SRXH 10-K & 10-Q changes, risk factors and insider trading
SRX Global Inc. · NYSE · Beverages · CIK 1471727 · All filings on SEC.gov
At a glance
What changed in the latest 10-K
Risk Factors
New heading “We have incurred significant losses in prior periods, and losses in the future could cause the quoted price of the Company’s common stock to decline or have a material adverse effect on the Company’s financial condition, the Company’s ability to pay its debts as they become due, and on its cash flows.”
New heading “The Company’s ability to be successful will depend upon the efforts of the Company’s Board and our key personnel and the loss of such persons could negatively impact the operations and profitability of the Company’s business.”
New heading “If we are unable to recruit and retain key personnel, our business may be harmed.”
New heading “Our business plan is not based on independent market studies.”
New heading “Our Board of Directors may change our policies without shareholder approval.”
New heading “We need to obtain financing in order to continue our operations and pursue strategic transactions.”
New heading “We currently do not have sufficient cash to fully implement our business plan.”
New heading “The Company’s business and operations could be negatively affected if it becomes subject to any securities litigation or shareholder activism, which could cause the Company to incur significant expense, hinder execution of business and growth strategy and impact its stock price.”
New heading “Risks Related to the Company’s Specialty Pharmacy Business”
New heading “SRx Health conducts its business in a highly regulated industry and environment.”
New heading “Changes in reimbursement programs, prescription drug pricing and commercial terms could adversely affect SRx Health’s operations and financial performance.”
New heading “SRx Health’s business is highly competitive and SRx Health may not be able to compete successfully against current and future competitors.”
New heading “SRx Health’s business is impacted by the interplay between brand name and generic drugs”
New heading “Changes in drug development and prescription mix may impact SRx Health’s results of operation”
New heading “Product liability, product recall or personal injury issues could damage SRx Health’s reputation and have a significant adverse effect on SRx Health’s business, operating results, cash flows and/or financial condition.”
New heading “The drug products that SRx Health carries have a set shelf life”
New heading “Continued operation of SRx Health’s distribution facilities is critical to SRx Health’s operations”
New heading “Conducting clinical trials involve a high degree of risk”
New heading “There may be delays or stoppages in SRx Health’s clinical trials due to circumstances beyond SRx Health’s control”
New heading “Negative results from clinical trials or studies of others and adverse safety events involving the targets of SRx Health’s products may have an adverse impact on SRx Health’s future commercialization efforts.”
New heading “SRx Health’s insurance policies may not be sufficient to cover all claims”
New heading “SRx Health is subject to a variety of business continuity hazards and risks, any of which could interrupt SRx Health’s operations or otherwise adversely affect its performance and operating results.”
New heading “SRx Health’s risk management policies and procedures may not be fully effective in mitigating SRx Health’s risk exposure in all market environments or against all types of risks, which could expose SRx Health to losses and liability and otherwise harm SRx Health’s business.”
New heading “Consumer opinion of SRx Health may be impacted in case of reputational damages to SRx Health’s suppliers”
New heading “Healthcare professional errors may harm SRx Health’s business and reputation”
New heading “Consolidation in the supply chain may negatively impact drug prices and SRx Health’s ability to compete”
New heading “SRx Health relies on third-party suppliers for a significant portion of its supply of products”
New heading “SRx Health’s quarterly results of operations may fluctuate and, as a result, SRx Health may fail to meet or exceed the expectations of investors or securities analysts which could cause SRx Health’s share price to decline.”
New heading “Change in tax and trade policies, tariffs and other government regulations affecting trade between Canada and other countries could adversely affect SRx Health.”
New heading “Disruption of the global supply chain and ineffective service providers could adversely impact SRx Health’s business”
New heading “Failure to meet customer expectations may harm SRx Health’s brand and reputation, its ability to retain and grow its customer base and its operating results.”
New heading “If SRx Health cannot keep pace with rapid developments in healthcare technology and change in SRx Health’s industry and continue to grow its patient base, the use of SRx Health’s services could decline, reducing SRx Health’s revenue.”
New heading “SRx Health’s use and disclosure of personally identifiable information, including personal health information, is subject to privacy and security regulations.”
New heading “SRx Health relies on the relationships that SRx Health has established with major drug manufacturers and specialty practitioners to conduct SRx Health’s business, and changes to these relationships may impair SRx Health’s operations.”
New heading “SRx Health may be subject to information technology systems impairment and cyber-attacks in the future”
New heading “SRx Health’s services must integrate and interoperate with a variety of operating systems, software, hardware, web browsers and networks.”
New heading “Failure to properly manage inventories and anticipate demand may impact SRx Health’s financial performance”
New heading “Reliance on data obtained from third party sources”
New heading “Change in population demographics could have an adverse effect on SRx Health’s business, operations, financial condition and results of operations.”
New heading “If SRx Health is unable to hire, retain and motivate qualified personnel, its business will suffer”
New heading “From time to time, SRx Health may become defendants in legal proceedings as to which SRx Health is unable to assess its exposure, and which could become significant liabilities in the event of an adverse judgment.”
New heading “Labor-related matters, including labor disputes, may adversely affect SRx Health’s operations”
New heading “Goodwill and other intangible assets could, in the future, become impaired”
New heading “Conflicts of interest may arise between SRx Health and its directors and officers as a result of other business activities undertaken by such individuals.”
New heading “SRx Health is subject to risks associated with leasing space and equipment and is subject to a number of long-term non-cancelable leases with substantial lease payments.”
New heading “SRx Health may be unable to adequately protect its proprietary and intellectual property rights”
New heading “Being accused of infringing intellectual property rights of others”
New heading “SRx Health may become involved in regulatory or agency proceedings, investigations and audits”
New heading “The impact of economic conditions, including the resulting effect on spending by consumers, may adversely affect SRx Health’s business, operating results and financial condition.”
New heading “Risks Relating to the SRx Health’s Growth Strategy”
New heading “SRx Health may not be able to successfully implement SRx Health’s growth strategy.”
New heading “A portion of SRx Health’s growth depends on SRx Health’s ability to complete future acquisitions, and failure to do so in a timely manner, or on less favorable terms to SRx Health, could impede SRx Health’s ability to execute portions of SRx Health’s business strategy”
New heading “Any future acquisitions, partnerships or joint ventures that SRx Health makes or enters into could disrupt SRx Health’s business and harm SRx Health’s financial condition.”
New heading “Competition for acquisition candidates, consolidation within the pharmacy industry and economic and market conditions may limit SRx Health’s ability to grow through acquisitions.”
New heading “Changes in the Canadian healthcare industry and regulatory environment could negatively affect SRx Health’s growth and financial projections.”
New heading “Risks Related to the Company’s Pet Health and Wellness Business”
New heading “Increases in sourcing, manufacturing, freight and/or warehousing costs, supply shortages, interruption in Halo’s sourcing operations and/or supply changes could have an adverse effect on Halo’s business, financial condition, and operating results.”
New heading “If Halo fails to maintain and expand Halo’s brand, or the quality of Halo’s products that customers have come to expect, Halo’s business could suffer.”
New heading “Halo may not be able to successfully implement and/or manage Halo’s growth strategy on a timely basis or Halo may not grow at all.”
New heading “If Halo does not successfully develop additional products and services, or if such products and services are developed but not successfully commercialized, Halo’s business will be adversely affected.”
New heading “Because Halo is engaged in a highly competitive business, if Halo is unable to compete effectively, Halo’s results of operations could be adversely affected.”
New heading “If Halo fails to attract new customers, or retain existing customers, or fail to do either in a cost-effective manner, Halo may not be able to increase sales.”
New heading “Food safety and food-borne illness incidents may materially adversely affect Halo’s business by exposing Halo to lawsuits, product recalls or regulatory enforcement actions, increasing Halo’s operating costs and reducing demand for Halo’s product offerings.”
New heading “Halo may not be able to manage Halo’s manufacturing and supply chain effectively, which may adversely affect Halo’s results of operations.”
New heading “If any of Halo’s independent shipping providers experience delays or disruptions, Halo’s business could be adversely affected.”
New heading “Halo’s intellectual property rights may be inadequate to protect Halo’s business.”
New heading “Halo depends on the knowledge and skills of Halo’s senior management and other key employees, and if Halo is unable to retain and motivate them or recruit additional qualified personnel, Halo’s business may suffer.”
New heading “Risks Related to Our Organization and Structure”
New heading “Our holding company structure makes us dependent on our subsidiaries for our cash flow and could serve to subordinate the rights of our shareholders to the rights of creditors of our subsidiaries, in the event of an insolvency or liquidation of any such subsidiary.”
New heading “Delaware law and the Certificate of Incorporation, as amended, and Bylaws contain certain provisions, including anti-takeover provisions that limit the ability of stockholders to take certain actions and could delay or discourage takeover attempts that stockholders may consider favorable.”
New heading “The Certificate of Incorporation, as amended, designates a state or federal court located within the State of Delaware as the exclusive forum for substantially all disputes between the Company and its stockholders, which could limit the Company’s stockholders’ ability to choose the judicial forum for disputes with the Company or its directors, officers, or employees.”
Removed heading “Risks Related to Our Business and Industry”
Removed heading “Increases in sourcing, manufacturing, freight and/or warehousing costs, supply shortages, interruption in our sourcing operations and/or supply changes could have an adverse effect on our business, financial condition, and operating results.”
Removed heading “If we fail to maintain and expand our brand, or the quality of our products that customers have come to expect, our business could suffer.”
Removed heading “We may not be able to successfully implement and/or manage our growth strategy on a timely basis or we may not grow at all.”
Removed heading “Our recurring losses and significant accumulated deficit have raised substantial doubt regarding our ability to continue as a going concern.”
Removed heading “If we do not successfully develop additional products and services, or if such products and services are developed but not successfully commercialized, our business will be adversely affected.”
Removed heading “Because we are engaged in a highly competitive business, if we are unable to compete effectively, our results of operations could be adversely affected.”
Removed heading “If we fail to attract new customers, or retain existing customers, or fail to do either in a cost-effective manner, we may not be able to increase sales.”
Removed heading “Food safety and food-borne illness incidents may materially adversely affect our business by exposing us to lawsuits, product recalls or regulatory enforcement actions, increasing our operating costs and reducing demand for our product offerings.”
Removed heading “If any of our independent shipping providers experience delays or disruptions, our business could be adversely affected.”
Removed heading “Our intellectual property rights may be inadequate to protect our business.”
Removed heading “Our bylaws designate the Court of Chancery of the State of Delaware as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers, employees or agents.”
Removed heading “Provisions in our certificate of incorporation and bylaws and Delaware law may discourage a takeover attempt even if a takeover might be beneficial to our stockholders.”
Removed heading “Claims for indemnification by our directors and officers may reduce our available funds to satisfy successful third-party claims against us and may reduce the amount of money available to us.”
Removed heading “Risks Related to the Amalgamation”
Removed heading “The Amalgamation may not be completed due to failure to obtain the necessary court and/or regulatory approvals.”
Removed heading “Uncertainty surrounding the Amalgamation could adversely affect our retention of strategic partners and personnel and could negatively impact our future business and operations.”
Removed heading “The parties could fail to complete the Amalgamation or the Amalgamation may be completed on different terms.”
Removed heading “The termination payment, if triggered, may discourage other parties from attempting to acquire us.”
Removed heading “We will incur substantial transaction-related costs in connection with the Amalgamation even if the Amalgamation is not completed.”
Removed heading “While the Amalgamation is pending, we are restricted from taking certain actions.”
Removed heading “The pending Arrangement may divert the attention of our management.”
Removed heading “Following the completion of the Amalgamation, the Combined Company may issue additional securities.”
Largest changes
“There are a number of federal and provincial laws protecting the confidentiality of certain patient health information, including patient records, and restricting the use and disclosure of that protected information. …”see in full comparison
“Halo cannot control all of the various factors that might affect Halo’s ability to ship orders of Halo’s products to customers in a timely manner or to meet Halo’s quality standards. Such factors include, among other things, natural disasters or adverse weather and climate conditions; political and financial instability; strikes; unforeseen public health crises, including pandemics and epidemics such as the COVID-19 pandemic; acts of war or terrorism and other catastrophic events, whether occurring in the U.S. or internationally (including, without limitation, the conflict in Ukraine). …”see in full comparison
“We cannot control all of the various factors that might affect our ability to ship orders of our products to customers in a timely manner or to meet our quality standards. Such factors include, among other things, natural disasters or adverse weather and climate conditions; political and financial instability; strikes; unforeseen public health crises, including pandemics and epidemics such as the COVID-19 pandemic; acts of war or terrorism and other catastrophic events, whether occurring in the U.S. or internationally (including, without limitation, the conflict in Ukraine). …”see in full comparison
“In Canada, the licensing and regulation of pharmacies is under the jurisdiction of provincial and territorial pharmacy regulatory authorities. SRx Health’s business is governed by stringent federal and provincial governmental regulations and licensing requirements, and it operates in an environment in which regulation and government funding play a key role. Since much of the regulation is provincial, SRx Health may encounter varying regulations in different provinces. …”see in full comparison
“SRx Health’s business requires compliance with many laws and regulations and the sensitive nature of the healthcare industry may attract increased regulatory and agency scrutiny. Failure to comply with these laws and regulations could subject SRx Health to regulatory or agency proceedings or investigations and could also lead to damage awards, fines and penalties. SRx Health may become involved in a number of government or agency proceedings, investigations and audits. …”see in full comparison
“Food safety and food-borne illness incidents may materially adversely affect Halo’s business by exposing Halo to lawsuits, product recalls or regulatory enforcement actions, increasing Halo’s operating costs and reducing demand for Halo’s product offerings.”see in full comparison
Full comparison: every changed paragraph (315)
General Risks
We have incurred significant losses in prior periods, and losses in the future could cause the quoted price of the Company’s common stock to decline or have a material adverse effect on the Company’s financial condition, the Company’s ability to pay its debts as they become due, and on its cash flows.
The Company has historically reported net losses,and any losses in the future could cause the quoted price of the Company’s common stock to decline or have a material adverse effect on the Company’s financial condition, its ability to pay its debts as they become due,and on its cash flows.
Risks
Related to Our Business and Industry
Increases
in sourcing, manufacturing, freight and/or warehousing costs, supply shortages, interruption in our sourcing operations and/or supply
changes could have an adverse effect on our business, financial condition, and operating results.
Our
products are sourced from a limited number of independent third-party suppliers, which we depend upon for the manufacture of all our
products. Some of the ingredients, packaging materials, and other products we purchase may only be available from a single supplier or
a limited group of suppliers. While alternate sources of supply are generally available, the supply and price are subject to market conditions
and are influenced by other factors beyond our control. We do not have long-term contracts with many of our suppliers, and therefore
they could increase prices or cease doing business with us. As a result, we may be subject to price fluctuations or demand disruptions.
The
prices of raw materials, packaging materials and freight are subject to fluctuations in price attributable to, among other things, global
competition for resources, weather conditions, changes in supply and demand of raw materials, or other commodities, fuel prices and government-sponsored
agricultural programs. Volatility in the prices of raw materials and other supplies we purchase could increase our cost of sales and
reduce our profitability, and we have no guarantees that prices will not rise. Our ability to pass along higher costs through price increases
to our customers is dependent upon competitive conditions and pricing methodologies employed in the various sales channels in which we
compete, and we may not be successful in implementing price increases. In addition, any price increases we do implement may result in
lower sales volumes. Customers and consumers may choose to shift purchases to lower-priced private label or other value offerings which
may adversely affect our results of operations.
We
cannot control all of the various factors that might affect our ability to ship orders of our products to customers in a timely manner
or to meet our quality standards. Such factors include, among other things, natural disasters or adverse weather and climate conditions;
political and financial instability; strikes; unforeseen public health crises, including pandemics and epidemics such as the COVID-19
pandemic; acts of war or terrorism and other catastrophic events, whether occurring in the U.S. or internationally (including, without
limitation, the conflict in Ukraine). From time to time, a co-manufacturer may experience financial difficulties, bankruptcy or other
business disruptions, which could disrupt our supply of products or require that we incur additional expense by providing financial accommodations
to the co-manufacturer or taking other steps to seek to minimize or avoid supply disruption, such as establishing a new co-manufacturing
arrangement with another provider. Further, we may be unable to locate an additional or alternate co-manufacturing arrangement in a timely
manner or on commercially reasonable terms, if at all. Any delay, interruption or increased cost in the proprietary value-branded products
that might occur for any reason could affect our ability to meet customer demand, adversely affect our net sales, increase our cost of
sales and hurt our results of operations, which in turn may injure our reputation and customer relationships, thereby harming our business.
Our
ability to meet increases in demand may be impacted by our reliance on our suppliers and we are subject to the risk of shortages and
long lead times. We may not be able to develop alternate sources in a timely manner. Therefore, we may not be able to source sufficient
product on terms that are acceptable to us, or at all, which may undermine our ability to fill our orders in a timely manner. The occurrence
of any of the foregoing could increase our costs, disrupt our operations, or could have a materially adverse impact on our business,
financial condition, results of operations or prospects.
If
we fail to maintain and expand our brand, or the quality of our products that customers have come to expect, our business could suffer.
The
continued development and maintenance of our brand and the quality of our products is critical to our success. We seek to maintain, extend,
and expand our brand image through marketing investments, including advertising and consumer promotions, and product innovation. Maintaining,
promoting and positioning our brand and reputation will depend on, among other factors, the success of preserving the quality of our
products, the availability of our products, marketing and merchandising efforts, the nutritional benefits provided to pets and our ability
to provide a consistent, high-quality customer experience.
The
success of our brand may suffer if our marketing plans or product initiatives do not have the desired impact on our brand’s image
or its ability to attract customers. Brand value is based on perceptions of subjective qualities, and any incident that erodes the loyalty
of our customers, suppliers or co-manufacturers, including adverse publicity or a governmental investigation or litigation, could significantly
reduce the value of our brand and significantly damage our business. Further, our brand value could diminish significantly due to a number
of factors, including consumer perception that we have acted in an irresponsible manner, adverse publicity about our products (whether
or not valid), our failure to maintain the quality of our products, product contamination, the failure of our products to deliver consistently
positive consumer experiences, inadequate labor conditions, health or safety issues at our co-manufacturers, or the products becoming
unavailable to consumers.
If
we are unable to build and sustain brand equity by offering recognizably superior products, we may be unable to maintain premium pricing
over private label products. The growing use of social and digital media by consumers increases the speed and extent that information
and opinions can be shared. Negative posts or comments about us or our brands or products on social or digital media could damage our
brands and reputation. If we fail to maintain the favorable perception of our brands, our business, financial condition and results of
operations could be negatively impacted.
We
may not be able to successfully implement and/or manage our growth strategy on a timely basis or we may not grow at all.
Our
future success depends on our ability to implement our growth strategy of introducing new products and expanding into new markets and
attracting new consumers to our brand and sub-brands. Our ability to implement this growth strategy depends, among other things, on our
ability to: establish our brands and reputation as a well-managed enterprise committed to delivering premium quality products to the
pet health and wellness industry; partner with retailers and other potential distributors of our products; continue to effectively compete
in specialty channels and respond to competitive developments; continue to market and sell our products through a multi-channel distribution
strategy and achieve joint growth targets with our distribution partners; expand and maintain brand loyalty; develop new proprietary
value-branded products and product line extensions that appeal to consumers; maintain and, to the extent necessary, improve our high
standards for product quality, safety and integrity; maintain sources from suppliers that comply with all federal, state and local laws
for the required supply of quality ingredients to meet our growing demand; identify and successfully enter and market our products in
new geographic markets and market segments; execute value-focused pricing strategies; and attract, integrate, retain and motivate qualified
personnel. We may not be able to successfully implement our growth strategy and may need to change our strategy in order to maintain
our growth. If we fail to implement our growth strategy or if we invest resources in a growth strategy that ultimately proves unsuccessful,
our business, financial condition and results of operations may be materially adversely affected.
If
we succeed in growing our business, such growth could strain our management team and capital resources. Our ability to manage operations
and control growth will be dependent on our ability to raise and spend capital to successfully attract, train, motivate, retain and manage
new members of senior management and other key personnel and continue to update and improve our management and operational systems, infrastructure
and other resources, financial and management controls, and reporting systems and procedures. Failure to manage our growth effectively
could cause us to misallocate management or financial resources, and result in additional expenditures and inefficient use of existing
human and capital resources. Such slower than expected growth may require us to restrict or cease our operations and go out of business.
Additionally, our anticipated growth will increase the demands placed on our suppliers, resulting in an increased need for us to manage
our suppliers and monitor for quality assurance and comply with all applicable laws. Any failure by us to manage our growth effectively
could impair our ability to achieve our business objectives.
Our
recurring losses and significant accumulated deficit have raised substantial doubt regarding our ability to continue as a going concern.
We
have experienced recurring operating losses, have a significant accumulated deficit, and we expect to continue to generate operating
losses and consume cash resources in the near term. Without generating sufficient cash flow from operations or additional debt or equity
financing, these conditions raise substantial doubt about our ability to continue as a going concern, meaning that we may be unable to
continue operations for the foreseeable future or realize assets and discharge liabilities in the ordinary course of operations. If we
need to seek additional financing to fund our business activities in the future and there remains doubt about our ability to continue
as a going concern, investors or other financing sources may be unwilling to provide additional funding on commercially reasonable terms
or at all. If we are unable to obtain sufficient funding, our business, prospects, financial condition and results of operations will
be materially and adversely affected and we may be unable to continue as a going concern. If we are unable to continue as a going concern,
we may have to liquidate our assets and may receive less than the value at which those assets are carried on our consolidated financial
statements, and it is likely that investors will lose all or a part of their investment.
If
we do not successfully develop additional products and services, or if such products and services are developed but not successfully
commercialized, our business will be adversely affected.
Our
success will depend, in part, on our ability to develop and market new products and improvements to our existing products. The process
of identifying and commercializing new products is complex, uncertain and may involve considerable costs, and if we fail to accurately
predict customers’ changing needs and preferences, our business could be harmed. The success of our innovation and product development
efforts is affected by, among other things, the technical capability of our team; our ability to establish new supplier relationships
and third-party consultants in developing and testing new products, and complying with governmental regulations; our attractiveness as
a partner for outside research and development scientists and entrepreneurs; and the success of our management and sales team in introducing
and marketing new products.
We
have already and may have to continue to commit significant resources to commercializing new products before knowing whether our investments
will result in products the market will accept. Substantial promotional expenditures may be required to introduce new products to the
market, or improve our market position. To remain competitive and expand and keep shelf placement for our products, we may need to increase
our advertising spending to maintain and increase consumer awareness, protect and grow our existing market share or promote new products,
which could affect our operating results. We may not always be able to respond quickly and effectively to changes in customer taste and
demand due to the amount of time and financial resources that may be required to bring new products to market, which could result in
our competitors taking advantage of changes in customer trends before we are able to and harm our brand and reputation.
Furthermore,
developing and commercializing new products may divert management’s attention from other aspects of our business and place a strain
on management, operational and financial resources, as well as our information systems. We may not execute successfully on commercializing
those products because of errors in product planning or timing, technical hurdles that we fail to overcome in a timely fashion, or a
lack of appropriate resources. Launching new products or updating existing products may also leave us with obsolete inventory that we
may not be able to sell or we may sell at significantly discounted prices. If we are unable to successfully develop or otherwise acquire
new products, our business, financial condition and results of operations may be materially adversely affected.
Because
we are engaged in a highly competitive business, if we are unable to compete effectively, our results of operations could be adversely
affected.
The
pet health and wellness industry is highly competitive. We compete on the basis of product and ingredient quality, product availability,
palatability, brand awareness, loyalty and trust, product variety and innovation, product packaging and design, reputation, price and
convenience and promotional efforts. The pet products and services retail industry has become increasingly competitive due to the expansion
of pet-related product offerings by certain supermarkets, warehouse clubs, and other mass and general retail and online merchandisers
and the entrance of other specialty retailers into the pet food and pet supply market, which makes it more difficult for us to compete
for brand recognition and differentiation of our products and services. We face direct competition from companies that sell various pet
health and wellness products at a lower price point and distribute such products to traditional retailers, which are larger than we are
and have greater financial resources. Price gaps between products may result in market share erosion and harm our business. Our current
and potential competitors may also establish cooperative or strategic relationships amongst themselves or with third parties that may
further enhance their resources and offerings. Further, it is possible that domestic or foreign companies, some with greater experience
in the pet health and wellness industry or greater financial resources than we possess, will seek to provide products or services that
compete directly or indirectly with ours in the future.
Many
of our competitors may have longer operating histories, greater brand recognition, larger fulfillment infrastructures, greater technical
capabilities, significantly greater financial, marketing and other resources and larger customer bases than we do. These factors may
allow our competitors to derive greater net sales and profits from their existing customer base, acquire customers at lower costs or
respond more quickly than we can to new or emerging technologies and changes in consumer preferences or habits. These competitors may
engage in more extensive research and development efforts, undertake more far-reaching marketing campaigns and adopt more aggressive
pricing policies, which may allow them to build larger customer bases or generate net sales from their customer bases more effectively
than we do.
Our
competitors may be able to identify and adapt to changes in consumer preferences more quickly than us due to their resources and scale.
They may also be more successful in marketing and selling their products, better able to increase prices to reflect cost pressures and
better able to increase their promotional activity, which may impact us and the entire pet health and wellness industry. Increased competition
as to any of our products could result in price reduction, increased costs, reduced margins and loss of market share, which could negatively
affect our profitability. While we believe we are better equipped to customize products for the pet health and wellness market generally
as compared to other companies in the industry, there can be no assurance that we will be able to successfully compete against these
other companies. Expansion into markets served by our competitors and entry of new competitors or expansion of existing competitors into
our markets could materially adversely affect our business, financial condition and results of operations.
If
we fail to attract new customers, or retain existing customers, or fail to do either in a cost-effective manner, we may not be able to
increase sales.
We
are highly dependent on the effectiveness of our marketing messages and the efficiency of our advertising expenditures in generating
consumer awareness and sales of our products. We may not always be successful in developing effective messages and new marketing channels,
as consumer preferences and competition change, and in achieving efficiency in our advertising expenditures. We depend heavily on internet-based
advertising to market our products through internet-based media and e-commerce platforms. If we are unable to continue utilizing such
platforms, if those media and platforms diminish in importance or size, or if we are unable to direct our advertising to our target consumer
groups, our advertising efforts may be ineffective, and our business could be adversely affected. The costs of advertising through these
platforms have increased significantly, which could in decreased efficiency in the use of our advertising expenditures, and we expect
these costs may continue to increase in the future.
Consumers
are increasingly using digital tools as a part of their shopping experience. As a result, our future growth and profitability will depend
in part on:
If
our marketing messages are ineffective or our advertising expenditures, geographic price-points, and other marketing programs, including
digital programs, are inefficient in creating awareness and consideration of our products and brand name and in driving consumer traffic
to our website or to our other sales channels, our sales, profitability, cash flows and financial condition may be adversely impacted.
In addition, if we are not effective in preventing the publication of confusing, false or misleading information regarding our brand
or our products, or if there arises significant negative consumer sentiment on social media regarding our brand or our products, our
sales, profitability, cash flows and financial condition may be adversely impacted.
Food
safety and food-borne illness incidents may materially adversely affect our business by exposing us to lawsuits, product recalls or regulatory
enforcement actions, increasing our operating costs and reducing demand for our product offerings.
Selling
food for consumption involves inherent legal and other risks, and there is increasing governmental scrutiny of and public awareness regarding
food safety. Unexpected side effects, illness, injury or death related to allergens, food-borne illnesses or other food safety incidents
caused by products we sell, or involving our suppliers or co-manufacturers, could result in the discontinuance of sales of these products
or our relationships with such suppliers or co-manufacturers, or otherwise result in increased operating costs, regulatory enforcement
actions or harm to our reputation. Shipment of adulterated or misbranded products, even if inadvertent, can result in criminal or civil
liability. Such incidents could also expose us to product liability, negligence or other lawsuits, including consumer class action lawsuits.
Any claims brought against us may exceed or be outside the scope of our existing or future insurance policy coverage or limits. Any judgment
against us that is more than our policy limits or not covered by our policies or not subject to insurance would have to be paid from
our cash reserves, which would reduce our capital resources.
The
occurrence of food-borne illnesses or other food safety incidents could also adversely affect the price and availability of affected
ingredients, resulting in higher costs, disruptions in supply and a reduction in our sales. Furthermore, any instances of food contamination
or regulatory noncompliance, whether or not caused by our actions, could compel us, our suppliers, our distributors or our customers,
depending on the circumstances, to conduct a recall in accordance with FDA regulations, comparable state laws or foreign laws in jurisdictions
in which we operate. Food recalls could result in significant losses due to their costs, the destruction of product inventory, lost sales
due to the unavailability of the product for a period of time and potential loss of existing distributors or customers and a potential
negative impact on our ability to attract new customers due to negative consumer experiences or because of an adverse impact on our brand
and reputation. The costs of a recall could exceed or be outside the scope of our existing or future insurance policy coverage or limits.
In
addition, food companies have been subject to targeted, large-scale tampering as well as to opportunistic, individual product tampering,
and we, like any food company, could be a target for product tampering. Forms of tampering could include the introduction of foreign
material, chemical contaminants and pathological organisms into consumer products as well as product substitution. FDA regulations require
companies like us to analyze, prepare and implement mitigation strategies specifically to address tampering (i.e., intentional adulteration)
designed to inflict widespread public health harm. If we do not adequately address the possibility, or any actual instance, of intentional
adulteration, we could face possible seizure or recall of our products and the imposition of civil or criminal sanctions, which could
materially adversely affect our business, financial condition and operating results.
WeIf
maywe notare be ableunable to manage ourfuture manufacturing and supply chainexpansion effectively, whichour business may be adversely affect our results of operations.impacted.
In the future, we may experience rapid growth in our business, which could place a significant strain on our operations, in general, and our internal controls and other managerial, operating and financial resources, in particular. If we are unable to manage future expansion effectively, our business would be harmed. There is, of course, no assurance that we will enjoy rapid development in our business.
The Company’s ability to be successful will depend upon the efforts of the Company’s Board and our key personnel and the loss of such persons could negatively impact the operations and profitability of the Company’s business.
The Company’s ability to be successful is dependent upon the efforts of the Company’s board members and key personnel. We cannot assure you that the Company’s board members and key personnel will be effective or successful or remain with the Company. In addition to the other challenges they will face, such individuals may be unfamiliar with the requirements of operating a public company, which could cause the Company’s management to expend time and resources becoming familiar with such requirements. See “Executive Compensation” for further discussion. The loss of service of our key personnel, for any reason,could seriously impair our ability to effectuate our business plan, which could have a materially adverse effect on our business and future results of operations. We also have not purchased any key-man life insurance.
If we are unable to recruit and retain key personnel, our business may be harmed.
If we are unable to attract and retain key personnel, our business may be harmed. Our failure to enable the effective transfer of knowledge and facilitate smooth transitions with regard to our key employees could adversely affect our long-term strategic planning and execution.
Our business plan is not based on independent market studies.
We have not commissioned any independent market studies concerning our business plans. Rather, our plans for implementing our business strategy and achieving profitability are based on the experience, judgment and assumptions of our management. If these assumptions prove to be incorrect, we may not be successful in our business operations.
Our Board of Directors may change our policies without shareholder approval.
Our policies, including any policies with respect to investments, leverage, financing, growth, debt and capitalization, will be determined by our Board of Directors or officers to whom our Board of Directors delegate such authority. Our Board of Directors will also establish the amount of any dividends or other distributions that we may pay to our shareholders. Our Board of Directors or officers to which such decisions are delegated will have the ability to amend or revise these and our other policies at any time without shareholder vote. Accordingly, our shareholders will not be entitled to approve changes in our policies, which policy changes may have a material adverse effect on our financial condition and results of operations.
We need to obtain financing in order to continue our operations and pursue strategic transactions.
On a prospective basis, we will require both short-term financing for operations and long-term capital to fund our expected growth. We currently have no existing bank lines of credit and have not established any definitive sources for additional financing. We believe that cash on hand will be sufficient to meet our short-term financial requirements into the 4th quarter of 2025 assuming that we elect not to pursue and consummate strategic transactions prior to that time. However, we will require additional funds if we want to fully implement our business plan and growth strategy, including strategic transactions, which funds could come in the form of equity, debt (including secured debt) or a combination of the two. Additional financing may not be available to us, or if available, then it may not be available upon terms and conditions acceptable to us. Our inability to take advantage of opportunities in the industry because of capital constraints may have a material adverse effect on our business and our prospects. While we expect to seek additional funding through public or private financings, we may not be able to obtain financing on acceptable terms, or at all. In addition, the terms of our financings may be dilutive to, or otherwise adversely affect, holders of our common stock and other capital securities. We may also seek additional funds through arrangements with collaborators or other third parties.
We currently do not have sufficient cash to fully implement our business plan.
We have experienced a lack of adequate capital resources causing us to be unable to fully implement our full business plan. We believe that we need to raise or otherwise obtain additional financing beyond our current cash position in order to satisfy our existing obligations and fully implement our business plan. We do not expect to have positive cash flow until the end of 2025 or longer. If we are not successful in obtaining additional financing, we will not be able to fully implement our business plan and we may not be able to continue our operations.
The Company’s business and operations could be negatively affected if it becomes subject to any securities litigation or shareholder activism, which could cause the Company to incur significant expense, hinder execution of business and growth strategy and impact its stock price.
In the past, following periods of volatility in the market price of a company’s securities, securities class action litigation has often been brought against that company. Shareholder activism, which could take many forms or arise in a variety of situations, has been increasing recently. Volatility in the stock price of the Company Common Stock or other reasons may in the future cause it to become the target of securities litigation or shareholder activism. Securities litigation and shareholder activism, including potential proxy contests, could result in substantial costs and divert management’s and board of directors’ attention and resources from the Company’s business. Additionally, such securities litigation and shareholder activism could give rise to perceived uncertainties as to the Company’s future, adversely affect its relationships with service providers and make it more difficult to attract and retain qualified personnel. Also, the Company may be required to incur significant legal fees and other expenses related to any securities litigation and activist shareholder matters. Further, its stock price could be subject to significant fluctuation or otherwise be adversely affected by the events, risks and uncertainties of any securities litigation and shareholder activism.
Risks Related to the Company’s Specialty Pharmacy Business
SRx Health conducts its business in a highly regulated industry and environment.
In Canada, the licensing and regulation of pharmacies is under the jurisdiction of provincial and territorial pharmacy regulatory authorities. SRx Health’s business is governed by stringent federal and provincial governmental regulations and licensing requirements, and it operates in an environment in which regulation and government funding play a key role. Since much of the regulation is provincial, SRx Health may encounter varying regulations in different provinces. Non-compliance with any existing or proposed laws or regulations, particularly those that provide for the licensing and conduct of pharmacies and health clinics, the licensing and conduct of healthcare professionals, the provision of information concerning prescription drugs, the distribution of prescription drugs, the distribution, pricing and sale of prescription drugs, privacy matters and restrictions or prohibitions on manufacturer allowance funding, could result in civil or regulatory proceedings, fines, penalties, injunctions, recalls or seizures, any of which may impact SRx Health’s results of operations or financial position.
In addition, any changes to the laws, regulations and policies of federal, provincial, territorial or local governmental authorities affecting SRx Health’s operations and activities, or the interpretation of such laws or regulations, including delisting of services or changes to licensing requirements relating to healthcare services, or their interpretation or application, could have a material adverse effect on the business, its performance, financial condition, results of operations, prospects and on the sales growth of SRx Health and SRx Health could incur significant costs in the course of complying with any changes in the regulatory regime.
Changes in reimbursement programs, prescription drug pricing and commercial terms could adversely affect SRx Health’s operations and financial performance.
SRx Health is reliant on prescription drug sales for a significant portion of its sales and profits. Prescription drugs and their sales are subject to rigorous federal, provincial, territorial and local laws and regulations. Changes to these laws and regulations, or non-compliance with these laws and regulations, could have a material adverse impact on SRx Health’s business, sales and profitability.
Federal and provincial laws and regulations that establish public drug plans typically regulate prescription drug coverage, patient eligibility, pharmacy reimbursement, drug product eligibility, drug pricing and may also regulate manufacturer allowance funding that may be provided to or received by pharmacies. With respect to pharmacy reimbursement, such laws and regulations typically regulate the allowable drug cost of a prescription drug product, the permitted mark-up on a prescription drug product and the professional or dispensing fees that may be charged on prescription drug sales to patients eligible under the public drug plan. With respect to drug product eligibility, such laws and regulations typically regulate the requirements for listing the manufacturer’s products as a benefit or partial benefit under the applicable governmental drug plan, drug pricing and, in the case of generic prescription drug products, the requirements for designating the product as interchangeable with a branded prescription drug product. In addition, other federal, provincial, territorial and local laws and regulations govern the approval, packaging, labeling, sale, marketing, advertising, handling, storage, distribution, dispensing and disposal of prescription drugs.
Sales of prescription drugs, pharmacy reimbursement and drug prices may be affected by changes to the health care industry, including legislative or other changes that impact patient eligibility, drug product eligibility, the allowable cost of a prescription drug product, the mark-up permitted on a prescription drug product, the amount of professional or dispensing fees paid by third-party payers or the provision or receipt of manufacturer allowances by pharmacy and pharmacy suppliers.
The majority of prescription drug sales are reimbursed or paid by third-party payers, such as governments, insurers or corporate employers. These third-party payers have pursued and continue to pursue measures to manage the costs of their drug plans. Each provincial jurisdiction has implemented legislative and/or other measures directed towards managing pharmacy service costs and controlling increasing drug costs incurred by public drug plans and private payers which impact pharmacy reimbursement levels and the availability of manufacturer allowances. Legislative measures to control drug costs include lowering of generic drug pricing, restricting or prohibiting the provision of manufacturer allowances and placing limitations on private label prescription drug products. Other measures that have been implemented by certain government payers include restricting the number of interchangeable prescription drug products which are eligible for reimbursement under provincial drug plans.
Legislation in certain provincial jurisdictions establish listing requirements that ensure that the selling price for a prescription drug product will not be higher than any selling price granted by the manufacturer for the same prescription drug product under other provincial drug insurance programs. In some provinces, elements of the laws and regulations that impact pharmacy reimbursement and manufacturer allowances for sales to the public drug plans are extended by legislation to sales in the private sector. Also, private third-party payers (such as corporate employers and their insurers) are looking or may look to benefit from any measures implemented by government payers to reduce prescription drug costs for public plans by attempting to extend these measures to prescription drug plans they own or manage. Accordingly, changes to pharmacy reimbursement and manufacturer allowances for a public drug plan could also impact pharmacy reimbursement and manufacturer allowances for private sector sales. In addition, private third party payers could reduce pharmacy reimbursement for prescription drugs provided to their members or could elect to reimburse members only for products included on closed formularies or available from preferred providers.
Management's Discussion & Analysis (MD&A)
New heading “Acquisition Activity”
New heading “Merger and CCAA Proceedings”
New heading “July PIPE Financing”
New heading “October PIPE Financing”
New heading “ELOC Transaction”
New heading “*Percentage change is not meaningful due to a prior year balance of zero.”
New heading “Valuation of Derivative Liabilities and Equity-Linked Instruments”
New heading “Convertible Notes”
Removed heading “The Global Pet Food and Treat Market”
Removed heading “Our Growth Strategy”
Removed heading “Arrangement Agreement”
Removed heading “Wintrust Receivables Credit Facility”
Removed heading “Alphia Term Loan”
Removed heading “Notes Receivable”
Largest changes
“In December 2023, the Company made a strategic exit out of Petco stores (while remaining on Petco.com), and Pet Supplies Plus. As of June 1, 2024, the Company has exited its DTC channel, in an effort to improve profitability. On March 25, 2024, Better Choice Company, Inc. (“BTTR”) initiated a legal action to enforce a right of first refusal (“ROFR”) option exercised by Alphia, Inc. (“Alphia”), which is controlled by a Paris-based private equity firm, PAI Partners. On June 20, 2024, the Company agreed to settlement terms of the lawsuit. …”see in full comparison
“As described in Note 9 - Debt, 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. …”see in full comparison
“If the Combined Company does not meet the Initial Listing Standards, Better Choice and SRx may nevertheless decide to consummate the Amalgamation. If this should occur, the Combined Company will likely be delisted from NYSE and then may seek to list on another national exchange or in the OTC Market. …”see in full comparison
“Following the recent restructuring and the filing for bankruptcy protection by SRx Canada, the Company has undergone a significant transition. As part of this process, the majority of SRx’s former specialty pharmacy, clinical services, and distribution operations have been discontinued or wound down. The business now continues through the Consumer Products segment, which represents the remaining operating platform after the restructuring.”see in full comparison
“Our ability to raise additional capital may be adversely impacted by the potential worsening of global economic conditions, including inflationary pressures, the recent disruptions to, and volatility in, the credit and financial markets in the United States and worldwide resulting from geopolitical tensions. If we seek additional financing to fund our business activities in the future and there remains doubt about our ability to continue as a going concern, investors or other financing sources may be unwilling to provide additional funding on commercially reasonable terms or at all. …”see in full comparison
“We do not have any off-balance sheet arrangements, as defined by applicable regulations of the SEC, that are reasonably likely to have a current or future material effect on our financial condition, results of operations, liquidity, capital expenditures or capital resources.”see in full comparison
Full comparison: every changed paragraph (133)
The
following discussion includes forward-looking statements about our business, financial condition and results of operations, including
discussions about management’s expectations for our business. The financial condition, results of operations and cash flows discussed
in this Management’s Discussion and Analysis of Financial Condition and Results of Operations are those of BetterSRx ChoiceHealth CompanySolutions
Inc. and its consolidated subsidiaries, collectively, the “Company,” “Better Choice Company,SRx,” “we,”
“our,”
or “us”. These statements represent projections, beliefs and expectations based on current circumstances
and conditions and
in light of recent events and trends, and you should not construe these statements either as assurances of performance
or as promises
of a given course of action. Instead, various known and unknown factors are likely to cause our actual performance and management’s
management’s actions to vary, and the results of these variances may be both material and adverse. A description of material factors
known to us that
may cause our results to vary or may cause management to deviate from its current plans and expectations, is set forth
under “Risk
Factors.” See “Cautionary Note Regarding Forward-Looking Statements.” The following discussion should
also be read
in conjunction with our audited consolidated financial statements including the notes thereto appearing elsewhere in this
filing. Accordingly,
readers are cautioned not to place undue reliance on these forward-looking statements, which reflect management’s
analysis only
as of the date hereof. We undertake no obligation to publicly release the results of any revision to these forward-looking statements
statements which may be made to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.
Following the recent restructuring and the filing for bankruptcy protection by SRx Canada, the Company has undergone a significant transition. As part of this process, the majority of SRx’s former specialty pharmacy, clinical services, and distribution operations have been discontinued or wound down. The business now continues through the Consumer Products segment, which represents the remaining operating platform after the restructuring.
The Consumer Products segment provides a broad portfolio of premium and super-premium pet food and wellness products formulated with high-quality, science-based nutrition under the Halo brand. Unlike the capital-intensive, infrastructure-heavy specialty healthcare model previously operated under the SRx Network, the continuing business has a more streamlined operating footprint, reduced overhead, and a more focused commercial strategy. This shift fundamentally changes the Company’s business profile, risk exposures, and future operating priorities.
The termination of the former specialty healthcare operations has also resulted in a simplified organizational structure. The Company no longer operates specialty pharmacies, clinics, PSP programs, or pharmaceutical distribution facilities, and is no longer positioned as a national specialty healthcare platform. Instead, management is focused on stabilizing the remaining operations, preserving core customer relationships, and ensuring continuity of service while the Company transitions to a more sustainable operating model.
Looking ahead, the Company’s outlook reflects the early stages of this reset. Near-term priorities include strengthening the financial position of the continuing operations, optimizing cost structure, and re-establishing a focused growth path that aligns with the capabilities and market positioning of the Consumer Products business. While the restructuring has materially reduced the scale and scope of the Company compared to prior periods, management believes that the streamlined business provides a clearer path to operational stability and disciplined execution.
The Company will continue evaluating strategic alternatives to support the long-term viability of the business, including potential partnerships, product expansion opportunities, and targeted investments that align with the strengths of the continuing operations.
Better
Choice is a pet health and wellness company committed to leading the industry shift toward pet products and services that help dogs and
cats live healthier, happier and longer lives. Our mission is to become the most innovative premium pet food company in the world, and
we are motivated by our commitment to making products with integrity and treating pets and their parents with respect. We believe that
our broad portfolio of pet health and wellness products are well positioned to benefit from the trends of growing pet humanization and
an increased consumer focus on health and wellness, and have adopted a laser focused, channel specific approach to growth that is driven
by new product innovation.
We
sell our premium and super-premium products (which we believe generally includes products with a retail price greater than $0.20 per
ounce) under the Halo brand umbrella, including Halo Holistic™, Halo Elevate® and the former TruDog brand, which was rebranded
and successfully integrated under the Halo brand umbrella during the third quarter of 2022. Our core products sold under the Halo brand
are made with high-quality, thoughtfully sourced ingredients for natural, science based nutrition. Each innovative recipe is formulated
with leading veterinary and nutrition experts to deliver optimal health. Our diverse and established customer base has enabled us to
penetrate multiple channels of trade, which we believe enables us to deliver on core consumer needs and serve pet parents wherever they
shop. We group these channels of trade into three distinct categories: Digital, which includes the sale of product to online retailers
such as Amazon and Chewy, as well as DTC which included the sale of product through the Company’s website, halopets.com, through
June 1, 2024; International, which includes the sale of product to foreign distribution partners and to select international retailers;
and Brick & Mortar, which primarily includes the sale of product to pet specialty retailers, independent pet stores, and regional
distributors.
A
concerted effort to drive brand awareness behind distinctive positioning and messaging is the cornerstone of our growth plan, supported
by innovation. Halo’s future growth is driven through an extensive brand positioning workstream executed over the last year. New
consumer messaging will build awareness with pet parents, persuade them that Halo is the right choice for their pet, and move the consumer
towards purchase. The creative campaign will be brought to life on Amazon and Chewy platforms as well as outside those platforms. By
shifting media investment from bottom-of-funnel-driven DTC activities to full funnel activation across the Amazon and Chewy platforms,
Halo will see improvements in both media effectiveness, efficiency, and reach.
In
addition to incremental consumer media activation, innovation plays a key role in Halo’s growth plans, supported by our own research
and development, and acquisitions. Our established supply and distribution infrastructure allows us to bring new products to market in
less than a year. Our outsourced manufacturing model is flexible, scalable and encourages innovation allowing us to offer a breadth of
assortment in dog and cat food main meal as well as pet treat products under the Halo brand, serving a wide variety of consumer needs,
dayparts, and occasions.
The
Halo portfolio offers a variety of platforms through which to innovate. Halo Holistic™ is designed for the pet parent seeking complete
digestive health with prebiotics, probiotics and postbiotics. Additionally, it’s one of the only brands made with only whole animal
proteins and no meat meals. Halo Elevate®, features leading nutrient levels supporting the top five pet parent health concerns including
digestive health, heart and immunity support, healthy skin and coat, hip and joint support and strength and energy. Halo Freeze Dried
Raw recipes preserve the natural flavor and nutrition of raw food with 100% protein from natural sources.
The
Global Pet Food and Treat Market
The
U.S. represents the largest and most developed market for pet food globally, with food and treats accounting for approximately $64 billion
of total spend in the pet care market in 2023. According to the American Pet Product Association (“APPA”), approximately
63% of all households in the U.S. own a pet, equating to a 180 million adult consumers living in a household with a pet. Pet spending
represents a significant portion of household spend on consumer products, as this translates to an average annual spend on pet products
of more than $738 in 2023, which represents a 7.4% increase over the previous year.
The
most recent data available from an October 2024 Packaged Facts report estimates that US retail sales of dog and cat food will top $54
billion in 2024, up 4.5% over 2023. This increase represents a significant slow-down in pet food growth, following four consecutive years
of double-digit increases and a 2018-2023 compound annual growth rate (CAGR) of 13.0%. While much of the pre-pandemic growth in the pet
food market can be attributed to continued premiumization and pet population growth among higher-income households, price inflation was
almost entirely behind more recent growth, specifically in 2022 and early 2023. These gains were especially impressive given a simultaneous
decline in the dog population. Pet food has proven itself to be amazingly resilient in both this and previous economic crises, and pet
food’s position as a non-discretionary item has spared it many of the cutbacks seen in the non-food pet supplies sector.
Due
to its ready access and “contactless” advantages, e-commerce saw a huge boost from the pandemic and continued to make inroads
into brick-and-mortar’s share of the market in the following years. Packaged Facts expects the channel to continue bleeding share
away from others at a somewhat slower pace in the years to come, with the ongoing, intensive, competitive pushes of Amazon.com driving
the momentum. Appeals continue to be the convenience of having large bags of pet food home delivered, the “endless aisles”
and product comparison benefits of online shopping, the movement toward fresh pet food sold online, and online shopping in general.
In
Packaged Facts’ January 2024 survey, pet food was cited as an important pet health and wellness product by the largest share of
pet owners– 80% of dog owners and 82% of cat owners. By comparison, 50% and 49%, respectively, view pet treats as an important pet
health product. Pet parents are on the lookout for products that improve their pet’s health and wellness, with 79% liking the idea
of healthier pet snacks and treats and 73% viewing high-quality pet foods as effective for preventive healthcare. Pet owners are also
willing to spend more on pet foods with extra health and wellness benefits, and this attitude appears to be growing, with 74% agreeing
with this sentiment in Packaged Facts July-August 2024 survey, up from 66% in the September-October 2023 survey.
Packaged
Facts projects moderate (in relation to the past four years) but steady pet food performance through 2028, with the sales to experience
a compound annual growth rate (CAGR) of 4.4% for the 2023-2028 period. This increase reflects a 4.3% increase for dog food and 4.6% increase
in cat food. Although the days of double-digit increases will likely remain in the past, given the mature nature of the pet food market,
should the dog population rebound more quickly than anticipated, this growth could reach beyond 5% or even 6%.
From
a demographic perspective, younger pet owners are more likely to spend a higher percentage of their income on pets, treat their pet as
an important member of the family and to purchase products from pet specialty and online retailers rather than from grocery stores. Along
these lines, women are more interested in purchasing pet food than men, and are more likely to engage with search ads than men. Taken
holistically, these traits suggest a preference to purchase more premium and super-premium pet food and treats from brands like Halo,
with a tendency to purchase products in the channels where we compete.
Globally,
Asia is the second largest market for pet products, with China representing the largest market opportunity for growth. Like the U.S.,
growth in the Asian pet care industry has been driven by dramatic increases in household pet ownership. The global plant-based pet food
market is set to expand its roots in the global market at a promising CAGR of 9.2%, while the market is anticipated to hold a revenue
of USD $57.43 billion in 2032. We believe that growth in Asia is fueled by increasing levels of economic financial status and demand
for premium, western manufactured products as a result of product quality concerns. This demand has been supported by a rapidly growing
middle class in China, where a McKinsey report estimated that in 2018 roughly 730 million people in urban areas fell into the income
categories of “aspirants” and “affluents,” with the Brookings group estimating that approximately 60 million
people are added to these income categories each year. We believe that this growth drove the increase in the number of dog-owning Chinese
households as measured by Euromonitor, which increased from 12% in 2015 to 22% in 2023, according to one 2024 study. According to Euromonitor,
the Chinese market for premium dry dog and cat food is anticipated to grow at a 20% CAGR and 28% CAGR, respectively, from 2015 through
2025, suggesting that the Chinese pet market has significant room for growth in the foreseeable future.
Our
Growth Strategy
Acquisition Activity
In 2023, the Company executed a number of strategic acquisitions aimed at expanding its national footprint, enhancing service capabilities, and strengthening its position in the specialty healthcare market. By contrast, 2024 saw a deliberate slowdown in acquisition activity, as the Company shifts focus toward integration, operational optimization, and organic growth initiatives across the existing SRx Network.
CWB Facility
The Company was not in compliance with certain financial covenants related to its loan facility with Canadian Western Bank (“CWB”) as of June 30, 2025, which resulted in the debt being callable by the lender. During the quarter, the Company actively engaged in discussions with CWB to address the non-compliance. Subsequent to June 30, 2025, the Company sought creditor protection under a formal restructuring proceedings under the Companies’ Creditors Arrangement Act (Canada) (“CCAA”). Refer to Note 19 – Discontinued operations for more information.
Merger and CCAA Proceedings
On September 3, 2024, Better Choice Company, Inc. (“Predecessor”), SRx Canada, 1000994476 Ontario Inc. (“AcquireCo”), a corporation existing under the laws of the Province of Ontario and an indirect wholly-owned subsidiary of Predecessor, and 1000994085 Ontario Inc., a corporation existing under the laws of the Province of Ontario and a direct wholly-owned subsidiary of Predecessor (“CallCo”) entered into an Arrangement Agreement (the “Arrangement Agreement”), and the transactions contemplated thereby (the “Merger”) were completed on April 24, 2025 (which is referred to herein as the “Closing Date”). Pursuant to the Arrangement Agreement, on the Closing Date, AcquireCo merged with and into SRx Canada, with SRx Canada remaining as the surviving entity. Predecessor acquired the business of SRx Canada pursuant to the Merger. Refer below and to Note 4 – Business Combinations for further information.
In connection with the Merger, on April 24, 2025, Predecessor changed its corporate name from “Better Choice Company Inc.” to “SRx Health Solutions, Inc.” by the filing of a Certificate of Amendment of its Certificate of Incorporation with the Secretary of State of the State of Delaware, and SRx Canada changed its name from “SRx Health Solutions Inc.” to “SRx Health Solutions (Canada) Inc.” by making the appropriate filing in the Province of Ontario.
On the Closing Date, Predecessor issued to certain holders of the common stock of SRx Canada 8,898,069 shares of the Company’s Common Stock, and AcquireCo issued to certain holders of the common stock of SRx Canada 19,701,935 shares in the capital stock of AcquireCo which shares are exchangeable into shares of the Company’s Common Stock (the “Exchangeable Shares”) on a one-for-one basis.
On August 12, 2025, the Company announced that SRx Canada had obtained an Initial Order (the “Initial Order”) in Canada under the federal Companies’ Creditors Arrangement Act (the “CCAA” and SRx Canada’s proceedings thereunder, the “CCAA Proceedings”) from the Ontario Superior Court of Justice (Commercial List) (the “Court”). In connection with the Initial Order, the Court granted, among other relief, a stay of proceedings in favor of SRx Canada, the appointment of Grant Thornton Limited as the monitor of SRx Canada (in such capacity, the “Monitor”), debtor-in-possession financing (“DIP Financing”), and a sale process (“Sale Process”).
SRx Canada has secured debtor-in-possession (DIP) Financing (which includes insider participation). The DIP Financing consists of a credit facility of up to a maximum of $1,750,000 which is expected to be used to finance SRx Canada’s working capital needs, including for continued operations and to implement the restructuring contemplated by the CCAA Proceedings. The CCAA Proceedings and DIP Financing will provide SRx Canada with the time and stability required to complete the Sale Process and identify transaction(s) which may include the sale of all or substantially all of the business or assets of SRx Canada. The Company intends to carry on the critical business of SRx Canada throughout the pendency of the CCAA Proceedings.
Neither the Company nor the Company’s United States subsidiary, Halo, Purely For Pets, Inc., a Delaware corporation, has made any filing under any bankruptcy code or statutory reorganization scheme either in the United States or in Canada.
On August 14, 2025, the Company entered into a Settlement, Share Forfeiture and Mutual Release Agreement (the “Settlement Agreement”) with certain of the founders and officers of SRx Canada (the “Forfeiting Stockholders”), pursuant to which the Forfeiting Stockholders forfeited for cancellation approximately 18,839,332 million Exchangeable Shares (the “Forfeited Shares”). In consideration of the Forfeited Shares, the Company agreed to release the Forfeiting Stockholders from certain claims by the Company.
Share Exchange
In connection with the Merger, on April 24, 2025, the Company contributed 152 shares of the common stock, without par value (the “Halo Shares”), of Halo, Purely For Pets, Inc. (“Halo”), a Delaware corporation, then the Company’s wholly-owned subsidiary, to Halo Spin-Out SPV Inc. (“Spin-Out SPV”), a special purpose subsidiary of the Company formed for such purpose. Immediately prior to the effectiveness of the Merger, the equity interests in Spin-Out SPV were distributed as a dividend to the then-current stockholders of the Company. The Halo Shares represent seventeen (17%) of the issued and outstanding capital stock of Halo.
Following the initiation of the CCAA Proceedings and the execution of the Settlement Agreement, on August 21, 2025, the Company and Spin-Out SPV executed a Share Exchange Agreement (the “Share Exchange Agreement”) whereby Spin-Out SPV transferred the Halo Shares back to the Company in exchange for 4,950,000 newly issued shares of the Company’s Common Stock (such shares, the “SPV Shares” and such transaction, the “Share Exchange”).
July PIPE Financing
On July 7, 2025, the Company entered into the Securities Purchase Agreement (the “July PIPE SPA”) by and among the Company and the July PIPE Investors, including the lead investor (the “Lead Investor”), pursuant to which the Company issued and sold to the Investors (i) a new series of senior secured convertible notes (the “July Notes”) with an aggregate original principal amount of $7,650,000, subject to an original issue discount as provided in the July Notes, and (ii) warrants (the “July Warrants”) to acquire 21,338,062 shares of the Company’s common stock (the “Common Stock”) (such transaction, the “July PIPE Financing”).
The July Notes bear interest at a rate of 8% per annum. The July Notes mature on July 8, 2027, provided that the maturity date may be extended by a noteholder if the Company is in default under the July Notes, and in certain other limited circumstances as described in the July Notes. The July Notes are convertible into shares of the Common Stock at a conversion price of $0.6274 per share, subject to customary adjustments. The July Warrants are exercisable for a period of three (3) years beginning six (6) months from the date of issuance at an exercise price of $0.6274 per share, also subject to adjustment.
Additionally, on July 8, 2025, pursuant to and in connection with the July PIPE SPA, the Company entered into a Security and Pledge Agreement (the “Security Agreement”) by and between the Company and the Lead Investor, in its capacity as collateral agent, pursuant to which the Company granted to the Lead Investor, for the ratable benefit of the Lead Investor and the other July PIPE Investors, a valid, perfected and enforceable security interest in certain assets of the Company and its subsidiaries, which assets include substantially all of the assets of the Company’s U.S. business, and pledged as collateral the equity held by the Company in certain of the Company’s subsidiaries.
Additionally, on July 8, 2025, pursuant to and in connection with the July PIPE SPA, the Company and the July PIPE Investors entered into a Registration Rights Agreement (the “July PIPE RRA”), pursuant to which the Company agreed to file a registration statement with the United States Securities and Exchange Commission (“SEC”) covering the resale of Common Shares that are issuable upon the conversion of the July Notes or the exercise of the July Warrants.
October PIPE Financing
On October 27, 2025, the Company entered into a Securities Purchase Agreement (the “October PIPE SPA”) with certain accredited investors named therein (the “October PIPE Investors”). Certain October PIPE Investors are July PIPE Investors. Pursuant to the October PIPE SPA, up to 38,070 shares of the Company’s Series A convertible preferred stock, par value $0.001 per share (the “Series A Preferred Stock”) and accompanying warrants (“October Warrants”) to purchase shares of the Company’s common stock, par value $0.001 per share (the “Common Stock”) may be purchased for an aggregate purchase price of up to $30.46 million in one or more closings (such transaction, the “October PIPE Financing”).
On October 27, 2025, in connection with the October PIPE Financing, the Company filed with the Secretary of State of the State of Delaware a Certificate of Designations establishing the rights, preferences, and privileges of the newly authorized Series A Preferred Stock.
On October 31, 2025, pursuant to the October PIPE SPA, the Company issued and sold, and the October PIPE Investors purchased, in a private placement: 19,035 shares of the Series A Preferred Stock and 54,527,811 October Warrants to purchase shares of Common Stock for aggregate proceeds of approximately $15.23 million, paid in cash or through the cancellation of such October PIPE Investor’s July Note and July in lieu of cash. The Company waived receipt of the cash portion of the purchase price until November 3, 2025. Pursuant to the October PIPE SPA, the July PIPE Investors waived the requirement under the July PIPE SPA that the Company register for resale 250% of the shares of Common Stock issuable upon the conversion or exercise of the July Notes or July Warrants.
In conjunction with the October PIPE SPA, on October 31, 2025 the Company entered a registration rights agreement with the investors (the “October PIPE RRA”), pursuant to which the Company will be required to file a registration statement with the Securities and Exchange Commission (the “SEC”), to register for resale the Common Stock issuable upon (x) the conversion of the Series A Preferred Stock and (y) the exercise of the October Warrants.
ELOC Transaction
Concurrently with the issuance of the Notes and Warrants described above under “July PIPE Financing,” on July 7, 2025, the Company and the Selling Stockholder entered into a common share purchase agreement (as amended, the “ELOC Purchase Agreement”), which provides that subject to the terms and conditions set forth therein, the Company may sell to the Selling Stockholder up to the lesser of (i) $50 million of the Company’s common shares, no par value (the “Common Share”) and (ii) the Exchange Cap (as defined below) (subject to certain exceptions provided in the ELOC Purchase Agreement) (the “Total Commitment”), from time to time during the term of the ELOC Purchase Agreement. On October 28, 2025, the Company and the Selling Stockholder executed an amendment to the ELOC Purchase Agreement increasing the Total Commitment from $50 million to $1.0 billion (the “ELOC Amendment”).
Additionally, on July 7, 2025, the Company and the Selling Stockholder entered into a registration rights agreement (the “ELOC RRA”), pursuant to which the Company agreed to file this registration statement with the United States Securities and Exchange Commission (“SEC”) covering the resale of Common Shares that are issued to the Selling Stockholder under the ELOC Purchase Agreement (the “Registration Statement”).
On October 28, 2025, the Selling Stockholder executed a waiver with respect to the ELOC Purchase Agreement and ELOC RRA which waivers allows the Company to register just $27.55 million of Common Stock under the Initial Registration Statement (as defined in the ELOC RRA), rather than $1 billion of Common Stock, due to the constraints of the Company’s currently authorized capital. In the event that the Company’s authorized capital increases, the Company intends to amend this Registration Statement to register an additional $972.45 million of Common Stock, subject to the ELOC Purchase Agreement and ELOC RRA.
Under the terms and subject to the satisfaction of the conditions set forth in the ELOC Purchase Agreement, the Company has the right, but not the obligation, to sell to the Selling Stockholder, and the Selling Stockholder is obligated to purchase, up to the Total Commitment. Such sales of Common Shares by the Company, if any, will be subject to certain limitations as set forth in the ELOC Purchase Agreement, and may occur from time to time, at the Company’s sole discretion, over the period commencing on the date that all of the conditions to the Company’s right to commence such sales are satisfied, including that the registration statement referred to above is declared effective by the SEC and a final form of the prospectus included therein is filed with the SEC (the “Commencement Date”) and ending upon the expiration of this Registration Statement pursuant to Rule 4125(a)(5) of the Securities Act of 1933, as amended, or otherwise upon the termination of the ELOC Purchase Agreement as provided therein. The Selling Stockholder has no right to require the Company to sell any Common Shares to the Selling Stockholder, but the Selling Stockholder is obligated to make purchases as the Company directs, subject to satisfaction of the conditions set forth in the ELOC Purchase Agreement.
As consideration for the Lead Investor entering into the ELOC Purchase Agreement, concurrently with the execution of the ELOC Amendment, the Company issued to the Lead Investor a convertible promissory note in the original principal amount of $20.0 million (the “Keystone Commitment Note”), which is convertible into up to 72,048,620 shares of Common Stock (collectively, the “Keystone Commitment Shares”), assuming a price of $0.3210 per share, which was the closing price of our shares of Common Stock on the NYSE American on October 22, 2025. The Keystone Commitment Note was issued by the Company to the Lead Investor in lieu of the Commitment Shares, as defined in the original ELOC purchase Agreement. The Company also agreed to pay the Lead Investor up to $35,000 for its reasonable expenses under the ELOC Purchase Agreement.
Other Matters
On June 10, 2025, Davender Sohi resigned from his role as President.
On June 11, 2025, the Company announced the following management team and Board of Directors changes: Lionel Conacher, current Board member, was appointed as Chairman of the Board; Adesh Vora, current Executive Chairman, remained on the Board and was appointed Chief Executive Officer; and Kent Cunningham, current Chief Executive Officer, assumed role as President.
On July 15, 2025, Kent Cunningham, current President, was reappointed as Chief Executive Officer, effective July 8, 2025, and Adesh Vora, current Chief Executive Officer and Board member, was named Vice Chairman of the Board.
On August 12, 2025, the Company initiated restructuring proceedings for its SRx Canada subsidiaries under the CCAA. Refer to Note 19 – Discontinued operations for more information.
On August 13, 2025, Adesh Vora resigned from his role as Vice Chairman and was no longer a shareholder nor Board member of the Company.
Subsequent to September 30, 2025, the Company appointed two new directors to its Board. Joshua Epstein joined the Board effective October 1, 2025, and Sammy Dorf, Esq. was appointed effective November 10, 2025.
On October 8, 2025, the Company’s stockholders, acting by written consent, approved several corporate actions. These actions included authorizing certain issuances of common stock and convertible securities, approving a future private equity offering of securities, amending the Certificate of Incorporation to increase the number of authorized shares, amending the Bylaws to reduce quorum requirements for stockholder meetings, and authorizing an additional reverse stock split of the Company’s common stock at a ratio to be determined by the Board.
On October 31, 2025, the Company accepted the voluntary resignations of directors Lionel F. Conacher and David Allen White. Following these resignations, Michael Young, Simon Conway, and Joshua A. Epstein were appointed to serve on each of the Audit, Compensation, and Nominating & Governance Committees, with each member designated as chairman of one of the committees.
What changed in the latest 10-Q
Risk Factors
There have been no material changes from the risk factors described under the heading “Risk Factors” in our Annual Report filed on December 5, 2025. While we believe there have been no material changes from the risk factors previously disclosed, you should carefully consider, in addition to the other information set forth in this report, the risk factors discussed in our Annual Report that could materially affect our business, financial condition or future results. The risks described in our Annual Report are not the only risks facing our Company. In addition to risks and uncertainties inherent in forward-looking statements contained in this Quarterly Report, additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results.
No wording changes found in this section.
Full comparison: every changed paragraph (0)
Management's Discussion & Analysis (MD&A)
New heading “Reverse Stock Split”
Largest changes
“*Prior-year comparative figures are not presented because its wholly owned subsidiary, Halo, Purely for Pets, Inc., constituting the Company’s continuing operations, only became the reporting entity following a reverse merger on April 24, 2025. The prior-year results of its former Canadian operations were discontinued in fiscal year September 30, 2025 subsequent to the merger as a result of a formal insolvency restructuring and thus are classified as discontinued operations in fiscal year 2025. …”see in full comparison
“As a result of the restructuring of SRx Canada and the Company’s shift to the Consumer Products business, the results of operations for three months ended March 31, 2026 are not directly comparable to 2025. Prior-year amounts reflect the specialty healthcare business, which has since been discontinued and are thus not presented.”see in full comparison
“At the closing of the Transaction (the “Closing”), the Company acquired 100% of the issued and outstanding equity interests of each of EMJC and CCC Crypto, and a 100% direct and indirect ownership interest in the IP Asset, as defined in the Transfer Agreement.”see in full comparison
“In a letter dated July 15, 2026, NYSE Regulation informed the Company that it had resolved the continued listing deficiency with respect to Section 1003(a)(i) and (ii) of the Company Guide, which had been referenced in the Exchange’s letter dated October 14, 2025 and disclosed in the Company’s Form 8-K filed with the SEC on October 17, 2025. As a result, the Company’s compliance indicator (“.BC”) will no longer be disseminated, and SRX Global will be removed from the list of NYSE American noncompliant issuers on the Exchange’s website.”see in full comparison
“On July 16, 2026, the Company announced it had received a written notification from NYSE Regulation confirming that the Company is back in compliance with all NYSE American LLC continued listing standards set forth in Part 10 of the NYSE American Company Guide, including the Section 1003(f)(v) low selling price deficiency addressed by the Reverse Split described above.”see in full comparison
Full comparison: every changed paragraph (34)
On
August 14, 2025, the Company entered into a Settlement, Share Forfeiture and Mutual Release Agreement (the “Settlement Agreement”)
with certain of the founders and officers of SRx Canada (the “Forfeiting Stockholders”), pursuant to which the Forfeiting
Stockholders forfeited for cancellation approximately 18,839,332 million313,988 Exchangeable Shares (the “Forfeited Shares”). In consideration
consideration of the Forfeited Shares, the Company agreed to release the Forfeiting Stockholders from certain claims by the Company.
EMJX
TransactionAsset Acquisition
On June 16, 2026, the Company completed a transaction with EMJ Crypto Technologies Inc., a corporation organized under the laws of Ontario, Canada (“EMJC”), pursuant to a Share Exchange and Asset Transfer Agreement, dated December 16, 2025, and amended on March 11, 2026 and June 17, 2026 (as amended, the “Transfer Agreement”), by and among the Company, EMJC, CCC Crypto Corp., a Delaware corporation (“CCC Crypto”), 1001440571 Ontario Inc., a corporation organized under the laws of Ontario, Canada and an indirect wholly-owned subsidiary of the Company (“ExchangeCo”), and the other parties thereto (the “Transaction”).
At the closing of the Transaction (the “Closing”), the Company acquired 100% of the issued and outstanding equity interests of each of EMJC and CCC Crypto, and a 100% direct and indirect ownership interest in the IP Asset, as defined in the Transfer Agreement.
As consideration, the Company issued to EMJC and certain other parties to the Transaction an aggregate of (i) 4,718,937 shares of the Company’s common stock, par value $0.001 per share (“Common Stock”), (ii) 1,954,470 exchangeable shares of ExchangeCo (the “Exchangeable Shares”) which are exchangeable for shares of Common Stock on a one-for-one basis, and (iii) warrants (the “Pre-Funded Warrants”) to purchase 492,984 shares of Common Stock.
The shares of Common Stock issued at the Closing, and the shares of Common Stock issuable upon the exchange or exercise of the Exchangeable Shares and Pre-Funded Warrants issued at the Closing, have been registered under the Securities Act of 1933, as amended (the “Securities Act”) in a Registration Statement on Form S-4 declared effective by the SEC on May 7, 2026.
The Transaction was accounted for as an asset acquisition in accordance with ASC 805-50. The fair value of the equity consideration transferred in the Transaction was $79.7 million. Additionally, the Company incurred direct acquisition-related transaction costs of $0.3 million, consisting primarily of legal, accounting and other professional fees, incurred in connection with the Closing and thus were capitalized as part of the cost of the assets acquired. Accordingly, the total purchase price for accounting purposes was $80.0 million.
Reverse Stock Split
On June 23, 2026, the Company was informed by the NYSE American LLC (the “NYSE American”) that it was not in compliance with the continued listing standards set forth in Section 1003(f)(v) of the NYSE American Company Guide, which relates to low selling price per share for a substantial period of time. The Company’s common stock closed below $0.10 on June 23, 2026, and NYSE American halted trading of the Company’s common stock, with the halt to continue until the Company effectuated a reverse stock split.
In response, on June 24, 2026, the Company announced its plan to proceed with a 1-for-60 reverse stock split of its issued and outstanding shares of common stock, par value $0.001 per share, as a measure the Company believes is necessary and in the best interests of the Company and its stockholders to regain compliance with NYSE American’s continued listing standards. The reverse stock split became effective July 6, 2026. See Note 23 – Subsequent events, for discussion of the reverse stock split.
On June 24, 2026, the Company’s Board of Directors approved a 1-for-60 reverse stock split of the Company’s issued and outstanding shares of common stock, par value $0.001 (the “Reverse Split”). The Reverse Split became effective, and trading on a post-split basis began, at the market open on July 6, 2026. There was no change to the par value of the Company’s common stock. The Reverse Split affected all stockholders uniformly and did not affect any stockholder’s ownership percentage of the Company’s shares with the exception of those holders of fractional shares. No fractional shares were issued in connection with the Reverse Split; any shareholder who would otherwise have been entitled to a fractional share received one whole share in lieu thereof.
On July 16, 2026, the Company announced it had received a written notification from NYSE Regulation confirming that the Company is back in compliance with all NYSE American LLC continued listing standards set forth in Part 10 of the NYSE American Company Guide, including the Section 1003(f)(v) low selling price deficiency addressed by the Reverse Split described above.
In a letter dated July 15, 2026, NYSE Regulation informed the Company that it had resolved the continued listing deficiency with respect to Section 1003(a)(i) and (ii) of the Company Guide, which had been referenced in the Exchange’s letter dated October 14, 2025 and disclosed in the Company’s Form 8-K filed with the SEC on October 17, 2025. As a result, the Company’s compliance indicator (“.BC”) will no longer be disseminated, and SRX Global will be removed from the list of NYSE American noncompliant issuers on the Exchange’s website.
On
December 16, 2025, the Company entered into a Share Exchange and Asset Transfer Agreement (the “Transfer Agreement”), as
unanimously approved by the Board, by and among the Company, EMJ Crypto Technologies Inc., a corporation organized under the laws of
Ontario, Canada (“EMJX”), CCC Crypto Corp., a Delaware corporation (“DelawareCo”), and the transferors named
therein (the “Transferors”).
Upon
the terms and subject to the conditions set forth in the Transfer Agreement, the Company shall acquire EMJX and DelawareCo and acquire
from certain Transferors all of their rights in and to certain intellectual property assets, in an all-stock transaction, for an aggregate
purchase price of approximately $55 million.
Results
of Operations for the three months ended MarchJune 31,30, 2026 and 2025
The following table sets forth our condensed consolidated results for the periods presented (in thousands):
* Percentage change is not meaningful due to a prior year balance of zero.
Net
sales for three and sixnine months ended MarchJune 31,30, 2026 were $3.4 million and $6.2$9.6 million, respectively, reflecting revenue generated from
the Company’s continuing operations in the Halo pet health and wellness business. Prior-year results for the Halo business are
not presented, as the Company only became the reporting entity following the reverse takeover on April 24, 2025. Net sales were driven
by the sale of premium
and super-premium pet food products across digital, brick-and-mortar, and international channels, reflecting the
Company’s focus
on product innovation, brand awareness, and meeting consumer demand in multiple trade channels.
Prior-year results reflect only the results for the Halo business within the Better Choice Company, Inc. The operations of SRx Canada, the Company’s former specialty healthcare business, were deconsolidated during the prior year and are presented as discontinued operations. Accordingly, prior year amounts for SRx Canada are not presented. As a result, and given the Company’s focus on the Consumer Products business, net sales for three months ended June 30, 2026 are not directly comparable to the corresponding 2025 periods.
As
a result of the restructuring of SRx Canada and the Company’s shift to the Consumer Products business, the results of operations
for three months ended March 31, 2026 are not directly comparable to 2025. Prior-year amounts reflect the specialty healthcare business,
which has since been discontinued and are thus not presented.
Gross
profit is affected by a variety of factors, including product sales mix, volumes sold, discounts offered to customers, the cost of manufactured
products, and freight costs from the manufacturer to the warehouse. For the three months ended MarchJune 31,30, 2026, gross profit was 1.30.9 million,
with a gross margin of 37%.27%. For the sixnine months ended MarchJune 31,30, 2026, gross profit was $2.3$3.2 million, with a gross margin of 37%.34%.
Interest
expense for the three and sixnine months ended MarchJune 31,30, 2026 primarily reflects interest associated with the ELOC Commitment Note issued
in October 2025. The period also includes interest incurred on the July 2025 notes, which were fully written off in October 2025, including
all outstanding principal and accrued interest. As a result, no further interest was recognized on those instruments for the remainder
of the period.
For
the three and six months ended MarchJune 31,30, 2026, the Company recorded no material income tax expense or benefit, resulting in a near-zero effective
effectivetax rate. For the nine months ended June 30, 2026, the Company recorded an income tax benefit of less than $0.01 million, which similarly
did not result in a meaningful effect tax rate. The Company recorded no material income tax expense or benefit for the comparative three
and nine months ended June 30, 2025. The absence of a significant tax expense or benefit in either period is primarily due to the continued
maintenance of a full valuation allowance
that fully offsets deferred tax assets arising from current-year losses. Prior-year comparative tax amounts related to the former SRx
Canada operations are not indicative of the continuing business and are therefore not meaningful.
The
Company had no uncertain tax positions as of MarchJune 31,30, 2026 and 2025. We remain subject to examination in the United States for tax years
2021 through 2026.
We
present Adjusted EBITDA as it is a key measure used by our management and board of directors to evaluate our operating performance, generate
future operating plans and make strategic decisions regarding the allocation of capital. We believe that the disclosure of Adjusted EBITDA
is useful to investors as this non-GAAP measure forms the basis of how our management team reviews and considers our operating results.
By disclosing this non-GAAP measure, we believe that we create for investors a greater understanding of and an enhanced level of transparency
into the means by which our management team operates our company. We also believe this measure can assist investors in comparing our
performance to that of other companies on a consistent basis without regard to certain items that do not directly affect our ongoing
operating performance or cash flows.
(c)
Other single-occurrence expenses, which consist of infrequentstrategic rebranding, systems implementation and technology transformation, initiatives
and other non-recurring costs that are not indicative of the Company’s
ongoing operating performance.costs.
*Prior-year results reflect only the results for the Halo business within the Better Choice Company, Inc. The operations of SRx Canada, the Company’s former specialty healthcare business, were deconsolidated during the fiscal year September 30, 2025 and are presented as discontinued operations. Accordingly, prior year amounts for SRx Canada are not presented.
*Prior-year
comparative figures are not presented because its wholly owned subsidiary, Halo, Purely for Pets, Inc., constituting the Company’s
continuing operations, only became the reporting entity following a reverse merger on April 24, 2025. The prior-year results of its former
Canadian operations were discontinued in fiscal year September 30, 2025 subsequent to the merger as a result of a formal insolvency restructuring
and thus are classified as discontinued operations in fiscal year 2025. Accordingly, prior-year amounts for continuing operations are
not meaningful and are presented as zero on the consolidated statement of operations.
Historically,
we have financed our operations primarily through debt and equity financing. On MarchJune 31,30, 2026 and September 30, 2025, we had cash and
and cash equivalents of $20.5$36.7 million and $1.3 million, respectively, and short-term investments of $3.0$7.5 million and zero, respectively.
Cash
used in operating activities was $9.6$10.5 million during the sixnine months ended MarchJune 31,30, 2026 compared to cash providedused byin operating
activities activities
of $0.1$1.8 million during the sixnine months ended MarchJune 31,30, 2025. The increase in cash used in operating activities was
primarily driven by
the a $19.1 million net loss ofand $15.0 million, offset by a $3.4$1.2 million change in fair value of derivative liabilities, offset by a $4.8 million change in fair
value of digital assets,assets $3.1and $2.6 million loss on settlement of debt,
and $2.7 million of debt discount amortization.debt.
Cash
used in investing activities was $15.5$24.2 million during the sixnine months ended MarchJune 31,30, 2026 compared to cash providedused byin investing
activities activities
of $3.7$3.4 million during the sixnine months ended MarchJune 31,30, 2025. Cash used in investing activities was primarily related to
the purchase
of digital assets of $16.5 million and purchase of equity securities of 5.2 million, partially offset by proceeds from
sale of digital assets of $4.8$9.6 million,million. asThe wellCompany asalso purchasespurchased $158.6 million of marketable securities and option positions associatedas
part withof the Company’sits active capital allocation and treasury management activities of $62.8 million,activities, offset by a $159.2 million of proceeds from sales of
marketable securities and option positions of $62.7
million.positions. Additionally, the Company invested approximately net $3.0$7.5 million in short-term U.S. Treasury securities as part of its broader treasury
management management
strategy and purchased $1.4a net $4.9 million of a convertible
note receivable,receivables, as described in Note 67 – Notes receivable.
Cash
provided by financing activities was $44.3$70.1 million during the sixnine months ended MarchJune 31,30, 2026 compared to cash used in financing activities
of $3.8$0.4 million during the sixnine months ended MarchJune 31,30, 2025. The cash provided by financing activities for the sixnine months ended MarchJune
31,30, 2026 was mainly related to proceeds from the issuance of common stock of $55.1$80.3 million and the issuance of convertible preferred
stock of $13.2$13.4 million, primarily offset by the redemption of Series A convertible preferred stock of $21.8 million.
As
of MarchJune 31,30, 2026, 299,522,8003,547,706 shares have been sold under the ELOC.
SRXH insider buying and selling (Form 4)
Since 2026-04-11, insiders reported open-market purchases in 0 Form 4 filings and open-market sales in 0 filings. Totals add up every open-market (code P and S) line in those filings, using the prices reported in the filings. Awards, option exercises, tax withholding and gifts are listed below but not counted.
No Form 4 stock transactions in this period.
Well-known investors holding SRXH (13F)
| Investor | Quarter | Shares | Reported value | % of their 13F | Change vs prior quarter |
|---|---|---|---|---|---|
| Citadel Advisors (Ken Griffin) | 2026-06-30 | 6,059,738 | $549.6K | 0.0% | New position |
| Renaissance Technologies | 2026-06-30 | 4,860,865 | $440.9K | 0.0% | New position |