NEPHROS INC

Current report

Recent Developments

Current report

Supreme Court Tariff Ruling

Current report

In February 2026, the U.S. Supreme Court issued a ruling striking down certain tariffs previously imposed under the International Emergency Economic Powers Act (“IEEPA”). The U.S. presidential administration subsequently invoked additional tariffs under other U.S. laws resulting in a rapidly changing tariff environment. In April 2026, the U.S. Customs and Border Protection agency (“CBP”) launched a platform to allow for the submission of IEEPA tariff refund requests.

Current report

During the six months ended June 30, 2026, we were notified by CBP that a refund of approximately $647,000 had been approved. Accordingly, during the six months ended June 30, 2026, we recognized a $624,000 reduction in cost of goods sold in our consolidated statements of operations, representing the expense for IEEPA tariffs to be refunded with respect to inventory sold to customers since the tariffs were imposed in February 2025. Additionally, we recognized a $23,000 reduction in the carrying value of inventories on hand on our consolidated balance sheet as of June 30, 2026 for IEEPA tariffs previously capitalized as cost of inventory. We recorded a receivable of approximately $647,000 related to the refunds as of June 30, 2026, as the cash had not yet been received.

Current report

We expect to receive approximately $22,000 of statutory interest in connection with the refund. Interest will be recognized in other income when realized or realizable.

Current report

Critical Accounting Policies, Significant Judgements and Use of Estimates

Current report

Our unaudited condensed financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”). The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported expenses incurred during the reporting periods. Our estimates are based on our historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. We believe that the accounting policies discussed below are critical to understanding our historical and future performance, as these policies relate to the more significant areas involving management’s judgments and estimates.

Current report

In the absence of specific U.S. GAAP applicable to tariff refunds, we apply the loss-recovery model in ASC 410-30 by analogy and evaluate whether recovery is probable under ASC 450-20. Under this policy, we recognize a tariff refund receivable when recovery is probable, limited to the amount of previously incurred tariff costs. We elected to recognize recoveries related to both tariff costs previously recognized in earnings and tariff costs remaining capitalized in inventory. Amounts related to inventory previously sold are recognized as a reduction of cost of goods sold, while amounts related to inventory remaining on hand are recognized as a reduction of inventory. Determining whether recovery is probable requires significant judgment and consideration of the applicable legal rulings, the status and requirements of the CBP refund process, the eligibility and status of individual import entries, confirmations from our customs broker and other available evidence regarding collectability. Statutory interest associated with tariff refunds is accounted for separately as a gain contingency and is recognized when realized or realizable.

Current report

Except for the adoption of this tariff-refund accounting policy, there were no material changes to our critical accounting policies during the six months ended June 30, 2026.

Current report

Gross profit margin was approximately 67% for the three months ended June 30, 2026, compared to approximately 63% for the corresponding 2025 period. The increase of approximately four percentage points was primarily attributable to our recognition during the period of IEEPA tariff refunds of approximately $0.6 million, which was recognized as a reduction of cost of goods sold during the three months ended June 30, 2026. The benefit resulting from the tariff refund was offset by increased costs due to the weakening of the U.S. dollar compared to the Euro, an increase in shipping expense and rapid growth in our service revenue, which yields lower gross margins than we realize from product sales. With respect to the tariff refund, the refund represents duties paid by us between the period from April 2025 to February 2026 and that were imposed by executive order in April 2025 under the IEEPA, which the U.S. Supreme Court ruled were invalid in February 2026. However, approximately $0.50 million of the entire tariff refund amount relates to purchased inventory that we converted to revenue beginning with the second quarter of 2025 through the first quarter of 2026 and which therefore would have reduced cost of goods sold in such periods; only approximately $0.1 million of the tariff refund related to purchased inventory that was converted to revenue during the three-month period ended June 30, 2026. The $0.50 million of tariff refund corresponding to product sales made in prior periods increased our gross profit margin by approximately nine percentage points for the three months ended June 30, 2026. Approximately $0.03 million of the tariff refund related to purchased inventory that was converted to revenue during the three-month period ended June 30, 2025. Including that $0.03 million, our gross profit margin for such period would have increased by approximately one percentage point. Although the IEEPA tariffs were declared invalid, the current administration has imposed tariffs using other statutory bases, which remain in effect. Accordingly, we expect that our gross profit margin will continue to face headwinds as a result of current U.S. tariff policy.

Current report

Six Months Ended June 30, 2026 Compared to the Six Months Ended June 30, 2025

Current report

Net Revenues

Current report

Gross Profit Margin

Current report

Gross profit margin was approximately 63% for the six months ended June 30, 2026, compared to approximately 64% for the corresponding 2025 period. The decrease of approximately one percentage point was primarily attributable to increased product costs due to the weakening of the U.S. dollar compared to the Euro, increased shipping expense and rapid revenue growth from our commercial products offerings and services revenue, both of which yield lower gross margins than our infection control business. However, our gross margins significantly benefited from our recognition during the 2026 period of the IEEPA tariff refund of approximately $0.6 million, which was recognized as a reduction of cost of goods sold during the six months ended June 30, 2026. This refund reflects tariffs paid by us between the period from April 2025 to February 2026. Approximately $0.3 million of this tariff refund corresponds to purchased inventory that we converted to revenue in 2026, which amount accounts for an approximately three percentage point improvement in our gross profit margin for the six months ended June 30, 2026. The remaining approximately $0.3 million of the refunded tariffs correspond to purchased inventory that we converted to revenue in 2025, of which approximately $0.03 million corresponds to purchased inventory that we converted to revenue in the six months ended June 30, 2025. Although the IEEPA tariffs were declared invalid by the U.S. Supreme Court in February 2026, the current U.S. administration has imposed tariffs using other statutory bases, which remain in effect. Accordingly, we expect that our gross profit margin will continue to face headwinds as a result of current U.S. tariff policy.

Current report

Selling, General and Administrative Expense

Current report

Research and Development Expense

Current report

Depreciation and Amortization Expense

Current report

Interest Income

Current report

Interest income was approximately $62,000 for the six months ended June 30, 2026 compared to approximately $44,000 for the six months ended June 30, 2025.

Current report

Other Income (Expense), net

Previous report

Critical Accounting Policies

Previous report

Gross profit margin was approximately 57% for the three months ended March 31, 2026 compared to approximately 65% for the three months ended March 31, 2025. The decrease of approximately 8 percentage points was primarily driven by higher product costs due to the decline in the US Dollar relative to the Euro and the impact of tariffs implemented in May 2025. Gross margins were also impacted by the mix of revenues as commercial revenues were a larger part of total revenue in the quarter ended March 31, 2026 vs. last year’s comparable quarter. Gross margins are lower on commercial revenues versus our infection control revenues.

Current report — wording carried from elsewhere

Net revenue increased by $1.6 million, or 36%, in the second quarter of 2026 compared to the same period in 2025. This increase was primarily driven by increased product revenue due to programmatic growth. We also experienced strong growth in our emergency response and service revenue.

Current report — wording carried from elsewhere

Selling, general and administrative expense increased $217,000, or 10%, primarily due to an increase in headcount and an increase in sales commissions.

Current report — wording carried from elsewhere

Research and development expense increased by approximately $55,000, or 18%, primarily due to higher salary expense.

Current report — wording carried from elsewhere

Other expense was approximately $32,000 for the three months ended June 30, 2026 and June 30, 2025, respectively, primarily as a result of gains and losses on foreign currency transactions.

Current report — wording carried from elsewhere

The following table sets forth our summarized results of operations for the six months ended June 30, 2026 and 2025 (in thousands, except percentages):

Current report — wording carried from elsewhere

Depreciation and amortization expenses were approximately $58,000 and $74,000, respectively, for the six months ended June 30, 2026 and 2025. The decrease was primarily due to the extension of the Medica license period.