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 and six months ended June 30, 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 Together with our wholly-owned subsidiary, Scienture, LLC, which we acquired on July 25, 2024, we are a Commack, New York based specialty pharmaceutical company 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 particularly focused on the commercialization and development of products for the treatment of Cardiovascular (“ CVS ”) and Central Nervous System (“ CNS ”) 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. To date, we have launched ARBLI™, a commercial product for the treatment of hypertension, and we are in the process of commercializing a second product, REZENOPY™, for the treatment of opioid overdose. Our development pipeline consists of a broad range of novel product candidates including new potential treatments for migraine, thrombosis, pain and other related disorders. Our mission is to bring to market innovative technology-based products to address unmet medical needs. We target a diversified portfolio of short- and long-term opportunities with efficient development, regulatory, and go to market strategies. In connection with our $11 million financing facility with Streeterville that we established in April 2026, we formed a wholly owned subsidiary—SCNX Holdings, LLC (“ SCNX Sub ”). SCNX Sub exists solely in connection with the financing facility and has no operations. At closing of the financing facility, Streeterville paid deposited $3 million into a bank account held by SCNX Sub, which is secured pursuant to a deposit account control agreement among SCNX Sub, Streeterville, and the bank. During the year ended December 31, We previously were known as TRxADE HEALTH, Inc. and operated a web-based market platform focused on enhancing commerce among healthcare participants, a licensed pharmaceutical wholesaler, and a digital telehealth company, through our ownership of Softell Inc. (f/k/a Trxade Inc.) (“ Softell ”), Integra Pharma Solutions, LLC d.b.a. Trxade Prime (“ IPS ”), Bonum Health, LLC, and Bonum Health Inc. In April 2025, we sold Softell, IPS, and Bonum Health Inc. We dissolved Bonum Health Inc. in November 2025. In connection with the acquisition of Scienture, LLC, we changed our legal name to “Scienture Holdings, Inc.” The divestiture of these legacy subsidiaries was part of a broader strategic realignment designed to sharpen operational focus and unlock long-term value. It is aligned with our commitment to streamline our core operations, optimize our portfolio, and accelerate growth in the Branded and Specialty Pharma markets. 25 Table of Contents Our vision is to be a leader in the industry by developing and commercializing new branded pharmaceutical products for the treatment of CNS and CVS diseases and across other therapeutic areas. Key elements of our strategy to achieve this vision include: ● Advance product candidates through clinical studies and toward commercialization. The product candidates in our pipeline are at various stages of clinical development. We intend 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 we are in the process of building, we will seek to begin to generate revenues and then drive the revenue growth of our product candidates approved for marketing by the FDA. ● Continue to grow pipeline. We will continue to evaluate commercial product acquisition opportunities and seek to develop additional product candidates that we believe have significant commercial potential through our internal research and development efforts. ● Target strategic business development opportunities. We are exploring a broad range of strategic opportunities. This may include in-licensing products and entering into co-promotion and co-development partnerships for our product candidates, although no agreements have been reached. We currently has two commercial products that have been launched and three primary product candidates in our development pipeline, summarized below, and are engaged in a variety of research and development efforts to develop novel product candidates for the treatment of various disease conditions. To date, we have generated limited revenue from product sales and will not generate meaningful revenues until we fully commercializes our FDA-approved product candidates (Arbli ™ and REZENOPY ™ ) and successfully obtain regulatory approval for, and commercialize, our other product candidates. The progress of our products in our development pipeline to date is represented by the green bars shown below. We have devoted and will continue to devote significant resources to sales and marketing of our commercial products and research and development activities, and expects to incur significant expenses as we continue advancing our product candidates towards FDA approval and expanding product indications for approved products and our intellectual property portfolio. Our expectations regarding our research and development programs are subject to risks, including the risk that our financial condition and results of operations may be materially and adversely affected by delays and failures in the completion of clinical development of our product candidates, which could increase costs or delay or limit our ability to generate revenues. We currently depend on third-party commercial manufacturing organizations (“ CMOs ”) for our manufacturing operations, including the production of raw materials, finished dosage form product, and product packaging for both our planned product commercialization and for use in our preclinical and clinical research. We do not own or operate manufacturing facilities for the production of any of our product candidates nor do we have plans to develop such manufacturing operations in the foreseeable future to support clinical trials or commercial production. We currently employs internal resources to manage our manufacturing contractors. We are in discussion with CMOs headquartered in North America, Europe and Asia for our pipeline product candidates. These CMOs offer a comprehensive range of commercial contract manufacturing and packaging services. If we fail to produce our products and product candidates in the volumes that we require on a timely basis, or fail to comply with stringent regulations applicable to pharmaceutical drug manufacturers, we may face delays in the development and commercialization of our products and product candidates or be required to withdraw our products from the market   for risks associated with manufacturing and supply of our products and product candidates. SCN-102 (ARBLI ™ - Losartan Oral Suspension) SCN-102, with the brand name Arbli ™ , 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 three 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. 26 Table of Contents SCN-110 (REZENOPY ™ – Naloxone HCl Nasal Spray) On March 4, 2025, Scienture, LLC entered into an Exclusive Commercial and Supply Agreement (the “Kindeva Agreement”) with Summit Biosciences Inc., a wholly-owned subsidiary of Kindeva, pursuant to which Kindeva granted us an exclusive, non-transferrable, non-sublicensable right and license to commercialize REZENOPY TM (Nalaxone hydrochloride nasal spray 10mg/0.11mL) within the United States and its territories. We intend 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 ™ (Naloxone hydrochloride 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 ™ 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 two 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, Issue Date: January 6, 2026, an Orange Book-listable patent, titled “DRUG PRODUCTS FOR INTRANASAL ADMINISTRATION AND USES THEREOF”, Expiration Date: February 5, 2041 and (ii) Patent #: 12,622,903, Issue Date: June 2, 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. We have had discussions with the FDA regarding the 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 us with feedback on nonclinical safety studies and stability testing. We are working to scale the formulation to enable future commercial scale production and the pen has been optimized for commercial use. Currently, we are focused on planning bioequivalence studies and increasing manufacturing activities for the SCN-104 injection pen. We plan to initiate a Phase 1 single dose study in healthy adults in early 2027, 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) We are 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. Specifically, we are 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. We 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, we learned that our analytical strategy for initiating analytical similarity studies between SCN-106 and a proposed biosimilar product is acceptable. We 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, we were 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 to be part of our product development portfolio, however we are not pursuing patent protection for this product. 27 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. Our 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, we believe this product candidate would require at least one Phase 3 clinical trial to support submission of a marketing application. We anticipate submitting an IND in 2027 and, if cleared by the FDA, plan to conduct an initial assessment of safety and tolerability of SCN-107. Scienture, LLC previously entered into a 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 us 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, we are 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, we license certain patent rights from Innocore for the research and development of SCN-107. Liquidity and Capital Resources Cash Cash was $8,188,140 as of June 30, 2026, compared to $6,662,008 as of December 31, 2025. In addition, we held restricted cash of $3,012,271 as of June 30, 2026, representing proceeds of the B Note held in a lender-controlled deposit account. We expect that our future available capital resources will consist primarily of cash generated from our 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: June 30, 2026 December 31, 2025 Change Percent Change Cash $ 8,188,140 $ 6,662,008 $ 1,526,132 23 % Current assets (excluding cash) $ 1,013,757 $ 1,254,398 $ (240,641 ) -19 % Current liabilities $ 3,026,300 $ 2,735,351 $ 290,949 11 % Working capital $ 6,175,597 $ 5,181,055 $ 994,542 19 % 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. 28 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 our business plan. 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 us, while also seeking to expand our 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 we 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 June 30, 2026, we had an accumulated deficit of $86,775,872. As of June 30, 2026, we had $8,188,140 in cash and $3,012,271 in restricted 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. While these factors initially indicated substantial doubt about the ability of the Company to continue as a going concern, management believes that its existing cash on hand, revenues from the commercialization of ARBLI™ (SCN-102) and REZENOPY™ (SCN-110) and its planned financing activities alleviate that doubt. Cash Flows The following table summarizes our Consolidated Statements of Cash Flows for the following periods: Six Months Ended June 30, Percent 2026 2025 Change Change Net cash used in operating activities (6,051,597 ) (4,990,704 ) (1,060,893 ) 21 % Net cash used in investing activities - - - - Net cash (used in) provided by financing activities 10,590,000 4,697,999 5,892,001 125 % Net change in cash 4,538,403 (292,705 ) 4,831,108 -1651 % 29 Table of Contents Cash used in operating activities for the six months ended June 30, 2026, was $6,051,597, compared to cash used in operating activities of $4,990,704 for the six months ended June 30, 2025. The increase of $1,060,893 was primarily due to the $400,000 repayment of the development agreement liability and other changes in working capital, including reductions in accounts payable and accrued liabilities, partially offset by a lower net loss during the 2026 period. There was no cash provided by or used in investing activities for the six months ended June 30, 2026, or 2025. Cash provided by financing activities for the six months ended June 30, 2026, was $10,590,000, compared to cash provided by financing activities of $4,697,999 for the six months ended June 30, 2025. Cash provided by financing activities for the six months ended June 30, 2026, reflected $10,590,000 of proceeds from the issuance of the Streeterville notes in April 2026, net of issuance costs. Cash provided by financing activities for the six months ended June 30, 2025, was primarily attributable to gross proceeds of approximately $4,598,000 from the issuance of common stock pursuant to an 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 June 30, 2026 compared to Three Month Period Ended June 30, 2025 Three Months Ended June 30, Percent 2026 2025 Change Change Revenues $ 343,639 $ - 343,639 100 % Cost of sales 7,860 - 7,860 100 % Gross profit 335,779 - 335,779 100 % Operating expenses: Wage and salary expense 411,411 773,739 (362,328 ) -47 % Professional fees 963,752 209,763 753,989 359 % Accounting and legal expense 117,815 381,683 (263,868 ) -69 % Technology expense 7,139 21,408 (14,269 ) -67 % General and administrative (including stock-based compensation expense) 368,790 2,927,764 (2,558,974 ) -87 % Research and development 1,166,605 843,549 323,056 38 % Total operating expenses 3,035,512 5,157,906 (2,122,394 ) -41 % Change in fair value of warrant liability - 76,122 (76,122 ) -100 % Change in fair value of derivative liability - (662,916 ) 662,916 -100 % Loss on disposition of subsidiaries - (385,528 ) 385,528 -100 % Interest income 147,147 63,148 83,999 133 % Interest expense (269,785 ) (653,493 ) 383,708 -59 % Net loss (2,822,371 ) (6,720,573 ) 3,898,202 -58 % Benefit / (provision) for income taxes - - - - Net loss (2,822,371 ) (6,720,573 ) 3,898,202 -58 % 30 Table of Contents Revenues for the three months ended June 30, 2026, were $343,639, compared to $0 for the three months ended June 30, 2025. The increase was primarily attributable to the continued ramp of wholesale distribution sales of SCN-102 (ARBLI™) following its commercial launch. Gross product sales for the quarter were $392,700, which were reduced by $49,061 of wholesale distribution fees, rebates and chargebacks to arrive at net revenues. All ARBLI™ product sales in the quarter were made through three national wholesale distributors — McKesson Corporation, Cencora and Cardinal Health — with McKesson accounting for approximately two-thirds of gross product sales. While we expect ARBLI™ revenues to continue to grow as prescription demand and payor coverage build, quarterly revenues may fluctuate with wholesaler ordering patterns and with the level of rebates, chargebacks and distribution fees, which will vary with payor and channel mix. Two of these distributors accounted for approximately 84% and 82% of revenues for the three and six months ended June 30, 2026, respectively (see “Concentration of Credit Risks and Major Customers” in the notes to our unaudited condensed consolidated financial statements). We expect this concentration to continue, and the loss of, or a material reduction in purchases by, any of these distributors could materially and adversely affect our revenues and cash flows. Cost of goods sold for the three months ended June 30, 2026, was $7,860, compared to $0 for the three months ended June 30, 2025, resulting in gross profit of $335,779 for the three months ended June 30, 2026 compared to $0 for the three months ended June 30, 2025. Wage and salary expense decreased by $362,328 for the three months ended June 30, 2026 to $411,411, compared to $773,739 for the comparable period in 2025. The decrease was primarily due to lower headcount following the disposition of legacy subsidiaries in April 2025. Following the dispositions, our workforce is concentrated in a small number of research and development, commercial and administrative personnel, and we have engaged a contract commercial organization — the cost of which is reflected in professional fees — in lieu of building an internal sales force. Professional fees increased by $753,989 to $963,752 for the three months ended June 30, 2026, compared to $209,763 for the comparable period in 2025. The increase was primarily attributable to outsourced commercial costs supporting the launch of ARBLI™ — including our contract commercial organization, sales training, market access consulting, pharmacy and sample fulfillment services, and commercial data purchases — which had no counterpart in the prior-year quarter. We expect professional fees to remain elevated relative to prior-year periods for as long as we commercialize ARBLI™ through an outsourced commercial model. Accounting and legal expense decreased by $263,868 for the three months ended June 30, 2026 to $117,815, compared to $381,683 for the comparable period in 2025. The decrease was primarily due to elevated activity in the prior-year quarter associated with the disposition of the legacy subsidiaries and related corporate transactions and SEC filings, which did not recur in 2026. With our simplified corporate structure, we expect accounting and legal expense to remain below prior-year levels for the remainder of 2026. General and administrative expenses (including stock-based compensation expense) decreased by $2,558,974 for the three months ended June 30, 2026, to $368,790, compared to $2,927,764 for the comparable period in 2025. The decrease was primarily because the prior-year quarter included substantial non-cash charges for common stock issued for services, which did not recur in 2026; stock option expense recognized in the three months ended June 30, 2026 was $103,457. The decrease occurred notwithstanding the inclusion in the 2026 quarter of $453,846 of amortization of intangible assets, which had no counterpart in the prior-year quarter and is expected to continue at a comparable quarterly rate. Technology expense decreased by $14,269 for the three months ended June 30, 2026, to $7,139, compared to $21,408 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 June 30, 2026, was $1,166,605, compared to $843,549 for the comparable period in 2025, an increase of $323,056. The increase was primarily attributable to higher contract research and contract manufacturing organization costs, which comprised substantially all of our research and development expense for the quarter, driven by the continued advancement of SCN-106 (Alteplase) and SCN-104 (DHE). We expect research and development expense to continue to increase as our product candidates advance. Total expenses by program were as follows: Three Months Ended Project Codes Product Name June 30, 2026 SCN-102 Losartan $ 504,135 SCN-104 DHE 316,151 SCN-106 Alteplase 346,319 Total research and development expense $ 1,166,605 Interest expense was $269,785 for the three months ended June 30, 2026, compared to $653,493 for the three months ended June 30, 2025. The decrease was primarily due to the repayment in full of certain convertible debentures during 2025 and the related cessation of debt discount amortization, partially offset by stated interest and debt discount amortization on the Streeterville notes issued in April 2026. Interest income was $147,147 for the three months ended June 30, 2026, compared to $63,148 for the three months ended June 30, 2025. The increase was primarily attributable to interest earned on Treasury Bill holdings and on the note receivable, together with interest credited on the restricted deposit account established in April 2026. We recognized no gain or loss on the change in the fair value of the warrant liability for the three months ended June 30, 2026, compared to a gain of $76,122 for the three months ended June 30, 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 June 30, 2026, as the derivative liability was fully derecognized in connection with the repayment of certain debentures during 2025. We recognized a loss on the change in the fair value of the derivative liability of $662,916 for the three months ended June 30, 2025. We recognized no loss on disposition of subsidiaries for the three months ended June 30, 2026, compared to a loss on disposition of subsidiaries of $385,528 for the three months ended June 30, 2025, which arose on the divestiture of the legacy subsidiaries in April 2025. During the three months ended June 30, 2026, we incurred a net loss of $2,822,371, compared to a net loss of $6,720,573 for the three months ended June 30, 2025. The decrease of $3,898,202 was primarily attributable to the increase in revenue and changes in operating expenses and non-operating income/(expense) discussed above. Six Month Period Ended June 30, 2026 compared to Six Month Period Ended June 30, 2025 Six Months Ended June 30, Percent 2026 2025 Change Change Revenues $ 399,964 $ 10,258 389,706 3799 % Cost of sales 10,335 9,585 750 8 % Gross profit 389,629 673 388,956 57794 % Operating expenses: Wage and salary expense 831,419 1,469,807 (638,388 ) -43 % Professional fees 1,896,304 622,613 1,273,691 205 % Accounting and legal expense 443,993 852,508 (408,515 ) -48 % Technology expense 22,902 83,028 (60,126 ) -72 % General and administrative (including stock-based compensation expense) 1,443,654 4,283,712 (2,840,058 ) -66 % Research and development 1,960,589 1,418,228 542,361 38 % Total operating expenses 6,598,861 8,729,896 (2,131,035 ) -24 % Change in fair value of warrant liability 10,910 722,108 (711,198 ) -98 % Change in fair value of derivative liability - (59,594 ) 59,594 -100 % Loss on conversion of note payable - (96,646 ) 96,646 -100 % Loss on disposition of subsidiaries - (385,528 ) 385,528 -100 % Interest income 280,491 88,590 191,901 217 % Interest expense (306,804 ) (1,324,277 ) 1,017,473 -77 % Net loss (6,224,635 ) (9,784,570 ) 3,559,935 -36 % Benefit / (provision) for income taxes - - - 0 % Net loss $ (6,224,635 ) $ (9,784,570 ) $ 3,559,935 -36 % 31 Table of Contents Revenues for the six months ended June 30, 2026, were $399,964, compared to $10,258 for the six months ended June 30, 2025 (all of which represented legacy pharmaceutical product resale revenue of the subsidiaries disposed of in April 2025), an increase of $389,706. The increase was primarily attributable to the continued ramp of wholesale distribution sales of SCN-102 (ARBLI™) following its commercial launch. As discussed above, our revenues remain concentrated among a small number of wholesale distributors. Cost of goods sold for the six months ended June 30, 2026, was $10,335, compared to $9,585 for the six months ended June 30, 2025, resulting in gross profit of $389,629 for the six months ended June 30, 2026, compared to $673 for the six months ended June 30, 2025. Wage and salary expense decreased by $638,388 for the six months ended June 30, 2026, to $831,419, compared to $1,469,807 for the comparable period in 2025. The decrease was primarily due to lower headcount following the disposition of legacy subsidiaries in April 2025. As discussed above, following the dispositions our workforce is concentrated in research and development, commercial and administrative functions, with outsourced commercial selling costs reflected in professional fees. Professional fees increased by $1,273,691 to $1,896,304 for the six months ended June 30, 2026, compared to $622,613 for the comparable period in 2025. The increase was primarily attributable to outsourced commercial costs supporting the launch of ARBLI™ — including our contract commercial organization, sales training, market access consulting, pharmacy and sample fulfillment services, and commercial data purchases — which had no counterpart in the prior-year period. We expect professional fees to remain elevated relative to prior-year periods for as long as we commercialize ARBLI™ through an outsourced commercial model. Accounting and legal expense decreased by $408,515 for the six months ended June 30, 2026, to $443,993, compared to $852,508 for the comparable period in 2025. The decrease was primarily due to elevated activity in the prior-year period associated with the disposition of the legacy subsidiaries and related corporate transactions and SEC filings, which did not recur in 2026. With our simplified corporate structure, we expect accounting and legal expense to remain below prior-year levels for the remainder of 2026. General and administrative expenses (including stock-based compensation expense) decreased by $2,840,058 for the six months ended June 30, 2026, to $1,443,654, compared to $4,283,712 for the comparable period in 2025. The decrease was primarily because the 2025 period included $3,781,253 of non-cash charges for common stock issued for services, which did not recur in 2026, while stock option expense was broadly comparable at $205,777 for the six months ended June 30, 2026 compared to $162,874 for the comparable period in 2025. The decrease occurred notwithstanding the inclusion in the 2026 period of $907,693 of amortization of intangible assets, which had no counterpart in the prior-year period. Technology expense decreased by $60,126 for the six months ended June 30, 2026, to $22,902, compared to $83,028 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 six months ended June 30, 2026, was $1,960,589, compared to $1,418,228 for the comparable period in 2025, an increase of $542,361. The increase was primarily attributable to higher contract research and contract manufacturing organization costs, which comprised substantially all of our research and development expense for the period, driven principally by SCN-106 (Alteplase), which accounted for $989,059 of expense for the six months ended June 30, 2026, together with the continued advancement of SCN-104 (DHE). We expect research and development expense to continue to increase as our product candidates advance. Total expenses by program were as follows: Six Months Ended Project Codes Product Name June 30, 2026 SCN-102 Losartan $ 544,836 SCN-104 DHE 426,694 SCN-106 Alteplase 989,059 Total research and development expense $ 1,960,589 Interest expense was $306,804 for the six months ended June 30, 2026, compared to $1,324,277 for the six months ended June 30, 2025. The decrease was primarily due to the repayment in full of certain convertible debentures during 2025 and the related cessation of debt discount amortization, partially offset by stated interest and debt discount amortization on the Streeterville notes issued in April 2026. Interest income was $280,491 for the six months ended June 30, 2026, compared to $88,590 for the six months ended June 30, 2025. The increase was primarily attributable to interest earned on Treasury Bill holdings and on the note receivable, together with interest credited on the restricted deposit account established in April 2026. We recognized a gain on the change in the fair value of the warrant liability of $10,910 for the six months ended June 30, 2026, compared to a gain of $722,108 for the six months ended June 30, 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 six months ended June 30, 2026, as the derivative liability was fully derecognized in connection with the repayment of certain debentures during 2025. We recognized a loss on the change in the fair value of the derivative liability of $59,594 for the six months ended June 30, 2025. We recognized no loss on conversion of note payable or loss on disposition of subsidiaries for the six months ended June 30, 2026, compared to a loss on conversion of note payable of $96,646 and a loss on disposition of subsidiaries of $385,528 for the six months ended June 30, 2025. For the six months ended June 30, 2026, we incurred a net loss of $6,224,635, compared to a net loss of $9,784,570 for the six months ended June 30, 2025. The decrease of $3,559,935 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 We account 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 we are the target’s primary beneficiary, and therefore we must consolidate its financial statements, or (b) we acquire more than 50% of the voting interest of the target and it was not previously consolidated. We record 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 32 Table of Contents Stock-Based Compensation We account 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, we 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 adjusted EBITDA, which we define as net loss before interest, taxes, depreciation and amortization, further adjusted for stock-based compensation and other non-cash and non-recurring items, 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 June 30, 2026, adjusted EBITDA was $(2,134,705), compared to $(2,263,734) for the three months ended June 30, 2025. For the six months ended June 30, 2026, adjusted EBITDA was $(5,073,870), compared to $(4,754,615) for the six months ended June 30, 2025. Net loss decreased to $(2,822,371) and $(6,224,635) for the three and six months ended June 30, 2026, from $(6,720,573) and $(9,784,570) for the comparable periods in 2025, reflecting lower general and administrative expense and higher gross profit from the continued ramp of SCN-102 (ARBLI™) wholesale distribution revenues. Adjusted EBITDA improved for the three months ended June 30, 2026 but declined for the six months then ended, because the prior-year net loss included substantially larger non-cash and non-operating charges that are added back in the reconciliation. Non-cash stock-based compensation was $103,457 and $205,777 for the three and six months ended June 30, 2026, compared to $2,863,691 and $3,944,127 for the comparable 2025 periods. Interest expense was $269,785 and $306,804 for the three and six months ended June 30, 2026, compared to $653,493 and $1,324,277 for the comparable 2025 periods. Depreciation and amortization increased to $461,571 and $929,585, from $30,481 in each of the comparable 2025 periods, following commencement of amortization of the finite-lived intangible asset. The following table reconciles net loss to adjusted EBITDA for the three and six months ended June 30, 2026 and 2025: Three Months Ended Six Months Ended June 30, June 30, 2026 2025 2026 2025 Net loss $ (2,822,371 ) $ (6,720,573 ) $ (6,224,635 ) $ (9,784,570 ) Depreciation and amortization 461,571 30,481 929,585 30,481 Interest expense 269,785 653,493 306,804 1,324,277 Other non-operating expenses (income) (147,147 ) 909,174 (291,401 ) (268,930 ) Stock based compensation (non-cash) 103,457 2,863,691 205,777 3,944,127 Adjusted EBITDA $ (2,134,705 ) $ (2,263,734 ) $ (5,073,870 ) $ (4,754,615 ) 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)), we are 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).