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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
(Mark One)
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For
the Fiscal Year Ended
Or
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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:
(Exact name of registrant as specified in its charter)
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| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
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| (Address of Principal Executive Offices) (Zip Code) | (Registrant’s Telephone Number, Including Area Code) |
Securities registered pursuant to Section 12(b) of the Act:
| Title of Each Class | Trading Symbol(s) | Name of Each Exchange on which Registered | ||
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Securities registered pursuant to Section 12(g) of the 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 ☐
Indicate
by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐
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.
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.)
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the 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 | ☐ |
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☒ | Smaller reporting company |
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Emerging growth company |
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If an emerging growth company, indicate by a 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 management’s 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 registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate
by a 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 and non-voting common equity held by non-affiliates of the registrant, as of the last business day
of the registrant’s most recently completed third fiscal quarter, based on the closing sale price of
$0.60
as reported on the NYSE American was:
$
The number of shares outstanding of each of the registrant’s classes of common stock as of the latest practicable date was: shares of $ par value common stock outstanding as of December 4, 2025 .
DOCUMENTS INCORPORATED BY REFERENCE:
SRx Health Solutions Inc. (formerly Better Choice Company, Inc.)
Annual Report on Form 10-K for the Fiscal Year Ended September 30, 2025
TABLE OF CONTENTS
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FORWARD-LOOKING STATEMENTS
This report contains forward-looking statements that are subject to risks and uncertainties. All statements other than statements of historical fact included in this report are forward-looking statements. Forward-looking statements discuss our current expectations and projections relating to our financial condition, results of operations, plans, objectives, future performance and business. You can identify forward-looking statements by the fact that they do not relate strictly to historical or current facts. These statements may include words such as “aim,” “anticipate,” “believe,” “can,” “could,” “estimate,” “expect,” “forecast,” “intend,” “likely,” “may,” “outlook,” “plan,” “potential,” “project,” “projection,” “seek,” “should,” “will,” “would,” the negatives thereof and other words and terms of similar meaning in connection with any discussion of the timing or nature of future operating or financial performance or other events. They appear in a number of places throughout this report and include statements regarding our intentions, beliefs or current expectations concerning, among other things, our results of operations, financial condition, liquidity, prospects, growth, strategies and the industry in which we operate. All forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those that we expected, including, but not limited to, those summarized below:
| ● | the impact of damage to or interruption of our information technology systems due to cyber-attacks or other circumstances beyond our control; |
| ● | business interruptions resulting from geopolitical actions, including war and terrorism; |
| ● | our ability to successfully implement our growth strategy; |
| ● | failure to achieve growth or manage anticipated growth; |
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| ● | our ability to achieve or maintain profitability; |
| ● | the loss of key members of our senior management team; |
| ● | our ability to generate sufficient cash flow or raise capital on acceptable terms to run our operations, service our debt and make necessary capital expenditures; |
| ● | our dependence on our subsidiaries for payments, advances and transfers of funds due to our holding company status; |
| ● | our ability to successfully develop additional products and services or successfully market and commercialize such products and services; |
| ● | competition in our market; |
| ● | our ability to attract new and retain existing customers, suppliers, distributors or retail partners; |
| ● | allegations that our products cause injury or illness or fail to comply with government regulations; |
| ● | our ability to manage our supply chain effectively; |
| ● | our or our co-manufacturers’ and suppliers’ ability to comply with legal and regulatory requirements; |
| ● | the effect of potential price increases and shortages on the inputs, commodities and ingredients that we require, whether as a result of the continued actual or perceived effects of broader geopolitical and macroeconomic conditions, including the military conflict between Russia and Ukraine; |
| ● | our ability to develop and maintain our brand and brand reputation; |
| ● | compliance with data privacy rules; |
| ● | our compliance with applicable regulations issued by the U.S. Food and Drug Administration (“FDA”), the U.S. Federal Trade Commission (“FTC”), the U.S. Department of Agriculture (“USDA”), and other federal, state and local regulatory authorities, including those regarding marketing pet food, products and supplements; |
| ● | risk of our products being recalled for a variety of reasons, including product defects, packaging safety and inadequate or inaccurate labeling disclosure; |
| ● | risk of shifting customer demand in relation to raw pet foods, premium kibble and canned pet food products, and failure to respond to such changes in customer taste quickly and effectively; and |
| ● | other factors discussed under the headings “Risk Factors,” “Business,” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this Annual Report on Form 10-K. |
While we believe that our assumptions are reasonable, we caution that it is very difficult to predict the impact of known factors, and it is impossible for us to anticipate all factors that could affect our actual results. Important factors that could cause actual results to differ materially from our expectations, or cautionary statements, are disclosed under “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this report. All forward-looking statements are expressly qualified in their entirety by these cautionary statements. You should evaluate all forward-looking statements made in this report in the context of these risks and uncertainties.
NOTE REGARDING TRADEMARKS
We own or have rights to use the trademarks and trade names that we use in conjunction with the operation of our business. Each trademark or trade name of any other company appearing in this Annual Report on Form 10-K is, to our knowledge, owned by such other company. Solely for convenience, our trademarks and trade names referred to in this Annual Report on Form 10-K may appear without the ® or ™ symbols, but those references are not intended to indicate, in any way, that we will not assert, to the fullest extent under applicable law, our rights or the right of the applicable licensor to these trademarks and trade names.
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PART I
ITEM 1. BUSINESS
Our History
SRx Health Solutions Inc. (“SRx” or the “Company”) is the successor reporting entity following a reverse merger with Better Choice Company, Inc. (“Better Choice” or “BTTR”), the pet health and wellness business.
Historically, SRx was engaged in specialty pharmaceuticals and healthcare services, including a series of acquisitions to expand its operations. These legacy operations faced financial difficulties and subsequently filed for bankruptcy, resulting in the winding down of the majority of SRx’s former business. These legacy operations are reported as discontinued operations in the financial statements.
Continuing Operations
The Company’s continuing operations consist of the pet health and wellness business formerly operated by Better Choice. This business is focused on providing high-quality pet products under the Halo brand, including foods, treats, toppers, dental products, chews, and supplements for dogs and cats.
Better Choice’s products are sold across multiple channels: e-commerce platforms such as Amazon and Chewy, select retail partners, and international distributors. The direct-to-consumer channel through halopets.com was exited in June 2024, and consumers are now directed to retail partners for online purchase.
The Company continues to operate this business post-RTO, including managing product innovation, brand positioning, and supply chain relationships with co-manufacturers. The Halo portfolio includes Halo Holistic™ and Halo Elevate®, designed for pet parents seeking high-quality, science-based nutrition for their pets.
Products and Brands — Continuing Operations
The continuing operations include over 100 premium and super-premium pet health and wellness products across multiple forms, including kibble, canned food, freeze-dried raw food, treats, and supplements. All products are formulated to meet high-quality sourcing and nutritional standards, leveraging longstanding co-manufacturing relationships.
Discontinued Operations
The Company’s legacy specialty pharmaceuticals and healthcare services operations, historically conducted under SRx, are classified as discontinued operations following the Company’s bankruptcy and subsequent winding down of these activities.
Historically, SRx provided specialty pharmaceutical products and related services to healthcare providers and patients across various therapeutic areas. Over time, the Company pursued acquisitions and expansion strategies aimed at growing its product portfolio and market presence.
Due to financial challenges, SRx filed for bankruptcy, resulting in the termination, sale, or wind-down of its operations. As of the reporting date, the legacy SRx business no longer generates meaningful revenue or operational activity.
Financial results of the discontinued operations are reported separately in the consolidated financial statements, in accordance with accounting guidance for discontinued operations, and include any final settlements, asset disposals, and associated liabilities. The Company does not expect future cash flows from these operations.
Our Customers and Channels
For the year ended September 30, 2025, the Company’s continuing operations, conducted through Better Choice, generated net sales of approximately $6.5 million. The Company primarily serves pet owners through three main channels: E-commerce, Brick & Mortar, and International.
E-commerce: The majority of continuing net sales are generated through E-commerce partner websites, including Amazon, Chewy, Petflow, Thrive Market, and Vitacost. Online sales are largely driven by repeat purchases from existing customers, reflecting strong brand loyalty.
Brick & Mortar: Sales through physical retailers primarily include specialty pet stores and select grocery chains. As of December 2023, the Company strategically exited Petco and Pet Supplies Plus stores while continuing online sales via those platforms.
International: Halo’s international sales represent a smaller portion of total net sales. Following the sale of Halo Asia, international operations now contribute only a limited amount of revenue, and the Company’s activities outside North America are no longer a significant growth focus. As a result, no single foreign market represents a material share of international revenue.
The majority of net sales are generated online, reflecting both the Company’s focus on digital channels and consumer preference for online purchasing. The Company’s ability to reach a growing base of diverse customers online is expected to improve as E-commerce penetration increases.
Discontinued Operations
The Company’s legacy SRx business, which historically provided specialty pharmaceuticals and healthcare services, is reported as discontinued operations following its bankruptcy and wind-down. SRx no longer generates meaningful revenue, and prior period comparatives related to SRx are presented separately in the financial statements.
Supply Chain, Manufacturing and Logistics
Halo partners with a number of co-manufacturing partners to produce its products. Products sold today under the Halo brand are made strictly from naturally raised animals on sustainable farms and are manufactured in the U.S and use healthy, natural ingredients, with all purchases transacted in U.S. dollars. By sourcing cage-free poultry, pasture-raised beef, and wild-caught fish from certified sustainable fisheries and not including meat meals or other animal byproducts in its formulations, our Halo brand is able to provide pets and pet parents with a nutritious and highly digestible suite of food and treats. Some products are preserved using either freeze drying or gentle air dehydration to eliminate the need for artificial preservatives and added chemicals. Our treats and chews are oven-baked, using natural ingredients for maximum nutrition and protein content. Halo’s dog and cat foods meet The Association of American Feed Control Officials (“AAFCO”) guidelines and are small-batch tested for common contaminants prior to leaving the manufacturer.
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We utilize logistics service providers as a part of our supply chain, primarily for shipping and logistics support. Fulfillment of orders is managed by a third-party warehousing and logistics partner, Fidelitone. Our warehouse is located in Wauconda, Illinois. Our products are shipped by trusted carriers for expeditious and reliable delivery.
Raw Materials and Principal Suppliers
We rely upon the supply of raw materials that meet our high-quality specifications and sourcing requirements. We source Global Animal Partnership (“GAP”) certified cage-free chicken, GAP certified cage-free turkey, Marine Stewardship Council (“MSC”) certified wild-caught salmon and whitefish and select non-GMO fruits and vegetables, such as peas, sweet potatoes and lentils. If any raw material is adulterated and does not meet our specifications, it could significantly impact our ability to source manufactured products and could materially and adversely impact our business, financial condition and results of operations.
For the supply and co-manufacturing of our products, we have relied on: Alphia, Inc. (“Alphia” f/k/a “C.J. Foods”) for dry kibble which transitioned to Barrett Petfood Innovations during 2022, then back to Alphia during 2023; Simmons Pet Food, Inc. (“Simmons”) and Thai Union Manufacturing Co., LTD. for canned wet food; BrightPet Nutrition Group, LLC (“BrightPet”) for vegan kibble and freeze dried treats; Carnivore Meat Company, LLC (“Carnivore”) for the supply and co-manufacturing of freeze-dried food and treats. We sourced approximately 85% of its inventory purchases from three vendors for the year ended September 30, 2025.
Sales and Marketing
Our marketing strategies are designed to clearly communicate to consumers about the benefits of our products and to build awareness of our brands. We deploy a broad set of marketing tools across various forms of media to reach consumers through multiple touch points and engage with a number of marketing agencies to develop content and product packaging. Our marketing initiatives include the use of social and digital marketing, Search Engine Optimization, email and SMS marketing, and paid media (Facebook, Instagram & YouTube), among other proven strategies to generate and convert sales prospects into loyal, satisfied customers. In addition to directly targeting and educating consumers of our products, we partner with a number of retailers such as Amazon, Chewy and Petco to develop joint sales and marketing initiatives to increase sales and acquire new customers.
In recent years, consumer purchasing behaviors have shifted dramatically and E-Commerce penetration has significantly increased. In the fourth quarter of 2023, management shifted from a Brick & Mortar channel focus to a digital first strategy as a result of its annual operating plan process and has strategically reallocated marketing investments to work more effectively and efficiently in its larger e-commerce platforms to drive growth and brand awareness.
Competition
The pet health and wellness industry is highly competitive. Competitive factors include product quality, ingredients, brand awareness and loyalty, product variety, product packaging and design, reputation, price, advertising, promotion, and nutritional claims. We believe that we compete effectively with respect to each of these factors. We compete with manufacturers of conventional pet food such as Mars, Nestlé and Big Heart Pet Brands (part of the J.M. Smucker Company), and manufacturers of specialty and natural pet food such as Blue Buffalo (part of General Mills), Wellness, Fromm, Orijen, Merrick (part of Nestlé), Stella and Chewy, Open Farm and Freshpet. In addition, we compete with many regional niche brands in individual geographic markets.
Employees and Human Capital Resources
As of September 30, 2025, we had 10 full time employees and one part time employee. Our human capital resource objectives include, as applicable, identifying, recruiting, retaining, incentivizing and integrating our existing and additional employees. The principal purposes of our equity incentive plans are to attract, retain and motivate selected employees, consultants and directors through the granting of stock-based compensation awards. Our employees are not represented by any labor union or any collective bargaining arrangement with respect to their employment with us. We have never experienced any work stoppages or strikes as a result of labor disputes and we believe our overall relationships with our employees are positive and the strength of our team is a critical success factor in becoming the most innovative premium pet food company in the world. Our employees share an entrepreneurial spirit, a passion for excellence and the inspiration to drive the future of the pet health and wellness industry.
Our core values are Integrity, Respect, Working Smarter and Faster and Building Lasting Relationships in all that we do. We continually focus on employee engagement and a diverse, inclusive culture in order to ensure the continued strength and well-being of our workforce. We strive to create a workplace where employees feel engaged, believe in our mission, understand their role in our strategy and are passionate about the work they do. We conduct employee engagement surveys to provide us with valuable insights into employee perspectives and experiences. We also hold frequent virtual town-hall meetings and team building events to provide updates, celebrate milestones in the business, communicate initiatives, recognize significant individual accomplishments and provide a forum for employees to communicate and engage with our entire employee base. We value and embrace diversity by fostering a culture that encompasses the unique attributes, ideas, perspectives, and experiences of our employees, customers, suppliers and communities. We believe a more inclusive and diverse work environment allows us to achieve better results and makes us a stronger business.
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We operate under a “Win From Anywhere” culture, which is our approach to creating a flexible and entrepreneurial working environment built for long term success. Winning from anywhere means our employees can work from anywhere in the country. We believe this culture provides the ability for us to attract the best talent and we now have employees all over the U.S. that are winning from anywhere.
Government Regulation
The regulation of animal food products is complex, multi-faceted, and continually changing. The U.S. Food and Drug Administration (“FDA”), the U.S. Federal Trade Commission (“FTC”), the U.S. Department of Agriculture (“USDA”) and other regulatory authorities at the federal, state and local levels, as well as authorities in foreign countries, extensively regulate, among other things, the research, development, testing, composition, manufacture, import, export, labeling, storage, distribution, promotion, marketing, and post-market reporting of animal foods. We are required to navigate a complex regulatory framework in the locations in which we wish to manufacture, test, import, export, or sell our products.
FDA Regulation of Animal Foods
The FDA regulates foods, including foods intended for animals, under the Federal Food, Drug and Cosmetic Act (“FDCA”) and its implementing regulations. The FDCA defines “food” as articles used for food or drink for man or other animals, which includes products that are intended primarily for nutritional use, taste, or aroma and the components of such products. For animal foods in particular, this definition applies based on their intended use regardless of labelling as animal food, treats, or supplements. The FDA also imposes certain requirements on animal foods relating to their composition, manufacturing, labeling, and marketing. Among other things, the facilities in which our products and ingredients are manufactured must register with the FDA, comply with current good manufacturing practices (“cGMPs”) and comply with a range of food safety requirements.
Although pet foods are not required to obtain premarket approval from the FDA, any substance that is added to or is expected to become a component of a pet food must be used in accordance with a food additive regulation, unless it is generally recognized as safe (“GRAS”) under the conditions of its intended use or if it appears on an FDA-recognized list of acceptable animal food ingredients in the Official Publication of AAFCO. A food may be adulterated if it uses an ingredient that is neither GRAS nor an approved food additive, and that food may not be legally marketed in the U.S.
The labeling of pet foods is regulated by both the FDA and state regulatory authorities. FDA regulations require proper identification of the product, a net quantity statement, a statement of the name and place of business of the manufacturer or distributor and proper listing of all the ingredients in order of predominance by weight. The FDA also considers certain specific claims on pet food labels to be medical claims and therefore subject to prior review and approval by the FDA. The FDA has a list of specific factors it will consider in determining whether to initiate enforcement action against such products if they do not comply with the regulatory requirements applicable to drugs, including, among other things, whether the product is only made available through or under the direction of a veterinarian and does not present a known safety risk when used as labeled. The FDA may classify some of our products differently than we do and may impose more stringent regulations which could lead to possible enforcement action.
Under the FDCA, the FDA may require the recall of an animal food product if there is a reasonable probability that the product is adulterated or misbranded, and the use of or exposure to the product will cause serious adverse health consequences or death. In addition, pet food manufacturers may voluntarily recall or withdraw their products from the market. If the FDA believes that our products are adulterated, misbranded or otherwise marketed in violation of the FDCA, the agency make take further enforcement action, including: restrictions on the marketing or manufacturing of a product; required modification of promotional materials or issuance of corrective marketing information; issuance of safety alerts, press releases, or other communications containing warnings or other safety information about a product; warning or untitled letters; product seizure or detention; refusal to permit the import or export of products; fines, injunctions, or consent decrees; and/or imposition of civil or criminal penalties.
Corporate Information
We were incorporated in the State of Nevada in 2001 under the name Cayenne Construction, Inc., and in 2009, changed our name to Sports Endurance, Inc. Effective March 11, 2019, we changed our name to Better Choice Company Inc. after reincorporating in Delaware and effective April 24, 2025, we changed our name to SRx Health Solutions, Inc. We have five wholly owned subsidiaries - Halo, Purely for Pets, Inc., Bona Vida, Inc., Aimia Pet Healthco Inc, SRx Health Solutions (Canada), Inc., and 1000994085 Ontario Inc. Our principal executive offices are located at 801 US Highway 1, North Palm Beach, Florida 33408. Our website is available at https://www.srxhealth.com. Our website and the information contained on or connected to that site are not, and should not be deemed to be part of or incorporated into this prospectus.
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Available Information
We file annual, quarterly and current reports and other information with the SEC that are publicly available at www.sec.gov . Our SEC filings are also available under the Investor Relations section of our website at www.srxhealth.com as soon as reasonably practicable after they are filed with or furnished to the SEC. Information contained on or connected to our website are not incorporated into this Annual Report on Form 10-K.
| ITEM 1A. | RISK FACTORS |
As a smaller reporting company, we are not required to provide a statement of risk factors. Nonetheless, we are voluntarily providing risk factors herein. You should consider carefully the following risk factors, together with all the other information in this Annual Report on Form 10-K, and in our other public filings with the SEC. The occurrence of any of the following risks could harm our business, financial condition, results of operations and/or growth prospects or cause our actual results to differ materially from those contained in forward-looking statements we have made in this report and those we may make from time to time. You should consider all of the risk factors described when evaluating our business.
General Risks
We have incurred significant losses in prior periods, and losses in the future could cause the quoted price of the Company’s common stock to decline or have a material adverse effect on the Company’s financial condition, the Company’s ability to pay its debts as they become due, and on its cash flows.
The Company has historically reported net losses,and any losses in the future could cause the quoted price of the Company’s common stock to decline or have a material adverse effect on the Company’s financial condition, its ability to pay its debts as they become due,and on its cash flows.
If we are unable to manage future expansion effectively, our business may be adversely impacted.
In the future, we may experience rapid growth in our business, which could place a significant strain on our operations, in general, and our internal controls and other managerial, operating and financial resources, in particular. If we are unable to manage future expansion effectively, our business would be harmed. There is, of course, no assurance that we will enjoy rapid development in our business.
The Company’s ability to be successful will depend upon the efforts of the Company’s Board and our key personnel and the loss of such persons could negatively impact the operations and profitability of the Company’s business.
The Company’s ability to be successful is dependent upon the efforts of the Company’s board members and key personnel. We cannot assure you that the Company’s board members and key personnel will be effective or successful or remain with the Company. In addition to the other challenges they will face, such individuals may be unfamiliar with the requirements of operating a public company, which could cause the Company’s management to expend time and resources becoming familiar with such requirements. See “Executive Compensation” for further discussion. The loss of service of our key personnel, for any reason,could seriously impair our ability to effectuate our business plan, which could have a materially adverse effect on our business and future results of operations. We also have not purchased any key-man life insurance.
If we are unable to recruit and retain key personnel, our business may be harmed.
If we are unable to attract and retain key personnel, our business may be harmed. Our failure to enable the effective transfer of knowledge and facilitate smooth transitions with regard to our key employees could adversely affect our long-term strategic planning and execution.
Our business plan is not based on independent market studies.
We have not commissioned any independent market studies concerning our business plans. Rather, our plans for implementing our business strategy and achieving profitability are based on the experience, judgment and assumptions of our management. If these assumptions prove to be incorrect, we may not be successful in our business operations.
Our Board of Directors may change our policies without shareholder approval.
Our policies, including any policies with respect to investments, leverage, financing, growth, debt and capitalization, will be determined by our Board of Directors or officers to whom our Board of Directors delegate such authority. Our Board of Directors will also establish the amount of any dividends or other distributions that we may pay to our shareholders. Our Board of Directors or officers to which such decisions are delegated will have the ability to amend or revise these and our other policies at any time without shareholder vote. Accordingly, our shareholders will not be entitled to approve changes in our policies, which policy changes may have a material adverse effect on our financial condition and results of operations.
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We need to obtain financing in order to continue our operations and pursue strategic transactions.
On a prospective basis, we will require both short-term financing for operations and long-term capital to fund our expected growth. We currently have no existing bank lines of credit and have not established any definitive sources for additional financing. We believe that cash on hand will be sufficient to meet our short-term financial requirements into the 4th quarter of 2025 assuming that we elect not to pursue and consummate strategic transactions prior to that time. However, we will require additional funds if we want to fully implement our business plan and growth strategy, including strategic transactions, which funds could come in the form of equity, debt (including secured debt) or a combination of the two. Additional financing may not be available to us, or if available, then it may not be available upon terms and conditions acceptable to us. Our inability to take advantage of opportunities in the industry because of capital constraints may have a material adverse effect on our business and our prospects. While we expect to seek additional funding through public or private financings, we may not be able to obtain financing on acceptable terms, or at all. In addition, the terms of our financings may be dilutive to, or otherwise adversely affect, holders of our common stock and other capital securities. We may also seek additional funds through arrangements with collaborators or other third parties.
We currently do not have sufficient cash to fully implement our business plan.
We have experienced a lack of adequate capital resources causing us to be unable to fully implement our full business plan. We believe that we need to raise or otherwise obtain additional financing beyond our current cash position in order to satisfy our existing obligations and fully implement our business plan. We do not expect to have positive cash flow until the end of 2025 or longer. If we are not successful in obtaining additional financing, we will not be able to fully implement our business plan and we may not be able to continue our operations.
The Company’s business and operations could be negatively affected if it becomes subject to any securities litigation or shareholder activism, which could cause the Company to incur significant expense, hinder execution of business and growth strategy and impact its stock price.
In the past, following periods of volatility in the market price of a company’s securities, securities class action litigation has often been brought against that company. Shareholder activism, which could take many forms or arise in a variety of situations, has been increasing recently. Volatility in the stock price of the Company Common Stock or other reasons may in the future cause it to become the target of securities litigation or shareholder activism. Securities litigation and shareholder activism, including potential proxy contests, could result in substantial costs and divert management’s and board of directors’ attention and resources from the Company’s business. Additionally, such securities litigation and shareholder activism could give rise to perceived uncertainties as to the Company’s future, adversely affect its relationships with service providers and make it more difficult to attract and retain qualified personnel. Also, the Company may be required to incur significant legal fees and other expenses related to any securities litigation and activist shareholder matters. Further, its stock price could be subject to significant fluctuation or otherwise be adversely affected by the events, risks and uncertainties of any securities litigation and shareholder activism.
Risks Related to the Company’s Specialty Pharmacy Business
SRx Health conducts its business in a highly regulated industry and environment.
In Canada, the licensing and regulation of pharmacies is under the jurisdiction of provincial and territorial pharmacy regulatory authorities. SRx Health’s business is governed by stringent federal and provincial governmental regulations and licensing requirements, and it operates in an environment in which regulation and government funding play a key role. Since much of the regulation is provincial, SRx Health may encounter varying regulations in different provinces. Non-compliance with any existing or proposed laws or regulations, particularly those that provide for the licensing and conduct of pharmacies and health clinics, the licensing and conduct of healthcare professionals, the provision of information concerning prescription drugs, the distribution of prescription drugs, the distribution, pricing and sale of prescription drugs, privacy matters and restrictions or prohibitions on manufacturer allowance funding, could result in civil or regulatory proceedings, fines, penalties, injunctions, recalls or seizures, any of which may impact SRx Health’s results of operations or financial position.
In addition, any changes to the laws, regulations and policies of federal, provincial, territorial or local governmental authorities affecting SRx Health’s operations and activities, or the interpretation of such laws or regulations, including delisting of services or changes to licensing requirements relating to healthcare services, or their interpretation or application, could have a material adverse effect on the business, its performance, financial condition, results of operations, prospects and on the sales growth of SRx Health and SRx Health could incur significant costs in the course of complying with any changes in the regulatory regime.
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Changes in reimbursement programs, prescription drug pricing and commercial terms could adversely affect SRx Health’s operations and financial performance.
SRx Health is reliant on prescription drug sales for a significant portion of its sales and profits. Prescription drugs and their sales are subject to rigorous federal, provincial, territorial and local laws and regulations. Changes to these laws and regulations, or non-compliance with these laws and regulations, could have a material adverse impact on SRx Health’s business, sales and profitability.
Federal and provincial laws and regulations that establish public drug plans typically regulate prescription drug coverage, patient eligibility, pharmacy reimbursement, drug product eligibility, drug pricing and may also regulate manufacturer allowance funding that may be provided to or received by pharmacies. With respect to pharmacy reimbursement, such laws and regulations typically regulate the allowable drug cost of a prescription drug product, the permitted mark-up on a prescription drug product and the professional or dispensing fees that may be charged on prescription drug sales to patients eligible under the public drug plan. With respect to drug product eligibility, such laws and regulations typically regulate the requirements for listing the manufacturer’s products as a benefit or partial benefit under the applicable governmental drug plan, drug pricing and, in the case of generic prescription drug products, the requirements for designating the product as interchangeable with a branded prescription drug product. In addition, other federal, provincial, territorial and local laws and regulations govern the approval, packaging, labeling, sale, marketing, advertising, handling, storage, distribution, dispensing and disposal of prescription drugs.
Sales of prescription drugs, pharmacy reimbursement and drug prices may be affected by changes to the health care industry, including legislative or other changes that impact patient eligibility, drug product eligibility, the allowable cost of a prescription drug product, the mark-up permitted on a prescription drug product, the amount of professional or dispensing fees paid by third-party payers or the provision or receipt of manufacturer allowances by pharmacy and pharmacy suppliers.
The majority of prescription drug sales are reimbursed or paid by third-party payers, such as governments, insurers or corporate employers. These third-party payers have pursued and continue to pursue measures to manage the costs of their drug plans. Each provincial jurisdiction has implemented legislative and/or other measures directed towards managing pharmacy service costs and controlling increasing drug costs incurred by public drug plans and private payers which impact pharmacy reimbursement levels and the availability of manufacturer allowances. Legislative measures to control drug costs include lowering of generic drug pricing, restricting or prohibiting the provision of manufacturer allowances and placing limitations on private label prescription drug products. Other measures that have been implemented by certain government payers include restricting the number of interchangeable prescription drug products which are eligible for reimbursement under provincial drug plans.
Legislation in certain provincial jurisdictions establish listing requirements that ensure that the selling price for a prescription drug product will not be higher than any selling price granted by the manufacturer for the same prescription drug product under other provincial drug insurance programs. In some provinces, elements of the laws and regulations that impact pharmacy reimbursement and manufacturer allowances for sales to the public drug plans are extended by legislation to sales in the private sector. Also, private third-party payers (such as corporate employers and their insurers) are looking or may look to benefit from any measures implemented by government payers to reduce prescription drug costs for public plans by attempting to extend these measures to prescription drug plans they own or manage. Accordingly, changes to pharmacy reimbursement and manufacturer allowances for a public drug plan could also impact pharmacy reimbursement and manufacturer allowances for private sector sales. In addition, private third party payers could reduce pharmacy reimbursement for prescription drugs provided to their members or could elect to reimburse members only for products included on closed formularies or available from preferred providers.
Changes impacting pharmacy reimbursement programs, prescription drug pricing and manufacturer allowance funding, legislative or otherwise, are expected to continue to put downward pressure on prescription drug sales, particularly branded drugs. These changes may have a material adverse impact on SRx Health’s business, sales and profitability. In addition, SRx Health could incur significant costs in the course of complying with any changes in the regulatory regime affecting prescription drugs.
Inflation risk
General inflationary pressures may affect drug costs and other operating costs, which could have a material adverse effect on SRx Health’s financial condition, results of operations and the capital expenditures required to advance SRx Health’s present and future business plans. There can be no assurance that any governmental action will be taken to control inflationary or deflationary cycles, that any governmental action taken will be effective or whether any governmental action may contribute to economic uncertainty or volatility. Governmental action to address inflation or deflation may also affect currency values. Accordingly, inflation and any governmental response thereto may have a material adverse effect on SRx Health’s business, results of operations, cash flow, financial condition and the price of its common shares.
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SRx Health’s business is highly competitive and SRx Health may not be able to compete successfully against current and future competitors.
The specialty healthcare industry is very competitive. SRx Health has competitors with longer operating histories, larger customer bases, greater brand recognition, greater experience and more extensive commercial relationships in certain jurisdictions, and greater financial, technical, marketing and other resources than SRx Health does. SRx Health’s potential new or existing competitors may be able to develop products and services better received by customers or may be able to respond more quickly and effectively than SRx Health can to new or changing opportunities, technologies, regulations or customer requirements. In addition, some of SRx Health’s larger competitors may be able to leverage a larger installed customer base and distribution network to adopt more aggressive pricing policies and offer more attractive sales terms, which could cause SRx Health to lose potential sales or to sell SRx Health’s products at lower prices. Disruptive innovation by existing or new competitors could alter the competitive landscape in the future. Competition may also come from other sources in the future. Changes in market dynamics or the actions of competitors or manufacturers, including industry consolidation, the emergence of new competitors and strategic alliances could materially and adversely affect SRx Health’s businesses. SRx Health’s inability to keep up with the pace of such behavioral changes or technological advancements or with its competitors could adversely affect SRx Health’s operations or financial performance.
SRx Health’s business is impacted by the interplay between brand name and generic drugs
The profitability of pharmacy businesses depends upon the utilization of prescription drugs. Utilization trends are affected by, among other factors, the introduction of new and successful prescription drugs as well as lower-priced generic alternatives to existing brand name drugs generally due to higher gross margins on the sale of generic alternatives. Inflation in the price of drugs also can adversely affect utilization. New brand name drugs can result in increased drug utilization and associated sales, while the introduction of lower priced generic alternatives typically results in relatively lower sales, but relatively higher gross profit margins. Accordingly, a decrease in the number or magnitude of significant new brand name drugs or generics successfully introduced, delays in their introduction, or a decrease in the utilization of previously introduced prescription drugs, could have an impact on results of operations. In addition, gross profit margins could be adversely affected if there is an increase in the amounts SRx Health pay to procure pharmaceutical drugs, including generic drugs, or if new brand name drugs replace existing generic drugs, or if new brand name drugs replace existing generic drugs.
Changes in drug development and prescription mix may impact SRx Health’s results of operation
A significant portion of SRx Health’s sales is dependent on the markup SRx Health earns on drugs dispensed as well as the related dispensing fee. The sources and amounts of SRx Health’s sales are determined by a number of factors, including the mix of patients, mix of pharmaceuticals dispensed and rates of reimbursement from payors. Changes in the mix of any of these categories could impact SRx Health’s sales and results of operations.
SRx Health dispenses significant volumes of prescription medications from its pharmacies. Dispensing volume is a driver of sales and profitability. When drug products are modified or withdrawn by manufacturers, or when increased safety risk profiles of specific drugs or classes of drugs result in decreased usage, physicians may reduce or stop writing prescriptions for these drugs. Negative media reports or other reputational issues regarding drugs could result in reduced consumer demand for such drugs. In cases where there are no acceptable prescription drug equivalents or alternatives for these prescription drugs, SRx Health’s prescription volumes, sales and profitability could decline.
The pharmaceutical industry’s pipeline of new drugs includes many drugs that over the long term may replace older, more expensive therapies, whether due to the development of new or more effective treatments, the replacement of brand name drugs with generic substitutes, the development of biosimilar drugs or other replacement therapies and new and less expensive delivery methods (such as when an infusion or injectable drug is replaced with an oral drug) or additional products are added to a therapeutic class. As new treatments and drugs are developed, price competition among competing manufacturer’s products may increase. In such cases, drug costs may decline. The mix of SRx Health’s dispensed drugs could and will change over time as technology advances and existing products are improved or become obsolete and these changes are likely to impact SRx Health’s sales, results of operations and financial condition.
Product liability, product recall or personal injury issues could damage SRx Health’s reputation and have a significant adverse effect on SRx Health’s business, operating results, cash flows and/or financial condition.
SRx Health’s business could be adversely impacted by the supply of defective or expired products, including the infiltration of counterfeit products into the supply chain, errors in re-labeling of products, product tampering, product recall and contamination or product mishandling issues. Furthermore, a disruption in business operations could occur as a result of contamination of drugs, a failure to maintain necessary shipment and storage conditions, errors in mail order processing, and the unavailability of prescription drugs provided by suppliers, labor disruptions or other unanticipated disruptions, among other factors. SRx Health seeks to manage this risk through the use of multiple logistics providers such that if there was a disruption of service from one service provider, another party may be used. However, such disruption could reduce SRx Health’s ability to process and dispense prescriptions and provide products and services to customers. Errors in the dispensing and packaging of pharmaceuticals, including related counseling, in consuming drugs in a manner that is not prescribed and in the provision of other healthcare services could lead to serious injury or death. Product liability or personal injury claims may be asserted with respect to any of the drugs or other products or services SRx Health sells or provides. The occurrence of such events or incidents, as well as the failure to maintain the cleanliness and health standards at store level, could result in harm to customers negative publicity or could adversely affect brands, reputation, operations or financial performance and could lead to other unforeseen liabilities from legal claims or otherwise.
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SRx Health may not be able to avoid significant liability exposure even if it takes appropriate precautions, including maintaining liability coverage (subject to deductibles and maximum payouts). Any liability that SRx Health may have as a result could have a material adverse effect on the business, financial condition and results of operations of SRx Health, to the extent insurance coverage for such liability is not available. Liability claims in the future, regardless of their ultimate outcome, could have a material adverse effect on SRx Health’s reputation, its ability to attract and retain customers and may detrimentally divert management’s attention away from the business.
The occurrence of unanticipated serious adverse events or other safety problems could cause the regulatory bodies to impose significant restrictions on the distribution or sale of drug products or provision of SRx Health’s pharmacy or other business services. In addition, the discovery of previously unknown safety problems or increased severity or significance of a pre-existing safety signal could result in withdrawal of the product from the market, product recalls or other material adverse effects on operations. If SRx Health fails to or does not promptly withdraw pharmaceutical products upon a recall by a drug manufacturer, its business and results of operations could be negatively impacted.
The drug products that SRx Health carries have a set shelf life
SRx Health holds finished goods in inventory and SRx Health’s products have a limited shelf life, as it is normal for certain drugs, supplements and other pharmaceutical ingredients to degrade over time. SRx Health’s inventory may reach its expiration date and not be sold. Even though SRx Health manages its inventory, SRx Health may be required to write-down the value of any inventory that has reached its expiration date, which could have a material adverse effect on SRx Health’s business, financial condition, and results of operations.
Continued operation of SRx Health’s distribution facilities is critical to SRx Health’s operations
SRx Health is largely dependent on SRx Health’s distribution facilities to supply SRx Health’s pharmacies with drug products. If one or more of SRx Health’s distribution facilities becomes inoperable, capacity is exceeded or if operations are disrupted, SRx Health’s business, financial condition and operating results could be negatively affected. SRx Health depends on the orderly operation of the receiving and distribution process, which relies on adherence to shipping schedules and the effective management of SRx Health’s distribution facilities. Although SRx Health believes that its receiving and distribution processes are efficient, and SRx Health has appropriate contingency plans, unforeseen disruptions in operations due to fire, severe weather conditions, natural disasters, or other catastrophic events, electronic or power interruptions, failure of software and hardware or other system failures, labor disagreements or other shipping problems may result in delays in the delivery of SRx Health’s shipments. Additionally, although SRx Health believes that the capacity of its distribution facilities meets its current needs, SRx Health may need to expand its receiving and distribution capacity in the future. Any failure to effectively expand SRx Health’s distribution capacity in a timely manner to keep pace with SRx Health’s growth could have an adverse effect on its business. Although SRx Health maintains business interruption insurance and property insurance, SRx Health cannot provide any assurance that its insurance coverage will adequately protect SRx Health from the adverse effects that could result from significant disruptions to its distribution system, such as the long-term loss of clients or an erosion of its reputation, or that insurance proceeds will be paid to SRx Health in a timely manner.
Conducting clinical trials involve a high degree of risk
SRx Health enrolls qualified patients, conduct, supervise and monitor clinical trials, conduct preclinical studies and complete chemistry, manufacturing and controls activities. SRx Health has regulatory responsibilities, including ensuring that its clinical trials are conducted in accordance with Good Clinical Practices and that preclinical studies are conducted in accordance with Good Laboratory Practices. Failure to complete activities on schedule or conduct preclinical studies or clinical trials in accordance with regulatory requirements or SRx Health’s trial design could materially adversely impact SRx Health’s business, financial condition or operating results and could cause the market value of its common shares to decline.
There may be delays or stoppages in SRx Health’s clinical trials due to circumstances beyond SRx Health’s control
The commencement of SRx Health’s planned clinical trials could be delayed or prevented due to a limited number of, and competition for, suitable patients with the particular types of cancer required for enrollment in SRx Health’s clinical trials; a limited number of, and competition for, suitable sites to conduct SRx Health’s clinical trials; delay or failure to obtain Health Canada or other regulatory agencies’ approval or agreement to commence a clinical trial; delay or failure to obtain sufficient supplies of the product candidate for SRx Health’s clinical trials; delay or failure to reach agreement on acceptable clinical trial agreement terms or clinical trial protocols; slower than expected rates of patient recruitment and enrollment; failure of patients to complete the clinical trial; unforeseen safety issues; inability or unwillingness of patients to follow SRx Health’s clinical trial protocols; and introduction of competitive products that may impede SRx Health’s ability to retain patients in its clinical trials. Any of the foregoing could have a material adverse effect on SRx Health’s business, results of operations and financial condition.
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Negative results from clinical trials or studies of others and adverse safety events involving the targets of SRx Health’s products may have an adverse impact on SRx Health’s future commercialization efforts.
From time to time, studies or clinical trials on various aspects of biopharmaceutical products are conducted by academic researchers, competitors, or others. The results of these studies or trials, when published, may have a significant effect on the market for the biopharmaceutical product that is the subject of the study. The publication of negative results of studies or clinical trials or adverse safety events related to SRx Health’s product candidates, or the therapeutic areas in which SRx Health’s product candidates compete, could adversely affect the price of its common shares and SRx Health’s ability to finance future development of its product candidates, and SRx Health’s business and financial results could be materially and adversely affected.
SRx Health’s insurance policies may not be sufficient to cover all claims
As a distributor of products designed to be ingested by humans, SRx Health faces an inherent risk of exposure to product liability claims, regulatory action, and litigation of its products are alleged to have caused significant loss or injury. SRx Health may be subject to various product liability claims, including, among others, that the products distributed by SRx Health caused injury or illness, include inadequate instructions for use or include inadequate warnings concerning possible side effects or interactions with other substances. A product liability claim or regulatory action against SRx Health could result in increased costs, could adversely affect SRx Health’s reputation with its clients and consumers generally, and could have a material adverse effect on the business, financial condition, and operating results of SRx Health. There can be no assurances that SRx Health’s insurance policies would be able to adequately cover all risks to which SRx Health is exposed and may not be adequate for all liabilities actually incurred or indemnification claims against SRx Health. A significant claim not covered by SRx Health’s insurance, in full or in part, may result in significant expenditures by SRx Health. Moreover, SRx Health may not be able to maintain insurance policies in the future at reasonable costs, on acceptable terms or at all, which may adversely affect SRx Health’s business and the trading price of its securities. The successful assertion of one or more large claims against SRx Health that exceed available insurance coverage, or the occurrence of changes in SRx Health’s insurance policies, including premium increases or the imposition of large deductible or co-insurance requirements, could adversely affect SRx Health’s business, financial condition and results of operations.
SRx Health is subject to a variety of business continuity hazards and risks, any of which could interrupt SRx Health’s operations or otherwise adversely affect its performance and operating results.
SRx Health is subject to business continuity hazards and other risks, including natural disasters, utility and other mechanical failures, acts of war or terrorism, outbreaks of infectious diseases, pandemics or similar health threats, disruption of communications, data security and preservation, disruption of supply or distribution, safety regulation and labor difficulties. The occurrence of any of these or other events to SRx Health might disrupt or shut down SRx Health’s operations or otherwise adversely affect SRx Health’s operations. SRx Health also may be subject to certain liability claims in the event of an injury or loss of life, or damage to property, resulting from such events. Although SRx Health has and maintain insurance policies that SRx Health believes are customary and adequate for its size and industry, its insurance policies include limits and exclusions and, as a result, its coverage may be insufficient to protect against all potential hazards and risks incident to SRx Health’s business. In addition, SRx Health’s crisis management and disaster recovery procedures and business continuity plans may not be effective. Should any such hazards or risks occur, or should SRx Health’s insurance coverage be inadequate or unavailable, SRx Health’s business, operating results, cash flows and financial condition could be adversely affected.
SRx Health’s risk management policies and procedures may not be fully effective in mitigating SRx Health’s risk exposure in all market environments or against all types of risks, which could expose SRx Health to losses and liability and otherwise harm SRx Health’s business.
SRx Health operates in a highly regulated industry and both SRx Health and the industry in which it conducts its business have experienced significant change in recent years. Accordingly, SRx Health’s risk management policies and procedures may not be fully effective at identifying, monitoring and managing SRx Health’s risks. Some of SRx Health’s risk evaluation methods depend upon information provided by third parties regarding markets, customers or other matters that are otherwise inaccessible to SRx Health. In some cases, however, that information may not be accurate, complete or up-to-date. SRx Health’s risk management policies, procedures, techniques and processes may not be effective at identifying all of the risks to which SRx Health is exposed or enabling it to mitigate the risks SRx Health has identified. In addition, when SRx Health introduces new services, focuses on new business types or begins to operate in markets in which SRx Health has a limited history or experience, SRx Health not be able to forecast and reserve accurately for new risks. If SRx Health’s risk management policies and processes are ineffective, SRx Health may suffer financial losses, SRx Health may be subject to liability and SRx Health’s business, financial condition and results of operations may be materially and adversely affected.
Consumer opinion of SRx Health may be impacted in case of reputational damages to SRx Health’s suppliers
SRx Health promotes nationally branded, non-proprietary products, as well as private label, proprietary products. Damage to the reputation of any of these brands, or to the reputation of any supplier or manufacturer of these brands, could negatively impact consumer opinion of SRx Health or the related products, which could have an adverse impact on the financial performance of SRx Health.
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Healthcare professional errors may harm SRx Health’s business and reputation
Exposure to risks related to managing confidential information and possible professional errors by healthcare professionals, including pharmacists, could have a significant impact on SRx Health’s reputation and corporate image. SRx Health may be subject to claims that it wrongfully hired an employee or healthcare professional from a competitor, or that SRx Health’s employees, consultants or independent contractors have wrongfully used or disclosed confidential information of third parties or that SRx Health’s employees have wrongfully used or disclosed alleged trade secrets of their former employers. Healthcare professionals may offer counseling to customers about medication, dosage, delivery systems, common side effects and other information that they deem significant. Healthcare professionals such as pharmacists may also have a duty to warn customers regarding any potential negative effects of a prescription drug if the warning could reduce or negate these effects. An error or omission could cause reputational harm and impact financial performance.
Consolidation in the supply chain may negatively impact drug prices and SRx Health’s ability to compete
Many sourcing and procurement organizations in the healthcare industry have consolidated to create larger healthcare enterprises with greater market power. While this consolidation could increase efficiency and has the potential to improve the delivery of health care services, it also reduces competition and the number of potential contracting parties in certain geographies, and has led to pricing pressures. New and proposed acquisitions, partnerships and strategic alliances in the healthcare industry can alter market dynamics and impact businesses and competitive positioning. Changes in the participants in global sourcing enterprises relating to drug procurement, whether as a result of mergers, acquisitions or other transactions, can also have a similar effect on market dynamics and business. In addition, further consolidation among generic drug manufacturers could lead to generic drug inflation in the future. SRx Health expects that market demand, government regulation, third-party reimbursement policies, government contracting requirements, and societal pressures will continue to cause the healthcare industry to evolve, potentially resulting in further business consolidations and alliances among industry participants.
SRx Health relies on third-party suppliers for a significant portion of its supply of products
SRx Health relies on third parties to supply a significant portion of SRx Health’s inventories. SRx Health is reliant on these third parties for timely supply of products, including general pharmaceutical products. These third parties may find it necessary to allocate their supply of particular products among its customers. Such allocations of supply may in the future be an impediment in the conduct of business. There can be no assurance that these third parties will continue to supply their products in the timeframe and quantities required by SRx Health. There may be a need to identify alternate third party suppliers to prevent a possible disruption of the manufacture of certain pharmaceutical drug products. SRx Health does not have control over the process or timing of the manufacturing of the pharmaceutical drug products that SRx Health distributes or sells, and disruptions could harm its business, financial condition and results of operation.
SRx Health’s quarterly results of operations may fluctuate and, as a result, SRx Health may fail to meet or exceed the expectations of investors or securities analysts which could cause SRx Health’s share price to decline.
SRx Health’s quarterly revenue and results of operations may fluctuate as a result of a variety of factors, many of which are outside of its control. If its quarterly revenue or results of operations fall below the expectations of investors or securities analysts, the price of its common shares could decline substantially. Fluctuations in its results of operations may be due to a number of factors, including: demand for and market acceptance of SRx Health’s products; the mix of services sold during a period; SRx Health’s ability to retain and increase sales to customers and attract new customers; the strength of the economy; changes in SRx Health’s pricing policies or those of SRx Health’s competitors; competition, including entry into the industry by new competitors and new offerings by existing competitors; network outages or security breaches; and the amount and timing of expenditures related to expanding SRx Health’s operations and SRx Health’s growth opportunities. Due to the foregoing factors, and the other risks discussed in this prospectus, you should not rely on quarter-to-quarter comparisons of SRx Health’s results of operations as an indication of SRx Health’s future performance.
Change in tax and trade policies, tariffs and other government regulations affecting trade between Canada and other countries could adversely affect SRx Health.
Many branded and generic drug products are manufactured in whole or in substantial part outside of Canada. As a result, significant changes in tax or trade policies, tariffs or trade relations between Canada and other countries, such as the imposition of unilateral tariffs on imported products, could result in significant increases in costs, restrict access to suppliers, depress economic activity, and have a material adverse effect on business, cash flows and results of operations. In addition, other countries may change their business and trade policies and such changes, as well as any negative sentiments towards Canada in response to increased import tariffs and other changes in Canada trade regulations, could adversely affect SRx Health’s businesses, if SRx Health fails to respond adequately to such changes, including by implementing strategic and operational initiatives.
Disruption of the global supply chain and ineffective service providers could adversely impact SRx Health’s business
Products are sourced from a wide variety of domestic and international vendors, and any future disruption in supply chain or inability to find qualified vendors and access products that meet requisite quality and safety standards in a timely and efficient manner could adversely impact pharmacy businesses.
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The loss or disruption of supply arrangements for any reason, including for health epidemics or pandemics, labor disputes, loss or impairment of key manufacturing sites, inability to procure sufficient raw materials, quality control issues, ethical sourcing issues, a supplier’s financial distress, natural disasters, civil unrest or acts of war or terrorism, trade sanctions or other external factors, could interrupt product supply. Additionally, offshore sourcing increases certain risks, including risks associated with drug safety, product defects, non-compliance with ethical and safe business practices and inadequate supply of products.
Ineffective selection of service providers (including transport carriers, logistics service providers and operators of warehouses and distribution facilities), contractual terms or relationship management could impact ability to source products (both national brand and control brand products), to have products available for customers, to market to customers or to operate efficiently and effectively.
Failure to meet customer expectations may harm SRx Health’s brand and reputation, its ability to retain and grow its customer base and its operating results.
Products and services must satisfy the needs and desires of customers, whose preferences may change. It is difficult to predict consistently and successfully the products and services customers will demand. Failure to timely identify or effectively respond to changing consumer preferences and spending patterns, and evolving demographic mixes in markets, an inability to expand the products being purchased by clients and customers, or the failure or inability to obtain or offer particular categories of products could adversely affect relationships with customers and clients and the demand for products and services and could result in excess inventories of products, which could adversely affect its operating results.
If SRx Health cannot keep pace with rapid developments in healthcare technology and change in SRx Health’s industry and continue to grow its patient base, the use of SRx Health’s services could decline, reducing SRx Health’s revenue.
Certain markets in which SRx Health competes are subject to rapid and significant changes. The healthcare technology market, in particular, is characterized by rapid technological change, new product and service introductions, evolving industry standards, changing patient needs, consolidation and the entrance of non-traditional competitors. In order to remain competitive and continue to acquire new customers, SRx Health is continually involved in a number of projects to develop new services and improve SRx Health’s existing services. These projects may not be successful and carry some risks, such as cost overruns, delays in delivery, performance problems and lack of patient adoption, and may cause SRx Health to become subject to additional regulation. Any inability to develop or delay in the delivery of new services or the failure to differentiate SRx Health’s services or to accurately predict and address market demand could render SRx Health’s services less desirable, or even obsolete, to SRx Health’s customers. In addition, many current or prospective customers may find competing services more attractive if SRx Health does not keep pace with market innovation, and many may choose to switch to competing services even if SRx Health does its best to innovate and provide superior services.
SRx Health relies in part, and may in the future rely in part, on third parties, including some of SRx Health’s competitors and potential competitors, for the development of, and access to, new technologies. If SRx Health is unable to maintain these relationships, it may lose access to new technologies or may not have the speed-to-market necessary to successfully launch new offerings.
SRx Health’s future success will depend on SRx Health’s ability to adapt to technological changes and evolving industry standards. SRx Health cannot predict the effects of technological changes on SRx Health’s business. If SRx Health is unable to adapt to technological changes or evolving industry standards on a timely and cost-effective basis by introducing new services and improving existing services, he SRx Health’s business, financial condition and results of operations could be materially adversely affected.
SRx Health’s use and disclosure of personally identifiable information, including personal health information, is subject to privacy and security regulations.
There are a number of federal and provincial laws protecting the confidentiality of certain patient health information, including patient records, and restricting the use and disclosure of that protected information. In particular, the privacy rules under PIPEDA and substantially similar provincial legislation, including personal health information protection legislation applicable in the provinces and territories of Canada, protect medical records and other personal health information by limiting their use and disclosure of health information to the minimum level reasonably necessary to accomplish the intended purpose. If SRx Health was found to be in violation of the privacy or security rules under the Personal Information Protection and Electronic Documents Act (Canada) (“PIPEDA”) or such other laws protecting the confidentiality of patient health information, it could be subject to sanctions or criminal penalties, or otherwise be the subject of litigation (including a class action) for breach of privacy or failing to ensure the security of resident and patient information, any of which could increase its liabilities, harm its reputation and have a material adverse effect on the business, results of operations and financial condition of SRx Health.
SRx Health relies on the relationships that SRx Health has established with major drug manufacturers and specialty practitioners to conduct SRx Health’s business, and changes to these relationships may impair SRx Health’s operations.
SRx Health has developed strong working relationships with several industry stakeholders including major drug manufacturers and specialty practitioners that have served to benefit SRx Health’s continued operations. SRx Health is dependent on these relationships to access therapies ahead of competition, stay ahead of the curve on innovative therapies and regulatory changes in the pipeline and to receive access to specialty medications promptly and at competitive prices. Changes to these favorable relationships could negatively impact its business, and its continued growth is in part dependent on the maintenance of these relationships.
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SRx Health may be subject to information technology systems impairment and cyber-attacks in the future
SRx Health’s operations depend on the timely maintenance, upgrade and replacement of networks, equipment, information technology systems and software, as well as pre-emptive expenses to mitigate the risks of failures.
In addition, SRx Health collects and stores personal information about SRx Health’s patients and are responsible for protecting that information from privacy breaches. A privacy breach may occur through procedural or process failure, information technology malfunction, or deliberate unauthorized intrusions. Theft of data for competitive purposes, particularly patient lists and preferences, is an ongoing risk whether perpetrated via employee collusion or negligence or through deliberate cyber-attack. Any such theft or privacy breach would have a material adverse effect on SRx Health’s business, financial condition and results of operations.
SRx Health has not experienced any material losses to date relating to cyber-attacks or other information security breaches, but there can be no assurance that SRx Health will not incur such losses in the future. SRx Health’s risk and exposure to these matters cannot be fully mitigated because of, among other things, the evolving nature of these threats. As a result, cyber security and the continued development and enhancement of controls, processes and practices designed to protect systems, computers, software, data and networks from attack, damage or unauthorized access is a priority. As cyber threats continue to evolve, SRx Health may be required to expend additional resources to continue to modify or enhance protective measures or to investigate and remediate any security vulnerabilities.
SRx Health’s services must integrate and interoperate with a variety of operating systems, software, hardware, web browsers and networks.
SRx Health is dependent on the ability of SRx Health’s products and services to integrate with a variety of operating systems, software, hardware, networks and web browsers that SRx Health does not control. Any changes in these systems or networks that degrade the functionality of SRx Health’s products and services, impose additional costs or requirements on SRx Health or give preferential treatment to competitive services could materially and adversely affect usage of SRx Health’s products and services. Given the nature of SRx Health’s business and the pace of technological change, SRx Health may be unsuccessful in attempting to keep up with changing systems or the cost of doing so could be prohibitive, either of which could materially adversely affect SRx Health’s business and operations. In the event that it is difficult for SRx Health’s patients and corporate customers to access and use SRx Health’s products and services, SRx Health’s business may be materially and adversely affected.
In addition, SRx Health’s solutions, including hardware and software, interoperate with mobile networks offered by telecom operators and mobile devices developed by third parties. Changes in these networks or in the design of these mobile devices may limit the interoperability of SRx Health’s solutions with such networks and devices and require modifications to SRx Health’s solutions. If SRx Health is unable to ensure that its hardware and software continue to interoperate effectively with such networks and devices, or if doing so is costly, SRx Health’s business, financial condition and results of operations may be materially and adversely affected.
Failure to properly manage inventories and anticipate demand may impact SRx Health’s financial performance
SRx Health’s business is subject to risks associated with managing inventory and changes in customer’s preferences. Failure by SRx Health to properly manage its inventory and effectively anticipate the demand for products offered may result in SRx Health having inventory that customers do not want, is not reflective of customers’ tastes or habits, or is priced at a level customers are not willing to pay. Inability of SRx Health to respond to changing consumer preferences may result in excess inventory, inventory levels that are insufficient to meet demand or inventory that may have to be sold at lower prices. SRx Health monitors the impact of customer trends and inventory turnover and obsolescence. However, despite these efforts, inappropriate inventory levels may negatively impact SRx Health’s financial performance.
Reliance on data obtained from third party sources
SRx Health relies on certain operational data obtained from third parties that are industry accepted data sources. Such data relied on by SRx Health may not accurately reflect actual prescriptions. If such data turns out to be inaccurate or unreliable and SRx Health’s controls are not effective, there could be an adverse effect on SRx Health’s financial performance, its ability to properly manage inventory and its ability to interpret industry trends.
Change in population demographics could have an adverse effect on SRx Health’s business, operations, financial condition and results of operations.
The aging population in Canada is a major driver of demand for SRx Health’s products and services. Due to declining fertility rates and increased life expectancy, seniors in Canada are a rapidly growing segment of the population and are living longer and healthier lives than previous generations. These trends have generally resulted in an increased demand for pharmaceutical and other drugs, particularly among the elderly population. A change in any of these demographic trends, including shorter life spans, reduced incidence of illness or reduced demand for pharmaceutical drugs, could significantly impact demand for SRx Health’s services and have a material adverse effect on SRx Health’s business, operations, financial condition and results of operations.
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If SRx Health is unable to hire, retain and motivate qualified personnel, its business will suffer
SRx Health’s future success depends, in part, upon SRx Health’s ability to attract, retain and motivate highly skilled and qualified personnel. Failure to attract and retain qualified professionals that are essential to SRx Health’s operations, including pharmacists, sales and marketing personnel and skilled management could adversely affect SRx Health’s business. If SRx Health fails to attract, train and retain sufficient numbers of these highly qualified people, its prospects, business, financial condition and results of operations will be materially and adversely affected.
SRx Health is dependent on the continued services and performance of SRx Health’s senior management and other key employees, the loss of any of whom could adversely affect SRx Health’s business, operating results and financial condition.
SRx Health’s future performance depends on the continued services and contributions of its senior management, including its NEOs, and other key employees to execute on its business plan and to identify and pursue new opportunities and product innovations. The failure to properly manage succession plans and/or the loss of services of senior management or other key employees could significantly delay or prevent the achievement of SRx Health’s strategic objectives. From time to time, there may be changes in SRx Health’s senior management team resulting from the hiring or departure of executives, which could disrupt SRx Health’s business. The loss of the services of one or more of its senior management or other key employees for any reason could adversely affect SRx Health’s business, financial condition and operating results and require significant amounts of time, training and resources to find suitable replacements and integrate them within SRx Health’s business and could affect SRx Health’s corporate culture.
From time to time, SRx Health may become defendants in legal proceedings as to which SRx Health is unable to assess its exposure, and which could become significant liabilities in the event of an adverse judgment.
From time to time in the ordinary course of SRx Health’s business, SRx Health may become involved in various legal proceedings, including commercial, product liability, employment, class action and other litigation and claims, as well as governmental and other regulatory investigations and proceedings. Such matters can be time-consuming, divert management’s attention and resources and cause SRx Health to incur significant expenses. Furthermore, because litigation is inherently unpredictable, the results of any such actions may have a material adverse effect on SRx Health’s business, operating results or financial condition.
Labor-related matters, including labor disputes, may adversely affect SRx Health’s operations
Potential labor disputes at SRx Health’s independent stores or transportation carriers create risks for SRx Health’s business, particularly if a dispute results in work slowdowns, lockouts, strikes or other disruptions of its operations. Any potential labor dispute, either in SRx Health’s own operations or in those of third parties, on whom SRx Health relies, could materially affect SRx Health’s costs, decrease SRx Health’s sales, harm SRx Health’s reputation or otherwise negatively affect SRx Health’s sales, profitability or financial condition.
Goodwill and other intangible assets could, in the future, become impaired
Goodwill and indefinitely lived intangible assets are subject to annual impairment reviews, or more frequent reviews if events or circumstances indicate that the carrying value may not be recoverable. When evaluating goodwill for potential impairment, SRx Health compares the fair value of SRx Health’s reporting units to their respective carrying amounts. SRx Health estimates the fair value of SRx Health’s reporting units using a combination of a discounted cash flow method and a market multiple method. If the carrying amount of a reporting unit exceeds its estimated fair value, a goodwill impairment loss is recognized in an amount equal to the excess to the extent of the goodwill balance. Estimated fair values could change if, for example, there are changes in the business climate, industry-wide changes, changes in the competitive environment, adverse legal or regulatory actions or developments, changes in capital structure, cost of debt, interest rates, capital expenditure levels, operating cash flows or market capitalization. Because of the significance of SRx Health’s goodwill and intangible assets, any future impairment of these assets could require material noncash charges to SRx Health’s operating results, which also could have a material adverse effect on SRx Health’s financial condition.
Conflicts of interest may arise between SRx Health and its directors and officers as a result of other business activities undertaken by such individuals.
SRx Health may be subject to various potential conflicts of interest because of the fact that some of its directors and executive officers may be engaged in a range of business activities. In addition, SRx Health’s directors and executive officers may devote time to their outside business interests, so long as such activities do not materially or adversely interfere with their duties to SRx Health and subject to any contractual restrictions restricting such activities. In some cases, SRx Health’s executive officers and directors may have fiduciary obligations associated with business interests that interfere with their ability to devote time to SRx Health’s business and affairs, which could adversely affect SRx Health’s operations. These business interests could require significant time and attention of SRx Health’s executive officers and directors.
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Conflicts of interest, if any, will be subject to the procedures and remedies provided under applicable laws and policies of SRx Health. For example, a director who has a material interest in a matter before the Board or any committee on which he or she serves is required to disclose such interest as soon as the director becomes aware of it and absent himself or herself from the meeting while discussions and voting with respect to the matter are taking place. In accordance with applicable laws, the directors of SRx Health are required to act honestly and in good faith with a view to the best interests of SRx Health.
SRx Health is subject to risks associated with leasing space and equipment and is subject to a number of long-term non-cancelable leases with substantial lease payments.
Other than its distribution facility, SRx Health leases its physical operating locations and is subject to risks associated with leasing, occupying and making tenant improvements to real property, including adverse demographic and competitive changes affecting the property, changes in availability of and contractual terms for leasable space, credit risk in relation to tenant improvement allowances from landlords and potential liability for environmental conditions or personal injury claims. There can be no assurances that SRx Health will be able to extend, renew or continue to lease its existing locations.
Additional sites that SRx Health leases may be subject to long-term non-cancelable leases if SRx Health is unable to negotiate shorter terms. If an existing or future location is not profitable, and SRx Health decides to close it, SRx Health may nonetheless be committed to perform its obligations under the applicable lease including, among other things, paying the base rent for the balance of the lease term. In addition, if SRx Health is not able to enter into new leases or renew existing leases on terms acceptable to SRx Health, this could have an adverse effect on SRx Health’s results of operations and profitability. Any failure to make lease payments when due, or the inability to extend, renew or continue to lease space and equipment in key locations, would likely harm SRx Health’s business, profitability and results of operations.
SRx Health may be unable to adequately protect its proprietary and intellectual property rights
SRx Health believes that its intellectual property has substantial value and has contributed significantly to the success of its business. SRx Health’s URL addresses, social media addresses, business names, and brand portfolio are assets, which add distinctive value and recognition to its customers. SRx Health’s trademarks are valuable assets that reinforce its brand and consumers’ favorable perception of its products. SRx Health’s continued success depends, to a significant degree, upon its ability to protect and preserve its intellectual property, including its trademarks and trade secrets. If SRx Health fails to protect its intellectual property adequately, unauthorized disclosure of such information could harm the value of its brand. SRx Health relies on confidentiality agreements and trademark, trade secret law to protect its intellectual property rights. Employees with access to such information are subject to confidentiality provisions contained in their employment offers which prohibit them from disclosing information. Even with confidentiality measures in place, there is no assurance that SRx Health’s intellectual property rights can be successfully defended and protected in the future.
Being accused of infringing intellectual property rights of others
Other parties may claim that SRx Health infringes or violates their trademarks, patents, copyrights, domain names, publicity rights or other proprietary rights. Such claims, regardless of their merit, could result in litigation or other proceedings and could require SRx Health to expend significant financial resources and attention by SRx Health’s management and other personnel that otherwise would be focused on SRx Health’s business operations, result in injunctions against SRx Health that prevent SRx Health from using material intellectual property rights, or require SRx Health to pay damages to third parties. SRx Health may need to obtain licenses from third parties who allege that SRx Health has infringed or violated their rights, but such licenses may not be available on terms acceptable to SRx Health or at all. In addition, SRx Health may not be able to obtain or use on terms that are favorable to SRx Health, or at all, licenses or other rights with respect to intellectual property that SRx Health does not own, which would require SRx Health to develop alternative intellectual property. To the extent SRx Health relies on open-source software, SRx Health may face claims from third parties that claim ownership of the open source software or derivative works that were developed using such software, or otherwise seek to enforce the terms of the applicable open source license. Similar claims might also be asserted regarding SRx Health’s in-house software. The occurrence of these claims could harm SRx Health’s brand or materially adversely affect SRx Health’s business, financial position and operating results.
The costs and effects of pending and future litigation, investigations or similar matters, or adverse facts and developments related thereto, could materially affect SRx Health’s business, financial position and results of operations.
SRx Health may in the future be party to legal, arbitration and administrative investigations, inspections and proceedings arising in the ordinary course of SRx Health’s business or from extraordinary corporate, tax or regulatory events that involve SRx Health or its associated participants, particularly with respect to negligence, civil, tax and labor claims.
SRx Health’s indemnities and insurance may not cover all claims that may be asserted against SRx Health, and any claims asserted against SRx Health, regardless of merit or eventual outcome, may harm SRx Health’s reputation. Furthermore, there is no guarantee that SRx Health will be successful in defending ourselves in pending or future litigation or similar matters under various laws. Should the ultimate judgments or settlements in any pending or future litigation or investigation significantly exceed SRx Health’s indemnity rights, they could have a material adverse effect on SRx Health’s business, financial condition and results of operations and the price of SRx Health’s securities. Further, even if SRx Health adequately addresses issues raised by an inspection conducted by an agency or successfully defend SRx Health’s case in an administrative proceeding or court action, SRx Health may have to set aside significant financial and management resources to respond and settle issues raised by such proceedings, which could adversely affect SRx Health’s business.
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SRx Health is heavily reliant on its healthcare professionals, and SRx Health’s success depends on the satisfactory performance by its healthcare professionals of their professional obligations including maintenance of their required qualifications. SRx Health’s healthcare professionals could be subject to negligence claims, suits or complaints relating to services provided from time to time. From time to time, SRx Health’s healthcare professionals may enmesh SRx Health in outstanding or unforeseen legal, regulatory, contractual, employee or other issues. The failure of SRx Health’s healthcare professionals to perform their professional obligations or the successful assertion of one or more large claims against SRx Health, whether or not those claims may be covered by an indemnity or insurance, could adversely affect SRx Health’s business, financial condition and results of operations.
SRx Health may become involved in regulatory or agency proceedings, investigations and audits
SRx Health’s business requires compliance with many laws and regulations and the sensitive nature of the healthcare industry may attract increased regulatory and agency scrutiny. Failure to comply with these laws and regulations could subject SRx Health to regulatory or agency proceedings or investigations and could also lead to damage awards, fines and penalties. SRx Health may become involved in a number of government or agency proceedings, investigations and audits. The outcome of any regulatory or agency proceedings, investigations, audits, and other contingencies could harm SRx Health’s reputation, require SRx Health to take, or refrain from taking, actions that could harm its operations or require SRx Health to pay substantial amounts of money, harming its financial condition. There can be no assurance that any pending or future regulatory or agency proceedings, investigations and audits will not result in substantial costs or a diversion of management’s attention and resources or have a material adverse impact on SRx Health’s business, financial condition and results of operation.
SRx Health may also become party to litigation from time to time in the ordinary course of business which could adversely affect its business. Should any litigation in which SRx Health becomes involved be determined against SRx Health, such a decision could adversely affect SRx Health’s ability to continue operating and the value of its common shares and could use significant resources. Even if SRx Health is involved in litigation and is successful, litigation can redirect significant Company resources, including the time and attention of management and available working capital. Litigation may also create a negative perception of SRx Health’s brand.
The impact of economic conditions, including the resulting effect on spending by consumers, may adversely affect SRx Health’s business, operating results and financial condition.
The impact of economic conditions, including the resulting effect on spending by consumers, may adversely affect SRx Health’s business, operating results and financial condition. Canadian pharmacies are affected by the Canadian economy and consumer confidence in general, including various economic factors, inflation and changes in consumer purchasing power, preferences and/or spending patterns. It is possible that an unfavorable, uncertain or volatile economic environment will cause a decline in drug utilization, an increase in health care utilization and dampen consumer demand for SRx Health’s products and services.
Risks Relating to the SRx Health’s Growth Strategy
SRx Health may not be able to successfully implement SRx Health’s growth strategy.
SRx Health’s future growth, profitability and cash flows depend upon SRx Health’s ability to successfully implement SRx Health’s growth strategy, which, in turn, is dependent upon a number of factors, including SRx Health’s ability to accomplish acquiring new pharmacies and integrating them into the SRx Network, leveraging existing infrastructure to drive organic growth, expanding SRx Health’s wholesale distribution capabilities, further developing SRx Health’s service offerings through investment in technology, and accelerating SRx Health’s clinical trials business.
There can be no assurance that SRx Health can successfully achieve any or all of the above initiatives in the anticipated manner or time period. Further, achieving these objectives will require investments which may result in short-term costs without generating any current revenue and therefore may be dilutive to SRx Health’s earnings. SRx Health cannot provide any assurance that SRx Health will realize, in full or in part, the anticipated benefits SRx Health expects SRx Health’s strategy will achieve. The failure to realize those benefits could have a material adverse effect on SRx Health’s business, financial condition and results of operations.
SRx Health has experienced significant growth in recent periods, which puts strain on its business, operations and employees. SRx Health anticipates that its operations will continue to expand. To manage its current and anticipated future growth effectively, SRx Health must continue to maintain and enhance its IT infrastructure, financial and accounting systems and controls.
Failure to effectively manage its growth could also lead SRx Health to over-invest or under-invest in development and operations, result in weaknesses in its infrastructure, systems or controls, and give rise to operational mistakes, financial losses, loss of productivity or business opportunities and result in loss of employees and reduced productivity of remaining employees. If SRx Health’s management is unable to effectively manage SRx Health’s growth, its expenses may increase more than expected, its revenue may not increase or may grow more slowly than expected and SRx Health may be unable to implement its business strategy.
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A portion of SRx Health’s growth depends on SRx Health’s ability to complete future acquisitions, and failure to do so in a timely manner, or on less favorable terms to SRx Health, could impede SRx Health’s ability to execute portions of SRx Health’s business strategy
SRx Health expects to engage in future acquisitions in order to achieve SRx Health’s growth strategy. SRx Health’s ability to execute its growth strategy depends in part on its ability to identify and acquire desirable acquisition candidates at a price and on terms acceptable to SRx Health and on its ability to successfully integrate acquired operations into SRx Health’s business. If SRx Health identifies suitable acquisition candidates, SRx Health may be unable to successfully negotiate their acquisition at a price or on terms and conditions acceptable to SRx Health. While SRx Health expects SRx Health will be able to fund some of its acquisitions and capital expenditures with SRx Health’s existing resources, SRx Health will likely require additional financing, including debt and equity financings, to pursue certain acquisitions. SRx Health may not be able to complete debt or equity financings on terms favorable to SRx Health or at all.
Any future acquisitions, partnerships or joint ventures that SRx Health makes or enters into could disrupt SRx Health’s business and harm SRx Health’s financial condition.
SRx Health evaluates, and expect in the future to evaluate, potential strategic acquisitions of, and partnerships or joint ventures with, businesses providing services or technologies that are complementary to SRx Health’s existing services and technologies. However, SRx Health may not be successful in identifying acquisition, partnership and joint venture targets or SRx Health may use estimates and judgments to evaluate the operations and future revenue of a target that turn out to be inaccurate. In addition, SRx Health may not be able to successfully finance or integrate a particular business, service or technology that SRx Health acquires or with which SRx Health forms a partnership or joint venture, and SRx Health may not achieve the anticipated benefits of such project or SRx Health may lose customers as a result. Furthermore, the integration of any acquisition, partnership or joint venture may divert management’s time and resources from SRx Health’s existing business and disrupt its operations. Certain acquisitions may also enmesh SRx Health in outstanding or unforeseen legal, regulatory, contractual, employee or other issues. As a result of any of the foregoing, SRx Health may spend time and money on projects that do not increase its revenue or profitability. Moreover, SRx Health’s competitors may be willing or able to pay more than SRx Health for acquisitions, which may cause SRx Health to lose certain acquisitions that SRx Health would otherwise desire to complete. Even if SRx Health successfully competes for a certain acquisition, partnership or joint venture, SRx Health may finance the project with cash on hand, equity or debt, or a combination thereof, which could decrease SRx Health’s cash reserves, dilute SRx Health’s shareholders, including investors under this prospectus, or significantly increase SRx Health’s level of indebtedness or place other restrictions on SRx Health’s operations. SRx Health cannot ensure that any acquisition, partnership or joint venture SRx Health makes will not have a material adverse effect on SRx Health’s business, financial condition and results of operations.
Competition for acquisition candidates, consolidation within the pharmacy industry and economic and market conditions may limit SRx Health’s ability to grow through acquisitions.
SRx Health seeks to grow through strategic acquisitions in addition to organic growth. Although SRx Health has and expects to continue to identify numerous acquisition candidates that SRx Health believes may be suitable, SRx Health may not be able to acquire them at prices or on terms and conditions favorable to SRx Health. Other companies have adopted or may in the future adopt SRx Health’s strategy of acquiring and consolidating regional and local businesses. SRx Health expects that increased consolidation in the pharmacy industry over the longer term will reduce the number of attractive acquisition candidates. Moreover, general economic conditions and the environment for attractive investments may affect the desire of the owners of acquisition candidates to sell their companies. As a result, SRx Health may have fewer acquisition opportunities, and those opportunities may be on less attractive terms than in the past, which could cause a reduction in SRx Health’s rate of growth from acquisitions.
Changes in the Canadian healthcare industry and regulatory environment could negatively affect SRx Health’s growth and financial projections.
Changes in the Canadian healthcare industry and regulatory environment could have a material adverse impact on SRx Health’s results of operations. Provincial governments in Canada provide partial funding for the purchase of pharmaceuticals and independently regulate the sale and reimbursement of drugs. Provincial governments in Canada have introduced significant changes in recent years in an effort to reduce the costs of publicly funded health programs. For instance, to reduce the cost for taxpayers, provincial governments have taken and will continue to take steps to reform the rules regarding the sale of generic drugs. These changes include increased powers of investigation, reporting and enforcement for provincial regulatory agencies, the significant lowering of prices for generic pharmaceuticals and, in some provinces, changes to the allowable amounts of professional allowances paid to pharmacists by generic manufacturers and the tendering of generic molecules on provincial drug formularies. These reforms may adversely affect the distribution of drugs as well as the pricing for prescription drugs in Canada. Additional provinces have implemented or are considering similar changes, which would also lower pharmaceutical pricing and service fees. Individually or in combination, such changes in the Canadian healthcare environment may materially reduce SRx Health’s revenue and operating results and could cause the market price of SRx Health’s Common Shares to decline.
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Risks Related to the Company’s Pet Health and Wellness Business
Increases in sourcing, manufacturing, freight and/or warehousing costs, supply shortages, interruption in Halo’s sourcing operations and/or supply changes could have an adverse effect on Halo’s business, financial condition, and operating results .
Halo’s products are sourced from a limited number of independent third-party suppliers, which Halo depends upon for the manufacture of all Halo’s products. Some of the ingredients, packaging materials, and other products Halo purchases may only be available from a single supplier or a limited group of suppliers. While alternate sources of supply are generally available, the supply and price are subject to market conditions and are influenced by other factors beyond Halo’s control. Halo does not have long-term contracts with many of Halo’s suppliers, and therefore they could increase prices or cease doing business with Halo. As a result, Halo may be subject to price fluctuations or demand disruptions.
The prices of raw materials, packaging materials and freight are subject to fluctuations in price attributable to, among other things, global competition for resources, weather conditions, changes in supply and demand of raw materials, or other commodities, fuel prices and government-sponsored agricultural programs. Volatility in the prices of raw materials and other supplies Halo purchases could increase Halo’s cost of sales and reduce Halo’s profitability, and Halo has no guarantees that prices will not rise. Halo’s ability to pass along higher costs through price increases to Halo’s customers is dependent upon competitive conditions and pricing methodologies employed in the various sales channels in which Halo competes, and Halo may not be successful in implementing price increases. In addition, any price increases Halo does implement may result in lower sales volumes. Customers and consumers may choose to shift purchases to lower-priced private label or other value offerings which may adversely affect Halo’s results of operations.
Halo cannot control all of the various factors that might affect Halo’s ability to ship orders of Halo’s products to customers in a timely manner or to meet Halo’s quality standards. Such factors include, among other things, natural disasters or adverse weather and climate conditions; political and financial instability; strikes; unforeseen public health crises, including pandemics and epidemics such as the COVID-19 pandemic; acts of war or terrorism and other catastrophic events, whether occurring in the U.S. or internationally (including, without limitation, the conflict in Ukraine). From time to time, a co-manufacturer may experience financial difficulties, bankruptcy or other business disruptions, which could disrupt Halo’s supply of products or require that Halo incurs additional expense by providing financial accommodations to the co-manufacturer or taking other steps to seek to minimize or avoid supply disruption, such as establishing a new co-manufacturing arrangement with another provider. Further, Halo may be unable to locate an additional or alternate co-manufacturing arrangement in a timely manner or on commercially reasonable terms, if at all. Any delay, interruption or increased cost in the proprietary value-branded products that might occur for any reason could affect Halo’s ability to meet customer demand, adversely affect Halo’s net sales, increase Halo’s cost of sales and hurt Halo’s results of operations, which in turn may injure Halo’s reputation and customer relationships, thereby harming Halo’s business.
Halo’s ability to meet increases in demand may be impacted by Halo’s reliance on Halo’s suppliers and Halo is subject to the risk of shortages and long lead times. Halo may not be able to develop alternate sources in a timely manner. Therefore, Halo may not be able to source sufficient product on terms that are acceptable to us, or at all, which may undermine Halo’s ability to fill Halo’s orders in a timely manner. The occurrence of any of the foregoing could increase Halo’s costs, disrupt Halo’s operations, or could have a materially adverse impact on Halo’s business, financial condition, results of operations or prospects.
If Halo fails to maintain and expand Halo’s brand, or the quality of Halo’s products that customers have come to expect, Halo’s business could suffer.
The continued development and maintenance of Halo’s brand and the quality of Halo’s products is critical to Halo’s success. Halo seeks to maintain, extend, and expand Halo’s brand image through marketing investments, including advertising and consumer promotions, and product innovation. Maintaining, promoting and positioning Halo’s brand and reputation will depend on, among other factors, the success of preserving the quality of Halo’s products, the availability of Halo’s products, marketing and merchandising efforts, the nutritional benefits provided to pets and Halo’s ability to provide a consistent, high-quality customer experience.
The success of Halo’s brand may suffer if Halo’s marketing plans or product initiatives do not have the desired impact on Halo’s brand’s image or its ability to attract customers. Brand value is based on perceptions of subjective qualities, and any incident that erodes the loyalty of Halo’s customers, suppliers or co-manufacturers, including adverse publicity or a governmental investigation or litigation, could significantly reduce the value of Halo’s brand and significantly damage Halo’s business. Further, Halo’s brand value could diminish significantly due to a number of factors, including consumer perception that Halo has acted in an irresponsible manner, adverse publicity about Halo’s products (whether or not valid), Halo’s failure to maintain the quality of Halo’s products, product contamination, the failure of Halo’s products to deliver consistently positive consumer experiences, inadequate labor conditions, health or safety issues at Halo’s co-manufacturers, or the products becoming unavailable to consumers.
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If Halo is unable to build and sustain brand equity by offering recognizably superior products, Halo may be unable to maintain premium pricing over private label products. The growing use of social and digital media by consumers increases the speed and extent that information and opinions can be shared. Negative posts or comments about Halo or Halo’s brands or products on social or digital media could damage Halo’s brands and reputation. If Halo fails to maintain the favorable perception of its brands, its business, financial condition and results of operations could be negatively impacted.
Halo may not be able to successfully implement and/or manage Halo’s growth strategy on a timely basis or Halo may not grow at all.
Halo’s future success depends on Halo’s ability to implement Halo’s growth strategy of introducing new products and expanding into new markets and attracting new consumers to Halo’s brand and sub-brands. Halo’s ability to implement this growth strategy depends, among other things, on Halo’s ability to: establish Halo’s brands and reputation as a well-managed enterprise committed to delivering premium quality products to the pet health and wellness industry; partner with retailers and other potential distributors of Halo’s products; continue to effectively compete in specialty channels and respond to competitive developments; continue to market and sell Halo’s products through a multi-channel distribution strategy and achieve joint growth targets with Halo’s distribution partners; expand and maintain brand loyalty; develop new proprietary value-branded products and product line extensions that appeal to consumers; maintain and, to the extent necessary, improve Halo’s high standards for product quality, safety and integrity; maintain sources from suppliers that comply with all federal, state and local laws for the required supply of quality ingredients to meet Halo’s growing demand; identify and successfully enter and market Halo’s products in new geographic markets and market segments; execute value-focused pricing strategies; and attract, integrate, retain and motivate qualified personnel. Halo may not be able to successfully implement Halo’s growth strategy and may need to change Halo’s strategy in order to maintain Halo’s growth. If Halo fails to implement Halo’s growth strategy or if Halo invests resources in a growth strategy that ultimately proves unsuccessful, Halo’s business, financial condition and results of operations may be materially adversely affected.
If Halo succeeds in growing Halo’s business, such growth could strain Halo’s management team and capital resources. Halo’s ability to manage operations and control growth will be dependent on Halo’s ability to raise and spend capital to successfully attract, train, motivate, retain and manage new members of senior management and other key personnel and continue to update and improve Halo’s management and operational systems, infrastructure and other resources, financial and management controls, and reporting systems and procedures. Failure to manage Halo’s growth effectively could cause Halo to misallocate management or financial resources, and result in additional expenditures and inefficient use of existing human and capital resources. Such slower than expected growth may require Halo to restrict or cease Halo’s operations and go out of business. Additionally, Halo’s anticipated growth will increase the demands placed on Halo’s suppliers, resulting in an increased need for Halo to manage Halo’s suppliers and monitor for quality assurance and comply with all applicable laws. Any failure by Halo to manage Halo’s growth effectively could impair Halo’s ability to achieve Halo’s business objectives.
If Halo does not successfully develop additional products and services, or if such products and services are developed but not successfully commercialized, Halo’s business will be adversely affected.
Halo’s success will depend, in part, on Halo’s ability to develop and market new products and improvements to Halo’s existing products. The process of identifying and commercializing new products is complex, uncertain and may involve considerable costs, and if Halo fails to accurately predict customers’ changing needs and preferences, Halo’s business could be harmed. The success of Halo’s innovation and product development efforts is affected by, among other things, the technical capability of Halo’s team; Halo’s ability to establish new supplier relationships and third-party consultants in developing and testing new products, and complying with governmental regulations; Halo’s attractiveness as a partner for outside research and development scientists and entrepreneurs; and the success of Halo’s management and sales team in introducing and marketing new products.
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Halo has already and may have to continue to commit significant resources to commercializing new products before knowing whether Halo’s investments will result in products the market will accept. Substantial promotional expenditures may be required to introduce new products to the market, or improve Halo’s market position. To remain competitive and expand and keep shelf placement for Halo’s products, Halo may need to increase Halo’s advertising spending to maintain and increase consumer awareness, protect and grow Halo’s existing market share or promote new products, which could affect Halo’s operating results. Halo may not always be able to respond quickly and effectively to changes in customer taste and demand due to the amount of time and financial resources that may be required to bring new products to market, which could result in Halo’s competitors taking advantage of changes in customer trends before Halo is able to and harm Halo’s brand and reputation.
Furthermore, developing and commercializing new products may divert management’s attention from other aspects of Halo’s business and place a strain on management, operational and financial resources, as well as Halo’s information systems. Halo may not execute successfully on commercializing those products because of errors in product planning or timing, technical hurdles that Halo fails to overcome in a timely fashion, or a lack of appropriate resources. Launching new products or updating existing products may also leave Halo with obsolete inventory that Halo may not be able to sell or Halo may sell at significantly discounted prices. If Halo is unable to successfully develop or otherwise acquire new products, Halo’s business, financial condition and results of operations may be materially adversely affected.
Because Halo is engaged in a highly competitive business, if Halo is unable to compete effectively, Halo’s results of operations could be adversely affected.
The pet health and wellness industry is highly competitive. Halo competes on the basis of product and ingredient quality, product availability, palatability, brand awareness, loyalty and trust, product variety and innovation, product packaging and design, reputation, price and convenience and promotional efforts. The pet products and services retail industry has become increasingly competitive due to the expansion of pet-related product offerings by certain supermarkets, warehouse clubs, and other mass and general retail and online merchandisers and the entrance of other specialty retailers into the pet food and pet supply market, which makes it more difficult for Halo to compete for brand recognition and differentiation of Halo’s products and services. Halo faces direct competition from companies that sell various pet health and wellness products at a lower price point and distribute such products to traditional retailers, which are larger than Halo is and have greater financial resources. Price gaps between products may result in market share erosion and harm Halo’s business. Halo’s current and potential competitors may also establish cooperative or strategic relationships amongst themselves or with third parties that may further enhance their resources and offerings. Further, it is possible that domestic or foreign companies, some with greater experience in the pet health and wellness industry or greater financial resources than Halo possesses, will seek to provide products or services that compete directly or indirectly with Halo’s in the future.
Many of Halo’s competitors may have longer operating histories, greater brand recognition, larger fulfillment infrastructures, greater technical capabilities, significantly greater financial, marketing and other resources and larger customer bases than Halo does. These factors may allow Halo’s competitors to derive greater net sales and profits from their existing customer base, acquire customers at lower costs or respond more quickly than Halo can to new or emerging technologies and changes in consumer preferences or habits. These competitors may engage in more extensive research and development efforts, undertake more far-reaching marketing campaigns and adopt more aggressive pricing policies, which may allow them to build larger customer bases or generate net sales from their customer bases more effectively than Halo does.
Halo’s competitors may be able to identify and adapt to changes in consumer preferences more quickly than Halo due to their resources and scale. They may also be more successful in marketing and selling their products, better able to increase prices to reflect cost pressures and better able to increase their promotional activity, which may impact Halo and the entire pet health and wellness industry. Increased competition as to any of Halo’s products could result in price reduction, increased costs, reduced margins and loss of market share, which could negatively affect Halo’s profitability. While Halo management believes Halo is better equipped to customize products for the pet health and wellness market generally as compared to other companies in the industry, there can be no assurance that Halo will be able to successfully compete against these other companies. Expansion into markets served by Halo’s competitors and entry of new competitors or expansion of existing competitors into Halo’s markets could materially adversely affect Halo’s business, financial condition and results of operations.
If Halo fails to attract new customers, or retain existing customers, or fail to do either in a cost-effective manner, Halo may not be able to increase sales.
Halo is highly dependent on the effectiveness of Halo’s marketing messages and the efficiency of Halo’s advertising expenditures in generating consumer awareness and sales of Halo’s products. Halo may not always be successful in developing effective messages and new marketing channels, as consumer preferences and competition change, and in achieving efficiency in Halo’s advertising expenditures. Halo depends heavily on internet-based advertising to market Halo’s products through internet-based media and e-commerce platforms. If Halo is unable to continue utilizing such platforms, if those media and platforms diminish in importance or size, or if Halo is unable to direct Halo’s advertising to Halo’s target consumer groups, Halo’s advertising efforts may be ineffective, and Halo’s business could be adversely affected. The costs of advertising through these platforms have increased significantly, which could in decreased efficiency in the use of Halo’s advertising expenditures, and Halo expects these costs may continue to increase in the future.
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Consumers are increasingly using digital tools as a part of their shopping experience. As a result, Halo’s future growth and profitability will depend in part on:
| ● | the effectiveness and efficiency of Halo’s online experience for disparate worldwide audiences, including advertising and search optimization programs in generating consumer awareness and sales of Halo’s products; | |
| ● | Halo’s ability to prevent confusion among consumers that can result from search engines that allow competitors to use or bid on Halo’s trademarks to direct consumers to competitors’ websites; | |
| ● | Halo’s ability to prevent Internet publication or television broadcast of false or misleading information regarding Halo’s products or Halo’s competitors’ products; | |
| ● | the nature and tone of consumer sentiment published on various social media sites; and | |
| ● | the stability of Halo’s website and other e-commerce platforms on which Halo sells Halo’s products. In recent years, a number of DTC, Internet-based retailers have emerged and have driven up the cost of basic search terms, which has and may continue to increase the cost of Halo’s Internet-based marketing programs. |
If Halo’s marketing messages are ineffective or Halo’s advertising expenditures, geographic price-points, and other marketing programs, including digital programs, are inefficient in creating awareness and consideration of Halo’s products and brand name and in driving consumer traffic to Halo’s website or to Halo’s other sales channels, Halo’s sales, profitability, cash flows and financial condition may be adversely impacted. In addition, if Halo is not effective in preventing the publication of confusing, false or misleading information regarding Halo’s brand or Halo’s products, or if there arises significant negative consumer sentiment on social media regarding Halo’s brand or Halo’s products, Halo’s sales, profitability, cash flows and financial condition may be adversely impacted.
Food safety and food-borne illness incidents may materially adversely affect Halo’s business by exposing Halo to lawsuits, product recalls or regulatory enforcement actions, increasing Halo’s operating costs and reducing demand for Halo’s product offerings.
Selling food for consumption involves inherent legal and other risks, and there is increasing governmental scrutiny of and public awareness regarding food safety. Unexpected side effects, illness, injury or death related to allergens, food-borne illnesses or other food safety incidents caused by products Halo sells, or involving Halo’s suppliers or co-manufacturers, could result in the discontinuance of sales of these products or Halo’s relationships with such suppliers or co-manufacturers, or otherwise result in increased operating costs, regulatory enforcement actions or harm to Halo’s reputation. Shipment of adulterated or misbranded products, even if inadvertent, can result in criminal or civil liability. Such incidents could also expose Halo to product liability, negligence or other lawsuits, including consumer class action lawsuits. Any claims brought against Halo may exceed or be outside the scope of Halo’s existing or future insurance policy coverage or limits. Any judgment against Halo that is more than Halo’s policy limits or not covered by Halo’s policies or not subject to insurance would have to be paid from Halo’s cash reserves, which would reduce Halo’s capital resources.
The occurrence of food-borne illnesses or other food safety incidents could also adversely affect the price and availability of affected ingredients, resulting in higher costs, disruptions in supply and a reduction in Halo’s sales. Furthermore, any instances of food contamination or regulatory noncompliance, whether or not caused by Halo’s actions, could compel us, Halo’s suppliers, Halo’s distributors or Halo’s customers, depending on the circumstances, to conduct a recall in accordance with FDA regulations, comparable state laws or foreign laws in jurisdictions in which Halo operates. Food recalls could result in significant losses due to their costs, the destruction of product inventory, lost sales due to the unavailability of the product for a period of time and potential loss of existing distributors or customers and a potential negative impact on Halo’s ability to attract new customers due to negative consumer experiences or because of an adverse impact on Halo’s brand and reputation. The costs of a recall could exceed or be outside the scope of Halo’s existing or future insurance policy coverage or limits.
In addition, food companies have been subject to targeted, large-scale tampering as well as to opportunistic, individual product tampering, and Halo, like any food company, could be a target for product tampering. Forms of tampering could include the introduction of foreign material, chemical contaminants and pathological organisms into consumer products as well as product substitution. FDA regulations require companies like Halo to analyze, prepare and implement mitigation strategies specifically to address tampering (i.e., intentional adulteration) designed to inflict widespread public health harm. If Halo does not adequately address the possibility, or any actual instance, of intentional adulteration, Halo could face possible seizure or recall of its products and the imposition of civil or criminal sanctions, which could materially adversely affect Halo’s business, financial condition and operating results.
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Halo may not be able to manage Halo’s manufacturing and supply chain effectively, which may adversely affect Halo’s results of operations.
Halo must accurately forecast demand for all of Halo’s products in order to ensure that Halo has enough products available to meet the needs of Halo’s customers. Halo’s forecasts are based on multiple assumptions that may cause Halo’s estimates to be inaccurate and affect Halo’s ability to obtain adequate co-manufacturing capacity in order to meet the demand for Halo’s products. If Halo does not accurately align Halo’s manufacturing capabilities with demand, Halo’s business, financial condition and results of operations may be materially adversely affected.
In addition, Halo must continuously monitor Halo’s inventory and product mix against forecasted demand. If Halo underestimates demand, Halo having inadequate supplies. Halo also faces the risk of having too much inventory on hand that may reach its expiration date and become unsalable, and Halo may be forced to rely on markdowns or promotional sales to dispose of excess or slow-moving inventory. If Halo is unable to manage Halo’s supply chain effectively, Halo’s operating costs could increase and Halo’s profit margins could decrease.
If any of Halo’s independent shipping providers experience delays or disruptions, Halo’s business could be adversely affected.
Halo relies on independent shipping service providers to ship raw materials and products from Halo’s third-party suppliers and to ship products from Halo’s manufacturing and distribution warehouses to Halo’s customers. Halo’s utilization of any shipping companies that Halo may elect to use, is subject to risks, including increases in fuel prices, employee strikes, organized labor activities and inclement weather, which may impact the shipping company’s ability to provide delivery services sufficient to meet Halo’s shipping needs. If Halo is not able to negotiate acceptable terms with these companies or they experience performance problems or other difficulties, it could negatively impact Halo’s operating results and customer experience.
Halo’s intellectual property rights may be inadequate to protect Halo’s business.
Halo attempts to protect Halo’s intellectual property rights, both in the U.S. and in foreign countries, through a combination of patent, trademark, copyright and trade secret laws, as well as licensing agreements and third-party nondisclosure and assignment agreements. Because of the differences in foreign trademark, patent and other laws concerning proprietary rights, Halo’s intellectual property rights may not receive the same degree of protection in foreign countries as they would in the U.S. Halo’s failure to obtain or maintain adequate protection of Halo’s intellectual property rights for any reason could have a material adverse effect on Halo’s business, results of operations and financial condition.
Halo also relies on unpatented proprietary technology. It is possible that others will independently develop the same or similar technology or otherwise obtain access to Halo’s unpatented technology. To protect Halo’s trade secrets and other proprietary information, Halo requires employees, consultants, advisors and collaborators to enter into confidentiality agreements. Halo cannot assure you that these agreements will provide meaningful protection for Halo’s trade secrets, know-how or other proprietary information in the event of any unauthorized use, misappropriation or disclosure of such trade secrets, know-how or other proprietary information. If Halo is unable to maintain the proprietary nature of Halo’s technologies, Halo could be materially adversely affected.
Halo relies on Halo’s trademarks, trade names, and brand names to distinguish Halo’s products from the products of Halo’s competitors, and have registered or applied to register many of these trademarks. Halo cannot assure you that Halo’s trademark applications will be approved. Third parties may also oppose Halo’s trademark applications, or otherwise challenge Halo’s use of the trademarks. In the event that Halo’s trademarks are successfully challenged, Halo could be forced to rebrand Halo’s products, which could result in loss of brand recognition, and could require Halo to devote significant additional resources to advertising and marketing new brands. Further, Halo cannot assure you that competitors will not infringe Halo’s trademarks, or that Halo will have adequate resources to enforce Halo’s trademarks.
Halo depends on the knowledge and skills of Halo’s senior management and other key employees, and if Halo is unable to retain and motivate them or recruit additional qualified personnel, Halo’s business may suffer.
Halo has benefited substantially from the leadership and performance of Halo’s senior management, as well as other key employees. Halo’s success will depend on Halo’s ability to retain Halo’s current management and key employees, and to attract and retain qualified personnel in the future, and Halo cannot guarantee that Halo will be able to retain Halo’s personnel or attract new, qualified personnel. In addition, Halo does not maintain any “key person” life insurance policies. The loss of the services of members of Halo’s senior management or key employees could prevent or delay the implementation and completion of Halo’s strategic objectives, or divert management’s attention to seeking qualified replacements.
A failure of one or more key information technology systems, networks or processes may materially adversely affect Halo’s ability to conduct Halo’s business.
The efficient operation of Halo’s business depends on Halo’s information technology systems. Halo relies on Halo’s information technology systems to effectively manage Halo’s sales and marketing, accounting and financial and legal and compliance functions, engineering and product development tasks, research and development data, communications, supply chain, order entry and fulfillment and other business processes. Halo also relies on third parties and virtualized infrastructure to operate and support Halo’s information technology systems. The failure of Halo’s information technology systems, or those of Halo’s third-party service providers, to perform as Halo anticipates could disrupt Halo’s business and could result in transaction errors, processing inefficiencies and the loss of sales and customers, causing Halo’s business and results of operations to suffer.
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In addition, Halo’s information technology systems may be vulnerable to damage or interruption from circumstances beyond Halo’s control, including fire, natural disasters, power outages, systems failures, security breaches, cyber-attacks and computer viruses. The failure of Halo’s information technology systems to perform as a result of any of these factors or Halo’s failure to effectively restore Halo’s systems or implement new systems could disrupt Halo’s entire operation and could result in decreased sales, increased overhead costs, excess inventory and product shortages and a loss of important information.
Further, it is critically important for Halo to maintain the confidentiality and integrity of Halo’s information technology systems. To the extent that Halo has information in Halo’s databases that Halo’s customers consider confidential or sensitive, any unauthorized disclosure of, or access to, such information could result in a violation of applicable data privacy and security, data protection, and consumer protection laws and regulations, legal and financial exposure, damage to Halo’s reputation, a loss of confidence of Halo’s customers, suppliers and manufacturers and lost sales. Despite the implementation of certain security measures, Halo’s systems may still be vulnerable to physical break-ins, computer viruses, programming errors, attacks by third parties or similar disruptive problems. If any of these risks materialize, Halo’s reputation and Halo’s ability to conduct Halo’s business may be materially adversely affected.
Halo relies heavily on third-party commerce platforms to conduct Halo’s businesses. If one of those platforms is compromised, Halo’s business, financial condition and results of operations could be harmed.
Halo relies upon third-party commerce platforms, including Shopify. The use of Shopify was discontinued when Halo exited Halo’s DTC channel in June 2024. Halo also relies on e-mail service providers, bandwidth providers, Internet service providers and mobile networks to deliver e-mail and “push” communications to customers and to allow customers to access Halo’s website. Any damage to, or failure of, Halo’s systems or the systems of Halo’s third-party commerce platform providers could result in interruptions to the availability or functionality of Halo’s website and mobile applications. As a result, Halo could lose customer data and miss order fulfillment deadlines, which could result in decreased sales, increased overhead costs, excess inventory and product shortages.
In the future, the loss of access to these third-party platforms, or any significant cost increases from operating on the marketplaces, could significantly reduce Halo’s revenues, and the success of Halo’s business depends partly on continued access to these third-party platforms. Halo’s relationships with Halo’s third-party commerce platform providers could deteriorate as a result of a variety of factors, such as if they become concerned about Halo’s ability to deliver quality products on a timely basis or to protect a third-party’s intellectual property. In addition, third-party marketplace providers could prohibit Halo’s access to these marketplaces if Halo is not able to meet the applicable required terms of use. If for any reason Halo’s arrangements with Halo’s third-party commerce platform providers are terminated or interrupted, such termination or interruption could adversely affect Halo’s business, financial condition, and results of operations.
In addition, Halo exercises little control over these providers, which increases Halo’s vulnerability to problems with the services they provide. Halo could experience additional expense in arranging for new facilities, technology, services and support. The failure of Halo’s third-party commerce platform providers to meet Halo’s capacity requirements could result in interruption in the availability or functionality of Halo’s website and mobile applications, which could adversely affect Halo’s business and results of operations.
Halo may face difficulties as Halo expands business and operations into jurisdictions in which Halo has no prior operating experience.
Halo plans in the future to expand Halo’s operations and business into jurisdictions outside of the jurisdictions where Halo currently carries on business, including internationally. There can be no assurance that any market for Halo’s products will develop in any such foreign jurisdiction. Halo may face new or unexpected risks or significantly increase Halo’s exposure to one or more existing risk factors, including economic instability, new competition, changes in laws and regulations, including the possibility that Halo could be in violation of these laws and regulations as a result of such changes, and the effects of competition.
In addition, it may be difficult for Halo to understand and accurately predict taste preferences and purchasing habits of consumers in new markets. It is costly to establish, develop and maintain operations and develop and promote Halo’s brands in new jurisdictions. As Halo expands its business into other jurisdictions, Halo may encounter regulatory, legal, personnel, technological and other difficulties that increase Halo’s expenses and/or delay Halo’s ability to become profitable in such countries, which may have a material adverse effect on Halo’s business and brand. These factors may limit Halo’s capability to successfully expand Halo’s operations in, or export Halo’s products to, those other jurisdictions.
There may be decreased spending on pets in a challenging economic climate.
A challenging economic climate, including adverse changes in interest rates, volatile commodity markets and inflation, contraction in the availability of credit in the market and reductions in consumer spending, or a slow-down in the general economy or a shift in consumer preferences to less expensive products may result in reduced demand for Halo’s products which may affect Halo’s profitability. Pet ownership and the purchase of pet-related products may constitute discretionary spending for some consumers and any material decline in consumer discretionary spending may reduce overall levels of spending on pets. As a result, a challenging economic climate may cause a decline in demand for Halo’s products which could be disproportionate as compared to competing pet food brands since Halo’s products command a price premium.
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Since a significant portion of Halo’s revenue has been derived from China, a slowdown in economic growth in China could adversely impact the sales of Halo’s products in China, which could have a material adverse effect on Halo’s results of operations and financial condition. In addition, a deterioration in trade relations between the U.S. and China or other countries, or the negative perception of U.S. brands by Chinese or other international consumers, could have a material adverse effect on Halo’s results of operations and financial condition.
If economic conditions result in decreased spending on pets and have a negative impact on Halo’s suppliers or distributors, Halo’s business, financial condition and results of operations may be materially adversely affected.
Significant merchandise returns or refunds could harm Halo’s business.
Halo allows Halo’s customers to return products or obtain refunds, subject to Halo’s return and refunds policy. If merchandise returns or refunds are significant or higher than anticipated and forecasted, Halo’s business, financial condition, and results of operations could be adversely affected. Further, Halo modifies its policies relating to returns or refunds from time to time, and may do so in the future, which may result in customer dissatisfaction and harm to Halo’s reputation or brand, or an increase in the number of product returns or the amount of refunds Halo makes.
Halo may seek to grow Halo’s company and business through acquisitions, investments or through strategic alliances and Halo’s failure to identify and successfully integrate and manage these assets could have a material adverse effect on the anticipated benefits of the acquisition and Halo’s business, financial condition or results of operations.
Halo management expects to consider opportunities to acquire or make investments in new or complementary businesses, facilities, technologies or products, or enter into strategic alliances, which may enhance Halo’s capabilities, expand Halo’s network, complement Halo’s current products or expand the breadth of Halo’s markets. In 2019, Halo completed three significant acquisitions that involved the combination of three businesses that historically have operated as independent companies. The success of these completed acquisitions and any future acquisitions will depend in large part on the success of Halo’s management team in integrating the operations, strategies, technologies and personnel. Potential and completed acquisitions, investments and other strategic alliances involve numerous risks, including: problems integrating the purchased business, facilities, technologies or products; issues maintaining uniform standards, procedures, controls and policies; assumed liabilities; unanticipated costs associated with acquisitions, investments or strategic alliances; diversion of management’s attention from Halo’s existing business; adverse effects on existing business relationships with suppliers, manufacturers, and retail customers; risks associated with entering new markets in which Halo has limited or no experience; potential write-offs of acquired assets and/or an impairment of any goodwill recorded as a result of an acquisition; potential loss of key employees of acquired businesses; and increased legal and accounting compliance costs.
Halo may fail to realize some or all of the anticipated benefits of the acquisitions if the integration process takes longer than expected or is more costly than expected. Halo’s failure to meet the challenges involved in successfully integrating acquisitions, including the operations of Halo, or to otherwise realize any of the anticipated benefits of the acquisitions could impair Halo’s financial condition and results of operations. Furthermore, Halo does not know if Halo will be able to identify additional acquisitions or strategic relationships Halo deems suitable or whether Halo will be able to successfully complete any such transactions on favorable terms or at all. Halo’s ability to successfully grow through strategic transactions depends upon Halo’s ability to identify, negotiate, complete and integrate suitable target businesses, facilities, technologies and products and to obtain any necessary financing. These efforts could be expensive and time-consuming and may disrupt Halo’s ongoing business.
Premiums for Halo’s insurance coverage may not continue to be commercially justifiable, and Halo’s insurance coverage may have limitations and other exclusions and may not be sufficient to cover Halo’s potential liabilities.
Halo has insurance to protect Halo’s assets, operations and employees. While Halo management believes Halo’s insurance coverage addresses all material risks to which Halo is exposed and is adequate and customary in Halo’s current state of operations, such insurance is subject to coverage limits and exclusions and may not be available for the risks and hazards to which Halo is exposed. No assurance can be given that such insurance will be adequate to cover Halo’s liabilities or will be generally available in the future or, if available, that premiums will be commercially justifiable. If Halo is unable to obtain such insurances or if Halo were to incur substantial liability and such damages were not covered by insurance or were in excess of policy limits, Halo may be prevented from entering into certain business sectors, Halo’s growth may be inhibited, and Halo may be exposed to additional risk and financial liabilities, which could have a material adverse effect on Halo’s business, results of operations and financial condition could be materially adversely affected.
Adverse litigation judgments or settlements resulting from legal proceedings relating to Halo’s business operations could materially adversely affect Halo’s business, financial condition and results of operations.
From time to time, Halo is subject to allegations, and may be party to legal claims and regulatory proceedings, relating to Halo’s business operations. Such allegations, claims and proceedings may be brought by third parties, including Halo’s customers, employees, governmental or regulatory bodies or competitors. Defending against such claims and proceedings, regardless of their merits or outcomes, is costly and time consuming and may divert management’s attention and personnel resources from Halo’s normal business operations, and the outcome of many of these claims and proceedings cannot be predicted. If any of these claims or proceedings were to be determined adversely to us, a judgment, a fine or a settlement involving a payment of a material sum of money were to occur, or injunctive relief were issued against us, Halo’s reputation could be affected and Halo’s business, financial condition and results of operations could be materially adversely affected.
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If third parties claim that Halo infringes upon their intellectual property rights, Halo’s business and results of operations could be adversely affected.
Any claims of intellectual property infringement, even those without merit, could be expensive and time consuming to defend; could require Halo to cease selling the products that incorporate the challenged intellectual property; could require Halo to redesign, reengineer, or rebrand the product, if feasible; could divert management’s attention and resources; or could require Halo to enter into royalty or licensing agreements in order to obtain the right to use a third party’s intellectual property. Any royalty or licensing agreements, if required, may not be available to Halo on acceptable terms or at all.
A successful claim of infringement against Halo could result in Halo’s being required to pay significant damages, enter into costly license or royalty agreements, or stop the sale of certain products, any of which could have a negative impact on Halo’s business, financial condition, results of operations and Halo’s future prospects.
Failure to comply with the U.S. Foreign Corrupt Practices Act, other applicable anti-corruption and anti-bribery laws, and applicable trade control laws could subject Halo to penalties and other adverse consequences.
Halo also operates Halo’s business in part outside of the U.S. and Halo’s operations are subject to the U.S. Foreign Corrupt Practices Act (the “FCPA”), as well as the anti-corruption and anti-bribery laws in the countries where Halo does business. In addition, Halo is subject to U.S. and other applicable trade control regulations that restrict with whom Halo may transact business, including the trade sanctions enforced by the U.S. Treasury, Office of Foreign Assets Control (“OFAC”). Halo also plans to expand its operations outside of the U.S. in the future and Halo’s risks related to the FCPA will increase as Halo grows its international presence. Any violations of these anti-corruption or trade controls laws, or even allegations of such violations, can lead to an investigation and/or enforcement action, which could disrupt Halo’s operations, involve significant management distraction, and lead to significant costs and expenses, including legal fees. In addition, Halo’s brand and reputation, Halo’s sales activities or Halo’s stock price could be adversely affected if Halo becomes the subject of any negative publicity related to actual or potential violations of anti-corruption, anti-bribery or trade control laws and regulations.
Halo’s ability to utilize its net operating loss carryforwards may be limited.
Halo’s ability to utilize its federal net operating loss carryforwards and federal tax credit may be limited under Section 382 of the Code as amended by the Tax Cut and Jobs Act (the “TCJA”). The limitations apply if Halo experiences an “ownership change”. Similar provisions of state tax law may also apply. If Halo has experienced an ownership change at any time since Halo’s formation, Halo may already be subject to limitations on Halo’s ability to utilize Halo’s existing net operating losses to offset taxable income. In addition, future changes in Halo’s stock ownership, which may be outside of Halo’s control, may trigger an ownership change and, consequently, the limitations under Section 382. As a result, if or when Halo earns net taxable income, Halo’s ability to use Halo’s pre-change net operating loss carryforwards to offset such taxable income may be subject to limitations, which could adversely affect Halo’s future cash flows.
Risks Related to the Regulation of Halo’s Business and Products
Halo and its co-manufacturers and suppliers are subject to extensive governmental regulation and may be subject to enforcement if Halo is not in compliance with applicable requirements.
Halo and its third-party suppliers are subject to a broad range of foreign, federal, state and local laws and regulations governing, among other things, the testing, development, manufacture, distribution, marketing and post-market reporting of animal foods. These include laws administered by the FDA, the FTC, the USDA, and other federal, state and local regulatory authorities. Because Halo markets food, supplements and other products that are regulated as food and cosmetic care products for animals, Halo and the companies that manufacture its products are subject to the requirements of the FDCA and regulations promulgated thereunder by the FDA. The FDCA and related regulations govern, among other things, the manufacturing, composition, ingredients, packaging, labeling and safety of food for animals. The FDA requires that facilities that manufacture animal food products comply with a range of requirements. If Halo’s third-party suppliers cannot successfully manufacture products that conform to Halo’s specifications and the strict regulatory requirements, they may be subject to adverse inspectional findings or enforcement actions, which could materially impact Halo’s ability to market Halo’s products, could result in their inability to continue manufacturing for Halo or could result in a recall of Halo’s products that have already been distributed.
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If the FDA or other regulatory authority determines that Halo or they have not complied with the applicable regulatory requirements, Halo’s business, financial condition and results of operations may be materially adversely impacted. If Halo does not comply with labeling requirements, including making unlawful claims about Halo’s products, Halo could be subject to public warning letters and possible further enforcement. Failure by Halo or Halo’s co-manufacturers and suppliers to comply with applicable laws and regulations or to obtain and maintain necessary permits, licenses and registrations relating to Halo’s or Halo’s partners’ operations could subject Halo to administrative and civil penalties, including fines, injunctions, recalls or seizures, warning letters, restrictions on the marketing or manufacturing of Halo’s products, or refusals to permit the import or export of products, as well as potential criminal sanctions, which could result in increased operating costs resulting in a material effect on Halo’s operating results and business.
International expansion of Halo’s business could expose Halo to substantial business, regulatory, political, financial and economic risks.
Halo currently conducts business and market products in the U.S., Canada and select Asian markets, including China. The expansion of Halo’s business outside of the U.S. could expose Halo to substantial risks, which may include, but are not limited to, the following:
| ● | political, social and economic instability; | |
| ● | higher levels of credit risk, corruption and payment fraud; | |
| ● | regulations that might add difficulties in repatriating cash earned outside the U.S. and otherwise prevent Halo from freely moving cash; | |
| ● | import and export controls and restrictions and changes in trade regulations | |
| ● | compliance with the U.S. Foreign Corrupt Practices Act, the U.K. Bribery Act and similar laws in other jurisdictions; | |
| ● | multiple, conflicting and changing laws and regulations such as privacy, security and data use regulations, tax laws, trade regulations, economic sanctions and embargoes, employment laws, anti-corruption laws, regulatory requirements, reimbursement or payor regimes and other governmental approvals, permits and licenses; | |
| ● | failure by us, Halo’s collaborators or Halo’s distributors to obtain regulatory clearance, authorization or approval for the use of Halo’s products in various countries; | |
| ● | additional potentially relevant third-party patent rights; | |
| ● | complexities and difficulties in obtaining intellectual property protection and enforcing Halo’s intellectual property; | |
| ● | logistics and regulations associated with shipping samples and customer orders, including infrastructure conditions and transportation delays; | |
| ● | the impact of local and regional financial crises; | |
| ● | natural disasters, political and economic instability, including wars, terrorism and political unrest, and outbreak of disease; | |
| ● | breakdowns in infrastructure, utilities and other services; | |
| ● | boycotts, curtailment of trade and other business restrictions; and | |
| ● | the other risks and uncertainties described in this Form 10K |
Any of these factors could significantly harm Halo’s future international expansion and operations and, consequently, Halo’s revenue and results of operations.
Changes in government regulations and trade policies may materially and adversely affect Halo’s sales and results of operations.
The U.S. or foreign governments may take administrative, legislative, or regulatory action that could materially interfere with Halo’s ability to sell products in certain countries and/or to certain customers, particularly in China. As part of Halo’s attempt to broaden its customer base, Halo has begun offering Halo’s products to Chinese consumers. Halo’s decision to export products to China requires Halo to comply with Chinese rules, laws, and regulations, as well as certain domestic and international laws relating to the import and export of goods to foreign countries. These laws are often changing, and the costs associated with complying with these laws and regulations may adversely affect Halo. Additionally, changes in the current laws may make importing products to China more difficult, which may also negatively affect Halo’s business. Furthermore, changes in U.S. trade policy more generally could trigger retaliatory actions by affected countries, which could impose restrictions on Halo’s ability to do business in or with affected countries or prohibit, reduce or discourage purchases of Halo’s products by foreign customers. Changes in, and responses to, U.S. trade policy could reduce the competitiveness of Halo’s products, cause Halo’s sales to decline and adversely impact Halo’s ability to compete, which could materially and adversely impact Halo’s business, financial condition and results of operations.
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There is significant uncertainty about the future relationship between the U.S. and China with respect to trade policies, treaties, government regulations and tariffs. An escalation of recent trade tensions between the U.S. and China has resulted in trade restrictions that could harm Halo’s ability to participate in Chinese markets and numerous additional such restrictions have been threatened by both countries. The U.S. and China have imposed a number of tariffs and other restrictions on items imported or exported between the U.S. and China. Halo cannot predict what actions may ultimately be taken with respect to tariffs or trade relations between the U.S. and China or other countries, what products may be subject to such actions, or what actions may be taken by the other countries in retaliation. The institution of trade tariffs both globally and between the U.S. and China specifically carries the risk of negatively impacting China’s overall economic condition, which could have negative repercussions for Halo’s business. Halo’s products are and may continue to be subject to export license requirements or restrictions, particularly in respect of China.
Halo’s products may be subject to recalls for a variety of reasons, which could require Halo to expend significant management and capital resources.
Manufacturers and distributors of products are sometimes subject to the recall or return of their products for a variety of reasons, including product defects, such as contamination, adulteration, unintended harmful side effects or interactions with other substances, packaging safety and inadequate or inaccurate labeling disclosure. Although Halo has detailed procedures in place for testing finished products, there can be no assurance that any quality, potency or contamination problems will be detected in time to avoid unforeseen product recalls, regulatory action or lawsuits, whether frivolous or otherwise. If any of the animal food or care products produced by Halo are recalled due to an alleged product defect or for any other reason, Halo could be required to incur the unexpected expense of the recall and any legal proceedings that might arise in connection with the recall. Halo had to issue a recall in 2018 for one of Halo’s products after a single retail sample collected by the Michigan Department of Agriculture tested positive for Salmonella. Although customers reported no incidents of injury or illness in association with this product, the recall negatively affected Halo’s results. As a result of any such recall, customers may be hesitant to purchase Halo’s products in the future and Halo may lose a significant amount of sales and may not be able to replace those sales at an acceptable margin or at all. In addition, a product recall may require significant management attention or damage Halo’s reputation and goodwill or that of Halo’s products or brands. Additionally, product recalls may lead to increased scrutiny of Halo’s operations by the FDA or other state or federal regulatory agencies, requiring further management attention, increased compliance costs and potential legal fees, fines, penalties and other expenses.
Changes in existing laws or regulations, including how such existing laws or regulations are enforced by federal, state, and local authorities, or the adoption of new laws or regulations may increase Halo’s costs and otherwise adversely affect Halo’s business, financial condition and results of operations.
The manufacture and marketing of animal food products is highly regulated, and Halo and its co-manufacturers and suppliers are subject to a variety of federal and state laws and regulations applicable to pet food and treats. These laws and regulations apply to many aspects of Halo’s business, including the manufacture, packaging, labeling, distribution, advertising, sale, quality and safety of Halo’s products. Halo could incur costs, including fines, penalties, and third-party claims, in the event of any violations of, or liabilities under, such requirements, including any competitor or consumer challenges relating to compliance with such requirements. For example, in connection with the marketing and advertisement of Halo’s products, Halo could be the target of claims relating to false or deceptive advertising, including under the auspices of the FTC and state consumer protection statutes. The regulatory environment in which Halo operates could change significantly and adversely in the future. The laws and regulations that apply to Halo’s products and business may change in the future and Halo may incur (directly or indirectly) material costs to comply with current or future laws and regulations or any required product recalls. New or revised government laws and regulations could significantly limit Halo’s ability to run Halo’s business as it is currently conducted, result in additional compliance costs and, in the event of noncompliance, lead to administrative or civil remedies, including fines, injunctions, withdrawals, recalls or seizures and confiscations, as well as potential criminal sanctions. Any such changes or actions by the FDA or other regulatory agencies could have a material adverse effect on Halo’s co-manufacturers, Halo’s suppliers or Halo’s business, financial condition and results of operations.
Risks Related to Our Organization and Structure
Our holding company structure makes us dependent on our subsidiaries for our cash flow and could serve to subordinate the rights of our shareholders to the rights of creditors of our subsidiaries, in the event of an insolvency or liquidation of any such subsidiary.
Our company acts as a holding company and, accordingly, substantially all of our operations are conducted through our subsidiaries. Such subsidiaries will be separate and distinct legal entities. As a result, substantially all of our cash flow will depend upon the earnings of our subsidiaries. In addition, we will depend on the distribution of earnings, loans or other payments by our subsidiaries. No subsidiary will have any obligation to provide our company with funds for our payment obligations. If there is an insolvency, liquidation or other reorganization of any of our subsidiaries, our shareholders will have no right to proceed against their assets. Creditors of those subsidiaries will be entitled to payment in full from the sale or other disposal of the assets of those subsidiaries before our company, as a shareholder, would be entitled to receive any distribution from that sale or disposal.
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Delaware law and the Certificate of Incorporation, as amended, and Bylaws contain certain provisions, including anti-takeover provisions that limit the ability of stockholders to take certain actions and could delay or discourage takeover attempts that stockholders may consider favorable.
Provisions contained in our certificate of incorporation and bylaws could make it more difficult for a third party to acquire us after we have become a publicly traded company. Provisions in our certificate of incorporation and bylaws impose various procedural and other requirements, which could make it more difficult for stockholders to effect certain corporate actions. For example, our certificate of incorporation authorizes our board of directors to determine the rights, preferences, privileges and restrictions of unissued series of preferred stock without any vote or action by our stockholders. Thus, our board of directors can authorize and issue shares of preferred stock with voting or conversion rights that could dilute the voting power of holders of our other series of capital stock. These rights may have the effect of delaying or deterring a change of control of our company. Additionally, our certificate of incorporation and/or bylaws establish limitations on the removal of directors and on the ability of our stockholders to call special meetings and include advance notice requirements for nominations for election to our board of directors and for proposing matters that can be acted upon at stockholder meetings.
Moreover, because we are incorporated in Delaware, we are governed by the provisions of Section 203 of the General Corporation Law of the State of Delaware (the “DGCL”), which prohibits an “interested stockholder” owning in excess of 15% of our outstanding voting stock from merging or combining with us for a period of three years after the date of the transaction in which such stockholder acquired in excess of 15% of our outstanding voting stock, unless the merger or combination is approved in a prescribed manner. These provisions could limit the price that certain investors might be willing to pay in the future for shares of our common stock.
The Certificate of Incorporation, as amended, is attached as Exhibits 3.1 through 3.6 to this Current Report and we urge you to read it.
The Certificate of Incorporation, as amended, designates a state or federal court located within the State of Delaware as the exclusive forum for substantially all disputes between the Company and its stockholders, which could limit the Company’s stockholders’ ability to choose the judicial forum for disputes with the Company or its directors, officers, or employees.
The Certificate of Incorporation, as amended, provides that, unless the Company consents in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware, or if such court does not have subject matter jurisdiction, any other court located in the State of Delaware with subject matter jurisdiction, will be the sole and exclusive forum for (i) any derivative action or proceeding brought on behalf of the Company, (ii) any action asserting a claim of breach of a fiduciary duty owed by any current or former director, officer, other employee or stockholder of the Company to the Company or the Company’s stockholders, (iii) any action asserting a claim against the Company or its officers or directors arising pursuant to any provision of the DGCL or the Amended and Restated Certificate of Incorporation or Bylaws or as to which the DGCL confers jurisdiction on the Court of Chancery of the State of Delaware, or (iv) any action asserting a claim against the Company or any director or officer of the Company governed by the internal affairs doctrine of the law of the State of Delaware; provided, that, if and only if the Court of Chancery of the State of Delaware dismisses any such action for lack of subject matter jurisdiction, such action may be brought in another state court sitting in the State of Delaware. Additionally, the Amended and Restated Certificate of Incorporation will provide that, unless the Company consents to the selection of an alternative forum, the federal district courts of the United States of America shall, to the fullest extent permitted by law, be the sole and exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act; provided, however, that such provision will not apply to suits brought to enforce any liability or duty created by the Exchange Act, or any other claim for which the federal courts have exclusive jurisdiction. However, there is uncertainty as to whether a court would enforce this provision and investors cannot waive compliance with the federal securities laws and the rules and regulations thereunder. Section 22 of the Securities Act creates concurrent jurisdiction for state and federal courts over all suits brought to enforce any duty or liability created by the Securities Act or the rules and regulations thereunder.
Any person or entity purchasing or otherwise acquiring any interest in any of the securities of the Company will be deemed to have notice of and consented to these provisions. These exclusive-forum provisions may limit or make more costly a stockholder’s ability to bring a claim in a judicial forum of its choosing for disputes with the Company or its directors, officers, or other employees, which may discourage lawsuits against the Company and its directors, officers, and other employees. If a court were to find these exclusive-forum provisions to be inapplicable or unenforceable in an action, the Company may incur additional costs associated with resolving the dispute in other jurisdictions, which could harm its results of operations.
Risks Related to Our Capital Structure
We are a holding company and rely on payments, advances and transfers of funds from our subsidiaries to meet our obligations and pay any dividends.
We have limited direct operations and significant assets other than ownership of 100% of the capital stock of our subsidiaries. Because we primarily conduct our operations through our subsidiaries, we depend on those entities for payments to generate the funds necessary to meet our financial obligations, and to pay any dividends with respect to our common stock. Legal and contractual restrictions in our Wintrust credit facility and other agreements that may govern future indebtedness of our subsidiaries, as well as the financial condition and operating requirements of our subsidiaries, may limit our ability to obtain cash from our subsidiaries. The earnings from, or other available assets of, our subsidiaries might not be sufficient to make distributions or obtain loans to enable us to meet certain of our obligations. Any of the foregoing could materially and adversely affect our business, financial condition, results of operations and cash flows.
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Our level of indebtedness and related covenants could limit our operational and financial flexibility and could significantly adversely affect our business if we breach such covenants and default on such indebtedness.
Our ability to meet our debt service obligations depends upon our operating and financial performance, which is subject to general economic and competitive conditions and to financial, business and other factors affecting our operations, many of which are beyond our control. If we are unable to service our debt, we may need to sell inventory and other material assets, restructure or refinance our debt, or seek additional equity capital. If our inability to meet our debt service obligations results in an event of default as defined under our Wintrust receivables credit facility, the lender thereunder may be able to take possession of substantially all of our assets. Prevailing economic conditions and global credit markets could adversely impact our ability to do so.
In addition, our debt agreements contain limits on our ability to, among other things, incur additional debt, grant liens, undergo certain fundamental changes, make investments, and dispose of inventory. These restrictions may prevent us from taking actions that we believe would be in the best interests of the business and may make it difficult for us to successfully execute our business strategy or effectively compete with companies that are not similarly restricted. If we determine that we need to take any action that is restricted under our debt agreements, we will need to first obtain a waiver from the related lenders. Obtaining such waivers, if needed, may impose additional costs or we may be unable to obtain such waivers. Our ability to comply with these restrictive covenants in future periods will largely depend on our ability to successfully implement our overall business strategy. The breach of any of these covenants or restrictions could result in a default, which could result in the acceleration of our outstanding debt. In the event of an acceleration of such debt, we could be forced to apply all available cash flows to repay such debt, which could also force us into bankruptcy or liquidation.
For information regarding our outstanding debt, refer to “Note 8 - Debt” in the Notes to Consolidated Financial Statements included this prospectus.
Our common stock may be deemed to be a “penny stock” and the “penny stock” rules could adversely affect the market price of our common stock.
The SEC has adopted Rule 3a51-1, which establishes the definition of a “penny stock” as any equity security that has a market price of less than $5.00 per share or with an exercise price of less than $5.00 per share, subject to certain exceptions. Our common stock may be deemed to be a penny stock. For any transaction involving a penny stock, unless exempt, Rule 15g-9 requires that a broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive (i) the purchaser’s written acknowledgment of the receipt of a risk disclosure statement; (ii) a written agreement to transactions involving penny stocks; and (iii) a signed and dated copy of a written suitability statement. Generally, brokers may be less willing to execute transactions in securities subject to the “penny stock” rules. This may make it more difficult for investors to dispose of our common stock and cause a decline in the market value of our stock.
Our failure to meet the continued listing requirements of NYSE American could result in a delisting of our common stock and could make it more difficult to raise capital in the future.
NYSE American has listing requirements for inclusion of securities for trading on the NYSE American, including minimum levels of stockholders’ equity, market value of publicly held shares, number of public stockholders and stock price. There can be no assurance that we will be successful in maintaining the listing of NYSE American as it is possible we may fail to satisfy the continued listing requirements, such as the corporate governance requirements or the minimum stock price requirement. On October 14, 2025, we received a written notice (the “Notice”) from the NYSE American indicating that we are in compliance with the NYSE American continued listing standard set forth in Section 1003(a)(ii) of the NYSE American Company Guide (“Section 1003(a)(ii)”). Section 1003(a)(ii) requires a listed company to have stockholders’ equity of $4 million or more if the listed company has reported losses from continuing operations and/or net losses in three of its four most recent fiscal years.. The Notice has no immediate effect on the listing or trading of our common stock and the common stock will continue to trade on the NYSE American under the symbol “SRXH.” Additionally, the Notice does not result in the immediate delisting of our common stock from the NYSE American. We are subject to the procedures and requirements of Section 1009 of the Company Guide, which could, among other things, result in the initiation of delisting proceedings, unless we cure the deficiency in a timely manner. NYSE American may also accelerate delisting action in the event that our common stock trades at levels viewed by the Staff to be abnormally low. Such a delisting or the announcement of such delisting will have a negative effect on the price of our common stock and would impair your ability to sell or purchase our common stock when you wish to do so. In the event of a delisting, we may attempt to take actions to restore our compliance with the NYSE American listing requirements, but we can provide no assurance that any such action taken by us would allow our common stock to become listed again, stabilize the market price or improve the liquidity of our common stock, prevent our common stock from dropping below the NYSE American minimum listing requirements or prevent future non-compliance with the NYSE American listing requirements. If we do not maintain the listing of our common stock on NYSE American, it could make it harder for us to raise additional capital in the long-term. If we are unable to raise capital when needed in the future, we may have to cease or reduce operations. On November 13, 2025, we submitted a plan of action we have taken or will take to regain compliance with the Exchange’s continued listing standards by July 14, 2026. We intend to regain compliance with the NYSE American’s continued listing standards by undertaking a measure or measures that are for our best interests and the best interests of our stockholders.
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Our common stock prices may be volatile.
The market price of our common stock has been and may continue to be highly volatile and subject to wide fluctuations. Our financial performance, government regulatory action, tax laws, interest rates and market conditions in general could have a significant impact on the future market price of our common stock.
The public price of our common stock could also be subject to wide fluctuations in response to the risk factors described in this prospectus and others beyond our control, including: the number of shares of our common stock publicly owned and available for trading; actual or anticipated quarterly variations in our results of operations or those of our competitors; our actual or anticipated operating performance and the operating performance of similar companies in our industry; our announcements or our competitors’ announcements regarding significant contracts, acquisitions, or strategic investments; general economic conditions and their impact on the pet food markets; the overall performance of the equity markets; threatened or actual litigation; changes in laws or regulations relating to our industry; any major change in our board of directors or management; publication of research reports about us or our industry or changes in recommendations or withdrawal of research coverage by securities analysts; and sales or expected sales of shares of our common stock by us, and our officers, directors, and significant stockholders. From time to time, our affiliates may sell stock for reasons due to their personal financial circumstances. These sales may be interpreted by other stockholders as an indication of our performance and result in subsequent sales of our stock that have the effect of creating downward pressure on the market price of our common stock.
The volatility of the market price of our common stock may adversely affect the ability of investors to purchase or sell shares of our common stock. Investors may also experience losses on their investments in our stock due to price fluctuations. In addition, the stock market in general has experienced extreme price and volume fluctuations that often have been unrelated or disproportionate to the operating performance of those companies. Securities class action litigation has often been instituted against companies following periods of volatility in the overall market and in the market price of a company’s securities. Such litigation, if instituted against us, could result in very substantial costs, divert our management’s attention and resources and harm our business, operating results, and financial condition.
We do not expect to pay any cash dividends to the holders of the common stock in the foreseeable future and the availability and timing of future cash dividends, if any, is uncertain.
We expect to use cash flow from future operations to repay debt and support the growth of our business and do not expect to declare or pay any cash dividends on our common stock in the foreseeable future. Our Wintrust receivables credit facility places certain restrictions on the ability of us and our subsidiaries to pay cash dividends. We may amend our current credit facilities or enter into new debt arrangements that also prohibit or restrict our ability to pay cash dividends on our common stock.
Subject to such restrictions, our board of directors will determine the amount and timing of stockholder dividends, if any, that we may pay in future periods. In making this determination, our directors will consider all relevant factors, including the amount of cash available for dividends, capital expenditures, covenants, prohibitions or limitations with respect to dividends, applicable law, general operational requirements and other variables. We cannot predict the amount or timing of any future dividends you may receive, and if we do commence the payment of dividends, we may be unable to pay, maintain or increase dividends over time. Therefore, you may not be able to realize any return on your investment in our common stock for an extended period of time, if at all.
Future sales of our common stock, or the perception that such sales may occur, may depress our share price, and any additional capital through the sale of equity or convertible securities may dilute your ownership in us.
In the future, we may issue our previously authorized and unissued securities. We are authorized to issue 5,000,000,000 shares of common stock and 4,000,000 shares of preferred stock with such designations, preferences and rights as determined by our board of directors. The potential issuance of such additional shares of common stock will result in the dilution of the ownership interests of the holders of our common stock and may create downward pressure on the trading price, if any, of our common stock. The sales of substantial amounts of our common stock pursuant to our effective registration statements, or the perception that these sales may occur, could cause the market price of our common stock to decline and impair our ability to raise capital. These shares also may be sold pursuant to Rule 144 under the Securities Act, depending on their holding period and subject to restrictions in the case of shares held by persons deemed to be our affiliates. We also may grant additional registration rights in connection with any future issuance of our capital stock.
For information regarding our outstanding stockholders’ equity and potentially dilutive securities, refer to “Note 8 - Debt”, “Note 10 - Commitments and contingencies”, “Note 11 - Warrants and other equity related instruments” and “Note 12 - Share-based compensation” in the Notes to Consolidated Financial Statements included in this prospectus.
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The market price of our common stock may not attract new investors, including institutional investors, and may not satisfy the investing requirements of those investors. Consequently, the trading liquidity of our common stock may not improve.
There can be no assurance that the share price of our stock will attract new investors, including institutional investors. In addition, there can be no assurance that the market price of our common stock will satisfy the investing requirements of those investors. As a result, the trading liquidity of our common stock may not necessarily improve.
We may issue preferred stock whose terms could adversely affect the voting power or value of our common stock.
Our certificate of incorporation authorizes us to issue, without the approval of our stockholders, one or more classes or series of preferred stock having such designations, preferences, limitations and relative rights, including preferences over our common stock with respect to dividends and distributions, as our board of directors may determine. The terms of one or more classes or series of preferred stock could adversely impact the voting power or value of our common stock. For example, we might grant holders of preferred stock the right to elect some number of our directors in all events or on the happening of specified events, or the right to veto specified transactions. Similarly, the repurchase or redemption rights or liquidation preferences we might grant to holders of preferred stock could affect the value of the common stock. The issuance of such preferred stock could also be used as a method of discouraging, delaying or preventing a change of control.
The administrative and regulatory costs of public company compliance could consume a significant amount of our resources.
The rules and regulations related to being a public company require us to incur significant legal, accounting and other expenses. The legal and financial compliance make some activities more time-consuming and costly, particularly after we are no longer a smaller reporting company. Moreover, if we are not able to comply with the requirements or regulations as a public reporting company in any regard, we could be subject to sanctions or investigations by the SEC or other regulatory authorities, which would require additional financial and management resources.
In addition, the Sarbanes-Oxley Act of 2002 and rules subsequently implemented by the SEC impose various requirements on public companies, including establishment and maintenance of effective disclosure and financial controls and corporate governance practices. Our management and other personnel devote a substantial amount of time to these compliance initiatives. To achieve compliance with Section 404 within the prescribed period, we will be engaged in a costly and challenging process to document and evaluate our internal control over financial reporting. In this regard, we will need to continue to dedicate internal resources and potentially engage outside consultants or hire an internal audit resource to assess and document the adequacy of internal control over financial reporting, validate through testing that controls are functioning as documented and implement a continuous reporting and improvement process for internal control over financial reporting. Despite our efforts, there is a risk that neither we nor our independent registered public accounting firm will be able to conclude within the prescribed timeframe that our internal control over financial reporting is effective as required by Section 404. This could result in an adverse reaction in the financial markets due to a loss of confidence in the reliability of our financial statements.
We are a smaller reporting company which could make our securities less attractive to investors and may make it more difficult to compare our performance with other public companies.
We are a smaller reporting company, as defined in Item 10(f)(1) of Regulation S-K, and we may take advantage of certain reduced disclosure obligations. To the extent we take advantage of such reduced disclosure obligations while we continue to qualify as a smaller reporting company, it may make comparison of our financial statements with other public companies difficult or impossible. Some investors may find our common stock less attractive because we may rely on these exemptions, which could result in a less active trading market for our common stock, and our stock price may be more volatile.
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| ITEM 1B. | UNRESOLVED STAFF COMMENTS |
None.
| ITEM 1C. | CYBERSECURITY |
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| ITEM 2. | PROPERTIES |
Our principal place of business is located at 801 US Highway 1, North Palm Beach, Florida 33408. We do not own any properties or land.
We believe our facilities are adequate and suitable for our current needs and that suitable additional or alternative space will be available if the need arises in the future.
| ITEM 3. | LEGAL PROCEEDINGS |
From time to time, we are subject to litigation and other proceedings that arise in the ordinary course of our business. Subject to the inherent uncertainties of litigation and although no assurances are possible, we believe that there are no pending lawsuits or claims that, individually or in the aggregate, will have a material adverse effect on our business, financial condition or our yearly results of operations.
| ITEM 4. | MINE SAFETY DISCLOSURES |
Not applicable.
PART II
| ITEM 5. | MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES |
Market Information
Our common stock is currently listed on the NYSE American marketplace under the symbol “SRXH,” representing the Company’s continuing operations following the reverse takeover and the subsequent discontinuation of the SRx business. Prior to the reverse takeover, the Company’s stock traded under the symbol “BTTR” on the NYSE American, and earlier on the OTC Market Group Inc.’s OTCQX market after being upgraded from the OTCQB on December 28, 2020, where it had been trading since June 2010.
The following table sets forth, for the periods indicated and as reported on the NYSE American and OTC Markets, the high and low bid prices for our common stock. Such quotations reflect inter-dealer prices, without retail mark-up, mark-downs, or commissions, and may not necessarily represent actual transactions.
| High | Low | |||||||
| 2024 | ||||||||
| First Quarter | $ | 17.19 | $ | 3.61 | ||||
| Second Quarter | $ | 1.98 | $ | 1.17 | ||||
| Third Quarter | $ | 10.96 | $ | 3.29 | ||||
| Fourth Quarter | $ | 1.84 | $ | 1.07 | ||||
| 2025 | ||||||||
| First Quarter | $ | 7.90 | $ | 2.13 | ||||
| Second Quarter | $ | 2.02 | $ | 0.47 | ||||
| Third Quarter | $ | 3.15 | $ | 1.39 | ||||
| Fourth Quarter | $ | 0.78 | $ | 0.27 | ||||
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Holders of Common Stock
As of December 4, 2025, we had 27,426,843 shares of our common stock issued and outstanding. As of December 4, 2025, there were 444 record holders of our common stock. Certain shares are held in “street” name and accordingly, the number of beneficial owners of such shares is not known or included in the foregoing number. This number of holders of record also does not include stockholders whose shares may be held in trust by other entities.
Dividend Policy
We do not currently anticipate declaring or paying cash dividends on our common stock in the foreseeable future. We currently intend to retain our future earnings, if any, to finance the development and expansion of our business. Any future determination to pay dividends will be at the discretion of our board of directors and will depend upon then-existing conditions, including our results of operations and financial condition, capital requirements, business prospects, statutory and contractual restrictions on our ability to pay cash dividends, including restrictions contained in our credit agreements, and other factors our board of directors may deem relevant. Accordingly, you may need to sell your shares of our common stock to realize a return on your investment, and you may not be able to sell your shares at or above the price you paid for them.
Securities Authorized for Issuance under Equity Compensation Plans
Information about our equity compensation plans is included in Item 12 of Part III of this Annual Report on Form 10-K.
Recent Sales of Unregistered Securities
Since January 1, 2023, the registrant made the following issuances and purchases of its unregistered securities as described below.
(1) On January 4, 2023, the registrant issued 20,292 shares of common stock to its board of directors in return for services provided in their capacity as directors.
(2) On January 11, 2023, the registrant issued 4,545 shares of common stock to its key executives as part of their compensation packages.
(3) On January 31, 2023, the registrant issued 409 shares of common stock to a member of its board of directors for service as interim CEO.
(4) On April 30, 2023, the registrant issued 909 shares of common stock to a member of its executive management as part of their compensation package.
(5) On September 5, 2023, the registrant issued 34,090 shares of common stock to two members of its board of directors in return for services provided in their capacity as directors.
(6) On February 9, 2024, the registrant issued 45,629 shares of common stock to the shareholders of Aimia Pet Healthco Inc., a corporation organized under the laws of Canada (“Aimia”),and certain related parties, in connection with the acquisition of Aimia by the registrant.
(7) In February 2024, the registrant granted 42,088 shares of restricted common stock to members of its Board of Directors as part of their equity compensation pursuant to the Amended and Restated 2019 Incentive Award Plan. These restricted stock awards were immediately vested and, as such, the registrant recorded share-based compensation expense of $0.4million upon issuance.
(8) On June 26, 2024, the registrant accelerated the vesting of 22,727 shares of restricted common stock held by its Chief Executive Officer in return for services provided in his capacity as such.
(9) On June 26, 2024, the registrant issued 47,285 options to purchase shares of common stock to certain of its directors, officers and employees in return for services provided in their capacities as such.
(10) In April 2025, the registrant issued 890,102 shares of restricted common stock to certain of its directors, officers and employees in return for services provided in their capacities as such.
(11) On April 24, 2025, the registrant issued 4,036,697 shares of common stock to certain other investors in private placement.
(12) On April 25, 2025, the registrant issued to one of its financial advisors 1,599,231 shares of Common Stock in consideration of services provided by the financial advisor to the Company.
(13) On July 3, 2025, the registrant issued 1,503,355 shares of Common Stock to certain of its financial advisors in consideration of services provided by the financial advisor to the Company.
(14) On July 15, 2025, the registrant issued 690,000 shares of Common Stock to certain of its financial advisors in consideration of services provided by the financial advisor to the Company.
(15) Between July and September 2025, the registrant issued 394,789 shares of restricted common stock to holders of exchangeable shares who retracted their exchangeable shares in exchange for common stock on a one-for-one basis.
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(16) On July 7, 2025, the registrant entered into the Securities Purchase Agreement by and among the registrant and certain investors, pursuant to which the registrant issued and sold to the Investors (i) a new series of senior secured convertible notes with an aggregate original principal amount of $7,650,000, subject to an original issue discount as provided therein, and warrants to acquire 21,338,062 shares of the Company’s common stock.
(17) On August 21, 2025, the registrant issued 4,950,000 shares of Common Stock to Halo Spin-Out SPV Inc. in exchange for 152 shares of the common stock, without par value, of Halo, Purely For Pets, Inc.
(18) On August 25, 2025, the registrant issued 2,396,697 shares of restricted common stock to certain of its directors, officers and employees in return for services provided in their capacities as such.
(19) On September 16, 2025, the registrant issued 196,000 shares of restricted common stock to certain of its current and former directors in return for services provided in their capacity as directors.
(20) On October 31, 2025, pursuant to a Securities Purchase Agreement dated October 27, 2025, the registrant issued and sold to certain investors in a private placement 19,035 shares of the registrant’s Series A Convertible Preferred Stock and 54,527,811 warrants to purchase shares of Common Stock for aggregate proceeds of approximately $15.23 million, paid in cash or through the cancellation of such investor’s existing notes in lieu of cash. The registrant waived receipt of the cash portion of the purchase price until November 3, 2025.
Unless otherwise stated above, the issuances of the above securities were deemed to be exempt from registration under the Securities Act in reliance upon Section 4(a)(2) of the Securities Act, or Regulation D promulgated thereunder, or Rule 701 promulgated under Section 3(b) of the Securities Act as transactions by an issuer not involving any public offering or pursuant to benefit plans and contracts relating to compensation as provided under Rule 701. The recipients of the securities in each of these transactions represented their intentions to acquire the securities for investment only and not with a view to or for sale in connection with any distribution thereof and appropriate legends were placed upon the stock certificates issued in these transactions.
Purchases of Equity Securities by the Issuer
The following table presents information with respect to our repurchases of Better Choice Company common stock during the year ended September 30, 2025:
| Period (1) | Total Number of Shares Purchased | Average Price Paid per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs | ||||||||||||
| July 1, 2024 to September 30, 2024 | 192 | $ | 2.71 | 192 | $ | 5,000,000 | ||||||||||
| October 1, 2024 to December 31, 2024 | 102,405 | $ | 1.99 | 102,405 | $ | — | ||||||||||
| Total | 102,597 | $ | — | 102,597 | ||||||||||||
| (1) | In May 2022, our Board of Directors approved a share repurchase program that authorized the repurchase of up to $5.0 million of the Company’s outstanding common stock in the open market through December 31, 2024. Repurchased shares are immediately retired and returned to unissued status. During the three months ended March 31, 2025, no shares were repurchased. On April 17, 2025, the Repurchase Plan was reinstated and authorization increased to $6.5 million. |
| ITEM 6. | [RESERVED] |
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| ITEM 7. | MANAGEMENT’S 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 management’s expectations for our business. The financial condition, results of operations and cash flows discussed in this Management’s Discussion and Analysis of Financial Condition and Results of Operations are those of SRx Health Solutions Inc. and its consolidated subsidiaries, collectively, the “Company,” “SRx,” “we,” “our,” or “us”. These statements represent projections, beliefs and expectations based on current circumstances and conditions and in light of recent events and trends, and you should not construe these statements either as assurances of performance 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. A description of material factors known to us that may cause our results to vary or may cause management to deviate from its current plans and expectations, is set forth under “Risk Factors.” See “Cautionary Note Regarding Forward-Looking Statements.” The following discussion should also be read in conjunction with our audited consolidated financial statements including the notes thereto appearing elsewhere in this filing. Accordingly, readers are cautioned not to place undue reliance on these forward-looking statements, which reflect management’s analysis only as of the date hereof. We undertake no obligation to publicly release the results of any revision to these forward-looking statements which may be made to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.
Overview and Outlook
Following the recent restructuring and the filing for bankruptcy protection by SRx Canada, the Company has undergone a significant transition. As part of this process, the majority of SRx’s former specialty pharmacy, clinical services, and distribution operations have been discontinued or wound down. The business now continues through the Consumer Products segment, which represents the remaining operating platform after the restructuring.
The Consumer Products segment provides a broad portfolio of premium and super-premium pet food and wellness products formulated with high-quality, science-based nutrition under the Halo brand. Unlike the capital-intensive, infrastructure-heavy specialty healthcare model previously operated under the SRx Network, the continuing business has a more streamlined operating footprint, reduced overhead, and a more focused commercial strategy. This shift fundamentally changes the Company’s business profile, risk exposures, and future operating priorities.
The termination of the former specialty healthcare operations has also resulted in a simplified organizational structure. The Company no longer operates specialty pharmacies, clinics, PSP programs, or pharmaceutical distribution facilities, and is no longer positioned as a national specialty healthcare platform. Instead, management is focused on stabilizing the remaining operations, preserving core customer relationships, and ensuring continuity of service while the Company transitions to a more sustainable operating model.
Looking ahead, the Company’s outlook reflects the early stages of this reset. Near-term priorities include strengthening the financial position of the continuing operations, optimizing cost structure, and re-establishing a focused growth path that aligns with the capabilities and market positioning of the Consumer Products business. While the restructuring has materially reduced the scale and scope of the Company compared to prior periods, management believes that the streamlined business provides a clearer path to operational stability and disciplined execution.
The Company will continue evaluating strategic alternatives to support the long-term viability of the business, including potential partnerships, product expansion opportunities, and targeted investments that align with the strengths of the continuing operations.
Recent Corporate Developments
Acquisition Activity
In 2023, the Company executed a number of strategic acquisitions aimed at expanding its national footprint, enhancing service capabilities, and strengthening its position in the specialty healthcare market. By contrast, 2024 saw a deliberate slowdown in acquisition activity, as the Company shifts focus toward integration, operational optimization, and organic growth initiatives across the existing SRx Network.
CWB Facility
The Company was not in compliance with certain financial covenants related to its loan facility with Canadian Western Bank (“CWB”) as of June 30, 2025, which resulted in the debt being callable by the lender. During the quarter, the Company actively engaged in discussions with CWB to address the non-compliance. Subsequent to June 30, 2025, the Company sought creditor protection under a formal restructuring proceedings under the Companies’ Creditors Arrangement Act (Canada) (“CCAA”). Refer to Note 19 – Discontinued operations for more information.
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Merger and CCAA Proceedings
On September 3, 2024, Better Choice Company, Inc. (“Predecessor”), SRx Canada, 1000994476 Ontario Inc. (“AcquireCo”), a corporation existing under the laws of the Province of Ontario and an indirect wholly-owned subsidiary of Predecessor, and 1000994085 Ontario Inc., a corporation existing under the laws of the Province of Ontario and a direct wholly-owned subsidiary of Predecessor (“CallCo”) entered into an Arrangement Agreement (the “Arrangement Agreement”), and the transactions contemplated thereby (the “Merger”) were completed on April 24, 2025 (which is referred to herein as the “Closing Date”). Pursuant to the Arrangement Agreement, on the Closing Date, AcquireCo merged with and into SRx Canada, with SRx Canada remaining as the surviving entity. Predecessor acquired the business of SRx Canada pursuant to the Merger. Refer below and to Note 4 – Business Combinations for further information.
In connection with the Merger, on April 24, 2025, Predecessor changed its corporate name from “Better Choice Company Inc.” to “SRx Health Solutions, Inc.” by the filing of a Certificate of Amendment of its Certificate of Incorporation with the Secretary of State of the State of Delaware, and SRx Canada changed its name from “SRx Health Solutions Inc.” to “SRx Health Solutions (Canada) Inc.” by making the appropriate filing in the Province of Ontario.
On the Closing Date, Predecessor issued to certain holders of the common stock of SRx Canada 8,898,069 shares of the Company’s Common Stock, and AcquireCo issued to certain holders of the common stock of SRx Canada 19,701,935 shares in the capital stock of AcquireCo which shares are exchangeable into shares of the Company’s Common Stock (the “Exchangeable Shares”) on a one-for-one basis.
On August 12, 2025, the Company announced that SRx Canada had obtained an Initial Order (the “Initial Order”) in Canada under the federal Companies’ Creditors Arrangement Act (the “CCAA” and SRx Canada’s proceedings thereunder, the “CCAA Proceedings”) from the Ontario Superior Court of Justice (Commercial List) (the “Court”). In connection with the Initial Order, the Court granted, among other relief, a stay of proceedings in favor of SRx Canada, the appointment of Grant Thornton Limited as the monitor of SRx Canada (in such capacity, the “Monitor”), debtor-in-possession financing (“DIP Financing”), and a sale process (“Sale Process”).
SRx Canada has secured debtor-in-possession (DIP) Financing (which includes insider participation). The DIP Financing consists of a credit facility of up to a maximum of $1,750,000 which is expected to be used to finance SRx Canada’s working capital needs, including for continued operations and to implement the restructuring contemplated by the CCAA Proceedings. The CCAA Proceedings and DIP Financing will provide SRx Canada with the time and stability required to complete the Sale Process and identify transaction(s) which may include the sale of all or substantially all of the business or assets of SRx Canada. The Company intends to carry on the critical business of SRx Canada throughout the pendency of the CCAA Proceedings.
Neither the Company nor the Company’s United States subsidiary, Halo, Purely For Pets, Inc., a Delaware corporation, has made any filing under any bankruptcy code or statutory reorganization scheme either in the United States or in Canada.
On August 14, 2025, the Company entered into a Settlement, Share Forfeiture and Mutual Release Agreement (the “Settlement Agreement”) with certain of the founders and officers of SRx Canada (the “Forfeiting Stockholders”), pursuant to which the Forfeiting Stockholders forfeited for cancellation approximately 18,839,332 million Exchangeable Shares (the “Forfeited Shares”). In consideration of the Forfeited Shares, the Company agreed to release the Forfeiting Stockholders from certain claims by the Company.
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Share Exchange
In connection with the Merger, on April 24, 2025, the Company contributed 152 shares of the common stock, without par value (the “Halo Shares”), of Halo, Purely For Pets, Inc. (“Halo”), a Delaware corporation, then the Company’s wholly-owned subsidiary, to Halo Spin-Out SPV Inc. (“Spin-Out SPV”), a special purpose subsidiary of the Company formed for such purpose. Immediately prior to the effectiveness of the Merger, the equity interests in Spin-Out SPV were distributed as a dividend to the then-current stockholders of the Company. The Halo Shares represent seventeen (17%) of the issued and outstanding capital stock of Halo.
Following the initiation of the CCAA Proceedings and the execution of the Settlement Agreement, on August 21, 2025, the Company and Spin-Out SPV executed a Share Exchange Agreement (the “Share Exchange Agreement”) whereby Spin-Out SPV transferred the Halo Shares back to the Company in exchange for 4,950,000 newly issued shares of the Company’s Common Stock (such shares, the “SPV Shares” and such transaction, the “Share Exchange”).
July PIPE Financing
On July 7, 2025, the Company entered into the Securities Purchase Agreement (the “July PIPE SPA”) by and among the Company and the July PIPE Investors, including the lead investor (the “Lead Investor”), pursuant to which the Company issued and sold to the Investors (i) a new series of senior secured convertible notes (the “July Notes”) with an aggregate original principal amount of $7,650,000, subject to an original issue discount as provided in the July Notes, and (ii) warrants (the “July Warrants”) to acquire 21,338,062 shares of the Company’s common stock (the “Common Stock”) (such transaction, the “July PIPE Financing”).
The July Notes bear interest at a rate of 8% per annum. The July Notes mature on July 8, 2027, provided that the maturity date may be extended by a noteholder if the Company is in default under the July Notes, and in certain other limited circumstances as described in the July Notes. The July Notes are convertible into shares of the Common Stock at a conversion price of $0.6274 per share, subject to customary adjustments. The July Warrants are exercisable for a period of three (3) years beginning six (6) months from the date of issuance at an exercise price of $0.6274 per share, also subject to adjustment.
Additionally, on July 8, 2025, pursuant to and in connection with the July PIPE SPA, the Company entered into a Security and Pledge Agreement (the “Security Agreement”) by and between the Company and the Lead Investor, in its capacity as collateral agent, pursuant to which the Company granted to the Lead Investor, for the ratable benefit of the Lead Investor and the other July PIPE Investors, a valid, perfected and enforceable security interest in certain assets of the Company and its subsidiaries, which assets include substantially all of the assets of the Company’s U.S. business, and pledged as collateral the equity held by the Company in certain of the Company’s subsidiaries.
Additionally, on July 8, 2025, pursuant to and in connection with the July PIPE SPA, the Company and the July PIPE Investors entered into a Registration Rights Agreement (the “July PIPE RRA”), pursuant to which the Company agreed to file a registration statement with the United States Securities and Exchange Commission (“SEC”) covering the resale of Common Shares that are issuable upon the conversion of the July Notes or the exercise of the July Warrants.
October PIPE Financing
On October 27, 2025, the Company entered into a Securities Purchase Agreement (the “October PIPE SPA”) with certain accredited investors named therein (the “October PIPE Investors”). Certain October PIPE Investors are July PIPE Investors. Pursuant to the October PIPE SPA, up to 38,070 shares of the Company’s Series A convertible preferred stock, par value $0.001 per share (the “Series A Preferred Stock”) and accompanying warrants (“October Warrants”) to purchase shares of the Company’s common stock, par value $0.001 per share (the “Common Stock”) may be purchased for an aggregate purchase price of up to $30.46 million in one or more closings (such transaction, the “October PIPE Financing”).
On October 27, 2025, in connection with the October PIPE Financing, the Company filed with the Secretary of State of the State of Delaware a Certificate of Designations establishing the rights, preferences, and privileges of the newly authorized Series A Preferred Stock.
On October 31, 2025, pursuant to the October PIPE SPA, the Company issued and sold, and the October PIPE Investors purchased, in a private placement: 19,035 shares of the Series A Preferred Stock and 54,527,811 October Warrants to purchase shares of Common Stock for aggregate proceeds of approximately $15.23 million, paid in cash or through the cancellation of such October PIPE Investor’s July Note and July in lieu of cash. The Company waived receipt of the cash portion of the purchase price until November 3, 2025. Pursuant to the October PIPE SPA, the July PIPE Investors waived the requirement under the July PIPE SPA that the Company register for resale 250% of the shares of Common Stock issuable upon the conversion or exercise of the July Notes or July Warrants.
In conjunction with the October PIPE SPA, on October 31, 2025 the Company entered a registration rights agreement with the investors (the “October PIPE RRA”), pursuant to which the Company will be required to file a registration statement with the Securities and Exchange Commission (the “SEC”), to register for resale the Common Stock issuable upon (x) the conversion of the Series A Preferred Stock and (y) the exercise of the October Warrants.
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ELOC Transaction
Concurrently with the issuance of the Notes and Warrants described above under “July PIPE Financing,” on July 7, 2025, the Company and the Selling Stockholder entered into a common share purchase agreement (as amended, the “ELOC Purchase Agreement”), which provides that subject to the terms and conditions set forth therein, the Company may sell to the Selling Stockholder up to the lesser of (i) $50 million of the Company’s common shares, no par value (the “Common Share”) and (ii) the Exchange Cap (as defined below) (subject to certain exceptions provided in the ELOC Purchase Agreement) (the “Total Commitment”), from time to time during the term of the ELOC Purchase Agreement. On October 28, 2025, the Company and the Selling Stockholder executed an amendment to the ELOC Purchase Agreement increasing the Total Commitment from $50 million to $1.0 billion (the “ELOC Amendment”).
Additionally, on July 7, 2025, the Company and the Selling Stockholder entered into a registration rights agreement (the “ELOC RRA”), pursuant to which the Company agreed to file this registration statement with the United States Securities and Exchange Commission (“SEC”) covering the resale of Common Shares that are issued to the Selling Stockholder under the ELOC Purchase Agreement (the “Registration Statement”).
On October 28, 2025, the Selling Stockholder executed a waiver with respect to the ELOC Purchase Agreement and ELOC RRA which waivers allows the Company to register just $27.55 million of Common Stock under the Initial Registration Statement (as defined in the ELOC RRA), rather than $1 billion of Common Stock, due to the constraints of the Company’s currently authorized capital. In the event that the Company’s authorized capital increases, the Company intends to amend this Registration Statement to register an additional $972.45 million of Common Stock, subject to the ELOC Purchase Agreement and ELOC RRA.
Under the terms and subject to the satisfaction of the conditions set forth in the ELOC Purchase Agreement, the Company has the right, but not the obligation, to sell to the Selling Stockholder, and the Selling Stockholder is obligated to purchase, up to the Total Commitment. Such sales of Common Shares by the Company, if any, will be subject to certain limitations as set forth in the ELOC Purchase Agreement, and may occur from time to time, at the Company’s sole discretion, over the period commencing on the date that all of the conditions to the Company’s right to commence such sales are satisfied, including that the registration statement referred to above is declared effective by the SEC and a final form of the prospectus included therein is filed with the SEC (the “Commencement Date”) and ending upon the expiration of this Registration Statement pursuant to Rule 4125(a)(5) of the Securities Act of 1933, as amended, or otherwise upon the termination of the ELOC Purchase Agreement as provided therein. The Selling Stockholder has no right to require the Company to sell any Common Shares to the Selling Stockholder, but the Selling Stockholder is obligated to make purchases as the Company directs, subject to satisfaction of the conditions set forth in the ELOC Purchase Agreement.
As consideration for the Lead Investor entering into the ELOC Purchase Agreement, concurrently with the execution of the ELOC Amendment, the Company issued to the Lead Investor a convertible promissory note in the original principal amount of $20.0 million (the “Keystone Commitment Note”), which is convertible into up to 72,048,620 shares of Common Stock (collectively, the “Keystone Commitment Shares”), assuming a price of $0.3210 per share, which was the closing price of our shares of Common Stock on the NYSE American on October 22, 2025. The Keystone Commitment Note was issued by the Company to the Lead Investor in lieu of the Commitment Shares, as defined in the original ELOC purchase Agreement. The Company also agreed to pay the Lead Investor up to $35,000 for its reasonable expenses under the ELOC Purchase Agreement.
Other Matters
On June 10, 2025, Davender Sohi resigned from his role as President.
On June 11, 2025, the Company announced the following management team and Board of Directors changes: Lionel Conacher, current Board member, was appointed as Chairman of the Board; Adesh Vora, current Executive Chairman, remained on the Board and was appointed Chief Executive Officer; and Kent Cunningham, current Chief Executive Officer, assumed role as President.
On July 15, 2025, Kent Cunningham, current President, was reappointed as Chief Executive Officer, effective July 8, 2025, and Adesh Vora, current Chief Executive Officer and Board member, was named Vice Chairman of the Board.
On August 12, 2025, the Company initiated restructuring proceedings for its SRx Canada subsidiaries under the CCAA. Refer to Note 19 – Discontinued operations for more information.
On August 13, 2025, Adesh Vora resigned from his role as Vice Chairman and was no longer a shareholder nor Board member of the Company.
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Subsequent to September 30, 2025, the Company appointed two new directors to its Board. Joshua Epstein joined the Board effective October 1, 2025, and Sammy Dorf, Esq. was appointed effective November 10, 2025.
On October 8, 2025, the Company’s stockholders, acting by written consent, approved several corporate actions. These actions included authorizing certain issuances of common stock and convertible securities, approving a future private equity offering of securities, amending the Certificate of Incorporation to increase the number of authorized shares, amending the Bylaws to reduce quorum requirements for stockholder meetings, and authorizing an additional reverse stock split of the Company’s common stock at a ratio to be determined by the Board.
On October 31, 2025, the Company accepted the voluntary resignations of directors Lionel F. Conacher and David Allen White. Following these resignations, Michael Young, Simon Conway, and Joshua A. Epstein were appointed to serve on each of the Audit, Compensation, and Nominating & Governance Committees, with each member designated as chairman of one of the committees.
On November 19, 2025, the Company filed a Certificate of Amendment with the Secretary of State of the State of Delaware which increased the number of shares of Common Stock that the Company is authorized to issue from 200,000,000 shares to 5,000,000,000 shares.
Results of Operations for the Years Ended September 30, 2025 and 2024
The following table sets forth our consolidated results for the periods presented (in thousands):
| Years Ended September 30, | Change | |||||||||||||||
| 2025 | 2024 | $ | % | |||||||||||||
| Net sales | $ | 6,534 | $ | — | $ | 6,534 | * | |||||||||
| Cost of goods sold | 5,008 | — | 5,008 | * | ||||||||||||
| Gross profit | 1,526 | — | 1,526 | * | ||||||||||||
| Operating expenses: | ||||||||||||||||
| Selling, general and administrative | 12,932 | — | 12,932 | * | ||||||||||||
| Total operating expenses | 12,932 | — | 12,932 | * | ||||||||||||
| Loss from continuing operations | (11,406 | ) | — | (11,406 | ) | * | ||||||||||
| Other income (expense): | ||||||||||||||||
| Interest expense | (628 | ) | — | (628 | ) | * | ||||||||||
| Loss on extinguishment of debt | (716 | ) | — | (716 | ) | * | ||||||||||
| Bargain purchase gain | 4,111 | — | 4,111 | * | ||||||||||||
| Total other income | 2,767 | — | 2,767 | * | ||||||||||||
| Net loss before income taxes | (8,639 | ) | — | (8,639 | ) | * | ||||||||||
| Income tax expense | — | — | — | * | ||||||||||||
| Total comprehensive loss | $ | (8,639 | ) | $ | — | $ | (8,639 | ) | * | |||||||
*Percentage change is not meaningful due to a prior year balance of zero.
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Net sales
We generate revenue primarily through the sale of premium and super-premium pet food and wellness products under the Halo brand. Revenue is recognized when control transfers to the customer, generally at the point of sale through our digital, international, or brick-and-mortar channels. Most transactions involve a single performance obligation. Reported net sales are reduced by trade promotions, discounts, and other customer incentives, which are estimated and recorded as reductions to gross revenue. We also maintain a reserve for expected product returns based on historical experience. Following the restructuring of SRx Canada and the CCAA proceedings, the Company no longer derives material revenue from specialty pharmacy, clinical services, diagnostics, or pharmaceutical distribution, and its current operations are focused exclusively on the pet health and wellness business.
Information about our revenue channels is as follows (in thousands):
| Year Ended September 30, | ||||||||||||||||
| 2025 | 2024 | |||||||||||||||
| Digital (1) | $ | 5,038 | 77 | % | $ | — | — | % | ||||||||
| International (2) | $ | 1,009 | 15 | % | $ | — | — | % | ||||||||
| Brick & Mortar (3) | $ | 487 | 8 | % | $ | — | — | % | ||||||||
| Net Sales (4) | $ | 6,534 | 100 | % | $ | — | — | % | ||||||||
| (1) | The Company’s Digital channel includes two wholesale customers that amounted to greater than 10% of the Company’s total net sales for the year ended September 30, 2025. |
| (2) | One of the Company’s International customers amounted to greater than 10% of the Company’s total net sales and represented $0.8 million of net sales for the year ended September 30, 2025. |
| (3) | None of the Company’s Brick & Mortar customers represented greater than 10% of net sales for the year ended September 30, 2025. |
| (4) | Prior period amounts have not been presented, as the Company’s prior year operations primarily related to SRX Canada, which has since been deconsolidated and is presented as discontinued operations. Accordingly, the results for the year ended September 30, 2025, reflect only the continuing operations of BTTR and Halo and are not comparable to prior periods. |
Net sales for 2025 were $6.5 million, reflecting revenue generated from the Company’s continuing operations in the Halo pet health and wellness business. Prior-year results for the Halo business are not presented, as the Company only became the reporting entity following the reverse takeover on April 24, 2025. Net sales were driven by the sale of premium and super-premium pet food products across digital, brick-and-mortar, and international channels, reflecting the Company’s focus on product innovation, brand awareness, and meeting consumer demand in multiple trade channels.
As a result of the restructuring of SRx Canada and the Company’s shift to the Consumer Products business, the results of operations for 2025 are not directly comparable to 2024. Prior-year amounts reflect the specialty healthcare business, which has since been discontinued and are thus not presented.
Gross profit
Cost of goods sold for the year ended September 30, 2025, consists primarily of the cost of products obtained from co-manufacturers, packaging materials, freight costs for shipping inventory to the warehouse, and third-party warehouse and order fulfillment expenses. Inventories are periodically reviewed to identify damaged, slow-moving, or aged inventory. Based on this assessment, inventory is recorded at the lower of cost or net realizable value, with any reduction in value expensed as cost of goods sold.
Our products are manufactured to our specifications by co-manufacturers using raw materials that meet our formulation requirements. Co-manufacturers also handle product testing and packaging, with packaging designed by the Company and shipped directly to the manufacturer.
Gross profit is affected by a variety of factors, including product sales mix, volumes sold, discounts offered to customers, the cost of manufactured products, and freight costs from the manufacturer to the warehouse. For the year ended September 30, 2025, gross profit was $1.5 million, with a gross margin of 23%.
We continue to work with co-manufacturing and freight partners to realize future cost savings and improved gross margins. However, gross margins may continue to fluctuate due to inflationary pressures on transportation and raw material costs. We will continue to refine and optimize our pricing strategy to align with market conditions and manage cost pressures.
Operating expenses
Our Selling, general and administrative (“SG&A”) expenses consist of the following:
| ● | Sales and marketing costs for the year ended September 30, 2025 primarily reflect spending on customer acquisition and retention programs, paid media, content development, promotional activities on Amazon and Chewy, and costs associated with supporting the Halo brand portfolio. These expenses also include the Company’s digital marketing initiatives and brand-building programs following the Halo brand renovation and the prior migration of the TruDog brand into the Halo umbrella. Prior-year comparisons are not meaningful due to the reverse takeover and the discontinuation of the SRx Canada operations. Sales and marketing spend in 2025 reflects the Company’s strategic focus on strengthening brand awareness, improving conversion across key e-commerce platforms, and optimizing channel-specific promotional activity, while remaining disciplined in its approach to paid media investment. |
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| ● | Employee compensation and benefits for the year ended September 30, 2025 reflect personnel costs associated with the Company’s continuing operations in the Halo pet health and wellness business. These expenses include salaries, wages, benefits, and stock-based compensation for employees supporting operations, marketing, supply chain, and corporate functions. Compensation levels in 2025 also reflect the impact of organizational restructuring activities completed during the year, including changes in headcount and role realignments following the reverse takeover and the subsequent discontinuation of the SRx Canada business under the CCAA process. As a result, current-year expense levels represent the ongoing cost structure of the standalone Halo business and are not directly comparable to prior periods. |
| ● | Share-based compensation includes expenses related to equity awards granted to employees and non-employee directors. For the year ended September 30, 2025, share-based compensation reflects the ongoing equity incentive programs of the continuing Halo business, including expense recognition for outstanding awards, new grants issued during the period, and common stock issued for board service. Share-based compensation in 2025 also reflects the vesting patterns of historical Better Choice equity awards, including awards that reached full vesting during the year. Because the Company became the reporting entity following the reverse takeover and the SRx Canada operations were subsequently discontinued, prior-year comparative amounts are not meaningful. Current-year expense therefore represents the continuing cost structure of the standalone Halo business. |
| ● | Freight costs for the year ended September 30, 2025 primarily relate to the shipping and logistics associated with fulfilling customer orders across the Company’s retail and e-commerce sales channels. Freight expense in 2025 also reflects the impact of the discontinuation of the direct-to-consumer (“DTC”) channel, which was shut down on June 1, 2024. As a result, freight activity in the current year is primarily driven by shipments to distribution partners, online retailers, and brick-and-mortar customers rather than individual consumer deliveries. Given the changes in the Company’s operating structure following the reverse takeover and the discontinuation of SRx Canada, prior-year comparisons are not meaningful. Current freight costs therefore reflect the ongoing logistics profile of the standalone Halo business. |
| ● | Non-cash charges for the year ended September 30, 2025 primarily consisted of depreciation and amortization, bad debt expense, and gains or losses on the disposal of assets. The Company recorded a gain on the sale of assets of approximately $0.5 million during the period related to the sale of its Halo Asia business. Given the impact of the reverse takeover and the discontinuation of the SRx Canada operations, prior-year comparative amounts are not meaningful. Current-year non-cash activity reflects the operating profile of the standalone Halo business. |
| ● | Other general and administrative costs for the year ended September 30, 2025 primarily reflect expenses incurred for professional services, insurance, and corporate compliance activities. The most significant components for the period included approximately $3.3 million of equity offering-related costs associated with capital markets transactions completed during the fiscal year, professional fees — including legal, financial advisory, and other consulting services — totaling approximately $1.8 million, and insurance expense of approximately $0.4 million. These costs also include routine corporate expenses such as director fees, state feed registration fees, and information technology support. Given the reverse takeover and the discontinuation of the SRx Canada operations, prior-year comparative amounts are not meaningful. Current-year costs reflect the operating and capital markets activities of the standalone Halo business. |
Interest expense, net
Interest income for the year ended September 30, 2025 primarily reflects interest earned on the notes receivable previously extended to SRx Health Solutions Inc. prior to the consummation of the reverse takeover. These notes included a $1.5 million convertible promissory note bearing interest at 25% per annum and a revolving promissory note with borrowing capacity of up to $1.9 million bearing interest at 12% per annum. Accrued interest on these notes continued to be recognized through the transaction date, after which the notes were settled in connection with the business combination at amounts approximating their carrying value.
Following the settlement of the notes receivable and the subsequent discontinuation of the SRx Canada operations under the CCAA process, interest income attributable to these instruments will not recur in future periods. As a result, period-over-period comparisons to prior quarters or fiscal years are not meaningful. Future interest income, if any, will depend on the Company’s capital allocation strategy and investment of excess cash.
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Income taxes
Our income tax expense now reflects only the tax position of the continuing U.S. operations following the discontinuation and deconsolidation of the SRx Canada business as a result of the CCAA proceedings. Accordingly, the Company’s tax provision is based on estimated U.S. federal and state income taxes, adjusted for nondeductible items and the impact of the valuation allowance.
For the year ended September 30, 2025, the Company recorded no material income tax expense or benefit, resulting in a near-zero effective tax rate. The absence of a significant tax benefit is primarily due to the continued maintenance of a full valuation allowance that fully offsets deferred tax assets arising from current-year losses. Prior-year comparative tax amounts related to the former SRx Canada operations are not indicative of the continuing business and are therefore not meaningful.
The Company continues to maintain a full valuation allowance against its U.S. deferred tax assets due to uncertainties regarding the timing and likelihood of generating sufficient future taxable income. Deferred tax assets consist primarily of U.S. federal and state net operating loss (“NOL”) carryforwards, which total approximately $24.0 million on a tax-effected basis and begin to expire at various dates unless utilized. The Company will continue to evaluate both positive and negative evidence each reporting period to determine whether a release of the valuation allowance is warranted. A reversal of the valuation allowance in future periods would reduce income tax expense.
The Company had no uncertain tax positions as of September 30, 2025. We remain subject to examination in the United States for tax years 2021 through 2025.
Non-GAAP Measures
Adjusted EBITDA
We define Adjusted EBITDA to supplement the financial measures prepared in accordance with GAAP. Adjusted EBITDA adjusts EBITDA to eliminate the impact of certain items that we do not consider indicative of our core operations. Adjusted EBITDA is determined by adding the following items to net loss: interest expense, tax expense (benefit), depreciation and amortization, share-based compensation, gain on extinguishment of debt and accounts payable, loss on disposal of assets, transaction-related expenses, and other non-recurring expenses.
We present Adjusted EBITDA as it is a key measure used by our management and board of directors to evaluate our operating performance, generate future operating plans and make strategic decisions regarding the allocation of capital. We believe that the disclosure of Adjusted EBITDA is useful to investors as this non-GAAP measure forms the basis of how our management team reviews and considers our operating results. By disclosing this non-GAAP measure, we believe that we create for investors a greater understanding of and an enhanced level of transparency into the means by which our management team operates our company. We also believe this measure can assist investors in comparing our performance to that of other companies on a consistent basis without regard to certain items that do not directly affect our ongoing operating performance or cash flows.
Adjusted EBITDA does not represent cash flows from operations as defined by GAAP. Adjusted EBITDA has limitations as a financial measure and you should not consider it in isolation, or as a substitute for, or superior to, financial measures calculated in accordance with GAAP. Because of these limitations, you should consider Adjusted EBITDA alongside other financial performance measures, including various cash flow metrics, net loss, gross margin, and our other GAAP results.
The following table presents a reconciliation of net loss, the closest GAAP financial measure, to EBITDA and Adjusted EBITDA for each of the years indicated (in thousands):
| Year Ended September 30, | ||||||||
| 2025 | 2024* | |||||||
| Net loss from continuing operations | $ | (8,639 | ) | $ | — | |||
| Interest expense, net | 628 | — | ||||||
| Income tax expense | — | — | ||||||
| Depreciation and amortization | 31 | — | ||||||
| EBITDA from continuing operations | (7,980 | ) | — | |||||
| Share-based compensation | 3,206 | — | ||||||
| Bargain purchase gain | (4,111 | ) | — | |||||
| Loss on extinguishment of accounts payable | 716 | — | ||||||
| Transaction-related expenses (a) | 6,031 | — | ||||||
| Other single occurrence expenses (b) | 376 | — | ||||||
| Adjusted EBITDA from continuing operations | $ | (1,762 | ) | $ | — | |||
(a) One-time legal fees, professional fees, financing fees, and other expenses for transaction-related business matters
(b) Restructuring costs, severance costs, and other litigation matters
*Prior-year results are not presented because the Halo business, which constitutes the Company’s continuing operations, only became the reporting entity following the reverse takeover completed on April 24, 2025. In addition, the SRx Health Solutions operations, which comprised prior-year results, were subsequently discontinued following SRx’s bankruptcy and are classified as discontinued operations. Accordingly, prior-year amounts for continuing operations are not meaningful and are presented as zero.
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Liquidity and capital resources
Historically, we have financed our operations primarily through debt financing. On September 30, 2025 and 2024, we had cash and cash equivalents of $1.3 million and $0.1 million, respectively.
We are subject to risks common in the healthcare and pharmacy services industry, including, but not limited to, our dependence on key personnel, intense competition, our ability to effectively market and scale our service offerings, the protection and enforcement of proprietary technology and data systems, expansion into new markets or service lines, and compliance with complex and evolving healthcare, data privacy, and pharmaceutical regulations. As of September 30, 2025, we have not experienced a significant adverse impact to our business, financial condition or cash flows resulting from geopolitical actions or threat of cyber-attacks. However, we have seen adverse impacts to our gross margin from time to time due to inflationary pressures in the current economic environment. Uncertainties regarding the continued economic impact of inflationary pressures, geopolitical actions and threat of cyber-attacks are likely to result in sustained market turmoil, which could negatively impact our business, financial condition, and cash flows in the future.
A summary of our cash flows is as follows (in thousands):
| Year Ended September 30, | ||||||||
| 2025 | 2024 | |||||||
| Cash flows (used in) provided by: | ||||||||
| Operating activities | $ | (8,143 | ) | $ | (1,478 | ) | ||
| Investing activities | 5,905 | (1,090 | ) | |||||
| Financing activities | 12,171 | 932 | ||||||
| Net increase (decrease) in cash and cash equivalents | $ | 9,933 | $ | (1,636 | ) | |||
Cash flows from operating activities
Cash used in operating activities increased $6.7 million, or 451%, during the year ended September 30, 2025 compared to $1.5 million during the year ended September 30, 2024. The increase in cash used in operating activities was primarily driven by the $4.1 million bargain purchase gain recognized related to the Merger, partially offset by significant fluctuations in our working capital.
Cash flows from investing activities
Cash provided by investing activities was $5.9 million during the year ended September 30, 2025 compared to cash used in investing activities of $1.1 million during the year ended September 30, 2024. The cash provided by investing activities related to the $5.9 million of cash acquired in business combinations as well as $2.0 million proceeds from the sale of cryptocurrency, offset by $2.1 million of purchases of cryptocurrency.
Cash flows from financing activities
Cash provided by financing activities was $12.2 million, during the year ended September 30, 2025 and $0.9 million during the year ended September 30, 2024. The cash provided by financing activities for the year ended September 30, 2025 was mainly related to net proceeds from the PIPE Offering of $8.8 million and proceeds from the issuance of convertible debt of $6.1 million, partially offset by payments on convertible debt of $1.7 million.
| 47 |
CWB Facility
As of June 30, 2025, SRx Canada maintained senior secured term loan facilities with CWB Financial Group (“CWB”) totaling $23.1 million. These facilities were originally entered into to support the development and acquisition of select pharmacy locations. On September 18, 2023, SRx Health Solutions Inc. refinanced its existing term facilities under a consolidated agreement with CWB that introduced updated financial covenants, including a Senior Funded Debt to Adjusted EBITDA ratio of less than 4.0x and a Fixed Charge Coverage Ratio greater than 1.0x.
As at both June 30, 2025 and 2024, SRx Canada was not in compliance with the CWB loan covenants. As a result, the full amount of the CWB loans was classified as a current liability, and the debt was callable at the lender’s discretion. Interest rates on the outstanding facilities ranged from 8.67% to 9.21%, with contractual maturities extending through late 2027.
The Company initiated restructuring proceedings for its SRx Canada subsidiaries under the Companies’ Creditors Arrangement Act (Canada) (“CCAA”) in August 2025. As part of these proceedings, the CWB debt was addressed through the court-supervised restructuring process and Company has no guarantees to the SRx Canada debt following the wind-down of the SRx Canada operations. Accordingly, the CWB facilities do not form part of the Company’s post-restructuring capital structure. Refer to Note 8 – Debt for additional information.
Contractual Commitments and Obligations
We are contractually obligated to make future cash payments for various items, including debt arrangements, certain purchase obligations, as well as the lease arrangement for our office. See Note 8 – Debt to our audited consolidated financial statements included in this Annual Report on Form 10-K for more information about our debt obligations. Our purchase obligations include certain ongoing marketing projects, software subscriptions as well as in-transit or in-production purchase orders with our suppliers, for which amounts vary depending on the purchasing cycle. The majority of our software subscriptions are not under long-term contracts, and we do not have long-term contracts or commitments with any of our suppliers beyond active purchase orders. These purchase obligations were not material as of the date of this Annual Report on Form 10-K.
Off-Balance Sheet Arrangements
On July 7, 2025, the Company entered into a Common Share Purchase Agreement (the “ELOC”) with a lead investor, under which the Company may sell, at its discretion, up to $50.0 million of its common shares, subject to certain conditions and limitations, including the NYSE American 19.99% Exchange Cap unless stockholder approval is obtained or sales otherwise qualify as “at-market” under applicable rules. The investor is obligated to purchase shares when directed by the Company, subject to the terms of the ELOC, and may not beneficially own more than 4.99% of the Company’s outstanding common shares following any purchase.
In connection with entering into the ELOC, the Company agreed to issue common shares to the investor as commitment consideration (the “Commitment Shares”) and to reimburse up to $35,000 of the investor’s expenses. Although the ELOC provides for the issuance of the Commitment Shares, the Company did not issue any such shares during fiscal year 2025. The Company also entered into a Registration Rights Agreement requiring it to file a resale registration statement covering shares issuable under the ELOC.
As of September 30, 2025, no shares have been sold under the ELOC and no Commitment Shares have been issued, and the ELOC remained unutilized.
Critical Accounting Estimates
Our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with GAAP. The preparation of our consolidated financial statements and related disclosures requires us to make estimates, assumptions and judgments that affect the reported amounts of assets, liabilities, net sales, costs and expenses and related disclosures. We believe that the estimates, assumptions and judgments involved in the accounting policies described below have the greatest potential impact on our financial statements and, therefore, we consider these to be our critical accounting estimates. Accordingly, we evaluate our estimates and assumptions on an ongoing basis. Our actual results may differ from these estimates under different assumptions and conditions. See “Note 1 - Nature of business and summary of significant accounting policies” to our audited consolidated financial statements included in this Annual Report on Form 10-K for a description of our significant accounting policies.
Share-Based Compensation
Share-based compensation expense is measured based on the estimated fair value of awards granted to employees, directors, officers and consultants on the grant date. Forfeitures are accounted for as they occur, therefore there are no forfeiture related estimates required.
The fair value of an option award is estimated on the date of grant using the Black–Scholes option valuation model, which requires the development of input assumptions, as described in “Note 12 - Share-based compensation”. Determining the appropriate fair value model and calculating the fair value of share-based payment awards requires the input of the subjective assumptions described in “Note 12 - Share-based compensation”. The assumptions used in calculating the fair value of share-based payment awards represent management’s best estimates, which involve inherent uncertainties and the application of management’s judgment. See “Note 12 - Share-based compensation” to our audited consolidated financial statements included in this Annual Report on Form 10-K for more information.
| 48 |
Valuation of Derivative Liabilities and Equity-Linked Instruments
The Company’s accounting for convertible notes, embedded conversion features, and warrants requires the application of significant judgment, particularly in assessing the classification and measurement of these instruments under ASC 815, ASC 480, and other relevant guidance. In connection with the July 7, 2025 financing transaction, the Company determined that the embedded conversion option within the senior secured convertible notes should be bifurcated and accounted for as a derivative liability. This determination required management to evaluate the economic characteristics of the conversion feature, assess settlement alternatives, and apply the relevant scope exceptions under U.S. GAAP. The derivative liability is initially recorded at fair value and remeasured at each reporting period, with changes in fair value recognized in earnings, which may result in significant volatility in the Company’s reported results. The fair value of the derivative liability and the related equity-classified warrants is estimated using valuation models such as the Black-Scholes option pricing model or other appropriate techniques, which incorporate assumptions including expected volatility, risk-free interest rates, expected term, and the market price of the Company’s common shares. These inputs involve inherent uncertainty and require considerable management judgment. Actual results could differ materially from the estimates used, and changes in assumptions or market conditions may have a material impact on the Company’s financial position and results of operations. See Note 11 – Warrants and other equity related instruments to our audited consolidated financial statements included in this Annual Report on Form 10-K for more information.
Convertible Notes
The Company’s accounting for its senior secured convertible notes requires the use of significant judgment in applying the guidance in ASC 470-20, ASC 815, and ASC 835. Upon issuance of the Notes on July 7, 2025, management was required to evaluate the economic characteristics and risks of the embedded conversion feature to determine whether it should be separately accounted for. Based on this evaluation, the conversion option did not qualify for equity classification and was bifurcated as a derivative liability measured at fair value. This assessment required consideration of settlement alternatives, the terms of the host debt instrument, and the applicability of scope exceptions under U.S. GAAP. The initial measurement of the Notes also required allocation of proceeds among the debt host contract, the derivative liability, the original issue discount, and issuance costs, each of which impacts the effective interest rate recognized over the life of the Notes. The derivative liability is remeasured at fair value at each reporting date, with changes recorded in earnings, which may produce significant period-to-period volatility. The valuation of the derivative liability incorporates assumptions such as expected volatility, risk-free interest rates, expected term, and market price of the Company’s common shares, all of which involve considerable estimation uncertainty. Changes in these assumptions or market conditions could materially impact the recorded amounts for the Notes, the derivative liability, interest expense, and the Company’s results of operations. See Note 8 – Debt to our audited consolidated financial statements included in this Annual Report on Form 10-K for more information.
| ITEM 7A. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and is not required to provide the information under this Item.
| 49 |
| ITEM 8. | FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA |
SRx Health Solutions Inc. (formerly Better Choice Company, Inc.)
Index to Consolidated Financial Statements
| Page | |
|
Report of Independent Registered Public Accounting Firm
(Davidson and Company LLP; Vancouver, British Columbia; PCAOB ID #
|
51 |
| Report of Independent Registered Public Accounting Firm (MNP LLP, Toronto, Ontario; PCAOB ID #1930) | 52 |
| Consolidated Statements of Operations for the years ended September 30, 2025 and 2024 | 53 |
| Consolidated Balance Sheets as of September 30, 2025 and 2024 | 54 |
| Consolidated Statements of Stockholders’ Equity for the years ended September 30, 2025 and 2024 | 55 |
| Consolidated Statements of Cash Flows for the years ended September 30, 2025 and 2024 | 56 |
| Notes to the Consolidated Financial Statements | 57 |
All financial statement schedules have been omitted, since the required information is not applicable or is not present in amounts sufficient to require submission of the schedule, or because the information required is included in the consolidated financial statements and accompanying notes.
| 50 |
Report of Independent Registered Public Accounting Firm
To the Shareholders and Directors of
SRx Health Solutions Inc.
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheet of SRx Health Solutions Inc. (the “Company”) as of September 30, 2025, and the related consolidated statements of operations, stockholders’ equity, and cash flows for the year ended September 30, 2025, 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 September 30, 2025, and the results of its operations and its cash flows for the year ended September 30, 2025, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits. 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 audits 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 entity’s 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 that 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 audits provide a reasonable basis for our opinion.
/s/
We have served as the Company’s auditor since 2025.
|
|
Chartered Professional Accountants |
December 5, 2025
| 51 |
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Shareholders of SRx Health Solutions Inc.
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated statements of financial position of SRx Health Solutions Inc. and its subsidiaries (the “Company”) as at September 30, 2024 and 2023, and the related consolidated statements of operations, changes in shareholders’ deficit, and cash flows for the years then ended, and the related notes (collectively referred to as the “consolidated financial statements”).
In our opinion, the consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Company as of September 30, 2024 and 2023, and the results of its consolidated operations and its consolidated cash flows for each of the years in the two-year period ended September 30, 2024, in conformity with accounting principles generally accepted in the United States of America.
Material Uncertainty Related to Going Concern
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2.3 to the consolidated financial statements, the Company has incurred a net loss from continuing operations, a negative operating cash flow, a significant deficit and has a net capital deficiency which raises substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 2.3. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. 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 audits 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 consolidated 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 Company’s 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 consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated 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 consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
Chartered Professional Accountants
Licensed Public Accountants
We have served as the Company’s auditor since 2021.
Burlington, Canada
July 9, 2025
| 52 |
SRx Health Solutions Inc. (formerly Better Choice Company, Inc.)
Consolidated Statements of Operations
(Dollars in thousands, except share and per share amounts)
| Year ended September 30, | ||||||||
| 2025 | 2024 | |||||||
| Net sales | $ |
|
$ | |||||
| Cost of goods sold |
|
|||||||
| Gross profit |
|
|||||||
| Operating expenses: | ||||||||
| Selling, general and administrative |
|
|||||||
| Total operating expenses |
|
|||||||
| Loss from continuing operations |
(
|
) | ||||||
| Other income (expense): | ||||||||
| Interest expense |
(
|
) | ||||||
| Loss on extinguishment of debt |
(
|
) | ||||||
| Bargain purchase gain |
|
|||||||
| Total other income |
|
|||||||
| Net loss before income taxes |
(
|
) | ||||||
| Income tax expense | ||||||||
| Net loss from continuing operations |
(
|
) | ||||||
| Loss from discontinued operations |
(
|
) |
(
|
) | ||||
| Total loss |
(
|
) |
(
|
) | ||||
| Reclassification of AOCI related to discontinued operations |
(
|
) | ||||||
| Foreign currency translation related to discontinued operations |
|
|||||||
| Total comprehensive loss | $ |
(
|
) | $ |
(
|
) | ||
| Weighted average number of shares outstanding, basic |
|
|
||||||
| Weighted average number of shares outstanding, diluted |
|
|
||||||
| Loss per share, basic | $ |
(
|
) | $ |
(
|
) | ||
| Loss per share, diluted | $ |
(
|
) | $ |
(
|
) | ||
The accompanying notes are an integral part of these consolidated financial statements.
| 53 |
SRx Health Solutions Inc. (formerly Better Choice Company, Inc.)
Consolidated Balance Sheets
(Dollars in thousands, except share and per share amounts)
| September 30, 2025 | September 30, 2024 | |||||||
| Assets | ||||||||
| Cash and cash equivalents | $ |
|
$ |
|
||||
| Accounts receivable, net |
|
|
||||||
| Inventories, net |
|
|
||||||
| Due from related parties |
|
|||||||
| Prepaid expenses and other current assets |
|
|
||||||
| Current portion of lease receivable |
|
|||||||
| Total Current Assets |
|
|
||||||
| Fixed assets, net |
|
|
||||||
| Right-of-use assets, operating leases |
|
|
||||||
| Lease receivable, long-term |
|
|||||||
| Intangible assets |
|
|||||||
| Deferred tax assets |
|
|||||||
| Other assets |
|
|||||||
| Total Assets | $ |
|
$ |
|
||||
| Liabilities & Stockholders’ Equity | ||||||||
| Current Liabilities | ||||||||
| Accounts payable | $ |
|
$ |
|
||||
| Accrued liabilities |
|
|
||||||
| Current portion of long-term borrowings |
|
|||||||
| Convertible debt, short-term |
|
|||||||
| Operating lease liability, short-term |
|
|
||||||
| Income tax payable |
|
|||||||
| Due to related parties |
|
|||||||
| Deferred revenue |
|
|||||||
| Short-term borrowings |
|
|||||||
| Total Current Liabilities |
|
|
||||||
| Non-current Liabilities | ||||||||
| Long-term borrowings |
|
|||||||
| Operating lease liability, long-term |
|
|||||||
| Convertible debt, long-term |
|
|||||||
| Deferred tax liability |
|
|||||||
| Total Non-current Liabilities |
|
|
||||||
| Total Liabilities |
|
|
||||||
| Stockholders’ Equity | ||||||||
| Common Stock, $ par value, shares authorized, & shares issued and outstanding as of September 30, 2025 and 2024, respectively |
|
|
||||||
| Additional paid-in capital |
|
|
||||||
| Accumulated deficit |
(
|
) |
(
|
) | ||||
| Accumulated other comprehensive income |
|
|||||||
| Total Stockholders’ Equity |
|
(
|
) | |||||
| Total Liabilities and Stockholders’ Equity | $ |
|
$ |
|
||||
The accompanying notes are an integral part of these consolidated financial statements.
| 54 |
SRx Health Solutions Inc. (formerly Better Choice Company, Inc.)
Consolidated Statements of Stockholders’ Equity
(Dollars in thousands, except shares)
| Common Stock | Accumulated Other Comprehensive |
Additional Paid-In
|
Accumulated
|
Total Stockholders’
|
||||||||||||||||||||
| Shares | Amount | Income | Capital | Deficit | Equity | |||||||||||||||||||
| Balance as of September 30, 2023 |
|
$ |
|
$ |
(
|
) | $ |
|
$ |
(
|
) | $ |
(
|
) | ||||||||||
| Capital contribution - debt forgiveness | — | — | — | — | 3,303 | 3,303 | ||||||||||||||||||
| Share-based compensation | — |
|
|
|||||||||||||||||||||
| Settlement of RSUs |
|
|
(
|
) | ||||||||||||||||||||
| Share redemption |
(
|
) |
(
|
) |
|
|||||||||||||||||||
| Acquisitions |
|
|
|
|||||||||||||||||||||
| Private placement |
|
|
|
|||||||||||||||||||||
| Foreign exchange translation adjustment | — |
|
|
|||||||||||||||||||||
| Net loss | — |
(
|
) |
(
|
) | |||||||||||||||||||
| Balance as of September 30, 2024 |
|
$ |
|
$ |
|
$ |
|
$ |
(
|
) | $ |
(
|
) | |||||||||||
| Pre-Merger share-based compensation |
|
|
|
|
||||||||||||||||||||
| Conversion of convertible debt |
|
|
|
|||||||||||||||||||||
| Shares issued for professional services |
|
|
|
|
||||||||||||||||||||
| Shares issued for settlement of accounts payable |
|
|
|
|
||||||||||||||||||||
| Shares issued for private placement |
|
|
|
|||||||||||||||||||||
| Warrant exercises |
|
|||||||||||||||||||||||
| Recapitalization adjustment in connection with Merger |
(
|
) |
(
|
) |
(
|
) |
(
|
) | ||||||||||||||||
| Post-Merger share-based compensation |
|
|
|
|
||||||||||||||||||||
| Shares issued for private placement, post-Merger |
|
|
|
|
||||||||||||||||||||
| Shares issued for acquisition costs |
|
|
|
|
||||||||||||||||||||
| Shares issued to acquire Better Choice |
|
|
|
|
||||||||||||||||||||
| Share repurchase |
(
|
) |
(
|
) |
(
|
) | ||||||||||||||||||
| Exercise of pre-funded warrants |
|
|||||||||||||||||||||||
| Shares issued for professional services |
|
|
|
|
||||||||||||||||||||
| Warrants issued in connection with convertible debt | — |
|
|
|||||||||||||||||||||
| Halo SPV share exchange |
|
|
(
|
) | ||||||||||||||||||||
| Share cancellations |
(
|
) | ||||||||||||||||||||||
| Retraction of exchangeable shares and conversion to common stock |
|
|||||||||||||||||||||||
| Net loss | — |
(
|
) |
(
|
) | |||||||||||||||||||
| Reclassification of AOCI related to discontinued operations | — |
(
|
) |
|
||||||||||||||||||||
| Deconsolidation of SRX (discontinued operations) | — |
(
|
) |
|
|
|||||||||||||||||||
| Balance as of September 30, 2025 |
|
$ |
|
$ | $ |
|
$ |
(
|
) | $ |
|
|||||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
| 55 |
SRx Health Solutions Inc. (formerly Better Choice Company, Inc.)
Consolidated Statements of Cash Flows
(Dollars in thousands)
| Year Ended September 30, | ||||||||
| 2025 | 2024 | |||||||
| Cash Flow from Operating Activities: | ||||||||
| Net loss | $ |
(
|
) | $ |
(
|
) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Income tax payable |
(
|
) | ||||||
| Depreciation and amortization |
|
|
||||||
| Interest expense on lease liability |
|
|||||||
| Impairment of goodwill |
|
|||||||
| Impairment of intangibles |
|
|||||||
| Deferred tax expense |
(
|
) | ||||||
| Share-based compensation |
|
|
||||||
| Bargain purchase gain |
(
|
) | ||||||
| Debt discount amortization |
|
|||||||
| Loss on settlement of accounts payable |
|
|||||||
| Loss on sale of cryptocurrency assets |
|
|||||||
| Other | ||||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable |
|
(
|
) | |||||
| Inventories |
|
|
||||||
| Prepaid expenses and other assets |
(
|
) |
|
|||||
| Accounts payable |
(
|
) |
|
|||||
| Accrued and other liabilities |
|
|
||||||
| Cash Used in Operating Activities | $ |
(
|
) | $ |
(
|
) | ||
| Cash Flow from Investing Activities: | ||||||||
| Capital expenditures, net of disposals | $ | $ |
|
|||||
| Purchase of cryptocurrency |
(
|
) | ||||||
| Proceeds from sale of cryptocurrency |
|
|||||||
| Cash acquired in business combination |
|
|||||||
| Cash paid for acquisitions, net of assets acquired |
(
|
) | ||||||
| Cash Provided by (Used in) Investing Activities | $ |
|
$ |
(
|
) | |||
| Cash Flow from Financing Activities: | ||||||||
| Proceeds from long-term borrowings | $ | $ |
|
|||||
| Repayment of long-term borrowings |
(
|
) | ||||||
| Payment of principal portion of lease liabilities |
(
|
) | ||||||
| Proceeds from share issuance |
|
|||||||
| Proceeds from short-term borrowings |
|
|||||||
| Increase in balance due to related parties |
(
|
) | ||||||
| Proceeds from Wintrust facility |
|
|||||||
| Payments on Wintrust facility |
(
|
) | ||||||
| Proceeds from short-term borrowings |
|
|||||||
| Repayment on short-term borrowings |
(
|
) | ||||||
| Proceeds from issuance of convertible debt |
|
|||||||
| Repayment of convertible debt |
(
|
) | ||||||
| Cash paid for financing costs |
(
|
) | ||||||
| Proceeds from PIPE |
|
|||||||
| Payments for share repurchase |
(
|
) | ||||||
| Cash Provided by Financing Activities | $ |
|
$ |
|
||||
| Net cash provided by (used in) continuing operations | $ |
|
$ |
(
|
) | |||
| Net cash used in discontinued operations |
(
|
) | ||||||
| Net increase (decrease) in cash |
|
(
|
) | |||||
| Effect of foreign currency translation adjustments |
(
|
) |
(
|
) | ||||
| Total cash and cash equivalents, beginning of period |
|
|
||||||
| Total cash and cash equivalents, end of period | $ |
|
$ |
|
||||
| Supplemental schedule of cash flow information: | ||||||||
| Cash paid for interest during the period | $ |
(
|
) | $ |
(
|
) | ||
The accompanying notes are an integral part of these consolidated financial statements.
| 56 |
Notes to the Consolidated Financial Statements
Note 1 – Nature of business and summary of significant accounting policies
Nature of the business
SRx Health Solutions, Inc. (formerly Better Choice Company, Inc.) and its subsidiaries are together referred to in these consolidated financial statements as the “Company”.
On April 24, 2025, SRx Health Solutions, Inc., a corporation incorporated under the laws of the Province of Ontario on April 26, 2022 (“SRx Canada” or the “Accounting Acquirer”), consummated a business combination (the “Merger”) with Better Choice Company, Inc., a Delaware corporation (“Better Choice” or the “Legal Acquirer”). In the Merger, 1000994476 Ontario Inc. (“AcquireCo”), an indirect wholly-owned subsidiary of Better Choice, amalgamated with and into SRx Canada, with SRx Canada surviving the amalgamation and continuing its operations under the new legal name SRx Health Solutions (Canada) Inc. (“SRx Canada”), an indirect wholly-owned subsidiary of Better Choice.
In connection with the Merger, Better Choice changed its corporate name to “SRx Health Solutions, Inc.”, and adopted the operations of the Accounting Acquirer as its primary business. As such, SRx Canada is the continuing reporting entity for accounting purposes. Refer to Note 4 – Business Combinations for more information.
SRx Canada’s registered head office was originally located at 65 Queen Street West, Suite 800, Toronto, Ontario, M5H 2M5. Post the Merger, the Company’s registered head office remained at 801 US Highway 1, North Palm Beach, Florida 33408.
The Company operates as a vertically integrated healthcare organization and branded pet wellness company. The Company consolidated the operations of two business segments: (i) Canadian pharmacy and healthcare services through SRx Canada, and (ii) premium pet health and nutrition products sold through its subsidiary Halo, Purely for Pets, Inc., a Delaware corporation (“Halo”).
Effective during the year ended September 30, 2025, the Company made the strategic decision to discontinue the operations of its Canadian pharmacy and healthcare services business conducted through SRx Canada. As a result, the SRx healthcare business is classified and presented as a discontinued operation in these consolidated financial statements in accordance with ASC 205-20. Following this discontinuation, the Company’s continuing operations consist solely of its premium pet health and nutrition products segment operated through Halo, Purely for Pets, Inc.
On August 12, 2025, SRx Canada initiated restructuring proceedings under the Companies’ Creditors Arrangement Act (“CCAA”) in Canada. The CCAA filing relates exclusively to the discontinued SRx healthcare business and does not impact the Company’s continuing pet food and pet wellness operations. Additional information regarding the discontinuation of the SRx healthcare segment, related CCAA proceedings, and the associated financial reporting impacts is provided in Note 19 – Discontinued operations.
Halo Spin-out Distribution
On
April 25, 2025, the Company distributed (the “Spin-Out Distribution”) to the Better Choice stockholders of record as of April
23, 2025 (the “Record Stockholders”) one share of Class A Common Stock, par value $
, of Halo Spin-Out SPV Inc., a Delaware
corporation (“Halo SPV”), for every one share of Better Choice common stock held by the Record Stockholders. Halo SPV held
The ownership of Halo SPV following the Spin-Out Distribution mirrored the ownership of Better Choice immediately prior to the Merger and the Spin-Out Distribution. As such, the Record Stockholders, who received the Halo SPV shares, are the same ultimate owners who indirectly held Halo prior to the Spin-Out Distribution. Accordingly, the Spin-Out Distribution did not result in a substantive change in ownership of Halo from the perspective of the Company’s consolidated financial statements. In accordance with ASC 810, Consolidation, the Spin-Out Distribution represented a reorganization of ownership interests under common control and was therefore treated as a common control equity reorganization, with transfers of interests accounted for as equity transactions. Halo continues to be fully consolidated, with no change in the Company’s accounting treatment.
On
August 21, 2025, the Company entered into a Share Exchange Agreement (the “Exchange Agreement”) with Halo Spin-Out SPV, whereby
the Company acquired the
| 57 |
Statement of Compliance
The Company’s consolidated financial statements are prepared in accordance with the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”) for annual financial reports and accounting principles generally accepted in the U.S.(“GAAP”). In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. Operating results for the year ended September 30, 2025 are not necessarily indicative of the results that may be expected for any other reporting period.
These consolidated financial statements have been prepared on a historical cost basis, unless otherwise stated in the significant accounting policies. These consolidated financial statements are presented in U.S. dollars and all values are rounded to the nearest thousand ($000), except when otherwise indicated.
Revision of Prior Period Financial Information
As
previously disclosed in the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2025, the Company identified
and corrected an immaterial error in revenue recognized for the fiscal year ended September 30, 2024, related to prescriptions that had
been billed but not dispensed and therefore did not meet the criteria for revenue recognition under ASC 606. The correction resulted
in a reduction to accumulated deficit of approximately $
Consolidation
The consolidated financial statements comprise the financial statements of the Company and its wholly owned subsidiaries. When the Company does not own all of the equity in a subsidiary, the non-controlling interest is disclosed as a separate line item in the consolidated statements of financial position and the earnings accruing to non-controlling interest holders are disclosed as a separate line item in the consolidated statements of operations. The financial results of subsidiaries are included in the consolidated financial statements from the date on which control commences, until the date on which control ceases. Intercompany balances and transactions are eliminated upon consolidation. Control is achieved when the Company is exposed to, or has the right to, variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee.
Going concern
The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities in the ordinary course of business. The Company has historically incurred operating losses and experienced negative operating cash flows; however, management has implemented actions to improve liquidity and operating performance, including cost-reduction initiatives, margin improvement measures, and securing additional financing, as further described in Note 20 – Subsequent events.
After considering these actions and the Company’s cash flow forecasts for the twelve months following the issuance of these consolidated financial statements, management believes the Company will have sufficient liquidity to meet its obligations as they become due. Accordingly, management has determined that there are no material uncertainties that cast doubt on the Company’s going concern status, and the management has a reasonable expectation that the Company has adequate resources to continue in operational existence beyond September 30, 2025, and the consolidated financial statements continue to be prepared using the going concern assumption.
| 58 |
Fiscal, Regulation and Other Federal Policies
Significant changes in, and uncertainty with respect to, legislation, regulation, government policy and economic conditions could adversely affect the Company’s business. Specific legislative and regulatory proposals that could have a material impact on the Company include, but are not limited to, modifications to international trade policy (such as tariffs); public company reporting requirements; and environmental regulation.
The Company cannot predict what actions may ultimately be taken with respect to tariffs or trade relations between the U.S. and other countries, what products may be subject to such actions, or what actions may be taken by the other countries in retaliation. Accordingly, it is difficult to predict how such actions may impact the Company’s business, or the business or habits of its customers. The Company’s business operations, as well as the businesses of its customers on which it is substantially dependent, are located in countries at risk for escalating trade disputes, including the U.S. Any resulting trade wars could have a significant adverse effect on world trade and could adversely impact the Company’s consolidated financial condition, results of operations and cash flows.
Use of estimates
The preparation of the consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the reporting periods. The Company bases its estimates on historical experience and on various other assumptions that the Company believes to be reasonable under the circumstances. On an ongoing basis, the Company evaluates these assumptions, judgments and estimates. Actual results may differ from these estimates.
In the opinion of management, the consolidated financial statements contain all adjustments necessary for a fair statement of the results of operations for the years ended September 30, 2025 and 2024, the financial position as of September 30, 2025 and 2024 and the cash flows for the years ended September 30, 2025 and 2024.
Summary of significant accounting policies
Cash and cash equivalents
Cash and cash equivalents include demand deposits held with banks and highly liquid investments with original maturities of ninety days or less at acquisition date. Cash and cash equivalents are stated at cost, which approximates fair value because of the short-term nature of these instruments.
Accounts receivable and allowance for credit losses
Accounts
receivable consist of unpaid buyer invoices from the Company’s customers and credit card payments receivable from third-party credit
card processing companies. Accounts receivable is stated at the amount billed to customers, net of point of sale and cash discounts.
The Company assesses the collectability of all receivables on an ongoing basis by considering its historical credit loss experience,
current economic conditions, and other relevant factors. Based on this analysis, an allowance for credit losses is recorded, and the
provision is included within SG&A expense. The Company recorded approximately $
Business combinations and goodwill
Business combinations are accounted for using the acquisition method in accordance with ASC 805. The cost of an acquisition is measured as the aggregate of the consideration transferred, which is measured at fair value at the acquisition date, and the amount of any noncontrolling interest in the acquiree. For each business combination, the Company elects to measure the noncontrolling interest either at fair value or at the noncontrolling interest’s proportionate share of the acquiree’s identifiable net assets. Acquisition-related costs are expensed as incurred and included in administrative expenses.
At the acquisition date, the Company assesses the classification and designation of the financial assets and liabilities assumed based on the contractual terms, economic conditions, and other relevant factors, including embedded derivatives in host contracts.
| 59 |
Goodwill is initially measured as the excess of the aggregate consideration transferred, the amount of any noncontrolling interest, and the fair value of any previously held equity interest in the acquiree over the fair value of the net identifiable assets acquired and liabilities assumed. If the fair value of the net assets acquired exceeds the total consideration transferred, the Company reassesses the measurement of the net assets and consideration. If the reassessment confirms the excess, a gain is recognized in the consolidated statement of operations.
After initial recognition, goodwill is carried at cost less any accumulated impairment losses. Goodwill is allocated to the Company’s reporting units, which are generally consistent with its operating segments, for the purpose of annual impairment testing or more frequently if impairment indicators exist.
If a portion of a reporting unit is disposed of, goodwill associated with the disposed reporting unit is included in the carrying amount of the operation when determining the gain or loss on disposal. The goodwill allocated to the disposed operation is measured based on the relative fair values of the portion disposed and the portion retained.
In connection with the reverse merger between SRx and Better Choice, the Company recorded a bargain purchase gain, which arises when the fair value of the net identifiable assets acquired exceeds the total consideration transferred. This typically occurs in a business combination where the acquirer purchases the acquiree at a discount, often due to financial distress or other market factors. In accordance with ASC 805 – Business Combinations, the excess was recognized as a gain in the consolidated statement of operations in the period the transaction closed, after confirming that all assets acquired and liabilities assumed were appropriately measured and no measurement errors existed.
Inventories
Inventories, consisting of finished goods available for sale as well as packaging materials, are valued using the first-in first-out (“FIFO”) method and are recorded at the lower of cost or net realizable value. Cost is determined on a standard cost basis and includes the purchase price, as well as inbound freight costs and packaging costs. Net realizable value is the estimated selling price in the ordinary course of business, less the estimated selling expenses. Inventories are written down to net realizable value when the cost of inventories is estimated to be unrecoverable due to obsolescence, damage, shrinkage, or declining selling prices. Write-downs to inventory are non-reversible even when circumstances that previously caused inventories to be written down below cost no longer exist. The Company records consideration received from suppliers as a reduction to the cost of inventory. These amounts are recognized in cost of sales when the associated inventory is sold.
This policy applies to inventories held in continuing operations. Inventories related to the discontinued Health Solutions segment, previously consisting of SRx Canada pharmacy operations, are classified as assets of discontinued operations and are disclosed separately in Note 19 – Discontinued operations.
Fixed Assets
Fixed assets are recorded at cost and depreciated using the straight-line method over the estimated useful lives of the assets, and depreciation expense is included within SG&A expense. Expenditures for normal repairs and maintenance are charged to operations as incurred. The cost of fixed assets that are retired or otherwise disposed of and the related accumulated depreciation are removed from the fixed asset accounts in the year of disposal and the resulting gain or loss is included in SG&A expense.
The Company assesses potential impairments of its fixed assets whenever events or changes in circumstances indicate that the asset’s carrying value may not be recoverable. An impairment charge would be recognized when the carrying amount of the identified asset grouping exceeds its fair value and is not recoverable, which would occur if the carrying amount exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the identified asset grouping.
Convertible Debt
The Company accounts for convertible debt instruments in accordance with ASC 470, Debt, and ASU 2020-06, which eliminated the requirement to separately account for embedded conversion features as equity when certain criteria are met. As such, convertible debt instruments that do not require separate derivative accounting under ASC 815 are accounted for entirely as liabilities and recorded at amortized cost. Debt issuance costs are capitalized and amortized to interest expense over the term of the instrument using the effective interest method. Upon conversion, the carrying amount of the debt is reclassified to equity with no gain or loss recognized. If a convertible instrument contains an embedded feature that does not qualify for the equity scope exception, it is accounted for separately as a derivative liability at fair value with changes recognized in earnings.
| 60 |
Warrants
The Company accounts for warrants as either equity-classified or liability-classified instruments based on an assessment of the warrant’s specific terms and applicable authoritative guidance in ASC 480 and ASC Topic 815, Derivatives and Hedging (“ASC 815”). The assessment considers whether the warrants are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and whether the warrants meet all of the requirements for equity classification under ASC 815, including whether the warrants are indexed to the Company’s own common stock, among other conditions for equity classification. This assessment, which requires the use of professional judgment, is conducted at the time of warrant issuance and as of each subsequent quarterly period end date while the warrants are outstanding. For issued or modified warrants that meet all of the criteria for equity classification, the warrants are required to be recorded as a component of additional paid-in capital at the time of issuance. For issued or modified warrants that do not meet all the criteria for equity classification, the warrants are required to be recorded at their initial fair value on the date of issuance, and each balance sheet date thereafter. Changes in the estimated fair value of the warrants are recognized as a non-cash gain or loss on the statement of operations. The Pre-Funded and Representative Warrants (as defined in Note 11) are equity classified.
Income taxes
Income taxes are recorded in accordance with FASB ASC Topic 740, “Income Taxes (ASC 740)”, which provides for deferred taxes using an asset and liability approach. The Company recognizes deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the consolidated financial statements or tax returns. Deferred tax assets and liabilities are determined based on the difference between the consolidated financial statements and tax bases of assets and liabilities and for loss and credit carryforwards using enacted tax rates anticipated to be in effect for the year in which the differences are expected to reverse. Valuation allowances are provided, if, based upon the weight of available evidence, it is more likely than not that some or all the deferred tax assets will not be realized.
The Company accounts for uncertain tax positions in accordance with the provisions of ASC 740. When uncertain tax positions exist, the Company recognizes the tax benefit of tax positions to the extent that some or all the benefit will more likely than not be realized. The determination as to whether the tax benefit will more likely than not be realized is based upon the technical merits of the tax position, as well as consideration of the available facts and circumstances. As of September 30, 2025 and 2024, the Company does not have any significant uncertain income tax positions. If incurred, the Company would classify interest and penalties on uncertain tax positions as income tax expense.
The Company was incorporated on May 6, 2019. Prior to this date, the Company operated as a flow through entity for state and U.S. federal tax purposes. The Company files a U.S. federal and state income tax return, including for its wholly owned subsidiaries.
Revenue
The Company generates revenue primarily from the sale of consumer products, including dry food, wet food, treats, and other premium pet products. Revenue is recognized in accordance with ASC 606, Revenue from Contracts with Customers, when control of the promised goods is transferred to the customer, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods.
The Company has concluded that it acts as the principal in its revenue arrangements, as it controls the goods before they are transferred to the customer. The Company does not have material financing components or significant variable consideration in its customer contracts.
Revenue from product sales is recognized when the products are shipped to the customer, which is the point at which control has transferred. Amounts billed and due from customers are recorded as accounts receivable. The Company provides for estimated sales returns and allowances, which are not material. Trade incentives, including customer pricing allowances, merchandising funds, and point-of-sale discounts, are recognized as reductions to revenue based on historical experience, estimated redemption rates, and management’s judgment.
Revenues from services formerly provided by the Health Solutions segment, including specialty healthcare services from SRx Canada, are presented as discontinued operations and are excluded from continuing operations.
The accounting policies for revenue recognition in the Consumer Products segment are consistent with those described above and in the accompanying consolidated financial statements.
Cost of goods sold
Cost of goods sold consists primarily of the cost of product obtained from co-manufacturers, packaging materials, freight costs for shipping inventory to the warehouse, as well as third-party warehouse and order fulfillment costs.
Advertising
The
Company charges advertising costs to expense as incurred and such charges are included in selling, general and administrative (“SG&A”)
expense. The Company’s advertising expenses consist primarily of online advertising, search costs, email advertising and radio
advertising. In addition, the Company reimburses its customers and third parties for in store activities and records these costs as advertising
expenses. Advertising costs were $
| 61 |
Share-based compensation awards are measured at their estimated fair value on each respective grant date. The Company recognizes share-based payment expenses over the requisite service period. The Company’s share-based compensation awards are subject only to service based vesting conditions. Pursuant to ASC 718-10-35-8, the Company recognizes compensation cost for stock awards with only service conditions that have a graded vesting schedule on a straight-line basis over the service period for each separately vesting portion of the award as if the award was, in-substance, multiple awards. Forfeitures are recognized as they occur.
In
April 2024, the Company’s board of directors authorized and approved a stock repurchase plan (the “Repurchase Plan”)
for up to $
Operating leases
The Company determines if a contract or arrangement meets the definition of a lease at inception. The Company has elected to make the accounting policy election for short-term leases. For leases with terms greater than 12 months, the Company records the related asset and obligation at the present value of lease payments over the term. Lease renewal options are only included in the measurement if the Company is reasonably certain to exercise the optional renewals. Any variable lease costs, other than those dependent upon an index or rate, are expensed as incurred. If a lease does not provide a readily available implicit rate, the Company estimates the incremental borrowing discount rate based on information available at lease commencement.
The Company’s only remaining operating lease as of September 30, 2025 relates to office space. There are no material residual value guarantees or material restrictive covenants.
Fair value of financial instruments
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date. The fair value hierarchy uses a framework which requires categorizing assets and liabilities into one of three levels based on the inputs used in valuing the asset or liability.
Level 1 inputs are unadjusted, quoted market prices in active markets for identical assets or liabilities.
Level 2 inputs are observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets or liabilities in active markets or quoted prices for identical assets or liabilities in inactive markets.
Level 3 inputs include unobservable inputs that are supported by little, infrequent or no market activity and reflect management’s own assumptions about inputs used in pricing the asset or liability.
Level 1 provides the most reliable measure of fair value, while Level 3 generally requires significant management judgment. Assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The Company’s financial instruments recognized on the Consolidated Balance Sheets consist of cash and cash equivalents, trade accounts receivable, accounts payable, term loan, line of credit, convertible debt, due to/from related parties, accrued liabilities and other liabilities.
Fair value measurements of non-financial assets and non-financial liabilities reflect Level 3 inputs and are primarily used to measure the estimated fair values of goodwill, other intangible assets and long-lived assets impairment analyses.
Basic and diluted loss per share has been determined by dividing the net loss available to common stockholders for the applicable period by the basic and diluted weighted average number of shares outstanding, respectively. Common stock equivalents are excluded from the computation of diluted weighted average shares outstanding when their effect is anti-dilutive.
| 62 |
Segment information
Operating segments are defined as components of an enterprise for which separate financial information is available and evaluated regularly by the Company’s Chief Operating Decision Maker (“CODM”) in deciding how to allocate resources and assess performance. The Company has determined that its Board of Directors functions as the CODM.
As of September 30, 2025, the Company reports a single reportable segment, Consumer Products, which includes the legacy Halo pet food business. This segment operates primarily in the United States and includes dry food, wet food, treats, and other premium pet products. The Health Solutions operations, previously reported as a separate segment, have been classified as discontinued operations as further described in Note 19 – Discontinued operations.
The Consumer Products segment reflects the Company’s internal management structure and is evaluated by the CODM based on its operational model, customer base, and economic characteristics. The accounting policies of the segment are consistent with those described in the accompanying consolidated financial statements. See Note 16 – Segment information.
Discontinued Operations
The Company classifies a component of its business as a discontinued operation when the operations and cash flows of the component can be clearly distinguished, operationally and for financial reporting purposes, from the rest of the Company, and the component represents a strategic shift that will have a major effect on the Company’s operations and financial results.
Upon classification as a discontinued operation, the results of operations, cash flows, and related assets and liabilities of the component are presented separately in the consolidated financial statements for all periods presented in accordance with ASC 205-20, Presentation of Financial Statements – Discontinued Operations. Gains or losses on the disposal of discontinued operations, including any adjustments to reflect the fair value less costs to sell of net assets, are recognized in the period in which the disposal occurs.
The Company assesses whether any of the assets or liabilities of the discontinued operation are impaired at the date of classification and recognizes any required adjustments in the consolidated financial statements. Subsequent changes in estimates or outcomes related to discontinued operations are recognized in the period of the change.
New Accounting Standards
Recently adopted
There were no new standards that would have an impact on the consolidated financial statements for the year ended September 30, 2025.
Note 2 – Revenue
The Company records revenue net of discounts, which primarily consist of trade promotions, certain customer allowances and early pay discounts. The Company excludes sales taxes collected from revenues. Retail-partner based customers are not subject to sales tax.
Revenue channels
The
Company groups its revenue channels into
| 63 |
Information about the Company’s net sales by revenue channel is as follows (in thousands):
| Year Ended September 30, | ||||||||||||||||
| 2025 | 2024 | |||||||||||||||
| Digital (1) | $ |
|
|
% | $ | % | ||||||||||
| International (2) | $ |
|
|
% | $ | % | ||||||||||
| Brick & Mortar (3) | $ |
|
|
% | $ | % | ||||||||||
| Net Sales (4) | $ |
|
|
% | $ | % | ||||||||||
| (1) |
|
| (2) |
|
| (3) |
|
| (4) |
|
Note 3 - Inventories
Inventories are summarized as follows (in thousands):
| Year Ended September 30, | ||||||||
| 2025 | 2024 | |||||||
| Food, treats and supplements | $ |
|
$ |
|
||||
| Inventory packaging and supplies |
|
|||||||
| Total | $ |
|
$ |
|
||||
| (1) | Inventories as of September 30, 2025 reflect only the continuing operations. Inventories as of September 30, 2024 include amounts related to SRX Canada, which was not classified as discontinued operations at that date. Inventory associated with SRX Canada as of September 30, 2025 is included within “assets of discontinued operations” on the consolidated balance sheet. See Note 19 – Discontinued operations for further information. |
Note 4 - Business combinations
Reverse Merger
On April 24, 2025, SRx Canada entered into an arrangement agreement (the “Arrangement Agreement”, or the “Reverse Merger”) with Better Choice Company, Inc. (“Better Choice”), a publicly listed company on the NYSE American, along with 1000994476 Ontario Inc. (“AcquireCo”), an indirect wholly-owned subsidiary of Better Choice, and 1000994085 Ontario Inc. (“CallCo”), a direct wholly-owned subsidiary of Better Choice, both existing under the laws of the Province of Ontario. Pursuant to the Arrangement Agreement, AcquireCo amalgamated with SRx Canada, with SRx Canada continuing as the surviving entity. As part of the reverse merger, Better Choice changed its name to SRx Health Solutions, Inc., and adopted the operations of SRx Canada as its primary business.
As
consideration, Better Choice issued
shares of its common stock, and AcquireCo issued
exchangeable shares (convertible
into Better Choice common stock on a 1:1 basis). Better Choice shareholders prior to the transaction retained
shares. Upon
closing, former shareholders of SRx Canada held approximately
The
total consideration transferred was less than the fair value of the net assets acquired, resulting in a preliminary bargain purchase
gain of $
In
connection with the closing of the Reverse Merger, the Company issued
shares of common stock for advisory and professional
services rendered to facilitate the completion of the close the transaction. These shares were issued in lieu of cash payment and were
recorded as acquisition-related costs totaling $
In
connection with the Reverse Merger, the Company also completed a private placement on April 24, 2025, issuing
shares of common
stock and
pre-funded warrants for aggregate gross proceeds of $
On
April 25, 2025, the Company entered into a consulting agreement with Terra Nova Business Holdings Inc., an arm’s length party,
under which Terra Nova will provide international logistics and business development services in support of the Company’s Health
Solutions segment. The agreement carries a term of 36 months with monthly consulting fees of $
| 64 |
As
of June 30, 2025, the Company had recorded $
| September 30, 2025 | ||||
| Common stock | $ |
|
||
| Total consideration | $ |
|
||
| Cash and cash equivalents |
|
|||
| Accounts receivable, net |
|
|||
| Inventories, net |
|
|||
| Prepaid expenses and other current assets |
|
|||
| Fixed assets, net |
|
|||
| Right-of-use assets, operating leases |
|
|||
| Other LT assets |
|
|||
| Total assets acquired | $ |
|
||
| Accounts payable |
|
|||
| Accrued liabilities |
|
|||
| Line of credit, short-term |
|
|||
| Operating lease liability, short-term |
|
|||
| Operating lease liability, long-term |
|
|||
| Total liabilities acquired | $ |
|
||
| Net assets acquired | $ |
|
||
| Bargain purchase gain | $ |
(
|
) | |
The following unaudited pro forma financial information presents the combined results of operations of the Company as if the reverse merger with Better Choice had occurred on October 1, 2024, the beginning of the earliest period presented. The pro forma results include adjustments to reflect the acquisition date fair value of assets acquired and liabilities assumed, transaction costs, and the alignment of accounting policies.
| Year Ended September 30, | ||||
| 2025 | ||||
| Revenue | $ |
|
||
| Cost of goods sold |
|
|||
| Selling, general and administrative |
|
|||
| Loss on extinguishment of debt |
|
|||
| Interest expense, net |
|
|||
| Bargain purchase gain |
(
|
) | ||
| Other income |
(
|
) | ||
| Net loss | $ |
(
|
) | |
This supplemental pro forma information is not necessarily indicative of what the Company’s actual results of operations would have been had the acquisition occurred at the beginning of the periods presented, nor does it purport to project future operating results of the combined entity.
| 65 |
Note 5 - Fixed assets
Fixed assets consist of the following (in thousands):
| Estimated Useful Life | September 30, 2025 | September 30, 2024 | ||||||||
| Equipment |
|
$ |
|
$ |
|
|||||
| Furniture and fixtures |
|
|
|
|||||||
| Medical equipment |
|
|
||||||||
| Automobiles |
|
|
||||||||
| Computer software |
|
|
||||||||
| Buildings |
|
|
||||||||
| Leasehold improvements |
Lesser
of
|
|
||||||||
| Signs |
|
|
||||||||
| Total fixed assets |
|
|
||||||||
| Accumulated depreciation |
(
|
) |
(
|
) | ||||||
| Fixed assets, net | $ |
|
$ |
|
||||||
Depreciation
expense related to the continuing business was less than $
Note 6 – Goodwill and intangible assets
Intangible assets
The Company’s intangible assets (in thousands) and related useful lives (in years) relate to the discontinued operations and are as follows:
| September 30, 2024 | ||||||||||||||||||
|
Estimated Useful Life (in years) |
Gross Carrying Amount |
Accumulated Amortization |
Impairment Loss |
Net Carrying Amount |
||||||||||||||
| Computer software |
|
$ |
|
$ |
(
|
) | $ | $ |
|
|||||||||
| Domain/website |
|
|
(
|
) |
|
|||||||||||||
| Customer list |
|
|
(
|
) |
(
|
) |
|
|||||||||||
| Charter license |
|
|
(
|
) |
|
|||||||||||||
| Total intangible assets | $ |
|
$ |
(
|
) | $ |
(
|
) | $ |
|
||||||||
The Company did not have any intangible assets as of September 30, 2025, nor did it record amortization expense for the year ended September 30, 2025.
The
Company recognized an impairment loss of $
The change in the carrying amount of goodwill is summarized as follows:
| Year Ended September 30, | ||||||||
| 2025 | 2024 | |||||||
| Beginning balance | $ | $ |
|
|||||
| Disposals |
(
|
) | ||||||
| Acquisitions |
|
|||||||
| Impairment expense | $ |
(
|
) | |||||
| Total | $ | $ | ||||||
| 66 |
The Company allocates goodwill to its Pharmacy and Prescription Drug Sales reporting unit, which includes multiple operating segments primarily consisting of retail and specialty pharmacies, wholesale distribution of pharmaceuticals, patient support programs, and a diagnostic laboratory.
The impairment was primarily driven by significant adverse changes in expected future cash flows resulting from the Company’s loss of a key contract during the fourth quarter of fiscal 2024, which materially reduced projected revenue for the Pharmacy and Prescription Drug Sales reporting unit. The contract, which accounted for a substantial portion of the reporting unit’s revenue base, was not renewed due to changes in customer procurement strategy. In addition, challenging industry dynamics, including increased pricing pressure from payors and reduced reimbursement rates, contributed to lower long-term growth expectations and operating margin forecasts. These factors, combined with a higher discount rate reflecting increased market volatility and risk specific to the Company’s sector, resulted in a decrease in the estimated fair value of the reporting unit below its carrying amount, triggering goodwill impairment.
As
September 30, 2024, the Company performed a quantitative goodwill impairment test for this reporting unit in accordance with ASC 350,
Intangibles—Goodwill and Other. The fair value of the reporting unit was estimated using a discounted cash flow (DCF) analysis
under the income approach. Based on the results of this analysis, the carrying amount of the reporting unit exceeded its fair value,
resulting in a goodwill impairment charge of $
Note 7 – Leases
The
Company leases its corporate headquarters office space under an operating lease that expires in January 2026. The Company does not intend
to renew this lease. As of September 30, 2025, the operating lease liability related to continuing operations was less than $
Lease
expense for continuing operations for the year ended September 30, 2025 was less than $
| Year | 2025 | |||
| 2026 | $ |
|
||
| Total | $ |
|
||
Note 8 – Debt
Convertible notes
On
July 7, 2025, the Company issued senior secured convertible notes with an aggregate principal amount of $
The
primary conversion feature within the Notes provides the holders the right to convert the principal amount into the Company’s common
stock at a fixed conversion price of $
The Company evaluated this conversion feature under ASC 815-40 and concluded that it meets the criteria for equity classification. Accordingly, the conversion feature was not bifurcated from the host debt instrument and no derivative liability was recognized. In addition, because the Notes were not issued at a substantial premium, no beneficial conversion feature was recorded under ASC 470-20.
Certain other provisions contained within the Notes allow the holder, upon the occurrence of defined triggering events, to convert the debt into common stock at 120 - 125% of the outstanding debt value through maturity. These contingent conversion features do not meet the criteria for equity classification and were therefore bifurcated and accounted for as derivative liabilities under ASC 815.
| 67 |
The table below summarizes the components used to determine the initial carrying amount of the Notes as of July 7, 2025 (in thousands):
| Amount | ||||
| Principal amount | $ |
|
||
| Less: original issue discount |
(
|
) | ||
| Less: issuance costs |
(
|
) | ||
| Add: fair value of derivative liabilities |
|
|||
| Initial carrying amount of Notes at July 7, 2025 | $ |
|
||
The carrying amount of the Notes as of September 30, 2025 is summarized below (in thousands):
| Amount | ||||
| Initial carrying amount | $ |
|
||
| Less: cash payments on convertible debt |
(
|
) | ||
| Add: amortization of debt discount and issuance costs |
|
|||
| Add: change in fair value of derivative liabilities | ||||
| Carrying amount of Notes at September 30, 2025 | $ |
|
||
In
connection with issuing the Notes, the Company executed a Securities Purchase Agreement that also included
After
deducting the original issue discount, issuance costs, fair value of warrants, and the fair value of derivative liabilities, the Company
received net proceeds of approximately $
Subsequent to September 30, 2025, the Company entered into a settlement agreement with the Note holders under which the Notes, together with all accrued interest and associated derivative liabilities, were fully settled and extinguished. The Company will recognize any resulting gain or loss on extinguishment in the period of settlement (see Note 20 – Subsequent events).
Short-term borrowings
| As of September 30, | ||||||||
| 2025 | 2024 | |||||||
| Revolving line of credit | $ | $ |
|
|||||
| Bank indebtedness |
|
|||||||
| Total | $ | $ |
|
|||||
Revolving line of credit
Separately,
in September 2023, the Company entered into a revolving line of credit agreement with Canadian Western Bank (“CWB”) that
permits borrowings up to $
This revolving line of credit relates to the discontinued SRx Health Solutions segment and is presented within discontinued operations.
Revolving Loan – Better Choice
On
September 20, 2024, the Company entered into a revolving credit facility (the “Promissory Note”) with Better Choice Company
Inc. (“BTTR”), under which the Company could borrow, repay, and reborrow up to $
In January 2025, the Promissory Note was further amended to include a provision whereby the outstanding balance would be converted into common shares of the Company upon the closing of a business combination between the Company and BTTR. The Promissory Note was personally guaranteed by Adesh Vora, former CEO of the Company. The agreement contained no financial or non-financial covenants.
| 68 |
On April 24, 2025, in connection with the reverse merger between the Company and BTTR, the full outstanding balance of the Promissory Note, including accrued interest, was converted into common shares of the Company in accordance with the amended terms. As a result, the Promissory Note has been settled in full and derecognized from the financial statements as of September 30, 2025.
No gain or loss was recognized upon conversion. All prior-period balances related to this facility have been extinguished, and no amounts are outstanding under this facility as of September 30, 2025.
Term Facilities
Prior to September 18, 2023, the Company entered into senior secured term facilities with CWB Financial Limited (“CWB”) for a select number of its pharmacy locations. Under the terms of the facility with CWB the Company must maintain a minimum Debt Service Coverage ratio of at least 1.30x. The Debt Service Coverage ratio is based on the combined results for 1093507 B.C. Ltd., Alberta Specialty Rx Inc., ConnectRX Inc., Trillium Pharmaceuticals, Nepean Medical Pharmacy Inc., and two other associated corporations of the Company. On September 18, 2023, the Company refinanced its existing senior secured term debt with CWB under SRx Health Solutions Inc. Under the terms of the facility with CWB the Company must maintain a Senior Funded Debt to Adjusted EBITDA of less than 4.0x and a Fixed Charge Coverage Ratio of greater than 1.0x. As at September 30, 2024, the Company was not in compliance with the covenants and as a result the entire CWB loan was classified as a current liability. The terms of these facilities have been summarized below.
| September 30, 2025 | September 30, 2024 | |||||||||||||||||||
| Amount | Rate |
Maturity date |
Amount | Rate |
Maturity date |
|||||||||||||||
| CWB Financial Limited | $ | — | N/A | $ |
|
|
% |
|
||||||||||||
| CWB Financial Limited | — | N/A |
|
|
% |
|
||||||||||||||
| CWB Financial Limited | — | N/A |
|
|
% |
|
||||||||||||||
| Total | $ | $ |
|
|||||||||||||||||
Other borrowings
| September 30, 2025 | September 30, 2024 | |||||||||||||||||||
| Amount | Rate |
Maturity date |
Amount | Rate |
Maturity date |
|||||||||||||||
| CEBA loans | $ | — | N/A | $ |
|
|
% |
|
||||||||||||
| Macdonald DND Site Development LP | — | N/A |
|
|
% |
|
||||||||||||||
| Meridian OneCap | — | N/A |
|
|
% |
|
||||||||||||||
| Arbinder Sohi | — | N/A |
|
|
% |
|
||||||||||||||
| Total other borrowings | $ | $ |
|
|||||||||||||||||
| Long-term portion of other borrowings |
|
|||||||||||||||||||
The
Company applied to CEBA (Canadian Emergency Business Account) program which is a government assistance program in the form of interest-free
loans provided to small businesses during a period of revenue reduction due to COVID-19. The Company did not repay the loans by the original
maturity date of
This CEBA loan relates to the discontinued SRx Health Solutions segment and is presented within discontinued operations.
The following outlines the current and long-term portion of the term facilities during the year:
| As of September 30, | ||||||||
| 2025 | 2024 | |||||||
| Current portion of long-term borrowings | $ | $ |
|
|||||
| Long-term portion |
|
|||||||
| Total | $ | $ |
|
|||||
Note 9 – Fair value measurements
Fair value hierarchy Levels 1 to 3 are based on the degree to which the fair value is observable:
Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active markets for identical assets or liabilities;
| 69 |
Level 2 fair value measurements are those derived from inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e., as prices) or indirectly (i.e., derived from prices); and
Level 3 fair value measurement are those derived from valuation techniques that include inputs for the asset or liability that are not based on observable market data (unobservable inputs).
The Company has assessed that the fair value of cash, trade and other receivables, and trade and other payables approximate their carrying amounts largely due to the short-term maturities of these instruments.
The carrying amount of the Company’s borrowings are considered to be the same as their fair values, as the terms of the Company’s borrowings are considered to be consistent with the commercial terms prevalent for similar loans. The Company has classified its derivative liability as a Level 3 financial instrument due to the use of unobservable inputs in its valuation.
The Company has no financial instruments classified as Level 2.
Financial risk management
The Company’s activities expose it to a variety of financial risks: credit risk, liquidity risk and market risk (primarily interest rate risk). Risk management is carried out by the Company by identifying and evaluating the financial risks inherent within its operations. The Company’s overall risk management activities seek to minimize potential adverse effects on the Company’s financial performance.
Liquidity risk
The Company is exposed to liquidity risk related to its financial liabilities, including trade payables, short-term borrowings, and convertible debt. Management monitors liquidity through cash flow forecasts and maintains access to credit facilities.
The following table summarizes the contractual maturities of the Company’s financial liabilities (including principal and interest) on an undiscounted basis:
September 30, 2025
| Year 1 | Year 2 | Year 3 | Year 4 |
Year 5 and over |
Total | |||||||||||||||||||
| Convertible debentures |
|
|
||||||||||||||||||||||
| Trade and other payables |
|
|
||||||||||||||||||||||
| Total | $ |
|
$ |
|
$ | $ | $ | $ |
|
|||||||||||||||
As of September 30, 2025, the Company has no financial instruments requiring fair value measurement disclosures that differ from their carrying amounts; accordingly.
Note 10 – Commitments and contingencies
The Company has manufacturing agreements with its vendors that provides for the company to make its commercial best efforts to purchase minimum quantities in the ordinary course of business. The Company had no material purchase obligations as of September 30, 2025 or 2024.
The Company may be involved in legal proceedings, claims, and regulatory, tax, or government inquiries and investigations that arise in the ordinary course of business resulting in loss contingencies. The Company accrues for loss contingencies when losses become probable and are reasonably estimable. If the reasonable estimate of the loss is a range and no amount within the range is a better estimate, the minimum amount of the range is recorded as a liability. Legal costs such as outside counsel fees and expenses are charged to expense in the period incurred and are recorded in SG&A expenses. The Company does not accrue for contingent losses that are considered to be reasonably possible, but not probable; however, the Company discloses the range of such reasonably possible losses. Loss contingencies considered remote are generally not disclosed.
Litigation is subject to numerous uncertainties and the outcome of individual claims and contingencies is not predictable. It is possible that some legal matters for which reserves have or have not been established could result in an unfavorable outcome for the Company and any such unfavorable outcome could be of a material nature or have a material adverse effect on the Company’s consolidated financial condition, results of operations and cash flows. Management is not aware of any claims or lawsuits that may have a material adverse effect on the consolidated financial position or results of operations of the Company.
Discontinued Operations
Certain legal matters, claims, and purchase obligations related to SRx Canada, which is classified as discontinued operations, are presented in Note 19 – Discontinued operations. These matters are subject to the same accounting policies as described above. Management does not expect any such matters to have a material impact on the results of continuing operations; however, they could affect the financial results of the discontinued operations segment.
| 70 |
Note 11 – Warrants and other equity related instruments
Convertible Note and Warrant Financing
On
July 7, 2025, in connection with a financing transaction described in Note 8 – Debt, the Company issued senior secured convertible
notes with an aggregate principal amount of $
The
warrants issued as part of the financing are exercisable for
In connection with the financing, the Company also entered into a registration rights agreement requiring it to register for resale the common shares issuable upon conversion of the notes and exercise of the warrants.
Equity warrants
The fair value of warrants issued is based on the market price of the Company’s common shares on the issue date. All unexercised warrants outstanding at SRx Canada expired prior to the Merger.
The following table summarizes the continuity of the Company’s warrants. Note all pre-merger warrants listed below have been presented to reflect the legal acquirer’s capital structure:
|
Warrants # |
Weighted Average Exercise Price |
|||||||
| Warrants outstanding on September 30, 2023 | $ | |||||||
| Issued |
|
|
||||||
| Exercised | ||||||||
| Expired | ||||||||
| Warrants outstanding on September 30, 2024 |
|
|
||||||
| Issued |
|
|
||||||
| Exercised |
(
|
) |
|
|||||
| Expired |
(
|
) |
|
|||||
| Assumed in merger |
|
$ |
|
|||||
| Warrants outstanding on September 30, 2025 |
|
$ |
|
|||||
On
April 24, 2025, the Company issued to a single investor a combination of
In connection with the Merger completed on April 24, 2025, the Company has adopted the Legal Acquirer’s Amended and Restated 2019 Incentive Award Plan (the “Amended 2019 Plan”). As of September 30, 2025, the maximum number of shares authorized for issuance under the Amended 2019 Plan was . Not more than shares may be issued pursuant to Incentive Stock Options under the Amended 2019 Plan, which is included within the total authorized shares described above. Refer to Management’s Discussion and Analysis for more information.
Awards are measured at grant date fair value in accordance with ASC 718, and compensation expense is recognized over the vesting period on a grade vesting basis.
During the year ended September 30, 2025, the Company recognized $ million of share-based compensation expense related to awards granted subsequent to the Merger.
During the pre-merger period in the year ended September 30, 2025, the Company issued an aggregate of restricted stock units (“RSUs”) to certain directors, officers, and employees, which auto vested upon the Merger closing, and as such, the Company recorded share-based compensation expense of $ million upon issuance. The weighted average grant-date fair value of these RSUs was $ per share.
| 71 |
Additionally, the Company recognized an additional $ million of share-based compensation expense related to the auto-vesting and settlement of RSUs prior to the Merger.
In April 2025, the Company effectuated a Reverse Merger, pursuant to which all outstanding RSUs were converted, at the RSU holder’s election, into a share of common stock or an exchangeable share of common stock of the post-merger entity in accordance with the applicable conversion ratio.
|
RSUs # |
||||
| RSUs outstanding on September 30, 2023 |
|
|||
| Issued |
|
|||
| Vested |
(
|
) | ||
| Forfeited and cancelled |
(
|
) | ||
| RSUs outstanding on September 30, 2024 |
|
|||
| Issued |
|
|||
| Vested |
(
|
) | ||
| Forfeited and cancelled |
(
|
) | ||
| RSUs outstanding on September 30, 2025 | ||||
Stock options
|
Options # |
||||
| Options outstanding on September 30, 2024 | ||||
| Assumed in Merger |
|
|||
| Expired |
(
|
) | ||
| Options outstanding on September 30, 2025 |
|
|||
Shares issued for professional fees
In July 2025, the Company issued shares of common stock to certain arm’s-length advisors in exchange for professional advisory services rendered in connection with financing and capital markets activities. The shares were issued at a weighted-average price of $ per share, and the resulting professional fees were recorded as expense in the accompanying consolidated statements of operations with a corresponding increase to additional paid-in capital.
Additionally,
during the year ended September 30, 2025, the Company issued
shares for the settlement of inventory-related accounts payable
of $
Shares issued to related parties
During the period from July through September 2025, the Company issued an aggregate of shares of restricted common stock to certain directors, officers, employees, and former employees of the Company as performance or service-based compensation.
On August 25, 2025, the Company issued shares of restricted common stock to certain directors, officers, and employees as performance bonus compensation. The restricted stock awards were immediately vested, with a weighted average grant price of $ per share.
On September 16, 2025, the Company issued shares of restricted common stock to certain current and former directors at a weighted average grant price of $ per share. These awards were immediately vested.
Additionally, between July and September 2025, the Company issued shares of common stock pursuant to the retraction of shareholders’ exchangeable shares, which converted into shares of common stock. These shareholders were former employees and shareholders of SRx Canada that initially received exchangeable shares in connection with the Merger.
The fair value of these awards was determined at the grant date and recognized as compensation expense in the consolidated Statement of Operations in accordance with ASC 718.
| 72 |
Note 13 – Employee benefit plans
The Company has a qualified defined contribution 401(k) plan, which covers substantially all of its employees. Participants are entitled to make pre-tax and/or Roth post-tax contributions up to the annual maximums established by the IRS. The Company matches participant contributions pursuant to the terms of the plan, which contributions are limited to a percentage of the participant’s eligible compensation. The Company made contributions related to the plan and recognized expense of less than $0.1 million during the years ended September 30, 2025.
Note 14 – Related party transactions
Related Party Loans and Balances
As
of September 30, 2025, the Company had outstanding convertible promissory notes held by certain members of the Board of Directors totaling
$
For
the fiscal year ended September 30, 2025, the Company’s continuing operations incurred approximately $
During the year ended September 30, 2025, the Company issued to its directors and executive officers an aggregate of $ million in share based compensation.
During
the year ended September 30, 2025, the Company paid its executive officers an aggregate of $
During the fiscal year ended September 30, 2024, prior to the Merger, SRx Canada, while privately held, engaged in non-interest-bearing working capital advances with its largest shareholder and entities under common control, intended to provide short-term liquidity. These advances were non-interest-bearing, not governed by formal written agreements, and SRx Canada did not incur or recognize interest expense in connection with these transactions.
As previously disclosed, for the fiscal year ended September 30, 2024, all material related party loans were forgiven and the Company recorded a capital contribution. No amounts remained outstanding prior to the merger.
As of September 30, 2025 and 2024 there were no other related party loans or receivables outstanding for any shareholder with greater than 10% ownership, and the Company does not intend to enter into similar related party lending arrangements in the future.
Related party balances are summarized as follows:
| As of September 30, | ||||||||
| 2025 | 2024 | |||||||
| Due from former affiliates | $ | $ |
|
|||||
| Due from shareholders related to acquisitions |
|
|||||||
| Total due from related parties | $ | $ |
|
|||||
| Due to former affiliates |
(
|
) | ||||||
| Due to shareholders related to acquisitions |
(
|
) | ||||||
| Ending due from related shareholders | $ | $ |
|
|||||
Governance and controls
The Company has adopted a formal Related Party Transaction Policy to ensure appropriate oversight of any future transactions with related parties. All related party transactions are subject to review and approval by the Audit Committee of the Board of Directors, in accordance with SEC Regulation S-K Item 404 and the Company’s internal policies.
| 73 |
Note 15 – Income taxes
For
the year ended September 30, 2025, the Company recorded income tax expense of less than $
The
following table is a reconciliation of the components that caused the Company’s provision for income taxes to differ from amounts
computed by applying the U.S. federal statutory rate of
| Year ended September 30, | ||||||||
| 2025 | ||||||||
| Statutory U.S. Federal income tax | $ |
(
|
) |
|
% | |||
| State income taxes, net |
(
|
) |
|
% | ||||
| Meals and entertainment |
(
|
) | % | |||||
| Bargain purchase |
(
|
) |
|
% | ||||
| Warrant valuation | % | |||||||
| Tax effect of non-deductible equity instruments | % | |||||||
| Change in valuation allowance |
|
(
|
)% | |||||
| Other |
|
% | ||||||
| Total provision | $ |
(
|
)% | |||||
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.
Significant components of the Company’s deferred tax assets and liabilities are as follows (in thousands):
| September 30, | ||||
| 2025 | ||||
| Deferred income tax assets: | ||||
| Fixed assets | $ |
(
|
) | |
| Intangibles | ||||
| Inventory |
|
|||
| Stock options |
|
|||
| Payroll |
|
|||
| Other assets |
|
|||
| Lease assets (liabilities), net |
|
|||
| Net operating loss carryforwards |
|
|||
| Gross deferred tax assets |
|
|||
| Valuation allowance |
(
|
) | ||
| Net deferred tax assets | $ | |||
As
of September 30, 2025, the Company had deferred tax assets (before valuation allowance) primarily related to U.S. federal and state
net operating loss (“NOL”) carryforwards of approximately $
The Internal Revenue Code, as amended (“IRC”), imposes restrictions on the utilization of NOLs and other tax attributes in the event of an “ownership change” of a corporation. Accordingly, a company’s ability to use pre-change NOLs may be limited as prescribed under IRC Section 382. Events which may limit the amount of NOLs and credits that can be utilized annually include, but are not limited to, a cumulative ownership change of more than 50% over a three-year period.
Management evaluates both positive and negative evidence to determine whether sufficient future taxable income is likely to be generated to realize deferred tax assets. A significant piece of objective negative evidence considered is the cumulative loss incurred through the years ended September 30, 2025 and 2024. This objective evidence limits the consideration of other subjective positive evidence, such as current -year taxable income and future income projections.
Based
on this evaluation, as of September 30, 2025, the Company recorded a full valuation allowance of approximately $
| 74 |
The following table reconciles the statutory federal income tax rate to the Company’s effective tax rate for the year ended September 30, 2025 (in thousands, except percentages):
| Year Ended September 30, 2025 | ||||||||
| Amount ($) | Effect on ETR (%) | |||||||
| Federal statutory rate | $ |
(
|
) |
|
% | |||
| State income taxes, net of federal benefit |
|
% | ||||||
| Nondeductible items |
|
% | ||||||
| Bargain purchase |
(
|
) |
|
% | ||||
| Change in valuation allowance |
|
|
% | |||||
| Other |
(
|
) | % | |||||
| Total income tax provision | $ | % | ||||||
As
of September 30, 2025, the Company does not have any significant uncertain tax positions and
The Company is subject to taxation in the U.S. federal and various state jurisdictions. The Company is not currently under audit by any taxing authorities. The Company remains open to examination by U.S. federal and state tax authorities for the tax years 2021 through 2025. Federal and state net operating losses are subject to review by taxing authorities in the year utilized and in future years. The Company has no uncertain tax positions as of September 30, 2025.
Note 16 – Segment information
As
of September 30, 2025, the Company reports
The Consumer Products segment includes the legacy Halo pet food business, consisting of premium pet products such as dry kibble, wet food, freeze-dried raw food, treats, and toppers for dogs and cats. This segment operates across various sales channels and represents the Company’s ongoing business.
The Health Solutions segment, which encompassed the Company’s pharmacy network operations in Canada, has been classified as discontinued operations as of September 30, 2025, and accordingly, its results and related assets and liabilities are reported separately in the financial statements.
Prior to discontinuation, the Company’s Chief Operating Decision Maker (“CODM”), the Board of Directors, evaluated the Company’s financial performance based on two segments: Health Solutions and Consumer Products. Following the classification of Health Solutions as discontinued, segment reporting focuses exclusively on the Consumer Products business.
For the year ended September 30, 2025, segment financial information for continuing operations relates solely to the Consumer Products segment, which was acquired through business combination on April 25, 2025. There are no comparative results for 2024, as all operations that existed in 2024 relate to the Health Solutions segment, which is now classified as discontinued.
| 75 |
The following table summarizes revenues, gross margin, and Adjusted EBITDA for the continuing Consumer Products segment for the years ended September 30, 2025 (in thousands):
| Twelve months Ended September 30, | ||||||||
| 2025 | 2024 | |||||||
| Net sales | $ |
|
$ | |||||
| Cost of goods sold: | ||||||||
| Direct |
|
|||||||
| Indirect |
|
|||||||
| Total cost of goods sold |
|
|||||||
| Gross profit |
|
|||||||
| Segment expenses: | ||||||||
| Discretionary marketing |
|
|||||||
| Outbound freight |
|
|||||||
| Other segment expenses (a) |
|
|||||||
| Total segment expenses |
|
|||||||
| Loss from operations |
(
|
) | ||||||
| Other income (expense): | ||||||||
| Interest expense |
(
|
) | ||||||
| Loss on extinguishment of debt |
(
|
) | ||||||
| Bargain purchase gain |
|
|||||||
| Other expense | ||||||||
| Total other income (expense) |
|
|||||||
| Net loss before income taxes |
(
|
) | ||||||
| Income tax expense | ||||||||
| Net loss | $ |
(
|
) | $ | ||||
| (a) |
|
The accounting policies of the segment are consistent with those described in Note 1 - Summary of Significant Accounting Policies.
Geographic Information
Revenue by geography is based on where the customer is based. Summary financial data attributable to various geographic regions for the years indicated is as follows:
| Year Ended September 30, | ||||||||
| 2025 | 2024 | |||||||
| United States | $ |
|
$ | |||||
| Taiwan |
|
|||||||
| Other |
|
|||||||
| Total | $ |
|
$ | |||||
Note 17 – Concentrations
Major suppliers
The
Company sourced approximately
Major customers
Accounts
receivable from three customers represented
| 76 |
Credit risk
As of September 30, 2025 and 2024, the Company’s cash and cash equivalents were deposited in accounts at several financial institutions and may maintain some balances in excess of federally insured limits. The Company maintains its cash and cash equivalents with high-quality, accredited financial institutions and, accordingly, such funds are subject to minimal credit risk. The Company has not experienced any losses historically in these accounts and believes it is not exposed to significant credit risk in its cash and cash equivalents.
The Company is also exposed to credit risk on its trade accounts receivable. In evaluating expected credit losses under ASC 326, the Company considers historical collection experience, the credit quality of its customers, and current economic conditions. Historically, the Company has experienced minimal bad debts and high collection rates, and as such, expected credit losses on accounts receivable are considered low and the related allowance is not material.
The Company presents net loss per share on a basic and diluted basis for the years ended September 30, 2025 and 2024. Basic loss per share is computed by dividing net loss by the weighted average number of common shares outstanding (“WASO”) during the period. For the years ended September 30, 2025 and 2024, the Company’s basic and diluted net loss per share attributable to common stockholders are the same as the Company generated a net loss.
For the year ended September 30, 2025, the Company’s basic and diluted net loss per share attributable to common stockholders are the same as the Company generated a net loss and common stock equivalents are excluded from diluted net loss per share as they have an anti-dilutive impact.
For the year ended September 30, 2025, potentially dilutive securities not included in the calculation of diluted net loss per share, because to do so would be anti-dilutive, are as follows: of stock equivalent warrants; and of stock equivalent employee stock options.
The Company’s discontinued operations relate entirely to SRx Health Solutions, Inc., which was disposed of during the year ended September 30, 2025. Net loss per share from discontinued operations is presented separately in accordance with ASC 205-20 and ASC 260. Basic and diluted net loss per share from discontinued operations are calculated using the same weighted average number of shares as used for continuing operations.
| Net loss | Weighted average shares | Loss per share | ||||||||||
| Continuing operations, basic and diluted | $ | ) | $ | ) | ||||||||
| Discontinued operations, basic and diluted | $ | ) | $ | ) | ||||||||
| Net loss | $ |
(
|
) | $ | ) | |||||||
Note 19 – Discontinued operations
On August 11, 2025, the Company’s wholly-owned subsidiary, SRx Health Solutions Inc. (“Health Solutions” or the “Discontinued Operations”), filed for protection under the Companies’ Creditors Arrangement Act (“CCAA”). As a result, the Health Solutions segment has been classified as discontinued operations for all periods presented. The financial statements for the years ended September 30, 2025 and 2024 reflect only continuing operations, and results of the discontinued Health Solutions segment are presented separately in this footnote.
Results of Operations of Discontinued Operations
The results of operations for the Health Solutions segment included in discontinued operations are as follows (in thousands):
| Year ended September 30, | ||||||||
| 2025 | 2024 | |||||||
| Net sales | $ |
|
$ |
|
||||
| Cost of sales |
|
|
||||||
| Income tax expense (benefit) |
|
(
|
) | |||||
| Net loss from discontinued operations |
(
|
) |
(
|
) | ||||
| 77 |
Cash Flows of Discontinued Operations
The cash flows attributable to the Health Solutions segment are summarized as follows (in thousands):
| Year Ended September 30, | ||||||||
| 2025 | 2024 | |||||||
| Cash flows (used in) provided by: | ||||||||
| Operating activities | $ |
(
|
) | $ |
(
|
) | ||
| Investing activities |
|
(
|
) | |||||
| Financing activities |
(
|
) |
|
|||||
| Net decrease in cash and cash equivalents | $ |
(
|
) | $ |
(
|
) | ||
Notes and Additional Information
All prior period results for Health Solutions, including the year ended September 30, 2024, are presented within discontinued operations.
All historical acquisitions associated with the Health Solutions segment relate solely to the discontinued business and were fully deconsolidated in connection with the CCAA process; accordingly, no ASC 805 business combination disclosures are included within the Company’s continuing operations.
The financial impact of Health Solutions’ filing under CCAA is reflected in the measurement of net assets and any associated impairment or restructuring charges, if applicable. Refer to Note 10 – Commitments and contingencies for additional details related to obligations of the discontinued operations.
The Company was subject to certain financial covenants under its senior secured term facilities with Canadian Western Bank (“CWB”) related to SRx Canada. As of the date of CCAA filing and subsequent disposal of the business, the Company was not in compliance with these covenants. The debt associated with these facilities has been deconsolidated from the Company’s financial statements. The underlying obligations, however, will not be legally settled or extinguished until completion of the CCAA process.
Subsequent to September 30, 2025, the Company entered into a Settlement, Share Forfeiture and Mutual Release Agreement with certain former founders and officers of SRx Canada, resulting in the forfeiture and cancellation of shares of SRx Canada stock, of which were common shares of the Company. The remaining shares were exchangeable into Company common stock on a one-for-one basis. This transaction has been reflected in the post-closing adjustments to the discontinued operations results.
Note 20 – Subsequent events
The Company has evaluated subsequent events and transactions that occurred after the balance sheet date up to the date that the financial statements were issued for potential recognition or disclosure. Other than the following, the Company did not identify any subsequent events that would have required adjustment or disclosure in the consolidated financial statements.
Election and Departure of Directors
On October 1, 2025, the Board of Directors appointed Joshua A. Epstein, as a director of the Company, effective immediately, to serve in such capacity until a successor has been elected and qualified, or until his resignation or removal.
On October 31, 2025, the Company accepted the voluntary resignation of directors Lionel F. Conacher and David Allen White. Following these resignations, Michael Young, Simon Conway, and Joshua A. Epstein serve on each of the Audit, Compensation, and Nominating & Governance Committees, with each serving as chairman of one committee.
On November 10, 2025, the Board of Directors appointed Sammy Dorf, Esq. as a director of the Company, effective immediately, to serve in such capacity until a successor has been elected and qualified, or until his resignation or removal.
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Submission of Matters to a Vote of Security Holders
On October 8, 2025, stockholders holding a majority of the voting power of the Company entitled to vote as of the record date of October 7, 2025 approved a number of corporate matters. These actions included authorizing certain issuances of common stock and convertible securities, approving a future private equity offering of securities, amending the Certificate of Incorporation to increase authorized shares, amending the Bylaws to reduce quorum requirements, and authorizing an additional reverse stock split of the common stock at a ratio to be determined by the Board. Refer to the definitive information statement filed via form DEF 14C with the SEC on October 20, 2025.
Series A PIPE
On
October 27, 2025, the Company entered into a Securities Purchase Agreement with certain accredited investors named therein. Pursuant
to the Securities Purchase Agreement, up to
shares of the Company’s Series A convertible preferred stock, par value $
per share, and accompanying warrants to purchase shares of the Company’s common stock, par value $
per share, may be purchased
for an aggregate purchase price of up to $
On
October 31, 2025, pursuant to the Securities Purchase Agreement, the Company issued and sold, and certain investors purchased, in a private
placement (the “Private Placement”):
shares of the Series A Preferred Stock and
Warrants to purchase shares
of Common Stock for aggregate proceeds of approximately $
As a result of the cancellation of the investors’ July Note and Warrants that comprised the purchase price of the Series A Private Placement, the Company no longer had any outstanding obligations under its convertible notes instruments issued in July 2025 as of the date the financial statements were issued. These events did not require adjustment to the September 30, 2025 consolidated financial statements but are disclosed to provide information regarding significant post–balance sheet financing activities.
In conjunction with the Securities Purchase Agreement, on October 31, 2025 the Company entered a registration rights agreement with the investors, pursuant to which the Company will be required to file a registration statement with the SEC, to register for resale the Common Stock issuable upon (x) the conversion of the Series A Preferred Stock and (y) the exercise of the Warrants. The preliminary registration statement was filed via form S-1 on November 7, 2025.
ELOC Amendment
On
October 28, 2025, the Company amended the common stock purchase agreement it entered into on July 7, 2025 (“ELOC”) with an
accredited investor,
No amounts were drawn under the amended ELOC as of the date the financial statements were issued. The amendment does not affect the balances recorded as of September 30, 2025, but is disclosed to provide information regarding post–balance sheet financing arrangements.
Amendment to Articles of Incorporation
On November 19, 2025, the Company filed a Certificate of Amendment with the Secretary of State of the State of Delaware which increased the number of shares of Common Stock that the Company is authorized to issue from shares to shares.
Issuance of Incentive Awards
On December 3, 2025, the Company recognized approximately $ million of share-based compensation expense in connection with granting million shares of fully vested restricted stock to directors, officers and certain employees for their services related to recent financing transactions, as recommended by the Compensation Committee and approved by the Board on October 31, 2025.
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| ITEM 9. | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE |
The information required by Item 304 of Regulation S-K regarding the change in our independent registered public accounting firm is incorporated herein by reference to our Current Report on Form 8-K filed on September 19, 2025.
| ITEM 9A. | CONTROLS AND PROCEDURES |
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our chief executive officer (our principal executive officer) and our chief financial officer (our principal financial officer), evaluated the effectiveness of our disclosure controls and procedures as of the year ended September 30, 2025. Based upon that evaluation, our principal executive officer and principal financial officer concluded that, as of September 30, 2025, our disclosure controls and procedures were effective. Notwithstanding this conclusion, we have determined that the consolidated financial statements included in this Form 10-K fairly present, in all material respects, our financial position, results of operations and cash flows for the periods presented in conformity with accounting principles generally accepted in the United States of America.
Management’s Annual Report on Internal Control Over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13a-15(f) and 15d-15(f) under the Exchange Act. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projection of any evaluation of effectiveness to future periods is subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with policies or procedures may deteriorate. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control – Integrated Framework (2013 Framework). Based on this assessment, management concluded that, as of September 30, 2025, the Company’s internal control over financial reporting was effective.
Changes in Internal Control Over Financial Reporting
There has not been any change in our internal controls over financial reporting identified in connection with the evaluation that occurred during the quarter ended September 30, 2025 that has materially affected, or is reasonably likely to materially affect, those controls.
Attestation Report of Independent Registered Public Accounting Firm
This Annual Report on Form 10-K does not include an attestation report of the Company’s registered public accounting firm, as non-accelerated filers are exempt from the auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act.
| ITEM 9B. | OTHER INFORMATION |
10b5-1 Plans
During
the year ended September 30, 2025, no director or officer (as defined in Rule 16a-1(f) under the Exchange Act) of the Company
Insider Trading Policy
The
Company has adopted
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PART III
| ITEM 10. | DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE |
The following table sets forth the names and positions of our executive officers and directors serving as of such date of filing of this annual report on Form 10-K. Directors will be elected at our annual meeting of stockholders and serve for one year or until their successors are elected and qualify. Officers are elected by the Board and their terms of office are, except to the extent governed by employment contract, at the discretion of the Board.
| Name | Age | Position | Director Since | |||
| Kent Cunningham | 55 | Chief Executive Officer | n/a | |||
| Carolina Martinez | 36 | Chief Financial Officer, Secretary and Treasurer | n/a | |||
| Michael Young | 48 | Director | 2019 | |||
| Simon Conway | 57 | Director | 2025 | |||
| Joshua A. Epstein | 46 | Director | 2025 | |||
| Sammy Dorf | 40 | Director | 2025 |
(1) On October 31, 2025, each of Lionel F. Conacher and David A. White voluntarily resigned from the Company’s Board of Directors.
Kent Cunningham . Mr. Cunningham was appointed as Chief Executive Officer of the Company effective July 8, 2025. He previously served as the Chief Executive Officer of Better Choice since May 22, 2023. Prior to joining the Company, Mr. Cunningham was a Principal with Catapult Consulting where he provided management and M&A advisory consulting services from February 2022 to May 2023. Prior to consulting, Mr. Cunningham served as the Chief Executive Officer of 1440 Foods, a sports and active nutrition company, between August 2021 and January 2022. Prior to 1440 Foods, he was a General Manager at The Bountiful Company, an American dietary supplements company, from May 2019 to August 2021. Prior to The Bountiful Company, Mr. Cunningham was Chief Marketing Officer for Whole Earth Brands, a global food company providing plant-based sweeteners and flavor enhancers, between April 2018 and May 2019. From 2013 to April 2018, Mr. Cunningham held various marketing positions at Glanbia Performance Nutrition, a global nutrition company. From 2006 to 2013, Mr. Cunningham held various Marketing positions at MARS Petcare, owner of several health and nutrition pet food brands. Mr. Cunningham is a passionate brand builder and business leader with over 25 years of CPG and Health & Wellness marketing and sales experience across a range of corporate environments and categories including accelerating growth within multinationals, brand turnarounds and high value exits in the private equity business for the likes of KKR & Co. Inc. Mr. Cunningham holds an MBA in Marketing from Vanderbilt University and a BA in Communications from the University of Michigan. Mr. Cunningham was appointed as a member of the Board, effective April 1, 2024.
Carolina (“Nina”) Martinez . Mrs. Martinez was appointed as Chief Financial Officer, effective April 24, 2025. She had previously served as the Chief Financial Officer of Better Choice since August 2, 2023. Mrs. Martinez was previously appointed and served as the Interim Chief Financial Officer, Secretary and Treasurer of the Company effective as of April 3, 2023, and will continue to serve as the Secretary and Treasurer of the Company. Prior to joining the Company, Mrs. Martinez was a Director of CFO Partnership Solutions at ONE10 Advisors, LLC, (“ONE10 Advisors”) a strategic finance and accounting advisory firm in Tampa, FL. Prior to joining ONE10 Advisors in January 2022, Mrs. Martinez spent nine years at PricewaterhouseCoopers, LLP where she served as a Manager in the National Quality Organization office from March through December 2021, and in various assurance roles from January 2013 through March 2021 where she primarily served publicly traded companies. Mrs. Martinez is a Certified Public Accountant in the State of Florida and holds a Master of Science in Accounting from The University of Tampa and a Bachelor of Science in Business Administration, Accounting from the University of Central Florida.
Michael Young . Mr. Young has served as our Chairman since December 2019. Mr. Young is a founding partner of Cottingham Capital, an investment company focused on real estate and technology investment, where he has served as Managing Partner since its inception in January 2017. Prior to January 2017, Mr. Young served as the Managing Director and Co-Head of Trading of GMP Securities, L.P., a Canadian investment bank. Mr. Young currently serves on the boards of Aerues Inc., an anti-microbial copper coating technology company, and XIB I Capital Corp., a capital pool company, and was previously on the boards of Nuuvera Corp. and ICC Labs. Mr. Young holds a diploma in Finance from George Brown College. We believe Mr. Young’s qualifications to serve as a director of our Company include his extensive senior level executive management and trading experience in the Canadian and U.S. capital markets and his experience on other public company boards of directors.
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Simon Conway. Mr. Conway was qualified as a Chartered Accountant in 1993. After leaving Stoy Hayward created an independent real estate business. In 1999 Simon created with Anthony Lyons St. James Capital which focused on UK real estate. Between 1999 and 2004 St. James Capital created a mixed use portfolio that specialised in hospitality and retail investments with a combined value of £245 million. In 2004 he acquired with Lyons London’s leading exhibition centre, Earls Court & Olympia (EC&O) for £225 million. EC&O featured over 1 mil square feet of real estate, visitor numbers of over 4 million per annum and 375 staff. At EC&O Simon served as Chief Operating Officer, before selling the business to Liberty International plc in 2007 for £380 million. In 2007 Simon co-founded with Lyons, Matterhorn Capital, which has been actively involved with real estate in the UK, France and the USA. Since 2012, Simon has served as Chief Operating Officer to Future Energy Solutions and its global operations. In addition to the roles at Matterhorn and Future Energy Solutions acts as advisor and a NED to start up business using experience gained in finance, real estate, management process and accounting.
Joshua A. Epstein. Joshua A. Epstein joined the Board on October 1, 2025. Mr. Epstein has over 20 years of operational, advisory and investing experience in the energy, technology, healthcare, medical cannabis, blockchain, and gaming sectors, including as an executive, investor, and attorney. Since December of 2024, Mr. Epstein has been the head of Corporate Development and on the Board of Managers for for Lisbon Valley Mining Co., overseeing all capital markets, M&A, partnership, and other transactional activities for the producing copper mine in Southeast Utah. Formerly, from March 2021 to November 2024, Mr. Epstein was a consultant to JJR Private Capital, a Florida and Toronto-based private equity firm founded in 2003. Previously, Mr. Epstein served as the CEO and Director of Socati Corp., a vertically integrated manufacturer of ingredients and consumer products for global cannabinoid and wellness markets. Prior to Socati, Mr. Epstein served as President and COO of Nuuvera Inc., an international wellness and medical cannabis company founded in 2016 that later listed on the Toronto Stock Exchange–V and sold to Tilray Inc. (NASDAQ: TLRY) (formerly Aphria Inc.) in 2018. Mr. Epstein was previously a Partner with FastForward Innovations Ltd., an early-stage venture capital firm where he oversaw investments and divestitures of the firm’s portfolio companies in the United States, Canada, the United Kingdom, Germany, Israel and China. Mr. Epstein began his career as an attorney with the international law firm Baker Botts, LLP, where his practice focused on mergers and acquisitions, venture capital and securities offerings. Mr. Epstein holds a B.A (English, Honors Program) and B.B.A. (Finance) from the University of Texas, a JD from the University of Texas School of Law, where he graduated with Honors and as a member of the Texas Law Review, and an MBA from the Acton School of Business in Austin, Texas, where he was Valedictorian of his class.
Sammy Dorf. Mr. Dorf joined the Board on November 10, 2025. Mr. Dorf currently serves as the Executive Chairman of Flora Growth Corp. (NASDAQ: FLGC). Prior to joining Flora, Sammy was the Co-Founder and Chief Growth Officer of Verano Holdings, one of the most successful multi-state cannabis companies in the United States, from 2015 to 2021. At Verano, Mr. Dorf was instrumental in the company’s evolution from a start-up into a national powerhouse known for its premium products, operational sophistication, and award-winning brands.. To date, Mr. Dorf has successfully raised over $300 million in capital and secured 25+ licenses across 14 states. Beyond the cannabis sector, Sammy has also demonstrated deep expertise in cryptocurrency investments, treasury management, and alternative asset strategy, helping companies optimize liquidity, hedge exposure, and build resilient portfolios in emerging financial ecosystems.
Board of Directors
The number of members of our Board of Directors will be determined from time to time by resolution of the Board of Directors. Currently, our Board of Directors consists of four persons. Our Directors hold office until the earlier of their death, resignation, retirement, disqualification or removal or until their successors have been duly elected and qualified.
Committees of the Board
We have an Audit Committee, a Compensation Committee, and a Nominating and Governance Committee. Each such committee of the Board of Directors has or will have the composition and responsibilities described below. Each committee is governed by a written charter. In 2025, each director attended all of the meetings of the Board and the committees on which such director serves. Each committee charter is posted on our website at https://srxhealth.com/governance/ . From time to time, our Board may also establish other, special committees when necessary to address specific issues.
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Audit Committee
Our Audit Committee’s responsibilities include, among other matters: appointing, approving the compensation of, and assessing the independence of our registered public accounting firm; overseeing the work of our registered public accounting firm, including through the receipt and consideration of reports from such firm; reviewing and discussing with management and the registered public accounting firm our annual and quarterly financial statements and related disclosures; coordinating our Board of Directors’ oversight of our internal control over financial reporting, disclosure controls and procedures; discussing our risk management policies; meeting independently with our internal auditing staff, if any, registered public accounting firm and management; reviewing and approving or ratifying any related person transactions; and preparing the audit committee report required by the SEC.
The members of our Audit Committee are Messrs. Young, Conway and Epstein. Mr. Conway has been appointed as chairperson of this committee on October 31, 2025. Our Board has determined that each of Messrs. Young, Conway and Epstein is independent under the applicable independence standards of Rule 10A-3 under the Exchange Act applicable to audit committee members. In addition, our Board has determined that Messrs. Young, Conway and Epstein each qualifies as an “audit committee financial expert” as defined by Item 407(d)(5)(ii) of Regulation S-K. Our Audit Committee met three times during 2025.
Compensation Committee
Our Compensation Committee’s responsibilities include, among other matters: reviewing and approving, or recommending for approval by the board of directors, the compensation of our Chief Executive Officer and our other executive officers; overseeing and administering our cash and equity incentive plans; reviewing and making recommendations to our board of directors with respect to director compensation; reviewing and discussing annually with management our “Compensation Discussion and Analysis,” to the extent required; reviewing and discussing the voting recommendations of our stockholders on matters involving executive compensation, to the extent required; and preparing the annual compensation committee report required by SEC rules, to the extent required. No compensation consultant was engaged to provide advice or recommendations on our executive or director compensation for 2025.
The members of our Compensation Committee are Messrs. Young, Conway and Epstein, and Mr. Young serves as chairman of this committee. Our Compensation Committee did not meet during 2025.
Nominating and Governance Committee
Our Nominating and Corporate Governance Committee’s responsibilities include, among other matters: identifying individuals qualified to become board of directors members; recommending to our board of directors the persons to be nominated for election as directors and to each board committee; developing and recommending to our board of directors corporate governance guidelines, and reviewing and recommending to our board of directors proposed changes to our corporate governance guidelines from time to time; and overseeing a periodic evaluation of our board of directors.
The members of our Nominating and Corporate Governance Committee are Messrs. Young, Conway and Epstein. Mr. Epstein was appointed as chairperson of this committee. Our Nominating and Corporate Governance Committee did not meet during 2025.
Director Compensation Table
The table below sets forth compensation information for the fiscal year ended September 30, 2025 for our non-employee directors:
| Name | Fees Earned or Paid in Cash | Stock Awards | Option Awards | Non-equity Incentive Plan Compensation | Total Compensation | |||||||||||||||
| Michael Young | $ | 316,667 | $ | 880,720 | $ | — | $ | — | $ | 1,197,387 | ||||||||||
| Lionel Conacher | $ | 241,667 | $ | 825,507 | $ | — | $ | — | $ | 1,067,174 | ||||||||||
| David White | $ | 41,667 | $ | 162,268 | $ | — | $ | — | $ | 203,935 | ||||||||||
| Simon Conway | $ | 41,667 | $ | 162,268 | $ | — | $ | — | $ | 203,935 | ||||||||||
(1) On October 31, 2025, each of Lionel F. Conacher and David A. White voluntarily resigned from the Company’s Board of Directors.
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The table below shows the aggregate number of option awards (exercisable and unexercisable) held as of September 30, 2025 by each non-employee director who was serving as of September 30, 2025:
| Name | Options Outstanding at Fiscal Year End | |||
| Michael Young | 8,155 | |||
| Lionel Conacher | 5,815 | |||
| Simon Conway | — | |||
| David White | — | |||
Code of Ethics and Code of Conduct
Our Board of Directors has adopted a Code of Ethics and Business Conduct that is applicable to all of our employees, executive officers, and directors of the Company (the “Code of Conduct”). The Code of Conduct is available on our website at https://srxhealth.com/governance/ . The Nominating and Governance Committee of our Board of Directors is responsible for overseeing the Code of Conduct and must approve any waivers of the Code of Conduct for employees, executive officers, and directors. We expect that any amendments to the Code of Conduct, or any waivers of its requirements, will be disclosed on our website.
Risk Oversight
The Audit Committee of our Board of Directors is responsible for overseeing our risk management process. Our Audit Committee focuses on our general risk management policies and strategy, the most significant risks facing us, and oversees the implementation of risk mitigation strategies by management. Our Board of Directors is also apprised of particular risk management matters in connection with its general oversight and approval of corporate matters and significant transactions.
Compensation Committee Interlocks and Insider Participation
None of our executive officers serve as a member of the Compensation Committee of our Board of Directors (or other committee performing equivalent functions) of any entity that has one or more executive officers serving on our Board of Directors or Compensation Committee.
Communications with Directors
Interested parties may communicate with our Board or with an individual director by writing to our Board or to the particular director and mailing the correspondence to: 801 US Highway 1, North Palm Beach, Florida 33408, Attention: Corporate Secretary. The Corporate Secretary will promptly relay to the addressee all communications that require prompt attention and will regularly provide our Board with a summary of all substantive communications.
Board Qualifications
Our Board has delegated to our Nominating and Governance Committee the responsibility for recommending to our Board the nominees for election as directors at the annual meeting of stockholders and for recommending persons to fill any vacancy on our Board. Our Nominating and Governance Committee selects individuals for nomination to our Board based on the following criteria. Nominees for director must:
| ● | Possess unquestionable moral and ethical character and core values. | |
| ● | Have a genuine interest in Better Choice and recognition that as a member of our Board, each director is accountable to all of our shareholders, not to any particular interest group. | |
| ● | Have a background that demonstrates experience, expertise and education in areas such as consumer product marketing, corporate strategy, technology, cybersecurity, financial and regulatory affairs, international sales and distribution and general management. | |
| ● | Have no conflict of interest or legal impediment that would interfere with the duty of loyalty owed to Better Choice and our stockholders. | |
| ● | Have the ability and willingness to make the personal commitment to invest the time, schedule and workload to be an active, participatory member of our Board and the Board’s responsibilities and commitment to corporate best practices. | |
| ● | Be compatible and able to work well with other directors, executives and other employees in a team effort with a view to a long-term relationship with Better Choice as a director. | |
| ● | Have independent opinions and be willing to state them in a constructive manner. |
Directors are selected on the basis of talent and experience. Diversity of background, including diversity of gender, race, ethnic or geographic origin and age, and education and experience in business, the consumer product market, the pet specialty sector, product marketing, product distribution and manufacturing and other areas relevant to our activities are factors in the selection process. As a majority of our Board must consist of individuals who are independent, a nominee’s ability to meet the independence criteria established by the NYSE American is also a factor in the nominee selection process. For a better understanding of the qualifications of each of our directors, we encourage you to read their biographies set forth in this report.
Director Nominations
The Nominating and Governance Committee will consider candidates for director recommended by stockholders so long as the recommendations comply with our Certificate of Incorporation and Bylaws and applicable laws, rules and regulations, including those promulgated by the SEC. The Nominating and Governance Committee will evaluate such recommendations in accordance with its charter, our Bylaws, our corporate governance guidelines, and the regular nominee criteria described above.
Attendance at Annual Meeting
Directors are expected to attend our annual meetings of stockholders. Our last annual meeting of shareholders was held on December 18, 2024 and the next annual meeting has not yet taken place.
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| ITEM 11. | EXECUTIVE COMPENSATION |
The following is a discussion and analysis of the compensation arrangements for our named executive officers, or NEOs. We are currently considered a “smaller reporting company” for purposes of the SEC’s executive compensation disclosure rules. In accordance with such rules, we are providing a Summary Compensation Table and an Outstanding Equity Awards at Fiscal Year-End Table as well as narrative disclosures regarding our executive compensation program. Our NEOs for 2025 consist of the following individuals:
| ● | Kent Cunningham, Chief Executive Officer appointed July 8, 2025. He previously served as Chief Executive Officer of Better Choice Company, Inc. since May 2023. | |
| ● | Carolina Martinez, Chief Financial Officer appointed April 24, 2025. She previously served as Chief Financial Officer of Better Choice Company, Inc. since April 2023. |
Executive Compensation Components
Base Salaries
The NEOs receive a base salary to provide a fixed component of compensation reflecting the executive’s skill set, experience, role and responsibilities. Our Compensation Committee adjusts NEO base salaries based on the committee’s review of available market information. Our board of directors established an annual base salary for each of our NEOs as follows:
| Annual Base Salary | ||||||||||||
| Name | 2023 | 2024 | 2025 | |||||||||
| Kent Cunningham (1) | 350,000 | 360,000 | 444,000 | |||||||||
| Carolina Martinez (2) | 240,000 | 254,400 | 325,000 | |||||||||
| Lionel F. Conacher (3) | 160,000 | n/a | n/a | |||||||||
(1) Mr. Cunningham was appointed as Chief Executive Officer of the Company effective July 8, 2025. He was previously serving as Chief Executive Officer of Better Choice, a position which he held beginning May 22, 2023.
(2) Mrs. Martinez was appointed as Chief Financial Officer of the Company effective April 24, 2025. She was previously serving as the Chief Financial Officer of Better Choice, a position which she held beginning August 2, 2023. Mrs. Martinez was previously appointed and served as the Interim Chief Financial Officer of Better Choice effective as of April 3, 2023.
(3) Includes Mr. Conacher’s compensation in his role as Interim Chief Executive Officer in 2023.
Annual Incentive
The purpose of our annual incentive bonus program is to incent all individuals in the organization to meet or exceed both our annual budget goals as well as individual responsibilities. Our annual incentive program requires minimum performance thresholds for any payout to occur for specific performance measures and objectives. We believe the annual incentive effectively motivates our NEOs to drive operational performance without encouraging unreasonable risk. The Committee believes the achievement of year-over-year gross revenue, gross margin and Adjusted EBITDA growth goals will result in sustainable long-term stockholder value creation. Our 2025 annual incentive potential was based on achievement levels of these financial metrics, measured against our annual plan as approved by our Board. Overall, the NEOs’ annual incentive bonus was weighted as follows: 50% Adjusted EBITDA, and 50% individual performance and achievement of goals. The CEO was eligible for a payout of 50% of base salary while the other NEOs were eligible for a payout of 45% of base salary based on these metrics. In 2025, the NEOs were eligible for an up to 100% payout of their respective bonus targets.
Equity Compensation
The goals of our long-term, equity-based incentive awards are to align the interests of our NEOs and other employees, non-employee directors and consultants with the interests of our stockholders. Because vesting is based on continued employment, our equity-based incentives also encourage the retention of our NEOs through the vesting period of the awards.
To reward and retain our NEOs in a manner that best aligns employees’ interests with stockholders’ interests, we use stock options as the primary incentive vehicles for long-term compensation. We believe that stock options are an effective tool for meeting our compensation goal of increasing long-term stockholder value by tying the value of the stock options to our future performance. The exercise price of each stock option grant is the fair value of our common stock on the grant date.
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Other Elements of Compensation
Retirement Plans. We currently maintain a 401(k) retirement savings plan that allows eligible employees to contribute a portion of their compensation, within limits prescribed by the Internal Revenue Code, on a pre-tax basis through contributions to the plan. Our NEOs are eligible to participate in the 401(k) plan. We believe that providing a vehicle for tax-deferred retirement savings through our 401(k) plan adds to the overall desirability of our executive compensation package and further incentivizes our NEOs in accordance with our compensation policies. In 2023 and 2024, the Company provided an employer matching contribution of 50% up to the first 10% of employees’ eligible compensation under our 401(k) plan.
Employee Benefits and Perquisites. All of our full-time employees, including our NEOs, are eligible to participate in our employee benefit plans and programs, including medical, dental, and vision benefits, health spending accounts, short and long-term disability and life insurance, subject to the terms and eligibility requirements of those plans.
Termination and Change in Control Benefits. Our NEOs may become entitled to certain benefits or enhanced benefits in connection with certain qualifying terminations of employment and/or a change in control of our Company. Each of our NEOs’ employment agreements entitles them to severance in the event of their termination without cause or their resignation for good reason and upon termination by reason of death or disability.
Summary Compensation Table
The table below sets forth the compensation earned by our NEOs for the years ended September 30, 2025, 2024 and 2023.
| Name and Principal Position | Year |
Salary ($) |
Bonus ($) |
Stock Awards ($) |
Option Awards (1) ($) |
Non-Equity Incentive Plan Compensation ($) |
All Other Compensation (2) ($) |
Total ($) |
|||||||||||||||||||||||
| Kent Cunningham (3) | 2025 | 444,000 | 40,000 | 242,477 | — | — | 7,305 | 733,782 | |||||||||||||||||||||||
| Chief Executive Officer | 2024 | 360,000 | 270,000 | — | 40,000 | — | 11,262 | 681,262 | |||||||||||||||||||||||
| 2023 | 350,000 | 53,459 | 362,727 | — | — | 8,785 | 774,971 | ||||||||||||||||||||||||
| Lionel F. Conacher (4) | 2025 | — | — | 241,667 | — | — | — | 241,667 | |||||||||||||||||||||||
| Interim Chief Executive Officer | 2024 | — | — | 81,481 | 26,000 | — | 60,000 | 167,481 | |||||||||||||||||||||||
| 2023 | 160,000 | — | 13,334 | — | — | — | 173,334 | ||||||||||||||||||||||||
| Carolina Martinez (5) | 2025 | 325,000 | 197,500 | 242,477 | — | — | 6,629 | 771,606 | |||||||||||||||||||||||
| Chief Financial Officer | 2024 | 254,400 | 171,720 | 47,500 | 31,000 | — | 6,375 | 510,995 | |||||||||||||||||||||||
| 2023 | 240,000 | 19,200 | — | 70,000 | — | 1,106 | 330,306 | ||||||||||||||||||||||||
(1) The amounts reported reflect the grant date fair value of the stock options granted, as computed in accordance with ASC 718. The fair value of each option grant is estimated based on the fair value on the date of grant using the Black-Scholes option pricing model. The assumptions that we used to calculate these amounts are discussed in Note 14 to our financial statements included in this Annual Report.
(2) The amounts reported reflect matching 401(k) payments and accrued PTO payout.
(3) Mr. Cunningham was appointed as Chief Executive Officer of the Company effective July 8, 2025. He was previously serving as Chief Executive Officer of Better Choice, a position which he held beginning May 22, 2023.
(4) Mr. Conacher was employed with us as interim Chief Financial Officer from September 14, 2022 until May 22, 2023. Compensation in 2024 was related solely to fees in his capacity as a director.
(5) Mrs. Martinez was appointed as Chief Financial Officer of the Company effective April 24, 2025. She was previously serving as the Chief Financial Officer of Better Choice, a position which she held beginning August 2, 2023. Mrs. Martinez was previously appointed and served as the Interim Chief Financial Officer of Better Choice effective as of April 3, 2023.
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Outstanding Equity Awards at Fiscal Year-End
The table below sets forth the outstanding stock option awards held by the NEOs as of September 30, 2025.
| Option Awards | |||||||||||||||||
| Name | Option Award Grant | Number of Securities Underlying Unexercised Options (#) Exercisable | Number of Securities Underlying Unexercised Options (#) Unexercisable | Option Exercise Price ($) | Option Expiration Date | ||||||||||||
| Kent Cunningham | 6/26/2024 | (1) | — | 8,000 | $ | 5.00 | 6/26/2034 | ||||||||||
| Carolina Martinez | 6/26/2024 | (1) | — | 6,200 | $ | 5.00 | 6/26/2034 | ||||||||||
| 8/7/2023 | (2) | 1,515 | 3,030 | $ | 15.40 | 8/7/2033 | |||||||||||
(1) Options vest as follows: 100% on first anniversary of the grant date
(2) Options vest as follows: 1/3 on each annual anniversary of the grant date
Employment Agreements and Potential Payments Upon Termination
On July 14, 2025, the Company entered into an executive employment agreement with Kent Cunningham, the Company’s Chief Executive Officer, effective July 8, 2025 (the “KC Executive Employment Agreement”). The term of the Executive Employment Agreement is indefinite. Pursuant to the Executive Employment Agreement, Mr. Cunningham will receive a base salary of $444,000 per year, less applicable withholdings, and he will be eligible to earn an annual performance bonus (the “Performance Bonus”) of 70% of his base salary, upon achievement of performance objectives to be determined by the Board in its sole discretion, provided that 50% of such bonus for the fiscal year ending December 31, 2025 shall be payable upon the achievement of identified performance objectives as set forth in the Executive Employment Agreement. Mr. Cunningham must be employed on the applicable bonus payment date to receive any such bonus. Mr. Cunningham is also eligible to participate in the employee benefit plans sponsored by the Company of general applicability to other employees. Mr. Cunningham will receive, subject to the Company achieving net profitability for three (3) consecutive fiscal quarters, a one-time equity award of Common Stock with an aggregate value of $3,000,000.
The KC Executive Employment Agreement also provides benefits in connection with a termination of Mr. Cunningham’s employment under specified circumstances. Under the terms of the Executive Employment Agreement, if Mr. Cunningham’s employment is terminated by the Company other than for “Cause” (as defined in the KC Executive Employment Agreement), or Mr. Cunningham terminates his employment for “Good Reason” (as defined in the KC Executive Employment Agreement), Mr. Cunningham will be entitled to receive, subject to his timely execution and non-revocation of a separation agreement and release of claims in a form agreed to by Mr. Cunningham and the Company (the “Release”) and his material compliance with all post-termination obligations in the Executive Employment Agreement and all material terms of the Release, a severance payment equal to his then-current base salary, as then in effect, less applicable withholdings, for a period of twelve (12) months, payable in accordance with the normal payroll policies of the Company.
In the event Mr. Cunningham’s employment is terminated for Good Reason Upon Change in Control (as defined in the KC Executive Employment Agreement) at any time, Mr. Cunningham will be entitled to receive, subject to his timely execution and non-revocation of the Release, (i) severance pay in an amount equal to (to his then-current base salary, as then in effect, less applicable withholdings, for a period of twenty-four (24) months, payable in accordance with the normal payroll policies of the Company; and (ii) forty percent (40%) of Mr. Cunningham’s pro-rata Performance Bonus for the then operative Performance Bonus cycle.
On July 14, 2025, the Company entered into Amendment No. 1 (the “Amendment”) to its Executive Employment Agreement with Carolina Martinez, the Company’s Chief Financial Officer, dated August 2, 2023 (the “Original Agreement”). The Amendment modified the Original Agreement to increase Ms. Martinez’s annual base salary to $325,000, less applicable withholdings, retroactive to June 19, 2025, and to provide a one-time bonus of $150,000, less applicable withholdings, payable within three (3) business days of the effectiveness of the Amendment. Notwithstanding the foregoing, if Ms. Martinez’s employment with the Company is terminated by the Company for Cause (as defined in her Executive Employment Agreement) or Ms. Martinez resigns from her employment with the Company without Good Reason (as defined in her Executive Employment Agreement), in either case within 90 days following the effectiveness of the Amendment, Ms. Martinez shall be required to remit back to the Company the full amount of such one-time bonus within three (3) business days following such termination of employment with the Company. Except as expressly modified by the Amendment, the remaining provisions of the Original Agreement remain in full force and effect. Mrs. Martinez’s annual discretionary performance bonus remains at a target of 40% of base salary, payable 50% in cash and 50% in shares of common stock of the Company. Pursuant to the Martinez Employment Agreement, Mrs. Martinez will be entitled to six weeks’ paid vacation and will be eligible to participate in certain employee benefit plans offered by the Company.
Pursuant to the Martinez Employment Agreement Mrs. Martinez is employed on an at-will basis. In the event the executive’s employment is terminated for any reason, the Company shall pay the executive any amounts due to such executive under the Company’s benefit plans and any unreimbursed expenses properly incurred prior to the date of termination (the “Accrued Obligations”). In the event the executive’s employment is terminated for by the Company without Cause (as defined in the Employment Agreements) or by the executive for Good Reason or for Good Reason Upon Change in Control (as such terms are defined in the NEO Employment Agreements), in addition to the Accrued Obligations, the executive shall also receive, subject to the execution of a release of claims in the form delivered by the Company, severance pay in an amount equal to the executive’s base salary then in effect for six (6) months, less applicable payroll deductions and tax withholdings, payable in accordance with normal payroll policies of the Company over a six (6) month period, with the first such payment being paid to the executive on the Company’s first regular pay date on or after the sixtieth (60th) day following the executive’s employment termination date.
The Employment Agreements of the named executive officers also contain standard confidentiality, intellectual property assignment, non-competition and non-solicitation covenants.
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| ITEM 12. | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS |
The following table sets forth information about the beneficial ownership of our capital stock by (i) each of our current directors, (ii) each of our named executive officers (iii) all our current directors and executive officers as a group, and (iv) each person or group known by us to own more than 5% of our common stock. The percentages reflect beneficial ownership, as determined in accordance with the SEC’s rules, as of December 4, 2025, and are based on 87,208,676 fully diluted shares of common stock outstanding, including 26,935,215 shares of common stock, 491,628 exchangeable shares of common stock, and 59,781,833 shares reserved issuance pursuant to warrants. Except as noted below, the address for all beneficial owners in the table below is 801 US Highway 1, North Palm Beach, Florida 33408:
| Shares Beneficially Owned | ||||||||
| Name of Beneficial Owner | Number (1) | % | ||||||
| Named Executive Officers and Directors: | ||||||||
| Michael Young (1) | 7,792,642 | 8.9 | % | |||||
| Kent Cunningham | 618,596 | * | ||||||
| Carolina Martinez | 565,436 | * | ||||||
| Simon Conway | 834,792 | * | ||||||
| All executive officers and directors as a group (4 persons) | 9,811,466 | 11.3 | % | |||||
| *indicates < 1.0% ownership | ||||||||
| 5% Shareholders (2) | ||||||||
(1) Includes approximately 2.8 million shares directly owned by Michael Young, 2,557 shares held indirectly through Cottingham Capital, LLC, and approximately 4.95 million shares issued to Halo Spin-out SPV, Inc. in which Michael Young has the power to vote and/or direct the voting of such group.
(2) As of September 30, 2025, no shareholders owned more than 5% of our common stock.
| ITEM 13. | CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS, AND DIRECTOR INDEPENDENCE |
Related Party Transaction Policy
A “Related Party Transaction” is a transaction, arrangement or relationship in which we or any of our subsidiaries was, is or will be a participant, the amount of which involved exceeds $50,000 in any one fiscal year, and in which any related person had, has or will have a direct or indirect material interest. A “Related Person” means:
| ● | any person who is, or at any time during the applicable period was, one of our executive officers, one of our directors, or a nominee to become one of our directors; | |
| ● | any person who is known by us to be the beneficial owner of more than 5.0% of any class of our voting securities; | |
| ● | any immediate family member of any of the foregoing persons, which means any child, stepchild, parent, stepparent, spouse, sibling, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law or sister-in-law of a director, executive officer or a beneficial owner of more than 5.0% of any class of our voting securities, and any person (other than a tenant or employee) sharing the household of such director, executive officer or beneficial owner of more than 5.0% of any class of our voting securities; and | |
| ● | any firm, corporation or other entity in which any of the foregoing persons is employed or is a general partner or principal or in a similar position or in which such person has a 5.0% or greater beneficial ownership interest in any class of the Company’s voting securities. |
Our Related Party Transaction policy subjects these transactions to review and either approval or disapproval of entry into the Related Party Transaction, subject to certain limited exceptions, by our Nominating and Governance Committee. In determining whether to approve or disapprove entry into a Related Party Transaction, our Nominating and Governance Committee shall take into account, among other factors, the following: (i) whether the Related Party Transaction is on terms no less favorable than terms generally available to an unaffiliated third-party under the same or similar circumstances and (ii) the extent of the Related Person’s interest in the transaction. Further, the policy requires that all Related Party Transactions required to be disclosed in our filings with the SEC be so disclosed in accordance with applicable laws, rules and regulations. Refer to Note 14 within this report.
Family Relationships
There are no family relationships amongst any of our executive officers or directors.
Director Independence
Each of our directors standing for election meets the definition of “independence” per Rule 803 of the NYSE American Company Guide.
| ITEM 14. | PRINCIPAL ACCOUNTING FEES AND SERVICES |
The following table shows the fees paid or accrued for the audit and other services provided by Davidson and Company, LLP, our independent auditors for the fiscal year ended September 30, 2025:
| Year ended September 30, | ||||||||
| 2025 | 2024 | |||||||
| Audit fees | 457 | — | ||||||
| Total | 457 | — | ||||||
(1) Audit fees consist of fees billed for services rendered for the audit of our financial statements included in our annual reports on Form 10-K and review of our financial statements included in our quarterly reports on Form 10–Q, and other fees, including fees related to our registration statements.
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PART IV
| ITEM 15. | EXHIBITS AND FINANCIAL STATEMENT SCHEDULES |
The following documents are filed as part of this report:
| (1) | Financial Statements - See Index to Consolidated Financial Statements appearing on page 50 . |
| (2) | Financial Statement Schedules - None. |
| (3) | Exhibits - The exhibits listed on the accompanying index are filed as part of, or incorporated by reference into, this Annual Report on Form 10-K. |
EXHIBIT INDEX
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| † | Indicates a management contract or any compensatory plan, contract or arrangement. |
| * | Filed or furnished herewith. |
| # | Certain schedules and similar attachments to this agreement have been omitted in accordance with Item 601(b)(5) of Regulation S-K. The Company will furnish copies of any schedules or similar attachments to the SEC upon request. |
| *** | Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded information is not material and would likely cause competitive harm to the registrant if publicly disclosed. |
| ITEM 16. | FORM 10-K SUMMARY |
None.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| BETTER CHOICE COMPANY INC. | ||
| Date: December 5, 2025 | By: | /S/ KENT CUNNINGHAM |
| Kent Cunningham | ||
|
Chief Executive Officer (Principal Executive Officer) |
||
| Date: December 5, 2025 | By: | /S/ CAROLINA MARTINEZ |
| Carolina Martinez | ||
|
Chief Financial Officer (Principal Financial and Accounting Officer) |
||
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Carolina Martinez his/her true and lawful attorney-in-fact, with full power of substitution and resubstitution for him/her and in his/her name, place and stead, in any and all capacities to sign any and all amendments to this Annual Report on Form 10-K, and to file the same, with all exhibits thereto, and 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 in connection therewith, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorney-in-fact or his/her substitute, each acting alone, may lawfully do or cause to be done by virtue thereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this Report has been signed below by the following persons on behalf of the Registrant in the capacities and on the dates indicated.
| Signature | Title | Date | ||
| /S/ KENT CUNNINGHAM | Chief Executive Officer | December 5, 2025 | ||
| Kent Cunningham | (Principal Executive Officer) | |||
| /S/ CAROLINA MARTINEZ | Chief Financial Officer | December 5, 2025 | ||
| Carolina Martinez | (Principal Financial and Accounting Officer) | |||
| /S/ JOSHUA EPSTEIN | Director | December 5, 2025 | ||
| Joshua Epstein | ||||
| /s/ SIMON CONWAY | Director | December 5, 2025 | ||
| Simon Conway | ||||
| /s/ SAMMY DORF | Director | December 5, 2025 | ||
| Sammy Dorf | ||||
| /s/ MICHAEL YOUNG | Director | December 5, 2025 | ||
| Michael Young |
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