, we employed a total of 31 full-time employees, including 12 employed in sales/marketing/customer support, 13 in logistics, general, and administrative, and 5 in research and development and 1 in manufacturing.
These commercial products are also sold into medical markets, as supplemental filtration to our medical filters. In commercial markets, our model combines both direct and indirect sales. Through our employee sales staff, we have sold products directly to a number of convenience stores, hotels, casinos, and restaurants.
In commercial markets, our model combines both direct and indirect sales. Through our employee sales staff, we have sold products directly to a number of convenience stores, hotels, casinos, and restaurants.
Our pending US patent application relates to filter technologies, including liquid purification filter systems that are particularly suited for use in harsh environments. 9 Trademarks As of December 31, 2023, in the United States, we secured registrations of the trademarks ENDOPUR, HYDRAGUARD, NANOGUARD, and NEPHROS. In the US, we filed two trademark applications for BECAUSE WATER MATTERS.
Notably, the fifth U.S. patent, granted in 2024, pertains to filter technologies, including liquid purification filter systems that are particularly suited for use in harsh environments. Trademarks As of December 31, 2024, in the United States, we secured registrations of the trademarks ENDOPUR, HYDRAGUARD, NANOGUARD, and NEPHROS. In the US, we filed one trademark application for BECAUSE WATER MATTERS.
Manufacturing and Suppliers We do not, and do not intend to in the near future, manufacture any of our medical device filtration products. We do manufacture some of our commercial filtration products in our facility in South Orange, New Jersey. On April 23, 2012, we entered into a License and Supply Agreement (the “License and Supply Agreement”) with Medica S.p.A.
We do manufacture some of our commercial filtration products in our facility in South Orange, New Jersey. On April 23, 2012, the Company entered into a License and Supply Agreement (as thereafter amended, the “License and Supply Agreement”) with Medica S.p.A.
We believe that we have an opportunity to offer unique expertise and products to the commercial market, and that our future revenue from the commercial market could even surpass our infection control revenue. 6 We currently market the following portfolio of proprietary products for use in the commercial, industrial, and food service settings: ● The NanoGuard set of products are in-line, 0.005-micron ultrafilter that provides dual-stage retention of any organic or inorganic particle larger than 15,000 Daltons.
We currently market the following portfolio of proprietary products for use in the commercial, industrial, and food service settings: ● The NanoGuard set of products are in-line, 0.005-micron ultrafilter that provides dual-stage retention of any organic or inorganic particle larger than 15,000 Daltons.
United States The FDA regulates the manufacture and distribution of medical devices in the United States pursuant to the Food, Drug, and Cosmetics (FDC) Act. All of our ESRD therapy products are regulated in the United States as medical devices by the FDA under the FDC Act.
All of our ESRD therapy products are regulated in the United States as medical devices by the FDA under the FDC Act.
In commercial markets, we develop and sell our filters, for which carbon-based absorption is the primary filtration mechanism. These products allow us to improve water’s odor and taste, to reduce scale and heavy metals, and to reduce other water contaminants for customers who are primarily in the food service, convenience store, and hospitality industries.
These products allow us to improve water’s odor and taste, to reduce scale and heavy metals, and to reduce other water contaminants for customers who are primarily in the food service, convenience store, and hospitality industries. These commercial products are also sold into medical markets, as supplemental filtration to our medical filters.
In January 2022, the Center for Clinical Standards and Quality at the Centers for Medicare and Medicaid Services (“CMS”) expanded its requirements – originally implemented in 2017 – for facilities to develop policies and procedures that inhibit the growth and spread of legionella and other opportunistic pathogens in building water systems.
Many HAIs are caused by waterborne bacteria and viruses that can thrive in aging or complex plumbing systems often found in healthcare facilities. 4 In January 2022, the Center for Clinical Standards and Quality at the Centers for Medicare and Medicaid Services (“CMS”) expanded its requirements – originally implemented in 2017 – for facilities to develop policies and procedures that inhibit the growth and spread of legionella and other opportunistic pathogens in building water systems.
Other than the Canadian approval of our OLpūr MD220 Hemodiafilter and DSU products, we have not obtained any regulatory approvals to sell any of our products outside of the United States and the European Union and there is no assurance that any such clearance or certification will be issued.
Other than the Canadian approval of our OLpūr MD220 Hemodiafilter and DSU products, we have not obtained any regulatory approvals to sell any of our products outside of the United States and the European Union and there is no assurance that any such clearance or certification will be issued. 10 Requirements pertaining to medical devices vary widely from country to country, ranging from no health regulations to detailed submissions such as those required by the FDA.
We have issued patents on our water filtration products and applications in process to cover various applications in residential, commercial, and remote environments. As of December 31, 2023, we had four U.S. patents and one Canadian patent. In addition, we have one pending patent application in the United States.
Any such reduction could be rapid and unanticipated. We have issued patents on our water filtration products and applications in process to cover various applications in residential, commercial, and remote environments. As of December 31, 2024, we had five U.S. patents and one Canadian patent.
We have also signed an agreement with a partner to be the exclusive distributor to resell select water filters and related products to customers in the commercial food and beverage markets subject to meeting certain minimum thresholds. 4 Target Markets Our ultrafiltration products currently target the following markets: ● Hospitals and Other Healthcare Facilities: Filtration of water for washing and drinking as an aid in infection control.
We have also signed an agreement with a partner to be the exclusive distributor to resell select water filters and related products to customers in the commercial food and beverage markets subject to meeting certain minimum thresholds.
In the UK, we secured registrations for the trademarks NANOGUARD, NEPHROS HYDRAGUARD, and PATHOGUARD. Governmental Regulation The research and development, manufacturing, promotion, marketing, and distribution of our ESRD therapy products in the United States, Europe and other regions of the world are subject to regulation by numerous governmental authorities, including the FDA, the European Union and analogous agencies.
Governmental Regulation The research and development, manufacturing, promotion, marketing, and distribution of our ESRD therapy products in the United States, Europe and other regions of the world are subject to regulation by numerous governmental authorities, including the FDA, the European Union and analogous agencies. 8 United States The FDA regulates the manufacture and distribution of medical devices in the United States pursuant to the Food, Drug, and Cosmetics (FDC) Act.
Audits are conducted by Auditing Organizations authorized by the participating Regulatory Authorities to audit under MDSAP requirements. The MDSAP is a way that medical device manufacturers can be audited once for compliance with the standard and regulatory requirements of up to five different medical device markets: Australia, Brazil, Canada, Japan, and the United States.
The MDSAP is a way that medical device manufacturers can be audited once for compliance with the standard and regulatory requirements of up to five different medical device markets: Australia, Brazil, Canada, Japan, and the United States. In November 2023, we received approval for expansion of our MDSAP certification to include Brazil.
For the food service and hospitality markets, we have contracted with Donastar LLC as our master distributor. For other prospective markets for our ultrafilter products, we are pursuing alliance opportunities for joint product development and/or distribution. Our ultrafilter manufacturer in Europe shares certain intellectual property rights with us for one of our dual stage ultrafilter designs.
For other prospective markets for our ultrafilter products, we are pursuing alliance opportunities for joint product development and/or distribution. Our ultrafilter manufacturer in Europe shares certain intellectual property rights with us for one of our dual stage ultrafilter designs. Research and Development Our research and development efforts continue on several fronts directly related to our current product lines.
Although we have no current plans to do so, we may re-evaluate opportunities for HDF in the future. 7 Corporate Information We were incorporated under the laws of the State of Delaware in April 1997. Our principal executive offices are located at 380 Lackawanna Place, South Orange, New Jersey 07079, and our telephone number is (201) 343-5202.
Corporate Information We were incorporated under the laws of the State of Delaware in April 1997. Our principal executive offices are located at 380 Lackawanna Place, South Orange, New Jersey 07079, and our telephone number is (201) 343-5202. We also have an office in Whippany, New Jersey. For more information about Nephros, please visit our website at www.nephros.com .
In addition, we granted to Medica an exclusive license under our intellectual property to make the filtration products during the term of the License and Supply Agreement. The filtration covered under the License and Supply Agreement include both certain products based on Medica’s proprietary Versatile microfiber technology and certain filtration products based on Medica’s proprietary Medisulfone ultrafiltration technology.
In addition, the Company granted to Medica an exclusive license under the Company’s intellectual property to make the filtration products during the term of the License and Supply Agreement.
In cases where those sources are linked to restaurants, hotels, office buildings and residential complexes, the corporate owners of those facilities will likely face increasing liability exposure. We expect that building owners will come to understand ASHRAE-188, which outlines risk factors for buildings and their occupants, and provides water safety management guidelines.
We expect that building owners will come to understand ASHRAE-188, which outlines risk factors for buildings and their occupants, and provides water safety management guidelines.
They also include infections acquired by patients in the hospital or facility, but appearing after discharge, and occupational infections among staff. Many HAIs are caused by waterborne bacteria and viruses that can thrive in aging or complex plumbing systems often found in healthcare facilities.
They also include infections acquired by patients in the hospital or facility, but appearing after discharge, and occupational infections among staff.
If the FDA believes that we or any of our contract manufacturers, or regulated suppliers, are not in compliance with these requirements, there may be a material adverse effect on our manufacturing operations, effecting our ability to sell. 11 European Union The European Union began to harmonize national regulations comprehensively for the control of medical devices in member nations in 1993, when it adopted its Medical Devices Directive 93/42/EEC.
The FDA evaluates compliance with the QSR through periodic unannounced inspections that may include the manufacturing facilities of our subcontractors. If the FDA believes that we or any of our contract manufacturers, or regulated suppliers, are not in compliance with these requirements, there may be a material adverse effect on our manufacturing operations, effecting our ability to sell.
In November 2020, we received MDSAP certification to continue sales and compliance in the United States and Health Canada. The Medical Device Single Audit Program (MDSAP) is a program that allows the conduct of a single regulatory audit of a medical device manufacturer’s quality management system that satisfies the requirements of multiple regulatory jurisdictions.
The Medical Device Single Audit Program (MDSAP) is a program that allows the conduct of a single regulatory audit of a medical device manufacturer’s quality management system that satisfies the requirements of multiple regulatory jurisdictions. Audits are conducted by Auditing Organizations authorized by the participating Regulatory Authorities to audit under MDSAP requirements.
Requirements pertaining to medical devices vary widely from country to country, ranging from no health regulations to detailed submissions such as those required by the FDA. Our manufacturing facilities are subject to audits and have been certified to be ISO 13485:2016, which allows us to sell our products in the United States and Canada.
Our manufacturing facilities are subject to audits and have been certified to be ISO 13485:2016, which allows us to sell our products in the United States and Canada. In November 2020, we received MDSAP certification to continue sales and compliance in the United States and Health Canada.
The term of the License and Supply Agreement with Medica expires on December 31, 2028, unless earlier terminated by either party in accordance with the terms of the License and Supply Agreement.
The filtration products covered under the License and Supply Agreement include both certain products based on Medica’s proprietary Versatile microfiber technology and certain filtration products based on Medica’s proprietary Medisulfone ultrafiltration technology In December 2023, the Company signed a new agreement with Medica which extends the term until December 31, 2028, unless earlier terminated by either party in accordance with the terms of the License and Supply Agreement.
We also have an office in Whippany, New Jersey. For more information about Nephros, please visit our website at www.nephros.com . We are not including the information on our website as a part of, nor incorporating it by reference into, this Annual Report on Form 10-K.
We are not including the information on our website as a part of, nor incorporating it by reference into, this Annual Report on Form 10-K. 6 Manufacturing and Suppliers We do not, and do not intend to in the near future, manufacture any of our medical device filtration products.
Once approved, the following products will have certification from BSI America for CE marking and adherence to ISO13485 standards as Class IIa (Rule 3) medical devices: ● SSU-D/DSU-D/SSUmini Ultrafilters: Intended to be used to filter water or bicarbonate concentrate used in hemodialysis procedures. 12 Regulatory Authorities in Regions Outside of the United States and the European Union In November 2007 and May 2011, the Therapeutic Products Directorate of Health Canada, the Canadian health regulatory agency, approved our OLpūr MD220 Hemodiafilter and our DSU, respectively, for marketing in Canada.
Regulatory Authorities in Regions Outside of the United States In November 2007 and May 2011, the Therapeutic Products Directorate of Health Canada, the Canadian health regulatory agency, approved our OLpūr MD220 Hemodiafilter and our DSU, respectively, for marketing in Canada.
Under the January 2023 agreement, we engaged this commercial partner to be our exclusive distributor to the food, beverage and hospitality industries. We continue to pursue other national accounts, which, over time, may result in step-change increases in commercial market revenue.
Under the January 2023 agreement, we engaged Donastar to be our exclusive distributor to the food, beverage and hospitality industries. Effective September 2024, we ended our exclusive relationship with Donastar.
Over time, we believe that the same water safety management programs currently underway at medical facilities may migrate to commercial markets. As the epidemiology of waterborne pathogens expands, links to contamination sources will become more efficient and the data more readily available.
As the epidemiology of waterborne pathogens expands, links to contamination sources will become more efficient and the data more readily available. In cases where those sources are linked to restaurants, hotels, office buildings and residential complexes, the corporate owners of those facilities will likely face increasing liability exposure.
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Hemodiafiltration (HDF) Systems and Specialty Renal Products, Inc. The current standard of care in the United States for patients with chronic renal failure is hemodialysis (“HD”), a process in which toxins are cleared via diffusion. Patients typically receive HD treatments at least 3 times weekly for 3-4 hours per treatment. HD is most effective in removing smaller, easily diffusible toxins.
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In addition to VARs, we also utilize a direct salesforce that targets key geographic regions throughout the country, as well as focuses on the hospital and dialysis markets. In commercial markets, we develop and sell our filters, for which carbon-based absorption is the primary filtration mechanism.
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For patients with acute renal failure, the current standard of care in the United States is hemofiltration (“HF”), a process where toxins are cleared via convection. HF offers a much better removal of larger sized toxins when compared to HD; however, HF treatment is more challenging for patients, as it is performed daily, and typically takes 12-24 hours per treatment.
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Target Markets Our ultrafiltration products currently target the following markets: ● Hospitals and Other Healthcare Facilities: Filtration of water for washing and drinking as an aid in infection control.
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Our company was originally founded to develop and commercialize a hemodiafiltration (“HDF”) medical device. HDF is an alternative dialysis modality that combines the benefits of HD and HF into a single therapy by clearing toxins using both diffusion and convection.
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These policies must be in accordance with The American Society of Heating, Refrigerating, and Air-Conditioning Engineers (ASHRAE) Standard 188-2015 and the CDC toolkit. Facilities must regularly monitor water systems and take corrective actions when needed to ensure safe water for patients, residents and visitors.
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Though not widely used in the United States, HDF is prevalent in Europe and is performed for a growing number of patients.
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Although Donastar continues to distribute our products on a non-exclusive basis, we are expanding our distribution in the commercial market in order to pursue other national accounts, which, over time, may result in step-change increases in commercial market revenue. Over time, we believe that the same water safety management programs currently underway at medical facilities may migrate to commercial markets.
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Clinical experience and literature demonstrate that HDF’s benefits, among other factors, include enhanced clearance of middle and large molecular weight toxins, improved patient survival, reduced incidence of dialysis-related amyloidosis, improved patient quality of life and reduced hospitalizations and overall length of stays. Our original HDF device (“HDF1”) was cleared by the U.S.
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We believe that we have an opportunity to offer unique expertise and products to the commercial market, and that our future revenue from the commercial market could even surpass our infection control revenue.
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Food and Drug Administration (“FDA”) for the treatment of patients with chronic renal failure in 2012, but did not gain market acceptance due to, among other reasons, the feeling that it was too difficult to use. We previously held a majority stake in Specialty Renal Products, Inc.
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For the food service and hospitality markets, as discussed above, we had contracted with Donastar LLC as our exclusive distributor. Effective September 2024, we ended our exclusive relationship with Donastar. Although Donastar continues to distribute our products on a non-exclusive basis, we are broadening our market reach through new distributor relationships.
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(“SRP”), a development-stage medical device company that was focused primarily on the development of the second-generation HDF device (“HDF2”). SRP undertook efforts to redesign and dramatically simplify our HDF device. We believe those updates made the system significantly easier to use.
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For the ultrafiltration systems business, we are continually working with existing and potential distributors of ultrafilter products to develop solutions to meet customer needs.
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On May 13, 2022, the FDA gave 510(k) clearance to SRP’s second-generation model of the OLpūrH2H Hemodiafiltration System, which enables nephrologists to provide HDF treatment to patients with end stage renal disease. In January 2023, SRP management began exploring strategic partnerships to support a commercial launch of the HDF product but was unsuccessful in identifying a partner.
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In the UK, we secured registrations for the trademarks NANOGUARD, NEPHROS HYDRAGUARD, and PATHOGUARD.
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By late February 2023, SRP had nearly exhausted its capital resources and, due to its limited capital and lack of prospects for securing a strategic partnership or additional financing, the board of directors of SRP adopted a plan on March 6, 2023 to wind down SRP operations, liquidate its remaining assets and dissolve the company.
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Accordingly, if we do obtain Section 510(k) clearance for any of our ESRD therapy and/or filtration products, we will need to submit another Section 510(k) notification if we significantly affect that product’s safety or effectiveness through subsequent modifications or enhancements.
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That plan was approved by SRP’s stockholders on March 9, 2023, and on April 13, 2023, SRP filed a certificate of dissolution with the State of Delaware. SRP’s cash resources were sufficient to satisfy all of its outstanding liabilities other than its obligations to us under a loan with an outstanding balance of approximately $1.5 million.
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Therefore, it must be used in conjunction with other water treatment equipment (RO, DI, etc.). ● EndoPur Filters: Is intended to be used to filter water used with hemodialysis devices. It assists in providing hemodialysis quality water. The device is not a complete water treatment system but serves to remove biological contaminants.
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Accordingly, SRP assigned to us all of its remaining assets, including its intellectual property rights in the HDF2 device, in satisfaction of its outstanding loan balance.
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Research and Development Our research and development efforts continue on several fronts directly related to our current product lines.
Removed
The FDA evaluates compliance with the QSR through periodic unannounced inspections that may include the manufacturing facilities of our subcontractors.
Removed
The European Union directive applies to both the manufacturer’s quality assurance system and the product’s technical design and discusses the various ways to obtain approval of a device (dependent on device classification), how to properly CE mark a device, and how to place a device on the market.
Removed
In 2017, the European Union (EU) adopted the EU Medical Device Regulation (Council Regulations 2017/745) which imposes stricter requirements for the marketing and sale of medical devices, including new quality system and post-market surveillance requirements.
Removed
As defined in EU Medical Device Regulation (Council Regulations 2017/745), the regulatory approach necessary to demonstrate to the European Union that the organization has the ability to provide medical devices and related services that consistently meet customer requirements and regulatory requirements applicable to medical devices requires the certification of a full quality management system by a notified body.
Removed
European Union requirements for products are set forth in harmonized European Union standards and include conformity to safety requirements, physical and biological properties, construction and environmental properties, and information supplied by the manufacturer.
Removed
A company demonstrates conformity to these requirements, with respect to a product, by pre-clinical tests, biocompatibility tests, qualification of products and packaging, risk analysis and well-conducted clinical investigations approved by ethics committees.
Removed
Once a manufacturer’s full quality management system is determined to be in compliance with ISO 13485/2016 and other statutory requirements, and the manufacturer’s products conform to harmonized European standards, the notified body will recommend and document such conformity. The manufacturer will receive a CE marking and ISO certifications, and then may place a CE mark on the relevant products.
Removed
The CE mark, which stands for Conformité Européene, demonstrates compliance with the relevant European Union requirements. Products subject to these provisions that do not bear the CE mark cannot be imported to, or sold or distributed within, the European Union.
Removed
Medical Devices sold in Europe/ anticipated to be sold in Europe, shall be examined, and classified as: ● Class I: Provided non-sterile or do not have a measuring function; Low Risk ● Class I: Provided sterile and/or have a measuring function; Low/medium risk ● Class IIa: Medium risk ● Class IIb: Medium/high risk ● Class III: High risk Currently we are in the process to seek approval for CE certification under EU Medical Device Regulation (Council Regulations 2017/745).
Removed
In November 2023, we received approval for expansion of our MDSAP certification to include Brazil.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

49 edited+17 added−13 removed63 unchanged
Biggest changeAlthough we have recently added a number of new sales and marketing professionals, our success will depend on their ability to quickly integrate into our business and our ability to develop and retain them as employees. Our ability to increase our sales revenue may be materially impaired if we experience attrition in our sales and marketing organization.
Biggest changeOur ability to increase our sales revenue may be materially impaired if we experience attrition in our sales and marketing organization or if we are unsuccessful in developing our sales personnel. We rely on information technology systems and network infrastructure to operate and manage our business.
Policing unauthorized use of our trade secrets is difficult and expensive and, in the event we further expand our operations, the laws of other countries may not adequately protect our trade secrets. 19 Risks Related to Owning Our Common Stock The prices at which shares of the common stock trade have been and will likely continue to be volatile.
Policing unauthorized use of our trade secrets is difficult and expensive and, in the event we further expand our operations, the laws of other countries may not adequately protect our trade secrets. Risks Related to Owning Our Common Stock The prices at which shares of the common stock trade have been and will likely continue to be volatile.
However, we will need to continue developing new products in the future to continue to compete in our industry, and such new products may require obtaining regulatory approvals in the U.S. and other jurisdictions in which we intend to market them. 17 We cannot ensure that any new products developed by us in the future, will be approved for marketing.
However, we will need to continue developing new products in the future to continue to compete in our industry, and such new products may require obtaining regulatory approvals in the U.S. and other jurisdictions in which we intend to market them. We cannot ensure that any new products developed by us in the future, will be approved for marketing.
We are not able to control many of these factors, and we believe that period-to-period comparisons of our financial results will not necessarily be indicative of our future performance. Our common stock could be further diluted as a result of the issuance of additional shares of common stock, warrants or options.
We are not able to control many of these factors, and we believe that period-to-period comparisons of our financial results will not necessarily be indicative of our future performance. 18 Our common stock could be further diluted as a result of the issuance of additional shares of common stock, warrants or options.
If we cannot sell our products in a particular region, then the size of our potential market could be reduced, which would limit our potential sales and revenues. Significant additional governmental regulation could subject us to unanticipated delays that would adversely affect our sales and revenues.
If we cannot sell our products in a particular region, then the size of our potential market could be reduced, which would limit our potential sales and revenues. 16 Significant additional governmental regulation could subject us to unanticipated delays that would adversely affect our sales and revenues.
While we believe that revenues will increase following our planned sales team expansion, there can be no guarantee of this. We may continue to incur additional losses in the future depending on the timing and marketplace acceptance of our products and as a result of operating expenses being higher than our gross margin from product sales.
While we believe that revenues will increase following our expansion of the sales team in 2024, there can be no guarantee of this. We may continue to incur additional losses in the future depending on the timing and marketplace acceptance of our products and as a result of operating expenses being higher than our gross margin from product sales.
We depend on our suppliers to provide us and our customers with materials in a timely manner that meet our and their quality, quantity and cost requirements. These suppliers may encounter problems during manufacturing for a variety of reasons, any of which could delay or impede their ability to meet our demand and our customers’ demands.
We depend on Medica and our other suppliers to provide us and our customers with materials in a timely manner that meet our and their quality, quantity and cost requirements. These suppliers may encounter problems during manufacturing for a variety of reasons, any of which could delay or impede their ability to meet our demand and our customers’ demands.
Although the manufacturing facilities and processes that we use to manufacture our OLpūr MD HDF filter series have been inspected and certified by a worldwide testing and certification agency (also referred to as a notified body) that performs conformity assessments to European Union requirements for medical devices, they have not been inspected by the FDA.
Although the manufacturing facilities and processes that we use to manufacture our OLpūr MD HDF filter series have been inspected and certified by a worldwide testing and certification agency (also referred to as a notified body) that performs conformity assessments to requirements for medical devices, they have not been inspected by the FDA.
If we are unable to achieve profitability, we will need additional capital to fund our operating activities. Such capital is likely to be from the sale of shares of our common stock or other equity securities or from loans or other debt securities. However, there is no assurance that such capital will be available on favorable terms or at all.
If we are unable to maintain profitability, we will need additional capital to fund our operating activities. Such capital is likely to be from the sale of shares of our common stock or other equity securities or from loans or other debt securities. However, there is no assurance that such capital will be available on favorable terms or at all.
Our agreement with that supplier will expire in 2028 and although our relationship with this supplier is good, there can be no assurance that our current agreement will guarantee uninterrupted supply or that we will be able to renew the agreement on favorable terms, or at all.
Our agreement with Medica will expire in 2028 and although we believe our relationship with this supplier is good, there can be no assurance that our current agreement will guarantee uninterrupted supply or that we will be able to renew the agreement on favorable terms, or at all.
We cannot be sure that any of the facilities or processes we use will comply or continue to comply with their respective requirements on a timely basis or at all, which could delay or prevent our obtaining the approvals we need to market our products in the European Community and the United States.
We cannot be sure that any of the facilities or processes we use will comply or continue to comply with their respective requirements on a timely basis or at all, which could delay or prevent our obtaining the approvals we need to market our products in the United States.
Our ability to grow our customer base also depends on our ability to continue increasing achieve market acceptance of our water filter products, including among healthcare facility customers, or may not be deemed suitable for other commercial, military, industrial or retail applications.
Our ability to grow our customer base also depends on our ability to achieve further market acceptance of our water filter products, including among healthcare facility customers, or may not be deemed suitable for other commercial, military, industrial or retail applications.
Our directors, executive officers, and Wexford Capital LP (“Wexford”) control a significant portion of our stock and, if they choose to vote together, could have sufficient voting power to control the vote on substantially all corporate matters. As of March 1, 2024, Wexford, our largest stockholder, beneficially owned approximately 35% of our outstanding common stock.
Our directors, executive officers, and Wexford Capital LP (“Wexford”) control a significant portion of our stock and, if they choose to vote together, could have sufficient voting power to control the vote on substantially all corporate matters. As of March 1, 2025, Wexford, our largest stockholder, beneficially owned approximately 34% of our outstanding common stock.
If we are not able to maintain sufficient quality controls, then the approval or clearance of our products by the European Union, the FDA or other relevant authorities could be withdrawn, delayed, or denied and our sales and revenues will suffer.
If we are not able to maintain sufficient quality controls, then the approval or clearance of any of our future products by the FDA or other relevant authorities could be withdrawn, delayed, or denied and our sales and revenues will suffer.
During the two years ended December 31, 2023, our common stock has traded at prices ranging from a high of $6.19 to a low of $0.91 per share. Due to the lack of an active trading market for our common stock, we expect the prices at which our common stock might trade to continue to be highly volatile.
During the two years ended December 31, 2024, our common stock has traded at prices ranging from a high of $4.04 to a low of $0.95 per share. Due to the lack of an active trading market for our common stock, we expect the prices at which our common stock might trade to continue to be highly volatile.
Item 1A. Risk Factors Risks Related to Our Overall Business and Operations We have a history of operating losses and a significant accumulated deficit, and we may not achieve or maintain profitability in the future. As of December 31, 2023, we had an accumulated deficit of $144.4 million as a result of historical operating losses.
Item 1A. Risk Factors Risks Related to Our Overall Business and Operations We have a history of operating losses and a significant accumulated deficit, and we may not be able to maintain or improve our profitability in the future. As of December 31, 2024, we had an accumulated deficit of $144.3 million as a result of prior historical operating losses.
These provisions include: ● authorizing our board of directors to issue “blank check” preferred stock without stockholder approval; ● providing for a classified board of directors with staggered, three-year terms; 20 ● prohibiting us from engaging in a “business combination” with an “interested stockholder” for a period of three years after the date of the transaction in which the person became an interested stockholder unless certain provisions are met; ● prohibiting cumulative voting in the election of directors; ● limiting the persons who may call special meetings of stockholders; and ● establishing advance notice requirements for nominations for election to our board of directors or for proposing matters that can be acted on by stockholders at stockholder meetings.
These provisions include: ● authorizing our board of directors to issue “blank check” preferred stock without stockholder approval; ● providing for a classified board of directors with staggered, three-year terms; ● prohibiting us from engaging in a “business combination” with an “interested stockholder” for a period of three years after the date of the transaction in which the person became an interested stockholder unless certain provisions are met; ● prohibiting cumulative voting in the election of directors; ● limiting the persons who may call special meetings of stockholders; and ● establishing advance notice requirements for nominations for election to our board of directors or for proposing matters that can be acted on by stockholders at stockholder meetings. 19 As a smaller reporting company with little or no name recognition and with several risks and uncertainties that could impair our business operations, we are not likely to generate widespread interest in our common stock.
In order to successfully commercialize our products, we need to be able to produce them in a cost-effective way on a large scale to meet commercial demand, while maintaining extremely high standards for quality and reliability. The extent to which we fail to successfully commercialize our products will limit our ability to be profitable.
In order to successfully maintain commercialization of our products, we need to be able to produce them in a cost-effective way on a large scale to meet commercial demand, while maintaining extremely high standards for quality and reliability.
We may be unable to achieve or sustain revenue growth. Our business and future prospects are substantially dependent upon our ability to significantly grow our product revenue. Although our sales were approximately 43% higher in 2023 compared to 2022, there is no assurance that we will be able to continue our sales growth in future periods.
We may be unable to achieve or sustain revenue growth. Our business and future prospects are substantially dependent upon our ability to significantly grow our product revenue. Although our sales were approximately 43% higher in 2023 compared to 2022, our revenues declined slightly in 2024 compared to 2023.
Approval or clearance of our products could be withdrawn, delayed, or denied by the European Union, the FDA and the relevant authorities of other countries if our manufacturing facilities do not comply with their respective manufacturing requirements.
Approval or clearance of our products could be withdrawn, delayed, or denied by the FDA and the relevant authorities of other countries if our manufacturing facilities do not comply with their respective manufacturing requirements. The FDA imposes requirements through quality system requirements regulations, which include requirements for good manufacturing practices.
Even if we are able to obtain and maintain product liability insurance, if a successful claim in excess of our insurance coverage is made, then we may have to indemnify some or all of our manufacturers for their losses, which could materially deplete our assets. 16 We cannot assure you that our products will be safe or that there will not be product-related deaths, serious injuries or product malfunctions.
Even if we are able to obtain and maintain product liability insurance, if a successful claim in excess of our insurance coverage is made, then we may have to indemnify some or all of our manufacturers for their losses, which could materially deplete our assets.
If we are successful in continuing to increase our product revenue, we will need to also increase our supply requirements. However, our contracted manufacturers could experience manufacturing and control problems in connection with their manufacture of our products, which could disrupt their ability to timely and adequately supply us with product.
However, our contracted manufacturers could experience manufacturing and control problems in connection with their manufacture of our products, which could disrupt their ability to timely and adequately supply us with product.
If any of these events occur, then we could incur significant expenses and it could become more difficult for us to market and sell our products and to generate revenues from sales. Other countries may impose analogous reporting requirements that could cause us to incur expenses and may also limit our ability to generate revenues from sales of our products.
If any of these events occur, then we could incur significant expenses and it could become more difficult for us to market and sell our products and to generate revenues from sales.
The FDA also imposes requirements through quality system requirements regulations, which include requirements for good manufacturing practices. Failure by our manufacturers to comply with these requirements could prevent us from obtaining FDA pre-clearance or approval of our products and from marketing such products in the United States.
Failure by our manufacturers to comply with these requirements could prevent us from obtaining FDA pre-clearance or approval of our products and from marketing such products in the United States.
In particular, our ability to grow sales in our commercial business depends largely on the efforts of a distribution partner with respect to which we have given exclusive distribution rights to our products in the food, beverage and hospitality markets. We cannot assure that we will be able to organize and manage this network on a cost-effective basis.
In particular, following the termination of our exclusive distribution relationship with Donastar in the food, beverage and hospitality markets, our ability to grow sales in our commercial business will depend largely on the efforts of new distribution partners in these markets. We cannot assure that we will be able to organize and manage this network on a cost-effective basis.
If we experience any of these problems with respect to our manufacturers’ scale-ups of manufacturing operations, then we may not be able to have our products manufactured and delivered in a timely manner.
If we experience any of these problems with respect to our manufacturers’ scale-ups of manufacturing operations, then we may not be able to have our products manufactured and delivered in a timely manner. Our products are new and evolving, and our manufacturers may encounter unforeseen difficulties in manufacturing them in commercial quantities or at all.
We rely on information technology systems and network infrastructure to operate and manage our business. If we experience a breach, cyber attack or other disruption to these systems or data, our business, results of operations and financial condition could be adversely affected.
If we experience a breach, cyber attack or other disruption to these systems or data, our business, results of operations and financial condition could be adversely affected. We are increasingly dependent on sophisticated information technology systems to operate our business, including to process, transmit and store sensitive data.
With respect to our proprietary filter material used in our DSU-H, SSU-H, S100 and HydraGuard TM and HydraGuard TM – Flush filters, we rely on a single source supplier.
With respect to our proprietary filter material used in our DSU-H, SSU-H, S100 and HydraGuard TM and HydraGuard TM – Flush filters, we rely on a single source supplier, Medica S.p.A. (“Medica”), an Italy-based medical product manufacturing company.
To provide these services, we have begun, and will need to continue, to develop a network of distribution and a staff of employees and independent contractors in each of the areas in which we intend to operate.
Our strategy requires us to distribute our products and, if needed, provide customer service and maintenance and other technical service. To provide these services, we have begun, and will need to continue, to develop a network of distribution and a staff of employees and independent contractors in each of the areas in which we intend to operate.
If we are unable to maintain and further grow our customer base, our ability to grow revenue will be limited and we will have difficulty achieving profitability.
Our success depends on our ability to both maintain our existing customers and to continue growing our customer base. If we are unable to maintain and further grow our customer base, our ability to grow revenue will be limited and we will have difficulty maintaining profitability.
If we are not able to adequately secure or enforce protection of our intellectual property, then we may not be able to compete effectively and we may not be profitable. Our future success depends in part on our ability to protect the intellectual property for our technology through patents.
Risks Related to our Intellectual Property Protecting our intellectual property in our technology through patents may be costly and ineffective. If we are not able to adequately secure or enforce protection of our intellectual property, then we may not be able to compete effectively and we may not be profitable.
If we are unsuccessful at manufacturing, marketing, and selling our products, our operations and potential revenues will be materially adversely affected. We are dependent on third parties to supply us with our products to us, making us vulnerable to supply problems and price fluctuations. We rely on third-party suppliers to provide us with certain components of our products.
We are dependent on third parties to supply us with our products, making us vulnerable to supply problems and price fluctuations. We rely on third-party suppliers to provide us with certain components of our products.
Moreover, even if we are able to obtain adequate insurance, any claim against us could generate negative publicity, which could impair our reputation and adversely affect the demand for our products, our ability to generate sales and our profitability.
Moreover, even if we are able to obtain adequate insurance, any claim against us could generate negative publicity, which could impair our reputation and adversely affect the demand for our products, our ability to generate sales and our profitability. 14 Some of the agreements that we may enter into with manufacturers of our products and components of our products may require us to obtain product liability insurance; or to indemnify manufacturers against liabilities resulting from the sale of our products.
Further, we are required under applicable law to report any circumstances relating to our medically approved products that could result in deaths or serious injuries. These circumstances could trigger recalls, class action lawsuits and other events that could cause us to incur expenses and may also limit our ability to generate revenues from such products.
These circumstances could trigger recalls, class action lawsuits and other events that could cause us to incur expenses and may also limit our ability to generate revenues from such products.
If inflation continues to rise, the prices of our components may rise, resulting in increased expenses to us that we may not be able to offset by raising the prices of our products.
For example, we and our suppliers have recently experienced, and may continue to experience, rising costs due to inflation, such as costs of materials, labor and freight. If inflation continues to rise, the prices of our components may rise, resulting in increased expenses to us that we may not be able to offset by raising the prices of our products.
Our products are new and evolving, and our manufacturers may encounter unforeseen difficulties in manufacturing them in commercial quantities or at all. 14 If we cannot develop adequate distribution, customer service and technical support networks, then we may not be able to market and distribute our products effectively and/or customers may decide not to order our products.
If we cannot develop adequate distribution, customer service and technical support networks, then we may not be able to market and distribute our products effectively and/or customers may decide not to order our products. In either case, our sales and revenues will suffer.
The protection provided by our patents, and patent applications if issued, may not be broad enough to prevent competitors from introducing similar products into the market. Our patents, if challenged or if we attempt to enforce them, may not necessarily be upheld by the courts of any jurisdiction.
Our patents, if challenged or if we attempt to enforce them, may not necessarily be upheld by the courts of any jurisdiction.
Any supply interruption from our suppliers or failure to obtain additional suppliers for any of the components used in our products, or price increases of these supplies, could have a material adverse effect on our business, financial condition and results of operations. We operate with a limited senior management team and are highly dependent on our sales and marketing personnel.
Any supply interruption from our suppliers or failure to obtain additional suppliers for any of the components used in our products, or price increases of these supplies, could have a material adverse effect on our business, financial condition and results of operations. 13 We are subject to minimum purchase obligations under our License and Supply Agreement with Medica and failure to meet these minimum purchase requirements may result in termination of the agreement, which could materially impact our ability to obtain our filtration products.
Litigation and other proceedings relating to patent matters, whether initiated by us or a third party, can be expensive and time-consuming, regardless of whether the outcome is favorable to us, and may require the diversion of substantial financial, managerial, and other resources.
If any of those publications or patents conflict with our patent rights, or cover our products, then any or all of our patent applications could be rejected and any or all of our granted patents could be invalidated, either of which could materially adversely affect our competitive position. 17 Litigation and other proceedings relating to patent matters, whether initiated by us or a third party, can be expensive and time-consuming, regardless of whether the outcome is favorable to us, and may require the diversion of substantial financial, managerial, and other resources.
Risks Related to Government Regulation If we violate any provisions of the FDC Act or any other statutes or regulations, then we could be subject to enforcement actions by the FDA or other governmental agencies.
Other countries may impose analogous reporting requirements that could cause us to incur expenses and may also limit our ability to generate revenues from sales of our products. 15 Risks Related to Government Regulation If we violate any provisions of the FDC Act or any other statutes or regulations, then we could be subject to enforcement actions by the FDA or other governmental agencies.
We will only be able to protect our products and methods from unauthorized use by third parties to the extent that our products and methods are covered by valid and enforceable patents or are effectively maintained as trade secrets. Our 4 granted U.S. patents will expire at various times from 2029 to 2039, assuming they are properly maintained.
Our future success depends in part on our ability to protect the intellectual property for our technology through patents. We will only be able to protect our products and methods from unauthorized use by third parties to the extent that our products and methods are covered by valid and enforceable patents or are effectively maintained as trade secrets.
Companies in the United States and around the world have experienced a disruption in the supply of certain components and raw materials, such as resins and polymers, which may adversely affect us and our ability to obtain these components in a timely manner, in the volumes we require, or at all.
A disruption in such items as resins and polymers, could adversely affect us and our ability to obtain these components in a timely manner, in the volumes we require, or at all. In addition, the prices of these components and other supplies we rely upon in the manufacture of our products may rise.
If we are unable to recruit and retain qualified personnel to our senior management teams, we will be unlikely to achieve our objectives of continuing to grow our company and our business may otherwise be harmed. 15 In addition, our need to significantly increase our revenue is also dependent on the personnel in our sales and marketing organization.
We do not carry key person life insurance on any of our employees. If we are unable to recruit and retain qualified personnel to our senior management teams, we will be unlikely to achieve our objectives of continuing to grow our company and our business may otherwise be harmed.
Even if we do obtain regulatory approval, approval may be only for limited uses with specific classes of patients, processes, or other devices. Our failure to obtain, or delays in obtaining, the necessary regulatory clearance and/or approvals would prevent us from selling our affected products in the applicable regions.
Our failure to obtain, or delays in obtaining, the necessary regulatory clearance and/or approvals would prevent us from selling our affected products in the applicable regions.
Our business therefore depends on the continuous, effective, reliable, and secure operation of our computer hardware, software, networks, Internet servers, and related infrastructure.
Specifically, we rely on our information technology systems to effectively manage sales and marketing, accounting and financial functions, inventory management, and our research and development data. Our business therefore depends on the continuous, effective, reliable, and secure operation of our computer hardware, software, networks, Internet servers, and related infrastructure.
Our ability to increase our revenues in future periods will depend on our ability to significantly grow our customer base and then consistently obtaining product reorders from those customers. If we cannot sustain significant revenue growth for an extended period, our financial results will be adversely affected, and our stock price may decline.
There is no assurance that we will be able to resume sales growth in future periods. Our ability to increase our revenues in future periods will depend on our ability to significantly grow our customer base and then consistently obtaining product reorders from those customers.
The clearance and/or approval processes can be lengthy and uncertain, and each requires substantial commitments of our financial resources and our management’s time and effort. We may not be able to obtain further CE marking or regulatory approval for any of our existing or new products in a timely manner or at all.
The clearance and/or approval processes can be lengthy and uncertain, and each requires substantial commitments of our financial resources and our management’s time and effort. Even if we do obtain regulatory approval, approval may be only for limited uses with specific classes of patients, processes, or other devices.
We rely on, and for the foreseeable future expect to continue to rely on, a limited number of independent manufacturers to produce our products. Our manufacturers’ systems and procedures may not be adequate to support our operations and may not be able to achieve the rapid execution necessary to exploit the market for our products.
Our manufacturers’ systems and procedures may not be adequate to support our operations and may not be able to achieve the rapid execution necessary to exploit the market for our products. If we are successful in continuing to increase our product revenue, we will need to also increase our supply requirements.
We face significant challenges in obtaining market acceptance of our products, which could adversely affect our potential sales and revenues. Our success depends on our ability to both maintain our existing customers and to continue growing our customer base.
If we cannot sustain significant revenue growth for an extended period, our financial results will be adversely affected, and our stock price may decline. We face significant challenges in obtaining market acceptance of our products, which could adversely affect our potential sales and revenues.
Removed
We began sales of our first product in March 2004, and we may never realize sufficient revenues from the sale of our products or be profitable.
Added
We sold our first commercial product in March 2004, and the year ended December 31, 2024 was only our first profitable year in our history with net income of $0.1 million.
Removed
In either case, our sales and revenues will suffer. Our strategy requires us to distribute our products and provide a significant amount of customer service and maintenance and other technical service.
Added
The extent to which we fail to successfully maintain commercial success of our products, could limit our ability to be profitable. 12 We rely on, and for the foreseeable future expect to continue to rely on, a limited number of independent manufacturers to produce our products.
Removed
We have limited experience selling our products to healthcare facilities, and we might be unsuccessful in increasing our sales. Our business strategy depends in part on our ability to sell our products to hospitals and other healthcare facilities, including dialysis clinics. We have limited experience with respect to sales and marketing.
Added
The revenue from our emergency response business is unpredictable and is subject to factors outside our control. As a result, our revenue and operating results may vary significantly from period to period.
Removed
In addition, the prices of these components and other supplies we rely upon in the manufacture of our products may rise. For example, we and our suppliers have recently experienced, and may continue to experience, rising costs due to inflation, such as costs of materials, labor and freight.
Added
A portion of our revenue is derived from the sale of our filtration products to address outbreaks of waterborne pathogens in hospitals and other buildings and facilities, which we sometimes refer to as our emergency response (ER) business. In these situations, building operators often look to us to install our filtration systems in order to immediately remediate an active outbreak.
Removed
We do not carry key person life insurance on any of our employees.
Added
However, the frequency, timing and severity of such outbreaks are unpredictable. During periods in which several outbreaks occur across the territories we serve we may see a significant increase in the demand for our filtration products, leading to increased sales.
Removed
We are increasingly dependent on sophisticated information technology systems to operate our business, including to process, transmit and store sensitive data. Specifically, we rely on our information technology systems to effectively manage sales and marketing, accounting and financial functions, inventory management, and our research and development data.
Added
On the other hand, during periods when only a small number of outbreaks occur, we see reduced demand for our products. Given the difficulty in predicting the timing and magnitude of sales based on our ER business, we may experience quarter-to-quarter fluctuations in revenue resulting in the potential for a sequential decline in quarterly revenue.
Removed
Some of the agreements that we may enter into with manufacturers of our products and components of our products may require us to obtain product liability insurance; or to indemnify manufacturers against liabilities resulting from the sale of our products.
Added
Companies in the United States and around the world may experience a disruption in the supply of certain components and raw materials, as happened during the worldwide pandemic starting in 2020.
Removed
The European Union imposes requirements on quality control systems of manufacturers, which are inspected and certified on a periodic basis and may be subject to additional unannounced inspections. Failure by our manufacturers to comply with these requirements could prevent us from marketing our products in the European Community.
Added
In addition, with the change in U.S. presidential administration in January 2025, there is increased risk of new tariffs which could also affect the prices we pay for critical supplies and materials.
Removed
To market our products in the European Community, the United States, and other countries, where approved, manufacturers of such products must continue to comply or ensure compliance with the relevant manufacturing requirements.
Added
On December 11, 2023, we entered into a license and supply agreement (the “License and Supply Agreement”) with Medica for the marketing and sale of certain filtration products based upon Medica’s proprietary ultrafiltration technology in conjunction with our filtration products (collectively, the “Products”), and to engage in an exclusive supply arrangement for the Products, meaning Medica is our sole supplier for the filter material used in certain of our products.
Removed
Although we cannot control the manufacturers of our products, we may need to expend time, resources and effort in product manufacturing and quality control to assist with their continued compliance with these requirements.
Added
Under the License and Supply Agreement, Medica granted to us an exclusive license, with right of sublicense, to market, promote, distribute, offer for sale and sell the Products in the Territory (as defined in the License and Supply Agreement).
Removed
If violations of applicable requirements are noted during periodic inspections of the manufacturing facilities of our manufacturers, then we may not be able to continue to market the products manufactured in such facilities and our revenues may be materially adversely affected. 18 Risks Related to our Intellectual Property Protecting our intellectual property in our technology through patents may be costly and ineffective.
Added
In addition, we granted to Medica an exclusive license under our intellectual property to make the Products during the term of the License and Supply Agreement. In exchange for the rights granted, we have agreed to make minimum annual aggregate purchases from Medica of €4,208,000, €4,629,000, €4,976,000, €5,349,000 and €5,750,000 for the years 2024, 2025, 2026, 2027 and 2028, respectively.
Removed
If any of those publications or patents conflict with our patent rights, or cover our products, then any or all of our patent applications could be rejected and any or all of our granted patents could be invalidated, either of which could materially adversely affect our competitive position.
Added
We satisfied our minimum purchase obligations for 2024, but if we are unable to satisfy the minimum purchase commitments in future years, we may be in breach of the License and Supply Agreement, giving Medica a right of termination.
Removed
As a smaller reporting company with little or no name recognition and with several risks and uncertainties that could impair our business operations, we are not likely to generate widespread interest in our common stock.
Added
If the License and Supply Agreement is terminated, we may be unable to obtain our filtration products from an alternative supplier on commercially favorable terms, if at all.
Added
If we are unable to obtain our filtration products from an alternative supplier, we may be unable to supply our products to our customers, which could have a material adverse effect on our results of operations and damage our reputation. We operate with a limited senior management team and are highly dependent on our sales and marketing personnel.
Added
In addition, our need to significantly increase our revenue is also dependent on the personnel in our sales and marketing organization. We have limited resources to add sales and marketing professionals at this time. Accordingly, our success will depend on our ability to continue developing and retaining our personnel.
Added
We cannot assure you that our products will be safe or that there will not be product-related deaths, serious injuries or product malfunctions. Further, we are required under applicable law to report any circumstances relating to our medically approved products that could result in deaths or serious injuries.
Added
Our 5 granted U.S. patents will expire at various times from 2029 to 2044, assuming they are properly maintained. The protection provided by our patents may not be broad enough to prevent competitors from introducing similar products into the market.

Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

5 edited+0 added−2 removed12 unchanged
Biggest changeOur cybersecurity risk management program includes: ● risk assessments designed to help identify material cybersecurity risks to our critical systems, information, products, services, and our broader enterprise information technology (“IT”) environment; ● an outsourced security team principally responsible for managing (1) our cybersecurity risk assessment processes, (2) our security controls, and (3) our response to cybersecurity incidents; ● the use of external service providers, where appropriate, to assess, test, or otherwise assist with aspects of our security controls; ● cybersecurity awareness training for our employees, incident response personnel, and senior management.
Biggest changeOur cybersecurity risk management program is integrated into our overall enterprise risk management program and shares common methodologies, reporting channels, and governance processes that apply across the enterprise risk management program to other legal, compliance, strategic, operational, and financial risk areas. 20 Our cybersecurity risk management program includes: ● risk assessments designed to help identify material cybersecurity risks to our critical systems, information, products, services, and our broader enterprise information technology (“IT”) environment; ● an outsourced security team principally responsible for managing (1) our cybersecurity risk assessment processes, (2) our security controls, and (3) our response to cybersecurity incidents; ● the use of external service providers, where appropriate, to assess, test, or otherwise assist with aspects of our security controls; ● cybersecurity awareness training for our employees, incident response personnel, and senior management.
Cybersecurity events, when detected by security tools or third parties, may not always be identified immediately or addressed in the manner intended by our cybersecurity incident response plan. 22 Governance Based on the information available as of the date of this Annual Report, we have no reason to believe any risks from cybersecurity threats, including as a result of any previous cybersecurity incidents, have materially affected or are reasonably likely to materially affect us, including our business strategy, results of operations or financial condition.
Governance Based on the information available as of the date of this Annual Report, we have no reason to believe any risks from cybersecurity threats, including as a result of any previous cybersecurity incidents, have materially affected or are reasonably likely to materially affect us, including our business strategy, results of operations or financial condition.
Our cybersecurity risk management strategy processes, discussed in greater detailed above, are led by our Chief Financial Officer, in conjunction with our outsourced security team, under the supervision of our Chief Executive Officer. Our Chief Financial Officer has over 5 years of prior work experience in various roles involving supervising the implementation of various information technology systems.
Our cybersecurity risk management strategy processes, discussed in greater detailed above, are led by our Chief Financial Officer, in conjunction with our outsourced security team, under the supervision of our Chief Executive Officer.
Given that cybersecurity risks can impact various areas of responsibility of the Committees of the Board, as well as the overall size of the Board, the Board believes it is useful and effective for the entire Board to maintain direct oversight over cybersecurity matters.
For additional information, see “Risks Related to Our Overall Business and Operations – We rely on information technology systems and network infrastructure…” in Item 1A, “Risk Factors” in this Annual Report on Form 10-K. 21 Given that cybersecurity risks can impact various areas of responsibility of the Committees of the Board, as well as the overall size of the Board, the Board believes it is useful and effective for the entire Board to maintain direct oversight over cybersecurity matters.
In addition, security controls, no matter how well designed or implemented, may only mitigate and not fully eliminate cybersecurity risks.
In addition, security controls, no matter how well designed or implemented, may only mitigate and not fully eliminate cybersecurity risks. Cybersecurity events, when detected by security tools or third parties, may not always be identified immediately or addressed in the manner intended by our cybersecurity incident response plan.
Removed
Our cybersecurity risk management program is integrated into our overall enterprise risk management program and shares common methodologies, reporting channels, and governance processes that apply across the enterprise risk management program to other legal, compliance, strategic, operational, and financial risk areas.
Removed
For additional information, see “Risks Related to Cybersecurity, Data Privacy and IT Systems,” in Item 1A, “Risk Factors” in this Annual Report on Form 10-K.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

3 edited+1 added−1 removed0 unchanged
Biggest changeItem 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Common Stock Information Our common stock is quoted on the Nasdaq Capital Market under the symbol “NEPH”. Our common stock commenced trading on August 14, 2019.
Biggest changeItem 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Common Stock Information Our common stock is quoted on the Nasdaq Capital Market under the symbol “NEPH”. Our common stock commenced trading on August 14, 2019. As of December 31, 2024, there were approximately 41 holders of record of our common stock.
Recent Sales of Unregistered Securities Except as previously reported in our Quarterly Reports on Form 10-Q and our Current Reports on Form 8-K, we have not sold any equity securities during the year ended December 31, 2023, that were not registered under the Securities Act of 1933, as amended.
Recent Sales of Unregistered Securities Except as previously reported in our Quarterly Reports on Form 10-Q and our Current Reports on Form 8-K, we have not sold any equity securities during the year ended December 31, 2024, that were not registered under the Securities Act of 1933, as amended.
Issuer Repurchases of Equity Securities There were no repurchases of our common stock during the fourth quarter of 2023. Equity Compensation Plan Information See Part III, Item 12, under the heading “Equity Compensation Plan Information,” which is incorporated by reference herein. Item 6. Reserved
Issuer Repurchases of Equity Securities There were no repurchases of our common stock during the fourth quarter of 2024. Equity Compensation Plan Information See Part III, Item 12, under the heading “Equity Compensation Plan Information,” which is incorporated by reference herein. Item 6. Reserved
Removed
As of December 31, 2023, there were approximately 44 holders of record and approximately 1,300 beneficial holders of our common stock.
Added
The actual number of holders of common stock is greater than this number of record holders and includes stockholders who are beneficial owners, but whose shares are held in street name by brokers and nominees. The number of holders of record also does not include stockholders whose shares may be held in trust by other entities.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

19 edited+9 added−15 removed16 unchanged
Biggest changeDue to these fluctuations, we believe that the period-to-period comparisons of our operating results are not a good indication of our future performance. 25 Fiscal Year Ended December 31, 2023, Compared to the Fiscal Year Ended December 31, 2022 The following table sets forth our summarized, consolidated results of operations for the years ended December 31, 2023 and 2022 (in thousands except percentages): Years Ended December 31, $ Increase % Increase 2023 2022 (Decrease) (Decrease) Total net revenues $ 14,238 $ 9,975 $ 4,263 43 % Cost of goods sold 5,833 5,244 589 11 % Gross margin 8,405 4,731 3,674 78 % Gross margin % 59 % 47 % - Research and development expenses 873 1,255 (382 ) (30 )% Depreciation and amortization expenses 214 218 (4 ) (2 )% Selling, general and administrative expenses 8,911 7,593 1,318 17 % Operating loss from continuing operations (1,593 ) (4,335 ) 2,742 (63 )% Interest expense (2 ) (20 ) 18 (90 )% Interest income 64 14 50 357 % Other (expense) income, net (44 ) 64 (108 ) (169 )% Net loss from continuing operations (1,575 ) (4,277 ) 2,702 (63 )% Net loss from discontinued operations - (2,829 ) 2,829 100 % Net Loss (1,575 ) (7,106 ) 5,531 (78 )% Less: undeclared deemed dividend attributable to continuing noncontrolling interest - (276 ) 276 (100 )% Net loss attributable to Nephros, Inc. shareholders $ (1,575 ) $ (7,382 ) 5,807 (79 )% Net Revenues.
Biggest changeFiscal Year Ended December 31, 2024, compared to the Fiscal Year Ended December 31, 2023 The following table sets forth our summarized, consolidated results of operations for the years ended December 31, 2024 and 2023 (in thousands except percentages): Years Ended December 31, $ Increase % Increase 2024 2023 (Decrease) (Decrease) Total net revenues $ 14,162 $ 14,238 $ (76 ) (1 )% Cost of goods sold 5,439 5,833 (394 ) (7 )% Gross margin 8,723 8,405 318 4 % Gross margin % 62 % 59 % - 3 % Research and development expenses 906 873 33 4 % Depreciation and amortization expenses 135 214 (79 ) (37 )% Selling, general and administrative expenses 7,676 8,911 (1,235 ) (14 )% Operating Income (loss) 6 (1,593 ) 1,599 (100 )% Interest expense (1 ) (2 ) 1 (50 )% Interest income 94 64 30 47 % Other (expense) income, net (10 ) (44 ) 34 (77 )% Income (loss) before income taxes 89 (1,575 ) 1,664 (106 )% Income tax expense (15 ) - (15 ) - Net Income (loss) $ 74 $ (1,575 ) 1,649 (105 )% 24 Net Revenues.
On May 13, 2022, the FDA gave 510(k) clearance to SRP’s second-generation model of the OLpūrH2H Hemodiafiltration System, which enables nephrologists to provide HDF treatment to patients with end stage renal disease. In January 2023, SRP management began exploring strategic partnerships to support a commercial launch of the HDF product but was unsuccessful in identifying a partner.
In May 2022, SRP received 510(k) clearance from the FDA for SRP’s second-generation model of the OLpūrH2H Hemodiafiltration System, which enables nephrologists to provide HDF treatment to patients with end stage renal disease. In January 2023, SRP management began exploring strategic partnerships to support a commercial launch of the HDF product but was unsuccessful in identifying a partner.
We expect to put our current capital resources toward the development, marketing, and sales of our water filtration products and working capital purposes. 27 Net cash provided by operating activities was $0.8 million for the year ended December 31, 2023 compared to net cash used in operating activities of approximately $3.2 million for the year ended December 31, 2022, an increase of $4.1 million.
We expect to put our current capital resources toward the development, marketing, and sales of our water filtration products and working capital purposes. Net cash used in operating activities was $0.5 million for the year ended December 31, 2024 compared to net cash provided by operating activities of approximately $0.8 million for the year ended December 31, 2023.
This was primarily from payments of $71,000 on our secured note, principal payments of approximately $7,000 on our finance lease obligation and principal payments of approximately $1,000 on our equipment financing debt. Net cash provided by financing activities was $34,000 for the year ended December 31, 2022.
Net cash used in financing activities was $79,000 for the year ended December 31, 2023. This was primarily from payments of $71,000 on our secured note, principal payments of approximately $7,000 on our finance lease obligation and principal payments of approximately $1,000 on our equipment financing debt.
As of December 31, Liquidity and Capital Resources 2023 2022 Cash and cash equivalents $ 4,307 $ 3,634 Other current assets 4,098 4,627 Working capital 6,292 6,849 Stockholders’ equity 8,358 8,881 We operate under an Investment, Risk Management and Accounting Policy adopted by our Board of Directors.
As of December 31, Liquidity and Capital Resources 2024 2023 Cash and cash equivalents $ 3,760 $ 4,307 Other current assets 4,538 4,098 Working capital 6,736 6,292 Stockholders’ equity 8,585 8,358 We operate under an Investment, Risk Management and Accounting Policy adopted by our Board of Directors.
This policy provides that our primary objectives for investments are the preservation of principal and achieving sufficient liquidity to meet our forecasted cash requirements. In addition, provided that such primary objectives are met, we may seek to achieve the maximum yield available under such constraints.
This policy provides that our primary objectives for investments are the preservation of principal and achieving sufficient liquidity to meet our forecasted cash requirements. In addition, provided that such primary objectives are met, we may seek to achieve the maximum yield available under such constraints. At December 31, 2024, we had an accumulated deficit of $144.3 million.
Additionally, our operating plans are designed to help control operating costs, to increase revenue and to raise additional capital until such time as we generate sufficient cash flows to fund operations.
Additionally, our operating plans are designed to help control operating costs, to increase revenue, and to raise additional capital so we can continue to generate sufficient cash flows to fund operations.
We anticipate that our annual results of operations will be impacted for the foreseeable future by several factors, including market acceptance of our products, expense management, and progress in continuing to achieve positive operating cash flow.
We anticipate that our annual results of operations will be impacted for the foreseeable future by several factors, including market acceptance of our products, expense management, and progress in continuing to achieve positive operating cash flow. Due to these fluctuations, we believe that the period-to-period comparisons of our operating results are not a good indication of our future performance.
Based on cash that is available for our operations and projections of our future operations, as well as the fact that we generated $0.7 million in cash flow in 2023, we believe that our existing cash resources together with our anticipated revenue, will be sufficient to fund our current operating plan through at least the next 12 months from the date of issuance of the consolidated financial statements in this Annual Report on Form 10-K.
Based on cash that is available for our operations and projections of our future operations, we believe that our cash balances will be sufficient to fund our current operating plan through at least the next 12 months from the date of issuance of the condensed consolidated financial statements in this Annual Report on Form 10-K.
Liquidity and Capital Resources The following table summarizes our liquidity and capital resources as of December 31, 2023 and 2022 and is intended to supplement the more detailed discussion that follows. The amounts stated are expressed in thousands.
This decrease is primarily a result of losses on foreign currency transactions in 2023. 25 Liquidity and Capital Resources The following table summarizes our liquidity and capital resources as of December 31, 2024 and 2023 and is intended to supplement the more detailed discussion that follows. The amounts stated are expressed in thousands.
Depreciation and Amortization Expense Depreciation and amortization expenses were $0.2 million for each of the years ended December 31, 2023 and 2022.
Depreciation and Amortization Expense Depreciation and amortization expenses were $0.1 million for the year ended December 31, 2024, and $0.2 million for the year ended December 31, 2023.
Results of Operations Fluctuations in Operating Results Our results of operations have fluctuated significantly from period to period in the past, including recently, and are likely to continue to do so in the future.
If inventory is written down, a new cost basis is established that cannot be increased in future periods. Results of Operations Fluctuations in Operating Results Our results of operations have fluctuated significantly from period to period in the past, including recently, and are likely to continue to do so in the future.
For a description of these new accounting standards, see “Note 2 – Summary of Significant Accounting Policies,” to our consolidated financial statements included in Item 8, “Financial Statements and Supplementary Data,” of this Annual Report on Form 10-K.
For a description of these new accounting standards, see “Note 2 – Summary of Significant Accounting Policies,” to our consolidated financial statements included in Item 8, “Financial Statements and Supplementary Data,” of this Annual Report on Form 10-K. 23 Critical Accounting Policies and Estimates Our discussion and analysis of our financial condition and results of operations is based on our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”).
Although we have no current plans to do so, we may re-evaluate opportunities for HDF in the future. 24 Recent Accounting Pronouncements We are subject to recently issued accounting standards, accounting guidance and disclosure requirements.
Accordingly, SRP assigned to Nephros all of its remaining assets, including its intellectual property rights in the HDF2 device, in satisfaction of its outstanding loan balance. Although we have no current plans to do so, we may re-evaluate opportunities for HDF in the future. Recent Accounting Pronouncements We are subject to recently issued accounting standards, accounting guidance and disclosure requirements.
The increase in interest income is due to higher interest rates earned on invested cash balances. 26 Other Income (Expense), net Other expense was approximately $44,000 for the year ended December 31, 2023, compared to other income of $64,000 for the year ended December 31, 2022. This decrease is primarily a result of losses on foreign currency transactions in 2023.
Interest Income Interest income was approximately $94,000 for the year ended December 31, 2024, compared to approximately $64,000 for the ended December 31, 2023. The increase in interest income is due to higher interest rates earned on invested cash balances.
Interest Income Interest income was approximately $64,000 for the year ended December 31, 2023 compared to approximately $14,000 for the ended December 31, 2022.
Other (Expense), net Other expense was approximately $10,000 for the year ended December 31, 2024, compared to $44,000 for the year ended December 31, 2023.
Net cash used in investing activities was $0.1 million for the years ended December 31, 2023 and 2022 Net cash used in financing activities was approximately $79,000 for the year ended December 31, 2023.
Net cash used in investing activities was approximately $50,000 and $75,000 for the years ended December 31, 2024 and 2023 respectively, Net cash used in financing activities was approximately $5,000 for the year ended December 31, 2024. This was primarily from principal payments on our finance lease obligation.
At December 31, 2023, we had an accumulated deficit of $144.4 million and we expect to incur additional operating losses from operations until such time, if ever, that we are able to increase product sales and/or licensing revenue to achieve profitability.
We may continue to incur additional operating losses until such time, if ever, that we are able to consistently increase product sales to achieve profitability.
Gross Profit Margin Gross profit margin was approximately 59% for the year ended December 31, 2023, compared to approximately 47% for the year ended December 31, 2022. The increase of approximately 12 percentage points reflects a return to target gross margins of 55%-60%.
Gross Profit Margin Gross profit margin was approximately 62% for the year ended December 31, 2024, compared to approximately 59% for the year ended December 31, 2023. The increase of approximately 3 percentage points reflects more favorable terms with our largest supplier. Research and Development Expenses Research and development expenses increased 4% primarily due to an increase in headcount.
Removed
Accordingly, SRP assigned to Nephros all of its remaining assets, including its intellectual property rights in the HDF2 device, in satisfaction of its outstanding loan balance.
Added
Inventory Reserves We value our inventories at the lower of cost or net realizable value using the first-in, first-out method, whereby we make estimates regarding the value of our inventories, including an assessment of excess and obsolete inventories. We utilize both specific product identification and historical product demand as the basis for estimating our excess or obsolete inventory reserve.
Removed
Critical Accounting Policies and Estimates Our discussion and analysis of our financial condition and results of operations is based on our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”).
Added
A portion of our inventories are subject to expiration dating, which can be extended in certain circumstances.
Removed
Inventories Our inventory reserve requirements are based on various factors including product expiration date and estimates for the future sales of the product. Reserve assessments include inventory obsolescence based upon expiration date, damaged, or rejected product, slow-moving products, and other considerations. We continue to monitor our inventory reserves amounts and policies, and to update both as required by relevant circumstances.
Added
We continually evaluate quantities on hand and the carrying value of our inventories to determine the need for reserves for excess and obsolete inventories, and apply a consistent policy to estimate the reserve, unless circumstances change that would require us to reassess our policy such as a sudden and significant decline in demand for our products, new technology, or macroeconomic conditions.
Removed
Total net revenues increased 43% in the year ended December 31, 2023, driven by investments in our executive and sales organizations, as well as partnering with a master distributor for much of our commercial business.
Added
Total net revenues decreased 1% in the year ended December 31, 2024. This decrease was primarily driven by decreased revenue from emergency response orders, which were unusually large in 2023 but not repeated to the same degree in 2024.
Removed
Lower gross margins in 2022 were primarily driven by large inventory write-downs due to expired product, and higher shipping expense from supply chain disruptions.
Added
We believe that one contributor to this decline is the reduced stringency of waterborne risk response in territories previously committed to both proactive filtration measures and robust corrective actions. Consequently, we experienced the effects of a relaxation of requirements for emergency relief and remediation.
Removed
Research and Development Expenses Research and development expenses decreased 30% primarily due to the wind down of SRP in 2023 and consequently a reduction in SRP-related research and development expense of $0 in 2023 versus $376,000 in 2022, and slightly decreased investment in 2023 in water filter research and development.
Added
However, the decrease in emergency response orders was partially offset by increased revenue from programmatic or recurring sales, which were 9% more than the same period in 2023. This increase in programmatic sales was due to the development of our newer sales personnel hired in 2023 and a number of new customer accounts.
Removed
Selling, General and Administrative Expenses Selling, general and administrative expenses increased $1.3 million or 17%, primarily due to increased bonus and sales commission expense associated with higher sales, the hiring of a new CEO and CFO to replace one person acting in both positions, and increased hires to support the sales organization.
Added
Selling, General and Administrative Expenses Selling, general and administrative expenses decreased $1.2 million or 14%, primarily due to a decrease in stock compensation, bonus, and commission expense Interest Expense Interest expense was approximately $1,000 for the year ended December 31, 2024, compared to $2,000 for the year ended December 31, 2023.
Removed
Interest Expense Interest expense was approximately $2,000 for the year ended December 31, 2023 compared to $20,000 for the year ended December 31, 2022. This reduction is primarily related to a lower principal balance of the company’s secured note payable.
Added
Net cash used in operating activities in 2024 was primarily due to an increase in inventory of approximately $0.4 million, an increase in accounts receivable of approximately $0.3 million, a decrease in accounts payable and accrued expenses of approximately $0.2 million each, offset by an increase in inventory impairments and write-offs of approximately $0.3 million.
Removed
For the year ended December 31, 2022, other income related to the release of the cumulative translation adjustment from accumulated other comprehensive income (loss) on the liquidation of a foreign entity , related to the closure in the second quarter of 2022 of Nephros International, our wholly-owned subsidiary.
Added
Net cash provided by operating activities in 2023 was primarily due to a decline in inventory of approximately $0.4 million, an increase in accrued expenses of approximately $0.5 million, partially offset by an increase in accounts receivable of approximately $0.2 million.
Removed
Loss from discontinued operations Loss from discontinued operations was approximately $2.8 million for the year ended December 31, 2022. The discontinued operations are related to the company’s former PDS operating segment.
Removed
This increase of $4.1 million is due primarily to a decrease in the net loss incurred of $5.5 million, in addition there was approximately $1.4 million in non-cash charges for impairment of assets held for sale in 2022.
Removed
This was primarily from proceeds from the exercise of warrants of $0.2 million and from the sale to Nephros of SRP preferred shares of $0.2 million, offset partially by payments of $0.3 million on our secured note, payments of employee taxes on restricted stock of approximately $31,000, principal payments of approximately $12,000 on our finance lease obligation and principal payments of approximately $3,000 on our equipment financing debt.
Removed
Purchase Commitments In exchange for the rights granted under the License and Supply Agreement with Medica (see Note 9 – License and Supply Agreement, net), the Company agreed to make certain minimum annual aggregate purchases from Medica over the term of the License and Supply Agreement.
Removed
For the year ended December 31, 2023, the Company had agreed to make minimum annual aggregate purchases from Medica of €3.8 million (approximately $4.1 million). For the year ended December 31, 2023, aggregate purchase commitments totaled €4.9 million (approximately $5.3 million). All purchase agreements were met.
Removed
Future purchase commitments under the License and Supply Agreement with Medica are as follows: ● 2024: €4,208,000 ● 2025: €4,629,000 ● 2026: €4,976,000

Other NEPH 10-K year-over-year comparisons