What changed in this filing

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Item 7. Management’s Discussion and Analysis

2026-03-30 compared with 2025-03-26 · 325 added, 236 removed, 109 unchanged (84% of the section changed)

32 unchanged sentences

in our reported financial results and forecasts.

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,

Company owned, as of December 31, 2024, 100% of Softell Inc.

(f/k/a Trxade Inc.), Integra Pharma Solutions, LLC and Scienture, LLC (f/k/a

Scienture, Inc.).

October 4, 2024, the Company and Softell entered into IPS Assignment Agreement, pursuant to which the Company transferred, and Softell

July 25, 2024, we acquired a wholly-owned subsidiary, Scienture LLC.

Scienture LLC is a specialty pharmaceutical company focused on the

commercialization and development of products for the treatment of Cardiovascular (CVS) and Central Nervous System (CNS) diseases.

Scienture LLC launched its first commercial product for hypertension and is in the process of commercializing its second product for

the treatment of opioid overdose.

Its development pipeline consists of a broad range of novel product candidates including new

potential treatments for migraine, thrombosis, pain and other related disorders.

Scienture LLC’s mission is to 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.

was formed on February 15, 2022.

The Company entered into a relationship with Exchange Health, LLC (“Exchange Health”), a

technology company providing an online platform for manufacturers and suppliers to sell and purchase pharmaceuticals, pursuant to which

SOSRx, a Delaware limited liability company, was formed, which was owned 51% by the Company and 49% by Exchange Health.

SOSRx did not

generate material revenue and in February 2023 the Company voluntarily withdrew from the joint venture agreement.

Specialty Pharmacy, LLC and Alliance Pharma Solutions, LLC

January 20, 2023, the Company entered into Membership Interest Purchase Agreements to sell 100% of the outstanding membership interests

of the Company’s former subsidiaries, Community Specialty Pharmacy, LLC and Alliance Pharma Solutions, LLC (d.b.a DelivMeds).

Company also agreed to enter into a Master Service Agreement to operate the businesses prior to closing.

The transactions contemplated

by the Membership Interest Purchase Agreements closed on August 22, 2023.

July 14, 2023, the Company entered into the Superlatus Merger Agreement with Superlatus Inc., a diversified food technology company,

and Merger Sub.

July 31, 2023, the Company completed its acquisition of Superlatus in accordance with the terms and conditions of the Superlatus Merger

Agreement, 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.

the terms of the Superlatus Merger Agreement, at the Closing, 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, 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.

October 13, 2023, the Company announced that Superlatus PD Holding Company, Inc., a purported subsidiary of Superlatus, entered into

a supplier agreement with Rainforest, pursuant to which Superlatus allegedly appointed Rainforest as its exclusive distributor for Superlatus’

portfolio of consumer packaged goods brands in certain markets.

The Company later learned and announced that neither the Company’s

management nor the Company’s Board of Directors authorized or approved the organization of Superlatus PD Holding Company, Inc.

or the entry into the supplier agreement.

Instead, the Company’s management determined that certain representatives of a former

subsidiary of the Company likely unilaterally took actions related to the supplier agreement.

January 8, 2024, the Company entered into the Superlatus Amendment as not all of the closing conditions of the Superlatus Merger Agreement

Under the terms of the Superlatus Amendment, the merger consideration to the shareholders of Superlatus was adjusted to the

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.

March 5, 2024, the Company entered into the Superlatus SPA with the Buyer, Superlatus Foods Inc.

Pursuant to the Superlatus SPA, the

Company sold all of the issued and outstanding stock of Superlatus to the Buyer.

A $1.00 purchase price 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 is

no longer 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.

Legacy Subsidiaries

Company also previously owned 100% of Softell, IPS, Bonum Health, Inc., and Bonum Health, LLC.

& IPS Entities

October 4, 2024, the Company and Softell entered into the IPS Assignment Agreement, pursuant to which the Company transferred, and Softell

accepted, 100% of the membership interests of 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

IPS is a licensed pharmaceutical wholesaler and sells brand, generic and non-drug products to customers.

IPS’ customers

include all healthcare markets including government organizations, hospitals, clinics and independent pharmacies nationwide.

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 is in the process of determining a divestment and winddown plan for Softell and IPS.

On January 25, 2025,

the Company’s Board of Directors approved the preparation of a divestment and winddown plan for the winddown of each of Softell,

IPS, Bonum Health, Inc., and Bonum.

LLC 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 LLC also plans to foray into commercialization of innovative and branded pharmaceutical products

in the US market.

Scienture LLC’s assets in development are across therapeutics areas and indications and cater to different market

Scienture LLC’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.

ITEM 1 of PART 1

See ITEM 1 of PART 1

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 “Name Change”).

Other than the Name Change, there were no changes to the Company’s certificate of

incorporation or bylaws.

September 23, 2024, the Company’s common stock trades under the ticker symbol “SCNX”.

The Name Change resulted in a

change to the CUSIP number for the Company’s outstanding shares of common stock offered on the Nasdaq Stock Market LLC.

As a result, IPS became a wholly-owned subsidiary of Softell.

April 8, 2025, the Company entered into the IPS MIPA with Tollo, pursuant to which Tollo agreed to purchase and the Company agreed to

sell all of the Company’s membership interests in IPS.

Suren Ajjarapu, the Company’s former Chief Executive Officer, and

Prashant Patel, the Company’s former President and Chief Operating Officer, each have a beneficial interest in Tollo.

April 8, 2025, the Company also entered into the Softell SPA with Tollo, pursuant to which Tollo agreed to purchase and the Company agreed

to sell all issued and outstanding shares of common stock of Softell.

Health Entities

April 8, 2025, the Company also entered into the Bonum SPA with Tollo, pursuant to which Tollo agreed to purchase and the Company agreed

to sell all issued and outstanding shares of common stock of Bonum Health, Inc.

November 2025, the Company dissolved Bonum Health, LLC.

divestitures described above are part of a broader strategic realignment at the Company designed to sharpen operational focus and unlock

long-term value.

It is aligned with the Company’s commitment to streamline its core operations, optimize its portfolio, and accelerate

growth in the Branded and Specialty Pharma markets.

The Company intends to use the proceeds obtained from the divestment to facilitate

the high-growth commercial and strategic product development activities at its Scienture LLC subsidiary.

Company believes that the key benefits of the divestitures include:

Operational Efficiency :

Streamlining the Company’s structure aimed at strengthening its balance sheet, providing

for leaner operations and a more agile decision-making framework.

Consolidating overlapping functions and eliminating redundancies intended to cause annualized cost savings.

Affording the full focus and deployment of resources to the commercial products and the high value product pipeline

in development at its Scienture subsidiary.

Outlook Cash Explanation

primary objectives for the year of 2025 are expected to be the continued implementation of the Scienture LLC business plan, and to complete

potential strategic transactions of our business-to-consumer subsidiaries, which may include a potential sale, spin-off, fund raising,

combination or other strategic transaction, and also include the winding down of such entities.

There can be no assurance that our operations

will generate significant positive cash flow, or that additional funds will be available to us, through borrowings or otherwise, on favorable

terms if required in the future, or at all.

We may also raise additional funding in the future through the sale of equity.

estimate our operating expenses and working capital requirements for the next 12 months to be approximately as follows:

Expenses from January 2025 to December 2025

administrative (1)

Includes estimated wages and payroll, legal and accounting, marketing, rent and research and development.

may require additional funding in the future to implement on our business plan and potentially to expand or complete acquisitions.

sources of this capital are expected to be equity investments and notes payable.

Our plan for the next twelve months is to continue using

the same marketing and management strategies to promote our IPS assets and operations, exploring strategic transactions involving our

corporate assets, while also seeking to expand our and Scienture LLC operations organically or through acquisitions, as funding and opportunities

In the event we require additional funding, we plan to raise that through the sale of debt or equity, which may not be available

on favorable terms, if at all, and may, if sold, cause significant dilution to existing stockholders.

If we are unable to access additional

capital moving forward, it may hurt our ability to grow and to generate future revenues.

accompanying 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.

of December 31, 2024, the Company had an accumulated deficit of $39,038,973 and $308,096 in cash.

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.

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.

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

Net cash (used in) provided by

operating activities from continuing operations

of December 31, 2025, the Company’s primary source of liquidity consisted of $6,662,008 in cash and cash equivalents and the

Tollo promissory note with a principal balance of $5,000,000 (bearing interest at the prime rate and maturing June 30, 2030).

Company has financed its operations primarily through equity issuances under its equity line of credit (“ELOC”) and

convertible note arrangements.

During the year ended December 31, 2025, the Company raised approximately $26.3 million in gross

equity proceeds through ELOC and other equity transactions.

The Company’s principal uses of cash are commercialization of

ARBLI™ and REZENOPY TM research and development, general and administrative costs, and debt service.

expects to fund its operations for at least the next twelve months from its existing cash balance and revenues generated from

ARBLI™ commercialization, which commenced in the third quarter of 2025 and is expected to grow in 2026.

The company also

expects to generate revenue from REZENOPY TM which is anticipated to commence in the second quarter of 2026.

may also raise additional funding through the sale of debt or equity to fund accelerated pipeline development activities;

there can be no assurance that such funding will be available on favorable terms, or at all.

Company’s ability to continue to fund operations beyond the next twelve months will depend on its ability to grow revenues

from the commercialization of ARBLI™ and REZENOPY TM and, if needed, to access additional capital markets.

Management continues to evaluate potential strategic transactions and partnerships to accelerate product development and

commercialization across the pipeline.

consolidated financial statements have been prepared on a going concern basis.

As of December 31, 2025, the Company had cash and cash

equivalents of $6,662,008, positive working capital of approximately $5,181,000, and current liabilities of approximately $2,735,000.

Management evaluated conditions and events in accordance with ASC 205-40 and determined that, based on the factors described below, there

is no substantial doubt about the Company’s ability to continue as a going concern for the twelve-month period following the date

these financial statements are issued.

See also “Note 2 – Going Concern” in the Notes to Consolidated Financial Statements

for further discussion.

of December 31, 2025, the Company had an accumulated deficit of $80,551,237 and cash and cash equivalents of $6,662,008.

had current liabilities of $2,735,351 and working capital of approximately $5,181,000, an improvement of approximately $6,782,000 from

the working capital deficit of $(1,601,416) as of December 31, 2024.

believes that the Company’s existing cash of $6,662,008, combined with growing revenues from ARBLI™ and

REZENOPY TM commercialization and its plans to access additional capital as needed, will be sufficient to fund operations

and meet its obligations for at least the twelve months following the issuance of these financial statements.

Key factors supporting

this assessment include:

(i) cash on hand of $6.7 million, which management believes is sufficient to cover current operating

requirements;

(ii) positive working capital of approximately $5.2 million as of December 31, 2025, compared to a working capital

deficit of approximately $(1.6) million as of December 31, 2024;

(iii) initial revenues from ARBLI™ commencing in the third

quarter of 2025, with projected revenue growth in 2026;

(iv) initial revenues from REZENOPY™ commencing in the third quarter of 2025, with

projected revenue growth in 2026 and (v) the Company’s ability to modulate discretionary spending and access equity markets,

as demonstrated by raising approximately $26.3 million in gross equity proceeds during 2025.

following table summarizes the Company’s Consolidated Statements of Cash Flows for the years ended December 31, 2025 and 2024:

Year Ended December 31, 2025

Year Ended December 31, 2024

Net cash used in operating activities from continuing operations

$ (13,382,482 )

$ (13,286,163 )

Net cash used in operating activities from

discontinued operations

Net cash provided by (used in) operating activities from discontinued operations

Operating Activities

1 unchanged sentence

$ (14,265,238 )

Net cash used in investing activities from

continuing operations

Net cash provided by investing activities from

discontinued operations

Net cash used in investing activities from continuing operations

$ (2,379,024 )

Net cash provided by investing activities from discontinued operations

(29,931,815 )

Investing Activities

Net cash (used in) provided by financing

activities from continuing operations

$ (27,552,791 )

Net cash provided by (used in) financing activities from continuing operations

$ (12,974,770 )

Net cash used in financing activities from

discontinued operations

Net cash used in financing activities from discontinued operations

Financing Activities

$ (12,979,770 )

(14,386,102 )

Net change in cash

$ (1,094,577 )

used in operating activities for the year ended December 31, 2024, was $14,265,238 compared to $2,225,192 in 2023.

The increase in

cash used in operations for the year ended December 31, 2024 was mainly due to our net loss and cash used in operating assets and

liabilities in 2024 driven by other receivables, partially offset by non-cash charges.

provided by investing activities for the year ended December 31, 2024, was $27,552,791 and cash used in investing activities was $275,717

for the year ended December 31, 2023.

The increase in cash provided by investing activities in 2024 was primarily due to the MMS disposition

in the first quarter and cash received in acquisition of Scienture, Inc., partially offset by the investment in securities of $2,500,000.

Cash provided by in financing activities for the year ended December 31, 2024, was ($14,979,770) compared to $1,406,332 of cash provided

by financing activities for the year ended December 31, 2023.

The change was primarily due to the payment of dividends of $14,858,831

In August 2024, the Company received note proceeds of $314,000 and $2,640,000 in net proceeds from convertible debenture in

November 2024.

cash used in operating activities from continuing operations for the year ended December 31, 2025 was $13,382,482, compared to net cash

used in operating activities of approximately $13,286,163 for the year ended December 31, 2024.

The net loss of $43,507,142 was the primary

driver of cash used in operations in 2025, partially offset by significant non-cash charges including $26,346,050 of impairment losses,

$3,161,100 of debt discount amortization, $2,068,892 of stock-based compensation expense, $4,310,090 of common stock issued for services,

$453,846 of amortization of intangible assets, and gains on warrant and derivative fair value changes of $3,205,854.

Changes in working

capital used cash of approximately $3,0,000, primarily driven by increases in accounts receivable and inventory associated with the

ARBLI™ commercialization launch.

cash provided by (used in) investing activities from continuing operations was $0 for the year ended December 31, 2025 and $2,379,024

net cash used in investing activities from continuing operations for the year ended December 31, 2024.

Net cash provided by investing

activities from discontinued operations was $0 for 2025, compared to $29,931,815 in 2024, which primarily reflected proceeds from the

disposition of Micro Merchant Systems assets and other asset sales completed in the first and second quarters of 2024.

cash provided by financing activities from continuing operations for the year ended December 31, 2025 was $19,733,595, compared to net

cash used in financing activities of approximately $12,980,000 for the year ended December 31, 2024.

Cash provided by financing activities

in 2025 was primarily driven by gross proceeds of $26,293,039 from the issuance of common stock through the Company’s ELOC and other equity transactions, partially offset by repayment of convertible notes of $9,244,444, net repayment of related

party loans of $415,000, and development liability payments of $400,000.

The year ended December 31, 2024 reflected cash used in financing

activities primarily due to the payment of special cash dividends of approximately $14,858,000 partially offset by proceeds from convertible

note issuances.

of Operations

following selected consolidated financial data should be read in conjunction with the unaudited consolidated financial statements and

the notes to these statements included above.

following selected consolidated financial data should be read in conjunction with the audited consolidated financial statements and the

notes to these statements included in this Annual Report.

Ended December 31, 2025 Compared to Year Ended December 31, 2024

3 unchanged sentences

Professional fees

Accounting and legal

Accounting and legal expense

Technology expense

General and administrative

(including stock-based compensation expense)

General and administrative (including stock-based compensation expense)

Research and development

operating expenses

Change in fair value

of warrant liability

Change in fair value

of derivative liability

Investment impairment

Impairment loss

Total operating expenses

Change in fair value of warrant liability

Change in fair value of derivative liability

Impairment of investment

Loss on conversion of note payable

Loss on disposition of subsidiaries

Interest income

Loss on disposal of

Loss on disposal of asset

Interest expense

loss from continuing operations

Net loss from continuing operations

(43,507,142 )

(18,778,876 )

(24,728,266 )

Benefit / (provision) for income taxes

1 unchanged sentence

(41,512,264 )

Income (loss) from discontinued operations,

Net income/(loss)

(18,244,480 )

were $136,643 in revenues for the year ended December 31, 2024.

Revenues decreased by $1,227,187, compared to the same period ended December

31, 2023 primarily because of the disposition of the assets and operations of Softell completed in February 2024 which resulted in the

Company having fewer revenue generating operations when compared to the comparable period in 2023.

the year ended December 31, 2024, cost of goods sold and gross profit were $130,638 and $6,005, and $1,314,800 and $49,031, all

respectively for the same period in 2023.

Cost of goods sold decreased by $1,184,162, compared to the same period ended December 31,

2023 primarily because of the disposition of the assets and operations of Softell completed in February 2024 which resulted in the

Company having fewer cost of goods sold.

Gross profit as a percentage of sales was 4.39% for the year ended December 31, 2024,

compared to 3.60% for the year ended December 31, 2023.

and salary expense increased by $1,484,520 for the year ended December 31, 2024 to $2,111,067 compared to $626,547 for the comparable

period in 2023.

The increase is primarily due to an increase in salary of the COO and CEO of IPS, as well as the increased personnel

as a result of the Scienture Merger in July 2024, as compared to the same period in 2023.

fees increased by $583,196 to $1,458,332 compared to $875,136 for the comparable period in 2023.

The increase was primarily due to increase

in Board members’ fees and consulting expense and post- acquisition professional fees of Scienture LLC.

and legal expenses increased by $162,836 for the year ended December 31, 2024 to $1,669,717 compared to $1,506,881 for the comparable

period in 2023.

The increase is primarily due to increase in amount of legal services during the year ended December 31, 2024 as compared

to the same period in 2023.

and administrative expenses (including stock-based compensation expense) increased by $5,369,446 for the year ended December 31, 2024,

to $6,706,082 compared to $1,336,637 for the comparable period in 2023.

The increase was mainly due to shares issued for services at

fair value of $4,598,294 in 2024.

expense increased by $316,031 for the year ended December 31, 2024 to $416,311 compared to $100,280 for the comparable period in 2023.

The increase was mainly due to increased software expense and software support expense.

and development expense pertaining to Scienture LLC’s operations post-acquisition was $2,236,690 for the year ended December 31,

Research and development expenses was mainly due to contract research

organization costs of Scienture LLC.

Total expenses by program were as follows:

Project Codes

research and development expense

had interest expense of $1,335,631 for the year ended December 31, 2024, compared to interest expense of $1,143,223 for the year ended

December 31, 2023.

The increase is due to the interest expense on Scienture LLC’s convertible debt, the convertible notes issued

in August and 2024, and related debt discount amortization on these notes, partially offset by the Superlatus notes no longer being outstanding

after its disposition in early 2024.

recognized a loss on the change in the fair value of the warrant liability of $182,982 for the year ended December 31, 2024 compared

to a loss of $148,420 during the year ended December 31, 2023, based on the underlying valuation inputs.

recognized a loss on the change in the fair value of the derivative liability of $180,383 for the year ended December 31, 2024, based

on the underlying valuation inputs and the conversion features of the Arena convertible debenture.

recognized impairment loss of $2,500,000 of the investment in equity securities for the year ended December 31, 2024.

the year ended December 31, 2024, the Company incurred a net loss from continuing operations of $18,244,480 compared to $8,482,864 for

the year ended December 31, 2023.

The change was due to change in operating income, other income (expense),

and provision for income taxes.

income from discontinued operations increased by $36,670,988 to a net income of $27,310,278 for the year ended December 31, 2024, compared

to a net loss from discontinued operations of $9,360,710 for the year ended December 31, 2023.

The increase was primarily due to the

disposal of Softell assets, partially offset by loss on disposal of Superlatus during the year ended December 31, 2024.

and Capital Resources

was $308,096 as of December 31, 2024, compared to $314 as of December 31, 2023.

The increase in cash was primarily due to the proceeds

in February 2024 and May 2024 related to the disposition of certain assets to MMS as described above and convertible debentures issued

in November 2024.

We expect that our future available capital resources will consist primarily of cash generated from operations, remaining

cash balances, borrowings, and additional funds raised through sales of debt and/or equity securities.

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

Current assets (excluding cash)

Current liabilities

(23,267,784 )

Working capital

Income from discontinued operations, net of tax

(27,310,278 )

Net (loss) income

$ (41,512,264 )

principal sources of liquidity have historically been cash provided by operations, sales of business assets and operations from time

to time, sales of equity, and borrowings under various debt arrangements.

Our principal uses of cash have been for operating expenses,

technology development, and acquisitions.

We anticipate these uses will continue to be our principal sources of, and uses of, cash in

increase in cash as of December 31, 2024 compared to 2023 was primarily due to the proceeds received in February 2024 and May 2024 resulting

from the disposition of assets to MMS as described above, as well as the convertible note issued in August 2024 and convertible debentures

issued in November 2024.

Cash Dividend

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 was

paid using a portion of the proceeds from the closing of the sale of certain assets.

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 was

$2,187,759 paid using a portion of the proceeds received in May 2024 in connection with the February 2024 sale of certain assets.

$ (50,578,062 )

and Gross Profit

for the year ended December 31, 2025 were $431,609, compared to $136,643 for the year ended December 31, 2024, an increase of $294,966,

or approximately 216%.

The increase reflects initial sales of ARBLI™ (SCN-102, Losartan Potassium Oral Suspension) through wholesale

distribution channels, which commenced in the third quarter of 2025 following FDA approval in March 2025.

Revenue in 2024 consisted primarily

of residual pharmaceutical wholesale activity prior to the IPS disposition.

Cost of sales for the year ended December 31, 2025 was $100,127,

resulting in gross profit of $331,482 (gross margin:

76.8%), compared to cost of sales of $130,638 and gross profit of $6,005 (gross

4.4%) for the year ended December 31, 2024.

The improvement in gross margin reflects the shift to higher-margin branded pharmaceutical

sales through ARBLI™ versus the prior-period lower-margin wholesale distribution activity.

operating expenses were $42,922,324 for the year ended December 31, 2025 compared to $14,707,020 for the year ended December 31, 2024.

The increase of $28,215,304 was primarily driven by non-cash impairment charges of $26,346,050 recognized in 2025 (comprising a goodwill

impairment of $21,372,960 and IPR&D impairment of $4,973,090), with no comparable charge in 2024.

Excluding impairment charges, total

operating expenses were $16,576,274 in 2025 compared to $14,707,020 in 2024.

Key components of operating expenses were as follows:

and salary expense was $2,118,568 for the year ended December 31, 2025, relatively flat compared to $2,111,066 for 2024.

fees increased $949,490 to $2,407,822 in 2025 from $1,458,332 in 2024, primarily due to higher external consulting costs related to commercialization

activities, SEC compliance, and corporate actions.

Accounting and legal expense was $2,070,337 in 2025 compared to $1,807,041 in 2024,

an increase of $263,296, driven by incremental costs associated with the year-end audit, SEC filings, and legal matters.

administrative expenses (including non-cash stock-based compensation) increased $1,248,436 to $7,926,016 in 2025 from $6,677,580 in 2024,

primarily due to higher non-cash stock-based compensation expense and costs associated with ARBLI™ commercialization activities.

Technology expense decreased $319,050 to $97,261 in 2025 from $416,311 in 2024, primarily reflecting the wind-down of legacy technology

platform expenses following the IPS and Softell dispositions.

Research and development expenses were $1,956,270 in 2025 compared to $2,236,690

in 2024, a decrease of $280,420, reflecting shifts in the timing of CRO and regulatory spending across our pipeline programs (SCN-102:

$500K in 2025).

Non-Operating

Income (Expense)

Non-operating

income (expense) for the year ended December 31, 2025 included:

a gain on the change in fair value of warrant liability of $909,020

loss of $182,982), reflecting mark-to-market decreases in warrant fair value;

a gain on the change in fair value of the

derivative liability of $2,296,834 (2024:

gain of $180,383), primarily related to the derecognition of the Arena convertible

debenture derivative liability upon full repayment;

interest income of $302,702 (2024:

$135,337) on the Tollo promissory note;

interest expense of $4,083,206 (2024:

$1,335,631), reflecting a full year of amortization of debt discount and interest on the Arena

debenture and other convertible notes;

a loss on conversion of note payable of $53,446;

and a loss on disposition of subsidiaries of

$288,204, primarily related to the Bonum Health, Inc.

and Softell transactions.

The Company recognized an income tax benefit of

$1,994,878 for the year ended December 31, 2025 (2024:

$nil), reflecting changes in deferred tax liabilities attributable to the

intangible asset impairment charges recognized during the year.

Loss and Discontinued Operations

loss from continuing operations, net of tax, was $41,512,264 for the year ended December 31, 2025, compared to a net loss from continuing

operations of $15,803,908 for the year ended December 31, 2024.

The increase in net loss was primarily attributable to the $26,346,050

of non-cash impairment charges recognized in 2025, with no comparable charge in 2024.

Excluding impairment, net loss from continuing

operations improved by approximately $37,000 year over year.

There was no income from discontinued operations in 2025.

For the year ended

December 31, 2024, income from discontinued operations, net of tax, was $27,310,278, primarily from the gain on the sale of MMS assets

and the Softell disposition in the first half of 2024.

Net loss for the year ended December 31, 2025 was $41,512,264, compared to net

income of $11,506,370 for the year ended December 31, 2024.

Accounting Policies

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or complex judgments, often as a result of the need to make estimates about the effects of matters that are inherently uncertain.

Company accounts for acquisitions and investments in businesses as business combinations if the target meets the definition of a business

and (a) the target is a variable interest entity and the Company is the target’s primary beneficiary, and therefore the Company

must consolidate its financial statements, or (b) the Company acquires more than 50% of the voting interest of the target and it was

not previously consolidated.

The Company records business combinations using the acquisition method of accounting, which requires all

the assets acquired and liabilities assumed to be recorded at fair value as of the acquisition date.

The excess of the purchase price

over the estimated fair values of the net tangible and intangible assets acquired is recorded as goodwill.

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

Company accounts for stock-based compensation to employees in accordance with ASC 718, “ Compensation-Stock Compensation ”.

ASC 718 requires companies to measure the cost of employee services received in exchange for an award of equity instruments, including

stock options, based on the grant date fair value of the award and to recognize it as compensation expense over the period the employee

is required to provide service in exchange for the award, usually the vesting period.

Stock option forfeitures are recognized at the

date of employee termination.

Effective January 1, 2019, the Company adopted ASU 2018-07 for the accounting of share-based payments granted

to non-employees for goods and services.

general, the Company accounts for revenue recognition in accordance with Financial Accounting Standards Board (“FASB”) Accounting

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order and recognizes revenue at the time the product is shipped to the Customer.

Customer returns are not material.

the contract with the Customer – IPS requires that an application and a credit card for payment be completed by the Customer prior

to the first order.

Each transaction is evidenced by an order form sent by the Customer and an invoice for the product is sent by IPS.

The collection is probable based on the application and credit card information provided prior to the first order.

the performance obligations in the contract – Each order is distinct and evidenced by the shipping order and invoice.

Determine the transaction price – The consideration is variable if product is returned.

The variability is determined based on

the return policy of the product manufacturer.

There are no sales or volume discounts.

The transaction price is determined at the time

of the order evidenced by the invoice.

Allocate the transaction price – There is no difference between contract price

and “stand-alone selling price”.

Recognize revenue when or as the entity satisfies a performance obligation –

The Revenue is recognized when the product is shipped to the Customer.

Urgent Company, Inc., which was a wholly-owned subsidiary, is a retail and distribution provider of prepackaged, prepared foods.

to December 31, 2023, we divested our interest in The Urgent Company, Inc.

IPS was divested on April 30, 2025, and its operations

are presented as discontinued operations for all periods presented.

Following the IPS disposition, the Company’s revenue is derived

solely from the sale of pharmaceutical products through wholesale distribution channels.

ARBLI™ (SCN-102, Losartan Potassium Oral

Suspension) is the Company’s first commercially available product, with sales commencing in the third quarter of 2025.

sells its products to wholesale distributors, who in turn sell to retail pharmacies, hospitals, and other healthcare providers.

is recognized at the point in time when control of the product transfers to the customer, which generally occurs upon delivery to the

customer’s designated facility.

Revenue is measured at the net transaction price, which reflects the gross invoice price reduced

by estimated variable consideration, as described below.

Sales Adjustments.

The Company records product revenue net of estimated variable consideration.

Gross-to-net adjustments include:

(i) chargebacks, representing the difference between the price charged to wholesale distributors and the lower contract price that distributors

extend to their end-customers (including retail pharmacies, hospitals, and clinics under contracted pricing arrangements), estimated

based on expected sell-through to qualifying end-customers and contractual terms;

(ii) wholesaler rebates and distribution service fees,

representing fees and rebates paid to wholesale distributors and, where applicable, group purchasing organizations (“GPOs”)

under contractual arrangements, estimated based on contracted rates, expected sales volumes, and historical payment patterns;

pay discounts, representing discounts offered to wholesale distributors for timely payment, estimated based on contractual terms and

expected payment timing;

and (iv) product returns, estimated based on contractual return rights and available market data, which have

not been material to date given the early stage of commercialization of ARBLI™.

Estimates of variable consideration are updated

each reporting period based on available historical data, contractual terms, and management’s judgment regarding current market

Accrued liabilities related to gross-to-net adjustments are classified within accrued liabilities on the consolidated balance

The Company does not disclose the value of unsatisfied performance obligations as all contracts have an expected duration of

one year or less.

Acquisitions,

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results at the test date.

Company accounts for stock-based compensation to employees in accordance with ASC 718, “Compensation-Stock Compensation”.

ASC 718 requires companies to measure the cost of employee services received in exchange for an award of equity instruments, including

stock options, based on the grant date fair value of the award and to recognize it as compensation expense over the period the employee

is required to provide service in exchange for the award, usually the vesting period.

Stock option forfeitures are recognized at the

date of employee termination.

Effective January 1, 2019, the Company adopted ASU 2018-07 for the accounting of share-based payments granted

to non-employees for goods and services.

Financial Measures

addition to our financial results determined in accordance with the generally accepted accounting principles in the United States (“GAAP”),

our management uses earnings before interest, taxes, depreciation, and amortization expenses to net income (“EBITDA”), a

non-GAAP measure, as a key measure in operating our business.

We use EBITDA to make strategic decisions, establish business plans and

forecasts, identify trends affecting our business, and evaluate performance.

For example, we use adjusted EBITDA as a measure of our

operating performance.

Adjusted EBITDA is presented for supplemental informational purposes only, should not be considered a substitute

for, or a more meaningful measure than, financial information presented in accordance with GAAP, and may be different from similarly

titled non-GAAP measures used by other companies.

A reconciliation is provided below for adjusted EBITDA to the most directly comparable

financial measure presented in accordance with GAAP.

Investors are encouraged to review the related GAAP financial measure and the reconciliation

of adjusted EBITDA to its most directly comparable GAAP financial measure.

the year ended December 31, 2025, adjusted EBITDA was $(5,384,274), compared to adjusted EBITDA of $17,820,898 for the year ended December

The decrease reflects the transition from a diversified operating business (which included higher-revenue wholesale and asset-sale

activities in 2024) to a focused specialty pharmaceutical company in 2025, with initial ARBLI™ revenues only commencing in Q3 2025

and higher operating costs associated with the build-out of commercialization infrastructure.

Excluding the non-cash impairment charges

of $26,346,050 recognized in 2025, adjusted EBITDA was $(5,384,274), reflecting the early-stage commercial nature of the business.

following table reconciles net loss from continuing operations to adjusted EBITDA for the years ended December 31, 2025 and 2024:

Net (loss) income

$ (41,512,264 )

Depreciation and amortization

Benefit for income taxes

Interest expense

Other non-operating expenses (income)

Stock based compensation (non-cash)

Impairment loss

Adjusted EBITDA

$ (5,384,274 )

Sheet Arrangements

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Issued Accounting Standards

more information on recently issued accounting standards, see “NOTE 1 – ORGANIZATION AND BASIS OF PRESENTATION”, to

the Notes to Consolidated Financial Statements included herein under “PART I.

FINANCIAL STATEMENTS”.

more information on recently issued accounting standards, see “ N ote 1 – Organization

and Basis of Presentation” to the Notes to Consolidated Financial Statements included herein under “ Item 8.

Statements and Supplemental Data .”.

AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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Holdings, Inc.

formerly TRxADE HEALTH, INC.

the Year Ended December 31, 2025

OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM PCAOB ID:

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM (PCAOB ID:

CONSOLIDATED BALANCE SHEETS

5 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis