Scienture Holdings, Inc. 10-Q

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS General Information This information should be read in conjunction with the interim unaudited financial statements and the notes thereto included in this Report, and the audited financial statements and notes thereto and “ Part II. Other Information – Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations ,” contained in our Annual Report on Form 10-K for the year ended December 31, 2025, filed with the SEC on March 30, 2026, and amended on April 30, 2026 (the “ Annual Report ”). Certain capitalized terms used below and otherwise defined below, have the meanings given to such terms in the footnotes to our unaudited consolidated financial statements included above under “ Part I – Financial Information – Item 1. Financial Statements .” Unless the context requires otherwise, references to the “ Company ,” “ we ,” “ us ,” and “ our ” refer specifically to Scienture Holdings, Inc., formerly TRxADE HEALTH, INC., and our consolidated subsidiaries. References to “ Q1 ”, “ Q2 ”, “ Q3 ”, and “ Q4 ” refer to the first, second, third, and fourth quarter, respectively, of the applicable year. Unless otherwise stated or the context otherwise requires, comparisons from one period to another are to the same period of the prior fiscal year. In addition, unless the context otherwise requires and for the purposes of this Report only: ● “ Exchange Act ” refers to the Securities Exchange Act of 1934, as amended; and ● “ Securities Act ” refers to the Securities Act of 1933, as amended. Summary of The Information Contained in Management’s Discussion and Analysis of Financial Condition and Results of Operations Our Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A) is provided in addition to the accompanying consolidated financial statements and notes to assist readers in understanding our results of operations, financial condition, and cash flows. MD&A is organized as follows: ● Company Overview . Discussion of our business and overall analysis of financial and other highlights affecting us, to provide context for the remainder of MD&A. ● Liquidity and Capital Resources . An analysis of changes in our consolidated balance sheets and cash flows and discussion of our financial condition. ● Results of Operations . An analysis of our financial results comparing the three months ended March 31, 2026 and 2025. ● Critical Accounting Policies . Accounting estimates that we believe are important to understanding the assumptions and judgments incorporated in our reported financial results and forecasts. Company Overview On July 25, 2024, we acquired a wholly-owned subsidiary, Scienture 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. After our acquisition of Scienture, we existed as a holding company owning all equity interests of Softell Inc. (f/k/a Trxade Inc.) (“ Softell ”), Integra Pharma Solutions, LLC d.b.a. Trxade Prime (“ IPS ”), Bonum Health, LLC, Bonum Health Inc., and Scienture. On October 4, 2024, the Company and Softell entered into IPS Assignment Agreement, pursuant to which the Company transferred, and Softell accepted, 100% of the membership interests of IPS. As a result, IPS became a wholly-owned subsidiary of Softell. During the year ended December 31, 2023 and a portion of the quarter ended March 31, 2024, Softell, operated a web-based market platform that enabled commerce among healthcare buyers and sellers of pharmaceuticals, accessories and services. Softell’s current primary operations are conducted through IPS. IPS is a licensed pharmaceutical wholesaler and sells brand, generic and non-drug products to customers. IPS’ customers include all healthcare markets including government organizations, hospitals, clinics and independent pharmacies nationwide. On September 20, 2024, the Company fil changed its legal name from “TRxADE HEALTH, Inc.” to “Scienture Holdings, Inc.” 26 Table of Contents Bonum Health, LLC was formed to hold certain telehealth assets acquired in October 2019. The “Bonum Health Hub” was launched in February 2020; however, the Company does not anticipate installations moving forward. On April 30, 2025, the Company completed the sale of Bonum Health, Inc. and Bonum Health, LLC. Disposition of Legacy Subsidiaries On April 8, 2025, the Company entered into a Membership Interest Purchase Agreement (the “ IPS MIPA ”) with Tollo Health, LLC (“ Tollo ”), pursuant to which Tollo agreed to purchase and the Company agreed to sell all of the Company’s membership interests in IPS. On April 8, 2025, the Company also entered into a Stock Purchase Agreement (the “ Bonum and Softell SPA ” and together with the IPS MIPA, the “ Agreements ”) with Tollo, pursuant to which Tollo agreed to purchase and the Company agreed to sell all issued and outstanding shares of common stock of Bonum Health, Inc. and Softell. Suren Ajjarapu, the Company’s former Chief Executive Officer, and Prashant Patel, the Company’s former President and Chief Operating Officer, each had a beneficial interest in Tollo at the time the Company entered into the each of the Agreements. In connection with each of the Agreements, the Company agreed to retain certain excluded liabilities of IPS, Softell and Bonum Health, Inc. including all liabilities: (i) related to, in connection with or arising out of any claims, charges, complaints, actions, suits, settlements, hearings, investigations, proceedings, or governmental or regulatory inquiries with respect to IPS, Softell or Bonum Health, Inc., respectively, prior to the closing under the applicable Agreement; (ii) related to, in connection with or arising out of any breach by the Company of the applicable Agreement or any other agreements and documents required to be delivered by the Company; (iii) not disclosed by the Company in accordance with each Agreement; (iv) related to any actions threatened or initiated by a governmental entity against IPS, Softell, or Bonum Health, Inc., respectively; and (v) related to tax returns or tax matters of the Company, IPS, Softell, or Bonum Health, Inc., respectively, for any periods prior to closing under the applicable Agreement. The Company and Tollo consummated the closing of each of the Agreements on April 30, 2025. As consideration for acquiring IPS, Softell, and Bonum Health, Inc., Tollo agreed to pay the Company $5 million, with that consideration delivered in the form of a promissory note bearing interest at the prime rate. The promissory note matures on June 30, 2030. However, Tollo is required to pay 20% of the proceeds of a future equity financing toward repayment of the principal and accrued but unpaid interest owed under the promissory note. On June 24, 2025, the promissory note was assigned to Integral Health, Inc., which (at the time of the assignment) was owned by Suren Ajjarapu, the Company’s former Chief Executive Officer, and Prashant Patel, the Company’s former President and Chief Operating Officer. The divestitures are part of a broader strategic realignment at the Company designed to sharpen operational focus and unlock long-term value. It is aligned with the Company’s commitment to streamline its core operations, optimize its portfolio, and accelerate growth in the Branded and Specialty Pharma markets. The Company intends to use the proceeds obtained from the divestment to facilitate the high-growth commercial and strategic product development activities at its Scienture subsidiary. The Company believes that the key benefits of the divestitures include: ● Increased Operational Efficiency : Streamlining the Company’s structure aimed at strengthening its balance sheet, providing for leaner operations and a more agile decision-making framework. ● Realize Synergies : Consolidating overlapping functions and eliminating redundancies intended to cause annualized cost savings. ● Dedicated Focus : Affording the full focus and deployment of resources to the commercial products and the high value product pipeline in development at its Scienture subsidiary. Existing Business Subsequent to the disposition of IPS, Softell, and Bonum Health, Inc. we now exist as a holding company for existing and planned pharmaceutical operating companies focused on providing enhanced value to patients, physicians and caregivers through developing, bringing to market, and distributing novel specialty pharmaceutical products to satisfy unmet market needs. We are in the process of winding down our Bonum Health, LLC subsidiary. Operating since 2019, Scienture, located in Commack, New York, is a specialty pharmaceutical company focused providing enhanced value to patients, physicians and caregivers by offering novel specialty products to satisfy unmet market needs. In this regard, Scienture is in the process of developing and commercializing products for the treatment of CNS and CVS diseases as well as a broad range of novel product candidates including new potential treatments for hypertension, migraine, pain and thrombosis and other related disorders. 27 Table of Contents Scienture’s vision is to be a leader in the industry by developing and commercializing new medicines for the treatment of CNS and CVS diseases and across other therapeutic areas. Key elements of Scienture’s strategy to achieve this vision include: ● Advance product candidates through clinical studies and toward commercialization. Scienture is in various stages of clinical development for the product candidates in its pipeline, and it intends to move these programs efficiently toward being commercially available to patients, subject to approval by the U.S. Food and Drug Administration (the “ FDA ”). ● Drive growth and profitability. Using dedicated sales and marketing resources in the U.S., which Scienture is in the process of building, Scienture will seek to begin to generate revenues and then drive the revenue growth of its product candidates approved for marketing by the FDA. ● Continue to grow pipeline. Scienture will continue to evaluate and seek to develop additional product candidates that it believes have significant commercial potential through Scienture’s internal research and development efforts. ● Target strategic business development opportunities. Scienture is exploring a broad range of strategic opportunities. This may include in-licensing products and entering into co-promotion and co-development partnerships for Scienture’s product candidates, although no agreements have been reached. Scienture currently has four primary product candidates in its development pipeline, summarized below, and is engaged in a variety of research and development efforts to develop novel product candidates for the treatment of various disease conditions. To date, Scienture has generated limited revenue from product sales and will not generate meaningful revenues until it fully commercializes its FDA-approved product candidate (SCN-102) and successfully obtains regulatory approval for, and commercializes, its other product candidates. The progress of Scienture products its development pipeline to date is represented by the green bars shown below. Scienture has devoted and will continue to devote significant resources to research and development activities, and expects to incur significant expenses as Scienture continues advancing its product candidates towards FDA approval and expanding product indications for approved products and its intellectual property portfolio. Scienture’s expectations regarding its research and development programs are subject to risks, including the risk that Scienture’s financial condition and results of operations may be materially and adversely affected by delays and failures in the completion of clinical development of its product candidates, which could increase its costs or delay or limit our ability to generate revenues. Scienture currently depends on third-party commercial manufacturing organizations (“ CMOs ”) for its manufacturing operations, including the production of raw materials, finished dosage form product, and product packaging for both its planned product commercialization and for use in its preclinical and clinical research. Scienture does not own or operate manufacturing facilities for the production of any of its product candidates nor does Scienture have plans to develop its own manufacturing operations in the foreseeable future to support clinical trials or commercial production. Scienture currently employs internal resources to manage its manufacturing contractors. Scienture is in discussion with CMOs headquartered in North America, Europe and Asia for its pipeline product candidates. These CMOs offer a comprehensive range of commercial contract manufacturing and packaging services. If Scienture fails to produce its products and product candidates in the volumes that it requires on a timely basis, or fails to comply with stringent regulations applicable to pharmaceutical drug manufacturers, Scienture may face delays in the development and commercialization of its products and product candidates or be required to withdraw its products from the market   for risks associated with manufacturing and supply of its products and product candidates. SCN-102 (ARBLI TM - Losartan Oral Suspension) SCN-102, with the brand name Arbli TM , is an oral liquid formulation of losartan potassium for (i) treatment of hypertension, to lower blood pressure in adults and children greater than 6 years old, (ii) reduction of the risk of stroke in patients with hypertension and left ventricular hypertrophy, and (iii) treatment of diabetic nephropathy with an elevated serum creatinine and proteinuria in patients with type 2 diabetes and a history of hypertension. SCN-102 was approved by the FDA in March 2025, making SCN-102 the first and only FDA-approved ready-to-use oral liquid losartan in the U.S. market. Losartan is classified as an angiotensin receptor blocker (ARB) for treating hypertension and is one of the highest prescribed molecules for this indication. Current products in the market containing losartan are available only as oral solids, which can be further compounded to a liquid formulation. Arbli TM is the first liquid formulation of losartan on the U.S. market that does not require compounding and has reduced dosing volume and long-term shelf life at room temperature storage. SCN-102 has two formulation composition and method of use patents listed in the FDA’s Approved Drug Products with Therapeutic Equivalence Evaluations, commonly referred to as the “orange book”: (i) Patent #: 11,890,273, Issue Date: February 6, 2024, titled “LOSARTAN LIQUID FORMULATIONS AND METHODS OF USE”, Expiration Date: October 7, 2041 and (ii) Patent # 12,156,869; Issue Date: December 3, 2024, titled “LOSARTAN LIQUID FORMULATIONS AND METHODS OF USE”. SCN-102 also has a third patent titled “LOSARTAN LIQUID FORMULATION AND METHODS OF USE” that was issued on April 21, 2026, and expires on October 7, 2041. 28 Table of Contents SCN-110 (REZENOPY TM – Naloxone HCl Nasal Spray) Scienture LLC entered into an Exclusive Commercial and Supply Agreement (the “Kindeva Agreement”) with Summit Biosciences Inc., a wholly-owned subsidiary of Kindeva, on March 4, 2025, pursuant to which Kindeva granted Scienture LLC an exclusive, non-transferrable, non-sublicensable right and license to commercialize REZENOPY TM (Nalaxone HCI nasal spray 10mg/0.11mL) within the United States and its territories. Scienture LLC intends to use the exclusive right and license to price, launch, promote, market, distribute, and educate the public on REZENOPY TM . Approved by the FDA in 1971, naloxone is considered the standard of care and has been shown to be effective in opioid overdose reversals. The opioid overdose reversal market (specifically for naloxone-based products) includes several branded and generic products across nasal spray, auto-injector, and injectable formulations. Most growth in recent years has been in intranasal products, such as Narcan 4mg, RiVive 3mg and Kloxxado 8mg, which are needle free and easier for bystanders and community responders to use. Real world studies suggest the need for multiple naloxone administrations (“MNA”) using these products among bystanders and EMS providers continues to increase. With the increase of synthetic opioids and the rapid onset of effect, evidence is emerging suggesting the need for increased doses of naloxone to reverse opioid toxicity. REZENOPY TM (Naloxone HCl Nasal Spray, 10mg) is the highest FDA-approved nasal spray dose available in the U.S. market. The product provides maximum naloxone protection in a single easy-to-use device and caters to the segment of patients who need multiple doses of lower strength for stabilization in emergency situations. REZENOPY TM provides potential longer duration of opioid receptor block, improves chances of quicker reversal and possible coverage against multiple abuse agents inclusive of synthetic opioids and combinations, through a single dose administration of 10mg naloxone hydrochloride. High dose REZENOPY™ improves the chances of reversing potent opioids quickly and reducing the requirement of MNA. SCN-110 has one issued formulation composition and method of use patents listed in the FDA’s Approved Drug Products with Therapeutic Equivalence Evaluations, commonly referred to as the “orange book”: (i) Patent #: 12,514,854 B2, Issue Date: January 6, 2026, an Orange Book-listable patent, titled “DRUG PRODUCTS FOR INTRANASAL ADMINISTRATION AND USES THEREOF”, Expiration Date: February 5, 2041. SCN-104 (Multi-dose Dihydroergotamine Mesylate (“ DHE ”) injection pen) The SCN-104 injection pen is a disposable, multiple fixed dose, single entity combination product comprised of a small molecule drug that is administered using a customized injection pen. SCN-104 is a drug product containing DHE as the active ingredient. The mechanism of action of SCN-104 is mediated through DHE and is the same as that of DHE. DHE is available in the market as a single dose nasal spray, which has a high degree of variability in clinical outcomes. While DHE is also available in the market as single dose ampoules for injection, we believe that the process of dose withdrawal from the ampoule followed by self-injection at the time of intense need is cumbersome and difficult for the patient. We believe that the SCN-104 multi-dose self-injection pen is easy to use, provides enhanced patient convenience, and provides for consistent and accurate delivery of doses. The SCN-104 injection pen is being developed via the 505(b)(2) regulatory pathway for the acute treatment of migraine headaches with or without aura and the acute treatment of cluster headache episodes. As shown in third party studies of DHE, SCN-104’s mechanism of action for its antimigraine effect is due to its potential action as an agonist at the serotonin 5-HT1D receptors. SCN-104 is intended for subcutaneous administration. SCN-104 is also intended for acute use and is not intended for chronic administration. Scienture has conducted two preclinical studies of SCN-104 and the SCN-104 injection pen: (i) a 30-day repeated dose toxicity study of dimethyl sulfoxide and caffeine following thrice daily, 3 times per week subcutaneous administration in Sprague-Dawley rats and (ii) a 30-day repeated dose toxicity study of dimethyl sulfoxide and caffeine following thrice daily, 3 times per week subcutaneous administration in Göttingen minipigs. Both studies support a conclusion that SCN-104 is considered to have no toxicological significance across hematology, coagulation parameters, clinical chemistry and urinalysis. Scienture has had discussions with the FDA regarding its development program for SCN-104, with the FDA indicating that the reference product selected for a comparative regulatory study and proposed plan for manufacturing New Drug Application registration batches are acceptable. The FDA also provided Scienture with feedback on nonclinical safety studies and stability testing. Scienture is working to scale the formulation to enable future commercial scale production and the pen has been optimized for commercial use. Currently, Scienture is focused on planning bioequivalence studies and increasing manufacturing activities for the SCN-104 injection pen. Scienture plans to initiate a Phase 1 single dose study in healthy adults in 2026, following submission of an Investigational New Drug application (an “ IND ”), if the IND is cleared by the FDA. SCN-104 has a formulation composition and method of use application pending in the U.S. (Appl. No. 17/757,924; Filing Date: June 23, 2022; Expiration Date: June 15, 2035). SCN-106 (Potential Biosimilar) Scienture is developing a potential biosimilar, SCN-106, based on Cathflo Activase, a reference product that is a thrombolytic agent that binds to fibrin in clots and converts entrapped plasminogen to plasmin. SCN-106 is a sterile, purified glycoprotein that is synthesized using the complementary DNA for natural human tPA obtained from a Chinese hamster ovary cell-line. Scienture is working with Anthem Biosciences Pvt, Ltd. to develop a biosimilar product that utilizes the same mechanism(s) of action for the proposed condition of use, and has the same route of administration, dosage form, and strength as the reference product. The development program is focused on establishing the analytical similarity of SCN-106 to the reference product. Multiple clones of CHO cells have been produced to synthesize lots of SCN-106 which were screened for similarity to the reference product for several key biochemical quality attributes as well as overall protein yield and finalization of a lead clone. Scienture completed a Biosimilar Initial Advisory meeting with the FDA in June 2023 to discuss the CMC, non-clinical, and clinical studies required for regulatory approval. As a result of this meeting, Scienture learned that its analytical strategy for initiating analytical similarity studies between SCN-106 and a proposed biosimilar product is acceptable. Scienture also learned that SCN-106 is suitable for further development and received guidance from the FDA on a comparable clinical study needed to demonstrate biosimilarity of SCN-106 and the reference product. In this regard, Scienture was informed that no additional safety, PK, toxicology or dose range finding studies will be required due to the method of use (very limited exposure) and the availability of an extensive amount of data on the original brand product. The only clinical requirement is a comparative phase 3 clinical study in the sensitive population to demonstrate that there are no clinically meaningful differences between SCN-106 and the currently marketed product. SCN-106 is a potential biosimilar and considered by the Company to be part of its product development portfolio, however the Company is not pursuing patent protection for this product. 29 Table of Contents SCN-107 (Bupivacaine Long-Acting Injection) SCN-107 is a long-acting injection suspension formulation of a non-opioid analgesic that is indicated for postsurgical local and regional analgesia. Scienture’s long-acting formulation, SCN-107, is a novel microsphere-based formulation of bupivacaine that comprises the drug in polymer-based microspheres and is intended to provide pain management over a period of 5-7 days. The product candidate is designed to potentially provide longer term post-surgical pain relief compared to the currently available products in the market. Based on initial discussions with FDA regarding this program, Scienture believes this product candidate would require at least one Phase 3 clinical trial to support submission of a marketing application. Scienture anticipates submitting an IND and, if cleared by the FDA, initiating a Phase 1 single dose study in healthy adults in 2025 to conduct an initial assessment of safety and tolerability of SCN-107. Scienture has entered into Feasibility Study and Animal Trial Material Manufacturing Agreement with Innocore Technologies, B.V. (“ Innocore ”), as amended on December 2, 2022 (the “ Innocore License ”), for certain intellectual property rights associated with SCN-107. Under the Innocore License, Innocore granted Scienture a worldwide exclusive, milestone, royalty-bearing and sublicensable license to certain patent rights for the research and development of SCN-107 in postsurgical local and regional analgesia. Pursuant to the Innocore License, Scienture is required to make low single-digit percentage royalty payments based on annual net sales of licensed products for the first three years of sales on a country-by-country basis, subject to a low single digit increase as of the fourth year of sales on a country-by-country basis. SCN-107 has a formulation composition and method of use application pending in the U.S. (Appl. No. 17/996,995; Filing Date: October 24, 2022; Expiration Date: on or after April 22, 2041). Applications in Canada and Europe are currently pending. As described above, the Company licenses certain patent rights from Innocore for the research and development of SCN-107. Liquidity and Capital Resources Cash Cash was $3,542,754 as of March 31, 2026, compared to $6,662,008 as of December 31, 2025. We expect that our future available capital resources will consist primarily of cash generated from Scienture’s operations, remaining cash balances, borrowings, and additional funds raised through sales of debt and/or equity securities. Liquidity Cash, current assets, current liabilities, short term debt and working capital at the end of each period were as follows: March 31, December 31, Percent 2026 2025 Change Change Cash $ 3,542,754 $ 6,662,008 $ (3,119,254 ) (47) % Current assets (excluding cash) $ 1,231,290 $ 1,254,398 $ (23,108 ) (2) % Current liabilities $ 2,803,669 $ 2,735,351 $ 68,319 2 % Working capital $ 1,970,374 $ 5,181,055 $ (3,210,681 ) (62) % Our principal sources of liquidity have historically been cash provided by operations, sales of business assets and operations from time to time, sales of equity, and borrowings under various debt arrangements. Our principal uses of cash have been for operating expenses, technology development, and acquisitions. We anticipate these uses will continue to be our principal sources of, and uses of, cash in the future. 30 Table of Contents Liquidity Outlook Cash Explanation Cash Requirements Our primary objectives for the remainder of 2026 are expected to be the continued implementation of Scienture business plan, and to complete potential strategic transactions of our business-to-consumer subsidiaries, which may include a potential sale, spin-off, fund raising, combination or other strategic transaction. There can be no assurance that our operations will generate significant positive cash flow, or that additional funds will be available to us, through borrowings or otherwise, on favorable terms if required in the future, or at all. We may also raise additional funding in the future through the sale of equity securities. We may require additional funding in the future to implement on our business plan and potentially to expand or complete acquisitions. The sources of this capital are expected to be equity investments and notes payable. Our plan for the next twelve months is to continue exploring strategic transactions or relationships with counterparties in industries that we deem synergistic or complimentary to those of the Company, while also seeking to expand our Scienture operations organically or through acquisitions, as funding and opportunities arise. In the event we require additional funding, we plan to raise that through the sale of debt or equity, which may not be available on favorable terms, if at all, and may, if sold, cause significant dilution to existing stockholders. If we are unable to access additional capital moving forward, it may hurt our ability to grow and to generate future revenues. Going Concern The accompanying interim consolidated financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates realization of assets and the satisfaction of liabilities in the normal course of business within one year after the date the consolidated financial statements are issued. In accordance with Financial Accounting Standards Board, or the FASB, Accounting Standards Update No. 2014-15, Presentation of Financial Statements - Going Concern (Subtopic 205-40), our management evaluates whether there are conditions or events, considered in aggregate, that raise substantial doubt about our ability to continue as a going concern within one year after the date that the financial statements are issued. As of March 31, 2026, the Company had an accumulated deficit of $83,953,501. As of March 31, 2026, the Company had $3,542,754 in cash. We will need to raise additional capital or secure debt funding to support on-going operations, and to fund the assets and operations of any businesses or assets we acquire. The sources of this capital are expected to be the sale of equity and debt, which may not be available on favorable terms, if at all, and may, if sold, cause significant dilution to existing stockholders. If we are unable to access additional capital moving forward, it may hurt our ability to grow and to generate future revenues, our financial position, and liquidity. These factors raise substantial doubt about the ability of the Company to continue as a going concern. Unless management is able to obtain additional financing, it is unlikely that the Company will be able to meet its funding requirements during the next 12 months. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. Cash Flows The following table summarizes our Consolidated Statements of Cash Flows for the following periods: Three Months Ended March 31, Percent 2026 2025 Change Change Net cash used in operating activities (2,919,255 ) (2,956,457 ) 37,202 -1 % Net cash used in investing activities - - - - Net cash (used in) provided by financing activities (200,000 ) 4,697,999 (4,897,999 ) -104 % Net change in cash (3,119,255 ) 1,741,542 (4,860,797 ) -279 % 31 Table of Contents Cash used in operating activities for the three months ended March 31, 2026 was $2,919,255, compared to cash used in operating activities of $2,956,457 for the three months ended March 31, 2025. The slight decrease was primarily due to changes in working capital, partially offset by higher operating expenses during the 2026 period. There was no cash provided by or used in investing activities for the three months ended March 31, 2026 or 2025. Cash used in financing activities for the three months ended March 31, 2026 was $200,000, compared to cash provided by financing activities of $4,697,999 for the three months ended March 31, 2025. Cash used in financing activities for the three months ended March 31, 2026 reflected the $200,000 repayment of the development agreement liability. Cash provided by financing activities for the three months ended March 31, 2025 was primarily attributable to gross proceeds of approximately $4,598,000 from the issuance of common stock pursuant to the equity line commitment, partially offset by other financing activity. Results of Operations The following selected consolidated financial data should be read in conjunction with the unaudited consolidated financial statements and the notes to these statements included above. Three Month Period Ended March 31, 2026 compared to Three Month Period Ended March 31, 2025 Three Months Ended March 31, Percent 2026 2025 Change Change Revenues $ 56,325 $ 10,258 46,067 449 % Cost of sales 2,475 9,585 (7,110 ) -74 % Gross profit 53,850 673 53,177 7902 % Operating expenses: Wage and salary expense 420,008 696,068 (276,060 ) -40 % Professional fees 932,552 412,850 519,702 126 % Accounting and legal expense 326,178 470,825 (144,647 ) -31 % Technology expense 15,763 61,620 (45,857 ) -74 % General and administrative (including stock-based compensation expense) 1,074,864 1,355,948 (281,084 ) -21 % Research and development 793,984 574,679 219,305 38 % Total operating expenses 3,563,349 3,571,990 (8,641 ) 0 % Change in fair value of warrant liability 10,910 645,986 (635,076 ) -98 % Change in fair value of derivative liability - 603,322 (603,322 ) -100 % Loss on conversion of note payable - (96,646 ) 96,646 -100 % Interest income 133,344 25,442 107,902 424 % Interest expense (37,019 ) (670,784 ) 633,765 -94 % Net loss (3,402,264 ) (3,063,997 ) (338,267 ) 11 % Benefit / (provision) for income taxes - - - - Net loss (3,402,264 ) (3,063,997 ) (338,267 ) 11 % 32 Table of Contents Revenues for the three months ended March 31, 2026 were $56,325, compared to $10,258 for the three months ended March 31, 2025, an increase of $46,067. The increase was primarily attributable to the continued ramp of wholesale distribution sales of SCN-102 (ARBLI™) following its commercial launch. Cost of goods sold for the three months ended March 31, 2026 was $2,475, compared to $9,585 for the three months ended March 31, 2025, resulting in gross profit of $53,850 for the three months ended March 31, 2026 compared to gross profit of $673 for the three months ended March 31, 2025. Wage and salary expense decreased by $276,060 for the three months ended March 31, 2026 to $420,008 compared to $696,068 for the comparable period in 2025. The decrease was primarily due to lower headcount following the disposition of legacy subsidiaries in April 2025. Professional fees increased by $519,702 to $932,552 for the three months ended March 31, 2026, compared to $412,850 for the comparable period in 2025. The increase was primarily attributable to higher external consulting fees during the 2026 period. Accounting and legal expense decreased by $144,647 for the three months ended March 31, 2026 to $326,178, compared to $470,825 for the comparable period in 2025. The decrease was primarily due to lower SEC filing and corporate transaction-related professional services activity during the 2026 period. General and administrative expenses (including stock-based compensation expense) decreased by $281,084 for the three months ended March 31, 2026 to $1,074,864, compared to $1,355,948 for the comparable period in 2025. The decrease was primarily due to lower stock-based compensation expense during the 2026 period. Technology expense decreased by $45,857 for the three months ended March 31, 2026 to $15,763, compared to $61,620 for the comparable period in 2025. The decrease was primarily due to lower software-related expenses following the disposition of IPS in April 2025. Research and development expense for the three months ended March 31, 2026 was $793,984, compared to $574,679 for the comparable period in 2025, an increase of $219,305. The increase was primarily due to higher contract research organization costs related to advancement of pipeline product candidates. Total expenses by program were as follows: Three Months Ended Project Codes Product Name March 31, 2026 SCN-102 Losartan $ 40,701 SCN-104 DHE 110,543 SCN-106 Alteplase 642,740 Total research and development expense $ 793,984 Interest expense was $37,019 for the three months ended March 31, 2026, compared to $670,784 for the three months ended March 31, 2025. The decrease was primarily due to the repayment in full of the Arena convertible debentures during 2025 and the related cessation of debt discount amortization. We recognized a gain on the change in the fair value of the warrant liability of $10,910 for the three months ended March 31, 2026, compared to a gain of $645,986 for the three months ended March 31, 2025, in each case based on the underlying valuation inputs. There was no gain or loss on the change in the fair value of the derivative liability for the three months ended March 31, 2026, as the derivative liability was fully derecognized in connection with the repayment of the Arena debentures during 2025. We recognized a gain on the change in the fair value of the derivative liability of $603,322 for the three months ended March 31, 2025. During the three months ended March 31, 2026, the Company incurred a net loss of $3,402,264, compared to a net loss of $3,063,997 for the three months ended March 31, 2025. The increase in net loss of $338,267 was primarily attributable to the changes in operating expenses and non-operating income/(expense) discussed above. Critical Accounting Policies Our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of net sales and expenses for each period. The following represents a summary of our critical accounting policies, defined as those policies that we believe are the most important to the portrayal of our financial condition and results of operations and that require management’s most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effects of matters that are inherently uncertain. Acquisitions The Company accounts for acquisitions and investments in businesses as business combinations if the target meets the definition of a business and (a) the target is a variable interest entity and the Company is the target’s primary beneficiary, and therefore the Company must consolidate its financial statements, or (b) the Company acquires more than 50% of the voting interest of the target and it was not previously consolidated. The Company records business combinations using the acquisition method of accounting, which requires all the assets acquired and liabilities assumed to be recorded at fair value as of the acquisition date. The excess of the purchase price over the estimated fair values of the net tangible and intangible assets acquired is recorded as goodwill. The application of the acquisition method of accounting for business combinations requires management to make significant estimates and assumptions in the determination of the fair value of assets acquired and liabilities assumed in order to properly 33 Table of Contents Stock-Based Compensation The Company accounts for stock-based compensation to employees in accordance with ASC 718, “ Compensation-Stock Compensation ”. ASC 718 requires companies to measure the cost of employee services received in exchange for an award of equity instruments, including stock options, based on the grant date fair value of the award and to recognize it as compensation expense over the period the employee is required to provide service in exchange for the award, usually the vesting period. Stock option forfeitures are recognized at the date of employee termination. Effective January 1, 2019, the Company adopted ASU 2018-07 for the accounting of share-based payments granted to non-employees for goods and services. Non-GAAP Financial Measures In 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. For the three months ended March 31, 2026, adjusted EBITDA was $(2,939,166), compared to adjusted EBITDA of $(2,475,856) for the three months ended March 31, 2025. The increase in the adjusted EBITDA loss of $463,310 was primarily attributable to a higher net loss of $(3,402,264) for the three months ended March 31, 2026 compared to $(3,063,997) for the prior-year period, driven by increased operating expenses including higher professional fees and research and development costs associated with pipeline advancement, partially offset by higher gross profit from the continued ramp of SCN-102 (ARBLI™) wholesale distribution revenues. The decrease was further moderated by lower non-cash stock-based compensation expense of $102,320 in the current period compared to $1,080,437 in the prior-year period, a significant reduction in interest expense to $37,019 from $670,784 following the repayment of the Arena convertible debentures during 2025, and higher depreciation and amortization of $468,013 compared to $15,024 in the prior-year period. The following table reconciles net loss to adjusted EBITDA for the three months ended March 31, 2026 and 2025: Three Months Ended March 31, 2026 2025 Net loss $ (3,402,264 ) $ (3,063,997 ) Depreciation and amortization 468,013 15,024 Interest expense 37,019 670,784 Other non-operating expenses (income) (144,254 ) (1,178,104 ) Stock based compensation (non-cash) 102,320 1,080,437 Adjusted EBITDA $ (2,939,166 ) $ (2,475,856 ) Recently Issued Accounting Standards For more information on recently issued accounting standards, see “ NOTE 1 – ORGANIZATION AND BASIS OF PRESENTATION, ” to the Notes to Consolidated Financial Statements included herein under “ PART I. - ITEM 1. FINANCIAL STATEMENTS ”. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Pursuant to Item 305(e) of Regulation S-K (17 C.F.R. § 229.305(e)), the Company is not required to provide the information required by this Item as it is a “smaller reporting company,” as defined by Rule 229.10(f)(1).