Nephros Inc 10-Q for FY2026 Q3
Nephros Inc (NEPH)
About this 10-Q
Nephros Inc filed this 10-Q on November 5, 2026, covering the quarter ended September 30, 2026 (FY2026 Q3).
Headline figures
Quarter ended September 30, 2026, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $5.62M
- up 18.0% from $4.76M a year earlier
- Net income
- $512K
- up 51.9% from net income of $337K a year earlier
- Diluted EPS
- $0.05
- up 66.7% from $0.03 a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
FORM
(Mark One)
| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For
the quarterly period ended:
OR
| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from: _______ to _______
Commission
File Number:
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) | |
| (Address of principal executive offices) | (Zip Code) |
Registrant’s telephone number, including area code
N/A
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading symbol | Name of exchange on which registered | ||
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒ ☐ NO
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒ ☐ NO
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.:
| Large accelerated filer ☐ | Accelerated filer ☐ |
| Smaller
reporting company | |
| Emerging
growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ YES
As of November 2, 2026, shares of the registrant’s common stock, $ par value per share, were outstanding.
NEPHROS, INC.
TABLE OF CONTENTS
| 2 |
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
NEPHROS, INC.
CONDENSED BALANCE SHEETS
(In thousands, except share and per share amounts)
(Unaudited)
| September 30, 2026 | December 31, 2025 | |||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Accounts receivable, net | ||||||||
| Inventory | ||||||||
| Prepaid expenses and other current assets | ||||||||
| Total current assets | ||||||||
| Property and equipment, net | ||||||||
| Lease right-of-use assets | ||||||||
| Intangible assets, net | ||||||||
| Goodwill | ||||||||
| License and supply agreement, net | ||||||||
| Other assets | ||||||||
| TOTAL ASSETS | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | ||||||||
| Accrued expenses | ||||||||
| Current portion of lease liabilities | ||||||||
| Total current liabilities | ||||||||
| Lease liabilities, net of current portion | ||||||||
| TOTAL LIABILITIES | ||||||||
| STOCKHOLDERS’ EQUITY: | ||||||||
| Preferred stock, $ par value; shares authorized at September 30, 2026 and December 31, 2025; shares issued and outstanding at September 30, 2026 and December 31, 2025 | ||||||||
| Common stock, $ par value; shares authorized at September 30, 2026 and December 31, 2025; and shares issued and outstanding at September 30, 2026 and December 31, 2025, respectively | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| TOTAL STOCKHOLDERS’ EQUITY | ||||||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited condensed interim financial statements.
| 3 |
NEPHROS, INC.
CONDENSED STATEMENTS OF OPERATIONS
(In thousands, except share and per share amounts)
(Unaudited)
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||
| Net revenue: | ||||||||||||||||
| Product revenues | $ | $ | $ | $ | ||||||||||||
| Service, royalty, and other revenues | ||||||||||||||||
| Total net revenues | ||||||||||||||||
| Cost of goods sold | ||||||||||||||||
| Gross margin | ||||||||||||||||
| Operating expenses: | ||||||||||||||||
| Selling, general and administrative | ||||||||||||||||
| Research and development | ||||||||||||||||
| Depreciation and amortization | ||||||||||||||||
| Total operating expenses | ||||||||||||||||
| Operating income | ||||||||||||||||
| Other (expense) income: | ||||||||||||||||
| Interest expense | ( | ) | ( | ) | ||||||||||||
| Interest income | ||||||||||||||||
| Other income (expense), net | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Total other income: | ||||||||||||||||
| Income before income taxes | ||||||||||||||||
| Income tax expense | ( | ) | ( | ) | ( | ) | ||||||||||
| Net income | ||||||||||||||||
| Net income per common share, basic | $ | $ | $ | $ | ||||||||||||
| Net income per common share, diluted | $ | $ | $ | $ | ||||||||||||
| Weighted average common shares outstanding, basic | ||||||||||||||||
| Weighted average common shares outstanding, diluted | ||||||||||||||||
The accompanying notes are an integral part of these unaudited condensed interim financial statements.
| 4 |
NEPHROS, INC.
CONDENSED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY
(In thousands, except share amounts)
(Unaudited)
| Three and nine months ended September 30, 2026 | ||||||||||||||||||||
| Common Stock | Additional Paid-in | Accumulated | Total Stockholders’ | |||||||||||||||||
| Shares | Amount | Capital | Deficit | Equity | ||||||||||||||||
| Balance, December 31, 2025 | $ | $ | $ | ( | ) | $ | ||||||||||||||
| Net Income | - | |||||||||||||||||||
| Stock Option Exercises | ||||||||||||||||||||
| Issuance of vested restricted stock | ||||||||||||||||||||
| Stock-based compensation | ||||||||||||||||||||
| Balance, March 31, 2026 | $ | $ | $ | ( | ) | $ | ||||||||||||||
| Net Income | - | $ | $ | $ | $ | |||||||||||||||
| Cashless Stock Option Exercises | ||||||||||||||||||||
| Issuance of vested restricted stock | ||||||||||||||||||||
| Stock-based compensation | - | |||||||||||||||||||
| Balance, June 30, 2026 | $ | $ | $ | ( | ) | $ | ||||||||||||||
| Net Income | - | $ | $ | $ | $ | |||||||||||||||
| Cashless Stock Option Exercises | ||||||||||||||||||||
| Issuance of vested restricted stock | ||||||||||||||||||||
| Stock-based compensation | - | |||||||||||||||||||
| Balance, September 30, 2026 | $ | $ | $ | ( | ) | $ | ||||||||||||||
| Three and nine months ended September 30, 2025 | ||||||||||||||||||||
| Common Stock | Additional Paid-in | Accumulated | Total Stockholders’ | |||||||||||||||||
| Shares | Amount | Capital | Deficit | Equity | ||||||||||||||||
| Balance, December 31, 2024 | $ | $ | $ | ( | ) | $ | ||||||||||||||
| Net income | - | |||||||||||||||||||
| Issuance of vested restricted stock | ||||||||||||||||||||
| Stock-based compensation | - | |||||||||||||||||||
| Balance, March 31, 2025 | $ | $ | $ | ( | ) | $ | ||||||||||||||
| Net income | - | $ | $ | $ | $ | |||||||||||||||
| Cashless stock option exercises | ||||||||||||||||||||
| Stock-based compensation | - | |||||||||||||||||||
| Balance, June 30, 2025 | $ | $ | $ | ( | ) | $ | ||||||||||||||
| Balance | $ | $ | $ | ( | ) | $ | ||||||||||||||
| Net income | - | |||||||||||||||||||
| Cashless Stock option exercises | ||||||||||||||||||||
| Stock-based compensation | - | |||||||||||||||||||
| Balance, September 30, 2025 | $ | $ | $ | ( | ) | $ | ||||||||||||||
| Balance | $ | $ | $ | ( | ) | $ | ||||||||||||||
The accompanying notes are an integral part of these unaudited condensed interim financial statements.
| 5 |
NEPHROS, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
| Nine Months Ended September 30, | ||||||||
| 2026 | 2025 | |||||||
| OPERATING ACTIVITIES: | ||||||||
| Net income | $ | $ | ||||||
| Adjustments to reconcile net income to net cash provided by (used in) operating activities: | ||||||||
| Depreciation of property and equipment | ||||||||
| Amortization of intangible assets, license and supply agreement and finance lease right-of-use asset | ||||||||
| Stock-based compensation | ||||||||
| Inventory impairments and write offs | ||||||||
| Change in right-of-use assets | ||||||||
| (Gain) loss on foreign currency transactions | ( | ) | ( | ) | ||||
| Decrease (increase) in operating assets: | ||||||||
| Accounts receivable | ( | ) | ( | ) | ||||
| Inventory | ( | ) | ( | ) | ||||
| Prepaid expenses and other current assets | ||||||||
| (Decrease) increase in operating liabilities: | ||||||||
| Accounts payable | ( | ) | ||||||
| Accrued expenses | ( | ) | ||||||
| Lease liabilities | ( | ) | ( | ) | ||||
| Net cash (used in) provided by operating activities | ( | ) | ||||||
| FINANCING ACTIVITIES: | ||||||||
| Proceeds from exercise of options | ||||||||
| Principal payments on finance lease liability | ( | ) | ( | ) | ||||
| Net cash provided by (used in) financing activities | ( | ) | ||||||
| Net (decrease) increase in cash and cash equivalents | ( | ) | ||||||
| Cash and cash equivalents, beginning of period | ||||||||
| Cash and cash equivalents, end of period | $ | $ | ||||||
| Supplemental disclosure of cash flow information | ||||||||
| Cash paid for interest | $ | $ | ||||||
| Cash paid for income taxes | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited condensed interim financial statements.
| 6 |
NEPHROS, INC.
NOTES TO CONDENSED INTERIM FINANCIAL STATEMENTS (unaudited)
Note 1 – Organization and Nature of Operations
Nephros, Inc. (“Nephros” or the “Company”) was incorporated under the laws of the State of Delaware on April 3, 1997. The Company was founded by health professionals, scientists and engineers affiliated with Columbia University to develop advanced end stage renal disease (“ESRD”) therapy technology and products.
Beginning in 2009, Nephros introduced high-performance liquid purification filters to meet the demand for water purification in certain medical markets. The Company’s filters, generally classified as ultrafilters, are primarily used in 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. The Company also develops and sells water filtration products for commercial applications, focusing on the hospitality and food service markets.
The Company’s primary facility is located at 380 Lackawanna Place, South Orange, New Jersey 07079. This location along with our Whippany, NJ facility, houses the Company’s corporate headquarters, research, manufacturing, and distribution facilities.
Note 2 – Basis of Presentation and Liquidity
Interim Financial Information
The accompanying unaudited condensed interim financial statements have been prepared in accordance with generally accepted accounting principles (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 8 and Article 10 of Regulation S-X. The condensed balance sheet as of December 31, 2025 was derived from the Company’s audited financial statements. Accordingly, they do not include all of the information and footnotes required by GAAP for annual financial statements. In the opinion of management, the accompanying unaudited condensed interim financial statements contain all adjustments, consisting of only normal recurring adjustments, necessary for a fair statement of the Company’s financial position as of September 30, 2026, and its results of operations and changes in stockholders’ equity for the three and nine months ended September 30, 2026 and 2025, and its cash flows for the nine months ended September 30, 2026 and 2025. Results as of and for the nine months ended September 30, 2026 are not necessarily indicative of the results that may be expected for the year ending December 31, 2026.
The condensed interim financial statements and notes thereto should be read in conjunction with the financial statements and notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2025.
Segment Reporting
The
Company operates in only
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities, at the date of the financial statements, and the reported amount of revenues and expenses, during the reporting period. Actual results could differ materially from those estimates. Included in these estimates are assumptions about the collection of accounts receivable, value of inventories, useful life of fixed assets and intangible assets, the assessment of expected cash flows used in evaluating goodwill and other long-lived assets, the assessment of the ability to continue as a going concern and assumptions used in determining stock compensation such as expected volatility and risk-free interest rate.
| 7 |
Liquidity
Management has evaluated the Company’s projected cash flows, existing cash balances and expected obligations for the twelve-month period following the date these financial statements are issued. Based on this evaluation, management believes that the Company’s existing cash balances and projected cash flows from operations will be sufficient to fund its current operating plan and meet its obligations as they become due for at least twelve months from the date these financial statements are issued. The Company’s projections are dependent on, among other matters, continued revenue growth, customer collections, inventory management and control of operating expenses. Actual results may differ from management’s projections, and adverse changes in these factors could reduce the Company’s available liquidity.
The
Company generated net income for the three and nine months ended September 30, 2026 and the full year December 31, 2025. The Company
used cash in operating activities during the three and nine months ended September 30, 2026 primarily due to increases in inventory and
accounts receivable and a decrease in accounts payable. The Company generated cash from operations in the three and nine months ended
September 30, 2025. In addition, the company generated cash from operations in the twelve months ended December 31, 2025 of $
Recent Accounting Pronouncements, Not Yet Effective
In November 2024, the FASB issued ASU 2024-03, “ASC 220- Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures,” which requires entities, in the notes to financial statements, to disclose specified information about certain costs and expenses. The guidance is effective for the Company’s annual periods beginning after December 15, 2026, and interim periods within annual reporting periods beginning after December 15, 2027. Early adoption is permitted. The Company is assessing the impact of adopting this guidance on its financial statements.
In December 2025, the FASB issued ASU 2025-11, “Interim Reporting (Topic 270): Narrow-Scope Improvements” (“ASU 2025-11”). ASU 2025-11 is intended to update the guidance in Topic 270 by improving navigability of the required interim disclosures, clarifying when that guidance is applicable and adding a principle that requires entities to disclose events since the end of the last annual reporting period that have a material impact on the entity. ASU 2025-11 will be effective for the interim reporting periods within annual reporting periods beginning after December 15, 2027, with the option to early adopt at any time prior to the effective date and should be applied either prospectively to financial statements issued for reporting periods after the effective date or retrospectively to any or all prior periods presented in the financial statements. The Company is assessing the impact of adopting this guidance on its financial statements.
Concentration of Credit Risk
The Company deposits its cash in financial institutions. At times, such deposits may be in excess of insured limits. To date, the Company has not experienced any impairment losses on its cash. The Company also limits its credit risk with respect to accounts receivable by performing credit evaluations when deemed necessary.
Major Customers
For the three months ended September 30, 2026, and 2025, the following customers accounted for the following percentages of the Company’s revenues, respectively:
Schedule of Revenues and Accounts Receivable Percentage of Major Customers
| Customer | 2026 | 2025 | ||||||
| A | % | % | ||||||
| B | % | % | ||||||
| D | % | % | ||||||
| Total | % | % | ||||||
| 8 |
For the nine months ended September 30, 2026, and 2025, the following customers accounted for the following percentages of the Company’s revenues, respectively:
| Customer | 2026 | 2025 | ||||||
| A | % | % | ||||||
| B | % | % | ||||||
| C | % | % | ||||||
| Total | % | % | ||||||
As of September 30, 2026 and December 31, 2025, the following customers accounted for the following percentages of the Company’s accounts receivable, respectively:
| Customer | 2026 | 2025 | ||||||
| A | % | % | ||||||
| D | % | % | ||||||
| E | % | % | ||||||
| C | % | % | ||||||
| Total | % | % | ||||||
| % | % | |||||||
Accounts Receivable
The
Company recognizes an allowance that reflects a current estimate of credit losses expected to be incurred over the life of a financial
asset, including trade receivables. The Company continuously monitors collections and payments from its customers and maintains a provision
for estimated credit losses. The allowance for credit
losses reflects the best estimate of expected credit losses of the accounts receivable portfolio determined by
considering current information, forecasts of future economic conditions, industry knowledge and to some extent the Company’s
historical experience. The Company determines its allowance by pooling receivable balances
at the customer level and considering various factors, including individual credit risk associated with each customer, the current and
future condition of the general economy and industry knowledge. These credit risk factors are monitored on a quarterly basis and updated
as necessary. The Company writes off accounts receivable when they are determined to be uncollectible.
The Company had
IEEPA Tariff Refunds
On February 20, 2026, the U.S. Supreme Court ruled that the International Emergency Economic Powers Act (“IEEPA”) does not authorize the President to impose tariffs, thereby invalidating prior IEEPA-based tariff programs previously announced by the current U.S. presidential administration. Following the decision, the President issued an executive order directing that the collection of such IEEPA-based duties end “as soon as practicable.” Although the Supreme Court ruling may allow importers to claim refunds of such previously paid IEEPA-related duties, and recovery may require administrative proceedings or litigation, with timing and outcomes uncertain. On the same date, the U.S. Administration announced new temporary global tariffs under Section 122 of the Trade Act of 1974 to take effect February 24, 2026. Subsequently, the U.S. Court of International Trade ruled that the collected IEEPA tariffs in question must be refunded in accordance with the law. The U.S. Customs and Border Protection (“CBP”) has issued an official notice and launched a special tariff refund program to facilitate such refunds.
In the absence of specific GAAP applicable to tariff refunds, the Company applied the loss-recovery model in ASC 410-30 by analogy and evaluated whether recovery was probable under ASC 450-20. Any future recovery of tariff refund claims will be recognized as a receivable when the claim becomes probable and will be reflected as a reduction of cost of goods sold for inventory previously sold, or as a reduction of inventory for goods that remain unsold.
| 9 |
During
the second quarter of 2026, the Company received notification from its customs broker, who acts as the Company’s liaison with CBP,
that previously paid IEEPA tariffs of approximately $
The
accounting for the IEEPA tariff refund reflects the original treatment of the underlying tariff costs. During the nine months ended September
30, 2026, the Company recognized a total reduction in cost of goods sold of approximately $
Management concluded that the IEEPA tariff refund, and receipt thereof, does not have any impact on its contracts with customers. The tariff imposed on Company products did not impact its pricing with customers, as the Company did not pass the tariff costs through to customers, and its customer contracts do not contain tariff pass-through or refund provisions. Accordingly, the Company did not recognize a customer refund liability or contract modification related to the tariff recovery.
Goodwill
The
Company has one operating segment and one reporting unit for purposes of goodwill impairment testing. Goodwill represents the excess
of the purchase price over the fair value of the net tangible and intangible assets acquired in a business combination. In accordance
with ASC Topic 350, Intangibles-Goodwill and Other, the Company does not amortize goodwill but tests it for impairment annually
on October 1st of each fiscal year or more frequently if events or changes in circumstances indicate that goodwill may be
impaired. The Company operates as one reporting unit. When testing goodwill for impairment, the Company may first perform an optional
qualitative assessment. The qualitative factors evaluated by the Company include macro-economic conditions of the business environment,
overall financial performance, and other entity-specific factors as deemed appropriate. If under such qualitative analysis the Company
determines that it is not more likely than not that the reporting unit’s fair value is less than its carrying amount, then no further
analysis is necessary. If the Company determines that it is more likely than not that the fair value of its reporting unit is less than
its carrying amount, then the quantitative impairment test will be performed. Under the quantitative impairment test, if the carrying
amount of the Company’s reporting unit exceeds its fair value, the Company will recognize an impairment loss in an amount equal
to that excess but limited to the total amount of goodwill.
Note 3 – Revenue Recognition
The
Company disaggregates revenue from contracts with customers between product sales and revenue related to royalty, service, and other
agreements. The majority of the Company’s revenue is derived from product sales. Product sales are recognized at a point in time
when control of the product transfers to the customer, generally upon shipment via external logistics providers, in accordance with the
applicable shipping terms, provided that the other applicable criteria of ASC 606 have been met. Product revenue is recorded net of variable
consideration which includes prompt pay discounts, other discounts, and returns and allowances. The allowance for sales returns was approximately
$
| 10 |
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. 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. The Company is not entitled to payment until the point at which the service is completed. The Company provides services as either programmatic or emergency response. These services are invoiced separately at the time the respective services are completed and recognized as service revenue at standalone selling price.
Revenue from contracts with customers may include multiple deliverables which include a combination of the product and service performance obligations discussed above. The Company has determined that these performance obligations are distinct and therefore should be accounted for as separate performance obligations for revenue recognition purposes. For contracts that include multiple deliverables, the Company allocates the transaction price for the contract among the identified performance obligations on a relative standalone selling price basis. The Company establishes standalone selling price for its products based on the observable price of the respective product. For services where the standalone selling price is not directly observable through historical transactions, the Company estimates 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. 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 the Company would sell each promised good or service on a standalone basis.
The Company combines contracts with the same customer into a single contract for accounting purposes when the contracts are entered into at or near the same time and the contracts are negotiated as a single commercial package, consideration in one contract depends on the other contract, or the services are considered a single performance obligation.
Service,
royalty, and other revenues recognized for the three and nine months ended September 30, 2026, were approximately $
Note 4 – Fair Value Measurements
The Company measures certain financial instruments and other items at fair value.
To determine the fair value, the Company uses the fair value hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputs market participants would use to value an asset or liability and are developed based on market data obtained from independent sources. Unobservable inputs are inputs based on assumptions about the factors market participants would use to value an asset or liability.
To measure fair value, the Company uses the following fair value hierarchy based on three levels of inputs, of which the first two are considered observable and the last unobservable:
Level 1 - Quoted prices in active markets for identical assets or liabilities.
Level 2 - Inputs other than Level 1 that are observable for the asset or liability, either directly or indirectly, such as quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data by correlation or other means.
Level
3 - Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets
or liabilities. Value is determined using pricing models, discounted cash flow methodologies, or similar techniques and also includes
instruments for which the determination of fair value requires significant judgment or estimation.
| 11 |
Assets and Liabilities Measured at Fair Value on a Recurring Basis
The Company evaluates its financial assets and liabilities subject to fair value measurements on a recurring basis to determine the appropriate level of classification for each reporting period. At September 30, 2026 and December 31, 2025, the Company’s cash equivalents consisted of money market funds. The Company values its cash equivalents using observable inputs that reflect quoted prices for securities with identical characteristics and classify the valuation techniques that use these inputs as Level 1.
At September 30, 2026 and December 31, 2025, the fair value measurements of the Company’s assets and liabilities measured on a recurring basis were as follows:
Schedule of Assets and Liabilities Measured at Fair Value on Recurring Basis
| Fair Value Measurements at Reporting Date Using | ||||||||||||
Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | ||||||||||
| (in thousands) | ||||||||||||
| September 30, 2026 | ||||||||||||
| Money market funds | $ | |||||||||||
| Cash equivalents | $ | $ | $ | |||||||||
| December 31, 2025 | ||||||||||||
| Money market funds | $ | |||||||||||
| Cash equivalents | $ | $ | $ | |||||||||
Assets and Liabilities Not Measured at Fair Value on a Recurring Basis
The carrying amounts of cash, accounts receivable, accounts payable and accrued expenses approximate fair value due to the short-term maturity of these instruments.
The carrying amounts of the lease liabilities and equipment financing approximate fair value as of September 30, 2026 and December 31, 2025 because those financial instruments bear interest at rates that approximate current market rates for similar agreements with similar maturities and credit.
Note 5 – Inventory
Inventory is stated at the lower of cost or net realizable value using the first-in, first-out method and consists of raw materials and finished goods. The Company’s inventory components as of September 30, 2026 and December 31, 2025, were as follows:
Schedule of Inventory, Net
| September 30, 2026 | December 31, 2025 | |||||||
| (in thousands) | ||||||||
| Finished goods | $ | $ | ||||||
| Raw materials | ||||||||
| Total inventory | $ | $ | ||||||
| 12 |
Note 6 – Intangible Assets and Goodwill
Intangible Assets
Intangible assets as of September 30, 2026, and December 31, 2025 are set forth in the table below. Gross carrying values and accumulated amortization of the Company’s intangible assets by type are as follows:
Schedule of Intangible Assets
| September 30, 2026 | December 31, 2025 | |||||||||||||||||||||||
| Cost | Accumulated Amortization | Net | Cost | Accumulated Amortization | Net | |||||||||||||||||||
| (in thousands) | ||||||||||||||||||||||||
| Customer relationships | ( | ) | ( | ) | ||||||||||||||||||||
| Total intangible assets | $ | $ | ( | ) | $ | $ | $ | ( | ) | $ | ||||||||||||||
The
Company recognized amortization expense of approximately $
As of September 30, 2026, future amortization expense for each of the next five years is (in thousands):
Schedule of Future Amortization Expense
| Fiscal Years | ||||
| 2026 (excluding the nine months ended September 30, 2026) | ||||
| 2027 | ||||
| 2028 | ||||
| 2029 | ||||
| 2030 | ||||
| 2031 and thereafter | ||||
Goodwill
Goodwill
had a carrying value on the Company’s condensed balance sheets of $
Note 7 – License and Supply Agreement, net
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. (“Medica”), an Italy-based medical product manufacturing company, for the marketing and sale of certain filtration products based upon Medica’s proprietary Medisulfone ultrafiltration technology in conjunction with the Company’s filtration products, and for an exclusive supply arrangement for the filtration products. Medica is currently the Company’s sole supplier of the filter material used in certain of the Company’s products. Under the License and Supply Agreement, Medica granted to the Company an exclusive license, with right of sublicense, to market, promote, distribute, offer for sale and sell the filtration products worldwide, with certain limitations on territory, during the term of the License and Supply Agreement. In addition, the Company granted Medica an exclusive license under the Company’s intellectual property to make the filtration products during the term of the License and Supply Agreement. 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 had extended the term until December 31, 2028. 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. As of November 21, 2025 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. There was no interest recognized for the nine months ended September 30, 2026 or September 30, 2025.
| 13 |
In
exchange for the rights granted, we have agreed to make minimum annual aggregate purchases from Medica of €
In
exchange for the license, the gross value of the intangible asset capitalized was $
Note 8 – Leases
The
Company has operating leases for corporate offices, and office equipment. The leases have remaining lease terms of
Lease cost, as presented below, includes costs associated with leases for which right-of-use (“ROU”) assets have been recognized as well as short-term leases.
The components of total lease costs were as follows:
Schedule of Components of Lease Cost
Three months ended September 30, 2026 | Three months ended September 30, 2025 | |||||||
| (in thousands) | ||||||||
| Operating lease cost | $ | $ | ||||||
| Finance lease cost: | ||||||||
| Amortization of right-of-use assets | ||||||||
| Interest on lease liabilities | ||||||||
| Total finance lease cost | ||||||||
| Variable lease cost | ||||||||
| Total lease cost | $ | $ | ||||||
Nine months ended September 30, 2026 | Nine months ended September 30, 2025 | |||||||
| (in thousands) | ||||||||
| Operating lease cost | $ | $ | ||||||
| Finance lease cost: | ||||||||
| Amortization of right-of-use assets | ||||||||
| Interest on lease liabilities | ||||||||
| Total finance lease cost | ||||||||
| Variable lease cost | ||||||||
| Total lease cost | $ | $ | ||||||
| 14 |
Supplemental cash flow information related to leases was as follows:
Schedule of Supplemental Cash Flow Information Related to Leases
Nine months ended September 30, 2026 | Nine months ended September 30, 2025 | |||||||
| (in thousands) | ||||||||
| Cash paid for amounts included in the measurement of lease liabilities: | ||||||||
| Operating cash flows from operating leases | $ | $ | ||||||
| Financing cash flows from finance leases | $ | $ | ||||||
Supplemental balance sheet information related to leases was as follows:
Schedule of Supplemental Balance Sheet Information Related to Leases
| September 30, 2026 | December 31, 2025 | |||||||
| (in thousands) | ||||||||
| Operating lease | $ | $ | ||||||
| Finance lease | $ | $ | ||||||
| Current portion of | $ | $ | ||||||
| , net of current portion | ||||||||
| Total operating lease liabilities | $ | $ | ||||||
| Current portion of | $ | $ | ||||||
| , net of current portion | ||||||||
| Total finance lease liabilities | $ | $ | ||||||
| Weighted average remaining lease term | ||||||||
| Operating leases | ||||||||
| Finance leases | ||||||||
| Weighted average discount rate | ||||||||
| Operating leases | % | % | ||||||
| Weighted average discount rate, Operating leases | % | % | ||||||
| Finance leases | % | % | ||||||
| Weighted average discount rate, Finance leases | % | % | ||||||
As of September 30, 2026, maturities of lease liabilities were as follows:
Schedule of Maturities of Lease Liabilities
| Operating Leases | Finance Leases | |||||||
| (in thousands) | ||||||||
| Year ending December 31, | ||||||||
| 2026 (remaining three months) | $ | $ | ||||||
| 2027 | ||||||||
| 2028 | ||||||||
| Total future minimum lease payments | ||||||||
| Less imputed interest | ( | ) | ( | ) | ||||
| Total | $ | $ | ||||||
| 15 |
The fair value of stock options and restricted stock is recognized as stock-based compensation expense in the Company’s condensed statement of operations. The Company calculates stock-based compensation expenses in accordance with ASC 718. The fair value of stock-based awards is amortized over the vesting period of the award.
Stock Options
The Company granted stock options to purchase shares of common stock to employees and board members during the nine months ended September 30, 2026. The fair value of the stock options granted during the nine months ended September 30, 2026, was approximately $ million.
The fair value of each option grant is estimated on the date of grant using the Black-Scholes option pricing model.
The below assumptions for the risk-free interest rates, expected dividend yield, expected lives and expected stock price volatility were utilized for the stock options granted during nine months ended September 30, 2026.
| Assumptions for Option Grants | ||||
| Stock Price Volatility | % | |||
| Risk-Free Interest Rate | % | |||
| Expected Life (in years) | ||||
| Expected Dividend Yield | % | |||
The Company granted stock options to purchase shares of common stock to employees and board members during the nine months ended September 30, 2025. Of the stock options granted in the nine months ended September 30, 2025, are stock options with service based vesting conditions and, as such, are being expensed over the respective service period. The remaining stock options contain a performance condition that is not probable and therefore have no expense recognized as of September 30, 2026. The fair value of the stock options granted during the nine months ended September 30, 2025, was approximately $ million.
Stock-based compensation expense related to stock options was approximately $ and $ for the three months ended September 30, 2026 and 2025, respectively. For the three months ended September 30, 2026, approximately $ and $ are included in selling, general and administrative expenses and research and development expenses, respectively, on the accompanying condensed statement of operations. For the three months ended September 30, 2025, approximately $ and $ are included in selling, general and administrative expenses and research and development expenses, respectively, on the accompanying condensed statement of operations.
Stock-based compensation expense related to stock options was $ and $ for the nine months ended September 30, 2026 and 2025, respectively. For the nine months ended September 30, 2026, approximately $ and $ are included in selling, general and administrative expenses and research and development expenses, respectively, on the accompanying condensed statement of operations. For the nine months ended September 30, 2025, approximately $ and $ are included in selling, general and administrative expenses and research and development expenses, respectively, on the accompanying condensed statement of operations.
As of September 30, 2026, there was $ of total unrecognized compensation expense related to unvested stock options granted under the equity compensation plans, which will be amortized over the weighted average remaining requisite service period of years. This does not include approximately $ of unrecognized compensation related to the vesting conditions of options that are not probable to be achieved as of September 30, 2026.
| 16 |
Restricted Stock
Total
stock-based compensation expense for restricted stock on the Company’s condensed statement of operations was approximately $
and for the three months ended September 30, 2026 and 2025, respectively, which was included in selling, general and administrative
expenses in the accompanying statement of operations.
Total
stock-based compensation expense for restricted stock was approximately $ and $ for the nine months ended September 30, 2026,
and 2025, respectively. During the nine months ended September 30, 2026, shares of restricted stock were issued to board members
related to services rendered during the year ended December 31, 2025 or the quarters ended March 31, 2026 and June 30, 2026. As a result
of the issuance of the shares of restricted stock, approximately $
As of September 30, 2026, there was unrecognized compensation expense related to unvested restricted stock awards granted under the equity compensation plans.
Note 10 – Segment Information
The
Company operates in
The accounting policies for the Company’s single operating segment are the same as those described in the summary of significant accounting policies. The Company’s Chief Executive Officer is the Chief Operating Decision Maker (“CODM”). The CODM manages the Company’s business activities as a single operating and reportable segment. Accordingly, our CODM uses net income (loss) to measure segment profit or loss, allocate resources, and assess performance. The measure of segment assets is reported on the balance sheet as total assets.
The following is a summary of the significant revenue and expense categories, and net income (loss) provided to the CODM (in thousands):
Schedule of Net Income (Loss) for Segment
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||
| Net revenue: | ||||||||||||||||
| Product revenues | $ | $ | $ | $ | ||||||||||||
| Service, royalty, and other revenues | ||||||||||||||||
| Total net revenues | ||||||||||||||||
| Cost of goods sold (1) | ||||||||||||||||
| Gross Margin | ||||||||||||||||
| Operating expenses: | ||||||||||||||||
| Research and development | ||||||||||||||||
| Selling, general and administrative | ||||||||||||||||
| Other operating expenses (2) | ||||||||||||||||
| Total operating expenses | ||||||||||||||||
| Operating income | ||||||||||||||||
| Other income | ||||||||||||||||
| Income before income taxes | ||||||||||||||||
| Income tax expense | ( | ) | ( | ) | ( | ) | ||||||||||
| Net income | $ | $ | $ | $ | ||||||||||||
| (1) | |
| (2) |
| 17 |
Basic income per common share is calculated by dividing net income available to common shareholders by the number of weighted average common shares issued and outstanding. Diluted income per common share is calculated by dividing net income available to common shareholders by the weighted average number of common shares issued and outstanding for the period, plus amounts representing the dilutive effect from the exercise of stock options and warrants and unvested restricted stock, as applicable. The Company calculates dilutive potential common shares using the treasury stock method, which assumes the Company will use the proceeds from the exercise of stock options and warrants to repurchase shares of common stock to hold in its treasury stock reserves.
Schedule of Basic and Diluted Income (Loss) Per Common Share
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
| (In thousands, except share and per share data) | 2026 | 2025 | 2026 | 2025 | ||||||||||||
| Numerator: | ||||||||||||||||
| Net income | $ | $ | $ | $ | ||||||||||||
| Denominator: | ||||||||||||||||
| Basic weighted average common shares outstanding | ||||||||||||||||
| Effect of potentially dilutive options | ||||||||||||||||
| Diluted weighted average common shares outstanding | ||||||||||||||||
| Income per common share: | ||||||||||||||||
| Basic | $ | $ | $ | |||||||||||||
| Diluted | $ | $ | $ | |||||||||||||
Schedule of Antidilutive Securities Excluded from Computation of Earnings Per Share
| As of September 30, | ||||||||
| 2026 | 2025 | |||||||
| Shares underlying options outstanding | ||||||||
| Unvested restricted stock | ||||||||
Note 12 – Income Taxes
Our tax provision or benefit from income taxes for interim periods is determined using an estimate of our annual effective tax rate, adjusted for discrete items, if any, that are taken into account in the relevant period.
Our quarterly tax provision, and our quarterly estimate of our annual effective tax rate, is subject to significant variation due to several factors, including variability in accurately predicting our pre-tax and taxable income and loss and the mix of jurisdictions to which they relate.
The
Company recorded income tax expense of approximately $ and $
The Company continues to maintain a full valuation allowance against its deferred tax assets as management believes it is more likely than not that such assets will not be realized.
| 18 |
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion should be read in conjunction with our financial statements and notes thereto included in Item 1 of Part I of this Quarterly Report on Form 10-Q. This discussion includes forward-looking statements about our business, financial condition and results of operations including discussions about management’s expectations for our business. These statements represent projections, beliefs and expectations based on current circumstances and conditions and in light of recent events and trends, and these statements should not be construed either as assurances of performances or as promises of a given course of action. Instead, various known and unknown factors are likely to cause our actual performance and management’s actions to vary, and the results of these variances may be both material and adverse.
Business Overview
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. 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. 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. 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.
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. 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. 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. 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. Emergency response orders are generally non-recurring in nature, although emergency deployments may lead to subsequent routine purchasing.
Recent Developments
Supreme Court Tariff Ruling
In February 2026, the U.S. Supreme Court issued a ruling invalidating certain tariffs previously imposed by the U.S. presidential administration under the International Emergency Economic Powers Act (“IEEPA”). The administration subsequently invoked additional tariffs under other U.S. laws resulting in a rapidly changing tariff environment. In April 2026, the U.S. Customs and Border Protection agency (“CBP”) launched a platform to allow for the submission of IEEPA tariff refund requests.
| 19 |
During the nine months ended September 30, 2026, the Company received notification from CBP that a refund of approximately $647,000 had been approved. The Company subsequently received the refund during the same period, and the related receivable was fully settled as of September 30, 2026. During the nine months ended September 30, 2026, we recognized a total reduction in cost of goods sold of approximately $636,000, consisting of $624,000 recognized during the six months ended June 30, 2026, and an additional $12,000 recognized during the three months ended September 30, 2026, which represented the expense for IEEPA tariffs refunded with respect to inventory sold to customers since the tariffs were imposed in February 2025. Additionally, we recognized an $11,000 reduction in the carrying value of inventories on hand on our balance sheet as of September 30, 2026 for IEEPA tariffs previously capitalized as cost of inventory.
During the three months ended September 30, 2026, we received approximately $22,000 of statutory interest in connection with the refund, which was recognized in other income on the statement of operations.
Our Products
Water Filtration 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. 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. 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”). 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. 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.
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”). 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. 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. 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.
| 20 |
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. 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. They are typically installed post-reverse osmosis in water treatment rooms or upstream of dialysis machines. 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. 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. |
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. 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. 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.
According to the American Hospital Association’s most recent annual survey data (2024), there are approximately 6,100 hospitals in the U.S., representing more than 916,752 beds and approximately 35.7 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.
According to a September 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. 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.
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. These factors underscore the importance of effective water management and point-of-use filtration strategies to mitigate microbiological risk in critical-use healthcare settings.
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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. Compliance with these expectations is evaluated through routine survey and certification activities, during which CMS surveyors and accrediting organizations review whether facilities have established and implemented formal water management programs (“WMPs”), including documented governance, monitoring protocols, corrective actions, and records demonstrating ongoing execution. CMS guidance directs facilities to align their WMPs with prevailing industry standards, including ASHRAE Standard 188 and the CDC water management toolkit. While the underlying CMS expectations have remained in effect since 2017, enforcement and documentation requirements have become increasingly embedded in standard survey practice over time, particularly as healthcare facilities have faced heightened scrutiny of waterborne infection risks. 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. All models are FDA 510(k)-cleared and installed at the point of use, where they can support compliance goals, align with evolving standards, and provide additional protection for patients, staff, and visitors.
Dialysis Settings. Nephros dialysis water filters are widely deployed in both acute and chronic dialysis environments to enhance water safety and support the production of ultrapure dialysate. Our solutions provide retention of bacteria, viruses, and endotoxins in water and bicarbonate lines used to treat patients with kidney failure.
Hemodialysis requires the use of large volumes of purified water, often more than 100 liters per treatment. Clinics rely on reverse osmosis systems to generate this water and use ultrafilters downstream as a final barrier against microbial contaminants. Our filters are used in both fixed RO loops and portable systems and are validated for up to 12 months of service life in dialysis applications.
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. While precise counts of hemodialysis machines in use are not publicly reported on a routine national basis, industry sources indicate that the installed base in the United States likely exceeds 200,000 hemodialysis units, consistent with estimates used in market analyses. These dialysis facilities and machines represent a significant sustained demand environment for water purification and treatment technologies that support patient safety and the reliable operation of clinical dialysis care.
Nephros dialysis filters are validated for physical retention of bacteria, viruses, and endotoxins through size exclusion. All models are FDA 510(k)-cleared and installed within dialysis water systems, where they support the production of ultrapure water and bicarbonate concentrate used in hemodialysis treatment.
Foodservice and Hospitality. Our commercial product portfolio includes both carbon-based and carbon-free filtration solutions that address a variety of water-quality concerns common in foodservice and hospitality industries. These include but are not limited to taste and odor compounds, scale-forming minerals, and various particulates, with several membrane-based models capable of retaining particles down to 0.005 micron. In addition, our newest offering supports the validated reduction of Total PFAS, expanding our reach to customers concerned with long-term exposure to “forever chemicals” in water-fed equipment.
Over time, we believe that the same water safety management programs currently underway at medical facilities may migrate to commercial markets. As the epidemiology of waterborne pathogens expands, links to contamination sources will become more efficient and the data more readily available. In cases where those sources are linked to restaurants, hotels, office buildings and residential complexes, the 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. We believe, in time, most commercial buildings will need to follow the basic requirements of ASHRAE-188: create a water management plan, perform routine testing, and establish a plan to treat the building in the event of a positive test.
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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.
Critical Accounting Policies, Significant Judgements and Use of Estimates
Our unaudited condensed financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”). The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported expenses incurred during the reporting periods. Our estimates are based on our historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. We believe that the accounting policies discussed below are critical to understanding our historical and future performance, as these policies relate to the more significant areas involving management’s judgments and estimates.
Our critical accounting policies are described in our Annual Report on Form 10-K for the year ended December 31, 2025 filed with the SEC on March 12, 2026. During the nine months ended September 30, 2026, we adopted an accounting policy for expected tariff refunds.
In the absence of specific U.S. GAAP applicable to tariff refunds, we apply the loss-recovery model in ASC 410-30 by analogy and evaluate whether recovery is probable under ASC 450-20. Under this policy, we recognize a tariff refund receivable when recovery is probable, limited to the amount of previously incurred tariff costs. We elected to recognize recoveries related to both tariff costs previously recognized in earnings and tariff costs remaining capitalized in inventory. Amounts related to inventory previously sold are recognized as a reduction of cost of goods sold, while amounts related to inventory remaining on hand are recognized as a reduction of inventory. Determining whether recovery is probable requires significant judgment and consideration of the applicable legal rulings, the status and requirements of the CBP refund process, the eligibility and status of individual import entries, confirmations from our customs broker and other available evidence regarding collectability. Statutory interest associated with tariff refunds is accounted for separately as a gain contingency and is recognized when realized or realizable.
Except for the adoption of this tariff-refund accounting policy, there were no material changes to our critical accounting policies during the nine months ended September 30, 2026.
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.
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. 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. The Company is not entitled to payment until the point at which the service is completed.
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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. We establish standalone selling price for our products based on the observable price of the respective product. 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. 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.
Recent Accounting Pronouncements
We are subject to recently issued accounting standards, accounting guidance and disclosure requirements. For a description of these new accounting standards, see Note 2, “Basis of Presentation and Liquidity,” of the Notes to our Unaudited Interim Financial Statements contained in Item 1 of Part I of this Quarterly Report on Form 10-Q, which is incorporated herein by reference.
Results of Operations
Fluctuations in Operating Results
Our results of operations have fluctuated significantly from period to period in the past, including recently, and are likely to continue to do so in the future. We anticipate that our annual results of operations will be impacted in the foreseeable future by several factors, including market acceptance of our products, expense management, and our progress toward achieving positive operating cash flow.
Three Months Ended September 30, 2026 Compared to the Three Months Ended September 30, 2025
The following table sets forth our summarized results of operations for the three months ended September 30, 2026 and 2025 (in thousands, except percentages):
| $ | % | |||||||||||||||
| Increase | Increase | |||||||||||||||
| 2026 | 2025 | (Decrease) | (Decrease) | |||||||||||||
| Total net revenues | $ | 5,622 | $ | 4,764 | $ | 858 | 18 | % | ||||||||
| Cost of goods sold | 2,336 | 1,849 | 487 | 26 | % | |||||||||||
| Gross margin | 3,286 | 2,915 | 371 | 13 | % | |||||||||||
| Gross margin % | 58 | % | 61 | % | - | (3 | )% | |||||||||
| Selling, general and administrative expense | 2,425 | 2,229 | 196 | 9 | % | |||||||||||
| Research and development expense | 331 | 338 | (7 | ) | (2 | )% | ||||||||||
| Depreciation and amortization expense | 29 | 34 | (5 | ) | (15 | )% | ||||||||||
| Operating income | 501 | 314 | 187 | 60 | % | |||||||||||
| Interest income | 53 | 41 | 12 | 29 | % | |||||||||||
| Other income (expense), net | (42 | ) | (15 | ) | (27 | ) | (180 | )% | ||||||||
| Income before income taxes | 512 | 340 | 172 | 51 | % | |||||||||||
| Income tax expense | - | (3 | ) | 3 | 100 | % | ||||||||||
| Net income | $ | 512 | $ | 337 | $ | 175 | 52 | % | ||||||||
Net Revenues
Net revenue increased by $0.9 million, or 18%, in the third quarter of 2026 compared to the same period in 2025. This increase was primarily driven by growth in both product and service revenue. We had particularly strong growth in our emergency response revenue which outpaced growth in our programmatic revenue.
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Gross Profit Margin
Gross profit margin was approximately 58% for the three months ended September 30, 2026, compared to approximately 61% for the corresponding 2025 period. The decrease of approximately three percentage points was primarily attributable to higher inventory shipping and handling costs, including tariff expense, and growth in our service revenue, which yields lower gross margins than we realize from product sales.
Selling, General and Administrative Expense
Selling, general and administrative expense increased $196,000, or 9%, primarily due to an increase in headcount and an increase in professional fees.
Research and Development Expense
Research and development expense decreased by approximately $7,000.
Depreciation and Amortization Expense
Depreciation and amortization expenses were approximately $29,000 and $34,000, respectively, for the three months ended September 30, 2026 and 2025. The decrease was primarily due to the extension of the Medica license period.
Interest Income
Interest income was approximately $53,000 for the three months ended September 30, 2026 compared to approximately $41,000 for the three months ended September 30, 2025. Interest income for the three months ended September 30, 2026 included approximately $22,000 of interest received in connection with the IEEPA tariff refund.
Other Income (Expense), net
Other expense was approximately $42,000 and $15,000 for the three months ended September 30, 2026 and September 30, 2025, respectively, primarily as a result of losses on foreign currency transactions.
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Nine Months Ended September 30, 2026 Compared to the Nine Months Ended September 30, 2025
The following table sets forth our summarized results of operations for the nine months ended September 30, 2026 and 2025 (in thousands, except percentages):
| $ | % | |||||||||||||||
| Increase | Increase | |||||||||||||||
| 2026 | 2025 | (Decrease) | (Decrease) | |||||||||||||
| Total net revenues | $ | 16,851 | $ | 14,060 | $ | 2,791 | 20 | % | ||||||||
| Cost of goods sold | 6,546 | 5,196 | 1,350 | 26 | % | |||||||||||
| Gross margin | 10,305 | 8,864 | 1,441 | 16 | % | |||||||||||
| Gross margin % | 61 | % | 63 | % | - | (2 | )% | |||||||||
| Selling, general and administrative expense | 7,364 | 6,684 | 680 | 10 | % | |||||||||||
| Research and development expense | 1,043 | 944 | 99 | 10 | % | |||||||||||
| Depreciation and amortization expense | 87 | 108 | (21 | ) | (19 | )% | ||||||||||
| Operating income | 1,811 | 1,128 | 683 | 61 | % | |||||||||||
| Interest expense | (1 | ) | (1 | ) | - | - | % | |||||||||
| Interest income | 115 | 85 | 30 | 35 | % | |||||||||||
| Other income (expense), net | (63 | ) | (68 | ) | 5 | 7 | % | |||||||||
| Income before income taxes | $ | 1,862 | $ | 1,144 | $ | 718 | 63 | % | ||||||||
| Income tax expense | (13 | ) | (12 | ) | (1 | ) | 8 | % | ||||||||
| Net income | $ | 1,849 | $ | 1,132 | $ | 717 | 63 | % | ||||||||
Net Revenues
Net revenue increased by $2.8 million, or 20%, for the nine months ended September 30, 2026, compared to the same period in 2025. This increase was primarily driven by growth in product revenue, attributable to both our programmatic and increased emergency response business. We also experienced growth in both our commercial products and service revenue.
Gross Profit Margin
Gross profit margin was approximately 61% for the nine months ended September 30, 2026, compared to approximately 63% for the corresponding 2025 period. The decrease of approximately two percentage points was primarily attributable to increased product costs due to the weakening of the U.S. dollar compared to the Euro, and rapid revenue growth from our commercial products offerings and services revenue, both of which yield lower gross margins than our infection control business. However, our gross margins significantly benefited from our recognition during the 2026 period of the IEEPA tariff refund of approximately $0.6 million, which was recognized as a reduction of cost of goods sold during the nine months ended September 30, 2026. This refund reflects tariffs paid by us between the period from April 2025 to February 2026. Approximately $0.3 million of this tariff refund corresponds to purchased inventory that we converted to revenue in 2026. The remaining approximately $0.3 million of the refunded tariffs correspond to purchased inventory that we converted to revenue in 2025, of which approximately $0.2 million corresponds to purchased inventory that we converted to revenue in the nine months ended September 30, 2025. Although the IEEPA tariffs were declared invalid by the U.S. Supreme Court in February 2026, the current U.S. administration has imposed tariffs using other statutory bases, which remain in effect. Accordingly, we expect that our gross profit margin will continue to face headwinds as a result of current U.S. tariff policy.
Selling, General and Administrative Expense
Selling, general and administrative expense increased $0.7 million, or 10%, primarily due to an increase in headcount and an increase in professional fees.
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Research and Development Expense
Research and development expense increased by approximately $99,000, or 10%, primarily due to higher salary expense driven by increased headcount.
Depreciation and Amortization Expense
Depreciation and amortization expenses were approximately $87,000 and $108,000, respectively, for the nine months ended September 30, 2026 and 2025. The decrease was primarily due to the extension of the Medica license period.
Interest Income
Interest income was approximately $115,000 for the nine months ended September 30, 2026 compared to approximately $85,000 for the nine months ended September 30, 2025.
Other Income (Expense), net
Other expense was approximately $63,000 for the nine months ended September 30, 2026, and $68,000 for the nine months ended September 30, 2025, primarily as a result of gains and losses on foreign currency transactions.
Liquidity and Capital Resources
The following table summarizes our liquidity and capital resources as of September 30, 2026 and December 31, 2025 and is intended to supplement the more detailed discussion that follows. The amounts stated are expressed in thousands.
| Liquidity and Capital Resources | September 30, 2026 | December 31, 2025 | ||||||
| Cash and cash equivalents | $ | 4,546 | $ | 5,400 | ||||
| Other current assets | $ | 8,710 | $ | 5,823 | ||||
| Working capital | $ | 10,847 | $ | 8,456 | ||||
| Stockholders’ equity | $ | 12,548 | $ | 10,202 | ||||
As of September 30, 2026, we had an accumulated deficit of approximately $141 million. Although we were profitable in the three and nine months ended September 30, 2026 and the full year ended December 31, 2025, we may incur future operating losses if we are unable to maintain or increase our revenue.
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 Quarterly Report on Form 10-Q. Additionally, our operating plans are designed to help control operating costs and to increase revenue so we can continue to generate sufficient cash flows to fund operations. If there were a decrease in the demand for our products due to either economic or competitive conditions, or if we are otherwise unable to achieve our plan or achieve our anticipated operating results, there could be a significant reduction in liquidity due to our possible inability to cut costs sufficiently. 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.
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. |
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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 approximately $1.1 million for the nine months ended September 30, 2026, compared to net cash provided by operating activities of approximately $1.4 million for the nine months ended September 30, 2025. Although we had negative cash flow in the nine months ended September 30, 2026, net income was $1.8 million for that period. The favorable impacts were more than offset by an increase in inventory of $1.8 million, an increase in accounts receivable of $1.1 million, and a decrease in accrued expenses of approximately $0.3 million. The increase in inventory primarily reflects the timing of inventory purchases to support revenue growth and our efforts to improve in-stock levels of fast-selling items. We also accelerated certain purchases ahead of our primary supplier’s annual summer shutdown in August. We believe we have sufficient inventory to support growth over the next twelve months and will work to improve inventory turns and manage the business more efficiently to improve cash flow from operations. Net cash provided by operating activities in 2025 was primarily due to net income of approximately $1.1 million and an increase in accrued expenses of approximately $0.7 million, offset by an increase in accounts receivable of approximately $0.9 million.
We had no investing activities for both the nine months ended September 30, 2026 and September 30, 2025.
Net cash provided by financing activities was approximately $286,000 for the nine months ended September 30, 2026, primarily due to cash exercises of stock options, compared to net cash used of approximately $4,000 for the same period in 2025, primarily due to payments on our equipment financing debt.
Off-Balance Sheet Arrangements
We did not have any off-balance sheet arrangements as of September 30, 2026.
Forward-Looking Statements
The Private Securities Litigation Reform Act of 1995 provides a “safe harbor” for forward-looking statements. Certain statements in this Quarterly Report on Form 10-Q constitute “forward-looking statements.” Such statements include statements regarding the efficacy and intended use of our technologies under development, the timelines and strategy for bringing such products to market, the timeline for regulatory review and approval of our products, the availability of funding sources for continued development of such products, and other statements that are not historical facts, including statements which may be preceded by the words “intends,” “may,” “will,” “plans,” “expects,” “anticipates,” “projects,” “predicts,” “estimates,” “aims,” “believes,” “hopes,” “potential” or similar words. Forward-looking statements are not guaranties of future performance, are based on certain assumptions and are subject to various known and unknown risks and uncertainties, many of which are beyond our control. Actual results may differ materially from the expectations contained in the forward-looking statements. Factors that may cause such differences include, but are not limited to, the risks that:
| ● | we face significant challenges in obtaining market acceptance of our products, which, if not obtained, could adversely affect our potential sales and revenues; | |
| ● | product-related deaths or serious injuries or product malfunctions could trigger recalls, class action lawsuits and other events that could cause us to incur expenses and may also limit our ability to generate revenues from such products; | |
| ● | we face potential liability associated with the production, marketing and sale of our products, and the expense of defending against claims of product liability could materially deplete our assets and generate negative publicity, which could impair our reputation; | |
| ● | to the extent our products or marketing materials are found to violate any provisions of the U.S. Food, Drug and Cosmetic Act (the “FDC Act”) or any other statutes or regulations, we could be subject to enforcement actions by the U.S. Food and Drug Administration (the “FDA”) or other governmental agencies; | |
| ● | we may not be able to obtain funding when needed or on terms favorable to us in order to continue operation; | |
| ● | we may not have sufficient capital to successfully implement our business plan; | |
| ● | we may not be able to effectively market our products; | |
| ● | we may not be able to sell our water filtration products at competitive prices or profitably; | |
| ● | we may encounter problems with our suppliers, manufacturers, and distributors; |
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| ● | we may experience increased costs and/or disruptions in our supply chain due to the imposition of U.S. tariffs; | |
| ● | fluctuations in the exchange rate between the U.S. dollar and the Euro may increase our product costs and adversely affect our gross margins; | |
| ● | we may encounter unanticipated internal control deficiencies or weaknesses or ineffective disclosure controls and procedures; | |
| ● | we may not be able to obtain appropriate or necessary regulatory approvals to achieve our business plan; | |
| ● | we may not be able to secure or enforce adequate legal protection, including patent protection, for our products; and | |
| ● | we may not be able to achieve sales growth in key geographic markets. |
More detailed information about us and the risk factors that may affect the realization of forward-looking statements, including the forward-looking statements in this Quarterly Report on Form 10-Q, is set forth in our filings with the U.S. Securities and Exchange Commission (the “SEC”), including our Annual Report on Form 10-K for the fiscal year ended December 31, 2025 and our other reports filed with the SEC. We urge investors and security holders to read those documents free of charge at the SEC’s web site at www.sec.gov. We do not undertake to publicly update or revise our forward-looking statements as a result of new information, future events or otherwise, except as required by law.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Not required for smaller reporting companies.
Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
We maintain a system of disclosure controls and procedures, as defined in Rule 13a-15(e) or Rule 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), which is designed to provide reasonable assurance that information required to be disclosed in our reports filed pursuant to the Exchange Act is accumulated and communicated to management in a timely manner. Management recognizes that any disclosure controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives. Because there are inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud have been or will be detected.
As required by Rules 13a-15 and 15d-15 under the Exchange Act, the Chief Executive Officer and Chief Financial Officer carried out an evaluation of the effectiveness of the design and operation of the disclosure controls and procedures as of September 30, 2026. Based upon this evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that the disclosure controls and procedures were not effective as of September 30, 2026, due to the existence of a material weakness in our internal control over financial reporting, as discussed below. Notwithstanding such material weakness, management believes that the financial statements included in this Quarterly Report on Form 10-Q present fairly in all material respects the financial position, results of operations and cash flows for the period presented.
Material Weakness in Internal Control Over Financial Reporting
As previously disclosed in Part I, Item 4 of our Quarterly Report on Form 10-Q for the period ended June 30, 2025, management identified a material weakness in our internal control over financial reporting related to the recognition of revenue from contracts that included a combination of products sales and service-based deliverables and the application of ASC 606. While management determined that both performance obligations were delivered at a point-in-time, the contract’s transaction price was not allocated based on the respective performance obligations’ relative standalone selling price. Management noted a lack of internal control over contract identification as well as a lack of internal control over evaluating contracts for proper revenue recognition under U.S. GAAP. The material weakness described above did not result in any material misstatement in our financial statements or disclosures for any period presented in the accompanying financial statements.
In response to the material weakness, with the oversight of the board of directors, management worked with its outside accounting consultants to establish controls and protocols designed to properly recognize revenue from contracts with multiple performance obligations while ensuring appropriate accounting for all material sales contracts. Specifically, we developed a process to correctly price product and service revenues on a standalone basis in order to properly allocate revenue from combined contracts between product and other revenues (service). We also implemented new controls to ensure that we properly recognize the specific point in time at which contracted services are completed and approved by the customer. In addition to developing internal processes and controls, we provided additional training to our sales team, to properly capture the relevant information needed when we price contracts and when contracted services are completed by us and approved by the customer. We will consider the material weakness to be fully remediated once these additional controls operate for a sufficient period of time and our management has concluded, through testing, that these controls are operating effectively.
Changes in Internal Control Over Financial Reporting
Other than our remediation efforts with respect to the material weakness described above, there were no changes in our internal control over financial reporting that occurred during our most recent fiscal quarter that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II - OTHER INFORMATION
Item 1A. Risk Factors
As a smaller reporting company, we are not required to provide disclosure pursuant to this item. However, in addition to other information set forth in this Quarterly Report on Form 10-Q, including the important information in the section entitled “Forward Looking Statements,” you should carefully consider the “Risk Factors” in Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2025 for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in this Quarterly Report on Form 10-Q. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial might materially adversely affect our actual business, financial condition and/or operating results.
Item 5. Other Information
Rule 10b5-1 Trading Arrangements
During
the three months ended September 30, 2026, none of our directors or officers
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Item 6. Exhibits
EXHIBIT INDEX
| * | Filed herewith | |
| ** | Furnished herewith. | |
| † | Management contract or compensatory plan arrangement. |
| 31 |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| NEPHROS, INC. | ||
| Date: November 5, 2026 | By: | /s/ Robert Banks |
| Name: | Robert Banks | |
| Title: | President, Chief Executive Officer (Principal Executive Officer) | |
| Date: November 5, 2026 | By: | /s/ Judy Krandel |
| Name: | Judy Krandel | |
| Title: | Chief Financial Officer (Principal Financial and Accounting Officer) | |
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Exhibit 31.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
UNDER SECTION 302 OF THE SARBANES-OXLEY ACT
I, Robert Banks, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of Nephros, Inc.
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
| Date: November 5, 2026 | By: | /s/ Robert Banks |
| Name: | Robert Banks | |
| Title: | President, Chief Executive Officer (Principal Executive Officer) |
Exhibit 31.2
CERTIFICATION OF CHIEF FINANCIAL OFFICER
UNDER SECTION 302 OF THE SARBANES-OXLEY ACT
I, Judy Krandel, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of Nephros, Inc.
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
| Date: November 5, 2026 | By: | /s/ Judy Krandel |
| Name: | Judy Krandel | |
| Title: | Chief Financial Officer (Principal Financial and Accounting Officer) |
Exhibit 32.1
Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
In connection with the Quarterly Report on Form 10-Q of Nephros, Inc. (the “Company”) for the period ended September 30, 2026 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, Robert Banks, President, Chief Executive Officer of the Company, certifies that:
| 1. | the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
| 2. | the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
| By: | /s/ Robert Banks | |
| Name: | Robert Banks | |
| Title: | President, Chief Executive Officer (Principal Executive Officer) | |
| Dated: November 5, 2026 | ||
Exhibit 32.2
Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
In connection with the Quarterly Report on Form 10-Q of Nephros, Inc. (the “Company”) for the period ended September 30, 2026 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, Judy Krandel, Chief Financial Officer of the Company, certifies that:
| 1. | the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
| 2. | the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
| By: | /s/ Judy Krandel | |
| Name: | Judy Krandel | |
| Title: | Chief Financial Officer (Principal Financial and Accounting Officer) | |
| Date: | November 5, 2026 |