NEPHROS INC
For the period ended Dec 31, 2024. Filed Mar 24, 2025.
View on SEC.govAbout this filing
A company's yearly report to the SEC, with audited financial statements. It is the fullest account a company gives of its business, its finances and the risks it sees.
FY2024 · Filed Mar 24, 2025
NEPH$2.79-9.7%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-K
Period ended 2023-12-31; filed 2024-03-15.
0001493152-24-010107
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-K
Period ended 2024-12-31; filed 2025-03-24.
0001641172-25-000234
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 48 previous paragraphs and 44 current paragraphs.
25 unchanged; 9 reworded; 9 added; 13 removed; 1 previous and 1 current paragraphs rearranged.
Tables are not compared: 4 previous and 3 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (9)
Current report
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Current report
Inventory Reserves
Current report
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. A portion of our inventories are subject to expiration dating, which can be extended in certain circumstances. 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. If inventory is written down, a new cost basis is established that cannot be increased in future periods.
Current report
Results of Operations
Current report
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. 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. 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.
Current report
Research and development expenses increased 4% primarily due to an increase in headcount.
Current report
Selling, general and administrative expenses decreased $1.2 million or 14%, primarily due to a decrease in stock compensation, bonus, and commission expense
Current report
Other (Expense), net
Current report
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. 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. 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 paragraphs (13)
Previous report
Inventories
Previous report
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.
Previous report
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.
Previous report
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.
Previous report
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.
Previous report
Other Income (Expense), net
Previous report
Loss from discontinued operations
Previous report
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.
Previous report
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. 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.
Previous report
Net cash provided by financing activities was $34,000 for the year ended December 31, 2022. 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.
Previous report
Purchase Commitments
Previous report
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. 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.
Previous report
Future purchase commitments under the License and Supply Agreement with Medica are as follows:
Reworded paragraphs (9)
Previous wording
We previously held a majority stake in Specialty Renal Products, Inc. (“SRP”), a development-stage medical device company that was focused primarily on developing hemodiafiltration (“HDF”) technology. 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. 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. 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. 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.
Current wording
We previously held a majority stake in Specialty Renal Products, Inc. (“SRP”), a development-stage medical device company that was focused primarily on developing hemodiafiltration (“HDF”) technology. 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. 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. 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. 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.
Previous wording
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%. 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.
Current wording
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.
Previous wording
Depreciation and amortization expenses were $0.2 million for each of the years ended December 31, 2023 and 2022.
Current wording
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.
Previous wording
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.
Current wording
Interest expense was approximately $1,000 for the year ended December 31, 2024, compared to $2,000 for the year ended December 31, 2023.
Previous wording
Interest income was approximately $64,000 for the year ended December 31, 2023 compared to approximately $14,000 for the ended December 31, 2022. The increase in interest income is due to higher interest rates earned on invested cash balances.
Current wording
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.
Previous wording
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 decreaseis primarilya result of losses on foreign currency transactions in 2023. 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.
Current wording
Other expense was approximately $10,000 for the year ended December 31, 2024, compared to $44,000 for the year ended December 31, 2023. This decrease is primarily a result of losses on foreign currency transactions in 2023.
Previous wording
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. 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. If there were a decrease in the demand for our products due to either economic or competitive conditions, or if we are otherwise unable to achieve our plan or achieve our anticipated operating results, there could be a significant reduction in liquidity due to our possible inability to cut costs sufficiently. In such event, the Company may need to take further actions to reduce its discretionary expenditures, including further reducing headcount, reducing spending on R&D projects and reducing other variable costs.
Current wording
At December 31, 2024, we had an accumulated deficit of $144.3 million. 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. 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. 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. If there were a decrease in the demand for our products due to either economic or competitive conditions, or if we are otherwise unable to achieve our plan or achieve our anticipated operating results, there could be a significant reduction in liquidity due to our possible inability to cut costs sufficiently. In such event, the Company may need to take further actions to reduce its discretionary expenditures, including further reducing headcount, reducing spending on R&D projects, and reducing other variable costs.
Previous wording
Net cash used in investing activities was $0.1 million for the years ended December 31, 2023 and 2022
Current wording
Net cash used in investing activities was approximately $50,000 and $75,000 for the years ended December 31, 2024 and 2023 respectively,
Previous wording
Net cash used in financing activities was approximately $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 obligationand principal payments of approximately $1,000 on our equipment financing debt.
Current wording
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.
Rearranged current paragraphs (1)
Current report — wording carried from elsewhere
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.
Rearranged previous paragraphs (1)
Previous report — wording carried elsewhere
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.