NEPHROS INC

Evaluation of Disclosure Controls and Procedures

We maintain a system of disclosure controls and procedures, as defined in Rule 13a-15(e) or Rule 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), which is designed to provide reasonable assurance that information required to be disclosed in our reports filed pursuant to the Exchange Act is accumulated and communicated to management in a timely manner. Management recognizes that any disclosure controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives. Because there are inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud have been or will be detected.

At the end of the period covered by this Quarterly Report on Form 10-Q, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, regarding the effectiveness of our disclosure controls and procedures pursuant to Exchange Act Rule 13a-15(b). Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures as of the end of the period covered by this report were not effective because of material weaknesses in our internal control over recognition of revenue from service-based contracts, as described more fully below under “—Material Weaknesses in Internal Controls over Financial Reporting.”The material weakness described above did not result in any material misstatements in our financial statements or disclosures for any period presented in the accompanying financial statements. This material weakness could create a reasonable possibility that a material misstatement in our consolidated financial statements would not be prevented or detected on a timely basis.

Material Weakness in Internal Controls over Financial Reporting

In the course of preparing our financial statements for the quarter ended March 31, 2025, we identified a material weakness in our internal controls over financial reporting relating to the recognition of revenue from contracts that include a combination of products sales and service-based deliverables and the application of ASC 606. While management determined that both performance obligations are delivered at a point-in-time, the contract’s transaction price was not allocated based on the respective performance obligations’ relative standalone selling price. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected and corrected on a timely basis. Our management has concluded that we have not designed or maintained effective controls to ensure that we properly recognize revenue from contracts with multiple performance obligations . Additional deficiencies include a lack of internal controls over contract identification as well as a lack of internal controls over evaluating contracts for proper revenue recognition under U.S. GAAP. To remediate the material weakness described above, management is working with consultants to establish controls and protocols to properly recognize revenue from contracts with multiple performance obligations and ensure all material sales contracts are properly accounted for.

Changes in Internal Control Over Financial Reporting

Other than 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.