Quarterly Report for Quarter Ending September 30, 2026 (Form 10-Q)

Management's Discussion and Analysis of Financial Condition and Results of Operations

References in this report (the "Quarterly Report") to "we," "us" or the "Company" refer to OSR Health, Inc. References to our "management" or our "management team" refer to our officers and directors. The following discussion and analysis of the Company's financial condition and results of operations should be read in conjunction with the financial statements and the notes thereto contained elsewhere in this Quarterly Report. Certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties.

Special Note Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q includes "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Exchange Act of 1934, as amended (the "Exchange Act"). We have based these forward-looking statements on our current expectations and projections about future events. These forward-looking statements are subject to known and unknown risks, uncertainties and assumptions about us that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as "may," "should," "could," "would," "expect," "plan," "anticipate," "believe," "estimate," "continue," or the negative of such terms or other similar expressions. Factors that might cause or contribute to such a discrepancy include, but are not limited to, those described in our other filings made with the U.S. Securities and Exchange Commission ("SEC").

Recent Developments

Shareholder Loyalty CVR Program

In June 2026, the Company announced a shareholder loyalty program (the "Loyalty Program") granting one non-transferable contingent value right ("CVR") for each share of common stock held on August 14, 2026 by holders who enrolled. Final enrollment was 19,582,663 shares, including deferred shares, held by 102 shareholders across 15 countries and representing approximately 55% of the Company's shares of common stock outstanding as of the end of the enrollment period. Enrolled holders who hold their shares continuously are eligible to receive additional shares of common stock ("Delivery Shares"), at no cost, if the Nasdaq closing price meets the following thresholds:

If all thresholds are met, up to 97,913,315 Delivery Shares would be issuable. The CVRs are non-transferable and have no standalone value. As described below, the common stock has been suspended from trading on Nasdaq and is expected to be delisted. Management intends to seek to continue the Loyalty Program for enrolled holders following delisting, including by amending the CVR Agreement to measure the price thresholds on the principal market on which the common stock is then listed or quoted. Any amendment requires the agreement of the rights agent, and any issuance of Delivery Shares remains subject to an effective registration statement on Form S-1 and sufficient authorized shares. There can be no assurance that the Loyalty Program will be continued or that any Delivery Shares will be issued. At its annual meeting on August 7, 2026, the Company's stockholders approved an increase in authorized common stock from 100,000,000 to 250,000,000 shares, which the Company plans to, but has not yet, effected.

A more detailed description of the Loyalty Program is available on the Company's website at www.osr-health.com/loyaltyprogram. Information on, or accessible through, the Company's website is not incorporated by reference into, and does not form a part of, this Report.

Nasdaq Delisting

The Company did not regain compliance with Nasdaq's $1.00 minimum bid price requirement by the end of its second compliance period, and trading in its securities on Nasdaq was suspended on August 26, 2026. Following a hearing on September 29, 2026, the Nasdaq Hearings Panel determined on October 23, 2026 to delist the Company's securities. The common stock and warrants are quoted on the over-the-counter market under the symbols "OSRH" and "OSRHW." The Company remains subject to SEC reporting requirements.

VXM01 License Amendment No. 1

On October 15, 2026, the Company, Vaximm AG and BCM Europe AG ("BCME") amended the Global Exclusive License Agreement for VXM01. The amendment allows the Company to convert all or part of its $15.0 million equity put option against BCME into an obligation of BCME, or a purchaser it designates, to buy convertible notes from the Company at par. The notes would be issued in four $3.75 million tranches convertible at fixed prices of approximately $2.00, $3.00, $4.00 and $5.00 per share. If the note purchase does not close as scheduled, the equity put option is reinstated.

Resignation of Chief Scientific Officer

On September 30, 2026, Dr. Constance Hoefer resigned as Chief Scientific Officer, effective immediately.

Director and Employee Stock Awards

On May 6, 2026, the Board of Directors approved fully vested awards of common stock under the Company's 2025 Omnibus Incentive Plan, consisting of 120,000 shares to each of the Company's five independent directors in settlement of previously approved equity compensation commitments, and shares to certain employees, including our Chief Executive Officer, Chief Financial Officer and Chief Operating Officer, in settlement of unpaid salaries. No shares have been issued under these awards, and issuance is conditioned on the effectiveness of a registration statement on Form S-8.

On October 29, 2026, following the suspension of trading of our common stock on Nasdaq, the Board of Directors and its Compensation Committee approved resetting the grant date of all of these awards to October 29, 2026. The number of shares awarded to each director is unchanged, and the contractual lock-up now expires on the later of April 29, 2027 or the date the shares are issued. The number of shares issuable to employees will be recalculated using an applied price of $0.2272 per share, equal to 115% of the 15-trading-day VWAP preceding October 29, 2026.

Senior Secured Convertible Note

The Company's senior secured convertible note held by White Lion Capital, LLC (original principal $1,055,556, maturing January 7, 2027) contains events of default relating to, among other things, failure to cure the Nasdaq bid price deficiency by August 31, 2026, cessation of trading on Nasdaq, and delisting. These permit the holder to convert at an alternative conversion price and to demand 120% of outstanding principal. Since September 30, 2026, the holder has converted $140,000 of principal into an aggregate of 140,000 shares of common stock, leaving approximately $791,438 of principal outstanding.

Results of Operations

Comparison of the Three and Nine Months Ended September 30, 2025 and 2026

The following tables present OSR Health's statements of operations for the three and nine months ended September 30, 2025 and 2026, and percentage change between the two periods:

Net Sales, Cost of Sales, Gross Profit

OSR Health's net sales, cost of sales and gross profit are derived primarily from two subsidiaries: RMC, which distributes medical devices, and Woori IO, which manufactures non-invasive glucose monitoring devices. RMC accounted for approximately 99% of total net sales for the nine months ended September 30, 2026. Woori IO was first consolidated in the first quarter of 2026.

For the three months ended September 30, 2026, net sales decreased by $102,954, or 16%, compared to the same period in 2025. Cost of sales increased by $120,901, or 33%. As a result, gross profit decreased by $223,856, or 86%. Gross profit margin declined from approximately 42% for the third quarter of 2025 to approximately 7% for the third quarter of 2026. The significant decline in gross profit margin was primarily due to RMC's recent sales of certain of its major products at discounted prices in response to changes in market conditions.

For the nine months ended September 30, 2026, net sales decreased by $1,200,017, or 48%, compared to the same period in 2025. Cost of sales decreased by $1,021,579, or 50%, a slightly higher rate than the decrease in net sales. As a result, gross profit decreased by $178,438, or 39%. Gross profit margin increased modestly from approximately 18% for the nine months ended September 30, 2025 to approximately 21% for the nine months ended September 30, 2026.

The decrease in net sales was primarily due to the termination of RMC's distribution arrangements with two of its major suppliers. Gross profit margin increased modestly despite lower net sales. This was because, during 2025, following the termination of contracts with certain existing suppliers, RMC sold its remaining inventory back to those suppliers at approximately cost. This one-time effect temporarily depressed gross profit margin in the prior-year period.

Selling, General and Administrative Expenses

For the three months ended September 30, 2026, OSR Health's selling, general and administrative ("SG&A") expenses decreased by $963,637, or 24%, compared to the same period in 2025.

For the nine months ended September 30, 2026, OSR Health's SG&A expenses decreased by $2,365,124, or 19%, compared to the same period in 2025.

Following the completion of the Business Combination on February 14, 2025, various costs associated with fulfilling public company obligations began to increase. This increase was primarily attributable to higher personnel-related expenses, including salaries, severance payments, employee benefits, bonuses and travel costs. Other SG&A expenses included amortization of intangible assets, research and development expenses, professional service fees such as legal, audit, investor relations and press release costs, as well as non-income taxes, insurance premiums, and employee recruiting and training expenses. The overall increase in these costs was primarily attributable to higher personnel-related expenses and professional service fees.

Nevertheless, SG&A expenses decreased for both the three and nine months ended September 30, 2026 compared to the prior-year periods because the 2025 periods included significant one-time costs associated with the completion of the Business Combination and related financing activities.

Research and Development (R&D) Expenses

OSR Health's research and development (R&D) expenses consist primarily of development costs associated with product candidates in pre-clinical and clinical trial stages, as well as related salary and outsourced service costs. R&D costs are expensed as incurred. Currently, OSR Health has been experiencing difficulties in securing R&D-related funding, and as a result, such expenses have not yet been incurred in significant amounts. However, if financing efforts progress successfully going forward, OSR Health expects to incur and report R&D-related expenses primarily from its subsidiaries actively engaged in research and development activities, at an estimated amount of approximately $2.5 million to $3.0 million per quarter, which could potentially increase to approximately $5.0 million to $6.0 million per quarter in the future.

Operating Loss

For the three months ended September 30, 2026, OSR Health's operating loss decreased by $739,780, or 19%, compared to the same period in 2025. The $963,637 decrease in SG&A expenses was partially offset by the $223,856 decrease in gross profit discussed above. As a result, the percentage decrease in operating loss was smaller than the 24% decrease in SG&A expenses.

For the nine months ended September 30, 2026, operating loss decreased by $2,186,686, or 18%, compared to the same period in 2025. This decrease was generally consistent with the amount and percentage decrease in SG&A expenses discussed in the section titled "Selling, General and Administrative Expenses."

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Other Income (Expense)

OSR Health's other income (expense) consists of interest income, interest expense, foreign exchange-related gains and losses, and other non-operating items.

For the three months ended September 30, 2026, the Company recorded net other income of $689,821, compared to net other expense of $686,361 for the same period in 2025, representing an increase of $1,376,182. This increase was primarily driven by a realized gain on financial liabilities measured at fair value, resulting from the resolution of a liability for which unrealized losses had previously been recognized.

For the nine months ended September 30, 2026, the Company recorded net other income of $2,026,891, a significant improvement compared to net other expense of $9,157,369 for the same period in 2025. This change was primarily attributable to the one-time recognition of approximately $8.5 million in merger-related expenses incurred in connection with the Business Combination completed on February 14, 2025, which was recognized only in the first quarter of 2025.

Loss Before Income Taxes

For the three months ended September 30, 2026, OSR Health's loss before income taxes decreased by $2,115,963, or 47%, compared to the same period in 2025. As previously discussed, this decrease was primarily driven by a realized gain on financial liabilities measured at fair value, resulting from the resolution of a liability for which unrealized losses had previously been recognized, and, to a lesser extent, by the $739,780 decrease in operating loss.

For the nine months ended September 30, 2026, OSR Health's loss before income taxes decreased by $13,370,946, or 63%, compared to the same period in 2025. As previously discussed, this decrease was also primarily attributable to the one-time recognition of approximately $8.5 million in merger-related expenses incurred in connection with the Business Combination completed on February 14, 2025, which was recognized in the first quarter of 2025.

Liquidity and Capital Resources

Since its inception through September 30, 2026, OSR Health has incurred significant operating losses and negative cash flows from operating activities. The Company recorded an operating loss of approximately $18.33 million for the year ended December 31, 2025, compared to an operating loss of approximately $11.69 million for the year ended December 31, 2024. In addition, the Company recorded an operating loss of approximately $9.77 million for the nine months ended September 30, 2026. As of September 30, 2026, OSR Health had an accumulated deficit of approximately $42.56 million.

To date, OSR Health has funded its operations primarily through the issuance of common stock and convertible bonds, bank borrowings and loans from affiliates, and, to a lesser extent, product revenue generated by its subsidiary, RMC. As of September 30, 2026, the Company had cash and cash equivalents of approximately $1.37 million, consisting primarily of bank deposits.

The Company incurred significant expenses in connection with the Business Combination and the filing of its Form S-4 registration statement. Together with other general operating expenses, these costs reduced the funds available for operations and created an urgent need for additional capital. In response, in February 2025, OSR Health entered into an equity line of credit ("ELOC") agreement with an investor, providing for up to $80 million in potential capital. As of September 30, 2026, the Company had issued a total of 4,875,440 shares under the ELOC, raising gross proceeds of $3.38 million. In addition, the Company has executed or is exploring various financing initiatives through the issuance of warrants and notes.

On August 26, 2026, trading in the Company's common stock and warrants on The Nasdaq Stock Market LLC ("Nasdaq") was suspended due to the Company's non-compliance with the minimum bid price requirement under Nasdaq Listing Rule 5550(a)(2). On October 23, 2026, the Nasdaq Hearings Panel determined to delist the Company's securities from Nasdaq. The Company's common stock and warrants are currently quoted on the OTC Pink Open Market under the symbols "OSRH" and "OSRHW," respectively. Accordingly, in order to raise additional capital, the Company is considering amending the ELOC agreement to permit the Company to continue to access the ELOC while its securities are quoted on the OTC market. The Company is also considering moving the quotation of its securities from the OTC Pink Open Market to a higher tier of the OTC Markets, such as the OTCQB Venture Market.

Contractual Obligations

We do not have any long-term debt, capital lease obligations, operating lease obligations, purchase obligations or long-term liabilities, other than an agreement to pay an affiliate of Bellevue Capital Management, LLC ("BCM") a monthly fee of $7,500, for office space, utilities and secretarial and administrative support. We began incurring these fees on March 1, 2023, and they continue following the consummation of our business combination in February 2025.

Chardan Capital Markets, LLC ("Chardan") is entitled to a deferred underwriting commission of $2,070,000, payable as of September 30, 2025.

The holders of the founder shares, equity participation shares, placement units, and units that may be issued upon conversion of working capital loans (and in each case holders of their component securities, as applicable) are entitled to registration rights pursuant to the registration rights agreement. These holders are entitled to make up to two demands, excluding short form registration demands, that we register such securities for sale under the Securities Act. In addition, these holders will have "piggyback" registration rights to include their securities in other registration statements filed by us. We will bear the expenses incurred in connection with the filing of any such registration statements. Chardan may not exercise its demand and "piggyback" registration rights after five and seven years, respectively, after the date of our prospectus issued in connection with our IPO and may not exercise its demand rights on more than one occasion.

Critical Accounting Policies and Estimates

The preparation of financial statements and related disclosures in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and income and expenses during the periods reported. Actual results could materially differ from those estimates. We have not identified any critical accounting estimates.