Quarterly Report for Quarter Ending September 30, 2025 (Form 10-Q)

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

General Information

This information should be read in conjunction with the interim unaudited financial statements and the notes thereto included in this Report, and the audited financial statements and notes thereto and "Part II. Other Information - Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations," contained in our Annual Report on Form 10-K for the year ended December 31, 2024, filed with the SEC on March 26, 2025 (the "Annual Report").

Certain capitalized terms used below and otherwise defined below, have the meanings given to such terms in the footnotes to our unaudited consolidated financial statements included above under "Part I - Financial Information - Item 1. Financial Statements."

Unless the context requires otherwise, references to the "Company," "we," "us," and "our" refer specifically to Scienture Holdings, Inc., formerly TRxADE HEALTH, INC., and its consolidated subsidiaries. References to "Q1", "Q2", "Q3", and "Q4" refer to the first, second, third, and fourth quarter, respectively, of the applicable year. Unless otherwise stated or the context otherwise requires, comparisons from one period to another are to the same period of the prior fiscal year.

In addition, unless the context otherwise requires and for the purposes of this Report only:

	●	"Exchange Act" refers to the Securities Exchange Act of 1934, as amended; and
	●	"Securities Act" refers to the Securities Act of 1933, as amended.

Summary of The Information Contained in Management's Discussion and Analysis of Financial Condition and Results of Operations

Our Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) is provided in addition to the accompanying consolidated financial statements and notes to assist readers in understanding our results of operations, financial condition, and cash flows. MD&A is organized as follows:

	●	Company Overview. Discussion of our business and overall analysis of financial and other highlights affecting us, to provide context for the remainder of MD&A.
	●	Liquidity and Capital Resources. An analysis of changes in our consolidated balance sheets and cash flows and discussion of our financial condition.
	●	Results of Operations. An analysis of our financial results comparing the three and nine months ended September 30, 2025, and 2024.
	●	Critical Accounting Policies. Accounting estimates that we believe are important to understanding the assumptions and judgments incorporated in our reported financial results and forecasts.

Company Overview

On July 25, 2024, we acquired a wholly-owned subsidiary, Scienture, which is a specialty pharmaceutical company focused on developing and commercializing products for the treatment of central nervous system and cardiovascular diseases. Scienture LLC is developing a broad range of novel product candidates including new potential treatments for hypertension, migraine, pain and thrombosis and other related disorders. Scienture's assets in development are across therapeutics areas and indications and cater to different market segments. Scienture's mission is to identify, develop and bring to market innovative technology-based products to address unmet medical needs. Its targeted portfolio consists of short term and long-term opportunities with efficient development, regulatory, and go to market strategies.

After our acquisition of Scienture, we existed as a holding company owning all equity interests of Softell Inc. (f/k/a Trxade Inc.) ("Softell"), Integra Pharma Solutions, LLC d.b.a. Trxade Prime ("IPS"), Bonum Health, LLC, Bonum Health Inc., and Scienture.

On October 4, 2024, the Company and Softell entered into IPS Assignment Agreement, pursuant to which the Company transferred, and Softell accepted, 100% of the membership interests of IPS. As a result, IPS became a wholly-owned subsidiary of Softell. During the year ended December 31, 2023 and a portion of the quarter ended March 31, 2024, Softell, operated a web-based market platform that enabled commerce among healthcare buyers and sellers of pharmaceuticals, accessories and services. Softell's current primary operations are conducted through IPS. IPS is a licensed pharmaceutical wholesaler and sells brand, generic and non-drug products to customers. IPS' customers include all healthcare markets including government organizations, hospitals, clinics and independent pharmacies nationwide.

On September 20, 2024, the Company fil changed its legal name from "TRxADE HEALTH, Inc." to "Scienture Holdings, Inc."

Bonum Health, LLC was formed to hold certain telehealth assets acquired in October 2019. The "Bonum Health Hub" was launched in February 2020; however, the Company does not anticipate installations moving forward. On April 30, 2025, the Company completed the sale of Bonum Health, Inc. and Bonum Health, LLC.

Disposition of Legacy Subsidiaries

On April 8, 2025, the Company entered into a Membership Interest Purchase Agreement (the "IPS MIPA") with Tollo Health, LLC ("Tollo"), pursuant to which Tollo agreed to purchase and the Company agreed to sell all of the Company's membership interests in IPS.

On April 8, 2025, the Company also entered into a Stock Purchase Agreement (the "Bonum and Softell SPA" and together with the IPS MIPA, the "Agreements") with Tollo, pursuant to which Tollo agreed to purchase and the Company agreed to sell all issued and outstanding shares of common stock of Bonum Health, Inc. and Softell. Suren Ajjarapu, the Company's former Chief Executive Officer, and Prashant Patel, the Company's former President and Chief Operating Officer, each had a beneficial interest in Tollo at the time the Company entered into the each of the Agreements.

In connection with each of the Agreements, the Company agreed to retain certain excluded liabilities of IPS, Softell and Bonum Health, Inc. including all liabilities: (i) related to, in connection with or arising out of any claims, charges, complaints, actions, suits, settlements, hearings, investigations, proceedings, or governmental or regulatory inquiries with respect to IPS, Softell or Bonum Health, Inc., respectively, prior to the closing under the applicable Agreement; (ii) related to, in connection with or arising out of any breach by the Company of the applicable Agreement or any other agreements and documents required to be delivered by the Company; (iii) not disclosed by the Company in accordance with each Agreement; (iv) related to any actions threatened or initiated by a governmental entity against IPS, Softell, or Bonum Health, Inc., respectively; and (v) related to tax returns or tax matters of the Company, IPS, Softell, or Bonum Health, Inc., respectively, for any periods prior to closing under the applicable Agreement.

The Company and Tollo consummated the closing of each of the Agreements on April 30, 2025. As consideration for acquiring IPS, Softell, and Bonum Health, Inc., Tollo agreed to pay the Company $5 million, with that consideration delivered in the form of a promissory note bearing interest at the prime rate. The promissory note matures on June 30, 2030. However, Tollo is required to pay 20% of the proceeds of a future equity financing toward repayment of the principal and accrued but unpaid interest owed under the promissory note. On June 24, 2025, the promissory note was assigned to Integral Health, Inc., which (at the time of the assignment) was owned by Suren Ajjarapu, the Company's former Chief Executive Officer, and Prashant Patel, the Company's former President and Chief Operating Officer.

The divestitures are part of a broader strategic realignment at the Company designed to sharpen operational focus and unlock long-term value. It is aligned with the Company's commitment to streamline its core operations, optimize its portfolio, and accelerate growth in the Branded and Specialty Pharma markets. The Company intends to use the proceeds obtained from the divestment to facilitate the high-growth commercial and strategic product development activities at its Scienture subsidiary.

The Company believes that the key benefits of the divestitures include:

	●	Increased Operational Efficiency: Streamlining the Company's structure aimed at strengthening its balance sheet, providing for leaner operations and a more agile decision-making framework.
	●	Realize Synergies: Consolidating overlapping functions and eliminating redundancies intended to cause annualized cost savings.
	●	Dedicated Focus: Affording the full focus and deployment of resources to the commercial products and the high value product pipeline in development at its Scienture subsidiary.

Existing Business

Subsequent to the disposition of IPS, Softell, and Bonum Health, Inc. we now exist as a holding company for existing and planned pharmaceutical operating companies focused on providing enhanced value to patients, physicians and caregivers through developing, bringing to market, and distributing novel specialty pharmaceutical products to satisfy unmet market needs. We are in the process of winding down our Bonum Health, LLC subsidiary.

Operating since 2019, Scienture, located in Commack, New York, is a specialty pharmaceutical company focused providing enhanced value to patients, physicians and caregivers by offering novel specialty products to satisfy unmet market needs. In this regard, Scienture is in the process of developing and commercializing products for the treatment of central nervous system ("CNS") and cardiovascular ("CVS") diseases as well as a broad range of novel product candidates including new potential treatments for hypertension, migraine, pain and thrombosis and other related disorders.

Scienture's vision is to be a leader in the industry by developing and commercializing new medicines for the treatment of CNS and CVS diseases and across other therapeutic areas. Key elements of Scienture's strategy to achieve this vision include:

	●	Advance product candidates through clinical studies and toward commercialization. Scienture is in various stages of clinical development for the product candidates in its pipeline, and it intends to move these programs efficiently toward being commercially available to patients, subject to approval by the U.S. Food and Drug Administration (the "FDA").
	●	Drive growth and profitability. Using dedicated sales and marketing resources in the U.S., which Scienture is in the process of building, Scienture will seek to begin to generate revenues and then drive the revenue growth of its product candidates approved for marketing by the FDA.
	●	Continue to grow pipeline. Scienture will continue to evaluate and seek to develop additional product candidates that it believes have significant commercial potential through Scienture's internal research and development efforts.
	●	Target strategic business development opportunities. Scienture is exploring a broad range of strategic opportunities. This may include in-licensing products and entering into co-promotion and co-development partnerships for Scienture's product candidates, although no agreements have been reached.

Scienture currently has four primary product candidates in its development pipeline, summarized below, and is engaged in a variety of research and development efforts to develop novel product candidates for the treatment of various disease conditions. To date, Scienture has generated limited revenue from product sales and will not generate meaningful revenues until it fully commercializes its approved product candidates and successfully obtains regulatory approval for, and commercializes, its other product candidates. The progress of Scienture products its development pipeline to date is represented by the green bars shown below.

Scienture has devoted and will continue to devote significant resources to research and development activities, and expects to incur significant expenses as Scienture continues advancing its product candidates towards FDA approval and expanding product indications for approved products and its intellectual property portfolio. Scienture's expectations regarding its research and development programs are subject to risks, including the risk that Scienture's financial condition and results of operations may be materially and adversely affected by delays and failures in the completion of clinical development of its product candidates, which could increase its costs or delay or limit our ability to generate revenues.

Scienture currently depends on third-party commercial manufacturing organizations ("CMOs") for its manufacturing operations, including the production of raw materials, finished dosage form product, and product packaging for both its planned product commercialization and for use in its preclinical and clinical research. Scienture does not own or operate manufacturing facilities for the production of any of its product candidates nor does Scienture have plans to develop its own manufacturing operations in the foreseeable future to support clinical trials or commercial production. Scienture currently employs internal resources to manage its manufacturing contractors.

Scienture is in discussion with CMOs headquartered in North America, Europe and Asia for its pipeline product candidates. These CMOs offer a comprehensive range of commercial contract manufacturing and packaging services.

If Scienture fails to produce its products and product candidates in the volumes that it requires on a timely basis, or fails to comply with stringent regulations applicable to pharmaceutical drug manufacturers, Scienture may face delays in the development and commercialization of its products and product candidates or be required to withdraw its products from the market for risks associated with manufacturing and supply of its products and product candidates.

SCN-102 (ARBLI^TM - Losartan Oral Suspension)

SCN-102, with the brand name Arbli^TM, is an oral liquid formulation of losartan potassium for (i) treatment of hypertension, to lower blood pressure in adults and children greater than 6 years old, (ii) reduction of the risk of stroke in patients with hypertension and left ventricular hypertrophy, and (iii) treatment of diabetic nephropathy with an elevated serum creatinine and proteinuria in patients with type 2 diabetes and a history of hypertension. SCN-102 was approved by the FDA in March 2025, making SCN-102 the first and only FDA-approved ready-to-use oral liquid losartan in the U.S. market.

Losartan is classified as an angiotensin receptor blocker (ARB) for treating hypertension and is one of the highest prescribed molecules for this indication. Current products in the market containing losartan are available only as oral solids, which can be further compounded to a liquid formulation. Arbli^TM is the first liquid formulation of losartan on the U.S. market that does not require compounding and has reduced dosing volume and long-term shelf life at room temperature storage.

SCN-102 has two formulation composition and method of use patents listed in the FDA's Approved Drug Products with Therapeutic Equivalence Evaluations, commonly referred to as the "orange book": (i) Patent #: 11,890,273, Issue Date: February 6, 2024, titled "LOSARTAN LIQUID FORMULATIONS AND METHODS OF USE", Expiration Date: October 7, 2041 and (ii) Patent # 12,156,869; Issue Date: December 3, 2024, titled "LOSARTAN LIQUID FORMULATIONS AND METHODS OF USE".

SCN-104 (Multi-dose Dihydroergotamine Mesylate ("DHE") injection pen)

The SCN-104 injection pen is a disposable, multiple fixed dose, single entity combination product comprised of a small molecule drug that is administered using a customized injection pen. SCN-104 is a drug product containing DHE as the active ingredient. The mechanism of action of SCN-104 is mediated through DHE and is the same as that of DHE. DHE is available in the market as a single dose nasal spray, which has a high degree of variability in clinical outcomes. While DHE is also available in the market as single dose ampoules for injection, we believe that the process of dose withdrawal from the ampoule followed by self-injection at the time of intense need is cumbersome and difficult for the patient. We believe that the SCN-104 multi-dose self-injection pen is easy to use, provides enhanced patient convenience, and provides for consistent and accurate delivery of doses. The SCN-104 injection pen is being developed via the 505(b)(2) regulatory pathway for the acute treatment of migraine headaches with or without aura and the acute treatment of cluster headache episodes.

As shown in third party studies of DHE, SCN-104's mechanism of action for its antimigraine effect is due to its potential action as an agonist at the serotonin 5-HT1D receptors. SCN-104 is intended for subcutaneous administration. SCN-104 is also intended for acute use and is not intended for chronic administration. Scienture has conducted two preclinical studies of SCN-104 and the SCN-104 injection pen: (i) a 30-day repeated dose toxicity study of dimethyl sulfoxide and caffeine following thrice daily, 3 times per week subcutaneous administration in Sprague-Dawley rats and (ii) a 30-day repeated dose toxicity study of dimethyl sulfoxide and caffeine following thrice daily, 3 times per week subcutaneous administration in Göttingen minipigs. Both studies support a conclusion that SCN-104 is considered to have no toxicological significance across hematology, coagulation parameters, clinical chemistry and urinalysis.

Scienture has had discussions with the FDA regarding its development program for SCN-104, with the FDA indicating that the reference product selected for a comparative regulatory study and proposed plan for manufacturing New Drug Application registration batches are acceptable. The FDA also provided Scienture with feedback on nonclinical safety studies and stability testing. Scienture is working to scale the formulation to enable future commercial scale production and the pen has been optimized for commercial use. Currently, Scienture is focused on planning bioequivalence studies and increasing manufacturing activities for the SCN-104 injection pen. Scienture plans to initiate a Phase 1 single dose study in healthy adults in 2026, following submission of an Investigational New Drug application (an "IND"), if the IND is cleared by the FDA.

SCN-104 has a formulation composition and method of use application pending in the U.S. (Appl. No. 17/757,924; Filing Date: June 23, 2022; Expiration Date: June 15, 2035).

SCN-106 (Potential Biosimilar)

Scienture is developing a potential biosimilar, SCN-106, based on Cathflo Activase, a reference product that is a thrombolytic agent that binds to fibrin in clots and converts entrapped plasminogen to plasmin. SCN-106 is a sterile, purified glycoprotein that is synthesized using the complementary DNA for natural human tPA obtained from a Chinese hamster ovary cell-line.

Scienture is working with Anthem Biosciences Pvt, Ltd. to develop a biosimilar product that utilizes the same mechanism(s) of action for the proposed condition of use, and has the same route of administration, dosage form, and strength as the reference product. The development program is focused on establishing the analytical similarity of SCN-106 to the reference product. Multiple clones of CHO cells have been produced to synthesize lots of SCN-106 which were screened for similarity to the reference product for several key biochemical quality attributes as well as overall protein yield and finalization of a lead clone.

Scienture completed a Biosimilar Initial Advisory meeting with the FDA in June 2023 to discuss the CMC, non-clinical, and clinical studies required for regulatory approval. As a result of this meeting, Scienture learned that its analytical strategy for initiating analytical similarity studies between SCN-106 and a proposed biosimilar product is acceptable. Scienture also learned that SCN-106 is suitable for further development and received guidance from the FDA on a comparable clinical study needed to demonstrate biosimilarity of SCN-106 and the reference product. In this regard, Scienture was informed that no additional safety, PK, toxicology or dose range finding studies will be required due to the method of use (very limited exposure) and the availability of an extensive amount of data on the original brand product. The only clinical requirement is a comparative phase 3 clinical study in the sensitive population to demonstrate that there are no clinically meaningful differences between SCN-106 and the currently marketed product.

SCN-106 is a potential biosimilar and considered by the Company to be part of its product development portfolio, however the Company is not pursuing patent protection for this product.

SCN-107 (Bupivacaine Long-Acting Injection)

SCN-107 is a long-acting injection suspension formulation of a non-opioid analgesic that is indicated for postsurgical local and regional analgesia. Scienture's long-acting formulation, SCN-107, is a novel microsphere-based formulation of bupivacaine that comprises the drug in polymer-based microspheres and is intended to provide pain management over a period of 5-7 days. The product candidate is designed to potentially provide longer term post-surgical pain relief compared to the currently available products in the market.

Based on initial discussions with FDA regarding this program, Scienture believes this product candidate would require at least one Phase 3 clinical trial to support submission of a marketing application. Scienture anticipates submitting an IND and, if cleared by the FDA, initiating a Phase 1 single dose study in healthy adults in 2025 to conduct an initial assessment of safety and tolerability of SCN-107.

Scienture has entered into Feasibility Study and Animal Trial Material Manufacturing Agreement with Innocore Technologies, B.V. ("Innocore"), as amended on December 2, 2022 (the "Innocore License"), for certain intellectual property rights associated with SCN-107. Under the Innocore License, Innocore granted Scienture a worldwide exclusive, milestone, royalty-bearing and sublicensable license to certain patent rights for the research and development of SCN-107 in postsurgical local and regional analgesia. Pursuant to the Innocore License, Scienture is required to make low single-digit percentage royalty payments based on annual net sales of licensed products for the first three years of sales on a country-by-country basis, subject to a low single digit increase as of the fourth year of sales on a country-by-country basis.

SCN-107 has a formulation composition and method of use application pending in the U.S. (Appl. No. 17/996,995; Filing Date: October 24, 2022; Expiration Date: on or after April 22, 2041). Applications in Canada and Europe are currently pending. As described above, the Company licenses certain patent rights from Innocore for the research and development of SCN-107.

Liquidity and Capital Resources

Cash

Cash was $355,692 as of September 30, 2025, compared to $308,096 as of December 31, 2024. We expect that our future available capital resources will consist primarily of cash generated from Scienture's operations, remaining cash balances, borrowings, and additional funds raised through sales of debt and/or equity securities.

Liquidity

Cash, current assets, current liabilities, short term debt and working capital at the end of each period were as follows:

		September 30,				December 31,								Percent
		2025				2024				Change				Change
Cash		$	355,692			$	308,096			$	47,596				15	%
Current assets (excluding cash)		$	1,065,382			$	5,997,381			$	(4,931,999	)			-82	%
Current liabilities		$	7,351,446			$	7,906,893			$	(555,447	)			-7	%
Working capital		$	(5,930,372	)		$	(1,601,416	)		$	(4,328,956	)			270	%

Our principal sources of liquidity have historically been cash provided by operations, sales of business assets and operations from time to time, sales of equity, and borrowings under various debt arrangements. Our principal uses of cash have been for operating expenses, technology development, and acquisitions. We anticipate these uses will continue to be our principal sources of, and uses of, cash in the future.

Liquidity Outlook Cash Explanation

Cash Requirements

Our primary objectives for the remainder of 2025 are expected to be the continued implementation of Scienture business plan, and to complete potential strategic transactions of our business-to-consumer subsidiaries, which may include a potential sale, spin-off, fund raising, combination or other strategic transaction. There can be no assurance that our operations will generate significant positive cash flow, or that additional funds will be available to us, through borrowings or otherwise, on favorable terms if required in the future, or at all. We may also raise additional funding in the future through the sale of equity securities.

We may require additional funding in the future to implement on our business plan and potentially to expand or complete acquisitions. The sources of this capital are expected to be equity investments and notes payable. Our plan for the next twelve months is to continue exploring strategic transactions or relationships with counterparties in industries that we deem synergistic or complimentary to those of the Company, while also seeking to expand our Scienture operations organically or through acquisitions, as funding and opportunities arise. In the event we require additional funding, we plan to raise that through the sale of debt or equity, which may not be available on favorable terms, if at all, and may, if sold, cause significant dilution to existing stockholders. If we are unable to access additional capital moving forward, it may hurt our ability to grow and to generate future revenues.

Going Concern

The accompanying interim consolidated financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates realization of assets and the satisfaction of liabilities in the normal course of business within one year after the date the consolidated financial statements are issued. In accordance with Financial Accounting Standards Board, or the FASB, Accounting Standards Update No. 2014-15, Presentation of Financial Statements - Going Concern (Subtopic 205-40), our management evaluates whether there are conditions or events, considered in aggregate, that raise substantial doubt about our ability to continue as a going concern within one year after the date that the financial statements are issued.

As of September 30, 2025, the Company had an accumulated deficit of $52,430,904. As of September 30, 2025, the Company had $355,692 in cash.

We will need to raise additional capital or secure debt funding to support on-going operations, and to fund the assets and operations of any businesses or assets we acquire. The sources of this capital are expected to be the sale of equity and debt, which may not be available on favorable terms, if at all, and may, if sold, cause significant dilution to existing stockholders. If we are unable to access additional capital moving forward, it may hurt our ability to grow and to generate future revenues, our financial position, and liquidity. These factors raise substantial doubt about the ability of the Company to continue as a going concern. Unless management is able to obtain additional financing, it is unlikely that the Company will be able to meet its funding requirements during the next 12 months. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Cash Flows

The following table summarizes our Consolidated Statements of Cash Flows for the following periods:

		Nine Months Ended
		September 30,												Percent
		2025				2024				Change				Change
Net cash used in operating activities from continuing operations			(8,207,188	)			(10,585,173	)			2,377,985				-22	%
Net cash provided by (used in) operating activities from discontinued operations			2,799				(770,653	)			773,452				-100	%
Operating Activities			(8,204,389	)			(11,355,826	)			3,151,437				-28	%
Net cash used in investing activities from continuing operations			-				(2,379,024	)			2,379,024				-100	%
Net cash provided by investing activities from discontinued operations			-				29,931,815				(29,931,815	)			-100	%
Investing Activities			-				27,552,791				(27,552,791	)			-100	%
Net cash provided by (used in) financing activities from continuing operations			8,251,985				(15,764,770	)			24,016,755				-152	%
Net cash used in financing activities from discontinued operations			-				(5,000	)			5,000				-100	%
Financing Activities			8,251,985				(15,769,770	)			24,021,755				-152	%
Net change in cash		$	47,596			$	427,195			$	(379,599	)			-89	%

Cash used in operating activities for the nine months ended September 30, 2025, was $8,204,389, compared to cash used in operations for the nine months ended September 30, 2024, of $11,355,826. The decrease in cash used in operations for the nine months ended September 30, 2025 compared to 2024 was primarily due to decreases in various expenses, charges and liabilities during the 2025 period.

Cash provided by (used in) investing activities for the nine months ended September 30, 2025, was $0 and cash provided by investing activities was $27,552,791 for the nine months ended September 30, 2024. The cash provided by investing activities in the 2024 period was primarily due to the disposition of various assets to Micro Merchant Systems, Inc. in the first quarter of 2024 related to our former web-based market platform, partially offset by the investment in securities of $2,500,000.

Cash provided by financing activities for the nine months ended September 30, 2025, was $8,251,985 compared to $15,769,770 of cash used in financing activities for the nine months ended September 30, 2024. Cash provided by financing activities in the 2025 period was due to proceeds from issuance of common stock pursuant to ELOC Agreement. The change was primarily due to the payment of dividends of $12,671,072 and repayment of contingent liability of $1,246,346 in 2024.

Results of Operations

The following selected consolidated financial data should be read in conjunction with the unaudited consolidated financial statements and the notes to these statements included above.

Three Month Period Ended September 30, 2025, compared to Three Month Period Ended September 30, 2024

		Three Months Ended
		September 30,												Percent
		2025				2024				Change				Change
Revenues		$	590,050			$	64,861				525,189				810	%
Cost of goods sold			15,429				60,978				(45,549	)			-75	%
Gross profit			574,621				3,883				570,738				14698	%
Operating expenses:
Wage and salary expense			251,747				708,977				(457,230	)			-64	%
Professional fees			1,320,845				593,364				727,481				123	%
Accounting and legal expense			1,018,737				619,227				399,510				65	%
Technology expense			9,756				157,474				(147,718	)			-94	%
General and administrative (including stock-based compensation expense)			2,165,398				168,649				1,996,749				1184	%
Research and development			169,344				1,253,983				(1,084,639	)			-86	%
Total operating expenses			4,935,827				3,501,674				1,434,153				41	%
Change in fair value of warrant liability			59,203				502,178				(442,975	)			-88	%
Change in fair value of derivative liability			2,356,428				-				2,356,428				100	%
Loss on conversion of note payable			43,200				-				43,200				100	%
Loss on disposition of subsidiaries			97,324				-				97,324				100	%
Interest income			1,120				29,445				(28,325	)			-96	%
Interest expense			(1,803,430	)			(217,433	)			(1,585,997	)			729	%
Net loss from operations			(3,607,361	)			(3,183,601	)			(423,760	)			13	%
Income (loss) on discontinued operations			-				-				-				0	%
Net loss		$	(3,607,361	)		$	(3,183,601	)		$	(423,760	)			13	%

There are $590,050 in revenues for the three months ended September 30, 2025. Revenues increased by $525,189 compared to the same period ended September 30, 2024 primarily because of the initial batch of pharmaceutical products (SCN - 102) sold via wholesale distribution channels during the quarter ended September 30, 2025 as compared to lower such revenue in same period of 2024 because of a) the disposition of the assets and operations of Softell completed in February 2024 and b) the IPS disposition in April 2025. The assets and operations of IPS that we retained generated limited revenues in the 2024 period but did not generate revenues between April 1, 2025 and the time our disposition of IPS later in April.

For the three-month period ended September 30, 2025, cost of goods sold and gross profit were $15,429 and $574,621, and $60,978 and $3,883, all respectively for the same period in 2024. There was a 97.39% gross profit as a percentage of sales for the three months ended September 30, 2025, compared to 5.99% for the three months ended September 30, 2024.

Wages and salary expense decreased by $457,230 for the three months ended September 30, 2025 to $251,747 compared to $708,977 for the comparable period in 2024. The decrease is primarily due to a decrease in salaries for existing executives and personnel as compared to the same period of 2024 due to the addition of personnel as part of the Scienture Merger in July 2024, which increased the headcount of the Company's operations.

Professional fees increased by $727,481 to $1,320,845 compared to $593,364 for the comparable period in 2024. The increase was primarily due to increase in external consulting fees expense in 2025.

Accounting and legal expenses increased by $399,510 for the three months ended September 30, 2025 to $1,018,737 compared to $619,227 for the comparable period in 2024. The increase is primarily due to more SEC filings and corporate actions and contemplated transactions requiring additional accounting and legal services.

General and administrative expenses (including stock-based compensation expense) increased by $1,996,749 for the three months ended September 30, 2025, to $2,165,398 compared to $168,649 for the comparable period in 2024. The increase from 2024 was mainly due to shares issued in the third quarter of 2025 and stock-based compensation expense due to options modifications.

Technology expense decreased by $147,718 for the three months ended September 30, 2025 to $9,756 compared to $157,474 for the comparable period in 2024. The decrease was mainly due to a less of software expense and software support expense after the disposition of IPS.

Research and development expense pertain to Scienture LLC's operations after its acquisition in July 2024. Research and development expenses was mainly due to contract research organization costs of Scienture LLC. Total expenses by program were as follows:

				Three Months Ended
				September 30,
Project Codes		Product Name		2025
SCN-102		Losartan		$	157,817
SCN-104		DHE			-
SCN-106		Alteplase			11,527
SCN-107		Bupivacaine			-
Total research and development expense				$	169,343

We had interest expense of $1,803,430 for the three months ended September 30, 2025, compared to interest expense of $217,433 for the three months ended September 30, 2024. The increase is due to the interest expense on Scienture LLC's convertible debt, the convertible notes issued in November 2024, and related debt discount amortization on these notes.

We recognized a gain on the change in the fair value of the warrant liability of $59,203 for the three months ended September 30, 2025, compared to a gain of $502,178 during the three months ended September 30, 2024, based on the underlying valuation inputs.

We recognized a gain on the change in the fair value of the derivative liability of $2,356,428 for the three months ended September 30, 2025, based on the underlying valuation inputs and the conversion features and derecognition of derivative liability on full repayment of the Debenture issued to Arena.

During the three months ended September 30, 2025, the Company incurred a net loss from continuing operations of $3,607,361 compared to a net loss from continuing operations of $3,183,601 for the three months ended September 30, 2024. The change was due to the increase in operating expense and other income (expense).

Nine Month Period Ended September 30, 2025, compared to Nine Month Period Ended September 30, 2024

		Nine Months Ended
		September 30,												Percent
		2025				2024				Change				Change
Revenues		$	600,308			$	83,560				516,748				618	%
Cost of goods sold			25,014				80,380				(55,366	)			-69	%
Gross profit			575,294				3,180				572,114				17991	%
Operating expenses:
Wage and salary expense			1,721,554				1,243,621				477,933				38	%
Professional fees			1,943,458				1,282,053				661,405				52	%
Accounting and legal expense			1,871,245				1,129,982				741,263				66	%
Technology expense			92,784				295,763				(202,979	)			-69	%
General and administrative (including stock-based compensation expense)			6,449,110				5,284,231				1,164,879				22	%
Research and development			1,587,572				1,253,983				333,589				27	%
Total operating expenses			13,665,723				10,489,633				3,176,090				30	%
Change in fair value of warrant liability			781,311				(392,843	)			1,174,154				-299	%
Change in fair value of derivative liability			2,296,834				-				2,296,834				100	%
Loss on conversion of note payable			(53,446	)			-				(53,446	)			100	%
Loss on disposition of subsidiaries			(288,204	)			-				(288,204	)			100	%
Interest income			89,710				133,397				(43,687	)			-33	%
Loss on disposal of asset			-				(374,968	)			374,968				-100	%
Interest expense			(3,127,707	)			(320,897	)			(2,806,810	)			875	%
Net loss from operations			(13,391,931	)			(11,441,764	)			(1,950,167	)			17	%
Income from discontinued operations, net of tax			-				27,670,294				(27,670,294	)			-100	%
Net (loss) income		$	(13,391,931	)		$	16,228,530			$	(29,620,461	)			-183	%

There are $600,308 in revenues for the nine months ended September 30, 2025. Revenues increased by $516,748 compared to the same period ended September 30, 2024 primarily because of the initial batch of pharmaceutical products (SCN - 102) sold via wholesale distribution channels during quarter ended September 30, 2025 as compared to lower such revenue in same period of 2024 because of a) the disposition of the assets and operations of Softell completed in February 2024 and b) the IPS disposition in April 2025. The assets and operations of IPS that we retained generated limited revenues in the 2024 period but did not generate revenues between April 1, 2025 and the time our disposition of IPS later in April.

For the nine-month period ended September 30, 2025, cost of goods sold and gross profit were $25,014 and $575,294, and $80,380 and $3,180, all respectively for the same period in 2024. Gross profit as a percentage of sales was 95.83% for the nine months ended September 30, 2025, compared to 3.81% for the nine months ended September 30, 2024.

Wages and salary expense increased by $477,933 for the nine months ended September 30, 2025 to $1,721,554 compared to $1,243,621 for the comparable period in 2024. The increase is primarily due to an increase in salaries for executives during the first and second quarters of 2025, as well as the Scienture Merger in July 2024, as compared to the same period in 2024, which increased the headcount of the Company's operations.

Professional fees increased by $661,405 to $1,943,458 compared to $1,282,053 for the comparable period in 2024. The increase was primarily due to increase in external consulting fees expense in 2025.

Accounting and legal expenses increased by $741,263 for the nine months ended September 30, 2025 to $1,871,245 compared to $1,129,982 for the comparable period in 2024. The increase is primarily due to more SEC filings and corporate actions requiring additional accounting and legal services.

General and administrative expenses (including stock-based compensation expense) increased by $1,164,879 for the nine months ended September 30, 2025, to $6,449,110 compared to $5,284,231 for the comparable period in 2024. The increase from 2024 was mainly due to shares issued in 2025 and stock-based compensation expense due to options modifications.

Technology expense decreased by $202,979 for the nine months ended September 30, 2025 to $92,784 compared to $295,763 for the comparable period in 2024. The decrease was mainly due to decreased software expense and software support expense.

Research and development expense pertain to Scienture LLC's operations post-acquisition. Research and development expenses was mainly due to contract research organization costs of Scienture LLC. Total expenses by program were as follows:

				Nine Months Ended
				September 30,
Project Codes		Product Name		2025
SCN-102		Losartan		$	367,527
SCN-104		DHE			422,165
SCN-106		Alteplase			297,880
SCN-107		Bupivacaine			500,000
Total research and development expense				$	1,587,572

We had interest expense of $3,127,707 for the nine months ended September 30, 2025, compared to interest expense of $320,897 for the nine months ended September 30, 2024. The increase is due to the interest expense on Scienture LLC's convertible debt, the convertible notes issued in November 2024, and related debt discount amortization on these notes.

We recognized a gain on the change in the fair value of the warrant liability of $781,311 for the nine months ended September 30, 2025, compared to a loss of $392,843 during the nine months ended September 30, 2024, based on the underlying valuation inputs.

We recognized a gain on the change in the fair value of the derivative liability of $2,296,834 for the nine months ended September 30, 2025, based on the underlying valuation inputs and the conversion features and derecognition of derivative liability on full repayment of the Debenture issued to Arena.

During the nine months ended September 30, 2025, the Company incurred a net loss from continuing operations of $13,391,931 compared to a net loss from continuing operations of $11,441,764 for the nine months ended September 30, 2024. The change was due to change in operating expense, other income (expense).

Net income from discontinued operations was $27,670,294 for the nine months ended September 30, 2024. The income was primarily due to the disposal of Softell assets, partially offset by loss on disposal of Superlatus Inc. during the nine months ended September 30, 2024.

Critical Accounting Policies

Our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of net sales and expenses for each period. The following represents a summary of our critical accounting policies, defined as those policies that we believe are the most important to the portrayal of our financial condition and results of operations and that require management's most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effects of matters that are inherently uncertain.

Acquisitions

The Company accounts for acquisitions and investments in businesses as business combinations if the target meets the definition of a business and (a) the target is a variable interest entity and the Company is the target's primary beneficiary, and therefore the Company must consolidate its financial statements, or (b) the Company acquires more than 50% of the voting interest of the target and it was not previously consolidated. The Company records business combinations using the acquisition method of accounting, which requires all the assets acquired and liabilities assumed to be recorded at fair value as of the acquisition date. The excess of the purchase price over the estimated fair values of the net tangible and intangible assets acquired is recorded as goodwill.

The application of the acquisition method of accounting for business combinations requires management to make significant estimates and assumptions in the determination of the fair value of assets acquired and liabilities assumed in order to properly

Stock-Based Compensation

The Company accounts for stock-based compensation to employees in accordance with ASC 718, "Compensation-Stock Compensation". ASC 718 requires companies to measure the cost of employee services received in exchange for an award of equity instruments, including stock options, based on the grant date fair value of the award and to recognize it as compensation expense over the period the employee is required to provide service in exchange for the award, usually the vesting period. Stock option forfeitures are recognized at the date of employee termination. Effective January 1, 2019, the Company adopted ASU 2018-07 for the accounting of share-based payments granted to non-employees for goods and services.

Recently Issued Accounting Standards

For more information on recently issued accounting standards, see "NOTE 1 - ORGANIZATION AND BASIS OF PRESENTATION," to the Notes to Consolidated Financial Statements included herein under "PART I. - ITEM 1. FINANCIAL STATEMENTS".