SRx Health Solutions, Inc.

Unaudited Condensed Consolidated Statements of Operations

(U.S. dollars in thousands, except share and per share amounts)

Unaudited Condensed Consolidated Balance Sheets

(U.S. dollars in thousands, except share and per share amounts)

SRx Health Solutions Inc. (formerly Better Choice Company, Inc)

Unaudited Condensed Consolidated Statements of Shareholders’ Equity (Deficit)

(U.S. dollars in thousands, except shares)

Unaudited Condensed Consolidated Statements of Cash Flows

(U.S. dollars in thousands)

Notes to the Condensed Consolidated Financial Statements

(Unaudited)

Note 1 –Nature of business and summary of significant accounting policies

Nature of the business

SRx Health Solutions, Inc. and its subsidiaries are together referred to in these condensed 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 12400 Race Track Road, Tampa, Florida 33626.

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”).

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 $0.001, 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 holds 17% of the issued and outstanding capital stock of Halo.

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 condensed consolidated financial statements.

In accordance with ASC 810,Consolidation, the Spin-Out Distribution represented a reorganization of ownership interests under common control, and is therefore treated as a common control equity reorganization, with those transfers of interests accounted for as equity transactions. As such, the transaction does not give rise to the presentation of a noncontrolling interest in the Company’s condensed consolidated financial statements. Halo continues to be fully consolidated, with no change in the Company’s accounting treatment.

On August 12, 2025, SRx Canada filed for protection under the Companies’ Creditors Arrangement Act (Canada) (“CCAA”). Refer to Note 23 – Subsequent Events for additional details.

Note 2 –Basis of Preparation

Statement of Compliance

The Company’s condensed consolidated financial statements are prepared in accordance with the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”) for interim financial reports and accounting principles generally accepted in the U.S.(“GAAP”). Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. 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 three and nine months ended June 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.

These condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and accompanying notes in the Company’s Annual Report for the year ended September 30, 2024, filed with the SEC on July 9, 2025.

Revision of Prior Period Financial Information

In connection with the preparation of the condensed consolidated financial statements for the nine months ended June 30, 2025, the Company identified an immaterial error in revenue recognized in 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. These prescriptions were a group of high-cost Hepatitis-C prescriptions, primarily related to an isolated patient population within a legacy government-funded care program, that remained in pharmacy workflow and had not been reversed due to deficient controls at the time of original billing.

To correct this error, the Company recorded a reduction to accumulated deficit of approximately $1.8 million as of September 30, 2024, which reflects the impact on previously reported net income. The adjustment is reflected in the current period condensed consolidated financial statements and does not result in any change to previously reported trends, segment information, compliance with covenants or regulations, or other key financial metrics.

Management assessed the materiality of this matter under SEC Staff Accounting Bulletins No. 99 and No. 108 and concluded that, based on currently available information, the matter is not material to previously issued financial statements, either individually or in the aggregate. Management is continuing its assessment, and the amount of the adjustment to accumulated deficit could change as the assessment is finalized.

Management has submitted the matter to relevant regulatory authorities in accordance with applicable reporting obligations. In addition, the Company implemented enhanced procedures across its operations to improve the estimation and review of unfulfilled prescription billings and continues to evaluate further enhancements to its internal control environment.

Consolidation

The condensed 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 condensed consolidated statements of financial position and the earnings accruing to non-controlling interest holders are disclosed as a separate line item in the condensed consolidated statements of operations. The financial results of subsidiaries are included in the condensed 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

These condensed consolidated financial statements have been prepared on a going concern basis, which assumes the realization of assets and the settlement of liabilities in the ordinary course of business.

As of June 30, 2025 and September 30, 2024, the Company had an accumulated deficit of $98.4 million and $70.0 million, respectively, and working capital deficiency of $49.6 million and $67.7 million, respectively. The Company incurred a net loss of $15.1 million and $29.7 million in the three and nine months ended June 30, 2025, respectively. The Company incurred a net loss of $3.1 million and $11.1 million in the three and nine months ended June 30, 2024, respectively.

The Company is also subject to certain financial covenants under its senior secured term facilities with Canadian Western Bank (“CWB”). As of June 30, 2025 and September 30, 2024, the Company was not in compliance with these covenants. As a result, the debt has been classified as current and the Company is in active discussions with the lender regarding an amendment. Refer to Note 11 – Debt for more information.

These conditions—recurring operating losses, negative operating cash flows, working capital deficiency, and covenant violations—represent the principal conditions that raise substantial doubt about the Company’s ability to continue as a going concern within one year from the date these financial statements are issued.

Management has evaluated these conditions and concluded that, absent additional sources of liquidity or material improvement in the Company’s operating performance, the Company may not be able to meet its obligations as they become due.

To address these uncertainties, management has developed and is actively pursuing the following plans:

While management believes these actions may provide short-term liquidity and operational improvements, there is no assurance that these plans will be successful or that the Company will be able to obtain the necessary financing or amendments to current financing with covenant violations on acceptable terms. As such, there is a material uncertainty that casts significant doubt on the Company’s ability to continue as a going concern.

In August 2025, the Company initiated proceedings under the Companies’ Creditors Arrangement Act (CCAA) in Canada to facilitate a court-supervised restructuring of its business and financial affairs. The CCAA process provides the Company with protection from creditor claims while it seeks to implement a restructuring plan. As a result of the CCAA filing, the Company has undertaken material changes in operations, including the divestiture of certain non-core assets and store locations, workforce reductions, and efforts to streamline its cost structure. These actions are intended to stabilize operations and improve liquidity. However, the outcome of the CCAA process remains uncertain, and there can be no assurance that the Company will be successful in implementing a viable restructuring plan. Accordingly, the CCAA proceedings further contribute to the material uncertainty that casts significant doubt on the Company’s ability to continue as a going concern.

In addition, the Company’s U.S. pet food business, acquired through the legacy Better Choice operations, continues to experience significant liquidity constraints and operating losses. This segment has not achieved profitability and remains reliant on external financing to fund its operations. Management is actively evaluating strategic alternatives for the pet food business, including potential restructuring, divestiture, or wind-down. These conditions also contribute to the overall uncertainty regarding the Company’s ability to continue as a going concern.

These condensed consolidated financial statements do not include any adjustments that may result from the outcome of this uncertainty, including adjustments to the carrying values and classifications of assets and liabilities, which could be material should the Company be unable to continue its operations.

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.

Note 3 –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.

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.

Following the reverse merger completed on April 24, 2025, the Company began reporting two reportable segments: Health Solutions and Consumer Products. The Health Solutions segment consists of the Company’s pharmacy operations across Canada, which represent the Company’s core business. The Consumer Products segment includes the legacy Halo pet food business, which operates primarily in the United States and includes dry food, wet food, treats, and other premium pet products.

These segments reflect the Company’s internal management structure and are evaluated separately by the CODM based on differences in their operational models, customer bases, and economic characteristics. The accounting policies of the segments are consistent with those described in the accompanying condensed consolidated financial statements. See Note 14 – Segment Information.

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.

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 condensed 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 condensed 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.

Accounts receivable

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.

Fair value measurement

Fair value is defined under GAAP as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value measurements are based on the assumption that the transaction to sell the asset or transfer the liability takes place either:

The principal or most advantageous market must be accessible by the Company at the measurement date. Fair value measurements reflect the assumptions that market participants would use when pricing the asset or liability, including assumptions about risk, acting in their economic best interest.

The Company utilizes valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value. These techniques maximize the use of relevant observable inputs and minimize the use of unobservable inputs.

The Company classifies fair value measurements using a three-level hierarchy, which prioritizes the inputs used to measure fair value. The hierarchy gives the highest priority to quoted prices in active markets and the lowest priority to unobservable inputs:

Assets and liabilities measured at fair value on a recurring or nonrecurring basis are categorized within this hierarchy based on the lowest level input that is significant to the fair value measurement in its entirety.

Share repurchases

In April 2024, the Company’s board of directors authorized and approved a stock repurchase plan (the “Repurchase Plan”) for up to $5.0 million of the currently outstanding shares of the Company’s common stock through December 31, 2024. Repurchased shares are immediately retired and returned to unissued status. During the period April 24, 2025 to June 30, 2025,76,800 shares were repurchased. On April 17, 2025, the Repurchase Plan was reinstated and authorization increased to $6.5 million.

Revenue recognition

The Company provides specialty healthcare and medical treatment services, including pharmacy services, patient support programs, diagnostic services, and clinical trials. Revenue is recognized in accordance with ASC 606, Revenue from Contracts with Customers, when control of the promised goods or services is transferred to the customer, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or services.

The Company has concluded that it is the principal in its revenue arrangements, as it controls the specified goods before they are transferred to the customer. The Company does not have significant financing components or material variable consideration in its contracts with customers.

SRx’s main revenue streams include the following:

The Company recognizes revenue related to services provided by pharmacies at the time the customer takes possession of the product or service. For retail pharmacy sales, each prescription claim has its own arrangement with the customer and is a performance obligation, separate and distinct from other prescription claims. The Company recognizes revenue related to products provided by wholesale and distribution at the time the pharmacy customer takes possession of the product. Revenue recognition for infusion services provided by the Company’s medical clinics occurs as services are provided to patients for each infusion service. Customer returns are not material to the Company’s operating results or financial condition. Sales taxes are not included in revenues.

For retail pharmacy and infusion services, a significant portion of revenue is reimbursed by third-party payors, including pharmacy benefit managers (“PBMs”), private insurers, and government programs. The Company recognizes revenue when control of the product or service has transferred to the customer (generally upon delivery or service completion), and collection is probable. Estimates of variable consideration, including contractual allowances, co-payments, and reimbursement adjustments, are considered based on historical experience and current contract terms. Receivables related to insurance claims are recorded as accounts receivable and are monitored for collection and valuation based on the Company’s experience with each payor class.

For services provided through clinical studies, revenue is recognized based on attaining pre-defined procedures that are outlined in the agreements with the Company’s customers. At the commencement of a clinical trial study, an agreement is signed that clearly outlines the procedures that the Company must complete over the life of a study. An ongoing, internal assessment is performed to determine the point at which the Company completes a contractual procedure. Revenue is recognized at that time, as each procedure is an individual performance obligation within the agreement and is not dependent on subsequent procedures in order to collect revenues.

Patient support program revenue is recognized upon invoicing the client (i.e., pharmaceutical companies) on a monthly basis for services provided in the month. The Company provides a detailed breakdown of all services completed and pre-approved reimbursable expenses.

During the three and nine months ended June 30, 2025 and 2024, revenues attributed to infusion services, consulting services, testing services, clinical trial services, or patient support programs were not material.

As it relates to the Halo pet food business, the Company’s customer contracts have a single performance obligation, and revenue is recognized when the product is shipped as this is when it has been determined that control has been transferred. Amounts billed and due from customers are classified as receivables and require payment on a short-term basis and therefore do not have any significant financing components. Revenue is measured as the amount of consideration the Company expects in exchange for transferring goods, which varies with changes in trade incentives the Company offers to its customers. Trade incentives consist primarily of customer pricing allowances and merchandising funds, and point of sale discounts. Estimates of trade promotion expense and coupon redemption costs are based upon programs offered, timing of those offers, estimated redemption/usage rates from historical performance, management’s experience and current economic trends.

Government grants

The Company’s government grants reflect compensation received from various provincial and national bodies related to COVID-19 support. Government grants are recognized where there is reasonable assurance that the grant will be received, and all attached conditions will be complied with. When the grant relates to an expense item, it is recognized as other income on a systematic basis over the periods that the related costs, for which it is intended to compensate, are expensed.

Taxes

We account for income taxes under the asset and liability method, which requires the recognition of deferred tax assets (DTAs) and deferred tax liabilities (DTLs) for the expected future tax consequences of events that have been included in the financial statements. Under this method, we determine DTAs and DTLs on the basis of the differences between the financial statement and tax bases of assets and liabilities by using enacted tax rates in effect for the year in which the differences are expected to reverse. The effect of a change in tax rates on DTAs and DTLs is recognized in income in the period that includes the enactment date.

We recognize DTAs to the extent that we believe that these assets are more likely than not to be realized. In making such a determination, we consider all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax-planning strategies, carry back potential if permitted under the tax law, and results of recent operations. If we determine that we would be able to realize our DTAs in the future in excess of their net recorded amount, we would make an adjustment to the DTA valuation allowance, which would reduce the provision for income taxes.

We record uncertain tax positions in accordance with ASC 740 on the basis of a two-step process in which (1) we determine whether it is more likely than not that the tax positions will be sustained on the basis of the technical merits of the position and (2) for those tax positions that meet the more-likely-than-not recognition threshold, we recognize the largest amount of tax benefit that is more than 50 percent likely to be realized upon ultimate settlement with the related tax authority.

Property and equipment

Property and equipment are recorded at cost less accumulated depreciation and accumulated impairment losses. Cost includes expenditures that are directly attributable to the acquisition of the asset, including costs incurred to prepare the asset for its intended use.

The Company estimates the depreciation of property and equipment to be calculated based on the straight-line method using the estimated useful life of the assets, unless otherwise specified:

Subsequent costs are included in the asset’s carrying amount or are recognized as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Company and the cost can be measured reliably. Repairs and maintenance costs are charged to the condensed consolidated statement of operations during the period in which they are incurred.

An item of property and equipment and any significant part initially recognized is derecognized upon disposal (i.e., at the date the recipient obtains control) or when no future economic benefits are expected from its use or disposal. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in the condensed consolidated statements of operations when the asset is derecognized.

Depreciation methods, useful lives and residual values are reviewed annually and are adjusted for prospectively, if appropriate. The change was made to better align the pattern of amortization expense with the expected economic benefit of the assets. This change in estimate was applied prospectively in accordance with ASC 250, Accounting Changes and Error Corrections. The impact of this change was immaterial to the condensed consolidated financial statements.

Intangible assets

Intangible assets acquired are measured on initial recognition at cost. The cost of intangible assets acquired in a business combination is their fair value at the date of acquisition. Following initial recognition, intangible assets are carried at cost less any accumulated amortization and accumulated impairment losses, if any. The estimated useful lives, residual values, and amortization methods for intangible assets are reviewed annually, or more frequently if indicators of impairment exist, and are adjusted prospectively if appropriate.

The Company estimates amortization to be calculated based on the straight-line method using the estimated useful life of the assets as follows:

Leases

The Company assesses at contract inception whether a contract is, or contains, a lease in accordance with ASC 842, Leases. A contract is considered a lease if it conveys the right to control the use of an identified asset for a period of time in exchange for consideration.

Company as a lessee

The Company recognizes a right-of-use (ROU) asset and a corresponding lease liability at the lease commencement date for all leases, except for short-term leases (i.e., leases with a term of 12 months or less) for which the Company has elected the short-term lease exemption.

Right-of-use assets

ROU assets are initially measured at the amount of the lease liability, adjusted for lease payments made at or before the commencement date, initial direct costs incurred, and any lease incentives received. ROU assets are subsequently measured at cost less accumulated amortization and accumulated impairment losses, if any, and are adjusted for certain remeasurements of the related lease liability.

ROU assets are amortized on a straight-line basis over the shorter of the lease term or the estimated useful life of the asset, unless the lease transfers ownership of the underlying asset to the Company or contains a purchase option that is reasonably certain to be exercised. In such cases, amortization is based on the estimated useful life of the underlying asset. Typical estimated useful lives are as follows:

If ownership of the leased asset transfers to the Company at the end of the lease term or the cost reflects the exercise of a purchase option, depreciation is calculated using the estimated useful life of the asset.

ROU assets are reviewed for impairment in accordance with the Company’s policy for non-financial assets.

Lease liabilities

At the commencement date of the lease, the Company recognizes lease liabilities measured at the present value of lease payments to be made over the lease term. The lease payments include the value of lease payments to be made over the lease term. The lease payments include fixed payments (including in-substance fixed payments) less any lease incentives receivable.

In calculating the present value of lease payments, the Company uses its incremental borrowing rate at the lease commencement date because the interest rate implicit in the lease is not readily determinable.

After the commencement date, the amount of lease liabilities is increased to reflect the accretion of interest and reduced for the lease payments made. Lease liabilities are remeasured when there is a modification to the lease agreement, a change in the lease term, a change in lease payments resulting from a change in an index or rate, or a reassessment of the likelihood of exercising a purchase, renewal, or termination option.

For operating leases, the Company recognizes lease expense on a straight-line basis over the lease term, which is included in general and administrative expenses in the condensed consolidated statements of operations. For finance leases, amortization of the ROU asset and interest expense on the lease liability are presented separately in the condensed consolidated statements of operations.

Impairment of non-financial assets

Long-lived assets

Property and equipment, intangible assets subject to amortization, right-of-use assets, and other long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset (or asset group) may not be recoverable. The impairment evaluation is performed at the asset group level, which is the lowest level for which identifiable cash flows are largely independent.

Impairment testing of long-lived assets is performed in accordance with ASC 360 and involves a two-step process:

Goodwill

Goodwill is tested for impairment at least annually, or more frequently if events or changes in circumstances indicate that it may be impaired, in accordance with ASC 350. The impairment test is performed at the reporting unit level.

The Company may first perform a qualitative assessment (“Step 0” test) to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. This qualitative assessment considers factors such as macroeconomic conditions, industry trends, operating performance, and other relevant events.

If the Company determines that it is more likely than not that the fair value is less than the carrying amount, or if the Company bypasses the qualitative assessment, a quantitative impairment test is performed. This involves comparing the fair value of the reporting unit to its carrying amount, including goodwill. If the carrying amount exceeds the fair value, a non-reversible impairment loss is recognized, limited to the amount of goodwill allocated to that reporting unit.

Financial Instruments

Recognition and derecognition

Financial instruments are recognized in the condensed consolidated statements of financial position when the Company becomes a party to the contractual obligations of the instrument. On initial recognition, financial instruments are recognized at their fair value, and in the case of financial liabilities not at fair value through profit or loss (“FVTPL”), net of transaction costs that are directly attributable to the issue of such financial liabilities.

Financial assets are subsequently derecognized when payment is received in cash or other financial assets or if the debtor is discharged of its liability. A financial liability is derecognized when the obligation under the liability is discharged or cancelled or expires. When the terms of the liability are substantially modified, such an exchange or modification is treated as the derecognition of the original liability and the recognition of a new liability. The difference in the respective carrying amounts is recognized in the condensed consolidated statements of operations.

Classification

Subsequent to initial recognition, financial instruments are measured according to the category to which they are classified. All of the Company’s financial instruments are classified and measured at amortized cost or fair value.

The classification of financial asset and liabilities is driven by the Company’s business model for managing the assets or liabilities and their contractual cash flow characteristics. Financial assets that are held to collect contractual cash flows where those cash flows represent solely payments of principal and interest are measured at amortized cost. All of the Company’s financial assets and financial liabilities are measured at amortized cost, as the Company does not have any financial assets or liabilities held for trading.

Impairment

The Company does not have purchased credit-deteriorated financial assets. The Company recognizes an allowance for credit losses on financial assets measured at amortized cost, including trade and other receivables.

For trade and other receivables, the Company applies the current expected credit loss (CECL) model, which requires recognition of lifetime expected credit losses at the time the asset is recognized. The Company estimates expected credit losses using a combination of historical loss experience, current conditions, and reasonable and supportable forecasts, including relevant macroeconomic factors.

The allowance for credit losses is presented as a contra asset, and the carrying amounts of financial assets are presented net of the related allowance in the condensed consolidated balance sheets.

Inventory

Inventory is valued at the lower of cost and net realizable value. Cost is determined on a weighted average basis. Cost includes all direct expenditures and other appropriate costs incurred in bringing inventory to its present location and condition, net of consideration received from vendors. 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.

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.

Share-Based Compensation

Prior to the Merger, the Company maintained a Long-Term Omnibus Compensation Plan (the “Omnibus Plan”) under which it may grant stock options and restricted stock units (“RSUs”) or stock options to directors, officers, employees, and consultants. The Board of Directors administers the Omnibus Plan and is responsible for determining the eligibility of participants and the specific terms of each award, including vesting conditions, exercise prices, and expiration dates.

Under the terms of the Omnibus Plan, the aggregate number of common shares issuable pursuant to outstanding and future awards was limited to 10% of the Company’s issued and outstanding common shares at any given time. Awards that expire, were canceled, or were otherwise forfeited are returned to the plan pool and may be reissued under future grants. Each RSU entitles the holder to receive one common share upon vesting. Stock options, when granted, entitled the holder to purchase one common share per option at a fixed exercise price and may be exercised following vesting until their expiry. Awards under the plan did not carry voting or dividend rights prior to settlement.

In connection with the Merger completed on April 24, 2025, the Company adopted the Legal Acquirer’s Amended and Restated 2019 Incentive Award Plan (the “Amended 2019 Plan”).

The Amended 2019 Plan provides for the grant of stock options, stock appreciation rights, restricted stock awards, restricted stock units, other stock or cash-based awards, and dividend equivalent awards (the “Awards”). The Amended 2019 Plan authorizes the issuance of Awards covering an aggregate number of shares of common stock equal to the sum of:

As of June 30, 2025, the maximum number of shares authorized for issuance under the Amended 2019 Plan was 1,928,023. Not more than 34,091 shares may be issued pursuant to Incentive Stock Options under the Amended 2019 Plan, which is included within the total authorized shares described above.

On July 16, 2021, Better Choice registered 10,227 shares of its common stock issuable under the Amended 2019 Plan in a registration statement on Form S-8. On January 25, 2022, an additional 65,909 shares were registered in a registration statement on Form s-8. On January 18, 2024, an additional 138,636 shares were registered in a registration statement on Form S-8.

In accordance with Accounting Standards Codification (“ASC”) 718 – Compensation—Stock Compensation, the Company measures share-based compensation cost at the fair value of the award on the grant date. For RSUs, fair value is based on the market price of the Company’s common shares on the date of grant. Compensation expense is recognized on a grade vesting basis over the requisite service period of the award, which can range from zero months tothree years. The Company accounts for forfeitures as they occur.

Share-based compensation expense is included in general and administrative expenses in the condensed consolidated statement of operations. No stock options were granted during either period.

Significant accounting judgments, estimates and assumptions

The preparation of the condensed consolidated financial statements in conformity with GAAP requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis.

Revisions to accounting estimates are recognized in the period in which the estimates are revised and in any future periods affected. Information about critical judgments in applying accounting policies that have the most significant effects on the amounts recognized in the condensed consolidated financial statements is as follows:

Inventories are carried at the lower of cost and net realizable value, which requires the Company to utilize estimates related to fluctuations in shrinkage, retail prices and shelf life. At each reporting date, the Company reviews its inventory and determines if a reserve is required for inventory.

The determination of asset groups for the purposes of impairment testing requires judgement when determining the lowest level for which identifiable cash flows are largely independent of other assets and liabilities. The Company evaluates how assets are used in operations and how cash flows are generated and monitored by management to determine appropriate asset groupings. These judgments can affect the timing and amount of impairment charges recognized in the condensed consolidated financial statements. Management has determined that the Company’s asset groups consist of the combined pharmacy locations that make up the pharmacy and sale of drugs operations, and the entities engaged in clinical trial services.

The Company evaluates non-financial assets, including goodwill, intangible assets, property and equipment, and right-of-use assets, for impairment in accordance with GAAP.

Goodwill and indefinite-lived intangible assets are tested for impairment at least annually, or more frequently if events or changes in circumstances indicate that the asset may be impaired, in accordance with ASC 350, Intangibles—Goodwill and Other. The Company performs its annual impairment test for goodwill at the reporting unit level, which management determines based on judgment, considering how the business is managed and where discrete financial information is available.

Long-lived assets, including finite-lived intangible assets, property and equipment, and right-of-use assets, are reviewed for impairment whenever events or changes in circumstances indicate that their carrying amount may not be recoverable, in accordance with ASC 360, Property, Plant, and Equipment. Recoverability is assessed by comparing the carrying amount of the asset (or asset group) to the estimated undiscounted future cash flows expected to result from the use and eventual disposition of the asset. If the carrying amount exceeds the estimated future undiscounted cash flows, an impairment loss is recognized for the amount by which the carrying amount exceeds the asset’s fair value.

Estimating future cash flows requires significant judgment by management, particularly regarding assumptions related to future operating performance, market conditions, and the selection of appropriate discount rates. Actual results may differ from those estimates, potentially resulting in material changes to the carrying amount of these assets in future periods.

The Company accounts for business combinations using the acquisition method. This involves the allocation of the costs of an acquisition to the underlying net assets acquired based on their estimated fair values. As part of this allocation process, management identifies and attributes values to the acquired intangible assets and any resulting goodwill. These determinations involve significant estimates and assumptions regarding cash flow projections, economic risk and discount rates. Management also exercises judgement in determining the estimated useful lives of intangible assets.

Judgment is used in determining whether an acquisition is a business combination or an asset acquisition. The assessment required management to assess the inputs, processes and outputs of the Company acquired at the time of acquisition. Pursuant to the assessment, the transaction was considered to be a business combination and estimate of fair value of the consideration paid was allocated to the identifiable assets acquired with the remaining value allocated to goodwill (Note 4).

The Company determines its reportable segments in accordance with ASC 280,Segment Reporting, based on how the Chief Operating Decision Maker (“CODM”) evaluates performance and allocates resources. Significant judgment is required in identifying operating segments, assessing their economic characteristics, and determining the appropriate level of aggregation.

Following the reverse merger completed on April 24, 2025, the Company hastwo reportable segments: Health Solutions and Consumer Products. The Health Solutions segment includes pharmacy operations, wholesale drug distribution, patient support programs, and diagnostic lab services, primarily based in Canada. The Consumer Products segment consists of the legacy Halo pet food business, which operates primarily in the United States and sells premium pet food and treat products.

The segments differ in economic characteristics, customer bases, and operational focus, and are evaluated separately by the CODM using key financial metrics such as revenue, gross margin, and Adjusted EBITDA. Prior to the merger, only the Health Solutions business was reflected in the Company’s operations.

Foreign currency translation

The Company operates in both the United States and Canada. The U.S. parent company conducts its operations in the United States, where the U.S. Dollar (USD) serves as the functional and reporting currency. SRx Canada conducts its operations in Canada, where the Canadian dollar (CAD) serves as the functional currency.

In accordance with ASC 830,*Foreign Currency Matters,*the financial statements of SRx Canada are translated into U.S. dollars for consolidation. Assets and liabilities are translated using exchange rates in effect at the balance sheet date, while revenues and expenses are translated using average exchange rates during the reporting period. Translation adjustments arising from this process are recorded in Accumulated Other Comprehensive Income (Loss) (“AOCI”), a component of shareholders’ equity, and excluded from net income until realized through sale or liquidation of the foreign operation.

New accounting standards

Recently adopted

There were no new standards that would have an impact on the condensed consolidated financial statements for the nine months ended June 30, 2025.

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 8,898,069 shares of its common stock at $2.09 per share, and AcquireCo issued 19,701,935 exchangeable shares (convertible into Better Choice common stock on a 1:1 basis). Better Choice shareholders prior to the transaction retained 4,277,297 shares. Upon closing, former shareholders of SRx Canada held approximately 88% of the total combined voting power of the Company’s equity, and Better Choice shareholders retained approximately 12%. The transaction has been accounted for as a reverse acquisition under ASC 805, with SRx Canada identified as the accounting acquirer. The condensed consolidated financial statements reflect the historical operations of the accounting acquirer, with the equity structure retroactively adjusted to reflect the legal acquirer’s equity.

The total consideration transferred was less than the fair value of the net assets acquired, resulting in a preliminary bargain purchase gain of $1.69 million, which was recognized in the condensed consolidated statement of operations for the three months ended June 30, 2025.

The Company has not finalized the purchase price allocation pending completion of the valuation of assets acquired and liabilities assumed, including any intangible assets. Accordingly, the amounts recognized for the major classes of assets and liabilities acquired have not yet been determined.

In connection with the closing of the Reverse Merger, the Company issued 1,599,231 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 $3.3 million in the condensed consolidated statement of operations for the period. The fair value of the shares issued was determined based on the closing trading price of the Company’s common stock on the date of issuance. No cash was exchanged in connection with these transactions.

In connection with the Reverse Merger, the Company also completed a private placement on April 24, 2025, issuing 1,280,000 shares of common stock and 2,756,697 pre-funded warrants for aggregate gross proceeds of $8.8 million. The transaction was exempt from registration under Section 4(a)(2) of the Securities Act.

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 $0.2 million.

As of June 30, 2025, the Company had recorded $8.6 million in prepaid expenses related to this agreement. Subsequent to June 30, 2025, the full prepaid amount was written off following the filing for creditor protection under the Companies’ Creditors Arrangement Act (“CCAA”) by SRx Health Solutions (Canada) Inc., the Company’s Canadian operating subsidiary. Refer to Note 23 – Subsequent Events for further details.

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, 2023, 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.

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.

Acquisition of pharmacies

The following table summarizes the preliminary fair value of the assets and liabilities acquired in business combinations for the three- and nine-month period ended June 30, 2024 (in thousands):

Acquisition of Elora Apothecary Ltd.

On October 6, 2023, the Company acquired the shares of Elora Apothecary Ltd. (“Elora”) as a business combination.

Elora is a retail pharmacy, located in Elora, ON, that provides customers with adequate prescription medications and other health related products and services.

The total purchase price consisted of cash consideration of $1.1 million and 32,962 common shares of the Company with a fair value of $0.1 million.

The excess of the purchase price over the net identifiable assets acquired and the liabilities assumed resulted in goodwill of $0.8 million, which is largely attributable to the assembled workforce acquired and the synergies from combining operations. Goodwill will not be deductible for tax purposes.

From the date of acquisition, Elora contributed $1.0 million of revenue and less than $0.01 million to income before income taxes during the nine-month period ended June 30, 2024.

Acquisition of Trailside Pharmacy Ltd.

On October 6, 2023, the Company acquired the shares of Trailside Pharmacy Ltd. (“Trailside”) as a business combination.

Trailside is a retail pharmacy located in Fergus, ON, that provides customers with adequate prescription medications and other health related products and services.

The total purchase price consisted of cash consideration of $0.5 million and 32,962 common shares of the Company with a fair value of $0.1 million.

The excess of the purchase price over the net identifiable assets acquired and the liabilities assumed resulted in goodwill of $0.3 million, which is largely attributable to the assembled workforce acquired and the synergies from combining operations. Goodwill will not be deductible for tax purposes.

From the date of acquisition, Trailside contributed $1.0 million of revenue and $(0.1) million to loss before income taxes during the nine-month period ended June 30, 2024.

The assets of Elora and Trailside were subsequently sold on August 31, 2024 for a total sale price of $1.3 million plus inventory, resulting in a loss of $0.4 million which is included in other expenses on the condensed consolidated statement of operations.

Acquisition of 0864009 B.C. Ltd.

On October 16, 2023 the Company acquired the shares 0864009 B.C. Ltd. (“Mediglen”) as a business combination.

Mediglen is a retail pharmacy, located in Coquitlam, BC, that provides customers with adequate prescription medications and other health related products and services. The acquisition of Mediglen compliments and is in line with the Company’s growth strategy.

The total purchase price consisted of cash consideration of $1.8 million and 54,936 common shares of the Company with a fair value of $0.2 million.

The excess of the purchase price over the net identifiable assets acquired and the liabilities assumed resulted in goodwill of $1.2 million, which is largely attributable to the assembled workforce acquired and the synergies from combining operations. Goodwill will not be deductible for tax purposes.

From the date of acquisition, Mediglen contributed $0.9 million of revenue and less than $0.1 million to income before income taxes during the nine-month period ended June 30,2024.

Acquisition of Vaughan Endoscopy Clinic Inc.

On February 29, 2024, the Company acquired the shares Vaughan Endoscopy Clinic Inc. (“VEC”) as a business combination.

VEC is a medical clinic, located in Vaughan, ON, that offers patients endoscopy and other health related services. The acquisition of VEC compliments and is in line with the Company’s growth strategy.

The total purchase price consisted of total consideration of $0.2 million.

The excess of the purchase price over the net identifiable assets acquired and the liabilities assumed resulted in goodwill of $0.1 million, which is largely attributable to the assembled workforce acquired and the synergies from combining operations. Goodwill will not be deductible for tax purposes.

From the date of acquisition, VEC contributed $0.2 million of revenue and less than $0.01 million to income before income taxes during the nine-month period ended June 30, 2024.

Note 5 –Trade and other receivables

Trade receivables are non-interest bearing and are generally on terms of 30 to 60 days. There are no receivables due from third party customers that are past due and not impaired at each reporting date. Set out below are the changes in the CECL during each year.

Note 6 –Inventory

Inventories are summarized as follows:

Note 7 –Fixed assets

Fixed assets consist of the following:

Depreciation expense was $0.2 million and $0.5 million for the three and nine months ended June 30, 2025, respectively. Depreciation expense was $0.2 million and $0.4 million for the three and nine months ended June 30, 2024, respectively.

Note 8 –Intangible assets

Amortization expense was $1.6 million and $2.4 million for the three and nine months ended June 30, 2025, respectively. Amortization expense was $0.6 million and $1.0 million for the three and nine months ended June 30, 2024, respectively.

The estimated future amortization of intangible assets is as follows:

The Company recognized an impairment loss of $1.6 million and $2.7 million during the three and twelve months ended September 30, 2024, and the three and nine months ended June 30, 2025, respectively, related to customer list intangible assets acquired through prior business combinations. The customer lists were tested for impairment prior to goodwill testing using the income approach, specifically a discounted cash flow (DCF) method. The impairment was the result of a decline in the estimated fair value of the customer lists below their carrying amount, based on updated projections of future cash flows attributable to customer relationships and the application of a discount rate reflecting current market conditions and entity-specific risks. The impairment charge is included in the condensed consolidated statement of operations and relates to the Pharmacy and Prescription Drug Sales reporting unit.

Note 9 –Goodwill

The change in the carrying amount of goodwill is summarized as follows:

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 $19.7 million for the three and twelve months ended September 30, 2024, which was recognized in the condensed consolidated statement of operations for the period then ended.

Note 10 –Leases

The Company has lease contracts for various buildings used in its operations. Leases of buildings generally have lease terms between 3 and 10 years. The Company applied incremental borrowing rates that ranged from 2.46% to 8.58% for respective leases. The Company’s obligations under its leases are secured by the lessor’s title to the leased assets. The Company has several lease contracts that include extension and termination options. These options are negotiated by management to provide flexibility in managing the leased-asset portfolio and align with the Company’s business needs. Management exercises significant judgement in determining whether these extension and termination options are reasonably certain to be exercised.

ROU assets and lease liabilities consist of the following:

Total lease costs for the three and nine months ended June 30, 2024 and 2025 were:

Approximate aggregate annual lease payments as of June 30, 2025:

The following table includes supplemental lease information as at June 30, 2025:

Note 11 –Debt

Short-term borrowings

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 $3.7 million at a variable interest rate equal to the bank’s prime rate plus 1.5% per annum. The interest rate was 6.45% and 7.95% at June 30, 2025 and September 30,2024, respectively. Interest is payable monthly, and the Company may repay and reborrow amounts at its discretion, subject to the terms of the facility. As of June 30, 2025 and September 30, 2024, $3.5 million was outstanding under the CWB line of credit. Accrued interest was not material as of June 30, 2025 and September 30, 2024. The facility is unsecured and contains no financial covenants.

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 $750,000 at an interest rate of 12% per annum. On December 31, 2024, the Promissory Note was amended to permit additional borrowing of $720,000 at a revised interest rate of 11% per annum.

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.

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 June 30, 2025.

No gain or loss was recognized upon conversion. All prior-period balances related to this facility have been removed, and no amounts are outstanding under this facility as of June 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 June 30, 2025 and September 30, 2024, the Company is not in compliance with the covenants and as a result the entire CWB loan is classified as a current liability. The terms of these facilities have been summarized below.

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 January 19, 2024, and the loans now have a maturity date of December 31, 2026 and bear an interest rate at 5% per annum.

The following outlines the current and long-term portion of the term facilities during the year:

Note 12 –Convertible debentures

The amount of convertible debentures recorded during the year is composed of the following:

The convertible debentures are automatically converted to equity at a 15% discount to the price per security issued at the time of an Initial Public Offering or liquidity event if this event occurs prior to the maturity date of December 31, 2023. The interest and principal is payable on maturity if a liquidity event has not occurred.

On December 31, 2023, the maturity date of the convertible debentures was extended to July 31, 2024, with the exception of $0.1 million in principal plus accrued interest that was repaid. On December 31, 2023 the interest rate was increased to 15% per annum from 5% per annum. This increase was applied retroactively from the date the cash was received. Additional amendments were provided to convertible debenture holders that further extended the maturity date. On November 29, 2024, convertible debentures with principal amounts $0.5 million plus accrued interest of $0.1 million were converted to common shares. On February 28, 2025, convertible debentures worth $0.1 million plus accrued interest of less than $0.1 million were converted to common shares.

During the nine-months ended June 30, 2025, the Company issued an additional $1.0 million in convertible debentures. The convertible debentures are converted to equity at a 115% of the principal amount plus accrued interest at the holders’ option.

Better Choice Convertible Note

On August 15, 2024, Better Choice Company Inc. (“BTTR”) entered into a convertible promissory note agreement with the Company in the principal amount of $1.45 million. The note included a provision allowing BTTR, under certain conditions, to convert the outstanding principal and any accrued interest into common shares of the Company based on a defined formula.

In connection with the reverse merger transaction that closed on April 24, 2025, the convertible promissory note was converted into common shares of the Company pursuant to its contractual terms and is no longer outstanding as of June 30, 2025. No gain or loss was recognized upon settlement.

Accordingly, the convertible promissory note has been derecognized from the financial statements and is not included in the June 30, 2025 condensed consolidated balance sheet. Prior-period fair value assessments and derivative accounting considerations are no longer applicable.

Accordingly, the convertible debentures and the convertible promissory note are accounted for as single financial liabilities. Upon initial recognition, the instruments are recorded at their transaction price, which approximates fair value.

Note 13 –Revenue

The Company’s disaggregated revenue is as follows:

Note 14 –Segment information

The Company evaluated its operating segments in accordance with ASC 280, “Segment Reporting,” and determined that it operates withtwo reportable segments: Health Solutions and Consumer Products. The Health Solutions segment encompasses the Company’s network of pharmacies across Canada, representing the core business. The Legacy Consumer Products segment consists of the legacy Halo pet food business, which includes a range of premium pet products such as dry kibble, wet food, freeze-dried raw food, treats, and toppers for dogs and cats. While the Consumer Products segment operates across various sales channels, it remains a distinct and immaterial component of the overall business. The two segments are evaluated separately by the Chief Operating Decision Maker, reflecting differences in their operational dynamics, customer bases, and economic characteristics. This segmentation provides a clear view of the Company’s financial performance aligned with how management oversees and allocates resources across its distinct lines of business.

The Company’s Board of Directors, designated as the Chief Operating Decision Maker (“CODM”), evaluates performance and makes decisions based on financial information presented for the Company’s two reportable segments: Health Solutions and Consumer Products. The CODM reviews financial results separately for each segment, including revenues, gross margin, and Adjusted EBITDA, to assess performance and allocate resources accordingly. Resources are allocated based on the distinct operational needs and strategic priorities of each segment, reflecting their differing business models, customer bases, and economic characteristics.

The Board of Directors, as the CODM for the Company, does not review total assets when evaluating the performance of the Company’s operating segments. The Consumer Products segment operates an asset-light business model, utilizing third-party logistics (3PL) providers and outsourced manufacturing, resulting in minimal asset ownership. While the Health Solutions segment includes pharmacy operations that may have more significant asset balances, asset-related information is generally not a key factor in the CODM’s performance assessments and is therefore not presented.

Sales, gross margin, and net loss are presented separately for the Health Solutions and Consumer Products segments in the table below and collectively reconcile to the Company’s consolidated results as reflected in the condensed consolidated statement of operations. The Board of Directors, acting as the CODM, evaluates the performance of each segment individually, including significant segment-level expenses. These expenses, which are reviewed to assess operating performance and support resource allocation decisions, consist of the following (in thousands):

The Company began reportingtwo operating and reportable segments – Health Solutions and Consumer Products – following the reverse merger completed on April 24, 2025. Prior to the merger, only the Health Solutions business was reflected in the condensed consolidated financial statements, and accordingly, financial information for the three and nine-month periods ended June 30, 2024 relates solely to the Health Solutions segment. Comparative information for the Consumer Products segment is not presented for those periods, as it was not part of the Company’s operations prior to the merger. For the three- and nine-month periods ended June 30, 2025, the Consumer Products segment reflects activity only from the merger date forward. Segment information for the Health Solutions business for the three- and nine-month periods ended June 30, 2024 is presented in the following table:

Geographic Information

Revenue by geography is determined based on the customer’s location. For the three- and nine-month periods ended June 30, 2025, U.S. revenue reflects only legacy Halo activity, representing revenue from the Consumer Products segment, and includes results only from the date of the merger (April 24, 2025) onward. Revenue from the Health Solutions segment during the same period reflects activity exclusively in Canada. Segment information for Health Solutions for the three- and nine-month periods ended June 30, 2024, is presented in the following table. Summary financial data by geographic region for the periods indicated is as follows (in USD):

Long-lived assets for the periods indicated are as follows (in USD):

The accounting policies of the segment are consistent with those described in Note 1 - Summary of Significant Accounting Policies.

Note 15 –Income taxes

For the three and nine months ended June 30, 2025, the Company recorded an income tax provision of $0.1 million and $0.8 million, respectively. The Company recorded an income tax provision of $0.3 million and $0.2 million for the three and nine months ended June 30, 2024, respectively.

For the three and nine months ended June 30, 2025, the Company recorded deferred tax income of $1.7 million and $1.5 million, respectively. The Company recorded deferred tax expense of $0.4 million for the three months ended June 30, 2024 and deferred tax income of $0.6 million for the nine months ended June 30, 2024.

For the three and nine months ended June 30, 2025 and 2024, the Federal and Provincial tax rates were 15.0% and 11.5%, respectively.

The Company’s U.S. operations are subject to a federal statutory tax rate of 21%, but due to a full valuation allowance against deferred tax assets related to net operating losses, the effective tax rate was less than 1% for the three and nine months ended June 30, 2025 and 2024, resulting in a minimal income tax provision.

Note 16 –Related party transactions

Related Party Loans and Balances

During the fiscal year ended September 30, 2024, and the nine month period ended June 30, 2025 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, and the interim periods ended March 31, 2025, all material related party loans were forgiven and the Company recorded a capital contribution. No amounts remained outstanding prior to the merger.

During the pre-merger period in the three months ended June 30, 2025, as a result of historical clean-ups, the net related party balances transitioned into a payable position. This included a $1.4 million balance due to Adesh Vora, the Company’s former Chief Executive Officer. The recognition of this payable was recorded as an increase to beginning accumulated deficit and reflected as a non-cash capital distribution in the condensed consolidated statement of changes in shareholders’ equity for the period.

As of June 30, 2025 and September 30, 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:

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.

Note 17 –Share issuances and 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:

On April 24, 2025, the Company issued to a single investor a combination of 1,280,000 shares of common stock, and 2,756,697 shares of pre-funded warrants to purchase Company Common Stock, (total of 4,036,697 shares issued) at a price of $2.18 per share, or $8.8 million in the aggregate, in a private placement transaction. No additional consideration is required to be paid to exercise the warrants and the warrant does not expire until conversion. The aggregate exercise price, except for a nominal $0.001 per share, was fully prepaid by the investor at issuance, requiring no additional consideration for exercise. The transaction was accounted for as an equity issuance because the number of common shares issuable upon exercise of the warrant is fixed. The proceeds were allocated between common share capital and warrants (additional paid-in capital) based on the $2.18 stock price and the par value of the shares issued. As of June 30, 2025, all 2,756,697 of these pre-funded warrants remained outstanding.

Additionally, during the nine months ended June 30, 2025, the Company issued 1,941,120 shares to for the settlement of inventory-related accounts payable of $2.9 million, and professional fee-related accounts payable of $3.1 million. The professional fees related to professional services provided for capital market activities (investor relations, legal, advisory, etc). No shares were issued in lieu of cash payments during the three months ended June 30, 2025 or three and nine months ended June 30, 2024.

Proceeds are intended to be used for general corporate purposes, including working capital and operational expenses. Issuance costs were not material and were expensed as incurred.

Note 18 –Loss per share

Basic and diluted net loss per share are the same for all periods presented, as the inclusion of potentially dilutive securities would have been anti-dilutive due to the net loss. The Company excluded the following potentially dilutive securities from the calculation of diluted net loss per share as at June 30, 2025:377,290 convertible debt instruments. The Company excluded the following potentially dilutive securities from the calculation of diluted net loss per share as at June 30, 2024:312,033 convertible debt instruments and 981,495 of restricted stock units.

These securities could potentially dilute earnings per share in the future but were not included in the computation of diluted net loss per share for the periods presented because their effect would have been anti-dilutive.

Note 19 –Share-based compensation

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 June 30, 2025, the maximum number of shares authorized for issuance under the Amended 2019 Plan was 1,928,023. Not more than 34,091 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 three months ended June 30, 2025 and 2024, the Company recognized $2.9 million and $0.8 million, respectively, of share-based compensation expense. During the nine months ended June 30, 2025 and 2024, the Company recognized $4.5 million and $2.6 million, respectively, of share-based compensation expense.

During the pre-merger period in the nine months ended June 30, 2025, the Company issued an aggregate of 290,611 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 $0.5 million upon issuance. The weighted average grant-date fair value of these RSUs was $1.67 per share.

In April 2025, the Company granted 890,192 shares of restricted common stock to certain directors, officers, and employees as performance bonus compensation. These restricted stock awards were immediately vested and, as such, the Company recorded share-based compensation expense of $1.9 million upon issuance. The weighted average grant-date fair value of these restricted stock grants was $2.09 per share.

Additionally, the Company recognized an additional $2.1 million of share-based compensation expense related to the auto-vesting and settlement of RSUs prior to the recapitalization.

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.

The fair value of RSUs granted is based on the market price of the Company’s common shares on the grant date. The following table summarizes the continuity of the Company’s RSUs:

Note 20 –Financial instruments

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;

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 related party receivables, trade and other payables and related party 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 convertible debt 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.

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.

The Company is exposed to liquidity risk related to its financial liabilities, including trade payables, long-term borrowings, and promissory notes. 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:

June 30, 2025

September 30, 2024

Note 21 –Disposal of assets

On October 18, 2024, the Company sold the assets of Niagara Community Pharmacy Ltd. for a total net proceeds of $2.4 million plus inventory of $0.3 million, for total sale price of $2.7 million. The net assets sold had a carrying value of $1.4 million, resulting in a gain of $1.3 million, which is recognized as other income on the condensed consolidated statement of operations.

On December 20, 2024, the Company sold the assets of P.A. Pharmacy Limited for a total sale price of $2.8 million plus inventory in excess of $0.1 million, for a total sale price of $2.9 million. The net assets sold had a carrying value of $0.8 million resulting in a gain of $2.1 million, which is recognized as other income on the condensed consolidated statement of operations.

On February 20, 2025, the Company sold the warehouse building and entered into a sale leaseback agreement with the purchasers. The total sale price was $1.2 million, resulting in a gain of $0.4 million, which is recognized as other income on the condensed consolidated statement of operations.

On April 30, 2025, the Company sold the assets of Clearbrook Pharmacy (1987) for a total sale price of $0.8 million plus inventory of $0.1 million, for a total sale price of $0.9 million. The net assets sold had a carrying value of $0.5 million resulting in a gain of $0.4 million, which is recognized as other income on the condensed consolidated statement of operations.

On June 16, 2025, the Company sold the assets of Greg’s Drug Ltd. for a total sale price of $0.8 million plus inventory of $0.1 million, for a total sale price of $0.9 million. The net assets sold had a carrying value of $0.5 million resulting in a gain of $0.4 million, which is recognized as other income on the condensed consolidated statement of operations.

Additionally, the Company incurred $0.3 million of losses on other asset disposals within the nine month period ending June 30, 2025, resulting in a net total gain of $4.3 million for the nine month period ending June 30, 2025 recorded on the condensed consolidated statement of operations.

Note 22 –Commitments and contingencies

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 selling, general, and administrative (“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 if estimable. Loss contingencies considered remote are generally not disclosed. No assets are pledged as security for these loans.

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 condensed 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 condensed consolidated financial position or results of operations of the Company.

Note 23 –Subsequent events

The Company has evaluated subsequent events and transactions that occurred after the condensed consolidated statement of financial position 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 condensed consolidated financial statements.

On July 11, 2025, the Company sold the assets of 3788602 Manitoba Ltd. for a total sale price of $1.8 million inclusive of inventory, resulting in a gain of $1,066, which will be recognized on the condensed consolidated statement of operations.

Equity Line of Credit (ELOC)

On July 7, 2025, the Company entered into a Common Share Purchase Agreement with a Lead Investor, granting the Company the right to sell up to $50 million of common shares, capped at 19.99% of outstanding shares unless stockholder approval is obtained or issuance meets “at market” exceptions under NYSE American rules. As commitment consideration, the Company issued $1 million in Commitment Shares (valued at the VWAP price) and agreed to reimburse up to $35,000 of investor expenses. A related Registration Rights Agreement obligates the Company to file a resale registration statement. The ELOC remains unutilized as of the date of this report.

Convertible Note and Warrant Financing

Also on July 7, 2025, the Company entered into a Securities Purchase Agreement with investors, issuing $7.65 million aggregate principal amount of senior secured convertible notes at an original issue discount. The notes bear interest at 8% per annum, mature on July 8, 2027 (subject to extension on default), and are convertible into common stock at $0.6274 per share (subject to adjustment). Investors also received warrants for 21,338,062 shares, exercisable three years post-issuance at $0.6274. The securities are secured by substantially all U.S. assets and certain subsidiary equity under a Security and Pledge Agreement. SRX also entered into a Registration Rights Agreement covering the resale of shares issuable upon conversion or exercise.

Share Cancellation Settlement Agreement

On August 1, 2025, the Company entered into a Settlement, Share Forfeiture and Mutual Release Agreement with certain of the original founders and officers of SRx Canada, including Adesh Vora, a former director and executive officer. Pursuant to the Agreement, an aggregate of 18,839,332 shares were forfeited and cancelled. Of the total cancelled,376,121 were common shares of the Company and remaining were exchangeable into shares of the Company’s common stock on a one-for-one basis. These shares were originally issued in connection with the merger between SRx Canada and Better Choice in April 2025. The cancellation represents approximately 46% of the Company’s total issued and outstanding shares on a fully diluted basis prior to the settlement. This settlement was executed after the reporting date and is not reflected in the condensed consolidated financial statements as of June 30, 2025.

Companies’ Creditors Arrangement Act “CCAA” Filing

Also on August 11, 2025, SRx Canada, a wholly owned subsidiary of the Company, commenced proceedings under the Companies’ Creditors Arrangement Act (Canada) (“CCAA”) with the Ontario Superior Court of Justice (the “Court”). The CCAA filing was made in response to liquidity constraints and the inability to refinance maturing obligations.

In connection with the CCAA proceedings, SRx Canada sought a stay of proceedings and approval of debtor-in-possession (“DIP”) financing to provide stability while it considers strategic alternatives, which may include a restructuring transaction or the sale of all or substantially all of its business or assets through a court-supervised process. As of the date of this filing, neither the Company nor its other subsidiaries, including Halo, Purely for Pets, Inc., has made any filing under any bankruptcy or insolvency legislation in the United States or Canada.

The CCAA filing and Settlement Agreement represent significant subsequent events. The Company’s condensed consolidated financial statements as of and for the period ended June 30, 2025 do not reflect the impact of these developments, as they occurred after the reporting date.

To assist stakeholders in evaluating the Company’s financial position, pro-forma financial information for the three and nine months ended June 30, 2025 is presented below. The pro forma results reflect only the U.S. operations, which are not subject to the CCAA proceedings and do not have associated debt obligations. These pro forma figures are presented for illustrative purposes only and do not reflect actual or anticipated outcomes of the CCAA process.

Shares issued for professional fees

In July 2025, the Company issued 2,193,355 shares of common stock to certain arm’s length advisors in exchange for certain professional advisory fees rendered in connection with the Company’s financing and capital markets activities, and the shares were issued with a weighted average price of $0.61 per share.

Share Exchange Agreement

On August 21, 2025, the Company entered into a Share Exchange Agreement (the “Exchange Agreement”), with Halo Spin-Out SPV, Inc., a Delaware corporation (“SPV”), whereby the Company acquired the 17% interest of the Common Stock of Halo, Purely for Pets, Inc., (“Halo”) held by SPV, in exchange for the issuance of 4,950,000 shares of the Common Stock of the Company to SPV. Upon execution of the agreement, the Company regained 100% ownership of Halo.

Shares issued to related parties

On August 25, 2025, the Company issued to certain directors, officers and employees an aggregate of 2,396,697 shares of restricted common stock as performance bonus compensation. The restricted stock awards were immediately vested with a weighted average price of $0.40 per share.

On September 16, 2025, the Company issued to certain current and former directors an aggregate of 196,000 shares of restricted common stock at a weighted average issue price of $0.35 per share.

Additionally, between July and September 2025, the Company issued 394,780 shares of common stock pursuant to a retraction of shareholders’ exchangeable shares which converted into a share of common stock. These shareholders were former employees and shareholders of SRx Canada that initially received exchangeable shares in the Merger.