NEPHROS INC
For the period ended Mar 31, 2025. Filed May 15, 2025.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Mar 31, 2025 · Filed May 15, 2025
NEPH$2.79-9.7%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-09-30; filed 2024-11-14.
0001493152-24-045793
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2025-03-31; filed 2025-05-15.
0001641172-25-010836
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 84 previous paragraphs and 69 current paragraphs.
38 unchanged; 16 reworded; 15 added; 29 removed; 1 previous and 0 current paragraphs rearranged.
Tables are not compared: 11 previous and 9 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (15)
Current report
Nephros is a commercial-stage company that develops and markets high-performance water filtration solutions, with a core focus on medical-grade water filtration. Our portfolio includes two primary product lines: infection control and dialysis water. The infection control segment features both microfilters (0.1 micron) and ultrafilters (0.005 micron), used to help prevent infections from waterborne pathogens such as Legionella and Pseudomonas. The dialysis segment consists exclusively of ultrafilters designed to remove biological contaminants, particularly endotoxins, from water and bicarbonate concentrate used in dialysis treatment. All of our medical-grade filters are FDA 510(k)-cleared as Class II medical devices—a distinguishing feature that affirms their validated safety and performance in critical-use environments. While these filters are widely used in healthcare settings, they have also been adopted across a range of other industries—including manufacturing, laboratories, aviation, and federal facilities—where water quality is essential to operational safety and compliance.
Current report
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 soluble lead from water systems. These 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.
Current report
Revenue Recognition
Current report
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.
Current report
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).
Current report
Service revenue is recognized at a point in time. the Company is not entitled to payment until the point at which the service is completed.
Current report
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 basis 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 reassessed periodically.
Current report
Net Revenues
Current report
Net revenue increased by $1.4 million, or 38%, in the first quarter of 2025 compared to the same period in 2024. This increase was primarily driven by increased revenue in both programmatic and emergency response. The growth in programmatic revenue reflects strong reorders, a number of new active sites, as well as some pre-ordering for the year ahead of a small price increase put through in February 2025. The growth in emergency response sales reflects stronger regulations in a number of markets. Given the change in U.S. presidential administrations in January 2025, we believe that the current elevated levels of emergency response-related sales may not persist throughout the year.
Current report
Selling, General and Administrative Expense
Current report
Selling, general and administrative expense increased $112,000, or 5%, primarily due to higher sales commissions and stock compensation expense. During the three months ended March 31, 2024, we had a one-time reversal of stock compensation expense of approximately $75,000 (see Note 9 – Stock Plans and Share-Based Payments).
Current report
Research and Development Expense
Current report
Research and development expense increased approximately $83,000 primarily due to higher salary expense.
Current report
As of March 31, 2025, we had an accumulated deficit of $143.8 million. Although we were profitable in the quarter ended March 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.
Current report
The company had no investing activities for both the three months ended March 31, 2025 and March 31, 2024.
Removed paragraphs (29)
Previous report
We are a commercial-stage company that develops and sells high performance water solutions to the medical and commercial markets.
Previous report
Our medical water filters, mostly classified as ultrafilters, are used primarily by hospitals for the prevention of infection from waterborne pathogens, such as legionella and pseudomonas, and in dialysis centers for the removal of biological contaminants from water and bicarbonate concentrate. Because our ultrafilters capture contaminants as small as 0.005 microns in size, they minimize exposure to a wide variety of bacteria, viruses, fungi, parasites, and endotoxins.
Previous report
Our commercial water filters improve the taste and odor of water and reduce biofilm, cysts, particulates, and scale build-up in downstream equipment. Our products are marketed primarily to the food service, hospitality, convenience store, and health care markets, and also sold into medical institutions to supplement our medical filters.
Previous report
We previously held a majority stake in Specialty Renal Products, Inc. (“SRP”), a development-stage medical device company that was focused primarily on developing hemodiafiltration (“HDF”) technology. In May 2022, SRP received 510(k) clearance from the FDA for SRP’s second-generation model of the OLpūrH2H Hemodiafiltration System, which enables nephrologists to provide HDF treatment to patients with end stage renal disease. In January 2023, SRP management began exploring strategic partnerships to support a commercial launch of the HDF product but was unsuccessful in identifying a partner. By late February 2023, SRP had nearly exhausted its capital resources and, due to its limited capital and lack of prospects for securing a strategic partnership or additional financing, the board of directors of SRP adopted a plan on March 6, 2023 to wind down SRP operations, liquidate its remaining assets and dissolve the company. That plan was approved by SRP’s stockholders on March 9, 2023, and on April 13, 2023, SRP filed a certificate of dissolution with the State of Delaware. SRP’s cash resources were sufficient to satisfy all of its outstanding liabilities other than its obligations to us under a loan with an outstanding balance of approximately $1.5 million. Accordingly, SRP assigned to Nephros all of its remaining assets, including its intellectual property rights in the HDF2 device, in satisfaction of its outstanding loan balance. Although we have no current plans to do so, we may re-evaluate opportunities for HDF in the future.
Previous report
Revenue
Previous report
Overall, net revenues decreased by $0.2 million, or 6%, for the three months ended September 30, 2024, compared to the same period in 2023. This decrease was primarily driven by a decline in programmatic business reflecting underperformance in one region and a few of our larger accounts showing slower order patterns. This decline was partially offset by an increase in emergency response business.
Previous report
Consolidated gross margin was approximately 61% for the three months ended September 30, 2024, compared to approximately 59% for the three months ended September 30, 2023. The increase of approximately 2 percentage points, was driven by favorable pricing terms with our largest supplier.
Previous report
Selling, General and Administrative Expenses
Previous report
Consolidated selling, general and administrative expenses decreased $416,000, or 19%, primarily due to a decrease in bonus accrual, sales commission expense, and stock compensation expense. In addition, we had expenses in the third quarter of 2023 related to our facilities consolidation which were not repeated in the third quarter of 2024.
Previous report
Research and Development Expenses
Previous report
Consolidated research and development expenses decreased approximately $17,000 due to a reduction in bonus accrual.
Previous report
Nine Months Ended September 30, 2024 Compared to the Nine Months Ended September 30, 2023
Previous report
Revenue
Previous report
Overall, net revenues decreased by $0.7 million, or 6% for the nine months ended September 30, 2024, compared to the same period in 2023. This decrease was primarily driven by decreased revenue from emergency response orders, which were unusually large in the first nine months of 2023 but not repeated to the same degree in the comparable 2024 period. We believe that one contributor to this decline is the reduced stringency of waterborne risk response in territories previously committed to both proactive filtration measures and robust corrective actions. Consequently, we experienced the effects of a relaxation of requirements for emergency relief and remediation. However, the decrease in emergency response orders was partially offset by increased revenue from programmatic or recurring sales, which were 3% more than the same period in 2023. This increase in programmatic sales was due to the development of our newer sales personnel hired in 2023.
Previous report
Gross Profit Margin
Previous report
Selling, General and Administrative Expenses
Previous report
Consolidated selling, general and administrative expenses decreased $696,000 or 11% primarily due to a decrease in bonus accrual, sales commission expense, stock compensation expense, and travel expenses offset in part by an increase in salary expense.
Previous report
Research and Development Expenses
Previous report
Consolidated research and development expenses decreased $11,000 primarily due to the wind down of our SRP division offset by an increase in headcount.
Previous report
Depreciation and Amortization Expense
Previous report
Depreciation and amortization expenses were approximately $101,000 and $163,000, respectively, for the nine months ended September 30, 2024 and 2023.
Previous report
Interest Expense
Previous report
Interest expense was approximately $1,000 for the nine months ended September 30, 2024 and September 30, 2023.
Previous report
Interest Income
Previous report
Interest income was approximately $66,000 for the nine months ended September 30, 2024, compared to approximately $36,000 for the nine months ended September 30, 2023.
Previous report
Other Income (Expense), net
Previous report
Other expense was approximately $29,000 and $12,000 respectively for the nine months ended September 30, 2024 and September 30, 2023 and is primarily a result of losses on foreign currency transactions.
Previous report
At September 30, 2024, we had an accumulated deficit of $144.7 million and we may incur additional operating losses from operations until such time, if ever, that we are able to increase product sales and/or licensing revenue to achieve profitability.
Previous report
Net cash used in investing activities was approximately $50,000 in the nine months ended September 30, 2024, due primarily to purchases of property and equipment. We had no investing activities for the nine months ended September 30, 2023.
Reworded paragraphs (16)
Previous wording
The following discussion should be read in conjunction with our condensed consolidated financial statements and notes thereto included in Item 1 of Part I of this Quarterly Report on Form 10-Q. This discussion includes forward-looking statements about our business, financial condition and results of operations including discussions about management’s expectations for our business. These statements represent projections, beliefs and expectations based on current circumstances and conditions and in light of recent events and trends, and these statements should not be construed either as assurances of performances or as promises of a given course of action. Instead, various known and unknown factors are likely to cause our actual performance and management’s actions to vary, and the results of these variances may be both material and adverse.
Current wording
The following discussion should be read in conjunction with our financial statements and notes thereto included in Item 1 of Part I of this Quarterly Report on Form 10-Q. This discussion includes forward-looking statements about our business, financial condition and results of operations including discussions about management’s expectations for our business. These statements represent projections, beliefs and expectations based on current circumstances and conditions and in light of recent events and trends, and these statements should not be construed either as assurances of performances or as promises of a given course of action. Instead, various known and unknown factors are likely to cause our actual performance and management’s actions to vary, and the results of these variances may be both material and adverse.
Previous wording
Our primary sales strategy in medical markets is to sell through value-added resellers (“VARs”). Leveraging VARs has enabled us to expand rapidly our access to target customers with limited sales staff expansion. In addition, while we are currently focused on medical markets, the VARs that support these customers also support a wide variety of commercial and industrial customers. We believe that our VAR relationships have and will continue to facilitate growth in filter sales outside of the medical industry.
Current wording
Our primary sales strategy in medical markets is to sell 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 medical markets, the VARs that support these customers also support a wide variety of commercial and industrial customers. We believe that our VAR relationships have and will continue to facilitate growth in filter sales outside of the medical industry. In addition to VARs, we also utilize a direct salesforce that targets key geographic regions throughout the country, as well as focuses on the hospital and dialysis markets.
Previous wording
In commercial markets, our model combines both direct and indirect sales. Through our employee sales staff, we have sold products directly to a number of convenience stores, hotels, casinos, and restaurants. We have also signed an agreement with a partner to be the exclusive distributor to resell select water filters and related products to customers in the commercial food and beverage markets subject to meeting certain minimum thresholds.
Current wording
In commercial markets, our model combines both direct and indirect sales. Through our employee sales staff, we have sold products directly to a number of convenience stores, hotels, casinos, and restaurants. We have also engaged a non-exclusive distributor to resell certain of our water filters and related products to end customers in the commercial food and beverage markets.
Previous wording
In January 2022, the Center for Clinical Standards and Quality at the Centers for Medicare and Medicaid Services (“CMS”) expanded its requirements – originally implemented in 2017 – for facilities to develop policies and procedures that inhibit the growth and spread of legionella and other opportunistic pathogens in building water systems. In this 2022 update, CMS requires teams to be assigned to the development of formal water management plans (“WMPs”), as well as detailed documentation regarding the development of the WMPs and their execution. CMS surveyors regularly review policies, procedures, and reports documenting water management implementation results to verify that facilities are compliant with these requirements. We believe that these CMS regulations may have a positive impact on the sale of our HAI-inhibiting ultrafilters.
Current wording
In January 2022, the Center for Clinical Standards and Quality at the Centers for Medicare and Medicaid Services (“CMS”) expanded its requirements – originally implemented in 2017 – for facilities to develop policies and procedures that inhibit the growth and spread of legionella and other opportunistic pathogens in building water systems. In this 2022 update, CMS requires teams to be assigned to the development of formal water management plans (“WMPs”), as well as detailed documentation regarding the development of the WMPs and their execution. CMS surveyors regularly review policies, procedures, and reports documenting water management implementation results to verify that facilities are compliant with these requirements. These policies must be in accordance with The American Society of Heating, Refrigerating, and Air-Conditioning Engineers (ASHRAE) Standard 188-2015 and the CDC toolkit. Facilities must regularly monitor water systems and take corrective actions when needed to ensure safe water for patients, residents and visitors. We believe that these CMS regulations may have a positive impact on the sale of our HAI-inhibiting ultrafilters.
Previous wording
Our commercial market focus is on the hotel, restaurant, and convenience store markets. In March 2022, we entered into an agreement to provide water filtration systems to an organization that services approximately 3,000 Quick Service Restaurants (“QSR”). Effective January 1, 2023, we entered into a new supply agreement with this commercial partner, which superseded the March 2022 agreement. Under the January 2023 agreement, we engaged this commercial partner to be our exclusive distributor to the food, beverage and hospitality industries. We continue to pursue other national accounts, which, over time, may result in step-change increases in commercial market revenue.
Current wording
Our commercial market focus is on the hotel, restaurant, and convenience store markets. In March 2022, we entered into an agreement with Donastar LLC to provide water filtration systems to an organization that services approximately 3,000 Quick Service Restaurants (“QSR”). Effective January 1, 2023, we entered into a new supply agreement with Donastar, which superseded the March 2022 agreement. Under the January 2023 agreement, we engaged Donastar to be our exclusive distributor to the food, beverage and hospitality industries. Effective September 2024, we ended our exclusive relationship with Donastar. Although Donastar continues to distribute our products on a non-exclusive basis, we are expanding our distribution in the commercial market in order to pursue other national accounts, which, over time, may result in step-change increases in commercial market revenue.
Previous wording
For the nine-month period ended September 30, 2024, there were no significant changes to our critical accounting policies as identified in our Annual Report on Form 10-K for the year ended December 31, 2023.
Current wording
For the three-month period ended March 31, 2025, other than noted below, there were no significant changes to our critical accounting policies as identified in our Annual Report on Form 10-K for the year ended December 31, 2024.
Previous wording
We are subject to recently issued accounting standards, accounting guidance and disclosure requirements. For a description of these new accounting standards, see Note 2, “Basis of Presentation and Liquidity,” of the Notes to our Unaudited Condensed Consolidated Interim Financial Statements contained in Item 1 of Part I of this Quarterly Report on Form 10-Q, which is incorporated herein by reference.
Current wording
We are subject to recently issued accounting standards, accounting guidance and disclosure requirements. For a description of these new accounting standards, see Note 2, “Basis of Presentation and Liquidity,” of the Notes to our Unaudited Interim Financial Statements contained in Item 1 of Part I of this Quarterly Report on Form 10-Q, which is incorporated herein by reference.
Previous wording
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 to achieve positive operating cash flow. Due to these fluctuations, we believe that the period-to-period comparisons of our operating results are not a good indication of our future performance.
Current wording
Our results of operations have fluctuated significantly from period to period in the past, including recently, and are likely to continue to do so in the future. We anticipate that our annual results of operations will be impacted in the foreseeable future by several factors, including market acceptance of our products, expense management, and continued ability to achieve positive operating cash flow. Due to these fluctuations, we believe that the period-to-period comparisons of our operating results are not a good indication of our future performance.
Previous wording
The following table sets forth our summarized, consolidated results of operations for the three months ended September 30, 2024 and 2023 (in thousands, except percentages):
Current wording
The following table sets forth our summarized, results of operations for the three months ended March 31, 2025 and 2024 (in thousands, except percentages):
Previous wording
Consolidated gross margin was approximately 61% for the nine months ended September 30, 2024, compared to approximately 58% for the nine months ended September 30, 2023. The increase of approximately 3 percentage points was driven by more favorable pricing terms with our largest supplier and reduced shipping expenses in the first quarter of 2024.
Current wording
Gross profit margin was approximately 65% for the three months ended March 31, 2025 compared to approximately 62% for the three months ended March 31, 2024. The increase of approximately 3 percentage points was primarily driven by a more favorable product mix and a price increase implemented during the first quarter of 2025, coupled with lower inventory reserves and write-offs compared to the prior period.
Previous wording
Depreciation and amortization expenses were approximately $34,000 and $55,000, respectively, for the three months ended September 30, 2024, and 2023.
Current wording
Depreciation and amortization expenses were approximately $39,000 and $33,000, respectively, for the three months ended March 31, 2025 and 2024.
Previous wording
Interest income was approximately $20,000 for the three months ended September 30, 2024 compared to approximately $11,000 for the three months ended September 30, 2023.
Current wording
Interest income was approximately $13,000 for the three months ended March 31, 2025 compared to approximately $25,000 for the three months ended March 31, 2024.
Previous wording
Other expense of approximately $43,000 for the three months ended September 30, 2024 is primarily a result of losses on foreign currency transactions. Other income of approximately $10,000 for the three months ended September 30, 2023 is primarily a result of gains on foreign currency transactions.
Current wording
Other expense was approximately $21,000 for the three months ended March 31, 2025, and other income was approximately $7,000 for the three months ended March 31, 2024, primarily as a result of gains and losses on foreign currency transactions.
Previous wording
Based on cash that is available for our operations and projections of our future operations, we believe that our cash balances will be sufficient to fund our current operating plan through at least the next 12 months from the date of issuance of the condensed consolidated financial statements in this Quarterly Report on Form 10-Q. Additionally, our operating plans are designed to help control operating costs, to increase revenue, and to raise additional capital until such time as we 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.
Current wording
Based on cash that is available for our operations and projections of our future operations, we believe that our cash balances will be sufficient to fund our current operating plan through at least the next 12 months from the date of issuance of the financial statements in this Quarterly Report on Form 10-Q. Additionally, our operating plans are designed to help control operating costs and to increase revenue so we can continue to generate sufficient cash flows to fund operations. If there were a decrease in the demand for our products due to either economic or competitive conditions, or if we are otherwise unable to achieve our plan or achieve our anticipated operating results, there could be a significant reduction in liquidity due to our possible inability to cut costs sufficiently. In such event, the Company may need to take further actions to reduce its discretionary expenditures, including further reducing headcount, reducing spending on R&D projects, and reducing other variable costs.
Previous wording
Net cash used in operating activities was $1.8 million for the nine months ended September 30, 2024, compared to net cash provided by operating activities of approximately $1.1 million for the nine months ended September 30, 2023. Net cash used in operating activities in 2024 was primarily due to an increase in inventory of approximately $0.8 million, a decrease in accounts payable and accrued expenses of approximately $0.5 million each, and a net loss of approximately $0.3 million, offset by an increase in inventory impairments and write-offs of approximately $0.2 million. Net cash provided by operating activities in 2023 was primarily due to a decline in inventory of approximately $0.8 million, an increase in accrued expenses of approximately $0.4 million, partially offset by an increase in accounts receivable of approximately $0.2 million.
Current wording
Net cash provided by operating activities was approximately $0.3 million for the three months ended March 31, 2025 compared to net cash used in operating activities of approximately $0.7 million for the three months ended March 31, 2024. Net cash provided by operating activities in 2025 was primarily due to the net income of approximately $0.6 million, a decrease in inventory of approximately $0.7 million, offset by an increase in accounts receivable of approximately $0.9 million. Net cash used in operating activities in 2024 was primarily due to the net loss of approximately $0.2 million, an increase in inventory of approximately $0.4 million, and a decrease in accrued expenses of approximately $0.4 million, offset by an increase in accounts payable of approximately $0.2 million.
Previous wording
Net cash used in financing activities was approximately $4,000 for the nine months ended September 30, 2024, primarily due to payments on finance leases. Net cash used in financing activities was approximately $0.1 million for the nine months ended September 30, 2023, primarily due to final principal payments on since-retired debt.
Current wording
Net cash used in financing activities was approximately $1,000 for the three months ended March 31, 2025, primarily due to payments on our equipment financing debt, compared to approximately $2,000 for the same period in 2024, also primarily due to payments on our equipment financing debt.
Rearranged previous paragraphs (1)
Previous report — wording carried elsewhere
The following table sets forth our summarized, consolidated results of operations for the nine months ended September 30, 2024 and 2023 (in thousands, except percentages):