these statements represent projections , beliefs and expectations based on current circumstances and conditions and in light of recent events and trends , and you should not construe these statements 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 . a list of the known material factors that may cause our results to vary , or may cause management to deviate from its current plans and expectations , is included in item 1a “ risk factors . ” the following discussion should also be read in conjunction with the consolidated financial statements and notes included herein . 37 going concern our independent registered public accounting firm has included an explanatory paragraph in their report on our financial statements included in this form 10-k which expressed doubt as to our ability to continue as a going concern . the accompanying financial statements have been prepared assuming that we will continue as a going concern , however , there can be no assurance that we will be able to do so . our recurring losses and difficulty in generating sufficient cash flow to meet our obligations and sustain our operations raise substantial doubt about our ability to continue as a going concern , and our consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty . business overview we are a medical device company developing and marketing filtration products for therapeutic applications , infection control , and water purification . our hemodiafiltration , or hdf , system is designed to improve the quality of life for the end-stage renal disease , or esrd , patient while addressing the critical financial and clinical needs of the care provider . esrd is a disease state characterized by the irreversible loss of kidney function . the nephros hdf system removes a range of harmful substances more effectively , and with greater capacity , than existing esrd treatment methods , particularly with respect to substances known collectively as “ middle molecules . ” these molecules have been found to contribute to such conditions as dialysis-related amyloidosis , carpal tunnel syndrome , degenerative bone disease and , ultimately , mortality in the esrd patient . nephros esrd products are sold and distributed throughout europe . we currently have three products in various stages of development in the hdf modality to deliver improved therapy to esrd patients : olpur mdhdf filter series ( which we sell in various countries in europe and currently consists of our md190 and md220 diafilters ) ; to our knowledge , it is the only filter designed expressly for hdf therapy and employs our proprietary mid-dilution diafiltration technology ; olpur h 2 h , our add-on module designed to allow the most common types of hemodialysis machines to be used for hdf therapy ; and olpur ns2000 system , our stand-alone hdf machine and associated filter technology . we have also developed our olpur hd 190 high-flux dialyzer cartridge , which incorporates the same materials as our olpur md series but does not employ our proprietary mid-dilution diafiltration technology . our olpur hd190 was designed for use with either hemodialysis or hemodiafiltration machines , and received its approval from the u.s. food and drug administration , or fda , under section 510 ( k ) of the food , drug and cosmetic act , or the fdc act , in june 2005. in january 2006 , we introduced our new dual stage ultrafilter , or dsu , water filtration system . our dsu represents a new and complementary product line to our existing esrd therapy business . the dsu incorporates our unique and proprietary dual stage filter architecture and is , to our knowledge , the only water filter that allows the user to sight-verify that the filter is properly performing its cleansing function . our research and development work on the olpur h 2 h and md mid-dilution filter technologies for esrd therapy provided the foundations for a proprietary multi-stage water filter that we believe is cost effective , extremely reliable , and long-lasting . the dsu is designed to remove a broad range of bacteria , viral agents and toxic substances , including salmonella , hepatitis , cholera , hiv , ebola virus , ricin toxin , legionella , fungi and e-coli . with over 5,800 registered hospitals in the united states alone ( as reported by the american hospital association in fast facts of january 3 , 2012 ) , we believe the hospital shower and faucet market can offer us a valuable opportunity as a first step in water filtration . the following trends , events and uncertainties may have a material impact on our potential sales , revenue and income from operations : 1 ) receiving regulatory approval for each of our esrd therapy products and our dsu product in our target territories ; 2 ) the completion and success of additional clinical trials ; 3 ) the market acceptance of hdf therapy in the united states and of our technologies and products in each of our target markets ; 4 ) our ability to effectively and efficiently manufacture , market and distribute our products ; 5 ) our ability to sell our products at competitive prices which exceed our per unit costs ; 6 ) the consolidation of dialysis clinics into larger clinical groups ; and 38 7 ) the current u.s. healthcare plan is to bundle reimbursement for dialysis treatmentwhich may force dialysis clinics to change therapies due to financial reasons . story_separator_special_tag the repayment of the $ 500,000 note , plus all accrued interest thereon , issued to lambda investors , llc , the payment of an 8 % sourcing/transaction fee ( $ 40,000 ) in respect of the note and an aggregate of $ 100,000 for reimbursement of lambda investors ' legal fees incurred in connection with the loan and the rights offering . on march 11 , 2011 , we effected a reverse stock split , in which every 20 shares of our common stock issued and outstanding immediately prior to the effective time , which was 5:00 p.m. on march 11 , 2011 , were converted into one share of common stock . fractional shares were not issued and stockholders who otherwise would have been entitled to receive a fractional share as a result of the reverse stock split received an amount in cash equal to $ 0.04 per pre-split share for such fractional interests . the number of shares of common stock issued and outstanding was reduced from approximately 201,300,000 pre-split to approximately 10,100,000 post-split . the reverse stock split was effected in connection with the rights offering and private placement . at december 31 , 2011 , we had an accumulated deficit of $ 94,268,000 , and we expect to incur additional losses in the foreseeable future at least until such time , if ever , that we are able to increase product sales or licensing revenue . we have financed our operations since inception primarily through the private placements of equity and debt securities and our initial public offering in september 2004 , from licensing revenue received from asahi kasei medical co. , ltd. ( “ asahi ” ) in march 2005 , a private placement of convertible debenture in june 2006 , a private investment in public equity in september 2007 , a private placement in july 2009 , and the october 2010 issuance of a senior secured note . in march 2011 , the rights offering and concurrent private placement to lambda investors provided additional capital . on june 27 , 2011 , the company entered into a license agreement , effective july 1 , 2011 , with bellco , as licensee . this agreement provides the company with payments of 500,000 , 750,000 , and 600,000 on july 1 , 2011 , january 15 , 2012 and january 15 , 2013 , respectively . the first two fixed payments have been received . the remaining fixed payment of 600,000 or approximately $ 778,000 , will take place in january 2013. beginning on january 1 , 2015 through and including december 31 , 2016 , bellco will pay to nephros a royalty based on the number of units of products sold per year in the territory as follows : for the first 103,000 units sold , 4.50 per unit ; thereafter , 4.00 per unit . anticipated payments from this license agreement will be a positive source of cash flow to the company . as of the date of this report , we estimate that these cash flows would allow us to keep operating only into the second quarter of 2013. our cash flow currently is not , and historically has not been , sufficient to meet our obligations and commitments . we must seek and obtain additional financing to fund our operations . if we can not raise sufficient capital , we will be forced to curtail our planned activities and operations or cease operations entirely and you will lose all of your investment in our company . there can be no assurance that we could raise sufficient capital on a timely basis or on satisfactory terms or at all . net cash used in operating activities was approximately $ 1,296,000 for the year ended december 31 , 2011 compared to approximately $ 1,292,000 for the year ended december 31 , 2010. the most significant items contributing to this net increase of approximately $ 4,000 in cash used in operating activities during the year ended december 31 , 2011 compared to the year ended december 31 , 2010 are highlighted below : · during 2011 , our net loss increased by approximately $ 427,000 , compared to 2010 ; · during 2011 , depreciation expense decreased by approximately $ 38,000 , compared to 2010 ; · our accounts receivable increased by approximately $ 832,000 during 2011 compared to 2010 ; 44 · our long-term assets increased by approximately $ 778,000 during 2011 compared to 2010 ; · our accounts payable and accrued expenses decreased by approximately $ 357,000 in the aggregate during 2011 compared to 2010 ; · during 2011 , we recorded amortization of debt issuance costs of $ 40,000 , whereas amortization of debt issuance costs in 2010 were $ 50,000 ; · during 2011 , we recorded non-cash interest of $ 12,000 , whereas non-cash interest was $ 15,000 in 2010 ; and · our inventory decreased by approximately $ 295,000 during 2011 compared to an increase of approximately $ 98,000 during 2010. offsetting the above changes are the following items : · during 2011 , our stock-based compensation expense , a non-cash expense , increased by approximately $ 164,000 compared to 2010 ; · during 2011 , our deferred revenue increased by approximately $ 2,061,000 compared to 2010 ; · our prepaid expenses and other assets decreased by approximately $ 76,000 during 2011 compared to 2010 ; and · during 2011 , we recorded an inventory reserve of $ 200,000 , whereas there was no inventory reserve in 2010. there was no cash used or provided by investing activities during the year ended december 31 , 2011. net cash used by investing activities was $ 30,000 for the year ended december 31 , 2010 , which was for the purchase of equipment . net cash provided by financing activities was approximately $ 2,723,000 for the year ended december 31 , 2011 , resulting from the issuance of stock and

liquidity and capital resources our future liquidity sources and requirements will depend on many factors , including : · the cost , timing and results of our efforts to obtain regulatory approval of our products , including specifically our 510 ( k ) application for our hdf system ; · the availability of additional financing , through the sale of equity securities or otherwise , on commercially reasonable terms or at all ; · the market acceptance of our products , and our ability to effectively and efficiently produce and market our products ; · the timing and costs associated with obtaining united states regulatory approval or the conformité européene , or ce , mark , which demonstrates compliance with the relevant european union requirements and is a regulatory prerequisite for selling our esrd therapy products in the european union and certain other countries that recognize ce marking ( for products other than our olpur mdhdf filter series , for which the ce mark was obtained in july 2003 ) ; · 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 : · for the marketing and sales of our products ; · to obtain appropriate regulatory approvals and expand our research and development with respect to our esrd therapy products ; · to continue our esrd therapy product engineering ; · to pursue business opportunities with respect to our dsu water-filtration product ; and · for working capital purposes . 42 in response to liquidity issues experienced with our auction rate securities , and in order to facilitate greater liquidity in our short-term investments , on march 27 , 2008 , our board of directors adopted an investment , risk management and accounting policy . such policy limits the types of instruments or securities in which we may invest our excess funds in the future to : u.s. treasury securities ; certificates of deposit issued by money center banks ; money funds by money center banks ; repurchase agreements ; and eurodollar certificates of deposit issued by money center banks .


 Write a concise suspicious activity report of the following text delimited by triple backquotes. Return your response as a formal report which covers the key points highlighting the location,dates,entity names and account holder information in chronological order of the text.
     ```liquidity and capital resources our future liquidity sources and requirements will depend on many factors , including : · the cost , timing and results of our efforts to obtain regulatory approval of our products , including specifically our 510 ( k ) application for our hdf system ; · the availability of additional financing , through the sale of equity securities or otherwise , on commercially reasonable terms or at all ; · the market acceptance of our products , and our ability to effectively and efficiently produce and market our products ; · the timing and costs associated with obtaining united states regulatory approval or the conformité européene , or ce , mark , which demonstrates compliance with the relevant european union requirements and is a regulatory prerequisite for selling our esrd therapy products in the european union and certain other countries that recognize ce marking ( for products other than our olpur mdhdf filter series , for which the ce mark was obtained in july 2003 ) ; · 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 : · for the marketing and sales of our products ; · to obtain appropriate regulatory approvals and expand our research and development with respect to our esrd therapy products ; · to continue our esrd therapy product engineering ; · to pursue business opportunities with respect to our dsu water-filtration product ; and · for working capital purposes . 42 in response to liquidity issues experienced with our auction rate securities , and in order to facilitate greater liquidity in our short-term investments , on march 27 , 2008 , our board of directors adopted an investment , risk management and accounting policy . such policy limits the types of instruments or securities in which we may invest our excess funds in the future to : u.s. treasury securities ; certificates of deposit issued by money center banks ; money funds by money center banks ; repurchase agreements ; and eurodollar certificates of deposit issued by money center banks .
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 Suspicious Activity Report : these statements represent projections , beliefs and expectations based on current circumstances and conditions and in light of recent events and trends , and you should not construe these statements 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 . a list of the known material factors that may cause our results to vary , or may cause management to deviate from its current plans and expectations , is included in item 1a “ risk factors . ” the following discussion should also be read in conjunction with the consolidated financial statements and notes included herein . 37 going concern our independent registered public accounting firm has included an explanatory paragraph in their report on our financial statements included in this form 10-k which expressed doubt as to our ability to continue as a going concern . the accompanying financial statements have been prepared assuming that we will continue as a going concern , however , there can be no assurance that we will be able to do so . our recurring losses and difficulty in generating sufficient cash flow to meet our obligations and sustain our operations raise substantial doubt about our ability to continue as a going concern , and our consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty . business overview we are a medical device company developing and marketing filtration products for therapeutic applications , infection control , and water purification . our hemodiafiltration , or hdf , system is designed to improve the quality of life for the end-stage renal disease , or esrd , patient while addressing the critical financial and clinical needs of the care provider . esrd is a disease state characterized by the irreversible loss of kidney function . the nephros hdf system removes a range of harmful substances more effectively , and with greater capacity , than existing esrd treatment methods , particularly with respect to substances known collectively as “ middle molecules . ” these molecules have been found to contribute to such conditions as dialysis-related amyloidosis , carpal tunnel syndrome , degenerative bone disease and , ultimately , mortality in the esrd patient . nephros esrd products are sold and distributed throughout europe . we currently have three products in various stages of development in the hdf modality to deliver improved therapy to esrd patients : olpur mdhdf filter series ( which we sell in various countries in europe and currently consists of our md190 and md220 diafilters ) ; to our knowledge , it is the only filter designed expressly for hdf therapy and employs our proprietary mid-dilution diafiltration technology ; olpur h 2 h , our add-on module designed to allow the most common types of hemodialysis machines to be used for hdf therapy ; and olpur ns2000 system , our stand-alone hdf machine and associated filter technology . we have also developed our olpur hd 190 high-flux dialyzer cartridge , which incorporates the same materials as our olpur md series but does not employ our proprietary mid-dilution diafiltration technology . our olpur hd190 was designed for use with either hemodialysis or hemodiafiltration machines , and received its approval from the u.s. food and drug administration , or fda , under section 510 ( k ) of the food , drug and cosmetic act , or the fdc act , in june 2005. in january 2006 , we introduced our new dual stage ultrafilter , or dsu , water filtration system . our dsu represents a new and complementary product line to our existing esrd therapy business . the dsu incorporates our unique and proprietary dual stage filter architecture and is , to our knowledge , the only water filter that allows the user to sight-verify that the filter is properly performing its cleansing function . our research and development work on the olpur h 2 h and md mid-dilution filter technologies for esrd therapy provided the foundations for a proprietary multi-stage water filter that we believe is cost effective , extremely reliable , and long-lasting . the dsu is designed to remove a broad range of bacteria , viral agents and toxic substances , including salmonella , hepatitis , cholera , hiv , ebola virus , ricin toxin , legionella , fungi and e-coli . with over 5,800 registered hospitals in the united states alone ( as reported by the american hospital association in fast facts of january 3 , 2012 ) , we believe the hospital shower and faucet market can offer us a valuable opportunity as a first step in water filtration . the following trends , events and uncertainties may have a material impact on our potential sales , revenue and income from operations : 1 ) receiving regulatory approval for each of our esrd therapy products and our dsu product in our target territories ; 2 ) the completion and success of additional clinical trials ; 3 ) the market acceptance of hdf therapy in the united states and of our technologies and products in each of our target markets ; 4 ) our ability to effectively and efficiently manufacture , market and distribute our products ; 5 ) our ability to sell our products at competitive prices which exceed our per unit costs ; 6 ) the consolidation of dialysis clinics into larger clinical groups ; and 38 7 ) the current u.s. healthcare plan is to bundle reimbursement for dialysis treatmentwhich may force dialysis clinics to change therapies due to financial reasons . story_separator_special_tag the repayment of the $ 500,000 note , plus all accrued interest thereon , issued to lambda investors , llc , the payment of an 8 % sourcing/transaction fee ( $ 40,000 ) in respect of the note and an aggregate of $ 100,000 for reimbursement of lambda investors ' legal fees incurred in connection with the loan and the rights offering . on march 11 , 2011 , we effected a reverse stock split , in which every 20 shares of our common stock issued and outstanding immediately prior to the effective time , which was 5:00 p.m. on march 11 , 2011 , were converted into one share of common stock . fractional shares were not issued and stockholders who otherwise would have been entitled to receive a fractional share as a result of the reverse stock split received an amount in cash equal to $ 0.04 per pre-split share for such fractional interests . the number of shares of common stock issued and outstanding was reduced from approximately 201,300,000 pre-split to approximately 10,100,000 post-split . the reverse stock split was effected in connection with the rights offering and private placement . at december 31 , 2011 , we had an accumulated deficit of $ 94,268,000 , and we expect to incur additional losses in the foreseeable future at least until such time , if ever , that we are able to increase product sales or licensing revenue . we have financed our operations since inception primarily through the private placements of equity and debt securities and our initial public offering in september 2004 , from licensing revenue received from asahi kasei medical co. , ltd. ( “ asahi ” ) in march 2005 , a private placement of convertible debenture in june 2006 , a private investment in public equity in september 2007 , a private placement in july 2009 , and the october 2010 issuance of a senior secured note . in march 2011 , the rights offering and concurrent private placement to lambda investors provided additional capital . on june 27 , 2011 , the company entered into a license agreement , effective july 1 , 2011 , with bellco , as licensee . this agreement provides the company with payments of 500,000 , 750,000 , and 600,000 on july 1 , 2011 , january 15 , 2012 and january 15 , 2013 , respectively . the first two fixed payments have been received . the remaining fixed payment of 600,000 or approximately $ 778,000 , will take place in january 2013. beginning on january 1 , 2015 through and including december 31 , 2016 , bellco will pay to nephros a royalty based on the number of units of products sold per year in the territory as follows : for the first 103,000 units sold , 4.50 per unit ; thereafter , 4.00 per unit . anticipated payments from this license agreement will be a positive source of cash flow to the company . as of the date of this report , we estimate that these cash flows would allow us to keep operating only into the second quarter of 2013. our cash flow currently is not , and historically has not been , sufficient to meet our obligations and commitments . we must seek and obtain additional financing to fund our operations . if we can not raise sufficient capital , we will be forced to curtail our planned activities and operations or cease operations entirely and you will lose all of your investment in our company . there can be no assurance that we could raise sufficient capital on a timely basis or on satisfactory terms or at all . net cash used in operating activities was approximately $ 1,296,000 for the year ended december 31 , 2011 compared to approximately $ 1,292,000 for the year ended december 31 , 2010. the most significant items contributing to this net increase of approximately $ 4,000 in cash used in operating activities during the year ended december 31 , 2011 compared to the year ended december 31 , 2010 are highlighted below : · during 2011 , our net loss increased by approximately $ 427,000 , compared to 2010 ; · during 2011 , depreciation expense decreased by approximately $ 38,000 , compared to 2010 ; · our accounts receivable increased by approximately $ 832,000 during 2011 compared to 2010 ; 44 · our long-term assets increased by approximately $ 778,000 during 2011 compared to 2010 ; · our accounts payable and accrued expenses decreased by approximately $ 357,000 in the aggregate during 2011 compared to 2010 ; · during 2011 , we recorded amortization of debt issuance costs of $ 40,000 , whereas amortization of debt issuance costs in 2010 were $ 50,000 ; · during 2011 , we recorded non-cash interest of $ 12,000 , whereas non-cash interest was $ 15,000 in 2010 ; and · our inventory decreased by approximately $ 295,000 during 2011 compared to an increase of approximately $ 98,000 during 2010. offsetting the above changes are the following items : · during 2011 , our stock-based compensation expense , a non-cash expense , increased by approximately $ 164,000 compared to 2010 ; · during 2011 , our deferred revenue increased by approximately $ 2,061,000 compared to 2010 ; · our prepaid expenses and other assets decreased by approximately $ 76,000 during 2011 compared to 2010 ; and · during 2011 , we recorded an inventory reserve of $ 200,000 , whereas there was no inventory reserve in 2010. there was no cash used or provided by investing activities during the year ended december 31 , 2011. net cash used by investing activities was $ 30,000 for the year ended december 31 , 2010 , which was for the purchase of equipment . net cash provided by financing activities was approximately $ 2,723,000 for the year ended december 31 , 2011 , resulting from the issuance of stock and

