Filed 2026-03-12 · Period ending 2025-12-31 · 34,876 words · SEC EDGAR
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# NEPHROS INC (NEPH) — 10-K **Filed:** 2026-03-12 **Period ending:** 2025-12-31 **Accession:** 0001493152-26-009848 **Source:** [SEC EDGAR](https://www.sec.gov/Archives/edgar/data/1196298/000149315226009848/) **Origin leaf:** f2f782c778eaad6c424969226d19bd6303a94d69aa8e530f27b9f3d7dac58cb7 **Words:** 34,876 --- ** UNITED STATES** **SECURITIES AND EXCHANGE COMMISSION** **WASHINGTON, DC 20549** **FORM 10-K** | | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | | For the fiscal year ended December 31, 2025 | | 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 001-32288** **NEPHROS, INC.** (Exact name of registrant specified in its charter) | Delaware | | 13-3971809 | | | (State or Other Jurisdiction of Incorporation or Organization) | | (I.R.S. Employer Identification No.) | | **380 Lackawanna Place** **South Orange, NJ 07079** (Address of Principal Executive Offices) **(201) 343-5202** (Telephone Number, Including Area Code) Securities registered pursuant to Section 12(b) of the Act: | Title of each class | | Trading symbol | | Name of exchange on which registered | | | Common stock, par value $0.001 per share | | NEPH | | The Nasdaq Stock Market LLC | | Securities registered pursuant to Section 12(g) of the Exchange Act: **None** Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes No Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. Yes No 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. Yes 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). Yes 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 emerging growth company. See 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 | | | Non-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 has filed a report on and attestation to its managements assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrants executive officers during the relevant recovery period pursuant to 240.10D-1(b). Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No The aggregate market value of the voting stock held by non-affiliates of the registrant, as of June 30, 2025, was $27,317,372. Such aggregate market value was computed by reference to the closing price of the common stock as reported on the Nasdaq Stock Market on June 30, 2025. For purposes of making this calculation only, the registrant has defined affiliates as including only directors and executive officers and stockholders holding greater than 10% of the voting stock of the registrant as of June 30, 2025. As of March 12, 2026, there were 10,644,268 shares of the registrants common stock, $0.001 par value, outstanding. **DOCUMENTS INCORPORATED BY REFERENCE** Certain portions of the registrants proxy statement to be filed with the Securities and Exchange Commission in connection with the 2026 Annual Meeting of Stockholders (the 2026 Proxy Statement) are incorporated by reference into Part III of this Annual Report on Form 10-K. The 2026 Proxy Statement will be filed within 120 days of December 31, 2025. | | | **NEPHROS, INC.** **TABLE OF CONTENTS** | PART I | 4 | | | | Item 1. Business | 4 | | | | Item 1A. Risk Factors | 11 | | | | Item 1B. Unresolved Staff Comments | 21 | | | | Item 1C. Cybersecurity | 21 | | | | Item 2. Properties | 23 | | | | Item 3. Legal Proceedings | 23 | | | | Item 4. Mine Safety Disclosures | 23 | | | PART II | 24 | | | | Item 5. Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities | 24 | | | | Item 6. Reserved | 24 | | | | Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations | 24 | | | | Item 7A. Quantitative and Qualitative Disclosures About Market Risk | 28 | | | | Item 8. Financial Statements and Supplementary Data | 29 | | | | Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure | 51 | | | | Item 9A. Controls and Procedures | 51 | | | | Item 9B. Other Information | 51 | | | PART III | 52 | | | | Item 10. Directors, Executive Officers and Corporate Governance | 52 | | | | Item 11. Executive Compensation | 52 | | | | Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters | 52 | | | | Item 13. Certain Relationships and Related Transactions, and Director Independence | 52 | | | | Item 14. Principal Accounting Fees and Services | 52 | | | PART IV | 52 | | | | Item 15. Exhibits, Financial Statement Schedules | 52 | | | | Item 16. Form 10K Summary | 55 | | | SIGNATURES | 56 | | | 2 | | **FORWARD LOOKING STATEMENTS** The Private Securities Litigation Reform Act of 1995 provides a safe harbor for forward-looking statements. Certain statements in this Annual Report on Form 10-K 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 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 that 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 guarantees 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 operations; | | | | we may not have sufficient capital to successfully implement our business plan; | | | | we may not be able to effectively market and sell our products in new or existing markets; | | | | we may not be able to sell our water filtration products at competitive prices or profitably; | | | | we may experience increased costs and/or disruptions in our supply chain due to the imposition of U.S. tariffs; | | | | 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 Annual Report on Form 10-K, is set forth in our filings with the U.S. Securities and Exchange Commission (the SEC), including our other periodic reports filed with the SEC. We urge investors and security holders to read those documents free of charge at the SECs web site at www.sec.gov. We do not undertake to publicly update or revise our forward-looking statements because of new information, future events or otherwise, except as required by law. | 3 | | **PART I** **Item 1. Business Overview** Nephros is a commercial-stage company that develops and markets high-performance water filtration solutions for points of use, with a core focus on medical-grade water filtration. Our medical filtration portfolio includes two product lines: infection control and dialysis water. The infection control segment features both microfilters (0.1 micron), which retain bacteria, and ultrafilters (0.005 micron), which retain bacteria, viruses, and endotoxins to address a broader spectrum of waterborne pathogens including and beyond *Legionella* and *Pseudomonas*. The dialysis segment consists exclusively of ultrafilters, extending the same microbial and endotoxin retention capabilities to the purification of water and bicarbonate concentrate used in dialysis treatment, where endotoxin control is especially critical. All of our medical-grade filters are FDA 510(k)-cleared as Class II medical devicesa 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 industriesincluding manufacturing, laboratories, aviation, and federal facilitieswhere 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. **Our Products** We develop and sell point-of-use water filtration products used in both medical and commercial applications. Our water filtration products employ multiple filtration technologies, as described below. For medical applications, we manufacture both ultra- and microfilters using polysulfone hollow fiber membranes that retain microbiological contaminants through physical size exclusion. 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. *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 Commissions 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. | | | 4 | | Additional Use Cases Beyond healthcare and foodservice settings, Nephros filters are also deployed in laboratories, manufacturing facilities, aviation environments, and government buildings, where water purity is critical to safety, compliance, or system performance. 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 Associations most recent annual survey data (2023), there are approximately 6,093 hospitals in the U.S., representing more than 913,000 beds and approximately 34.4 million inpatient admissions annually. These facilities rely on extensive internal water systems to support patient care, including handwashing, bathing, medical device reprocessing, dialysis, and other clinical and operational uses. According to a June 2025 report from the U.S. Centers for Disease Control and Prevention (CDC), on any given day, approximately one in 31 hospitalized patients has at least one healthcare-associated infection (HAI), underscoring the scale of infection risk within hospital environments. 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. 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 Centers for Disease Control and Prevention (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. | 5 | | *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. 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. **Corporate Information** We were incorporated under the laws of the State of Delaware in April 1997. Our principal executive offices are located at 380 Lackawanna Place, South Orange, New Jersey 07079, and our telephone number is (201) 343-5202. We also have an office in Whippany, New Jersey. For more information about Nephros, please visit our website at *www.nephros.com*. We are not including the information on our website as a part of, nor incorporating it by reference into, this Annual Report on Form 10-K. | 6 | | **Manufacturing and Suppliers** We do not, and do not intend to in the near future, manufacture any of our medical device filtration products. We do manufacture some of our commercial filtration products in our facility in South Orange, New Jersey. In April 2012, we entered into a License and Supply Agreement (as thereafter amended, the License and Supply Agreement) with Medica S.p.A. (Medica), an Italy-based medical product manufacturing company, for the marketing and sale of certain filtration products based upon Medicas proprietary Medisulfone ultrafiltration technology in conjunction with the Companys filtration products, and for an exclusive supply arrangement for the filtration products. Under the License and Supply Agreement, as amended, Medica granted us 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 to Medica an exclusive license under the Companys 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 Medicas proprietary Versatile microfiber technology and certain filtration products based on Medicas proprietary Medisulfone ultrafiltration technology. In November 2025, the Company signed a new agreement with Medica which extends the term until December 31, 2030, unless earlier terminated by either party in accordance with the terms of the License and Supply Agreement. In exchange for the rights granted, the Company has agreed to make minimum annual aggregate purchases from Medica of 4,976,000, 5,349,000, 5,750,000, 6,000,000 and 6,300,000 for the years 2026, 2027, 2028, 2029 and 2030, respectively. Under the November 2025 agreement, we have agreed to pay interest per month at the EURIBOR 360-day rate plus 500 basis points calculated on the principal amount of any outstanding invoices that are overdue by more than 15 days beyond the original payment terms. The Company has the right to terminate the License and Supply Agreement for convenience upon 90 days prior written notice. Medica may terminate the License and Supply Agreement upon written notice if the Company fails to cure a monetary breach thereunder within 30 days after Medica provides written notice thereof to the Company. Either the Company or Medica may terminate the License and Supply Agreement if the other party is in material breach and such breach is not cured within the specified cure period. Additionally, either the Company or Medica may terminate the License and Supply Agreement in the event of specified insolvency events involving the other party. **Sales and Marketing** Our New Jersey headquarters oversees global sales and marketing activity of our ultrafilter products. We work with multiple distributors for our ultrafilter products in the hospital and dialysis water markets. For the foodservice and hospitality markets, as discussed above, we had contracted with Donastar LLC as our exclusive distributor. Effective September 2024, we ended our exclusive relationship with Donastar. Although Donastar continues to distribute our products on a non-exclusive basis, we are broadening our market reach through new distributor relationships. For other prospective markets for our ultrafilter products, we are pursuing alliance opportunities for joint product development and/or distribution. Our ultrafilter manufacturer in Europe shares certain intellectual property rights with us for one of our dual stage ultrafilter designs. **Research and Development** Our research and development efforts continue on several fronts directly related to our current product lines. For the ultrafiltration systems business, we are continually working with existing and potential distributors of ultrafilter products to develop solutions to meet customer needs. **** **Major Customers** For the years ended December 31, 2025 and 2024, the following customers accounted for the following percentages of our revenues, respectively: | Customer | | 2025 | | | 2024 | | | | A | | | 22 | % | | | 25 | % | | | B | | | 12 | % | | | 3 | % | | | C | | | 10 | % | | | 8 | % | | | Total | | | 44 | % | | | 36 | % | | | 7 | | As of December 31, 2025 and 2024, the following customer accounted for the following percentage of our accounts receivable: | Customer | | 2025 | | | 2024 | | | | A | | | 17 | % | | | 13 | % | | | C | | | 16 | % | | | 4 | % | | | D | | | 11 | % | | | 6 | % | | | Total | | | 44 | % | | | 23 | % | | **Competition** With respect to the water filtration market, we compete with companies that are well-entrenched in the water filtration domain. These companies include Cytiva (formerly Pall Corporation), Aquatools, Aquamedix, and i3 for medical / microbiological filtration, and 3M Company and Pentair for commercial water-quality filtration. Our methods of competition in the water filtration domain include: | | | Designing and commercializing point-of-use filtration solutions that address defined, high-risk applications where water quality directly impacts safety, compliance, or performance | | | | | Differentiating through validated performance, reliability, and ease of use in mission-critical environments | | | | | Competing in regulated and high-consequence customer segments where product performance, documentation, and service consistency are essential | | | | | Supporting customers and partners through education-driven engagement, including standards interpretation, application guidance, and risk-based filtration selection | | | | | Expanding value through installation, replacement, and lifecycle support services that improve adoption, reliability, and long-term customer outcomes | | | | | Pursuing strategic alliances, OEM arrangements, and selective acquisitions to extend technical capabilities, market reach, and distribution efficiency | | **Intellectual Property** *Patents* We protect our technology and products through patents and patent applications. In addition to the United States, we also apply for patents in other jurisdictions, such as the European Patent Office, Canada, and Japan, to the extent we deem appropriate. We have built a portfolio of patents and applications covering our products, including their hardware design and methods of hemodiafiltration. We believe that our patent strategy will provide a competitive advantage in our target markets, but our patents may not be broad enough to cover our competitors products and may be subject to invalidation claims. Our U.S. patent for the Method and Apparatus for a Hemodiafiltration Module for use with a Dialysis Machine, has claims that cover the OLpr MDHDF filter series and the method of hemodiafiltration employed in the operation of the products. Technological developments in end stage renal disease (ESRD) therapy could reduce the value of our intellectual property. Any such reduction could be rapid and unanticipated. We have issued patents on our water filtration products and applications in process to cover various applications in residential, commercial, and remote environments. As of December 31, 2025, we had five U.S. patents and one Canadian patent. | 8 | | *Trademarks* As of December 31, 2025, in the United States, we secured registrations of the trademarks ENDOPUR, HYDRAGUARD, NANOGUARD, and NEPHROS. In the U.S., we filed one trademark application for BECAUSE WATER MATTERS. In the U.K., we secured registrations for the trademarks NANOGUARD, and NEPHROS HYDRAGUARD. **Governmental Regulation** The research and development, manufacturing, promotion, marketing, and distribution of our medical filtration products in the United States and other regions of the world are subject to regulation by numerous governmental authorities, including the FDA and analogous agencies. **United States** The FDA regulates the manufacture and distribution of medical devices in the United States pursuant to the Food, Drug, and Cosmetics (FDC) Act. Our medical filtration products are regulated in the United States as medical devices by the FDA under the FDC Act. Under the FDC Act, medical devices are classified into one of three classes, namely Class I, II or III, on the basis of the controls deemed necessary by the FDA to reasonably ensure their safety and effectiveness. | | | Class I devices are medical devices for which general controls are deemed sufficient to ensure their safety and effectiveness. General controls include provisions related to (1) labeling, (2) producer registration, (3) defect notification, (4) records and reports and (5) quality service requirements (QSR). | | | | | | | | | | Class II devices are medical devices for which the general controls for the Class I devices are deemed not sufficient to ensure their safety and effectiveness and require special controls in addition to the general controls. Special controls include provisions related to (1) performance and design standards, (2) post-market surveillance, (3) patient registries and (4) the use of FDA guidelines. | | | | | | | | | | Class III devices are the most regulated medical devices and are generally limited to devices that support or sustain human life or are of substantial importance in preventing impairment of human health or present a potential, unreasonable risk of illness or injury. Pre-market approval by the FDA is the required process of scientific review to ensure the safety and effectiveness of Class III devices. | | Before a new medical device can be introduced to the market, Section 510(k), and Section 515 of the FDC Act require a manufacturer who intends to market a medical device to submit a premarket notification (Section 510(k)) or a request for premarket approval (Section 515), to the FDA. A 510(k) clearance will be granted if the submitted information establishes that the proposed device is substantially equivalent to a legally marketed Class I or Class II medical device or to a Class III medical device for which the FDA has not called for premarket approval under Section 515. The 510(k)-clearance process is generally faster and simpler than the premarket approval process. Premarket approval (PMA) is the FDAs process of scientific and regulatory review to evaluate the safety and effectiveness of Class III medical devices. Class III devices are those that support or sustain human life, are of substantial importance in preventing impairment of human health, or which present a potential, unreasonable risk of illness or injury, or are new and present unknown safety or effectiveness issues or risks. PMA is the most stringent type of device marketing application required by the FDA. To gain approval, the manufacturer must present adequate scientific evidence to assure that the device is safe and effective for its intended use(s). For any devices cleared through the 510(k)-clearance process, modifications or enhancements that could significantly affect the safety or effectiveness of the device or that constitute a major change to the intended use of the device will require a new 510(k) clearance submission. Accordingly, for any of our medical filtration products cleared through the Section 510(k) clearance process, we are required to submit an additional Section 510(k) notification if subsequent modifications or enhancements could significantly affect a products safety or effectiveness or constitute a major change to its intended use. | 9 | | All of our medical filtration products currently marketed in the United States are regulated by the FDA as Class II medical devices and have received FDA 510(k) clearance for their intended uses. Our FDA-cleared portfolio includes ultrafiltration designed for purification of dialysis water, as well as ultrafiltration and microfiltration technologies for filtration of EPA-quality water to aid in infection control at the point of use. In addition, we hold FDA clearances for certain products and technologies that are not currently commercialized, which may support future development, partnerships, or strategic initiatives. The FDC Act requires that medical devices be manufactured in accordance with the FDAs current QSR regulations which require, among other things, that: | | | the design and manufacturing processes be regulated and controlled by the use of written procedures; | | | | | the ability to produce medical devices which meet the manufacturers specifications be validated by extensive and detailed testing of every aspect of the process; | | | | | any deficiencies in the manufacturing process or in the products produced be investigated; | | | | | detailed records be kept, and a corrective and preventative action plan be in place; and | | | | | manufacturing facilities be subject to FDA inspection on a periodic basis to monitor compliance with QSR regulations. | | In addition to the requirements described above, the FDC Act requires that: | | | all medical device manufacturers and distributors register with the FDA annually and provide the FDA with a list of those medical devices which they distribute commercially; | | | | | information be provided to the FDA on death or serious injuries alleged to have been associated with the use of the products, as well as product malfunctions that would likely cause or contribute to death or serious injury if the malfunction were to recur; and | | | | | certain medical devices not cleared with the FDA for marketing in the United States meet specific requirements before they are exported. | | We and our contract manufacturers are required to manufacture our products in compliance with current Good Manufacturing Practice (GMP) requirements set forth in the QSR. The QSR requires a quality system for the design, manufacture, packaging, labeling, storage, installation, and servicing of marketed devices, and it includes extensive requirements with respect to quality management and organization, device design, buildings, equipment, purchase and handling of components or services, production and process controls, packaging and labeling controls, device evaluation, distribution, installation, complaint handling, servicing, and record keeping. The FDA evaluates compliance with the QSR through periodic unannounced inspections that may include the manufacturing facilities of our subcontractors. If the FDA believes that we or any of our contract manufacturers, or regulated suppliers, are not in compliance with these requirements, there may be a material adverse effect on our manufacturing operations, affecting our ability to sell. **Regulatory Authorities in Regions Outside of the United States** We have obtained regulatory approvals to market certain medical filtration products outside of the United States, including in Canada and Brazil. Regulatory requirements for medical devices vary significantly by country and may range from minimal oversight to comprehensive pre-market review and post-market compliance obligations similar to those required by the FDA. Our manufacturing facilities are subject to audits and certified to ISO 13485:2016, the international quality management standard for medical device manufacturers, which supports regulatory compliance and product distribution in multiple jurisdictions, including the United States and Canada. We participate in the Medical Device Single Audit Program (MDSAP), which allows for a single regulatory audit of a medical device manufacturers quality management system that satisfies the requirements of multiple regulatory authorities. In November 2020, we received MDSAP certification supporting continued compliance regulatory compliance and the ongoing marketing of approved products in the United States and Canada. In November 2023, our MDSAP certification was expanded to include Brazil, enabling the marketing of select medical filtration products in that market in accordance with applicable regulatory approvals. | 10 | | **Product Liability and Insurance** The production, marketing and sale of our products have an inherent risk of liability in the event of product failure or claim of harm caused by product operation. We have acquired product liability insurance for our products in the amount of $3 million. A successful claim in excess of our insurance coverage could materially deplete our assets. Moreover, any claim against us could generate negative publicity, which could decrease the demand for our products, our ability to generate revenues and our profitability. Some of our existing and potential agreements with manufacturers of our products and components of our products do or may require us (1) to obtain product liability insurance or (2) to indemnify manufacturers against liabilities resulting from the sale of our products. If we are not able to maintain adequate product liability insurance, we will be in breach of these agreements, which could materially adversely affect our ability to produce our products. Even if we are able to obtain and maintain product liability insurance, if a successful claim in excess of our insurance coverage is made, then we may have to indemnify some or all of our manufacturers for their losses, which could materially deplete our assets. **Employees** As of December 31, 2025, we employed a total of 36 full-time employees, including 12 employed in sales/marketing/customer support, 17 in logistics, quality, general, and administrative, and 6 in research and development and 1 in manufacturing. None of our employees are currently represented by a labor union or covered by a collective bargaining agreement and we believe that our relations with our employees are good. During 2025, we had limited voluntary turnover. Going forward, we intend to focus on maintaining our current good relations with our employees and continuing to develop and explore ways to collaborate with our employees and create a well-regarded workplace. **Available Information** We are subject to the reporting requirements of the Securities Exchange Act of 1934, as amended (the Exchange Act). The Exchange Act requires us to file periodic reports, proxy statements and other information with the SEC. The SEC maintains a website that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC. These materials may be obtained electronically by accessing the SECs website at http://www.sec.gov. **Item 1A. Risk Factors** **Risks Related to Our Overall Business and Operations** **We have only a limited history of profitability and a significant accumulated deficit, and we may not be able to maintain or improve our profitability in the future.** Although we have been profitable during each of the fiscal years ended December 31, 2024, and December 31, 2025, as of December 31, 2025, we had an accumulated deficit of $143.1 million as a result of prior historical operating losses. While our revenues have increased following our expansion of the sales team in both 2024 and 2025, there can be no guarantee our revenues will continue to grow. We may incur additional losses in the future depending on the timing and marketplace acceptance of our products and as a result of operating expenses being higher than our gross margin from product sales. Each of the following factors, among others, may influence our profitability: | | | the market acceptance of our technologies and products in each of our target markets; | | | 11 | | | | | our ability to effectively and efficiently manufacture, market and distribute our products; | | | | | our ability to sell our products at competitive prices that exceed our per unit costs; and | | | | | our ability to continue to develop products and maintain a competitive advantage in our industry. | | If we are unable to maintain profitability, we will need additional capital to fund our operating activities. Such capital is likely to be from the sale of shares of our common stock or other equity securities or from loans or other debt securities. However, there is no assurance that such capital will be available on favorable terms or at all. **We may be unable to achieve or sustain revenue growth.** Our business and future prospects are substantially dependent upon our ability to significantly grow our product revenue. Although our sales were approximately 33% higher in 2025 compared to 2024, our revenues declined slightly in 2024 compared to 2023. There is no assurance that we will be able to maintain sales growth in future periods. Our ability to increase our revenues in future periods will depend on our ability to significantly grow our customer base and then consistently obtain product reorders from those customers. If we cannot sustain significant revenue growth for an extended period, our financial results will be adversely affected, and our stock price may decline. **We face significant challenges in obtaining market acceptance of our products, which could adversely affect our potential sales and revenues.** Our success depends on our ability to both maintain our existing customers and to continue growing our customer base. If we are unable to maintain and further grow our customer base, our ability to grow revenue will be limited and we will have difficulty maintaining profitability. Our ability to grow our customer base also depends on our ability to achieve further market acceptance of our water filter products, including among healthcare facility customers, or may not be deemed suitable for other commercial, military, industrial or retail applications. Factors that may affect our ability to achieve acceptance of our water filtration products and technologies in the marketplace include whether such products will be safe for use, whether they will be effective and whether they will be cost-effective. **If we are not able to successfully scale-up production of our products, then our sales and revenues will suffer.** In order to successfully maintain commercialization of our products, we need to be able to produce them in a cost-effective way on a large scale to meet commercial demand, while maintaining extremely high standards for quality and reliability. The extent to which we fail to successfully maintain commercial success of our products could limit our ability to be profitable. We rely on, and for the foreseeable future expect to continue to rely on, a limited number of independent manufacturers to produce our products. Our manufacturers systems and procedures may not be adequate to support our operations and may not be able to achieve the rapid execution necessary to exploit the market for our products. If we are successful in continuing to increase our product revenue, we will need to also increase our supply requirements. However, our contracted manufacturers could experience manufacturing and control problems in connection with their manufacture of our products, which could disrupt their ability to timely and adequately supply us with product. If we experience any of these problems with respect to our manufacturers scale-ups of manufacturing operations, then we may not be able to have our products manufactured and delivered in a timely manner. Our products are new and evolving, and our manufacturers may encounter unforeseen difficulties in manufacturing them in commercial quantities or at all. **The revenue from our emergency response business is unpredictable and is subject to factors outside our control. As a result, our revenue and operating results may vary significantly from period to period.** A portion of our revenue is derived from the sale of our filtration products to address outbreaks of waterborne pathogens in hospitals and other buildings and facilities, which we sometimes refer to as our emergency response (ER) business. In these situations, building operators often look to us to install our filtration systems in order to immediately remediate an active outbreak. However, the frequency, timing and severity of such outbreaks are unpredictable. During periods in which several outbreaks occur across the territories we serve we may see a significant increase in the demand for our filtration products, leading to increased sales. On the other hand, during periods when only a small number of outbreaks occur, we see reduced demand for our products. Given the difficulty in predicting the timing and magnitude of sales based on our ER business, we may experience quarter-to-quarter fluctuations in revenue resulting in the potential for a sequential decline in quarterly revenue. | 12 | | **If we cannot develop adequate distribution, customer service and technical support networks, then we may not be able to market and distribute our products effectively and/or customers may decide not to order our products. In either case, our sales and revenues will suffer.** Our strategy requires us to distribute our products and, if needed, provide customer service and maintenance and other technical service. To provide these services, we have begun, and will need to continue, to develop a network of distribution and a staff of employees and independent contractors in each of the areas in which we intend to operate. In particular, following the termination of our exclusive distribution relationship with Donastar in the food, beverage and hospitality markets, our ability to grow sales in our commercial business will depend largely on the efforts of new distribution partners in these markets. We cannot assure that we will be able to organize and manage this network on a cost-effective basis. If we cannot effectively organize and manage this network, then it may be difficult for us to distribute our products and to provide competitive service and support to our customers, in which case customers may be unable, or decide not, to order our products and our sales and revenues will suffer. **We are dependent on third parties to supply us with our products, making us vulnerable to supply problems and price fluctuations.** We rely on third-party suppliers to provide us with certain components of our products. With respect to our proprietary filter material used in our DSU-H, SSU-H, S100 and HydraGuardTM and HydraGuardTM Flush filters, we rely on a single source supplier, Medica S.p.A. (Medica), an Italy-based medical product manufacturing company. Our agreement with Medica will expire in 2030 and although we believe our relationship with this supplier is good, there can be no assurance that our current agreement will guarantee uninterrupted supply or that we will be able to renew the agreement on favorable terms, or at all. We depend on Medica and our other suppliers to provide us and our customers with materials in a timely manner that meet our and their quality, quantity and cost requirements. These suppliers may encounter problems during manufacturing for a variety of reasons, any of which could delay or impede their ability to meet our demand and our customers demands. Companies in the United States and around the world may experience a disruption in the supply of certain components and raw materials, as happened during the worldwide pandemic starting in 2020. A disruption in such items as resins and polymers could adversely affect us and our ability to obtain these components in a timely manner, in the volumes we require, or at all. In addition, the prices of these components and other supplies we rely upon in the manufacture of our products may rise. For example, we and our suppliers have recently experienced, and may continue to experience, rising costs due to inflation, such as costs of materials, labor and freight. If inflation continues to rise, the prices of our components may rise, resulting in increased expenses to us that we may not be able to offset by raising the prices of our products. Any supply interruption from our suppliers or failure to obtain additional suppliers for any of the components used in our products, or price increases of these supplies, could have a material adverse effect on our business, financial condition and results of operations. **Significant developments resulting from recent and potential changes in United States tariff policies could have a material adverse effect on us****.** **** Beginning in the first quarter of 2025, the current U.S. presidential administration has imposed tariffs on various goods from various countries, including the European Union (EU), and has announced intentions to impose further significant tariffs on certain United States imports. The administration relied on the U.S. International Emergency Economic Powers Act (IEEPA) as the statutory basis for its authority to impose most of such tariffs. However, on February 20, 2026, the U.S. Supreme Court ruled that the IEEPA did not grant the president authority to impose tariffs, rendering such previously imposed tariffs invalid. Following the Supreme Courts decision, the U.S. administration announced its intention to invoke other laws to impose tariffs by executive order and thereafter imposed new tariffs on imports from all countries, in addition to any existing non-IEEPA tariffs. We rely on suppliers operating in, and exporting from, the EU, including our exclusive supplier of the filtration materials and technology used in certain of our filtration products. To the extent that tariffs and other restrictions imposed by the United States increase the price of, or limit the amount of, materials and finished goods imported into the United States, the costs of our materials, which we may be unable to pass onto customers, may be adversely affected, which could adversely affect our revenues and profitability. We cannot predict the effect these and potential additional tariffs will have on our supplier and our business, including in the context of escalating trade tensions. Further tariffs, additional taxes, or trade barriers, both domestically and internationally, may affect our costs and margins, the competitiveness of our products, and our ability to sell products or purchase necessary equipment and supplies, and consequently materially and adversely affect our business, results of operations, and financial conditions. | 13 | | **We are subject to minimum purchase obligations under our License and Supply Agreement with Medica and failure to meet these minimum purchase requirements may result in termination of the agreement, which could materially impact our ability to obtain our filtration products.** On November 1, 2025, we entered into a license and supply agreement (the License and Supply Agreement) with Medica for the marketing and sale of certain filtration products based upon Medicas proprietary ultrafiltration technology in conjunction with our filtration products (collectively, the Products), and to engage in an exclusive supply arrangement for the Products, meaning Medica is our sole supplier for the filter material used in certain of our products. Under the License and Supply Agreement, Medica granted to us an exclusive license, with right of sublicense, to market, promote, distribute, offer for sale and sell the Products in the Territory (as defined in the License and Supply Agreement). In addition, we granted to Medica an exclusive license under our intellectual property to make the Products during the term of the License and Supply Agreement. In exchange for the rights granted, we have agreed to make minimum annual aggregate purchases from Medica of 4,976,000, 5,349,000, 5,750,000, 6,000,000 and 6,300,000 for the years 2026, 2027, 2028, 2029 and 2030, respectively. If we are unable to satisfy the minimum purchase commitments in future years, we may be in breach of the License and Supply Agreement, giving Medica a right of termination. If the License and Supply Agreement is terminated, we may be unable to obtain our filtration products from an alternative supplier on commercially favorable terms, if at all. If we are unable to obtain our filtration products from an alternative supplier, we may be unable to supply our products to our customers, which could have a material adverse effect on our results of operations and damage our reputation. **We operate with a limited senior management team and are highly dependent on our sales and marketing personnel. Our business could be harmed if we are unable to attract and retain personnel necessary for our success.** We operate our business with a two-person senior management team. We have a Chief Executive Officer and a Chief Financial Officer, who together directly oversee operations, sales, finance and corporate development. Our dependence on two officers to perform multiple functions exposes us to various risks, including the risk that two officers may be unable to devote sufficient or timely attention to all aspects of operating our business and that in the event of a sudden departure of one officer, we may not be able to promptly identify a successor. We do not carry key person life insurance on any of our employees. If we are unable to recruit and retain qualified personnel to our senior management teams, we will be unlikely to achieve our objectives of continuing to grow our company and our business may otherwise be harmed. In addition, our need to significantly increase our revenue is also dependent on the personnel in our sales and marketing organization. We have limited resources to add sales and marketing professionals at this time. Accordingly, our success will depend on our ability to continue developing and retaining our personnel. Our ability to increase our sales revenue may be materially impaired if we experience attrition in our sales and marketing organization or if we are unsuccessful in developing our sales personnel. | 14 | | **We rely on information technology systems and network infrastructure to operate and manage our business. If we experience a breach, cyber attack or other disruption to these systems or data, our business, results of operations and financial condition could be adversely affected.** We are increasingly dependent on sophisticated information technology systems to operate our business, including to process, transmit and store sensitive data. Specifically, we rely on our information technology systems to effectively manage sales and marketing, accounting and financial functions, inventory management, and our research and development data. Our business therefore depends on the continuous, effective, reliable, and secure operation of our computer hardware, software, networks, Internet servers, and related infrastructure. Although we believe our computer and communications hardware is protected by reasonable physical, technical, and administrative safeguards, it is still vulnerable to system malfunction, computer viruses, and cybersecurity breaches including ransomware, phishing, malware, brute force, insider threats, and other cyber attacks and security incidents. These events could lead to the unauthorized access to information systems maintained by us or our service providers or customers and result in the misappropriation or unauthorized disclosure of confidential information belonging to us, our employees, customers, distributors or our suppliers. The techniques used by criminal elements to attack computer systems are sophisticated, change frequently and may originate from less regulated and remote areas of the world, including countries that engage in state-sponsored cyber attacks. As a result, we may not be able to address these techniques proactively or implement adequate preventative measures. Additionally, the regulatory environment governing information, security and privacy laws is increasingly demanding and continues to evolve. If our information technology systems are compromised, we could be subject to fines, damages, litigation and enforcement actions and we could lose trade secrets or other confidential information, the occurrence of which could harm our reputation, business, results of operations and financial condition. Our information systems, and those of third parties with whom we contract, also require an ongoing commitment of significant resources to maintain, protect and enhance existing systems and develop new systems to keep pace with continuing changes in information technology. The failure of our information technology systems to perform as we anticipate or our failure to effectively implement new systems could disrupt our operations and could result in decreased sales, increased overhead costs, excess inventory and product shortages, all of which could have a material adverse effect on our reputation, business, results of operations and financial condition. **Product liability associated with the production, marketing, and sale of our products, and/or the expense of defending against claims of product liability, could materially deplete our assets and generate negative publicity which could impair our reputation.** The production, marketing and sale of water-filtration products, particularly to healthcare facility customers, have inherent risks of liability in the event of product failure or claim of harm caused by product operation. Voluntary recalls could subject us to claims or proceedings by consumers, the FDA or other regulatory authorities which may adversely impact our sales and revenues. Furthermore, even meritless claims of product liability may be costly to defend against. Although we have acquired product liability insurance for our products, we may not be able to maintain or obtain this insurance on acceptable terms or at all. Because we may not be able to obtain insurance that provides us with adequate protection against all potential product liability claims, a successful claim in excess of our insurance coverage could materially deplete our assets. Moreover, even if we are able to obtain adequate insurance, any claim against us could generate negative publicity, which could impair our reputation and adversely affect the demand for our products, our ability to generate sales and our profitability. Some of the agreements that we may enter into with manufacturers of our products and components of our products may require us to obtain product liability insurance; or to indemnify manufacturers against liabilities resulting from the sale of our products. For example, the agreement with our contract manufacturer (CM) requires that we obtain and maintain certain minimum product liability insurance coverage and that we indemnify our CM against certain liabilities arising out of our products that they manufacture, provided they do not arise out of our CMs breach of the agreement, negligence or willful misconduct. If we are not able to obtain and maintain adequate product liability insurance, then we could be in breach of these agreements, which could materially adversely affect our ability to produce our products and generate revenues. Even if we are able to obtain and maintain product liability insurance, if a successful claim in excess of our insurance coverage is made, then we may have to indemnify some or all of our manufacturers for their losses, which could materially deplete our assets. | 15 | | **We cannot assure you that our products will be safe or that there will not be product-related deaths, serious injuries or product malfunctions. Further, we are required under applicable law to report any circumstances relating to our medically approved products that could result in deaths or serious injuries. These circumstances could trigger recalls, class action lawsuits and other events that could cause us to incur expenses and may also limit our ability to generate revenues from such products.** We cannot assure you that our products will prove to be safe or that there will not be product-related deaths or serious injuries or product malfunctions, which could trigger recalls, class action lawsuits and other events that could cause us to incur significant expenses, limit our ability to market our products and generate revenues from such products or cause us reputational harm. Under the FDC Act, we are required to submit medical device reports (MDRs) to the FDA to report device-related deaths, serious injuries and malfunctions of medically approved products that could result in death or serious injury if they were to recur. Depending on their significance, MDRs could trigger events that could cause us to incur expenses and may also limit our ability to generate revenues from such products. Additionally, any of the following could occur: | | | information contained in the MDRs could trigger FDA regulatory actions such as inspections, recalls and patient/physician notifications; | | | | | because the reports are publicly available, MDRs could become the basis for private lawsuits, including class actions; and | | | | | if we fail to submit a required MDR to the FDA, the FDA could take enforcement action against us. | | If any of these events occur, then we could incur significant expenses and it could become more difficult for us to market and sell our products and to generate revenues from sales. Other countries may impose analogous reporting requirements that could cause us to incur expenses and may also limit our ability to generate revenues from sales of our products. **We rely on both employees and third-party contractors to install and service our water filtration products, and any failure by these parties to perform adequately could adversely affect our business and reputation**. The proper installation and servicing of our water filtration products are critical to ensuring their performance, safety and regulatory compliance. We rely on employees and third-party contractors and service providers to install and service our water filtration products. These contractors are not our employees, and we have limited control over the quality, timeliness, and consistency of their work. Their performance is influenced by factors that may be beyond our control, including the availability and training of their personnel. If we or our third-party service providers fail to perform installation or service work to our standards or to our customers expectations, our products may not function as intended, our reputation and customer satisfaction may be harmed. Poor workmanship or noncompliance with our installation and servicing specifications or applicable regulations could result in product malfunctions, water quality issues, property damage, customer complaints, personal injury, or other claims against us. Such failures could also expose us to increased warranty claims, as well as costs associated with corrective actions, replacements, or recalls. In addition, even isolated incidents of improper installation or servicing whether caused by us or by third-party providers engaged by us could negatively impact our brand and reputation, leading to reduced repeat or referral sales. Any of these outcomes could materially and adversely affect our reputation, results of operations, and financial condition. **Risks Related to Government Regulation** **If we violate any provisions of the FDC Act or any other statutes or regulations, then we could be subject to enforcement actions by the FDA or other governmental agencies.** We face a significant compliance burden under the FDC Act and other applicable statutes and regulations which govern the testing, labeling, storage, record keeping, distribution, sale, marketing, advertising and promotion of our medically approved products. If we violate the FDC Act or other regulatory requirements (either with respect to our ultrafilters or otherwise) at any time during or after the product development and/or approval process, we could be subject to enforcement actions by the FDA or other agencies, including: | | | fines; | | | | | injunctions; | | | 16 | | | | | civil penalties; | | | | | recalls or seizures of products; | | | | | total or partial suspension of the production of our products; | | | | | withdrawal of any existing approvals or pre-market clearances of our products; | | | | | refusal to approve or clear new applications or notices relating to our products; | | | | | recommendations that we not be allowed to enter into government contracts; and | | | | | criminal prosecution. | | Any of the above could have a material adverse effect on our business, financial condition, and results of operations. **If we develop new water filter products in the future, we may be required to obtain regulatory approvals and clearances in the countries in which we intend to sell such products. If we fail to receive, or experience a significant delay in receiving, such approvals and clearances, then we may not be able to get our new products to market and enhance our revenues.** Our current water filter products that we market and sell to healthcare facilities and dialysis centers have 510(k) clearance from the FDA. However, we will need to continue developing new products in the future to continue to compete in our industry, and such new products may require obtaining regulatory approvals in the U.S. and other jurisdictions in which we intend to market them. We cannot ensure that any new products developed by us in the future, will be approved for marketing. The clearance and/or approval processes can be lengthy and uncertain, and each requires substantial commitments of our financial resources and our managements time and effort. Even if we do obtain regulatory approval, approval may be only for limited uses with specific classes of patients, processes, or other devices. Our failure to obtain, or delays in obtaining, the necessary regulatory clearance and/or approvals would prevent us from selling our affected products in the applicable regions. If we cannot sell some of our products in such regions, or if we are delayed in selling while waiting for the necessary clearance and/or approvals, our ability to generate revenues from these products will be limited. Over time, we intend to market our products globally. Requirements pertaining to the sale of our products vary widely from country to country. It may be very expensive and difficult for us to meet the requirements for the sale of our products in many countries. As a result, we may not be able to obtain the required approvals in a timely manner, if at all. If we cannot sell our products in a particular region, then the size of our potential market could be reduced, which would limit our potential sales and revenues. **Significant additional governmental regulation could subject us to unanticipated delays that would adversely affect our sales and revenues.** Our business strategy depends in part on our ability to get our products into the market as quickly as possible. Additional laws and regulations, or changes to existing laws and regulations that are applicable to our business may be enacted or promulgated, and the interpretation, application or enforcement of the existing laws and regulations may change. We cannot predict the nature of any future laws, regulations, interpretations, applications or enforcements or the specific effects any of these might have on our business. Any future laws, regulations, interpretations, applications, or enforcements could delay or prevent regulatory approval or clearance of our products and our ability to market our products. Moreover, changes that result in our failure to comply with the requirements of applicable laws and regulations could result in enforcement actions by the FDA and/or other agencies, all of which could impair our ability to have manufactured and to sell the affected products. **If we are not able to maintain sufficient quality controls, then the approval or clearance of any of our future products by the FDA or other relevant authorities could be withdrawn, delayed, or denied and our sales and revenues will suffer.** Approval or clearance of our products could be withdrawn, delayed, or denied by the FDA and the relevant authorities of other countries if our manufacturing facilities do not comply with their respective manufacturing requirements. The FDA imposes requirements through quality system requirements regulations, which include requirements for good manufacturing practices. Failure by our manufacturers to comply with these requirements could prevent us from obtaining FDA pre-clearance or approval of our products and from marketing such products in the United States. Although the manufacturing facilities and processes that we use to manufacture our OLpr MD HDF filter series have been inspected and certified by a worldwide testing and certification agency (also referred to as a notified body) that performs conformity assessments to requirements for medical devices, they have not been inspected by the FDA. A notified body is a group accredited and monitored by governmental agencies that inspects manufacturing facilities and quality control systems at regular intervals and is authorized to carry out unannounced inspections. We cannot be sure that any of the facilities or processes we use will comply or continue to comply with their respective requirements on a timely basis or at all, which could delay or prevent our obtaining the approvals we need to market our products in the United States. | 17 | | **Risks Related to our Intellectual Property** **Protecting our intellectual property in our technology through patents may be costly and ineffective. If we are not able to adequately secure or enforce protection of our intellectual property, then we may not be able to compete effectively and we may not be profitable.** Our future success depends in part on our ability to protect the intellectual property for our technology through patents. We will only be able to protect our products and methods from unauthorized use by third parties to the extent that our products and methods are covered by valid and enforceable patents or are effectively maintained as trade secrets. Our 5 granted U.S. patents will expire at various times from 2026 to 2044, assuming they are properly maintained. The protection provided by our patents may not be broad enough to prevent competitors from introducing similar products into the market. Our patents, if challenged or if we attempt to enforce them, may not necessarily be upheld by the courts of any jurisdiction. Numerous publications may have been disclosed by, and numerous patents may have been issued to, our competitors and others relating to methods and devices for dialysis of which we are not aware and additional patents relating to methods and devices for dialysis may be issued to our competitors and others in the future. If any of those publications or patents conflict with our patent rights, or cover our products, then any or all of our patent applications could be rejected and any or all of our granted patents could be invalidated, either of which could materially adversely affect our competitive position. Litigation and other proceedings relating to patent matters, whether initiated by us or a third party, can be expensive and time-consuming, regardless of whether the outcome is favorable to us, and may require the diversion of substantial financial, managerial, and other resources. An adverse outcome could subject us to significant liabilities to third parties or require us to cease any related development, product sales or commercialization activities. In addition, if patents that contain dominating or conflicting claims have been or are subsequently issued to others and the claims of these patents are ultimately determined to be valid, then we may be required to obtain licenses under patents of others in order to develop, manufacture, use, import and/or sell our products. We may not be able to obtain licenses under any of these patents on terms acceptable to us, if at all. If we do not obtain these licenses, we could encounter delays in, or be prevented entirely from using, importing, developing, manufacturing, offering, or selling any products or practicing any methods, or delivering any services requiring such licenses. If we file for or obtain additional patents in foreign countries, we will be subject to laws and procedures that differ from those in the United States. Such differences could create additional uncertainty about the level and extent of our patent protection. Moreover, patent protection in foreign countries may be different from patent protection under U.S. laws and may not be as favorable to us. Many non-U.S. jurisdictions, for example, prohibit patent claims covering methods of medical treatment of humans, although this prohibition may not include devices used for such treatment. **If we are not able to secure and enforce protection of our trade secrets through enforcement of our confidentiality and non-competition agreements, then our competitors may gain access to our trade secrets, we may not be able to compete effectively, and we may not be profitable. Such protection may be costly and ineffective.** We attempt to protect our trade secrets, including the processes, concepts, ideas, and documentation associated with our technologies, through the use of confidentiality agreements and non-competition agreements with our current employees and with other parties to whom we have divulged such trade secrets. If these employees or other parties breach our confidentiality agreements and non-competition agreements, or if these agreements are not sufficient to protect our technology or are found to be unenforceable, then our competitors could acquire and use information that we consider to be our trade secrets and we may not be able to compete effectively. Policing unauthorized use of our trade secrets is difficult and expensive and, in the event we further expand our operations, the laws of other countries may not adequately protect our trade secrets. | 18 | | **Risks Related to Owning Our Common Stock** **The prices at which shares of the common stock trade have been and will likely continue to be volatile.** During the two years ended December 31, 2025, our common stock has traded at prices ranging from a high of $6.42 to a low of $1.39 per share. Due to the limited trading volume of our common stock, we expect the prices at which our common stock might trade to continue to be highly volatile. The expected volatile price of our stock will make it difficult for investors to predict the value of an investment in our common stock, to sell shares at a profit at any given time, or to plan purchases and sales in advance. A variety of other factors might also affect the market price of our common stock. These include, but are not limited to: | | | period-to-period fluctuations in our results of operations; | | | | | | | | | | sales of our common stock or other financing transactions; | | | | | | | | | | announcements of technological innovations or new commercial products by our competitors or us; | | | | | | | | | | developments concerning proprietary rights, including patents; | | | | | | | | | | achievement or rejection of regulatory approvals by our competitors or us; | | | | | | | | | | regulatory developments in the United States and foreign countries; | | | | | | | | | | economic or other crises and other external factors; | | | | | | | | | | threatened or actual litigation; and | | | | | | | | | | changes in financial estimates by securities analysts. | | We are not able to control many of these factors, and we believe that period-to-period comparisons of our financial results will not necessarily be indicative of our future performance. **Our common stock could be further diluted as a result of the issuance of additional shares of common stock, warrants or options.** In the past we have issued common stock and warrants in order to raise capital to help fund our business. We have also issued stock options and restricted stock as compensation for services and incentive compensation for our employees, directors, and consultants, and we have previously issued shares of our common stock as consideration for acquiring other businesses. We have shares of common stock reserved for issuance upon the exercise of certain of these securities and may increase the shares reserved for these purposes in the future. Our issuance of additional common stock, options and warrants could affect the rights of our stockholders, could reduce the market price of our common stock, or could obligate us to issue additional shares of common stock. Market sales of large amounts of our common stock, or the potential for those sales even if they do not actually occur, may have the effect of depressing the market price of our common stock, the supply of common stock available for resale could be increased, which could stimulate trading activity and cause the market price of our common stock to drop, even if our business is doing well. Furthermore, the issuance of any additional shares of our common stock or securities convertible into our common stock could be substantially dilutive to holders of our common stock if they do not invest in future offerings. | 19 | | **We have identified a material weakness in our internal control over financial reporting. If we are unable to remediate this material weakness, or if we identify additional material weaknesses in the future or otherwise fail to maintain an effective system of internal control over financial reporting, we may not be able to accurately or timely report our financial condition or results of operations, which may adversely affect investor confidence in us and the value of our common stock.** **** In connection with the preparation of our financial statements as of and for the quarterly period ended March 31, 2025, we identified a material weakness in our internal control over financial reporting. A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our financial statements will not be prevented or detected on a timely basis. Specifically, our management concluded that we had designed or maintained effective controls to ensure that we properly recognize revenue from service-based sales contracts. See PART II Item 9A. Controls and Procedures in this Annual Report. Although these items did not result in a material misstatement to our financial statements, this material weakness could have resulted in a material misstatement to our annual or interim financial statements that would not be prevented or detected. While we are designing and implementing measures to remediate our existing material weakness, we cannot predict the success of such measures. Our current controls and any new controls that we develop may become inadequate because of changes in conditions in our business, personnel, information technology systems or other factors. If we fail to remediate our existing material weakness or identify new material weaknesses in our internal control over financial reporting, or if we are unable to conclude that our internal control over financial reporting is effective, it is possible that a material misstatement of our financial statements would not be prevented or detected on a timely basis, investors may lose confidence in the accuracy and completeness of our financial reports, and the value of our common stock could be materially and adversely affected. **We have never paid dividends and do not intend to pay cash dividends.** We have never paid dividends on our common stock and currently do not anticipate paying cash dividends on our common stock for the foreseeable future. Consequently, any returns on an investment in our common stock in the foreseeable future will have to come from an increase in the value of the stock itself. As noted above, the lack of an active trading market for our common stock will make it difficult to value and sell our common stock. While our dividend policy will be based on the operating results and capital needs of our business, we anticipate that all earnings, if any, will be retained to finance our future operations. **Several provisions of the Delaware General Corporation Law, our fourth amended and restated certificate of incorporation, as amended, and our second amended and restated bylaws could discourage, delay or prevent a merger or acquisition, which could adversely affect the market price of our common stock.** Several provisions of the Delaware General Corporation Law, our fourth amended and restated certificate of incorporation, as amended, and our second amended and restated bylaws could discourage, delay or prevent a merger or acquisition that stockholders may consider favorable, and the market price of our common stock could be reduced as a result. These provisions include: | | | authorizing our board of directors to issue blank check preferred stock without stockholder approval; | | | | | | | | | | providing for a classified board of directors with staggered, three-year terms; | | | | | prohibiting us from engaging in a business combination with an interested stockholder for a period of three years after the date of the transaction in which the person became an interested stockholder unless certain provisions are met; | | | | | | | | | | prohibiting cumulative voting in the election of directors; | | | | | | | | | | limiting the persons who may call special meetings of stockholders; and | | | | | | | | | | establishing advance notice requirements for nominations for election to our board of directors or for proposing matters that can be acted on by stockholders at stockholder meetings. | | | 20 | | **As a smaller reporting company with little or no name recognition and with several risks and uncertainties that could impair our business operations, we are not likely to generate widespread interest in our common stock. Without widespread interest in our common stock, our common stock price may be highly volatile and an investment in our common stock could decline in value.** Unlike many companies with publicly traded securities, we have little or no name recognition in the investment community. We are a relatively new company and very few investors are familiar with either our company or our products. We do not have an active trading market in our common stock, and one might never develop, or if it does develop, might not continue. Additionally, the market price of our common stock may fluctuate significantly in response to many factors, many of which are beyond our control. Risks and uncertainties, including those described elsewhere in this Risk Factors section could impair our business operations or otherwise cause our operating results or prospects to be below expectations of investors and market analysts, which could adversely affect the market price of our common stock. As a result, investors in our common stock may not be able to resell their shares at or above their purchase price and could lose all of their investment. Securities class action litigation is often brought against public companies following periods of volatility in the market price of such companys securities. We may become subject to this type of litigation in the future. Litigation of this type could be extremely expensive and divert managements attention and resources from running our company. **Our directors, executive officers, and Wexford Capital control a significant portion of our stock and, if they choose to vote together, could have sufficient voting power to control the vote on substantially all corporate matters.** As of March 1, 2026, Wexford Capital L.P. and its affiliates (together, Wexford),, our largest stockholder, beneficially owned approximately 34% of our outstanding common stock. Collectively, Wexford, our directors and our executive officers beneficially owned approximately 37.5% of our outstanding common stock. As a result of this ownership, Wexford has the ability to exert significant influence over our policies and affairs, including the election of directors. Wexford, whether acting alone or acting with other stockholders, could have the power to elect all of our directors and to control the vote on substantially all other corporate matters without the approval of other stockholders. Furthermore, such concentration of voting power could enable Wexford, whether acting alone or acting with other stockholders, to delay or prevent another party from taking control of our company even where such change of control transaction might be desirable to other stockholders. The interests of Wexford in any matter put before the stockholders may differ from those of any other stockholder. **Future sales of our common stock could cause the market price of our common stock to decline.** The market price of our common stock could decline due to sales of a large number of shares in the market, including sales of shares by Wexford or any other large stockholder, or the perception that such sales could occur. These sales could also make it more difficult or impossible for us to sell equity securities in the future at a time and price that we deem appropriate to raise funds through future offerings of common stock. Future sales of our common stock by stockholders could depress the market price of our common stock. **Item 1B. Unresolved Staff Comments** Not required. **Item 1C. Cybersecurity** **** **Risk Management and Strategy** We have implemented cybersecurity processes, technologies, and controls to aid in our efforts to assess, identify, and manage cybersecurity risks. Our enterprise risk management framework considers cybersecurity risk alongside other company risks as part of our overall risk assessment process. | 21 | | Our cybersecurity risk management program is integrated into our overall enterprise risk management program and shares common methodologies, reporting channels, and governance processes that apply across the enterprise risk management program to other legal, compliance, strategic, operational, and financial risk areas. Our cybersecurity risk management program includes: | | | risk assessments designed to help identify material cybersecurity risks to our critical systems, information, products, services, and our broader enterprise information technology (IT) environment; | | | | | | | | | | an outsourced security team principally responsible for managing (1) our cybersecurity risk assessment processes, (2) our security controls, and (3) our response to cybersecurity incidents; | | | | | | | | | | the use of external service providers, where appropriate, to assess, test, or otherwise assist with aspects of our security controls; | | | | | | | | | | cybersecurity awareness training for our employees, incident response personnel, and senior management. This includes mandatory computer-based training, internal communications, and regular phishing awareness campaigns that are designed to emulate real-world contemporary threats and provide immediate feedback (and, if necessary, additional training or remedial action) to employees. | | In addition to the processes, technologies, and controls that we have in place to reduce the likelihood of a material cybersecurity incident (or series of related cybersecurity incidents), our outsourced security team has a written incident response plan outlining how to address cybersecurity events that occur. We have assigned a team comprised of finance and technology personnel to review the plan annually to serve as a framework for the execution of responsibilities across businesses and operational roles. The incident response plan is designed to help us coordinate actions to prepare for, detect, respond to and recover from cybersecurity incidents, and includes processes to triage, assess severity, escalate, contain, investigate, and remediate the incident, as well as to assess the need for disclosure, comply with applicable legal obligations and mitigate the impact to our brand and reputation and on impacted parties. In addition to the cybersecurity incident response plan, our outsourced team conducts tabletop exercises to enhance our incident response preparedness. They also have processes to oversee and identify material risks from cybersecurity threats associated with our use of third-party service providers. Such processes include conducting due diligence and risk assessment of our current and potential vendors that examine such vendors cybersecurity protocols and adherence to applicable regulations. We also maintain business continuity and disaster recovery plans to prepare for and respond to the potential for any disruption in the technology we rely on. Additionally, we maintain insurance coverage that, subject to its terms and conditions, is intended to help us cover certain costs associated with cybersecurity incidents and information system failures. ** We (or the third parties we rely on) may not be able to fully, continuously, or effectively implement security controls as intended. As described above, we utilize a risk-based approach and judgment to determine whether and how to implement certain security controls and it is possible that we may not implement the necessary controls if we are unable to recognize or underestimate a particular risk. In addition, security controls, no matter how well designed or implemented, may only mitigate and not fully eliminate cybersecurity risks. Cybersecurity events, when detected by security tools or third parties, may not always be identified immediately or addressed in the manner intended by our cybersecurity incident response plan. **Governance** **** Based on the information available as of the date of this Annual Report, we have no reason to believe any risks from cybersecurity threats, including as a result of any previous cybersecurity incidents, have materially affected or are reasonably likely to materially affect us, including our business strategy, results of operations or financial condition. For additional information, see Risks Related to Our Overall Business and Operations We rely on information technology systems and network infrastructure in Item 1A, Risk Factors in this Annual Report on Form 10-K. | 22 | | Given that cybersecurity risks can impact various areas of responsibility of the Committees of the Board, as well as the overall size of the Board, the Board believes it is useful and effective for the entire Board to maintain direct oversight over cybersecurity matters. We have implemented processes that will include regular updates to the Board from our Chief Executive Officer and Chief Financial Officer for its review and feedback regarding cybersecurity governance processes, the status of projects to strengthen internal cybersecurity, results from third-party assessments, and also discusses any significant cyber incidents, including recent incidents at other companies and the emerging threat landscape. **** Our cybersecurity risk management strategy processes, discussed in greater detailed above, are led by our Chief Financial Officer, in conjunction with our outsourced security team, under the supervision of our Chief Executive Officer. These individuals are informed about and monitor the prevention, mitigation, detection and remediation of cybersecurity incidents through their management of, and participation in, the cybersecurity risk management and strategy processes described above, including their roles in our overall enterprise risk management. As discussed above, our Chief Executive Officer and Chief Financial Officer regularly report to the Board about cybersecurity threat risks, among other cybersecurity related matters. **Item 2. Properties** Our U.S. facilities are located at 380 Lackawanna Place, South Orange, New Jersey 07079 and 30 Leslie Court, Whippany, NJ 07981. We use these facilities to house our corporate headquarters, research, manufacturing, and distribution facilities. We believe our current facilities are adequate to meet our needs, although we may consolidate facilities in the future. We do not own any real property for use in our operation or otherwise. **Item 3. Legal Proceedings** There are currently no material pending legal proceedings and, as far as we are aware, no governmental authority is contemplating any material proceeding to which we are a party or to which any of our properties is subject. **Item 4. Mine Safety Disclosures** Not applicable. | 23 | | **PART II** **Item 5. Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities** *Common Stock Information* Our common stock is quoted on the Nasdaq Capital Market under the symbol NEPH. Our common stock commenced trading on August 14, 2019. As of December 31, 2025, there were approximately 41 holders of record of our common stock. The actual number of holders of common stock is greater than this number of record holders and includes stockholders who are beneficial owners, but whose shares are held in street name by brokers and nominees. The number of holders of record also does not include stockholders whose shares may be held in trust by other entities. *Recent Sales of Unregistered Securities* Except as previously reported in our Quarterly Reports on Form 10-Q and our Current Reports on Form 8-K, we have not sold any equity securities during the year ended December 31, 2025, that were not registered under the Securities Act of 1933, as amended. *Issuer Repurchases of Equity Securities* There were no repurchases of our common stock during the fourth quarter of 2025. *Equity Compensation Plan Information* See Part III, Item 12, under the heading Equity Compensation Plan Information, which is incorporated by reference herein. **Item 6. Reserved** **Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations** *The following discussion includes forward-looking statements about our business, financial condition and results of operations including discussions about managements 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 managements actions to vary, and the results of these variances may be both material and adverse. A list of the known material factors that may cause our results to vary, or may cause management to deviate from its current plans and expectations, is included in Item 1A, Risk Factors, of this Annual Report on Form 10-K. The following discussion should also be read in conjunction with the financial statements and notes included in Item 8, Financial Statements and Supplemental Data, of this Annual Report on Form 10-K.* **Business Overview** Nephros is a commercial-stage company that develops and markets high-performance water filtration solutions for points of use, with a core focus on medical-grade water filtration. 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 devicesa 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 industriesincluding manufacturing, laboratories, aviation, and federal facilitieswhere 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. | 24 | | **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 Summary of Significant Accounting Policies, to our financial statements included in Item 8, Financial Statements and Supplementary Data, of this Annual Report on Form 10-K. **Critical Accounting Policies and Estimates** **** Revenue Recognition A majority of our revenue is product sales which is recognized at a point-in-time when the product is shipped via external logistics providers and the other criteria of ASC 606 are met. Product revenue is recorded net of variable consideration which includes prompt pay discounts, other discounts, and returns and allowances. 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. 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. Our discussion and analysis of our financial condition and results of operations is based on our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States (GAAP). The preparation of financial statements in accordance with GAAP requires application of managements subjective judgments, often requiring estimates about the effect of matters that are inherently uncertain and may change in subsequent periods. Our actual results may differ substantially from these estimates under different assumptions or conditions. While our significant accounting policies are described in more detail in Note 2 Summary of Significant Accounting Policies, to our financial statements included in Item 8, Financial Statements and Supplementary Data, of this Annual Report on Form 10-K, we believe that the following accounting policies require the application of significant judgments and estimates. **Inventory Reserves** We value our inventories at the lower of cost or net realizable value using the first-in, first-out method, whereby we make estimates regarding the value of our inventories, including an assessment of excess and obsolete inventories. We utilize both specific product identification and historical product demand as the basis for estimating our excess or obsolete inventory reserve. A portion of our inventories are subject to expiration dating, which can be extended in certain circumstances. We continually evaluate quantities on hand and the carrying value of our inventories to determine the need for reserves for excess and obsolete inventories, and apply a consistent policy to estimate the reserve, unless circumstances change that would require us to reassess our policy such as a sudden and significant decline in demand for our products, new technology, or macroeconomic conditions. If inventory is written down, a new cost basis is established that cannot be increased in future periods. | 25 | | **Results of Operations** **Fluctuations in Operating Results** Our results of operations have fluctuated significantly from period to period in the past, including recently, and are likely to continue to do so in the future. We anticipate that our annual results of operations will be impacted for the foreseeable future by several factors, including market acceptance of our products, expense management, and progress in continuing to achieve positive operating cash flow. **Fiscal Year Ended December 31, 2025, compared to the Fiscal Year Ended December 31, 2024** The following table sets forth our summarized, results of operations for the years ended December 31, 2025, and 2024 (in thousands except percentages): | | | Years Ended December 31, | | | $ Increase | | | % Increase | | | | | | 2025 | | | 2024 | | | (Decrease) | | | (Decrease) | | | | Total net revenues | | $ | 18,789 | | | $ | 14,162 | | | $ | 4,627 | | | | 33 | % | | | Cost of goods sold | | | 7,164 | | | | 5,439 | | | | 1,725 | | | | 32 | % | | | Gross margin | | | 11,625 | | | | 8,723 | | | | 2,902 | | | | 33 | % | | | Gross margin % | | | 62 | % | | | 62 | % | | | - | | | | 0 | % | | | Research and development expenses | | | 1,339 | | | | 906 | | | | 433 | | | | 48 | % | | | Depreciation and amortization expenses | | | 140 | | | | 135 | | | | 5 | | | | 4 | % | | | Selling, general and administrative expenses | | | 9,000 | | | | 7,676 | | | | 1,324 | | | | 17 | % | | | Operating Income | | | 1,146 | | | | 6 | | | | 1,140 | | | | 19,000 | % | | | Interest expense | | | (1 | ) | | | (1 | ) | | | - | | | | 0 | % | | | Interest income | | | 139 | | | | 94 | | | | 45 | | | | 48 | % | | | Other expense net | | | (78 | ) | | | (10 | ) | | | (68 | ) | | | 680 | % | | | Income before income taxes | | | 1,206 | | | | 89 | | | | 1,117 | | | | 1,255 | % | | | Income tax expense | | | (12 | ) | | | (15 | ) | | | 3 | | | | (20 | )% | | | Net Income | | $ | 1,194 | | | $ | 74 | | | | 1,120 | | | | 1,514 | % | | *Net Revenues.* Total net revenues increased 33% in the year ended December 31, 2025. This increase was primarily driven by higher programmatic revenue, reflecting strong reorder activity and the addition of several new active sites. In addition, we experienced solid growth in our emergency response business as well as significant growth in our service revenue. *Gross Profit Margin* Gross profit margin was approximately 62% for the years ended December 31, 2025 and December 31, 2024. Although we achieved higher margins during the first half of fiscal 2025, those margins eroded somewhat during the second half of the year primarily due to the impact of tariffs. We anticipate that tariffs will continue to affect our gross profit margins in future periods unless there is a change in U.S. tariff policy. *Research and Development Expenses* Research and development expenses increased 48% primarily due to an increase in headcount, and the related salary expense, as well as higher accrual for employee bonuses. *Depreciation and Amortization Expense* Depreciation and amortization expenses were approximately $0.1 million for the year ended December 31, 2025, and for the year ended December 31, 2024, respectively. | 26 | | *Selling, General and Administrative Expenses* Selling, general and administrative expenses increased $1.3 million or 17%, primarily due to higher sales commissions and higher accrual for employee bonuses. *Interest Income* Interest income was approximately $139,000 for the year ended December 31, 2025, compared to approximately $94,000 for the ended December 31, 2024. The increase in interest income is due to higher cash balances as well as higher interest rates earned on invested cash balances. *Other (Expense), net* Other expense was approximately $78,000 for the year ended December 31, 2025, compared to $10,000 for the year ended December 31, 2024. This increase is primarily a result of losses on foreign currency transactions in 2025. **Liquidity and Capital Resources** The following table summarizes our liquidity and capital resources as of December 31, 2025 and 2024 and is intended to supplement the more detailed discussion that follows. The amounts stated are expressed in thousands. | | | As of December 31, | | | | Liquidity and Capital Resources | | 2025 | | | 2024 | | | | Cash and cash equivalents | | $ | 5,400 | | | $ | 3,760 | | | | Other current assets | | | 5,823 | | | | 4,538 | | | | Working capital | | | 8,456 | | | | 6,736 | | | | Stockholders equity | | | 10,202 | | | | 8,585 | | | We operate under an Investment, Risk Management and Accounting Policy adopted by our Board of Directors. Such policy limits the types of instruments or securities in which we may invest our excess funds: U.S. Treasury Securities; Certificates of Deposit issued by money center banks; Money Funds by money center banks; Repurchase Agreements; and Eurodollar Certificates of Deposit issued by money center banks. This policy provides that our primary objectives for investments are the preservation of principal and achieving sufficient liquidity to meet our forecasted cash requirements. In addition, provided that such primary objectives are met, we may seek to achieve the maximum yield available under such constraints. As of December 31, 2025, we had an accumulated deficit of $143.1 million. Although, we were profitable in the quarter and year ended December 31, 2025, and the full year ended December 31, 2024, we may incur future operating losses if we are unable to maintain or increase our revenue. Based on cash that is available for our operations and projections of our future operations, we believe that our cash balances will be sufficient to fund our current operating plan through at least the next 12 months from the date of issuance of the financial statements in this Annual Report on Form 10-K. Additionally, our operating plans are designed to help control operating costs, to increase revenue so we can continue to generate sufficient cash flows to fund operations. 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. | 27 | | Our future liquidity sources and requirements will depend on many other factors, including: | | | the market acceptance of our products, and our ability to effectively and efficiently produce, market and sell our products; | | | | | | | | | | the costs involved in filing and enforcing patent claims and the status of competitive products; and | | | | | | | | | | the cost of litigation, including potential patent litigation and any other actual or threatened litigation. | | We expect to put our current capital resources toward the development, marketing, and sales of our water filtration products and working capital purposes. Net cash provided by operating activities was $1.6 million for the year ended December 31, 2025 compared to net cash used in operating activities of approximately $0.5 million for the year ended December 31, 2024. Net cash provided by operating activities in 2025 was primarily due to net income of approximately $1.2 million, and increase in accrued expenses of approximately $1 million, an increase in accounts payable of approximately $0.3 million, offset by an increase in accounts receivable of approximately $0.6 million, and an increase in inventory of approximately $0.7 million. Net cash used in operating activities in 2024 was primarily due to an increase in accounts receivable of approximately $0.3 million, a decrease in accounts payable and accrued expenses of approximately $0.2 million each, offset by an increase in inventory impairments and write-offs of approximately $0.3 million. Net cash used in investing activities was approximately $0 and $50,000 for the years ended December 31, 2025 and 2024 respectively. Net cash used in financing activities was approximately $5,000 for each of the years ended December 31, 2025 and 2024. This was primarily from principal payments on our finance lease obligation. **Item 7A. Quantitative and Qualitative Disclosures About Market Risk** Not required for smaller reporting companies. | 28 | | **Item 8. Financial Statements and Supplementary Data** **** **Report of Independent Registered Public Accounting Firm** To the Shareholders and the Board of Directors of Nephros, Inc. **Opinion on the Financial Statements** We have audited the accompanying balance sheet*s* of Nephros, Inc. (the Company) as of December31, 2025 and 2024, the related statements operations, changes in stockholders equity, and cash flows for the year*s* then ended, and the related notes (collectively referred to as the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December31, 2025 and 2024, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America. ** **Basis for Opinion** These financial statements are the responsibility of the Companys management. Our responsibility is to express an opinion on the Companys financial statements based on our audit*s*. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit*s* in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Companys internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures to respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit*s* provide*s*a reasonable basis for our opinion. **Critical Audit Matters** **** Critical audit matters are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. We determined that there are no critical audit matters. /s/ Baker Tilly US, LLP Tewksbury, Massachusetts March 12, 2026 We have served as the Companys auditor since 2015. | 29 | | **NEPHROS, INC.** **BALANCE SHEETS** **(In thousands, except share and per share amounts)** | | | December 31, 2025 | | | December 31, 2024 | | | | ASSETS | | | | | | | | | | | Current assets: | | | | | | | | | | | Cash and cash equivalents | | $ | 5,400 | | | $ | 3,760 | | | | Accounts receivable, net | | | 2,414 | | | | 1,781 | | | | Inventory | | | 3,232 | | | | 2,615 | | | | Prepaid expenses and other current assets | | | 177 | | | | 142 | | | | Total current assets | | | 11,223 | | | | 8,298 | | | | Property and equipment, net | | | 106 | | | | 161 | | | | Lease right-of-use assets | | | 1,021 | | | | 1,377 | | | | Intangible assets, net | | | 318 | | | | 349 | | | | Goodwill | | | 759 | | | | 759 | | | | License and supply agreement, net | | | 164 | | | | 216 | | | | Other assets | | | 50 | | | | 50 | | | | TOTAL ASSETS | | $ | 13,641 | | | $ | 11,210 | | | | LIABILITIES AND STOCKHOLDERS EQUITY | | | | | | | | | | | Current liabilities: | | | | | | | | | | | Accounts payable | | | 914 | | | | 649 | | | | Accrued expenses | | | 1,462 | | | | 565 | | | | Current portion of lease liabilities | | | 391 | | | | 348 | | | | Total current liabilities | | | 2,767 | | | | 1,562 | | | | Lease liabilities, net of current portion | | | 672 | | | | 1,063 | | | | TOTAL LIABILITIES | | | 3,439 | | | | 2,625 | | | | | | | | | | | | | | | STOCKHOLDERS EQUITY: | | | | | | | | | | | Preferred stock, $.001 par value; 5,000,000 shares authorized at December 31, 2025 and 2024; no shares issued and outstanding at December 31, 2025 and 2024 | | | - | | | | - | | | | Common stock, $.001 par value; 40,000,000 shares authorized at December 31, 2025 and 2024; 10,644,268 and 10,544,691 shares issued and outstanding at December 31, 2025 and 2024, respectively | | | 11 | | | | 11 | | | | Additional paid-in capital | | | 153,329 | | | | 152,906 | | | | Accumulated deficit | | | (143,138 | ) | | | (144,332 | ) | | | TOTAL STOCKHOLDERS EQUITY | | | 10,202 | | | | 8,585 | | | | TOTAL LIABILITIES AND STOCKHOLDERS EQUITY | | $ | 13,641 | | | $ | 11,210 | | | *The accompanying notes are an integral part of these financial statements.* | 30 | | **NEPHROS, INC.** **STATEMENTS OF OPERATIONS** **(In thousands, except share and per share amounts)** | | | 2025 | | | 2024 | | | | | | Years Ended December 31, | | | | | | 2025 | | | 2024 | | | | Net revenue: | | | | | | | | | | | Product revenues | | $ | 18,234 | | | $ | 14,035 | | | | Royalty and other revenues | | | 555 | | | | 127 | | | | Total net revenues | | | 18,789 | | | | 14,162 | | | | Cost of goods sold | | | 7,164 | | | | 5,439 | | | | Gross Margin | | | 11,625 | | | | 8,723 | | | | Operating expenses: | | | | | | | | | | | Research and development | | | 1,339 | | | | 906 | | | | Depreciation and amortization | | | 140 | | | | 135 | | | | Selling, general and administrative | | | 9,000 | | | | 7,676 | | | | Total operating expenses | | | 10,479 | | | | 8,717 | | | | Operating income | | | 1,146 | | | | 6 | | | | Other (expense) income: | | | | | | | | | | | Interest expense | | | (1 | ) | | | (1 | ) | | | Interest income | | | 139 | | | | 94 | | | | Other expense net | | | (78 | ) | | | (10 | ) | | | Total other income | | | 60 | | | | 83 | | | | Income before income taxes | | | 1,206 | | | | 89 | | | | Income tax expense | | | (12 | ) | | | (15 | ) | | | Net income | | | 1,194 | | | | 74 | | | | | | | | | | | | | | | Net income per common share, basic | | $ | 0.11 | | | $ | 0.01 | | | | Net income per common share, diluted | | $ | 0.11 | | | $ | 0.01 | | | | Weighted average common shares outstanding, basic | | | 10,612,288 | | | | 10,525,197 | | | | Weighted average common shares outstanding, diluted | | | 10,968,063 | | | | 10,602,004 | | | *The accompanying notes are an integral part of these financial statements.* | 31 | | **NEPHROS, INC.** **STATEMENTS OF CHANGES IN STOCKHOLDERS EQUITY** **(In thousands, except share amounts)** **** | | | | | | | | | | | | | | | | | | | | | | | | | | Common Stock | | | Additional Paid-in | | | Accumulated | | | Total Stockholders | | | | | | Shares | | | Amount | | | Capital | | | Deficit | | | Equity | | | | Balance, December 31, 2023 | | | 10,501,508 | | | $ | 10 | | | $ | 152,754 | | | $ | (144,406 | ) | | $ | 8,358 | | | | Net income | | | - | | | | - | | | | - | | | | 74 | | | | 74 | | | | Cashless exercise of stock options | | | 1,016 | | | | - | | | | - | | | | - | | | | - | | | | Restricted stock vesting | | | 42,164 | | | | 1 | | | | (1 | ) | | | - | | | | - | | | | Stock-based compensation | | | - | | | | - | | | | 153 | | | | - | | | | 153 | | | | Balance, December 31, 2024 | | | 10,544,691 | | | $ | 11 | | | $ | 152,906 | | | $ | (144,332 | ) | | $ | 8,585 | | | | Balance | | | 10,544,691 | | | $ | 11 | | | $ | 152,906 | | | $ | (144,332 | ) | | $ | 8,585 | | | | Net income | | | | | | | | | | | | | | | 1,194 | | | | 1,194 | | | | Cashless exercise of stock options | | | 28,869 | | | | - | | | | - | | | | - | | | | - | | | | Restricted stock vesting | | | 70,708 | | | | - | | | | 147 | | | | - | | | | 147 | | | | Stock-based compensation | | | - | | | | - | | | | 276 | | | | - | | | | 276 | | | | Balance, December 31, 2025 | | | 10,644,268 | | | $ | 11 | | | $ | 153,329 | | | $ | (143,138 | ) | | $ | 10,202 | | | | Balance | | | 10,644,268 | | | $ | 11 | | | $ | 153,329 | | | $ | (143,138 | ) | | $ | 10,202 | | | *The accompanying notes are an integral part of these financial statements.* | 32 | | **NEPHROS, INC.** **STATEMENTS OF CASH FLOWS** **(In thousands)** | | | 2025 | | | 2024 | | | | | | Years Ended December 31, | | | | | | 2025 | | | 2024 | | | | OPERATING ACTIVITIES: | | | | | | | | | | | Net income | | $ | 1,194 | | | $ | 74 | | | | Adjustments to reconcile net income to net cash provided by (used in) operating activities: | | | | | | | | | | | Depreciation of property and equipment | | | 55 | | | | 46 | | | | Amortization of intangible assets, license and supply agreement and finance lease right-of-use asset | | | 84 | | | | 91 | | | | Stock-based compensation | | | 296 | | | | 153 | | | | Inventory impairments and writeoffs | | | 68 | | | | 262 | | | | Change in right-of-use asset | | | 356 | | | | 447 | | | | Gain on asset disposal | | | - | | | | (5 | ) | | | (Gain) or loss on foreign currency transactions | | | 5 | | | | (6 | ) | | | Decrease (Increase) in operating assets: | | | | | | | | | | | Accounts receivable | | | (633 | ) | | | (285 | ) | | | Inventory | | | (685 | ) | | | (407 | ) | | | Prepaid expenses and other current assets | | | (35 | ) | | | (10 | ) | | | Other assets | | | - | | | | 36 | | | | (Decrease) Increase in operating liabilities: | | | | | | | | | | | Accounts payable | | | 259 | | | | (220 | ) | | | Accrued expenses | | | 1,024 | | | | (226 | ) | | | Lease liabilities | | | (343 | ) | | | (442 | ) | | | Net cash provided by (used in) operating activities | | | 1,645 | | | | (492 | ) | | | INVESTING ACTIVITIES: | | | | | | | | | | | Sale of property and equipment | | | - | | | | 5 | | | | Purchase of property and equipment | | | - | | | | (55 | ) | | | Net cash used in investing activities | | | 0 | | | | (50 | ) | | | FINANCING ACTIVITIES: | | | | | | | | | | | Principal payments on finance lease liability | | | (5 | ) | | | (5 | ) | | | Net cash used in financing activities | | | (5 | ) | | | (5 | ) | | | Net increase (decrease) in cash and cash equivalents | | | 1,640 | | | | (547 | ) | | | Cash and cash equivalents, beginning of year | | | 3,760 | | | | 4,307 | | | | Cash and cash equivalents, end of year | | $ | 5,400 | | | $ | 3,760 | | | | Supplemental disclosure of cash flow information | | | | | | | | | | | Cash paid for interest expense | | $ | 1 | | | $ | 2 | | | | Supplemental disclosure of noncash investing and financing activities | | | | | | | | | | | Right-of-use asset obtained in exchange for finance lease liability | | $ | - | | | $ | 22 | | | *The accompanying notes are an integral part of these financial statements.* | 33 | | **NEPHROS, INC.** **NOTES TO FINANCIAL STATEMENTS** **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 Companys 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 foodservice markets. The Companys primary facility is located at 380 Lackawanna Place, South Orange, New Jersey 07079. This location along with our Whippany, NJ facility, houses the Companys corporate headquarters, research, manufacturing, and distribution facilities. **Note 2 - Summary of Significant Accounting Policies** **Use of Estimates** The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (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, standalone selling prices, 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. **Liquidity** The Company generated net income for the year ended December 31, 2025, and had positive cash flow from operations of approximately $1.6 million for the same period. Our operations have consumed substantial amounts of cash since inception, generating an accumulated deficit of $143.1 million as of December 31, 2025. The Company continues to focus on growth in sales and managing expenses with the goal of maintaining cash flow positive from operations. **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 years ended December 31, 2025 and 2024, the following customers accounted for the following percentages of our revenues, respectively: Schedule of Revenues and Accounts Receivable Percentage of Major Customers | Customer | | 2025 | | | 2024 | | | | A | | | 22 | % | | | 25 | % | | | B | | | 12 | % | | | 3 | % | | | C | | | 10 | % | | | 8 | % | | | Total | | | 44 | % | | | 36 | % | | As of December 31, 2025 and 2024, the following customer accounted for the following percentage of our accounts receivable: | Customer | | 2025 | | | 2024 | | | | A | | | 17 | % | | | 13 | % | | | C | | | 16 | % | | | 4 | % | | | D | | | 11 | % | | | 6 | % | | | Total | | | 44 | % | | | 23 | % | | | Concentration risk percentage | | | 44 | % | | | 23 | % | | **Cash and Cash Equivalents** The Company considers all highly liquid money market instruments with an original maturity of three months or less when purchased to be cash equivalents. The company also classifies, as cash equivalents, certificates of deposit with an original maturity of greater than three months for which there is no cost to withdrawal funds prior to maturity date. At December 31, 2025 and 2024, cash and cash equivalents were deposited in financial institutions and consisted entirely of immediately available fund balances. The Company maintains its cash deposits and cash equivalents with financial institutions it believes to be well known and stable. **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 Company determines its allowance for credit losses by considering a number of factors, including the length of time balances are past due, the Companys previous loss history, the customers current ability to pay its obligations to the Company and the expected condition of the general economy and the industry as a whole. The Company writes off accounts receivable when they are determined to be uncollectible. There was no allowance for credit losses as of December 31, 2025. The allowance for credit losses was approximately $11,000 as of December 31, 2024. | 34 | | **Inventory** For all medical device products and some commercial products, the Company engages third parties to manufacture and package its finished goods, which are shipped to the Company for warehousing, until sold to distributors or end customers. Some commercial products are manufactured at Company facilities. Inventory consists of finished goods and raw materials and is valued at the lower of cost or net realizable value using the first-in, first-out method. Reserve assessments include inventory obsolescence based upon expiration date, damaged, or rejected product, slow-moving products, and other considerations. **License and Supply Rights** The Companys rights under the License and Supply Agreement with Medica are capitalized and stated at cost, less accumulated amortization, and are amortized using the straight-line method over the term of the License and Supply Agreement, which is from April 23, 2012 through December 31, 2030. The Company determines amortization periods for licenses based on its assessment of various factors impacting estimated useful lives and cash flows of the acquired rights. The intangible asset is being amortized as an expense over the life of the License and Supply Agreement. See Note 8 License and Supply Agreement, net for further discussion. **Leases** The Company determines if an arrangement contains a lease at inception. Leases are included in lease right-of-use (ROU) assets and lease liabilities on the balance sheet. Lease ROU assets and lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at commencement date. As most of the Companys leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at commencement date in determining the present value of future payments. The operating lease ROU asset includes any lease payments made and initial direct costs incurred and excludes lease incentives. The Companys lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term. The Company has elected as an accounting policy not to apply the recognition requirements in ASC 842 to short-term leases. Short-term leases are leases that have a term of 12 months or less and do not include an option to purchase the underlying asset that the Company is reasonably certain to exercise. The Company recognizes the lease payments for short-term leases on a straight-line basis over the lease term. The Company has also elected, as a practical expedient, by underlying class of asset, not to separate lease components from non-lease components and, instead, account for them as a single component. **Property and Equipment, net** Property and equipment, net is stated at cost less accumulated depreciation. These assets are depreciated over their estimated useful lives of three3 to seven years using the straight-line method. The Company adheres to ASC 360 and periodically evaluates whether current facts or circumstances indicate that the carrying value of its depreciable assets to be held and used may not be recoverable. If such circumstances are determined to exist, an estimate of undiscounted future cash flows produced by the long-lived assets, or the appropriate grouping of assets, is compared to the carrying value to determine whether impairment exists. If an asset is determined to be impaired, the loss is measured based on the difference between the assets fair value and its carrying value. For long-lived assets, the estimate of fair value is based on various valuation techniques, including a discounted value of estimated future cash flows. The Company reports an asset to be disposed of at the lower of its carrying value or its fair value less costs to sell. There were no impairment losses for long-lived assets recorded for the year ended December 31, 2025 and 2024. | 35 | | Direct internal and external costs to implement internal-use software are capitalized. Capitalized costs are depreciated over the estimated useful life of the software, generally five years, beginning when software is ready for its intended use. **Intangible Assets** The Companys intangible assets include finite lived assets. Finite lived intangible assets, consisting of customer relationships, tradenames, service marks and domain names are amortized on a straight-line basis over the estimated useful lives of the assets. Finite lived intangible assets are tested for impairment when events or changes in circumstances indicate that the carrying value of the asset may not be recoverable. Impairment testing requires management to estimate the future undiscounted cash flows of an intangible asset using assumptions believed to be reasonable, but which are unpredictable and inherently uncertain. Actual future cash flows may differ from the estimates used in the impairment testing. **Goodwill** Goodwill represents the excess of purchase price over the fair value of net assets acquired. In accordance with ASC 350, Goodwill and Other Intangibles, rather than recording periodic amortization, goodwill is subject to an annual assessment for impairment by applying a fair value-based test. If the fair value of the reporting unit exceeds the reporting units carrying value, including goodwill, then goodwill is considered not impaired, making further analysis not required. The Company reviews goodwill for possible impairment annually during the fourth quarter, or whenever events or circumstances indicate that the carrying amount may not be recoverable. **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. | 36 | | **Revenue Recognition** The Company recognizes revenue under ASC 606, Revenue from Contracts with Customers. ASC 606 prescribes a five-step model for recognizing revenue, which includes (i) identifying contracts with customers; (ii) identifying performance obligations; (iii) determining the transaction price; (iv) allocating the transaction price; and (v) recognizing revenue. See Note 3 Revenue Recognition for further discussion. **Shipping and Handling Costs** Shipping and handling costs charged to customers are recorded as revenue and as cost of goods sold and were approximately $198,000 and $126,000 for the years ended December 31, 2025 and 2024, respectively. The company has elected the practical expedient and treats shipping and handling as a fulfillment cost. **Warranty Costs** The Companys customers may return products due to defects, malfunctions, or if no longer needed (credit) within 30 days from the date of the original purchase, subject to inspection and approval by the Company. However, return quantities have historically been minimal/insignificant due to the Companys rigorous pre-shipment inspection processes and ongoing customer support. The Company does not therefore accrue for warranty expense. **Research and Development Costs** Research and development costs represent a significant part of our business. Costs included in research and development are expensed as incurred and relate to the processes of discovering, testing and developing new products, improving existing products and regulatory compliance prior to FDA approval. Research and development costs include, but are not limited to, personnel expenses, consulting costs and equipment depreciation. **Stock-Based Compensation** The fair value of stock options is recognized as stock-based compensation expense in the Companys statement of operations. The Company calculates stock-based compensation expense in accordance with ASC 718. The fair value of the Companys stock option awards is estimated using a Black-Scholes option valuation model. This model requires the input of assumptions and elections including expected stock price volatility and the estimated life of each award. The fair value of stock-based awards is amortized over the vesting period of the award. For stock awards that vest based on performance conditions (e.g., achievement of certain milestones), expense is recognized when it is probable that the condition will be met. **Other Income and Expense, net** Other expense of approximately $78,000 and $10,000 for the years ended December 31, 2025 and 2024, respectively, primarily resulted from losses on foreign currency transactions. **Income Taxes** The Company accounts for income taxes in accordance with ASC 740, which requires accounting for deferred income taxes under the asset and liability method. Deferred income taxes are recognized for the tax consequences of temporary differences by applying enacted statutory tax rates applicable in future years to differences between the financial statement carrying amounts and the tax basis of existing assets and liabilities. For financial reporting purposes, the Company has incurred a loss in each period since its inception until 2024 Based on available objective evidence, including the Companys history of losses, management believes it is more likely than not that the net deferred tax assets will not be fully realizable. Accordingly, the Company provided for a full valuation allowance against its net deferred tax assets at December 31, 2025 and 2024. ASC 740 prescribes, among other things, a recognition threshold and measurement attributes for the financial statement recognition and measurement of uncertain tax positions taken or expected to be taken in a companys income tax return. ASC 740 utilizes a two-step approach for evaluating uncertain tax positions. Step one, or recognition, requires a company to determine if the weight of available evidence indicates a tax position is more likely than not to be sustained upon audit, including resolution of related appeals or litigation processes, if any. Step two, or measurement, is based on the largest amount of benefit that is more likely than not to be realized on settlement with the taxing authority. The Company is subject to income tax examinations by major taxing authorities for all tax years subsequent to 2017. During the years ended December 31, 2025 and 2024, the Company recognized no adjustments for uncertain tax positions. However, managements conclusions regarding this policy may be subject to review and adjustment at a later date based on factors including, but not limited to, on-going analyses of and changes to tax laws, regulation and interpretations, thereof. See Note 11 Income Taxes for further discussion. | 37 | | **Net Income per Common Share** 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. A reconciliation of the Companys basic and diluted income per common share is as follows: Schedule of Basic and Diluted Income (Loss) Per Common Share | | | | | | | | | | | | Year Ended December 31, | | | | (In thousands, except share and per share data) | | 2025 | | | 2024 | | | | Numerator: | | | | | | | | | Net income | | $ | 1,194 | | | $ | 74 | | | | | | | | | | | | | | | Denominator: | | | | | | | | | | | Basic weighted average common shares outstanding | | | 10,612,288 | | | | 10,525,197 | | | | Effect of potentially dilutive options | | | 355,775 | | | | 76,807 | | | | Diluted weighted average common shares outstanding | | | 10,968,063 | | | | 10,602,004 | | | | | | | | | | | | | | | Income per common share: | | | | | | | | | | | Basic | | $ | 0.11 | | | $ | 0.01 | | | | Diluted | | $ | 0.11 | | | $ | 0.01 | | | The following potentially dilutive securities have been excluded from the computations of diluted weighted average shares outstanding as they would be antidilutive: Schedule of Antidilutive Securities Excluded from Computation of Earnings Per Share | | | December 31, | | | | | | 2025 | | | 2024 | | | | Shares underlying options outstanding | | | 989,785 | | | | 1,161,986 | | | | Unvested restricted stock | | | - | | | | - | | | **Foreign Exchange Transaction Gains/Losses** Transactions denominated in a currency other than an entitys functional currency may give rise to transaction gains and losses. The Company recognizes transaction gains and losses within other (expense) income, net, within the statements of operations. **Segment Reporting** The Company operates in only one business segment from which the Companys chief operating decision maker evaluates the financial performance of the Company. | 38 | | **Recently Adopted Accounting Pronouncements** **** In December 2023, the FASB issued ASU 2023-09, Improvements to Income Tax Disclosures, which enhances the transparency and decision usefulness of income tax disclosures. The guidance is effective for the Companys annual reporting period ending December 31, 2025. The adoption of this standard during the year ended December 31, 2025, did not have a material impact on the Companys financial statements. **Recent Accounting Pronouncements, Not Yet Effective** In November 2024, the FASB issued ASU 2024-03, ASC 220- Income StatementReporting Comprehensive IncomeExpense 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 Companys 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. **Note 3 Revenue Recognition** The Company recognizes revenue related to product sales at a point-in-time when 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. The allowance for sales returns was approximately $1,000 as of December 31, 2025 and $5,000 as of December 31, 2024. 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 provided. The Company is not entitled to payment until the point at which the service is completed. Certain contracts include additional product and related services in cases of emergencies. These performance obligations are separately invoiced at the time of the emergency and are not included in the initial customer contract 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 revenue transactions for recognition purposes. For these contracts, revenue is allocated to each performance obligation based on its relative standalone selling price basis by maximizing the use of observable inputs to determine the standalone selling price for each performance obligation. If the standalone selling price is unknown, management uses an expected cost-plus margin approach to determine the standalone selling price in order to allocate the transaction price. 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. | 39 | | Royalty and other revenues recognized for the years ended December 31, 2025 and 2024 (in thousands) is comprised of: Schedule of Royalty and Other Revenues | | | 2025 | | | 2024 | | | | | | Years Ended December 31, | | | | | | 2025 | | | 2024 | | | | Service | | $ | 520 | | | $ | 78 | | | | Other revenue | | | 24 | | | | 43 | | | | Royalty revenue under the Sublicense Agreement with CamelBak (1) | | | 11 | | | | 6 | | | | Total royalty and other revenues | | $ | 555 | | | $ | 127 | | | | | (1) | In May 2015, the Company entered into a Sublicense Agreement (the Sublicense Agreement) with CamelBak Products, LLC (CamelBak). Under this Sublicense Agreement, the Company granted CamelBak an exclusive, non-transferable, worldwide (with the exception of Italy) sublicense and license, in each case solely to market, sell, distribute, import and export the IWTD. In exchange for the rights granted to CamelBak, CamelBak agreed, through December 31, 2022, to pay the Company a percentage of the gross profit on any sales made to a branch of the U.S. military, subject to certain exceptions, and to pay a fixed per-unit fee for any other sales made. CamelBak was also required to meet or exceed certain minimum annual fees payable to the Company, and, if such fees are not met or exceeded, the Company was able to convert the exclusive sublicense to a non-exclusive sublicense with respect to non-U.S. military sales. In the first quarter of 2019, the Sublicense Agreement was amended to eliminate the minimum fee obligations starting May 6, 2018 and, as such, CamelBak has no further minimum fee obligations. The Sublicense Agreement expired on December 31, 2022, though we and CamelBak thereafter orally agreed to continue operating under the terms of the Sublicense agreement. In March 2024, we entered into a further written amendment to the Sublicense Agreement, which was made effective December 31, 2022, that extended the term of the Sublicense Agreement through December 31, 2025. In March 2026, we entered into a further written amendment to the Sublicense Agreement, which was made effective January 1, 2026, that extended the term of the Sublicense Agreement through December 31, 2027. | | **Note 4 Fair Value Measurements** **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 December 31, 2025 and December 31, 2024, the Companys 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 December 31, 2025 and December 31, 2024, the fair value measurements of the Companys 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) | | | | | | | December 31, 2025 | | | | | | | | | | | | | | | Money market funds | | $ | 4,205 | | | | - | | | | - | | | | Cash equivalents | | $ | 4,205 | | | $ | - | | | $ | - | | | | | | | | | | | | | | | | | | | December 31, 2024 | | | | | | | | | | | | | | | Money market funds | | $ | 1,866 | | | | - | | | | - | | | | Cash equivalents | | $ | 1,866 | | | $ | - | | | $ | - | | | | 40 | | **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 as of December 31, 2025 and 2024 due to the short-term maturity of these instruments. The carrying amounts of the lease liabilities and equipment financing approximate fair value as of December 31, 2025 and 2024 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 Companys inventory components as of December 31, 2025 and December 31, 2024, were as follows: Schedule of Inventory, Net | | | 2025 | | | 2024 | | | | (In thousands) | | December 31, | | | | | | 2025 | | | 2024 | | | | Finished goods | | $ | 2,973 | | | $ | 2,261 | | | | Raw material | | | 259 | | | | 354 | | | | Total inventory | | $ | 3,232 | | | $ | 2,615 | | | **Note 6 - Property and Equipment, Net** Property and equipment as of December 31, 2025, and 2024 was as follows (in thousands): Schedule of Property and Equipment, Net | | | | | | | | | | | | | | | | Estimated Useful | | December 31, | | | | | | Life | | 2025 | | | 2024 | | | | Manufacturing and research equipment | | 3-7 years | | $ | 899 | | | $ | 899 | | | | Capitalized internal use software and website development | | 5 years | | | 103 | | | | 103 | | | | Computer equipment | | 3-4 years | | | 43 | | | | 43 | | | | Furniture and fixtures | | 7 years | | | 37 | | | | 37 | | | | Leasehold improvements | | Life of lease | | | 88 | | | | 88 | | | | Property and equipment, gross | | | | | 1,170 | | | | 1,170 | | | | Less: accumulated depreciation | | | | | (1,064 | ) | | | (1,009 | ) | | | Property and equipment, net | | | | $ | 106 | | | $ | 161 | | | Depreciation expense for the years ended December 31, 2025 and 2024 was approximately $55,000 and $46,000, respectively. | 41 | | **Note 7 Intangible Assets and Goodwill** **Intangible Assets** Intangible assets at December 31, 2025 and December 31, 2024, are set forth in the table below. Gross carrying values and accumulated amortization of the Companys intangible assets by type are as follows: Schedule of Intangible Assets | | | December 31, 2025 | | | December 31, 2024 | | | | | | Cost | | | Accumulated Amortization | | | Net | | | Cost | | | Accumulated Amortization | | | Net | | | | | | (in thousands) | | | | Customer relationships | | $ | 540 | | | | (222 | ) | | | 318 | | | | 540 | | | | (191 | ) | | | 349 | | | | Total intangible assets | | $ | 540 | | | $ | (222 | ) | | $ | 318 | | | $ | 540 | | | $ | (191 | ) | | $ | 349 | | | The Company recognized amortization expense of approximately $32,000 for the years ended December 31, 2025, and 2024, respectively, which is included in selling, general, and administrative expenses on the accompanying statement of operations. As of December 31, 2025, future amortization expense for each of the next five years is (in thousands): Schedule of Future Amortization Expense | Fiscal Years | | | | | | 2026 | | $ | 32 | | | | 2027 | | | 32 | | | | 2028 | | | 32 | | | | 2029 | | | 32 | | | | 2030 | | | 32 | | | **Goodwill** Goodwill had a carrying value on the Companys balance sheets of $0.8 million at December 31, 2025 and 2024, respectively. The Company concluded the carrying value of goodwill was not impaired as of December 31, 2025, or 2024 as the Company determined that it was not more likely than not that the fair value of goodwill was less than its carrying value. **Note 8 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 Medicas proprietary Medisulfone ultrafiltration technology in conjunction with the Companys filtration products, and for an exclusive supply arrangement for the filtration products. Medica is currently the Companys sole supplier of the filter material used in certain of the Companys 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 Companys 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 Medicas proprietary Versatile microfiber technology and certain filtration products based on Medicas 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. In exchange for the rights granted, we have agreed to make minimum annual aggregate purchases from Medica of 4,629,000, 4,976,000, 5,349,000, 5,750,000, 6,000,000, 6,300,000 for the years 2025, 2026, 2027, 2028, 2029 and 2030, respectively. The Company satisfied its minimum purchase requirement for 2025, but if the Company is unable to satisfy its remaining minimum purchase commitment for 2026 and beyond, it will be in breach of the License and Supply Agreement, giving Medica a right of termination. In exchange for the license, the gross value of the intangible asset capitalized was $2.3 million. License and supply agreement, net, on the balance sheet is $0.2 million as of December 31, 2025 and 2024, respectively. Accumulated amortization is $2.1 million as of December 31, 2025 and 2024, respectively. The intangible asset is being amortized as an expense over the life of the License and Supply Agreement. Amortization expense of $52,000 and $54,000 was recognized for the years ended December 31, 2025 and 2024, respectively, in the statement of operations. | 42 | | As of November 21, 2025, the Company has contractually agreed to pay interest per month at the EURIBOR 360-day rate plus 500 basis points calculated on the principal amount of any outstanding invoices that are overdue by more than 15 days beyond the original payment terms. There was no interest recognized for the years ended December 31, 2025 or 2024. **Note 9 Leases** The Company has operating leases for corporate offices, and office equipment. The leases have remaining lease terms of 2 to 3 years. 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 (in thousands): Schedule of Components of Lease Cost | | | Year ended December 31, 2025 | | | Year ended December 31, 2024 | | | | Operating lease cost | | $ | 351 | | | $ | 447 | | | | Finance lease cost: | | | | | | | | | | | Amortization of right-of-use assets | | | 5 | | | | 5 | | | | Interest on lease liabilities | | | 1 | | | | 2 | | | | Total finance lease cost | | | 6 | | | | 7 | | | | Variable lease cost | | | 105 | | | | 108 | | | | Total lease cost | | $ | 462 | | | $ | 562 | | | Supplemental cash flow information related to leases was as follows (in thousands): Schedule of Supplemental Cash Flow Information Related to Leases | | | Year ended December 31, 2025 | | | Year ended December 31, 2024 | | | | Cash paid for amounts included in the measurement of lease liabilities: | | | | | | | | | | | Operating cash flows from operating leases | | $ | 435 | | | $ | 562 | | | | Financing cash flows from finance leases | | $ | 5 | | | $ | 5 | | | Supplemental balance sheet information related to leases was as follows (in thousands except years): Schedule of Supplemental Balance Sheet Information Related to Leases | | | December 31, 2025 | | | December 31, 2024 | | | | Operating lease right-of-use assets | | $ | 1,004 | | | $ | 1,355 | | | | Finance lease right-of-use assets | | $ | 17 | | | $ | 22 | | | | | | | | | | | | | | | Current portion of operating lease liabilities | | $ | 386 | | | $ | 343 | | | | Operating lease liabilities, net of current portion | | | 661 | | | | 1,046 | | | | Total operating lease liabilities | | $ | 1,047 | | | $ | 1,389 | | | | | | | | | | | | | | | Current portion of finance lease liabilities | | $ | 5 | | | $ | 5 | | | | Finance lease liabilities, net of current portion | | | 11 | | | | 17 | | | | Total finance lease liabilities | | $ | 16 | | | $ | 22 | | | | | | | | | | | | | | | Weighted average remaining lease term | | | | | | | | | | | Operating leases | | | 2.6 years | | | | 3.6 years | | | | Finance leases | | | 2.8 years | | | | 3.8 years | | | | | | | | | | | | | | | Weighted average discount rate | | | | | | | | | | | Operating leases | | | 8.0 | % | | | 8.0 | % | | | Finance leases | | | 8.0 | % | | | 8.0 | % | | | 43 | | As of December 31, 2025, maturities of lease liabilities were as follows (in thousands): Schedule of Maturities of Lease Liabilities | | | Operating Leases | | | Finance Leases | | | | 2026 | | $ | 450 | | | $ | 7 | | | | 2027 | | | 450 | | | | 7 | | | | 2028 | | | 251 | | | | 5 | | | | Total future minimum lease payments | | | 1,151 | | | | 19 | | | | Less imputed interest | | | (104 | ) | | | (3 | ) | | | Total | | $ | 1,047 | | | $ | 16 | | | **Note 10 - Accrued Expenses** Accrued expenses as of December 31, 2025 and 2024 were as follows (in thousands): Schedule of Accrued Expenses | | | 2025 | | | 2024 | | | | | | December 31, | | | | | | 2025 | | | 2024 | | | | Accrued bonus | | $ | 1,019 | | | $ | 209 | | | | Accrued directors fees | | | 29 | | | | 129 | | | | Accrued legal | | | 60 | | | | 7 | | | | Accrued sales commission | | | 171 | | | | 123 | | | | Accrued sales tax payable | | | 15 | | | | 35 | | | | Accrued taxes | | | 93 | | | | 9 | | | | Accrued other | | | 75 | | | | 53 | | | | Accrued expenses | | $ | 1,462 | | | $ | 565 | | | **Note 11 - Income Taxes** The components of the provision for income taxes for the years ended December 31, 2025 and 2024 consisted of the following: Schedule of Components of Provision (Benefit) for Income Taxes | (in thousands) | | 2025 | | | 2024 | | | | | | Year Ended December 31, | | | | (in thousands) | | 2025 | | | 2024 | | | | Current | | | | | | | | | | | Federal | | | - | | | | - | | | | State and local | | $ | 12 | | | | 15 | | | | Total Current | | $ | 12 | | | | 15 | | | | Deferred: | | | | | | | | | | | Federal | | | - | | | | - | | | | State and local | | | - | | | | - | | | | Total Deferred | | | - | | | | - | | | | Total provision (benefit) for income taxes | | $ | 12 | | | | 15 | | | | 44 | | A reconciliation of the income tax benefit computed at the statutory tax rate to the Companys effective tax rate for the years ended December 31, 2025, and 2024 is as follows: Schedule of Effective Income Tax Rate Reconciliation | | | $ in thousands | | | Percent | | | $ in thousands | | | Percent | | | | | | Years Ended December 31, | | | | | | 2025 | | | 2024 | | | | | | $ in thousands | | | Percent | | | $ in thousands | | | Percent | | | | U.S. Federal Statutory Rate | | $ | 253 | | | | 21.00 | % | | $ | 19 | | | | 21.00 | % | | | State income tax expense, net of federal income tax effect* | | | 187 | | | | 15.52 | % | | | 49 | | | | 55.78 | % | | | Tax Credits | | | 88 | | | | 7.26 | % | | | 107 | | | | 121.37 | % | | | Expired NOLs | | | 390 | | | | 32.30 | % | | | 829 | | | | 940.83 | % | | | Stock-based Compensation | | | 215 | | | | 17.84 | % | | | 56 | | | | 63.65 | % | | | Other Nontaxable or Nondeductible Items | | | 1 | | | | 0.03 | % | | | - | | | | 0.09 | % | | | Valuation Allowance | | | (1,122 | ) | | | -92.96 | % | | | (1,045 | ) | | | -1186.05 | % | | | Effective Tax Rate | | $ | 12.00 | | | | 0.99 | % | | $ | 15 | | | | 16.67 | % | | The majority of the state tax expense relates to operations in New Jersey, Arizona, and California. | 45 | | Significant components of the Companys deferred tax assets (liabilities) as of December 31, 2025 and 2024 are as follows (in thousands): Schedule of Deferred Tax Assets | | | | | | | | | | | | | | December 31, | | | | | | 2025 | | | 2024 | | | | Deferred tax assets: | | | | | | | | | | | Net operating loss carry forwards | | $ | 15,082 | | | $ | 15,628 | | | | Research and development credits | | | 893 | | | | 980 | | | | Nonqualified stock option compensation expense | | | 395 | | | | 601 | | | | Lease liabilities | | | 255 | | | | 348 | | | | Capital loss carryforwards | | | 2,035 | | | | 2,090 | | | | Fixed and intangible basis difference | | | - | | | | - | | | | Other temporary book - tax differences | | | 652 | | | | 857 | | | | Total deferred tax assets | | | 19,312 | | | | 20,504 | | | | | | | | | | | | | | | Deferred tax liabilities: | | | | | | | | | | | Lease right-of-use assets | | | (245 | ) | | | (339 | ) | | | Fixed and intangible asset basis difference | | | (158 | ) | | | (134 | ) | | | Total deferred tax liabilities | | | (403 | ) | | | (473 | ) | | | | | | | | | | | | | | Deferred tax assets, net | | | 18,909 | | | | 20,031 | | | | Valuation allowance for deferred tax assets | | | (18,909 | ) | | | (20,031 | ) | | | Net deferred tax assets after valuation allowance | | $ | - | | | $ | - | | | A valuation allowance has been recognized to offset the Companys net deferred tax asset as it is more likely than not that such net asset will not be realized. The Company primarily considered its historical loss and potential Internal Revenue Code Section 382 limitations to arrive at its conclusion that a valuation allowance was required. The Companys valuation allowance decreased approximately $1.1 million from December 31, 2024 to December 31, 2025. At December 31, 2025, the Company had Federal income tax net operating loss carryforwards of $70 million and State income tax net operating loss carryforwards of $5.3 million. The Company had Federal research and development tax credit carryforwards of $0.90 million at December 31, 2025. The Companys net operating losses and research and development tax credits may ultimately be limited by Section 382 of the Internal Revenue Code and, as a result, the Company may be unable to offset future taxable income (if any) with losses, or its tax liability with credits, before such losses and credits expire. Included in the Federal net operating loss carryforwards are $14 million of losses generated from 2018 onward that have an indefinite carryover period. The remaining Federal and State net operating loss carryforwards and Federal and State tax credit carryforwards will expire at various times between 2025 and 2044 unless utilized. The Company has analyzed the tax positions taken or expected to be taken in its tax returns and concluded it has no liability related to uncertain tax positions. The Company is subject to income tax examinations by major taxing authorities for all tax years subsequent to 2021 and does not anticipate a change in its uncertain tax positions within the next twelve months. The Companys policy is to report interest and penalties, if any, related to unrecognized tax benefits in income tax expense. Income taxes paid, net of refunds received during the year were not material. Such payments primarily related to U.S State jurisdictions. The total tax paid, net of refunds, during the year ended on December 31, 2025, was $2,000. | 46 | | **Note 12 - Stock Plans and Share-Based Payments** The fair value of stock options and restricted stock is recognized as stock-based compensation expense in the Companys statement of operations. The Company calculates stock-based compensation expense in accordance with ASC 718. The fair value of stock-based awards is amortized over the vesting period of the award. **Stock Plans** **** In 2024, the Board of Directors adopted the Nephros, Inc. 2024 Equity Incentive Plan (2024 Plan). As of December 31, 2025, options to purchase 212,755 shares of common stock had been issued to employees under the 2024 Plan and were outstanding. The options issued to employees expire on various dates between November 6, 2034 and November 10, 2035. As of December 31, 2025, there were 1,294,708 shares available for future grant under the 2024 Plan. Generally, grants vest based on a service condition only and vest between two to four years. The share reserve under the 2024 Plan is be automatically increased from time to time for shares subject to outstanding stock awards under the 2015 Plan (as defined below) and that following the effective date of the 2024 Plan: (i) are not issued because such stock award or any portion thereof expires or otherwise terminates without all of the shares covered by such stock award having been issued; (ii) are not issued because such stock award or any portion thereof is settled in cash; (iii) are forfeited back to or repurchased by the Company because of the failure to meet a contingency or condition required for the vesting of such shares; (iv) are withheld or reacquired to satisfy the exercise, strike or purchase price; or (v) are withheld or reacquired to satisfy a tax withholding obligation. However, the maximum number of shares that may be available for issuance under the 2024 Plan cannot exceed 2,616,875. The maximum contractual term for stock options granted under the 2024 Plan is 10 years. The Company had previously adopted the Nephros, Inc. 2015 Equity Incentive Plan (2015 Plan), pursuant to which the Company granted equity awards to its officers, directors, employees and other service providers. Following the adoption of the 2024 Plan, the Company ceased using the 2015 Plan for granting equity awards. As of December 31, 2025, options to purchase 1,010,281 shares of common stock had been issued to employees under the 2015 Plan and were outstanding. The options issued to employees expire on various dates between May 14, 2026 and May 14, 2034. No shares are available for future grants under the 2015 Plan. In 2023, the Company issued 122,524 stock options outside of the 2015 Plan to the Companys new Chief Financial Officer. The terms for these options are identical to those issued to employees under the 2015 Plan. **Stock Options** The Company has elected to recognize forfeitures as they occur. Stock-based compensation expense related to stock options was approximately $0.3 million and $0.1 million for the years ended December 31, 2025, and 2024, respectively. For the year ended December 31, 2025, approximately $266,000 and $11,000 are included in selling, general and administrative expenses and research and development expenses, respectively, on the accompanying statement of operations. For the year ended December 31, 2024, $131,000 and approximately $6,000 are included in selling, general and administrative expenses and research and development expenses, respectively, on the accompanying statement of operations. | 47 | | The following table issued summarizes the option activity for the years ended December 31, 2025: Summary of Option Activity | | | Shares | | | Weighted Average Exercise Price | | | | Outstanding at December 31, 2024 | | | 1,238,793 | | | $ | 3.20 | | | | Options granted | | | 221,304 | | | | 1.82 | | | | Options forfeited | | | (60,737 | ) | | | 4.50 | | | | Options expired | | | (1,667 | ) | | | 7.11 | | | | Options exercised (1) | | | (52,132 | ) | | | 1.96 | | | | Outstanding at December 31, 2025 | | | 1,345,561 | | | $ | 2.96 | | | | (1) | 52,132 options were exercised via cashless exercise which resulted in 28,869 shares issued. | | The following table summarizes the options exercisable and vested and expected to vest as of December 31, 2025. Summary of Options Exercisable Vested and Expected to Vest | | | Shares | | | Weighted Average Exercise Price | | | | Vested at December 31, 2025 | | | 890,653 | | | $ | 3.60 | | | | Vested and expected to vest at December 31, 2025 | | | 1,263,633 | | | $ | 3.04 | | | The grant date fair value of each option grant was estimated throughout the year using the Black-Scholes option-pricing model using the following weighted-average assumptions: Schedule of Fair Value Assumptions | Assumption for Option Grants | | 2025 | | | 2024 | | | | Stock Price Volatility | | | 63.43 | % | | | 69.54 | % | | | Risk-Free Interest Rates | | | 4.22 | % | | | 4.45 | % | | | Expected Life (in years) | | | 6.03 | | | | 6.08 | | | | Expected Dividend Yield | | | 0 | % | | | 0 | % | | Expected volatility is based on historical volatility of the Companys common stock at the time of grant. The risk-free interest rate is based on the U.S. Treasury yields in effect at the time of grant for periods corresponding with the expected life of the options. For the expected life, the Company is using the simplified method as described in the SEC Staff Accounting Bulletin 107. This method assumes that stock option grants will be exercised based on the average of the vesting periods and the options life. The weighted-average fair value of options granted in 2025 and 2024 is $1.13 and $1.40, respectively. The aggregate intrinsic values of stock options outstanding and stock options vested or expected to vest as of December 31, 2025 was approximately $3.2 million and $2.9 million respectively. A stock option has intrinsic value, at any given time, if and to the extent that the exercise price of such stock option is less than the market price of the underlying common stock at such time. The weighted-average remaining contractual life of options vested or expected to vest as of December 31, 2025 was approximately 6.1 years. The intrinsic values of stock options exercised was approximately $125,000 and $2,000 for the years ended December 31, 2025, and 2024 respectively. As of December 31, 2025, there was $0.4 million of total unrecognized compensation cost related to unvested share-based compensation awards granted under the equity compensation plans which will be amortized over the weighted average remaining requisite service period of 2.03 years. The Company did not recognize an income tax benefit for the years ended December 31, 2025, and 2024. While the Company generated taxable income during the year ended December 31, 2025, this income was fully offset by the utilization of net operating loss carryforwards for which the company continues to maintain a full valuation allowance against its deferred tax assets as of December 31, 2025. **** | 48 | | **** **Restricted Stock** The Company has issued restricted stock as compensation for the services of certain employees and non-employee directors. The grant date fair value of restricted stock is based on the fair value of the common stock on the date of grant, and compensation expense is recognized based on the period in which the restrictions lapse. The following table summarizes restricted stock activity for the years ended December 31, 2025, and 2024: Summary of Restricted Stock Activity | | | Shares | | | Weighted Average Grant Date Fair Value | | | | Nonvested at December 31, 2023 | | | 42,167 | | | $ | 3.18 | | | | Granted | | | - | | | | - | | | | Vested | | | (42,167 | ) | | | 3.18 | | | | Nonvested at December 31, 2024 | | | - | | | $ | - | | | | Granted | | | 70,708 | | | | 2.07 | | | | Vested | | | (70,708 | ) | | | 2.07 | | | | Nonvested at December 31, 2025 | | | - | | | $ | - | | | The total fair value of restricted stock that vested during each of the years ended December 31, 2025 and 2024 was approximately $0.1 million. Total stock-based compensation expense for restricted stock was approximately $19,000 and $15,000 for the year ended December 31, 2025 and 2024, respectively and is recognized in selling, general and administrative expenses on the accompanying statement of operations. As of December 31, 2025 and December 31, 2024, there was no unrecognized compensation expense related to restricted stock-based awards granted under the equity compensation plans. **Note 13 Savings Incentive Match Plan** On January 1, 2017, the Company established a Savings Incentive Match Plan for Employees Individual Retirement Account (SIMPLE IRA), which covers all employees. The SIMPLE IRA Plan provides for voluntary employee contributions up to statutory IRA limitations. The Company matches 100% of employee contributions to the SIMPLE IRA Plan, up to 3% of each employees salary. The Company contributed and expensed approximately $115,000 and $105,000 to the SIMPLE IRA in 2025 and 2024, respectively. **Note 14 Segment Information** **** The Company operates in one operating segment, and therefore one reportable segment, focused on the development and sale of high-performance water solutions to the medical and commercial markets. The Company manages business activities primarily through the development and commercialization of water filtration products, which are sold to U.S. and international customers. The accounting policies for the Companys single operating segment are the same as those described in the summary of significant accounting policies. The Companys Chief Executive Officer is the Chief Operating Decision Maker (CODM). The CODM manages the Companys 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. | 49 | | The following is a summary of the significant revenue and expense categories, and net income provided to the CODM (in thousands): Schedule of Net Income for Segment | | | 2025 | | | 2024 | | | | | | Years Ended December 31, | | | | | | 2025 | | | 2024 | | | | Net revenue: | | | | | | | | | | | Product revenues | | $ | 18,234 | | | $ | 14,035 | | | | Royalty and other revenues | | | 555 | | | | 127 | | | | Total net revenues | | | 18,789 | | | | 14,162 | | | | Cost of goods sold | | | 7,164 | | | | 5,439 | | | | Gross Margin | | | 11,625 | | | | 8,723 | | | | Operating expenses: | | | | | | | | | | | Research and development | | | 1,339 | | | | 906 | | | | Selling, general and administrative | | | 9,000 | | | | 7,676 | | | | Other operating expenses (1) | | | 140 | | | | 135 | | | | Total operating expenses | | | 10,479 | | | | 8,717 | | | | Operating income | | | 1,146 | | | | 6 | | | | Other income | | | 60 | | | | 83 | | | | Income tax expense | | | (12 | ) | | | (15 | ) | | | Net income | | | 1,194 | | | | 74 | | | | (1) | Other operating expenses is comprised of depreciation and amortization. | | **Note 15 Subsequent Events** **** 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. 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, no refund mechanism has been established, 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. The Company is assessing the effects of these developments. No asset or gain related to potential tariff refunds has been recognized due to uncertainty regarding eligibility, amount, and timing. **** | 50 | | **** **Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure** None. **Item 9A. Controls and Procedures** **Disclosure Controls and Procedures** Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in the reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SECs rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in company reports filed or submitted under the Exchange Act is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure. 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 December 31, 2025. 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 December 31, 2025, due to the existence of a material weakness in our internal control over financial reporting. Notwithstanding such material weakness, management believes that the financial statements included in this Annual Report on Form 10-K present fairly in all material respects the financial position, results of operations and cash flows for the period presented. **Managements Report on Internal Control Over Financial Reporting** Management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f). Under the supervision of the Chief Executive Officer and Chief Financial Officer, management conducted an evaluation of the effectiveness of the internal control over financial reporting as of December 31, 2024 based on the framework set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework. Based on the assessment, management concluded that the internal control over financial reporting was not effective as of December 31, 2025. **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 March 31, 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 contracts 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 the applicable 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. **Item 9B. Other Information** During the three months ended December 31, 2025, none of our directors or officers adopted or terminated a Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement, as each term is defined in Item 408 of Regulation S-K. | 51 | | **PART III** **Item 10. Directors, Executive Officers and Corporate Governance** The information set forth under the captions Proposal No. 1 Election of Directors, Corporate Governance and Delinquent Section 16(a) Reports in the 2025 Proxy Statement is incorporated herein by reference. **Item 11. Executive Compensation** The information set forth under the caption Compensation Matters in the 2025 Proxy Statement is incorporated herein by reference. **Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters** The information set forth under the captions Stock Ownership of Management and Principal Stockholders and Compensation Matters in the 2025 Proxy Statement is incorporated herein by reference. **Item 13. Certain Relationships and Related Transactions, and Director Independence** The information set forth under the captions Corporate Governance and Certain Relationships and Related Transactions in the 2025 Proxy Statement is incorporated herein by reference**.** **Item 14. Principal Accounting Fees and Services** The information set forth under the caption Proposal No. 2 Ratification of Selection of Independent Registered Public Accounting Firm in the 2025 Proxy Statement is incorporated herein by reference. **PART IV** **Item 15. Exhibits, Financial Statement Schedules** **(a) Documents filed as part of this report:** **(1) Financial Statements of Nephros, Inc.** | Report of independent registered public accounting firm, Baker Tilly US, LLP. 1 Highwood Drive, Tewksbury, MA 01876, Firm ID - 23 | | | Balance sheets as of December 31, 2025 and 2024. | | | Statements of operations for the years ended December 31, 2025 and 2024. | | | Statements of changes in stockholders equity for the years ended December 31, 2025 and 2024. | | | Statements of cash flows for the years ended December 31, 2025 and 2024. | | | Notes to financial statements. | | | 52 | | **(2) Exhibits:** | Exhibit No. | | Description | | | 2.1 | | Agreement for Purchase and Sale of Assets, dated October 4, 2022, by and between Nephros, Inc. and BWSI, LLC, incorporated by reference to Exhibit 2.1 to Nephros Inc.s Current Report on Form 8-K, filed with the SEC on November 21, 2022 (pursuant to Item 601(b)(2)(ii) of Regulation S-K, certain information contained in this Exhibit 2.1 has been redacted as indicated therein). | | | | | | | | 3.1 | | Conformed Copy of the Fourth Amended and Restated Certificate of Incorporation, incorporating those Certificates of Amendment dated June 4, 2007; June 29, 2007; November 13, 2007; October 23, 2009; March 10, 2011; March 11, 2011 and July 8, 2019, incorporated by reference to Exhibit 3.1 to Nephros, Inc.s Quarterly Report on Form 10-Q for the quarter ended June 30, 2019, filed with the SEC on August 7, 2019. | | | | | | | | 3.2 | | Second Amended and Restated By-Laws of the Registrant, incorporated by reference to Exhibit 3.1 to Nephros, Inc.s Current Report on Form 8-K, filed with the SEC on December 3, 2007. | | | | | | | | 4.1 | | Specimen of Common Stock Certificate of the Registrant, incorporated by reference to Exhibit 4.1 to Nephros, Inc.s Amendment No. 1 to Registration Statement on Form S-1/A (Reg. No. 333-116162), filed with the SEC on July 20, 2004. | | | | | | | | 4.2 | | Description of Capital Stock, incorporated by reference to Exhibit 4.5 to Nephros, Inc.s Annual Report on Form 10-K for the year ended December 31, 2019, filed with the SEC on February 27, 2020. | | | | | | | | 10.1 | | Nephros, Inc. 2015 Equity Incentive Plan, incorporated by reference to Exhibit 10.2 to Nephros, Inc.s Quarterly Report on Form 10-Q for the quarter ended March 31, 2015, filed with the SEC on May 15, 2015. | | | | | | | | 10.2 | | Form of Incentive Stock Option Agreement under the 2015 Equity Incentive Plan, incorporated by reference to Exhibit 10.3 to Nephros, Inc.s Quarterly Report on Form 10-Q for the quarter ended March 31, 2015, filed with the SEC on May 15, 2015. | | | | | | | | 10.3 | | Form of Non-Qualified Stock Option Agreement under the 2015 Equity Incentive Plan, incorporated by reference to Exhibit 10.4 to Nephros, Inc.s Quarterly Report on Form 10-Q for the quarter ended March 31, 2015, filed with the SEC on May 15, 2015. | | | | | | | | 10.4 | | Form of Restricted Stock Agreement under the 2015 Equity Incentive Plan, incorporated by reference to Exhibit 10.5 to Nephros, Inc.s Quarterly Report on Form 10-Q for the quarter ended March 31, 2015, filed with the SEC on May 15, 2015. | | | | | | | | 10.5 | | Form of Restricted Stock Unit Agreement under the 2015 Equity Incentive Plan, incorporated by reference to Exhibit 10.6 to Nephros, Inc.s Quarterly Report on Form 10-Q for the quarter ended March 31, 2015, filed with the SEC on May 15, 2015. | | | | | | | | 10.6 | | Nephros, Inc. 2024 Equity Incentive Plan, incorporated by reference to Exhibit 10.1 to Nephros, Inc.s Current Report on Form 8-K, filed with the SEC on May 24, 2024. | | | | | | | | 10.7 | | Form of Stock Option Agreement under 2024 Equity Incentive Plan (incorporated by reference to Exhibit 10.7 to Nephros, Inc.s Annual Report on Form 10-K for the year ended December 31, 2024). | | | | | | | | 10.8 | | Form of Restricted Stock Grant Notice under 2024 Equity Incentive Plan (incorporated by reference to Exhibit 10.8 to Nephros, Inc.s Annual Report on Form 10-K for the year ended December 31, 2024). | | | 53 | | | 10.9 | | Registration Rights Agreement, dated September 19, 2007, among the Registrant and the Holders, incorporated by reference to Exhibit 10.3 to Nephros, Inc.s Current Report on Form 8-K, filed with the SEC on September 25, 2007. | | | | | | | | 10.10 | | Form of Registration Rights Agreement, between the Registrant and Wexford Capital LP, incorporated by reference to Exhibit 10.57 to Nephros, Inc.s Registration Statement on Form S-1 (Reg. No. 333-169728), filed with the SEC on October 1, 2010. | | | | | | | | 10.11 | | Registration Rights Agreement, dated February 4, 2013, between the Registrant and Wexford Capital LP, incorporated by reference to Exhibit 10.68 to Nephros, Inc.s Registration Statement on Form S-1 (Reg. No. 333-187036), filed with the SEC on March 4, 2013. | | | | | | | | 10.12 | | First Amendment to Registration Rights Agreement, dated May 23, 2013, between the Registrant and Wexford Capital LP, incorporated by reference to Exhibit 10.1 to Nephros, Inc.s Quarterly Report on Form 10-Q for the quarter ended June 30, 2013, filed with the SEC on August 13, 2013. | | | | | | | | 10.13 | | Registration Rights Agreement, dated November 12, 2013, between the Registrant and Wexford Capital LP, incorporated by reference to Exhibit 10.2 to Nephros, Inc.s Current Report on Form 8-K, filed with the SEC on November 14, 2013. | | | | | | | | 10.14 | | First Amendment to Registration Rights Agreement, dated April 14, 2014, between the Registrant and Wexford Capital LP, incorporated by reference to Exhibit 10.2 to Nephros, Inc.s Quarterly Report on Form 10-Q for the quarter ended March 31, 2014, filed with the Securities and Exchange Commission on May 14, 2014. | | | | | | | | 10.15 | | Registration Rights Agreement, dated August 29, 2014, between the Registrant and Wexford Capital LP, incorporated by reference to Exhibit 10.2 to Nephros, Inc.s Current Report on Form 8-K, filed with the SEC on September 3, 2014. | | | | | | | | 10.16 | | First Amendment to Registration Rights Agreement, dated September 23, 2014, between the Registrant and Wexford Capital LP, incorporated by reference to Exhibit 10.5 to Nephros, Inc.s Quarterly Report on Form 10-Q for the quarter ended September 30, 2014, filed with the SEC on November 13, 2014. | | | | | | | | 10.17 | | Registration Rights Agreement dated March 17, 2017, among the Registrant and the Purchasers identified therein, incorporated by reference to Exhibit 10.2 to Nephros, Inc.s Current Report on Form 8-K, filed with the SEC on March 23, 2017. | | | | | | | | 10.18 | | Employment Agreement dated May 5, 2023, between Nephros, Inc. and Robert Banks (incorporated by reference to Exhibit 10.1 to Nephros, Inc.s Quarterly Report on Form 10-Q for the quarter ended June 30, 2023). | | | | | | | | 10.19 | | Letter Agreement, dated July 28, 2023, between Nephros, Inc. and Judy Krandel (incorporated by reference to Exhibit 10.31 to Nephros, Inc.s Annual Report on Form 10-K for the year ended December 31, 2023). | | | | | | | | 10.20 | | Amendment to Letter Agreement, dated February 26, 2025, between Nephros, Inc. and Judy Krandel (incorporated by reference to Exhibit 10.1 to Nephros, Inc.s Quarter Report on Form 10-Q for the quarter ended March 31, 2025, filed with the SEC on May 15, 2025). | | | | | | | | 10.21 | | Inducement Stock Option Agreement, dated November 1, 2023, between Nephros, Inc. and Judy Krandel (incorporated by reference to Exhibit 10.32 to Nephros, Inc.s Annual Report on Form 10-K for the year ended December 31, 2023). | | | 54 | | | 10.22 | | Nephros, Inc. Non-Employee Director Compensation Policy (incorporated by reference to Exhibit 10.1 to Nephros, Inc.s Quarterly Report on Form 10-Q for the quarter ended September 30, 2025, filed with the SEC on November 6, 2025). | | | | | | | | 10.23 | | License and Supply Agreement, dated November 21, 2025, between Nephros, Inc. and Medica S.p.A. (pursuant to Item 601(b)(2)(ii) of Regulation S-K, certain information contained in this Exhibit 10.23 has been redacted as indicated therein).+ * | | | | | | | | 19.1 | | Nephros, Inc. Insider Trading Policy (incorporated by reference to Exhibit 19.1 to Nephros, Inc.s Annual Report on Form 10-K for the year ended December 31, 2024). | | | | | | | | 23.1 | | Consent of Baker Tilly US, LLP Independent Registered Public Accounting Firm. * | | | | | | | | 24.1 | | Power of Attorney (included on the signature page). * | | | | | | | | 31.1 | | Certification by the Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. * | | | | | | | | 31.2 | | Certification by the Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. * | | | | | | | | 32.1 | | Certification by the Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. * | | | | | | | | 32.2 | | Certification by the Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. * | | | | | | | | 97.1 | | Nephros, Inc. Policy for Recoupment of Erroneously Awarded Compensation (incorporated by reference to Exhibit 97.1 to Nephros, Inc.s Annual Report on Form 10-K for the year ended December 31, 2023). | | | | | | | | 101 | | Interactive Data File. * | | | * | Filed herewith. | | | | Management contract or compensatory plan arrangement. | | | + | Confidential treatment has been granted for certain portions omitted from this exhibit pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended. | | **Item 16. Form 10-K Summary** Not applicable. | 55 | | **SIGNATURES** Pursuant to the requirements of Section 13 or 15(d) 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: March 12, 2026 | | | | | | By: | /s/ Robert Banks | | | | Name: | Robert Banks | | | | Title: | President, Chief Executive Officer (Principal Executive Officer) | | | | | | | | Date: March 12, 2026 | | | | | | By: | /s/ Judy Krandel | | | | Name: | Judy Krandel | | | | Title: | Chief Financial Officer (Principal Financial and Accounting Officer) | | **POWER OF ATTORNEY** We, the undersigned directors and officers of Nephros, Inc., hereby severally constitute and lawfully appoint Robert Banks, our true and lawful attorney-in-fact with full power to him to sign for us, in our names in the capacities indicated below, the Annual Report on Form 10-K for the fiscal year ended December 31, 2025 of Nephros, Inc. and any and all amendments thereto, and to file the same with all exhibits thereto, and all other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent, full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intents and purposes as such person might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, or their or his or her substitute or substitutes, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated. | Signature | | Title | | Date | | | | | | | | | | /s/ Robert Banks | | President, Chief Executive Officer | | March 12, 2026 | | | Robert Banks | | (Principal Executive Officer) | | | | | | | | | | | | /s/ Judy Krandel | | Chief Financial Officer | | March 12, 2026 | | | Judy Krandel | | (Principal Financial and Accounting Officer) | | | | | | | | | | | | /s/ Arthur H. Amron | | Director | | March 12, 2026 | | | Arthur H. Amron | | | | | | | | | | | | | | /s/ Oliver Spandow | | Director | | March 12, 2026 | | | Oliver Spandow | | | | | | | | | | | | | | /s/ Lisa Nettis | | Director | | March 12, 2026 | | | Lisa Nettis | | | | | | | | | | | | | | /s/ Joe Harris | | Director | | March 12, 2026 | | | Joe Harris | | | | | | | 56 | |