Scienture Holdings, Inc. 10-Q

ITEM 1. FINANCIAL STATEMENTS Scienture Holdings, Inc. formerly TRxADE HEALTH, INC. Condensed Consolidated Balance Sheets September 30, 2024 and December 31, 2023 (Unaudited) September 30, December 31, 2024 2023 ASSETS Current assets: Cash $ 579,103 $ 314 Accounts receivable, net 10,430 - Inventory 7,884 968 Prepaid expenses and other current assets 775,113 50,724 Notes receivable - related party 1,300,000 1,300,000 Other receivables 4,505,797 1,224,702 Deferred offering costs 69,444 - Current assets of discontinued operations 8,145 176,355 Total current assets 7,255,916 2,753,063 Property, plant and equipment, net 17,500 7,500 Deposits 22,039 10,531 Intangible assets, net 76,400,000 - Goodwill 7,848,747 - Investments 2,500,000 - Operating lease right-of-use assets 215,491 191,216 Noncurrent assets of discontinued operations - 9,570,603 Total assets $ 94,259,693 $ 12,532,913 LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) Current liabilities: Accounts payable $ 2,904,081 $ 1,463,014 Accrued liabilities 1,042,892 160,214 Other current liabilities 5,441 67,831 Loan payable, related party 265,000 - Contingent funding liabilities - 1,246,346 Lease liability - current portion 60,882 32,595 Warrant liability 1,129,796 736,953 Current liabilities of discontinued operations 5,346 7,849,402 Total current liabilities 5,413,438 11,556,355 Convertible note, net of debt discount 2,255,848 - Lease liability - net of current portion 173,366 176,909 Development agreement liability 1,285,000 - Noncurrent liabilities of discontinued operations - 257,296 Total liabilities 9,127,652 11,990,560 Commitments and contingencies - - Stockholders’ equity (deficit): Series A preferred stock, $ 0.00001 par value; 0 and 9,211,246 shares authorized; none issued and outstanding as of September 30, 2024 and December 31, 2023, all respectively - - Series B preferred stock, $ 0.00001 par value; 787,754 shares authorized; 15,759 shares issued and outstanding as of both September 30, 2024 and December 31, 2023 - - Series C preferred stock, $ 0.00001 par value; 1,000 shares authorized; 0 and 290 shares issued and outstanding as of September 30, 2024 and December 31, 2023, respectively - - Series X preferred stock, $ 0.00001 par value; 9,211,246 shares authorized; 0 and 0 shares issued and outstanding as of September 30, 2024 and December 31, 2023, respectively - - Preferred stock, value - - Common stock, $ 0.00001 par value; 100,000,000 shares authorized; 8,605,366 and 905,008 shares issued and outstanding as of September 30, 2024 and December 31, 2023, respectively 86 9 Additional paid-in capital 117,008,196 33,788,284 Accumulated deficit ( 31,876,241 ) ( 33,245,940 ) Total stockholders’ equity 85,132,041 542,353 Total liabilities and stockholders’ equity $ 94,259,693 $ 12,532,913 The accompanying notes are an integral part of the unaudited consolidated financial statements. 4 Table of Contents Scienture Holdings, Inc. formerly TRxADE HEALTH, INC. Condensed Consolidated Statements Of Operations For the Three and Nine Months Ended September 30, 2024 and 2023 (Unaudited) 2024 2023 2024 2023 Three Months Ended Nine Months Ended September 30, September 30, 2024 2023 2024 2023 Revenues $ 64,861 $ 392,286 $ 83,560 $ 1,235,168 Cost of sales 60,978 352,694 80,380 1,072,178 Gross profit 3,883 39,592 3,180 162,990 Operating expenses: Wage and salary expense 708,977 7,342 1,243,621 345,235 Professional fees 593,364 295,497 1,282,053 619,794 Accounting and legal expense 619,227 409,480 1,129,982 782,495 Technology expense 157,474 22,071 295,763 74,946 General and administrative 168,649 66,880 5,284,231 483,374 Research and development 1,253,983 - 1,253,983 - Total operating expenses 3,501,674 801,270 10,489,633 2,305,844 Operating loss ( 3,497,791 ) ( 761,678 ) ( 10,486,453 ) ( 2,142,854 ) Non-operating income (loss): Change in fair value of warrant liability 502,178 925,320 ( 392,843 ) ( 443,308 ) Interest income 29,445 - 133,397 4,198 Loss on disposal of asset - - ( 374,968 ) ( 352,244 ) Interest expense ( 217,433 ) ( 251,778 ) ( 320,897 ) ( 494,904 ) Total non-operating income (loss), net 314,190 673,542 ( 955,311 ) ( 1,286,258 ) Net loss from continuing operations ( 3,183,601 ) ( 88,136 ) ( 11,441,764 ) ( 3,429,112 ) Net (loss) income from discontinued operations - ( 3,436,978 ) 27,670,294 ( 2,748,833 ) Net (loss) income $ ( 3,183,601 ) $ ( 3,525,114 ) $ 16,228,530 $ ( 6,177,945 ) Net loss per common share from continuing operations Basic $ ( 1.34 ) $ ( 0.11 ) $ ( 7.10 ) $ ( 4.84 ) Diluted $ ( 1.34 ) $ ( 0.11 ) $ ( 7.10 ) $ ( 4.84 ) Net (loss) income per common share from discontinued operations Basic $ - $ ( 4.46 ) $ 17.17 $ ( 3.88 ) Diluted $ - $ ( 1.45 ) $ 14.64 $ ( 1.20 ) Net (loss) income per common share Basic $ ( 1.34 ) $ ( 4.57 ) $ 10.07 $ ( 8.72 ) Diluted $ ( 1.34 ) $ ( 4.57 ) $ 8.59 $ ( 8.72 ) Weighted average common shares outstanding Basic 2,373,848 771,192 1,611,221 708,116 Diluted 2,373,848 2,363,233 1,889,504 2,300,157 The accompanying notes are an integral part of the unaudited consolidated financial statements. 5 Table of Contents Scienture Holdings, Inc. formerly TRxADE HEALTH, INC. Condensed Consolidated Statements of Changes in Stockholders’ Equity (Unaudited) Shares Amount Shares Amount Shares Amount Shares Amount Shares Amount Capital Deficit Subsidiaries Equity Series A Series B Series C Series X Common Additional Non-controlling Total Preferred Stock Preferred Stock Preferred Stock Preferred Stock Stock Paid-in Accumulated Interests in Stockholders’ Shares Amount Shares Amount Shares Amount Shares Amount Shares Amount Capital Deficit Subsidiaries Equity Balances at December 31, 2022 - $ - - $ - - $ - - $ - 626,247 $ 6 $ 20,482,666 $ ( 19,719,536 ) $ ( 420,269 ) $ 342,867 Common stock issued for services - - - - - - - - 14,362 - 63,486 - - 63,486 Disposition of assets, related party - - - - - - - - - - - 492,030 420,269 912,299 Warrants exercised for cash - - - - - - - - 40,116 1 6 - - 7 Options expense - - - - - - - - - - 14,434 - - 14,434 Net loss - - - - - - - - - - - ( 677,953 ) - ( 677,953 ) Balances at March 31, 2023 - - - - - - - - 680,725 7 20,560,592 ( 19,905,459 ) - 655,140 Common stock issued for services - - - - - - - - - - 15,813 - - 15,813 Warrants exercised for cash - - - - - - - - 1,795 - 1,615 - - 1,615 Options expense - - - - - - - - - - 7,783 - - 7,783 Net loss - - - - - - - - - - - ( 1,974,878 ) - ( 1,974,878 ) Balances at June 30, 2023 - - - - - - - - 682,520 7 20,585,803 ( 21,880,337 ) - ( 1,294,527 ) Options expense - - - - - - - - - - 3,761 - - 3,761 Disposition of assets - - - - - - - - - - - 3,875,476 - 3,875,476 Shares issued pursuant to merger agreement 15,759 - - - - - - - 136,441 1 12,500,088 - - 12,500,089 Net loss - - - - - - - - - - - ( 3,525,114 ) - ( 3,525,114 ) Balances at September 30, 2023 15,759 $ - - $ - - $ - - $ - 818,961 $ 8 $ 33,089,652 $ ( 21,529,975 ) $ - $ 11,559,685 Balances at December 31, 2023 - $ - 15,759 $ - 290 $ - - $ - 905,008 $ 9 $ 33,788,284 ( 33,245,940 ) $ - $ 542,353 Cash dividends paid ($ 8 per share) - - - - - - - - - - - ( 12,671,072 ) - ( 12,671,072 ) Common stock issued for services - - - - - - - - 470,482 5 4,450,914 - - 4,450,919 Options exercised for cash - - - - - - - - 2,371 - 9,840 - - 9,840 Warrants exercised for cash - - - - - - - - 28,487 - 16,567 - - 16,567 Options expense - - - - - - - - - - 24,266 - - 24,266 Net income - - - - - - - - - - - 21,246,033 - 21,246,033 Balances at March 31, 2024 - - 15,759 - 290 - - - 1,406,348 14 38,289,871 ( 24,670,979 ) - 13,618,906 Options expense - - - - - - - - - - 444 - - 444 Net loss - - - - - - - - - - - ( 1,833,902 ) - ( 1,833,902 ) Balances at June 30, 2024 - - 15,759 - 290 - - - 1,406,348 14 38,290,315 ( 26,504,881 ) - 11,785,448 Balance - - 15,759 - 290 - - - 1,406,348 14 38,290,315 ( 26,504,881 ) - 11,785,448 Cash dividends paid ($ 1.50 per share) - - - - - - - - - - - ( 2,187,759 ) - ( 2,187,759 ) Conversion of Series C preferred stock into common stock - - - - ( 290 ) - - - 52,158 1 ( 1 ) - - - Issuance of shares pursuant to Merger - - - - - - 6,826,753 68 291,536 3 78,646,113 - - 78,646,184 Conversion of Series X preferred stock into common stock - - - - - - ( 6,826,753 ) ( 68 ) 6,826,753 68 - - - - Warrants issued with convertible note - - - - - - - - - 71,332 - - 71,332 Warrants exercised for shares - - - - - - - - 28,571 - - - - - Options expense - - - - - - - - - - 437 - - 437 Net loss - - - - - - - - - - - ( 3,183,601 ) - ( 3,183,601 ) Net income (loss) - - - - - - - - - - - ( 3,183,601 ) - ( 3,183,601 ) Balances at September 30, 2024 - $ - 15,759 $ - - $ - - $ - 8,605,366 $ 86 $ 117,008,196 $ ( 31,876,241 ) $ - $ 85,132,041 Balance - $ - 15,759 $ - - $ - - $ - 8,605,366 $ 86 $ 117,008,196 $ ( 31,876,241 ) $ - $ 85,132,041 The accompanying notes are an integral part of the unaudited consolidated financial statements 6 Table of Contents Scienture Holdings, Inc. formerly TRxADE HEALTH, INC. Condensed Consolidated Statements of Cash Flows For The Nine Months Ended September 30, 2024 and 2023 (Unaudited) 2024 2023 Nine Months Ended September 30, 2024 2023 Cash flows from operating activities: Net loss from continuing operations $ ( 11,441,764 ) $ ( 3,429,112 ) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation expense 2,000 8,464 Change in fair value of warrant liability 392,843 443,308 Options expense 25,147 25,978 Common stock issued for services 4,450,919 79,299 Amortization of debt discount 13,180 - Amortization of right-of-use assets 37,302 325,916 Changes in operating assets and liabilities: Accounts receivable, net ( 10,430 ) ( 212,292 ) Prepaid expenses and other assets ( 735,897 ) ( 138,450 ) Inventory ( 6,916 ) ( 39,013 ) Other receivables ( 3,281,095 ) - Lease liability ( 37,141 ) 6,414 Accounts payable 453,969 854,171 Accrued liabilities ( 384,900 ) 43,729 Current liabilities ( 62,390 ) ( 5,127 ) Net cash used in operating activities from continuing operations ( 10,585,173 ) ( 2,036,715 ) Net cash (used in) provided by operating activities from discontinued operations ( 770,653 ) 830,638 Net cash used in operating activities ( 11,355,826 ) ( 1,206,077 ) Cash flows from investing activities: Cash received in acquisition 132,976 5,546 Acquisition of property and equipment ( 12,000 ) - Investment in securities ( 2,500,000 ) - Net cash (used in) provided by investing activities from continuing operations ( 2,379,024 ) 5,546 Net cash provided by investing activities from discontinued operations 29,931,815 68,737 Net cash provided by investing activities 27,552,791 74,283 Cash flows from financing activities: Repayment of contingent liability ( 1,246,346 ) ( 1,755,688 ) Proceeds from issuance of debt - 200,000 Proceeds from repayment of notes receivable - 25,000 Cash dividends paid ( 14,858,831 ) - Proceeds from sale of future revenue - 2,100,000 Proceeds from convertible note 314,000 - Proceeds from exercise of warrants 16,567 1,622 Proceeds from exercise of options 9,840 - Net cash (used in) provided by financing activities from continuing operations ( 15,764,770 ) 570,934 Net cash used in financing activities from discontinued operations ( 5,000 ) ( 500,000 ) Net cash (used in) provided by financing activities ( 15,769,770 ) 70,934 Net change in cash 427,195 ( 1,060,860 ) Cash at beginning of period 151,908 1,094,891 Cash at end of period $ 579,103 $ 34,031 Supplemental disclosure of cash flow information: Cash paid for interest $ - $ 243,126 Cash paid for taxes $ - $ - Supplemental disclosure of non-cash investing and financing activities: Issuance of shares pursuant to Merger $ 78,646,184 $ - Assets acquired in connection with Merger $ 194,554 $ - Liabilities assumed in connection with Merger $ 5,797,117 $ - Insurance premium financed $ 198,245 $ 306,152 Deferred offering costs $ 69,444 $ - Warrants issued with convertible note $ 71,332 $ - Note issued as SOSRx contribution $ - $ 500,000 Disposition of assets, related party $ - $ 492,030 The accompanying notes are an integral part of the unaudited consolidated financial statements. 7 Table of Contents NOTE 1 – ORGANIZATION AND BASIS OF PRESENTATION Overview On September 20, 2024, the Company filed with the Secretary of State of the State of Delaware an amendment to its Second Amended and Restated Certificate of Incorporation to change the legal name of the Company from “TRxADE HEALTH, Inc.” to “Scienture Holdings, Inc.” The Company owned, as of September 30, 2024, 100 % of Softell Inc. (f/k/a Trxade Inc.), Integra Pharma Solutions, LLC, and Scienture, LLC (f/k/a Scienture, Inc.). On October 4, 2024, the Company and Softell Inc. (f/k/a Trxade Inc.) (“Softell”) entered into an Assignment and Assumption of Membership Interests (the “IPS Assignment Agreement”), pursuant to which the Company transferred, and Softell accepted, 100 % of the membership interests of Integra Pharma Solutions, LLC (“IPS”). As a result, IPS is now 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 span various healthcare markets including government organizations, hospitals, clinics and independent pharmacies nationwide. 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. The Company anticipates dissolving Bonum Health, Inc. and Bonum Health, LLC. Scienture, LLC (f/k/a Scienture, Inc.) (“Scienture”) is a New York based branded, specialty pharmaceutical research company which is engaged in the research and development of branded pharmaceutical products. The intellectual property application process was initiated in November 2019 and the product development activities commenced in January 2020. Scienture also plans to foray into commercialization of innovative and branded pharmaceutical products in the US market. 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. Acquisitions Superlatus Merger On July 14, 2023, the Company entered into an Amended and Restated Agreement and Plan of Merger (the “Superlatus Merger Agreement”) with Superlatus, Inc., a U.S.-based holding company of food products and distribution capabilities (“Superlatus”) and Foods Merger Sub, Inc., a Delaware corporation and wholly owned subsidiary of the Company (“Merger Sub”). 8 Table of Contents On July 31, 2023, the Company completed its acquisition of Superlatus in accordance with the terms and conditions of the Superlatus Merger Agreement (the “Superlatus Merger”), pursuant to which the Company acquired Superlatus by way of a merger of the Merger Sub with and into Superlatus, with Superlatus being a wholly owned subsidiary of the Company and the surviving entity in the Superlatus Merger. Under the terms of the Superlatus Merger Agreement, at the closing of the Superlatus Merger, shareholders of Superlatus received an aggregate of 136,441 shares of the Company’s common stock and 306,855 shares of the Company’s Series B Preferred Stock, par value $ 0.00001 per share (the “Series B Preferred Stock”). Each share of Series B Preferred Stock is convertible into 100 shares of the Company’s common stock. At Closing, the value of the Company’s common stock was $ 7.30 per share, resulting in a total value of $ 225,000,169 . Upon consummation of the Superlatus Merger, the Company continued to trade under its former ticker symbol “MEDS”. Not all of the closing conditions of the Superlatus Merger Agreement were met. As a result, the Company entered into Amendment No. 1 to the Amended and Restated Agreement and Plan of Merger (the “Superlatus Amendment”) on January 8, 2024. Under the terms of the Superlatus Amendment, the merger consideration to the shareholders of Superlatus was adjusted to an aggregate of 136,441 shares of the Company’s common stock and 15,759 shares of the Company’s Series B Preferred Stock, resulting in a total value of $ 12,500,089 . Additionally, the shareholders of Superlatus agreed to surrender back to the Company 291,096 shares of the Company’s Series B Preferred Stock. As described below, in March 2024, the Company divested of its interest in Superlatus. Scienture Merger On July 25, 2024, the Company entered into and closed an Agreement and Plan of Merger (the “Scienture Merger Agreement”) with MEDS Merger Sub I, Inc., a Delaware corporation and wholly owned subsidiary of the Company (“Merger Sub I”), MEDS Merger Sub II, LLC, a Delaware limited liability company and wholly owned subsidiary of the Company (“Merger Sub II” and, together with Merger Sub I, the “Merger Subs”), and Scienture. Pursuant to the Scienture Merger Agreement, (i) Merger Sub I merged with and into Scienture (the “First Merger”), with Scienture continuing as the surviving entity and a wholly owned subsidiary of the Company, and (ii) Scienture merged with and into Merger Sub II (the “Second Merger” and, together with the First Merger and all other related transactions, the “Scienture Merger”), with Merger Sub II continuing as the surviving entity. In connection with the transactions, the Company changed its name to “Scienture Holdings, Inc.” and Merger Sub II, as the surviving entity of the Second Merger, changed its name to “Scienture, LLC”. As consideration for the Scienture Merger, at the effective time of the First Merger (the “Effective Time”), the shares of Scienture common stock issued and outstanding immediately prior to the Effective Time were converted into the right to receive, in the aggregate, (i) 291,536 shares of the Company’s common stock and (ii) 6,826,753 shares of the Company’s Series X Non-Voting Convertible Preferred Stock (the “Series X Preferred Stock”), each share of which is convertible into one share of common stock. Dispositions MMS APA On February 16, 2024, the Company, together with Softell and Micro Merchant Systems, Inc. (“MMS”), entered into an asset purchase agreement (the “MMS APA”) under which MMS agreed to purchase for cash substantially all of the assets of Softell. On February 16, 2024, the parties consummated the closing of the transactions contemplated by the MMS APA. Softell operated a web-based market platform designed to enable trading among healthcare buyers and sellers of pharmaceuticals, accessories and services. The purchase price paid at closing was $ 22,660,182 . Pursuant to the terms and conditions of the MMS APA, because MMS received $ 1,600,000 or greater in certain collections from third parties resulting from any products or services sold, or provided, by the business assets and operations acquired from Softell during the period ending on the four-month anniversary of the closing date, the Company was due an additional $ 7,500,000 payment from MMS. The Company received the $ 7,500,000 in May 2024. Superlatus SPA On March 5, 2024, the Company entered into a Stock Purchase Agreement (the “Superlatus SPA”) with Superlatus Foods Inc. (the “Buyer”). Pursuant to the Superlatus SPA, the Company sold all of the issued and outstanding stock of Superlatus to the Buyer. The $ 1.00 purchase price for the stock was delivered to the Company at the closing, which occurred simultaneously with the execution of the Superlatus SPA. As a result of the transaction, Superlatus ceased to be a subsidiary of the Company, and the rights and assets of Superlatus together with various liabilities and obligations that were specific to Superlatus became rights and obligations of the Buyer. See Note 3 for further detail on the dispositions. Basis of Presentation and Principles of Consolidation The accompanying unaudited interim condensed consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and the rules of the SEC and should be read in conjunction with the audited financial statements and notes thereto contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023, as filed with the SEC on April 22, 2024. 9 Table of Contents In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial position and the results of operations for the interim periods presented have been reflected herein. All significant intercompany balances and transactions have been eliminated in consolidation. The results of operations for the interim periods are not necessarily indicative of the results to be expected for the full year. Notes to the financial statements that would substantially duplicate the disclosures contained in the audited financial statements for the year ended December 31, 2023, as reported in the Company’s Annual Report on Form 10-K have been omitted. Use of Estimates The preparation of condensed consolidated financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses in the reporting period. The Company bases its estimates and assumptions on current facts, historical experience and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by the Company may differ materially and adversely from its estimates. To the extent there are material differences between estimates and the actual results, future results of operations will be affected. Significant estimates for the nine months ended September 30, 2024 and 2023 include the valuation of intangible assets, including goodwill, and gain (losses) on dispositions. Fair Value of Financial Instruments The carrying amounts for cash, accounts receivable, accounts payable, accrued liabilities, and other current liabilities approximate their fair value because of their short-term maturity. Stock Split Effective June 21, 2023, the Company executed a 1:15 reverse stock split for stockholders of record on that date . This was executed to comply with the Nasdaq Listing Rule 5550(a)(2) to have the price of the stock above $ 1.00 . Recently Issued Accounting Pronouncements In November 2023, the FASB issued Accounting Standards Update (“ASU”) 2023-07 Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures . The new guidance requires enhanced disclosure of significant expenses that are regularly reported to the chief operating decision maker and the nature of segment expense information used to manage operations. The new guidance is effective for all public companies for annual reporting periods beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. The Company will adopt the new standard in annual reporting period beginning after December 15, 2023 and is currently evaluating the impacts of the new guidance on its disclosure within the financial statements. The Company does not expect any significant impact from the ASU on its consolidated financial statements. In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740) : Improvements to Income Tax Disclosures . The new guidance requires disaggregated information about the effective tax rate reconciliation and additional information on taxes paid that meet a quantitative threshold. The new guidance is effective for public companies for annual reporting periods beginning after December 15, 2024, and for non-public companies for annual reporting periods beginning after December 15, 2025, with early adoption permitted for both. The Company will adopt the new standard in annual reporting period beginning after December 15, 2025, and is currently evaluating the impacts of the new guidance on its disclosures within the consolidated financial statements. Accounts Receivable, net On January 1, 2023, the Company adopted ASU 2016-13 “Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments” and its related amendments using the prospective method. The new standard requires the use of a current expected credit loss impairment model to develop and recognize credit losses for financial instruments at amortized cost when the asset is first originated or acquired, and each subsequent reporting period. The Company’s receivables are from customers and are typically collected within 90 days. The Company determines the allowance based on known troubled accounts, historical experience, and other currently available evidence. Other Receivables As of September 30, 2024 and December 31, 2023, other receivables are $ 4,505,797 and $ 1,224,702 . As of September 30, 2024, other receivables primarily consist of short-term advances to Wellgistics Health, Inc. (f/k/a Danam Health Inc.). 10 Table of Contents Deferred Offering Costs The Company complies with the requirements of Accounting Standards Codification (“ASC”) 340-10-S99-1 with regards to offering costs. Prior to the completion of an offering, offering costs are capitalized. The deferred offering costs are charged to additional paid-in capital or as a discount to debt, as applicable, upon the completion of an offering or to expense if the offering is not completed. As of September 30, 2024, the Company has $ 69,444 capitalized deferred offering costs. 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 (“VIE”) 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 allocate purchase price consideration between assets that are depreciated and amortized from goodwill. The fair value assigned to tangible and intangible assets acquired and liabilities assumed are based on management’s estimates and assumptions, as well as other information compiled by management, including valuations that utilize customary valuation procedures and techniques. Significant assumptions and estimates include, but are not limited to, the cash flows that an asset is expected to generate in the future, the appropriate weighted-average cost of capital, and the cost savings expected to be derived from acquiring an asset, if applicable. If the actual results differ from the estimates and judgments used in these estimates, the amounts recorded in the Company’s financial statements may be exposed to potential impairment of the intangible assets and goodwill. If the Company’s investment involves the acquisition of an asset or group of assets that does not meet the definition of a business, the transaction is accounted for as an asset acquisition. An asset acquisition is recorded at cost, which includes capitalizing transaction costs, and does not result in the recognition of goodwill. On July 25, 2024, the Company acquired intangible assets of $ 76,400,000 and recognized goodwill of $ 7,848,747 pursuant to the Scienture acquisition (see Note 3). The acquired goodwill represents the value in excess of the net assets and liabilities acquired at the acquisition date. As of September 30, 2024, there were no indicators of impairment since the acquisition in July 2024. Company determined that no impairment was necessary. Intangible Assets and Goodwill The Company tests indefinite-lived intangible assets for impairment on an annual basis or whenever events or changes occur that would more-likely-than not reduce the fair value of the indefinite-lived intangible asset below its carrying value between annual impairment tests. Any indefinite-lived intangible asset assessment is performed at the Company level. The Company did not record an indefinite-lived intangible asset impairment charge for the three or nine months ended September 30, 2024 and 2023. Investments The Company accounts for investments that it does not control using the cost method, equity method or fair value method, as applicable. Investments in companies in which the Company owns less than a 20% equity interest and where it does not exercise significant influence over the operating and financial policies of the investee are accounted for using the cost method of accounting. The Company periodically reviews the carrying value of these investments to determine if there has been an other-than-temporary decline in fair value below carrying value. A variety of factors are considered when determining if a decline in fair value below carrying value is other-than-temporary, including, among others, the financial condition and business prospects of the investee, as well as the Company’s investment intent. Cost method investments are carried at cost, which approximates or is less than fair value. Dividends received by the Company are recognized in equity (losses) earnings of affiliates, net of tax on the consolidated statements of operations. 11 Table of Contents On February 29, 2024, Softell entered into a Subscription Agreement (the “Subscription Agreement”) with Lafayette Energy Corp., a Delaware corporation (“Lafayette”). Pursuant to the Subscription Agreement, Softell agreed, in two equal tranches, to invest a total of up to $ 5,000,000 in Lafayette in exchange for up to 2,000,000 shares of Lafayette’s Series A Convertible Preferred Stock, with the second tranche becoming payable only upon Softell’s receipt of notice that Lafayette has successfully drilled its first oil and gas well and produced at least one hundred (100) barrels of oil. As of September 30, 2024, the Company’s investment in Lafayette was $ 2,500,000 . The Company determined there was no impairment necessary as of September 30, 2024. Research & Development Expenses Research and development costs are expensed in the period incurred in accordance with ASC 730, Research and Development. These expenses consist of independent contractor costs, costs for outsourced analytical research and development activities, batch manufacturing cost and, advisory costs as a part of research, market research costs and other regulatory consulting costs. Income (loss) Per Common Share Basic net income per common share is computed by dividing net income available to common stockholders by the weighted average number of common shares outstanding. Diluted net income per common share is computed similar to basic net income per common share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common shares had been issued and if the additional common shares were dilutive. The dilutive effect of the Company’s options and warrants is computed using the treasury stock method. As of September 30, 2024, we had 238,594 outstanding warrants to purchase shares of common stock, 15,759 shares of Series B preferred stock and 23,930 options to purchase shares of common stock. The following table sets forth the computation of basic and diluted loss per share: SCHEDULE OF BASIC AND DILUTIVE LOSS PER SHARE 2024 2023 2024 2023 Three Months Ended Nine Months Ended September 30, September 30, 2024 2023 2024 2023 Numerator: Net loss from continuing operations $ ( 3,183,601 ) $ ( 88,136 ) $ ( 11,441,764 ) $ ( 3,429,112 ) Net (loss) income on discontinued operations - ( 3,436,978 ) 27,670,294 ( 2,748,833 ) Net (loss) income $ ( 3,183,601 ) $ ( 3,525,114 ) $ 16,228,530 $ ( 6,177,945 ) Denominator: Denominator for EPS – weighted average shares Basic 2,373,848 771,192 1,611,221 708,116 Diluted 2,373,848 2,363,233 1,889,504 2,300,157 Net loss per common share from continuing operations Basic $ ( 1.34 ) $ ( 0.11 ) $ ( 7.10 ) $ ( 4.84 ) Diluted $ ( 1.34 ) $ ( 0.11 ) $ ( 7.10 ) $ ( 4.84 ) Net loss (income) per common share from discontinued operations Basic $ - $ ( 4.46 ) $ 17.17 $ ( 3.88 ) Diluted $ - $ ( 1.45 ) $ 14.64 $ ( 1.20 ) Net (loss) income Basic $ ( 1.34 ) $ ( 4.57 ) $ 10.07 $ ( 8.72 ) Diluted $ ( 1.34 ) $ ( 4.57 ) $ 8.59 $ ( 8.72 ) 12 Table of Contents Income taxes The Company’s provision for income taxes was $ 0 for the three and nine months ended September 30, 2024 and 2023. The income tax provisions for these periods are based upon estimates of annual income (loss), annual permanent differences and statutory tax rates in the various jurisdictions in which the Company operates. For all periods presented, the Company utilized net operating loss carryforwards to offset the impact of any taxable income. The Company’s tax rate differs from the applicable statutory rates due primarily to the establishment of a valuation allowance, utilization of deferred and the effect of permanent differences and adjustments. NOTE 2 – 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, 2024, the Company had an accumulated deficit of $ 31,876,241 . As of September 30, 2024, the Company had $ 579,103 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. NOTE 3 – ACQUISITIONS AND DISPOSITIONS Acquisitions Scienture, Inc. The Company evaluated the Scienture Merger Agreement pursuant to ASC 805 and ASU 2017-01, Topic 805, Business Combinations. The Company first determined that Scienture met the definition of a business as it includes inputs and a substantive process that together significantly contribute to the ability to create outputs. Scienture’s results of operations are included in the Company’s consolidated financial statements from the date of acquisition. The acquisition method of accounting requires, among other things, that the assets acquired and liabilities assumed in a business combination be measured at their estimated respective fair values as of the closing date of the acquisition. Goodwill recognized in connection with this transaction represents primarily the potential economic benefits that the Company believes may arise from the acquisition. The purchase price allocation is preliminary and could be significantly revised as a result of additional information obtained regarding assets acquired and liabilities assumed and revisions of estimates of fair values of tangible assets and related deferred tax assets and liabilities. The Company will finalize its valuation and the allocation of the purchase price, along with required retrospective adjustments, if any, within a year following the acquisition date. On July 25, 2024, the Company issued 291,536 shares of common stock and 6,826,753 shares of Series X Preferred Stock pursuant to the Scienture Merger Agreement. The aggregate fair value of the purchase price consideration was $ 78,646,184 . The fair value was determined by the underlying stock price of the common stock on the date of the Scienture Merger, which was $ 11.63 per share, which was utilized for both the issuance of common and preferred stock after evaluating the terms of the Series X Preferred Stock. The Company also applied a discount for lack of marketability of 5% due to certain lock-up terms on the shares issued. The following summarizes the purchase price consideration and the preliminary purchase price allocation as of the acquisition date: SCHEDULE OF PURCHASE PRICE ALLOCATION July 25, 2024 Purchase consideration: Common stock $ 3,221,245 Series X preferred stock 75,424,939 Total purchase consideration $ 78,646,184 Purchase price allocation: Cash $ 132,976 Operating lease right-of-use assets 61,578 Goodwill 7,848,747 Intangible assets - product technologies 76,400,000 Prepaid expenses Inventory Accounts payable ( 987,097 ) Accrued liabilities ( 1,198,134 ) Loan payable, related party ( 265,000 ) Lease liability ( 61,886 ) Development agreement liability ( 1,285,000 ) Long-term convertible notes ( 2,000,000 ) Accounts payable and other current liabilities Purchase price payable Notes payable Net assets acquired $ 78,646,184 Goodwill is primarily attributable to the go-to-market synergies that are expected to arise as a result of the acquisition and other intangible assets that do not qualify for separate recognition. The goodwill is not deductible for tax purposes. The results of Scienture have been included in the consolidated financial statements since the date of acquisition. Scienture’s revenue and net loss included in the consolidated financial statements since the acquisition date through September 30, 2024 were $ 0 and a loss of $ 1,643,455 , respectively. 13 Table of Contents Unaudited Pro Forma Financial Information The following unaudited pro forma financial information presents the Company’s financial results as if the Scienture Merger had occurred as of January 1, 2023. The unaudited pro forma financial information is not necessarily indicative of what the financial results actually would have been had the acquisitions been completed on this date. In addition, the unaudited pro forma financial information is not indicative of, nor does it purport to project, the Company’s future financial results. The pro forma information does not give effect to any estimated and potential cost savings or other operating efficiencies that could result from the acquisition: SCHEDULE OF PRO FORMA FINANCIAL INFORMATION 2024 2023 Nine Months Ended September 30, 2024 2023 Revenue $ 83,560 $ 1,735,168 Net loss from continuing operations $ ( 16,722,735 ) $ ( 4,644,587 ) Net loss from continuing operations per share $ ( 10.38 ) $ ( 6.56 ) Superlatus, Inc. On July 31, 2023, the Company entered into the Superlatus Merger Agreement (see Note 1) with Superlatus whereby the Company acquired 100 % of the stock of Superlatus in the Superlatus Merger. Superlatus includes a wholly-owned subsidiary, Sapientia. Consideration for the Superlatus Merger consisted of (i) 136,441 shares of the Company’s common stock at a fair value of $ 7.30 per share and (ii) 306,855 shares of the Company’s Series B Preferred Stock, each share of which is convertible into 100 shares of common stock. The total fair value of the common stock and Series B Preferred Stock on the closing date was $ 225,000,169 (the “Purchase Price”). On January 8, 2024, the Company entered into the Superlatus Amendment. Under the terms of the Superlatus Amendment, the merger consideration to the shareholders of Superlatus was adjusted to an aggregate of 136,441 shares of the Company’s common stock and 15,759 shares of the Company’s Series B Preferred Stock. The total fair value of the common stock and Series B Preferred Stock on the closing date was adjusted to $ 12,500,089 (the “Amended Purchase Price”). Additionally, the shareholders of Superlatus agreed to surrender back to the Company 289,731 shares of the Company’s Series B Preferred Stock received before the Superlatus Amendment. The acquisition of Superlatus was accounted for as a business combination using the acquisition method pursuant to FASB ASC Topic 805. As the acquirer for accounting purposes, the Company had estimated the Purchase Price, assets acquired and liabilities assumed as of the acquisition date, with the excess of the Purchase Price over the fair value of net assets acquired recognized as goodwill. An independent valuation expert assisted the Company in determining these fair values. The Amended Purchase Price allocation as of the acquisition date is presented as follows: SCHEDULE OF PURCHASE PRICE ALLOCATION July 31, 2023 Purchase consideration: Common Stock, at fair value $ 996,019 Series B Preferred Stock, at fair value 11,504,070 Total purchase consideration $ 12,500,089 Purchase price allocation: Cash $ 5,546 Prepaid expenses 3,705 Inventory 122,792 Intangible assets, net 9,777,479 Goodwill 5,129,115 Assets acquired 15,038,637 Accounts payable and other current liabilities ( 283,548 ) Purchase price payable ( 350,000 ) Notes payable ( 1,905,000 ) Liabilities assumed ( 2,538,548 ) Net assets acquired $ 12,500,089 14 Table of Contents The Urgent Company, Inc. On September 27, 2023, the Company entered into an Asset Purchase Agreement (the “TUC APA”) with The Urgent Company, Inc. (“TUC”) and its wholly owned subsidiaries, pursuant to which, the Company was assigned certain inventory and property and equipment and assumed certain operating leases for consideration of $ 4,400,000 in promissory notes (see Note 11). Subsequent to December 31, 2023, we divested our interest in TUC. The transaction was accounted for as an asset acquisition pursuant to FASB ASC Topic 805. As the acquirer for accounting purposes, the Company allocated the cost of the asset acquisition to the assets acquired and liabilities assumed as of the acquisition date based on their respective relative fair value as of the date of the transaction. The following summarizes the provisional relative fair values of the assets acquired as of the acquisition date based on the allocation of the cost of the asset acquisition: SCHEDULE OF FAIR VALUES OF ASSETS ACQUIRED September 27, 2023 Purchase consideration: Promissory note $ 4,400,000 Total purchase consideration $ 4,400,000 Allocation of cost of assets acquired: Inventory $ 4,168,830 Property and equipment 231,170 Assets acquired 4,400,000 Net assets acquired $ 4,400,000 Dispositions and Divestitures Alliance Pharma Solutions, LLC and Community Specialty Pharmacy, LLC On August 22, 2023, the Company and Wood Sage, LLC (“Wood Sage”) entered into (i) a Membership Interest Purchase Agreement (the “APS MIPA”), pursuant to which the Company sold its 100 % membership interest in Alliance Pharma Solutions, LLC (“APS”) for consideration of a $ 125,000 promissory note (the “APS Sale Price”) and (ii) a Membership Interest Purchase Agreement (the “CSP MIPA”), pursuant to which the Company sold 100 % of the membership interest in Community Specialty Pharmacy, LLC (“CSP”) in exchange for a $ 100,000 promissory note (the “CSP Sale Price”). As a result, the results of APS and CSP were classified as discontinued operations in our condensed statements of operations and excluded from both continuing operations and segment results for the nine months ended September 30, 2023. As part of recognizing the business as held for sale in accordance with U.S. GAAP, the Company was required to measure APS and CSP at the lower of its carrying amount or fair value less cost to sell. As a result of this analysis, during the year ended December 31, 2023, the Company recognized a non-cash, pre-tax loss on disposal of $ 3,300,225 . The loss is included in “Net loss from discontinued operations” in the consolidated statements of operations. The loss was determined by comparing the fair value of the consideration received for the sale of a 100% interest in APS and CSP with the net assets of APS and CSP, respectively, immediately prior to the transaction. As a result of the transactions, the following assets and liabilities of APS and CSP were transferred to Wood Sage as of August 22, 2023: SCHEDULE OF ASSETS AND LIABILITIES Alliance Pharma Solutions, LLC Community Specialty Pharmacy, LLC Cash $ 1,050 $ 61,988 Accounts receivable, net - 101,901 Inventory - 123,230 Prepaid assets - 525 Intangible assets and capitalized software, net 739,337 - Accounts payable ( 23,982 ) ( 231,876 ) Accrued liabilities - ( 10,182 ) Net assets sold $ 716,405 $ 45,586 MMS APA On February 16, 2024, the Company, together with Softell and MMS, entered into the MMS APA under which MMS agreed to purchase for cash substantially all of the assets of Softell. On February 16, 2024, the parties consummated the closing of the transactions contemplated by the MMS APA. The purchase price paid at closing was $ 22,660,182 . Subject to the terms and conditions of the MMS APA, because MMS received $ 1,600,000 or greater in certain collections from third parties resulting from any products or services sold, or provided, by the business assets and operations acquired from Softell during the period ending on the four-month anniversary of the closing date, the Company was due an additional $ 7,500,000 payment from MMS. The Company received the payment in May 2024. 15 Table of Contents The MMS APA was accounted for a business disposition in accordance with ASC 810-40-40-3A. As of February 16, 2024, the Company no longer consolidated the assets, liabilities, revenues and expenses of Softell. The components of the disposition are as follows: SCHEDULE OF BUSINESS ACQUISITIONS ASSETS AND LIABILITIES Cash received from MMS $ 22,660,182 Other receivable from MMS 7,500,000 Fair value of consideration received $ - Total fair value of consideration received $ 30,160,182 Carrying amount of assets and liabilities Cash $ 76,821 Accounts receivable, net 719,876 Prepaid expenses 55,397 Property, plant and equipment, net 45,655 Intangible assets, net Operating lease right-of-use assets 12,277 Purchase price payable Accounts payable ( 347,000 ) Accrued liabilities ( 5,269 ) Other current liabilities ( 26,244 ) Lease liability, current ( 1,556 ) Notes payable, current portion ( 45,000 ) Lease liability, net of current portion ( 10,720 ) Notes payable Total carrying amount of assets and liabilities 474,236 Gain on disposition of business $ 29,685,946 The gain on disposition of business of $ 29,685,946 was included in income from discontinued operations, net of tax in the consolidated statements of operations. Superlatus SPA On March 5, 2024, the Company entered into the Superlatus SPA with the Buyer. Pursuant to the Superlatus SPA, the Company sold all of the issued and outstanding stock of Superlatus to the Buyer. The $ 1.00 purchase price for the stock was delivered to the Company at the closing, which occurred simultaneously with the execution of the Superlatus SPA. As a result of the transaction, Superlatus ceased to be a subsidiary of the Company, and the rights and assets of Superlatus together with various liabilities and obligations that were specific to Superlatus became rights and obligations of the Buyer. The transaction was accounted for a business disposition in accordance with ASC 810-40-40-3A. As of March 5, 2024, the Company no longer consolidated the assets, liabilities, revenues and expenses of Superlatus. The components of the disposition are as follows: SCHEDULE OF BUSINESS ACQUISITIONS ASSETS AND LIABILITIES Fair value of consideration received $ 1 Total fair value of consideration received $ 1 Carrying amount of assets and liabilities Cash $ 151,546 Property, plant and equipment, net 223,080 Intangible assets, net 8,962,688 Operating lease right-of-use assets 325,995 Purchase price payable ( 350,000 ) Accounts payable ( 224,137 ) Accrued liabilities ( 173,436 ) Notes payable, current portion ( 6,480,000 ) Lease liability - current ( 105,567 ) Lease liability - net of current portion ( 221,428 ) Notes payable ( 25,000 ) Total carrying amount of assets and liabilities 2,083,743 Loss on disposition of business $ ( 2,083,742 ) The loss of disposition of business of $ 2,083,742 was included in income from discontinued operations, net of tax in the consolidated statements of operations. 16 Table of Contents Discontinued Operations In accordance with the provisions of ASC 205-20, the Company has excluded the results of discontinued operations from its results of continuing operations in the accompanying consolidated statements of operations for the three and nine months ended September 30, 2024 and 2023. The results of the discontinued operations for the three and nine months ended September 30, 2024 and 2023 consist of the following: SCHEDULE OF DISCONTINUED OPERATIONS 2024 2023 2024 2023 2024 2023 2024 2023 2024 2023 2024 2023 2024 2023 TRX Bonum Superlatus SOSRx CSP APS Total Three Months Ended Three Months Ended Three Months Ended Three Months Ended Three Months Ended Three Months Ended Three Months Ended September 30, September 30, September 30, September 30, September 30, September 30, September 30, 2024 2023 2024 2023 2024 2023 2024 2023 2024 2023 2024 2023 2024 2023 Revenues $ - $ 1,663,736 $ - $ 2,006 $ - $ - $ - $ - $ - $ 124,238 $ - $ - $ - $ 1,789,980 Cost of sales - - - - - 756 - - - 127,671 - - - 128,427 Gross profit (loss) - 1,663,736 - 2,006 - ( 756 ) - - - ( 3,433 ) - - - 1,661,553 Operating expenses: Wage and salary expense - 716,082 - 24,942 - - - - - 108,772 - - - 849,796 Professional fees - 122,797 - - - - - - - 18,078 - - - 140,875 Technology expense - 367,818 - 20,197 - - - - - 2,932 - ( 45,107 ) - 345,840 General and administrative - 106,036 - 1,265 - 439,512 - - - 5,298 - 133 - 552,244 Total operating expenses - 1,312,733 - 46,404 - 439,512.00 - - - 135,080 - ( 44,974 ) - 1,888,755 Operating income (loss) - 351,003 - ( 44,398 ) - ( 440,268 ) - - - ( 138,513 ) - 44,974 - ( 227,202 ) Non-operating income (expense): Gain on dispositions - - - - - - - - - ( 1,426,567 ) - ( 1,783,209 ) - ( 3,209,776 ) Net income (loss) on discontinued operations $ - $ 351,003 $ - $ ( 44,398 ) $ - $ ( 440,268 ) $ - $ - $ - $ ( 1,565,080 ) $ - $ ( 1,738,235 ) $ - $ ( 3,436,978 ) 2024 2023 2024 2023 2024 2023 2024 2023 2024 2023 2024 2023 2024 2023 TRX Bonum Superlatus SOSRx CSP APS Total Nine Months Ended Nine Months Ended Nine Months Ended Nine Months Ended Nine Months Ended Nine Months Ended Nine Months Ended September 30, September 30, September 30, September 30, September 30, September 30, September 30, 2024 2023 2024 2023 2024 2023 2024 2023 2024 2023 2024 2023 2024 2023 Revenues $ 970,808 $ 4,663,756 $ - $ 20,862 $ - $ - $ - $ - $ - $ 761,306 $ - $ - $ 970,808 $ 5,445,924 Cost of sales - - - - - 756 - - - 705,206 - - - 705,962 Gross profit (loss) 970,808 4,663,756 - 20,862 - ( 756 ) - - - 56,100 - - 970,808 4,739,962 Operating expenses: Wage and salary expense 713,021 1,715,411 578 67,051 - - - - - 456,297 - - 713,599 2,238,759 Professional fees 62,160 162,492 - - - - - - - 20,246 - 3,125 62,160 185,863 Technology expense 86,660 877,015 2,245 58,413 - - - - - 72,464 - 28,384 88,904 1,036,276 General and administrative 37,377 338,041 678 3,829 - 439,512 - 146 - 32,830 - 3,762 38,055 818,120 Total operating expenses 899,218 3,092,959 3,500 129,293 - 439,512 - 146 - 581,837 - 35,271 902,718 4,279,019 Operating income (loss) 71,590 1,570,797 ( 3,500 ) ( 108,431 ) - ( 440,268 ) - ( 146 ) - ( 525,737 ) - ( 35,271 ) 68,090 460,943 Non-operating loss, net: Gain (loss) on dispositions 29,685,946 - - - ( 2,083,742 ) - - - - ( 1,426,567 ) - ( 1,783,209 ) 27,602,204 ( 3,209,776 ) Net income (loss) on discontinued operations $ 29,757,536 $ 1,570,797 $ ( 3,500 ) $ ( 108,431 ) $ ( 2,083,742 ) $ ( 440,268 ) $ - $ ( 146 ) $ - $ ( 1,952,304 ) $ - $ ( 1,818,480 ) $ 27,670,294 $ ( 2,748,833 ) In the second quarter of 2024, the Company determined to dissolve Bonum Health, Inc. and Bonum Health, LLC, and have presented the results of operations in net income (loss) from discontinued operations. 17 Table of Contents NOTE 4- RELATED PARTY TRANSACTIONS On November 21, 2023, but effective September 14, 2023, the Company issued a promissory note (the “Wellgistics Note”) to Wellgistics Health, Inc. (f/k/a Danam Health Inc.) (“Wellgistics”) in the amount of $ 300,000 . Wellgistics prepaid $ 250,000 prior to the execution date. The Wellgistics Note did not accrue interest. As of December 31, 2023, the balance of the Wellgistics Note was $ 50,000 . The Wellgistics Note was fully paid off in February 2024. On February 29, 2024, the Company’s wholly owned subsidiary, Softell, entered into the Subscription Agreement with Lafayette. Pursuant to the Subscription Agreement, Softell agreed, in two equal tranches, to invest a total of up to $ 5,000,000 in Lafayette in exchange for up to 2,000,000 shares of Lafayette’s newly created Series A Convertible Preferred Stock, with the second tranche becoming payable only upon Softell’s receipt of notice that Lafayette has successfully drilled its first oil and gas well and produced at least one hundred (100) barrels of oil. As of September 30, 2024, other receivables includes a $ 3,302,115 receivable from Wellgistics and $ 1,203,682 receivable from APS and CSP. The advances are unsecured, non-interest bearing and due on demand. See Note 7 for note receivable from Wood Sage. In July 2024, the executives of Scienture issued a short-term loan to Scienture for an aggregate amount of $ 265,000 . The loans are unsecured, non-interest bearing and due on demand. The loans were still outstanding as of the date of the Scienture Merger and September 30, 2024. NOTE 5 – REVENUE RECOGNITION The Company derives revenue from one primary source—product revenue. Product revenue consists of shipments of: ● Resale of pharmaceutical products to pharmacies; and ● Revenues for our products are recognized and invoiced when the product is shipped to the customer. Revenues for one-time services are recognized at the point in time when services are rendered. Payment terms for products and services are generally 0 to 60 days and the Company has no contract assets or liabilities. The following table presents disaggregated revenue by major product categories during the three and nine months ended September 30, 2024 and 2023: SCHEDULE OF DISAGGREGATED REVENUE 2024 2023 2024 2023 Three Months Ended Nine Months Ended September 30, September 30, 2024 2023 2024 2023 Product revenues Pharmaceutical product resale $ 64,861 $ 392,286 $ 83,560 $ 1,235,168 Total product revenue $ 64,861 $ 392,286 $ 83,560 $ 1,235,168 Total revenue $ 64,861 $ 392,286 $ 83,560 $ 1,235,168 NOTE 6 – INVENTORY Inventory value is determined using the weighted average cost method and is stated at the lower of cost or net realizable value. As of September 30, 2024 and December 31, 2023, inventory was comprised of the following: SCHEDULE OF INVENTORY September 30, December 31, 2024 2023 Finished goods $ 7,884 $ 968 Inventory $ 7,884 $ 968 As of September 30, 2024, prepaid expenses and other current assets includes $ 750,000 in deposits for future inventory. NOTE 7 – NOTES RECEIVABLE – RELATED PARTY On August 22, 2023, the Company received a Promissory Note (the “Wood Sage Note”) in the amount of $ 1,300,000 from Wood Sage. The Wood Sage Note bears no interest and is currently due and payable. As of both September 30, 2024 and December 31, 2023, the outstanding balance of the Wood Sage Note was $ 1,300,000 . 18 Table of Contents NOTE 8 – GOODWILL AND INTANGIBLE ASSETS In connection with the Scienture Merger on July 25, 2024, the Company recorded goodwill of $ 7,848,747 and intangible assets of $ 76,400,000 . The intangible assets acquired consist of developed technology and the related intellectual property and of the Company’s products. The Company is currently assessing whether the assets are indefinite-lived such as in-process research and development assets, or whether they will begin amortization upon commercialization. NOTE 9 – CONTINGENT FUNDING LIABILITIES On December 13, 2023, the Company entered into a non-recourse funding agreement with a third-party for the purchase and sale of future receivables (the “December Receivables Agreement”). Pursuant to the December Receivables Agreement, the third party agreed to fund the Company $ 150,000 to purchase $ 214,500 of future receivables. The Company also paid $ 7,500 as a one-time origination fee in connection with the December Receivables Agreement. This agreement was fully paid off in February 2024. On November 22, 2023, the Company entered into a non-recourse funding agreement with a third-party for the purchase and sale of future receivables (the “November Receivables Agreement”). Pursuant to the November Receivables Agreement, the third party agreed to fund the Company $ 275,000 to purchase $ 393,250 of future receivables. The Company also paid $ 13,750 as a one-time origination fee in connection with the November Receivables Agreement. This agreement was fully paid off in February 2024. On October 25, 2023, the Company entered into a non-recourse funding agreement with a third-party for the purchase and sale of future receivables (the “October Receivables Agreement”). Pursuant to the October Receivables Agreement, the third party agreed to fund the Company $ 1,200,000 to purchase $ 1,728,000 of future receivables. The Company also paid $ 60,000 as a one-time origination fee in connection with the October Receivables Agreement. This agreement was fully paid off in February 2024. The Company’s relationship with the funding source meets the criteria in ASC 470-10-25 – Sales of Future Revenues or Various Other Measures of Income (“ASC 470”), which relates to cash received from a funding source in exchange for a specified percentage or amount of revenue or other measure of income of a particular product line, business segment, trademark, patent or contractual right for a defined period. Under this guidance, the Company recognized the fair value of its contingent obligation to the funding source, as of the acquisition date, as a current liability in its consolidated balance sheet. Under ASC 470, amounts recorded as debt are to be amortized under the interest method. The Company made an accounting policy election to utilize the prospective method when there is a change in the estimated future cash flows, whereby a new effective interest rate is determined based on the revised estimate of remaining cash flows. The new rate is the discount rate that equates the present value of the revised estimate of remaining cash flows with the carrying amount of the debt, and it will be used to recognize interest expense for the remaining period. Under this method, the effective interest rate is not constant, and any change in expected cash flows is recognized prospectively as an adjustment to the effective yield. As of September 30, 2024, and December 31, 2023, the total contingent funding liability was $ 0 and $ 1,246,346 respectively, and the effective interest rate was approximately 0 % and 31 %, respectively. This rate represents the discount rate that equates the estimated future cash flows with the fair value of the debt and is used to compute the amount of interest to be recognized each period. Any future payments made to the funding source will decrease the contingent funding liability balance accordingly. 19 Table of Contents NOTE 10 – CONVERTIBLE DEBT AND NOTES PAYABLE Scienture Convertible Debt In September 2023, Scienture entered into a Loan and Security Agreement (the “NVK Loan Agreement”) with NVK Finance, LLC, a Nebraska Limited Liability Company (“NVK”) for $ 2,000,000 . The debt accrues interest at a per annum rate equal to the Prime Rate (as defined in the NVK Loan Agreement) plus 7 percent and the prime rates are adjusted quarterly. As of September 30, 2024, the interest rate was 15.50 %. The debt is collateralized by all of Scienture’s receivables, cash and cash equivalents and its right, title and interest in, to and under its Intellectual Property (as defined in the NVK Loan Agreement) and all proceeds thereof. The principal is entirely repayable on the maturity date in September 2025 and interest shall be paid monthly following a Qualified Financing (as defined in the NVK Loan Agreement). The NVK debt is convertible into common stock of Scienture at a fully-diluted Scienture valuation of $ 60,000,000 . The balance of the NVK debt upon the Scienture Merger and at September 30, 2024 was $ 2,000,000 . Interest expense on the NVK debt was $ 154,454 for the period ended September 30, 2024. August 2024 Note In August 2024, the Company issued a convertible note of $ 360,000 , for which the Company received $ 314,000 in net proceeds. On the six-month anniversary of the issuance, the Company will be required to make a payment of $ 360,000 to the noteholder and each month thereafter the Company will be required to make a payment of $ 7,200 to the noteholder towards repayment of the note (each, an “Amortization Payment”). The note bears interest at 12 % per annum and shall be deemed earned in full and guaranteed as of the note issuance date. If the Company fails to pay any Amortization Payment, the noteholder will have the right to convert the outstanding principal and accrued interest at a conversion price equal to the Conversion Price (as defined below and subject to a floor price of $ 1.50 ). The Conversion Price is the lesser of i) $ 8.36 or (ii) 85 % of the lowest volume-weighted average prices of the preceding five trading days . The note matures on August 20, 2025 . During the three and nine months ended September 30, 2024, the Company incurred $ 43,200 in interest expense pertaining to the note. In connection with the note, the Company issued 76,923 warrants to purchase common stock. The warrants have an exercise price of $ 9.36 per share, are immediately exercisable and have a term of 5 years. The fair value of the warrant was $ 71,332 , which was recognized as a debt discount and will be amortized to interest expense over the life of the note. Total debt discount recognized in connection with the note was $ 117,332 , of which $ 13,180 was amortized through September 30, 2024. The note payable, net of unamortized discount of $ 104,152 , was $ 255,848 as of September 30, 2024. Superlatus Notes Each of the promissory notes described below were obligations of Superlatus Foods, Inc., and all liabilities related to these notes ceased to be obligations of the Company upon the Company disposing of its entire interest in Supoerlatus in March 2024. On November 17, 2023, the Company issued a promissory note to Moku Foods, Inc. (the “Moku Foods November 2023 Note”) in the amount of $ 50,000 . The promissory note accrues interest at 11.5 % per annum, compounded monthly and is payable upon demand at any time after November 30, 2023. As of December 31, 2023, the balance of the Moku Foods November 2023 Note was $ 50,000 . The Company has accrued interest of $ 945 as of December 31, 2023. On March 5, 2024, the Company entered into the Superlatus SPA, whereby the Company sold its entire interest in Superlatus to Superlatus Foods, Inc. thereby transferring all assets and liabilities. On October 16, 2023, the Company issued a promissory note to Moku Foods, Inc. (the “Moku Foods October 2023 Note”) in the amount of $ 150,000 . The promissory note accrues interest at 11.5 % per annum, compounded monthly and is payable upon demand at any time after October 31, 2023. As of December 31, 2023, the balance of the Moku Foods October 2023 Note was $ 150,000 . The Company has accrued interest of $ 4,300 as of December 31, 2023. On March 5, 2024, the Company entered into the Superlatus SPA, whereby the Company sold its entire interest in Superlatus to Superlatus Foods, Inc. thereby transferring all assets and liabilities. 20 Table of Contents On September 27, 2023, the Company issued a promissory note to Perfect Day, Inc. (the “Perfect Day Note”) in the amount of $ 4,400,000 as consideration for the TUC APA (see Note 3). The promissory notes do not accrue interest and are payable upon demand at any time after October 31, 2023. The entire aggregate, unpaid principal sum of the note is immediately due and payable upon the occurrence of a change in control, as defined in the agreement. On March 5, 2024, the Company entered into the Superlatus SPA, whereby the Company sold its entire interest in Superlatus to Superlatus Foods, Inc. thereby transferring all assets and liabilities. On September 14, 2023, the Company issued a promissory note to Wellgisitcs (the “Wellgistics Note”) in the amount of $ 300,000 . The Company received a deposit of $ 200,000 on September 14, 2023, and an additional deposit of $ 100,000 on October 13, 2023. The Wellgisitcs Note accrues interest at 0 % per annum and is due and payable no later than 30 days after a change in control of borrower, as defined in the note agreement. As of December 31, 2023, the balance of the Wellgistics Note was $ 50,000 . The Wellgistics Note was fully paid off in February 2024. On June 16, 2023, the Company issued a secured debenture to Eat Well Investment Group, Inc. (the “Eat Well June 2023 Note”) in the amount of $ 1,150,000 for the purchase of Sapientia, a wholly-owned subsidiary of Superlatus. The Eat Well June 2023 Note is secured by 100 % of the membership interests in Sapientia. The Eat Well June 2023 Note began accruing interest at 12 % per annum, compounded monthly, as of October 31, 2023. The Eat Well June 2023 Note matured on December 31, 2023 . As of December 31, 2023, the balance of the Eat Well June 2023 Note was $ 1,150,000 . The Company has accrued interest of $ 23,063 as of December 31, 2023. On March 5, 2024, the Company entered into the Superlatus SPA, whereby the Company sold its entire interest in Superlatus to Superlatus Foods, Inc. thereby transferring all assets and liabilities. On February 8, 2023, Sapientia, a wholly-owned subsidiary of Superlatus, entered into a Loan Agreement with Eat Well Investment Group, Inc. (the “Eat Well February 2023 Note”) in the amount of $ 25,000 . The Eat Well February 2023 Note is unsecured, accrues interest at a rate of 1.87 % per annum, and matures February 7, 2025 . As of December 31, 2023, the balance of the Eat Well February 2023 Note was $ 25,000 . The Company has accrued interest of $ 418 as of December 31, 2023. On March 5, 2024, the Company entered into the Superlatus SPA, whereby the Company sold its entire interest in Superlatus to Superlatus Foods, Inc. thereby transferring all assets and liabilities. On September 14, 2022, Sapientia entered into a Loan Agreement with Eat Well Investment Group, Inc. (the “Eat Well September 2022 Note”) in the amount of $ 50,000 . The Eat Well September 2022 Note is unsecured, accrues interest at a rate of 1.87 % per annum, and matures September 13, 2024 . As of December 31, 2023, the balance of the Eat Well September 2022 Note was $ 50,000 . The Company has accrued interest of $ 1,212 as of December 31, 2023. On March 5, 2024, the Company entered into the Superlatus SPA, whereby the Company sold its entire interest in Superlatus to Superlatus Foods, Inc. thereby transferring all assets and liabilities. On July 26, 2022, Sapientia entered into a Loan Agreement with Eat Well Investment Group, Inc. (the “Eat Well July 26, 2022 Note”) in the amount of $ 35,000 . The Eat Well July 26, 2022 Note is unsecured, accrues interest at a rate of 1.87 % per annum, and matures July 25, 2024 . As of December 31, 2023, the balance of the Eat Well July 26, 2022 Note was $ 35,000 . The Company has accrued interest of $ 938 as of December 31, 2023. On March 5, 2024, the Company entered into the Superlatus SPA, whereby the Company sold its entire interest in Superlatus to Superlatus Foods, Inc. thereby transferring all assets and liabilities. 21 Table of Contents On July 12, 2022, Sapientia entered into a Loan Agreement with Eat Well Investment Group, Inc. (the “Eat Well July 12, 2022 Note”) in the amount of $ 25,000 . The Eat Well July 12, 2022 Note is unsecured, accrues interest at a rate of 1.87 % per annum, and matures July 11, 2024 . As of December 31, 2023, the balance of the Eat Well July 12, 2022 Note was $ 25,000 . The Company has accrued interest of $ 688 as of December 31, 2023. On March 5, 2024, the Company entered the Superlatus SPA, whereby the Company sold its entire interest in Superlatus to Superlatus Foods, Inc. thereby transferring all assets and liabilities. On March 15, 2022, Sapientia entered into a Loan Agreement with Eat Well Investment Group, Inc. (the “Eat Well March 2022 Note”) in the amount of $ 100,000 . The Eat Well March 2022 Note is unsecured, accrues interest at a rate of 1.87 % per annum, and matures March 14, 2024 . As of December 31, 2023, the balance of the Eat Well March 2022 Note was $ 100,000 . The Company has accrued interest of $ 3,361 as of December 31, 2023. On March 5, 2024, the Company entered into the Superlatus SPA, whereby the Company sold its entire interest in Superlatus to Superlatus Foods, Inc. thereby transferring all assets and liabilities. On February 1, 2022, Sapientia entered into a Loan Agreement with Eat Well Investment Group, Inc. (the “Eat Well February 2022 Note”) in the amount of $ 100,000 . The Eat Well February 2022 Note is unsecured, accrues interest at a rate of 1.87 % per annum, and matures February 1, 2024 . As of December 31, 2023, the balance of the Eat Well February 2022 Note was $ 100,000 . The Company has accrued interest of $ 3,576 as of December 31, 2023. On March 5, 2024, the Company entered into the Superlatus SPA, whereby the Company sold its entire interest in Superlatus to Superlatus Foods, Inc. thereby transferring all assets and liabilities. On January 20, 2022, Sapientia entered into a Loan Agreement with Eat Well Investment Group, Inc. (the “Eat Well January 2022 Note”) in the amount of $ 20,000 . The Eat Well January 2022 Note is unsecured, accrues interest at a rate of 1.87 % per annum, and matures January 20, 2024 . As of December 31, 2023, the balance of the Eat Well January 2022 Note was $ 20,000 . The Company has accrued interest of $ 728 as of December 31, 2023. On March 5, 2024, the Company entered into the Superlatus SPA, whereby the Company sold its entire interest in Superlatus to Superlatus Foods, Inc. thereby transferring all assets and liabilities. On December 24, 2021, Sapientia entered into a Loan Agreement with Eat Well Investment Group, Inc. (the “Eat Well December 2021 Note”) in the amount of $ 100,000 . The Eat Well December 2021 Note is unsecured, accrues interest at a rate of 1.87 % per annum, and matured December 24, 2023 . As of December 31, 2023, the balance of the Eat Well December 2021 Note was $ 100,000 . The Company has accrued interest of $ 3,776 as of December 31, 2023. On March 5, 2024, the Company entered into the Superlatus SPA, whereby the Company sold its entire interest in Superlatus to Superlatus Foods, Inc. thereby transferring all assets and liabilities. On November 10, 2021, Sapientia entered into a Loan Agreement with Eat Well Investment Group, Inc. (the “Eat Well November 2021 Note”) in the amount of $ 50,000 . The Eat Well November 2021 Note is unsecured, accrues interest at a rate of 1.87 % per annum, and matured November 10, 2023 . As of December 31, 2023, the balance of the Eat Well November 2021 Note was $ 50,000 . The Company has accrued interest of $ 2,001 as of December 31, 2023. On March 5, 2024, the Company entered into the Superlatus SPA, whereby the Company sold its entire interest in Superlatus to Superlatus Foods, Inc. thereby transferring all assets and liabilities. On August 18, 2021, Sapientia entered into a Loan Agreement with Eat Well Investment Group, Inc. (the “Eat Well August 2021 Note”) in the amount of $ 250,000 . The Eat Well August 2021 Note is unsecured, accrues interest at a rate of 1.87 % per annum, and matured August 18, 2023 . As of December 31, the balance of the Eat Well August 2021 Note was $ 250,000 . The Company has accrued interest of $ 11,079 as of December 31, 2023. On March 5, 2024, the Company entered into the Superlatus SPA, whereby the Company sold its entire interest in Superlatus to Superlatus Foods, Inc. thereby transferring all assets and liabilities. 22 Table of Contents NOTE 11 – STOCKHOLDERS’ EQUITY Designation of Series X Preferred Stock On July 25, 2024, the Company revoked the authorization to issue shares of the Company’s Series A Preferred Stock, par value $ 0.00001 per share (the “Series A Preferred Stock”). Concurrently with revoking the Company’s authority to issue Series A Preferred Stock, the Company authorized the issuance of up to 9,211,246 shares of the Series X Preferred Stock, a new class of preferred stock. Holders of the Series X Preferred Stock are entitled to receive dividends on shares of the Series X Preferred Stock on an as-if-converted-to-Common-Stock basis, without regard to any beneficial ownership limitation described in a letter of transmittal, equal to and in the same form and manner as dividends are paid to holders of the shares of Common Stock. Subject to any requirements of the General Corporation Law of the State of Delaware, the Series X Preferred Stock has no voting rights. The Series X Preferred Stock ranks on parity with shares of Common Stock as to distributions of assets upon liquidation, dissolution, or winding up of the Company. As consideration for the Scienture Merger, at the Effective Time o, the shares of Scienture common stock issued and outstanding immediately prior to the Effective Time were converted into the right to receive, in the aggregate, (i) 291,536 shares of the Company’s common stock and (ii) 6,826,753 shares of the Company’s Series X Preferred Stock, each share of which is convertible into one share of common stock. On September 20, 2024, all previously issued shares of Series X Preferred Stock were converted into a total of 6,826,753 shares of common stock. Designation of Series C Preferred Stock Effective October 4, 2023, the Company filed a Certificate of Designation, Preferences, Rights and Limitations of the Series C Preferred Stock with the Secretary of the State of Delaware which designated 1,000 shares of the Company’s authorized and unissued preferred stock as convertible Series C Preferred Stock at a par value of $ 0.00001 per share. Hudson Global Ventures Stock Purchase Agreement On October 4, 2023, the Company entered into a Securities Purchase Agreement the “Hudson SPA”) with Hudson Global Ventures, LLC (“Hudson”). Under the terms of the Hudson SPA, the Company agreed to sell, and Hudson agreed to purchase, Two Hundred Ninety ( 290 ) shares of Series C Preferred Stock (the “Purchased Shares”) at a price of $ 1,000 per share and a Warrant to purchase up to 41,193 shares of Common Stock. Additionally, pursuant to the Agreement, 40,000 shares of Common Stock were issued to Hudson upon closing for a commitment fee. The Company received $ 250,000 in exchange for the Purchased Shares, Common Stock, and Warrants, net of issuance costs. On July 12, 2024, the Company converted 290 shares of Series C Preferred Stock into 52,158 shares of common stock at the election of the holder. Designation of Series B Preferred Stock Effective June 26, 2023, the Company filed a Certificate of Designation, Preferences, Rights and Limitations of the Series B Preferred Stock with the Secretary of the State of Delaware which designated 787,754 shares of the Company’s authorized and unissued preferred stock as convertible Series B Preferred Stock at a par value of $ 0.00001 per share. 2023 1:15 Stock Split Effective June 21, 2023, the Company executed a 1:15 reverse stock split for stockholders of record on that date . This was executed to comply with the Nasdaq Listing Rule 5550(a)(2) to have the price of the stock above $ 1 . 23 Table of Contents Common Stock During the nine months ended September 30, 2024, the Company issued 470,482 shares of common stock for services. The fair value of shares issued for services was $ 4,450,919 and was included in general and administrative expenses in the consolidated statements of operations. During the nine months ended September 30, 2024, a warrants holder exercised a warrant and acquired 28,487 shares of common stock for $ 16,567 in proceeds (see Note 13). During the nine months ended September 30, 2024, an options holder exercised an option and acquired 2,371 shares of common stock for $ 9,840 in proceeds (see Note 14). On July 12, 2024, the Company converted 290 shares of Series C Preferred Stock into 52,158 shares of common stock at the election of the holder. On July 25, 2024, the Company issued 291,536 shares of common stock and 6,826,753 shares of Series X Preferred Stock pursuant to the Scienture Merger Agreement. The aggregate fair value of the purchase price consideration was $ 78,646,184 . In August 2024, the Company issued 28,571 shares of common stock pursuant to the exercise of warrants. On September 20, 2024, all previously issued shares of Series X Preferred Stock were converted into a total of 6,826,753 shares of common stock. Special Cash Dividend On March 6, 2024, the Company announced the declaration of a special cash dividend of eight dollars ($ 8.00 ) per share of common stock, payable to stockholders of record as of March 18, 2024, with the dividend being paid on March 22, 2024. The special dividend of $ 12,671,072 (in the aggregate) was paid using a portion of the proceeds from the closing of the sale of certain assets to MMS. On July 9, 2024, the Company announced the declaration of a special cash dividend of one dollar and fifty cents ($ 1.50 ) per share of common stock, payable to stockholders of record as of July 19, 2024, with the dividend being paid on July 22, 2024. The special dividend of $ 2,187,759 was paid using a portion of the proceeds received in May 2024 in connection with the sale of certain assets to MMS. Equity Compensation Awards Each independent member of the Company’s board of directors (the “Board”) is to receive an annual grant of restricted common stock of the Company equal to $ 55,000 in value on April 1st of each year (or such date thereafter as the awards are approved by the Board), and valued on such same date, based on the closing sales price on such date (or the first business day thereafter), which restricted stock awards will vest at the rate of 1/4th of such awards over the following four calendar quarters, subject to such directors continued service to the Company. Effective on August 13, 2023, the Board approved the issuance of 24,444 shares of common stock of the Company to each of Mr. Fell and Mr. Peterson (who each at the time of issuance were members of the Board) for services rendered to the Company during fiscal 2023, which shares were valued at $ 110,000 . The Board also approved the issuance of 14,056 shares of common stock of the Company to Jeff Newell (who, at the time of issuance was a member of the Board) for services rendered during fiscal 2023, which were valued at $ 63,250 based on the most recent close price of the Company’s common stock on the date approved by the Board. The shares vest at the rate of 1/4th of such shares immediately on the grant date, and 1/4th of such shares on each of October 1, 2023, January 1, 2024 and April 1, 2024, subject to each applicable independent director’s continued service to the Company on such dates. Additionally, the Board approved 10,000 shares with immediate vesting to each Board member to recognize the significant additional work for various financing, sales, acquisitions, operations restructuring. All of the awards discussed above were issued under the Company’s Second Amended and Restated 2019 Equity Incentive Plan (the “Plan”) and all restricted stock awards discussed above were evidenced by Restricted Stock Grant Agreements. The Company’s board of directors and stockholders approved an amendment to the Plan increasing the available shares under the Plan to 5,000,000 shares of the Common Stock as such common stock existed on July 24, 2024 (see Note 19). 24 Table of Contents NOTE 12 – PREFUNDED AND PRIVATE PLACEMENT WARRANTS On October 4, 2022 the Company entered into a securities purchase agreement (the “2022 SPA”) with an institutional investor (the “Purchaser”) which provided for the sale and issuance by the Company of (i) the Company’s common stock, (ii) pre-funded warrants (the “Pre-Funded Warrants”) and (iii) warrants (the “Private Placement Warrants” and, together with the shares of common stock and the Pre-Funded Warrants, the “Securities”). On January 4, 2023, the investor exercised the Pre-Funded Warrants for a purchase price of $ 6.02 . The investor was issued the shares on this date. Each Private Placement Warrant has an exercise price of $ 22.50 per share and is exercisable following the stockholder approval obtained in December 2022, and will expire on the fifth anniversary of the date on which the Private Placement Warrants became exercisable. The Private Placement Warrants contain standard adjustments to the exercise price including for stock splits, stock dividend, rights offerings and pro rata distributions, and include full ratchet anti-dilutive rights in the event the Company issues shares of Common Stock or Common Stock equivalents within fifteen months of the initial exercise date, with a value less than the then exercise price of such Private Placement Warrants, subject to certain customary exceptions, and further subject to a minimum exercise price of $ 3.48 per share. The Private Placement Warrants also include certain rights upon ‘fundamental transactions’ as described in the Private Placement Warrants, including allowing the holders thereof to require that the Company re-purchase such Private Placement Warrants at the Black Scholes Value of such securities. NOTE 13 – WARRANTS During the nine months ended September 30, 2024, 28,487 warrants to purchase shares of common stock were exercised for a total purchase price of $ 16,567 (see Note 12). In connection with a note (see Note 10), in August 2024 the Company issued 76,923 warrants to purchase common stock. The warrants have an exercise price of $ 9.36 per share, are immediately exercisable and have a term of 5 years. In August 2024, the holder exercised 28,571 warrants for shares of commons stock on a cashless basis. The Company uses the Black-Scholes pricing model to estimate the fair value of stock-based awards on the date of the grant. Compensation cost related to the warrants for the nine months ended September 30, 2024, and 2023 was $ 71,332 and $ 0 , respectively. As of September 30, 2024, the Company remeasured the fair value of warrants outstanding at $ 1,129,796 . In connection with remeasurement of warrants, a $ 502,178 gain and $ 392,843 loss was recognized during the three and nine months ended September 30, 2024, respectively, as the change in fair value of warrant liability. The Company recognized a $ 925,320 gain and $ 443,308 loss during the three and nine months ended September 30, 2023, respectively, as the change in fair value of warrant liability. The Company’s outstanding and exercisable warrants, as of September 30, 2024, are presented below: SCHEDULE OF OUTSTANDING AND EXERCISABLE WARRANTS Number Outstanding Weighted Average Exercise Price Contractual Life In Years Intrinsic Value Warrants outstanding as of December 31, 2023 218,729 19.62 3.95 - Warrants granted 76,923 9.36 - - Warrants forfeited, expired, cancelled - - - - Warrants exercised ( 57,058 ) 8.25 - - Warrants outstanding as of September 30, 2024 238,594 19.02 3.45 96,311 Warrants exercisable as of September 30, 2024 238,594 19.02 3.45 96,311 25 Table of Contents NOTE 14 – OPTIONS The Company maintains stock option plans under which certain employees are awarded option grants based on a combination of performance and tenure. The stock option plans provide for the grant of up to 155,556 shares, and the Plan provides for automatic increases in the number of shares available under such plan (currently 133,333 shares) on April 1 st of each calendar year, beginning in 2021 and ending in 2029 (each a “Date of Determination”), in each case subject to the approval and determination of the administrator of the plan (the Board of Directors or Compensation Committee) on or prior to the applicable Date of Determination, equal to the lesser of (A) ten percent (10%) of the total shares of common stock of the Company outstanding on the last day of the immediately preceding fiscal year and (B) such smaller number of shares as determined by the administrator. The administrator as a result of the annual meeting shareholder vote increased the number of shares available to grant to employees under the Plan by 2,000,000. The administrator did not approve an increase in the number of shares covered under the Plan as of April 1, 2022. The Company’s board of directors and stockholders approved an amendment to the Plan increasing the available shares under the Plan to 5,000,000 shares of the Common Stock as such common stock existed on July 24, 2024. For the nine months ended September 30, 2024, no options to purchase shares were granted. For the nine months ended September 30, 2024, 2,371 options to purchase shares of common stock were exercised for $ 9,840 in cash (see Note 12). Total compensation cost related to stock options granted was $ 437 and $ 3,761 for the three months ended September 30, 2024, and 2023, respectively. Total compensation cost related to stock options granted was $ 25,147 and $ 25,978 for the nine months ended September 30, 2024 and 2023, respectively. The following table represents stock option activity for the nine-month period ended September 30, 2024: SCHEDULE OF STOCK OPTION ACTIVITY Number Outstanding Weighted-Average Exercise Price Weighted-Average Contractual Life in Years Intrinsic Value Options outstanding as of December 31, 2023 26,229 $ 43.04 3.70 $ - Options exercisable as of December 31, 2023 16,141 60.75 3.64 - Options granted - - - - Options adjusted 72 - - - Options expired - - - - Options exercised ( 2,371 ) 53.29 3.07 - Options outstanding as of September 30, 2024 23,930 40.78 2.93 13,625 Options exercisable as of September 30, 2024 23,930 42.16 2.05 13,625 NOTE 15 – CONTINGENCIES Studebaker Defense Group, LLC In July 2020, the Company’s wholly-owned subsidiary, IPS, entered into an agreement with Studebaker Defense Group, LLC (“Studebaker”) wherein IPS would pay Studebaker a down payment of $ 550,000 and Studebaker would deliver 180,000 boxes of nitrile gloves by August 14, 2020. IPS wired the $ 550,000 to Studebaker, but to date, Studebaker has not delivered the gloves or provided a refund of the deposit. In December 2020, the Company filed a complaint against Studebaker in Florida state court, Case No. 20-CA-010118 in the Circuit Court for the Thirteenth Judicial Circuit in Hillsborough County, for among other things, breach of contract. Studebaker did not answer the complaint, nor did counsel for Studebaker file an appearance. Accordingly, in February 2021, the Company filed for a default judgment; however, on March 22, 2021, counsel for Studebaker filed an appearance and shortly thereafter filed a motion to vacate the default judgment and dismiss the complaint on jurisdictional grounds. The court granted Studebaker’s motion to set aside the default judgment but denied the motion to dismiss. At June 30, 2021, the $ 500,000 was recorded as Loss on Inventory Investment. The Company won this case but has not collected any settlement yet, another lawsuit was filed to collect. 26 Table of Contents On April 13, 2023, a settlement was reached in the Studebaker and IPS legal case. The court found in favor of IPS and ordered Studebaker to pay $ 550,000 to IPS. The payments were to commence on May 1, 2023 and continue monthly in 17 instalments until the full amount is paid in full but as of the filing date, no payment has been received by IPS. GSG PPE, LLC On November 19, 2021, IPS filed a complaint against GSG PPE, LLC (“GSG”) and Gary Waxman (“Waxman”), the owner, alleging three counts of breach of contract for a purchase agreement, a promissory note, and a personal guaranty. Collectively, the company alleges that GSG and Waxman have materially breached all three contracts. In late 2020, GSG and IPS executed a valid initial contract setting the terms of a business transaction. GSG failed to pay IPS approximately 75% of the amount owed to IPS. GSG acknowledged it owed the money and executed a promissory note in favor of IPS in the amount of $ 630,000 which matured on September 30, 2021 . The note provides for attorney fees and interest in addition to the $ 630,000 . Waxman’s personal guaranty confirmed that GSG owed IPS $ 630,000 . On September 30, 2021, the $ 630,000 was recorded as Bad Debt Expense. A settlement was entered into between the parties in June 2022, whereby GSG and Waxman agreed to pay $ 743,000 which included attorney fees and interest, which is required to be paid to the Company in monthly instalments over 17 months. The Company received additional monthly instalment payments as part of the agreement through January 2023. As of September 30, 2024, and through the date of this filing, the Company has not received the monthly installment payments due to the Company from GSG since January of 2023. Exclusive License and Commercial Agreements Scienture entered into an exclusive license and commercial agreement with Kesin Pharma Corporation (“Kesin”) whereby Scienture granted the exclusive license rights to commercialize SCN-102 in 2022 and SCN-104 in 2023 to Kesin (SCN-102 and SCN-104 are together referred to as “the Products”) for use in the United States of America. In March 2024, the parties terminated the agreement, and the parties agreed that Scienture shall pay Kesin a total gross amount of $ 1,285,000 upon commercialization of product via a royalty arrangement. This agreement also requires that if the full $1,285,900 has not been repaid within two years of the early of i) commercial launch or ii) 120 from FDA approval, then interest will accrue prospectively at a rate of 8% annually on unpaid balance. Accordingly, Scienture recorded a $1,285,000 termination fee liability . As of September 30, 2024, the entire amount is outstanding. In August 2024, Kesin demanded immediate payment of the full amount under the Kesin Termination Agreement, alleging the full amount is payable in connection with the consummation Scienture’s business combination with the Company. Scienture has disputed that the amount is now payable, and the parties are in discussions to resolve the issue. There can be no assurance that an amicable resolution will be obtained. If Kesin brings a legal action, Scienture will vigorously defend it. NOTE 16 – LEASES The Company entered into a warehouse lease in October 2023. The Company determined that the new lease required measurement and recognition of the lease liability and right-of-use assets of $ 351,581 . The lease is classified as an operating lease. No incentives were included in the lease. 27 Table of Contents On July 25, 2024, the Company entered into and closed the Scienture Merger Agreement. Pursuant to the Scienture Merger Agreement, the Company acquired right of use asset value of $ 61,578 and right of use liability of $ 61,886 on the acquisition date together with all the assets and liabilities of Scienture. The table below reconciles the fixed component of the undiscounted cash flows for and the total remaining years to the lease liabilities recorded in the consolidated balance sheet as of September 30, 2024. SCHEDULE OF FUTURE MINIMUM PAYMENTS FOR OPERATING LEASE LIABILITIES Future lease obligations 2024 remaining $ 20,633 2025 83,538 2026 73,084 2027 56,919 2028 48,612 Total minimum lease payments 282,786 Less: effect of discounting ( 48,538 ) Present value of future minimum lease payments 234,248 Less: current obligation under lease 60,882 Long-term lease obligations $ 173,366 For the three months ended September 30, 2024, and 2023, total operating lease expense was $ 28,034 and $ 75,496 , respectively, which is included in general and administrative expenses in the condensed consolidated statements of operations, as well as $ 62,656 from discontinued operations, respectively. For the nine months ended September 30, 2024, and 2023, total operating lease expense was $ 53,715 and $ 226,488 , respectively, which is included in general and administrative expenses in the condensed consolidated statements of operations, as well as $ 187,968 from discontinued operations, respectively. For the three months ended September 30, 2024, and 2023, total short-term lease expense was $ 0 and $ 6,010 , respectively, which is included in general and administrative expenses in the condensed consolidated statements of operations, respectively. For the nine months ended September 30, 2024, and 2023, total short-term lease expense was $ 10,228 and $ 20,049 , respectively, which is included in general and administrative expenses in the condensed consolidated statements of operations, respectively. NOTE 17 – SEGMENT REPORTING Operating segments are defined as the components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision makers in deciding how to allocate resources and in assessing performance. The Company’s chief operating decision makers direct the allocation of resources to operating segments based on the profitability, cash flows, and growth opportunities of each respective segment. The Company classifies its business interests into reportable segments which are: ● IPS - Licensed wholesaler of brand, generic and non-drug products – B2B sales ● Scienture – pharmaceutical research company which is engaged in the research and development of branded pharmaceutical products ● Unallocated - Other – corporate overhead expense and discontinued operations. SCHEDULE OF BUSINESS INTERESTS INTO REPORTABLE SEGMENTS Three Months Ended September 30, 2024 Integra Scienture Unallocated Total Revenue $ 64,861 $ - $ - $ 64,861 Gross Profit 3,883 - - 3,883 Segment Assets 4,315,259 84,758,070 5,186,364 94,259,693 Segment Profit/Loss ( 606,138 ) ( 1,643,455 ) ( 934,008 ) ( 3,183,601 ) Cost of Sales $ 60,978 $ - $ - $ 60,978 Three Months Ended September 30, 2023 Integra Scienture Unallocated Total Revenue $ 392,286 $ - $ - $ 392,286 Gross Profit 39,592 - - 39,592 Segment Assets 349,334 - 21,304,509 21,653,843 Segment Profit/Loss ( 180,814 ) - ( 3,344,300 ) ( 3,525,114 ) Cost of Sales $ 352,694 $ - $ - $ 352,694 Nine Months Ended September 30, 2024 Integra Scienture Unallocated Total Revenue $ 83,560 $ - $ - $ 83,560 Gross Profit 3,180 - - 3,180 Segment Assets 4,315,259 84,758,070 5,186,364 94,259,693 Segment Profit/Loss ( 1,191,224 ) ( 1,643,455 ) 19,063,209 16,228,530 Cost of Sales $ 80,380 $ - $ - $ 80,380 Nine Months Ended September 30, 2023 Integra Scienture Unallocated Total Revenue $ 1,235,168 $ - $ - $ 1,235,168 Gross Profit 162,990 - - 162,990 Segment Assets 349,334 - 21,304,509 21,653,843 Segment Profit/Loss ( 388,900 ) - ( 5,789,045 ) ( 6,177,945 ) Cost of Sales $ 1,072,178 $ - $ - $ 1,072,178 28 Table of Contents