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What changed in NEPHROS INC's 10-K — 2024 vs 2025

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Paragraph-level year-over-year comparison of NEPHROS INC's 2024 and 2025 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2025 report.

+184 added−167 removedSource: 10-K (2026-03-12) vs 10-K (2025-03-24)

Top changes in NEPHROS INC's 2025 10-K

184 paragraphs added · 167 removed · 95 edited across 5 sections

Item 1. Business

Business — how the company describes what it does

31 edited+42 added−51 removed27 unchanged
Biggest changeAccordingly, if we do obtain Section 510(k) clearance for any of our ESRD therapy and/or filtration products, we will need to submit another Section 510(k) notification if we significantly affect that product’s safety or effectiveness through subsequent modifications or enhancements.
Biggest changeAccordingly, for any of our medical filtration products cleared through the Section 510(k) clearance process, we are required to submit an additional Section 510(k) notification if subsequent modifications or enhancements could significantly affect a product’s safety or effectiveness or constitute a major change to its intended use. 9 All of our medical filtration products currently marketed in the United States are regulated by the FDA as Class II medical devices and have received FDA 510(k) clearance for their intended uses.
The Exchange Act requires us to file periodic reports, proxy statements and other information with the SEC. The SEC maintains a website that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC. These materials may be obtained electronically by accessing the SEC’s website at http://www.sec.gov. 11
The Exchange Act requires us to file periodic reports, proxy statements and other information with the SEC. The SEC maintains a website that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC. These materials may be obtained electronically by accessing the SEC’s website at http://www.sec.gov.
The FDA evaluates compliance with the QSR through periodic unannounced inspections that may include the manufacturing facilities of our subcontractors. If the FDA believes that we or any of our contract manufacturers, or regulated suppliers, are not in compliance with these requirements, there may be a material adverse effect on our manufacturing operations, effecting our ability to sell.
The FDA evaluates compliance with the QSR through periodic unannounced inspections that may include the manufacturing facilities of our subcontractors. If the FDA believes that we or any of our contract manufacturers, or regulated suppliers, are not in compliance with these requirements, there may be a material adverse effect on our manufacturing operations, affecting our ability to sell.
None of our employees are currently represented by a labor union or covered by a collective bargaining agreement and we believe that our relations with our employees are good. During 2024, we had limited voluntary turnover.
None of our employees are currently represented by a labor union or covered by a collective bargaining agreement and we believe that our relations with our employees are good. During 2025, we had limited voluntary turnover.
We do manufacture some of our commercial filtration products in our facility in South Orange, New Jersey. On April 23, 2012, the Company entered into a License and Supply Agreement (as thereafter amended, the “License and Supply Agreement”) with Medica S.p.A.
We do manufacture some of our commercial filtration products in our facility in South Orange, New Jersey. In April 2012, we entered into a License and Supply Agreement (as thereafter amended, the “License and Supply Agreement”) with Medica S.p.A.
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.
Nephros infection control filters are a leading tool for 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.
Employees As of December 31, 2024, we employed a total of 31 full-time employees, including 12 employed in sales/marketing/customer support, 13 in logistics, general, and administrative, and 5 in research and development and 1 in manufacturing.
Employees As of December 31, 2025, we employed a total of 36 full-time employees, including 12 employed in sales/marketing/customer support, 17 in logistics, quality, general, and administrative, and 6 in research and development and 1 in manufacturing.
Major Customers For the years ended December 31, 2024 and 2023, the following customers accounted for the following percentages of our revenues, respectively: Customer 2024 2023 A 25 % 23 % B 8 % 11 % Total 33 % 34 % As of December 31, 2024 and 2023, the following customer accounted for the following percentage of our accounts receivable: Customer 2024 2023 A 13 % 12 % 7 Competition With respect to the water filtration market, we compete with companies that are well-entrenched in the water filtration domain.
Major Customers For the years ended December 31, 2025 and 2024, the following customers accounted for the following percentages of our revenues, respectively: Customer 2025 2024 A 22 % 25 % B 12 % 3 % C 10 % 8 % Total 44 % 36 % 7 As of December 31, 2025 and 2024, the following customer accounted for the following percentage of our accounts receivable: Customer 2025 2024 A 17 % 13 % C 16 % 4 % D 11 % 6 % Total 44 % 23 % Competition With respect to the water filtration market, we compete with companies that are well-entrenched in the water filtration domain.
For other prospective markets for our ultrafilter products, we are pursuing alliance opportunities for joint product development and/or distribution. Our ultrafilter manufacturer in Europe shares certain intellectual property rights with us for one of our dual stage ultrafilter designs. Research and Development Our research and development efforts continue on several fronts directly related to our current product lines.
Our ultrafilter manufacturer in Europe shares certain intellectual property rights with us for one of our dual stage ultrafilter designs. Research and Development Our research and development efforts continue on several fronts directly related to our current product lines.
As of December 11, 2023, the Company has agreed with Medica to pay interest per month at the EURIBOR 360-day rate plus 500 basis points calculated on the principal amount of any outstanding invoices that are overdue by more than 15 days beyond the original payment terms.
Under the November 2025 agreement, we have agreed to pay interest per month at the EURIBOR 360-day rate plus 500 basis points calculated on the principal amount of any outstanding invoices that are overdue by more than 15 days beyond the original payment terms.
We have built a portfolio of patents and applications covering our products, including their hardware design and methods of hemodiafiltration. We believe that our patent strategy will provide a competitive advantage in our target markets, but our patents may not be broad enough to cover our competitors’ products and may be subject to invalidation claims.
We believe that our patent strategy will provide a competitive advantage in our target markets, but our patents may not be broad enough to cover our competitors’ products and may be subject to invalidation claims.
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.
As demand for water testing and microbiological filtration grows, we intend to be ready to deploy our expertise and solutions based on our years of experience servicing the medical market. We believe that we have an opportunity to offer unique expertise and products to the commercial market.
Any such reduction could be rapid and unanticipated. We have issued patents on our water filtration products and applications in process to cover various applications in residential, commercial, and remote environments. As of December 31, 2024, we had five U.S. patents and one Canadian patent.
Any such reduction could be rapid and unanticipated. We have issued patents on our water filtration products and applications in process to cover various applications in residential, commercial, and remote environments.
Intellectual Property Patents We protect our technology and products through patents and patent applications. In addition to the United States, we also apply for patents in other jurisdictions, such as the European Patent Office, Canada, and Japan, to the extent we deem appropriate.
In addition to the United States, we also apply for patents in other jurisdictions, such as the European Patent Office, Canada, and Japan, to the extent we deem appropriate. We have built a portfolio of patents and applications covering our products, including their hardware design and methods of hemodiafiltration.
For the food service and hospitality markets, as discussed above, we had contracted with Donastar LLC as our exclusive distributor. Effective September 2024, we ended our exclusive relationship with Donastar. Although Donastar continues to distribute our products on a non-exclusive basis, we are broadening our market reach through new distributor relationships.
Effective September 2024, we ended our exclusive relationship with Donastar. Although Donastar continues to distribute our products on a non-exclusive basis, we are broadening our market reach through new distributor relationships. For other prospective markets for our ultrafilter products, we are pursuing alliance opportunities for joint product development and/or distribution.
All of our ESRD therapy products are regulated in the United States as medical devices by the FDA under the FDC Act.
United States The FDA regulates the manufacture and distribution of medical devices in the United States pursuant to the Food, Drug, and Cosmetics (FDC) Act. Our medical filtration products are regulated in the United States as medical devices by the FDA under the FDC Act.
The filtration products covered under the License and Supply Agreement include both certain products based on Medica’s proprietary Versatile microfiber technology and certain filtration products based on Medica’s proprietary Medisulfone ultrafiltration technology In December 2023, the Company signed a new agreement with Medica which extends the term until December 31, 2028, unless earlier terminated by either party in accordance with the terms of the License and Supply Agreement.
In November 2025, the Company signed a new agreement with Medica which extends the term until December 31, 2030, unless earlier terminated by either party in accordance with the terms of the License and Supply Agreement.
In addition, while we are currently focused on medical markets, the VARs that support these customers also support a wide variety of commercial and industrial customers. We believe that our VAR relationships have and will continue to facilitate growth in filter sales outside of the medical industry.
We believe that our VAR relationships have and will continue to facilitate growth in filter sales outside of the medical industry. In addition to VARs, we also utilize a direct salesforce that targets key geographic regions throughout the country, while focusing on the hospital and dialysis customers.
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.
In cases where those sources are linked to restaurants, hotels, office buildings and residential complexes, the owners of those facilities may 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.
Governmental Regulation The research and development, manufacturing, promotion, marketing, and distribution of our ESRD therapy products in the United States, Europe and other regions of the world are subject to regulation by numerous governmental authorities, including the FDA, the European Union and analogous agencies. 8 United States The FDA regulates the manufacture and distribution of medical devices in the United States pursuant to the Food, Drug, and Cosmetics (FDC) Act.
In the U.K., we secured registrations for the trademarks NANOGUARD, and NEPHROS HYDRAGUARD. Governmental Regulation The research and development, manufacturing, promotion, marketing, and distribution of our medical filtration products in the United States and other regions of the world are subject to regulation by numerous governmental authorities, including the FDA and analogous agencies.
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 American Journal of Kidney Diseases, there are approximately 7,100 dialysis clinics in the United States servicing approximately 500,000 patients annually.
To perform hemodialysis, dialysis clinics rely on dedicated water purification systems to produce ultrapure water and bicarbonate concentrate, the two essential ingredients for preparing dialysate, the fluid used to remove waste material from the blood during treatment. As of early 2025, there are approximately 7,556 dialysis clinics in the United States serving more than 500,000 patients.
Notably, the fifth U.S. patent, granted in 2024, pertains to filter technologies, including liquid purification filter systems that are particularly suited for use in harsh environments. Trademarks As of December 31, 2024, in the United States, we secured registrations of the trademarks ENDOPUR, HYDRAGUARD, NANOGUARD, and NEPHROS. In the US, we filed one trademark application for BECAUSE WATER MATTERS.
As of December 31, 2025, we had five U.S. patents and one Canadian patent. 8 Trademarks As of December 31, 2025, in the United States, we secured registrations of the trademarks ENDOPUR, HYDRAGUARD, NANOGUARD, and NEPHROS. In the U.S., we filed one trademark application for BECAUSE WATER MATTERS.
In exchange for the rights granted, we agreed to make minimum annual aggregate purchases from Medica throughout the term of the License and Supply Agreement. Sales and Marketing Our New Jersey headquarters oversees global sales and marketing activity of our ultrafilter products. We work with multiple distributors for our ultrafilter products in the hospital and dialysis water markets.
Sales and Marketing Our New Jersey headquarters oversees global sales and marketing activity of our ultrafilter products. We work with multiple distributors for our ultrafilter products in the hospital and dialysis water markets. For the foodservice and hospitality markets, as discussed above, we had contracted with Donastar LLC as our exclusive distributor.
Therefore, it must be used in conjunction with other water treatment equipment (Reverse Osmosis, Deionization, etc.). Product Liability and Insurance The production, marketing and sale of our products have an inherent risk of liability in the event of product failure or claim of harm caused by product operation.
In November 2023, our MDSAP certification was expanded to include Brazil, enabling the marketing of select medical filtration products in that market in accordance with applicable regulatory approvals. 10 Product Liability and Insurance The production, marketing and sale of our products have an inherent risk of liability in the event of product failure or claim of harm caused by product operation.
We have extended our filtration technologies to meet the demand for liquid purification in other areas, in particular, water purification. 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.
Our Products We develop and sell point-of-use water filtration products used in both medical and commercial applications. Our water filtration products employ multiple filtration technologies, as described below. For medical applications, we manufacture both ultra- and microfilters using polysulfone hollow fiber membranes that retain microbiological contaminants through physical size exclusion.
Many HAIs are caused by waterborne bacteria and viruses that can thrive in aging or complex plumbing systems often found in healthcare facilities. 4 In January 2022, the Center for Clinical Standards and Quality at the Centers for Medicare and Medicaid Services (“CMS”) expanded its requirements – originally implemented in 2017 – for facilities to develop policies and procedures that inhibit the growth and spread of legionella and other opportunistic pathogens in building water systems.
Since 2017, Centers for Medicare and Medicaid Services (“CMS”) has required Medicare- and Medicaid-certified healthcare facilities to implement policies and procedures to reduce the risk of growth and spread of Legionella and other opportunistic waterborne pathogens in building water systems.
Item 1. 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.
Item 1. Business Overview Nephros is a commercial-stage company that develops and markets high-performance water filtration solutions for points of use, with a core focus on medical-grade water filtration. Our medical filtration portfolio includes two product lines: infection control and dialysis water.
Our manufacturing facilities are subject to audits and have been certified to be ISO 13485:2016, which allows us to sell our products in the United States and Canada. In November 2020, we received MDSAP certification to continue sales and compliance in the United States and Health Canada.
Our manufacturing facilities are subject to audits and certified to ISO 13485:2016, the international quality management standard for medical device manufacturers, which supports regulatory compliance and product distribution in multiple jurisdictions, including the United States and Canada.
The Medical Device Single Audit Program (MDSAP) is a program that allows the conduct of a single regulatory audit of a medical device manufacturer’s quality management system that satisfies the requirements of multiple regulatory jurisdictions. Audits are conducted by Auditing Organizations authorized by the participating Regulatory Authorities to audit under MDSAP requirements.
We participate in the Medical Device Single Audit Program (MDSAP), which allows for a single regulatory audit of a medical device manufacturer’s quality management system that satisfies the requirements of multiple regulatory authorities. In November 2020, we received MDSAP certification supporting continued compliance regulatory compliance and the ongoing marketing of approved products in the United States and Canada.
We believe that these CMS regulations may have a positive impact on the sale of our HAI-inhibiting ultrafilters.
We believe that continued enforcement of these requirements and the growing emphasis on effective water management programs may have a positive impact on demand for our HAI-inhibiting micro- and ultrafilters. Nephros filters are validated for physical retention of bacteria, viruses, and endotoxins through size exclusion.
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.
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.
Removed
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.
Added
The infection control segment features both microfilters (0.1 micron), which retain bacteria, and ultrafilters (0.005 micron), which retain bacteria, viruses, and endotoxins to address a broader spectrum of waterborne pathogens including and beyond Legionella and Pseudomonas .
Removed
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, heavy metals, chemical compounds, scale build-up in downstream equipment, and other various contaminants.
Added
The dialysis segment consists exclusively of ultrafilters, extending the same microbial and endotoxin retention capabilities to the purification of water and bicarbonate concentrate used in dialysis treatment, where endotoxin control is especially critical. All of our medical-grade filters are FDA 510(k)-cleared as Class II medical devices—a distinguishing feature that affirms their validated safety and performance in critical-use environments.
Removed
Our products are marketed primarily to the food service, hospitality, convenience store, and health care markets. These commercial products are also marketed into medical markets, as supplemental filtration to our medical filters. 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.
Added
While these filters are widely used in healthcare settings, they have also been adopted across a range of other industries—including manufacturing, laboratories, aviation, and federal facilities—where water purity is essential to operational safety and compliance.
Removed
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.
Added
In addition, we offer a line of commercial water filters that improve taste and odor, reduce biofilm formation and scale buildup, and remove cysts, particulates, and lead from water systems.
Removed
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 rapidly expand our access to target customers with limited sales staff expansion.
Added
With the recent release of our newest solution, validated for the reduction of Total PFAS (a mixture of seven PFAS compounds including PFOA, PFOS, PFHxS, PFNA, PFHpA, PFBS, and PFDA), our portfolio of products is further enhanced with the ability to address a broad spectrum of emerging and persistent waterborne contaminants.
Removed
In addition to VARs, we also utilize a direct salesforce that targets key geographic regions throughout the country, as well as focuses on the hospital and dialysis markets. In commercial markets, we develop and sell our filters, for which carbon-based absorption is the primary filtration mechanism.
Added
Our commercial filtration products are broadly applicable across industries and are especially valuable when used in tandem with our medical-grade filters to deliver comprehensive water-quality protection. Whether in clinical care, industrial operations, or public infrastructure, Nephros solutions support the universal need for safe, high-quality water.
Removed
These 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. These commercial products are also sold into medical markets, as supplemental filtration to our medical filters.
Added
Our ultrafilters, with a 0.005-micron pore size, retain bacteria, viruses, and endotoxins, provide a unique alternative to charged membrane solutions and feature one of the smallest pore sizes available. Our microfilters, with a 0.1-micron pore size, also retain bacteria, a critically important function given the prevalence of Legionella in premise plumbing and the risks associated with Legionnaires’ disease.
Removed
In commercial markets, our model combines both direct and indirect sales. Through our employee sales staff, we have sold products directly to a number of convenience stores, hotels, casinos, and restaurants.
Added
Across both filter types, Nephros filters are distinguished by exceptional membrane surface area and longer service life, particularly in comparison to our competitors, making Nephros filters well-suited to support improved water safety within the demands of highly regulated environments. Our primary sales strategy for medical applications is to sell within healthcare through distributors (also termed as value-added resellers, or “VARs”).
Removed
We have also signed an agreement with a partner to be the exclusive distributor to resell select water filters and related products to customers in the commercial food and beverage markets subject to meeting certain minimum thresholds.
Added
Leveraging VARs has enabled us to rapidly expand our access to target customers with limited sales staff expansion. In addition, while we are currently focused on healthcare as a primary customer base, the VARs that support these facilities also support a wide variety of commercial and industrial businesses.
Removed
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.
Added
For commercial applications, we develop filters to improve water quality through the reduction of aesthetic and functional contaminants. This segment includes both carbon-based and carbon-free solutions to reduce a number of issues including taste, odor, scale buildup, fine particulate, lead, cysts, and Total PFAS (otherwise known as “forever chemicals”).
Removed
The filters produce water that is suitable for wound cleansing, cleaning of equipment used in medical procedures, and washing of surgeons’ hands. ● Dialysis Centers and Home/Portable Dialysis Machines: 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.
Added
Like our infection control segment, our commercial filters support a wide range of applications; they also play a key role in enhancing equipment performance and reducing maintenance needs. Our commercial application sales model also combines both direct and indirect channels.
Removed
As of 2023, according to the American Hospital Association, there are approximately 6,129 hospitals in the U.S., with approximately 920,000 beds. Over 34 million patients were admitted to these hospitals. The U.S.
Added
Through our internal sales team, we sell directly to customers across a range of industries, including healthcare, where our commercial solutions are an effective complement to our medical-grade, infection control filters. We also partner with VARs, including one non-exclusive partner focused only on food service and hospitality sectors, such as quick-service restaurants (QSRs), convenience stores, and restaurants.
Removed
Centers for Disease Control and Prevention (“CDC”) estimates that healthcare associated infections (“HAI”) occur in approximately 1 out of every 31 hospital patients, which calculates to over one million patients in 2023. HAIs affect patients in hospitals or other healthcare facilities and are not present or incubating at the time of admission.
Added
In contrast to our channel partners who offer both medical and commercial products, this VAR expands our reach in high-volume, commercial food and beverage markets.
Removed
They also include infections acquired by patients in the hospital or facility, but appearing after discharge, and occupational infections among staff.
Added
Target Markets We currently serve the following primary and emerging markets through our portfolio of medical-grade and commercial water filtration products: ● Hospitals and Other Healthcare Facilities: Our ultrafilters and microfilters support infection control across a wide range of water outlets and equipment, including sinks, showers, ice machines and sterile processing.
Removed
In this 2022 update, CMS requires teams to be assigned to the development of formal water management plans (“WMPs”), as well as detailed documentation regarding the development of the WMPs and their execution. CMS surveyors regularly review policies, procedures, and reports documenting water management implementation results to verify that facilities are compliant with these requirements.
Added
These filters are FDA 510(k)-cleared Class II medical devices, offering validated performance that helps facilities address waterborne pathogen control under CMS Conditions of Participation and The Joint Commission’s water management expectations. ● Dialysis Settings: Our ultrafilters are used for advanced purification and polishing of water or bicarbonate concentrate in dialysis environments.
Removed
These policies must be in accordance with The American Society of Heating, Refrigerating, and Air-Conditioning Engineers (ASHRAE) Standard 188-2015 and the CDC toolkit. Facilities must regularly monitor water systems and take corrective actions when needed to ensure safe water for patients, residents and visitors.
Added
They are typically installed post-reverse osmosis in water treatment rooms or upstream of dialysis machines.
Removed
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.
Added
These filters assist in achieving hemodialysis-quality water that exceeds the ISO 23500-5 standard for ultrapure dialysate production and are FDA 510(k)-cleared as Class II medical devices. ● Foodservice and Hospitality: Our commercial filters are ideal for foodservice and hospitality operations where they improve water quality, equipment performance, and operational efficiency.
Removed
They are primarily used to filter potable water feeding ice machines, sinks, and medical equipment, such as endoscope washers and surgical room humidifiers.
Added
These filters are commonly installed at beverage dispensers, coffee machines, and ice makers, supporting restaurants, convenience stores, hotels, and similar venues in enhancing taste and customer experience. 4 Additional Use Cases Beyond healthcare and foodservice settings, Nephros filters are also deployed in laboratories, manufacturing facilities, aviation environments, and government buildings, where water purity is critical to safety, compliance, or system performance.
Removed
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 product 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.
Added
With the recent addition of Total PFAS reduction capability, we also anticipate growing relevance in schools and other federally regulated facilities, where adherence to standards such as the Safe Drinking Water Act is a key consideration. We continue to evaluate opportunities to expand into new verticals where our filtration technologies provide measurable value. Hospitals and Other Healthcare Facilities .
Removed
The S100 has an up to 3-month product life when used in a hospital setting. ● The HydraGuard TM and HydraGuard TM - 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.
Added
According to the American Hospital Association’s most recent annual survey data (2023), there are approximately 6,093 hospitals in the U.S., representing more than 913,000 beds and approximately 34.4 million inpatient admissions annually. These facilities rely on extensive internal water systems to support patient care, including handwashing, bathing, medical device reprocessing, dialysis, and other clinical and operational uses.
Removed
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, and point-of-use can be viewed on our website at https://www.nephros.com/infection-control/ .
Added
According to a June 2025 report from the U.S. Centers for Disease Control and Prevention (“CDC”), on any given day, approximately one in 31 hospitalized patients has at least one healthcare-associated infection (“HAI”), underscoring the scale of infection risk within hospital environments.
Removed
We are not including the information on our website as a part of, nor incorporating it by reference into, this Annual Report on Form 10-K. Dialysis Centers - Water/Bicarbonate . In the dialysis water market, Nephros ultrafiltration products are among the highest performing products on the market.
Added
The CDC further identifies waterborne pathogens such as Legionella , Pseudomonas , and nontuberculous mycobacteria as significant contributors to HAIs, noting that these organisms can proliferate in aging, complex premise plumbing systems commonly found in healthcare facilities and be transmitted through sinks, showers, ice machines, and other water outlets.
Removed
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.
Added
CDC surveillance of waterborne disease outbreaks indicates that premise plumbing is a leading source of water-related illness, hospitalizations, and deaths in the United States, with healthcare facilities representing a higher-risk environment due to susceptible patient populations and frequent water exposure.
Removed
We estimate that there are over 100,000 hemodialysis machines in operation in the United States.
Added
These factors underscore the importance of effective water management and point-of-use filtration strategies to mitigate microbiological risk in critical-use healthcare settings.
Removed
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.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

39 edited+26 added−6 removed84 unchanged
Biggest changeIf any of those publications or patents conflict with our patent rights, or cover our products, then any or all of our patent applications could be rejected and any or all of our granted patents could be invalidated, either of which could materially adversely affect our competitive position. 17 Litigation and other proceedings relating to patent matters, whether initiated by us or a third party, can be expensive and time-consuming, regardless of whether the outcome is favorable to us, and may require the diversion of substantial financial, managerial, and other resources.
Biggest changeLitigation and other proceedings relating to patent matters, whether initiated by us or a third party, can be expensive and time-consuming, regardless of whether the outcome is favorable to us, and may require the diversion of substantial financial, managerial, and other resources.
If we violate the FDC Act or other regulatory requirements (either with respect to our ultrafilters or otherwise) at any time during or after the product development and/or approval process, we could be subject to enforcement actions by the FDA or other agencies, including: ● fines; ● injunctions; ● civil penalties; ● recalls or seizures of products; ● total or partial suspension of the production of our products; ● withdrawal of any existing approvals or pre-market clearances of our products; ● refusal to approve or clear new applications or notices relating to our products; ● recommendations that we not be allowed to enter into government contracts; and ● criminal prosecution.
If we violate the FDC Act or other regulatory requirements (either with respect to our ultrafilters or otherwise) at any time during or after the product development and/or approval process, we could be subject to enforcement actions by the FDA or other agencies, including: ● fines; ● injunctions; 16 ● civil penalties; ● recalls or seizures of products; ● total or partial suspension of the production of our products; ● withdrawal of any existing approvals or pre-market clearances of our products; ● refusal to approve or clear new applications or notices relating to our products; ● recommendations that we not be allowed to enter into government contracts; and ● criminal prosecution.
These provisions include: ● authorizing our board of directors to issue “blank check” preferred stock without stockholder approval; ● providing for a classified board of directors with staggered, three-year terms; ● prohibiting us from engaging in a “business combination” with an “interested stockholder” for a period of three years after the date of the transaction in which the person became an interested stockholder unless certain provisions are met; ● prohibiting cumulative voting in the election of directors; ● limiting the persons who may call special meetings of stockholders; and ● establishing advance notice requirements for nominations for election to our board of directors or for proposing matters that can be acted on by stockholders at stockholder meetings. 19 As a smaller reporting company with little or no name recognition and with several risks and uncertainties that could impair our business operations, we are not likely to generate widespread interest in our common stock.
These provisions include: ● authorizing our board of directors to issue “blank check” preferred stock without stockholder approval; ● providing for a classified board of directors with staggered, three-year terms; ● prohibiting us from engaging in a “business combination” with an “interested stockholder” for a period of three years after the date of the transaction in which the person became an interested stockholder unless certain provisions are met; ● prohibiting cumulative voting in the election of directors; ● limiting the persons who may call special meetings of stockholders; and ● establishing advance notice requirements for nominations for election to our board of directors or for proposing matters that can be acted on by stockholders at stockholder meetings. 20 As a smaller reporting company with little or no name recognition and with several risks and uncertainties that could impair our business operations, we are not likely to generate widespread interest in our common stock.
Policing unauthorized use of our trade secrets is difficult and expensive and, in the event we further expand our operations, the laws of other countries may not adequately protect our trade secrets. Risks Related to Owning Our Common Stock The prices at which shares of the common stock trade have been and will likely continue to be volatile.
Policing unauthorized use of our trade secrets is difficult and expensive and, in the event we further expand our operations, the laws of other countries may not adequately protect our trade secrets. 18 Risks Related to Owning Our Common Stock The prices at which shares of the common stock trade have been and will likely continue to be volatile.
We are not able to control many of these factors, and we believe that period-to-period comparisons of our financial results will not necessarily be indicative of our future performance. 18 Our common stock could be further diluted as a result of the issuance of additional shares of common stock, warrants or options.
We are not able to control many of these factors, and we believe that period-to-period comparisons of our financial results will not necessarily be indicative of our future performance. Our common stock could be further diluted as a result of the issuance of additional shares of common stock, warrants or options.
If we cannot sell our products in a particular region, then the size of our potential market could be reduced, which would limit our potential sales and revenues. 16 Significant additional governmental regulation could subject us to unanticipated delays that would adversely affect our sales and revenues.
If we cannot sell our products in a particular region, then the size of our potential market could be reduced, which would limit our potential sales and revenues. Significant additional governmental regulation could subject us to unanticipated delays that would adversely affect our sales and revenues.
Our ability to increase our sales revenue may be materially impaired if we experience attrition in our sales and marketing organization or if we are unsuccessful in developing our sales personnel. We rely on information technology systems and network infrastructure to operate and manage our business.
Our ability to increase our sales revenue may be materially impaired if we experience attrition in our sales and marketing organization or if we are unsuccessful in developing our sales personnel. 14 We rely on information technology systems and network infrastructure to operate and manage our business.
Our agreement with Medica will expire in 2028 and although we believe our relationship with this supplier is good, there can be no assurance that our current agreement will guarantee uninterrupted supply or that we will be able to renew the agreement on favorable terms, or at all.
Our agreement with Medica will expire in 2030 and although we believe our relationship with this supplier is good, there can be no assurance that our current agreement will guarantee uninterrupted supply or that we will be able to renew the agreement on favorable terms, or at all.
Our business could be harmed if we are unable to attract and retain personnel necessary for our success. We operate our business with a two-person senior management team. We have a Chief Executive Officer and a Chief Financial Officer, who together directly oversee operations, sales and finances.
Our business could be harmed if we are unable to attract and retain personnel necessary for our success. We operate our business with a two-person senior management team. We have a Chief Executive Officer and a Chief Financial Officer, who together directly oversee operations, sales, finance and corporate development.
We may be unable to achieve or sustain revenue growth. Our business and future prospects are substantially dependent upon our ability to significantly grow our product revenue. Although our sales were approximately 43% higher in 2023 compared to 2022, our revenues declined slightly in 2024 compared to 2023.
We may be unable to achieve or sustain revenue growth. Our business and future prospects are substantially dependent upon our ability to significantly grow our product revenue. Although our sales were approximately 33% higher in 2025 compared to 2024, our revenues declined slightly in 2024 compared to 2023.
There is no assurance that we will be able to resume sales growth in future periods. Our ability to increase our revenues in future periods will depend on our ability to significantly grow our customer base and then consistently obtaining product reorders from those customers.
There is no assurance that we will be able to maintain sales growth in future periods. Our ability to increase our revenues in future periods will depend on our ability to significantly grow our customer base and then consistently obtain product reorders from those customers.
Each of the following factors, among others, may influence the timing and extent of our profitability, if any: ● the market acceptance 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 that exceed our per unit costs; and ● our ability to continue to develop products and maintain a competitive advantage in our industry.
Each of the following factors, among others, may influence our profitability: ● the market acceptance of our technologies and products in each of our target markets; 11 ● our ability to effectively and efficiently manufacture, market and distribute our products; ● our ability to sell our products at competitive prices that exceed our per unit costs; and ● our ability to continue to develop products and maintain a competitive advantage in our industry.
On December 11, 2023, we entered into a license and supply agreement (the “License and Supply Agreement”) with Medica for the marketing and sale of certain filtration products based upon Medica’s proprietary ultrafiltration technology in conjunction with our filtration products (collectively, the “Products”), and to engage in an exclusive supply arrangement for the Products, meaning Medica is our sole supplier for the filter material used in certain of our products.
On November 1, 2025, we entered into a license and supply agreement (the “License and Supply Agreement”) with Medica for the marketing and sale of certain filtration products based upon Medica’s proprietary ultrafiltration technology in conjunction with our filtration products (collectively, the “Products”), and to engage in an exclusive supply arrangement for the Products, meaning Medica is our sole supplier for the filter material used in certain of our products.
Our directors, executive officers, and Wexford Capital LP (“Wexford”) control a significant portion of our stock and, if they choose to vote together, could have sufficient voting power to control the vote on substantially all corporate matters. As of March 1, 2025, Wexford, our largest stockholder, beneficially owned approximately 34% of our outstanding common stock.
Our directors, executive officers, and Wexford Capital control a significant portion of our stock and, if they choose to vote together, could have sufficient voting power to control the vote on substantially all corporate matters. As of March 1, 2026, Wexford Capital L.P. and its affiliates (together, “Wexford”),, our largest stockholder, beneficially owned approximately 34% of our outstanding common stock.
In addition, we granted to Medica an exclusive license under our intellectual property to make the Products during the term of the License and Supply Agreement. In exchange for the rights granted, we have agreed to make minimum annual aggregate purchases from Medica of €4,208,000, €4,629,000, €4,976,000, €5,349,000 and €5,750,000 for the years 2024, 2025, 2026, 2027 and 2028, respectively.
In addition, we granted to Medica an exclusive license under our intellectual property to make the Products during the term of the License and Supply Agreement. In exchange for the rights granted, we have agreed to make minimum annual aggregate purchases from Medica of €4,976,000, €5,349,000, €5,750,000, €6,000,000 and €6,300,000 for the years 2026, 2027, 2028, 2029 and 2030, respectively.
In the past we have issued common stock and warrants in order to raise capital to help fund our business. We have also issued stock options and restricted stock as compensation for services and incentive compensation for our employees, directors, and consultants.
In the past we have issued common stock and warrants in order to raise capital to help fund our business. We have also issued stock options and restricted stock as compensation for services and incentive compensation for our employees, directors, and consultants, and we have previously issued shares of our common stock as consideration for acquiring other businesses.
In order to successfully maintain commercialization of our products, we need to be able to produce them in a cost-effective way on a large scale to meet commercial demand, while maintaining extremely high standards for quality and reliability.
In order to successfully maintain commercialization of our products, we need to be able to produce them in a cost-effective way on a large scale to meet commercial demand, while maintaining extremely high standards for quality and reliability. The extent to which we fail to successfully maintain commercial success of our products could limit our ability to be profitable.
We cannot be sure that any of the facilities or processes we use will comply or continue to comply with their respective requirements on a timely basis or at all, which could delay or prevent our obtaining the approvals we need to market our products in the United States.
We cannot be sure that any of the facilities or processes we use will comply or continue to comply with their respective requirements on a timely basis or at all, which could delay or prevent our obtaining the approvals we need to market our products in the United States. 17 Risks Related to our Intellectual Property Protecting our intellectual property in our technology through patents may be costly and ineffective.
Even if we are able to obtain and maintain product liability insurance, if a successful claim in excess of our insurance coverage is made, then we may have to indemnify some or all of our manufacturers for their losses, which could materially deplete our assets.
Even if we are able to obtain and maintain product liability insurance, if a successful claim in excess of our insurance coverage is made, then we may have to indemnify some or all of our manufacturers for their losses, which could materially deplete our assets. 15 We cannot assure you that our products will be safe or that there will not be product-related deaths, serious injuries or product malfunctions.
However, our contracted manufacturers could experience manufacturing and control problems in connection with their manufacture of our products, which could disrupt their ability to timely and adequately supply us with product.
If we are successful in continuing to increase our product revenue, we will need to also increase our supply requirements. However, our contracted manufacturers could experience manufacturing and control problems in connection with their manufacture of our products, which could disrupt their ability to timely and adequately supply us with product.
If any of these events occur, then we could incur significant expenses and it could become more difficult for us to market and sell our products and to generate revenues from sales.
If any of these events occur, then we could incur significant expenses and it could become more difficult for us to market and sell our products and to generate revenues from sales. Other countries may impose analogous reporting requirements that could cause us to incur expenses and may also limit our ability to generate revenues from sales of our products.
Our strategy requires us to distribute our products and, if needed, provide customer service and maintenance and other technical service. To provide these services, we have begun, and will need to continue, to develop a network of distribution and a staff of employees and independent contractors in each of the areas in which we intend to operate.
To provide these services, we have begun, and will need to continue, to develop a network of distribution and a staff of employees and independent contractors in each of the areas in which we intend to operate.
During the two years ended December 31, 2024, our common stock has traded at prices ranging from a high of $4.04 to a low of $0.95 per share. Due to the lack of an active trading market for our common stock, we expect the prices at which our common stock might trade to continue to be highly volatile.
During the two years ended December 31, 2025, our common stock has traded at prices ranging from a high of $6.42 to a low of $1.39 per share. Due to the limited trading volume of our common stock, we expect the prices at which our common stock might trade to continue to be highly volatile.
Item 1A. Risk Factors Risks Related to Our Overall Business and Operations We have a history of operating losses and a significant accumulated deficit, and we may not be able to maintain or improve our profitability in the future. As of December 31, 2024, we had an accumulated deficit of $144.3 million as a result of prior historical operating losses.
Item 1A. Risk Factors Risks Related to Our Overall Business and Operations We have only a limited history of profitability and a significant accumulated deficit, and we may not be able to maintain or improve our profitability in the future.
Risks Related to our Intellectual Property Protecting our intellectual property in our technology through patents may be costly and ineffective. If we are not able to adequately secure or enforce protection of our intellectual property, then we may not be able to compete effectively and we may not be profitable.
If we are not able to adequately secure or enforce protection of our intellectual property, then we may not be able to compete effectively and we may not be profitable. Our future success depends in part on our ability to protect the intellectual property for our technology through patents.
If the License and Supply Agreement is terminated, we may be unable to obtain our filtration products from an alternative supplier on commercially favorable terms, if at all.
If we are unable to satisfy the minimum purchase commitments in future years, we may be in breach of the License and Supply Agreement, giving Medica a right of termination. If the License and Supply Agreement is terminated, we may be unable to obtain our filtration products from an alternative supplier on commercially favorable terms, if at all.
Furthermore, the issuance of any additional shares of our common stock or securities convertible into our common stock could be substantially dilutive to holders of our common stock if they do not invest in future offerings. We have never paid dividends and do not intend to pay cash dividends.
Furthermore, the issuance of any additional shares of our common stock or securities convertible into our common stock could be substantially dilutive to holders of our common stock if they do not invest in future offerings. 19 We have identified a material weakness in our internal control over financial reporting.
Our patents, if challenged or if we attempt to enforce them, may not necessarily be upheld by the courts of any jurisdiction.
The protection provided by our patents may not be broad enough to prevent competitors from introducing similar products into the market. Our patents, if challenged or if we attempt to enforce them, may not necessarily be upheld by the courts of any jurisdiction.
As noted above, the lack of an active trading market for our common stock will make it difficult to value and sell our common stock. While our dividend policy will be based on the operating results and capital needs of our business, we anticipate that all earnings, if any, will be retained to finance our future operations.
While our dividend policy will be based on the operating results and capital needs of our business, we anticipate that all earnings, if any, will be retained to finance our future operations.
While we believe that revenues will increase following our expansion of the sales team in 2024, there can be no guarantee of this. We may continue to incur additional losses in the future depending on the timing and marketplace acceptance of our products and as a result of operating expenses being higher than our gross margin from product sales.
We may incur additional losses in the future depending on the timing and marketplace acceptance of our products and as a result of operating expenses being higher than our gross margin from product sales.
Moreover, even if we are able to obtain adequate insurance, any claim against us could generate negative publicity, which could impair our reputation and adversely affect the demand for our products, our ability to generate sales and our profitability. 14 Some of the agreements that we may enter into with manufacturers of our products and components of our products may require us to obtain product liability insurance; or to indemnify manufacturers against liabilities resulting from the sale of our products.
Moreover, even if we are able to obtain adequate insurance, any claim against us could generate negative publicity, which could impair our reputation and adversely affect the demand for our products, our ability to generate sales and our profitability.
Any supply interruption from our suppliers or failure to obtain additional suppliers for any of the components used in our products, or price increases of these supplies, could have a material adverse effect on our business, financial condition and results of operations. 13 We are subject to minimum purchase obligations under our License and Supply Agreement with Medica and failure to meet these minimum purchase requirements may result in termination of the agreement, which could materially impact our ability to obtain our filtration products.
Any supply interruption from our suppliers or failure to obtain additional suppliers for any of the components used in our products, or price increases of these supplies, could have a material adverse effect on our business, financial condition and results of operations.
These circumstances 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.
Further, we are required under applicable law to report any circumstances relating to our medically approved products that could result in deaths or serious injuries. These circumstances 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 have never paid dividends on our common stock and currently do not anticipate paying cash dividends on our common stock for the foreseeable future. Consequently, any returns on an investment in our common stock in the foreseeable future will have to come from an increase in the value of the stock itself.
We have never paid dividends and do not intend to pay cash dividends. We have never paid dividends on our common stock and currently do not anticipate paying cash dividends on our common stock for the foreseeable future.
Other countries may impose analogous reporting requirements that could cause us to incur expenses and may also limit our ability to generate revenues from sales of our products. 15 Risks Related to Government Regulation If we violate any provisions of the FDC Act or any other statutes or regulations, then we could be subject to enforcement actions by the FDA or other governmental agencies.
Risks Related to Government Regulation If we violate any provisions of the FDC Act or any other statutes or regulations, then we could be subject to enforcement actions by the FDA or other governmental agencies.
Our future success depends in part on our ability to protect the intellectual property for our technology through patents. We will only be able to protect our products and methods from unauthorized use by third parties to the extent that our products and methods are covered by valid and enforceable patents or are effectively maintained as trade secrets.
We will only be able to protect our products and methods from unauthorized use by third parties to the extent that our products and methods are covered by valid and enforceable patents or are effectively maintained as trade secrets. Our 5 granted U.S. patents will expire at various times from 2026 to 2044, assuming they are properly maintained.
If we cannot develop adequate distribution, customer service and technical support networks, then we may not be able to market and distribute our products effectively and/or customers may decide not to order our products. In either case, our sales and revenues will suffer.
Given the difficulty in predicting the timing and magnitude of sales based on our ER business, we may experience quarter-to-quarter fluctuations in revenue resulting in the potential for a sequential decline in quarterly revenue. 12 If we cannot develop adequate distribution, customer service and technical support networks, then we may not be able to market and distribute our products effectively and/or customers may decide not to order our products.
On the other hand, during periods when only a small number of outbreaks occur, we see reduced demand for our products. Given the difficulty in predicting the timing and magnitude of sales based on our ER business, we may experience quarter-to-quarter fluctuations in revenue resulting in the potential for a sequential decline in quarterly revenue.
On the other hand, during periods when only a small number of outbreaks occur, we see reduced demand for our products.
Our manufacturers’ systems and procedures may not be adequate to support our operations and may not be able to achieve the rapid execution necessary to exploit the market for our products. If we are successful in continuing to increase our product revenue, we will need to also increase our supply requirements.
We rely on, and for the foreseeable future expect to continue to rely on, a limited number of independent manufacturers to produce our products. Our manufacturers’ systems and procedures may not be adequate to support our operations and may not be able to achieve the rapid execution necessary to exploit the market for our products.
Removed
We sold our first commercial product in March 2004, and the year ended December 31, 2024 was only our first profitable year in our history with net income of $0.1 million.
Added
Although we have been profitable during each of the fiscal years ended December 31, 2024, and December 31, 2025, as of December 31, 2025, we had an accumulated deficit of $143.1 million as a result of prior historical operating losses.
Removed
The extent to which we fail to successfully maintain commercial success of our products, could limit our ability to be profitable. 12 We rely on, and for the foreseeable future expect to continue to rely on, a limited number of independent manufacturers to produce our products.
Added
While our revenues have increased following our expansion of the sales team in both 2024 and 2025, there can be no guarantee our revenues will continue to grow.
Removed
In addition, with the change in U.S. presidential administration in January 2025, there is increased risk of new tariffs which could also affect the prices we pay for critical supplies and materials.
Added
In either case, our sales and revenues will suffer. Our strategy requires us to distribute our products and, if needed, provide customer service and maintenance and other technical service.
Removed
We satisfied our minimum purchase obligations for 2024, but if we are unable to satisfy the minimum purchase commitments in future years, we may be in breach of the License and Supply Agreement, giving Medica a right of termination.
Added
Significant developments resulting from recent and potential changes in United States tariff policies could have a material adverse effect on us .
Removed
We cannot assure you that our products will be safe or that there will not be product-related deaths, serious injuries or product malfunctions. Further, we are required under applicable law to report any circumstances relating to our medically approved products that could result in deaths or serious injuries.
Added
Beginning in the first quarter of 2025, the current U.S. presidential administration has imposed tariffs on various goods from various countries, including the European Union (“EU”), and has announced intentions to impose further significant tariffs on certain United States imports. The administration relied on the U.S.
Removed
Our 5 granted U.S. patents will expire at various times from 2029 to 2044, assuming they are properly maintained. The protection provided by our patents may not be broad enough to prevent competitors from introducing similar products into the market.
Added
International Emergency Economic Powers Act (IEEPA) as the statutory basis for its authority to impose most of such tariffs. However, on February 20, 2026, the U.S. Supreme Court ruled that the IEEPA did not grant the president authority to impose tariffs, rendering such previously imposed tariffs invalid.
Added
Following the Supreme Court’s decision, the U.S. administration announced its intention to invoke other laws to impose tariffs by executive order and thereafter imposed new tariffs on imports from all countries, in addition to any existing non-IEEPA tariffs.
Added
We rely on suppliers operating in, and exporting from, the EU, including our exclusive supplier of the filtration materials and technology used in certain of our filtration products.
Added
To the extent that tariffs and other restrictions imposed by the United States increase the price of, or limit the amount of, materials and finished goods imported into the United States, the costs of our materials, which we may be unable to pass onto customers, may be adversely affected, which could adversely affect our revenues and profitability.
Added
We cannot predict the effect these and potential additional tariffs will have on our supplier and our business, including in the context of escalating trade tensions.
Added
Further tariffs, additional taxes, or trade barriers, both domestically and internationally, may affect our costs and margins, the competitiveness of our products, and our ability to sell products or purchase necessary equipment and supplies, and consequently materially and adversely affect our business, results of operations, and financial conditions. 13 We are subject to minimum purchase obligations under our License and Supply Agreement with Medica and failure to meet these minimum purchase requirements may result in termination of the agreement, which could materially impact our ability to obtain our filtration products.
Added
Some of the agreements that we may enter into with manufacturers of our products and components of our products may require us to obtain product liability insurance; or to indemnify manufacturers against liabilities resulting from the sale of our products.
Added
We rely on both employees and third-party contractors to install and service our water filtration products, and any failure by these parties to perform adequately could adversely affect our business and reputation . The proper installation and servicing of our water filtration products are critical to ensuring their performance, safety and regulatory compliance.
Added
We rely on employees and third-party contractors and service providers to install and service our water filtration products. These contractors are not our employees, and we have limited control over the quality, timeliness, and consistency of their work. Their performance is influenced by factors that may be beyond our control, including the availability and training of their personnel.
Added
If we or our third-party service providers fail to perform installation or service work to our standards or to our customers’ expectations, our products may not function as intended, our reputation and customer satisfaction may be harmed.
Added
Poor workmanship or noncompliance with our installation and servicing specifications or applicable regulations could result in product malfunctions, water quality issues, property damage, customer complaints, personal injury, or other claims against us. Such failures could also expose us to increased warranty claims, as well as costs associated with corrective actions, replacements, or recalls.
Added
In addition, even isolated incidents of improper installation or servicing – whether caused by us or by third-party providers engaged by us – could negatively impact our brand and reputation, leading to reduced repeat or referral sales. Any of these outcomes could materially and adversely affect our reputation, results of operations, and financial condition.
Added
If any of those publications or patents conflict with our patent rights, or cover our products, then any or all of our patent applications could be rejected and any or all of our granted patents could be invalidated, either of which could materially adversely affect our competitive position.
Added
If we are unable to remediate this material weakness, or if we identify additional material weaknesses in the future or otherwise fail to maintain an effective system of internal control over financial reporting, we may not be able to accurately or timely report our financial condition or results of operations, which may adversely affect investor confidence in us and the value of our common stock.
Added
In connection with the preparation of our financial statements as of and for the quarterly period ended March 31, 2025, we identified a material weakness in our internal control over financial reporting.
Added
A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our financial statements will not be prevented or detected on a timely basis.
Added
Specifically, our management concluded that we had designed or maintained effective controls to ensure that we properly recognize revenue from service-based sales contracts. See “PART II – Item 9A. Controls and Procedures” in this Annual Report.
Added
Although these items did not result in a material misstatement to our financial statements, this material weakness could have resulted in a material misstatement to our annual or interim financial statements that would not be prevented or detected. While we are designing and implementing measures to remediate our existing material weakness, we cannot predict the success of such measures.
Added
Our current controls and any new controls that we develop may become inadequate because of changes in conditions in our business, personnel, information technology systems or other factors.
Added
If we fail to remediate our existing material weakness or identify new material weaknesses in our internal control over financial reporting, or if we are unable to conclude that our internal control over financial reporting is effective, it is possible that a material misstatement of our financial statements would not be prevented or detected on a timely basis, investors may lose confidence in the accuracy and completeness of our financial reports, and the value of our common stock could be materially and adversely affected.
Added
Consequently, any returns on an investment in our common stock in the foreseeable future will have to come from an increase in the value of the stock itself. As noted above, the lack of an active trading market for our common stock will make it difficult to value and sell our common stock.

Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

3 edited+1 added−0 removed14 unchanged
Biggest changeOur cybersecurity risk management program is integrated into our overall enterprise risk management program and shares common methodologies, reporting channels, and governance processes that apply across the enterprise risk management program to other legal, compliance, strategic, operational, and financial risk areas. 20 Our cybersecurity risk management program includes: ● risk assessments designed to help identify material cybersecurity risks to our critical systems, information, products, services, and our broader enterprise information technology (“IT”) environment; ● an outsourced security team principally responsible for managing (1) our cybersecurity risk assessment processes, (2) our security controls, and (3) our response to cybersecurity incidents; ● the use of external service providers, where appropriate, to assess, test, or otherwise assist with aspects of our security controls; ● cybersecurity awareness training for our employees, incident response personnel, and senior management.
Biggest changeOur cybersecurity risk management program includes: ● risk assessments designed to help identify material cybersecurity risks to our critical systems, information, products, services, and our broader enterprise information technology (“IT”) environment; ● an outsourced security team principally responsible for managing (1) our cybersecurity risk assessment processes, (2) our security controls, and (3) our response to cybersecurity incidents; ● the use of external service providers, where appropriate, to assess, test, or otherwise assist with aspects of our security controls; ● cybersecurity awareness training for our employees, incident response personnel, and senior management.
For additional information, see “Risks Related to Our Overall Business and Operations – We rely on information technology systems and network infrastructure…” in Item 1A, “Risk Factors” in this Annual Report on Form 10-K. 21 Given that cybersecurity risks can impact various areas of responsibility of the Committees of the Board, as well as the overall size of the Board, the Board believes it is useful and effective for the entire Board to maintain direct oversight over cybersecurity matters.
For additional information, see “Risks Related to Our Overall Business and Operations – We rely on information technology systems and network infrastructure…” in Item 1A, “Risk Factors” in this Annual Report on Form 10-K. 22 Given that cybersecurity risks can impact various areas of responsibility of the Committees of the Board, as well as the overall size of the Board, the Board believes it is useful and effective for the entire Board to maintain direct oversight over cybersecurity matters.
Item 1C. Cybersecurity Risk Management and Strategy We have implemented cybersecurity processes, technologies, and controls to aid in our efforts to assess, identify, and manage cybersecurity risks. Our enterprise risk management framework considers cybersecurity risk alongside other company risks as part of our overall risk assessment process.
Item 1C. Cybersecurity Risk Management and Strategy We have implemented cybersecurity processes, technologies, and controls to aid in our efforts to assess, identify, and manage cybersecurity risks.
Added
Our enterprise risk management framework considers cybersecurity risk alongside other company risks as part of our overall risk assessment process. 21 Our cybersecurity risk management program is integrated into our overall enterprise risk management program and shares common methodologies, reporting channels, and governance processes that apply across the enterprise risk management program to other legal, compliance, strategic, operational, and financial risk areas.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

3 edited+0 added−0 removed1 unchanged
Biggest changeItem 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Common Stock Information Our common stock is quoted on the Nasdaq Capital Market under the symbol “NEPH”. Our common stock commenced trading on August 14, 2019. As of December 31, 2024, there were approximately 41 holders of record of our common stock.
Biggest changeItem 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Common Stock Information Our common stock is quoted on the Nasdaq Capital Market under the symbol “NEPH”. Our common stock commenced trading on August 14, 2019. As of December 31, 2025, there were approximately 41 holders of record of our common stock.
Recent Sales of Unregistered Securities Except as previously reported in our Quarterly Reports on Form 10-Q and our Current Reports on Form 8-K, we have not sold any equity securities during the year ended December 31, 2024, that were not registered under the Securities Act of 1933, as amended.
Recent Sales of Unregistered Securities Except as previously reported in our Quarterly Reports on Form 10-Q and our Current Reports on Form 8-K, we have not sold any equity securities during the year ended December 31, 2025, that were not registered under the Securities Act of 1933, as amended.
Issuer Repurchases of Equity Securities There were no repurchases of our common stock during the fourth quarter of 2024. Equity Compensation Plan Information See Part III, Item 12, under the heading “Equity Compensation Plan Information,” which is incorporated by reference herein. Item 6. Reserved
Issuer Repurchases of Equity Securities There were no repurchases of our common stock during the fourth quarter of 2025. Equity Compensation Plan Information See Part III, Item 12, under the heading “Equity Compensation Plan Information,” which is incorporated by reference herein. Item 6. Reserved

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeFiscal Year Ended December 31, 2024, compared to the Fiscal Year Ended December 31, 2023 The following table sets forth our summarized, consolidated results of operations for the years ended December 31, 2024 and 2023 (in thousands except percentages): Years Ended December 31, $ Increase % Increase 2024 2023 (Decrease) (Decrease) Total net revenues $ 14,162 $ 14,238 $ (76 ) (1 )% Cost of goods sold 5,439 5,833 (394 ) (7 )% Gross margin 8,723 8,405 318 4 % Gross margin % 62 % 59 % - 3 % Research and development expenses 906 873 33 4 % Depreciation and amortization expenses 135 214 (79 ) (37 )% Selling, general and administrative expenses 7,676 8,911 (1,235 ) (14 )% Operating Income (loss) 6 (1,593 ) 1,599 (100 )% Interest expense (1 ) (2 ) 1 (50 )% Interest income 94 64 30 47 % Other (expense) income, net (10 ) (44 ) 34 (77 )% Income (loss) before income taxes 89 (1,575 ) 1,664 (106 )% Income tax expense (15 ) - (15 ) - Net Income (loss) $ 74 $ (1,575 ) 1,649 (105 )% 24 Net Revenues.
Biggest changeFiscal Year Ended December 31, 2025, compared to the Fiscal Year Ended December 31, 2024 The following table sets forth our summarized, results of operations for the years ended December 31, 2025, and 2024 (in thousands except percentages): Years Ended December 31, $ Increase % Increase 2025 2024 (Decrease) (Decrease) Total net revenues $ 18,789 $ 14,162 $ 4,627 33 % Cost of goods sold 7,164 5,439 1,725 32 % Gross margin 11,625 8,723 2,902 33 % Gross margin % 62 % 62 % - 0 % Research and development expenses 1,339 906 433 48 % Depreciation and amortization expenses 140 135 5 4 % Selling, general and administrative expenses 9,000 7,676 1,324 17 % Operating Income 1,146 6 1,140 19,000 % Interest expense (1 ) (1 ) - 0 % Interest income 139 94 45 48 % Other expense net (78 ) (10 ) (68 ) 680 % Income before income taxes 1,206 89 1,117 1,255 % Income tax expense (12 ) (15 ) 3 (20 )% Net Income $ 1,194 $ 74 1,120 1,514 % Net Revenues.
While our significant accounting policies are described in more detail in “Note 2 – Summary of Significant Accounting Policies,” to our consolidated financial statements included in Item 8, “Financial Statements and Supplementary Data,” of this Annual Report on Form 10-K, we believe that the following accounting policies require the application of significant judgments and estimates.
While our significant accounting policies are described in more detail in “Note 2 – Summary of Significant Accounting Policies,” to our financial statements included in Item 8, “Financial Statements and Supplementary Data,” of this Annual Report on Form 10-K, we believe that the following accounting policies require the application of significant judgments and estimates.
If inventory is written down, a new cost basis is established that cannot be increased in future periods. Results of Operations Fluctuations in Operating Results Our results of operations have fluctuated significantly from period to period in the past, including recently, and are likely to continue to do so in the future.
If inventory is written down, a new cost basis is established that cannot be increased in future periods. 25 Results of Operations Fluctuations in Operating Results Our results of operations have fluctuated significantly from period to period in the past, including recently, and are likely to continue to do so in the future.
Net cash used in operating activities in 2024 was primarily due to an increase in inventory of approximately $0.4 million, an increase in accounts receivable of approximately $0.3 million, a decrease in accounts payable and accrued expenses of approximately $0.2 million each, offset by an increase in inventory impairments and write-offs of approximately $0.3 million.
Net cash used in operating activities in 2024 was primarily due to an increase in accounts receivable of approximately $0.3 million, a decrease in accounts payable and accrued expenses of approximately $0.2 million each, offset by an increase in inventory impairments and write-offs of approximately $0.3 million.
Based on cash that is available for our operations and projections of our future operations, we believe that our cash balances will be sufficient to fund our current operating plan through at least the next 12 months from the date of issuance of the condensed consolidated financial statements in this Annual Report on Form 10-K.
Based on cash that is available for our operations and projections of our future operations, we believe that our cash balances will be sufficient to fund our current operating plan through at least the next 12 months from the date of issuance of the financial statements in this Annual Report on Form 10-K.
We expect to put our current capital resources toward the development, marketing, and sales of our water filtration products and working capital purposes. Net cash used in operating activities was $0.5 million for the year ended December 31, 2024 compared to net cash provided by operating activities of approximately $0.8 million for the year ended December 31, 2023.
We expect to put our current capital resources toward the development, marketing, and sales of our water filtration products and working capital purposes. Net cash provided by operating activities was $1.6 million for the year ended December 31, 2025 compared to net cash used in operating activities of approximately $0.5 million for the year ended December 31, 2024.
This policy provides that our primary objectives for investments are 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. At December 31, 2024, we had an accumulated deficit of $144.3 million.
This policy provides that our primary objectives for investments are 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. As of December 31, 2025, we had an accumulated deficit of $143.1 million.
Additionally, our operating plans are designed to help control operating costs, to increase revenue, and to raise additional capital so we can continue to generate sufficient cash flows to fund operations.
Additionally, our operating plans are designed to help control operating costs, to increase revenue so we can continue to generate sufficient cash flows to fund operations.
Net cash used in investing activities was approximately $50,000 and $75,000 for the years ended December 31, 2024 and 2023 respectively, Net cash used in financing activities was approximately $5,000 for the year ended December 31, 2024. This was primarily from principal payments on our finance lease obligation.
Net cash used in investing activities was approximately $0 and $50,000 for the years ended December 31, 2025 and 2024 respectively. Net cash used in financing activities was approximately $5,000 for each of the years ended December 31, 2025 and 2024. This was primarily from principal payments on our finance lease obligation.
Interest Income Interest income was approximately $94,000 for the year ended December 31, 2024, compared to approximately $64,000 for the ended December 31, 2023. The increase in interest income is due to higher interest rates earned on invested cash balances.
Interest Income Interest income was approximately $139,000 for the year ended December 31, 2025, compared to approximately $94,000 for the ended December 31, 2024. The increase in interest income is due to higher cash balances as well as higher interest rates earned on invested cash balances.
As of December 31, Liquidity and Capital Resources 2024 2023 Cash and cash equivalents $ 3,760 $ 4,307 Other current assets 4,538 4,098 Working capital 6,736 6,292 Stockholders’ equity 8,585 8,358 We operate under an Investment, Risk Management and Accounting Policy adopted by our Board of Directors.
As of December 31, Liquidity and Capital Resources 2025 2024 Cash and cash equivalents $ 5,400 $ 3,760 Other current assets 5,823 4,538 Working capital 8,456 6,736 Stockholders’ equity 10,202 8,585 We operate under an Investment, Risk Management and Accounting Policy adopted by our Board of Directors.
The following discussion should also be read in conjunction with the consolidated financial statements and notes included in Item 8, “Financial Statements and Supplemental Data,” of this Annual Report on Form 10-K. Business Overview We are a commercial-stage company that develops and sells high performance water solutions to the medical and commercial markets.
The following discussion should also be read in conjunction with the financial statements and notes included in Item 8, “Financial Statements and Supplemental Data,” of this Annual Report on Form 10-K. Business Overview Nephros is a commercial-stage company that develops and markets high-performance water filtration solutions for points of use, with a core focus on medical-grade water filtration.
We anticipate that our annual results of operations will be impacted for the foreseeable future by several factors, including market acceptance of our products, expense management, and progress in continuing to achieve positive operating cash flow. 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.
We anticipate that our annual results of operations will be impacted for the foreseeable future by several factors, including market acceptance of our products, expense management, and progress in continuing to achieve positive operating cash flow.
This decrease is primarily a result of losses on foreign currency transactions in 2023. 25 Liquidity and Capital Resources The following table summarizes our liquidity and capital resources as of December 31, 2024 and 2023 and is intended to supplement the more detailed discussion that follows. The amounts stated are expressed in thousands.
Liquidity and Capital Resources The following table summarizes our liquidity and capital resources as of December 31, 2025 and 2024 and is intended to supplement the more detailed discussion that follows. The amounts stated are expressed in thousands.
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, market and sell our products; ● 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.
In such event, the Company may need to take further actions to reduce its discretionary expenditures, including further reducing headcount, reducing spending on R&D projects, and reducing other variable costs. 27 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, market and sell our products; ● 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.
Net cash provided by operating activities in 2023 was primarily due to a decline in inventory of approximately $0.4 million, an increase in accrued expenses of approximately $0.5 million, partially offset by an increase in accounts receivable of approximately $0.2 million.
Net cash provided by operating activities in 2025 was primarily due to net income of approximately $1.2 million, and increase in accrued expenses of approximately $1 million, an increase in accounts payable of approximately $0.3 million, offset by an increase in accounts receivable of approximately $0.6 million, and an increase in inventory of approximately $0.7 million.
For a description of these new accounting standards, see “Note 2 – Summary of Significant Accounting Policies,” to our consolidated financial statements included in Item 8, “Financial Statements and Supplementary Data,” of this Annual Report on Form 10-K. 23 Critical Accounting Policies and Estimates Our discussion and analysis of our financial condition and results of operations is based on our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”).
For a description of these new accounting standards, see “Note 2 – Summary of Significant Accounting Policies,” to our financial statements included in Item 8, “Financial Statements and Supplementary Data,” of this Annual Report on Form 10-K.
Other (Expense), net Other expense was approximately $10,000 for the year ended December 31, 2024, compared to $44,000 for the year ended December 31, 2023.
Other (Expense), net Other expense was approximately $78,000 for the year ended December 31, 2025, compared to $10,000 for the year ended December 31, 2024. This increase is primarily a result of losses on foreign currency transactions in 2025.
Depreciation and Amortization Expense Depreciation and amortization expenses were $0.1 million for the year ended December 31, 2024, and $0.2 million for the year ended December 31, 2023.
Depreciation and Amortization Expense Depreciation and amortization expenses were approximately $0.1 million for the year ended December 31, 2025, and for the year ended December 31, 2024, respectively. 26 Selling, General and Administrative Expenses Selling, general and administrative expenses increased $1.3 million or 17%, primarily due to higher sales commissions and higher accrual for employee bonuses.
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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.
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Our medical filtration portfolio includes two product lines: infection control and dialysis water. The infection control products feature both microfilters (0.1 micron), which retain bacteria, and ultrafilters (0.005 micron), which retain bacteria, viruses, and endotoxins to address a broader spectrum of waterborne pathogens including and beyond Legionella and Pseudomonas.
Removed
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. Our commercial water filters improve the taste and odor of water and reduce biofilm, cysts, particulates, and scale build-up in downstream equipment.
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The dialysis products consist exclusively of ultrafilters, extending the same microbial and endotoxin retention capabilities to the purification of water and bicarbonate concentrate used in dialysis treatment, where endotoxin control is especially critical. All of our medical-grade filters are FDA 510(k)-cleared as Class II medical devices—a distinguishing feature that affirms their validated safety and performance in critical-use environments.
Removed
Our products are marketed primarily to the food service, hospitality, convenience store, and health care markets, and are also sold into medical institutions to supplement our medical filters. We previously held a majority stake in Specialty Renal Products, Inc. (“SRP”), a development-stage medical device company that was focused primarily on developing hemodiafiltration (“HDF”) technology.
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While these filters are widely used in healthcare settings, they have also been adopted across a range of other industries—including manufacturing, laboratories, aviation, and federal facilities—where water purity is essential to operational safety and compliance.
Removed
In May 2022, SRP received 510(k) clearance from the FDA for SRP’s second-generation model of the OLpūrH2H Hemodiafiltration System, which enables nephrologists to provide HDF treatment to patients with end stage renal disease. In January 2023, SRP management began exploring strategic partnerships to support a commercial launch of the HDF product but was unsuccessful in identifying a partner.
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In addition, we offer a line of commercial water filters that improve taste and odor, reduce biofilm formation and scale buildup, and remove cysts, particulates, and lead from water systems.
Removed
By late February 2023, SRP had nearly exhausted its capital resources and, due to its limited capital and lack of prospects for securing a strategic partnership or additional financing, the board of directors of SRP adopted a plan on March 6, 2023 to wind down SRP operations, liquidate its remaining assets and dissolve the company.
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With the recent release of our newest solution, validated for the reduction of Total PFAS (a mixture of seven PFAS compounds including PFOA, PFOS, PFHxS, PFNA, PFHpA, PFBS, and PFDA), our portfolio of products is further enhanced with the ability to address a broad spectrum of emerging and persistent waterborne contaminants.
Removed
That plan was approved by SRP’s stockholders on March 9, 2023, and on April 13, 2023, SRP filed a certificate of dissolution with the State of Delaware. SRP’s cash resources were sufficient to satisfy all of its outstanding liabilities other than its obligations to us under a loan with an outstanding balance of approximately $1.5 million.
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Our commercial filtration products are broadly applicable across industries and are especially valuable when used in tandem with our medical-grade filters to deliver comprehensive water-quality protection. Whether in clinical care, industrial operations, or public infrastructure, Nephros solutions support the universal need for safe, high-quality water. Across our product portfolio, we characterize revenue as either programmatic or emergency response.
Removed
Accordingly, SRP assigned to Nephros all of its remaining assets, including its intellectual property rights in the HDF2 device, in satisfaction of its outstanding loan balance. Although we have no current plans to do so, we may re-evaluate opportunities for HDF in the future. Recent Accounting Pronouncements We are subject to recently issued accounting standards, accounting guidance and disclosure requirements.
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Programmatic revenue reflects recurring procurement of filters used within ongoing clinical, treatment, or operational workflows, and following a replacement schedule based on filter life. Emergency response revenue represents the rapid deployment of filtration solutions in response to acute water-quality events, such as outbreaks, contamination concerns, system disruptions, or precautionary advisories, and is predominantly associated with infection control filtration.
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Total net revenues decreased 1% in the year ended December 31, 2024. This decrease was primarily driven by decreased revenue from emergency response orders, which were unusually large in 2023 but not repeated to the same degree in 2024.
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Emergency response orders are generally non-recurring in nature, although emergency deployments may lead to subsequent routine purchasing. 24 Recent Accounting Pronouncements We are subject to recently issued accounting standards, accounting guidance and disclosure requirements.
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We believe that one contributor to this decline is the reduced stringency of waterborne risk response in territories previously committed to both proactive filtration measures and robust corrective actions. Consequently, we experienced the effects of a relaxation of requirements for emergency relief and remediation.
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Critical Accounting Policies and Estimates Revenue Recognition A majority of our revenue is product sales which is recognized at a point-in-time when the product is shipped via external logistics providers and the other criteria of ASC 606 are met. Product revenue is recorded net of variable consideration which includes prompt pay discounts, other discounts, and returns and allowances.
Removed
However, the decrease in emergency response orders was partially offset by increased revenue from programmatic or recurring sales, which were 9% more than the same period in 2023. This increase in programmatic sales was due to the development of our newer sales personnel hired in 2023 and a number of new customer accounts.
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In addition to product revenue, the Company recognizes revenue related to royalty, service, and other agreements in accordance with the five-step model in ASC 606.
Removed
Gross Profit Margin Gross profit margin was approximately 62% for the year ended December 31, 2024, compared to approximately 59% for the year ended December 31, 2023. The increase of approximately 3 percentage points reflects more favorable terms with our largest supplier. Research and Development Expenses Research and development expenses increased 4% primarily due to an increase in headcount.
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Sales-based royalties, for which the license is the predominant item to which the royalties relate, are recognized (i) when the related sales occur, or (ii) when the performance obligation to which some or all of the royalty has been allocated has been satisfied (or partially satisfied). Service revenue is recognized at a point in time when service is completed.
Removed
Selling, General and Administrative Expenses Selling, general and administrative expenses decreased $1.2 million or 14%, primarily due to a decrease in stock compensation, bonus, and commission expense Interest Expense Interest expense was approximately $1,000 for the year ended December 31, 2024, compared to $2,000 for the year ended December 31, 2023.
Added
The Company is not entitled to payment until the point at which the service is completed. To recognize revenue for contracts that include a combination of products and services, we allocate the transaction price for the contract among the identified performance obligations on a relative standalone selling price basis.
Removed
We may continue to incur additional operating losses until such time, if ever, that we are able to consistently increase product sales to achieve profitability.
Added
We establish standalone selling price for our products based on the observable price of the respective product.
Removed
In such event, the Company may need to take further actions to reduce its discretionary expenditures, including further reducing headcount, reducing spending on R&D projects, and reducing other variable costs.
Added
For services where the standalone selling price is not directly observable through historical transactions, we estimate standalone selling price using expected cost-plus margin based on management judgment by considering available data, such as labor cost of providing the services and internal margin objectives which include market and competitive conditions.
Removed
Net cash used in financing activities was $79,000 for the year ended December 31, 2023. This was primarily from payments of $71,000 on our secured note, principal payments of approximately $7,000 on our finance lease obligation and principal payments of approximately $1,000 on our equipment financing debt.
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Standalone selling prices for our products and services are evaluated on a periodic basis using updated observable inputs and market information to ensure they continue to reflect an appropriate estimate of the price at which we would sell each promised good or service on a standalone basis.
Added
Our discussion and analysis of our financial condition and results of operations is based on our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”).
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Total net revenues increased 33% in the year ended December 31, 2025. This increase was primarily driven by higher programmatic revenue, reflecting strong reorder activity and the addition of several new active sites. In addition, we experienced solid growth in our emergency response business as well as significant growth in our service revenue.
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Gross Profit Margin Gross profit margin was approximately 62% for the years ended December 31, 2025 and December 31, 2024. Although we achieved higher margins during the first half of fiscal 2025, those margins eroded somewhat during the second half of the year primarily due to the impact of tariffs.
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We anticipate that tariffs will continue to affect our gross profit margins in future periods unless there is a change in U.S. tariff policy. Research and Development Expenses Research and development expenses increased 48% primarily due to an increase in headcount , and the related salary expense, as well as higher accrual for employee bonuses.
Added
Although, we were profitable in the quarter and year ended December 31, 2025, and the full year ended December 31, 2024, we may incur future operating losses if we are unable to maintain or increase our revenue.

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