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 . 23 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 nephros is a commercial stage medical device company that develops and sells high performance liquid purification filters . our filters , which we call ultrafilters , are primarily used in dialysis centers and healthcare facilities for the production of ultrapure water and bicarbonate . because our ultrafilters capture contaminants as small as 0.005 microns in size , they eliminate a wide variety of bacteria , viruses , fungi , parasites , and endotoxins harmful to humans . all of our ultrafilters use proprietary hollow fiber technology . we believe the hollow fiber design allows our ultrafilters to be the only commercially available filters for healthcare applications that optimize the three elements critical to filter performance : · filtration – as low as 0.005 microns · flow rate – minimal disruption · filter life – up to 12 months by comparison , competitive filters on the market today are typically effective only to the 0.2 micron level and are prone to clog more quickly , thus reducing their useful lives . we were founded in 1997 by healthcare professionals affiliated with columbia university medical center/new york-presbyterian hospital to develop and commercialize an alternative method to hemodialysis ( hd ) . in 2009 , we began to extend our filtration technologies to meet the demand for liquid purification in other areas , in particular water purification . we have not begun to broadly market our mid-hdf system and plan to seek a commercialization partner in the u.s. the following trends , events and uncertainties may have a material impact on our potential sales , revenue and income from operations : · the market acceptance of our products in the united states and of our technologies and products in each of our target markets ; · our ability to effectively and efficiently manufacture , market and distribute our products ; · our ability to sell our products at competitive prices which exceed our per unit costs ; · the consolidation of dialysis clinics into larger clinical groups ; and · the current u.s. healthcare plan is to bundle reimbursement for dialysis treatment which may force dialysis clinics to change therapies due to financial reasons . to the extent we are unable to succeed in accomplishing the foregoing , our sales could be lower than expected and dramatically impair our ability to generate income from operations . recently adopted accounting pronouncements in june 2011 , the fasb issued asu no . 2011-05 , `` comprehensive income ( asc topic 220 ) : presentation of comprehensive income , `` ( `` asu 2011-05 `` ) which amends current comprehensive income guidance . this accounting update eliminates the option to present the components of other comprehensive income as part of the statement of shareholders ' equity . instead , we must report comprehensive income in either a single continuous statement of comprehensive income which contains two sections , net income and other comprehensive income , or in two separate but consecutive statements . asu 2011-05 will be effective for public companies during the interim and annual periods beginning after dec. 15 , 2011 with early adoption permitted . we adopted this guidance as of january 1 , 2012 and since this relates to presentation only , the adoption of this guidance did not have any other effect on our consolidated financial statements . 24 critical accounting policies and estimates our discussion and analysis of our financial condition and results of operations are based on our consolidated financial statements , which have been prepared in accordance with accounting principles generally accepted in the united states . the preparation of financial statements in accordance with generally accepted accounting principles in the united states requires application of management 's subjective judgments , often requiring the need to make estimates about the effect of matters that are inherently uncertain and may change in subsequent periods . our actual results may differ substantially from these estimates under different assumptions or conditions . story_separator_special_tag 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 . due to these fluctuations , we believe that the period to period comparisons of our operating results are not a good indication of our future performance . the fiscal year ended december 31 , 2012 compared to the fiscal year ended december 31 , 2011 revenues total revenues for the year ended december 31 , 2012 were approximately $ 1,807,000 compared to approximately $ 2,214,000 for the year ended december 31 , 2011. total revenues decreased approximately $ 407,000 , or 18 % as a result of decreases of approximately $ 733,000 related to our md filters in europe , $ 346,000 related to the office of naval research , whose contract ended as of march 2012 , and approximately $ 33,000 related to the steris project . these decreases were partially offset by an increase of approximately $ 315,000 related to the bellco license agreement as well as a 63 % increase in water filter sales , which increased from $ 620,000 in 2011 to $ 1,010,000 in 2012. revenues were not significantly impacted by inflation or changing prices for the years ended december 31 , 2012 or 2011. cost of goods sold cost of goods sold was approximately $ 737,000 for the year ended december 31 , 2012 compared to approximately $ 1,346,000 for the year ended december 31 , 2011. the decrease of approximately $ 609,000 or 45 % , in cost of goods sold is primarily related to a $ 583,000 reduction in cost of goods sold of our md filters in europe . additional decreases include approximately $ 208,000 related to the office of naval research , approximately $ 15,000 related to dsu sales for the year ended december 31 , 2012 compared to the same period in 2011 and a decrease of approximately $ 29,000 related to the steris project . these decreases were partially offset by an increase in cost of goods sold of approximately $ 226,000 related to filters sold to the military during the year ended december 31 , 2012 , a 100 % increase compared to the same period in 2011. cost of goods sold includes increases in inventory reserves of approximately $ 82,000 and $ 218,000 for the years ended december 31 , 2012 and 2011 , respectively . research and development research and development expenses were approximately $ 632,000 and $ 451,000 respectively , for the years ended december 31 , 2012 and december 31 , 2011. this increase of approximately $ 181,000 or 40 % is primarily due to an increase in research and development personnel related costs of approximately $ 136,000 during the year ended december 31 , 2012 compared to the year ended december 31 , 2011. depreciation and amortization expense depreciation and amortization expense was approximately $ 151,000 for the year ended december 31 , 2012 compared to approximately $ 91,000 for the year ended december 31 , 2011 , an increase of 66 % . the increase of approximately $ 60,000 is primarily due to amortization of approximately $ 142,000 related to the asset recognized in conjunction with the license and supply agreement offset partially by several assets having been fully depreciated as of year-end 2011 resulting in no depreciation expense for those assets during the year ended december 31 , 2012 . 26 selling , general and administrative expenses selling , general and administrative expenses were approximately $ 3,620,000 for the year ended december 31 , 2012 compared to approximately $ 2,636,000 for the year ended december 31 , 2011 , an increase of $ 984,000 or 37 % . the increase is primarily due to $ 489,000 of salary expense , an increase in legal expenses of approximately $ 330,000 , an increase in stock compensation expense of $ 159,000 , and $ 171,000 of travel related expenses during the year ended december 31 , 2012 compared to the year ended december 30 , 2011. these increases were partially offset by a reduction in bonus expense of approximately $ 165,000 for the year ended december 31 , 2012 compared to the year ended december 31 , 2011. interest income interest income was approximately $ 2,000 for the year ended december 31 , 2012 compared to approximately $ 4,000 for the year ended december 31 , 2011. the decrease of $ 2,000 reflects the impact of having less cash on hand in 2012 compared to 2011. interest expense interest expense for the year ended december 31 , 2012 was $ 0 compared to $ 12,000 for the year ended december 31 , 2011. interest expense for the year ended december 31 , 2011 relates to interest accrued on the $ 500,000 senior secured note issued to lambda investors llc , which was paid in march 2011. amortization of debt issuance costs we account for debt issuance costs in accordance with asc 835 , which requires that these costs be reported in the balance sheet as deferred charges and amortized over the term of the associated debt . amortization of debt issuance costs of $ 0 and $ 40,000 for the years ended december 31 , 2012 and 2011 , respectively , were associated with the senior secured note issued to lambda investors llc . the note was paid in march 2011 and these capitalized costs were fully amortized by the first quarter of 2011. other income/expense other income in the amount of approximately $ 69,000 for the year ended december 31 , 2012 was primarily due to approximately $ 55,000 arising from the sale of fully depreciated manufacturing equipment sold to medica in october 2012. in addition , approximately $ 18,000 was related to the write-offs of

liquidity and capital resources our future liquidity sources and requirements will depend on many factors , including : · receipt of scheduled payments per the bellco s.r.l . license agreement ; · 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 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 . 27 we expect to put our current capital resources to the following uses : · for the marketing and sales of our water-filtration products ; · to pursue business development opportunities with respect to our chronic renal treatment system ; and · for working capital purposes . 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 . this policy provides that our primary objectives for investments shall be the preservation of principal and achieving sufficient liquidity to meet our forecasted cash requirements . in addition , provided that such primary objectives are met , we may seek to achieve the maximum yield available under such constraints . on march 10 , 2011 we completed our rights offering and private placement that together resulted in gross proceeds of approximately $ 3.2 million to us .


 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 : · receipt of scheduled payments per the bellco s.r.l . license agreement ; · 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 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 . 27 we expect to put our current capital resources to the following uses : · for the marketing and sales of our water-filtration products ; · to pursue business development opportunities with respect to our chronic renal treatment system ; and · for working capital purposes . 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 . this policy provides that our primary objectives for investments shall be the preservation of principal and achieving sufficient liquidity to meet our forecasted cash requirements . in addition , provided that such primary objectives are met , we may seek to achieve the maximum yield available under such constraints . on march 10 , 2011 we completed our rights offering and private placement that together resulted in gross proceeds of approximately $ 3.2 million to us .
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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 . 23 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 nephros is a commercial stage medical device company that develops and sells high performance liquid purification filters . our filters , which we call ultrafilters , are primarily used in dialysis centers and healthcare facilities for the production of ultrapure water and bicarbonate . because our ultrafilters capture contaminants as small as 0.005 microns in size , they eliminate a wide variety of bacteria , viruses , fungi , parasites , and endotoxins harmful to humans . all of our ultrafilters use proprietary hollow fiber technology . we believe the hollow fiber design allows our ultrafilters to be the only commercially available filters for healthcare applications that optimize the three elements critical to filter performance : · filtration – as low as 0.005 microns · flow rate – minimal disruption · filter life – up to 12 months by comparison , competitive filters on the market today are typically effective only to the 0.2 micron level and are prone to clog more quickly , thus reducing their useful lives . we were founded in 1997 by healthcare professionals affiliated with columbia university medical center/new york-presbyterian hospital to develop and commercialize an alternative method to hemodialysis ( hd ) . in 2009 , we began to extend our filtration technologies to meet the demand for liquid purification in other areas , in particular water purification . we have not begun to broadly market our mid-hdf system and plan to seek a commercialization partner in the u.s. the following trends , events and uncertainties may have a material impact on our potential sales , revenue and income from operations : · the market acceptance of our products in the united states and of our technologies and products in each of our target markets ; · our ability to effectively and efficiently manufacture , market and distribute our products ; · our ability to sell our products at competitive prices which exceed our per unit costs ; · the consolidation of dialysis clinics into larger clinical groups ; and · the current u.s. healthcare plan is to bundle reimbursement for dialysis treatment which may force dialysis clinics to change therapies due to financial reasons . to the extent we are unable to succeed in accomplishing the foregoing , our sales could be lower than expected and dramatically impair our ability to generate income from operations . recently adopted accounting pronouncements in june 2011 , the fasb issued asu no . 2011-05 , `` comprehensive income ( asc topic 220 ) : presentation of comprehensive income , `` ( `` asu 2011-05 `` ) which amends current comprehensive income guidance . this accounting update eliminates the option to present the components of other comprehensive income as part of the statement of shareholders ' equity . instead , we must report comprehensive income in either a single continuous statement of comprehensive income which contains two sections , net income and other comprehensive income , or in two separate but consecutive statements . asu 2011-05 will be effective for public companies during the interim and annual periods beginning after dec. 15 , 2011 with early adoption permitted . we adopted this guidance as of january 1 , 2012 and since this relates to presentation only , the adoption of this guidance did not have any other effect on our consolidated financial statements . 24 critical accounting policies and estimates our discussion and analysis of our financial condition and results of operations are based on our consolidated financial statements , which have been prepared in accordance with accounting principles generally accepted in the united states . the preparation of financial statements in accordance with generally accepted accounting principles in the united states requires application of management 's subjective judgments , often requiring the need to make estimates about the effect of matters that are inherently uncertain and may change in subsequent periods . our actual results may differ substantially from these estimates under different assumptions or conditions . story_separator_special_tag 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 . due to these fluctuations , we believe that the period to period comparisons of our operating results are not a good indication of our future performance . the fiscal year ended december 31 , 2012 compared to the fiscal year ended december 31 , 2011 revenues total revenues for the year ended december 31 , 2012 were approximately $ 1,807,000 compared to approximately $ 2,214,000 for the year ended december 31 , 2011. total revenues decreased approximately $ 407,000 , or 18 % as a result of decreases of approximately $ 733,000 related to our md filters in europe , $ 346,000 related to the office of naval research , whose contract ended as of march 2012 , and approximately $ 33,000 related to the steris project . these decreases were partially offset by an increase of approximately $ 315,000 related to the bellco license agreement as well as a 63 % increase in water filter sales , which increased from $ 620,000 in 2011 to $ 1,010,000 in 2012. revenues were not significantly impacted by inflation or changing prices for the years ended december 31 , 2012 or 2011. cost of goods sold cost of goods sold was approximately $ 737,000 for the year ended december 31 , 2012 compared to approximately $ 1,346,000 for the year ended december 31 , 2011. the decrease of approximately $ 609,000 or 45 % , in cost of goods sold is primarily related to a $ 583,000 reduction in cost of goods sold of our md filters in europe . additional decreases include approximately $ 208,000 related to the office of naval research , approximately $ 15,000 related to dsu sales for the year ended december 31 , 2012 compared to the same period in 2011 and a decrease of approximately $ 29,000 related to the steris project . these decreases were partially offset by an increase in cost of goods sold of approximately $ 226,000 related to filters sold to the military during the year ended december 31 , 2012 , a 100 % increase compared to the same period in 2011. cost of goods sold includes increases in inventory reserves of approximately $ 82,000 and $ 218,000 for the years ended december 31 , 2012 and 2011 , respectively . research and development research and development expenses were approximately $ 632,000 and $ 451,000 respectively , for the years ended december 31 , 2012 and december 31 , 2011. this increase of approximately $ 181,000 or 40 % is primarily due to an increase in research and development personnel related costs of approximately $ 136,000 during the year ended december 31 , 2012 compared to the year ended december 31 , 2011. depreciation and amortization expense depreciation and amortization expense was approximately $ 151,000 for the year ended december 31 , 2012 compared to approximately $ 91,000 for the year ended december 31 , 2011 , an increase of 66 % . the increase of approximately $ 60,000 is primarily due to amortization of approximately $ 142,000 related to the asset recognized in conjunction with the license and supply agreement offset partially by several assets having been fully depreciated as of year-end 2011 resulting in no depreciation expense for those assets during the year ended december 31 , 2012 . 26 selling , general and administrative expenses selling , general and administrative expenses were approximately $ 3,620,000 for the year ended december 31 , 2012 compared to approximately $ 2,636,000 for the year ended december 31 , 2011 , an increase of $ 984,000 or 37 % . the increase is primarily due to $ 489,000 of salary expense , an increase in legal expenses of approximately $ 330,000 , an increase in stock compensation expense of $ 159,000 , and $ 171,000 of travel related expenses during the year ended december 31 , 2012 compared to the year ended december 30 , 2011. these increases were partially offset by a reduction in bonus expense of approximately $ 165,000 for the year ended december 31 , 2012 compared to the year ended december 31 , 2011. interest income interest income was approximately $ 2,000 for the year ended december 31 , 2012 compared to approximately $ 4,000 for the year ended december 31 , 2011. the decrease of $ 2,000 reflects the impact of having less cash on hand in 2012 compared to 2011. interest expense interest expense for the year ended december 31 , 2012 was $ 0 compared to $ 12,000 for the year ended december 31 , 2011. interest expense for the year ended december 31 , 2011 relates to interest accrued on the $ 500,000 senior secured note issued to lambda investors llc , which was paid in march 2011. amortization of debt issuance costs we account for debt issuance costs in accordance with asc 835 , which requires that these costs be reported in the balance sheet as deferred charges and amortized over the term of the associated debt . amortization of debt issuance costs of $ 0 and $ 40,000 for the years ended december 31 , 2012 and 2011 , respectively , were associated with the senior secured note issued to lambda investors llc . the note was paid in march 2011 and these capitalized costs were fully amortized by the first quarter of 2011. other income/expense other income in the amount of approximately $ 69,000 for the year ended december 31 , 2012 was primarily due to approximately $ 55,000 arising from the sale of fully depreciated manufacturing equipment sold to medica in october 2012. in addition , approximately $ 18,000 was related to the write-offs of

