Financial Performance - Full-year net revenue for 2023 was $14.2 million, a 43% increase from $10 million in 2022[4] - Fourth-quarter net revenue was $3.3 million, up 27% from $2.6 million in Q4 2022[4] - Total net revenues for 2023 increased to $14,238,000, up 42.7% from $9,975,000 in 2022[28] - Product revenues rose to $14,110,000, a 42.5% increase compared to $9,929,000 in the previous year[28] Profitability and Loss - Gross margin for the year was 59%, compared to 47% in 2022; Q4 gross margin was 62%, up from 59% in Q4 2022[6] - Gross margin improved to $8,405,000, representing a 77.8% increase from $4,731,000 in 2022[28] - Net loss for the year decreased by 63% to ($1.6 million) from ($4.3 million) in 2022; Q4 net loss remained approximately ($0.7 million)[10] - Operating loss from continuing operations decreased to $1,593,000, down from $4,335,000 in 2022, indicating improved operational efficiency[28] - Net loss attributable to Nephros Inc. shareholders was $1,575,000, significantly reduced from $7,382,000 in the prior year[28] Expenses - Cost of goods sold for the year was $5.8 million, an 11% increase from $5.2 million in 2022; Q4 cost of goods sold was $1.2 million, up 18% from $1 million in Q4 2022[6] - Selling, general and administrative expenses for the year were $8.9 million, a 17% increase from $7.6 million in 2022; Q4 expenses were approximately $2.4 million, up 35% from $1.8 million in Q4 2022[7] - Research and development expenses for the year decreased by 30% to $0.9 million from $1.3 million in 2022; Q4 expenses were $0.2 million, down 42% from $0.4 million in Q4 2022[8] - Research and development expenses decreased to $873,000 from $1,255,000, suggesting a potential shift in investment strategy[28] Cash and Assets - The company remains debt-free with cash and cash equivalents of approximately $4.3 million as of December 31, 2023, compared to $3.6 million at the end of 2022[11] - Cash and cash equivalents increased to $4,307,000, up from $3,634,000 year-over-year[26] - Total assets grew to $11,861,000, compared to $10,999,000 in 2022, reflecting a solid asset base[26] Liabilities - Total liabilities increased to $3,503,000, up from $2,118,000, indicating a rise in financial obligations[26] Operational Developments - Nephros opened a new warehouse in Q4 2023 to enhance delivery efficiency and support growing sales[3] Shareholder Information - Weighted average common shares outstanding increased to 10,386,018 from 10,297,134, reflecting a slight dilution in share value[28]

Company Overview - The company develops and sells high-performance water solutions primarily for medical and commercial markets[87]. - The company has a diverse product portfolio for commercial markets, including NanoGuard ultrafiltration technologies, aimed at improving water quality in food service and hospitality[109][112]. Medical Products and Market Opportunity - Medical water filters, classified as ultrafilters, capture contaminants as small as 0.005 microns, minimizing exposure to various pathogens[88]. - The company has FDA 510(k) clearance for multiple medical device products aimed at infection control in hospitals, with product life ranging from 3 to 12 months[99][106]. - There are approximately 6,100 hospitals in the U.S. with over 33 million patient admissions in 2022, highlighting a significant market opportunity for infection control products[97]. - The company anticipates that stricter water quality standards will be adopted by Medicare, potentially increasing demand for its dialysis-related products[103]. Financial Performance - Total net revenues for Q3 2023 were $3,742,000, a 55% increase from $2,409,000 in Q3 2022, driven by investments in sales and partnerships[115][116]. - Gross margin improved to 59% in Q3 2023 from 32% in Q3 2022, reflecting a return to target margins and better inventory management[117]. - Selling, general, and administrative expenses rose to $2,137,000, a 23% increase from $1,743,000 in Q3 2022, primarily due to increased commissions and headcount[118]. - Research and development expenses decreased to $205,000 in Q3 2023 from $252,000 in Q3 2022, attributed to the wind down of certain projects[119]. - Net loss from continuing operations significantly reduced to $182,000 in Q3 2023 from $1,250,000 in Q3 2022, marking an 85% improvement[115]. - For the nine months ended September 30, 2023, total net revenues were $10,984,000, a 48% increase from $7,417,000 in the same period of 2022[124][125]. - Gross margin for the nine months ended September 30, 2023, was 58%, up from 43% in the same period of 2022, reflecting improved pricing and cost management[126]. - Cash and cash equivalents increased to $4,622,000 as of September 30, 2023, compared to $3,634,000 at the end of 2022[134]. - Net cash provided by operating activities was $1,100,000 for the nine months ended September 30, 2023, a $4,100,000 improvement from net cash used in the same period of 2022[138]. - The company expects its current cash balances to fund operations for at least the next 12 months, contingent on revenue growth and cost management[136]. Challenges and Risks - The company acknowledges significant fluctuations in operating results, which may continue to impact future performance due to various factors including revenue growth rates and expense management[114]. - The company may face challenges in achieving or sustaining revenue growth[145]. - Product-related incidents could lead to recalls and class action lawsuits, impacting revenue generation[145]. - Potential liabilities from product production and marketing could deplete assets and harm reputation[145]. - The company may struggle to obtain necessary funding on favorable terms for operations[145]. - Insufficient capital may hinder the successful implementation of the business plan[145]. - Marketing effectiveness for products may be compromised[145]. - Competitive pricing and profitability of water filtration products may be at risk[145]. - Issues with suppliers, manufacturers, and distributors could arise[145]. - Regulatory approvals necessary for the business plan may not be secured[145]. - Sales growth in key geographic markets may not be achieved[145]. Strategic Decisions - The company previously held a majority stake in Specialty Renal Products, which was liquidated in April 2023 due to capital exhaustion and lack of strategic partnerships[90]. - The company sold its Pathogen Detection Systems business in November 2022 but will receive annual royalties based on BWSI's revenue from the products developed by this segment[110]. - The company expects future revenue from the commercial market to potentially surpass its infection control revenue as demand for water testing and filtration grows[108].

Company Overview - The company develops and sells high-performance water solutions primarily for medical and commercial markets[93]. - The company previously held a majority stake in Specialty Renal Products, which was wound down due to lack of capital and strategic partnerships, with an outstanding loan balance of approximately $1.5 million[96]. - The company sold substantially all assets of its Pathogen Detection Systems business to BWSI, LLC, with an annual royalty agreement for seven years[117]. Medical Products and Market - Medical water filters, classified as ultrafilters, capture contaminants as small as 0.005 microns, minimizing exposure to various pathogens[94]. - The company has FDA 510(k) clearance for a portfolio of medical device products aimed at infection control in hospitals[106]. - The company estimates there are over 100,000 hemodialysis machines in operation in the U.S., servicing approximately 468,000 patients annually[108]. - The company anticipates stricter water quality standards will be adopted by Medicare, positively impacting the sale of its ultrafilters[109]. - The company believes future revenue from the commercial market could surpass its infection control revenue as demand for water testing and filtration grows[115]. Financial Performance - Total net revenues for the three months ended June 30, 2023, increased by $0.7 million, or 24%, to $3,545,000 compared to $2,850,000 in the same period of 2022[121]. - Gross margin improved to approximately 59% for the three months ended June 30, 2023, up from 49% in the same period of 2022, reflecting a 10% increase[123]. - For the six months ended June 30, 2023, total net revenues increased by $2.2 million, or 45%, reaching $7,242,000 compared to $5,009,000 in the same period of 2022[131]. - The consolidated gross margin for the six months ended June 30, 2023, was approximately 58%, an increase of 9% from 49% in the same period of 2022[132]. - Net cash provided by operating activities was $0.5 million for the six months ended June 30, 2023, compared to a net cash used of approximately $2.9 million in the same period of 2022, an increase of $3.4 million[143]. - Cash and cash equivalents increased to $4,060,000 as of June 30, 2023, compared to $3,634,000 as of December 31, 2022[140]. - Interest income for the three months ended June 30, 2023, was approximately $13,000, a significant increase of 1,200% compared to $1,000 in the same period of 2022[128]. Expenses and Challenges - Selling, general and administrative expenses rose by $354,000, or 19%, primarily due to increased bonus accrual and sales commission expenses[124]. - Research and development expenses decreased by approximately $52,000, attributed to the wind down of SRP and reduced investment in water filter R&D[125]. - The company had an accumulated deficit of $143.6 million as of June 30, 2023, and may incur additional operating losses until profitability is achieved[140]. - The company may face challenges in achieving or sustaining revenue growth[148]. - Potential product-related issues could lead to recalls and class action lawsuits, impacting revenue generation[148]. - The company is at risk of liability associated with product marketing and sales, which could deplete assets and harm reputation[148]. - There may be difficulties in obtaining necessary regulatory approvals to execute the business plan[148]. - The company could struggle to effectively market its products and maintain competitive pricing[148]. - Issues with suppliers, manufacturers, and distributors may arise, affecting operations[148]. - Internal control deficiencies or weaknesses could be encountered, impacting financial reporting[148]. - The company may not secure adequate legal protection for its products, including patent rights[148]. - Sales growth in key geographic markets may not be achieved[148]. Product Offerings - The company’s NanoGuard products provide dual-stage retention of organic or inorganic particles larger than 15,000 Daltons[120]. - The company’s commercial filters improve water quality in food service, convenience store, hospitality, and industrial applications[120].

Business Overview - The company develops and sells high-performance water solutions primarily for medical and commercial markets [86]. - The company owns a majority stake in Specialty Renal Products, Inc. (SRP), which was wound down due to limited capital and unsuccessful partnership efforts [89]. - The company has a portfolio of proprietary products for commercial, industrial, and food service settings, combining NanoGuard ultrafiltration technologies [108]. - The company sold its pathogen detection system business to BWSI, LLC, which includes an annual royalty agreement for seven years based on gross margins from the PDS products [109]. Market Potential - The company targets approximately 6,100 hospitals in the U.S., with over 33 million patient admissions in 2022, highlighting the potential market for infection control products [97]. - The dialysis market includes approximately 6,500 clinics servicing around 468,000 patients annually, with over 100,000 hemodialysis machines in operation in the U.S. [101]. - The Centers for Medicare and Medicaid Services (CMS) expanded requirements for water management plans in 2022, which may positively impact sales of the company's ultrafilters [98]. - The company anticipates stricter water quality standards will be adopted by Medicare, potentially increasing demand for its products [102]. Financial Performance - Total net revenues for the three months ended March 31, 2023, were $3.7 million, a 71% increase from $2.2 million in the same period in 2022 [121]. - Gross margin improved to 57% for Q1 2023, up from 49% in Q1 2022, reflecting an 8% increase driven by price increases and improved inventory management [122]. - Operating loss from continuing operations significantly reduced to $306,000 in Q1 2023, an 80% improvement from a loss of $1.5 million in Q1 2022 [121]. - Net cash provided by operating activities was approximately $0.3 million for Q1 2023, compared to a net cash used of $1.8 million in Q1 2022, marking a $2.1 million improvement [133]. - As of March 31, 2023, cash and cash equivalents totaled $3.8 million, up from $3.6 million at the end of 2022 [130]. - The accumulated deficit as of March 31, 2023, was $143.1 million, with expectations of continued operating losses until product sales increase [130]. - The company anticipates that its cash balances will be sufficient to fund operations for at least the next 12 months [131]. Research and Development - Research and development expenses decreased by $133,000, primarily due to the wind down of SRP and reduced investment in water filter R&D [123]. - SRP's HDF2 device was cleared by the FDA in May 2022, but the company has not identified any strategic partners for its commercial launch [115]. - SRP's operations were wound down in March 2023 due to capital constraints, with remaining assets expected to be assigned to the company [116]. Product Details - Medical water filters, classified as ultrafilters, capture contaminants as small as 0.005 microns, minimizing exposure to various pathogens [87].

Financial Performance - Total net revenues for the fiscal year ended December 31, 2022, were $9.975 million, a decrease of 2% from $10.217 million in 2021[169] - Gross margin for the fiscal year ended December 31, 2022, was approximately 47%, down from 55% in 2021, reflecting an 8% decrease due to increased shipping costs and inventory reserves[171] - Net loss attributable to Nephros, Inc. shareholders for the fiscal year ended December 31, 2022, was $7.382 million, an increase of 80% from $4.107 million in 2021[169] - Loss from discontinued operations was approximately $2.8 million for the year ended December 31, 2022, compared to $1.1 million in 2021, primarily due to asset impairment[180] - The company incurred a net loss of $3.2 million for the year ended December 31, 2022[187] Expenses - Research and development expenses decreased by 16% to $1.255 million in 2022, primarily due to reduced investment in the Water Filtration segment[172] - Selling, general and administrative expenses increased by 6% to $7.593 million in 2022, attributed to higher sales headcount and associated costs[174] Cash Flow and Liquidity - Cash and cash equivalents decreased to $3.634 million as of December 31, 2022, down from $6.973 million in 2021[181] - The accumulated deficit as of December 31, 2022, was $142.8 million, with expectations of incurring additional operating losses until profitability is achieved[183] - Net cash used in operating activities increased to $3.2 million for the year ended December 31, 2022, compared to $1.4 million in 2021, an increase of $1.8 million[187] - Net cash provided by financing activities was approximately $43,000 for the year ended December 31, 2022, primarily from proceeds of $0.2 million from warrant exercises[189] - The company believes that existing cash resources and anticipated revenue will be sufficient to fund operations for at least the next 12 months[185] - Future liquidity sources will depend on the development, marketing, and sales of water filtration products[186] Operational Changes - The company plans to wind down Specialty Renal Products, Inc. operations and liquidate its assets due to limited capital and lack of strategic partnerships[162] - The company may need to reduce discretionary expenditures, including headcount and R&D spending, if demand for products decreases[185] Purchase Commitments - The company has agreed to make minimum annual aggregate purchases from Medica of €3.5 million (approximately $3.7 million) for the year ended December 31, 2022[191] - Aggregate purchase commitments for the year ended December 31, 2022, totaled €3.2 million (approximately $3.4 million)[191] - The company has a commitment to make up a €0.3 million purchase shortfall based on anticipated future revenues[191] Segment Performance - Total net revenues in the Water Filtration segment decreased by 2% in the year ended December 31, 2022[169] - Net cash used in investing activities remained stable at $0.1 million for both years ended December 31, 2022, and 2021[188]

Financial Data and Key Metrics Changes - The fourth quarter gross margins were reported at 59%, an increase from 54% in 2021 [23] - The net consolidated loss for Q4 2022 was $0.7 million, consistent with Q4 2021, while the annual net consolidated loss increased to $4.3 million from $2.8 million in 2021 [8] - Consolidated adjusted EBITDA for Q4 was negative $0.5 million compared to negative $0.1 million in 2021, and for the year, it was negative $2.4 million compared to negative $1.6 million in 2021 [8] - Cash used in operating activities decreased to $202,000 in Q4 2022 from $336,000 in Q4 2021 [24] Business Line Data and Key Metrics Changes - Fourth quarter net revenue was $2.6 million, a 6% decrease year-over-year, while full-year revenue was $10 million, a 2% decrease from the previous year [22] - Consolidated research and development expenses for Q4 were $0.4 million, up from $0.3 million in 2021, but for the year, they decreased to $1.3 million from $1.5 million in 2021 [9] Market Data and Key Metrics Changes - The company established a strategic partnership with Donastar Enterprises as the exclusive master distributor for its commercial filters in the food & beverage and hospitality markets [6] - The company anticipates further cost savings due to the planned cessation of operations by its majority-owned subsidiary, Specialty Renal Products (SRP) [21] Company Strategy and Development Direction - The company is focused on achieving cash flow breakeven by mid-2023 while targeting significant revenue growth [4] - Actions taken to achieve these goals include restructuring the sales organization, doubling the sales team, and relaunching the commercial filtration business [20] - The company aims to return to target gross margins of 55% to 60% through price increases and operational efficiencies [19] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about internal trends and the potential for growth despite challenges in the dialysis market and funding difficulties [30][31] - The company is prioritizing cash burn management and revenue growth, with a focus on expanding its sales capabilities [42] Other Important Information - The company’s cash balance as of December 31, 2022, was $3.6 million, which is believed to be sufficient for the foreseeable future [24] - The SRP board has decided to wind down operations and liquidate remaining assets, with Nephros re-evaluating future opportunities for HDF [7] Q&A Session Summary Question: What is the status of the Donastar Enterprises agreement? - The agreement allows Donastar to bring their own pipeline and manage existing customer relationships, benefiting both parties [27] Question: How many active customer sites does the company have? - The company did not disclose specific numbers but emphasized the importance of the Donastar relationship in expanding its market reach [30] Question: What are the growth drivers going forward? - The company has doubled its sales force to better respond to market opportunities and is focused on growing its revenue [53] Question: What is the company's stance on the SRP operations and funding? - Management expressed disappointment over the inability to secure funding for SRP, leading to its shutdown, but emphasized the need to focus on profitability [31][39] Question: How is the R&D budget being allocated? - The R&D budget is modest and primarily focused on product development and technology updates, with a significant portion being cut due to the cessation of SRP [71]

Company Overview - The company develops and sells high-performance water solutions for medical and commercial markets, focusing on water filtration and pathogen detection products [116]. - The company has FDA 510(k) clearance for its medical device products, including a complete hospital infection control product line [132]. - The company’s ultrafiltration products are positioned to address the growing concerns over waterborne pathogens in both medical and commercial settings [141]. Market and Product Demand - The company expects a net positive impact on product demand as the COVID-19 pandemic subsides, particularly for infection control filtration and pathogen detection products [122]. - The dialysis market includes approximately 6,500 clinics servicing around 468,000 patients annually, with over 100,000 hemodialysis machines in operation in the U.S. [134]. - The acquisition of the AETHER brand aims to enhance access to commercial markets, with a contract secured to provide filtration systems to approximately 3,000 Quick Service Restaurants [139]. - The company anticipates that water safety management programs will migrate from medical to commercial markets, increasing demand for its filtration solutions [140]. - The company’s AETHER products are designed to improve water quality in food service, hospitality, and convenience store markets, combining with NanoGuard ultrafiltration technologies [142]. Financial Performance - Total net revenues for the three months ended September 30, 2022, were $2,409,000, a decrease of 7% compared to $2,578,000 for the same period in 2021 [162]. - Gross margin for the three months ended September 30, 2022, was approximately 32%, down from approximately 53% for the same period in 2021, representing a decrease of 21% [163]. - Total net revenues for the nine months ended September 30, 2022, were $7,417,000, a decrease of 1% compared to $7,504,000 in 2021 [170]. - Gross margin for the nine months ended September 30, 2022, was approximately 43%, down from 55% in 2021, representing a decrease of 12% [171]. - Selling, general and administrative expenses increased by 8% to $5,806,000 for the nine months ended September 30, 2022, from $5,373,000 in 2021 [174]. - Interest expense decreased to approximately $17,000 for the nine months ended September 30, 2022, compared to $34,000 in 2021, primarily due to a lower principal balance [175]. - Other income increased to approximately $94,000 for the nine months ended September 30, 2022, compared to $16,000 in 2021, mainly from foreign currency transactions [177]. - Cash and cash equivalents decreased to $3,940,000 as of September 30, 2022, from $6,973,000 as of December 31, 2021 [179]. - The accumulated deficit as of September 30, 2022, was $142,000,000, with expectations of incurring additional operating losses until product sales increase [179]. - Net cash used in operating activities was $3,000,000 for the nine months ended September 30, 2022, an increase of $1,900,000 from $1,100,000 in 2021 [181]. Research and Development - Research and development expenses decreased by $143,000 to $252,000 for the three months ended September 30, 2022, primarily due to reduced investment across product lines [165]. - Research and development expenses decreased by 23% to $896,000 for the nine months ended September 30, 2022, compared to $1,170,000 in 2021 [173]. Product Development and Launch - The HDF2 system was cleared by the FDA for patient use on May 13, 2022, enabling nephrologists to provide HDF treatment to patients with end-stage renal disease [155]. - The company plans to launch the HDF2 system at 1-3 clinics in late 2022 to establish clinical experience [156]. - The individual water treatment device developed for military applications meets NSF Protocol P248 standards and has been validated for deployment [143]. Future Outlook - The company anticipates that annual results will be impacted by market acceptance of products and progress in achieving positive operating cash flow [161]. - The company believes that HDF therapy has a place in the treatment landscape for patients with end-stage renal disease in the United States, with potential for over 10 million individual treatments if HDF achieves similar penetration as in Europe [158]. - The company plans to implement strategies to control operating costs and increase revenue to improve liquidity and fund operations [180].

Financial Data and Key Metrics Changes - Net revenue for Q3 2022 was $2.4 million, a decrease of 7% year-over-year and 16% compared to the previous quarter [10] - Loss from continuing operations increased to $1.3 million from $0.8 million in Q3 2021, primarily due to changes in inventory reserve policy [14] - Consolidated adjusted EBITDA improved to negative $304,000 from negative $394,000 in Q3 2021, reflecting cost-reduction efforts [15] - Consolidated gross margins decreased to 32% from 53% in Q3 2021, impacted by the slow-moving inventory reserve policy [15] Business Line Data and Key Metrics Changes - Active customer sites increased by 18% year-over-year to a record 1,391 sites, with customer retention rates steady at over 90% [10] - Medical water filtration segment showed strong performance with record numbers of active customer sites and strong sales of filter evaluation kits [12] - Specialty Renal Products segment is in development for a commercial launch anticipated by the end of 2022 [13] Market Data and Key Metrics Changes - The company experienced a revenue reduction of approximately $200,000 from a large customer due to unrelated regulatory issues, which have since been resolved [11] - The company noted that competitors are facing supply chain issues, which may have contributed to gaining market share [35] Company Strategy and Development Direction - The company is focused on achieving profitability and positive cash flow by mid-2023, with ongoing cost-saving measures [12] - The sale of the pathogen detection systems business is expected to reduce expenses by more than $300,000 per quarter and allow the company to focus on core operations [12][25] - The company is committed to investments in scalable commercial and operational infrastructures for long-term sustainable growth [18] Management Comments on Operating Environment and Future Outlook - Management acknowledged the impact of the COVID-19 pandemic and regulatory challenges on operations and revenue [5] - The company expects to see a narrowing of cash usage gap as it approaches cash flow breakeven in mid-2023 [26] - Management expressed confidence in the potential future cash generation from the sale of the PDS segment, despite not expecting significant immediate returns [25] Other Important Information - The company reported a cash balance of $3.9 million as of September 30, 2022, which is believed to be sufficient for the foreseeable future [16] - The company is implementing a new slow-moving inventory reserve policy, which has led to increased inventory reserves and net losses [9] Q&A Session Summary Question: Can you explain the charge related to the slow-moving inventory? - Management explained that the change in policy was due to a careful review of the commercial business, leading to a more aggressive reserve for slow-moving inventory [21] Question: How do new customers compare to the existing customer base? - Management indicated a healthy mix of new large customers with potential for significant revenue alongside smaller customers, contributing to an 18% increase in active customers [22] Question: What is the expectation for cash usage until positive cash flow is achieved? - Management expects variability in cash usage but anticipates a narrowing of the gap in operating income as they approach cash flow breakeven [26] Question: Is there any anticipated cash closing costs associated with the PDS sale? - Management confirmed that they have accrued for expected closing costs and do not anticipate significant additional costs in Q4 [55]

Company Overview - The company develops and sells high-performance water solutions for medical and commercial markets, focusing on water filtration and pathogen detection products [103]. - The company has FDA 510(k) clearance for its OLpūr H2H Hemodiafiltration System, enabling HDF treatment for patients with end-stage renal disease [107]. - The acquisition of the AETHER brand is expected to expedite access to commercial markets and expand filtration capabilities, with a contract secured for 3,000 Quick Service Restaurants [127]. - The company acquired GenArraytion, enhancing its pathogen detection capabilities and exploring new market opportunities beyond waterborne pathogens [147]. Market Demand and Trends - The company expects increased demand for pathogen detection products as unoccupied buildings are prepared for re-occupation, addressing biofilm propagation issues [110]. - The company anticipates that stricter water quality standards will be adopted by Medicare, positively impacting the sale of its ultrafilters [125]. - The company believes that water safety management programs in medical facilities will migrate to commercial markets, increasing demand for its filtration solutions [131]. - The company anticipates fluctuations in operating results due to market acceptance of products and expense management, impacting future performance [165]. - The company expects to utilize current capital resources for product development, marketing, and working capital purposes [188]. - The company anticipates that demand for water filtration products will increase as the hospitality industry recovers [194]. Product Performance and Development - In medical markets, the ultrafilters capture contaminants as small as 0.005 microns, minimizing exposure to various pathogens, including legionella and pseudomonas [104]. - The PluraPath pathogen detection system allows real-time tracking of multiple pathogens in water systems, providing data in less than one hour compared to traditional assays that take 24-72 hours [138]. - The SequaPath system can screen for over 20,000 bacterial genera, including 40+ pathogenic bacteria, enabling same-day on-site analysis [143]. - The DialyPath system provides real-time data on endotoxin levels and six specific gram-negative bacteria in less than one hour, addressing urgent contamination issues in dialysis clinics [142]. - The HDF2 system, cleared by the FDA on May 13, 2022, is designed to improve patient outcomes in end-stage renal disease treatment and is the only HDF system cleared by the FDA [159]. - Nephros plans to launch the HDF2 system in 1-3 clinics in late 2022 to establish clinical experience before a broader market expansion [160]. - The individual water treatment device developed for military applications has been validated to meet NSF Protocol P248 standards, enhancing mission effectiveness [134]. Financial Performance - Total net revenues for the three months ended June 30, 2022, were $2,884,000, representing a 27% increase from $2,266,000 in the same period of 2021 [166]. - Water Filtration segment revenues increased by 30% to $2,849,000, driven by sales growth in hospitals, dialysis, and commercial markets [166]. - Pathogen Detection segment revenues decreased by 54% to $35,000 due to lower-than-expected service and testing revenues [167]. - Consolidated gross margin decreased to 47% for the three months ended June 30, 2022, down from 56% in the same period of 2021, primarily due to increased shipping costs and inventory expirations [168]. - Research and development expenses decreased by 11% to $431,000, with a notable 103% increase in Renal Products segment expenses [170]. - Selling, general and administrative expenses increased by 12% to $2,070,000, attributed to increased headcount expenditures and severance costs from a 15% reduction in staff [172]. - For the six months ended June 30, 2022, total net revenues were $5,071,000, a slight increase of 1% from $5,002,000 in the same period of 2021 [175]. - The Pathogen Detection segment experienced a 17% revenue decline to $63,000, reflecting significant revenue fluctuations typical of early-stage businesses [177]. - Consolidated selling, general and administrative expenses rose by 15% to $4,418,000, driven by increased employee-related costs and travel expenses [180]. - Interest expense decreased to $13,000 for the six months ended June 30, 2022, compared to $24,000 in the same period of 2021, due to a lower principal balance on the secured note payable [181]. - Other income for the six months ended June 30, 2022, was approximately $63,000, compared to $8,000 for the same period in 2021, primarily due to foreign currency transaction gains [183]. Cash Flow and Liquidity - As of June 30, 2022, cash and cash equivalents were $4,179,000, down from $6,973,000 as of December 31, 2021, indicating a decrease in liquidity [185]. - The accumulated deficit as of June 30, 2022, was $138.8 million, with expectations of incurring additional operating losses until product sales or licensing revenue increase [185]. - Net cash used in operating activities increased to $2.9 million for the six months ended June 30, 2022, from $0.2 million in the same period of 2021, primarily due to a higher net loss [189]. - Net cash used in investing activities was approximately $137,000 for the six months ended June 30, 2022, compared to $23,000 for the same period in 2021, reflecting increased purchases of property and equipment [190]. - Net cash provided by financing activities was approximately $0.2 million for the six months ended June 30, 2022, primarily from warrant exercises and preferred share sales [191]. - Future liquidity will depend on market acceptance of products and the costs associated with patent claims and litigation [187]. - The company plans to further reduce cash expenditures if anticipated operational results are not achieved [194].

Financial Data and Key Metrics Changes - Net revenue for Q2 2022 was $2.9 million, representing a 27% increase year-over-year and a 32% increase over the previous quarter [6][15] - Active customer sites increased by 21% year-over-year to a record 1,349, which is also 6% higher than the previous quarter [6] - Customer retention rates remained over 90% [6] - Consolidated net loss for the quarter was $1.1 million, consistent with Q2 2021 [16] - Consolidated adjusted EBITDA was negative $0.7 million, an improvement from negative $0.8 million in Q2 2021 [16] - Consolidated gross margins decreased to 47% from 57% in Q2 2021, attributed to inflationary pressures and supply chain issues [17] Business Line Data and Key Metrics Changes - Medical Water Filtration businesses, including hospital infection control and dialysis water purification, showed strong performance with record active customer sites [12] - In the Commercial Filtration business, over 3,000 filters were shipped for installation in Chipotle restaurants, with a replacement cycle every six months [13] - The Pathogen Detection business completed agreements with two strategic testing partners, anticipating steady sales growth [14] Market Data and Key Metrics Changes - The company reported healthy growth across all three filtration markets, with commercial filtration experiencing additional growth due to Chipotle shipments [38] - The at-home dialysis market was impacted by an FDA hold on a leading competitor, which has now been lifted, potentially accelerating growth in the second half of the year [44] Company Strategy and Development Direction - The company aims to achieve cash flow positivity by mid-2023 while focusing on revenue growth and cost management [7] - A 15% headcount reduction and other cost-cutting measures have been implemented to reduce operating expenses by over $300,000 per quarter [8][9] - The company is committed to investments in scalable commercial and operational infrastructures for long-term sustainable growth [22] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about revenue growth despite current economic challenges and inflationary pressures [7][17] - The company anticipates modest increases in gross margins over the next few quarters due to a price increase implemented on June 1 [28] - Management acknowledged the need to demonstrate product capabilities in dialysis clinics to regain market credibility [73][74] Other Important Information - The company’s cash balance as of June 30, 2022, was $4.2 million, which is expected to suffice for the foreseeable future [18] - The company plans to file its Form 10-Q on August 15, 2022, for more detailed financial results [19] Q&A Session Summary Question: Insights on gross margins and future expectations - Management noted stabilization in gross margins and anticipated modest increases in the coming quarters, but not necessarily reaching the target range of 55% to 60% by year-end [26][28] Question: Operating expenses and infrastructure sufficiency - Management confirmed that current operating expenses are sufficient to support expected growth without significant increases [31][65] Question: Medical Filtration market insights - All three filtration markets showed healthy growth, with commercial filtration benefiting from specific shipments [38] Question: Impact of FDA hold on at-home dialysis market - Management confirmed that the FDA hold impacted the first half of the year but expects growth to accelerate now that the hold has been lifted [44] Question: Expense cuts and headcount reductions - Cuts were made across most departments, deemed necessary for future operations without significantly harming business capabilities [56] Question: Potential monetization of business segments - Management indicated that all options are being considered for achieving cash flow breakeven, but no specific plans were disclosed [61] Question: Supply constraints and market share - Management confirmed that they have gained some sales due to competitors' supply constraints and do not anticipate significant supply chain issues for the remainder of the year [85]