OSR Health, Inc.: Form 10-Q for the period ended Jun 30, 2026

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”) under which the Company intends to distribute one non-transferable contingent value right (“CVR”) for each share of the Company’s common stock held of record as of the record date, which is August 14, 2026. To participate, holders must enroll in the Loyalty Program and continuously hold their shares; enrolled holders would be eligible to receive additional shares of common stock, at no additional cost, if specified closing-price thresholds are met at four measurement dates over the twelve months following the record date, as set forth in the table below. The tiers are cumulative, and a holder that enrolls and continuously holds through all four measurement dates could receive up to a maximum of five additional shares for each share held on the record date if all thresholds are met.

The CVRs are non-transferable and have no standalone value, and the distribution of CVRs and any delivery of shares remain subject to an effective registration statement or an available exemption, applicable Nasdaq listing requirements, and other conditions. A more detailed description of the Loyalty Program is available on the Company’s website at www.osr-health.com/loyaltyprogram (http://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.

On July 31, 2026, the Company announced that Nasdaq had informed the Company, in a verbal communication, that the Loyalty Program would not result in any mechanical adjustment to the price of the Company’s common stock, either upon the distribution of the CVRs or upon the delivery of additional shares to enrolled holders. This communication relates solely to the exchange’s treatment of the CVR distribution and related share deliveries for price-adjustment purposes; it does not constitute an endorsement of the Loyalty Program and does not address the separate securities-law requirements applicable to the distribution of the CVRs or the delivery of shares, which remain subject to the Company’s ongoing regulatory process.

Results of Operations

Comparison of the Three and Six Months Ended June 30, 2025 and 2026

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

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Net Sales, Cost of Sales, Gross Profit

OSR Health’s net sales, cost of sales, and gross profit are primarily derived from RMC, its subsidiary engaged in the distribution of medical devices, and Woori IO, a manufacturer of non-invasive glucose monitoring devices. Based on cumulative revenue for the first half of 2026, approximately 98% of total revenue was attributable to RMC. In addition, Woori IO was first consolidated in the first quarter of 2026.

For the three months ended June 30, 2026, OSR Health’s net sales decreased by $819,848, or 72%, compared to the same period in the prior year. Cost of sales decreased at a higher rate of 79%, or $873,670, resulting in an increase in gross profit of $53,823 for the period. Overall, gross profit margin increased from approximately 3% in the second quarter of 2025 to 27% in the second quarter of 2026.

This improvement in profitability was driven by a change in RMC’s contractual arrangement with one of its major suppliers. Specifically, RMC transitioned from a traditional purchase-and-resale model to a consignment-based arrangement under which only commission revenue is recognized. Although the new contract was executed in April 2025, the change began to affect revenue recognition starting in July 2025. During the second quarter of 2025, RMC sold previously held inventory back to the supplier at cost, which resulted in relatively high net sales but temporarily and significantly depressed profitability for that period. Excluding this one-time effect, the second quarter of 2026 reflects lower net sales but a more normalized level of profitability.

For the six months ended June 30, 2026, OSR Health’s net sales decreased by $1,097,062, or 58%, compared to the same period in the prior year. Cost of sales decreased at a higher rate of 67%, or $1,142,480, resulting in an increase in gross profit of $45,418. Overall, gross profit margin increased from approximately 11% in the first half of 2025 to 31% in the first half of 2026. The overall drivers of this change are the same as those described above for the second quarter (three months). However, because the one-time transaction occurred in the second quarter of 2025, the year-over-year variance for the six-month period appears relatively moderate.

Selling, General and Administrative Expenses

For the three months ended June 30, 2026, OSR Health’s selling, general and administrative (SG&A) expenses decreased by $2,142,441, or 41%, compared to the same period in the prior year.

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. Additional SG&A expenses included amortization of intangible assets, research and development expenses, and 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, expenses appear to have decreased compared to the prior-year period because the second quarter of 2025 included significant one-time costs associated with the completion of the Business Combination and related financing activities.

For the six months ended June 30, 2026, OSR Health’s selling, general and administrative (SG&A) expenses decreased by $1,401,487, or 17%, compared to the same period in the prior year. The decrease for the six-month period was more moderate than the year-over-year decline in the second quarter (three months) alone, as the one-time cost increase in the second quarter of 2025 was particularly large.

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 June 30, 2026, OSR Health’s operating loss decreased by $2,196,262, or 42%, compared to the same period in the prior year

For the six months ended June 30, 2026, operating loss decreased by $1,446,906, or 18%, compared to the same period in the prior year.

This increase was at a level generally consistent with the amount and percentage increase in SG&A expenses discussed in the section titled “Selling, General and Administrative Expenses.”

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 June 30, 2026, the Company recorded net other income of $1,589,374, an increase of $1,585,395, or 39,844%, compared to the same period in the prior year. This was driven by a realized gain on financial liabilities measured at fair value of $1,798,064, resulting from the resolution of a liability for which unrealized losses had previously been recognized.

For the six months ended June 30, 2026, the Company recorded net other income of $1,337,069, a significant improvement compared to net other expense of $8,471,009 recorded in the same period in the prior year. 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 during the first quarter of 2025.

Loss Before Income Taxes

For the three months ended June 30, 2026, OSR Health’s loss before income taxes decreased by $3,781,657, or 72%, compared to the same period in the prior year. As previously discussed, this was driven by a realized gain on financial liabilities measured at fair value of $1,798,064, resulting from the resolution of a liability for which unrealized losses had previously been recognized.

For the six months ended June 30, 2026, OSR Health’s loss before income taxes decreased by $11,254,983, or 68%, compared to the same period in the prior year. This decrease was also primarily attributable, as previously discussed, 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 during the first quarter of 2025.

Liquidity and Capital Resources

Since its inception through June 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 same period in 2024. In addition, the Company recorded an operating loss of approximately $6.70 million during the first half of 2026. As of June 30, 2026, OSR Health had an accumulated deficit of approximately $40.95 million.

To date, OSR Health has funded its operations primarily through the issuance of common stock and convertible bonds, bank borrowings, loans from affiliates, and, to a lesser extent, product revenue generated by its subsidiary, RMC. As of June 30, 2026, the Company had cash and cash equivalents of approximately $1.49 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, which, together with other general operating expenses, 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 June 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.

OSR Health expects to continue utilizing the ELOC until the end of the Commitment Period (December 31, 2026) as set forth in the ELOC Agreement with White Lion which was most recently amended in April 2026 to provide additional flexibility in accessing the equity line. However, the Company intends to exercise a higher level of prudence and control in the execution of the ELOC in order to minimize the dilution and price impact it may have on the market for the Company’s equity securities. In addition, the Company plans to implement new equity financing facilities that are generally considered less dilutive and more controllable than ELOC arrangements, such as an At-the-Market (“ATM”) offering.

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. In addition, we incurred deferred legal fees of approximately $1.25 million that were payable upon consummation of our initial business combination.

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.

We are a smaller reporting company as defined in Rule 12b-2 of the Exchange Act and are not required to provide the information otherwise required under this item.

Disclosure controls and procedures are controls and other procedures designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure.

As required by Rules 13a-15 and 15d-15 under the Exchange Act, our management, with the participation of our Chief Executive Officer and Chief Financial Officer, carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of June 30, 2026.

As previously disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2025, management concluded that material weaknesses in internal control over financial reporting existed as of December 31, 2025, including deficiencies relating to (i) the completeness and accuracy of liabilities and (ii) the sufficiency of personnel within the accounting and financial reporting function. As a result of these material weaknesses, management concluded that the Company’s disclosure controls and procedures were not effective as of December 31, 2025.

As of June 30, 2026, these material weaknesses have not been fully remediated. Accordingly, management concluded that the Company’s disclosure controls and procedures were not effective as of June 30, 2026.

Management continues to implement remediation measures to address the identified material weaknesses. These measures include, among other things, enhancing review and approval procedures over financial reporting, strengthening processes related to the identification and recording of liabilities, and augmenting accounting and financial reporting personnel.

Changes in Internal Control over Financial Reporting

Except for the ongoing remediation efforts described above, there have been no changes in the Company’s internal control over financial reporting during the quarter ended June 30, 2026 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

However, a controls system, no matter how well designed and operated, cannot provide absolute assurance that the objectives of the control system will be met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud or error, if any, within a company have been detected.

In addition to the risk factors set forth below and the other information set forth in this report, you should carefully consider the factors discussed under Part I, Item 1A, “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2025 filed with the SEC on March 31, 2026 (or “2025 Annual Report”), and in the other reports we file with the SEC before making a decision to invest in our securities. These factors could materially adversely affect our business, financial condition, liquidity, results of operations and capital position, and could cause our actual results to differ materially from our historical results or the results contemplated by the forward-looking statements contained in this report or we could face liquidation. In that event, the trading price of our securities could decline, and you could lose all or part of your investment. The risks and uncertainties described in our 2025 Annual Report and below are not the only ones we face. Additional risks and uncertainties that we are unaware of, or that we currently believe are not material, may also become important factors that adversely affect our business, financial condition and operating results. There have been no material changes to the risk factors described in Part I, Item 1A, “Risk Factors,” included in our 2025 Annual Report.