NEPHROS, INC. The following discussion should be read in conjunction with our condensed consolidated financial statements and notes thereto included in Item 1 of Part I of this Quarterly Report on Form 10-Q. This discussion includes forward-looking statements about our business, financial condition and results of operations including discussions about management's expectations for our business. These statements represent projections, beliefs and expectations based on current circumstances and conditions and in light of recent events and trends, and these statements should not be construed either as assurances of performances or as promises of a given course of action. Instead, various known and unknown factors are likely to cause our actual performance and management's actions to vary, and the results of these variances may be both material and adverse.
Business Overview
We are a commercial-stage company that develops and sells high performance water solutions to the medical and commercial markets.
In medical markets, we sell water filtration products and waterborne pathogen detection products. Our medical water filters, mostly classified as ultrafilters, are used primarily by hospitals for the prevention of infection from waterborne pathogens, such as legionella and pseudomonas, and in dialysis centers for the removal of biological contaminants from water and bicarbonate concentrate. 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. Marketed under both the Nephros and AETHER brands, our products are marketed primarily to the food service, hospitality, convenience store, and health care markets.
Our pathogen detection systems are portable, near real-time systems designed to provide actionable data for infection control teams, biomedical engineers in dialysis clinics, and water quality teams in building management organizations.
We also have a subsidiary,
We were founded in 1997 by healthcare professionals affiliated with
COVID-19 Pandemic
Most customers and prospects - including healthcare, hospitality, and food and beverage- have begun to re-open to our sales activity as the country has progressed through the COVID-19 pandemic. Furthermore, our filter emergency response business has begun to normalize. We expect the pandemic to continue its overall trend toward abatement in the coming months, but recent infection increases from new viral variants such as the Delta variant may interrupt that abatement for a period of time.
During the pandemic, we maintained full operations, supporting our customers and strategic partners, with no significant interruptions in supply chain or service capabilities.
We believe that, as the COVID-19 pandemic generally subsides, we may experience a net positive impact on demand for our products, due especially to increased global awareness of infectious pathogens and the serious problems they cause. Specifically, we expect that:
? Purchase decisions for infection control filtration that had been deferred,
both in new and existing customer organizations, may be re-prioritized.
? Demand for our pathogen detection products may increase as unoccupied
buildings, including office buildings and hotels, are readied for
re-occupation. Extended periods of low, or no, water flow through building
piping creates opportunities for biofilm propagation - a problem our strategic
partners are trained to eradicate.
? Demand for our commercial filtration products may increase as business returns
to hotels, casinos, and restaurants.
22 Our Products Water Filtration Products
We develop and sell water filtration products used in both medical and commercial applications. Our water filtration products employ multiple filtration technologies, as described below.
In medical markets, our primary filtration mechanism is to pass liquids through the pores of polysulfone hollow fiber. Our filters' pores are significantly smaller than those of competing products, resulting in highly effective elimination of waterborne pathogens, including legionella bacteria (the cause of Legionnaires disease) and viruses, which are not eliminated by most other microbiological filters on the market. Additionally, the fiber structure and pore density in our hollow fiber enables significantly higher flow rates than in other polysulfone hollow fiber.
Our primary sales strategy in medical markets is to sell through value-added resellers ("VARs"). Leveraging VARs has enabled us to expand rapidly our access to target customers without significant sales staff expansion. In addition, while we are currently focused in medical markets, the VARs that support these customers also support a wide variety of commercial and industrial customers. We believe that our VAR relationships will facilitate growth in filter sales outside of the medical industry.
In commercial markets, we develop and sell our Nephros- and AETHER-branded filters, for which carbon-based absorption is the primary filtration mechanism. Aether 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.
Our Aether filter offerings have the potential to generate accretive revenue growth in at least three ways. First, we expect the business to continue its organic growth. Second, cross-selling opportunities are generated by offering taste/odor-focused products to the medical markets, as well as pathogen-focused filtration to the commercial markets. Finally, as part of the more substantial Nephros organization, Aether may be able to compete for larger filtration contracts than may have been available to it as a smaller, independent firm. In the year since we acquired the AETHER brand, we have seen some promising results in each of these strategies, but it is still too early to judge the likelihood or magnitude of their long-term success.
In commercial markets, our model combines both direct and indirect sales. Our sales staff have sold products directly to a number of convenience stores, hotels, casinos, and restaurants. We are also pursuing large corporate contracts through partnerships.
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. The filters produce water that is
suitable for wound cleansing, cleaning of equipment used in medical procedures,
and washing of surgeons' hands.
? Dialysis Centers: Filtration of water or bicarbonate concentrate used in
hemodialysis.
? Commercial Facilities: Filtration and purification of water for consumption,
including for use in ice machines and soft drink dispensers.
? Military and Outdoor Recreation: Individual water purification devices used by
soldiers and backpackers to produce drinking water in the field, as well as
filters customized to remote water processing systems.
Hospitals and Other Healthcare Facilities. Nephros filters are a leading tool used to provide proactive protection to patients in high-risk areas (e.g., ice machines, surgical rooms, NICUs) and reactive protection to patients in broader areas during periods of water pathogen outbreaks. Our products are used in hundreds of medical facilities to aid in infection control, both proactively and reactively.
According to the
In
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We currently have FDA 510(k) clearance on the following portfolio of medical device products for use in the hospital setting to aid in infection control:
? The DSU-H and SSU-H are in-line, 0.005-micron ultrafilters that provide dual-
and single-stage protection, respectively, from waterborne pathogens. They are
primarily used to filter potable water feeding ice machines, sinks, and
medical equipment, such as endoscope washers and surgical room humidifiers.
The DSU-H has an up to 6-month product life in a typical hospital setting,
while the SSU-H has an up to 3-month life.
? The S100 is a point-of-use, 0.01-micron microfilter that provides protection
from waterborne pathogens. The S100 is primarily used to filter potable water
feeding sinks and showers. The S100 has an up to 3-month product life when
used in a hospital setting.
? The HydraGuardTM and HydraGuardTM - Flush are 0.005-micron cartridge
ultrafilters that provide single-stage protection from waterborne pathogens.
The HydraGuard ultrafilters are primarily used to filter potable water feeding
ice machines and medical equipment, such as endoscope washers and surgical
room humidifiers. 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, point-of-use, and cartridge filters, can be viewed on our website at http://www.nephros.com/infection-control/. We are not including the information on our website as a part of, nor incorporating it by reference into, this Quarterly Report on Form 10-Q.
Dialysis Centers - Water/Bicarbonate. In the dialysis water market, Nephros ultrafiltration products are among the highest performing products on the market. The DSU-D, SSU-D and the SSUmini have become the standard endotoxin filter in many portable reverse osmosis systems. The EndoPur®, our large-format ultrafilter targeted at dialysis clinic water systems, provides the smallest pore size available. Following a long pilot project at a major dialysis provider, we are now seeing growth in the use of this product. In addition, we aim to expand EndoPur's usage into heat-disinfected water systems, which will further open the market for this product.
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
Medicare is the main payer for dialysis treatment in
We currently have FDA 510(k) clearance on the following portfolio of medical device products for use in the dialysis setting to aid in bacteria, virus, and endotoxin retention:
? The DSU-D, SSU-D and SSUmini are in-line, 0.005-micron ultrafilters that
provide protection from bacteria, viruses, and endotoxins. All of these
products have an up to 12-month product life in the dialysis setting and are
used to filter water following treatment with a reverse osmosis ("RO") system,
and to filter bicarbonate concentrate. 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 EndoPur has an up to
12-month product life in the dialysis setting, and is used to filter water
following treatment with an RO system. More specifically, the EndoPur is used
primarily to filter water in large RO systems designed to provide ultrapure
water to an entire dialysis clinic. 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" configurations.
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. In addition, the recently acquired AETHER brand expands our product line to include water filtration and purification technologies that are primarily focused on improving odor and taste and on reducing scale and heavy metals from filtered water.
We purchased the AETHER brand to expedite our access to commercial markets and to expand our filtration expertise and capabilities. Our commercial market focus is in the hotel, restaurant, and convenience store markets. In the first year post-acquisition, we upgraded Aether facilities to increase production and logistics capacity, integrated Aether products into the Nephros infection control product portfolio, and initiated sales efforts with a number of large commercial customers. We have recently added to our commercial sales team and, going forward, expect to close on one or more large contracts that may result in step-change increases in commercial market revenue.
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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. 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 believe, in time, most commercial buildings will need to follow the basic requirements of ASHRAE-188: create a water management plan, perform routine testing, and establish a plan to treat the building in the event of a positive test.
As demand for water testing and microbiological filtration grows, we will be ready to deploy our expertise and solutions based on years of experience servicing the medical market. 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.
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. NanoGuard products are designed to fit a variety of existing
plumbing configurations, including 10" and 20" standard housings, and AETHER
and Everpure® manifolds. Included in the NanoGuard product line are both
conventional and flushable filters.
? The AETHER line of commercial filters, which are also sold under the Nephros
brand, provide a variety of technology solutions that improve water quality in
food service, convenience store, hospitality, and industrial applications.
AETHER filters improve water taste and odor, and reduce sediment, dirt, rust
particles and other solids, chlorine and heavy minerals, lime scale build-up,
and both particulate lead and soluble lead.
AETHER products combine effectively with NanoGuard ultrafiltration technologies to offer full-featured solutions to the commercial water market, including to existing users of Everpure filter manifolds.
Military and Outdoor Recreation. We developed our individual water treatment
device ("IWTD") in both in-line and point-of-use configurations. Our IWTD allows
a soldier in the field to derive drinking water from any freshwater source. This
enables the soldier to remain hydrated, to help maintain mission effectiveness
and unit readiness, and to extend mission reach. Our IWTD has been validated by
the military to meet the NSF Protocol P248 standard. It has also been approved
by the
In
Pathogen Detection Systems
Pathogen Detection in Infection Control. We recently expanded our portfolio of solutions with the introduction of our PluraPath™ pathogen detection system, which we believe represents a significant growth opportunity for Nephros.
We developed the PluraPath pathogen detection system to provide real-time data to infection control teams executing their water management plans. We integrated our ultrafilter technology with emerging, quantitative polymerase chain reaction (qPCR) technology and real-time analytics. We chose a portable, open-source qPCR platform that allows us to parallel-processes up to 15 different bacteria and virus assays. We worked with industry experts to select and develop DNA- and RNA-based assays that could meet our goals of providing quantitative precision within one hour. We also developed a mobile application to extract and process the data real-time. Furthermore, we designed the system so that anyone can perform qPCR testing, not just someone with training in microbiological laboratory techniques.
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With the PluraPath system, it will be possible to map and track the changes to levels of multiple bacterial and viral pathogens in a building's water system on a real-time basis, at cost levels equivalent to assays that currently take 24-72 hours or more and typically provide data on only a single pathogen. Using PluraPath, we expect that infection control teams will be able to quickly assess approximate levels of a broad array of pathogens in their water systems, and optimally focus their secondary disinfection efforts and point-of-use filtration; services and products offered by our strategic partners.
The PluraPath system does not replace culture-based assays, which are the current regulatory requirements for confirmation in testing for waterborne pathogens. Rather, we believe PluraPath will become a valuable tool in the arsenal of defense, permitting faster decision making about a larger target population of pathogens. Our objective is to provide our customers and strategic partners with a user-friendly system that delivers dependable, actionable data to infection control teams in less than an hour.
Pathogen Detection in Dialysis Facilities. We have also been investigating pathogen detection efforts in the dialysis space. The LAL (limulus amebocyte lysate) test is a dialysis industry standard assay that identifies the presence of potential endotoxins, agnostic to the source species. The source of endotoxins are gram-negative bacteria. LAL testing routinely takes 48-72 hours to provide results from the time of shipping the sample to a central laboratory. When dialysis clinics have urgent contamination or severely elevated endotoxin issues, they may have to shut down for extended periods of time creating enormous logistical issues for patients and increasing the cost of care.
To provide a real-time solution for this testing paradigm, we announced the
DialyPath™ pathogen detection and endotoxin estimation system in
Facility-Wide Pathogen Detection. Bacterial contaminants in water systems can
originate from thousands of different bacterial families. The technology now
exists to map the water system biome in real-time, on-site, using an enhanced
form of the portable PluraPath system and a bioinformatics database. The
SequaPath system provides the capability to screen water for over 20,000
different bacterial genera (families), including genera of the 40+ pathogenic
bacteria listed by the
The SequaPath technology was used in 2020 to perform an academic study that found far more bacteria in buildings unoccupied during the COVID-19 pandemic than in occupied buildings. The potential for building biome mapping is enormous. We are developing the technology, processes, and procedures to perform as many as 96 tests in a single run. SequaPath is currently available as a service offering.
While this service could be of value to the management of any water system in any building in any part of the world, we will first focus on the hospital customers of our strategic partners. Once proven in the hospital space, we believe that SequaPath has the potential to shift the building water testing paradigm across multiple markets and geographies.
On
Specialty Renal Products: HDF System
Introduction to HDF
The current standard of care in
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Hemodiafiltration ("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. Though not widely used in
? Enhanced clearance of middle and large molecular weight toxins ? Improved survival - up to a 35% reduction in mortality risk ? Reduction in the occurrence of dialysis-related amyloidosis ? Reduction in inflammation ? Reduction in medication such as EPO and phosphate binders ? Improved patient quality of life ? Reduction in number of hospitalizations and overall length of stay
However, like HD, HDF can be resource-intensive and can require a significant amount of time to deliver one course of treatment.
Nephros HDF Background
Over the course of our history, we originally developed a medical device that enabled a standard HD machine to perform HDF. We refer to our approach as an on-line mid-dilution hemodiafiltration ("mid-dilution HDF") system. Our original solution included an OLp?r H2H Hemodiafiltration Module ("H2H Module"), an OLp?r MD 220 Hemodiafilter ("HDF Filter") and an H2H Substitution Filter ("Dialysate Filter").
Our H2H Module attaches to a standard HD machine to perform on-line HDF therapy. The HD machine controls and monitors the basic treatment functions, as it would normally when providing HD therapy. The H2H Module is a free-standing, movable device that is placed next to either side of an HD machine. The H2H Module connects to the clinic's water supply, drain, and electricity.
The H2H Module utilizes the HDF Filter, and is very similar to a typical hollow fiber dialyzer assembled with a single hollow fiber bundle made with a high-flux (or high-permeability) membrane. The fiber bundle is separated into two discrete, but serially connected, blood paths. Dialysate flows in one direction that is counter-current to blood flow in Stage 1 and co-current to blood flow in Stage 2.
In addition to the HDF Filter, the H2H Module also utilizes a Dialysate Filter during patient treatment. The Dialysate Filter is a hollow fiber, ultrafilter device that consists of two sequential (redundant) ultrafiltration stages in a single housing. During on-line HDF with the H2H Module, fresh dialysate is redirected by the H2H Module's hydraulic (substitution) pump and passed through this dual-stage ultrafilter before being infused as substitution fluid into the extracorporeal circuit. Providing ultrapure dialysate is crucial for the success of on-line HDF treatment.
Our original HDF system conformed with current ANSI/AAMI/ISO standards and was
cleared by the
Over the last four years,
Over the past two years, we have dramatically simplified and redesigned our HDF device. Our updates have made the system significantly easier to use. By shifting from a reusable substitution ultrafilter to a disposable substitution ultrafilter, we were able to simplify the set-up process and substantially reduce the time required between patient treatments - two of the key complaints from users of our first-generation system. We used real-time user feedback to aid in the fine-tuning of our changes to the system that impacted usability. We believe our second-generation HDF system will meet the needs of both clinicians and patients.
In 2018, we spun-off the development of the HDF device into SRP. We raised
We submitted the second-generation HDF system for FDA clearance in
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While a number of studies have been performed in
Critical Accounting Policies
For the nine-month period ended
Recent Accounting Pronouncements
We are subject to recently issued accounting standards, accounting guidance and disclosure requirements. For a description of these new accounting standards, see Note 2, "Basis of Presentation and Liquidity," of the Notes to our Unaudited Condensed Consolidated Interim Financial Statements contained in Item 1 of Part I of this Quarterly Report on Form 10-Q, which is incorporated herein by reference.
Results of Operations
Fluctuations in Operating Results
Our results of operations have fluctuated significantly from period to period in the past and are likely to continue to do so in the future. We anticipate that our annual results of operations will be impacted for the foreseeable future by several factors, including the progress and timing of expenditures related to our research and development efforts, marketing expenses related to product launches, timing of regulatory approval of our various products and market acceptance of our products.
Three Months Ended
The following table sets forth our summarized, consolidated results of operations for the three months endedSeptember 30, 2021 and 2020 (in thousands, except percentages): $ % Increase Increase 2021 2020 (Decrease) (Decrease) Total net revenues$ 2,637 $ 2,121 $ 516 24 % Cost of goods sold 1,225 896 329 37 % Gross margin 1,412 1,225 187 15 % Gross margin % 54 % 58 % - (4 )% Research and development expenses 632 751 (119 ) (16 )% Depreciation and amortization expense 50 49 1 2 % Selling, general and administrative expenses 1,892 1,544 348 23 % Change in fair value of contingent consideration - (187 ) (187 ) (100 )% Loss from operations (1,162 ) (932 ) 230 25 % Interest expense (10 ) (22 ) (12 ) (55 )% Interest income 2 3 (1 ) (33 )% Other income (expense), net 8 (61 ) 69 113 % Net loss (1,162 ) (1,012 ) 150 15 % Less: Undeclared deemed dividend attributable to noncontrolling interest (60 ) (60 ) - - Net loss attributable to Nephros, Inc.$ (1,222 ) $ (1,072 ) $ 150 14 % 28
Net Revenues. Our business is reported in three reportable segments: Water
Filtration, Pathogen Detection and Renal Products. Our net revenues in each of
these segments for the three months ended
$ %
Increase Increase
2021 2020 (Decrease) (Decrease)
Water Filtration $ 2,578 $ 2,121 $ 457 22 %
Pathogen Detection 59 - 59 100 %
Renal Products - - - -
Total $ 2,637 $ 2,121 $ 516 24 %
Total net revenues in the Water Filtration segment increased 22% as a result of increased medical device filter sales.
Total net revenues in the Pathogen Detection segment increased 100% reflecting early receptivity of the market to our pathogen detection products.
Gross Profit Margin
%
Increase
2021 2020 (Decrease)
Water Filtration 53 % 58 % (5 )%
Pathogen Detection 88 % - % 88 %
Renal Products - % - % -%
Total 54 % 58 % (4 )%
Consolidated gross margin was approximately 54% for the three months ended
Research and Development Expenses
Research and development expenses by segment for the three months ended
$ %
Increase Increase
2021 2020 (Decrease) (Decrease)
Water Filtration $ 363 $ 359 $ 4 1 %
Pathogen Detection 237 49 188 384 %
Renal Products 32 343 (311 ) (91 )%
Total $ 632 $ 751 $ (119 ) (16 )%
Consolidated research and development expenses decreased
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Selling, General and Administrative Expenses
Selling, general and administrative expenses by segment for the three months endedSeptember 30, 2021 and 2020 (in thousands, except percentages) were as follows: $ % Increase Increase 2021 2020 (Decrease) (Decrease) Water Filtration$ 1,703 $ 1,317 $ 386 29 % Pathogen Detection 175 116 59 51 % Renal Products 14 111 (97 ) (87 )% Total$ 1,892 $ 1,544 $ 348 23 %
Consolidated selling, general and administrative expenses increased
Interest Expense
Interest expense was approximately
Other Income (Expense), net
Other income of approximately
Nine Months Ended
The following table sets forth our summarized, consolidated results of operations for the nine months endedSeptember 30, 2021 and 2020 (in thousands, except percentages): $ % Increase Increase 2021 2020 (Decrease) (Decrease) Total net revenues$ 7,639 $ 6,227 $ 1,412 23 % Cost of goods sold 3,365 2,616 749 29 % Gross margin 4,274 3,611 663 18 % Gross margin % 56 % 58 % - (2 )% Research and development expenses 1,675 2,150 (475 ) (22 )% Depreciation and amortization expense 151 142 9 6 % Selling, general and administrative expenses 5,745 5,104 641 13 % Change in fair value of contingent consideration - (229 ) (229 ) (100 )% Loss from operations (3,297 ) (3,556 ) (259 ) (7 )% Interest expense (34 ) (95 ) (61 ) (64 )% Interest income 8 8 - - Forgiveness of PPP Loan 482 - 482 100 % Other income (expense), net 16 (124 ) 140 113 % Net loss (2,825 ) (3,767 ) (942 ) (25 )% Less: Undeclared deemed dividend attributable to noncontrolling interest (179 ) (179 ) - - Net loss attributable to Nephros, Inc.$ (3,004 ) $ (3,946 ) $ (942 ) (24 )% 30
Net Revenues. Our business is reported in three reportable segments: Water
Filtration, Pathogen Detection and Renal Products. Our net revenues in each of
these segments for the nine months ended
$ %
Increase Increase
2021 2020 (Decrease) (Decrease)
Water Filtration $ 7,504 $ 6,199 $ 1,305 21 %
Pathogen Detection 135 28 107 382 %
Renal Products - - - -
Total $ 7,639 $ 6,227 $ 1,412 23 %
Total net revenues in the Water Filtration segment increased 21% as a result of increased medical device filter sales.
The increase in total net revenues in the Pathogen Detection segment reflects early receptivity of the market to our pathogen detection products.
Gross Profit Margin
%
Increase
2021 2020 (Decrease)
Water Filtration 55 % 58 % (3 )%
Pathogen Detection 83 % 51 % 33 %
Renal Products - % - % %
Total 56 % 58 % (2 )%
Consolidated gross margin was approximately 56% for the nine months ended
Research and Development Expenses
Research and development expenses by segment for the nine months ended
$ %
Increase Increase
2021 2020 (Decrease) (Decrease)
Water Filtration $ 961 $ 1,014 $ (53 ) (5 )%
Pathogen Detection 505 206 299 145 %
Renal Products 209 930 (721 ) (78 )%
Total $ 1,675 $ 2,150 $ (475 ) (22 )%
Consolidated research and development expenses decreased
Selling, General and Administrative Expenses
Selling, general and administrative expenses by segment for the nine months endedSeptember 30, 2021 and 2020 (in thousands, except percentages) were as follows: $ % Increase Increase 2021 2020 (Decrease) (Decrease) Water Filtration$ 5,314 $ 4,381 $ 933 21 % Pathogen Detection 372 377 (5 ) (1 )% Renal Products 59 346 (287 ) (83 )% Total$ 5,745 $ 5,104 $ 641 13 % 31
Consolidated selling, general and administrative expenses increased
Interest Expense
Interest expense was approximately
Extinguishment of PPP loan
Our outstanding PPP loan was forgiven in
Other Income (Expense), net
Other income was approximately
Liquidity and Capital Resources
The following table summarizes our liquidity and capital resources as of
September 30, December 31,
Liquidity and Capital Resources 2021 2020
Cash and cash equivalents $ 7,350 $ 8,249
Other current assets 6,271 6,905
Working capital 11,798 13,829
Stockholders' equity 15,330 15,573
At
Based on cash that is available for our operations and projections of our future operations, we believe that our cash resources 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 Quarterly Report on Form 10-Q. 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, there could be a significant reduction in liquidity due to our possible inability to cut costs sufficiently.
Our future liquidity sources and requirements will depend on many other factors, including:
? the market acceptance of our products, and our ability to effectively and
efficiently produce and market our products;
? the continued progress in, and the costs of, clinical studies and other
research and development programs;
? the costs involved in filing and enforcing patent claims and the status of
competitive products; and
? the cost of litigation, including potential patent litigation and any other
actual or threatened litigation.
We expect to put our current capital resources to the following uses:
? the development, marketing, and sales of our water-filtration and water
diagnostics product; and
? working capital purposes.
At
Net cash used in operating activities was
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Net cash used in investing activities was approximately
Net cash provided by financing activities of
Net cash provided by financing activities of
Off-Balance Sheet Arrangements
We did not have any off-balance sheet arrangements as of
Forward-Looking Statements
Certain statements in this Quarterly Report on Form 10-Q constitute "forward-looking statements". Such statements include statements regarding the efficacy and intended use of our technologies under development, the timelines and strategy for bringing such products to market, the timeline for regulatory review and approval of our products, the availability of funding sources for continued development of such products, and other statements that are not historical facts, including statements which may be preceded by the words "intends," "may," "will," "plans," "expects," "anticipates," "projects," "predicts," "estimates," "aims," "believes," "hopes," "potential" or similar words. Forward-looking statements are not guaranties of future performance, are based on certain assumptions and are subject to various known and unknown risks and uncertainties, many of which are beyond our control. Actual results may differ materially from the expectations contained in the forward-looking statements. Factors that may cause such differences include, but are not limited to, the risks that:
? we face significant challenges in obtaining market acceptance of our products,
which could adversely affect our potential sales and revenues;
? product-related deaths or serious injuries or product malfunctions 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;
? we face potential liability associated with the production, marketing and sale
of our products, and the expense of defending against claims of product
liability could materially deplete our assets and generate negative publicity,
which could impair our reputation;
? to the extent our products or marketing materials are found to violate any
provisions of the
regulations, we could be subject to enforcement actions by the FDA or other
governmental agencies;
? we may not be able to obtain funding if and when needed or on terms favorable
to us in order to continue operations;
? we may not have sufficient capital to successfully implement our business plan;
? we may not be able to effectively market our products;
? we may not be able to sell our water filtration products, pathogen detection
systems or chronic renal failure therapy products at competitive prices or
profitably;
? we may encounter problems with our suppliers, manufacturers and distributors;
? we may encounter unanticipated internal control deficiencies or weaknesses or
ineffective disclosure controls and procedures;
? we may not obtain appropriate or necessary regulatory approvals to achieve our
business plan;
? products that appeared promising to us in research or clinical trials may not
demonstrate anticipated efficacy, safety or cost savings in subsequent
pre-clinical or clinical trials;
? we may not be able to secure or enforce adequate legal protection, including
patent protection, for our products;
? we may not be able to achieve sales growth in key geographic markets; and
? the effects of the Covid-19 pandemic may be more severe than we currently
anticipate.
More detailed information about us and the risk factors that may affect the
realization of forward-looking statements, including the forward-looking
statements in this Quarterly Report on Form 10-Q, is set forth in our filings
with the
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