NEPHROS INC Revenue Disclosure

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.

 

 

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.