SRX Global Inc.

Unaudited Condensed Consolidated Statements of Operations

(Dollars in thousands, except share and per share amounts)

Unaudited Condensed Consolidated Balance Sheets

(Dollars in thousands, except share and per share amounts)

Unaudited Condensed Consolidated Statements of Stockholders’ Equity (Deficit)

(Dollars in thousands, except shares)

Unaudited Condensed Consolidated Statements of Cash Flows

(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. (the “Company”) operates a pet health and wellness company through its subsidiary Halo, Purely for Pets, Inc., a Delaware corporation (“Halo”). Halo has a broad portfolio of pet health and wellness products for dogs and cats sold under its Halo brand across multiple forms, including foods, treats, toppers, dental products, chews and supplements. The products consist of kibble and canned dog and cat food, freeze-dried raw dog food and treats, vegan dog food and treats, oral care products and supplements. Beginning April 24, 2025, subsequent to the fiscal quarter to which this Quarterly Report relates, the Company also operates a specialty pharmacy business through its wholly-owned subsidiary SRx Health Solutions (Canada) Inc., a corporation organized under the laws of the Province of Ontario (“SRx Health”).

Reverse stock split

On March 8, 2024, the Company’s Board of Directors approved a reverse stock split of the Company’s issued and outstanding shares of common stock at a ratio of 1-for-44, effective March 20, 2024 (the “Reverse Stock Split”). In addition, the exercise prices of the Company’s underlying common stock purchase warrants and stock options were proportionately adjusted at the applicable reverse stock split ratio in accordance with the terms of such instruments. Proportionate voting rights and other rights of common stockholders were not affected by the Reverse Stock Split, other than as a result of the rounding up of fractional shares. In April 2024, in connection with the Reverse Stock Split,70,039 shares of common stock were issued in lieu of fractional shares.

Accordingly, all share and per share amounts related to the Company’s common stock for all periods presented in the accompanying consolidated financial statements and notes thereto have been retroactively adjusted, where applicable, to reflect the Reverse Stock Split. The number of authorized shares and the par values of the common stock and convertible preferred stock were not adjusted as a result of the Reverse Stock Split.

July 2024 public offering

On July 29, 2024, the Company entered into an Underwriting Agreement (the “Underwriting Agreement”) with ThinkEquity LLC (the “Underwriter”), for an underwritten public offering (the “Offering”) of 639,000 shares (the “Shares”) of the Company’s common stock, par value $0.001 per share (the “Common Stock”) at a public offering price of $3.00 per share and pre-funded warrants to purchase 1,028,000 shares of Common Stock (the “Pre-Funded Warrants” and together with the Shares, the “Securities”) at a public offering price of $2.99 per Pre-Funded Warrant, for aggregate gross proceeds of approximately $5.0 million prior to deducting approximately $0.5 million of underwriting discounts, commissions, and other offering expenses. In addition, the Company granted the Underwriter a 45-day option to purchase an additional 100,000 shares of Common Stock, at the public offering price per share, less the underwriting discounts and commissions, to cover over-allotments (the “Over-allotment Option”). The Company also issued representative warrants to purchase 83,350 shares of common stock (equal to 5% of the total number of shares sold in the public offering). The representative warrants will be exercisable at $3.75 per share, a per share exercise price equal to 125% of the public offering price per share of common stock sold in the offering. The Company has determined these warrants are equity classified in accordance with Topic 480. Refer to Note 11 - Warrants for more information. The Securities were offered and sold to the public pursuant to the Company’s registration statement on Form S-1 (File No. 333-280714), filed by the Company with the Securities and Exchange Commission on July 8, 2024, as amended, which became effective on July 29, 2024. The sale of the Securities in connection with the Offering closed on July 31, 2024.

On August 2, 2024, pursuant to and in compliance with the terms and conditions of the Underwriting Agreement and the Offering, the Underwriters provided notice that they would exercise the Over-allotment Option to purchase 100,000 shares of Common Stock at $3.00 per share. The sale of 100,000 shares of Common Stock in connection with the exercise of the Over-Allotment Option closed on August 2, 2024. The Company has received gross proceeds of approximately $5.3 million for the Offering to date, including in connection with the exercise of the Over-Allotment Option, prior to deducting $0.5 million of underwriting discounts and commissions and offering expenses payable by the Company.

Reverse Merger

On September 3, 2024, BCC, SRx Health, AcquireCo and 1000994085 Ontario Inc., a direct wholly-owned subsidiary of the Company and corporation existing under the laws of the Province of Ontario (“CallCo”) entered into an Arrangement Agreement (the “Arrangement Agreement”), and the Business Combination was completed on April 24, 2025 (which we refer to as the “Closing Date”), subsequent to the fiscal quarter to which this Quarterly Report relates.

Pursuant to the Arrangement Agreement, on the Closing Date, AcquireCo, a wholly-owned subsidiary of BCC, amalgamated with and into SRx Health, with SRx Health remaining as the surviving entity. BCC acquired the business of SRx Health pursuant to the Business Combination and will continue the existing business operations of SRx Health as a wholly-owned subsidiary.

On the Closing Date, BCC issued to certain holders of the common stock of SRx Health 8,898,069 shares of the Company’s common stock, par value $0.001 per share (the “Company Common Stock”), and AcquireCo issued to certain holders of the common stock of SRx Health 19,701,935 shares in the capital stock of AcquireCo which shares are exchangeable into Company Common Stock (the “Exchangeable Shares”) on a one-for-one basis. The common stockholders of BCC before the Merger retained 5,403,460 shares of our Company Common Stock. As a result, immediately following the Closing, SRx Health’s former stockholders and BCC’sexisting stockholders held approximately 84% and 16%, respectively, of the total combined voting power of all classes of the Company’s stock entitled to vote (including the Exchangeable Shares).

The acquisition will be accounted for as a business combination in accordance with the Accounting Standards Codification (ASC) 805, Business Combinations. The Company has begun the process to determine the purchase price allocation for the assets acquired and liabilities assumed including estimating the fair values of intangible and tangible assets. Due to the limited time since the acquisition, these estimates and the initial accounting for the business combination have not been completed. As a result, the Company is unable to provide the amounts recognized as of the acquisition date for the major classes of assets acquired and liabilities assumed.

In connection with the Business Combination on April 24, 2025, we issued to a single investor a combination of 4,036,697 shares of Company Common Stock and pre-funded warrants to purchase Company Common Stock at a price of $2.18 per share, or $8.8 million in the aggregate, in a private placement transaction (the “Private Placement”). The issuance of shares of Company Common Stock in the private placement was exempt from registration under Section 4(2) of the Securities Act.

On April 25, 2025, we entered into a consulting agreement with Terra Nova Business Holdings Inc., a corporation governed by the laws of the British Virgin Islands (“Terra Nova”), pursuant which Terra Nova will provide us with international logistics and business development strategies globally, including potential global licensing or distribution arrangements, for our specialty pharmacy business. The term of the consulting agreement is 36 months and the consulting fee payable to Terra Nova thereunder is $0.2 million per month.

Basis of presentation

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, the Condensed Consolidated Balance Sheet as of December 31, 2024 has been derived from the audited consolidated financial statements at that date but does not include all of the information required by GAAP for complete financial statements. Results of operations for interim periods may not be representative of results to be expected for the full year.

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 December 31, 2024, filed with the SEC.

Consolidation

The condensed financial statements are presented on a consolidated basis and include the accounts of the Company and its wholly owned subsidiaries. All intercompany transactions and balances have been eliminated in consolidation.

Use of estimates

The preparation of the condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the reporting periods. The Company bases its estimates on historical experience and on various other assumptions that the Company believes to be reasonable under the circumstances. On an ongoing basis, the Company evaluates these assumptions, judgments and estimates. Actual results may differ from these estimates.

In the opinion of management, the condensed consolidated financial statements contain all adjustments necessary for a fair statement of the results of operations for the three months ended March 31, 2025 and 2024, the financial position as of March 31, 2025 and December 31, 2024 and the cash flows for the three months ended March 31, 2025 and 2024.

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.

Going concern considerations

The Company is subject to risks common in the pet wellness consumer market including, but not limited to, dependence on key personnel, competitive forces, successful marketing and sale of its products, the successful protection of its proprietary technologies, ability to grow into new markets, and compliance with government regulations. The Company has historically incurred losses, has an accumulated deficit, and expects to continue to generate operating losses and consume cash resources in the near term. These conditions raise substantial doubt about the Company’s ability to continue as a going concern for a period of twelve months from the date these interim condensed consolidated financial statements are issued, meaning that we may be unable to generate sufficient operating cash flows to pay our short-term obligations. The Company will need to either raise additional capital or obtain additional financing to maintain sufficient liquidity. There can be no assurance that the Company will be successful in raising additional capital, renewing or refinancing its existing debt or securing new financing. If the Company is unsuccessful in doing so, it may need to reduce the scope of its operations or sell certain assets.

The Company has implemented and continues to implement plans to achieve operating profitability, including various margin improvement initiatives, the consolidation of and introduction of new co-manufacturers, the optimization of pricing strategy and ingredient profiles, and new product innovation. The accompanying condensed consolidated financial statements have been prepared assuming the Company will continue as a going concern, which contemplates the realization of assets and payments of liabilities in the ordinary course of business. Accordingly, the consolidated financial statements do not include any adjustments relating to the recoverability and classification of asset carrying amounts or the amount of and classification of liabilities that may result should the Company be unable to continue as a going concern.

Summary of significant accounting policies

For additional information, please refer to the most recently filed Annual Report regarding the Company’s 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.

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 three months ended March 31, 2025, no shares were repurchased. On April 17, 2025, the Repurchase Plan was reinstated and authorization increased to $6.5 million.

Warrants

The Company accounts for warrants as either equity-classified or liability-classified instruments based on an assessment of the warrant’s specific terms and applicable authoritative guidance in ASC 480 and ASC Topic 815, Derivatives and Hedging (“ASC 815”). The assessment considers whether the warrants are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and whether the warrants meet all of the requirements for equity classification under ASC 815, including whether the warrants are indexed to the Company’s own common stock, among other conditions for equity classification. This assessment, which requires the use of professional judgment, is conducted at the time of warrant issuance and as of each subsequent quarterly period end date while the warrants are outstanding. For issued or modified warrants that meet all of the criteria for equity classification, the warrants are required to be recorded as a component of additional paid-in capital at the time of issuance. For issued or modified warrants that do not meet all the criteria for equity classification, the warrants are required to be recorded at their initial fair value on the date of issuance, and each balance sheet date thereafter. Changes in the estimated fair value of the warrants are recognized as a non-cash gain or loss on the statement of operations. The Pre-Funded and Representative Warrants (as defined in Note 11) are equity classified.

Advertising

The Company charges advertising costs to expense as incurred and such charges are included in selling, general and administrative (“SG&A”) expense. The Company’s advertising expenses consist primarily of online advertising, search costs, email advertising and radio advertising. In addition, the Company reimburses its customers and third parties for in store activities and records these costs as advertising expenses. Advertising costs were $0.6 million and $1.1 million for the three months ended March 31, 2025 and 2024, respectively.

Fair value measurements

The carrying amounts of cash and cash equivalents, trade accounts receivable, notes receivable and other current assets, accounts payable and accrued expenses approximate fair value because of the short-term nature of these financial instruments. The carrying amounts of borrowings under credit facilities approximates fair value because of the short-term nature and variable interest rates on these instruments approximates current market rates.

Segment information

Operating segments are defined as components of an enterprise about which separate discrete financial information is available for evaluation by the chief operating decision-maker (“CODM”) in making decisions regarding resource allocation and assessing performance. The Company has viewed its operations and manages its business asone segment. The Company’s CODM reviews operating results and makes decisions based on consolidated financial information. All the assets and operations of the Company are in the U.S. See Note 16 - Segment information for additional disclosures on segment reporting.

New Accounting Standards

Recently adopted

There were no new standards that would have an impact on the condensed consolidated financial statements for the three months ended March 31, 2025.

Note 2 –Revenue

The Company records revenue net of discounts, which primarily consist of trade promotions, certain customer allowances and early pay discounts.

The Company excludes sales taxes collected from revenues. Retail-partner based customers are not subject to sales tax.

The Company’s direct-to-consumer (“DTC”) loyalty program enabled customers to accumulate points based on their spending. A portion of revenue was deferred at the time of sale when points are earned and recognized when the loyalty points were redeemed. The Company closed its DTC channel effective June 1, 2024 and expired the loyalty program as of June 30, 2024. Net sales for the period ended March 31, 2024 were $1.2 million.

Revenue channels

The Company groups its revenue channels into three categories: Digital, which includes the sale of product to online retailers such as Amazon and Chewy, as well as DTC sales, which included the sale of product through the Company’s website through June 1, 2024; Brick & Mortar, which primarily includes the sale of product to Pet Specialty retailers, independent pet stores, and regional distributors; and International, which includes the sale of product to foreign distribution partners and to select international retailers (transacted in U.S. dollars). Refer to “Note 19 - Subsequent events” for discussion on the sale of the Halo Asia business.

Information about the Company’s net sales by revenue channel is as follows (in thousands):

Note 3 -Inventories

Inventories are summarized as follows (in thousands):

Note 4 –Notes receivable

On September 3, 2024, the Company entered into a definitive agreement to acquire SRx Health Solutions Inc. (“SRx” or the “Borrower”) in an all-stock transaction, subject to customary closing conditions. On August 15, 2024, the Company entered into a Convertible Promissory Note (the “Convertible Note”) with SRx, whereby SRx promises to repay the principal amount of $1.5 million with an interest rate of 25% per annum. As the Holder of this Convertible Note, the Company can convert the total amount owed, including unpaid interest and fees, into shares of SRx stock. The Company can elect to convert the principal of the Convertible Note plus accrued and unpaid interest into shares of SRx common stock upon an Event of Default, given the Event of Default is not cured within the applicable cure period. The Convertible Note matures two days after the Business Combination between SRx and the Company is consummated or upon termination of the business combination. The issuance price reflects the perceived value of both the note receivable component and the embedded conversion option, which is initially determined based on market expectations. As there have not been drastic changes in market conditions or the Borrower’s financial standing, the transaction price at issuance approximates the fair value of the note receivable on March 31, 2025. Accrued interest on the Convertible Note was $0.2 million and is recorded in prepaid expenses and other current assets on March 31, 2025.

The Convertible Note has been classified and accounted for as available-for-sale. The Company classifies its marketable debt securities as either short-term or long-term based on each instrument’s underlying maturity date. Unrealized gains and losses on marketable debt securities classified as available-for-sale are recognized in other comprehensive income/(loss) (“OCI”).

In conjunction with the Convertible Note, the Company entered into a Services Agreement whereby the Company is to provide financial planning, reporting and analysis services, utilizing the Company’s in-house financial organization. In exchange for such services, the Company shall receive $0.02 million per month, payable on the last day of the month in which services are provided, commencing on September 30, 2024. Income related to the Services Agreement was $0.05 million for the three months ended March 31, 2025 and is accrued for within prepaid expenses and other current assets on the consolidated balance sheets, and as other income in the consolidated statements of operations. The Company does not have a variable nor controlling financial interest in SRx as it does not have the power to direct significant activities of SRx that most significantly impact SRx’s economic performance. Additionally, the Company does not have an obligation to absorb the losses of, or the right to receive benefits from, SRx that could potentially be significant to SRx. Therefore, SRx is not consolidated as of March 31, 2025.

On September 20, 2024, the Company entered into a revolving credit facility (“Promissory Note”) with SRx whereby SRx may borrow, repay, and reborrow in accordance with the terms set out in the Promissory Loan Agreement, not to exceed $750,000 (USD) at any time outstanding with an interest rate of 12% per annum. The Borrower shall make payments of principal in accordance with the Repayment Schedule set forth in the agreement. Interest under the Promissory Note shall be due and payable in monthly installments until the Promissory Note matures on March 20, 2025. The Promissory Note was subsequently amended to include for additional borrowings of up to $1.9 million. The Promissory Note was also amended to allow the Company to convert the total amount owed, including unpaid interest and fees, into shares of SRx stock.

The outstanding principal on both notes was $3.3 million as of March 31, 2025 and accrued interest of $0.3 million is included within prepaid expenses and other current assets as of March 31, 2025. Subsequently, in conjunction with the Reverse Merger, the Notes were settled for an amount that approximated fair value at March 31, 2025 (the “Notes Settlement”).

Note 5 –Prepaid expenses and other current assets

Prepaid expenses and other current assets are summarized as follows (in thousands):

Note 6 -Fixed assets

Fixed assets consist of the following (in thousands):

Depreciation expense was $0.03 million and $0.04 million for the three months ended March 31, 2025 and 2024, respectively.

Note 7 –Accrued and other liabilities

Accrued and other liabilities consist of the following (in thousands):

**Note 8 –Debt **

The components of the Company’s debt consist of the following (in thousands):

Wintrust Receivables Credit Facility

On June 21, 2023, the Company entered into an account purchase agreement with Wintrust Receivables Finance (the “AP Agreement”), a division of Wintrust Bank N.A. (“Wintrust”) pursuant to which Wintrust will purchase, at its discretion, eligible customer invoices and advance up to 70% of the face amount of all purchased invoices, the maximum outstanding balance can be $4.8 million. Each advance under the AP Agreement will bear a variable interest rate at the prime rate plus 2.5% percentage per annum. The interest rate at March 31, 2025 was 10.0% per annum. The AP Agreement has an initial term of two years and will automatically renew annually unless terminated by the Company on at least 60 days’ notice. The Wintrust Receivables Credit Facility is guaranteed and secured by a general security interest in the assets of the Company. The Company continues to service the receivables, the transfers are at full recourse and the eligible customer invoices are not legally isolated from the Company. As such, the Wintrust Receivables Credit Facility was accounted for as a secured borrowing under ASC 860.

The Wintrust Receivables Credit Facility limits or restricts the ability of the Company to incur additional indebtedness; incur additional liens; make dividends and other restricted payments; make investments; sell, assign, transfer or dispose of certain assets; make optional prepayments of other indebtedness; engage in transactions with affiliates; and enter into restrictive agreements. The Wintrust Receivables Credit Facility does not include any financial covenants and if an event of default occurs, Wintrust is entitled to accelerate the advances made thereunder and exercise rights against the collateral. As of March 31, 2025, the Company was in compliance with its restrictive covenants.

Borrowing under the Wintrust Receivables Credit Facility are classified as current debt as a result of a required lockbox arrangement and a subjective acceleration clause. During the three months ended March 31, 2025, the Company sold receivables having an aggregate face value of $3.1 million, in exchange for cash proceeds of $2.2 million. As of March 31, 2025, the balance outstanding on the Wintrust Receivables Credit Facility amounted to $1.2 million.

Alphia Term Loan Facility

On June 21, 2023, the Company entered into a term loan credit agreement (the “Term Loan Agreement”) with Alphia Inc. (“Alphia”), a custom manufacturer of super-premium pet food in the U.S. Pursuant to the Term Loan Agreement, Alphia made a term loan to the Company in the original principal amount of $5.0 million (the “Term Loan”). In conjunction with the Term Loan Agreement, the Company issued warrants to Alphia (see “Note 11 - Warrants” for further discussion). The proceeds of the Term Loan, together with a portion of the Company’s cash on hand, were used to retire all of the outstanding obligations of Halo, Purely for Pets, Inc. (“Halo”), a wholly-owned subsidiary of the Company, under Halo’s long-term credit facility with Old Plank Trail Community Bank, N.A., an affiliate of Wintrust Bank, N.A described above.

As of December 31, 2023, the Company’s indebtedness on the Alphia Term Loan Facility is $5.0 million and $0.3 million of payable-in-kind (“PIK”) interest. As discussed below, the total value of the consideration received in connection with the Term Loan Agreement was first allocated to the Warrants at fair value, with the remainder allocated to debt. Accordingly, the Company recorded a debt discount of $2.2 million on the Alphia Term Loan Agreement. Furthermore, the Company incurred debt issuance costs of $0.2 million. The discount and debt issuance costs associated with the Term Loan Agreement are amortized using the effective interest method.

On March 25, 2024, the Company initiated a legal action to enforce a right of first refusal option exercised by Alphia pursuant to the terms of a written agreement between Alphia and the Company whereby Alphia was to acquire the assets of Halo. On June 20, 2024, the Company agreed to settlement terms of the lawsuit. The agreement dismisses the Company’s ongoing litigation with Alphia and provides for the forgiveness of the Company’s term loan, including $5.0 million in principal and $0.5 million of payable-in-kind (“PIK”) accrued interest, the termination of 335,640 warrants with a strike price of $11.44 per share that were set to expire in 2028, and the forgiveness of up to $2.6 million in accounts payable due to Alphia, provided the remaining outstanding accounts payable balance is paid within 90 days of the settlement date. The accounts payable were paid prior to December 31, 2024, resulting in a gain of $2.6 million. The book value of the Alphia term loan and the unamortized debt issuance costs were $3.2 million and $0.2 million, respectively, on the date of forgiveness.

As a result of the settlement terms described above, the Company is not indebted to Alphia as it relates to the Term Loan Facility as of March 31, 2025 and December 31, 2024.

Note 9 -Business Combinations

On February 9, 2024, the Company completed the acquisition of Aimia Pet Healthco, Inc. (“Aimia”) to develop treats and toppers that safely combat pet obesity.

The Company completed a business combination for a purchase price of $0.4 million during the three months ended March 31, 2024 with common shares issued as consideration, which have been adjusted herein to reflect the Reverse Stock Split effective March 20, 2024. In accordance with ASC Topic 805, Business Combinations (“Topic 805”), total consideration was first allocated to the fair value of assets acquired, including liabilities assumed, with the excess being recorded as goodwill. For financial statement purposes, goodwill is not amortized but rather is evaluated for impairment at least annually or more frequently if an event or change in circumstances occurs that indicates goodwill may be impaired. Goodwill is deductible for tax purposes and will be amortized over a period of 15 years. No business combinations were completed during the three months ended March 31, 2025.

The recorded purchase price for the business combination includes an estimation of the fair value of equity interests, which is calculated based on the value of the Company’s common stock on the closing date.

Under ASC 805, a business combination involves the acquisition of a business, defined as an integrated set of activities and assets capable of being conducted and managed for the purpose of providing a return to investors. The Company assessed whether the acquired entity constituted a business by evaluating its assets, processes, and outputs and determined the acquired set to be a business based on the inputs and substantive processes that together significantly contribute to the ability to create outputs.

Aimia is a pre-revenue business and there were no operating results related to this business combination to include in the condensed consolidated statements of operations for the three months ended March 31, 2025 since the acquisition date.

In November 2023, Aimia entered into a memorandum of understanding (“MOU”) which establishes a research and development (“R&D”) partnership with doctors and a lab which would facilitate the development of a GLP-1 supplement for pets. In connection with the MOU, the Company issued 6,818 shares to the R&D partners and the Company incurred $0.1 million of acquisition-related costs, which are recorded in selling, general, and administrative expenses in the consolidated statement of operations for the three months ended March 31, 2024. No such costs were incurred during the three months ended March 31, 2025.

The table below provides a summary of the total consideration and the purchase price allocation made for the business combination that became effective during the three months ended March 31, 2024.

The factors contributing to the recognition of the amount of goodwill are based on expanding research and development to develop dog treats that mirror the weight loss benefits of brands including Slentrol, Wegovy, Ozempic, and Mounjaro with added protein and nutrients from the Company’s Halo products to promote lean muscle and overall pet health.

Note 10 –Commitments and contingencies

The Company has manufacturing agreements with its vendors that provide for the company to make its commercial best efforts to purchase minimum quantities in the ordinary course of business. There areno other purchase obligations as of March 31, 2025 or December 31, 2024.

The Company may be involved in legal proceedings, claims, and regulatory, tax, or government inquiries and investigations that arise in the ordinary course of business resulting in loss contingencies. The Company accrues for loss contingencies when losses become probable and are reasonably estimable. If the reasonable estimate of the loss is a range and no amount within the range is a better estimate, the minimum amount of the range is recorded as a liability. Legal costs such as outside counsel fees and expenses are charged to expense in the period incurred and are recorded in SG&A expenses. The Company does not accrue for contingent losses that are considered to be reasonably possible, but not probable; however, the Company discloses the range of such reasonably possible losses if estimable. Loss contingencies considered remote are generally not disclosed.

Litigation is subject to numerous uncertainties and the outcome of individual claims and contingencies is not predictable. It is possible that some legal matters for which reserves have or have not been established could result in an unfavorable outcome for the Company and any such unfavorable outcome could be of a material nature or have a material adverse effect on the Company’s consolidated financial condition, results of operations and cash flows. Management is not aware of any claims or lawsuits that may have a material adverse effect on the consolidated financial position or results of operations of the Company.

Note 11 –Warrants

The following summarizes the Company’s outstanding warrants to purchase shares of the Company’s common stock as of and for the periods ended March 31, 2025 and December 31, 2024:

The outstanding warrants had an intrinsic value of $0.3 million and $1.8 million as of March 31, 2025 and December 31, 2024, respectively. The warrants exercised during the three months ended March 31, 2025 had an intrinsic value of $1.1 million.

The settlement terms discussed in Note 8 - Debt provide for the termination of all 335,640 Warrants, which resulted in a net zero impact on equity. As a result, there are no Alphia warrants outstanding as of March 31, 2025.

In connection with the Offering discussed in Note 1, the Company issued pre-funded warrants to purchase 1,028,000 shares of Common Stock (the “Pre-Funded Warrants” and together with the Shares, the “Securities”) at a public offering price of $2.99 per Pre-Funded Warrant. The Pre-Funded Warrants do not expire until conversion and the warrant shares fully vest upon issuance. The aggregate exercise price of the Pre-Funded Warrant, except for a nominal exercise price of $0.01 per Warrant Share, was pre-funded to the Company on or prior to the Initial Exercise Date of July 31, 2024. Consequently, no additional consideration (other than the nominal exercise price of $0.01 per Warrant Share) shall be required to be paid by the Holder to effect the exercise of the Pre-Funded Warrant. The Pre-Funded Warrants are transferable, in whole or in part, upon surrender of the Warrant. The Pre-Funded Warrants do not entitle the Holder to any voting rights, dividends, or other rights as a stockholder of the Company prior to exercise. In no event shall the Company be required to net cash settle an exercise of the Pre-Funded Warrant.

The Company also issued representative warrants to purchase 83,350 shares of common stock which are exercisable at $3.75 per share. The representative warrants expire on July 29, 2029 and have an exercise price of $3.75 per share of Common Stock. The representative warrant shares fully vest upon issuance. The representative warrants are non-transferable until the initial exercise date of January 25, 2025, unless transferred to ThinkEquity LLC or an underwriter. After the exercise date, the warrants are fully transferable. The representative warrants do not entitle the Holder to any voting rights, dividends, or other rights as a stockholder of the Company prior to exercise.

During the three months ended March 31, 2025,551,000 pre-funded warrants were exercised. As of March 31, 2025,199,000 Pre-Funded and 83,350 representative warrants remain outstanding.

Note 12 –Share-based compensation

During the three months ended March 31, 2025 and 2024, the Company recognized $0.3 million and $0.5 million, respectively, of share-based compensation expense.

On November 11, 2019, the Company received shareholder approval for the 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 or a dividend equivalent award. On July 16, 2021, the Company registered 61,364 shares of its common stock issuable under the Amended 2019 Plan in a registration statement on Form S-8. The Amended 2019 Plan provides for an annual increase on the first day of each calendar year beginning on January 1, 2021 and ending on and including January 1, 2029, equal to the lesser of (A)10% of the shares of common stock outstanding (on an as-converted basis) on the last day of the immediately preceding fiscal year and (B) such smaller number of shares of common stock as determined by the Board; provided, however, not more than 204,546 shares of common stock shall be authorized for issuance. The number of shares eligible for issuance increased to 127,606 on January 1, 2022, increased to 194,493 on January 1, 2023, and increased to the maximum allowable of 204,546 on January 1, 2024.

Stock options

The following table provides detail of the options granted and outstanding:

Options granted under the Amended 2019 Plan vest over a period of one tothree years. All vested options are exercisable and may be exercised through the ten-year anniversary of the grant date (or such earlier date described in the applicable award agreement).

On June 26, 2024, the Company granted 47,285 options to acquire common stock to certain of its directors, officers and employees, at a weighted-average exercise price of $5.00 per share. The stock options were granted with a one-year vesting period and the Company recognized less than $0.1 million of share-based compensation expense in its consolidated statements of operations for the three months ended March 31, 2025. As of March 31, 2025, unrecognized share-based compensation related to these options was less than $0.1 million, which is expected to be recognized over a weighted average period of less thanone year.

Restricted Stock Awards

In February 2024, the Company granted 42,088 shares of restricted common stock to members of its Board of Directors as part of their equity compensation pursuant to the Amended and Restated 2019 Incentive Award Plan. These restricted stock awards were immediately vested and, as such, the Company recorded share-based compensation expense of $0.4 million upon issuance.

In June 2024, the Company granted 22,727 shares of restricted common stock to certain executives under the Amended 2019 Plan as performance bonus compensation. These restricted stock awards were immediately vested and, as such, the Company recorded share-based compensation expense of $0.1 million upon issuance.

In March 2025, the Company granted 139,785 shares of restricted common stock to certain executives under the Amended 2019 Plan as performance bonus compensation. These restricted stock awards were immediately vested and, as such, the Company recorded share-based compensation expense of $0.2 million upon issuance.

Note 13 –Employee benefit plans

The Company has a qualified defined contribution 401(k) plan, which covers substantially all of its employees. Participants are entitled to make pre-tax and/or Roth post-tax contributions up to the annual maximums established by the Internal Revenue Service. The Company matches participant contributions pursuant to the terms of the plan, which contributions are limited to a percentage of the participant’s eligible compensation. The Company made contributions related to the plan and recognized expense of less than $0.1 million during the three months ended March 31, 2025 and 2024.

Note 14 –Related party transactions

Director Fees

The Company pays quarterly board of director fees. Board of director fees totaled $0.1 million during the three months ended March 31, 2025 and 2024. As of March 31, 2025 and December 31, 2024, $0.1 million of these director fees were in accrued and other liabilities on the Consolidated Balance Sheets.

Marketing Support Services

On March 7, 2023, the Company entered into an agreement with Believeco to provide marketing support services for an interim period. A previous member of the Company’s board of directors, whose resignation was effective April 1, 2024, is a partner at Believeco. As of March 31, 2025, Believeco is no longer considered a related party. Marketing expenses related to Believeco for the three months ended March 31, 2024 was less than $0.01 million, all of which was included within Accounts Payable.

Note 15 –Income taxes

For the three months ended March 31, 2025 and 2024, the Company recorded an income tax provision of less than $0.01 million. For the three months ended March 31, 2025 and 2024, the Company’s effective tax rate was less than 1%, respectively. The Company’s effective tax rate differs from the U.S. federal statutory rate of 21% primarily because the Company’s net operating losses (“NOLs”) included in deferred tax assets have been fully offset by a valuation allowance due to uncertainty of realizing the tax benefit of NOLs for the three months ended March 31, 2025 and March 31, 2024.

Note 16 –Segment information

The Company evaluated its operating segments in accordance with ASC 280, “Segment Reporting” and determined it operates as one reportable segment, pet food products. The Company provides a comprehensive range of premium pet products, including dry kibble, wet food, freeze dried raw food, treats, and toppers for dogs and cats. In 2024, these products were sold through the three different revenue channels described in “Note 2 - Revenue” - Digital, Brick-and-Mortar and International. The Company has concluded each of the three different channels met the three characteristics of an operating segment. While the company’s products are offered across three operating segments, they are aggregated into a single reporting segment, as there are no material differences in the nature of the products and services, the nature of the production processes, the type or class of customer for their products and services, the methods of distribution, and the regulatory environment in which they operate.

The Company’s Chief Executive Officer, who is the designated chief operating decision maker (“CODM”), evaluates performance and makes decisions based on consolidated financial information. The CODM does not separately evaluate distinct groups of products or services, nor are resources allocated differently based on individual product lines or geographic regions. Rather, performance is assessed on an overall basis, considering consolidated metrics such as total revenues, gross margin, and net loss of the Company as a whole, and resources are allocated to support the Company’s overall business plan.

The CODM of Better Choice Company does not review total assets when evaluating the results of the pet food products segment, as the Company operates with an asset-light business model. As the Company utilizes a third-party logistics (3PL) provider and does not manage its own manufacturing, asset-related information is not considered in performance assessments and is therefore not presented.

Consolidated sales, gross margin, and net loss of premium pet food products generate the Company’s revenues and are reflected in the condensed consolidated statement of operations. The CODM also evaluates significant segment expenses, which consist of the following (in thousands):

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

Geographic Information

Revenue by geography is based on where the customer is based. Summary financial data attributable to various geographic regions for the periods indicated is as follows:

Note 17 –Concentrations

Major suppliers

The Company sourced approximately 82% of its inventory purchases from one vendor for the three months ended March 31, 2025. The Company sourced approximately 75% of its inventory purchases from two vendors for the three months ended March 31, 2024. As of March 31, 2025 and December 31, 2024, $2.0 million and $1.0 million of inventory purchases from major suppliers were in accounts payable on the Condensed Consolidated Balance Sheets, respectively.

Major customers

Accounts receivable from four customers represented 96% of accounts receivable as of March 31, 2025. Accounts receivable from two customers represented 86% of accounts receivable as of December 31, 2024. Three customers represented 84% of gross sales for the three months ended March 31, 2025. Three customers represented 70% of gross sales for the three months ended March 31, 2024.

Credit risk

As of March 31, 2025 and December 31, 2024, the Company’s cash and cash equivalents were deposited in accounts at several financial institutions and may maintain some balances in excess of federally insured limits. The Company maintains its cash and cash equivalents with high-quality, accredited financial institutions and, accordingly, such funds are subject to minimal credit risk. The Company has not experienced any losses historically in these accounts and believes it is not exposed to significant credit risk in its cash and cash equivalents.

Note 18 –Earnings per share

The Company presents net loss per share on a basic and diluted basis for the three months ended March 31, 2025 and 2024. Basic loss per share is computed by dividing net loss by the weighted average number of common shares outstanding (“WASO”) during the period. In the calculation of basic weighted-average shares outstanding, the shares issuable under equity-classified pre-funded warrants, as described in Note 11 – Warrants, have been included in the denominator. For the three months ended March 31, 2025 and 2024, the Company’s basic and diluted net income per share attributable to common stockholders are the same as the Company generated a net loss and common stock equivalents are excluded from diluted net loss per share as they have an anti-dilutive impact. Therefore, the Company did not have any dilutive securities and/or other contracts that could, potentially, be exercised or converted into shares of common stock and then share in the earnings of the Company.

For the year ended March 31, 2025, potentially dilutive securities not included in the calculation of diluted net loss per share, because to do so would be anti-dilutive, are as follows:269,345 of stock equivalent warrants; and 97,854 of stock equivalent employee stock options.

The following table sets forth basic and diluted net loss per share attributable to common stockholders for the three months ended March 31, 2025 and 2024 (in thousands, except share and per share amounts*)*:

Note 19 –Subsequent events

The Company has evaluated subsequent events and transactions that occurred after the balance sheet date up to the date that the financial statements were issued for potential recognition or disclosure. The Company did not identify any subsequent events that would have required adjustment or disclosure in the financial statements, other than the reverse merger and share repurchases described in Note 1, the Notes Settlement described in Note 4, and the following:

In April 2025, the Company successfully completed the sale of its Asian business, to CZC Company LTD (the “Buyer”) for total gross proceeds of $8.1 million including $6.5 million in cash, along with a 5-year royalty agreement. This guarantees a minimum total royalty payment of $1.7 million, based on a 3% royalty on sales over the next five years, with a minimum annual payment of $0.3 million. Summary financial data attributable to the Asian business for the periods indicated is as follows:

Summary financial data attributable to the Asian business for the year ended December 31, 2024 is as follows:

In April 2025,100,000 pre-funded warrants were exercised.

In May 2025,50,000 pre-funded warrants were exercised.