Quarterly Report for Quarter Ending September 30, 2025 (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 Holdings, 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

Nasdaq Minimum Bid Price Deficiency Notice

On September 5, 2025, the Company received a notification from The Nasdaq Stock Market LLC ("Nasdaq") stating that the Company was not in compliance with Nasdaq Listing Rule 5550(a)(2) after the closing bid price fell below USD 1.00 per share for 30 consecutive business days. The Company has been provided a grace period until March 4, 2026 to regain compliance by maintaining a closing bid price of at least USD 1.00 for ten consecutive business days.

Management is actively monitoring the Company's share price performance and evaluating various available options to regain compliance within the applicable period, which may include corporate or capital structure adjustments, enhanced investor communications, and other strategic measures as appropriate. The Company intends to take all necessary actions to maintain its continued listing on the Nasdaq Capital Market.

Annual General Meeting and Board Changes

As previously reported in the Company's Definitive Proxy Statement on Schedule 14A filed with the SEC on August 29, 2025 and Form 8-K filed on September 18, 2025, the Company held its annual meeting of stockholders on September 17, 2025 (the "Annual Meeting"). As of the record date of August 15, 2025, there were 21,585,360 shares of common stock outstanding and entitled to vote. A total of 13,325,691 shares (approximately 61.7% of the outstanding shares) were present in person or by proxy, constituting a quorum.

At the Annual Meeting, stockholders approved all proposals described in the Definitive Proxy Statement, including the following: (i) Director Proposal, (ii) Executive Compensation Proposal, (iii) Equity Incentive Plan Proposal, and (iv) Proposal to Exceed 20% Common Share Issuance Pursuant to Nasdaq Listing Rule 5635(d). No other matters were submitted for stockholder vote, and each of the four proposals was approved by the stockholders. As a result, the Board underwent the following changes: Reto Fierz was appointed as an Independent Director, and Jin Whan Park and Phil Geon Lee were removed.

The Board committees have been reconstituted as follows: Audit Committee - Reto Fierz and Hyuk Joo Jee, Compensation Committee - Seng Chin Mah, Alcide Barberis and Hyuk Joo Jee, Corporate Governance and Nominating Committee - Seng Chin Mah and Alcide Barberis and Joong Myung Cho. These changes reflect the Company's ongoing commitment to strengthening corporate governance and enhancing strategic oversight.

Definitive Agreement to Acquire Woori IO Co., Ltd.

On October 14, 2025, the Company announced that its wholly owned Korean subsidiary, OSR Holdings Co., Ltd. ("OSRK"), entered into a definitive share exchange agreement with Woori IO Co., Ltd. ("WORIO"), a Korean medical-device company specializing in noninvasive glucose monitoring and biosensing technologies. Under the agreement, WORIO will become a wholly owned subsidiary of OSRK. WORIO shareholders will receive newly issued OSRK shares worth KRW15bn (~$10.5m) in exchange for WORIO shares. If, within 3 years of the share exchange, OSRH reaches at least $10 per share, OSRK shares may be converted into OSRH common stock at a ratio of 12.96:1 or approximately 1.09 million new shares. Following the acquisition, WORIO will leverage OSRH's governance, global partnerships and clinical development resources to accelerate product development, enhance supply readiness, and boost commercialization speed and efficiency

Results of Operations

Comparison of the Three and Nine Months Ended September 30, 2024 and 2025

The following tables present OSR Holdings' statements of operations for the three and nine months ended September 30, 2024 and 2025, and percentage change between the two periods:

		Three Months Ended September 30,
		2024				2025				Change $				Change %
Net Sales:			822,996				627,747				-195,249				-24	%
Cost of Sales			643,903				366,014				-277,889				-43	%
Gross Profit			179,093				261,734				82,641				46	%
Expenses:
Selling, general and administrative expenses			3,745,635				4,065,199				319,564				9	%
Operating loss			(3,566,542	)			(3,803,465	)			-236,923				7	%
Other income (expense)			70,448				(686,361	)			-756,809				-1,074	%
Profit (loss) before income taxes			(3,496,094	)			(4,489,826	)			-993,732				28	%

		Nine Months Ended September 30,
		2024				2025				Change $				Change %
Net Sales:			2,615,051				2,524,536				-90,515				-3	%
Cost of Sales			1,963,835				2,061,335				97,500				5	%
Gross Profit			651,215				463,201				-188,014				-29	%
Expenses:
Selling, general and administrative expenses			10,730,393				12,413,670				1,683,277				16	%
Operating loss			(10,079,178	)			(11,950,469	)			-1,871,291				19	%
Other income (expense)			(23,392	)			(9,157,369	)			-9,133,977				39,047	%
Profit (loss) before income taxes			(10,102,570	)			(21,107,838	)			-11,005,268				109	%

Net Sales, Cost of Sales, Gross Profit

OSR Holdings' net sales, cost of sales, and gross profit are primarily derived from RMC, its subsidiary engaged in the distribution of medical devices.

For the three months ended September 30, 2025, RMC's net sales decreased by $195,249, or 24%, compared to the same period in the prior year. However, cost of sales decreased by $277,889, or 43%, resulting in an increase in gross profit of $82,641, or 46%.

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, the change began to affect revenue recognition starting in July. Management expects this consignment-based model to enhance gross-margin stability in future periods.

For the nine months ended September 30, 2025, RMC's net sales decreased by $90,515, or 3%, while cost of sales increased by $97,500, or 5%, compared to the same period in the prior year. As a result, gross profit decreased by $188,014, or 29%. The decline in gross profit for the nine-month period was primarily due to the impact of the second quarter, during which RMC sold previously held inventory back to the supplier at cost as part of the transition to the new consignment-based model. This transaction temporarily depressed gross margin in the second quarter, offsetting the margin improvement realized in the third quarter. The margin decline in the second quarter was a one-time event.

Selling, General and Administrative Expenses

For the three months ended September 30, 2025, OSR Holdings' selling, general and administrative (SG&A) expenses increased by $319,564, or 9%, compared to the same period in the prior year.

For the nine months ended September 30, 2025, OSR Holdings' selling, general and administrative (SG&A) expenses increased by $1,683,277, or 16%, 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 rise. The 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 most significant drivers of the increase were personnel-related costs and professional service fees.

Research and Development (R&D) Expenses

OSR Holding's R&D expenses consisted primarily of development costs associated with our product candidates in pre-clinical and clinical trials, and related costs of salaries and contractors. R&D costs are expensed as incurred. OSR Holdings expects to incur and report R&D related expenses mainly from its subsidiaries actively engaged in R&D at an estimated amount of $2.5 million to $3.0 million per quarter beginning in 2026, which could potentially increase to $5.0 million to $6.0 million per quarter.

Operating Loss

For the three months ended September 30, 2025, OSR Holdings' operating loss increased by $236,923, or 7%, compared to the same period in the prior year.

On a year-to-date basis, operating loss increased by $1,871,291, or 19%, for the nine months ended September 30, 2025.

As discussed in the section titled "Selling, General and Administrative Expenses," this increase was primarily due to the rise in SG&A expenses beginning in the second quarter of 2025 following the completion of the Business Combination on February 14, 2025.

Other Income (Expense)

OSR Holdings' 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, 2025, the Company recorded net other expenses of $686,361, representing an increase of $756,809 compared to the same period in the prior year. The primary drivers of this increase were the loss on change in fair value of financial liabilities and higher interest expense.

For the nine months ended September 30, 2025, net other expenses increased significantly to $9,157,369 from $23,392 in the prior-year period, an increase of $9,133,977. This substantial increase was primarily due 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.

Loss Before Income Taxes

For the three months ended September 30, 2025, OSR Holdings' loss before income taxes increased by $993,732, or 28%, compared to the same period in the prior year. As previously discussed, this increase was primarily attributable to higher expenses incurred following the completion of the Business Combination on February 14, 2025.

For the nine months ended September 30, 2025, loss before income taxes increased by $11,005,268, or 109%, compared to the same period in the prior year. This increase was primarily due 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.

Liquidity and Capital Resources

Since its inception through September 30, 2025, OSR Holdings has incurred significant operating losses and negative cash flows from operating activities. The Company recorded an operating loss of approximately $10.08 million for the nine months ended September 30, 2024, and approximately $11.95 million for the same period in 2025. As of September 30, 2025, OSR Holdings had an accumulated deficit of approximately $32.33 million.

To date, OSR Holdings 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 September 30, 2025, the Company had cash and cash equivalents of approximately $2.18 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 expenses, reduced the funds available for operations and created an urgent need for additional capital. In response, in February 2025, OSR Holdings 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, 2025, the Company had issued a total of 767,500 shares under the ELOC, raising gross proceeds of $741,937. In addition, the Company has executed or is exploring various financing initiatives through the issuance of warrants and notes.

OSR Holdings expects to continue utilizing the ELOC and other available financing instruments to secure additional capital for its ongoing operations.

Off-Balance Sheet Arrangements

We have no obligations, assets or liabilities which would be considered off-balance sheet arrangements as of September 30, 2025. We do not participate in transactions that create relationships with unconsolidated entities or financial partnerships, often referred to as variable interest entities, which would have been established for the purpose of facilitating off-balance sheet arrangements. We have not entered into any off-balance sheet financing arrangements, established any special purpose entities, guaranteed any debt or commitments of other entities, or purchased any non-financial assets.

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.